/raid1/www/Hosts/bankrupt/CAR_Public/001114.MBX               C L A S S   A C T I O N   R E P O R T E R

             Tuesday, November 14, 2000, Vol. 2, No. 222


225 EAST: Ct Denies Shareholders/Lessees Exclusivity to Portion of Roof
ACRODYNE COMMUNICATIONS: Ct OKs Shareholders’ Lead and Liaison Counsel
AUTO FINANCING: Palm Beach Judge OKs Suits Against AutoNation
BREAST IMPLANT: TX Ct. App. Remands Malpractice Claims Against Attorneys
CENDANT CORP: $935M Avis Deal Follows Two Years of Difficulties

ENPC TECHNOLOGY: CEO Allegedly Fired In Retaliation For Bias Complaints
HEARTLAND HIGH-YIELD: Former Fund Manager Conlin Named in Investors Suit
HMOs: Aetna Agrees to Pay $82.5M to Settle US Healthcare Merger Charges
HMOs: Lawyers Put On Happy Faces After Lawsuit Is Consolidated In Miami
INTERSPEED, INC: Confirms Shareholder Complaints; Reports Q-4 Results

LERNOUT & HAUSPIE: Consultancy Says 3000+ Minority Shareholders Register
LOS ANGELES POLICE: Woman Recants Claim That Officer Killed Three People
MP3.COM: Sued Again; Unity Alleges of Infringement on Indie Labels
NATIONAL TREASURY: Target Date Set For Settling Special Rate Pay Suit
PRESIDENTIAL ELECTION: CNN Coverage on Voting, Balloting and the Lawsuit

TEXAS MEDICAID: 5th Cir Grants Delay in Implementing Improvements
TRANSCRYPT INT’L: Securities Suit Settled; SEC Settlement Not Yet Okayed
U-M: Southgate Woman Key Figure In University Admissions Bias Suit
UNITED CONSUMERS: 'Association-in-Fact' Allegations Lack Specificity
ZIRKLE FRUIT: Ct Says Workers' Depressed Wages Claim Is Too Speculative

* Survey Says State Court Class Action Increased By 1,042%
* The Developing Role Of Class Actions In Canadian Civil Justice Reform


225 EAST: Ct Denies Shareholders/Lessees Exclusivity to Portion of Roof
A dispute arose between plaintiff shareholders/lessees of an apartment and
defendant residential cooperative who owned the building. Plaintiffs
brought suit arguing that they owned exclusive right to use the north
portion of the building's upper roof level. They also argued that even if
defendant owned the right to use the north area, its tenant shareholders
were barred from utilizing the roof garden there, because defendant should
be equitably estopped from and/or had waived such usage. After reviewing
the facts of the case, the court concluded that plaintiffs failed to
establish that the proprietary lease allocated the north area to them, and
failed to show that defendant waived its right to use the area.
Accordingly, the portion of plaintiffs' complaint that sought damages and
equitable relief was dismissed.


Justice Tompkins

O'NEILL v. 225 EAST 73rd OWNERS CORP. QDS:22703401-The Court by a
preponderance of the credible evidence finds as follows:

Findings of Fact

1. Defendant 225 East 73rd Owners Corp, (the "Coop"), is a residential
cooperative apartment corporation which owns the land and building located
at 225 East 73rd Street, New York, New York (the "Building").

2. Plaintiffs Gregory O'Neill and Carol O'Neill (the O'Neills) are the
owners of the shares allocated to apartment PHA at the Building and the
lessees under the proprietary lease appurtenant thereto. The O'Neils
purchased PHA in March 1991 and moved into the apartment in April 1992,
Plaintiff Gregory O'Neill is a partner in the law firm of Hill, Betts and

3. The area in dispute is the north portion of the Building's upper roof
level (the "north area") as depicted by "X" marks placed on three
photographs taken in February 1999.

4. Plaintiffs' claims are as follows: (a) that plaintiffs own the exclusive
right to use the north area; or alternatively (b) that even if the Coop
owns that right, its tenantshareholders are barred from utilizing a roof
garden installed thereon either (i) because such usage is prohibited by the
terms and conditions of the proprietary lease; or (ii) because the Coop
should be equitably estopped from and/or has waived such usage.

5. The proprietary lease, as the first unnumbered introductory paragraph,
establishes the parameters of each "Apartment" (including any exclusive
area appurtenant thereto), by defining the "Apartment" as follows:

"... the rooms in the Building as partitioned on the date of the execution
of this Lease designated by the above-stated Apartment number, together
with their appurtenances and fixtures and any closets, terraces, maid's
rooms, balconies, roof or portion thereof outside of said partitioned
rooms, which are allocated exclusively to the occupant of the Apartment."

6. The proprietary lease, at paragraph 7, sets forth the express grant of
exclusive use rights as follows:

"If the apartment includes a terrace, balcony ... or a portion of the roof
adjoining a penthouse, the Lessee shall have an enjoy the exclusive use of
the terrace, ... balcony or that portion of the roof appurtenant to the
penthouse, subject to the applicable provisions of this lease and to the
use of the ... terrace, balcony or roof by the Lessor to the extent herein
permitted. The Lessee's use thereof shall be subject to such regulations as
may, from time to time, be prescribed by the Directors. The Lessor shall
have the right to erect equipment on the root including radio and
television aerials and antennas, for its use and the use of the lessees in
the Building and shall have the right of access thereto for such
installations and for the repair thereof."

7. The Coop's house rules, which are incorporated into the terms and
conditions of the proprietary lease, state at house rule number 3 as

"Children shall not play in the public halls ... and shall not be permitted
on the roof unless accompanied by a responsible adult."

8. The term "PHA" stands for "Penthouse A," a duplex apartment whose second
floor is at the upper roof level, PHA, at its second floor, has two sets of
french doors leading directly onto two terraces (the "east terrace" and the
"west terrace), both of which (in addition to the north area) are also
located on the upper roof level. It is stipulated by all parties that the
O'Neills have the exclusive right to use the east and west terraces
pursuant to the terms of the proprietary lease.

9. Wrought iron fences physically separating both the east and west
terraces from the north area have been in place since at least 1990. The
two fences which appear on the three photographs are situated in
approximately the same location as the fences have been located since at
least 1990.

10. Donald Knezovic acquired apartment 7G at the Building in November 1990.
He was elected to the Board in the fall of 1992 and has been on it
continuously since then. Mr. Knezovic testified that the three photographs
fairly and accurately depict the spatial and physical relationship between
the O'Neills' east and west terraces and the Coop's north area both at the
time the photographs were taken (February 1999) and for all time since
1990. He further testified that other than the fact that the roof surface
was in disrepair prior to the roof replacement project in 1994, the same
structures that are depicted in the photographs also existed since 1990
(except that a metal fence was located at the spot where a wooden fence now

11. The brick wall separating PHA from the north area is windowless and
thus PHA cannot be looked in upon from the north area.

12. The only two doors leading directly out onto the north area are from
the Building's two public internal stairwells.

13. There is no direct access from inside PHA to the north area.

14. All of the Building's mechanical systems are housed on the north area,
including the motor room for the elevator and the chamber located at the
top of the incinerator housing.

15. Eugene Hegy, in 1985, drafted "Schedule A" and the reasonable
relationship letter contained in the offering plan.

16. Mr. Hegy performed the same work on approximately 100 other offering
plans over a 27 year period and accordingly was qualified as an expert to
give an opinion regarding whether he would include the north area within
PHA and whether he would allocate shares to PHA with respect to the north

17. Mr. Hegy stated that he believed the north terrace was retained by the
cooperative corporation and the eastern and western terraces were part of
the share allocation attributable to Penthouse A.

18. In rendering his opinion, Mr. Hegy relied in part upon three (3)
documents which he had located from his 1985 original file.

19. Mr. Hegy further testified that while he could not recall the basis for
his having annexed the notation "2T" to the description of PHA on Schedule
A, he does not believe that he meant thereby that the north area was part
of one unified terrace on the upper roof level within the ambit of PHA. Mr.
Hegy testified that if he had considered the north area as part of a single
unified terrace, he would have so indicated with the denotation "wrap
terrace" as he had done for other apartment on his worksheet.

20. The O'Neills have conceded that they believed the Coop owned the right
of exclusive use of the north area from when they first began viewing the
premises in 1990 until approximately 1996.

21. At or about the time he first saw PHA, Mr. O'Neill read a brochure
prepared by a selling agent which in part described PHA as having "two
enormous terraces on the top floor," which O'Neill understood referred to
the east and west terraces.

22. Prior to acquiring PHA, Mr. ONeill reviewed the offering plan
(including the engineer's report contained therein), the selling agent's
brochure and the proprietary lease on numerous occasions, and inspected the
penthouse roof area more than fifty (50) times.

23. Mr. O'Neill testified that at the time he and his wife acquired PHA, it
was their belief that the Coop owned the north ten-ace area.

24. Mr. ONeill testified that during the one year period between closing on
PHA in March 1991 and moving into the apartment in April 1992, the O'Neills
continued to believe that the Coop owned the north terrace area.

25. In a letter to the Coop dated August 24, 1993, after having lived in
the apartment and using the east and west terraces for more than one year,
Mr. ONeill again memorialized his belief that only the east and west
terraces, and not the north area, were part of PHA.

26. In a letter which Mr. O'Neill delivered to the Board at its September
28, 1993 meeting, he admitted that PHA "occupies about 43 percent of the
roof terrace," which he testified corresponded to the east and west
terraces (and that the north area constituted the remaining 57 percent).

27. In a letter to the Board dated February 28, 1994, Mr. O'Neill admitted
that the north area constituted "terrace space adjoining mine but not
appurtenant to my apartment."

28. In the verified petition commencing this action, the O'Neills admitted
that of the total area of the upper roof, only the east and west terraces
are "appurtenant" to PHA while the north area "is undevised and adjoins PHA
on the north or back part of the roof."

29. Mr. O'Neill testified that, without having read any additional
documents, he changed his view in 1996 and began believing that PHA had
exclusive use rights to the north area.

30. With respect to the Coop's understanding of its ownership of the north
area, Mr. O'Neill conceded that the Board consistently advised him-from and
after his moving into PHA-that the north area was "building property." The
first time this happened was when Howard Slonim stated his belief that the
Coop owns the north area to Mr. O'Neill in the spring of 1992.

31. All of the witnesses who testified on behalf of the defendant also
stated they believed that the Coop owned the exclusive rights to use the
north area. Each of these witnesses also testified that they openly
utilized the north area for recreational purposes with the knowledge and
assistance of Building personnel such as the elevator man and

32. Karen Amiel purchased an apartment in the Building in 1987 and served
as a Board member from 1990 thouggh 1994. She has been a curator at several
international art galleries, had her own business for 15 years and in 1999
became the vice-president of an Internet company devoted to art information
and e-commerce.

33. Ms. Amiel's understanding after purchasing an apartment was that she
had the right to utilize the north area.

34. Between 1987 and 1990, Ms. Amiel utilized the north area seven or eight
times for recreational purposes. She went up with her husband "who was a
sun worshiper;" she went up with other friends, including Board member
Janet Bernstein; and she went up alone to enjoy the view. Ms. Amiel had to
get a key from the elevator man, who needed to turn the alarm off.

35. Howard Slonim testified that he currently is and has been a practicing
attorney in New York State since 1964 and has at all times been in good
standing with the bar.

36. Mr. Slonim moved into the Building in 1976, eleven years before the
Building was converted to cooperative ownership. He used the north area for
recreational purposes on a regular basis approximately three to four times
a year from 1976 through 1994. He would take a beach chair and reading
material to the roof. On several occasions he saw several other tenants
utilizing the north area, particularly two women who also enjoyed relaxing
and sunbathing.

37. Mr. Slonim used the north area openly and continuously. He was taken up
to the thirteenth floor by the elevator man who had to disengage an alarm
to let Mr. Slonim out onto the north area.

38. Mr. Knesovic testified that it was his understanding ever since he
moved into the Building that the north area was "common space" that could
be used recreationally by the tenant-shareholders.

39. Prior to the roof replacement project in 1994, Mr, Knezovic, went up to
the roof several times. In order to do so, the alarm system had to be
disarmed by the elevator person.

40. James V. Hart moved into the Building in 1983 and purchased his
apartment in 1987. He became a Board member in 1994 and served for several
years. Mr. Hart is a screen writer and movie producer. From the time he
moved into the Building until the 1994 roof rehabilitation project, he
visited the roof approximately 12 to 20 times, usually during the end of
the day or evening. Mr. Hart liked to watch the moon and recalled viewing a
lunar eclipse. He took his daughter up to the roof to look at the moon and
the stars.

41. The first time Mr. Hart visited the roof, he was taken up by the
elevator man. The stairwell door was alarmed and someone had to go
downstairs to turn it off. Mr. Hart saw a no trespassing sign. He later
spoke with the Building's superintendent and elevator man as to whether
there were restrictions on the tenant-shareholders' use of the roof. He
subsequently continued to go out on the north area with the assistance of
the elevator man.

42. In October 1992, Mr. Hart took a photographer up to the roof in order
to take a publicity photo regarding the film "Dracula." Because of
inclement weather, Hart's photographer needed additional electricity
outlets. Hart spoke to the plaintiff, Carol O'Neill, who permitted the
photographer to plug his strobe lights into outlets in PHA. Han then shot
numerous photographs on both the thirteenth floor terrace and the north
area. After the shoot, Mrs. O'Neill let Hart and the photographer into PHA
to collect their equipment. Mrs O'Neill did not mention that Mr. Hart was
not permitted to be out on the north area. Mrs. O'Neill failed to
controvert this testimony.

43. In addition to defining the grant of exclusive use rights, paragraph 7
of the proprietary lease also describes permitted activities in those areas
where individual shareholders are accorded such rights:

"If the Apartment includes a terrace, balcony ... or a portion of the roof
adjoining a penthouse, the Lessee shall have and enjoy the exclusive use of
the terrace, ... balcony or that portion of the roof appurtenant to the
penthouse, subject to the applicable provisions of this lease and to the
use of the ... terrace balcony or roof by the Lessor to the extent herein
permitted. The Lessee's use thereof shall be subject to such regulations as
may, from time to time, be prescribed by the Directors. The Lessor shall
have the right to erect equipment on the roof, including radio and
television aerials and antennas, for its use and the use of the lessees in
the Building and shall have the right of access thereto for such
installations and for the repair thereof."

44. The proprietary lease additionally accords to the Board of Directors
broad discretion to determine the manner in which the Building is to be
operated. Paragraph 3 of the lease provides:

"The covenants of the Lessor herein contained are subject, however, to the
discretionary powers of the Directors to determine form time to time what
services and what attendants shall be proper, and the manner of maintaining
and operating the Building, and also what existing services shall be
increased, reduced, changed, modified or terminated."

45. The Coop's by-laws, Article III, Section 7, contain a similar grant of
discretionary powers to the Board to determine the manner of management of
the Building.

46. The by-laws, Article III, Section 9, also accord to the Board of
Directors the right to adopt and amend rules that the directors may deem
necessary for the health, safety and convenience of the shareholders.

47. Plaintiffs allege that the institution of the sitting area was not done
with proper attention to PHA's security or pursuant to the valid exercise
of business judgment.

48. Mr. Knezovic testified that the Board addressed security measures in
depth in connection with its resolution to redevelop a sitting area on the
roof for the tenant-shareholders. The Board brought representatives of the
local police department and two security firms to the Building to review
its security, One of the companies thereafter installed a comprehensive
security system, for which the Coop paid Twelve Thousand Dollars ($
12,000.00) to Thirteen Thousand Dollars ($ 13,000.00), which coordinates
security for the basement, the elevators, the gymnasium, the laundry room,
the roof, the backyard and the front entrance. A twenty-four (24) hour
video monitoring system was installed, with cameras placed at various
locations including the entrance doors for the roof. There is an electronic
key system which allows entry to the roof the door to which is alarmed.
Keys were issued only to the Building's shareholders and the identity of
the person using the key is recorded. The security firm continues to
monitor and maintain this system.

49. At trial, the O'Neills did not contest that the Coop was properly
attentive to matters of security in connection with the establishment of
the sitting area.

50. Prior to adopting any roof rules, the Board sought and obtained written
opinions from two separate law firms regarding the Coop's right to develop
a sitting area on the north space.

51. Thereafter, in December 1994, the Board formed a roof committee to
investigate various guidelines for shareholders to use the common area on
the roof.

52. In formulating roof rules, the Board of Directors was further advised
by outside counsel.

53. Draft roof rules were circulated and thereafter modified to reflect
suggestions and/or concerns expressed by interested persons in the
Building, including the sponsor's representative, Neil Ritter.

54. The finalized version of the roof rules was duly promulgated at the
Board's February 22, 1995 meeting.

55. The O'Neills contend that they were discriminated against because the
Coop resurfaced all of the Building's other terraces with quarry tile
without asking any other shareholders for a contribution as the plaintiffs

56. However, the 1994 roof project was restricted to the upper roof level
and none of the other terraces (all of which are on the floor below) was
replaced, other than Henry's terrace as set forth below. The other terraces
were only worked upon on an as needed basis if patch work was needed to
correct water damage.

57. The only terrace other than plaintiffs' that was fully replaced
belonged to Ms. Delilah Henry. Her terrace-although also being addressed on
a partial basis to correct water leakage-had to be fully replaced because
no quarry tiles could be found to match the original tiles. The Coop did
not charge Ms. Henry because her terrace was extremely small and the price
differential between quarry tiles and paver stones was de minimus.

58. Plaintiffs allege that during the period they were negotiating with the
Board regarding their contribution towards the price differential between
the two roofing systems [commencing in the summer of 1993 and ending with
plaintiffs Ten Thousand Dollars ($ 10,000.00) contribution in March 1994],
they were unaware of the Board's intention to develop a sitting area.

59. Other Board members (including the sponsor's representative, Neil
Ritter), notified all the shareholders of the Board's intention.

60. In a letter from the managing agent to Mr. Ritter dated July 27, 1992,
the agent stated that before the specifications for the roof replacement
project could be finalized, "the Board must still, decide what it wants
regarding the ... creation of a possible sitting area on the roof."

61. In a follow up letter to Mr. Ritter, dated August 4, 1992, the managing
agent discussed the areas on the upper roof where "pedestrian traffic is
anticipated (existing Penthouse patios and a possible sitting area for

62. The agenda for the Board's October 21, 1992 meeting states that one
topic to be discussed, under the general category of "Roof Replacement,"
was to "select sitting area and decking materials."

63. In a letter to all shareholders, including plaintiffs, dated May 1993,
the five incumbent residential Board members (including Mr. Slomin and Ms.
Amiel) stated-under the caption "Programs for the Coming Year,"-that the
"construction of a roof sitting area" was contemplated.

64. By a letter to the managing agent dated August 4, 1993, in which Mr.
O'Neill set forth plaintiffs' "concerns" as of that date, plaintiffs
conceded that they were aware of the proposed "roof sundeck" and stated
their opposition as follows:

"'We foresee a breach of our security. Our penthouse ... depends for its
security on the locked and alarmed door ... Further, our quiet enjoyment
would be intruded upon by noise and persons looking in on us ... No other
apartment in the building is subject to the type of intrusion on privacy
and security that is proposed."

65. The Board was advised by its engineer that the upper roof level needed
to be resurfaced due to its deteriorated condition and that the replacement
should be with one uniform system encompassing both the east and west
terraces as well as-the north area.

66. The Board was advised by its attorneys that its obligation in repairing
the roof was to provide a walking surface, that both a paver stone system
and a quarry tile system were adequate for the required purposes and that
it was within the Board's purview to choose which system to utilize.

67. The engineer prepared specifications for both the paver stone and
quarry tile systems and sent them to various contractors for bids. The bids
were unsealed at a Board meeting in February 1992. Upon review, the Board
determined that the paver stone surface was substantially less expensive,
and that Allied Waterproofing Co. ("Allied") had submitted the lowest bid
with respect to that system. Allied was introduced to the Coop by Neil

68. At the December 14, 1992 Board meeting, the Board approved Allied's
proposal to carry out the roof replacement program, using paver stones,
subject to review by the Coop's counsel and engineer.

69. By letter dated April 22, 1993, the Coop informed plaintiffs that,
among other things, it intended to commence the repair and waterproofing
work shortly and that the new walking surface would consist of paver stones
in the place of quarry tile.

70. There were discussions and correspondence between the two sides as to
whether and to what extent plaintiffs would contribute to the differential
in price for the entire upper roof level between the paver stone and quarry
tile systems. During a discussion between Mr. O'Neill and Paul Gottsegen, a
principal of the Coop's managing agent, on or about September 3, 1993, Mr.
Gottsegen stated that the differential between the two systems was
approximately Seventy Thousand Dollars ($ 70,000.00). The discussion
between Mr. O'Neill and Mr, Gottsegen regarding the Seventy Thousand
Dollars ($ 70,000.00) and the memorandum subsequently prepared by Mr.
Gottsegen on the subject was based on the price differential solely in the
bid submitted by Allied, even though Allied was not the low bidder for
quarry tile. Mr. Gottsegen believed at that time, that the Coop might be
committed to Allied, even if the Coop decided to resurface with quarry
tiles because Allied was due to commence the project imminently using paver

71. Within one week of the September 3rd conversation, the Coop supplied
Mr. O'Neill with all of the raw information necessary to analyze the
various options on construction costs for the roof, including the
contractors' bids and a spread sheet prepared by Mr. Gottsegen comparing

72. Mr. ONeill was invited to the Board's September 28, 1993 meeting, after
he had been able to review the underlying bid data. At the meeting, (i)
plaintiff offered to make a contribution of Twenty Thousand Dollars ($
20,000.00) towards the price differential; and (ii) the Board of directors
rejected the notion that there might be an implied promise to Allied if the
project were done in quarry tile and instructed Mr. Gottsegen to ask
Structural Maintenance Corp. ("Structural"), the low bidder on quarry,
whether it would hold to its previous bid.

73. The Coop's Board of directors never demanded or requested Seventy
Thousand Dollars ($ 70,000.00) from the O'Neills at the September 28th
meeting or any other time. The Board never said it wanted to cause the
O'Neills to pay for the entire roof project, but rather discussed a
contribution toward the price differential.

74. Mr. Slomin did not tell Mr. O'Neill that he believed the contribution
from plaintiffs was proper because no other shareholders were permitted on
the north area.

75. By November 1, 1993, Mr. Gottsegen had ascertained that Structural
would honor its previous bid. He prepared a memorandum comparing the
respective costs for paver stone (using Allied's bid) and quarry tiles
(using Structural's bid)-the differential between the two systems was
calculated to be Thirty Nine Thousand, Three Hundred and Ten Dollars ($

76. During negotiations with the plaintiffs, the Board sent a letter dated
November 30, 1993, at the top of which was written "without prejudice." in
which it agreed to accept a contribution in the amount of Twenty Thousand
Dollars ($ 20,000.00) if the O'Neills would agree to certain stated
conditions, including a request that the plaintiffs "acknowledge" that the
Coop's charter documents "allow a common area for use by the Corporation's
shareholders and that, as such, your rights are limited regarding claims of
invasion of Privacy, noise, etc." The language of P6 was drafted in direct
response to the objections to the roof garden contained in Mr. O'Neill's
letter to the Board dated August 5, 1993.

77. Plaintiffs did not sign the "acknowledgment," and thereafter reduced
their offer to Ten Thousand Dollars ($ 10,000.00). The Board accepted this
offer to ensure that the roof project could be performed in 1994.

78. The proprietary least provides at paragraph 28 in relevant part as

"If the Lessor shall incur any expenses "whether paid or not" ... in
defending ... any action or proceeding brought by the Lessee, the expense
thereof to the Lessor, including reasonable attorneys' fees and
disbursements shall be paid by the Lessee to the Lessor, on demand, as
additional rent."

Conclusions of Law

1. Plaintiffs have failed to establish that the proprietary lease allocates
the north terrace to them.

2. Plaintiffs have failed to establish that the cooperative corporation
waived its right to use the north terrace area.

3. The cooperative corporation owns the north terrace area and this area is
subject to rules and regulations for the use and enjoyment of all tenant

4. The rules and regulations the cooperative corporation adopted with
respect to the north terrace area are reasonable and within the scope of
its authority. They were not adopted due only to bad faith or malice, see
Figlia v. Sutton Manor Apartment, Inc., 198 AD2d 65 (1st Dept. 1993);
Rubenstein v. 242 Apartment Corp, 189 AD2d 685 (1st Dept. 1993).

5. Pursuant to the proprietary lease, defendant is entitled to attorneys'


The portion of plaintiffs' complaint that seeks damages and equitable
relief is dismissed. The portion of plaintiffs complaint that seeks
declaratory relief is resolved by granting a declaration of the parties'
rights in accordance with the above decision that the cooperative
corporation owns the north terrace area, has the right to make rules and
regulations for its use and the rules and regulations adopted are within
the scope of its authority, were adopted without bad faith or malice and
are binding. (New York Law Journal, November 1, 2000)

ACRODYNE COMMUNICATIONS: Ct OKs Shareholders’ Lead and Liaison Counsel
Acrodyne Communications, Inc. (Nasdaq: ACROE) announced on November 13 that
lead and liaison Plaintiffs' counsel have been approved by the United
States District Court judge presiding over the consolidated class action
lawsuits alleging violations of federal securities laws against the
Company. Additionally, the Plaintiffs were given until January 31, 2001 to
file an Amended Complaint.

The Court also agreed to a joint request by Plaintiffs' counsel and counsel
representing the Company to the appointment of a magistrate judge preside
over settlement discussions. Commenting on the Court's actions, Nat Ostroff
said, "This presents the best opportunity for Acrodyne to resolve the
shareholder suits in a timely and equitable manner. Unless an acceptable
resolution to the current litigation is reached quickly, the Company's
ability to continue operations may be in question.

AUTO FINANCING: Palm Beach Judge OKs Suits Against AutoNation
A Palm Beach Circuit judge has granted class-action status to a group of
automobile buyers who claim that Fort Lauderdale-based AutoNation failed to
sign and deliver loan contracts to buyers. Class certification was also
approved for a group of buyers who were not told in writing that the
vehicles sold to them by AutoNation were formerly used as lease vehicles or
rental cars.

The judge found that AutoNation did not give buyers copies of contracts
until the loans were paid in full, ruling that it seemed it was a common
course of conduct at AutoNation. AutoNation is the largest retailer of used
cars in the United States.

BREAST IMPLANT: TX Ct. App. Remands Malpractice Claims Against Attorneys
The Texas Court of Appeals in Houston has reversed and remanded claims of
negligence and breach of fiduciary duty asserted by a breast implant
recipient against the law firm of Mithoff & Jacks. The plaintiff argued the
firm misinformed her regarding the benefits she would be entitled to as
part of the global settlement in multi-district litigation. Dreisbach v.
Mithoff & Jacks, No. 01-99-00305 (Tex. Ct. App., 1st Dist., Sept. 14,

Virginia Dreisbach was a plaintiff in a class-action products liability
suit alleging defective breast implants. A global settlement was offered to
her through the claims administrator set up through the MDL 926 litigation
in the Northern District of Alabama.

Mithoff & Jacks allegedly advised the plaintiff that she was a "current
claimant" which entitled her to a $20,000 to $50,000 award. Originally,
Dreisbach accepted the settlement offer, but the claims administrator later
withdrew the offer and replaced it with a much smaller one.

The claims office reclassified Dreisbach as an "other registrant" with no
opt-out rights, which entitled her to only $1,000. Although the law firm
appealed the change in classification, the claims office denied relief.

Dreisbach then sued her attorneys, alleging negligence, breach of fiduciary
duty, fraud and breach of contract. She argued they negligently told her of
the "current claimant" status, which induced her to waive her right to
pursue private litigation. She also claimed that she was told she could
receive as much as $490,000 if she pursued litigation on her own.

Mithoff & Jacks filed a motion for summary judgment regarding all of
Dreisbach's claims. While that motion was pending, the claims administrator
reclassified her to the "current claimant" status that she pursued all
along. At that point, the trial court granted summary judgment in favor of
Mithoff & Jacks.

On appeal, Dreisbach said the trial court erred in granting summary
judgment in favor of the firm. The law firm responded that the breast
implant recipient was not harmed because she was, in fact, a "current
claimant" as they had advised her.

However, it took the claims office about two and a half years to reclassify
her claim, and that occurred about nine months after she filed her
malpractice claims.

"She is now apparently better off than before," said the court, "but that
is not dispositive of the issues." The court held that Mithoff & Jacks did
not prove that Dreisbach had received all benefits plus interest for any
delay that she would have received if she had originally been classified as
a "current claimant."

"Even if Dreisbach was correctly classified by appellee's as a 'current
claimant,' a fact issue exists as to whether appellees were responsible for
the claims office's original adverse decision," said the court.

Accordingly, the court could not determine if Dreisbach had suffered any
damages and remanded two of the four claims for further proceedings. The
court found no merit in the fraud or breach of contract claims. (Medical
Devices Litigation Reporter, October 6, 2000)

CENDANT CORP: $935M Avis Deal Follows Two Years of Difficulties
Cendant Corp. announced a sweetened $935 million bid for the portion of
Avis Group Holdings it does not already own. The companies announced the
deal Monday, three months after Cendant made an initial $750 million bid
for the car rental company.

Cendant, which already owns 18 percent of Avis' outstanding common shares
as well as the Avis trademark and Wizard reservation system, will pay $33 a
share in cash for the remainder of the business. That represents a 10
percent premium over Avis' closing price Friday and a 25 percent increase
over Cendant's previous offer. The deal, expected to close in the first
quarter of 2001, will return Avis to Cendant's control. Cendant purchased
Garden City, N.Y.-based Avis in full in 1996, then sold off most of its
interest the following year in a public stock offering.

The Avis deal coincides with a number of other acquisitions by New
York-based Cendant.

The company recently agreed to buy the AmeriHost hotel brand names and
franchising rights for an undisclosed price. It also is paying $635 million
for Fairfield Communities Inc., a developer and manager of time-share

In addition, Cendant recently purchased Bradford & Bingley Relocation
Services, a British firm, and Hamilton Watts International, an Australian
relocation company.

The acquisitions follow two years of difficulties at Cendant, stemming from
accounting irregularities that led to the largest-ever settlement in a
shareholder class-action lawsuit. As it struggled, Cendant sold off many of
its non-strategic assets.

From Avis' point of view, the deal was too good to pass up especially at a
time when the stock market has been particularly volatile. "If you put this
deal in perspective of what's happening around us, I think you'll
understand why shareholders believe they have received very good value,"
said A. Barry Rand, Avis' chairman and CEO.

The deal also makes sense because it reunites the Avis brand name with the
company managing that business, said Robert P. Napoli, an analyst with ABN
Amro in Chicago. But the driving factor is that Avis has been largely
undervalued and Cendant's offer was too good to pass up, he said.

"Cendant is getting an excellent deal," Napoli said. "I think the
independent board (at Avis) made the decision that the deal is going to be
done and I don't think shareholders, at this point, are going to prevent
the deal from being done."

Shares of Avis were up $1.88, or 6 percent, to $31.88 in Monday afternoon
trading on the New York Stock Exchange. Cendant stock was off 56 cents, or
5 percent, at $11.44. (The Associated Press, November 13, 2000)

ENPC TECHNOLOGY: CEO Allegedly Fired In Retaliation For Bias Complaints
Los Angeles County Superior Court

Lee v. ENPC Technology, No. BC196250, Downtown. Mel Red Recana. Jury trial:
3 weeks. Verdict/judgment: 7/28/2000.

Verdict/Judgment: $ 1,359,262

    -- $ 54,262 awarded for loss of earnings, $ 200,000 general damages,
        $ 1,100,000 punitive damages as against defendant ENPC Technology
        and $ 5,000 punitive damages as against defendant Peter Chen.

Vote: Mixed poll. Deliberations: 1 day plus 1 hour.

Trial Counsel

    Plaintiff: David H. Greenberg, Law Offices of David H. Greenberg,
                  Beverly Hills. Jeremy Pasternak, Law Offices of David H.
                  Greenberg, Beverly Hills.

    Defendant: Albert J.C. Chang, Law Offices of Albert J.C. Chang,
                  Rowland Heights. Travis Tom, Law Offices of Albert J.C.
                  Chang, Rowland Heights.


According to plaintiff: Plaintiff brought suit for retaliation, wrongful
termination, breach of implied contract and breach of implied covenant of
good faith and fair dealing following his termination from his position as
CEO. The plaintiff was Linus Lee. The defendants were ENPC Technology
Corporation and Peter Chen.

Plaintiff is a 43-year-old Chinese American. He was hired in late 1997 to
be the CEO of a brand-new U.S. subsidiary (defendant ENPC) of a
Chinese-owned public company. In the first year, ENPC lost over $ 2
million. Plaintiff was fired shortly thereafter. Defendants contended that
plaintiff had actually quit, that his leaving had been by mutual agreement
and that they no longer wished to employ him because of his poor
performance and his failure to follow company policies. Defendant ENPC
brought a cross-complaint for defamation and breach of fiduciary duty.

Plaintiff alleged that in the six months before his termination, he was
told to hire Chinese employees and to replace American employees and that
he was fired in retaliation for protesting this discrimination. Plaintiff
also alleged that after he made these protests, the parent company no
longer perceived him as Chinese but rather as an American and, therefore,
fired him because of his perceived national origin

Claimed Injuries


Claimed Damages

According to plaintiff: Complaint: Past loss of earnings; general damages;
punitive damages. Cross-complaint: Damages resulting from alleged breach of
fiduciary duty.

Settlement Discussions

According to plaintiff: Mediation was agreed to by the parties. Defendants
then backed out.

Trial Experts



According to plaintiff: The jury poll was 12 to 0 for plaintiff on the
causes of action for retaliation, wrongful termination, breach of implied
contract and breach of covenant of good faith and fair dealing. The vote
was 12 to 0 for plaintiff and against defendants on the cross-complaint for
breach of fiduciary duty. The defamation claim was dismissed on a motion
for nonsuit.

Plaintiff will be making a motion for attorney fees pursuant to the Fair
Employment and Housing Act. (Metropolitan News-Enterprise; Capitol News
Service, September 25, 2000)

HEARTLAND HIGH-YIELD: Former Fund Manager Conlin Named in Investors Suit
Investors in the Heartland High-Yield Municipal Bond Fund (Nasdaq: HRHYX)
and the Heartland Short Duration High-Yield Municipal Fund (Nasdaq: HRSDX)
have filed a class action lawsuit after suffering devastating losses from
the sudden and shocking revaluation of those funds. The lawsuit names
Heartland Advisors and former fund manager Thomas Conlin as defendants,
among others. The lawsuit is pending in the United States District Court
for the Eastern District of Wisconsin, Case No. 00-C-1401.

Source: Shalov Stone & Bonner

Contact: Ralph M. Stone of Shalov Stone & Bonner, 212-686-8004

HMOs: Aetna Agrees to Pay $82.5M to Settle US Healthcare Merger Charges
Aetna Inc. has agreed to pay $82.5 million to settle a securities fraud
suit which claimed investors lost hundreds of millions of dollars when Wall
Street learned that the $8.1 billion Aetna/U.S. Healthcare Inc. merger had
not produced the cost savings and earnings that Aetna officers allegedly
touted. In re Aetna Inc. Securities Litigation, Civil Action MDL No. 1219
(All Cases), memorandum in support of settlement filed (E.D. Pa., Sept. 26,
2000); see Corporate Officers & Directors Liability LR, Feb. 22, 1999, P.

In the tentative settlement, the nation's largest HMO did not admit that
its officers and directors understated U.S. Healthcare's medical expense
reserves by as much as $76 million and used Aetna reserves to plug widening
gaps between promised efficiencies and disappointing results.

In what is now a multi-district class action securities fraud suit based in
Philadelphia, shareholders charged that Aetna deceived investors with
fiscal machinations that violated Generally Accepted Accounting Principles
and federal securities laws. They claimed that when Aetna could no longer
keep up the fiscal facade, the company announced it would take up to a $161
million charge before taxes to account for prior understatements. The class
action was brought on behalf of anyone who bought Aetna common stock
between March 6, 1997, and Sept. 29, 1997.

The action also included two subclasses of people who purchased Aetna
common stock at the same time Ronald E. Compton and Richard L. Huber sold
their stock. Compton was the chief executive officer and Huber was the
chief financial officer of Aetna at the time of the merger. They were named
as defendants, along with U.S. Healthcare's CEO, Leonard Abramson.

The plaintiffs asserted that Aetna falsely represented that it would
quickly and smoothly integrate its operations with U.S. Healthcare's once
the two companies had merged. The suit also alleged that the computer
systems of Aetna and U.S. Healthcare were incompatible, and that Aetna
issued misleading financial statements after the merger.

The defendants previously moved to dismiss the complaint, asserting that
the allegations did not meet the specificity requirements set by the
Private Securities Litigation Reform Act of 1995. The district court agreed
but ruled that the plaintiffs could amend their complaint.

An amended complaint survived a motion to dismiss and the federal judge's
ruling was upheld by the U.S. Court of Appeals for the Third Circuit.
Subsequently, settlement negotiations began.

In their memorandum in support of the settlement, plaintiffs said that the
trial -- scheduled to begin next month -- would be long, expensive and full
of risks even though they had a strong case. Both the liability and the
damages aspects of the suit would have become a "battle of experts," the
plaintiffs said.

Under the tentative settlement, objectors have until Nov. 29 of this year
to protest the terms of the pact before the fairness hearing is held on
Dec. 18, 2000.

The action had been hard fought, with plaintiffs examining 180 boxes of
documents and deposing 35 witnesses. While they may have won more after a
trial, they also might have had to settle for little or nothing, said the
plaintiffs, noting that in one recent securities fraud case a judge had
approved a settlement of $4.3 million when plaintiffs had sought damages of
$100 million.

Aetna officials said its insurance will pay for most of the settlement but
it will still have to take a $5 million after-tax charge to pay the

Stuart Savett , a partner of the Philadelphia law firm of Savett Frutkin
Podell & Ryan , one of the co-lead plaintiff attorney firms, said the
sizeable settlement shows that well supported securities fraud claims will
survive, even in the post-Reform Act world.

"The evidentiary support for plaintiffs' claims of misrepresentation is
compelling; the documents and deposition discovery reveal a consistent
pattern of intentional earnings manipulation which violated the Generally
Accepted Accounting Principles and materially false and misleading
statements regarding the purportedly successful progress of the merger
integration which perpetrated a fraud on the investing public," Savett
said. "Investors who purchased Aetna stock during the class period suffered
losses in the aggregate of hundreds of millions of dollars." (Corporate
Officers and Directors Liability Litigation Reporter, October 10, 2000)

HMOs: Lawyers Put On Happy Faces After Lawsuit Is Consolidated In Miami
HMO defense lawyers begged a Washington panel not to consolidate a host of
class-action suits in Miami, but their pleas were ignored. And so the
largest class-action case in history, affecting up to 150 million Americans
and bringing together a coalition of top plaintiffs lawyers from around the
country -- is now in the hands of U.S. District Judge Federico Moreno.

But lawyers for Aetna, Humana and others sang a different tune at a recent
case status hearing when one after another they said with straight faces:
Im happy to be here in Miami.

Moreno couldnt help but wonder whether that was exactly true. Im not giving
anyone a lie detector test, he joked. But Keith Vanden Dooren, a Florida
assistant attorney general, was genuinely pleased to get the HMO suit in
Florida. His office, which is also investigating health maintenance
organizations run by Humana and Aetna, is looking forward to working
closely with the plaintiffs lawyers, some of whom they previously teamed up
with to win a huge verdict against the tobacco industry.

Vanden Dooren will be working with more than 40 of the nations top
litigation firms, led by famed lawyers David Boies and Dickie Scruggs.

Gazing out at a sea of millionaire trial lawyers in dark blue Brooks
Brothers suits, many of whom flew in on private planes, Moreno cracked, I
think we have the top 1 percent here. In fact, there were so many plaintiff
lawyers that they filled every seat in the courtroom, including the jury

This is a high compliment to our court, that Judge Moreno was chosen, said
U.S. District Judge James Lawrence King. The panel only chooses judges who
can handle such a complex case and can keep a case moving along.

Even the defense lawyers said that if they had to have a consolidated case,
at least they got Moreno. He vowed to rule on a motion to dismiss the
entire case, along with several other matters, by Thanksgiving Day. Yet he
acknowledged that wont be easy with a case this magnitude and with dozens
of lawyers all clamoring to speak. Im here until 2017, he cracked. Well
stay until were done.

INTERSPEED, INC: Confirms Shareholder Complaints; Reports Q-4

In its report for the Fourth Quarter and Year End 2000 and Restated Results
for Three Previous Quarters, Interspeed, Inc. (Nasdaq:ISPD), a supplier of
digital subscriber line (DSL) access routers, confirmed that certain
shareholder class action complaints have been filed in the United States
District Court for the District of Massachusetts against the Company and
certain other parties, including certain former officers and directors of

The lawsuits have previously been reported in the CAR.

Interspeed's report says that those lawsuits arise out of Interspeed's
prior announcement that it will be restating its unaudited financial
results for the prior three quarters of the fiscal year 2000. The claims in
the litigation include allegations that Interspeed, and certain of its
former directors and officers, made false or misleading statements
regarding the Company's financial results for prior periods. Interspeed is
currently reviewing the allegations in those lawsuits.

The Company's gross revenues for the fourth quarter and the fiscal year
were $968,000 and $6,419,000, as compared with gross revenues of$637,000
and $ 1,978,000 for the fourth quarter and fiscal year ended September 30,
1999, respectively. The Company's net loss for the fourth quarter ended
September 30, 2000, was $8,395,000 or $0.77 per basic and diluted share, as
compared to a net loss of $3,395,000 or$0.40 per basic and diluted share,
for the fourth quarter of fiscal year 1999. The Company's net loss for the
fiscal year ended September 30, 2000 was $20,441,000 or $1.89 per basic and
diluted share, as compared with a net loss of $10,469,000 or $1.29 per
basic and diluted share for the fiscal year ended September 30, 1999.

The Company also announced that it is restating its financial results for
the fiscal quarters ending December 31, 1999, March 31, 2000 and June 30,
2000 as a result of the Company having learned that certain revenue was
recognized incorrectly. As restated, total revenues for the nine months
ended June 30, 2000 were $5,451,000, an$8,711,000 reduction from previously
reported revenues of $ 14,162,000 for the period, and the net loss for the
nine months ended June 30, 2000 was $12,046,000, a $3,466,000 increase from
a previously reported loss of $ 8,580,000 for the period. Further details
with respect to each of the affected fiscal quarters will be presented in
amended reports to be filed with the Securities and Exchange Commission.
The results for the fiscal year reported elsewhere in this press release
include the effect of these restatements.

LERNOUT & HAUSPIE: Consultancy Says 3000+ Minority Shareholders Register
Over 3,000 of Lernout & Hauspie's minority shareholders have indicated an
interest in defensive action against the company by registering with
Deminor, a consultancy specialising in defending minority shareholders,
said partner Bernard Thuybaert.

Deminor offered minority shareholders the chance to register online with
them last Friday, and has been "overwhelmed" by the response, he said.

"The minority shareholders have registered with us because they want us to
start an action against Lernout & Hauspie to recover some of their losses,"
he said, adding that some of them have lost up to 75 pct of the value of
their investment since the beginning of the year. "We have been completely
submerged by the response -- it's amazing how many people are affected," he
said. "If there is enough evidence we will launch a defensive action on
their behalf," he said. "The only action is to claim damages from the
company itself, its directors and officials, its auditors and advisors," he

Private actions are the only remedy for shareholders as class actions are
not possible under Belgian law, he said.

But shareholders will have to wait for the results of the public
investigation of the public prosecutors office in Ypres, he said. "We could
then file an action based on the results of the public enquiry," he said.

The basis for the action is that shareholders were buying and selling
shares based on wrong figures, he said.

Lernout & Hauspie's admission that its audit has uncovered errors and
irregularities in its financial statements only weeks after the co-founder
Jo Lernout was assuring shareholders there was nothing wrong with the
company and they should be buying shares is "very strange", he said. "It's
difficult to believe that the information was not at least partly known a
few weeks ago," he said. (AFX European Focus, November 13, 2000)

LOS ANGELES POLICE: Woman Recants Claim That Officer Killed Three People
An ex-lover of the disgraced officer at the center of a police corruption
probe has recanted her allegations that he and another officer killed three
people and buried their bodies in Mexico.  The Los Angeles Times reported
last Friday November 10 that Sonia Flores, 23, failed a lie detector test,
broke down in tears and admitted to federal authorities that she made up
the claims against former Officer Rafael Perez.

Flores fabricated the stories because she still feels jilted by Perez and
wanted to see him behind bars for the rest of his life, said her attorney,
Marshall Bitkower.  ``She's a woman scorned,'' Bitkower said. ``She had
everybody fooled.''

Flores had told federal authorities that Perez and former Officer David
Mack buried three bodies in Tijuana. Her claims led Mexican authorities, at
the request of the U.S. attorney's office and the FBI, to excavate a
trash-filled ravine in Tijuana last month in search of the bodies.  After
Flores made her claims, prosecutors said a plea bargain deal with Perez
would not cover the murder allegations.

Perez was not called to testify during the ongoing trial of four Los
Angeles officers accused of falsifying reports to frame innocent people
between March 1996 and April 1998. Perez made his allegations under a deal
with prosecutors after he was caught stealing cocaine from an evidence
locker. He agreed to cooperate in exchange for leniency. Perez's attorney,
Winston Kevin McKesson, said he was pleased that Flores decided to come
clean. ``It's further evidence to support our contention that Perez has
been completely forthright,'' McKesson said.

The jury in that trial ended their first full day of deliberations without
reaching a verdict. The panel is scheduled to reconvene September 13.  The
case is the first stemming from allegations by Perez, who claims fellow
officers in the Police Department's Rampart station broke laws to arrest
gang members and committed other crimes. (AP)

MP3.COM: Sued Again; Unity Alleges of Infringement on Indie Labels
The embattled music downloading/digital locker service has been slapped
with a class-action suit in U.S. District Court for the Central District of
California by indie label Unity Entertainment. In a complaint similar to
that filed against MP3.com by the five major labels earlier this year,
Unity's founder and chairman, Robert Tauro, alleges that the MP3's
My.MP3.com digital music locker service has infringed on copyrights held by
Unity and other indie labels. Unity is seeking $ 150,000 in damages per
work infringed by My.MP3.com, Tauro said. That may be overly optimistic:
Federal Judge Lewis Kaplan in Gotham last month awarded Universal Music
Group, the world's largest recorded music label, only $ 25,000 per work.
(Daily Variety, November 13, 2000)

NATIONAL TREASURY: Target Date Set For Settling Special Rate Pay Suit
The National Treasury Employees Union and the federal government plan to
reach agreement by Nov. 30 on how to pay current and former "special rate"
employees the million of dollars in back pay owed them.

The date was agreed upon during a status conference in U.S. District Court
Oct. 24.

The class action suit covering some 188,000 special rate employees dates
back to 1983 when NTEU challenged an Office of Personnel Management
regulation blocking annual salary increases for such employees.

In January 1998, the federal court determined that special rate employees -
those paid a special wage to work in hard-to-fill-jobs - were denied salary
increases in the 1980s due to an illegal OPM regulation, an NTEU statement
said. The U.S. Court of Appeals for the Federal Circuit determined that
affected employees were owed back pay, but remanded the case back to
district court to determine the proper award.

Judge John Garrett Penn strongly urged the Department of Justice and the
NTEU to reach agreement by Nov. 30 on how the back pay owed to the members
of the class would be calculated. He scheduled a second status conference
for Dec. 7.

"NTEU has been ready to work with the government on a settlement since
1998," NTEU President Colleen Kelley said. "We are ready to work night and
day to reach an agreement by the target date." (Federal Human Resources
Week, November 6, 2000)

PRESIDENTIAL ELECTION: CNN Coverage on Voting, Balloting and the Lawsuit
(Broadcast on the Cable News Network on November 13, 2000)
     Highlight: First, the ballots are still being counted in the U.S.
presidential election race that remains too close to call. Then, bundle up
as things could be getting a bit colder with changing weather patterns.
Next, set sail for the Black Sea and a journey into the past. Finally,
celebrate the 200th anniversary of the U.S. White House.

    SHELLEY WALCOTT, CO-HOST: And welcome to NEWSROOM. I'm Shelley Walcott.
We have lots of news to report today. Let's take a look at our itinerary.

The ballots are still being counted in the U.S. presidential election race
that remains too close to call.

Bundle up. Things could be getting a bit colder in our "Environment Desk."

We're pulling up anchor when "Worldview" sets sail on the Black Sea.

Then we've got some special birthday wishes in "Chronicle" as we celebrate
the 200th anniversary of the U.S. White House.

The numbers game continues as Florida counts and recounts votes from last
Tuesday's presidential election. At stake is Florida's 25 electoral votes,
and ultimately the White House.

Election officials voted this weekend to recount by hand all 425,000 Palm
Beach County ballots. Three other Florida counties -- Volusia, Broward and
Dade also are hand-counting Tuesday's votes.

The campaign of Republican George W. Bush has gone to federal court trying
to block the manual recounts. Republican Party officials say they may
contest election results in states Democrat Al Gore narrowly won if
Democrats pursue the hand counts in Florida. Bush campaign officials fear
manual counting could expose the presidential race to error and, in their
words, "political mischief." Gore's legal team argues that the recount is
allowed under state law.

The two candidates are keeping their comments to a minimum as they dig in
for another long week of wrangling over the election. Bush spent much of
the weekend at his ranch in Crawford, Texas. Gore and his family attended
church Sunday in suburban Washington.

With the presidency in the balance, the Democrats and the Republicans are
gearing up for a battle over ballots. It may be a long battle, or, if the
GOP gets its way, a very short one.

Mark Potter reports.

lawsuit was filed on behalf of George W. Bush, Dick Cheney and seven
Florida residents who voted Republican. The case will be heard in the Miami
federal courthouse by Judge Donald Middlebrooks, who was appointed to the
bench by President Clinton.

The Republicans are trying to stop the manual recount of ballots in four
Florida counties, as requested by the Democrats. Those predominantly
Democratic counties are Palm Beach, Volusia, Miami-Dade and Broward.

The GOP's argument is the votes have already been counted and the election
decided. In court papers, they say, "the repetitive counting of ballots,
especially manual counting, diminishes the accuracy of the count." They
also argue, "further recounts could unnecessarily delay the elections
process, potentially leading to a federal constitutional crisis."

Donald Jones teaches constitutional law at the University of Miami. He says
this is not a constitutional crisis, and argues the Republicans have little
chance of succeeding in court.

    DONALD JONES, UNIVERSITY OF MIAMI: For the Republicans to argue that
the Canvassing Board should not have the discretion to do its job as it
sees fit, you know, absent a claim of bad faith, is a radical argument, and
is a dog that won't hunt.

    POTTER: Jones says the Florida legislature, not a federal judge, has
the right to decide how votes are to be tallied, and predicts the court
will agree.

Joshua Rosenkranz of the New York University Law School doubts Republicans
will win the other argument: that recounting ballots in only four counties
violates the due process rights of others in Florida.

counting heavily Democratic areas, and there is some truth to that. Is that
a constitutional violation? I don't think so. They had the right to ask for
a recount in the other 60 or so counties and they didn't.

    POTTER (on camera): The Democrats have assembled their own legal team,
including Harvard law professor Lawrence Tribe. They will face off against
the Republicans in federal court, arguing that Florida's manual ballot
recount should continue.

Mark Potter, CNN, Miami.


    WALCOTT: Now that the race for the White House has moved into overtime,
the legal skirmishing is clearly picking up speed. It all makes for one
very good civics lesson.

    (BEGIN VIDEO CLIP) UNIDENTIFIED MALE: In regards to the people that are
actually counting the votes, is there a provision made for Republicans and
Democrats to be equal in that where -- or is it just two parties, where it
could be a Green and a Republican or a Green and a Democrat?

    GRETA VAN SUSTEREN, CNN LEGAL ANALYST: One of the advantages of
actually coming here is you get to see how it's really done. And I have to
tell you, while there may be a lot of bad publicity for this state about
how it counts or doesn't count or any errors, I'll tell you one thing, this
county ought to be very proud about the way they do the recount. I have
never seen anything so open.

Not only do they have a Republican and a Democrat, and not only do they
have lawyers for the Republican Party -- or for the Republican candidate,
lawyers for the Democratic candidate, but they have the entire media
watching through a glass window. We have cameras, we're five feet away. It
is the most accessible, open thing I've ever seen, and I think Palm Beach
County deserves an awful lot of credit because this is a very open process.


WALCOTT: Events of the past week also raise some important questions: Is
the U.S. electoral system outdated? And can it be fair even if it's not

Charles Bierbauer deliberates the answer.


    CHARLES BIERBAUER, CNN CORRESPONDENT (voice-over): One-hundred million
Americans punching and poking their votes into cards and machines are bound
to make mistakes.

    JAMES BAKER, OBSERVER FOR BUSH CAMPAIGN: This happens in every precinct
and in every election.

    BIERBAUER: The technology and process are both primitive by 21st
century standards.

to the elements, rain, how many buses you can locate to drive people to the
polls, and people forgetting boxes of votes locked up in the trunk.

    BIERBAUER: Garment says what has changed since he was counsel to
President Nixon, and Nixon declined to pursue ballot recounts, is the
current eagerness to take any dispute to court.

    GARMENT: That was not a litigating culture. Now we have a culture that
is dominated by class actions, by lawyers, by, I mean, litigious behavior.

    BIERBAUER: Palm Beach County's butterfly ballot and some confused
voters added up to what Democrats consider miscast votes.

    WILLIAM DALEY, GORE CAMPAIGN CHAIRMAN: The will of the people, not a
computer glitch, should select our next president.

    BIERBAUER: The will of the people figured in a 1998 case before the
Florida Supreme Court. It sustained the reelection of Volusia County
Sheriff Robert Vogel over his opponent's claim that thousands of absentee
ballots were spoiled. But the court also said if reasonable doubt exists
that the election expresses the will of the voters, "then court is to void
the contested election even in the absence of fraud or intentional

    GERALD KOGAN, FMR. FLORIDA CHIEF JUSTICE: It has to be more than just a
technical violation of the election laws.

    BIERBAUER: The former chief justice of Florida's Supreme Court says
elections can be flawed yet still fair. But it will take guts for any
Florida judge to throw out the Palm Beach vote on the basis of confusion,
not fraud.

    KOGAN: The court presumes and wants to assume that the voters are
correct and does not like to set aside that which the voters have chosen,
except in extreme circumstances.

    BIERBAUER (on camera): While the system may be imperfect, the damage is
hard to calculate. Elections pick winners and losers, so what may be no
more than an annoyance to one voter is a fatal flaw to another.

Charles Bierbauer, CNN, Washington.

TEXAS MEDICAID: 5th Cir Grants Delay in Implementing Improvements
The 5th U.S. Circuit Court of Appeals has granted the state's motion to
delay implementing a court-ordered plan to make improvements in Texas'
Medicaid program for poor children. On Oct. 18, a three-judge panel of the
5th Circuit said the public interest will be better served by delaying
Senior U.S. District Judge William Wayne Justice's order in Jeneva Frazar,
et al. v. Richard Ladd, et al. requiring the state to come up with a plan
until the appeals court can review his findings.

Attorney General John Cornyn says the "ruling recognizes that our appeal of
Judge Justice's order will not prevent the state from continuing its good
faith efforts to ensure that every eligible Texan receives access to
Medicaid services and programs."

The state had faced an Oct. 27 deadline for submitting a plan for curing
problems that Justice cited in the Texas Health Steps program. Justice
ruled in August that the state had failed to live up to terms of a 1996
consent decree in a class-action suit brought on behalf of Texas children
eligible for Medicaid. Among other things, Justice found that the state has
failed to educate indigent families about the health care that is
available. Susan Zinn, a San Antonio lawyer representing the plaintiffs,
did not return calls seeking comment. Zinn has been critical of state
officials for appealing Justice's ruling instead of fixing the alleged
problems in the program. (Texas Lawyer, October 23, 2000)

TRANSCRYPT INT’L: Securities Suit Settled; SEC Settlement Not Yet Okayed
Transcrypt International Inc. was named as a defendant in class action
lawsuits that were filed subsequent to the Company's announcement on March
27, 1998 that the filing of its Annual Report on Form 10-K for year ended
December 31, 1997 would be delayed, and that adjustments would be made to
the Company's previously announced financial results. The Company has
settled the stockholder class action suits against the Company and certain
of its current or former officers. The Honorable Warren K. Urbom of the
United States District Court for the District of Nebraska approved the
settlement, which also resulted in a dismissal of the stockholder class
action suit pending in the District Court for Scotts Bluff County,

                         SEC Investigation

In April 1998, the Securities and Exchange Commission ("SEC") issued a
formal order of investigation to determine whether violations of certain
aspects of the federal securities laws had occurred in connection with the
Company. As part of this investigation, the SEC is also examining the
conduct of certain former officers of the Company. The Company has an
obligation to defend and/or indemnify certain former employees. The Company
has discussed possible settlement of the investigation or any pending
enforcement action against the Company or its affiliated parties relating
to these events. At this time, it is unknown whether the Company will
settle the SEC formal order of investigation.

It is the Company's current expectation that the SEC investigation will not
result in a monetary sanction against the Company.

The Company has submitted an offer for settlement in anticipation of
cease-and-desist proceedings to be instituted pursuant to Section 8A of the
Securities Act of 1993 and Section 21C of the Securities Exchange Act of
1934. The Company's offer of settlement does not contain a monetary
sanction against the Company. However, the SEC has not approved any
settlement with the Company. Furthermore, the SEC has the authority to
impose a variety of sanctions against the Company and Company-affiliated
parties. Such sanctions could include monetary penalties, imposition of a
cease and desist order and issuance of removal and prohibition orders
against Company-affiliated persons, among other things.

The Company says it is involved in certain other legal proceedings
incidental to the normal conduct of its business. The Company does not
believe that any liabilities relating to such other legal proceedings are
likely to be, individually or in the aggregate, material to the Company's
business, financial condition, results of operations or cash flows.

U-M: Southgate Woman Key Figure In University Admissions Bias Suit
Between the bills and catalogues, Gratz spotted a thin envelope from the
University of Michigan. She paused. A thin letter could only mean bad news.
After reading the first two lines, the tears began to flow. The letter told
Gratz -- homecoming queen, honor student, cheerleader, math tutor and
student government leader -- that she wasn't U-M material. "You are told
all your life that if you work hard and apply yourself, then you can do
anything you want," said Gratz, now 23. "I did all of that and had enough
to get into U-M and I was told 'no'."

That April 1995 letter eventually spawned a legal battle, which goes to
court earlier this month and ultimately could have widespread
repercussions, including saying "no" to more minority students seeking
admission to the nation's top universities.

Gratz is the lead plaintiff in a federal affirmative action lawsuit aimed
at eliminating race as a factor in college admissions. Opponents fear the
challenge, if successful, will hamstring efforts to build a diverse student
body at U-M, which is 75 percent white.

U-M officials say the highly selective university, one of the country's top
public schools, uses race as one of many admission factors. That policy
helps make U-M the most diverse of any large university in the Midwest --
diversity that U-M President Lee Bollinger says is essential to a modern
education that prepares students to work in an increasingly multicultural,
global marketplace. And it's a policy, he says, that's legal. For two
decades, colleges and universities have relied on a 1978 Supreme Court
decision in Bakke v. Regents of the University of California, which became
the legal grounds for colleges' affirmative action programs.

Reversing that decision would drastically reduce minority admissions and
resegregate the nation's public and private universities, college officials

"Bakke was the decision on which higher education and the society built,"
said Bollinger, former U-M Law School dean and a First Amendment scholar.
"And it was right to do so."

Gratz and others disagree. They want the 37,000-student Ann Arbor school to
eliminate race from admissions. Gratz, who aspired to become a doctor
before she was rejected by U-M, doesn't think it's fair to give more weight
to being African American, Hispanic or Native American than to earning a
perfect score on a college entrance exam. "It amazes me what they do here,"
Gratz, who graduated from U-M Dearborn, said recently, sitting in the
Michigan Union in Ann Arbor. "Why do they think that discriminating against
people is right? Why don't they have to play by the rules?"

Her class-action lawsuit begins last Thursday, November 9, when each side
will ask a U.S. District Court judge to rule in its favor without a trial.
If Judge Patrick Duggan refuses, the case will go to trial in December.

Legal scholars believe the case will make its way to the U.S. Supreme Court
and determine the fate of affirmative action in college admissions
nationwide. The Gratz name will become as symbolic as Bakke or Hopwood,
plaintiffs in prior landmark affirmative action cases.

                          Blue-collar background

The oldest of two children, Gratz grew up in a blue-collar family in
Southgate, part of the Downriver enclave of strip malls, small-lot
subdivisions and smokestacks from heavy industry. Her father is a cop; her
mother works in a hospital lab. Jennifer would become her family's first
college graduate.

Southgate, a suburb south of Detroit, is a city of 30,000 where people tend
to stay. There are many second- and third-generation residents who live in
three-bedroom ranches, built in the 1950s. Most of Gratz's friends, even
those who went away to college, still live in Southgate and other Downriver

While Southgate is 94 percent white, Gratz says she had a racially mixed
group of friends. She befriended an exchange students from Spain, which
gave her a chance to practice Spanish. She occasionally ventured to
Detroit, but like most Southgate teens, a favorite hangout was the parking
lot at the Taco Bell on Eureka Road.

She spent most of her after-school hours cheerleading at Southgate Anderson
High School. During the summer, she went to cheerleading camp.

                          Rejection Kept Quiet

Although cheerleading put Gratz in the spotlight, she was a quiet, private
person off the field. She told only three people about her rejection from
U-M: her mom, dad and brother. Her friends and high school boyfriend found
out when news of the lawsuit hit newspapers and the nightly news on Oct.
14, 1997. "That's how upset and embarrassed I was. I didn't know how to
handle it, so I didn't tell anyone. I didn't lie, but I made it look like I
chose to go to Dearborn," she said. "When they saw it in the newspapers,
they were like, 'What happened?' I had to explain to them that I was never

On that April afternoon when the rejection letter fell through her mail
slot, a hurt and angry Gratz turned to her father. "Dad," she said. "Can we
sue them?"

The statement was more a reflection of feeling discriminated against than
of any probable action, she said. She knew her family couldn't afford a
lawsuit. And besides, she said, "I didn't know that people could sue the
University of Michigan."

So she put aside thoughts of a lawsuit and started college in Dearborn, but
thought a lot about what she was missing in Ann Arbor -- like kicking back
in a dorm. By her junior year, the rejection letter would again become
pivotal in her life.

                          Lawsuit Filed in 1997

Gratz and another white applicant, Patrick Hamacher, filed their
class-action lawsuit in October 1997. A month later, a 44-year-old rejected
law school applicant, Barbara Grutter, filed a similar suit against the U-M
Law School.

The three students are represented by the Center for Individual Rights, a
Washington, D.C.-based public interest law firm known for its challenges to
affirmative action, including the case of Cheryl Hopwood, a white woman
denied admission to the University of Texas Law School.

Gratz decided to take action against U-M in 1997, her junior year at U-M
Dearborn, after reading an article her parents clipped from a newspaper. It
said four Republican state lawmakers were looking for people who wanted to
sue U-M over racial preferences. She called and said she was interested in
helping. She thought she'd be stuffing envelopes.

Center for Individual Rights attorneys were casting around for their next
target when state Rep. Deborah Whyman, R-Canton, called. Whyman had seen
one of its attorneys talking about the Hopwood case on TV. Whyman and the
other legislators forwarded Gratz's name, and 100 others, to the Center for
Individual Rights.

                          Perfect Poster Child

Attorneys came to Metro Detroit to interview about a dozen prospective
plaintiffs. Gratz, a poised cheerleader, already was comfortable in the

She appeared to be the perfect poster child for their cause: She's female
and didn't carry the "angry white male" image. She comes from a
working-class family, is generally nonpolitical and nonactivist -- and,
legal experts said, simply has a good story to tell. "We didn't want
someone with a political ax to grind," said Terry Pell, CIR's executive
director. "We wanted somebody who thought what happened to them was wrong,
deeply wrong, and was prepared to do something about it."

U-M officials agree they don't use a colorblind admissions process. At
issue in Gratz's lawsuit is whether admissions counselors, as they sift
through thousands of applications, can consider race in their attempts to
create a diverse student body. "Our opponents say no in black and white,"
said Liz Barry, U-M's deputy general counsel. "We say the Constitution
allows us to do that. We know that to offer an excellent education -- we
have to offer it in a diverse environment."

                      'Double Standard' Hit

But Gratz, standing recently on U-M's center Diag area and near a sign that
read "Defend Affirmative Action," said it's unfair that U-M "has different
standards for people of different races."

Days earlier, she watched a 60 Minutes segment on the issue and listened as
U-M Law Dean Jeffrey Lehman backed up the school's diversity argument by
saying when issues such as racial profiling come up in class, "the learning
that takes place is better in a racially diverse classroom."

"That's exactly what they're doing: They're racially profiling," Gratz said
of U-M's admissions policies. "They are doing it backwards by giving points
-- something positive -- to black students. It's a double standard."

U-M doesn't see it that way. "The educational benefits of diversity create
a compelling government interest to take race and ethnicity into account,"
Barry said.

There's a third opinion, too. A group of minority students, who have won
the right to intervene as co-defendants in the case, says U-M needs
affirmative action policies to fix the effects of past and present
discrimination. "To win this case, we need more than the diversity
argument. We also need to make the argument that there is a history of past
discrimination and present discrimination at U-M," said Godfrey Dillard, a
Detroit attorney. Without affirmative action, he said, "you would not have
the critical mass you need" to make minority students feel welcome on

                           U-M Was Only Choice

The year Gratz applied to U-M, her application was joined by 14,156 other
applications. The pool included 8,585 white students and 1,609 students
from the groups that U-M says are underrepresented in the student body:
African Americans, Native Americans and Hispanics. The other applicants
were Asian Americans or students who didn't identify themselves as any

Of the applicants, 4,016 got rejection letters.

Gratz didn't feel she deserved one. She had a 3.8 grade point average,
graduated 13th in a class of 298 and scored 25 -- an average mark -- on the
ACT college admissions test. She was elected homecoming queen. She tutored
students in math and science. She participated in student government and
was elected vice-president of the student body.

So during her senior year at Southgate Anderson High School, when students
fretted about where to apply to college, Gratz had no hesitations: U-M was
her only choice. Her mom encouraged her to apply to Wayne State and U-M
Dearborn -- just in case.

Gratz eventually opted for U-M Dearborn, with the hope of transferring
later to the main campus. She never applied to transfer, saying she got too
caught up with classes and a part-time job. She's satisfied with her
college education, but feels she missed out on the college experience.
"Being at home is different from campus. You can't wake up and go to a
football game," she said. "I had looked forward to being away, meeting new
people, living in a dorm and starting something new."

She graduated with a bachelor's degree in math in August 1999 and began
working for C.U. Processing, a Southfield company that creates financial
software for credit unions. She switched to a Los Angeles-based competitor
a few months ago, but won't identify it by name. She hasn't told her new
employer about the lawsuit.

Although she enjoys her job, she says there was limited career advice at
Dearborn and fewer companies interviewing students. She found her first job
by searching the Internet. "U-M Ann Arbor makes bigger companies more
accessible. I've heard about the job fairs. It's a lot more limited at
Dearborn," Gratz said.

                          Plaintiff Reflects

Gratz left her parents' home after 23 years. She moved to San Diego,
deciding on a small studio apartment, despite some anxiety about living
alone for the first time. She will train clients to use her company's
financial software.

As she packed her belongings, she boxed up her U-M teddy bears, pendants
and blanket to decorate her new home. Even today, as a plaintiff in U-M's
greatest legal challenge, she still thinks positively about the Ann Arbor
campus. "U-M Ann Arbor is the ideal place for me. I know that for sure,"
she says with no bitterness in her voice. "It is a great school, a great
education and great people."

But because of those feelings, there are a lot of "what ifs" in Gratz's
life. "I look back and think, if only I went to Ann Arbor, what things
would be different?" she said. "Maybe if I went away to school, it wouldn't
be such a big deal to move across the country." Maybe she would be in
medical school. Maybe she would have new friends from different parts of
the country. Still, she has moved on. She graduated from college, found her
first job and perfected the media interview. She's helped Japanese and
French reporters, some who barely speak English, find her home. She's
looking forward to starting her new job in California. She enjoys the
teaching role of a corporate trainer and says she can draw on college
classes she took for a teaching certificate. She had thought about becoming
a high school teacher. She remembers taking a class on multiculturalism, a
requirement in the education program. At the Ann Arbor campus, all
undergraduates must take a race and ethnicity class. "The point of the
class was to open our eyes to the fact that there are a lot of different
things out there," she said. "It was to make you think from an education
standpoint, how can you reach out to the most people and touch the most
peoples' lives?"

At U-M, President Lee Bollinger says that's exactly what his school is
trying to do. (The Detroit News, November 12, 2000)

UNITED CONSUMERS: 'Association-in-Fact' Allegations Lack Specificity
The 7th U.S. Circuit Court of Appeals affirmed the dismissal of a RICO
claim brought by a member against a "buying club" because the member failed
to plead the nature of the alleged "association-in-fact" enterprise with
the requisite specificity. (Stachon v. United Consumers Club Inc., et al.,
No. 99-3938 (7th Cir. 10/6/00).)

Edward and Judy Stachon were members of a "buying club" operated by the
United Consumers Club Inc. The Club was established in 1978. The Club
allegedly enters into agreements with manufacturers to sell "first quality"
consumer goods to its members at wholesale prices. Consumers join the Club
by paying a membership fee. Membership entitles members to buy the Club's
goods at significant savings.

The Stachons sued the Club and five of its officers and directors for
violations of the RICO Act and the Illinois Consumer Fraud and Deceptive
Practices Act. They filed an amended complaint seeking class action
certification for similarly situated individuals. The Club and its officers
and directors moved to dismiss the suit for failure to state a claim. The
U.S. District Court for the Northern District for Illinois dismissed the
RICO claim and declined to exercise its supplemental jurisdiction over the
state law claim (see Civil RICO Report, Dec. 22, 1999, p.11).

The 7th Circuit reviewed the allegations of the Stachons' amended complaint
de novo. The court stated that "(t)he gist of the Appellants' RICO claim is
that Appellees have fraudulently represented that UCC members have access
to first quality merchandise at special wholesale prices." The Stachons
contended that a great deal of the merchandise was of inferior quality and
was sold for more than the wholesale price. They also alleged that the Club
misrepresented the number of its members to induce other individuals to

The court stated that the Stachons alleged an "association-in-fact"
enterprise comprised of the Club, "its franchisees, its officers and/or
directors, its members, participating wholesalers, and participating
manufacturers." The Club contended that the Stachons failed to meet the
heightened pleading requirements for RICO when they alleged the nature of
the enterprise.

The 7th Circuit ruled that "the mere fact that (the Club), for nearly 21
years, had business dealings with a wide assortment of unnamed
manufacturers, wholesalers, and members in no way establishes that they
function with (the Club) as a continuing unit or as an ongoing structured
organization." The Court of Appeals held that the Stachons failed to plead
with the required specificity the existence of an "association-in-fact"
Rico enterprise.

The 7th Circuit affirmed the District Court decision dismissing the amended
complaint. (Civil RICO Report, November 8, 2000)

ZIRKLE FRUIT: Ct Says Workers' Depressed Wages Claim Is Too Speculative
In a class action filed against apple industry companies for scheming to
depress employee wages, the U.S. District Court for the Eastern District of
Washington found the workers' complaint failed to allege a sufficiently
non-speculative financial loss resulting from the companies' conduct to
sustain their RICO Act claim. The court dismissed the complaint and
remanded the state conspiracy claim to state court. (Mendoza, et al. v.
Zirkle Fruit Co., et al., No. CS-00-3024-FVS (E.D. Wash. 9/27/00).)

Olivia Mendoza and Juana Mendiola, as class representatives for apple
industry workers, filed a class action against Zirkle Fruit Co. and Matson
Fruit Co. The complaint alleged the apple companies schemed to depress
employee wages, in violation of the RICO Act. The complaint further alleged
Zirkle and Matson conspired with Selective Employment Agency Inc., in
violation of the Immigration and Nationality Act (see Civil RICO Report,
April 26,2000, p. 1). Selective hired workers for Matson and Zirkle; paid
employees' wages; and prepared the paperwork for each employee. (Civil RICO
Report, November 8, 2000)

* Survey Says State Court Class Action Increased By 1,042%
As harried in-house counsel across the country can attest, class action
litigation has reached epidemic proportions. According to a joint study by
the Institute for Civil Justice and the RAND Institute, class action
activity has grown dramatically, and is increasingly concentrated in the
state courts. A 1999 survey indicates that the number of state court class
actions pending against surveyed companies increased by an astonishing
1,042 percent over the ten-year period from 1988 - 1998. State court class
action lawsuits have become a growth industry for the plaintiffs' bar.

The dramatic increase in state court class actions is a symptom of the
flaws in our legal system, not the result of any change in corporate
behavior that would give rise to new claims. Plaintiffs' attorneys have
discovered that some state courts have an "anything goes" attitude toward
class action lawsuits - they are willing to effectively ignore class
members' and defendants' due process rights and certify cases that do not
meet the certification requirements of F.R.C.P. Rule 23 and its state
variants. As a result of state courts' disregard of the class action rules,
attorneys are filing class actions in state courts that they would not have
considered bringing even five years ago. To succeed in getting these highly
questionable suits certified as classes, plaintiffs' counsel forum shop for
the state and county courts in which they wish the action to be heard.

According to the joint ICJ/RAND report, plaintiffs' counsel have
acknowledged "too many non-meritorious lawsuits are [being] filed and
certified as class actions."

                       A State Court Problem

The state court class action explosion has occurred because certain states
and certain state and county courts employ very lax class certification
criteria, rendering virtually any controversy worthy of class action
treatment. Many of these suits do not merit class treatment but nonetheless
are certified by state court judges. There are many examples of state court
judges certifying classes that had been rejected by federal court judges
despite the fact that state courts function under virtually identical rules
to those used by the federal court. The reasons for this phenomena can be
as benign as the fact that most state courts are simply not accustomed to
addressing complex litigation issues and don't have the experience
necessary to make appropriate decisions. This problem is compounded by the
fact that state courts do not have staff and other resources that federal
courts have available for managing complex litigation. Too often however,
state courts certify classes for the benefit of local lawyers who have much
to gain financially from such suits and who also are supporters of the
elected judges.

The state court class action crisis has resulted in the wasting of precious
national judicial resources. Because class actions involve high financial
stakes for plaintiffs' counsel, they often compete with one another for the
most lucrative settlement by filing "copycat" national class actions in
state courts around the country. Copycat litigation makes losers of the
claimants involved in the competing class actions because the outcomes for
the various classes are often very different depending on the attorneys,
the judge, the jurisdiction, etc. Class counsel jockeying for controlling
positions among "competing" cases often sacrifice class members' interests
in the process to achieve their own objectives. But the court system also
loses because its resources are being squandered due to identical national
class actions being heard in multiple courtrooms around the country rather
than being heard as a national class action by one judge as would be the
case if the actions had been in federal court.

Litigants facing copycat litigation do not have the means in the state
court system of consolidating the various cases to have them heard in one
court. The federal system on the other hand, does provide a means of
bringing together all similar actions. The benefits of consolidating
competing class actions represents a very significant reason to permit
removal of national class actions from state courts to federal court. Yet,
this benefit is elusive. Under the current diversity rule, defendants are
unable to meet the requirements of the rule in a national class action
because plaintiffs' attorneys "game the system" to stymie removal efforts.

One game plaintiffs' lawyers play is to name a defendant who is from the
same state as the named plaintiff to destroy diversity, only to drop that
defendant from the case once the time period expires within which removal
must occur. Another example of gaming involves counsel "shaving" the class
claims, which means that counsel give up valuable rights of class members,
such as federal claims, to keep the actions in the favorable state court.
In other instances, counsel "shave" the amount of the claims. Limiting the
stated amount of damages sought will keep the action in state court (even
when the class may be entitled to more). And they may waive punitive
damages in their entirety. In short, class counsel operate to the detriment
of their clients and waive the class members valuable legal rights to keep
the action out of federal court.

The net effect of the games being played under the current system is
tremendous inefficiency and inequity. Another significant effect is the
"federalization" of interstate class actions in certain state courts. The
state courts of one jurisdiction end up dictating the laws of other states
and resolving the claims of other states' citizens.

For example, in Snider v. State Farm, a county court judge in Marion
County, IL, issued a $ 1.1 billion judgment in a 48-state class action,
finding that Illinois law governed State Farm not just in Illinois, but in
the 47 other states as well. This ruling ignored the fact that a number of
the states' laws specifically allowed for or required the business
practices at issue.

The class action epidemic would be substantially ameliorated if interstate
class actions could be removed to federal courts. Federal courts have a
long and deliberate history of protecting the laws and the interests of
various states in interstate controversies. Federal courts long ago
recognized that class actions can be used as extortion devices and have
developed policies and practices to ensure that the due process rights of
all parties - plaintiffs and defendants - are protected. In recent years,
the federal court system has doubled its efforts to ensure that class
members' rights are protected. In one case, the U.S. Court of Appeals for
the Eleventh Circuit went so far as to apologize when it decided that the
law required it to return a class action to state court, recognizing the
problems at the state level.

                          The Statutory Problem

Most interstate class actions are excluded from federal courts because of
an historical quirk in the diversity jurisdiction statute. Article III of
the United States Constitution states that "[t]he judicial power [of the
United States] shall extend to controversies between citizens of different
States." The diversity jurisdiction concept was created to ensure that
local biases against out-of-state companies would not discourage expansion
of commercial and manufacturing interest throughout the country. Article
III ensures that there will be a fair, uniform and efficient forum (i.e., a
federal court) for adjudicating interstate commercial disputes.

The federal diversity jurisdiction statute was originally enacted well over
a century before the rise of the modern day class action and was drafted
with individual actions in mind. The federal court removal statute simply
does not take account of the uniqueness of class actions, which by their
nature allow for the gaming that defeats a litigant's ability to be heard
in a federal court. It is indeed ironic that class actions of national
importance cannot be heard in a neutral forum whereas individual plaintiff
cases can be readily removed to federal court.

For example, under current law, a slip-and-fall case worth $ 75,001
involving residents of different states can be heard in federal court under
the diversity jurisdiction statute. But a nationwide class action that
involves tens of millions of citizens residing in all 50 states that seeks
billions of dollars in damages and that implicates the laws of every state,
typically MUST be handled by a state court because there is not complete
diversity or each named plaintiffs' claim is not worth $ 75,000. Former
Clinton Administration Solicitor General Walter Dellinger testified during
a July 1999 House Judiciary Committee hearing that if Congress were to
start over and write a new federal diversity jurisdiction statute,
interstate class actions would be the first category of cases to be
included within the scope of the statute.

              Lawyers Win, Plaintiff Class Members Lose

Defendants, of course, are big losers in this game, where claims utterly
without merit must be treated seriously because of the vast numbers of
claims involved and the significant threat that the financial consequences
present to the company. But consumers, too, are victims of the epidemic.
One storyline is increasingly familiar: An interstate class action,
asserting claims either totally without or with only the most marginal
merit, is brought on behalf of thousands (and sometimes millions) of
claimants. The potential exposure is enormous, exceeding the defendants'
assets. Plaintiffs' attorneys use this potential exposure to coerce a
settlement that offers uniformly minimal benefits to the putative class
members (taking no account of the extent (if any) to which the class member
is actually owed any relief.) Then, class counsel apply to the state courts
for huge attorneys' fee awards, which are granted. Defendants are extorted,
putative class members obtain no real benefits, but plaintiffs' counsel is
rewarded handsomely. The practice has earned the apt nickname "jackpot

The fact is that purported state court class actions are frequently
benefiting only the attorneys for the purported class. The ICJ/RAND
Institute study indicates that in state court class action settlements, the
class counsel typically receive more in attorneys' fees from consumer class
action settlements (that is, non-personal injury cases) than all the class
members combined.

Specific examples abound. In one of the most ridiculous cases, the Chicago
Tribune reported that in a class action against a record company to recover
the prices paid for albums by the music group Milli Vanilli (who used the
voices of other performers), class members were given a settlement of $ 1
to $ 3 each. But the court awarded the lawyers $ 675,000. The attorneys,
however, did not feel that that was sufficient, and petitioned the court
for an additional $ 1.9 million.

                         Congressional Action

Congress attempted to address this problem in the 1999-2000 session, and
significant progress was made despite the legislation not being enacted
into law. The House and Senate Judiciary Committees held hearings on the
problems in the class action system and legislation was introduced by
bipartisan sponsors in both chambers.

The U.S. House of Representatives passed the Class Action Jurisdiction Act
of 1999, H.R. 1875, and the Senate Judiciary Committee successfully
reported the Class Action Fairness Act, S.353 (although the bill did not
reach the Senate floor this year). These bills correct the class action
anomaly in the diversity statute and reaffirm the intent of Framers of the
Constitution when they created diversity jurisdiction.

The legislation would allow defendants or unnamed class members to remove
interstate class action cases to federal court if there is minimal
diversity and the aggregate amount in controversy is over the requisite
amount ($ 1 million in the House bill and $ 2 million in the Senate bill).
Further, state courts would continue to have exclusive jurisdiction over
single state cases and class actions of a local character (cases in which a
substantial majority of the class members and defendants are local and the
claims will be governed primarily by local law) and state action cases
(cases against states or state officials).

The legislation would combat the gaming of the system used to keep
diversity cases in state court with three new protections. First, unnamed
plaintiff class members would be able to file for removal if they feel that
their rights are not adequately protected in state courts. Second, any
party would be allowed to remove without the consent of other parties. And
third, the bar on removing cases to federal court after one year would not
apply to class actions (although removal would still be required within 30
days of notice that the action could be removed).

Under the legislation, if a removed class action were found not to meet the
Rule 23 requirements for class certification, the federal court would be
required to dismiss the action. The plaintiffs would be able to refile an
amended complaint in state or federal court, and the statute of limitations
would be tolled during the period that the action was pending in federal
court. The bill is entirely procedural and would not change the substantive
law governing any claims. While protecting plaintiff class members' rights,
the legislation would merely allow litigants greater latitude in moving
interstate lawsuits to federal court.

                           What Can Be Done

The wave of class action lawsuits, which have inhibited the ability of
states to interpret their own laws and which have hurt consumers, must be
stopped. Congress will undoubtedly consider class action reform legislation
again next year. The legal community must be energetically and aggressively
engaged to offset the profound influence of the plaintiffs' bar. The
legislative effort will require the work of constituents to educate members
of Congress about the importance of this legislation. Diversity
jurisdiction reform is a very complex issue, and education about the
problem and the reasonableness of the proposed solution is critical.
Readers interested in restoring fairness to class action practice should
contact Marsha Rabiteau, Counsel, The Dow Chemical Company (517/636-0639)
who is working with the Civil Justice Reform Task Force of The Business
Roundtable, and led the legislative campaign during the 106th Congress.
(The Metropolitan Corporate Counsel, November, 2000)

* The Developing Role Of Class Actions In Canadian Civil Justice Reform
Class action legislation is a relatively recent development in Canadian
jurisprudence. Compared to the American legislative counterpart, Rule 23 of
the Federal Rules of Civil Procedure, enacted in 1966, the availability of
the Canadian class action mechanism is only a few steps from its infancy.
In Canada, the provinces (as opposed to the federal parliament) have
exclusive jurisdiction over matters of civil proceedings. The first
Canadian province to enact any type of class action legislation was Quebec
in 1979. Following more recently were Ontario and British Columbia, each
enacting a Class Proceedings Act, in 1992 and 1995 respectively. Although
the remaining provinces have yet to reform their civil proceedings rules to
allow for such actions, Canadian class action litigation has firmly taken
root, and will continue to expand Canadian jurisprudence.

Existing Canadian class action legislation was created with the intention
of implementing three major goals: access to justice, judicial economy and
behaviour modification. The class action legislation in the three Canadian
provinces shows a clear understanding and adherence to these objectives, as
does Rule 23 in the U.S. legislation upon which much of our Canadian
legislation was modeled. However, to many observers, the Canadian class
action legislation has sought to expand the boundaries of the class action
mechanism and, with a particular emphasis on the goal of access to justice,
has rejected certain perceived restrictions of the U.S. model to make class
proceedings in Canada more liberally available. In fact, the drafters of
Ontario's legislation explicitly commented that the legislation was
designed to overcome some of the obstacles encountered in Rule 23.

Given Canada's relative inexperience with the class proceedings mechanism,
the American jurisprudence in the field has been readily drawn upon to
promote the development of this very significant procedural tool. This
article addresses three particular developments in Canada which owe much to
an understanding of the more mature American experience. Reference is made
to these issues as being illustrative of not only the benefit of
comparative law but also to highlight the impact such an analysis can have
on achieving significant strides in the area of civil justice reform. The
three concepts we discuss are the national class, settlement bar orders,
and the Canadian reaction to U.S. style strike suits.

                              National Class

The concept of a national class has perhaps best been articulated in Canada
in Carom v. Bre-X Minerals Ltd. et al. (1999), 44 O.R. (3d) 173 (S.C.J.).
In that case, the Court held that under the Ontario class action
legislation a proposed class plaintiff could represent a national class of
persons, that is, a class involving residents from provinces other than
Ontario. Unlike in the U.S., if multiple actions were commenced in Canada,
no procedure akin to a multi-district litigation panel exists to streamline
the efficient handling of competing claims. Further, in Ontario and Quebec,
the legislation provides that any person may be part of a class without
regard to residency. In British Columbia, however, the legislation provides
that only a resident may commence a class proceeding, and that
non-residents may "opt-in" if they desire.

In Carom the defendants opposed the definition of a class on a nation-wide
basis, and in response the court rejected the constitutional arguments
against a national class and found that the inclusion of a national class
"accorded with order and fairness". Further, the court found that the
various claims had a "real and substantial connection to Ontario" and
provided the basis for the court to assume jurisdiction with respect to the
claims of a national class of plaintiffs.

The Carom decision was subsequently followed in Webb v. K-Mart (2000), 45
(3d) 389, leave to appeal refused, 45 O.R. (3d) 638. On leave to appeal
being refused, the court stated that it was a "sensible solution to a
practical problem" to certify the claim on a national class basis.

The fact that the courts of at least one province have accepted a national
class in class proceedings is an important factor in the development of
future class proceedings in Canada. As the jurisprudence develops, this
factor may establish one or more provinces as the jurisdiction of choice
for Canadian class proceedings due to the wide scope of eligible persons
able to join in the proceeding. A national class allows for the opportunity
to unite a greater number of persons together as a party under the same
litigation proceeding. This, in turn, serves all three goals of class
action legislation.

                                Bar Orders

A settlement bar order is a device which has long been used in the American
class action experience, but which has only recently made an appearance in
Canadian jurisprudence.

A bar order is a settlement device which permits settling defendants, where
there are a variety of defendants, to cap their exposure and ensure that
they are no longer subject to further liability or costs. Where a bar order
is granted, a partial settlement may bar the non-settling defendants from
asserting cross-claims for contribution against the settling defendants.
The effect of the bar order may be to convert the remaining claims of the
plaintiffs as against the non-settling defendants from "joint and several"
to "several" claims with a cap on the liability of the non-settling
defendants at a percentage of the total damages to be proven at trial.

The first Canadian case to implement a bar order was Ontario New Home
Warranty Program v. Chevron Chemical Company (1999), 46 O.R. (3d) 130 (Gen.
Div.). In that case, a number of the defendants offered to settle. However,
as part of their settlement, they required that the non-settling defendants
be prevented from making any claims for contribution against the settling
defendants. The plaintiffs agreed to restrict their claims against the
non-settling defendants to their several liability with a limitation on
that liability being set at a proportion of the plaintiffs' total damage
claim not otherwise satisfied by the settling defendants. The Court held
that under s.12 of the Ontario Class Proceedings Act, such an order could
be granted since it would ensure the "fair and expeditious determination"
of the class proceeding.

This illustrates why the bar orders are such an effective tool. They work
to counteract the inhibiting effect of claims for contribution on
settlement. Bar orders are frequently used to achieve settlement of
complex, on-going litigation. They are a useful mechanism in the
development of class actions, in that they greatly increase the expediency
with which they can be resolved. Bar orders encourage settlement, rather
than lengthy, protracted litigation, and thereby increase judicial economy.

                              Strike Suits

Strike suits are perceived by many as a form of manufactured litigation.
Such suits have most commonly been seen in the United States in securities
litigation. In a strike suit, a plaintiff representative of a class of
shareholders will intervene into matters of corporate governance with
arguments that the planned proposals are harmful or damaging to that class
of shareholders. However, more often than not these lawsuits have proffered
essentially unmeritorious claims as a basis for extorting settlements from
corporations who would rather pay out than have their corporate
transactions threatened by expensive and time consuming litigation.

Strike suits were, until recently, an almost entirely American phenomena.
With the appearance of class actions in Canada, however, strike suits have
now been initiated in Canadian courts as well. Strike suits are especially
problematic because they rely on exactly what it is about class proceedings
that makes them so valuable - that they are an easily accessible form of
litigation - and use that to the justice system's disadvantage. However,
Ontario courts have now found a novel and effective way to keep strike
suits from clogging up the courts and detracting from civil justice.

In Epstein v. First Marathon Inc. (2000), 2 B.L.R. (3d) 30 (Ont. S.C.) the
court clearly stated that strike suits would not be tolerated. Having seen
the American experience with this type of proceeding, the court refused to
allow such "legalized blackmail", as Cumming J. referred to it, in Ontario.
The court used its powers under s.29(2) of the Ontario Class Proceedings
Act, which requires the court's approval of any settlement of a class
proceeding commenced under the Act, to disallow the proposed settlement of
the strike suit. The settlement would have provided no benefit to the
proposed shareholder class and a substantial payment to class counsel.
Cumming J. held that approval of the settlement "would violate the public
policy objectives underlying the legislature's enactment of the [Act]", and
that the "plaintiff's class proceeding is counter-productive to all these
objectives". To emphasize its disfavour with such actions, the court also
held that the plaintiff's lawyers were to be barred from receiving any
money by way of the proposed settlement.

Epstein has sent a powerful message to anyone thinking of bringing American
strike suits into Canada to profit from this manufactured litigation. The
Canadian reaction to strike suits has sought to immunize Canadian courts
from this less desirable product of class action legislation. It is clear
that settlements generated from this type of litigation will not be
accepted, and lawyers who attempt to foster this type of litigation will
not be rewarded. These are both powerful disincentives which may serve to
protect the core values underlying class action legislation.


Class actions remain a relatively new experience for the Canadian judicial
system. Fortunately, American experience has provided guidance for both
what is effective - mechanisms such as national classes and bar orders -
and for what is to be avoided - abusive strike suits. Class action
legislation is a positive step in the continuing reform of the Canadian
justice system. It is certain that American experience and ingenuity will
continue to be monitored in Canada to assist in our efforts to improve,
enrich and reform our judicial system. (The Metropolitan Corporate Counsel,
November, 2000)


S U B S C R I P T I O N  I N F O R M A T I O N

Class Action Reporter is a daily newsletter, co-published by Bankruptcy
Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc.,
Washington, DC. Theresa Cheuk, Managing Editor.

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

This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.

Information contained herein is obtained from sources believed to be
reliable, but is not guaranteed.

The CAR subscription rate is $575 for six months delivered via e-mail.
Additional e-mail subscriptions for members of the same firm for the
term of the initial subscription or balance thereof are $25 each.  For
subscription information, contact Christopher Beard at 301/951-6400.

                    * * *  End of Transmission  * * *