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               Wednesday, February 9, 2000, Vol. 2, No. 28


ABBOTT LABORATORIES: Cohen, Milstein Files Securities Lawsuit in IL
AICI CAPITAL: Rabin & Peckel Files Securities Lawsuit in NE
ANALYTICAL SURVEYS: Berman, DeValerio Files Securities Suit in IN
AOL: Rivals Join Customers in Suing over Alleged Glitch in Software
ASHWORTH INC: Will Defend Vigorously CA Securities Suit Amended Dec 99

AUTO FINANCING: CA Borrowers Turn Deficiency into Claims for Relief
CARIBINER INTL: Contests NY Securities Suits; Ct Orders Consolidation
CHRISTIE'S INT'L: Changes Its Fee Structure for Both Buyers and Sellers
CHRISTIE'S, SOTHEBY'S: Antitrust in Art World's "Gentlemen's Agreement"
DELGRATIA MINING: Former Executives Claim Pressure Re Report on Salting

DOW CHEMICAL: NY Ct Dismisses Agent Orange Exposure Claims
HURD'S HEAT: Ct OKs Settlement for Fog-up Hurd Millwork Windows & Doors
LABORATOIRES SERVIER: NJ Ap Ct OKs Convention for Witnesses in France
MEXICO: Mexicans File SC Suit to Regain Control of World Trade Center
NORWEST BANK: MN Ap Ct Remands Case Re Lender's Unauthorised Coverages

PAYDAY LENDERS: Borrowers without Injury Get No Award, 7th Cir Rules
SYNC RESEARCH: Announces Dismissal of Shareholder Lawsuit in CA
TEXAS EDUCATION: TAAS Test Is Necessary Despite Racial Impact, Ct Rules
TOBACCO LITIGATION: Lawyers Plan to File Suits in WA over Price Fixing
Y2K LITIGATION: Executone Settles Alabama Suit over Telephone System

* Arbitration Fails to Achieve National Policy against Workplace Bias
* Canadians Take Lessons from U.S. Masters of Securities Actions
* Monitoring E-Mail May Be an Employer's Best Defense


ABBOTT LABORATORIES: Cohen, Milstein Files Securities Lawsuit in IL
The law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C filed a
lawsuit in the United States District Court for the Northern District of
Illinois on behalf of all persons who purchased the securities of ALZA
Corporation between June 22, 1999 through Nov 1, 1999.

The complaint charges the Abbott Laboratories, Inc and Abbott's CEO,
Miles D. White with violations of sections 10(b) and 20(a) of the
Securities Exchange Act of 1934.

On June 21, 1999, the defendants announced that Abbott would acquire
ALZA in a stock for stock transaction with a fixed exchange ratio of 1.2
shares of Abbott stock for each share of ALZA. As a result, the price of
ALZA stock increased and began to track the price of Abbott stock. The
defendants failed to disclose, however, that Abbott was in the midst of
a dispute with the FDA over quality control problems at Abbott's North
Chicago, Illinois plant, which posed a serious risk to Abbott's
Diagnostic Products Division -- the Division had accounted for $2.79
billion (about 22 percent) of Abbott's total sales in 1998. As early as
March 17, 1999, the FDA had written Abbott an official warning letter
concerning the problems, threatening to halt the sale of a number of
Abbott's diagnostic products. This important information was hidden from
investors, however, until September 29, 1999, when Abbott acknowledged
the March 17 FDA letter. Even then, the full extent of the problems and
their devastating consequences for Abbott was not revealed until the
morning of Nov. 2, 1999, when Abbott disclosed a consent decree with the
FDA that called for a $100 million fine to be paid by Abbott, and which
would result in Abbott taking a charge to third-quarter earnings of $168

The complaint further charges that the defendants' false and misleading
statements and omissions caused the price of ALZA stock, which tended to
track the price of Abbott stock because of the pending acquisition, to
trade at artificially inflated levels throughout the Class Period, and
seeks to recover damages for the members of the proposed class who
suffered damages as a result of the misconduct alleged.

Contact: Steven J. Toll (stoll@cmht.com), Matthew J. Ide (mide@cmht.com)
or Tamara J. Driscoll (tdriscoll@cmht.com), of Cohen, Milstein, Hausfeld
& Toll, P.L.L.C., 999 Third Avenue, Seattle, Washington 98104. PH. at
888/240-1238 or 206/521-0080.

AICI CAPITAL: Rabin & Peckel Files Securities Lawsuit in NE
Rabin & Peckel LLP commenced securities lawsuit in the United States
District Court for the District of Nebraska, on behalf of purchasers of
AICI Capital Trust preferred securities during the period from July 29,
1997 through November 15, 1999, inclusive.

The complaint alleges that AICI, Acceptance Insurance Companies Inc and
certain of its directors and officers violated the Securities Act of
1933 by issuing a false and misleading Registration Statement and
Prospectus for the public offering of AICI preferred securities. In
particular, it is alleged that the Prospectus failed to that the
Company's loss reserves were inadequate and failed to disclose that the
Company was exposed to losses on policies issued to construction
contractors and subcontractors in California as a result of the 1995
California Supreme Court decision adopting the "continuous trigger"
theory for losses involving continuous or progressive damage. AICI
preferred securities which sold at $25 per preferred security on the
offering closed at $12 1/16 today.

For more information regarding the above-mentioned lawsuit, please
contact Joseph V. McBride of RABIN & PECKEL LLP at (800) 497-8076 (212)
682-1818 or at email@rabinlaw.com via e-mail.

ANALYTICAL SURVEYS: Berman, DeValerio Files Securities Suit in IN
Berman, DeValerio & Pease LLP filed a class action lawsuit in the United
States District Court for the Southern District of Indiana on behalf of
all investors who purchased Analytical Surveys common stock during the
period January 25, 1999 through January 26, 2000.

The shareholder seeks damages for violations of sections 10(b) and 20(a)
of the Securities Exchange Act of The action charges that Analytical
Surveys and certain of its officers and directors misled investors
concerning the company's revenues and earnings and that the company did
not prepare its financial statements in accordance with Generally
Accepted Accounting Principles. Analytical Systems' common stock price
dropped approximately 23% after the company announced that it may be
required to restate financial results for its fiscal year ended
September 30, 1999.

For more details concerning this lawsuit, you may contact Chauncey D.
Steele IV; or Michael G. Lange both of Berman DeValerio & Pease LLP, One
Liberty Square, Boston, MA 02109; telephone at 800-516- 9926, or at
bdplaw@bermanesq.com via e-mail or visit website at

AOL: Rivals Join Customers in Suing over Alleged Glitch in Software
Competitors of America Online Inc., the nation's largest Internet
service provider, are joining some customers in demanding compensation
for alleged bugs in the latest version of AOL software.

Prodigy, one of the top five Internet service providers, with 2.2
million customers, wrote AOL last week asking to be reimbursed for the
administrative and technical costs of helping customers who said they
were having trouble reaching their Prodigy accounts after installing
AOL's Version 5.0.

Three small Washington area Internet providers have gone even further.
CapuNet, Digizen and Millkern Communications filed a class-action
lawsuit on February 4 in Baltimore City Circuit Court seeking to
represent 6,000 ISPs nationwide. Customers have filed class-action suits
in federal court in Alexandria and in state court in California.

All three lawsuits and Prodigy's Feb. 2 letter allege that when AOL
customers install Version 5.0 and click a "yes" button to make it their
default browser, the installation changes their computers' settings,
making it much harder to access providers using other browsers. Two of
the suits ask AOL to stop distributing Version 5.0 until the problems
are solved, and Prodigy asked AOL to create and distribute a software

AOL, which has 21 million customers, "is leveraging its market position
. . . to foreclose competition and gain unfair competitive advantage,"
Prodigy Executive Vice President Andrea Hirsch wrote to AOL last week.
When users who agreed to make AOL their default browser try to access
Prodigy, a promo asking if they want to go to AOL comes up, she wrote.

Barry Schuler, president of AOL's interactive services, said the
lawsuits are "without merit." "We're not doing anything that other ISPs
aren't doing," he said. He said that the 8 million customers who have
downloaded Version 5.0 are reporting 20 percent fewer problems than with
the previous version and that the company has received a "tiny" number
of complaints about accessing other providers. Schuler said that AOL's
technical support staff can easily walk customers through the steps to
access another Internet provider, and that customers who click "no" when
asked if they want AOL as the default browser should have no problems.

David Zale, an analyst who follows AOL for Sands Brothers & Co., said he
is not concerned about the lawsuits' effect on the company's stock
price--which has fallen almost 22 percent since it announced its
marriage to media powerhouse Time Warner Inc. on Jan. 10--based on what
has been revealed so far. "Even if these lawsuits have some merit and
have to be settled for half a billion or a billion [dollars], that's
still a small amount compared to the capitalization that's added and
subtracted on a daily basis because of the uncertainty of the Time
Warner merger," he said.

Lawyer Kenneth Yates, who represents the Alexandria plaintiffs, said the
installation program sometimes changes settings even if the user clicks
"no" when asked if AOL should be the default setting.

John Dvorak, director of technology at Rockville-based CapuNet, said
that when his customers call AOL, "they don't get an answer, so we wind
up with the problem because we're smaller and the client can reach us."
He added that his technicians are spending up to two hours walking each
client through the reconnection process. About 45 of CapuNet's 1,000
corporate customers have reported problems after installing AOL Version
5.0, Dvorak said.

Some online chat rooms have been filled with complaints about the AOL
software, and beta testers told The Washington Post they had warned AOL
about connection problems before the software's official launch. A
German trade group, Eco Electronic Commerce Forum, has issued a warning
against using "crash-prone" Version 5.0.

EarthLink Inc., the second-largest ISP, with 3.1 million customers, said
it has no plans to file suit. "That would be piling on," spokesman Kurt
Rahn said. But when customers call with connection problems, he said,
"the first question we ask [is]: 'Have you put AOL 5 on your computer?'"
(The Washington Post, February 8, 2000)

ASHWORTH INC: Will Defend Vigorously CA Securities Suit Amended Dec 99
Ashworth Inc announces to its investors that a class action suit was
filed on January 22, 1999 by Milberg Weiss Bershad Hynes & Lerach LLP in
the United States District Court for the Southern District of California
on behalf of purchasers of the Company's common stock during the period
between September 4, 1997 and July 15, 1998 alleging violations of the
Securities Exchange Act of 1934 by the Company and certain of its
officers and directors.

The complaint alleged that, during the class period, Company executives
made positive statements about the Company's business including
statements concerning product demand, offshore production and
inventories. The complaint further alleged that the defendants knew
these statements to be false and concealed adverse conditions and trends
in the Company's business during the class period.

The Company was served a copy of the complaint on January 26, 1999.
Subsequently, two other suits were served upon the Company making
similar allegations. The three actions have been consolidated by order
of the United States District Court and lead counsel for the plaintiffs
has been appointed. Per order of the Court, Plaintiffs filed their
Amended and Consolidated Complaint on December 17, 1999.

The Company has approximately 60 days to respond by way of a motion to
dismiss or other responsive pleading. Under the scheduling order entered
by the United States District Court, a hearing on the Company's motion
to dismiss, if filed, will occur no sooner than May of 2000. Until that
time, under the applicable provisions of the Private Securities
Litigation Reform Act of 1995, plaintiffs cannot conduct discovery
against the Company until resolution of the motion to dismiss.
Accordingly, no discovery has occurred to date.

The Company has retained counsel, conducted an internal investigation of
the allegations of the various complaints and intends to vigorously
defend against the action.

AUTO FINANCING: CA Borrowers Turn Deficiency into Claims for Relief
in California are turning automobile lenders' deficiency actions into
claims for affirmative relief. Plaintiff's attorney Mark A. Chavez of
Chavez & Gertler LLP in Mill Valley, Calif., reports that upon
discovering that many California automobile lenders were not adhering to
the requirements for repossession notices, his firm filed affirmative
claims for relief against 42 lenders in class actions and private
attorney-general cases. The affirmative claims alleged the lenders, such
as Nissan Motor Acceptance Corp., Ford Credit, Chrysler Financial Co.,
NationsBank, American Honda Finance Co. and General Motors Acceptance
Corp., issued defective repossession notices in collection or attempting
to collect deficiency balances from borrowers.

To date Chavez has negotiated settlements with five of the lenders. The
terms of the settlements require the lenders to refund to their
borrowers over 41 million in deficiencies, correct the borrowers' credit
histories and stipulate to injunctions which proscribe further
collection efforts.

Chavez stated, "It is unlikely that California is an isolated exception.
In all probability, lenders are failing to fully comply with the law in
other jurisdictions as well."

For more information, contact Chavez at (415) 381-5599 or
mark@chavezgertler.com. He represents consumers in class actions and
private attorney general cases against banks, finance companies,
automobile dealers and insurance companies. He is the co-chair of the
Practising Law Institute's Consumer Financial Services Litigation
Institute and the former co-chair of the National Association of
Consumer Advocates. He also serves as a consumer advocate advisor to
Consumer Financial Services Law Report. (Consumer Financial Services Law
Report, January 25, 2000)

CARIBINER INTL: Contests NY Securities Suits; Ct Orders Consolidation
Caribiner International Inc reminds its investors that a purported
shareholder class action was filed on March 25, 1999 in the United
States District Court for the Southern District of New York against the
Company and certain of its current and former officers and one of its
directors. On May 7, 1999, a purported shareholder class action
substantially identical to the March 25th action was filed in the
Southern District against the Company and the same individuals named in
the March 25th action.

Both lawsuits allege, among other things, that defendants misrepresented
the Company's ability to integrate various companies it was acquiring
and alleges violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and various rules promulgated thereunder. The
lawsuits seek unspecified money damages, plus costs and expenses,
including attorneys' fees and expert fees.

The Company believes it has meritorious defenses to this action and
intends to defend the lawsuits vigorously. In November, 1999, the Court
issued an order consolidating the lawsuits into a single action and
appointing lead plaintiffs and lead counsel. It is anticipated that an
amended consolidated complaint will be filed by the plaintiffs in early

CHRISTIE'S INT'L: Changes Its Fee Structure for Both Buyers and Sellers
Christie's International, one of the world's leading auction houses,
unveiled on February 7 big changes to its fee structure for buyers and
sellers, the Financial Times (London) reported. Christie's announced
that it will immediately be reducing the commissions it charges sellers
for items that reach between $ 100,000 and $ 5m in an auction. In
addition, those clients who buy or sell goods worth more than $ 5m will
be able to negotiate "special terms on a case-by-case basis". From March
31, Christie's will increase the premium it charges buyers on the first
$ 80,000 of any sale from 15 per cent to 17.5 per cent. They will pay 10
per cent on any amount above that. For the first time at Christie's,
buyers will be able to combine the amount of their annual purchases to
reduce the commission on goods they sell at the auction house.

Christie's said that its new management had been considering altering
the company's commission and premium structure for some time, but
conceded that the move had "been accelerated by the recent events", the
Financial Times (London) says. The Justice Department has been
investigating the industry for several years, and the EU confirmed over
the weekend that it had launched its own probe of Christie's and
Sotheby's. The EU could impose a maximum fine equivalent to 10 per cent
of a firm's turnover. There have also been a number of class action
civil lawsuits filed against the auction houses in the US. One alleges
that they adopted the same buyer's premiums within weeks of each other
in 1992, and then the same sliding scale of seller's commissions in
1995. (Financial Times (London), February 8, 2000)

The New York Times says the new fee structure is much the same way
airlines give frequent fliers incentives to maintain a loyal customer
base, Christie's will now give customers who buy a lot of art cheaper
rates when they sell art. Previously, sellers paid a fixed scale of
charges ranging from 2 percent to 20 percent based upon the value of the
property sold at Christie's during a calendar year.

But while it may be cheaper to sell at Christie's, it will be more
expensive to buy there. As of March 31, Christie's will increase its
buyers' commissions, charging buyers 17.5 percent on the first $80,000
and 10 percent on any amount over that.

Since 1993 both Sotheby's and Christie's charged buyers 15 percent for
the first $50,000 they spent and 10 percent for everything after that.

People in both auction houses said that Christie's new fee structure was
a reaction to the Justice Department's investigation and to the numerous
civil lawsuits that were filed last week by angry buyers and sellers who
contend that the auction houses inflated their fees as a result of
illegal price-fixing.

The Justice Department has declined to comment on its case since
beginning the investigation in 1997. Gina Talamona, a government
spokeswoman, said only that "the antitrust division is looking at the
possibility of anticompetitive practices in the fine art auction
industry." But people at the auction houses, who spoke on condition of
anonymity, said the investigation centers on the fees.

In 1992, Sotheby's announced the increase in the buyer's commission, up
from a flat fee of 1 percent. Seven weeks later Christie's followed
suit. Then in 1995, Christie's announced it was changing the fee it
charged sellers from a flat commission of 10 percent to a more complex,
nonnegotiable sliding scale ranging from 2 to 20 percent depending on
the size of the sale. Weeks later Sotheby's did the same.

Before the auction houses changed the commission for sellers in 1995
they ran the risk of cutting into their profits by wooing many of the
world's richest sellers and often agreeing to cut or eliminate fees to
get their business. If the two conspired to set the fees in secret, they
would circumvent the problem and both make more money.

Christie's, with the change announced on February 7, is signaling that
it will again lower or even drop its sellers' charges to lure big
business. Clients who purchase or sell more than $5 million a year
receive special terms negotiated case by case. "We believe this will
make us more competitive in winning business," said Edward Dolman, who
was named chief executive of Christie's on Dec. 24 after the abrupt
departure of Christopher Davidge, who had been chief executive for six
years. "We have been planning this for some time. But recent events have
accelerated this announcement."

A week and a half ago, Christie's announced that it had given federal
investigators information about "possible conduct" at the firm that was
relevant to the antitrust investigation, which includes about a dozen
prominent dealers in addition to the two auction houses. In exchange for
its cooperation, the company was "conditionally accepted" into the
Justice Department's amnesty program, Christie's said.

Collusion in setting the commissions would constitute an illegal
restraint of trade under the Sherman Antitrust Act. Penalties for
violations can include substantial fines and imprisonment of up to three

One art lawyer familiar with the case noted that changing the fee
structure would be a natural result of the investigation. "This signals
there may have been collusion not just on the seller's but on the
buyer's premium," he said. "Since the present commission schedule is
presumably collusive, they now have to take themselves out of a

But other auction house experts disagreed, saying that they thought the
investigation concerned only sellers' fees, not the buyers' premiums.
The increase in the premium, they said, would be a logical step,
intended to off set the loss of revenue from the reduced seller's

Art dealers had other theories concerning Christie's announcement. "I
find Christie's announcement consistent with their decision to concede
the Internet auction business to Sotheby's," said Vance Jordan, an
American painting dealer who runs a Madison Avenue gallery. Last year,
Sotheby's invested $40 million to create two Internet sites, one with
Amazon.com, the other managed solely by the auction house. Christie's
said it would not team up with an Internet company to sell its
lower-priced items online. Mr. Jordan added that the new fee structure,
"if unmatched by Sotheby's, would give Christie's a clear competitive
advantage with upper-end buyers and sellers because it gives them
preferential treatment."

The antitrust investigation will make it difficult for Sotheby's to
exactly match Christie's fees, experts say. But if Sotheby's is to
remain competitive, it will have to lower its sellers' commissions also.
Matthew Weigman, a spokesman for Sotheby's, said, "we will be reviewing
the changes", according to the New York Times. Financial Times (London)
says Sotheby's officials declined to comment about whether the firm was
planning to alter its price structure.

As reported on the New York Times, Mr. Dolman of Christie's said the new
rates would apply only to the company's higher end or what he called its
"principal sales rooms," which allows it to retain the ability to
compete with the online auction businesses like eBay that charge only
7.5 percent to sellers and nothing to buyers. The principal sales rooms
include Christie's headquarters in London, on King Street; its
Rockefeller Center location in New York; and its Los Angeles sales room.

Christie's lower-priced auction rooms like South Kensington in London
and Christie's East in New York will change their sellers' fees in the
coming weeks, the company said. Its other European and Asian locations,
including Amsterdam, Hong Kong and Singapore, will also change their fee
structures but the rates have yet to be determined.

The new commission terms will automatically apply to consignment
agreements that have already been signed, Mr. Dolman said. (The New York
Times, February 8, 2000)

CHRISTIE'S, SOTHEBY'S: Antitrust in Art World's "Gentlemen's Agreement"
It emerged only recently that a long suspected "gentlemen's agreement"
between two great names of the art world may in fact have been criminal,
Financial Times (London) says.

In late January, Christie's, one of the leading auction houses,
confirmed it had supplied information to the US Justice Department
relevant to its antitrust investigation of the industry. The information
was believed to have outlined a deal with Christie's main rival,
Sotheby's, to limit competition on commissions the companies charged
their clients. Christie's said the alleged price-fixing took place under
an earlier management and a different owner. For its co-operation, it
was granted conditional amnesty from criminal charges by US authorities.

But that has not spared either company from civil lawsuits in the US and
regulatory authorities in Europe - not to mention a bitter dose of
public scorn.
"This is shocking, absolutely shocking," an art scene veteran said.
"It's going to reinforce the idea that you can't trust the art world,
that they're selling something with no intrinsic value and then pumping
up the price of it."

The disclosure is highly embarrassing for companies that dedicate so
many resources to polishing their images and many are now wondering if
it will mean something more for two companies that stood as pillars of
the art auction world for more than 200 years, according to the
Financial Times (London).

The early indications are not encouraging, the paper says. The European
Union confirmed recently that its competition commission had launched
its own probe into anti-competitive practices, which carry a maximum
penalty of 10 per cent of the companies' revenues. There have also been
a number of class-action civil lawsuits filed against the two houses in

One alleges that in 1992, both companies raised their buyers'
commissions to identical levels within six weeks of each other. Then,
three years later, they harmonised the sliding scale of commissions they
charge sellers within just a few months of each other.

Lawyers are seeking awards of treble damages on every item clients
bought or sold at the houses during the time in question. "It could be
in the hundreds of millions of dollars," said Jeffrey Klafter, an
attorney bringing one of the suits. "This is a very serious matter for
the art community."

Sotheby's said it was not surprised by the multiple copycat lawsuits in
light of the press reports, but it has not denied the allegations. The
scandal comes at a delicate time for the auction house establishment. A
new breed of competitors is using technology to challenge an established
order. eBay, the leading online auctioneer, purchased Butterfield &
Butterfield of San Francisco last April to create a premium Great
Collections division. The company, previously known for the army of
Beanie Babies (soft toys) it trades over the internet, is seeking to
peddle more expensive items that draw higher commissions. Boosted by its
Dollars 20bn (Pounds 12bn) market capitalisation, eBay has already
poached executives from the establishment for the new franchise.

"There are a number of companies looking to get into the high-end
auction market, and an event like this certainly adds ammunition for
them against the traditional houses," said Martin De Bono, an analyst at
Gomez Advisors, an internet research firm. While they are unlikely to
challenge Christie's and Sotheby's on impressionist paintings or
Chippendale furniture, they may carve out a greater share of the market
for items worth Dollars 10,000 or less, Mr De Bono said.

Despite their current travails, however, there are reasons to believe
that Christie's and Sotheby's will recover from their public humiliation
and that the two houses, founded in 1766 and 1744 respectively, will
continue to dominate the high-end art world for a while, as opined in
the Financial Times (London).

Both have weathered controversy in the past. Dealers and collectors in
London took legal action against them in the 1970s after they began
charging commissions to buyers within just three days of each other. The
suit was settled out of court.

There was a threat of boycott when the companies later introduced the
policy in the US, but that controversy also faded. "It was like asking a
gourmet to go on a hunger strike," said Victor Wiener, of the Appraisers
Association of America. "If collectors like the object, they will have
to go to the auction houses to buy it. It's not like there are an
infinite number of Rembrandts in the world."

Despite their current embarrassment, Christie's and Sotheby's have come
to sell a disproportionate number of such goods over the years because
of their fine arts expertise and their skill at cultivating well-heeled
buyers. Given that apparent lock on the art market, many collectors are
said not to be eager to join the legal fight.

After the initial wave of criticism, there are even signs that some
rival auction industry executives are feeling sympathy for Christie's
and Sotheby's. They argue it is only natural they would charge similar
prices, as they sell the same specialised goods, cater to the same
clientele and draw on the same small pool of workers, many of whom have
shifted between them during their careers.

Some cite the old cliche, that Christie's executives are gentlemen
trying to be businessmen, while Sotheby's are businessmen trying to be
gentlemen. In light of recent events, however, it appears both may have
been businessmen all along. (Financial Times (London), February 8, 2000)

DELGRATIA MINING: Former Executives Claim Pressure Re Report on Salting
Two former executives of scandal-ridden Vancouver company Delgratia
Mining Corp. claim in court documents they were forced out of the
company through the behind-the-scenes activities of Terry Alexander and
Carlo Civelli, two men with long histories in the Vancouver market. In
1999, the executives say, they came under extreme pressure from Mr.
Alexander and Mr. Civelli to disregard engineering reports that
determined Delgratia's earlier test results had been salted, and instead
to publicize a new report that purported the firm had found gold on the
Josh property in Nevada.

The allegations arise from a lawsuit brought by Central Minera Corp.
against the two men, Eric Xavier Lavarack, a former president and
director of Delgratia, and David Rodger Manning, former vice-president
of finance. Central Minera, the successor company to Delgratia, has
accused two former executives of misappropriating $272,400 in company
funds just before they stopped working for the company, a charge
vigorously denied by both men.

They say they were legally entitled to the money as severance for their
being forced out. The company's statement of claim alleges the two
executives made up the contracts that entitled them to the severance pay
in their final days with the company.

The case was launched in May of last year, but key details of the suit
remained sealed at the request of the company until last week. The firm
had claimed the two men were in possession of privileged and
confidential information that should not be revealed. Mr. Manning and
Mr. Lavarack challenged the sealing order, and portions of the case have
now been opened to the public.

Mr. Civelli and Central Minera are represented by Vancouver lawyer John
Frank. He refused to comment on the case, other than to refer to the
company's statement of claim for the $272,400. 'It's all in the
pleadings. I really don't want to add anything to that. This matter will
be dealt with by the courts, and that's the appropriate way to deal with
it,' Mr. Frank said.

Mr. Alexander is a Vancouver businessman who was fined $1.2-million last
year by the B.C. Securities Commission and barred from the province's
securities business for 20 years for his role in the Arakis Energy Corp.

Mr. Civelli, a Swiss businessman, is described in court documents as
spokesman for a group of unnamed European investors. He has a long
history in financing Vancouver companies.

The dispute between the former executives and Central Minera stems from
the company's handling of the Delgratia salting scandal.

In March, 1997, Delgratia's stock hit a high of $34.75 (US) on Nasdaq
following the publication of strong drilling results from the Josh
property. The stock then plummeted on revelations that drill samples had
been salted -- or as the court documents sum up the engineering reports,
'any [gold] detected had been introduced after drilling.'

Charles Ager, then Delgratia's president, resigned and was replaced by
Mr. Lavarack. A Delgratia news release later confirmed Mr. Ager's family
trust beneficially owned half of Philgold Investments Inc., a company
registered in the British Virgin Islands, which had sold Delgratia a
stake in the Josh property.

Shareholders launched a class action following the collapse. A tentative
settlement was reached in the case in December, 1998. Plaintiffs would
receive $ 500,000 and 2.5 million common shares in the company.

Last February, Delgratia changed its name to Central Minera in a bid to
move beyond the salting scandal. The company, delisted from Nasdaq in
1997, now trades on the over-the-counter bulletin board.

By 1999, it looked as if Central Minera could look forward to a more
reputable future searching for gold in Mexico and Nicaragua. But,
according to Mr. Manning's affidavit, Mr. Alexander and Mr. Civelli were
keenly interested in the Josh site.

As early as February, Mr. Manning states that Mr. Lavarack had been
telephoned by Mr. Civelli and Mr. Alexander, who said that Mr. Ager was
'finding gold in Nevada.' Mr. Manning then states that in March, Mr.
Alexander talked of going to Nevada with 'top experts' to check out
information that Mr. Ager was supposed to have regarding the property.

According to Mr. Manning, the pressure really started in April. He
claims Mr. Civelli phoned from Switzerland on April 8 to suggest Central
Minera put off settling the class action lawsuit and hire an engineer
from Saskatchewan to look into Mr. Ager's information.

In what he describes as a business-like conversation, Mr. Manning
reminded Mr. Civelli that previous engineering reports had confirmed
there was no gold at Josh and the company had already publicly agreed to
settle the class action.

Mr. Manning says things grew tense the next day. Mr. Alexander entered
Mr. Manning's office and demanded he hire the Saskatchewan engineer. Mr.
Manning refused. 'We had worked hard to regain some credibility back for
the company and it would be wiped out if we started working down there
[in Nevada],' the affidavit states. Mr. Manning says Mr. Alexander
became furious at his refusal, even though Mr. Alexander, who had once
been a president and early promoter of Delgratia, was not a company
officer or director at the time of the conversation. Mr. Manning says
Mr. Alexander described himself in a subsequent phone call as the owner
of one million shares of Central Minera, but said he had approached Mr.
Manning as the 'go-between' for Swiss investors.

Mr. Manning's conversation with Mr. Alexander was followed by another
with Mr. Civelli. This time, the Swiss businessman was less civil. The
affidavit states Mr. Civelli told Mr. Manning that his concerns were
just 'bullshit' and that 'the Europeans' were not happy with the way the
executives were running the company.

Mr. Manning claims the pressure continued in subsequent communications.
A draft report from the Saskatchewan engineer Lawrence Melis was
prepared, though Mr. Manning claims that it contained 'no independent
data.' Mr. Civelli wrote Mr. Manning a letter suggesting that if gold
could be found at Josh, the class action lawsuit would be invalid.
Again, Mr. Manning disagrees. 'This was not what the lawyers had told us
-- the plaintiffs alleged disclosure issues against the company whether
there was gold or not.'

Things became more tense when Mr. Manning learned that a copy of the
Melis report -- the one Mr. Manning chided for containing 'no
independent data' -- was apparently leaked to one of the plaintiffs in
the class action. Then, court documents state, Mr. Lavarack received a
fax from Reinhard Siegrist, a company director with ties to Mr. Civelli,
demanding the lawsuit settlement be halted and the Melis findings be

On April 29, Mr. Manning and Mr. Lavarack spoke with Mr. Alexander by
telephone. Mr. Lavarack had suggested that if any engineering firm was
hired to take another look at Josh, it should be Strathcona Minerals,
the same company that had produced the definitive analysis of the Bre-X
samples. Mr. Alexander said Strathcona would be too expensive, but Mr.
Lavarack countered that Strathcona would do the job for $100,000, which
was the suggested budget.

But Strathcona would not get anywhere near the Josh property. 'Terry
Alexander said Ager won't allow them on the property and there might
even be a tank guarding the gates,' the affidavit states.

Things continued to boil at a meeting the next day with Mr. Civelli.
According to Mr. Manning, Mr. Civelli attacked Mr. Lavarack for
mismanaging the company -- so much so that Mr. Lavarack eventually said
that he had had enough, got up and left the room.

Central Minera claims Mr. Lavarack's exit from the meeting resulted in
his immediate resignation. In court documents, Mr. Lavarack denies this
and says he did not officially resign until May 3. Central Minera also
claims Mr. Manning resigned on April 30, but Mr. Manning denies this and
says he was fired or forced to resign by reason of duress on that date.

Central Minera's statement of claim alleges the two executives had no
right to take the money. It also says the men took computer equipment
that belonged to the company and alleges the supposed employment
contracts, under which Mr. Manning and Mr. Lavarack claim the money,
were prepared by the executives in their final days at the firm.

The company won an early round of the dispute. In May, it succeeded in
obtaining a court ruling ordering the $272,400 be paid into court
pending a resolution of the lawsuit. That order, along with most of the
court documents, remained sealed until this week.

The case continues, and more details are expected to be revealed as more
court documents become available. (National Post (formerly The Financial
Post), February 07, 2000)

DOW CHEMICAL: NY Ct Dismisses Agent Orange Exposure Claims
----------------------------------------------------------A New York
federal judge on Dec. 13 granted a defense dismissal motion in which the
defendants maintained compensation for injury claims arising out of
Agent Orange exposure are barred by a previous class action settlement
agreement (Michael F. Ryan, et al. v. Dow Chemical Co., et al., No. 79
CV 747 (JBW), In re: "Agent Orange," MDL No. 381, Joe Isaacson, et al.
v. Dow Chemical Co., et al., No. 98-6383 (JBW), Daniel Raymond
Stephenson v. Dow Chemical Co., et al., No. 99-3056 (JBW), E.D. N.Y.;
See 12/8/99, Page 15). Sources said the court will not issue a written
opinion and the plaintiffs will be filing an appeal.

Vietnam Veterans exposed to Agent Orange settled a suit in which they
argued that the chemical producers were liable for exposure injuries.
Criteria for eligibility included that an applicant suffer from "total
disability" and that claims for awards be submitted by Jan. 1, 1989, or
within 120 days of onset of disability.

Joe Isaacson and his wife claim that his exposure to Agent Orange caused
him to suffer from non-Hodgkin's disease. He sued Dow Chemical Co. in
1998 in the New Jersey Superior Court for Orange County. Isaacson's
action was later removed to the U.S. District Court for the District of
New Jersey. Isaacson objected to the remand and also opposed transfer to
the MDL 381 court, but the Judicial Panel on Multidistrict Litigation
ordered the Isaacson action transferred.

                       Stephenson Action

Daniel Stephenson sued Dow Chemical and Monsanto Co. in 1999 in the U.S.
District Court for the Western District of Louisiana. Stephenson
maintains that his exposure to Agent Orange caused him to suffer from
multiple myeloma, which was diagnosed in 1998. The Stephenson action was
also transferred to MDL 381.

Before the U.S. District Court for the Eastern District of New York, Dow
Chemical, Monsanto and other defendants noted in an Oct. 12 dismissal
motion that the Second Circuit U.S. Court of Appeals rejected an earlier
challenge to the settlement agreement, holding that class members who
have not yet manifested injury were forever barred from filing an action
based on Agent Orange exposure. Dow Chemical added that the settlement
parties agreed that all future suits by class members would be
permanently barred.

However, Isaacson countered in his Nov. 26 response motion that res
judicata cannot bar his claim for compensation in the absence of an
inquiry into the adequacy of representation and due process issues.
Isaacson further maintained that the right to collaterally attack the
adequacy of notice and representation is so well established that a
number of courts have held that absent class members have no standing to
appeal a class action judgment or settlement precisely because they can
challenge the settlement by collateral attack.

Dow Chemical is represented by Steven Brock and Philip D. Nykamp of
Rivkin, Radler & Kremer in Uniondale, N.Y. Monsanto is represented by
John C. Sabetta of Seyfarth, Shaw, Fairweather & Geraldson in New York.
Isaacson is represented by Gerson H. Smoger of Smoger & Associates in
Oakland, Calif., and Mark R. Cuker and Esther Berezofsky of Williams,
Cuker & Berezofsky in Cherry Hill, N.J. (Mealey's Litigation Report:
Emerging Toxic Torts, December 21, 1999)

HURD'S HEAT: Ct OKs Settlement for Fog-up Hurd Millwork Windows & Doors
A proposed settlement has been reached in a nationwide class action
lawsuit concerning Hurd Millwork Heat Mirror(TM) Windows and Doors.
Under the terms of the proposed settlement, owners of Hurd's Heat
Mirror(TM) products manufactured between January 1, 1990 and January 11,
1999 will be eligible for certain warranty enhancements and door and
window replacement including credit for labor.

The affected windows and doors are sealed with Bostik 3190-HM sealant.
The windows and doors incorporate a technology that utilizes a thin
reflective plastic film between the glass lites.

The complaint alleges that the seals on the windows and doors
prematurely fail, causing the windows to fog-up resulting in permanent
obstruction of vision through the glass unit.

Hurd windows are identified by a "Hurd" logo or numbers stamped on the
spacer bar, or on the crank handles of casement and awning windows and
on the door handles of most Hurd patio doors. A full description of
affected products and identification methods can be found on the Web:
http://www.hurdclaims.comor by requesting a legal notice packet from
the notice/claims administrator by calling toll-free, 800-708-2425.

The Court has preliminarily approved the Settlement. The Court will hold
a final hearing on March 30, 2000 to consider whether the Settlement is
fair, reasonable and adequate and in the best interest of the Class.
Class members have a right to appear at the hearing and to be heard
either in support of, or in opposition to, the Settlement. Class members
who wish to opt-out of the settlement must notify class counsel and the
notice administrator by March 20, 2000.

Persons who think they are members of the class and would like to
receive written settlement notice, which includes a Claim Form and
Instructions On How to Opt Out, can obtain complete information by
calling 800-708-2425, or visiting the Website at

Contact: Tom Cochran, Esq., 509-624-5265, or Brian Strange, Esq.,
310-207-5055, both of Witherspoon Kelley/Strange & Hoey

LABORATOIRES SERVIER: NJ Ap Ct OKs Convention for Witnesses in France
New Jersey's appeals court on Nov. 12 reversed a trial court decision
not to use the Convention on the Taking of Evidence Abroad in Civil or
Commercial Matters as it applies to phentermine defendant Servier in a
state class action (Helen Huse, et al. v. Laboratoires Servier SA, et
al., No. A-5211-98T2, N.J. Super., App. Div.; See November 1998, Page

The class plaintiffs sought to depose three Servier witnesses living in
France. Servier moved for an order requiring use of the Convention. The
trial court denied the motion and Servier appealed.

The appeals court said it was bound by the U.S. Supreme Court's ruling
on application of the Convention in Aeropatiale v. U.S. District Court
(482 U.S. 522, 107, S. Ct. 2542, 96 L. Ed.2d 461 [1987]), but deemed it
to be an optional method of gathering evidence. It said the choice is
between the Convention and New Jersey procedural and substantive law.

Reviewing case law, the appeals court said it is persuaded that the
Convention should be used "unless it is demonstrated that its use will
substantially impair the search for truth. . . ." It noted that the
Convention is supported by the American Bar Association, the U.S.
Judicial Conference and the National Conference of Commissions on
Uniform State Laws.

                      Foreign Parties Common

In addition, the court said New Jersey litigation involving foreign
parties is common. "New Jersey courts should utilize international
agreements which facilitate the conduct of cross-border litigation in
the absence of demonstrable prejudice to legitimate interests," the
court said. "Implementation of the Convention will demonstrate our
cosmopolitan approach to litigation arising out of the global economy
and our sensitivity to the concerns of our trading partners."

Although the French "blocking statute" cannot control the jurisdiction
of an American court to order the production of evidence, the French law
is a "cogent expression of French concerns which should be accommodated,
when possible," the court wrote. "As a result, our courts and litigants
may harvest reciprocal benefits when in need of the cooperation of
foreign tribunals to gather evidence from persons or entities not
subject to the jurisdiction of our courts, or in the enforcement of

Servier made a showing of the effectiveness of the Convention, the
appeals court said, including "American-style" depositions. "In the
event utilization of the Convention proves to be inadequate, the trial
court can revisit the discovery issues," the appeals court said.

The plaintiffs are represented by Margaret M. Allen and James J. Pettit
of Greitzer & Locks in Philadelphia. Servier is represented by Frank
Lloyd, Peter E. Muller and Valerie Steiner of Harwood Lloyd in
Hackensack, N.J. (Mealey's Emerging Drugs & Devices, December 17, 1999)

MEXICO: Mexicans File SC Suit to Regain Control of World Trade Center
Probably only James Bond can handle such international intrigue, but the
plaintiffs are going to try - using civil RICO. Two Mexican nationals
filed a complaint in the U.S. District Court for the District of
Columbia on Nov. 9 alleging the Mexican government and its agents used
fraud and duress to wrest control from them of the World Trade Center of
Mexico. (Len Olea, et al. v. Republic of Mexico, et al., No.

The complaint alleges the following: Plaintiff Francisco de Paula Len
Olea was a graduate student at the American University in the District
of Columbia when in 1987 he conceived of the idea of constructing a
World Trade Center in his homeland. He teamed up with Alfredo Surez Ruz,
whose family owned the uncompleted frame of the Hotl de Mxico and the
underlying fee. Together they incorporated World Enterprises Inc. in the
District of Columbia to obtain a franchise from the World Trade Centers
Association Inc. and take steps toward creation of the World Trade
Center of Mexico. By late 1988, Len Olea had invested virtually all of
his personal assets in the project and had obtained the needed

Thereafter, the rights, options, evaluations, drawings, plans and the
franchise were sold to Escala Internacionl S.A., a Mexican corporation,
formed by Len Olea and Surez Ruz. They owned 75 percent of the shares
and Bancomext, an instrumentality of the Mexican government, purchased
the other 25 percent. Bancomext offered to extend a 35 million line of
credit to Escala in exchange for a greater equity interest. When Escala
refused, Bancomext extended the line anyway. However, despite an
agreement that the line of credit would be used exclusively to construct
and develop the Hotl de Mxico, Bancomext diverted 30 million to pay off
a previous owner of the hotel. The diversion severely damaged the World
Trade Center Project. Bancomext now renewed its demands for a greater
equity share in Escala and sent a representative to the United States to
negotiate the sale with Len Olea. The latter eventually agreed to sell
his 26 percent of the shares for 6.4 million, giving Bancomext a
controlling interest. After Len Olea transferred his shares, Bancomext
refused to pay him, saying its board of directors had not approved the

Thereafter, the complaint alleged, the government of Mexico, acting
through Guillermo Ortz Martnez, a high government official, offered
plaintiffs 5 million for the outstanding stock of Escala. He threatened
that the full weight of the Mexican government would be used to force
the sale and that those who opposed the government would be punished.
The plaintiffs feared arrest, imprisonment or physical violence. The
Surez family was ordered to the headquarters of Mexico's tax service,
held there for two days, and threatened that the inheritance from their
recently deceased father would be wiped out by inheritance taxes unless
they complied. The family ultimately signed papers renouncing rights in
the World Trade Center without receiving any compensation. In May 1992,
the partners sold the rest of their stock to Gutsa, a company set up by
the Mexican government. For their 75 percent share in Escala, they
received 3.75 million in all.

In July 1998, the biggest banking scandal in Mexican history was exposed
by the media. The public attention on Ortz Martnez and his role in the
scandal led the plaintiffs to believe they could seek redress for the
wrongs perpetrated against them. At that time they also learned for the
first time that the board of directors of Bancomext had approved the
purchase of shares for 6.4 million, contrary to what they were told.
They also discovered that Gutsa paid, not 5 million, but 18.9 million
for the stock they sold. The whereabouts of the other 13.9 million is

The plaintiffs allege that the Mexican government's actions constituted
"commercial activity" carried on in or affecting the United States,
thereby conferring jurisdiction on the federal courts to hear the civil
complaint brought against the Mexican government despite its sovereign

The plaintiffs allege that Mexico, Ortz Martnez, Bancomext and Gutsa
made up an association-in-fact within the meaning of RICO and that this
enterprise expropriated plaintiffs' interests in the World Trade Center
of Mexico through a pattern of racketeering activity, which included
extortion, wire and mail fraud, travel and transportation in aid of
racketeering and money laundering.

The plaintiffs seek divestiture of the interests defendants hold in the
World Trade Center and treble damages.

Counsel for Plaintiffs: William A. Bradford, Mark J. Larson and Anthony
J. Franze, Hogan & Hartson LLP, Washington, D.C. (Civil RICO Report,
December 23, 1999)

NORWEST BANK: MN Ap Ct Remands Case Re Lender's Unauthorised Coverages
The benefit a borrower receives from collateral protection insurance is
irrelevant to the determination of expectation damages in a breach of
contract action alleging the lender purchased unauthorized coverages.
Logan, et al. v. Norwest Bank Minnesota N.A., et al., No. C7 99-817
(Minn. Ct. App. 12/27/99).

Sheryl Lynn Logan financed the purchase of her car with Norwest Bank
Minnesota N.A. using the car as collateral. In connection with the loan,
Logan signed an "FTCI agreement" stating she would provide fire, theft
and collision insurance on the car. The "FTCI agreement" also provided
that Norwest could purchase insurance coverage to cover its interest and
add the premium to Logan's account if she failed to maintain the
required insurance.

Logan allowed her insurance to lapse and her car sustained 3,000 in
damages. Norwest purchased a CPI policy covering her car and the
proceeds from the CPI policy paid for the repairs. After Logan failed to
make her required monthly payments, Norwest closed her account.

Arguing breach of contract, Logan, her father, who guaranteed her loan,
and a separate Norwest borrower, Donald Anderson, filed a class action
against Norwest and the insurance company. The trial court granted the
insurance company's motion to dismiss and granted summary judgment for
Norwest against Anderson.

Logan, however, pursued her breach of contract, breach of an implied
covenant of good faith and fair dealing claims on the ground that
Norwest overcharged her by purchasing insurance coverages not authorized
by her contract and adding the insurance premiums to her account.
Specifically, Logan alleged Norwest purchased four unauthorized
coverages: instrument non-filing errors and omissions coverage,
mechanic's lien coverage, repossession expense coverage and premium
deficiency coverage. She moved for partial summary judgment and class
certification while Norwest moved for summary judgment on her and her
father's claims. The trial court granted Norwest's motions finding that
Logan could not demonstrate damages and was estopped from asserting her
breach of contract claim. Logan appealed.


On appeal, the Minnesota Court of Appeals found that Logan breached her
contract by failing to maintain the required insurance. Thus, Norwest
was authorized by the contract to force place insurance to cover its
interest in the automobile. However, Norwest was only permitted "to
force place only such insurance as [was] authorized by the contract
between the parties," said the court.

Writing for the Court of Appeals, Judge Bruce D. Willis noted that Logan
claimed she was entitled to damages because Norwest breached the
contract by adding unauthorized coverages and overcharging her account.
The court considered whether the facts supported her theory of damages.

The trial court found that because Logan would not have received the
3,000 in repairs without the CPI coverage, she could not demonstrate

The Court of Appeals held that Logan sought reimbursement for
unauthorized insurance premiums, not a return to the status quo. Judge
Willis opined that Logan sought expectation damages not considered by
the trial court. He explained, expectation damages are "damages that
attempt to place the plaintiff in the same position as if the breaching
party had complied with the contract."

The Court of Appeals also stated that the benefit Logan received from
the CPI insurance was irrelevant to the determination of expectation
damages. Because the court found a genuine issue of material fact as to
whether Logan was damaged by Norwest's CPI purchases, it reversed the
trial court's summary judgment.


The trial court held that Logan was estopped from raising her breach of
contract claim because she accepted the benefits of the force-placed
insurance. However, the Court of Appeals explained that a party cannot
be estopped under the theory of ratification unless it has full
knowledge of the facts.

The Court of Appeals found that the documentation Norwest provided Logan
upon exercising its remedy to purchase CPI insurance failed to identify
any of the coverages. Thus, a question existed as to whether Logan knew,
when she accepted the benefits of the insurance, that the allegedly
unauthorized coverages were included in the CPI policy.

The Court of Appeals also held that knowledge of the extent of the
coverage encompassed by the CPI could not be imputed to Logan because
the record indicated the coverages purchased by Norwest were not
available to the general public. Again, the appellate court ruled the
trial court's judgment was in error.

                      Class Certification

Lastly, the court addressed the trial court's ruling on Logan's motion
for class certification. The trial court found Logan to be an unsuitable
class representative based on its determination that she could not
demonstrate damages. Because the Court of Appeals reversed and remanded
the issues of damages, it also reversed and remanded the denial of
Logan's motion for class certification.

Barry G. Reed, Ronald S. Goldser and J. Gordon Rudd Jr. of Zimmerman
Reed in Minneapolis, Michael Malakoff of Malakoff, Doyle & Finberg in
Pittsburgh, and Thomas J. Lyons of Thomas J. Lyons & Associates in St.
Paul, Minn. represented the plaintiffs. James L. Volling and John Edward
Connelly of Faegre & Benson in Minneapolis represented the defendants.
(Consumer Financial Services Law Report, January 25, 2000)

PAYDAY LENDERS: Borrowers without Injury Get No Award, 7th Cir Rules
the Truth in Lending Act means what it says, a federal appeals court
panel has rejected a bid by payday loan borrowers to obtain monetary
awards for statutory violations that did not cause them any actual harm.

A panel of the 7th U.S. Circuit Court of Appeals held that 15 U.S.C.
sec1640(a)(2) makes awards available only for certain violations by
lenders. But the violations do not include those committed by the
lenders who extended short-term, high-interest loans known as payday
loans to the borrowers who sued the lenders, the panel continued. The
panel said the lenders committed such errors as lumping together on loan
forms information that should have been separated and failing to
adequately describe the terms finance charge and annual percentage rate.

While compensatory damages for those violations are available if the
borrower suffers actual injury, the panel said, the plaintiffs in the
appeal before the 7th Circuit forswear any claim of injury.

"Noting that it apparently was the first federal appellate court in the
nation to address the matter, the panel rejected the borrowers' argument
that violations in the way certain information was presented on loan
forms amounted to failure to disclose that information.

Failing to disclose certain information is among the violations that
allows borrowers to seek monetary awards even if there has been no
injury, the panel said.
We hold that section 1640(a) means what it says, that only 'violations
of the subsections specifically enumerated in that clause support
statutory damages, and that the TILA does not support plaintiffs' theory
of derivative violations under which errors in the form of disclosure
must be treated as non-disclosure of the key statutory terms," the panel

The panel issued its decision in Sandra Brown, et al. v. Payday Check
Advance Inc., et al., No. 99-3110; Marguerite Mitchem v. Payday Check
Advance Inc., No. 99-3353; and Denise Laws v. Payday Loan Corp. of
Illinois, No. 99-3625. Judge Frank H. Easterbrook wrote the opinion for
the panel. Joining in the opinion were Judges William J. Bauer and
Michael S. Kanne.

In a Dec. 23 opinion in a different appeal, the same panel criticized
the trial-level court in Chicago for failing to consolidate before a
single judge the payday-loan cases that had been filed in the Northern
District of Illinois. The panel said there was substantial overlap in
the issues and parties involved in eight pending cases and in four the
7th Circuit already had decided in 1999. The panel also noted that all
12 cases had been filed on behalf of the plaintiffs by Edelman, Combs &
Latturner, a Chicago law firm that represents consumers in class-action
suits. Citing Operating Procedure 6(b), the panel said it would handle
all future appeals involving payday loans.

Derrick D. Smith, et al. v. Check-N-Go of Illinois Inc., et al., No.
99-2666, and Sandra Brown, et al. v. Check-N-Go of Illinois Inc., No.

The panel kept its word in its issue of opinion in the Brown, Mitchem
and Laws cases as well as separate per curiam opinions in two other
payday-loan cases. All but one of the cases originated in the Northern
District of Illinois.

In one of the per curiam opinions, the panel rejected the argument that
the Truth in Lending Act, 15 U.S.C. sec1601, bars a lender from using
the word fee" rather than the term finance charge" to describe the price
of extending the deadline for paying a single-payment loan. Deborah
Jackson, et al. v. American Loan Co., No. 99-2596.

In the other per curiam opinion, the panel held that referring to the
post-dated check that a borrower leaves with the lender extending a
payday loan as security" does not violate the Truth in Lending Act.
William D. Hahn v. McKenzie Check Advance of Illinois LLC, No. 99-3346.
(Chicago Daily Law Bulletin, February 3, 2000)

SYNC RESEARCH: Announces Dismissal of Shareholder Lawsuit in CA
Sync Research, Inc. (Nasdaq: SYNX) announced on February 7 that it has
won the dismissal of a shareholder class action lawsuit against the
Company. The lawsuit, which accused Sync Research and several of its
officers and directors of securities law violations, had been pending
since 1997.

Judge Alicemarie Stotler of the U.S. District Court for the Central
District of California granted Sync Research's motion to dismiss the
lawsuit. In a written opinion, Judge Stotler found that the lawsuit
"clearly fails" to satisfy applicable legal requirements for securities
law claims.

Sync has not yet heard whether the plaintiffs intend to appeal the

TEXAS EDUCATION: TAAS Test Is Necessary Despite Racial Impact, Ct Rules
District Judge Edward Prado of San Antonio ruled Jan. 7 that the use of
the Texas Assessment of Academic Skills test to determine whether
students get their high school diploma is constitutional. Although Prado
found that the test has had a disparate impact on minorities, he
concluded that the test serves a necessary function of holding schools
accountable and ensuring that graduates do possess a minimum level of
knowledge, and that the plaintiffs failed to identify equally effective
alternatives to accomplish those goals.

The plaintiffs in GI Forum, et al. v. Texas Education Agency, et al. are
weighing whether to appeal. Texas Attorney General John Cornyn, whose
office defended the test, calls Prado's ruling "a landmark event in
public education" that will help Texas "prepare its children for higher
education and the world beyond."

Following are excerpts of Prado's order, which is available in its
entirety on TexLaw. Go to www.texlaw.com and click on "Hot Docs."

In deciding the issues presented, both at the summary judgment stage and
at trial, the Court has been required to apply a body of law that has
not always provided clear guidance. It is clear that the law requires
courts to give deference to state legislative policy. . . . Education is
the particular responsibility of state governments. Moreover, courts do
not have the expertise, or the mandate of the electorate, that would
justify unwarranted intrusion in curricular decisions. On the other
hand, these considerations cannot be used to tie a court's hands when a
state uses its considerable power impermissibly to disadvantage minority

. . .

On the issue of internal test fairness and soundness, clearly the [Texas
Education Agency] presented better experts - their experts wrote the
test and have written other tests. . . . However, TEA's experts were not
so qualified, the Court finds, to speak on the wisdom of the use of
standardized tests as they apply to ethnic minorities in a state
educational system that has had its difficulties providing an equal
education to minorities. In that regard, the expert testimony failed to
match up.

. . .

Ultimately, resolution of this case turns not on the relative validity
of the parties' views on education but on the State's right to pursue
educational policies that it legitimately believes are in the best
interests of Texas students. The Plaintiffs were able to show that the
policies are debated and debatable among learned people. The Plaintiffs
demonstrated that the policies have had an initial and substantial
adverse impact on minority students. The Plaintiffs demonstrated that
the policies are not perfect. However, the Plaintiffs failed to prove
that the policies are unconstitutional, that the adverse impact is
avoidable or more significant than the concomitant positive impact, or
that other approaches would meet the State's articulated legitimate
goals. In the absence of such proof, the State must be allowed to design
an educational system that it believes best meets the need of its
citizens . . . .

      Fact Findings on History of Testing and Discrimination

While it is true that a number of minority students fail to pass the
TAAS test and earn a diploma, there is no evidence that this was the
design of the State in initiating the test. On the contrary, there is
evidence that one of the goals of the test is to help identify and
eradicate educational disparities. The receipt of an education that does
not meet some minimal standards is an adverse impact just as surely as
failure to receive a diploma.

The Court agrees with Plaintiffs that sufficient evidence, including
evidence cited in other state and federal case law, exists to support
the Plaintiff's claim that Texas minority students have been, and to
some extent continue to be, the victims of educational inequality.

. . .

Socio-economics, family support, unequal funding, quality of teaching
and educational materials, individual effort, and the residual effects
of prior discriminatory practices were all implicated. The Court finds
that each of these factors, to some degree, is to be blamed.

However, because of the rigid, state-mandated correlation between the
Texas Essentials of Knowledge and Skills and the TAAS test, the Court
finds that all Texas students have an equal opportunity to learn the
items presented on the TAAS test, which is the issue before the Court.
In fact, the evidence showed that the immediate effect of poor
performance on the TAAS examination is more concentrated, targeted
educational opportunities, in the form of remediation.

. . .

               Fact Findings on Disparate Impact

The Court finds as an inescapable conclusion that in every
administration of the TAAS test since October 1990, Hispanic and African
American students have performed significantly worse on all three
sections of the exit exam than majority students. However, the Court
also finds that it is highly significant that minority students have
continued to narrow the passing rate gap at a rapid rate. In addition,
minority students have made gains on other measures of academic
progress, such as the National Assessment of Educational Progress test.
The number of minority students taking college entrance examinations has
also increased. . . .

  Conclusions of Law on Disparate Impact and Educational Necessity

Given the sobering differences in pass rates and their demonstrated
statistical significance, the Court finds that the Plaintiffs have made
a prima facie showing of significant adverse impact.

. . .

Having found . . . significant adverse impact, the Court must consider
whether the TEA has met its burden of production on the question of
whether the TAAS test is an educational "necessity."

. . .

Plaintiffs did offer evidence that different approaches would aid the
State in measuring the acquisition of essential skills. Among these
approaches were a sliding-scale system that would allow educators to
compensate a student's low test performance with high academic grades or
to compensate lower grades with outstanding test scores. However,
Plaintiffs failed to present evidence that this, or other, alternatives
could sufficiently motivate students to perform to their highest
ability. In addition, and perhaps more importantly, the present use of
the TAAS test motivates schools and teachers to provide an adequate and
fair education, at least of the minimum skills required by the State, to
all students. (Texas Lawyer, January 10, 2000)

TOBACCO LITIGATION: Lawyers Plan to File Suits in WA over Price Fixing
A group of class action lawyers may be the latest problem facing Big
Tobacco. The Wall Street Journal reported on February 8 that the
attorneys plan to file an antitrust lawsuit on the same day accusing
cigarette makers of illegally fixing prices since the 1980s.

The lawsuit, expected to be filed in federal court in Washington, D.C.,
asserts that major U.S. cigarette manufacturers met secretly to make
illegal agreements on wholesale prices.

The suit initially will be brought on behalf of two cigarette
wholesalers in Buffalo, N.Y., and Bryan, Texas. It seeks class action
status, meaning the lawyers are asking to represent all distributors
hurt by the alleged price-fixing, said Michael Hausfeld, whose
Washington firm, Cohen, Milstein, Hausfeld & Toll, is head of a group of
more than 20 firms in the case.

The suit was expected to allege that the major tobacco companies fixed
prices at meetings of a group of company lawyers who periodically
discussed industry issues together.

The price-fixing suit was expected to name Philip Morris Cos.; R.J.
Reynolds Tobacco Holdings Inc.; Brown & Williamson Tobacco Corp., a unit
of British American Tobacco PLC; Lorillard Tobacco Co., a unit of Loews
Corp.; and Liggett Group, a unit of Brooke Group Ltd.

Industry spokesmen dismissed the suit as wrongheaded or frivolous or
refused to comment, the Journal said. (AP Online, February 8, 2000)

Y2K LITIGATION: Executone Settles Alabama Suit over Telephone System
Information Systems, which is defending a nationwide class action in
California, has settled a lawsuit filed in Alabama in March (Norris &
Associates, P.C. v. Executone Information Systems Inc., et al., No.
CV-99-N-2142-S, N.D. Ala.).

No proposed settlement was filed with the U.S. District Court for the
Northern District of Alabama, but District Judge Edwin L. Nelson ordered
the case dismissed on Sept. 28, "having been advised by counsel that
cause has been settled. . . ."

Judge Nelson said either party could reopen within 60 days for good
cause, but there have been no docket filings since and calls to
attorneys and the parties elicited no information on the settlement.

Norris & Associates P.C., a Birmingham law firm, filed the action in
state court on March 21 on behalf of a statewide class. Executone and
co-defendants Claricom Inc. and Staples Inc., Claricom's parent company,
removed the action to federal court on Aug. 17 (Case No. CV 99-1857,
Ala. Cir., Jefferson Co.).

Defendants' motion to dismiss and plaintiff's motion to remand were
pending at the time of settlement. The court had taken no action on the
proposed class.

                        Numerous Counts

Norris & Associates complained on March 21 that a telephone system
purchased from Executone Information Systems in 1995 for $ 52,659.18 was
not Year 2000 compliant. The firm complained that it was notified in
November 1998 that the system was not compliant but could be upgraded
for $ 8,678, or $ 7810.20 if done by Dec. 1, 1998.

In its suit, Norris & Associates sought certification of a class of
Alabama customers and asked for declaratory judgment, injunctive relief
and damages for breach of contract, breach of implied warranties and
negligence. Norris & Associates also sought revocation of lease and
financing arrangements and damages for breach of express warranties and
unjust enrichment.

Norris & Associates was represented by Janet R. Varnell and Andrew P.
Campbell of Campbell, Waller & McCallum of Birmingham and Timothy C.
Davis of Heninger, Burge & Vargo of Birmingham. Executone is represented
by N. Lee Cooper, Robert W. Tapscott Jr. and Matthew W. Grill of
Maynard, Cooper & Gale in Birmingham. Claricom was represented by John
E. Goodman, John W. Smith and Margaret Kubiszyn of Bradley, Arant, Rose
& White of Birmingham. (Text of Complaint in Section D. Mealey's
Document # 36-991222-108.) (Mealey's Year 2000 Report, December, 1999)

* Arbitration Fails to Achieve National Policy against Workplace Bias
increasingly require employees to agree - in advance and often as a
condition of employment - to arbitrate claims against the employer that
may arise at work. Although most workers do not realize it, they give up
their right to sue the employer when they sign mandatory arbitration
agreements. In 1991, the U.S. Supreme Court endorsed this trend when it
held in Gilmer v. Interstate/ Johnson Lane Corp. that arbitration
agreements apply even to a statutory claim of employment discrimination.

Despite this Supreme Court imprimatur, commentators, practitioners and
disenchanted claimants largely agree that arbitration is not a congenial
forum for employees. A greater problem - which affects all of us,
employers and employees alike - is that arbitrating discrimination
claims in a private forum fails to achieve a broader national policy: to
eliminate workplace discrimination.

In a typical arbitration, the parties choose the arbitrator, usually a
private individual who has experience in an industry but who has no
official status or authority. The arbitrator's power to resolve the
dispute stems from the parties' agreement to abide by the decision. The
parties pay the costs of the private hearing, including the arbitrator's

In contrast, when a claim is litigated, the decision-maker, whether
judge or jury, is an agent of the state. The decision is thus an
official judgment. The parties do not decide who will hear their case
and do not compensate the decision-maker. Judges are required to reach
unbiased decisions, explain the reasoning for their rulings and ensure
that the jury applies correct standards of law. Arbitrators generally
issue only cursory decisions that indicate who won the dispute and the
amount of the award. These statements do not provide the reason for the
decision or an explanation of the grounds supporting it.

Unlike a judicial determination, an arbitrator's decision is, for all
practical purposes, final. Judges, in contrast, are accountable to the
parties and to the public. When a judge ignores or misinterprets the
law, appellate courts or sometimes Congress may rectify the error.
Judicial adjudications and the process by which they are reached are
open to the public. Arbitration, on the other hand, is confidential.
Members of the public may not attend arbitration hearings; arbitrators
do not create a public record of the filings, hearing or ultimate award.

Many commercial parties prefer arbitration; it is often (but not always)
cheaper and faster than litigation. Because the parties control the
arbitration process, they can also control its costs. The absence of
motion practice and broad discovery orders also curtails expenses.
Because it is less formal than litigation, arbitration is often faster,
which contributes to lower costs. Arbitration also may be attractive to
some employees, especially those who find it difficult to obtain

Nevertheless, the procedures that make arbitration less expensive than
litigation can be traps for unwary employees, especially when the issue
is discrimination. For instance, employees claiming discrimination often
require extensive discovery to determine how the employer treated
similarly situated fellow employees. They are unlikely to obtain this
information during arbitration.

Moreover, arbitrators are not bound by rules of evidence or procedure.
As a result, they tend to hear all evidence, which increases the
possibility that they will consider irrelevant or prejudicial evidence.
Arbitrators may apply inappropriate standards, such as industry
practices, rather than established legal standards. The absence of a
reasoned explanation of the decision means that the parties never know
why they won or lost.

In addition to these concerns, a structural bias favors employers.
Arbitrators have a natural incentive to favor the party most likely to
hire them again. In deciding workplace disputes, arbitrators may
unconsciously favor repeat customers who are, of course, the employers.
Finally, the demographic characteristics of arbitrators do not reflect
the participation of women and minorities in the workplace. According to
a securities industry study, arbitrators are most likely to be white (97
percent) and male (98 percent) with an average age of 60. Given this
structural bias and the absence of procedural safeguards, many employees
cannot effectively vindicate their discrimination claims through

There is a second, more fundamental problem with arbitrating
discrimination claims: Arbitration is not as effective as litigation in
ending workplace discrimination.

We are all familiar with the statutory network - Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act, and the
Americans With Disabilities Act - that gives working Americans the right
to sue employers who have discriminated against them because of race,
national origin, color, religion, sex, age or disability. Successful
litigants are awarded compensatory and punitive damages to redress the
injury of discrimination. The public shares the interest of these
employees in fair, equal treatment at work and proper remediation when
those rights are violated.

We may need to be reminded, however, of the underlying purpose of the
discrimination statutes - to eliminate discrimination in the workplace.
This goal reflects and confirms the ideal of equality, a defining value
of the U.S. Constitution and American society. Ending discrimination is
also founded on more pragmatic considerations; ensuring equal
opportunity in the workplace reduces racial tension and removes
artificial barriers to economic growth.

When an individual pursues a claim of employment discrimination, that
person essentially becomes a private attorney general acting for the
common good to enforce the statute. Congress' choices - to award
attorneys' fees to successful plaintiffs and to authorize limited
punitive damages - underscore the public role of the private litigant.
In the face of the diminished number of employment-related class actions
and the budget constraints of the Equal Employment Opportunity
Commission, private litigants are the primary enforcers of workplace
discrimination statutes.

Litigation furthers the public goal of ending discrimination because
judicial determinations accomplish more than a simple resolution of the
dispute. In addition to solving the immediate problem, resolution in a
public forum generates specific and general deterrence, creates
precedent, develops uniform law, educates the community and forms public
values. Each of these byproducts moves the community toward the ultimate
goal of ending workplace discrimination.

                       Litigation Benefits

When individual employers are found to have violated the statutes, they
are unlikely to discriminate again. Such determinations cost an employer
mon-ey; the offender must compensate the employee and, in certain
circumstances, pay punitive damages. Although both litigation and
arbitration achieve this type of deterrence, public adjudication
achieves an additional level of deterrence because it has effects beyond
the immediate parties.

Resolution in a public forum also deters potential violators; the
example of a sanctioned employer discourages other employers from
engaging in similar practices. Potential violators can assess the threat
of sanctions only when they learn that others have been subject to
damages. The public forum of litigation makes this information available
to the parties, other employers and the general public. In contrast, the
private and confidential character of arbitration means that only the
parties know about the claim and the award. While arbitration will
specifically deter the particular employer, it does not deter others.

A second benefit of litigation in a public forum is that it develops a
consistent and uniform law. The judicial process produces precedents and
procedural rules that influence the outcome of future cases. In the case
of employment discrimination, this consequence is particularly
propitious. Discrimina-tion statutes are phrased in broad, aspirational
language that provides general operating principles and standards. It is
impossible to do otherwise; legislators cannot write laws that take into
account every possible situation. The courts, by applying a statute's
principles to specific situations, give meaning to the aspirational
language of the discrimination laws.

The power of the courts to develop the law comes from Congress, which
authorized the judiciary to apply and thus to refine the law. This
authority is augmented by the training, experience and ability of
judges. It is limited by appellate courts that review decisions and,
ultimately, by Congress and the Constitution. Arbitrators do not have
this authority or limitation; they are accountable only to the parties,
not to Congress or the public. Finally, they have no incentive to
develop the law and are, in fact, discouraged from developing precedent
even within the arbitral forum.

Third, litigating discrimination claims in a public forum educates the
community, because trial publicity teaches what conduct is legal or
illegal. Adjudication in a public forum gives concrete meaning and
expression to the public values embodied in discrimination statutes.
Employment discrimination suits, which often challenge traditional
practices and views, move the community to accept the relatively new
laws that ban employment discrimination. Authoritative resolution by an
official decision-maker can more readily secure acceptance.

                     Mandatory Arbitration

Concerns about mandatory arbitration agreements have prompted members of
Congress to introduce legislation that would amend the employment
discrimination statutes so that only post-dispute agreements to
arbitrate - those reached voluntarily after the claim has arisen - are
valid. Post-dispute arbitration agreements don't raise the same fairness
concerns because a plaintiff typically has had an opportunity to consult
with counsel to assess her claim and potential damages. Although the
Civil Rights Procedures Protection Act has been introduced every year
since 1994, neither chamber has seriously considered it.

Only a few appellate courts have imposed restrictions on arbitration
agreements mandated by employers. In Duffield v. Robertson Stephens &
Co., the U.S. Court of Appeals for the 9th Circuit held that employers
may not require employees to sign mandatory arbitration agreements as a
condition of employment. According to Duffield, the 1991 amendments to
Title VII that "encourage" arbitration did not authorize "take it or
leave it" job offers. In Cole v. Burns, the D.C. Circuit indicated that
it will not enforce arbitration agreements that require employees to pay
their own fees. The court reasoned that the cost of arbitration would
discourage employees from bringing claims and pursuing vigorous
discovery. The decision, written by Judge Harry Edwards, also endorsed a
standard for obtaining judicial review that would permit more appeals of
arbitration awards.

Even with judicial safeguards, arbitration is not as effective as
litigation in achieving the long-term public policy goal of ending
workplace discrimination. Litigation allows the courts to develop the
laws in a way that maintains their effectiveness in identifying and
preventing workplace discrimination while accounting for the interests
of employers. Judicial resolution of private suits develops precedent
that ultimately creates a consistent and uniform law. As a single,
unified interpreter of public law, the judicial forum reinforces the
public sentiment that workplace discrimination is wrong.

Arbitration cannot produce general deterrence, development of law and
precedent, education or the formation and affirmation of public values
as litigation does. Employment discrimination laws encompass two goals -
to end workplace discrimination and to provide redress for
discrimination - while arbitration only addresses one of them.

Thus, while arbitration may be a useful and appropriate forum in which
to resolve commercial disputes, it is neither useful nor appropriate for
employment discrimination claims.

Geraldine Szott Moohr is associate professor of law at the University of
Houston Law Center. She is the author of "Arbitration and the Goals of
Employment Discrimination Law," (Texas Lawyer, January 24, 2000)

* Canadians Take Lessons from U.S. Masters of Securities
In Canada, there are glimmerings of a specialist securities litigation
bar that's going to use provincial class action statutes to go after
large publicly traded companies and those who help them sell their

Following their U.S. counterparts, Canadian litigators are sharpening
their knives to go after the securities class action business, and
nowhere was that better demonstrated than a September Montreal meeting
on shareholder right and remedies, sponsored by the Barreau du
Quebec-the Quebec Bar.

Many of the 80 lawyers present came from Quebec's smaller
business-litigation firms and were keenly interested in the new creative
class-action remedies being touted for shareholder plaintiffs.

The upswing in interest in Canadian securities class actions is offset
by the fact that shareholder class actions seem to be, if not on the
wane in the United States, at least not as popular as they once were,
thanks to tough new legislation and civil procedure rules.

The lawyers at the meeting paid close attention to speaker Darren J.
Robbins, a San Diego-based partner with Milberg Weiss Bershad Hynes &
Lerach. He was there to tell them how to swim with the sharks south of
the border.

With 150 lawyers in five U.S. cities, the 30-year-old Milberg firm's
bread and butter, said Robbins, is plaintiff-side shareholder class
actions - his firm is involved in 60 to 70 percent of all such lawsuits,
he estimates.

Robbins gave the Canadian neophytes a short course in U.S. securities
law, recounting how the crash of 1929 led to the enactment of modern
securities statutes in 1933 and 1934, and ultimately to a 1967
court-created rule which allowed victimized shareholders to band
together into classes and sue.

The Canadian litigators perked right up when he described the landmark
1975 9th Circuit decision in Blackie v. Barrack, which approved the
notions of deemed reliance and fraud on the market.

This weapon of "fraud on the market," and the practical difficulties it
created for large companies (mostly in coughing up truckloads of records
for pre-trial discoveries), led to a rapid growth in the number
shareholder class actions, many of which get settled for big bucks
because of their nuisance factor.

                      Billion Dollar Payouts

But Robbins said the turnaround started in 1991, when the U.S. Supreme
Court clamped a strict three-year statute of limitations on federal
securities class actions.

In 1994, the court also reined in the number of defendants that could be
sued, effectively weeding out lawyers, accountants and other service
providers. Then Congress stepped in with the Private Securities Reform
Act of 1995, which tightened the certification rules for class actions
even further. These measures, said Robbins, have put securities class
actions on a "downward trend" in the United States.

But even though more lawsuits are being dismissed at a preliminary stage
("about 14 percent of cases were dismissed before 1995. It's now 35
percent," said Robbins), the cases that do survive these days are paying
what he described as astronomical settlements and damages. "The average
value of a securities class action in 1995 was about $ 6.5 million, now
it's $ 12 million," said Robbins, and billion-dollar payouts no longer
raise eyebrows. There were two last year, and Robbins predicted at least
three more by next year.

Back on Canadian turf, securities class actions are just getting warmed
up, says class-action specialist David A. Klein, a lawyer with
Vancouver's Klein Lyons. Three provinces now have class action
legislation, Quebec (since 1979), Ontario, (since 1993) and British
Columbia (since 1995). "They really are a very new animal," says Klein,
who estimates about 20 big class actions per year are being filed under
the Ontario and British Columbia class proceedings statutes.

While only a few of the cases touch on securities issues, he says "the
number is increasing-most of the securities actions have been started in
the last two years, and I think we'll see even more in the next two

A big incentive for lawyers is the ability to collect a contingency fee.
While such arrangements have been legal in British Columbia and Quebec
for years, they are still illegal in Ontario, except for class
proceedings lawsuits, where they're expressly allowed by statute. Even
so, many Ontario lawyers are not comfortable with such fee arrangements.

And the presence of three class-action jurisdictions could itself be a
powerful plaintiff's weapon in a shareholder suit.

"There's the triple threat," Klein says. "When we file any class action,
we try to have it filed in Vancouver, Toronto and Montreal. It's the
principle of 'maximum mayhem.' We hit the defendants in as many
jurisdictions with as many lawsuits as we can. And if we can, we'll want
to tie in with any U.S. litigation as well. And that's the really the
big stick."

Even so, says Klein, shareholder class actions have been slow to get

                     An Unfortunate Decision

One big barrier, he says, is that the "fraud on the market" concept
hasn't been recognized by Canadian courts.

In November 1998, for example, in Carom v. Bre-X Minerals Ltd., a group
of class-action mining company shareholders, all victims of a fraud,
invited Ontario Superior Court Justice Warren Winkler to "import" the
doctrine into Canada. But they had no luck-shareholders in Canada still
have to show they relied on an issuer's or broker's misrepresentations.

"It was a truly unfortunate decision," says Klein. "Creating a
fraud-on-the-market concept for Canada was something urged three years
ago by the Toronto Stock Exchange's Allen Commission, and it's been
recommended by the Ontario Securities Commission. It's clear there is a
need for secondary market enforcement."

Shareholder class actions also are generally not looked on with favor by
institutional investors or lawyers.

"Most lawyers who are knowledgeable in securities or companies law or
shareholder remedies already act for issuers and underwriters. They're
reluctant to sue the people they work for," he says.

For one shareholder action, he recalls, his firm tried to get a simple
legal opinion on the sufficiency of an information circular. After
numerous calls to "Bay Street," or the big-firm, lawyers, Klein found
"there wasn't anyone who was going, for the sake of a few thousand
dollars, to provide us with an opinion that might sacrifice hundreds of
thousands in future legal fees."

A preliminary hurdle is to meet all the requirements of the class-action
statute: a class and a cause of action.

These can come from the common law, with contract actions like
misrepresentation or torts like negligence. Equitable remedies can also
assist shareholders, with claims for things such as breach of a
director's fiduciary duty.

There also federal or provincial company law (the Canada Business
Corporations Act, the Ontario Business Corporations Act or the British
Columbia Company Act), which offer shareholders derivative actions and
oppression remedies.

Then there's the various provincial securities acts which, Klein says,
are the most promising for founding shareholder class actions.

And oppression remedies, which are meant to be speedy real-time legal
actions, don't have the same broader discovery rules of a full-blown
class action. What's more, class action statutes contain preferability
rules, says Klein. When it's "preferable" for the shareholders to bring
their action under some other statute, such as a company act rather than
the local class proceedings act, the plaintiffs must do so.

                      A Significant Tool

Assuming the requirements are met, the big goal of the shareholder class
action is certification.

"The defendants recognize that certification is a significant tool in
the hands of plaintiff shareholders," says Klein. "Once a case is
certified, the risk rises exponentially for the defendants. Even if
there is a 10 percent chance of success, that could be worth millions or
even hundreds of millions of dollars."

That's why corporate defendants "delay, fight and appeal certification
and take every possible opportunity, take numerous motions and every
conceivable appeal" to avert certification.

And even though class actions can be long drawn-out affairs, says Klein,
"this is an exciting time to be practicing in this area of law.

"It's brand-new, and it's an opportunity to shape the way thing wills
occur, plus an opportunity as plaintiffs' counsel to advance the
interests of those who are previously unrepresented and unheard. It's an
opportunity to ensure that shareholders' rights are enforced and there's
some measure of justice done," he says.

One of the most prominent Canadian lawyers working the class-action
field is Harvey T. Strosberg of the Windsor, Ontario, firm Gignac,
Sutts. Last year he was head of the Law Society of Upper Canada, the
governing body of Ontario's legal profession.

"We have benefits and detriments here," he says. "It's easier to get
certified here, for example, and generally our civil procedure rules are

Strosberg even disputes the notion that fraud on the market is a dead
concept in Canada. Looking at the Carom ruling, where he represented the
class plaintiffs seeking to recover from the brokers and auditors of a
Calgary-based gold mining company which pulled off a spectacular stock
fraud, Strosberg says the reason fraud on the market was rejected is
that certification is easier in Canada.

Justice Winkler, says Strosberg, noted that the U.S. rule was developed
in order to give class plaintiffs a shot. "And you don't really need the
rule in Canada," he says. He suspects fraud on the market will be back
before the Canadian courts sometime soon, especially since there is no
appellate court jurisprudence-yet-on the issue.

And, says Strosberg, the bar in Canada is not comfortable with the
little developing class action jurisprudence has developed. Ontario's
class action statute has only been on the books since 1993, and
litigators still haven't really got their heads around all its
subtleties yet.

Strosberg points out that most of the class actions are being driven by
small and mid-sized specialist litigation firms, and often they'll join
together into consortiums to pursue corporate defendants across Canada.
Those firms tend to be located in smaller centers or the suburbs of big

                      Building the Capital

Getting the money to sustain a class action through to certification and
trial is a big problem for plaintiff firms. "The firms here just aren't
as deeply capitalized as the specialist class-action firms in the United
States," says Strosberg "You're going to spend literally hundreds of
thousands of dollars in disbursements on one of these."

But Strosberg says firms are currently building the critical mass of
capital needed to stay the course on big class actions. Right now, he
says, class actions haven't really specialized to the point where one
firm or group of firms will take on a specialist role of shareholders'
actions, but that will probably evolve once the revenues from the
general class actions become large enough. And if recent cases are any
indication, that day may not be far off.

Strosberg points to a recent $ 814 million (C$ 1.2 billion) settlement
awarded to plaintiffs who contracted hepatitis C after transfusions from
the government-controlled blood-banking agency.

Press reports say Strosberg's and seven other smaller litigation firms
will be sharing fees of almost $ 36 million (C$ 53 million)-enough to
bankroll other class actions already in the pipeline.

Those include a $ 203.5 million (C$ 300 million) action against First
Marathon Inc. and its directors, alleging breach of fiduciary duty over
its proposed acquisition by the National Bank of Canada and a $ 67.8
million (C$ 100 million) class action certified against Bayer Corp. in
July for an international price fixing conspiracy, the first Canadian
class action for price fixing.

A class action by shareholders of Hamilton, Ontario-based Philip
Environmental Inc., was settled for a 1.5 percent interest in a
reorganized company after Philip applied for bankruptcy protection. The
action, which was started on both sides of the border, was later ordered
consolidated in the Ontario courts by U.S. District Court Judge Michael
B. Mukasey. The plaintiffs are pressing on with their claims against the
officers and directors.

W. John Jussup, vice president, general counsel and secretary of the
Ottawa, Ontario-based software company Cognos Inc., also has little
doubt that the shareholder class actions are on the rise in Canada.

It's a topic that has special resonance for him, since his company has
already been on the receiving end of a U.S. shareholder class action-an
event he wasn't prepared for as a Canadian corporate counsel ["Canadians
Go to Class-Actions, That Is," September 1999, p. 1].

The shareholders, says Jussup, were alleging insider trading on the
flimsiest of evidence that some executives had sold stock several months
before announcing quarterly earnings would be down slightly.

Eventually the plaintiffs went away, but "they went on a romp through
our records. We had to produce everything, even our Canadian corporate
records. We didn't want to dance around not producing stuff. We felt
strongly enough so we just produced everything," he says.

The Cognos board members were accustomed to Canadian law, not the rodeo
of U.S. shareholder class actions, says Jussup. "They found the whole
process really offended their sense of justice.

The single biggest difference between Canadian and U.S. shareholder
suits, says Jussup, boils down to liability for costs.

"The Canadian system drains out a lot of the frivolous actions when the
unsuccessful plaintiffs have to pay not only their own costs, but the
defendants' as well," says Jussup.

That is why law firms launching class actions in Canada choose their
battles carefully: The lawyers can face an enormous personal payout if
the suit falls flat.

"The American plaintiff's bar would be aghast at this notion," Jussup
says. "They would argue it raises barriers to the justice system." But
"in Canada we have a very Scottish-Orange Order view of things-working
for an honest dollar-and if you take the risk of launching a lawsuit,
the losing side pays the costs, even for a class action. That's probably
why we've been dragged kicking and screaming into some areas of American
class action litigation," says Jussup.

"The problem with the U.S. system is, it puts people to immense amounts
of cost and effort, and nobody has to pay for it-except the consumers of
your products and services," he says. "It's not free, except for the
plaintiffs." (Corporate Legal Times, February, 2000)

* Monitoring E-Mail May Be an Employer's Best
When it comes to e-mail, what your employees say can be held against
you. In 1996, Chevron Corp. was ordered to pay $ 2.2 million to four
plaintiffs in a sexual harassment suit based, in part, on an e-mail
message that circulated about "why beer is better than women." That same
year, a Seattle company ended up paying a $ 250,000 settlement in an
age-discrimination suit that was considered a nuisance until the
plaintiff's attorney presented an "unerased" e-mail from the president
himself, directing the head of personnel to "get rid of the tight-assed
bitch." In either of these cases, a strong, well-enforced e-mail policy
might have made a difference in the outcome.

There's no question that e-mail has been a boon to business. It's faster
and more effective than many other forms of communication. It has become
the backbone of electronic commerce, used for everything from customer
information requests to bids, proposals and orders.

But with increased use comes increased potential for liability. Every
time employees log on to computers at the workplace, they do so in the
name of the company; sending e-mail through a corporate system is
analogous to sending mail on company letterhead. Just a few illegal uses
of corporate e-mail systems are running outside businesses, downloading
pornographic files, selling or leaking trade secrets, and engaging in
harassment or defamation.

Part of the problem is that e-mail is seen as an "informal" method of
communication, so people say things they might not otherwise say. And a
company can be held liable for "allowing" such remarks--that is, for not
monitoring and policing its e-mail system.

E-mail does not go away when it is deleted; it can be recovered with
relative ease. And in a lawsuit, it is discoverable. Attorneys have
realized that corporate e-mail can be a gold mine of information.

                        Limit Your Liability

A few key points to remember as you ponder this issue:

* Treat electronic communication the same as all other corporate
* Create, disseminate and enforce an e-mail policy. (See box, page 27.)
* Avoid using e-mail addresses that match the domain name of the
  company's Web site. (For example, if the corporate Web site is
  "http://www.xyzcorp.com"don't use employee e-mail addresses that
  end in "@xyzcorp.com")
* Require electronic disclaimers on all e-mails
  and Internet postings indicating that the opinions expressed are not
  necessarily those of the company.
* Pay attention to what's being said
  under the corporate name.

The bottom line is monitoring. This must be done with care in order not
to violate employee rights--and bear in mind that the more heavily you
monitor your corporate e-mail, the more responsibility you are likely to
be assessed for the content thereof.

A growing selection of monitoring software is available. Some enables
the employer to see what is on an employee's screen or stored on a given
hard disk. Keystroke monitoring allows the employer to keep track of the
number of keystrokes per hour at a given terminal--and, in the case of
at least one program, allows the employer to trace every keystroke.
Other programs filter e-mail messages for obscene or inappropriate
words; messages containing any such verbiage are intercepted and
"quarantined" for later perusal.

No matter which route you decide to take, the first step is to establish
and disseminate a clear policy on e-mail use.

While it is technically legal to monitor communications without
informing your employees, it is advisable to ensure that every employee
is clear about the need, the standards and the consequences for
violation of company policy. This will offer more legal protection if an
outside party sues the company over an employee violation.

The policy should have two parts: First, state the necessity to protect
the company from disclosure of information in discovery or regulatory
actions; and second, state the company's right to monitor
communications. Enlist the help of legal counsel as well as your human
resources and technical departments in writing your policy.

Every employee should be required to sign the policy before being
allowed to touch a keyboard on the company premises.

                        Cautionary Notes

If you have union members among your employees, check the collective
bargaining agreement before you draft your policy. The contract may set
parameters on monitoring and use of information.

The National Labor Relations Board has taken a strong stand on
monitoring union organization efforts. Courts have determined that union
members have the same rights as other employees when it comes to e-mail.
For example, if you allow other groups to use company e-mail to announce
their meetings, union organizers cannot be prohibited from doing the

The Electronic Communications Privacy Act of 1986 protected e-mail
communications with three very important exceptions. There is no
violation if the employee consents to the monitoring; if the monitoring
happens during the "ordinary course of business"; or if the e-mail
service provider is doing the monitoring. (According to the November
1988 issue of the Federal Communication Law Journal: "There is no ECPA
violation if the person or entity providing the electronic communication
service intentionally examines everything on the system, whether or not
it is for the purposes of a system quality check.")

In short, companies looking to shield themselves from liability related
to e-mail have several options: They can impose an unlimited monitoring
policy; selectively monitor messages for legitimate business reasons; or
track down and disclose only those messages required to comply with a
law or to investigate a crime. These days, having no policy is not an

                           Best Defense

If your company uses e-mail, you need to set a policy. What might look
like overkill while your firm is very small will set the tone as you

While the points below will get you started, it's imperative that you
get some legal input to ensure you are not violating employees' rights.
Because workers are likely to see monitoring as an invasion of their
privacy you may be able to ease the way by explaining why such a policy
is necessary for the company's health and safety.

* Establish the firm's ownership of the computer system, including all
  e-mail and Internet communications (internal and external). Set forth
  management's tight to access information.* Indicate an intention to
monitor, access and, if necessary; disclose
  any communication is that violate the policy. You may want to
  specifically include any uploaded or downloaded information. Warn
  employees that their passwords do not shield e-mail from monitoring.*
Set out the rules for use of e-mail. Clearly list the do's and
  don'ts. If incidental personal e-mail is allowed, make it clear that
  such messages become the property of the company and, as such, are
  subject to monitoring and disclosure.* Outline the consequences of
violating the policy. These should
  escalate from a simple warning to termination.
* Make sure all employees are aware of the policy Include it in the
  employee manual and place notices regarding the monitoring of all
  communications on all startup screens. In addition, all employees
  -- including management--should be required to sign the policy.* Hold
regular training sessions on topics including:  -- Reasons behind the
policy;  -- Privacy expectations of employees during work;
  -- Reminders that deleted e-mail can be "unerased" and be used in
     lawsuits; and  -- Specific don'ts, including offensive material
(racial or ethnic
     slurs, off-color jokes) and illegal material. (The Business
     Journal, December 10, 1999)


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

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