/raid1/www/Hosts/bankrupt/CAR_Public/001030.MBX              C L A S S   A C T I O N   R E P O R T E R

             Monday, October 30, 2000, Vol. 2, No. 211


ANNTAYLOR STORES: Skadden, Arps Seeks High Ct Review of Reinstatement
ARKANSAS: Lake View School Funding Trial Could Wrap Up Soon
AUTO FINANCING: The New York Times Reports on Hidden Charges
BONE SCREW: Bechtle Awards $ 6 M Interim Fee in Case Settled
BRIDGESTONE/FIRESTONE, FORD: Judge Remands Suits over Tire Defects to PA

BRIDGESTONE/FIRESTONE INC: Workders Deposed in Decatur
CA SCHOOL: Davis Offers $520 Million to Settle Special Education Lawsuit
FHP INTERNATIONAL: Shareholders Drop Appeal in Securities Fraud Suit
FORD MOTOR: PA Ct Dismisses All But 1 Claim in Transmission Defect Case
GLOBAL LIGHT: Announces Dismissal of Washington Suit against Officers

MAGELLAN HEALTH: Cohen, Milstein Accuses of Breaking Promise on Services
MENLOVE DODGE: Former Sales Employees Allege Dealer Skimmed Commissions
MICROSOFT CORP: Indirect Buyer Lacks Antitrust Standing against Maker
MICROSTRATEGY INC: Announces that Operating Loss Drops
NORTH CAROLINA: Families Claim Disparity in Education Among Counties

PRICELINE.COM: The American Banker Offers View on New Banker
RITALIN LITIGATION: Second Thoughts about Taking Controversy to Court
SPRINGDALE CEMETERY: Settles Consumer Fraud and Antitrust Charges
SYKES ENTERPRISES: Period Is Expanded in Securities Lawsuit
TOBACCO LITIGATION: California Regions May Sell Securities Tied To Sales

* S Korea Revise Regulations On Company Protocols; Permits Class Action


ANNTAYLOR STORES: Skadden, Arps Seeks High Ct Review of Reinstatement
Skadden, Arps, Slate, Meagher & Flom wants the high court to review a
decision by the Second Circuit U.S. Court of Appeals that reinstated a
class action brought by shareholders against the Ann Taylor clothing store
chain. It is believed to be the first time the justices have been asked to
set pleading standards for securities fraud cases.

The 1995 Private Securities Litigation Reform Act was intended to bring
uniform standards to all courts, said Skadden, Arps partner Robert Zimet,
who filed the petition. "Instead, it has provoked disuniformity."

Several circuits are in conflict with one another. The Second Circuit's
decision favors the plaintiffs bar, and the Ninth Circuit's In re Silicon
Graphics, 183 F.3d 970, favors the defense bar.

Should the U.S. Supreme Court grant certiorari in Kasaks v. Novak, 00-432,
it could have a profound impact. Since 1996, 881 companies have been sued
in federal court, with New York and the Bay Area the most active venues.

The Second Circuit case arose from the Southern District of New York, while
Silicon Graphics was from the Northern District of California. It's Silicon
Alley vs. Silicon Valley.

The Ninth Circuit's 1999 decision was immediately controversial. The
deciding vote on the panel was cast by a visiting judge. Judge Joseph
Sneed, writing for the majority, acknowledged that "not all courts share
our view" that something more than recklessness -- or "deliberate
recklessness" -- must be shown to prove scienter and that all facts
supporting the claims, "in great detail," must be shown before plaintiffs
can begin discovery. But the Second Circuit, in a ruling written by Judge
John Walker, seemed to set a lower standard, saying that a "strong
inference of fraudulent intent" could be established with the facts set
forth by lawyers at Milberg Weiss Bershad Hynes & Lerach.

Skadden, Arps argues that the Second Circuit in deciding the Ann Taylor
case simply adopted its pre-existing pleading standard (which, prior to the
PSLRA, had been regarded as one of the strictest in the country) and
thereby ignored congressional intent to raise the bar for bringing
securities cases.

In its petition for certiorari, Skadden, Arps does not ask the Supreme
Court to adopt the Ninth Circuit's stricter interpretation of the 1995
Private Securities Litigation Reform Act, but the case looms throughout
their petition.

"Skadden, Arps would like the Supreme Court to adopt Silicon Graphics,"
said Reed Kathrein, a partner in Milberg's San Francisco office. "The
likelihood of that happening, I think, is slim."

In its reply petition, Milberg Weiss argues that Skadden, Arps is asking
the court to decide questions regarding the recklessness pleading standard
outside the bounds of the case.

"If the court were to grant review on that question, it would be reviewing
general statements about the law that were never applied to the pleading at
issue in this case," wrote partner Keith Fleischman. BOX AND HOLD'

In the case, former shareholders of Ann Taylor Stores Corp. contend that
the company and certain of its officers concealed two warehouses of unsold
merchandise in order to spruce up its financial picture, a practice called
" Box and Hold." Ann Taylor claims the merchandise was held for sale at a
later date, and denies any wrongdoing.

Also named as defendants were Merrill Lynch-affiliated shareholders who
sold 42 percent of their stock during the class period. The Merrill Lynch
defendants have settled the case.

The rulings make life tricky for Milberg Weiss, by far the most active
securities plaintiffs firm, because its two main practice areas, New York
and California, are operating under different rules.

While the New York case could be an avenue to bring down the higher
standards in Silicon Graphics, partner William Lerach, who heads the San
Diego office, has signed on to Fleischman's reply petition asking the court
not to review the case.

"We think Silicon Graphics is bad law," said Milberg's Kathrein. But the
firm never appealed the 1999 ruling. Some have speculated that Milberg
Weiss feared the case would become the law of the land.

"There's always that fear," Kathrein said. But, he added, "I think the
rationale at the time was to let the courts develop the law more fully."

Lawyers on both sides of the securities bar have said it's only a matter of
time before the Supreme Court decides the issue. That time may have come.

"We had expected all along that this issue would get to the Supreme Court
at some point, from either the Second Circuit or the Ninth Circuit," said
defense attorney Sara Brody, a partner at Brobeck, Phleger & Harrison.

But defense lawyers in the West have little to gain from Supreme Court
review. "It certainly has raised the bar for plaintiffs," Brody said.

The Silicon Graphics ruling was even controversial at the Ninth Circuit.
The judges declined to hear the case en banc, prompting Judge Stephen
Reinhardt to blast both the decision and the en banc process.

Last month, the Ninth Circuit, in an opinion joined by Silicon Graphics
author Judge Sneed, held that the recklessness standard for liability,
although higher at the pleading stages of a case, remains when the case
goes to a jury. The decision in Howard v. Hui, 00 C.D.O.S. 8035, was hailed
as a victory by the plaintiffs bar.

The decision is not being appealed, said Brobeck partner Robert Varian, who
argued for the defendants.

"I think if anyone cited that case ... as somewhat undermining Silicon
Graphics, it says pretty clearly that Silicon Graphics governs the pleading
standard," Varian said. "We'll just live with it." (The Recorder, October
26, 2000)

ARKANSAS: Lake View School Funding Trial Could Wrap Up Soon
The Lake View School District's lawsuit over funding for public schools
resumes October 30, and testimony could wrap up that day.

An expert testified last Thursday October 26 that the state does not put
enough money into its education system to adequately educate all of its
students. Consultant James Smith of Davis, Calif., a former state deputy
superintendent in California, testified that Arkansas does have clear
standards and a system in place to hold school districts accountable for
student achievement.

But Smith said the state would have to spend between $400 million and $900
million more annually to adequately fund the system.

Attorney David Matthews, representing the Rogers and Bentonville school
districts, which are interveners in the lawsuit, had called Smith to the
stand. On October 25, expert James Guthrie made similar statements under
questioning by Matthews. The Rogers and Bentonville districts claim the
state distributes school money fairly but that the $1.7 billion given
annually to the state's 310 school districts is inadequate.

Pulaski County Chancellor Collins Kilgore is to decide whether the funding
system is fair and adequate.

The Lake View district is the lead plaintiff in a class action lawsuit
involving scores of districts. More than 30 districts have intervened to
keep the current funding system.

A 1994 court order declared the school funding formula unconstitutional and
gave the state two years to correct problems. (The Associated Press State &
Local Wire, October 27, 2000)

AUTO FINANCING: The New York Times Reports on Hidden Charges
Byline: By Diana B. Henriques; This article was prepared under a joint
reporting agreement between The New York Times and ABC News.

Shawn Core and Retina Massey-Core, newlyweds from Athens, Tex., were
shopping for their first car -- a Valentine's Day gift for each other --
when they found a used Lincoln Town Car at a local Ford Lincoln Mercury
dealer in 1995. With no established credit history, they were grateful when
the dealer declared that they had been approved for a car loan by the Ford
Motor Credit Company.

Ford agreed to finance the Cores' car at 14 percent. But that is not the
rate they were told they got. Without their knowledge, Ford permitted the
local dealer to add on two and a half percentage points. This increased the
Cores' total finance charges by $466, which Ford immediately paid to the

This industrywide but obscure practice is called the dealer markup. In
today's increasingly transparent world of consumer credit, it is an
anomaly, almost a throwback to an earlier era.

Over several decades, laws and federal actions have pried open the credit
process. Under fair housing laws, for example, all points and commissions
must be specifically disclosed. More recently, banks and other major
lenders have spend millions of dollars on credit systems that screen out
subjective bias.

But there is no legal requirement that car dealers or lenders must tell
consumers about the role dealers play in setting the interest rate on
dealer-arranged car loans. At the dealership, the ultimate decision about a
loan's cost is left to the discretion of an employee who profits
immediately by charging the highest possible rate, even though the dealer
has no money at risk.

Now this markup practice is coming under legal attack in at least five
states, a joint investigation by The New York Times and ABC News "20/20"
has found.

The Cores are plaintiffs in one of two class-action lawsuits in Texas state
court seeking to have the markup declared a fraudulent and deceptive
business practice. "If they're going to make money off the loan, then they
need to tell people," said Mrs. Core in a recent interview.

A similar class-action case has been filed in California, said Jack E.
McGehee of Houston, one of the lawyers working on the cases. In New Jersey,
lawyers are seeking permission to expand an earlier individual case against
Chase Manhattan into a class action. Litigation is also being prepared in
Pennsylvania, he said.

"We're saying that this is a huge lie," Mr. McGehee said.

The dealers and lenders named as defendants in those cases, which include
the Bank of America and the Ford Motor Credit Company, described dealer
markup as a legitimate business practice that in no way misleads or
defrauds consumers. Texas courts have affirmed this position in the past,
they noted.

Dealer markups are also under attack in class-action cases pending in
Nashville against the General Motors Acceptance Corporation and the Nissan
Motor Acceptance Corporation, two of the nation's most prominent auto
finance companies.

Those lawsuits, filed under seal two years ago and recently made public,
accuse the lenders of participating in arrangements that have resulted in
black car buyers being charged higher dealer markups than whites, on
average, regardless of creditworthiness.

"There's two problems from a consumer perspective with dealer markup," said
Gary Klein, a lawyer with the National Consumer Law Center in Boston, which
is helping plaintiffs in the Nashville cases. "The first is that it's
secret. The second is that there's discrimination: blacks are typically
charged more than whites in markup."

General Motors Acceptance, Nissan Motor Acceptance and the local auto
dealers involved in the cases deny any discriminatory practices and say the
plaintiffs' claims rest on flawed statistical analysis.

Car financing is an enormous business. In 1998, the most recent year for
which the Federal Reserve has figures, there were more than $450 billion in
car loans outstanding in America. This year, according to industry surveys,
about half of the 17.7 million new vehicles expected to be sold will be
financed. More than 75 percent of those loans will be arranged through car

Industry experts say that the money dealers make on markups -- part of what
dealers call "finance and insurance" income -- can make the difference
between profit and loss for many dealerships.

The National Automobile Dealers Association and the American Financial
Services Association, which represents lenders, say that markups compensate
dealers for the expense involved in offering consumers the convenience of
dealer-arranged financing.

Besides providing one-stop shopping for credit, dealer-arranged loans also
give consumers access to more sources of credit than they would have on
their own, especially if they have a poor credit history, these industry
groups say. And they assert that the competition among lenders for each
dealer's loan business keeps rates low even after dealers have added their
"retail markup."

Lenders and dealers say that consumers who know their creditworthiness and
the rates available from other sources can negotiate an excellent
dealer-arranged car loan.

But consumer advocates dispute that, noting it is almost impossible, short
of litigation, for consumers to find out the rates at which lenders
approved them for dealer-arranged credit.

"If the dealers honestly think that this is a service that customers are
willing to pay for, then let them tell the customers what they're charging
for it," suggested Kathleen Keest, Iowa's assistant attorney general for
consumer protection and the former chairwoman of the National Association
of Consumer Advocates.

"I would very much doubt many people will think that it was a service worth
three percentage points, or five, or even more," she said.

                 The Mechanics of the Buy Rate

With his strawberry-blond hair and blue eyes, Scott Zajaczkowski looks like
a well-scrubbed choirboy. His earnest demeanor and college polish helped
him succeed as a car salesman in the suburbs of Cleveland. "People trusted
me. I'm an honest person, and I like to help people," said Mr. Zajaczkowski
(pronounced Zage-ah-COW-ski).

But in the months after he was promoted to finance and insurance manager at
his dealership, he became uncomfortable with his new role.

He said he was trained to persuade customers to pay the highest interest
rates possible on dealer-arranged loans and to discourage them from paying
cash or financing their car elsewhere. He was also expected to push other
high-priced financial products, like extended service warranties and credit
insurance policies that would pay off consumers' car loans if they died, he

After about 18 months, Mr. Zajaczkowski resigned. "I felt I was scamming
people," he said. "I was so depressed."

His former dealership is now under new management, and executives there
declined to comment on his remarks.

Mr. Zajaczkowski's reaction to his work is hardly typical, though. The
finance and insurance manager -- or F & I manager, in dealer parlance -- is
usually one of a car dealership's highest-paid employees, earning
commission-based incomes of $100,000 or more a year, Mr. Zajaczkowski said.

Those paychecks reflect how important these "back end" products --
warranties, insurance and the loan markups -- are to dealer profits.

"We were expected to average $400 to $500 on all transactions, which
includes leases and deals that you can't mark up because of special
promotions," Mr. Zajaczkowski said. "So many are much, much more."

In his experience, he said, a customer's credit rating was entirely
irrelevant to the size of the interest rate markup.

Dealers arrange car loans by collecting credit information from the
customer and submitting it, by fax or e-mail, to one or more lenders --
major banks, the finance arms of major automakers, even local credit
unions. The lenders analyze the customer's credit history and arrive at a
minimum interest rate, called the buy rate, at which they would be willing
to finance the purchase.

If the dealer quotes that minimum rate to the customer, and the customer
accepts it, the dealer immediately sells or "assigns" that loan to the
lender, which will typically pay him a small flat fee, between $50 and
$150, for arranging the paperwork.

If possible, however, the dealer will quote a higher interest rate to the
customer. If the customer accepts it, the dealer sells the loan to the
lender and collects, from the lender, all or most of the cash value of the
difference between the buy rate and the higher rate set by the dealer.

Some lenders, including Nissan, limit the number of percentage points a
dealer can add to the loans they finance; other lenders, including
G.M.A.C., will buy loans even if the dealer markup exceeds the fixed limit
-- but will keep a share of the higher markup themselves.

Some lenders, bidding aggressively for a dealer's business, may impose no
limit on markups at all. In those cases, finance managers "can charge
whatever rate they want," Mr. Zajaczkowski said. "There's no rhyme or

David Robertson is the founder and executive director of the Association of
Finance and Insurance Professionals, a trade association for finance
managers. He sees their role very differently.

In his view, endorsed by the trade associations for the dealers and
lenders, finance managers are selling a service: the arrangement of credit.

"A retail merchant buys products at wholesale, sells them at retail and
hopes he has the products his customers need -- and one of those products
happens to be money," said Mr. Robertson.

Finance managers may work hard to find lenders willing to extend credit,
especially to more marginal customers, he said. And finance managers have
access to many more sources of credit than a typical consumer has, he

No informed consumer, Mr. Robertson said, should expect the dealer to
arrange vehicle financing free.

Lawyers for the lenders and dealers point out that several earlier lawsuits
challenging dealer markups have been largely unsuccessful.

The exceptions have been a few cases where the consumers could argue -- as
Mr. McGehee's clients do -- that the dealers promised to seek "the best
rate" on their behalf. Dealers who make such promises may unwittingly
assume a fiduciary duty to look out for the consumer's best interests,
lawyers say.

The Federal Reserve and Congress have declined to require dealers or
lenders to disclose loan markups. The Truth in Lending Act requires only
that consumers be informed about the actual interest rate and total finance
charges they are paying. The loan documents that dealers use do that,
although the dealers' own share is not disclosed.

To Mr. Robertson, it is just as legitimate to mark up the price of the car
loan as it is to mark up the price of the floor mats the dealer sells. Must
a grocer tell shoppers how much he marked up the lettuce?

No, consumer advocates answer, but the grocer bought the lettuce and is at
risk if it goes bad before it is sold. Dealers have no money at risk in the
car loans they arrange, they said, and are almost always free to cancel a
customer's purchase if they cannot sell the loan immediately.

Moreover, they argue, the grocer does not pretend that the farmer actually
set the price of his lettuce, nor does the grocer arbitrarily mark up the
lettuce by 50 cents a pound for one customer and by $1 a pound for the

                   A Question of Discrimination

But what if this hypothetical grocer were found to be charging a 50-cent
markup to his white customers and a $1 markup to his black ones?

That, in essence, is the allegation at the heart of the two class-action
cases now pending against Nissan Motor Acceptance and General Motors
Acceptance in Nashville.

The case against Nissan's financing unit began in late August 1995 when
Betty Cason, who is disabled, went to a Nissan dealer in Nashville to shop
for a four-door vehicle to accommodate the five foster children she is
raising with her husband, Robert.

She selected a Pathfinder, trading in a two-door Chevrolet Blazer as her
down payment and agreeing to finance the rest of the $24,292 purchase price
through the dealer. She filled out an N.M.A.C. credit application.

The Casons' credit history is pockmarked with problems. But the Nissan
credit unit would finance the Pathfinder purchase for 16.49 percent. The
finance manager at the Nashville dealership marked the Casons' loan rate up
to 19.49 percent, adding $3,520 to the price they would pay over the loan's
six-year term.

Addie Coleman, a fragile-looking woman with two children, also went
shopping for a new car in 1995, visiting a local Pontiac dealer. She, too,
had a poor credit history and had been denied financing by several other
lenders. The dealer arranged her loan with G.M.A.C., which agreed to
finance the car purchase at 18.25 percent. The dealer presented her with a
four-year contract showing an interest rate of 20.75 percent, which added
$809 to her financing costs, and Mrs. Coleman signed it.

Both women later consulted Nashville Legal Services about other complaints
they had against the local dealers and were referred to Clinton W. Watkins,
a local lawyer. Initially, the lawsuits he filed on their behalf simply
challenged the legitimacy of the loan markup.

But while litigating those cases, he and his co-counsel, Michael E. Terry
and Wyman Gilmore Jr., obtained data on thousands of G.M.A.C. and N.M.A.C.
loans in Tennessee. Using state motor vehicle records, they racially coded
as many of the loan applications as they could.

They then asked Dr. Debby A. Lindsey, a business professor at Howard
University, to analyze the loans -- roughly 9,600 from N.M.A.C. and
slightly fewer than 5,000 from G.M.A.C.

Their theory was that the buy rate fairly captured all credit variables
unique to individual consumers without respect to race.

In the plaintiffs' view, the dealers had no money at risk and should have
been indifferent to any variations in consumer creditworthiness. So how did
they decide how much to add to the buy rate on each loan?

What Dr. Lindsey found, in both cases, was that the amounts dealers added
to the buy rates of black consumers were, on average, several hundred
dollars higher than the amounts added to white consumers' rates.

Nissan ordered its own studies of the loan data, conducted by Dr. Janet
Thornton, an economist with a private research firm in Florida. Dr.
Thornton disputed whether differences in creditworthiness were fully
captured in the lender's buy rate. Indeed, she argued, it was exactly those
credit differences not race -- that explained the markup disparities.

Mark A. Cohen, a business professor at Vanderbilt University who confirmed
Dr. Lindsey's findings, said that such differences were indeed examined,
but they did not adequately explain the pattern.

The plaintiffs' lawyers said the dealers have testified that they do not
consider credit factors when they set markups. The discriminatory pattern
is "as bad, or worse" among consumers within the best credit tiers, said
Mr. Klein, one of the plaintiffs' lawyers.

At a hearing in August, Anne Fortney, a former Federal Trade Commission
member who is representing Nissan, dismissed the studies as unreliable.

"If I thought there was a problem here such as the plaintiffs described, I
would not be defending this action," she said.

                      Defining the Dealer's Role

In fact, the Nashville reports are only the latest in a decade-long series
of studies that suggest there is pervasive discrimination against black car
buyers, said Ian Ayres, a law professor at Yale University.

Professor Ayres, who also has a doctorate in economics, has conducted two
audits of car dealers' behavior toward white and black customers, one in
1991, another in 1995. In each experiment, matched pairs of shoppers,
identical except for their race, used the same script to negotiate for cars
at dealerships in the Chicago area. And in each experiment, black shoppers
got poorer deals, he said.

More recently, Professor Ayres analyzed five years of customer sales
records from a Mazda dealership in suburban Atlanta. That data, too, showed
that black customers paid higher car prices and larger finance charges than

Professor Ayres said he cannot say for sure what causes these patterns:
"There are lots of possibilities but none of them is inconsistent with
old-fashioned racial discrimination by dealers."

The legal issues being tested in these cases are just as contentious as the
statistical arguments.

The key question is whether the dealers are acting as the lenders' agents
when they arrange car loans, as the plaintiffs contend, or whether the
dealers are actually negotiating the loans and then selling them after the
fact, as the lenders insist. The lenders' view has prevailed in many court
tests and has been endorsed by staff interpretations from the Federal

But the Justice Department, which recently has intervened in the Nissan
case in Nashville, is arguing that the lenders actually exercise enormous
control over the dealers as part of the loan process and should be held
accountable for the outcome.

At a court hearing in August, Carolyn A. Evans, a Justice Department
lawyer, noted that lenders design the application forms and limit how many
points dealers can add to loans. They forbid markups on certain promotional
loan programs. They determine how much of the markup the dealer can collect
up front and how much must be shared with the lenders.

The Nissan finance unit makes dealers use its own forms to insure their
loans comply with truth-in-lending laws, she added. "Why can't N.M.A.C.
take steps to insure that the loans it approves and funds comply with the
Equal Credit Opportunity Act?"

                   Getting, and Using, Information

These knotty questions are anything but academic for consumers making what
may be, after their homes, the largest purchase they will ever make -- as
Natolie Davis, a working mother who lives with her husband and three
children in Bedford Heights, Ohio, can attest.

According to a lawsuit she has filed in Cleveland, Mrs. Davis had been
assured by her local bank that she could get a 9.5 percent loan to finance
her purchase of a new Ford Taurus she found at a Dodge dealership in
November 1996.

Her dealer still arranged financing for her -- without her knowledge or
approval, she contends in her lawsuit -- and found a lender willing to
finance her purchase at almost the same rate her bank had quoted. Then, she
contends, he marked up that loan rate, charging her 12.5 percent and
receiving $963 in markup from the lender.

The dealer's lawyer contends that Mrs. Davis, who had taken possession of
the car, did not provide proof of bank financing within the set time limit,
and that the dealer had no choice but to seek financing for her.

The dispute captures the debate about markups: The dealer did, indeed, get
a competitive loan rate for Mrs. Davis.

But that did not save her any money, since the loan's rate was raised. Over
the term of the loan, the dealer's rate would cost $3,000 more than the
bank rate, according to her complaint.

At least Mrs. Davis knew what rate she could command in the marketplace
before she shopped for her car -- knowledge any consumer with access to a
computer and the Internet can obtain. Consumers with excellent credit can
now even arrange their loans online, through Internet lending services.

In the future, according to industry consultants, these developments could
affect dealer-arranged car lending more than the litigation now making its
way through the courts.

"The Internet has made consumers more aware of what constitutes a fair
discount from the dealer's price on the car," said Chris Denove, a partner
with J. D. Power & Associates, the customer-service consultants. "It has
the potential to have an even more powerful impact for consumers who are
attempting to finance their vehicles."

                        Preparing to Make a Deal

Consumer advocates offer these tips for car-loan shoppers:

* Before shopping, check with a bank, a credit union or an Internet site
   to learn what rates they offer.

* Ask credit agencies for a complete consumer credit history.

* Take note of the annual percentage rate the dealer offers, not just
   the monthly payments.

* Bargain for a lower rate; the dealer sets it and can change it.

* Never sign blank loan documents, even if that delays driving the new
   car home.

(Sources: J.D. Power & Associates; Lindsey report, Cason vs.
N.M.A.C., U.S. District Court, Nashville; Published in The New York
Times, October 27, 2000)

BONE SCREW: Bechtle Awards $ 6 M Interim Fee in Case Settled
It was payday for dozens of lawyers who worked on the $ 100 million
settlement of the massive pedicle bone screw litigation in federal court as
Senior U.S. District Judge Louis C. Bechtle handed out interim awards
totaling about $ 6 million.

In his 47-page opinion, Bechtle approved the plaintiffs' lawyers' request
for 12 percent of the $ 100 million fund established in the settlement with
AcroMed Inc., but he awarded only half of the fees since litigation is
continuing. Each of the lawyers will be suffering a pay cut, however,
because the $ 12 million fund for fees was not enough to cover the $ 19.2
million they billed at their current hourly rates. Bechtle also ruled that
the fees he awarded are "not in addition to any fees a claimant may be
obligated to pay to his or her attorney for representation in the bonescrew
litigation, but rather is to be deducted from the fee that would otherwise
be payable to that privately retained attorney."

Under Bechtle's orders, the lawyers submitted bills that showed all of
their hours directly related to AcroMed and 50 percent of the hours related
to other work in the litigation prior to December 1996. Thirty-two firms
including eight from the Philadelphia area will receive money under October
25's order.

Levin Fishbein Sedran & Berman of Philadelphia topped the list with $ 1.622
million. Early in the litigation, Bechtle authorized the certified public
accounting firm of Zelnick Mann & Winikur to monitor time and expenses
incurred by the lawyers to assure "reliability in the work done, the sums
and hours expended and adherence ... with the same standard upon which
later application for fees and costs would be based."

Bechtle also appointed a CPA auditor, Alan B. Winikur, who conducted an
independent review of the fee petitions. One firm, Harrison Kemp & Jones,
argued that Bechtle's approach "penalizes" attorneys who were assigned to
work on other defendants. The Harrison firm noted that it would receive
only about 43 percent of its fees and that Levin Fishbein Sedran & Berman
would receive only 29 percent, while Becnel Landry & Becnel will receive 72
percent.Bechtle flatly rejected the complaint, saying "this is a limited
fund. The court will only reimburse expenses and compensate time that was
related to the AcroMed Settlement in the instant Order. Work that was
performed and expenses incurred respecting other defendants will not be
compensated or reimbursed here."

In awarding fees in class action settlements, Bechtle said courts use two
methods the lodestar method and the percentage-of-recovery method.Under the
lodestar method, the court determines fees by multiplying the number of
hours spent on the litigation by an hourly rate appropriate for the region
and for the experience of the lawyer.But Bechtle found that the lodestar
method "may encourage attorneys to delay settlement or other resolution to
maximize legal fees, and it places a great deal of pressure on the judicial
system, as the courts must evaluate the propriety of thousands of billable
hours." Those flaws, he said, "have led to the increased use of the
percentage of recovery method, which permits courts to reward success and
penalize failure more directly." Turning to the question of what percentage
to award, Bechtle said the decision "is somewhat elastic and depends upon
the facts of a given case."

Courts consider seven factors in deciding a percentage, Bechtle found. They

* the size of the fund created and the number of persons benefitted; the
   presence or absence of substantial objections by members of the class
   to the settlement terms and/or fees requested by counsel;

* the skill and efficiency of the attorneys involved; the complexity and
   duration of the litigation; the risk of nonpayment;

* the amount of time devoted to the case by plaintiffs' counsel; and

* awards in similar cases.Bechtle found that all seven factors weighed
   in favor of approving a 12 percent award.

More than 4,400 claimants and 1,400 consortium claims will benefit from the
AcroMed fund, Bechtle said. And since AcroMed's assets were just $ 58
million at the time of settlement, Bechtle found that it was "at the outer
boundary" of what the company could afford to pay. While there were some
objections to the settlement, Bechtle found that "none were
substantial."The request for 12 percent of the fund was also "modest given
the nature and quality of the work performed, the complexity of the case
and the settlement achieved," Bechtle wrote. "This litigation has been
nothing less than an uninterrupted, hard-fought, antagonistic legal battle
since it began," Bechtle said. The plaintiffs' lawyers conducted extensive
discovery of AcroMed and other defendants, he noted, reviewing more than
105,000 pages of documents produced by AcroMed and almost 1.5 million pages
of documents produced by other defendants. They also successfully litigated
complex issues, defeating AcroMed's pre-emption defense and other motions
including those seeking dismissal on the grounds of First Amendment
protection, 11th Amendment immunity, lack of jurisdiction, failure to state
a claim, improper joinder and statute of limitations. Both the risk of
nonpayment and the amount of time devoted to the case also weighed in the
plaintiffs' lawyers favor, Bechtle found. "There are inherent, substantial
risks entailed in undertaking any contingency fee action. In this case,
over the entire litigation thus far, counsel expended more than 219,648
hours and paid out expenses of more than $ 8,834,851 with no guarantee of
recovery," Bechtle wrote.

Looking to other cases with large recoveries, Bechtle found that the
bone-screw plaintiffs' lawyers request was moderate.Ordinarily, personal
injury lawyers receive 30 percent to 40 percent of any recovery, but in
class actions, Bechtle found the norm is usually 25 to 33 percent. But in a
limited-fund class action involving a large number of claimants, Bechtle
said, "this otherwise reasonable percentage may prove to amount to an
unreasonable fee." In such cases, Bechtle said, courts exercise their
inherent power to control fees and reduce the percentage of fees
recoverable by individual attorneys on their contingency fee contracts.

Although 25 percent has become the "benchmark," Bechtle found that courts
have generally decreased the percentage awarded as the amount recovered
increases, and that "$100 million seems to be the informal marker of a
'very large' settlement." The reason for the inverse relationship, he said,
is the belief that "in many instances the increase in recovery is merely a
factor of the size of the class and has no direct relationship to the
efforts of counsel."The 3rd Circuit, he said, recently suggested that very
large recoveries have generally yielded fees from 4.1 percent to 17.92
percent, but cases cited in that decision were all decided at least 13
years ago. An Eastern District of Texas judge analyzed much more recent
cases and found the average award to be approximately 15
percent.Nonetheless, Bechtle said, other courts have declined to adjust the
standard percentage, even in the face of a large recovery.

* In In Re: IKON Securities Litigation, Senior U.S. District Judge
   Marvin Katz awarded a 30 percent fee of $ 111 million settlement;

* a New York judge awarded 27.5 percent of $ 116 million in In Re:
   Sumitomo Copper Litigation; a Texas federal judge awarded 25 percent
   of a $ 190 million fund in In Re: Lease Oil Antitrust Litigation; and

* a Louisiana federal judge awarded 36 percent of a $ 127 million fund
  in In Re: Combustion Inc.

As a result, Bechtle concluded that the bone screw plaintiffs' lawyers
request for 12 percent "is modest, reasonable and in line with awards
received in similar cases." (The Legal Intelligencer, October 26, 2000)

BRIDGESTONE/FIRESTONE, FORD: Judge Remands Suits over Tire Defects to PA
A federal judge has remanded four class-action lawsuits against
Bridgestone/Firestone Inc. and Ford Motor Co. to the Philadelphia Court of
Common Pleas, ruling that the federal court lacks subject matter
jurisdiction. Eastern District Court Judge Jay C. Waldman released all four
decisions on the same day using very similar language in each opinion.The
cases are part of a number of state and federal class actions across the
country involving defective ATX, ATX II and Wilderness AT tires.

Firestone has recalled those tires due to a defect that causes the treads
of the tires to "peel off their casing." Ford Motor Co. used the tires as a
standard component in a number of cars, particularly the Ford Explorer.
Firestone is working closely with the National Highway Traffic Safety
Administration in coordinating the recall.

Attorneys representing plaintiffs include Ken Jacobsen, Robert Gibson,
Robert Sink, Frank Farina, David Berger, Michael Coren, Howard Gottlieb.

Attorneys representing Bridgestone/Firestone include Edward Greenberg and
Morton Daller.

Ford is represented by Dylan Walker and Robert Toland.

Lawyers for Bridgestone-Firestone Inc. and Ford Motor Co. had taken steps
to get all of the class action suits combined by filing motions with the
federal Judicial Panel on Multi-District Litigation to consolidate all of
the cases before a single federal judge. The MDL panel held a hearing in
late September on the transfer and consolidation motions.

There are other cases still pending in federal court that could become part
of an MDL litigation. Plaintiff's attorney Gibson said the judge's decision
in the instant four cases ensures that "Pennsylvania doesn't get looked
over" in any potential national litigation.

Lennon v. Donnelly was the first case on record in Pennsylvania dealing
with the recalled tires. Waldman said in Lennon, the parties did not
dispute their diversity of citizenship, but he said the decision hinged on
whether the amount in controversy exceeded $ 75,000. Waldman said it did
not. "Defendants have not refuted plaintiffs' assertion that the cost of
the tires is no more than $ 800 per set," Waldman said. "Even assuming that
it is $ 1,000 and that this would be trebled to $ 3,000, plaintiff and each
class member would have to receive additional incidental and punitive
damages and prorated attorney fees in an amount exceeding $ 72,000 to
satisfy the jurisdictional amount."

Waldman said the prospect of an award exceeding $ 72,000 was "beyond
remote. "The Lennon case sought recovery for breach of implied warranties
and violations of the Pennsylvania Unfair Trade Practices and Consumer
Protection Law. Plaintiffs in Lennon are seeking compensatory damages for
the cost of the tires, punitive damages and attorney's fees. They are also
seeking an injunction against future sales of the recalled model of tires
and disgorgement of any profits from prior sales.

Defendants argued that the UTPCPL claim exceeded the amount required to
prove subject matter jurisdiction. Firestone and Ford argued in Lennon that
the starting point for calculations should be at $ 20,000, the value of a
vehicle, then treble, that amount to $ 60,000 and add at least $ 15,000 for
punitives and attorney's fees. Waldman said those calculations are
"dubious" and do not reflect a "reasonable reading of the value of the
claims at issue." The court said the defendants failed to show the amount
in controversy "even remotely approaches the jurisdictional threshold."

Firestone and Ford also argued that the federal court has jurisdiction
based on the doctrine of preemption. Specifically, they argued, the
National Traffic and Motor Vehicle Safety Act along with the Safety
Administration's regulations trump the state law claims because such claims
could interfere with the recall.

Waldman said the complaints clearly did not present any federal question,
and the preemption argument failed. "Defendants do not and cannot
reasonably argue that the MVSA or NHSTA regulations preempt all state law
claims concerning automobile defects," Waldman wrote in Lennon. "Safety and
uniformity was the primary objective of Congress in passing the MVSA. The
preservation of common law liability furthers this objective."

In Miller v. Bridgestone Firestone Inc., the plaintiffs filed a class
action suit on claims for negligence, strict liability, misrepresentation,
breach of express and implied warranties and for violation of the UTPCPL.
The Miller class expressly excluded anyone with a personal injury claim.

The class in Beatty v. Bridgestone/Firestone Inc. also excluded those with
personal injury claims. Following the nearly identical reasoning of Lennon,
the court followed suit in remanding the cases in Miller, Beatty and Dorian
v. Bridgestone/Firestone Inc. to common pleas court. Shannon P. Duffy
contributed to this report. (The Legal Intelligencer, October 23, 2000

BRIDGESTONE/FIRESTONE INC: Workders Deposed in Decatur
A retired tire maker testified that inspectors at the Bridgestone/Firestone
Inc. plant in Decatur, Ill., sometimes had fewer than 30 seconds to check
the product.

Jan Wagoner Sr., one of four former workers deposed by attorneys suing
Bridgestone/Firestone in wrongful death and injury lawsuits, said workers
repairing flawed tires were reprimanded for not meeting daily quotas.

But when questioned about manufacturing practices by lawyers representing
Bridgestone/Firestone, all of the workers being deposed admitted they were
not experts who should be assessing whether those practices were

Some 119 deaths, 500 injuries and 3,700 complaints of tread separations,
blowouts and other problems blamed on Firestone tires have been reported to
federal officials.

Under pressure from federal investigators, Firestone agreed in August to
recall 6.5 million tires - all P235/75R15 ATX and ATX II and some
Wilderness AT tires, which were made in Decatur.

Meantime, a deposition of Bridgestone/Firestone's new chief executive in
Nashville, Tenn., where the tire company is based, was halted abruptly last
Thursday October 26 by a judge's ruling.

John Lampe gave about five hours of testimony about his knowledge of the
recall before an attorney for Bridgestone/Firestone interrupted him.

"We have just been notified in the court in Indianapolis has issued a stay
effective immediately," said Steve Brogan.

Attorneys representing consumers suing the tire maker protested, but to no

The consumers are seeking class-action status for dozens of lawsuits
claiming Bridgestone/Firestone and Ford Motor Co. breached their warranties
and provided products that were not fit for their intended use.

None of the lawsuits involve injury accidents, but the information from
depositions will be shared with attorneys representing victims and families
of people killed or hurt in accidents linked to Firestone tires.

Last Wednesday October 25, a federal judicial panel had agreed to combine
federal lawsuits over the recalled tires before Chief Judge Sarah Evans
Barker of the Southern District of Indiana. Shortly after officially
receiving the case last Thursday October 26, she agreed to
Bridgestone/Firestone's request to stop all fact-gathering in the case.

"We assume that Mr. Lampe can provide facts crucial to the combined
litigation. Thus it is highly advisable to delay deposing him until counsel
for all the plaintiffs have had the opportunity to participate in the
formulation of the litigation strategy, to cooperate with each other and to
coordinate their efforts," she wrote.

Lampe's testimony had been scheduled earlier this month, but attorneys had
agreed to postpone it to let him settle into the job he took on Oct. 10.

During Lampe's abbreviated deposition, he said he told Ford CEO Jac Nasser
during a meeting that the investigation into the tire recall must focus on
the Explorer as well.

"I don't recall what Mr. Nasser's response was," Lampe said.

Many of the fatal wrecks involved rollovers of the popular sport-utility
vehicle after a tire blew out or the tread separated. Nasser has insisted
that the problem is solely tire related.

Lampe said he also told Nasser that Bridgestone/Firestone hopes to continue
the 96-year-old relationship with Ford. Lampe said Nasser "also indicated a
desire to continue a relationship with our company."

Lampe said he scheduled the meeting to introduce himself to Nasser in his
new capacity as CEO, president and chairman of the board of Bridgestone
Corp.'s U.S. subsidiary.

In Decatur, the four former workers testified that they followed whatever
procedures were set forth by company officials even when they disagreed
with those practices.

Wagoner said he complained to managers about a procedure calling for him to
poke an awl completely through the sidewall of new tires.

"I objected to it, but I did it," said Wagoner, who worried the practice
might hurt the tire. "I didn't want to get fired."

Bridgestone/Firestone attorney Colin Smith questioned each worker about his
feelings regarding the company, trying to further the firm's claim that
some of those testifying are disgruntled former employees.

Wagoner, for example, admitted he retired in 1995 during a strike that he
said turned very bitter because the company hired replacement workers.

Charles Hilton, who worked in the lab that tested rubber, testified that he
felt workers were conscientious and paid great attention to detail. But he
also testified that if rubber passed its first test, it was sent into
production. If it failed the first test, it was tested again to make sure
the first test was accurate. (The Associated Press State & Local Wire,
October 27, 2000)

CA SCHOOL: Davis Offers $520 Million to Settle Special Education Lawsuit
Gov. Gray Davis has proposed settling a 20-year-old lawsuit over special
education funding by offering to repay school districts $520 million for
past costs and promising to increase future funding.

Davis announced the offer, saying it would assure adequate funds for
special education in the future. But school districts say that while the
half billion dollars promised would help, it wouldn't cover what they have

For the settlement to become final, 92 percent of school districts and
county offices of education must still agree to it.

School districts initially estimated that the state owed them at least $1.1
billion for unreimbursed special education expenses over the last two

But the legal battle has dragged on so long and victory in the courts
seemed so uncertain, districts are likely to accept less, said Richard
Hamilton, general counsel for the California School Boards Association.

"We're talking about dollars coming into school districts," said Hamilton.
"We're not going to be delayed for five years by court action. This is
money in hand, and with a settlement, there's always a compromise."

In the lawsuit, school districts claimed the state was violating a 1979 law
requiring the state to fund programs it mandates. School districts said the
state required them to offer special education programs but didn't provide
enough money to pay for them. The state has maintained that it fully funded
all the special education programs it mandated.

If an agreement had not been reached, school districts would have been
forced to dig up 20 years of records and file a claim that the state
Department of Finance was expected to dispute in court.

"We were literally praying this settlement agreement would be signed," said
Superintendent Gary McHenry of the 36,000-student Mount Diablo Unified
School District in Contra Costa County.

Under the settlement, school districts would get a total $270 million this
year followed by 10 annual payments of $25 million statewide. That amounts
to about $45 per student. In addition, the state would provide another $100
million for special education each year. The state now funds special
education at about $2 billion annually.

School districts around California have struggled for decades to meet the
federal and state standards for educating students with disabilities. About
628,000 California students receive special education.

The lack of funds has lead to a number of lawsuits by parents who say their
schools are not providing the kind of education the law requires.

Contra Costa County's Mount Diablo Unified School District, which recently
settled a class action lawsuit by parents of disabled students, faces
problems typical of many districts. This year, federal and state funding
for special education in Mount Diablo will fall about $15 million short of
the district's costs. Mount Diablo will make up the difference by dipping
into its general fund, which is facing a $2 million shortfall this year.

A large part of the problem is lack of funding from the federal government,
which at one time promised to pay 40 percent of special education costs but
has never come closer than funding 10 percent.

The state settlement would repay the Mount Diablo district about $1.5
million this year for unfunded expenses.

"It helps, but it doesn't solve the problem," said McHenry.

Oakland would get about $2.3 million this year -- not including payments in
future years -- and Berkeley would get about $400,000; San Francisco
Unified School District would get about $2.6 million. (The San Francisco
Chronicle, October 27, 2000)

FHP INTERNATIONAL: Shareholders Drop Appeal in Securities Fraud Suit
Disgruntled shareholders of FHP International Corp. first told a federal
appeals court in San Francisco that the company's officers and directors
side-stepped the arguments in the plaintiffs petition to revive their
securities fraud suit; then, after briefing was complete, the plaintiffs
dropped the appeal. Brady et al. v. Anderson et al., No. 98-56217,
voluntary dismissal (9th Cir., June 6, 2000).

The defendant officers and directors had asked the appellate panel to find
that a federal judge was correct in dismissing charges that they
undervalued a spin-off, so they could personally reap $35 million in
profits from a subsequent sale of the HMO. However, the plaintiffs
responded that that the opposition to their petition mischaracterized every
argument they made and did a revisionist history treatment on the case.

The central question was whether the investors met the heightened pleading
standards under the Private Securities Litigation Reform Act of 1995 by
alleging facts giving rise to a strong inference of scienter.

In 1995, the defendants restructured FHP, and its physicians' practice
management operation became a wholly owned subsidiary known as Talbert.
They later sold FHP to HMO giant PacifiCare but did not include Talbert in
the sale. Under the terms of the joint merger proxy statement, FHP
shareholders received cash and PacifiCare stock worth $35 per share plus
the right (in a post-merger offering) to acquire shares in Talbert for
$21.50 each.

According to the investors, the FHP defendants portrayed Talbert as a
loss-riddled company worth only about $60 million and dissuaded
shareholders from exercising their rights to purchase its stock. Due to
FHP's warnings about the value of Talbert, many shareholders let their
rights expire or sold them at a depressed price, the investors assert,
while the defendants snapped up the unsubscribed shares for themselves.

Three months after the Talbert offering, the FHP defendants announced they
were selling Talbert to MedPartners Inc. for approximately $200 million.
The plaintiffs assert the FHP defendants, along with investment banking
firm Merrill Lynch Pierce, Fenner & Smith, knew Talbert was worth more than
they had portrayed and intentionally misled investors.

The FHP defendants counter that, even if the allegations are true, the
shareholders benefited from the sale to PacifiCare. If the joint proxy
describing the proposed acquisition understated Talbert's value and
overstated FHP's, argue the defendants, then the price PacifiCare paid to
acquire FHP was more advantageous to the shareholders. PacifiCare has also
been named as a defendant in the suit.

The defendants also contended that the complaint failed to allege any facts
showing how any particular officer or director knew Talbert was
undervalued. The allegations are conclusory, say the FHP defendants, and
the district court was correct in dismissing the action with prejudice.

In response, plaintiffs charged that in three long, overlapping briefs, the
defendants never confronted their arguments and instead presented a warped,
out-of-sequence version of the history of the case -- and the caselaw on
this issue -- that supported their position. For instance, they said:

-- Defendants claimed the U.S. Supreme Court has ruled that the requited
mental state under Section 14 of the Securities Exchange Act of 1933 is
"actual knowledge" when in fact, the high court has explicitly reserved
that issue;

-- The disclosure that defendants claim made the transaction's value clear
was not made until after the original complaint was filed; and

-- The proxy statement that is a the core of the fraud complaint occurred
before the complaint was filed, not after the amended complaint.

However, on June 6 the plaintiffs voluntarily dismissed the appeal with the
agreement of each of the defendants. The U.S. Court of Appeals for the
Ninth Circuit panel approved the dismissal the next day.

The plaintiff-appellants are represented by Leonard B. Simon, Blake M.
Harper, Eric A. Isaacson, Laura M. Andracchio and Joseph D. Daley of
Milberg Weiss Bershad Hynes & Lerach in San Diego, and by Clifford W.
Roberts Jr. of Roberts & Associates in Tustin, Calif.

The FHP defendants-appellees are represented by John W. Spiegel, Kristin
Linsley Myles and Robert L. Dell Angelo of Munger, Tolles & Olson in Los

Merrill Lynch is represented by Phillip L. Bosl and William E. Thomson of
Gibson, Dunn & Crutcher in Los Angeles. (Professional Liability Litigation
Reporter, September 2000)

FORD MOTOR: PA Ct Dismisses All But 1 Claim in Transmission Defect Case
U.S. District Judge Ronald J. Buckwalter of the Eastern District of
Pennsylvania has dismissed all but one claim by one of eight plaintiffs in
a putative transmission defect class action against Ford Motor Co.
Werwinski et al. v. Ford Motor Co., No. 00-943 (E.D. Pa., Aug. 15, 2000);
see Automotive LR, May 2, 2000, P. 11.

The plaintiffs contended that certain 1990--1995 Ford vehicles have
defective automatic transmissions, which cause erratic performance and
require premature repairs. Their complaint asserted claims for breach of
express warranty, breach of the implied warranty of merchantability,
fraudulent concealment and violation of state consumer protection statutes.

The vehicles are the 1990--1995 Ford Taurus, the 1990-1993 Taurus SHO, the
1990--1995 Mercury Sable, the 1990--1994 Lincoln Continental and the 1995
Ford Windstar. Plaintiffs said the transmissions have a faulty trans-axle
that fails at an unacceptable rate before the expected 80,000 miles of
service. They also claim Ford used aluminum instead of steel in the
construction of the forward clutch piston and inadequately lubricated the
rear planetary gears. The cracking of the trans-axle causes the vehicles to
move erratically or come to a halt, often creating a dangerous situation,
the plaintiffs maintained.

The suit was filed in Pennsylvania state court and removed to the federal
court by Ford. The plaintiffs moved for remand, arguing that jurisdictional
was not proper because the amount in controversy did not exceed the $75,000
federal court minimum. Judge Buckwalter denied the motion, ruling that the
minimum jurisdictional amount of $75,000 had been met -- despite an
estimated $2,000 to $3,000 per vehicle repair cost -- since plaintiffs were
seeking trebled compensatory damages, punitive damages, injunctive relief
and attorneys' fees.

Ford then moved for judgment on the pleadings.

Judge Buckwalter first ruled that only one of the eight named plaintiffs,
Robert Werwinski, had given Ford proper pre-litigation notice of the
alleged breach of the express warranty. The judge also noted that too many
factual issues remained to grant Ford judgment as a matter of law based on
Werwinski's supposed failure to present his vehicle for repair within the
warranty period.

The court allowed Werwinski's express warranty claim to proceed, but
dismissed the claims of the other plaintiffs.

On breach of implied warranty, Judge Buckwalter said all plaintiffs except
Werwinski brought their claims well after the written warranties had
expired. "Since Pennsylvania law allows warranties to be limited, the named
Plaintiffs' remedy expired no later than their claim under their respective
express warranties," the opinion states. Therefore, those claims were
barred, the judge ruled.

Werwinski's implied warranty claim was also dismissed because he did not
file suit until more than a year after the statute of limitations on the
claim expired.

Judge Buckwalter then ruled that the economic loss doctrine barred the
claims for fraudulent concealment and unfair trade practices, applying the
doctrine despite the fact that the dispute involved a manufacturer and
consumer, and rejecting plaintiffs' contentions that the doctrine did not
apply to tort claims involving fraud. The doctrine bars recovery in tort in
product liability actions between commercial enterprises when the only
damage is to the product itself.

"Since Pennsylvania courts have recognized limitations on even intentional
tort remedies for those attempting to recover on essentially breach of
contract claims, the Court is confident that the Pennsylvania Supreme Court
would not prohibit the application of the economic loss doctrine to fraud
cases," the judge held.

The gist of the action is a contract claim for selling a defective product,
Judge Buckwalter observed.

Ford was represented by Dylan J. Walker and Robert Toland II of Cabaniss,
Conroy & McDonald in Wayne, Pa.

The plaintiffs were represented by Joseph C. Kohn, Martin J. D'Urso and
David J. Cohen of Swift, Kohn & Graf in Philadelphia; Donald F. Clarke of
Devon, Pa.; and Isaac H. Green of Philadelphia. (Automotive Litigation
Reporter, September 26, 2000)

GLOBAL LIGHT: Announces Dismissal of Washington Suit against Officers
Global Light Telecommunications Inc. (AMEX:GBT)(CDNX:GGB.U) is pleased to
announce that the United States District Court, Western District of
Washington has ordered a dismissal of the class action against the Company
and certain individual directors and past directors of the Company.

The Court Order for Dismissal ends a class action against the Company,
Gordon Blankstein, Stephen Irwin, John Warta, Robert Hanson, Peter Legault
and Ian Watson begun by Robert Schiefelbein in October, 1999.

In dismissing the action with prejudice, U.S. District Judge, Franklin D.
Burgess noted that the plaintiff's claim "is insufficient to survive."
Moreover, Judge Burgess found no facts to substantiate a proper action
against the Company's individual directors.

No stock exchange has reviewed or approved the contents of this press

The Canadian Venture Exchange Inc. does not accept responsibility for the
accuracy or adequacy of this press release.

MAGELLAN HEALTH: Cohen, Milstein Accuses of Breaking Promise on Services
Nationwide Class Action Filed Against Magellan Health Services for Failing
to Provide Promised Behavioral Health Services

The law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C., and Berger &
Montague, P.C., two of the nation's top plaintiffs' law firms, on October
26 filed nationwide class action law suits against Magellan Health
Services, Inc., the largest specialty managed care organization in the
country and its subsidiary Magellan Behavioral Health, Inc.

Magellan is a nationwide health care organization that manages mental
health and substance abuse services for 70 million Americans. The suits
were brought on behalf of beneficiaries whose behavioral health benefits
were provided, underwritten, and/or managed by Magellan. Both cases were
filed in the U.S. District Court for the Eastern District of Missouri.

Millions of Americans confront a national crisis -- as well as a personal
crisis -- when they need treatment for mental illness or substance abuse.
Less than one-third of adults in this country with a diagnosable mental
di[order actually receive treatment in a given year. The most commonly
cited reason for not receiving treatment is cost.

Although they have purchased health insurance policies that expressly cover
treatment for mental illness and substance abuse where such treatment is
"medically necessary," many policyholders discover they can't obtain the
treatment their doctors say is necessary, because insurance companies and
their claims reviewers won't approve it and won't pay for it. Disregarding
the orders of treating physicians, insurance company claims reviewers
determine that the treatment prescribed does not meet the insurer's
undisclosed cost-based criteria and therefore the claims will not be paid.
As a result, policyholders wind up paying more for their behavioral health
care coverage than they would have if the insurers had truthfully detailed
the coverage that actually would be provided.

The law suits claim that policyholders have paid more money for less
coverage not to mention the fact that when policyholders discover they do
not have the coverage that was represented to them, many go without needed
treatment. Unfortunately without proper care, some of the policyholders
have been known to commit crimes, lose their jobs, have accidents and even
commit suicide.

Magellan takes in annual revenues of $1.9 billion. Magellan makes profits
by keeping the difference between the premiums paid for promised coverage
and the cost of coverage actually provided and by managing behavioral
health care services for employers and insurers to keep utilization as low
as possible to save money.

The complaint alleges that Magellan achieves "savings," and makes profits,
by engaging in a variety of practices, including: (1) imposing cost-based
restrictive criteria to limit approvals of coverage; (2) providing
financial incentives to physicians not to recommend covered services; (3)
pressuring claim reviewers to deny claims; (4) instituting unreasonable
approval and appeal requirements to prevent, discourage and delay
policyholders from attaining their right to coverage under the terms of
their policies; and (5) arranging to profit directly from under-treatment
by assuming the role of an insurance company, not merely a claims

The law suits state that none of these practices are disclosed adequately
to policyholders. To the contrary, Magellan, along with the insurance
companies and other entities that utilize Magellan, represent that they
will provide and pay for broad coverage for medically necessary treatment.

Contact: Cohen, Milstein, Hausfeld & Toll, P.L.L.C. Stephen Annand,
202/408-4600 OR Berger & Montague, P.C. Peter Norberg, 215/875-3000 OR
Media Relations Inc. Deborah Schwartz, 301/897-8838 Charles Maier,

MENLOVE DODGE: Former Sales Employees Allege Dealer Skimmed Commissions
Eight former sales employees of Menlove Dodge Toyota in Bountiful have
filed a proposed class-action lawsuit alleging the dealership owner
secretly diverted $9 million in profits that should have contributed to
commissions and bonuses.

The suit claims the owner offered "morale boosters" - purportedly including
drugs and prostitutes - to keep employees quiet and those who did not agree
were fired or harassed.

Dealership owner and general manager Wesley Johnson called the allegations
"absolutely bogus," saying they were being made by a group of disgruntled
former employees.

He produced records and written statements from current employees to
demonstrate the company's open-book policies and to show there was nothing
secret about accounts established long ago with profits from the
dealership's successful "Fresh Start" car-sales program to allow "fairness
and equity" in compensation among employees in less lucrative sales.

The former employees allege they had contracts guaranteeing that 25 percent
of gross profits from the "Fresh Start" program would be distributed as
commissions and bonuses. Johnson denied the employees had such contract

"I have people who have worked here 16, 18, 20 years; they will tell you
it's a good place to work and it's fair," he said. "Why in the world would
I have people working with me this long and be this successful if I was
defrauding and ripping my employees off?" Cherie Baddley, Clyde L. Francis,
Delmar Dee Thomas, Jack R. Horwitz, Alfred B. Taylor, Scott Bradshaw, Brian
P. Hill and Oliver-Thomas Adler filed the suit on behalf of themselves and
up to 150 others who sold cars under the program between 1990 and 1998,
said Dana Heinzelman, a Salt Lake City attorney representing the group.

Compensatory damage claims by the employees run up to $300,000 apiece, she
said. The lawsuit was filed in 2nd District Court last month and amended
October 25.

According to the suit, the morale boosters included illegal drugs, trips to
a strip club, strip shows after hours at the dealership and limousine rides
in which sales people received oral sex from a prostitute.

Sales people also received tickets to Jazz basketball games and trips to

"If they say no, they'll be fired. If they threaten to tell what's going
on, their wives will find out," Heinzelman said.

"As far as the bribery and the sex - this is the National Enquirer version
of trying to sling mud," Johnson said. (The Associated Press State & Local
Wire, October 27, 2000)

MICROSOFT CORP: Indirect Buyer Lacks Antitrust Standing against Maker
who did not buy their software directly from the manufacturer lack standing
to pursue antitrust claims under Rhode Island law, a trial-level judge in
Providence has ruled in one of the many state class-action lawsuits filed
against Microsoft Corp. Siena et al. v. Microsoft Corp., No. 00-1647 (R.I.
Super. Ct., Aug. 21, 2000).

As a result, Superior Court Judge Michael A. Silverstein granted a defense
motion to dismiss the class-action complaint brought by two licensees of
the software program.

A physician and a professional corporation sued Microsoft Corp., seeking
damages under the Rhode Island antitrust statute on behalf of purported
class members who own or lease Intel-based personal computers that use
Windows 98. Neither plaintiff bought the operating system directly from
Microsoft. Instead, Windows 98 had either been pre-installed by the
computer manufacturer or was contained on a CD-ROM purchased by the
plaintiff from a retailer.

In support of standing, they unsuccessfully argued that they were compelled
to accept and agree to Microsoft's mandatory end-user license as a
precondition to using the software.

In his decision, Judge Silverstein held that only direct purchasers who
paid Microsoft -- either the computer maker or the CD-ROM manufacturer,
distributor or wholesaler -- would have standing under either the federal
or state antitrust statutes.

Nor did the end-user license agreement eliminate the direct-purchaser
requirement under the U.S. Supreme Court decision in Illinois Brick Co. v.
State of Illinois, 431 U.S. 720, 97 S. Ct. 2061 (1977), he said, adding
that the plaintiffs paid nothing directly to Microsoft for the license

He noted that the Rhode Island attorney general has statutory authority to
sue on behalf of state residents who are victimized by antitrust violations
and has discretion to do so.

The Rhode Island decision is in line with a recent decision from the
Kentucky Circuit Court, which held that under Illinois Brick, indirect
purchasers cannot file suit under Kentucky's antitrust law. Arnold v.
Microsoft Corp., No. 00-CI- 00123 (Ky. Cir. Ct., July 21, 2000). However, a
Tennessee court recently held that consumers in that state could sue
Microsoft for antitrust violations. In Sherwood v. Microsoft Corp., No.
99C-3562 (Tenn. Cir. Ct., July 5, 2000), the court held that the Tennessee
Trade Practices Act picks up where federal law leaves off, and that
end-users of Microsoft software can therefore sue the company. (Computer &
Online Industry Litigation Reporter, September 26, 2000)

MICROSTRATEGY INC: Announces that Operating Loss Drops
MicroStrategy Inc. reported that its operating loss narrowed during the
quarter that ended Sept. 30.

If $ 10.8 million in restructuring charges for layoffs and other
cost-cutting measures are excluded, the operating loss was $ 35.8 million,
down 24.9 percent from $ 46.7 million in the second quarter. Total losses
for the third quarter were $ 170.4 million, including a $ 113.7 million
charge for the estimated cost of settling a shareholder lawsuit.

In a conference call with stock analysts after the market closed,
MicroStrategy chief executive Michael J. Saylor said he and other
executives were "very happy" about the company's performance during the
quarter, as it reduced costs by cutting about 10 percent of its employees,
created a Web site to sell its software over the Internet, and settled a
class-action suit over its accounting practices.

"In fact, I can say that the mood around the table is close to giddy,"
Saylor said.

MicroStrategy has been trying to recover from disclosures earlier this year
that it had overstated revenue and reported profits while it was actually
losing money. The company has settled a class-action lawsuit alleging that
its accounting defrauded investors. The settlement included an $ 80.5
million IOU for members of the class, due in five years.

The $ 10.8 million restructuring cost accounted for the recent layoffs, the
revocation of job offers to recent recruits, and the cancellation of an
annual Caribbean cruise for which MicroStrategy had reserved a ship.

One financial analyst said MicroStrategy's performance was a mixed bag, and
therefore difficult to put into perspective.

Steven Abrahamson, of Prudential Volpe, said that although the company won
a high-profile client this quarter in KPMG, the Big Five accounting firm,
only 10 percent of MicroStrategy's business came from new customers. "At
some point in time, the existing customer well will dry up," Abrahamson
said. "Most companies right now are getting substantially more of their
business from new customers."

MicroStrategy's revenue totaled $ 64.9 million for the quarter, up from $
50.3 million in the second quarter and $ 35.3 million in the third quarter
of last year.

MicroStrategy said $ 9.5 million of that revenue came from restructuring a
deal with Deutsche Bank so it could count the revenue sooner.

When MicroStrategy announced that deal in April, it said it "could be worth
up to $ 35 million."

In a July news release, Saylor said MicroStrategy's goal was to become
"profitable on a consolidated basis" by the fourth quarter of 2001. The
company put it differently, saying its goal was to break even by then,
excluding factors such as the results of its Strategy.com subsidiary,
preferred dividend costs, and amortization. (The Washington Post, October
27, 2000)

NORTH CAROLINA: Families Claim Disparity in Education Among Counties
May: Ten families from Cumberland, Halifax, Hoke, Robeson and Vance
counties sue the state, claiming that the low-wealth counties do not
receive the same education opportunities as children in wealthier counties
and districts. The case initially takes on the name of the lead plaintiff,
Hoke County student Robert Leandro.

October: Six urban districts - Asheville City, Buncombe, Mecklenburg,
Durham, Wake and Forsyth - join the case, saying the state has failed to
provide enough resources for urban districts.


April: After a Wake Superior Court judge refused to dismiss the lawsuit,
the state Court of Appeals reverses that decision, ruling in favor of the
state's motion to dismiss. The Court of Appeals holds that the state
constitution does not guarantee quality or equity in public schools.


July: The N.C. Supreme Court reverses the decision of the Court of Appeals,
restoring the Leandro lawsuit and establishing every child's constitutional
right to a "sound basic education," which it defines with four key
elements. The high court sends the case to trial in Wake County Superior
Court to determine whether the constitutional right to a sound basic
education is being denied to public school children in North Carolina.


February: Superior Court Judge Howard Manning Jr. rules that the right to
an opportunity for a sound basic education in the public schools is not to
be conditioned upon age but rather upon the need of the particular child,
including, if necessary, the right to early childhood education before the
age of 5.

September: The trial begins in the case, which has been renamed Hoke County
Board of Education v. State. Testimony centers on Hoke County schools.


Oct. 12: Judge Manning issues the first part of a three-part ruling. He
finds that the state's system for administering and funding public
education is constitutionally sound but reserves judgment as to whether it
is adequately serving every student. He rules that any student who fails to
perform at grade level in state achievement tests is not receiving a sound
basic education.

Oct. 26: Judge Manning rules that the state must provide pre-kindergarten
for 4-year-olds at risk of failing academically. He indicates that he hopes
to issue his third ruling, focusing on Hoke schools, before the end of the
year. (The News and Observer (Raleigh, NC), October 27, 2000)

PRICELINE.COM: The American Banker Offers View on New Banker
The original idea behind Priceline.com was simple but clever: compile an
inventory of airplane seats that go empty, and sell them to people at
whatever price they are willing to pay.

Armed with this premise, Priceline opened its virtual doors in April 1998
and quickly made a name for itself. Web surfers seemed enthusiastic about
the "name-your-own-price" concept, and soon friends and family members
started bragging to one another about the bargain travel arrangements they
had made through Priceline.

So the company started expanding, looking for other products and services
it could sell at name-your-own prices. Hotel rooms, cars, long-distance
telephone service, groceries, gasoline -- Priceline tried them all,
sometimes with success, and sometimes (in the much-publicized cases of
groceries and gasoline) with failure.

Now the Norwalk, Conn., company is planning to offer financial services at
full tilt. Mortgages and home-equity loans came online last year, and plans
are in place to offer credit cards, auto insurance, and term life insurance
at what will likely be fairly attractive prices.

Priceline has had its share of bad news this fall, including the closing of
the grocery and gas operation, Priceline WebHouse Club Inc., and
lower-than-expected third-quarter earnings. But the company is marching
forward with plans to become one of what American Banker is calling the
"New Bankers" -- companies with little or no prior expertise in banking
that think they can capture a share of the market.

"We're building a brand," said Ben Ness, 45, senior vice president for
financial services at Priceline. The addition of financial services to the
Priceline menu is "a good fit."

The growth strategy centers on geographic expansion. Priceline plans to add
name-your-price services for airline tickets, hotel rooms, rental cars, and
long-distance telephone calls in Europe by yearend. After that it plans to
expand into Australia, New Zealand, Japan, and other parts of Asia. Within
the United States, the push will be into consumer goods and financial

But treading into new waters may not be as easy as it seems. As eager as
mortgage lenders are to pick up new business, it is not as if they have an
inventory of products lying fallow, as the airlines and hotels do with
their empty seats and rooms.

Mark Mahaney, an analyst at Morgan Stanley Dean Witter & Co., said that
when it comes to offering financial services, "it may be too early to tell"
how Priceline will fare. "Priceline generally throws things against the
wall to see what sticks."

The company's basic formula is best summed up by its airline ticket
service. U.S. airlines take off with 500,000 empty seats daily, and
Priceline figured it could become a middleman, filling some of those seats
by letting travelers name their own ticket price. After a consumer submits
a bid, which includes the travel dates, destination, and proposed price,
Priceline passes it on to the airlines with which it has agreements,
including eight major U.S. and 20 international carriers.

If one of the airlines has an empty seat on a plane that would accommodate
the traveler, it can accept the bid and thus have one less empty seat.
Priceline sells a whopping 15,000 seats a day and takes a cut of each sale.

The company is selling mortgages, refinancings, and home equity loans in
much the same way. People name their own mortgage terms, and 30 minutes to
24 hours later they learn if any of the lenders affiliated with Priceline's
two partner companies has accepted the bid. Customers whose bids are
accepted get guaranteed closing costs and can lock in their rates.

Priceline's formed its first mortgage partnership in February 1999 with
LendingTree, a service quite similar to Priceline that lets people describe
what they want in a loan -- products include credit cards, small business
loans, student loans, and so on -- and get offers from interested lenders.
The Charlotte, N.C., company has a network of 40 lenders to which it
funnels bids from Priceline's seven million customers.

In September 1999 Priceline formed a joint venture with Alliance Capital
Partners of Jacksonville, Fla., which owns the $100 million-asset thrift
First Alliance Bank. The companies opened PricelineMortgage, which acts as
a broker and lender through the thrift.

PricelineMortgage was tested in several markets before it went national in
March. Experts say it may have an edge over other online mortgage
companies, like MortgageMarvel.com and Loanworks.com, if only because of
Priceline's name and reputation for getting people good deals.

Priceline's success has spawned some copycats. On the airline ticket side
-- which provides most of Priceline's revenues -- new companies called
Savvio.com and Hotwire.com have set themselves up in direct competition.

Nick Karris, an Internet mortgage analyst at Gomez Advisors Inc., said "the
name-your-price model is appealing to consumers who want a good deal." Most
other Web sites "only provide products they want consumers to see."

The complexity of mortgages may make them much more difficult to sell
through the Priceline format than airline tickets or hotel rooms. Robert
Sterling, an analyst with Jupiter Communications, said the problem is "with
people who don't know how to compare and contrast prices on mortgages --
especially closing costs and so it might not pack the right punch."

Priceline announced a partnership in July with W.R. Berkley Corp., a
Greenwich, Conn., property casualty insurance company, to sell auto and
term life policies, thus tapping into another big financial services
market. The new Priceline.com Insurance Agency is expected to offer
customers another chance to name their own price by early next year.

Cobranded credit cards are also being developed, and Priceline says it will
have partners in that field too.

The company will not release figures on the mortgages it has generated, but
it does say that within the first 10 months of operation, the
PricelineMortgage site generated $3.5 billion of loan requests, and
mortgages were closed in 45 states.

Priceline's corporate strategy is drawing some mixed reviews. On the plus
side, people point to the strength of the brand, which has helped Priceline
raise money, go public, and get William Shatner of "Star Trek" fame to
appear on its television commercials.

It has also helped attract top talent, including several former Citigroup
Inc. executives. The first of these was Richard S. Braddock, former
president of Citibank, who joined Priceline in August 1998 and is now its
chairman. Mr. Braddock was Priceline's chief executive officer until May,
when he was succeeded by Daniel Schulman, former president of AT&T Consumer

Heidi Miller, formerly chief financial officer of Citigroup, joined
Priceline in February as senior executive vice president and chief
financial officer. William F. Pike, formerly director of investor relations
at Citi, was named vice president of financial planning, analysis, and
investor relations in April. Mr. Ness also hails from Citibank.

Last month -- before the brunt of Priceline's problems hit -- the Saudi
Arabian prince Alwaleed bin Talal agreed to double his investment in the
company, to $100 million.

But the news has been all downhill since then, and Priceline founder Jay S.
Walker -- who once boasted that "there is no category we won't be in" --
has found himself on the hot seat.

On Sept. 27 Priceline announced that its third-quarter revenues would fall
short of expectations, mainly because of sluggish sales in its core
product, airline tickets. The company's stock fell 40% that day, to what
was then a record low of $10.75. Priceline's stock had been trading as high
as $104.25 a share in March, but the company was trading midday October 26
at $5.40625.

In the fallout from the third-quarter warning, at least three class actions
from disgruntled shareholders were filed against the company.

This month brought the news that the Priceline WebHouse Club, which was
started by Mr. Walker but is technically separate from Priceline.com, would
be winding down operations over three months. The service, which ran out of
money, is already closed.

Priceline issued a statement trying to distance itself from the failure,
saying "WebHouse Club is a separate company that licensed Priceline.com's
business model and offered groceries and gasoline on the Priceline.com Web

Customer complaints also reached a crescendo this month, and Connecticut's
attorney general, Richard Blumenthal, opened a consumer protection
investigation into the company.

He said his office had received more than 100 complaints over a few months,
and was looking into whether the company made full and accurate disclosures
of product terms, prices, and conditions. The investigation will focus on
airline tickets, gasoline, and long-distance telephone calls, he said.

Mr. Ness insists the complaints come from the travel side, not from
mortgages. The businesses maintain different call centers, four for travel
and two for financial services.

"Mortgages are a different product area," Mr. Ness said. "The staff are
employees of a thrift and are trained mortgage professionals."

Despite its woes, Priceline is proceeding with its plans to add financial
services products. However, unlike other "New Banker" companies, Priceline
has no intention of taking deposits.

"I don't think we'll be selling bank accounts," Mr. Ness said. "We're
focusing on lending and insurance, where there are significant margins to
be had. That's where we'll come in." (The American Banker, October 27,

RITALIN LITIGATION: Second Thoughts about Taking Controversy to Court
A polarizing debate over the growing use of the drug Ritalin to treat
attention-deficit hyperactivity disorder in children has now been thrown to
the courts. That is the wrong place to address this subtle medical issue.
What's needed, for a start, is government research that might settle the

Ritalin has been used to treat ADHD for more than a decade and has been
highly successful in some children for whom nothing else works. But
controversy ballooned in the late 1990s, when the use of Ritalin among
children nearly tripled.

Class-action lawsuits were filed last month in California and New Jersey by
some of the same lawyers who pressed high-profile actions against gun
makers and the tobacco industry. The suits, alleging that Ritalin's
manufacturer conspired with the American Psychiatric Assn. to inflate the
drug's market, appear to be cynical attempts to mine the industry's deep
pockets. For instance, they depict as conspiratorial common practices like
drug company funding of a disease advocacy group. The group, Children and
Adults With Attention-Deficit/Hyperactivity Disorder, was indeed an early
supporter of Ritalin use in children, but disease advocacy groups
frequently receive funds from drug companies and it is perfectly legal, if
somewhat troubling.

Nevertheless, the lawsuits do help underscore the legitimate fears of
parents who question the use of Ritalin and find themselves at odds with
educators, psychologists and the doctors who believe in the drug's ability
to help hyperactive children lead more normal and stable lives.

Earlier this year, members of Congress and the White House called for
action to reverse the sharp increase in Ritalin use, asking Steven Hyman,
the director of the National Institute of Mental Health, to study whether
the rise might signify a growing tendency in the United States to explain
away behavioral problems as hard-wired organic brain diseases. However, the
studies the NIMH has since launched focus not on answering such larger
questions but on more limited issues like whether the long-term use of
Ritalin in children is safe.

Part of the problem with Ritalin use, or overuse, is that the definition of
ADHD is ambiguous. The Web site of the National Institute of Mental Health,
for instance, says it is characterized by "an inability to sustain
attention and concentration."

There is indeed subjectivity in the Ritalin issue, a matter that science is
unlikely to resolve soon. Many psychiatrists, for instance, fundamentally
disagree about how to define normal behavior, about where to draw the line
between fidgeting and abnormality.

But the NIMH can and should do more to address parents' specific worries:
Why is this drug being used in the United States dramatically more than in
the rest of the developed world? Is it being used too hastily because it
provides an easier solution than other interventions?

As the recent lawsuits suggest, if parents don't get better guidance soon,
they may increasingly take their case to the courts. That may be a way to
vent frustration, but it would hardly provide solutions. (Los Angeles
Times, October 27, 2000)

SPRINGDALE CEMETERY: Settles Consumer Fraud and Antitrust Charges
The former owner of the historic Springdale Cemetery must pay $200,000 to
settle a class-action lawsuit alleging consumer fraud and anti-trust
violations over business practices at the cemetery, a circuit judge has

The money goes to settle a lawsuit filed two years ago by 17 cemetery
consumers and an insurance company against owner Larry Leach, his wife and
Springdale Cemetery Inc.

Specific details of the order and the monetary disbursements were not made
available, but Circuit Judge Richard Grawey on October 26 ordered Leach to
offer proof of payments by Nov. 17.

Leach was stripped of his operating license in September 1999 for failing
to maintain the 200-acre cemetery.

A year later, the Illinois comptroller's office released an audit showing
that at least $796,315, and probably much more, of the cemetery's trust
funds was missing. The report blamed several owners and operators for the

Leach is serving 30 months' probation in Florida, where he lives. He agreed
to a negotiated guilty plea for felony theft for selling three Civil War
cannons from the cemetery in 1997 for $35,000. As part of the plea
agreement, Leach signed over the cemetery's deeds to a court-appointed
receiver. He also paid $ 35,000 in fines and restitution.

A lawyer in the case said some of the lawsuit's plaintiffs have pledged to
donate part of the settlement to the not-for-profit Springdale Historic
Preservation Foundation, which plans to take over the cemetery. (The
Associated Press, October 27, 2000)

SYKES ENTERPRISES: Period Is Expanded in Securities Lawsuit
Court-appointed Lead Plaintiffs, Florida State Board of Administration and
the Louisiana State Employees Retirement System, announce that on October
16, 2000, a Consolidated Amended Class Action Complaint was filed in the
action against defendants Sykes Enterprises, Inc. (Nasdaq:SYKE), John L.
Sykes, Scott J. Bendert and David L. Grimes, Case No. 8:00-cv-212-T-26F, in
the United States District Court for the Middle District of Florida.

The Amended Complaint, which seeks damages for violations of the federal
securities laws, charges that the defendants, through a series of false
statements of revenue and earnings, materially misled the investing public
regarding the success of Sykes' business operations and thereby inflated
the Company's stock price during the period commencing July 27, 1998
through and including September 18, 2000 (the "Class Period").
Specifically, the lawsuit alleges that, in order to continue to meet or
exceed the consensus expectations of Wall Street analysts, and in order to
use artificially inflated stock as currency for acquisitions, Sykes
improperly booked millions of dollars in revenue in the second quarter of
1998, and the second and third quarters of 1999 from software license
agreements that, in two instances, were expressly contingent on the
occurrence of future events that did not occur. This allegedly improper
revenue recognition on license agreements was in violation of generally
accepted accounting principles ("GAAP"), but enabled Sykes to avoid
announcing earnings shortfalls through the third quarter of 1999.

In February 2000, Sykes announced that it was required to restate the
second and third quarters of 1999 due to improper revenue recognition
related to certain license agreements, reducing second quarter 1999 income
to approximately $4 million from the $11.5 million originally reported, and
reducing third quarter 1999 income to approximately $4.3 million from the
$14.1 million originally reported. On September 18, 2000, Sykes again
announced that it would have to restate previously reported results of
operations, this time for year-end 1998, due to $4.5 million in revenue
from a license agreement that was improperly booked in the second quarter
of 1998. In the wake of the February and September 2000 disclosures of
restatements, the common stock of Sykes, which had traded as high as $52.25
per share during the Class Period, fell to a low of less than $4.50 per
share. In light of these latest revelations the Amended Complaint
encompasses the expanded Class Period defined above and is brought by Lead
Plaintiffs as a class action on behalf of themselves and all other persons
who purchased the common stock of Sykes on the open market during that
Class Period.

Contact: Burt & Pucillo, LLP, West Palm Beach Michael J. Pucillo,
561/835-9400 or 800/349-4612 law@burt-pucillo.com or Burtpucill@aol.com or
Bernstein Litowitz Berger & Grossmann LLP John P. ("Sean") Coffey,
212/554-1400 sean@blbglaw.com

TOBACCO LITIGATION: California Regions May Sell Securities Tied To Sales
growing number of California counties, including at least three in the Bay
Area, are getting ready to sell one of the strangest and most disturbing
securities in the annals of municipal finance.

These would be tax-free bonds backed by revenue from the gargantuan
tobacco-litigation settlement.

As part of a "master settlement agreement," the nation's major tobacco
companies have agreed to make payments to 46 states and five U.S.
territories in perpetuity to reimburse them for treating tobacco-related
illnesses. These payments are expected to total $206 billion during the
next 25 years.

California began receiving its share, about $1 billion a year, in January.
Half of that money goes into the state's general fund, the other half is
being distributed to the state's counties and four largest cities, based on
their population.

But some counties don't want to wait for their money to come in year by
year, because they have immediate needs or they're afraid it will go up in

So like the vast majority of lottery winners, who opt for less money now
rather than more money over time, some counties are getting their money up
front by selling bonds that will be repaid from their tobacco payments.

Here's the disturbing part: For the tobacco bonds to be repaid in full,
Americans have to keep on puffing.

That's because the tobacco companies' actual payments are tied to domestic
tobacco consumption, inflation and market share. If Americans were to kick
the habit en masse, or if the cigarette-makers went bankrupt because of
foreign, civil class-action or federal lawsuits, the tobacco payments to
the counties would decrease or even disappear and the counties might not be
able to repay the bonds.

Brian Annis, a budget analyst in the state Department of Finance, said the
initial payment from the tobacco companies was slightly less than expected
because of a decline in U.S. cigarette usage.

If the tobacco bonds went belly up, bondholders could not go back to the
counties for repayment. Unlike general obligation bonds, the tobacco bonds
are secured only by payments from the tobacco companies, not by the
issuer's general funds.

Given the perceived risks to investors, most issuers have to pay a higher
interest rate on tobacco bonds than they do on regular bonds. But unlike
regular bonds, tobacco bonds don't need voter approval and don't add to the
issuer's debt, so they're easier to get out the door.

So far, tobacco bonds have been issued by New York City, at least five New
York counties, Alaska, Alabama and Puerto Rico.

Most of these bonds are rated A and yield 6.1 to 6.63 percent. By
comparison, an A-rated California bond might yield only 5.75 percent, says
Bernard Schroer, a bond-fund manager with Franklin Templeton in San Mateo.

WHO'S DOING WHAT: In California, Sacramento and San Diego are very close to
issuing tobacco bonds. Sonoma and Solano county supervisors have also voted
to sell tobacco bonds, and Marin County supes voted to hire a team to
manage one.

Stanislaus, Merced and Kern counties are also doing issues on their own,
and 20 smaller counties are banding together to issue them under the
California State Association of Counties.

San Francisco, which expects $20 million a year in tobacco revenues, does
not plan to issue bonds. Instead, it will spend the first $1 million per
year on anti-tobacco education and the rest to help repay the bond approved
last year to rebuild Laguna Honda Hospital.

San Francisco will avoid the ruckus raised in other counties that proposed
using tobacco revenues on projects other than health care.

Although there are no restrictions on how tobacco settlement money can be
used, some people are adamant it should pay for health care.

"Orange County would like to use the proceeds to repay a lot of their
bankruptcy debt and to build a jail. But there are two measures on the
November ballot that would force the county to spend it on health care,"
says Jean Buckley, managing director of C.M. deCrinis & Co. a municipal
financial advisory firm in Sausalito.

Ventura County also has a ballot measure that would divert tobacco money to
community hospitals. Both counties are awaiting the results of those ballot
measures before proceeding with any plans for tobacco bonds.

WHAT LAWYERS WANT: Another snag: Most bonds can't be sold until they get a
rating, and the agencies won't rate some California tobacco bonds until
they get a decision in a legal-fee arbitration.

Most of the larger California cities and counties involved in the tobacco
lawsuit were represented by outside lawyers who worked on a contingency
basis. Their contract entitled them to 25 percent of the first $25 million
a year in tobacco settlement revenue and 15 percent of anything over that,
according to Geoff Davey, chief financial officer of Sacramento County.

However, the national settlement provides for an annual payment of $500
million to be divided among lawyers in all states involved in the
litigation. The California counties hope their lawyers will get enough out
of that settlement that they will forgo their contingency fees.

Arbitrators have been doling out that money on a state-by-state basis.
California's arbitration hearing was held in early October, and a decision
on how much money California lawyers will get is expected any day.

If the lawyers are not satisfied with their share of the national
settlement, some tobacco bond issues could be held up indefinitely.

THE ECONOMIC PICTURE: Almost every county in California is considering a
tobacco bond issue, but some may decide it doesn't make economic sense,
especially if they don't have a pressing capital need.

That's why Contra Costa County recently scrapped plans for a tobacco bond
issue after studying it for 18 months.

Tax-free municipal bonds were designed to finance capital expenditures,
meaning brick-and-mortar projects.

If municipal bond proceeds are used instead to finance continuing operating
expenses, the IRS requires the proceeds be placed in a fund earning the
lowest tax-free interest rate, currently around 5.5 percent. If counties
have to pay more than 6 percent on tobacco bonds and only earn 5.5 percent
on their proceeds, the county ends up paying part of the debt service.

On top of that, counties must pay underwriting and other fees. Finally,
given the substantial risks involved, counties have to set aside a
significant portion of their tobacco revenue to ensure repayment.

All of these expenses together are known as a "haircut," and the haircut is
the price counties pay to insure their tobacco revenue.

Santa Clara County expects to get $20 million a year in tobacco revenue and
plans to spend it all on continuing health care costs. If it were to issue
bonds and invest the proceeds in a tax-free endowment fund, it would earn
only $18 million a year, estimates John Guthrie, the county's director of

Guthrie says his county hasn't decided whether it's worth $2 million a year
to get its tobacco money up front.

But some counties think it is.

Sonoma County voted to sell $68 million to $70 million in tobacco bonds.
All of its $4 million to $5 million a year in tobacco revenue will go
toward repaying the bonds. When they are paid off, in about 22 years, the
county will get all the tobacco revenue.

In the meantime, the county can invest its bond proceeds in an endowment
fund that will earn $3 million to $3.5 million a year. So its haircut, or
insurance policy, will be $500,000 to $2 million a year.

Sonoma County Auditor Rod Dole says that's an acceptable price to pay,
because the endowment fund earnings will be much more predictable than the
tobacco payments.

THE ISSUES FOR INVESTORS: Once the legal-fee issue is settled, high-income
California investors can expect calls from their brokers pitching tobacco

Although most municipal bonds are sold to mutual funds, underwriters are
trying to sell tobacco bonds to retail investors by reducing the risk and
complexity of the earlier issues. Even so, these bonds can be extremely
complicated, with all sorts of unusual features like "trapping events" and
"full turbo payoffs."

And bear in mind that the same Wall Street firms that are encouraging
counties to eliminate their tobacco-industry risk are also telling
investors that the tobacco industry will never die because so many
Americans are addicted to cigarettes.

Franklin's Schroer says his firm has bought tobacco bonds when the added
yield is high enough to justify the added risk.

Aside from the financial considerations, investors will also have to decide
if they want to buy a bond that depends on continued tobacco use. Amy
Domini, who runs a group of socially conscious mutual funds, says she would
never buy a tobacco bond, even if it's helping support a good cause such as
health care.

"This is definitely tainted," she says. "You're dependent on tobacco
succeeding. In the best case, all new smokers would come out of population
growth, and that means young people. There's nothing in this that's good
for public policy, although I can't fault the counties for doing it." (The
San Francisco Chronicle, October 27, 2000)

* S Korea Revise Regulations On Company Protocols; Permits Class Action
The government decided to permit class action suits in securities-related
cases for minority investors but ease regulations on accumulative voting
systems for companies at an economic ministerial meeting.

The government will also mandate that a company must receive its board of
directors' approval prior to doing business with a major shareholder or
affiliated firm.

Moreover, the qualifications for outside directors will be tightened; a
candidate who is involved in any of the company's financial arrangements is
automatically disqualified.

The government said it will send these measures to improve corporate
transparency and director autonomy to the National Assembly this year for
approval and implement them in January.

"Class action suits will be implemented gradually and detailed measures
will be worked out in consultations with the Justice Ministry," a Finance
and Economy Ministry official said.

He added that such lawsuits will be allowed against large corporations

An accumulative voting system will not be mandated for companies selecting
board members, but a company can broaden qualification for voting from
those holding 3 percent of the company shares to 1 percent.

The accumulative voting system permits shareholders to refrain from voting
in the election of certain board members and opt instead to use all their
votes in the election of other members. (Asia Pulse, October 27, 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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Washington, DC. Theresa Cheuk, Managing Editor.

Copyright 1999.  All rights reserved.  ISSN 1525-2272.

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