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               Tuesday, October 12, 1999, Vol. 1, No. 175


ALLIANCE CAPITAL: Will Defend Vigorously Unitholders Suit In Delaware
ALLSTATE INSURANCE: Faces Ill. FDCPA Suit Over Credit Collection Mail
AUTO INSURANCE: Chicago Tribune Says State Farm Verdict Is Wrong
BRUNSWICK CORP: Settles 3 Of 4 Antitrust Suits Re Marine Engines
CITIBANK: TX Suit Charges Trickery For Late Payment Penalties

DONNKENNY INC: Announces Settlement Of Securities Suit
EDWARD FILBIN: Legal Morass From Tires Fire In CA Can Go On For Years
FEN-PHEN: Attorney Says 70000 Louisianians May Soon Share In Settlement
FORD MOTOR: Ill. Sp. Ct. Affirms Dismissed Fd Case As Untimely In Ill.
FRITZ COMPANIES: Faces Appeal Of Dismissed Securities Suits In CA

GENERAL MOTORS: 8th Cir Closes Door On Claims Of Speculative Damages
GPU ENERGY: NJ Electric Utility Reimburses Customers for July Outages
INLAND REVENUE: Union-Covered Lawyers Sue IRS For Overtime Pay
KMART CANADA: Ontario Super. Ct. Oks Class Of Dismissed Employees
LASERGATE SYSTEMS: Intends To Defend Vigorously Securities Suit In NY

LIFE USA: Fd Ct Oks Investor Fraud Suit Against Annuity Firm
NATIONSBANK CORP: 5th Cir Says FBI May Be Liable For Harm To 3rd Parties
PERRIGO CO: Securities Suit Dismissed; Appeal Withdrawn
UC IRVINE: Experts Disagree Over Payouts For U's Willed Body Scandal
WELLS FARGO: Bank Sued In CA Over Bankruptcy Debt Collection Practices

WORLD ACCESS: Faces Shareholders Suits In Georgia
Y2K LEGISLATION: Texas Law May Need To Yield To Federal Legislation
Y2K LITIGATION: NEC Faces CA Suit Over Non-Compliance Of Versa Laptop
Y2K LITIGATION: Policyholders Try To Bill Insurers For Remediation


ALLIANCE CAPITAL: Will Defend Vigorously Unitholders Suit In Delaware
At a special meeting of unitholders held on September 22, 1999, the
unitholders of Alliance Capital Management L.P. ("Alliance Holding")
approved both the transfer of Alliance Holding's business to Alliance
Capital Management L.P. II ("Alliance Capital"), a newly-formed private
limited partnership, in exchange for all units of Alliance Capital and
the amendment and restatement of Alliance Holding's partnership
agreement. In connection with the reorganization, Alliance Holding is
offering to its unitholders the opportunity to exchange Alliance Holding
units for Alliance Capital units on a one-for-one basis.

On September 29, 1999, R.S.M. Inc. and Mel Mohr, trustee for the Irene
Mohr Revocable Trust (the "Plaintiffs"), on behalf of themselves and
other unitholders of Alliance Holding, filed a purported class action
complaint in the Court of Chancery of the State of Delaware in and for
New Castle County against Alliance Holding, Alliance Capital, Alliance
Capital Management Corporation (the "General Partner"), Dave H.
Williams, Bruce W. Calvert, Robert H. Joseph, Jr. and John D. Carifa
(together with Alliance Holding, Alliance Capital and the General
Partner, the "Defendants").

The complaint seeks, among other things, to: (1) declare the action to
be a proper class action and to designate Plaintiffs as representatives
of the class and their counsel as class counsel; (2) declare that the
amended and restated agreement of limited partnership of Alliance
Holding was not adopted by the vote of partners and unitholders required
under the existing Alliance Holding partnership agreement; (3) enjoin
the consummation of the reorganization and the exchange offer; (4)
direct Defendants to pay to Plaintiffs and the class all damages
allegedly caused to them and to account for all profits and any special
benefits obtained by Defendants as a result of their allegedly unlawful
conduct; and (5) award to Plaintiffs their costs and disbursements of
the action, including reasonable fees and expenses of Plaintiffs'
attorneys and experts.

The complaint alleges, among other things, that: (1) the amended and
restated Alliance Holding partnership agreement adversely affects the
existing rights and benefits of Alliance Holding unitholders and was not
approved by the requisite number of unitholders; (2) Defendants' major
and undisclosed purpose in proposing the reorganization is to take
Alliance Holding private at a substantial discount; (3) Defendants
violated their common law duties of loyalty, care and candor to Alliance
Holding unitholders by recommending the reorganization, which the
complaint alleges diminishes the public float for Alliance Holding units
to the detriment of Alliance Holding unitholders and therefore is
neither fair nor in the best interests of unitholders; and (4)
Defendants breached their duties of good faith, fair dealing and candor
to Plaintiffs and the class by intentionally misleading them through
false and misleading disclosures.

On October 4, 1999, Plaintiffs filed with the Court a motion for
preliminary injunction seeking to enjoin Defendants from implementing
the amended and restated Alliance Holding partnership agreement and the
reorganization of Alliance Holding's business. No response to the
complaint or motion has yet been made.

The Defendants intend to vigorously defend this action.

ALLSTATE INSURANCE: Faces Ill. FDCPA Suit Over Credit Collection Mail
Although other class actions involving the same defendants and raising
similar violations of the Fair Debt Collection Practices Act were
pending, the U.S. District Court for the Northern District of Illinois
granted class certification to another group of Illinois debtors who
received a standard form letter. Vines, et al. v. Sands, et al., No. 98
C 4131 (8/10/99).

In December 1997, Credit Collection Services mailed a letter to Roger
and Helen Vines to collect a debt they allegedly owed Allstate Insurance
Co. The front of the letter explained that without consent a collection
agency may not communicate with a consumer at his place of employment if
the "collector knows or has reason to know that the consumer's employer
prohibits the consumer from receiving such communication." On the back
of the collection notice, under the heading "Massachusetts Law," the
consumers read, "You have the right to make a written or oral request
that the telephone calls regarding your debt not be made to you at your
place of employment."

Believing the "Massachusetts" portion of the letter to be false and
misleading because all debts have this right under federal law, the
Vines filed suit under the FDCPA. They also moved for class
certification on behalf of other Illinois debtors who received a similar
letter regarding Allstate from Credit Collection.

The District Court considered the plaintiffs' motion for class
certification under Fed. R. Civ. P. 23(a) and 23(b)(3). Because Credit
Collection did not dispute that at least several hundred Illinois
consumers received a copy of its collection letter, the court held that
Rule 23's numerosity requirement was satisfied.

The District Court found the commonality and typicality requirements of
Rule 23 were easily satisfied as well because the claims all involved
the same form letter from Credit Collection. The court explained the
plaintiffs' FDCPA claims arose from the same course of conduct as all
class members' claims and were based on the same legal theory - that the
letter was misleading in violation of 15 USC 1692e, 1692e(5) and

After concluding that both the named plaintiffs and their counsel could
adequately represent the proposed class, the court considered if common
issues of law or fact predominated over individual issues to make a
class action the appropriate method for adjudicating the claims. Writing
for the court, Judge Bucklo opined that the predominate legal issue was
whether the letters violated the FDCPA. He added the form letter served
as a "common factual link among the proposed class members." Finally,
the last hurdle of Rule 23(b)(3) was satisfied when the court concluded
that a class action was a superior method of adjudication given that
many consumers may not realize their rights were being violated.

The defendants argued that certification should be denied because other
class actions were pending that related to other letters sent by Credit
Collection. Credit Collection pointed out that a class in Illinois and a
class in Indiana were previously certified in connection with similar
collection letters. The defendants claimed that plaintiffs' counsel only
sought class certification in this action to obtain more fees.

The court found these arguments in opposition to class certification to
be without merit. It explained that the other class actions involved
other issues in addition to the claims raised by the Vines and involved
different collection letters. In granting the motion for certification,
Judge Bucklo stated, "The plaintiffs are entitled to define their class
narrowly as including only people in Illinois who have received the form
letter that they received.

Finding that the letter could imply to an unsophisticated consumer that
he does not have the power to stop communications from the collection
agency to his place of employment, the court also denied the defendants'
motion to dismiss. (Consumer Financial Services Law Report 9-20-1999)

AUTO INSURANCE: Chicago Tribune Says State Farm Verdict Is Wrong
It didn't take long for State Farm to blink after a Downstate jury
awarded plaintiffs $456 million in damages because the insurance company
used cheaper "aftermarket" parts to replace the fenders and bumpers of
policyholders' cars after accidents.

State Farm says it will appeal the verdict. But in the meantime, it's
going to suspend the use of such parts to prevent "customer confusion
and concern over its auto repair estimates."

No doubt that is a sound business decision. But make no mistake: This is
no victory for consumers. It means the monopoly enjoyed by the car
makers over replacement parts will be restored. Insurance rates will go
up and car repair costs will go up because, with no competition, there
will be nothing to restrain the pricing of these parts.

The whole aftermarket parts industry surged in the last decade, as
insurers and consumers sought alternatives to the high cost of fixing
damaged cars using only parts supplied by the automakers. They had a
monopoly and could charge pretty much whatever they wanted. Aftermarket
hoods, bumpers, fenders and the like--all elements of the so-called
outer shell of cars--now account for about 15 percent of a "crash parts"
market the American Insurance Association estimates to be about $9
billion a year.

At issue in the class-action lawsuit heard in Downstate Marion was State
Farm's practice of ordering body shops to use these generic parts--on
average 40 to 50 percent cheaper than those made by the car
manufacturers. Deception was not an issue: The company disclosed that
aftermarket parts would be used in repairs and gave its customers the
option of paying more to get the car maker parts.

State Farm argued the aftermarket parts are safe and sound, result in
few customer complaints and saved policyholders $234 million in 1997.
The plaintiffs said they don't fit, they aren't safe and they hurt cars'
resale value.

The plaintiffs argued that it is impossible to restore a car to
pre-crash condition unless parts of "like kind and quality" are used,
and that the only parts that qualify are those made by the car makers.
The jury bought this argument.

If this verdict is upheld, insurance rates at State Farm, the nation's
largest auto insurer, will certainly go up. As a mutual insurance
company, it is owned by its policyholders and higher costs ultimately
are passed along as higher rates. But this lawsuit is only one of half a
dozen or so similar suits against other insurance companies, and thus
has implications for everyone.

Competition is the lifeblood of the American economy. It acts as a brake
on higher prices and a spur to better quality. This verdict eliminates
the competition and mandates the monopoly. It is wrong.
(Chicago Tribune 10-10-1999)

BRUNSWICK CORP: Settles 3 Of 4 Antitrust Suits Re Marine Engines
Brunswick Corp. said last Thursday it has settled three of four
antitrust lawsuits charging the leading U.S. maker of marine engines
with unfairly monopolizing that market.

All three of the suits were patterned after one in which a Little Rock,
Ark., jury in June 1998 awarded plaintiffs $133 million. That suit
remains under appeal, but Lake Forest-based Brunswick clearly wanted to
get the newer cases resolved without risking another huge verdict.

The last outstanding case, representing independent boatbuilders who
claim they were harmed by Brunswick's pricing policies, was filed by the
same Minneapolis attorney who represented the plaintiffs in the
successful Little Rock case.

That attorney, K. Craig Whitefang of law firm Winthrop and Weinstine,
says Brunswick has made no effort to settle either of those cases.

Brunswick refused to detail terms of the three settlements beyond saying
the company will take an after-tax charge of $31 million, or 33 cents a
diluted share, in the third quarter.

In the third quarter of 1998, Brunswick earned $4.1 million, or 4 cents
a diluted share, on sales of $956.5 million. The quarter included a
one-time restructuring charge. Last Thursday, a First Call survey of six
analysts estimated Brunswick would earn 52 cents a share in the third
quarter of this year.

"This is about settling the litigation in a construct where we're still
engaged in litigation," said Peter Hamilton, Brunswick senior vice
president and chief financial officer, explaining why the company won't
disclose details.

One of the three settlements involved a suit filed by Volvo Penta of the
Americas Inc., Brunswick's principal competitor in the stern-drive
engine market. As part of the settlement, Brunswick said it signed a
long-term contract to buy diesel engines from Volvo Penta.

That agreement will have no impact on operations of Brunswick's Mercury
Marine unit, Hamilton said. "Brunswick doesn't make diesel engines," he
noted. Hamilton said the Volvo Penta engines will be used in some models
of Sea Ray and Bayliner boats; Brunswick owns both those brands. Other
Brunswick boat brands include Boston Whaler, Trophy, Baja and Maxum.

The second case settled was filed on behalf of people in 16 states and
the District of Columbia who purchased boats equipped with Brunswick's
MerCruiser brand engines.

The third case was a class-action suit on behalf of marine dealers who
bought MerCruiser engines or boats equipped with those engines.

All the suits contend that Brunswick has used "predatory pricing" of its
engines in an attempt to drive competitors out of business.

The Little Rock lawsuit was filed by Independent Boat Builders Inc. and
22 of its members. The last suit outstanding, filed in Minnesota, is on
behalf of independent boat manufacturers not covered in the Little Rock

Those lawsuits charge that Brunswick sells its Mercury brand engines to
its own boat divisions at prices cheaper than to outside builders. The
suits say that Brunswick requires boatbuilders it doesn't own to commit
to buying an unrealistically high number of engines to get the best

Brunswick has consistently denied the charges and predicted that its
appeal of the Little Rock verdict will result in a reversal or a new
trial. Hamilton said a decision in that appeal could come as early as
year-end, but likely not until the first quarter of 2000. He would not
discuss whether Brunswick had attempted to negotiate a settlement with
the 22 dealers in that case or the subsequent lawsuit by other
manufacturers. (Chicago Tribune 10-8-1999)

CITIBANK: TX Suit Charges Trickery For Late Payment Penalties
A class action alleges that Citibank used "hyper-technical and
misleading payment-credit guidelines" to trick bankcard holders into
late payment penalties.

According to the suit, Citibank set a deadline of 10:00 a.m. for
processing payments. Payments received after that were credited the next
day, the suit said, meaning many whose payments were received on the due
date were deemed to be late. Those who missed the deadline were charged
a $29 fee, or higher annual interest rates, the suit said.

Citibank spokeswoman Maria Mendler said the bank has not yet received a
copy of the suit, but added, "in order to maximize our
payment-processing capacity and control, Citibank has had a 10:00 a.m.
deadline in place for many years."

"Citibank's due-date cutoff time is clearly stated on the payment coupon
and these payment processes and communication to customers are
specifically authorized by federal law," Ms. Mendler said.

Class actions against credit-card issuers over late fees and other
penalties are a growing trend. Another Citigroup subsidiary, Travelers
Bank, was accused in March in Delaware Superior Court of charging higher
interest rates than promised on balance transfers. Other large issuers
such as Bank One Corp.'s First USA and Providian Financial Corp. have
been accused of similar practices.

The Citibank lawsuit, which seeks class-action status, was filed by
three law firms on Oct. 1 in Texas Eastern District Federal Court on
behalf of Willi Jo Jimmerson, a Citibank Visa cardholder. (The American
Banker 10-6-1999)

DONNKENNY INC: Announces Settlement Of Securities Suit
Donnkenny, Inc. (Nasdaq: DNKY) announced the signing of a Stipulation of
Settlement providing for the dismissal of claims against Donnkenny in
the securities class actions commenced against the Company in 1996. The
terms of the settlement provide for the payment by the Company and its
insurance carriers of $ 10 million and the issuance by the Company to
the Class of 3,000,000 shares of Donnkenny common stock.

Currently there are approximately 14,300,000 shares of Donnkenny common
stock outstanding. The Stipulation of Settlement is subject to Court

EDWARD FILBIN: Legal Morass From Tires Fire In CA Can Go On For Years
A plume of black smoke rises above the tiny community of Westley, a town
in Stanislaus County about 40 miles south of Stockton. Nearly seven
million tires are ablaze there after lightning struck a massive tire
pile Sept. 22. It is a catastrophe that nearly everyone familiar with
the pile predicted.

As the county remains under a health advisory two weeks later, a cadre
of attorneys are sharpening their swords to do legal battle with Edward
Filbin, the man who owns the land on which the pile sits.

But Filbin, who has been accumulating tires on the 40-acre property
since the 1950s, sold the tire pile -- though not the land -- to Oxford
Tire Recycling of California Inc. in 1987 and has intimated that the
sale mitigates his responsibility for the blaze.

The county recently brought in a team of Texas firefighters that
specializes in industrial fires to fight the blaze. They used foam to
extinguish a related oil fire, but the tires themselves continue to
smolder and could do so for months. A tire pile in nearby Tracy has been
ablaze since August 1998.

The sticky legal morass resulting from the Filbin blaze could rival the
fire itself. A family of five from Patterson has already filed a class
action, Nicola v. Filbin, 231800, in Stanislaus County Superior Court
alleging medical ailments caused by the smoke. More suits, including
environmental claims and nuisance charges, are expected to follow. "This
is going to be a tremendous legal quagmire," says Solange Goncalves
Altman, a Modesto attorney who prosecuted Filbin on nuisance charges
related to the tire pile more than a decade ago. "The lawsuits could go
on for the next 15 years."

Tire fires are notoriously difficult to extinguish. Pouring water onto
burning tires poses the risk that the melted rubber runoff could poison
rivers and underground water supplies. Complicating matters in the
Westley fire is that it is close to the California Aqueduct. The most
effective way to put out tire fires is with foam, but it is costly and
works best on flat surfaces; the Filbin pile is 50- to 60-feet deep in
some spots.

As firefighters battle the blaze itself, attorneys are focusing their
attention on Filbin, who has declined to comment except for a statement
issued nearly two weeks ago through his attorney, Landels Ripley &
Diamond partner Thomas Trapp.

Ironically, the California Integrated Waste Management Board, the state
agency responsible for managing solid waste, issued a cleanup order to
Filbin a mere two weeks before the blaze ignited. The order marked the
culmination of a drawn-out battle between the board and the owners and
operators of the tire facility.

Filbin's dealings with authorities stretch as far back as 1987, when the
attorney general was among the parties to file a nuisance suit against
Filbin and Oxford Tire Recycling. At one time, the tires on the property
numbered 40 million, making it the largest tire pile in the state.

Judgments were entered in 1990 against both Filbin and OTR, who were
required to embark on a plan to reduce the size of the pile.

Because burning tires can generate electrical power, the board partnered
with the Modesto Energy Limited Partnership in 1997 to incinerate the
tires and recover the resulting energy. MELP leased land from Filbin to
build a tire-to- energy facility on-site.

The board forked over almost $2 million to MELP for the incineration of
four million tires and told Filbin and OTR to complete a final closure
plan for the pile after MELP finished burning the tires. MELP completed
its end of the bargain by May 1998, but, according to the board, neither
Filbin nor OTR ever submitted a plan to get rid of the remaining tires.

In the spring of 1998, the board issued a cleanup and abatement order to
Filbin and OTR, which required complete elimination of the pile by July
1999. A few months later, it revoked OTR's waste tire facility permit,
and OTR stopped doing business at the site and filed for bankruptcy at
the end of 1998.

The summer of 1999 came and went, and Filbin had yet to submit a
complete plan to the board or substantially reduce the size of his pile.
In issuing another cleanup and abatement order two weeks before the
blaze, the board again fingered Filbin as the responsible party for the
tire pile and set the wheels in motion for legal action against him.

David Post, a partner at Sacramento's McDonough, Holland & Allen who is
representing waste management board executive director Ralph Chandler in
action against Filbin, says there are a "number of targets" for
litigation. "Filbin may own the pile and he may not," Post says. "He
certainly put the tires there, but along the way, he sort of passed off
to others the responsibility for operation of the facility. Filbin's a
target, and his companies are a target." Filbin had transferred
ownership of the land to various trusts and limited liability companies
in an attempt, the board alleges, to shirk responsibility for the pile.

But the brief statement released on Sept. 24 implied that Filbin did not
deem himself the responsible party: "Mr. Filbin sold his used tire
collection business to OTR in 1987. . . . Since 1984, a part of the
property has been leased to Modesto Energy Limited Partnership, which
operates the waste tire- to-energy facility there. Because of potential
litigation, neither Mr. Filbin nor his representatives will have any
further comment at this time."

Post says a nuisance action against Filbin is possible, as is an
environmental suit over water contamination. "There will be sundry
things," he notes.

Scott Cole, the Oakland-based attorney who, along with Berkeley attorney
Timothy Rumberger, is representing plaintiffs in the class action, says
the decision to file stems from "years of neglect by Mr. Filbin and
Oxford in knowing about potential hazards and doing little if anything
to correct it."

The class members ask that Filbin and his affiliated companies be
required to set up a monitoring fund that would pay for medical testing
and treatment. They are also seeking an unspecified amount of punitive
damages. The class participating in the suit could eventually comprise
10,000 area residents, Cole estimates.

Government officials are hesitant to discuss the precise form litigation
against Filbin will take, but David Schmidt, a public information
officer for the Environmental Protection Agency's San Francisco office,
says "the EPA always pursues cost recovery when there's a viable,
responsible party. Cost recovery may also be pursued by state and county
agencies and could lead to litigation, but it's too early to tell."

Stacey Geis, an environmental specialist with the California District
Attorneys Association, says she cannot discuss potential litigation, but
notes that "an investigation is diligently under way."

At an estimated cost of $100,000 a day, the price tag for the cleanup
already has reached more than $1.5 million. Post says a lien could be
placed on the 200,000 gallons of oil runoff generated by the tires thus
far. "The owner and the operator could be required to use the moneys
generated from the oil to pay for cleanup and fire protection."

Goncalves Altman says she also expects legal action to surface from the
county's commercial sector -- "people who end up with crop losses and
businesses that were shut down because of the fire." Now that the threat
of nuisance has become a full-blown disaster, litigation is inevitable,
Post says. "Nobody was minding the store," he says. "It's no more
complicated than that." (The Recorder 10-8-1999)

FEN-PHEN: Attorney Says 70000 Louisianians May Soon Share In Settlement
When she described the residual effects of the diet drug she took for 13
months, Lynda G. Ratliff clenched her hands in front of her chest and
started to cry. "It's like something grabs your heart, and you can't
breathe," the Slidell woman said. "Your mind tells you to breathe, and
you can't. "

The palpitations, which strike about twice each day, provide vivid
reminders of the damage to her heart valves that she and her attorney,
John J. Cummings III, attribute to phentemine, the drug sold as Redux.
Instead of forcing blood out and then shutting, Ratliff said, her faulty
heart valves let blood slosh back in, creating a sound she can hear when
she lies in bed at night.

Ratliff, whose only hope for improvement is valve-replacement surgery,
was one of about two dozen clients Cummings represents who claim valve
damage from the drug. Each of them soon may be offered a share of a
record-breaking settlement announced by American Home Products Corp.,
the pharmaceutical company that pulled the drug off the market in 1997.

American Home agreed to pay as much as $4.83 billion to settle claims in
payments that could be as high as $1.5 million per person. Cummings was
a lead negotiator. The Madison, N.J., company is looking to resolve
thousands of product-liability cases involving people who claim maladies
caused by phentemine or fenfluramine, another diet drug whose brand name
is Pondimin.

The drugs could be taken separately or in combination, leading to the
nickname "fen-phen." Both drugs were manufactured by American Home,
which stopped selling them after a study linked the drugs to potentially
fatal valve problems. Ratliff also blames phentemine for her blurry
vision because, she said, it reduced blood flow to her brain.

About 5.8 million Americans, including 70,000 Louisianians, used them,
Cummings said. Even though the settlement has been announced, it is not
final. The decision will be made by U.S. District Judge Louis Bechtle of
Philadelphia. Assuming no obstacles, Cummings said he expects approval
by the middle of next year. (The Times-Picayune 10-9-1999)

FORD MOTOR: Ill. Sp. Ct. Affirms Dismissed Fd Case As Untimely In Ill.
Filing of complaint in federal court seeking certification of class
action did not toll or suspend Illinois statute of limitations. Because
state courts have no control over the work of the federal judiciary, it
would be unwise to adopt a policy basing the length of Illinois
limitation periods on the federal courts' disposition of suits seeking
class certification. State courts should not be required to entertain
stale claims simply because the controlling statute of limitations
expired while a federal court considered whether to certify a class

Gwendolyn Portwood v. Ford Motor Company, Illinois Supreme Court. 183
Ill.2d 459, 701 N.E.2d 1102, 223 Ill.Dec. 828 (1998).

Gwendolyn Portwood and 51 other plaintiffs appealed the following
holdings of the circuit and appellate courts: (1) the filing in federal
court of a complaint seeking certification of a class action does not
toll, or suspend, the Illinois statute of limitations during the
pendency of that complaint; and (2) plaintiffs whose breach of warranty
claim are dismissed by a federal court for lack of jurisdiction have six
months to refile those claims in Illinois state court.

On Aug. 21, 1981, a group of plaintiffs filed a complaint in United
States District Court for the District of Columbia seeking certification
of a nationwide class action against defendant Ford Motor Co. The
complaint alleged that thousands of people who purchased Ford
automobiles between 1976 and 1979 sustained property damage as a result
of collisions which occurred when the vehicles' transmissions shifted
from park "to reverse" without warning.

The district court initially certified a class action, but was reversed
on appeal. Walsh v. Ford Motor Co., 807 F.2d 1000 (D.C. Cir. 1986). On
remand, the district court found class certification unwarranted, and
also dismissed the plaintiffs' individual claims for lack of federal
jurisdiction. Walsh v. Ford Motor Co., 130 F.R.D. 260 (D.D.C. 1990).

On May 14, 1991, plaintiffs filed this action in the Circuit Court of
Cook County seeking certification of a nationwide class similar to that
sought in Walsh. Of the named plaintiffs in the instant case, 47 were
also named as plaintiffs in Walsh; the other five were unnamed members
of the potential class.

The Circuit Court granted defendant's motion to dismiss the complaint as
untimely. The court ruled that the statute of limitations for bringing
suit in Illinois was not tolled, or suspended, by the filing in federal
court of the Walsh class-action complaint, and hence the claims of the
five plaintiffs not named in Walsh were untimely.

The court also ruled that under section 2-725 of the Uniform Commercial
Code, the 47 plaintiffs named in Walsh had six months to bring suit in
Illinois following dismissal by the U.S. District Court. Because the
instant complaint was not filed until one year after the dismissal of
Walsh, the Circuit Court ruled that the claims of the 47 Walsh
plaintiffs were also untimely.

The Appellate Court affirmed the Circuit Court's dismissal of the
complaint. Portwood v. Ford Motor Co., 292 Ill.App.3d 478 (1997). On
further appeal, the Illinois Supreme Court, in an opinion written by
Justice James D. Heiple, without dissent, ruled as follows:

Tolling the statute of limitations for individual actions filed after
the dismissal of a class action is sound policy when both actions are
brought in the same court system. In such instances, failing to suspend
the limitation period would burden the subject court system with the
protective filings described by the Supreme Court in American Pipe and
Crown (citations). Tolling the statute of limitations for purported
class members who file individual suits within the same court system
after class status is denied therefore serves to reduce the total number
of filings within that system.

Tolling a state statute of limitations during the pendency of a federal
class action, however, may actually increase the burden on that state's
court system, because plaintiffs from across the country may elect to
file a subsequent suit in that state solely to take advantage of the
generous tolling rule.

Unless all states simultaneously adopt the rule of cross-jurisdictional
class-action tolling, any state which independently does so will invite
into its courts a disproportionate share of suits which the federal
courts have refused to certify as class actions after the statute of
limitations has run.

Although plaintiffs assert that the majority of courts which have
considered this issue have chosen to adopt cross-jurisdictional tolling
to preserve claims under state law, our research indicates precisely the

Furthermore, because state courts have no control over the work of the
federal judiciary, we believe it would be unwise to adopt a policy
basing the length of Illinois limitation periods on the federal courts'
disposition of suits seeking class certification. State courts should
not be required to entertain stale claims simply because the controlling
statute of limitations expired while a federal court considered whether
to certify a class action....

For the reasons stated, we affirm the judgment of the Appellate Court,
affirming the Circuit Court's dismissal of the instant complaint as
untimely filed." (Chicago Daily Law Bulletin 9-28-1999)

FRITZ COMPANIES: Faces Appeal Of Dismissed Securities Suits In CA
In 1996, a total of six complaints were filed (three in federal court
and three in state court of California) against Fritz Companies Inc. and
certain of its then officers and directors, purporting to be brought on
behalf of a class of purchasers or holders of the Company's stock
between August 28, 1995 and July 23, 1996. The complaints allege various
violations of Federal Securities law and California Corporate Securities
law in connection with prior disclosures made by the Company and seek
unspecified damages.

The three class action suits filed against the Company in state court
were dismissed with prejudice by the Superior Court of California for
the County of San Francisco on grounds the claims asserted under the
California Corporate Securities law and common law fraud were not
legally tenable. One of the dismissals was reversed on appeal,
permitting the plaintiff to file an amended complaint. That amended
complaint was dismissed with leave to amend. A further amended complaint
was filed and was dismissed without leave to amend. That dismissal is on

The three class action suits filed against the Company in federal court
were consolidated into one suit which was dismissed with prejudice,
finding that plaintiffs had not alleged any statement that was false and
misleading in violation of the federal securities laws. Plaintiffs have
filed an appeal with the Ninth Circuit Court of Appeals. That appeal is

GENERAL MOTORS: 8th Cir Closes Door On Claims Of Speculative Damages
In Briehl v. General Motors Corporation, 172 F.3d 623 (8th Cir. Apr. 14,
1999), the U.S. Court of Appeals for the Eighth Circuit held that the
plaintiffs' allegations that an unmanifested defect in their vehicles'
anti-lock brake systems resulted in an inflated purchase price or
diminished the resale value was too speculative to maintain a cause of
action. The Eighth Circuit's ruling reinforces courts' overwhelming
rejection of claims for speculative damages in recent years.


Plaintiffs, a putative class of owners of 1989-96 General Motors (GM)
vehicles with anti-lock brake systems (ABS), sued GM for fraud and
breach of warranty. Specifically, plaintiffs claimed that the ABS
performed "counter-intuitively," and that when a driver applied pressure
on the brakes during an emergency, the brake pedal fell rapidly to the
floor causing the driver to perceive a brake failure and misapply the
brakes. Plaintiffs did not allege that the defect had actually occurred
with their vehicles or that they had sold their vehicles with ABS for a
lower amount due to ABS. The plaintiffs' original complaint claimed
unspecified economic damages for (1) lost resale value and (2)
overpayment for the vehicles at the time of purchase. The district court
dismissed the original complaint for failure to allege manifestation of
a defect and for failure to adequately allege actual damages. The ruling
and denial of a request to amend were both appealed to the Eighth

                        Eighth Circuit Decision

The Eighth Circuit affirmed the district court because plaintiffs did
not allege that the defect actually occurred in their vehicles (i.e.
manifested itself). The court rejected plaintiffs' argument that the ABS
installed in their vehicles diminished the vehicles' resale value and
made them worth less than what they paid. In doing so, the court focused
on the fact that the plaintiffs failed to state the actual amount of any
claimed damages or allege that any member of the class actually sold a
vehicle at a reduced value as a result of the alleged defect.

The court reasoned that because "the plaintiffs failed to allege that
any defect had actually manifested itself in their vehicles, the
plaintiffs' allegations of damages failed to meet the pleading
requirements for defective products." Id. at 627. The court found that
the vehicles performed as they should and never exhibited an alleged
defect. Id. at 628. Therefore, the Eighth Circuit ruled that "the
plaintiffs' conclusory assertion that they, as a class, have experienced
damages and the method the plaintiffs use to calculate the damages
[were] simply too speculative to allow [the] case to go forward." Id. at


Briehl properly reinforces the "manifestation" doctrine and confirms
that plaintiffs may not circumvent this rule by claiming a reduction in
resale value or overpayment of the vehicle at the time of purchase as
damages. Id. at 628. This ruling is consistent with a multitude of
courts which have held that, regardless of the nature of the defect at
issue, no cause of action can be maintained for an alleged defect which
has not yet manifested because, in the absence of manifestation, there
can be no damages. See, e.g., Barrett v. General Motors Corp., Case No.
SA-CV-98-557 (United States District Court, C.D.Ca. Feb. 22, 1999)
(dismissing plaintiffs' claims for "diminution in value" and "increased
risk of future harm" based on alleged defects in seatbacks because
plaintiffs did not allege that the seats in their vehicles failed); Ford
Motor Company v. Rice, 726 So.2d 626, 631 (Ala. 1998) (in class action,
plaintiffs' fraudulent suppression claims -- based on alleged defect in
vehicles which increased likelihood of rollover accidents -- should have
been dismissed because plaintiffs did not allege that their vehicles
actually rolled over and "an alleged product defect that has not
manifested itself in such a way as to cause any observable adverse
physical or economic consequences [does not] constitute an 'injury' that
will support a claim of fraudulent suppression"); In re Air Bag Products
Liability Litigation, 7 F. Supp. 2d 792 (E.D. La. 1998) (court held that
tort and implied warranty claims were legally deficient because
plaintiffs had "not suffered manifest injury," even though plaintiffs
asserted that the defect at issue was "life threatening"); Weaver v.
Chrysler Corporation, 172 F.R.D. 96 (S.D.N.Y. 1997) (court dismissed
fraud, negligent misrepresentation and breach of warranty claims even
though plaintiff alleged that "he paid more for his vehicle than he
would have had he known of the defect").

The court in Briehl properly interpreted and defined existing case law.
There simply is no proper basis for actions for economic loss when there
is no manifestation of a defect. Briehl again signals that the door is
closing on these types of claims, and that plaintiffs may not
legitimately bring a cause of action based on pure speculation that a
vehicle that has always performed as it should may, at some time in the
future, suffer a reduction in resale value, or is worth less than the
price paid. (Legal Opinion Letter 10-1-1999)

GPU ENERGY: NJ Electric Utility Reimburses Customers for July Outages
GPU Energy has paid some residential customers an average of $ 100 to
$ 200 to reimburse the cost of food that spoiled as a result of the
rolling blackouts and power outages in July, a spokesman said. So far,
the company has received approximately 4,000 claims and has settled
about 800, spokesman Ron Morano said. Some claims have been denied, he
added. While the claims were primarily filed by residents, some
commercial customers also received settlements of up to $ 1,000 for
losses. The total amount paid was not available. GPU Energy is
continuing to review claims individually. "We are trying to be very
reasonable in assessing them," Morano said.

Record-setting heat, unprecedented electrical demand and a failure of
two transformers at GPU Energy's Red Bank substation caused power
outages and forced the company to impose rolling blackouts. Engineers
said porcelain insulators that surrounded 230,000-volt cables feeding
the transformers broke, causing the transformers to fail. GPU officials
said tests on the two transformers would not have detected the problem.

Company executives have estimated that about 80,000 customers in and
around Monmouth and Ocean counties lost electricity at some point. The
company decided to pay some claims because of "extenuating
circumstances," Morano said. "Customers were out of service for extended
periods of time."

In addition to residents and businesses, municipal officials, including
the 14-town Two Rivers Council of Mayors, want GPU Energy to pay the
thousands of dollars spent for overtime and other expenses during the
blackout. For instance, Red Bank officials have said the outages cost
more than $ 33,000. Morano said no towns have been paid. "We are still
looking to see if we can come to resolutions with the towns," he said.

Some people have already taken GPU Energy to court. In late July, a
group of Monmouth County residents and businesses filed a class action
lawsuit seeking damages on behalf of all GPU's New Jersey customers who
lost money or were inconvenienced during the Independence Day weekend

To file a claim, residents and business owners can call GPU Energy at
(800) 545-7738. (Asbury Park Press 10-6-1999)

INLAND REVENUE: Union-Covered Lawyers Sue IRS For Overtime Pay
The National Treasury Employees Union has filed a class action suit
against the Internal Revenue Service charging the agency failed to pay
union-protected attorneys for overtime hours worked and spent in
traveling. The suit, filed Sept. 9 in the U.S. Court of Federal Claims,
seeks compensation for regional and district counsel attorneys who "are
induced, encouraged and expected to work uncompensated overtime hours."

A finding for the lawyers could be costly. One source said that because
the suit makes claims stretching back over six years, overtime pay due
the plaintiffs might total "multi-millions of dollars."

The NTEU represents some 1,200 attorneys and support workers in the IRS
regional and district counsel offices. The employees in these offices
ensure compliance with tax laws through the judicial system, arguing
cases in the U.S. Tax Court.

The suit charges that because of heavy workloads and tight deadlines,
attorneys are required to work overtime for which they generally are not

"Even though management is well aware that attorneys are often required
to work overtime to complete their assignments in a timely and
responsible manner, it continues to assign more work to them, which
exacerbates the need to work overtime," the suit charges. "In addition,
a culture permeates the regional and district counsel offices that
induces attorneys to work whatever hours are necessary to do a
professional job on all assigned tasks." It says that agency supervisors
"routinely assign tasks and duties that must be completed by internally
imposed deadlines, fully cognizant that they cannot be performed
responsibly within an eight-hour day or forty-hour work week."

The suit says that the attorneys "receive no compensation for the vast
majority of hours worked" in violation of the Federal Employees Pay Act.

In addition to the overtime work problem, the suit charges, attorneys
"log overtime hours when they are required to travel on their own time
to events that are beyond the administrative control of the agency." By
example, the suit says out-of-town attorneys pleading in tax courts must
travel to the city on Sundays or early Monday mornings "well before the
start of the employee's tour of duty."

Such lawyers often travel on weekends or holidays to be at the
appropriate destination when court begins.

The NTEU suit asks for back pay at the rate of one and one half times
the minimum basic pay for GS-10s for all overtime hours worked and for
overtime hours spent on travel. It also asks for damages for lost
retirement benefits, pre- and post-judgment interest, and legal fees.

NTEU President Colleen Kelley said the suit is "the first step in
righting a wrong that goes to the very heart of fairness and equity."

A similar suit has been filed by attorneys at the Department of Justice,
who are seeking more than 500 million to compensate for overtime work.
(Federal Human Resources Week 9-20-1999)

KMART CANADA:  Ontario Super. Ct. Oks Class Of Dismissed Employees
An Ontario Superior Court judge has rejected Kmart Canada's bid to
appeal certification of a class-action lawsuit by former employees laid
off last year.

Justice Jean MacFarland upheld rulings by Justice John Brockenshire of
the same court which certified a class of up to 4,000 former Kmart
employees across Canada in a wrongful dismissal suit. Justice
Brockenshire had also granted partial summary judgment against Kmart.

"Certification in the particular circumstances provides access to
justice for individuals who might otherwise for any number of reasons
not have that access,"wrote Justice MacFarland.

On March 2, 1998 the Hudson's Bay Company announced it would merge the
Kmart stores which it had purchased with its Zellers and Bay chain
stores. This involved closing about 31 Kmart stores. The suit was
launched on behalf of the class by former Kmart employee Karen Webb.

Counsel for the class had asked for mediation in the case and for
referees to be appointed in the various provinces where class members
resided. Kmart wanted the matter dealt with solely in Ontario.

In upholding Justice Brockenshire's order to appoint referees in other
provinces, Justice MacFarland said that asking class members outside the
province to come to Ontario for hearings "would in all likelihood put
any remedy out of their reach." The claims are also modest, she noted.
(The Lawyers Weekly 10-1-1999)

LASERGATE SYSTEMS: Intends To Defend Vigorously Securities Suit In NY
On or about June 27, 1997, a class action was commenced in the United
States district Court for the Eastern District of New York (CV 97-3775)
by Andrew Petit and Michael A. Lepera, on behalf of themselves
individually, and on behalf of all others similarly situated against
INTER ALIA, the Company, Sterling Foster, & Co., Inc. ("Sterling
Foster"), the Company's former underwriter, counsel for Sterling Foster
and certain issuer defendants for whom Sterling Foster acted as

The Complaint alleges that in connection with an offering of the
Company's securities which became effective on October 17, 1994,
Sterling Foster engaged in a campaign to inflate the price of the
Company's stock, to create a short position at the inflated price and
then cover the short position with shares from shareholders who had been
secretly released from "lock-up" agreements. With respect to the
Company, the Complaint alleges that it failed to disclose in its
Registration Statement that prior to the date the offering became
effective, Sterling Foster had secretly agreed to release certain
shareholders from "lock-up" agreements for the purpose of selling their
shares to Sterling Foster at reduced prices. The Plaintiffs' claims
allege that the Company violated Sections 11 and 12 (2) of the
Securities Act of 1933, Sections 10(b) of the Securities Exchange Act of
1934 and Rule 10b-5 promulgated thereunder and Section 349 of the New
York General Business law, as well as making negligent
misrepresentations. Since the Complaint was filed, it has been amended
twice, but the allegations against the Company have remained the same.
On August 5, 1999 the Company moved to dismiss The Second Amended and
Consolidated Class Action Complaint in its entirety. The Company
believes that it has defenses to these claims and intends to vigorously
defend itself in this action.

LIFE USA: Fd Ct Oks Investor Fraud Suit Against Annuity Firm
A federal judge has refused to dismiss a class-action suit against
LifeUSA Holdings Inc. that alleges the company defrauded investors who
bought one of its most popular annuities by misrepresenting the interest
they would earn.

In his 17-page opinion in Benevento v. LifeUSA Holding Inc., U.S.
District Judge J. Curtis Joyner ruled that a jury must decide if the
contract for the company's "Accumulator" annuity was "ambiguous,"
"misleading" and "confusing." "Plaintiffs have adduced enough evidence
that defendant misrepresented the terms and conditions of the annuity
contracts, their interest and payout rates and procedures both prior to
their formation and following the plaintiffs' purchase to warrant the
submission of these claims to the jury," Joyner wrote. The ruling is a
victory for plaintiffs' attorneys Mark A. Kearney and Thomas J. Elliott
of Elliott Reihner Siedzikowski & Egan who represent six investors from
Pennsylvania, New Jersey and Florida on behalf of a nationwide class.

The suit alleges that LifeUSA's Accumulator annuity is actually a "bait
and switch" scam that targets senior citizens and retirees. It alleges
that the company falsely represents that the annuity has a "guaranteed
minimum interest rate for the life of the policy," and that it pays
"current" interest rates. In fact, the suit says, once consumers start
getting their money back over the minimum five-year payout period,
LifeUSA never sends them another account statement and they never know
the real interest rate they are receiving. In reality, the suit alleges,
at least three different "current interest rates" are secretly applied
to the funds depending on whether the annuity is in "deferral," meaning
the consumer has not requested any money from the policy; the consumer
is receiving "interest only" payments; or the consumer is receiving
payments of principal and interest.

The suit alleges that LifeUSA trains its agents through standardized and
uniform misrepresentations and nondisclosures that consumers would be
paid substantial interest bonuses, "current" interest rates and obtain
"fully insured" and "safe" economic gain greater than the gains offered
in the stock market or certificates of deposit. To induce the agents to
sell the Accumulator annuity, the suit says, Life USA immediately
rewards them with "producer perks" within 24 hours of sale and only
later sends the "fine print" annuity contracts which are misleading and

Consumers are duped, the suit alleges, because Life USA disguises the
interest rates paid to purchasers in quarterly accountings by comparing
the Accumulator annuity favorably with bank certificates of deposit and
then misrepresents the "yield" as the "interest rate," thereby creating
a false impression that the represented "compounded daily" interest rate
is much higher, when in fact, the interest rate is less than the
represented "interest rate." The company then eliminates any ability for
the purchaser to gain the misrepresented benefits of their annuity
policy upon withdrawal, the suit says, by employing confusing options.
When a purchaser attempts to obtain the benefits, the suit says, they
must accept a lump sum of principal and interest with a penalty of about
5 percent periodic principal and interest payments over a minimum of
five years with the balance being paid a "compounded daily" interest
rate of less than 3 percent; periodic interest only payments for a
minimum of five years with the entire principal remaining with LifeUSA
earning a current interest rate unilaterally defined by LifeUSA; or
death benefits to the purchaser's estate which must select from the
aforementioned options.

LifeUSA's lawyers, Daniel Segal, William T. Hangley and Michael
Lieberman of Hangley Aronchick Segal & Pudlin, along with James F.
Jorden, Waldemar J. Pflepsen, Paul A. Fischer and Richard Karpinski of
Jorden Schulte & Burchette in Washington, argued that LifeUSA cannot be
held liable for the misrepresentations and non-disclosures allegedly
made by the agents who sold the plaintiffs their annuity policies
because those sales people were acting as the agents of the individual
insureds, not the defendant company.

Joyner disagreed, finding that while there was evidence that the sales
people were the agents of the individual plaintiffs and not the company,
"there is also ample evidence that LifeUSA trained, educated and in
other respects held these sales agents out as having the authority to
speak for and represent the company and that it made and treated those
people who sold its products 'owners' of the company." Company stock,
company-paid trips and other fringe benefits and incentives were a part
of the compensation package given a salesperson upon the sale of a
LifeUSA policy, Joyner noted. "Since we believe that a jury could find
from this evidence that the plaintiffs were justified and reasonable in
their beliefs that the sales agents from whom they purchased their
annuities were in fact representatives and agents of LifeUSA, we must
decline to grant summary judgment in defendant's favor on the basis of
this argument," Joyner wrote. (The Legal Intelligencer 10-7-1999)

NATIONSBANK CORP: 5th Cir Says FBI May Be Liable For Harm To 3rd Parties
For the first time, a federal court has imposed limits on the authority
of federal law enforcement agents engaged in undercover operations. The
5th U.S. Circuit Court of Appeals ruled Sept. 8 in Brown v. Nationsbank
Corp. that the FBI can be liable to innocent third parties who are
harmed in a sting operation by agents' "deliberate indifference."

The court did not extend this standard to injuries suffered by people
who are targets of an undercover investigation. "Because the Fifth
Amendment due process guarantee against conscience-shocking injury
imposes clear limits on law enforcement conduct, we conclude that it was
neither necessary nor proper for the defendants in this case to destroy
the lives and businesses of innocent non-targets in the name of law
enforcement," wrote Circuit Judge Robert M. Parker for a unanimous
three-judge panel. He was joined by Judges Carl E. Stewart and W. Eugene

Though the court held the FBI could be liable, it dismissed the
plaintiffs' claims against the FBI on two grounds: The claims were not
filed within the statute of limitations and the new liability standard
was not in effect when the plaintiffs were injured.

Scott Rothenberg, the plaintiffs' attorney, says he is shocked the court
would recognize the harm suffered by his clients yet not afford them
relief. Still, he says, the holding has value as precedent. "In light of
the Ruby Ridge debacle . . . and the serious questions raised by the
FBI's conduct in its handling of the Waco situation . . . this case
provides fuel for one who would argue that the FBI's emphasis on law
enforcement must be counterbalanced by a consideration of citizen's
constitutionally protected rights," says Rothenberg, a Houston solo.

The FBI did not respond to two requests for comment. Chris Watney, a
spokesperson with the U.S. Department of Justice, which represented the
FBI, declines to comment because the litigation is pending.

According to the 5th Circuit's opinion, the FBI began "Operation
Lightning Strike" in 1991 to uncover alleged contract procurement fraud
in the aerospace industry.

The sting targeted certain NASA employees and private members of the
aerospace industry, but not the plaintiffs, who operated two
Houston-based companies that provided high-tech engineering services,
the opinion noted.

In 1992, an FBI agent indicated to plaintiffs Dale A. Brown, R. Scott
Satterwhite and Anthony P. Hodgson that he wanted to form a partnership
in order to gain contracts with NASA, according to the opinion. The 5th
Circuit found that the plaintiffs worked hundreds of hours and spent
large amounts of money bidding on projects with the agent before
learning of the undercover operation.

Concluding that Operation Lightning Strike was a "disastrous boondoggle
. . . run amok," the court held that the FBI could be liable under the
U.S. Supreme Court's 1971 ruling in Bivens v. Six Unknown Named Agents
of Fed. Bureau of Narcotics, which permits the recovery of money damages
from federal agents who violate a person's constitutional rights.

The court distinguished U.S. Supreme Court precedent that grants law
enforcement agents qualified immunity for misconduct they commit during
high-pressure situations, such as prison riots or automobile chases.

In Brown, the 5th Circuit concluded, "The FBI made decisions which
harmed the Plaintiffs after ample opportunity for cool reflection."

Cynthia Hujar Orr, a San Antonio criminal-defense lawyer, says Brown
will afford relief to innocent people harmed by undercover operations.
Potential beneficiaries would be people whose private telephone calls
are intercepted by an FBI wiretap and later made public in litigation,
she says.

"In their effort to uncover secret illicit behavior, law enforcement
[officers] often listen too long and recover too much and harm a lot of
folks in their zeal to catch criminals," says Orr, an associate with
Goldstein, Goldstein & Hilley. She applauds Brown, adding, "I understand
the tough job law enforcement have, but I think a strong statement needs
to be made to tell law enforcement that you don't have the right to
abuse." (Texas Lawyer 9-20-1999)

PERRIGO CO: Securities Suit Dismissed; Appeal Withdrawn
Certain shareholders brought a class action against the Company, the
Selling Shareholders (which include several past and present officers
and/or directors of the Company) and the Underwriters of the October 20,
1993 secondary offering of outstanding shares of the Company's common
stock, alleging various securities law violations. In October 1997, all
of the defendants moved for summary judgment on the class action
complaint. In October 1998, the class action lawsuit was dismissed
against all defendants. In November 1998, the plaintiffs appealed the
dismissal of their case. In April 1999, the plaintiffs withdrew their
appeal. The dismissal of the appeal and the subsequent entering of the
final judgment ends any further action against the Company. Under the
agreement reached with the plaintiffs, no money or other compensation
will be paid to the plaintiffs or their attorneys.

In November 1995, a derivative class action law suit relating to the
class action described above was filed against the Company. In April
1999, the plaintiffs in this lawsuit agreed to dismiss this suit based
upon the dismissal of the class action. No money or other compensation
will be paid to the derivative plaintiff or his attorneys.

The Company received an $8.0 million reimbursement under provisions of
its liability insurance coverage in the fourth quarter of fiscal year
1999 for a significant portion of the legal fees and expenses incurred
for this class action lawsuit and the related derivative lawsuit.

UC IRVINE: Experts Disagree Over Payouts For U's Willed Body Scandal
Experts disagree over how much UC Irvine's Willed Body Program scandal
could cost taxpayers in court, with some saying that the alleged misuse
of cadavers and loss of cremated remains would prove a compelling issue
for jurors if cases reach trial.

Others, however, note that suits filed several years ago against UCLA
involving mishandling of ashes from its cadaver program were dismissed.
And one plaintiff's attorney with a successful record in wringing money
out of university lawyers says the contracts typically signed by donors
insulate the university.

"Once a person wills a body to science, the heirs have no standing,"
regardless of what happened to the bodies, said Melanie Blum, a lawyer
who represented many families suing UCI over a previous scandal at its
fertility clinic.

What is clear is that the cases--two have been filed so far, and more
may be coming--will present a new legal twist on an old issue.
Generally, lawsuits over disposal of bodies have accused mortuaries of
mishandling remains that are to be cremated or buried, not medical
schools that promise donors to use their bodies for research and

Even before investigators from the district attorney's office and the
university have concluded exactly what happened at the Willed Body
Program, a North Tustin man has filed a lawsuit against the university
alleging that his mother's remains may have been sold for personal
profit or otherwise mishandled. Robert Simpson has hired Newport Beach
lawyer Federico Castelan Sayre, who has successfully pursued mortuaries
for mishandling of human remains.

Allegations of possible wrongdoing at the Willed Body Program broke last
month when the university announced the dismissal of program director
Christopher S. Brown, who is suspected of selling cadaver parts for
personal gain and having business ties to companies that profited from
his program.

Since then, additional reports have surfaced that cadavers were used
without university permission in an unauthorized private anatomy class
on UCI grounds and that families may have received the wrong remains and
have been improperly billed by an outside company for the return of

Brown has repeatedly denied any wrongdoing and says he kept his
supervisors informed of his activities.

Despite the swirl of allegations, members of the University of
California's Board of Regents, who were informed of the problems at UCI
in a private briefing last month, have expressed overwhelming support
for medical school Dean Thomas C. Cesario and Chancellor Ralph J.
Cicerone and their plans to improve oversight. "We recognize them as
excellent managers and leaders and we support them," said Meredith
Khachigian of Orange County, who chairs the regents' health services
committee. "Nobody is threatening their jobs. Nobody is suggesting that
someone else could do a better job. They are highly qualified,
distinguished people."

Neither regents nor UC attorneys would discuss UCI's potential
liability. Other legal experts, however, noted that the state law
authorizing anatomical gifts exempts the recipient institution from
civil or criminal liability if the recipient makes an attempt at
good-faith compliance with the law. The standard is very loose, said
several lawyers, because it encompasses not just a good-faith effort but
even an attempt to do so.

So far, one other family has joined the Simpson suit, and lawyer Sayre
plans to seek permission from a judge to grant the case class-action
status that would allow the plaintiffs to pursue their claims as a
group. Sayre said he has spoken with 10 other families whose relatives
donated bodies to the Willed Body Program.

The potential group of plaintiffs could reach into the hundreds, said
Sayre. The university estimates that it has collected 75 bodies a year
in the past three years that Brown has headed the program.

The suit argues that the possible or perceived mishandling of loved
one's remains caused the survivors emotional distress.

A key point will likely be the waivers signed by the people who donated
their bodies. That standard UCI contract allowed the use of cadavers for
teaching, scientific research "or any other purposes deemed advisable by
the university of its authorized representatives." Sayre believes he can
persuade a jury that what happened to these cadavers went beyond what is
allowed by that waiver.

University officials and the district attorney's office have said they
are investigating whether Brown profited from the sale of body parts,
mixed up cremated remains or allowed donated cadavers to be used in a
private anatomy session. To recover damages from the university,
however, the plaintiffs must show that Brown was acting within the scope
of his employment or that the university failed to properly supervise

Byron Beam, who has represented the university in other suits, including
the fertility clinic cases that drew international attention, said the
plaintiffs would "have to show wrongdoing on the part of the university
such as negligent oversight or negligent failure to discover wrongdoing
when there was a sufficient time to discover it and prevent it."

University officials have acknowledged that oversight of Brown was loose
and have announced administrative reforms.

Some said the apparently swift reaction at UCI to pursue a detailed
audit after early indications of problems in June could help the school
fend off any lawsuit. The university's response--especially the prompt
firing of the person they suspected of wrongdoing and notifying affected
families--may help in the long run, said George Annas, a professor of
health law at Boston University.

Annas said he doesn't agree with anyone predicting a large award because
of the limited nature of the damages to relatives. "You can probably
show negligence" on the university's behalf, said Annas. "You still have
to prove damages--not damages to the body, but to relatives or
next-of-kin. (Los Angeles Times 10-10-1999)

WELLS FARGO: Bank Sued In CA Over Bankruptcy Debt Collection Practices
Wells Fargo Bank N.A. has been taking lessons from Sears, Roebuck & Co.
when it comes to its bankruptcy debt collection practices, a consumer
contends. Cathy Singleton says, in a lawsuit filed on Sept. 2 in federal
court in San Francisco, that she was pressured to sign an agreement to
repay more than $ 2,800 outstanding on her Wells Fargo Visa card when
she filed to wipe out her debts under Chapter 7 of the U.S. Bankruptcy
Code. That "reaffirmation agreement" was never filed with the bankruptcy
courts. Her suit seeks class action status on behalf of all Wells Fargo
customers who were the targets of the practice. Sears' use of such
unfiled reaffirmation agreements to get bankrupt credit card customers
to repay discharged debts wound up costing the giant retailer more than
$ 500 million in settlements paid to victimized consumers.

Ms. Singleton is being represented in the case by Solomon B. Cera,
Patricia Szumowski and Gary Garrigues, of San Francisco's Gold Bennett &
Cera L.L.P. She is also represented by Jordan M. Lewis, of Minneapolis'
Siegel, Brill, Greupner, Duffy & Foster P.A., and Peter N. Wasylyk, a
sole practitioner in Providence, R.I. Wells Fargo declined to comment
about the litigation. Singleton v. Wells Fargo Bank N.A., CA No.
99-4089. (The National Law Journal 9-27-1999)

WORLD ACCESS: Faces Shareholders Suits In Georgia
Following World Access Inc's announcement on January 5, 1999 regarding
earnings expectations for the quarter and fiscal year ended December 31,
1998 and the subsequent decline in the price of the Company's common
stock, 22 putative class action complaints were filed between January 7,
1999 and March 5, 1999 in the United States District Court for the
Northern District of Georgia. The Company and certain of its then
current officers and directors were named as defendants. A second
decline in the Company's stock price occurred shortly after actual
earnings were announced on February 11, 1999, and a few of these cases
were amended, and additional, similar complaints were filed. On March 8,
1999, a group of plaintiffs filed a joint motion seeking to be appointed
as lead plaintiffs and to have certain law firms appointed as lead
counsel in these actions. The Company expects that the cases will be
consolidated and that an amended consolidated complaint will be filed
after a ruling on the pending motion regarding the appointment of lead
plaintiffs and lead counsel.

Although the 22 complaints differ in some respects, the plaintiffs,
generally, have alleged violations of the federal securities laws
arising from misstatements of material information in and/or omissions
of material information from certain of the Company's securities filings
and other public disclosures, principally related to inventory and sales
activities during the fourth quarter of 1998. With the exception of a
single complaint (not filed by one of the proposed lead plaintiffs)
which seeks to include stock purchases that occurred as early as April
10, 1998, the complaints are filed on behalf of: (a) persons who
purchased shares of the Company's common stock between October 7, 1998
and February 11, 1999; (b) shareholders of Telco who received shares of
common stock of the Company as a result of the Company's acquisition of
Telco that closed on November 30, 1998; and, (c) shareholders of NACT
who received shares of common stock of the Company as a result of the
Company's acquisition of NACT that closed on October 28, 1998.
Plaintiffs have requested damages in an unspecified amount in their
complaints. Although the Company and the individuals named as defendants
deny that they have violated any of the requirements or obligations of
the federal securities laws, there can be no assurance the Company will
not sustain material liability as a result of or related to these
shareholder suits.

Y2K LEGISLATION: Texas Law May Need To Yield To Federal Legislation
This summer, Washington sizzled as the particulars of a Y2K litigation
bill were forged. President Bill Clinton walked a tightrope between the
competing interests of technology and software companies and consumer
rights advocates. The technology companies may have gotten the better of
the battle when the president signed the Y2K Act of 1999 on July 20. The
act has wide-ranging affects on potential suits in Texas.

In @4(e), the act confirms that its provisions pre-empt any state law
that runs counter to it. By implication, the act leaves intact state law
that is not inconsistent. Deciding which sections pre-empt state law and
which do not will inevitably lead to some hotly contested litigation.
There are, however, several areas of Texas law where it is clear that
state law must yield to the act.

The following is a section-by-section summary of specific provisions in
the Y2K Act where Texas law will likely have to yield to federal law.

Section 4 - Application of the Act: Section 4(c) makes the act
inapplicable to personal-injury and wrongful-death cases, and @4(i)
makes it inapplicable to any case sounding in securities law. These
cases would still be governed by state law.

It is also in this section, however, that one of the first pre-emption
issues arises: consumer foreclosures. Section 4(h) prohibits the
enforcement of a foreclosure action, which is typically governed by
state law, when the mortgage holder's default is the result of a Year
2000 problem. In order for the consumer to obtain protection under the
act, the consumer must provide written notice within seven days of the
time he or she becomes aware of the Y2K failure. The consumer, after
providing notice, is given a four-week grace period to make the mortgage

Section 5 - Punitive Damages Limitations: The Y2K Act specifically
addresses punitive damages, making it plain that state law provisions do
not apply. Under Texas law, the general rule on how much money a
plaintiff can collect is found in Civil Practice & Remedies Code
@41.008. A plaintiff can collect the greater of the following two:
non-economic damages up to $ 750,000 plus two times the amount of
economic damages, or $ 200,000.

Under @5(b)(1) of the act, the plaintiff recovers the lesser of three
times the economic damages or $ 250,000. There is a caveat, though:
Congress' overall theme in the Y2K Act is to protect small businesses
and individual defendants from Y2K litigation. Section 2(a)(3)(B)(iii)
states that excessive Y2K litigation "would strain the Nation's legal
system, causing particular problems for the small businesses and
individuals who already find [the legal] system inaccessible because of
its complexity and expense." In keeping with this theme, the cap on
punitive damages only applies to individuals who have a net worth of
less than $ 500,000 or to small-business defendants that have fewer than
50 full-time employees. Thus, bigger companies that are not protected
under the act remain subject to Texas law.

Section 6 - Proportionate Liability: One of the most confusing aspects
of the Y2K Act's interaction with state law comes in the area of
proportionate liability. Texas, like most states, allows for joint and
several liability among defendants in certain circumstances. Under Civil
Practice & Remedies Code chapter 33, any defendant that is more than 50
percent responsible can be held accountable for paying the entire

Concerned with saddling businesses with repeated or particularly onerous
judgments, Congress implemented a more restrictive joint and several
liability policy. Under @6, each defendant pays the same percentage of
the judgment for which it has been determined to be responsible.

There are a handful of exceptions here, too. Individual consumers
meeting certain requirements can get the remaining defendants to pay for
an additional portion of an insolvent defendant's liability. Another
exception exists when one of the remaining defendants has acted with
specific intent to injure or has committed a fraud. Limited joint and
several liability for the remaining portion may also be obtained if the
plaintiff can establish that the defendant acted with reckless

The act's provisions are loaded with formulaic intricacies for
determining exactly what each defendant owes. But the bottom line is
that Texas law will not apply.

Section 7 - Prelitigation Notice: Section 7 of the Y2K Act requires the
plaintiff to send a detailed notice to the defendant prior to filing
suit. In Texas, statutes such as the Deceptive Trade Practices Act
require a plaintiff to send the defendant notice of a potential suit
before it's filed. Under the act, if notice is not given, the suit
itself serves as notice to the defendant and the case may be abated. If
the defendant responds to the pre-suit notice within the first 30 days,
the plaintiff must wait an additional 60 days before filing suit in
order to provide the defendant an opportunity to remedy the problem. If
the defendant does not respond within 30 days, the plaintiff may sue.

                          Watch the Clock

Section 8 - Pleading Requirements: In Texas a petition must allege the
nature of damages, but does not require an explicit recitation of how
each element of the cause of action contributes to the total amount of
damages requested. The Y2K Act does. Section 8(b) says that the
plaintiff's complaint must be accompanied by a "statement of specific
information as to the nature and amount of each element of damages and
the factual basis for the damages calculation."

Section 12 - Damages in Tort Claims: Texas courts have had varying
degrees of sympathy with the "tortification" of contract actions. These
are claims that can be cast as a contract claim or a tort claim in an
effort to avoid contractual liability limitations or defenses or to more
easily seek punitive damages.

The Y2K Act makes clear that the economic losses - such as lost profits
or consequential damages - can only be recovered in a tort action if the
Y2K failure damaged "other property." If the failure causes a building's
elevators to crash to the bottom floor, the elevators have obviously
been damaged. However, if there is no damage to other property, the act
provides that the plaintiff may not recover economic damages as defined
by the act.

Section 15 - Y2K Actions as Class-Actions: Texas law does not set forth
any guidelines on class-action suits. The rule in Texas, T.R.Civ.P. 42,
discusses class certification and other procedural aspects of class
actions applying to all class actions generally. The Y2K Act devotes
specific attention to class actions, imposing both substantive and
procedural requirements for their filing.

Congress has vested federal courts with original jurisdiction over class
actions in @15(c). There are some exemptions (e.g., fewer than 100
members in the class), but for the most part, Y2K class-action
defendants will be able to insist on a federal venue.

In @15(a), a class action can be maintained only if there is a "material
defect" in a product or service that is common to the majority of the
class. "Material defect" is defined in @3(4) as excluding defects that
do not alter the basic operation of the product or service. The real
meaning of this term will certainly be a battleground in future suits.

Another requirement for class-action suits in the Y2K Act is the
detailed class notice that must be mailed to prospective plaintiffs at
the beginning of the suit. Section 15(b) states that a plaintiff must be
notified not only about the nature of the case and where it is pending,
but also about the fee arrangement - hourly or contingent - the
plaintiffs' attorney is operating under.

The Y2K Act is an interesting piece of legislation if for no other
reason than we may never need it. Should it become necessary, any Texas
practitioner must be aware of its interaction with state law. Until that
time, all we can do is watch the clock and stock canned vegetables.
(Texas Lawyer 9-20-1999)

Y2K LITIGATION: NEC Faces CA Suit Over Non-Compliance Of Versa Laptop
A class action lawsuit has been filed in California state court against
the manufacturers of the Versa 2000 laptop PC, which is not Year 2000
compliant. The plaintiff alleges violation of a host of state and
federal consumer protection laws. Elbert v. Packard Bell NEC Inc. et
al., No. B C212012 (CA Super. Ct., Los Angeles Cty., complaint filed
June 15, 1999).

Plaintiff Ed Elbert purchased in 1997 a Versa 2000 laptop PC
manufactured by defendant NEC Technologies Inc. Elbert soon learned that
the laptop would not function properly after Dec. 31, 1999, and was
ultimately told that he would need a new ROM chip and a redesigned
motherboard to fix the problem. According to the complaint, the
defendant's customer service department told Elbert the repair was not
covered under the limited warranty. The complaint states that the date
problem was corrected in the next version of the Versa.

Elbert seeks certification of a nationwide class consisting of all
present owners of non-compliant Versa PCs, and a subclass consisting of
all California residents who own non-compliant Versas.

The complaint contains counts for violation of the federal Magnuson-Moss
Warranty Act; breach of contract; fraudulent nondisclosure; violation of
the state's Song-Beverly Consumer Warranty Act, the state's Consumer
Legal Remedies Act, and the California Business and Professions Code;
and declaratory relief.

The plaintiff is represented by A. Barry Cappello and J. Paul Gignac of
Cappello & McCann in Santa Barbara, CA, and Steven H. Haney of Haney,
Buchanan & Patterson in Los Angeles. (Computer & Online Industry
Litigation Reporter 9-7-1999)

Y2K LITIGATION: Policyholders Try To Bill Insurers For Remediation
Over the last several years, organizations worldwide have spent billions
of dollars in their attempts to solve the Year 2000 problem. Now that
most of the work is done, the officers and directors of these
organizations are beginning to look for ways to recover these expenses.
With estimates of total remediation costs ranging as high as $ 600
billion, these organizations are highly motivated and will leave no
stone unturned in their quest for compensation.

Most corporations with significant expenditures are establishing cost
recovery strategies. These strategies include attempts to secure free
upgrades from vendors, demands made on contractual obligations for
maintenance and repair, and reimbursement from insurers. Because of the
huge out-of-pocket expenses involved, litigation over these issues was
inevitable and is likely to spread. For some organizations, this
litigation may become a whole separate Y2K problem.

Businesses have already filed several suits against software
manufacturers for their alleged refusal to offer free upgrades. For
example, customers filed at least six class-action suits in 1998 against
Medical Manager Corp., a software manufacturer that markets a program
used by more than 25,000 health care practitioners in the United States.
The suits alleged numerous complaints, including claims for injunctive
relief, violations of state consumer protection laws, negligence, and
breach of express and implied warranties. These suits were generally
successful: Medical Manager settled most of these cases in December
1998, agreeing to provide free upgrades and reimburse those who had
already paid.

Expanding on the theme, individual and class actions filed over the last
year involve a wide variety of electronic devices, including
telecommunications systems, voice-mail systems, personal computers,
dictation systems and copier billing software. These suits have come to
address many of the expenses incurred by corporations, making them an
increasingly important method of cost recovery for both clients and

                           Pointing Fingers

The most interesting development in the area of cost recovery lies in
the suits recently brought against insurers for the cost of remediation.
On June 18, 1999, GTE sued five of its insurers to cover its remediation
costs, which according to Securities and Exchange Commission filings
amount to almost $ 400 million. Since that time, Xerox and Unisys have
sued their insurers in similar actions. The total recovery sought so far
approaches $ 1 billion.

These suits were prompted in part by the size of the remediation efforts
brought on behalf of these companies, and in part because of a closer
scrutiny of the insurance policies under which they have been operating.
The result has been renewed interest in some very old policy language.

All of these policies contain what is known as a "sue and labor" clause.
This clause, with origins dating back to at least the 17th century, is
at the eye of the litigation storm that is about to ensue. Couched in
antiquated language, the clause typically provides that: "[I]n case of
loss or damage or imminent loss or damage hereunder, it shall be lawful
and necessary for the Assured . . . to sue, labor and travel for, in and
about the defense, safeguard and recovery of the insured property, or
any part thereof without prejudice to this insurance. . . ."

A relatively innocuous clause at first sight, the sue and labor clause
serves two functions. One is to encourage the policyholder to take
reasonable measures to prevent a threatened loss for which the insurer
would be liable if it happened and, when a loss does happen to minimize
the amount. The other function of the clause is to provide reimbursement
to the policyholder for expenses that are primarily for the benefit of
the insurer to reduce or eliminate a covered loss.

Sue and labor clauses are generally described as separate insurance, and
the insurer's liability is supplementary to the insurer's contract to
pay for damage sustained to the property. This means policy limits may
not apply to claims made under this provision. This is one of the
reasons insurers are worried.

The analogy offered by policyholders is generally this: If the sue and
labor clause would pay for sandbags used to prevent flooding, it should
pay for Year 2000 remediation expenses to prevent damage to a company's
computer systems and machinery.

                            Rising Waters

Insurance companies involved in these suits have offered several
arguments in response to this deceptively simple analogy.

The first argument is that to recover under this language, the insured
must have attempted to prevent damage to an insured interest. According
to the answers filed, since Year 2000 occurrences would not be covered
under the policies, efforts spent to prevent these occurrences would not
be covered under the clause. The problem with this argument is that
these policies are broadly written "all risk" policies, with specific
language covering loss to electronic data and equipment. Inventive
policyholders may even argue that the interest protected was not their
data, but their potential business interruption. To determine coverage,
courts will have to come to grips with several timeless issues of
insurance law, such as fortuity and exactly what constitutes a "physical
loss" to data.

A second argument universally made in response to these claims has been
that the insured's failure to give notice as soon as practicable now
bars their claims against the policy. Couched as an alleged breach of
the cooperation clause or the proof of loss or notice provisions, the
insurers are essentially arguing that a company's failure to make a
claim when their remediation efforts began now bars claims made when
their remediation is complete.

One final common defensive argument worth mentioning is the contention
that Y2K remediation costs are noncovered upgrades, not simple
protective measures. This will raise an interesting and fact-intensive
area of investigation in these suits, as the parties battle over what
portions of remediation were necessary, and what portions were

Overall, these recent suits indicate a strong movement toward
cost-recovery efforts by corporations both large and small. As suits
such as the one brought by GTE become publicized, shareholders will come
to expect similar efforts from their officers and directors. Judging
from the policy review requests our firm has received, this is a growing
trend. While recent legislative efforts have minimized actual
Y2K-problem suits, we are just beginning to see the flood waters rise in
cost recovery litigation. (Texas Lawyer 9-20-1999)


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

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