/raid1/www/Hosts/bankrupt/CAR_Public/001128.MBX               C L A S S   A C T I O N   R E P O R T E R

             Tuesday, November 28, 2000, Vol. 2, No. 231


ANTHEM INC: Health Insurer Sued; Medigap Policies May Be At Issue
EMPIRE STATE: Similar Claims over Self-Dealing Dismissed Again in NY
GENERAL ELECTRIC: Fixing of Damages Hampered in Diamond Price Suit
GENTIVA HEALTH: Reaches Agreement to Settle Securities Suits in NY
GIO: Bernard Murphy Expects Lawsuit to Have Biggest Class in Australia

H.J. MEYERS: Ct Awards Part of Atty's Fees in Shares in Securities Suit
HOLOCAUST VICTIMS: Judge OKs Pan to Slit $1.25B Swiss Bank Settlement
IMPAC FUNDING: Faces Lawsuit under Missouri’s Second Loans Act
KNOLLS ATOMIC: Jury Awards $ 4.6M in Former Employees Age Bias Suit
MED WASTE: Contests Lawsuit over Acquisition of Target Medical

MED WASTE: Emerges from Securities Suit Files 1999
MED WASTE: SEC Conducts Informal Inquiry into Accounting Procedures
NY CITY: Police May Seize Vehicle Suspected to Link to Crime, Ct Affirms
PILGRIMS PRIDE: Employees Seek Wages for All Time Worked
PILGRIMS PRIDE: Settlement for Price Suit Provides for Vitamin Recovery

SOTHEBY'S, CHRISTIE'S: $27M Fee Award For Boies' Firm Sets Off Debate
SUNBEAM CORP: SEC May Recommend Filing Civil Claims against Former CEO
TOBACCO LITIGATION: Wrangle on Trust Fund for Asbestos Workers to Begin
TORONTO SUN: 28 Women in Sunshine Girl Photos Sue for $20 Million
TRANSFINANCIAL HOLDINGS: Halts Management Buyout after Filing of DE Suit


ANTHEM INC: Health Insurer Sued; Medigap Policies May Be At Issue
Elizabeth Ewing enjoyed traveling and going to garden club and sorority
meetings until she suffered a severe stroke in 1995. The widowed former
Indianapolis librarian soon was all but unable to talk, walk or swallow.
Fatefully, Ewing had prepared financially for her plight. In the 1970s,
she bought a health insurance policy that covered up to $1 million of
skilled care in a nursing home.

Or so she and her children thought.

Before Ewing died in a Shelbyville nursing home three years later at age
85, her insurer had rejected about $100,000 worth of claims for her
skilled care, while subjecting her children to the frustrations of
corporate red tape and a drawn-out appeal. "It's not fair," said Ewing's
daughter, Susan Jessup. "She had faith in that policy."

Jessup got so mad that she sued on behalf of her mother's estate. Her
target: none other than Anthem Inc., Indiana's largest health insurance
underwriter and purveyor of the venerable Blue Cross-Blue Shield policies
in Indiana and other states.

For Anthem, Jessup's lawsuit is nothing new. The Indianapolis insurer
faced similar lawsuits in the 1990s from autoworkers and their families
who bought coverage through car company-sponsored group plans. Those
lawsuits were settled out of court.

Now the issue is back in the public eye, pushed by elder-law specialist
Scott R. Severns , the same Indianapolis attorney who handled the
autoworker cases against Anthem.

Severns has brought two new lawsuits against Anthem in Marion County
courts. State insurance regulators also are weighing a complaint against
Anthem that " raises serious questions" about the insurer's contracts,
said Colleen F . McNenny , chief deputy commissioner for consumer
protection at the Indiana Department of Insurance.

Anthem just settled a similar contract complaint last year by paying a
$5,000 fine. It was only the second time the state has fined Anthem since
its founding in 1944.

Denying health coverage to the sick elderly is a particularly sensitive
charge against an insurance company. At stake is the reputation of
Anthem, which writes one out of five private health policies in the
state. The company is a leading corporate presence in its hometown, with
prominent headquarters on Monument Circle and a new operations center
lured Downtown by $37 million in public assistance.

Paul J. Severance , executive director of United Senior Action, which
represents the interests of Indiana's elderly, said he has lost trust in
Anthem. "We think this kind of coverage is outrageous on the part of
Anthem," he said. "People's rights are being trampled" by Anthem selling
health insurance coverage "that turns out not to be real," Severance

Anthem won't discuss the lawsuits against it or issues involved in the
litigation. In fact, no company executive would talk about the dispute,
though the company did answer submitted questions. A spokeswoman said the
company believes it has fulfilled its insurance contract obligations.

At issue are so-called Medigap policies, which are popular among the
elderly because they bridge gaps in Medicare's coverage. Medicare is the
federal health insurance program for the elderly.

Anthem has sold its retiree policies, many carrying the trusted Blue
Cross-Blue Shield name, since at least the 1970s. The policies with
skilled nursing care coverage are especially appealing, since Medicare
covers only the first 100 days of skilled care. Moreover, such care can
cost hundreds of dollars a day, which can drain a retiree's life savings
in mere months.

What also made Anthem's policies attractive is that few other insurers
offer coverage of skilled care for the elderly, in part because it can be
a costly benefit to provide. State insurance regulator McNenny said she
doesn't know of any other company in the state that offers it as a
standardized benefit.

But while many people bought the policies for the skilled-care coverage,
Anthem has found ways not to honor the provision, the lawsuits charge.
One technique to hold down claims payouts: making it time-consuming and
burdensome for nursing homes and members to file claims. Another method:
restricting coverage through internal underwriting guidelines that
policyholders don't normally see.

A dozen or more state consumer complaints in the past four years cite
Anthem's failure to pay for skilled nursing care. "It is fraud against
the elderly, and I believe it is wrong," Ronald A. Vice of Crown Point
wrote in a complaint on behalf of his elderly mother, Lulu .

Hers was another case of what might be called the 101st-Day Surprise.

After Lulu Vice's 100-day Medicare coverage ended, Anthem denied claims
under her policy, even though it supposedly covered skilled nursing care.
Ronald Vice said Anthem insisted that the care his mother received at a
Lafayette nursing home for her blindness, colon cancer, congestive heart
failure and inability to swallow didn't meet its definition of skilled
nursing care, even though it met Medicare's.

"They tried to give you the impression there was some coverage there,"
Vice said of Anthem. "But when it got right down to it, it was basically
smoke and mirrors. When Medicare quit, they quit."

Other complaints said Anthem at times has overruled physicians who have
said the skilled care given to their patients was medically necessary.
When Anthem disagreed, it denied payment.

The dispute, in part, is semantics. Anthem acknowledges that it has a
tighter definition of skilled nursing care than Medicare does.

The medical distinction between skilled and nonskilled care is like the
legal difference between a lawyer and a paralegal. Skilled nursing care
is high-level care given by licensed medical personnel, usually a nurse.
Nonskilled, or custodial, care is routine work that can be done by a
nonlicensed nurse's aide or a patient's relative or family friend who has
been shown what to do.

For Anthem, the bottom line is that its skilled-care claims payouts
remain small. They make up less than 2 percent of its total health claims
payments statewide, the company said.

Anthem's attempt to narrow the definition of skilled nursing care in
contracts got it in trouble with state insurance regulators last year.

Anthem made changes to a contract in 1998 without filing them with the
Insurance Department, as required by law. Moreover, Anthem didn't
properly notify policyholders of the changes, instead describing them as
"enhancements" in customer brochures, according to Jessup's lawsuit,
filed in Marion County last year.

"Anthem's actions were taken fraudulently and with intent to deceive its
in sureds and unjustly enrich itself," the lawsuit contends.

The state disallowed the changes, and Anthem paid a $5,000 fine for not
filing them with regulators.

The dispute has caught the attention of at least one state legislator,
Sen. Mark J. Blade, D-Terre Haute, who became involved when a constituent
complained about Anthem.

"I think there are some serious problems with Anthem," Blade said. "I
don't like the idea of a big company like this taking advantage of
people. Here we have citizens trying to get coverage that is due them."

Blade has met with state regulators on the issue and said he might
consider legislation to address it.

Much of the ire for Anthem comes from members of two large, influential
retiree groups: the Indiana State Teachers Retirement Fund (ISTRF) and
the Retired Indiana Public Employees' Association (RIPEA). About 18,000
members of the two groups own Anthem health policies, paying premiums
that often top $100 a month.

Ewing bought her Anthem coverage in 1978. The former children's librarian
at Indianapolis-Marion County libraries suddenly needed the policy when
she suffered her stroke in 1995.

After Ewing's Medicare eligibility ran out, the nursing home that cared
for her billed Anthem starting in January 1996. It took until October for
Anthem to respond, saying "they would not be paying for any of this,"
since the care was nonskilled under the company's definition, Jessup

Ewing's condition was dire. She couldn't talk or walk and needed a
gastrostomy tube into her stomach to eat. Nurses provided nearly
round-the-clock care, according to the lawsuit.

Jessup appealed the denial within Anthem, to no avail. Sporadically,
Anthem would agree to pay for some daily care, such as when her mother's
gastrostomy tube was replaced, Jessup said.

The reasons for Anthem's denials, it turned out, went beyond a wording

Jessup's lawyer found out, after questioning Anthem officials under oath,
that the insurer based its denials of coverage on an internal "medical
policy" that defined skilled nursing care much more narrowly than
benefits booklets given to members of the two state retirees

Anthem "developed an elaborate scheme of internal coverage criteria and
oppressive claims procedures to ensure that the company does not pay what
the contract promises," Severns said in court documents.

Anthem calls medical policies a standard tool of insurers. The company
developed its 1,300-page medical policy to help its staff and outside
experts evaluate claims, a spokeswoman said.

Severns questions whether it's even legal for Anthem to use the medical
policy to resolve claims. According to contracts covering policyholders
at the two retiree groups, he said, the medical policy doesn't have legal
standing to determine coverage.

He also accuses Anthem of keeping its medical policy secret. Anthem
denies that, but it's clear the company does not advertise the fact that
it uses internal claims-settling guidelines.

Jessup said it took more than a year after Anthem denied her mother's
first claims for the company to finally tell her about its internal
medical policy.

"I just thought that somebody was failing to read the contract we had a
copy of," Jessup said. Her mother's Anthem policy, she said, promised $1
million in coverage for skilled nursing care and didn't put any detailed
restrictions on it.

But the medical policy did. It said, for instance, that maintenance of
gastrostomy tubes isn't skilled care, and thus isn't covered.

Jessup didn't take kindly to finding out that Anthem based critical
claims decisions on a document she'd never seen.

"I started getting really mad," she said. "I thought of all those other
people they could roll right over. I just didn't think it was right."

Anthem insists it doesn't keep its medical policy secret. In fact, it was
posted on Anthem's public Internet site from April 1998 through 1999
before being removed while the Web site is being redesigned, a
spokeswoman said.

Anthem lets policyholders see the medical policy on request, though it's
not routinely handed out, she said. "The medical policy is much, much
more detailed than the average person wants to look at," she said.

The use of internal guidelines by insurers is a fairly routine, if
controversial, practice, said Eleanor D. Kinney , professor of law and
co-director of the Center for Law and Health at Indiana University Law

Problems over internal guidelines arise when they aren't consistent with
the contract or benefits booklet given to policyholders, she said.

"Customers should know what they're buying," Kinney said. "If they go in
thinking they are getting one thing and come out with another thing,
that's a problem."

It's a problem that the lawsuits aim to address.

Severns also handles the other Anthem fraud lawsuit, brought in Marion
County in 1997 by Raymond C. and Margaret Presser of Terre Haute for the
estate of Ray R. Presser, Margaret's husband and Raymond's father.

Ray R. Presser was a school maintenance worker and Retired Indiana Public
Employees' Association member who was proud to own a Blue Cross-Blue
Shield policy that had $1 million in coverage for skilled nursing care,
his widow said.

"We always felt like if we had Blue Cross-Blue Shield, that that was a
good company, and we would be covered," said Margaret Presser.

But the lawsuit said Anthem denied coverage after Ray Presser was sent to
a Terre Haute nursing home in 1996, suffering from advanced Alzheimer's
disease, emphysema and a lung infection. He was hooked to a feeding tube
and a colostomy bag.

Because Anthem refused to consider his care as skilled for most of the
time he was in the nursing home, Presser ran up bills of more than
$80,000 before he died in 1998, the lawsuit said.

Anthem's denials have stuck nursing homes and families such as the
Pressers with large, unforeseen bills. To pay them, many patients must
declare themselves indigent to qualify for federal Medicaid coverage for
the poor. The government takes over the financial burden but requires
patients to turn over most of their assets.

That's what happened to Leonora Volkman, who was denied coverage by
Anthem when she was in a Dyer nursing home in 1996 and 1997, suffering
from Alzheimer's, a stroke and a broken pelvis. Anthem said her care
wasn't considered skilled and refused to pick up coverage under her
policy after Medicare ran out on the 100th day, said Herbert Volkman, a

To pay nursing home bills that topped $25,000, his mother had to go on
Medicaid and turn over to the state all but $30 of her $800-a-month
Social Security check until she died last year at age 91, he said.

"The insurance should have paid it. That's what she was paying the
premiums for," Herbert Volkman said. "It shouldn't be the people of

So many policyholders or their heirs are angry at Anthem that Severns
said he intends to file a class-action lawsuit soon against the insurer,
naming multiple plaintiffs.

Meanwhile, Anthem is trying to explain its actions to avoid being fined
again by the state Insurance Department.

A second consumer complaint, filed this summer by Severns, charges that
Anthem broadened the definition of "contract" for its group medical
policies in Indiana without getting state approval or notifying

The new definition of contract adds thousands of pages of Anthem
documents, including, most notably, the controversial medical policy,
said Severns, 49, who is past president of the National Academy of Elder
Law Attorneys. He also filed the earlier complaint against Anthem that
brought the fine.

In a sharply worded letter to the Insurance Department, Severns charged
that "Anthem has been on a relentless campaign to rescind the legally
enforceable promises of coverage to RIPEA and ISTRF members, and replace
them with vague assertions that it will pay for the care that Anthem
determines is appropriate.

"If such changes were allowed to stand," he said, "any insurer could
eviscerate a health insurance consumer's protection at will."

Severns' new complaint "does raise some concern about contract law and
unequal bargaining power between insurer and the insured," said McNenny
of the state Insurance Department.

The department is investigating the complaint, a process that might take
several weeks, she said. It has the power to disallow contracts it deems
unfair, unjust or deceptive.

In a rebuttal sent to the department last month, Anthem's vice president
and counsel, Sandra Miller, defended the redefinition of "contract" as an
attempt to "standardize Anthem's contracts in the Midwest region" and
clarify to customers the materials that Anthem uses in administering
insurance coverage.

"These documents were not added to the new master group contract in order
to restrict any group's insurance benefits," Miller said.

Anthem further told The Star, "These clarifications grant no more nor no
less authority to Anthem than previously existed."

Miller also made it known that Anthem isn't happy with Severns, whom it
accuses of bringing the complaints "to further his litigation interests."

Severns' complaint has prompted the retired teachers group to review its
Anthem contract by sending it to outside attorneys for an audit, said Tom
Davidson, the group's general counsel.

"It seemed to be broadened," he said of Anthem's new definition of what
makes up a group insurance contract.

"We want to take a look at what's going on here with our contract,"
Davidson said. "If you think you're buying coverage for something and
you're not, it's like giving money away. You don't want that to happen."

Vicki Gottlich , an attorney for the nonprofit Center for Medicare
Advocacy in Mansfield, Conn., said she looked into the complaints about
Anthem's policies and saw an irony.

While Anthem Chairman L. Ben Lytle served on a presidential advisory
commission that recently drew up a list of patients' rights that all
health providers should honor, his own company seems be trampling them,
she said.

Based on her review of the lawsuits and complaints, Gottlich said, Anthem
"didn't have clear standards, their appeal standards were not good, they
didn't provide accessible information to consumers."

The dispute comes to a head in the courts next year. Trial is set for
February in the Presser lawsuit and September in the Ewing case.

For Jessup, a homemaker in her 50s who lives in Kansas and traveled often
to Indiana during her mother's 3 1/2 -year illness, the trial promises
the end of a long fight to persuade a reluctant insurance company to ante
up for her mother's care.

"I've had quite an education," she said, "an education I really didn't

State insurance regulator Colleen McNenny offers suggestions that are
geared to the elderly but also useful for anyone:

* Read the actual contract closely and be aware of coverage and

* Before buying a policy from an agent, get a second opinion. Ask
   another insurance agent, a knowledgeable friend or a tax adviser.

* Be wary of buying "piecemeal policies" with limited coverage, such as
   a health policy for cancer. Your main health insurance already might
   provide the narrower coverage.

* Finally, ask to read any internal guidelines that an insurer may use
   to settle claims. But be prepared to find that some companies might
   not show you their internal guidelines or may share only requested

The Retired Indiana Public Employees' Association and its health insurer,
Anthem Inc., have several cozy business relationships. Among them: The
retiree group's executive director is paid $ 1,000 a month by Anthem.

Such arrangements, detailed in two lawsuits against the insurer, have
brought into question whether the association is serving its members'
best interests. (The Indianapolis Star, November 26, 2000)

EMPIRE STATE: Similar Claims over Self-Dealing Dismissed Again in NY
On October 21, 1991, in an action entitled Studley v. Empire State
Building Associates et al., the holder of a $20,000 original
participation in Empire brought suit in New York Supreme Court, New York
County against the Agents for Empire (Peter L. Malkin, Donald A. Bettex
and Alvin Silverman) in their individual capacities and Wien, Malkin &
Bettex (currently "Wien & Malkin LLP"), Supervisor to Registrant.

The suit claimed that the defendants had engaged in breaches of fiduciary
duty and acts of self-dealing in relation to the Agents' solicitation of
consents and authorizations from the participants in Empire State in
September 1991 and in relation to other unrelated acts of the Agents and
the sublessee.

By order dated July 14, 1997, and entered July 29, 1997, the Supreme
Court granted defendants' motion for summary judgment and dismissal of
the action. The plaintiff filed an appeal with respect to the foregoing
order. By decision and order entered April 2, 1998, the Appellate
Division of the Supreme Court unanimously affirmed the order dismissing
the action. The plaintiff was denied permission to appeal the Appellate
Division's ruling to the New York Court of Appeals.

In October 1997, the plaintiff has filed a further Complaint in New York
Supreme Court alleging similar claims, purportedly as a class action.
Defendants' counsel filed a motion to dismiss the new complaint based
upon the courts' prior rulings and on other grounds. The Court granted
the motion to dismiss the new complaint in its entirety. On plaintiff's
appeal of that ruling, the Appellate Division by decision and order dated
October 17, 2000, unanimously affirmed the dismissal of the plaintiff's
new complaint. Plaintiff's motion for permission to appeal the Appellate
Division's affirmance to the New York Court of Appeals is pending.

GENERAL ELECTRIC: Fixing of Damages Hampered in Diamond Price Suit
An antitrust class action charged a conspiracy between defendant General
Electric Co. and defendants De Beers Consolidated Mines Ltd. and De Beers
Centenary A.G. to fix prices for industrial diamonds. After De Beers
defaulted, the court conducted an inquest. At the inquest plaintiffs
sought to establish the amount of their damages by calculations described
in the report and opinion testimony of their economics expert. The court
found that in theory, the methodology employed by plaintiffs' expert was
simple and logical. However, in practice it found that the expert's
application of this methodology was riddled with error. The court stated
that he ignored two specific limitations in the class definition, and
based his computations on two types of sales which were expressly
excluded. Thus, the court did not make a finding of damages.

Judge Conner

antitrust class action charges a conspiracy between defendant General
Electric Co. ("GE") and defendants De Beers Consolidated Mines, Ltd. and
De Beers Centenary, A.G. (collectively "De Beers") to fix prices for
industrial diamonds in violation of Section 1 of the Sherman Act, 15
U.S.C. @ 15. It is now before the Court on an inquest to assess damages,
pursuant to FED. R. Civ. P. 55(b)(2), following a default by De Beers.
For the reasons stated hereinafter, the Court finds that plaintiffs have
thus far failed to prove their damages with sufficient definiteness to
support a judgment against De Beers.


Procedural History

This litigation was started as three separate antitrust class actions
against GE and De Beers, two of the actions being brought in this Court
respectively by American Diamond Tool & Gauge, Inc. (92 Civ. 5130) and
Zollner Corp. (94 Civ. 3809) and one in the Southern District of Ohio by
Cold Spring Granite Co. (92 CV 511). The latter action was transferred to
this Court by the Judicial Panel on Multidistrict Litigation for
consolidated discovery with the two actions pending here. De Beers did
not answer or otherwise appear in either of the New York actions and
default judgment was entered against it on April 4, 1994 in Case No. 92
Civ. 5130 and on January 20, 1995 in Case No. 94 Civ. 3809. De Beers was
not named as a defendant in the Ohio action.

Plaintiffs in all three actions moved under FED. R. Civ. P. 23 (a) and 23
(b) (3) for class certification and, in a decision filed July 10, 1996
and reported at 197 F.R.D. 374, this Court certified a plaintiff class
consisting of: all persons and entities located in the United States that
purchased industrial diamond products for which the defendants set list
prices directly from one of the defendants, or a corporation or other
person owned or controlled by one of the defendants, at any time during
the period of November 1, 1987, through May 23, 1994 (excluding (i) any
federal, state or local government purchaser, and (ii) any defendant or
other manufacturer of industrial diamonds, and any parent, subsidiary or
affiliate of any defendant or other manufacturer of industrial diamonds).

Following extensive discovery and negotiation, GE settled all claims
asserted against it by the plaintiff class by agreeing to pay plaintiffs'
attorneys fees and expenses ($ 1,850,000 and $ 500,000 respectively) and
to give each class member an in-kind rebate of free diamonds of like
grade and quality to their purchases of industrial diamonds from GE
during a "claim period" of 20 months after the settlement became final,
in an amount equal to 3 percent of the diamonds purchased by the member
from GE during the claim period. If a class member purchased no diamonds
from GE during the claim period, it was given the option of either
transferring a share of its right to such inkind rebate to another entity
or of receiving from GE a cash payment of $ 1,000. After notification of
the class members and a fairness hearing, the settlement was approved by
the Court on July 23, 1999.

The Inquest

The Court conducted an inquest to fix damages against the defaulting
defendant De Beers on July 26, 2000. The only witness was Dr. Michael C.
Keeley, plaintiffs' economics expert. De Beers was not represented at the
hearing. An attorney for its Irish subsidiary, De Beers Industrial
Diamonds (Ireland), attended the hearing, but declined the Court's
invitation to cross-examine the witness or otherwise actively

Because all of the court reporters in the courthouse were occupied on
other cases at the time, counsel agreed to have the proceedings recorded
by machine. Unfortunately, it was later discovered that the recording
machine had malfunctioned and that a readable record had been made of
only a short portion at the end of the hearing. However, there was no
prejudice because, along with their post-hearing memorandum, plaintiffs
submitted an affidavit of Dr. Keeley repeating the substance of his


The Applicable Law

While a default constitutes an admission of all the facts "well pleaded"
in the complaint, it does not admit any conclusions of law alleged
therein, nor establish the legal sufficiency of any cause of action.

Once the default is established, defendant has no further standing to
contest the factual allegations of plaintiff s claim for relief. Even
after the default, however, it remains for the court to consider whether
the unchallenged facts constitute a legitimate cause of action, since a
party in default does not admit mere conclusions of law.

10A CHARLES ALAN WRIGHT ET AL., Federal Practice & Procedure, Civil 3d, @
2688, at 63 (1988). A fact is not "well pleaded" if it is inconsistent
with other allegations of the complaint or with facts of which the court
can take judicial notice. See Trans World Airlines v. Hughes, 449 F.2d
51, 63 (2d Cir. 1971).

Likewise, a default does not constitute an admission as to the amount of
damages claimed, which must be established at an evidentiary hearing.

Even when a default judgment is warranted based on a party's failure to
defend, the allegations in the complaint with respect to the amount of
damages are not deemed true. The district court must instead conduct an
inquiry in order to ascertain the amount of damages with reasonable

Credit Lyonnais Securities (USA), Inc. v. Alcantara et al., 183 F.3d 151,
155 (2d Cir. 1999) (citations omitted). At the inquest in this case,
plaintiffs sought to establish the amount of their damages by
calculations described in the report and opinion testimony of their
economics expert, Dr. Keeley.

The Opinion of Dr. Keeley

In theory, the methodology employed by Dr. Keeley to calculate the
damages sustained by plaintiffs as a result of defendants' price-fixing
conspiracy was simple and logical. First, he estimated the average "but
for" U.S. market price that would have prevailed for each of 3 categories
of industrial diamonds for each year of the class period in the absence
of the price-fixing conspiracy by plotting on a graph a straight line
extending from the last market price before the class period to the first
market price after the class period. Next, for each year, he ascertained
the actual average market price of that category of diamonds and
subtracted from it the average "but for" price to determine the average
price inflation attributable to the conspiracy that year. Then, for each
year, he multiplied this average price inflation by the estimated total
volume of U.S. sales of each category of diamonds during that year to
determine the total damages for that year. Then he added these annual
damages to determine the total damages for the class period. Finally, he
increased the damages by an inflation factor to compensate for the lesser
present value of dollars relative to their value during the class period.
By this process, he computed total damages of $ 52,033,581 before the
inflation adjustment and $ 68,811,674 after such adjustment. Thus, after
trebling of the damages and deduction of $ 8 million as the estimated
monetary value of the settlement with GE (Gary L. French Decl., Ex. E to
Pls.' Mem. Supp. GE Settlement), plaintiffs sought judgment against De
Beers in the amount of $ 198,435,022.

However, in practice, Dr. Keeley's application of this straightforward
methodology was riddled with error. First, he ignored two specific
limitations in the class definition and based his computations on two
types of sales which were expressly excluded.

Inclusion of Excluded Sales

Non-List-Price Products

One of these improper inclusions was called to plaintiffs' attention at
the inquest when the Court reminded plaintiffs' counsel that the class
was limited to "all persons and entities located in the United States
that purchased industrial diamond products for which the defendants set
list prices ..." (emphasis added), and inquired whether Dr. Keeley had
based his computations only on diamond products for which the defendants
had set list prices. Obviously, plaintiffs' counsel had overlooked this
limitation in the class definition, because after the hearing, they
submitted a supplemental report of Dr. Keeley in which he stated that he
had learned that list prices had not been set for some diamonds in one of
the categories on which he had based his original computations and he
accordingly reduced his computed damages for that category of diamonds by
15 percent, reducing the total damages to $ 49,350,592 plus an inflation
adjustment of $ 15,928,582 for a total of $ 65,279,174 before trebling.
After trebling and deduction of credit for the estimated value of the GE
settlement, plaintiffs now seek judgment against De Beers in the reduced
amount of $ 187,837,522. However that modest amendment left uncorrected a
number of much more serious errors in Dr. Keeley's computations, such as
inclusion of a large volume of purchases of industrial diamonds for which
damages cannot be assessed against De Beers and reliance on mere
estimates of sales of industrial diamonds where actual sales figures were

Indirect Purchases Dr. Keeley based his computation of damages on
estimates of the total U.S. sales of industrial diamonds by both GE and
De Beers. This was a clear error of considerable magnitude. De Beers did
not sell directly to any members of the plaintiff class or any other U.S.
purchasers similarly situated. De Beers industrial diamonds are marketed
in the U.S. by distributors-from 1974 through 1988 by Anco Diamond Corp.
("Anco") and Diamond Abrasives Corp. ("DAC") and from 1989 on by DAC

To award damages against De Beers based on plaintiffs' purchases of
industrial diamonds not directly from De Beers but from an independent
distributor would violate the rule of Illinois Brick Co. v. Illinois, 431
U.S. 720 (1976) that those who purchased the products of a price-fixing
defendant indirectly through an independent middleman may not recover
damages therefor from that defendant. The Illinois Brick opinion suggests
that a defendant may be held liable to an indirect purchaser who bought
from a distributor owned or controlled by that defendant. Id. at 736 n.
16. It was for these reasons that the plaintiff class was defined as all
persons and entities located in the United States that purchased
industrial diamond products ... directly from one of the defendants, or a
corporation or other person owned or controlled by one of the defendants
... (emphasis added).

Plaintiffs did not allege that either Anco or DAC was owned or controlled
by De Beers during the class period and submitted no evidence of such
ownership or control. The closest approach to such an allegation was in
paragraph 3 of the complaints in the American Diamond and Zollner cases,
which read: Plaintiff made purchases of diamonds for industrial
applications directly from one or more of the defendants or a corporation
owned or controlled by, or acting in combination with one or more of the
defendants, during the time period relevant to this action.

Obviously, the allegation that a plaintiff purchased industrial diamonds
directly from "one or more" of the defendants would be true even if the
plaintiff had purchased directly only from GE and never from De Beers.
Likewise the disjunctive allegation that the plaintiff purchased directly
from a corporation owned or controlled by "one or more" of the defendants
does not constitute an averment that De Beers owned or controlled Anco or
DAC or any other corporation from whom the plaintiff purchased diamonds.

Moreover, an allegation of ownership or control of Anco by De Beers would
be inconsistent with averments in the affidavit of Thomas M. Corcoran
filed by plaintiffs as one of their posthearing submissions. Corcoran
stated that he was employed by Anco from 1974 through 1988, during which
time Anco was one of two U.S. distributors of De Beers industrial
diamonds. He characterized Anco as an "independent dealer" (Corcoran Aff.
P4) and stated that he "had discussions with De Beers at the time De
Beers terminated [Anco] as a De Beers distributor" (Id. P13). This is not
language one would use to describe a relationship between a parent and a
wholly owned or controlled subsidiary.

Thus ownership or control of either Anco or DAC by De Beers was not
alleged at all, much less being "well pleaded." Therefore De Beers'
default does not warrant a finding that it owned or controlled any
company from whom plaintiffs purchased De Beers' industrial diamonds.

This does not mean that De Beers has no liability to any member of the
plaintiff class. If any of them purchased directly from GE industrial
diamond products for which list prices were set by agreement between
defendants, and was injured by paying prices higher than those that it
would have had to pay in the absence of such agreement, De Beers would be
jointly and severally liable for such injury. But the damages must be
computed only on the purchases from GE. Assessing damages against De
Beers on the basis of the total of U.S. purchases from both GE and De
Beers, would result in holding De Beers liable to indirect purchasers of
its products in violation of the Illinois Brick rule. Since, by
plaintiffs' own estimate, the U.S. sales of the industrial diamond
products of De Beers during the class period were almost as great of
those of GE, it is clear that Dr. Keeley's computation of damages was
almost double what it should have been, for this reason alone. But there
were other serious faults in his computation.

         Unreliable and Unnecessary Estimates of Sales Figures

The figures on total U.S. sales of industrial diamond products by GE and
De Beers used by Dr. Keeley in his computation were not directly derived
from corporate records but upon estimates made through a complicated,
roundabout process disturbingly redolent of Rube Goldberg. Plaintiffs
obtained no discovery from De Beers and had no direct evidence of either
the unit volume or the dollar value of DeBeers' sales of industrial
diamonds during the class period either in the U.S. or abroad. Moreover,
although plaintiffs did obtain from GE through discovery over half a
million pages of GE documents (Pls.' Mem. Supp. GE Settlement at 2), they
apparently found no record therein of GE's U.S. sales of industrial
diamonds. Instead, the best they could come up with was a document
reporting GE's 1987 sales of industrial diamonds in the AmericasNorth and
South. They also found a document (GE R 07193, Alan R. Wentzel Aff., Ex.
14) depicting a pie chart that they interpreted as showing that 73
percent of the "MBS" diamonds (GE's trade name for diamonds used in metal
bonded saws) sold in the Americas in 1987 were sold in the U.S. However
this pie chart did not portray sales of MBS diamonds per se but of "Saw
Diamond Tools" (emphasis added). Neither GE nor De Beers sells diamond
tools. Either unaware of this anomaly or choosing to disregard it, Dr.
Keeley seized on this 73 percent fraction and applied it to GE's sales in
the Americas to compute GE's U.S. sales. Moreover, he used the same
fraction not only for MBS diamonds but for all categories of industrial
diamonds, and not only for 1987 but for the entire six-year class period.

This allowed him to make what it would be charitable to call a rough
estimate of GE's U.S. sales of all categories of industrial diamonds for
each year of the class period. But he wanted a figure for the U.S. sales
of GE and De Beers combined and he had no data on sales by De Beers.
Plaintiffs had obtained a GE estimate of De Beers' share of the worldwide
market in industrial diamonds in 1990-1991. Dr. Keeley made the
improbable assumption that GE and De Beers had the same relative shares
of the U.S. market that they had in the worldwide market, despite the
fact that GE's headquarters and focus of operations are in the U.S. while
De Beers has no offices or employees here but an extensive presence
elsewhere in the world. Dr. Keeley made the further improbable assumption
that the two companies had these same relative shares not only in
1990-1991 but throughout the entire 1988-1993 class period, despite the
fact that there were significant changes in the types of industrial
diamonds they marketed during that period. Then Dr. Keeley added his
estimate of U.S. sales by De Beers to his estimate of U.S. sales by GE to
determine their total U.S. sales for each year, which he multiplied by
his figure for the average percentage of price inflation that year to
arrive at his determination of the damages sustained by plaintiffs.

This convoluted and artificial process of determining the U.S. sales of
industrial diamonds by defendants, involving improbable assumptions based
on other improbable assumptions, was utterly unnecessary because,
mirabile dictu, hard data on such sales were available merely for the

From GE Itself

It is astonishing that, in all of plaintiffs' extensive discovery, they
never got around to asking GE about the dollar volume of its U.S. sales
of each category of industrial diamonds each year during the class
period. GE is a corporation whose securities are publicly traded and it
therefore must publish its financial statements. If GE nevertheless takes
the position that the volume of its U.S. sales of industrial diamonds is
a business secret, the disclosure of such data to plaintiffs would have
been protected under the secrecy order already in effect and it could
have been filed under seal.

From Purchasers

If, for some unforeseen reason, plaintiffs could not get the sales
information they wanted from GE, they had another source. They already
had a list of all the U.S. purchasers of GE industrial diamond products
and had communicated with them on two occasions-first, to inform them
that they were putative members of the plaintiff class certified by the
Court and of their right to opt out of the class and, again, to notify
them of the settlement with GE and of the upcoming fairness hearing.
There was no reason plaintiffs could not have contacted them again to
inquire about their purchases of industrial diamonds from GE during the
class period. Indeed, if and when the time comes to distribute to the
class members the net proceeds of any recovery against De Beers, each of
the them will have to file a claim with proof of its volume of such
purchases. There is no reason to believe that they would not eagerly
supply that same information for use at an inquest.

With such ready availability of accurate data as to GE's U.S. sales of
industrial diamonds during the class period, we can divine no reason why
plaintiffs resorted to the circuitous and speculative methodology
employed by Dr. Keeley other than a desire to magnify their damages.
That, of course, is what plaintiffs' counsel naturally try to do, but it
is the duty of the court, even where a defaulting defendant has not
appeared at the inquest to challenge the plaintiffs' computation of
damages, to protect the interest of the absent defendant and insure that
justice is done to all parties, even foreign corporations who are
reputedly members of powerful cartels.


Because of the serious errors in the opinion of Dr. Keeley, which was the
only evidence submitted by plaintiffs to establish the amount of the
damages to be assessed against De Beers, the Court is unable to make any
finding respecting such damages at this time. Plaintiffs are directed to
appear before the Court at 11:00 a.m. on Friday, December 1, 2000 and
show cause why the Court should conduct a second inquest to determine the
amount of such damages. This showing must include a summary of the proof
which plaintiffs would offer at such an inquest. Any written submissions
which plaintiffs choose to make to the Court in advance of the hearing
should be delivered to the Court no later than noon on Wednesday,
November 29, 2000. (New York Law Journal, November 16, 2000)

GENTIVA HEALTH: Reaches Agreement to Settle Securities Suits in NY
Gentiva Health Services Inc., formerly known as Olsten Health Services
Holding Corp. reveals in its report to the SEC that there is presently
pending in the U.S. District Court for the Eastern District of New York a
purported class action filed by some Olsten stockholders against Olsten
and some of its directors and officers, captioned In re Olsten
Corporation Securities Litigation, No. 97-5056.

The Class Action asserts claims for violations of the Securities Act and
the Securities Exchange Act, including claims that the directors and
officers of Olsten misrepresented information to stockholders relating to
the government investigations into Olsten's health services business.

                        Derivative Action

There is also pending in the Delaware Chancery Court a purported
derivative lawsuit filed by some Olsten stockholders against some
directors and officers of Olsten (and Olsten, as nominal defendant),
captioned Rubin v. May, No. 17135-NC (the "Derivative Lawsuit").

This Derivative Lawsuit alleges that the Olsten directors and officers
breached their fiduciary duties to stockholders in connection with the
Class Action and certain government investigations.

                       Agreement to Settle

As a result of their participation in a mediation process supervised by a
third-party mediator, the parties to the Class Action and the Derivative
Lawsuit recently agreed in principle to settle both lawsuits for the
aggregate sum of $25 million. The Company's insurers have agreed to
contribute $18 million of the settlement sum and the Company has agreed
to contribute the remaining $7 million. The settlement reached by the
parties is subject to, among other things, the parties' execution of
formal settlement agreements and obtaining the approval of the respective
courts before which the Class Action and the Derivative Lawsuit are

GIO: Bernard Murphy Expects Lawsuit to Have Biggest Class in Australia
On Christmas Eve, 68,000 former GIO shareholders will receive "opt out"
notices from the law firm running a class action against GIO, Maurice
Blackburn Cashman (MBC). They will have until February 16 to tell MBC if
they want to exclude themselves from the case concerning allegedly
misleading statements by GIO, which encouraged many shareholders not to
accept AMP's hostile takeover bid in 1998.

The notices are a standard feature of class actions, which are run on the
basis that everyone affected by the allegedly wrong conduct is included
in the class unless they opt out.

MBC partner Bernard Murphy says 33,000 shareholders have contacted the
law firm asking to be included. He expects thousands more to stay in,
making it the biggest class action, in terms of number of plaintiffs, in
Australia. He calculates the potential damages at $500-600 million and
hopes for a trial date late next year.

Murphy also hopes for a trial date next year in the class action against
Esso over the Longford gas explosion in 1998 that MBC is running as a
joint venture with three other law firms. The Federal Court recently
struck out part of the claim, covering misleading and deceptive conduct,
but Murphy says the remaining negligence claim is strong.

Another prominent class action that should reach the courts next year is
the Mobil/Avgas fuel contamination case, which came to light in January
this year. Slater & Gordon is running the action in the Victorian Supreme
Court and partner Andrew Grech says procedural steps are nearing
completion. MBC filed a rival action in the Federal Court, however Murphy
says that case will soon be discontinued, as Mobil has settled most of
the claims. (Business Review Weekly, November 24, 2000)

H.J. MEYERS: Ct Awards Part of Atty's Fees in Shares in Securities Suit
Plaintiffs petitioned for court approval of a proposed settlement and for
an award of attorney's fees in a securities action. The settlement
provided for recovery of approximately $ 5 million out of an estimated $
29 million in total damages. Looking to the substantive terms of the
proposed settlement, the court was satisfied that it was fair, adequate
and reasonable. In regards to attorney's fees, plaintiffs' counsel
requested a 33 percent fee, resulting in an award of over $ 1.6 million.
Balancing the relevant factors enumerated in Goldberger v. Integrated
Resources Inc., the court awarded plaintiff's counsel $ 800,000 in cash
and 89,000 shares of Palomar Medical Technologies Inc. stock. The court
stated that this was a relatively generous percentage given the fact that
there had been no trial and not even full discovery. The court also
awarded $ 290,000 in costs.

Judge Cote

VARLJEN v. H.J. MEYERS & CO., INC. QDS:02763179 - Plaintiffs petition for
court approval of a proposed settlement and for an award of attorneys'
fees and reimbursement of litigation costs and expenses. For the reasons
discussed below, the settlement is approved and attorneys' fees and costs
are awarded.

Plaintiffs filed this class action lawsuit on September 11, 1997,
alleging violations of federal securities laws and state law. Defendant
H.J. Meyers, Inc. ("HJM") filed a motion to dismiss, which was denied on
July 14, 1998. The parties began discovery, during which defendant HJM
ceased doing business. A default against HJM was entered on January 8,
1999. On March 9, 1999, the Court granted plaintiffs permission to file a
Second Amended Complaint naming Palomar Medical Technologies, Inc.
("Palomar") and its officers Joseph Caruso and Steven Georgiev as
defendants. The Court denied their motion to dismiss on August 6,
Thereafter, discovery of the Palomar defendants began.

On July 5, 1999, the Court signed an order dismissing without prejudice
defendant Amy M. Bell from this case. Individual settlements were reached
between plaintiffs and Tobin J. Senefeld, William F. Masucci, Robert J.
Setteducati, and Michael Bergin. The Court signs a final judgment of
dismissal for these four defendants. Defendants James A. Villa and HJM
have filed for bankruptcy; the Court signs a final judgment of dismissal
for these two defendants.

On September 17, 1999, plaintiffs moved to certify the litigation as a
class action pursuant to Rule 23(b)(3), Fed. R. Civ. P. It defined the
class to include all persons or entities who purchased Palomar common
stock from February 1, 1996 through and including March 26, 1997. The
parties reached this proposed settlement with the remaining
defendants-Palomar, Caruso, and Georgiev-before the motion for class
certification was decided by the Court. According to their agreement, the
Gross Settlement Fund was to be set at $ 5,040,750.00, representing a
cash sum of $ 4,040,750.00 and Palomar stock valued at $ 1,000,000.00. As
part of that Settlement, plaintiffs identified two separate periods for
damages and broke the Class Period into two segments, one prior to and
one subsequent to July 23, 1996. During the first segment, plaintiffs
describe a substantial increase in the price of Palomar stock due to
manipulation and unrelated to any news event. In contrast, the
substantial decrease in the stock price on July 24, 1996, was apparently
influenced by several publicized events occurring around that date,
including a report issued by HJM lowering earnings projections for
Palomar and HJM's agreement with the NASD to repay over $ 1 million in
restitution for improper sales practices. Division of the class into two
periods is corroborated by a corresponding decline in the volatility of
Palomar stock around July 24, 1996. Plaintiffs have attributed a $ 1.50
inflationary effect to the price of Palomar stock in the first period and
a $ 0.30 inflationary effect on the price in the second period.

On May 18, 2000, the parties executed the Stipulation of Settlement. On
June 19, 2000, the Court entered an Order which, among other things,
certified a Class for the purposes of Settlement and scheduled a hearing
for October 27, 2000 on the proposed Settlement and the application for
attorneys' fees and4 costs.

Plaintiffs sent a detailed notice of the proposed Settlement to over
24,000 identified class members on or about June 28, 2000, and published
a summary notice in the national edition of The Wall Street Journal on
June 30, 2000. The Notice was also available on the internet.

The Notice also advised that plaintiffs' counsel intended to apply to the
Court for expenses as well as for attorneys' fees not in excess of 33
percent of the Settlement Fund. The Notice instructed Class members how
to opt-out of the Settlement and informed members that they could serve
and file objections to the Settlement or to plaintiffs' counsel's fee
application or both. As of October 27, 2000, no class members had
opted-out or objected. I find that the notice provided by plaintiffs was
adequate pursuant to Rule 23(c)(2), Fed. R. Civ. P.

On October 27, 2000, this Court held a fairness hearing in order to
discuss class certification, settlement approval, and attorneys' fees and
costs. No class members appeared at the fairness hearing. This Court
indicated that it would certify the class as defined and approve the
Settlement. It agreed to take further submissions on the issue of
attorneys' fees and costs.

The Court addressed the issue of sub-classes during the fairness hearing
and was satisfied that sub-classes were not necessary where, as in this
case, the class was notified and no objections were made.

Subsequent to the fairness hearing, the parties agreed that the
attorneys' fees would be paid out in both cash and Palomar stock. The
parties further agreed that the Palomar stock component of the Gross
Settlement Fund was the equivalent of 447,547 shares, based on the
average closing price of Palomar stock on the ten trading days prior to
the fairness hearing on October 27, 2000.

                   Standard for Class Certification

Pursuant to Rule 23(a), Fed. R. Civ. P., plaintiffs must satisfy each of
four prerequisites in order to secure class certification: numerosity,
commonality, typicality, and adequacy of representation. Amchem Products,
Inc. v. Windsor, 521 U.S. 591, 613 (1997); Blyden v. Mancusi, 186 F.3d
252, 269 (2d Cir. 1999). In addition, plaintiffs "must qualify under one
of three criteria set forth in Rule 23(b)." Marisol v. Giuliani, 126 F.3d
372, 376 (2d Cir. 1997). In this case, plaintiffs seek certification
under Rule 23(b)(3), based on the questions of law and fact common to the
members of the class.

A. Numerosity

The requirement of numerosity is met if it is impracticable to join all
class members. Marisol, 126 F.3d at 376. Notice was sent to 24,461 Class
members as of October 12, 2000, indicating a class numbering in the
thousands. I find that the class would be too numerous to make joinder

B. Commonality

The plaintiffs allege several questions of law or fact common to the
class: that the defendants engaged in an elaborate scheme to artificially
inflate and manipulate the prices at which Palomar stock was sold to the
investing public; that the defendants engaged in a course of conduct that
inflated and maintained the price of Palomar stock at artificial levels;
that the scheme included the widespread dissemination of materially false
and misleading reports about the Company as well as numerous improper
broker promotions; and that the scheme included payments to brokers at
other firms to promote the Company's stock. These common questions
satisfy Rule 23(a)(2).

C. Typicality

The requirements of commonality and typicality "tend to merge into one
another." Marisol, 126 F.3d at 376. While the commonality inquiry asks if
the named plaintiffs' "grievances share a common question of law or of
fact" with those of the proposed class, id., the focus of the typicality
inquiry concerns whether "each class member's claim arises from the same
course of events, and [whether] each class member makes similar legal
arguments to prove the defendant's liability," id. (internal citations

The plaintiffs' claims stem from similar events and rely on similar legal
arguments. Accordingly, Rule 23(a)(3) is satisfied.

D. Adequacy of Representation

A class is adequately represented when its counsel "is qualified,
experienced, and generally able to conduct the litigation." Marisol, 126
F.3d at 378. Plaintiffs must also show that there is no conflict of
interest between the named plaintiffs and other members of the class.

The Court has confidence that plaintiffs' counsel has fairly and
adequately protected the interests of the class. Plaintiffs are
represented by counsel who are skilled in federal securities and class
action litigation. In addition, plaintiffs' counsel allege that they know
of no conflicts of interest among class members.

II. Standard for Judicial Approval of Class Action Settlements Under Rule

Rule 23(e), Fed. R. Civ. Pro., mandates court approval of any settlement
or dismissal of a class action. The standard to be applied in determining
whether to approve a class action settlement is well established: the
district court must determine that it is "fair, adequate, and reasonable,
and not a product of collusion." Joel A. v. Giuliani, 218 F.3d 132, 138
(2d Cir. 2000). In so doing, the court must "eschew any rubber stamp
approval" yet simultaneously "stop short of the detailed and thorough
investigation that it would undertake if it were actually trying the
case." City of Detroit v. Grinnell Corp., 495 F.2d 448, 462 (2d Cir.

The district court must consider several factors, including "the
complexity of the litigation, comparison of the proposed settlement with
the likely result of litigation, experience of class counsel, scope of
discovery preceding settlement, and the ability of the defendant to
satisfy a greater judgment." In re the Drexel Burnham Lambert Group,
Inc., 960 F.2d 285, 292 (2d Cir. 1992) (internal citations omitted). The
court should also analyze the negotiating process in light of "the
experience of counsel, the vigor with which the case was prosecuted, and
the coercion or collusion that may have marred the negotiations
themselves." Malchman v. Davis, 706 F.2d 426, 433 (2d Cir. 1983)
(internal citations omitted).

Finally, public policy favors settlement, especially in the case of class
actions. "There are weighty justifications, such as the reduction of
litigation and related expenses, for the general policy favoring the
settlement of litigation." Weinberger v. Kendrick, 698 F.2d 61, 73 (2d
Cir. 1982).

Turning to the substantive terms of the proposed Settlement, which need
not be restated in this Opinion, the Court is satisfied that the
Settlement is fair, adequate, and reasonable. The Settlement provides for
recovery of approximately $ 5 million out of a generously estimated $ 29
million in total damages. Plaintiffs originally filed this case against
HJM. After HJM ceased to do business, plaintiffs filed a Second Amended
Complaint which included the Palomar defendants. Genuine hurdles exist
for plaintiffs in their suit against Palomar. Significantly, Palomar, a
fledgling research and development company, may also enter bankruptcy if
faced with a judgment significantly greater than is proposed here.
Further, it will be more difficult to prove Palomar's liability than
HJM's. Plaintiffs will have the burden of establishing Palomar's
knowledge of and involvement in HJM's misconduct. Finally, the litigation
is admittedly complex and will necessitate expensive expert testimony.
There are also serious questions about the reliability of the damage
calculation on which plaintiffs have relied. In particular, the
plaintiffs would have had to address the defendants' evidence that
Palomar's stock price was reacting during the relevant period to forces
affecting its industry.

III. Attorneys' Fees and Costs

It is well established that where an attorney creates a common fund from
which members of a class are compensated for a common injury, the
attorneys who created the fund are entitled to "a reasonable fee - set by
the court - to be taken from the fund." Goldberger v. Integrated
Resources, Inc., 209 F.3d 43, 47 (2d Cir. 2000) (citing Boeing Co. v. Van
Gemert, 444 U.S. 472, 478 (1980)). Determination of "reasonableness" is
within the discretion of the district court. Id. There are two methods by
which the district court may calculate reasonable attorney's fees in
class action cases, the lodestar or percentage method. Under either
method, attention should be paid to the following factors: the time and
labor expended by counsel, the magnitude and complexities of the
litigation, the risk of the litigation, the quality of representation,
the requested fee in relation to the settlement, and public policy
considerations. See id. at 50 (internal citations omitted).

Using the lodestar method, the court "scrutinizes the fee petition to
ascertain the number of hours reasonably billed to the class and then
multiplies that figure by an appropriate hourly rate." Id. at 47
(internal citations omitted). The final step is to consider whether an
enhancement of the lodestar is warranted, taking into account such
factors as: (i) the contingent nature of the expected compensation for
services rendered; (ii) the consequent risk of non-payment viewed as of
the time of filing the suit; (iii) the quality of representation; and
(iv) the results achieved.

In re Boesky, 888 F. Supp. at 562; see also Goldberger, 209 F.3d at 47;
Savoie v. Merchants Bank, 166 F.3d 456, 460 (2d Cir. 1999)(applying the
lodestar steps).

The second method is the much simpler percentage method, by which the fee
award is simply some percentage of the fund created for the benefit of
the class. See Savoie, 166 F.3d at 460. This method has been found a
solution to some problems raised by the lodestar method. First, it
"relieves the court of the cumbersome, enervating, and often surrealistic
process of evaluation fee petitions." Id. at 461 n.4 (internal citations
and quotations omitted). Second, it decreases plaintiff lawyers'
incentive to "run up the number of billable hours" for which they would
be compensated by the lodestar method. Id. at 460-61. And finally, it
decreases the incentive to delay settlement because the fee for the
plaintiffs' attorneys does not increase with delay. See id. at 461.

Plaintiffs' counsel requests a 33 percent fee, resulting in an award of $
1,663,447.50. It uses the lodestar method as a cross-check of its
proposed fee, calculating a total of $ 1,029,298.25 from over 2500 hours
worked at a variety of hourly rates from seven law firms. The lodestar
figure for the firm representing the lead plaintiffs and their bankruptcy
counsel, however, is $ 788,844.25. A lodestar multiplier of 1.6 is used
to reach the 33 percent amount of $ 1,646,877.20 for the seven law firms.
The corresponding figure for the lead plaintiffs and their bankruptcy
counsel is $ 1,262,150.80.

Five law firms beyond lead counsel and their bankruptcy counsel sought
attorneys' fees in the amount of $ 240,454.00. I have reviewed
descriptions of their work and, to the extent that the work is
non-duplicitous and merits reimbursement, I have valued the work as
reasonably supporting an award of no more than $ 60,000.

Plaintiffs' counsel further requests $ 173,692.72 in costs incurred.
Plaintiffs' counsel's costs include expert fees of $ 54,519.33,
settlement administration fees of $ 64,355.00, as well as an array of
mailing, photocopies, telecopier, telephone, computer research, and other
like costs. The costs incurred by lead counsel and their bankruptcy
counsel, however, are $ 150,811.47. It is estimated that an additional $
138,362.00 will be needed for settlement administration. I find that
total costs not in excess of $ 290,000.00 are fair and reasonable.
Plaintiffs Mark Varljen and Simon Becker requested lost wages in the
amounts of $ 880.00 and $ 1,800.00, respectively. Pursuant to 15 U.S.C. @
78u-4(a)(4), I have approved this award in principle as it encourages
participation of plaintiffs in the active supervision of their counsel.
Their claims have been considered in the award of costs.

Balancing the relevant factors enumerated in Goldberger, I award an
attorneys' fee of approximately 20 percent of the cash sum and of the
Palomar stock, or $ 800,000.00 in cash and 89,000 shares. This is a
relatively generous percentage given the fact that there has been no
trial and not even full discovery. This amount reflects an amount between
an unexamined lodestar figure for principal counsel - albeit one without
any enhancement - and the 33 percent fee requested and, I believe,
adequately recognizes the efforts of counsel and the risks and
complexities of this litigation while ensuring sufficient remaining funds
for distribution to Class members. The attorneys' fee also recognizes the
considerable public benefit from adding the pressure of this lawsuit to
whatever other pressures drove H.J. Meyers & Co. from business.

I also award costs in the amount of $ 290,000.00, which includes the
total costs for principal counsel and their bankruptcy counsel as well as
the estimate of future settlement administration costs. I decline to
award costs to the remaining five law firms.


For the aforementioned reasons, I hereby certify the Class and approve
the Class Settlement as fair, adequate, and reasonable. I award
attorneys' fees in the amount of $ 800,000.00 cash and 89,000 shares of
Palomar stock. I award costs in the amount of $ 290,000.00.

It is my judgment that plaintiffs' counsel have been diligent and
responsible in this litigation and have served the class with vigor,
dedication and professionalism. (New York Law Journal, November 16, 2000)

HOLOCAUST VICTIMS: Judge OKs Pan to Slit $1.25B Swiss Bank Settlement
A federal judge has approved the plan for dividing the historic $ 1.25
billion settlement of claims by Holocaust survivors against two Swiss

In a seven-page ruling released Wednesday, November 22, U.S. District
Court Judge Edward Korman signed off on the allocation plan filed by
Special Master Judah Gribetz.

The ruling came two days after a public hearing in federal court in
Brooklyn in which some survivors and their lawyers claimed the settlement
was flawed and others lobbied for more money. Korman, however, ruled that
the plan was 'carefully reasoned and well-supported,' noting that 99
percent of the hundreds of thousands of settlement plaintiffs did not
submit any comment on the plan. More than 700,000 people are claimants.

Under the Gribetz plan, $ 800 million has been set aside for those who
can provide proof of deposited assets. Refugees turned away at the Swiss
border and slave laborers for German and Swiss companies will receive $
350 million.

The remaining $ 100 million has been set aside for people whose assets
were looted by the Germans, and will be distributed to charitable
organizations in the United States and Eastern Europe.

Korman noted that if any of the $ 800 million is left over from the
deposited assets fund, the remainder will be moved over to pay claims in
the other categories. (The Denver Post, November 23)

IMPAC FUNDING: Faces Lawsuit under Missouri’s Second Loans Act
On September 1, 2000, a complaint captioned Michael P. and Shellie Gilmor
v. Preferred Credit Corporation and Impac Funding Corporation, et. al.
was filed in the United States District Court for the Western District of
Missouri, Case #4-00-00795-SOW.

The plaintiffs are alleging a class action lawsuit whereby the defendants
violated Missouri’s Second Loans Act and Merchandising Practices Act by
marketing loans and charging certain origination fees or finders; fee or
mortgage broker or broker fees or closing fees and costs on second
mortgage loans on residential real estate, and committed conversion from
the illegal charge of interest or closing costs or fees.
The plaintiffs are also alleging a defendant class action.

IFC was a purchaser of second mortgage loans originated by Preferred
Credit Corporation which the plaintiffs contend are included in this
lawsuit. The plaintiffs are seeking damages that include a permanent
injunction enjoining the defendants, together with their officers,
directors, employees, agents, partners or representatives, successors and
any and all persons acting in concert from, directly or indirectly,
engaging in the wrongful acts described therein, disgorgement or
restitution of all improperly collected charges and the imposition of an
equitable constructive trust over such amounts for the benefit of the
plaintiffs, the right to rescind the loan transactions and a right to
offset any finance charges, closing costs, points or other loan fees paid
against the principal amounts due on the loans, actual damages, punitive
damages, reasonable attorney’s fees, pre- and post- judgment interest and
costs and expenses. Damages are unspecified.

The Company believes that it has meritorious defenses to such claims and
intends to defend these claims vigorously. Nevertheless, litigation is
uncertain, and the Company may not prevail in this suit.

KNOLLS ATOMIC: Jury Awards $ 4.6M in Former Employees Age Bias Suit
Albany A four-month age discrimination trial brought against Knolls
Atomic Power Lab ended Wednesday, November 22, bringing the total jury
award in the case to more than $ 4.6 million.

A federal jury awarded five former employees -- the fourth and final
group of plaintiffs -- $ 1.1 million in lost wages and emotional
suffering. The jury let out a cheer as they filed out of the courtroom,
in what Federal Magistrate David Homer called the second longest trial
he's seen in his 21-year career. Attorneys who argued on behalf of some
two dozen workers who claim they were fired because of their age were
also relieved to see the trial end.

Knolls terminated 36 employees in December 1995 as part of a company
restructuring program at its Niskayuna and Milton facilities. The vast
majority of the workers were older than 40. Twenty-eight of them sued,
alleging they were targeted for layoff because of their age.

In July, the jury found Knolls partly at fault for discriminating against
the workers. The jury determined that though there was no direct proof
that the company targeted older workers, the company's actions still
caused harm to the workers.

Knolls plans to appeal.

In the last group of plaintiffs, John Stannard, 52, was awarded $
201,000; Bruce Palmatier, 54, $ 361,000; Ted Eighmie, 58, $ 66,000; David
Townsend, 51, $ 420,000; and Christine Palmer, 48, $ 68,000;

Twenty-six salaried employees were entitled to damages in the second
phase of the trial. Eight of the workers agreed to a confidential
settlement and did not share in the $ 4.6 million award.

Knolls employs 2,200. (The Times Union (Albany, NY), November 23, 2000)

MED WASTE: Contests Lawsuit over Acquisition of Target Medical
On October 8, 1999, the Company was served with a lawsuit by Richard
Anthony Dean, alleging fraud, breach of contract and misrepresentation,
among other charges, associated with the acquisition of Target Medical
Waste Services, LLC, in Mobile, Alabama. Dean is claiming unspecified
compensatory damages, punitive damages and court costs. The Company is
vigorously defending the lawsuit and a counterclaim by the Company for
breach of covenants and misrepresentation has been filed. Accordingly,
the Company is unable to predict the outcome of this case at this time

MED WASTE: Emerges from Securities Suit Files 1999
On June 16, 1999, a complaint was filed against the Company, and certain
former officers and directors. The Plaintiff seeks to certify a class
action against the Defendants for purported securities violations.
Specifically, the complaint seeks relief for violations of Section 10(b)
of the Securities Exchange Act of 1934 and Rule 10(b)-5, promulgated
thereunder, as well as purported violation of Section 20(a) of the
Exchange Act.

The complaint alleges that the Defendants purportedly issued false and
misleading statements as to the Company's results of operations and that,
specifically, earnings and earnings per share of the Company for each of
the quarterly reports issued for the first, second and third quarters of
the 1998 fiscal year were fraudulently misstated. The court dismissed the
case without prejudice, and the parties have stipulated to a dismissal
with prejudice. Counsel and Company believe this case is now concluded.

MED WASTE: SEC Conducts Informal Inquiry into Accounting Procedures
In July 19, 1999, the Securities and Exchange Commission advised the
Company that it was conducting an informal inquiry into the accounting
procedures utilized by the Company. The SEC has requested that the
Company voluntarily provide certain records and other information. The
Company says it is complying fully with such request and will continue to
cooperate with the SEC in its inquiry. The Company cannot predict how
long the investigation will last or its outcome. In addition, the Company
cannot determine what actions, if any, the SEC might take against the
Company, or what effect any such action might have on the Company's

NY CITY: Police May Seize Vehicle Suspected to Link to Crime, Ct Affirms
QDS:02900108-Section 14-140 of the New York City Administrative Code
("Property Clerk Law") authorizes the Police Department to seize the
vehicle of a person arrested for a crime when the vehicle is "suspected
of having been used as a means of committing the crime." N.Y.C. Admin.
Code @ 14-140 (1996). If the Police receive a demand from the vehicle's
owner for its return, they must either return it, or the Department's
Property Clerk must start a civil forfeiture action within 25 days to
obtain ownership of the vehicle, RCNY @ 12-36.

In this putative class action, plaintiffs, whose vehicles have been
seized, sue the City, on behalf of themselves and others similarly
situated, under 42 U.S.C. @ 1983, on the ground that the forfeiture
procedures violate the Due Process Clause of the Fourteenth Amendment. In
particular, plaintiffs claim that the "Due Process Clause ... requires
that those persons whose cars are seized by the police and held for
forfeiture under the Administrative Code must receive a prompt hearing at
which they can challenge the legitimacy and necessity of the impoundment
of the car for the duration of the forfeiture case." Plaintiffs claim
also that the Due Process Clause requires that "those persons whose cars
have been seized and held for forfeiture receive a meaningful opportunity
to be heard in their requests for the assistance of court-appointed
counsel in the forfeiture case."

Plaintiffs move for class action certification pursuant to Fed. R. Civ.
P. 23, and for a preliminary injunction pursuant to Fed. R. Civ. P. 65,
ordering that "unless a person whose automobile is seized and held for
forfeiture receives a prompt hearing on the legitimacy and necessity of
defendants' continued detention of the car, the vehicle be released to
the owner for the pendency of the litigation." Plaintiffs also seek a
preliminary injunction ordering that "if a car owner subjected to
forfeiture has not had a meaningful opportunity to request court
appointed counsel in the case, then the car should be returned to him as
its lawful claimant, until the counsel determination is made by a court."
The City cross-moves pursuant to Fed. R. Civ. P. 12(b)(6) to dismiss the
complaint. For the reasons stated below, the motion to dismiss is

    I. For the purpose of deciding the motion to dismiss, the material
facts alleged in the complaint are assumed to be true. See Cooper v.
Pate, 378 U.S. 546, 546 (1964) (per curiam). The vehicles of six of the
seven named plaintiffs-Valerie Krimstock, Charles Flatow, Ismael Delapaz,
Clarence Walters, James Webb, and Michael Zurlo-were seized after each
was arrested for Driving While Intoxicated ("DWI"). (Id. P9) These six
named plaintiffs have all pleaded guilty to the non-criminal violation of
driving while impaired. (Id.) The vehicle of the seventh named plaintiff,
Sandra Jones, was seized when her husband was arrested for drug and
weapon possession; those charges were dismissed. (Id. P29) The Property
Clerk started civil forfeiture proceedings against all seven in the civil
part of the New York Supreme Court. (Id. PP12, 15, 17, 21, 24, 26, 30) As
of December 14, 1999, when the complaint was filed, the forfeiture cases
of all seven plaintiffs were pending, but none had received a hearing,
and their vehicles remained in the Property Clerk's custody. (Id. P10)

    II. Defendants argue that this court should dismiss plaintiffs'
complaint because under Younger v. Harris, 401 U.S. 37 (1971) and
subsequent cases, federal courts must abstain when exercising
jurisdiction would interfere with state criminal proceedings or certain
types of state civil proceedings. Defendants contend that hearing
plaintiffs' claims here would interfere with the Property Clerk's
forfeiture actions. (Def. Mem. at 5) Younger abstention is appropriate
when 1) there is an ongoing state proceeding; 2) the proceeding involves
important state interests; and 3) the state proceeding provides an
adequate opportunity for the plaintiff to raise his constitutional
claims. See Phillip Morris, Inc. v. Blumenthal, 123 F.3d 103, 105 (2d
Cir. 1997).

State proceedings are ongoing until the parties exhaust their state
appellate remedies. See Huffman v. Pursue Ltd, 420 U.S. 592, 608 (1975).
The Property Clerk's forfeiture proceedings were pending in New York
Supreme Court when plaintiffs' complaint was filed. Thus, plaintiffs do
not suggest that they have exhausted their appellate remedies. Rather,
they argue that the forfeiture suits are not ongoing "in any realistic
sense" because once plaintiffs answered the Property Clerk's summonses,
the Clerk has done nothing to advance the cases. (Pl. Reply Mem. at 15)
Plaintiffs fail to provide any legal support for this argument. Moreover,
state court defendants can cause the clerk to place a case on the court's
trial calendar by filing a note of issue. See N.Y. C.P.L.R. @ 3402 (Mc
Kinney 1990). Accordingly, the forfeiture proceedings are ongoing.

State proceedings involve an important state interest if they "concern
the central sovereign functions of state government." Phillip Morris,
Inc., 123 F.3d at 106. Furthermore, a federal court should consider not
only the state's interest in the outcome of a particular case, but also
the "underlying nature" of that class of cases, Id. The Property Clerk's
forfeiture proceedings act to complement and strengthen the state's law
enforcement efforts by depriving those who commit dangerous offenses of
the means of repeating those offenses. Accordingly, the forfeiture
proceedings involve an important state interest.

Finally, federal courts should not abstain unless the state proceeding
provides an adequate opportunity to raise constitutional claims. Here,
the forfeiture proceedings do adequately permit plaintiffs to claim the
due process right to a meaningful opportunity to request court-appointed
counsel. Plaintiffs do not disagree that they would be able to raise this
claim as individual defendants in the forfeiture proceedings. They argue
instead that their individual state court proceedings cannot provide the
"broad-based" class relief they request here. (Pl. Reply Mem. at 15-16).
In support of that argument, they mistakenly cite La Shawn A. by Moore v.
Kelly, 990 F.2d 1319 (DC Cir. 1990). However, in that case, the Court did
not deny abstention because the federal suit was a class action, Rather,
the Court held narrowly that the state proceedings in the Family Division
of the D.C. Courts were "not suitable arenas" for the plaintiffs' federal
claims. Id. at 1323-24. Moreover, in Juidice v. Vail, 430 U.S. 327, 331,
337 (1977), the Supreme Court upheld a federal district court's
abstention on the ground that each member of a class of judgment
creditors had an adequate opportunity to raise constitutional claims in
individual state proceedings.

Accordingly, I will abstain from hearing plaintiffs' claim that they have
a due process right to a meaningful opportunity to request
court-appointed counsel. Defendants' motion to dismiss is granted with
respect to that claim.

The forfeiture proceedings do not, however, provide an adequate
opportunity for plaintiffs to claim a due process right to a prompt
probable cause hearing. After claimants demand the return of their
vehicle, the Property Clerk has 25 days to begin forfeiture proceedings.
Thus, plaintiffs would not be able to raise their due process claim for
at least 25 days, and even if the state court immediately ruled in
plaintiffs' favor on that claim, the time for a prompt probable cause
hearing would already have passed. In Gerstein v. Pugh, 420 U.S. 103, 108
n.9 (1975), the plaintiffs also claimed a due process right to prompt
probable cause hearings, in that case after their arrest. The Supreme
Court upheld the decision to hear the plaintiffs' claim rather than to
abstain under Younger because the "legality of pretrial detention without
a judicial hearing ... could not be raised in defense of the [state]
prosecution." Accordingly, I am not required to abstain from hearing
plaintiffs' claim that they have a due process right to prompt probable
cause hearings.

Defendants argue also that the court should dismiss plaintiffs' complaint
because under Colorado River Water Conservation Dist. v. United States,
424 U.S. 800 (1976) and subsequent cases, federal courts could, in
"exceptional circumstances," abstain when there are concurrent state and
federal proceedings. Sheerbonnet, Ltd. v. American Express Bank, 17 F.3d
46, 49 (2d Cir, 1994). Defendants maintain that the concurrent state
proceeding here is Grinberg v. Safir, 266 A.D.2d 43, 698 N.Y.S.2d 218
(1st Dep't 1999), in which the plaintiffs claim, inter alia, that the
application of the Property Clerk Law to persons arrested for DWI
violates the Due Process Clause. I need not consider whether Grinberg
warrants abstention under Colorado River because on February 29, 2000,
the New York Court of Appeals dismissed the plaintiff's appeal from the
Appellate Division's decision, see Grinberg v. Safir, 94 N.Y.2d 896, 707
N.Y.S.2d 143 (2000), and Grinberg no longer a "concurrent" proceeding.
For the above reasons, I am not required to abstain either under Younger
or Colorado River from hearing plaintiffs' claim that they have a due
process right to a probable cause hearing.

    III Defendants argue that the court should, nevertheless, dismiss
plaintiffs' claim that they have a due process right to a probable cause
hearing because the Property Clerk's existing procedures provide due
process. (Def. Mem. at 11) The Fourteenth Amendment's Due Process Clause
guarantees that no State shall "deprive any person of life, liberty, or
property, without due process of law." That guarantee usually requires
that the government provide notice and an opportunity to be heard before
a person is deprived of property. See United States v. James Daniel Good
Real Property 510 U.S. 43, 47 (1993). However, the government may
postpone the notice and hearing in "extraordinary circumstances." Id. at
53. Plaintiffs acknowledge that it would be "impractical" to provide a
hearing before seizing a vehicle in the "typical, DWI arrest." (Pl. Mem.
at 20) Rather, they argue that due process requires the government to
provide them with a prompt probable cause hearing "in a matter of days,
not weeks or months." (Id. at 30)

Defendants respond that the Property Clerk's existing procedures have
been challenged in the past as violating due process, and the Second
Circuit has declared that they were constitutional. (Def. Mem. at 10-11)
They cite Butler v. Castro, 896 F.2d 698, 699 (2d Cir. 1990), in which
the Court stated that "the actual procedures followed by the City with
regard to the disposition of seized items are constitutionally valid."
(Def. Mem. at 10) At least one district court in this Circuit has
characterized the Circuit's statement in Butler as affirming the
constitutionality of the Clerk's existing procedures. In Leyh v. Property
Clerk, 774 F. Supp. 742, 746 (E.D.N.Y. 1991), Judge Glasser said "[the]
Second Circuit has had occasion to review the substance of [the
procedures], and the court declared [them] to be 'constitutionally
valid.' " Similarly, in a more recent Second Circuit case, Alexandre v.
Cortes, 140 F.3d 406, 409 (2d Cir. 1998), the Court referred to the order
creating the existing procedures as establishing "constitutional
procedures for the disposition of property held by the clerk."

However, the Court in Butler did not examine the hearing provided under
the Property Clerk's procedures. Rather, the Court addressed whether the
claimant had received notice of the procedures for recovering his
vehicle. See Butler, 896 F.2d at 703. The court in Alexandre also
addressed a different issue-whether arrestees received notice and an
opportunity to contest the release of their vehicles to lienholders. See
Alexandre, 140 F.3d at 413. In neither case was the Second Circuit
required to consider whether the hearing provided under the existing
procedures provides due process. In addition, when the courts in Butler
and Alexandre reviewed the Property Clerk's existing procedures, the
Clerk had only 10 days to initiate a forfeiture proceeding; under current
regulations, the Clerk has 25 days. RCNY @ 12-36. Thus, although I am
mindful of these passing approvals of the Clerk's existing procedures, I
must nonetheless consider whether the forfeiture proceeding under the
existing procedures provides due process.

Plaintiffs contend that the proceeding does not provide due process,
because the Second Circuit has held that when the United States Customs
Service seizes vehicles under 19 U.S.C. @@ 1602 et seq., which governs
forfeitures for violations of the customs laws, it must provide claimants
with a prompt probable cause hearing. In Lee v. Thornton, 538 F.2d 27, 33
(2d Cir. 1976), Customs agents arrested Lee for bringing undeclared
people, merchandise and marijuana into the country and also seized the
vehicle he used to transport those items. See Id. at 30-31. The agents
told Lee that his vehicle could be forfeited but that he had a right to
petition Customs for "remission or mitigation" of the forfeiture. Customs
would remit or mitigate a forfeiture if the agency found mitigating
circumstances. In Lee, Customs mitigated but did not remit the forfeiture
of the vehicle, and the plaintiff paid $ 100 for the return of his car.
See Id.

In general, when Customs does not grant a petition for mitigation, the
United States Attorney may sue for forfeiture of the vehicle. See United
States v. $ 8,850, 461 U.S. 555, 557-58 (1983). In Lee, the Court found
that the United States Attorney's "condemnation proceedings necessarily
consume substantial periods of time," and that "[deprivation] of means of
transportation for such periods requires an opportunity to be heard."
Lee, 538 F.2d at 32. The court held, therefore, that when "vehicles are
seized for forfeiture ... actions on petitions for mitigation or
remission should be required within 24 hours," and a "hearing on probable
cause for the detention ... within 72 hours it the petition is not
granted in full." Id. at 33.

Although Lee does appear to hold under similar circumstances that due
process requires a prompt probable cause hearing, Lee has been implicitly
overruled by two subsequent Supreme Court decisions also addressing the
forfeiture procedures under 19 U.S.C. @@ 1602 et. seq. in United States
v. $ 8,850, 461 U.S. 555, 555 (1983), Customs seized $ 8,850 from the
claimant when she failed to declare the money upon entering Los Angeles
International Airport. Customs referred the case to the U.S. Attorney who
filed a complaint seeking civil forfeiture in federal District Court 18
months later. See id. at 560-61. As one of her defenses to that suit, the
claimant argued that the government's "dilatory" commencement of the suit
violated her due process right to a hearing at a meaningful time. When
her claim reached the Supreme Court, the Court characterized the issue in
$ 8,850 as "when the post-seizure delay may become so prolonged that the
dispossessed property owner has been deprived of a meaningful hearing at
a meaningful time." Id. at 562-63. The Court then explained that this
issue of when the government's delay in initiating a civil forfeiture
suit violates the due process right to a hearing is analogous to the
issue of when the government's delay violates one's right to a speedy
trial. See Id. at 564. On the basis of that analogy, the Court then
applied the test that it had developed in Barker v. Wingo, 407 U.S. 514
(1972) to resolve the speedy trial issue in order to determine whether
Customs' 18-month delay in initiating the forfeiture suit had violated
claimant's due process right to a "meaningful hearing at "meaningful
time," and held that Customs' delay in instituting civil forfeiture
proceedings was reasonable.

Plaintiffs respond that $ 8,850 does not apply to this case because $
8,850 concerns the "time limits within which a federal forfeiture action
itself must be initiated," rather than the "timing of the initial
poet-seizure hearing." (Pl. Reply Mem. at 7) This limited reading of $
8,850 might be plausible if the Supreme Court itself had not read the
case more broadly. Less than three years later the Supreme Court
addressed 19 U.S.C. @@ 1602 et seq. again. In United States v. Von
Neuman, 474 U.S. 242 (1986), the claimant argued that Customs' 36-day
delay in responding to his petition for mitigation or remission violated
his right to due process. See Von Neuman, 474 U.S. at 243. The Ninth
Circuit had held that due process requires Customs to act promptly in
ruling on petitions for remission or mitigation under 19 U.S.C. @@ 1602
et. seq. See id. at 247. The Supreme Court reversed, The Court explained
that due process did not require Customs to act promptly on the petition
because "[implicit] in this Court's discussion of timeliness in $ 8,850
was the view that the forfeiture proceeding, without more, provides the
post-seizure hearing required by due process ..." Id. at 249. The Court
reiterated this message when it wrote, "we have already noted that
[claimant's] right to a forfeiture proceeding meeting the Barker test
satisfies any due process right with respect to the car. ..." Id. at 251.
If the due process right to a meaningful post-seizure hearing under 19
U.S.C. @@ 1602 et seq. requires only the forfeiture proceeding, it does
not also require a probable cause hearing, and the Second Circuit's
decision in Lee holding to the contrary must be considered overruled.

Although due process does not requires a probable cause hearing when
vehicles are seized under 19 U.S.C. @@ 1602 et seq., it might require a
probable cause hearing when vehicles are seized under the Property Clerk
Law. The Supreme Court's explanation in Van Neuman that in the Customs
cases due process requires only a forfeiture proceeding addressed facts
different from those in this case. In this case, for example, claimants'
vehicles are seized for driving while intoxicated rather than smuggling;
they are seized by local rather than federal law enforcement officers;
and the forfeiture proceeding is brought by the Property Clerk rather
than a United States Attorney. One or more of the differences between the
Customs cases and this case might warrant providing plaintiffs with a
probable cause hearing.

To determine whether these differences require providing a probable cause
hearing, we consider the three interests the Supreme Court identified in
Mathews v. Eldridge, 424 U.S. 319 (1972) as relevant to deciding whether
due process requires an additional safeguard. See United States v.
Monsanto, 924 F.2d 1186, 1193 (2d Cir. 1991). In Mathews, the Supreme
Court explained that to determine whether due process requires procedural
safeguards in addition to those provided, the court must weigh the "
'private interest that will be affected by the official action', 'the
risk of erroneous deprivation of such interest through the procedures
used, and the probable value, if any, of additional or substitute
safeguards;' and lastly, 'the government's interest, including the
function involved and the fiscal or administrative burdens that the
additional or substitute procedural requirement would entail.' " Id.

The weights of those interests in this case do not require providing
plaintiffs with the additional safeguard of a probable cause hearing. The
private interest affected by the official action is the same: a person's
use of his vehicle. Further, the important of that interest might be even
greater for persons whose vehicles are seized by Customs. They are likely
to be stranded at a "remote border [points] far from their destination"
where it would be difficult to find alternative transportation. Lee, 538
F.2d at 33. Under the Property Clerk Law at issue here, vehicles are not
seized at a "remote border" location. Indeed, they are seized in a
jurisdiction that abounds in mass transit facilities. Similarly, the risk
of erroneous deprivation of that interest is based in both cases on the
reliability of the same procedure: a probable cause arrest. Plaintiffs do
not allege any facts suggesting that the use of that procedure to
determine whether a person has committed an offense for which a vehicle
would be subject to forfeiture under the Property Clerk Law is unusually
unreliable. Plaintiffs also do not allege facts suggesting that a
probable cause hearing in drunk driving cases would be more valuable in
eliminating the risk of erroneous deprivation that attaches to the use of
probable cause arrests than it would be in other cases, including Customs

The government's interest in both cases is to supplement law enforcement.
Analyzing this interest also requires that I consider the fiscal or
administrative burden that conducting the probable cause hearing would
entail. In Lee, the court found that the cost to the government of
conducting probable cause hearings in the Customs cases "would not be
great since ... machinery is readily available and ... is not in use in
[similar] cases." Id. Plaintiffs allege that the Police seized 1,162
vehicles from February to November 1999 for DWI and that this "class of
persons is increasing daily." (Comp. P37) Therefore, it is likely that
the cost of conducting probable cost hearings here would be far more
burdensome that the minimal burden described by the Court in the Customs

Because the Mathews interests do not weigh any more in favor of claimants
in Property Clerk cases than they do in Customs cases, and because those
interests are deemed fully protected in Customs cases by no more than a
forfeiture proceeding, see Von Neuman, 474 U.S. 249, plaintiffs' due
process right to a meaningful hearing at a meaningful time does not
require the additional safeguard of a probable cause hearing.
Accordingly, defendant's motion to dismiss plaintiffs claim that due
process entitles them to a prompt post-deprivation probable cause hearing
is granted.

For the reasons stated above, defendants' motion to dismiss plaintiffs'
complaint is granted. (New York Law Journal, November 16, 2000)

PILGRIMS PRIDE: Employees Seek Wages for All Time Worked
In January of 1998, seventeen current and/or former employees of the
Company filed the case of "Octavius Anderson, et al. v. Pilgrim's Pride
Corporation" in the United States District Court for the Eastern District
of Texas, Lufkin Division, claiming the Company violated requirements of
the Fair Labor Standards Act.

The suit alleges the Company failed to pay employees for all hours
worked. The suit generally alleges that (i) employees should be paid for
time spent to put on, take off, and clean certain personal gear at the
beginning and end of their shifts and breaks and (ii) the use of a master
time card or production "line" time fails to pay employees for all time
actually worked. Plaintiffs seek to recover unpaid wages plus liquidated
damages and legal fees.

Approximately 1,700 consents to join as plaintiffs have been filed with
the court by current and/or former employees. It is anticipated that a
trial date will be set in February of 2001. The Company believes it has
substantial defenses to the claims made and intends to vigorously defend
the case. However, neither the likelihood of an unfavorable outcome nor
the amount of ultimate liability, if any, with respect to this case can
be determined at this time.

PILGRIMS PRIDE: Settlement for Price Suit Provides for Vitamin Recovery
On March 23, 1999, the Company is a plaintiff in two antitrust lawsuits
in U.S. District Court in Washington, D.C. alleging a world-wide
conspiracy to control production capacity and raise prices of common
vitamins such as A, B-4, C and E.

The suit alleged that, Roche Holding, Ltd. Affiliates Hoffmann- LaRoche
Inc., Roche Vitamins Inc. and F. Hoffman-LaRoche, Ltd.; Rhone-Poulenc SA;
BASF AG and the German chemical company's U.S. unit, BASF Corp.; Eisai
Co.; Takeda Chemical Industries Ltd.; and Merck KgaA conspired to control
production of vitamins A, C and E.

In a separate suit, the Company contended that Chinook Group Ltd., DuCoa
LP, DCV Inc. and various individuals tried to monopolize the vitamin B-4

On November 3, 1999, a settlement, which was entered into as part of a
class action lawsuit, to which the Company was a member was agreed to
among the defendants and the class, which would provide for a recovery of
between 18-20% of vitamins purchased from the defendants from 1990
through On March 28, 2000, the judge presiding over the case accepted the
negotiated settlement between the parties; however, appeals from various
sources are in process.

The Company has filed documentation showing that vitamin purchases made
during the recovery period totaled approximately $14.9 million.  Based on
information the Company has received to date, it is anticipated that the
majority of the recovery will occur upon resolution of the appeals
process, which is expected before the end of fiscal 2001.

SOTHEBY'S, CHRISTIE'S: $27M Fee Award For Boies' Firm Sets Off Debate
It took Boies, Schiller & Flexner six months to make almost $27 million
as lead counsel for plaintiffs in the price-fixing class action against
Sotheby's Holdings Inc. and Christie's International.

But both observers of and participants in the unique auction system used
by Judge Lewis Kaplan of the U.S. District Court for the Southern
District of New York to select lead counsel say the fee award for the
$512 million settlement leaves plenty of room for debate.

The formula for the blind auction established by Kaplan called for firms
to present a minimum amount that would go to the class. The winner of the
auction would then be entitled to 25 percent of any monies recovered in
excess of that amount.

The minimum amount presented by Boies, Schiller, $405 million, swept the

"The way this auction worked, you had to calculate a number you thought
you could achieve for the class," said Daniel Osborn of New York's Beatie
and Osborn, who submitted a bid he said was somewhere above $300 million.
" According to the bid requirements, you got no fee if you did not
recover that minimum amount for the class."

While Osborn was not surprised at the size of the winning bid, the same
cannot be said for Lawrence Sucharow of New York's Goodkind Labaton
Rudoff & Sucharow, who was stunned by the Boies, Schiller bid.

"That was magnitudes higher than I thought bids would go for," said

Although his firm submitted a bid along with more than 20 other firms
back in May, Sucharow was vocal in his opposition to the auction process.

"I think this is one situation where the auction process may have
resulted in a lower payment to the class members," he said. "The same
fees could have been awarded under the traditional Rule 23 standards,
based on the nature of case, the strength of the claims, the existence of
parallel proceedings and the nature and quality of work performed."

Kaplan designed the auction procedure to ensure that class members
received the best representation possible at the fairest price. From the
beginning, he solicited the opinions of both competing counsel and
academics who have studied the use of auctions in class action
litigation, and at one point, changed the formula.

One academic who submitted his opinion was John Coffee Jr. of Columbia
Law School, who argued that the system established by Kaplan was flawed
in that it presented a conflict of interest between the interests of lead
counsel and those of the plaintiff class.

Coffee said that the system worked in this setting, but that the same
problems remain.

"It did economize on the attorneys fees, but it wound up revealing just
how sharp a conflict can arise between counsel and class under this
specific auction formula," he said. "Hypothetically, what if the highest
offer the defendants were willing to make was $350 million? Then class
counsel would have had a very strong self-interest in rejecting a

Coffee said a better system is one based on an increasing percentage
formula, with lawyers recovering a higher percentage of increasingly
higher recoveries. He said the U.S. Supreme Court has made it clear that
the "determination of who is an adequate representative of a class cannot
be determined by the nature of the settlement."

He also noted that the facts of the auction house litigation, which is
still awaiting a hearing as a prelude to Kaplan's final approval, are
different because the suit was filed as Christie's acknowledged it was
cooperating with a federal criminal investigation into commission
price-fixing between the two rivals.

"I don't want to say it was riskless," Coffee said. "But it is a case
that started out with a concession by Christie's."

Osborn said the Christie's concession should lead Kaplan to use his
discretion and reconsider the award to the Boies, Schiller.

"What offends me is that this is really a classic example of the tail
wagging the dog because Boies, Schiller had the benefit of the criminal
investigation and prosecutions," Osborn said, adding that he nonetheless
"loves the auction concept," because it levels the playing field for
small firms such as his own and Boies, Schiller.

"In a 100-yard dash, they had a 50-yard head start, and to be able to
coattail a criminal investigation should affect the fee award."

But Sucharow was not so sure.

"I would certainly rather have Sotheby's than some other cases," he said.
" But it's certainly not a slam dunk. You have to have large cojones to
bid $400 million in this case."

The hearing for the final approval of the plan is scheduled for Feb. 2.
However, Kaplan has said in an order that he has a "substantial question"
about whether the use payment of nearly 20 percent of the settlement
amount in the form of discount certificates to reduce future sellers'
commissions, is "in the public interest."

The proposed payment of discount certificates amounts to $100 million of
the $512 million settlement.

Boies, Schiller is also representing Vice President Gore in the Florida
election litigation.

Mark Hamblett is federal court reporter at the New York Law Journal, an
American Lawyer Media affiliate. (The Recorder, November 27, 2000)

SUNBEAM CORP: SEC May Recommend Filing Civil Claims against Former CEO
A Return Visit to Earlier Stories -- Chainsaw Justice? SEC staff viewed
as seeking civil action against Dunlap By Bill Alpert

Investigators at the Securities and Exchange Commission plan to recommend
filing civil claims against Alfred J. Dunlap, former Sunbeam Corp. chief
executive, says Dunlap's attorney, Donald S. Zakarin. But he says he has
seen no sign of any criminal investigation following Sunbeam's 1998
restatement of three prior years' results -- after sacking the executive
known as "Chainsaw Al." Zakarin, a partner with Pryor Cashman Sherman &
Flynn in New York, likewise expects SEC staffers to urge enforcement
action against another client, former Sunbeam Vice Chairman Russell A.
Kersh. Staff recommendations are voted on by the commission.

"I've expected that they would do this since June of 1998," said Zakarin.
"Dunlap is and has been a lightning rod. Any fair-minded person who
abides by the evidence will see that neither he nor Russ Kersh did
anything wrong whatsoever." Sunbeam has disclosed that the SEC staff
plans to seek civil action against the company.

Dunlap was fired a week after Barron's June 8, 1998, story questioned the
validity of reported sales underlying Sunbeam's prior-year turnaround.
Sunbeam subsequently restated its financials, reducing profits and
increasing the 1997 loss that Sunbeam reported in 1998's first quarter.

Losses have continued for the company, maker of such consumer appliance
brands as Sunbeam, Oster, Mr. Coffee, First Alert and Coleman. Sunbeam
reported a loss of $84 million, or 78 cents a share, in the September
2000 quarter. Sales slid 23% from the prioryear period, to $466 million.
Moody's last week downgraded the debt of the Boca Raton, Florida-based
firm, as lenders agreed to defer payments until April 2001. Sunbeam's
shares have fallen from a high of 53 before the 1998 story in Barron's,
to a recent 69 cents.

Zakarin, who represents both Dunlap and Kersh, expects SEC staff to
recommend that the commission seek civil remedies against "a slew of
people and entities." Zakarin believes that the staffers had already made
up their minds, even before starting their investigation two and a half
years ago, and he calls depositions they have taken from witnesses
"worthless." The agency doesn't comment on investigations.

Class-action suits against Sunbeam, its officers and its auditors are
wending their way through pretrial stages-in the same West Palm Beach
federal district court where Republican Party attorneys recently
challenged the recount of the Presidential election. (Dow Jones &
Company, Inc., November 27, 2000)

TOBACCO LITIGATION: Wrangle on Trust Fund for Asbestos Workers to Begin
A lawsuit filed with little fanfare three years ago has emerged as the
latest flash point in the high-stakes legal battle between the tobacco
industry and opponents who claim it conspired to conceal the dangers of

Attorneys planned to meet in court Monday to begin picking jurors for a
two-month trial pitting a trust fund for sick asbestos workers against
R.J. Reynolds, Brown & Williamson and other tobacco giants.

Attorneys say damages could exceed $3 billion.

The trial is the first out of a backlog of about a dozen tobacco claims
filed in federal court in Brooklyn, some under civil provisions of the
Racketeer Influenced and Corrupt Organizations Act.

Unlike class-action suits filed by consumers, most of the Brooklyn cases
were brought by third parties including health insurance groups.

In this case, the plaintiff is a trust representing workers exposed to
asbestos. The trustees allege cigarette companies are liable because they
concealed medical evidence that "smoking, an activity indisputably
dangerous to human health in and of itself, is even more lethal to
individuals occupationally exposed to asbestos." (Chicago Tribune,
November 27, 2000)

TORONTO SUN: 28 Women in Sunshine Girl Photos Sue for $20 Million
Twenty-eight women who posed for scantily clad Sunshine Girl photos are
suing former Toronto Sun photographer Norm Betts and The Sun for $20
million, according to court documents filed this week.

The Toronto Sun, its parent Sun Media Corp. and Betts - who resigned from
the tabloid in January - are being sued by 28 women who allege the
veteran photographer fondled them, intimidated them into removing their
clothes and performed sex acts in their presence.

One of the women was 16 at the time the incidents are alleged to have
occurred, and several others were 17 and 18 at the time. Toronto lawyer
Jeffrey Raphael, who is representing the women, said yesterday he's
confident the number of participants will grow as more of the alleged
victims learn about the class action.

"I've spoken personally to over 50 women who have different allegations
of misconduct that's occurred during their photo shoots, from the early
1970s right up to 1999," Raphael said.

None of the allegations has been proved in court and no statement of
defence has been filed. Lawyers for The Toronto Sun were not available
for comment yesterday.

An application for class-action status filed by Raphael in the Superior
Court of Justice is scheduled to be heard April 4. (The Toronto Star,
November 25, 2000)

TRANSFINANCIAL HOLDINGS: Halts Management Buyout after Filing of DE Suit
The Company and its directors have been named as defendants in a lawsuit
filed on January 12, 2000 in the Chancery Court in New Castle County,
Delaware. The suit seeks declaratory, injunctive and other relief
relating to the proposed management buyout of the Company. The suit
alleges that the directors of the Company failed to seek bidders for the
Company's subsidiary, Crouse, failed to seek bidders for its subsidiary,
UPAC, failed to actively solicit offers for the Company, imposed
arbitrary time constraints on those making offers and favored a
management buyout group's proposal. The suit seeks certification as a
class action complaint. The proposed management buyout was terminated on
February 18, 2000 and the Company has filed for dismissal of the suit.
The plaintiff filed an amended class action complaint on August 9, 2000,
seeking damages in excess of $4.50 per share for the alleged breaches of
fiduciary duties by the defendants. A motion to dismiss and an amended
complaint have been filed and the Company believes this suit will not
have a material adverse effect on the financial condition, liquidity or
results of operations of the Company.


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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