/raid1/www/Hosts/bankrupt/CAR_Public/000106.MBX                 C L A S S   A C T I O N   R E P O R T E R

                Thursday, January 6, 2000, Vol. 2, No. 4


AMERICAN BANKERS: Appeals Court Upholds Class of Credit Card Insurance
BANK ONE: Zwerling, Schachter Files Securities Suit in Illinois
COCA-COLA: Black Exec Is Promoted As Company Defends Racial Bias Suit
DRUG MANUFACTURERS: Kansas Health Centers Get Share of Settlement
EQUIFAX CHECK: Ap Ct Tosses Out Settlement That Pays Members Nothing

GEORGIA BLUE: Wellpoint Extends Merger Agreement for Securities Suit
GUN MANUFACTURER: Ct Dismisses Bridgeport Case against Smith & Wesson
HMO: 5th Cir Says ERISA Doesnít Require Disclosure of Physician Schemes
HMO: Jury Issues Award of $80M; Case May Form Crux for Fed Class Action
PAYDAY LENDERS: 7th Cir Says Postdated Check Can Be Security under TILA

PONZI SCHEME: Kutak Rock Says Schools Suit Takes Aim at Its Deep Pocket
SKECHERS USA: Announces Filing of Securities Suit in CA
SKECHERS USA: Kirby McInerney Files Securities Suit  in CA
USAIR 427: Il. Case Settled in Nov. Hours before Trial; 5 of 18 Remain
Y2K LITIGATION: MI School District Sues to Recover Costs from MASB-SEG


AMERICAN BANKERS: Appeals Court Upholds Class of Credit Card Insurance
Consumers who purchased credit card insurance but whose claims were
denied because of restrictions contained in fine print won a victory.
The Appellate Division of the State of New York, First Department,
unanimously affirmed the decision of Justice Ira Gammerman of the
Supreme Court of the State of New York which certified a nation-wide
class of consumers who purchased credit card insurance from American
Bankers Insurance Group, Inc., American Bankers Insurance Company of
Florida, and Bankers American Life Assurance Company.

The consumer class action suit charges these companies' advertising
material and solicitations are deceptive because the large typeface
promises coverage if the insured cardholder dies, becomes disabled or
becomes unemployed, but then the fine print restricts the availability
of that coverage for a variety of reasons, including the state of the
customer's residence, the age of the customer, and whether or not the
customer is self-employed, so that when a claim for insurance is made,
the claim is denied.

Contact: Emily Madoff, Esq., Lawrence D. Levit, Esq., WOLF POPPER LLP,
845 Third Avenue, New York, NY 10022-6689, Telephone: 212-451-9622,
212-451-9621, Toll Free: 877-370-7703, Facsimile: 212-486-2093, E-Mail:
emadoff@wolfpopper.comor llevit@wolfpopper.com Website:

BANK ONE: Zwerling, Schachter Files Securities Suit in Illinois
Zwerling, Schachter & Zwerling, LLP ("Zwerling Schachter") has filed a
class action lawsuit in the United States District Court for the
Northern District of Illinois on behalf of investors who purchased Bank
One Corp. (NYSE: ONE) ("Bank One" or the "Company") securities between
October 22, 1998 and November 10, 1999 (the "Class Period").

The lawsuit charges Bank One and several of its officers with violations
of the federal securities laws. The complaint alleges that defendants
issued a series of false and misleading statements concerning the
Company's operations, revenue, and earning trends. Specifically, Bank
One is alleged to have misled the market concerning its financial
results by improperly recognizing revenue from its wholly-owned
subsidiary, First USA, which, in turn, improperly recorded revenue from
late fees, penalties, and interest by failing to post credit card
payments on time. Following a series of disclosures beginning August 24,
1999, the Company's stock price declined from a Class Period high of
$63.563 to $34.625 at the end of the Class Period.

Contact: Zwerling Schachter by telephone at 800-263-7337 (Paul C.
Whalen, Esq. or Ms. Jayne C. Nykolyn), via e-mail at
zlaw96@ix.netcom.com with reference made to Bank One, or visit website
at http://www.zsz.com

COCA-COLA: Black Exec Is Promoted As Company Defends Racial Bias Suit
Carl Ware, Coca-Cola's highest-ranking black executive, has changed his
mind about retiring after being promoted to head a new global public
affairs division.

New company President Douglas Daft said Ware is being given an important
new assignment at a time when the company needs his skills. "Carl's
principal role is to ensure that the Coca-Cola Co. continues to be
welcome around the world and that we apply 'community' and 'neighbor'
equally to those who live next door, or on the next continent," Daft
said in a statement. "We must think locally and act locally, and no one
understands that better than Carl."

In early November, Ware, 56, announced his retirement four days after
Ivester divulged a reorganization of top management. Ivester's action
was criticized by some company observers, especially since Coca-Cola has
been embroiled in the well-publicized discrimination suit. With the Ware
decision coming on the heels of other missteps, some company observers
said, key board members then pressured Ivester to resign.

Company observers said the move on January 4 is an attempt to eliminate
the negative fallout from a decision by Chairman M. Douglas Ivester that
effectively demoted Ware in a management restructuring. Ivester has
since announced his own retirement, which some have partially blamed on
the fallout from Ware's demotion.

Analysts also said the first major announcement by Daft is aimed at
improving Coke's image as it defends itself against a racial
discrimination lawsuit.

The company has denied the allegations in the suit. An attorney for the
plaintiffs, who are seeking class-action status, said the company needs
to do more. "I think the real question for Daft is not making one
promotion, but whether he will have the guts and vision to put an end to
the barriers thwarting the careers of African-Americans throughout the
company," said plaintiffs' attorney Cyrus Mehri. (The Atlanta Journal
and Constitution January 5, 2000)

DRUG MANUFACTURERS: Kansas Health Centers Get Share of Settlement
About $ 4 million is on its way to Kansas community health centers as
part of a 1998 settlement of class-action litigation against more than
20 brand-name prescription drug manufacturers.

The litigation, which comprised lawsuits filed in Kansas and around the
country, contended that drug companies had charged higher prices to
retail pharmacies than to certain managed-care organizations.

The settlement has been approved for Kansas, nine other states and the
District of Columbia. Missouri is not included.

About $ 250,000 of the money earmarked for Kansas will go to Southwest
Boulevard Family Health Care, 340 Southwest Blvd. in Kansas City, Kan.
The money will be used to help pay for prescription drugs for
non-Medicaid, established patients at the center, regardless of income
or insurance coverage. Most of the center's non-Medicaid patients don't
have health insurance.

Distribution of the money began recently, said Bernard Persky of New
York, a lead attorney for plaintiffs in the case. He said the total
multistate settlement amounted to nearly $ 65 million. After attorneys'
fees and other costs, more than $ 40 million will be distributed to
participating community health centers.

In terms of the settlement, a community health center is defined as a
nonprofit, community-run facility that provides health services to area
residents, regardless of insurance coverage or ability to pay.

More information about the program is available at (800) 790-8476 and
the Web site http://www.rxconsumerlit.com(USA Today January 5, 2000)

EQUIFAX CHECK: Ap Ct Tosses Out Settlement That Pays Members Nothing
Suggesting that the plaintiff attorney and the class representative in a
debt-collection lawsuit were trying to benefit themselves at the expense
of class members, a federal appeals court panel has tossed out a
settlement reached in the action.

In an opinion made January 4, a panel of the 7th U.S. Circuit Court of
Appeals also criticized the magistrate judge who approved the settlement
in a class-action lawsuit accusing Equifax Check Services Inc. of
violating the Fair Debt Collection Practices Act. The panel said the
only thing the settlement would have done for many of the class members
would have been to cut them off at the knees.

ďThe settlement called for the named plaintiff, Lawrence Crawford, to
receive $ 500 in damages and a $ 1,500 incentive award" for serving as
the class representative, the panel said.

The panel said the settlement also called for Equifax to pay reasonable
attorney fees -- later determined to be $ 78,000 -- for the services of
Crawford's lawyer, Christopher V. Langone of Chicago.

Other terms of the settlement included Equifax' agreement to never again
use the form letters that the plaintiffs claimed violated the law and to
donate $ 5,500 for the Legal Clinic of Northwestern University Law
School to use in protecting consumers' rights, the panel said.

The panel said the settlement also allowed class members other than
Crawford to pursue their own lawsuits against Equifax -- so long as
those suits did not proceed as class actions.

The panel noted that the settlement did not provide for monetary damages
for any of the approximately 214,000 unnamed class members whose
interests Crawford was designated to represent. And the panel said those
class members were not personally notified of the class certification or
the settlement and were not allowed to opt out of the settlement. Even
without considering the lack of notice or an opt-out provision, the
panel said, the settlement is substantively troubling.

"Crawford and his attorney were paid handsomely to go away; the other
class members received nothing (not even any value from the $ 5,500
donation') and lost the right to pursue class relief," Judge Frank H.
Easterbrook wrote for the panel.

The panel reversed an order by U.S. Magistrate Judge Sidney I. Schenkier
approving the settlement under Rule 23(e) of the Federal Rules of Civil

The panel also reversed an order in which Schenkier had blocked two
people pursuing separate class actions against Equifax from intervening
in the suit filed by Crawford in order to object to the settlement.

Joining in the opinion were Chief Judge Richard A. Posner and Judge
Ilana Diamond Rovner.

Lawrence Crawford v. Equifax Payment Services Inc., et al., Nos. 99-1973
and 99-2122.

Both Langone and Chicago attorney David L. Hartsell, who represented
Equifax in the suit, said that they were disappointed by the panel's
decision. Langone said the relief contained in the settlement would have
fulfilled the primary purpose of the Fair Debt Collection Practices Act,
15 U.S.C. sec1692, to bring a halt to abusive and unfair debt-collection
practices." But if the act is interpreted to deny the kind of injunctive
relief sought by the plaintiffs under Rule 23(b)(2) of the Federal Rules
of Civil Procedure, Langone said, that strikes a blow to consumer
rights." And Langone said that a monetary settlement in the case would
have netted each class member only a dollar or two in damages -- damages
that would have been reduced to zero once Equifax exercised its setoff

Hartsell also noted that the class members would have been limited by
the Fair Debt Collection Practices Act to a minimal amount of damages.
But under the settlement hammered out by the attorneys with the help of
Schenkier, class members could have filed their own suits seeking up to
$ 1,000 in damages, Hartsell said.

In June 1997, Crawford filed the suit that led to the January 3ís
decision by the 7th Circuit panel. Beverly Blair brought a similar
action six months later and Latressa Wilbon filed a third in August

The panel said all three plaintiffs sought to represent a class of
debtors who had received letters from Equifax that allegedly violated
certain provisions of the Fair Debt Collection Practices Act.

The Blair and Wilbon suits were consolidated before U.S. District Judge
Paul E. Plunkett, who in February 1999 certified both as class actions,
the panel said.

The panel said Schenkier a week later certified Crawford's suit as a
class action and, at the same time, tentatively approved the settlement
in the case.

Because the Crawford class included all members of the Blair and Wilbon
classes, Equifax asked Plunkett to decertify the classes in the
consolidated case, the panel said.

The panel said Plunkett declined to take that step in a decision that
was affirmed by the 7th Circuit. Blair v. Equifax Check Services Inc.,
181 F.3d 832 (1999).

A few weeks after the settlement in the Crawford suit was tentatively
approved, Blair and Wilbon attempted to intervene in the case because
they deemed the settlement terms inadequate, the panel said.

The panel agreed with that assessment, saying that class members other
than Crawford receive no relief for harms that may already have been

They gain nothing (the settlement does not include a concession of
liability that would facilitate individual suits), but lose something:
the possibility of any collective proceeding for damages," the panel
said. Because these are small-stakes cases, a class suit is the best,
and perhaps the only, way to proceed."

But Schenkier blocked Blair and Wilbon from challenging the settlement
when he refused to allow them to intervene in the case, the panel said.

The panel said Schenkier determined that Blair and Wilbon had waited too
long to file their motions to intervene. Schenkier also concluded that
allowing the two to intervene would cause prejudice" by upsetting the
settlement, the panel said.

Schenkier was wrong on both counts, the panel said.

The panel said unnamed class members seldom have any reason to intervene
until learning of the terms of a (potentially inadequate) settlement or
problems in the class definition."

And while acknowledging that an appeal by Blair and Wilbon ultimately
could lead to the rejection of the settlement, the panel said that is
the way the system is supposed to work.

The possibility that we would see merit to their appeal cannot be called
prejudice'; appellate correction of a district court's errors is a
benefit to the class," the panel said.

The panel said Schenkier also erred in approving the settlement.

Magistrate Judge Schenkier concluded that Crawford's attorney was a
vigorous champion of the class, despite the appearance that for $ 78,000
he sold out the class," the panel said. Even so, the fact that one class
member receives $ 2,000 and the other 200,000+ nothing is quite enough
to demonstrate that the terms should not have been approved under Rule
23(e)." (Chicago Daily Law Bulletin January 4, 2000)

GEORGIA BLUE: Wellpoint Extends Merger Agreement for Securities Suit
Wellpoint Health Networks Inc. has extended its $500 million cash merger
agreement with Cerulean Cos. Inc., the holding company of Blue Cross and
Blue Shield of Georgia, until Dec. 31, 2000.

The companies cannot close the deal prior to getting a decision from the
Georgia Supreme Court over a class-action suit brought by policyholders
of the Georgia Blue prior to its conversion into a not-for-profit.

In 1996, policyholders were offered shares of Cerulean in the Georgia
Blue conversion, but only half, roughly 70,000, accepted the offer. In
1998 the rest sued to receive Cerulean shares.

While the suit delays the deal closing, it will not affect its
valuation, said a Wellpoint spokesman, except that it will dilute the
amount of cash Cerulean shareholders will receive, currently about
$4,000 each.

The court decision is expected during 2000. After the court renders its
decision, the Georgia insurance commission also must approve the deal.
(Fulton County Daily Report January 5, 2000)

GUN MANUFACTURER: Ct Dismisses Bridgeport Case against Smith & Wesson
A judge's dismissal of Bridgeport's lawsuit against gun manufacturers
has disappointed the city's officials and attorneys, but not diminished
their devotion to the cause. "This issue is not going to go away,"
Bridgeport Mayor Joseph P. Ganim declared after Superior Court Judge
Robert F. McWeeny held that Bridgeport lacks standing to sue the gun
industry. "We are going to continue to pursue it."

The Waterbury judge's Dec. 10 decision in Ganim v. Smith & Wesson Corp.
" does not exonerate the gun industry," says plaintiffs' co-counsel
Brian J. Siebel. "It simply suggests the city's not the right party to
bring the case."

In fact, Siebel, of the Center to Prevent Handgun Violence in
Washington, D. C., says he is encouraged by language in McWeeny's ruling
that "says the state would have a stronger case. ..." "It almost invites
the attorney general to file suit," he says. It's an invitation that
will have to wait for a response.

Attorney General Richard Blumenthal, who filed an amicus brief in Ganim
urging the court to hear Bridgeport out, says his office is reviewing
McWeeny's ruling, and considering the possibility of initiating a
separate legal action. "A decision to begin a lawsuit of this kind has
to be approached with utmost caution," he says. That decision, he says,
depends in part on the progress of negotiations with the gun
manufacturers aimed at improving gun safety and changing the way
firearms are marketed. Those talks took on a new urgency this month when
the Clinton administration threatened to support a possible class action
against the firearms industry by public housing authorities.

Blumenthal says the federal government's expected entry into the
negotiations will provide a "powerful impetus" toward a settlement. "A
settlement is not on the immediate horizon," he says, "but the federal
government has to be regarded as a star player."

Bridgeport is one of 29 cities and counties that have charged the gun
industry with producing unsafe weapons and failing to stop them from
falling into the hands of criminals. The plaintiffs are seeking
injunctive relief and millions of dollars in damages for the money they
have spent on police protection, emergency services and health care for
their citizens.

The lawsuits have generated activity in state legislatures as well as
the courts. Ten states have passed laws barring cities or counties from
bringing claims against gun manufacturers, or to shield the gun industry
from liability in suits that have been filed. Another dozen states have
similar legislation pending.

Ganim is one of three complaints to have been dismissed so far.
Com-plaints brought by Cincinnati and Miami-Dade County also have been
dismissed. A complaint filed by Atlanta has been allowed to proceed in
Georgia state court.

Bridgeport sued more than 30 defendants, including gun manufacturers,
distributors and retailers, to recover damages for the costs of police
and fire protection and medical and social services "necessitated by gun
injuries to persons who are not parties to this litigation," McWeeny
writes in his 35- page ruling.

The essential issue before him, the judge writes, is whether those are
injuries for which the city could recover. "It is recognized at common
law," he writes, "that a plaintiff who complains of harm resulting from
misfortune visited upon a third person is generally held to stand at too
remote a distance to recover."

McWeeny notes, and the plaintiffs' attorneys have acknowledged, that the
gun litigation is patterned in part on lawsuits filed by the states
against cigarette manufacturers. That litigation resulted in a $206
billion national settlement in November 1998.

The judge muses that the Ganim plaintiffs "must have envisioned such
settlements as the dawning of a new age of litigation during which the
gun industry, liquor industry and purveyors of 'junk' food would follow
the tobacco industry in reimbursing government expenditures and
submitting to judicial regulation."

He says they envisioned wrong. "The tobacco litigation," the judge
writes, "has not succeeded in eradicating the rule of law on proximate
cause, remoteness of damages and limits on justiciability." McWeeny
notes that a number of federal appellate courts have dismissed what he
calls "'me-too' cases," such as complaints filed against tobacco
companies by insurers. Unlike the cities in the gun litigation, or the
insurers in the tobacco cases, he writes, the states that sued the
tobacco companies were authorized to do so by state law and by "the
state's unique role relative to protection of its citizens."

But McWeeny says there is no state law that permits Bridgeport to recoup
expenditures or obtain injunctive relief on behalf of its citizens. In
addition, he finds, state law pre-empts municipalities from acting in
areas, such as firearms regulation, where the Legislature has
demonstrated an intent to "occupy the entire field."

The judge says any harm suffered by the city is too remote and indirect
to allow for recovery, and also finds Bridgeport does not have common
law grounds to sue.

The judge raises several policy reasons to bolster his findings. For one
thing, he says, it would be too difficult to ascertain damages.

"Calculating the impact of gun marketing on teen suicide and diminution
of property values in Bridgeport would create insurmountable
difficulties in damage calculation," he writes. "Plain-tiffs cannot
seriously maintain that reasonable certainty in calculating their damage
claims is within the realm of possibility."

Still another policy factor weighing against the plaintiffs, McWeeny
says, is that other plaintiffs are available to bring suit. Those
directly injured by firearms, he writes, "would be able to proceed under
traditional tort or perhaps nuisance theories of redress."

"In this case," McWeeny writes, "the nefarious conduct of the gun
industry should be addressed in a traditional tort suit in which the
direct victims would have to overcome the industry's claims of proximate
cause, assumption of risk and contributory negligence."

"Moreover, with respect to the medical expense claim, the state through
Medi-caid reimbursement certainly would be in a better position ... to
seek recoupment."

McWeeny also dismisses a nuisance claim, finding that the city's
ordinances don't provide for such a remedy.

Plaintiffs' attorney Siebel says the Center to Prevent Handgun Violence
represents individual victims of gun violence in other cases and would
do the same in Connecticut.

But Siebel says Bridgeport can make a strong case on appeal as it is.
For one thing, he says, he believes McWeeny is wrong on the nuisance
claim. "If a city cannot bring a nuisance action, who can?" Siebel asks.
"This would irretrievably weaken public nuisance law." "The defendants,"
he says, "can't defend these cases on the merits, so they throw up
arguments desperately seeking to avoid having their conduct looked at in
a court of law."

Bridgeport Mayor Ganim also is not giving up. "This is a national issue
that impacts every person and every city or town in the country," he
says. "This industry is not going to walk away without accepting
responsibility for its past actions," and "being ordered, or agreeing,
to take corrective action in the future."

Plaintiffs' lead counsel Bourke G. Spellacy, of the Hartford firm of
Updike, Kelly & Spellacy, says he will file an appeal by the end of the
month, and will seek a hearing before the Connecticut Supreme Court.
"This is round one of what I expect will be a long fight," he says. (The
Connecticut Law Tribune December 27, 1999)

HMO: 5th Cir Says ERISA Doesnít Require Disclosure of Physician Schemes
The Court of Appeals for the Fifth Circuit affirmed on January 4 the
dismissal of a case alleging that several Texas HMOs, including Aetna
U.S. Healthcare, violated ERISA by allegedly failing to disclose their
financial arrangements with the physicians in their networks.

In his opinion in Ehlmann vs. Kaiser et al, Chief Judge Reynaldo G.
Gasza wrote that the lower court "correctly dismissed Ehlmann's claim
for the breach of a duty to disclose [physician compensation schemes]
because ERISA imposes no such duty."

David F. Simon, Chief Legal Officer of Aetna U.S. Healthcare, said,
"This federal appellate decision rejecting a failure to disclose theory
is yet another blow to the viability of the recent class actions brought
against HMOs." (Source: Aetna U.S. Healthcare)

HMO: Jury Issues Award of $80M; Case May Form Crux for Fed Class Action
HMO giant Humana must pay more than $ 79.6 million for cutting off
special care coverage to a 9-year-old girl suffering from cerebral
palsy, a jury ruled on January 4 in one of the largest verdicts in Palm
Beach County history.

The ruling could have national implications because the information
gathered in this case is the crux for a federal lawsuit filed in Miami
against Humana that is under consideration for class-action
certification. The suit filed on the behalf of two Riviera Beach police
officers, a West Palm Beach landscaper and two Texas residents alleges
the company misrepresents its coverage and engages in racketeering.

"This case was basically contempt of court, and the punitive award
imposed by the jury reflects the increasing outrage of Americans who are
denied care by their HMOs," said Ralph Nader, head of watchdog group
Public Citizen and a frequent critic of managed care.

A Palm Beach County judge had entered a default judgment against Humana
Health Insurance Co. in March after the company repeatedly failed to
turn over documents requested by the legal team for the family of
Loxahatchee girl Caitlyn Chipps.

Circuit Court Judge James T. Carlisle ruled that Humana falsely
represented coverage to the Chipps family and intentionally cut off
Caitlyn's special care coverage with disregard for her well being, and
that this wasn't an isolated case. The default judgment was upheld by
the 4th District Court of Appeal and was denied a hearing by the Florida
Supreme Court.

The only thing left for a jury to decide was how much to award the
Chipps family in compensatory and punitive damages based on a three-week
penalty hearing and Carlisle's decision.

After two days of tense deliberations with the six jurors bitterly split
for most of that time, the jury decided to award the Chipps $ 1,115,052
in compensatory damages and $ 78.5 million in punitive damages. The
Chipps' attorneys had been asking for a verdict of more than $ 100
million to send a message to Humana, which they told jurors had at least
$ 1.7 billion in net assets.

But juror Michael David Anderson, 32, said he and another juror only
wanted to award the Chipps family between $ 1 million and $ 2 million in
compensatory damages. The other four jurors, who were pushing for a more
than $ 100 million verdict, wouldn't listen.

Humana spokeswoman Pam Gadinsky said an appeal of the verdict is
imminent. Glenn Waldman, Humana's lead attorney, had argued that the
company with more than 400,000 clients in Florida made mistakes in
cutting off special care coverage to Caitlyn and a handful of other
children. Those mistakes didn't qualify as a pattern of conduct, he
maintained. He argued that Humana should only have been accountable for
the $ 14,000 in actual damages.

Mark Chipps, a deputy with the Palm Beach County Sheriff's Office, filed
suit against Humana in 1996 after the company took Caitlyn off a special
case management plan and moved her to regular coverage. He said that
when the Sheriff's Office was switched to Humana coverage in 1994, he
had been assured that Caitlyn would receive the same level of coverage
as her previous plan. The change left the Chipps family picking up the
tab for then-5-year-old Caitlyn's speech, occupational and physical
therapy, Mark Chipps said.

Even therapy claims that fell under Humana's regular coverage were being
denied, Leopold argued. Leopold said that during the course of preparing
for the trial, he uncovered evidence of at least 100 catastrophically
ill children who had been taken off Humana's special care coverage and
moved to regular coverage. Among those children was an 8-year-old boy
with brain damage and a blind, quadriplegic 7-year-old boy. "In
Louisville, Ky., the word came from corporate to weed out the pediatric
patients so they could save more money on the more acutely injured
catastrophically ill," Leopold said. "You can't do that to people. You
can't treat children like that who are already catastrophically ill."

Leopold said he hopes the jury award causes other HMOs to realize that
they should be watching out for their clients' interests, rather than
solely their own. Leopold said that at Carlisle's last hearing on the
default judgment, Humana took the case so lightly that the attorneys
attended by phone.

But Nader predicted abuses by managed care organizations would continue
"unless legislatures start doing their jobs and stop the divisiveness
about reforming HMOs."

Susan Pisano, spokeswoman for the American Association of Health Plans,
said she fears lawyers are beginning to capitalize on anti-HMO

Juror Anderson said there was a lot of anger in the jury room. Anderson
said he fears the verdict's outcome. (Sun-Sentinel (Fort Lauderdale, FL)
January 5, 2000)

PAYDAY LENDERS: 7th Cir Says Postdated Check Can Be Security under TILA
Because the "economic substance" of post-dated checks provide remedies
to creditors not available under the terms of payday loan agreements,
they can serve as collateral or security for such loans under the Truth
in Lending Act. Smith v. Cash Store Management Inc., et al., No. 99-2472
(7th Cir. 10/27/99).

Valerie Smith obtained eight payday loans from The Cash Store Management
Inc. by providing Cash Store with post-dated checks. Each of her loan
agreements read, "Security: Your post-dated check is security for this
loan" and listed on the front, in bold type, the finance charge and
annual percentage rate. Upon making the loans to Smith, Cash Store
stapled a receipt to the top, left-hand corner of each loan document. In
red ink, the receipt used the terms "deferred deposit extension fee" or
"deferred deposit check fee" instead of the term "finance charge."

Smith filed a class action under the TILA alleging that the receipts
obscured the required disclosures and failed to report the finance
charge and APR in conspicuous terms. She further contended that Cash
Store's loan agreements failed to accurately disclose its security
interest in violation of the TILA because a post-dated check cannot
create a security interest in Illinois.

                        Trial Court's Decision

The U.S. District Court for the Northern District of Illinois dismissed
Smith's complaint for failure to state a claim. It held that Cash
Store's stapling the receipts to the front of the loan documents "could
not reasonably confuse or mislead Smith as to the terms of the loan."
Further, the District Court ruled that payday lenders may take
post-dated checks as security because the checks only give the lenders
certain rights to the funds in the borrowers' checking account. (See
Consumer Financial Services Law Report, July 23, 1999, p. 10).


Smith appealed the decision to the 7th U.S. Circuit Court of Appeals.
The 7th Circuit first addressed Smith's contention that the receipts
obscured the required federal disclosures and characterized the finance
charges in a misleading way.

Upon review of the record, the TILA, and Regulation Z, the 7th Circuit
concluded that "Whether or not Cash Store's practices run afoul of
Regulation Z is a factual issue, and the [D]istrict [C]ourt therefore
erred in dismissing the receipt of claims under Rule 12(b)(6)." In
reversing this portion of the District Court's ruling, the Circuit Court
noted that its holding did not preclude the defendant from arguing in a
motion for summary judgment that Smith cannot prove her TILA claim.

                          Security Interest

Next, the 7th Circuit considered the issue of whether the Cash Store's
statement, "Your post-dated check is security for this loan" was a
lawful disclosure. To answer this question, said the court, it had to
determine if the post-dated checks could serve as loan collateral.

Regulation Z defines security as "an interest in property that secures
performance of a consumer credit obligation and that is recognized by
state or federal law." Illinois law defines it as "an interest in
personal property ... which secures payment or performance of an
obligation." Using these definitions, Smith argued to the 7th Circuit
that the post-dated checks could not serve as collateral or security
because the negotiable instruments were merely additional evidence of
her indebtedness under the loan agreements. She contended the checks
were only a second promise to repay the loans, identical to the first

Although the court agreed with Smith that the post-dated checks did not
operate as an assignment of her bank account and had no intrinsic value,
it was not persuaded that the checks gave Cash Store no interest that it
did not already have. Writing for the 7th Circuit, Judge Flaum opined
that the checks had extrinsic legal value in that they gave the holder
rights and remedies not available under the payday loan agreements.
Judge Flaum explained that the post-dated checks allowed Cash Store to
negotiate them to someone else, present the checks for payment or pursue
bad check litigation. These options created some value in the
instruments and allowed them to serve as collateral and security for the
loans. Thus, the 7th Circuit affirmed the District Court's dismissal of
the security interest claim.

Judge Daniel Manion dissented from the 7th Circuit's decision to reverse
the lower court's decision on Smith's receipt claim.

Daniel Edelman of Edelman, Combs & Latturner in Chicago represented the
plaintiff. Paul E. Greenwalt III and Paula J. Morency of Schiff, Hardin
& Waite in Chicago represented the defendants. (Consumer Financial
Services Law Report December 29, 1999)

PONZI SCHEME: Kutak Rock Says Schools Suit Takes Aim at Its Deep Pocket
The only reason school districts sued Kutak Rock and its attorneys over
an alleged Ponzi scheme orchestrated by money manager John Gardner Black
is that the law firm is "a convenient deep pocket," Kutak's lawyers
recently told a state court in Pennsylvania.

The Daniel Boone Area School District filed suit last September against
Kutak and its attorneys -- including Bruce M. Serchuk, a former Kutak
lawyer who is now the senior technical attorney for the Internal Revenue
Service's tax-exempt bond branch.

The suit claims that Kutak and Serchuk set up Devon Capital Management,
Inc. and Financial Management Services Inc. for Black and then conspired
with him to use the two companies to defraud investors. It seeks class
action status to represent not just Daniel Boone, but about 49 other
school districts in Pennsylvania and Maryland that lost a total of about
$70 million from investments managed by Black and the companies.

But in a 28-page response filed Dec. 22 with the court in Blair County,
Pa., Kutak's lawyers claim the charges are completely meritless and urge
the court to dismiss them. The school districts, they say, produced no
evidence that Kutak gave misleading or false information to any of the
school districts. In addition, they maintain the suit's charges are not
valid under state law.

"Should it become necessary, Kutak Rock will welcome the opportunity to
refute plaintiff's unsubstantiated and baseless factual assertions in
their entirety," the firm said.

Meanwhile in related litigation, Kutak moved a malpractice suit filed
against it, its lawyers, and Serchuk out of bankruptcy court and into a
federal court in Pittsburgh.

Carl P. Izzo Jr., the court-appointed bankruptcy trustee responsible for
collecting and distributing to investors the assets from the now defunct
Devon and FMS, filed the suit against the firm in November.

F. Joseph Warin, a lawyer with Gibson, Dunn & Crutcher here, which is
representing Kutak and its co-defendants, said that a federal court is
the "more appropriate" venue for the suit. But lawyers for Izzo with
Fox, Rothschild, O'Brien & Frankel in Lansdale, Pa., said they will try
to get the suit moved back to bankruptcy court.

In its response to the Daniel Boone suit, Kutak said the complaint
"repeatedly mischaracterizes and misrepresents the manner in which Kutak
Rock represented these entities." The key factual allegations in the
suit -- that Kutak prepared documents used to defraud investors, that it
opined the collateralized investment agreement program set up by Black
was legal, and that it was aware of a collateral shortfall -- "are based
on nothing more than 'information and belief,'" the firm told the court.

The school district knows the allegations are not accurate because none
of the 80 depositions taken in related cases supports them, lawyers for
Kutak said. "Kutak submits that it was sued by this class of school
districts for no reason other than that it is perceived to be a
convenient 'deep pocket,'" the lawyers said.

The suit fails to show an attorney-client or fiduciary relationship
between Kutak and the school districts, Kutak said. There is no evidence
that Kutak gave any legal advice to the school districts, or that it
signed or endorsed any of the documents at issue in the case, it said.

In addition, the suit fails to show that Kutak had a legal obligation or
fiduciary duty to disclose any information to the school districts, it

While Kutak's payment for its services was based in part on the business
done by Black's companies, the firm's lawyers told the court, "No
principle of law supports the claim that a law firm paid for its
professional services from a percentage of funds under management stands
in a 'fiduciary relationship' to third parties," the firm said.

Even if some of the documents at issue can be attributed to Kutak, the
negligence charges must be dismissed because the suit does not allege
that the school districts read, reviewed, or relied on the documents,
Kutak said. Further, there is no evidence that any of Kutak's actions
contributed to the investment decisions made by Devon or FMS or to the
losses suffered by investors, it said.

The charges that Kutak and Serchuk aided and abetted fraud must be
dismissed because they are not recognized as causes of action under
Pennsylvania law, the law firm said in its filing. Kutak is not liable
for state securities law violations because it played no part in
offering or selling securities, it added.

Lawyers for the school district have 30 days to respond to Kutak's
filing. (The Bond Buyer January 5, 2000)

SKECHERS USA: Announces Filing of Securities Suit in CA
SKECHERS USA, Inc. (NYSE:SKX), announced on January 5 that a class
action lawsuit has been filed in federal district court in Los Angeles,
California on behalf of persons who purchased securities of SKECHERS in
the Company's June 9, 1999 initial public offering or thereafter on the
open market prior to June 15, 1999. The lawsuit alleges violations of
the federal securities laws and names as defendants SKECHERS and two of
its officers and directors. The lawsuit also names as defendants the
lead underwriters involved in the initial public offering. The lawsuit
alleges that SKECHERS failed to disclose a threatened lawsuit prior to
the initial public offering.

Although the lawsuit has been filed, it has not yet been served on
SKECHERS. After reviewing the complaint, SKECHERS vehemently denies the
allegations and believes that all material disclosures required by the
federal securities laws were made on a timely basis. Robert Greenberg,
Chairman and CEO of SKECHERS, commented that, "The lawsuit is completely
without merit. The Company will vigorously defend itself and we are
confident that our action will be completely vindicated by the courts."

SKECHERS, based in Manhattan Beach, California, designs, develops and
markets branded footwear for men, women and children sold to department
stores and specialty retailers, as well as directly to consumers through
42 company-owned SKECHERS retail stores, mail order and electronic
commerce. The company sells its products in more than 100 countries and
territories throughout the world.

SKECHERS USA: Kirby McInerney Files Securities Suit in CA
The following is an announcement by the law firm of Kirby McInerney &
Squire, LLP on January 5, 2000:

PLEASE TAKE NOTICE THAT a class action lawsuit has been commenced in the
United States District Court for the Central District of California on
behalf of all purchasers of Skechers U.S.A., Inc. common stock in the
June 9, 1999 public offering for those securities, or thereafter, in the
open market on or before June 15, 1999 (the "Class Period"). The action
asserts claims against Skechers U.S.A., Inc. (NYSE: SKX), certain of its
directors and officers, and certain securities brokerage firms that
served as underwriters for the June 9, 1999 offering. The action asserts
claims for violations of sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and rule 10b-5 of the Securities and Exchange
Commission, as well as sections 11, 12(2) and 15 of the Securities Act
of 1933, by reason of material misrepresentations and omissions during
the Class Period concerning claims asserted against the Company by a

Contact: Ira M. Press, Esq. Mark Strauss, Esq. Danielle Feman, Paralegal
KIRBY McINERNEY & SQUIRE, LLP 830 Third Avenue 10th Floor New York, New
York 10022 Telephone: (212) 317-2300 or Toll Free (888) 529-4787 E-Mail:

USAIR 427: Il. Case Settled in Nov. Hours before Trial; 5 of 18 Remain
Since USAir Flight 427 crashed outside Pittsburgh on Sept. 8, 1994,
Demetrio and a cadre of lawyers for families of the dead had spent years
building cases against the airline and jet manufacturer Boeing. They
hired economists to turn the life of each victim into dollars and cents.
They bought the tail of a Boeing 737 for a courtroom exhibit. One lawyer
even spent $ 70,000 for a jet part he could find only on a scrap heap in

And in perhaps the most gruesome exercise, the lawyers tried to assess
what passengers experienced during those final 21 seconds -- from the
time the 737's rudder likely jammed and the jet rolled onto its back
until it barreled nose-first into the ground, killing all 132 aboard.

Someone, they vowed, would pay for the lives that were lost.

Like more than 90% of lawsuits filed after commercial jet crashes,
Demetrio's case would be settled before a jury heard the story. Only
hours before a trial was to begin in Illinois state court in November,
the family of Marshall Berkman, a Pennyslvania manufacturing executive,
agreed to the largest settlement ever paid to the estate of a commercial
airline crash victim: $ 25.2 million.

                          The Settlement

By November, more than five years had passed since the crash of Flight
427. Donna Rae Peters had settled her suit confidentially more than two
years earlier. Of the 18 lawsuits handled in Illinois state court, only
five remained.

With their liability trial set to begin in those cases, Lebovitz and
Chicago lawyer Michael Demetrio, Thomas' brother, hatched a grand plan.
If it worked, they hoped it would bring the remaining cases to a quick
and lucrative close.

They wanted to erect the tail of a 737, nearly three stories tall,
outside the courthouse in Chicago. Beside it, weather and judge
permitting, they would present their opening statement, demonstrating to
jurors why they believed the tail's rudder malfunctioned and brought the
jet down. Thomas Demetrio doubted the judge would allow it. Too many
distractions. He would ask nonetheless, "just to tweak" lawyers for US
Airways and Boeing.

But only hours before the trial was to begin, Lebovitz, the Demetrio
brothers and other lawyers settled the state court cases, including the
record Berkman deal. The liability case they had spent years preparing
would never be heard.

Like most cases that end in settlements, much about the negotiations is
a closely guarded secret. Lebovitz says only that Boeing and US Airways
pushed for settlement talks the week of the trial. But Thomas Demetrio
says he always believed a jury would hear his case. In part, he says,
that was because the first settlement offer he received in the Berkman
case didn't come until the week before the trial was to start.

It was for $ 7.5 million, and Demetrio's answer was terse. "I said,
'It's rejected,' and they then asked, 'Is there going to be a counter)?'
" No, Demetrio says he told defense lawyers. Early the next week -- the
week of trial Chief Judge Donald O'Connell began supervising the
settlement talks. Only then, Demetrio says, did the discussions become

For 10 hours over two days, O'Connell explored settlement options in
private conferences with the lawyers. If $ 20 million were offered,
would it be accepted? he asked Demetrio. No, Demetrio said. He told the
judge he needed at least $ 25 million, a sum Demetrio says now that he
never expected, "not in a hundred years." Finally, less than 24 hours
before trial, the defendants made their final offer: $ 25.2 million.
Demetrio wasted no time settling.

The Berkman case was by far the largest settlement among the lawsuits.
Although other cases settled for between $ 5 million and $ 10 million,
one lawyer estimates that most families received between $ 1.25 million
and $ 2 million.

Demetrio and Lebovitz think the crash of EgyptAir Flight 990 three days
earlier may have helped prompt their settlements. Phil Condit, Boeing's
chairman and CEO, says the crash had no impact. But the lawyers reason
that Boeing wanted to avoid the publicity a trial would generate,
especially so soon after another deadly accident.

Who paid what share of the settlement also is unknown, even to lawyers
for the families. Settlement checks often are drawn on nondescript
accounts maintained by insurance underwriters representing the
defendants. In part, that's because neither the airline nor the jet
builder wants it publicly known what amount of blame it has conceded.

Of the 84 suits from the crash of Flight 427, four -- all federal court
cases in Pennsylvania -- remain unsettled. No trial date has been set
for those suits.

Defense lawyers routinely blame lawyers for the families for prolonging
the suits. And families' lawyers admit that waiting until just before
trial usually ensures top-dollar settlements. But to their clients, they
say, the lawsuits are more about justice than money. "The lawsuit can't
undo the damage," Lebovitz says. "But it can provide hope that someone
else will not have to suffer the same loss, the same terror, the same
misfortune these families did."

Now, with 217 dead in the Oct. 31 crash of EgyptAir Flight 990, lawyers
have begun preparing scores of new lawsuits. As the litigation from
Flight 427 demonstrates, the process will be haunting and complex -- and
certain to last for years.

Y2K LITIGATION: MI School District Sues to Recover Costs from MASB-SEG
Royal Oak School District v. MASB-SEG Property/Casualty Pool Inc.

A Michigan school district has filed suit on behalf of 400 districts
seeking coverage for Year 2000 remediation expenses under a commercial
general liability (CGL) policy issued by MASB-SEG Property/Casualty Pool
Inc. (School District of the City of Royal Oak v. MASB-SEG
Property/Casualty Pool Inc. (MI Cir. Ct., Oakland Cty., complaint filed
Nov. 18, 1999)).

The School District of the City of Royal Oak claims coverage under the
terms of a CGL policy issued by MASB covering July 1, 1998, through July
1, 1999, and July 1, 1999, through July 1, 2000. The complaint seeks
certification of a class consisting of about 400 districts in Michigan
that purchased coverage under the same CGL policy.

According to the complaint, Royal Oak has incurred substantial expenses
for Y2K remediation of information technology systems, embedded chips,
HVAC control systems, telephone systems, and other equipment. The
district alleges the MASB policy provides coverage for loss of "computer
programs and other magnetic recording, or storage media for electronic
data processing to reproduce, replace, or restore" such programs and

According to the complaint, an exclusion for mechanical failure, faulty
construction, or design error was specifically marked as "deleted." MASB
has tried to rely on a "Y2K exclusion" that was mailed to Royal Oak
after the most recent policy took effect and did not include a reduction
in premium, according to the complaint. Royal Oak notified the insurer
of the claim on Oct. 28, 1999.

The complaint contains three counts: breach of contract, declaratory
judgment, injunctive relief, and injunctive relief under the Michigan
Consumer Protection Act.

The complaint was filed by Dale R. Burmeister of Harvey Kruse, P.C. in
Troy, MI, and Phillip J. Goodman of Phillip J. Goodman, P.C., in
Birmingham, MI. (Computer & Online Industry Litigation Reporter December
21, 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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Washington, DC.  Theresa Cheuk and Peter A. Chapman, editors.

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

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