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               Friday, October 1, 1999, Vol. 1, No. 168


ASHWORTH INC: Intends To Defend Vigorously Stockholders Suit In CA
AUTO FINANCING: Al Piemonte Faces Suit In Ill. For Credit/Cash Diff.
AUTO INSURANCE: State Farm Suit On Cheap Repair Car Parts Goes To Jury
BOARDWALK CASINO: Faces Shareholders Suit Re Merge With Mirage Resorts
COYOTE NETWORK: CA Court Approves Settlement For Securities Suit

DELIAS INC: Intends To Defend Vigorously Securities Suits In New York
GAMETECH INT'L: Will Defend Vigorously Securities Suit In Arizona
HARNISCHFEGER INDUSTRIES: Shareholders Suit In Del. Stayed Under Ch 11
HARNISCHFEGER INDUSTRIES: Sued In Wis Re Discl Of Indonesian Contracts
HARRIS TRUST: 7th Cir Oks Dismissal Of Retirees Suit On Unpaid Interest

HMOs: GOP Leaders Say They Want To Make Access To Health Care Cheaper
INSO CORP: Engages Insurer To Remove Shareholder Litigation Liability
KONA KAI: Coffee Distributors Settle CA Claims Of Selling Fake Kona
MANHATTAN CITY: Sued Over Temporary Housing for Homeless Aids Patients
MOTORCAR PARTS: Wolf Haldenstein Files Securities Suit In CA

SEARS: Florida Ct Oks Suit Alleging Charges On Service Rarely Performed
TOBACCO LITIGATION: Argentine Law Firm Looks For Applicable Law
UC IRVINE: Sued Over Alleged Sale Of Donated Body For Profit
Y2K LITIGATION: Lawyers Anticipate Various Year 2000 Scenarios


ASHWORTH INC: Intends To Defend Vigorously Stockholders Suit In CA
On January 22, 1999, a class action was commenced in the United States
District Court for the Southern District of California ("U.S. District
Court") purportedly on behalf of purchasers of the Company's common
stock during the period between September 4, 1997 and July 15, 1998
alleging violations of the Securities Exchange Act of by the Company and
certain of its officers and directors.

The complaint alleged, among other things, that, during the class
period, Company executives made positive statements about the Company's
business including statements concerning product demand, offshore
production and inventories. The complaint further alleged that the
defendants knew these statements to be false when made and concealed
adverse conditions and trends in the Company's business during the class
period. The plaintiff sought to recover unspecified damages on behalf of
all purchasers of the Company's common stock during the period September
4, 1997 to July 15, 1998.

Subsequently, two additional class actions were commenced in U.S.
District Court which alleged similar conduct, added certain allegations
regarding financial reporting and expanded the shareholders purportedly
represented from the above referenced period to the periods of September
4, 1997 through December 17, 1998 and December 17, 1997 through July 15,
1998. The U.S. District Court has consolidated these matters, appointed
co-lead plaintiffs, co-lead counsel, and ordered that plaintiffs file a
consolidated and amended complaint.

However, the filing of the consolidated and amended complaint has been
postponed, pursuant to stipulation and court order, until the earlier
of: (i) thirty days after the Ninth Circuit Court of Appeals decides the
Silicon Graphics case (the decision which will impact the pleading
standard for this case); or (ii) October 21, 1999. The U.S. District
Court has further approved a stipulation dismissing Company spokesperson
Fred Couples as a defendant in the action. To date, no formal discovery
has occurred in the matter, no class action has been certified and no
contested motions have been filed or heard. Although the consolidated
and amended complaint has not been filed, it is management's intent to
vigorously defend this action.

AUTO FINANCING: Al Piemonte Faces Suit In Ill. For Credit/Cash Diff.
The evidence presented by consumers to support their Truth in Lending
Act claims that credit customers paid more for warranty contracts than
cash customers showed only that marketing factors created the difference
in the prices. Credit customers pay more simply because they are less
likely to negotiate and they perceive a greater need for a warranty.
Swanagan v. Al Piemonte Ford Sales Inc., et al., Nos. 94 C 4070, 94 C
5688 (N.D. Ill. 7/12/99).

Reatha Swanagan and Darnell Cox each purchased automobiles from separate
dealerships on credit. In conjunction with their purchases, the
consumers also bought extended warranties and service contracts and were
informed that the cost of these warranties would be paid entirely to a
third party, the extended warranty provider. When quoting the prices for
the extended service contracts and extended warranties, the dealerships
did not inform the customers that the prices were negotiable. Neither
consumer attempted to negotiate their cost downward. Additionally, the
dealerships failed to inform the consumers that they typically doubled
the actual cost of the warranties and that the dealerships profited from
this upcharge.

                     Cash Versus Credit Customers

Alleging that their financing contracts contained a hidden finance
charge because the upcharges were not disclosed, the consumers sued
under the TILA. Both plaintiffs contended that the dealerships did not
charge a uniform price for extended warranties and service contracts in
cash and credit transactions. In fact, the plaintiffs claimed that the
dealerships charged a greater upcharge and higher prices in credit

Rejecting settlement, the plaintiffs moved for class certification based
on the "cash/credit differential." The defendants responded by moving
for summary judgment. The U.S. District Court for the Northern District
of Illinois first addressed the motion for class certification stating
that the cash/credit differential claim only had merit "if the dealer's
markup on third-party charges is systematically higher on sales to
credit customers than on sales to cash customers." The District Court
reviewed the evidence and concluded that the plaintiffs failed to meet
this burden.

Specifically, the court relied on the testimony of Christopher Wilhelm,
a finance manger for Al Piemonte Ford Sales Inc. Wilhelm explained that
the cost of extended warranties is negotiable upon a customer's
insistence. He also pointed out that cash customers are better at
negotiating because they are less interested in buying an extended
warranty if they don't have a payment to make and can afford repairs.
Wilhelm added that cash customers also typically purchase shorter term
warranties, which are less expensive.

Writing for the District Court, Judge Leinenweber opined that the TILA
was not violated where the automobile dealerships were charging market
prices for the warranties, even if credit customers paid more than cash
customers. He explained that "credit customers pay more for two reasons:
first, they are less sophisticated and therefore less likely to seek to
negotiate the price; and second, they perceive, or more probably are led
to perceive, a greater need for a warranty contract, or a more extensive
and more costly one, because they will be making payments on the car
over a longer period of time."

The court considered these differences to be the result of marketing
factors and not TILA violations or hidden finance charges. Nothing in
the record indicated to the court that the dealerships maintained
separate price lists for cash and credit customers. Therefore, it denied
the motion for class certification and granted the defendants' motion
for summary judgment on this TILA claim.

                    Failure To Itemize Upcharges

The plaintiffs were more successful on their argument that the
defendants violated the TILA by failing to accurately itemize the amount
paid to third parties for the extended warranties on the disclosure
statement. The court held that the inaccurate disclosure not only
violated the TILA, but also the Illinois Consumer Fraud Act.

The District Court found the defendants' argument that the plaintiffs
could not recover under this theory because they did not suffer any
actual damages to be without merit. The court reasoned that a question
of fact existed as to whether the consumers would have objected to the
upcharges at the time of signing the retail installment contracts had
they realized the dealerships were pocketing a significant portion of
the price of the warranties. Judge Leinenweber denied the defendants'
motion for summary judgment on this issue.

James Eric Arand of Chicago represented the plaintiffs. Hall Adams III
and Edward J. Murphy of Williams & Montgomery Ltd. in Chicago
represented the defendants along with Channing K. Blair of Skefsky &
Froelich Ltd. in Chicago. (Consumer Financial Services Law Report

AUTO INSURANCE: State Farm Suit On Cheap Repair Car Parts Goes To Jury
A lawsuit accusing State Farm of cheating customers by paying only for
cheap auto-body repair parts is near its end, with lawyers for
dissatisfied policyholders asking for at least $ 1.4 billion in damages.

Lawyers representing State Farm policyholders said the company
deliberately withheld concerns about the parts' quality and safety.
Attorneys for the insurer based in Bloomington, Ill., said their
opponents failed to provide any substantial proof of their claim. "They
haven't even bothered to show you a photo of a bad repair to a State
Farm customer," said Barney Schultz, the company's lead attorney.

Jury deliberations began Wednesday afternoon. The class-action lawsuit
accuses State Farm of breach of contract for failing to restore
customers' cars to pre-accident condition. The lawsuit also accuses the
insurer of consumer fraud for failing to properly disclose its use of
the parts.

The lawsuit involves aftermarket parts, which are modeled on factory
original parts but are made without benefit of factory specifications.
Critics say the parts make cars less valuable by failing to provide the
same level of fit, finish and corrosion protection as original parts.
Some parts, such as hoods, may also pose a safety threat, they argue.
State Farm, however, says the parts it uses are of the same quality as
original parts.

About 15 percent of vehicles are repaired using aftermarket parts,
according to the Insurance Information Institute, an insurance-industry
group. The lawsuit combines the potential claims of 4.7 million current
and former State Farm policyholders.

The plaintiffs asked for $ 243.7 million, or about $ 51 for each person
who received an estimate for aftermarket parts - whether the parts were
installed or not. They also asked for $ 1.2 billion to cover the costs
of removing aftermarket parts and installing original equipment
replacements on the cars of customers whose cars were repaired with
imitation parts.

State Farm, the nation's largest auto insurer, covers one of every five
cars in the United States. (St. Louis Post-Dispatch 9-30-1999)

This verdict will be the first handed down from among several similar
lawsuits now pending against nearly all the nation's top auto insurers.
For stations unable to travel to Marion, Ill., to speak with company
representatives, State Farm is making available its reaction to the
verdict in a video news release (VNR) and an audio news release (ANR).
Once the verdict is announced, satellite coordinates for the VNR and
information on the ANR will be sent on wire and posted on State Farm's
website, www.statefarm.com (Source: State Farm Insurance Companies)

BOARDWALK CASINO: Faces Shareholders Suit Re Merge With Mirage Resorts
A former minority shareholder in Boardwalk Casino Inc. filed a lawsuit
that alleges the company did not adequately represent the interest of
shareholders when merging with Mirage Resorts.

Harvey Cohen claims he and other shareholders were damaged when company
officers and directors failed to maximize the amount Mirage paid to
acquire outstanding shares of Boardwalk.

Cohen claims he owned 74,000 shares of common stock when the merger was
completed June 30, 1998. He said he and other shareholders were paid $ 5
per share. Cohen claims some company officers and directors received
additional benefits that were not available to other shareholders.

Cohen will ask a judge to certify the suit as a class action
representing Boardwalk shareholders, not including those individuals
specifically named as defendants. 'It is estimated that there may be
hundreds of plaintiffs,' the suit claims.

Also named as a defendant is Mirage Resorts. The case has been assigned
to District Judge Valorie Vega. (Las Vegas Review-Journal (Las Vegas,
NV) 9-29-1999)

COYOTE NETWORK: CA Court Approves Settlement For Securities Suit
Coyote Network Systems Inc was a defendant in a consolidated class
action, In re The Diana Corporation Securities Litigation (Civ. No.
97-3186) , that was pending in the United States District Court for the
Central District of California. The consolidated complaint asserted
claims against the Company and others under Section 10(b) of the
Securities Exchange Act of 1934, alleging essentially that Coyote was
engaged, together with others, in a scheme to inflate the price of our
stock during the class period, December 6, 1994 through May 2, 1997,
through false and misleading statements and manipulative transactions.

On or about February 25, 1999, the parties executed and submitted to the
court a formal Stipulation of Settlement, dated as of October 6, 1998.
Under the terms of the settlement, all claims asserted or that could
have been asserted by the class are to be dismissed and released in
return for a cash payment of $8.0 million (of which $7.25 million was
paid by our D&O insurance carrier on behalf of the individual defendants
and $750,000 was paid by Concentric Network Corporation, an unrelated
defendant) and the issuance of three-year warrants to acquire 2,225,000
shares of our common stock at prices per share increasing each year from
$9 in the first year, to $10 in the second year and $11 in the third
year. The cash portion of the settlement was previously paid into an
escrow fund pending final court approval. Charges relating to the
warrants were fully reserved by us in fiscal 1998.

On June 9, 1999, the Court rendered its Final Judgment and Order
approving the settlement set forth in the Stipulation of Settlement. No
objections to the approval of the settlement were filed.

DELIAS INC: Intends To Defend Vigorously Securities Suits In New York
In June 1999, two separate purported securities class action lawsuits
were filed against us and certain of our officers and directors and one
former officer of a subsidiary. The complaints in these lawsuits purport
to be class actions on behalf of the purchasers of our securities during
the period May 21, 1998 through June 17, 1998 and January 20, 1998
through September 10, 1998, respectively.

The complaints generally allege that the defendants violated Section
10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder
by making material misstatements and by failing to disclose certain
allegedly material information regarding trends in our business. The
complaints also allege that the individual defendants are liable for
those violations under Section 20(a) of the Securities Exchange Act. The
complaints seek unspecified damages, attorneys' and experts' fees and
costs, and such other relief as the court deems proper. The complaints
were filed in Federal District Court for the Southern District of New
York by Allain Roy on June 1, 1999 and by Lorraine Padgett on June 3,
1999. On August 3, 1999, the plaintiffs in both suits filed a motion to
consolidate the suits.

The Company intends to vigorously defend against these actions.

GAMETECH INT'L: Will Defend Vigorously Securities Suit In Arizona
On February 13, 1998, a purported securities class action complaint,
the United States District Court for the District of Arizona against the
Company and certain officers and directors alleging that defendants
violated Section 11 of the Securities Act of 1933 by making false
misleading statements and omissions in the Company's Form S-1
Registration Statement in connection with the Company's public offering
on November 25, 1997. Two other complaints making nearly identical
factual allegations have been consolidated with the WEISS action for all
Civ. 98-0268 PHX-ROS. On July 17, 1998, the Court appointed "lead
plaintiff" and co-lead counsel.

On September 21, 1998, plaintiffs filed a consolidated complaint,
alleging a claim against the Company and the individual defendants under
Section 11 of the Securities Act and a claim against the individual
defendants under Section 15 of the Securities Act, based upon the
conduct alleged in the original complaints. Plaintiffs seek an
unspecified amount of damages.

On November 5, 1998, defendants moved to dismiss the complaint. On June
3, 1999 Defendants' motion to dismiss was granted in part and denied in
part by the Court. Defendants believe that there is no merit to
plaintiffs' allegations and intend to defend the action vigorously.

HARNISCHFEGER INDUSTRIES: Shareholders Suit In Del. Stayed Under Ch 11
The Company and certain of its current and former directors have been
named defendants in a purported class action, entitled Brickell
Partners, Ltd., Plaintiff vs. Jeffery T. Grade et. al., in the Court of
Chancery of the State of Delaware. This action seeks damages of an
unspecified amount on behalf of shareholders based on allegations that
the defendants failed to explore all reasonable alternatives to maximize
shareholder value.

As a result of its bankruptcy filing, litigation relating to prepetition
claims against the Debtors is stayed.

On June 7, 1999, Harnischfeger Industries, Inc. and its domestic
operating subsidiaries (collectively, the "Debtors") filed voluntary
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy
Code in the United States Bankruptcy Court for the District of Delaware
and orders for relief were entered. The Debtors include the Company's
principal domestic operating subsidiaries, Beloit Corporation, Joy
Mining Machinery, and P&H Mining Equipment. The Debtors' Chapter 11
cases have been consolidated for the purpose of joint administration
under case number 99-2171. The Debtors are currently operating their
businesses as debtors-in-possession pursuant to the Bankruptcy Code.

Pursuant to the Bankruptcy Code, actions to collect prepetition
indebtedness of the Debtors and other contractual obligations against
the Debtors may not be enforced. In addition, under the Bankruptcy Code,
the Debtors may assume or reject executory contracts, including leases.
Additional claims may arise from such rejections, and from the
determination by the court (or as agreed by the parties in interest) to
allow claims for contingencies and other disputed amounts. From time to
time since the Chapter 11 filing, the Bankruptcy Court has approved
motions allowing the Company to reject certain business contracts which
were deemed burdensome or of no value to the Company. The Debtors have
not yet completed their review of all their prepetition executory
contracts and leases for assumption or rejection.

The Debtors received approval from the Bankruptcy Court to pay or
otherwise honor certain of their prepetition obligations, including
employee wages and product warranties. In addition, the Bankruptcy Court
authorized the Debtors to maintain their employee benefit programs.
Pension and savings plan funds are in trusts and protected under federal
regulations. All required contributions are current in the respective

Contingent liabilities as of the Chapter 11 filing date are also subject
to compromise. At July 31, 1999, the Company was contingently liable to
banks, financial institutions, and others for approximately $451,124 for
outstanding letters of credit securing performance of sales contracts
and other guarantees in the ordinary course of business, of which
$424,701 were issued prepetition and $26,423 were issued under the DIP
Facility. The Company may also guarantee performance of its equipment at
levels specified in sales contracts without the requirement of a letter
of credit.

HARNISCHFEGER INDUSTRIES: Sued In Wis Re Discl Of Indonesian Contracts
The Company and certain of its senior executives have been named as
defendants in a class action, entitled In re: Harnischfeger Industries,
Inc. Securities Litigation, in the United States District Court for the
Eastern District of Wisconsin. This action seeks damages in an
unspecified amount on behalf of an alleged class of purchasers of the
Company's common stock, based principally on allegations that the
Company's disclosures with respect to the Indonesian contracts of Beloit
- Beloit APP Contracts violated the federal securities laws.

                       Beloit APP Contracts

In fiscal 1996 and 1997, Beloit's Asian subsidiaries received orders for
four fine paper machines from Asia Pulp & Paper Co. Ltd. ("APP") for a
total of approximately $600,000. During the second quarter of fiscal
1998, the Company identified $155,000 of additional estimated contract
costs at Beloit related to these contracts. The additional costs
primarily related to non-proprietary equipment, installation, erection,
freight, site construction costs, and overruns resulting from changes in
estimates of costs to complete related to these large, complex projects.

The first two machines have been substantially paid for and installed at
APP facilities in Indonesia. Beloit sold approximately $44,000 of
receivables from APP on these first two machines to a financial
institution. The machines are currently in the start-up/optimization
phase and are required to meet certain contractual performance tests.
The contracts provide for potential liquidated damages, including
performance damages, in certain circumstances. The Company has had
discussions with APP on certain claims and back charges on the first two

The two remaining machines were substantially manufactured by Beloit and
are in Beloit's or Beloit's Asian subsidiaries' possession. Beloit
received a $46,000 down payment from APP and issued letters of credit in
the amount of the down payment. In addition, the Company repurchased
various notes receivable from APP in December 1998 and February 1999 of
$2,770 and $16,230, respectively, which had previously been sold to a
financial institution.

On December 15, 1998, Beloit's Asian subsidiaries declared APP in
default on the contracts for the two remaining machines, concluding that
APP had not acted in good faith and was unwilling to pay its obligations
or was incapable of securing financing for these two paper machines.
Consequently, on December 16, 1998, Beloit's Asian subsidiaries filed
for arbitration in Singapore for the full payment from APP for the
second two machines plus at least $125,000 in damages and delay costs.

On December 16, 1998, APP filed a notice of arbitration in Singapore
against Beloit's Asian subsidiaries seeking a full refund of
approximately $46,000 paid to Beloit's Asian subsidiaries for the second
two machines and claiming that Beloit's Asian subsidiaries had an
obligation under the purchase contracts to secure financing. APP also
seeks recovery of other damages it alleges were caused by Beloit's Asian
subsidiaries' claimed breaches. The $46,000 is included in liabilities
subject to compromise. In addition, APP seeks a declaration in the
arbitration that it has no liability under certain promissory notes.

APP subsequently filed an additional notice of arbitration in Singapore
against Beloit seeking the same relief on the grounds that Beloit was a
party to the Beloit Asian subsidiaries' contracts with APP and was also
a guarantor of the Beloit Asian subsidiaries' performance of those
contracts. The arbitration against Beloit was stayed by agreement of the
parties after the Chapter 11 proceedings were filed. Since then, APP has
not sought to pursue this arbitration. Also, APP has filed for and
received an injunction from the Singapore courts that prohibit Beloit
from acting on the notes receivable from APP except in the Singapore

Beloit and it's Asian subsidiaries will vigorously defend against all of
APP's assertions. APP has attempted to draw on approximately $15,900 of
existing letters of credit issued by Banca Nazionale del Lavaro ("BNL")
in connection with the down payments on the contracts for the second two
machines. The Company filed for and received a preliminary injunction
that prohibits BNL from making payment under the draw notice. The final
disposition of the Company's request for a permanent injunction remains
pending with the United States District Court for the Eastern District
of Wisconsin. The Company has placed funds on deposit with BNL to
provide for payment under the letters of credit should the permanent
injunction not be granted.

To mitigate APP's damages and to improve short-term liquidity, Beloit's
Asian subsidiaries have sought to sell these two machines to alternative

HARRIS TRUST: 7th Cir Oks Dismissal Of Retirees Suit On Unpaid Interest
Interpreting the payment language of a bank's defined contribution
pension plan, the Seventh Circuit U.S. Court of Appeals has affirmed the
dismissal of a retiree suit for unpaid interest accrued on allegedly
overdue lump sum benefits payments. Clair et al. v. Harris Trust and
Savings Bank et al., No. 98-2334 (7th Cir., Aug. 10, 1999).

The appellate panel said its decision was based on the merits of the
case and not, as the lower court ruled, on the retirees purported lack
of standing to sue under federal pension law.


After retiring from Harris Trust & Savings Bank, William L. Clair and
John D. O'Malley filed a class action alleging the bank held their
defined contribution pensions for an unreasonable amount of time before
paying them the proceeds.

The suit made claims for lost interest under the Employee Retirement
Income Security Act (ERISA). The plaintiffs alleged the bank violated
ERISA Sec. 502(a)(1)(B) for not paying owed benefits, and ERISA Sec.
502(a)(3)(b) for violating the terms of its own pension plan.

At issue was a provision in the plan that stated pension proceeds must
be paid in a lump sum to beneficiaries in a"reasonable time" but no
later than 60 days from an employee's benefits settlement date, i.e.,
the end of the calendar quarter in which the employee retired. The
Internal Revenue Service gives a beneficiary 60 days to roll over his
pension benefit into an Individual Retirement Account before federal
income taxes are assessed.

The class action alleged Harris Trust was capable of paying lump sum
benefits within about three days; however, the bank took 45 days to pay
and the plaintiffs said the delay unreasonably deprived them of the
benefit of the interest on their money.

                       The District Court Ruling

The district court dismissed the suit, finding the plaintiffs had no
standing to sue under ERISA because federal pension law applies only to
plan participants, beneficiaries, and fiduciaries.

The retirees, the court said, separated from Harris Trust, received
their lump sum pension proceeds, and therefore could not be considered
plan participants, beneficiaries, or plan fiduciaries.

                         The Appellate Ruling

"The district court dismissed the suit on the basis of the defendants'
argument that the plaintiffs lack standing to complain under ERISA about
this alleged violation of the plan because, when they received the full
balance in their retirement accounts -- albeit 45 days after that date
-- they ceased to be participants in the plan," the Seventh Circuit

The appellate court, however, said the district court's ruling was
"erroneous" and swept the ERISA standing issue aside. "The term
'participant' has been interpreted to include former employees 'who have
a colorable claim' to vested benefits," the appellate court said, citing
Firestone Tire & Rubber Co. v. Bruch (U.S., 1989).

The Seventh Circuit found the plaintiffs did have a "colorable claim"
and thus had standing under ERISA Sec. 502(a)(3)(B) to allege the bank
had violated the terms of its pension plan. At issue was the language
about making payments in a "reasonable time" but not more than 60 days
from the settlement date. The "colorable claim," though, could not
stand, the appellate court said in affirming dismissal of the suit for
lack of merit, as opposed to the district court's finding of lack of

Although the court of appeals said it appeared the plaintiffs had two
entitlements in the plan's language -- distribution in a "reasonable
time" and distribution not to exceed 60 days -- such a literal reading
would be "absurd." "It would mean that the authors of the plan had
invited participants (more realistically, in view of the rather small
stakes for any individual employee, class action lawyers) to litigate
over how soon within the 60-day period the employer could "reasonably"
be required to pay," the court said.

Reading into the perceived meaning of the plan, the Seventh Circuit said
it was clear that Harris Trust had intended to allow itself 60 days
before making payments. "It is apparent that what the authors of the
plan meant was that the plan reserved the right to wait the full 60 days
allowed by the IRS to make the payment. There is no suggestion that
anyone was fooled by the reference to reasonableness," the court said.
(Bank & Lender Liability Litigation Reporter 9-1-1999)

HMOs: GOP Leaders Say They Want To Make Access To Health Care Cheaper
The New York Times (9/29, Greenhouse) reported, "The Supreme Court on
Tuesday assigned itself an important role in the debate over managed
health care, accepting a case on whether an Illinois health maintenance
organization breached a legal duty to a patient whose appendix burst
during an eight-day wait for a test to diagnose her abdominal pain. The
question in the case is whether the HMOs financial structure, under
which doctors' compensation depended in part on their success in holding
down costs, meant that its patients' best interests did not come first,
as required under a federal appeals court's interpretation of the
federal law governing employer- sponsored health plans."

The Wall Street Journal (9/29, Greenberger) reported, "Stepping into a
debate with huge stakes for managed-care companies, the Supreme Court
agreed to determine the legal liability of these providers when they are
accused of cutting costs at the expense of patients' health." In the
managed-care case, Cynthia Herdrich "claims that to hold down costs, her
doctor at a health-maintenance organization run by Health Alliance
Medical Plans Inc. of Urbana, Ill., delayed treating what was

Among other legal actions, Ms. Herdrich sued her doctor and the HMO
under the Employment Retirement Income Security Act, or Erisa, the 1974
law governing employee pension and health plans. She charged that the
delay was motivated by the HMO's desire to save money, rather than to
act in the patient's best interest, as mandated by Erisa." The US
appeals court in Chicago "ruled that the lawsuit under Erisa may go
forward, and if the Supreme Court agrees, it will reshape the landscape
for HMOs, says a lawyer for the defendants in the case."

California Now Allows HMOs To Be Sued. ABC (9/28, 374 words, Jennings)
reported last night, "The governor of California just signed into law
one of the most comprehensive health care reform packages in the
country. It gives HMO patients the right to sue their provider. A right
the vast majority of people in managed care elsewhere do not have yet."
ABC (Rooney) added, "When California Governor Gray Davis signed the
bundle of 20 health care reform laws, he said his intent was to give
doctors and patients more power." Davis was shown saying, "No longer
will a 'no' from a nameless, faceless bureaucrat on the other end of the
phone line be the final word on medical care in California." ABC added,
"The new laws establish a system of independent review for patients
denied care they believe is necessary. But most importantly, California
has given 23 million of its residents the right to sue their HMO as a
last recourse.

California becomes only the third state to pass such HMO reform laws,
behind Georgia and Texas. And some advocates point to Texas as a big
success, because its insurance rates have not gone up and most disputes
have been settled in arbitration. But with five lawsuits pending, the
industry says don't celebrate yet." Jerry Patterson of the Texas
Association of Health Plans was shown saying, "It doesn't take much to
have one of those lawsuits reach a $100 million plaintiff award, which
would have a very negative effect on premiums and increase the number of
uninsured." ABC added, "Other legislatures may not wait to find out what
happens in Texas. Thirty-three states are considering HMO reform."

GOP Offers Tax Help For Health Insurance. WSIL ABC TV9 in Carterville,
Illinois (9/28) reported, "Republicans are pushing a new bill that
offers tax cuts to help more people buy health insurance. At a news
conference on Capitol Hill, House Speaker Dennis Hastert said he wants
to make the tax cut bill part of the effort to reform HMOs. GOP leaders
want to make access to health care cheaper." WSIL added, "The GOP
proposal includes a 100 percent health care premium deduction for the
self-employed and for people who buy their own insurance. There's a
similar tax break for people who purchase insurance for elderly
relatives. (The Bulletin's Frontrunner 9-29-1999)

INSO CORP: Engages Insurer To Remove Shareholder Litigation Liability
Inso Corporation (Nasdaq: INSO) announced that it has entered into an
insurance agreement with a major AAA-rated insurance carrier pursuant to
which the insurance carrier will assume complete financial
responsibility for the defense and ultimate resolution of the securities
class action litigation initially filed in February 1999 on behalf of
certain purchasers of the Company's common stock.

Stephen O. Jaeger, Chief Executive Officer and Chairman of the Board of
Inso Corporation, said: "This is an important development for Inso. We
can move forward with the certainty that the class action litigation no
longer presents a material adverse financial risk to the Company.
Equally significant is the removal of the distraction from this
litigation on our business continuity."

The Company expects to take a net charge against earnings of
approximately $14,000,000 in the third fiscal quarter ending October 31,
1999. This charge includes professional fees, other expenses incurred to
date in connection with the class action litigation, and premium costs
for the insurance agreement, less recovery under the Company's existing
insurance policy. The Company expects that all future costs to defend
and resolve the class action litigation will be covered by the insurance

KONA KAI: Coffee Distributors Settle CA Claims Of Selling Fake Kona
Gourmet coffee drinkers who pay a premium price to savor unique Kona
beans have greater assurance they are getting the real thing under a
$1.2 million settlement with some of the nation's biggest coffee

The farmers reached a settlement with the now defunct California-based
wholesaler Kona Kai Farms and some of the nation's top retailers,
including Starbucks and Costco, who sold coffee falsely labeled as being
from Kona on the west side of Hawaii Island.

The settlement on the class action lawsuit filed in 1997 is subject to
approval by a California state court, according to Mark Davis, an
attorney representing 650 Kona coffee growers.

"The farmers undertook a difficult battle to fight for the protection of
the Kona name and to send a message that coffee farmers would seek to
fight the expropriation of the fraudulent use of their product for
profit," Davis said Wednesday.

The civil case stems from federal criminal charges brought in 1996
against Kona Kai and its owner, Michael Norton, for allegedly
distributing a cheaper and inferior grade Central American coffee
labeled as Kona coffee. Norton is awaiting trial, Davis said.

Kona Kai and its insurance company agreed to pay $1 million to the
farmers while the $255,000 balance comes from retailers including
Nestle's Beverage Co., Price Costco Inc., First Colony & Tea Co., S&W
Fine Foods, Gloria Jeans' Gourmet Coffee Corp., Peerless Coffee Co., The
Coffee Beanery, Starbucks Corp., Brothers Gourmet Coffee, Peets Coffee
and Tea Inc. and Klein Brothers, Davis said.

The $1 million is all the assets and insurance coverage available from
the defunct Kona Kai.

While there is no evidence the retailers were aware of Kona Kai's fraud,
"we all have a responsibility to ensure that when we buy coffee and make
a representation to the public about what it is that we ensure that it
is authentic," Davis said."The deals consummated by some of the
retailers were too good to be true and they were, in fact, too good to
be true."

Starbucks' attorney here, Daniel Bent, said the company agreed to settle
two years ago because it was the best business decision to make.
"We settled for less than a month's legal fees," Bent said. "There was
no evidence whatsoever that Starbucks received any of the phony coffee.
We don't think we did," he said.

As part of the settlement, some of the retailers have agreed to buy
161,000 pounds of green Kona coffee over the next five years from Kona
farmers, he said.

When attorneys' fees and expenses are paid, the settlement will give the
farmers about $600,000, or about $300 per acre in production during the
1987-1995 period of Kona Kai's scheme, Davis said.

The settlement falls far short of the losses suffered by Kona farmers
when 20 million pounds of Kona Kai's falsely labeled and lower-priced
coffee hit the world market, artificially depressing Kona prices, he

Two-thousand acres in Kona annually produce about 2 million pounds of
green coffee which, after roasting, retails for an average $20-$22 per
pound. That's second only to Jamaican Blue Mountain Coffee, which can
fetch up to $40 a pound.

"Kona coffee is one of the finest and most expensive coffees in the
world and there are many who capitalize on that fact and take advantage
of the public," said Gus Brocksen of the Kona Farmers Alliance. For
years, Kona farmers have been seeking a federal certification mark for
their coffee but have been blocked by local processors who make money
off so-called Kona blends, which under state law can be marketed with as
little as 10 percent Kona beans, farmer John Langenstein said.

However, the Hawaii Coffee Association is close to gaining separate
certification marks designating Kona and other growing regions,
including Kauai and Molokai. "That's what's used with the Jamaican Blue
Mountain coffee industry, Colombian coffee uses it and most notable any
other significantly point-of-origin agricultural product -- Idaho
potatoes, Maui onions," he said. "The farmers are united to protect the
Kona coffee name and we will continue our ongoing battle."

MANHATTAN CITY: Sued Over Temporary Housing for Homeless Aids Patients
In his room at the Concourse Hotel in the Bronx, which the city uses to
house homeless people with AIDS, Simon Vargas says he sleeps with the
television and the lights on to keep the roaches and rodents away. He
says that he has found crack vials in the mattress and that mice have
slid through the seal of his refrigerator door to eat his food.

Mr. Vargas, 42, is part of a class-action lawsuit filed in Federal
District Court in Manhattan yesterday that contends that conditions at
the nearly 50 hotels the city uses for short-term housing for homeless
AIDS patients are so violent and unsanitary that a stay there could put
the patients' lives at risk.

Housing advocates say that the city, which places 2,000 AIDS patients a
month in emergency housing through its Division of AIDS Services and
Income Support, is violating its own 1997 law by failing to provide
housing that is "medically appropriate for people living with AIDS and
H.I.V.," which should include a private refrigerator and a lockable

The lawsuit was announced at a news conference and protest yesterday
morning on the steps of City Hall where about 40 homeless people with
AIDS carried signs that read "Giuliani, Obey the Law You Signed."
Several dozen others formed a picket line outside the line of fences
around City Hall.

The suit names as defendants Mayor Rudolph W. Giuliani, Jason A. Turner,
the Commissioner of the Human Resources Administration, and Gregory
Caldwell, deputy commissioner of the city's AIDS services division. The
suit alleges violations of both the Federal Americans With Disabilities
Act and local laws.

In a report released at the news conference yesterday by Housing Works,
an AIDS service organization that is representing the plaintiffs, 88
percent of the AIDS patients in emergency housing surveyed said they had
never been visited by workers from the AIDS division, as is required by
the city's regulations. Many said they did not have access to a
refrigerator, even though they required an elaborate regimen of drugs,
some of which must be refrigerated.

Two earlier reports, advocates noted, had outlined similar conditions
for homeless people with AIDS living in such hotels, one by the National
Development and Research Institute in 1997, another in 1998 by Alan G.
Hevesi, the City Comptroller, which found conditions unsatisfactory and

"The city has known that, day after day, year after year," said Armen
Merjian, a senior staff attorney for Housing Works, who is working on
behalf of the plaintiffs, as is the law firm Milbank, Tweed, Hadley &
McCloy. "While city officials go to sleep and wake up, a rodent has
bitten one of our clients, and one of our clients has had to clean up
human waste from the bathroom."

Housing Works has long been a critic of the Mayor and his policies.
Recently, Mr. Giuliani blocked the group from receiving a $600,000 state
contract for job training for welfare recipients with H.I.V.

One AIDS patient who attended the rally, Ella Berry, said she used to
have to leave her room at 6 A.M. to get from the Allerton Hotel on 23d
Street to her sister's home in the Bronx, where she keeps her medicine

Other residents complained that they could not easily get in and out of
their rooms on higher floors because some of the hotels do not have
elevators. Residents also said loan sharking, prostitution and drug use
in the hotels were common.

Robert Thompson, 32, who lived in emergency housing for three years,
leaving only a month ago, , said that at one hotel in the Bronx where he
stayed, the manager would routinely padlock the door to the basement,
where 10 people lived. Mr. Thompson said he feared that if a fire broke
out when the door was locked, everyone would have been trapped.

Officials at the city's Law Department and the Human Resources
Administration said late yesterday that they had not seen the court
papers and would not comment on the case. (The New York Times 9-30-1999)

MOTORCAR PARTS: Wolf Haldenstein Files Securities Suit In CA
The following is an announcement by the law firm of Wolf Haldenstein
Adler Freeman & Herz LLP:

Wolf Haldenstein Adler Freeman & Herz LLP announces that it filed a
class action lawsuit in the United States District Court for the Central
District of California on behalf of investors who bought Motorcar Parts
& Accessories, Inc. (NASDAQ: MPAAE)(formerly NASDAQ:MPAA) stock between
August 1, 1996 and July 30, 1999.

The lawsuit charges Motorcar and certain of its officers and directors
with violations of the securities laws and regulations of the United
States. The Complaint alleges that defendants issued a series of false
and misleading statements concerning the Company's strong sales and
financial results during the Class Period. The Complaint alleges that
defendants used their knowledge of these false and misleading statements
about Motorcar's strong sales and financial results to allow the Company
and certain insiders to sell 1.55 million shares in a secondary public
offering in November 1997 at $ 16.63 per share, and to artificially
inflate its stock price during the Class Period. On May 24, 1999,
Motorcar revealed a huge loss for its 1999 fiscal year ended March 31,
1999 causing the Company's stock to fall by 36% in one day to $ 7 from a
Class Period high of $ 20 1/2. When the Company eventually revealed that
its financial results for FY97, FY98 and interim FY99 would have to be
restated to reduce previously reported revenues and earnings, its stock
fell to as low as $ 5 per share.

If you purchased Motorcar stock during the Class Period, you have until
October 4, 1999 to participate in the case and ask the Court to appoint
you as one of the lead plaintiffs for the Class. In order to serve as
lead plaintiff, you must meet certain legal requirements.

Plaintiff is represented by the law firm of Wolf Haldenstein Adler
Freeman & Herz LLP (www.whafh.com). Contact Wolf Haldenstein Adler
Freeman & Herz LLP at 270 Madison Avenue, New York, New York 10016, by
telephone at (800) 575-0735 (Michael Miske, Gregory Nespole, Esq., Fred
Taylor Isquith, Esq. or Shane T. Rowley, Esq.), via e-mail at
classmember@whafh.com or whafh@aol.com TICKERS: NASDAQ:MPAAE with
reference made to Motorcar or visit website at http: //www.whafh.com

SEARS: Florida Ct Oks Suit Alleging Charges On Service Rarely Performed
A federal judge in Florida has declined to dismiss a class-action
lawsuit against Sears that accuses the company of knowingly charging
customers for a special tire-balancing service that was rarely
performed. Sears had argued that the key plaintiff could not prove any
misrepresentation because he could not remember anything about the
transaction. But U.S. District Judge Susan C. Bucklew said, "It is
wholly illogical to assume that any rational consumer would purchase a
service that he or she knew would likely not be performed." (The
Washington Post 9-30-1999)

TOBACCO LITIGATION: Argentine Law Firm Looks For Applicable Law
Mario E. Castro Sammartino (e-mail cassam@arnet.com.ar) from the Buenos
Aires-based law firm of Castro Sammartino & Pierini, reports that the
liability of tobacco companies for smokers' cancer, lung diseases and
other pathologies is currently being strongly discussed in Argentine, in
a message posted to the Business Law Listserv (bizlaw@law.umaryland.edu)
on September 29, 1999.

"As consumer organizations' lawyers we are dealing with a lot of queries
on the possibility of filing a lawsuit. Further to this we have been
told that there exists important judicial rulings against tobacco
companies in the United States," Mr. Sammartino says. "Therefore we
would appreciate your helping us in these matters by kindly indicating
us where we could get case law and any applicable law or information on
this subject. Needless to say," Mr. Sammartino adds, "we would be
delighted to furnish you with any information you may need concerning
Argentine's law."

UC IRVINE: Sued Over Alleged Sale Of Donated Body For Profit
A North Tustin man filed a lawsuit against UC Irvine contending his
mother's body, donated for education and research, instead may have been
sold for personal profit or otherwise mishandled.

Coming just 10 days after the public first learned of an investigation
over body parts at UC Irvine, the suit seeks to become a class action on
behalf of other families of people who willed their bodies to the

Newport Beach attorney Federico Castelan Sayre--whose past clients have
included Rodney King and victims of the 1984 poison-gas disaster at a
Union Carbide plant in Bhopal, India--filed the suit on behalf of Robert
Simpson and his father, Robert Simpson Sr. The younger Simpson said he
donated his mother's body, according to her wishes, to UCI's Willed Body
Program last year.

While there is no evidence that Lorraine Simpson's body was mishandled,
Sayre said the Simpsons and other families are distressed by news of the

The Willed Body Program's director was fired, effective Friday, amid
suspicions that he had business ties to companies that profited from the
program. Gaps in record-keeping also make it difficult to tell if some
donated remains were properly disposed of, university officials say.

The younger Simpson, a 56-year-old family therapist, said filing a
lawsuit is the best way he knows to find out what happened to his
mother, who died at 81 after a stroke. Simpson said memories of his
spirited, red-haired mother painting seascapes from her Laguna Beach
home have been ruined by questions.

"We don't know what's happened--that's what prompted me to file a
lawsuit," Simpson said Monday. "I don't know if her body was split up,
parts sold here and there. They're supposed to be cremating remains when
they're done using her body and scattering them at sea or returning
them. But how will I ever know it's her? Or if it's parts of her and
someone else? . . . I feel like I've betrayed her."

Simpson said he called the university to find out what happened to his
mother's ashes after news of the investigation broke, but hung up when
he was referred to the university's public information office.

The suit, filed in Superior Court in Santa Ana, contends that UC Irvine,
former program director Christopher S. Brown and companies affiliated
with Brown may have:

* Allowed bodies to be sold for private gain, rather than the public
  good. Improperly disposed of cremated remains or mixed ashes.
* Failed to monitor the use of bodies donated for science.
* The complaint does not specify a sum for damages.

UC Irvine officials declined to discuss the suit, but a lawyer for
Brown, Stephen Warren Solomon, said he sympathizes with those concerned
about their deceased family members. "My client's position is that
everything is accounted for and that nothing inappropriate was done by
him," he said. "I can't comment on the actions of another lawyer, but I
think this adds more fuel to a fire when calm and reason should

Sayre hopes that a judge will certify the suit as a class action,
allowing the Simpsons to represent other families who have complaints
against the program. Sayre said he has talked to two other families
about the class-action possibility. He has spoken with a lawyer
representing relatives of Vincent Craig, who donated his body to the
program in 1995. Craig's relatives have sued UC Irvine in Superior
Court, contending that the man's remains were not returned to them as
requested. Instead, the suit claims, the remains were disposed of and
the family was not consulted.

One legal expert said the new case, if it proceeds, may hinge on waivers
signed by people who left their bodies to science. At UCI, donors are
supposed to sign a form authorizing the use of cadavers for "teaching
purposes, scientific research or any other purposes deemed advisable by
the university or its authorized representatives." Another key point
will be the necessity for the Simpsons to establish that anything
improper happened to Lorraine Simpson's remains, said Alan Calnan, a
professor specializing in torts and product liability at Southwestern
University school of law in Los Angeles.

"I don't think the claim itself is shaky," Calnan said. "The mishandling
of corpses is a long-standing, well-recognized doctrine for sustaining
claims of emotional distress. That part of it is very solid. It sounds
like the underlying facts of this case are still questionable."

Sayre, one of two lawyers representing the Simpson family, has been
involved in several widely publicized lawsuits, including one against a
Santa Fe Springs cemetery accused of mishandling graves that resulted in
a $ 3.9-million settlement in April. Sayre also was among lawyers
criticized in 1985 by the Board of Governors of the California Trial
Lawyers Assn. for filing "overstated claims" in the Bhopal disaster.
(Los Angeles Times 9-28-1999)

Y2K LITIGATION: Lawyers Anticipate Various Year 2000 Scenarios
A Hollywood treatment on the legal profession and the year 2000 crisis
might offer a weird science fiction scenario for the crash of an
airplane that hasn't even taken off.

Already set up at the various possible crash sites are law firm Y2K
teams, ready to race in with expertise in contracts, warranties,
insurance and all manner of commercial law. And off to the side are
plaintiffs lawyers, ready to bring class actions -- they've even tried
out a few before the plane crash. Another group offering alternative
dispute resolution is handing out parachutes to as many passengers on as
many planes as possible.

The legal profession has never engaged in so much emergency response
before an emergency -- and a highly unpredictable one at that. A June
survey of 2,000 experts found 45 percent of them believe the Y2K problem
will be minor; 45 percent deem it very serious; and 10 percent say it
will bring down society. The problems cited run the gamut from utility
and infrastructure failures to manufacturing disruptions.

And if the explosion turns out to be a firecracker rather than an atomic
bomb, few lawyers will be hurt from overreacting. "They'll just go back
to doing what they were doing two years ago before all this got going,"
says Mark Kaufmann, who heads the Y2K practice group at Chicago's Sidley
& Austin. That is Kaufmann's way of saying these groups simply pool
expertise already in the firms, from insurance to securities, from
regulatory matters to contracts. "The key is that there are a lot of
angles to look at," he says. "And lawyers are capable of moving in and
out of hot practice areas."

Many, if not most, firms with Web pages are touting their Y2K expertise
in an electronic flurry, though few can boast any accomplishments as

By June, fewer than 100 Y2K suits had been filed. Many were what one
prominent Y2K lawyer calls gadfly suits, simply stirring up trouble
where it may or may not actually happen come crunch time. And many of
the suits settled quickly, especially those concerning software. Some
judges threw out class actions because there is no damage yet.

Congress was quick to pass the Year 2000 Information and Readiness
Disclosure Act, taking businesses off the hook for good-faith offers of
Y2K information to other businesses.

About 30 states considered legislation to limit Y2K liability, with much
of it tied up by complaints of anti-consumer bias. Florida enacted the
Commerce Protection Act in June, protecting businesses from suits
concerning Y2K crashes of computers and software, and prohibiting class
actions unless major damages occur. A number of states passed
legislation giving themselves Y2K immunity.

Then in July, President Clinton signed a compromise bill that would
limit punitive damages in Y2K suits to the lesser of $ 250,000 or three
times compensatory damages in cases brought by individuals with a net
worth of $ 500,000 or by small businesses with fewer than 50 employees.
The legislation also moves class actions to federal courts in cases
concerning more than $ 10 million in damages. Further, businesses would
have 90 days to fix problems before a lawsuit could move forward.

                            ADR Looms Big

While estimates of Y2K litigation run into the hundreds of billions and
trillions of dollars, most of it will be business vs. business. Thus one
surprising outcome of the crisis might be a big boost for ADR.

The CPR Institute for Dispute Resolution, a not-for-profit coalition of
corporate law departments, law firms, academics and others, has
persuaded more than 100 companies -- many on the Fortune 500 list -- to
pledge that they will negotiate and, if necessary, mediate disputes
before going to more adversarial forums.

Many disputes likely will concern supply or productivity disruptions,
says institute vice president Peter Phillips. "Among those with
established business relationships with each other in the supply chain,
the fastest and best remedy is not to file suit," he says.

The American Arbitration Association has introduced fast-track
procedures for Y2K claims to resolve them within 105 days of filing.

Then there's just one more wrinkle. Like planets lining up in unusual
fashion, the Big Date comes on both a holiday and a weekend. "I think
some lawyers might be not celebrating New Year's Eve, or not celebrating
in the usual fashion," says Kaufmann.

Looking ahead How extensive or uneventful the much talked about Y2K
computer bug will be depends largely upon who offers the opinion. Here
is a random sampling from surveys, released since Jan. 1, 1999, of how
various computer users see the problem:

    * 69% of chief executives in an Economic Confidence Survey in the
      Northwest states of Washington, Oregon and Idaho expect very
      little or no impact on their businesses.
    * 55% of information technology decision-makers at small businesses
      polled by Sage Software say they have already fixed the problem.
    * 45% of managers for human resources computer systems at companies
      polled by Towers Perrin say they won't be compliant until some
      time between July 1 and Dec. 31.
    * 25% of insurance companies responding to a questionnaire from
      Weiss Ratings have made inadequate preparations.

(ABA Journal, September 1999)


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 and Peter A. Chapman, editors.

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

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