/raid1/www/Hosts/bankrupt/CAR

/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 Headlines 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 County. 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 safe. 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 religion." 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 courts; 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 sharmah@glrs.com 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 proceed. 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 company. 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 class. 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 appealed. 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 charge. 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, 415-772-6000 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 toxins. 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 off. "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 members. 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 court. 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 Development. 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 forward." 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 counties. 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 lifted." 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 customers." "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 statute." 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 Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Theresa Cheuk, Managing Editor. Copyright 1999. All rights reserved. ISSN 1525-2272. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. 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