/raid1/www/Hosts/bankrupt/CAR_Public/000929.MBX              C L A S S   A C T I O N   R E P O R T E R

            Friday, September 29, 2000, Vol. 2, No. 190


AMERICAN FAMILY: Haddonfield Firm and Summit Solo Win Sweepstakes' Pact
AOL: Users Should Not Be Forced to Transfer Suit to Virginia, Judge Says
BANK OF AMERICA: Consumer Anger at ATM Fees Flared Again in Seattle Suit
BLOOD BANKS: Transfusion Caused Hepatitis, Chicago Minister Alleges
FLORIDA : Utility Pays for Troubled Insurance Subsidiary

GENERAL MOTORS: 500 to Get Settlement For Tornado-Damaged Cars
ILLINOIS: State Sued over Slow Services to Developmentally Disabled
JOHN DAWS: SEC Accuses Trio Of Former Tech Executives at Cylink Corp.
KRAFT FOODS: Consumer Sues over Taco Shells Made with Gene-Modified Corn
LAIDLAW INC: $275M in Funding May Be a Challenge But Not Impossible

OSICOM TECHNOLOGIES: Ct Preliminarily OKs Settlement for Securities Suit
PILOTS UNION: AA Passengers Can Sue over Travel Disruption Due to Strike
PREMIER LASER: CFO to Pay $10,000 SEC Fine for Inflated Irvine Revenue
REVLON, INC: Stull, Stull Files Securities Suit in New York
SHELL OIL: Dealers Claim Conglomerate Overcharge to Squeeze Them out

SOTHEBY'S HOLDINGS: Philly Lawyers Head Shareholder Settlement Team
THOMSON CONSUMER: Proof Burden in Consumer Fraud Suit Vs. TV Maker Eased
TIG HOLDINGS: Officers to Stand Trial in N.Y. Securities Fraud Suit

* Hospitals Ask IL Supreme Court to Restore Med-mal Laws
* Wireless Web Features Create Privacy Features for Service Providers


AMERICAN FAMILY: Haddonfield Firm and Summit Solo Win Sweepstakes' Pact
Class action over allegedly deceptive sweepstakes mailings settles for $33
million, with another $8 million going for legal fees. Sweepstakes Class
Action Settles For $33M, and $8M in Legal Fees Haddonfield firm, Summit
solo are likely to share in the bounty

A Haddonfield firm and a Summit solo practitioner came up winners in the
settlement of a nationwide class action against sweepstakes sponsor
American Family Publishers of Jersey City. Rodriguez & Richards and John
Maher are among 25 to 50 firms expected to share more than $8 million fees
and costs in the multidistrict case.

The suit alleged that deceptive sweepstakes mailings induced recipients to
order magazines and merchandise by creating the false impression that the
purchases were necessary to win, or improved the odds of winning.

On Sept. 11, U.S. District Judge Nicholas Politan in Newark approved the
plaintiffs' attorneys' fees and the $33 million settlement in In re
American Family Publishers Business Practices Litigation, 98 CV 1653 (MDL
No. 1235).

He also confirmed the Chapter 11 plan in the underlying bankruptcy, In re
American Family Enterprises, 99-41774. While other class actions have
produced higher settlements and fees, the case - in terms of the sheer
class size - is among the largest class actions ever litigated. Politan's
orders state no specific class size but refer generally to "tens of
millions of members, placing them among the largest of which the Court is

The class consists of everyone in the United States, including Puerto Rico
and U.S. territories, who received American Family Publishers' sweepstakes
materials between Jan. 20, 1992 and Dec. 9, 1999, the date Politan gave
preliminary approval to the settlement.

As Guy Burns, a lead counsel in the case, comments, "It was the stated goal
of American Family Publishers to put a piece of mail in every household in
the country at least four times a year," and the company largely succeeded
in that effort. Burns, a partner in the Tampa, Fla., firm of Johnson,
Blakely, Pope, Boker, Ruppel & Burns, is one of three designated lead
counsel for the class action plaintiffs. The others are Elizabeth Cabraser
of San Francisco's Lieff, Cabraser, Heimann & Bernstein and Steven Katz of
Carr, Korein, Tillery, Kunin, Montroy, Cates & Glass, of Belleville, Ill.

Under the fee order, the lead counsel will allocate and distribute the
award among class counsel. They will distribute $8,028,435 after payment of
$631, 565 in out-of-pocket expenses from the $8,660,000 award. Just how
many firms will divide the jackpot is unclear. There were 63 separate
litigations in federal and state courts around the country -- 28 of which
were class actions -- that were resolved by the settlement and whose
plaintiffs' attorneys arguably are entitled to some of the monies.

Some lawyers, including Lisa Rodriguez of Rodriguez & Richards, worked on
more than one case, and several law firms often represented plaintiffs in
the same action. Noting that some lawyers did not assist in prosecuting the
multidistrict action, Burns estimates that about 25 firms will split the
pot. Katz says it could reach 50 firms. Nor have lead counsel decided on a
formula for distributing the fees. "The issue has not been addressed," says
Katz, and will not be until any appeals are resolved. Only the 140 or so
claimants who objected to the settlement have standing to challenge
Politan's orders.

Burns says it is premature to comment on fee allocation. But, he adds,
"generally speaking, the allocation will be done in relation to the work

Also likely to be taken into account, says Katz, are the date the lawyer
filed his or her case and how far along they were when the Judicial Panel
on Multi-District Litigation transferred all federal court actions to the
District Court of New Jersey in August 1998.

Elizabeth Cabraser was out of town and could not be reached for comment.
Her partner, Barry Himmelstein, who also worked on the case, declines to
discuss the allocation.

Though not one of the lead counsel, Rodriguez stands to do well in the
allocation process, under the factors identified by Katz and Burns. She
says that in 1997 her firm, acting at the behest of the Lieff Cabraser
firm, filed two of the earliest cases.

Stachula v. American Family Enterprises et al., C-31-98, filed in Bergen
County Superior Court, was stayed during the pendency of the multidistrict
litigation. The other, Jackson et al v. American Family Enterprises et al.,
a class action filed in U.S. District Court in Newark, became the lead case
in the multidistrict action.

Rodriguez accordingly took on an active role as liaison to the lead
counsel. She spent many hours, she says, reviewing all the papers, which
were filed over her signature, and attended all conferences and hearings.
Partner Ira Richards also assisted in the litigation. Rodriguez, who says
she is pleased with the total fee award, expects "it will be divided up

Maher says he was brought in before consolidation as local counsel for a
plaintiff's firm from Boston, and his role was mainly to monitor the

The fees are less than the $11.7 million ceiling plaintiffs' counsel
imposed in the December 1999 notice of settlement. They later reached the
$8 million figure in negotiations with defense counsel. Katz calls the $8
million "a fair fee," especially given the sweepstakes company's
bankruptcy. But he acknowledges that it is a bit lower than fees allowable
under standard measures in common fund cases.

As Politan's order notes, the fee amount is about 24 percent of the $33
million in cash to be distributed under the settlement. It is also about 20
percent of the $39.6 million value of the settlement, including additional
sweepstakes to be held, and less than 17 percent of the total benefit to
the class, including counsel fees and costs. Politan compares these
percentages with the typical one-third contingency fee percentage, and a
benchmark of 25 percent for complex litigation.

The amount also passes the lodestar "cross-check," Politan found, with its
lodestar multiplier of 1.8 based on the $4.45 million value of the 16,600
hours the plaintiffs' attorneys devoted to the litigation.

Politan rejected application of the "sliding scale approach," which he
described as appropriate for megafund cases, which he defined as starting
at a settlement figure of $100 million. He also found that the fees satisfy
the " quality of representation" factor based on the "excellent result,"
the difficulties faced and the quality of counsel.

The $8,660,000 will not come out of the $33 million to be paid to
claimants. Like the settlement itself and the Chapter 11 plan, the fees
will be funded by Time Inc. and a related entity, AFP Partners LLC.

Time, a defendant in the class action, owns the sweepstakes company, now
known as Magazine Associates.

Under the settlement, a subclass of the millions who bought magazine
subscriptions or other goods in response to a sweepstakes mailing were
eligible to submit claims for refunds until May 5. Refunds will be
distributed among the more than 143,000 people who filed claims. The
refunds will be allocated in proportion to the claimants' purchases in
excess of $40 per year or "their total purchases influenced by the belief
that a purchase was either necessary to win or enhanced their chances of
winning." The injunctive relief also provided by the settlement imposes
numerous requirements on Magazine Associates in future contests. These
include printing rules in at least 8-point type and explaining that no
purchase is necessary to win.

Lead counsel for the defendants was former federal judge Frederick Lacey,
of the Newark office of LeBoeuf, Lamb, Greene & MacRae. He did not return
calls seeking comment. (New Jersey Law Journal, September 18, 2000)

AOL: Users Should Not Be Forced to Transfer Suit to Virginia, Judge Says
America Online users who sue the Internet giant should not be forced to
transfer their lawsuits to the company's home state of Virginia because it
is "unfair and unreasonable," an Alameda County judge has ruled.

In a decision, Superior Court Judge Ronald Sabraw said legal remedies in
Virginia are not comparable to those in California, which AOL has

The decision comes in a lawsuit filed in June by Al Mendoza Jr. of
Sacramento, who accused AOL of continuing to charge his credit card --
which he was forced to cancel -- three months after he canceled his trial

"If I am required to sue in Virginia, I will drop the matter because the
cost of travel alone is obviously many times more" than the $65 that AOL
owed him, Mendoza said in court papers.

Mendoza said he was surprised when he learned that AOL had a standard
membership agreement requiring all lawsuits to be filed in Virginia.

Mendoza said he did not remember reading a clause saying all lawsuits had
to be filed in Virginia and lambasted AOL for using it "as a way to avoid
its legal responsibilities."

He has asked the case to be deemed a class-action lawsuit on behalf of
"many hundreds of people who I believe have suffered from the same unfair
billing practice."

Nicholas Graham, an AOL spokesman, said that he could not discuss the
lawsuit because he was unfamiliar with its details. Everett Johnson, a
Washington, D.C., attorney representing AOL, did not return a call seeking

Mendoza said he signed up for AOL in early October using an unsolicited
free disc he received in the mail that promised free trial service for 30
days. He remembered following numerous instructions and reading "densely
worded, small-size text that was hard to read on the computer screen."

Kennedy Richardson, an Oakland attorney representing Mendoza, said AOL
routinely mails formal requests for dismissals to local small-claims
courts, citing the Virginia requirement. In most cases, the claimants drop
the matter. (The San Francisco Chronicle, September 28, 2000)

BANK OF AMERICA: Consumer Anger at ATM Fees Flared Again in Seattle Suit
Consumer anger over automated teller machine fees has flared again in a
lawsuit filed against Bank of America Corp. by a Seattle resident who said
he was improperly surcharged at a machine the bank owns in a grocery store.
The lawsuit, filed Sept. 21 in U.S. District Court in Seattle, alleges that
the bank violated the Electronic Funds Transfer Act when it surcharged Bank
of America customers at unbranded ATMs the bank owns and operates at
off-premises sites.

Jeremy Knapp, a Bank of America customer, initiated the lawsuit, and he and
his lawyer are seeking class-action status. Mr. Knapp said he was
repeatedly surcharged for withdrawals at an ATM in his neighborhood grocery
store. When he noticed the Bank of America logo on his receipt, he said, he
contacted a customer service representative who verified that the company
owns the machine.

The company refunded that month's surcharges but subsequently charged Mr.
Knapp again for using the machine.

Mr. Knapp is represented by Adam Berger of Schroeter, Goldmark & Bender in
Seattle, one of the largest personal injury law firms in the Northwest. "As
we read it," Mr. Berger said, the Electronic Funds Transfer Act "basically
requires the bank to tell its customers up-front when and how much it will
charge for fees, so the violation really goes back to the terms of the
customer agreement."

Mr. Berger said he is unsure whether the company's current customer
agreement covers this practice. He said that the several mergers involving
Bank of America make it difficult to determine what customer agreement
covered the machine in question.

Mr. Knapp's complaint also charges the company with violating the
Washington Consumer Protection Act, which, according to the office of the
Washington attorney general, "declares that unfair and deceptive practices
in trade or commerce that harm the public interest are illegal."

Bank of America declined to comment. "That's our policy when there's
pending litigation," said Holly Siegel, a spokeswoman.

If the court makes the complaint a class action, Bank of America customers
in the state of Washington who have been surcharged on unbranded machines
may qualify for reimbursements. Mr. Berger said the plaintiffs will also
seek statutory penalties. Under the state Consumer Protection Act, if a
class of plaintiffs wins such a case, the court may award triple damages up
to $10,000 per plaintiff, in addition to attorney's fees. Violation of the
Electronic Funds Transfer Act may incur a damage award of up to $500,000.

Mr. Berger said one goal of the lawsuit is to get the company to stop
surcharging its customers at ATMs that it owns. Though the company could
justify the surcharge if it were covered under a customer agreement, Mr.
Berger said, exposing the practice "might be a little difficult in a public
relations sense."

Alanna Kellogg, president of an electronic bank consulting firm, Kellogg
Group in St. Louis, said it is difficult to gauge how widespread this
practice is in the banking industry since, for obvious reasons, banks do
not publicize the matter. "With unbranded ATMs, it's difficult to know who
owns them, especially with the explosion of ATMs owned by nonbanks and
retailers," she said. Ms. Kellogg said the lawsuit against Bank of America
may have originated with a servicing mistake in which the wrong receipt
paper was installed in the machine, giving away its ownership.

A bank client of hers struggled with this issue, Ms. Kellogg said, when it
put ATMs in casinos and did not want its name associated with gambling.

The bank in question was "very, very careful" about altering its customer
agreement to reflect the practice, and though "we weren't going to
advertise it, we absolutely presumed that our customers could know," she

Though various states and municipalities have tried to take the ATM
surcharge issue into their own hands by enacting bans, these efforts have
largely failed as courts and regulatory agencies upheld the legality of
banks' surcharging noncustomers. The Seattle lawsuit may be one of the
first attempts by a consumer to fight the surcharge issue -- or at least
one aspect of it -- through the legal system. "I think what this shows is
that people really hate ATM surcharges," Mr. Berger said. (The American
Banker, September 28, 2000)

BAPTIST FOUNDATION: Arizona Blames Accounting Firm for Positive Audit
State securities regulators filed a complaint accusing an accounting firm
of giving the Baptist Foundation of Arizona a good audit in 1996 that
allowed it to keep raising money despite knowing that the foundation was
financially troubled.

The complaint filed Wednesday by the Arizona Corporation Commission's
Securities Division seeks administrative penalties against Arthur Andersen
LLP and an unspecified amount of restitution for investors.

David Scullin, Arthur Andersen's managing partner for Arizona, issued a
statement saying the firm is disappointed by the allegations. "As
previously stated, we believe we took appropriate actions and followed our
professional guidelines in our work," the statement said.

The accounting firm has 10 business days to request a hearing. If it does
not respond, the commission could enter a judgment.

According to the complaint, Arthur Andersen began seeing warnings signs in
1994 that foundation management was defrauding investors. Then, during the
1996 audit, a former foundation employee gave the firm information
confirming what the warning signs had suggested. The financially troubled
foundation and its affiliates raised more than $200 million based on the
audit, according to the complaint. Arthur Andersen's audits also
contributed to the Securities Division dropping an investigation of the
foundation in 1993. The division had been looking into allegations of
irregularities in the foundation's investment solicitations but didn't
pursue it after reviewing the clean audit.

Wednesday's complaint is the first attempt by the Securities Division to
assess blame in the case. It began current investigations of fraud at the
foundation in 1998.

The foundation filed for Chapter 11 bankruptcy protection in November,
listing debts of $640 million, $590 million of which is owed to about
13,000 investors.

The commission complaint follows the filing of three lawsuits against the
accounting firm in connection with the Baptist Foundation case. The suits
claim Arthur Andersen's negligence contributed to the foundation's collapse
and the loss of millions by investors.

Rich Himelrick, lead counsel in the class-action suit, said the
commission's action corroborates what plaintiffs have been saying.
"Foundation officials were operating a Ponzi scheme and Arthur Andersen
should have known it because they were told by a whistle-blower," Himelrick
said. "But they made what appears to be a conscious decision not to
disclose it. They could have prevented the loss of tens of millions of
dollars in investments." (The Associated Press State & Local Wire,
September 28, 2000)

BLOOD BANKS: Transfusion Caused Hepatitis, Chicago Minister Alleges
A Chicago minister filed a class action lawsuit Wednesday against
Rush-Presbyterian-St. Luke's Medical Center and three blood bank
organizations, alleging that they failed to inform him and other blood
transfusion recipients that they might be at risk for a dangerous liver

A lawyer for Rev. John David Sturman, who is infected with the hepatitis C
virus, said health care providers should call or send letters to all
patients who received blood before 1992, when screening tests for the virus
became widespread.

"Rush and its co-defendants incurred a moral and professional
responsibility to notify their prior blood-recipient patients of the
potential risk to their lives," Sturman, 51, said during a news conference.
"They have not met this moral imperative."

An estimated 4 million people in the U.S. are infected with hepatitis C,
though experts believe only a fraction of that number are aware they have
the potentially deadly disease.

Public health organizations have mounted large advertising campaigns in an
effort to encourage tests for people at risk for the virus, such as
intravenous drug users and people who had transfusions before 1992.

Some public health experts said sending out letters to all past transfusion
recipients would not help solve the problem. Such an approach would be
"very inefficient," said Dr. Miriam Alter, chief of epidemiology at the
hepatitis branch of the Centers for Disease Control and Prevention in

Patients at the highest risk, Alter said, are those who had transfusions in
the distant past. Yet those individuals, who may have moved or died in the
intervening years, are also the hardest to track down.

Alter said the danger is that transfusion recipients who do not receive a
letter might assume they are not at risk.

In addition to Rush, Sturman's lawsuit names the American Association of
Blood Banks, LifeSource Blood Services and Blood Systems Inc.
Representatives of those organizations declined to comment on the merits of
the suit Wednesday, saying they had not yet received copies of it or had
time to review it.

John Pontarelli, a spokesman for Rush, stressed that the hospital is in
compliance with local and federal regulations.

"The blood used at Rush is and has been as safe as possible," Pontarelli

In 1998, the CDC began a massive effort calling on hospitals and blood
banks to identify patients who had received blood tainted with the virus
before 1992. The campaign, called a targeted lookback, attempts to reach
only patients who are known to have received blood from donors in whom the
virus was later diagnosed.

Sturman, a minister with the Christian Church (Disciples of Christ), said
he believes he contracted hepatitis C in 1982 while being treated for
leukemia at Rush. He found out he had the virus in 1998, after hearing of
the federal lookback program.

Sturman said he would donate any monetary award that might result from the
lawsuit to a fund that would allow indigent patients to receive treatment
for hepatitis C. (Chicago Tribune, September 28, 2000)

FLORIDA PROGRESS: Utility Pays for Troubled Insurance Subsidiary
Florida Progress Corp. finally can see the end of its costly misstep into
the insurance business.

Two events Tuesday cleared the way for the St. Petersburg utility company
to walk away from its $ 120-million stake in Mid-Continent Life Insurance,
its troubled Oklahoma-based insurance subsidiary, and end litigation with
customers who claimed the company broke promises to never raise premiums on
their policies.

First, Florida Progress settled the lawsuit by agreeing to pay $
17.5-million to help protect policyholders against future rate increases.
Then, a judge approved a rescue plan that transfers 128,000 Mid-Continent
policies to American Fidelity Assurance Co. of Oklahoma City.

The deal ends an embarrassing chapter in Florida Progress history, getting
the issue out of the way before Carolina Power & Light completes its $
5.3-billion purchase of the utility company.

Mid-Continent, Oklahoma's oldest insurer, would cease to exist when
Oklahoma County District Judge Noma Gurich gives final approval to the
deal, likely by late November, Florida Progress spokeswoman Melanie
Forbrick said.

American Fidelity agreed not to raise premiums for at least 17 years on
so-called extra-life policies, the main insurance product sold by
Mid-Continent. Floridians hold about 7,800 such policies.

While Florida Progress regretted losing the investment and disputed charges
in the lawsuit, officials said it was time to end the long, costly battle
with Oklahoma regulators and policyholders.

"Negotiating a reasonable settlement is in the best interest of all parties
and removes some of the uncertainty surrounding Mid-Continent, which has
gone on for far too long," Florida Progress chairman and chief executive
Richard Korpan said in a statement.

Florida Progress bought Mid-Continent in 1986 for $ 87-million as part of
an ultimately flawed plan to diversify beyond its core electric power
business. The strategy led to investments in everything from orange groves
to aircraft leasing.

Mid-Continent began aggressively selling the extra-life policies, a blend
of traditional whole life and term insurance, outside the Southwest after
its sale to Florida Progress. The majority of the policy was made up of
term coverage that decreased in value every year. But the dividends were
used to buy add-ons to the term insurance to guarantee a fixed level of
protection - a big selling point. Mid-Continent heavily promoted the policy
as having "level" premiums, suggesting the annual cost of a policy would
not change over the years.

Former Oklahoma Insurance Commissioner John Crawford seized Mid-Continent
in 1997 after determining the company was insolvent because of a huge
shortfall in reserves. Florida Progress fought the move, saying the company
could raise premiums to cover future liabilities.

An Oklahoma judge agreed but put Mid-Continent in receivership. Crawford
sued Florida Progress, seeking to make the company financially responsible
for the deficit, which he estimated at $ 348-million. But Crawford was
defeated in his 1998 re-election bid. His opponent, insurance agent Carroll
Fisher, received more than $ 20,000 in campaign contributions from Florida
Progress executives.

Fisher put off the lawsuit to come up with a rehabilitation plan for
Mid-Continent. Last year he backed a plan to sell the policies to
Iowa-based Life Investors, which guaranteed no premium increase for 10
years. Florida Progress agreed to pitch in $ 10-million to soften the
impact of premium increases beyond that time.

The plan was attacked by a group of policyholders and competing bidders.
Policyholders argued they were promised premiums would never increase.

Gurich, the judge, ordered Fisher to hold another round of bidding on the

American Fidelity agreed to freeze rates for 17 years. The company also
will allocate $ 160-million to policyholders' reserves, enough to make up
the deficiency in reserves that landed Mid-Continent in receivership in the
first place.

On Tuesday, the sixth day of testimony on the American Fidelity plan,
Florida Progress sweetened its offer to policyholders by $ 7.5-million.

Florida Progress wrote off the original $ 10-million offer last year,
Forbrick said. Only the additional $ 7.5-million, plus up to $ 4.4-million
for the plaintiffs' attorney costs and court fees, still must charged to
the company, she said. "There will be no material adverse effects on
earnings," Forbrick said. (St. Petersburg Times, September 28, 2000)

GENERAL MOTORS: 500 to Get Settlement For Tornado-Damaged Cars
Nearly 500 people who bought tornado-damaged General Motors cars are due
refunds of between $2,000 and $19,000 under a settlement in a class-action

A tornado hit a storage unit at the Burlington Northern railroad yard in
Memphis, Tenn., on Nov. 19, 1991. Cars held at the yard were later sold as
new to customers in Arkansas, Mississippi and Tennessee.

Testimony in the lawsuit said 496 vehicles suffered damage ranging in value
from $200 to $4,800 - mostly to the exterior. Some customers were told that
"a windstorm caused minor cosmetic damage," court records show. "They
spruced them up and sold them as new," said Phillip Duncan, who represented
the customers.

GM lawyer David Williams said the automaker shipped the cars as is and
directed the dealers to make repairs. "Our defense was that GM should not
be responsible," Williams said. "It has told dealers to inspect vehicles,
and if you find damage, repair it. And if you repair it, tell the

The settlement was made final Tuesday. (The Associated Press State & Local
Wire, September 28, 2000)

ILLINOIS: State Sued over Slow Services to Developmentally Disabled
A lawsuit claims the state of Illinois violates the rights of people with
developmental disabilities by delivering some care so slowly that people
sometimes wait years for help. The lawsuit was filed on behalf of five
people with various levels of mental retardation but asks to be declared a
class action, including "hundreds and hundreds" of people.

Federal law requires the state to provide prompt care - ranging from
physical therapy to round-the-clock nursing - for disabled adults who
qualify for special Medicaid care, the lawsuit claims. "It's a federal
civil right. It's an entitlement," said Robert Farley, attorney for the
five plaintiffs.

The lawsuit, filed earlier this month, names Gov. George Ryan and the
directors of his Public Aid and Human Services departments. Agency
spokesmen declined to comment on the lawsuit beyond saying their lawyers
were reviewing it.

Tony Paulauski, executive director of the advocacy group The Arc of
Illinois, called the lawsuit "exciting" because it addresses a longrunning
problem for thousands of people. "People are entitled to these services and
the state hasn't recognized that entitlement," Paulauski said.

The lawsuit does not involve routine Medicaid services, such as medical or
dental care. Instead, it involves care given as an alternative to
institutionalizing people, said Lynn Handy, deputy director of the Public
Aid Department.

States can apply for a federal waiver to depart from normal Medicaid rules
and offer a variety of services instead of placing people in state
facilities, Handy said. The services can range from short therapy sessions
to housing in small group homes. The state does provide such services to
children, but that changes when they reach adulthood. Last year, the state
provided care for only 6,900 adults with developmental disabilities. Most
others go without. State government does not even keep waiting lists for
the program, which would show how many people need services and help in

The lawsuit argues states have a choice of whether to take part in the
waiver programs, but once they sign up they must provide services promptly.
Instead, Illinois budgets too little money - $149 million in 1999 - and
that creates long waits, according to the suit. Farley's clients "have
suffered and continue to suffer physical, mental and emotional deprivation,
including but not limited to the loss of skills (and) the loss of
opportunities to develop to their fullest potential," the lawsuit claims.
The lawsuit asks that the state be required to offer appropriate services
within a specific period, preferably 90 days. (The Associated Press State &
Local Wire, September 28, 2000)

JOHN DAWS: SEC Accuses Trio Of Former Tech Executives at Cylink Corp.
Securities regulators on Wednesday leveled fraud accusations against three
former executives of a technology company that's already the target of
eight fraud class actions. The Securities and Exchange Commission, in SEC
v. John Daws, 20997, alleges three former Cylink Corp. executives played
key roles in prematurely recording revenue to meet ambitious sales goals.

The Santa Clara-based maker of secure networks became a target for civil
actions in late 1998 after the company restated its financials for three
quarters in fiscal 1997 and 1998.

The suit names: John Daws of Orinda, former chief financial officer; Thomas
Butler of Pebble Beach, former vice president of sales; and Mark Folit of
New York, former head of North American sales.

Butler's lawyer at Bergeson Eliopoulos in San Jose declined comment, while
the lawyers representing the two others did not return calls by press time.

The SEC accuses each of securities fraud, circumvention of Cylink's
internal controls, falsification of records, and aiding and abetting
Cylink's violations of federal securities laws.

In one instance, the complaint alleges the trio recognized more than
$900,000 in sales in the second quarter of fiscal 1998 despite a
three-month window during which the customer could cancel the order. In
another instance, the SEC alleges the company logged a sale and then stored
the shipment in a warehouse while the customer secured a letter of credit.
"Where senior officers get involved in this kind of conduct we're going to
hold them responsible -- companies only act through individuals," said
SEC's Robert Mitchell, assistant district administrator.

The trio faces injunctions and civil fines, and the SEC is seeking to
disgorge performance bonuses of up to $30,000 that the individuals
received. Renee Deger (The Recorder, September 28, 2000)

KRAFT FOODS: Consumer Sues over Taco Shells Made with Gene-Modified Corn
A lawsuit was filed in Cook County Circuit Court on Wednesday accusing
Kraft Foods Inc. and its supplier of corn flour of recklessly producing and
selling taco shells that contained a gene-modified variety of corn that is
not approved for human consumption. Northfield-based Kraft recalled its
Taco Bell brand of taco shells Friday after lab tests found Starlink corn
in samples. The corn is approved for use only in animal feed because of
questions about whether it could cause allergic reactions in people. The
lawsuit, filed by a Downers Grove woman, seeks class-action status. A Kraft
spokesman said the company had not seen the suit and could not comment.
(Chicago Tribune, September 28, 2000)

LAIDLAW INC: $275M in Funding May Be a Challenge But Not Impossible
Laidlaw Inc.'s debenture holders appear likely to approve US$275-million in
new borrowing by the near-bankrupt firm although it is not a certainty, say
debt analysts.

The Burlington, Ont., transport and health care company took the rare step
on Tuesday of hosting a two-hour conference call for noteholders in which
Stephen Cooper, vice-chairman and chief restructuring officer, begged
noteholders to approve the financing by Oct. 10.

'Bondholders I've talked to have said they thought it was a good
presentation and basically accepted the premise, but no one said, 'I've
definitely decided I've got to do this,' ' said one analyst, asking not to
be identified.

'It's going to be a challenge, but I think it's conceptually possible that
they'll do it  I'm more confident about it after the call than before.'

Another analyst, who also asked not to be named, noted the bonds are
trading at a two-thirds discount and it is in the bondholders' interests to
co-operate because a bankruptcy would diminish the value of Laidlaw's

Still, he added, the company is facing a credibility issue with some debt
holders who are accusing it of violating its 1992 indenture by improperly
giving banks priority in the debt structure. Earlier this week, a
class-action suit was begun against Laidlaw and its underwriters, Goldman
Sachs & Co. and Bear Stearns & Co., related to these allegations.

Laidlaw, which has suspended principal and interest payments while it
restructures US$3.5-billion bank and public debt, said the new money, in
the form of two revolving debt facilities, will enable it to avoid seeking
court protection.

There are four indentures to be voted on. Three require two-thirds majority
while the fourth needs a simple majority.

Failure to win consent would force the company to seek alternative
financing in the form of an accounts receivables securitization and,
failing that, it has negotiated a US$750-million debtor in possession
financing if it has to resort to court protection.

Laidlaw said a potential buyer of its American Medical Response ambulance
unit is doing due diligence in anticipation of buying the company by early
next year. It also has an offer on the table for Emcare, its emergency room
business, but the deal is not expected to be consummated.

Laidlaw put the units up for sale last year in hope of raising
US$1.6-billion to pay down debt, but now only expects about US$505-million
from its sale. (National Post (formerly The Financial Post), September 28,

OSICOM TECHNOLOGIES: Ct Preliminarily OKs Settlement for Securities Suit
On August 4, 2000, the company entered into a settlement of the
consolidated shareholder class actions pending in Federal district court in
Los Angeles against Osicom and certain present and former officers. The
settlement, which was entered into without any admission of liability by
any of the defendants, provides that, among other things, all claims
against the all defendants shall be dismissed. The settlement also provides
for an aggregate cash payment to class members of $3.75 million, plus
accrued interest from September 1, 2000, if any, less approved attorneys'
fees and related expenses. The settlement will be funded by our insurance
carrier, and did not have a material adverse effect on our financial
position or results of operations. The court granted preliminary approval
to the settlement on August 8, 2000, notice to the class members has been
made and a hearing for final approval of the settlement is scheduled for
October 23, 2000.

The lawsuit, entitled In re Osicom Technologies, Inc. Securities
Litigation, Master File No. CV-99-4321-R, was filed on August 20, 1999
against, the company’s Chief Executive Officer, President and former Chief
Financial Officer in the United States District Court for the Central
District of California. The consolidated complaint generally alleged that,
during the period July 1, 1998 to April 20, 1999, the defendants made false
and misleading public statements related to a contract entered into by our
Far East business unit with a Japanese customer. The consolidated complaint
asserted that the defendants' conduct violated Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, and SEC Rule 10b-6 promulgated
thereunder, as well as state common law. The consolidated complaint did not
specify an amount of damages.

PILOTS UNION: AA Passengers Can Sue over Travel Disruption Due to Strike
American Airlines' pilots union can be sued in state court by passengers
whose travel was disrupted by a 1999 work stoppage that forced the carrier
to cancel about 6,600 flights, a federal judge ruled Wednesday.

Lawyers for the passengers will seek class-action status for the lawsuit,
meaning the Allied Pilots Association could face claims from 220,000 to
300,000 individuals because of the February 1999 sickout.

The union already faces a $ 45.5 million judgment it was ordered to pay
American, a unit of AMR Corp., for losses suffered after the pilots ignored
a judge's order to return to work. (From Associated Press, Dow Jones News
Services, Bloomberg News , andd Staff Reports published in St. Louis
Post-Dispatch, September 28, 2000)

PREMIER LASER: CFO to Pay $10,000 SEC Fine for Inflated Irvine Revenue
A former executive of troubled Premier Laser Systems Inc. was accused by
federal authorities of inflating the Irvine company's revenue nearly three
years ago. Michael L. Hiebert, former chief financial officer, agreed to
pay a $ 10,000 fine and to refrain from future violations, the Securities
and Exchange Commission said Wednesday. He neither admitted nor denied any

The SEC complaint said Hiebert improperly logged $ 2.4 million for a laser
sale that never took place, inflating the company's total revenue by a
third for the fiscal third quarter ended Dec. 31, 1997. At the time, the
laser developer also recorded its first quarterly profit, which later was
restated to reflect a loss of nearly $ 100,000 for the period. The
questionable accounting involved an agreement with Henry Schein Inc. to
market Premier's lasers. Although Schein entered into a nonbinding
agreement to market the lasers, it never actually placed an order to buy
them, according to the SEC complaint.

Hiebert also violated Premier's internal control process by recording a
sale without first obtaining a signed purchase order, the complaint said.
An unnamed executive, who is now dead, allegedly assured Hiebert that the
sale was legitimate, the complaint said.

Hiebert declined to comment Wednesday.

The SEC also said the company agreed to refrain from violating anti-fraud
and reporting provisions of federal securities laws. The company shut down
operations in March and filed for bankruptcy reorganization. After Premier
slashed its revenue estimates in 1998 and restated its financial results,
disgruntled shareholders took legal action. In January 1999, the company
agreed to pay nearly $ 14 million to settle 19 class-action lawsuits.
Premier denied any wrongdoing. On Tuesday, Premier announced that it hoped
to liquidate its remaining assets within the next four months. The company
also said it has agreed to sell the laser technology that once helped make
the company the darling of Wall Street. The laser was heralded as a
breakthrough in dentistry because of its potential for eliminating many
painful drilling procedures. Premier's stock closed Wednesday at 40 cents,
down 25 cents a share, in over-the-counter trading. (Los Angeles Times,
September 28, 2000)

REVLON, INC: Stull, Stull Files Securities Suit in New York
An announcement by the law firm of Stull, Stull & Brody says that a class
action lawsuit was filed on September 27, 2000, in the United States
District Court for the Southern District of New York on behalf all persons
who purchased the securities of Revlon, Inc., (NYSE:REV) between October 2,
1998, and September 30, 1999 (the "Class Period").

The complaint alleges that certain officers and directors of the Company
violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934
by, among other things, misrepresenting and/or omitting material
information concerning Revlon's revenues and results of operations. These
statements caused Revlon's securities prices to be artificially inflated
during the Class Period.

Contact: Stull, Stull & Brody, New York Tzivia Brody, Esq., 1-800-337-4983

SHELL OIL: Dealers Claim Conglomerate Overcharge to Squeeze Them out
A group of 22 independent Shell gas station dealers poised to seek $300
million in damages from Shell Oil Co. are awaiting a federal judge's ruling
on a 1997 lawsuit that claims the oil conglomerate tried to squeeze the
dealers out of business.

The dealers say Shell tried to force them out of business in favor of
company-owned service stations. The lawsuit contends Shell tried to milk
profits from smaller dealers by overcharging them for gas and rent.

J. Gregory Copeland, an attorney representing Shell, denied that the
company concealed or destroyed documents. The Indianapolis lawsuit is one
of several filed nationwide against Shell.

Shell's neighborhood dealers usually owned their businesses but rented
their buildings and bought their gasoline from Shell. In Indianapolis,
Keith McKinney and Kevin Johnson each invested in their first Shell service
stations in 1976 when oil companies were getting out of the retail side of
the business.

But they say their relationship with Shell changed in recent years. "It's
like having a partner who's got his eye on the whole pie," said McKinney,
56. "For some reason they didn't have the intestinal fortitude to be
upfront and tell us, 'Guys, you've had a helluva run, but your time has
come."' Three years ago, Johnson paid Shell from $1,500 to $2,000 a month
on rent, depending on sales, for his station. Now that rent is $8,000 a
month. "We've been in business for 24 years," Johnson said. "Most of us
have been able to make a living and support our families. ... Suddenly, we
can't anymore."

According to the lawsuit, the neighborhood dealers were forced to pay
higher prices for their gasoline than those who operate Shell stations
under a different contractual arrangement.

Shell contends the company has done nothing wrong. "The main thing is that
all these relationships are covered by very detailed contracts," Copeland

Also named as a defendant in the lawsuit is Equilon Enterprises, a joint
venture formed by Shell and Texaco to oversee the companies' dealers. In
all the lawsuits brought by dealers, Shell and Equilon contend they abided
by the contracts.

U.S. District Judge Larry J. McKinney Said Thursday he would decide within
two weeks whether 22 independent Shell gas station suing Shell Oil Co. are
entitled to seek damages of up to $300 million. McKinney
has penalized Shell once for its failure to give dealers documents. In
June, McKinney ordered Shell to pay most of the dealers' pretrial legal
fees a penalty the dealers' attorneys say could reach more than $2 million.
If McKinney awards the dealers a default judgment, they will be asking for
$ 300 million, said Linda L. Pence, one of their attorneys. If the judge
rules against such a judgment, Pence said the case would go to trial on
Nov. 13.

U.S. District Judge Larry McKinney heard two hours of arguments Thursday
morning from attorneys for Shell and the dealers, who contend that the
company tried to drive them out of business.

Linda A. Pence, an attorney representing the dealers, asked McKinney to
issue a judgment by default in the lawsuit, contending the case was clearly
laid out. McKinney said he needed to review the volumes of documents in the
case and decide how to rule on the plaintiff's request. "These are fairly
serious allegations," he said. If the judge rules in their favor, the
dealers' attorneys have said they are prepared to seek about $300 million
in damages from Shell Oil.

In April, a Houston judge dismissed many of the complaints filed in a class
action involving 650 dealers in 11 states. The 22 Indianapolis dealers,
however, had a legal edge over their counterparts in other lawsuits.

The Indiana Deceptive Franchise Practices Act was designed to protect
franchise holders from deceptive practices by the company that sold them
their franchise. Copeland acknowledged that the Indiana law gives the
independent Indianapolis Shell dealers a better legal footing.

None of this may matter, however, if the dealers persuade McKinney that
Shell destroyed or concealed documents in direct violation of his orders.
Without ever ruling on the merits of the case, the judge could declare the
dealers victors. (The Associated Press State & Local Wire, September 28,

SOTHEBY'S HOLDINGS: Philly Lawyers Head Shareholder Settlement Team
New York auction giant Sotheby's Holdings Inc. has agreed to pay $ 70
million to settle a class action shareholders' suit that accused the
company of hiding the fact that it was illegally conspiring to fix prices
with Christie's International, its only true competitor.

The lead counsel for the plaintiffs in the case were Philadelphia attorneys
Sherrie R. Savett, Gary E. Cantor and Sandra G. Smith of Berger & Montague.

Sotheby's board of directors voted to approve the settlement on Sunday in
the same meeting in which the board agreed to pay $ 256 million to settle a
class action antitrust suit brought by customers of the two auction houses.
Christie's has agreed to pay an equal amount to settle that suit, for a
total settlement of $ 512 million. The settlements stem from a three-year
Justice Department criminal investigation into whether the two auction
houses, which control 95 percent of the $ 4 billion worldwide auction
market, stifled competition by colluding on several business practices. But
while Christie's is privately held, Sotheby's also had to answer to
investors who said the company made false and misleading statements in the
forms it filed with the Securities and Exchange Commission.

Sotheby's moved to dismiss the shareholders' suit, arguing that securities
laws do not require companies to disclose "uncharged illegal conduct."But
U.S. District Judge Denise Cote of the Southern District of New York
refused to dismiss the suit, finding that the shareholders stated a valid
claim by pointing to affirmative statements made in SEC filings.

The suit alleged that Sotheby's publicly touted the positive impact of its
new commission structure and increased auction sales as the sources of its
improved revenues, when the real cause of the increased profits was the
illegal collusion with Christie's.The complaint said Sotheby's falsely
stated in its SEC filings that there was "intense" competition with
Christie's, when, in fact, the price-fixing agreement between the two
houses had eliminated price competition. Judge Cote found that a jury could
conclude that the statements could have led investors to believe that the
two houses "were competing with each other in the usual manner."

Although Cote agreed that corporations generally have no duty to disclose
uncharged illegal conduct, the courts have also held that "when a
corporation does make a disclosure whether it be voluntary or required
there is a duty to make it complete and accurate."That duty, Cote said,
"exists even where the omitted information relates to allegedly illegal
conduct." The U.S. Justice Department began investigating the auction
houses in early 1997, issuing subpoenas that called for documents going
back to 1992. The issue went public in February 2000 when Christie's
disclosed that it had been granted "conditional amnesty" by the DOJ's
Antitrust Division under its "corporate leniency policy." The policy is
open only to those who report "illegal activity" with "candor and

In the wake of the disclosure, two top figures at Sotheby's resigned
longtime chairman, A. Alfred Taubman, who had headed its board since 1983
and who controlled more than 60 percent of the voting stock; and Diana D.
Brooks, who had served as president and CEO since 1994 and who signed
Sotheby's annual reports filed with the SEC for the years 1997 and 1998.

In a statement issued late Sunday, Sotheby's board said it had voted
unanimously to approve the settlements of both the antitrust suit and the
shareholder class action, as well as "potential claims between the company
and its former chairman, A. Alfred Taubman." The statement also said that
Sotheby's "is also in serious negotiations with the United States
Department of Justice and is optimistic that a mutually acceptable
resolution will be reached in the near future."

The settlement of the antitrust suit calls for a payment to the class by
Sotheby's of $ 256 million. Sotheby's will receive $ 156 million from
Taubman toward the settlement and will be paying an additional $ 50 million
in cash. The company will also be issuing discount coupons to the class
with a value of $ 50 million, which class members can use as a credit
against future vendor's commissions. The settlement of the shareholder suit
calls for a cash payment to the class of $ 30 million and $ 40 million in
Sotheby's Class A Common Stock. Taubman has agreed to reimburse Sotheby's
the full $ 30 million in cash. Commenting on the settlements, Taubman said:
"I endorse and am contributing to these settlements to facilitate the
resolution of all matters and to minimize the impact on Sotheby's, a
company I care about deeply."

Michael Sovern, the new chairman of the board of Sotheby's Holdings, said:
"Our goal over the last several months has been to put behind us the
litigation clouding Sotheby's future. The settlements we have approved
resolve the lawsuits in which the company had the greatest potential
financial exposure. With a Justice Department resolution in prospect, the
company can move forward with its business under the strong leadership of
its current management team."

The shareholders' settlement must be approved by Judge Cote, while the
antitrust settlement must be approved by U.S. District Judge Lewis A.
Kaplan.Attorney Savett said that she is not sure how much her team on the
shareholders' case will be asking for in the way of fees but that it is
sure to be less than one-third of the settlement. So far, Savett said, the
only document relating to the settlement is a "memorandum of
understanding." In late October, she said, the parties will be filing a
proposed notice to be sent to the class that will include a maximum
percentage that the plaintiffs' team will be requesting as a fee. (The
Legal Intelligencer, September 28, 2000)

THOMSON CONSUMER: Proof Burden in Consumer Fraud Suit Vs. TV Maker Eased
Plaintiffs in a class-action lawsuit alleging consumer fraud by a
television manufacturer should receive a new trial because a trial judge
used the wrong standard of proof in granting judgment for the defendant, a
state appeals court held Wednesday.

A 1st District Appellate Court panel held that the lower court should have
used the preponderance-of-evidence standard, rather than the more stringent
standard of clear and convincing evidence. The panel reversed Cook County
Circuit Judge Thomas A. Hett's judgment in favor of Thomson Consumer
Electronics Inc. and returned the matter to the Circuit Court for a new

The appeals court's decision has broad significance in the area of consumer
law and protection," said Marshall Patner, a Chicago attorney representing
Nancy Cuculich and her husband, Donald Cuculich, the named class

Wednesday's ruling should make it easier for plaintiffs to pursue consumer
fraud actions, Patner said. In 1991, the Cuculiches purchased a 19-inch RCA
television, which they believed had stereo sound capability. The plaintiffs
later filed a lawsuit alleging that Thomson violated the Illinois Consumer
Fraud and Deceptive Business Practices Act by advertising the set and other
sets with an XS system" as providing stereo sound. The plaintiffs asserted
that the sets were not stereo.

The lawsuit was brought on behalf of the Cuculiches and all people who
purchased televisions manufactured by ... Thomson, which include the
Thomson XS System, and labeled and advertised as stereo,' " Wednesday's
decision said, quoting from the third amended complaint. Patner said that
on remand he will ask a judge to declare a national class, which could
include between eight and 10 million members.

Hett heard extensive and detailed testimony during a bench trial. After the
plaintiffs had presented their evidence, Thomson filed a motion for
judgment in its favor under section 2-1110 of the Illinois Code of Civil

Following a hearing on that motion, Hett found that the plaintiffs had not
proved their claims by clear and convincing evidence and in late 1998 ruled
in the manufacturer's favor.

The plaintiffs appealed to the 1st District, asserting that Hett had
applied on the wrong burden of proof.

The Appellate Court agreed.

The trial court clearly required plaintiffs to present clear and convincing
evidence of a violation of the Consumer Fraud Act to defeat defendant's
motion," Justice Anne M. Burke wrote for the panel. The application of this
greater evidentiary standard, as opposed to the less demanding
preponderance standard, prejudiced plaintiffs and constituted reversible

The panel relied on a 1993 3d District Appellate Court decision that held
it is entirely consistent with the legislative intent behind the Consumer
Fraud Act to establish the standard of proof as a preponderance of the
evidence." That case is Malooley v. Alice, 251 Ill.App 3d 51, 621 N.E.2d

The panel also resolved an ambiguity created by a 1990 1st District
decision, Patner said. That case is Lidecker v. Kendall College, 194
Ill.App.3d 309, 550 N.E.2d 1221.

We disagree with the opinion in Lidecker to the extent that it can be read
to establish a clear and convincing evidentiary standard for claims under
the Consumer Fraud Act as opposed to the preponderance of the evidence
standard," the panel said in an 18-page order, unpublished under Illinois
Supreme Court Rule 23. We find that the application of the preponderance'
standard is consistent with the purpose of the Consumer Fraud Act as
discussed in Malooley."

Another judge will preside over the new trial because Hett left the bench
earlier this year to run a grant program for an area health foundation.

Joseph J. Zaknoen, a Winston & Strawn partner representing Thomson,
declined to comment because attorneys with the firm had not yet discussed
Wednesday's decision with the client.

Justices Robert Cahill and Warren D. Wolfson joined in the decision. Nancy
Cuculich and Donald Cuculich v. Thomson Consumer Electronics Inc., No.
1-99-1672. (Chicago Daily Law Bulletin, September 27, 2000)

TIG HOLDINGS: Officers to Stand Trial in N.Y. Securities Fraud Suit
A federal judge in Manhattan denied a motion by two TIG Holdings Inc.
officers to dismiss a class-action securities fraud suit against them after
finding sufficient evidence that they knew the company's financial
statements were false and misleading. Ruskin et al. v. TIG Holdings Inc. et
al., No. 98 Civ. 1068 (LLS) (S.D.N.Y., Aug. 14, 2000).

Jerrold Ruskin and William Mitchell filed suit on behalf of investors who
bought TIG common stock between Oct. 21, 1997, and Jan. 30, 1998, alleging
in part violations of the Securities Exchange Act of 1934 and Rule 10b-5
for alleged misrepresentations about the company's loss reserves. TIG is in
the insurance and reinsurance business. The statements at issue appeared in
quarterly Form 10-Qs and a press release.

The complaint in the Southern District of New York also sought to impose
controlling-persons liability on Jon W. Rotenstreich as TIG's chief
executive officer and chairman of its board, and on William G. Clark as the
CEO, chairman and a director of a wholly owned subsidiary.

The first amended complaint was dismissed for insufficient particularity in
pleading fraud and for failure to state a claim. However, the investors
were granted leave to replead.

In the instant decision, Judge Louis Stanton denied the officers' motion to
dismiss the second amended complaint.

First, he found the repleaded allegations sufficient in light of an
internal memo from TIG's president and chief operating officer to
Rotenstreich indicating that the company was aware of a significant reserve
deficiency at its subsidiary.

Second, he said the complaint meets the heightened requirements for
pleading scienter under the Private Securities Litigation Reform Act. For
Rotenstreich, the president's memo is evidence he knew or had access to
information suggesting that TIG's public statements were inaccurate, the
judge said. Judge Stanton also said that Clark's sale of a significant
number of shares -- 88 percent of his direct holdings -- during the class
period is evidence of a motive by an insider to inflate the price of TIG
stock, even in light of his previously announced impending retirement.

Lastly, the judge rejected defense arguments that the statements were
protected by the safe harbor provision or the "bespeaks caution" doctrine.
(Corporate Officers and Directors Liability Litigation Reporter, August 28,

* Hospitals Ask IL Supreme Court to Restore Med-mal Laws
The County of Cook and the state's hospitals have asked the Illinois
Supreme Court to reinstate laws that aided defense lawyers in medical
malpractice cases by letting hospital lawyers have ex parte conversations
with doctors not named as defendants.

In amicus curiae briefs filed Tuesday, the county and the hospitals joined
an ongoing Illinois Supreme Court case that is expected to decide whether
the laws unconstitutionally violate a patient's right to privacy or the
separation of powers doctrine.

In the setting of a hospital," Assistant State's Attorney Sara Dillery
Hynes wrote for the county, patients do not have a reasonable expectation
that the physician-patient privilege will be strictly applied, since it is
now established that hospitals have an independent duty to provide for the
patient's health and welfare, particularly where they are the physician's
employer such as is the case with the County of Cook, which employs the
vast majority of the physicians which care for patients in its hospitals."

The high court took the case after Cook County Associate Judge Joseph N.
Casciato declared the laws -- amendments to the Hospital Licensing Act, 210
ILCS 85/6.17(d) and (e), that were effective Jan. 1 -- unconstitutional in

The amendments, part of Public Act 91-526, allowed hospital lawyers and
risk managers to talk to patients' doctors about the defendant physicians'
care without the patients' knowledge. They also allowed such communications
with doctors who are not alleged to have been negligent in their care of a
plaintiff in a malpractice case.

Plaintiff attorneys involved in more than 100 separate cases attacked the
amendments on separation of powers grounds, asserting that the legislature
involved itself in discovery rules, which remain the purview of the Supreme
Court. They also argued that the amendments violate privacy rights.

Attorneys for the hospitals, including the University of Chicago Hospitals,
Michael Reese Hospital and Lutheran General Hospital, countered that the
amendments were constitutional and that they leveled the playing field so
attorneys for both sides could talk freely to any provider whose conduct is
or could be at issue in a malpractice lawsuit.

The high court's decision in the case could affect every medical
malpractice case in the state where a a hospital is named as a defendant,
said Chicago attorney Bruce R. Pfaff, who represented the lead plaintiff in
the Circuit Court challenge.

There were 1,214 medical malpractice cases filed in Cook County in 1999,
according to Carolyn Barry, spokeswoman for the Cook County Circuit Clerk's
office, who could not say how many of the cases involved hospitals as
defendants. So far this year, there were 947 of those cases filed.

The amicus briefs were the first briefs filed in the high court case.
Briefs from the defendant hospitals -- Lutheran General,
Rush-Presbyterian-St. Luke's Medical Center and others -- were due
Wednesday. Under Supreme Court rule, briefs are filed" on the day they were

Cook County operates six health care facilities, including three public
hospitals, Cook County Hospital, Oak Forest Hospital and Provident
Hospital, according to its brief. The county employs nearly 500 full-time
physicians, with more than 1,200 physicians serving on staff. Under county
ordinance, all the doctors are indemnified for medical negligence.

The Illinois Hospital & HealthSystems Association, which filed the other
amicus brief, represents more than 200 hospitals around the state. The
group drafted the law that's at issue.

The county and the IHHA, in their amicus briefs, argued that Casciato
failed to recognize that patients don't have a reasonable expectation that
hospital personnel won't discuss patient care among themselves. They also
stressed that the communication permitted by the amendments was
intra-corporate" or intra-hospital" and argued that it was necessary to
provide optimum patient care."

The patient's reasonable expectation of medical privacy is satisfied
because private hospital information remains within the hospital where it
belongs," Thaddeus J. Nodzenski, an attorney for IHHA, wrote for the group.
Similarly, none of the judicial rules of discovery are implicated in the
absence of the hospital's attorney seeking information from a third party
or disclosing this information to a third party. These conversations only
involve hospital attorneys talking to hospital caregivers about hospital
patient care. Neither patient privacy nor discovery rules are implicated at
that point."

Pfaff, who said he would write the brief in response to the hospitals'
briefs, said he wasn't surprised by the argument raised in the amicus
briefs. I believe that the same arguments were already made and properly
rejected by Judge Casciato," he said.

The Illinois Supreme Court case is In re Medical Malpractice cases pending
in the Law Division (Doris Burger v. Lutheran General Hospital, et al.),
Nos. 89643 and 89644, consolidated.

The high court, meanwhile, took the last scheduled oral argument of its
September term on Wednesday. Oral argument will resume in November.
(Chicago Daily Law Bulletin, September 27, 2000)

* Wireless Web Features Create Privacy Features for Service Providers
Unique features of wireless Web, such as location-specific information, are
creating privacy challenges for service and content providers as mobile
Internet usage increases, govt. regulators, Internet companies and privacy
advocate said at PCIA GlobalXChange here Wed. FTC plans series of workshops
later this year to focus on consumer issues related to new technology,
including wireless pricing, privacy, security, said Daniel Caprio, chief of
staff to FTC Comr. Orson Swindle. Noting FTC issued report earlier this
year that marked shift away from its previous self-regulation stance on
online privacy, Caprio said industry now faced dwindling window to convince
lawmakers that market-based measures work.

"There is a looming crisis here" in privacy issues on mobile devices, said
Alan Davidson, staff counsel for Center for Democracy & Technology (CDT).
On wireless Internet, "location- based information and identity information
are likely to be shared much more widely than they are in the offline
world." He said legislative fix may be needed to guarantee privacy
protections in contexts such as location-based information, which "is not
very well protected." Among measures wireless industry could take would be
to create version of industry best practices, including informed consent
before consumers allow use of certain kind of information.

"It's possible that self-regulation may not be enough or that it won't
happen quickly enough," Davidson said. "Government may need to be involved
to at least set up a goal so that good actors can do what needs to be
done... and bad actors will be punished." Because wireless Web strategies
still are at relatively early stage, companies have chance to build privacy
mechanisms into networks from ground up, he said.

Federal Register notice on FTC workshops hasn't been published, but Caprio
said he was interested in receiving wireless industry feedback on how
security and privacy issues could be addressed at hearing. Convergence of
technologies, including wireless, isn't something FTC has addressed at
length yet, he said. Swindle dissented from annual FTC report that
recommended legislation to require privacy regulation for commercial Web
sites. FTC report indicated that of random sample of Web sites, 90% were
posting version of consumer privacy policy, Caprio said, up from 66% of
sites year ago. "Commissioner Swindle's point of view is that that's an
improvement," he said. "We still have a long way to go." In sign of how
quickly technology is evolving, Caprio said Commission's report contained
"no consideration at all of the technology solutions for different kinds of
platforms such as wireless."

DoubleClick is drafting privacy policy that takes into account wireless
Internet access, DoubleClick Deputy Gen. Counsel Nuala O'Connor said. One
key issue is that screens on Wireless Application Protocol (WAP) phones are
too small to support lengthy privacy policy explanations that could be read
with ease on desktop PCs, she said. One possibility is that DoubleClick "is
looking to partner with service providers before consumers sign on" for
wireless service, O'Connor said.

On wireline Web site, DoubleClick has opt-out policy that allows Web
surfers to leave site before cookie information is captured. Mechanism
overwrites DoubleClick cookie with null cookie that prevents user's online
activity from being tracked. To provide wireless-specific privacy options,
company is in talks with wireless carriers now, she said. "We think the
notice should come in advance" at start of customer's service, O'Connor
said. Wireless platforms pose "major challenge," agreed CDT's Davidson.
Subscribers are less tolerant of elements such as pop-up screens on
relatively small WAP devices, he said.

In response to concerns raised by CDT's Davidson, Michael Vatis, FBI dir.,
Critical Infrastructure Center, stressed that law enforcement officials
have access to wireless location information only when they can show
"probable cause" that information will be necessary in investigation.
Davidson voiced concern that location information was available under
existing standard even if wireless phone user wasn't target of
investigation. When elements such as GPS-enabled location identification
information are available, issues will be more acute, he said. "When it
comes to law enforcement, these things are debated by Congress," Vatis
retorted in later panel exchange. "This is not the case with commercial

Panel diverged sharply on extent to which privacy measures were adequate to
protect consumers. Amazon.com Vp-Global Public Policy Paul Misener defended
company's privacy policy of not divulging customer information to 3rd
parties except when part of company is sold to another in transaction that
would include customer data. CDT's Davidson questioned whether policies "go
far enough," with users concern still centering on information that they
gave to Amazon that would be turned over to another party. Misener said
Amazon would be exposed to class-action lawsuits and FTC action if
information were turned over to disreputable firm interested in securing
telemarketing information. -- Mary Greczyn (Communications Daily, September
28, 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.

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