/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/010409.MBX C L A S S A C T I O N R E P O R T E R Monday, April 9, 2001, Vol. 3, No. 69 Headlines AUTO INSURANCE: IL Appellate Court Upholds $1.05B Verdict Vs State Farm BANK ONE: $45M Offer to Shareholders Answers 2nd Hit re First USA Unit BUY COM: Faces CA Suits Filed in 2000 over Consumer Privacy BUY COM: Settles Consumers' Lawsuit Filed in 1999 in CA CENDANT CORP: Two Plead Not Guilty to Wire Fraud and Conspiracy COUNCIL: Parents Lose Suit for Further NJ Pro Bono Lawyer Assignments DAVID DEBAENE: President of Open Door Online Faces Securities Suit in NJ E STAMP: Intends to Vigorously Denfend Consumer Lawsuit in NY HOLOCAUST VICTIMS: Polish P.M. Urged Germany for Interim Solution HOLOCAUST VICTIMS: Schroeder Rules Out Payments Before US Settlement HOLOCAUST VICTIMS: US Judge To Present Lawsuit By April 13 IBP, INC: US Merger May Affect Molson's Sale of Montreal Canadiens INMATES LITIGATION: Suit Vs CA over Medical Needs Says Lives Are At Risk LERNOUT & HAUSPICE: KPMG Charges Former L&H Officials Of Blocking Audit PACER LOGISTICS: Both Sides to Appeal in CA Suit over Business Practices PINNACLE HOLDINGS: Sued for Securities Fraud, Schiffrin & Barroway Says ROCK HILL: Countersues 6 Investors Who Claimed Scam Investment Program ST. CHARLES: Mold To Keep School Shut for Testing and Remediation SUN PIPE, SUNOCO: Sued in PA over Luzerne County Pipeline Rupture TOBACCO LITIGATION: Ex-Flight Attendant Loses Suit in Miami TOXIC WASTE: Lawsuit Blames New York Landfills For Health Woes U OF ILLINOIS: Can't Stifle Anti-Illiniwek Talk with Potential Athletes U-M: Court Rules Law School Can Resume Admitting New Law Students U.S. BUREAU: Ruling Bars Delivery of Water to Farmers at CA-OR Border * The American Banker Publishes Article re Overdraft Coverage Preys ********* AUTO INSURANCE: IL Appellate Court Upholds $1.05B Verdict Vs State Farm ----------------------------------------------------------------------- In a class action lawsuit pitting 4.7 million auto insurance policyholders across the United States against the nation's largest insurer, State Farm Mutual Automobile Insurance Company, the Illinois Court of Appeal, in a unanimous opinion, upheld a $1.05 billion award for consumer fraud and breach of contract involving State Farm's practice of specifying imitation crash parts in auto repairs. Upholding the verdict issued in October of 1999 on behalf of the class, the court's 40-page opinion found no error in either the trial of the action as a class action or the conduct of the trial. The court, however, reduced the original $1.18 billion judgment entered by the trial court by $130 million to subtract an overlapping award on the two separate counts. The total remaining award of $1,050,000,000 is one of the largest verdicts every upheld on appeal. The award is on average approximately $223.40 for each of the 4.7 million members of the class. Elizabeth J. Cabraser of Lieff, Cabraser, Heimann & Bernstein, LLP, one of the trial and appellate counsel for the class, noted that "the appeals court opinion was a victory for consumers who are unable to obtain meaningful relief from large corporations on their own and a vindication of the class action device." The team of attorneys involved in the appeal included lead trial counsel Don Barrett of the Barrett Law Offices of Lexington, Mississippi; and Tom Thrash of Little Rock, Arkansas. Plaintiff counsel at trial, and on appeal, also included Patricia Littleton of Marion, Illinois; Elizabeth Cabraser, Morris A. Ratner and Scott P. Nealey of Lieff, Cabraser, Heimann & Bernstein, LLP of San Francisco, California; Michael Hyman, William H. London and Melinda J. Morales of Much, Shelist, Freed, Denenberg, Ament & Rubenstein of Chicago, Illinois, and Ted Kionka of Carbondale, Illinois. If any further appeals by State Farm are unsuccessful, consumers will be notified by the Court of the claims process by which the monetary award will be distributed, and allowed to participate in that process. The affected members of the class who can share in the consumer fraud verdict are U.S. residents (except people residing in Arkansas and Tennessee) who were insured by a vehicle casualty insurance policy issued by State Farm and who made a claim for vehicle repairs under their policy and had non-factory-authorized and/or non-OEM "crash parts" installed on their vehicles, or received monetary compensation determined in relation to the cost of such parts. "Crash parts" are vehicle components typically repaired or replaced as a result of crash damage, rather than as a result of normal vehicle usage. Excluded from sharing in the award are employees of State Farm, its officers, its directors, its subsidiaries, or its affiliates, and persons who resided in California when these policies were issued/executed prior to September 26, 1996. The class period for purposes of the consumer fraud award starts on July 28, 1994 and ends on February 23, 1998. Individuals who received estimates containing non-OEM crash parts during this period of time will be eligible to participate in any eventual award. The Avery team will follow up to attempt to obtain damages for more recent policyholders affected by State Farm's fraudulent practices. Members of the class need take no action at this time, as no claim process will be established until any appeal in State Farm has been decided. Contact Lieff, Cabraser, Heimann & Bernstein, LLP Plaintiffs' Class Counsel Press Only: Elizabeth Cabraser, 415/956-1000 Morris A. Ratner, 415/956-1000 Scott P. Nealey, 415/956-1000 http://www.lchb.com BANK ONE: $45M Offer to Shareholders Answers 2nd Hit re First USA Unit ---------------------------------------------------------------------- Bank One Corp.'s $45 million offer to settle a shareholder class action is the second such hit the bank has taken recently in connection with its First USA card unit. In December the company agreed to pay $40 million to settle a class action over card fee policies. The more recent settlement offer, which came to light recently in a letter to Bank One shareholders and must still be approved by a judge, was made in response to a lawsuit filed in December 1999 that charged some former officers and directors of Bank One and First USA with making "false and misleading statements" about financial performance -- statements that artificially inflated the stock price, the lawsuit further charges. If approved at a June 1 hearing, the settlement offer will be paid to shareholders who bought Bank One shares between Oct. 22, 1998, and Nov. 10, 1999. About 396 million shares were purchased in that period, according to the plaintiffs. The proposed settlement will come to 11 cents per share before the deduction of attorney's fees and expenses. In their suit, the plaintiffs had asked for $148 million, or 37 cents a share. Oct. 22, 1998, was the date of the first earnings report and telephone briefing for analysts after the merger of Bank One and First Chicago NBD. John McCoy, who was chief executive officer of Bank One at the time, conducted the proceedings. Nov. 10, 1999, was the date of a second earnings warning released by Bank One as its financial performance suffered. The class action, which alleges that the company's financial statements did not comply with Generally Accepted Accounting Principles, grew out of a lawsuit first filed Dec. 14, 1999, in U.S. District Court for the Northern District of Illinois, Eastern Division. In January and February 2000, a number of similar complaints were also filed in the court, each seeking class action status. On Feb. 18, 2000, the court consolidated the cases. Bank One and First USA filed a joint motion to dismiss the complaint, which was denied. In its offer to settle, Bank One denied the allegations of the complaint and did not acknowledge "fault, wrongdoing, or liability." Bank One Corp. spokesman Tom Kelly said the proposed settlement would have no impact on earnings. He declined to comment on the litigation. (The American Banker, April 6, 2001) BUY COM: Faces CA Suits Filed in 2000 over Consumer Privacy ----------------------------------------------------------- On March 13, 2000 a class action suit was filed against the company in the U.S. District Court for the Central District of California alleging that the company collects, uses and discloses personally identifiable customer information to its third party advertising server and other advertisers without first informing customers or seeking their permission in violation of several federal statutes. The complaint seeks damages of up to $10,000 per class member per violation, actual and punitive damages, restitution, attorneys' fees and costs plus injunctive and other equitable relief. On April 7, 2000 a companion lawsuit was filed in the Superior Court of the State of California, County of Orange alleging violations of state statutory and common law based upon the same facts and federal causes of action as alleged in the federal class action. The state complaint seeks statutory damages of up to $5,000 per class member per violation, plus actual and punitive damages or restitution, attorneys' fees and costs and injunctive and other equitable relief. On April 25, 2000 a third class action suit was filed in the United States District Court for the Central District of California alleging violation of the same federal statutes as those in the federal class action filed on March 13, 2000. As with the first two class actions, the complaint alleges that the company collects, uses and discloses personally identifiable information of consumers without first informing them or obtaining their consent. The complaint seeks unspecified statutory damages, compensatory damages, punitive damages, attorneys' fees and costs, plus declaratory, injunctive and other equitable relief, including disgorgement of all profits and restitution of all monies acquired by means of any act or practice declared to be unlawful. The classes have not yet been certified in any of these actions and such actions are in their early stages. BUY COM: Settles Consumers' Lawsuit Filed in 1999 in CA ------------------------------------------------------- In March 1999, a class action suit was filed against the company in the Orange County, California Superior Court alleging breach of contract, fraud and violation of consumer protection laws based on an error in the pricing of a computer monitor that was offered for sale on our Web site. Shortly thereafter in March 1999, a similar class action case was filed in Camden County, New Jersey. Both actions claimed that Buy Com Inc. intentionally mispriced the monitors as a scheme to cause more people to visit its site. Plaintiffs also claimed that Buy Com attempted the same scheme with other products. The plaintiffs were seeking compensatory and punitive damages in addition to injunctive relief. Neither action set forth the amount of damages sought by the plaintiffs. In September 2000, the company received preliminary approval from the Orange County Superior Court to settle both lawsuits for an aggregate of $575,000. Final approval of the settlement was granted by the Orange County Superior Court in December 2000. CENDANT CORP: Two Plead Not Guilty to Wire Fraud and Conspiracy --------------------------------------------------------------- Newark, N.J. (AP) -- Two former executives pleaded not guilty April 5 to charges they falsely inflated the value of a Connecticut company involved in the merger that created Cendant Corp. One of the defendants sought to have a new judge chosen for the case. Cendant's disclosure three years ago of the accounting fraud led to a one-day, $14 billion stock meltdown and triggered a huge class-action lawsuit by aggrieved shareholders. Walter Forbes, former chairman of Cendant, and E. Kirk Shelton, a former executive vice president, both face one conspiracy charge and one count of wire fraud, from a Feb. 28 indictment, as previously reported in the CAR. COUNCIL: Parents Lose Suit for Further NJ Pro Bono Lawyer Assignments --------------------------------------------------------------------- Most lawyers in New Jersey can breathe a collective sigh of relief -- at least for now. A federal judge dismissed Pasqua v. Council, a class-action suit that, had it prevailed, might have flooded lawyers here with pro bono assignments for hundreds of deadbeat parents. U.S. District Judge Garrett E. Brown Jr. in essence said that because there was not ample evidence the state denied counsel to parents accused of reneging on child support payments, he found no need to order state courts to supply lawyers to indigents facing jail time. "New Jersey law appears amenable to adjudicating plaintiffs' claims," Brown said in a recent memorandum opinion. Still, the issue isn't going away. David Perry Davis, the Princeton lawyer representing the plaintiffs, maintains New Jersey violates the 14th Amendment rights of indigent deadbeat parents sent to jail without being afforded a lawyer. He plans to appeal on grounds the judge's cited cases don't apply to the Pasqua cases. In addition to asking the judge to release jailed indigents in the class, Davis also had petitioned the judge to order New Jersey courts to begin appointing counsel whenever an indigent defendant faces incarceration. If Brown had so ruled, the number of court-ordered pro bono assignments might have dramatically increased. Although it's unknown how many of the annual 50,000 deadbeat parent enforcement cases involve defendants unable to afford a lawyer, Davis said at any given point there are 20 to 80 people -- who never had the advice of an attorney -- held in county jails for failing to make timely child support payments. He maintained the ruling does not explain why the name plaintiffs -- Anne Pasqua, Ray Tolbert and Michael Anthony -- were not offered lawyers. He said he is preparing to file a reconsideration motion with Brown and, if that is unsuccessful, he will appeal to the 3rd U.S. Circuit Court of Appeals. "Personally, I believe the decision is illustrative of a federal judiciary that has been progressively closing the doors of the federal courthouse to civil rights claims over the past 25 years," Davis said. The judge, however, noted the plaintiffs did not produce evidence that New Jersey denied them representation. "There is no evidence that the New Jersey courts would not fairly provide an opportunity for (alleged deadbeat parents) to raise and adjudicate all of their constitutional claims, both state and federal," in the course of proceedings, Brown said. Brown cited Younger v. Harris, a 1971 U.S. Supreme Court case that "espouses a strong federal policy against federal court interference with pending state judicial proceedings absent extraordinary circumstances." Federal interference is appropriate, Brown said, if the plaintiff can establish that either the state proceedings are conducted in bad faith or to harass, or some other extraordinary circumstances exist, such as proceeding under a flagrantly unconstitutional statute. Davis said his appeal, in part, will claim the Younger decision applies only to ongoing cases, not those in which defendants already are jailed. Under a procedure established after the 1992 New Jersey Supreme Court decision in Madden v. Delran, private attorneys must represent certain clients not covered under the public defender mandate. To date, that has not included the representation of indigent defendants who owe court-ordered child support. New Jersey is the only state with mandatory pro bono and lawyers here have grumbled about it for years. In filing Pasqua -- and naming as defendants everyone from Chief Justice Deborah T. Poritz to Judge Richard J. Williams, director of the Administrative Office of the Courts -- Davis emphasized the suit is not aimed at letting deadbeats off the hook. "It's about making sure the system works," he said. "The constitution has to be enforced, and child support has to be enforced and they are not mutually exclusive. We can do both." Currently, it appears indigent deadbeat parents fall through the cracks. The public defender usually doesn't get involved in child support cases because they are civil matters. And Legal Services offices do not represent deadbeat parents because they generally serve parents owed the support payments. Deputy Attorney General Barbara J. Stoop moved to dismiss the case, arguing the defendants -- including Mercer County Judges Gerald J. Council and F. Lee Forrester -- are covered by judicial immunity. In Pasqua, the primary plaintiff is Anne Pasqua, who shared custody of her two sons with her ex-husband. But she says she had psychiatric problems that worsened and two years ago she lost custody. She was ordered to pay $ 160 a week in child support, Davis said. After she fell behind, she was arrested May 15. When Pasqua appeared before Forrester, the judge told her she had to come up with $ 3,400 as a release amount. Pasqua alleges nothing was said about an attorney. When she couldn't pay, the judge sent her to jail. She was released two weeks later without having made any payments. The Pasqua suit names the two other plaintiffs and asserts it represents "all persons similarly situated." (New Jersey Lawyer, March 26, 2001) DAVID DEBAENE: President of Open Door Online Faces Securities Suit in NJ ------------------------------------------------------------------------ In the Superior Court of New Jersey, Bergen County, Camille M. Barbone and Tom Carley, individually and as a class and derivatively on behalf of the corporation filed an amended complaint and expanded their lawsuit against David DeBaene as President, CEO/Director, the officers and the Directors of Open Door Online, Inc. The amended complaint names the following defendants: David DeBaene, Norman Birmingham, individually and as a director and CFO of Open Door Online, Randolph E. Biemel, individually, Peter Cohen, individually, Edmond Lonergan, individually and as President of Corporate Architects, Jennifer Hanson, individually and as president of Mission Bay Consultants, Mission Bay Consultants, a Florida based business, Richard Greene, attorney at law in the State of Florida and counsel to Open Door Online, Steev Panneton, individually and as a director of Open Door Online, Corporate Architects, an Arizona corporation and Renee Garcia, individually and as a principal of Florida Atlantic Stock Transfer and Florida Atlantic Stock Transfer, a Florida corporation. The suit alleges that DeBaene and the Board of Directors have committed fraud by substituting, without consent or authorization, securities in lieu of payment on account of promissory notes given by ODOL in exchange for loans from investors. It also alleges that the acts of DeBaene and his co-defendants constitute crimes in the nature of "racketeering" including, but not limited to, theft, forgery, fraudulent practices and fraud in the offering, sale or purchase of securities. Further allegations describe misrepresentations made by DeBaene and Biemel, through Mission Bay, when raising capital for ODOL whereby they solicited loans for ODOL through the guise of no risk, high interest promissory notes. Other counts allege the sale of unregistered securities, the sale of unregistered or registered securities by unlicensed persons, the solicitation of investments through false representations, the creation of false debt on ODOL's books, the issuance of shares to DeBaene and his co-defendents without any valid consideration with the intent to hinder, delay and/or defraud the creditors and shareholders of ODOL and the interference with the property rights of the Plaintiffs. The Plaintiffs are also seeking a motion to block the shareholders' meeting called by Defendants for April 10th, 2001 on the grounds that the Proxy issued is incomplete, misleading, and was not solicited in accordance with the rules and regulations of the Securities Exchange Commission and the Corporate laws of New Jersey. Open Door Online, Inc. is a New Jersey corporation that is publicly traded over-the-counter on the NASDAQ. For further information, please contact the attorneys for Camille M. Barbone and Tom Carley: Milazzo, Fortunato, McCann & Murray, LLC 15 Warren Street, Suite 20 Hackensack, New Jersey 07601, (201) 343-7070 (Telephone), (201) 343-7916 (Facsimile) E-Mail: MFMLAWYERS@cs.com E STAMP: Intends to Vigorously Denfend Consumer Lawsuit in NY ------------------------------------------------------------- On March 16, 2001, a plaintiff filed a purported consumer class action suit against E Stamp Corp. in the Supreme Court of the State of New York, County of Kings. The suit alleges that the company breached its contracts with plaintiff and other customers. The plaintiff seeks compensatory damages and disgorgement of monies received in connection with the sale of Internet postage products. The company is currently investigating the claims against it and intends to vigorously defend this action. HOLOCAUST VICTIMS: Polish P.M. Urged Germany for Interim Solution ----------------------------------------------------------------- Polish Prime Minister Jerzy Buzek urged Germany on April 6 to find an ''interim solution'' so hundreds of thousands of elderly victims of Nazi-era slave labor can receive compensation soon, but he was rebuffed by Chancellor Gerhard Schroeder. ''We have nearly reached the final round,'' Buzek said, referring to delays in payments from the 10 billion mark (dlrs 4.6 billion) German government-industry fund. ''But it's that 'nearly' that has a very important meaning,'' he said after talks with Schroeder in Berlin, pointing out that a victim dies every 11 minutes. Schroeder, however, rejected changing German laws to release money before U.S. class-action lawsuits against companies that used slave labor during World War II are dismissed and German industry says it feels secure from potential future claims. Buzek said he discussed an ''interim solution'' with Schroeder, given that it doesn't appear the lawsuits will be dismissed soon. He gave no further details, but many critics have called on the foundation in recent weeks to start payments as a good-will gesture. Trying to remedy the problem, the Polish foundation handling Nazi labor claims is paying 1,400 zlotys (dlrs 350) to victims older than 80. So far, 50,000 checks have been sent and the group is still accepting new applications. Class-action lawsuits in the United States prompted leading German companies to establish the fund initiative in 1999 and thousands of other companies have since joined. Although problems with industry gathering their 50 percent of the fund persisted for months, the companies now have pledged their entire share and say they will release money when all existing lawsuits are dismissed. In addition, a German law requires parliament to confirm legal security for companies before the government can hand over its half of the fund. On April 5, the parliament passed a resolution urging U.S. courts to dismiss the cases so payments to victims can begin. Some victims' groups have suggested changing that law to allow preliminary payments before the lawsuits are dismissed. Schroeder flatly rejected that proposal. ''There is no such possibility,'' he said. ''Every attempt to unravel the entire package won't help the victims.'' Differences over the Nazi labor issue aren't the only strains in the Polish-German relationship. Neighboring Poland is also the largest candidate from former communist eastern Europe seeking entry into the European Union, a prospect that has Germans worried about a flood of cheap labor given their persistently high unemployment. Although Schroeder stressed that ''Germany sees itself as an advocate for Poland's entry into the EU,'' he has also proposed a transition period of up to seven years before Poles would be allowed to work in other member countries. Poland hopes to join the economic bloc in 2003. Buzek said that plans for the transition period ''still must undergo very many negotiations and need further work.'' Still, Schroeder said he hoped Poland would participate in the next European Parliament elections in 2004 and stressed that his proposals for a transition period were flexible. (AP Worldstream, April 6, 2001) HOLOCAUST VICTIMS: Schroeder Rules Out Payments Before US Settlement -------------------------------------------------------------------- German Chancellor Gerhard Schroeder on April 6 ruled out beginning compensation payments to former Nazi slave laborers before a legal settlement is reached with US courts. Polish Prime Minister Jerzy Buzek had proposed beginning payments immediately when he met in Berlin with Schroeder on April 6. He pointed out that the average age of the some million former slave and forced laborers is over 80 and "every 11 minutes, a former forced laborer under the Nazis dies. Time is of the essence." But Schroeder repeated his backing of German industry's demands for guarantees against further lawsuits from the former slave laborers. He said the delay was caused by court cases in the United States. US judge Shirley Kram, whose refusal to dismiss a lawsuit filed by Nazi-era slave laborers is holding up compensation for the victims, has until April 13 to present vital written arguments to a New York Appeals Court, Otto Graf Lambsdorff, the German negotiator in the case to compensate the World War II victims, said in Berlin last Friday April 6. He said the plantiffs, former slave and forced laborers, had until April 18 to submit their arguments and that a ruling was expected in early May though no date had been set. Kram last month caused a new hitch in long-running efforts to compensate victims of Nazi labor camps when she refused to dismiss a class-action suit against German and Austrian banks, saying she doubted whether a German foundation set up last July to compensate the victims would ever hand out the payments. Under an agreement brokered last year by the United States the plaintiffs were to drop lawsuits targetting Germany. In return, the foundation funded by German business and industry would pay out compensation of some five billion dollars to the around one million survivors of the Nazi work camps. German businesses were to receive immunity from any future suits, such as the one Kram has refused to dismiss. The Nazi-era victims want Kram's decision overturned as they are anxious for the payment of compensation to begin. (Agence France Presse, April 6, 2001) HOLOCAUST VICTIMS: US Judge To Present Lawsuit By April 13 ---------------------------------------------------------- US judge Shirley Kram, whose refusal to dismiss a lawsuit filed by Nazi-era slave laborers is holding up compensation for the victims, has until April 13 to present vital written arguments to a New York Appeals Court, German officials said. Otto Graf Lambsdorff, the German negotiator in the case to compensate the World War II victims, said the plantiffs, all former slave laborers, had until April 18 to submit their arguments and that a ruling was expected in early May though no date had been set. Kram last month caused a new hitch in long-running efforts to compensate victims of Nazi labor camps when she refused to dismiss a class-action suit against German and Austrian banks, saying she doubted whether a German foundation set up last July to compensate the victims would ever hand out the payments. Under an agreement brokered last year by the United States the plaintiffs were to drop lawsuits targetting Germany. In return, the foundation funded by German business and industry would pay out compensation of some five billion dollars to the around one million survivors of the Nazi work camps. German businesses were to receive immunity from any future suits, such as the one Kram has refused to dismiss. The Nazi-era victims want Kram's decision overturned as they are anxious for the payment of compensation to begin. (Agence France Presse, April 6, 2001) IBP, INC: US Merger May Affect Molson's Sale of Montreal Canadiens ------------------------------------------------------------------ Molson Inc. is confident its sale of the Montreal Canadiens and their arena will be completed despite a report that prospective buyer George Gillett Jr. was having financial problems. "Right now, we are in the process of negotiating the final terms of the purchase agreement," John Paul MacDonald, Molson's vice-president of corporate affairs, said. "We feel it will be finalized in the weeks ahead. "We are negotiating with Mr. Gillett and we expect it to be closed." The Globe and Mail reported that the deal may be in trouble due to the collapse of a $3.2-million US merger at the end of March involving a meat-packing company in which Gillett holds a substantial interest. The report said Gillett hoped to finance his $250-million purchase of 80.1% of the Canadiens and 100% of the Molson Centre with proceeds from the sale of his shares in IBP Inc., the largest meat packer in the United States. IBP, which is facing a class-action lawsuit from shareholders, was to have merged with Tyson Foods Inc. Molson agreed to sell majority interest in the team to Gillett on Jan. 31. Molson would retain a 19.9% interest and become the main sponsor. (The Edmonton Sun, April 6, 2001) INMATES LITIGATION: Suit Vs CA over Medical Needs Says Lives Are At Risk ----------------------------------------------------------------------- California prisoners suffer needlessly and are at risk of death because state corrections officials are ill-trained, underfunded and indifferent to inmates' medical needs, according to a class-action lawsuit filed April 5. The suit follows years of persistent complaints about health care in state prisons, and the recent deaths of eight female inmates. Filed in federal court in San Francisco, it alleges that deficient care by Gov. Gray Davis' administration subjects prisoners to unconstitutionally cruel and unusual punishment. "When inmates are denied the medical care they need, it can amount to a death sentence," said Don Specter, director of the Prison Law Office, a nonprofit firm handling the case with a team of private lawyers donating their time. "Gov. Gray Davis . . . knows the care is substandard and he has failed to take action," Specter said. Though it was filed on behalf of all 160,000 California inmates, the lawsuit names nine plaintiffs scattered at prisons around the state. One, Raymond Stoderd, has advanced AIDS and claims that his pain medication was consistently interrupted, causing suffering and damaging side effects. A second plaintiff, Gilbert Aviles, is a paraplegic who claims that his urinary catheter--which doctors ordered changed every 14 days--was left unchanged for two months, causing infections that required hospitalization. Officials at the Department of Corrections would not discuss individual cases, calling inmate medical files confidential. But spokeswoman Margot Bach, while describing prison health care as "compassionate and adequate," acknowledged that the system has a shortage of doctors and that inmates do not always receive prompt treatment. She added, however, that "these problems aren't confined to the prison system. My mother has cancer, and she waits for weeks for approval from her HMO to get something her doctor has said will help her. "We aren't perfect, but we're striving mightily to provide quality medical care for inmates, many of whom come into prison with ongoing health issues," Bach said. April 5�s legal action comes seven years after another lawsuit by the Prison Law Office prompted a federal court to order sweeping reforms in how the state treats mentally ill inmates. Specter and his associates also have filed suits attacking medical care at several individual penitentiaries. The class action, Specter said, marks the largest ever against a statewide prison system. Inmate lawyers say they tried for 18 months to settle the lawsuit, but that negotiators for the governor cut off talks in January. State officials would not comment on that claim, saying negotiations were to be kept secret. But they characterized the Prison Law Office demands as excessive. "They seem to think we should have Cadillac treatment for inmates that is far beyond the treatment available to you and I who have medical insurance," said Steve Green, assistant secretary of the Youth and Adult Correctional Agency. "We provide treatment that is comparable to that available in the community." Specter disagrees, and the lawsuit claims deficiencies ranging from a shortage of medical staff to delays in treatment and laboratory tests, poor health screening of incoming inmates, and a lack of protocols for dealing with chronic illnesses such as diabetes, heart disease and AIDS. The suit also charges that inmate medical records are "disorganized and incomplete," a problem compounded when prisoners are transferred from one institution to another. Green agreed that corrections record-keeping--both for medical purposes and basic tracking of inmates' lives behind bars--is "a nightmare." "Most of our record-keeping is on paper, and that's a big problem," Green said. "We want to automate our system and we're working on that. But it's expensive." Though Davis has not freed up funding for that project, Green said the governor has made significant increases in spending on medical care in recent years. In the 1999-2000 fiscal year, spending on inmate health care was $ 566 million. The governor's budget for 2001-2002--which may change, given the energy crisis--calls for $ 724 million. Specter said the increases are like "offering a Band-Aid for a condition that requires major surgery." He added that although the public may not view state spending on inmate care as a high priority, most prisoners will return to society and pose potential public health problems if their diseases--many of them infectious--are not treated. Among those cheering the filing of the lawsuit is Mary Kelly, who teaches high school history in Simi Valley. Kelly's son, James, died of tongue cancer that she says went untreated while he served a two-year drug sentence. Kelly said that her son's lesion was visible but that prison doctors claimed he was injuring himself by biting his tongue. That assessment led to a months-long delay in treatment and allowed the cancer to spread to his neck, she said. By the time he completed his sentence and was released, he had lost 60 pounds and could scarcely eat, his mother said. He was immediately hospitalized, but his cancer was too advanced to halt and he died four months later. "This was a cancer that was totally treatable, but it wound up killing him because nobody would listen," Kelly said. "My son was a drug addict, but he was not a bad person. I never dreamed something like this could happen in America. Until you have a loved one in the system, you have no idea what goes on." Corrections spokeswoman Bach would not comment on the Kelly case, but Specter said the family sued the state and received a settlement, the details of which are private. To win the class-action case, the inmates must prove that state officials have shown "deliberate indifference" to their medical needs. The suit asks the court to issue an injunction requiring the Department of Corrections to improve its health care system and award monetary damages to the nine named plaintiffs. (Los Angeles Times, April 6, 2001) LERNOUT & HAUSPICE: KPMG Charges Former L&H Officials Of Blocking Audit ----------------------------------------------------------------------- Accounting giant KPMG accused former officials of troubled high-tech firm Lernout & Hauspie Speech Products NV of obstructing its efforts to audit the company by giving false information. In a civil lawsuit filed in Ieper, where L&H is based, KPMG charged it was deliberately given ''false, inaccurate or incomplete information'' while trying to prepare a court-ordered report on restated financial statements for 1998, 1999 and the first half of 2000. The report was ordered after L&H admitted it had misstated revenues during that period, sending the once high-flying company's stock crashing and forcing it to seek bankruptcy protection in Belgium and the United States. L&H, which also has offices in Burlington, Massachusetts, also is under investigation on both sides of the Atlantic for alleged fraud. KPMG did not publicly identify the individuals who it charges lied or pressed others to make false statements, but a spokesman, speaking on condition he not be identified, said they were ''senior former management officials'' at L&H. A statuatory auditor is required under Belgian law to file a lawsuit in such a situation, he added. KPMG still intends to present its report as ordered, but with notes that certain figures were not provided, he said. At a news conference, L&H's new chief executive, Philippe Bodson, said KPMG was provided a copy of an internal report prepared by another accounting firm, PricewaterhouseCoopers. That report found that that most of the sales reported by L&H's South Korean unit for that period were a sham, and that several major South Korean banks were involved, he said. He said L&H is considering declaring its South Korea unit bankrupt and also may bring legal action against the head of L&H Korea, Joo Chul Seo, and possibly the banks and others as well, he said. ''We feel they have some responsibilities.'' He said he did not know whether his predecessor, Gaston Bastiaens, was aware of what was going on at the unit. Bastiaens resigned last year following the discovery of accounting irregularities, including a dlrs 100 million cash shortfall at L&H's Korean unit. Chairman Jo Lernout was forced to resign and he and co-founder Pol Hauspie also were ousted from the board of directors. John Duerden was brought in as the new CEO last August from U.S.-based Dictaphone, which L&H had bought the previous March. But Duerden was ousted by the board in January, with no explanation given. Bodson said he was working to ensure that when L&H emerges from bankruptcy protection, it is shielded from claims linked to the former management including class-action lawsuits filed by shareholders in the United States. ''The past is the past,'' he said. (AP Worldstream, April 6, 2001) PACER LOGISTICS: Both Sides to Appeal in CA Suit over Business Practices ------------------------------------------------------------------------ Two subsidiaries of Pacer Logistics, Interstate Consolidation, Inc. and Intermodal Container Service, Inc., were named defendants in a class action filed in July 1997 in the State of California, Los Angeles Superior Court, Central District, alleging, among other things, breach of fiduciary duty, unfair business practices, conversion and money had and received in connection with monies allegedly wrongfully deducted from truck drivers' earnings. The defendants entered into a Judge Pro Tempore Submission Agreement dated as of October 9, 1998, pursuant to which the plaintiffs and defendants have waived their rights to a jury trial, stipulated to a certified class, and agreed to a minimum judgement of $250,000 and a maximum judgement of $1.75 million. On August 11, 2000, the Court issued its Statement of Decision, in which Interstate Consolidation, Inc. and Intermodal Container Service, Inc. prevailed on all issues except one. The only adverse ruling was a Court finding that Interstate failed to issue certificates of insurance to the owner-operators and therefore failed to disclose that in 1998, the Company's retention on its liability policy was $250,000. The court has ordered that restitution of $488,978 be paid for this omission. Plaintiff's counsel has indicated he intends to appeal the entire ruling. Defendants will be appealing the restitution issue. Based upon information presently available and in light of legal and other defenses and insurance coverage, management does not expect these legal proceedings, claims and assessments, individually or in the aggregate, to have a material adverse impact on the Company's consolidated financial position or results of operations. PINNACLE HOLDINGS: Sued for Securities Fraud, Schiffrin & Barroway Says ----------------------------------------------------------------------- A class action lawsuit was filed in the United States District Court, Middle District of Florida, Tampa Division, on behalf of all purchasers of the common stock of Pinnacle Holdings, Inc. (Nasdaq: BIGT) from January 18, 2000 through March 17, 2001, inclusive (the "Class Period"). The complaint charges Pinnacle Holdings and certain of its officers and directors with issuing false and misleading statements concerning the Company's business and financial condition. During the Class Period, Defendants repeatedly issued press releases highlighting the Company's increasing financial "strength" through its numerous acquisitions of wireless tower sites in its financial results. At one point during the Class Period, the Company announced that the SEC was investigating Pinnacle Holdings' accounting for certain aspects of its recent acquisition of certain assets from Motorola. The Complaint alleges that, in an effort to continue the fraud on the market, the Company stated that its financial results were reported in conformity with applicable accounting guidelines and that the SEC's investigation was nothing more than a "political" issue. On March 17, 2001, the Company shocked the market by announcing that its previously issued financial statements for the fiscal year ended December 31, 1999 and its quarterly reports for the three-month periods ending September 30, 1999, March 31, 2000, June 30, 2000 and September 30, 2000, would have to be revised. Additionally, despite defendants' statements to the contrary during the Class Period, Pinnacle also disclosed that the restatements would be necessary to properly account for the Motorola acquisition. Contact: Marc A. Topaz, Esq. or Robert B. Weiser, Esq., both of Schiffrin & Barroway, LLP, 888-299-7706, 610-667-7706, info@sbclasslaw.com ROCK HILL: Countersues 6 Investors Who Claimed Scam Investment Program ---------------------------------------------------------------------- A small South Carolina bank has countersued six customers who claimed it duped them with a scam investment program. Rock Hill Bank and Trust says that it is the victim, and has accused the customers of conspiring with two other people to damage it. In its suit, filed with the U.S. district court in Columbia, S.C., the $200 million-asset bank said that the investors' lawsuit has affected its stock and may have cost it a "profitable merger opportunity." The bank's share price has plunged more than 25%, to $11.75, since the customers' suit was filed Feb. 16, and a month ago it suspended merger plans with Ridgeway Bancshares of Ridgeway, S.C. Rock Hill Bank has asked for trial fees, special damages, and punitive damages but did not specify a figure. The investors' lawsuit alleges that the bank and its loan officer, Robert M. Yoffie, promoted a fraudulent investment program that cost them $9.5 million -- the amount of their deposit. Lawyers on both sides declined to discuss the case. Both of the claims stem from the deposit, which lead plaintiff Samuel R. Anthony and five other investors made in an agency account at Rock Hill Bank last year. Their lawsuit says that the bank promoted a program that promised returns of at least 15% a month for 10 months, and that Mr. Yoffie told them 18 to 20 other people had been involved in a similar program at the bank and had made the expected returns. However, the plaintiffs claim they saw little return and have been unable to access their money. Rock Hill Bank denies that it ever had such a program or that Mr. Yoffie, who quit the bank in early February, was involved in it. In court documents the bank says that it returned some of the original funds and that some or all of the rest were returned through other channels, including the two others it is pursuing in its lawsuit: Donald E. Hughes, who introduced the investors to the program, and Douglas J. Smith, who had power of attorney over the account. The investors say Mr. Yoffie was on the board of directors of Mr. Hughes' construction company; the bank says that the investors had a series of business relationships with Mr. Hughes. Though the bank denies nearly every claim in the investors' lawsuit, including those related to Mr. Yoffie and his relationship with Mr. Hughes, it has asked for indemnification from Mr. Yoffie for any "resulting damages suffered by the bank" if he is found liable. (The American Banker, April 6, 2001) ST. CHARLES: Mold To Keep School Shut for Testing and Remediation ----------------------------------------------------------------- Faced with the discovery of more potentially dangerous mold, school officials said that St. Charles East High School will be closed indefinitely for further environmental testing and remediation. Testing for mold could take two to three months, Kane County Regional Supt. Clem Mejia said. All of the school, including indoor athletic facilities and the Norris Cultural Arts Center, will be shut down. "I do not anticipate us going in there before the end of the school year," District 303 Supt. Francis Kostel said during a news conference at the district's administrative offices. "The building will not be reopened until we receive a report from the state Board of Education and the Illinois Department of Public Health assuring me that the building will be safe," Mejia said. Beginning April 16, East's 2,300 students will be shifted to newly opened St. Charles North High School, where there are about 900 freshmen and sophomores. That building can hold about 2,000 students, so classes will likely be held in morning and afternoon shifts, officials said. Some classes and extracurricular activities might have to be located in other district buildings. The district has about 11,000 students in 15 buildings. AAA Environmental, which is doing the testing, found mold earlier this month in the main part of the building. That discovery came after mold was found during a routine check during spring break in an older portion of the school. Officials then suspended classes. The environmental testing had been scheduled as part of a school district plan to examine the building for potential health hazards, officials said. Parents and teachers, while applauding the school's closing, said it was high time that district officials did extensive testing. Earlier this month, a class-action lawsuit was filed by a student alleging that he is suffering a variety of symptoms from exposure to mold at the school. In March, a former student had filed suit charging that the school had made her sick. Students, teachers and parents have complained of air-quality problems in the 1970s-era building since at least the mid-1980s. Reported symptoms include sinus infections, sore throats and bronchial irritation. Some contend that the district has dragged its feet in finding and fixing the problems. At least two students said they had seen mold in the school. Sophomore James Kelly, who attended the briefing last Thursday (April 5), wondered why it took so long for school officials to act. "I feel lied to by this school board and this administration," Kelly said. But Kostel said the school has been repeatedly tested over the years and found to be safe. "This school has been examined six times by a variety of groups. Getting to the bottom of this has always been our goal," he said. Some are skeptical. "They keep repeating the same thing over and over. Like why don't they tell us something we don't know," said junior Joe Vyhnanek. Although students will have to make up two weeks of classes, officials said graduation will take place as scheduled June 3. "Our primary concern right now is the students, and that is the reason we want to get them back in school," Kostel said. School officials said they have contacted the governor's office and may try to acquire some portable structures. In addition, local churches have offered space for student use. Kostel said, "This will be a scheduling challenge, but I know we're up for it." The district already has spent about $5.6 million in remodeling, including a new ventilation system, new carpeting and floor tiles, to try to improve conditions at the school. The remodeling was done in the wake of a critical 1998 report by the National Institute of Occupational Safety and Health that noted several problems, including mold, a lack of fresh air, high carbon dioxide levels and water leakage. Recently, three types of dangerous mold were discovered at the school, stachybotrys, aspergillus, and penicillium. The mold can cause illness if inhaled by susceptible people, such as those with impaired immune systems, allergies or lung disease. In an effort to keep the community informed about the mold and its dangers, as well as the work at the school, the district has been posting updates on its Web site. (Chicago Tribune, April 6, 2001) SUN PIPE, SUNOCO: Sued in PA over Luzerne County Pipeline Rupture ----------------------------------------------------------------- Tina Wall and Christopher Deleur, Luzerne County residents, filed a class action complaint on April 6 in the Pennsylvania Court of Common Pleas for Luzerne County, claiming damages for personal injuries and property damages caused when a pipeline owned and operated by Sun Pipe Line Co. and Sunoco, Inc. ruptured on January 19, 2000 in Jackson Township, Luzerne County, Pennsylvania. The lawsuit is on behalf of all residents and property owners who were damaged when gasoline was released after a pipeline valve ruptured. Thousands of persons live or own property in the area affected by the rupture. The suit alleges that the pressurized pipeline spewed a geyser of gasoline at least sixty feet high for several hours. The complaint alleges that the toxic components of the gasoline were carried downwind as far as Swoyersville and exposed thousands of people to benzene, a known carcinogen contained in gasoline. According to the complaint, the spill released noxious chemicals into the atmosphere, forcing some residents to evacuate their homes. The spill also contaminated groundwater around the surrounding area, forcing residents to abandon their drinking water wells. Tina Wall, a named plaintiff, said she was in her home the morning the pipeline burst. She said, "I smelled an overwhelming smell of gasoline, ran outside in a blanket, and saw the gasoline spraying from the pipeline. I wasn't able to return to my home for three weeks," she said. Wall continued, "Even weeks later, we could still see the rainbow of gasoline in a glass of water from our well." Four law firms have joined forces to litigate the class action: Gregory E. Fellerman of Fellerman Law Offices in Wilkes-Barre, Dianne M. Nast, Michael G. Nast and Daniel N. Gallucci of Roda & Nast, P.C., in Lancaster, Pennsylvania, Daniel E. Becnel, Jr. of The Law Offices of Daniel E. Becnel, Jr., in Reserve, Louisiana and Richard J. Arsenault of Neblett, Beard & Arsenault, in Alexandria, Louisiana. Contact: Dianne M. Nast, Michael G. Nast or Daniel N. Gallucci, all of Roda & Nast, P.C., 717-892-3000; or Gregory E. Fellerman of Fellerman Law Offices, 570-822-3500 TOBACCO LITIGATION: Ex-Flight Attendant Loses Suit in Miami ----------------------------------------------------------- A flight attendant awaiting a lung transplant is not entitled to money from the tobacco industry for illnesses she blames on cigarette smoke in jetliner cabins, a jury decided. The jury found the tobacco industry was not liable for the lung disease that made Marie Fontana cough up blood on the witness stand during her testimony in the three-week trial. Fontana's request for compensatory damages is the first of 3,100 claims prompted by the industry's $349-million settlement of a national class-action suit by nonsmoking attendants. (The Detroit News, April 6, 2001) TOXIC WASTE: Lawsuit Blames New York Landfills For Health Woes -------------------------------------------------------------- More than a dozen companies -- including major U.S. manufacturers, three landfill owners and a limestone quarry -- are named in a $400 million lawsuit filed on behalf of nearby Cheektowaga residents who claim toxic waste is making them sick. Attorneys for 39 residents and former residents of the neighborhood southeast of Buffalo filed the claim in New York Supreme Court in mid-March against companies that at one time owned or disposed of waste at three area landfills. The lawsuit says those landfills and a nearby limestone quarry are responsible for illnesses and deaths in the region. The lawsuit claims that hazardous waste disposed of in the Schultz landfill, the Land Reclamation landfill and the Old Land Reclamation landfill are leaching into the surrounding soil and water. The lawsuit, which has yet to be served to all the defendants, seeks compensatory and punitive damages of $10.1 million per plaintiff. Integrated Waste Systems owns the 20-acre Schultz construction and demolition debris landfill on Indian Road. Casella Waste Management of New York and its subsidiary, Schultz Landfill Inc., own the air space rights to the unused section of the Schultz Landfill. Both are named. BFI Waste Systems owns the Land Reclamation landfill that partially surrounds the Schultz landfill. The two Land Reclamation landfills are spread over 110 acres and are listed by the state as inactive hazardous waste disposal sites. Both are closed. BFI, Casella Waste Management of New York and Integrated Waste are all named in the lawsuit. Also named in the lawsuit is Buffalo Crushed Stone, which owns a nearby limestone quarry. According to the lawsuit, hydrogen sulfide gas produced at the quarry exacerbated asthma and other health problems, while blasting accentuated soil and ground water contamination from three landfills. The list of defendants also includes major manufacturers, including Westwood Squibb Pharmaceuticals Inc., Niagara Mohawk Power Corp., Pratt & Lambert United, Waste Management of New York, and the Ford Motor Co. "Simply, the defendants are the landfills, the quarry, past and present owners and the people who hauled the waste there," said Linda Sikka, an attorney for the plaintiffs. As of March 19, Sikka said that she had not served defendants copies of the lawsuit. Under New York state law, she has 120 days from the day of filing, which was March 9, she said. Peter Ruppar -- an attorney for Integrated Waste, Schultz landfill and Integrated Waste -- declined comment, saying he had not yet seen the lawsuit and that even if he had he would not comment on pending litigation. Sandy DiSalvo, regional environmental manager for BFI Waste Systems, declined comment, referring questions to BFI's attorney, who did not respond. Residents have complained for years of poor health. The lawsuit says the contamination from the landfills is causing cancer, asthma and autoimmune diseases. The lawsuit seeks compensatory and punitive damages for personal illnesses as well as the contamination of property in the area. Since the lawsuit was reported in a local newspaper, more residents have come forward. "The list of plaintiffs is definitely growing," Sikka said. "I have done nothing in the past four days but return phone messages from people who want to become plaintiffs." The lawsuit is the latest in a series of legal issues surrounding hazardous waste deposited in the area. The Pfohl Brothers Landfill, on Aero Drive in Cheektowaga, is about to undergo decontamination after it was declared a Superfund site. (Waste News, April 2, 2001) U OF ILLINOIS: Can't Stifle Anti-Illiniwek Talk with Potential Athletes ----------------------------------------------------------------------- A judge told the University of Illinois last Thursday April 5 that it could not stop faculty and students from personally trying to persuade athletic-team prospects not to attend the school because of its controversial symbol, Chief Illiniwek. In a case raising the issue of free speech in academia and underlining the divisive impact of the Illiniwek dispute on the university's flagship campus at Urbana-Champaign, U.S. Judge Michael Mihm said a university policy on the issue could constitute a violation of the 1st Amendment. Reading from a 26-page ruling in U.S. District Court in Peoria, Mihm said he would enter a temporary order restraining the university from enforcing a directive that all contact with recruits had to be cleared with the school athletic department. He said he also would set a timetable for arguments on a permanent injunction. "We're very pleased with the court for enabling us to go ahead and exercise our right to talk to students, and we plan on doing that," said Stephen Kaufman, a professor of cell biology, a leader in the anti-Chief Illiniwek movement and a plaintiff in the suit. U. of I. spokesman Bill Murphy said the school was disappointed with the ruling but would wait to examine it fully before commenting on its impact. The American Civil Liberties Union had filed a class action suit on behalf of four faculty members and three students seeking a ruling to prevent the university from taking action against them for giving their views on Chief Illiniwek to potential student athletes. The immediate cause of the suit was a campuswide e-mail sent March 2 by Chancellor Michael Aiken warning that such contact could be against NCAA rules governing contacts between school representatives and athletic recruits. ACLU lawyers called the message "a drastic, intimidating, draconian response" that created a chilling effect on the speech of people opposed to Illiniwek's appearance at sporting events. Aiken had testified in a hearing that his policy wasn't intended to stifle free speech but to protect the school from incurring NCAA penalties. Lawyers for the school argued that the rules could restrict such contacts even if they were intended to discourage potential recruits. One purpose of the NCAA rules is to avoid having undue pressure put on student athletes regardless of whether the purpose is to help or hurt recruiting efforts, the university lawyers said in court documents. NCAA spokeswoman Jane Jankowksi said the organization was watching the case with particular interest. NCAA rules could prohibit people outside an athletic department from contacting potential recruits even for a "recruiting disadvantage," but it was difficult to say in advance, she added. Murphy said the university would try to maintain "institutional control" of contacts with recruits as required by the NCAA, but would have to do so within the "constraints" of Mihm's ruling. The university lawyers said that the plaintiffs had plenty of opportunity to exercise their free speech rights through demonstrations, public statements and media interviews, and indeed had often done so. But the ACLU pleadings said that university was making a "hyper-technical and strained interpretation of the NCAA rules--requiring [prior] approval of all speech between all members of the university community and all high school students in America." Instead, the school "should be guided by the 1st Amendment's mandate to allow robust debate," the ACLU lawyers said. The judge "refused to allow the university to fall back on NCAA rules without examining them for compliance with the 1st Amendment," said Harvey Grossman, the lead ACLU lawyer in the case. In addition to Kaufman, the faculty members who filed the suit are Brenda Farnell, a professor of anthropology who specializes in American Indian studies; Frederick Hoxie, a history professor specializing in Native American history; and Philip Phillips, a physics professor. The students are Cydney Crue, a graduate student and Illinois president of the National Coalition Against Racism in Sports and Media; John McKinn, a graduate student and member of Red Roots, a student advocacy group for Native Americans; and Debbie Reese, president of Red Roots. Kaufman said some of the plaintiffs had made contact with potential recruits in a group setting, but that they have refrained from doing so since Aiken's directive. The legal battle reflects the raw feelings aroused by Chief Illiniwek, cherished by many alumni and students as a stirring symbol honoring Native Americans but offensive to others, including civil rights and church groups, who consider it a demeaning caricature. Last month the university board of trustees voted to seek a compromise in the dispute, which has flared sporadically over many years, but grounds for compromise may be hard to find. Chief Illiniwek, portrayed by a student who paints his face and dons garb and headdress representing the Oglala Lakota Sioux tribe, dances at football and basketball games. (Chicago Tribune, April 6, 2001) U-M: Court Rules Law School Can Resume Admitting New Law Students ----------------------------------------------------------------- A panel of federal judges put the University of Michigan Law School's affirmative action case on the fast track last Thursday April 5 in a ruling that also allows the school to resume extending offers to new students. A trio of judges from the 6th U.S. Circuit Court of Appeals in Cincinnati delayed the end of March decision by U.S. District Judge Bernard Friedman from taking effect. He found the school's race-conscious admissions system unconstitutional and ordered the Law School to immediately stop using it while filling its incoming classes. The appeals judges did not rule on the constitutionality issue -- only that the school should proceed under its existing system while appeals proceed. The judges also ruled to speed up the appeal, though it's unclear how quickly the court will act. Friedman's ruling came during the height of the admissions season and prevented the school from sending out acceptance letters. U-M officials worried that any further delay would cause students to turn elsewhere. The higher court agreed. "The injunction now in place irreparably harms the University of Michigan and disrupts the selection of the 2001-02 first-year Law School class," its order said. "This harm cannot be undone and therefore is irreparable." "The admissions office is off and running," U-M attorney Liz Barry said. "All along, we have been confident that our policy was constitutional." The ruling stems from a 1997 lawsuit filed by Barbara Grutter, a rejected white applicant from Plymouth Township. The case was eventually declared a class action suit. "The Sixth Circuit made a poor decision, which is going to mean many more applicants are going to be discriminated against solely because of their skin color," said Curt Levey, spokesman for the Center for Individual Rights, which represents Grutter. Although some legal scholars hoped the appeals court's ruling might reveal its leaning on this and a similar case addressing U-M's undergraduate admissions, the court didn't tip its hand, said Robert Sedler, a Wayne State University law professor who is watching the case. (The Detroit News, April 6, 2001) U.S. BUREAU: Ruling Bars Delivery of Water to Farmers at CA-OR Border --------------------------------------------------------------------- A ruling by federal Judge Saundra Brown Armstrong of Oakland aimed at protecting endangered salmon bars the U.S. Bureau of Reclamation from delivering water to farmers in the Klamath Basin Project until it devises a plan for protecting coho salmon. Farmers in the 240,000-acre Klamath Lake Basin, which straddles the California-Oregon border, may have to struggle through the 2001 growing season without irrigation water. Armstrong ruled that the bureau violated the Endangered Species Act by operating the project last year without calculating the impact of its operations on the salmon or consulting with the National Marine Fisheries Service. "This really dims any hope that we had," Tessa Steudli, executive director of the Klamath Water Users Association said yesterday. "What's going to happen is that people will go broke and there'll be a huge dust bowl here. Wildlife will die and cattle will be sold. It's just devastation," she said. In a letter to Oregon Gov. John Kitzhaber, several business leaders in the Klamath Basin area, warned that "a federally sanctioned disaster will overwhelm our region." Paul Simmons, the Sacramento attorney who represents Klamath Basin farmers who depend on Bureau of Reclamation water to irrigate, was more hopeful. If the bureau can persuade the National Marine Fisheries Service and the U.S. Fish and Wildlife Service that its operation of the Klamath Basin Project does not put the coho salmon -- and two other endangered species -- in danger of extinction, the irrigation water still might flow, Simmons said. Commercial fishermen and the Indian tribes that fish the Klamath River blame poor water quality caused by nitrate- and pesticide-rich runoff from irrigated lands in the basin for a huge fish kill in the river last year. To complicate the picture, farmers contend that in addition to putting them out of business, the court's ruling will be bad for wildlife because basin refuges, where waterfowl congregate, are dependent on tailwater from irrigation. Glen Spain, northwest regional director of the Pacific Coast Federation of Fishermen's Associations, lead plaintiff in the suit by eight organizations aimed at reviving the Klamath River salmon fishery, said he fears that political pressure is being exercised "at the highest levels" to negate the force of Armstrong's ruling. "They're trying to force the agencies to back away from what science requires and cut a deal where irrigators get some water," he said. The Klamath Basin is in the midst of its worst drought on record, and the snowpack that feeds its watercourses has just 29 percent of its normal water content. Principal crops grown in the arid basin, which receives just 6 to 8 inches of rain in a normal year, are potatoes, onions, hay and sugar beets. All of the horseradish grown commercially in the western U.S. comes from the Tule Lake area on the basin's southern edge. "There's no market for most of the crops grown (in the Klamath Basin)," Spain said. Sugar beets, for example, have become such a low-profit crop that farmers in some parts of California where they were once a staple, such as the Salinas Valley, have given up on them, and several refineries have shut down. Said Spain, "The question is: Do we want to sacrifice the lower Klamath River to provide federally subsidized water for farmers to grow things they cannot sell.� (The San Francisco Chronicle, April 6, 2001) * The American Banker Publishes Article re Overdraft Coverage Preys ------------------------------------------------------------------- Lately the banking industry is beset by so-called "strategic consultants" pushing a highly addictive form of overdraft banking. These consultants are selling increasingly aggressive overdraft policies to which some banks, under mounting earnings pressure, are succumbing but which more reasonable people might term usurious. The new overdraft policies are unlike reasonably priced protection plans backed by balance transfers, unsecured credit lines, or credit card advances. Known by oxymoronic names such as "Overdraft Courtesy" or "Bounce Protection," these products rely on manipulative direct marketing programs to encourage the weakest customers to write what bankers used to term "bad checks." Essentially, customers are told to ignore their check registers. Instead, they are invited to write a bad check and told the bank will cover it. The cost of this sucker's bet -- typically $30 an item and $5 a day -- is buried in the blizzard of disclosures and paperwork given to the customer. To maximize the income generated by this practice, banks exhaust the small available balance by posting the largest items first. The consultants watch gleefully as the volume of overdrafts (and their contingent fee for the advice) grows. The consultant's reasoning is simple. Why wait for the intermittent overdraft when you can entice weak-willed customers into writing checks for more than they have in their accounts? Apparently, the income from conventional protection plans is now inadequate. Greed aside, the reason why is unclear. My sense is that the more traditional protections against ruining a reputation with an accidental overdraft require Regulation Z disclosure. However, the new variety of overdraft protection charges fees so large a banker is challenged to calculate the annual percentage rate, let alone disclose it. Frankly, such practices are shameful. They represent psychographic analysis used in all the wrong ways and for all the wrong reasons. These dubious approaches do nothing to build the deep and lasting relationships that the industry professes to cherish: multiple product-and-service users of all stripes who look to their bankers for transaction processing, loan and investment products, and lifelong financial advice. And it is not as if the industry doesn't know better. On the contrary, the trail of litigation and costly settlements paid by banks over overdraft practices goes back to the early 1970s. More recently, Bank of America Corp. settled a class action over posting schemes by its Boatmen's Bancshares. In past instances, the only winners were the lawyers with their 40% contingent fees. Yet despite the negative public relations these practices generate and the opportunities they create for class-action barracuda among trial lawyers, the industry continues to risk further confrontation by exploiting "opportunities" to generate more fee income from overdrafts. Though disclosure might be difficult, it isn't the heart of the issue. The complaint about predatory lending is not about noncompliance with Reg Z or annual-percentage-rate calculation errors. It is that the practice intentionally targets people who can't help themselves, who do not fully understand what they are agreeing to until it is too late and foreclosure is inevitable. Wrapping a predatory practice in the cloak of customer service is tantamount to arguing that the onerous terms of a predatory mortgage are the borrower's only chance at homeownership. It's hogwash. In all but name, most of what occurs with "Overdraft Courtesy" is no more a service than "payday lending" -- a truly deceitful term and a worse practice. This and its evil cousin, check-cashing stores, target folks too uninformed, too careless, or with too few resources to make real choices. These practices amount to bankers playing "kick the kid with one shoe." Are these lines of business that a bank should covet? Is this how bankers, with a community service charge built right in to their corporate charters, want to be perceived? I can see Mike Wallace and the "60 Minutes" editorial team planning their next expose now. Reliance on overdraft fees to increase noninterest income is a bad idea and certainly not a credible strategy. These fees are an addiction that will end up haunting the banking industry. Now would be an excellent time to stop kidding ourselves that these practices are a legitimate banking service. We need to return to treating overdrafts as financial mismanagement and loss risk. That is, as something we are obliged to discourage. (The American Banker, April 6, 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 * * *