/raid1/www/Hosts/bankrupt/CAR

/raid1/www/Hosts/bankrupt/CAR_Public/000114.MBX C L A S S A C T I O N R E P O R T E R Friday, January 14, 2000, Vol. 2, No. 10 Headlines BOARD OF ED.: Parent at Brockton, MA Sues over Education Reform Failure BOHARIC: IL Judge Overturns State Law on Fees From Telephone Cos CERIDIAN CORP: Savett Frutkin and Milberg Announce MN Securities Suit DEBT COLLECTORS: 7th Cir Again Looses Ire at Abuse Of Class Actions FARMERS INSURANCE: Contractor Rejects Offer For (Bleep)-Load Of Money HELMS, U.S.: High Court Hears Arguments On School Internet Access HOLOCAUST VICTIMS: Poland to Fight Proposed Limits on Comp for Seizures INMATES LITIGATION: Judge Tells NYC to Assure Schooling in Rikers Jail MCINTOSH SAWMILL: Logging Co’s Sawmill Is Illegal, Georgia Ct Rules MERIT ENERGY: Canadian Ct Denies Class Status for Shareholders’ Suit PAYDAY LENDERS: Edelman, Combs Sues 3 IL and 1 in High-Interest Lenders RACIAL PROFILING: Ct Limits AZ Suit Re Hispanic Looking Drivers TOBACCO LITIGATION: Big Tobacco Reads The Smoke Signal for Going Online TOBACCO LITIGATION: FL Governor Bush Wants Upfront Cash from Settlement WAR VICTIMS: Senator Wants Japan to Compensate for U.S. Victims Of War WAR VICTIMS: Sp Ct in Japan Rejects Claims by Korean Conscripts in WWII * NJLJ Says Lawyers Lack Guidance on the Dishonesty of Overbilling ******** BOARD OF ED.: Parent at Brockton, MA Sues over Education Reform Failure ----------------------------------------------------------------------- Petite and ponytailed, Julie Hancock is an energetic 11-year-old who plays softball, is a cheerleader, and is learning to play the French horn. While it seems the popular and bright sixth-grader at Hancock Community School represents all that is right with education, she is going to be the lead plaintiff in a lawsuit that will try to show the courts all that is wrong. "I want to help Brockton get the money we really need for books and smaller classrooms," said Hancock, on being the new torchbearer for better education. "I want to make sure we make it through, even though we don't have as much money as richer towns." Seven years after a landmark ruling poured billions of dollars into schools across Massachusetts, Hancock and her father, Maurice, are joining a dozen other plaintiffs who say education reform has not yet worked. In reopening the McDuffy case, named for then-sixth-grader Jami McDuffy, they join a fierce debate over whether education reform has truly done enough to close the gap between less affluent districts such as Brockton and top performers such as Harvard, Newton, and Wellesley. Critics of the case believe the plaintiffs will have a hard time convincing a judge that the billions spent on education reform have not improved even the most challenged districts. "Since the last case, the Commonwealth has spent $6 billion in new money, and it's hard to understand how that hasn't been considered living up to their obligation," said State Education Commissioner David P. Driscoll. "Other than that, we'll have to see how it plays out; what the issues are in respect to education adequacy and quality." But most of the McDuffy plaintiffs feel the state has not done enough to ensure their school districts are fairly funded, adequately equipped, and properly staffed to be competitive on the MCAS exam. "These are children from different towns saying, 'We're not getting the education the Commonwealth ought to be providing,' " said Michael Weisman, attorney for the students and their parents. "It has become clear that the Education Reform Act is not accomplishing what has to be accomplished; schools are still overcrowded, teachers are not adequately trained, and the MCAS results are abysmal. The buck stops with the state." And with the education reform funding formula set to expire this year, districts such as Brockton and Lowell fear their schools will be left financially wanting if their voices are drowned out by wealthier districts with more political clout in the Legislature. "I will keep fighting to improve our schools. If the threat of court action can help in that fight, then this legal challenge can play a constructive role in improving the quality of education in the Commonwealth," said Senate President Thomas F. Birmingham. Led by Weisman, the plaintiffs filed a "motion for further relief" with the Supreme Judicial Court on Dec. 22. So far four communities have signed on to the suit, with at least a dozen more expected to join. The case will be renamed "Hancock v. the Board of Education" and several students are expected to testify. The case, however, begins with Julie Hancock, as it did nearly nine years ago with freckle-faced Jami McDuffy. Jami's father, Scott, was a member of the Brockton School Committee; Maurice Hancock now sits on the committee. Both fathers are employed by the Brockton Fire Department and they are good friends. As Maurice Hancock walked through the Hancock School (no relation) one day last week, he pointed to the gym converted to an art class and storage area, and poked his head into a storage room turned into offices and a conference area. Although average class size is about 25 now, down from a high of nearly 60 in one class in the early 1990s, more needs to be done in his district, Hancock said. "We were down so low before education reform, it took us much longer to build up and get new materials and hire enough teachers just to keep our heads above water," he said. "So now, even though billions have been spent on education reform, districts like ours - with diverse populations and low real estate values - still don't have the chance to compete with the Lincolns of the world. And we think the suit is an appropriate way to make the state do the right thing to make our districts better." In 1993, a judge ruled in favor of the McDuffy plaintiffs, saying the state owed cities and towns more of a moral and financial commitment to bring depressed school districts, such as Lowell, in line with stellar performers such as Lexington. Two months after the verdict, the Education Reform Act was signed into law and many credit the McDuffy case as a key catalyst. Now, seven years later, Jami McDuffy hopes the case not only wins again but has an even more substantial impact. A sophomore at Stone hill College, McDuffy, 19, wants to be a teacher in her hometown, where she learned so many lessons about education, politics, the challenges of being in class with 57 students, and, most importantly, how to be a symbol of change. "I was proud of what I stood for," she said. "I was in the sixth grade and all these television cameras were following me around. I would say things like, 'I just hope my books don't fall apart anymore. . .' I think my teachers did a reasonably good job with the supplies and circumstances they were in, and I guess it left an impression on me." McDuffy said she hopes that by the time she becomes a teacher, education will be more equalized - as promised - and no other 11-year-old will have to be the flag-bearer for fairness. "I'm just hoping that all the promises that were made to equalize opportunities will be met some day," she said. "I know we're still not up there with the Westwoods of the state, but I know improvements have happened, and I hope it continues to increase." (The Boston Globe January 13, 2000) BOHARIC: IL Judge Overturns State Law on Fees From Telephone Cos ---------------------------------------------------------------- The ruling on January 11 by Circuit Judge Robert V. Boharic could leave Mayor Richard M. Daley's budget $ 44 million short. City and state officials said they would appeal directly to the Illinois Supreme Court. The 1998 Telecommunications Municipal Infrastructure Maintenance Fee Act lets Chicago impose a 2 percent fee on wireless and landline telephone companies for putting equipment on streets, alleys and other public rights of way. Other towns can impose a 1 percent fee. The law requires that the fees be passed on to consumers. The law was challenged by PrimeCo Communications. Boharic ruled it should be exempt since wireless companies have no equipment on public rights of way. He went on to find the law unconstitutional. PrimeCo attorney Caesar Tabet said cities would have to stop imposing the fee immediately, but city and state officials said they expected to keep charging the fee until the high court decides the case. (Chicago Daily Law Bulletin January 12, 2000) CERIDIAN CORP: Savett Frutkin and Milberg Announce MN Securities Suit --------------------------------------------------------------------- The following was released on January 13 by Savett Frutkin Podell & Ryan, P.C. and Milberg Weiss Bershad Hynes & Lerach: SUMMARY NOTICE OF CLASS ACTION, CONDITIONAL CLASS CERTIFICATION, SETTLEMENT AND FAIRNESS HEARING TO: ALL PURCHASERS OF CERIDIAN CORPORATION ("CERIDIAN") COMMON STOCK DURING THE PERIOD JANUARY 23, 1996 THROUGH AUGUST 26, 1997, INCLUSIVE. This Notice is given pursuant to Rule 23 of the Federal Rules of Civil Procedure and the January 3, 2000 Order of the United States District Court for the District of Minnesota, Third Division. The purpose of this Notice is to inform you that the action brought in the Court as a class action on behalf of the purchasers of Ceridian common stock during the period January 23, 1996 through August 26, 1997, inclusive, has concluded in a proposed settlement of $ 5,175,000, before any award of attorneys fees and costs. The action alleged violations of the federal securities laws and Minnesota law. If you purchased the common stock of Ceridian during the period January 23, 1996 through August 26, 1997, inclusive, you may be eligible to share in the settlement, and your rights will be affected by the proposed settlement. On January 13, 2000, a Notice, including a Proof of Claim and Release, was mailed to potential class members. That Notice contains important information regarding the rights of class members and a form that must be completed to share in the settlement. If you believe you are a member of the class as defined above, and if you have not received a copy of the Notice by mail, you may request a copy free of charge by mailing your request to: Claims Administrator, Ceridian Securities Litigation, P.O. Box 2370, Minneapolis, MN 55402-0370. PROOF OF CLAIM AND RELEASE FORMS MUST BE FILED BY CLASS MEMBERS BY JUNE 26, 2000. Lead counsel for the Plaintiff Class in this matter are Savett Frutkin Podell & Ryan, P.C., 325 Chestnut Street, Suite 700, Philadelphia, PA 19106 (215) 923-5400 and Milberg Weiss Bershad Hynes & Lerach, 100 Pine Street, Suite 2600, San Francisco, CA 941l1 (415) 288-4545. A HEARING ON THE FAIRNESS OF THE SETTLEMENT AND CLASS COUNSELS' REQUEST FOR THE ATTORNEYS FEE AND EXPENSES WILL BE HELD ON MARCH 21, 2000 AT THE UNITED STATES COURTHOUSE IN MINNEAPOLIS, MN. For more information, please contact the Claims Administrator, in writing, at the address listed above. DO NOT TELEPHONE THE CLERK OF COURT REGARDING THIS NOTICE Dated: January, 13, 2000 BY THE ORDER OF THE COURT UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA CONTACT: Claims Administrator, Ceridian Securities Litigation, P.O. Box 2370, Minneapolis, MN 55402-0370 DEBT COLLECTORS: 7th Cir Again Looses Ire at Abuse Of Class Actions ------------------------------------------------------------------- Displaying impatience with the all-too-common abuse of the class action," a federal appeals court panel has blasted three debtors who sued a company that stuffs envelopes for a collection agency. In an opinion released January 11, a panel of the 7th U.S. Circuit Court of Appeals said the debtors should have been sanctioned for what amounts to malicious prosecution." The panel said the debtors should not have included the envelope-stuffing company or a shareholder of the collection agency as defendants in a lawsuit alleging violations of the Fair Debt Collection Practices Act, 15 U.S.C. sec1692. The joinder of these defendants illustrates the all-too-common abuse of the class action as a device for forcing the settlement of meritless claims and is thus a mirror image of the abusive tactics of debt collectors at which the statute is aimed," Chief Judge Richard A. Posner wrote for the panel. Joining in the opinion were Judges Daniel A. Manion and Ilana Diamond Rovner. Patricia White, et al. v. Jerome Goodman, et al., Nos. 98-4180, 98-4328 and 98-4329. Plaintiff Patricia White was represented before the 7th Circuit by Daniel A. Edelman, while the other two plaintiffs were represented by Cathleen M. Combs. Edelman and Combs are name partners in Edelman, Combs & Latturner, a Chicago firm that represents consumers in class-action suits. The White opinion was issued a week after Posner and Rovner in an unrelated case took aim at what they apparently considered to be an example of the misuse of the class-action method of litigation. In the earlier case, Posner and Rovner joined Judge Frank H. Easterbrook in tossing out a settlement reached in a class-action suit accusing Equifax Check Services Inc. of violating the Fair Debt Collection Practices Act. In an opinion written by Easterbrook, the panel said the settlement would have benefited the plaintiffs' attorney and the class representative at the expense of the class members. Lawrence Crawford v. Equifax Payment Services Inc., et al., Nos. 99-1973 and 99-2122. In the opinion in the White case, the 7th Circuit panel affirmed a decision by U.S. District Judge James B. Moran to dismiss two suits that had been brought against North Shore Agency Inc. One of those suits had been filed by White after she received a letter from the collection agency demanding payment of the princely sum of $ 18.45" to Book-of-the-Month Club, the panel said. The panel said other defendants named in White's class-action suit were Book-of-the-Month Club, the company that stuffs and mails envelopes for North Shore and a North Shore shareholder named Jerome Goodman. The panel said Book-of-the-Month Club has an arrangement with North Shore in which the agency attempts to collect debts from customers who have not paid for their books. The panel said North Shore probably sues some delinquent customers on behalf of Book-of-the-Month Club just so that the club does not get a reputation as being a particularly easy mark for people who like to get their books free." But because debts to the club are small, the panel said, North Shore's collection efforts apparently are limited in most situations to sending a series of dunning letters to the customer. The panel said White's suit was consolidated with a similar -- but more limited -- action that had been brought against North Shore by two other debtors. The panel made it clear it believed that Goodman and the envelope-stuffing company should not have been included as defendants in the consolidated case. So far as the joinder of defendants other than North Shore and Book-of-the-Month Club is concerned, the suits are frivolous and the plaintiffs, represented by an experienced practitioner in consumer finance litigation, should have been sanctioned for what amounts to malicious prosecution," the panel said. The Fair Debt Collection Practices Act is not aimed at the shareholders of debt collectors operating in the corporate form unless some basis is shown for piercing the corporate veil, which was not attempted here, Aubert v. American General Finance Inc., 137 F.3d 976, 979-80 (7th Cir. 1998), or at companies that perform ministerial duties for debt collectors, such as stuffing and printing the debt collector's letters." On the merits of the plaintiffs' claims, the panel rejected the allegation that North Shore was guilty of flat-rating." Flat-rating is the practice of providing a form that creates the false impression that someone besides the creditor is participating" in collecting a debt, the panel said. The panel said the practice's name stems from the fact that the form's provider presumably charges a flat rate for the form. Flat-rating is prohibited by the Fair Debt Collection Practices Act because of the signal, conveyed by turning over a debt for collection, that the creditor does not intend to drop the matter," the panel said. Congress' concern was that such deception might induce debtors to abandon legitimate defenses," the panel said. Whether the concern was well founded is not for us to say." The panel said the act also bars a creditor from falsely suggesting that a third party is involved in the collection of a debt. The panel, however, said the fact that Book-of-the-Month Club does not initially assign a debt to North Shore does not make the collection agency a flat-rater in violation of the Fair Debt Collection Practices Act. It is ironic that the named plaintiffs in a class action directed against a debt collector should be accusing the debt collector of being insufficiently aggressive in its efforts to collect debts owed by the members of the class; but in any event the claim was correctly dismissed," the panel said. The panel also rejected the claim that consumers were deceived by a dunning letter in which North Shore said it was required to inform Colorado residents of certain rights they had under state law. The panel said the debtors contended that including that information in the letter implies that nonresidents of Colorado do not have similar rights, whereas in fact the Fair Debt Collection Practices Act itself confers similar rights on debtors." In other words, the reader of the paragraph is assumed to react by saying to himself, Since I'm not a resident of Colorado, I guess I have no right to limit further communications from this pesky debt collector,' " the panel said. But the panel said that scenario is fantastic conjecture." A recipient of such a letter who lives outside Colorado would be more likely to assume that the paragraph had nothing to do with him," according to the panel. And the panel indicated that the Fair Debt Collection Practices Act goes just so far to protect consumers. The Act is not violated by a dunning letter that is susceptible of an ingenious misreading, for then every dunning letter would violate it," the panel said. The Act protects the unsophisticated debtor, but not the irrational one." (Chicago Daily Law Bulletin January 12, 2000) FARMERS INSURANCE: Contractor Rejects Offer For (Bleep)-Load Of Money --------------------------------------------------------------------- Farmers Insurance Group agreed to pay millions to settle a whopping judgment that has saddled Simi Valley condo owners, but the offer was turned down by the debtor, homeowners attorneys announced on January 12. The insurance company told ZM Corp. in mediation Jan. 7 it would consider paying "a (bleep)-load of money" in order to settle a $7.3 million judgement, Jim Lingl, attorney for the the Le Parc Homeowners Association, told homeowners. Only the Arcadia contractor reneged on the deal, he said. "At the mediation session, ZM made a settlement offer that Farmers Insurance agreed to settle," Lingl said. "Farmers was prepared to put a lot of money on the table -- I can't say how much because of confidences (incurred by) mediation but it was many, many millions of dollars." A ZM attorney said earlier he would settle the six-year dispute for more than $5 million -- but that Farmers never offered the money. Farmers officials said they don't discuss matters of mediation and declined to comment. "It was withdrawn," Glenn Campbell, a ZM attorney, said of the offer. "They didn't pick it up, they sat on it for five days, planning our destruction. "Screw 'em." Lingl made his announcement to more than 100 Le Parc homeowners clustered in semidarkness around a community swimming pool. Robert Long, representing the Le Parc Community Association, confirmed the offer. During the meeting, homeowners were informed that Farmers was willing to pay the $166-a-month assessments already paid by residents since October toward the debt. Farmers' attorneys had won an automatic stay on further payments pending the results of one of many appeals. Lingl said legislation is being introduced in Sacramento that would retroactively limit the liability of Le Parc homeowners and prevent such an occurrence from ever happening again. The Le Parc saga began in 1998 with an arbitration ruling that determined the Le Parc Homeowners Association broke a contract with ZM and slandered the contractor during earthquake repairs in 1994, thereby ruining his business. The dispute became a legal sinkhole after the courts ordered the special assessment and allowed a receiver to defer months of maintenance and utilities dues in order to pay the contractor. A class-action suit was filed against Farmers, the former Le Parc insurance provider, last month. Lingl said Campbell told him that if Farmers is willing to shell out $3 million and Le Parc homeowners another $2 million -- payable for 10 years at $68 a month -- ZM would wash its hands of the affair. But the offer does not allow residents time to notify a public meeting and vote, Lingle said. (Ventura County Star (Ventura County, Ca.) January 13, 2000) HELMS, U.S.: High Court Hears Arguments On School Internet Access ----------------------------------------------------------------- The Clinton administration's plan to spend $ 800 million to provide Internet connections in all public and parochial schools may be affected by the Supreme Court's determination as to whether a school computer can remain religiously neutral. The court heard arguments in the case Dec. 1 (Mitchell v. Helms, U.S., No. 98-1648, argued 12/1/99). At issue in Mitchell v. Helms is the Elementary and Secondary Education Act of 1965 that gives public school districts federal money for special services and instructional equipment and requires that the funds be shared with all private schools in the district. The controversial aspect of the law has grown due to the Clinton administration's proposal to link all classrooms, including those in parochial schools, to the Internet in order to enhance the quality of education and teach children the skills needed to survive and prosper in an e-business world. Private and parochial schools in Louisiana's Jefferson Parish received books, supplies, and later computers under a federal program authorized by the 1965 law. The case was argued one day short of the 15th anniversary of what was originally a general lawsuit involving all public assistance that could go to parochial schools. But over the years the suit evolved to focus on the question of providing computers and other equipment. Louisiana taxpayers complained about the funds for computers going to religious schools. And last year, the Fifth Circuit ruled that the 1965 law violated the separation between church and state. The Clinton Administration sided with the parochial school parents who appealed the ruling, arguing that the high-tech assistance was a neutral policy that did not support claims of religious indoctrination. University of Utah Law Professor Michael McConnell, representing seven Jefferson Parish Catholic school parents, argued that computers can be used for strictly nonreligious purposes. But Lee Boothby of Washington, D.C.'s Boothby &Yingst, representing Mary Helms and Marie Schneider, parents who initially challenged the program, said that it would be impossible to tell whether religious schools are using government provided computers for strictly secular purposes. Justice Stephen Breyer expressed doubt that the court could ban computers from being given to private schools absent evidence that they were being used for religious purposes. He added that in four years of discovery, the attorneys for the taxpayers had not uncovered any evidence that Jefferson Parish parochial schools had been using their government-financed computers for religious purposes. Court watchers said that the justices seemed to be split on the matter, with O'Connor and Kennedy seen as swing votes. During the arguments, Scalia appeared to be more sympathetic to allowing public funding of Internet access, and Souter and Stevens seemed the most skeptical. The decision will also tie into other related but separate issues such as school vouchers. The court is expected to rule on the case by late June. (The Internet Newsletter including legal.online, December 1999) HOLOCAUST VICTIMS: Poland to Fight Proposed Limits on Comp for Seizures ----------------------------------------------------------------------- Poland's government pledged on January 13 to fight a proposed legislative amendment that could exclude tens of thousands of Polish emigres in the United States and other countries from compensation for property seized by the former Nazi and communist regimes. The restriction, added to a compensation bill by a parliamentary committee, would limit payments to Polish citizens who have lived in Poland for five years at the time the law takes effect. Committee members said the original bill would expose Poland to huge claims the country count not afford to pay. The Solidarity-led government's chief spokesman, Krzysztof Luft, said the government would stick to its original proposal for broader eligibility, including people ''who lost their property, went to live abroad and have a different passport today, or their heirs.'' ''Such is the government draft, and we still support it,'' he said. Luft was responding in part to complaints by some members of the U.S. Congress, who sent a letter to government and parliamentary leaders calling the amendment ''arbitrary and discriminatory.'' The Polish daily Rzeczpospolita, in a report from Washington, said the letter was sent by the Congressional Commission on Security and Cooperation in Europe. Signatories included the commission's chairman, Representative Christopher H. Smith, and Senator Frank Lautenberg, both from New Jersey. Foreign Ministry spokesman Pawel Dobrowolski said the government was aware of anger over the amendment and suggested the battle is far from over. ''This is still not a final phase. This is only a parliamentary committee's decision,'' he said. The parliament sent the measure to a special committee in October, where the amendment was proposed by deputes from the Polish Peasants Party. They got backing from some Solidarity legislators who said they feared the original wording would leave the cash-strapped government swamped in claims. Because the communist regime seized farms and factories across the country, as well as all of central Warsaw, some predict that Poland could face as many as 170,000 claims totaling dlrs 27 billion to dlrs 32 billion. That is about equal to Poland's annual federal budget. Government officials did not specify how they would fight the amendment, but the Solidarity-led coalition has been forced in the past to put pressure on rebellious Solidarity party lawmakers to get legislation approved. Attempts to pass similar bills have collapsed at least twice previously, reflecting Poland's continuing difficulty in coming to terms with its communist past despite its largely successful political and economic reforms. The current government-backed draft would offer 50 percent compensation to people whose property was seized between 1939 and 1962. The government proposes to pay compensation in bonds or return the equivalent of half of confiscated property if it still exists and has no new private owner. National parks and monuments would be exempt. Two class-action suits, one in New York by 11 American Jews and one in Chicago by four plaintiffs, have sought compensation from the Polish government for seized property. The Chicago case was dismissed in September, while the New York case is still pending. (AP Worldstream January 13, 2000) INMATES LITIGATION: Judge Tells NYC to Assure Schooling in Rikers Jail ---------------------------------------------------------------------- A federal judge has told New York City officials to devise a plan to educate all school-age inmates held on Rikers Island. The ruling came in a class action suit filed in 1996 by the Legal Aid Society on behalf of inmates between the ages of 16 and 21. The lawyers who filed the suit acknowledged that since then, the Board of Education and the city's Department of Correction have made improvements by adding an academy, providing more instructors and starting a program in which teachers tutor inmates in their cells. But they said the ruling by Judge Constance Baker Motley of United States District Court in Manhattan shows that some inmates eligible for an education at Rikers are still not receiving sufficient educational services. The plaintiffs' lawyers are especially critical of the city for what they claim is a continuing failure to provide special-education programs for everyone who needs them, though school officials say up to 40 percent of all education-eligible male inmates require such instruction. Judge Motley's brief ruling, which will be followed by a formal opinion, orders the city to submit a plan for "full and complete educational facilities and services to all eligible Rikers Island inmates" by April 14. The plaintiffs have until June 12 to file objections to the city's plan. "There have been ad-hoc improvements, because this lawsuit has forced the two agencies to finally talk to each other," said Mary Lynn Werlwas, who represented the school-age inmates along with another Legal Aid lawyer, Dori Lewis. "The big problem is there is still not a coherent system for the Board of Education and the Department of Correction to work together to provide education to the inmates." Janice Birnbaum, an assistant corporation counsel who defended the city, disputed Legal Aid's assertions and said the plan that Judge Motley ordered the city to submit will detail measures that have already been instituted to improve educational services. "The city's position, truthfully, is that pretty much effectively right now, the current provision of educational services on Rikers Island more than meets the letter of the law," Ms. Birnbaum said. She acknowledged that before the suit was filed, instruction was not always available to inmates who were segregated from the general population or restricted to their cells. Since the cell-study program was started last September, she said, teachers have been reaching those students and providing homework materials. In addition, a new academy, Horizons, was founded in 1998 and last year had a daily attendance of 146 students in 6 of Rikers' 10 jails. Ms. Birnbaum also strongly rejected the assertion that special education programs are lacking, saying, "We dispute that and we don't think that's right." Ms. Birnbaum said that class size was rarely larger than 18 students per teacher, far smaller than the ratio in the city's public schools. She also lauded teachers in the jail. "I can't pretend that Rikers Island is the garden spot of the city and teachers are flocking to Rikers Island, but I can say that the quality of the teachers on Rikers is very high," she said. Because 52 percent of Rikers' inmates leave within two weeks of entering the jail, Legal Aid lawyers could not say how many education-eligible inmates are not receiving instruction. Department of Correction officials, however, said the vast majority of those who take classes are enrolled in Horizons and three other high school-equivalent institutions that in 1999 had an average daily attendance of about 1,100. When the suit was filed, Legal Aid lawyers noted there were 2,854 inmates between the ages of 16 and 21 on Rikers Island. Last year, the average population for that age group was 1,531, 540 of them ages 16 and 17. The average daily population of all inmates in the 10 jails that comprise Rikers was 14,416 in 1999. Those eligible for an education include 16- and 17-year-old inmates, who are required by city law to attend classes full time. Educational services must also be offered to inmates between 18 and 21 who do not have a high school diploma. The Legal Aid lawyers argue that, despite the improvements at Rikers, many deficiencies remain, including fluctuating space for teaching and a failure to provide some segregated inmates with instruction. In addition, Gloria Ortiz, the principal of Horizons Academy, said in a deposition related to the lawsuit that on 20 occasions during the 1998-1999 school year, inmates in wheelchairs who are housed in an infirmary were unable to attend class because of a lack of guards to escort them. Richard Organisciak, superintendent of alternative adult- and continuing-education schools and programs for city schools, said providing continuing education for all eligible inmates is difficult in a prison, where disturbances, the constant turnover of inmates, and students' special needs create problems unknown in a regular school setting. Yet school officials have worked to enhance education, he said, while minimizing disruptions. "We are getting better at this, given the variety of intervening factors that make it very difficult to provide consistent educational services," he said. "We have evidence to show that our inmates there are getting higher quality attention, materials and support for their educational needs." (The New York Times January 13, 2000) MCINTOSH SAWMILL: Logging Co’s Sawmill Is Illegal, Georgia Ct Rules ------------------------------------------------------------------- A Superior Court judge ruled on January 11 that a Camden County logging company cannot operate a sawmill on a piece of land it owns next to a McIntosh County church. Superior Court Judge Paul Rose issued a summary judgment for the plaintiffs, two dozen Meridian residents. Meridian residents filed suit in May asserting that the county had not enforced its own zoning laws in allowing Drury Logging Co. to operate on land zoned forest-agriculture. The residents had also sued over a barge constructed on the site last summer, but the barge was moved to the Meridian dock a short distance from the church and put into service. Lawyer Hal Wright, who represented the plaintiffs, said there is nothing wrong with the logging operation or a sawmill but that neither could take place at the property on Georgia 99 under the current zoning. 'The issue was whether the county was following their own regulations,' Wright said. Because there had been no similar cases filed in Georgia, Wright said he had to cite cases from other courts in other states that found a sawmill is a manufacturing operation and not forestry, Wright said. Stanley Drury, who owns Drury Logging, had announced plans to build a sawmill on the site last year but later canceled those plans. Building Inspector Jimmy Amerson said Drury had not sought a building permit since. Wright said the County Commission could ultimately rezone the property to allow for industrial use, but Parkinson said he and other residents would oppose such a change. 'I don't think McIntosh County would allow that rezoning,' he said. The McIntosh County Commission and the county building and zoning inspector were named in an earlier suit filed by Meridian residents seeking to have a barge removed from near their homes and a local church. (The Florida Times-Union (Jacksonville, FL) January 12, 2000) MERIT ENERGY: Canadian Ct Denies Class Status for Shareholders’ Suit -------------------------------------------------------------------- Merit Energy Ltd. confirms that on January 7, 2000, the Court of Queen's Bench of Alberta declared that the lawsuit filed by three former shareholders of Belfast Petroleum Inc. seeking rescission and/or damages from Merit in connection with Merit's acquisition of Belfast cannot proceed as a representative, or "class" action. As a result of this decision, the claim has been amended so that it is being brought by certain specific plaintiffs only, and not on behalf of a "class", and the damages being claimed have been reduced from $25.3 million to $8.8 million. The Company continues to actively defend this action. As a further result of the above decision, an additional plaintiff has filed a statement of claim seeking rescission and/or damages in the amount of $1.5 million from Merit in connection with the Belfast acquisition. This statement of claim has not been served on the Company. Merit has also been advised that a statement of claim has been filed in Ontario seeking rescission and/or damages from it in connection with the issuance by it of "flow-through" common shares on August 17, 1999. This statement of claim has not been served on the Company. In the event that either of the above claims is served, Merit shall defend the action vigorously. In respect of its ongoing disposition program, Merit announces that on January 7, 2000 it closed an asset sale for consideration of $7.9 million. Further, merit has entered into agreements to sell additional properties for total consideration of $14.2 million. In aggregate, these additional properties, together with the aforementioned disposition, represent approximately 700 barrels of oil equivalent per day of production, net to Merit. The proceeds from these asset sales will be used to pay down indebtedness. PAYDAY LENDERS: Edelman, Combs Sues 3 IL and 1 in High-Interest Lenders ----------------------------------------------------------------------- The Chicago law firm of Edelman, Combs & Latturner has filed class action lawsuits against four more high-interest "payday lenders," three in Illinois and one in Indiana. The Illinois lenders are: * Illini Cash Advance * Great American Cash Advance * Cash For Payday Inc. The Indiana lender is: * ACE Cash Express, Inc. Illini Cash Advance makes what are nominally two-week loans at 520% interest. Great American charges 521%. Cash for Payday charges 677%. Ace Cash Express charged 456%. All of the complaints allege violation of the Truth In Lending Act, as well as the making of unconscionable loans and violation of the Illinois Consumer Fraud Act through the making of unconscionable loans without proper disclosures. The cases are Donnelly v. Illini Cash Advance, 00 C 94, Burgin v. Great American Cash Advance, 00 C 96, and Davis v. Cash for Payday Inc., 00 C 34, filed in the federal district court in Chicago, and Rowings v. Ace Cash Express, Inc., IP 99-1887 C-B/S, filed in the federal district court in Indianapolis. Contact: Daniel A. Edelman of Edelman, Combs & Latturner, 312-739-4200, toll-free, 800-644-4673, or fax, 312-419-0379 RACIAL PROFILING: Ct Limits AZ Suit Re Hispanic Looking Drivers --------------------------------------------------------------- A federal appeals court sharply limited the scope of a lawsuit accusing the Border Patrol of targeting Hispanic-looking drivers in southern Arizona. In an 11-0 ruling, the 9th U.S. Circuit Court of Appeals dismissed a suit that claimed Border Patrol officers engaged in racial profiling in eight Arizona counties, commonly stopping motorists because of their appearance and without reason to suspect any wrongdoing. They sought no damages, only a court order prohibiting stops of drivers without reasonable suspicion of wrongdoing. The court allowed two plaintiffs to seek damages on their own behalf but said they cannot act as representatives in a class-action suit "that would restructure the operations of the Border Patrol and that would require ongoing judicial supervision." The ruling did not address the allegations that Hispanics were targeted, a practice long prohibited by federal court rulings. The court oversees federal courts in nine Western states. A lawyer for the drivers said he would appeal to the Supreme Court. The ruling "means that the ability of minorities to stop these kinds of abusive practices has diminished greatly," said attorney Armand Salese. (Chicago Tribune December 22, 1999) TOBACCO LITIGATION: Big Tobacco Reads The Smoke Signal for Going Online ----------------------------------------------------------------------- Carl Mortished finds out why BAT wants more government controls on smoking. Why don't you sell cigarettes over the Internet? Martin Broughton, chief executive of BAT, is brought up short by this question. The idea of tobacco.com ought to appeal to a company that has been almost deserted by investors. There is a silence ... "Well, watch this space," he says. "Tell me more." "No, I shan't," he responds. Pressed further, Broughton says that BAT has been mulling over the idea, but his attitude remains ambivalent. Cigarettes over the Web are as much a threat as an opportunity. Another weapon with which the Government, doctors, lobbyists and lawyers could beat up the already bruised giant that is BAT. Search the Internet for the word "cigarette" and you will find plenty of mail-order retailers, mostly American and many on Native American reservations - RedNationTobacco.com, Big Bear Discounts. Their gambit is a tax-free puff. And the possible spread of unregulated offshore tobacco e-tailers to Europe and this island is something that BAT worries about, even if the Government has yet to notice the smoke signals. BAT's chief has not broached the subject with ministers, but that is scarcely surprising. New Labour's romance with business has its limits. Drug companies, beer barons and even arms dealers all have their routes, albeit circuitous, to Downing Street, but tobacco, it seems, is a stench ministers cannot abide. "They have gone deliberately confrontational. They say: we are going to pass legislation, but we don't want to talk to you. We will talk to everybody and anybody except you." BAT, and the other members of the smoker's club, Imperial Tobacco and Gallaher, have been retaliating in the courts, in particular a recent unsuccessful challenge to the Government's early adoption of EU advertising restrictions. They are now resigned to fighting their case in Brussels, but what irritates Broughton more than the restrictions is lack of access to the policymakers. He points out that the Government has a big stake in the tobacco business and clearly he resents being treated like a drug-dealer at the school gate. Broughton recognises the concern about smoking among under-16s. "We proposed putting the age up to 18 because that is what it is in most countries. The UK is out on a limb at 16, but they won't change. They think, because the proposal comes from the tobacco industry, there must be some devious motive." Could there be an element of mischief? BAT's proposed 18 limit somehow became linked to the Government's plans to reduce the homosexual age of consent to 16. But behind the sniping is a larger issue that Broughton believes the Government is ducking. It has to do with civil liberties and regulating an industry that will not go away. No one contemplates banning tobacco and at the moment, as Broughton points out, the Government has the best of both worlds. "It takes the profit but does not have the responsibility of running it. The UK Government makes more money out of tobacco in this country than BAT does worldwide." Tobacco is a golden goose, but the Treasury is force-feeding it. Regular rises in tobacco duty have opened the door wide to smugglers - BAT claims it is now 18-20 per cent of the market. And smuggling is skewing tobacco consumption figures. "The Government says, 'See what success we have had in driving down consumption'. But consumption is static - the share of big tobacco is going down, while the share of the fringe element is going up." The cigarettes may be Benson & Hedges or Embassy or products from Serbia or China, all sourced abroad. Step forward the Internet, an ideal opportunity to expand this parallel market. According to BAT, it has already started with occasional fly-by-night retailers in Gibraltar or Spain exploiting the price differential. "Our problem with the Internet is trying to prevent distributors from selling to minors and getting us into trouble. The access controls are just not there. We are trying to find ways to make sure the Internet can be used in a responsible way to ensure no one without proper access is there." It could be a perfect marketing solution - targeting adult smokers directly without the expense and controversy of advertising in public. The irony is that BAT, a keen supporter of the people's right to choose to smoke, desperately wants the Government to exercise more control, not less. In addition to age limits, Broughton is challenging the Government on another taboo subject. "We don't think that kids should smoke and we think there are other things that can be done. ID cards." As he sees it, the anti-smoking campaigners have created a bogeyman: big tobacco. But big tobacco, in the form of BAT, Philip Morris, Gallaher and Imperial, is the solution, says Broughton. It is more able to control distribution, restrict access to children, and pay the statutory rent to big tobacco's biggest stakeholder: the Treasury. If the Chancellor does well out of tobacco, investors have had a torrid time. Battered by litigation fears and a stock market that has almost abandoned all interest in food and household product manufacturers, the stock price of BAT has halved in 12 months, making "big tobacco" Pounds 7 billion smaller. In Florida, a class action by smokers alleging injury is wending its way through the courts. Now, in its second phase, a jury is to consider damages and the defendants, including BAT's subsidiary, Brown & Williamson, are challenging its right to award a lump sum, potentially hundreds of billions of dollars. In the circumstances, Broughton might be forgiven for looking around for some other product to sell. But investors have told BAT to focus, not diversify. The demerger of BAT's insurance arm is two years old and Broughton insists that tobacco still offers growth opportunities. "Maybe in ten years' time it will be fair to say it has gone ex-growth. In 1996, we set ourselves the objective of becoming the largest international tobacco company within ten years." BAT is gunning for Philip Morris, but dethroning the Marlboro Man may take more than a bit of extra spend in the ad department. The Pounds 5 billion takeover of Rothmans in April means that BAT now sells almost one out of every six cigarettes worldwide. BAT used the opportunity to close down cigarette plants, reducing costs and boosting its margin. The process could be replicated and Broughton is keeping a watching brief on every significant tobacco manufacturer. That includes the recent comedy of Gallaher's failed attempt to intervene in the merger of France's Seita and Tabacalera of Spain. He muses that the French and Spanish have now created a world-leading cigar company. "They have not stated this as a strategy, but I could see a second stage - why be in the cigarette business? Is it not better to be a world leader in cigars than a fringe player in cigarettes." Would BAT be a buyer? "We are interested in any of these opportunities," says Broughton. If Broughton is right, big tobacco is going to get a lot bigger before the last smoker stubs out his cigarette, a development that may force ministers to rethink their relations with the industry. "We don't expect the Government to like us, but perhaps, eventually, they will come to respect us." They may have little choice. (The Times (London) January 13, 2000) TOBACCO LITIGATION: FL Governor Bush Wants Upfront Cash from Settlement ----------------------------------------------------------------------- Gov. Bush needs legislative approval to sell investors half of future tobacco revenues rather than risk receiving less money. Like a lottery winner who wants his winnings in a lump sum today rather than getting payments over time, Gov. Jeb Bush wants to turn some of the future proceeds from the state's windfall tobacco settlement into upfront cash. Florida is expected to get $ 17.4-billion from tobacco companies during the next 30 years as a result of a 1997 lawsuit settlement. But that figure is just an estimate; the payments are tied to the tobacco companies' domestic cigarette sales. Bush is worried that major lawsuits against the tobacco companies and declining sales could leave Florida with far less than originally estimated. Bush's answer? He wants to sell half of Florida's future revenues to investors. The investors would assume the risk that the tobacco companies would actually make payments totaling $ 8.3-billion. In return, the governor's office estimates that the state could get $ 2.4-billion in upfront cash. The state would put that money into a special fund, invest it and earn interest. Assuming a decent rate of return, the governor's office estimates that the $ 2.4-billion would grow to at least the original $ 8.3-billion during the next 30 years. Bush said that his plan was prompted by a shortfall this year. The state learned last month that this year it will receive $ 71-million less than expected. The state is using the tobacco money to finance health and human service programs. Bush said his plan ensures that the income stream for those programs is more stable. "There is a real concern that this money won't be around," Bush said during a news conference. "We're diversifying our risk away from the tobacco companies." There are reasons to worry. Some of the tobacco money is being used for an anti-smoking campaign. If successful, the number of smokers - and thus cigarette sales - would drop. Bush also pointed to a South Florida class-action lawsuit against tobacco companies. A jury last year found that the industry hid the effects of smoking and could be held liable for smoking-related illnesses. Though damages have not yet been awarded, the prospects of a huge judgment that could potentially bankrupt the industry caused tobacco stocks to fall. Bush also is concerned that the tobacco companies might be unable to make payments if the federal government follows in the footsteps of states, which sued the tobacco companies to recover medical costs incurred treating poor people with smoking-related illnesses. The governor would have to get approval for his plan from both the Legislature and Cabinet. There, the reaction is mixed. Comptroller Robert Milligan said that although he is willing to consider the plan, he wants to see evidence that this year's shortfall was more than a temporary blip. He said the state might be trading one set of risks for another: There's no guarantee that the market will hold up and that the $ 2.4-billion in upfront cash would earn enough interest over time to equal the $ 8-billion in future revenue the state would be giving up. "I've not yet seen the logic, the rationale for this. Someone's seat-of-the-pants assessment isn't what I would call solid rationale," said Milligan, a member of the Cabinet. "There certainly are some risks. The question is, do we want someone else to assume those risks at a cost to us, what is that cost and does it make sense?" Lawmakers of the governor's party were willing to consider the idea but wanted more information. "It's a bird in hand," said Republican House Speaker John Thrasher, who added that the Florida class-action lawsuit could "wreck the tobacco industry." "It's worth looking at," he said. State Rep. Tom Feeney, an Oviedo Republican who is slated to succeed Thrasher, agreed. "Right now we have all of our risk in one basket - the tobacco companies," Feeney said. "I think the governor's suggestion ... makes sense." But Senate Majority Leader Jack Latvala, R-Palm Harbor, said Milligan is right to urge a cautious approach. "We need to take a close look before we jump out on this," said Latvala. "It needs a lot of study." Meanwhile, Democrats were wary. Senate Democratic Leader Buddy Dyer said he worries that lawmakers will dip into the $ 2.4-billion rather than investing it over the long term. "I want to be mindful that they don't get the 2-billion bucks and then give it out in tax breaks the year before Jeb runs for re-election," he said. Dexter Douglass, general counsel to the late Gov. Lawton Chiles and a chief player in the state's tobacco lawsuit, was even more critical. He said Bush's plan might amount to a sweetheart deal for the tobacco companies. The companies could "buy" the state's future revenues as a way to pay the state a fraction of what they owe. The companies would reduce their long-term liability - a move that would help them with shareholders, Douglass said. "It would be a good deal for whoever buys it," Douglass said. "Nobody connected with the settlement ever seriously considered this." (St. Petersburg Times January 13, 2000) WAR VICTIMS: Senator Wants Japan to Compensate for U.S. Victims Of War ---------------------------------------------------------------------- On the 58th anniversary of the Japanese attack on Pearl Harbor, a leading Republican senator stepped up demands for Japan to heal old war wounds and compensate U.S. World War II veterans who endured war crimes at the hands of their Japanese captors. Sen. Orrin Hatch, a Republican from Utah, released a letter he sent to Secretary of State Madeleine Albright demanding that the State Department press the government of Japan to compensate survivors of the Bataan Death March in the Philippines and slave labor in Japan. "A 55-year-old injustice imposed on our military forces held as prisoners of war in Japan during World War II has yet to be corrected," Hatch wrote. "What is also troubling is that the administration (has) taken no action to press Japan to right the wrong." The Bataan Death March claimed the lives of more than 10,000 American and Filipino prisoners of war in April 1942. Survivors suffered torture and starvation in prison camps or were forced to serve as slave laborers for Japanese companies until the end of the war. Hatch is chairman of the influential Senate Judiciary Committee and one of six Republican contenders for the presidential nomination in the 2000 election. He vowed to pressure the administration of President Bill Clinton and the government of Japan "until fair and complete justice is achieved." "If necessary, I will schedule hearings before the Senate Judiciary Committee," Hatch threatened in a statement released to the media. Hatch's move is the latest salvo in a growing effort by some World War II veterans and sympathetic leaders in the U.S. Congress to seek justice from Japan and heal old war wounds. Last month, Sen. Dianne Feinstein, a California Democrat, began a new legislative push to declassify and release all United States government documents related to Japanese war crimes during World War II. Earlier this fall, members of the U.S. House of Representatives and the Senate submitted bills that would make Japanese companies subject to damage suits from victims of forced labor and other unjust practices during World War II. The two bills, if enacted into law, would likely lead to an increase in the number of suits filed by former U.S. POWs against Japanese companies over forced labor. The bills would also open the way to more suits from victims of medical experiments by the Imperial Japanese Army's Unit 731. As many as 17 lawsuits have already been filed in the U.S. by former POWs against Japanese companies over their wartime forced labor on the basis of state laws. In California, a new law allows victims of slave labor to sue multinational corporations like Mitsubishi Corp. and Nippon Steel Corp. for damages in state courts. But while these veterans have a new legal approach, they do not have an easy case. In the 1950s the U.S. government had extensive knowledge of prison atrocities but needed Japan as an ally in Asia. Thus in 1951, it signed the San Francisco peace treaty with Japan that appears to give away the rights of these victims. "We cannot do anything about (compensation) now," argued Shunji Yanai, the Japanese ambassador to the U.S., at a news conference in November. "The U.S. Congress cannot say it is not aware of the San Francisco treaty." Even so, scores of former POWs, now in their 70s and 80s, have filed class-action law suits against Japanese companies, hoping for apologies and compensation. The veterans and their lawyers take heart from an ongoing effort by the German government and a German industry fund to compensate forced laborers of the Nazi era. U.S. lawyers prosecuting a massive class-action suit on behalf of the surviving victims are very near an agreement with Germany for several billions of dollars in restitution. Meanwhile, the Japanese companies being sued in U.S. courts are taking shelter under the San Francisco treaty. Recently, however, Mitsubishi admitted that compensation and an apology were moral issues that deserve investigation. In his letter to Albright, Hatch hailed the German effort to make amends for the victims of the Nazi holocaust and the U.S. government's voluntary restitution of Japanese-Americans who were interred in camps during the war. "It is my hope and expectation that the Japanese government will now make amends ... I am certain that the injustices these brave men suffered can be corrected," Hatch said. (Asian Political News, December 13, 1999) WAR VICTIMS: Sp Ct in Japan Rejects Claims by Korean Conscripts in WWII ----------------------------------------------------------------------- The Supreme Court rejected a suit demanding that the Japanese government apologize and pay compensation to eight Koreans, four of them deceased, who were punished as war criminals for serving as civilian employees in the Japanese military during World War II. The top court's First Petty Bench, upholding a high court ruling, rejected the plaintiffs' argument that Japan should pay compensation in accordance with society's basic sentiments as Japan has no legislation to compensate foreigners conscripted into its military. Presiding Judge Motoo Ono said such basic sentiments do not exist, rejecting their demand for a total of 14 million yen. But Ono showed sympathy to the Koreans, saying, "In light of the seriousness of the suffering the plaintiffs have gone through, we can understand they are dissatisfied with the absence of legal measures." The plaintiffs were four former civilian employees conscripted into the Imperial Japanese Army and the bereaved families of four other such conscripts. According to the suit, the conscripts were sent to Thailand during the war to supervise the construction of a railway linking Thailand with Burma, now Myanmar, by Allied prisoners of war. The Koreans were detained by the Allies after the war as Class-B and -C war criminals. They were later sentenced to death or given long prison terms, the suit said. One of the conscripts was executed. "We were forcibly conscripted by the Japanese army and detained for a long time as war criminals after the war. But we didn't receive any compensation from Japan or South Korea," one of the plaintiffs said in the suit. The Tokyo District Court ruled against the plaintiffs in September 1996 and the ruling was upheld by the Tokyo High Court in July 1998. The courts determined that only the Diet could decide whether the Japanese government should pay compensation to Korean servicemen and employees of Japan's wartime military. The district court ruling was the first on Class-B or -C war criminals of Korean origin who were conscripted into the imperial military. The high court acknowledged a need for new laws to deal with the issue, because war criminals of Korean origin suffer immense disadvantages compared with Japanese war criminals. Under the 1952 San Francisco Peace Treaty, Koreans who were forced to take Japanese citizenship during Japanese colonial rule had that citizenship revoked, making them ineligible for Japanese government war pensions. (Asian Political News, December 27, 1999) * NJLJ Says Lawyers Lack Guidance on the Dishonesty of Overbilling ------------------------------------------------------------------ Lawyers' fees are controlled, supposedly, by one elementary rule, RPC 1.5(a), which says they shall be reasonable. That rule is tested -- and too often breached -- every day. In "Blue-Chip Bilking," a recent study in the Georgetown Journal of Legal Ethics, Lisa Lerman names 16 partners at large firms, each of whom allegedly stole more $100,000 from clients and/or partners in the past 10 years through billing or expense fraud. The subject has many facets. While even the most sophisticated client may fail to detect overbilling, it is the inexperienced and uninformed who are the most likely victims. Big business organizations and other wealthy clients negotiate lawyer fees and expenses; they may obtain competing bids, even dictate the cost of various services, e.g., paralegal services. Unsophisticated clients have no fee-controlling capacity; they trust lawyers to treat them fairly. When that trust is abused, the entire bar is tarnished. Lawyers' fees are controlled, supposedly, by one elementary rule: They shall be reasonable. RPC 1.5(a). That rule is tested and too often breached -- every day. The major influence on lawyer billing practices has been the movement of the profession, during several decades, from one operated with a dominant interest in service, ethics, reputation and skill to one with a dominant interest in business, with money as the measure of success. Many lawyers, of course, do not accept that measure, especially small-town lawyers, small-firm lawyers, solo practitioners, prosecutors, defense counsel, public defenders, and legal service providers -- a list not intended to be comprehensive. Surveys show that these lawyers put service, challenging work, congenial, supportive associates and respect, well ahead of monetary concerns. These are the true professionals. Boston College Law Dean Dan Coquillette recognized them in an interview a few years ago: "When the profession begins to lose its self-respect, it is devastating to these lawyers. It makes a tremendous difference to them that they are professionals and not just pursuing a business. ... When the big ethical disputes come before the ABA, it is not the partners in the big law firms who espouse the highest principles, but the small lawyer groups, because to them being a lawyer is very important." The effects of using business practices to shape the practice of law are easily documented. Bar associations, interested in the business-like management of law offices and a wider understanding of the value of lawyers' services, once adopted fee schedules to cover common transactions. The purpose: improving income and lessening competition. Brethren who charged lower fees were frowned upon. These schedules were abolished when it was recognized that they violated the antitrust laws. Separate billing of overhead costs, such as postage and telephone, became the rule, thus adding these items to basic fees which previously included them. Copy machines provided an easy way to keep clients informed and impressed with copies of pleadings, briefs, correspondence, etc. -- separately and profitably billed. One New York firm touted its copy machines as "major profit centers." Advertising, a marketplace, business-getting device, long shunned by lawyers as unbecoming, was generally forbidden by ethics rules. It became available to lawyers because the Federal Communications Commission would not distinguish law practices and business organizations, ruling that advertising provided an important source of public information that could not be prohibited. Imitating the Business World Lawyers now hawk their wares everywhere. Advertising, almost always loaded with inflated rhetoric, has been a leading force in the bar's descent to the marketplace, where it rubs shoulders with and shares the ethics of a business crowd that is interested almost exclusively in getting and spending money. Business teachings stressed the importance of tracking lawyers' time, using hourly rates for billing purposes as a way to increase income. Lawyers responded enthusiastically, charging hourly rates that varied widely and still do. Those with fee-controlling clients, such as insurance defense lawyers, might be held to $90 per hour or less. Uncontrolled lawyers may charge $150, frequently much more. Fees respond to competition and one's own views of one's monetary value. Firms impose some discipline, but rates are the province of partners reacting to competition and anticipated profit shares. Hourly fees generate more than rate problems. Hours charged may represent generous estimates. Usually, hours are calculated quarterly and rounded, more often up than down. A 10-minute telephone call is billed as 15 minutes. Minimum times may be adopted for these calls as well as for correspondence, regardless of actual time spent. Law firm associates are required to produce large amounts of annual billable hours; 2,000 hours is standard, 2,500 possible. This requirement ensures firm profits. An associates' 2,000 hours, charged at $75 per hour (a conservative figure), produces a very tidy, business-like income of $150,000, likely at least double the associate's salary. The pressure to produce 2,000 billable hours causes predictable, hard-to-distinguish from fraud, malpractice. Generating 2,000 billable hours is not easy. It may require an expenditure of 3,000 actual hours, or about 60 hours per week, if an associate works 52 weeks per year. Associates, fearful of consequences if they fail to produce, are tempted to pad their records. They may exaggerate time spent, for example, in research, or include time spent on matters unrelated to their firm as billable time. Partners themselves, as "Blue-Chip Bilking," demonstrates, may pad. Paralegals now perform many tasks that lawyers once performed. Big firms employ dozens of them. Like lawyer-associates, they represent profitable investments. Paid perhaps an average of $15 to $20 per hour, their services may be billed -- separately from lawyer fees -- at as much as $90 per hour. Business organizations charge what the traffic will bear. No law prohibits that. The rule is caveat emptor. While that is not the rule for lawyers, it appears to be one for those whose hourly rate techniques are described here. Contingent fees often fail the "reasonableness" test. New Jersey regulates these fees, restricting them to allowable percentages on a sliding scale. But the rule of reasonableness still applies -- theoretically. The fact is that lawyers, almost universally, charge the maximum permitted percentage in every case. Cases with different risks are not distinguished. An accident case involving clear liability, in which the only issue is "How much?," costs clients as much as one involving complex liability issues. Fee Sharing Our rules permit the confidential sharing of fees by certified attorneys with those who refer cases to them. Referrers are not required to contribute services and have no responsibility for the conduct of litigation. A standard split is a lucrative one for referrers -- probably 30 percent, a finder's fee to make even business executives blush. Bribing public officials to get business is unlawful -- unless disguised by another name: "campaign contributions." Business organizations have used them effectively for generations. Lawyers have aped them, successfully purchasing lucrative appointments and retainers with campaign contributions. The ABA has tried to bar them as unethical, but has been unable to convince its governing body to bite the bullet. Rules are only as effective as their enforcement. Enforcement sometimes depends on judges, but judges have proven to be unreliable reasonable fee calculators. Frequently, in class action suits, excessive portions of recoveries are allocated to lawyers instead of damaged parties, An example is the tobacco settlement. Lawyers and judges lack adequate guidelines for fixing fees. Ethics rules and judicial opinions list factors to be considered, such as time, result, novelty, skill, and customary charges (RPC 1.5), but all of these factors are subject to widely varying, subjective interpretations as well as manipulation. Fee rules could be enforced through random audits by Supreme Court ethics committees. They have never undertaken that responsibility, except in the relatively few cases initiated by disgruntled clients. RPC 8.3 provides: "A lawyer having knowledge that another lawyer has committed a violation of the Rules of Professional Conduct that raises a substantial question as to that lawyer's honesty, trustworthiness or fitness as a lawyer in other respects, shall inform the appropriate professional authority." This rule, if obeyed, could curb fraudulent and unethical billing practices. It is honored only in the breach. A strong current effort aims to improve the professionalism of lawyers everywhere. Dishonesty is the opposite of professionalism. The effort should be directed in part to the improvement of fee practices. Education can help. Most of all, lawyers need much more guidance than that provided by RPC 1.5. That rule needs conscientious application in actual situations so that its correct meaning becomes clear. And courts must take much more interest in the proper enforcement of the rule, an interest much lacking. (The author is a retired Burlington County assignment judge and former president of the State Bar Association whose column appears monthly in the Law Journal.) (New Jersey Law Journal, January 3, 2000) ********* 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. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The CAR subscription rate is $575 for six months delivered via e-mail. 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