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/raid1/www/Hosts/bankrupt/CAR_Public/010212.MBX C L A S S A C T I O N R E P O R T E R Monday, February 12, 2001, Vol. 3, No. 30 Headlines ALLSTATE CORP: Says US Drops Probe of '94 Northbridge Earthquake Claims AUTO INSURANCE: Settlement Approved in Suit over Aftermarket Car Parts COLORADO: State to Pay Those Cut from Medicaid $17.2 Million COMDISCO INC: Milberg Weiss Corrects Announcement on Securities Suit ECONOMY-CLASS SYNDROME: Experts Call For Definitive Study FILM MAKERS: "Law & Order" Shows Subject of Lawsuit by Writers Guild HOLOCAUST VICTIMS: Irked By German Delays, Poland Plans to Start Paying NEW JERSEY: Ap Ct Takes up Suit Re Market Transition Fund Assessments NEW JERSEY: Churches Sue Governor and Depts. over Chromium Contamination NEW JERSEY: Districts Petitions for Appeal Re Early Childhood Programs NEW JERSEY: Hospitals Challenge $10 Per Adjusted Admission Charges NEW JERSEY: Hospitals Challenge Medicaid Reimbursements Since 1995 NEW JERSEY: Judge Denies Class Cert. in Case By Children’s Rights Inc. NEW JERSEY: Lawsuit Challenges Constitutionality of Waste Licensure Fees NEW JERSEY: Middle Income School Districts Appeal in Lawsuit Re Funding NEW JERSEY: Rural School Districts Sue for Parity Funding NEW JERSEY: Trial Ct OKs Lawsuit Re Police & Firemen Retirement System NEW JERSEY: Wins Dismissal of Suit By Institutionalized Persons’ Spouses OKLAHOMA HEALTHCARE: Suit Filed to Protect Mentally Ill Patients OTTAWA: Fed Govt Accused of Foot Dragging As Diabled Veterans Languish PRESIDENTIAL ELECTION: Report Accuses Democrats of Vote Fraud RECORD COMPANIES: Judge Grants Stay on FL Music Suit in Face of MDL Suit RITE AID: Former Top Executives Accused of Fraud SOTHEBY'S, CHRISTIE'S: Taking Stock of Turmoil; Art Auction War Heats up U.S INTERACTIVE: Schiffrin & Barroway Files Securities Lawsuit in PA WADE: FL Sp Ct Poised to Hear Debate on Abortion Law on March 29 * Chief Judge of 3rd Cir Takes Closer Look at Lead Counsel Selection * HCFA Published a Proposed Reg Outlining Medicare+Choice Appeals Rules * UM Medical System Accuses Judge Nance of Bias in Malpractice Case ********* ALLSTATE CORP: Says US Drops Probe of '94 Northbridge Earthquake Claims ----------------------------------------------------------------------- Allstate Corp. said last Thursday February 8 that the U.S. attorney's office in Los Angeles has dropped a longstanding criminal probe of the insurer's handling of claims from the 1994 Northridge earthquake. The company said federal officials told its Allstate Insurance Co. subsidiary that the government is closing the file on its investigation "with no charges or action being taken against the company." Edward M. Liddy, the parent company's chairman and chief executive officer, said Allstate is "very pleased" to see the investigation terminated. The review was launched in 1998, after an Allstate employee alleged that the company had cheated some policyholders by having engineering reports altered to minimize homeowners' damage claims. The federal probe became public when FBI agents raided three Allstate offices, seizing thousands of earthquake-related documents. Allstate denied the allegations, and separately contended that the company had been victimized in the quake's aftermath by certain contractors in California. The Northridge quake, which generated an estimated $12.5 billion in damage claims for the insurance companies involved, was a heavy financial blow to Allstate, which at the time was a Sears, Roebuck and Co. unit. While the government has decided not to pursue criminal charges, the quake spawned civil lawsuits over Allstate's claims-handling. In late 1998, Allstate settled class-action litigation by agreeing to reopen claims from as many as 9,000 California homeowners for an independent review by a court-approved engineer. To cover the potential costs of that settlement, Allstate set aside $60 million, and it also agreed to pay $5 million in funding for a foundation that seeks to promote loss prevention. (Chicago Tribune, February 9, 2001) AUTO INSURANCE: Settlement Approved in Suit over Aftermarket Car Parts ---------------------------------------------------------------------- Country Companies Insurance Group has agreed to pay $6.3 million to settle a class-action lawsuit over its use of aftermarket auto-body repair parts. The settlement, approved last Thursday February 8 by Marion County Circuit Judge David Sauer, equals the amount the company says it saved since 1993 by paying for repairs that included parts not made by vehicles' original manufacturers. The lawsuit was filed in October 1999 by the same attorneys who, just weeks earlier, won $1.2 billion in judgments against State Farm Insurance over that company's use of aftermarket parts. That case is being appealed, and a decision is expected later this spring. The lawsuit claimed the use of aftermarket parts failed to restore customers' cars to their pre-accident condition. Country Companies officials said in a written statement that they admitted no wrongdoing by settling. "It is in the best interest of its policyholders to settle the case and avoid further costs and uncertainty associated with lengthy and complex litigation," the statement said. Country Companies, the fourth-largest insurer of vehicles in Illinois and 36th largest in the United States, insures some 800,000 vehicles, company spokeswoman Melinda Zehr said. Policyholders whose vehicles were repaired with aftermarket parts since July 1993 - about 76,000 claims were handled by the company since then - and who don't take steps to exclude themselves from the lawsuit, will be eligible for a one-time refund of at least $52, said Tom Thrash, one of the attorneys representing policyholders. Up to one-third of the settlement likely will go to attorneys representing policyholders. Critics say aftermarket parts - including hoods, doors, fenders, bumpers and other parts - which are modeled on factory originals but made without access to factory specifications, fail to provide the same level of fit, finish, corrosion protection and, in some cases, safety, as the originals. (The Associated Press State & Local Wire, February 9, 2001) COLORADO: State to Pay Those Cut from Medicaid $17.2 Million ------------------------------------------------------------ A federal judge approved a $17.2 million settlement in which Colorado will reimburse 40,000 people whose Medicaid benefits were cut because of a computer glitch. U.S. District Judge Wiley Daniel last Thursday February 8 ruled on a deal that will settle a class-action suit against state agencies including the Colorado Department of Human Services. The agreement requires the Colorado Health Care Policy and Financing Department to launch a massive five-month campaign to find each person who lost their benefits, re-evaluate their eligibility and reinstate health care. The state will also reimburse people who can prove they spent their own money for care that should have paid through Medicaid. Health care providers who paid for treatment that should have been covered by Medicaid or who still have outstanding bills will also be reimbursed. Officials estimate it will cost $279,230 to reimburse clients for proven out-of-pocket medical expenses and at least $1.2 million to pay back health care providers for outstanding bills. The settlement protects those "who have the fewest resources to fight and who didn't even know that their Medicaid was cut, potentially illegally," said Tracy Ashmore, an attorney who helped represent the plaintiffs. "We will do everything in our power to notify people affected by this," said Vivianne Chaumont, an attorney representing the state. The mistake in Medicaid benefits occurred after welfare reforms kicked in. Most recipients who moved from welfare to work or school were supposed to keep their health care coverage. State officials have blamed computer problems for the mistakes between July 1997 to last August. Johanna Gerke, a Jefferson County mother of two who was not a plaintiff but had her benefits cut, said she was pleased with the outcome. "They cut me off everything just two months after I started going to school and got my job," said Gerke, who attended the hearing. "But if they would have just helped us out for at least six months with Medicaid or even cash benefits, we could have gotten our feet on the ground." Of the 40,000 who lost health care, 16,558 gradually got Medicaid back on their own. The state will reinstate the remaining 23,442. Five attorneys handled the class-action lawsuit, filed in December 1999, at no cost. They and state officials spent 10 months forging a settlement. (The Associated Press State & Local Wire, February 9, 2001) COMDISCO INC: Milberg Weiss Corrects Announcement on Securities Suit -------------------------------------------------------------------- The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announced, on February 7, 2001, the filing of a securities class action lawsuit against Comdisco Inc. That notice listed the date of April 8, 2001, as the deadline by which class members must seek lead plaintiff appointment. That date was incorrect. The correct date by which class members must seek appointment as lead plaintiffs is April 9, 2001. The corrected release follows: The law firm of Milberg Weiss Bershad Hynes & Lerach LLP announces that a class action lawsuit was filed on February 7, 2001, on behalf of purchasers of the securities of Comdisco, Inc. ("Comdisco" or the "Company") (NYSE: CDO) between January 25, 2000 and October 3, 2000, inclusive (the "Class Period'). A copy of the complaint filed in this action is available from the Court, or can be viewed on Milberg Weiss' website at: http://www.milberg.com/comdisco/ The action, numbered 01-C-874, is pending in the United States District Court for the Northern District of Illinois, Eastern Division, located at the Dirksen Bldg., 219 S. Dearborn St., Chicago IL, 60604, against defendants Comdisco, Nicholas K. Pontickes (CEO President and Director throughout the Class Period), and John J. Vosicky (Chief Financial Officer and Executive V.P.) The Honorable William J. Hibbler is the Judge presiding over the case. The complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between January 25, 2000 and October 3, 2000 concerning the Company's operations and its Prism Communications Services ("Prism") subsidiary. Specifically, the complaint alleges that defendants repeatedly issued positive statements concerning Prism, Prism's expansion into new markets and purported positive developments in Prism's existing markets but failed to disclose that Prism was suffering from a host of adverse factors including, but not limited to, that incumbent local exchange carriers were slow to provide Prism access to their networks and Prism was experiencing intense competition from entrenched telecommunications companies who were lowering prices in an effort to garner market share. Then, on October 3, 2000, Comdisco announced that it would stop funding Prism and would write down its investment in Prism, which amounted to $ 350 million. In response to this announcement, Comdisco's stock price dropped by 23% in one day, from $17.5625 per share to$13.37 per share (representing a 66% drop from the Class Period high of $53 per share, reached on March 9, 2000). Prior to the disclosure of the true facts about Prism, Comdisco insiders sold $ 10 million of their personally-held Comdisco stock and the Company completed a $ 500 million note offering on favorable terms. Contact: Milberg Weiss Bershad Hynes & Lerach LLP Steven G. Schulman or Samuel H. Rudman 800/320-5081 comdiscocase@milbergNY.com http://www.milberg.com ECONOMY-CLASS SYNDROME: Experts Call For Definitive Study --------------------------------------------------------- Scientists called last Friday February 9 for a major study to establish decisively if there is a link between flying and deadly blood clots at an unprecedented summit between airlines and medical experts. Representatives from several top international airlines held closed-door talks with scientists and doctors amid mounting public concern that long-distance flying is a major cause of potentially fatal blood clots. Experts in Deep Vein Thrombosis (DVT), or ''economy class syndrome,'' say airline passengers may be at special risk of contracting the problem. Some 800 Australians who claim that they suffered DVT because of flying are taking part in a class action against several major airlines. Speaking after the meeting, experts from The Australasian Society of Thrombosis and Haemostasis (ASTH) and the Griffith University Center for Aviation Medicine said it was up to the general public, government and business to find funding for the study to determine the link between flying and blood clots. Asked if airlines had agreed to help fund the study, organizers would only say that responsibility for funding rested on everyone. The summit February 9 was the biggest meeting yet on the issue. To date, just two studies have been conducted on the relationship between DVT and flying, offering conflicting opinions, said ASTH president Dr. Ross Baker. ''Our aim now is to conduct a definitive study to answer the questions remaining about the association between DVT and air travel,'' Baker told a press conference after the summit. ''This type of study would enable informed choices by passengers and airlines and assist doctors in advising their patients prior to travel.'' Qantas Airways, Australia's biggest airline, and Air New Zealand took part in the summit. Other airlines attended, but organizers refused to identify them. Deep vein thrombosis involves the formation of blood clots in the legs, sometimes caused by sitting in cramped conditions for long periods. A clot can be deadly if it moves to the lungs. The condition is common, with high-risk groups including the elderly, obese and those with a family history of the disease. The intensive study would be the first of its kind anywhere in the world and could take as much as three years, Baker said. ''The study will involve people that are consecutively coming to Australian hospitals in major cities (with DVT) and looking to see whether there is an association (with) airline flight and what that risk is over and above the background rate of veinous thrombosis in the community,'' Baker said. Qantas Airways said in a statement that the seminar proved there was a need for ''an objective controlled study, conducted on a global scale.'' The airline did not say if it had agreed to provide funding for such a study. Qantas said it will participate in a meeting on DVT to be convened by the World Health Organization next month in Geneva. (AP Worldstream, February 9, 2001) FILM MAKERS: "Law & Order" Shows Subject of Lawsuit by Writers Guild -------------------------------------------------------------------- In the midst of early negotiations for a new movie and television contract, the Writers Guild of America has filed a labor complaint against the makers of the ''Law & Order'' TV shows. The guild accused Wolf Films, the NBC network and related production companies of refusing to disclose information about whether it has stockpiled scripts in an effort to lessen the impact of a potential strike. Universal City Studios Inc., Studios USA Television, USA Development and Studios USA Pictures Development also are named in the complaint, which was filed on February 5 with the National Labor Relations Board. ''Within the last six months, the above-named employers failed and refused to provide the charging party with information necessary and relevant to its bargaining obligations,'' according to the complaint. The complaint relates to both the show ''Law & Order'' and its spin-off ''Law & Order: Special Victims Unit,'' WGA spokeswoman Cheryl Rhoden said. A WGA strike in 1988 lasted 22 weeks and delayed that year's fall TV season. (AP Worldstream, February 9, 2001) HOLOCAUST VICTIMS: Irked By German Delays, Poland Plans to Start Paying ----------------------------------------------------------------------- Worried that aging victims will die before they see any cash, a Polish foundation said it would start paying Nazi-era slave labor survivors from its own funds next month if a German compensation plan is delayed much longer. ''This is a dramatic decision. This is our last resort,'' said Bartosz Jalowiecki, head of the Polish-German Reconciliation Foundation. The German government and German companies who used forced and slave labor during the Nazi era set up the 10-billion-mark (dlrs 4.8 billion) fund last year to compensate surviving victims and bring an end to U.S. class-action lawsuits. Payments have been held up, however, by the refusal of a New York judge last month to dismiss a Holocaust suit against German banks. Lawyers were given until Feb. 28 to explain how compensation will be disbursed and answer other questions. If the judge refuses to dismiss the case then, Jalowiecki said, the Polish group will start making payments March 12 on the assumption it eventually will recoup the money from the German fund. The foundation decided it would begin with payments of 1,400 zlotys (dlrs 340) to the 77,000 oldest eligible Poles, those born before Jan. 31, 1921. The foundation was set up in the early 1990s under an earlier German initiative to help needy victims of the Holocaust. That would represent only a small part payments that Poland estimates will be about dlrs 7,000 for people forced to work in Nazi death camps and about dlrs 5,000 for people forced to work in Nazi industries or farms. ''For many people it will be the only sign that their suffering has been noticed,'' said a member of the foundation's governing council, Jerzy Widzyk, who was the Warsaw government's chief negotiator in compensation talks. Various estimates put the number of people eligible for payments at 1 million to 2 million, mostly non-Jews in Eastern Europe and the former Soviet Union. Warsaw estimates that 500,000 Poles are eligible. The compensation plan has been fraught with delays, and some critics accuse German companies of hiding behind legal arguments to put off payment. The Polish foundation, which will oversee distribution of Poland's share of the fund, has frequently pressed for faster payments before many more victims die. Polish Foreign Minister Wladyslaw Bartoszewski, a survivor of the Auschwitz Nazi death camp, also sharply criticized Germany for the delays. German politicians and industry leaders whose companies have already paid into the fund are increasingly exasperated with the reluctance of many firms to contribute. The chief executive of sportscar maker Porsche condemned what he called the ''blocking tactics'' of some companies. German industry must understand its ''moral obligation'' to make the payments, also in the light of how much it earns from exports, Wendelin Wiedeking was quoted as saying in the Stuttgarter Zeitung newspaper. (AP Worldstream, February 9, 2001) NEW JERSEY: Ap Ct Takes up Suit Re Market Transition Fund Assessments --------------------------------------------------------------------- Affiliated FM Insurance Company v. State of New Jersey et al., an action by certain members of the New Jersey Property-Liability Insurance Guaranty Association challenging the constitutionality of assessments used for the Market Transition Fund and seeking repayment of assessments paid since 1990. New Jersey is vigorously defending this action which on August 7, 1998 was transferred to the Appellate Division as an appeal from final agency action. NEW JERSEY: Churches Sue Governor and Depts. over Chromium Contamination ------------------------------------------------------------------------ Interfaith Community Organization v. Shinn et al., a suit filed by a coalition of churches and church leaders in Hudson County against the Governor, the Commissioners of the New Jersey Department of Environmental Protection (the "DEP") and the Department of Health, concerning chromium contamination in Liberty State Park in Jersey City. On March 2, 1999 the federal district court entered an order for a preliminary injunction which requires the DEP to fence in certain areas of Liberty State Park, requires no mitigation work beyond that which the DEP has nearly completed as part of the Green Park development in that area and denies the plaintiff's motion for preliminary injunctive relief in other areas of Liberty State Park. NEW JERSEY: Districts Petitions for Appeal Re Early Childhood Programs ---------------------------------------------------------------------- Thirteen Abbot District's have filed petitions of appeal with the Commissioner concerning the Department of Education's letters regarding such District's early childhood programs developed in response to the Court's decision in Abbot v. Burke. The matters were transmitted to the Office of Administrative Law for further proceedings. To date, eleven of the original districts that filed petitions remain active (two withdrew their petitions). Additionally, the Education Law Center has filed petitions on behalf of the students in the state-operated schools of Newark, Jersey City and Paterson as well as the students of West New York. Six districts filed appeals with the Commissioner of Education which were transferred to the Office of Administrative Law regarding supplemental programs. Of the six districts, four districts have settled and/or withdrawn their petitions for the 1999/2000 school year. Five districts filed petitions of appeal of the Department of Education's decision on the district's early childhood programs for the 2000/2001 school year. Also, seven districts have filed petitions of appeal of the amount of additional Abbot New Jersey aid that each district was awarded. Out of seven districts, one district has withdrawn its petition. NEW JERSEY: Hospitals Challenge $10 Per Adjusted Admission Charges ------------------------------------------------------------------ Zurbrugg Hospital et al v. Fishman; Rancocas Hospital et al. v. Fishman; St. Francis Medical Center et al. v. Fishman and Solaris Health System v. Fishman. These cases represent challenges by various hospitals to the $10 per adjusted hospital admission charges imposed by N.J.S.A. 26:2H-18.57. Most of the fees in controversy have been paid by hospitals pending the outcome of the appeal pursuant to agreements with the Department of Health and Senior Service. The Appellate Division upheld the $10 per adjusted admission charges and affirmed the payment demand and rejected the hospitals' claims that the assessment constituted a special law relating to taxation or a violation of the hospitals' equal protection rights. The New Jersey Supreme Court denied the hospitals' petition for certification. NEW JERSEY: Hospitals Challenge Medicaid Reimbursements Since 1995 ------------------------------------------------------------------ United Hospitals v. State of New Jersey and William Waldman, 19 New Jersey hospitals are challenging the Medicaid reimbursements made since February 1995 claiming that New Jersey failed to comply with certain federal requirements, the reimbursement regulations are arbitrary, capricious and unreasonable, rates were incorrectly calculated, the hospitals were denied due process, the Medicaid reimbursement provisions violate the New Jersey Constitution, and Medicaid State Plan was violated by the New Jersey Department of Human Services implementation of hospital rates since 1995. NEW JERSEY: Judge Denies Class Cert. in Case By Children’s Rights Inc. ---------------------------------------------------------------------- Charlie and Nadine H. v. Christine Todd Whitman, a class action suit filed by Children's Rights Inc. against the Governor, the Commissioner of the Department of Human Services and Charles Venti, Director of the Division of Youth and Family Services alleging their systemic failures to protect the plaintiff class and furnish legally required services to the children and their families and that the alleged failures violate the United States Constitution, federal statutes and federal common law. The state has filed a motion to dismiss, which was decided on January 27, 2000. Most of the causes of action were dismissed. The trial judge denied plaintiffs' motion seeking to appeal the decision. Plaintiffs' motion for class certification was dismissed without prejudice and plaintiffs were ordered to file an amended complaint. NEW JERSEY: Lawsuit Challenges Constitutionality of Waste Licensure Fees ------------------------------------------------------------------------ American Trucking Associations, Inc. and Tri-State Motor Transit Co. v. State of New Jersey, challenging the constitutionality of annual hazardous and solid waste licensure renewal fees collected by the Department of Environmental Protection, seeking permanent injunction enjoining future collection of fees and refund of all renewal fees, fines and penalties collected. On October 2, 1997 oral argument was conducted on the parties' cross-motions for summary judgement in the Tax Court. No decision on the Cross-motions has been rendered to date. NEW JERSEY: Middle Income School Districts Appeal in Lawsuit Re Funding ----------------------------------------------------------------------- Verner Stabaus, et al. v. State of New Jersey, et al. Plaintiffs, 25 middle income school districts, have filed a complaint alleging that New Jersey's system of funding for their schools is violative of the constitutional rights of equal protection and a thorough and efficient education. One June 23, 1998, plaintiffs filed an amended complaint removing one and adding eighteen school district plaintiffs. On January 31, 2000 an order was entered granting the defendants' motion to dismiss. On March 8, 2000, the districts filed a notice of appeal. NEW JERSEY: Rural School Districts Sue for Parity Funding --------------------------------------------------------- Buena Regional Commercial Township et al. v. New Jersey Department of Education et al. This lawsuit was filed on behalf of 17 rural school districts seeking the same type of relief as has been mandated to be provided to the poor urban school districts in Abbot v. Burke, which included, without limitation, sufficient funds to allow the school districts to spend at the average of wealthy suburban school districts, to implement additional programs and to upgrade school facilities. The Buena school districts are seeking to be treated as special needs districts and to receive parity funding the with Abbot school districts as a remedial measure. They also are seeking additional funding as may be necessary to provide an educational equivalent to that being provided in the Abbot districts. Similar complaints have been filed individually by the school districts of Dover and Pennsville and are presently pending before the Commissioner of Education. On February 24, 2000, the matter was transferred to the Office of Administrative Law for a hearing limited to whether each petitioning district has fully effectuated the provisions of the Comprehensive Educational Improvement and Financing Act. Administrative hearings are ongoing. NEW JERSEY: Trial Ct OKs Lawsuit Re Police & Firemen Retirement System ---------------------------------------------------------------------- Brown v. State, Dept. of Treasury, Div. of Pensions & Benefits, Plaintiff seeks to represent a class of persons who received retirement benefits under the Police & Firemen Retirement System. Plaintiff seeks to challenge on statutory and constitutional grounds their omission from legislation that provided enhanced retirement benefits only to these people who retired after April 1, 1991. The trial court denied New Jersey's motion to dismiss and transferred the counts seeking a declaration regarding the tax statutes to the New Jersey Tax Court. NEW JERSEY: Wins Dismissal of Suit By Institutionalized Persons’ Spouses ------------------------------------------------------------------------ Cleary v. Waldman, the plaintiffs claim that the Medicare Catastrophic Coverage Act, providing funds to spouses of institutionalized individuals sufficient funds to live in the community, requires that a certain system be used to provide the funds and another system is being used instead. Plaintiffs’ motion for a preliminary injunction was denied and is being appealed. Subsequently, plaintiffs filed for class certification which was granted. On February 8, 1999, the Third Circuit court of Appeals affirmed the District court's decision, concluding the federal statute allowed States discretion to employ either methodology. Plaintiffs' petition for certiorari to the United States Supreme Court was denied. On August 21, 2000, the district court denied plaintiffs' motion for summary judgement, granted New Jersey's cross motion for summary judgment, and granted defendant-intervenors' cross motion to dismiss. OKLAHOMA HEALTHCARE: Suit Filed to Protect Mentally Ill Patients ---------------------------------------------------------------- A class action lawsuit on behalf of 740 mentally ill patients has been filed against the Oklahoma Healthcare Authority by Southeastern Oklahoma Family Services (SOFS) and Milton Evans, a consultant to SOFS. Steve Holden, lead attorney for Holden, Glendening and McKenna, said the suit requests immediate assistance in reinstating Medicaid benefits to the patients which, he said, the Authority terminated "without cause." "As much as I hate to say it, it appears that we are witnessing a vendetta against Milton Evans by the Healthcare Authority (HCA) with a lot of innocent people caught in the middle," Holden said. Holden described Evans as an outspoken advocate of services for the mentally ill in Southeastern Oklahoma who has often found himself at odds with the Authority and its directors. "There is undeniably some friction between Mr. Evans and some of the directors of the Healthcare Authority," he noted. "But Federal law is very clear when it comes to rendering and paying for Medicaid services and in this case, the law is seeking relief on behalf of themselves and a total of 740 mentally ill individuals who will be denied reasonable access to Medicaid services. The suit names high ranking HCA members Mike Fogarty, Terrie Fritz, Dr. Lynn Mitchell and Dana Brown, both individually and in their official capacity for "violations of various federally protected statutory and constitutional rights" afforded to each of the plaintiffs. Source: Holden, Glendening and McKenna Contact: Peggy Striegel, 918-258-3536, or 800-663-1136, for Holden, Glendening and McKenna OTTAWA: Fed Govt Accused of Foot Dragging As Diabled Veterans Languish ---------------------------------------------------------------------- The federal government could save hundreds of millions of dollars by reaching a quick settlement on a class-action lawsuit on behalf of disabled veterans and their heirs, the London Free Press cites a London lawyer. Peter Sengbusch said a settlement would save the government additional court costs and higher damages in the case, but the government shows no signs of being ready to settle, according to the Press. Sengbusch is the lawyer for Joseph Authorson, an 86-year-old veteran who lives at Parkwood Hospital in London. Authorson and other veterans went to court seeking interest on money held by the government on their behalf in trust funds, the London Press says. The veterans won an initial court victory in October when Superior Court Justice John Brockenshire ruled the government had mismanaged the finances of thousands of veterans for decades while they were patients in hospitals and psychiatric institutions. According to the London Press, it's estimated the Department of Veterans Affairs took over the assets of about 10,000 veterans judged incompetent to handle their own affairs. A report commissioned by the veterans estimates that, had the government properly managed the money, it would now have totalled $ 1.6 billion. The federal government is appealing the October decision. Sengbusch said the appeal is expected to be heard in the latter half of April. In Ottawa on February 8, Saskatchewan MP Roy Bailey, the Canadian Alliance's Veterans Affairs critic, decried the government's delay in settling the suit. The veterans are getting older and may not survive the government's delay in settling, Bailey said. "I can't believe the government's callousness in this matter," the MP said. "What the government did was illegal and morally wrong . . . What kind of government would rob from its own war veterans?" the London Press cites. Authorson, meanwhile, remains in Parkwood, unaware of the lawsuit and the media attention it has attracted, the report goes on. He has been institutionalized since returning shell-shocked from the Second World War in 1943. He was diagnosed with schizophrenia and later lobotomized. (The London Free Press, February 9, 2001) According to the Toronto Star, another lawyer acting for disabled veterans in a lawsuit against the government charged on February 8 that Ottawa "seems intent on waiting until every widow and every veteran is dead" to avoid paying compensation. David Greenaway accused the government of foot dragging for its decision to fight a court's finding it mishandled veterans' trust accounts. The move could leave taxpayers on the hook for interest piling up at a rate of $1.5 million a week, said Greenaway, one of the lawyers acting for thousands of disabled veterans in a class action suit, the Toronto Star says. "We have time and time again gone to the government and said, 'Let's sit down and talk about this,' and the government has continually rebuffed us," Greenaway told a Parliament Hill news conference. The government is appealing last fall's Superior Court decision that Ottawa knowingly withheld interest payments on money it administered for an estimated 10,000 disabled vets from both world wars. Veterans unable to manage their own finances, generally because they were mentally incompetent, had their affairs taken over by the government. An economist hired by the veterans' lawyers has estimated they're owed at least $1.6 billion. A hearing into how much the government will have to pay is scheduled for spring. Federal officials denied the lawyer's claim that there's a planned effort to drag out the process. "The government is appealing, that's not delaying," said Janice Summerby, a Veterans Affairs spokesperson. Ottawa argues the court has intruded on Parliament's jurisdiction to pass legislation. A 1990 bill provided for interest payments on veterans' accounts the government administers, but it specifically ruled out retroactive interest payments. Cliff Chadderton, chair of the National Council of Veteran Associations in Canada, said the government will be "saving, not wasting" money if it wins its appeal. He fears a large compensation payout will mean funds are taken from other veterans' programs, and suggested most of those affected have already died. (The Toronto Star, February 9, 2001) PRESIDENTIAL ELECTION: Report Accuses Democrats of Vote Fraud ------------------------------------------------------------- Sen. Christopher "Kit" Bond, R-Mo., has forwarded to the U.S. attorney's office here a report -- compiled by a group of local lawyers -- that accuses Democrats of "an organized effort to commit vote fraud" in the city of St. Louis last Nov. 7. A spokesman for the state Democratic Party in turn accuses Bond of instigating "a Joe McCarthy witch hunt" aimed at intimidating city voters. McCarthy was a senator who accused various people in the 1950s of being communists. A spokeswoman for Audrey Fleissig, the U.S. attorney for Eastern Missouri, has confirmed that she had received the report. Sources gave the Post-Dispatch a copy, but the names of the lawyers are blacked out -- as were several passages and pages. Sources say the lawyers fear reprisals if their identities become public, and that many of the excised portions raise questions about what judges did. The 250-page report cites various incidents but zeroes in on the Election Day lawsuit filed by the state Democratic Party and the Gore-Lieberman campaign, among others, to keep city polls open for three hours beyond the 7 p.m. closing time. Judge Evelyn Baker granted the request; a state appeals court overturned it and shut down the polls at 7:45. The report contends that the lawsuit contained false statements identifying specific people as being denied the right to vote, when they really had voted. Among them was the lead plaintiff, identified in the suit as Robert D. Odom, although Democratic officials say the middle initial was in error. That plaintiff, Democrats say, actually was Robert M. Odom, known as Mark Odom, an aide to former Rep. William L. Clay Sr. and now an aide to Rep. William Lacy Clay Jr. Odom had been listed as a plaintiff in the suit, which stated that he "has not been able to vote and fears he will not be able to vote" because of long lines and "machine breakdowns" at polling places "that have lasted for several hours." The lawyer handling the case, Douglas Dowd, said that Lacy Clay had given him the wrong initial and that he didn't know that Odom was Clay's aide. Dowd said he gave the judge wrong information about Odom's voting status because he had gotten incorrect information from Democratic officials. During the Election Day hearing, Dowd said another lawyer alerted him in a note that Odom already had voted. Odom told Dowd that he thought he was to testify about what he'd witnessed at polls, Dowd said. Because of the confusion about his voting status, Odom didn't testify. Instead, Dowd added Mahina Nightsage as a plaintiff. She testified that she had been blocked from voting because she had been improperly purged from the rolls. Dowd said he failed to correct the suit or tell the judge that Odom had in fact voted. Legally, "I didn't have to," Dowd said. "My job is to prove my case," he said. "My allegation was that people were being denied a right to vote. I didn't prove Mr. Odom was being denied the right to vote (but that Mahina Nightsage) was denied the right to vote. That's the key." He said he left Odom as a plaintiff in the case because at that point he was in the same category as one of the other plaintiffs, Lacy Clay. Both had voted, Dowd said, but had seen other voters experiencing problems. Dowd called those who assembled the report "a bunch of cowards" for not identifying themselves. State Democratic Party spokesman Jim Grebing, who made the McCarthy barb, accused Bond of "overblowing the Odom thing" while overlooking legitimate issues. Grebing had been the spokesman for former Secretary of State Bekki Cook, who issued a report last month on the Election Day troubles in St. Lo uis. State and city election officials said in the report that at least 143 people were improperly allowed to vote, and an undetermined number of legitimate voters were improperly barred from voting. Meanwhile, several prominent African-Americans are seeking a meeting with the city Election Board to prevent a replay in the March 6 Democratic mayoral primary. "We want to find out what mechanisms have been put in place so we don't have a fiasco (like the one) we had on election night in November," said the Rev. Earl Nance Jr., a member of the group. Other members include James Buford, chief executive of the Urban League of Metropolitan St. Louis; the Rev. Sammie Jones; and insurance executive Richard Gaines. (St. Louis Post-Dispatch, February 9, 2001) RECORD COMPANIES: Judge Grants Stay on FL Music Suit in Face of MDL Suit ------------------------------------------------------------------------ Noting that their efforts would only be duplicative, Miami-Dade Circuit Judge Margarita Esquiroz dealt a blow to a lawsuit filed by Florida music lovers against the nations major record companies. The suit, which alleges the companies conspired to overcharge consumers for compact discs, is similar to dozens of others that have been filed around the country, the judge noted in a Feb. 6 order. Those actions have been consolidated and transferred by the Judicial Panel on Multidistrict Litigation to a federal judge in Maine. Because of that, Esquiroz granted a defense motion to stay all proceedings for now. Esquiroz did, however, allow for further discovery by the plaintiffs attorneys that might convince her to change her mind. The suit, which seeks class-action status, was filed by five Floridians against Sony Music Entertainment Inc., Time Warner Inc., Universal Music & Video Distribution Corp., UMG Recordings Inc., Capitol Records Inc. and BMG Music. The suits in the multidistrict litigation were filed in California, New York, Connecticut, New Mexico and Florida. They were filed after the companies signed a settlement agreement with the Federal Trade Commission. But the arrangement did not require the companies to rebate money to consumers. It only required the companies to stop pressuring retailers to advertise CDs at or above a minimum price set by the distributors, or else the retailers would lose out on cooperative advertising funds from the distributors. The FTC called the practice a violation of antitrust laws. (Broward Daily Business Review, February 9, 2001) RITE AID: Former Top Executives Accused of Fraud ------------------------------------------------ Former top executives at Rite Aid Corp. improperly pledged corporate assets to secure a bank loan and tried to pay a subordinate to manipulate earnings figures, a class-action lawsuit alleges. The new charges are part of an amended complaint accusing the drugstore chain of releasing misleading information that artificially inflated share value. Rite Aid has settled claims against it, and agreed to provide plaintiffs with details to bolster their suit against the company's former executives and auditing firm. "The extent of defendant's accounting manipulations was extraordinary, touching nearly every significant aspect of the company's income statements and balance sheets for fiscal years 1997, 1998 and 1999," stated the complaint, filed recently in U.S. District Court in Philadelphia. It alleges that three former Rite Aid officials, CEO Martin Grass, chief financial officer Frank Bergonzi and president Timothy Noonan, collaborated to manipulate earnings figures as early as 1997 and until Grass was ousted by the Rite Aid board in October 1999. The complaint also accuses the company's former auditing firm, KPMG LLP, of being aware that the accounting was "deficient." But auditors continued to sign off on the statements as "clean" because Camp Hill-based Rite Aid was a big client which paid "millions of dollars in annual consulting fees." Bob Zeitlinger, a spokesman for KPMG, denied the allegations. "We will vigorously defend our work," he said, explaining that national accounting publications recognize that "even a well-planned and executed audit may not detect management fraud." Rite Aid, the nation's third largest drugstore chain which operates stores in West Virginia, declined to comment about the lawsuit. But the complaint is noteworthy for offering fresh details provided by the company about the accounting debacle that forced it to revise earnings downward last year by more than $1 billion for fiscal years 1998 and 1999. Meanwhile, a criminal investigation into the accounting troubles is continuing, with prosecutors reportedly calling witnesses before a grand jury in recent weeks. According to the complaint, accounting problems at Rite Aid began to unfold in 1997, when the company sold 189 stores to a unit of J.C. Penney. Instead of logging the one-time gain of $82.6 million, the company improperly put it into an internal reserve account to "inflate" future operating income. Later in early 1999, Bergonzi continually sought the help of then-corporate controller Steven Kindler to find ways to make the earnings figures look better on the books. The complaint states that Bergonzi offered Kindler $20,000, telling him, "We're going to have to get dirty here." And the complaint reveals that Grass was ousted by the Rite Aid board in 1999 because he improperly pledged corporate assets to secure a bank loan for the company and then falsified board minutes. An attorney for Grass called the allegations "totally false and indeed, scandalous." The Washington attorney, who declined to give his name, said telephone records would help show that the pledging of assets to J.P. Morgan was made with full knowledge of the board's finance committee. The minutes were drafted by Rite Aid's general counsel and never falsified by Grass, he said. "With regard to the supposed scheme to inflate the company's stock, there is no basis for contending that Mr. Grass had any motivation to do that or anything like that," the attorney said, pointing to the auditors KPMG as the culprit. "He relied on people who knew about accounting issues to make accounting decisions. He didn't pressure them to do anything other than what was within ordinary accounting principles," Grass' attorney said. In trading last Thursday February 8, Rite Aid shares were down 14 cents to $4.36 on the New York Stock Exchange. (The Associated Press State & Local Wire, February 9, 2001) SOTHEBY'S, CHRISTIE'S: Taking Stock of Turmoil; Art Auction War Heats up ------------------------------------------------------------------------ Phillips, a London-based auction house owned by French interests, is making its boldest bid to date to become a major player in a global business long dominated by Sotheby's and Christie's. Since Phillips, the No. 3 international auction house was purchased in 1999 by the LVMH Moet Hennessy Louis Vuitton conglomerate controlled by French billionaire Bernard Arnault, it has been aggressive in paying top dollar for artworks, even if it loses money selling them. But that may change beginning with an important auction of impressionist and modern art May 7. The house, known since last month as Phillips, de Pury & Luxembourg, announced Thursday, Feb. 8 that it has purchased seven museum-quality paintings and drawings by Paul Cezanne and Vincent Van Gogh, valued at $80 million, for the sale. The seller was Heinz Berggruen, an 87-year-old Berlin-based dealer who recently sold 87 Picassos to the German government. "This is a fabulous collection and we're very excited," Phillips new chairman, Simon de Pury, told UPI. "Everything is of outstanding quality." De Pury also disclosed that it is moving from small quarters on Manhattan's upper east side to a 12-story building at a prime location on 57th Street, just off Fifth Avenue. It has leased the former bank building for three years and is currently remodeling it to be ready for the May auction. These announcements come at a time when both Sotheby's and Christie's are staggering from fall-out of a two-year scandal, the worst in world auction history. Both houses have admitted guilt in a price-fixing conspiracy involving commission rates paid by many customers through the 1990s. De Pury, a former chairman of Sotheby Europe, was not involved in the criminal case, which has been prosecuted by the U.S. Justice Department. The two houses, both headquartered in London since the 18th century, have agreed to a $512 million settlement of the antitrust case in the form of restitution to 130,000 customers represented by a class action suit. Rather than pay entirely in cash, Sotheby's and Christie's have offered to pay $125 million in certificates that buyers could use toward future commission fees and other charges. Christie's cooperated with the government in the investigation of the conspiracy and received conditional amnesty, but Sotheby's pleaded guilty. Sotheby USA's resigned president, Diana D. Brooks, a prominent financial and social figure in New York, pleaded guilty last October to one count of conspiracy and faces a prison term when she is sentenced May 23. She also has forfeited $11 million in stock options. Sotheby USA's chairman, Detroit shopping malls tycoon A. Alfred Taubman, who also resigned, has denied any wrongdoing but agreed to pay $156 million of Sotheby's share of the settlement and $30 million more to settle a shareholders' lawsuit. But he is still under investigation, and Brooks has agreed to become a witness against him if the government presses charges. Both houses also face paying additional millions of dollars in restitution to foreign buyers and sellers who have sued them. As a result of the financial drain represented by the settlements, Sotheby's has just announced an eight percent cut in its worldwide staff, about 150 employees, costing $14 million in severance pay. Christie's, owned by French investor Francois Pinault, has not yet announced any downsizing measures. This turmoil in the auction world provides a splendid opportunity for Phillips, which was founded in 1796, to move in on Sotheby's and Christie's. It already is well represented globally with offices in New York and St. Louis as well as several European cities and Australia and has a highly respected British chairman, Lord Charles Powell of Bayswater, former key advisor to Prime Ministers Margaret Thatcher and John Major. Last fall, Phillips rented the American Crafts Museum in midtown Manhattan for its first major sales in New York of Impressionist, modern and contemporary art. Most of the consigned works had been financed by Phillips, either through outright purchase or guarantees to sellers of a minimum sale price even if bidding fell below it. Its Impressionist-modern sale was disappointing, totaling only $32.6 million, far below the $54.1 million pres-sale estimate, but the contemporary art fetched $10.6 million, just above the estimate of $10.4 million. Auction experts said too high reserve prices, below which a seller will not sell, had been placed on the Impressionist and modern works, whereas unusually low reserves had been placed on the contemporary works. De Pury said the Berggruen acquisitions consisted of five paintings by Cezanne, including one of his famous views of France's Mount Sainte-Victoire, valued at $35 to $45 million, and a painting and drawing done by Van Gogh in Arles, France, two years before his suicide. After his departure from Sotheby Europe some years ago, de Pury became an art dealer in Geneva with Daniella Luxembourg. Their firm merged with Phillips in Janurary and de Pury was named chairman to guide the auction house on its quest for a larger slice of the annual $2.5 billion auction pie enjoyed by Sotheby's and Christie's. De Pury also is renowned as an auctioneer and conducted Phillips' sales last fall. (United Press International, February 9, 2001) U.S INTERACTIVE: Schiffrin & Barroway Files Securities Lawsuit in PA -------------------------------------------------------------------- The law firm of Schiffrin & Barroway, LLP announced on February 8 that a class action lawsuit was filed in the United States District Court for the Eastern District of Pennsylvania on behalf of all purchasers of the common stock of U.S. Interactive, Inc. (Nasdaq: USITQ) from February 10, 2000 through November 8, 2000, inclusive (the "Class Period"). The complaint charges certain officers and directors of U.S. Interactive with issuing false and misleading statements concerning its business and financial condition. [U.S. Interactive was not named as a defendant because it filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code.] Specifically, the complaint alleges that during the Class Period, defendants were aware that at least two of the Company's dot-com clients, which were owned in part by certain of the defendants, would not be able to pay the Company for services rendered. Notwithstanding this adverse information, defendants reassured the public that U.S. Interactive's dot-com risk exposure was minimal because the Company only did business with dot-com organizations that had proper funding levels. In addition, defendants failed to disclose that the Company was unable to pay-off even part of an $80 million debt and would not achieve profitability by the end of 2000 as previously represented. On September 20, 2000, the Company pre-announced that its third quarter financial results would be lower than expected due to rapid changes in the Internet professional services market, including lengthening sales cycles, re-evaluation of e-business initiatives by clients and prospective clients, and reduced funding available to its dot-com clients. Following this partial disclosure, the Company's stock dropped over 33% from the day before to close at $12.937. On November 8, 2000, when the Company announced its third quarter financial results, it disclosed that not only were its results worse than pre- announced on September 20, 2000, but that the Company was forced to write-off $ 8.8 million of uncollectible accounts receivable during the third quarter, which amounts were primarily related to services performed for dot-com organizations. Following this full disclosure, U.S. Interactive's stock dropped to $0.81 per share. Contact: Marc A. Topaz, Esq., or Robert B. Weiser, Esq. of Schiffrin & Barroway, 1-888-299-7706, (toll free), or 1-610-667-7706, or info@sbclasslaw.com WADE: FL Sp Ct Poised to Hear Debate on Abortion Law on March 29 ---------------------------------------------------------------- While abortion-rights activists around the country fear their landmark 1973 victory in Roe v. Wade could be toppled, Floridas Supreme Court is poised to hear debate on whether the state will eliminate Medicaid regulations that deny state-funded abortions to poor women. In a class-action suit scheduled for oral arguments March 29, lawyers from the Center for Reproductive Law & Policy in New York and the American Civil Liberties Union of Florida will argue that the states abortion funding ban violates the state constitution by denying state-funded abortions to women whose pregnancy poses a threat to their physical or emotional health but is not life-threatening or the result of rape or incest. The federal government, which reimburses the states for a portion of its Medicaid costs, has restricted the use of federal funds for abortions since 1977, with those exceptions. Many states have adopted identical restrictions, and at least 18 have had to defend them against similar constitutional challenges. In 13 cases, including six decided by state supreme courts, abortion rights advocates prevailed. Still, many courts remain unconvinced that the governments refusal to fund a constitutionally protected choice is the equivalent of denying a constitutional right. The governments argument is simple, and one that four state supreme courts and the U.S. Supreme Court have found compelling: There is no constitutional right to an abortion -- only a constitutional right to choose abortion. Therefore, the states failure to pay for such a choice is not the same as infringing on it. By protecting the right to choice, the Constitution does not also guarantee that the woman choosing to have an abortion will be able to obtain one, attorney William Roberts, general counsel to the state Agency for Health Care Administration, argues in his brief defending the states policy. But Bonnie Scott Jones, a lawyer with the Center for Reproductive Law & Policy, who represents the plaintiffs, says Florida constitutional law strongly favors the case for expanding abortion funding to include women whose abortions are deemed medically necessary. Among the plaintiffs Jones represents are women who sought abortions because of health conditions that include cancer, HIV, heart disease and schizophrenia. In each case, the brief argues, doctors determined that an abortion was necessary to preserve the physical or emotional health of the woman but Medicaid coverage was denied. As a result, Jones says, the women were forced to delay abortion until they could manage to pay for it, driving up the cost and exacerbating the health risk. By paying for all other medically necessary health care associated with reproduction, Jones argues the state is essentially coercing women to give up their constitutional rights. Though the constitution does not directly obligate the state to pay for abortions once the state has chosen to fund necessary medical care for its indigent citizens, the Florida Constitution requires it to do so in a manner neutral with the respect to fundamental rights, the plaintiffs argue. To do otherwise violates Floridas equal protection and privacy guarantees, Jones says. And in Florida, privacy is a particularly powerful argument. The Florida Constitution gives its citizens greater protection than that guaranteed under the federal constitution. We should have a strong chance in Florida because it has very strong privacy protections, Jones says. Among other things, the Florida Supreme Court has invoked the privacy amendment to overturn abortion laws requiring minors to get a parents permission and requiring women to undergo counseling prior to having an abortion. And since 1998, when voters agreed to add the words male and female alike to the state constitutions equal protection provision, Florida residents also have enjoyed explicit protection against gender-based discrimination. The state, however, argues that the Medicaid regulations do not affect any such fundamental rights. In contrast to overturned laws that required parental notification and counseling, the Medicaid regulations do not put any additional hurdles between a woman and her right to choose abortion, Roberts argues in his brief. To the extent their choice may be hindered, it is not hindered by these funding regulations, but by the womens poverty, which was not created by the state. Rene B.; Barbara S. Hunter; Tahara D. Wilson; Presidential Womens Center Inc.; Florida Womens Medical Clinic Inc. doing business as Womens Clinic; Aware Woman Medical Center doing business as Manhattan Magnolia Corp.; Aware Woman Health Center doing business as Magnolia Management and Marketing Group Inc.; Aware Woman Center For Choice Inc.; Feminist Womens Health Center in Tallahassee Inc.; Central Florida Womens Organization Inc.; Randall Brooks Whiteny, M.D.; Michael Benjamin, M.D.; Emergency Medical Assistance, Inc. v. State of Florida, Agency for Health Care Administration. Case No. SC00-989 (Miami Daily Business Review, February 9, 2001) * Chief Judge of 3rd Cir Takes Closer Look at Lead Counsel Selection -------------------------------------------------------------------- As federal judges increasingly require law firms to bid for the right to serve as lead counsel in class-action lawsuits, the chief judge of the federal appeals court in Philadelphia has decided to take a closer look at the practice. It's believed to be the first time the federal courts have examined the issue, which has gained prominence nationwide. At its conclusion, the effort is designed to yield guidance that judges across the country can use when handling such cases. Chief Judge Edward R. Becker of the 3d U.S. Circuit Court of Appeals has called together a task force to help judges determine when, if ever, to use a bidding process to select lead counsel. In announcing the formation of the committee, Becker noted that there have been no empirical studies on the effect of the bidding process or even a comprehensive look at the benefits and drawbacks of the approach. Despite the apparent success of such a process in terms of lowering transaction costs with seemingly greater benefit for the class, many respected judges and lawyers have opined that the bidding process is flawed in concept and practice, and that it presents professional responsibility problems," Becker noted in a press release. Deciding how to assign the leadership role in class actions could be especially intimidating to a newly appointed district judge, he observed. The working group includes federal judges, attorneys who have successfully bid for lead counsel positions, attorneys who have lost out in the bidding process and other lawyers who have not been involved in cases that used bidding. Chicago attorney Ronald L. Marmer, a member of Jenner & Block's management committee who is one of the authors of the Class Actions" volume of Moore's treatise on federal practice, will be one of the members of the committee. Marmer said he expects that the commission will draft a document laying out the pros and cons of using bidding to award lead counsel status, but he was unsure whether the task force would recommend whether to use the practice. Noting that the document would be a guide for judges, not a prescription, Marmer said, They're all Article III judges. We will only be as persuasive as the reasoning in our report." Marmer, who usually defends against class-action suits, has not participated in a case where there has been bidding for lead counsel. But he has watched the issue closely, he said, because he figures he will be party to one eventually. The named party in a class action usually brings an attorney to the case, but often it is the attorney, not the party, who is driving the litigation, Marmer said. The judges who have used bidding have reasoned that a sophisticated party, like a corporate client, would shop around for the best deal before hiring an attorney, and that by extension plaintiffs in a large class should have that same option. The task force will also seek to determine whether bidding presents more problems in certain areas of the law than others. For example, the group will determine whether bidding is appropriate in securities cases, where the largest shareholder is usually the lead plaintiff, said Marmer, who has served as chair of Jenner & Block's securities practice group. The bidding approach first gained widespread attention when a San Francisco jurist, U.S. District Judge Vaughn R. Walker, ordered law firms representing plaintiffs in a case against Oracle Corp. to bid for lead counsel status. Milberg, Weiss, Bershad, Hynes & Lerach LLP won the bid. Melvyn I. Weiss, of Milberg, Weiss, will sit on the task force commissioned by Becker. In New York last year, David Boies of Microsoft antitrust case and Florida recount fame, won a similar bid for his firm to represent a class of collectors who sued Sotheby's and Christie's for price-fixing. Boies and Ricard B. Drubel of Boies, Schiller & Flexner LLP served as lead counsel in the case. U.S. District Judge Lewis A. Kaplan proposed the auction after arguments among the five -- and later six -- law firms that initially had sought to share lead counsel status in the case. Kaplan added a twist in the bidding process by requiring the firms to submit a threshold recovery amount that the class would receive before the firms took their share. In explaining his decision, Kaplan wrote that traditional methods for paying for the plaintiffs' attorney's fees do not necessarily promote the best interests of the plaintiffs. The lodestar" method of calculating appropriate fees (multiplying billable hours by a risk factor) can prolong the trial process and encourage the attorneys to settle, even if it's not in the best interest of the plaintiffs, Kaplan wrote. The percentage-of-recovery method can present similar problems, he wrote. Early settlement allows counsel to collect a large fee after investing relatively little time in the case, rather than continuing the litigation in order to maximize plaintiffs' recovery but receiving a lower marginal rate of return on his or her work. Again, from the plaintiffs' perspective, this outcome is suboptimal," Kaplan argued. In re Auction Houses, No. 00 CV 00648 (Sept 22., 2000). Becker's task force will accept public comment in about two weeks, when it decides which questions it wants feedback on. Those questions will be posted on the 3d Circuit's Web page at pacer.ca3.uscourts.gov. Public hearings will be held on March 16, May 5 and June 1. The task force hopes to have a draft ready in October, so the 3d Circuit Judicial Conference will be able to discuss it at its meeting Nov. 13. (Chicago Daily Law Bulletin, February 8, 2001) * HCFA Published a Proposed Reg Outlining Medicare+Choice Appeals Rules ----------------------------------------------------------------------- HCFA published a proposed reg in the Federal Register outlining Medicare+Choice appeals rules. Publication was required under a settlement agreement of the Grijalva Medicare class-action lawsuit (MCW 8/21/00, p. 8). The rules require health plans to give prior notice when benefits are terminated and provide an expedited appeals process to contest such decisions. Call (202) 690-6145. (Managed Care Week, January 29, 2001) * UM Medical System Accuses Judge Nance of Bias in Malpractice Case ------------------------------------------------------------------- The agency that polices conduct of state judges has opened another investigation into Baltimore Circuit Judge Alfred Nance, after one of the state's top hospital systems accused the judge of bias. It is the second investigation into Nance in recent months by the Commission on Judicial Disabilities, which began an investigation in the fall into allegations that Nance behaved inappropriately with female prosecutors by touching their faces and making remarks about their appearance. As a result of the complaint lodged by the University of Maryland Medical System, Nance was temporarily barred in December from hearing malpractice cases involving the system, the second such action taken against him that month. He was temporarily removed from the criminal docket after the city's top prosecutor accused him of bias against her office when he wrote her a letter lambasting her lawyers. University officials formally filed the complaint against Nance on Dec. 20, after he presided over a malpractice trial last year in which the system was being sued in the death of a 2-year-old boy. In that trial, Nance said he found the case "horrifying," implied that nurses had modified records and suggested that hospital officials might have treated a boy in the hospital differently if he had not been from one of Baltimore's poor neighborhoods, court records show. "We felt strongly that (Nance's remarks) were inappropriate and unfounded," said Kathleen Gast Smith, director of claims and risk management for the medical system. Nance, 52, did not respond to a list of questions hand-delivered to his office. A former public defender and Legal Aid lawyer, he was appointed to the bench three years ago. The decision to file the complaint was approved by top officials, including the president of the University of Maryland Medical System, Dr. Morton I. Rapoport, and the dean of the medical school, Dr. Donald E. Wilson. Smith said the system had never filed a complaint against a judge before. In an interview, Del. Howard P. Rawlings, a Baltimore Democrat and a system board member, said he did not know about the complaint but said of Nance: "This judge has been known to be very undisciplined with regard to his remarks." The disabilities commission declined to comment about the complaint. Investigative counsel Steven P. Lemmey said all investigations are confidential. Possible punishment ranges from a reprimand to removal from the bench. Hospital officials contend that Nance treated witnesses for the hospital in a "substantially different manner" from the way he treated those for the opposing side and poisoned the jury against the hospital by sharply questioning their witnesses and making comments about their testimony. "We believe that this difference in treatment indicated a bias against the medical system," said Joan Shnipper, spokeswoman for the system. The hospital system lost the case and is appealing it to the state's higher courts, asking that a $ 717,000 judgment be vacated, and that a new trial be granted because of judicial bias. In his three years on the bench, Nance's behavior has been challenged on a number of fronts. In another incident, he had to agree with the disabilities commission to take "corrective action" after the commission investigated his jailing of a lawyer who left the courtroom for six minutes because his client was not there. Commission officials would not provide details of the corrective action. He has also drawn criticism from legal experts for practices such as asking potential jurors to stand up and announce their marital status in open court. He has been barred from the criminal docket until September and removed from hearing malpractice cases against the hospital system until the disabilities investigation is complete. In the malpractice case, Nance told lawyers for the hospital system and the plaintiffs last February that he felt the doctors and nurses might have acted differently if the 2-year-old boy who was the subject of the lawsuit had not been from a poor city neighborhood. Attorneys representing the mother of the boy contended that the hospital misdiagnosed the gravity of a boy's respiratory condition, and that he died as a result. The defense maintained that the boy could have died from ingesting poison. On Feb. 24, Nance told the lawyers outside the presence of the jury that he had "a great deal of concern as to how a human being was viewed" the night the boy, who lived in the 1700 block of W. Lanvale St., was brought to the emergency room. His concern, Nance said, was "whether or not this child, because of his location and where he lives ... whether or not if we had driven him in from Timonium where he lived in a house with a mother and father and a dog and a cat and two cars in the garage ... whether or not (nurses and doctors) would have jumped to the (same) conclusions." Four days later, the jury awarded the plaintiffs $3.5 million, which was later reduced to $717,000 because of a state ceiling on damages. At a hearing before Nance on May 19, hospital system lawyer Donald L. Devries Jr. asked the judge for a new trial, alleging that Nance had treated the defense differently from the plaintiffs because of his bias against the hospital as shown by his comments about the boy's economic status. He argued that Nance had a "look of disgust" on his face in front of the jury after one defense witness answered a question. He said Nance asked questions of witnesses and made comments during their testimony in a "critical," "derogatory" and "detrimental" tone. "The combination of those episodes and numerous others ... I submit did communicate to the jury the court's dislike of the defense's case (and)) unfairly influenced the jury," Devries argued. Nance responded that he was disturbed by some defense witnesses who testified with "glee on their faces as if they were joking around the coffeepot or the water fountain." "This court should not allow such levity or actions to happen during the course of a trial, especially when a wrongful death and injury as to negligence is questioned," he said. He added that he did not feel the jury was influenced, because he had instructed its members that anything he did should not figure in their deliberations. Devries challenged him, saying Nance had made a defense witness laugh after he told a joke in front of the jury. Nance began another salvo. He suggested that nurses might have modified their accounts of the boy's care on records after they found out he had died, perhaps to protect themselves from lawsuits. "The manner in which the reports were made ... is one that cries out for review," Nance said. "It is curious to this court of the identicalness, specifically in certain areas, of the actual writing of the reports to fill in the blanks after the nurses were told that the child had died." He ended the hearing with an admonition for the system. "The court's comments are more of such not for the purpose of just this case, but overall," Nance said. "I do hope it becomes a matter of discussion internally." (The Baltimore Sun, February 9, 2001) ********* S U B S C R I P T I O N I N F O R M A T I O N Class Action Reporter is a daily newsletter, co-published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Theresa Cheuk, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 301/951-6400. * * * End of Transmission * * *