/raid1/www/Hosts/bankrupt/CAR_Public/000218.MBX                C L A S S   A C T I O N   R E P O R T E R

               Friday, February 18, 2000, Vol. 2, No. 35


2THEMART.COM: Says It Will Apply for Trading on NASD Bulletin Board
ACCEPTANCE INSURANCE: Milberg Weiss Files Securities Suit in Nebraska
AMERICAN MEDICAL: Policyholders Sue in FL over Business Practices
AUTO FINANCING: Motor Vehicle Sales Finance Act Permits Case over Fees
CAMPBELL SOUP: Spector, Roseman Files Securities Lawsuit in New Jersey

CANADIAN IMPERIAL: Bank Wins a Round at NY in Fraud Charges over Livent
DOJ: More Than 8000 Lawyers Join Lawsuit for OT Pay; Dept Wants a List
FAMILY GOLF: Shalov Stone Files Securities Complaint
GENE MODIFIED CROPS: Demand Wavers; Farmers Return to Traditional Seeds
GUN MANUFACTURERS: HUD Report Shows Crime Falls But Gun Risk Looms High

HEALTH MANAGEMENT: Executive Wins Indemnity Ruling; Loses Fees on Fees
INMATES LITIGATION: Judge OKs $8 Mil Deal for Victims of Attica Torture
IWAN'S DELI: 1,500 File Claim Forms over E. Coli Tainted Potato Salad
JDN REALTY: Shepherd & Geller Files Expanded Suit in Georgia
PHYSICIAN COMPUTER: Reaches Partial Settlement of Securities Suit in NJ

THOMAS & BETTS: Milberg Weiss Files Securities Suit in Tennessee
TOBACCO LITIGAIION: Growers and Quota Holders File $69B Suit over Fraud
TOBACCO LITIGATION: B&W Issues Statement; Says Suits Will Hurt Farmers
TYSON FOODS: U.S. Audits Wage and Hour Practices at Poultry Plants
U.S., BRITAIN: French Groups May Sue over Eavesdropping by Echelon

WHITMAN EDUCATION: Ct OKs Students with Fd Loans/Aid As Class over Sham

* Internet Privacy Breaches Raise Specter of Lawsuits and Govt Action
* Proposed Ontario Franchise Act Will Increase Franchisor Liability
* The Washington Post Says Documents Show Suffering Of D.C. City Wards


2THEMART.COM: Says It Will Apply for Trading on NASD Bulletin Board
2TheMart.com, a financially troubled Internet auction site, said on
February 15 it will apply to have its shares traded on the NASD
over-the-counter bulletin board, Los Angeles Times reports, February 16.

The Irvine firm, which has been struggling with angry debtors and at
least two class-action lawsuits, also said that federal regulators had
no outstanding comments tied to the latest documents it filed, according
to Los Angeles Times. The class action lawsuits have been covered in
previous issues of the CAR.

The February 16 Los Angeles Times report says the company told
regulators late last year that it sold shares at a discount of as much
as 89% after an earlier attempt to raise funds fell short. On Nov. 18,
the day the company launched its Web site, it sold 2 million shares at $
1.50--a day when the stock closed at $ 13.44. The below-market sales
followed the company's unsuccessful effort over the summer to raise $ 10
million by selling 1 million shares at $ 10 each. 2TheMart said at the
time that it was short of cash.

ACCEPTANCE INSURANCE: Milberg Weiss Files Securities Suit in Nebraska
A class action lawsuit was filed in the United States District Court for
the District of Nebraska, on behalf of all purchasers of the common
stock of Acceptance Insurance Companies, Inc. (NYSE: AIF) between March
10, 1998, through November 16, 1999, inclusive.

The complaint charges Acceptance and certain of its senior officers and
directors with violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 as well as Rule 10b-5 promulgated thereunder. The
complaint alleges that defendants issued a series of materially false or
misleading statements concerning the adequacy of the Company's loss
reserves and the successful implementation of its restructuring plans.
In particular, the complaint alleges that the defendants misled
investors by materially understating prior period loss reserves by as
much as $44.0 million. Because of the issuance of a series of false or
misleading statements the price of Acceptance common stock was
artificially inflated during the Class Period.

Contact: at Milberg Weiss Bershad Hynes & Lerach, Steven G. Schulman or
Samuel H. Rudman at One Pennsylvania Plaza, 49th Floor, New York, New
York 10119-0165, by telephone 1-800-320-5081 or via e-mail:
endfraud@mwbhlny.com or visit the firm's website at

Milberg Weiss Bershad Hynes & Lerach LLP, Shareholder Relations Dept.,
E-Mail: endfraud@mwbhlny.com 800-320-5081

AMERICAN MEDICAL: Policyholders Sue in FL over Business Practices
Several policyholders whose "guaranteed renewable" health insurance was
canceled in 1999 by American Medical Security Group, Inc. ("American
Medical"), and its subsidiary United Wisconsin Life Insurance Company
("United Wisconsin") filed a class action lawsuit on February 17 in the
Circuit Court for Palm Beach County, an announcement by the law firm of
Searcy Denney Scarola Barhhart & Shipley says.

The lawsuit alleges that American Medical and United Wisconsin violated
Florida insurance laws and breached their contract with policyholders by
canceling their original coverage and offering in its place an inferior
package of benefits at premium rates ranging as high as three times 1998

The lawsuit further charges American Medical and United Wisconsin with
unfairly targeting policyholders who had become ill and filed
substantial claims for insured health care costs. "We have evidence that
American Medical and United Wisconsin made a business decision to offer
medical insurance at competitive rates while they intended to increase
premiums drastically to their customers who became seriously ill and
were most in need of continued medical insurance at reasonable rates,"
said Ms. Terry Rogers, daughter of Mrs. Mary Rogers of Hollywood,
Florida, one of the plaintiffs in the action.

"A great many of American Medical and United Wisconsin's 40,000 Florida
policyholders have been adversely affected by the Company's deliberate
strategy of splitting out those who are ill and perceived to be high
cost," said Ellen Brandt of the West Palm Beach, Florida law firm Searcy
Denney Scarola Barhhart & Shipley.

Contact: Searcy Denney Scarola Barhhart & Shipley Ellen F. Brandt, Esq.

AUTO FINANCING: Motor Vehicle Sales Finance Act Permits Case over Fees
Although the Motor Vehicle Sales Finance Act prohibits class actions for
a claim that a loan secured by an interest in a motor vehicle violates
the act, the Georgia Court of Appeals held the legislature did not
intend for the act to proscribe all claims founded on automobile loans
or contracts. Taylor Auto Group Inc. v. Jessie, et al., No. A99A0827
(Ga. App. 12/17/99).

Gejuan Jessie filed a class action against Taylor Auto Group Inc.
alleging that it charged her for services she did not receive, such as
notary and filing fee rights act services, and overcharged for a tag and
title fee. Jessie additionally contended the financing contract failed
to disclose a markup for the extended warranty payable to a third party.
In her complaint, she claimed Taylor committed fraud and theft by
deception and violated the Uniform Deceptive Trade Practices Act, the
Motor Vehicle Sales Finance Act and Georgia's Racketeer Influenced and
Corrupt Organizations Act. (See Consumer Financial Services Law Report,
July 23, 1999, p. 16).

Because Taylor showed that the charge for the nonexistent notary and
filing fee services was misidentified on the customer order form but
correctly indicated on the sales contract, the trial court did not
certify this claim for class action treatment. It also did not certify
the MVSFA claim for class action treatment because Taylor refunded the 7
it overcharged Jessie for tag and title fees. However, the trial court
did certify the remaining counts of the complaint as a class action.

Taylor applied for interlocutory appeal with the Georgia Court of
Appeals. Taylor disputed the trial court's finding that Jessie was an
adequate class representative. It also contends that OCGA Section
10-1-36.1(a) prohibited the case from becoming a class action. That
section reads, "A claim of violation of any loan or contract secured by
an interest in a motor vehicle may be asserted in an individual action
only and may not be the subject of a class action under Code Section
9-11-23 or any other provision of law."

The Court of Appeals disagreed with Taylor's argument. It explained the
OCGA "is intended to prohibit class action certification for a claim
that any loan or contract secured by an interest in a motor vehicle
violates the MVSFA. It does not ... reach the 'universe' of claims
founded on loans or contracts secured by a motor vehicle."

Finding Jessie had no interests in conflict with the other 150 class
members and that she fulfilled the requirements of Fed. R. Civ. P. 23,
the court affirmed the trial court's certification. Judges Elizabeth
Barnes and John J. Ellington concurred. David Hudson of Hull, Towill,
Norman, Barrett & Salley in Augusta, Ga., represented Taylor. Pamela
James of Bell & James in Augusta, Ga., represented Jessie. (Consumer
Financial Services Law Report, February 9, 2000)

CAMPBELL SOUP: Spector, Roseman Files Securities Lawsuit in New Jersey
A class action suit alleging securities fraud was filed on January 13,
2000 in the United States District Court for the District of New Jersey
against Campbell Soup Company (NYSE:CPB) and certain of its officers by
the Philadelphia law firm Spector, Roseman & Kodroff, P.C. The case was
filed on behalf of all persons who purchased Campbell Soup common stock
during the period November 18, 1997 through January 8, 1999, inclusive.

The complaint charges the defendants with violations of Section 10(b) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder. As alleged in the Complaint, Campbell claimed to have "sold"
product to major distributors or resellers when in actuality Campbell
never shipped the product to its customers.

Campbell claimed these phantom sales in order to meet Wall Street's
earnings estimates for the Company and therefore artificially inflate
the price of Campbell's stock. When Campbell disclosed that it would
have declining earnings as a result of lower sales, the price of
Campbell stock dropped from approximately $54 per share to approximately
$46 per share and has never recovered.

Contact: Spector, Roseman & Kodroff, P.C. Robert M. Roseman toll free at
888/844-5862 E-mail at classaction@spectorandroseman.com Website at

CANADIAN IMPERIAL: Bank Wins a Round at NY in Fraud Charges over Livent
A New York court has dismissed allegations against CIBC made in a
class-action lawsuit over Livent, which collapsed in 1998 amid
allegations of a $100-million fraud. The CIBC was a financial advisor to
Toronto-based Livent and also underwrote several financings. This week,
New York judge Robert Sweet said the class-action plaintiffs had not
made a sufficient case against the bank. However, the plaintiffs have
been given a month to re-file their allegations.

The suit also named Livent co-founders Garth Drabinsky and Myron
Gottlieb, who both face criminal charges over Livent's collapse. The two
deny any wrongdoing and are fighting extradition to the United States.

Judge Sweet dismissed some allegations against the two in the class
action. However, the plaintiffs can also re-file their allegations
against Mr. Drabinsky and Mr. Gottlieb within a month.

Last year, Judge Sweet dismissed Deloitte & Touche, Livent's former
auditors, along with three other former company directors, from another
class action filed over Livent.

Livent was once a dominant live theatre company in North America with
theatres in Chicago, Toronto, Vancouver and New York. It filed for
bankruptcy after the allegations surfaced and all of its assets were
sold last year to SFX Entertainment Inc. for $115-million (US).

Michael Ovitz, the Hollywood super agent who acquired control of Livent
just before the allegations surfaced, is also suing CIBC and several
former company directors. (National Post (formerly The Financial Post),
February 17, 2000)

DOJ: More Than 8000 Lawyers Join Lawsuit for OT Pay; Dept Wants a List
In an effort to stamp out potential conflicts of interest, Justice
Department officials want to collect the names of lawyers suing the
department for overtime pay. But attorneys for the DOJ rank and file see
a darker motive behind the move.

More than 8,000 DOJ lawyers including about 75 percent of active Justice
attorneys have joined a class action in the U.S. Court of Federal
Claims. The high opt-in rate is leading department officials to worry
about broader implications of the suit.

Deputy Attorney General Eric Holder Jr. issued a memo last month
directing prosecutors who face off against Williams & Connolly, which is
representing the overtime plaintiffs, to report to the DOJ's
Professional Responsibility Advisory Office. In essence, the department
is trying to prevent criminal defendants from appealing convictions on
the grounds that prosecutors had a financial relationship with the law
firm defending them. Holder also ordered civil and criminal litigators
who serve as individual plaintiffs in the overtime suit to get a waiver
from their supervisors before handling cases in which Williams &
Connolly or co-counsel Gary Simpson appear. He wrote that some lawyers
would likely be reassigned to avoid conflicts.

The memo has outraged Williams & Connolly. The firm filed a motion Feb.
4 asking Judge Robert Hodges Jr. to stop the DOJ in its tracks. The firm
argues that Justice is trying to ferret out the names of lawyers
participating in the suit and that giving up the names could lead to
retribution by DOJ brass. Deputy Associate Attorney General Ethan Posner
said in a statement that the memo "was a measured, efficient effort to
respond to [questions from DOJ attorneys] and address important
professional ethics issues." This story originally appeared in the Legal
Times. (The Legal Intelligencer, February 16, 2000)

FARMER: NJ Ct OKs Sex Offenders' Claims Re Privacy under Megan's Law
Paul P. et al v. Farmer et al, No. 97-2919; United States District Court
(DNJ); opinion by Irenas, U.S.D.J.; filed January 24, 1999.

The current system devised by the Attorney General Guidelines for
distributing notices regarding the release of Tier 2 and 3 registrants
under Megan's Law unreasonably infringe on plaintiffs' privacy rights by
failing to provide a uniform method to ensure that in all 21 counties in
New Jersey Megan's Law notices will be distributed in a manner
reasonably calculated to get the information to those with a particular
need for it while avoiding disclosure to those who have no similar need;
although the court has issued an injunction against the enforcement of
Megan's Law until the Attorney General promulgates guidelines that
comply with this holding, the enforcement of the injunction is stayed
pending appeal to, and decision by, the Third Circuit.

Plaintiff sex offenders move, and defendants cross-move, for summary
judgment in this class-action challenge to New Jersey's Registration and
Community Notification Act, N.J.S.A. 2C:7-1 et seq. (Megan's Law).

This matter represents the latest skirmish in the battle over Megan's
Law in New Jersey. Plaintiffs are Tier 2 or 3 registrants under Megan's
Law whose offenses were committed after the law's enactment. In their
initial complaint, filed with the court on June 16, 1997, plaintiffs
challenged the constitutionality of the law, alleging that it violated
their rights to privacy, due process, and to be free from double
jeopardy and cruel and unusual punishment.

Prior to the court's decision on the merits, the Third Circuit found
that the community-notification provisions of Megan's Law do not
constitute punishment for purposes of the Ex Post Facto and Double
Jeopardy Clauses and held that the due process clause "would be violated
by any Tier 2 or Tier 3 notification that occurred without a prior
opportunity to challenge the registrant's classification and
notification plan in a hearing at which the prosecutor has the burden of
persuasion and must prove her case by clear and convincing evidence."
E.B. v. Verniero, 119 F.3d 1077, 1111 (3d Cir. 1997), cert. denied sub
nom. W.P. v. Verniero, 118 S.Ct. 1039 (1998). In light of the Third
Circuit's opinion in E.B., the court granted defendants' motion for
summary judgment as to plaintiffs' cruel and unusual punishment and
double jeopardy claims, but denied summary judgment on the due process
claim. The court also granted summary judgment as to plaintiffs' privacy

Plaintiffs appealed the court's ruling on their privacy claim to the
Third Circuit. During the pendency of this appeal, plaintiffs-appellants
filed six motions to supplement the record and appellee, former Attorney
General Verniero, filed three motions to supplement the record. The
Third Circuit declined to consider the materials proffered by these
motions and proceeded to affirm the court's holding that Megan's Law did
not violate plaintiffs' constitutional rights to privacy. Paul P. v.
Verniero, 170 F.3d 396 (3d Cir. 1999). However, the Third Circuit
remanded the case back to the District Court so that it could consider
the material contained in the motions to supplement and "determine
whether any action is appropriate" in light of Third Circuit precedent.
Id. at 406. Specifically, the Third Circuit cited its previous holding
in Fraternal Order of Police v. Philadelphia, 812 F.2d 105, 118 (3d Cir.
1987), that "the fact that protected information must be disclosed to a
party who has a particular need for it ... does not strip the
information of its protection against disclosure to those who have no
similar need."

Plaintiffs challenge not the substance or scope of notification, but the
method of notification. Plaintiffs claim that the procedures currently
used to distribute Megan's Law notices have failed to prevent the
disclosure of confidential information to persons not entitled to that
information under the Act.

They argue that the current system of applying and enforcing Megan's Law
is flawed because: (1) the law lacks penalties to deter the unauthorized
disclosure of information; (2) there is no uniform requirement that the
registration process occur in a setting that protects the registrant's
privacy; (3) many counties have inconsistent or unclear rules regarding
which school staff members are entitled to receive information
concerning Tier 2 offenders; (4) not all counties deliver Tier 3 notices
by hand to an authorized adult; and (5) home addresses are included in
all Tier 2 notices and are disclosed to all notice recipients despite
the fact that this information is not needed by all recipients.

Defendants cite several portions of the Attorney General Guidelines that
caution against improper disclosure of Megan's Law information. For
example, the Guidelines provide that Tier 2 notices given to community
organizations and schools "shall caution the recipients against
unauthorized dissemination" and suggest that "(i)t should be emphasized
that it is the responsibility of the Prosecutors and the Courts to
determine who is to receive notices and the methods used to conduct
notification." The Guidelines further provide that:
It will be the responsibility of each of these organizations and schools
to take appropriate steps to educate and alert those staff members who
are charged with the care and supervision of children, emphasizing that
this information is intended to assist such staff members in the
protection of their charges, not to provide notification to the
community at large.

According to defendants, the warnings contained within the Guidelines
have been further emphasized by public statements made by the Attorney
General and county prosecutors condemning the publication of Megan's Law
information in the news media.

Defendants dispute plaintiffs' contention that there are no credible
penalties in place to deter unauthorized disclosures. First, defendants
argue that a public servant who improperly distributes Megan's Law
information could be prosecuted for official misconduct under N.J.S.A.
2C:30-2. This statute states that a public servant commits official
misconduct when he engages in acts related to his office, but
constituting an unauthorized exercise of his official authority, with
the purpose of benefiting himself or injuring another. Second,
defendants maintain that State and local law enforcement agencies have
internal rules and regulations that could be used to charge officers
with insubordination if they fail to comply with an order relating to a
Megan's Law notification. Third, defendants suggest that official
immunity would not protect a public employee or agency from civil
liability for violating the provisions of Megan's Law in bad faith or
with gross negligence. Finally, defendants note that judges in ten of
New Jersey's 21 counties routinely include contempt-of-court language in
their court orders to discourage members of the public from disclosing
information to unauthorized persons.

Despite these efforts, defendants concede that the names and addresses
of Megan's Law registrants are sometimes given to persons without a
"particular need" for such information. Defendants state that
"occasionally those who receive Megan's Law notices do provide
notification information to other members of the community" and "the
press has sometimes been able to obtain notification information."

Plaintiffs have summarized 45 incidents where confidential information
released under Megan's Law was distributed to unauthorized persons. In
one such incident, a front-page story was published in the Homes News
Tribune that identified an offender as a Tier 3 Megan's Law registrant.
The article disclosed the registrant's home address and included a
criminal history and photograph. The article even included a map with an
arrow pointing to the registrant's home. The following day, eight other
newspapers, including the New York Times, published similar articles,
several included the registrant's name and address. One article quoted
the managing editor of the Home News Tribune as saying, "We put out word
that we wanted a flier, and we got one."

Plaintiffs have provided many equally glaring examples where Megan's Law
notices were publicly disseminated. In one case, a parent received a
flier that was sent home from school with her child. The parent, who was
also a principal at a different school, made copies of the Tier 3 notice
and distributed it to parents of children who attended the school at
which she was employed. The school was outside the scope of the
notification authorized by the court. In addition, plaintiffs have noted
several incidents where notices were either posted in public places, or
systematically distributed in neighborhoods not within the scope of


A system of distributing this information with zero "leakage" to
unauthorized persons is, in reality, unattainable. However, the mandate
for the Attorney General is not to devise a perfect system, but one
calculated to achieve the goals of the statute without unreasonably
impinging on the "nontrivial" privacy interests of plaintiffs. The
record shows that the current system fails to meet this standard.
Currently, there is no uniform method of distribution that ensures that,
in all 21 counties, Megan's Law notices will be distributed in a manner
reasonably calculated to get the information to those with a particular
need for it while avoiding disclosure to those who have no similar need.
The Attorney General Guidelines for distributing Tier 2 and 3 notices
unreasonably infringe on plaintiffs' privacy rights and orders that they
be redrafted to reasonably limit disclosure to those entitled to receive
it. Plaintiffs' motion for summary judgment is granted, and defendants'
cross-motion is denied. Although the court has issued an injunction
against the enforcement of Megan's Law until the Attorney General
promulgates guidelines that comply with this holding, the enforcement of
the injunction is stayed pending appeal to, and decision by, the Third

For plaintiffs -- Susan L. Reisner, Public Defender (Michael Z. Buncher,
Deputy Public Defender; Edward L. Barocas, Assistant Deputy Public
Defender). For defendants -- John J. Farmer Jr., Attorney General
(Stephan Finkel, Senior Deputy Attorney General; Rhonda S.
Berliner-Gold, Deputy Attorney General). (New Jersey Law Journal,
February 14, 2000)

FAMILY GOLF: Shalov Stone Files Securities Complaint
A class action was commenced on behalf of all persons who purchased the
common stock of Family Golf Centers, Inc. (Nasdaq: FGCI) in the period
from July 23, 1998 to August 12, 1999. The lawsuit alleges that the
defendants violated the federal securities laws by, among other things,
materially misrepresenting the Company's business condition and failing
to disclose material facts concerning the integration of acquired

Contact: Shalov Stone & Bonner (Ralph M. Stone), 276 Fifth Avenue, Suite
704, New York, New York 10001, telephone: 212-686-8004, email:
ralph@lawssb.com  and the firm's website is at: http://www.lawssb.com

GENE MODIFIED CROPS: Demand Wavers; Farmers Return to Traditional Seeds
Farmers will reduce their planting of genetically-engineered seeds by as
much as 25 percent this year in yet another setback for the once
high-flying biotechnology industry, according to estimates provided by
environmentalists and growers.

Based on its surveys of a range of industry and governmental sources,
the Worldwatch Institute in Washington, D.C., an environmental think
tank, estimates that the planting of genetically-engineered seeds will
decline 20-25 percent this year.

Meanwhile, a preliminary survey by the American Corn Growers Association
indicates corn growers will plant 15-20 percent less
genetically-engineered seeds this year than last. The survey's final
results are scheduled to be released next week.

Indeed, the rush among corn farmers to return to traditional seeds is so
great that some farmers can't find unmodified seeds because of
shortages, said Gary Goldberg, the association's chief executive

A drop of as much as one-fourth in the planting of genetically-modified
crops would represent an abrupt turnaround for the biotechnology
industry, which has experienced stupendous growth over the past four
years. Genetically-modified crops soared from about 5 million acres in
1996 to nearly 100 million acres in 1999.

The U.S., Argentina and Canada collectively account for 99 percent of
all genetically modified crops. For some major commodities like
soybeans, corn and canola, genetically-modified crops were more than
half the acreage planted last year.

However, the biotech industry has been roiled over the past year by a
strong consumer and environmental backlash in Europe against so-called
"Frankenfoods'' made from genetically engineered crops. That backlash
has begun to spread to the U.S., raising significant questions about the
industry's future.

Stock prices for agricultural biotech companies have fallen sharply and
U.S. exports of genetically-modified crops have plunged. Most major food
companies have announced they will avoid genetically-modified
ingredients in their products for the European market. More recently,
some companies - including Gerber and Frito-Lay - have said they will
avoid genetically-modified ingredients for the U.S. market as well.

"Farmers are going to do what's best for farmers. The customer is
disappearing,'' said Goldberg, adding that his association's 14,000
members lost $200 million in export sales last year as a result of the

For its part, the biotech industry is forecasting sales of
genetically-engineered seeds will remain flat this year, said Robert
Horsch, co-president of sustainable development at Monsanto Co., the
agricultural biotech leader.

Monsanto is the target of a class action lawsuit filed in December on
behalf of American soy farmers, who charge the company did not
adequately test the safety of genetically engineered crops before
release and that the company has tried to monopolize the American seed

Monsanto has vigorously defended its safety testing and research record.
Margaret Mellon, a biotechnology expert with the Union of Concerned
Scientists and leading critic of genetically-engineered crops,
acknowledged that she knows of no instance in which genetically-modified
foods have been shown to have had a harmful health affect on people.

However, Mellon cautioned "not to make too much out of'' the lack of a
specific example, saying not enough research has been performed to prove
or disprove the safety of genetically modified foods.

"We can say no more at this point than that there are no egregious,
obvious health risks connected to the technology,'' Mellon said. "What
we can't say is that there are no subtle risks, no long-term risks, no
chronic risks associated with the technology.'' (Scripps Howard News
Service, February 17, 2000)

GUN MANUFACTURERS: HUD Report Shows Crime Falls But Gun Risk Looms High
Crime is falling in public housing developments around the nation, but
the 2.6 million Americans living in public housing are more than twice
as likely to become victims of gun violence as the rest of the
population, according to a Department of Housing and Urban Development
report released by President Clinton. The report shows for the first
time that an estimated 10 out of every 1,000 residents of public housing
are victimized annually by violent gun crimes, compared with 4 out of
every 1,000 people in the nation as a whole.

"We've succeeded in driving down crime and gun violence around the
nation to make families safer, but our job isn't finished," President
Clinton said. "Now we have an obligation to take common-sense steps that
are long overdue to save still more lives and reduce gun violence even
further, especially in places hit hardest by this problem."

"The lives of children in our struggling inner cities are just as
precious as the lives of children in our prosperous suburbs," said HUD
Secretary Andrew Cuomo. "This report tells us that HUD needs to do more
to reduce gun violence that kills, maims and terrorizes far too many
innocent victims in public housing."

The new HUD study -- called In The Crossfire: The Impact of Gun Violence
on Public Housing Communities -- also found that:

* Gun violence poses a threat to public housing residents in cities of
  all sizes.
* Besides crimes committed with guns, gun accidents and suicides take a
  heavy toll in public housing and in the rest of the nation.
* Public housing authorities around the country have spent
  significantly more than $4 billion in HUD funds on crime reduction
  and prevention since 1990 to deal with gun violence and other crimes.
* Fear of gun violence and other crime can lead to neighborhood

The United States Housing Act of 1937 established a federal commitment
to provide "decent, safe, and sanitary" housing for low-income families.
As part of this responsibility, HUD is charged with maintaining secure
and livable public housing communities.

HUD provides funding to 3,200 public housing authorities around the
nation that run more than 1.12 million units of public housing units in
14,000 developments. Children and senior citizens make up about half the
residents of public housing. The average household income of public
housing residents is about $9,500 annually.

Here are the six key findings of the HUD report:

1: Across the nation, public housing has experienced declining crime
   rates. Indeed, many housing authorities have seen greater reductions
   in crime rates than the cities in which they are located. An
   analysis of detailed crime-trend data for 55 public housing
   authorities receiving HUD Public Housing Drug Elimination Program
   funds found that the crime rate declined in two-thirds of the
   authorities analyzed between 1994 and 1997. Sixty percent of public
   housing authorities with available data saw their crime rate decline
   faster than their surrounding municipality. Crime declined in four
   public housing authorities despite crime rate increases within the
   surrounding municipality.

2: Despite the overall progress, gun-related crime remains a serious
   problem in public housing. People living in public housing are over
   twice as likely to suffer from firearm-related victimization as
   other members of the population. There is a strong correlation
   between income and violent crime; thus, the low-income population in
   public housing is especially vulnerable to gun violence. Gun
   violence poses a direct threat to the 2.6 million residents of
   public housing -- including more than 1 million children and 360,000
   elderly residents. In 1998, there were an estimated 360 gun-related
   homicides in 66 of the nation's 100 largest public housing
   authorities -- an average of nearly one gun-related homicide per
   day. The problem of gun violence, however, is not confined to the
   largest public housing authorities. In a larger group of more than
   550 housing authorities, there were an estimated 296 gun-related
   homicides in public housing authorities across the country in the
   first six months of 1999 alone.

3: Gun violence poses a threat to public housing residents in cities of
   all sizes. In fact, residents of public housing in smaller and
   medium-sized metropolitan areas experienced rates of gun violence
   similar to those in larger metropolitan areas. According to
   preliminary analysis of newly available data from the National Crime
   Victimization Survey, residents of public housing in metro areas of
   less than 500,000 residents have the same or higher rates of gun
   violence victimization as public housing residents in larger metro
   areas with more than 1 million residents. Moreover, public housing
   residents in smaller-sized metro areas experience higher rates of
   firearm victimization relative to non-public housing residents in
   their metro areas than the equivalent ratio for public housing
   residents in larger metro areas.

4: Beyond crime and violence, firearms are a significant source of
   physical and financial damage in American communities. Nationally,
   there were 18,500 unintentional injuries, 1,400 unintentional
   deaths, and 17,566 suicides caused by firearms in 1997 alone. While
   there are limited data available showing similar rates of
   unintentional injuries, deaths, and suicides in public housing, it
   is estimated that nearly 200 unintentional injuries occur in public
   housing communities each year. Numerous examples of accidental
   shootings and unintended weapon discharges indicate the prevalence
   of this problem.

5: In response to the growing recognition of the need for improved
   safety for residents, public housing authorities have spent well
   over $4 billion in HUD funds on crime reduction and prevention
   efforts since 1990. These expenditures have diverted limited budgets
   from affordable housing, modernization, and capital needs.

6: The damage imposed by gun violence goes beyond the lives lost and
   injuries inflicted. Often, children exposed to gun violence present
   symptoms of post-traumatic stress disorder similar to those observed
   in children exposed to war and major disasters. In a recent study of
   large public housing authorities, one in five residents reported
   feeling unsafe in their neighborhood. Exposure to gun violence can
   shatter feelings of safety and security as well.

The HUD study analyzed new crime data from the National Crime
Victimization Survey, with data collected by the Census Bureau for the
Bureau of Justice Statistics. Data was also extracted from HUD's Public
Housing Drug Elimination Program, including narrative reports and HUD's
new Semi-Annual Performance Reporting System that examined crime and
gun-violence patterns in 100 of the largest public housing authorities.

Cuomo was joined at a discussion of the report by these people who have
experience with gun violence: 1) New York Congresswoman Carolyn
McCarthy, whose husband was killed and whose son was seriously wounded
by a gunman on the Long Island Rail Road. 2) Baltimore Housing Authority
Police Chief Hezekiah Bunch. 3) Namel Norris, 19, and his mother
Vanessa, who live in public housing in the Bronx in New York City. Namel
Norris was accidentally shot during a party for his sister last year and
is now paralyzed from the chest down.

The largest source of federal funding for anti-crime programs in public
housing is the Public Housing Drug Elimination Program established by
the Anti-Drug Abuse Act of 1988. The program provides funds for a wide
variety of anti-drug and anti-crime initiatives, such as: employment of
security personnel and investigators; reimbursement of local law
enforcement agencies for additional security; resident patrols; drug-
and crime-prevention programs; and other measures.

President Clinton's Fiscal Year 2001 budget includes a $35 million
increase in HUD's Public Housing Drug Elimination Program, boosting
funding for the program to $345 million. This funding increase would

* An increase in formula grants to support local anti-crime strategies,
  including an increased law enforcement presence, community policing,
  increased security personnel, coordinated resident patrols, physical
  security improvements and youth crime prevention programs.

* The Community Gun Safety and Violence Reduction Initiative. The
  initiative, which would be administered by HUD, would fund
  computerized mapping of gun violence to help law enforcement agencies
  better protect the public, education and outreach programs to promote
  responsible safety measures by gun owners, and innovative community
  activities to reduce both gun crimes and accidents. If Congress
  approves funding for the initiative, local governments, law
  enforcement agencies, public housing authorities, and community
  organizations would be eligible to compete for HUD grants to support
  gun violence reduction activities in the communities the Department

* Crime Prevention Through Environmental Design, which will help public
  housing authorities incorporate architectural design features in
  developments to promote safety and security.

In addition, the President's budget includes a $280 million national
firearms enforcement initiative. The initiative would hire 500 new ATF
agents and inspectors to target gun criminals, hire more than 1,000 pr
osecutors at all levels of government, fund new gun tracing and
ballistics testing systems to catch more gun criminals, fund local media
campaigns to discourage gun violence, and expand the development of
"smart gun" technologies.

The Clinton Administration is also calling for negotiations with gun
manufacturers to seek changes in the design, distribution and marketing
of guns. If the negotiations fail, the Administration could support a
class- action lawsuit by the nation's public housing authorities against
the gun manufacturers.

Contact: U.S. Department of Housing and Urban Development Office of
Public Affairs, 202-708-0685

HEALTH MANAGEMENT: Executive Wins Indemnity Ruling; Loses Fees on Fees
A corporate official who is indemnified for legal fees incurred in
defending himself in litigation cannot recover additional fees for
forcing his company to indemnify him, a Southern District Judge has
ruled. Judge Richard M. Berman said in In Re Health Management Systems
Inc. Securities Litigation, 97 Civ. 1865, that the official is barred
from recovering what is commonly known as "fees on fees."

In 1997, shareholders of Health Management Systems Inc. (HMS) launched a
class action suit charging that HMS and some directors and officers made
misleading statements to inflate the price of company stock. The
securities suit has been reported previously in the CAR. Among those
named in the suit was Chief Financial Officer Philip Siegel.

Mr. Siegel retained his own defense counsel, Dennis Block and Michelle
Roth, who at the time, respectively, a partner and an associate at Weil,
Gotshal & Manges. During their representation of Mr. Siegel, the pair
moved to Cadwalader, Wickersham & Taft.

Because Mr. Siegel had not joined HMS until the spring of 1996, three
months after the conduct that prompted the lawsuit occurred, the
plaintiffs agreed to a stipulation dismissing him as a defendant.

HMS refused to indemnify Mr. Siegel for attorneys fees owed Mr. Block
and Ms. Roth. The company argued that the fees were unreasonable and
there had been no need for Mr. Siegel to launch a defense that was
independent of the company's.

Mr. Siegel filed a motion for indemnification before Southern District
Magistrate Judge James C. Francis IV. While the motion was pending, HMS
conceded that Mr. Siegel was right to retain his own lawyers, but the
company held firm on its position that the fees were excessive.

Magistrate Judge Francis recommended that Mr. Siegel be indemnified for
$ 60,959 in attorneys' fees and $ 6,6777 in expenses. But he disallowed
the "fees on fees," $ 17,147, which Mr. Siegel paid Mr. Block and Ms.
Roth to force HMS to indemnify him in the class action.

Magistrate Judge Francis said that Mr. Siegel's "right to be indemnified
does not include the right to be reimbursed for the costs and fees he
incurred" in order to win indemnification.

Judge Berman upheld Magistrate Judge Francis' findings, saying the
"general rule" for resolving the indemnity issue was stated by the New
York Court of Appeals in Hooper Associates, Ltd. v. AGS Computers Inc.,
548 NE2d 903 (N.Y. 1989).

"Inasmuch as a promise by one party to a contract to indemnify the other
for attorney's fees incurred in the litigation between them is contrary
to the well-understood rule that parties are responsible for their own
attorney's fees, the court should not infer a party's intention to waive
the benefit of the rule unless the intention to do so is UNMISTAKABLY
CLEAR from the language of the promise," the Court in Hooper Associates

Magistrate Judge Francis, in his report and recommendation, noted that
some courts, including one in the Southern District, have awarded fees
on fees. And some states, but not New York, have explicitly provided for
fees on fees by statute.

Nonetheless, Magistrate Judge Francis said he could find no
"unmistakably clear" language that supported such an award to Mr.

                       'Element of Illogic'

Judge Berman agreed, while noting that "there may be an element of
illogic in denying fees on fees." "After all, the purpose of indemnity
is to make someone whole," he said. "In light of existing precedents,
however, the court believes that the appropriate resolution of this
problem is to amend the applicable instrument, be it a contract or a
corporate bylaw, explicitly to authorize fees on fees, rather than
conclude that language that ambiguous is, actually, 'unmistakenly
clear.' "

Mr. Siegel had argued that he nonetheless should be indemnified for the
$ 17,147 because the company's "unreasonableness, bad faith conduct and
dilatory tactics," in resolving the fee issue. "The determination of
whether HMS's conduct vis-a-vis Siegel's indemnity rose to the level of
bad faith is regrettably a very close call," Judge Berman wrote. "HMS's
initial determination to resist indemnification arguing that Siegel had
no need for separate representation was untenable."

But Judge Berman noted that the company later backed off this claim,
while continuing to insist that the fees were excessive, and he
concluded that HMS's conduct did not rise to the level needed to
overcome the bar to fees on fees.

Skadden, Arps, Slate, Meagher & Flom; and Howard I. Rhine and R. Jeffrey
More, of Coleman & Rhine, represented HMS and other individual
defendants. (New York Law Journal, February 7, 2000)

INMATES LITIGATION: Judge OKs $8 Mil Deal for Victims of Attica Torture
A federal judge approved on February 16 a settlement in which New York
State is to pay $8 million to the inmates who were tortured after the
1971 Attica prison uprising, paving the way for the end of one of the
longest and messiest chapters in criminal justice history.

The decision by Judge Michael A. Telesca of Federal District Court did
not come as a surprise. Last month, the judge unveiled a settlement
proposal that would allot $8 million for inmates and $4 million in
lawyers' fees, without requiring that the state admit any wrongdoing or
liability. And all but 1 of the 16 former inmates and inmates' relatives
who attended an unusual hearing here said that they supported the

Still, the absence of any last-minute snags was a great relief to all
parties, given all the legal delay and legerdemain that has dogged the
case for almost 30 years. "Upon consideration of all the relevant
factors as discussed in this decision," Judge Telesca wrote, "I find
that the amount of the proposed settlement is fair, adequate and
reasonable under all of the prevailing -- and compelling --

Eleven guards and 32 prisoners were killed during the September 1971
uprising, which lasted four days and ended catastrophically when state
troopers stormed the Attica Correctional Facility in western New York.
Eighty people were wounded, making it the bloodiest prison incident in
American history.

The inmates had originally seized control of one yard to protest poor
living conditions inside the prison, taking 49 guards as hostages. But
after the unexpected assault by state troopers, law enforcement
officials and prison guards engaged in what a federal court later
described as an "orgy of brutality" against the inmates, forcing many to
crawl naked over broken glass while beating them with nightsticks.

Three years later, lawyers representing the more than 1,200 prisoners
who were in the yard during the reprisals filed a class-action suit
against prison and state officials. The case stalled for years, but by
this year, when many of the inmates are ailing or already dead, all
parties decided to settle at the behest of Judge Telesca.

In the next day or two, the judge plans to release a questionnaire of
about four or five pages that will seek to determine the nature and
extent of each inmate's injuries. The inmates will have until July 7 to
complete the questionnaire, which will be available at the federal
courthouses in Rochester and Buffalo, as well as the offices of the

The allocation of the $8 million is to be based on the severity of those
injuries. And each inmate -- or survivor of a deceased inmate -- will
have the opportunity to be interviewed by the judge. When all the claims
have been identified and determined, the judge will issue a final order.

All told, the inmates' lawyers expect that perhaps 500 former and
current inmates will file claims, and that the money will be divided up
by year's end.

"We are extremely gratified and relieved that the last chapter is going
to start," said Ellen Yacknin, one of the inmates' lawyers, who is also
associated with the Greater Upstate Law Project here. "It's going to be
a lot of work, but we are committed to meeting every person and making
sure that each claim is considered by the judge as thoroughly as
possible." (The New York Times, February 16, 2000)

IWAN'S DELI: 1,500 File Claim Forms over E. Coli Tainted Potato Salad
Some 1,500 people sickened by potato salad prepared by Iwan's Deli and
Catering filed formal complaints by February 16, the deadline to
petition for a portion of the $3 million class-action settlement.

Attorneys who brought the class-action suit against the Orland Park
company in June said they had expected to see far more claim forms
submitted because public health officials had estimated some 5,600
people became ill as result of the E. coli-tainted salad in the summer
of 1998.

"We expect that a few more claim forms postmarked today will arrive in
the next couple of days, but I don't expect there will be a great flood
of them," said Chicago attorney Mary Pohl, co-counsel representing the
plaintiffs. The $3 million fund is the maximum allowed by Iwan's
insurance policy. Pohl said how much each complainant stands to collect
as part of the settlement will be determined by the courts. "We have two
weeks to report how many claims and the nature of those claims to the
judge," said Pohl, who noted some complainants required hospitalization
and others simply stayed home sick from work. "There's a difference in
recovery, and each award will be determined by the court."

Initially, 200 people reportedly fell ill after eating at Iwan's-catered
parties the weekend of June 6 and 7, 1998. Within 36 to 48 hours of the
parties, the number of victims had jumped to some 2,000 suspected
food-poisoning cases because of so-called secondary infection, which
Cook County Health officials believed spread by hand-to-mouth contact.

Eventually, according to a report by the Centers for Disease Control and
Prevention in Atlanta, an estimated 5,600 of the estimated 25,000 people
who ate at the parties were infected.

In the course of two-month investigations by the CDC and Cook County
Health officials, the potato salad was identified as the culprit. The
salad contained a strain of E. coli called ETEC--commonly known as
"traveler's diarrhea." Inspectors said the bacteria surfaced because of
poor sanitation and refrigeration at the deli.

Shortly after the incident, two lawsuits were filed in Cook County
Circuit Court by Pohl's partner, Lawrence Leck, who represented some
15,000 plaintiffs in Illinois' largest food-poisoning class-action suits
in 1985. That outbreak was linked to salmonella-tainted milk.

Iwan's, now shuttered, was once a popular deli and catering business at
15750 S. Harlem Ave. in Orland Park. (Chicago Tribune, February 17,

JDN REALTY: Shepherd & Geller Announces Files Expanded Suit in Georgia
The Law Firm of Shepherd & Geller, LLC announced on February 16 that it
has filed a class action in the United States District Court for the
Northern District of Georgia on behalf of all individuals and
institutional investors that purchased the securities of JDN Realty
Corporation(NYSE:JDN) between February 15, 1997 and February 14, 2000,
inclusive. Securities covered by the lawsuit include common stock, bonds
and 9.375% Series A Cumulative Redeemable Perpetual Preferred Stock.

The complaint charges that the Company and one of its officers violated
the federal securities laws. During the period of 1994 - 1998, JDN's
financial statements were all materially overstated and false. As a
result of these false and misleading statements the Company's stock
traded at artificially inflated prices during the class period. On
February 14, 2000, the Company revealed that it would be restating its
financial results, thereby admitting that its financial statements
between 1994 and 1998 were false. Prior to the disclosure of the above
mentioned adverse facts, the Company took advantage of the inflated
stock price by selling $150 million worth of JDN securities to the
investing public. When the truth about the Company was revealed, the
price of the stock dropped significantly.

Contact: Shepherd & Geller, LLC, Boca Raton Jonathan M. Stein,
561/750-3000 Toll Free: 888/262-3131 Email:

PHYSICIAN COMPUTER: Reaches Partial Settlement of Securities Suit in NJ
Bernstein Litowitz Berger & Grossmann LLP posts a notice to all persons
or entities who purchased or acquired common stock of Physician Computer
Network, Inc. from February 21, 1996 through April 1, 1998, inclusive.
This Summary Notice is given pursuant to Rule 23 of the Federal Rules of
Civil Procedure and an Order by the United States District Court for the
District of New Jersey, dated January 26, 2000.

The Notice says that a partial settlement for the proposed amount of
$21,150,000 has been reached in this Class Action by Lead Plaintiff, the
State of Wisconsin Investment Board, with defendants PCN, Henry Green,
Jeffry Picower, Frederick Frank, Frederic Greenberg.

The proposed settlement resolves all claims, rights, causes of action,
suits, matters and issues, whether known or unknown arising out of or
related to the subject matter of the Action or claims asserted by or on
behalf of plaintiffs or any member of the Class, whether individual,
class, derivative, representative, legal, equitable or any other type or
in any other capacity, against any one of the foregoing parties. The
proposed settlement does not resolve the claims against the non-settling
defendants, John Mortell and Thomas Wraback.

The settlement consideration consists of $21,150,000 (subject to certain
adjustments more fully described in the detailed Notice of Pendency of
Class Action, Proposed Partial Settlement of Class Action and Settlement
Hearing (the "Detailed Notice")), comprised of $2,150,000 in cash and
$19,000,000 in shares of Medical Manager Corporation common stock
(which, under certain circumstances more fully described in the Detailed
Notice, may be paid in cash in lieu of Medical Manager common stock). Of
this amount, $300,000 will be allocated to Class Members who possess
claims as a result of acquiring shares of PCN common stock pursuant to
PCN's merger with Wismer-Martin, Inc. The remainder of the Settlement
Fund will be allocated to all Class Members who do not possess Merger

A hearing will be held by the Court on March 22, 2000 at 9:00 a.m., in
the United States District Court for the District of New Jersey, Martin
Luther King, Jr. Federal Courthouse, 50 Walnut Street, Court Room 5B,
Newark, New Jersey 07101.

The purpose of the hearing will be, among other things: (1) to determine
whether the proposed settlement is fair, reasonable, and adequate and
should be approved and, therefore, whether this class action should be
dismissed on the merits and with prejudice and without costs as to the
Settling Defendants; and (2) to consider the reasonableness of an
application of plaintiffs' counsel for the payment of attorneys' fees
and reimbursement of expenses incurred in prosecuting the class action.

A copy of the Detailed Notice, or a copy of the Proof of Claim, can be
obtained by contacting the Settlement Administrator at: In re Physician
Computer Network, Inc. Class Action Securities Litigation P.O. Box 9353
Garden City, New York 11530-9353 Phone Number: (888) 889-8746.

For additional information about this partial settlement, please contact
Lisa K. Buckser, Esq. At Bernstein Litowitz Berger & Grossmann LLP at
blbg@blbglaw.com A copy of the detailed notice and proof of claim form
is available at the Bernstein Litowitz Berger & Grossmann LLP web site
at: http://www.blbglaw.com

Please do not contact the Court or the Clerk's office information.
Contact: Bernstein Litowitz Berger & Grossmann LLP, New York Ava C.
Thorin, 212-554-1429

THOMAS & BETTS: Milberg Weiss Files Securities Suit in Tennessee
A class action lawsuit was filed by the law firm of Milberg Weiss
Bershad Hynes & Lerach on February 16, 2000, in the United States
District Court for the Western District of Tennessee on behalf of all
persons who purchased the common stock of Thomas & Betts Corporation
(NYSE:TNB) between April 28, 1999, and December 14, 1999, inclusive.

The complaint charges T&B and certain of its senior officers with
violations of Sections 10(b) and 20(a) of the Securities Exchange Act of
1934 and Rule10b-5 promulgated thereunder. The complaint alleges that
defendants issued a series of materially false and misleading statements
concerning the Company's operations and earnings which artificially
inflated the price of T&B common stock. In particular, the complaint
alleges that due to certain customer billing improprieties and
over-valued assets, among other thing, defendants overstated T&B's
previously reported financial results and delayed recognizing over $50
million in charges against pre-tax 1999 earnings. The action further
alleges that defendants misled investors concerning the successful
implementation of T&B's "web-enabled" order processing systems which had
caused serious disruptions to the Company's operations, resulting in an
estimated earnings shortfall of over 40% for the fourth quarter of 1999
alone. Prior to the disclosure of the adverse facts described above, the
Company completed several acquisitions using the inflated price of T&B
common stock as currency for the transactions. When the truth was
finally revealed the price of T&B common stock fell over 29% on December
15, 1999, and has declined more than 50% from the Class Period high of
over $53 per share reached during September 1999.

Contact: at Milberg Weiss Bershad Hynes & Lerach, Steven G. Schulman or
Samuel H. Rudman at One Pennsylvania Plaza, 49th Floor, New York, New
York 10119-0165, by telephone 1-800-320-5081 or via e-mail:
endfraud@mwbhlny.com or visit website at http://www.milberg.com

TOBACCO LITIGAIION: Growers and Quota Holders File $69B Suit over Fraud
The law firm Conlon, Frantz, Phelan & Pires, LLP issued the following
press release:

A $69 billion lawsuit has been filed against the four major cigarette
manufacturers, Philip Morris, R.J. Reynolds, Brown & Williamson and
Lorillard, signators to the Master Tobacco Settlement Agreement (MSA)
and the National Tobacco Growers Settlement Trust (Growers Trust).

The lawsuit, filed by tobacco farmers and quota holders, charges among
other things that the tobacco companies have conspired, contracted and
combined to eliminate the federal statutory scheme regulating the
quantity of tobacco (called "quota") that may be grown annually and
cheated the farmers and quota holders out of fair settlement under the
Growers Trust.

"Why should the American public care about this lawsuit?" asks lead
plaintiff attorney Alexander J. Pires, Jr. "Because multi-billion dollar
tobacco companies are once again defrauding the public and exerting
control well beyond the scope of what the U.S. Congress mandated in the
tobacco program." Pires' lawsuit charges that the Cigarette Companies
have manipulated the U.S. tobacco regulatory system in a private,
subterranean effort to control the purchase of domestic cigarette
tobacco in violation of the anti-trust laws. They used their combined
power to eliminate the long-standing quota system by themselves, without
any involvement by Congress to ensure that such a drastic restructuring
occur only in tandem with appropriate compensation for growers and quota
holders. Without federally regulated quota, U.S. tobacco prices would
drop, causing world tobacco prices to fall, making it substantially more
profitable for the cigarette manufacturers to do business in the United
States and abroad. The plight of the U.S. tobacco farmers is addressed
in a December 1999 joint report entitled "False Friends: The U.S.
Cigarette Companies' Betrayal of the American Tobacco Growers." The
report was co-sponsored by the American Heart Association, American
Cancer Society, and the Campaign for Tobacco Free Kids. U.S. tobacco
farmers have been financially devastated by deep quota cuts for three
straight years.

Pires comments that this report has some striking findings including the
fact that while tobacco farmers are being wiped out, Phillip Morris'
profits have roughly tripled to $6.5 billion since 1985, even after
deducting $3.4 billion to cover costs associated with the state tobacco
settlements. The report details, tobacco companies' shift to foreign
manufacturing in countries including Cambodia, Mexico, Romania and
China, where they exploit less expensive labor and fixed costs, and the
absence of regulation.

The Master Settlement Agreement, which settled the states' health care
lawsuits against cigarette manufacturers in November 1998, required the
cigarette manufacturers to meet with political leadership of the tobacco
growers' states to address the adverse economic effects that undeniably
would impact growers as a consequence of the Settlement. The result was
a $5.15 Billion dollar National Tobacco Grower Settlement Trust,
negotiated without participation or input from tobacco farmers, which is
subject to numerous conditions and escape clauses, and, even if carried
out, will not compensate farmers for even 10% of their losses. "Since
1997 tobacco companies have manipulated the tobacco quota system to
reduce tobacco farmers assets by more than 50% in order to line their
own pockets, and they tell the farmers to get relief from the Growers
rust, which provides but pennies" says Pires.

The bottom line result: the American tobacco farmers have been left
holding severely reduced quotas, and they are now unable to transition
to other agricultural crops or businesses. "Everything in these
communities is tied to tobacco," says Pires. "Without adequate
compensation, these farmers and quota holders will go bankrupt. Without
these farmers, entire communities will be financially devastated.
Tobacco companies need to take responsibility for easing this
transition. Most importantly, they need to ensure that taxpayers don't
have to pick-up the tab for homeless farmers, and community wide
economic devastation," states Pires.

Today, because of quota cuts engineered and manipulated by the
Defendants and to which the Co-conspirators surprisingly have given
their imprimatur, it is worth a small percentage of that amount, with
the value declining daily.

The devastating impact of the quota devaluation was recognized in May of
1997, when a bipartisan group of Members of the Congress asked C.
Everett Koop, M.D., Sc.D., former U.S. Surgeon General and David A.
Kessler, M.D., former head of the Food and drug Administration to form
the Advisory Committee on Tobacco Policy and Public Health. This group
produced a report entitled, "Final Report of the Advisory Committee on
Tobacco Policy and Public Health," July 1997. The report states,
"Serious efforts to reduce the use and consumption of tobacco products
in the United States must address the issue of the tobacco farmers,
their families and the economic viability of their communities. Not
unlike many smokers who know the dangers of tobacco but got seduced and
'hooked' on the product and cannot quit, the American tobacco farmer and
the economic infrastructures of tobacco states are and have been for a
long time 'tobacco dependant.' They are a part of the deeply imbedded
economic and political system that the tobacco companies have
established and maintained to protect the companies' interests."

Lead plaintiff attorney, Alexander Pires, Jr., is a Partner with the
Washington, D.C. based- law firm of Conlon, Frantz, Phelan & Pires. In
1999 he settled a $1.2 billion civil rights class action against the
USDA on behalf of 19,000 African-American Farmers.

Contact: Alexander J. Pires, Jr., Esq., or Ingrid Hutto, Esq., both of
Conlon, Frantz, Phelan & Pires, LLP, 202-331-7050

TOBACCO LITIGATION: B&W Issues Statement; Says Suits Will Hurt Farmers
Brown & Williamson Tobacco Corporation has released the following
statement in response to news accounts of a lawsuit expected to be filed
against the major US tobacco manufacturers by a group consisting largely
of tobacco quota holders:

"It's unfortunate that a Washington, D.C. plaintiff's attorney is
leading a group of mostly tobacco quota holders to believe that more
litigation is the answer to decreasing cigarette consumption and
relative declines in income derived from growing tobacco. In fact, this
litigation will hurt farmers -- not help them.

"The master settlement agreement (MSA) negotiated by tobacco companies
and the states' attorneys general resulted in higher prices and lower
cigarette consumption and, consequently, reduced leaf purchases from
farmers. To help offset these losses to growers, the tobacco companies
agreed to pay $5.1 billion into a growers' trust fund.

"We hope that the relatively small group of farmers who were encouraged
to help fund the lawsuit have been fully informed by the plaintiffs'
attorneys who have contacted them. One should hope that these lawyers
have explained that the lawyers themselves are the only ones likely to
win in this litigation. One should also hope that these attorneys have
informed the group of farmers that no court has upheld any challenge to
the MSA.

"Fortunately, the vast majority of tobacco growers do not support this
lawsuit. We believe that a large majority of those who have signed up
are quota holders, not active tobacco growers. Further, it is important
to note that no state grower association has signed on or supports this
lawsuit." Brown & Williamson Tobacco Corporation is the nation's third
largest manufacturer of tobacco products. Based in Louisville, Ky., its
major brands include Lucky Strike, KOOL, GPC, Misty, Capri and Barclay.

TYSON FOODS: U.S. Audits Wage and Hour Practices at Poultry Plants
Tyson Foods Inc., the world's largest chicken and poultry producer, said
the Labor Department is conducting a nationwide audit of wage and hour
practices in the industry, as reported in the Chicago Tribune, February
16, 2000.

The examination, revealed in a filing by Tyson with the Securities and
Exchange Commission, includes practices that are the subject of a
lawsuit against Tyson in which employees have alleged that the company
failed to pay them for all hours worked and has not properly paid them
for overtime hours, according to Tyson's filing.

The Labor Department began its audit Feb. 9 at 17 poultry plants,
including five facilities owned by Tyson, and will eventually include 51
plants, the filing said.

The federal lawsuit against Tyson was filed June 22 in Alabama by 11
current and former employees. The case is in the discovery stages, and a
hearing has been set for March 6 to consider a request by the plaintiffs
for class-action certification. More details about the lawsuit are
covered in the December 28, 1999 issue of the CAR.

U.S., BRITAIN: French Groups May Sue over Eavesdropping by Echelon
Espionage French set their sights on Echelon Hostility to Echelon,
America's controversial electronic eavesdropping system with a base in
Britain, is growing across Europe, reports Simon Davies

French lawyers and politicians are growing increasingly restless over
the activities of the American National Security Agency's Echelon spy
network, leading to unconfirmed reports of possible legal action against
the British and American governments. The NSA maintains a base at
Menwith in Yorkshire.

The controversial electronic eavesdropping system, first reported in
Connected more than two years ago, is capable of scanning a vast chunk
of the telecommunications spectrum to detect key-words of interest to
America. Legal experts said to be preparing a class action on behalf of
civil rights groups say they have adequate evidence to establish that
Echelon has breached French privacy law. One lawyer, Jean-Pierre Millet,
told reporters: "You can bet that every time a French government
minister makes a mobile telephone call, it is recorded. The simple fact
that an attempt has been made to intercept a communication is against
the law in France."

The activity comes ahead of next week's meeting of the European
Parliament's Civil Liberties Committee, which has scheduled a debate on
the implications of Echelon (Connected February 3).

The committee will discuss a new European Commission report detailing
the threats to commercial secrecy posed by the Echelon system.
Interception Capabilities 2000 has been hailed as the first
authoritative investigation for more than a decade into the NSA.

This report describes how Communications Intelligence agencies such as
the NSA have obtained access to much of the world's international
communications. These include the unauthorised interception of faxes,
emails and telephone calls.

While many of the facts have been known to senior politicians
responsible for defence, the report's conclusions have come as a
surprise to many members of the European and national parliaments. Some
have been stunned by the report's finding that Echelon has been at the
centre of a covert global strategy of commercial espionage. The report
states "there is wide-ranging evidence indicating that major governments
are routinely utilising communications intelligence to provide
commercial advantage to companies and trade". In short, America is using
intelligence data to gain advantage in international trade.

The new report is the second in a series commissioned by the European
Parliament. The first, An Assessment of the Technologies of Political
Control, alleged that the NSA was routinely intercepting most of
Europe's email and fax traffic. The subsequent furore motivated the
parliament to investigate the claims in detail.

While the British Government has so far remained silent on the issue, a
full debate in Brussels last year resulted in a shot being fired across
the NSA's bows through a consensus resolution of all major parties.
However, no action was taken by the parliament.

Echelon has sparked controversy across Europe and the United States. The
Italian government has recognised potential constitutional implications,
and last year commenced a judicial inquiry into Echelon. Meanwhile, the
American Congress is scheduled to hold hearings on the possibility that
Echelon has breached the constitutional privacy rights of Americans.
Congress ordered the NSA to hand over documents relating to the system,
but in an unprecedented move, the NSA refused, claiming attorney/client
privilege. (The Daily Telegraph (London), February 17, 2000)

WHITMAN EDUCATION: Ct OKs Students with Fd Loans/Aid As Class over Sham
As reported in the CAR, the SEC filing by Whitman Education Group Inc.
shows that in July 1999, in the case styled, Cullen, et al. v. Whitman
Education Group, Inc., in the United States District Court for the
Eastern District of Pennsylvania (Civil Action No. 98-CV-4076), the
Court certified a class of all students in the general ultrasound
program who incurred financial obligations (federally guaranteed student
loans or aid) from August 1, 1994 to August 1, 1998 to attend an
Ultrasound Diagnostic School. The Court, however, rejected the
plaintiffs' attempts to certify a class action based on theories that
the Ultrasound Diagnostic School made misrepresentations to students and
to its accrediting body. The Court allowed the case to proceed as a
class action only to the extent that the plaintiffs could prove that the
schools "did not meet even the most minimal requirements of a vocational

The Court subsequently modified the class definition to all students in
the general ultrasound program who attended from August 1, 1994 to
August 1, 1998 and who, at any time, paid with federally guaranteed
student loans or aid.

Whitman's reports to the SEC that Management believes that the lawsuit
is without merit and intends to continue to vigorously defend it. The
Company says that while the outcome cannot be predicted with certainty,
if determined adversely to Whitman, it could have a material adverse
effect on its financial position and results of operations.

* Internet Privacy Breaches Raise Specter of Lawsuits and Govt Action
Class action suits could result from releasing certain personal
information on the Web. If Web companies don't take substantial steps to
prevent consumer abuses stemming from their commercial practices, then
the government will.

Late last year, U.S. Secretary of Commerce William Daley warned at a
online privacy workshop that there will be a governmental backlash if
Internet businesses fail to protect consumer privacy, disclose
information collection practices and provide consumer choice. There's
another danger that Daley didn't mention: privacy breaches raise the
specter of class action lawsuits.

Internet privacy breaches pertain to a wide range of information
collected by Web firms such as addresses, telephone numbers, e-mail
addresses and text entries to specific user interests found in
registrations and mailing lists. This kind of information is called
personally identifiable information (PII).

Daley's comments speak to recent steps taken by the Federal Trade
Commission. In June 1998, the FTC submitted a report to Congress
entitled: Federal Trade Commission, Privacy Online: A Report to
Congress. The report is available on at website

The report highlighted five key principles that the FTC recommends
e-commerce sites employ to promote consumer privacy:

* Notice
  Web firms should give consumers notice of any PII collection
  practices prior to actual collection. Such notice should incorporate
  the names of all parties involved in collecting, archiving or
  receiving PII. Notice should also include the PII's nature, use, and
  security. Consumers should also be advised of the consequences of a
  failure to provide PII.

* Choice
  Consumers must first consent to planned uses of their PII. Such
  consent should be clear, easily available and sufficiently

* Access
  Consumers must have a right to access their PII and correct errors
  and omissions.

* Security
  Web firms should have adequate protections to prevent corruption of
  and inappropriate access to PII.

* Enforcement
  The FTC contended that enforcement mechanisms should be created for
  privacy regulations, but did not offer firm recommendations.

Notice, along with the other principles, suggests that Web firms
collecting PII have and maintain a clearly displayed privacy policy.
Firms may even want to consider requiring consumers to accept the terms
of the privacy policy under a click-wrap agreement prior to PII

Choice requires Web firms provide either an "opt-in" or "opt-out"
method. Opt-in means that consumers have to actually click their consent
to having their PII put to particular uses. Opt-out means that such
consent is presumed unless consumers tell the firm that they do not
consent. It remains to be seen whether the FTC will require firms to use
the opt-in method. This method is arguably most in keeping with the
principle of choice because opting in requires actual affirmative
consent. However, the disadvantage for Web firms is that an opt-in
method will most likely result in less information gathering.

Interestingly, the European Union has also issued a directive containing
many of the same principles in advising EU members on drafting future
e-commerce privacy legislation. EU Parliament and Council, Council
Directive 95/46 of 24 October 1995, 1995 O.J. (L 281) 31. The directive
requires that PII can only be collected if: (1) the PII collector, or
"data controller," has a legitimate purpose; (2) the data is relevant,
accurate and up-to-date; (3) notice is given, including the identity of
all other collectors receiving the PII; (4) access is granted to review
and correct collected PII; and (5) no re- disclosures of PII are made to
third parties without the user's consent.

Thus, adherence to the FTC's guidelines may provide Web firms engaged in
international business some basis to conform their collection practices
with EU members' future statutory frameworks.

Additionally, many Web firms have a strong interest in protecting PII
due to the more rigorous nature of some EU member states' enforcement
mechanisms. These mechanisms can encroach on a multinational
corporation's ability to share information across borders. For instance,
Sony and Fiat have been blocked from transferring PII to affiliates in
the United States and Italy because of the lack of legislative
frameworks to ensure an adequate level of privacy protection under Art.
25 of the directive. On another front, the Internet's lowering of the
transaction costs involved in international business prompts many
domestic Web firms to attempt to penetrate international markets. Their
market penetration in Europe may be slowed by a lack of compliance with
the directive.

                          FTC Actions

The FTC has filed deceptive trade practices complaints against Web firms
that violate their own privacy policies. For instance, the FTC filed a
complaint against Geocities Corporation, an Internet service provider
and Web hosting entity. In August 1998, the commission announced that
Geocities had agreed to a consent order regarding its PII collection
practices. The consent order settled the FTC's complaint that the
company had violated an agreement with users not to share any consumer
information without their consent. Despite this agreement, the FTC was
prepared to prove that Geocities had regularly shared subscription
information to third-party recipients without user permission.

Consequently, Geocities faced a charge of commercially deceptive acts
and practices under Sec. 5(a) of the Federal Trade Commission Act, 15
U.S.C. Sec. 45. Under the consent order, Geocities must provide notice
of PII collection, including such as the PII's nature, use, third-party
recipients, access and deletion methods. Decision and Order, In re.
Geocities, C-3850, File No. 9823051. Geocities must also respect user
instructions to delete or not disclose PII.

Last May, the FTC settled a case against Liberty Financial Companies
Inc., the operator of the "Young Investor" Web site. The FTC accused the
site -- apparently geared toward children and teens -- of falsely
representing that PII collected from children would be maintained
anonymously. The FTC contended that the PII was instead maintained in
"an identifiable manner." The FTC and Liberty entered into a consent
agreement under which future misrepresentations would be prohibited and
Liberty would be required to post a privacy policy and obtain verifiable
parental consent before collecting children's PII. Liberty's
responsibilities are significant now that the FTC has drafted
regulations under the "The Children's Online Privacy Protection Act," 15
U.S.C. Sec. 6501 (COPPA), which applies to Web sites geared toward
children or sites that have actual knowledge of collecting children's
PII. These cases demonstrate the need to conform privacy policies with
FTC principles. The commission has also settled an action against
ReverseAuction.com, which involved an accusation by eBay that
ReverseAuction.com collected eBay user e-mail addresses to send
unsolicited commercial e-mail. The FTC is additionally considering
complaints that Alexa software, owned by a subsidiary of Amazon.com,
violates privacy laws by collecting PII without user consent. The Alexa
software has also triggered a class action lawsuit.

Interestingly, given the FTC's ability to obtain settlements so clearly
reflective of the privacy principles, it remains to be seen whether the
commission will need any additional remedies as suggested by the
enforcement principle. To clarify the import of such principles, the FTC
has assembled the Advisory Committee on Online Access and Security,
which is composed of 40 representatives from government, private
companies, law schools and public interest groups.

The committee is charged with advising the FTC on the implementation of
fair PII collection practices, the current effectiveness of privacy
policies, whether the degree of access provided by Web sites correlates
with the sensitivity of the information collected and the protection of
PII. The committee's report is due this May and should offer further
suggestions for privacy policy content.

                            Bad Publicity

In addition to legal liability, a number of companies have generated a
large degree of negative publicity due to privacy breaches. Controversy
has surrounded TRUSTe, an industry-financed privacy organization.
RealNetworks, one of the companies overseen by TRUSTe, admitted in
November that the company's RealJukebox software collects user
information without consumer consent.

The software transmits a unique number linked to the user's CD selection
and e-mail address. This controversy follows Microsoft's (another TRUSTe
company) admission in March that some of its software applications
contain a number known as a global universal identifier that tags a
user's particular computer.

TRUSTe requires companies to sign a contract governing consumer privacy.
In return, the companies may use the TRUSTe privacy logo. But the
contract only governs Web sites, not the site owners' software programs.
Thus both RealNetworks Jukebox and Microsoft's software programs were
not explicitly subject to the TRUSTe contract. Consequently, TRUSTe
chose to not take aggressive action, such as voiding RealNetworks' and
Microsoft's use of the TRUSTe seal and bringing suit for fraud or breach
of contract.

Persuaded by RealNetworks' contention that the collected information was
never used for marketing purposes, TRUSTe instead agreed with
RealNetworks that the company would appoint a privacy officer, accept
external auditing, post a privacy policy and ensure that the identifying
number is an opt-in decision of the user. Strikingly, this result is a
good example of how an opt-in method may be the best way for e-commerce
entities to strengthen consumer trust, effectively harmonize with the
choice principle and stave off future regulation. The aftermath may also
demonstrate that RealNetworks would have been much better off if they
had offered a simple opt-out clause from the start to pre- empt the
possibility of a much stricter opt-in clause being imposed later.

Another controversy came to light in November involving Comet Systems
Inc. Comet, a New York firm, offers cursor software that changes a
user's computer cursor into cartoon characters and other images. The
software is supported by tens of thousands of Web sites, including Vice
President Al Gore's presidential campaign site. (Gore's site removed the
software once the controversy came to light.) Once downloaded, the
cursor software harvests a user's computer serial number and issues
reports to Comet on that user's visits to other sites that support the
cursor software.

Comet professes it has no interest in correlating its data with names
and e-mail addresses. The company says it only harvests the numbers to
create a census of its customers and because some sites pay Comet based
on the number of site visitors that use the cursor software. But Comet
acknowledges that a user's Internet browsing history could be linked
back to a specific computer by analyzing Comet's tracking logs.
Complaints have been submitted to the New York's Attorney General's

The Comet situation serves as an excellent example of the risks Web
firms face when utilizing third-party content on their sites. For
instance, security experts have pointed out that third-party advertising
service providers can cause Web sites to violate their own privacy
policies. Because, as the Geocities and Liberty cases demonstrate,
violating one's own privacy policy can lead to a charge of deceptive
trade practices by the FTC, Web firms must be attuned to the actions of
ad providers.

For instance, a person may visit site A and enter PII, under the
assumption that the information will not be shared with any other party
because the site states as much in its privacy policy. Unbeknownst to
site A, an ad provider on its site may collect PII from the user, issue
her a cookie, and target her for future advertising. When she visits
site B, which is also supported by the same ad provider, the provider
instantly recognizes the now cookie-tagged user, and in doing so
harvests information on the Web sites she is visiting.

The ad provider may also send her advertisements based on the
preferences indicated by the sites she has visited. Site A's supposedly
secure receipt of PII has led to a third party collecting a database of
user information, including personal preferences and Web browsing. A
number of steps can be taken to ensure that these policy violations do
not occur, including clear agreements between Web firms and ad providers
governing the use of collected data.

By failing to consider these issues, e-commerce firms are creating an
environment ripe for legislative encroachment, future FTC actions and
class action lawsuits.


Already we have seen the advent of federal law and regulations in the
area of children's digital privacy with the passage of COPPA. COPPA
requires the FTC to develop rules for Web firms that are geared toward
children or if they knowingly collect children's PII. These rules
require giving detailed notice of PII collection and obtaining
verifiable parental consent prior to disclosure, allow the parent to ban
further collection and dissemination, limit disclosures tied to a
child's participation in games and prize offers and create security
procedures holding children's information confidential. Supporting
Statement for Information Collection Provisions of the Children's Online
Privacy Protection Rule, 16 C.F.R. Part 312.

Recently, the FTC has issued a final rule under 16 C.F.R. 312 setting
forth elaborate proscriptions, requirements, and methods for Web firms
to meet the act's requirements. Now children's Web firms that collect
PII should strongly consider consulting an Internet attorney to meet the
rule's dictates. Furthermore, all Web firms should review their terms of
use and applicable agreements to ensure that they do not violate COPPA's

Another example of the encroachment of Internet law is the growing
number of states that have passed or are considering legislation
limiting unsolicited bulk commercial e-mail. Washington, Nevada,
California and Virginia have already passed such statutes as states
respond to the abuses of commercial e- mail Internet companies. For
instance, many such firms send floods of messages with false subject
lines and addresses. By not effectively reigning in such abusive tactics
-- which have shut down servers, drained Internet service provider
resources and swamped user accounts -- these firms are coming under the
regulatory thumb. A recent case in the state of Washington raised an
additional body of statutes that may apply here. The case involved a
criminal complaint against an alleged pedophile. A police detective had
adopted a false persona as a 13-year-old girl on the Internet. The
detective corresponded with the defendant by e-mail and chat. When the
defendant tried to meet the "girl," the detective had him arrested and
charged with a number of sex crimes.

At trial, the prosecution tried to introduce printed copies of the
e-mails and chats. The defense argued that the copies violated the
Washington statutory prohibition on wiretapping. The judge ruled against
the defense, noting that the statute does not specifically apply to
computers and that one should assume that privacy is compromised by
computers because of their recording capabilities.

However, the federal statutes, 18 U.S.C. Sec. 2510 - 2522, and the New
Jersey statutes, N.J.S.A. 2A:156A-1 to -34, on wiretapping do cover
electronic communications. Web sites, ad providers and Internet service
providers risk violating these statutes if they use software that allows
monitoring of chat and e-mail. For instance, some Web sites now allow
third-party firms to monitor customer's site visits and to step in and
offer customer service based on the customer's browsing. If a user is
visiting a site offering chat or e-mail, then there is a risk that this
kind of monitoring could involve an interception of an electronic
communication in violation of state and federal law.

However, a common exception, such as that appearing in N.J.S.A.
2A:156A-4, allows e-mails to be intercepted if the user has given prior
consent and the purpose is not unlawful. Therefore, Web sites and
Internet service providers should review their terms of use and other
relevant agreements with counsel to ensure that sufficient consent
exists to fall within the exemption. It would seem that few, if any Web
companies have considered this issue.

Another statutory risk is the Driver's Privacy Protection Act, 18 U.S.C.
Sec. 2721-2725 (DPPA). On Jan. 12, the U.S. Supreme Court upheld the
constitutionality of the act in Reno v. Condon, No. 98-1464. The DPPA
illustrates the re-disclosure risk. Under Sec. 2724, any person who
knowingly discloses personal information obtained from motor vehicle
records for an unlawful purpose may face a lawsuit by the person whose
information was disclosed for actual and punitive damages, as well as
attorneys' fees, litigation costs and other equitable relief.

While most of this article has discussed the Web firm as the collector
of PII, often a company will receive PII from another party in the
course of marketing efforts. Under the DPPA, a Web firm could
conceivably risk liability for re-disclosing that PII if it was
unlawfully obtained from motor vehicle records. Rather than having to
litigate whether one had knowledge of the source of re-disclosed PII,
Web companies should seriously consider requiring a party supplying PII
to represent that the disclosure does not violate the DPPA.

Ultimately, if Web firms will not take substantial steps to prevent
consumer abuses stemming from their commercial practices, then the
government will. In the future, Secretary Daley has made clear that if
the world of e-commerce does not police itself effectively and in
harmony with the FTC's suggested principles for fair trade and dealing,
then all Web firms may be forced to face extensive legal hurdles. In
addition, current practices create a risk of future class action
lawsuits. The lesson, then, is that any company that collects or plans
to collect consumer information should promptly have an Internet
attorney review and update the Web firm's Internet agreements and
privacy policies. (New Jersey Law Journal, February 14, 2000)

* Proposed Ontario Franchise Act Will Increase Franchisor Liability
On Dec. 14, 1999, for the third time in a little over 12 months, the
government of Ontario introduced its Franchise Disclosure Act, 1999 as
Bill 33, fulfilling a commitment made in the October Throne Speech.

Committee Hearings on Bill 33 are now scheduled for March 6 to 9, in
Toronto, Sault Ste. Marie, Ottawa and London. Franchisee representatives
are expected to use these hearings to advocate the inclusion of specific
relationship standards in Bill 33.

Bill 35, a similar private member's bill introduced by Tony Martin, the
NDP critic for Consumer and Commercial Relations, has restrictions on
performance standards; franchisor discretion, territorial encroachment;
renewal, transfer and termination provisions; and franchisor
restrictions on suppliers.

While Bill 33 may be amended, its basic balance is unlikely to be
disturbed. After Bill 33 is passed, it will be necessary for the
regulations specifying the minimum disclosure requirements to be
prepared before it is proclaimed.

The legislation could be in force before the end of the year and will
have significant implications for franchisor liabilities, and for the
due diligence necessary when buying a franchise system.

Provisions-Under the proposed Act, franchisors will be required to
provide prospective franchisees with a disclosure document containing
all material facts about the business, operations, capital or control of
the franchisor or its associate(s), or about the franchise system, as
well as financial statements and other terms to be prescribed in the
regulations, and copies of all agreements. This must be done 14 days
before any agreements are signed or any consideration is paid. During
this disclosure period, which for business reasons may be longer than 14
days, the franchisor has an obligation to notify the prospective
franchisee of any material change.

A franchisee or licensee has a right of rescission for two years after
entering into the franchise agreement, if no disclosure document was
given, or for 60 days if the disclosure document was given late. On
rescission, the franchisor must refund monies received and compensate
the franchisee or licensee for losses.

If a franchisee suffers a loss because of a misrepresentation in a
disclosure document, this gives the franchisee a right of action for
damages against the franchisor, associated companies, and every
individual who signed the disclosure document.

The Act will facilitate such actions by specifically including omissions
in the definition of a "misrepresentation"and by deeming that the
franchisee relied on the misrepresentation in acquiring the franchise.

Finally, the Act will impose a duty of fair dealing on both parties in
all franchise or licence arrangements to which it applies, both existing
and new. Similarly, all franchisees or licensees will have a right of

                             Class Actions

Although Ontario adopted the Class Proceedings Act on Jan. 1, 1993, only
two franchisee disputes have resulted in certification hearings. Both of
these occurred in 1999.

In 909787 Ontario Limited v. Bulk Barn Foods Limited, 1999 Ont. Sup.
C.J. LEXIS 1048 (Aug. 9, 1999), leave to appeal granted Oct. 15, 1999,
(Ont. S.C.J.) the complaint was framed as a breach of the standard form
franchise agreement, and certification was granted.

However, in Rosedale Motors Inc. v. Petro-Canada Inc. (1998), 42 O.R.
(3d) 776 (Ont. Gen. Div.), the action was for negligent

Certification was denied in Rosedale Motors, in part because of "...the
difficulty, if not the impossibility, of dealing with the
misrepresentation aspect of some 40 commercial agreements between
relatively sophisticated parties as if they were all one and the
same."(at p. 788)

Bill 33 will increase the commonality of the issues, a requirement for
the certification of class actions, because material representations
will have to be in the disclosure document given to all prospective

Further, reliance on any "misrepresentation"will be deemed by the Act to
have occurred, removing another one of the individual elements in such

Due diligence-For persons interested in purchasing a franchise or
distribution system, Bill 33 will increase the necessary due diligence.
The first issue that a purchaser will have to establish is whether or
not the Act will apply to the system being purchased.

Even in the United States, where similar legislation has been in place
for many years, this is an ongoing issue in dealership and sales agent

Purchasers will further have to satisfy themselves that there has not
been any misrepresentation or omission of material facts in the
disclosure document(s) delivered within the appropriate limitation
period, and whether disclosure documents were properly given to all

In the United States, the issues that arise on purchasing a franchise
system are sufficiently different from traditional acquisitions that the
ABA Forum on Franchising has published a book on the mergers and
acquisitions of franchise companies.

The book includes a specialized due diligence checklist that focuses on
issues regarding disclosure and franchise marketing and sales.

The implications of missing a disclosure issue in an acquisition will be
significant because of the potential for a class action and the
associated costs.

Even if class action certification is denied, the legal costs to a
franchisor are usually a factor of the number of franchisees in the
system. The file on each franchisee must be reviewed to determine if it
is an appropriate member of the proposed class.

Thus for a variety of reasons, Bill 33 will have long term implications
for franchisor conduct in Ontario. (Byline: Paul Jones. Paul Jones
practises franchising, distribution and trademark law at Miller Thomson
LLP in Toronto. He chairs the American Bar Association Sub-committee on
Canadian Franchising Developments. Miller Thomson LLP represented the
franchisor in Rosedale Motors. (The Lawyers Weekly, February 18, 2000))

* The Washington Post Says Documents Show Suffering Of D.C. City Wards
A report on The Washington Post says the haunting tales are contained in
more than 100 pages of court-sealed reports compiled by the U.S. Justice
Department on the city's troubled program for its mentally retarded
wards. Those documents, according to The Washington Post, chronicle a
system plagued not only by mysterious, uninvestigated deaths, but also
by daily indignities, disrespect and suffering.

The documents make it clear that life for these city wards -- identified
in the documents by pseudonyms -- is routinely punctuated by insults:
aching teeth for lack of dental care, broken or missing wheelchairs,
inadequate food, a victim of rape housed with the rapist. In some cases,
the city docked funds from its wards' accounts, ostensibly for their
burials, but then was unable to tell investigators where the money could
be found.

"It's heartbreaking that the system continues to dehumanize people in
this way," said Kelly Bagby, an attorney with University Legal Services,
which represents the mentally retarded in a two-decade-old class-action

The Washington Post says that the Justice Department began its review
last spring after it reported hundreds of cases of abuse and neglect of
the city's mentally retarded wards, followed by a second investigation
published in December which found 116 uninvestigated deaths in the

The Justice reports were issued beginning in June and continuing through
December, but the findings were placed under a gag order when city
officials argued they would violate the privacy of the mentally

The documents ultimately constitute a paper trail of notification to
city officials. The reports forwarded to city lawyers warned in pointed
detail that many of the mentally retarded adults were at serious risk of
harm. When in December the city had done little to correct the urgent
problems flagged in June, a Justice official admonished the city in
ever-stronger language, saying its inaction was "unacceptable" and
required "sweeping systemic change."

In one case, the problems of a 34-year-old profoundly retarded man,
William Moxley Jr., were cited as urgent in June, August and again in
December. He died four days after the final report was issued on Dec.

Mayor Anthony A. Williams (D) said he had not seen the Justice reports
nor been told of their contents until December.

While officials in the corporation counsel's office, the Department of
Health and the Department of Human Services had seen the documents,
Williams said the word did not reach his office. "I took this to be
another inherited, accumulated wreck," he said of the city's handling of
the mentally retarded. "Never once was I told the scope and magnitude of
lost lives that we were talking about."

Since December, he has fired six DHS officials and suspended two others
and last week initiated a review of each of the 1,600 mentally retarded
people in the city's care.

The series of Justice Department reports, produced by two expert
consultants given unprecedented access, offers the broadest portrait yet
of a system flawed at virtually every level.

Using as a benchmark the requirements in a 1978 federal court decree
deinstitutionalizing the mentally retarded, the authors conclude that
the city is "out of compliance with every major requirement of the
court's orders."

More specifically, they list 15 findings, including poor staff training,
unsafe transportation, an absence of legally required advocates,
inadequate planning and monitoring of care and the overuse of
psychotropic medication and restraints to control behavior.

The report documents the effect of the system's flaws on individual

"Thomas" eats nails. When he swallowed a handful, he was dispatched to
the hospital, where a doctor suggested a procedure to extract them. But
because the District government had not arranged for medical consent for
Thomas, a mentally retarded ward of the city, there could be no
procedure. He remained in his hospital bed for a week, strapped down to
control his outbursts, while the nails worked their way through his

"Victor" wears a Size 8 shoe. But the caretakers at his group home sent
him off one morning with his feet jammed into a pair of Size 4s. Seeing
he was in agony, workers at his day program pried them off. Then, as his
friends headed off for a field trip, Victor was told he must stay
behind. How could he go without shoes?

For at least one man -- identified as "Walter" -- the weaknesses at
various points in the system combined to leave him essentially stranded:
He arrived at a nursing home in Baltimore on a stretcher in a hospital
gown, without clothing, personal possessions or a wheelchair, despite
the fact that he couldn't walk.

Walter has a tendency to bang his head and hit himself. The report found
that his city caretakers did not put together a program to address that
behavior. Instead, they prescribed three psychotropic medications and
outfitted him in an "abdominal binder" and hand mitts. Even so, Walter
managed to damage his hearing and render himself blind. In Walter's
three years at the nursing home, his case manager from the city's
Department of Human Services never visited him, nursing home staff
members told the Justice consultants.

The investigators based their findings on a comprehensive review of 74
adults who are members of the class-action lawsuit that closed Forest
Haven, the city's institution for the mentally retarded until the early
1990s. The experts visited 54 residential sites, as well as "day
treatment" programs where the wards spend roughly five hours each

But investigators complained of a lack of cooperation -- the city turned
over only a small portion of the documents that had been requested. "The
failure of the [city] to submit the documents requested in a timely
manner impeded the review process unnecessarily," the report states.

Nevertheless, the investigation produced a detailed list of defects.
Foremost among them was an ineffective policy for reporting and
investigating "unusual incidents." That policy -- requiring group-home
and day-program staff to record injuries, abuse and other problem -- was
envisioned as a vital safety net when the wards were moved out of Forest

But the investigators found the safety net missing: "During the course
of the review, no provider staff were able to provide the reviewers with
either a copy of the [city] policy or to describe specifically what is
required by the policy." One provider for the wards said that despite
its repeated attempts to obtain a copy of the policy from the city, it
had received nothing for more than a year.

Scrutinizing the city's handling of deaths among the mentally retarded,
investigators reported that the city failed to tell them of five of 42
deaths that occurred over a three-year period. And officials had not
completed an independent investigation into any of the deaths.

When reviewers turned their attention to the city's handling of the
wards' finances, they found similar shortcomings. "Henry's" caretakers,
for example, had removed $ 2,000 from his personal funds to set aside in
a burial account. But when questioned, the city couldn't say where that
money had gone. The same was true of numerous other wards. In only two
cases could the city document the whereabouts of the burial money.

The city was also routinely paying its wards their personal allowances
months late, keeping their funds in non-interest-bearing accounts and
failing to ensure they were receiving their Social Security disability

The court order in the city's class-action suit -- now covering more
than 700 former Forest Haven residents -- laid out a blueprint for
reforming the way the District cares for its mentally retarded wards.
They would be moved into the community in small group homes and offered
day programs that would stretch their horizons by teaching them daily
living skills. They would also get good medical care and be protected
from abuse and mistreatment. When that order is not followed, the
experts wrote, "it is people who suffer."

Among the cases they cite:

"Elaine" was diagnosed with severe gum disease in 1997, but by last
spring she had received no treatment. Some of her teeth could not be
saved. The city said there was no funding for her treatment,
recommending she pay her dental bills out of her own money, even though
the city is legally responsible for her dental care.

When investigators visited "Clarissa," she complained that she was often
hungry. Workers at her day program said she routinely arrives from her
group home without enough food. The day of their visit, reviewers noted,
her lunch consisted of a "thin peanut butter sandwich, a six-ounce can
of juice and a lolly pop."

When the investigators reported this to the city, officials said they
could find no evidence that Clarissa wasn't getting enough to eat.
Experts ultimately labeled it "remarkable" that the city was unable to
investigate "relatively simple allegations" and correct the problems.

Clarissa wasn't alone. It took the city three years to act on complaints
that "Mary" was routinely sent to her day program with food that was
"inadequate and/or spoiled." Mary's case manager hadn't visited her home
in two years, the report stated.

Such cases can be ignored for years in part because the city's Superior
Court has failed to fulfill another requirement of the 1978 federal
court order--providing the former Forest Haven residents with an
advocate to ensure they are receiving the proper services. Of the 74
adults reviewed by the investigators, only three had court-appointed

Bagby, whose firm has been designated as the city's "protection and
advocacy" agency for persons with disabilities, said the details of the
report underscore "why we have been pushing so hard for a body of
advocates and monitors who are completely independent of the District
and can dedicate themselves to nothing but protecting these individuals
from harm."

One of the most tangible problems cited in the report was a simple lack
of working equipment.

"Christopher," for example, has needed a new wheelchair for at least two
years. The footrest, which he needs to keep from sliding down, is
missing. He must prop his feet on a plastic milk crate to keep upright.
The headrest, which he needs to keep from choking, is also missing. The
brakes do not work and the armrests are falling off. Because he has no
shower chair, Christopher must sit in his wheelchair when he is
showered, causing it to rust.

The staff at his day program will no longer take him out on field trips
for fear his wheelchair will fall apart.

"Christopher is angry about the condition of his current wheelchair and
the time it has taken to get him a new one," the investigators wrote.
"The quality of his life as well as his health and safety have been
jeopardized." (The Washington Post, February 15, 2000)


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

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

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