CAR_Public/000202.MBX               C L A S S   A C T I O N   R E P O R T E R

              Wednesday, February 2, 2000, Vol. 2, No. 23

                             Headlines

ASBESTOS LITIGATION: Lieff, Cabraser Sues W.R. Grace over Mining in MT
CAPITAL ONE: Late Fees Are Not Unlawful Liquidated Damages, IL Ct Rules
ESSO AUST: Will Defend Workplace Safety Charges over Longford Explosion
FREEMARKETS: Weiss & Yourman Files Securities Lawsuit in PA
HMO: PacifiCare Announces Layoffs & Plans for Technology Improvements

JUNK FAXES: Law Journal Says Class Litigation May Be a Money-Maker
LI SAVINGS: TILA Covers Inaccurate Disclosures of Finance Charges
MARINER POST: CO Ct OKs Preclusion of Recovery of Medicaid Funds
MARINER POST: Contests PA Case over Training & Cert. of Nurse Aides
MARINER POST: Files Petitions for Bankruptcy in Delaware under Ch 11

MARINER POST: FL Case over Healthcare Facility Voluntarily Dismissed
MARINER POST: Former Employee Filed Case in TX under False Claims Act
MARINER POST: TX Case Alleging False Claims Re Services Has Been Closed
MARINER POST: Vigorously Contests AL Complaint over Employment Matters
MARINER POST: Vigorously Contests FL Case over Breach of Fiduciary Duty

MARINER POST: Vigorously Contests MI Claims over Medicare Payments
MEDICAL MANAGER: Y2K Litigation Tab Totals $2,366,000 in FY1999
MOOLAH LOAN: IL Ct Certifies Class for Suit over Unclear Loan Documents
NY STATE: Suit Contends Mental Care for Children Is Inadequate
PACIFIC TELESIS: Fraudulently Induced Workers to Retire, CA Suit Says

PRIVACY BREACH: Canadian Paper Says Ontario Govt Sells Data on Citizens
TOBACCO LITIGATION: Arbitration Panel Announces Atty. Fees for LA Case

* Rulings Say Communication Is Main Factor in Insurance Class Cert.
* Legislating: Gun Control; Class Actions; Chapter 7; Product Liability
* The Daily Telegraph(London) Brings out Legal Issue Re U.S. Softwares

                               *********

ASBESTOS LITIGATION: Lieff, Cabraser Sues W.R. Grace over Mining in MT
----------------------------------------------------------------------
Darrell W. Scott of Lukins & Annis, P.S. and Elizabeth Cabraser of
Lieff, Cabraser, Heimann & Bernstein, LLP, announced on January 31 the
filing of a class action lawsuit against W. R. Grace & Co., for medical
monitoring and environmental remediation in connection with tremolite
asbestos-contaminated vermiculite ore mining operations conducted for
over 60 years at Zonolite Mountain in the City of Libby in Lincoln
County, Mont. (Dorrington and Sather v. W. R. Grace & Company et. al.,
Lewis & Clark County, Montana, case no. to be assigned).

According to attorneys Darrell Scott and Elizabeth Cabraser, "the class
action lawsuit seeks a court order creating and implementing a
court-controlled, defendant funded, medical diagnostic program for the
benefit of exposed residents and workers. The proposed program would
include: (1) medical screening to ensure the early detection and
treatment of diseases caused by tremolite, including asbestosis, lung
cancer and mesothelioma; (2) maintenance and operation of a medical
registry that keeps track of relevant health data; (3) dissemination of
medical data to public and private health institutions to promote
significant medical research into new treatments for the often-deadly
diseases caused by tremolite; (4) and funding of beneficial medical
research and procedures for prompt reporting to health-care providers of
developments relating to the diagnosis and treatment of these diseases."

The class action suit alleges a pattern and practice of unsafe mining
operations and the longstanding concealment, by W. R. Grace & Co., of
the true hazards, and continuing dangers, of tremolite exposure.
Tremolite asbestos is an especially deadly form of asbestos because it
consists of tiny needle-like fibers which are sharply pointed and easily
penetrate the linings of the lungs. The lungs are unable to remove
tremolite asbestos that has speared into lung tissue, and the tremolite
spears cannot be coughed out or washed out of the lung tissues by blood.
As a result, affected lung areas become inflamed and eventually the lung
areas become heavily scarred and non-functional. Eventually, it becomes
impossible to breath effectively because oxygen cannot get into the
lungs and carbon dioxide and other impurities cannot get out.

Scott and Cabraser stated that "the medical monitoring class action is
necessitated by the inadequacy of W. R. Grace & Co.'s voluntary efforts,
which would cover only a tiny fraction of the costs necessary for
adequate screening of those exposed. The W.R. Grace & Co. proposal fails
to include screening of thousands of workers and their households,
nationwide, who were directly exposed to tremolite contaminated
vermiculite; lacks a beneficial medical research component; and fails to
formally involve medical physicians and researchers most knowledgeable
about tremolite exposure."

Darrell Scott, whose offices are in Spokane, Wash., about a two and
one-half hour drive from Libby, said: "It is a tribute to the character
of those who live in Libby that they have endured so much and for so
long. They live in one of the most beautiful spots in this country. We
are hopeful that this litigation will achieve significant progress
toward ensuring that Libby, Montana is also a safe and healthy place to
live and raise families." Scott and Cabraser also expressed interest in
ensuring that W. R. Grace & Co., and not the taxpayers of Montana,
shoulder the costs associated with W. R. Grace's mining activities in
Libby.

If any present or former Lincoln County resident or any vermiculite
processing worker, or their household members, who processed vermiculite
ore from Zonolite Mountain in Lincoln County wish to speak to an
attorney in connection with their rights, they may contact Darrell Scott
of Lukins & Annis at 509/455-9555 or 888/760-7000 and/or Fabrice Vincent
of Lieff, Cabraser, Heimann & Bernstein, LLP at 415/956-1000 or
800/254-3079 or by e-mail to fvincent@lchb.com

                           FACT SHEET

Plaintiffs: The class representative plaintiffs are Andy Dorrington, who
is a resident of Libby, and Marvin Sather, who resided in Libby for some
years and is presently a resident of Spokane.

Defendants: W.R. Grace & Co.

Court: The lawsuit was filed Jan. 31, 2000 in Montana State Court in the
City of Helena, located in Lewis and Clark County, Mont.

Claims Alleged: The Class Action lawsuit alleges violations of the
Montana Constitution; negligence; private and public nuisance; trespass
and strict liability for ultra hazardous activity. Article II, Section 3
of the Montana Constitution provides: all persons are born free and have
certain inalienable rights. They include the right to a clean and
healthful environment and the right to pursuing life's basic
necessities, enjoying and defending their lives and liberties,
acquiring, possessing and protecting property, and seeking their safety,
health and happiness in all lawful ways.

Relief Sought: The Class Action Complaint seeks medical monitoring and
related beneficial medical research and environmental remediation and
restoration.

Contact Attorneys: Darrell Scott at Lukins & Annis, P.S. in Spokane and
Elizabeth J. Cabraser and Fabrice Vincent at Lieff, Cabraser, Heimann &
Bernstein, LLP, in San Francisco. You may visit Lukins & Annis at
http://www.lukins.comand visit Lieff, Cabraser, Heimann & Bernstein,
LLP at http://www.lchb.com


CAPITAL ONE: Late Fees Are Not Unlawful Liquidated Damages, IL Ct Rules
-----------------------------------------------------------------------
The common law doctrine of unlawful liquidated damages does not apply to
late fees imposed by credit card issuers in Virginia. The state's
statutory law allows banks and savings institutions, in the event of
untimely account payments, to assess late charges at such rates as
agreed to by the lender and borrower in the cardholder agreement. Perez
v. Capital One Bank, No. 990677 (Va. 11/5/99).

Carmen Perez, an Illinois resident, filed a class action against Capital
One Bank in the U.S. District Court for the Northern District of
Illinois. She alleged that the late fees charged to her Capital One
credit card account constituted unlawful liquidated damages under
Virginia common law. Common law characterizes damages assessed upon
breach of contract to be unenforceable penalties if the damages are
"prone to definite measurement or when the stipulated amount would
grossly exceed actual damages ... ."

                         Cardholder Agreement

Perez's Customer Agreement with Capital One provided that the agreement
was governed by Virginia and federal law, and that the bank could impose
an 20 late charge when a customer failed to make a timely payment.
Section 6.1-330.63(A) of the Virginia Code provides "any bank or savings
institution may impose finance charges and other charges and fees at
such rates and in such amounts and manner as may be agreed by the
borrower under a contract for revolving credit ... ."

Perez contended that Capital One imposed late fees that ranged from 10
to 29. She further contended that the Code did not preclude her from
bringing an unlawful liquidated damages claim because the language of
Section 6.1-330.63(A) did not clearly rescind the common law of
contracts.

Capital One, a Virginia limited-purpose credit card bank, responded with
a motion for summary judgment. It argued that Virginia common law was
replaced by Section 6.1-330.63. Specifically, Bank One relied on Section
6.1-330.63's statement, "Any lender ... may impose a late charge for
failure to make timely payment of any installment due on a debt, ...
provided that such late charge does not exceed [5] percent of the amount
of such installment payment and that the charge is specified in the
contract between the lender ... and the debtor."

                          Certified Question

The District Court reserved its ruling on the motion and certified the
following question to the Virginia Supreme Court:

Does Section 6.1-330.63 preclude a challenge, under the common law
doctrine of unlawful liquidated damages, to late fees included in
contracts between credit card issuers and cardholders, where those
contracts are governed by Virginia law?

Writing for the Supreme Court, Justice Stephenson explained that the
court accepted the plain meaning of the Code section and did not
consider the rules of statutory construction, legislative history or
extrinsic evidence. The court concluded that the Virginia General
Assembly, in enacting Section 6.1-330.80, intended to abrogate the
common law rule prohibiting a penalty and to remove the 5 percent cap on
charges imposed by banks under credit contracts.

Because the court held that the plain language of the Code "perpetuates
the abrogation of the common law rule," it answered the District Court's
certified question in the affirmative. (Consumer Financial Services Law
Report, December 29, 1999)


ESSO AUST: Will Defend Workplace Safety Charges over Longford Explosion
-----------------------------------------------------------------------
Esso will defend itself against a raft of workplace safety charges when
it goes on trial later this year over the 1998 Longford gas disaster in
which two men died. Esso entered not (not) guilty pleas in Melbourne
Magistrates Court to 35 WorkCover charges alleging an unsafe workplace,
lack of proper training and supervision, and nine other summary
offences.

The oil and gas giant faces fines in excess of $9 million if it loses
the Victoria County Court trial to be held after April 4. WorkCover laid
the 44 charges last September, just four days before the first
anniversary of the explosion and fire at Esso's Longford natural gas
processing plant in Victoria's south-east.

John Lowery and Peter Wilson were killed, eight of their colleagues
injured and gas was cut off to homes and industry in the September 25,
1998, explosion. An inquest into the deaths of Mr Lowery and Mr Wilson
has been postponed until after the trial. A royal commission found the
disaster was caused because Esso had not properly trained its workers.

WorkCover barrister Robert Richter, QC, on February 1 handed Magistrate
Barbara Cotterell a hand-up brief detailing the charges. Ms Cotterell
ordered Esso to stand trial in the County Court on a date to be fixed,
not before April 4. Esso waived its right to a committal hearing.

A spokesman for WorkCover said each of the 35 charges carried a maximum
possible penalty of a $250,000 fine. The nine summary offences carried
maximum $40,000 fines, and were adjourned separately until a date to be
fixed. Esso is also facing a class action suit seeking compensation for
damages following the explosion - also a state record at $1.3 billion.
(AAP Newsfeed, February 1, 2000)


FREEMARKETS: Weiss & Yourman Files Securities Lawsuit in PA
-----------------------------------------------------------
Weiss & Yourman commenced a class action lawsuit in the United States
District Court for the Western District of Pennsylvania on behalf of
purchasers of FreeMarkets shares between December 10, 1999 and January
4, 2000.

The complaint charges FreeMarkets and certain of its executive officers
with violations of the Securities Exchange Act of 1934. The complaint
alleges that defendants misrepresented or omitted information regarding
the Company and its business operations. The misrepresentation and/or
omission of information caused the Company's stock price to plummet.

For more details on the above mentioned lawsuit, please contact Moshe
Balsam, (888) 593-4771 or (212) 682-3025 or via internet electronic mail
at wynyc@aol.com or by writing Weiss & Yourman, The French Building, 551
Fifth Avenue, Suite 1600, New York City 10176
HMO: PacifiCare Announces Layoffs & Plans for Technology Improvements

PacifiCare Health Systems, Inc. announced that it will lay off 250
employees and eliminate another 200 positions through attrition over the
next twelve months as part of a belt-tightening that comes amid a number
of restructuring efforts.

The managed care plan said it will take a $ 7 million to $ 8 million
charge in the first quarter of 2000 for severance and other employee
benefit expenses as a result of the reduction in force. The 450-position
layoff amounts to 5% of the firm's employees. The firm also said it will
restructure its operations to consolidate sales and marketing, human
resources and other corporate departments, and will move PacifiCare Life
and Health Insurance into its health plans division.

At the same time, the firm plans more investments in technology
improvements, including a heavier reliance on the Internet for marketing
as well as for internal functions such as human resources.

Although the moves have fueled recent rumors about a possible sale, the
cost reductions could simply be in reaction to higher expected provider
expenses, particularly in California, as Credit Suisse First Boston's
Joe France suggested. "It makes perfect sense to reduce infrastructure."

PacifiCare has had a difficult fall, enduring a class-action lawsuit
filed by the REPAIR legal team and a shuffle in top leadership (MCW
11/8/99, p.1). It also saw its debt rating drop after its purchase of
the financially troubled Harris Methodist Health Plan and is undergoing
a Justice probe into subsidiary TakeCare Inc. (MCW 11/22/99, p. 1).

At the same time, the plan has slowed the development of long-term care
and Medicare supplemental insurance offerings. Last summer it projected
that a long-term care product would enter the market in fall 1999, but
that was nixed in favor of a potential partnership with a major
long-term care insurer. And a planned debut of Medicare supplemental
insurance in early 2000 has been put on the back burner as well.
(Managed Care Week, January 17, 2000)


JUNK FAXES: Law Journal Says Class Litigation May Be a Money-Maker
------------------------------------------------------------------
Unwanted fax advertisements, outlawed by a little-known federal statute,
may be an irritant to recipients, but plaintiffs' attorneys are hoping
they will be a boon for business.

Congress banned the sending of uninvited advertisements by facsimile in
the Telephone Consumer Protection Act of 1991, 47 U.S.C. 227(b)(1)(C),
which also cracked down on some telemarketing practices. The law against
sending so-called junk faxes -- which vests exclusive jurisdiction in
state courts -- imposes a $ 500 fine that is subject to trebling for
willful and knowing violations. But in nine years, the penalties have
hardly deterred large fax distribution companies that have thrived
despite the ban, plaintiffs' lawyers note.

Irritated owners of fax machines have had a hard time getting lawyers
interested in taking their cases because the stakes are so small, said
Robert Biggerstaff, an engineer in Charleston, S.C., who has filed four
pro se junk-fax cases over uninvited promotions that he received at his
home fax. Aggregating the fax recipients into a plaintiff class makes
the cases more interesting to plaintiffs' lawyers, said Mr. Biggerstaff.
His lawyer agrees.

                            2,700 faxes

Mr. Biggerstaff is name plaintiff in a class action in South Carolina
state court against a Charleston Ramada Inn and a fax service.
Biggerstaff v. Ramada Inn-Coliseum, No. 98-CP-10-4722 (Ct. of Common
Pleas, Charleston County, S.C.). The fax, promoting a New Year's Eve
bash, was sent to as many as 2,700 fax machines, said plaintiffs' lawyer
Joseph C. Wilson, of the civil litigation firm Pierce, Herns, Sloan and
McLeod, in Charleston. A written order is yet to come, but the judge has
said from the bench that he will certify the class, the lawyers in the
case said. "An individual case isn't worth that much," Mr. Wilson said.
"Just getting them certified as a class really changes the whole
complexion of a case."

The attorney defending Ramada, J. R. Murphy, of Murphy & Grantland, an
insurance defense firm in Columbia, S.C., said that he can understand
why plaintiffs' lawyers are more interested in junk-fax class actions
than individual cases.

"As a lawyer, who wants to litigate a case for $ 500?" Mr. Murphy said.
But he contended that the bill's sponsor, Senator Ernest Hollings,
D-S.C., said that the law's intent was to provide a hassle-free forum
for private citizens, such as small claims court -- not a financial boon
for attorneys.

Plaintiffs' attorneys said that they know of only one other junk-fax
case to be certified: a closely watched suit by Augusta, Ga., solo
practitioner Sam Nicholson against Hooters of Augusta, a restaurant and
bar. Hooters of Augusta v. Nicholson (Ga. Ct. of Appeals, A00A0429).

Nicholson's lawyer, Harry D. Revell, of Augusta, Ga.'s Burnside, Wall,
Daniel, Ellison & Revell, said that the plaintiffs -- about 1,400
businesses in Georgia and South Carolina -- are seeking $ 12 million in
damages for repeat faxes of a Hooters discount coupon. The case will be
argued on Jan. 19 before the Georgia Court of Appeals. Junk-fax class
actions are "fertile territory," Mr. Revell said, but there are no
certainties. However, "if you're going to win, you'll win big."

Among the questions that the cases must resolve are whether states must
pass laws specifically allowing or disallowing the suits and whether the
federal statute regulates interstate as well as intrastate faxes.

"It's still a very much unclear area of the law," said Chris A. LaVoy,
plaintiff's co-counsel in a recently filed junk-fax case seeking class
status in Phoenix.

The plaintiff, an office supply company, has sued two defendants: United
Artists Theater Circuit, for a movie ticket promotion; and American
Blast Fax, a Texas company that allegedly sent the fax.

American Blast Fax's lawyer, Dean F. Hunt, a senior associate in the
Houston office of New York's Weil, Gotshal & Manges L.L.P., declined to
comment, as did the attorney for United Artists, Keith Beauchamp, a
partner at Lewis & Roca in Phoenix.

Junk-fax cases are "groundbreaking" but risky because the law is
unsettled, said plaintiffs' lawyers Mr. LaVoy, a partner at LaVoy &
Chernoff in Phoenix, and co-counsel Edward Moomjian II, an associate at
Chandler, Tullar, Udall & Redhair, a civil litigation firm in Tucson,
Ariz. "This is not our meal ticket," Mr. Moomjian said. "We're in it for
the long haul." (The National Law Journal, January 17, 2000)


LI SAVINGS: TILA Covers Inaccurate Disclosures of Finance Charges
-----------------------------------------------------------------
A class action was brought pursuant to the Truth in Lending Act against
defendant bank, chairman and law firm before Judge Platt. (Weil V. The
Long Island Savings Bank, FSB QDS:03761896).

Plaintiffs were consumers who obtained residential mortgage loans from
defendant bank and alleged that it failed to accurately disclose what
amount of finance charges was associated with the loans and what amount
was for legal fees. Plaintiffs contended that as a result, they paid
inflated legal fees and portions of these payments were used for bribes,
kickbacks and unearned fees to the chairman and his family. Defendants
argued that because they disclosed exactly what plaintiffs were required
to pay, there was no actionable failure to disclose. The court agreed
with plaintiffs and held that a liberal reading of TILA precluded
inaccurate disclosure since, according to Freed, TILA was intended to
remedy "unscrupulous and predatory creditor practices."

Defendants in this action move for dismissal of the Complaint pursuant
to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure.
Several groups of defendants move for dismissal: (i) the Bank Defendants
and the Director Defendants; (ii) Mrs. Conway and Whalen (iii) Conway
and the Law Firm Defendants; and (iv) Conway III. Each group's Motion is
discussed separately below.

The court concluded that since plaintiffs have stated claims as against
the Bank and Director Defendants on which relief may be granted in all
those claims listed save the Debtor and Creditor Law claim and the
breach of duty claim, the Bank and Director Defendants' Motion should be
denied, except as to these two claims. Whalen and Mrs. Conway's Motion
to dismiss is granted since plaintiffs claims are untimely and do not
relate back to the original Complaint within the meaning of Rule
15(c)(3). As to Conway and the Law Firm defendants, their Motion to
dismiss as to the RICO and common law fraud claims, RESPA, and N.Y. Gen.
Bus. Law are denied. Their Motion to dismiss as to the N.Y. Debt. and
Cred. Law claim is granted. (New York Law Journal, December 15, 1999)


MARINER POST: CO Ct OKs Preclusion of Recovery of Medicaid Funds
----------------------------------------------------------------
Mariner Post-Acute Network, Inc. was formed through a series of business
combinations commencing with the November 4, 1997 merger of Living
Centers of America, Inc. with Apollo LCA Acquisition Corp., a Delaware
corporation (the "Recapitalization Merger") and subsequent merger of
GranCare, Inc., a Delaware corporation ("GranCare") with a wholly-owned
subsidiary of LCA (the "GranCare Merger," and collectively with the
Recapitalization Merger, the "Apollo/LCA/GranCare Mergers"). On July 31,
1998, a wholly-owned subsidiary of the Company merged with and into
Mariner Health Group, Inc., a Delaware corporation with Mariner Health
surviving the merger and continuing as a wholly-owned subsidiary of the
Company. The Company changed its name to "Paragon Health Network, Inc."
following the Recapitalization Merger and subsequently changed its name
to "Mariner Post-Acute Network, Inc." following the Mariner Merger.

On August 26, 1996, a class action complaint was asserted against
GranCare in the Denver, Colorado District Court, Salas, et al v.
GranCare, Inc. and AMS Properties, Inc. d/b/a Cedars Healthcare Center,
Inc., case no. 96-CV-4449. On March 15, 1998, the Court entered an Order
in which it certified a class action in the matter. On June 10, 1998,
the Company filed a Motion to Dismiss all claims and Motion for Summary
Judgment Precluding Recovery of Medicaid Funds and these motions were
partially granted by the Court on October 30, 1998. Plaintiffs' Motion
for Reconsideration was denied by the Court on November 19, 1998, the
Court's decision was certified as a final judgment on December 10, 1998,
and plaintiffs then filed a writ with the Colorado Supreme Court and an
appeal with the Colorado Court of Appeal. This Supreme Court writ has
been denied, the Court of Appeal matter has been briefed and Oral
Argument has been set for January 18, 2000. The Company will continue in
its opposition to all appeals and further intends to vigorously contest
the remaining allegations of class status.


MARINER POST: Contests PA Case over Training & Cert. of Nurse Aides
-------------------------------------------------------------------
On October 27, 1999, the Company was served with a Complaint in United
States ex rel. Cindy Lee Anderson Rutledge and Partnership for Fraud
Analysis and State of Florida ex rel. Cindy Lee Anderson Rutledge Group,
Inc., ARA Living Centers, Inc. and Living Centers of America, Inc., No.
97-6801, filed in the United States District Court for the Eastern
District of Pennsylvania. This action originally was filed under seal on
November 5, 1997, by relators Cindy Lee Anderson Rutledge and the
Partnership for Fraud Analysis under the Federal False Claims Act and
the Florida False Claims Act. The Complaint alleges that the Company is
liable under the Federal False Claims Act and the Florida False Claims
Act for alleged violations of regulations pertaining to the training and
certification of nurse aides at former LCA facilities. After conducting
an investigation in which the Company cooperated by producing documents
responsive to an administrative subpoena and allowing certain employee
interviews, the United States Department of Justice elected not to
intervene. The district court unsealed the Complaint on October 15,
1999. On December 14, 1999, the Company filed a motion to dismiss the
relators' complaint. The Company intends vigorously to defend this
action.


MARINER POST: Files Petitions for Bankruptcy in Delaware under Ch 11
--------------------------------------------------------------------
On January 18, 2000, the Company and substantially all of its
subsidiaries, including Mariner Health and its subsidiaries, filed
voluntary petitions (the "Chapter 11 Filings") in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court")
under Title 11 of the United States Code, 11 U.S.C. (S)(S) 101, et seq.
(the "Bankruptcy Code"). While this action will likely constitute a
default under the Company's and such subsidiaries various financing
arrangements, Section 362 of the Bankruptcy Code imposes an automatic
stay that will generally preclude the creditors and other interested
parties under such arrangements from taking any remedial action in
response to any such resulting default without prior Bankruptcy Court
approval.

The Company's need to seek relief afforded by the Bankruptcy Code is
due, in part, to the significant financial pressure created by the
Balanced Budget Act of 1997 ("Balanced Budget Act") and its
implementation, which reduced the Company's Medicare reimbursement rate
by approximately $115 per resident, per day.


MARINER POST: FL Case over Healthcare Facility Voluntarily Dismissed
--------------------------------------------------------------------
On May 18, 1998, a class action complaint was asserted against the
Company, certain of its predecessor entities and affiliates and certain
other parties in the Tampa, Florida Circuit Court, Wilson, et al, v.
Mariner Post-Acute Network, Inc., et al., case no. 98-03779, asserting
seven claims for relief, including breach of contract, breach of
fiduciary duty, unjust enrichment, violation of Florida Civil Remedies
for Criminal Practices Act, violation of Florida Racketeer and Corrupt
Organization Act, false advertising and common law conspiracy arising
out of quality of care issues at a healthcare facility formerly operated
by the Brian Center Health and Rehabilitation/Tampa, Inc. and later by a
subsidiary of LCA as a result of the Brian Center Corporation merger.
The Company removed this case to Federal Court on June 10, 1998 and the
matter was pending in the United States District Court for the Middle
District of Florida, Tampa division, case no. 98-1205-CIV-T23B. The
plaintiff voluntarily dismissed this case on April 16, 1999.


MARINER POST: Former Employee Filed Case in TX under False Claims Act
---------------------------------------------------------------------
On November 16, 1998, a complaint was filed under seal by a former
employee against the Company, certain of its predecessor entities and
affiliates in the United States District Court for the Southern District
of Texas, alleging violation of the Federal False Claims Act. The action
is titled United States ex rel. Nelius, et al., v. Mariner Health Group,
Inc., et al., civil action No. H-98-3851. The complaint which was
unsealed, has been recently amended to add additional relators and
allegations under the Federal False Claims Act. The Company has been
advised that the government is evaluating its decision not to intervene
with regard to the amended complaint and relators. The Company will
vigorously contest the alleged claims. In addition, a three judge panel
of the United States Court of Appeals for the Fifth Circuit recently
held that qui tam lawsuits in which the government does not intervene
are unconstitutional under the Take Care Clause of Article II of the
United States Constitution. The Court declined to rule whether qui tam
suits in which the government does intervene are unconstitutional. The
full bench of the U.S. Court of Appeals for the Fifth Circuit agreed
November 15, 1999, to review this decision. Riley v. St. Luke's
Episcopal Hospital, No. 97-20948, rehearing en banc granted (5th Cir.,
1999). A full court determination affirming the court's decisions could
favorably effect the outcome of this action, which is currently before a
United States District Court located in the Fifth Circuit.


MARINER POST: TX Case Alleging False Claims Re Services Has Been Closed
-----------------------------------------------------------------------
The Company received a letter dated September 5, 1997 from an Assistant
United States Attorney ("AUSA") in the United States' Office for the
Eastern District of Texas (Beaumont) advising that the office was
involved in an investigation of allegations that services provided at
some of the Company's facilities may violate the Civil False Claims Act.
The AUSA informed the Company that the investigation was the result of a
qui tam complaint filed under seal against the Company. On May 3, 1999,
the Government advised that it has declined to intervene into this
matter, but the case remains under seal. The Company received a letter
from the court clerk informing the Company that this case was closed as
of September 15, 1999.


MARINER POST: Vigorously Contests AL Complaint over Employment Matters
----------------------------------------------------------------------
On March 18, 1998, a complaint was filed under seal by a former employee
against the Company, certain of its predecessor entities and affiliates
in the United States District Court for the Northern District of
Alabama, alleging, inter alia, employment discrimination, wrongful
discharge, negligent hiring, violation of the Federal False Claims Act,
and retaliation under the False Claims Act. The action is titled Powell,
et al. v. Paragon Health Inc., et al., civil action No. CV-98-0630-S.
The complaint has been unsealed and the Company has been advised that
the government has declined to intervene in this matter under the
Federal False Claims Act. The Company is vigorously contesting the
alleged claims.


MARINER POST: Vigorously Contests FL Case over Breach of Fiduciary Duty
-----------------------------------------------------------------------
On October 1, 1998, a class action complaint was asserted against
certain of the Company's predecessor entities and affiliates and certain
other parties in the Tampa, Florida, Circuit Court, Ayres, et al v.
Donald C. Beaver, et al, case no. 98-7233. The complaint asserted three
claims for relief, including breach of fiduciary duty against one group
of defendants, breach of fiduciary duty against another group of
defendants, and civil conspiracy arising out of issues involving
facilities previously operated by the Brian Center Corporation or one of
its subsidiaries, and later by a subsidiary of LCA, as a result of the
merger with Brian Center Corporation. All defendants submitted Motions
to Dismiss which were heard by the Court on September 15, 1999. The
Company is awaiting a decision from the Court and is not in a position
to evaluate the probability of a favorable outcome or the range of
potential loss. The Company intends to vigorously contest the request
for class certification, as well as all alleged claims made.


MARINER POST: Vigorously Contests MI Claims over Medicare Payments
------------------------------------------------------------------
On August 25, 1998, a complaint was filed by the United States against
the Company's GranCare and International X-Ray subsidiaries and certain
other parties under the Civil False Claims Act and in common law and
equity. The lawsuit, U.S. v. Sentry X-Ray, Ltd., et al., civil action
no. 98-73722, was filed in United States District Court for the Eastern
District of Michigan. Valley X-Ray operates a mobile X-Ray company in
Michigan. A Company subsidiary, International X-Ray, owns a minority
partnership interest in defendant Valley X- Ray.

The case asserts five claims for relief, including two claims for
violation of the Civil False Claims Act, two alternative claims of
common law fraud and unjust enrichment, and one request for application
of the Federal Debt Collection Procedures Act. The two primary
allegations of the complaint are: that the X-Ray company received
Medicare overpayments for transportation costs in the amount of
$657,767; and that the X-Ray company "upcoded" Medicare claims for EKG
services in the amount of $631,090. The United States has requested
treble damages as well as civil penalties of $5,000 to $10,000 for each
of the alleged 388 submitted Medicare claims. The total damages sought
varies from $5.3 to $7.2 million. The Company is vigorously contesting
all claims and filed two motions to dismiss on behalf of its
subsidiaries on November 23, 1998. The United States has agreed to the
motion to dismiss GranCare as a party. The Court has heard a motion to
dismiss the Civil False Claims Act and other claims against
International X-Ray. The Company is awaiting the Court's decision.


MEDICAL MANAGER: Y2K Litigation Tab Totals $2,366,000 in FY1999
---------------------------------------------------------------
For its fiscal year ending June 30, 1999, Medical Manager Corp. reports
that it incurred $2,366,000 in litigation expenses related to a class
action lawsuit alleging Year 2000 issues regarding its Medical Manager
software.

As previously reported in the CAR, a class action lawsuit was brought
against the Company alleging Year 2000 issues regarding The Medical
Manager software in versions prior to Version 9.0. Seven additional
lawsuits were also brought against the Company, each purporting to sue
on behalf of those similarly situated and raising essentially the same
issues. In March 1999, the Company entered into an agreement to settle
the class action lawsuit, as well as five of the seven other similar
cases.

The settlement created a settlement class of all purchasers of Version 7
and 8 and upgrades to Version 9 of The Medical Manager software, and
released the Company from Year 2000 claims arising out of the sales of
these versions of the Company's product. Under the terms of the
settlement, Version 8.12, containing the Company's upgraded Version of
8.11 software in addition to the Year 2000 patch, will be licensed
without a license fee to Version 7 and 8 users who participate in the
settlement. In addition, the settlement also provided that participating
users who purchased a Version 9 upgrade will have the option to obtain
one of four optional modules from the Company without a license fee, or
to elect to take a share of a settlement cash fund. The settlement
required the Company to make a cash payment of $1,455,000. Pursuant to
the settlement, the Company was released from liability due to the Year
2000 non-compliance of Versions 7 and 8 by all users of Versions 7 and 8
except 29 users who opted-out of the class settlement.


MOOLAH LOAN: IL Ct Certifies Class for Suit over Unclear Loan Documents
-----------------------------------------------------------------------
The U.S. District Court for the Northern District of Illinois has
granted a plaintiff's motion for class certification in a suit asserting
that a consumer lending company violated the federal Truth in Lending
Act (TILA) and Illinois state law. The suit, which contends that loan
documents were unclear, also survived a motion to dismiss for failure to
state a claim. Pinkett v. Moolah Loan Company et al., No. 99C2700 (ND
IL, Nov. 1, 1999).

Plaintiff Rodney Pinkett took out a short term loan from Moolah Loan
Company, under the terms of which he was to be charged interest at the
rate of 365 percent. He also provided a post-dated check in order to
obtain the loan.

The finance charge and the annual percentage rate were not set forth
more conspicuously than other terms on the loan documents, and the
documents did not adequately disclose what security interest the lender
had. As such, Pinkett sued Moolah in the U.S. District Court for the
Northern District of Illinois, asserting violations of TILA, 15 U.S.C.
Sec. 1601 et seq., and Illinois state law. Pinkett then sought
certification as a class action, desiring to include all borrowers who
signed promissory notes with Moolah between April 23, 1998, and April
23, 1999.

Moolah moved to dismiss the suit.

The district court discussed class certification first, outlining the
criteria necessary. Under the Federal Rules of Civil Procedure,
plaintiffs seeking certification must satisfy four requirements,
including numerosity, commonality, typicality, and adequacy of
representation, the judge explained.

The numerosity requirement provides that the class must be composed of a
large number of persons so that joinder is impracticable, the district
court said. Pinkett did not provide an exact number of potential
plaintiffs, but alleged that common sense dictated that the requirement
was met, the judge said. Since the defendant did not contest this
assertion, numerosity existed, the judge held.

Turning to the commonality prerequisite, the district court stated that
there must be questions of law or fact that are common to all class
members. This condition was satisfied, the judge decreed, because Moolah
engaged in standardized conduct.

In discussing typicality, the court said that a plaintiff's claim is
typical if it arises from the same event giving rise to the claims of
other class members, and the claims are all based on the same legal
theory. Pinkett's claims were typical, the judge ruled. The court
arrived at this conclusion after rejecting Moolah's argument that class
members would have individual claims concerning damages, and would have
individual inquiries concerning the alleged unconscionability of the
loans.

The last condition discussed by the court was that of adequacy of
representation. The judge stated that a class representative cannot have
claims that conflict with those of other class members, and the
representative must have a sufficient interest in the outcome which will
enable him or her to act as a vigorous advocate. Further, the counsel
representing the class representative must be experienced and competent,
the judge elaborated. Pinkett satisfied this condition, the district
court held, and, since all criteria were fulfilled, the motion for class
certification was granted.

Moolah's motion to dismiss was then evaluated. The district court stated
that Moolah asserted that the complaint failed to state a claim, and
further argued that the court did not have subject matter jurisdiction
over Pinkett's state law claims. The judge reviewed the loan documents
and noted that the finance charge and the annual percentage rate were
not more conspicuous than the other loan terms, as was required by the
TILA.

In addition, Pinkett claimed statutory damages under the TILA, the judge
said. Contrary to Moolah's assertion, Pinkett did not have to allege
actual damages, the court continued. Further, there was a duty to
disclose the fact that the post-dated check Pinkett provided was being
held as security, the court said. Pinkett's suit stated a claim upon
which relief could be granted, the judge held. Therefore the state law
claims would fall under the court's supplemental jurisdiction, the judge
said.

The motion to dismiss was denied. (Bank & Lender Liability Litigation
Reporter, December 1, 1999)
NY STATE: Suit Contends Mental Care for Children Is Inadequate

The Legal Aid Society has filed a class action lawsuit accusing New York
State's mental health system of letting hundreds of severely mentally
ill children languish in hospitals, juvenile jails and foster care homes
instead of providing them with a place in community-based mental health
centers.

The suit, which was filed in Federal District Court in Brooklyn,
contends that the state's Department of Health and Office of Mental
Health said about 400 children with illnesses ranging from schizophrenia
to severe depression should be allowed to enter the centers, known as
residential treatment centers, but then kept them on waiting lists,
sometimes for more than a year, until spaces opened up. The suit seeks a
court order that would compel the state to put all eligible children in
residential centers within 30 days of their being accepted for
admission.

Mental health officials and advocates agree that the state's network of
treatment centers is filled to capacity, but state officials would not
comment on the state's plans to create additional space.

"The children bringing this lawsuit are some of the most gravely
mentally ill young people imaginable," said Monica Drinane, the lawyer
in charge of the Legal Aid Society's juvenile rights division. "The
state has recognized this by accepting them for its therapeutic
residential programs. The painful irony is that at the same time the
state promises this help, it does not have, and never has had, nearly
enough of these placements to meet the demand."

Rob Kenny, a spokesman for the Health Department, said officials had not
yet received the court papers and could not comment on the lawsuit. Jill
Daniels, a spokeswoman for the Office of Mental Health, also would not
comment on the suit because officials had not yet seen the papers.

New York's 19 residential treatment centers are generally considered to
be the first place children with severe mental ailments go after being
discharged from more traditional psychiatric hospitals. Run by nonprofit
corporations but regulated by the state, the treatment centers are
typically staffed by full-time nurses and social workers and part-time
psychiatrists.

But mental health advocates say programs for children, particularly
those like residential treatment centers, have been given short shrift
in the larger debate over the soundness of the state's mental health
system, largely because adult mental health concerns dominate policy and
planning efforts.

The issue of mental health services for adults has attracted increased
attention in recent months in particular because of the case of Andrew
Goldstein, a schizophrenic man who shoved a 32-year-old woman, Kendra
Webdale, in front of a New York City subway train last January, killing
her.

In the 2000 fiscal year, state mental health officials are expected to
spend about $228 million on programs for children, or about 5 percent of
the total budget of $4.2 billion -- even though children 18 years old or
younger make up about 25 percent of the state's population, according to
a report released this month by the Citizens' Committee for Children of
New York, an advocacy group.

In November, Gov. George E. Pataki unveiled a sweeping plan to halt the
longstanding practice of emptying the state's huge psychiatric hospitals
and called for spending an additional $125 million on services for the
mentally ill. While nearly 30 percent of the additional spending
package, or $36.2 million, has been earmarked for children's mental
health services, advocates say it is not enough.

The class action filed by the Legal Aid Society, which represents
children in the child welfare system, does not overtly seek additional
money from the Pataki administration. But Ms. Drinane said that in order
to comply with the suit's demand that children be moved promptly into
residential treatment centers, "the state is going to have to fund more
beds."

State officials refused to comment on whether there was money available
to pay for more beds. But Mary Abrams, executive director of the New
York State Coalition for Children's Mental Health Services, the trade
association that represents the state's residential treatment centers,
said she planned to give the state a year to see if the Governor's new
spending initiative would solve the problem. (The New York Times,
December 24, 1999)


PACIFIC TELESIS: Fraudulently Induced Workers to Retire, CA Suit Says
---------------------------------------------------------------------
A proposed class action filed in the Southern District of California
alleges that Pacific Telesis Group fraudulently induced its managers to
take early retirement while concealing the fact that a more attractive
retirement program would soon be offered. The enhanced program increased
lump sum benefits by $100,000 for most long-term employees, the suit
claims. Anderson et al. v. Pacific Telesis Group and Pacific Bell, No.
00-CV-2311 (SD CA, Oct. 28, 1999).

The suit by Robert Anderson was filed in the wake of an Aug. 30, 1999,
federal appellate decision in a dispute involving the same companies (
Wayne v. Pacific Bell 9th Cir., 1999 ; see Pension Fund LR, Nov. 12,
1999, P. 6).

The Anderson suit asserts the enhanced offering affected salaried
managers as well as union employees.

Employers have a fiduciary duty under the Employee Retirement Income
Security Act (ERISA) to disclose plan changes if the changes are under
"serious consideration."

Pacific Telesis Group is the parent company of Pacific Bell, where the
plaintiffs in both cases worked.

In Wayne, the Ninth Circuit U.S. Court of Appeals held that Pacific
Telesis was "seriously considering" enhancing its retirement benefits
for union employees shortly before the plaintiffs in both cases took
early retirement.

Pacific Telesis revealed it had plans to enhance the early retirement
program for its union workers during collective bargaining negotiations.
However, the enhanced program was not revealed to rank-and-file
employees including salaried managers.

While contract negotiations were ongoing, the plaintiffs in both Wayne
and the case at bar opted to retire under what turned out to be a less
attractive benefits package.

Eventually, Wayne ended up before the Ninth Circuit, which held that the
enhanced early retirement program was under "serious consideration" when
the company revealed it during contract negotiations.

Anderson and the mangers allege in their complaint that the appellate
holding in Wayne marked the first time they knew Pacific Telesis was
"seriously considering" a better benefits offering.

Complicating the matter is the company's Management Employment Security
(MES) policy and a release the salaried employees were required to sign
when they retired. If downsizing occurred, the MES promised reassignment
for all managers, unless the company's business was materially
jeopardized. Anderson's suit says Pacific Telesis falsely told its
managers the company was in such poor financial shape that the MES no
longer applied and recommended they retire early rather than risk
termination with no retirement incentive at all.

Anderson further asserts that on electing early retirement, managers
were required to execute a release against any future ERISA fiduciary
claims against the company.

The complaint charges Pacific Telesis with breach of fiduciary duties
under ERISA for failing to disclose the enhanced early retirement
program. The complaint also makes claims for fraudulent inducement,
alleging the company lied about its financial condition to get them to
retire with less benefits.

The suit seeks benefits under the enhanced plan, damages equal to the
lost benefits, and a declaration that the releases they signed are
legally void. (Pension Fund Litigation Reporter, November 30, 1999)


PRIVACY BREACH: Canadian Paper Says Ontario Govt Sells Data on Citizens
-----------------------------------------------------------------------
According to the Toronto Star, the Ontario government sells personal
information about its citizens - taken from drivers' licences and motor
vehicle registrations - to businesses such as banks, insurance companies
and collection agencies.

A question and answer session is given to this issue:

Question: Should the Ontario government sell any information about its
citizens to businesses?

No. The government is here to serve the people, not to serve as a
statistical agency for corporate interests.

If it's immigration, the police, hospitals in emergency cases and,
certainly, banks, I think they have the right to know because there are
too many crooks in the country. Otherwise, I would say no.

No, of course not, and I'm absolutely horrified at the question because
I didn't know they were doing it. What kind of information do they have
that they sold about me?

Sure. Why not? Some of these people deserve to be investigated.

No. The government is who we would turn to to investigate or enforce law
if we had a problem with a breach of privacy. If anyone should start a
class-action suit against the government, I would most certainly include
my name in that suit.

No. Since I am obligated to supply the Ontario government with my
personal information, by what right do they have to share, give or sell
this information to anyone without my written permission?

No. But then, who can stop them? What we have in Ontario is not a
democracy any more.

No. I've been wondering where all my junk mail has been coming from. Now
I know. So every week I'm going to wrap it and send it to Premier Mike
Harris and see how he likes it.

I work for the Ontario government in licensing-related areas and my
opinion on this one is no.

It is very wrong that our licences are being sold to anybody who has
$12.

No, but I imagine it's a very lucrative practice for them. It's been my
experience that the Ontario government doesn't have too many scruples.

No. Private is defined in the dictionary as belonging to one's self
alone, personal and not public. You cannot sell what you do not own. Or
should we be getting a new, revised Ontario government dictionary?

No. The right to privacy should be absolute and should not in any way be
used by the government for profit reasons.

No. I just wonder how much further our loss of privacy, personal
dignity, is going to go. (The Toronto Star, January 18, 2000)


TOBACCO LITIGATION: Arbitration Panel Announces Atty. Fees for LA Case
----------------------------------------------------------------------
The Tobacco Fee Arbitration Panel announced on January 31 a decision
regarding attorneys' fees for outside counsel retained by the State of
Louisiana in the 1998 state tobacco litigation settlement. In this case,
the Panel determined that full, reasonable compensation for these
attorneys is $575,000,000. These fees, which will be paid by the tobacco
companies, are separate from and in addition to the $4.6 billion
financial recovery Louisiana will receive through its settlement with
the tobacco industry over the next 25 years, and additional payments in
perpetuity.

The Louisiana State Fee Payment Agreement specifically granted the Panel
the authority to award a fee either lower or higher than the contract
stipulates. The Panel's findings are final and not appealable by any
party.

The arbitrators for the Louisiana case included the Panel's two
permanent members Dr. John Calhoun Wells, the Panel's chairman, and
former U.S. District Court Judge Charles Renfrew, the industry-appointed
member and Harry Huge, Esq., the Louisiana counsel-appointed member. Dr.
Wells is the consensus selection of both parties and is permanent
chairman. Dr. Wells and Mr. Huge signed the opinion. Judge Renfrew
dissented.

During its consideration of the Louisiana application, the Panel
conducted a hearing in Washington, DC on October 29-30. During the
hearing, the Panel heard from and questioned witnesses for both parties.
Both parties also presented written submissions to the arbitrators.

The Panel has previously announced fee determinations for attorneys
representing the states of Florida, Texas, Mississippi, Massachusetts,
Hawaii, Illinois and Iowa. It is also announcing a determination for
attorneys representing the state of Kansas. The Panel will continue its
work for those states choosing to enter the arbitration process. To
date, some states have opted not to enter arbitration and have reached
separate agreements with the industry on attorneys' fees.

Contact: Eric Berman of Kekst and Company, 212-521-4894, for Tobacco Fee
Arbitration Panel


* 3 Rulings Say Communication Is Main Factor in Insurance Class Cert.
---------------------------------------------------------------------
Communication is key in insurance class certification, according to
three recent decisions, two from state court and one from federal court.

A Philadelphia Court of Common Pleas judge denied class certification to
a group of plaintiffs who alleged Massachusetts Mutual Life Insurance
Co. misled them into buying a certain type of whole life insurance
policy. The same judge also denied class certification in a lawsuit
between 11 workers' compensation insurance purchasers and 13 workers'
compensation insurance companies.

Philadelphia Common Pleas Court Judge Stephen E. Levin said the claims
in both Solomon v. Massachusetts Mutual Life Ins. Co., PICS Case No.
00-0105 (C.P. Philadelphia Jan. 19, 2000) Levin, J. (23 pages) and
Foodarama Supermarkets v. American Ins. Co., PICS Case No. 00-0106 (C.P.
Philadelphia Jan. 10, 1999) Levin, J. (36 pages), did not meet the
commonality requirement for class certification because the
circumstances surrounding the purchase of each policy needed individual
inquiry. But at the same time, a federal court judge has given the green
light in a consumer fraud case as long as the plaintiffs can show that
the fraud was perpetrated on all the victims with the same deceptive
literature. In In Re: LifeUSA Holding Inc. Insurance Litigation., PICS
Case No. 00-0082 (E.D. Pa. Jan. 20, 2000) Joyner, J. (22 pages), U.S.
District Judge J. Curtis Joyner said the commonality question was a
"close" one, but he ultimately sided with the plaintiffs. A review of
these cases makes it clear that all three decisions hinged on the
communication between the plaintiffs and defendants when the deals were
made.

                         MassMutual

In Solomon, plaintiff Mark Solomon and the other potential class members
were seeking class status for claims of breach of contract, fraud,
negligent misrepresentation, violation of Pennsylvania Unfair Trade
Practice and Consumer Protection Law and unjust enrichment claims. In
that suit, the plaintiffs allege Massachusetts Mutual Life Insurance Co.
persuaded them to buy whole life "N-Pay" insurance policies using
misleading sales presentations and marketing materials. An "N-Pay"
policy is often referred to as a "vanishing premium" policy. Basically,
an N-Pay policy could shorten the number of years a policyholder has to
pay premiums out-of-pocket. "The 'N' in N-Pay represents the year after
which future dividends plus the current balance of paid-up additions
(based on current dividend scale, which is not guaranteed) are
sufficient to pay all future premiums," Levin explained in a footnote.

The suit was filed on behalf of MassMutual whole life policyholders who
were asked by the insurance company to make payments beyond the stated
number of years and/or whose policies have not yielded the stated
returns. The fraud class included any policyholder who owned a
MassMutual policy issued at any time since February 1990.

The plaintiffs alleged MassMutual misled them by providing deceptive
illustrations or schedules that showed that the policyholders would have
to pay premiums for a "finite" time period, after which the "earnings on
the accumulated funds and dividends on the policy would cover future
premiums." Solomon alleged that MassMutual persuaded policyholders to
buy whole life policies by misrepresenting or omitting the following:

* The number of "out-pocket-payments" the policyholder would have to
  pay.
* The fact that "life insurance is not an investment."
* The fact that the insurer would use part of the policyholder's
  payment for certain charges.
* The true rate of return.
* The comparison of the policy to other methods of investment.

In November 1992, Solomon bought a whole life policy from MassMutual
that used the N-Pay concept. In May 1992, MassMutual had added to its
illustration a statement to prospective policyholders that said, "We
strongly recommend you look at an illustration showing a lower dividend
scale." Solomon's policy stated in part that dividends were not
guaranteed and were subject to change. His illustration, however, did
not contain the language the company added in May. A plaintiff's expert
testified that the illustrations given to policyholders also did not
include the excess interest rate, the potential change in dividends
MassMutual expected or the insurer's investment portfolio.

In determining whether Solomon and others similarly situated could be
certified as a class, Levin analyzed the prerequisites for class
certification: numerosity, commonality, typicality, adequacy of
representation and a fair and efficient method of adjudication.

The court first found that the class could satisfy the numerosity
requirement that the class be "both numerous and identifiable" as long
as it were narrowed to purchasers of policies purchased under the N-Pay
concept.

On the issue of commonality, Solomon argued that the class met the
requirement because the insurance company "presented uniform sales
presentations, sales materials, and policy illustrations which" misled
potential policy purchasers. But the court disagreed, finding that
resolving the contract claim for the entire class would necessitate
individual inquiries. "The court cannot decide the class' contract claim
based on the illustrations alone because the material information
MassMutual allegedly omitted from its illustrations was disclosed in
other written materials or in MassMutual agents' customized sales
presentations," Levin wrote. The court also said the fraud-based claim
lacked commonality because "individual issues of reliance upon and the
materiality of MassMutual's misrepresentations and omissions predominate
over common issues of defendant's knowledge about the assumptions
underlying its sales illustrations." The court then said that because
the class failed to meet the commonality requirement, the typicality
requirement could not be met.

Having already decided the class could not be certified, Levin did not
analyze the fourth and fifth requirements for class certification. This
is now the third case, following New Jersey and New York courts, in
which class certification has been denied in similar actions against
MassMutual.

                            Foodarama

Levin also recently said a lawsuit pitting workers' compensation
insurance purchasers against workers' compensation insurers did not meet
the class certification requirement of commonality and therefore
couldn't proceed as a class action.The insureds in Foodarama charged
that the insurance companies "schemed to bilk" their voluntary market
policyholders in Pennsylvania and across the country out of $ 1 billion.
"Broadly speaking, plaintiff's claim asserts that defendants charged
more in premiums than the law or their insurance contracts allowed in
order to recoup losses the insurers were sustaining in the residual
market," Levin wrote.

The plaintiffs are all commonwealth employers that since 1985 have
voluntarily purchased or renewed "retrospectively-rated or adjusted
policies or other similarly loss sensitive policies." This is the first
time a judge has decided the class issue in any of the several similar
cases pending across the country. Under a loss-sensitive policy, the
insurance company bases an employer's premium on the actual amount of
losses the employer incurs. Therefore, since the loss changes from year
to year, an employer's premium fluctuates yearly.

The lawsuit alleges that in the mid-1980s, when the workers'
compensation insurance companies began to lose money from non-voluntary
insureds, the companies in turn upped the premiums charged to the
voluntary insureds to compensate for their loss in the residual market.
The plaintiffs said the "yearly adjustment" allowed the defendant
insurance companies to stack "illegal" charges.

They set forth five causes of action including breach of contract,
common law fraud, civil conspiracy, unjust enrichment and negligence.
Foodarama Supermarkets Inc. and the other plaintiffs seeking class
certification said the insurance companies misrepresented and inflated
the tax multiplier when calculating the final premium, imposed "illegal
and unauthorized" residual market assessments on those purchasers in the
voluntary market and used an "illegally inflated" loss-conversion
factor, inflating basic premiums and forcing buyers to acquire
unnecessary coverage.

Again, Levin analyzed each prerequisite for class certification,
summarily concluding that numerosity was satisfied. But commonality
could not be satisfied in this case, the court concluded. Because a
single workers' compensation policy may include coverage for employees
in states other than Pennsylvania, the rules and regulations of the
other states become pertinent to the lawsuit. "Regulation of workers'
compensation insurance varies and has varied from state to state and,
over time, within each state," Levin wrote. "An individualized analysis
is required to determine which state's law applies to the various
elements of each plaintiff's claims for any specific program at any
particular point in time." The court also said in its findings of fact
that because each plaintiff negotiated with its insurance carrier
separately, individual inquiries were necessary to determine if any
plaintiffs were charged residual market load charges or "RML charges."
Plaintiffs said that commonality existed because each defendant
insurance company had the same practice of including illegal RML's in
its policies. Defendants countered that plaintiffs were more interested
in the "bottom line" and that many of the plaintiffs said they knew that
part of their premiums were used to defray the insurance company's
residual market costs. "Many plaintiffs never saw, much less relied on,
the boiler-plate language plaintiffs now claim as the basis of their
fraud allegation," Levin wrote. "Many, if not all, plaintiffs never
received copies of such policy language until weeks or months after they
had executed written agreements with their carriers detailing the
pricing terms of their insurance programs and after their coverage had
begun." The court also said it could not assume that Pennsylvania laws
apply in cases involving multi-state policies. On the fraud-based
claims, the court said that although there was similar language in each
policy, how each insured relied on the language defeated the commonality
requirement. "Defendants communicated with plaintiffs individually
during negotiation sessions prior to the issuance of the policies,"
Levin wrote. "To resolve plaintiff's fraud claims class-wide, this court
must consider the communications between individual defendants and
plaintiff policyholders to determine whether each class member did, in
fact, rely upon the contract language that the plaintiffs cite." The
court then said that because the class did not meet the commonality
requirements, it did not meet the typicality requirement. Having ruled
on those issues, the court did not address the merits of the fourth and
fifth requirements.

                             LifeUSA

A class of plaintiffs fared better in federal court when a U.S. District
judge said it could proceed with a consumer fraud case against LifeUSA
Holding because all class members received the same allegedly deceptive
literature. "Claims arising out of standard documents present a classic
case for treatment as a class action," Joyner wrote in a 22-page
opinion.Joyner certified a national class of more than 280,000
purchasers of LifeUSA's best selling "Accumulator" annuity sold from
August 1989 to the present.

LifeUSA is a subsidiary of Allianz AG, one of the world's largest
insurance companies. The lawsuit was filed on behalf of six investors
from Pennsylvania, New Jersey and Florida.

It was Joyner's third major ruling in the case. In November 1998, he
denied a defense motion to dismiss the suit, and in September 1999, he
denied a defense motion for summary judgment. In his September opinion,
Joyner said a jury must decide whether LifeUSA's contract for the
Accumulator annuity was "ambiguous," "misleading" or "confusing."

The suit alleges that LifeUSA's Accumulator annuity is actually a "bait
and switch" scam that targets senior citizens and retirees. It alleges
that the company falsely represents that the annuity has a "guaranteed
minimum interest rate for the life of the policy" and that it pays
"current" interest rates. In reality, the suit says, once consumers
start getting their money back over the minimum five-year payout period,
LifeUSA never sends them another account statement, and they never know
the real interest rate they are receiving.At least three different
"current interest rates" are secretly applied to the funds, the suit
alleges, depending on whether the annuity is in "deferral," meaning the
consumer has not requested any money from the policy; the consumer is
receiving "interest only" payments; or the consumer is receiving
payments of principal and interest. The suit alleges that LifeUSA trains
its agents through standardized and uniform misrepresentations and
nondisclosures that consumers would be paid substantial interest
bonuses, "current" interest rates and obtain "fully insured" and "safe"
economic gain greater than the gains offered in the stock market or
certificates of deposit. To induce the agents to sell the Accumulator
annuity, the suit says, LifeUSA immediately rewards them with "producer
perks" within 24 hours of sale and only later sends the "fine print"
annuity contracts, which the suit characterizes as misleading and
ambiguous. Consumers are duped, the suit alleges, because LifeUSA
disguises the interest rates paid to purchasers in quarterly accountings
by comparing the Accumulator annuity favorably with bank certificates of
deposit and then misrepresents the "yield" as the "interest rate,"
thereby creating a false impression that the represented "compounded
daily" interest rate is much higher. The company then eliminates any
ability of the purchaser to gain the misrepresented benefits of their
annuity policy upon withdrawal, the suit says, by employing confusing
options. When purchasers attempt to obtain the benefits, the suit says,
they must accept a lump sum of principal and interest with a penalty of
about 5 percent periodic principal and interest payments over a minimum
of five years with the balance gaining interest of less than 3 percent;
periodic interest-only payments for a minimum of five years with the
entire principal remaining with LifeUSA earning a current interest rate
unilaterally defined by LifeUSA; or death benefits to the purchaser's
estate, which must select from the aforementioned options.

Joyner found that the case should be certified as a class action because
it meets all of the requirements of Rule 23. The most hotly contested of
the elements commonality was a "close" question, Joyner said, but in the
end the plaintiffs proved it by pointing to common documents that
affected every member of the class. "It appears from the record that the
defendant company has engaged in standardized conduct toward its clients
and potential clients, agent-shareholders and potential
agent-shareholders in that its advertising and training materials,
statements and promotional materials are directed toward emphasizing
Life USA's allegedly unique program of offering its agents stock options
and prompt payment of commissions among other things, and of offering
its clients products which pay interest rates, bonuses and yields that
are higher than those offered by bank certificates of deposit and which
are safer than the stock market," Joyner wrote.

Commonality, Joyner said, is satisfied if there are some questions of
law or fact common to the class. "The fact that there is some factual
variation among class members' grievances will not defeat
certification," he wrote. Not all factual or legal questions need be
common, he said, "so long as at least one issue is common to all class
members." Similarly, Joyner found that the case also met Rule 23's
"typicality" requirements. "Typical does not necessarily mean
identical," he wrote. "... Even relatively pronounced factual
differences will generally not preclude a finding of typicality where
there is a strong similarity of legal theories."

To show typicality, Joyner said, courts have held that the named
plaintiffs must not have an interest that is antagonistic to that of the
class members and must have suffered similar injuries. LifeUSA's lawyers
argued against class certification, saying the class members' claims are
dependent on non-uniform oral representations. Joyner disagreed, saying
"although each of defendant's sales agents has his or her own sales
technique and does not use a company-created script, the information
which the agents receive and disseminate on LifeUSA's products was
written exclusively by the company, which also maintains careful
oversight over any and all advertising generated by its agents and/or
anyone else with regard to its annuities and other products."
(Pennsylvania Law Weekly, January 31, 2000)


* Legislating: Gun Control; Class Actions; Chapter 7; Product Liability
-----------------------------------------------------------------------
As if an election year isn't enough of a distraction, an action-packed
January in Washington seemingly has rendered the returning Congress even
more of an afterthought. The lame-duck session, which began the last
week of January, promises to serve as a platform for election-year
politics. Issues that make good campaign-trail fodder won't be
compromised away on Capitol Hill over the next few months.

Kevin Driscoll, a legislative coordinator for the American Bar
Association, says leaders of both parties "will determine what's in
their best interest-to hold up certain bills and pass other ones."

If anything is to be done, it will have to be done quickly. This year's
legislative calendar is compressed. Members will leave Congress early,
before the party conventions this summer. By the time they return, they
will be consumed with next year's budget process.

           Gun-Control Advocates Don't See The Bill Getting Out

"It's an impossible situation," says Mark Pertschuk, legislative
director for the Coalition to Stop Gun Violence. "The Republicans have
drawn a line in the sand."

It is possible, however, that the gun restrictions will be purged from
the bill and that some of the provisions, ones that would make it easier
for courts to try juveniles as adults in federal courts, may survive.

Still, despite fears of both houses' being swallowed by politics, some
legislation carried over from last year's session should make it
through. "There are many things that aren't front and center on any
political burners, and there is a chance for final action on many," says
David Carle, press secretary for the Democratic members of Senate
Judiciary.

                          Class Actions

In the Senate, one of those bills may be a measure that would make it
tougher to bring class actions in state courts. The House has already
passed a version of the bill. "We're very optimistic," says Barry
Bauman, executive director of the Lawyers for Civil Justice, an
association of defense lawyers. "There is a fundamental unfairness to
the current system. Federal courts are the appropriate forum."

The bill, which passed the House by a slim margin, would require removal
of all actions to federal court if a single defendant is an out-of-state
resident. Most congressional Democrats oppose the legislation as anti-
consumer, and Public Citizen's Bartle says he doesn't believe a final
bill will reach the president's desk "unless someone thinks that there
is political hay to be gained by moving the bill." The American Bar
Association has not taken a position on the measure.

                       Closing Chapter 7

Other pro-business efforts may see enactment before the term is through.
A bill that would make it more difficult for a debtor who files under
Chapter 7 of the bankruptcy code to have his debts wiped clean has
already been passed by the House, as well as the Senate Judiciary
Committee. The bill, which is supported by members of both parties,
would allow a creditor to ask a court to convert a Chapter 7 liquidation
to a reorganization-in which the bankrupt party must pay back his debts
over time-if the debtor is shown to have certain financial means. Its
passage, however, is no certainty.

"You have too many people abusing the bankruptcy system," says Bill
Morley, congressional affairs director for the U.S. Chamber of Commerce.
"Who gets left holding the bag? Small businesses that extend credit and
credit card companies."

                       Product Liability

A House bill that would insulate small business vendors of a product
from product liability claims remains under consideration in the House
Judiciary Committee, where it has been labeled a priority by House
Republicans.

Another House bill would bar people injured on the job by a defective
product from suing the manufacturer if the product has been on the
market for 18 years or more. That bill has already cleared the judiciary
committee.

But any tort reform measure, even such watered-down ones as the two
under consideration in the House, typically don't gain a veto-proof
majority in either house should they pass. (Legal Times, January 24,
2000)


* The Daily Telegraph(London) Brings out Legal Issue Re U.S. Softwares
----------------------------------------------------------------------
An article on The Daily Telegraph(London) says “BEWARE of buying
American software - if it fails, does damage to the business or cannot
perform as it should, the chances are there is not a lot a buyer can do
about it. For years American companies have been abrogating their
responsibilities under English law.”

According to the article, the protection in the Trades Descriptions Act,
Sale of Goods Act and other consumer protection legislation is evaded by
the conditions of sale. The contracts say the suppliers' local US
jurisdiction would apply and the software companies' liability is
limited to the cost of the program.

There has been some dispute whether software counts as services or
products. Either is covered by English law - goods should be of
reasonable quality and fit for purpose, and services should be provided
with skill and care.

Kit Burden of legal firm Barlow Lyde & Gilbert said normal practice has
long been the "shrink-wrap licence": by breaking through the plastic
packaging the buyer is tacitly agreeing to the contract terms. In theory
English law should insist the buyer has a chance to see and agree the
terms before buying the product but even that may not work. "I think
that the contract is suspect, though I think it would be hard for a
court to go against the long practice in the trade," he said. In any
case, it has never been tested, the Daily Telegraph(London) says.

Private consumers cannot have their rights cancelled like that and are
protected by the Unfair Contract Terms Act. But corporate buyers have to
show the exclusion was unreasonable and nobody has so far mustered the
wealth to take on the giant US program makers.

Few were aware of all this until the Y2K bug. To provide additional
protection for the companies selling non-compliant programs, America
introduced the "Good Samaritan" law. If the software company owned up to
incompetence by admitting the software may not cope with 2000, it avoids
responsibility. It could not be sued for the admission.

The Good Samaritan law was said to make producers disclose problems in
time for users to take action. They would at least be able to decide
whether to take on experts to remedy it, up-grade, or start again.

The effect, according to the Daily Telegraph, has been to provide
immunity if they put their hands up. It is the claimed refusal of AT&T
and its subsidiaries to provide that sort of warning about some
telecommunications products that has triggered a class action in the US
because customers were told it would cost nearly pounds 5,000 to set the
problem right.

Mr Burden said the US government was acting as Good Samaritan to its
software industry. Now further legislation is being introduced "to make
it more difficult to take action against the software companies", said
Andrew Rigby of law firm Tarlo Lyons.

The plan is to cap punitive damages at $250,000, set a ceiling on
directors' liability and have a cooling-off period for talks and
mediation. As a result, US companies will have protection their British
counterparts lack, Mr Rigby said. Australia has moved to offset American
protectionist legislation harming its local suppliers by introducing
parallel laws. "The UK government should be talking bugs, not bananas,
with the US," he added. "I doubt if the Good Samaritan law would make
much difference to litigation in the US because it is such a litigious
society," said Mr Burden. But he warned UK users of software to be wary
of apparent warranties.

Many of the reassuring statements in programs packs "send you down a
very narrow alley" and limit the conditions in which buyers can make a
claim, said the Daily Telegraph(London), January 17, 2000.


                               *********


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

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