/raid1/www/Hosts/bankrupt/CAR_Public/000505.MBX                  C L A S S   A C T I O N   R E P O R T E R

                   Friday, May 5, 2000, Vol. 2, No. 88


BREAST IMPLANT: Dow Says Precedent Supports Less Money for Foreigners
BROWARD CITY: Pending Lawsuits over Foster Care Cited for Changing Bill
CENDANT CORP: Price of Additional FELINE PRIDES Set for Settlement
DAILY TIMES: EEOC Files Suit over Religious Discrimination
DOW CHEMICAL: Curtis V. Trinko Files NY Suit over Union Carbide Merger

DOW CHEMICAL: Stockholders Sue over Merger with Union Carbide
GIANT GROUP: No Resolution Reported on Checkers '98 DE Securities Suits
GIANT GROUP: NYSE Accepts Business Plan for Compliance with Standards
GIANT GROUP: Securities Suits in =9294 in KY Continues
H&R BLOCK: Agree to Settle Tax Consumer Suit over Charges Disclosure

HERTZ CORPORATION: Ap Ct Oks Complaint on Fuel Charges for Rented Car
HOLOCAUST VICTIMS: US Lawyer Rejects Austrian Compensation Offer
LOCKHEED MARTIN: Judge Rejects Burbank Residents' Claims over Cancer
MCKESSON HBOC: Firm Can't Solicit Clients in Securities Case
MICROSTRATEGY: Strikes Back at Employment Lawsuits

PARK PLACE: Foes Blast Catskills Casino Plan
POTOMAC ELECTRIC: Officials Decide against Joint Suit over Oil Spill
QUEST DIAGNOSTICS: Settles Govt and Private Claims on Billing
SOTHEBY'S, CHRISTIE'S: Auction House Case Advances As Class Action
TOBACCO LITIGATION: Flight Attendants' Suit May Proceed, 9th Cir Rules


BREAST IMPLANT: Dow Says Precedent Supports Less Money for Foreigners
In its response to the appeals of its reorganization plan asserted by
foreign claimants, Dow Corning asserts the two-tiered program for
settlements, based on the claimant's country of origin, has strong
precedent in mass tort litigation. In re Dow Corning: Appellee Brief of
Dow Corning in Response to Appeals of Foreign Claimants , No.
99-CV-73941 (E.D. Mich., Mar. 13, 2000).

The company says its structure is based on the model used in Bowling v.
Pfizer Inc., 927 F. Supp. 1036 (S.D. Ohio, 1996), a class action suit
which arose from defective artificial heart valves. "Pfizer presents a
model for classifying foreign claims from dozens of countries and
establishing equivalent settlement values for those foreign claims based
on settlement offers to domestic claimants," says Dow.

Moreover, the settlement offers in the Dow plan are far more generous
than those approved in Pfizer, says the breast implant manufacturer. In
Pfizer the settlements offered to foreign claimants ranged from 8
percent to 32 percent of the offers made to domestic claimants. Under
Dow's reorganization plan, foreign claimants will either receive 35
percent or 60 percent of the settlement offered to the personal injury
claimants from the United States.

Dow Corning has received personal injury claims associated with silicone
breast implants from at least 60 countries on six continents. The breast
implant manufacturer asserts it is justified in offering lower
settlement payments to foreign claimants due to differences in their
legal, cultural and economic systems. If a foreign claimant is
dissatisfied with the offer, she can choose to litigate her claim and is
not required to accept the settlement offer.

According to the responsive pleading, the Australian, New Zealand and
the other foreign claimants, represented by Sybil Shainwald (the
Shainwald appellants), contend the two-tiered structure of the plan is
unfair and discriminatory. However, Dow and the Official Committee of
Tort Claimants say the argument is irrelevant as both classes voted to
accept the plan by more than the two-thirds margin required.

The appellants also try to attack the plan's classification scheme by
calling it arbitrary, irrational, unprecedented, in bad faith and even
unconstitutional. However, the evidence supports the position that the
value of the foreign breast implant claims is lower than the value of
the domestic clams, they continue, and that the legal rights of the
claimants are significantly different. For example, tort damage awards
in Australia are lower than in the United States. According to the
brief, the highest award for non-pecuniary damages in the most severe
case in Australia is approximately $230,000 (US] and damages for less
severe injuries are far less.

The implant manufacturer argues the plan's classification reflects "real
world variations" in the value of claims. When there was insufficient
data on the value of tort claims in a particular country, the plan
relied on gross domestic product (GDP) information. The Pfizer model
also took into account multiple economic factors such as earning power,
cost of living, home ownership, computer and television ownership and
communications systems.

Pfizer is a useful model for Dow's plan, the proponents assert, even if
the case did not involve a Chapter 11 reorganization plan. Dow Corning
contends that it is not required to "reinvent the wheel" in their
classification structure, and Pfizer resulted in a fair and reasonable
approach for the compensation of foreign breast implant claims. (Breast
Implant Litigation Reporter, April 24, 2000)

BROWARD CITY: Pending Lawsuits over Foster Care Cited for Changing Bill
The same gut-wrenching lawsuits that indicate Broward County needs
better oversight of foster care cost it a million-dollar pilot program
that would have appointed trained attorneys to represent foster
children's legal interests.

In two amendments Wednesday, the Senate stripped Broward of the program,
gave it to Orange County, and handed out $ 19 million worth of group
homes for special-needs foster children in Orange and other Central and
North Florida counties.

The amendments were part of a sweeping Department of Children & Families
reorganization bill (SB 2566), which rolls over to its third and final
reading, and likely will pass out of the Senate. Its future in the House
is uncertain.

The double blow to Broward's 1,400 foster children surprised advocates.
Chris Zawisza, legal director of the Children First program at Nova
Southeastern University's law school, said Orlando's lobbying landed the
pilot program there.

Some of Broward's foster children currently are represented in court by
guardians ad litem, who aren't required to have legal expertise.

Sen. John McKay, R-Bradenton, said a federal class-action lawsuit
against the DCF in Broward County complicates implementing a pilot
program. He advised giving the three-year attorney ad litem pilot to
Orange, where there aren't any class-action suits.

"Leaving this program in Broward will cause a veto of the entire bill,"
he said.

Sen. Howard Forman, D-Pembroke Pines, fought to keep the program in
Broward, asserting that lawsuits can "pop up anywhere," including Orange

The lawsuit, settled in February but still under scrutiny by attorneys
for Broward's foster children, alleged the DCF was negligent and allowed
children to be abused and neglected. Two other suits are pending. One
was filed against the department on behalf of six siblings who suffered
sexual, physical and emotional abuse while in the care of a foster
mother whose own children had been taken away after she was declared
unfit. And a girl who was gang-raped while in foster care is suing DCF
employees, saying they violated her civil rights by failing to keep her

The amended DCF reorganization bill, sponsored by Sen. Mario
Diaz-Balart, R-Miami, calls for a prototype region -- comprising Pasco,
Pinellas, Manatee, Sarasota, DeSoto and Hillsborough counties -- where
the DCF can contract out services to private companies.

The department is gradually privatizing its foster care service by 2003.
Other services are being handed off, as well, including investigation of
child abuse reports.

Diaz-Balart's bill also abolishes district and state health and human
services boards and creates boards of community leaders and children's
advocates to advise the DCF.

Sen. Tom Rossin, D-West Palm Beach, criticized the bill. He said it was
the fourth DCF reorganization in his six legislative sessions.

"You cannot run a department that you are constantly reorganizing," he
said. "I've got to tell you, if you think you've got problems with a
department, it's because of what we do here. ... The fact that they've
been able to do anything is a miracle."

Staff Writer Shana Gruskin contributed to this report.

Heidi Hall can be reached at hhall@sun-sentinel.com or 850-224-6214.
(Sun-Sentinel (Fort Lauderdale, FL), May 4, 2000)

CENDANT CORP: Price of Additional FELINE PRIDES Set for Settlement
Cendant Corporation (NYSE: CD) announced on May 3 the subscription price
for its offering of up to 4,000,000 additional FELINE PRIDES (the
"Additional FELINE PRIDES") in connection with its previously announced
settlement of the PRIDES class action lawsuit. The subscription price
has been set at $23.48 per Additional Income PRIDES and $20.98 per
Additional Growth PRIDES. Additional Growth PRIDES will only be offered
to persons who received Rights as part of the court ordered distribution
and were beneficial owners of Growth PRIDES on April 15, 1998. The
Additional FELINE PRIDES are being offered in accordance with a
Stipulation and Agreement of Compromise and Settlement dated as of March
17, 1999.

A registration statement relating to the Additional FELINE PRIDES and
the related New FELINE PRIDES was filed with, and declared effective by,
the Securities and Exchange Commission. The Securities and Exchange
Commission and state securities regulators have not approved or
disapproved of these securities. Any representation to the contrary is a
criminal offense.

DAILY TIMES: EEOC Files Suit over Religious Discrimination
The government is suing past and present owners of The Daily Times of
Farmington, alleging religious discrimination against employees by the
newspaper's former owner-publisher, Eliot O'Brien.

The class action was filed Monday on behalf of former assistant managing
editor Garry Moes and others. It was filed in U.S. District Court in
Albuquerque by the U.S. Equal Employment Opportunity Commission.

Daily Times publisher Keith Haugland said any religious discrimination
ended when the paper's ownership changed. "I don't understand why we
were named (as a defendant)," Haugland said. "Garry Moes apparently
worked for the previous owner and was terminated long before Garden
State Newspapers purchased the paper."

According to the EEOC complaint, Moes and others were discriminated
against because they did not hold the same religious beliefs as O'Brien.
The complaint also alleges discrimination was not limited to one issue
but was widespread and affected employees in various ways. "The
complaint alleges religion was a factor in the hiring, firing,
disciplining and promotions of employees," an EEOC news release says.
"The EEOC also contends that employees at the Farmington Daily Times
were subjected to a hostile work environment and harassed because of

The commission alleged that a class of individuals was disciplined and
discharged by The Daily Times in retaliation for opposing the alleged
practices. The Daily Times also allegedly printed advertisements for
employment that indicated a preference, specification or limitation
based on religion.

Besides New Mexico Newspapers and The Daily Times, defendants include
Garden State Newspapers and Northwest New Mexico Publishing Co., which
purchased the paper Oct. 1, 1998.

The lawsuit seeks back wages, interest and compensatory and punitive
damages as well as affirmative relief necessary to eradicate the effects
of the alleged discrimination. (The Associated Press, May 4, 2000)

DOW CHEMICAL: Curtis V. Trinko Files NY Suit over Union Carbide Merger
The Law Offices of Curtis V. Trinko, LLP and Goodkind Labaton Rudoff &
Sucharow LLP announces that a class action lawsuit was filed in the
United States District Court for the Southern District of New York on
behalf of all persons who held the common stock of Dow Chemical (NYSE:
DOW), since August 13, 1999.

The complaint alleges that Dow violated federal securities laws,
including Section 13(d) of the Securities Exchange Act of 1934, in an
SEC filing on August 13, 1999 that contained false statements and
omissions concerning potential liabilities and dangers of business
disruption to which Dow would be exposed upon its acquisition by merger
of Union Carbide.

Specifically, the complaint alleges that Dow failed to disclose that
Union Carbide is exposed to potential criminal and other liabilities
from its former pesticide plant in Bhopal, India, that (i) released
poisonous gas in 1984 that killed thousands and injured half a million
people, and (ii) continues to cause environmental contamination in a
densely populated region.

The complaint alleges that Dow failed to disclose that:

Union Carbide is criminally charged in India for the Bhopal Disaster
with culpable homicide and other charges, which expose it to potentially
billions of dollars of liability;

Union Carbide failed to appear in Indian criminal court, was proclaimed
an absconder, and its Indian assets were attached;

Dow's Indian holdings will likewise be in danger of attachment by Indian

Dow's plans to expand operations in India will, therefore, be
jeopardized; and

Union Carbide remains liable for damages from environmental
contamination from its former Bhopal pesticide plant.

The complaint further alleges that Dow's failure to address these
matters has caused Dow: (i) to underestimate the liabilities it stands
to assume pursuant to the merger, and (ii) to make an excessive offer
for Union Carbide.

Contact: Law Offices Of Curtis V. Trinko, LLP Curtis V. Trinko (212)
490-9550 ctrinko@trinko.com or Goodkind Labaton Rudoff & Sucharow LLP
(212) 907-0700 Kenneth F. McCallion H. Rajan Sharma mccallio@glrs.com or

DOW CHEMICAL: Stockholders Sue over Merger with Union Carbide
Dow Chemical Co. shareholders have filed a federal lawsuit claiming they
were not told of potential liabilities involving the company's purchase
of Union Carbide Corp.

The two companies announced last year that Dow would purchase Union
Carbide in a $11.6 billion stock swap. Carbide operates a technical
center and a chemical plant in Charleston.

A press release from a law firm representing shareholders Wednesday said
Dow failed to disclose that Union Carbide is exposed to criminal and
other liabilities related to the 1984 release of methyl isocyanate from
its Bhopal, India, plant. The leak killed more than 2,000 people. The
product is used to produce pesticide.

The lawsuit claims Dow did not inform stockholders about Union Carbide's
exposure to potential criminal and financial liabilities stemming from
the leak. The lawsuit also claims the liabilities would be transferred
to Dow and the company's Indian holdings could be at risk.

A Dow spokeswoman said the company had not received the lawsuit and
could not comment. The lawsuit, which seeks class-action status, was
filed in federal court in New York City.

Dow, which received European Union Commission clearance for the
acquisition Wednesday, has said it expects to complete its acquisition
this summer. (The Associated Press, May 4, 2000)

GIANT GROUP: No Resolution Reported on Checkers '98 DE Securities Suits
Giant Group=92s report to the SEC says that a putative class action was
filed on September 29, 1998 in the Delaware Chancery Court in and for
New Castle County, Delaware by First Albany Corp., as custodian for the
benefit of Nathan Suckman, an alleged stockholder of 500 shares of the
common stock of Checkers. The complaint names Checkers, the Company,
Rally's, and certain of Rally's current and former officers and
directors as defendants, including William P. Foley II, James J.
Gillespie, Joseph N. Stein, James T. Holder, Terry N. Christensen, Burt
Sugarman, Harvey Fattig, Richard A. Peabody, Frederick E. Fisher,
Clarence V. McKee, C. Thomas Thompson and Peter C. O'Hara.

The complaint arises out of the proposed merger announced on September
28, 1998 between the Company, Rally's and Checkers, and alleges
generally that certain of defendants engaged in an unlawful scheme and
plan to permit Rally's to acquire the public shares of Checkers' stock
in a "going private" transaction for grossly inadequate consideration
and in breach of the defendants' fiduciary duties. The plaintiff
allegedly initiated the complaint on behalf of all stockholders of
Checkers as of September 28, 1998, and seeks, among other things,
certain declaratory and injunctive relief against the consummation of
the Proposed Merger, or in the event the Proposed Merger is consummated,
rescission of the Proposed Merger and costs and disbursements incurred
in connection with bringing the action, including attorneys' fees, and
such other relief as the court may deem proper. In view of a decision by
the Company, Rally's and Checkers not to implement the transaction that
had been announced on September 28, 1998, plaintiffs have agreed to
provide the Company and all other defendants with an open extension of
time to respond to the complaint, and plaintiffs have indicated that
they will probably file an amended complaint in the event of that they
choose to proceed.

A putative class action was filed on October 2, 1998 in the Delaware
Chancery Court in and for New Castle County, Delaware by David J.
Steinberg and Chaile B. Steinberg, alleged stockholders of an
unspecified number of shares of the common stock of Checkers. The
complaint names Checkers, the Company, Rally's, and certain of Rally's
current and former officers and directors as defendants, including
William P. Foley II, James J. Gillespie, Joseph N. Stein, James T.
Holder, Terry N. Christensen, Burt Sugarman, Harvey Fattig, Richard A.
Peabody, Frederick E. Fisher, Clarence V. McKee, C. Thomas Thompson and
Peter C. O'Hara.

As with the complaint in Suckman, the complaint arises out of the
Proposed Merger, and alleges generally that certain of defendants
engaged in an unlawful scheme and plan to permit Rally's to acquire the
public shares of Checkers' stock in a "going private" transaction for
grossly inadequate consideration and in breach of the defendants'
fiduciary duties. The plaintiffs allegedly initiated the complaint on
behalf of all stockholders of Checkers and seek, among other things,
certain declaratory and injunctive relief against the consummation of
the Proposed Merger, or in the event the Proposed Merger is consummated,
rescission of the Proposed Merger and costs and disbursements incurred
in connection with bringing the action, including attorneys' fees, and
such other relief as the court may deem proper. For the reasons stated
above in the Suckman action, plaintiffs have agreed to provide the
Company and all other defendants with an open extension of time to
respond to the complaint, and plaintiffs have indicated that they will
probably file an amended complaint in the event of that they choose to

Giant Group, Ltd. is a corporation, which was organized under the laws
of the State of Delaware in 1913. As of December 31, 1999 and 1998, the
Company's wholly-owned subsidiaries include KCC Delaware Company and
Periscope Sportswear, Inc. On December 28, 1998, GIANT MARINE GROUP,
LTD. was dissolved and the remaining assets and liabilities were
transferred to the Company.

Periscope was acquired by the Company in December 1998. Periscope was
organized under the laws of the State of Delaware in 1998 and is the
successor, by merger, to Periscope I Sportswear, Inc., a New York
corporation organized in 1975. Periscope provides an extensive line of
high-quality women and children's clothing in the moderate price
category to mass merchandisers and major retailers, primarily for sale
under private labels. Effective April 11, 2000, Periscope terminated the
employment of Glenn Sands as president and chief executive officer ("Mr.
Sands") and appointed Ralph Stone Chief Executive Officer and Scott
Pianin, a long-time Periscope senior executive, president of the

GIANT MARINE was organized under the laws of the State of Delaware in
November 1996. GIANT MARINE started and operated the Luxury Yacht
Co-Ownership Program (the "Co-Ownership Program") with two yachts until
November 1997, when the Co-Ownership Program was ended. During 1998,
GIANT MARINE chartered its two yachts until they were both sold.

GIANT GROUP: NYSE Accepts Business Plan for Compliance with Standards
On September 20, 1999, the Company was notified by the New York Stock
Exchange ("NYSE") that it fails to meet the recently effective continued
listing standards requiring total market capitalization of not less than
$50 million and total stockholders' equity of not less than $50 million
("continued listing standards"). The Company has responded with a
business plan, to the Listings and Compliance Committee of NYSE for
review, that demonstrates compliance with these standards within 18
months of receipt of the NYSE notice. On March 20, 2000, the Company
received notice that the business plan had been accepted. However,
because Periscope's operations incurred significant losses from its
operations for the year ended December 31, 1999, the Company expects to
submit a new plan that demonstrates compliance with the NYSE listing
standards, but is also exploring other alternatives for the public
trading of its common stock.

GIANT GROUP: Securities Suits in =9294 in KY Continues
In January and February 1994, two putative class action lawsuits were
filed, purportedly on behalf of the shareholders of Rally's in the
United States District Court for the Western District of Kentucky,
against Rally's, certain of Rally's present and former officers,
directors and shareholders and its auditors and GIANT.

The complaints allege defendants violated the Securities Exchange Act of
1934, as amended, among other claims, by issuing inaccurate public
statements about Rally's in order to arbitrarily inflate the price of
Rally's common stock, and seek unspecified damages, including punitive
damages. On April 15, 1994, GIANT filed a motion to dismiss and a motion
to strike. On April 5, 1995, the Court struck certain provisions of the
complaint but otherwise denied GIANT's motion to dismiss. In addition,
the Court denied plaintiffs' motion for class certification. On July 31,
1995, the plaintiffs renewed this motion, and on April 16, 1996, the
Court certified the class. Two settlement conferences have been
conducted, most recently on December 7, 1998, but have been
unsuccessful. Fact discovery was completed by summer 1999. Expert
discovery will be completed by early spring of 2000. No trial date has
been scheduled. Management is unable to predict the outcome of this
matter at the present time. Rally's and GIANT deny all wrongdoing and
intend to defend themselves vigorously in this matter.

H&R BLOCK: Agree to Settle Tax Consumer Suit over Charges Disclosure
H&R Block Inc. and Household Bank have agreed to pay $25 million to
settle a consumer class-action lawsuit alleging that Block failed to
tell tax customers about some of the fees it charged. The lawsuit, filed
in Chicago, alleged that Block didn't disclose to customers all the
charges included in the cost of its refund anticipation loan program, in
violation of the Truth in Lending Act. The lawsuit was originally filed
against Beneficial National Bank, which Household purchased.

Block would pay about $12.5 million under the settlement, said Neil
Getzlow, a Block spokesman. He said that in settling the case, Block did
not admit any wrongdoing. The settlement agreement still has to be
approved by U.S. District Judge James B. Zagel in Chicago. A fairness
hearing is expected to be held on the settlement in July. Most
individuals would get less than $15. Getzlow said nearly 15 million
people used Block's loan program between Jan. 1, 1987, and Oct. 26,
1999, the period covered by the settlement.

Under the loan program, customers get a faster tax refund by arranging
through Block to borrow the amount of their refund from Household. The
customer then repays the loan by signing over the refund sent by the
Internal Revenue Service. According to the lawsuit, Block failed to
disclose to its customers that Beneficial was paying the tax preparer a
licensing fee of between $2 and $9 for each refund loan it made. Getzlow
said the fees were intended to cover Block's costs, which included
overhead costs for running the program.

The notice to potential class members states that in addition to their
$25 million settlement, Block and Household have agreed to provide more
up-front fee disclosures to customers.

Officials began mailing notices of the proposed settlement last month.
Block will start advertising the settlement in selected national
newspapers beginning next Thursday, officials said. Class members have
until Dec. 1 to file a claim. Consumers who want to pursue claims on
their own must mail a notice by June 21 that they are opting out of the

The settlement announcement comes at a time when the company said its
unrelated e-commerce tax-filing program lost about $18 million before
taxes in the filing season that just ended. The lawsuit was originally
filed against Beneficial National Bank, which Household purchased. (The
Kansas City Star, May 4, 2000)

HERTZ CORPORATION: Ap Ct Oks Complaint on Fuel Charges for Rented Car
Peter Schnall rented a car from Hertz. Hertz's rental agreement required
that Schnall choose, at the time of rental, whether to purchase fuel
from Hertz. Two options were provided. The first, which Schnall
selected, was not to buy fuel from Hertz, but instead to return the car
with a full tank of gas. The rental agreement provided that if Schnall
returned the car with less than a full tank, Hertz would impose a charge
for fuel and refueling service. The amount of the charge was not
indicated in the rental agreement, but referred to either a "per mile"
or "per gallon" rate specified on a separate printout accompanying the
rental agreement. The second alternative was to pay for the gas in the
car at the commencement of the rental, and then have Hertz refuel the
car upon its return. This option avoided the fuel service charge, but
did not provide a credit for the gas remaining in the car upon its
return. Schnall selected the first option.

Schnall filed a class action against Hertz regarding its fuel service
charge imposed against customers who choose to return a car with a full
fuel tank but fail to do so. Among his claims, Schnall alleged unfair,
unlawful or fraudulent business practice in violation of the unfair
competition law (UCL). Schnall asserted that the fuel service charge's
"per mile" and "per gallon" rates resulted in a charge that was more
than two and one half times the average retail price of fuel. Schnall
showed that the printout accompanying his own rental agreement contained
unintelligible abbreviations and obscure references to the refueling
charges. Schnall maintained that Hertz purposefully crafted its
refueling formulas to be incomprehensible to customers, especially in
light of the typical four-minute rental transaction, and that the
company purposefully failed to disclose its actual price per gallon
refueling charge in the rental agreement.

The trial court sustained Hertz's demurrer on the ground that Hertz's
rental agreement clearly described customers' options, and that it was
not unfair for Hertz to impose a charge should a customer agree to
return a car with a full fuel tank and then fail to do so. Schnall

The court of appeal reversed, holding that Schnall stated a claim that
Hertz unfairly and fraudulently concealed the amount of its fuel service
charge. The court of appeal noted that the cost of fuel needed to refill
the gas tank in a customer's rented car is highly relevant to the
customer's decision of whether to accept the duty to refill and then
follow through. A rental company's failure to clearly indicate that an
avoidable charge is much higher than the retail rate for fuel and fuel
service could encourage many customers to incur an easily-avoided

In this case, Hertz failed to clearly indicate the nature of its
refueling charges, which included alternative "per mile" and "per
gallon" charges, by including cryptic descriptions of the charges in a
difficult-to-read printout accompanying Schnall's rental agreement.
Hertz offered no explanation for the dual, alternative formulas, failed
to indicate why two formulas were necessary, and did not provide
information indicating whether the formulas would produce different
results. The inexplicable use of two formulas and the needlessly
complicated language in the rental agreement easily could mislead
customers into believing that they would receive a per mile charge
resulting in a lower fuel service charge. The confusing provisions of
the rental agreement and accompanying printout, as to how much a renter
will be charged for failing to return a car with a full tank of gas,
violated the fundamental rules of honesty and fair dealing. As a result,
Schnall stated a claim under the UCL, and the trial court erred in
granting Hertz's demurrer.

The court rejected Schnall's claim that Hertz's fuel service charge was
inherently unlawful; Hertz's rental agreement indicated, in emphasized
print, how a customer could avoid the fuel service charge. The charge
therefore was lawful for purposes of the UCL. Nor was the fee unfair as
exorbitant. The legislature regulated rental car companies' acceptable
charges in Civil Code @1936(m)(2), but placed no limit on the amount
that companies can charge for optional services such as refueling. The
legislature's failure to impose such a limit reflected its intent that
car rental companies may charge what the market will bear for such
services, so long as consumers are fully informed of what they must do
to avoid optional services that they do not want.

Counsel for petitioner Hertz Corporation: Peter Hecker, Heller Ehrman
White & McAulife, 333 Bush St., San Francisco, CA 94104-2878,

Counsel for respondent Peter Schnall: Michael Coffino, Tatro, Coffino,
Zeavin & Bloomgarden, 116 New Montgomery St., Ste. 640, San Francisco,
CA 94105

Supreme Court Case No. S087543; Petition filed: April 14, 2000
(California Supreme Court Service, April 21, 2000)

HOLOCAUST VICTIMS: US Lawyer Rejects Austrian Compensation Offer
A key US lawyer representing Nazi victims rejected in an interview
Thursday Austrian plans to set aside six billion schillings (430 million
euros) in compensation for forced laborers.

Ed Fagan, who has launched an 18 billion-dollar (19-billion-euro)
class-action lawsuit against Austria on behalf of Nazi victims, said the
lowest acceptable forced labour compensation sum was 60 billion
schillings (4.3 billion euros). The Austrian proposal "is not even a
tenth of what we are demanding and is completely out of the question,"
he told the weekly magazine News. He also wants a sum of 80 billion
schillings (5.7 billion euros) established to compensate those whose
property was seized by the Nazis. The Austrian government has decided to
deal with the issues of forced labour and property separately, and has
not yet set a date on action over the latter.

Maria Schaumayer, the government official in charge of forced labour,
came in for a personal attack from Fagan. "For only one reason do I
respect the government's decision to nominate Schaumayer: never before
has anyone allowed a pensioner to stand up against us - someone who is
like my grandmother," he said.

According to an Austrian historical commission, around a million people
were forced to labor in Austria under the Nazi regime. Schaumayer
calculates that of these some 150,000 are still alive.

She intends to pay the laborers according to the work they did --"Slave"
laborers would be entitled to the highest payment, set at 105,000
schillings (7,664 euros) each, while the forced laborer in industry
would receive just 35,000 schillings (2,554 euros) and those on the land
even less. (Agence France Presse, May 4, 2000)

LOCKHEED MARTIN: Judge Rejects Burbank Residents' Claims over Cancer
Dealing a potential blow to the legal claims of thousands of
Burbank-area residents, a state judge has rejected allegations that
Lockheed Martin caused cancer and other illnesses when it released toxic
chemicals into ground water and soil during decades of defense
manufacturing. In a test case involving 140 plaintiffs, Los Angeles
County Superior Court Judge Carl J. West ruled late Tuesday that they
had failed to provide acceptable evidence or witnesses to back up their
contention that Bethesda, Md.-based Lockheed Martin was responsible for
their ailments. "Lockheed provides three epidemiological studies that
show the cancer incidence in Burbank is not statistically higher than
the rest of Los Angeles County," West wrote in a 49-page ruling.
"Plaintiffs provide no epidemiological study."

The decision could prove to be a crushing setback for the larger case
involving more than 3,000 residents who also are suing Lockheed and five
small Burbank businesses over toxic contamination to neighborhoods
surrounding the site of the famed Skunk Works defense plant.

The plaintiffs' lawyers were undeterred by the decision, saying they
would ask the trial judge to limit his ruling to the 140 plaintiffs, and
file an appeal. West set a hearing later this month to decide whether to
rule in favor of Lockheed in all of the remaining cases.

Cancer-causing compounds were first discovered in the ground water and
soil beneath the company's Burbank industrial sites in 1980. Eight years
later, extensive monitoring and testing by federal, state and local
agencies revealed the water to be undrinkable and the soil toxic.
Thousands of residents blamed the defense firm for alleged health
problems and declining property values they attribute to the now-closed
facility's discharge of carcinogens and other hazardous substances.

Lockheed and other companies agreed in 1992 to pay $ 265 million to
clean up toxic compounds originally used as solvents, such as
perchloroethylene, trichloroethylene and hexavalent chromium.

The first toxic tort lawsuits were filed in 1996, after Lockheed
secretly paid out $ 60 million in an out-of-court settlement to nearly
1,300 residents for health problems resulting from toxic exposure. Since
then, a total of 27 cases involving more than 3,100 residents have been
filed in state court against Lockheed and five area businesses.

The main issue is whether cancer and other ailments were caused by more
than 30 different toxic chemicals the plaintiffs claimed were discharged
by Lockheed and the other businesses into ground water and air in
Burbank during its 63 years of operation near the city's airport. To
make the litigation more manageable, the judge consolidated the cases
into one, then pulled out the 140 plaintiffs for the test case. In it,
their lawyers were limited by the judge to arguing claims against
Lockheed involving the three most toxic of the 33 chemicals they had
alleged caused injury.

"Since the court found no causation for only these three chemicals, this
doesn't prejudge whether the remaining chemicals used by Lockheed indeed
caused cancer or any other injury to the remaining 2,400 plaintiffs,"
said attorney Thomas G. Foley Jr., who represents the plaintiffs. "They
are entitled under due process to have their day in court," Foley said,
maintaining that Tuesday's ruling should apply only to the first 140
plaintiffs in the test case, not to the thousands of other plaintiffs.

Throughout the past few months, the judge has slowly whittled away the
plaintiffs' case, having already dismissed claims alleging property
damage, battery and intentional infliction of emotional distress.

On Tuesday, West granted Lockheed's motions to exclude key plaintiffs'
witnesses and expert testimony, saying they did not prove causation. To
do so, the plaintiffs would have had to prove their injuries were caused
by Lockheed's conduct and exposure to sufficiently high levels of the

Tuesday's court decision was the second significant court victory for
Lockheed Martin this year related to the Burbank site. In January, the
aerospace giant reached a court settlement with the U.S. government,
which agreed to pay Lockheed Martin half of the $ 265 million it spent
since 1992 to clean up Burbank contamination.

Lockheed Corp., the precursor to Lockheed Martin, was established in
Burbank in 1928. In its heyday, it employed nearly 100,000 and turned
out aircraft for World War II and the Cold War, including the P-38
fighter, U-2, SR-71 Blackbird spy planes and the F-117A Stealth fighter.

The Burbank site was the home of the legendary Skunk Works, which
designed advanced military planes. Lockheed began closing its Burbank
facility in the late 1980s and moved manufacturing to Palmdale and
Marietta, Ga. The company merged with Martin Marietta Corp. in 1995 to
become Lockheed Martin. (Los Angeles Times, May 4, 2000)

MCKESSON HBOC: Firm Can't Solicit Clients in Securities Case
A federal judge Monday blocked a controversial approach to bringing
securities fraud suits that began when two firms lost out on their bids
to become lead counsel in stock-drop suits targeting McKesson HBOC Inc.

San Jose-based U.S. District Judge Ronald Whyte ruled that Chicago's
Much Shelist Freed Denenberg Ament & Rubenstein must end the practice of
soliciting potential plaintiffs in the class action by asking them,
through a form letter, to opt out. San Diego's Milberg Weiss Bershad
Hynes & Lerach initially joined in the solicitations but later backed

"The court is particularly troubled by the distribution of a 'notice'
not authorized by the court and by the assembly line pre-authorization
of class 'opt-outs,'" Whyte wrote. "Moreover, the solicitations
inadequately disclosed the risks inherent in pursuing a remedy as an
individual, rather than as a class member, including the possibility of
higher attorneys fees and being subject to discovery." The unprecedented
move by Much Shelist -- Whyte noted in his order that few cases, if any,
provided guidance -- would have flouted provisions of the Private
Securities Litigation Reform Act, argued Bernstein Litowitz Berger &
Grossmann. The San Diego firm, which represents the New York State
Retirement Fund, was awarded lead counsel status by Whyte.

Partner Alan Schulman said Whyte's ruling could be interpreted as one
which further regulates communications between firms and potential class

Much Shelist will have to pay for a curative notice, to be scripted by
Bernstein Litowitz and approved by the court. All future solicitations
will have to clearly be marked as an advertisement.

"Attorneys have a special obligation not to disguise their
advertisements as official-sounding notices; after all, even an attorney
thinks twice before throwing away an envelope from a law firm," Whyte
wrote. On one important point, however, Whyte sided with Much Shelist.
Bernstein Litowitz attorneys had tried to convince the judge that
because it had been named lead plaintiff, their firm had an
attorney-client relationship with putative class members and that Much
Shelist violated ethical rules by contacting them. "Taken to an extreme,
lead plaintiff's logic suggests that putative class members are forever
walled off from any effort at solicitation, a proposition that seems
unsupportable," Whyte wrote.

The case is In re McKesson HBOC Inc. Securities Litigation, 99-20743.
Reporter Jason Hoppin's e-mail address is jhoppin@therecorder.com. (The
Recorder, May 3, 2000)

MICROSTRATEGY: Strikes Back at Employment Lawsuits
Employers, especially high technology companies which have rarely faced
employment litigation, have begun to strike back against employees who
file job-related lawsuits. Employment lawyers say corporate defendants
increasingly bring counter-suits, often pre- emptively, to try to force
employees to drop claims before they get to court, but so far the tactic
appears to be failing, according to an article on the Financial Times
(London), May 4, 2000.

"Employers are being much more aggressive about litigation," the article
cites Gary Phelan, an employment law expert who normally represents
plaintiffs. "It's most prevalent in the high-tech area," he adds, partly
because internet companies are not yet accustomed to big employment
lawsuits as a normal cost, and partly because the stakes are higher at
internet companies where remuneration packages are larger. "The higher
the income level of the individual, the more likely a company is to
(counter-)sue," says Mr Phelan.

Companies use a range of tactics in counter-suits: alleging trade secret
violations, bringing defamation claims against women who file sexual
harassment complaints, scrutinising expense reports to come up with
breach of contract claims, or alleging breach of fiduciary duty, the
Financial Times says.

MicroStrategy, a software company in northern Virginia, is said to have
taken such a tit-for-tat employment battle to the Virginia courts.

MicroStrategy is facing a raft of investor class-action lawsuits and an
investigation by the Securities and Exchange Commission, because of
accounting irregularities. The Financial Times says MicroStrategy's suit
illustrates the new tactic on employment lawsuits. After a 47-year-old
executive made clear her intention to sue for age and sex
discrimination, MicroStrategy counter-sued her for trade secret
violations. The case was dismissed by a federal judge last month, but
MicroStrategy is appealing, and has re-introduced the suit in state

David Shaffer, MicroStrategy's lawyer, says the company is levelling the
playing field: "Employees try to use their access to sensitive
information as leverage," he says, alleging the executive, Betty
Lauricia, did just that with information on salaries, stock options,
recruitment plans, new ventures and privileged information about other
lawsuits against the company. "Companies are often forced to settle just
to keep things quiet."

But Claude Convisser, Ms Lauricia's lawyer, insists his client has no
privileged or confidential documents. He claims MicroStrategy is
retaliating because his client discovered violations of federal
employment law at the company, according to the Financial Times. The
report says Ms Lauricia claims she was denied a promotion and granted
fewer stock options than male employees. She has applied to the Equal
Employment Opportunity Commission, the federal employment watchdog, for
permission to sue MicroStrategy. Her original demand for compensation
(before the value of the company's stock plummeted) was in the tens of
millions of dollars.

As internet companies mature - and employment relations sour as the
start-up spirit wanes - legal experts expect more suit and counter-suit
activity, according to the Financial Times.

Mr Phelan says counter-suits usually backfire, the report adds. "It's
the kind of thing that makes both judges and juries angry." But Mr
Shaffer insists high-tech companies, whose intellectual property is both
portable and hugely valuable, have to sue to protect their assets.

PARK PLACE: Foes Blast Catskills Casino Plan
The proposal by the world's largest gambling company to build a casino
for the St. Regis Mohawk Tribe at a Catskills resort was criticized
Tuesday by dissenting tribe members and local officials. Opponents said
Park Place Entertainment's deal with Kutsher's Resort Hotel and Country
Club would mean spending years to get federal approval before any actual
work could begin. "I don't see any possible way they're going to
shortcut it. I don't see anything that can get anybody excited in the
next five years," said former Chief Phil Tarbell.

Under a deal reached Monday, Park Place acquired the option to purchase
the 1,400-acre Kutsher property and entered a definitive agreement to
buy 50 acres of land that would be transferred in trust to the Tribal
Council. On that 50-acre slice, Park Place would be expected to build a
casino for the Mohawks and operate it for seven years.

The Mohawks had been linked for about five years with Catskill
Development Corp., a firm that acquired a 30-acre parcel near Monticello
Raceway and in April received federal approval to put the land in a
trust. That step is necessary for the Mohawks to use non-reservation
land for a casino.

Critics have accused Park Place of trying to derail plans for any casino
in the Catskills to avoid competition for the casinos in Atlantic City.
A Sullivan County casino would be about 75 miles from New York City.

Tarbell and 28 other dissenting Mohawks filed a $ 12 billion
class-action lawsuit last week against Park Place; its chief executive,
Arthur Goldberg; and its chief counsel, Clive Cummis. The suit accused
Park Place of interfering with the tribe's earlier deal with Catskill

Tarbell, who serves on the board of the tribe's Gaming Authority, said
that so far as board members were concerned, the tribe's original
agreement with Catskill Development is"still in the works, still moving

Rowena General, a spokeswoman for the Tribal Council, said the agreement
with Park Place signed April 14 included a $ 3 million payment to the
tribe and exclusive rights to develop and manage future Mohawk casinos
in the state. (The Record (Bergen County, NJ), May 3, 2000)

POTOMAC ELECTRIC: Officials Decide against Joint Suit over Oil Spill
Representatives from Calvert, Charles and St. Mary's counties have
decided to refrain for now from filing a joint lawsuit against the
Potomac Electric Power Co. in response to last month's massive oil spill
from the company's Chalk Point Generating Station in Aquasco.

However, Calvert County Commissioner David F. Hale (R-Owings) said that
although local government representatives on the Tri-County Council for
Southern Maryland have exhibited "no support" for such legal action,
they are still exploring ways to respond. The spill spread oil across at
least 17 miles of Patuxent River shoreline, much of it in Calvert
County, as well as into areas of Prince George's, Charles and St. Mary's

An immediate economic impact has been felt by those who fish the
Patuxent and are encountering market resistance to their catch, Hale
said. "People immediately say, 'Is this from the Patuxent?' " Hale said
at Tuesday's Calvert County commissioners meeting.

Others, though, continue to press local governments to get involved in
the mounting legal action against Pepco, in particular the numerous
class-action suits that have been filed against the company on behalf of
people who live and work in the area. "They have effectively ruined the
economy," Calvert Commissioner Barbara A. Stinnett (D-At Large) said
Tuesday. "The watermen are afraid to take that product and sell it."

About 111,000 gallons of fuel oil leaked from a pipeline at Pepco's
Chalk Point plant on April 7. State, federal and Pepco officials
involved with the cleanup reported Monday in a joint news release that
"no indication of oil or petroleum odor was noted on any of the
shellfish, crabs, fish or sediment samples collected" recently from the
river. Moreover, those officials noted that "all advisories relating to
harvesting, fishing and eating of crabs, shellfish and fish have been

Meanwhile, cleanup efforts continue around the Pepco plant in the
southeast corner of Prince George's County. Officials said that tests
taken last weekend confirmed that no oil was found on the bottom of the
river, though "some oil was observed in association with the intertidal
zones of shorelines." Those officials said that "more than 550 people .
. . continue working on the cleanup" and "more than 35,000 gallons of
oil have been recovered from the affected waterway."

Pepco, with the help of federal and state officials, has hosted several
meetings with residents affected by the spill and has offered to assist
those interested in filing claims.

The National Transportation Safety Board, which is investigating the
accident, previously announced that it had discovered "a vertical crack
. . . five inches long and half an inch wide" in pipeline under the
marsh area near the plant, which is on Swanson Creek. The NTSB has been
examining the pipe in hopes of determining the cause of the leak.

In the days following the spill, the U.S. Transportation Department's
Office of Pipeline Safety issued an order requiring Pepco to shut down
the 51.5-mile pipeline that runs from Piney Point in St. Mary's County
to the Chalk Point plant.

Pepco officials said they had the leak under control about 30 minutes
after detecting it on the evening of April 7, but a storm with high
winds blew through the area the next day, pushing spilled oil past
barriers and into the Patuxent River. Pepco officials said the pipeline
had never suffered any prior leaks. The pipeline was last inspected 18
months ago, according to a Pepco official, and it was being prepared for
maintenance when the spill was found.

The Environmental Protection Agency has criticized Pepco's response,
saying that the company was unprepared to deal with the spill. Pepco has
mailed letters to several thousand affected residents, apologizing for
the incident. (The Washington Post, May 4, 2000)

QUEST DIAGNOSTICS: Settles Govt and Private Claims on Billing
Quest Diagnostics relates in its report to the SEC that the Company has
entered into several settlement agreements with various governmental and
private payers during recent years relating to industry-wide billing and
marketing practices that had been substantially discontinued by early
1993. At present, government investigations of certain practices by
Nichols Institute, a clinical laboratory company acquired in 1994, are
ongoing. The Company has received notices of private claims relating to
billing issues similar to those that were the subject of prior
settlements with various governmental payers.

In March 1997, a former subsidiary of Damon Corporation, an independent
clinical laboratory acquired by Corning and contributed to Quest
Diagnostics in 1993, was served a complaint in a purported class action.
Quest Diagnostics was added to the complaint by the plaintiffs in August
1999. The complaint asserts claims relating to private reimbursement of
billings that are similar to those that were part of a prior government
settlement. The Company has entered into a settlement agreement, which
received the preliminary approval of the court on April 4, 2000. The
court will consider final approval of the settlement at a hearing
scheduled for July 14, 2000. The Company anticipates that the final
settlement will release the Company and all of its subsidiaries other
than SBCL from all potential private claims related to the reimbursement
of billings that were subject to the prior government settlement.

Corning has agreed to indemnify Quest Diagnostics against all monetary
settlements for any governmental claims relating to the billing
practices of the Company and its predecessors based on investigations
that were pending on December 31, 1996. Corning also agreed to indemnify
the Company in respect of private claims relating to indemnified or
previously settled government claims that alleged overbillings by Quest
Diagnostics or any of its existing subsidiaries for services provided
before January 1, 1997. Corning will indemnify Quest Diagnostics in
respect of private claims for 50% of the aggregate of all judgment or
settlement payments made by December 31, 2001 that exceed $42 million.
The 50% share will be limited to a total amount of $25 million and will
be reduced to take into account any deductions or tax benefits realized
by Quest Diagnostics. At March 31, 2000 the receivable from Corning
totaled $14 million, which is management's best estimate of amounts
which are probable of being received from Corning to satisfy the
remaining indemnified governmental claims on an after-tax basis.

                       SmithKline Beecham

On August 16, 1999, Quest Diagnostics completed the acquisition of the
clinical laboratory business of SmithKline Beecham plc for approximately
$1.3 billion. The company says the acquisition of SmithKline Beecham's
clinical laboratory business ("SBCL") was accounted for under the
purchase method of accounting.

Similar to Quest Diagnostics, SBCL has entered into settlement
agreements with various governmental agencies and private payers
primarily relating to its prior billing and marketing practices.
Effective in 1997, SBCL and the U.S. government and various states
reached a settlement with respect to the government's civil and
administrative claims. SBCL is also responding to claims from private
payers relating to billing and marketing issues similar to those that
were the subject of the settlement with the government. The claims
include ten purported class actions filed in various jurisdictions in
the United States and two non-class action complaints by a number of
insurance companies. Nine of the purported class actions have been
consolidated into one complaint, which has been consolidated with one of
the insurers' suits, for pre-trial proceedings.

SmithKline Beecham has agreed to indemnify Quest Diagnostics, on an
after tax basis, against monetary payments for governmental claims or
investigations, relating to the billing practices of SmithKline Beecham
and its affiliates, that have been settled before, or are pending as of,
the closing date of the SBCL acquisition. SmithKline Beecham has also
agreed to indemnify Quest Diagnostics, on an after tax basis, against
monetary payments to private payers, relating to or arising out of the
pending governmental claims. The indemnification with respect to
governmental claims is for 100% of those claims. SmithKline Beecham will
indemnify Quest Diagnostics, in respect of private claims for: 100% of
those claims, up to an aggregate amount of $80 million; 50% of those
claims to the extent the aggregate amount exceeds $80 million but is
less than $130 million; and 100% of such claims to the extent the
aggregate amount exceeds $130 million. The indemnification also covers
80% of out-of-pocket costs and expenses relating to investigations of
the claims indemnified against by SmithKline Beecham. In addition,
SmithKline Beecham has agreed to indemnify the Company against all
monetary payments relating to professional liability claims of SBCL for
services provided prior to the closing of the SBCL acquisition.

SOTHEBY'S, CHRISTIE'S: Auction House Case Advances As Class Action
Plaintiffs the antitrust case against New York City's two major auction
houses have been granted certification as a class by a Southern District
judge. Judge Lewis A. Kaplan certified the plaintiff class on Friday in
In re Auction Houses Antitrust Litigation, 00 Civ. 0648., clearing the
way for the price-fixing case against Sotheby's Holding Inc. and
Christie's Inc. to proceed.

Plaintiffs are a group of potentially thousands of people who bought and
sold items through the two auction houses after 1993. They filed suit
earlier this year alleging that beginning as early as 1993, Christie's
and Sotheby's conspired to fix a common rate schedule for premiums
charged to buyers. The suit also charges that the price fixing was
extended to sellers' commissions in 1995.

While Sotheby's did not oppose the plaintiffs' motion for class
certification, Christie's, which has reportedly provided evidence of the
conspiracy to the Department of Justice, did opposed it.

Attorneys for Christie's argued that certification under Rule 23(b)(2)
of the Federal Rules of Civil Procedure should not be granted, Judge
Kaplan said, because the antitrust suit was "primarily a damages case."
Moreover, he said, the auction house contended that certification was
inappropriate under Rule 23(b)(3) because of the "alleged predominance
of individual issues."

Judge Kaplan agreed that certification under Rule 23(b)(2) should not be
granted because that rule is only applicable where the plaintiffs are
"exclusively or predominantly" seeking injunctive or declaratory relief.
"There is simply no denying that the predominant relief sought here is
damages," he said.

But under Rule 23(b)(3), he said, Christie's and Sotheby's argued that
the amount of damages would have to be determined on an individual
basis. The auction houses, he said, believe "that these individual
questions predominate over the common questions as to the nature and
existence of the conspiracy."

To support that argument, the judge said, "they point to the fact that
the 1995 schedule of sellers' commissions lowered the stated rates, that
it permitted sellers to aggregate their sales over time to get lower
rates, and that the defendants 'cheated' to some extent on the alleged
unlawful agreement by undercutting the agreed commissions to certain

"Defendants appear greatly to exaggerate the extent to which
individualized proof of impact may be required," he said. " 'Cheating,'
or individually negotiated deviations form the agreed premiums, the
frequency of which has not been identified by defendants, quite likely
did not eliminate all adverse impact even on the favored buyers."

Individual Questions

Judge Kaplan acknowledged he could not "exclude the possibility that
there will be some individualized questions pertaining to impact."

"It perhaps even is likely that the prices paid by some class members
will have to be compared to a construct of the prices that would have
prevailed absent the alleged conspiracy in order to determine whether
they in fact were injured by it," he said. "But the court is persuaded,
at least on the present record, that the impact question is quite
predominantly a common question."

Interim counsel for the plaintiffs are Frederick P. Furth, Stanley M.
Grossman, Michael D. Hausfeld, Robert N. Kaplan, Christopher Lovell and
Robert Skirnick.

Michael L. Weiner, Christopher H. Aronson and John A. Donovan, of
Skadden, Arps, Slate, Meagher & Flom, represent Christie's International
plc and Christie's Inc. Steven Alan Reiss, Howard B. Comet and Edward J.
Burke, of Weil, Gotshal & Manges, represent Sotheby's Holdings Inc. and
Sotheby's Inc. (New York Law Journal, April 24, 2000)

TOBACCO LITIGATION: Flight Attendants' Suit May Proceed, 9th Cir Rules
A Ninth Circuit panel, finding no Airline Deregulation Act preemption,
has reversed a district court ruling and allowed a class action filed by
non-smoking flight attendants to proceed against Northwest Airlines.
Duncan et al. v. Northwest Airlines Inc., No. 98-35617 (9th Cir., Apr.
6, 2000).

The named plaintiff, Julie Duncan, worked for Northwest on trans-Pacific
routes serving Japan and other destinations in Southeast Asia. At the
time the action was filed, Northwest permitted smoking on these flights,
although it now bans smoking on all routes.

Duncan sued the airline in Washington state court, claiming the airline
breached its duty to provide a safe and healthy work environment. She
also alleged that Northwest's decision to permit smoking on the
trans-Pacific trips injured the flight attendants by exposing them to
secondhand smoke.

Northwest removed the case to federal district court and was granted
summary judgment, successfully arguing that the action was preempted by
the Airline Deregulation Act (ADA).

The U.S. Court of Appeals for the Ninth Circuit reversed. The panel
noted that the ADA precludes states from enacting any law, rule or
regulation "relating to" an airline's "rates, routes or services."

In Charas v. Trans World Airlines, 160 F.3d 1259 (9th Cir., 1998) ( en
banc), the Ninth Circuit said the term "service" refers to the "prices,
schedules, origins and destinations of the point-to-point transportation
of passengers, cargo or mail," noting that Congress did not intend to
preempt "run of the mill" personal injury claims. The Charas court held,
"'Service' was not intended to include an airline's provision of
in-flight beverages, personal assistance to passengers, the handling of
luggage, and similar amenities." Given this holding, the panel in the
instant case ruled, "It is clear that allowing smoking on Northwest's
trans-Pacific flights does not constitute a 'service.'"

Northwest's Additional Arguments

The airline maintained that the allowance of smoking was "related to" a
service, in that banning smoking could lead to a loss of business and
the shuffling of routes. The appeals court found this argument
unpersuasive, noting that Northwest had already banned smoking on the
disputed routes after Duncan filed her appeal. "In spite of its smoking
prohibition," the opinion states, "Northwest has not canceled its
trans-Pacific flights. Thus, the airline's own business decision
demonstrates conclusively that, even if Duncan's suit had forced it to
prohibit smoking on flights originating in Washington (and perhaps it
did), the airline would not have had to cancel its Washington-based
trans-Pacific departures and reroute its other flights."

The panel observed that the type of causal relationship to a service
alleged by Northwest was not sufficient to invoke preemption. If it
were, the appeals court said, almost all personal injury suits would be
preempted, contrary to Charas. Such suits carry economic costs and in
some instances cause a carrier to make operational changes.

"Charas makes clear, however, that the imposition of liability as a
result of a personal injury action does not sufficiently interfere with
the objectives of airline deregulation to warrant preemption of the
action -- in other words, the connection between an award in a tort case
and an airline's 'services' is simply too tenuous."

Finally, Northwest also maintained that Read-Rite Corp. v. Burlington
Air Express , 186 F.3d 1190 (9th Cir., 1999) compelled a different
result. Read-Rite involved lost and damaged cargo; the suit was found
preempted by the ADA. The crux of the holding was that such claims had
been governed for nearly the entire century by a purely federal regime:
"federal regulation by statute, federal preemption of state regulation
and regulation by federal common law of matters not covered by federal

Thus, Read-Rite provided no support for Northwest's position, the
appeals court ruled. "Unlike personal injury claims, which state tort
law has traditionally governed, federal law governed the claims at issue
in Read-Rite prior to the enactment of the ADA. Consequently,
Read-Rite's finding of preemption after the ADA's enactment simply
maintained the regulatory status quo ante, the panel held.

"Because it did not address the question of when preemption within a
field that the states have traditionally occupied is appropriate -- the
question at issue in both Charas and the present case -- Read-Rite is of
no relevance here."

Duncan is represented by Steve W. Berman of Hagens & Berman in Seattle.
Northwest is represented by Thomas Tinkham of Dorsey & Whitney in
Minneapolis. (Employment Litigation Reporter, April 25, 2000)


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

Class Action Reporter is a daily newsletter, co-published by Bankruptcy
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Washington, DC. Theresa Cheuk, Managing Editor.

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

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