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              Thursday, October 5, 2000, Vol. 2, No. 194


AA PILOTS: Likely to Appeal against Payment for Work Stoppage
AMERITECH CORP: Consumer Antitrust Suit Dismissed; TCA Reigned Supreme
ARKANSAS: Education Officials Say Funding Data Are Not Audited
BRIDGESTONE/FIRESTONE, FORD: Coordination of Suits to Be Heard Oct. 17
BRIDGESTONE/FIRESTONE: Venezuelans File Suits over Tire Problems in FL

EXXON MOBIL: High Court Upholds $5 Bil Judgment for 1989 Oil Spill
FIRST SECURITY: Shareholders File Suit over Wells Fargo Merger
GUN MANUFACTURERS: CA Ct Says Ignorance No Excuse for Illegal Possession
HMOs: Physicians' Group Turns more to Suits for Patient Service Payments
HSM INC: Investors Appeal against Suit Filed in PA in 1995

P&G: Actors Guild Threatens Boycott for Use of Replacement Workers
PHOENIX TELECOM: Georgia Company Used 4 Web Sites in Fraud, SEC Alleges
POTOMAC ELECTRIC: Vastly Underreported Scope of Oil Spill, Officials Say
QUORUM HEALTH: Stockholders Suit Allege of Inflation of Revenues
RURAL METRO: Defends Securities Suits in Arizona over Missrepresentation

SOUTH CAROLINA: Federal Retirees Lawsuit Comes Before Supreme Court
SYMMETRICOM INC: Investors Appeal against CA Securities Suit Dismissal
T.M. COBB: Defective Window Suit Reinstated in CA Vs. Component Maker


AA PILOTS: Likely to Appeal against Payment for Work Stoppage
American Airlines pilots union representing 10,500 American Airlines
pilots said it will likely ask the U.S. Supreme Court to overturn a
judge's order to pay the carrier $ 45.5 million for dragging out a 1999
work stoppage. The U.S. 5th Circuit Court of Appeals last month upheld
the fine that U.S. District Judge Joe Kendall imposed against the Allied
Pilots Association and its leaders. Kendall found that the second-largest
U.S. airline, a unit of AMR Corp., lost $ 45.5 million in revenue after
pilots ignored his order. (The Atlanta Journal and Constitution, October
4, 2000)

AMERITECH CORP: Consumer Antitrust Suit Dismissed; TCA Reigned Supreme
Balancing the tenets of antitrust law against the mandates of the
Telecommunications Act of 1996, the Seventh Circuit ruled that in the
context of a class-action lawsuit by consumers challenging alleged
monopolistic practices by Ameritech Corp., the TCA reigned supreme, and
the appeals court affirmed the dismissal of the lawsuit. Goldwasser et
al. v. Ameritech Corp., No. 98-1439 (7th Cir., July 25, 2000).

The plaintiffs in the lawsuit are four individual residents of Illinois,
Wisconsin, Indiana and Michigan. Ameritech is the local telephone service
provider in those states, and the plaintiffs are all consumers of local
telephone service in Ameritech's area. The genesis of their lawsuit was
their disappointment with the dearth of competition in the local services
market. Development of competition was a primary goal of the
Telecommunications Act, and when it did not materialize, the plaintiffs
lay blame on the monopolistic practices of Ameritech.

Section 251 of the TCA sets forth the responsibilities of incumbent local
exchange carriers (ILECs) to negotiate in good faith with other carriers
to establish the terms and conditions of interconnection agreements,
through which the competitors can gain access to the facilities and
equipment of the ILECs. The plaintiffs filed a class-action lawsuit
claiming that Ameritech controls more than 90 percent of the markets for
local telephone service in their area and, contrary to the mandate of
Section 251 requiring Ameritech to create access to its facilities, it
had erected substantial barriers to entry into those markets. The
complaint alleged 20 specific exclusionary or monopolistic practices
engaged in by Ameritech, including:

-- Ameritech has not given its competitors nondiscriminatory access to
    its operational support systems;

-- Ameritech has failed to provide its competitors access to poles,
    ducts, conduits and rights-of-way;

-- Ameritech has failed to fully unbundle its network elements,
    including local loops, local transport and local switching; and

-- Ameritech has refused to allow its competitors to connect with its
    local telephone network on just, reasonable and nondiscriminatory

The plaintiffs asserted that Ameritech's practices violated both the
antitrust provisions of the Sherman Act, and of the TCA itself. The
district court dismissed the complaint, ruling that the plaintiffs failed
to state a claim and lacked standing to sue under the antitrust laws. The
U.S. Court of Appeals for the Seventh Circuit disagreed with the district
court on the issue of standing, but agreed with it on the merits of the
plaintiff's case.

With respect to the antitrust claims, the panel explained there were two
elements that needed to be shown to establish unlawful monopolization by
Ameritech: the possession of monopoly power in the relevant market and
the willful acquisition of that power as distinguished from growth or
development as a consequence of a superior product, business acumen or
historic accident.

Under a pure antitrust analysis, even a firm with significant market
power has no duty to deal with certain suppliers or distributors, unless
it can be shown that its decisions are part of a broader effort to
maintain its monopoly power. In the context of telecommunications, the
TCA established numerous affirmative duties requiring a company to help
its competitors that went far beyond the mandates of unadorned antitrust
law. The fundamental fallacy of the plaintiffs' complaint was that the
duties imposed by the TCA were not coterminous with duty of a monopolist
to refrain from exclusionary practices under antitrust law. To the extent
such duties existed, they arose out of the TCA, not out of antitrust law.

The court added that it would be undesirable to assume that a violation
of the TCA equated to exclusionary behavior under an antitrust analysis,
given the elaborate enforcement structure created by Congress to
transition from the regulated telecommunications markets to the hoped-for
competitive markets of the future.

The Seventh Circuit was careful to note that it was not holding that the
TCA confers immunity on behavior that would other wise violate antitrust
law; rather, it was simply holding that the statute imposes duties on
ILECs that are not found in antitrust law and that those duties do not
conflict with antitrust law.

The appeals court also addressed the plaintiffs' claims that Ameritech's
practices violated the Telecommunications Act itself. The court observed
that in its simplest terms, the lawsuit boiled down to a claim for
overcharges that Ameritech has been able to impose as a result of its
failure to carry out its responsibilities under the TCA. As such, the
Seventh Circuit agreed with the district court's conclusion that the
claims were barred by the filed-rate doctrine. The doctrine precludes
courts from re-examining the reasonableness of rates that have been filed
with regulatory commissions, in this case the Federal Communications
Commission. The court was bound by the doctrine, and affirmed the
dismissal of the plaintiffs' TCA claims. (Antitrust Litigation Reporter,
September 2000)

ARKANSAS: Education Officials Say Funding Data Are Not Audited
An expert for the Lake View School District testified Tuesday that the
formula for funding Arkansas' public schools does not meeting strictures
set forth in a 1994 court order.

Economist Charles Venus testified that current school funding does not
meet two of three tests from the earlier order. His statements are in
conflict with a state Education Department research analyst who testified
earlier that the current system fulfills the 1994 order.

The Lake View School District is the lead plaintiff a lawsuit that claims
the funding formula still leaves poor school districts without enough
money to give students the same educational opportunity as students in
wealthy districts.

The state argues that funding changes initiated since the court order -
allocating funds on a per-student basis and establishing a statewide
standard local tax rate - made the state's distribution of $1.7 billion
in public school funding equitable.

Venus estimated the state would have to have spent an additional $274
million to $418 million in 1998-99 to equalize per-pupil spending among
districts. He said the number varies, depending on which of the
statistical measures is used from the 1994 order by former Pulaski County
Chancellor Annabelle Clinton Imber.

Chancellor Collins Kilgore is considering whether the revised system is
constitutional, and whether the amount is adequate to educate all public
school students.

Earlier, Education Department analyst Tristan Greene testified that the
state funding system meets all three tests in Imber's order. Greene
applied the equity measures to the revenues that each school district
gets to educate students. Venus worked with what the districts spend per
student, as did Imber.

Lake View lawyers have argued that the state formula violates Imber's
order because it is based on revenues rather than expenditures.

The state says using Education Department revenue figures is more
accessible and more uniformly calculated than expenditures, which are
reported by each school district.

Lake View lawyers and lawyers for the state argued Tuesday over the
accuracy of the 1998-99 expenditure figures, which were given to the Lake
View lawyers by the Education Department. Assistant Attorney General
Brian Brooks asked Venus whether his analyses would be flawed if the
state data he used was flawed. Venus said that was unlikely because the
state was so far from meeting two of the tests.

State Sen. Bill Lewellen, D-Marianna, Lake View's lead counsel, asked
Kilgore to rule immediately in Lake View's favor and to sanction the
state for providing false data. Kilgore turned away the request but
questioned the accuracy of expenditure reports on which Imber based her
order. Education officials told the judge that they attempt to verify the
data but said the information is not audited. Department officials said
the annual report contains a disclaimer on accuracy. (The Associated
Press State & Local Wire, October 4, 2000)

BRIDGESTONE/FIRESTONE, FORD: Coordination of Suits to Be Heard Oct. 17
Bridgestone/Firestone and Ford Motor Co. face significant hearings this
month on coordination of all federal lawsuits against them and on
plaintiffs' demands for an expanded tire recall, according to Hayes Law
Reports' Motor Vehicle Product Liability journal.

Judges who make up the Judicial Panel on Multidistrict Litigation will
meet in Washington, D.C., Oct. 17 on a motion to consolidate by Tennessee
plaintiff Martin Brookes. Brookes suggested transferring the federal
cases to either the Middle District of Tennessee or the Southern District
of Illinois, where a class action with 165 named plaintiffs is pending.
Plaintiffs in the Illinois case support Brookes' motion. Ford has asked
the panel to consider transferring the cases to the Northern District of
Illinois, in Chicago, rather than the Southern District.

On Oct. 16, a federal judge in Illinois will consider a request for
injunctive relief by the Gustafson plaintiffs asking that the recall be
expanded beyond specified lots of ATX, ATX II and Wilderness tires
currently affected. Those model tires have been standard equipment on
Ford SUVs. A similar motion for an expanded recall is pending in a
lawsuit filed in the District of Columbia by the Center for Auto Safety.

There are currently more than 100 cases pending against
Bridgestone/Firestone, many of them removed to federal court by
Bridgestone/Firestone since the initial motion for an MDL. At last count,
plaintiffs in 47 cases were asking federal courts for class relief and
another 41 were seeking damages on behalf of individuals.
Bridgestone/Firestone and Ford have moved to stay proceedings in most of
the cases until the Judicial Panel decides on the transfer motions.

Hayes Law Reports, based in Wilmington, Del., publishes the monthly Motor
Vehicle Product Liability report, and a monthly legal journal on
E-Commerce. The company also conducts specialized litigation research for
insurers, securities analysts and attorneys. For information write to:
Hayes Law Reports, PO Box 5027, Wilmington DE 19808-0027; call (302)
995-1269; or email jhayes@hayesreports.com. (Source: Hayes Law Reports)

BRIDGESTONE/FIRESTONE: Venezuelans File Suits over Tire Problems in FL
Venezuelans file suits against Firestone Caracas, Venezuela ---
Venezuelan victims of accidents involving Ford vehicles and
Bridgestone/Firestone tires have filed or are in the process of filing 35
civil suits against the companies in a Florida federal court, a Miami
lawyer handling the cases said Tuesday. Attorney Victor Diaz said the
suits are seeking punitive as well as compensatory damages. (The Atlanta
Journal and Constitution, October 4, 2000)

EXXON MOBIL: High Court Upholds $5 Bil Judgment for 1989 Oil Spill
In a blow to Exxon Mobil's effort to overturn a $ 5 billion judgment
against the company for the 1989 oil spill in Prince William Sound, the
U.S. Supreme Court on Monday declined to hear the company's appeal on an
aspect of the company's ongoing court case.

The high court's decision upholds a lower-court ruling that dismissed
Exxon's contention of jury tampering in Anchorage.

The heart of Exxon's case is still under consideration by a panel of
judges on the 9th U.S. Circuit Court of Appeals. Exxon is arguing the
multibillion-dollar penalty is too much. Exxon is also arguing that a
controversial settlement agreement that the company made with seven
Seattle-based fish processors, under which the processors would give back
their entire share of the punitive award to Exxon, is legitimate.

But Monday marked the end to one of the bizarre moments of the Exxon
trial in Anchorage. As jury deliberations ground forward in 1994, one
jury member balked at making a huge ruling against Exxon. A bailiff
pulled a bullet out of his gun and held it before another jury member,
suggesting they should put the reluctant juror ''out of her misery.''

The plaintiff's attorney contended the statement was a joke and was never
circulated to the woman. Exxon contended the bailiff's words were a form
of coercion, pushing the woman to decide against Exxon.

Federal District Judge Russel Holland, who oversaw the Anchorage trial,
discounted the incident and allowed the verdict to stand.

Since the ruling in Anchorage in 1994, Exxon has repeatedly vowed to
appeal the case to the Supreme Court. With the first part of Exxon's case
to reach the court getting an apparent cold shoulder, Exxon spokesman Tom
Cirigliano said the company was unfazed. ''This is just one of several
issues that needs to be resolved by the courts. It still leaves our case
very strong,'' Cirigliano said. He added that the company still sees the
bailiff's actions as troubling. ''When a bailiff holds up a bullet to a
deadlocked jury, that's irregular,'' Cirigliano said.

Brian O'Neill, an attorney for the thousands of Alaska plaintiffs,
expressed relief at the Supreme Court's decision not to review the jury
tampering issue. The question was a volatile one, he said. Had the issue
gained traction with the justices, it could have derailed the whole
complexion of the lawsuit, casting Exxon as a victim and the jurors as
having acted under pressure.

Though relieved, O'Neill also said he expected the Supreme Court to pass
on reviewing on the issue. ''The Supreme Court likes cases of broad
significance. The Exxon Valdez is a drunk-driving case. The court is not
going to make a new law on a drunk-driving case,'' he said.

O'Neill said he expected resolution of the case within a year. On top of
the $ 5 billion levied as punishment against Exxon, the jury awarded $
300 million in direct economic damages. With interest, the total judgment
now totals $ 6.4 billion, he said. O'Neill also said he believes Exxon's
argument that the settlement is excessive is eroding with time,
particularly in light of settlements now being paid by tobacco companies.
The tobacco settlements run into the tens of billions of dollars.

In the fishing town of Cordova, where hundreds of residents sustained
losses due to the spill, fisherman Ross Mullins took the news of Exxon's
loss Monday with weary optimism. The war is not over, he noted. ''It's
been 11 years since the spill,'' Mullins said.

With most Sound herring fisheries closed in recent years because of low
stocks and with disastrous pink salmon runs in 1992 and 1993, some local
fishermen washed out of the business, Mullins said. Some moved on to
different fishing in different parts of the state. Others, like Mullins,
now simply make less money. ''People around here could use it. I could
use it,'' Mullins said of his share of the $ 5 billion.

The bailiff who made the comments at the root of Monday's ruling lost his
job after an internal investigation. He died four months later, in spring

Milestones of the Exxon Valdez oil spill and the ensuing lawsuit:

*  March 24, 1989: Exxon Valdez tanker runs aground in Prince William
    Sound, spilling at least 11 million gallons of oil.

*  Oct. 1, 1991: Federal and state governments settle criminal and civil
    claims against Exxon for $ 1 billion.

*  Sept. 16, 1994: A federal court jury rules Exxon must pay $ 5.3
    billion to an estimated 30,000 fishermen, Native Alaskans,
    landowners and other people. It was the second-largest jury verdict
    in U.S. history and the largest punitive award ever against a

*  June 19, 1997: Exxon appeals to the 9th U.S. Circuit Court of Appeals
   the $ 5 billion punitive portion of the verdict.

*  May 3, 1999: A panel of three appellate judges hears oral arguments
    on three issues: 1) Is $ 5 billion excessive? 2) Is a group of
    seafood processors entitled to a share of the punitive damages? 3)
    Did a bailiff's contact with the jurors constitute jury tampering or

*  March 16, 2000: Appellate judges rule there was no jury tampering or
   coercion. Other two issues remain pending.

*  Monday: U.S. Supreme Court upholds the appellate decision on jury

*  Pending: Appellate court ruling on $ 5 billion in punitive damages
   and on seafood processors issues. (Anchorage Daily News, October 3,

FIRST SECURITY: Shareholders File Suit over Wells Fargo Merger
A First Security shareholder has filed suit alleging the banking
company's board of directors did not act in the best interest of
stockholders when it approved First Security's sale to Wells Fargo.

Leland Stenovich of Elko, Nev., filed the proposed class-action lawsuit
in 3rd District Court just weeks before Wells Fargo's acquisition of
First Security is set to close.

First Security shareholders overwhelmingly approved the merger in August,
and the deal received approval from the U.S. Justice Department last

The suit alleges the directors "didn't get the best deal they could for
the shareholders ... when they sought a bid from Wells Fargo," said Blake
Harper, an attorney for Stenovich in San Diego.

First Security spokeswoman Jackelin Slack said the lawsuit will not delay
the closing of the deal, but she declined to comment further.

First Security Chairman and CEO Eccles agreed to sell First Security to
Wells Fargo in April, just 10 days after shareholders of Zions
Bancorporation rejected their company's proposed acquisition of First

The First Security board approved the sale "not because it was in the
best interest of First Security shareholders but because Eccles was
personally angry and humiliated and wanted to punish Zions and its
management because Zions shareholders had voted down a proposed merger of
Zions and First Security," the lawsuit alleges.

"To spite Zions' management for what Eccles perceived to be a personal
affront, Eccles and the other defendants quickly initiated and pursued a
merger with Wells Fargo, embracing a course exactly opposite to First
Security's prior long-term strategic plan," the suit contends.

Eccles had agreed to allow Zions to acquire First Security in June 1999
and the deal was nearing completion when First Security announced on
March 3 it would have a disappointing first quarter.

The announcement, which sent shares in First Security and Zions plunging
by more than a 25 percents, led Zions shareholders to reject the deal.

The Wells Fargo deal isn't as financially attractive to First Security
shareholders as the original deal with Zions would have been.

Eccles has maintained the Wells Fargo deal is the best deal for First
Security shareholders and he was not obligated to try and salvage a deal
with Zions.

The lawsuit is the second to be filed against First Security this year
relating to the failed merger with Zions.

A proposed class action lawsuit was filed in May by shareholder Harvey
Anderson in U.S. District Court alleging top bank officials concealed the
earnings problems that ultimately derailed its merger with Zions. The
suit, which is still pending, seeks unspecified damages for anyone who
bought First Security common stock between Oct. 18, 1999 and March 2.
(The Associated Press State & Local Wire, October 4, 2000)

GUN MANUFACTURERS: CA Ct Says Ignorance No Excuse for Illegal Possession
The California Supreme Court has held that owners of illegal assault
weapons can be sent to prison even if they did not know that their
firearms had been banned. In a 5--2 ruling, the high court asserted that
prosecutors do not need to prove an owner actually knew a semiautomatic
weapon was a model that had been outlawed, only that the owner should
have known. People v. Jorge M. (Product Liability Litigation Reporter,
September 2000)

HMOs: Physicians' Group Turns more to Suits for Patient Service Payments
Texas' leading doctors' group is becoming more aggressive about suing
health plans on behalf of its members for slow-paying or not paying
necessary patients' services. The Texas Medical Association's
policy-making body has passed a resolution to begin litigating over
perceived abuses, such as not paying doctors enough for their work or
using administrative obstacles to slow payment, according to the Texas
Journal of The Wall Street Journal. "Doctors are just so frustrated with
the system that's in place they feel like they have to enforce the laws
themselves," Rocky Wilcox, the association's general counsel, told the
newspaper in its Wednesday editions.

Until now, the physicians' group has concentrated on legislative rather
than judicial action on behalf of members. But individual doctors under
contract to health maintenance organizations have previously filed
lawsuits claiming to be improperly reimbursed.

Lawyers for the Austin-based association is considering whether to join a
lawsuit like one filed last year by Dr. Todd Samuelson, a Fort Worth ear,
nose and throat specialist, against United Healthcare of Texas Inc., a
subsidiary of Minneapolis-based UnitedHealth Group Co. in state court in
Fort Worth, Wilcox said. Papers filed in that lawsuit contend that United
reduced Samuelson's compensation in violation of his contract. A hearing
to determine whether it should be treated as a class action on behalf of
other Texas physicians under contract with United is scheduled for Nov. 2
before Judge Thomas Wilson Lowe III.

"We believe we followed the terms of the provider agreement," a United
spokesman said, contending that the lawsuit, seeking unspecified damages,
was meritless.

Several Texas law firms, which Wilcox declined to name, have agreed to
take cases like the Samuelson lawsuit and others that the association may
file or join on behalf of doctors on a contingency basis, with lawyers
receiving a fixed portion of any judgment - or nothing if the case is

Such lawsuits are unnecessary, according to the leading industry group
representing health plans. "We would prefer to continue to work on these
things and avoid litigation," Leah Rummel, head of the Austin-based Texas
Association of Health Plans, a lobby group, said.

Representatives of large health plans meet regularly with the TMA to
discuss individual physician complaints, she said, and is drafting a
joint proposal to create a standard form for pre-authorizing services and
making referrals to specialists. The TMA, for the past several years, has
working for state legislation to restrict the power of HMOs over stiff
opposition from the insurance industry. The lobbying group three years
ago succeeded in passage of a bill allowing patients to sue HMOs if they
are denied treatment or suffer harm.

Doctors contend that, with health plans under increased pressure to
control rising health care costs, they are refusing to pay for many
necessary services or using so-called "downcoding" or "bundling" to
prevent full payment.

Association members said in downcoding, a doctor sends in a large bill
seeking reimbursement for a complicated office visit but the health plan
classifies it as a routine visit and reimburses the doctor at a lower
rate. In bundling, a patient sees a doctor for several services, but the
health plan pays for only one of the treatments or combines them and
reimburses the doctor at a discounted rate. "It's called theft and it's
happening a lot," said Fort Worth general surgeon Robert Lovett, adding
that bundling will cost him several thousand dollars this year. (The
Associated Press State & Local Wire, October 4, 2000)

HSM INC: Investors Appeal against Suit Filed in PA in 1995
John W. Matthews, et al. v Kidder, Peabody & Co., et al. and HSM Inc., et
al., filed on January 23, 1995 in the United States District Court for
the Western District of Pennsylvania, is a class action on behalf of
approximately 6,000 limited partners who invested approximately $85
million in three public real estate limited partnerships (the
"Partnerships") during the period beginning in 1982 and continuing
through 1986. The defendants include HSM Inc., a wholly- owned subsidiary
of Grubb & Ellis Co., and several subsidiaries of HSM Inc., along with
other parties unrelated to HSM Inc.

The complaint alleges violation under the Racketeer Influenced and
Corrupt Organizations Act ("RICO"), securities fraud, breach of fiduciary
duty and negligent misrepresentation surrounding the defendants'
organization, promotion, sponsorship and management of the Partnerships.
Specific damages were not pled, but treble, punitive as well as
compensatory damages and restitution were sought.

Following the court's dismissal of the complaint by Partnerships I and
III due to the plaintiff's lack of standing, in September 1996, the
district court granted plaintiff's motion to file an amended complaint to
add additional plaintiffs, and granted plaintiffs' motion for class
certification with respect to Partnerships I, II and III. Plaintiffs then
filed an amended complaint adding new party plaintiffs in order to
preserve claims relating to Partnerships I and III. The case was stayed
in September 1996, pending the outcome of defendants' subsequent appeal
to the United States Court of Appeals for the Third Circuit on the
question of the applicability of the Private Securities Litigation Reform
Act of 1995 (the "Securities Litigation Reform Act") to the case.

The Third Circuit Court of Appeals entered an order in November 1998
holding that the Securities Litigation Reform Act was not applicable to
this case and that plaintiffs may proceed with their RICO claims against
the defendants. Defendants filed a petition for writ of certiorari with
the United States Supreme Court appealing the Third Circuit's decision,
which was denied on April 19, 1999. Discovery has been completed.

On August 18, 2000, the district court issued an opinion granting
defendants' motions for summary judgment dismissing the federal RICO
claims as time-barred under the statute of limitations. As to the state
law claims for breach of fiduciary duty and negligent misrepresentation,
the court declined to exercise supplemental jurisdiction and dismissed
them without prejudice. The court declined to rule on defendants' motion
to decertify the class because it was moot. Plaintiffs have filed a
notice of appeal to the Third Circuit Court of Appeals.

The Company has, and intends to continue to, vigorously defend the
Matthews action, and believes it has meritorious defenses to contest the
claims asserted by the plaintiffs. Based upon available information, the
Company is not able to determine the financial impact, if any, of such
action, but believes that the outcome will not have a material adverse
effect on the Company's financial position or results of operations.

P&G: Actors Guild Threatens Boycott for Use of Replacement Workers
Screen Actors Guild threatens P&G boycott Cincinnati --- Procter & Gamble
will face a U.S. boycott led by the Screen Actors Guild, which objects to
the company using replacement workers to make commercials while the union
is on strike. The actors group is determining which products to single
out in the consumer boycott, union spokeswoman Ilyanne Kichaven said, and
details are expected by next week. The guild and the American Federation
of Television and Radio Artists have been on strike against the
advertising industry since May 1 over compensation. (The Atlanta Journal
and Constitution, October 4, 2000)

PHOENIX TELECOM: Georgia Company Used 4 Web Sites in Fraud, SEC Alleges
A Georgia company used four Web sites to solicit customers as part of a
securities fraud that raised $74 million from gullible investors, most of
them elderly people, an Atlanta federal court suit alleges. Securities
and Exchange Commission v. Phoenix Telecom L.L.C. et al., No. 00-CV-1970,
complaint filed (N.D. Ga., Aug. 2, 2000).

The civil action filed by the Securities and Exchange Commission in the
Northern District of Georgia alleges that Atlanta-based Phoenix Telecom
L.L.C. and its three principals -- Jerold Benjamin Clawson, 49, of Cape
Coral, Fla.; Jerry Deland Beacham, 50, of Atlanta; and H. Ellis Ragland
Jr., 55, also of Atlanta -- sold illegal investment units in
coin-operated telephones. According to the suit, the defendants
commingled funds and illegally used millions for operational expenses.

"The investment program was operated as a Ponzi scheme, i.e., a scheme
whereby returns are paid to investors from monies contributed by later
investors," the complaint alleges.

The suit asserts that Phoenix, which raised $74 million from 2,000
investors beginning in 1997, currently has a negative net worth of $25.6
million. According to the complaint, investors were solicited on four
Phoenix Web sites with promises of 14.1 percent returns. Principal was
purportedly protected by insurance policies. Each investor purchased a
coin-operated telephone for $7,000 and leased it back to Phoenix,
receiving a monthly $82.25 investment unit check for five years. The SEC
maintains that the investment units were securities under federal law.

Sales materials on one of the Web sites offered the following:

* Alternative Income Opportunity

* Competitive Double Digit Return: Fixed annual return.

* Safety: You hold the title to a valuable income-producing asset.

* Liquidity: You have the option to liquidate early!

* Insurance: Your asset is insured for 100% of its value.

* Monthly Income: Income that you can count on!

* Tax Advantage: You can depreciate you asset and receive valuable tax

* End of Lease Options.

* Refund Principal-Full return of principal.

* Renew for an additional 5-year period.

* Retain title and mange yourself.

"The web site is misleading in that it does not disclose that both the
return and the insurance, which purportedly protects the investment, are
totally dependent on Phoenix's viability, which in turn is dependent on a
continuing stream of new investors," the complaint alleges.

The alleged Ponzi scheme came to light on July 5 when Phoenix failed to
make its monthly unit payments to investors.

The SEC's complaint makes claims for fraud and securities registration
violations under the Securities Exchange Act and the Securities Act. The
suit seeks disgorgement of ill-gotten gains, an order freezing the
company's assets, and unspecified civil monetary damages.

The SEC is represented by William P. Hicks, Edward G. Sullivan and James
E. Long of the commission's Atlanta District Office. (E-Trading Legal
Alert, September 1, 2000)

POTOMAC ELECTRIC: Vastly Underreported Scope of Oil Spill, Officials Say
Potomac Electric Power Co. vastly underreported the scope of the oil
spill from a pipeline at its plant in Aquasco, then had problems with
contractors cleaning up after the April 7 incident, federal officials

Bradley M. Campbell, the regional administrator of the federal
Environmental Protection Agency, told members of the Maryland Senate's
Economic and Environmental Affairs Committee that his agency was
restrained in its first response to the spill "because the initial call
to EPA indicated that the volume of oil was very small."

Federal data disclosed at the hearing by a transportation official showed
that Pepco initially reported that 2,000 gallons of fuel oil had been
spilled, but it turned out that at least 42 times as much oil had been

Campbell also said that communication among the many state, federal and
private agencies responding to the spill was at a "high level" but that
some of Pepco's private contractors for the cleanup had to be fired after
they failed to place containment booms across key waterways near the
plant, allowing the oil to spread.

"We need to make sure we have the contractors," Campbell said.

More than 100,000 gallons of fuel oil spread to the river and surrounding
waterways after a pipeline burst near the power plant. The oil spread
across at least 17 miles of Patuxent River shoreline, much of it in
Calvert County. At least 100 birds, mammals and reptiles died, and many
others were injured.

Immediately after the spill, the U.S. Department of Transportation's
Office of Pipeline Safety shut down the 51.5-mile pipeline, which carried
fuel oil between Pepco's Chalk Point plant and Piney Point on the Potomac
River in St. Mary's County.

Pepco officials have said their efforts to isolate the oil were thwarted
the day after the spill by a storm with high winds that pushed the oil
past containment barriers on Swanson Creek and into the nearby Patuxent.

Despite the criticism of Pepco, the company has received high marks by
many for its ongoing efforts to restore the affected area. John M.
Derrick Jr., Pepco's chairman and chief executive, once again publicly
apologized for the spill at the hearing and said the company has spent
more than $ 60 million so far on the cleanup.

The hearing may lead to new pipeline legislation, said state Sen. Roy P.
Dyson (D-St. Mary's), a committee member. "I think the response . . . was
laughable," he said at the hearing.

The federal Transportation Department also found that the pipeline was
not shut down until about an hour after the problem was detected. Dyson
pressed company officials, who have maintained that they had the leak
under control about 30 minutes after detecting it, to explain the lag.

"What happened prior to that time?" he asked.

Derrick told the committee the company shut down the pipeline as soon as
it was known where the pipeline was leaking oil into Swanson Creek beside
the plant.

"As soon as we had confirmed that there was oil in that creek, we pulled
the trigger," Derrick said.

Numerous class action lawsuits have been filed against Pepco on behalf of
private property owners.

The National Transportation Safety Board, which discovered a crack in the
pipeline, is continuing to investigate the incident. Robert J.
Chipkevich, director of the NTSB's Office of Pipeline and Hazardous
Materials Safety, testified that shortly after the spill was
detected--Pepco initially reported that 2,000 gallons of oil had been
released instead of the far greater 2,000 barrels eventually found to
have been released.

Chipkevich also disclosed that federal investigators were focusing on a
1997 internal inspection log that identified a connective fitting as
being near the spot where the pipe later cracked. Investigators failed to
find that fitting when they recently dug up the pipe but instead found a
bulge in the line where a five-inch crack was. "There was no fitting
there," Chipkevich said after the hearing.

Pepco workers have been working to restore private property, beaches and
shoreline along and near the Patuxent River through the summer. Though
the first phase of cleanup is essentially complete, long-term restoration
of the environmentally sensitive area could take years. (The Washington
Post, October 4, 2000)

QUORUM HEALTH: Stockholders Suit Allege of Inflation of Revenues
In October and November 1998, some of the stockholders of Quorum Health
Group Inc. filed lawsuits against the company in the U.S. District Court
for the Middle District of Tennessee. In January 1999, the court
consolidated these cases into a single lawsuit. (M.D. Tenn. No.
3-98-1004) The plaintiffs filed an amended complaint in March 1999. The
plaintiffs seek to represent a class of plaintiffs who purchased the
company’s common stock from October 25, 1995 through October 21, 1998,
except for the company’s insiders and their immediate families. The
consolidated complaint names Qrorum Health, several of the company’s
officers and one of its outside directors, as defendants.

The complaint alleges that defendants violated the Securities Exchange
Act of 1934. The plaintiffs claim that the company materially inflated
its net revenues during the class period by including in those net
revenues amounts received from the settlement of cost reports that had
allegedly been filed in violation of applicable Medicare regulations
years earlier and that, because of this practice, this statement, which
first appeared in the company’s Form 10-K filed in September 1996, was
false: "The Company believes that its owned hospitals are in substantial
compliance with current federal, state, local, and independent review
body regulations and standards."

In May 1999, the company filed a motion to dismiss the complaint. The
plaintiffs have filed papers opposing the motion, and the judge has not
yet ruled on the motion. We intend to vigorously defend the claims and
allegations in this action.

RURAL METRO: Defends Securities Suits in Arizona over Missrepresentation
Rural Metro Corp., Warren S. Rustand, the company’s former Chairman of
the Board and Chief Executive Officer, James H. Bolin, the company’s Vice
Chairman of the Board, and Robert E. Ramsey, Jr., our Executive Vice
President and Director, have been named as defendants in two purported
class action lawsuits: Haskell v. Rural/Metro Corporation, et. al., Civil
Action No. C-328448 filed on August 25, 1998 in Pima County, Arizona
Superior Court and Ruble v. Rural/Metro Corporation, et al., CIV
98-413-TUC-JMR filed on September 2, 1998 in United States District Court
for the District of Arizona.

The two lawsuits, which contain virtually identical allegations, were
brought on behalf of a class of persons who purchased Rural Metro’s
publicly traded securities including its common stock between April 28,
1997 and June 11, 1998. Haskell v. Rural/Metro seeks unspecified damages
under the Arizona Securities Act, the Arizona Consumer Fraud Act, and
under Arizona common law fraud, and also seeks punitive damages, a  31
constructive trust, and other injunctive relief. Ruble v. Rural/Metro
seeks unspecified damages under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934.

The complaints in both actions allege that between April 28, 1997 and
June 11, 1998 the defendants issued certain false and misleading
statements regarding certain aspects of our financial status and that
these statements allegedly caused our common stock to be traded at
artificially inflated prices. The complaints also allege that Mr. Bolin
and Mr. Ramsey sold stock during this period, allegedly taking advantage
of inside information that the stock prices were artificially inflated.
On May 25, 1999 the Arizona state court granted the company’s request for
a stay of the Haskell action until the Ruble action is finally resolved.
We and the individual defendants have moved to dismiss the Ruble action.
This motion is currently pending. The company intends to defend the
actions vigorously.

SOUTH CAROLINA: Federal Retirees Lawsuit Comes Before Supreme Court
The S.C. Supreme Court is scheduled to hear arguments this morning in a
case seeking millions of dollars in state income tax refunds for
thousands of federal retirees.

A federal retiree's lawsuit against the state claims that a 1989 state
law taxing federal and state retiree pensions is unconstitutional. There
are an estimated 65,000 federal retirees in South Carolina.

The law stemmed from a 1989 U.S. Supreme Court ruling requiring states to
treat state and federal retirees equally in taxation. At the time, South
Carolina was among about two dozen states that exempted state retirees
from income tax, but taxed federal retirees' income. South Carolina
changed its law in 1989, but it didn't comply with the U.S. Supreme Court
decision because it increased state retirees' benefits by 7 percent to
offset the tax increase, according to the suit filed by Doris Stieglitz
Ward of Columbia. That amounted to a discriminatory tax rebate to state
retirees, Ward claims.

Ward's lawyers have said if the lawsuit is successful, the state would
owe millions of dollars in refunds to federal retirees, though the exact
amount is unknown. The state paid about $ 75 million to about 62,000
federal retirees from 1994 through 1996 to settle a separate suit
stemming from the U.S. Supreme Court decision. The court ruling at the
time prompted federal retirees nationwide to seek tax refunds from their
home states. The S.C. Supreme Court twice rejected refund claims by
federal retirees, but both decisions were overturned by the U.S. Supreme

Ward filed her suit in 1998 in Richland County on behalf of herself and
other federal retirees. Circuit Court Judge Alison Renee Lee dismissed
the case last year, ruling that Ward didn't follow proper appeal
procedures. The state claims Ward violated state law by filing her suit
in circuit court before complying with appeal procedures within the S.C.
Department of Revenue.

If the S.C. Supreme Court sides with Ward, the case likely would be sent
back to the circuit court. A judge would have to certify the class of
plaintiffs before there would be any large-scale refunds. The Supreme
Court is expected to issue its ruling at a later date. Chief Justice Jean
Toal and Associate Justice Costa Pleicones have removed themselves from
the case to avoid any conflict-of-interest questions. Toal is a cousin of
John Hoefer, one of Ward's lawyers; Pleicones was in private law practice
with Cam Lewis, another lawyer for Ward.

State Court of Appeal Judges H. Samuel Stilwell and William Howard will
replace Toal and Pleicones.

Ward's lawsuit isn't the only legal challenge to the 1989 state law. A
separate suit filed by state retiree Victor Evans of Columbia claims the
law is unconstitutional because state retirees had, in effect, a contract
guaranteeing that their retirement contributions, made while they were
working, would not be subject later to income tax. There are about 70,000
current state retirees. Circuit Court Judge Jackson Gregory dismissed
Evans' suit in January. The case has been appealed to the S.C. Supreme
Court, but a hearing has not been scheduled.

State retirees won a separate legal battle on May 22 when the S.C.
Supreme Court ruled the retirement system has been miscalculating unused
vacation credits in its pensions since 1986. The ruling could cost the
retirement system from $ 125 million to $ 2 billion, depending on which
side's figures are used. The Supreme Court in July agreed to revisit that
case at the state's request. A rehearing, which hasn't been scheduled,
isn't expected until next year, a lawyer for the state has said. (The
State, October 4, 2000)

SYMMETRICOM INC: Investors Appeal against CA Securities Suit Dismissal
In January 1994, a securities class action complaint was filed against
the company and certain of Symmetricom’s former officers and directors in
the United States District Court, Northern District of California. The
action was filed on behalf of a putative class of purchasers of the
Company's stock during the period April 6, 1993 through November 10,
1993. The complaint sought unspecified money damages and alleges that we
and certain of our present or former officers or directors violated
federal securities laws in connection with various public statements made
during the putative class period. The Court granted summary judgment to
Symmetricom Inc. and the company’s former officers and directors in
August 2000.

The plaintiff has filed a notice of appeal to the United States Court of
Appeals for the Ninth Circuit.

T.M. COBB: Defective Window Suit Reinstated in CA Vs. Component Maker
The manufacturer of allegedly defective windows which were installed in
mass-produced homes in California may be held subject to strict products
liability, the state's court of appeal has ruled. Reinstating a class
action against defendant T.M. Cobb Co., the Fourth Appellate District
found that a manufacturer of a component that is subsequently installed
in or otherwise integrated as part of a larger product may be held liable
if that component was in fact defective at the time it left the
manufacturer's possession. Jimenez et al. v. Superior Court of San Diego
County, No. D034723 (Cal. Ct. App., 4th Dist., Div. 1, Aug. 1, 2000).

Plaintiffs Filipina and Nestor Jimenez own a home in the Galleria
subdivision of 82 single-family homes in the Scripps Ranch area of San
Diego. The homes in the subdivision were developed by McMillin Scripps
II, who entered into a contract with Minnoch Supply Co. to supply and
install windows and glass doors in at least some of the homes. T.M. Cobb
Co. designed and manufactured the aluminum frames, windows and glass
doors that were installed by Minnoch.

In a lawsuit filed on behalf of the Galleria homeowners, the Jimenezes
charged that the windows installed in the subdivi sionleaked and caused
damage to their property. The trial court granted Cobb summary judgment
after determining that a manufacturer of component parts installed in
mass-produced homes cannot be held liable for strict products liability
absent a special relationship with the developer of the homes.

The appellate court, however, held that the fact that these products were
subsequently installed as component parts does not change their character
as products subject to the imposition of strict products liability.

"Although the defendants' windows are intended to be installed in and
become component parts of the larger product of homes and other
buildings, their incorporation as component parts in a larger product
does not change their status as products," the three-judge panel held.
"If a defective manufactured component incorporated into a larger
product, including real estate, caused damage to a person or other
property, the manufacturer of that component, and all others in the chain
of distribution of that component, may be subject to strict products

The panel added that the application of the doctrine of strict products
liability to a component manufacturer should not depend on the
contractual arrangements for the installation of the component in a home.
The contractual arrangements of the parties in the chain of distribution
of a defective product do not affect the strict products liability of a
manufacturer or any other distributor of that product, it said. (Product
Liability Litigation Reporter, September 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
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Copyright 1999.  All rights reserved.  ISSN 1525-2272.

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