CAR_Public/010501.MBX               C L A S S   A C T I O N   R E P O R T E R

                Tuesday, May 1, 2001, Vol. 3, No. 85

                             Headlines

CISCO SYSTEMS: Plaintiffs Want to Burn Technology Giant With Suit
COMPAQ COMPUTER: Wayne Reaud Announces Consumers’ Lawsuits re Warranty
COX ARENA: Ticket for Baby Subject of Suit over Bias against the Mother
CREDIT CARDS: A Snapshor at Forum While Antitrust Suit Is Still Puzzling
DAIMLERCHRYSLER AG: EEOC sues for Transfer for Disabled Workers

DOJ: Treasury Employees Special Rates Case Heads To Mediation
FBI: African-American Special Agents Settle of Racial Bias Suit
FREEMARKETS, INC: Kirby McInerney Commences Securities Lawsuit
GENERAL MOTORS: Document Unlocked Reveals and Brings Fury
HIGH-INTEREST LENDERS: Green Tree, Long Beach, TMS Mortgage Sued

JAPAN, CHISSO: Osaka High Ct Orders To Pay Minamata Mercury Victims
LifeUSA HOLDING: Ct Decertifies Case v. Independent Agents over Annuity
MERRILL LYNCH: To Pay $16.9 Million To Injury Victims
PRICELINE.COM, INC: Wolf Haldenstein Commences Securities Suit in N.Y.
QUALCOMM INC: Settled Suit Shows Impact of Giving Employee Stock Options

REDIFF.COM: Wolf Haldenstein Commences Securities Suit in New York
SANTA FE: Las Vegas Unions File Suit Alleging Violations of WARN
SUNBEAM CORP: Stockholders And Arthur Andersen Enter into Agreement
TURNSTONE SYSTEMS: Spector, Roseman Commences Securities Lawsuit in CA
WINSTAR COMMUNICATIONS: Spector, Roseman Expands Securities Lawsuit

                            *********

CISCO SYSTEMS: Plaintiffs Want to Burn Technology Giant With Suit
-----------------------------------------------------------------
Milberg Weiss Bershad Hynes & Lerach's recent assault on Cisco Systems
Inc. could be a test case for getting plaintiffs suits back on firm
footing in Northern California's federal courts.

At least that's one of the theories defense lawyers are floating as they
analyze the case against technology darling Cisco. No surprise defense
lawyers see the case as flawed at best."It certainly says something about
the plaintiffs bar fiscal '01 business plan," said Boris Feldman, a
Wilson Sonsini Goodrich & Rosati partner and a leading securities defense
lawyer.

Defense-side scoffing aside, the Cisco case has the potential to become a
bellwether: For the first time, the Valley's biggest company is getting
hit for securities fraud and that alone is cause for concern among other
technology heavies. And, as defense lawyers point out, a successful case
against Cisco would end a losing streak for plaintiffs lawyers."My guess
is that they're trying to get some better rulings out of the 9th
Circuit," said Shirli Fabbri Weiss, a Gray Cary Ware & Freidenrich
securities partner.

Plumbers & Pipefitters v. Cisco Systems Inc. alleges the company and key
executives violated securities laws by passing on misleading information
to investors to inflate the value of the company's stock. The suit
further contends that company insiders including CEO John Chambers took
advantage of inflated stock prices to reap a total of $ 595 million from
personal trades.So far, Cisco hasn't filed an answer to the complaint.

And Cisco hasn't yet announced whether it will award the potentially plum
piece of litigation work to its longtime chief outside counsel, Brobeck
Phleger & Harrison. In the meantime, Brobeck isn't commenting on whether
it's talking to Cisco about the suit.

The case against Cisco is one of a handful of securities class actions
Milberg has filed against tech companies this year. Smaller players like
Broadvision Inc. and PlanetRx.com have also been targeted by the firm.

Cisco contends the suit is without merit a view echoed by Silicon Valley
defense lawyers: "Cisco's one of the great companies in America. They're
going through a tough time, but to insist that Cisco has been a fraud for
the past 18 months is absurd," Feldman said.

But Milberg stands behind its complaint and will likely level more
detailed accusations against Cisco in future filings."We have an
incentive to bring a case that has merit if we lose, we don't get paid,"
said Milberg partner Spencer Burkholz. He added that the firm would be
sanctioned by the court if its stock-fraud suits lacked merit, and so
far, that hasn't happened.

When it comes to securities class actions, judges in lower federal courts
and the 9th Circuit U.S. Court of Appeals have delivered a series of
defense-friendly rulings in recent years.Defense lawyers - capitalizing
on the 1995 Private Securities Litigation Reform Act have accused
plaintiffs attorneys of relying on the discovery process to prove fraud
allegations. The 9th Circuit has sided with the defense in key rulings.
As a result, securities class action plaintiffs lawyers have to file
detailed complaints up front. To survive a defense motion to dismiss,
Milberg's complaint must explain in painstaking detail its allegations of
stock price manipulation.And a judge has to buy the argument.

The higher pleading standard came from the 9th Circuit's most
influential interpretation of the 1995 law. Decided in July 1999, In re:
Silicon Graphics Securities Litigation pitted Milberg against defense
lawyers at Wilson Sonsini. In that case, a 9th Circuit panel ruled that
plaintiffs' filings must illustrate that defendants committed fraud
intentionally and recklessly to benefit from an artificially inflated
stock price. In other words, "being wrong is not actionable," said James
Finberg, a partner at Lieff Cabraser Heimann & Bernstein.The decision
made life much harder for plaintiffs lawyers. "The standard now is that
you have to have particularized facts showing deliberate recklessness,"
Finberg said. Gray Cary's Weiss said she sees the Cisco case simply as an
attempt to revisit the tougher standards. Weiss herself extracted a key
defense ruling from the 9th Circuit earlier this month. In Zeid v.
Kimberly, the 9th Circuit applied the same high pleading standard to
accounting fraud cases as it does to stock-drop suits. Accounting fraud
cases usually occur as a company is restating its financials.

Stock-drop suits like the one against Cisco often follow a steep decline
in the value of a company's stock on the market. In Cisco's case, the
stock hit a high of $ 82 between Aug. 10, 1999 and April 6, 2001 the
period covered in the lawsuit. It ended trading last Wednesday April 25
at $ 15.73 a share.

Stanford University securities law professor Joseph Grundfest, however,
is skeptical the current Cisco complaint will have much impact when it
comes to testing the new standards. Grundfest helped craft the 1995
reform act and has worked on both plaintiffs-side and defense cases.
"This is not one of the stronger complaints I've seen," said Grundfest.
Among other things, he dinged the complaint for citing an article that he
thinks will ultimately prove more useful for the defense.

Still, the Cisco complaint makes for interesting reading. According to
the suit, everyone from market analysts to customers questioned Cisco's
growth plans and projections. They informed the company that some of its
practices like loaning potentially unstable customers money to buy
products could not prop up sales forever.Meanwhile, insiders were selling
hundreds of millions in stock, the suit alleges. But juicy tidbits aside,
Grundfest said he sees the Cisco case as part of a buckshot strategy by
plaintiffs lawyers. They are suing multiple technology companies with
hopes of extracting a large settlement from at least one. "They only need
a small probability to make it worth their while," Grundfest said. "How
much does it cost to write a complaint?" This article previously appeared
in The Recorder, an American Lawyer Media publication in San Francisco.
(The Legal Intelligencer, April 27, 2001)


COMPAQ COMPUTER: Wayne Reaud Announces Consumers’ Lawsuits re Warranty
----------------------------------------------------------------------
Consumers filed two national class action lawsuits against Compaq
Computer Corporation alleging the company systematically defrauds
consumers through their express warranty procedures and knowingly denies
consumers implied warranty rights.

The suits affect owners of Compaq iPaq Pocket PC handhelds, iPac
computers and Presario computers.

The first case, Pope v. Compaq, alleges that Compaq illegally requires
consumers to sign release forms anytime a unit is refunded or replaced
under Compaq's one-year express warranty. The release forms require
customers to swear they will not disclose the problem or remedy or risk
forfeiting their property and open themselves up to a potential lawsuit
from Compaq. Nowhere in the Compaq express warranty is the signing of the
release mentioned or required.

The required illegal release reads:

     "The parties hereto further agree that the terms and conditions
created by this Limited Release shall remain confidential. If the
releasing parties breach or cause a breach of this Limited Release, it is
hereby agreed and understood that Compaq will be entitled to liquidated
damages, including not limited to a return of the new Compaq Presario..."

     "Compaq is not standing behind their products and is attempting to
bully its customers into keeping their mouths shut about the problems
they are having," spokesman for the plaintiffs Patrick Woodson said.

The lawsuit seeks to waive all of the signed releases, force Compaq to
abandon this illegal practice and reestablish all of the proper consumer
remedies for purchasing defective equipment.

"In the course of researching this case, we heard from many dissatisfied
customers who are fed up with Compaq's tactics. In one case, a computer
owner had to fight with Compaq for more than six months before he could
get a product that he could even use and then only if he signed a release
requiring him not to discuss his situation," Woodson said.

The second case, Albanese v. Compaq, alleges Compaq illegally excludes
all implied warranty rights in violation of federal law. United States
law allows companies to limit, but not exclude implied warranty rights
for products. Compaq's own warranty violates this law by saying "Compaq
makes no other warranties express or implied, including any implied
warranties of merchantability and fitness for a particular purpose" (iPac
handheld warranty).

Prohibiting warranties like Compaq's was a major reason Congress passed
the Magnum-Moss Act, which states "the implied warranties on consumer
products may not be disclaimed if a written express warranty is given."
As a leading authority explains, "Feeling that it is deceptive to use an
express warranty as a means of disavowing more valuable implied
warranties, the Magnuson-Moss Act in its most important provision states
that the implied warranties on consumer products may not be disclaimed if
a written express warranty is given" (Hawkland Uniform Commercial Code
Series by William D. Hawkland, Hawkland Uniform Commercial Code Series by
William D. Hawkland).

Plaintiffs seek to have the full implied warranty rights of Compaq's
customers reestablished. Title 15, Chapter 50 of the United States Code
clearly articulates that if Compaq is found in violation of this section,
their attempts to limit customers' rights "shall be ineffective for
purposes of this chapter and state law." A ruling in the plaintiffs favor
would give all of the affected product owners their full four-year
implied warranty rights.

"These cases are about forcing Compaq to stop shortchanging customers who
are getting stuck with defective products," Woodson said. "These are
deceptive practices, they are wrong and they need to stop."

The two suits were filed in state court in Beaumont, Texas, by the law
offices of Wayne Reaud, the law firm of Orgain, Bell, & Tucker and the
same legal team who negotiated a $2.1 billion settlement against Toshiba
Corporation.

Contact: Shipley and Associates (for Wayne Reaud and Orgain, Bell, &
Tucker) Patrick Woodson, 512/474-7514 or 512/680-6036 (cell)


COX ARENA: Ticket for Baby Subject of Suit over Bias against the Mother
-----------------------------------------------------------------------
An attorney who was required to buy a separate ticket for his 7-month-old
daughter at the NCAA basketball tournament last month has filed a
lawsuit.

Joshua Gruenberg filed the Superior Court lawsuit on behalf of his wife,
Karen, saying the Cox Arena policy requiring tickets for children
regardless of age discriminates against women who are breast-feeding
their infants.

Gruenberg said his wife couldn't leave their daughter, Sidonie, at home
because the baby needs to be breast-fed every one to two hours.

The couple paid $85 to buy a ticket from a scalper after security
personnel refused to let them enter the arena without a ticket for
Sidonie for the March 17 game at San Diego State University.

A spokesman with the Division I Men's Basketball Championship said all
spectators must have tickets because there is no reliable way to
determine the age of children and no standard for determining an age
limit.

The university and the NCAA are among the defendants named in the
lawsuit, which seeks a court order changing the ticketing policy plus
attorney fees. It also seeks class-action status for other parents who
bought extra tickets for babies that day. (The Associated Press State &
Local Wire, April 30, 2001)


CREDIT CARDS: A Snapshor at Forum While Antitrust Suit Is Still Puzzling
------------------------------------------------------------------------
Everybody in the credit card industry wants to know why last summer's
intense, three-month showdown between the Justice Department and the
credit card associations ended not with a bang but a whimper, and several
of the most curious and concerned gathered here last week to puzzle it
out.

Judge Barbara Jones, who presided over the antitrust trial in U.S.
District Court for the Southern District of New York, abruptly cancelled
closing arguments in October -- apparently signaling that she had heard
enough -- and has not said a public word about the case since then. A lot
of people who followed the trial or were involved in it are yearning for
some closure.

Though the matter has receded from headlines, the stakes are still big,
and Judge Jones' decision, whenever it comes, could potentially
reconfigure the industry along any number of permutations. Among other
things, it could force Visa U.S.A. and MasterCard International to let
banks work with American Express Co. and Discover Financial Services.

At the Credit Card Forum 2001 conference here last week, some of the
familiar faces from last summer's courtroom drama gathered to swap
theories and rehash some of the arguments in the trial, both for old
times' sake and to try to make sense of the judge's loud silence.

A few have moved on to new jobs, but many of them gathered nonetheless at
the conference, which was sponsored by Thomson Financial Media, parent
company of American Banker.

Most notably, Melvin A. Schwarz, the Justice Department's chief litigator
in the case, has left the government and become a partner in the
Washington antitrust group of Dechert, a U.K. law firm previously known
as Dechert Price & Rhoads.

Since no date is in sight for a decision to be handed down, lawyers and
card industry executives have had no choice but to speculate a lot.
Circulating theories include: One of Judge Jones' clerks left last fall,
and the judge is overloaded with other cases; she wants to see the
outcome of the Wal-Mart trial; she is leaning against the government, but
still has to sort through all the documents; she favors the government,
but will write a very complicated decision.

"I would not begin to be able to tell you why" no decision has yet been
made, Mr. Schwarz said at the conference. "I have no idea. Federal judges
have complete discretion."

"He's right -- ditto," said Stephen Bomse, a partner at Heller Ehrman
White & McAullife in San Francisco and a longtime counsel for Visa
U.S.A., who argued the association's case last summer.

Also on the panel were Gary R. Carney Jr., an attorney at Clifford Chance
Rogers & Wells LLP who represents MasterCard, and David Balto, who
recently left his job as policy director for the Federal Trade Commission
for a partnership at White & Case LLP in Washington. Mr. Balto has
investigated competitive issues in the payments industry for several
years.

The only point of agreement among the panelists -- who spent years
clashing during the pretrial and trial proceedings -- was that nobody
knows why the decision is taking so long.

Indeed, the waiting has put stress on everyone: A public relations
executive for one company that could be affected by the outcome said
recently that her firm has prepared different public statements for every
likely outcome, and reviews them every month to make sure they are up to
date.

With no answers to the judge conundrum, the panelists spent more than an
hour debating the familiar issue of whether Visa and MasterCard exert
market dominance over the networked payments industry and unfairly
restrict competition from American Express, Discover, and others.

"There is a tremendous perception by merchants that they have to accept
credit cards, that they have no competitive choice," Mr. Schwarz said.

Reviving a key piece of evidence from the government's case last summer,
he pointed to the introduction of the American Express Blue card, after
which Visa and MasterCard renewed their interest in microchip technology,
which both associations had investigated and long ago abandoned -- in
concert, he contended.

"Why didn't smart cards come out earlier?" Mr. Schwarz asked the
audience, transformed during the panel into an ad hoc jury. After Blue
was launched, Visa and MasterCard renewed their interest in smart cards,
"despite the fact that for 20 years they said there wasn't a business
case" for the products, he said.

If Visa and MasterCard were truly competitors, they would have competed
on the smart card front long before the arrival of Blue, Mr. Schwarz
said. "That's what competition is about. Sometimes you're forced to do
things you don't want to because your competitor is doing it."

Mr. Schwarz also brought up the subject of interchange fees, the
interbank fees paid by merchants when they accept credit and debit cards.
The fees -- which are higher for Visa/MasterCard debit cards than for
nonassociation ones -- are the central issue in the pending Wal-Mart
lawsuit, which pits the nation's biggest retailers against Visa and
MasterCard, but they also came up during the Justice Department trial.

Mr. Schwarz argued that because interchange is not transparent to
cardholders, and because merchants have no choice but to pay it, the fee
represents another testament to the associations' market dominance.

"In the last two to three years the interchange was raised 10% to 15%,
and merchants still have no choice," Mr. Schwarz said. "That, to a
regulator, screams market power."

Mr. Balto, who has repeatedly challenged the legitimacy of interchange
fees, agreed. "The antitrust question for the court to decide is whether
or not you can raise the price without losing volume," he said. "Visa and
MasterCard have raised it without substantially losing business, and that
shows they have market power."

Mr. Bomse, speaking for Visa, countered that the proprietary networks
American Express and Discover charge even higher interchange fees than
the associations. "Never mind that American Express has a much higher fee
and gets a free pass from antitrust laws, while Visa gets sued over and
over again," he said.

With a weary voice, Mr. Bomse said that he had already litigated and won
this issue in the landmark National Bancard Co. (NaBanco) case of 1984,
in which the court effectively legalized interchange fees. "I feel like
someone in a dream slaying the same dragon over and over again," he said.
"Every night, the dragon comes back with more of his cousins."

Saying his opponents had an "overly formalistic mind and a competition ax
to grind," Mr. Bomse said the government's case is biased against his
client and in favor of Amex -- not consumers.

"The government does not have the real interest" in pursuing these
matters, Mr. Bomse said. "American Express is the driving force," and it
persuaded the government to try the case in the first place, he said.

Mr. Schwarz flatly denied this. "The government's interest was not that
we cared about whether American Express or Discover succeeds."

Competitive concerns about Visa and MasterCard are embedded in the
structure of the market, which demands the participation of issuers,
merchants, and consumers, Mr. Schwarz said. Those conditions already
dictate a tight market, he said.

"The problem is there are very few networks, and there are not likely to
be many more in the future," Mr. Schwarz said. "We have to make sure the
existing networks are viable, and that they compete. You now have a lack
of competition between 1 and 2, and weakened competition against 3 and
4."

The Wal-Mart suit, which will be scheduled pending an appeals court
decision that will either uphold or strike down the plaintiffs'
class-action status, shows that the associations' market power is so
great that they can push around giants like Wal-Mart Stores Inc., he
said.

"The Wal-Marts of the world normally have the power to tell their
suppliers what they would or would not like to buy, but they are forced
to take Visa and MasterCard offline debit cards, even when they may not
want to," Mr. Schwarz said.

Mr. Balto called the Wal-Mart suit "the most interesting case," and said
its outcome will determine "what are the kinds of markets Visa and
MasterCard can expand in."

Lloyd Constantine of Constantine & Partners in New York, the lead counsel
for the plaintiffs in the Wal-Mart suit, was not on the panel, but in a
telephone interview following it he said his clients and the Justice
Department have similar aims.

"The belief in the government's and the retailers' case is that if they
are successful, there will be a salutatory effect on all of the factors
that would create healthy competition," he said. "There are two ways to
measure that: price and quality. Certainly, if our case is successful,
there will be massive improvement in both."

As for interchange fees, Mr. Constantine said the issue is not raised in
the Wal-Mart suit except as a measure of damages. But, he warned, "as
sure as night follows day, it will be an issue in the future." (The
American Banker, April 30, 2001)


DAIMLERCHRYSLER AG: EEOC sues for Transfer for Disabled Workers
---------------------------------------------------------------
The Equal Employment Opportunity Commission filed suit against
DaimlerChrysler AG's Kokomo, Ind., transmission plant in March on behalf
of Melinda Young.

Young suffered a crushed right arm, which forced her to miss several
years of work and left her unable to lift more than five pounds. She
requested a transfer from the plant's assembly operation to the factory's
inspection department. Although her request was granted, Young alleged
she was sent back to assembly because of her restrictions and disability.

According to Jamie Prenkert, an EEOC attorney, there was a plantwide
understanding of the policy that employees with restrictions were not
granted transfers, a practice that violates their collective-bargaining
rights.

The class-action lawsuit seeks an injunction to stop Chrysler's alleged
refusal of such voluntary transfer requests by disabled workers. The suit
also seeks to stop Chrysler from engaging in any other employment
practice that discriminates on the basis of disability. The EEOC also
charges that Chrysler failed to meet record-keeping requirements under
the Americans with Disabilities Act and asks for unspecified compensatory
and punitive damages.

Chrysler expressed surprise at the suit because the company had replied
in writing more than a year ago and was waiting for a response, a company
spokeswoman said. The EEOC said the suit was filed after efforts to
conciliate failed. (Successful Job Accommodations Strategies, April 23,
2001)


DOJ: Treasury Employees Special Rates Case Heads To Mediation
-------------------------------------------------------------
A federal court judge has referred the long-running special rates case
between the Justice Department and the National Treasury Employees Union
to a court-sponsored mediation program.

The action by Judge Garrett Penn of the U.S. District Court, District of
Columbia is the result of the most recent conference with attorneys
between the two sides.

The issue relates to a 1982 Office of Personnel Management regulation
that denied or minimized pay increases for special rates employees. In
1998, a federal judge determined the provision was illegal. Since then,
the NTEU and the DOJ have been working to develop a plan for the
government to pay back compensation to the 170,000 current and former
federal employees affected over a six-year period.

NTEU President Colleen Kelley said the union is "interested in engaging
in a final, intensive effort to resolve the remaining issues that divide
the parties" so the class members can receive the money they are owed.

So long as the mediation effort is underway, no action will be taken by
the court on the NTEU's request for an order directing the government to
comply with a court of appeals ruling that established the government's
liability to affected members. Should mediation fail, the NTEU will ask
the court to rule on its request. (Federal Human Resources Week, April
23, 2001)


FBI: African-American Special Agents Settle of Racial Bias Suit
---------------------------------------------------------------
The African-American Special Agents of the Federal Bureau of
Investigation ("FBI") announced on April 30 the settlement of a class
action began by the Black Agents in 1991.

Although wide-spread claims of racial discrimination were brought by the
black agents in 1991 and settled in the final days of the Administration
of former President George H. W. Bush, the black agents had renewed these
claims when the Clinton Administration failed to meet the timetables set
forth under the original settlement.

The new settlement, reached pursuant to a mediation between the black
agents and the FBI ensures that the reforms put in place under former
President Bush will be achieved and that a mechanism will exist to
compensate black agents who have had their careers harmed by the delays.

Under the Agreement, a timetable is established requiring the FBI to
reform its selection system for its first and second level supervisors by
2004. Until this new system is in place, agents will have the opportunity
to have certain types of claims heard by a neutral mediator. The FBI
Director will accept the mediator's decisions unless they lack
substantial justification or are clearly erroneous.

The lead attorney for the class, David J. Shaffer, stated, "I am pleased
that the President and the new Administration are committed to resolving
these serious issues at one of the nation's premier law enforcement
agencies."

Shaffer was lead counsel in a class action on behalf of the African
American Agents of the ATF, and he is currently representing the Black
Agents of the Secret Service in a class action against that agency filed
during the Clinton Administration. Shaffer was "optimistic" that the new
Administration would ensure that "federal law enforcement agencies
provide an example to the nation" by their own institutional reforms.

Copies of the Agreement and further information are available by
contacting David J. Shaffer.

Counsel for Plaintiffs:

David J. Shaffer & Ron Schmidt

Contact: David Shaffer, 202-508-4135, or rschmidt@thelenreid.com, or Ron
Schmidt, 202-508-4058, or dshaffer@thelenreid.com, both of Thelen Reid &
Priest LLP


FREEMARKETS, INC: Kirby McInerney Commences Securities Lawsuit
--------------------------------------------------------------
Kirby McInerney & Squire (www.kmslaw.com) has been retained to commence a
class action on behalf of purchasers of FreeMarkets, Inc. (Nasdaq: FMKT)
common stock between July 24, 2000 and April 23, 2001 (the "class
period").

The complaint will charge FreeMarkets, as well as its chief executive and
chief financial officers, with violations of sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, arising from the dissemination of
materially false and misleading financial statements throughout the class
period (as detailed below). The complaint will allege that the revenues
and earnings reported by FreeMarkets for the second, third and fourth
quarters of 2000 were inflated and materially false and misleading, and
that such inflated financial results caused FreeMarkets' stock to trade
at artificially-inflated prices. The action will seek to recover losses
suffered by individual and institutional investors who purchased
FreeMarkets' stock during the class period, excluding the defendants and
their affiliates.

Specifically, the complaint will allege that FreeMarkets improperly
recorded revenues from a large client in the second, third and fourth
quarters of 2000, thereby inflating the company's actual revenues,
earnings and stock price. As the complaint alleges, FreeMarkets induced a
client to employ FreeMarkets' services by granting that client low-cost
warrants - valued at $95.5 million - to purchase FreeMarkets' stock. The
client paid FreeMarkets approximately$10 million during the class period
for its services, which $10 million FreeMarkets recorded as revenue. The
Securities and Exchange Commission, however, has ruled that these
payments should be regarded as payment forthe warrants, rather than
revenue. Absent an appeal, as FreeMarkets revealed on April 23, 2001,
FreeMarkets will amend its financial statements to eliminate all the
revenue it had received from the client during the class period.
FreeMarkets' stock, which had traded above $85 per share during the class
period, fell to $9.30 on April 24, 2001.

Contact: Kirby McInerney & Squire, LLP Ira Press, Esq. Orie Braun
212/317-2300 Toll Free: 888/529-4787 obraun@kmslaw.com


GENERAL MOTORS: Document Unlocked Reveals and Brings Fury
---------------------------------------------------------
For nearly 30 years the auto maker has fought to keep a damaging document
out of court. Now that it is on the record, the damages awarded in
vehicle-fire lawsuits have been staggering.

How much should General Motors Corp. spend to keep people from burning to
death in fiery crashes? In a memo nearly 30 years ago, a young GM
engineer, Edward C. Ivey, suggested that the answer was: Not much.

With a couple of simple calculations, Ivey estimated that these fiery
deaths were costing GM only about $ 2 per vehicle--the implication being
that it was not enough to justify the expense of changing the vehicles'
design.

Ivey didn't know it at the time, but he was planting a legal time bomb.

In the years that followed, a platoon of GM lawyers fought successfully
to exclude the Ivey memo from scores of vehicle-fire lawsuits. They did
it by convincing judges the document was merely the idle musings of a
novice engineer. There was contradictory evidence, but they kept it
locked tight.

Now the memo and GM's stealth tactics have been revealed in court, and
from the furious response of judges and juries, GM may have brought more
grief on itself by not producing it in the first place. A Georgia judge
berated GM for scheming "to defraud and mislead several courts, to thwart
and obstruct justice and to enjoy the ill-gotten gains of likely
perjury." And in a Los Angeles case that drew heavily on the Ivey affair,
GM in 1999 suffered a then-record verdict of $ 4.9 billion (later reduced
and now on appeal).

GM says it has behaved properly at all times. "I don't believe anybody
has ever misled a court or even misled opposing counsel," said Richard W.
Shapiro of Snell & Wilmer, one of the firms representing GM.

In the world of civil litigation, the Ivey memo has attained the status
of a "smoking gun" due as much to GM's unceasing efforts to suppress it
as for what it actually says.

The Ivey saga illustrates the extraordinary lengths to which big
companies may go to keep damaging documents away from juries and the
public, behavior which also has been seen in litigation involving
cigarette makers, drug manufacturers and defense contractors. But the
strategy can backfire if the documents and the companies' deceptions
eventually come to light.

The Ivey story also reflects the potential conflict between a lawyer's
most basic obligations: to win for the client, and to avoid using
deceptive means to mislead judges and legal adversaries.

In seeking to avoid giving opponents valuable ammunition, many attorneys,
including from the most prominent firms, increasingly seem to resort to
tactics that "might once have been seen as absolutely forbidden," said
Stephen Gillers, a New York University law professor. If there is even a
feeble excuse for withholding information, "we're going to do it and take
that risk," the thinking goes, because "that's what clients expect."

Legal warfare over the Ivey memo has all but overshadowed some of the
most emotionally wrenching of all personal injury cases--involving people
who were maimed or burned alive in crashes they might have survived, or
even walked away from, but for fires fed by leaking gasoline. For auto
makers, the danger of such cases is extreme, because juries that put the
blame on unsafe designs are quick to send a message.

"The American public says it's worse to die from being burned to death
than being crushed to death," said Brian O'Neill, president of the
Insurance Institute for Highway Safety. If a person burns to death in an
otherwise survivable crash, "that's a prescription for a very large
award."

Ivey Said Price Can't Be Placed on a Life

Ed Ivey, 54, who declined to be interviewed, is GM's director of chassis
engineering. He signed on after high school, training first at the
General Motors Institute and going on to the University of Michigan. In
1972, two years after earning his master's in engineering, Ivey was
assigned to the advance design group at GM's Oldsmobile division, which
took the lead on fuel system design.

For one of his assignments, Ivey prowled through a junkyard, examining
wrecked cars to see which fuel systems held up best. And in June 1973, he
wrote his combustible memo.

Dominating the dry, page-and-a-half analysis were two calculations
leading to the same bottom line: The financial rewards of designing safer
fuel systems would be minimal for GM. In the first computation, Ivey
estimated that burn fatalities were costing GM about $ 2.40 per car. In
the second, he found that avoiding future deaths would be worth $ 2.20 to
GM for each new model.

In his computations, Ivey used $ 200,000 for the value of a human life--a
figure that easily could anger jurors, but that actually came from a
government study.

The memo offered no recommendations. And it closed by acknowledging the
crassness of the exercise. "It is really impossible to put a value on
human life," Ivey wrote. "This analysis tried to do so in an objective
manner but a human fatality is really beyond value, subjectively."

James E. Butler Jr., a Georgia plaintiffs attorney, has described the
document as a "let 'em burn" memo. Others--including some GM foes--see it
as more nuanced, or as just plain confusing. Another plaintiffs lawyer
said the Ivey report would have "melted into history" but for GM's
ferocious battle to suppress it.

The Ivey memo is "a meaningless document," said GM attorney Shapiro. It
"has been blown so out of proportion by plaintiffs lawyers, it's absurd."

Why, then, did GM treat it as radioactive?

The company had seen what similar documents had done to rival Ford.

During the late 1970s, Ford suffered a series of eye-popping verdicts
involving fire-prone Pinto compacts, as juries reacted to documents
showing Ford had placed profit over safety.

At GM, the Ivey memo began triggering alarms in 1981, when the firm
launched a massive effort to collect and analyze records it might have to
disclose in fuel-fire cases.

In November of that year, GM lawyers called in Ivey to talk about his
memo. If he had prepared it on his own, and it went no further than his
desk, GM could argue it had no probative value and should be excluded
from evidence.

But Ivey's statements, as summarized by one of the lawyers, Don Howard,
were not completely helpful. Eight years had passed, and although Ivey
was no longer certain who had given the assignment, he remembered doing
it "for Oldsmobile management," with the idea of seeing "how much Olds
could spend on fuel systems."

And although Ivey was not sure about the distribution list, he named
several key engineers he believed had gotten copies.

"Obviously," Howard wrote, "Ivey is not an individual whom we would ever,
in any conceivable situation, want to be identified to the Plaintiffs, .
. . and the documents he generated are undoubtedly some of the
potentially most harmful and most damaging were they ever to be
produced."

Ivey was debriefed a second time by GM lawyers in 1983. William Kemp, one
of the lawyers, took handwritten notes, which included the phrase:
"Purpose: how much money could we spend on each car to prevent it." And
more ominously: "Did not do it on his own."

This interview came at a crucial stage, as the Ivey memo for the first
time had been produced to a plaintiff. By accident or on purpose, it was
included in a box of documents sent to Darrel Peters, the lawyer for
Thomas Swanic, who had suffered 3rd-degree burns and lost an arm in a
fiery crash.

When GM lawyers interviewed Ivey that August, he was a month from having
his deposition taken in the Swanic case. Then, before he had to testify,
a settlement was reached.

Despite the resolution of the Swanic case, Peters was intrigued by the
Ivey memo. But like other GM documents, it was covered by a protective
order that barred him from sharing it with others.

So Peters did what he thought was the next best thing. Over beers at a
legal conference in Washington, he tipped off a handful of plaintiffs
lawyers handling fuel-fire cases. He told of a hot document, and how to
identify it specifically enough that GM would have to produce it.

In no time, GM realized that the word was out, and quickly identified
Peters as the source. GM hauled Peters before the Michigan judge who had
presided in the Swanic case, and the judge ordered him to pay about $
8,500 in sanctions for violating the protective order.

"I have always worn that as a badge of honor, frankly," Peters said
recently.

David J. Bennion, a San Jose lawyer for Cheryl Burton, who had been
seriously burned in the crash of a Chevette, was the first to benefit
from Peters' actions. GM balked at Bennion's request for the memo, but
eventually had to turn it over. And in September 1984, Ivey had his
deposition taken in the Burton case, the first of many times he would be
forced to testify.

But Ivey's memory was nearly a blank. In his interviews with GM lawyers,
he seemed to recall many things. Now he remembered almost nothing.

"I don't know why I prepared" the analysis, Ivey testified. He could not
recall anyone telling him to do it, and believed no one had. He could not
recall who read it, and thought probably no one had.

Beginning with the Burton case in '84, the forgetful Ivey has testified
at least 20 times. Each time, the who, what and why of his memo have been
lost down a memory hole.

For 15 years, Ivey's recollections for the GM lawyers would remain a
well-kept secret. And with no other evidence on the record, GM lawyers
had an easy time using Ivey's testimonies to persuade judges that the
memo should be excluded.

"Mr. Ivey has testified that he did not disseminate the document to
anyone," according to one GM motion, nearly identical to dozens of others
it would file. "It was rather, simply an individual intellectual exercise
performed on his own. . . . Thus, the document has no relevance in this
case."

Shapiro, the GM lawyer, recently told The Times he saw no inconsistency
between the sworn testimonies of Ivey and his prior statements to company
lawyers. In the '81 interview with Howard, Ivey merely had "offered a few
speculations. 'I may have done this,' or 'I may have done that,' "
Shapiro said. When witnesses "have to go on the record, they're more
careful," he said. "They're not prone to speculate or guess."

From 1983, when Darrel Peters first obtained the Ivey memo, until 1998,
plaintiffs had to settle or try their cases without it. In the meantime,
they kept chipping at the wall.

In December 1992, a Georgia judge, weary of obstructive tactics by GM,
ordered it to produce a host of records--including "any and all documents
discussing, mentioning, referring to, or otherwise dealing with" the Ivey
memo.

GM produced plenty of records, but the Ivey-related documents weren't
among them. Company lawyers told the court they had turned over all
records "kept in the ordinary course of business."

James Butler, the plaintiffs lawyer, told the judge that GM was using
weasel-words to defy his order. "We're back to the same old Mickey Mouse
gamesmanship," Butler said at a hearing. "It's the use of semantics to
continue hiding evidence."

GM lawyer Philip E. Holladay Jr., from the big Atlanta firm of King &
Spalding, assured the court it wasn't so. "Judge, there's not a single
document that has been withheld," Holladay said. "In fact, General Motors
has produced everything they've got in response to the court order."

The Georgia case had been filed by the parents of Shannon Moseley, 17,
who died in the flaming wreck of a GM pickup. GM's stonewalling did not
prove fatal to the Moseleys' case: In February 1993, the jury awarded
them $ 105 million (the verdict was overturned on appeal, and the case
eventually settled).

Plaintiffs nearly breached the wall a few months later, in Cameron vs.
GM. For the first time, GM acknowledged that some Ivey-related papers did
exist. But these documents were privileged, GM said, because they
involved confidential attorney-client communications. With a series of
delaying tactics GM succeeded in keeping the documents hidden until the
case was settled and the matter dropped.

The Ivey-related documents would not be pried loose for another four
years.

Judge Asked GM to Produce Documents

The pivotal showdown came in a Florida case involving 13-year-old Shane
McGee, who died of burns suffered in a fire in his family's '83 Olds
wagon.

In 1997, the McGees asked GM to produce all Ivey-related documents. GM
lawyers twice replied that there were none. Later, they amended their
answer to state that they were "not aware of any documents which
specifically pertain to" the Ivey memo.

The McGee lawyers informed the judge, Arthur J. Franza, that GM
previously had acknowledged the existence of such documents in the
Cameron case. In December 1997, with the McGee trial in progress, Franza
ordered GM to produce the documents for his inspection. In response to
the order, a GM attorney appeared in court but without the documents,
claiming GM officials had refused to give them to him.

Franza was irate. GM, he thundered, wasn't "big enough to thumb its nose
at the court," or "to obstruct justice or conceal evidence." Produce the
documents or face severe sanctions, he warned.

GM then produced the papers, including the Howard and Kemp documents, for
Franza's review. The judge ruled that the documents, and the Ivey memo,
could be placed before the jury.

Several weeks later, the McGee jury ordered GM to pay $ 33 million in
damages.

For GM, things soon would get worse. A Georgia judge, Gino Brogdon,
unleashed a scalding attack on GM and its lawyers for their "recklessly
inaccurate misstatements and misrepresentations."

For Brogdon, the last straw was GM's defiant response to his order to
turn over 81 boxes of records. GM produced 71 boxes, saying the
difference was that it had repacked the papers in sturdier boxes.

But GM failed to mention that it had eliminated 2,300 pages, making "a
unilateral decision to remove documents and conceal its decision to
violate the order."

Brogdon's ruling came in a wrongful death case that ultimately was
settled. But in another ruling before the settlement, Brogdon reviewed
the tangled history of the Ivey affair.

GM Is Appealing the Verdicts in Latest Cases

Ivey's memory loss, he declared, was "bizarre, disturbing and likely in
violation of his oath." And GM--by concealing Ivey's original
recollections--"did obstruct and impede the due administration of
justice."

But Brogdon found no proof of a "criminal nexus" between Ivey's memory
loss and the conduct of GM lawyers. "The record is simply void of any
evidence that GM or its lawyers took some specific action" to induce Ivey
to forget, Brogdon wrote. "Only Ivey knows what in fact caused him to
scarlet his story."

The fallout intensified in Los Angeles in 1999, when jurors in Anderson
vs. GM ordered the company to pay $ 4.9 billion in damages to six burn
victims, whose Chevy Malibu caught on fire when a drunk driver plowed
into it, causing the fuel tank to explode.

The plaintiffs argued that the fuel system of the Malibu was defectively
designed. And they used the Ivey memo and the Howard and Kemp documents
to portray GM as callous and deceitful.

GM has appealed the McGee and Anderson verdicts, claiming, among other
things, that the judges erred in allowing the Ivey-related documents.

GM foes say if the verdicts are upheld, that still won't even the score.
Over the years, they say, GM was able to cut the cost of settlements and
judgments by deceiving the courts about Ivey.

"Casting all ethics aside for the moment," GM lawyers "have managed it
superbly," said Butler, the plaintiffs lawyer. "They've saved General
Motors hundreds of millions of dollars." (Los Angeles Times, April 30,
2001)


HIGH-INTEREST LENDERS: Green Tree, Long Beach, TMS Mortgage Sued
----------------------------------------------------------------
Two local attorneys have filed class-action lawsuits against three
companies in the mortgage-lending industry, claiming the companies prey
on those who can least afford it.

The lawsuits were filed by attorneys Mitch Taylor and Richard Bell on
behalf of customers of Green Tree Financial Services, Long Beach Mortgage
Co. and TMS Mortgage Inc., which until recently did business as The Money
Store.

"People are stuck into loans that they'll probably never pay back," said
Shelly Sheehy, development director at the Rural Housing Institute in
Wilton.

Sheehy's organization conducted a study that led to the litigation,
finding that high-interest, out-of-state lenders like the three companies
appeared to have targeted the state's poor and minority communities.

"We were astounded to find out that Green Tree ... had the largest
percentage of the market in Muscatine County," she said.

The lawsuit against Green Tree and its parent company, Conseco Financial
Services Corp., was filed on behalf of Thomas and Susan Luttenegger of
Burlington.

Their 1997 loan contract included a 4 percent origination fee, a $200
processing fee, a $6 courier fee and a $4.95 credit report fee.

State law limits fees to 1 percent of real estate loans, and doesn't
authorize courier fees or charges for credit reports, according to the
lawsuit.

A second lawsuit, filed on behalf of Timothy and Tammie Gardin of
Burlington, alleges California-based Long Beach Mortgage charged a $2,385
loan origination fee, a $165 underwriting fee, a $40 overnight fee, $250
for title insurance and a $250 closing fee. Iowa law doesn't permit such
charges, the lawsuit claims.

A third lawsuit, filed on behalf of Gina Edwards of Mount Pleasant and
Jose and Zina Rios of Burlington, seeks damages from The Money Store and
its parent company, First Union Corp., over similar claims.

Sheehy said such lenders often cater to borrowers that more established
banks turn away. Several states, including Illinois, are considering
legislation specifically targeting such companies.

Attorneys for the mortgage companies did not return calls last week
seeking comment. (The Associated Press State & Local Wire, April 30,
2001)


JAPAN, CHISSO: Osaka High Ct Orders To Pay Minamata Mercury Victims
-------------------------------------------------------------------
The Osaka High Court on April 27 overturned a ruling exonerating the
central and prefectural governments in the Minamata mercury poisoning
tragedy and ordered compensation to surviving plaintiffs of a lawsuit
filed 19 years ago.

It was the first time a high court has held the central government and
the Kumamoto prefectural government responsible for Minamata disease.

The compensation of 319.5 million yen ($2.6 million) will also come from
Chisso Corp., the company responsible for discharging mercury into
Minamata Bay in the prefecture in the 1950s.

Chisso was ordered to pay 51 of the 58 plaintiffs and the governments
will compensate 45. That translates into payments of up to 8.5 million
yen per plaintiff.

The Osaka District Court in July 1994 ordered Chisso to pay damages
totaling 276 million yen to the plaintiffs and their family members, but
said the governments were not responsible for the disaster.

That changed last Friday April 28, when Presiding Judge Takaaki Okabe
ruled the governments were aware in November 1959 that a Chisso plant was
discharging toxic mercury compounds into Minamata Bay, but failed to
implement measures under the Water Quality Conservation Law and other
regulations to block the plant's waste. Therefore, Okabe said, the
governments violated the laws.

"This is an epoch-making decision in the long history of Minamata
disease," a lawyer for the plaintiffs said. "We have spent a lot of time
questioning witnesses from the administration at the time of the
poisoning so that we could prove the responsibility of the governments.
We are grateful the court has acknowledged our efforts."

The lawsuit, one of many concerning Minamata disease, was filed in 1982
by victims and their families who lived in Minamata and later moved to
the Kansai region.

But 21 of the 59 original plaintiffs died as the court proceedings
dragged on. Families took over for the dead plaintiffs, although one of
the deceased had no relatives, leaving 58 plaintiffs.

Plaintiff Toshiyuki Kawakami, 76, said: "We have been able to fight for
the duration of 19 years because of help from our supporters. It is not
just a victory of the plaintiffs."

Kawakami was born into a fishing family in Minamata. His mother showed
severe symptoms of Minamata disease, prompting neighbors to avoid the
family, he said.

Kawakami himself had suffered headaches and other symptoms but said he
couldn't admit he had the same disease that befell his mother.

Like the other plaintiffs in the lawsuit, Kawakami was not recognized by
the government as a Minamata disease victim.

But the high court said patients may be certified as Minamata victims "as
long as they meet certain conditions-such as having shared daily meals
with family members, at least one of whom is officially certified as a
Minamata disease patient-even if they have only sensory disabilities."

Judge Okabe rejected the state's argument that patients cannot be
official Minamata disease victims unless they match a certain set of
criteria.

"The state failed in its recognition and judgment of Minamata disease,"
Okabe said.

Minamata disease, confirmed as mercury poisoning in 1956, paralyzes the
nervous system. It killed hundreds and disabled thousands who consumed
mercury-tainted marine products from Minamata Bay.

The disease became internationally known through the chilling photos of
American Eugene Smith.

Many people suffering Minamata disease symptoms have been denied
government certification as Minamata patients, which would have entitled
them to various medical and financial help.

April 27's decision on the criteria for determining Minamata disease
patients will likely press the government to change the way patients are
assessed, observers said.

Environment Minister Yoriko Kawaguchi said in a statement, "The fact that
the court did not recognize the state's contentions was a very severe
ruling against the government." (Asahi News Service, April 28, 2001)


LifeUSA HOLDING: Ct Decertifies Case v. Independent Agents over Annuity
-----------------------------------------------------------------------
In re LifeUSA Holding, Inc., PICS Case No. 01-0470 (3d Cir. March 5,
2001) Garth, J. (13 pages).

The court decertified a class action alleging that independent agents
selling an annuity engaged in pre-sale fraud and misconduct, because the
annuity was not sold according to uniform sales materials and
presentations, and therefore common questions of law or fact did not
predominate over questions affecting only individual members. Class
decertified.

Plaintiffs filed suit against defendant LifeUSA Holding Inc. alleging
that independent LifeUSA agents engaged in pre-sale fraud and misconduct
by misrepresenting the terms of the "Accumulator" annuity issued by
LifeUSA.

The district court granted plaintiffs class certification pursuant to
Fed.R.Civ.P. 23. LifeUSA appealed.

Although the district court's grant of class certification was based on
plaintiffs' allegations of the pre-sale marketing of the Accumulator, the
Third Circuit noted that plaintiffs had since "shifted their emphasis
from pre-sale fraud and misconduct in connection with the sale and
marketing of the annuities, to post-sale fraud and misconduct[.]"

The court reviewed the district court's decision to grant class
certification on the basis of plaintiff's pre-sale allegations. The court
concluded that the district court erred in finding that plaintiffs'
pre-sale claims satisfied the predominance requirement of Rule 23. Here,
unlike In re The Prudential Ins. Co. of America Sales Practice Litig.,
148 F.3d 283 (3d Cir. 1998), the sales materials and sales presentations
used by the agents were not uniform or standardized. In addition, the
agents in Prudential were career agents who worked exclusively for
Prudential, while the agents who sold the Accumulator were independent
agents. Therefore, the court decertified the class. However, because
plaintiffs consistently asserted post-sale misrepresentations regarding
the interest paid under the Accumulator, the court remanded "to the
[d]istrict [c]ourt for consideration of those claims and if applied for
by the plaintiffs for consideration as to whether these post-sale claims
comply with Rules 23(a) and (b)[.]" (Pennsylvania Law Weekly, April 23,
2001)


MERRILL LYNCH: To Pay $16.9 Million To Injury Victims
-----------------------------------------------------
Under a $16.9 million settlement announced April 27, dozens of injury
victims will be at least partially reimbursed after their compensation
funds were allegedly looted last year.

Wall Street giant Merrill Lynch had been one of six financial services
firms named in a lawsuit alleging that more than $100 million in payouts
had been mishandled and later lost.

Settlement Services Treasury Assignments, a company that had been sold by
Merrill in 1991, was accused of using the bonds in the 1990s as
collateral that was lost when that company failed to repay loans.

A Merrill spokesman said his company had no connection to Settlement
Services at the time of the alleged mishandling. Merrill Lynch admits no
wrongdoing as part of the settlement.

"Although we sold this business 10 years ago and did not have any
involvement in the actions that led to the recent problems, we thought it
was appropriate to resolve this matter quickly without further litigation
and to ensure that these individuals receive the payments they need,"
Merrill spokesman Bill Halldin said.

The bonds had generated the interest being used to pay living expenses
for roughly 200 sufferers of workplace injuries, car wrecks or medical
mistakes. Last November, the checks stopped coming to the victims,
leading to the discovery of the alleged mishandling.

"Merrill Lynch is stepping up at this time and doing the right thing by
being part of the solution rather than the problem," Marc Seltzer, a
lawyer for the plaintiffs, told the Los Angeles Times.

The settlement does not affect a spate of existing class action suits
against several other blue-chip defendants also accused of losing the
bonds, including Bank of America Corp., Wells Fargo & Co. and Bear
Stearns Cos.

The agreement still needs Los Angeles Superior Court approval.

The settlement calls for the company to pay $7.9 million to the
plaintiffs and advance as much as $9 million more to keep payments coming
through year's end. The latter money will be returned to Merrill if the
plaintiffs succeed in winning payments from the other defendants. (The
Associated Press State & Local Wire, April 28, 2001)


PRICELINE.COM, INC: Wolf Haldenstein Commences Securities Suit in N.Y.
----------------------------------------------------------------------
Wolf Haldenstein Adler Freeman & Herz LLP announces that it filed a class
action lawsuit in the United States District Court for the Southern
District of New York, on behalf of purchasers of Priceline.com, Inc.
(Nasdaq: PCLN) between March 29, 1999 and March 14, 2001, inclusive,
against defendants Priceline, certain of its officers and directors, and
its underwriters.

The case name and index number are Buddy and Eileen Dukeman v.
Priceline.Com, Inc. (01-CV-3590). A copy of the complaint filed in this
action is available from the Court, or can be viewed on the Wolf
Haldenstein Adler Freeman & Herz LLP website at http://www.whafh.com.

The complaint alleges that defendants violated the federal securities
laws by issuing and selling Priceline common stock pursuant to the March
30, 1999 IPO without disclosing to investors that some of the
underwriters in the offering, including the lead underwriters, had
solicited and received excessive and undisclosed commissions from certain
investors.

Specifically, the complaint alleges that in exchange for the excessive
commissions, defendants allocated Priceline shares to customers at the
IPO price. To receive the allocations (i.e., the ability to purchase
shares) at the IPO price, the underwriters' brokerage customers had to
agree to purchase additional shares in the aftermarket at progressively
higher prices. The requirement that customers make additional purchases
at progressively higher prices as the price of Priceline stock rocketed
upward (a practice known on Wall Street as "laddering") was intended to
(and did) drive Priceline's share price up to artificially high levels.
This artificial price inflation enabled both the underwriters and their
customers to reap enormous profits by buying stock at the IPO price and
then selling it later for a profit at inflated aftermarket prices.

Contact: Gregory M. Nespole, Esq., George Peters or Fred Taylor Isquith,
Esq., 800-575-0735, classmember@whafh.com


QUALCOMM INC: Settled Suit Shows Impact of Giving Employee Stock Options
------------------------------------------------------------------------
A recent settlement entered into by Qualcomm Inc. and a group of more
than 800 employees illustrates the potential problems that may arise from
providing stock options to workers. This form of incentive compensation
has resulted in numerous lawsuits over the past several years, with
claims ranging from discrimination to breach of contract. If you have
implemented such a program or are considering such, you should carefully
reveiw the litigation trends in this area.

                     Qualcomm Settlement

The class-action lawsuit brought against San Diego-based Qualcomm stemmed
from allegations by former employees that they were denied lucrative
stock options when the company sold its wireless division in 1999. As a
result, the workers maintained, their unvested stock options were
"illegally taken from them."

Under the settlement, Qualcomm has agreed to pay $ 11 million in damages
to more than 800 former employees to end the suit. A hearing to approve
the settlement has been scheduled for April.

              Growing Popularity of Stock Options

This class action is only one of many cases currently being litigated
that focus on company-provided stock options. In 1992, only about one
million American workers received stock options as part of their
compensation. Today, that number has increased to between seven and 10
million. Many employers realized they could attract the best workers in a
tight labor market by offering stock options in addition to traditional
compensation. This is especially true for many high-tech start-up firms
that might pay lower salaries but could offer employees stock options
that may be very valuable in the future.

A stock option gives an employee the right to purchase a certain number
of shares of company stock at a specific price within a designated
period. At that time, if the company's stock price is trading higher than
the option (or "strike") price, the employee can realize an immediate
profit upon exercising the option. Stock options create the possibility
of extra compensation for employees if the stock's value increases, but
they also create special liability concerns for employers.

                  Increase in Litigation

The number of workers suing their current or former employers over stock
option issues has been increasing rapidly. The suits implicate a variety
of state and federal claims, including discrimination, fraud,
misrepresentation, breach of contract, and violations of securities law.

The lawsuits usually arise after an employee has been discharged. Many of
these employees allege that they were fired because the employer did not
want their options to vest. The Ninth Circuit has suggested (in an
unpublished decision construing Massachuesetts law) that such a firing
might violate an employer's duty of good faith and fair dealing. In
Fleming v. Parametric Technology Corp., the court stated that "where an
employee has earned a right to a benefit which is contingent upon his
being employed at some later date, the employer cannot terminate him for
the very purpose of depriving him of that benefit."

                     Practical Tips

To avoid this type of litigation, employers would be wise to include
terms in employment contracts detailing what happens to options on
termination (with or without cause). The contract should also address
stock options on an employee's death or disability retirement.

Many companies have switched to option plans that offer earlier vesting
and have moved away from "cliff vesting" (in which the entire grant is
vested at one time on the completion of a certain period of employment).
This helps prevent employee charges that the company was trying to avoid
vesting. For example, if an employee will earn 5,000 options over a
four-year period, the employer might award the first 25 percent after one
year and then offer monthly vesting for the next three years.

Confusion surrounding the terms of the stock option agreement is a common
source of litigation. You should ensure that employees are not inundated
with paperwork, that the various documents do not contradict one another,
and that the employees understand the agreement. A lawsuit may arise if a
brief, written summary of the plan appears to offer a more generous deal
than the plan actually provides. In some cases, employees have claimed
that the failure to disclose limitations contained in the (usually
voluminous) grant document constitutes misrepresentation of the plan
terms.

Employees who have been lured away from good jobs with promises of stock
options have begun to sue their employers when the expected wealth fails
to materialize. While fraud may be difficult to prove because the worker
would have to show that the employer knowingly made false statements, he
or she may be able to establish fraudulent misrepresentation. Or, if the
employee can show that the employer made promises it should have known
were false and he or she suffered damages as a result, the company may
find itself defending a negligent misrepresentation lawsuit. Thus, you
would be wise to avoid making promises that you may later be unable to
keep.

"Claw-back" provisions also are generating increased litigation. A
"claw-back" term in an option contract provides that an employee will
forfeit any gain realized from an option if he or she subsequently
violates a noncompete agreement. The outcomes of these cases often depend
on the jurisdiction. In California, such a provision could not be
enforced against the employee, but under New York law, an employee may
forfeit any profit realized under the option if he or she began working
for a competitor while a noncompete agreement is in effect.

Finally, you should note that a merger or acquisition can lead to
lawsuits over stock options. Some plans require acceleration of the
option upon sale or merger of the company. That could lead to shareholder
suits against the board of directors for diluting the value of the
company's shares or, if the options are not accelerated, the employees
may sue for breach of contract.

To reduce the risk of such litigation, you should consider including a
provision in your option plans that would accelerate options only when
there is either a merger or acquisition and the employee loses his or her
job or has a reduction in duties. Such provisions should carefully define
what constitutes a triggering transaction -- whether it is a merger,
acquisition, or other change of control.

                          Conclusion

These are just a few of the types of lawsuits that have resulted from the
proliferation of stock options in recent years. Stock options are likely
to remain popular, even though they may be less lucrative than in the
past. You should discuss strategies to reduce the potential for
litigation in this area with your company's attorneys. (California
Employment Law Letter, March 19, 2001)


REDIFF.COM: Wolf Haldenstein Commences Securities Suit in New York
------------------------------------------------------------------
Wolf Haldenstein Adler Freeman & Herz LLP announces that it filed a class
action lawsuit in the United States District Court for the Southern
District of New York, on behalf of all purchasers of Rediff.com India
Ltd. American Depositary Shares (Nasdaq: REDF) between June 14, 2000, and
April 4, 2001, inclusive, against defendants Rediff, certain of its
officers and directors, and its lead underwriters. The case name and
index number are Bhasin v. Rediff.com India Ltd. (01-CV-3593). A copy of
the complaint filed in this action is available from the Court, or can be
viewed on the Wolf Haldenstein Adler Freeman & Herz LLP website at
http://www.whafh.com.

The complaint alleges that defendants violated the federal securities
laws by issuing and selling American Depositary Shares pursuant to the
June 14, 2000 IPO without disclosing to investors that Rediff's Internet
business had been experiencing difficulty with its e-mail software and
that it was known that many significant advertising contracts would
terminate by December 2000.

Specifically, the complaint alleges that Rediff had stated in the
Prospectus that there were significant restrictions on the use of funds
obtained from the IPO. Rediff failed to disclose that it intended to
invest in speculative securities and falsely represented that it would
conservatively apply the funds received through the IPO when in fact it
would not. Additionally, Rediff misled purchasers to believe that Rediff
would have significant cash reserves for the foreseeable future and
falsely stated in the Prospectus that one of its directors, Richard Li,
was a graduate of Stanford University.

Contact: Gregory M. Nespole, Esq., George Peters, Fred Taylor Isquith,
Esq., all of Wolf Haldenstein Adler Freeman & Herz, 800-575-0735,
classmember@whafh.com


SANTA FE: Las Vegas Unions File Suit Alleging Violations of WARN
----------------------------------------------------------------
Santa Fe's union woes continue. Four Las Vegas unions recently filed a
class-action lawsuit against the Santa Fe Hotel and Casino alleging that
the company violated the Worker Adjustment and Retraining Notification
Act (commonly referred to as "WARN") by conducting a mass layoff last
October without providing 60 days' notice. The suit seeks to recover back
pay and benefits for more than 1,200 workers.

This suit is just another in a series of actions brought by unions
against the hotel. In July 2000, the National Labor Relations Board
(NLRB) held that the company unlawfully refused to allow employees to
handbill at two of its entrances and pursued trespass citations against
off-duty workers who participated in the handbilling. On a positive note,
an administrative law judge found that the Culinary Union had failed to
prove that a collective bargaining agreement existed with the Santa Fe,
and the NLRB recently denied the union's effort to appeal that decision.
The Santa Fe, formerly owned by the Santa Fe Gaming Corporation, was
purchased by Station Casinos, Inc., last August.

Organizing campaign halted. The Operating Engineers Local 501 recently
withdrew its petition to represent 25 engineers at the Boulder Station in
Las Vegas. On February 12, the union filed a petition with the NLRB, the
first step in scheduling a representation election, and a hearing was set
for March 26. According to Mike Chavez, the agent in charge of the NLRB's
Las Vegas office, the union withdrew the petition and "indicated that
they didn't want to proceed further at this time." The union does not
currently represent any Boulder Station or Station Casinos employees.

Union, hospital reach agreement. Catholic Healthcare West (CHW), which
owns the two St. Rose hospitals in Henderson, has entered into an
agreement with the California Nurses Association that allows the
company's nearly 900 nurses to discuss and seek union representation
"without harassment, discouragement, or threats from management." The
agreement also bans mandatory antiunion meetings and one-on-one
conversations about representation between nurses and supervisors.
Although CHW has stated that it prefers to remain a nonunion employer,
vice president Lori Aldrete stated: "If an organizing campaign does
occur, we want it to occur in an environment of dignity and respect for
our employees." (Nevada Employment Law Letter, April, 2001)


SUNBEAM CORP: Stockholders And Arthur Andersen Enter into Agreement
-------------------------------------------------------------------
Common stock class plaintiffs and Arthur Andersen LLP announced that they
have entered into a settlement agreement resolving the claims asserted by
the common stock class plaintiffs against Arthur Andersen LLP in In re
Sunbeam Securities Litigation, No. 98-8258-Civ-Middlebrooks.

Claims in the suit related primarily to certain allegedly fraudulent
financial reporting and accounting practices under former Sunbeam
management led by Al Dunlap. Settlement of this matter is without
admission of fault or liability by Arthur Andersen.

Under the agreement, which must be approved by the Court, Arthur Andersen
will pay $110 million in settlement of the common stock class action
claims.

"We are pleased to be able to resolve this matter. Even though we believe
we had very strong defenses to the claims asserted by the class, the firm
made this business decision to allow us to apply resources and management
time to our core business of providing value to our clients," said Andrew
Pincus, General Counsel of Arthur Andersen.

"We are gratified to resolve this matter with Arthur Andersen. The
settlement represents an excellent result for the class. The litigation
continues against former management of Sunbeam, including Al Dunlap and
Russell Kersh, and trial is scheduled for January 14, 2002," said Merrill
Davidoff, M. Richard Komins, Robert Kornreich, and Abraham Rappaport,
plaintiffs' co-lead counsel.

Contact: Mike Hatcliffe of Arthur Andersen LLP, 312-931-3546; Plaintiffs'
co-lead counsel, Merrill Davidoff of Berger & Montague, P.C.,
215-875-3084, M. Richard Komins of Barrack, Rodos & Bacine, 215-963-0600,
Abraham Rappaport of Milberg Weiss Bershad Hynes & Lerach LLP,
561-361-5000, Robert Kornreich of Wolf Popper LLP, 212-759-4600


TURNSTONE SYSTEMS: Spector, Roseman Commences Securities Lawsuit in CA
----------------------------------------------------------------------
The law firm of Spector, Roseman & Kodroff, P.C. announces that a class
action lawsuit has been commenced in the United States District Court for
the Northern District of California against defendant Turnstone Systems,
Inc. (NASDAQ:TSTN - news), and certain of its officers and directors, on
behalf of purchasers of the stock of Turnstone during the period from
June 5, 2000 through January 2, 2001, inclusive (the "Class Period"),
including those who acquired their shares in connection with Turnstone's
secondary offering on September 26, 2000.

The complaint charges Turnstone and certain of its officers and directors
with violations of the Securities Exchange Act of 1934. Turnstone is a
provider of technology for the digital subscriber line ("DSL") service
industry. Turnstone's first and primary product, the Copper CrossConnect
CX100, enables telephone access providers to remotely evaluate, manage,
and control the DSL connections within the telephone routing system,
permitting identification of copper lines which are suitable for DSL and
making installation and maintenance of DSL on those lines cheaper and
easier. Turnstone's customer base consists almost entirely of Competitive
Local Exchange Carriers, or "CLECs."

The complaint alleges that contrary to defendants' representations during
the Class Period, Turnstone's CX100 product was fraught with problems,
including blown capacitors, malfunctioning chips, and inaccurate
calibration of the CX100. As a result, and contrary to the
representations in the Registration Statement/Prospectus, the CX100
product was unreliable, inaccurate and inefficient in deploying DSL
services to Turnstone's customers. Moreover, Turnstone's key customers
were returning the product as a result of the malfunctioning of the
CX100.

After the market closed on January 2, 2001, Turnstone issued another
press release warning investors that its 4thQ '00 revenue would be
"substantially below" market estimates because its CLEC customers had
cancelled and reduced their orders. As a result, the Company announced
revenue of $26 million to $28 million for the 4thQ '00, 37% lower than
consensus market analyst estimates. In the same press release, the
Company also disclosed that it expected to take a$ 13.0 to $15.5 million
charge to increase its inventory reserves and bad debt reserves, thus
causing Turnstone to forecast an operating loss of $12 million to $14
million for the quarter.

Contact: Spector, Roseman & Kodroff, P.C., Philadelphia Robert M.
Roseman, 888/844-5862


WINSTAR COMMUNICATIONS: Spector, Roseman Expands Securities Lawsuit
-------------------------------------------------------------------
The law firm of Spector, Roseman & Kodroff on April 27 announced that the
class action on behalf of Winstar Communications Inc., investors (Nasdaq:
WCIIQ) will be expanded to include investors who purchased Winstar
securities in the period from June 2000 to April 2, 2001.

The complaint names Winstar, William Rouhana, Richard Uhl and Nathan
Kantor as defendants. The complaint alleges that the defendants made
material misrepresentations and omissions of material facts concerning
the company's business performance during the relevant time. According to
the complaint, throughout the relevant time period, defendants repeatedly
assured investors that the company was performing well, that the company
was enjoying strong growth and that it was well-funded to follow its
growth-oriented business plan through the first quarter of 2002. At the
same time, however, the complaint alleges that the defendants knew or
recklessly disregarded that Winstar was overstating revenues and assets.
In April 2001, contrary to prior representations, Winstar announced that
it was halting its expansion and laying off thousands of employees. The
company has delayed the filing of its annual Report on Form 10-K with the
SEC and its stock price has collapsed. The lawsuit was filed in the
United States District Court for the Southern District of New York.

Contact: Robert M. Roseman of Spector, Roseman & Kodroff, 888-844-5862


                             *********


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

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

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

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