/raid1/www/Hosts/bankrupt/CAR_Public/991101.MBX                C L A S S   A C T I O N   R E P O R T E R

               Monday, November 1, 1999, Vol. 1, No. 189


ALZA, ABBOTT: Il. Ct Sets Hearing Date For Prelim. Injunction On Merger
AMERICAN FAMILY: Ch 11 Case-Settlement Imminent Re Sweepstakes Mailings
BERGEN BRUNSWIG: Milberg Weiss Files Securities Suit In California
CHASE LINCOLN: NY Ct Dismisses Claims Over Formula; Some Claims Go On
DETROIT EDISON: Settles By Arbitration 3 Employment Bias Cases For $45M

DUNEDIN FIRE: Two Female Fire-Fighters Sue In Tampa Over Gender Bias
GST TELECOMMUNICATIONS: Klari Neuwelt Files Washington Securities Suit
HMO: Aetna Says SEC Is Reviewing Its Purchase Of Prudential Insurance
HMO: CA Suit Claims Aetna's Deals With Doctors Harm Patients
HOLOCAUST VICTIMS: Germany Seeks To Increase Offer To Reach Agreement

MACY'S: Union Sq Store Found To Violate ADA; Faces 2 Other CA Suits
MICHAEL SHEAHAN: State Attorney Rebuts Argument For Private Counsel
NY CITY: Suits Re Children in Forster Care to Go On As Individual Suits
QUINTILES TRANSNATIONAL: Stull, Stull Files Securities Suit In Carolina
SALINAS: Connecticut 2nd Cir Vacates Injunction Against Towing Company

SOCOG: Aussie Lawyer Enraged With Olympic Ticketing Fiasco Sues
TOSHIBA CORP: Says US Suit Settlement Over Glitch In PC Blows Out Loss
TRIPP CONSTRUCTION: Insurer To Defend Contractor, Fla. Ap. Ct. Rules
US BANCORP: Minn AG Sues Over Selling Of Data; Privacy Concerns Raised
Y2K LITIGATION: Illinois Suit Against IBM is Dismissed with Prejudice

Y2K LITIGATION: Judge Dumps Suit Against Quicken Maker Intuit Inc Again

* Senate Oks Banning Genetic Tests For Screening MI Workers For Jobs


ALZA, ABBOTT: Il. Ct Sets Hearing Date For Prelim. Injunction On Merger
The United States District Court for the Northern District of Illinois
has scheduled a hearing for November 23 and 24, 1999 on plaintiff's
motion for a preliminary injunction against ALZA Corp. (NYSE: AZA) and
Abbott Laboratories (NYSE: ABT). Plaintiff's motion seeks to enjoin the
proposed merger between Abbott and ALZA pending the dissemination to
ALZA's shareholders of the true facts concerning the status of Abbott's
negotiations with the U.S. Food and Drug Administration (the "FDA")
concerning manufacturing deficiencies at Abbott's Lake County, Illinois

The motion for a preliminary injunction was filed by Wolf Popper LLP and
Miller Faucher Cafferty and Wexler LLP, in connection with the
prosecution of a securities class action on behalf of all owners of ALZA
Corp. common stock as of August 16, 1999, the record date for the vote
on approval of the proposed merger between ALZA and Abbott.

The complaint in that action and the motion for a preliminary injunction
charge that defendants violated the U.S. securities laws by failing to
inform ALZA shareholders, in connection with the shareholder vote on the
proposed merger, of material facts concerning Abbott's continuing
negotiations with the FDA to resolve FDA allegations that Abbott's Lake
County, Illinois Diagnostic Division manufacturing facilities are not in
compliance with federal regulations. Abbott belatedly disclosed, after
ALZA's shareholders approved the merger, that if "discussions (with the
FDA) are not successful, the government has advised the company that it
will file a complaint for injunctive relief which would include the
cessation of manufacturing and sale for a period of time of a number of
diagnostic products."

Abbott announced these continuing difficulties with the FDA after the
close of the U.S. securities markets on September 28, 1999, just seven
days after ALZA's shareholders approved the merger. As a result of the
disclosures, Abbott stock, which had been trading at $43.00 per share at
the time of the September 21, 1999 merger vote, fell to close at $37.50
on September 29, 1999. ALZA common stock, which had been trading at
$50.25 as of the date of the merger vote, also declined to close at
$43.625 per share on September 29, 1999.

Any member of the proposed class who desires to be appointed lead
plaintiff in the underlying class action against Abbott and ALZA must
file a motion with the Court no later than sixty (60) days from October
7, 1999. Class members must meet certain legal requirements to serve as
a lead plaintiff. If you have questions or information regarding this
action, or if you are interested in serving as a lead plaintiff in this
action, you may call or write:
Robert C. Finkel, Esq. or Peter G.A. Safirstein, Esq. Kent Bronson, Esq
Wolf Popper LLP 845 Third Avenue New York, NY 10022-6689
Telephone: 212-451-9620 212-451-9626 212-451-9629
Toll Free: 877-370-7703 Facsimile: 212-486-2093
E-Mail: rfinkel@wolfpopper.com psafirst@wolfpopper.com
kbronson@wolfpopper.com  Website: http://www.wolfpopper.com
Marvin A. Miller, Esq. Adam J. Levitt, Esq.
Miller Faucher Cafferty And Wexler LLP
30 North LaSalle Street, Suite 3200 Chicago, Illinois 60602
Telephone: 312-782-4880 Facsimile: 312-782-4485

AMERICAN FAMILY: Ch 11 Case-Settlement Imminent Re Sweepstakes Mailings
In the wake of the Chapter 11 bankruptcy filing of sweepstakes promoter
American Family Publishers on October 29, attorneys for plaintiffs in
class action lawsuits against the company pending in federal court
confirmed that they have reached an agreement in principle to settle the
cases, brought by customers who claim they were misled by the company's

Guy Burns, one of the lead attorneys for the plaintiffs, explained that
`in light of AFP's financial situation, we felt it was critical to make
adequate provision for those customers who may have been misled by the
company's sweepstakes promotions.` Lead plaintiffs' attorney Elizabeth
Cabraser stated that `we are working diligently on the terms of an
agreement to protect the interests of class members in the context of
AFP's Chapter 11 filing.`

The terms of the proposed settlement remain confidential at this time,
by order of the Court, but the plaintiffs' lawyers anticipate that the
details will be announced shortly. There is nothing for customers of
American Family Publishers to do at this time. Once the details of the
proposed settlement have been finalized, notice will be given advising
customers of their rights and the procedures to be followed in making a
claim. Contact: Lieff, Cabraser, Heimann & Bernstein, LLP
                Barry R. Himmelstein, Esq., 212/218-6600
                415/956-1000, Ext. 268 (voice) or
                Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A.
                Guy M. Burns, Esq., 813/225-2500

BERGEN BRUNSWIG: Milberg Weiss Files Securities Suit In California
Milberg Weiss (http://www.milberg.com)announced on October 28, 1999
that a class action has been commenced in the United States District
Court for the Central District of California on behalf of all persons
who purchased or otherwise acquired Bergen Brunswig Corp. (NYSE:BBC)
securities during the period between March 16, 1999 and October 14,

The complaint charges Bergen and certain of its officers and directors
with violations of the federal securities laws by making
misrepresentations about Bergen's business, earnings growth and
financial statements and its ability to continue to achieve profitable
growth. By issuing these allegedly false and misleading statements,
defendants caused Bergen's stock price to trade at artificially inflated
levels during the Class Period at as high as $ 26 per share, allowing
Bergen to complete the acquisition of PharMerica using Bergen stock to
pay for PharMerica, before the true facts about Bergen's troubled
operations, diminished profitability and its false financial statements
arising from its Stadtlander acquisition were revealed, and Bergen's
stock collapsed to as low as $ 7 per share.

The plaintiff is represented by two law firms, including Milberg Weiss
Bershad Hynes & Lerach LLP. If you wish to serve as lead plaintiff, you
must move the Court no later than 60 days from October 22, 1999. If you
wish to discuss this action or have any questions concerning this notice
or your rights or interests, please contact plaintiff's counsel, William
Lerach or Darren Robbins of Milberg Weiss at 800/449-4900 or via e-mail
at wsl@mwbhl.com

CHASE LINCOLN: NY Ct Dismisses Claims Over Formula; Some Claims Go On
Plaintiffs brought a class action against defendant banks and mortgage
corporations for their alleged unlawful practices in the servicing of
six-month Treasury-indexed adjustable rate mortgages. Plaintiffs claimed
that defendants deceptively used a formula for computing interest-rate
adjustment that was inconsistent with the formula agreed to in the
mortgage. The court granted defendants' motion for summary dismissal as
to individual claims of one group of plaintiffs, because evidence showed
that plaintiffs actually paid less in interest than if defendants had
used the mandated method for calculation. The court denied the banks'
motion for summary dismissal of a Deceptive Practices Act claim by
another group of plaintiffs, finding that the miscalculation by major
servicers of mortgages had a broad impact and was of a recurring nature.

Judge Casey

Siradas, Robin L. Siradas, Laszlo Takacs and Judith E. Takacs have
brought a class-action suit against The Chase Manhattan Bank, successor
by merger to the Chase Manhattan Bank, N.A. ("CMB"), and successor in
interest to Chase Lincoln First Bank, N.A., and Chase Mortgage Services,
Inc., (formerly known as Chase Manhattan Mortgage Corporation, formerly
known as Chase Home Mortgage Corporation) ("CMSI") (collectively
referred to as the "Chase Defendants") and Federal Home Loan Mortgage
Corporation ("Freddie Mac") for their alleged unlawful practices in the
servicing of Adjustable Rate Mortgages ("ARMs"). Plaintiffs have brought
this suit on behalf of all persons whose six month treasury indexed
Adjusted Rate Mortgage is or was owned or serviced by Defendants and who
were damaged because of the method of calculation of interest.

The Supreme Court of the State of New York, County of New York, removed
the instant case to this Court pursuant to 28 U. S.C. @ 1446 n1 and 12
U. S. C. @ 1452(f)(3). n2 According to 12 U.S.C. @ 1452(f)(3), the
Federal Home Loan Mortgage Corporation ("FHLMC"), a corporate entity
created by the United States of America, organized and existing under
the terms of the Emergency Home Finance Act of 1970, has the statutory
right to remove this action to the District Court of the United States
in the district and division embracing where the action is pending.
Therefore, federal jurisdiction is appropriate.

n1 28 U.S.C. @ 1446 sets forth the procedure for removal to federal

n2 12 U.S.C. @ 1452(f)(3) provides, in pertinent part:... any civil or
other action, case or controversy in a court of a State, or in any court
other than a district court of the United States, to which the
Corporation is a party may at any time before the trial thereof be
removed by [FHLMC], without the giving of any bond or security, to the
district court of the United States for the district and division
embracing where the same is pending... by following any procedure for
removal of causes in effect at the time of such removal. 12 U.S.C. @

Before the Court is a motion for summary judgment, pursuant to Rule 56
of the Federal Rules of Civil Procedure, as to all of the Takacses'
individual claims, and a motion for judgment on the pleadings pursuant
to Rule 12(c) of the Federal Rules of Civil Procedure as to the
Siradas's individual claims for violation of Section 349 and 350 of the
New York General Business Law (McKinney 1991), unjust enrichment and
money had and received, and breach of duty of fair dealing. n3 Both
motions have been brought by The Chase Defendants.

n3 Although the parties' motion papers refer to the duty of fair
dealing, such duty is commonly referred to as the duty of good faith and
fair dealing. The Court will refer to this duty in a manner consistent
with the parties' motion papers.

Also before the Court is a motion to dismiss, pursuant to Federal Rule
of Civil Procedure 12(b)(6), the aforementioned Plaintiffs' claims,
brought by Defendant Freddie Mac. For the reasons set forth below,
Defendants' motions are granted with respect to all of the Takacses'
individual claims and the Siradas's unjust enrichment, money had and
received and breach of fair dealing claims, and denied with respect to
the Siradas's deceptive practices claim.

                            Factual Background

The underlying facts in this case are not in controversy. In the
mid-1980's, Plaintiffs George W. Siradas and Robin L. Siradas obtained a
six month treasury-indexed adjustable rate mortgage ("ARM") loan from
Chase Lincoln. See Answer P 6. In 1986, Plaintiffs Laszlo Takacs and
Judith E. Takacs obtained a six month treasury indexed ARM loan from
Chase Lincoln. Fourth Amended Complaint P 7; Answer P 7. Plaintiffs' ARM
loans provided that the interest rates were to be adjusted using the
Auction Average every six months until the loans were paid off.
Subsequently, Freddie Mac purchased the mortgage and owned the Siradas's
loan at all relevant times.

The Siradas's ARM loan provided that the interest rate could be adjusted
every six months, based on the weekly auction average of the six-month
United States Treasury Bills. See Fourth Amended Complaint P 17; Answer
P 17. Such auction average may be obtained using two methods: (1)
contacting the member banks of the Federal Reserve Board, newspapers or
electronic information sources (collectively referred to as the
"Telerate Method"); or (2) by consulting the Federal Reserve Board's
Statistical Release H.15 (519), which is publicized each Monday by the
Federal Reserve Board ("H15 Method"). See Fourth Amended Complaint P 18;
Answer P 18.

The adjustable rate rider attached to the Siradas's mortgage provides
that the H15 method should be used. n4 In addition, Freddie Mac has
published a policy which mandates use of the H5 method for six-month
treasury indexed ARMs. n5

n4 The rider states: "Beginning with the first Change, my interest will
be based on an Index. The "Index" is the weekly auction average on
six-month United States Treasury bills, as made available by the Federal
Reserve Board. The most recent Index figure available as of the date 45
days before each Interest Change is called the "Current Index." See
Fourth Amended Complaint P 17.

n5 A Freddie Mac bulletin states: "The Treasury index will be considered
to have been made available on the release date that appears on the
Federal Reserve Statistical Release H.15(519)." See Freddie Mac
Bulletin, No. 91-18 (Sept. 5, 1991).

According to Freddie Mac, the proper method for adjusting the interest
rate on six month treasury indexed ARMs is the H15 method. See Fourth
Amended Complaint, Exhibit C, Freddie Mac Bulletin, No. 91-18. Chase
Manhattan serviced the Siradas's mortgage under an agreement with the
owner, Freddie Mac, by making interest rate adjustments commencing June
1, 1986 and each and every June 1 and December 1 thereafter up to the
time the loan was transferred to Mellon Mortgage in or about May 1995.
At times, the Defendants used the Telerate method, rather than the H15
method to compute the Plaintiffs' interest rates. See Carson Decl. P 4.
In or about April of 1998, Joseph M. Carson, the Assistant Manager of
Alternative Servicing for Chase Manhattan Mortgage Corporation ("CMMC")
[programmed] CMMC's computer to run analysis on the Takacses' loan from
inception to payoff making interest rate adjustments on their ARM loan
mortgage using the H15 Method. He compared this analysis to the
Takacses' actual loan history and found that had the H15 method been
used, Plaintiffs would have been charged $ 55.72 more in interest over
the life of the loan than they were actually charged. Id.

                         The Takacses' Claims

The Takacses claim breach of contract, violation of New York General
Business Law Section 349 and 350 (the "Deceptive Practices Act"), unjust
enrichment, and breach of the duty of fair dealing. The Chase Defendants
move for summary judgment on all of these claims.

Summary Judgment may only be granted when, "there is no genuine issue as
to any material fact [and]... the moving party is entitled to judgment
as a matter of law." Fed. R. Civ. P. 56(c). The moving party carries the
burden of demonstrating that there exists no genuine issue as to any
material fact. See Gallo v. Prudential Residential Services, Limited
Partnership, 22 F.3d 1219, 1223 (2d Cir. 1994). All ambiguities must be
resolved and all inferences must be drawn in favor of the non-moving
party. Id. The moving party may also succeed on a summary judgment
motion by showing that little or no evidence may be found in support of
the non-moving party's case. Id.

Each of the Takacses' claims is based solely on the allegation that they
suffered damages due to Defendants charging them excessive interest. See
Fourth Amended Complaint PP 47, 51, 55. However, the evidence
demonstrates that not only were the Takacses not overcharged, but they
were actually undercharged. An analysis showed that they paid less in
interest than they would have if the Defendants had used the H15 method.
See Decl. of Joseph Carson P 4. The Plaintiffs have not presented any
contradictory evidence on this issue, thus, there is no genuine issue of
fact on the question of damages. As damages is an essential element on
the Plaintiff's claim, the Defendants are entitled to summary judgment
on the Plaintiffs, claims of breach of contract, violation of the
Deceptive Practice Act and unjust enrichment.

The Takacses cannot maintain a cause of action, because they have not
been damaged. See N.Y. Gen. Bus. Law @ 349(h) (McKinney 1991) (allowing
a cause of action to "any person who has been injured by reason of any
violation of this section"); Lexington 360 Associates v. First Union
Nat'l Bank, 234 A.D.2d 187, 651 N.Y.S.2d 490 (1st Dep't 1996) (granting
defendant's motion for summary judgment where borrower could not prove
that he suffered any damages as the result of the lender's alleged
breaches); Small v. Bank of New York, 222 A.D.2d 667, 636 N.Y.S.2d 71
(2d Dep't 1995) (granting defendant's motion for summary judgment
because plaintiff suffered no damages from defendant's conduct). The
Takacses themselves admit that they have suffered no injury and request
a voluntary dismissal without prejudice. See Plaintiffs' Memorandum in
opposition to Chase's Motion at 2-3.

Defendants are entitled to summary judgment on the Takacses' individual
claims, because, on the specific facts of this case, the Takacses have
demonstrated no injury.

                        Deceptive Practices Act

The Chase Defendants move for judgment on the pleadings pursuant to Rule
12(c) of the Federal Rules of Civil Procedure n6 regarding the Siradas's
claim of violation of New York's Deceptive Practices Act. The Deceptive
Practices Act, which applies to New York residents and New York
transactions, provides that "deceptive acts or practices in the conduct
of any business, trade or commerce... are hereby declared unlawful."
N.Y. Gen. Bus. Law @ 349-50. n7

n6 The Federal Rules state: "After the pleadings are closed but within
such time as not to delay the trial, any party may move for judgment on
the pleadings." Fed. R. Civ. P. 12(c).

n7 The Court notes that the Plaintiffs, in the Fourth Amended Complaint,
allege that The Chase Defendants violated Florida's uniform deceptive
acts and practices statute, Fla. Stat. Ann. 501.201 et seq., which they
claim applies to The Chase Defendants because Chase Mortgage is located
in Florida and carried out the unlawful practices from Florida. None of
the parties addressed this claim in their moving papers on the issues
addressed herein, therefore, the Court will not address the
applicability of this statute to the Defendants' motions. However, as
the Court has denied the Defendants' motion with respect to the New York
uniform deceptive acts and practices statute, the parties suffer no
prejudice by omitting discussion on this issue here.

The standard for obtaining a judgment on the pleadings under Federal
Rule of Civil Procedure 12(c) is the same as the standard used for a
motion to dismiss for failure to state a claim under Federal Rule of
Civil Procedure 12(b)(6): A court may dismiss the complaint only if it
"appears beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief." Cohen v.
Koening, 25 F.3d 1168, 1172 (2d Cir. 1994), quoting Conley v. Gibson,
355 U.S. 41, 45-46 (1957). In this case, it does not appear beyond doubt
that the Plaintiffs can prove no set of facts entitling them to relief
under the Deceptive Practices Act.

Plaintiffs maintain that the Chase Defendants violated the Deceptive
Practices Act by deceptively using a formula for computing interest rate
adjustment that was inconsistent with the formula agreed upon in the
mortgage. See Fourth Amended Complaint P 49. Defendants' motion for
judgment on the pleadings regarding this claim is denied, given that
Defendants' conduct could arguably meet all of the elements of a
violation of the Deceptive Practices Act.

In order to prove a claim for deceptive practices the Plaintiffs must
demonstrate that the act or practice was misleading in a material
respect, and that the plaintiff was injured. Schneider v. Citicorp
Mortg., Inc., 1997 982 F. Supp. 897, 903 (E.D.N.Y. 1997) (citing
Steinmetz v. Toyota Motor Credit Corp., 963 F. Supp. 1294, 1306
(E.D.N.Y. 1997)). There is no requirement that the Plaintiff show
specific dollars injury. In order for the Plaintiffs to plead and prove
their claims for relief under the Deceptive Practices Act, they must
prove, at a minimum, that the conduct is consumer oriented, that
Defendant's acts have a broad impact on consumers at large, and that
there is injury to the public generally. Occidental Chemical Corp. v.
OHM Remediation Services Corp., 173 F.R.D. 74, 76-77 (W.D.N.Y. 1997).

First, a miscalculation of interest rates by major servicers of
mortgages in the United States clearly has a broad impact on consumers
at large. See Teller v. Bill Hayes, Ltd., 213 A.D.2d 141, 630 N.Y.S.2d
769 (2d Dep't 1995) (basing denial of a deceptive practices on the fact
that the deceptive act did not have a sufficiently broad impact on
consumers at large); United Knitwear Co. v. North Sea Ins. Co., 203
A.D.2d 358, 359 (2d Dep't 1994) (requiring that claims under the
Deceptive Practices Act be "harmful to the public at large").
Additionally, the Chase Defendants' practices are of a persisting
nature, rather than isolated incidents. See id. at 359 (requiring that
violations of the Deceptive Practices Act involve conduct "of a
recurring nature."); Teller, 213A.D.2d at 148, 630 N.Y.S. 2d at 774 (the
Deceptive Practices Act is not applicable to "single-shot"
transactions). Unlike Teller, which involved deceptive conduct between
only two parties, the Chase Defendants' deceptive practices extended to
hundreds of thousands of borrowers. See Fourth Amended Complaint P 12.
This vast impact on consumers at large is the type of ongoing behavior
which the Deceptive Practices Act was intended to censure.

Defendants argue that Plaintiffs' claim under the Deceptive Practices
Act must be dismissed because it is "duplicative of their breach of
contract claim." Defendants' Memorandum at 7. Defendants base this
contention on the Teller court's statement that the Deceptive Practices
Act "was not intended to turn a simple breach of contract into a tort,"
Teller, 213 A.D.2d 141 at 148. Additionally, Defendants refer to the
United Knitwear court's denial of a claim under the Deceptive Practices
Act because it "amounts to nothing more than a private contract dispute
between the parties." United Knitwear Co., 203 A.D.2d at 359. Defendants
have taken these statements out of context to support their claim that
the Deceptive Practices Act cannot apply to those deceptive practices
which are rooted in contracts. The Teller court clearly bases its
decision to deny the deceptive practices claim on the insufficient
manner and extent to which the defendant's conduct impacts consumers -
not the fact that a contract was involved. Only after a lengthy analysis
of these factors does the court give its conclusory statement that the
Deceptive Practices Act "was not intended to turn a simple breach of
contract into a tort." Id.

Similarly, the court in United Knitwear Co. based its denial of the
claim under the Deceptive Practices Act on the fact that the deception
was neither harmful to the public nor of a recurring nature. Only after
an extensive examination of these factors, did the court conclude that
there was nothing more than a simple breach of contract.

Because the mortgages serviced by the Chase Defendants clearly do have a
broad impact and are of a recurring nature, their conduct amounts to
more than a "simple breach of contract" and as such is subject to the
Deceptive Practices Act. Although Plaintiffs supplied little evidence of
other mortgagors who potentially were harmed by Chase's and Freddie
Mac's practices, this is a factual issue. it is possible that evidence
of such could be developed to demonstrate deceptive practices which
caused harm to consumers. Therefore, the Defendants' motion for summary
judgment on this point is denied.

                       Claim of Unjust Enrichment

Plaintiffs George and Robin Siradas also bring a quasi contract claim of
unjust enrichment and money had and received. (See Fourth Amended
Complaint PP 53-55); see generally Rocks & Jeans Inc. v. Lakeview Auto
Sales & Service, Inc., 184 A.D.2d 502, 502 (2d Dep't 1992) (holding that
a claim for money had and received "sounds in quasi contract" and arises
when "in the absence of an agreement, one party possesses money that in
equity and good conscience it ought not retain"). Plaintiffs base this
claim on the assertion that Defendants unjustly received their money
through the charging of excessive interest rates.

Plaintiffs and Defendants agree that one may not maintain a claim in
quasi contract where a contract governs the "particular subject matter
of its claims for unjust enrichment." See Plaintiffs, Memorandum at 7
(quoting Metropolitan Elec. Mfg. Co. v. Herbert Constr. Co., 183 A.D.2d
758, 759 (2d Dep't 1992)).

The only dispute here is whether Plaintiffs' claim in quasi contract
covers subject matter different from that covered by the contract
itself. Plaintiffs argue that the two claims cover two different
subjects: the contract (the mortgage) governs the proper method to
calculate interest rates, whereas the subject matter of the quasi
contract claim "is not the method of calculation contained in the
contract, but that the defendants did not use the method of calculation
contained in the contract."

This analysis is unpersuasive. Simply rephrasing an affirmative,
contractual obligation into a failure to uphold this obligation, does
not create a new subject matter. The quasi contract claim does not have
a subject matter independent from the contract itself. The Chase
Defendants' motion for judgment of the pleadings with respect to
Plaintiff's claim of unjust enrichment and money had and received
against the Chase Defendants is dismissed, as there is no set of facts
in support of the Plaintiffs' claim which would entitle them to relief.
Cohen, 25 F.3d at 1172 (quoting Conley, 355 U.S. at 45- 46).

                       The Duty of Fair Dealing

A party may maintain a claim for breach of the duty of fair dealing only
if it is based on allegations different than those underlying the
accompanying breach of contract claim. See Geler v. National Westminster
Bank USA, 770 F. Supp. 210, 215 (S.D.N.Y. 1991) (denying plaintiff's
claim under breach of duty of fair dealing because the allegations of
that claim presupposed a breach of the express terms of the contract).
Geler is analogous to this case, in that the Siradas Plaintiffs have not
asserted any basis for their breach of duty of fair dealing claim beyond
the allegation that Defendants breached the contract.

Plaintiffs' reliance on Davis v. Dime Bank of New York, FSB, 158 A.D.2d
50 (Appel Div. 3d Dept 1990) (holding that a plaintiff could sue for
breach of contract, as well as breach of fiduciary duty, only if the
latter duty arose from more than the mere existence of the contract) is
misguided for two reasons. First, the plaintiffs in Davis claimed breach
of fiduciary duty, which involves a very different relationship between
the parties and requires a different standard of conduct, n8 rather than
breach of duty of fair dealing. Second, the Davis court found a
fiduciary relationship between the parties which was based on
allegations independent of the contract itself. There was no such
special duty between the Siradases and the Chase Defendants, other than
the duty of fair dealing which is implicit in every contract. See Geler,
770 F. Supp. at 215 (holding that every contract obligates the party to
engage in fair dealing). The breach of that implicit duty to engage in
fair dealing is merely a breach of the underlying contract. id.

n8 "The essence of a fiduciary relationship is that the fiduciary agrees
to act as his principal's alter ego...." United States v. Ashman, 979
F.2d 469, 478 (7th Cir. 1992).

Plaintiffs cannot claim both breach of contract and breach of the duty
of fair dealing, because the latter claim is not independent of the
contract itself. For this reason, the Defendants' motion for judgment of
the pleadings with respect to the Plaintiffs' breach of duty of fair
dealing claim is granted.

                 Plaintiff's Claims Against Freddie Mac

Freddie Mac has brought a motion to dismiss all of the Plaintiffs'
claims against it. For the reasons set forth below, the Court grants
such motion as to each claim.

                       Overcharging of Interest

Plaintiffs are subject to New York Civil Practice Law and Rules @
215(6), because they seek recovery of an overcharge of interest. This
law imposes a one year statute of limitations on an action to recover
any overcharge of interest. C.P.L.R. @ 215(6). This language clearly and
unambiguously applies to any "monetary charge in excess of the proper,
legal or agreed rate or amount." Rubin v. City Nat'l Bank and Trust Co.,
131 A.D.2d 150, 152 (3d Dep't 1987) (citation omitted). Plaintiffs rely
on Englishtown Sportswear, Ltd. v. Marine Midland Bank, 97 A.D.2d 498,
(2d Dep't 1983) (holding that C.P.L.R. @ 215(6) only applies to usury
actions), which directly contradicts the holding in Rubin (holding that
the plain, ordinary meaning of CPLR 215(6) statutory language is clear
on its face and such language is controlling). The Court will follow the
more recent and thoughtful analysis provided in Rubin. See Rubin, 131
A.D.2d at 153 (holding that the ordinary meaning of the statute

When a statute is clear and unambiguous in its language, New York courts
should not inquire as to legislative history to aid in its
interpretation. See Washington Post Co. v. New York State Insurance
Dep't et al., 61 N.Y.2d 557, 565 (1984) ("When the plain language of the
statute is precise and unambiguous, it is determinative") (citation
omitted); see also McKinney's Cons. Laws of N.Y., Book 1, Statutes at 76
(Where words of a statute are free from ambiguity and express plainly,
clearly and distinctly the legislative intent, "resort need not be had
to other means of interpretation."). The language of C.P.L.R. @ 215(6)
is entirely clear, therefore, it would be inappropriate to examine the
statute's legislative history.

Plaintiffs argue that the Rubin holding is limited to the facts of that
case, and as such does not extend to overcharges of interest that are
contractual rather than statutory. See Plaintiff's Memorandum at 4. This
argument, however, overlooks the court's statement that "While this case
and Englishtown are factually distinguishable, the question remains
whether CPLR 215(6) extends to actions other than usury." Rubin, 131
A.D.2d 150 (3d Dep't 1987). Despite the differing factual backgrounds
between the two cases, the Rubin court was clearly re-examining the same
issue addressed by the Englishtown court. The Rubin court ultimately
concludes that C.P.L.R. @ 215(6) applies to any overcharge of interest -
not just usury. See Rubin, 131 A.D.2d at 153. The Court grants Freddie
Mac's motion to dismiss on this issue, because Plaintiffs' claim is
barred by the statute of limitations.

                       The Duty of Fair Dealing

Plaintiffs' claim under breach of duty of fair dealing should be
dismissed. As discussed above, see supra Section IV, New York courts
have consistently denied claims of breach of duty of fair dealing when
they are alleged together with breach of contract. See OHM Remediation
Services Corp. v. Highes Environmental Systems, Inc., 952 F. Supp. 120,
124 (N.D.N.Y. 1997) (holding that New York does not recognize a
simultaneous claim for breach of contract and breach of the duty of fair
dealing). The Court grants Freddie Mac's motion to dismiss the
Plaintiff's claim of breach of duty of fair dealing, accordingly.

                           Unjust Enrichment

Plaintiffs' claim for unjust enrichment and money had and received claim
against Freddie Mac must be dismissed, as there is no set of facts in
support of the Plaintiffs' claim which would entitle them to relief.
Cohen, 25 F.3d at 1172 (quoting Conley, 355 U.S. at 45-46). Plaintiffs
and Defendants agree that one may not maintain a claim in quasi contract
where a contract governs the "particular subject matter of its claims
for unjust enrichment." See Plaintiffs, Memorandum at 7 (quoting
Metropolitan Elec. Mfg. Co., 183 A.D.2d at 759). Simply rephrasing an
affirmative, contractual obligation into a failure to uphold this
obligation, does not create a new subject matter. The quasi contract
claim does not have a subject matter independent from the contract
itself. Therefore, Plaintiff's claim of unjust enrichment and money had
and received against Freddie Mac is dismissed.

                       Deceptive Practices Act

The Siradas's claim that Freddie Mac violated New York and Virginia n9
statutes by deceptively using a formula for computing interest rate
adjustment that was inconsistent with the formula agreed upon in their
mortgage, and inconsistent with Freddie Mac's policy.

n9 The Virginia statute specifies certain unlawful practices, and
prohibits all conduct "using any other deception, fraud, false pretense,
or misrepresentation in connection with a consumer transaction." Va.
Code Ann. @@ 59.1-200.

Although the Siradas's deceptive practices claim against the Chase
Defendants has survived, their deceptive practices claim against Freddie
Mac is dismissed. Unlike the Chase Defendants, Freddie Mac is not
subject to the New York Deceptive Practices Act. Freddie Mac is also not
subject to the Virginia Code @@ 59.1-200 regulating deceptive business

Freddie Mac Is Not Subject to N.Y. Gen. Bus. Law @@ 349, 350

The Deceptive Practices Act only applies to New York residents and New
York transactions. See Riordan v. Nationwide Mutual Fire Insurance Co.,
977 F. 2d 47, 52 (2d Cir. 1992) (holding that the section applies to
"every business operating in New York"), see also Weaver v. Chrysler
Corp., 172 F.R.D. 96, 100 (S.D.N.Y. 1997) (dismissing claim because
Plaintiff has failed to allege any deceptive acts or practices by
Chrysler that occurred within New York State, which is required to state
a claim under the Deceptive Practices Act). However, Plaintiffs have
failed to allege that Freddie Mac committed any deceptive practices or
acts within New York or is a New York resident.

Plaintiffs claim that Freddie Mac should not be able to absolve itself
from liability simply by hiring a servicer to do that which it was
obligated to do under the contract, suggesting that Freddie Mac be
liable because of its relationship with The Chase Defendants, which is
subject to the New York Deceptive Practices Act. Plaintiff's Memorandum
at 11. However, Freddie Mac, as a government institution, is not liable
for the deceptive conduct of its servicers. See United States v.
Zenith-Godly Co. Inc., 180 F. Supp. 611, 615 (S.D.N.Y. 1960) ("While a
private person may be bound by acts of his agents that are not within
the actual bounds of the agent's authority, it does not follow that the
Government may be bound by the apparent authority of its agents").
Therefore, there may be no liability under the Deceptive Practices Act
on the part of Freddie Mac, and Defendants' motion to dismiss on this
issue is granted.

       Freddie Mac Is Not Subject to Va. Code Ann. @@ 59.1-200

Freddie Mac is not subject to the Virginia Consumer Protection Act
("VCPA") for two reasons. First, consumer real estate transactions are
governed by 15 U.S.C.S. @ 1603, and are therefore not subject to the
VCPA. See Smith v. United States Credit Corp., 626 F. Supp. 102 (E.D.
Va. 1985) (holding that consumer real estate transactions are not
subject to the VCPA, because they are exclusively under the domain of 15
U.S.C.S. @ 1603, the Federal Consumer Credit Act).

Plaintiffs' attempt to distinguish this case from Smith by arguing that
although 15 U.S.C.S. @ 1603 does regulate consumer real estate
transactions in general, it does not specifically regulate interest rate
adjustments on ARM loans. Plaintiffs then conclude that since this
conduct is not regulated by the Federal statute, it is subject to the
VCPA. See Plaintiffs' Memorandum at 12, Plaintiffs are incorrect in
their assertion that interest rate adjustments on ARM loans are not
subject to 15 U.S.C.S. @ 1603. Although the federal statute does not
specify that this particular type of conduct is within its ambit, its
general phrasing includes the deceptive calculation of interest rates.
See 15 U.S.C.S. @ 1603. The statute's statement of its own purpose
supports a broader construction: "it is the purpose of this title... to
assure a meaningful disclosure of credit terms so that the consumer will
be able to compare more readily the various credit terms available to
him and avoid the uninformed use of credit." Id.

Secondly, the VCPA does not apply here because Freddie Mac is not a
supplier. The VCPA only regulates suppliers. The statute defines the
term "supplier" to mean "a seller or lessor who advertises, solicits or
engages in consumer transactions, or a manufacturer or distributor who
advertises and sells or leases goods or services to be resold or leased
by other persons in consumer transactions." Va. Code @ 59.1-198. Freddie
Mac is clearly not a seller or lessor-it has not sold goods or services
to Plaintiffs. Rather, Freddie Mac purchased the mortgage after the loan
had already been given to Plaintiffs. Finally, Freddie Mac did not
engage in "consumer transactions." The VCPA defines consumer
transactions as, "the advertisement, sale, lease or offering for sale or
lease, of goods or services to be used primarily for personal, family or
household services." Va. Code @ 59.1-198. "Goods" are defined to include
"all real, personal or mixed property, tangible or intangible." Id. This
does not apply to Freddie Mac.

For both of the above reasons, Freddie Mac is not subject to the VCPA,
and Plaintiff's deceptive practices claim against Freddie Mac is


For the above reasons, the Court, dismisses all of Plaintiffs' claims
against Freddie Mac, and all of the individual claims brought by the
Takacses against Defendants. Finally, the Court dismisses the Siradas's
claims of unjust enrichment and their claim of breach of duty of fair
dealing. The Court denies the Defendant's motion to dismiss the
Siradas's deceptive practices claim against the Chase Defendants.
(New York Law Journal 10-20-1999)

DETROIT EDISON: Settles By Arbitration 3 Employment Bias Cases For $45M
The D.E. Class Action Office announced a unanimous decision in favor of
plaintiffs by the arbitration panel in the Gilford v. Detroit Edison
class action lawsuit. The panel has awarded $45,150,000 (forty-five
million, one hundred and fifty thousand dollars) to the plaintiff class,
thereby resolving three class action lawsuits against the Detroit Edison

This announcement follows a month-long arbitration hearing before a
three-person panel, which concluded in mid-September 1999. The
settlement arbitration was based upon three employment discrimination
class action lawsuits filed against Detroit Edison brought by salaried,
non-unionized current and former employees of the Company. The panel
hearing the case consisted of former United States District Court Judge
for the District of Colorado, Hon. Jim R. Carrigan (Neutral Arbitrator),
Richard A. Soble, Esq. of Ann Arbor, MI (Plaintiffs' Arbitrator) and
Gilbert F. Casellas, Esq. (Defendant's Arbitrator) of West Chester, PA.

Class representative, Luther Gilford, filed the first class action in
Wayne County Circuit Court in November 1993. Gilford was later joined by
class representatives Darney Standfield and John Washington. They
alleged that Detroit Edison had violated Michigan race and age
discrimination laws in connection with a company-wide reorganization
known as the Staffing Transition Program (STP) which commenced in 1992
and ended in July of 1995. Wayne County Circuit Court Judge Carole
Youngblood certified this class action in May of 1996. Gilford, et al v.
Detroit Edison Co., Case No. 93-333296-NO.

The second class action was filed in Wayne County Circuit Court in March
of 1997 by class representatives Franz Sanchez, Christine Guerrero and
Edward Juarez, who were former and current Hispanic/Mexican-American
Detroit Edison employees. They alleged that Detroit Edison had
discriminated against each on the basis of their
Hispanic/Mexican-American national origin. The Detroit Edison Company
agreed for purposes of settlement, to certify the Sanchez lawsuit as a
class action. Sanchez, et al v. Detroit Edison, Case No. 97-706639-NO.

Beverly Frazier, a former Detroit Edison employee, filed the third class
action in Federal Court in April 1997. Ms. Frazier alleged that Detroit
Edison had violated federal age-discrimination laws. More specifically,
she alleged that the Voluntary Separation Offer (VSO) which she and
other employees had signed, was legally defective. The Detroit Edison
Company agreed for purposes of settlement, to likewise certify the
Frazier lawsuit as a class action, Frazier, et al v. Detroit Edison,
Case No. 97-71448.

On February 6, 1998, approximately two weeks before the start of trial
in the Gilford class action, the parties in all three class actions
reached a comprehensive settlement of all three class actions and agreed
to an arbitration hearing in order to determine the amount of damages.

On August 14, 1998, Wayne County Circuit Court Judge Carole Youngblood
conducted a preliminary fairness hearing whereby she approved the
settlement of the Gilford, Sanchez and Frazier class actions and entered
a Consent Judgment governing the settlement of each. The terms and
conditions of the Consent Judgment govern all of the claims of the
Gilford, Sanchez and Frazier classes. The Consent Judgment provides a
method for establishing a monetary settlement, equitable/non-monetary
remedies, the appointment of Special Master Valdemar Washington, former
Genesee County Circuit Court Judge, as well as a five-year Monitoring
Agreement. Further, the Consent Judgment provides for the development of
eighteen (18) distinct Human Resources programs designed to remedy past
discrimination and to prevent future discrimination. These Human
Resources programs apply to the entire Detroit Edison Company and are
available to all employees.

During the course of the arbitration, plaintiffs offered several lay and
expert witnesses. Nitin Paranjpe, Ph.D. of Southfield, MI offered
statistical evidence of adverse impact based on age and race during the
reorganization. Duane Q. Hagen, M.D. of St. Louis, MO and former Harvard
professor and consultant Barrie S. Greiff, M.D. of Cambridge, MA, joint
authors of "The Psychosocial Impact of Job Loss," testified on behalf of
the plaintiff class regarding non-economic damages, including
psychological and physical damages, as did Karen Noelle Clark, Ph.D. of
Southfield, MI. Taylor Cox, Ph.D. of the University of Michigan
presented evidence on behalf of the class regarding the issue of
corporate discrimination.

Approximately 1,400 current and former Detroit Edison employees claiming
race, age and/or national origin discrimination will receive
compensation through the disbursement of the arbitration award. SOURCE
D.E. Class Action Office and the named representatives of the Gilford v.
Detroit Edison class action on October 29, 1999 at 11 a.m. The
conference will be held in the Crowne Ballroom (Section B, Main Floor)
of the Crowne Plaza Pontchartrain Hotel, Detroit, Michigan 48226,
313-965-0200. Class representatives and counsel will make a statement
and be available for questions./ CONTACT: Alice B. Jennings of Edwards &
Jennings, P.C., Counsel for Plaintiffs, 313-961-5000; William A. Roy of
Roy, Shecter & Vocht, P.C., Counsel for Plaintiffs, 248-540-7660;
Michael L. Pitt and Jeanne E. Mirer of Pitt, Dowty, McGehee & Mirer,
P.C., Counsel for Plaintiffs, 248-398-9800; or Andrea L. Laramie,
Executive Director of D. E. Class Action Office, 313-967-0410

DUNEDIN FIRE: Two Female Fire-Fighters Sue In Tampa Over Gender Bias
Dunedin's highest-ranking female firefighter and another female
firefighter who retired last year filed a $ 10-million class-action
lawsuit against the Dunedin Fire Department last Thursday alleging
widespread gender discrimination.

Both Nancy Dile, 48, currently a district commander in the department,
and Diane LaPointe-Drewes, 56, who left the department in August 1998,
were denied deserved promotions because of their gender and age,
according to the lawsuit. When the women protested the promotional
decisions, their superiors retaliated against them with unwarranted
disciplinary action, the lawsuit alleges.

The lawsuit, filed in U.S. District Court in Tampa, seeks class-action
status on behalf of all women who have been employed or sought
employment in the Dunedin Fire Department and faced gender
discrimination, said attorney David J. Linesch of Palm Harbor, who is
representing the women.

That Dile is one of only two women in the 51-member department indicates
a problem, Linesch said. "You're talking about a pattern of practice of
discrimination against women," said Linesch, who last year represented
five female college professors who won a discrimination lawsuit against
the University of South Florida.

Dunedin City Attorney John Hubbard said the allegations of gender
discrimination are untrue. The class-action status, he said, is "an
absurdity." "Absolutely and without equivocation the promotional
practices in the Dunedin Fire Department have been fair and
straightforward without any gender bias whatsoever," Hubbard said. "We
sincerely believe that when we promote or hire people we do it
absolutely on the basis of merit and qualifications."

LaPointe-Drewes worked for the department for 11 years before she
retired in August 1998. She said she felt forced to leave the department
after she was passed over for three lieutenant posts when she had
finished second on a promotions test.

City Manager John Lawrence found that a grievance filed by
LaPointe-Drewes over the promotion had no merit. "If I ever thought for
one millisecond someone was discriminating against a woman . . . I would
go crazy," Lawrence said at the time. "I wouldn't put up with any type
of discrimination."

Dile was the first female firefighter hired in Pinellas County and has
worked for the Fire Department for 20 years. Her complaint started when
fire Chief Bud Meyer announced a departmental reorganization that
promoted a younger, male firefighter to a newly created position over
her. Dile said she most resented that she was never given an opportunity
to apply for the position, and she filed a grievance asking the city to
reconsider the promotional process. Lawrence denied her grievance.

Meyer, who nine years ago promoted Dile to her current rank, said he
considered all eligible firefighters for the new job and selected the
most qualified person.

In July, Dile was suspended for five days after a Fire Department
investigation determined she failed to properly command a particularly
bad accident involving a tanker truck and a car in May. Meyer said that
before the suspension, he had verbally counseled Dile at least six times
for mishandling emergency scenes.

In her lawsuit, Dile contends the suspension was retaliation for her
complaints. "I (sued) because of the unfairness," Dile said. "I felt
like it was in the slap in the face." She contested the five-day
suspension and in August the city's Personnel Review Board agreed that
the punishment was too harsh. The city cut the suspension to two days.
Dile contested the punishment a second time and again prevailed before
the board. On Oct. 12, the discipline was dropped to reprimand. "I went
from almost being fired to a reprimand," Dile said.

Linesch, her lawyer, said the retaliation is continuing with Dile's
recent reassignment as the department's training officer. "The
reassignment is an attempt to take her out of a promotional track,"
Linesch said. "This is interesting because the training and safety
officer is responsible for a lot of the things they criticized her for.
It's suspicious." (St. Petersburg Times 10-29-1999)

GST TELECOMMUNICATIONS: Klari Neuwelt Files Washington Securities Suit
The following is an announcement from the Law Office of Klari Neuwelt:

Law Office of Klari Neuwelt hereby gives notice that on October 27, 1999
it filed a class action lawsuit in the United States District Court for
the Western District of Washington on behalf of purchasers of common
stock of GST Telecommunications, Inc. (Nasdaq:GSTX) during the period
November 4, 1996 through October 21, 1998.

The complaint charges GST and certain of its former officers and
directors with violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, as well as SEC Rule 10b-5. The complaint alleges
that during the Class Period the defendants issued materially false and
misleading statements concerning GST's interest in a company now known
as Global Light Telecommunications. It further alleges that the
individual defendants used Global to divert to themselves, and away from
GST, a lucrative corporate opportunity to provide telecommunications
services in Mexico, and that they materially misled the investing public
about that fact. The complaint alleges that the market price of GST
common stock was artificially inflated throughout the Class Period.

The plaintiff is represented by Law Office of Klari Neuwelt. If you want
to discuss this action or have any questions concerning this notice or
your rights or interests regarding the lawsuit, please contact the firm
at 212 593-8800 or by E-mail at KNeuwelt@AOL.com. If you are a member of
the Class described above, you may, not later than sixty days from
October 21, 1999, move the Court to serve as lead plaintiff for the
class. In order to serve as lead plaintiff, you must meet certain legal
requirements. Contact Law Office of Klari Neuwelt Klari Neuwelt,

HMO: Aetna Says SEC Is Reviewing Its Purchase Of Prudential Insurance
Aetna Inc., the biggest U.S. health insurer, said regulators are
reviewing its acquisitions, including this year's $ 1 billion purchase
of a Prudential Insurance Co. of America unit, to determine if it
properly accounted for costs.

The Securities and Exchange Commission review is the latest in a series
of problems with the Prudential Healthcare acquisition, which took half
a year to pass regulatory muster and is losing money at a rate equal to
$ 175 million a year.

Aetna's shares have fallen by more than one-third in two months amid
worries about the Prudential purchase, possible new restrictions on
managed health care plans and the threat of class-action lawsuits
against health insurers. Analysts said investors are concerned that the
company, which on Thursday said third-quarter earnings beat
expectations, may have to restate earnings.

Aetna said it believes the accounting it has used for acquisitions and
sales was appropriate. (The Atlanta Journal and Constitution 10-29-1999)

Aetna faces allegations of 'heavy-handed extortionate conduct'. Charging
the nation's largest health maintenance organization with
misrepresentation, fraud and extortion to "systematically limit, delay
or deny medical care" to its members, a group of nationally renowned
attorneys, called the REPAIR Team, filed a national class action lawsuit
on behalf of 18 million HMO enrollees against Aetna, Inc., and 25
subsidiaries alleging violations of the Racketeer Influenced and Corrupt
Organizations (RICO) Act and the Employee Retirement Income Security Act

The lawsuit charges that Aetna engaged in a "nationwide fraudulent
scheme" to enroll members by promising quality healthcare and then
denying needed services to boost corporate profits and dominate the HMO
marketplace. It also charges a "pattern of heavy-handed extortionate
conduct against Aetna's physicians" designed to coerce them into
accepting contracts imposing "unreasonable, and often unsafe,
restrictions on the level of medical services that may be delivered."
The lawsuit seeks compensatory damages to class members, which can be
tripled under RICO; an injunction preventing Aetna from pursuing the
practices alleged by the class action; punitive damages; the imposition
of a Cy Pres Trust to be administered by the Court; prejudgment and
post-judgment interest; and other relief the Court deems appropriate.

Filed in U.S. District Court, O'Neill v. Aetna details Aetna's alleged
strategy "of fraudulently inducing increased membership to obtain
revenues, while actually aggressively and deceitfully seeking to reduce
the delivery of quality healthcare services provided its members to
maximize its profit." It cites multiple acts of mail and wire fraud,
violations of the Travel Act, "heavy-handed extortionate conduct," and a
breach of Aetna's fiduciary duties under ERISA.

The lawsuit charges that Aetna engages in a variety of practices that
run contrary to what the company tells enrollees and that harm the
quality of care.

The lawsuit notes that Aetna's merger with U.S. Healthcare in 1996, its
acquisition of NYLCare in 1998 and its purchase of Prudential Healthcare
this August have given it disproportionate market clout. This gives
Aetna the power to engage in "Undisclosed heavy-handed profit and market
dominance strategies designed to coerce physicians into accepting
contracts and policies and practices on a 'take it or leave it' basis.
... The defendants engage in extortionate conduct designed to exploit
physician fear of economic loss or loss of business."

"Under Aetna's incentive and disincentive arrangements, the fewer the
services provided to members, the greater the physicians' compensation,"
the lawsuit charges. "Conversely, the more services provided, even where
deemed by Aetna physicians to be medically necessary, the greater the
likelihood the physicians will owe money at the end of the
reconciliation of budget period. These arrangements are specifically
designed to cause Aetna physicians to become unwilling co-conspirators
in the reduction or limitation in the delivery of healthcare services to
the plaintiff and the class in order to maximize profits."

The RICO count of the lawsuit seeks the "return of the portion of
premium payments allocable to the profits the defendants derived through
fraud and non-disclosure" or "alternatively, disgorgement of profits
made by the defendants through fraud and nondisclosure," either of which
are subject to treble damages.

The ERISA breach of fiduciary duty count seeks "restitution of all sums
of money paid to the defendants during such time as defendants were
engaged in the breach(s) of the fiduciary obligation(s) imposed by law.
The defendants properly should be compelled to disgorge all such
revenues received during the period of its wrongful conduct, including
fiduciary breach, fraud and non-disclosure of its conflicted private

HMO: CA Suit Claims Aetna's Deals With Doctors Harm Patients
In the first class-action suit of its kind in California, Aetna Inc.,
one of the nation's largest managed health care providers, was accused
last Thursday of failing to disclose confidential arrangements with
physicians that were injurious to members of the health plan.

The lawsuit, filed in Contra Costa County Superior Court, charges that
under the contracts, doctors were barred from disclosing information to
patients about monetary incentives based on providing less care. "Many
doctors are fed up with the HMO [health maintenance organization]
system, which interferes with the ability to deliver quality health
care," said San Francisco attorney Frederick P. Furth, the lead lawyer
for the plaintiffs. "We believe they will fully support this lawsuit."

Calls to several Aetna representatives seeking comment last Thursday
night were not returned. In response recently to lawsuits elsewhere
targeting physician payment arrangements, Aetna issued a statement
saying its companies' "general practice is to provide full disclosure to
potential members on how our health plans operate including how
physicians are paid and we encourage participating physicians to discuss
their financial arrangements with their patients."

The suit, like class actions filed recently in other states against
health maintenance organizations, attacks some of the basic tenets of
managed care.

The suit specifically contends that Aetna's payment system to doctors is
harmful to patients and contains hidden elements. Aetna, like other
HMOs, pays doctors a set amount per patient for providing all the care
that person needs.

Consequently, the suit alleges, a primary care physician "has
significant financial incentive to give little or no medical services to
each Aetna patient since the amount paid to him/her remains the same,
regardless of the amount of care the patient receives." "This financial
incentive to reduce patient care . . . is exacerbated by Aetna's policy
of paying financial bonuses to [primary care physicians], based on their
ability to keep costs down," the suit says.

The suit also contends that the undisclosed financial incentives reward
those primary care doctors who keep medical treatment to a minimum while
penalizing those doctors who provide a full range of care.

Moreover, the suit contends that these financial arrangements force the
primary care physicians into inherent conflicts of interest that prevent
them "from making medical decisions unsullied by financial concerns."

The suit, filed under the California Business and Professions Code, was
the first of what is expected to be a wave of major suits against HMOs
in California. Indeed, Furth said the legal team that filed the case
plans to file additional suits in California, perhaps as soon as the
next few weeks.

Joining Furth in filing the case were law firms headed by Richard
Scruggs of Pascagoula, Miss., and Ronald Motley of Charleston, S.C. Both
firms played instrumental roles in the assault state attorneys general
waged against the tobacco industry in recent years.

Those firms have won hundreds of millions of dollars in fees from
groundbreaking tobacco litigation, providing a large war chest to wage a
protracted court battle if necessary. They were joined Thursday by six
firms from Texas, several of which also were involved in tobacco suits,
four other firms from Mississippi, and one from Maryland.

The suit asks that Aetna be required to surrender "all of their
ill-gotten gains and monies wrongfully acquired by means of any acts of
unfair competition . . . and/or any acts of unlawful advertising."

According to the suit, Aetna has engaged in an "advertising scheme that
is fraudulent, unfair, misleading and deceptive" to consumers.

The suit also seeks an order enjoining Aetna and its officials from
engaging in these kinds of illegal acts in the future. The lawsuit was
filed by Jeanne E. Curtright, a self-employed San Diego resident and
Aetna member since 1997, on behalf of 1.4 million Aetna enrollees in
California. In addition to Hartford, Conn.-based Aetna Inc., the other
defendants are Aetna-U.S. Healthcare Inc., based in Pennsylvania, and
Aetna U.S. Healthcare of California Inc. (Los Angeles Times 10-29-1999)

HOLOCAUST VICTIMS: Germany Seeks To Increase Offer To Reach Agreement
The government is working on raising Germany's $ 3.3 billion offer for
Nazi-era slave laborers in the hope of reaching an agreement at the next
round of talks in November, the German envoy to the talks said last
Friday. Otto Lambsdorff told ARD television that the government was
working on getting more German companies to contribute to the fund being
set up to compensate former slave and forced laborers. Three dozen have
agreed to participate so far. But he said it was proving difficult and
that the next round of talks, set for Nov. 16-17 in Bonn, could be

The German side had described its $ 3.3 billion offer, unveiled Oct. 7
in Washington, as final, but survivors groups and class-action attorneys
have blasted it as too low.

The Berliner Zeitung daily reported last Friday that Lambsdorff had
persuaded Chancellor Gerhard Schroeder that settlement negotiations
would collapse unless the Germans offer more. The newspaper indicated
that the government will only offer more if German companies do, too.
Both sides have reached an understanding that the companies will pay two
thirds of the proposed compensation fund and the government one third.

By paying compensation to people who were forced to work for the Nazi
war machine during World War II, Germany hopes to atone for the past and
protect German companies from U.S. class-action lawsuits by survivors.

Previous German governments had excluded compensation specifically for
slave labor from more than $ 60 billion in reparations paid to Nazi
victims, arguing that the victims were technically working for private

Talks involving Germany, the United States, Jewish groups and U.S.
class-action lawyers began early this year. Some East European countries
also are taking part. (AP Worldstream 10-29-1999)

MACY'S: Union Sq Store Found To Violate ADA; Faces 2 Other CA Suits
From its entrance and aisles to its dressing rooms and cash registers,
Macy's flagship Union Square store here violates state and federal laws
requiring access for disabled people and must be made easier for them to
navigate, a federal judge ruled last Thursday.

The decision by Chief Judge Marilyn Hall Patel of the U.S. District
Court applies only to the chain's main San Francisco store and its Men's
Store, but advocates for the disabled hailed it as a victory.
"This is a case of nationwide importance," said Larry Paradis, executive
director of Disability Rights Advocates, the nonprofit legal advocacy
group that filed the suit against Macy's. "[The judge] sent a very clear
message to the entire retail industry that the Americans With
Disabilities Act really does have to be followed and really requires
changes from business as usual," he said.

Two other class-action lawsuits are pending against all of Macy's
California stores. One case--against just the Sacramento store--was put
on hold to await last Thursday's decision. The larger suit--which
accounts for 83 other stores--will also be presided over by Patel.

Rina Neiman, a spokeswoman for Macy's West, said the company had not had
a chance to review the 29-page decision and had no comment. Tim Pierce,
one of the attorneys representing Macy's, also declined to comment,
saying he too had not reviewed the decision.

In recent years, the presence of Macy's has greatly increased in
California as its parent company--Federated Department Stores, which
operates more than 400 department stores in 36 states--acquired
Bullocks, Broadway and I. Magnin.

"The impact will go beyond Macy's," said Linda Kilb, an attorney with
the Disability Rights Education and Defense Fund in Berkeley. "Macy's is
a large, prominent chain and this case involved issues that are not
unique to Macy's. This will clarify the obligations of large retail

Disability Rights Advocates sued on behalf of several men and women with
disabilities who complained that the retail giant violates the federal
Americans With Disabilities Act and California law in the sprawling
store in San Francisco's premier shopping district.

The disabled shoppers argued that state and federal laws require Macy's
to make its stores more accessible, in part by widening aisles to fit
the electric wheelchairs and scooters they use to get around.

Glen Vinton, one of the plaintiffs, suffered a spinal cord injury in a
diving accident 28 years ago and testified during the 1998 trial that
gaining access to the retailer is difficult at best. "Once you're in a
wheelchair, the most difficult thing is asking for help," Vinton
testified. "Every time you have to do that, you lose a little bit of
your independence, and to me, independence is very, very important."

Macy's argued that every available inch of floor space is needed for
displaying wares for the massive retailer to stay competitive, and that
if aisles were widened it would change the fundamental nature of the
business and cause it to lose money.

Bill Dombrowski, president of the California Retailers Assn., could not
be reached for comment Thursday. At the time of the trial, Dombrowski
said the industry fully supported the Macy's position, which he said was
based on economic realities of the retail business.

But Patel said in her decision that Macy's presented no evidence during
the trial that sales would be lost if it widened its aisles to 36

                     Some Passages Just 1 Foot Wide

During trial, witnesses testified that areas between display racks can
be as narrow as a foot. "In fact, the evidence indicates that Macy's may
already be past the point of diminishing returns," the judge wrote,
"such that widening pathways might encourage shoppers who would
otherwise be deterred from shopping at Macy's Union Square as much as
they would if the store environment were less crowded."

The 1990 Americans With Disabilities Act required that "readily
achievable" steps be taken by January 1992 to remove barriers to access
at public facilities. Newly constructed and renovated facilities were
held to a higher standard, including a requirement for 36-inch aisles to
allow for wheelchairs.

In a litany of violations, Patel ruled that fitting rooms designated as
accessible to the handicapped at Macy's do not have the required lowered
benches and clothing hooks, that floors with changing elevations impede
accessibility, that many public telephones are too high, and that a
company goal of providing 24-inch to 30-inch pathways breaks federal

Patel ordered Macy's to designate an employee to review display layouts
to "ensure that access is maximized," to make at least one fitting room
in each sales area accessible, and to bring all restrooms in renovated
areas into compliance with federal law.

At least one main entrance in each renovated area must be made
accessible, and signs must be posted to direct shoppers to features that
improve maneuverability. And the judge ordered Macy's and the plaintiffs
to come up with a plan within 60 days to implement her orders.

"Macy's has failed to even consider various alternative means of
providing access, such as those utilized by other department stores,"
Patel wrote. "The court was persuaded that, taken as a whole,
plaintiffs' testimony demonstrated a pattern overall of lack of access
which worsens at certain times of the year when Macy's increases its
merchandise inventory."

In fact, Paradis said that around this time of year his organization
receives an increase in complaints from across the country from people
who use wheelchairs, walkers, canes or scooters. As the holiday shopping
season approaches, retailers crowd stores with more merchandise. (Los
Angeles Times 10-29-1999)

MICHAEL SHEAHAN: State Attorney Rebuts Argument For Private Counsel
In a sharply worded rebuttal filed last Thursday, Cook County State's
Atty. Richard Devine accused Sheriff Michael Sheahan of using irrelevant
arguments and Joseph McCarthy-like tactics in his effort to hire private
legal representation in a class-action lawsuit on improper strip
searches at the County Jail. "Not having the legal basis for appointment
of a special state's attorney, the petitioner's staff counsel attempts
to overwhelm the statutory inquiry with sensational attacks," states the
petition, filed in Cook County Circuit Court.

Sheahan asked the court Oct. 13 for new representation, citing poor
communication, conflicts of interest and ineffective representation by
the state's attorney in the 3-year-old case. A judge denied an emergency

It is unclear when Circuit Judge Stephen A. Schiller will rule on the
latest round of petitions.

Devine has maintained that his office has been effective in its
statutory responsibility to represent the sheriff and other county
officials. To hand over this case to a private attorney would overlook
Devine's "duty to safeguard the public purse from illegal expenditures,"
his rebuttal said.

The two offices agreed to extend the deadline for Devine's rebuttal in
an attempt to resolve the dispute this week. But they could not reach an
agreement, representatives for both offices said. "Some people might
question whether the state's attorney can continue representing the
sheriff in this case given the tone and spirit of the petitions," the
rebuttal said. "The court knows better. . . . One staff pleading cannot
undermine the institutional relationship."

Sheriff's Department spokesman Bill Cunningham said Sheahan still
believes he has not been properly represented in the 1996 case in which
12,000 women claim they were improperly searched. "We stand by our
petition 100 percent," Cunningham said. "We look forward to the judge's
ruling." (Chicago Tribune 10-29-1999)

NY CITY: Suits Re Children in Forster Care to Go On As Individual Suits
No. 96 Mark G., et al., appellants-respondents, v. Barbara J. Sabol,
&c., et al., respondents-appellants. Martin A., et al.,
appellants-respondents, v. Barbara J. Sabol, &c., et al.,
respondents-appellants. Dakinya B., &c., et al., appellants-respondents,
v. Barbara J. Sabol, &c., et al., respondents-appellants. Frances F., et
al., appellants-respondents, v. Barbara J. Sabol, &c., et al.,
respondents-appellants; Decided August 31, 1999; Before Rosenblatt, J.
and Smith, J.; QDS:10109558

This appeal involves actions against New York City child welfare
officials. Plaintiffs are eleven children (and the estate of a twelfth)
from four families. They assert that they were dependent upon
defendants' child welfare system and that they suffered abuse or neglect
in their homes or foster homes. These actions were originally part of a
proposed class action suit seeking injunctive relief and damages.
Plaintiffs, however, withdrew their claims against the State, along with
their request for class certification and injunctive relief. In seeking
to hold defendants liable under the remaining claims, plaintiffs in a
series of complaints have asserted multiple causes of action under a
variety of theories.

At issue before us is the resolution of defendants' motions, denominated
as motions for summary judgment. They are more appropriately
characterized as motions to dismiss the pleadings for failure to state a
cause of action. Despite contrary nomenclature, the courts below in
actuality addressed plaintiffs' allegations in that context, as do we
(see, Guggenheimer v. Ginzburg , 43 NY2d 268, 274-275).

                   New York State Social Services Law

Plaintiffs make claims for money damages under two distinct Titles of
this law: Title 4 of Article 6 ("Preventative Services for Children and
Their Families") and Title 6 of Article 6 ("Child Protective Services").

In determining whether a private right of action for money damages
exists for violation of a New York State statute, this Court has
established the following three-part test:

(1) whether the plaintiff is one of the class for whose particular
    benefit the statute was enacted;

(2) whether recognition of a private right of action would promote the
    legislative purpose; and

(3) whether creation of such a right would be consistent with the
    legislative scheme"(Sheehy v. Big Flats Community Day, 73 NY2d 629,

Title 4 of Article 6 of the Social Services Law

As a part of the Child Welfare Reform Act of 1979 (L 1979, ch 610, 611),
the Legislature enacted this provision, its purpose is to:

"delineate and implement a State policy of permanent homes for children
who are currently in foster care or at risk of entering foster care by -
placing increased emphasis on preventive services designed to maintain
family relationships rather than responding to children and families in
trouble only by removing the child from the family; - providing for
increased monitoring of the foster care system with safeguards against
abuse and for penalties where violations are found to ensure that the
needs of children in foster care are appropriately met; and, - making
necessary changes in adoptive services to provide appropriate homes when
adoption is needed" (Governor's Memorandum, 1979 McKinney's Session Laws
of New York, at 1814 [emphasis added]).

The Legislature declared its intention to implement Title 4 by providing
added funding for preventative services (See, L 1979, ch 610, @ 1). It
also amended related Titles to establish utilization review standards
for increased monitoring of children to assure that Title 4's
preventative services are carried out (See, L 1979, ch 611, @ 7).
Furthermore, it imposed fiscal penalties on noncompliant agencies (See,
L 1979, ch 610, @@, 9).

The history of Title 4 establishes that the Legislature intended to
create financial incentives for local social services districts to
provide preventive services. As Senator Joseph Pisani stated in his
sponsoring memorandum: "This bill addresses these problems in a
comprehensive manner. Furthermore, the bill holds districts accountable
for meeting these standards or suffer loss of reimbursement" (1979 NYS
Legis Ann, at 353). Similarly, Assemblyman Howard Lasher in his
Memorandum in support of the bill stated:

"The purpose of this bill is to restructure the financing and management
of child welfare services in New York State by establishing a new
funding mechanism for services which are alternatives to foster care,
strengthening accountability mechanisms for foster care, development and
use of standardized assessment and placement tools, increased State
monitoring of the necessity and appropriateness of foster placement and
limits on the availability of foster care reimbursement" (1979 NYS Legis
Ann, at 355).

We agree with plaintiffs that they are members of the class for whom
Title 4 was enacted, and that a private right of action for money
damages could arguably promote the Title's goals. However, the third
factor - the one this Court has deemed the most critical (see, Carrier
v. Salvation Army, 88 NY2d 298) - is not satisfied. Recognition of such
a private right of action under Title 4 would not be consistent with the
legislative scheme. The legislative approach centered on improved
monitoring and on penalizing local social services districts with a loss
of state reimbursement of funds for their failure to provide services or
meet the standards mandated by the statute. The Legislature specifically
considered and expressly provided for enforcement mechanisms. As Senator
Pisani's sponsoring memorandum makes clear, the provisions of Title 4
were enacted as the "comprehensive" means by which the statute
accomplishes its objectives. Given this background, it would be
inappropriate for us to find another enforcement mechanism beyond the
statute's already "comprehensive" scheme.

The statute's goals are advanced by legislative action in providing and
allocating appropriate funding. If the statute were opened to private
causes of action for money damages the funding scheme would be affected,
perhaps significantly. Allocations of money and government resources
would be rechanneled, no longer to be based on administrative judgments,
but driven, at least in part, by tort law principles. The legislature
has the authority to determine whether opening the statute to private
tort law enforcement would advance the objectives of child and family
welfare or skew the distribution of resources. Considering that the
statute gives no hint of any private enforcement remedy for money
damages, we will not impute one to the lawmakers.

Title 6 of Article 6 of the Social Services Law

This enactment was one of several legislative initiatives to counter the
breakdown in the child protective system that was brought to the
Legislature's attention in the late 1960s (Report of the Assembly Select
Committee on Child Abuse, at ii [1972]). The purpose of Title 6, as
stated in its preamble, is:

"to encourage more complete reporting of suspected child abuse and
maltreatment and to establish in each county of the state a child
protective service capable of investigating such reports swiftly and
competently and capable of providing protection for the child or
children from further abuse or maltreatment and rehabilitative services
for the child or children and parents involved" (Social Services Law @

In seeking to encourage early reporting of child abuse, the Legislature
determined that immunity from civil and criminal liability was
indispensable. Protection from liability would remove "the fear of an
unjust lawsuit for attempting to help protect a child" (Report of the
Assembly Select Committee on Child Abuse, at 32-33 [1972]; see also,
Budget Report on Bills, Bill Jacket, L 1973, ch 1039 ["Requires
designated persons to report suspected cases of child abuse or
maltreatment immediately [and] permits any person to make such a report
and provides immunity for all acting in good faith."]).

Section 419, as it existed at the relevant time, contained the following
immunity provision:

"Any person, official, or institution participating in good faith in the
providing of a service pursuant to section [424 of the Social Services
Law], the making of a report, the taking of photographs, or the removal
or keeping of a child pursuant to this title shall have immunity from
any liability, civil or criminal, that might otherwise result by reason
of such actions" (emphasis added).

Plaintiffs assert an implied private right of action for money damages
for defendants' alleged violations of Social Services Law @ 424. They
rely on the above-quoted immunity provision of Social Services Law @ 419
to support their contention that such an action exists for a failure to
comply with the provisions of Title 6, including Social Services Law @

Section 419's legislative history, however, reveals that it was intended
to provide immunity only with respect to civil or criminal liability
that would otherwise result from acts taken by persons, officials or
institutions in a good faith effort to comply with specific provisions
of the Social Services Law (see, Straton v. Orange County Dept. of
Social Servs., 217 AD2d 576, 577; Dagan v. Brookdale Hosp. Med. Ctr.,
202 AD2d 385). There is no indication that section 419 was intended to
apply to failures to provide the services required by the Social
Services Law.

Indeed, the Legislature specifically created a private right of action
in the very next section. Social Services Law @ 420 provides for
criminal and civil liability for the willful failure of persons,
officials or institutions required by Title 6 to report cases of
"suspected child abuse or maltreatment." If the Legislature had intended
for liability to attach for failures to comply with other provisions of
Title 6, it would likely have arranged for it as well.

The enforcement mechanisms of Title 6 have not escaped legislative
review. In fact, the Legislature's subsequent amendments to the
enforcement scheme of Title 6 evinced an emphasis on funding mechanisms
and the development of performance standards by the State Department of
Social Services (see, L 1988, ch 707; L 1995, ch 83, @@ 229, 231; L
1998, ch 58, Pt C, @ 87; see also, Mem of State Executive Dept., 1988
McKinney's Session Laws of NY, at 2138-2140). The Legislature
specifically concentrated on the statutory scheme's enforcement
provisions, which, except for the unique motivations that underlie
Social Services Law @ 420, have never included private rights of action
for money damages. In sum, we conclude that a private right of action
for money damages can not be fairly implied from Title 6 of the Social
Services Law (see, Sheehy v. Big Flats Community Day, 73 NY2d at 633,

Plaintiffs' Due Process Claims

Plaintiffs assert that when they were placed in foster care they
remained within the ambit of the defendants' custodial responsibility,
where defendants were obligated to take supervisory and interventive
steps to keep them free from harm. They further allege that while they
were in foster care defendants failed to accord them the protective
services to which they were entitled under Titles 4 and 6 of the Social
Services Law. Based on these claims, plaintiffs contend that they have
been denied due process of law. Plaintiffs apparently do not include
non-foster care children within this claim. n1

n1 See, DeShaney v. Winnebago County Dept. of Social Servs., 489 US 189,

Plaintiffs have asserted violations of the substantive component of the
due process clause of the Fourteenth Amendment of the United States
Constitution - sometimes called substantive due process - as well as
violations of the procedural component of the due process clause. In
general, procedural due process claims challenge the procedures used by
the government in effecting a deprivation of a right, whereas
substantive due process claims challenge the action itself. n2 Thus,
substantive due process implicates "the essence of state action rather
than its modalities." n3 In one commentator's formulation, "procedural
due process differs from substantive due process by focusing not on what
a person has been deprived of, but rather on how the deprivation was
accomplished." n4

n2 See, Griffin v. Strong, 983 F2d 1544, 1547 (10th Cir); Sierra Lake
Reserve v. The City of Rocklin, 938 F2d 951, 956-957 (9th Cir), opn
vacated in part 987 F2d 662.

n3 See, Amsden v. Moran, 904 F2d 748, 753 (1st Cir), cert denied 498 US

n4 Note, Forum Non Conveniens in the Absence of an Alternate Forum, 86
Colum L Rev 1000, 1015 (1986).

The classic procedural due process case arises when the government acts
to deny or curtail someone's life, liberty or property interest and
defends its action by asserting that it employed fair procedures in
furtherance of a legitimate governmental objective (see, Schall v.
Martin, 467 US 253 [pretrial juvenile detention]; Vitek v. Jones, 445 US
480 [prison to mental hospital transfer]; Addington v. Texas, 441 US 418
[civil commitment]). That is not the case before us.

Here, deprivation or denial is not the governmental goal. This case does
not involve an attempt by the government to deprive the plaintiffs of a
right that carries with it a pre-deprivation procedure. The government
may not decide to deny a foster child's safety or entitlements and seek
to justify the denial by showing that its processes or procedures were
fair. No amount of procedure can justify the wrongful denial of an
entitlement. Moreover, merely asserting a denial of a statutory
entitlement does not make out a claim of procedural due process. As the
United States Supreme Court held in Olim v. Wakinekona, "process is not
an end in itself" (461 US 238, 250; see also, Hewitt v. Helms, 459 US
460, 469). We conclude that plaintiffs have not adequately pleaded a
violation of procedural due process, and that those causes of action
should be dismissed.

Plaintiffs also assert violations of the substantive component of the
due process clause of the United States Constitution. Three United
States Supreme Court cases are critical to our treatment of this issue.
In Estelle v. Gamble (429 US 97) the Court held that the State owes a
duty to those whom it has placed in its custody, so that when a prisoner
demonstrates that the State exhibited "deliberate indifference" to the
prisoner's medical needs, the Constitution's guarantees against cruel
and unusual punishment are violated. Although Estelle was an Eighth
Amendment case, the Supreme Court has characterized the government's
deliberate indifference toward the prisoner in Estelle as a violation of
substantive due process (see, DeShaney v. Winnebago County Dept. of
Social Servs., 489 US 189, 198, n 5, supra; Whitley v. Albers, 475 US
312, 326-327).

Six years later, the Supreme Court in Youngberg v. Romeo (457 US 307,
315) addressed the government's obligations to a person whom it
committed to a facility for the mentally retarded. The Court stressed
that people who are in the State's custody are dependent on the
government for their basic needs (457 US, at 324). The Supreme Court
held that inasmuch as Romeo was not a prisoner, the Estelle "deliberate
indifference" standard was inappropriate. The Court ruled that Romeo - a
person involuntarily committed and thereby dependent on the government
for basic needs - was "entitled to more considerate treatment and
conditions of confinement than criminals whose conditions of confinement
are designed to punish" (457 US, at 322). The Court stated that as to
persons so confined the State owes a duty to accord such services as are
necessary to insure their reasonable safety. The litigants in Romeo also
agreed that the State owed a duty to provide such persons "adequate
food, shelter, clothing, and medical care" (Romeo, 457 US, at 324). In
such a setting an actionable claim is made out if and when a decision by
the State through its professional administrators with respect to such
services "is such a substantial departure from accepted professional
judgment, practice, or standards as to demonstrate that the person
responsible actually did not base the decision on such a judgment"
(supra, 457 US, at 323).

Estelle and Romeo are the only two cases in which the Supreme Court
recognized monetary damage claims based on the substantive component of
the due process clause. Neither involved children in foster care.
Thereafter, in 1989, the United States Supreme Court decided DeShaney v.
Winnebago County Dept. of Social Services (489 US 189), the only case in
which it touched upon the issue of substantive due process in the
context of children in foster care. The Court held that a child who
suffered harm while in the custody of his father has no claim based on
the substantive component of the due process clause. The Court, however,
in a footnote, stated: "Had the State by the affirmative exercise of its
power removed [the child] from free society and placed him in a home
operated by its agents, we might have a situation sufficiently analagous
to incarceration or institutionalization to give rise to an affirmative
duty to protect" (489 US, at 201 n9). The Court then cited several cases
by way of illustration, but expressly disclaimed any view on the
validity of that analogy.

In the case before us, the original complaint was drafted before the
Supreme Court decided DeShaney. It was drawn as a putative class action
that included various plaintiffs, some of whom were allegedly harmed
while in foster care, others while living with their parents. Plaintiffs
commenced this litigation employing an array of claims designed to
address numerous facets of the child welfare system and to test the
availability of a host of remedies, including various forms of
injunctive relief and putative class certification. The complaints had
been conceived and drawn with a broad thrust that did not contemplate or
take aim at the more specific and essential elements that would enable
them to withstand a motion to dismiss for failure to articulate a
substantive due process violation. Although the complaints are abundant
with allegations relating to defendants' failure to provide plaintiffs
with family social services, we are left on this appeal only with the
sufficiency of the complaints insofar as they seek monetary damages. In
addressing plaintiffs' claims for money damages pursuant to the
substantive component of the due process clause, the Appellate Division
determined, and we agree, that the complaints did not meet the Estelle
"deliberate indifference" standard. The Appellate Division, however, did
not address the Romeo "professional judgment" standard.

Even though in our view the Romeo standard is a better fit, 5 we
conclude that plaintiffs have not articulated a cause of action under
Romeo. In Romeo and Estelle the United States Supreme Court identified a
narrow set of constitutional entitlements to basic necessities, arising
out of conditions of total dependence in which the State itself had
placed those institutionalized plaintiffs. Romeo and Estelle, however,
do not support any substantive due process right to monetary redress for
the defendants' alleged failure to provide the array of social services
claimed by plaintiffs here. Moreover, the crux of the plaintiffs'
complaints here is the defendants' alleged failure to provide protective
and preventive services to the plaintiffs' families in order to avoid
foster care placement and keep them at home in a safe environment, or to
minimize their stay in foster care through family rehabilitation
services, thereby expediting their return to a safe home environment.
Under DeShaney, however, any substantive due process rights of foster
children cannot be extended to entitlement to preventive and protective
services before placement in care, or to family social services during
placement. The allegations of harm or denial of needed medical or other
services to the children while in foster care are very much incidental
to the foregoing primary complaints that are pleaded, and since
plaintiffs never articulated a violation of the Romeo standard of care,
an independent claim for money damages for injuries in foster care based
on such omissions cannot be implied. Considering that this Court has
never had occasion to deal with the contours of the substantive
component of the due process clause in the context of a child welfare
case, neither the parties nor the courts below had a precedential basis
on which to proceed. We therefore affirm the dismissal of those claims
with leave to replead.

Common Law Negligence

In their briefs, the parties have addressed the viability of the
so-called common law tort causes of action. These causes of action are
not pleaded separately, but are intertwined with a plethora of other
causes of action and theories. Indeed, the complaints do not identify
any common law duties claimed to be owed plaintiffs - as distinguished
from the alleged breach of other governmental responsibility to furnish
protective and preventative services, which form the primary bases for
these actions.

We recognize, of course, that pleadings should be construed liberally,
but it would be improvident for us to attempt to isolate and identify
any common law claims and theories asserted on plaintiffs' behalf.
Although we do not as a matter of law rule out the possibility of any
such common law claims, we conclude that no viable common law claim has
been pleaded and we therefore grant plaintiffs leave to replead. The
parties' remaining contentions are without merit.

Accordingly, the order of the Appellate Division should be modified,
without costs, by dismissing the remaining causes of action, and, as so
modified, affirmed. The certified question should be answered in the

See, e.g., Kearse, Abused Again: Competing Constitutional Standards for
the State's Duty to Protect Foster Children, 29 Colum. J.L. & Soc.
Probs. 385 (1996).

SMITH, J. (concurring): I concur generally with the decision of the
majority which gives the plaintiffs an opportunity to replead the
substantive due process and common law causes of action.

Because of the myriad allegations in the complaints, however, I would
not foreclose an opportunity for the plaintiffs to plead a new cause of
action, alleging violations of specific provisions of the Adoption
Assistance and Child Welfare Act of 1980 (42 USC @@ 620-628, 670-679a)
and of the Federal Child Abuse Prevention and Treatment Act (CAPTA; 42
USC @@ 5101-5106). Permitting the repleading of a violation of specific
statutory provisions is consistent with the statements of the Supreme
Court of the United States in Blessing v. Freestone (520 US 329, 345,
346) that "we do not foreclose the possibility that some provisions of
Title IV-D [provisions of the Social Security Act which generally deal
with cooperative State and Federal child welfare programs] give rise to
individual rights" and "we leave open the possibility that Title IV-D
may give rise to some individually enforceable rights" (see, Marisol A.
v. Giuliani, 929 F Supp 660, affd (appeal of class certification only )
126 F3d 372).

While I agree that the common law claims must be repleaded, particularly
to clarify plaintiffs' contentions, I do not agree that no viable common
law claims have been stated (see, Bartels v. Westchester County, 76 AD2d
517; see also, e.g., Mammo v. State of Arizona, 675 P2d 1347 [Ariz];
Department of Health & Rehabilitative Serv. v. Yamuni, 529 So2d 258
[Fla]; Brodie v. Summit County Children Serv. Bd., 554 NE2d 1301 [Ohio];
Jenson v. Anderson County Dept. of Social Serv., 403 SE2d 615 [SC];
Gonzalez v. Avalos, 866 SW2d 346 [Tx]; Sabia v. State of Vermont, 669
A2d 1187 [Vt]; Turner v. District of Columbia, 532 A2d 662 [Wash DC].
While this litigation is old, it is important that the claims of the
plaintiffs against the municipality be clearly focused.

Order modified, without costs, by dismissing the remaining causes of
action and, as so modified, affirmed. Certified question answered in the
negative. Opinion by Judge Rosenblatt. Chief Judge Kaye and Judges
Bellacosa, Levine, Ciparick and Wesley concur. Judge Smith concurs in
result in an opinion. (New York Law Journal 9-2-1999)

QUINTILES TRANSNATIONAL: Stull, Stull Files Securities Suit In Carolina
The following is an announcement by the law firm of Stull, Stull &

Notice is hereby given that a class action lawsuit was filed on October
28, 1999, in the United States District Court for the Middle District of
North Carolina on behalf of persons who purchased the common stock of
Quintiles Transnational Corp. (NASDAQ:QTRN) between July 16, 1999 and
September 15, 1999.

The complaint charges Quintiles and certain of its officers and
directors with violations of Sections 10(b) and 20(a) of the Securities
and Exchange Act of 1934 as well as Rule 10b-5 promulgated thereunder.
The complaint alleges that Quintiles and certain of its officers and
directors issued a series of materially false and misleading statements
regarding trends in the Company's business and the termination of a
series of significant clinical trials. As a result of these materially
false and misleading statements, plaintiff alleges that the price of
Quintiles common stock was artificially inflated during the Class

Plaintiff is represented by, among others, the law firm of Stull, Stull
& Brody. If you are a member of the class described above, you may, not
later than sixty days from September 30, 1999, move the Court to serve
as lead plaintiff of the class, if you so choose. In order to serve as
lead plaintiff, however, you must meet certain legal requirements. If
you wish to discuss this action or have any questions concerning this
notice or your rights or interests with respect to these matters, please
contact Tzivia Brody, Esq. at Stull, Stull & Brody by calling toll-free
at 1-800-337-4983, or by e-mail at SSBNY@aol.com or by fax at
212/490-2022, or by writing to Stull, Stull & Brody, 6 East 45th Street,

SALINAS: Connecticut 2nd Cir Vacates Injunction Against Towing Company
Plaintiff Connecticut residents, claimed that, without notice to them
and at the direction of the police, their vehicles were towed by private
towing companies and then, to recover towing and storage costs, were
ultimately sold. Plaintiffs sued under 42 USC @ 1983 for deprivation of
property without Due Process. They claimed this happened to about 25,000
vehicles annually. Court found due process required reasonable notice
and an opportunity for a post-towing procedure. After the statute was
changed to provide notice and a hearing remedy, the District Court
granted plaintiffs a permanent injunction because the statute was still
not in accordance with due process. The Second Circuit vacated the
injunction, holding that the District Court failed to adequately reveal
the basis of its decision, in violation of Fed. R. Civ. P. 52(a) and

By Winter, Ch.J.; Walker and Cabranes, C.JJ.

KNOX v. SALINAS QDS:01761706 - Per Curiam: This appeal presents for
review a permanent injunction entered by the United States District
Court for the District of Connecticut (Peter C. Dorsey, Judge ) against
Connecticut's Commissioner of Motor Vehicles, defendant-appellant Jose
O. Salinas. Stating that recently adopted regulations "did not go far
enough to meet the due process concerns raised by plaintiffs," the
District Court entered an injunction that prescribes detailed procedures
for notifying owners when their motor vehicles are towed as well as when
a towing company intends to sell an unclaimed vehicle to recover towing
and storage costs. We hold that the District Court's findings are
insufficient to permit appropriate appellate review. Accordingly, we
vacate the injunction and remand for an articulation of findings
consistent with this opinion.


Plaintiffs Ernest Knox ("Knox") and Gwendolyn Hansberry ("Hansberry")
are Connecticut residents who claim that, without notice to them, their
motor vehicles were towed from the streets of the City of New Haven and
ultimately sold by private towing companies in order to recover towing
and storage costs. In 1993, Knox and Hansberry filed separate complaints
against the private towers, the Commissioner, and the City of New Haven
(the "City"), asserting claims, pursuant to 42 U.S.C. @ 1983, for
deprivation of property without due process of law. Knox moved for
certification, pursuant to Fed. R. Civ. P. 23(b)(2), of a plaintiff
class composed of "all New Haven residents who, on and after February 8,
1990, had their vehicles towed by [the private operator that towed
Knox's car] at the direction of the New Haven Police Department, and who
were thereafter deprived of title to their vehicles in conjunction with
the Department of Motor Vehicles, without prior notice or opportunity to
be heard." Absent opposition, the District Court granted the motion
pursuant to Local Rule 9(a)(1). n1

n1 Local Rule 9(a)(1) provides: Unless otherwise ordered by the Court,
all memoranda in opposition to any motion shall be filed within
twenty-one (21) days of the filing of the motion.... Failure to submit a
memorandum in opposition to a motion may be deemed sufficient cause to
grant the motion, except where the pleadings provide sufficient grounds
to deny the motion. D. Conn. R. 9 (a)(1).

Plaintiffs' complaints alleged that the towing practice in New Haven was
as follows. Plaintiffs claimed that, first, the New Haven Police
Department would direct private towing companies to tow and then store
vehicles that were illegally parked or had otherwise come under police
suspicion. According to plaintiffs, neither the City nor the towing
companies would notify vehicle owners that their cars had been towed, or
afford these owners any opportunity to be heard on the legality of the
tow itself. Plaintiffs alleged that most vehicles not claimed after
fifteen days would be valued by the tower at less than $ 500 and then
sold, again without notice, for unpaid towing and storage charges.
According to plaintiffs, the towers would rely on Conn. Gen. Stat. @
14-150, which applied only to vehicles that are towed because they are
abandoned, unregistered or a "menace to traffic." n2 To effect a
transfer of title, the towers allegedly would complete a form affidavit
certifying that the vehicle was abandoned, that the vehicle was worth
less than $ 500, and that the owner of the vehicle was unknown.
Plaintiffs further alleged that, based only on this affidavit, the State
Department of Motor Vehicles ("DMV") would "rubber-stamp" the sale by
issuing a new certificate of title to the purchaser. According to
plaintiffs, the DMV allowed private companies to sell some 25,000
vehicles n3 per year in roughly this fashion.

n2 The statute provided that, if a vehicle was worth $ 500 or less, it
could be sold without advertisement or public auction, and the towing
company could retain all of the sale's proceeds. The statute also
required that prior notice of intent to sell be provided to the vehicle
owner, "if known." Conn. Gen. Stat. @ 14-150(g).

n3 The record is unclear as to whether this figure was meant to reflect
the sale of vehicles statewide or within the City of New Haven alone.

The District Court never determined whether these allegations were true.
Instead it simply entered default judgments against the private towing
companies, and then denied plaintiffs' motions for summary judgment
against the City and the Commissioner. In a March 31, 1995 ruling on
Knox's motion for summary judgment, the Court noted that an individual
cannot be deprived of his automobile without due process of law, and
conducted the three-factor "balancing test" set forth in Mathews v.
Eldridge, 424 U.S. 319 (1976). n4 It concluded that individuals have an
important interest in ownership of an automobile, that "lack of notice
multiplies the risk of erroneous deprivation," and that the burden of
mailing a notice to the owner, who can easily be located through the
DMV, is relatively minimal. Accordingly, the Court stated: "Due process
is found to require reasonable notice and the opportunity for
post-towing grievance procedure before any towed car may be sold to
recoup towing and storage costs." The Court denied summary judgment,
however, because it concluded that there was a genuine issue as to
whether applicable city ordinances satisfied these due process
requirements, and as to whether the private tower had actually provided
Knox with notice.

n4 In Mathews, the Supreme Court stated: Identification of the specific
dictates of due process generally requires consideration of three
distinct factors: First, the private interest that will be affected by
the official action; second, the risk of an erroneous deprivation of
such interest through the procedures used, and the probable value, if
any, of additional or substitute procedural safeguards; and finally, the
Government's interest, including the function involved and the fiscal
and administrative burdens that the additional or substitute procedural
requirement would entail. 424 U.S. at 335.

On April 4, 1996, the Court consolidated the Knox and Hansberry cases,
and on January 30, 1997, plaintiffs moved for a permanent injunction
against both the City and the Commissioner. After holding a conference
with the parties, the District Court denied plaintiffs' motion, without
prejudice, to allow time for the Commissioner to consider amendment of
the DMV regulations to moot the requested relief. On June 5, 1997,
plaintiffs, dissatisfied with the Commissioner's proposed amendments,
renewed their motion for a permanent injunction. The Court, on September
12, 1997, heard lengthy oral argument at which it considered, point by
point, plaintiffs' specific objections to the proposed regulations.
Plaintiffs had presented these objections to the Court in a letter
which, in the Court's view, reflected all of plaintiffs' "problems" with
the proposed regulations. Transcript of 9/12/97 Hearing at 40, 56. In
the course of oral argument, the parties appeared to reach agreement,
with the Court's approval, on each of these issues, and the motion for
an injunction was again denied without prejudice.

The current regulations went into effect on December 8, 1997. They
provide that, when a motor vehicle is towed by order of a police officer
or traffic authority (as opposed to, for example, an owner of private
property on which the vehicle is illegally parked), the owner and all
lienholders of record must be notified by the towing company within 48
hours of the tow. Conn. Agencies Regs. @ 14-307-2. Upon a towing
company's request, DMV must "immediately" provide registration and title
information necessary to complete the notice form. Id. @ 14-307-2(b).
The notice must state (1) that the vehicle was towed, (2) the location
of storage, (3) that the vehicle may be sold by the tower or storage
facility after 45 days or, if the market value is $ 500 or less, after
15 days, and (4) that the owner has a right to contest the validity of
the tow by requesting a hearing. n5 See id. (incorporating notice
requirements of Conn. Gen. Stat. @ 14-150(e)). Market value is defined
as "the average trade-in value, appearing in the current month's issue
of the N.A.D.A. Official Used Car Guide, Eastern Edition." Id. @

n5 Nothing in the regulation explicitly requires the notice to explain
that a vehicle may not be sold while an application for a hearing is

The new regulations require that, upon receiving an application for a
hearing, the hearing officer must promptly schedule a hearing, at which
the vehicle owner and the authority responsible for the decision to tow
may present any relevant evidence to show that the tow was or was not
conducted in accordance with the statute. See id. @ 14-150- 3; see also
Conn. Gen. Stat. @ 14-150(e) (providing for appointment of a hearing
officer). The hearing officer must, with reasonable dispatch, provide
both parties with a written decision, including a statement of reasons.
See Conn. Agencies Regs. @ 14-150-4.

Unless the owner notifies the tower or storage facility that a hearing
application is pending, the vehicle may be sold after 45 days or, if the
market value is $ 500 or less, after 15 days. See id. @ 14-307-5(a)
(incorporating requirements of Conn. Gen. Stat. @ 14-150(g)). The tower
or storage facility intending to sell the vehicle must notify the owner
at least five days before the date of sale. See id. On a DMV form
completed and signed under penalty of false statement, the putative
seller must provide the DMV with notice of intent to sell, including
evidence of notice to the owner and, if the market value of the vehicle
exceeds $ 500, a statement of value. See id. @@ 14-307-5, -8. "The
commissioner may require that proof of such stated value be provided,
except that if no market value exists, a reasonable estimate of current
market value may be provided together with a statement of the facts on
which such estimate is based." Id. @ 14-307- 8. Finally, notice of the
pending sale must be provided by the seller to all lienholders of
record. See id. @ 14-307-6.

If the market value does not exceed $ 500, the vehicle may be sold "for
storage and towing charges owed thereon." Conn. Gen. Stat. @ 14-150(g),
incorporated by reference in Conn. Agencies Regs. @ 14-307-5. If the
value exceeds $ 500, then the vehicle must be sold at an advertised
public auction, and the proceeds (in excess of towing charges, storage
charges, and costs of sale) paid to the owner or, if unclaimed after one
year, to the state. See Conn. Gen. Stat. @ 14-150(h). Regardless of
market value, the seller must provide the DMV with a notice of completed
sale including the sale price, the towing, storage, and other charges,
the identity of the buyer, and information concerning any advertisement
of public auction. See Conn. Agencies Regs. @ 14-150-5, incorporated by
reference in id. @ 14-307-5(b). On a form issued by the DMV, the seller
must provide the buyer with an "affidavit of compliance." Id. @
14-307-5(b). "DMV shall not register or title any such motor vehicle
sold by a tower or storage facility unless the application for
registration and title is accompanied by the duly executed 'Affidavit of
Compliance.'" Id.

Nothing in the record suggests that, in adopting the December 8, 1997
regulations, the DMV did not fully implement the agreements previously
reached at the September 1997 hearing before the District Court. In
fact, the DMV seems to have incorporated the District Court's
recommendations that, for example, the regulations should (1) apply
broadly to all "nonconsensual tows," Transcript of 9/12/97 Hearing at
66, (2) use the term "market value" instead of "book value," id. at
51-61, (3) require notice to lienholders n6 after a vehicle has been
towed, see id. at 80, and (4) explicitly state that the DMV may not
issue a new certificate of title without an affidavit of compliance from
the seller, see id. at 83-87. Nevertheless, on December 17, 1997,
plaintiffs again renewed their motion for a permanent injunction, based
on specific objections that had not been asserted before or during the
September 1997 hearing. After defendants filed responsive papers, the
District Court, on March 17, 1998, denied defendants' request for a
hearing and determined that the motion would be decided based on the
written record.

n6 The September 1997 hearing included substantial discussion about
whether a lienholder should receive a notice of tow, or only a notice of
any intent to sell. See Transcript of 9/12/97 Hearing, at 68-80. We
note, however, that the plaintiff class includes only vehicle owners,
and that the notice to lienholders therefore is not before us.

On September 29, 1998, the District Court, without conducting an
evidentiary hearing or discussing the Mathews v. Eldridge factors
relevant to the permanent injunction proposed by plaintiffs, adopted the
requested injunction virtually wholesale. After setting forth
plaintiffs' objections to the new regulations, the Court's opinion
provided this reasoning:

Though defendants are commended for voluntarily proposing and ensuring
that the subject regulations were enacted, the regulations as they stand
now do not go far enough to meet the due process concerns raised by
plaintiffs and extensively discussed by all parties and the Court
throughout the drawn out proceedings in this case. Thus, in accordance
with the Ruling on Summary Judgement [sic] of March 31, 1995, where it
was recognized that due process requires reasonable notice and the
opportunity for post-deprivation grievance procedures before any towed
car may be sold, the following [injunction] is hereby ordered....

The highly detailed, eight-paragraph injunction entered by the District
Court is largely the same as the order proposed by plaintiffs on
December 17, 1997, which in turn is nearly identical to an order
proposed by plaintiffs two-and-one-half years earlier. As a result, the
regulations and the injunction appear to overlap substantially. The main
provision enjoins the Commissioner from registering or "titling" a towed
vehicle "without documentary proof" that:

within three (3) days after the tow, notice was sent to the most recent
registered owner of the vehicle, by first class and certified mail to
the address last provided to the Commissioner by said owner, stating the
location of the vehicle and the methods for redeeming it; (2) not less
than five (5) business days before any sale, transfer or other
disposition of the vehicle, notice of the proposed sale or other
disposition was sent to the address last provided to the Commissioner by
the most recent registered owner of the vehicle, and lienholder, if any,
by both first class and certified mail; and (3) not less than ten (10)
days after the sale or other disposition, notice was mailed to the most
recent registered owner of the vehicle at the last address provided by
said owner to the Commissioner providing an accounting to the owner for
the difference between the amount owed for towing and storage and the
sale price of the vehicle.

In addition, the injunction directs the Commissioner, inter alia, to (1)
issue a blank affidavit of compliance to a seller only upon receipt of
certain completed notice forms, (2) warn its licensees that
falsification of notice documents will be grounds for suspension or
revocation of their licenses, and allow aggrieved vehicle owners to seek
compensation out of surety bonds that state law requires such licensees
to furnish.

The Commissioner, who opposes at least some of the injunction's terms,
filed this timely appeal on October 29, 1998. n7

n7 The injunction separately requires the City to notify owners when
their vehicles are towed, and to "require towers to provide[] a $ 50,000
bond with corporate surety or obtain professional insurance to answer
for damage, destruction, or disposition of any towed vehicle if the
procedures of this Order are violated." These terms also are nearly
identical to those found in the proposed orders submitted by plaintiffs.
Although the proposed bond requirement had been dismissed by the
District Court as "a negotiating ploy" at the September 1997 hearing,
see Transcript of 9/12/97 Hearing, at 36, the City has not appealed.


We review the District Court's entry of a permanent injunction for abuse
of discretion, which may be found where the Court, in issuing the
injunction, relied on clearly erroneous findings of fact or an error of
law. See, e.g., General Media Communications, Inc. v. Cohen, 131 F.3d
273, 278 (2d Cir. 1997), cert. denied, 118 S. Ct. 2367 (1998).

Pursuant to Fed. R. Civ. P. 65(d), an order entering an injunction
"shall set forth the reasons for its issuance." Similarly, Fed. R. Civ.
P. 52(a) requires special findings of fact and conclusions of law in
support of a permanent injunction. See Fed. R. Civ. P. 52(a) ("In all
actions tried upon the facts and without a jury..., the court shall find
the facts specially and state separately its conclusions of law
thereon... ; and in granting or refusing interlocutory injunctions the
court shall similarly set forth the findings of fact and conclusions of
law which constitute the grounds of its action."); Securities & Exchange
Comm'n v. Management Dynamics, Inc., 515 F.2d 801, 814 (2d Cir. 1975)
("We find it plain that the entry of a permanent injunction without
appropriate findings violates the command of Fed. R. Civ. P. 52(a).").
This requirement helps ensure "due care" by the district court, and it
"aids the appellate court in understanding the ground or basis for the
trial court's decision." Davis v. New York City Hous. Auth., 166 F.3d
432, 435 (2d Cir. 1999).

In this case, the March 20, 1995 summary judgment ruling sets forth the
District Court's reasoning in support of its conclusion that due process
requirements are violated when a towed car is sold without reasonable
notice and an opportunity to be heard. However, in later concluding that
the DMV's regulations of December 1997 failed to provide due process of
law, the District Court offered little more than the conclusory
statement that "the regulations as they stand now do not go far enough
to meet the due process concerns raised by plaintiffs." The order's
recitation of plaintiffs' objections to the regulations, like the terms
of the injunction itself, provides some insight into the perceived
procedural deficiencies, but the opinion is devoid of factual findings
or legal analysis explaining whether, why, or how the District Court
determined - without any evidentiary hearing - that the absent
procedures are necessary for compliance with constitutional due process
requirements. The record of the September 1997 hearing is similarly
unenlightening, because, as discussed above, that hearing was devoted to
a review of plaintiffs' initial objections to the Commissioner's new
regulations, all of which seem to have been resolved by the DMV's final,
December 1997 regulations.

In sum, the District Court's statements fail to meet the requirements of
Fed. R. Civ. P. 52(a) and 65(d), because they do not adequately reveal
the basis of the Court's decision. See United States v. Vulpis, 961 F.2d
368, 371 (2d Cir. 1992) ("A district court's statement is sufficient to
meet the requirements of Rule 52(a) if it informs the court of appeals
of the basis of the decision, thereby permitting appropriate appellate
review."). Although we may nevertheless proceed "if we are able to
discern enough solid facts from the record to permit us to render a
decision," Davis, 166 F.3d at 436, our independent search of the record
reveals nothing of relevance other than the rulings and the hearing
transcript discussed above. Accordingly, we conclude that appellate
review would be inappropriate, and we vacate the injunction.

In the interests of judicial economy, we also offer the following
observations about the nature and scope of any injunction that might
issue should the District Court identify specific procedural
deficiencies of constitutional proportions. "The court's discretion to
frame equitable relief is limited by considerations of federalism," and
in crafting a permanent injunction, "federal courts must take care to
exercise a proper respect for the integrity and function of local
government institutions." Schwartz v. Dolan, 86 F.3d 315, 319 (2d Cir.
1996) (alteration in original) (internal quotation marks omitted); see
also Lewis v. Casey, 518 U.S. 343, 349 (1996) ("It is for the courts to
remedy past or imminent official interference with [constitutional
rights]; it is for the political branches of the State and Federal
Governments to manage [public institutions] in such fashion that
official interference with [constitutional rights] will not occur."). We
have acknowledged that a judicial finding of a constitutional defect may
easily give rise to a temptation "to right the wrong by assuming control
of the entire system in which the offensive condition exists and
prescribing a new system deemed to meet constitutional requirements."
Schwartz, 86 F.3d at 319 (internal quotation marks omitted). However, a
court should first "give the state a reasonable opportunity to remedy a
constitutional deficiency, imposing upon it a court-devised solution
only if the state plan proves to be unfeasible or inadequate for the
purpose." Id.

In this case, the District Court acted with admirable restraint when,
after determining that reasonable notice and an opportunity to be heard
are required, it twice denied plaintiffs' motions for a permanent
injunction, thereby granting the Commissioner time to adopt new
regulations. Cf. Tedeschi v. Blackwood, 410 Supp. 34, 46 (D. Conn. 1976)
(noting, also in the context of tow and sale procedures, that "it is not
necessary for this court to attempt to define exactly what procedure the
State must follow"). In fact, the Court devoted substantial time and
effort to the process of identifying ways in which plaintiffs' concerns
could be resolved, not through an injunction, but by agreement of the

After the DMV's regulations were adopted, however, the District Court
entered the type of detailed injunction - effectively rewriting the
Commissioner's regulations - that is appropriate only as a last resort.
See Schwartz, 86 F.3d at 319 (vacating injunction because "the court
gave detailed instructions" for the remedy of constitutionally deficient
notices); cf. Lewis, 518 U.S. at 347 (invalidating injunction that
"specified in minute detail" the operations of prison libraries). On
remand, if the District Court, upon a review of the regulations and the
record and after such additional hearings as it deems appropriate, finds
specific constitutional defects warranting an injunction, it should
instead enter an order enjoining the Commissioner from "titling" or
registering towed vehicles until he amends the regulations to remedy the
clearly identified defects.


The permanent injunction entered by the District Court is vacated, and
the cause is remanded for further proceedings consistent with this
opinion, including, as appropriate, an articulation of findings.
(New York Law Journal 10-19-1999)

SOCOG: Aussie Lawyer Enraged With Olympic Ticketing Fiasco Sues
CANBERRA lawyer David Lardner is so enraged with the Olympic ticketing
fiasco that he's starting a class action against SOCOG.

“I've always found myself on the side of the SOCOG,” he said, “and the
way SOCOG has treated us is just appalling." In fact, he said, he was
finally impelled to start the action by this week's Pryor cartoons
lampooning the dictatorial methods of the SOCOG bosses.

If enough Canberrans sign up he plans to pursue SOCOG not only for
refunds but interest payments and other damages.

They really shouldn't be allowed to get away with he said. (The Canberra
Times 10-29-1999)

TOSHIBA CORP: Says US Suit Settlement Over Glitch In PC Blows Out Loss
Japan's Toshiba Corp. announced that a US lawsuit settlement over an
alleged glitch in its personal computers will blow out group net losses
for this fiscal year. Toshiba said group losses would expand to a net 50
billion yen (476 million dollars) in the year to March because of the
lawsuit, compared to earlier expectations of a 15 billion yen loss.

The news earned Toshiba a hammering on the stock exchange and a swift
credit rating downgrade from Moody's Investors Service to "A3" from "A2"
for its long-term debt and to "P-2" from "P-1" for short-term debt. "The
ratings remain under review for a possible further downgrade due to
concerns in its core businesses .. and further implication of the
lawsuit on Toshiba's PC business," the agency said in a statement.

On the Tokyo Stock Exchange, which rose 3.0 percent, Toshiba shares
slumped 43 yen, or 6.2 percent, to close at 656 yen. "Toshiba's stock
dropped on a massive sell-off as investors were repelled by the
worsening earning projection due to the lawsuit," said Nomura Securities
Co. Ltd. senior analyst Tatsuo Kurokawa.

The US class action would cause an extraordinary loss of 110 billion
yen, Toshiba said in a statement.

The lawsuit was brought by two US owners of Toshiba personal computers
who said the microcode in the floppy disc controllers was faulty. One
part of the coding "may, under certain circumstances, cause data to be
lost or corrupted as it is written to a floppy disc," the owners
alleged, according to Toshiba.

The personal computer giant said it was not aware of the microcode ever
resulting in loss of data. But it said it decided to settle to avoid the
risk of a "substantial amount" of compensation being awarded by a jury
and to ensure customers trust the product. Toshiba said it reached the
settlement without admitting liability or that the personal computers
have any technical problem or defect.

After the lawuit, Toshiba said it expected a group pre-tax loss of 70
billion yen for the year to March against the previous estimate of a 10
billion yen loss. The sales forecast was unchanged at 5,670 billion yen.
Under the settlement, only valid in the United States, Toshiba said it
had agreed to provide 100-dollar coupons for Toshiba products to owners
whose personal computer warranties had expired as of March 5, 1999. It
would provide similar coupons with a value of 200-225 dollars to users
whose personal computers were under warranty as of that date to help
them purchase Toshiba computer products. Toshiba said it would also
offer cash refunds to more recent buyers of its personal computers.

Outside the United States, Toshiba said it would ship modified personal
computers after November and make a free software adaption available to
current users. (Agence France Presse 10-29-1999)

TRIPP CONSTRUCTION: Insurer To Defend Contractor, Fla. Ap. Ct. Rules
Affirming in part and reversing in part, the Florida Court of Appeals
has ruled Auto Owners Insurance Co., the insurer of a general
contractor, has a duty to defend and indemnify the contractor in the
second phase of litigation brought by homeowners related to alleged
construction defects in their homes. Auto Owners Insurance Co. v. Tripp
Construction Inc., No. 99-166 (FL Ct. App., 3rd Dist., July 14, 1999).

This is an appeal from a nonfinal trial court order that granted Tripp
Construction Inc.'s motion for summary judgment and its finding that
Auto Owners owed Tripp a duty to defend against a class action complaint
brought by the homeowners.

After the homeowners brought suit against Tripp for construction
defects, Auto Owners declined to defend the contractor, saying the
damages claims were not covered by the comprehensive general liability
(CGL) policy issued to Tripp. The trial court granted summary judgment
to Tripp, finding that after a fair reading of the allegations there was
coverage for at least part of the claim. Auto Owners appealed, arguing
the language in the class action complaint was insufficient to either
create liability on the part of the insurer or to require the insurer to
defend Tripp in the suit brought by the homeowners. The Florida Court of
Appeals' Decision

For coverage and duty to defend to arise, the appellate court explained,
a complaint has to allege that there was damage to some personal
property, or bodily injury to a person, that resulted from the defective

The trial judge decided to bifurcate the class action suit into two
totally separate phases. The first phase dealt with homeowner claims
against the construction company for damages which they say they
suffered in connection with repairs and/or replacing the actual defects
in the construction of their homes. As a result, the appellate court
said the type of damages being sought by the homeowners are not the type
covered by the policy in question and, therefore, Auto Owners has no
duty to defend or cover those claims.

However, the trial court ruled the second phase of litigation would
relate to the claims that each of the individual homeowners had against
the construction company in connection with "damages to the subject
property including damage caused by construction defects to other
elements of the subject homes and cost of repair."

"Here," the appellate court concluded, "the trial court correctly held
that the foregoing language, which was added to the plaintiff's
complaint by virtue of the court granting the plaintiff's motion to
amend by interlineation, related to personal property damage of the type
that would be covered by the policy issued by Auto Owners to Tripp."

Accordingly, the Florida Court of Appeals affirmed the order granting
Tripp's motion for summary judgment as to Phase Two of the litigation,
but the court reversed the order granting Tripp's motion for summary
judgment as to Phase One of the litigation. The court then remanded the
case to the trial court with orders to grant the motion for summary
judgment filed by Auto Owners in Phase One of the litigation. (Insurance
Industry Litigation Reporter 8-18-1999)

US BANCORP: Minn AG Sues Over Selling Of Data; Privacy Concerns Raised
It all started June 14, 1999. That is when the Minnesota Attorney
General announced he had sued U.S. Bancorp for allegedly selling Social
Security numbers, account balances and other sensitive customer data to
a telemarketing company in exchange for commissions. That announcement
prompted the Office of the Comptroller of the Currency to reveal that
several other banks are hawking customer information, raising serious
privacy concerns.

                         The Minnesota Case

In the U.S. Bancorp case, Minnesota accused the bank of violating the
Fair Credit Reporting Act by revealing confidential customer data to a
direct-marketing company. The company would allegedly call bank
customers to pitch products such as vacations, dental insurance and
shopping clubs. In turn, the bank would take a commission of 15 percent
to 22 percent on each sale. The Minneapolis-based bank, a subsidiary of
U.S. Bancorp, suspended business with the marketing company the day
after the suit was filed. Apparently, the bank has a close involvement
in the program. It writes the scripts, monitors the selection of
customers to call and lets customers take their names off solicitation
lists. It has been sharing customer data for about 15 years.

This caused a firestorm on Capitol Hill. At hearings earlier this
summer, the Senate Banking Committee debated the proposed Financial
Information Privacy Act, which would mandate that banks and other
financial companies better protect customer information. More than 50
bills related to how and whether companies and government agencies can
buy, sell or trade private data are pending in Congress.

                           A Flood Of Suits

The week after the Minnesota Attorney General's announcement, the first
of several bank privacy suits was filed in California. The suits allege
violations of California's "Little FTC Act" or Business & Professions
Code 17200. Several are brought by an unaffected corporation called
Consumer Cause Inc. So far, they have named Bank of America, Wells Fargo
Bank, and others. The theory of the suits is similar to the theory
behind the Minnesota action. (Consumer Financial Services Law Report

Y2K LITIGATION: Illinois Suit Against IBM is Dismissed with Prejudice
In a May 28 bench ruling, an Illinois state court judge has dismissed,
with prejudice, a lawsuit seeking class action status against IBM Corp.
and Medic Computer Systems Inc., because the plaintiff has already
received all the relief he sought. Yu v. IBM Corp., No. 99CH02873 (IL
Cir. Ct., Cook Cty., Ch. Div., May 28, 1999); see Software Law Bulletin,
March 1999, P. 67.

The complaint alleges that International Business Machines Corp. and
Medic Computer Systems Inc. sold a non-compliant "bundled solution"
consisting of IBM's RISC 6000 hardware, containing the AIX operating
system 4.1; the Medic application software version 7.0; and related
services including installation, integration, training and support.

Plaintiff Mario C. Yu, M.D., an OB-GYN in Oak Brook, IL, alleges he was
first notified of the Y2K defect in the IBM-Medic system in early
December 1998, and was told he would have to pay more than $2,400 to
upgrade to a compliant system. Yu paid $19,336 to purchase the system in
December 1996 for installation in early 1997, his complaint states.

Yu alleges that the non-compliance of the Medic system will threaten the
well being of patients whose doctors use it. The medic system allows
doctors to track each patient they see, schedule appointments, store
test results, ensure proper follow-up and perform various other

Yu seeks certification of a class consisting of all purchasers of the
IBM-Medic "bundled solution," as well as a subclass of those who have
already purchased the Y2K compliant AIX version 4.3.

The complaint alleges violations of the Illinois Consumer Fraud and
Deceptive Business Practices Act and the Illinois Uniform Deceptive
Trade Practices Act; breach of express warranty and breach of implied
warranty of merchantability; and fitness for a particular purpose. It
seeks compensatory and punitive damages, as well as an order that the
defendants notify all users of the system's non-compliance.

The complaint was initially filed in federal court, but was dismissed
sua sponte for failure to meet jurisdictional requirements. Yu then
refiled in state court, where the defendants moved to dismiss.

Cook County Circuit Court Judge Thomas A. Hett, in a bench ruling
following a hearing, said the complaint must be dismissed with prejudice
because Yu has already received a free fix for the Y2K problem, which
was what he requested in his complaint.

Judge Hett said there might be a viable class action claim for customers
who purchased an upgrade before the free fix was available, but Yu could
not represent that class.

Judge Hett went on to deny Yu's motions for a preliminary injunction and
class certification.

Medic was represented at the hearing by Norman M. Hirsch of Jenner &
Block in Chicago. IBM was represented by James R. Daly and Eric P.
Berlin of Jones Day Reavis & Pogue in Chicago. Yu was represented by
Arthur S. Gold of Arthur S. Gold & Associates in Chicago. (Software Law
Bulletin, September 1999)

Y2K LITIGATION: Judge Dumps Suit Against Quicken Maker Intuit Inc Again
Plaintiffs in a Year 2000 bug class action have lost their fourth and
final round against Quicken financial software manufacturer Intuit Inc.

Santa Clara County Superior Court Judge Leonard Sprinkles dismissed the
suit, In re Intuit Inc. Year 2000 California Litigation, on Oct. 13,
concluding that allegations of deception or unfairness by Intuit "are
not specific enough to support plaintiff's claim." Fenwick & West, which
represents Intuit, announced the ruling.

The case hinged on whether Mountain View-based Intuit provided
sufficient information to its customers about the availability of free
Y2K-compliant Quicken software.

Plaintiffs' attorney Michael Spencer, of the New York office of Milberg
Weiss Bershad Hynes & Lerach, said Intuit "led reasonable consumers to
believe that the only way to get a Y2K upgrade was to purchase it." In
addition, he said Intuit's tech support staff did not make it clear to
customers who called in that they could get a free fix.

Judge Sprinkles said plaintiffs had claimed that "some early-version
users who purchased new software could have gotten 'something for
nothing' if Intuit had disclosed on its Web site bulletin that it would
soon distribute copies of the new software for free, as a remedy for Y2K

However, he concluded, "as defendants point out, if this was deceptive
or unfair under California law, then any time a company sold a product
to a consumer without informing the consumer of an upcoming sale or
giveaway on that product, then the consumer could sue the company."

The court had dismissed three previous versions of the complaint but had
given plaintiffs the option to amend them.

Intuit attorney Claude Stern, a partner at Palo Alto-based Fenwick &
West, said plaintiffs initially alleged that Intuit had sold a
non-Y2K-compliant product. By the latest version of the suit, plaintiffs
claimed that Intuit " hadn't given adequate notification of a free fix .
. . and misrepresented who was eligible for the fix," Stern said.

But Milberg Weiss contends that its suit compelled Intuit to offer the
free fix and has requested attorneys fees in the case on the basis of
this claim. To rule on the request, Judge Sprinkles has requested
evidence as to what specific changes in Intuit's practices were caused
by the class action and what actions were "reasonably necessary to
instigate such changes, if any."

Stern refutes Milberg Weiss' claim, saying Intuit had told consumers
prior to the class action that it would provide upgraded software before
2000. He contends only the prevailing party in California is entitled to
win attorneys fees. But Spencer disagreed, citing California Code of
Civil Procedure 1021.5, which states that a court may award attorneys
fees to either side if the lawyer's work confers benefit to the general
public or a large class of persons.

The Intuit case is the latest in a string of Y2K suits that have settled
or been dismissed, including a class action filed in New York, _In re
Intuit Inc. Year 2000 Litigation_, 773646. According to a
PricewaterhouseCoopers report, as of June 30, 74 Y2K suits had been
filed in the United States. The number drops to 45 when multiple cases
filed against the same defendant are excluded. (The Recorder 10-27-1999)

* Senate Oks Banning Genetic Tests For Screening MI Workers For Jobs
Legislation designed to protect Michigan workers against genetic testing
as a condition of employment was unanimously passed by the state Senate.
The bills now go to the state House for debate. They are aimed at
employers who would require genetic testing to determine which workers
or applicants are more susceptible to illness. "Genetic testing must not
be a precondition" of employment, said Sen. Dale Shugars, R-Portage,
whose Health Policy Committee reviewed the bills. But a Democrat argued
the bills don't go far enough -- for example, by not barring review of
medical records.

"This bill has limited scope. That is worrisome," said Sen. Alma Wheeler
Smith, D-Salem Township.

The measures are an outgrowth of a special Commission on Genetic Privacy
appointed by Gov. John Engler. Engler in his State of the State address
early this year called for a prohibition on the use of genetic testing
as a precondition for obtaining health insurance or a job.

The bills would:

* Prohibit an employer from requiring an individual to take a genetic
  test as a condition of employment or promotion.

* Prohibit Blue Cross and Blue Shield of Michigan and health
  maintenance organizations from requiring insured people or applicants
  to submit to genetic testing or to disclose genetic information.

* Regulate the disposal of DNA information that isn't needed by police,
  and the disposal of specimens taken from a newborn infant.

* Prohibit a genetic test without the written, informed consent of the
  person to be tested.

* Revise provisions under court-ordered blood or tissue tests to
  determine paternity. They would include repeated tests to determine
  paternity if two or more people appeared likely to be the parent.

In other action, the Senate passed, 37-0, and returned to the House a
bill which provides that Holocaust victims will not have to pay state
income tax on reparations, returned assets or settlements of
class-action lawsuits. Rep. Marc Shulman, R-West Bloomfield and sponsor
of the bill, has said he expects about 2,500 survivors and benefactors
would be eligible for the deduction. The bill would apply to assets
owned by Holocaust victims from 1920 to 1945 which were not returned to
them or otherwise reimbursed before January 1994. Interest also can be

The genetic privacy bills are Senate Bills 589-91, 593-95, 807 and 815;
the Holocaust bill is House Bill 4796. (The Detroit News 10-29-1999)


S U B S C R I P T I O N  I N F O R M A T I O N

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

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