/raid1/www/Hosts/bankrupt/CAR_Public/000906.MBX               C L A S S   A C T I O N   R E P O R T E R

             Wednesday, September 6, 2000, Vol. 2, No. 173


ASSISTED LIVING: Announces Agreement to Settle Securities Suit in Oregon
BANK LEUMI: Continues to Defend Credit Card Holders’ Suit over Fees
BANK LEUMI: Depositor Claims Promised Interest Bonus in Tel Aviv
BANK LEUMI: Suit over Charge Cancellation Commission Seeks Class Status
BRIDGESTONE/FIRESTONE: Canadian Paper Says Tire Recall Rolling Smoothly

DEPT OF PARKS: Cir Ct Precluded Avenue; App Panel Reinstates Temps' Suit
E.COLI: Twice Hit Walkerton Family Seeks Justice in Court
ENGINEERING ANIMATION: Sued by Investors; Reported Losses; Sells Company
FEDERATED DEPARTMENT: Cauley & Geller Files Securities Suit in New York
GREATER DANDENONG: Aussi Employees Win the Right to Reinstatement

HAMAGEN INSURANCE: Faces Action over Non-reduction of Insurance Premiums
LEUMI MORTGAGE: Faces Claim in Jerusalem over Insurance Brokerage
LEUMI MORTGAGE: Hearing on Commissions on Borrowers’ Insurance in Nov
MATAV CABLE: Families Not Connected Sue Israeli Broadband Provider
MIGDAL: Insurers Alleged of Unlawful Use of Outdated Mortality Tables

MIGDAL, HAMAGEN: Sued for Risk Premium ub Women Managers’ Insurance
N.Y. STATE: High-Minority Public School Students Sue for Civil Rights
OTTAWA, CHURCH: Former Students of Catholic School to Sue over Abuse
TOBACCO LITIGATION: Attorney Raises Question on FL Engle Class Action
WASHINGTON DEPT: To Medically Monitor Workers' Exposure to Pesticide

WITTINGSLOW AMUSEMENTS: Operators of Crashed Adelaide Show To Face Suit

* Authorities Piece Together Evidence against Suspect in Stock Hoax


ASSISTED LIVING: Announces Agreement to Settle Securities Suit in Oregon
Assisted Living Concepts, Inc. (AMEX:ALF) announced on September 5 that it
had reached an agreement to settle the class action litigation stemming
from the restatement of its financial statements for the years ended
December 31, 1996 and 1997 and the first three quarters of fiscal 1998.
This settlement is subject to the approval of the United States District
Court for the District of Oregon, as are all settlements in federal class
action litigation.

The total pre-tax cost of the settlement to the Company will be
approximately $10,020,000 (less $1.0 million of legal fees and expenses to
be reimbursed by the Company's corporate liability insurance carriers and
other reimbursements of approximately$193,000), to be documented in a
non-interest bearing note collateralized by certain residences satisfactory
to plaintiffs, and payable in four quarterly installments of approximately
$2,255,000 each, commencing no later than October 23, 2000, with a fifth
and final payment of $1.0 million due within 90 days following the final
quarterly payment.

On or before November 15, 2000, the Company's corporate liability insurance
carriers will reimburse the Company for $1.0 million related to legal fees
and expenses incurred by the Company to date in connection with the
litigation, which will be included within the amounts contributed to the
settlement by the carriers under the policy terms. The Company in turn has
agreed to make the final $1.0 million installment set forth in the payment
schedule described above, in addition to the approximately $9,020,000
Company contribution contemplated by a Memorandum of Understanding
previously proposed and executed by the plaintiffs in the class action and
also agreed to by certain of the settling defendants.

As previously announced in the Company's Report on Form 8-K filed with the
Securities and Exchange Commission on August 21, 2000, the settlement had
been pending the approval of the Company's corporate liability insurance
carriers. These carriers had raised certain coverage issues that resulted
in the filing of litigation between the carriers and the Company. These
carriers have now consented to the settlement, and the Company and the
carriers have agreed to dismiss their litigation regarding coverage issues
and to resolve those issues through mediation or binding arbitration, if
the mediation fails. To the extent that the carriers are successful, the
Company and the carriers have agreed that the carriers' recovery will not
exceed $4.0 million. The parties have further agreed that payment of any
such amount awarded or agreed to will not be due in any event until 90 days
after the Company has satisfied its obligations to the plaintiffs in the
class action, with any such amount to be subordinated to new or refinancing
of existing obligations. The Company believes that it has strong defenses
regarding this dispute.

As a result of the class action settlement, the Company expects to record a
charge of approximately $10,020,000 in the third quarter of 2000, which
will be offset by a reduction in general and administrative expenses of
approximately $ 1,193,000 as a result of the reimbursement of legal fees
and expenses incurred in connection with the litigation. Accordingly, the
settlement will result in an increase in net loss of $8,827,000 (or
approximately $0.52 per basic and diluted share) for the third quarter of
2000 and for the year ended December 31, 2000. This amount may be increased
in the event that the Company receives an unfavorable outcome in resolving
its dispute with its corporate liability insurance carriers.

The Company currently does not have any financing commitments in place to
meet the settlement obligations described above, but the Company has been
exploring financing opportunities, including possible loan transactions
secured by certain of its numerous unencumbered properties, and is
optimistic that this settlement will enhance those opportunities. However,
there can be no assurances that such financing will be available.

The foregoing settlement was reached in a settlement conference concluded
late Friday afternoon September 1, 2000 before the Honorable Michael R.
Hogan, Presiding Judge in the United States District Court for the District
of Oregon.

BANK LEUMI: Continues to Defend Credit Card Holders’ Suit over Fees
On 24 August 1997 a motion was filed in the Tel Aviv District Court
requesting certification of the filing of a class action against the Bank
and ICC concerning the collection of fees for limiting the liability of
credit card holders; the motion is for certification of a monetary class
action in the amount of some NIS 105 million as of the date on which the
action was filed and for additional remedies.

According to the opinion of the Bank's legal advisers, it appears that the
Bank and ICC have valid defense claims against the motion to certify the
action as a class action and also with respect to the matter at issue.
However, at this stage, it is not possible to evaluate the outcome of the
motion. An action and motion to certify a class action were filed against
the Bank, ICC, and others concerning the collection of excessive
commissions from businesses that honored credit cards. The amount claimed
from all the defendants, jointly and severally, was NIS 1.025 billion as of
the date on which the action was filed. In the opinion of the legal
advisers of the Bank, it is not possible at this stage to evaluate the
outcome of the motion to certify the action and of the action. (Regulatory
News Service, September 5, 2000)

BANK LEUMI: Depositor Claims Promised Interest Bonus in Tel Aviv
On 15 June 2000, an action coupled with a motion to recognize the action as
a class action, was filed against the Bank in the Tel Aviv District Court,
in the sum of NIS 1 billion.

The plaintiff claims that the Bank, in various publications, promises
depositors in shekel deposits on a self-service basis in the direct banking
system, an interest bonus of 1% per annum above the customary interest
rate. It is claimed that these advertisements, as well as the information
given to depositors when making the original deposit, mislead them into
thinking that the interest bonus of 1 % is also given for the periods after
automatic renewal, and not merely for the original deposit period, as is
actually the case.

The plaintiff is accordingly demanding that the Bank also pay him and all
relevant depositors represented by him, the interest bonus for the periods
when the deposits were automatically renewed.

The Bank has valid claims against the action and the motion to
recognize it as a class action, although at this stage it is not
possible to evaluate the outcome of the action. In any event, a
preliminary investigation made by the Bank shows that the amount of
the action is completely baseless and is not material.  (Regulatory News
Service, September 5, 2000)

BANK LEUMI: Suit over Charge Cancellation Commission Seeks Class Status
On 13 July 2000, an action against the Bank coupled with a motion to
recognize the claim as a class action, was filed against the Bank in the
sum of NIS 20 million. The plaintiff claims that the Bank collected NIS 174
from him as commission for canceling a charge over a vehicle, after the
loan had been repaid by him, and is claiming that the commission collected
is contrary to the Banking (Service to Customer) Law, which obliges the
Bank to cancel such a charge after the loan has been repaid, and provides
that the expenses of cancelling the charge will be borne by the Bank. At
this stage it is not possible to evaluate the outcome of the claim.
(Regulatory News Service, September 5, 2000)

BRIDGESTONE/FIRESTONE: Canadian Paper Says Tire Recall Rolling Smoothly
Canadians are rolling with the punches as far as the recall of millions of
Firestone tires is concerned. And it's all happening despite an
industrywide shortage congressional investigations and class-action
lawsuits in the U.S.

In fact, Canadian consumers may be reaping a windfall because of the recall
of 6.5-million tires made by Bridgestone-Firestone Inc., despite reports
some tire models can fall apart on the road and cause accidents under
certain conditions.

"Actually, they love it," says Bill Minicuci, assistant manager at a
Firestone dealer in Toronto. "They're getting a new set of tires and
they're happy with the product as it was. I've had no one coming into the
store and yelling or screaming at all."

George Iny, Montreal-based president of the Automobile Protection
Association, agrees there have been few complaints in Canada since the
recall was announced nearly a month ago. "Our assessment of the situation
in Canada is that this recall is going to be a windfall for consumers
here," Iny says. "People with expensive tires are eligible for four new
tires (and) the relative risk appears to be quite low in Canada."

The U.S. federal agency responsible for highway safety has received more
than 1,400 complaints about the Firestone tires, including reports of 88
deaths and more than 250 injuries that were reportedly the result of
blowouts, tread separation and other tire defects.

The U.S. government warned consumers that 1.4-million Firestone tires the
manufacturer refused to recall could pose a safety risk and should be

The National Highway Traffic Safety Administration says it is examining all
47 million Firestone ATX, ATX II and Wilderness AT tires -- not just the
6.5 million that have been voluntarily recalled by Bridgestone-Firestone.
(The Calgary Sun, September 5, 2000)

DEPT OF PARKS: Cir Ct Precluded Avenue; App Panel Reinstates Temps' Suit
Seasonal workers who claim they were promised virtually full-time jobs with
the Department of Parks should have a chance to prove it, the Kentucky
Court of Appeals ruled last Friday September 1.

Part of a class-action lawsuit to that effect was ordered reinstated in
Franklin Circuit Court. The three-judge appellate panel offered no opinion
about the validity of the allegation itself - only that the circuit court
improperly precluded one avenue by which the claim might be proved.

The case dates to 1993, when the department began requiring dozens of
temporary construction and maintenance employees to sign acknowledgments
that they were allowed to work no more than nine months per year.

The department had been told by the Kentucky Retirement Systems that the
employees would be eligible for retirement benefits if they worked more
than nine months in a year.

The workers claimed they were given oral promises of 11 months of work per
year. The circuit court granted a summary judgment to the department,
ruling it could not be sued over an oral contract, even if the workers
could prove an oral contract was made.

But the appeals court said the contracts are not necessarily void. "It may
be possible that they have been memorialized or ratified in some way by
written documents," Judge William McAnulty said in the unanimous opinion.

"It is not clear whether there is such documentary proof ... or even
whether it would establish a ratification," McAnulty wrote. "However, the
claim does present an issue of material fact for the court's determination.
Therefore, summary judgment was not appropriate for this particular claim."

Judges Joseph Huddleston of Bowling Green and John D. Miller of Owensboro
joined in the opinion by McAnulty, of Louisville. (The Associated Press
State & Local Wire, September 1, 2000)

E.COLI: Twice Hit Walkerton Family Seeks Justice in Court
How much is peace of mind worth when it comes to your child's health?
That's a question on the minds of many Walkerton residents, especially for
the family of toddler Eric Smith, who contracted deadly E.coli twice, two
years ago and again in May.

It's why his father, high school teacher Jamie Smith, has stepped forward
as one of four lead plaintiffs in a lawsuit on behalf of those people
affected by tainted water last spring. They have chosen to seek justice
from the courts instead of through a provincial compensation package.

Life inside the Smith's homey side-split bungalow near downtown Walkerton
reflects the surreal quality of a placid Ontario town under siege. In the
kitchen and bathroom, water taps are concealed under tied plastic bags to
prevent small children from getting at them. A 50-gallon plastic tub that
is laboriously filled for baths sits in the breakfast area.

The garage is half-filled with cases of bottled water which run out every
two days. Stephanie Smith, a travel agent who was laid off during the water
crisis due to lack of business, scratches her hands and arms. They're dry
and itchy from the chlorine bleach with which she frequently disinfects

Kylie, 5, has become "terrified of water." All four family members
experienced some symptoms from the May outbreak - fever, nausea, kidney and
abdominal pain. At 5 p.m. when most children are restless for dinner, Eric
falls asleep exhausted from yet another wracking bout of diarrhea which has

From their backyard patio, one can smell the distinct odour of manure
fromthe town's surrounding farmland - a constant reminder of the animal
waste bacteria that killed six people and sickened 2,000 others after a
torrential storm caused runoff into the town's water supply. "People (in
charge of the water) were either making obvious mistakes or not giving
their full attention to previous outbreaks," Smith said.

Eric had attended a private day care along with three other children who
were infected with the same virulent strain of E. coli in the summer of

Just a few months before, the environment ministry had sent to the
Walkerton Public Utilities Commission a damning report on Walkerton's
water, noting contamination including E. coli. A copy had gone to the
Bruce-Grey-Owen Sound health unit which serves Walkerton.

The ministry demanded improvements. In a return letter in July, 1998, the
very month Eric got sick, the commission wrote promising to fix the
problems. Yet the health unit failed to check the day-care's water or warn
the Smiths that water could be a cause.

Eric was violently ill then and came close to being put on dialysis. "I
thought I was going to lose my son," an emotional Smith recalls. The source
of the 1998 E. coli remained unknown. Eric's parents were told to give him
clear fluids to flush his system so they used his favourite apple juice
diluted with - water. "I was unwittingly poisoning my own child."

The couple and their babysitter were all made to feel guilty when health
officials implied they must have fed the child something harmful, such as
undercooked hamburger. When he learned this latest outbreak came from town
water, and that there had been many occasions over the years when officials
knew the water was suspect, Smith said, "I held my kid sick in my arms and
vowed to God I'd get to the bottom of this."

He's chosen the lawsuit route, he says, because of his loss of trust in the
health unit, and municipal and provincial officials. The 1998 E. coli
episode should have served as a warning that the water was unsafe, alleges
his affidavit in the $300 million class-action suit which a judge has yet
to send for trial.

Smith says he has practical reasons for using the civil courts to fight for
damages. "I want to make sure there's enough money involved if Eric has
long- term problems. Look at the way health care is going towards
privatization. What if he needs a new kidney? "That's the concern of many
parents. They're afraid for the future. We don't know if this disease will
come back on us." Eric wasn't as ill this second time, and the Smiths are
quick to say they know some other children suffered more than theirs this
summer. But they're counting on the justice system to make sure there won't
be a third time. "People (in charge of the water) were either making
obvious mistakes or not giving their full attention to previous outbreaks,"
Smith said.

ENGINEERING ANIMATION: Sued by Investors; Reported Losses; Sells Company
Engineering Animation Inc., the Ames-based software engineering company
that reported repeated losses last year, is being sold to a St. Louis, Mo.,
company for $205 million in cash.

Engineering Animation has worked with Unigraphics Solutions Inc. since
1998, and the acquisition announced is expected to benefit Unigraphics
Solutions' work on the Internet while expanding distribution of Engineering
Animation products, the companies said.

"The Internet's impact on time, geography and idea collaboration ... is
significantly changing the way manufacturers compete," Tony Affuso,
president and chief executive officer of Unigraphics Solutions, said in a

Engineering Animation lost $4.9 million, or 41 cents per share, on revenues
of $18.1 million in the quarter ended June 30. The company lost $40.5
million last year, including a record loss of $16.5 million in the quarter
ended Dec. 31.

The company was established in 1988 by a group of Iowa State University
professors and graduate students and went public in 1996. It is known for
developing 3-dimensional software for car designers and orthodontists, as
well as 3-D programs for children's coloring books.

Engineering Animation was accused in a class-action lawsuit filed in
February 1999 of misleading investors to drive up stock prices. A judge
dismissed some of the claims, but let stand complaints that the company had
violated generally accepted accounting practices. A second lawsuit was
filed in October.

Unigraphics Solutions is known for creating computer-assisted drafting
software programs and Internet business solutions to promote use of the
Internet. The Associated Press, September 5, 2000)

FEDERATED DEPARTMENT: Cauley & Geller Files Securities Suit in New York
The Law Firm of Cauley & Geller, LLP announced on September 5 that it has
filed a class action in the United States District Court for the Southern
District of New York on behalf of all individuals and institutional
investors that purchased the common stock of Federated Department Stores,
Inc. ("Federated" or the "Company") (NYSE:FD) between February 23, 2000 and
July 20, 2000, inclusive (the "Class Period").

The complaint charges that the Company and certain of its officers and
directors violated the federal securities laws by providing materially
false and misleading information about the Company's financial condition.
Specifically, as alleged in the complaint, on February 23, 2000, Federated
issued a press release announcing its financial results for its 1999 fiscal
year, which highlighted an 18% increase in year-over-year earnings per
share. This statement, the complaint alleges, was materially false and
misleading because Federated failed to disclose that it had materially
under-reserved for credit delinquencies in its Federated Direct division,
which was largely composed of Fingerhut Inc.- a Federated subsidiary. When
the Company revealed, in a July 20, 2000, press release, that rising credit
delinquencies coupled with insufficient reserves for such defaults, would
lead to, among other things, a $200-$250 million shortfall in Federated's
fall earnings, the Company's stock price plunged by 15% to $23.5 per share-
which represented a 44% drop from the class period high of $42.0625 per
share on March 21, 2000.

Contact: Cauley & Geller, LLP Sue Null, Jackie Addison or Sharon Jackson
Toll Free: 1-888-551-9944 E-mail: Cauleypa@aol.com

GREATER DANDENONG: Aussi Employees Win the Right to Reinstatement
Melbourne, Sept 5 AAP - Workers sacked by a council and then hired by a
contractor to perform the same duties at a cheaper rate won the right to
their old jobs. The Federal Court decision would have major ramifications
for a number of industries, Maurice Blackburn Cashman partner Josh
Bornstein said. "This is the first successful class action for employees
whose work has been illegally outsourced," Mr Bornstein said in a
statement. "The court has found it is illegal for employers to use
outsourcing to remove employment conditions in an award or enterprise
bargaining agreement."

The Australian Services Union (ASU) took action on behalf of 70 home care
workers from Melbourne's Greater Dandenong Council who were made redundant
early last year. The workers were retrenched after the council invited
tenders for Home Care Services and rejected the in-house bid in favour of a
company, Silver Circle. About 55 workers were then hired by Silver Circle
on below award conditions.

Mr Bornstein, representing the ASU, said the union had come to an
out-of-court settlement with Silver Circle - with the company agreeing to
match most of the employees' previous conditions - shortly after the
contract was awarded. But the case brought against the council would
reinstate those workers who wished to have their council jobs back,
providing them with secure employment. He said the security of employment
provided by a council job, as opposed to one on a contract basis, was a
critical issue for workers.

ASU state secretary Darrell Cochrane said the decision sent a warning to
all local councils across Australia. "The drive for greater efficiency
can't be at the expense of the law and workers entitlements," he said. "The
court decision confirms what the union has said all along - that tendering
should only be about the quality and level of services, not breaking down
wages and conditions of employment." Justice Rodney Madgwick ordered the
parties to confer on the most appropriate remedy for each employee. He said
"there is nothing impracticable about ordering reinstatement" but those who
did not desire this could be compensated if that was appropriate.

Greater Dandenong Council chief executive officer Warwick Heine said the
council would assess its legal options. "We'll be consulting with our legal
team as to whether we appeal," he told AAP. He said the council's contract
with Silver Circle would continue and was not due to expire for another two
years. (AAP NEWSFEED, September 5, 2000)

HAMAGEN INSURANCE: Faces Action over Non-reduction of Insurance Premiums
Bank Leumi discloses that a monetary action in the amount of some NIS 12
million along with a motion to certify the action as a class action was
filed against Hamagen Insurance Company Ltd. The action is in the matter of
the non-reduction of insurance premiums relating to cars whose value has
diminished. The Bank Leumi report suggests that the action is in Tel Aviv.

LEUMI MORTGAGE: Faces Claim in Jerusalem over Insurance Brokerage
A petition was filed by the Association of Insurance Agents in Israel and
the Israel Consumer Council with the Supreme Court in Jerusalem against
various state authorities and against mortgage banks regarding a claim that
the mortgage banks engage in insurance brokerage, and regarding the payment
of commissions by insurance companies to mortgage banks.

Within the framework of the proceedings, the Prosecutors Office filed a
proposed statement of principles for arranging the matter of life and
property insurance relating to housing loans by mortgage banks. It was
distributed in March 1999 to various parties for their comments by the
Supervisor of Insurance, who stated that upon the completion of the process
a final decision would be made regarding the arrangements that would apply.

At a hearing that took place on 2 February 2000 the High Court of Justice
issued an order nisi, requiring the authorities to explain why they have
not acted to end the activities of the mortgage banks in insurance
brokerage as long as the aforesaid activity is not regulated by law. In
addition, the Court instructed the respondents to explain why appropriate
arrangements have not been made that would enable supervision of the
activities of the banks in the area of insurance business.

LEUMI MORTGAGE: Hearing on Commissions on Borrowers’ Insurance in Nov
A motion was filed to certify the filing of a class action for an amount in
excess of NIS 1 billion (as of the date of the filing) against Leumi
Mortgage Bank together with additional mortgage banks, concerning the
collection of commissions on borrowers' life insurance and property
insurance. The exact amount of the claim was unspecified, and no separate
amount was attributed to any of the banks. The Court determined that it was
possible to hear the request for declaratory judgment regarding "the
restrictive arrangement matter and the issue of the various kinds of
insurance", but not regarding the monetary claim. All parties filed
appeals, and the court fixed a date for hearing the appeals on 20 November

In the opinion of Leumi Mortgage Bank's legal advisers, Leumi Mortgage Bank
has valid claims in respect of the appeals. However, at this stage it is
not possible to assess the chances that any of the appeals will be granted,
and no provision has been made.

MATAV CABLE: Families Not Connected Sue Israeli Broadband Provider
Matav Cable Systems Media Ltd. (Nasdaq: MATV), a leading Israeli provider
of broadband cable TV services, announced on September 5 that on August 31,
2000, the Company received notice of a motion for the approval of a class
action filed against it.

The motion was filed on August 21, 2000, in the Haifa District Court, by
six residents of northern Israel, who seek recognition of their action as
representing 10,981 families from northern Israel who's homes, according to
the claim, have not been connected to the cable network by the Company.

If the motion and class action is approved, the court will be requested,
among other things, to require the Company to compensate the families by a
total sum of NIS 69,476,707 and by a additional sum of NIS 2,082,951 for
each month which will pass from the date of filing this motion and until
the connection of the petitioner's homes, and the homes of all those
belonging to the group mentioned above, to the cable network.

Furthermore, the court will be requested to force the Company to connect
all the families belonging to the group mentioned above, who shall request
to be connected, as a cable television subscriber, within 3 months from the
day of such request.

The Company is currently studying the details of the claim.

Matav is one of Israel's three cable television providers, serving roughly
25 percent of the population in a government-mandated monopoly market.
Matav's investments include 15 percent of Partner Communications Ltd., a
GSM mobile phone company, 10 percent of Barak Ltd., Israel's second-largest
provider of international long distance and Internet telephony, and 100
percent of Non-Stop, a new company preparing to offer broadband Internet

MIGDAL: Insurers Alleged of Unlawful Use of Outdated Mortality Tables
Bank Leumi reports that an action, along with a motion to certify the
action as a class action was filed against Migdal and two other insurance
companies concerning alleged unlawful use of outdated mortality tables in
the calculation of the premiums collected for life insurance. In the
estimation of the management of Migdal and based on legal counsel that it
received, it is not possible to evaluate at this stage the results of the
claim against Migdal. Accordingly, no provision has been made for this
action in the Financial Statements. The report suggests that the action is
in Tel Aviv.

MIGDAL, HAMAGEN: Sued for Risk Premium ub Women Managers’ Insurance
Bank Leumi reveals that on 27 February 2000 two actions against Migdal,
Hamagen and other insurance companies were filed in the Regional Labor
Court in Tel Aviv regarding the risk premium paid by women under managers'
insurance policies. Together with the said actions a motion to certify them
as class actions was filed. The plaintiffs claim that the damage to the
represented class in each of the actions, as estimated on the basis of a
number of assumptions, is in excess of NIS 224 million. At this stage, the
management of Migdal cannot evaluate the amount of the exposure and the
changes of the proceedings. Accordingly, no provision has been made for
these actions in the Financial Statements.

N.Y. STATE: High-Minority Public School Students Sue for Civil Rights
CEASER v. PATAKI QDS:02762884 - Plaintiffs, representing a proposed class
of nearly 80,000 students attending high-minority public schools n New
York, excluding schools in New York City, conmenced this disparate impact
action against the State of New York and related defendants, alleging
violation of regulations promulgated under Title VI of the Civil Rights Act
of 1964. Plaintiffs seek "injunctive relief to remedy the unlawful
discrimination that pervades the education that New York State officials
are providing" the proposed class. (Compl. P1.)

"High-minority" public schools are defined as those with over so percent
minority enrollment. (Compl. P2.)

Students from high-minority schools in New York City are currently seeking
relief in state court. See Campaign for Fiscal Equity, Inc. v. State, Index
No. 93-111070 (N.Y. Co. Sup. Ct.).

Now before the Court are defendants' motion to dismiss for failure to state
a claim pursuant to Fed. R. Civ. P. 12(b)(6) and plaintiffs motion for
class certification under Fed. R. Civ. P. 23(b)(2). For the reasons set
forth below, defendants' motion is denied, while plaintiffs' motion is

Plaintiffs are 33 students attending high-minority schools and their
parents or guardians. Defendants are state entities and officials "legally
responsible for the operation of the New York State educational system and
are legally required to assure that its operation complies with relevant
federal law." Defendant State of Now York receives federal funding to
assist with the operation of this system.

Plaintiffs point out that the New York Legislature has passed laws which
require defendants Board of Regents (the "Board") and the commissioner of
the State Education Department (the "Commisioner") to, inter alia, "monitor
the provision of educational services to plaintiffs, take actions to assure
compliance with legal mandates pertaining to the provision of educational
services to the plaintiffs; and assure that the plaintiffs are being taught
by properly certified teachers."

Plaintiffs also point out that thommissioner have themselves promulgated
regulations requiring, inter alia, the following: the provision of remedial
services for children who score below specified levels on standardized
tests administered by the state; suitable and adequate buildings and
grounds; access to appropriate libraries; the opportunity for students to
take courses in preparation for Regents examinations and the opportunity to
earn Regents diplomas; and that defendants monitor the provision of
educational services and assure compliance with relevant law.

The Complaint goes on to cite "data published by the State Education
Department [demonstrating] that the academic achievement of students in
high-minority public schools in New York State but outside of New York City
is significantly lower than that of students in low-minority schools in the
state."  "Low-minority" schools are those with less than 20 percent
minority enrollment. The data evidence disparities in student performance
on state-administered standardized tests, including the Pupil Evaluation
Program (PEP) Test, which is administered to elementary school students;
the Regents Competency Test, which is administered to middle- and
high-school students; and the Regents Examination, which is available to
high school students. Plaintiffs also cite data demonstrating disparity in
the awarding of Regents Diplomas, and drop-out rates.

The Complaint then alleges that high-minority schools "have far fewer
educational resources than do low-minority schools," and attribute this to
"a variety of methods of administration the defendants employ in their
operation of the New York educational system that have specific
discriminatory, disparate impacts upon students in high-minority schools."
These methods of administration, according to plaintiffs: include the
discriminatory manner in which they comply with and enforce the mandates
[1] that all teachers be certified, [2] that students receive remedial
instruction, [3] that students have access to suitable and appropriate
buildings and grounds, [4] that students have access to appropriate
libraries, [5] that students have the opportunity to take Regents courses
and to earn Regents diplomas, and [6] that educational services be
monitored and provided in a specified manner.

"This lawsuit seeks to enjoin these methods of administration." The
Complaint then goes on to specify the defendants' failures to enforce and
assure compliance with the legal requirements mentioned above. The sixth
area noted by plaintiffs, monitoring and enforcement, essentially
reiterates defendants' alleged nonenforcement of the first five areas. The
Complaint later details the lamentable conditions in eleven high-minority

The Complaint also alleges that defendants' system for financing education
is discriminatory. However, in their brief in opposition to defendants'
motion to dimiss, plaintiffs concede that the Complaint "does not include
any Title VI claim against the defendents' finance system"

In their request for relief, plaintiffs ask that the Court "[issue] a
permanent injunction directing the defendants... to cease violating the
plaintiffs' rights and to take any and all action necessary to assure that
the plaintiffs are receiving the educational services to which they are
entitled in a nondiscriminatory manner as required by the laws.

               Defendants' Motion to Dismiss

Under Rule 12(b)(6), a complaint will be dismissed if there is a "failure
to a state a claim upon which relief can be granted." Fed. R. Civ. P.
12(b)(6). The Court must read the complaint generously accepting the truth
of and drawing all reasonable inferences from well-pleaded factual
allegations. Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.
1993). A court should dismiss a complaint only "if 'it appears beyond doubt
that the plaintiff can prove no set of facts in support of his claim which
would entitle him to relief.' " Valmonte v. Bane, 18 F.3d 992, 998 (2d Cir.
1994) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).

Section 601 of Title VI of the Civil Rights Act of 1964 ("Title VI"), 42
U.S.C. @ 2000d, "prohibits any recipient of federal financial assistance
from discriminating on the basis of race, color, or national origin in any
federally funded program." Sandoval v. Ragan, 197 F.3d 404, 501 (11th Cir.
1999). Section 601 of Title VI provides: "No person in the United States
shall, on the ground of race, color, or national origin, be excluded from
participation in, be denied the benefits of, or be subjected to
discrimination under any program or activity receiving Federal financial
assistance." 42 U.S.C. @ 2000d.

The Supreme Court has held that Section 601 itself "only prohibits
intentional discrimination, not actions that have a disparate impact upon
minorities." New York Urban League, Inc. v. New york, 71 F.3d 1031, 1036
(2d Ciruardians Ass'n v. Civil Serv. Comm'n, 463 U.S. 582, 610-11 (1983)
(opinion of Powell, J., in which Burger, C.J. and Rehnquist, J. joined);
id. at 612 (opinion of O'Connor, J.); id. at 641-42 (opinion of Stevens,
J., in which Brennan and Blackmun, JJ., joined)). However, the Court also
concluded in Guardians "that Title VI delegated to federal agencies the
authority to promulgate regulations incorporating a disparate impact
standard." Urban League, 71 F.3d at 1036 (citing Guardians, 463 U.S. at 564
(opinion of White, J.); id. at 623 n.15 (opinion of Marshall, J.) id. at
643 (opinion of Stevens, J., in which Brennan and Blackmun, JJ., joined));
see also Alexander v. Choate, 469 U.S. 287, 293 & nn.8-9 (1985). Title VI
delegates such authority through Section 602, which " '[authorizes] and
[directs]' federal departments and agencies that extend federal financial
assistance to particular programs or activities 'to effectuate the
provisions of section 2000d [Section 601]... by issuing rules, regulations,
or orders of general applicability,' " Powell v. Ridge, 189 F.3d 387,
392-93 (3d Cir. 1999) (quoting 42 U.S.C. @ 2000d-1).

Here, plaintiffs' claim of disparate impact is based on a regulation
promulgated by the former Department of Housing, Education and Welfare
("HEW"), predecessor to the current Department of Education, which provides

A recipient, in determining the types of services, financial aid, or other
benefits, or facilities which will be provided under any such program, or
the class of individuals to whom, or the situations in which, such
services, financial aid, other benefits, or facilities will be provided
under any such program, or the class of individuals to be afforded an
opportunity to participate in any such program, may not, directly or
through contractual or other arrangements, utilize criteria or methods of
administration which have the effect of subjecting individuals to
discrimination because of their race, color, or national origin, or have
the effect of defeating or substantially impairing accomplishment of the
objectives of the program as respect individuals of a particular race,
color, or national origin.

34 C.F.R. I 100.3(b)(2).

Private Right of Action Under Title VI Regulations

As a preliminary matter, the court notes that the Second Circuit has not
yet decided the issue of whether a private right of action exists for
disparate impact claims brought under Title VI regulations. Just recently,
the Second Circuit noted that the issue was an unresolved one, yet declined
to address it. See New York City Envtl. Justice Alliance v. Giuliani, 214
F.3d. 65, 73 (2d Cir. 2000). In Justice Alliance, the court noted that the
Eleventh and Third Circuits have held that a private right of action does
indeed exist under such regulations. Id. (citing Sandoval v. Hagan, 197
F.3d 484 (11th Cir. 1999) & Powell v. Ridge, 189 F.3d 387 (3d Cir. 1999)).
The court then went on to state that "it may be difficult for a plaintiff
to establish that Congress intended to create a private right of action
under @ 602 of Title VI, [but] this is an issue that we need not and do not
reach." Id.

Though defendants do not argue that no private right of action exists under
the HEW regulations, they do point out in a footnote of their brief that
"[there] is a 'serious question' whether a private right of action exists
for disparate impact claims under the Title VI regulations." (Defs.' Br. at
6 n. 3 (quoting South Bronx Coalition for Clean Air, Inc. v. Conroy, 20 F.
Supp.2d 565, 572 (S.D.N.Y. 199B)).)

Defendants contend that in this case, "as in South Bronx, the Court need
not decide the question 'because plaintiff's allegations are insufficient
to support even a prima facie case of "disparate impact" discrimination
under Title VI.' " (Defs.' Br. at 6 n. 3 (citing South Bronx, 20 F. Supp.
2d at 572).) This Court disagrees with that proposition, as Section A.2. of
this opinion explains.

Though the issue has not been briefed by the parties, the Court finds the
reasoning of the Third Circuit in Powell v. Ridge, 189 F.3d at 397-400, to
be especially persuasive on this issue, and holds that a private right of
action under the HEW regulations does exist.

              "Criteria or Method of Administration"

To ultimately prevail on a claim under Title VI regulations: A plaintiff...
must make a prima facie showing that the alleged conduct [has] a disparate
impact. Once such a showing has been made, the burden shifts to the
defendant to demonstrate the existence of a substantial legitimate
justification for the allegedly discriminatory practice. If the defendant
sustains this burden, the plaintiff may still prove his case by
demonstrating that other less discriminatory means would serve the same
objective. New York Urban League, Inc. v. New York, 71 F.3d 1031, 1036 (2d
Cir. 1995) (internal citations and quotations omitted). However, for a
disparate impact claim to survive the current motion to dismiss, "all that
the plaintiff must do is plead that a facially neutral practice's adverse
effects fall disproportionately on a group protected by Title VI." Powell
v. Ridge, 189 F.3d at 394.

Defendants argue that plaintiff's motion must be dismissed because
plaintiffs have failed to allege any actionable criteria or method of
administration employed by the defendants which has a disparate impact on
minorities. Indeed, [the] Regulations are not violated by proof that the
educational services provided by a school system are disproportionately
less beneficial to members of one race than another unless the reason for
that disparate impact is that the [defendant] selected discernable
administrative policies that, although facially neutral, are the functional
equivalent of purposeful racial discrimination.

Grimes v. Sobol, 832 F. Supp. 704, 710 (S.D.N.Y. 1993), aff'd, 37 F.3d 857
(2d Cir, 1994) (emphasis added).

A method of administration or discernible administrative policy may involve
a policy of inaction as easily as affirmative conduct. The Complaint
adequately alleges that defendants have adopted a policy of nonenforcement
of legal mandates evident in five specified areas; certified teachers,
remedial instruction, school facilities and grounds, libraries, and regents
courses and diplomas. The Complaint also adequately alleges that this
policy has had a disparate impact on high-minority schools.

"To survive a motion to dismiss, plaintiffs need merely plead sufficient
allegations to put the defendants on notice of what they intend to prove at
trial." Powell v. Ridge, 189 F.3d at 397. Plaintiffs have done so. Whether
defendants' alleged policy of nonenforcement indeed exists and, if so, is
justified by the circumstances, financial or otherwise, is a question for a
later stage of the proceedings.

            Plaintiffs' Motion For Class Certification

Plaintiffs seek certification of a class defined an follows: all children
attending the approximately 150 New York State public schools located
outside New York City that the New York State Education Department
classifies as "high-minority" by virtue of the fact that more than 80
percent of the students in the school are African-American, Latino, or
otherwise non-Caucasian.

The party seeking certification bears the burden of establishing that the
requirements of Rule 23 are satisfied. Sharif v. New York Ed., Dep't, 127
F.R.D. 04, 87 (S.D.N.Y. 1989). The Court asserts that it may grant
certification only after a "rigorous analysis" of whether the Rule 23
requirements have been satisfied. General Tel. Co. v. Falcon, 457 U.S. 147,
161 (1982). At the same time, plaintiffs' allegations are accepted as true,
and the court must "refrain from conducting an examination of the merits
when determining the propriety of class certification." Weigmann v.
Glorious Food, Inc., 169 F.R.D. 280, 284 (S.D,N.Y. 1996). "[Because] courts
are given discretion to tailor the scope of the class later in the
litigation, liberal consideration of the requirements for class
certification is permitted in the early stages of the litigation." Id.
Indeed, "if an error is to be made with respect to class certification, it
is to be 'in favor and not against the maintenance of a class action.' "
Sharif, 127 F.R.D. at 87 (quoting Gordon v. Hunt, 98 F.R.D. 573, 577
(S.D.N.Y. 1983)).

For their class to be certified, plaintiffs must satisfy all of the
requirements of Rule 23(a) and must fit within one of the three categories
of Rule 23(b). See Marisol v. Giuliani, 126 F.3d 372, 375-76 (2d Cir.
1997). Plaintiffs seek certification under Rule 23(b)(2).

                   Rule 23(a) Requirements

Under Rule 23 (a): One or more members of a class may sue or be sued as
representative parties on behalf of all only if (1) the class is so
numerous that joinder of all members is impracticable, (2) there are
questions of law or fact common to the class, (3) the claims or defenses of
the representative parties are typical of the claims or defenses of the
class, and (4) the representative parties will fairly and adequately
protect the interests of the class.

Fed. R. Civ. P. 23 (a).


Defendants do not challenge the numerosity requirement, which is clearly
satisfied by the proposed class of over 80,000 students attending
high-minority schools outside New York City.


The purpose of the requirement of commonality, as well as of typicality, is
"to ensure that maintenance of a class action is economical and [that] the
named plaintiff's claim and the class claims are so interrelated that the
interests of the class members will be fairly and adequately protected in
their absence.' " Marisol, 126 F.3d at 376 (quoting Falcon, 457 U.S. at 157
n.13). "The commonality requirement is met if plaintiffs' grievances share
a common question of law or of fact." Id.

Plaintiffs identify a common question of law as "whether the defendants'
failure to enforce and to assure compliance with various mandates
pertaining to the provision of educational services is having a disparate
impact on high minority schools so as to violate Title VI." (Pls.' Br. at
17.) They also identify common questions of fact as to "whether the
defendants in fact are failing to enforce and assure compliance with those
mandates and whether such failure is having a disparate impact upon
high-minority schools." (Id.)

Defendants argue that there is no common question of law because
"[plaintiffs] appear not to assert one theory of liability, but at least
five, and there are genuine questions as to which of these five theories of
liability would properly be applicable to which of the proposed 80,000
class members." (Defs.' Br. at 13). Defendants also argue that, as to
common questions of fact, "certification would require fact-specific
inquiries concerning the differential statue and conditions of an estimated
80,000 plaintiffs attending more than 150 high-minority schools, in order
to determine whether all or even most of those schools can be appropriately
included in the class." (Id. at 10-11.) This Court disagrees. As plaintiffs
note, the pinpointing of five specific areas of defendants' alleged policy
of nonenforcement, or the possibility that that policy does not affect
every high-minority school, "does not undermine the commonality of their
claim that defendants have a unitary policy of not enforcing and complying
with certain educational mandates," (Pls.' Reply Br. at 6), in violation of
the HEW regulations.

The court finds ample support in the Second Circuit's decision in Marisol.
There, the district court certified a class of children challenging the
administration of the New York City child welfare system. The plaintiffs
not only challenged various aspects of the welfare system, but also brought
claims under "different statutory, constitutional and regulatory schemes."
Marisol, 126 F.3d at 376-77. The Second Circuit, in affirming
certification, noted the district court's reasoning that:

The unique circumstances of each child do not compromise the common
question of whether, as plaintiffs allege, defendants have injured all
class members by failing to meet their federal and state law obligations.
Indeed, as plaintiffs argue, the actions or inactions of defendants are not
isolated or discrete instance but, rather, form a pattern of behavior that
commonly affects all of the proposed class members.

The commonality noted in Marisol is strikingly similar to the commonality
which plaintiffs in this case have noted. Indeed, this case presents an
even stronger case for certification, as we deal only with a single claim
under the Title VI regulations. Thus, the commonality requirement is met.


"Typicality... requires that the claims of the class representatives be
typical of those of the class, and 'is satisfied when each class member's
claim arises from the same course of events, and each class member makes
similar legal arguments to prove the defendants liability.' " Marisol, 126
F.3d at 376 (quoting In re Drexel Burnham Lambert, 960 F.2d 285, 291 (2d
Cir. 1992)). The Court finds that the typicality requirement is satisfied
for substantially the same reasons the commonality requirement is met: the
State's alleged nonenforcement of legal mandates provides the relevant
course of events, and each named Plaintiff makes the similar legal argument
that this nonenforcement has a disparate impact on high-minority schools.

Defendants contest typicality because plaintiffs "do not aver or establish
that all or most of the named plaintiffs or all or most of the 24 schools
they attend suffer from the five specific forms of inadequacy that are said
to characterize high-minority schools generally." (Defs.' Br. at 7.)
Plaintiffs need make no such showing. As the Third Circuit has recognized:

cases challenging the same unlawful conduct which affects both the named
plaintiffs and the putative class usually satisfy the typicality
requirement irrespective of the varying fact patterns underlying the
individual claims. Actions requesting declaratory and injunctive relief to
remedy conduct directed at the class clearly fit this mold.

Baby Neal v. Casey, 43 F.3d 40, 56 (3d Cir. 1994) (internal citations
omitted). In this case, plaintiffs sufficiently allege that defendants'
nonenforcement disparately impacts high-minority schools and that each of
the named plaintiffs attends a high-minority school. (See Compl. PP8-62.)
The Court sees no need at this point for an inquiry into the specific
conditions at every high-minority school attended by a named plaintiff.

   Adequacy of Representation

"To establish adequacy of representation, plaintiffs must show (1) that
plaintiffs' counsel is competent to handle the case and (2) that there are
no conflicts of interests among the class members." Weigmann v. Glorious
Food, Inc., 169 F.R.D. 280, 286 (S.D.N.Y. 1996). Defendants do not
challenge the competency of plaintiffs' counsel. They do, however, argue
that conflicts likely exist between class members because "it is reasonable
to anticipate that class members who are students at a high-minority school
particularly suffering in one regard, but not in another, may have remedial
interests that conflict with other class members who, by reason of a
different prevalent deficiency at their school, favor quite a different
remedy." (Defs.' Br. at 14.)

As did the district court in Marisol, this Court "is inclined to take a
much broader view of the relief sought in the instant case." 929 F. Supp.
at 692, aff'd, 126 F.3d 372 (2d Cir. 1997). In Marisol, Judge Ward reasoned
that: [All] [plaintiffs] seek declaratory and injunctive relief which would
require defendants to comply with federal and state law. Plaintiffs do not
ask this Court to adjudicate individual claims or to establish policies
with respect to any particular situation. Rather, plaintiffs allege
systemic failures which, if remedied, would result in defendants providing
plaintiffs with services appropriate their individual situations and
regardless of outcome. The Court fails to see how institutional reform such
as this raises potential conflicts among class members such that
certification should be denied.

Likewise, in the present case plaintiffs' claim can fairly be characterized
as seeking systemic injunctive relief which would benefit all class
members. Thus, there are no conflicting interests which prevent

Rule 23(b)(2) demands that: the party opposing the class has acted or
refused to act on grounds generally applicable to the class, thereby making
appropriate final injunctive relief or corresponding declaratory relief
with respect to the class as a whole.

Fed. R. Civ. P. 23(b)(2). The Second Circuit has noted that "pattern of
racial discrimination cases for injunctive relief against state or local
officials for injunctive relief are the 'paradigm' of [Rule] 23(b)(2) class
action cases. Comer v. Cisneros, 37 F.3d 775, 796 (2d Cir. 1994). Here,
plaintiffs have adequately alleged that defendants' policy of
nonenforcement is generally applicable to the proposed class.

            Defendants' Other Objections to Certification

In addition to challenging requirements set forth by Rule 23, defendants
offer other arguments against the proposed class. First, they argue that
the proposed class is under-inclusive because it excludes students from
high-minority schools in New York City. (See Defs., Br. at 20-21.)
Defendants argue that plaintiffs must justify this exclusion, though they
provide no specific reason why such a justification is necessary. As
plaintiffs note, "[that] the putative class excludes high-minority schools
in New York City has no bearing on whether the defendants have acted on
grounds generally applicable to the class, as required by section (b) (2)
of Rule 23." (Pls.' Reply Br. at 9.) The Court also rejects Defendants'
further argument that the class is overbroad simply because it includes
students from Yonkers city schools, which are already subject to federal
court supervision under States v. Yonkers Bd. of Educ., 80 Civ. 6761 (LBS)
(S.D.N.Y.). (See Defs.' Br. at 22.)

However, the Court does note that the class appears to be overbroad in a
sense not noted by defendants, in that the proposed class includes all
students attending high-minority schools. In a disparate impact claim such
as this, it would seem more appropriate that the class include only
minority students attending those schools. The class is thus accordingly
limited. This issue was not briefed by either party. If there should be
reason to modify the class definition approved herein, that can be done.

Finally, defendants argue that certification is unnecessary because, if
plaintiffs are successful on their claim any relief will "benefit the
entire class of students in New York State schools, even without
certification." (Id. at 22-23.) However, certification here allows for the
continuation of this case in light of the likelihood that the named
plaintiffs' claims will become moot before the conclusion of this
litigation. See, e.g., Finberg v. Sullivan, 634 F.2d 30, 64 (3d Cir. 1980)
(en banc) (noting that in light of mootness concerns, certification ensured
that the claims of the "unnamed class members present live

For the above reasons, then, the Court holds that class certification is


In sum, Defendants' motion to dismiss the complaint is denied; and
The following class is certified: All African-American, Latino, or
otherwise non-Caucasian children attending New York State public schools
located outside New York City that the New York State Education Department
classifies as "high-minority" by virtue of the fact that more than 80
percent of the students in the school are African-American, Latino, or
otherwise non-Caucasian. (New York Law Journal, August 24, 2000)

OTTAWA, CHURCH: Former Students of Catholic School to Sue over Abuse
More than 100 former students of a Catholic school on a Northern Ontario
reserve have commenced legal action against Ottawa, the province and the
church claiming decades of physical, sexual and psychological abuse. Many
of the claimants say they were slapped, brutally beaten and sexually
assaulted at St. Anne's Residential School in Fort Albany as part of a
larger attempt to smother their native culture.

"Really, genocide happened at that school," said John-Paul Nakochee, 42, a
student there between 1965 and 1973. "I was slapped for trying to speak my
own language."

Lawyer James Wallbridge has filed 13 individual claims and eight group
statements, each representing about 10 claimants, in Superior Court. Two
more group claims were being processed and Wallbridge said at least 150
people have requested the forms necessary to commence action.

Nakochee's statement of claim alleges he was beaten and sexually assaulted
and also "punished and ridiculed for speaking Cree, or for observing any
aspect of his culture." "He was taught that his parents and his community
were savages and inferior, " the document claims. Nakochee, who heads a
steering committee organizing the lawsuits, is claiming damages of more
than $2 million.

The Archdiocese of Keewatin Le Pas operated St. Anne's from 1904 to 1973 in
the isolated Cree community of 1,400 on James Bay. Cree and Ojibwa children
were forced to live for 10 months a year at the school as part of a failed
federal policy that tried to assimilate aboriginals into white culture.

In 1996, Ontario Provincial Police concluded a three-year investigation
that found evidence of widespread sexual and physical abuse of students at
St. Anne's. Already some former teachers have been convicted.

Ottawa has recognized its role in misconduct by staff and teachers at
residential schools. In 1998, Ottawa apologized and established a $350-
million fund to pay for traditional healing circles and to cover the cost
of counselling for victims.

But the fund does not offer financial compensation for victims and does not
directly address issues of lost heritage, a central focus of the lawsuits.
"Our focus is on physical and sexual abuse," said Wayne Spear, a
spokesperson for the Aboriginal Healing Foundation. "But the projects we
fund do have sections for language and culture."

Lawsuits flooded into the courts soon after the fund was created, and about
9,800 people are now suing Ottawa and the Catholic, Anglican, United and
Presbyterian churches. As many as nine class-action lawsuits have been
filed across Canada but Wallbridge has decided against a class-action suit
because he views the cases as "individual claims." An estimated 105,000
aboriginal children attended Canada's live-in schools from 1930 until the
last was closed outside Regina in 1996. (The Toronto Star, September 5,

TOBACCO LITIGATION: Attorney Raises Question on FL Engle Class Action
(Ronni E. Fuchs; Ronni E. Fuchs is an attorney with the Dechert law firm in
Philadelphia. Dechert represents defendants in smoking and health

Thanks to the enormous size of the award and the nature of the defendants
in the case, last month's $143 billion punitive damages "finding" imposed
upon tobacco companies by a Florida jury escaped few people's attention.
Overlooked in all of the media's and the public's fascination with the
award was the question of how this case ever proceeded as a class action in
the first place. The fact that it did go forward, in the face of a national
judicial trend against class action lawsuits in general and state-wide
class actions against tobacco companies specifically, merited more
attention than it received. This Legal Backgrounder reviews the history of
this case as well as the treatment of a nearly identical case, when it was
reviewed by the highest court of Maryland.

                   The Florida "Engle" Class Action

On October 31, 1994, the Circuit Court of Dade County, Florida certified a
class of all United States citizens who "have suffered, presently suffer or
have died from diseases and medical conditions caused by their addiction to
cigarettes." See R.J. Reynolds Tobacco Company v. Engle, 672 So. 2d 39
(Fla. Third Dist. Ct. App. 1996). On defendants' interlocutory appeal, the
Florida Third District Court of Appeals affirmed the class certification,
but modified the class certification order to limit the class to Florida
residents. Id. The Third DCA held that "the basic issues of liability
common to all members of the class will clearly predominate over the
individual issues." Id. at 41. Although the court recognized that
"individual hearings will have to be held for each class member on at least
the issue of damages, if not other issues as well," it held that
restricting the class to Florida citizens and residents -- a group
plaintiffs' counsel represented at about 40,000 people -- rather than all
United States citizens would sufficiently reduce the burden on the Florida
judiciary. Id. at 41, 42. The Florida Supreme Court denied review. 682 So.
2d 1100 (Fla. 1996).

The Engle case was partially tried using a polyfurcated phased trial plan
that separated issues of defendants' and plaintiffs' conduct. Phase I was
intended to focus on the defendants' conduct. It began on July 6, 1998, and
ended one year later in a set of abstract findings, almost all of which
were adverse to the tobacco defendants. Phase II A presented the same jury
with the conduct and claims of three of the class representatives, who were
chosen by plaintiffs' counsel. That twelve-week phase began on November 1,
1999, and ended with verdicts in favor of two of the three plaintiffs. The
jury found the third plaintiff's claims were time-barred. Phase II B, also
before the same jury, was intended to determine a lump sum punitive award
in which all class members (whose individual claims will be heard by
different juries in Phase III) who obtain liability verdicts and are
awarded compensatory damages may share. That phase began on May 22, 2000.
On July 14, 2000 -- two years after the trial process clanked into gear --
the jury determined that the tobacco defendants should pay $143 billion in
punitive damages. Phase III, which remains to be tried, will involve the
trial of each absent class member's claims. Over defendants' objections,
Phase III trials will not be heard by the Phase I and II jury, but by
different juries. Although plaintiffs' counsel originally estimated the
class size at 40,000, they now estimate it at up to 800,000 individuals.

               The Maryland "Richardson" Class Action

On January 28, 1998, the Circuit Court for Baltimore County, Maryland,
certified a Maryland residents' smokers' class, adopting a class definition
and trial plan virtually identical to Engle's. On May 16, 2000, however,
the Maryland Court of Appeals granted a petition for writ of mandamus to
vacate that class certification order. Philip Morris Incorporated v.
Angeletti, 2000 WL 622933 (Md. May 16, 2000). In ordering the class
decertified, the Maryland Court of Appeals rejected the approach the
Florida court applied in Engle at every turn.


First, while the Florida Supreme Court denied discretionary review of the
class certification order prior to the beginning of trial, the Maryland
Court of Appeals found it to be its duty to conduct such a review prior to
the trial. The Maryland court:

recognize[d] that the parties will incur significant costs and delays if
mandamus relief is not granted and appellate review of the . . . Class
Certification Order is denied until the entry of a final judgment. . . .
Should such expenses have been endured on account of a judgment by the
Circuit Court that suffers from underlying legal error or an abuse of
discretion, they would be as monumental in their unfairness as in their
sheer amount.

Moreover, the Maryland court acknowledged that granting class certification
significantly increases the pressure to settle pending class claims --
regardless of their merit -- rather than face the threat of an exceptional
award of damages:

Should similar undue pressure [to settle] be thrust upon Petitioners here,
owing to a determination by the Circuit Court that is erroneous or abusive
of its discretion, the injustice would be equally attributable to this
Court for hesitating to exercise a discretion, however extraordinary in
nature, with which we are not so much empowered as we are charged. Id.

Second, the Maryland court noted the almost unanimous reluctance of courts
to certify smokers' class actions in the face of the many individualized,
significant issues in smokers' cases. Indeed, just one month earlier, a
trial court in California rejected certification of smokers' claims,
finding it "almost textbook law" that individual claims predominate in
smokers' cases. Brown v. Brown & Williamson Tobacco Corp., No. 711400,
ca.gov/jccp/tobacco/orders/tr000403.html (San Diego Sup. Ct. Apr. 10,
2000). Calling Engle a "lone ebb[] against the countervailing flow of class
certification denials," the Maryland court found Engle's reasoning
"unpersuasive," noting that Engle contained "no analysis of why common
issues predominated over individual issues," and that the opinion was
"devoid of a thorough analysis of the requirements which must be satisfied
before a class is certified." (citations omitted).

Third, the Maryland court rejected the notion that limiting a class to
residents of a single state reduces a smokers' class to a manageable size.
The Maryland court recognized that for a class of Maryland residents, "the
individual issues in this case would necessitate potentially hundreds of
thousands of somewhat extensive individual trials. Such a trial plan . . .
renders the presently proposed class litigation unmanageable. . . ."

Speaking about the Baltimore Circuit Court's class certification order in
terms that could just as well apply to Engle, the Maryland court rejected
the notion that common issues advocated by plaintiffs -- the very same ones
tried in Engle's Phase I trial -- predominated over individual issues in
these cases:

The seeming collective lynchpin of the Circuit Court's finding of
predominance of common issues . . . is 'that the common issues regarding
[Petitioners'] conduct and knowledge . . . are at the core of all of
[Respondents'] liability claims,' . . . that the jury's assessment of 'any
one of these issues may potentially be dispositive of the entire
[lawsuit],' . . . and that 'if [Petitioners] prevail in the adjudication of
the significant common questions, the case is concluded.'

Missing from [the] analysis is any detailed explanation whether common
issues would predominate if the common questions are resolved in
plaintiffs' favor. (citations omitted).

The Maryland court looked down the road and held that because the result of
a Phase I trial "won" by plaintiffs would be to require hundreds of
thousands of individual trials, which would "significantly impact or divert
the public resources earmarked for the judiciary for the next several
years," the class action certified by the circuit court was "unmanageable."

The Maryland court, like other courts around the country, also rejected the
underlying assumption in Engle that the law of the forum state applies to
all absent class members. The Engle court denied a motion to consider the
impact of Florida's "significant contacts" choice of law doctrine on the
trial plan. The Maryland Court, however, found that application of
Maryland's lex loci principles would require a court to perform choice of
law analysis for every class member: "Take, for example, the case of a
person who used tobacco products in one state, initially suffered the
effects of illness in another state, was diagnosed with a tobacco-related
disease or diseases in a different state, and subsequently moved to
Maryland." Because Maryland law would not apply to that person's claims,
the state-wide class is not manageable.

Moreover, although Engle's Phase I included elements of plaintiffs' fraud
claims, the Maryland court held that reliance is such a critical element of
fraud and negligent misrepresentation claims that it "cannot be glossed
over at trial on a classwide basis." Similarly, although Engle's Phase I
tried issues of "generic causation," the Maryland court noted the need for
each plaintiff to prove causation on an individual basis. Id. (citing cases
holding that general causation trials do not advance the resolution of
individual plaintiffs' claims).

Finally, the Engle court adopted a procedure for punitive damages whereby a
single jury assessed a lump sum punitive award from which class members who
prevail in their individual follow-up trials may take. This lump sum was
set before liability was determined as to a single absent class member:
that is, without knowing how many class members would pursue claims - - let
alone win judgments; without knowing what their injuries are; and without
knowing what their damages are.

The Maryland Court of Appeals found that the Maryland trial court's
analogous proposal to have a single jury assess a punitive damages ratio
for use if class members prevail in their individual follow-up trials
violated Maryland law by allowing a jury to award punitive damages before
all of the issues relating to compensatory damages have been decided.
Maryland law requires an award of compensatory damages as a predicate to
punitive damages. The jury deciding punitive damages must retain discretion
in deciding whether to award such damages. Id. Because "the punitive
damages determination would be made [under the trial court's plan] . . .
without any knowledge of how much, if any, compensatory damages would be
awarded to any class member by other juries who would never hear the Phase
I evidence," the "Circuit Court's treatment of punitive damages was error."

Other courts have reached the same result under other states' laws. See
Southwestern Refining Co. v. Bernal, 2000 WL 621146 (Tex. May 11, 2000)
(finding plan whereby jury determines amount of punitive damages after
hearing claims of nineteen class representatives, but before hearing
causation or actual damages evidence for the 885 remaining class members,
prejudicial because it "fails to ensure that punitive damages . . . arenot
grossly out of proportion to the severity of the offense for each of the
885plaintiffs"); Lowery v. Circuit City Stores, Inc., 158 F.3d 742, 758
(4th Cir. 1998), vacated on other grounds 119 S. Ct. 2388 (1999) (holding
that due process forbids a Trial Plan that "would allow the Stage 1 jury to
determine punitive damages before the Stage 2 jury hears evidence of actual
harm to the class members"); Allison v. Citgo Petroleum Corp., 151 F.3d
402, 418 (5th Cir. 1998) (holding that "because punitive damages must be
reasonably related to the reprehensibility of the defendant's conduct and
to the compensatory damages awarded to the plaintiffs, recovery of punitive
damages must necessarily turn on the recovery of compensatory damages").


In Angeletti, the Maryland Court of Appeals understood and utilized in its
opinion each and every pertinent legal and logical criticism that have been
made of these state-wide tobacco class actions. The power of the Maryland
court's logic is quite remarkable when juxtaposed with the approach of the
Florida trial court in Engle. If the Florida appeals court embraces the
teachings of the court in Angeletti, as they justly should, it may well
rule that the Engle jury's $143 billion "statement" should never have been
made in the first place.

WASHINGTON DEPT: To Medically Monitor Workers' Exposure to Pesticide
A Washington appeals court has reversed a decision that denied a group of
pesticide handlers their declaratory judgment petition obliging the state
to require medical monitoring of the workers' exposure to certain
pesticides that affect the nervous system. Rios et al. v. Washington
Department of Labor and Industries et al., No. 24739-9-II (Wash. Ct. App.,
July 21, 2000).

By lowering the level of the cholinesterase enzyme in the blood, these
pesticides seriously affect the nervous system and can cause muscle spasms,
seizures and more severe long-term effects, including death.

The pesticide handlers first requested that the Washington Department of
Labor and Industries (L&I) require this testing in 1986, and then in 1991.
As one of their arguments, the workers said that the state of California
has required monitoring since 1974.

In 1993, L&I adopted a rule recommending a non-mandatory program for
pesticide handlers.

The workers filed this class-action suit seeking declaratory judgment in
October 1997. The Washington Superior Court for Thurston County denied the
motion and the handlers sought discretionary review by the state supreme
court, which denied relief and transferred the matter to the Washington
Court of Appeals.

The workers claim that L&I should have adopted a rule mandating monitoring
for pesticide handlers, relying upon the state constitution and the
Washington Safety and Health Act (WISHA).

The workers argue that WISHA contains mandatory language requiring
implementation of medical monitoring when it is feasible and appropriate:
"The director of L&I shall provide for the promulgation of health and
safety standards in all work places <> and such standards shall
require protective devices and monitoring."

The appeals court ruled that the mandatory language of WISHA required L&I
to mandate medical monitoring, and reversed the denial of the pesticide
handlers' declaratory judgment petition.

The workers were represented by Todd Dale True of Earthjustice Legal
Defense Fund; John Matthew Geyman of Heller, Ehrman, White & McAulifee; and
Daniel Ford of Evergreen Legal Services, all in Seattle.

L&I was represented by Assistant Attorney General Elliot Furst of Olympia,
Wash. (Toxic Chemicals Litigation Reporter, August 11, 2000)

WITTINGSLOW AMUSEMENTS: Operators of Crashed Adelaide Show To Face Suit
Adelaide, Sept 5 AAP - A class action is to be lodged against the operators
of the Adelaide show ride which collapsed on Saturday night, injuring 37
people. Seven people remained in hospital late Tuesday, three of them in a
serious condition, as a result of the collapse of the Spin Dragon. Those
most seriously injured were not on the ride but standing nearby when it

Duncan and Hannon lawyer Patrick Boylen said a class action would be lodged
against the ride's operator, Wittingslow Amusements, in the District Court.
The action seeks compensation for medical bills, pain and suffering and
time off work or study on behalf of those physically or psychologically
hurt by the crash. Mr Boylen said about 15 to 20 people had so far
contacted his firm to join the action. Others were expected to do so in the
coming weeks.

Wittingslow Amusements spokesman Des Wittingslow expressed sympathy for the
victims, but said the four-year-old ride had always been maintained
according to design specifications and Australian safety standards. "All
our staff are very upset about this accident and our deepest sympathies go
to the guests who received injuries and to their families," Mr Wittingslow
said. But he refused to answer questions or speculate on what caused the
ride to collapse.

Workplace Safety officials dismantled the ride and took it to a government
depot for forensic examination. "Until workplace safety and the independent
engineers can tell us what has happened we do not want to engage in any
speculation as to the cause of the accident," Mr Wittingslow said.
Meanwhile, victims and their families, witnesses and staff were offered
trauma counselling by the state's Department of Human Services (DHS). DHS
executive director Brendan Kearney said those affected by the accident
could experience anger, tearfulness, disturbed sleep and mood swings.
"Following trauma such as the Royal Show accident, many people benefit by
talking through their feelings with someone supportive and sympathetic,"
Professor Kearney said. He said in some cases people involved in the
accident could experience severe mental distress lasting for weeks. (AAP
Newsfeed, September 5, 2000)

* Authorities Piece Together Evidence against Suspect in Stock Hoax
Was the man accused of sabotaging a company's stock by issuing a phony
press release a clever cyber criminal or an amateur investor who hatched a
clumsy plan to cover his losses?

Federal documents filed in the case of 23-year-old Mark Jakob reveal the
man authorities say caused Emulex's stock to plunge 62 percent went to
great lengths to cover his tracks, registering at one Las Vegas hotel and
making stock trades from another the day he allegedly perpetrated the hoax.

But the documents also paint a picture of a typical twenty-something who
listed snowboarding and dancing as his hobbies - along with playing the
stock market.

Jakob, charged with securities and wire fraud, faces up to 15 years in
prison if convicted. He was jailed on $100,000 bail.

Jakob is accused of issuing a false press release last Friday stating that
the head of Emulex Corp., a Costa Mesa, Calif., maker of fiber-optic
equipment, had quit and the company was restating its quarterly earnings
from a profit to a loss.

The company's stock plunged after some financial news services, including
Bloomberg and Dow Jones, ran stories based on the bogus release.

Authorities say Jakob, of El Segundo, sent the release because he faced a
huge loss from a "short sale" of 3,000 Emulex shares. A short sale involves
selling borrowed shares of a stock in anticipation that the price will

The bogus release was issued through Internet Wire, an online distributor
of press releases where Jakob had worked. He left the company "on good
terms" a week before the crime, authorities said. A federal complaint
claims Jakob used a computer at Internet Wire to make some of his short
sales on Aug. 17 and 18. Instead of the stock price declining, however, it
began to rise, leaving Jakob with the probability of having to repurchase
the shares at a loss of about $97,000, according to a lawsuit filed by the
Securities and Exchange Commission.

Instead, authorities say, Jakob made more than $241,000 from Emulex trades
after the phony press release was delivered.

On Aug. 23, authorities say, Jakob registered at the Luxor hotel in Las
Vegas. The next day he allegedly opened an e-mail account using a computer
at El Camino College in Torrance, Calif. Jakob attended classes during the
summer session but was not a student at the time of the hoax, the college

Authorities say he e-mailed the news release using language that led
Internet Wire staffers to believe the document had been approved for

Emulex's stock plunged. Jakob then allegedly bought back the 3,000 shares
he had sold short, using a computer at Las Vegas' Mandalay Bay hotel.

Apparently not satisfied to merely cover his losses, authorities say that
within minutes of his first trade Jakob bought 3,500 Emulex shares at their
depressed price and sold them a few days later.

Minutes after the stock crash, Nasdaq halted trading after learning that
the press release was false. Trading resumed that day and the stock made up
most if its losses.

Officials said they will continue their investigation to determine if
anyone besides Jakob was involved in the hoax.

Already one investor has sued Internet Wire, claiming he lost thousands of
dollars as a result of the bogus press release. And a Hartford, Conn.-based
law firm has sued both Internet Wire and Bloomberg. That suit, which seeks
class-action status, alleges that both companies of "recklessly
disseminating materially false and misleading information." (The Associated
Press, September 1, 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  * * *