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               C L A S S   A C T I O N   R E P O R T E R

                Tuesday, August 31, 1999, Vol. 1, No. 147

                               Headlines

BEVERLY ENTERPRISES: Faces Securities Suit In Arkansas Re Medicare
BEVERLY ENTERPRISES: May Settle For Allocation Of Costs To Medicare
BEVERLY ENTERPRISES: Sued In Different States Over Fiduciary Breach
BREAST IMPLANTS: Canadians Dissatisfied With Inamed Corp. Settlement
CAPRIUS INC.: Settles For Securities Suit Filed In Massachusetts

CELLEXIS: A Case That Tells How To Settle 60 Mil In Claims With 2.7 Mil
CROWN LIFE: Policyholders Of Differing Countries Denied Class Status
ESCUDE FUNERAL: Mortuary Inequity Against Blacks Righted At Fed. Ct.
FEN-PHEN: Interneuron Tells Ct Its Settlement Offer Unaffected by Ortiz
FOAMEX INTERNATIONAL: Sued In Delaware Over Buy-Out By Sorgenti

GARY-WHEATON: Illinois Sp. Ct. Okays Bank Fees On Mortgage
GLAXO WELLCOME: MA. Ct. Sustains Patients' Suit Over Use Of Data
GPU INC.: N.J. Power Customers File Class Action After Outage
INMATES' RIGHTS: Canadian Murderers Win Right To Vote In Manitoba
METRO-NORTH: 2nd Cir. Certifies Class Of Black Employees

MI DEPT OF CORRECTIONS: Ordered To Apply NIH Standard On HIV To Inmates
PROVIDIAN FINANCIAL: Study Finds No Late-Fee Fraud But May Not End Suit
RAINTREE HEALTHCARE: Discloses State And Fed. Securities Actions
RIKERS ISLAND: Suit In Man. Cites Needs When Mentally Ill Leave Prison
SENSORMATIC ELECTRONICS: Settles For Federal Securities Suits

TURBODYNE TECHNOLGIES: Will Defend 6 Securities Suits In California
VIAGRA: Fed. Judge In Brooklyn Gives Suit V. Oxford Health Go Ahead

                            *********

BEVERLY ENTERPRISES: Faces Securities Suit In Arkansas Re Medicare
------------------------------------------------------------------
On July 6, 1999, an amended complaint was filed by the plaintiffs in the
previously disclosed purported class action lawsuit pending against the
Company and certain of its officers in the United States District Court
for the Eastern District of Arkansas. The amended complaint asserts
claims under Section 10(b) (including Rule 10b-5 promulgated thereunder)
and under Section 20 of the Securities Exchange Act of 1934 arising from
practices that are the subject of the Allocation Investigations. Due to
the preliminary state of the Class Action and the fact the amended
complaint does not allege damages with any specificity, the Company is
unable at this time to assess the probable outcome of the Class Action
or the materiality of the risk of loss. However, the Company believes
that it acted lawfully with respect to plaintiff investors and will
vigorously defend the Class Action.


BEVERLY ENTERPRISES: May Settle For Allocation Of Costs To Medicare
-------------------------------------------------------------------
The Company has been the subject of a federal government investigation
relating to the allocation to the Medicare program of certain nursing
labor costs in its skilled nursing facilities from 1990 to 1998. The
investigation has been conducted by the Office of Inspector General of
the Department of Health and Human Services and by the U.S. Department
of Justice. In addition, a federal grand jury in San Francisco has
investigated business practices which are the subject of the above civil
investigation. In addition, the Company's current Medicare fiscal
intermediary, Blue Cross of California, is examining cost reports of the
Company's facilities with respect to the areas that are the focus of the
government investigation.

In late July 1999, the Company reached a tentative understanding with
the U.S. Department of Justice to settle the civil and criminal aspects
of all investigations by the federal government and its fiscal
intermediary into the allocation of nursing labor hours to the Medicare
program from 1990 to 1998 (the "Allocation Investigations"). The
proposed civil and criminal settlements are subject to completion and
execution of definitive settlement documents, satisfaction of certain
conditions and court approval.

If the tentative civil settlement is consummated, the Company would be
obligated to reimburse the federal government $170,000,000 as follows:
(i) $25,000,000 within 30 days of signing the definitive civil
settlement agreement; and (ii) $145,000,000 to be withheld from the
Company's biweekly Medicare periodic interim payments in equal
installments over eight years. In addition, the Company would agree to
resubmit certain Medicare filings to reflect reduced direct labor costs.

If the tentative criminal settlement is consummated, a subsidiary of the
Company would pay a fine of $5,000,000. The effect of this settlement
would be to exclude such subsidiary's nursing facilities from the
Medicare and Medicaid programs. It is expected that this will affect no
more than ten nursing facilities.


BEVERLY ENTERPRISES: Sued In Different States Over Fiduciary Breach
-------------------------------------------------------------------
In addition, since July 29, 1999, five derivative lawsuits have been
filed in the state courts of Arkansas, California and Delaware (Norman
M. Lyons v. David R. Banks, et al., Case No. OT94-4041, filed in the
Chancery Court of Pulaski County, Arkansas (4th Division) filed on or
about July 29, 1999; James L. Laurita v. David R. Banks, et al., Case
No. 17348NC, filed in the Delaware Chancery Court on or about August 2,
1999; Elles Trading Company v. David R. Banks, et al., filed in the
Superior Court for San Francisco County, California on or about August
4, 1999; Kenneth Abbey v. David R. Banks, et al., Case No. 17352NC filed
in the Delaware Chancery Court on or about August 4, 1999; Alan Friedman
v. David R. Banks, et al., Case No. 17355NC filed in the Delaware
Chancery Court on or about August 9, 1999 - collectively, the
"Derivative Lawsuits"). The Derivative Lawsuits, which each name the
Company as a nominal defendant, allege claims for breach of fiduciary
duties to the Company and its stockholders arising out of the Company's
alleged exposure to loss due to the Class Action and the Allocation
Investigations.


BREAST IMPLANTS: Canadians Dissatisfied With Inamed Corp. Settlement
--------------------------------------------------------------------
Canadian breast implant claimants are disappointed with their paltry
share of the $31.5 million settlement funded by Inamed Corp. and
subsidiaries McGhan Medical Corp. and CUI Corp., reports the Toronto
Star.

Toronto resident Violet Coughlin told the newspaper she was shocked to
learn she will receive only $500 to $1,000 once the settlement is
divided among approximately 45,000 claimants. "For all the suffering and
pain I've had in the last 15 years, I just thought they must have made a
mistake," she said. Coughlin, who received breast implants following a
mastectomy in 1982, links the implants to muscle cramping, dizziness,
sleeplessness and inflammations of various body parts, according to the
paper.

Mike Eizenga of Siskind, Cromarty, Ivey and Dowler in Ontario, counsel
for the Canadian claimants, told the Toronto Star that the women of
Canada have achieved a victory because they were given equal standing
with U.S. claimants under the settlement.

On July 7, U.S. District Judge Sam C. Pointer Jr. ordered a pro rata
distribution of the mandatory class action settlement. The settlement
class consists of all persons who have or may have claims against Inamed
or the released parties based on Inamed breast implants implanted before
June 1, 1993. Prompt distribution among all eligible class members
returning a satisfactory claim form by Oct. 1, 1999, will be made
without any differences in benefits based on citizenship or residence;
on the extent of demonstrable injuries or expenses; and without any
reduction for fees of class counsel. (Breast Implant Litigation Reporter
8-10-1999)


CAPRIUS INC.: Settles For Securities Suit Filed In Massachusetts
----------------------------------------------------------------
On January 7, 1998, the Company and Jack Nelson, who was the Company's
Chairman and Chief Executive Officer, were served with a complaint in
connection with a purported class action brought against them by Dorothy
L. Lumsden in the United States District Court of the District of
Massachusetts. The complaint contains claims for alleged violations of
Sections 10(b) and 20(a) under the Securities Exchange Act and common
law. Ms. Lumsden purported to bring her action "on behalf of herself and
all other persons who purchased or otherwise acquired the common stock
of the Company during the period August 10, 1994 through and including
December 12, 1997". On February 2, 1998, the Company and Mr. Nelson were
served with a second class action complaint naming them as defendants in
connection with another action brought in the United States District
Court for the District of Massachusetts. This action was brought by
Robert Curry and the complaint alleged the same purported class and
contained similar allegations and claims as the class action complaint
discussed above. On April 24, 1998, the District Court consolidated the
two class actions claims into one for pre-trial purposes.

On January 7, 1999, the Company announced that it has reached a
preliminary settlement in the shareholder class action in Federal Court
in Boston. Under the terms of the settlement, Caprius made a cash
payment of $150,000 and will issue 325,000 shares of common stock to
Plaintiffs. Caprius' insurance carrier contributed $100,000 of the cash
payment. In addition, the settlement also stipulated that in the event
Caprius sold all or part of its business within 12 months an additional
payment of $75,000 and issuance of 100,000 additional shares would be
made by Caprius to plaintiffs. Consequently, on April 27, 1999, the
additional payment was made and the additional shares will be issued.
For the quarter ended June 30, 1999, the Company reported $175,795 as
total settlement costs, which included $50,798 for the market value of
the shares to be issued.

On October 19, 1998, the Company filed a complaint in the Middlesex
Superior Court against Eric T. Shebar, M.D. ("Shebar"), the former Chief
Operating Officer and Medical Director for the Company's motor vehicle
accident rehabilitation ("MVA") business, and MVA Center for
Rehabilitation, Inc. ("MVA, Inc.") whereby the Company alleges breach of
contract and certain misrepresentations and seeks damages in an amount
to be determined at trial. The Company filed a preliminary injunction to
reach and apply a secured promissory note to MVA, Inc. against damages
sought from Shebar and to enjoin against any remedies under default of
the Note. The ruling on the injunction was denied. Consequently, the
final Note payment of $347,000 was paid as part of the sale of the MVA.
Dr. Shebar instituted a counterclaim seeking damages under a terminated
employment agreement. The parties are currently in settlement
discussions, the amount of which is not expected to be material.


CELLEXIS: A Case That Tells How To Settle 60 Mil In Claims With 2.7 Mil
-----------------------------------------------------------------------
Here's the case that's related in BCD News and Comment of 8-18-1999:

You take over as debtor's counsel in a case that has been transferred
from Wilmington, Del. to Los Angeles because the debtor's original
counsel has been conflicted out. The debtors, who include One Stop
Wireless of America, Inc. and two other jointly administered and
substantively consolidated cases, used to sell prepaid cellular phone
cards nationwide. While they initially managed to raise 53 million
through 53 separate limited liability partnerships, the estate is now
worth only 2.7 million or thereabouts.

How do you leverage 2.7 million in order to satisfy investors with about
53 million in claims, trade creditors with 5 million to 6 million in
claims, and claims by class action plaintiffs, the executive committee,
employees and a large judgment creditor? And, by the way, as you might
suspect from the facts above, you also have to deal with individual
claims against the three debtors based on breach of contract, fraud,
mismanagement, etc. as well as some nasty arbitration.

The attorneys who took over this case - James Bastian, Richard Marshack
and Mark Bradshaw of Marshack Shulman & Hodges LLP in Irvine, Calif. -
did satisfy most creditors, to the extent that is possible, with a plan
that is quite ingenious. But before you can understand the plan, you
need to understand how the debtors got themselves into this mess in the
first place.

                           Background

One of the first questions most people ask when they hear that the
debtors raised 53 million from individual partnerships is: Unless they
were living large (which they reportedly were not), how could anyone
possibly go through 53 million selling prepaid cellular telephone cards?
Believe it or not, the investors actually agreed that their 1 million
would be allocated as follows:

"Half the money [500,000] went to brokers, etc. to form the
partnership," Bastian said. "Another tranche went to marketing each
individual business. About 200,000 to 300,000 was allocated to buy
equipment. So, at the end of the day, less than 20 percent of the money
was used to operate the business."

Originally, the plan was to do business in Canada, but the debtors
couldn't reach agreement with the major carriers so they switched their
focus to the U.S. and made plans to expand to "everything under the
wireless umbrella." To distribute their products, the debtors opened or
were opening stores in Salt Lake City, Seattle, San Francisco,
Albuquerque, N.M., Boston, Dallas, Houston and San Antonio.

"The idea was that each partnership, which consisted of one of the
debtors and several individual investors, would own a business that
would be operated by one of the three corporate entities," Bastian said.
"Roughly one half of the partnership was owned by the corporation and
the other half was owned by the individual investors."

To operate the business, the debtors bought telephone switching
equipment from Cellexis International. The equipment was specially
programmed to transfer prepaid calls. But to use this technology,
Bastian said customers ended up having to use old style phones - phones
that few people have. Customers also couldn't dial directly. They had to
dial an 800 number and put in PIN codes - and there were reception
problems.

"They got new phones that were better, but there were still problems
with dropped calls," Bastian continued. "People's accounts weren't being
credited. That hurt the business significantly. There were claims
against the directors and officers and their insurance policy. Many
believed the debtors' management was not equipped to handle this type of
business and didn't manage it well."

After the companies filed Chapter 11, the debtors would take Cellexis to
arbitration saying they should be excused from performance because the
technology wasn't up to the standards of the contract. But the
arbitrator would rule that the debtors had licensed technology and
hadn't paid the licensing fees and that the contracts weren't
terminated. Therefore, Cellexis was awarded more than 2 million. As part
of the arbitration, Cellexis also wanted a 750,000 unpaid airtime charge
paid, but the arbitrator said that wasn't part of the hearing. This is
how Cellexis would end up with an unsecured claim in the bankruptcy for
almost 3 million.

However, at this point, the companies were continuing their downward
slide into bankruptcy. In desperation, management wasted 1.5 million
buying satellite-based phones in what reportedly turned out to be a
total scam. The investors, equally desperate, formed an executive
committee of five to insure their interests were protected. The
committee filed a class action suit alleging everything from securities
fraud to mismanagement, retained Deloitte & Touche to do an audit, and
hired an outside consulting firm, C/Net: Solutions Inc. of Irvine,
Calif. to whom it gave management authority.

The consultants were attempting to work out deals with vendors and
others in January 1998, when Cellexis brought injunctive proceedings in
state court in Denver to freeze the debtor's remaining assets. With the
money frozen, the consulting firm couldn't implement its plan and the
company was forced to file bankruptcy on Feb. 13, 1998 in the District
of Delaware.

"There were a number of venue fights and ultimately the judge
transferred venue out here [to Judge Robert W. Alberts (Bankr. C.D.
Calif.)] and we took over the case," Bastian said.

                   How do you leverage 2.7 million?

The easy thing to do would have been to divide the remaining monies
among all the parties. That would have resulted in the issuance of
multiple checks of 100 to 200 - and a lot of unhappy people.

Here's what actually happened. To beef up the estate, Marshack Shulman
went after management. Two members of the management team paid the
estate a lump sum of 750,000 to settle claims against them.

"Everyone had to provide a sworn financial affidavit setting forth their
net worth," Bastian said. "They paid a substantial percentage of that.
On that basis, the investors, the executive committee and Cellexis were
satisfied the deal was a good one. [Some said], 'What if they lied on
the affidavit?' There is a six-month review period. If a
misrepresentation is found, the settlement relief is set aside and all
claims are reinstated."

Unsecured creditors divvied up 250,000 on day one, with the possibility
of more depending on the outcome of litigation against those officers
and directors who didn't settle.

Cellexis' equipment was returned to them, but the company had other
assets including office computers and equipment. The debtors managed to
raise 200,000 by selling this equipment. Says Bastian: "There were some
economic realists [among the investors] who said, 'Get me some upside,
some stock.'"

Here's how his firm managed to do that. Remember the management
consulting company with the strange name: C/Net:? It turned out that
they were affiliated with an Irvine, Calif. company called PhoneXchange,
a long distance carrier that specializes in switching traffic to
international locations.

"PhoneXchange was in a massive expansion mode," Bastian said. "They
wanted to raise money relatively cheaply by issuing Chapter 11 stock.
Section 1145 allows stock to be issued without registration. Ultimately,
we gave them 750,000 in exchange for 1.5 million worth of stock. The
stock kept going up in price. It was originally 5 a share. We froze the
price at 7.50 a share to calculate the 1.5 million shares."

On June 30, 1999, the day the deal was approved by two courts (more on
this later), the closing price of the stock was 11.50 per share.

Next, the debtor was approached by a company called Freedom Wireless
Inc., a Tempe, Ariz.-based prepaid cellular phone business which, as it
turned out, had many of the same officers as Cellexis. Bastian explains.
"They said, 'We're launching our plan to exploit our new patented
technology. That technology is allegedly the best and most used in the
prepaid cellular industry. We have a great claim against third parties
that may be infringing against our patents. If you're interested, we
will offer you 5 percent of our company for the sums you have on hand.'
The investors were happy with that. We invested 1.1 million in that."

Litigation against directors and officers and other parties continues in
Denver. Investors have agreed to subordinate up to 750,000 of their
recovery from litigation proceeds to unsecured trade creditors, whose
allowed claims are expected to range between 1 million and 2 million.

                             The deadline

Most of the investors were happy with the PhoneXchange and Freedom
Wireless deals. However, the plan had to be presented not only to the
bankruptcy court but to the state court in Denver. Why? Under the plan,
the state court had to approve a partial class settlement in order for
monies to be released. The partial class settlement included the 750,000
payment made by the two managers and the release of claims against those
who provided financial statements of minimal or negative net worth.

Normally, this wouldn't have been a problem. However, it was June 25,
1999 and the PhoneXchange offer was only good until June 30. This made
the confirmation hearing a race against time.

"Two of the 4,500 investors objected," Bastian said. "One [represented
himself]. The other [was represented] by a non-bankruptcy lawyer. We had
to put on evidence covering every part of this deal. The objecting
parties said everybody was committing fraud, including our firm. They
had lost money and thought it was all a big scam. We said, 'We don't
know what happened. We're not exonerating anyone. We're just trying to
deal with the situation as it now exists.' The plan got a 93 percent
acceptance. That spoke volumes."

Because of the deadline, Judge Alberts told the parties he would finish
the evidentiary hearing "if it took all night." That's why the debtors'
Modified Fourth Amended Plan of Reorganization wasn't confirmed until
11:30 p.m. Monday June 28. Bastian was on a plane to Denver the next
day.

District Judge William G. Meyer entered an order and judgment approving
the partial settlement over the objection of one of the class members,
on Wednesday, June 30, the deadline. This meant funds could now be
distributed.

Is this a good deal? Says Bastian: "As Judge Alberts said, 'This could
be a great deal [for investors] or it could be pie in the sky.'" Only
time will tell.


CROWN LIFE: Policyholders Of Differing Countries Denied Class Status
--------------------------------------------------------------------
In a case that could mark a turnaround for the beleaguered Crown Life
Insurance Co., a federal district judge has declined to certify a class
of Central and South American holders of the insurer's "vanishing
premium" life insurance policies.

On Aug. 10, U.S. District Judge Sim Lake said in a 19-page order that it
would be difficult to manage a class action because of the differing
legal standards and remedies applicable in each class member's home
country. Lake also noted that "this is not a case in which the damages
alleged by each member are so insignificant that no individual class
member would have an economic incentive to pursue his own case." Ed
DeYoung, a partner in the Dallas office of Locke Liddell & Sapp who
represents Crown Life, says the case differs from agreed classes of U.S.
and Mexican policyholders because "South America is a continent, not a
country."

Crown Life settled a U.S. class of about 22,000 policyholders for $ 27
million in 1996 and a Mexican class of about 2,900 policyholders for $ 5
million in 1997. Michael Stuart Lee, a partner in Corpus Christi's Lee &
Garcia, says the plaintiffs' legal team will regroup and move forward
with the individual case filed for Dr. Arnulfo Mansur Velasquez. Lee
says no other South American or Central American policyholders have
filed individual cases. Plaintiffs in "vanishing premium" cases allege
they were misled about the ultimate costs of the policies. (Texas Lawyer
8-16-1999)


ESCUDE FUNERAL: Mortuary Inequity Against Blacks Righted At Fed. Ct.
--------------------------------------------------------------------
Wilbert Jean Oliver wanted to give his mother a proper funeral. But for
blacks in the rural South in the early 1970s, that often was not a
simple matter. He approached the white-owned Escude Funeral Home, the
only mortuary in his hometown of Mansura, La. The firm would embalm his
mother, but it refused to allow her wake to be held on its premises
because she was black.

The pain of Escude's refusal went deep. The indignity was doubled by the
fact that Oliver's mother, the community midwife, had delivered and
nursed some of the Escude children and was considered a family friend.

Oliver, who died at age 89 in a Marksville, La., hospital Aug. 17,
sought to right that wrong as the lead plaintiff in a 1973 federal
class-action lawsuit that alleged unequal treatment of blacks and whites
in two local funeral homes.

He won the case, scoring a legal victory that helped to end
discriminatory practices in funeral homes around the country.

Raised in Mansura, a small town about 70 miles northwest of Baton Rouge,
Oliver was a laborer who lost an arm in a factory accident and later
turned to farming cotton.

When blacks in Mansura died, their families had few options. They could
go to a black-owned funeral home about 10 miles out of town, but that
was far enough away to pose a hardship for poor families who didn't have
reliable transportation. The two closest mortuaries, Escude in Mansura
and Hixson Bros. Funeral Home in nearby Marksville, were white-owned.

When Martha Pierre Oliver died in 1971, Wilbert Oliver turned to
undertaker Joseph Escude Jr., who knew the Olivers well. Unlike many
white-owned mortuaries, the Escude Funeral Home had been embalming
blacks since its founding in 1928. But, no, it could not hold the wake.
That was just the custom, Escude said. Hixson Bros. would not handle
black bodies at all.

Oliver ended up holding the visitation in what the lawsuit called "a
run-down storage building" on the grounds of a local black church.
According to the suit, Escude offered to cover the church rental costs.
But he still charged Oliver the same total fee as he charged whites, who
were not forced to hold their wakes elsewhere.

The circumstances in Mansura were typical of many areas of the rural
South at the time, according to Oliver's lawyers at the Southern Poverty
Law Center. Blacks often had to do without embalming their dead, which
was illegal in many states. If they found a mortuary that would perform
the embalming but refused to allow visitation, they could hold the wake
at home but were forced to pay the mortuary's full price.  "It was not
giving equal service for the same amount of money," said Father August
Thompson, who was Oliver's priest when his mother died.

Thompson called Joseph Escude Jr. a good man. "He was the only white
funeral home operator in the area who would embalm blacks," Thompson
said. "But when you looked at it, it was something to laugh at: They
would embalm a black person in the same room as a white person, but not
allow the wake." The inequity, he said, came from not wanting to "buck
the comfort zone."

At Oliver's urging, Thompson tried to find a local attorney who would
take the funeral homes to court but found that "no lawyer wanted to
touch it." The priest finally approached the Southern Poverty Law
Center, which agreed to take the case.

The suit alleged that the Escude and Hixson Bros. funeral homes had
violated a federal law that prohibited discrimination against blacks in
contracts.

Finding that the facts in the case were not disputed by Escude or Hixson
Bros., a federal district judge handed down a summary judgment within a
month that declared the undertakers' actions unconstitutional. They were
ordered to pay $ 1,000 in damages to each plaintiff.

Although it did not go to the Supreme Court, the ruling "served a
precedential purpose," said Morris Dees, the crusading civil rights
attorney who co-founded the Southern Poverty Law Center and was a member
of the original legal team on the case. After the ruling was announced,
Dees said, the center received reports that funeral homes across the
country were changing their practices and offering a full range of
services to blacks. "It sent a message to other funeral homes that it
was not a good idea to discriminate against blacks , because they would
be hit by legal fees," Dees said. "They would be violating the law."

Escude, who still runs the only funeral home in Mansura, said in an
interview this week that he did not contest the lawsuit 26 years ago.
"It was a matter of discrimination," he said, adding, "We knew we'd
lose." Back then, he said, "nobody was putting blacks in white funeral
homes." Since the case with Oliver was settled, "we've been burying the
whole family ever since." Oliver was "very courageous" to battle the
white funeral home operators, Thompson said. "He's the one who said,
'We've got to sue them.' He was upset for his mama."

Martha Oliver's son was buried Saturday. Escude directed his memorial
services, which included a wake held at the Mansura funeral home.
Survivors include Oliver's wife of 69 years, Catherine Carmouche Oliver,
three sons, six daughters, 39 grandchildren, 72 great-grandchildren, and
13 great-great-grandchildren. (Los Angeles Times 8-25-1999)


FEN-PHEN: Interneuron Tells Ct Its Settlement Offer Unaffected by Ortiz
-----------------------------------------------------------------------
Unlike Ortiz v. Fibreboard Corp., the proposed limited fund settlement
recently rejected by the U.S. Supreme Court, the $100 million
Interneuron settlement offer now pending in the federal diet drug MDL
court is a true limited fund and complies with all of the requirements
that the Supreme Court laid down in Ortiz, Interneuron has told the
court in a supplemental briefing. In re Diet Drugs (Phentermine,
Fenfluramine, Dexfenfluramine) Products Liability Litigation , MDL No.
1203 (ED PA, supplemental memorandum in support of the settlement filed
July 1, 1999).

Interneuron is a Massachusetts pharmaceutical development company whose
only viable product in 1997 was dexfenfluramine, which it marketed under
the name Redux. It is currently developing new and potentially lucrative
prescription drug products, but contends that if its proposed settlement
is not accepted, it will have no choice but to file for bankruptcy.

                            The Ortiz Ruling

In a 7-2 decision, the Supreme Court rejected Fibreboard Corp.'s $1.535
billion class action asbestos "global settlement," reversing the Fifth
Circuit U.S. Court of Appeals ( Ortiz et al. v. Fibreboard Corp. et al.,
No. 97-1704 U.S., June 23, 1999 ).

Fibreboard Corp. had proposed an agreement that contemplated joint
settlement of thousands of asbestos personal injury claims by persons
allegedly exposed to Fibreboard's products, together with settlement of
corresponding insurance coverage claims against its carriers,
Continental Casualty Co. and Pacific Indemnity Co.

Fibreboard had agreed to pay $1.535 billion to a mandatory class of
claimants and potential claimants.

The insurance companies were to pay $1.525 billion of the total
settlement amount, with Fibreboard contributing the remaining $10
million. In the event that the settlement was not approved, Continental,
Pacific Indemnity and Fibreboard crafted a "trilateral settlement
agreement," pursuant to which the carriers would pay Fibreboard a $2
billion "limited fund" settlement to defend or settle the underlying
claims.

In a detailed discussion of Federal Rule of Civil Procedure 23(b)(1)(B),
the court identified three common characteristics of a limited class
settlement:

*The maximum available fund is inadequate to pay all claims;
*The whole of the inadequate fund is to be devoted to the claims; and
*The plaintiffs share a common theory of recovery, and are to be treated
equitably with regard to each other.

Based on that analysis, the majority concluded that the district court
and the Fifth Circuit "failed to demonstrate that the fund was limited
except by agreement of the parties."

                   Interneuron's Proposed Settlement

Interneuron's proposal in no way resembles Ortiz ," the company said; in
fact, it does meet the Supreme Court's three-pronged test: the proposed
fund is inadequate to pay all claims; the whole of the fund would be
devoted to the claims; and the plaintiffs have a common theory of
recovery and would be equitably treated.

                             Inadequacy

The number of pending lawsuits naming the company as a defendant has
grown to more than 1,100 and the estimated number of claimants exceeds
30,000, Interneuron said.

The proposed settlement would be made up of the remaining amounts in
three insurance funds that originally totaled $40 million, $15 million
in cash and $55 million in future royalties paid out over seven years,
totaling about $100 million.

Interneuron's three insurance policies, for $20 million, $15 million and
$5 million each, are wasting policies that are currently being consumed
by litigation expenses. Those policies would likely fall far short of
satisfying the claims of Redux users.

The MDL court was presented with substantial evidence that "a highly
conservative estimate of the minimum size of the aggregate value of such
claims (based upon defense costs and the cost of 'nuisance' value
settlements), exceeds the available fund in this case," the memorandum
stated.

                        Devotion to the Claims

As of Dec. 31, 1998, Interneuron had assets of $41 million and
liabilities of $22 million, with virtually no income coming in.
Nevertheless it is still obligated to make the $15 million up front cash
payment. The additional requirement that it make royalty payments of $55
million in the next seven years means that the fund is worth more than
the net worth of the entire company and that the Redux claimants will do
better with the fund than without it because in the absence of a
settlement, the class members would likely receive nothing, the
memorandum explained.

                   Equitable Treatment of Claimants

Interneuron is proposing to allocate the available funds on a ratable
basis. In other words, if the fund is adequate to cover only 75% of the
total amount of the claims; each claimant will receive $75% of his or
her claimed amount.

Unlike Fibreboard's proposed settlement, Interneuron's proposal is
inclusive of all claimants with no exclusions and no "side deals," the
company said.

"With every day that passes, Interneuron's assets continue to dwindle.
If Interneuron is to survive, it is critical that the settlement be
approved as quickly as possible. If Interneuron does not survive, class
members will likely recover nothing from this defendant," the memorandum
concluded.

MDL Judge Louis C. Bechtle held a fairness hearing over several days at
the end of February and beginning of March, but has not yet ruled on
whether to grant final approval to the proposed settlement. (Mass Tort
Litigation Reporter August 1999)


FOAMEX INTERNATIONAL: Sued In Delaware Over Buy-Out By Sorgenti
---------------------------------------------------------------
Foamex International reveals the following in its filing with the SEC:

On August 13, 1999 a purported class action complaint (the "Watchung
Complaint") was filed in the Court of Chancery for the State of
Delaware, Newcastle County by shareholders Watchung Road Associates,
L.P. and Pyramid Trading Limited Partnership naming Foamex International
Inc., a Delaware corporation, Mr. Marshall Cogan, Mr. Etienne Davignon,
Mr. John Gutfreund, Mr. Robert Hay, Dr. Stuart Hershon, Mr. John
Johnson, and Mr. John Tunney as defendants. The Watchung Complaint
alleges that the individual defendants breached their fiduciary duties
when they agreed to the buy-out of the Company by Sorgenti Chemical
Industries, Inc., LLC, a Delaware limited liability company, and Liberty
Partners, L.P., a Delaware limited partnership.

The Watchung Complaint alleges that the price of $11.50 per outstanding
share offered by Sorgenti and Liberty is inadequate and fails to take
into consideration claims the Company is alleged to have as a result of
purportedly wrongful diversions of Company assets in a variety of
transactions between the Company or its affiliates and Trace
International Holdings, Inc., a Delaware corporation, Mr. Marshall
Cogan, or their affiliates. The Watchung Complaint also alleges that the
individual defendants breached their fiduciary duties in agreeing to a
buy-out by Sorgenti and Liberty without making an effort to obtain the
best offer possible for the shareholders.

The Company and the individual defendants deny that they have committed
any breaches of duty to the Watchung Plaintiffs or to the purported
class, and intend to vigorously defend the suit.

Separately, New York Law Journal publishes the following in its edition
of August 10, 1999 the Class Action against Trace International Holding,
Inc. on its alleged abandonment of its proposed buyout of Foamex.

             Greenberg V. Trace International Holding, Inc.

Plaintiffs sued defendant company for breach of contract on behalf of
themselves and others who had purchased common stock of Foamex
International Inc., defendant's subsidiary. Allegedly, plaintiffs had
bought stock in reliance on defendant's offers regarding its proposed
buyout of Foamex and were damaged when defendant abandoned these offers.
Defendant moved to dismiss the complaint for lack of subject matter
jurisdiction, arguing that no single plaintiff's claim individually met
the $ 75,000 jurisdictional threshold. Plaintiffs contended that
aggregation of plaintiffs' claims was permissible to satisfy the
amount-in-controversy requirement. Granting the motion, the court held
that plaintiffs failed to show to a reasonable probability that the
claims of any or all putative class members exceeded the jurisdictional
threshold.

                            Judge Stein
      Greenberg V. Trace International Holdings, Inc. QDS:02761390

Plaintiffs have brought this action against defendant Trace
International Holdings, Inc. alleging a breach of contract in connection
with Trace's proposed buy-out of Foamex International, Inc. Trace has
now moved to dismiss the complaint for a lack of subject matter
jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1) and for failure to
state a claim upon which relief can be granted pursuant to Fed. R. Civ.
P. 12(b)(6). For the reasons that follow, the motion is granted on the
grounds that this Court lacks subject matter jurisdiction over this
dispute.

                            Background

This action arises out of Trace's offer to buy the common shares that it
did not already own of its subsidiary Foamex. Approximately 54% of
Foamex common stock was owned by public shareholders. On March 16, 1998,
Trace offered $ 17 per share, a 22.5% premium over the latest closing
market price of $ 13 7/8 per share. The offer was subject to various
conditions, including approval by Foamex's board of directors and
shareholders. On June 25, 1998, Trace announced that the Foamex board
had accepted a definitive merger agreement at a price to shareholders of
$ 18.75 per share. Consummation of the merger remained subject to
certain conditions, including approval of the transaction by a majority
of shareholders and Trace's obtaining financing for the buy-out at
reasonable terms.

On October 16, 1998, allegedly due to "the inability to obtain financing
and changes in market conditions," Trace withdrew its $ 18.75 offer and
offered $ 12.00 per share. A merger agreement based on the later offer
was entered into on November 5, 1998, but this revised proposal failed
as well, and the merger transaction was ultimately terminated on January
8, 1999.

The named plaintiffs have brought this action on behalf of themselves
and "all persons, other than [Trace], who purchased common stock of
Foamex between March 16, 1998 and October 19, 1998... in reliance upon
the Offer[s]" and seek class certification pursuant to Fed. R. Civ. P.
23(a) and (b)(3). Their claim is that Trace's announcements on March 16,
1998 and June 25, 1998 constituted binding offers capable of acceptance
by those who purchased in reliance on the offers; that "by purchasing
Foamex stock in reliance upon the Offer[s] Plaintiffs accepted the
Offer[s] as did other members of the class similarly situated," Compl. P
31; and that plaintiffs and class members "have been damaged by Trace's
abandonment of the Offer[s] after the acceptance thereof by Plaintiffs
and members of the class," id. P 32.

Plaintiffs base jurisdiction on diversity of citizenship pursuant to 28
U.S.C. @ 1332(a) and supplemental jurisdiction pursuant to 28 U.S.C. @
1367(a). The two named plaintiffs, one a citizen of Florida and the
other of New Jersey, are diverse with respect to Trace, a Delaware
corporation with its principal place of business in New York. Plaintiffs
also state that "the matter in controversy exceeds, exclusive of
interest and costs, the sum of seventy-five thousand dollars ($
75,000.00)." Trace challenges this Court's subject matter jurisdiction
on the ground that no single plaintiff's claim individually meets the $
75,000 jurisdictional threshold and that aggregation of plaintiffs'
claims to meet the amount-in-controversy requirement is impermissible.
In response, plaintiffs assert that aggregation is premissible but do
not state that any single plaintiff's claim meets or exceeds $ 75,000.
See Plaintiffs' Mem. at 3-6.

                             Discussion

Pursuant to 28 U.S.C. @ 1332(a), this Court may exercise diversity
jurisdiction only where the parties are of diverse citizenship and the
amount in controversy exceeds $ 75,000, exclusive of interest and costs.
The party asserting subject matter jurisdiction has the burden of
proving its existence. See Robinson v. Overseas Military Sales Corp., 21
F.3d 502, 507 (2d Cir. 1994). Here, there is no dispute regarding the
parties' diverse citizenship, but the Court must resolve whether the
amount in controversy requirement is met.

The amount in controversy must appear on the face of the complaint or be
established by proof that the matter in controversy exceeds $ 75,000.
See Miller v. European American Bank, 921 F. Supp. 1162, 1167 (S.D.N.Y.
1996). In determining the sufficiency of the pleadings on a Rule
12(b)(1) motion to dismiss, the Court will accept the plaintiff's
allegations as true and construe them favorably to the plaintiff. See
Robinson, 21 F.3d at 507 (When district court relies solely on pleadings
and supporting affidavits, plaintiff need only make prima facie showing
of jurisdiction; court will construe allegations liberally and take as
true uncontroverted factual allegations.). Nevertheless, the "party
invoking the jurisdiction of the federal court has the burden of proving
that it appears to a 'reasonable probability' that the claim is in
excess of the statutory jurisdictional amount." Chase Manhattan Bank,
N.A. v. American Nat'l Bank and Trust Co. of Chicago, 93 F.3d 1064, 1070
(2d Cir. 1996) (quoting Tongkook America, Inc. v. Shipton Sportswear
Co., 14 F.3d 781, 1784 (2d Cir. 1994)).

In their complaint, plaintiffs merely state that the "matter in
controversy exceeds, exclusive of interest and costs, the sum of [$
75,000]." Compl. P 5. They leave the amount of actual damages to be
determined at trial. Moreover, in response to defendant's challenge that
the jurisdictional amount must be alleged and met by each plaintiff
class member, plaintiffs respond that "the requisite jurisdictional
level is adequately pleaded here... by virtue of the permissible
aggregation of the claims of Plaintiffs and all class members." They
also assert that their demand for attorneys' fees independently
satisfies the jurisdictional requirement. Plaintiffs' Mem. at 3, 5.

                            Aggregation

In a putative class action where jurisdiction is based on diversity, the
amount in controversy requirement cannot be satisfied by the aggregation
of claims. Each plaintiff must individually satisfy the jurisdictional
amount for suit in the federal courts. See Zahn v. International Paper
Co., 414 U.S. 291, 294-300, 94 S. Ct. 505, 509-11, 38 L. Ed. 2d 511
(1973) (citing Snyder v. Harris, 394 U.S. 332, 89 S. Ct. 1053, 22 L. Ed.
2d 319 (1969) for the "well-established rule that each of several
plaintiffs asserting separate and distinct claims must satisfy the
jurisdictional-amount requirement if his claim is to survive a motion to
dismiss"); Local 538 United Bhd. of Carpenters and Joiners of America v.
United States Fidelity and Guar., 154 F.3d 52, 55 (2d Cir. 1998); Gilman
v. BHC Sec., Inc., 104 F.3d 1418, 1422 (2d Cir. 1997); Miller, 921 F.
Supp. at 1167; Trapanotto v. Aetna Life Ins. Co., 1996 WL 417519 11
(S.D.N.Y. Jul. 25, 1996); Benfield v. Mocatta Metals Corp., 1993 WL
148978, at *3 (S.D.N.Y. May 5, 1993). The rule against aggregating
separate and distinct claims "plainly mandates... that the entire case
must be dismissed where none of the plaintiffs claims more than [the
jurisdictional minimum]." Gilman, 104 F.3d at 1422 (2d Cir. 1997)
(quoting Zahn, 414 U.S. at 300, 94 S. Ct. at 511).

Plaintiffs additionally suggest, however, that if any plaintiff meets
the jurisdictional amount, this Court may exercise supplemental
jurisdiction pursuant to 28 U.S.C. @ 1367 over the remaining class
members' claims. In doing so, plaintiffs cite the decisions of those
U.S. Courts of Appeals which hold that, in enacting 28 U.S.C. @ 1367 in
1990, Congress effectively overruled the more conservative
jurisdictional standard of Zahn. See In re Abbott Lab., 51 F.3d at
526-27 (5th Cir.) reh'g en banc, denied, 65 F.3d 33 (1995); Stromberg
Metal Works, Inc. v. Press Mechanical, Inc., 77 F.3d 928, 930 (7th Cir.
1996). Plaintiffs specifically assert that "Zahn... is no longer the
law." Plaintiffs' Mem. at 3.

Neither the U.S. Supreme Court nor the U.S. Court of Appeals for the
Second Circuit has addressed the issue of whether @ 1367 overrules the
holding in Zahn. See E.R. Squibb & Sons, Inc. v. Accident & Cas. Ins.
Co., 160 F.3d 925, 934 (2d Cir. 1998). However, the courts of this
district which have considered the issue have uniformly determined that
@ 1367 does not overrule Zahn by permitting district courts to exercise
supplemental jurisdiction over the claims of class members that do not
meet the jurisdictional amount. See Colon v. Rent-A-Center, Inc., 13 F.
Supp. 2d 553, 562 (S.D.N.Y. 1998); Gerber Food, 938 F.Supp. at 224;
McGowan v. Cadbury Schweppes, PLC, 941 F. Supp. 344, 348 (S.D.N.Y.
1996), Benfield, 1993 WL 148978, at *4 (without a Congressional showing
that 28 U.S.C. @ 1367 overrules Zahn "this Court declines to exercise
supplemental jurisdiction over class members' claims for less than
[jurisdictional amount]"). Thus, pursuant to the precedent in this
district, even if one of the plaintiffs met the amount in controversy
requirement, Zahn would prohibit this Court from exercising supplemental
jurisdiction over putative class members' claims of less than $ 75,000
and would require dismissal of those claims. See, e.g., Gerber Food, 938
F.Supp. at 224.

Even if @ 1367 has overruled Zahn, this Court could exercise
supplemental jurisdiction over all of plaintiffs' claims only if one or
more of the claims satisfied the jurisdictional amount. Plaintiffs here
have failed to allege that any single class member's claim exceeds $
75,000. In fact, in response to defendant's challenge that no
plaintiff's claim meets the jurisdictional level, plaintiffs simply
posit that Zahn is no longer effective and that aggregation is
permissible. Accordingly, plaintiffs have failed to carry their burden
of showing to a reasonable probability that claims of any or all
putative class members exceed the jurisdictional threshold. See Gilman,
104 F.3d at 1421 (party seeking federal jurisdiction must "justify [its]
allegations" that complaint asserts claims exceeding jurisdictional
amount) (quoting McNutt v. General Motors Acceptance Corp., 298 U.S.
178, 189, 56 S. Ct. 780, 785, 80 L. Ed. 1135 (1936)).

                           Attorneys' Fees

"A potential award of attorneys' fees may be considered by the court
when determining whether a case involves the jurisdictional minimum."
Gardiner Stone Hunter v. Iberia Lineas Aeras, 896 F. Supp. 125, 128
(S.D.N.Y. 1995). However, a court can consider attorneys' fees only if
they are reasonable and are provided for by contract or state statute.
See Givens v. W.T. Grant Co., 457 F.2d 612, 614 (2d Cir.), vacated on
other grounds, 409 U.S. 56, 93 S. Ct. 451, 34 L. Ed. 2d 266 (1972);
Goldberg v. CPC Int'l, Inc., 678 F.2d 1365 (9th Cir.), cert. denied, 459
U.S. 945, 103 S. Ct. 259, 74 L. Ed. 2d 202 (1982); Trapanotto, 1996 WL
417519, *9. Additionally, the total amount of fees may not be aggregated
for jurisdictional purposes, but must be attributed pro rata to
individual class members. See Goldberg, 678 F.2d at 1367; Gilman v.
Wheat, First Sec., Inc., 896 F. Supp. 507, 511 (D. Md. 1995); 5 Moore's
Federal Practice, @ 23.07[3][b][v] (Matthew Bender 3d ed.); but see In
re Abbott, 51 F.3d at 526-527 (Louisiana statute mandated different
result when it created fund to satisfy requisite jurisdictional amount,
provided for attorney's fees to prevailing parties, and awarded all fees
to representative parties).

While New York law grants a court discretion to award attorneys' fees to
representatives of a prevailing class, see N.Y. C.P.L.R. @ 909, it would
be premature to add such fees at this time in determining the amount in
controversy requirement. See Trapanotto, 1996 WL 417519, at *9-10 (court
declines to add prospective attorneys' fees to plaintiffs damages in
order to satisfy amount-in-controversy requirement). First, the class
has not yet been certified indeed, no motion for class certification has
even been made. Second, plaintiffs are entitled to an award of
reasonable fees pursuant to the N.Y. C.P.L.R. only if they ultimately
prevail in the action, and there is no reasonable method to gauge the
plaintiffs' likelihood of success on their breach of contract claim at
this point in the litigation. Third, there is no way to know what fees
are going to be incurred over the course of the litigation or their
reasonableness.

                             Conclusion

Because this Court lacks jurisdiction over the subject matter of this
dispute, defendant's motion to dismiss the complaint pursuant to Fed. R.
Civ. P. 12(b)(1) is granted.


GARY-WHEATON: Illinois Sp. Ct. Okays Bank Fees On Mortgage
----------------------------------------------------------
A lender does not violate the Illinois Consumer Fraud and Deceptive
Business Practices Act by charging mortgage applicants a mortgage
assignment recording fee. Illinois Appellate Court reversed.

Weatherman v. Gary-Wheaton Bank of Fox Valley, Illinois Supreme Court.
No. 83822 (1999).

The issues presented in this appeal center on whether a lender violated
the Illinois Consumer Fraud and Deceptive Business Practices Act by
charging loan applicants a mortgage assignment recording fee and a tax
escrow suspension fee.

In October of 1992, plaintiffs, Phyllis J. Weatherman, Ruth A. Russell
and Ronald D. Vega, applied to defendant, Gary-Wheaton Bank of Fox
Valley, for a mortgage to refinance residential property. At the time
that plaintiffs applied for the loan, defendant provided them with a
document entitled Good Faith Estimate of Charges.

That document disclosed certain estimated charges relating to closing,
including the sum of $ 80 for recording fees and a real estate tax
escrow in the amount of $ 2,664. Defendant also informed plaintiffs when
they applied for their loan that it sells all of its loans into the
secondary mortgage market and that their loan would be sold and
transferred at or after closing. Plaintiffs accepted these terms.

Defendant approved a $ 137,250 loan and issued its loan commitment.
Plaintiffs signed the loan commitment and gave defendant approximately $
1,400 as a lock-in fee," which was refundable upon closing of the loan.

Before closing, defendant chose to assign plaintiffs' mortgage to
Midwest Mortgage Services Inc., a wholesale mortgage banking company
that buys and then sells mortgage loans into the secondary mortgage
market. Defendant and Midwest have had a contract with each other since
1987 regarding the sale and purchase of mortgage loans. Also prior to
closing, plaintiffs requested that defendant suspend the tax escrow.
Defendant agreed and informed plaintiffs they would be charged a $
343.13 fee to control their own escrow.

At closing, defendant provided plaintiffs with a Settlement Statement"
containing an itemized breakdown of all closing costs. That statement
indicated that plaintiffs would be charged $ 77 in recording fees, which
included a $ 15 fee to record the assignment of the mortgage to Midwest.
Defendant paid that fee to the title company, which was paying for the
recording.

The Settlement Statement further indicated that plaintiffs would be
charged a $ 343.13 escrow suspension fee. Plaintiffs paid these fees at
closing, but claim that they did so only to complete the refinancing,
control their own escrow by paying their property taxes themselves and
avoid losing their lock-in fee.

Plaintiffs thereafter filed a class-action complaint in the Cook County
Circuit Court against defendant, the First National Bank of Chicago, and
First Chicago Corp. Acting on behalf of a putative class comprised of
all mortgage borrowers to whom defendant charged either a mortgagee
assignment recording fee or an escrow suspension fee within the
applicable limitations period, plaintiffs alleged that defendant failed
to inform them of the mortgage assignment recording fee until closing
and failed to inform them of the escrow suspension fee until just a few
days before closing.

Plaintiffs claimed that they received no benefit as a result of either
the mortgage assignment recording fee or the escrow suspension fee and
that, had they known before paying their lock-in fee that defendant
would charge them these two fees, they would have pursued refinancing
with other lenders who did not require payment of these fees." In
addition, plaintiffs claimed that defendant misrepresented that the fees
were required and necessary charges to close and fund the loan.
Plaintiffs further alleged that they relied on defendant's omissions and
misrepresentations.

Based on these allegations, plaintiffs claimed that defendant violated
the Consumer Fraud Act by engaging in unfair, unauthorized and deceptive
lending practices.

The trial court dismissed that portion of plaintiffs' complaint charging
that the imposition of the escrow suspension fee violated the Consumer
Fraud Act. The court ruled that plaintiffs had been notified in advance
of the escrow suspension fee and agreed to that fee.

On defendant's request, the Circuit Court certified the following
question of law for interlocutory appeal pursuant to Supreme Court Rule
308:

Whether a lender violates the Illinois Consumer Fraud and Deceptive
Business Practices Act by giving an applicant for a loan, at the time a
loan is applied for, a gross estimate of the recording fees to be paid
at closing and not telling the loan applicant until closing that one of
the fees included in the gross estimate was a fee to cover the cost of
recording the assignment of the mortgage securing the loan.

In this case, the assignee of the assignment is a wholly owned affiliate
of the defendant.

The Illinois Appellate Court majority answered the certified question
affirmatively on the basis that such conduct amounted to a deceptive and
unfair practice (286 Ill.App.3d at 59-62). The Appellate Court rejected
defendant's argument that conduct by a lender as set forth in the
certified question complies with a federal statute such that it
constitutes a defense to liability under the Consumer Fraud Act (286
Ill.App.3d at 55-58).

On further appeal, the Illinois Supreme Court, in an opinion written by
Justice Michael A. Bilandic, with Justice Moses W. Harrison II
concurring in part and dissenting in part, ruled as follows:

Defendant's compliance with RESPA Real Estate Settlement Procedures Act
in this case renders defendant exempt from liability under the Consumer
Fraud Act. Actions specifically authorized by RESPA satisfy section
10b(1) of the Consumer Fraud Act because they are actions or
transactions specifically authorized by laws administered by any
regulatory body or officer acting under statutory authority of this
State or the United States....

We hold that defendant, as a lender that disclosed the mortgage
assignment recording fee under the circumstances stated in the certified
question, complied with RESPA. By complying with RESPA, a lender is
exempt from liability under section 10b(1) of the Consumer Fraud Act.
Defendant's acts, as set forth in the certified question, therefore did
not violate the Consumer Fraud Act. Accordingly, we answer the certified
question in the negative. (Chicago Daily Law Bulletin 8-24-1999)


GLAXO WELLCOME: MA. Ct. Sustains Patients' Suit Over Use Of Data
----------------------------------------------------------------
A Massachusetts judge has denied a motion by a pharmacy chain and
several pharmaceutical companies to dismiss a suit by two men who say
their privacy rights were violated by a joint marketing plan under which
the pharmaceutical firms used pharmacy records to send mailings to
customers containing disease-specific marketing materials. Weld et al
v.. CVS Pharmacy Inc., No. 98-0897F (MA Super Ct., Suffolk Cty., June 1,
1999).

In a ruling of interest to persons with HIV or other sensitive
conditions, the court said summary judgment was inappropriate in the
prospective class action privacy and conspiracy suit against CVS Inc.
and other drug companies because the legality of CVS's use of its
patient record data base for marketing purposes has yet to be decided.

In their as yet uncertified class action, plaintiffs John Weld Jr. and
Jeffrey A. Kelly complain that CVS's Patient Compliance Program (PCP)
breached their confidentiality rights by allowing pharmaceutical
companies, such as defendant Glaxo Wellcome Inc., to send designated CVS
customers information concerning new drugs and urging them to discuss
their medical condition with their physician.

The program, since discontinued by CVS, was funded by the pharmaceutical
companies and selected recipients of the marketing mailings based on
illness-specific "key word" searches of CVS's patient database. The
names and address of the patients chosen were released to mailing houses
commissioned to distribute the pieces by PCP managers.

According to the record, Kelley received a mailing concerning high
cholesterol in June, 1997. Although the materials did not state or imply
that Kelley had the problem, it suggested that he speak with his doctor
about the dangers thereof. The letter indicated that it was paid for by
Merck & Co., another named defendant. Kelley, who suffers from diabetes,
testified that in late 1997, he received two other mailings concerning
diabetes medicines, but did not remember who sent them.

CVS admits that it generated one diabetes-related mailing in October
1997, but says it was not sent to Kelley because it targeted only the
CVS customers who received a certain diabetes medicine and Kelley had
never had a prescription for that drug filled there. Ward, according to
the record, has undisputedly never received any mailing.

In their five-count suit, the plaintiffs allege that the defendants
violated a Massachusetts privacy statute, breached their duty of
confidentiality to them, have "tortiously misappropriated private and
personal information", and engaged in a conspiracy to violate
plaintiffs' rights.

CVS maintained that it was due summary judgment because the release of
just the name, address and date of birth of its customers could not
constitute a violation of state privacy laws. Suffolk County Superior
Court Judge Thayer Fremont-Smith disagreed, observing that the
plaintiffs "complain not only about the unauthorized use of their names,
addresses and dates of birth, but complain that CVS's marketing program
as a whole, which involved at least the use of Kelley's name, address
and date of birth in conjunction with the systematic searching of
customer prescription records, constitutes a violation of the
plaintiffs' right of privacy."

The judge denied summary judgment on the privacy count as to Kelley, but
denied it without prejudice regarding Weld, based on evidence that Weld
never received a CVS mailing. Noting that plaintiff attorneys asserted
that further discovery was required to determine if CVS disclosed any
prescription information related to Weld, the defendants were given the
opportunity to renew their motion as to him at the end of discovery.

Summary judgment on the claim that CVS breached its assumed duty to
maintain patient confidentiality, observed the judge, is inappropriate
based partly on a CVS brochure, submitted by the plaintiffs, in which
the pharmacy represented to its customers that prescription files would
be kept confidential.

While CVS maintained that the plaintiffs would have to show the presence
of coercion in order to sustain their conspiracy claim, the judge
observed that it need only be claimed that the defendants "rendered
substantial assistance to the other participants with the knowledge that
such assistance is contributing to a common tortious plan," citing
Kurker v. Hill (MA App. Ct., 1998). (Pharmaceutical Litigation Reporter
August 1999)


GPU INC.: N.J. Power Customers File Class Action After Outage
-------------------------------------------------------------
A number of electric power consumers in central New Jersey have filed a
putative class action against GPU Inc. and its subsidiary utility
companies after a series of "rolling blackouts" over the July 4 weekend.
The plaintiffs claim to have suffered monetary damages when their
businesses were affected. Tzannetakis et al. v. GPU Inc. et al., No.
L-3637-99 (NJ Super. Ct., Monmouth Cty., complaint filed July 22, 1999).

The plaintiffs, who include the owners of a restaurant, fishery,
catering business and home business, contend the GPU was negligent and
reckless in maintaining its equipment; misrepresented its ability to
provide electricity; violated the state's Consumer Fraud Act; and
breached express and implied warranties on the provision of safe and
reliable power delivery.

The complaint says PGU's tariff filed with the New Jersey Board of
Public Utilities stated that the company would use "reasonable
diligence" to provide a regular and uninterrupted supply of energy.
While the tariff limits GPU's liability for the effects of "natural
disasters," the plaintiffs claim the heat wave leading to the July 4
power outages did not fall into that category.

The specific charge involves two substation transformers that GPU
allegedly knew needed replacement. The plaintiffs seek an unspecified
amount of damages for spoilage of food; damage to computers, appliances
and other electronic equipment; inconvenience; emotional and physical
pain and suffering; loss of use of electrically powered computers,
appliances, equipment and buildings; loss of business income; and other
consequential and incidental damages including the cost of alternative
energy, living quarters and commercial space.

The plaintiffs are seeking class certification alleging that: (1)
joinder of thousands of affected GPU customers is impractical; (2) there
are common questions of law and fact; and (3) a class action is the only
viable method of adjudication in such a case, given the "financial and
political strength" of the defendants.

The plaintiffs are represented by Gerhard P. Dietrich and Tracy C.
Nugent of Daller Greenberg & Dietrich in Fort Washington, PA.
(Utilities Industry Litigation Reporter August 1999)


INMATES' RIGHTS: Canadian Murderers Win Right To Vote In Manitoba
-----------------------------------------------------------------
Convicted murderers and other prisoners will be able to cast their
ballots in the Manitoba election on Sept. 21. Thanks to a judge's
decision this week, inmates serving five years or more are no longer
disqualified from voting. The decision affects approximately 187
convicts who are serving five-year terms, said the inmates's lawyer Arne
Peltz of the Public Interest Law Centre. That was the case after
amendments to the Elections Act were passed last year.

But Court of Queen's Bench Justice Morris Kaufman said withholding the
privilege is unconstitutional. The Charter of Rights and Freedoms
guarantees the right to vote and the prisoners were being discriminated
against, he said in a written decision.

Two members of the inmates' committee at Stony Mountain Institution
brought a class-action suit on behalf of their fellow prisoners. James
Patrick Driskell is serving a life sentence for murder and Richard
Robert Paul was sentenced to six years for robbery.

Manitoba now has the same voting law as Ontario and Quebec, Peltz added,
noting that prisoners join judges and mentally disabled people as the
latest addition to the voting ranks. Only Manitoba's chief electoral
officer is unable to cast a ballot.

Prisoners in federal institutions won the right to vote after a Supreme
Court ruling five years ago, but the Alberta Elections Act continued to
bar provincial prisoners from voting in provincial elections.

In 1998, an Alberta appeal judge struck down that prohibition, saying
Alberta's ban was far too broad - applying to murderers and rapists, but
also shoplifters and people who couldn't pay a fine.

Alberta then countered with a bill that denies convicts the right to
vote except those serving time for not paying a fine, serving 10 days or
less or those awaiting sentence. The bill has not yet been passed by the
legislature. (The Edmonton Sun 8-25-1999)


METRO-NORTH: 2nd Cir. Certifies Class Of Black Employees
-------------------------------------------------------
The commonality and typicality requirements for class certification
under Rule 23(a) of the Federal Rules of Civil Procedure were met in an
action under Title VII of the Civil Rights Act of 1964 in which the
members of the proposed class challenged the subjective components of
companywide policies and procedures governing employee discipline and
promotion, the U.S. Court of Appeals for the 2d Circuit held on July 30.
Caridad v. Metro-North Commuter Railroad, No. 98-7825.

The plaintiffs filed a proposed class action against Metro-North
Commuter Railroad, challenging the delegation to supervisors of the
authority to make certain subjective decisions regarding employees. The
district court -- incorporating a prior ruling denying a motion for
certification of a class consisting of current and former black
employees -- dismissed all claims.

Reversing in part, Senior Judge Jon O. Newman noted among other things
that "the statistical evidence...tends to establish that being Black has
a statistically significant effect on an employee's likelihood of being
promoted; indeed, being Black reduces an employee's likelihood of
promotion by approximately 33 percent." (The National Law Journal
8-16-1999)


MI DEPT OF CORRECTIONS: Ordered To Apply NIH Standard On HIV To Inmates
-----------------------------------------------------------------------
For the first time, a federal court has held that prison inmates are
entitled to the same quality of HIV medical care as outlined in
treatment guidelines issued by the National Institutes of Health.

In a preliminary injunction issued July 16, U.S. Magistrate Judge Jerry
A. Davis placed the Mississippi Department of Corrections on a schedule
for complying with the NIH standards.

"The HIV-positive inmates are entitled to a degree of care that will not
hasten their death, and the defendants are obligated to provide it,"
Davis said in ruling the DOC probably was deliberately indifferent to
the inmates' medical needs.

"It's a very good order, and if it is enforced, it will bring dramatic
changes in the quality of care in Mississippi," said Margaret Winter,
associate director of the American Civil Liberties Union's National
Prison Project, which pressed for the injunction.

Two medical experts retained by the ACLU described the treatment
accorded HIV-positive prisoners at the state's Parchman Penitentiary as
"abysmal" and "shocking." The state's medical expert considered the
conditions "adequate" and said improvements were being made.

Since June 1997, the NIH has called for the use of at least three
antiretroviral drugs, including a protease inhibitor, whenever treatment
is begun.

If lab tests show a particular combination is not effective in
suppressing the virus, then the patient is to be switched to a different
combination of drugs. Until January 1999, Mississippi prison officials
maintained a policy of prescribing a two-drug regimen. Inmates received
a protease inhibitor only if they could prove they were adhering to that
regimen for at least six months.

The prison's medical staff changed drug regimens without determining
whether the combination actually was working, according to medical
testimony the ACLU presented at a hearing in March and April. The prison
did not perform regular viral load tests, which are needed to determine
whether a particular regimen is effective. Also, inmates were denied
access to medications to prevent opportunistic infections. Davis
emphasized the health-care system at Parchman had made "great strides"
in recent months, largely due to a contract between the DOC and the
University of Mississippi Medical Center which took effect in July 1998.

As part of the contract, the university provides specialists and
established a telemedicine program. But the judge was unconvinced that
the DOC's promise of improvements rendered the motion for injunctive
relief moot.

The judge said the inmates were entitled, "at a minimum," to the degree
of care outlined by the NIH. The judge said there was "a substantial
likelihood" that the inmates could prove the DOC was deliberately
indifferent to their medical needs. "It is clear to the court that the
doctors involved with inmate health knew of the proper regimen for
treatment of HIV-positive inmates, that failure to provide this regimen
would substantially reduce treatment options, and that the medical
providers have failed to timely institute the guidelines of the National
Institutes of Health," the judge said. "These failures constitute
deliberate indifference."

The injunction orders the DOC to perform viral load tests within 14 days
for inmates not on triple drug therapy. The prison is to adopt written
protocols within 30 days establishing a standard of HIV care. If the
protocols diverge from the NIH guidelines, specific medical
justification must be shown.

All parties were pleased by the decision. "We're really okay with the
ruling," said Assistant Attorney General Joe Goff. "The judge
acknowledged what we were doing and the improvements we've been making.
He just gave us a time frame under which we are to continue." Goff said
he was pleased the court did not appoint a special monitor to oversee
the DOC's work and did not grant the ACLU's request to intervene.

Ronald Reid Welch, the attorney who represented Parchman's HIV-positive
inmates in a 1992 settlement of a class-action lawsuit in Moore v.
Fordice, will remain as the inmates' legal counsel.

Welch said the inmates never complained to him about their medical care.
Instead, they approached the ACLU. A petition bearing 110 of the 140
Parchman inmates' names asked the court to fire Welch and hire the ACLU.

He endorsed the ACLU's move for an injunction. "There definitely were
problems there," Welch said. "The way I saw the testimony, the problem
is being addressed."

The ACLU's Winter said she is satisfied the court recognized that the
DOC needed to improve the quality of inmates' medical care. "I would
have liked it if the judge appointed an independent monitor, but it's
not a fatal omission," Winter said, adding the ACLU will continue to
check on the DOC's progress in carrying out the judge's order.

The injunction affects not only the male inmates at Parchman, but also
female inmates at the Central Mississippi Correctional Facility, Welch
said.

Gates v. Fordice, No. 4:71CV6-JAD, consolidated with Moore v. Fordice,
No. 4:90CV125-JAD (N.D. Miss., 6/16/99). (Corrections Professional
8-20-1999)


PROVIDIAN FINANCIAL: Study Finds No Late-Fee Fraud But May Not End Suit
-----------------------------------------------------------------------
Providian Financial, the credit card giant accused of milking customers
by charging improper late fees, said that an outside review has cleared
it of deliberate fee fraud. The study by the accounting and consulting
firm Ernst & Young "found no evidence that Providian or any of its
vendors were intentionally withholding payments from processing," the
consultant concluded in a letter released by Providian. In addition,
Providian has "established procedures to ensure timely payment
processing," Ernst & Young noted. The firm has been Providian's auditor
since it became a public company two years ago.

Ernst & Young's report addresses one of the most important accusations
leveled against San Francisco's Providian in a scandal that erupted
three months ago after KRON and The Chronicle disclosed that hundreds of
consumer complaints had been filed against the company.

Providian, the nation's ninth-largest credit card issuer, currently is
under investigation by the city district attorney's office for a range
of alleged abuses, including thousands of cases in which it levied $29
late fees even though payments arrived on time. Federal bank regulators
also are conducting a review, and the matter is a key allegation in
lawsuits seeking class-action status filed against the company.
Providian has denied any wrongdoing.

Providian Chairman and Chief Executive Officer Shailesh Mehta issued a
statement characterizing Ernst & Young's study as "confirmation" that
the company's payment-processing procedures "are fundamentally sound."
For its part, Ernst & Young stated in its letter to Providian that it
was expressing "no opinion or any other form of assurance" concerning
the allegations against the company. Ernst & Young tested
payment-processing performance at six sites, including four operated by
outside vendors. The review examined only current operations and did not
consider past practices, Providian spokesman Konrad Alt said.

An attorney representing plaintiffs in one of the consumer lawsuits
against Providian said the study wouldn't affect the case, which
addresses the company's actions before Ernst & Young was hired. "These
things, even if true, don't have any bearing on the merits of our case,"
said Eric Gibbs, an attorney with the San Francisco firm Girard & Green.
Gibbs said his firm has asked for a court order directing Ernst & Young
to make its report and all supporting materials available to the
plaintiffs.

Providian previously has admitted that it had a serious
payment-crediting problem. Last month, Providian said a software coding
error had caused it to charge improper late fees in 700,000 cases since
1997. The company apologized and promised to give customers refunds.

The company said that it will set up a pay-by-phone service by September
that will make it easier for customers to avoid missing payment due
dates.

Three months ago, Providian adopted a series of measures to address
consumer complaints, such as offering a two-day grace period before
imposing late fees and promising to cancel sales of credit protection
and other add-on products if consumers feel they were misled.

Providian's release of the results of Ernst & Young's study came on the
same day Chicago's Bank One disclosed that problems at its credit card
subsidiary, First USA, forced it to slash its profit projections for the
year. First USA is the nation's No. 2 credit card issuer.

The announcement prompted investors to dump shares of virtually all
major credit card companies. Providian's shares fell $3.94, or 4.3
percent, to $87.50. (The San Francisco Chronicle 8-26-1999)


RAINTREE HEALTHCARE: Discloses State And Fed. Securities Actions
----------------------------------------------------------------
The following is an extract from the SEC filing of RainTree Healthcare
Corp.:

The Company is, and may in the future be, party to litigation arising in
the ordinary course of its business. It is also routinely subject to
surveys and investigations by regulators and payors. There can be no
assurance that RainTree's insurance coverage will be adequate to cover
all liabilities occurring by reason of such claims or investigations or
that any such matters that are not covered by insurance will not have an
adverse effect on Unison's business.

Reference is made to the securities class action lawsuits entitled
Martin Grossman, et al. v. Unison HealthCare Corporation, et al., USDC
No. CIV 97-0583 PHX SMM (the "Federal Action"), and Jeffrey D. VanDyke
v. Cruttenden Roth, Inc., Wheat First Butcher Singer, Individually and
as Representatives of a Defendant Underwriter Class, and Bruce H.
Whitehead, Unison Healthcare Corp., John T. Lynch, Jr., Trouver Capital
Partners, L.P., Jerry M. Walker, Phillip R. Rollins, Craig R. Clark, and
Paul J. Contris, Case No. 779111 (Orange County Sup. Ct.) (the "State
Action"). The parties in the Federal Action reached a settlement that is
expected to resolve both the Federal and State Actions in their
entirety. The settlement includes a cash payment by the Company's
primary insurer amounting to $4.25 million and 1,000,000 shares of old
Common Stock. Under the Plan, old Common Stock was converted into
warrants; under the proposed settlement, class members who are to
receive RainTree shares will receive a pro rata share of such warrants.
The settlement was approved by the Bankruptcy Court on December 30, 1998
and by the district court in the Federal Action on April 28, 1999.


RIKERS ISLAND: Suit In Man. Cites Needs When Mentally Ill Leave Prison
----------------------------------------------------------------------
A class action lawsuit filed on behalf of mentally ill inmates in city
jails charges that the city and its medical provider on Rikers Island
routinely release patients who have received mental treatment behind
bars without making any provision for continuing their mental health
care and medication in the community.

The lawsuit, filed in State Supreme Court in Manhattan by legal
advocates for the mentally ill, cited as plaintiffs seven current
inmates with extensive histories of serious mental illness and criminal
arrest who have repeatedly been released to the streets without any
planning for continued care.

About 25,000 inmates with mental illnesses are discharged each year from
city jails without referrals or plans for them to get treatment or
support services, the lawsuit said. Typically, the mentally ill are
discharged in the same way as other Rikers inmates: they are dropped off
in Queens Plaza between 2 and 6 in the morning, with $1.50 in cash and a
two-fare Metrocard.

The lawsuit charges that this kind of discharge violates state laws,
including those requiring hospitals and other providers of health care
to plan for needed treatment after discharge.

Because many of the mentally ill inmates are unable to find support or
treatment on their own, they often deteriorate and commit new offenses,
the lawsuit said.

City officials at the Departments of Health, Mental Health and
Corrections, the Human Resources Administration and the city's Health
and Hospitals Corporation, all named as defendants in the lawsuit, said
they could not comment on pending litigation. Gerald McKelvey, a
spokesman for St. Barnabas Hospital in the Bronx, which provides medical
and mental health care to Rikers inmates under contract to the city and
is also a defendant, said he could not comment because the hospital had
not yet been served with the legal papers.

But in a telephone interview last week, Dr. John Burgess, St. Barnabas's
director of mental health at the jail, said part of the problem is that
the city often discontinues the Medicaid insurance coverage of the
mentally ill while they are in jail -- often because the inmates fail to
keep up with paperwork requirements.

"The problem with that is after they're released, they have no way of
paying for medication and no way of getting care in most community
clinics because they have no Medicaid and no ability to pay," Dr.
Burgess said. "It would certainly help if the city could have a better
procedure for that so we could make sure they had a prescription when
they left Rikers -- a prescription they could get filled using
Medicaid."

The plaintiffs, identified by pseudonyms in the lawsuit, include Brad
H., a 44-year-old homeless man with schizophrenia who grew up in a
psychiatric hospital and has been treated for mental illness each of 26
times he has been jailed as an adult, most recently for jumping a subway
turnstile. On none of these occasions, the lawsuit charges, did anyone
plan for how the man would continue to receive medication and other
mental health services on his release from jail, or how he would obtain
Medicaid benefits, Social Security disability payments, or supportive
housing.

Another plaintiff, called Robert K., was described in the suit as a
38-year-old schizophrenic drug offender who "hears voices commanding him
to do things," has tried to commit suicide and who has been arrested
about 30 times, twice for assault. Every time he has been arrested, he
has received treatment for his mental illness in the units set aside for
the mentally ill in the city's jails.

But no one at Rikers Island, where he is now jailed, "has assisted
Robert K. in determining how he will continue his treatment upon
release," the lawsuit said.

A third plaintiff, Kevin W., 36, was most recently accused of wielding a
knife in the subway. Despite a diagnosis of schizophrenia and cocaine
addiction and three episodes of inpatient treatment during prior
incarcerations, the lawsuit said, "he has never been able to continue
his treatment after discharge," in part because he has never received
Medicaid insurance coverage as an adult.

Public concern over the dangerously mentally ill spurred Gov. George E.
Pataki and state lawmakers to agree earlier this month on legislation
giving the courts new authority to order former mental patients to
comply with treatment or face rehospitalization. But lawyers at the
Urban Justice Center, the nonprofit advocacy organization that brought
the lawsuit, said the new law, which carries no financing until April
2000, does not address the larger problem of jail inmates like the
plaintiffs, many of whom serve sentences for the same kinds of
misdemeanors again and again.

"We really are moving the hospitals into the jails," said Heather Barr,
a lawyer at the Urban Justice Center, which brought the lawsuit with
assistance from New York Lawyers for the Public Interest and lawyers
from Debevoise & Plimpton working free.

Expanded mental health services on Rikers Island include nine "mental
observation units" capable of housing up to 625 inmates at a time if
they are seriously mentally ill, seriously depressed or at high risk for
suicide. In addition, each year a separate center on Rikers Island
houses 1,200 disturbed male inmates considered too ill for the mental
observation units. They receive around-the-clock psychiatric, medical
and nursing care for an average stay of 60 days. A third center, the
Behavior Modification Unit in the Bronx, each year handles about 150
male Rikers inmates who are considered too disturbed and aggressive for
the center.

Though all such inmates are probably eligible for Medicaid on their
release, obtaining coverage is a complicated process that can take weeks
and is often daunting to the mentally healthy, Ms. Barr noted, adding
that as the city has tried to divert people from public assistance into
jobs, the hurdles to get and keep Medicaid have multiplied. But Medicaid
is usually necessary to obtain scarce community mental health services,
like supportive housing. (The New York Times 8-25-1999)


SENSORMATIC ELECTRONICS: Settles For Federal Securities Suits
-------------------------------------------------------------
During the first six months of fiscal 1996, a number of class actions
were filed in federal court by alleged shareholders of Sensormatic
Electronics Corp. following announcements by the Company that, among
other things, its earnings for the quarter and year ended June 30, 1995,
would be substantially below expectations and, in the later actions or
complaint amendments, that the scope of the Company's year-end audit for
the fiscal year ended 1995 had been expanded and that results for the
third quarter of fiscal 1995 were being restated. These actions were
consolidated. The consolidated complaint alleged, among other things,
that the Company and certain of its current and former directors,
officers and employees, as well as the Company's auditors, violated
certain Federal securities laws.

The Company has settled the above-referenced consolidated class action.
The settlement agreement, requiring payment by the Company of
approximately $53.5, was approved by the Court and has been fully
performed by the Company. The Company has recovered a portion of the
settlement amount and related expenses from its primary directors and
officers liability insurance policy, which has a policy limit of $10.0,
and has also been paid $10.0 by one of its two excess directors and
officers liability insurers. Subsequent to June 30, 1998, the Company
also reached an agreement providing for the payment of $6.25 by the
other insurer. A pre-tax charge of $53.0, with an after-tax effect of
$37.0, was recorded by the Company for payments made in connection with
this settlement in the first quarter of fiscal 1998. Subsequently,
during the third quarter of fiscal 1998, the Company also recorded a net
estimated insurance recovery of $7.3 ($5.1 after-tax).


TURBODYNE TECHNOLGIES: Will Defend 6 Securities Suits In California
-------------------------------------------------------------------
In January-March 1999 six purported class action complaints were filed
against Turbodyne Technologies Inc. and certain of its officers and
directors in the United States District Court for the Central District
of California, as follows:

    * Takeda, Et Al. V. Turbodyne Technologies, Et Al.
      CV-99-00697-MMM 01/22/99

    * Zaks, Et Al. V. Turbodyne Technologies, Et Al.
      CV-99-00743-MMM 01/25/99

    * Linscott, Et Al. V. Turbodyne Technologies, Et Al.
      CV-99-00933-MMM 01/28/99

    * Siebert, Et Al. V. Turbodyne Technologies, Et Al.
      CV-99-01288-MMM 02/08/99

    * Gentile, Et Al. V. Turbodyne Technologies, Et Al.
      CV-99-02194-MMM 03/01/99

    * Giammarco, Et Al. V. Turbodyne Technologies, Et Al.
      CV-99-02751-MMM 03/16/99

On June 4, 1999 the court entered an order consolidating these six
actions for all purposes under the caption In Re Turbodyne Technologies,
Inc. Securities Litigation, Master File No. CV-99-00697-MMM (BQRx). By
the same order, the court appointed the "Kadner -7 Group," comprised of
Ralf Kadner, Gordon Williamson & Associates, Louis T. Inglehart, Ronald
Shoen, Gunther Wrieden, Combined Atlantic Carriers, and Dennis Jones, as
Lead Plaintiffs pursuant to the provisions of the Private Securities
Litigation Reform Act of 1995, 15 U.S.C. ss. 78u-4(a)(3)(B), and
approved the Lead Plaintiffs' selection of lead counsel for the
plaintiffs in the Consolidated Action.

On August 9, 1999, the plaintiffs filed their consolidated class action
complaint, which is now the operative complaint in the Consolidated
Action. The Consolidated Action purports to be brought on behalf of
individuals claiming to have purchased common stock of the Company
during the time period from March 1, 1997 through January 22, 1999.
Plaintiffs seek unspecified damages arising from alleged misstatements
concerning such matters as the technological capability and actual and
potential sales of the Company's Turbopac product, and the demand for
and market acceptance of Turbopac and other Company products. Plaintiffs
allege that these alleged misstatements caused the Company's stock price
to be "artificially inflated" during the purported class period.

The Company has tendered these actions to its insurance carriers who
have appointed counsel to represent the Company and the other defendants
in these actions. The Company has yet to file a response to the
consolidated class action complaint; however, the Company intends to
defend itself vigorously against the allegations of the Consolidated
Action. Since this action is in the very early stages of litigation, the
Company is unable to assess the likelihood of an adverse result, and
there can be no assurances as to the outcome of the action.


VIAGRA: Fed. Judge In Brooklyn Gives Suit V. Oxford Health Go Ahead
-------------------------------------------------------------------
A class action challenging the policy of Oxford Health Plans and Oxford
Health Insurance regarding coverage for the erectile dysfunction
treatment Viagra has been cleared to proceed in a searing decision by a
federal judge in Brooklyn.

Eastern District Judge Raymond J. Dearie rejected Oxford's contention
that the suit, Sibley-Schreiber v. Oxford Health Plans, should be
dismissed for plaintiffs' failure to exhaust the administrative claims
process provided by the insurance plans. The judge called Oxford's
contention offensive to "notions of fairness and common sense," given
the fact that the exhaustion requirement is hidden "behind an arguabl[e]
thicket of misleading legalese" in the Oxford membership handbook.

Each of the four plaintiffs claims to suffer from "organic impotence"
and to have been prescribed Viagra by a physician shortly after the drug
received FDA approval in March 1998. Oxford announced in June 1998 that
it would pay for only six Viagra pills per month, regardless of the
number of pills prescribed by a physician. The plaintiffs described
making numerous telephone calls to Oxford after the announcement of the
so-called "six pill policy," but said they were never told either that
there was any possibility of exception to the policy or that they had
any right to appeal to a higher authority.

In moving to dismiss the suit, Oxford argued that the insurance plans'
administrative appeal procedure is clearly set forth in the membership
handbook distributed by employers and that the plaintiffs had not
exhausted that process. But Judge Dearie criticized that argument as
disingenuous. "It is curious that defendants plead the doctrine of
exhaustion as a shield against litigation, yet rely on others to ensure
that policyholders are aware of the administrative process rather than
simply educating policyholders about the need to exhaust at the time
adverse decisions are made," he wrote. "Relying on a simple provision in
a handbook that the employee may or may not see, much less understand,
is unreasonable and merely encourages the sl[e]ight of hand suggested
here. The industry may not have it both ways insisting on compliance
with the judicial requirement of exhaustion and at the same time, hiding
the requirement behind an arguabl[e] thicket of misleading legalese."

In addition, Judge Dearie endorsed the plaintiffs' contention that the
pursuit of an administrative appeal would have been futile even if they
had been aware of the exhaustion requirement. Noting that they had made
repeated telephone calls to Oxford and sent letters of medical necessity
from treating physicians, all to no avail, Judge Dearie asked, "How many
times can policyholders be expected to contact their insurance company
before concluding that they are wasting their time?" Lastly, Judge
Dearie noted that the question remains open of whether the exhaustion
requirement is even appropriate in a case in which a company-wide
promulgation of limited coverage, unrelated to the specific situations
of individual claimants, is at issue. "Indeed," he wrote, "exhaustion
for the sake of exhaustion, without any reasonable expectation of
relief, serves no legitimate purpose except to deter insureds from
seeking redress in the only forum that would offer a meaningful
opportunity to vindicate rights secured in the insurance contract." This
story originally appeared in the New York Law Journal.
(The Legal Intelligencer 8-26-1999)


                               *********


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 and Peter A. Chapman, editors.

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

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