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

               Wednesday, October 20, 1999, Vol. 1, No. 181

                                 Headlines

ASSOCIATES FINANCIAL: Tenn. Co. To Halt Sales Of Insurance On Loans
BONE SCREW: Fed Ap Ct Affirms Dismissal Of Conspiracy Claims Under FDCA
BRK, PITTWAY: Judge Certifies Class On Makers Of Smoke Dectectors
EMPIRE BLUE: Health Insurer Not Liable; Expenses Within Contractual 20%
ENGINEERING ANIMATION: Milberg Weiss Files Securities Suit In Iowa

FIRST NATIONAL: FBI Found Failed Bank's Files Buried; 2 Execs Jailed
FONAR CORP: Settles For Stockholders' Suit Filed In Delaware
FORD MOTOR: Judge Certified Class On Sexual Harassment At 2 Plants
INSO CORP: MA-Based Company Removes Shareholder Litigation Liability
KMART CANADA: Abandons Appeal Of Employees' Wrongful Dismissal Suit

NEWBRIDGE NETWORKS: Settles For Securities Suit In Washington
OVERLAND DATA: Announces Settlement of Securities Suit Filed In CA
PREMIER LASER: Reaches Agreement For Settlement Of CA Securities Suits
PUBLISHERS CLEARING: Consumers Have Options In Sweepstakes Class Action
PUBLISHERS CLEARING: Deadline For Claims Is Extended To Nov. 5

T. EATON: Wants To Be Released From Lawsuits Arising Form Insolvency
TERAGLOBAL COMMUNICATIONS: LA Sup Ct Oks Nationwide Securities Suit
TOBACCO LITIGATION: S&P To Rate Tobacco Bonds As High As 'A'
Y2K LITIGATION: Canadian Insurance Journal Talks About Claims Handling

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ASSOCIATES FINANCIAL: Tenn. Co. To Halt Sales Of Insurance On Loans
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Insurance Commissioner John Oxendine on Monday ordered a Tennessee
company to halt sales of credit insurance on long-term loans and fined
the company, Associates Financial Life Insurance Co., $ 147,000.

More than 1,700 Georgians have paid an estimated $ 9 million in premiums
in recent years for the controversial coverage, which pays off a loan if
the borrower dies.

Oxendine's ban on the sale of credit insurance on loans with terms
longer than 10 years comes more than a year after a state examiner
reported that Associates had been selling the insurance on a policy form
that had been " specifically disapproved" by the Insurance Department.

The broader question of the legality of long-term credit insurance in
Georgia has been in dispute for several years, and a class-action suit
challenging its sale by Associates is pending in Cobb County.

Oxendine said last Friday he had asked the state attorney general to
review whether the insurance product is legal.

The company has 10 days to request a hearing on Oxendine's actions.
Martin Wilson, an Atlanta attorney for Associates, said the company will
demand a hearing.

Oxendine said his actions were based on the report of an examination he
ordered last year. The report was dated July 17, 1998, but Oxendine said
he didn't receive it until several months later. Last Friday, Oxendine
"withdrew" the report without explanation and canceled a public hearing
on the report that had been set for Monday.

"We do not understand how Commissioner Oxendine can sanction the company
based on a report so flawed that he withdrew it on the eve of our long-
scheduled hearing," Wilson said. "We believe that cancellation of our
hearing that would have exposed the shortcomings of the report was
unfair," Wilson added. "The proposed administrative penalty and
prohibition against using certain of our forms are unfounded and
illegal."

Howard Rothbloom, attorney for the plaintiffs in the Cobb class-action
suit, also criticized Oxendine for canceling the hearing. "The
fact-finding process was subverted when the report was withdrawn and the
hearing canceled," Rothbloom said. He said it appeared Oxendine was
accommodating Associates by agreeing to a "backroom deal." Oxendine
denied that allegation. He noted that Wilson had written the Insurance
Department to request that corrections be made in the report without a
public hearing. (The Atlanta Journal and Constitution 10-19-1999)


BONE SCREW: Fed Ap Ct Affirms Dismissal Of Conspiracy Claims Under FDCA
-----------------------------------------------------------------------
In a major defeat for thousands of plaintiffs in the spinal fusion bone
screws cases, a federal appeals court has ruled that they cannot pursue
conspiracy claims against manufacturers and doctors for violating the
federal Food Drug & Cosmetic Act.

Conspiracy claims must be based on an underlying tort, the court said,
but the FDCA can't serve that purpose since it doesn't allow for a
private cause of action. "Because plaintiffs here could not sue an
individual defendant for an alleged violation of the FDCA, it follows
that they cannot invoke the mantle of conspiracy to pursue the same
cause of action against a group of defendants," U.S. Circuit Judge
Anthony J. Scirica wrote in an opinion handed down Oct. 7."A claim of
civil conspiracy cannot rest solely upon the violation of a federal
statute for which there is no corresponding private right of action,"
Scirica wrote in an opinion joined by U.S. Circuit Judge Jane R. Roth
and visiting 10th Circuit Senior Judge Monroe G. McKay.

The ruling upholds a decision by Senior U.S. District Judge Louis C.
Bechtle, who is presiding over all pretrial issues in more than 2,000
federal bone screw cases under the Multi-District Litigation program. In
the suits, about 5,000 individual plaintiffs claim to have suffered
physical injuries caused by defective orthopedic bone screw devices
affixed to the pedicles of their spines during spinal fusion surgery.
The devices, which are intended to stabilize the spine and achieve
fusion of the vertebrae, consist of rods or plates that are screwed into
the vertical axis of the lumbar spine. In most cases, the plaintiffs
allege the devices broke after being implanted. In some instances,
plaintiffs have undergone surgery to have the devices removed; in
others, the broken devices could not be removed. The first suit, filed
in early 1994, alleged both federal statutory claims and state law tort
and contract claims. Generally, they named as defendants only the
manufacturers and distributors of the bone screw devices.

                           The 'Omni' Suits

But later suits named a broader array of defendants and stated
additional theories of recovery. Hundreds of so-called "omni" suits were
filed beginning in October 1995 that named as defendants the
manufacturers, designers and distributors of the devices; trade
associations that conducted seminars on their use; regulatory
consultants; and physicians who promoted the product. In addition to the
conspiracy and concert of action claims, the omni complaints alleged
fraud; negligent misrepresentation; strict liability in tort; liability
per se; negligence; and breach of implied warranty of merchantability.
The conspiracy allegations centered on the activities of the top
manufacturers beginning in 1984 when they first approached the FDA for
clearance to market the pedicle screw devices.

The FDA denied clearance but approved a series of clinical trials
between 1986 and 1993. Because the trials failed to generate sufficient
safety data, the FDA denied market approval after each one. At that
point, the suits alleged, the manufacturers and the other defendants
conspired to market the devices without the necessary FDA approvals. To
dupe the public, the manufacturers allegedly entered into written
agreements with spinal surgeons and other health care professionals in
which the manufacturer agreed to provide them royalties and stock
options in exchange for their participation in "seminars" instructing
physicians how to use the manufacturer's bone screw device. According to
the complaints, although the seminars were conducted in the guise of
educating fellow members of the medical profession, they were actually
more akin to "Tupperware parties" because their true purpose was purely
commercial. The plaintiffs' lawyers pointed out that the doctors who
conducted the seminars did not disclose to attendees that the bone screw
device had not received FDA market approval clearance for use in pedicle
fixation surgery; that clinical trials had actually raised serious
questions about its safety and efficacy; and that they, the physicians,
had a direct financial stake in the sale of the device.

Bechtle found that the conspiracy claim essentially alleged that the
defendants agreed to a scheme to market and sell bone screw devices
without the necessary FDA approvals. Such a claim fails to state a cause
of action, Bechtle found, because civil conspiracy and concert of action
claims require an independent basis of tort liability, which the FDCA
does not provide. Technically, Bechtle didn't dismiss the claims in each
of the 2,000-plus pending suit but instead transferred them back to the
district where they were originally filed. Dozens of federal judges
around the country have since granted summary judgment on the conspiracy
claims citing Bechtle's order as the law of the case.

                              The Appeal

But in the meantime, the plaintiffs appealed Bechtle's order, hoping to
revive the conspiracy claims. Judge Scirica found that no federal Court
of Appeals has yet tackled the question of whether to recognize a claim
for conspiracy to violate the FDCA. "It is well settled, however, that
the FDCA creates no private right of action," Scirica wrote. "The
question, then, is whether violation of a federal statute imposing
criminal penalties but establishing no private right of action may serve
as a basis for civil recovery under state conspiracy law." But the basic
legal rule, Scirica said, is that a cause of action for civil conspiracy
requires a separate underlying tort as a predicate for liability. "Thus,
one cannot sue a group of defendants for conspiring to engage in conduct
that would not be actionable against an individual defendant," Scirica
wrote. "We are unaware of any jurisdiction that recognizes civil
conspiracy as a cause of action requiring no separate tortious conduct.
To the contrary, the law uniformly requires that conspiracy claims be
predicated upon an underlying tort that would be independently
actionable against a single defendant." Applying that test to the bone
screw plaintiffs' omni suit, Scirica found that Bechtle properly
dismissed the claims.

But plaintiffs attorneys Michael D. Fishbein, Arnold Levin and Sandra L.
Duggan of Levin Fishbein Sedran & Berman argued that under the doctrine
of per se liability often called "negligence per se" violations of
federal statutes can be the basis of common law tort liability. Their
brief pointed to language in the Restatement of Torts as well as
numerous cases in which courts, in determining common law tort
liability, have considered whether the defendant's conduct violated
federal law.

But Scirica found they still hadn't cleared the conspiracy hurdle. "The
cases make clear the doctrine of per se liability does not create an
independent basis of tort liability but rather establishes, by reference
to a statutory scheme, the standard of care appropriate to the
underlying tort," Scirica wrote. The bone screw plaintiffs' theory of
per se liability "is quite different," because it invokes the federal
statutory violations not to prove liability for a separate underlying
tort, but instead to assert that the violations themselves form a cause
of action. "This interpretation of per se liability would allow private
plaintiffs to recover for violations of a federal statute that creates
no private cause of action and, in fact, expressly restricts its
enforcement to the federal government," Scirica found. "We do not
believe the concept of per se liability supports such a result."

The appeal was argued for the defense by Frederick Krutz of Forman Perry
Watkins Krutz & Tardy in Jackson, Miss., on behalf of the American
Academy of Orthopaedic Surgeons, the North American Spine Society and
the Scoliosis Research Society; and attorney Philip H. Lebowitz of
Pepper Hamilton in Philadelphia on behalf of Danek Medical Inc.; Sofamor
Danek Group Inc.; Warsaw Orthopedic Inc. and nine individual doctors.
Other Philadelphia lawyers participating in the appeal were J. Kurt
Straub of Obermayer Rebmann Maxwell & Hippel for Scientific Spinal Ltd.;
and Robert R. Reeder, Cozen & O'Connor for Synthes Inc. (The Legal
Intelligencer 10-12-1999)


BRK, PITTWAY: Judge Certifies Class On Makers Of Smoke Dectectors
-----------------------------------------------------------------
A judge in Belleville has given the go-ahead to a class-action suit
involving alleged faulty smoke detectors.

The suit, filed by lawyer Bruce N. Cook of Belleville, associate Harriet
H. Hamilton and three Minneapolis lawyers, seeks compensation for up to
100 million buyers of ionization-type smoke detectors similar or
identical to one that was the subject of a St. Louis case this summer.

In that case, a jury awarded $ 50 million to a couple who lost two
children in a fire. The couple said the deaths should have been
prevented by their smoke detector, made by BRK Brands Inc.

Defendants in the class-action are BRK, the Pittway Corp. and First
Alert Inc., all manufacturers of ionization-type smoke detectors for the
Sunbeam Corp. of the Chicago area. They sold smoke detectors under such
brand names as First Alert, Family Gard, Wake 'n Warn and BRK
Electronics.

In a hearing last month, plaintiffs' lawyer James L. Fetterly of
Minneapolis said ionization-type alarms don't go off soon enough to warn
of smoldering, slow-moving fires, such as those caused by a cigarette
dropped on bedding or upholstery. He said they were often advertised
with the slogan "seconds save lives." That was fraudulent, he asserted,
because, "They do not timely sound."

Defense attorney Barbara Wrubel of New York retorted that the
plaintiffs' lawyers had merely "cobbled together" assorted "provocative
and conclusory" claims. It is common knowledge that no smoke detector
can provide protection for every fire, she said. She also argued that
Illinois law cannot be applied to buyers outside the state because
consumer law varies from state to state.

Circuit Judge Michael J. O'Malley of Belleville ruled that it would be
impractical for the buyers to sue individually. Lawyers for both sides
are "amply capable" of handling the dispute as a class action, he wrote.
O'Malley ruled that buyers of the alleged faulty detectors have common
interests that outweigh individual differences. "Finally, a class action
is an appropriate, if not the only, method for the fair and efficient
adjudication of the controversy," he concluded.

That decision, known as "class certification," is the critical step in
getting such cases to trial. A trial date has not been set. (St. Louis
Post-Dispatch 10-14-1999)


EMPIRE BLUE: Health Insurer Not Liable; Expenses Within Contractual 20%
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GAROFALO v. EMPIRE BLUE CROSS AND BLUE SHIELD QDS:02761661

Plaintiffs brought a class action against their health insurer, claiming
it violated the Employee Retirement Income Security Act of 1974 and
effectively breached their contract. Plaintiffs and defendant insurer
each moved for summary judgment. The insurance contracts provided that
after the insured's deductible was met, insurer was to pay 80 percent
and the insured 20 percent of the "covered expenses," up to a certain
limit, at which point insurer was to pay 100 percent. While the
insured's payments amounted to 20 percent of the hospital's actual
charges, insurer's contribution was 80 percent of a statistical average
rate for the hospital costs of the procedure at issue, known as the
Diagnostic Related Group Rate. Since plaintiffs never paid more than the
contractual 20 percent of charges incurred, insurer's motion for summary
judgment was granted.

Judge Rakoff

The thinly-disguised premise of this lawsuit is that a New York health
insurer should be penalized for adhering to the peculiarities of New
York State health insurance law. That such a premise is contrary to
common sense is obvious. To show that it is also contrary to applicable
legal principles requires a bit more discussion.

On May 15, 1998, plaintiffs Laurie Garofalo and Hilary Rosser commenced
this action against their health insurer, defendant Empire Blue Cross
and Blue Shield, seeking under sections 502(a)(1)(B) and (a)(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. @@
1132(a)(1)(B) and (a)(3), to enforce certain contractual rights and to
remedy certain fiduciary breaches. Specifically, plaintiffs alleged that
defendant was paying less than its requisite eighty percent share of
certain insured hospital and medical expenses.

By Consent Order dated September 29, 1998, the lawsuit was certified as
a class action, with plaintiffs Garofalo and Rosser named as the class
representatives. The class certified by the September 29 Order consists
of:

All participants and beneficiaries in ERISA-governed health or dental
benefit plans, underwritten or administered by defendant Empire, for
whom Empire made payments to hospitals or other health care providers
pursuant to plans which included or includes a provision whereby Empire
or the plans administered by Empire and/or a plan participant is or was
responsible to pay a specified percentage of some or all medical or
hospital bills for which the plan provides coverage; and whose claims
are not barred by an applicable statute of limitations.

By Stipulation dated May 14, 1999, the parties contingently settled all
class-wide claims relating to coverage for outpatient health services.
The parties further agreed that subsequent actions by defendant had
mooted plaintiffs' requests for injunctive relief. See Transcript of
Hearing, June 15, 1999 ("Tr.") at 36. As a result, the only claims
remaining were those seeking reimbursement of certain inpatient hospital
costs paid by members of the class that plaintiffs claimed should have
been paid by defendant.

Following discovery, each side moved for summary judgment in its favor
on these remaining claims. For the reasons that follow, the Court grants
defendant's motion and denies plaintiffs' motion.

Plaintiff Garofalo is covered by Empire's Tradition Plus Comprehensive
Group Contract, which Empire insures and administers. See Maloney Aff.
PP 6, 20-23, Exs. A, B. With respect to inpatient hospital expenses, the
contract provides that after the insured participants, like Garofalo,
have satisfied an initial "deductible," Empire is to pay 80 percent of
"covered expenses" up to a certain limit, after which 100 percent is
covered, and that the insured participants "are responsible for amounts
not covered." Id., Ex. B at 6. Plaintiff Rosser is covered by a health
benefits plan sponsored by her employer, Merrill Lynch & Co., Inc.,
which similarly provides that, after the insured participants, like
Rosser, have satisfied the basic deductible, the insurer is to pay "80
percent of the covered expenses" up to a certain limit, after which 100
percent is covered. See Phillips Aff. P 12; Pl. Ex. 8 at 5. While, for
most purposes, Merrill Lynch self-insures this plan and contracts with
Empire to provide administrative services only, Empire itself insured
participants for the hospital expenses here at issue pursuant to a
"Required Operating Fund" agreement with Merrill Lynch. See Phillips
Aff. PP 12-13; see also Def. 56.1 Statement P 35.

It is undisputed that prior to January 1, 1997, Empire calculated its 80
percent coinsurance liability under these and similar plans on a
different basis from that on which the participants' contributions were
calculated. See Def. 56.1 Statement P 28; Pl. 56.1 Statement P 28.
Specifically, each participant's contribution was calculated at 20
percent of the hospital's actual charges for that participant's
hospitalization, while Empire's contribution was calculated at 80
percent of a statistical average rate for the hospital costs of the
procedure at issue, known as the Diagnostic Related Group ("DRG") Rate.
See id. The result was that, even though in each case the hospital
always received 20 percent of its actual costs from the insured
participant, in any given case it might receive more or less than 80
percent of its actual costs from Empire; but over many cases Empire's
share would average out to 80 percent of actual costs as well.

This bimodal method for calculating coinsurance contributions was and is
mandated, defendant asserts, by the New York Prospective Hospital
Reimbursement Methodology ("NYPHRM"), codified at N.Y. Public Health Law
@ 2807-c. In pertinent part, this statute provides, at @
2807-c(11)(n)(i), that: the dollar value of such percentage coinsurance
responsibility by or on behalf of [the] patient shall be determined by
multiplying such coinsurance percentage by the hospital's charges for
such patient... and (B) the payment due to a general hospital for
reimbursement of inpatient hospital services by [the] payor [i.e., the
insurer] shall be determined by multiplying the [DRG Rate]... by the
coinsurance percentage for which such payor is responsible, considering
any applicable deductibles.

It is undisputed that at all times here relevant Empire's coinsurance
calculation methodology conformed to @ 2807-c(11)(n)(i). Plaintiffs
assert, however, that in the case of a person covered by not-for-profit
insurers like Empire, other provisions of the NYPHRM limit "the
hospital's charges for such patient" to the DRG rate, so that the
co-insurance responsibility of an Empire-insured participant should
never exceed the participant's coinsurance percentage (typically 20
percent) multiplied by the DRG Rate, as it allegedly did in various
instances here at issue. Alternatively, plaintiffs assert that, even if
Empire's methodology was correct under New York law, ERISA preempts that
law and requires Empire to adhere to what was actually represented in
the plans that it insured, which, according to plaintiffs, were worded
so as to lead a reasonable participant to understand that both the
insurer's and the participant's respective percentage payments were
calculated on the same basis.

Whatever the merits of these contentions, it follows from the fact that
plaintiffs' remaining claims are now limited to recovering for alleged
past overcharges of their portions of inpatient hospital charges that
plaintiffs Garofalo and Rosser lack standing to pursue these claims,
since neither suffered actual injury in respect to these claims. n1 See
Valley Forge Christian College v. Americans United for Separation of
Church and State, Inc., 454 U.S. 464, 472 (1982); Gladstone, Realtors v.
Village of Bellwood, 441 U.S. 91, 99 (1979). Specifically, it is
undisputed that, with respect to inpatient hospital claims, plaintiff
Garofalo has never paid more than 20 percent of the DRG Rate. See
Maloney Aff. PP 30-34, Exs. D, E; Def. 56.1 Statement P 32; Pl. 56.1
Statement P 32; Pl. Submission Regarding Standing, June 29, 1999, pp.
2-3; see also Tr. at The same is true of plaintiff Rosser except with
respect to a single hospital visit in June 1996 in connection with which
she allegedly was billed $ 362 in excess of 20 percent of the DRG Rate.
With respect to that visit, however, her entire bill was subsequently
reimbursed under another health insurance plan maintained through her
husband's employer, so that she suffered no actual out-of-pocket loss.
See Pl. Submission Regarding Standing, June 29, 1999, pp. 3-4, Exs. B,
C.

n1 A fortiori, Garofalo and Rosser are inadequate representatives of the
stipulated class with respect to these remaining claims. It does not
follow, however, that they lacked standing to pursue the outpatient
claims that have been contingently settled or that they cannot
adequately represent the stipulated class with respect to the
finalization of that settlement, since they are alleged to have suffered
actual injuries with respect to those claims.

Rosser nonetheless argues that she still has standing to sue under the
New York "collateral source" rule, which provides that tort damages "may
not be reduced or offset by the amount of any compensation that the
injured person may receive from a source other than the tortfeasor,"
Oden v. Chemung County Indust. Develop. Agency, 87 N.Y.2d 81, 85 (1995);
see Stanley v. Bertram-Stanley, Inc., 868 F.Supp. 541, 542-43 (S.D.N.Y.
1994). She fails, however, to cite a single case in which this doctrine
has been applied to a claim brought under ERISA; and, in any event, the
underlying nature of the remaining claims here at issue render the
doctrine inapplicable. Specifically, to the extent Rosser's remaining
claims are for breach of contract, the collateral source rule does not
apply because "no one should profit more from the breach of an
obligation than from its full performance," 22 Am.Jur.2d Damages @ 568
(1988). See also United States v. City of Twin Falls, 806 F.2d 862, 873
(9th Cir. 1986) ("The policy rationales underlying the collateral source
rule... do not support its application to contract cases."). This leaves
only her claims under ERISA for a fiduciary breach that she concedes
was, at worst, neither purposeful nor negligent, see Tr. at 11. In these
no-fault circumstances, it would be inequitable to apply the
fault-premised collateral-source rule. See generally Restatement
(Second) of Trusts @ 201 cmt. c ("The mere fact that [a trustee] has
made a mistake of fact or of law in the exercise of his powers or
performance of his duties does not render him liable for breach of
trust.").

The unsettled claims must therefore be dismissed on the basis of
plaintiffs' lack of standing. Anticipating this possibility, however,
plaintiffs' counsel has represented that he could locate other members
of the stipulated class who suffered actual injuries with respect to the
remaining claims and who would be willing to serve as named plaintiffs
and class representatives. Assuming arguendo that this proposal were
otherwise acceptable, it must nonetheless be rejected on the ground of
futility: for the Court, reaching the merits, concludes that, even if
some plaintiffs (present or proposed) have standing to bring the
remaining claims, the claims must still be dismissed as a matter of law.

Initially, this is because the methodology that Empire uses for
calculating the participants' coinsurance payments under the plans that
it insures or administers is the only methodology permitted under the
applicable law, the NYPHRM. Thus, there are no "benefits due" or
contractual "rights" to "enforce," "accountings" to be made, or
"fiduciary breaches" to be rectified, because the benefits plaintiffs
seek cannot exist by operation of law. Specifically, section
2807-c(11)(n)(i) requires that the calculation of patient coinsurance
payments "shall" be based on actual hospital charges while calculation
of the portion payable by insurers like Empire "shall" be based on the
DRG Rate. The statute gives the insurer no discretion to vary this
methodology, nor to contract around it. See Memorandum in Support of
Legislation, 1988 N.Y. Laws 605, discussed infra. New York law thus
mandates the methodology for calculating both the insurer's and the
participants' payments in this case, even assuming, arguendo, that the
plans could be read to suggest a different scheme. See UNUM Life Ins.
Co. v. Ward, 119 S. Ct. 1380, 1390 (1999) (holding that non-preempted
state law controls parties' rights under health plan, notwithstanding
directly contradictory plan language).

Thus, the plaintiffs' allegations that the language of the plans fails
adequately to disclose the NYPHRM methodology and even misleadingly
suggests that Empire's and participants' payments are calculated on the
same base are ultimately irrelevant to the plaintiffs' remaining claims.
Perhaps such allegations might support a claim for future injunctive
relief to clarify the plans' language; but here that claim has been
rendered moot by the withdrawal of plaintiffs' requests for injunctive
relief - in part, the Court is informed, because certain clarifications
in the plans' description of the calculation methodology have already
been made. As to the past, plaintiffs do not seek rescission but rather
seek to require defendant to reimburse those participants who paid more
than they would have if defendant, instead of following the NYPHRM, had
calculated Empire's and the participants' payments on the same base in
violation of New York law. In other words, plaintiffs seek a windfall
beyond what the law entitles them to. This the law will not allow. See
UNUM, 119 S. Ct. at 1390.

Independently, moreover, the alleged misrepresentations are immaterial.
See Ballone v. Eastman Kodak, 109 F.3d 117, 122 (2d Cir. 1997)
("Misrepresentations are material if they would induce a reasonable
person to rely on them.") n2 Here, there is no claim that any plaintiff
was induced to join a plan by its alleged mischaracterization of its
calculation methodology or that any plaintiff would have opted out of
that plan if the methodology had been accurately disclosed (assuming,
arguendo, that it was not). Realistically, moreover, disclosure of the
NYPHRM methodology could not have affected any New York plaintiff's
health plan choices in any way because insurers in New York State were
all required to, and in fact were, calculating benefits in this manner.
See Billing Manual of the Hospital Association of the State of New York,
Laks Aff., Ex. G, see also Gahan Aff.; Fitzgerald Aff., Ex. A, P 13;
Costello Aff., Ex. C, at 21. While plaintiffs' counsel hypothesized at
oral argument (for the first time) that some participants, had they
known of the methodology, would have chosen to be treated at hospitals
with cheaper charges for inpatient care than the ones they actually
chose, there is not an iota of evidence in the record to support the
supposition that the marginal difference in calculating benefits would
have materially affected this choice. Counsel's unsupported speculations
are insufficient to sustain plaintiff's burden of evidentiary response
at summary judgment. See generally Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986).

n2 While in Cavallo v. Utica-Watertown Health Ins. Co., 985 F. Supp. 72
(N.D.N.Y.), reconsid. denied, 3 F. Supp. 2d 223 (1998), discussed infra,
Magistrate Judge Hurd found similar claims to be material, this was in
the context of claims for "declaratory, injunctive and other equitable
relief," id. at 75, where materiality must partly be assessed on a
forward-looking basis. In the instant case, by contrast, no equitable
relief is available, forward-looking or otherwise. To begin with,
plaintiffs, as noted, concede that their claims for injunctive relief
have been mooted. Tr. at 36. Also, because plaintiffs have adduced no
competent evidence that Empire profited from its methodology,
plaintiffs' claims for an accounting, restitution, and other equitable
relief under 29 U.S.C. @ 1132(a)(3)(B) must be dismissed. See Geller v.
County Line Auto Sales, Inc., 86 F.3d 18, 22 (2d Cir. 1996) (no
restitution liability without unjust enrichment); see also In re
Evangelist, 760 F.2d 27, 30 (1st Cir. 1985) (Breyer, J.) (same, for
restitution and accounting); Kastle v. Steibel, 120 A.D.2d 868, 869
(N.Y. App. Div. 3rd Dep't 1986) (per curiam) (same, for accounting).
Finally, such equitable claims are not "appropriate" in this case in any
event, see 29 U.S.C. @ 1132(a)(3)(B), because relief for any injuries
would already be available elsewhere, such as in a claim for "benefits
due" under 29 U.S.C. @ 1132(a)(1)(B). See Varity Corp. v. Howe, 516 U.S.
489, 515 (1996) ("Where Congress elsewhere provided adequate relief for
a beneficiary's injury, there will likely be no need for further
equitable relief, in which case such relief normally would not be
'appropriate.'"); Forsyth v, Humana, Inc., 114 F.3d 1467, 1475 (9th
Cir.), aff'd, 525 U.S. 299 (1999).

Plaintiffs raise a more fundamental objection to the above analysis,
however, in that they contend that defendant did not follow the NYPHRM
after all. This, they argue, is because even if Empire's methodology
comported with the section of the NYPHRM most directly applicable, i.e.,
@ 2807-c(11)(n)(i), another section of the NYPHRM, i.e., @ 2807-c(12),
"caps" the co insurance responsibility of participants insured by
not-for-profit insurers (as well as by health maintenance organizations)
at their applicable percentage multiplied by the DRG rate. Thus, for
participants insured by Empire, the participants' 20 percent coinsurance
responsibility, though initially calculated, under @ 2807-c(11)(n)(1),
as 20 percent of the hospital's actual charges, may not, under
plaintiffs' interpretation of @ 2807-c(12), exceed in any instance 20
percent of the DRG Rate. On this theory, Empire's method of calculation,
which followed @ 2807-c(11)(n)(i) alone, failed to comply with the
NYPHRM as a whole and resulted in at least some members of the class
being overcharged.

Even on its face, this argument seems problematic, since it posits that
some participants will reimburse the hospital for considerably less than
their applicable percentage of the DRG Rate but that none will pay more
than their applicable percentage of the DRG Rate. Since the DRG Rate is
itself based on averaging, plaintiffs' interpretation guarantees that
the hospitals will lose substantial sums. There is no reason to suppose
the legislature would have intended such a confiscatory result.

Moreover, the argument presupposes that not only Empire but also all
other New York insurers and hospitals have for years ignored the
legislative mandate of @ 2807-c(12), since it is undisputed that all New
York insurers and hospitals have uniformly calculated benefits under
NYPHRM according to the same methodology used by Empire. Further still,
as discussed infra, this is the same methodology expressly prescribed by
the relevant New York administrative agencies. See Billing Manual of the
Hospital Association of the State of New York, Laks Aff., Ex. G; see
also Gahan Aff., Fitzgerald Aff., Ex. A. P 13; Castelle Aff., Ex. C., at
21. According to plaintiffs, they all got it wrong.

The source of plaintiffs' argument - and its sole support - is
Magistrate Judge Hurd's opinion in Cavallo, supra, 985 F. Supp. at 72,
in which the Court took note of the fact that, even though @
2087-c(11)(n)(i) of the NYPRHM specifically compels participant
coinsurance charges to be calculated on the basis of the actual hospital
costs in that participant's particular case, @ 2807-c(12) provides
generally that hospital charges to participants for services insured by
certain classes of insurers, including not-for-profit organizations like
Empire and also health maintenance organizations ("HMOs"), "shall not
exceed the rates of payment approved by the commissioner for payments by
[those insurers]," which at all times here relevant were the DRG Rates.
The opinion in Cavallo sought to reconcile these two provisions by
concluding that the legislature somehow sought to put a lower cap on
what the hospitals could charge participants in not-for-profit and HMO
plans than what it could charge other patients. See Cavallo, 985 F.
Supp. at 81-82.

Cavallo does not meaningfully suggest, however, why the legislature
might have so intended. At the time that @ 2807-c(12) was enacted, it is
estimated that almost 90 percent of the health-insured population in New
York was covered by Empire, see People v. Womens' Christian Assoc. of
Jamestown, 44 N.Y.2d 466, 472 (1978), so that the foreseeable impact on
hospitals, if plaintiffs' interpretation were correct, would have been
dramatic and confiscatory. An interpretation so rife with unlikely
practical consequences is not readily to be accepted in the absence of
any legislative history indicating that the legislature intended such
consequences.

Moreover, plaintiffs' construction renders other provisions of the
NYPHRM superfluous. For example, other provisions of the NYPHRM
specifically "cap" what any New York hospital may charge any insured
patient at 135 percent of the DRG Rate. See @@ 2807-c(1)(c) and
2807-c(11)(n)(i). This limit, which was designed to prevent
price-gouging by hospitals without imposing on them a material financial
disability, see infra, applies on its face to all categories of insureds
(and, moreover, as described below, was enacted subsequent to @
2807-c(12)). Plaintiffs' theory that @ 2807-c(12) imposes a cap of 100%
of the DRG Rate on charges to Empire and HMO insureds, regardless of the
subsequently-enacted general cap of 135 percent, not only renders the
135 percent cap superfluous for an estimated 90 percent or more of all
insureds, but also fails to explain why the legislature wrote the 135
percent cap as a limit on all insureds generally rather than on the
small class of insureds not capped by @ 2807-c(12) as plaintiffs
interpret it.

Put another way, plaintiffs' reading of @ 2807-c(12) is seemingly
inconsistent with the plain meaning of other provisions of the NYPHRM
or, at the least, creates an ambiguity as to how the NYPHRM should be
interpreted as a whole. This counsels resort to the pertinent
legislative history. That history shows that @ 2807-c(12) was passed, in
1978, not to set any particular cap but to prevent hospitals from
avoiding rate limitations altogether by terminating their contracts with
certain classes of insurers and charging participants directly. See
Memorandum in Support of Legislation, Costello Aff., Ex. D. Indeed, at
the time this provision was passed, the DRG Rate, which originated with
the federal government, was not yet recognized in New York.

In 1988, New York adopted the DRG-based system of hospital reimbursement
and, initially, required both participants and insurers to calculate
their applicable coinsurance payments based on the DRG Rate. See 1988
N.Y. Laws, Ch. 2 (Laks Aff., Ex. E.). Shortly thereafter, however, in
response to the complaints of some patients that, because of the
averaging approach of the DRG Rate, they were paying large amounts for
hospitalizations that in their particular cases had involved short stays
well below the average, the prior legislation was amended, and @
2807-c(11)(n)(i) was enacted to require that patient coinsurance
responsibility be based, instead, on actual hospital charges. See
Memorandum in Support of Legislation, 1988 N.Y. Laws 605, Gahan Aff.,
Ex. A. This change was "designed to assure that individual patients are
not unduly burdened by the obligation to make large coinsurance payments
which may correctly reflect statistical patterns for the hospital
industry as a whole, but are inordinate in relation to the services
utilized by that particular patient." Id.

At the same time, the legislature recognized that, in order to make
economic sense, this change necessarily entailed that some patients must
pay more than their coinsurance percentage multiplied by the DRG Rate if
their stays were longer than average or if they otherwise required more
than average services; and, indeed, the Bill Jacket for @
2807-c(11)(n)(i) sets forth specific examples contemplated by the
legislature of where patients would so pay when their costs of care
exceeded the average. See id. So obvious and inherent was this
possibility, and subsequent reality, that in 1990, in order to avoid
price-gouging by hospitals, the legislature added the final provisions
capping the actual-charge base on which the participants' coinsurance
responsibility was to be calculated at 135 percent of the DRG Rate. See
1990 N.Y. Laws Ch. 922. n3 This further amendment would have been
entirely unnecessary for Empire and HMO patients (i.e., the great
majority of all patients) if the Cavallo theory were correct.

n3 Unlike the severe limits on actual charges that plaintiffs posit of
100 percent of the DRG Rate, a 135% cap is not materially confiscatory
but simply imposes a modest upper limit. In economic terms, it is the
difference between allowing market forces to operate except at the
extremes versus interfering with market forces in roughly half of the
cases.

As the legislative history thus shows, any seeming inconsistency between
@ 2807-c(12) and @ 2807(c)(11)(n)(i) reflects, at most, a legislative
oversight in failing to recognize that the enactment and amendment of
the latter might require amendment of the language of the former. But as
@ 2807-c(11)(n)(i) is both the more recently-enacted and the more
specific provision, it clearly takes precedence over @ 2807-c(12) with
respect to any arguable conflict between the two. See In re Ionosphere
Clubs, Inc., 922 F.2d 984, 991 (2d Cir. 1990); see also Bolar v. Frank,
938 F.2d 377, 379 (2d Cir. 1991).

As if that were not enough, deference must also be accorded, in
resolving which provision to follow in calculating hospital charges
under the NYPHRM, to the New York State Department of Health, the agency
charged with implementing the statute, whose interpretation, as already
noted, completely supports defendant's position. See Gahan Aff. See
generally Salvati v. Eimicke, 72 N.Y.2d 784, 791 (1988) (per curiam);
Friends of Shawangunks, Inc. v. Clark, 754 F.2d 446, 449 (2d Cir 1985).

Accordingly, the Court is obliged to reject Cavallo and conclude instead
that Empire's method of calculation is the method required by New York
law.

Plaintiffs' final argument is that the NYPHRM is preempted by federal
ERISA law, and that, under the latter, the relevant calculations are
determined by the face of the plans, which, plaintiffs argue apply the
same base to both the insurers' and the participants' share. n4 Once
again plaintiffs' argument is unpersuasive.

n4 On this theory, the present stipulated class (described above) would
have to be narrowed, since some members of that class, far from
incurring added costs, would have realized a windfall.

The pertinent provisions of ERISA provide that it "shall supersede...
State laws" to the extent that those laws "relate to any employee
benefit plan" unless they are laws that "regulate[] insurance." 28
U.S.C. @@ 1144(a), 1144(b)(2)(A). Although the Supreme Court has
previously ruled that certain parts of the NYPHRM the provisions setting
surcharge reimbursement rates by type of payor - do not even "relate to"
employee benefit plans (and are, therefore, not preempted by ERISA), see
New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins.
Co., 514 U.S. 645, 656 (1995), the Court here need not consider whether
the provisions at issue in the instant case are similarly excluded,
because it finds that, in any event, these provisions "regulate
insurance" and are therefore saved from preemption on that ground.

A state statute "regulates insurance," from a common-sense standpoint,
where it "homes in on the insurance industry," UNUM, 119 S.Ct. at
1386-87. This category includes, inter alia, "laws that regulate the
substantive terms of insurance contracts," Metropolitan Life Ins. Co. v.
Mass. Travelers Ins. Co., 471 U.S. 724, 741-42 (1985). See also
Washington Physicians Serv. Assoc'n v. Gregoire, 147 F.3d 1039, 1045
(9th Cir. 1998), cert. denied, 119 S.Ct. 1033 (1999). The laws here at
issue expressly center on those insurance contracts providing
"percentage coinsurance responsibility" and seek by legislative decree
to set certain terms of those contracts. For example, as noted, they
require that a participant's coinsurance liability must be based on
actual hospital charges and that the insurer's contribution must be
based on the DRG Rate. They are thus closely analogous to so-called
mandatory benefit statutes that, by inserting substantive terms in
insurance contracts, have uniformly been held to "regulate insurance."
See Metropolitan, 471 U.S. at 741-42, n. 18; see also Washington
Physicians Serv., 147 F.3d at 1045.

While the provisions on their face also cover entities beyond those
traditionally considered to be "insurance companies," such as HMOs and
payors under the Workers' Compensation laws and similar laws, see, e.g.,
@ 2807-c(1)(a)-(b), this is of no moment because, unlike laws of general
applicability, see, e.g., Prudential Ins. Co. v. National Park Medical
Center, 154 F.3d 812, 829 (8th Cir. 1998), the provisions here in issue
only regulate such payors to the extent they are parties to coinsurance
contracts and thus, in effect, are acting as insurers under classic
insurance arrangements. See Washington Physician Serv., 147 F.3d at
1045-46 (holding that HMOs and other health contractors, even if not
"traditional" insurance companies, operate in the "business of
insurance" and function as insurance companies).

While the provisions also extend to self-insured plans, which under
ERISA are not considered to be in the business of insurance, see 29
U.S.C. @ 1144(b)(2)(B), this is incidental at most and would only
warrant preemption, if at all, as to the NYPHRM's application to such
plans. See Metropolitan, 471 U.S. at 736 n. 14 (statute regulates
insurance even though, as written, it also encompasses self-insured
funds). n5

n5 The Supreme Court in Metropolitan considered the state statute's
treatment of self-insured and other plans to be severable, so that even
if the regulation were preempted as to the self-insured plans the
remainder of the regulation was still within the savings clause. Id.

Thus, on any "common sense" view, the portions of the NYPHRM here at
issue regulate insurance. The same result obtains, moreover, if one
applies the three factors of the so-called "McCarran-Ferguson" test
often invoked to help make such determinations. See UNUM, 119 S.Ct. at
1386. Regarding the first factor - whether the law transfers or spreads
a participant's risk - the effect of the two-tiered method of
coinsurance computation mandated by NYPHRM is to govern material aspects
of the spreading of risks of hospital costs faced by the parties.
Regarding the second factor - whether the law is integral to the
relationship between the policyholder and insurer - the provisions here
at issue directly mandate and define certain terms in the coinsurance
contracts. Finally, even assuming, arguendo, that the third factor -
whether the regulation is limited to insurance entities - weighs in
favor of preemption because of the incidental inclusion of self-insured
plans, it would do so, at most, slightly, because the provision
primarily "homes in" on insurance companies and other entities acting in
their role as insurers.

The Court has carefully considered plaintiffs' other arguments but finds
them to be without merit. Accordingly, for the reasons stated herein,
defendants' motion for summary judgment on all the non-settled claims is
granted, plaintiffs' motion for summary judgment on the same claims is
denied, and all of the claims based on inpatient hospitalizations are
hereby dismissed with prejudice. The parties are ordered to jointly call
Chambers by no later than October 15, 1999 to schedule final
settlement-approval proceedings as to the previously-settled claims.
(New York Law Journal 10-5-1999)

Cincinnati Bell Inc., an Ohio corporation ("CBI"), IXC Communications,
Inc., a Delaware corporation ("IXC"), and Ivory Merger Inc., a Delaware
corporation and a wholly owned subsidiary of CBI, previously entered
into an Agreement and Plan of Merger dated as of July 20, 1999, pursuant
to which IXC will merge with and into Ivory Merger Inc. and become a
wholly owned subsidiary of CBI.

In light of the decision of Chancellor Chandler on September 27, 1999,
in the Court of Chancery of the State of Delaware in Phelps Dodge
Corporation vs. Cyprus Amax Minerals Company, CBI and IXC have entered
into Amendment No. 1 dated as of October 13, 1999 to the Merger
Agreement. While IXC does not believe that the decision is applicable to
the Merger or the Merger Agreement, IXC has decided to amend the Merger
Agreement.

In connection with putative class action litigation filed by John D.
Crawford and other IXC stockholders (John D. Crawford, et al., v.
Cincinnati Bell Inc., et al., C.A. No. 17334 (the "Crawford Action") and
In re IXC Communications, Inc. Shareholders Litigation, Consolidated
C.A. No. 17324), in the Court of Chancery of the State of Delaware,
plaintiffs served a Joint Opening Brief In Support Of Their Motions for
Preliminary Injunction on October 8, 1999.

On October 13, 1999, plaintiffs in the Crawford Action filed a motion
for leave to file a second amended and supplemental complaint.

In the Joint Opening Brief and in the Amended Complaint, plaintiffs
allege that the joint proxy statement/prospectus filed with the
Securities and Exchange Commission on September 13, 1999, and mailed by
IXC to its stockholders on or about September 14, 1999, contained
various misstatements and omissions that are misleading.

                IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

                          IN AND FOR NEW CASTLE COUNTY


JOHN D. CRAWFORD, CAROLYN                   )
BAGBEY, RICK R. DAVIS, DONNA                )
RAOUST, OLIVIER RAOUST, and DAVID           )
GLENN TATUM SMITH,                          )
                                            )
                       Plaintiffs,          )
                                            )
             v.                             )        Civil Action
                                            )        No. 17334
                                            )
CINCINNATI BELL, INC., an Ohio              )
corporation, IXC COMMUNICATIONS,            )
INC., a Delaware corporation, IVORY         )        FILED UNDER
MERGER, INC., a Delaware corporation,       )        SEAL
WOLFE H. BRAGIN, JOE C. CULP, CARL W.       )
MC KINZIE, RALPH J. SWETT,                  )
PHILLIP L. WILLIAMS, BENJAMIN L. SCOTT,     )
RICHARD D. IRWIN, JOHN M. ZRNO,             )
                                            )
                                            )
                       Defendants.          )

                 SECOND AMENDED AND SUPPLEMENTAL COMPLAINT


ENGINEERING ANIMATION: Milberg Weiss Files Securities Suit In Iowa
------------------------------------------------------------------
The Following is an Announcement by the Law Firm of Milberg Weiss
Bershad Hynes & Lerach LLP:

Notice is hereby given that a class action lawsuit was filed on October
15, 1999, in the United States District Court for the District of Iowa
on behalf of all persons who purchased the common stock of Engineering
Animation, Inc. (NASDAQ: EAII), between July 29, 1999 and October 1,
1999, inclusive.

The complaint charges Engineering Animation and certain officers and/or
directors with violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 as well as Rule 10b-5 promulgated thereunder. The
complaint alleges that defendants issued a series of materially false
and misleading statements concerning the Company's financial
performance. Because of the issuance of a series of false and misleading
statements, the price of Engineering Animation common stock was
artificially inflated during the Class Period.

Plaintiffs are represented by the law firms of Milberg Weiss Bershad
Hynes & Lerach, LLP, Cohen, Milstein, Hausfeld & Toll, P.L.L.C.,
Schiffrin & Craig, LLP, Reinhardt & Anderson, Fruchter & Twersky,
Whitfield & Eddy, Weiss & Yourman, Bernstein Liebhard & Lifshitz, LLP,
Lockridge Grindal & Nauen, and the Law Offices of Jeffrey S. Abraham.

If you are a member of the class described above, you may, not later
than sixty days from today, move the Court to serve as lead plaintiff of
the class, if you so choose. In order to serve as lead plaintiff,
however, you must meet certain legal requirements.

If you wish to discuss this action or have any questions concerning this
notice or your rights or interests with respect to these matters, please
contact, at Milberg Weiss Bershad Hynes & Lerach LLP ("Milberg Weiss"),
Steven G. Schulman or Samuel H. Rudman, One Pennsylvania Plaza, 49th
Floor, New York, New York 10119-0165, by telephone 1-800-320-5081 or via
e-mail: endfraud@mwbhlny.com or visit website at http://www.milberg.com
TICKERS: NASDAQ:EAII


FIRST NATIONAL: FBI Found Failed Bank's Files Buried; 2 Execs Jailed
--------------------------------------------------------------------
Two senior executives of the failed First National Bank of Keystone,
W.Va., were jailed after Federal Bureau of Investigation agents
discovered heaps of buried bank documents that the pair allegedly hid
from regulators.

Charging conspiracy to obstruct an Office of the Comptroller of the
Currency examination, the U.S. attorney's office in Charleston, W.Va.,
last Friday ordered the arrests of Terry L. Church, the bank's senior
vice president and president of its mortgage subsidiary, and Michael H.
Graham, executive vice president of the mortgage company.

The arrests were the first stemming from the failure of $1.1
billion-asset First National. Once heralded as one of the most
profitable banks, it was closed Sept. 1 after examiners found that $515
million of assets it claimed to own had actually been sold. The missing
funds have not been found.

At a hearing scheduled for October 19, the U.S. attorney plans to ask
that Mr. Graham and Ms. Church be denied bail while the government's
investigation continues.

The weeks since the closing have produced an abundance of rumors and
finger-pointing among bank officials and their regulators.

Noticeably absent from the criminal complaint was the name of Billie J.
Cherry, the bank's chairman. Her testimony to a grand jury investigating
the bank's failure was postponed last month and has not been
rescheduled. Calls to Ms. Cherry, Ms. Church, and Mr. Graham or their
lawyers were not returned.

In an affidavit filed last Friday, FBI agent Robert B. Selbe said the
OCC first discovered bank documents were missing during an exam this
summer. Some of the files -- about 22 boxes, 27 folders, and five
notebooks -- were found in Ms. Church's house the day after the bank was
closed. But most remained missing until last week, when FBI agents found
them buried in a trench 100 feet long and 10 feet deep on Ms. Church's
mountaintop ranch.

Mr. Selbe said two unnamed sources led agents to the site. One, a former
bank employee, told investigators that in July she provided Mr. Graham
and several associates access to bank documents locked in a building
across the street from bank headquarters.

The unnamed employee said she watched as the men dropped a large number
of files from a third-story window onto a flatbed truck owned by Ms.
Church's husband, a construction contractor.

The FBI also interviewed the driver of the truck, who said he was
instructed to dig the trench and then haul and bury three truckloads of
files. Investigators uncovered the documents, which included ledger
printouts and microfilm of bank transactions, last Thursday.

If convicted, Ms. Church and Mr. Graham could face up to five years in
prison and $250,000 in fines, according to law enforcement officials.

The arrests would seem to support the OCC's contention that First
National officials made it impossible for regulators to detect the
alleged fraud sooner.

Rep. Jim Leach, R-Iowa, the House Banking Committee chairman, has asked
the OCC to explain First National's failure. Comptroller John D. Hawke
Jr., in an Oct. 12 response, said bank officials made it tough for
examiners to do their jobs. "There were several apparent attempts to
deliberately deceive the examiners and to alter bank records," Mr. Hawke
said.

Mr. Hawke said bank officers were hostile towards his examiners,
secretly videotaping them and hiring armed guards as "protection"
against examiners. One exam was postponed after OCC officials arriving
at the bank found profane and threatening graffiti sprayed on the
sidewalk outside. Fearing for their safety, the examiners sent for U.S.
marshals to accompany them into the bank.

"In the face of the kind of intimidation and obstruction that the
Keystone examiners faced, together with the massive falsifications of
documents as was the case with Keystone, fraud detection becomes
exceedingly difficult," Mr. Hawke said.

The regulators are not the only ones who claim they were deceived. Three
credit unions that placed brokered deposits with the defunct bank have
sued to recover some of what they lost.

The suit, filed Oct. 4, accuses seven former First National officers and
directors of misleading depositors about the bank's financial condition.
The credit unions -- $277 million-asset Grand Rapids (Mich.) Teachers'
Credit Union, $118 million-asset St. Louis Postal Credit Union, and $102
million-asset Chetco Federal Credit Union of Harbor, Ore. -- held
certificates of deposit worth $1.4 million, some of which was insured.

The list of plaintiffs could grow. The lawyer representing the credit
unions said he intends to seek class-action status to enable other
depositors to join the suit. (The American Banker 10-19-1999)


FONAR CORP: Settles For Stockholders' Suit Filed In Delaware
------------------------------------------------------------
In June 1995, one of the Company's stockholders commenced an action in
the Delaware Court of Chancery against FONAR and its directors, alleging
breaches of fiduciary duties by the defendants for adopting the
recapitalization plan (Horace Rubenstein, Individually and on Behalf of
All Others Similarly Situated v. Raymond V. Damadian et al.) The action
was brought derivatively, on behalf of FONAR and as a class action on
behalf of the public holders of FONAR's Common Stock. FONAR and its
directors answered the complaint and vigorously denied any wrongdoing or
liability.

The parties reached a settlement agreement, which was approved by the
Court of Chancery on April 29, 1997. The settlement was revised and
approved by the Court on March 2, 1998.


FORD MOTOR: Judge Certified Class On Sexual Harassment At 2 Plants
------------------------------------------------------------------
In an opinion handed down on October 15, 1999, U.S. District Judge
Elaine E. Bucklo, certified a class action based on allegations of
sexual harassment and sex discrimination against Ford Motor Company. The
court rejected Ford's claim that its recent settlement with the EEOC
should prevent the case from proceeding as a class action. Calling the
EEOC's conduct "disappointing", the court found that the EEOC
Conciliation Agreement lacks meaningful "bite." The certified class
includes approximately 850 women employed at Ford's Stamping and
Assembly plants from December 2, 1993 to present.

The action arises out of two separate cases: Warnell et al. v. Ford,
filed in March, 1998 and Rapier et. al. v. Ford filed in August, 1998.
The cases have now been consolidated. The suits, brought by 14 women,
allege a pattern and practice of sexual harassment and discrimination at
the Chicago Assembly Plant and the Ford Stamping Plant over the course
of many years. The harassment took the form of sexually explicit and
derogatory graffiti in public areas of the plants, demeaning comments
made to and about women and minorities and inappropriate physical
contact. The plaintiffs claim to have "been subjected to unwanted or
unwelcome sexual advances, touching, comments of a sexual nature, lurid,
foul and offensive language and name calling."

The Warnell plaintiffs are represented by Keith L. Hunt and Katherine A.
Rodosky of Hunt & Associates, P.C., in Chicago. The Rapier plaintiffs
are represented by Daniel L. Berger and Darnley D. Stewart of Bernstein,
Litowitz, Berger & Grossmann in New York, and Vanessa L. Smith in
Chicago. CONTACT: Bernstein Litowitz Berger & Grossmann LLP Daniel
Berger, 212/554-1406, New York Vanessa Smith, 312/362-9341, Chicago or
Hunt & Associates, P.C., Chicago Keith Hunt, 312/558-6577


INSO CORP: MA-Based Company Removes Shareholder Litigation Liability
--------------------------------------------------------------------
The Company files the following press release On Form 8-K with the SEC:

Press release, dated September 30, 1999

INSO PRESS CONTACT: Bruce G. Hill Vice President, Business Development
Telephone: 617/753-6542 E-mail: bhill@inso.com

For Immediate Release

Inso Corporation Removes Shareholder Litigation Liability

PURCHASES INSURANCE COVERAGE ENSURING THAT CLASS ACTION LITIGATION
PRESENTS NO MATERIAL ADVERSE FINANCIAL RISK TO THE COMPANY

BOSTON, MA, September 30, 1999 - Inso Corporation (NASDAQ: INSO)
announced today that it has entered into an insurance agreement with a
major AAA-rated insurance carrier pursuant to which the insurance
carrier will assume complete financial responsibility for the defense
and ultimate resolution of the securities class action litigation
initially filed in February 1999 on behalf of certain purchasers of the
Company's common stock.

Stephen O. Jaeger, Chief Executive Officer and Chairman of the Board of
Inso Corporation, said: "This is an important development for Inso. We
can move forward with the certainty that the class action litigation no
longer presents a material adverse financial risk to the Company.
Equally significant is the removal of the distraction from this
litigation on our business continuity."

The Company expects to take a net charge against earnings of
approximately $14,000,000 in the third fiscal quarter ending October 31,
1999. This charge includes professional fees, other expenses incurred to
date in connection with the class action litigation, and premium costs
for the insurance agreement, less recovery under the Company's existing
insurance policy. The Company expects that all future costs to defend
and resolve the class action litigation will be covered by the insurance
agreement.


KMART CANADA: Abandons Appeal Of Employees' Wrongful Dismissal Suit
-------------------------------------------------------------------
Kmart Canada has decided not to appeal a landmark judgment that found
the company responsible for the wrongful dismissal of 4,000 former
employees.

The company was the target of a class-action suit after Hudson's Bay
Co.'s Zellers division bought the discount department store chain last
year. A former employee launched the action after figuring she was
treated shabbily and wasn't given enough severance pay. An Ontario
Superior Court judge ruled in her favour this June, opening the door for
up to $11 million in added payments. Lawyers for The Bay said they were
going to appeal the case.

The case is now expected to move to some form of mediation process, said
Windsor lawyer David Deluzio, who started the suit. (The Toronto Star
10-19-1999)


NEWBRIDGE NETWORKS: Settles For Securities Suit In Washington
-------------------------------------------------------------
In the fourth quarter of fiscal 1998 the Company reached an agreement in
principle to settle the class action lawsuit which was filed in United
States District Court in Washington, D.C. during the fiscal year ended
April 30, 1995. The lawsuit purported to be a class action on behalf of
a class of persons who purchased securities of the Company between March
29 and August 1, 1994 and alleged that the Company made false and
misleading statements in violation of United States securities law and
common law. The Court entered an order and final judgement approving the
settlement and dismissing the lawsuit with prejudice in October 1998.

The Company recorded the expense in connection with the settlement of
$2,642,000 in the fourth quarter of fiscal 1998, which represents the
direct costs incurred.


OVERLAND DATA: Announces Settlement of Securities Suit Filed In CA
------------------------------------------------------------------
Overland Data, Inc. (Nasdaq:OVRL) reported that it had reached tentative
settlement of the class action securities litigation currently pending
against it in the U.S. District Court for the Southern District of
California (Marucci v. Overland Data, Inc., et al.).

Plaintiff Edward Marucci filed the class action suit in 1997 on behalf
of the Company's shareholders, alleging that the Company made misleading
statements in its Prospectus for the Company's initial public offering.
The Company and its Directors and Officers who were named as defendants
had denied all liability and were prepared to defend against the claims
at a jury trial. The tentative settlement is a compromise disposition of
controverted claims, and no admissions have been made by either side of
the litigation.

The parties have signed a Memorandum of Understanding to settle the
entire dispute. Terms were not disclosed and the settlement is subject
both to execution of a definitive settlement agreement and final
approval by the court. The Company currently anticipates that the court
will act to approve the settlement before the end of November, 1999,
with a hearing on final approval likely to take place in early 2000. As
a result of the settlement, the Company will incur a one-time pre-tax
charge in its first fiscal quarter ended September 30, 1999 of
approximately $ 250,000, or slightly greater than $ .01 per share on an
after-tax basis.

Scott McClendon, Overland President and CEO, stated: "We are pleased to
be able to put this issue behind us and focus instead on managing our
business and executing our strategic growth plans. We believe Overland
is well-positioned in the growing data storage market with a broad range
of product and technology offerings, and considerable opportunity to
create shareholder value."

Overland is a global supplier of storage automation solutions and
related technologies designed to meet and surpass the critical
requirements of high-availability network computing environments, from
entry level to the enterprise. The Company is a recognized leader in
technology innovation and product reliability. Its award-winning
products meet the critical needs of end users, distributors and OEMs in
industries worldwide.

Except for the factual statements made herein, the information contained
in this press release consists of forward looking statements that
involve risks, uncertainties and assumptions that are difficult to
predict. Words and expressions reflecting optimism and satisfaction with
current prospects, as well as words such as "believe," "intends,"
"expects," "plans," "anticipates," and variations thereof, identify
forward-looking statements, but their absence does not mean that a
statement is not forward-looking. Such forward-looking statements are
not guarantees of performance, and the Company's actual results could
differ materially from those contained in such statements. Factors that
could cause or contribute to such differences include unexpected
shortages of critical components, rescheduling or cancellation of
customer orders, loss of a major customer, the timing and market
acceptance of new product introductions by the Company and its
competitors, general competition and price pressures in the marketplace,
and the Company's ability to control costs and expenses. Reference is
also made to other factors set forth in the Company's filings with the
Securities and Exchange Commission including the "Risk Factors",
"Management's Discussion and Analysis" and other sections of the
Company's Form 10-K for the most recently completed fiscal year. These
forward-looking statements speak only as of the date of this release,
and the Company undertakes no obligation to publicly update any
forward-looking statements to reflect new information, events or
circumstances after the date of this release.


PREMIER LASER: Reaches Agreement For Settlement Of CA Securities Suits
----------------------------------------------------------------------
>From the report of Premier Laser Systems Inc, filed with the Securities
and Exchange Commission, as of date October 12, 1999:

We and certain of our officers and directors have been named in a number
of securities class action lawsuits which allege violations of the
Securities Exchange Act or the California Corporations Code. The
plaintiffs seek damages on behalf of classes of investors who purchased
our stock between May 7, 1997 and April 15, 1998. The complaints allege
that we misled investors by failing to disclose material information and
making material misrepresentations regarding our business operations and
projections. We have also been named in a shareholder derivative action
purportedly filed on our behalf against certain of our officers and
directors arising out of the same alleged acts.

We have reached an agreement in principal with lead plaintiffs and their
counsel to settle the class and derivative actions. Under the terms of
the agreement in principle, in exchange for a release of all claims
against Premier and its officers and directors, this agreement would
require Premier to issue to the defendants an aggregate of 2,250,000
shares of its common stock and requires Premier's insurance carrier to
pay $4.6 million in cash. This agreement is not final, however, and is
subject to several conditions, including the approval by the court and
execution of a final settlement agreement. If for any reason , the
proposed settlement is not consummated, and the plaintiffs obtain a
judgment, our business may be adversely affected.

In accordance with the terms of the agreement in principle to settle
class and derivative actions, we established a reserve during the
quarter ended December 31,1998 for the issuance of 2,250,000 shares of
common stock. These shares were valued at a price of $3.31 per share,
which was the closing price of our stock on November 18,1998, the
effective date of the proposed settlement agreement. We have also
included approximately $884,000 of associated legal and professional
fees in this reserve, but have not included in the reserve approximately
$4,600,000 in cash that would be paid by our insurers.


PUBLISHERS CLEARING: Consumers Have Options In Sweepstakes Class Action
-----------------------------------------------------------------------
The following is an update on the lawsuit on Publishers Clearing House
by Melissa Preddy of Detroit News:

The plot has thickened since PCH agreed to a proposed settlement in an
Illinois class-action lawsuit representing consumers nationwide. About
40 million people were mailed notices of the settlement back in August.
But last week, Michigan Atty. Gen. Jennifer Granholm filed her own
lawsuit against PCH, which might affect your decision about whether or
not to participate in what I'll call the Illinois lawsuit.

People are eligible to make a cash claim in that lawsuit if, from
February 1992 to June 1999, they ordered PCH merchandise believing it
would help their chances in the contest. Since no one knows how many
consumers will follow through with a claim -- theoretically it could be
millions -- there is a chance refunds could be only pennies on the
dollar.

The Michigan lawsuit is not a class action on behalf of Michigan
residents. But it does give Granholm a chance to be heard by the judge
in the Illinois case, arguing for a better deal for Michigan consumers.
Or, she could ask that all Michigan consumers be automatically excluded
from the Illinois lawsuit, leaving her free to bring a separate one on
behalf of Michigan. Or, she could ask that only Michigan residents who
don't make claims in the Illinois lawsuit be excluded. Unfortunately,
this is still unclear.

There are no guarantees and the deadlines are looming -- one, in fact,
is [October 18]. But before you get confused and upset, remember: even
in the best-case scenario, most consumers are liable only to get the
price of a few magazine subscriptions. And that's not worth losing sleep
over.

Meanwhile, here are your options in the Illinois lawsuit:

Do nothing. If you don't respond at all, you will automatically be
considered a member and will receive noncash compensation such as
automatic sweepstakes entries -- unless Granholm succeeds in getting you
removed from the class, and then, who knows?

Exclude yourself from the lawsuit. Write a letter, which must be
postmarked by midnight tonight, per the instructions in the settlement
notice.

File a claim for refunds on items you've ordered from PCH to help you
win sweepstakes. Remember, there is no guarantee you'll receive the full
amount you claim, or anything for that matter. The deadline for claims
has been moved to Nov. 5. Claim forms are available by calling
(800) 521-4724 weekdays, or on the Internet at www.pch.com cust
consumer1asp. The form will also be published in the Oct. 22 edition of
USA Today.

Readers say their main worry is they can't remember exactly what they've
ordered from PCH and when the purchases were made. Don't worry, said
Steven Katz, the attorney in charge of the Illinois lawsuit. The rules
aren't as strict as they seem. Just make your best estimate and if you
can't get your hands on a claim form, a letter will do. Claims
eventually will be checked against PCH computer records anyway, he said.
(The Detroit News 10-18-1999)


PUBLISHERS CLEARING: Deadline For Claims Is Extended To Nov. 5
--------------------------------------------------------------
The deadline for submitting claims under a settlement in a class-action
suit against Publishers Clearing House has been extended to Nov. 5,
plaintiffs' lawyers said. The deadline had been Monday. The suit was
filed in U.S. District Court in East St. Louis.

People who subscribed to magazines through Publishers Clearing House may
cancel the subscriptions and get a refund. Those who bought merchandise
through the company can return the goods for a refund.

Claim forms are available on the Publishers Clearing House Web site at
www.pch.com/customer/classaction.asp. The claim form can be reached by
clicking on "Document 6." The claim form will also be published in
Friday's edition of USA Today. (St. Louis Post-Dispatch 10-18-1999)


T. EATON: Wants To Be Released From Lawsuits Arising Form Insolvency
--------------------------------------------------------------------
Some creditors of T. Eaton Co. are upset that, should they accept a plan
for having the debts repaid, the retailer wants to be released from any
lawsuits arising from Eaton's fall into insolvency.

'What Eaton's wants is to be absolved from virtually everything that has
happened to creditors and shareholders if the plan is approved Nov. 19,'
said one source close to the landlord creditors.

The source noted Eaton's plan of compromise, unveiled on Oct. 8, says
that, should the plan be implemented, Eaton's, any former or current
shareholder, or the company's financial advisors would be released from
any legal claims or lawsuits arising from the business and affairs of
the company. The plan also says no one will be released should they be
judged to have committed 'fraud or wilful misconduct.' Hap Stephen,
Eaton's chief financial officer, could not be reached for comment.

Eaton's filed for bankruptcy protection in August. It is now in the last
days of a giant liquidation sale. Many of Eaton's 64 locations have
closed, and those that are still open are down to the last dregs of
merchandise.

Eaton's is divesting itself of assets to pay back creditors. It has
already signed a deal with Sears Canada Inc., which wants to purchase
the corporate entity and up to 19 Eaton's locations.

Michael McGowan, a class action lawyer not involved in the Eaton's
matter, said the retailer likely wants to be released from any potential
legal dispute, given that Sears wants a 'clean slate.'
(National Post (formerly The Financial Post) 10-19-1999)


TERAGLOBAL COMMUNICATIONS: LA Sup Ct Oks Nationwide Securities Suit
-------------------------------------------------------------------
At a hearing on October 18, 1999 in the Los Angeles County Superior
Court in a lawsuit brought by shareholders Norine Lam of Mountain View,
Calif., and Clifton Kees Jr. of Wichita Falls, Texas, Judge Elihu M.
Berle certified a nationwide class of shareholders seeking restitution
of monies paid to San Diego-based Technovision Communications Inc., now
TeraGlobal Communications Inc. (Nasdaq:TGCC.BB).

The action was filed in June 1998, to rescind the purchase of stock and
recover funds paid pursuant to an offering managed by an unlicensed
telemarketing operation hired by the issuer. The court set further
hearing dates and the parties were ordered to prepare and submit a joint
proposal for the scheduling of trial and further discovery in the case.

According to plaintiffs' counsel, Los Angeles-based Ashley D. Posner and
Barbara Brudno of the Law Offices of Ashley D. Posner, the plaintiff
class purchased $ 4 million worth of stock from the issuer through the
telemarketing operation. The stock is currently trading under the
purchase price of $ 10 per share (adjusted for a reverse two-for-one
split). The suit seeks restitution of the amount paid, interest and
attorney's fees.

CONTACT: Law Offices of Ashley D. Posner, Los Angeles Ashley D. Posner,
310/475-8520 TICKERS: Nasdaq:TGCC.BB


TOBACCO LITIGATION: S&P To Rate Tobacco Bonds As High As 'A'
------------------------------------------------------------
After conducting an extensive analysis of all known rating risks,
Standard & Poor's announced that bonds secured by tobacco settlement
revenues can achieve ratings as high as 'A.' "While we do see a number
of risks associated with securitizing the tobacco settlement revenues,
including risks related to the price of cigarettes and litigation
against the industry, we see enough strengths in the transactions we are
seeing to rate at the 'A' level," said Richard Gugliada, managing
director in Standard & Poor's Structured Finance Department.

Standard & Poor's expects to announce ratings to individual municipal
debt issues of tobacco bonds in the coming weeks.

Debt rated 'A' reflects Standard & Poor's opinion of a strong ability to
repay debt on time and in full but that the issuer is more susceptible
to the adverse effects of changes in circumstances and economic
conditions than more highly-rated debt. The highest rating assigned by
Standard & Poor's is triple-A. Standard & Poor's has been working on the
criteria needed to rate tobacco bonds since 46 states and a number of
local governments negotiated a multi-billion-dollar Master Settlement
Agreement (MSA) with the major U.S. tobacco manufacturers in November
1998. This agreement has led several local governments to pursue the
unique opportunity to accelerate the funds due and payable under the
agreement by securitizing the agreement's payment flow, a trend that
will likely continue.

"To date, municipal governments' utilization of securitization
techniques has been limited and generally restricted to delinquent tax
lien sales, stranded cost financings and a few future flow
transactions," said Steven Murphy, managing director in Standard &
Poor's Public Finance Department. "However, the existence of the MSA may
serve to change this trend." Standard & Poor's ratings on tobacco bonds
will be based upon the following factors:

* The price elasticity of demand for cigarettes and the uniqueness of
  the product. Although domestic shipments of cigarettes have declined
  over the last several years, the low price elasticity of the product
  nevertheless reveals a consistent underlying demand for the product
  despite the recent price increases, a significant portion of which
  have been driven by the MSA. Demand for the product should continue
  despite the potential for continued price increases, which could
  result from, among other things, future litigation payments.

* The limited joint and several obligation characteristics of the
  Master Settlement Agreement. The MSA provides for payments to the
  Settling States, levied on a per unit basis, based on a market share
  allocation among participating manufacturers. To the extent that a
  company ceases to manufacture cigarettes, the market share of such
  company would be reallocated among remaining manufacturers. As long
  as the remaining companies continue to participate in the MSA, there
  should only be a temporary loss of settlement revenues, which would
  eventually be recaptured to the extent the remaining participating
  companies absorb the market share of the lost company. A properly
  structured securitization could absorb the temporary loss settlement
  revenues caused by the unwinding of a manufacturer. The features of
  the MSA facilitate an approach which accounts for the overall
  strength of the industry as opposed to a purely company-specific
  approach.

* The strong incentives to participate in the MSA as provided by the
  Model Statute. The Model Statute, Exhibit T to the MSA, provides a
  strong incentive for manufacturers to participate in the MSA, in the
  states that choose to adopt it. The Model Statute requires a non-
  participating manufacturer to establish a qualified escrow account,
  which is funded through an annual deposit based upon the company's
  cigarette sales in a given year. This reserve fund is intended to
  prevent a non-participating manufacturer from achieving an unfair
  cost advantage in relation to participating manufacturers, as well as
  provide the state with a source of recovery to the extent that a non-
  participating manufacturer is proven to be liable for damages.

* The limited predictability of domestic shipments of cigarettes over
  the long term. As the relative predictability of cigarette sales
  decreases over time, a securitization that is secured by cigarette
  shipments over an extended period of time, e.g., 40 years, would be
  prevented from achieving a rating higher than 'A.' The limited
  predictability is a result of uncertainties, including the potential
  for price increases resulting from any future litigation, imposition
  of future taxes by federal, state and local governments, and the
  effect of smoking prevention programs and education initiatives.

* The potential impact of present and future litigation facing the
  cigarette industry. Currently, the industry faces a number of large
  lawsuits, including the Engle class-action suit in Florida, and a
  suit filed by the Justice Department on September 22, 1999. Although
  the industry has historically been successful in defending itself
  against individual lawsuits, it is difficult to reasonably predict
  the outcome of all present and future litigation.

* Transaction-specific enhancement. The rating received by a particular
  transaction will also be dependent upon the levels of debt service
  coverage provided by the transaction's structure. For example, a
  transaction should have a reserve mechanism in place that is
  sufficient to cover a number of contingencies, including
  unanticipated shipment declines, potential litigation, etc.

* Bond Maturity. As stated above, the level of predictability of
  certain events decreases over time. Therefore, a transaction with a
  shorter maturity has a higher potential for achieving an 'A' rating
  than a transaction with a longer maturity, due in part to the ability
  to more accurately forecast outcomes over the short term.


Y2K LITIGATION: Canadian Insurance Journal Talks About Claims Handling
----------------------------------------------------------------------
Oh no, not another Y2K article . . . Most of the IT testing is already
done.

Now insurers, brokers and adjusters must look ahead to handling claims
when the date flips to 2000.

Not since Cinderella was at the ball will there be such interest in and
anxiety about what will happen at the stroke of midnight on December
31st of this year.

The Year 2000 date recognition problem presents a unique challenge to
insurers and their intermediaries ("Year 2000" is used here to describe
all dates that systems and components may misinterpret or tht may cause
failures or errors; for a list of currently identified dates see
www.fcc.gov/year2000/dates.html). Like other businesses, insurers have
devoted considerable time, effort and money to the Y2K problem. They
have analyzed, modified and tested systems, considered and possibly
modified products (insurance policies) and assessed the vulnerability of
their investment portfolio.

Insurers, however, will also be primary targets for claims and lawsuits
if things go wrong and policyholders either suffer or cause damage.
Unlike natural disasters, there is no precedent to enable them to
predict the extent let alone the likely location of failures and the
damage that will result from those failures. What aspects of the claims
handling process and legal experiences should insurers, brokers and
adjusters be aware of and preparing for as the Year 2000 approaches.

As the case of Fine's Flowers Ltd. versus General Accident Assurance Co.
of Canada ( 1978) shows, one of the legal duties of brokers is to act
reasonably and responsibly to ensure that their clients have the
insurance coverage that they require. In quoting from a previous
decision, Wilson J. said: "'The solution lies in the intelligent
insurance agent who inspects the risks when he insures them, knows what
his insurer is providing, discovers the areas that may give rise to
dispute and either arranges for the coverage or makes certain the
purchaser is aware of the exclusion.' I do not think this is too high a
standard to impose upon an agent who knows that his client is relying
upon him to see that he is protected against all forseeable insurable
risks."

This duty requires that brokers understand the business of their clients
and the insurance policies of the insurers that they represent. It also
requires them to act responsibly to match the coverage to the client's
business and exposure. For the Year 2000 problem this has been made much
more difficult. Insurers, like others, are not certain what Year 2000
events will give rise to claims and exactly how courts will interpret
policy terms. Because the insurance market has been relatively soft in
Canada during the last few years, insurers have been varied in their
responses.

                           Unique event

Some insurers have imposed or may impose date recognition/processing
exclusion clauses. Some may seek to do it mid-term . The extent of the
exclusion varies from insurer to insurer. Some insurers conduct Year
2000 due diligence as part of the renewal process and others seek to
include Year 2000 preparedness questions into their renewal application
process. It is the broker's duty to work with clients to understand and
advise them of Year 2000 exposures they are likely to face and how their
policy may or may not respond.

If there is the possibility of misrepresentation as part of the
application process, it is the broker's duty to advise clients on how to
remedy the error and the potential consequences. In doing so, brokers
may first rely on the stated positions of the insurers that they
represent, but this may not in and of itself be sufficient. They have to
independently apply their mind and experience to the matter and, if
necessary, take steps to educate themselves on the issues. There are
plenty of resources, seminars and publications available to do this.

It is now well established that the duty of outmost good faith applies
to the claims handling process. Adjusters and brokers, to the extent
that they become involved in handling Year 2000 claims, owe a duty to
deal with insurance claims in a fair, expeditious and efficient manner.
The failure to do so will expose them and the insurers they represent to
litigation, claims for punitive damages and possible regulatory
sanction. This duty requires adjusters and brokers to pursue a range of
initiatives.

To recognize that they are first line of contact with the insured who
has a claim. As such, they have a unique opportunity by handling the
claim well to prevent it from blossoming into a lawsuit - or by
mishandling or not handling the claim to steer the client elsewhere (a
lawyer) for resolution.

To ensure that their businesses are up and running at the crucial dates
and recognizing that some events giving rise to claims may require quick
action. These may occur perhaps right around midnight of December 31 st,
and adjusters and brokers may need to take extraordinary steps to ensure
their availability, communicate those steps to their clients and ensure
that the lines of communications with their insurers are open.

To train their staff to understand their duties, the extent of coverage,
the claims process and how to deal with clients who may be under stress.
Checklists and training are essential - dry runs and simulations may be
appropriate.

To advise clients to retain their old policies; the event may be one
that older "occurrence" policies may respond to.

To recognize that some commentators have advised insureds to consider
giving 'preemptive' claims notices on "claims made" policies. While this
might be appropriate in some circumstances, in others it will expose the
insured and may result in a gap in coverage be very careful in how you
respond or initiate this type of notice;

To be fair, straightforward and understanding-the claimant should be
made to understand that the Year 2000 is a unique event and that
everyone is doing their best to understand and respond to it. If it is
your best judgement that there is no coverage, advise the claimant
clearly and with reasons. If there is some uncertainty concerning the
claim, advise the claimant of this. In either case, the claimant may be
able to take alternative action to mitigate the damage but what his next
response will be may well depend on how you handled his/her claim;

To communicate with your clients on a regular basis - let them know how
you are preparing to help them . If nothing happens, you will still reap
goodwill and perhaps referrals and new business by doing so.

To ensure that there is a permanent record to show a court the
procedures that were in place to handle claims and how those procedures
were applied to a particular claim that was denied in whole or in part.

If your actions are alleged to have fallen short of your legal duties,
they will, by necessity, be looked at in hindsight in a court of law.
Govern yourself accordingly. At each step, consider how your actions,
communications and procedures will be viewed if looked at in this way.
How will you prove, perhaps months later, what you said or did and the
circumstances and reasons for it?

While the Year 2000 problems bring challenges and possibly exposures to
insurers, brokers and adjusters, they also bring opportunities. Those
who are prepared - and perceived to be so by their clients will retain
and likely enhance their business relationships. Those who are not will
lose the goodwill of their customers and may be exposed to a range of
lawsuits, which could include class action. (Canadian Insurance,
September 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
Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc.,
Washington, DC.  Theresa Cheuk and Peter A. Chapman, editors.

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

This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers.

Information contained herein is obtained from sources believed to be
reliable, but is not guaranteed.

The CAR subscription rate is $575 for six months delivered via e-mail.

Additional e-mail subscriptions for members of the same firm for the
term of the initial subscription or balance thereof are $25 each.  For
subscription information, contact Christopher Beard at 301/951-6400.


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