/raid1/www/Hosts/bankrupt/CAR_Public/000719.MBX              C L A S S   A C T I O N   R E P O R T E R

              Wednesday, July 19, 2000, Vol. 2, No. 139


AID ASSOCIATION: James, Hoyer Alleges of Deceptive Insurance Sales
ALPINE ASSURANCE: Foreign Insurer Accused of Lack of Assets in US Trust
BMC SOFTWARE: Milberg Weiss to Expand Scope of Securities Suit in TX
CHATTEM INC: Alleged in CA of Selling Skin Care Product with Zinc Oxide
COCA-COLA: Agreed Settlement May Not Resolve Employee Racial Bias Case

CREDITRUST CORP: Keller Rohrback Investigates Securities Fraud Claims
FIRSTWORLD COMMUNICATIONS: Milberg Weiss Files Securities Suit in CO
HMOs: Review Sought in TX over Kaiser's Duty to Disclose Incentive Plan
HOHOS, WONDER: Workers Seek Award for Damages in CA for Racial Bias
HOLOCAUST VICTIMS: German Firms Soon to See If Protection Is Watertight

INMATES LITIGATION: Settlement Reached in Population Cap Suit in PA
INSURERS: Regulators in FL and GA Suspect Continued Racial Bias
LAMINATES MAKERS: Barrett, Johnston Files Suit in TN over Price Fixing
MCDONALD'S: Fails to Abort Trial in Aust. for Monopoly McMatch & Win
TOBACCO LITIGATION: AP Talks about States' Share and Use of Funds

TOBACCO LITIGATION: Firms to Seek to Overturn $ 145 Bil Punitive in FL
TOBACCO LITIGATION: Italy Joins Hunt for Cash on Their Own Soil
TOBACCO LITIGATION: Moody’s Confirms PM, BAT, RJ, Loews Stable Outlook
TV COMMUNICATIONS: Reports on Settled Shareholders Suit; Pays for Stock
U OF MICHIGAN: GM Backs Minority Admissions Program


AID ASSOCIATION: James, Hoyer Alleges of Deceptive Insurance Sales
The law firm of James, Hoyer, Newcomer and Smiljanich, P.A. has filed a
class action lawsuit on behalf of policy owners of Aid Association for
Lutherans (AAL) (Glenn A. Hawkins and Nedra Hawkins on Behalf of Themselves
And All Others Similarly Situated, vs. Aid Association for Lutherans; Case
No. 85C01-0007-CP-344). The complaint was filed in the Wabash, Indiana
Circuit Court. The suit alleges deceptive and misleading practices in the
sale of life insurance policies.

Policy owners Glenn and Nedra Hawkins allege in the lawsuit that AAL agents
induced them to replace cash-rich interest-paying AAL whole life insurance
policies with AAL's "Horizon" policies. They were promised that the large
cash amounts invested from the old policies, together with additional cash
"investments" would net them policies which would be "premium free." AAL
also told them that these policies were excellent investments, and that
they would do well to put cash into the new policies. Mr. and Mrs. Hawkins
were encouraged by AAL agents to put cash into the policies because of
AAL's high illustrated interest rates, and assurances from AAL that money
in the policies were "investments" that would continue to grow, and from
which cash could be borrowed at low interest rates. AAL used accumulated
cash in the policies by transferring this cash between the couples'
policies to fund the purchases of additional policies.

In recent years, it has become apparent that these policies cannot perform
as promised by AAL. The Hawkins, now in their retirement years, are faced
with paying unexpected and costly premiums or losing the coverage they
believed they had paid for many years ago. AAL never explained to policy
owners the extreme increases in cost of insurance that would take place
with every increase in age of the policy owners, rendering the new policies
unaffordable for retirees, and depleting all of the cash invested into the
policies over time.

AAL failed to inform policy owners that with each policy issued came
commissions and administrative charges which would be removed from the
funds transferred from other sources. AAL did not explain that the interest
rates upon which their promises were based were not guaranteed. The
combination of these factors, along with the increasing cost of insurance
made it almost a certainty that additional significant premium outlays
would be required in order for the death benefits to be maintained. Yet,
AAL actively sought to replace its own traditional whole life policies with
Horizon policies, and encouraged its members to do so with frequent
contacts and suggestions that their products be "updated."

AAL is a fraternal benefit society, which exists to market insurance and
financial products to Lutherans. AAL markets its life insurance products
and annuities through more than 2000 district representatives throughout
the United States. Purchasers must be Lutheran or members of a Lutheran
family, and AAL agents utilize the Lutheran Church connection as a central
feature of their marketing approach. The complaint alleges counts of:
breach of contract, breach of the duty of good faith and fair dealing,
breach of fiduciary duty, negligent misrepresentation, fraudulent
inducement, and negligent supervision. Additionally, the complaint seeks
declaratory and injunctive relief.

As numerous life insurance companies were sued in the 1990s over similar
market conduct complaints, AAL attempted to hinder its own "member" policy
owners from filing suit against the company by adopting a mandatory
arbitration plan. In March, 1999, the AAL Board of Directors amended the
by- laws, without notice to the "member" policy owners, to pass a
retroactive arbitration clause as a means to preclude policy owners from
suing the company in court. The suit also seeks a declaration from the
Court that this clause be declared void due to the manner in which it was
unilaterally adopted by the Company, without notice to those most affected
by its adoption.

The class action plaintiffs are residents of Indiana who seek to represent
all persons nationwide who were victimized by the fraudulent, overreaching,
and misleading sales practices of AAL.

John Yanchunis, an attorney with James, Hoyer, Newcomer & Smiljanich, P.A.,
a Tampa, Florida firm that represents victims of corporate fraud, stated:
"This company held itself out as an arm of the church in order to have a
ready market for its products. Under the banner of fraternalism, the
company harmed and exploited the very people who supported AAL and trusted
it over the years. Through this action, we hope to make certain that not
only the Hawkins, but also others who have been victimized by AAL's tactics
will be able to get help."

Contact: John Yanchunis, jyanchunis@jameshoyer.com or Mike Peacock,
mpeacock@jameshoyer.com, both of James, Hoyer, Newcomer & Smiljanich, P.A.,

ALPINE ASSURANCE: Foreign Insurer Accused of Lack of Assets in US Trust
A proposed class action on behalf of all policyholders and third-party
claimants of Alpine Assurance Co. says the foreign insurer collected more
than $ 15 million in premiums but put virtually no assets in a U.S. trust.
The complaint alleges the bank holding the trust failed to verify assets
and produce quarterly reports (Amarilis Black, on behalf of herself and all
others similarly situated v. Chase Bank of Texas National Association, et
al., No. 3-00CV-822-G, N.D. Texas, Dallas Div.).
(Complaint in Section A. Document # 13-000607-101.)

Plaintiff Amarilis Black seeks to represent all policyholders and
third-party claimants of Alpine Assurance Co. Ltd. in the action against
three financial institutions. Black, who received a judgment and an
assignment of rights against an Alpine truck insurance policyholder,
alleges Alpine was an offshore, alien insurance company that was not
licensed to sell policies in the United States.

                         $ 15 Million Premiums

Between 1993 and 1995, the complaint alleges, Alpine received more than $
15 million in premiums from the sale of policies nationwide. The policies
insured all types of risks, from automobile insurance to marine contractors
liability insurance to karate school liability insurance. Alpine allegedly
operated as an alien, nonadmitted carrier with policies being sold by
Surplus Lines Brokers. By law, the insurer had to set up a trust in order
to sell in the United States.

The complaint alleges Alpine set up a trust with Ameritrust of Texas and
that per the agreement, the fund was to have no less than $ 5.4 million in
it. Black alleges Alpine was managed and operated by a small group of
insurance con artists that engaged in fraudulent practices.

"Records from various Commissioners of Insurance indicate that Alpine
collected premiums while its insiders diverted a large portion of these
dollars to their own use thereby looting the corporation of its assets and
ability to pay claims. The Alpine insiders transferred premiums from Alpine
to themselves and to related companies for no consideration for purposes
other than paying the claims of the Alpine insureds and for their own
purpose and gain," the complaint says.

The complaint alleges Ameritrust breached its obligations to make sure the
value of approved assets in the trust fund was adequate; to certify the
existence of the fund on a quarterly basis; and to collect interest and
dividends on sums in the trust fund. Black alleges Alpine did not deposit
any assets of substantial value into the trust and that one stock
purportedly worth $ 3.7 million was not a readily marketable security and
had an overstated value or no value at all.

                          Letter 'Worthless'

"Alpine insiders deposited a $ 3 million letter of credit issued by Intel
Trust & Trade Development Bank, Ltd. which is not a U.S. bank. The letter
of credit is and was worthless and a fraud," the complaint says.

The complaint alleges claims of breach of express terms of irrevocable
trust agreement, breach of fiduciary duties, fraud and conspiracy to commit
fraud. The proposed class is made up of "all Alpine policyholders or third
party claimants of Alpine policyholders with a claim against Alpine for a
loss under an American policy excluding punitive damages and all Alpine
policyholders with a claim against Alpine for return of unearned premium."

Ameritrust later merged with Texas Commerce Bank. Chase Bank of Texas is
the successor to Ameritrust and Texas Bank. The complaint alleges Chase
Bank is required to assume all liabilities of Ameritrust and Texas Bank.

Plaintiffs are represented by John G. Busby of Hollister & Brace of Santa
Barbara, Calif., Christopher D. Atwell of Oliphant, Hammond, O'Hara &
Atwell of Steamboat Springs, Colo., and Norton Rosenthal of Rosenthal,
Reynolds, Mateer & Shaffer of Dallas. (Mealey's Litigation Report, Emerging
Insurance Disputes, June 7, 2000)

BMC SOFTWARE: Milberg Weiss to Expand Scope of Securities Suit in TX
Court-appointed Lead Counsel Milberg Weiss announced on July 17 that it has
been ordered by the United States District Court for the Southern District
of Texas to file a consolidated amended complaint on or before Aug. 14,
2000. As part of their consolidated amended complaint, the court-appointed
lead plaintiffs will expand the scope of a class action previously filed on
behalf of purchasers of BMC Software Inc. ("BMC") (Nasdaq:BMCS) common
stock. The original Class Period spanned between July 29, 1999 and Jan. 4,
2000. The consolidated amended complaint will include allegations
concerning defendants' continuing misrepresentations throughout January -
July 2000.

Lead Plaintiffs continue to allege that BMC and certain of its officers and
directors have violated the Securities Exchange Act of 1934 by, among other
things, disseminating false and misleading statements about strong sales of
BMC's existing software products, the successful integration of its
acquisitions of Boole & Babbage and New Dimension Software earlier in 1999,
strong demand for its mainframe MIPS software (notwithstanding a slowdown
in sales of IBM mainframe computers and customer deferrals of orders or
purchases due to Y2K concerns) which would result in 25%-30% EPS growth for
BMC during FY 2000-FY 2001 and 3Q and 4Q 2000 EPS of $.52-$.55 and
$.58-$.64, respectively. During the Class Period, BMC insiders and
controlling shareholders sold 1,085,015 shares of their BMC stock at as
high as$78.83 for $63.1 million in proceeds.

On Jan. 5, 2000, just two days after BMC's stock hit its all-time high, BMC
partially revealed the true condition of the company's operations,
disclosing that, due to problems integrating BMC's, Boole & Babbage's and
New Dimension's sales forces, sales execution problems in Europe and the
U.S., and weakness in demand for mainframe MIPS software products, its 3Q
2000 results would be much worse than earlier forecast. BMC's stock fell
from $85-1/8 on Jan. 4, 2000 to$ 47, an almost 50% drop in one day.
Following the Jan. 5, 2000 partial disclosure, plaintiffs' complaint will
allege that defendants continued to falsely assure the market about the
demand for BMC's mainframe MIPS software products, claiming that they saw
no slowing in mainframe capacity demand and that the company's mainframe
business remained very strong. Then, on July 5, 2000, BMC shocked the
market when it finally announced the truth, that despite its contentions in
1999 that BMC enjoyed continued strong demand for its mainframe MIPS
software and its reassurances in 2000 that the company's mainframe business
remained "very strong," weak demand for mainframe software had in fact
existed throughout fiscal Q1 2001. Defendants also disclosed that BMC's
revenue for Q1 2001 would be less than half of analysts' estimates, and EPS
estimates for the quarter were below consensus analysts' estimates. BMC's
stock immediately plummeted to just $22 per share.

Contact: Milberg Weiss Bershad Hynes & Lerach LLP William Lerach,
800/449-4900 wsl@mwbhl.com

CHATTEM INC: Alleged in CA of Selling Skin Care Product with Zinc Oxide
The Company has been named as a defendant in a lawsuit brought by the
Center for Environment Health (CEH) contending that the Company violated
the California Safe Drinking Water and Toxic Enforcement Act of 1998
(Proposition 65) by selling to California consumers without a warning
topical skin care products containing zinc oxide which in turn contains
lead. On December 30, 1999, Chattem was sent a notice of intent to sue
letter from CEH alleging that Chattem had violated Proposition 65 because
zinc oxide allegedly also contains cadmium. The lawsuit contends that the
purported failure to comply with Proposition 65 requirements also
constitutes a violation of the California Business & Professions Code
Section 1700, ET SEQ. Violations of either Proposition 65 or Business &
Profession Code Section 1700, ET SEQ., render a defendant liable for civil
penalties of up to $2.5 per day per violation.

The Company has also been named as a defendant in a lawsuit filed in San
Francisco Superior Court on December 29, 1999. JOHNSON ET AL. V
BRISTOL-MYERS SQUIBB CO., et al., Case No. 308872. This is a putative class
action brought by two named plaintiffs on behalf of the general public in
California, against the same entities that are defendants in the CEH
lawsuit. As with the CEH lawsuit, the Johnson lawsuit alleges that Chattem
violated Proposition 65 by selling to California consumers without a
warning topical skin care product containing zinc oxide which in turn
contains lead. The lawsuit does not assert claims directly under
Proposition 65, but asserts that the alleged failure to comply with
Proposition 65 gives rise to claims under California's Business and
Professions Code Sections 17200 ET. SEQ., and 17500 ET SEQ. and the Civil
Code Section 1750 ET SEQ. The lawsuit seeks injunctive and equitable
relief, restitution, the disgorgement of allegedly wrongfully obtained
revenues, and damages.

COCA-COLA: Agreed Settlement May Not Resolve Employee Racial Bias Case
Coca-Cola offered no details when it announced a tentative settlement of a
racial discrimination suit last month. The message to 2,000 members of a
potential class was "Trust us." Whether Coke's problems are over will
depend in large part on class members' willingness to extend that trust.
"The one thing they Coke executives did not get with this settlement is
global peace, which is always important for a corporate defendant," says
Decatur attorney Keenan R.S. Nix of Nix, DelCampo, Thornton & Graddock.

Nix is suing Norcross based Waffle House Inc. for widespread discriminatory
employment practices similar to those attributed to Coke. "What remains to
be seen is whether Coke can satisfy the demands of the individual
plaintiffs. My feeling is that the company ought to pursue a resolution of
the individual claims as aggressively as they did the class claims."

In June, Coke announced it had reached a tentative settlement with four
named plaintiffs and members of a prospective class of 2,000 current and
former African-American employees who allege they were discriminated
against in pay and promotions. Abdallah v. Coca-Cola Co., No.1-98-cv-3679
(N.D. Ga., June 14, 2000). The company and plaintiffs lawyers, who hammered
out the tentative settlement with help from a mediator, said they couldn't
release details of the settlement until October.

Ten lawyers from four firms-Cyrus Mehri of Mehri, Malkin & Ross in
Washington; H. Lamar Mixson, Jeffrey O. Bramlett, Joshua R. Thorpe and
Steven J. Rosenwasser of Bondurant, Mixson & Elmore of Atlanta; James E.
Voyles of DeVille, Milhollin & Voyles of Marietta; and Robert L. Wiggins
Jr., Samuel Fisher, Byron R. Perkins and Rusty Adams of Gordon, Silberman,
Wiggins & Childs of Birmingham-are representing four of the plaintiffs and
the potential class in settlement talks.

Coke is being defended by their in-house lawyers and the Atlanta firm King
& Spalding. Lawyers with Paul, Hastings, Janofsky & Walker and Thomas,
Kennedy, Sampson & Patterson also have joined the litigation on Coke's

Meanwhile, Coke faces a new race discrimination suit and continuing
litigation by three people removed in April as lead plaintiffs and
potential class representatives. The new discrimination suit, filed in
Fulton State Court last month on the day Coke announced the settlement,
seeks $1.5 billion in compensatory and punitive damages for four
African-American women, all current or former Coke employees. Two
high-profile litigators, Florida's Willie E. Gary and Los Angeles' Johnnie
E. Cochran Jr. represent the plaintiffs. Goodman v. Cola-Cola Co.,
No.00-cv-006139 (Fult. St., June 14, 2000).

The three removed as lead plaintiffs from the original suit and a fourth
woman who left the potential class action suit voluntarily have not yet
filed new suits but have hired Gary to represent them.

After two years of discovery, negotiations and mediation, Coke, as well as
the lawyers who represent plaintiffs in the original suit, believe Gary and
Cochran have emerged just in time to complicate a hard-fought settlement.

"Make no mistake about it. They wanted to resolve this with one fell
swoop," Nix says. "The decision by several of the individual claimants to
retain new counsel made that impossible."

Attorneys who are hammering out the details of the settlement with Coke
won't discuss how the plaintiffs they dismissed from the suit or Gary, who
is now their lawyer, may affect the outcome of their settlement. U.S.
District Judge Robert W. Story barred Gary from the mediation talks, and
Gary says he intends to pursue individual rather than class claims against

But metro Atlanta lawyers who have engaged in class actions say the
attorneys for four plaintiffs seeking a class settlement now may be forced
to work hand-in-hand with Coke. Plaintiffs lawyers fear Gary will erode the
potential class, and thus the amount of the settlement, by encouraging
employees to take individual legal action. And the company is banking on a
class-wide settlement to remove the matter from the public spotlight.

"I think it's important economically to Coca-Cola to do this," says Edward
D. Buckley III of Greene, Buckley, Jones & McQueen. "It's been a factor in
their stock dropping. I think there are a lot of shareholders who want to
see this suit settled because of that."

A class action trial, says Buckley, who recently won a $2.9 million
judgment against Fulton County commissioners for discriminating against two
of its white employees, "would have enormous financial repercussions. It's
hard to say with a company the size of Coca-Cola which would more
economically be a problem-the ultimate payout or the loss of value in the
stock and good will I think that Mr. Douglas Daft Coke's chairman and chief
executive officer really wanted to see this thing resolved early in his
watch so that this doesn't become his legacy."

But Buckley says successful settlement now depends on how many members of a
prospective class elect to participate. "I don't know whether it the
settlement will be highly favorable to class members or simply a token," he

"Coke is probably going to be allies with Mehri in this and urge the court
to get Willie Gary out of things," he says. "I'd be surprised if they did
anything but that. If they are going forward and agreeing to a stipulated
class, they, in essence, are holding hands and working in unison. That's
not a bad thing That's just the way it's done."

Nix agrees. "The prospect of having to face a class action is not only
economically precarious, but it's also publicly embarrassing," he says. "So
the resolution of the class claim enables the company to move forward with
their business agenda without the cloud of class action litigation hanging
over its operations, depressing its stock price, demoralizing employees and
generally disrupting business operations."

If a handful of individual suits remain after settlement, that probably
doesn't present a major problem for Coke. "They don't take on the same
public dimension that class action cases do typically," says Nix. "And the
economic exposure from individual cases typically is not as daunting or
staggering as the economic fallout from class actions, both in terms of the
cost of resolution and the impact on publicly traded stock." But Nix says
individual claims probably will be strengthened by evidence of
discrimination obtained through the class action. And if the each claim has
merit, filing serial claims can be an effective tactic, he says.

But, Nix notes, "If individual claims lack merit, then filing them back to
back won't make any of them any stronger. That's the whole point.
Individual claims are less intimidating to the company than class claims.
But individual claims with merit cannot be ignored in terms of their
cumulative effect." And Gary can't be ignored, either, Nix notes. "Willie
Gary is a well-known, formidable lawyer," he says. "Obviously, his presence
in this case has attracted the attention of potential class members. To the
extent those potential class members opt out of any proposed class relief
in favor of individual claims asserted by Mr. Gary, then that complicates
the class action settlement."

Rather than wage another court battle, Nix says, Coke needs to settle its
dispute with the employees now represented by Gary and Cochran,
particularly because among them are several original plaintiffs. Four "were
named plaintiffs in the class matter just resolved," Nix says, "so it's
illogical to suggest these individual claims don't have merit . It was
those allegations that gave rise to the class action to begin with."

Coke and the lawyers who have mediated with the company need to release
specific details of a settlement as quickly as they can before Gary siphons
off the plaintiffs with the strongest claims, Nix says.

"Right now, none of these folks have anything certain in their hands," Nix
says. "One of the most difficult things in a matter like this is keeping
everyone patient. The more time passes, the less patient people get. They
want to know, 'What have you done for me lately?' It's that impatience that
may cause many of them to seek out an audience with Mr. Gary."

Atlanta attorney Patrick W. McKee, who persuaded a federal judge last year
to junk Fulton County's affirmative action program because it was deemed
biased against whites, thinks class members will be reluctant to trust a
secret settlement. He says Coke's only hope now is to agree to certify a
class as part of the settlement agreement instead of fighting it. Simply
telling all prospective class members to trust them and trust Coke is
failing as a strategy, he says. "And in the meantime, Gary is pulling the
settlement apart."

Instead, McKee says, "I think a good strategy for Bondurant, Mixson would
be to get a firm settlement and tell the plaintiffs immediately. That would
probably take the wind out of Gary's sails."

Until then, he says, "Their settlement's bleeding to death while Gary's out
there beating the bushes. Ultimately, it's a bad thing for the plaintiffs,
and it's a bad thing for Coke because Coke wants to put an end to all of

Mehri insists that "When the fog clears in a few months, class members will
have the opportunity to evaluate for themselves whether the settlement is
fair and whether to partake in the recovery," he says. But Mehri and
Bondurant, Mixson lawyers are still seeking to stop Gary from signing up
any more former and current black Coke employees with claims-at least until
October when their announced settlement in principle with Coke becomes

In a motion challenging Gary's ethics filed in U.S. District Court in
Atlanta June 30, the lawyers sought to bar Gary's firm "from soliciting
illegal fee contracts" from prospective class members.

The motion accused Gary of "in large measure serving the interests of the
Coca-Cola Company, which would vastly prefer to face employees in
individual cases, where it has the opportunity to use its superior
resources to defeat their claims entirely, rather than in a class action in
which it must compensate all class members. " And it also claimed that by
filing the $1.5 billion state court suit, the Florida lawyer was "creating
unjustified expectations."

In his response, Gary claimed he never solicited any potential Coke
litigants. "The issue is, they can't stop the multitudes of people from
calling my office," he says. "If they had a settlement they thought people
would be proud of . . . they wouldn't have anything to worry about," Gary

Last week, Story issued a consent order barring Gary from actively
soliciting fee agreements from prospective class members and from lobbying
them not to participate in the settlement. Gary may discuss the suit with
prospective class members who contact his firm on their own. The order
mirrored a nearly identical order the judge issued at Coke's request last
year that placed a similar ban on Mehri and his co-counsel.

                  A "Tremendous PR Problem"

Marketing strategist Al Reis, a partner at Roswell's Reis & Reis consulting
firm, says Coke "still has a tremendous PR problem."

"They didn't settle nearly soon enough," says the author of 11 Immutable
Laws of Internet Branding and 22 Laws of Branding. "Believe me, this is
something that should have been settled a long, long time ago Every day
this thing drags on is a day lost for Coke. And it just hurts their

According to Reis, Coke has allowed its lawyers to wage the battle as if
the allegations were solely a legal problem. But Reis says, "These are all
public relations battles. That's the problem. Coke is being advised by
lawyers on the basis of what is legally right when they need some help on
what is right in the minds of the public."

Reis says any race discrimination suit is a blot on the Coke name, which he
calls "the most valuable brand in the world."

"They can win it in court and lose it in court of public opinion," he says.
"It's not just a lawsuit . This is a battle being fought out in the press."

Coke's brand and sales are easily jeopardized because "It's a fashion
product," Reis says. "It's an in thing to drink, but it could be an out
thing. These things are driven by fashion trends. When a brand gets tarred,
there are plenty of alternatives."

But Kenneth L. Bernhardt, a Regents professor of marketing at Georgia State
University's Robinson College of Business, says that with the settlement
announcement, "Coke is over the hump."

"I think it would have been far more damaging to have a court rule against
Coke," he says. "It's one thing to be accused and found guilty of
discriminating against one person or four people . It's another thing to be
found guilty of discriminating against a class of people."

Coke must balance the legal cost against the impact on public opinion, he
says. "The idea would be to settle it and make it go away, which might save
legal costs and have the least impact on public opinion. On the other hand,
that could just encourage more lawsuits, which keeps Coke in a bad light,"
he says. "You've got to feel for Coke." (Fulton County Daily Report, July
18, 2000)

                Coke Plaintiff Eavesdrops on Lawyers

Another article in Fulton County says that a single phone call changed the
face of the employee discrimination suit against Coca-Cola Co.

It was the catalyst that prompted lawyers to jettison three lead plaintiffs
from the potential class action case. It's why others are now suing Coke
for $1.5 billion and promising more such suits. It is why, now that Coke
has announced a tentative settlement, some employees who will be asked to
sign on as part of a class remain skeptical. And it's why Coke's legal
problems are far from over.

The March 29 conference call that resulted in these far-reaching but
unintended consequences was arranged for the Rev. Jesse Jackson. With
mediation less than two weeks away, the civil rights leader wanted to bring
together the eight plaintiffs and their lawyers to talk about the case.

It was Jackson who first raised the question of what the attorneys' cut
would be if Coke agreed to settle the case as a class action, Coke security
guard Gregory A. Clark recalls. Clark, who still works at Coke, was one of
the first to join the suit, which was filed in 1998.

Cyrus Mehri, of the Washington firm of Mehri, Malkin & Ross-one of at least
five lawyers on the line-told Jackson he anticipated a 25 percent
contingency fee. The lawyer's answer surprised Clark, who had signed a
contract in which the lawyers retained a third of any settlement. In an
affidavit filed with the suit, Clark would later ask why Mehri "lied about
the legal fees specified in the contract when asked by the Rev. Jesse

                   A Conversation Overheard

Jackson and the other plaintiffs hung up when the conference call ended,
while the lawyers remained on the line. But Clark remained on the phone
while they continued what they thought was a private conversation.

Besides Mehri, other lawyers on the call included Jeffrey O. Bramlett,
Joshua F. Thorpe and Steven J. Rosenwasser, all of Bondurant, Mixson &
Elmore; and James E. Voyles of the Marietta firm DeVille, Milhollin &
Voyles, Clark says.

Clark recalls that after Jackson and the other seven plaintiffs hung up,
his attorneys discussed $250 million as an acceptable class action
settlement. No one connected with the suit has ever publicly mentioned a
settlement amount. Of that $250 million, the eight named plaintiffs,
including Clark, were expected to split one percent-an estimated $2.5
million, Clark recalls the lawyers saying. The lawyers, on the other hand,
would take one-third of the settlement, or an estimated $87 million. The
remaining $160 million would be divided among some 2,000 current and former
black employees attached to Coke's U.S. offices-an estimated $80,000 each.

"Hey, I've got it all worked out," Clark recalls Mehri saying. He would
first tell the lead plaintiffs that their individual claims were worth no
more than $20,000 each. Later, he would ask U.S. District Judge Robert W.
Story to set aside $2.5 million for them as class representatives, Clark
says. While that might be less than they expected, the revised amount would
look much better to the plaintiffs, Clark recalls Mehri saying.

Mehri acknowledged that the lead plaintiffs "won't be pleased with that,"
Clark recalls. "But what can they do?" he recalls Mehri saying. "The case
will be over."

Clark's affidavit also notes that the attorneys made "various derogatory
comments" about their clients. "It was not just what they said," Clark
says. "It was almost as if they had taken us for granted I can tell this
story 10 years from now, word for word, the conversation I heard.

"It was the arrogance with which they laughed and chuckled about the
seriousness of our lives," he says. "No one was looking out for those of us
who put their lives on the line. No one was doing that. All they were
concerned about was getting theirs and running. They were not concerned
about the people in the company left to deal with its policies, left to
deal with whites angry about the lawsuit who had the ability to retaliate.
All they were concerned about was the money they were getting."

Asked about Clark's recollection of the conference call he overheard, Mehri
will say only, "Either he misunderstood or has chosen to misrepresent what
was said on the call." Any discussion of a 33 percent fee was "flat out not
true," Mehri says. "It was never discussed." But he says he did talk with
Jackson about a 25 percent contingency fee once the case was settled. The
Daily Report reviewed a copy of the legal contract with the lead
plaintiffs, which sets aside a 33 1/3 percent contingency fee "for the
clients' individual claims" as well as the litigation expenses. But the
contract also notes: "Counsel's work for the class will be compensated, if
at all, with the approval and at the direction of the court."

Mehri declined to comment on the fee discussion or on the contract, citing
attorney-client privilege. He says, "Attorney-client privileges, work
product privileges and mediation ground rules handicap our ability to
address some of the misinformation being peddled to the class."

Enraged and hurt by what he says he had overheard, Clark promptly called
the other plaintiffs that night to warn them that their lawyers could no
longer be trusted. "It was a very emotional time for all of us," says New
York resident Kimberly Gray Orton, a former Coke marketing director, who
remains one of the lead plaintiffs and participated in the mediation talks
with the company. "We were about to start mediation. We had fought the good
fight . Greg incited a riot."

                 Call 'Never Clearly Articulated'

But, she adds, "He Greg never actually said what was said. We spent a lot
of time talking to each other, understanding what the situation was, all
for something nobody heard but Greg, and he never clearly articulated."

Still, she says all of the plaintiffs were upset. As a result, two days
later, on March 31, Orton wrote a letter to Mehri on behalf of the
plaintiffs. "We believe we now have a major credibility gap," the letter
states. "This gap has created a sincere lack of trust; an emotional outpour
ing and a wake up call for us as plaintiffs. We now believe it is
imperative that we take charge of this case as if it were our business."

And because the case was yet to be certified as a class, the attorneys "are
accountable to us," the letter said. It then asked for a list of all legal
expenses, a calendar of court hearings, meetings and press conferences as
well as telephone logs.

Orton says that although she wrote the letter, she never stopped trusting
the lawyers. "The letter was written, quite frankly, because we had a
hysterical Greg on our hands," she says.

That same day, Mehri attempted to mollify his rattled clients in a letter.
"It is imperative that we bridge any communication or credibility gap that
may exist and regain the unity and focus that has been the hallmark of our
team." But, he warned, "None of us can favor ourselves over the interests
of the class, even though there is not one yet." In that letter, now on
file in federal court, Mehri also offered some confidential observations
from the mediator, who had been overseeing talks between Coke and the
plaintiffs' lawyers.

After meeting with Coke officials, the mediator "said they are in no hurry
to settle the case," Mehri wrote. "He also said that they had an adverse
reaction to some of our cultural initiatives. Another source said that the
Company's decision making process is so slow that it could take months for
the case to resolve and their people are 'shockingly out of touch with
reality' to their current overall situation. Based on that, it is our
speculation that the Company will lowball us and that no settlement will be
achieved anytime soon. "The mediator also said that the case would not
settle unless both sides are flexible and able to compromise."

In his letter, Mehri also firmly laid out the realities of class
litigation, something he said he and his co-counsel had intended to do
before mediation talks with Coke began April 10. The attorneys, he said,
intended to secure as much money for their clients as the law permits. But
those damages were limited by "the law, the restrictions that apply to a
class action case and the facts of each individual claim," he said.

"Generally the courts will not approve individual recoveries to
representative plaintiffs that are unreasonably large compared to similar
settlements and recoveries by class members or by individual plaintiffs in
other cases," the letter continued. "Most importantly, we cannot risk
having the interests of the class jeopardized or even to appear to seek a
recovery for individual claims that could be viewed as unreasonable. That
could lead to disqualification."

Then he reminded his clients of the substantial financial investment that
the lawyers had made, banking that they would win the case and secure a
generous contingency fee. "As you can imagine, the lawyers have already
invested millions of dollars of their own time and hundreds of thousands of
dollars of their own money in this case," Mehri wrote. "It now looks like
more will be required of us. The details of this investment are available
at any time to any plaintiffs."

Orton says Clark had trouble accepting the legal premise that any class
settlement had to be fairly distributed. "It was not new news to Greg,"
Orton says. "Everybody joked we were not going to get rich. I think that
was unacceptable to him." Clark, she says, hoped to realize at least $15
million. "His quote," she says, "was, 'I don't care about the class.'"

                     Clark Turns to Gary

Mehri's letter did little to allay Clark's feeling of betrayal. Certain
that his lawyers were now treating him much as Coke had, Clark called
Florida attorney Willie E. Gary. Jackson had earlier recommended to the
plaintiffs' lawyers that they add Gary to the team to help cut a deal with
Coke. Unlike the other lawyers then involved in the case, Gary was black.
Clark asked him to join the litigation.

After investing two years in litigation, with mediation talks finally set
to begin, Mehri and other plaintiffs' lawyers didn't feel they needed Gary.
In a motion filed in federal court, plaintiffs' attorneys claimed that
Gary's attempt to enter the case "was no accident; it occurred ' o n the
eve of mediation' after reports that Coca-Cola was interested in reaching a
financial settlement in the case."

Negotiations among the lawyers quickly broke down. Gary and Clark say those
negotiations ended after Mehri told four of the plaintiffs that Gary
intended to take charge of the pending negotiations. "That wasn't true,"
Gary insists. "I never said I wanted to be lead counsel."

Gary says the lawyers also couldn't agree on fees. He says he proposed
reducing the contingency fees specified in Mehri's contracts with the
plaintiffs from one-third to 25 percent. Gary says he also objected to
contract clauses that made it virtually impossible for a plaintiff to drop
out of the suit and make a separate settlement without the lawyers'
permission. Under terms of Mehri's contract, plaintiffs who drop out of the
suit and settle separately with Coke must turn over 25 percent of their
settlement to the attorneys and pay 150 percent of their legal fees.

"Cyrus boasted to me his hours alone were over $1 million," Gary says. 'One
of two of the other lawyers said they had over $1 million, too." It was,
Gary says, "a slave contract."

H. Lamar Mixson, Mehri's co-counsel, says the clause levies a financial
penalty only if a plaintiff settles his or her own claim against the
lawyers' advice and prejudices the class litigation.

Orton says she had no problems with the penalty clause after Mehri flew to
New York and explained to her that Coke lawyers would probably approach
each plaintiff privately and attempt to settle out of court, thus
fracturing the plaintiffs' united front. "Everybody was in agreement there
ought to be some penalty for that," she says. "This is one thing Coca-Cola
has tried to do is get us not to have a consensus."

In a court brief, the plaintiffs' lawyers voiced their own concerns about a
possible hidden conflict of interest. Gary had failed to disclose that he
was a major investor in a cable network that was then negotiating a
substantial advertising deal with Coke.

The potential conflict of interest apparently didn't bother the plaintiffs,
according to Gary, although four of them later raised concerns in sworn
affidavits. On April 6, they told Mehri they wanted Gary to join the legal
team. The next day, Mehri responded by telling Clark and two other
plaintiffs-Motisola Malikha Abdallah and Ajibola "Tai" Laosebikan-that he
was removing them from the suit. He advised them to seek other counsel.

Says Mehri: "Class representatives cannot pursue narrow agendas at the
expense of the class. Here the narrow agendas of a few became paramount.
Fortunately, other named plaintiffs Elvenyia Barton-Gibson, George Eddings
Jr., Linda Ingram and Kimberly Gray Orton-stayed true to their duties to
the class." That opened the door for Gary, who quickly hired on as the
jettisoned plaintiffs' attorney. Banned by the court from participating in
the mediation talks, Gary announced his intention to avoid class action
litigation in favor of individual damage suits seeking punitive as well as
actual damages.

On June 14, Coca-Cola announced it had reached a previously secret
settlement in principle with the four remaining plaintiffs in which the
company's American black employees would share. But everyone involved has,
so far, refused to release any details of the agreement. That same day,
Gary and Los Angeles lawyer Johnnie E. Cochran Jr. filed a $1.5 billion
damage suit against Coke in Fulton County State Court on behalf of four
African-American women. Gary insists the timing was a coincidence. (Coke
last week asked to move this suit to U.S. District Court.)

The potential class was now in danger of eroding. Employees who would
otherwise have waited for a class settlement to become final, began calling
Gary. Says Gary: "The road to final resolution is going to have to come
through Willie Gary and Johnnie Cochran."

          Removal of Lead Plaintiff Offer Parallels to Texaco

The race discrimination suit against Coca-Cola is not the first time that
Washington class action litigator Cyrus Mehri has removed a lead plaintiff
from a suit.

In 1997, Mehri and lead counsel at his previous firm- Milstein, Hausfeld &
Toll-asked the lead plaintiff to step down in a historic race
discrimination suit against Texaco. Former lead plaintiff, Bari-Ellen
Roberts, offers details of the suit in her book, Roberts vs. Texaco: A True
Story of Race and Corporate America.

Roberts had been the first of two named plaintiffs in the suit, filed
against Texaco in 1994. In March 1997, the case settled for $176 million,
the largest race discrimination settlement to date. Roberts was a lead
plaintiff and prospective class representative until Texaco refused to sign
the settlement deal unless Roberts resigned from Texaco and surrendered her
legal status as lead plaintiff, according to her book.

Roberts' removal as lead plaintiff for the good of a class created only as
part of the settlement with Texaco, and the presence of Mehri are just two
of several striking parallels between the three-year litigation against
Texaco and the current litigation against Coke. Among them: Neither case
was certified as a class action before a settlement agreement, although
both were constantly referred to as class actions by the plaintiffs'
lawyers. Texaco's suit was certified as a class only for the limited
purpose of settlement. Coke's has yet to be certified as a class but the
proposed settlement would treat 2,000 current and former employees as a
class. In both suits, the Rev. Jesse Jackson and his Rainbow/PUSH Coalition
weighed in when a settlement agreement appeared close, attracting national
media attention and threatening boycotts that caused stock prices to
tumble. In both cases, Jackson contacted the plaintiffs and then met with
company executives to try to extract concessions for the black community.

The plaintiffs were surprised to learn that lawyers shaped the strategy,
made the day-to-day decisions and controlled the course of the case. "It
was," Roberts wrote in her book, "like being a soldier in a remote outpost
far from the main battleground. I could only hear the distant thunder of
legal artillery. I was not calling the shots."

Roberts writes she was asked to step aside when Texaco agreed to settle.
Texaco had learned that she had signed a book deal and company executives
had angrily refused to complete the settlement if Roberts insisting on
writing about the case. Texaco's chairman, she wrote, "insisted that Texaco
would not sign the final settlement papers unless I agreed to either resign
from the company or remain silent." Determined to tell her story, Roberts
resigned and stepped down as lead plaintiff. (Fulton County Daily Report,
July 18, 2000)

CREDITRUST CORP: Keller Rohrback Investigates Securities Fraud Claims
Seattle's Keller Rohrback L.L.P. (www.SeattleClassAction.com) is currently
investigating securities fraud claims on behalf of shareholders of
Creditrust Corp. (Nasdaq:CRDTQ) who purchased the common stock of
Creditrust between July 29, 1998 and March 31, 2000, inclusive (the "Class

Shareholders allege that certain officers and directors of the Company
violated federal securities laws by issuing a series of false and
misleading statements in Creditrust's press releases and public filings
during the Class Period. The defendant officers and directors allegedly
caused Creditrust to overstate its earnings by deliberately inflating the
estimated amounts that could be collected on bad debt receivables purchased
by the Company, thereby inflating revenue and pre-tax earnings by at least
$4.9 million for the fiscal year 1999 alone. In addition, defendant Rensin
sold more than 500,000 shares of his personal holdings in the company
during the class period for a profit in excess of $18 million.

Contact: Keller Rohrback L.L.P. Jen Veitengruber, 800/776-6044
investor@kellerrohrback.com www.SeattleClassAction.com

FIRSTWORLD COMMUNICATIONS: Milberg Weiss Files Securities Suit in CO
Weiss (http://www.milberg.com/firstworld/)announced on July 18 that a
class action has been commenced in the United States District Court for the
District of Colorado on behalf of persons who purchased FirstWorld
Communications, Inc. ("FirstWorld") (Nasdaq: FWIS) common stock prior to
July 6, 2000.

The complaint charges FirstWorld and certain of its officers and directors,
together with its underwriters, with violations of the federal securities
laws for selling 10 million shares pursuant to a Prospectus/Registration
Statement which misrepresented FirstWorld's operations and its ability to
continue to execute its business plan. In fact, the defendants failed to
disclose the fact that at the time of the IPO, the Company was planning to
dramatically change its business model and that the service the Company was
then able to provide was suffering innumerable deficiencies resulting from
deficient bandwidth capacity, commercially unsuitable connectivity, poorly
trained sales staff and deficient security.

On July 5, 2000, defendants revealed that they would dramatically change
FirstWorld's business plan and that due to deficiencies in FirstWorld's
infrastructure, FirstWorld would have to devote significant resources to
retrain its staff, increase bandwith availability and install a
state-of-the- art security system due to security deficiencies all of which
would result in flat to declining revenues in future quarters. FirstWorld's
stock price reacted swiftly and negatively to these revelations which
partially surfaced on July 5, 2000, falling over $5 to $4-3/32 on huge
volume of 6.4 million shares the following trading day.

Contact: William Lerach or Darren Robbins of Milberg Weiss, 800-449-4900,

HMOs: Review Sought in TX over Kaiser's Duty to Disclose Incentive Plan
Shortly before the U.S. Supreme Court issued its ruling in Pegram v.
Herdrich last month, a group of plaintiffs in a Texas case filed a petition
with the court seeking its review of a nearly identical case in which the
Fifth Circuit found that HMOs did not have a duty to disclose the existence
of physician incentive plans limiting members' coverage under federal law.
Ehlmann et al. v. Kaiser Foundation Health Plan of Texas et al., No.
99-1828 (U.S., May 15, 2000); see Managed Care LR, Jan. 17, 2000, P. 13.

Given the Supreme Court's holding in Pegram , No. 98-1949 (U.S., June 13,
2000), that mixed treatment and coverage decisions by HMO doctors are not
fiduciary in nature pursuant to the Employee Retirement Income Security
Act, it does not appear likely that this latest appeal request will find
favor with the court. However, the court has not yet denied certiorari.

In this class action, the plaintiffs had alleged that a group of HMOs had a
fiduciary duty to disclose physician financial incentive arrangements that
they claimed harmed patients by causing doctors to minimize referrals and
testing. The plaintiffs had alleged that the HMOs maintained disincentive
programs that withheld payments and bonuses to physicians pending review of
their patients' medical costs.

The district court had granted the defendants' motion to dismiss, finding
that the HMOs had no duty to volunteer the terms of physicians'
compensation to plan members.

The U.S. Court of Appeals for the Fifth Circuit agreed on appeal. The court
said that principles of statutory construction, ERISA's legislative history
and case law did not favor the plaintiffs' overly broad reading of the
statute's general provision regarding fiduciary duty.

The court noted that physician compensation arrangements are not among
ERISA's numerous provisions detailing specific disclosure duties, and it
refused to add to the requirements already provided by the statute.

                        Not the Same as Pegram

Anticipating that the Supreme Court might rule in favor of HMOs in Pegram,
the Ehlmann plaintiffs attempted to distance their case from that one.

In Pegram, the Supreme Court held that Congress intended the fiduciary duty
imposed on health plan administrators under ERISA to be strictly financial
in nature. When HMO doctors act as both health care providers and ERISA
plan administrators, making decisions about both treatment of patients and
the scope of insurance coverage, Congress did not intend that those mixed
decisions be regarded as fiduciary duties under ERISA, the court ruled.

The Ehlmann petitioners contend that unlike the plaintiff in Pegram, they
are not challenging the right of HMOs to employ physician incentive plans
to cut costs, but rather, they argue the HMOs have a duty to disclose the
existence of those incentives to plan enrollees.

Failing to disclose financial incentives affecting patient insurance
coverage and treatment "give s rise to conflicts of interest where the HMO
ERISA plan administrator occupies both the ERISA fiduciary role and the
self-dealing, profit-seeking health care provider role," the petitioners

The suit named several HMOs owned and operated by Kaiser Foundation Health
Plans, two NYLCARE health plans, two Aetna U.S. Healthcare plans,
Prudential HealthCare Plan of Texas Inc. and Cigna Healthcare of Texas Inc.
Lead plaintiff Mary Ellen Ehlmann was insured by Kaiser Foundation Health
Plan of Texas Inc. through her employer.

She alleges that not only did Kaiser fail to inform her about its physician
incentive plans, its promotional materials, member handbook and other
materials, made several affirmative representations that its doctors were
not encumbered by disincentives to treat and that their medical diagnoses
and treatment recommendations were based solely on the patient's medical

Ehlmann and other plan members relied on Kaiser's doctors for advice about
medical treatment unaware of any incentives to withhold treatment, the
petition states.

"Kaiser breaches its ERISA fiduciary duty by failing to disclose any
information about the potentially life-threatening incentives and
disincentives that discourage the contracting physicians from providing any
but the most minimal level of health care," the petitioners argue.

The Supreme Court should grant their petition for review because failing to
disclose incentive plans that impact on patient care violates ERISA's
stated purpose of protecting participants and beneficiaries of ERISA plans
and conflicts with the ERISA requirement that plan fiduciaries act solely
in the interests of plan participants and beneficiaries, said the

The petition for writ of certiorari was filed by George Parker Young and
Donnas S. Peery of Friedman, Young, Suder & Cooke in Fort Worth, Texas.
(Managed Care Litigation Reporter, July 3, 2000)

HOHOS, WONDER: Workers Seek Award for Damages in CA for Racial Bias
Attorneys for 21 workers who accused the baker of HoHos, Wonder Bread and
Twinkies of racial discrimination asked a San Francisco jury in closing
arguments Monday to award their clients monetary damages to make up for
denied promotions and insulting treatment.

But the attorney for Kansas City-based Interstate Brands Corp. told the
jury in Superior Court Judge Stuart Pollack's courtroom that plaintiffs'
attorneys failed to prove their case. "I like to believe people will
present a case based on facts, not innuendo," said defense attorney Patrick
Mullin. "That was not done."

The case is expected to go to the jury along with a different, complicated
three-page verdict form for each plaintiff. They all have different causes
of action.

Mullin, of San Francisco's Jackson, Lewis, Schnitzler & Krupman, told the
jury of four women and eight men that after two months of testimony about
allegations of discriminatory behavior by management at IBC's San Francisco
bakery, plaintiffs failed to meet their burden of proof by a preponderance
of evidence.

"It is important that we separate facts from fiction," Mullin said. "Look
for the standard of proof." Mullin said earlier outside the courtroom that
his task was a difficult one, since "everyone on the jury is an employee."

The 21 plaintiffs, all African-Americans who worked at the nation's largest
bakery for up to 30 years, alleged that through racial discrimination they
were denied promotions, wrongfully terminated and retaliated against for
filing the lawsuit, Carroll v. Interstate Brands Corp., 995728.

Attorney Angela Alioto, who represented 18 of the plaintiffs, told jurors
promotions to management positions were denied simply because of skin
color. "Each and every one of them has the ability to be in management, if
they were just given a chance," Alioto said. "No human being should be
treated this way. "

Alioto and her co-counsel, Paul Justi, from the Law Offices of Joseph L.
Alioto and Angela Alioto, said she was uncertain how much in compensatory
and punitive damages the jurors should award her clients. Initially her
complaint asked for $260 million just in general damages, but she appeared
to back off that amount as the trial closed. Instead, she said jurors
should do their own calculations but asked them to start by awarding each
plaintiff $1 million, and then go from there.

Justi invoked the memory of the lone protester 10 years ago who stood
before the tank in China's Tiananmen Square, forcing the driver to come to
a complete stop. Justi used the image as a metaphor for what his clients
did by filing their lawsuit to stop the alleged discriminatory practices of
their employer. "It is necessary to stand up and get in the way when you
know something is wrong," Justi said.

He said IBC, through its household brands of Twinkies and Wonder Bread, is
"a cultural icon" in this country. "These men stood up to that icon and
said this is wrong .^.^. that you are passing us over for promotion because
of the color of our skin."

While the main courtroom theater was played out before jurors, there was
also another underlying drama between Alioto and attorney Waukeen McCoy,
who once worked for her but struck out on his own over the case.

McCoy represents three of the 21 plaintiffs, including lead plaintiff
Theodis Carroll, who has accused Alioto of being racist and calling him a
"punk." He also said Alioto was paying Justi more than McCoy, which Carroll
said showed Alioto discriminated.

Although McCoy and Alioto sat at the same plaintiffs' table, they rarely
spoke, seldom looked at each other and never shared trial documents, such
as juror profiles.

In his closing argument, McCoy compared IBC to old Southern segregationists
who kept black folk down. "This is part of the old-boy plantation
mentality," he told jurors. "The old- boy network mentality equals
discrimination and victimization." He added that the civil rights
"battleground of the 21st century is in the workplace." (The Recorder, July
18, 2000)

HOLOCAUST VICTIMS: German Firms Soon to See If Protection Is Watertight
companies should discover in a matter of days whether the elaborately
crafted legal agreement to protect them from Nazi-era forced and slave
labour claims is watertight. "We hope to have an answer very quickly," said
Stuart Eizenstat, the US deputy treasury secretary, at a news conference to
mark the signing in Berlin of a DM10bn (Pounds 3.2bn) deal settling one of
the longest disputes since the end of the second world war.

Mr Eizenstat said the 55 cases already pending against German companies in
US federal courts had recently been consolidated into one hearing before
one judge.

The case, expected to be heard shortly, should be decisive in demonstrating
whether the framework for protecting German companies from class action
suits in the US by way of a "statement of interests" issued by the US
government is effective.

The statement advises courts that Washington deems it "in the foreign
policy interests" of the US for any claims against German companies to be
directed to the foundation set up as part of the complex deal.

The Berlin government and German industry have each promised to contribute
DM5bn to the settlement, which includes the creation of a foundation to
oversee compensation claims.

Although commitments from the business community are still running well
short of the total, Manfred Gentz, the DaimlerChrysler finance director and
leading businessman behind the deal, said the first payments should be made
by the end of this year.

Negotiations on the deal continued until almost the last minute, as
participants discussed issues including the precise legal wording of the
English and German documentation and lawyers' fees. The class action
lawyers will receive more than DM100m. (Financial Times (London), July 18,

INMATES LITIGATION: Settlement Reached in Population Cap Suit in PA
City officials and attorneys representing inmates have agreed to a
preliminary settlement ending an 18-year, federal class-action lawsuit that
capped city prison population and forced the release of hundreds of inmates
awaiting trial, the Philadelphia Daily News reported Tuesday, according to
the Associated Press. While the cap caused widespread controversy in the
city, it ultimately failed to control the city's prison population.

Both sides are to meet on July 27 to hear from members of the inmate class
in the case of Martin Harris and others against the city of Philadelphia.
Final approval must be given by the parties and U.S. District Court Judge
Norma Shapiro, the newspaper reported.

In exchange for giving up its lawsuit and a possible contempt ruling
against the city from Shapiro, the inmates would get a pledge from the city
to have independent professionals continue monitoring prison policies for
two years and substantial renovations to the aged House of Correction, the
city's oldest prison.

Several factors pushed the parties toward settlement: On the one hand, a
1995 federal law made federal litigation over prison living conditions much
more difficult to win, while attorneys for the inmates presented a strong
case for holding the city in contempt for failing to live up to a 1991
consent decree, in part by failing to replace the House of Correction.

Though Shapiro has chosen not to rule on the contempt issue at the request
of both sides, she noted that "the city could be subject to substantial
penalties" if she ruled against it.

Starting in 1986 and then again in 1991, the court approved a consent
decree that detailed the actions the city prison system had to take. Court
hearings followed, where attorneys argued over whether the city had lived
up to the decree.

From a prison population of about 3,500 in the late 1980s, the system has
now pushed to a daily population close to 7,000.

In a letter to inmates, Shapiro set out the results of the decree,

  *  Closing Holmesburg Prison in 1995 with the opening of the Curran-
      Fromhold prison. Poor living conditions in Holmesburg led to
      lawsuits in both state and federal courts.

  *  Millions of dollars of improvements to the entire system based on a
      10-year plan.

  *  A ban on triple celling and the use of non-permanent housing areas
      as sleeping quarters for inmates.

  *  Development of prison standards and a monitoring system based on
      reports from experts in prison issues.

As part of the deal, the city's Prison Board of Trustees, which has been
beefed up in its technical expertise by the addition of William Babcock,
Shapiro's former prison master, will assume a more aggressive role in
reviewing policies, the Daily News reported.

Renovations at the House of Correction must be finished by 2003. A series
of interim deadlines will be set up, and failure to meet them will lead to
daily penalties of up to $5,000 per day. (The Associated Press State &
Local Wire, July 18, 2000)

INSURERS: Regulators in FL and GA Suspect Continued Racial Bias
Nearly a month after one of the largest insurers in the United States
agreed to pay more than $215 million in penalties and restitution to
resolve claims that it charged black customers more for coverage than white
ones, regulators in Florida and Georgia said they suspected some companies
were continuing to discriminate.

The regulators said they thought that at least four companies were
continuing to discriminate in premium collections in Georgia and at least
one was doing so in Florida. But they said their investgations were in the
preliminary stages and that the number might well grow as they gathered
more information.

Both Bill Nelson, the insurance commissioner in Florida, and John W.
Oxendine, the commissioner in Georgia, issued orders that the practice be
stopped immediately. The orders apply to 28 companies in Florida and 23 in
Georgia. Ignoring the order, the regulators said, could lead to fines and
revocation of sales licenses.

Neither state would identify companies suspected of discrimination. But
they said that while they developed their cases, they wanted to pre-empt
further discrimination. "We don't want to let another day go by with
consumers paying higher premiums because of the color of their skin," Mr.
Nelson said.

On June 21, American General, the nation's fourth-largest life insurer,
agreed to pay $215.5 million in fines and restitution to settle a
class-action suit and accusations by regulators that for decades it had
charged black customers up to 30 percent more than it charged white ones
for burial insurance. American General acknowledged that it had continued
to collect the discriminatory premiums until April, when Mr. Nelson ordered
the company to stop.

Just last week, the two largest American life insurers -- MetLife and
Prudential Insurance of America -- were accused in separate class-action
suits of charging blacks more than whites for coverage. Both companies
acknowledged they had priced life insurance based at least in part on race
but said they stopped collecting premiums on all burial policies, known as
industrial life, in the early 1980's.

For decades, until the civil rights actions of the early 1960's, the
insurance industry sold life insurance based on actuarial tables indicating
that blacks were likely to die sooner than whites. Later, the actuaries
came to believe that longevity was related to economic conditions rather
than race.

Anticipating paying death benefits to blacks sooner than to whites, the
insurers charged blacks higher premiums. In many cases, the companies also
often charged both blacks and whites more in premiums than the policies
would eventually pay their heirs.

Florida began investigating the discrimination last fall. In Atlanta, Mr.
Oxendine said his office had begun looking into companies in Georgia just
last month. "We definitely see indications that some of these policies are
still in force and that the race-based premiums are still being collected,"
he said. "We've just started. We haven't looked at most of the companies
yet." (The New York Times, July 18, 2000)

LAMINATES MAKERS: Barrett, Johnston Files Suit in TN over Price Fixing
A class action lawsuit was filed on July 14, 2000 in Davidson County,
Tennessee against Premark International, Inc., Wilsonart International,
Inc., International Paper Company, Panolam Industries International, Inc.,
and Pioneer Plastics Corporation, charging the companies with price fixing
in the high pressure laminate industry (HPL). HPL's are used to make
durable and impact-resistant decorative surfacing products, such as kitchen
and bath countertops, eating surfaces, doors, lavatory dividers, desktops
and work surfaces.

The complaint alleges the defendants violated the Tennessee Trade Practices
Act ("Antitrust statute") and the Tennessee Consumer Protection Act of
1977. In addition to Tennessee purchasers who have paid for HPL's since
January 1, 1994, the complaint is also brought on behalf of purchasers in
the states of Alabama, California, Kansas, Maine, Michigan, Minnesota,
Mississippi, New Mexico, New York, North Carolina, North Dakota, South
Dakota, West Virginia, Wisconsin, and the District of Columbia, in light of
the similar antitrust laws of those states.

The lawsuit is one of several which have been filed around the country
against these companies, however, unlike those suits filed in federal
courts on behalf only of "direct purchasers" of HDL, this suit is also
brought on behalf of consumers in 16 states who have antitrust statutes
similar to Tennessee which allow consumers, who are defined by law as
"indirect purchasers" to bring suit for violations of those states'
antitrust laws.

The suit, charging violations of the Tennessee Trade Practices Act and the
Tennessee Consumer Protection Act, was filed on behalf of Custom Woodworks,
Inc. in Davidson County, Tennessee, by the law firms of Barrett, Johnston &
Parsley and Branstetter, Kilgore, Stranch & Jennings, of Nashville,
Tennessee. The lawsuit charges that the companies conspired to fix the
prices for HPL's causing consumers to pay supra-competitive prices. The
lawsuit asks for compensatory and statutory damages in accordance with
Tennessee law.

Contact: George E. Barrett, or Douglas S. Johnston, Jr., or Edmund L.
Carey, Jr., of Barrett, Johnston & Parsley, 615-244-2202

MCDONALD'S: Fails to Abort Trial in Aust. for Monopoly McMatch & Win
An attempt to abort the trial of the class action against McDonald's over
the controversial Monopoly McMatch and Win competition failed. Federal
Court Justice John Dowsett dismissed an application on behalf of the 34
claimants to have the six-month long trial aborted because of perceived

The allegations concern Justice Dowsett's former associate, who in March
this year commenced employment with Sydney law firm Baker and McKenzie,
which is representing McDonald's in the case. The man, not referred to by
name in the judgment, had been employed as Justice Dowsett's associate when
the case against McDonald's started the previous October and left in
February this year, a month before starting at Baker and McKenzie.

Legal firm Shine Roche McGowan, representing the disgruntled McDonald's
customers, claimed that the former associate may have been privy to
confidential and important information, which if disclosed, could quite
easily be influential to the McDonald's case.

Justice Dowsett, in lengthy written reasons, determined the motion must
fail for three main reasons including that the former associate and staff
from Baker and McKenzie had sworn affidavits saying there had been no
disclosure concerning the case. Justice Dowsett also pointed to the fact
that the issue was only raised in July, even though he formed the class
action legal team of all the circumstances in March. He added that to "a
very great extent the legal system depend on the trial fairness and lack of
bias on the part of the trial judge. There is no reason to believe that the
incident in question will result in other than a fair adjudication, based
on the law and the admissible evidence led by the parties," he wrote.

A total of more than 6,000 McDonald's customers who played Monopoly McMatch
and Win between June 4 and August 5 last year, are claiming prizes, this
includes 1100 claiming the major prize, a new Honda HRV four wheel drive
vehicle. The claimants have accused the international company of a cover-up
after they discovered that there was a problem with the nation-wide
competition. McDonald's in turn have accused their former customers of
"lying" and "cheating" in the game. To play the game, participants
collected stamps on allocated products and matched them with squares on a
Monopoly tray mat to win Disneyland holidays, toy shop vouchers,
camcorders, computers and the cars.

The trial which has heard evidence in Brisbane, Sydney, Melbourne and
Adelaide is now sitting in Brisbane where Justice Dowsett is hearing final
submissions. (AAP Newsfeed, July 18, 2000)

TOBACCO LITIGATION: AP Talks about States' Share and Use of Funds
States plan to spend $8 billion through next year in tobacco settlement
money the first installment of a 25-year cash flow - and nearly half the
money is going toward health care services for working poor families, a
report shows.

Less than 10 percent of the money is going for smoking prevention programs,
according to the National Conference of State Legislatures report that
gives the first comprehensive look at how states are using money from the
historic lawsuit settlement.

Instead, states have earmarked money for tax cuts, general funds and other
initiatives that have nothing to do with anti-smoking themes, as well as
assistance for tobacco farmers, services for children, elderly care,
education and other programs. The report, detailing money appropriated by
44 states for fiscal years 2000 and 2001, showed states have enacted 91
laws governing how to spend their share of a massive 1998 settlement under
which tobacco companies will shell out $206 billion to states over the
following 25 years. Four other states settled separately for an additional
$40 billion.

The money was to compensate states for the cost of treating smoking-related
illnesses of people on Medicaid. But there are no rules on how the money
can be spent, so the settlement funds have provided a windfall for states
to use on a variety of health and non-health related programs, from
rainy-day funds and property tax relief to fixing dilapidated schools and
beefing up teacher salaries.

"In the end, each state has acted in a manner that reflects the concerns
and desires of their respective citizens," said William Pound, executive
director of the conference.

The report comes just days after a Florida jury ordered tobacco companies
to pay a $145 billion penalty in a class-action suit filed on behalf of
sick Florida smokers. The companies plan to appeal.

Thirty-eight states have appropriated $3.5 billion - 43 percent of the
total amount states will spend through fiscal 2001 - to help low-income
people get health care, reflecting widespread concern about the 44 million
Americans who lack health benefits.

Many states have earmarked the money for expanding existing health
insurance programs for the poor. Washington state has appropriated $153
million of the $ 168 million it received for a state-funded program for
working poor families that don't qualify for Medicaid and can't afford to
buy their own insurance.

New Jersey, which received $552 million, will use $100 million to expand
Medicaid, a state-federal insurance program for low-income people.

The report also showed that 17 states used $1.3 billion for a variety of
non-health related services. Illinois, which received $437 million, used
$315 million for property tax relief and an earned income tax credit and
just $26.4 million for anti-smoking programs and $8.9 million for health

Minnesota, New York and Wisconsin each put over $200 million in their
general funds. They allocated $20.2 million, $30 million and $20 million
for anti-smoking campaigns, respectively. Minnesota and Wisconsin didn't
use any money for health care; New York allocated $338 million for health

Tobacco prevention programs represented the third largest area of spending
among all states, with $754 million going toward community and school-based
programs, anti-smoking media campaigns and other tobacco control
initiatives. Prior to this year, states spent just $140 million of their
own money for anti-smoking campaigns.

Other spending detailed in the report:

  * Seven states are spending $537 million to assist tobacco growers;

  * Ten states earmarked $534 million for programs benefiting kids,
     including foster care, pre-school learning and after-school

  * leven states put $496 million in reserve to insulate themselves
     against future reductions in annual tobacco payments;

  * Fourteen states will spend $483 million on education, including
     remodeling schools and scholarships;

  * Twelve states have earmarked nearly $270 million for long-term care,
    including home and community care designed to keep the elderly
    living at home, long-term care insurance and prescription drug
    coverage for seniors.
          State May Have Missed Chance to Take Funds up

The state may have missed its chance to take a big chunk of its funds from
a national tobacco settlement up front, an influential legislator says.

Sen. Dave Kerr said Monday that last week's verdict in a Florida lawsuit by
smokers against tobacco companies bolsters his belief in a proposal that
failed to win legislative approval this year. Kerr, R-Hutchinson, chairman
of the Senate Ways and Means Committee, was a vocal supporter of the plan.

The proposal would have brought the state $415 million up front, and
supporters saw it as way to hedge against the possibility of the tobacco
companies going bankrupt.

Many legislators were skeptical of that possibility and had other questions
about the plan. The Senate approved a bill containing the plan, but the
House took no action, and the measure died when the Legislature adjourned.

Kerr made his comments in the wake of a Florida jury's decision in a
class-action lawsuit on behalf of 700,000 sick smokers in that state
against major tobacco companies. The jury awarded a record $145 billion
verdict, and the companies say that amount would bankrupt them. (The
Associated Press, July 18, 2000)

TOBACCO LITIGATION: Firms to Seek to Overturn $ 145 Bil Punitive in FL
Lawyers for Philip Morris Cos. and other tobacco companies told a Florida
judge they'll file motions within a week that may seek to overturn the
record $ 145 billion in punitive damages a jury awarded last Friday. Judge
Robert Kaye, at a hearing Monday morning, said he may schedule arguments
next week on whether to enter a final judgment against the cigarette makers
in the class-action suit brought on behalf of sick Florida smokers.
Attorneys for Philip Morris have said the judge shouldn't issue a final
judgment until the individual claims of hundreds of thousands of class
members are heard in court--a process that could take decades. The six
jurors deliberated less than five hours last Friday.

                     What Does the Verdict Mean

What does last Friday's $144.8-billion punitive damage verdict in a smoking
case mean? Even apart from all the zeros after the dollar sign, plenty. The
jurors in the case were clear in saying they intended to send a message
about the duplicity of the tobacco industry. "We had a sense of mission,"
the foreman said in an interview.

The verdict shows that the well of public anger over the industry's
reckless and deceptive behavior in recent decades is not empty.

The crushing award against the tobacco companies in a class action brought
on behalf of sick Florida smokers is a record, but it probably won't stand.
For one thing, Florida law bars damage awards that could bankrupt a
business, and the cigarette makers, certain to appeal, have already claimed
they can't possibly pay this amount. Moreover, if any punitive award stands
after appeal--and if the entire case isn't thrown out--damages won't be
payable until after mini-trials for the hundreds of thousands of
class-action members who might be entitled to a share. This could take

The award is excessive by any standard, but the six-member jury that sat
through the two-year trial clearly meant it to be so. In a first-stage
verdict last July, the jury ruled that smoking was indeed a cause of 20
different diseases and that cigarette makers had committed fraud in falsely
denying the risks and addictive power of smoking. Tobacco industry
officials "lied to the American public," the jury foreman said. "They
devastated millions of lives." All true, though of course smokers were well
warned of smoking's dangers by government and medical authorities.

Rolling the dice in the tort liability system is hardly the best way to
make public policy. One unintended consequence of this verdict, for
example, is that there is now cause for concern among the states and
localities expecting hefty annual payments from the cigarette makers as
part of the 1998 settlement intended to reimburse state and local
governments for the public costs of treating sick smokers. After paying $
144.8 billion, could the companies make good on their $ 206-billion
commitment? This is a point the tobacco companies are making, over and
over. Still, the companies have mostly themselves to blame for the Florida

The verdict should also be read as an expression of frustration directed at
the industry's loyal benefactors in Congress and their refusal, year after
year, to hold the cigarette companies accountable for their dishonesty and
the harm they caused. This message, beyond the numbers, is one that
Congress should listen to.
(Los Angeles Times, July 18, 2000)

TOBACCO LITIGATION: Italy Joins Hunt for Cash on Their Own Soil
Italy may consider suing U.S. tobacco firms on their own soil for the harm
caused to Italian smokers, Corriere della Sera newspaper reported on
Sunday. The move follows a legal decision last week to make U.S. tobacco
companies pay massive reparations to American smokers.

Codacons, Italy's main consumer association, said it had proposed that the
government 'begin legal proceedings on behalf of the Italian people
directly in the United States," Corriere della Sera reported.

Last Friday, a jury in Miami ordered U.S. tobacco companies to pay US$
145-billion in punitive damages for injuring hundreds of thousands of
Florida smokers. Tobacco lawyers have pledged to spend years appealing the
verdict, and may negotiate a more modest settlement.

Italy's agriculture minister, Alfonso Pecoraro Scanio, said any legal
action in the United States would be within the power of Prime Minister
Giuliano Amato.

'We will decide the steps the government will take once we have received an
opinion from the State Bar Association," Mr. Scanio, who has already had
contact with lawyers in the United States, told Il Sole 24 Ore newspaper.

Codacons said the aim would be to obtain compensation for Italian smokers
that they cannot get from their own country. The Italian state itself
manufactures cigarettes under the brand Monopoli di Stato. (National Post
(formerly The Financial Post), July 18, 2000)

TOBACCO LITIGATION: Moody’s Confirms PM, BAT, RJ, Loews Stable Outlook
Investors Service said it confirmed the ratings of Philip Morris Cos Inc,
RJ Reynolds Tobacco Holdings Inc, British American Tobacco PLC and Loews
Corp, following the award by a Florida jury in the Engle case of punitive
damages amounting to 145 bln usd against the companies.

Moody's also confirmed the stable outlooks for those companies.

Based on the trial structure defined by the trial court judge, the
companies would not have to pay these damages before the end of a possibly
decades-long process of individual trials, it said. The trial court judge
could reduce the awards before entering the verdict, it said.

The probability of class action decertification on appeal of Engle is high,
and the companies have significant protection against the risk of an
overwhelming bond requirement. (AFX European Focus, July 18, 2000)

TV COMMUNICATIONS: Reports on Settled Shareholders Suit; Pays for Stock
On April 2, 1994, two TVCN shareholders filed a class action suit against
the Company in the United States District Court for the District of
Colorado under Case No. 94-D-837.

Merton Frederick, as Trustee of the M&M Frederick, Inc. Profit Sharing
Plan, f/k/a M&M Frederick, Inc. Defined Benefit Pension Plan; and F.S.
Workman; on Behalf of Themselves and All Others Similarly Situated, were
the Plaintiffs, and the Defendants were TV Communications Network, Inc.;
TVCN Of Michigan, Inc.; TVCN Of Washington, D.C., Inc.; International
Integrated Systems; TVCN International, Inc.; International Exports, Inc.;
Omar Duwaik; Jacob A. Duwaik; Kenneth D. Roznoy; Scott L. Jenson; and Scott
L. Jenson, P.C.

The company tells investors it has always emphatically denied the
plaintiffs' allegations in this legal action and were vigorously defending
the case. The Plaintiffs made several settlement offers, the first of which
was made only two weeks after filing their allegations. But, all offers
were rejected by the Company. However, because of the continued drain on
resources caused by nearly four years of protracted and expensive
litigation, on October 31, 1997 TV Communications agreed to settle the
case. Pursuant to the terms of the settlement agreement, TVCN agreed to pay
the plaintiffs the sum of $1.5 million in full settlement of all their
claims of any nature whatsoever, and that the participating shareholders
agreed to relinquish their stock of TVCN back to the Company. On March 3,
1998 the Court approved the settlement and dismissed the class action with

Of the $1.5 million paid pursuant to the settlement agreement, $705,268.82
was paid as fees and expense to the plaintiff class' counsel. The remaining
funds were ordered distributed to the members of the class that had filed
valid proofs of claim. In addition, pursuant to the settlement agreement,
those class members who had purchased TVCN stock during the class period
and who still retained the stock at the time of the settlement, were
required to relinquish those shares back to the Company in order to
participate in the settlement. Pursuant to this provision, the Company
received 359,960 shares of stock from class members participating in the
settlement. TVCN then canceled the shares of common stock returned as a
result of the settlement.

U OF MICHIGAN: GM Backs Minority Admissions Program
General Motors Corp. is publicly supporting the University of Michigan's
minority admissions programs, the subject of two federal class-action
lawsuits. Eliminating affirmative action would deprive businesses of
well-trained minority candidates and reduce campus diversity, GM said in a
friend-of-the-court brief filed Monday in U.S. District Court.

Two 1997 lawsuits allege the university's admissions policies discriminate
against whites in favor of less-qualified minorities. A case over
undergraduate admissions is set for trial this fall, while one over law
school admissions is set for January.

''What we are doing is supporting the policy of the university that will
encourage a very diverse student body that ultimately is to the advantage
of America and American businesses,'' GM Vice President Harry J. Pearce
said. About 23 percent of GM's 193,000 U.S. employees are minorities,
Pearce said.

Michigan President Lee Bollinger praised GM's intervention. ''What is at
issue in these cases is of central importance not only to every selective
university in the country, but also to every other major institution in the
country, not the least of which is business,'' Bollinger said.

The lawsuits were filed by the Washington, D.C.-based Center for Individual
Rights on behalf of white students who were not admitted to the Ann Arbor

''As a large corporation that has to worry about their public image, I
don't blame them for coming down on the politically correct side,'' Center
for Individual Rights attorney Curt Levey said of GM.

Other states have scrapped affirmative action policies in response to legal
or political challenges. Texas universities lost a court case similar to
those pending against Michigan in 1996. California also was forced to
change its admissions policy that year after voters passed Proposition 209,
which abolished racial preferences. (AP Online, July 18, 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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