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              Friday, February 16, 2001, Vol. 3, No. 34


ASBESTOS LITIGATION: W.R. Grace Seeks to Block Zonolite Class Cert.
BANK OF AMERICA: Suit Accuses of Selling Consumer Credit Bureau Files
CAPRIUS INC: Issues Shares to Settle Consolidated Securities Suit in MA
CINCINNATI CITY: Lawsuit against Police May Go Beyond Racial Profiling
CONSECO INC: Conseco fighting fraud claims from investors

DSL ACCESS: Service provider Fires Back Suing Covad Re Customer Contact
FORD MOTOR: Workders Sue Accusing of Age Bias; Evaluation Favors Youth
HMOs: Connecticut Doctors Wage Suit against Six Insurance Firms
HOLOCAUST VICTIMS: Financial Times (Lon) Talks of Signs Threatening Deal
INDIANA A.G.: Nursing Home Administrators File Suit against Complaints

INTERNET CAPITAL: SEC Suit Says Investors Defrauded on Internet Stock
KCSI: Shareholders Suit in NY Allege Spin-off Was Defacto Liquidation
KCSI: Wins in 1 Trial in MI over Rail Car Explosion; More Trials Set
LABOR READY: Temp Workers Allege Millions of Dollars in Unpaid Work
NBA, HEISLEY: Fans Frustrated with Vancouver Grizzlies Talk of Lawsuit

ODYSSEY: Dream Vacation May End in Courtroom for Payment Gone Astray
OPTIONS EXCHANGES: Ct Dismisses Suit over Conspiracy to Inflate Prices
PREDATORY LENDING: Journal Presents Review on Subprime Market
SCIF: CA Fund Loses Schaefer Ambulance Case Re Workers' Compensation
SOTHERBYíS, CHRISTIEíS: Clients Say Settlement Canít Compensate Enough

US MICROBICS: Suit Alleges of Improper Issuance of Stock to Co President
WAYNE, TAX BOARD: Homeowners Sue To Void Spot Reassessment for Bias
WOODSIDE ELEMENTARY: School District Investigates on Cause of Cancer


ASBESTOS LITIGATION: W.R. Grace Seeks to Block Zonolite Class Cert.
W.R. Grace & Co. is seeking a higher court order to block a Spokane
judge's decision approving a class action on behalf of Washington state
homeowners with asbestos-tainted Zonolite insulation in their attics.

The lawsuit filed last year was certified as a class action in December
by Spokane Superior Court Judge Kathleen O'Connor.

It seeks to represent thousands of state residents living in homes
containing Zonolite. It asks for money from W.R. Grace to identify, test
and warn residents about the potentially dangerous insulation.

The class action also seeks unspecified punitive damages against Grace
for failing to warn the public about Zonolite's hazards.

The insulation was sold until 1984 and was made from vermiculite ore
mined in Libby, Mont. It contains tremolite asbestos, a fiber that can
cause lung cancer or asbestosis.

Lead plaintiff is Marco Barbanti, a Spokane landlord with Zonolite in
some of his rental houses.

Grace also filed a motion Thursday that seeks to delay publication of a
court-approved notice to state residents about the Zonolite litigation
until after the Washington Court of Appeals hearing.

Grace can't automatically appeal O'Connor's class certification. An
appeals court commissioner has the discretion to grant or deny Grace's

"The court has to grant them that right. They always seek it in these
class actions, but in my experience, nobody has gotten it," said Darrell
W. Scott, lead counsel for the plaintiffs in the Zonolite case.

Grace officials "don't care to elaborate" on their reasons for seeking an
appeal, company spokesman Greg Euston said.

In a Friday hearing before Judge O'Connor, lawyers for Barbanti and Grace
clashed about the wording and style of the notice to state residents.
Both sides had prepared a draft notice for O'Connor's review.

She'd ruled last month that the case didn't warrant an emergency notice,
and that the notice should be worded neutrally to avoid pretrial bias.

Plaintiffs' attorney Scott presented a graphically striking notice with a
large picture of a bag of Zonolite insulation in an attic, with links to
government Web sites with information on the risks of asbestos exposure.

"We are answering 20 to 30 calls a day. It's very clear the public is
eager to receive a neutral statement on this," Scott said.

In contrast, Vern L. Woolston Jr., attorney for Grace, presented a
proposed warning that was a densely worded page of type resembling a
typical newspaper legal notice.

"This is not intended to create a media frenzy, " Woolston said.

O'Connor held up both sheets of paper.

"These are two radically different notices. This one (the plaintiffs')
will get the public's attention much more than this one (Grace's),"
O'Connor said.

Meanwhile, the U.S. Environ mental Protection Agency has agreed to set up
a national toll-free number to answer questions about Zonolite. The
number will be working by mid-February, said Bill Dunbar of EPA's
regional office in Seattle. (The Spokesman Review, February 10, 2001)

BANK OF AMERICA: Suit Accuses of Selling Consumer Credit Bureau Files
Twenty-seven consumers have accused Bank of America Corp. of violating
the Fair Credit Reporting Act by allegedly obtaining and selling their
credit reports.

The accusations were made Tuesday in a lawsuit filed in U.S. District
Court for the District of Maryland in Baltimore. The plaintiffs, who are
scattered throughout the United States, seek $81 million in damages.

Rodney R. Sweetland 3d, an Arlington, Va., attorney representing the
plaintiffs, said the group is only a fraction of the thousands of people
whose credit reports were allegedly obtained and then sold to a third
party by at least one Bank of America employee in 1999.

The lawsuit contends that a Bank of America employee obtained the credit
reports under false pretenses and sold them. Mr. Sweetland described the
alleged buyers of the reports as being involved in a "black market"
industry. He did not elaborate.

Bank of America did not return phone calls seeking comment.

Allegations of privacy violations have dogged several financial
institutions recently. Last year an investor sued Merrill Lynch & Co.
after his identity was disclosed by the brokerage despite his
registration of the account as "confidential." In 1999 the state of
Minnesota filed a lawsuit charging Fleet Mortgage, a unit of FleetBoston
Financial Corp., with deceptive telemarketing.

Bank of America is also accused of "negligently failing to implement and
maintain" procedures that would safeguard against violations like the
ones alleged in the suit. Mr. Sweetland said that 3,000 to 5,000 credit
reports were illegally obtained and sold.

Bank of America, one of the largest banking companies in the United
States, makes thousands of requests to credit bureaus every day. Because
of this volume, credit bureaus do not require it to give a reason for
each request. Contracts with the bureaus state that every request for a
credit report is a certification that it is being obtained for a
permissible purpose.

"Internally, they have to have some record as to why they obtained that,
and if they don't have a record, it's a violation," Mr. Sweetland said.

The plaintiffs notified Bank of America's general counsel in December of
the possible suit but got no response, Mr. Sweetland said. The plaintiffs
might seek class-action status, he said. (The American Banker, February
15, 2001)

CAPRIUS INC: Issues Shares to Settle Consolidated Securities Suit in MA
On January 7, 1998, the Company and Jack Nelson, the Company's former
Chairman and Chief Executive Officer were served with a complaint in
connection with a purported class action brought against them by Dorothy
L. Lumsden in the United States District Court of the District of

The complaint contains claims for alleged violations of Sections 10(b)
and 20(a) under the Securities Exchange Act and for common law fraud. Ms.
Lumsden purported to bring her action "on behalf of herself and all other
persons who purchased or otherwise acquired the common stock of the
Company during the period August 10, 1994 through and including December
12, 1997".

On February 2, 1998, the Company and Mr. Nelson were served with a second
class action complaint naming them as defendants in connection with
another action brought in the United States District Court for the
District of Massachusetts. This action was brought by Robert Curry and
the complaint alleged the same purported class and contained similar
allegations and claims as the class action complaint discussed above. On
April 24, 1998, the District Court consolidated the two class actions
claims into one for pre-trial purposes.

On January 7, 1999, the Company announced that it had reached a
preliminary settlement in the shareholder class action in Federal Court
in Boston. Under the terms of the settlement, Caprius made a cash payment
of $150,000 and agreed to issue 325,000 shares of common stock to
Plaintiffs. Caprius' insurance carrier contributed $100,000 of the cash
payment. In addition, the settlement also stipulated that in the event
Caprius sold all or part of its business within 12 months an additional
payment of $75,000 and issuance of 100,000 additional shares would be
made by Caprius to plaintiffs. Upon the sale of its Aurora Technology in
April 1999, the additional payment was made. For the year ended September
30, 1999, the Company reported $207,323 as total settlement costs, which
included $82,323 for the market value of the shares to be issued. During
the year ended September 30, 2000, the Company issued 425,000 shares of
common stock to the plaintiffs, thereby completing the settlement.

CINCINNATI CITY: Lawsuit against Police May Go Beyond Racial Profiling
Expect a class action lawsuit within 30 days against the city of
Cincinnati over the way its Police Division treats African Americans,
says an attorney handling the case, and expect claims that could go well
beyond racial profiling.

The suit will be filed in federal court here with the aid of the Ohio
Chapter of the American Civil Liberties Union, said attorney Ken Lawson,
and alleges a pattern of misconduct that could include excessive force
and illegal arrests.

Racial profiling has gotten most of the attention since Lawson and his
allies began collecting statements from residents early in January,
overshadowing the fact they are interested in input on other types of
problems people have had with police.

"We're not just talking about police stops, we're talking about
misconduct that goes on after stops and when police go into people's
homes," Lawson said.

The case will probably combine several pending lawsuits and add some new
litigants, Lawson said.

The ACLU and Lawson parted ways in January over which course to pursue
but renewed their alliance last week, Legal Director Ray Vasvari said.

Since existing cases will be part of the action, the litigation must be
filed by a mid-March deadline U.S. District Judge Susan Dlott set for
Lawson in December to mount a class action.

The Cincinnati Black United Front and other groups helped Lawson to
collect more than 300 statements last month from people alleging
mistreatment by city police.

Lawson said officers will begin this week going through hundreds of
closed cases of the Police Division's Internal Investigations Unit and
the Office of Municipal Investigations looking for further evidence for
their suit.

"In African American neighborhoods, people are being arrested, they're
being beaten up," Lawson said. "I don't believe you could get away with
that in other neighborhoods."

Police spokesman Lt. Ray Ruberg said the agency has internal means in
place to follow up on all complaints of police misconduct and is working
on a new system to capture data that should prove racial profiling is not
practiced widely.

Assistant City Solicitor Rick Ganulin, who is researching the city's
response to a lawsuit from Lawson and his associates, said the city has
no policy or practice of condoning police excesses. That's what the
plaintiffs would have to prove to make their case, he said, not that
there are problems with individual officers.

Fraternal Order of Police President Keith Fangman called the proposed
litigation an attempt to intimidate officers.

He said officers are now under intense scrutiny every time they stop a
motorist or a pedestrian, so it would be foolish for them to do so for
other than legitimate reasons. He predicted two consequences if the suit
is successful: Officers will issue a citation every time they make a stop
to justify it, or they will quit making stops altogether.

"Neither option is healthy for the community," he said.

Fangman said he thought that various levels of scrutiny that complaints
against police officers now go through - including Office of Municipal
Investigations, the Citizen's Police Review Panel and the Division's own
Internal Investigations Unit - are more likely to get at the truth than a

There are several officers in prison now because of investigations by
police, he said. "The false allegation that this Police Division looks
the other way at wrongdoing within its ranks is not only untrue, it's
insulting," he said. (The Cincinnati Post, February 13, 2001)

CONSECO INC: Conseco fighting fraud claims from investors
According to the Associated Press, a lawsuit filed by two pension funds
last year accusing Conseco Inc. of falsifying financial records to
inflate securities' prices was amended last week. The lawsuit was filed
by the Anchorage Police and Fire Retirement System and the State of
Louisiana Firefighters' Retirement System.

The lawsuit, which seeks class-action status, claims investors lost
millions of dollars because of the alleged scheme, whereby the company
manipulated loan records to lower its loan delinquency rates. The scheme,
the lawsuit says, was orchestrated by Steve Hilbert, Conseco's former
chief executive officer.

Because of that manipulation, the lawsuit alleges, investors were mislead
by false company information into buying Conseco securities at
"artificially inflated prices."

Conseco offered investors $2.3 billion in securities between April 1999
and April 2000 that were derived from loans made to U.S. consumers by
Conseco Finance. The Conseco unit consists largely of the former Green
Tree Financial Corp., a lender Conseco bought for $6 billion.

The lawsuit says that during 1999 and early 2000 executives directed
collection officers at Conseco Finance's Tempe, Ariz., office to change
the delinquencies on accounts - a process called "re-aging" - in order to
reach a predetermined percentage.

Hilbert traveled to Tempe to "oversee the doctoring of accounts as they
were being changed on Conseco's computer screens. ... The 're-aging'
process would take place during the last seven days of each month and
often become around-the- clock efforts during the final two days," the
lawsuit states.

Hilbert and chief financial officer Rollin M. Dick, who also is named in
the lawsuit, resigned in April after consistent financial troubles at
Conseco, whose stock dropped to less than one-tenth of its high in 1998.

Conseco's new CEO said the allegations made against former executives are
"wild" and unsupported by the facts. A statement Wednesday from Conseco
Chief Executive Officer Gary Wendt, a former GE executive who was named
in June to succeed Hilbert, said the lawsuit was one of the last legacy
issues from his predecessor. Wendt said the allegations "are so wild as
to be, literally, fantastic."

The lawsuit claims Hilbert personally directed the alleged manipulation,
but Conseco spokesman Mark Lubbers said the company's collections manager
in Tempe denies ever meeting Hilbert.

The lawsuit alleges investors suffered loses in five securities, only one
of which trades regularly. That trust-preferred security closed Wednesday
at $ 19.65. Its 52-week high is $22.25.

The lawsuit does not specify a damage amount. Daniel Berger, the lead
lawyer for the plaintiffs, did not return a phone message to his New York
office Wednesday.

Conseco's stock fell as low as $4.50 per share last year. The stock price
has since rebounded, reaching $18.60 last month and closing Wednesday at

The company has sold five of Conseco Finance's eight units in recent
months to restructure the troubled division, Lubbers said.

"We now have a company that produces cash for the parent and with much
slower growth produces very handsome earnings growth," Lubbers said. (The
Associated Press State & Local Wire, February 15, 2001)

DSL ACCESS: Service provider Fires Back Suing Covad Re Customer Contact
An Internet service provider whose customers lost high-speed access last
week when Covad Communications Inc. cut the connection fired back
Wednesday by suing Covad.

Covad mainly sells high-speed digital subscriber lines to Internet
service providers, which in turn sell them to businesses and residential
users. Last week, Covad unplugged two service providers, DSLnetworks and
Internet Express, for not paying millions of dollars of bills.

The move left thousands of customers nationwide without DSL access.

In its lawsuit, filed in Santa Clara County Superior Court, DSLnetworks
contends Covad has been calling, faxing and e-mailing many of its 3,500
affected customers and asking them to sign up for DSL service directly
with Covad. In some cases, top Covad executives personally have been
making the calls, said Dan Melmed, director of marketing at San
Francisco-based DSLnetworks.

That violates nondisclosure clauses in the customers' service agreements,
and also is "indicative of what Covad's intentions were, which is to
really take our customers away from us and take them directly," Melmed

The lawsuit asks that Covad be ordered to stop contacting DSLnetworks'

Covad spokeswoman Suluh Lukoskie said the Santa Clara-based company had
not been served with the lawsuit and would not comment.

Covad also has been reaching out to customers of Internet Express, but
that is allowed under an agreement the companies signed last year, said
Barry Diamond, chief Executive of Internet Express. Still, he expects to
join in a class-action lawsuit with other ISPs against Covad.

Both Internet Express and DSLnetworks pointed out that they had set up
payment plans with Covad when the service was cut off, and that their
deals with other DSL providers still are going strong.

DSL technology vastly increases the data capacity of ordinary copper
telephone wires. But Covad and competing DSL companies have been stung by
their complicated partnerships with Internet service providers, service
disruptions and installation delays in many areas. (The Associated Press,
February 14, 2001)

FORD MOTOR: Workders Sue Accusing of Age Bias; Evaluation Favors Youth
Workers accuse Ford of age bias Multimillion-dollar suit claims
evaluation process is skewed toward promoting youth Mark Truby, and Craig
Garrett The Detroit News

Nine white-collar workers at Ford Motor Co. filed a multimillion-dollar
age discrimination lawsuit against the automaker Tuesday in a Wayne
County court -- the first legal challenge to the company's controversial
employee evaluation process.

In addition, another group of salaried Ford employes is expected to file
a second class-action age and reverse-discrimination suit against the
Dearborn-based company this week in federal district court.

The claims come as some Ford employees complain that President Jacques
Nasser is attempting to sweep out older workers. Nasser has said he wants
to build a younger, more diverse management team that will embrace new
technology and rapid change while better reflecting Ford's customer base.

At issue in both cases is Ford's evaluation policy for its top 18,000
managers and executives, which is similar to the scholastic practice of
grading students on a curve.

Under Ford's policy instituted in January 2000, 10 percent of employees
receive A grades, 80 percent get B's and 10 percent receive C's. The
policy was altered this year so that only 5 percent of employees must
receive C grades.

Those who receive C's are not eligible for a raise or bonus and a C grade
for two consecutive years is grounds for demotion or termination.

Lawyers for the nine employees who filed suit in Wayne Country Circuit
Court claim Ford is using the grading scale to systematically weed out
older workers. They are asking the court to prohibit further use of the

"We believe Ford is using this system to get rid of older workers," said
Megan Bonanni, a lawyer for the plaintiffs. "Our hope is to stop this
program before anyone else gets hurt."

Ford lawyers had not reviewed the lawsuit late Tuesday.

Ford spokesman Edward Miller said the grading system -- referred to
internally as the Performance Management Process -- does not take an
employee's age into account.

"It's designed to be fair to everybody," he said. "We want all of our
leaders to contribute at higher levels, but the age of a worker shouldn't
be a consideration."

                         Cases Hard to Prove

While Ford is not the only major company using such a strict evaluation
method, the automaker has been among the most vocal in promoting and
defending the approach.

The grading system has struck a nerve at Ford, whose conservative
corporate culture traditionally favored the promotion of longtime, loyal
managers -- often white males. The new system has meant that many veteran
white-collar workers are being passed over for promotions by younger

The suit was filed Tuesday on behalf of Harold Siegel, 69, Charles
Jerzycke, 54, Jane Laird, 53, James Mulligan, 57, Ronald Robertson, 52,
Sanaa Taraman, 54, Pamela Tucker, 47, Ron Wojtas, 53, and John Wyrwas,

The lawsuit claims the plaintiffs unfairly received poor evaluations that
led to economic loss, embarrassment and mental anguish. The workers are
seeking several million dollars in damages.

Wayne State Law professor Kingsley Browne said age discrimination cases
are typically hard to prove.

"The ultimate question is whether the employers relied on age or some
legitimate criterion," said Browne, who specializes in employment law.
"It really requires fairly complicated circumstantial proof."

Wyrwas, in an interview, said he had a history of good reviews in his
23-year career as a Ford engineer. In February 2000, he was chosen to
participate in Ford's Six Sigma quality improvement program. Ford has
said the Six Sigma program is intended for top employees.

In December, he said he was informed he would receive a C grade and would
not be eligible for a raise or bonus. Wyrwas -- who received a $16,000
bonus last year -- claims his supervisor could not tell him specifically
where his performance came up short.

"I just thought, 'I can't believe I walked into this buzz saw,' " Wyrwas

Wyrwas said he first noticed that the culture had changed for older
workers after he returned in 1999 from a six-year Ford assignment in

"There was this pervasive fear," Wyrwas said. "At our age it was a
reality -- you don't get promoted."

Age suits on rise

Age discrimination cases are on the rise in corporate America as large
numbers of baby boomers reach age 50 and older, said Eric Matusewitch, an
equal employment opportunity specialist for New York City and a
well-known workplace discrimination expert.

"Older people are very aware of their rights," he said. "As companies
downsize the situation often lends itself to class-action lawsuits."

Later this week, attorney James K. Fett plans to file a separate
class-action workplace discrimination lawsuit against Ford on behalf of
at least five current employees. Fett will claim that Ford discriminated
by age and race.

His clients, all white, say they were unfairly given C ratings in the
last year on annual performance reviews. The workers he represents are
"getting ready to tell the whole story at Ford," Fett said.

He received inquiries from Ford workers after having successfully
represented several state police troopers in reverse discrimination

Fett plans to file his lawsuit on behalf of the Ford workers in federal
district court, and then plans to amend the complaint to include age
discrimination following a state Equal Employment Opportunity Commission
review in the coming weeks, he said. Each of the men is between 40 and 50
and is considered leadership level executives at the automaker.

Fett plans to cite several diversity programs at Ford as well as public
comments made by Nasser and other company executives as proof that the
automaker is making personnel decisions based on race and age.

Since Nasser, a Lebanese-born Australian, became president and chief
executive officer in 1999, Ford has increasingly made diversity a top
priority for managers. At the same time, it has become a hot- button
issue among employees.

Last year Nasser asked his top 300 managers to outline a plan to increase
the diversity in their organization. Part of the executives' bonuses
hinge on how well they accomplish these goals.

Fortune magazine in its July issue rated Ford the country's 30th best
company for minorities. No other automaker made the top 50. In 1999, Ford
made 30 percent of its new hires minorities and raised the percentage of
minority managers to 15 percent.

"Increasing diversity is a major goal," Miller said. "We want to be
inclusive. But the evaluations are based totally on job performance."

                                 The Issue

At issue in a class-action workplace discrimination lawsuit filed Tuesday
is Ford Motor Co's controversial evaluation system for upper level

Here's how it works: Ford requires managers to give 10 percent of
employees A grades, 85 percent B grades and 5 percent C's.

Why it's controversial: Those who receive C grades are not eligible for
an annual raise or bonus. An employee who receives a C grade two
consecutive years can be fired. (The Detroit News, February 14, 2001)

HMOs: Connecticut Doctors Wage Suit against Six Insurance Firms
The Connecticut State Medical Society on February 14 said it intends to
file suit during the day against six health-insurance companies, alleging
their business practices seriously compromise  medical care.

The companies expected to be named in the suit are Aetna Inc., Cigna
Corp., Oxford Health   Plans Inc., Anthem Insurance Cos., Connecticare,
and a subsidiary of Health Net Inc.

The society, which represents 7,000 doctors in Connecticut, isn't seeking
monetary damages.  Instead, it is asking for a judge to order the
companies to stop the alleged practices.

"We basically feel that these health plans breach the terms of their
contracts with physicians and engage in illegal policies and deceptive
practices," said Tim Norbeck, the group's executive director.

The society was expected to hold a news conference on February 14 that
will include the attorney general of Connecticut, who sued a handful of
health insurers last year, as well as patients and doctors who say they
have been harmed.

The lawsuit echoes similar suits that have been filed against
managed-care companies in the  past year and a half. Several of those
lawsuits are in a Florida court now awaiting a judge's  decision on
whether they will be combined into a huge class-action suit on behalf of
patients  and doctors.

The Connecticut doctors' complaints, Dr. Norbeck says, include these:
that the health plans  arbitrarily deny payments due to physicians, that
the plans make medical-necessity decisions   based on costs and that the
plans coerce doctors into unfavorable contracts.

The suit is expected to be filed in Superior Court in Waterbury. (The
Wall Street Journal, February 14, 2001)

HOLOCAUST VICTIMS: Financial Times (Lon) Talks of Signs Threatening Deal
After 18 months of bitter recriminations and legal wrangles,
international negotiators emerged triumphant last summer with a DM10bn
(Pounds 3.3bn) compensation deal for slave and forced labourers in Nazi

But in recent weeks, the highly detailed agreement has shown signs of
falling apart, mainly because of two new lawsuits in the US. After this
week's filing of a new lawsuit against IBM alleging complicity in the
Holocaust, the landmark deal is now threatened with a critical loss of
public confidence.

According to class-action lawyers at the heart of the Holocaust-era
cases, this may be just the start of their latest legal battles. Michael
Hausfeld, the lead attorney behind the IBM case, says he is looking into
the wartime records of about 100 US companies - including IBM - over
their complicity with Nazi Germany.

Other lawyers say they are planning to sue US-based investment banks and
law firms that were involved with the German regime. The suit may
intensify pressure on US-based companies to make their own payments for
Holocaust-related issues.

Under last year's agreement, which set up a special foundation to receive
the money and pay victims, German companies will not part with any funds
until they have been assured of "legal peace" in the US.

Several people on the German side of the negotiations believe that the
new suit against IBM breaches this requirement, opening the possibility
they will refuse to pay.

"Legal peace" technically covers only the dismissal of existing
class-action lawsuits - coupled with a commitment by the US
administration to back the dismissal of future lawsuits. Stuart
Eizenstat, the US envoy who mediated the settlement, said he was
confident that the required legal peace would be achieved.

But the political impact of the new lawsuit is substantial, regardless of
its legal grounds. Wolfgang Gib-owski, spokesman for the German industry
foundation for Holocaust compensation, said: "The IBM case is very
serious. We have a problem here in Germany because people are really
anxious all these cases will cause further delays in the payments to the
Nazis' victims.

"When we were negotiating this agreement, nobody thought that it would be
possible for someone to file lawsuits and class actions again while we
are waiting for the uncontested dismissal of other class actions. This is
not really a proof of the goodwill of the people who are doing this now."
The German deal seemed to be already struggling after the first legal
bombshell. While most of the biggest class-action lawsuits against German
companies in the US have been dismissed, Judge Shirley Wohl Kram refused
to dismiss a case against German banks at a hearing in New York last

The judge opted to give lawyers until the end of this month to answer
questions about the way the fund will operate. That aroused fears in
Germany that they would not be able to avert continued lawsuits in the

The IBM lawsuit, which was timed to coincide with the publication of a
new book, alleges it knowingly supplied punch card technology which was
used by the Nazis to organise their campaign of genocide.

Other law firms involved in the German settlement were apparently not
contacted by Mr Hausfeld about the IBM lawsuit, which took most of them
by surprise. Many of them appeared angered by Mr Hausfeld's decision,
which they believed could delay payments to victims or even destroy the
German settlement altogether.

Mr Hausfeld insists his lawsuit does not breach the terms of the German
agreement because it focuses on the US parent company. "IBM is not a
German company and it is not part of the German economy," he said. "This
has nothing to do with them. This is IBM USA and I don't think we could
have made it any clearer.

"I don't know why one of the world's foremost economies seems to be one
of the biggest cry babies."

Mr Hausfeld insists the lawsuit aims primarily to open IBM's archives, as
well as obtain contributions to a Holocaust compensation fund established
for US companies which profited from trade with Nazi Germany.

IBM said its German subsidiary had already contributed money towards the
German foundation, and added that the allegations were not new. It said
that "well-known facts appear to be the primary underpinning for these
recent allegations" and that it had already deposited the relevant
archives with universities in the US and Germany.

Dismissing the IBM case could take several months, and it is not clear if
the German foundation will seek to delay payments until then. In that
case, Mr Hausfeld says he would go back to his clients and "reassess" the
lawsuit - but only if the German foundation gave unconditional
commitments to begin payments. (Financial Times (London), February 15,

INDIANA A.G.: Nursing Home Administrators File Suit against Complaints
Two nursing home administrators, joined by the Indiana Health Care
Association, have filed a proposed class-action lawsuit alleging that
former Indiana Attorney General Karen Freeman-Wilson violated federal and
state law in filing administrative actions against them and 82 other

The suit alleges that the attorney general, faced with re-election and a
media investigation, lodged the complaints without first investigating
the merits of the charges. Trumbauer et al. v. Freeman-Wilson et al., No.
IP00-1975-C, removal order issued (S.D. Ind., Dec. 27, 2000).

The attorney general "repeatedly ignored basic, fundamental rights we all
enjoy as she tried to keep her job," Art Logsdon, president of the IHCA,
said in a press release. Freeman-Wilson was "politically motivated" to
expedite the filing of the actions because she was running for
re-election, explained J. Michael Grubbs of Barnes & Thornburg in
Indianapolis, the attorney representing the named plaintiffs in case. The
first set of charges, he said, were filed on the heels of an expose
published by the Indianapolis Star based on an extensive backlog of
complaints of substandard nursing home care. Freeman-Wilson lost her bid
in the November election to Republican Steve Carter. IHCA, an affiliate
of the industry's national organization, the American Health Care
Association, is a nonprofit corporation whose members include licensed
nursing homes in Indiana.

The suit, originally filed in state court on Dec. 5, was subsequently
removed to federal court pursuant to a petition filed by the attorney
general's office. The plaintiffs, Grubbs said, have decided not to seek a
remand to state court.

According to the complaint, Freeman-Wilson filed administrative actions
against 84 nursing home administrators to suspend or revoke their health
facility administrator licenses without first following proper

Each of the administrators worked for a facility that the Indiana State
Department of Health found to be providing substandard quality of care.
Medicaid regulations provide that inspection reports are to be turned
over to the Indiana Board of Health Facility Administrators within 10
days so that the board can independently investigate whether the
administrator violated the Standards of Competent Practice, 840 Ind. Code
Ann. @ 2-1 et seq., for administrators. The board, in turn, is to send
any complaints to the attorney general's Consumer Protection Division for
further investigation. After an investigation, the director of the
Consumer Protection Division reports the matter to the attorney general
if a sanction is warranted. The attorney general can then opt to
prosecute the licensee but only after a majority vote by the board.

The complaint alleges that more than 130 of these complaints of
substandard care were sent to the board by the health department in 1998
and 1999. The board, however, allegedly failed to do anything with them
until the Indianapolis Star started looking into the two-year backlog.

On June 12, 2000, one day after the Star published an article titled
"State Vows to Remedy Backlog of Complaints on Nursing Home Care,"
Freeman-Wilson filed administrative complaints with the board against 14
administrators. The next day, complaints were filed against 54
administrators. Another 16 complaints were filed 10 days before the
election. The plaintiffs allege that the complaints were filed "without
any investigation whatsoever."

In addition to Freeman-Wilson, the complaint names the director of the
Consumer Protection Division, Gregory Thomas, for allegedly failing to
investigate the complaints received by the board to determine whether the
administrators should be subject to disciplinary actions. The suit seeks
"prospective relief only," Grubbs said. The complaint asks the court to
enter a declaratory judgment finding that defendants failed to follow
Medicaid regulations, 42 C.F.R. @ 431.700-.715, and Ind. Code @ 25-1-7-7
and misrepresented that they have the authority to recommend sanctions
without first following proper procedure.

The complaint also seeks to permanently enjoin the defendants from
asserting that the board has jurisdiction over the pending charges. The
defendants should be barred from filing future charges without first
conducting an investigation, the complaint says, and a declaratory
judgment should be entered stating that the plaintiffs' were charged
without due process of law in violation of 42 U.S.C. @ 1983. "These cases
should be thrown out by the licensing Board and refiled only in those
very few cases where an appropriate investigation may find that an
administrator committed a knowing violation of the standards of competent
practice," Logsdon said. (Nursing Home Legal Insider, January 2001)

INTERNET CAPITAL: SEC Suit Says Investors Defrauded on Internet Stock
Two Florida men have been charged in a Securities and Exchange Commission
civil action with allegedly defrauding investors by selling them $2
million worth of unregistered securities in West Palm Beach investment
companies that purportedly held substantial stock in high-tech Internet
businesses. SEC v. Internet Capital Holdings. (E-Trading Legal Alert,
December 22, 2000)

KCSI: Shareholders Suit in NY Allege Spin-off Was Defacto Liquidation
On October 3, 2000, a lawsuit was filed in the New York state Supreme
Court purporting to be a class action on behalf of the Company's
preferred shareholders, and naming the Company, its Board of Directors
and Stilwell Financial Inc. as defendants. This lawsuit seeks a
declaration that the Company's Spin-off was a defacto liquidation of the
Company, alleges violation of Directors' fiduciary duties to the
preferred shareholders and also seeks a declaration that the preferred
shareholders are entitled to receive the par value of their shares and
other relief. (Jaroslawicz Class Action.)

KCSI: Wins in 1 Trial in MI over Rail Car Explosion; More Trials Set
In July 1996, Kansas City Southern Industries was named as one of
twenty-seven defendants in various lawsuits in Louisiana and Mississippi
arising from the explosion of a rail car loaded with chemicals in
Bogalusa, Louisiana on October 23, 1995. As a result of the explosion,
nitrogen dioxide and oxides of nitrogen were released into the atmosphere
over parts of that town and the surrounding area causing evacuations and
injuries. Approximately 25,000 residents of Louisiana and Mississippi
have asserted claims to recover damages allegedly caused by exposure to
the chemicals.

KCSR says it neither owned nor leased the rail car or the rails on which
it was located at the time of the explosion in Bogalusa. KCSR did,
however, move the rail car from Jackson to Vicksburg, Mississippi, where
it was loaded with chemicals, and back to Jackson where the car was
tendered to the Illinois Central Corporation ("IC"). The explosion
occurred more than 15 days after the Company last transported the rail
car. The car was loaded in excess of its standard weight, but under the
car's capacity, when it was transported by the Company to interchange
with the IC.

The trial of a group of twenty plaintiffs in the Mississippi lawsuits
arising from the chemical release resulted in a jury verdict and judgment
in favor of KCSR in June 1999. The jury found that KCSR was not negligent
and that the plaintiffs had failed to prove that they were damaged. The
trial of the Louisiana class action is scheduled to commence on June 11,
2001. The trial of a second group of Mississippi plaintiffs is scheduled
for January of 2002.

KCSR believes that its exposure to liability in these cases is remote. If
KCSR were to be found liable for punitive damages in these cases, such a
judgment could have a material adverse effect on the Company's results of
operations, financial position and cash flows.

LABOR READY: Temp Workers Allege Millions of Dollars in Unpaid Work
On February 14, temporary construction workers filed a class action
lawsuit in Alameda Superior Court in Oakland, CA against Labor Ready Inc.
(NYSE: LRW), one of the largest construction temporary help firms in the
country, charging that the company's payroll practices violate California
labor laws. If the court finds in favor of the workers, Labor Ready may
be required to pay millions of dollars in back wages to workers
throughout the state.

The issue at the heart of the class action suit concerns the definition
of "hours worked." As a matter of company policy, Labor Ready temp
workers must report to the company's dispatch offices between 5:00 and
6:00 a.m. to receive their daily assignment. Labor Ready, however, does
not consider its workers to be "on the clock" until they physically reach
the Labor Ready customer's worksite. Their laborers are considered "off
the clock" as soon as the workers leave the client's property at the end
of the day. But for most Labor Ready temp workers, the day is not over.
They must return to the Labor Ready dispatch office at the end of each
day to be paid.

The time spent waiting in the office for an assignment, and the time
spent traveling to and from the work site may add up to several hours per
day that are completely uncompensated.

Workers in California are required to be paid time and a half for working
over eight hours in a day. Under California law, virtually all temporary
employees who have worked for Labor Ready over the last four years could
be eligible for back pay for uncompensated work time.

"I think there is strong evidence that Labor Ready's payroll practices
violate California law," said David Rosenfeld, the plaintiffs' attorney.
"Under California law, 'hours worked' certainly includes the time spent
traveling to and from the Labor Ready office to the job sites of Labor
Ready clients, as well as the time that Labor Ready requires employees to
be present at its dispatch offices."

Source: Building and Construction Trades Department, AFL-CIO

NBA, HEISLEY: Fans Frustrated with Vancouver Grizzlies Talk of Lawsuit
Fans faced with the loss of the Vancouver Grizzlies expressed resentment
at team management and questioned the true motive behind the NBA giving
owner Michael Heisley permission to move the franchise to another city.

"I think this is a totally premeditated deal," said Russ Lowrie, who
watched February 13's game against the Boston Celtics with his
11-year-old son Brett. "You'll never convince me otherwise.

"This one has B.S. written all over it. Right from Day 1 this is what he
(Heisley) wanted. We've been played like a fiddle."

There was a scattering of boos from the smaller-than-usual crowd when the
U.S. national anthem was sang. One fan held up a red-lettered sign that
said Heisley Lied. Two others sat with paper bags on their heads.

A couple received a round of applause from people in their section when
they held up a large message aimed at both Heisley and NBA commissioner
David Stern.

The sign said: Dear Michael and Dave. We've been to 215 games, seen 41
wins, spent over $80,000. Sorry if we've disappointed you.

Sitting in the crowd, snacking on popcorn and chicken wings, Sandi Olson
and her friend Slyvia Trammell seethed.

The two women, dressed in business suits, were furious that when Heisley
bought the team for $160 million US last year he promised to try and make
basketball work in Vancouver. Now, less than five months later, he says
he must relocate because of losses that could exceed $40 million US.

"I feel like we should be filling a class-action lawsuit against either
the NBA or Heisley, saying we were misled," said Olson, who like Trammell
has been a season-ticket holder since the Grizzlies' first game in 1995.

"Heisley wanted a team and he took this one."

Olson, who works for a large Vancouver financial institution, disputed
claims from Grizzlies management and Stern that local businesses failed
to support the team.

"We did not have one piece of information come across our desk," said
Olson. "In the past, we used to get stuff from the (NHL) Canucks,
Grizzlies, everybody. It's irritating." (Winnipeg Free Press, February
14, 2001)

ODYSSEY: Dream Vacation May End in Courtroom for Payment Gone Astray
But the Odyssey 2000 trip, organized by a Seattle company, had problems
from the beginning. Many riders, who paid $36,000 each for the
experience, complained they had little support or medical help. The worst
part came when the trip ran out of money in Singapore, sending some
people home a month early and forcing the rest to fork over an extra

Of the 247 riders who started, including four Spokane residents, only 58

Now about 80 people have registered complaints with the state Attorney
General's Office and six have also filed suit in King County Superior
Court, seeking class action status. They are seeking triple damages under
the state's Consumer Protection Act.

"We were doing rides harder than what they do on the Tour de France,"
said Valerie Olson, 40, of Minnetonka, Minn. "I'm a very accomplished
rider, but I didn't sign up for a year of punishment."

On its Web site, the tour company, Timothy Kneeland & Associates, says
the extra $3,000 was the result of unexpected travel costs.

"Our fliers and brochures, which formed part of the contract, were very
clear on the possibility of a surcharge if fuel and transportation
increased beyond reasonable inflation rates," says David Timothy
Kneeland, president and chief executive. He is a former Spokane resident.

But the riders who are suing Kneeland say the contract was the problem.
They were given it to sign only after they had already paid for the trip
in full, they say - and they were told they had to sign it if they wanted
to go.

They were given no opportunity to get their money back, they say.

"His attitude was, if you don't like it, you can go home and I'll keep
your money," said Bruce Thompson, 41, of Golden, Colo.

Kneeland has been organizing bike tours since 1980. He did not
immediately return a call from The Associated Press, but in published
reports has said some clients did not realize it was going to be hard
work to bike around the world. They focused on being negative, he said,
and should have known not everything would go perfectly on the yearlong

The tour, which averaged 78 miles a day for five days a week, began Jan.
1, 2000, with the Tournament of Roses Parade in Pasadena.

Thompson, an avid biker who previously had positive experiences with
Kneeland & Associates, said he knew it was going to be a long trip after
he was abandoned three times in the first three weeks.

The riders were promised adequate support vehicles and also medical help,
Thompson said. Instead, when Thompson was stricken with what he believes
was a reaction to a parasite from Mexican water, he had to continue
riding until finally a police truck picked him up.

In Costa Rica, he and Olson said, about 40 riders made it 7,000 feet up
the 11,171-foot Cerro de la Muerta, "Hill of the Dead," before stopping
at a restaurant in the cold, rainy dusk. Company Vice President Karen-Ann
Sutter berated the group for stopping, they said.

"She just chewed everybody out for not riding, for (not) being in enough
shape," Thompson said. "She got mad and took an empty van, drove it down
the hill and said, 'Find your own way down."'  Group members who spoke
Spanish persuaded locals to give them a ride in an empty tour bus and
flatbed truck.

Gary Hoffman, a doctor from Nevada, says he was kicked off the tour in
April because he was complaining about the lack of medical personnel and
other perceived shortcomings - comments the company found "disruptive"
under the contract, he said.

"I was simply abandoned in rural France and had to find and pay for my
transportation to return to the United States," he wrote in court papers.

Thompson and a woman he met on the tour left the group in France. They
continued on their own - and at their own cost - through Europe,
Australia, China and other countries.

Olson, who rode across the United States in 1995, flew to Los Angeles
rather than pay the extra $3,000 to continue on from Singapore.

"In terms of the trip, I had a great time, saw amazing places and met
great people," Olson said. "But if you look in terms of the trip I bought
and the services they provided, it was just awful."

Not everyone found the company's efforts disappointing. On a Web site
devoted to the trip, Erik Estrem and Micki Mallory, of Sherwood, Ore.,
thank the "awesome staff ... for the tremendous amount of work they put
into making this trip possible."

The four Spokane riders were Kay Putnam, Dave and Pam Zack and Patricia

Putnam left the tour in September. Dave and Pam Zack left a few weeks
early rather than pay the additional $3,000. Danner nearly finished the
tour, but suffered a head injury in an accident while biking the final
days to Pasadena after returning to the United States. (The Spokesman
Review, February 11, 2001)

OPTIONS EXCHANGES: Ct Dismisses Suit over Conspiracy to Inflate Prices
The U.S. District Court here dismissed a class-action suit brought
against the major options exchanges that had alleged the exchanges
conspired to stifle competition and to inflate option prices.

The ruling could throw into question a recent settlement between the
plaintiffs and many of the defendant exchanges and options-trading firms.
Plaintiffs are expected to appeal the decision, said their lead counsel,
Andrew D. Friedman.

The suit, filed in early 1999, involved more than 21 class-action
complaints against the American Stock Exchange, the Chicago Board Options
Exchange, the Pacific Exchange and the Philadelphia Stock Exchange, as
well as the market makers and specialists that trade options. The New
York Stock Exchange, whose options-trading business was sold to the CBOE
in 1997, also was named as a defendant.

At the heart of the lawsuit was the so-called gentleman's agreement that,
until recently, existed among the options exchanges. The arrangement
allowed options listings on most major stocks to be carried exclusively
by one exchange. In the lawsuit, the plaintiffs claimed that investors
were hurt economically when they traded options listed on just one

In his judgment, U.S. District Judge Richard Conway Casey found that the
court has no jurisdiction to determine whether the allegations have
substantive merit.

According to Mr. Friedman, the plaintiffs already had reached a
settlement, pegged at about $85 million, with all the defendants except
the Big Board and seven of the market makers. The settlement agreement
also isn't subject to the outcome of this motion for summary judgment,
Mr. Friedman added.

Soon after the lawsuit was filed, the gentleman's agreement complained
against has gone the way of fractions at the NYSE. Since August 1999,
multiple listing has become the norm. (The Wall Street Journal, February
15, 2001)

PREDATORY LENDING: Journal Presents Review on Subprime Market
The faces behind the skyrocketing foreclosure rate in Georgia often
belong to elderly homeowners who worked their entire lives to support
their families and pay off their homes. House rich, but income poor, they
become the perfect quarry for a predatory lender.

Predatory lending targets a market known as "subprime" --- consumers who
have poor credit, are young and inexperienced, or are elderly and have
equity in their homes. The subprime market --- with profits six to seven
times that of the conventional market --- grew nationwide from $20
billion in 1993 to $150 billion in 1998.

That explosive growth has not escaped Main Street banks, many of which
are now adding subprime units. And in what advocates call reverse
redlining, banks set up their subprime affiliates in neighborhoods they
once shunned.

Banks insist their subprime units make loans to people who have credit
blemishes, and that the higher rates cover the higher risks. But the
industry is out of control and extorts vulnerable borrowers by charging
high fees and interest, collecting high pre-payment penalties and packing
pre-paid, unnecessary credit insurance into loans secured by the
borrower's home.

"It is legalized theft," charges David Beck, spokesman for the North
Carolina coalition that passed the nation's first state law reining in
predator lenders. Here in Georgia, state Sen. Vincent Fort (D-Atlanta) is
proposing similar limits, but Senate Bill 70 faces resistance from
bankers and lawmakers in debt to the banking lobby.

"It is happening all over Georgia," says Fort. "We're the predatory
mortgage-lending capital of the United States."

The state's Department of Banking and Finance says its hands are tied.
"We do think some of these abuses do occur, but until there are laws that
actually prohibit them, there's not a lot we can do," says spokeswoman
Leslie Bechtel.

Marietta attorney Howard Rothbloom has represented thousands of victims
of predatory lending and won substantial settlements. "I cannot remember
being in a single home of a person targeted who did not have a Bible on
the table," he says. "These are religious and trusting people. And they
are of a certain generation who believe in paying their bills."

Beautie Bailey is an example. The 82-year-old owns her Atlanta house in
full, and except for a brief time when she held a Davison's charge, she
has never even had a credit card. Yet a month after her husband died last
August, Bailey signed her name to a 15-year home mortgage with Peachtree
Funding Group at an annual percentage rate of 12.147 to finance a roof

Peachtree Funding CEO Larry Ridgeway defends his loan, saying the rate
offered was "competitive and fair." However, conventional banks were
offering 15-year rates of just 7 percent on the day that Bailey signed
her mortgage papers and home equity loans were hovering around 9 percent.

How do people end up in debt to a predatory lender? Imagine a low-income
homeowner who suddenly ends up with a bill that he can't meet, such as a
$500 credit card charge.

Somebody calls and offers to make him a new loan and consolidate his
debt. They convince him to increase the loan to pay off his car or to get
a new furnace, and suddenly this person who couldn't pay a $500 credit
card bill now has a $17,000, 15 percent interest loan on a house that he
once owned free and clear.

As the borrower struggles, the lender often proposes new loans in a
profitable scam called "flipping" that piles on new charges. A 1991 loan
of $567 to meet medical bills put Winfred Wood of Austell in the clutches
of predatory lenders who flipped his loan nine times, until he owed
three-fourths of his annual income.

Wood and 2,100 other Georgians have just agreed to settle a class-action
suit case against Associates Financial Services of America for $9
million. The suit was filed by Rothbloom, whose co-counsel at the time
included Roy Barnes, now governor.

"These victims are not losers," says Rothbloom. "They are people who
worked their entire lives. They may have worked cleaning commodes, but
they worked every single day. By some fluke, they managed to stay in
their homes and earn an asset with equity in it."

Fort's bill narrows the profit margin in high-cost loans by banning such
abusive but lucrative practices as flipping, charging fees for paying off
loans early, and the financing of credit insurance into the loan. It
requires lenders to verify that the borrower is able to afford the
payments and mandates home-ownership counseling.

State Sen. Don Cheeks (D-Augusta), the powerful chairman of the Senate
Banking and Financial Institutions Committee, admits that "there is
definitely predatory lending in Georgia." Yet Cheeks is not backing
Fort's bill, saying the North Carolina law has "slowed down the economy
there tremendously. Four different banks have refused to make loans on

That's not how North Carolina tells the story. "We have seen one lender
pull out who did an insignificant amount of lending," said Beck. "But
North Carolina lending numbers were up last year."

As director of the Home Defense Program of Atlanta Legal Aid Society,
William J. Brennan Jr. has battled abusive mortgage lending practices in
Georgia for 30 years. He's always asked why his clients didn't seek
financing from a conventional bank, especially since a national report
says half of them would have qualified for standard loans.

While Brennan agrees that consumers ought to be savvier, he has a few
questions of his own:

"Why can't these lenders charge a point or two higher to cover any risks
associated with the loan? Why aren't the big banks in these communities?
Why do they put their subprime affiliates there instead? Why do they have
to rip people off?"

At a conference Wednesday on predatory lending, the Rev. Gerald Durley
talked about the devastation these loans have wreaked on elderly members
of his church, Providence Missionary Baptist.

"This is misery and evil, side by side," he said. If the General Assembly
fails to take action to stop these predatory practices, it will become
misery, evil and cowardice, side by side by side. (The Atlanta Journal
and Constitution, February 15, 2001)

SCIF: CA Fund Loses Schaefer Ambulance Case Re Workers' Compensation
SCIF vs. Superior Court of Orange County [Schaefer Ambulance Service,
Inc., et al.]

Before 1995, minimum premiums for workers' compensation insurance were
set by the Department of Insurance. The department relied on the Workers'
Compensation Insurance Rating Bureau (WCIRB) to gather and process the
relevant financial information from insurers.

In April of 1994, Schaefer Ambulance Service, Inc., Sectran Security,
Inc. and Universal Courier Limited (collectively Schaefer) filed a class
action lawsuit against the State Compensation Insurance Fund (SCIF).
Schaefer alleged breach of the implied covenant of good faith and fair
dealing and negligence. Specifically, Schaefer alleged that SCIF had
misallocated and then misreported the insureds' financial information to
the WCIRB for calendar years January 1, 1984 through December 31, 1992.

According to the lawsuit, SCIF forwards the insureds' financial
information to the WCIRB in unit statistical reports. And each of these
reports contains three columns: indemnity, medical, and defense expense
or allocated loss expense. Only expenses reported under the indemnity and
medical columns are used to calculate an insured's experience
modification. Schaefer alleged that medical-legal reports prepared at the
employer's or insurer's request by doctors other than the treating
physician should be allocated as defense expense. But, according to
Schaefer, SCIF either intentionally or negligently misreported such
expenses as "medical" thus artificially inflating the insureds'
experience modification and, in turn, al-lowing SCIF to collect excessive

                         Refusing Access

Schaefer also alleged that SCIF had a policy of refusing access to
individual claims files, frustrating its insureds' ability to monitor
SCIF's handling of various workers' compensation actions, and barring its
insureds from information, including how medical-legal expenses were
reported to the WCIRB. According to Schaefer, these policies were
designed to prohibit insureds from questioning whether SCIF administered
claims reasonably and to prevent discovery of SCIF's intentional or
negligent manipulation of reserves and misreporting of financial
information to the WCIRB.

The class action lawsuit was stayed for several years while Schaefer
pursued its administrative remedies. The WCIRB ruled that, prior to 1993,
medical-legal reports should have been reported as defense expenses, so
long as they did not include expenses for actual medical treatment. SCIF
appealed the decision to the classification and rating committee within
the WCIRB which upheld the ruling in January of 1995. SCIF then appealed
the decision to the Insurance Commissioner. After an evidentiary hearing,
an administrative law judge issued a proposed decision in May of 1996
affirming the WCIRB's ruling. The Insurance Commissioner adopted the
proposed decision that same month. In September of 1996, SCIF sought a
writ of mandate from the trial court directing the commissioner to vacate
his order. But on March 16, 1999, the trial court denied the request.
Judgment was finally entered in May of 1999. And by May of 2000, the
Court of Appeal had affirmed the trial court in an unpublished opinion.

                         The Stay is Lifted

Meanwhile, the stay on the class action lawsuit was lifted on March 19,
1999. In May of 1999, SCIF moved for judgment on the pleadings,
contending that the action was barred by Insurance Code 11758. In its
entirety, that section states: "No act done, action taken or agreement
made pursuant to the authority conferred by this article shall constitute
a violation of or grounds for prosecution or civil proceedings under any
other law of this State heretofore or hereafter enacted which does not
specifically refer to insurance." SCIF contended that this is a
ratemaking case and that 11758 bars all civil claims arising from
workers' compensation ratemaking disputes unless brought under a statute
which specifically relates to insurance. And since none of Schaefer's
claims are brought under such a statute, they are barred by 11758.

The trial court was unmoved, however, and denied SCIF's motion, and the
Court of Appeal summarily denied SCIF's ensuing petition for writ of
mandate and immediate stay request. Finally, the California Supreme Court
granted SCIF's petition for review. While acknowledging that "the
question is close," the Supreme Court concluded that 11758 "does not
immunize SCIF from civil liability under these circumstances."

                       Concerted Activity

The Court noted that 11758, by its express terms, refers to an act done,
action taken or agreement made pursuant to the authority conferred by the
Insurance Code. And what the Insurance Code authorizes here is
"cooperation between insurers, rating organizations and advisory
organizations in ratemaking and other related matters to the end that the
purposes of this chapter may be complied with and carried into effect."
(Insurance Code 11750(a).) According to the Court, "such price-setting
activity would arguably otherwise be barred by the antitrust laws." So
11758 was enacted to immunize insurers and rating organizations from
anti-trust laws so that they can act in concert to make rates. Thus, in
order for the miscalculating and misreporting of loss information to fall
within the scope of 11758's immunity, it must be related to such
authorized cooperation in ratemaking and other related matters. In other
words, 11758 applies only to concerted activity otherwise barred by the
antitrust laws and not to individual misconduct of an insurer regarding
its insured.

Here, however, Schaefer does not contend that the mere act of reporting
information to the WCIRB was misconduct. Nor does Schaefer contend that
SCIF violated any antitrust laws by reporting such information. Rather,
Schaefer disputes the manner in which SCIF analyzed and allocated
Schaefer's financial data prior to sending it to the WCIRB. Thus, the
Court concluded that Schaefer's allegations are not precluded by 11758's
immunity. The Court specifically emphasized, however, that "in reaching
this result we are not asked to and do not reach any conclusion as to
whether Schaefer has stated a valid cause of action against SCIF."

Don E. Clark is a senior staff counsel with the State Compensation
Insurance Fund, specializing in appellate practice. (California Worker's
Comp Advisor, February 14,2001)

SOTHERBYíS, CHRISTIEíS: Clients Say Settlement Canít Compensate Enough
Subject to Court approval, a group of about 130,000 buyers and sellers at
Sotheby's and Christie's may soon divvy up the $512 million that the two
art auction houses have agreed to pay to settle a class-action antitrust
lawsuit. The plaintiffs alleged that the auctioneers had secretly
colluded in setting commission fees, resulting in an overcharge to
customers of $286.55 million. The bountiful amount of the restitution and
the novel procedure used to select the ubiquitous litigator David Boies
and his partner Richard Drubel as the plaintiffs' attorneys are likely to
have a significant impact on some future class-action cases. The jury is
still out, though, on whether the settlement will produce any lasting
benefits for customers of the art market's Big Two.

Certain clients who did business with the two auction houses during the
period of commission collusion have already complained that the
settlement won't adequately compensate them. Those who had bought and
sold at the houses' foreign branches, including their important London
salesrooms, were dismayed by U.S. District Court Judge Lewis A. Kaplan's
decision last month to dismiss their cases on the grounds that U.S.
courts did not have jurisdiction over such foreign activity. The
claimants still have the option of suing in foreign courts.

Some buyers of works priced at more than $50,000 also feel left out.
Jeremy Epstein, an attorney for the deep-pocketed J. Paul Getty Trust in
Los Angeles, argued at a hearing before Judge Kaplan earlier this month
that if the 15% buyers' premium for bids up to $50,000 had been
artificially inflated, then the 10% charge for the amount above that
figure might have been also. The settlement only provides relief for
purchases up to $50,000, because Mr. Boies said he could find no
convincing evidence that the pre-existing 10% fee had been affected by
the recent intrigues.

The most controversial aspect of the settlement, which some feel would
reinforce the duopoly, is the payment of about one-fifth of the
restitution in the form of certificates valid during a five-year period
to pay sellers' charges for future consignments at the two houses. Even
the lawyers' fees would be paid partly in certificates, which would
probably make Boies, Schiller & Flexner the largest single holder of
those instruments. The certificates served to reduce the sting of the
settlement by allowing the auction houses to spread part of the payment
over time. Another advantage for the auction houses is the likelihood
that some certificate holders will never use them.

"It is a peculiar way to settle an antitrust suit, to say that the
victims have to do business with those who victimized them to obtain
restitution," declared one objector, Thomas Broussard, at the court
hearing. He noted that competing art auction houses, such as Phillips, de
Pury & Luxembourg, might find it more difficult to attract consignments
from certificate holders. Concern about the certificates' possible
anticompetitive effects prompted Judge Kaplan to seek opinions from two
economists and from the Justice Department, in advance of his ruling.

The certificates' proponents point out that bearers are not compelled to
bestow their wares on Sotheby's and Christie's to get compensated. Under
the terms of the settlement, they can instead sell their certificates on
the open market or, beginning four years after issue, redeem the
certificates for cash from the two houses, at full face value. Other
auction houses could theoretically also honor the certificates for their
own consignors and later sell them or redeem them for cash.

Another source of contention is the certificates' applicability against
sellers' fees only, not buyers' premiums, even though the plaintiffs have
alleged that the overcharge for buyers was more than twice that for
sellers. The auction houses successfully argued that all bidders must
compete on a "level playing field," with no difference in their method of
paying the premiums.

Just how few of the class-action claimants are likely to have any
personal use for the certificates was revealed in the analysis of the
proposed settlement requested by Judge Kaplan from two economists,
Kenneth Elzinga and Denise Neumann Martin. Their report revealed that
only 12% of Sotheby's clients and 14% of Christie's clients were repeat
sellers between 1993 and 1999. The rest, who were purely buyers or
one-time sellers, are likely to be forced to see what the certificates
will bring on the open market or wait four years to get cash.
Anticipating that market value could be 80% of face value, and taking
into account the time value of money, the settlement gives the
certificates a face value of $125 million, with an estimated fair market
value of $100 million.

What matters most to the art market is whether the resolution of this
lawsuit will result in any significant benefits for present and future
auction customers. The outlook, based on recent developments, is
uncertain at best. Sellers' commissions have declined since the
price-fixing came to light; buyers' premiums have risen. The phenomenon
of "virtually identical commission and premium rates," attacked in the
lawsuit as having been fixed by collusion, still exists today. Acting
independently, the auctioneers evidently still deem it in their best
interests to keep their sellers' fees identical.

The current complex schedule, which took effect last February at both
houses, lists commissions ranging from 2% to 20% of the hammer price,
depending on the total volume of sales and purchases done at the house by
the consignor during the calendar year and on whether the seller is a
private individual, dealer or museum. The higher the volume, the lower
the commission. Individuals pay the most, museums the least. A fee below
the published rates may be negotiated for customers who turn over more
than $5 million in merchandise during one year.

As for buyers, fees at Sotheby's are now 20% on the first $15,000 of the
hammer price, 15% on the next $85,000 and 10% over $100,000. At
Christie's, buyers pay 17.5% on the first $80,000, 10% on the excess. At
both houses, the rates on lower dollar amounts are now higher than the
rates challenged in the lawsuit.

Whatever its possible drawbacks, the settlement could set new standards
for what class-action plaintiffs may attempt to extract from defendants
who don't want to go to trial. Customary procedure in such negotiations
has been to start at the amount of the alleged overcharge and settle for
less. In this case, Mr. Boies and Mr. Drubel correctly perceived that the
auction houses' urgent desire to put this financial and public-relations
debacle behind them could sweeten the pot. The auction houses' agreement
to pay 179% of the alleged overcharge was regarded on all sides as
unusually generous.

Under an innovative procedure adopted by Judge Kaplan to choose lead
counsel for the plaintiffs, Mr. Boies' firm had to win big to get its
fee. Befitting a lawsuit about auctions, the judge held his own auction
to determine which firm could best represent the class. He required each
bidder to set a base dollar amount for recovery. Any settlement below
that amount would result in no payday for the lawyers. One-quarter of any
recovery above that amount would go to the lead counsel for fees and
expenses. Mr. Boies' firm, selected on the basis of both its high bid of
$405 million and Judge Kaplan's assessment of its ability to achieve that
goal, now stands to receive $26.75 million of the $512-million

Law firms that worked on the case before the lead counsel was selected
may also be paid a share, undetermined at this writing, of the $512
million. Saying that the auction had been "successful beyond my
imaginings," Judge Kaplan noted the large size of the settlement and
observed that the lead counsel's fee, at "5.2% of the recovery . . . is
among the lowest fee awards ever made in comparable litigation on a
proportionate basis."

This result may well encourage other judges to conduct similar auctions
in future class-action lawsuits. It should certainly discourage deals
struck in the backseats of limousines between officials of competing
firms. What long- term effects it may have on the auction houses'
financial health and their relations with their customers remain to be
seen. (The Wall Street Journal, February 15, 2001)

US MICROBICS: Suit Alleges of Improper Issuance of Stock to Co President
In March 1999, the Company was served with a shareholder derivative
lawsuit titled Merriam v. U.S. Microbics, et. al, Marin County Superior
Court, Case No. 991288. This lawsuit alleges, among other things, that
certain stock was improperly issued to the President of the Company and
to certain consultants for services. The Company has formed a special
independent committee of the Board of Directors to investigate these
claims. The Company has engaged outside legal counsel to represent it in
this matter and intends to vigorously defend this action. Although
management believes the lawsuit to be without merit, the Company believes
an unfavorable ruling would have a material adverse impact on its
financial position and results of operations.

WAYNE, TAX BOARD: Homeowners Sue To Void Spot Reassessment for Bias
The owners of four homes are suing the township and the Passaic County
Board of Taxation, claiming the recent controversial spot reassessment of
3,700 properties is discriminatory.

In a lawsuit filed Tuesday in state Superior Court, Paterson, the
homeowners argue that the reassessment makes them pay a disproportionate
share of the local tax burden.

The number of homeowners in the suit may grow considerably when a
Superior Court judge decides on March 2 whether the complaint can be
classified as a class-action lawsuit.

"You can't just discriminate like this,"said Frank Cartel, the Clifton
lawyer representing homeowners Ruth D'Angelo, William and Marion English,
William Manning, and Brenda K. Jezierski.

In December, Wayne's chief tax assessor, Dorothy Kreitz, sent a letter to
homeowners indicating that a reassessment, an updating of taxable
property values on the municipal books, was needed because their homes
were being taxed below 75 percent of market value.

The average increase in value was about $ 30,000, which under last year's
tax rates would bring about an $ 800 increase in municipal, school, and
county taxes.

The suit calls for all the increases to be voided except in cases where a
home underwent some type of improvement.

Reassessments, done by a computer model, usually are triggered when 5
percent of properties within a neighborhood are sold and those sales show
a change in market 1 value. Assessors delineate the size and scope of tax

After a public hearing on the matter, the Passaic County Board of
Taxation decided last week that the spot reassessment did not violate
state law.

Township officials, who could not be reached for comment Wednesday, have
said the program is standard in many municipalities statewide. They have
said most residential property is near 84 percent of its assessment.

A similar uproar occurred in Wayne in 1995, when 2,000 homes were
reassessed. (The Record (Bergen County, NJ), February 15, 2001)

WOODSIDE ELEMENTARY: School District Investigates on Cause of Cancer
CONCORD, Calif. (AP) - The Mt. Diablo Unified School District is
investigating Woodside Elementary School because 10 people from the
school have been diagnosed with breast cancer in the last three years.

Three of the five teachers who have been diagnosed with the disease have
been diagnosed in the past two months, and five parents who volunteer
regularly at the school have been diagnosed with the cancer since 1999.

Concord-based Professional Service Industries will try to tell whether
air, water or other contamination has contributed to the spread of
cancer. The company will interview teachers and staff members and may
test for asbestos or other carcinogens. (The Associated Press State &
Local Wire, February 15, 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
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Washington, DC. Theresa Cheuk, Managing Editor.

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

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