/raid1/www/Hosts/bankrupt/CAR_Public/001219.MBX               C L A S S   A C T I O N   R E P O R T E R

             Tuesday, December 18, 2000, Vol. 2, No. 245


BRIDGESTONE/FIRESTONE, FORD: Cohen Milstein Takes Role in Public Safety
COCA-COLA: Settlement with African American Employees Far From Sealed
FARMER: 3rd Cir OKs NJ Guidelines On Releasing Megan's Law Information
FLEMINGTON PHARMACEUTICAL: Resolves Securities Suit Filed in NJ in 1998
FOREST SERVICE: Settles with Promise to Break Sexual Harassment Pattern

FRITZ COMPANIES: Sp Ct Grants Review in Case over "Not to Sell" Damages
GIULIANI: 2nd Cir Affirms Denial of Injunctive Relief in AIDS ADA Case
HMOs: Aetna Announces Actions for Profitability and Competitiveness
ITURF INC: Intends to Defend Vigorously Securities Suits in New York
ITURF INC: Stockholders’ Suits in DE Seek to Enjoin Merger

KADOSH: Release Signed By Patient Not a Bar to Dental Malpractice Action
LIFESCAN INC: Pleads Guilty for Home Blood Glucose Monitors for Diabetes
LOUISIANA: Fishers Nab $48M for Ruined Oyster Beds; State to lose $700M
MORTGAGE INSURANCE: MGIC, PMI and United Guaranty Settle RESPA Cases
PARATRANSIT SERVICES: CA Suit Alleges County Authority of Denial

PHILIPS INTERNATIONAL: Trust Can't Show Liquidation Is to Save CEO Tax
TICKETMASTER: Unwanted Magazine Subscriptions Attract State's Attention
UTILITIES: Alleged of Restraint of Trade & Unfair Business Practices

* H.M.O.'s Are Pressed on Many Fronts to Reinvent Themselves


BRIDGESTONE/FIRESTONE, FORD: Cohen Milstein Takes Role in Public Safety
On Friday, December 8, 2000, the federal district court presiding over
the consolidated federal court proceedings against Bridgestone/Firestone,
Inc. and Ford Motor Company involving allegations of defects in Firestone
ATX, ATX II and Wilderness tires and Ford Explorer SUVs, named Cohen
Milstein Hausfeld & Toll partner Michael D. Hausfeld as Liaison to the
Public Safety Community, which includes consumer advocacy and watchdog
groups and state and federal government entities and officials.

According to Hausfeld, who also serves as counsel in the Center for Auto
Safety's tire recall case, "I am honored to be named to this important
position. This litigation is first and foremost about protecting the
safety of the motoring public. To do that the litigants will require the
input, expertise and leadership of the various governmental agencies and
public safety groups, such as the Center for Auto Safety, that focus on
automotive safety issues. I feel privileged to be able to work with those
groups and to advocate their viewpoints in the litigation."

Hausfeld indicated that as Liaison to the Public Safety Community, he
would seek to encourage as inclusive a dialogue as possible among the
various consumer groups, governmental agencies and members of the public
regarding the automotive safety concerns that are at issue in the
litigation. Accordingly, he indicated that he has created a public safety
newsletter on his firm's website which will provide brief updates about
the public safety issues being analyzed in the litigation and will
provide a chat room for people to engage in an exchange regarding those
public safety issues. The firm's website is located at www.cmht.com.

Contact: Media Relations, Inc. for Cohen Milstein Deborah Schwartz,
301/897-8838 dschwartz@mediarelationsinc.com or Alexander E. Barnett,

COCA-COLA: Settlement with African American Employees Far From Sealed
Atlanta Washington attorney Cyrus Mehri describes a $ 192 million race
discrimination settlement with the Coca-Cola Co. as "breathtaking."

"These are probably the most sweeping reforms any company has agreed to,"
said Mehri, who represents plaintiffs in a class action suit against the
soft drink company. "These cases are extremely difficult, and the law is
stacked and very much in favor of the employer. It's the rare case that
succeeds. It's the rare case that succeeds to breathtaking levels like
this one." It's even better than Texaco's 1997 $ 176 million settlement
of a similar race discrimination suit, he said.  The Texaco agreement was
hailed at the time as a record settlement of its kind.

Tricia "C.K." Hoffler, a partner of Florida attorney Willie E. Gary,
disagrees. "It's a historic agreement in that it's pitifully low," she
said. "This is a big public relations sham. ..." Hoffler is co-managing
the Coke litigation.

Coke and plaintiffs' attorneys announced Nov. 16, with great fanfare,
that after months of negotiation they had agreed to a historic

Actually, there is only a draft settlement, attorneys for both sides say,
and the final settlement still must be approved by U.S. District Judge
Richard W. Story of the Northern District of Georgia. According to an
executive summary of the settlement agreement Story approved that was
made public last month, the judge had expected both sides to submit the
settlement for preliminary court approval by Nov. 26. That timetable
"obviously has not been adhered to," Coke spokesman Ben Deutch said. The
draft still has not been released to class members or the public.

Coke's African-American employees ultimately will determine whether the
company can put charges of racial discrimination behind it. If Mehri and
Coke can persuade most of the 2,000 employees eligible to participate in
the settlement that it's a good deal, Coke can close the book on this
troublesome chapter in its history. But if employees buy the view of
Gary's firm, the settlement may not allow Coke to lay the discrimination
charges to rest.

Gary's firm already represents four Coke employees who were named
plaintiffs in the original suit but parted company with Mehri and
co-counsel Bondurant, Mixson & Elmore last year. If 200 or more of the
eligible employees elect not to participate, Coke has the option of
canceling the settlement agreement. Coke insists that's unlikely.

This is the second time Coke and plaintiffs' lawyers have announced a
settlement without actually producing a final document. In June, both
sides said a settlement in principle had been reached, but that it would
take until October to hammer out the details.

Deutsch now acknowledges that no monetary amount had been determined at
the time of the June announcement. Mehri said both sides agreed on the $
192 million figure only the day before he announced it at a Nov. 16 news

While plaintiffs' lawyers say they still hope to send the details of the
settlement to prospective class members by the end of this month, Deutsch
said Coke is now telling its employees it may not be mailed out until
January. Coke is represented by company attorneys, and a team of King &
Spalding attorneys led by William A. Clineburg Jr. that includes Larry D.
Thompson, former U.S. Attorney for the Northern District of Georgia.

However, Coke has insisted that its public relations staff handle all
media inquiries regarding the suit.

Both sides are emphatic that the draft settlement is a binding agreement.
But they also agree that important details remain to be worked out. The
biggest issue is exactly how much cash employees will receive. Mehri has
said in a signed column in the Atlanta Journal-Constitution and on his
Web site that employees will receive an average of $ 40,000 each. Jeffrey
O. Bramlett, a partner with Bondurant, Mixson, calls that figure
"somewhat misleading." "It's going to depend on the circumstances of the
individual," he said.

All of Coke's salaried African-American employees in the United States a
prospective class that does not include hourly wage-earners will share $
58.7 million in compensatory damages, based on their tenure with the
company. But the $ 40,000 average also is based on an additional $ 23.7
million in back pay. The actual amount each employee will receive from
that back-pay fund will be based on individualized formulas that include
experience, current pay, education and wage discrepancies between white
and black employees in similar positions. Those formulas still are being
computed and will result in individual settlements far below and possibly
far above the average, Mehri acknowledged. Part of the back pay may be
paid, however, not in cash, but in stock options. Bramlett said an
estimated $ 5 million of the back wages most likely will be in options.
Still to be determined are the details of the stock options to compensate
employees who should have received them when the company's stock was more

Employees who aren't satisfied with the back pay they receive can
challenge the award in court. But they'll have to hire their own lawyers
and they'll also forfeit the company's award of back pay before the
litigation begins. The only big payoff for employees is $ 300,000 set
aside for each of the suit's four remaining named plaintiffs. In
addition, every Coke employee who gave an affidavit supporting the suit
will get a $ 3,000 bonus.

The cash to employees and lawyers' fees totals about $ 113 million. The
remainder of the $ 192 million about $ 79 million is what Coke spokesman
Deutsch calls "soft money." The soft money in the settlement includes $
43.5 million as the estimated cost to Coke over 10 years of raising the
pay of all African-American employees to eliminate differences with white
employees in comparable positions. Another $ 36 million of "soft money"
includes fees paid to members of a Diversity Task Force, a diversity
ombudsman and two corporate psychologists. This article previously
appeared in Fulton County Daily Report, an American Lawyer Media
publication. (The Legal Intelligencer, December 15, 2000)

FARMER: 3rd Cir OKs NJ Guidelines On Releasing Megan's Law Information
New Jersey Attorney General John J. Farmer's new guidelines for the
release of Megan's Law information are sufficient to ensure that private
information about convicted sex offenders doesn't fall into the wrong
hands, the 3rd Circuit Court of Appeals ruled.

The court's opinion, written by Circuit Judge Marion Trump Barry, calls
the ruling an end to years of litigation concerning the constitutionality
of New Jersey's Megan's Law, which instructs law-enforcement officers to
notify the public of the whereabouts of released sex offenders.

The appeal addressed two narrow issues all that remained of a class
action filed in 1997. The suit, Paul P. v. Farmer, alleged that the law's
community notification provisions violated released prisoners'
constitutional right to privacy.

The first time the challenge reached the 3rd Circuit, the appeals court
held that registrants had a privacy interest in only one bit of
information police could release about them under the law their home
addresses. The court also ruled, however, that the public interest in
"knowing where sex offenders live so that susceptible individuals can be
appropriately cautioned" was compelling enough to overwhelm the
plaintiffs' privacy interest. But the appeals court noted that "the fact
that protected information must be disclosed to a party who has a
particular need for it ... does not strip the information of its
protection against disclosure to those who have no similar need."

The case was remanded to the district court of New Jersey for a
determination of whether the state's procedures for releasing the
information adequately guarded against unauthorized release.

On remand, the plaintiffs found fault with several aspects of the
community notification system, including the lack of penalties to deter
unauthorized release of the information and inconsistency in the
procedures followed. The New Jersey attorney general responded that the
guidelines for release of Megan's Law information cautioned in several
places against improper disclosure.

But U.S. District Judge Joseph E. Irenas pointed out that the plaintiffs
had "summarized forty-five incidents where confidential information
released under Megan's Law was distributed to unauthorized persons." No
system could be perfectly leak-proof, Irenas said, but there should be a
uniform system that was at least reasonably calculated to prevent
unauthorized disclosure. The guidelines as written failed to meet that
standard, he held, and he ordered that they be redrafted.

The current set of guidelines, issued on March 23, are Farmer's response
to that order. Under the new guidelines, two forms are used to notify the
community of a sex offender's presence an "unredacted notice" and a
"redacted notice." The first form contains all the information a
registrant's name, photograph, description, exact street address, exact
business or school address, vehicle number and license number, and a
description of the offense.Such unredacted notices are provided only to
those who sign a "Megan's Law Receipt Form" in which they agree to be
bound by the "Megan's Law Rules of Conduct," which bar any unauthorized
sharing of the information with others who were not notified by law
enforcement authorities. The redacted notice contains all the same
information except that the exact home and work addresses are replaced by
street names and block numbers.

The plaintiffs raised only two challenges to the new guidelines. They
argued that they were deficient because they did not raise the threat of
contempt-of-court sanctions for unauthorized disclosures. Second, they
argued that the redacted notices were still too revealing because "a
person's block of residence is constitutionally protected information."

Irenas rejected both arguments, and the plaintiffs appealed. Their case
was argued by Edward L. Barocas of the New Jersey Office of the Public
Defender. Attorney General Farmer argued for the state.

The appeals court agreed with Irenas. Noting that it had already found
the state's interest in disclosing where prior sex offenders live
"compelling," Barry pointed out that "Megan's Law's fundamental purpose
... is public disclosure." "For example, with a Tier 3 offender [one who
has been deemed likely to commit a sex offense again], every parent of a
child attending a school within the court-authorized notification zone is
entitled to receive an Unredacted Notice," Barry wrote. "In light of all
these authorized public disclosures," Barry said, "all that remains is
the potential that a minimal burden ... will be placed on appellants'
nontrivial privacy interest if there are subsequent, unauthorized
disclosures with respect to a single piece of information, an offender's
address." "Moreover," the court found, "the notification order itself and
the accompanying Rules of Conduct rigorously stress the confidentiality
of the information being provided, comprehensively explain how the
information can and cannot be used, and firmly warn against unauthorized
disclosures." Although the threat of contempt sanctions might further
reduce the number of unauthorized disclosures, the court found, it isn't
necessary to make the process constitutional.

Responding to the plaintiff's criticism of the unredacted notices that
specifying what block a registrant lives on is a violation of a
constitutionally protected privacy interest the court again found the
plaintiffs' privacy interest was trumped by the state's interest in
disclosing Megan's Law information to the "relevant public."

Jeff Beach, a spokesperson for the New Jersey Office of the Public
Defender, said  that the appellate ruling was "a disappointment for our
clients."The plaintiffs haven't yet determined what their next step will
be, he said, although he noted that a request for an en banc rehearing
was possible. He pointed to a footnote in the appeals court's opinion,
which he called an invitation to "start over again at square one" if the
new guidelines are ineffective that is, he said, if there are more
unauthorized disclosures, particularly ones that result in vigilante
actions against his clients. "If the safeguards prove to be inadequate,"
the footnote says, "we do not preclude an application to the District
Court for relief." Shannon P. Duffy contributed to this report. (The
Legal Intelligencer, December 12, 2000)

FLEMINGTON PHARMACEUTICAL: Resolves Securities Suit Filed in NJ in 1998
On December 23, 1998, a complaint was filed against the Company in United
States District Court for the District of New Jersey by Richard F.
Biborosch, individually and as class representative. Defendants in the
lawsuit include the Company, John J. Moroney, Harry A. Dugger, III, Ph.D.
and Monroe Parker Securities, Inc. and two of its principals
(collectively, "Monroe Parker").

The complaint alleges certain securities law violations against the
Company relative to Monroe Parker's role as underwriter for the Company's
initial public offering and the Company's alleged failure to properly
disclose certain information relating to Monroe Parker. Relief sought by
the plaintiff includes certification of the action as a class action,
damages, rescission and costs.

The Company has retained special litigation counsel to assist in defense
of the claim and believes the allegations contained in the Complaint are
without merit. On March 25, 1999, the Company filed a motion to dismiss
the complaint for failure to state a cause of action. In October, 1999,
the United States District Court granted the Company's motion in part and
denied it in part.

On November 8, 2000, Plaintiff's Motion for Class Certification was
dismissed by the court and Plaintiff did not appeal that denial.
Subsequently, the Company and Plaintiff reached agreement on the terms of
a settlement of the action. A formal settlement agreement, including a
dismissal of the lawsuit with prejudice, is in the process of being

FOREST SERVICE: Settles with Promise to Break Sexual Harassment Pattern
The U.S. Forest Service has settled a class action lawsuit with thousands
of current and former female workers by agreeing to break a pattern of
sexual harassment within the agency.

Agency spokesman Matt Mathes said the Forest Service agreed with the
terms of the settlement and will fully abide by them. "We think it's a
fair settlement, and we think it's going to take care of some problems
that were brought to our attention," Mathes told FEDHR.

In 1995, Lesa Donnelly and Ginelle O'Connor filed a lawsuit against the
agency alleging "a pattern and practice" of sexual harassment and
retaliation in Region 5 of the Forest Service, which includes the Pacific
Southwest and all of California. In 1997, the complaint expanded into a
class action lawsuit covering all past and current female employees of
Region 5 since Feb. 1, 1994.

The U.S. District Court for the Northern District of California has
scheduled a fairness hearing on Feb. 2, 2001 to consider the terms of the
settlement. If finalized, the settlement would affect about 6,000 female
workers in the region, Mathes said.

The tentative terms of the settlement require the Forest Service to:

* Eliminate sexual harassment and the hostile environment against women.

* Implement a zero tolerance policy against the sexual harassment of

* Ensure that persons committing or contributing to sexual harassment
   are held accountable for their actions.

* Eliminate reprisal against those who exercise their rights to complain
   about sexual harassment.

* Ensure that issues regarding sexual harassment are addressed and
   resolved in a timely and effective manner.

* Provide finality to the resolution of all claims asserted in this

Region 5 officials would also be required to keep semi-annual reports on
the effectiveness of their efforts and create a federal women's program
position. The duties of the new position have not been finalized.

A monitoring council will be established to oversee the agency's progress
and equal employment opportunity programs. A neutral mediator will chair
the council. Representatives chosen by the agency and members of the
lawsuit will make up the remaining seats.

The settlement also creates a task force to monitor the agency's
mentoring program. The task force will report to the council proposals
for ensuring that members of the lawsuit "are provided appropriate
mentoring, including assistance with respect to issues relating to sexual

In addition, the agency is required to form a task force to find ways to
reward all workers "who perform exceptionally in the civil rights
components of their duties." The task force will also help the agency
consider the civil rights performance records of employees seeking
promotion or advancement, the settlement said.

Although the settlement doesn't require the Forest Service to pay the
employees monetary damages, it does require the agency to set aside
100,000 per year for scholarships. The scholarships will be available to
men and women, the settlement said.

Forest Service officials also agreed to host an annual women's
conference, open to all Region 5 female workers, according to the

Mathes said the parties mutually agreed to the settlement terms. "We
should absolutely meet these goals," he said. "It will be a problem if we

The employees' attorneys, Brad Yamauchi and Jack Lee, of Minami, Lew &
Tamaki in San Francisco, said their clients were pleased with the
settlement. (Federal Human Resources Week, December 11, 2000)

FRITZ COMPANIES: Sp Ct Grants Review in Case over "Not to Sell" Damages
Greenfield v. Fritz Companies, Inc.

Supreme Court Case No. S091297

Case Below: A086982; Cal.Ct.App., 1st Dist., Div. 4; 82 Cal.App.4th 741,
98 Cal.Rptr.2d 530, 00 C.D.O.S. 6342

Petition filed: September 7, 2000

Review granted: November 22, 2000

Justices voting for review: Baxter, Brown, George, Werdegar

Procedure: Petition for review after affirmance in part and reversal in
part of judgment.

Question presented: Should the tort of common law fraud, including
negligent misrepresentation, be deemed to permit suits by those who claim
that alleged misstatements by a corporation, its officers, and/or its
directors induced the plaintiffs not to sell their stock in the


Harvey Greenfield filed a putative class action against Fritz Companies,
Inc. on behalf of Fritz's shareholders. Greenfield alleged that Fritz and
several officers omitted material information about the company's
financial prospects from a document provided to the shareholders. A
couple of months after issuing this document, Fritz dramatically revised
downward its revenues and earnings, causing the value of the common stock
to plummet. Greenfield sought damages for the reduction in the stock's

Greenfield's causes of action included fraud and negligent
misrepresentation. In his complaint, Greenfield alleged with regard to
both these causes that the shareholders relied on the document provided
by Fritz in determining whether to continue to hold stock between the
issuance of the document and Fritz's downward revision of the

Fritz demurred to the complaint, arguing that Greenfield failed to plead
with the requisite specificity facts constituting actual reliance, and
that California law does not recognize any claim on behalf of
shareholders who neither bought nor sold shares based upon any alleged
misstatement or omission. The trial court agreed with Fritz's first
argument and sustained the demurrer without leave to amend. Greenfield

The court of appeal reversed in part, affirmed in part and remanded,
holding that the complaint alleged sufficient facts to meet the
requirements for pleading fraud.

The court noted that Greenfield pleaded how the misrepresentations were
made, referring to a statement sent by Fritz to shareholders pertaining
to its revenue, net income and earnings per share for the preceding
quarter. He also pleaded as to when the misrepresentations were made,
through allegations as to a statement which was received by the
shareholders on or about a specific date. The court also noted that these
allegations also answered the where, to whom and by what means
requirements for pleading fraud.

Further, Greenfield even satisfied the additional requirement for
corporate defendants by identifying the individuals who made the
misrepresentations on the corporation's behalf. The court found that this
was enough to satisfy the reliance element required for fraud and
negligent misrepresentation causes of action.

The court also found that two additional factors supported its finding
that the pleadings were adequate. First, Fritz and its officers had at
all times possessed greater knowledge of the corporation's financial
affairs. Second, the Fritz officers were fiduciaries to shareholders such
as Greenfield. The court stated that these factors supported relaxing the
strict rule requiring specific pleadings of fraud.

The court additionally found that the allegations were adequate to show
causation. The court noted that Greenfield alleged that the
misrepresentations induced him not to sell his stock and that he
otherwise would have done so, and that he suffered damage because of the
wrongfully induced decision to hold Fritz stock.

The court opined that California should join other states in recognizing
a cause of action by a shareholder alleging that the company's
misrepresentations wrongfully induced him to continue holding shares of
stock that he otherwise would have sold, but for the misrepresentations.
The court noted that induced forbearance may be the basis for tort
liability and stated that this principle should be applied to
Greenfield's situation.

The court also noted that state and federal securities law do not
militate against recognizing this cause of action. In fact, the court
noted that securities law does not provide a remedy for the
misrepresentations Greenfield alleged.

Counsel for petitioner Fritz Companies, Inc.: William Alderman, Orrick,
Herrington & Sutcliffe, 400 Sansome St., San Francisco, CA 94111-3143,

Counsel for respondent Harvey Greenfield: Michael Braun, Stull, Stull &
Brody, 10940 Wilshire Blvd., Ste. 2300, Los Angeles, CA 90024 (California
Supreme Court Service, December 1, 2000)

GIULIANI: 2nd Cir Affirms Denial of Injunctive Relief in AIDS ADA Case
The evidence was insufficient for a federal District Court in New York to
determine whether injunctive relief was warranted in a case involving
allegations that the City of New York failed to reasonably accommodate
plaintiffs with disabilities in need of emergency housing, the 2nd U.S.
Circuit Court of Appeals ruled. Wright v. Giuliani, 19 NDLR 123 (2nd Cir.
2000) (No. 00-7853).


Five homeless individuals with HIV or AIDS filed suit on behalf of
themselves and a putative class alleging that a city and various city
officials violated Section 504 of the Rehabilitation Act and Title II of
the ADA by failing to reasonably accommodate their disabilities.
Specifically, the plaintiffs maintained that they were deprived of
meaningful access to emergency housing. The District Court denied the
plaintiffs' request for preliminary injunctive relief. The plaintiffs

                    Precise relief sought

While an order granting a permanent injunction in another case might have
the effect of providing the relief sought by the plaintiffs, the appeal
was not moot because the relief granted in the other case did not provide
the precise relief sought by the plaintiffs. However, the record was
insufficient to conclude that the District Court abused its discretion in
denying the request for injunctive relief since the District Court was
unable to determine whether the remedial measures sought by the
plaintiffs constituted reasonable accommodations or substantive benefits.
Therefore, the court affirmed the judgment of the District Court denying
the plaintiffs' request for injunctive relief. (Disability Compliance
Bulletin, December 15, 2000)

HMOs: Aetna Announces Actions for Profitability and Competitiveness
Aetna (AET: NYSE) announced on December 18 a series of actions intended
to strengthen the company's competitiveness, improve its profitability
and concentrate its resources on its core mission as a health care and
related benefits company.

"Last week, we completed the sale of our financial services and
international businesses," Aetna Chairman William H. Donaldson said. "Now
that we are solely focused on health care and related benefits, we are
taking a number of initiatives designed to improve customer service,
strengthen the profitability of Aetna and increase our competitiveness.
These actions better align our business structure with the needs of all
our constituents and should help get our costs more in line with our new
business focus."

The initiatives include:

    -- The elimination of targeted unprofitable membership and a
reduction in associated expenses, which are expected to help improve the
company's overall profitability. As a result, membership levels in 2001
are anticipated to decline due to Medicare market exits, commercial HMO
product withdrawals in selected markets and Prudential HealthCare
membership attrition.

    -- The reorganization of the sales force to place greater emphasis on
higher-potential middle-market business and to serve more efficiently
smaller cases, while enhancing the company's customer relationships and
important national accounts franchise, and strengthening relationships
with brokers and consultants. The resulting sales organization is
designed to be smaller but more effective at both selling and retaining

    -- Overall improvements in the efficiency of claim and member
services processes to reduce administrative hassles and "get it right the
first time." The changes are designed to result in a claims payment
system that is more effective, in terms of both costs and results.

    -- The continued integration of the Prudential HealthCare business to
Aetna products. Among other changes are the previously announced closing
of the Jacksonville, Fla., data center and the transfer of these
functions to other company data centers.

    -- The integration and elimination of duplicate corporate and health
business staff functions related to Aetna's new status as a stand-alone
health company.

    -- Significant price increases on health plan business renewing
January 1, 2001, coupled with a strong focus on disciplined underwriting,
with the intent of improving medical cost ratios.

    -- Reforms to our medical cost management practices that are designed
to eliminate unnecessary hassles and ineffective requirements, while
strengthening responsible and effective practices. This should help hold
medical cost increases to appropriate levels.

"These targeted actions are about running our business right, not just
about belt tightening," Aetna President and CEO John W. Rowe, M.D., said.
"They flow not only from lower membership levels and the sale of certain
businesses, but also from re-engineering decisions that will make the
company more disciplined and efficient. These actions not only reflect
today's need for a more streamlined infrastructure, but our commitment to
restoring Aetna as a major competitive force, with industry-leading
financial performance and a heightened ability to serve our customers

The cost-saving initiatives are expected to result in approximately $200
million in pretax savings in 2001. The run rate of these expense savings
is projected to be approximately $300 million pretax in 2002. Aetna plans
to reduce its work force by approximately 5,000 positions out of the
current employee base of approximately 40,000. More than half of these
reductions will be achieved through attrition, while the remainder, or
approximately 2,400, will be achieved through targeted job eliminations.

"As we implement our plan, we are committed to fulfilling our promise to
rely as much as practicable on attrition and to be as sensitive as
possible to the needs of affected employees, providing job elimination
benefits to eligible employees," Dr. Rowe said.

Related to these restructuring initiatives, Aetna will record a charge of
approximately $100 million after tax in the fourth quarter 2000.

                    Other Fourth Quarter 2000 Charges

Aetna also will record in the fourth quarter an approximately $235
million after-tax charge related to the impairment of goodwill primarily
associated with the previously announced exiting of certain Medicare
markets as of January 1, 2001. In addition, a charge of approximately $35
million after tax resulting from other costs related to the spinoff of
Aetna will be recorded in continuing operations.

In addition, results of discontinued operations will include a charge of
approximately $195 million after tax to be recorded in the fourth quarter
related to transaction costs from the sale of Aetna Financial Services
and Aetna International to ING Groep N.V.

ITURF INC: Intends to Defend Vigorously Securities Suits in New York
On november 20, 2000, dELia*s Inc. and Iturf Inc. Completed a merger.

In 1999, two separate purported securities class action lawsuits were
filed against dELiA*s Inc. and certain of its officers and directors, and
one former officer of a subsidiary. The original complaints were filed in
Federal District Court for the Southern District of New York by Allain
Roy on June 1, 1999 and by Lorraine Padgett on June 3, 1999. The suits
were consolidated into a single class action and an amended and
consolidated complaint was filed on March 22, 2000.

The complaint in this lawsuit purports to be a class action on behalf of
the purchasers of the company’s securities during the period January 20,
1998 through September 10, 1998. The complaint generally alleges that the
defendants violated Section 10(b) of the Securities Exchange Act of 1934
and Rule 10b-5 thereunder by making material misstatements and by failing
to disclose certain allegedly material information regarding trends in
our business. The complaint also alleges that the individual defendants
are liable for those violations under Section 20(a) of the Securities
Exchange Act. The complaint seeks unspecified damages, attorneys' and
experts' fees and costs, and such other relief as the court deems proper.

On April 14, 2000, dELiA*s Inc. and the other named defendants filed a
motion to dismiss the lawsuit. On May 12, 2000, counsel for the
plaintiffs filed a memo in response to our motion and on May 26, 2000,
the company filed a reply to that response. The company intends to
vigorously defend against this action.

ITURF INC: Stockholders’ Suits in DE Seek to Enjoin Merger
Between August 17 and August 25, 2000, three purported class action
complaints on behalf of iTurf stockholders were filed in Delaware
Chancery Court against iTurf, dELiA*s Inc. and each of iTurf's directors.
All three complaints make virtually identical claims, alleging that
dELiA*s and the members of the iTurf board of directors have breached
their fiduciary duties to iTurf and iTurf's public stockholders and that
the exchange ratio was unfair to iTurf's public stockholders. These
complaints seek class certification and other equitable and monetary
relief, including enjoining the merger or awarding damages.

KADOSH: Release Signed By Patient Not a Bar to Dental Malpractice Action
Plaintiff appeals from an order of the Appellate Term of the Supreme
Court, First Department, entered July 13, 1999, which reversed an order
of the Civil Court, New York County (Martin Shulman, J.), entered on or
about July 1, 1998 and granted defendant's motion to dismiss the

Marc A. Rapaport, attorney for plaintiff-appellant, Elliot A.
Cristantello, of counsel (Leonard A. Robusto, on the brief, Voute,
Lohrfink, Magro & Collins, LLP, attorneys) for defendant-respondent.

SAXE, J. - On this appeal, the court is asked to determine whether a
release signed by the plaintiff is a bar to this dental malpractice

The facts as alleged by the plaintiff are as follows. He had been in this
country some months when he began experiencing pain in the left side of
his mouth. Having seen the defendant's advertisement in a local
newspaper, the plaintiff scheduled an appointment with him. The defendant
recommended that if the pain continued, a molar on the lower left side of
the plaintiff's mouth should be extracted; the defendant indicated that
the extraction should take approximately a half-hour. A few weeks later,
on April 11, 1995, the defendant spent 2 to 2 1/2 hours extracting the
tooth, during which time the plaintiff needed about three short breaks to
calm down. According to the plaintiff's deposition testimony, after the
first 20 minutes of the procedure, "all hell broke loose." The defendant
started to use brutal force, and the more brutal the force, the more
explosive the pain became. Ultimately, the defendant used what appeared
to be a chisel and hammer to remove the tooth. The plaintiff left the
defendant's office in excruciating pain, but was assured that the pain
and severe swelling he was experiencing were normal. Meanwhile, the
plaintiff was not able to fully open his mouth until about a month later,
at which time he found that the left side of his tongue and left inner
side of his face were completely numb. The defendant continued to assure
the plaintiff that this condition should end within about 3 months.

When the numbness persisted, the plaintiff sought the advice of other
oral surgeons who referred him to a specialist, Dr. Salvatore Ruggiero,
the Program Director at the Long Island Jewish Hospital Department of
Dental Medicine, Division of Oral and Maxillofacial Surgery. Based on his
examination of the plaintiff on Aug. 17, 1995, Dr. Ruggiero concluded
that the plaintiff suffered from "severe axonotmesis," a nerve injury
characterized by an intact nerve trunk with damage of varying degrees,
involving numbness that can last for several months. It was Dr.
Ruggiero's position that because four months had passed since the time of
the injury, which period he considered the "outer limits of the window
for surgical intervention," he "strongly [recommended] that [plaintiff]
undergo surgical exploration with the intent to repair the lingual
nerve." The plaintiff was informed that the surgery would cost $ 10,000,
a sum he did not have.

Believing the defendant to be responsible for his condition, and
therefore to have an obligation to pay for the necessary surgery, the
plaintiff made numerous attempts to reach the defendant, but was
unsuccessful. Finally, a friend of the plaintiff succeeded in speaking
with the defendant, who then agreed to pay the cost of the surgery, on
condition that the plaintiff sign a release.

On Aug. 28, 1995, the plaintiff signed the following release, which was
prepared by his immigration lawyer:

Dear Dr. Kadosh:

    This shall confirm my agreement with you regarding the following:

    You shall be responsible and promptly pay any and all costs relating
to dental work to be performed on my mouth and teeth by Dr. Salvatore
Ruggiero as a result of the work you performed April 11, 1995.

    If you shall promptly pay all costs relating to the above-referenced
work, I hereby release you from any claims which I may have in connection
with the work you performed on me on April 11, 1995.

The defendant then negotiated a reduction in the cost of the procedure
from $ 10,000 to $ 3,000, by eliminating the proposed hospital stay.

The surgery was not successful. Rather, Dr. Ruggiero discovered that the
lingual nerve could not be repaired because it had been completely
severed during the extraction. Thus, Dr. Ruggiero changed the plaintiff's
diagnosis from axonotmesis to neurotmesis, a permanent nerve injury. As a
result, it is alleged, this now 30-year-old plaintiff is saddled with the
permanent loss of sensation on the left side of his mouth and tongue,
affecting his ability to taste and to speak, as well as his appearance,
with resulting emotional and psychological ramifications as well. This
lawsuit for dental malpractice ensued.

The defendant's motion for summary judgment was based upon the existence
of the release. The Civil Court, to which this action was transferred
from the Supreme Court, denied the defendant's motion, concluding that
the plaintiff might have a viable claim to set aside the release based on
mutual mistake. Appellate Term reversed and dismissed the complaint,
holding that the evidence offered did not establish mutual mistake.

                 The Court Reinstated the Complaint

The Appellate Term of the Supreme Court reversed and reinstated the
complaint, holding that the plaintiff's evidence was sufficient to create
a question of fact, precluding summary judgment dismissal.

The Court is aware that a release "is a jural act of high significance
without which the settlement of disputes would be rendered all but
impossible" (Mangini v. McClurg, 24 NY2d 556, 563). The Court says it is
well established that further litigation following a release should not
be permitted "except under circumstances and under rules which would
render any other result a grave injustice" (id.). "It is for this reason
that the traditional bases for setting aside written agreements, namely,
duress, illegality, fraud, or mutual mistake, must be established or else
the release stands. In the instance of mutual mistake, the burden of
persuasion is on the one who would set the release aside * * * " (id.;
see also, Touloumis v. Chalem, 156 AD2d 230).

In these circumstances, enforcing the release would indeed represent "a
grave injustice." In the mutual misapprehension that what was needed to
repair the damage caused by the defendant was surgery that would cost $
10,000, the plaintiff agreed to a deal by which the defendant would pay
for the surgery, and the plaintiff, restored to something approximating
his former health, would give up any claims against the defendant. If
there had been any contemplated possibility that the injury was of a type
that surgery could not repair and correct, there is no question that such
deal would not have been considered.

The question here comes down to whether the information known to both
parties at the time of the release precludes the possibility of mutual
mistake, the Court says.

The Mangini case drew a distinction between "[a] mistaken belief as to
the nonexistence of presently existing injury" and a mistake "as to the
consequence, future course, or sequelae of a known injury" (Mangini,
supra at 564). In Mangini, the infant plaintiff was injured in an
automobile accident and subsequently complained of lower back and left
hip pain. All the physicians who examined the plaintiff prior to the
settlement concluded that there had been no injury to the hip or femur,
and that the pain was a symptom of lower back injury and nerve root
irritation. However, within six months of signing a release, the
plaintiff was diagnosed with a severe hip injury that was causally linked
to the accident.

The court in Mangini set aside the release, reasoning that the settlement
had been based on the parties' mistaken belief that the only injury
sustained by the plaintiff arising out of the accident was her back
injury, as distinct from the separate hip injury that was subsequently
diagnosed. As such, the case was said to "involve[] two distinct injuries
flowing from the same accident, one known and one unknown" (id. at 568).

The Appellate Term of the Supreme Court notes it is inaccurate to
describe what the plaintiff experienced here as merely the "consequence,
future course, or sequelae of a known injury." Although the plaintiff did
not suffer injuries at two distinct sites, the injury he was actually
suffering from was substantially different from the injury that the
parties believed existed, and not merely a sequela of a known injury.
Both parties believed the plaintiff to be suffering from damage to an
intact nerve, a treatable injury from which the attendant pain was
expected to dissipate; the real injury, unknown to both parties at the
time of the release, was a completely severed nerve, a condition
untreatable and irreversible. The nature of the presumed injury is so
different from that of the actual injury, it is not merely a matter of
degree or severity (greater pain or for a longer period). Although the
parties knew the location of the damage, they misunderstood the nature of
the damage. This differentiates the present matter from those relied upon
by the defendant.

In Calavano v. New York City Health & Hospitals Corp. (246 AD2d 317),
relied upon by the defendant, the plaintiff was aware when he signed the
release of the nature of his injury, a herniated disk at L4-L5, but was
simply unaware that he would afterward experience severe pain from the
injury, requiring emergency surgery. In contrast, in cases where the
plaintiffs have been unaware of the exact nature of their injuries at the
time they signed releases, those releases have been set aside. For
instance, in Curry v. Episcopal Health Svcs. (248 AD2d 662), the
plaintiff knew that her back was injured, but not that she had suffered
an annular tear and other serious injuries. And, in Carola v. NKO
Contracting Corp. (205 AD2d 931), the release was set aside where the
plaintiff was aware of back pain at the time of the release, but unaware
of three herniated discs (but see, Finklea v. Heim, 262 AD2d 1056
[release not set aside where an MRI showed the existence of a mid-line
disc herniation after plaintiff settled personal injury action]).

The Court says it is clear from the previous analysis that the law does
not preclude the setting aside of a release wherever the plaintiff is
aware of the location or body part suffering the injury. Rather, if the
plaintiff can demonstrate that the injury was of a different nature than
that which both parties believed at the time of the release, a claim of
mutual mistake is made out. Here, the motion court correctly concluded
that the plaintiff's claim to set aside the release based upon mutual
mistake should not be dismissed.

There are also triable issues with respect to whether the release is void
as procured under duress or unconscionable circumstances. "Where fraud or
duress in the procurement of a release is alleged, a motion to dismiss
should be denied" ( Bloss v. Va'ad Harabonim of Riverdale, 203 AD2d 36,
37). In particular, "it is inequitable to allow a release to bar a claim
where, as here, it is alleged that the releasor had little time for
investigation or deliberation and that it was the result of overreaching
or unfair circumstances" (id. at 40). Here, the plaintiff's evidence
supports a finding that as a practical matter, the defendant compelled
him to execute the release by (1) representing, incorrectly, that his
numbness was a very common, temporary side effect of an extraction, and
(2) exploiting the plaintiff's belief that he was already at the end of
the limited "window" period in which corrective surgery was possible. The
"choice" the defendant presented to the plaintiff was to continue to
suffer indefinitely the pain directly caused by the defendant's tooth
extraction technique, or to accept the defendant's offer to immediately
pay for the surgery that they both believed would repair the damage and
end the pain. For the defendant to take advantage of the situation to
extract such a concession from the plaintiff may well be found to be
"overreaching or unfair circumstances," making it inequitable to allow
the release to bar a claim (see, Bloss v. Va'ad Harabonim of Riverdale,
203 AD2d 36, 40).

The Court finds that the allegations are sufficient to support a possible
finding that the release signed by the plaintiff "was obtained under
circumstances which indicate unfairness, overreaching and
unconscionability" (see, Rivera v. Vickers, 72 AD2d 807; Grenan v. New
York, New Haven & Hartford R.R. Co., 224 App Div 744 ["the exacting of a
release from plaintiff under the circumstances was unconscionable upon
the part of the defendant"]). Conduct that amounts to overreaching on the
part of a professional in an attempt to avoid liability for malpractice
is particularly egregious, and where it is shown, that professional
should not be permitted to "reap the benefits of his own misconduct"
(see, Simcuski v. Saeli, 44 NY2d 442, 454).

Finally, the timing and circumstances of the release's execution, as well
as the consideration it recites, also give the plaintiff a viable basis
to challenge defendant's reliance upon the release as a complete defense
(see, Best v. Yutaka, 90 NY2d 833).

Accordingly, the order of the Appellate Term of the Supreme Court, First
Department, entered July 13, 1999, which reversed an order of the Civil
Court, New York County (Martin Shulman, J.), entered on or about July 1,
1998 and granted the defendant's motion for summary judgment dismissing
the complaint, should be reversed, on the law, without costs, the motion
denied and the complaint reinstated. (New York Law Journal, December 7,

LIFESCAN INC: Pleads Guilty for Home Blood Glucose Monitors for Diabetes
In lawsuit Filed By Milberg Weiss Bershad Hynes & Lerach; Johnson &
Johnson Subsidiary, Lifescan, Pleads Guilty to Federal Criminal Charges
and Is Ordered to Pay $60 Million in Restitution and Criminal Fine To
Federal Government; Massive Class Action Lawsuit Seeks Justice For More
Than 400,000 Diabetics

LifeScan, Inc., a Johnson & Johnson subsidiary and the world's largest
manufacturer of home blood glucose monitors for diabetes, on December 15
pleaded guilty to criminal conduct and agreed to pay the federal
government $60 million in restitution and criminal fines following a
two-year grand jury investigation. The plea resulted from the company's
decision to market the devices despite two defects that its own safety
adviser warned might have "catastrophic" consequences. Of that, $30.6
million will be paid to the federal government to cover Medicare/Medicaid
costs spent to purchase the defective products.

Johnson & Johnson and LifeScan, still face an ongoing class-action
lawsuit brought on behalf of more than 400,000 American diabetics, many
of them elderly, who purchased the defective monitors and the test strips
that are used with the monitors. The suit -- pending in federal court in
San Jose -- is seeking several hundred million dollars in damages and
restitution, and also asks the court to order LifeScan and Johnson &
Johnson to disgorge profits the companies allegedly reaped through
"untrue and misleading" advertising and fraud perpetrated on consumers.

"Seldom has a company dealing in medical supplies so grossly placed
dollars ahead of lives," declared Dennis Stewart of Milberg Weiss Bershad
Hynes & Lerach, a lead attorney for the plaintiffs in the class-action

On September 6, 2000, United States District Court Judge Jeremy Fogel
granted the plaintiffs' motion for class certification, stating that
whether the SureStep is defective and LifeScan and Johnson & Johnson made
misrepresentations to the public are questions common to every consumer
who purchased an affected meter and strips, thus rendering the
consolidated civil actions appropriate for class action treatment. At the
same time, Fogel rejected LifeScan and Johnson & Johnson's attempts to
dismiss plaintiff's claims under RICO (Racketeer Influenced and Corrupt
Organizations) before trial. On November 15, the Ninth Circuit Court of
Appeals in San Francisco rejected Lifescan's attempts to appeal the class

Attorneys for the class will soon be notifying class members to inform
them about the details of the massive class action.

LifeScan introduced its blood glucose meter and test strips, known as the
SureStep system, in 1996. LifeScan marketed the SureStep system as
"easier to use" and "sure at every step," and claimed that it was
designed specifically for those with failing eyesight or shaky or numb
hands, symptoms common among diabetics.

However, according to corporate documents seized in a 1998 government
raid and obtained in the civil case, the readout on the meter at times
failed to display the "HI" alert for patients in need of immediate
lowering of glucose levels, leading to a risk of diabetic coma, renal
failure or toxic shock.

Another design defect in the test strips used with the meters also caused
false readings and posed a similar risk, according to a second memo. The
SureStep meter is supposed to warn patients when a strip is inserted
incorrectly. Instead, if a diabetic did not insert a test strip
completely the meter would indicate a falsely low glucose level. Taking
measures to increase low blood glucose when in fact levels are very high
can have catastrophic effects. Company supervisors were warned that
incorrect readings had "the potential to create a life-threatening field
failure ...[a patient] could go into katacidosis -- a critical medical
emergency." At least three diabetics may have died as a result of the
faulty readings from the SureStep meter.

Documents seized by federal agents indicate that LifeScan's management
chose to ignore an internal recommendation in June of 1997 that it recall
the meters. The company's Director of Clinical Analysis, a medical
doctor, urged LifeScan's top management to recall the product, describing
the readout flaw as "a catastrophic failure that could lead to serious
injury." One memo quotes him as saying that "if lawyers got hold of this,
LifeScan would be in serious trouble."

Although LifeScan sent out a letter in June of 1997 notifying physicians
of a possible problem with the SureStep, the letter claimed no danger
existed -- "this situation does not constitute a risk to health, but is
one of labeling clarity."

Other internal documents suggest that LifeScan continued to attempt to
minimize its responsibility even after it began notifying customers of
the defects. Operators in LifeScan's customer service department who
answered complaints about the defective devices were instructed "not to
admit or agree that the customer's LifeScan product is at fault ... [or
make any statement] that may be interpreted as an admission of guilt,"
according to company documents.

"It would be charitable to call this an attempted cover-up," said James
McManis of McManis, Faulkner & Morgan, another lead attorney for the
plaintiffs in the class action. "In fact, it was a blatant example of
corporate fraud, deception and greed. Unfortunately, this is all too

Not until May of 1998, two months after 40 federal agents confiscated
more than half a million pages of records from LifeScan's Milipitas, Ca.,
headquarters, was there a concerted effort to remove the devices from the
marketplace. Even then, the U.S. Food and Drug Administration (FDA)
distributed a statement that took issue with the company's approach.
"LifeScan has characterized this as a product replacement program," the
statement said. "However, the FDA is concerned that some diabetics,
wholesalers and distributors who purchased these meters may be misled and
not realize this product replacement is for a potentially serious

Diabetes is a chronic, incurable disease affecting an estimated 15.7
million people in the U.S. About 798,000 new cases of the disease are
diagnosed each year. Diabetics who are dependent on insulin test their
blood glucose levels up to four times a day, usually with personal
monitors, in order to control the effects of the disease.

Source: Milberg Weiss Bershand Hynes & Lerach

Contact: Elizabeth Buchanan, 202-822-5200, ext. 234, or Charles Longer,
202-822-5200, ext. 223, both of Fenton Communications, for Milberg Weiss
Bershand Hynes & Lerach

LOUISIANA: Fishers Nab $48M for Ruined Oyster Beds; State to lose $700M
After a two-week trial, a Plaquemines Parish jury awarded $48 million to
five plaintiffs who claim that sediment and freshwater from a 1991
wetlands project ruined 3,049 acres of Breton Sound oyster beds and
rendered their leases worthless.

If the judgment against the state is upheld, court officials said, it
could translate into a total of $700 million plus interest and attorneys'
fees for the remaining 125 claimants in the class-action suit.

The suit claims that a total of 35,000 acres of Breton Sound oyster beds
were damaged.

But the Louisiana Department of Natural Resources insists the Caernarvon
Freshwater Diversion Project did not harm productive oyster-fishing areas
and contends there is evidence of oyster production in southern Breton

State officials also have said that leases at risk from the project were
identified before construction began and were not renewed.

The suit was filed in 1994 by oyster fishers from Plaquemines, St.
Bernard and Jefferson parishes. They are represented by Michael St.
Martin and Carolyn McNabb of Houma, Wendell Gauthier of New Orleans and
Phillip Cossich of Belle Chasse.

More than 144 billion gallons of water and silt per year are pumped into
the affected area by the freshwater-diversion project, St. Martin said.

The diversion project allows Mississippi River water and sediment to
enter Breton Sound east of the river. The diversion is designed to reduce
saltwater intrusion and funnel sediment into the sound to create new
wetlands. It's also supposed to increase oyster production on the sound's
eastern and southern shores.

Oysters can live only in water with a specific amount of salt. When the
water becomes too fresh, natural predators of the oysters increase, or
the oysters die. Sediment also can suffocate oysters as it settles onto
their reefs.

The five named plaintiffs, who are considered representatives of
different classes of plaintiffs in the suit, all are from Plaquemines
Parish. The jury found that four of the five had all of their acres
damaged and awarded them $ 21,345 an acre in damages.

Court officials expect that the state will ask District Judge William Roe
to reduce the verdict.

The verdict was as follows:

   -- Kenneth Fox, who the jury found had 948 acres of oyster leases
damaged, was awarded $20,235,060.

   -- Clarence Duplessis, who had 255 acres damaged, was awarded

   -- Nick Skansi, who had 261 acres damaged, was awarded $5,571,045.

   -- Fox Oyster Co., which had 759 acres of oyster leases damaged, was
awarded $16,200,855.

   -- Albert J. Avenal Jr. claimed he had 948 acres of leases damaged by
the diversion. However, the jury found that only 826 acres were harmed
and awarded him only $1,000 per acre.

St. Martin said the jury might have awarded Avenal less because it
thought he was trying to capitalize on the situation. Avenal bought four
of his leases the same day the lawsuit was filed. St. Martin said the
date was "totally coincidental." He said Avenal knew he would suffer
losses on leases he already held, so he bought leases farther from the
diversion, but they ultimately were damaged as well. (The Times-Picayune
(New Orleans), December 16, 2000)

MORTGAGE INSURANCE: MGIC, PMI and United Guaranty Settle RESPA Cases
MGIC Investment Corporation, the parent of Mortgage Guaranty Insurance
Corporation (NYSE: MTG) (MGIC), announced that MGIC, PMI Mortgage
Insurance Company and United Guaranty Residential Insurance Company, have
entered into an agreement with the plaintiffs to settle separate lawsuits
brought as nationwide class actions against each of the companies.

The actions allege that the defendants violated the Real Estate
Settlement Procedures Act of 1974 (RESPA) through the provision of
various products, including agency pool insurance, captive mortgage
reinsurance, and contract underwriting, that were not properly priced, in
exchange for the referral of mortgage insurance. In the settlement
agreement, each defendant denies that it violated RESPA.

Under the agreement, MGIC will pay up to an estimated $17.6 million to
certain borrowers whose lenders obtained private mortgage insurance from
MGIC during the period of May 19, 1997, through November 30, 2000. The
per-borrower payment is estimated at $38.60. The total amount to be paid
to borrowers by the three companies is up to $46.022 million.

MGIC Investment said that during the current quarter it would record a
pre-tax charge of $23.2 million (which is equal to $0.14 per share on an
after-tax basis) to cover the payments to borrowers under the settlement,
attorneys fees and costs, and expenses of administering the settlement.

The settlement includes an injunction that specifies the basis on which
agency pool insurance, captive mortgage reinsurance, and contract
underwriting may be provided by the defendants in compliance with RESPA.

The Federal District Court for the Southern District of Georgia, where
the cases are pending, is being asked to give preliminary approval to the
settlement. If preliminary approval is received, MGIC anticipates that a
hearing to give final approval to the settlement will be held in the
latter part of the first quarter of 2001. Payments to borrowers will be
made following final approval of the settlement.

Commenting on the settlement, Curt S. Culver, President and Chief
Executive Officer of MGIC Investment and MGIC, said, "The good news in
the settlement is that we can put this case behind us in a way that sets
clear standards for practices by which we and other companies in our
industry routinely conduct business. We now can avoid the distraction
that this litigation has entailed and devote all of our efforts to serve
our customers and make homeownership easier to achieve for more

                              About MGIC

Mortgage Guaranty Insurance Corporation (MGIC), the principal subsidiary
of MGIC Investment Corporation, is a provider of private mortgage
insurance with $157.0 billion primary insurance in force covering 1.43
million mortgages as of September 30, 2000. MGIC serves over 9,000
lenders representing more than 22,000 locations nationwide and in Puerto
Rico, helping families achieve homeownership sooner by making affordable
low-down- payment mortgages a reality.

PARATRANSIT SERVICES: CA Suit Alleges County Authority of Denial
A federal lawsuit filed in California last month claims that a county
transportation authority is violating Title II of the ADA and Section 504
by failing to provide adequate paratransit services to people with

Lawyers from the Western Law Center for Disability Rights, the American
Civil Liberties Union Foundation of Southern California and Protection
and Advocacy Inc., all in Los Angeles, teamed up to file the class action
complaint on behalf of six individuals with disabilities: Nadine Flores,
Stefanie Michihara, Maria Vasquez, Johnny Bolagh, Tamara Muhammad and
Mary Ann Jones. The defendants are the Los Angeles County Metropolitan
Transportation Authority and Access Services Inc., which acts as the
authority's regional paratransit service provider.

The ADA generally requires operators of fixed-route systems to use
paratransit as a way to provide a comparable level of service for people
with disabilities. The plaintiffs' lawyers say that the defendants have
failed to meet this requirement in a number of ways. They allege that
"untimely pickups are the norm," adding that paratransit drivers often
arrive more than 30 minutes after a scheduled pickup time. In addition,
the complaint says, every day approximately 60 people are left stranded
by a complete failure of the defendants to make scheduled pickups.

The plaintiffs also assert that the defendants have refused to permit
riders to schedule service more than 24 hours in advance, a practice that
they say is barred by ADA regulations.

"Public transportation is of crucial importance to people with
disabilities, who often cannot afford cars and whose disabilities may
prevent them from driving," said Eve Hill, executive director at the
Western Law Center for Disability Rights. "Without it, it is nearly
impossible for riders with disabilities to successfully hold jobs, attend
school, and have full social lives."

The complaint refers to what it states are Access Service's own numbers
to assert that a comparable level of service is not being provided. The
paratransit system is designed to be on time 90 percent of the time, it
says, whereas the transportation authority's regular bus service has an
on-time rate of more than 99 percent.

In addition to claims raised under Title II of the ADA and Section 504,
the complaint asserts claims under 42 U.S.C. 1983 and California law. It
seeks declaratory and injunctive relief as well as attorney's fees,
expenses and costs.

Contact: Eve Hill, Western Law Center for Disability Rights, Los Angeles,
(213) 736-1031; Mark D. Rosenbaum, ACLU Foundation of Southern
California, Los Angeles, (213) 977-9500; Guy Leemhuis, Protection and
Advocacy Inc., Los Angeles, (213) 427-8747.

Source: Disability Compliance Bulletin, December 15, 2000

PHILIPS INTERNATIONAL: Trust Can't Show Liquidation Is to Save CEO Tax
Plaintiff Trust brought suit against defendants, a realty corporation and
the members of its board of directors. Plaintiff's complaint alleged that
defendant corporation solicited shareholder approval for a plan of
liquidation by means of a false and misleading proxy statement. Plaintiff
has now moved to preliminarily enjoin defendant corporation from
proceeding with its plan of liquidation. Plaintiff's principal claim was
that the proxy failed to disclose that the motivation of defendant chief
executive officer, in structuring the liquidation was to protect his
financial interest. The court found that plaintiff had not proffered any
evidence showing that defendant corporation's decision to liquidate was
motivated by defendant officer's tax needs. After reviewing plaintiff's
other claims, the court denied the motion for a preliminary injunction.

Judge Cedarbaum

-Plaintiff Zemel Family Trust brings suit, purportedly as a class
representative, against Philips International Realty Corp. ("Philips")
and the members of its board of directors. Although Barry Zemel, trustee
of the Plaintiff trust, had only skimmed the proxy before the complaint
was filed, the complaint alleges that Philips has solicited shareholder
approval for a plan of liquidation by means of a false and misleading
proxy statement in violation of Section 14(a) of the Securities Exchange
Act of 1934 and its accompanying regulations. Plaintiff has moved
preliminarily to enjoin Philips from proceeding with its plan of
liquidation. On November 9, at the conclusion of the evidentiary hearing,
in an oral opinion in open court, I denied the motion from the bench and
said that this written opinion would follow to elaborate more fully the
reasons for the ruling.


Philips is a publicly held real estate investment trust ("REIT")
incorporated under the laws of Maryland. Its sole business is the
ownership of real estate, mostly shopping centers, and the management of
its properties. Philips was formed in late 1997 and completed an initial
public offering on May 8, 1998. Currently, approximately 80 percent of
its public shareholders are institutional investors.

The individual defendants are officers and directors of the company.
Philip Pilevsky is the founder, CEO, and Chairman of the Board of
Philips, as well as its largest single equity owner. Louis Petra is
President of Philips and a member of its board of directors. Sheila
Levine, Pilevsky's sister, is Chief Operating Officer of Philips and a
member of the board of directors. Brian Gallagher, Elise Jaffe, Robert
Grimes, Arnold Penner and A.F. Petrocelli are members of the board of

Philips is structured as an umbrella partnership REIT, or UPREIT. The
publicly held REIT is general partner of Philips International Realty,
L.P. (the "Operating Partnership"), through which it holds title and
operates its properties, and owns roughly 75 percent of the partnership
units in the Operating Partnership. The remaining 25 percent of the
partnership units is held by Pilevsky, members of his family and various
other individuals and entities (the "unitholders") who are limited
partners. The unitholders have no voting rights in Philips, but have the
option of converting their units into Philips common stock on a one to
one basis.

The company was formed, like most UPREITs, through contributions of
property by the limited partners in exchange for partnership units.
Pilevsky was the largest contributor and, as a result, owns the largest
number of units. Under federal tax law, Pilevsky and the other
unitholders did not recognize taxable gains on these exchanges. The units
of each limited partner have the same tax basis as the contributed
property. As a result, a unitholder who sells units or converts them into
common stock is likely to incur a substantial tax liability.

In late 1999, Philips' board of directors, with the help of its financial
advisor Prudential Securities Inc. ("Prudential"), began to review
"strategic alternatives" in light of the poor performance of Philips'
stock price. By March the board had finalized a plan of liquidation. The
plan consisted of four segments. In the first segment, Philips sold
several shopping center properties to Kimco, another REIT that deals in
similar types of retail properties, for just over $ 67 million (the
"Prior Kimco Transaction"). That transaction was completed in July 2000.

In the second segment, Philips will sell other shopping centers to Kimco
for $ 137 million (the "Kimco Transaction"). In the third segment,
Philips will exchange four shopping centers in Hialeah, Florida, with
Pilevsky and some of his family (the "Pilevsky Group") in return for the
redemption of their partnership units. In addition, the Pilevsky Group
will purchase redevelopment properties in Lake Worth, Florida, and at
86th Street and Third Avenue in New York City. In the fourth segment,
Philips will sell its remaining properties, all shopping centers anchored
by K-Mart stores, on the open market.

According to the Proxy, Philips shareholders will receive cash
distributions estimated at $ 18.25 per share following the liquidation.
The unitholders, at their option, will receive the same cash
distributions as the shareholders or exchange their units for comparable
partnership interests in Kimco.

After finalizing the plan of liquidation, Philips' board established a
Special Committee, consisting of outside directors Jaffe, Grimes, Penner
and Petrocelli, to review the Pilevsky Group transaction. The Board
retained Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
("Houlihan Lokey") to render an opinion as to the fairness of the
Pilevsky Group transaction and the plan of liquidation as a whole. The
Board also asked Prudential to opine on the fairness of the Kimco
transaction. The Special Committee met twice and, on April 17,
recommended that the plan of liquidation be adopted. The full board
approved the plan of liquidation shortly thereafter.

On April 17, 2000, Philips publicly announced its plan to liquidate the
company. On April 19, 2000, Plaintiff Zemel Family Trust purchased 2,000
shares of stock in the Company. On September 8, 2000, Philips' board of
directors issued a proxy statement to Philips shareholders seeking
approval for its plan of liquidation and giving notice of a special
meeting to be held on October 10, 2000, at which the vote would be taken
on the proposed liquidation. Plaintiff commenced this action on October
2, 2000, one week before the special meeting was to be held, and on
October 4 made an ex parte motion for a temporary restraining order,
expedited discovery, and a preliminary injunction to stop the shareholder
vote and the consummation of the liquidation. I directed Plaintiff's
counsel to serve the motion on Defendants and, after service was
effected, called a conference to discuss the issues presented in the
motion and the timing of the proceedings.

At the October 6 conference, the parties informed me that an agreement
had been reached that Plaintiff would withdraw its motion for a temporary
restraining order, the October 10 vote would proceed as scheduled, there
would be expedited discovery and Defendants would not carry out the
liquidation until a hearing had been held on the motion for a preliminary
injunction. At the October 10 special meeting, approximately 80 percent
of the shareholders voted and more than 99 percent of those who voted
approved the plan of liquidation. The parties have briefed the issues and
the evidentiary hearing has been held.


A preliminary injunction may issue only when the movant demonstrates (a)
irreparable harm and (b) either (i) a likelihood of success on the merits
of the underlying claim, or (ii) sufficiently serious questions going to
the merits of the claim to make it fair ground for litigation, and the
balance of the equities tips decidedly in favor of the movant. Reuters
Ltd. v. United Press Intn'l, Inc., 903 F.2d 904, 907 (2d Cir. 1990);
Lichtenberg v. Besicorp Group Inc., 43 F.Supp.2d 376, 384 (S.D.N.Y.

Plaintiff has shown neither a likelihood of success on the merits nor
raised a sufficiently serious question going to the merits to entitle it
to the extraordinary relief it seeks. To establish a violation of Section
14(a) of the '34 Act and Rule 14a-9, Plaintiff must show that the Proxy
statement "is false or misleading with respect to any material fact,
or... omits to state any material fact necessary in order to make the
statements therein not false or misleading." 17 C.F.R. @ 240.14a-9
(2000); 15 U.S.C. @ 78n(a)(1997); Virginia Bankshares v. Sandberg, 501
U.S. 1083, 1086-7, 111 S.Ct. 2749, 2755 (1991). n1

n1 In the Second Circuit, a plaintiff may satisfy the scienter
requirement of 14(a) by showing negligence. Gerstle v. Gamble-Skogmo,
Inc., 478 F.2d 1281, 1298-1301 (2d Cir. 1973). "As a matter of law, the
preparation of a proxy statement by corporate insiders containing
materially false or misleading statements or omitting a material fact is
sufficient to satisfy the Gerstle negligence standard." Wilson v. Great
American Industries, 855 F.2d 987, 995 (2d Cir. 1988).

A fact is material "if there is substantial likelihood that a reasonable
shareholder would consider it important in deciding how to vote." TSC
Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449, 96 S.Ct. 2126,
2132 (1976). In assessing the materiality of an omission, a court must
determine whether "disclosure of the omitted fact would have been viewed
by the reasonable investor as having significantly altered the 'total
mix' of information made available." Id.

Although Plaintiff has alleged that Defendants' conduct was suspicious,
it has failed to substantiate its suspicions by credible evidence that
the proxy statement is materially false or misleading. Plaintiff alleges
the following specific defects in the Proxy: (1) it fails to disclose
that the structure of the liquidation will result in substantial tax
savings for Pilevsky; (2) it omits material facts relevant to the value
of properties being sold; (3) it provides an inaccurate estimate of the
amount shareholders will receive in the liquidation; (4) it is misleading
about the protection afforded the public shareholders by the Special
Committee; (5) it fails to disclose that Prudential has a conflict of
interest; and (6) the Houlihan Lokey fairness opinion is misleading.
Plaintiff has failed to show that it is likely to succeed on the merits
of any of its allegations or that its allegations raise sufficiently
serious questions going to the merits.

A. Pilevsky's Tax Savings

Plaintiff's principal claim is that the proxy fails to disclose that the
motivation of Philip Pilevsky in structuring the liquidation was to
protect his financial interest in deferring recognition of taxable gain.
As described above, if the unitholders sell their units for cash, they
are likely to incur a substantial tax liability. Pilevsky would recognize
a taxable gain of $ 50 to 60 million from a cash sale. As a result, the
plan of liquidation is structured so that Pilevsky and the other
unitholders can redeem their units for real property and partnership
interests in Kimco, again deferring tax liability for the increase in
value of their investments.

Plaintiff relies on Mendell v. Greenberg, 927 F.2d 667 (2d Cir. 1990),
amended by 938 F.2d 1528 (2d Cir. 1991), to support its claim that
Philips had a duty to disclose the differing tax consequences to Pilevsky
and the shareholders. The court in Mendell, however, considered the
plaintiff's claim that the majority shareholder's estate tax obligation
created an urgent need for cash, resulting in a "quick sale" of the
company. The issue was thus the motivation for selling the company at
that time. The Court held that a rational jury could conclude that the
tax motivation for selling the company was material to a shareholder's
decision to approve the proposed merger. Id. at 675. Plaintiff, however,
has not proferred any evidence that Philips' decision to liquidate was
motivated by Pilevsky's tax needs. Nor does Plaintiff contend that
Pilevsky's tax situation played a role in the decision to liquidate.

Further, Plaintiff has not proferred any evidence that the price Philips
will receive for the real property to be liquidated is inadequate or that
the consideration to be paid by the Pilevsky Group is unfair. Absent
evidence that Pilevsky's tax savings will adversely affect shareholders'
interests, additional disclosure is not likely to significantly alter the
'total mix' of information available to the shareholders. TSC Indus., 426
U.S. at 449, 96 S.Ct. at 2132; Mendell v. Greenberg, 938 F.2d 1528, 1529
(2d Cir. 1991)(amending its prior opinion to require some evidence of
unfairness "before the district court enters the morass of alleged

Plaintiff insists that it is not Pilevsky's motivation that it complains
about, but rather that the differing tax concerns of the shareholders and
Pilevsky create a conflict of interest. Regardless of how Plaintiff
chooses to frame its argument, the substance of its claim is that Philips
had a duty to disclose the tax issue. Plaintiff has provided no evidence
that the interests of the shareholders were compromised by the
tax-efficient outcome for Pilevsky and the other unitholders, and so has
failed to show that the alleged non-disclosure was material.

Moreover, the proxy discloses that the Board considered the tax
consequences to the unitholders, including Pilevsky, in formulating the
plan of liquidation. It states that Pilevsky suggested the Pilevsky Group
transaction in part because it would be "tax-efficient for the
unitholders." Philips Proxy at 15. Similarly, the proxy states that the
Special Committee considered the tax efficiency of the plan for the
unitholders when it recommended the plan to the board. Id. at 18. The
proxy also discloses that the Pilevsky Group transaction was conditioned
upon Pilevsky not realizing any taxable gain in the exchange of his units
for the Hialeah properties. Id. at 44.

Finally Philips' Form 10-K Annual Report for 1999, expressly incorporated
by reference in the proxy, clearly discloses the potential conflict
between the shareholders and unitholders in the following paragraph on
page 6: Holders of units of Philips International Realty, L.P., including
Mr. Pilevsky and Ms. Levine, may have interests that conflict with our
and our shareholders' interests. If we (1) sell or refinance certain
properties or (2) reduce indebtedness encumbering such properties,
holders of units (particularly Mr. Pilevsky and Ms. Levine who previously
held interests in our properties) may suffer worse tax consequences than
we or our shareholders may suffer. To avoid such consequences, Mr.
Pilevsky and Ms. Levine, as executive officers and directors or our
company, could (1) influence our board of directors not to sell or
refinance a property even though such sale or refinance might otherwise
benefit us or (2) cause us to refinance a property at a higher level of
debt than would be in our best interest.

B. The Estimated Share Price

Plaintiff also alleges that the proxy inaccurately estimates the value
per share that the shareholders will receive in the liquidation. The
proxy estimates that the shareholders will receive an aggregate of $
18.25 per share in two or more distributions - one distribution at the
time of the closing of the Pilevsky and Kimco Transactions, and
additional distributions following the sale of Philips' remaining K-Mart
properties. Philips Proxy at 1, 6, 33. Plaintiff contends that the
estimate is misleading because the shareholders are likely to receive
less than $ 18.25.

Plaintiff's main argument is that the Proxy overestimates the price at
which Philips will be able to sell its remaining K-Mart properties. The
Proxy states that the K-Mart properties are being offered for an asking
price of $ 41.5 million. Defendants have admitted that the expected sale
price of the properties is less than $ 41.5 million. Plaintiff argues
that disclosing only the asking price is misleading. It further alleges
that a lower price will force the company to distribute less than $ 18.25
per share to the shareholders.

Defendants respond that disclosing their expectations for the properties
in the Proxy would hamper their ability to get the best price. Instead,
the company reserved $ 9 million to cover unexpected costs or shortfalls.
This reserve is sufficient on its face to make up any difference between
the asking price and the actual price. Plaintiff has proferred no
evidence that the $ 9 million reserve will be insufficient. As a result
Plaintiff has failed to show that the shareholders are likely to receive
less than $ 18.25.

Plaintiff also alleges that the Proxy fails to disclose that shareholders
will pay the costs of the liquidation and disproportionately bear the
risk that the K-Mart properties will yield a lower price. All witnesses
at the hearing testified that the liquidation is structured so that the
unitholders and shareholders will bear the same pro rata share of the
costs of the liquidation. Plaintiff has offered no evidence to the

Defendants also deny that the shareholders alone bear the risk that the
K-Mart properties will yield a lower price than expected. They argue that
the plan of liquidation includes a mechanism to equalize the value
received by the Pilevsky Group and the shareholders. See Philips Proxy at

Under the plan, Pilevsky will purchase the Lake Worth and Third Avenue
properties for cash. At the closing of the Pilevsky Group transaction,
the company will increase the cash price to be paid by Pilevsky if it
appears that the K-Mart properties will be sold for less than the
company's present expectations. As a result the Pilevsky Group and the
shareholders will share the risk of a shortfall from the sale of the
K-Mart properties. The shareholders will bear some residual risk because
the adjustment, if any, of Pilevsky's cash payment will be based on an
estimate, but this is disclosed in the Proxy. Philips Proxy at 43 ("The
effect of this adjustment is that the members of the Pilevsky Group will
receive our best estimate at the closing of the Pilevsky Group
Transaction of what our stockholders will receive in the aggregate
liquidation distributions.").

The Proxy discloses that the per share price estimate is uncertain, and
the actual amount the shareholders will receive may be lower than the
company's estimate. It also describes the reasons for the uncertainty.
The Proxy states the following at page 33:

The aggregate amount we expect you to receive in the liquidation will be
subject to the amounts required to pay or provide for our liabilities and
expenses, including any contingent liabilities, and the amounts received
in the liquidation of our real estate assets that we have listed for sale
but are not currently subject to definitive sale agreements. Thus we
cannot assure you that you will receive $ 18.25 per share.

C. Insufficient Disclosure About Individual Properties

Plaintiff also claims that the Proxy fails to disclose sufficient
information about the specific properties being sold in the liquidation.
It points to two specific omissions which, according to Plaintiff, make
the Proxy materially misleading.

The first omission alleged by Plaintiff is the failure of Philips to
disclose certain information about the future profitability of the Third
Avenue property. Plaintiff offered as evidence a confidential offering
memorandum prepared by Prudential and distributed to potential buyers of
Philips' property. The confidential memorandum predicted that the Third
Avenue property would generate a future profit of $ 13 million for
Philips' 50 percent non-controlling interest. Plaintiff argues that this
projection is material and should have been disclosed in the Proxy.

A company has no duty to include "speculative financial predictions" in a
proxy. Rodman v. Grant Foundation, 608 F.2d 64, 72 (2d Cir. 1979).
However, if a Proxy discloses valuation information, it must be complete
and accurate. Kahn v. Wien, 842 F.Supp. 667, 676 (E.D.N.Y. 1994). Both
the proxy and the Houlihan Lokey opinion address the value of the Third
Avenue property and so Philips has a duty to fully and accurately
disclose information related to the valuation.

Plaintiff has not shown that the valuation statements in the Proxy were
inaccurate without the $ 13 million projection. The Houlihan Lokey
witness, Marjorie Bowen, testified that Houlihan Lokey considered the
projection in rendering its fairness opinion. She also testified that the
$ 13 million projection referred to long term profit. When discounted at
an appropriate discount rate, the $ 13 million projection represents a
present value of approximately $ 3 million, which is less than the price
the Pilevsky Group is paying. Plaintiff has proferred no evidence
challenging the discount rate used by Houlihan Lokey or establishing a
higher value for the property.

The second specific omission alleged by Plaintiff is the failure of the
Proxy to list separately a small property among the Hialeah properties
being sold to the Pilevksy Group. This allegation is also without merit.
Louis Petra, President of Philips, testified that the disputed property
was considered in the company's valuation of the Hialeah properties. He
further testified that Philips has consistently treated the disputed
property as part of the adjacent Palm Springs Village property. He also
testified that Philips, in its public disclosures, has included the
square footage and lease information for the disputed property in its
description of Palm Springs Village. Plaintiff has offered no evidence to
contradict this testimony. Since Philips' treatment of the disputed
property in the Proxy is consistent with its treatment of the property in
its previous public filings, it is unlikely to mislead a reasonable

Further, the disputed property is valued at approximately $ 1 million and
the Pilevsky Group is paying $ 120 million for the Hialeah properties.
Since the property represents less than 1 percent of the value of the
Hialeah package, it is not material.

Plaintiff has also alleged a general failure to disclose in the Proxy
required information about the properties. Plaintiff argues that Item 15
of Regulation 14A, 17 C.F.R. @ 240.14a-101, Item 15, requires disclosure
of specific "property level" information. n2

n2 Regulation 14A lists certain disclosure requirements for proxy
statements that vary depending on the type of action for which
shareholder approval is sought. 17 C.F.R. @ 240.14a-101. The parties
disagree as to whether Item 15 of Regulation 14A, which specifies
information to be disclosed if the action involves the acquisition or
disposition of property, applies to the Philips' Proxy in addition to
Item 14, which applies to mergers, acquisitions, liquidations, and
dissolutions. This issue need not be resolved, however, because Plaintiff
has provided no authority holding that Item 15 requires greater
disclosure than that provided in Philips' Proxy.

Where applicable, Item 15 requires that a proxy describe briefly the
general character and location of the property; (b) state the nature and
amount of consideration to be paid or received by the registrant or any
subsidiary. To the extent possible, outline briefly the facts bearing
upon the fairness of the consideration; (c) state the name and address of
the transferer or transferee, as the case may be and the nature of any
material relationship of such person to the registrant or any affiliate
of the registrant; and (d) outline briefly any other material features of
the contract or transaction.

17 C.F.R. @ 240.14a-101, Item 15 (emphasis added). Plaintiff claims that
Defendants' Proxy is deficient as to (a) and (b). Plaintiff argues that
these provisions require Defendants to disclose specific, "property
level" information about each property being sold in the liquidation. n3
The language of the regulation, however, requires only a brief and
general description of each property, and a brief outline of the facts
bearing on the fairness of the transaction. The Proxy satisfies these
minimal requirements. It describes the general character of each property
by identifying it as either a shopping center or a redevelopment
property. It also identifies the city in which each is located.

n3 Plaintiff has never clearly defined "property level" information in
its papers. Plaintiff's counsel has alluded to specific information such
as present occupancy, revenue and profitability for each property, but
Plaintiff has provided no authority requiring that this information be
disclosed in the Proxy.

The Proxy discusses the fairness of the transaction in some depth. It
provides two fairness opinions by established investment banks. It also
discloses a list of the positive and negative factors considered by the
Special Committee in its review of the plan.

Plaintiff has provided no authority requiring Defendants to provide more
information about each property than is disclosed in the Proxy.

D. The Role of the Special Committee

Plaintiff claims that the Proxy gives the misleading impression that the
Special Committee adequately protected the interests of the shareholders.
Plaintiff, however, has put forth no evidence that Philips' Special
Committee did not protect the shareholders' interests. The Falstaff
Brewing case relied on by Plaintiff is not on point. S.E.C. v. Falstaff
Brewing Corp., 629 F.2d 62 (D.C. Cir. 1980). There the proxy referred to
an audit committee that did not exist - a clear misrepresentation. Id. at
75. In this case, the Special Committee met twice, voted, and formally
recommended that the Board approve the plan of liquidation. Plaintiff
points to the fact that the Special Committee did not retain its own
legal counsel. But there is no evidence that it sought or received advice
from Pryor Cashman, counsel to Philips.

E. The Fairness Opinions

Plaintiff has also failed to support its claims regarding the Houlihan
Lokey and Prudential fairness opinions.

Plaintiff does not allege any particular misstatements or omissions in
the Houlihan Lokey opinion. It alleges, rather, that the opinion uses
improper methodology and conveys a misleading impression about the
fairness of the plan of liquidation. A proxy may be false and misleading
if it includes a fairness opinion that lacks a reasonable basis or is
made without a genuine belief in its accuracy. Herskowitz v.
Nutri/System, Inc., 857 F.2d 179, 184 (3d Cir. 1988).

In challenging the fairness opinion, however, Plaintiff must prove facts
"undercutting the statement that the [liquidation] was 'fair from a
financial point of view.' " Minzer v. Keegan, 218 F.3d 144, 151 (2d Cir.
2000)(dismissing plaintiff's claim for failure to allege facts suggesting
that the transaction was unfair). The Second Circuit provided two
examples of such facts: (i) the premium shareholders will receive over
the historic share price is lower than that of comparable transactions
and (ii) the price does not adequately reflect the present value of
future cash flows. Id. Plaintiff has not presented such evidence. It has
criticized the valuations used by Houlihan Lokey without putting forward
evidence of alternate valuations.

Plaintiff's claim that the Proxy fails to disclose Prudential's prior
relationship to Philips and Pilevsky is without merit. The Proxy explains
that Houlihan Lokey was hired because the "board determined that a
financial advisor with no previous relationship with us and the Pilevsky
Group should opine on the fairness of the Pilevsky Group transaction and
the over-all transaction." Philips' Proxy at 16. Because of the prior
relationship, Prudential was asked to opine only on the fairness of the
Kimco transactions. Id. Since the Prudential opinion does not address the
Pilevsky Group transaction, it is unlikely that more detailed disclosure
about Prudential's relationship with Pilevsky would be material to a
reasonable shareholder.


Plaintiff failed to demonstrate either that it is likely to succeed on
the merits, or that there are sufficiently serious questions going to the
merits to make it fair ground for litigation. For the foregoing reasons,
Plaintiff's motion for a preliminary injunction was denied. (New York Law
Journal, December 7, 2000)

TICKETMASTER: Unwanted Magazine Subscriptions Attract State's Attention
Some customers say they have been billed for unwanted magazine
subscriptions and concert memorabilia.

In August, Valrico resident Victoria McLean called Ticketmaster to buy
two tickets to see the aging British rock group the Who at the Ice
Palace. The operator asked McLean whether she wanted a free trial
subscription to Entertainment Weekly or to buy tour memorabilia. She told
the operator in her lilting English accent that she simply wanted the
tickets, nothing else. A short time later, a $ 372.17 charge showed up on
her MasterCard bill for 11 tour T-shirts and pins. Then came notice that
her subscription would soon arrive. Her credit card would be billed $
24.95 unless she called to cancel.

"I couldn't believe Ticketmaster had given my credit card number to
another company," McLean said. "It was really upsetting. It also struck
me as possibly illegal."

It just might be. The Florida Attorney General's Office is investigating
more than 20 similar claims against Ticketmaster and Time Inc., which
publishes Entertainment Weekly. Those are just the complaints that have
made it to Tampa, where Time Inc. has its customer service center.
Investigators want to know whether the companies are using deceptive
marketing practices or violating Florida statutes about unauthorized
disclosures of credit card information. There's also a class action
lawsuit in the works.

The ordeal left the consumers who complained wondering whether these
types of promotions are just the beginning as the industry fights falling
circulation brought on by factors such as the demise of the much-derided
sweepstakes. It also raises larger privacy issues in this era of
increasingly pervasive marketing. Addresses and phone numbers are
routinely sold or exchanged. But the prospect of companies sharing
consumers' financial information leaves many feeling uneasy.

Consumers who order tickets to shows or concerts with Ticketmaster
routinely receive a pitch for Entertainment Weekly. Buyers of tickets to
sporting events get the pitch for Sports Illustrated, another Time
product. If the caller expresses interest, the Ticketmaster operator
explains that they will receive six to eight weeks free, after which the
credit card they used to purchase their tickets will be billed
indefinitely until the customer specifically asks for the subscription to
stop. The process is called "continuous service" or "evergreening." It's
an effort by the magazine industry to retain readers and make subscribing
less of a nuisance.

Ticketmaster officials say they are simply in a marketing agreement with
Time. If a customer wants a magazine subscription they can set it up.
They are not "giving" away credit card information, said spokesman Larry
Solters. Operators are supposed to follow a careful script when talking
with customers about the magazine offers. Operators who try to earn extra
commissions by signing people up without permission are fired, the
officials said. "We provide an 800 number for people to call to get
refunds if there is any confusion," Solters said. "I don't know what else
we can do for the customer."

Some consumers don't see it that way.

Ticketmaster customers such as McLean said they turned down the offer but
received the magazine anyway. Others, including Wilmington, N.C. resident
Donna Gunter, said the Ticketmaster operator never mentioned the
promotion. The magazine notice just arrived in the mail one day. It was
up to them to call to cancel, or have their credit cards charged.

Gunter wrote a blistering letter to the Better Business Bureau scolding
Ticketmaster for not only being dishonest but also for refusing to own up
to the dishonesty when she called to complain. The company, according to
Gunter, refused to say that it had shared her credit card number with
Time. "The whole thing felt like a violation," Gunter said. "I'd like to
see it outlawed."

Many of the consumers who complained were stunned to find out another
company had their credit card number. Thoughts of credit card fraud,
blown credit ratings and stolen financial identities swirled through
their heads.

Handwritten insults filled the letters consumers wrote to Time and
Ticketmaster. "What a scam you have going!" a woman from Omaha, Neb.
wrote. "Don't you dare charge this magazine subscription to my credit
card!!" A man who bought Cleveland Browns tickets through Ticketmaster
and ended up getting Sport Illustrated called the practice "by far the
worst form of trickery and a blatant disregard for consumer interests." A
mother in Mission Viejo, Calif. summed up the frustration many others
expressed. "I have spent an hour on getting this taken care of. An hour
that I could have spent with my kids!" she wrote.

For McLean, the frustration went beyond wasting time and energy. She,
like many others, was worried about what else might mysteriously show up
on her bill. She went ahead and canceled the card. "If they did it once,
who else might they have given my card number to?" said McLean, who
received a refund for the subscription and memorabilia.

In Florida, disclosure of credit card information without the
cardholder's consent is a first-degree misdemeanor. Also, orders for
magazine subscriptions are supposed to be in writing.

Tampa lawyer Chris Hoyer hopes to employ those laws to help end what he
called "a criminal violation of consumer trust." His firm, James, Hoyer,
Newcomer & Smiljanich, specializes in class action suits and has
recovered hundreds of millions of dollars in the past decade suing
insurance companies for fraud. Hoyer plans to file a class action suit
against Ticketmaster and Time Inc. in the next few days. McLean is the
lead plaintiff.

As Hoyer sees it, there is also a bigger privacy issue in play.
Businesses have always worked hard to retain customers. But today's
technology makes it easier to track their spending habits, demographics
and financial information. Somewhere privacy boundaries must be drawn,
Hoyer said.

Big business, he thinks, will do what's good for profits. As he points
out, even Ticketmaster's own Web site guarantees consumers that it will
not share their financial information. It's up to the consumer to decide
where to draw the line, he said. "People are tired of the bombardment on
their privacy," Hoyer said. "If we hit companies in the pocketbook they
might just stop doing it."

The sweepstakes, run by companies such as Publisher's Clearinghouse and
American Family Publishers, accounted for a big chunk of new
subscriptions - more than 60-million a year in the early 1990s. In the
wake of a number of scandals and lawsuits, they now account for only a
fraction of that amount.

In filling that void, magazine companies have had to spend more money and
use new techniques to market their product. Companies have to be careful
not to alienate potential subscribers when exploring the new territory,
said Michael Loeb, whose company, Synapse, developed many of the current
marketing alternatives to the sweepstakes. "They absolutely must be sure
the consumer is making an informed choice," he said. "No funny business.
Nothing misleading."

The experience has soured McLean on both companies. She said she would be
reluctant to use Ticketmaster again, although it may be tough to avoid.
On the brighter side, she sees the hassles as a lesson learned. It has
made her an even more vigilant consumer. "You have to always be watching
out," she said. "Businesses want your money. Sometimes they'll cross the
line to get it." (St. Petersburg Times, December 18, 2000)

UTILITIES: Alleged of Restraint of Trade & Unfair Business Practices
Two related class action lawsuits have been filed in the California
Superior Court in Los Angeles, against Southern California Gas Company,
San Diego Gas & Electric Company, Sempra Energy (parent of the two
utilities), El Paso Natural Gas Co., and other companies related to El
Paso Natural Gas.

The two lawsuits allege a conspiracy resulting in restraint of trade and
unfair competition and unlawful business practices. The complaints
summarize the issue as follows:

This action involves a massive conspiracy to eliminate competition in the
newly deregulated energy industry that has resulted in endangering
California's electrical system and threatening California's economy. It
is perhaps the largest gouging of energy consumers in American history.

Southern California's current "energy crisis" is not simply the result of
ever-increasing demand by a growing population for energy. Rather, it is
the direct result of a conspiracy among the natural gas industry's most
powerful Southern California players to preserve and maintain the market
dominance that they enjoyed for many years as monopolies subject to
regulation. When the artificial monopoly created by regulation was
disassembled, those dominant companies took prompt and illegal action to
ensure that they would not lose the benefits of their market power. Their
unlawful collusion has contributed significantly to the recent
astronomical increases in the price of natural gas and electricity. As a
result, Southern California customers have had to pay billions of dollars
extra for their natural gas and electric needs. This lawsuit seeks to
recover those damages. (Para. 1 and 2 of complaint.)

"In September of 1996, top executives of Southern California Gas Company
("SoCal Gas"), San Diego Gas & Electric ("SDG&E") and El Paso Natural Gas
Corporation ("EPNG") met at the Embassy Suites Hotel, near Sky Harbor
Airport in Phoenix, Arizona. Fearing a new era of open competition and
lower prices, these latter day captains of industry gathered secretly to
hatch a conspiracy to dominate the unregulated aspects of the natural gas
and electricity markets. At the meeting, these three companies, who
together dominate the Southern California natural gas market, illegally
agreed not to compete against each other in the Southern California and
Baja California natural gas delivery markets. They also conspired to
prevent other pipelines from being built that would have competed against
them and lowered natural gas prices in these markets. The conspirators
sought to eliminate competition, take advantage of electric deregulation,
drive up the price of natural gas, and profit from the increased prices."

One of the two lawsuits addresses the effects of the conspiracy on
natural gas prices; the other deals with the effects on electricity
prices. (The price of gas-fired generation establishes the price for most
of the electricity used in Southern California.)

Copies of the two lawsuits filed this morning are available as Adobe
Acrobat (PDF) files on the web site of the law firm of O'Donnell and
Shaeffer at http://oslaw.com/osnews.

Attorneys representing the plaintiffs are available for interviews, and
can also provide additional materials, including copies of the agenda
prepared for the secret meeting, as well as graphics illustrating the
location of natural gas pipelines that were planned, but then terminated
by the defendants following the secret meeting in Phoenix.

For more information contact: Pierce O'Donnell or Carole E. Handler,
O'Donnell & Shaeffer LLP, (213) 532-2000

Contact: Pierce O'Donnell or Carole E. Handler of O'Donnell & Shaeffer
LLP, 213-532-2000

* H.M.O.'s Are Pressed on Many Fronts to Reinvent Themselves
The managed care industry can hope to be reasonably prosperous next year,
but many critics both in and outside the industry say H.M.O.'s will soon
have to reinvent themselves, or perish.

Bigger premiums next year should provide bigger profits for many. But
higher costs in a number of areas -- in installing high-technology
equipment, paying for new drugs and modernizing facilities -- are taking
their toll. Hospitals and physicians are also rebelling against what they
consider inadequate payments, and employers are railing against rate
increases. Add to this legislation in Congress that supports patients'
rights, and it becomes clear that the industry is under great pressure to
re-evaluate its operations on many fronts.

"The very model that the health plans function on is being called into
question by the plans themselves," said Kenneth A. Tannenbaum, a health
care consultant in Atlanta with Tillinghast-Towers Perrin, the benefits
consulting firm.

Taking advantage of the still-vibrant economy and tight labor market that
has stoked demand for employee health coverage, insurers raised premiums
8 and 9 percent for large companies for 2001 and as high as 20 and 30
percent for small concerns.

With profits improving at many for-profit health maintenance
organizations, their stock prices have rebounded from the lows of the
last few years. But smaller managed care plans are in danger as they
scramble to merge and come up with financing for new information systems.
More than half the health plans reported losses for 1999.

The industry's main concerns, said Leonard D. Schaeffer, chief executive
of Wellpoint Health Networks, one of the strongest health insurers,
include assessing the costs and efficacy of changing new technology,
especially expensive new drugs. The industry must also meet the growing
needs of aging baby boomers and keep on the right side of employers who
may be reluctant to cover growing health costs if the economy falters.

Michael Barrett, a senior analyst at Forrester Research in Cambridge,
Mass., said that "a real collision is brewing" for managed care
companies. "Employers don't want to see a return to double-digit rate
increases," he said. "Doctors and hospitals are getting higher
reimbursements, and consumers are not inclined to play patsy for cost

He said many H.M.O.'s will need a significant amount of money for
improvements in information systems to keep customers happy and try to
keep costs in line. But with profit margins slim, "they do not have any
ready means of raising it."

Managed care companies have also been fighting a raft of lawsuits from
patients whose lawyers are seeking class-action status and charging that
the system does not deliver the quality of care that it says it does. The
companies have won several rounds in federal appeals courts. On another
front, a bill that would make it easier to sue H.M.O.'s for medical
malpractice is now moving through Congress. It was passed last year by
the House and has been stuck in the Senate, but the new Congress may be
more receptive to the legislation after the defeat of several senators
who had opposed it.

Finding that their attempt to manage costs by delaying and denying
payments for care has broken down in the face of consumer resistance,
some health plans are planning to give consumers more choices of coverage
and follow up with close attention to preventive measures, which they
hope will safeguard the health of those at risk of contracting expensive

Industry experts say the insurers must shift to policies that permit
consumers to put together their own customized health plans and offer
help to them in deciding what to do. Insurers are also beginning to
provide consumers with personalized Web pages to see how their medical
claims are being handled, said Jeff Goldsmith, a health care economist
who is president of Health Futures, an independent consulting firm in
Charlottesville, Va.

As they adopt sophisticated new strategies, the health plans must spend
heavily to "Web-enable" their communications with providers and consumers
of care and payers, said Mr. Tannenbaum of Tillinghast-Towers Perrin.

"Health plans are trying to control costs by delivering information
online," said Jack Reichman, director for health insurance at Standard &
Poor's, the credit rating agency. "The new systems cost $200 million to
$300 million," he said.

But there is little choice. "Those that don't invest will ultimately have
higher costs," Mr. Reichman said. And all health plans must comply with
new federal regulations requiring standardized computer language and
privacy and security measures to protect patients.

The federal requirements will cost 20 to 30 percent more than last year's
multimillion-dollar outlays that prepared computer systems for Year 2000
problems that largely failed to materialize, Mr. Tannenbaum said.

If the economy sours, the pressures will only increase. "When corporate
employers' cash flow begins to decline significantly, the plans will be
in serious trouble," Mr. Goldsmith said. When consumer prices and wages
are rising at low single-digit rates, employers will reject big increases
for health care, he said.

Mr. Schaeffer of Wellpoint added: "If the economy slows even a little bit
in 2002, the chief financial officers will come out of their offices.
Right now, the sales guys are in charge."

Mr. Reichman said 10 to 15 percent of employers might turn to "something
like defined contributions" next year, rather than swallow further rate
increases. Under defined contributions, individual members of health
plans have to make their own money stretch to cover costs, instead of
having a commitment from their employer or an H.M.O. to cover their
medical needs.

Many hospitals, meanwhile, have been aggressively demanding higher
payments after years of being squeezed by the health plans. Some strong
hospitals have refused to do business this year with insurers who
squeezed too hard. Both hospitals and physician group practices are
avoiding the risks of accepting capitation arrangements, in which they
receive low monthly per capita payments for groups of health plan
members, many of whom may need expensive care.

"Physician enterprises are in a serious mess," Mr. Goldsmith said at
Health Futures. "In the West, a lot of health plans drove them into
bankruptcy." More than 100 medical groups in California have filed for
bankruptcy protection the last three years.

For-profit hospital chains were among the first to increase their
revenues and earnings by making their operations more efficient. Share
prices of HCA Healthcare, Tenet Healthcare and other big chains have
soared this year. But the picture is still mixed as the industry lobbies
vigorously for restoration of federal budget cuts.

"A third of the 4,800 hospitals are doing real well," said Rick Wade, a
senior vice president of the American Hospital Association, a Washington
trade group. "About a third have taken it on the chin from the balanced
budget act cuts and state Medicaid cutbacks, and the rest are in the
middle with profit margins of 1 to 5 percent, not enough to go to the
bond markets with," he said.

Most hospitals need big amounts to modernize buildings that were put up
with liberal federal help under the Hill-Burton act after World War II.
Some are seeking financial help from local governments, businesses and
philanthropies, to make up for cutbacks by managed care and Washington.

Nurses and other hospital workers are in short supply, and unions regard
health care as "the last great frontier" for them to organize, Mr. Wade
said. There have been strikes around the country but he said the
hospitals "do not have a lot of options for coming up with the money."

"This industry has been in a recession for two years," Mr. Goldsmith
said. Now hospitals are beginning to cut administrative costs, eliminate
highly paid administrators and consolidate departments, he said. "I'm
cautiously optimistic for next year about both hospitals and health
plans," he said. (The New York Times, December 18, 2000)


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