/raid1/www/Hosts/bankrupt/CAR_Public/000110.MBX                C L A S S   A C T I O N   R E P O R T E R

                Monday, January 10, 2000, Vol. 2, No. 6


ACTION PERFORMANCE: Stull, Stull Files Expanded Securities Suit
C. BREWER: DE Ct Rejects Fee Shifting for Proxy Campaign against Merger
FREEMARKETS: Announces Securities Suit in PA; Will Defend Vigorously
GT INTERACTIVE: Stock Purchasers Fail to Establish a Claim
HAVERFORD STATE: PA Hospital Placed Mental Patients; Ct Oks Settlement

HMOs: Legal Panel Debates the Merits Of Medical Monitoring
INMATES LITIGATION: Center Set up for Fighting Death Row in CA
LIGHTHOUSE FINANCIAL: IL Suit over Loan Disclosure Statement Fails
MASTERCARD: WI Fed Ct Dismisses RICO Action To Recover Gambling Losses
NY CITY: Stage Is Set for Court Debate On Limiting Right to Shelter

OHIO SAVINGS: IL Ct Denies Class in Suit over Kickbacks in Mortgage
PATTERSON: PA Ct Agrees to Lack of Informed Consent for MD's False Ans.
REPAP ENTERPRISES: TD Bank Wages Bankruptcy; Shareholders Plan to Sue
SEARS ROEBUCK: IL Ap Ct Oks Dismissal of Charge over Used Car Batteries


ACTION PERFORMANCE: Stull, Stull Files Expanded Securities Suit
According to an announcement on January 6, an amended class action
lawsuit was filed in U.S. District Court on behalf of purchasers (the
"Class") of Action Performance Companies, Inc., ("Action Performance" or
the "Company") (NASDAQ:ACTN) common stock between July 27, 1999 and
December 16, 1999 (the "Class Period").

Previously, the firm had filed an action for ACTN purchasers between
July 27, 1999 and November 4, 1999.

Action Performance is engaged in the design and sale of licensed
motorsports collectible and consumer products. The Company's products
include die-cast scaled replicas of motorsports vehicles, apparel and

The defendants include Action Performance, Fred W. Wagenhals, Tod J.
Wagenhals and Christopher S. Besing. The Complaint charges that
defendants violated Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 and Rule 10-b(5). The action arises from damages incurred by
the Class as a result of a scheme and common course of conduct by
defendants which operated as a fraud and deceit on the Class during the
Class Period. Defendants' scheme included rendering allegedly false
statements about the state of Action Performance's business and the
shipment of certain of its products to Home Depot.

If you wish to discuss this action, or have any questions concerning
this notice, or your rights or interests with respect to this matter,
please contact Stull, Stull & Brody Marc L. Godino, Esq., 888/388-4605

C. BREWER: DE Ct Rejects Fee Shifting for Proxy Campaign against Merger
In an issue of first impression ruling, the Delaware Supreme Court held
that a unitholder whose proxy campaign contributed to the defeat of an
acquisition plan by Mauna Loa Macadamia Partners cannot recover fees for
the alleged savings the company realized as a result of the merger
plan's defeat. Waterside Partners v. C. Brewer & Co., No. 142 (DE Sup.
Ct., Nov. 1, 1999); see Delaware Corporate LR, April 5, 1999, P. 7.

The high court said although a plaintiff may receive attorneys' fees for
a suit that becomes moot when company officials kill or modify a
challenged plan, the plaintiff here made its own suit moot when a
majority of shareholders backed its merger opposition in a proxy

Plaintiff Waterside Partners owned 1,000 units of Mauna Loa when it
announced a plan to acquire C. Brewer Homes Inc. In a previous Delaware
Chancery Court suit, Waterside objected that the transaction would
benefit C. Brewer far more than Mauna Loa and certain principals. That
plan was submitted to a vote of the unitholders and defeated, mooting
Waterside's claims in that action, which was dismissed.

Waterside filed the current action to recover attorneys' fees based on
the alleged savings the company experienced as a result of its
opposition -- more than $17.5 million by the plaintiff's estimate.

Although fee shifting is recognized where a plaintiff's efforts have
resulted in the creation of a common fund, here the litigation was
ineffective and the non-litigation efforts (even though successful) are
not a basis for attorneys' fees, said the chancery court.

On appeal, the high court endorsed that position in a per curiam
opinion. A panel made up of Chief Justice Norman Veasey and Justices
Andrew Walsh and Randy Holland said shifting fees based on a common
benefit is dangerous when the benefit was created outside the litigation
context because there is "no limiting principle."

"Fee shifting is the exception rather than the rule in corporate
litigation and the establishment of a nexus between the litigation
itself and the claimed corporate benefit is a sine qua non," the panel
wrote. "To permit the award of litigation fees for efforts outside the
litigation would en tangle courts in the ex post pricing of volunteer
informational services to corporations."

That situation can only be avoided by the chancery court's policy of
strict adherence to the causal nexus requirement, the panel concluded.

Plaintiffs are represented by Joseph Rosenthal of Rosenthal, Monhait,
Gross & Goddess in Wilmington, DE.

Defendants are represented by Rodman Ward Jr. of Skadden, Arps, Meagher
& Flom in Wilmington. (Delaware Corporate Litigation Reporter December
6, 1999)

FREEMARKETS: Announces Securities Suit in PA; Will Defend Vigorously
FreeMarkets, Inc. (Nasdaq: FMKT) announced on January 6 that a purported
class action lawsuit has been filed against the Company and certain of
its officers and directors in the Federal District Court in the Western
District of Pennsylvania. The complaint alleges that the defendants
violated federal securities laws in connection with the Company's
initial public offering as a result of alleged misstatements and
omissions regarding the Company's relationship with General Motors

The Company issued a press release on January 4, 2000 to announce that
General Motors had informed the company that day of its intention to
cancel its agreements with FreeMarkets. Following that announcement, the
Company received written notice of General Motors' exercise of its
90-day cancellation right, which will be effective April 3, 2000.

The Company believes that the lawsuit misrepresents the facts and is
completely without merit. The Company and the individual defendants
intend to contest the lawsuit vigorously.

                        About FreeMarkets

FreeMarkets is the global leader in creating business-to-business online
auctions for industrial parts, raw materials, commodities and services.
The Company created online auctions for approximately $1.0 billion worth
of purchase orders in 1998 and approximately $1.4 billion worth of
purchase orders in the nine months ended September 30, 1999. Since 1995,
FreeMarkets has created online auctions for products in more than 50
supply verticals, including injection molded plastic parts, commercial
machinings, metal fabrications, chemicals, printed circuit boards,
corrugated packaging and coal. More than 2,000 suppliers from over 30
countries have participated in FreeMarkets auctions to date. The
Company's current clients include United Technologies Corporation, The
Quaker Oats Company, Honeywell International Inc., Eaton Corporation,
Emerson Electric Company, FirstEnergy Corp., SmithKline Beecham plc and
the Commonwealth of Pennsylvania. (Source: FreeMarkets, Inc.)

GT INTERACTIVE: Stock Purchasers Fail to Establish a Claim
Herzog V. Gt Interactive Software Corp.

A Securities class action was brought alleging that defendant
corporation and three of its directors materially inflated earnings for
the corporation, thus violating @ 10(b) of the Exchange Act. Defendants
made a motion to dismiss the complaint. In order to survive this motion,
plaintiffs had to plead that defendants acted with scienter and made a
false material representation and that plaintiffs' own reliance on
defendants' action caused injury. The court held that plaintiffs'
complaint failed to allege adequate facts to support any of @ 10(b)'s
elements because plaintiffs' assertion that the corporation's accounting
methods were false and misleading was unfounded; individual defendants'
stock sales did not raise an inference of motive to commit securities
fraud; and plaintiffs failed to show defendants' action caused a decline
in stock price.


This matter reaches the Court framed as a Rule 12(b)(6) and Rule 9(b)
motion. Accordingly, the facts recited herein are drawn predominantly
from Plaintiffs' amended complaint.


Plaintiffs are members of the class who purchased GT securities from
December 15, 1995 through December 12, 1997, the GT Class Period, and
from February 4, 1996 through December 12, 1997, the Andersen Class
Period, and were allegedly damaged thereby. See Second Consolidated and
Am. Class Action Compl. ("Second Amended Complaint") at P 23. Plaintiffs
were appointed to serve as lead plaintiffs on behalf of the class
pursuant to an Order of Honorable Sidney H. Stein signed October 5,
1998. See id. at P 14.

Defendant GT, incorporated in Delaware in 1992 and headquartered in New
York City, creates, publishes, and merchandises interactive
entertainment and consumer software. See id. at P 15. In 1995, GT
expanded into "edutainment" - educational entertainment - and in 1997,
GT proclaimed itself the "leading global publisher of interactive
entertainment and edutainment." Id. at P 33. During the GT Class Period,
GT generally contracted with small, independent software developers to
manufacture requested products for GT. See id. at P 31. The independent
developers were, thereby, entitled to royalty payments for GT's sale of
the developers' software. See id. In this case, GT paid those royalty
payments in advance of any sales. See id.

Defendant Chaimowitz is, and was at all relevant times, President, Chief
Executive Officer, and a Director of GT. See id. at P 18. Defendant
Cayre is, and was at all relevant times, Chairman of the Board of
Directors of GT. See id. at P 19. Defendant Gregor is, and was at all
relevant times, Vice President of Finance and Chief Financial Officer of
GT. See id. at P 20. Defendant Andersen is an international accounting
and consulting firm, maintaining offices throughout the world, including
New York City, and has been GT's outside auditor since prior to the
class periods. See id. at P 22.

                        Procedural History

On January 7, 1998, Plaintiff Chani Herzog ("Herzog") filed a class
action complaint against Defendant GT and the Individual Defendants. The
Clerk of the Court assigned the case to Honorable Sidney H. Stein of the
United States District Court for the Southern District of New York.
Plaintiffs brought motions requesting consolidation of related actions,
appointment of the members of the Herzog Group as lead Plaintiffs, and
approval of the Herzog Group's choice of law firms as the Executive
Committee and co-chairs of the Executive Committee for the putative
class. On October 7, 1998, Judge Stein granted Plaintiff Herzog's
motions. See Order of Honorable Sidney H. Stein dated Oct. 7, 1998.

Pursuant to Judge Stein's Order, on January 7, 1999, Plaintiffs then
filed a consolidated and amended class action complaint against
Defendant GT and the Individual Defendants. On January 26, 1999, Judge
Stein granted Plaintiffs leave to file a second consolidated and amended
class action complaint to include Andersen as a defendant.

The Second Amended Complaint asserted the following three causes of
action: that the GT Defendants violated @ 10(b) of the Exchange Act and
Rule 10b-5 promulgated thereunder, see id. at PP 106 - 13; (2) that the
Individual Defendants violated @ 20(a) of the Exchange Act, see id. at
PP 114 - 18; and (3) that Defendant Andersen violated @ 10(b) of the
Exchange Act and Rule 10b-5 promulgated thereunder, see id. at PP 119 -

After Judge Stein recused himself, on February 10, 1999, the Clerk of
the Court reassigned this action to this Court. On April 9, 1999, the GT
Defendants and Defendant Andersen, separately, filed motions to dismiss
the Second Amended Complaint pursuant to Rules 12(b)(6) and 9(b). All
parties submitted papers responding to the motions.


The Court finds that Plaintiffs have failed to allege sufficiently in
the Second Amended Complaint claims for fraud against Defendant GT, the
Individual Defendants, or Defendant Andersen. Thus, defendants' motions
to dismiss the Second Amended Complaint was granted, and plaintiffs'
complaint was dismissed with prejudice. (New York Law Journal December
6, 1999)

HAVERFORD STATE: PA Hospital Placed Mental Patients; Ct Oks Settlement
A federal judge has approved a global settlement of the class-action
suit brought by former residents of Haverford State Hospital, finding
that Pennsylvania officials have made significant efforts to ensure that
members of the class are quickly moved to group homes and other
community treatment facilities.

"The court believes that this settlement is an indication that the
Commonwealth is now well aware of the duties imposed upon it by the
Americans With Disabilities Act," Senior U.S. District Judge Raymond J.
Broderick wrote. "The settlement of this case appears to this court as
having paved the way for all individuals institutionalized for treatment
of mental and emotional disorders to be cared for in the community
within a reasonable period after their having been evaluated as
appropriate for community treatment," Broderick wrote.

The judge's comments in the closing paragraphs of an 18-page opinion in
Kathleen S. v. Department of Public Welfare stand in stark contrast to
the remarks he made in the same case in June 1998 when he declared that
state officials violated the Americans with Disabilities Act by delaying
the class members' placements in community programs. Following a
non-jury trial, Broderick found that the state violated the rights of
all three sub-classes of former Haverford State residents. He ordered
the state to meet strict deadlines in placing or evaluating all of the
class members. Although none of the discrimination was intentional,
Broderick found that "in the programs undertaken by DPW to close
hospitals for the mentally ill, DPW has apparently been apathetic and
indifferent to the mandate of Congress set forth in the ADA ... enacted
to make certain that individuals with disabilities are to be provided
with services in the most integrated setting appropriate to their needs,
and are not to be discriminated against by being unnecessarily
segregated in the institution." That ruling was appealed to the 3rd U.S.
Circuit Court of Appeals, and the case was argued twice before a
three-judge panel. The second argument was necessary to assess the
impact of the U.S. Supreme Court's decision in Olmstead v. L.C. The
Olmstead decision cut both ways because the high court held that the ADA
requires states to provide community-based treatment of individuals with
mental disabilities but that courts can consider whether the state has
resources available to make the accommodation. The 3rd Circuit never
ruled on the issue, however, because after the second argument, Chief
U.S. Circuit Judge Edward R. Becker called the lawyers aside and
suggested that they consider trying to settle the case. They agreed to
meet with 3rd Circuit mediator Joseph Torregrossa.

When Torregrossa announced that he had hammered out a deal, the Court of
Appeals sent the case back to Broderick for court approval. Now
Broderick has approved the settlement, saying it closely mirrors the
order he handed down in June 1998 and adds only minor delays that will
affect only a handful of class members. Nearly all of the former
Haverford State residents are promised community placements by March 31,
2000, or June 30, 2000, he noted. If he rejected the settlement,
Broderick found that he would only increase the risks to both sides.
Broderick said he believed that his June 1998 decision was consistent
with Olmstead since Pennsylvania officials conceded that funding was not
a concern in this state. He also noted that the terms of the settlement
are not very different from the obligations imposed in his June 1998
order. "Defendants have thus far complied with the court's order, and in
so doing have made admirable progress during the pendency of their
appeal in placing the vast majority of class members into appropriate
community placements the most integrated setting to fit their needs as
is required by the ADA," Broderick wrote.

The plaintiffs' class was represented by Robert W. Meek of the
Disabilities Law Project and sole practitioner Stephen F. Gold. (Copies
of the 18-page opinion in Kathleen S. v. Department of Public Welfare,
PICS NO. 99-2445, are available from The Legal Intelligencer. Please
refer to the order form on page 9). (The Legal Intelligencer January 7,

HMOs: Legal Panel Debates the Merits Of Medical Monitoring
Legal experts from the plaintiffs' and defense bar debated the merits of
medical monitoring Dec. 1, focusing on some recent court decisions
expanding the circumstances under which such remedies may be ordered.

Central to the debate in Washington, DC, sponsored by the Manhattan
Institute and the Federalist Society is the definition of what
constitutes an injury. To Victor E. Schwartz, general counsel of the
American Tort Reform Association, courts are beginning to erode one of
the basic precepts of tort law: In order to recover, there must be a
present injury.

If courts follow the pattern set last July by the West Virginia Supreme
Court of Appeals, "the potential exposures of employers are enormous,"
said Schwartz, who also is co-author of the most widely used textbook on

To Ronald Simon, lead plaintiffs' lawyer in several medical monitoring
cases, the definition that should be applied is that of an economic
injury - comparable to holding a motorist who runs into the back of your
car accountable for the cost of a medical exam and an X-ray.

Much of the discussion centered on the West Virginia decision. Answering
a certified question by a federal judge, the Supreme Court of Appeals
held that "a cause of action exists under West Virginia law for the
recovery of medical monitoring costs, where it can be proven that such
expenses are necessary and reasonably certain to be incurred as a
proximate result of a defendant's tortious conduct."

The ruling said a plaintiff must prove that he or she has been
significantly exposed to a proven hazardous substance and as a
"proximate result . . . has suffered an increased risk of contracting a
serious latent disease relative to the general population. A plaintiff
also must prove that the increased risk of disease makes it reasonably
necessary for the plaintiff to undergo periodic diagnostic medical
examinations and that monitoring procedures exist making early detection
of a disease possible.

Justice Elliott Maynard, who dissented in that decision, told the panel
that the majority ruling makes everybody a plaintiff.

One of the substances that could give rise to a lawsuit, he said, is
iron. "I just think that's silly, and I didn't want to put the word
silly in a Supreme Court opinion," Maynard said. And he said lump sums
awarded in such lawsuits would be used for "pickup trucks and beach
vacations." He said that since West Virginia became a state in 1863, the
Legislature has always created new causes of action, and courts
shouldn't do so now.

Gene Locks of Greitzer & Locks, a plaintiffs' lawyer who negotiated a
settlement including medical monitoring for people who took the diet
drug cocktail fen-phen, said he probably would agree with Maynard's
dissent. But, he said, New Jersey law he relied upon in the fen-phen
case specifically allows medical monitoring. And, he said, the judicial
system is better able to craft solutions for complicated toxic tort
cases. "I defy any legislature in this county - even at the state level,
let alone at the federal level - to plug all the gaps," Locks said.
(Liability Week December 6, 1999)

INMATES LITIGATION: Center Set up for Fighting Death Row in CA
Talk to judges and defense lawyers about delays on death row, and the
shortage of attorneys willing and able to represent condemned inmates
inevitably pops up. While representation is no longer an issue for most
of the first 101 inmates whose sentences were affirmed by the California
Supreme Court, it remains a problem for the busloads of new inmates
trucked to San Quentin each year. In all, 159 of the 555 death row
inmates are without counsel.

Enter the Habeas Corpus Resource Center and Michael Laurence, a
passionate advocate for the inhabitants of California's death row. The
Legislature created the resource center in 1997 with $5 million in
funding. The goal: to create a state-run law firm to pursue habeas
relief on behalf of the men and women California juries have judged the
worst of the worst.

A five-member board of directors tapped Laurence, 40, to head up the
center last year. Joining him as deputy directors are his former law
partners, Jeannie Sternberg and Gary Sowards.

Laurence was a logical choice to head up the agency: Virtually his
entire career has been dedicated to death row representation, including
a stint in private practice and as head of the American Civil Liberties
Union's Northern California death penalty project. "He's the dean of
this work right now," says defense attorney Nanci Clarence of Clarence &
Snell. "It's like he's the managing partner of all these cases."

Laurence's convictions about the death penalty run deep. As a junior on
his high school debate team, he railed against capital punishment for an
entire school year. And as a law student at University of
California-Davis, he edited a 600-page symposium on the subject.

But as the head of a state agency created to reduce delays on death row,
Laurence now expresses his views in a more muted fashion. "I don't think
the state has a right to kill people," he says, after some prompting.
But rather than push for the abolition of the death penalty, Laurence
has instead devoted himself to overturning capital sentences.

More important, Laurence is seeking to train the capital defenders of
the future. Instead of seeking out experienced habeas counsel when
staffing the center, he has hired relatively inexperienced lawyers and
paired them up with the center's seasoned directors. "The only way to
solve the chronic shortage is to expand the pool," Laurence says.

Part of the challenge is finding lawyers as comfortable investigating
and writing as they are in putting on witnesses at an evidentiary
hearing. "It's very difficult for a lawyer -- even one with extensive
experience -- to operate efficiently because the work is so much
different," Laurence says. "A post-conviction lawyer is a trial lawyer
and an appellate lawyer."

Laurence's goal is to create a resource center not just for inmates, but
for defense attorneys who work in and outside the center. He has
assigned common issues to each of the attorneys on his staff with
instructions to master the topic area and prepare model briefs for use
in future cases.

And Laurence is developing a database for briefs so that habeas
attorneys filing these monster petitions "don't reinvent the wheel" in
presenting standard issues. All this work has made him a guru to the
defense bar.

But state prosecutors roll their eyes at the mention of Laurence's name.
They say Laurence drags out appeals and employs suspect tactics in his
efforts to spring the condemned. "He's very dedicated, conscientious,
very bright, an excellent writer," says Supervising Deputy Attorney
General Ronald Matthias. "But he is obviously determined to have this
system not work." "He doesn't litigate the way we do -- which is very
merits-oriented," Matthias adds. "He litigates on the basis of political

Matthias points to Laurence's challenge to the fast-track legislation
passed by Congress three years ago.

The U.S. Supreme Court swatted down Laurence's bid to litigate the
application of the law as a class action on behalf of California's
capital defendants. Chief Justice William Rehnquist groused that
Laurence's clients had no standing to bring the "disruptive" case, and
instead must litigate the applicability of the Anti-Terrorism and
Effective Death Penalty Act on a case-by-case basis.  "It is a lawsuit
that never, never should have been brought," Matthias claims.

But Laurence says a ruling one way or the other would have forestalled
duplicative litigation. And he notes that, so far, the Ninth Circuit and
district judges have agreed in each case with the defense position that
California doesn't qualify for the fast-track provisions.

"That's part of the prosecution mentality, to insist on taking issue
with every procedural issue with the case," Laurence says. "There's no
cost to them to litigate it 40 times, but a tremendous cost to us."

And Laurence says he doesn't engage in dilatory gamesmanship. "I don't
think any judge has ever accused me of raising any argument that's not
grounded in facts," Laurence says. "I don't believe in the system
grinding to a halt."

Indeed, in embracing his new position, Laurence is at odds with those in
the defense bar who decline capital assignments with the intent of
slowing what U.S. Supreme Court Justice Harry Blackmun called the
"machinery of death." "I've never believed in abandoning poor people,"
Laurence says. "If we could represent everyone on death row, we would."
(The Recorder December 15, 1999)

LIGHTHOUSE FINANCIAL: IL Suit over Loan Disclosure Statement Fails
The U.S. District Court for the Northern District of Illinois has ruled
that a loan disclosure statement issued by a consumer lender met federal
requirements under the federal Truth in Lending Act (TILA). The decision
dismisses a suit brought by a debtor in order to recover damages
resulting from the allegedly improper disclosure of loan terms. Shabas
v. Lighthouse Financial Group of Illinois Inc. et al., No. 99 CV 4501
(ND IL, Oct. 15, 1999).

Plaintiff David Shabas took out a loan from Lighthouse Financial Group
of Illinois Inc. in March 1999. In connection with the loan, Shabas was
given a disclosure statement with which he took issue.

He subsequently filed a class action suit in the U.S. District Court for
the Northern District of Illinois, asserting that Lighthouse violated
the TILA, 15 U.S.C. Sec. 1601 et seq., and Illinois law.

Shabas' suit alleged that the disclosure statement he was given did not
comply with the TILA and its accompanying regulations because it
positioned the monthly percentage rate in the federal disclosures. By
placing this item in the federal disclosures, the annual percentage rate
and the finance charge were rendered less conspicuous, and these items
should have been clearly conspicuous, he claimed.

The complaint further argued that the description of rights with respect
to the security interest was misleading. As a result the class was
entitled to damages under the TILA, Shabas asserted.

Lighthouse moved to dismiss the suit.

The district court stated that under the TILA, a creditor must segregate
certain disclosures from other terms of a loan. The terms of the finance
charge and annual percentage rate, together with the corresponding
amount, must be more conspicuous than any other disclosure except for
the identity of the creditor, the judge said. Further, under the
regulations set forth at 12 C.F.R. Sec. 226.17(a)(1), the segregated
disclosures cannot contain unrelated information, the judge continued.

The judge ruled that Shabas was unable to prove facts in support of his
claims. Looking to the disclosure statement issued by Lighthouse, the
district court stated that it complied with the TILA. The fact that the
monthly percentage rate was as equally prominent as the annual
percentage rate and the finance charge did not render the statement
illegal, the judge said. All of these disclosures were prominently set
forth on the statement and were capitalized, in bold and set apart by a
black line, the judge continued. The TILA mandates were satisfied, the
district court ruled.

Turning to Shabas' allegations regarding rights surrounding the security
interest, the court outlined the suit's allegations. Although Shabas
agreed that Lighthouse complied with the TILA in the disclosure
statement, he claimed that the loan agreement document to which it
referred made misleading representation regarding the automobile he put
up as security. Shabas took the position that the loan agreement
provided that upon default Lighthouse could take possession of the
vehicle at will, whereas, under the Uniform Commercial Code, the vehicle
had to be sold or kept in full satisfaction of the debt. Shabas claimed
the TILA was violated as a result of the problem with the loan

The district court stated that the disclosures made by Lighthouse were
not inaccurate. Lighthouse could keep the automobile in full
satisfaction, or it could sell it and seek a deficiency judgment, the
judge said. Lighthouse has indicated its preference to retain the
vehicle in satisfaction of the debt in the event of default, and this
premature disclosure of intention did not violate the TILA, the judge

The defendant's motion to dismiss was granted. (See Document Section I
for the opinion.) (Bank & Lender Liability Litigation Reporter December
1, 1999)

MASTERCARD: WI Fed Ct Dismisses RICO Action To Recover Gambling Losses
A district court judge in Wisconsin has dismissed at the pleading stage
a federal racketeering lawsuit against MasterCard International Inc. and
MBNA American Bank, finding that the companies' involvement with on-line
casinos does not constitute a violation of the Racketeer Influenced and
Corrupt Organizations Act (RICO). Jubelirer et al. v. MasterCard
International Inc. et al., No. 99C0256S (WD WI, opinion filed Sept. 17,

U.S. District Court Judge John C. Shabaz, of the Western District of
Wisconsin, concluded that the plaintiff's third amended complaint failed
to allege the existence of a RICO enterprise, or the conduct of such an
enterprise, by the two defendants.

According to the complaint, the plaintiff, Ari Jubelirer, activated a
credit card account with Casino 21, an on-line gambling website. He used
his MBNA MasterCard to place a deposit of $25 in order to receive 25
wagering chips.

After losing $20, plus a $4.95 processing fee, Jubelirer filed a class
action lawsuit against MasterCard and MBNA. Jubelirer alleged that
MasterCard and MBNA committed RICO violations by charging, clearing, and
paying credit card charges to illegal gambling operators. He further
averred that the two defendants aided and abetted others in violating
federal anti-gambling laws. Lastly, he sought to enjoin the collection
of all debts for illegal gambling charged to MBNA credit cards, and (2)
to have such activity declared unlawful.

MasterCard and MBNA moved for dismissal, alleging the third amended
complaint failed to state a claim under RICO, or for aiding and abetting
a RICO violation. They also contended that declaratory relief was not
available under the circumstances. Finally, they argued the action
should be barred by the doctrine of in pari delicto.

The court agreed with the defendants and dismissed the RICO and aiding
and abetting claims with prejudice. According to Judge Shabaz, a RICO
claimant must allege four elements: (1) the conduct (2) of an enterprise
(3) through a pattern (4) of racketeering activity. He concluded
Jubelirer insufficiently pleaded facts to support the existence of a
RICO enterprise or the conduct of such an enterprise by the defendants.
Instead, he found MasterCard and MBNA merely collect debts incurred by
its cardholders, regardless of the merchant involved.

"Accepting plaintiff's allegations as sufficient to allege a RICO
enterprise would lead to the absurd conclusion that each of the many
million combinations of merchant, MasterCard, and lender is a RICO
enterprise," Judge Shabaz wrote. "However broadly worded, the RICO
statute is not to be applied to situations absurdly remote from the
concerns of the statute's framers." The court concluded its analysis of
the RICO claims by saying the defendants' involvement with online
casinos is a routine contractual relationship that does not rise to the
level of being an enterprise for RICO purposes.

Turning to the aiding and abetting allegations, the court found the
language of the RICO statute, requiring participation in the conduct of
an enterprise, too narrow to permit liability for aiding and abetting.

"Implying a cause of action for aiding and abetting where the language
is purposely drawn more narrowly would circumvent rather that further
Congressional intent," Judge Shabaz said.

The court also declined to grant Jubelirer declaratory relief, finding
it lacked subject matter jurisdiction over the claim. Judge Shabaz said
subject matter jurisdiction for declaratory actions generally exists
only where the defendant could have brought a coercive action to enforce
its rights in federal court against the plaintiff. Presently, however,
the court determined that neither MasterCard nor MBNA could have sued
Jubelirer in federal court to collect the $25 obligation he incurred in
connection with Casino 21. The court found no federal question involved
in a simple debt collection, and also concluded no diversity
jurisdiction existed.

Jubelirer and the proposed class are represented by Ronald S. Goldser
and Keelyn M. Friesen with Zimmerman Reed in Minneapolis. MasterCard and
MBNA are represented by Richard Norton Jr., Senior Vice President, Legal
Department, in Purchase, NY, and Stanley J. Adelman with Rudnick & Wolfe
in Chicago. (Gaming Industry Litigation Reporter November 1999)

NY CITY: Stage Is Set for Court Debate On Limiting Right to Shelter
Almost 20 years ago, after much courtroom testimony and tough
negotiations, New York City settled a class-action lawsuit by agreeing
to the Callahan decree, which promised clean and safe shelter to every
homeless man who sought a bed.

Today, in State Supreme Court in Manhattan, lawyers will debate whether
new limits on eligibility for shelter violate the decree, the bedrock of
the city's broad right to shelter. The Giuliani administration has been
fighting for four years to enforce state regulations that limit shelter
to those who meet work requirements and other welfare rules.

Robert Callahan, a hard-drinking, homeless short-order cook who was the
lead plaintiff in the original lawsuit in 1979, will not be at the 2
p.m. hearing. A year before the court issued the decree in his name, he
was found dead of natural causes at 55, face-down in a Manhattan gutter.

But his fate bears on the arguments made on both sides, in a foot-high
stack of briefs and affidavits. Lawyers for the homeless are contending
that the regulations would undermine the fundamental purpose of the
Callahan decree by relegating people like him to the streets again.

Their affidavits include a doctor's account of 12 homeless people who
died of exposure in Boston, including 6 turned away from shelters, and
grim photographs of limbs blackened by frostbite.

City lawyers counter that the rules will help motivate people like Mr.
Callahan to move toward work, treatment, training and self-reliance. The
rules call for those who fail to comply to be denied shelter for up to
180 days, but city officials say such penalties will be used sparingly,
with exemptions for those who cannot follow the rules because of mental
illness or physical impairment.

"We've bent over backwards in establishing safeguards and interventions
at all stages of the process to help to ensure that only those
individuals who are demonstrably refusing to abide by these rules will
be denied shelter," Thomas C. Crane, the city lawyer on the case, said.
"It's not a punitive intent by any stretch of the imagination."

But Steven Banks, the Legal Aid lawyer for the Coalition for the
Homeless, called the policy "a combination of both Orwell and Dickens."
He said, "If you're too troubled to follow bureaucratic rules, the city
will determine that you're not troubled anymore, and throw you onto the
streets, where you can suffer serious injury or freeze to death."

After the hearing before Justice Stanley L. Sklar, a related hearing
will follow before Justices Helen E. Freedman and Elliott Wilk, also of
the State Supreme Court. In December 1999, they ordered a temporary halt
to enforcement of the rules as they affect homeless families with
children. They particularly questioned a measure that would place
children in foster care if their parents were ejected from shelters.

The city has appealed, contending that the justices had no right to
intervene because the rules had already been upheld by a higher court.
But city officials agreed to delay enforcement at least until the
underlying issues in the Callahan case were debated.

Both sides agree that shelters now are vastly better than the Third
Street Men's Shelter, where Mr. Callahan went in winter weather.
Hundreds of men slept on concrete floors, and others were turned away.

The system now consists mainly of smaller, more specialized shelters,
including many with job programs and treatment for substance abuse or
mental illness, 80 percent run by nonprofit agencies under contract to
the city. It serves about 24,000 single adults in a year and 7,500 at
one time, up from 1,500 in 1979.

Martin Oesterreich, commissioner of the city's Department of Homeless
Services, noted in an affidavit defending the regulations that the Third
Street Men's Shelter is now run by Project Renewal as a substance-abuse
and employment-training program that has placed hundreds of men in
permanent housing.

But like all but one of the 23 agencies running such shelters, Project
Renewal opposes the city's plan to enforce the state regulations. A
coalition representing the agencies has declared that it will refuse to
put the rules into effect even if the courts approve their enforcement.

"That's terrific that Project Renewal has a model program at East Third
Street," said Robert M. Hayes, who was a young Wall Street lawyer when
he began the Callahan lawsuit, "but that doesn't create a rationale for
imposing bureaucratic eligibility requirements on that last homeless man
getting inside tonight." He met Mr. Callahan, who called himself "the
mayor of the Bowery," at a soup kitchen.

In a new affidavit, Mr. Hayes, now in Maine, recalled that in those days
virtually all homeless people were excluded from welfare benefits by a
combination of their own mental and social disabilities and bureaucratic
requirements, like demands for addresses or Social Security numbers they
had long forgotten.

Barbara B. Blum, who was a defendant in the original case as the state
commissioner for the Department of Social Services, said in an affidavit
opposing the new rules that the decree was written to make sure that
bureaucratic obstacles would not prevent homeless people from getting
and keeping a warm, safe place to sleep. To get that, advocates for the
homeless gave up demands like substance abuse treatment and community
shelters, she said.

The language of the decree created shelter as the ultimate safety net
for those who met the standard of need for home relief, or who were
homeless "by reason of physical, mental or social dysfunction."

Now, in depositions and interviews, city officials have said they do not
know what "social dysfunction" means. But they say that a welfare center
only for the homeless, known as Riverview, will offer special safeguards
and chances to appeal so that few people will be ejected or barred from
shelter under the rules.

Mr. Hayes dismissed those assurances, noting that it took Mr.
Oesterreich 22 paragraphs in his affidavit to explain those procedures.
(The New York Times January 7, 2000)

OHIO SAVINGS: IL Ct Denies Class in Suit over Kickbacks in Mortgage
Real Estate Settlement Procedures Act:Golan v. Ohio Savings Bank

The U.S. District Court for the Northern District of Illinois has denied
a motion for class certification filed by plaintiffs in a suit accusing
Ohio Savings Bank (OSB) of violating the prohibition against kickbacks
contained in the Real Estate Settlement Procedures Act (RESPA). The
plaintiffs claim that the bank paid an illegal kickback to a mortgage
broker in connection with their residential mortgage, and sought to
include as class members other mortgage borrowers. Golan v. Ohio Savings
Bank, No. 98 C 7430 (ND IL, Oct. 15, 1999).

Plaintiffs Donald and Janice Golan funded the purchase of their home
with what is known as a table-funded mortgage loan. Table-funding refers
to a residential mortgage that is processed by a mortgage broker and
funded by a bank which receives assignment of the note and the mortgage.
The Golans used Midwest Financial Group Inc. as their broker and OSB as
their lender. Midwest charged the Golans $420 in fees for its services.
At the closing on the purchase, the Golans discovered that OSB paid
Midwest a yield spread premium of $1,612.50.

The Golans subsequently filed suit against OSB in the U.S. District
Court for the Northern District of Illinois, alleging violations of
RESPA, 12 U.S.C. Sec. 2601 et seq. The Golans took the position that the
yield spread premium was not listed in the document detailing a good
faith estimate of settlement costs, and alleged that OSB paid the
premium to brokers when the interest rate charged to borrowers was
higher than its minimum available rate. They asserted that the premium
was an illegal kickback under Sec. 8 of the RESPA.

After filing the complaint, the Golans sought class certification,
hoping to include all those who borrowed money via a table-funded
mortgage where OSB paid a broker an amount which was determined by the
borrower's interest rate rather than by the services actually rendered.
OSB opposed the certification, claiming that the Golans could not
satisfy the requirements set out in Rule 23 of the Federal Rules of
Civil Procedure.

The district court stated that under Rule 23(a), the plaintiffs must
meet four requirements for class action status. First, the plaintiffs
must show that the class is so numerous as to make joinder of all
members impracticable. There must be questions of law or fact common to
all class members, and the claims or defenses of the representative
plaintiffs must be typical of all those in the class, the court
continued. Lastly, the representative plaintiffs must be able to fairly
and adequately protect the interests of the class, the district court
said. In addition, under Rule 23(b)(3) certification is allowed when
questions of law or fact common to the class predominate over questions
affecting only individual class members and when a class action suit is
the superior way to efficiently adjudicate the matter.

The district court then discussed RESPA, its accompanying Regulation X
and the Department of Housing and Urban Development's Policy Statement
1999-1, which concerns yield spread premiums. The policy statement
provides that the payment of such premiums by lenders to brokers is not
per se illegal, the judge said. There is a two-pronged test for
determining whether the payment of premiums is covered by the RESPA
prohibition against kickbacks, the district court stated. First, it must
be determined whether services were actually performed in exchange for
the compensation paid. Second, the court must decide whether the
payments were reasonably related to the value of the services performed.

The district court stated that it would assume that the plaintiffs met
the four requirements of Rule 23(a), and then proceeded to discuss
predominance under Rule 23(b). The policy statement directs that
plaintiffs seeking class certification must show that the broker premium
unreasonably exceeds the value of the services performed by the broker,
the judge said. A plaintiff cannot rely on a showing that the premium
was not connected to the services. The policy statement therefore
requires an individual examination of each transaction in order to
determine what services were provided and whether the total compensation
for those services was reasonable in each case. Under the policy
statement's test, common questions concerning the transactions at issue
do not predominate over questions affecting individual class members,
the judge held. The motion for certification was therefore denied. (See
Document Section D for the opinion.) (Bank & Lender Liability Litigation
Reporter December 15, 1999)
PATTERSON: PA Ct Agrees to Lack of Informed Consent for MD's False Ans.

In a case of first impression, the Pennsylvania Superior Court has held
that false answers to a patient's questions about a surgeon's experience
and competence may form the basis of a claim for lack of informed
consent. Duttry v. Patterson, No. 199 MDA 1999 (Pa. Super. Ct. Oct. 5).

The plaintiff had undergone surgery for esophageal cancer; following the
surgery, a leak occurred along the suture site; eventually, the sutures
ruptured, requiring emergency surgery. Represented by Richard A. Wix of
Wix, Wenger & Weidner in Harrisburg, Pa., the plaintiff claimed that
because of the defendant's faulty surgical technique, she developed
adult respiratory distress syndrome and sustained permanent lung damage.
A jury returned a verdict for the defendant physician and medical group,
who were represented by Linda Porr Sweeney of Porr & Associates in
Lancaster, Pa. The plaintiff appealed, claiming that the trial court had
erred in not allowing her to present testimony relating to the number of
such surgeries the defendant had performed: Although he allegedly
claimed to do one such surgery per month, on average, he had actually
performed it only five times in the preceding five years. Reversing, the
appellate court held, "A surgeon who... misleads the patient into
believing that the hands of an experienced surgeon will be performing
the operation does not have the true consent of that patient." (Medical
Malpractice Law & Strategy December 1999)

REPAP ENTERPRISES: TD Bank Wages Bankruptcy; Shareholders Plan to Sue
Toronto-Dominion Bank threatened to push Repap Enterprises Inc. into
bankruptcy last spring if the company didn't pay the bank a special fee,
court documents say. The bank allegedly demanded a $200,000 (U.S.
dollars except where noted) fee or it would ruin a $100-million
financing Repap arranged to stay solvent and pay off a TD loan,
according to the documents filed in the first week of this year as part
of a lawsuit by former Repap chairman Steven Berg.

'Berg believed that the actions and demands of [TD officials] might
constitute violations of criminal statues and securities laws of the
United States and thereafter ceased all contact with [TD officials],'
the suit claims. None of the allegations has been proven in court.

TD officials deny any wrongdoing. 'In our view, the claim is legally and
factually without merit and obviously we intend to defend ourselves
against it vigorously,' Kym Robertson, a TD spokeswoman, said.

Mr. Berg, 65, has been involved in a bitter feud within Repap for nearly
a year. The fight pits him against a group of shareholders, led by TD
Asset Management Inc., an arm of TD Bank, and Stephen Larson, Repap's
chief executive.

Repap, based in Connecticut, trades on the Toronto Stock Exchange and
owns one paper mill, located in New Brunswick.

Mr. Berg was removed as chairman in August and the company's new board
has filed a lawsuit to terminate his employment contract, which the
board alleges is too generous.

In the first week of 2000, Mr. Berg sued Mr. Larson, Repap and TD for
$25-million over his ouster. Sources say some Repap shareholders have
also contacted the U.S. Securities and Exchange Commission and the U.S.
attorney's office in New York about the allegations in his lawsuit.

Sources say another group of shareholders also plans to file a class
action over the clash, which they claim has cut the company's share
price to 7.5 cents (Cdn) from 12.5 cents (Cdn) a year ago. Mr. Berg owns
32 million Repap shares.

Hap Stephen, Repap's chairman, said the board backs Mr. Larson and the
company denies Mr. Berg's allegations.

Mr. Berg's lawsuit provided new details of the feud which has been
raging since he became chairman last January.

Mr. Berg alleges he was misled about Repap's finances by Mr. Larson. He
claims he was not told that Repap considered filing for bankruptcy in
1998 because of its $1-billion debt.

Mr. Berg also alleges that shortly after he joined Repap, Mr. Larson and
two other executives sought $1.6-million in special payments. Mr. Berg
refused and Mr. Larson and another executive agreed not to take the
money. However, Terry McBride, chief financial officer, took his
$300,000 and was fired by Mr. Berg, he alleges. Mr. McBride has
re-joined Repap. Mr. Larson has said they were entitled to the payments
under their employment contracts because there had been a change of
control in 1998.

Mr. Berg alleges that Repap's finances were so bad that he considered
filing for bankruptcy last spring. But in May, he finalized a
$100-million financing to pay off a series of loans including one held
by TD.

However, Mr. Berg alleges TD officials demanded the $200,000 fee and
generally hampered the financing in order to gain control of Repap. He
also claims Mr. Larson feared being fired and lined up TD to begin a
shareholder revolt to force Mr. Berg out.

The shareholders allege Mr. Berg's compensation package -- $420,000
salary, $ 1.25-million signing bonus and stock options -- is too
generous. Mr. Berg says he did not take the signing bonus and was not
paid a salary until the financing closed.

Mr. Berg also alleges that former Repap director Marshall Cohen, who is
also a TD director, was furious at the bank's dealing with Repap and
tried to raise the matter at a TD board meeting. However, Mr. Berg
alleges Mr. Cohen backed down when a TD lawyer told him they were about
to lead a shareholder revolt.

Repap's five outside directors, including Mr. Cohen, resigned in June
when the revolt was launched. In a letter to TD, the directors praised
Mr. Berg's work as chairman but said they were leaving to help end the
fight. Mr. Berg was removed as chairman two months later. (National Post
(formerly The Financial Post) January 05, 2000)

SEARS ROEBUCK: IL Ap Ct Oks Dismissal of Charge over Used Car Batteries
Automobile Battery (Fraudulent Concealment):Kelly v. Sears Roebuck and

The Illinois Appellate Court has rejected a proposed class action
brought by a man claiming that Sears Roebuck and Co. deceived consumers
by selling used car batteries as new. Kelly et al. v. Sears Roebuck and
Company, No. 1-98-2317 (IL App. Ct., 1st Dist., 5th Div., Nov. 5, 1999).

The plaintiff, according to the First District, did not sufficiently
allege an injury as required under the Illinois Consumer Fraud Act.

Tim Kelly, who filed the proposed class suit, had bought a DieHard
automobile battery from an Ocala, FL, Sears automotive center in the
fall of 1995. Before making the $79 purchase, Kelly had seen and heard
Sears' television advertisements for its DieHard batteries, which
allegedly indicated that the store sold nothing but new batteries. Kelly
also did not receive any indication, upon his visit to the automotive
center, that used batteries were being offered for sale or that Sears
mixed new and used batteries together for retail sale.

Two months after the battery was purchased and installed in his van, the
DieHard failed while he was in the Florida Keys. Kelly took his car to a
Sears store 60 miles away, where an employee determined that the battery
was bad and recommended a new product. Kelly did, however, receive a
$51.72 refund in accordance with the terms of the warranty.

Kelly thereafter sued Sears in Cook County Circuit Court alleging that
he had been injured by the store's "deceptive practices" of selling used
batteries as if they were new. In the suit, he claimed that all Sears
batteries carry a risk of poorer performance due to Sears' practice of
intermingling used and new batteries.

The trial court, in an opinion by Judge Aaron Jaffe, granted Sears'
motion to dismiss the complaint on the basis that Kelly failed to assert
that his battery was actually used, "bad," or that he otherwise suffered
an injury. If Kelly's proposed class action were allowed to go forward,
Judge Jaffe said everyone who has ever purchased a Sears battery could
bring a suit.

In upholding Judge Jaffe's decision, the appellate court rejected
Kelly's argument that a risk that a product may fail is a compensable
injury sufficient to state a cause of action under Illinois law. Kelly's
allegation that he "believed" he received a defective battery does not
allege a cognizable injury under the state's Consumer Fraud Act, the
three-judge panel said. "We reject the proposition that all of the
batteries Sears sold are defective because some of them may have been
used," the panel wrote.

The panel added that although Kelly did charge that the fair market
value of a battery known to be new is substantially greater than the
fair market value of a battery that runs a substantial risk of being
used, his allegations are "speculative and are insufficient to
adequately state a compensable injury." The injury that Kelly may have
suffered as a result of Sears' alleged fraud was redressed when the
warranty provisions were fulfilled and his battery was replaced, the
panel said. (Consumer Product Litigation Reporter, December 1999)


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

Class Action Reporter is a daily newsletter, co-published by Bankruptcy
Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc.,
Washington, DC.  Theresa Cheuk and Peter A. Chapman, editors.

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

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