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               Friday, June 11, 1999, Vol. 1, No. 91


* H. xx: Business Groups Back New Interstate Jurisdiction Act
* S. 837: Defendants Dislike States Certifying National Suits
3COM CORP.: Shepherd & Geller File Complaint in California
ASSOCIATES FINANCIAL: May Demand Collateral Protection Insurance
FIDELITY NATIONAL: Negotiates to Avoid CA Atty. General's Suit

FIRST UNION: Milberg Weiss Files Complaint in North Carolina
FIRST UNION: Schiffrin & Barroway File Suit in North Carolina
FIRST UNION: Signet Retirees & Workers Complaint About Merger
FIRST USA: Visa Card Users Lose Using Balance-Transfer Checks
HOLOCAUST SURVIVORS: Class Notices Delay Swiss Banks Settlement

MCKESSON HBOC: Krislov Firm Files Complaint in California
MCKESSON HBOC: Morris and Morris File Complaint in Georgia
MINNESOTA MINING: Case Continues, But Some Claims Dismissed
NATIONSWAY TRANSPORT: Employees Sue Company Officers for Wages
POLAROID CORPORATION: Cauley Firm Files Suit in Massachusetts

UNIFUND CORP.: Illinois Class Representatives Must Weigh Offers
WASHINGTON MUTUAL: Asks What Law Applies to Nationwide Action


* H. xx: Business Groups Back New Interstate Jurisdiction Act
Insurance companies have joined a wide range of business groups
in backing legislation that they say would reduce frivolous
class action lawsuits. Called the Interstate Class Action
Jurisdiction Act, the legislation would make it easier for
defendants in class action lawsuits to move cases from state
courts to federal courts.

The bipartisan bill is sponsored by Reps. Bob Goodlatte, R-Va.;
Rick Boucher, D-Va.; Ed Bryant, R-Tenn.; and Jim Moran, D-Va.
The legislation, which at press time had not been given a bill
number, also has 26 cosponsors.

Industry representatives supporting the bill say something must
be done to correct abuses in class action lawsuits.

"The number of state court class action lawsuits has grown
dramatically in the last two to three years and the record shows
that many state courts do not give a fair shake to either class
action defendants or class members, particularly if they are
from other states," said Carroll Campbell, president of the
American Council of Life Insurance.

"Too often," he said, "the only people who appear to benefit are
the class action lawyers."

"In recent years, class actions have become a hotbed for abuse,"
added Melissa Shelk, vice president of federal affairs with the
American Insurance Association. "Class actions are flooding into
certain state courts because those courts tend to favor local
lawyers in cases against out-of-state companies or because those
courts are ill-equipped to handle such cases."

At a press briefing, Rep. Goodlatte said the legislation helps
fulfill the original purpose of federal courts.

"Federal courts were actually designed by the framers of the
Constitution to handle large cases that crossed state
boundaries," he said. "This measure will put these suits in the
jurisdiction where they belong."

In addition to ACLI and AIA, other groups supporting the bill
include the Alliance of American Insurers, the U.S. Chamber of
Commerce and the National Association of Manufacturers.

Specifically, the legislation grants federal courts jurisdiction
over most class actions in which there is "minimal diversity,"
which means that any member of the proposed plaintiff class is a
citizen of a different state than any defendant.

Under these circumstances, any party could move a class action
from a state court to a federal court. In addition, current
federal law that bars transferring state court cases to federal
courts after one year would not apply to class actions.

However, federal jurisdiction would not apply to certain
circumstances, such as limited scope cases involving fewer than
100 class members or less than $ 1 million or cases against
state governments.

In addition, federal courts could not hear cases in which the
substantial majority of plaintiff class members are citizens of
the same state as the primary defendants and the claims will be
governed under the laws of that state. (National Underwriter
(Life/Health/Financial Services); May 24, 1999)

* S. 837: Defendants Dislike States Certifying National Suits
(The following is a portion of the prepared statement of Gerard
T. Noce, Esq., on behalf of the Defense Research Institute and
the Missouri Organization of Defense Lawyers, before the Senate
Commerce, Science and Transportation Committee concerning Senate
Bill 837.)

Finally, there is the issue of state courts certifying
nationwide class actions. Both the Senate and House Judiciary
Committees have held hearings on the problems created by this

- the "drive-through certifications" of classes, in which a
judge rubber-stamps approval, giving a plaintiffs' lawyer the
leverage to force a settlement of even the most frivolous or de
minimus claims;

- the use of discount coupon settlements, in which defendants
provide virtually worthless coupons to buy their own products,
or reversionary settlements, in which defendants retain any
money not paid out through the settlement's arduous claim
procedure; both of which provide real monetary benefits only to
the plaintiffs' attorneys, not to consumers;

- "reverse auction" settlements, by which defendants negotiate
with various plaintiffs' attorneys to purchase res judicata for
the cheapest price.

Only federal legislation can solve these problems. Whenever
class actions are filed, as they frequently are, before rural
small-town judges who do not have the time or inclination to
question class certifications, there is risk that businesses
will be blackmailed into settling frivolous claims. And these
state court judges, who do not have law clerks or staff
attorneys to assist them as federal judges do, also lack the
resources to scrutinize settlement agreements, leading to
appalling instances of consumers being short-changed. But most
importantly, the mere fact that class actions involving the same
subject matter can filed simultaneously by different lawyers in
different state courts inevitably leads to the "reverse auction"
process in settling meritorious claims on the cheap.

S. 353, a bipartisan bill now pending in the Judiciary
Committee, would make a huge step toward ending these abuses by
moving multi-state class actions into the federal courts.
(Federal News Service; JUNE 9, 1999)

3COM CORP.: Shepherd & Geller File Complaint in California
The Law Firm of Shepherd & Geller, LLC filed a class action in
the United States District Court, Northern District of
California, on behalf of all individuals and entities that
purchased 3COM CORPORATION common stock (Nasdaq:COMS) between
September 22, 1998 and March 2, 1999.

The complaint charges that 3COM and certain of its officers and
directors violated the federal securities laws by making
numerous false and misleading statements about the Company's
financial condition, causing the stock to trade at artificially
inflated prices. While inflating the price of the stock, the
Complaint alleges that Company insiders engaged in insider
selling, reaping millions of dollars in illegal profits. When
the truth was uncovered, the stock price fell, damaging

To learn more, contact Paul J. Geller at 888-262-3131 or at
pgeller@classactioncounsel.com or Scott R. Shepherd at 610-891-
9880 or 877-891-9880  or at sshepherd@classactioncounsel.com via

ASSOCIATES FINANCIAL: May Demand Collateral Protection Insurance
Consumers who allege they suffered a monetary loss as a result
of their lenders' adding the cost of force-placed collateral
protection insurance to their original loan amount do not have a
sufficient "investment injury" or "acquisition injury" to
sustain Racketeer Influenced and Corrupt Organizations Act
claims. The borrowers must show that the investment of
racketeering profits caused the complained injury. Weathersby,
et al. v. The Associates Financial Services Co. Inc., et al.,
No. 98-1551 "J" (1) (E.D. La. 4/28/99).

William and Gladys Weathersby obtained consumer loans from The
Associates Financial Services Co. Inc., which were secured by
real or movable property. When the borrowers learned that the
lender charged them for CPI they filed a class action complaint
against The Associates, Associates Financial Life Insurance Co.,
Associates Insurance Co., Associates Investment Co., Associates
Corp. of North America and Associates First Capital Corp. Their
complaint claimed that the defendants fraudulently force-placed
CPI on their loans and charged the cost of the allegedly
overpriced insurance to their original loan amount. According to
the plaintiffs, the defendants' practice of force-placing
insurance violated 1962(a), (b), and (d) of the RICO Act and
caused them to lose money by paying the overpriced CPI.

The defendants responded with a motion to dismiss for failure to
state a claim.

Investment Injury Requirement

Section 1962 (a) of RICO makes it unlawfully for any person who
has received income derived from a pattern or racketeering
activity to invest that income or its proceeds in an enterprise
which is engaged in interstate commerce. To state a claim under
the "investment injury" section of the Act, a "plaintiff must
adequately allege some nexus between his injury and the alleged
RICO violation."

Consumers must support their claim that an injury flowed from
the defendants' racketeering income into the enterprise with
specific facts, said the U.S. District Court for the Eastern
District of Louisiana. It is not enough, explained Judge Carl J.
Barbier to merely make allegations that track the language of
the Act. Nor is it sufficient, said the court, "[t]o merely
allege a monetary loss, even as a result of fraud" or "to allege
that the defendants invested the money obtained through an
alleged RICO fraud into the alleged enterprise." Because the
Weathersbys failed to plead an "investment injury," the district
court held that they failed to state a claim under 1962(a).

Acquisition Injury Requirement

The court next addressed whether the plaintiffs made a case for
a violation of 1962(b), often referred to as the "acquisition
injury" requirement. That section makes it illegal for any
person to use racketeering activities to acquire or maintain any
interest or control over an enterprise engaged in activities
affecting interstate commerce.

To adequately plead an "acquisition injury," the statute
requires a plaintiff to show his injuries were proximately
caused by a RICO person in control of an enterprise through
racketeering activities. According to the district court, the
Weathersbys failed to meet their burden of proof. The court
stated that nowhere did the borrowers allege that Associates
acquired or maintained control of the alleged enterprise,
presumably the force-placed insurance, by virtue of the
plaintiffs' alleged monetary injury. Thus, the court concluded
that this claim failed as well.

Because the Weathersbys' claims under 1962 (a) and (c) failed,
their subsection (d) claim failed as well, ruled the court.
Judge Barbier explained that a plaintiff may only maintain a
1962(d) claim if they also have a viable claim under subsections
(a), (b) or (c). The borrowers lacked any viable claim under the
Act and therefore, the court granted the defendants' motion to
dismiss without prejudice.

Dawn Adams Wheelahan of New Orleans represented the plaintiffs.
William N. Withrow and C. LeeAnn McCurry of Troutman, Sanders
LLP in Atlanta, Stephen Winthrop Rider, Anthony J. Rollo Jr. and
Lauren Zimmerman Garvey of McGlinchey Stafford PLLC in New
Orleans represented The Associates. (Consumer Financial Services
Law Report; May 28, 1999)

FIDELITY NATIONAL: Negotiates to Avoid CA Atty. General's Suit
Fidelity National Financial Inc. (NYSE: FNF) announced positive
developments in the class action lawsuit filed by the California
Attorney General against the entire title and escrow industry in
California. As a result of extensive meetings and discussions
with Fidelity, the Attorney General issued a letter stating it
expected a quick resolution of the matter as it relates to
Fidelity and does not expect to serve Fidelity with a formal
complaint or proceed with litigation.

The Attorney General had filed a lawsuit on behalf of the
California Controller and the California Department of Insurance
naming Fidelity National Title Insurance Company, a subsidiary
of Fidelity National Financial, Inc. as one of the industry
defendants. However, as a result of their meetings, the parties
expressed confidence the issues regarding Fidelity are likely to
be resolved on a fast-track basis and without litigation. In a
letter to Fidelity dated June 4, 1999, Brian Taugher, Deputy
Attorney General stated, "We expect that the issues will be
resolved with Fidelity quickly and without litigation. The
auditors are working rapidly toward completion, and we expect to
reconcile all outstanding issues to our mutual satisfaction,
concluding Fidelity's involvement. We have not and do not
anticipate serving Fidelity with the complaint."

The letter also expressed appreciation for the assistance
Fidelity had given state auditors and stated that "Fidelity was
named as a defendant because the audits were close to
completion, and not because the company is more culpable than
any other title insurance company."

William P. Foley, II, Chairman of the Board and Chief Executive
Officer of Fidelity stated, "Fidelity always has been a good
corporate citizen and very sensitive to the laws, rules and
regulations which govern our industry and business practices. We
believe this matter will be disposed of in a quick and
cooperative manner, as we continue to discuss the issues raised
in the lawsuit with the Office of the Attorney General, the
Department of Insurance and the Office of the Controller. We
have never compromised nor exploited our customers or consumers
in the price of our products or the quality of our service.
Similarly, we anticipate a resolution of this action by the
State of California would serve as a basis of the resolution of
the recent class-action lawsuit filed in Federal court."

Headquartered in Irvine, California, Fidelity National
Financial, Inc. is a diversified real estate services company
engaged in doing business in 49 states, the District of
Columbia, Puerto Rico, the Bahamas and the Virgin Islands.
Fidelity, through its principal subsidiaries, issues title
insurance policies and performs other title-related services
such as escrow, collection and trust activities, real estate
information and technology services, trustee sales guarantees,
credit reporting, attorney services, flood certifications, real
estate tax services, reconveyances, recordings, foreclosure
publishing and posting services and exchange intermediary
services in connection with real estate transactions.

FIRST UNION: Milberg Weiss Files Complaint in North Carolina
Milberg Weiss Bershad Hynes & Lerach LLP filed a class action
lawsuit on June 8, 1999, in the United States District Court for
the Western District of North Carolina on behalf of all persons
and entities who purchased the common stock of First Union Corp.
(NYSE: FTU) between August 14, 1998 and May 24, 1999.

The complaint charges First Union, and certain of its officers
and directors with violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 as well as Rule 10b-5
promulgated thereunder. The complaint alleges that defendants
issued a series of materially false and misleading statements
concerning the Company's operations, operating results and
integration of operations with CoreStates Financial Corporation
and the Money Store Inc. Because of the issuance of a series of
false and misleading statements the price of First Union common
stock was artificially inflated.

To learn more, contact Steven G. Schulman or Samuel Rudman at
800-320-5081 or at endfraud@mwbhlny.com via email.

FIRST UNION: Schiffrin & Barroway File Suit in North Carolina
Schiffrin & Barroway, LLP filed a class action lawsuit in the
United States District Court for the Western District of North
Carolina on behalf of all persons and institutions who purchased
the common stock of First Union Corporation (NYSE: FTU) from
August 14, 1998, through May 24, 1999.

The complaint charges First Union and certain of its officers
and directors with issuing a series of false and misleading
statements concerning the Company's operating results and
integration of the CoreStates Financial Corporation and The
Money Store, Inc. acquisitions.

To learn more, call Andrew L. Barroway, Esq. at 888-299-7706 or
610-667-7706 or write info@scbclasslaw.com via email.

FIRST UNION: Signet Retirees & Workers Complaint About Merger
Claiming the merger of a Signet Bank retirement plan into a
First Union plan violated plan documents and the Employee
Retirement Income Security Act (ERISA), a proposed class action
representing 5,000 Signet retirees and former workers has asked
a Virginia federal court for more than $150 million in damages.
Franklin et al. v. First Union Corp. et al., No. 99-CV-344 (ED
VA, complaint filed May 5, 1999).

The dispute centers on the July 8, 1997, merger of Signet and
First Union. As part of the merger, Signet's $250 million 401(k)
plan was merged into First Union's plan. The result was a
liquidation of investment holdings in the Signet plan and
reinvestment in proprietary First Union mutual funds. The
plaintiffs say the plan merger cost them at least $150 million.

Under the Signet plan, employees were allowed to invest in eight
investment vehicles, including three non-proprietary mutual
funds the Vanguard Index Trust 500 Portfolio, the American
Century/Twentieth Century Ultra Investors Fund and the Capital
One Financial Corporation Stock Fund. Those three funds held
$100 million of Signet's 401(k) assets. The remaining $150
million was equally split between the Signet Company Stock Fund
and several Signet proprietary mutual funds.

The plaintiffs claim First Union's proprietary funds contained
significantly higher fees and costs, which made substantial
profits for the bank, but eroded the investment earnings of
401(k) plan participants.

The Signet merger, the suit alleges, "was part of First Union's
invariable pattern or practice of liquidating the 401(k) plan
and non-proprietary investment vehicles of the dozens of
companies it has acquired (some 80 companies since 1984) and
transferring the proceeds into the First Union Plan and First
Union proprietary investment vehicles in order to maximize
corporate profits."

The plaintiffs say First Union's actions breached several
fiduciary duties under ERISA and caused "massive financial harm"
to Signet plan participants and beneficiaries. Additionally, the
suit claims that Signet retirees were not told they could "roll
over" their 401(k) holdings into Individual Retirement Accounts,
where they could reinvest in the same three non-proprietary

Finally, the suit claims the plan merger never actually took
place because First Union failed to properly amend the Signet
plan as required by the plan's documents and ERISA.

"The acts taken were thus not only unauthorized but also illegal
under the terms of the Signet Plan which, because it was not
properly amended or 'merged' out of existence, still exists as a
matter of law today, albeit improperly drained of all its
assets," the complaint asserts.

The suit seeks a declaration that the plan merger is "null and
void," removal of the First Union fiduciaries as fiduciaries of
the Signet plan and appointment of an independent fiduciary,
disgorgement of investment earnings, restitution, other
unspecified equitable relief and reasonable attorneys' fees.
(Bank & Lender Liability Litigation Reporter; May 19, 1999)

FIRST USA: Visa Card Users Lose Using Balance-Transfer Checks
A Fort Lee NJ man who believed he would save money by using
balance-transfer checks from America's biggest Visa lender ended
up with hundreds of dollars in unexpected fees, a federal class-
action lawsuit alleges.

Paul Dimick says First USA Bank issued him a Visa card in March
1998 that allowed him to transfer balances using the bank's
checks, with a maximum transaction fee of $ 25. Six months
later, he says, First USA sent him a letter that lowered
Dimick's interest rate from 4.9 percent to 3.9 percent, and said
he would save by using new checks. But Dimick failed to notice
fine print that also raised the transaction fee on checks to 3
percent of the total amount, according to his lawsuit, filed in
U.S. District Court in Newark.

Dimick alleges he transferred $ 12,422 from another credit card
and was surprised to learn he had incurred a $ 373 charge. His
lawyers say the bank's letter violated the federal Truth in
Lending Act and the state Consumer Fraud Act.

"The notice was improper," said Michaelene Loughlin, one of his
attorneys. "They didn't make it conspicuous the way it was
supposed to be under the Truth in Lending Act. The disclosure
must be made clearly and conspicuously."

A spokesman for First USA, David Webster, would not discuss the
specific allegations, but said: "We always comply with the Truth
in Lending laws, and applicable state and federal laws."

The lawsuit said the Delaware-based company should have notified
Dimick with larger print and such language as "Summary of
Changes" or "Transaction Finance Charges. "Those headings came
in a two-page description of the account included with his
original card, it said.

"They tried to slip one by him, and it worked," said Dimick's
second lawyer, Richard J. Doherty. "If they're going to disclose
the change in finance charges, they have to do it in a way that
you can understand." Dimick did not return phone messages left
on his answering machine. Doherty described Dimick as an
executive with a New Jersey company that manufactures pipeline
equipment. He said Dimick was very angry after getting the
charge, complained without success, and is paying the fees under
protest. "He just kind of ran into the seamless bureaucracy, and
he couldn't do anything about it," Doherty said. "He felt that
if this happened to him, First USA was perpetrating this on a
number of people, and it wasn't fair."

Webster, a vice president of corporate affairs, said the rate
offer sent to Dimick and other cardholders was discontinued in
December. He would not disclose how many people received it.
"That offer was a test," Webster said. "We test lots of
different offers for consumers all the time. The purpose of
tests was to learn and produce better products that are of
interest to card members."

The company now caps its transaction fee at $ 50 for balance
transfers, he said. First USA has about 57 million customers and
$ 70 billion in loans. (The Record; June 9, 1999)

HOLOCAUST SURVIVORS: Class Notices Delay Swiss Banks Settlement
It will be at least a year before payments to Nazi victims are
made from the $1.25 billion Swiss banks settlement, according to
a court calendar approved last week by a federal judge in
Brooklyn. The distribution plan is expected to be approved next
May 30 by the judge, Edward Korman.

That would be nearly two years after it was first announced that
the two major Swiss banks, Credit Suisse and UBS, agreed to
settle class-action lawsuits against them for hoarding Jewish
Holocaust-era accounts. The delay is due, in part, to specific
American legal requirements in class-action lawsuits. These call
for a series of steps to notify, and then to take into account
the opinions of, potential beneficiaries about how the
settlement should be distributed.

In the case of the Swiss settlement, additional time is required
because of the complicated logistics of translating materials
into two dozen languages and notifying Nazi victims around the
world. Nearly 900,000 potential beneficiaries soon will receive
a legal notice, by mail and in newspaper ads, about their
possible eligibility for some of the funds. The notification is
expected to cost some $25 million - about the same amount sought
by the survivors attorneys for legal fees, according to court

Beneficiaries have until October 22 to indicate if they do not
want to be included in the suit, according to Korman's calendar.
This phase, known as "opting out," is extremely important. Those
who do not opt out forego all future claims against all Swiss
banks, the Swiss National Bank, Swiss industry and the Swiss

The plan to distribute the settlement will be proposed to Korman
by Judah Gribetz, the court-appointed special master. Gribetz
has scheduled a legally mandated "fairness hearing" on the
settlement for November 29, at which time survivors can comment
on allocations. Last year, Melvyn Weiss, one of the survivors'
lawyers in New York, said that public forums will be held in
Israel, the US, Europe, South America and Australia to solicit
comments. However, no such forums have been officially

There are the five categories of beneficiaries in the
settlement: the so-called "Volcker Committee" class of
depositors and heirs of the hoarded or unclaimed Swiss bank
accounts; those whose assets were looted and then laundered
through the Swiss banks; two categories of slave laborers; and
refugees who were turned away by Switzerland during World War
II. The Volcker Committee group may get its funds before next
May. The committee has completed a forensic audit of those
accounts, and has established a tribunal in Zurich to match the
Holocaust-era dormant accounts to individual claimants.

The Zurich tribunal is being headed by Thomas Buergenthal, a
survivor of Auschwitz who is now a prominent human rights
lawyer. (Jerusalem Post; 06/06/99)

MCKESSON HBOC: Krislov Firm Files Complaint in California
The law firm of Krislov & Associates, Ltd. filed a class action
complaint captioned Ingall v. McKesson HBOC, Inc. et al., Case
No. C-99-2724WHO, in the United States District Court for the
Northern District of California on behalf of all persons and
entities who have suffered loss as a result of having been
issued shares of McKesson HBOC, Inc. (NYSE: MCK) common stock
during the period October 19, 1998 through April 27, 1999,
including those whose shares of HBO & Company (formerly Nasdaq:
HBOC) were converted into McKesson HBOC shares following
McKesson's January 12, 1999 merger with HBOC. The action also
alleges claims on behalf of persons and entities who purchased
McKesson common stock during the period October 19, 1999 through
April 27, 1999.

The Complaint is brought against McKesson and certain of its
current and former officers and directors of HBOC. The Complaint
alleges violations of under Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5. Specifically,
the Complaint alleges that the defendants issued false and
misleading financial statements that artificially inflated the
McKesson's income and earnings per share.

To learn more, contact Clinton A. Krislov or William M. Sweetnam
at 312-606-0500 or clint@krislovlaw.com via email.

MCKESSON HBOC: Morris and Morris File Complaint in Georgia
A class action lawsuit was filed by Morris and Morris on June 4,
1999 in the United States District Court for the Northern
District of Georgia, Atlanta Division, seeking to pursue
remedies under the Securities Exchange Act of 1934, on behalf of
all who purchasers of the common stock of McKessonHBOC Corp. or
its predecessor McKesson Corp (NYSE:MCK) between November 27,
1998, and April 28, 1999, except for persons who received
McKesson stock in exchange for shares of HBO & Company ("HBOC")
in the Jan. 12, 1999 merger of McKesson and HBOC.

The class action complaint alleges a fraudulent scheme and
deceptive course of conduct by certain individuals, officers and
directors first of HBOC and later of McKesson, who disseminated
materially misleading statements. Specifically, these
individuals oversaw HBOC operations prior to the merger of
McKesson and HBOC, and McKesson's healthcare software business
after the merger, and publicly reported supposedly skyrocketing
software revenues at HBOC and McKesson. As these individuals
knew or recklessly disregarded, however, these revenue figures
were artificially inflated through the use of improper
accounting techniques including the recording of sales revenue
on non-final contingent software sales. These false and
misleading revenue figures caused the price of McKesson stock to
be artificially inflated, injuring purchasers of McKesson stock.

To learn more, contact Patrick F. Morris, Esq. or James A.
McShane, Esq. at 800-296-0410 or morrisandmorris@compuserve.com
via email.

MINNESOTA MINING: Case Continues, But Some Claims Dismissed
A Minneapolis federal court has denied a motion by Minnesota
Mining and Manufacturing Co. (3M) to dismiss a class action
alleging the company's investments in volatile collateralized
mortgage obligations (CMOs) caused $80 million in losses to the
3M pension plan. Harley v. Minnesota Mining and Manufacturing
Co., No. CivA4-96-488 (D MN, March 31, 1998).

3M gained some relief, however, when the court dismissed one of
the plaintiffs' claims alleging CMO investments were prohibited
transactions under federal pension law. The plaintiffs are all
3M pension fund participants or beneficiaries.

The claims in this case were filed under the fiduciary duties
provisions contained in the Employee Retirement Income Security
Act (ERISA), specifically the general standard of care in Sec.
1104(a)(1)(B), and the prohibited transactions provision in Sec.
1106(b)(1), which was struck down by the court.

The court also held that in light of Hughes Aircraft Co. v.
Jacobson (U.S., 1999), a question of whether or not a surplus in
the 3M pension plan invalidates the plaintiffs' claim for
damages could be entertained in further motions for summary

CMOs are mortgage-backed debt securities that are divided into
classes known as "tranches," with each class, or tranche,
carrying a different risk factor. The values of some tranches
are pegged to the performance of derivative factors such as
interest rates, and CMOs generally are sensitive to mortgage
prepayments and interest rate fluctuations.

In 1990, 3M's pension asset committee decided to invest $20
million in Granite Corporation, a New York hedge fund that held
millions of dollars worth of CMOs. The 3M fund is a define d-
benefits plan, i.e., a plan based solely on company
contributions and investment performance where beneficiaries
receive an annuity based on actuarial calculations.

The plaintiffs claim Granite's offering materials fully
disclosed that CMO investments carry "substantial risks," but
that these warnings were ignored by the plan committee, which
approved the $20 million investment following a "brief" meeting.

Several years later, in February and March 1994, the Federal
Reserve Board raised interest rates several times unexpectedly.
Granite's CMO portfolio, composed of bonds containing derivative
factors pegged to interest rates, plunged in value. Granite's
consequent bankruptcy forced 3M to "write off" its entire

The plaintiffs later claimed in their District of Minnesota suit
that losses to the plan totaled $80 million. The court notes
that 3M "does not quarrel" with this figure.

In striking down 3M's motion for summary judgment seeking
dismissal of the suit in its entirety, the court said ERISA's
general duty of care imposed a duty on the fund to both fully
investigate the CMOs before investing and to obtain outside
expertise to monitor their performance.

The prohibited transaction charge was based on allegations that
Granite's investment adviser, David Askin and Askin Capital
Management (ACM), improperly increased the price of the CMOs to
receive higher fees and commissions. The plaintiffs claimed that
under ERISA, the 3M-fund committee had a duty to discover the
alleged price manipulation.

The court noted, however, that ERISA considers such transactions
to be prohibited unless they are made in return for "reasonable
compensation." In granting 3M's motion to dismiss the charge,
the court said the plaintiffs had failed to show that ACM's
compensation was "unreasonable."

Finally, turning to the damages question, the court said triable
material facts existed as to whether or not the 3M Fund's CMO
losses were paid from surplus plan assets or from core assets.
Under Hughes, use of surplus plan assets by an employer does not
deprive beneficiaries of their ERISA benefits or rights.
However, if the loss was debited to core assets and that cost
affected the rate of benefits, then ERISA was violated.

The court said 3M had not clearly established that the fund
actually had a surplus, and gave the parties the option to
address the issue in further motions for summary judgment.
(Derivatives Litigation Reporter; May 20, 1999)

NATIONSWAY TRANSPORT: Employees Sue Company Officers for Wages
Former employees of NationsWay Transport filed suit against
owner Jerry McMorris and other company officers for wages lost
after the company declared bankruptcy May 20. Attorney Evan S.
Lipstein is asking the Denver District Court to certify the
lawsuit as a class action, which could ultimately include about
3,500 employees.

Lipstein and two other attorneys, John D. Beckman and Kip B.
Shuman, named 57 employees as plaintiffs and expect more to join
the suit. "By the time we got to the courthouse to file the
suit, I had about 20 more calls from employees," Beckman said.

So far, the attorneys are asking for about $450,000, a sum that
will grow if other employees join the suit.

Neither McMorris nor NW Vice President Cal Wolfe would comment
on the lawsuit. Other officers named in the suit were Harold R.
Roth, George R. Roberge, James R. Feehan, Mike Hampton and
Lester Smith.

In the Chapter 11 bankruptcy case in Phoenix, the unpaid
employees are considered unsecured creditors who are unlikely to
be reimbursed. But under Colorado law, the officers of a company
are personally liable for back wages, even if the company they
headed is in bankruptcy, Lipstein said. "We named only
individuals," Beckman said. "If you sue the corporation, you're
stuck in bankruptcy court."

The lost wages have heightened employee bitterness about the
shutdown of the company. Employees picketed the Colorado Rockies
game Friday night because McMorris owns the baseball team. Some
said they resented the fact that they were made to work the
final day of business, even though McMorris had already decided
to close the company.

Meantime Monday, a skeleton crew of drivers and dockworkers
continued delivering freight, including four truckloads of
McMorris' personal property. Four padlocked trailers containing
possessions of McMorris' late son Michael were shipped to the
owner's home near Timnath. McMorris said his son's possessions
had been stored at the Denver terminal in extra trailers, which
had to be emptied after the bankruptcy filing May 20. Michael
McMorris died of cystic fibrosis in 1996.

Wolfe said McMorris also had some leased computer equipment at
his home that had to be returned.

Customers who have been awaiting shipments tied up in the
bankruptcy are also beginning to recover their merchandise.
Brenda Hart, who operates a Boulder mail-order business, said
she had to go to the NW loading dock when she could not get
through on the telephone. About $8,000 worth of Peruvian pottery
shipped by truck from Miami made it as far as the Denver
terminal when NW shut down. Hart paid a moving company to
complete the last leg of the shipment. (Rocky Mountain News;

POLAROID CORPORATION: Cauley Firm Files Suit in Massachusetts
The Law Offices of Steven E. Cauley, PA filed a class action
lawsuit on June 8, 1999 in the United States District Court for
the District of Massachusetts on behalf of all persons and
entities who purchased the common stock of Polaroid Corporation
(NYSE: PRD) between April 16, 1997 and August 28, 1998. The
complaint charges Polaroid, and certain of its officers and
directors with violations of the Securities Exchange Act of

The complaint alleges that defendants issued a series of
materially false and misleading statements concerning the
Company's operations and operating results. Because of the
issuance of a series of false and misleading statements the
price of Polaroid common stock was artificially inflated.

For more information, contact Steven E. Cauley, Scott E.
Poynter, or Gina M. Cothern at CauleyPA@aol.com or 888-551-9944.

UNIFUND CORP.: Illinois Class Representatives Must Weigh Offers
In the first Illinois case to address the applicability of Fed.
R. Civ. P. 68 to class actions, the U.S. District Court for the
Northern District of Illinois ruled that "Rule 68 does not on
its face exempt class actions from its application." Named class
representatives, therefore, must seriously consider defendants'
offers of settlement. Taylor v. Unifund Corp., No. 98 C 5921
(N.D. Ill. 4/30/99).

Debra Taylor filed a class action against Unifund Corp. alleging
that it deceptively attempted to collect time-barred debts in
violation of the Fair Debt Collection Practices Act. When
Unifund made a Rule 68 offer of judgment in the amount of
$1,000, Taylor filed a motion to strike claiming that such an
offer was inappropriate in a class action lawsuit.

Rule 68 provides that defendants may make an offer of judgment
at any time more than 10 days before trial and gives the
plaintiff 10 days to respond to the offer. If the offer is not
accepted, it is deemed withdrawn. The rule additionally states
that if the offer is withdrawn and "the judgment obtained by the
offeree is not more favorable than the offer, the offeree must
pay the costs incurred after the making of the offer."

To support her motion to strike, Taylor cited U.S. Supreme Court
Justice William Brennan's dissent in Marek v. Chesny, 473 U.S. 1
(1985). In that dissent, Justice Brennan voiced his concerns of
using Rule 68 in class action litigation because Rule 23(e)
requires the court to approve any settlement and the class
representative in rejecting an offer could cause exposure for
the class in costs and fees.

This argument did not persuade the district court however.
Writing for the court, Judge Wayne R. Andersen explained that
the federal rules of civil procedure, including Rule 68, govern
all suits of a civil nature unless exempted by Rule 81 and Rule
81 does not specifically exempt class actions from Rule 68's
scope. Therefore, the district court denied Taylor's motion and
gave her 10 days to respond to Unifund's offer.

Christopher Langone of Chicago represented the plaintiff. Scott
C. Frost and Alan Ehrenberg of Ehrenberg & Frost P.C. in Chicago
represented the Unifund. (Consumer Financial Services Law
Report; May 28, 1999)

WASHINGTON MUTUAL: Asks What Law Applies to Nationwide Action
Washington Mutual Bank has asked the California Supreme Court to
decide what is the appropriate choice-of-law analysis for a
nationwide class certification in a suit against the bank which
involves an underlying contractual choice-of-law provision.
Washington Mutual Bank, FA et al. v. Briseno, No. S070418 (CA
Sup. Ct., petition for review filed April 6, 1999); see Bank &
Lender Liability LR, April 7, 1999, P. 10.

The class action, led by Jayne A. Briseno, claims American
Savings Bank (ASB) (n/k/a Washington Mutual Bank) "grossly
overcharged" homeowners whose hazard insurance had lapsed for
collateral protection insurance.

The class action complaint alleges breach of contract, breach of
the implied covenant of good faith and fair dealing, unfair
business practices under the federal Unfair Practices Act,
unjust enrichment, imposition of a constructive trust, and

According to Briseno, standard residential loan contracts, like
those used by ASB, require borrowers to buy hazard insurance. If
the borrower fails to maintain the insurance, the bank may
continue the insurance policy by paying the premium on the
lapsed policies and charging the premium to the loan amount.

Instead, Briseno claims, ASB allows the original policy to
lapse, place s the property on a blanket policy and charges the
borrower for the coverage. In these cases, ASB charges a premium
typically two to five times more than the premium on the lapsed
policy would have been, she claims. For example, she says ASB
charged her $1,980 annually for collateral protection insurance;
the premium on her original policy was only $516.

On Feb. 24, 1999, the California Court of Appeal ruled choice-
of-law clauses are not choice-of-forum clauses, and as such did
not prevent certification of a nationwide class action.

But Washington Mutual Bank, formerly known as American Savings
Bank, argues to the state Supreme Court that the appellate court
inappropriately applied the governmental interest test.
According to the petition for review, the state Supreme Court
remanded the case to the appeals court, which was supposed to
apply the choice-of-law analysis in Nedlloyd for enforcing
contractual choice-of-law provisions. The Nedlloyd test
determines whether the chosen state has a substantial
relationship to the parties or their transaction or whether
there is any other reasonable basis for the parties' choice of
law. If either test is met, "the court must determine whether
the chosen state's law is contrary to a fundamental policy of
California," Washington Mutual claims. If no such conflict
exists, the court must enforce the parties' choice of law. Under
Nedlloyd, the relevant inquiry is whether a chosen state's law
conflicts with a fundamental policy of California, the bank
claims. According to the petition for review, the appeals court
disregarded Nedlloyd and instead discussed the governmental
interest test described in Clothesrigger, Inc. v. GTE Corp. (CA
Ct. App., 1985). The governmental interest test determines
whether another state's law would conflict with California law.
Such an analysis constitutes a conflict of law test, instead of
the choice-of-law test proscribed in the writ petition, the bank

By applying the governmental interest test, and not Nedlloyd,
the appeals court failed to address the issue presented by the
writ petition, Washington Mutual Bank claims. Therefore, the
bank requests in its petition for review that the state Supreme
Court decide whether the lower court abused its discretion by
failing to engage in the proper choice-of-law analysis. The bank
also claims that, since Nedlloyd governs, the trial court should
have been ordered to engage in the proper choice-of-law analysis
on remand.

The bank also argues the state Supreme Court should hear this
case to protect the uniformity of decisions. Trial courts may be
misled into following the court's analysis that "at most a
choice-of-law clause raises the potential that another state's
law might apply," Washington Mutual argues. The opinion
articulates a rule that directly contradicts Nedlloyd, the bank
argues. The appeals court also erred by improperly shifting the
burden of demonstrating commonality of law to the party
resisting class certification, Washington Mutual claims. The
opinion contradicts well-established law that on a motion for
class certification, the party seeking certification bears the
burden of showing that common issues of law do predominate.

Finally, the Washington Mutual Bank argues there is no rationale
for the court's determination to favor public policy protecting
consumers. Nedlloyd reflects a fundamental public policy worthy
of protection, which is the right of parties to be assured that
the provisions of their contracts will be enforced, the bank
contends. The bank also claims such a ruling will open
California courts to the burden of numerous nationwide class
actions. (Bank & Lender Liability Litigation Reporter; May 19,


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

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