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/raid1/www/Hosts/bankrupt/CAR_Public/991119.MBX C L A S S A C T I O N R E P O R T E R Friday, November 19, 1999, Vol. 1, No. 203 Headlines ADAPTEC INC: Vows To Vigorously Defend Securities Suit In CA AUSSIE GOVT: Opposition Proposes Suit For Self Governing For Schools BONE SCREW: Sp Ct Balks On Review Of Fraud-On-The-FDA Claims & Asks DOJ BOSTON POLICE: Sued For Arresting Veterinarian On Scalping Charge CAREMATRIX CORP: Lockridge Grindal Files Securities Suit In MA CHARLES SCHWAB: Krause & Kalfayan File Suit In CA For TGLO Investors COLEMAN CO: Dela Ct Hears But Not Rule On Settlement For Suit Re Merger DAIRY COMPANIES: 8th Cir Upholds Denial Of Minn. Antitrust Suit FEDERAL CUSTOMS: Ad Executive Cites Her Race At Newark Airport Search GATX CORP: Awaits Approval Of Settlement For Car Fire In New Orleans HMO: United HealthCare Sued In Utah Over Information On Coverage HMO: United Healthcare Sued In Alabama Under Mob-Busting Law HOLOCAUST VICTIMS: Talks End Without Pact; Gaps Narrow INTELECT COMMUNICATIONS: Responds To Announcement On Securities Suit MICROSOFT CORP: CA Buyer Files Antitrust Suit In Orange County Sup. Ct. MICROTEST INC: Intends To Vigorously Defend Securities Suits In Arizona NATHANS FAMOUS: Will Defend Vigorously Fla. Suit Over Miami Subs Merger NY CITY: Street Crimes Unit Alleged Of Targetting Black & Latino Men OPTUS: Aussie Rugby League Defers Action To Retrieve Pay Until Nov 26 REDFORD TOWNSHIP: Homeowners Sue For Damages Due To Sewage Backups SECURITY GUARDS: LA Suit Says The Homeless Are Harrassed And Assaulted XEROX CORP: Contract Workers File Suit In Conn. Seeking ERISA Benefits * Lobbyists Use State Farm Case To Fight For Class Action Reform Bill * Paper Says United Health Group Shows Market Can Force HMO Quality ********* ADAPTEC INC: Vows To Vigorously Defend Securities Suit In CA ------------------------------------------------------------ A class action lawsuit is pending in the United States District Court for the Northern District of California against the Company and certain of its officers and directors. The class action lawsuit alleges that the Company made false and misleading statements at various times during the period between April 1997 and January 1998 in violation of federal securities laws. The complaint does not set forth purported damages. The Company believes the class action lawsuit is without merit and intends to defend itself vigorously. AUSSIE GOVT: Opposition Proposes Suit For Self Governing For Schools -------------------------------------------------------------------- New law may be needed to end self-running schools. The Victorian government may have to pass a new law to strip 51 state schools of self-governing status after legal advice showed the coalition had granted them unprecedented protections. The state opposition vowed to back the schools in a proposed class action law suit against the government for damages from any losses they faced. New Education Minister Mary Delahunty may face a protracted court fight to enforce her pledge to end the previous government's school self-administration experiment from next year. The new Labor government believes giving state schools the option of governing themselves creates an elitist group of schools in the education system. According to legal advice to the opposition, the government cannot return the 51 schools that signed contracts to the state system without repealing Jeff Kennett's government's Education (Self-Governing Schools) Act. The success of such a move is not guaranteed - three of the schools are in Mildura, whose independent member Russell Savage would have to support the bill for it to pass through the lower house. It then faced a coalition-dominated upper house. The act, passed last year, offered school councils greater control over employing staff, including principals, investing money and entering partnerships with business. But according to the legal advice, the act also gave councils of self-governing schools a higher degree of protection from the adverse actions of governments than those which remained in the Education Department system. The government could divest councils of self-governing status only if they did not comply with their obligations under educational services agreements signed with the Education Department. "It would be unlawful and improper for a minister to purport to strip a school council of the powers conferred on it by the Education Act without warrant under that Act," barrister Alan Sandbach's advice stated. Education spokesman Phil Honeywood said Ms Delahunty had "perpetrated an enormous bluff on 51 schools and over 20,000 students". Comment was being sought from the government. Ms Delahunty told parliament last week all valid existing three-year contracts would be honoured. But a week later each of the 51 schools were told they would have the special $30,000 initial self-governing funding plus $125 per student withdrawn from December 20, Mr Honeywood said. Mr Honeywood said the opposition would pursue the matter through the courts. He will meet with the presidents of 35 of the schools to discuss the action. (AAP Newsfeed Nov-17-1999) BONE SCREW: Sp Ct Balks On Review Of Fraud-On-The-FDA Claims & Asks DOJ ----------------------------------------------------------------------- The U.S. Supreme Court has held off on deciding whether it will hear a exhausted bone screw debate, in the interim asking the Justice Department for help in determining the extent to which plaintiffs can sue manufacturers of the devices for fraud on the FDA (Buckman Co. v. Plaintiffs' Legal Committee, No. 98-1768, U.S. Sup.). In an order issued Oct. 4, the high court referred the case to the Office of the Solicitor General, which is expected to give its opinion in the next several months. A final decision as to whether the Supreme Court will grant review of the case is pending review of the government briefs. The decision was issued without explanation. The writ of certiorari, filed in May on behalf of the Buckman Co. Inc., seeks reversal of a November 1998 Third Circuit U.S. Court of Appeals decision that found fraud-on-the-FDA claims against bone screw manufacturers were not preempted by the Medical Device Amendments to the Food, Drug and Cosmetic Act (FDCA). Thousands of plaintiffs had previously claimed that while representing AcroMed Corp. in a pedicle screw device application process before the FDA, Buckman made misrepresentations to the FDA in an attempt to have its Variable Screw Placement Spinal Plate Fixation System approved for marketing. A decision by the U.S. District Court for the Eastern District of Pennsylvania dismissed all of those claims, but the decision was reversed and the claims reinstated by the Third Circuit's November 1998 ruling, leading to the petition now before the U.S. Supreme Court. In what it called a "narrow holding," the Third Circuit said the FDCA did not necessarily preclude state common law claims arising from alleged misrepresentations to the FDA and that relevant state law could determine whether such claims are viable in each case. Buckman now moves in the Supreme Court to determine whether the Medical Device Amendments - which Buckman says "expressly preempt any state requirement that relates to safety or effectiveness of devices and is different from, or in addition to" federal requirements - exclude state requirements that are imposed through tort laws of general applicability. The petition for certiorari was filed by Kenneth S. Geller and Alan E. Untereiner of Mayer, Brown & Platt in Washington, D.C., Scott Buresh and Fred Feller of Buresh, Kaplan, Jang, Feller & Austin in Berkeley, Calif., and George P. Noel of Noel & Hackett of Media, Pa. (Mealey's Emerging Drugs & Devices, Vol. 4, No. 20, Oct-15-1999) BOSTON POLICE: Sued For Arresting Veterinarian On Scalping Charge ----------------------------------------------------------------- A 44-year-old Canton veterinarian sued three Boston police officers on November 17 for arresting him this past summer for selling one spare $18 Red Sox ticket at face-value. The class-action lawsuit filed in Suffolk Superior Court by Gary A. Lainer seeks to stop the Boston police from making future arrests of ordinary ticket-resellers like himself, and his case appears to be the first major legal challenge to the Boston Police Department's interpretation of the state's 1924 statute. "I went to Fenway for a leisurely afternoon at the ball park and I left with a police arrest," said Lainer, an avid Red Sox fan who said he has never been arrested before for anything. A district court judge in Roxbury ultimately dismissed the criminal scalping charges that were filed against Lainer, who offered the ticket to a stranger at Fenway on July 31 before a game against the New York Yankees. Lainer said the stranger gave him a $20 bill, but then fled without getting the $2 in change as soon as officers approached them. While Lainer acknowledges trying to move away when the police officers approached him, he said three officers handled him roughly at the ball park and one actually punched him in the side. Lainer said he was fingerprinted, handcuffed and chained to a wall during his booking at the station. Lainer's attorney, Robert Mendillo of Boston, said he was appalled at his client's treatment by the police, particularly the punching, but he has not accused officers of brutality. Two Boston police officers named in the suit are Christopher Crager and Christopher Macneil. Another is referred to as John Doe, because Mendillo said he has yet to identify him. Police Commissioner Paul Evans is also named in the suit in his role as the head of the department. Mendillo said the main focus of the lawsuit is to expose the police department's wrongful interpretation of the scalping law. Boston police spokesman Thomas Sexton said last night the department has not had a chance to review the lawsuit and therefore cannot comment. The state's law on scalping has been the subject of much dispute in recent months. Late last month, several law enforcement attorneys who are familiar with the law said they disagree with the Boston police interpretation. The attorneys said ordinary citizens, who sell a ticket at face value or below, are not violating the law, as they interpret it. Meanwhile, Boston police, as well as Foxborough police, who oversee the New England Patriots stadium, have stood by their interpretation that any ticket resale - even at face-value or below - can be conducted only by individuals who have a reseller's license issued by the state. Governor Paul Cellucci this fall filed a bill that would specifically legalize face-value sales in most cases, and allow public arenas, such as Fenway Park, to set up a separate ticket resale zone for face-value sales. Lainer said the ordeal left him angry and committed to changing the Boston police's behavior with ordinary ticket re-sellers like himself. "I'm not a ticket scalper," he said. "I'm a veterinarian." (The Boston Globe Nov-18-1999) CAREMATRIX CORP: Lockridge Grindal Files Securities Suit In MA -------------------------------------------------------------- The following is an announcement by Lockridge Grindal Nauen P.L.L.P. on November 17, 1999: Pursuant to Section 21D(a)(3)(A)(i) of the Securities Exchange Act of 1934, Lockridge Grindal Nauen P.L.L.P. hereby gives notice that a class action complaint has been filed against CareMatrix Corp. (Nasdaq:CMDC) in the United States District Court for the District of Massachusetts. The lawsuit was filed on behalf of all persons who purchased CareMatrix Corp. securities from October 29, 1998 through October 7, 1999. The Complaint charges that defendants issued materially false and misleading statements in violation of the federal securities laws, specifically, sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The suit alleges that CareMatrix improperly recorded development fees, thereby artificially inflating the price of CareMatrix common stock during the Class Period. Plaintiffs are represented by the law firm of Lockridge Grindal Nauen P.L.L.P. Any member of the proposed Class who desires to be appointed lead plaintiff in this action must file a motion with the Court no later than sixty (60) days from November 3, 1999. If you have questions or information regarding this action, or if you are interested in serving as a lead plaintiff in this action, you may call or write: Karen M. Hanson Lockridge Grindal Nauen P.L.L.P. 100 Washington Avenue South Suite 2200 Minneapolis, MN 55401, (612) 339-6900 or by e-mail at kmhanson@locklaw.com CHARLES SCHWAB: Krause & Kalfayan File Suit In CA For TGLO Investors -------------------------------------------------------------------- The following is a notice by Krause & Kalfayan and Finkelstein, Thompson & Loughranon November 17, 1999: Notice is hereby given that a class action has been commenced in the United States District Court for the Southern District of California entitled, Aaron Abada v. Charles Schwab & Co., Inc., Case Number 99-CV-0940 K (JAH), on behalf of all investors who maintained online brokerage accounts with Charles Schwab & Co., Inc. ("Schwab") on November 13, 1998 and who placed market orders to buy or sell shares of theglobe.com, Inc. (Nasdaq: TGLO). Plaintiff Aaron Abada brings this action on behalf of himself and a class of all individuals who had accounts with Schwab on November 13, 1998 and (1) who placed market orders to purchase or sell TGLO through Schwab's Web site; (2) whose market orders were delayed more than one minute and executed at disadvantageous prices, or whose market orders were not confirmed instantaneously; and (3) who were damaged thereby. Excluded from the Class are Schwab, any entity in which Schwab has a controlling interest, and any of Schwab subsidiaries, affiliates, and officers and directors. The complaint alleges that each Class member, including Plaintiff, has been damaged by: (1) his or her inability to access his or her accounts during trading hours and (2) Schwab's deceptive advertising about its capacity to execute trades within seconds and accessibility 24 hours a day. Plaintiff is represented by the law firms of Krause & Kalfayan and Finkelstein, Thompson & Loughran. If you are a member of the Class described above, and if you meet certain other legal requirements, you may, not later than 60 days from [date of notice], move the Court to serve as a lead plaintiff. 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 attorneys for plaintiff, James C. Krause or Patrick N. Keegan at KRAUSE & KALFAYAN, 1010 Second Avenue, Suite 1750 San Diego, CA 92101, Tel: (619) 232-0331 or visit http://www.lawyers.com/krausekaflayanor e-mail James C. Krause at: jkrause@krausekalfayan.com or Patrick N. Keegan at: pkeegan@krausekalfayan.com or Burton H. Finkelstein at: bfinkelstein@ftl.com COLEMAN CO: Dela Ct Hears But Not Rule On Settlement For Suit Re Merger ----------------------------------------------------------------------- Beginning on June 25, 1998, several class action lawsuits were filed in the Court of Chancery of the State of Delaware by minority stockholders of Coleman against Coleman, Sunbeam and certain of their current and former officers and directors. These actions were consolidated into a single class action lawsuit. The actions allege, among other things, that the consideration payable to the public stockholders of Coleman in the proposed Coleman Merger is no longer fair to such stockholders as a result of the decline in the market price of Sunbeam common stock. In October 1998, Coleman and Sunbeam entered into a memorandum of understanding to settle, subject to court approval, the consolidated class action lawsuit. The court hearing on the settlement was held on September 29, 1999, but the court has not ruled on the settlement. Under the terms of the proposed settlement, if approved by the court, Sunbeam will issue to the minority stockholders of Coleman warrants to purchase 4.98 million shares of Sunbeam common stock at an exercise price of $7.00 per share, subject to certain anti-dilution provisions. These warrants will generally have the same terms as the Parent Holdings Warrant and will be issued when the Coleman Merger is consummated, which is now expected to occur during the second half of 1999. Any shareholder who does not exercise appraisal rights under Delaware law will receive the warrants. There can be no assurance that the court will approve the settlement as proposed, although such approval is not a condition to the consummation of the Coleman Merger. The consummation of the Coleman Merger is conditional upon a registration statement under the Securities Act of 1933 (the "Securities Act") to register the shares of Sunbeam common stock to be issued in the Coleman Merger (the "Registration Statement") becoming effective in accordance with the provisions of the Securities Act. Sunbeam has filed the Registration Statement, but is uncertain when the Registration Statement will become effective. However, it is anticipated the Coleman Merger will be completed during the second half of 1999. Upon consummation of the Coleman Merger, Coleman will become an indirect wholly-owned subsidiary of Sunbeam. As a result of the Sunbeam Acquisition, all previous arrangements with Parent Holdings and its affiliates for the provision of services to Coleman were terminated. DAIRY COMPANIES: 8th Cir Upholds Denial Of Minn. Antitrust Suit --------------------------------------------------------------- The 8th U.S. Circuit Court of Appeals denied an attempt by attorneys to form a class-action suit against dairy companies on antitrust grounds, upholding a federal district court's dismissal of the suit. In the decision, filed in St. Paul, the appeals court ruled that the district court in Minnesota had not erred in twice dismissing the suit or in denying the lone remaining plaintiff, a former owner of Rainy Lake One Stop, additional time to find plaintiffs for a class action. The court also concluded that the former owner of the International Falls convenience store lacked standing to bring a class-action suit against the dairies. Named in the suits, which date back to 1996, were the major suppliers of drinking milk in Minnesota, including Marigold Foods, Land O'Lakes and Schroeder Brothers. In an earlier action, several of the dairies agreed to donate milk to Minnesota food shelves to settle a complaint brought by the Minnesota Attorney General's Office. FEDERAL CUSTOMS: Ad Executive Cites Her Race At Newark Airport Search --------------------------------------------------------------------- A black advertising executive accused United States Customs officers of subjecting her to an extensive pat-down search for drugs at Newark International Airport solely because of her race. The executive, Yvette Bradley, said that after she returned from a trip to Jamaica in April, several customs agents interrogated her, tore through her luggage and then patted her down in a search for drugs, delaying her for an hour and a half. "I should have worn my blond wig and blue contacts and I probably wouldn't have been stopped," she said. Ms. Bradley, 32, an art director at an advertising firm in Manhattan, SpikeDDB, a partnership with DDB Needham, filed a legal notice November 17 against the Federal Customs Service seeking $500,000 in damages. The agency has six months to respond before a damage suit can be filed. In an interview after a news conference at the New York Civil Liberties Union office on Broad Street, she said: "It was very invasive. They touched everything. It was very humiliating." She said the inspector who patted her down was a woman. Her case is being handled by the civil liberties union and by lawyers with a Roseland, N.J., law firm, Lowenstein Sandler. Although Ms. Bradley's legal initiative is one of the first involving an airport search in the New York metropolitan area, about a dozen lawsuits filed in the last two years have accused customs offices elsewhere of racial bias, several legal experts and officials said. Most notably, a class-action suit was filed last year in Chicago on behalf of 83 black women who said they were strip-searched or patted down by customs agents, inspectors and supervisors at O'Hare International Airport. Dennis Murphy, a spokesman for the Federal Customs Service, declined to comment on Ms. Bradley's claim or any continuing legal matter. But he said agency officials have previously reviewed airport searches and found no evidence of racial bias. "We don't tolerate racial profiling," he said. "It's not a part of our policy and should not be part of our practice." The lawsuits and complaints of racial bias are part of the reason that Raymond W. Kelly, the federal customs commissioner, appointed an independent committee in April to examine the agency's search policies. The committee's findings are expected by the end of the year, Mr. Murphy said. Of the 71 million passengers who pass through the nation's international terminals each year, customs agents pull aside 3 percent to open their luggage or search them physically, agency records show. The number of personal searches, which was 50,000 in fiscal 1998, dropped to about 25,800 in fiscal 1999. Mr. Murphy attributed that decline to recent procedural changes that require closer supervision and oversight of the search process. For instance, an inspector must now get a supervisor's permission before patting down a passenger. Because of national security concerns, federal regulations give customs inspectors more leeway in conducting searches than police officers have, several legal experts said. The United States Supreme Court has ruled that inspectors need have no cause for suspicion before patting down a clothed passenger, but must have reasonable suspicion to search more closely. Mr. Murphy said the agency sets a higher standard than the law by requiring that agents have some suspicion before any physical check of passengers. Legal experts said the customs regulations were still less demanding than the probable cause that is required before a police officer can obtain a search warrant. Reginald T. Shuford, a lawyer who specializes in racial profiling litigation for the national civil liberties office, said the "unbridled discretion" of customs officers could lead to discriminatory practices such as deciding to search an airline passenger just because of race. "It happens every day," he said. "I felt absolutely helpless," Ms. Bradley said. "There are so many subtle things that happen to me because of my skin color, and it's hard to prove." Ms. Bradley said in the interview that a customs official told her later that she was subjected to the drug search because she was wearing a striking headpiece of tan, turquoise and lavender yarn twisted loosely into braids. But, she said, her headpiece was not inspected during the search and officers stopped other black women on her flight. (The New York Times, Section B; Page 4; Column 4; Metropolitan Desk Nov-18-1999) GATX CORP: Awaits Approval Of Settlement For Car Fire In New Orleans -------------------------------------------------------------------- General American Transportation Corporation ("GATC") and GATX Terminals Corporation ("Terminals"), each a subsidiary of GATX Corporation (the "Company"), together with three other defendants have entered into a preliminary settlement agreement with the Plaintiffs Management Committee with respect to the matter of in re New Orleans Train Car Leakage Fire Litigation (No. 87-16374), Civil District for the Parish of Orleans, a class action lawsuit arising out of a September 1987 tank car fire in the City of New Orleans. The Preliminary Settlement Agreement sets forth the terms, conditions and provisions of a settlement of all actual and potential claims by members of the class against the compromising defendants, subject to preliminary approval by the trial court and final approval by the trial court following a fairness hearing as required by the Louisiana Code of Civil Procedure. A sixth defendant has entered into a separate preliminary settlement agreement. A trial of the claims of twenty of the plaintiffs (Phase I) had resulted in a jury verdict in September 1997 which awarded the twenty plaintiffs approximately $1.9 million in compensatory damages plus interest from the date of the accident. In addition, the jury had awarded punitive damages (Phase II) totaling $3.4 billion against five of the nine defendants, including $190 million as to Terminals. In July of 1999, a trial of the claims of a second group of twenty plaintiffs (Phase III) resulted in a jury verdict which awarded the second group of plaintiffs $344,300 in compensatory damages. It is anticipated that trials of the claims of additional groups of plaintiffs against those defendants who have not settled will be scheduled later this year. The Company believes that should the Preliminary Settlement Agreement be approved, the amounts required to be paid by it are not likely to be material to the Company's consolidated financial position or results of operations. The incident resulted in no deaths or significant injuries, and only minor property damage, but did result in the overnight evacuation of a number of residents from the surrounding area. If the proposed settlement is not approved, GATC and Terminals will aggressively defend any future trials and pursue post-judgment review of the compensatory and punitive awards and, if necessary, appeal of any final judgment. HMO: United HealthCare Sued In Utah Over Information On Coverage ---------------------------------------------------------------- Lawsuit filed against United HealthCare: United HealthCare, the No. 2 U.S. health insurer, is the target of a lawsuit seeking to prove it failed to provide sufficient information to its members about its coverage decisions. The suit filed in U.S. District Court in Utah seeks class-action status. It claims United wouldn't provide information as required by federal law to justify its refusal to cover medical expenses for a child of one of its members. The Utah suit was brought on behalf of Shaun Mann, whose father, N. Clynn Mann, was a member of Metrahealth, an insurer bought by United in 1995. United couldn't be reached for comment. In a quarterly filing with the Securities and Exchange Commission, United also said it plans to eliminate 5,200 jobs in total under a corporate reorganization begun last year that divided its businesses into six divisions. United, which had 29,226 employees as of the end of last year, said it cut about 3,300 jobs as of Sept. 30 and plans to complete the job cuts by the end of next year. HMO: United Healthcare Sued In Alabama Under Mob-Busting Law ------------------------------------------------------------ A lawsuit filed against United Healthcare Wednesday alleges that the insurer interferes with doctors' medical judgment and hurts their relationships with patients. The case, filed in U.S. District Court for the Northern District of Alabama, is the latest in a series of lawsuits filed against health insurers under federal anti-racketeering law. Lawyers for the doctors claim that United Healthcare is more concerned about costs than patient care and places burdensome restrictions on medications and referrals to specialists. Doctors who don't abide by the restrictions risk being dropped by United Healthcare, potentially losing a major source of revenue. "It's nothing more than extortion," says Birmingham lawyer Archie Lamb. "There are economic incentives and disincentives to get doctors to forsake what is in the best interests of their patients." United Healthcare spokesman Jay Silverstein says the company has not yet seen the lawsuit and would not comment on pending litigation. The case comes a week after United Healthcare, the nation's second-largest health insurer, surprised some in the industry by dropping a commonly held requirement that doctors seek its approval for most tests, procedures and hospitalizations. The case joins at least two other cases against insurers now pending under the federal Racketeer Influenced and Corrupt Organization Act, known as RICO. The United Healthcare case, which seeks class-action status, was filed on behalf of Jerry Harrison, a family practitioner in Haleyville, Ala. It seeks unspecified financial damages. Harrison, whose United patients make up at least 12% of his business, says United frequently changes drugs on its approved list and limits referrals to certain specialists, eroding "the almost sacred bond between the doctor and the patient." Lawyers familiar with RICO say these cases may be difficult to prove. "The extortion theory is a tough nut to crack," says Andrew Weissman, a Washington, D.C., lawyer. "It's the same statute used when someone tries to collect debts by breaking arms." (USA Today Nov-18-1999) HOLOCAUST VICTIMS: Talks End Without Pact; Gaps Narrow ------------------------------------------------------ Lawyers for Nazi-era slave and forced laborers have almost halved their monetary demands for settling compensation claims against German companies, bringing the proposed figures close to the range of Germany's offer. Although Germany officially raised its compensation offer from $3.2 billion to $4.2 billion, proposals of up to $5.3 billion were discussed during two days of negotiations that ended Wednesday. Lawyers have demanded between $5.3 billion and $7.9 billion. ''A negotiated settlement now seems attainable,'' said U.S. government envoy Stuart Eizenstat. ''The two sides have narrowed their differences.'' The sides haven't agreed on a figure because they have different ideas as to what the compensation would cover. The companies want complete legal immunity from all future claims relating to World War II actions, while lawyers say the money would only cover compensation for slave and forced laborers. Lawyer Edward Fagan said the companies would have to pay more to get the broad legal protection that they want, including the settlement of unpaid insurance claims and bank accounts seized by the Nazis. ''The more claims they want included and the more (legal) protection they want, the further up the scale they have to go,'' he said. However, German envoy Otto Lambsdorff called the lawyers' figures unrealistic. Industry officials also said the demands would have to be lower. Before the round of talks, lawyers had been asking for more than $12 billion. The sides agreed to mull over the offers during the next three weeks. No further meeting date or location was set. ''We hope that at the end of the three-week period, we will have reached the long-delayed agreement,'' said Lambsdorff, who was to meet with Eizenstat again next week in Washington. All parties to the talks have acknowledged the urgent need to resolve the issue. The victims' average age is 80, Eizenstat said. A German Jewish leader, Michel Friedman, criticized the delay and blamed German industry for ''unbearable and incomprehensible'' behavior. Under the current offer of $4.2 billion, Lambsdorff said the government would pay $1.6 billion and industry would pay the rest. The spokesman for German companies contributing to the fund, Wolfgang Gibowski, said his side was still trying to get more German firms to sign on to the fund, which has so far only raised $1.1 billion from industry. Manfred Gentz, chief financial officer at DaimlerChrysler, said it would take at least three to four months to raise the money from German firms once officials agreed on a final amount. Fagan said the lawyers drastically reduced their demands because some of the groups representing laborers which include Eastern European governments, Israel and Jewish groups had shown a willingness to accept a smaller offer. The higher German offer also demonstrated their willingness to be flexible, he said. German companies proposed the compensation fund in February under pressure of class-action lawsuits in the United States. About 50 firms, 17 of which have been publicly identified, have signed on to contribute to the fund, which aims to compensate between 1.5 million and 2.3 million victims. The victims include 235,000 slave laborers, or people who were expected to be worked to death in concentration camps, and hundreds of thousands of other forced laborers, mostly non-Jews from Eastern Europe. Although Germany has already made $60 billion in payments, pensions and other programs for war crimes, there has never been compensation for the estimated 12 million people put to work to help Nazi Germany's war effort. Participants in the talks include the German and U.S. governments, class-action lawyers, German industry, Jewish groups, Israel, Ukraine, Poland, Russia, Belarus and the Czech Republic. (AP Online Nov-18-1999) The Atlanta Journal and Constitution of November 18 cites the the reminder Wednesday from a member of the Jewish Claims Committee - that no amount of money can buy justice and certainly not when you are talking about the Holocaust - as he spoke to the General Assembly of United Jewish Communities in Atlanta. "No survivor will get rich," Gregory Schneider, assistant executive vice president of the Jewish Claims Conference, told delegates to the assembly, which continues through Sunday. "Most survivors will receive a token for the destruction of their entire world." Schneider said negotiations over the issue in Bonn, Germany, started disastrously Tuesday, but "the sides began to bridge a little bit" Wednesday. Whatever the ultimate negotiated result, Schneider said, "Justice, morality, will never be restored." Schneider's workshop --- attended by delegates from Tel Aviv, North Carolina and Virginia, among other places --- was one of several at the gathering that tackled weighty world topics Wednesday. "We're sharing together all kinds of things and ideas," said Gaby Blauer of Jerusalem, a project coordinator for Jewish Healthcare International, which provides volunteer health care to Jews in Eastern Europe. The group was established in part by the Jewish Federation of Atlanta. This General Assembly is the first of the annual sessions to include a presentation by the Society for Humanistic Judaism, a controversial movement that embraces Jewish culture but promotes a philosophy relying on human solutions, not the belief in an all-knowing God. Rabbi Sherwin Wine, founder of the Secular Humanistic Jewish movement, said his organization is critical to the survival of the Jewish community because it provides an outlet for those "searching for their Jewish identity." Asked what made his view uniquely Jewish if his advice drew from human experience, panel member and Rabbinic student Adam Chalom said, "My title. Maybe the jokes I tell." Chalom said his school's Torah --- the religious law of the Jewish faith --- is kept in the library instead of in a more exalted ark. "It's a book among other Jewish books," Chalom said. "We're dealing with it as Jewish literature." Some objected to the workshop's title --- "Humanistic Judaism: A Powerful Alternative for Cultural Jews." Julius Berman, board member of the United Jewish Appeal Federation of New York, told the Jewish paper Forward last week that he is "disturbed about the way this was escalated and isolated as something unique and special." While Wine was hosting about 40 people at his workshop, nearly 400 other delegates attended a meeting of the Jewish Agency for Israel. That group focused on rescuing Jews facing crises worldwide, in places like Kosovo, Chechnya and Ethiopia. More people attended the forum than expected, exhausting the supply of tuna and turkey sandwiches and delaying the presentation while more chairs were brought in. "Jews," the agency's Robert Goldberg announced as delegates shuffled about the Marquis IV ballroom, "are accustomed to problems. But there is no problem here having more in attendance than we expected." (The Atlanta Journal and Constitution Nov-18-1999) INTELECT COMMUNICATIONS: Responds To Announcement On Securities Suit -------------------------------------------------------------------- Intelect Communications, Inc. (Nasdaq: ICOMC) announced on November 18 that Kaplan, Kilsheim & Fox, LLP, a plaintiffs' class action law firm, has issued its own press release stating that it has filed suit against the Company on behalf of yet unknown shareholders. The Company was not served with the lawsuit before the press release and still has not been served at this time. However, from the language in the law firm's press release, the Company disputes the alleged basis for the suit and intends to vigorously defend the matter once it is served. MICROSOFT CORP: CA Buyer Files Antitrust Suit In Orange County Sup. Ct. ----------------------------------------------------------------------- An Orange County man filed a lawsuit against Microsoft Corp. saying that as an individual buyer of one of its personal-computer operating systems he suffered damages by the world's largest software maker's alleged efforts to illegally hurt competition and drive prices up. The suit filed Monday in Superior Court in Orange County accuses Microsoft of violating state antitrust law and seeks class-action status on behalf of all California purchasers of Microsoft operating-system software in the past four years. It was the latest claim to come after a federal judge's ruling that the company holds a monopoly. Michael R. Wilson, who filed the suit, says Microsoft illegally took steps to harm potential competitors, boosting product prices to consumers. U.S. District Judge Thomas Penfield Jackson on Nov. 5 found that Microsoft "stifled innovation" by using its dominance in personal-computer operating systems to quash rivals. (The Orange County Register, Calif., Business Briefs Column Nov-18-1999) According to the Los Angeles Times of November 18, 1999, the suit was filed Monday in Superior Court in Santa Ana. Wilson bought a licensed copy of Windows 98 from CompUSA in February for $ 89, the suit said. To get on to the Microsoft Network, say Wilson's attorneys and the complaint, the software "contained several flaws, which Microsoft required users to pay to repair." The amount of money sought in damages for the allegedly overpriced software was not stated. Wilson's attorneys estimate there will be more than a million consumers--and therefore, potential members of the class-action suit--who were affected in California. "This is a necessary adjunct to the federal judge's ruling to get money back to consumers," said Wilson's attorney Alan M. Mansfield of Milberg Weiss Bershad Hynes & Lerach in San Diego. The government's case will "bring about penalties and certain injunctive measures . . . but not money back to the consumers." Wilson could not be reached for comment. His attorneys declined to say what city he lives in. Microsoft spokesman Jim Cullinan said the company hasn't received the filing yet, though he noted that its Windows operating system is cheaper than its current competition. "It's unfortunate in the wake of one step in a long process that plaintiffs' lawyers seek to file baseless lawsuits," said Cullinan, declining to comment further. Jackson's factual findings in an antitrust suit brought by the U.S. Justice Department and 19 states stopped short of saying Microsoft violated antitrust laws, though they suggest he's likely to make that conclusion. The judge would then decide what remedies to impose on Microsoft. (Los Angeles Times Nov-18-1999, Bloomberg News was used in compiling this report.) MICROTEST INC: Intends To Vigorously Defend Securities Suits In Arizona ----------------------------------------------------------------------- On March 8, 1999, a purported class action lawsuit was filed against Microtest, Inc. and certain former officers in the United States District Court for the District of Arizona. The suit claims that Microtest violated Section 10(b) of the Securities Exchange Act of 1934 by making public misrepresentations or failing to disclose material facts regarding its financial results. The suit was filed as a class action on behalf of all purchasers of Microtest stock between April 14, 1998 and March 2, 1999. A similar suit was filed April 7, 1999. Microtest intends to vigorously defend these lawsuits. The eventual outcome of these claims cannot be predicted with any degree of legal certainty. The Securities and Exchange Commission ("SEC") is engaged in an investigation relating primarily to accounting matters of the Company. The SEC has not, to date, asserted any specific claims or remedy with respect to the Company. NATHANS FAMOUS: Will Defend Vigorously Fla. Suit Over Miami Subs Merger On January 5, 1999, Miami Subs was served with a class action lawsuit entitled Robert J. Feeney, on behalf of himself and all others similarly situated vs. Miami Subs Corporation, et al., in Circuit Court, in Broward County, Florida, which was filed against Miami Subs, its directors and Nathans in a Florida state court by a shareholder of Miami Subs. Since that time, Nathans and its designees to the Miami Subs board have also been served. The suit alleges that the proposed merger between Miami Subs and Nathans, as contemplated by the companies' non-binding letter of intent, is unfair to Miami Subs' shareholders based on the price that Nathans is paying to the Miami Subs' shareholders for their shares and constitutes a breach by the defendants of their fiduciary duties to the shareholders of Miami Subs. The plaintiff seeks among other things: (1) class action status; (2) preliminary and permanent injunctive relief against consummation of the proposed merger; and (3) unspecified damages to be awarded to the shareholders of Miami Subs. On March 19, 1999, the court granted the plaintiff leave to amend his complaint. The plaintiff then filed an amended complaint. Miami Subs moved to dismiss the complaint on April 13, 1999. Nathans and its designees on the Miami Subs' board moved to dismiss the complaint on April 29, 1999. The court denied the motions. Nathans intends to defend against this suit vigorously. NY CITY: Street Crimes Unit Alleged Of Targetting Black & Latino Men -------------------------------------------------------------------- "I have heard countless stories from friends who were stopped by the police for no reason," said Debevoise & Plimpton senior associate Natalie Williams. Ms. Williams, who grew up in Brooklyn, N.Y., is the firm's leader in a class action against the city of New York. It alleges that the Police Department's Street Crimes Unit has a policy of stopping and frisking black and Latino men in violation of their constitutional rights. National Congress for Puerto Rican Rights v. The City of New York, No. 99 Civ. 1695. The action, brought in conjunction with the Center for Constitutional Rights (CCR) and the law firm of Jonathan C. Moore, was given the go-ahead on Oct. 21 when Southern District Judge Shira A. Scheindlin rejected part of the city's motion to dismiss. Taking on the city How does a big law firm take on the Big Apple? Debevoise pro bono chairman John Kiernan noted that this is not the first time the firm has done so. He said that once the case passed a conflicts check, the firm treated it like any other pro bono project. "If you're going to bring impact litigation, it's not at all unusual that the government's the defendant," Mr. Kiernan said. The suit came to the firm via an invitation from the CCR. An associate who had ties to both organizations floated a query by Mr. Kiernan. He approved the proposal and sent out an e-mail to see if any attorneys at the firm were interested. Ms. Williams said that her personal experience with the problem prompted her to volunteer. In balancing the sometimes differing agendas of clients and co-counsel in a case like this, she said, the firm takes care not to politicize the case but that "firms like ours have a commitment to good work." Daniel S. Connolly, special counsel to New York's corporation counsel, said that he was pleased some of the claims against the city had been dismissed and that he intends to "vigorously and aggressively defend this lawsuit." (The National Law Journal, Names and News; Pg. A12, Nov-8-1999) OPTUS: Aussie Rugby League Defers Action To Retrieve Pay Until Nov 26 --------------------------------------------------------------------- Newcastle rugby league players threatening a class action against Optus to retrieve an outstanding $500,000 payment have given the communications giant a 12-day extension. Keith Bagley, the lawyer representing the 40 Newcastle players still owed the final installment of their 1999 contracts, agreed on November 17 to defer any legal proceedings until November 26 to allow negotiations between Optus and the Australian Rugby League to continue. "At the request of both Optus and the Knights Club, the players have agreed to defer any decision to take action (in the Industrial Relations Court) until at least Friday, November 26," said Mr Bagley. "The players will review the position next Friday week. However they earnestly hope that the principal players in this dispute will reach an overall settlement thereby eliminating any need for further action on the part of the Knights' players." Optus did not forward $5 million to the ARL to be shared equally among its 10 former clubs because the League failed to invoice them by March 1. The class action has the potential to spread to more than 300 players from all the 10 ARL clubs affected by Optus' failure to settle the debt. (AAP Newsfeed Nov-17-1999) REDFORD TOWNSHIP: Homeowners Sue For Damages Due To Sewage Backups ------------------------------------------------------------------ Residents on Marion and Farley have filed a lawsuit asking that the township reimburse them for property damage and depreciating home values caused by sewage backups. Homeowners say the township has ignored their complaints and requests to fix the problem. Basil Mashni, 33, whose basement filled with sewage three times in the last two years, said he made half-a-dozen calls to the township since June and never received a response. "We had eight or nine inches of sewage in the basement in June," Mashni said. "It ruined everything -- a TV, carpeting, tiles, business equipment, mattresses, a dresser. Our home values will drop because of this. And the worst thing about it is they just keep ignoring us." Mashni is among about 35 homeowners who complained of sewage backups damaging basements and ruining belongings during the last few years. Township Supervisor Kevin Kelley said residents have legitimate complaints, but he contends that the township did respond by taking care of the problem. "We have a sewer maintenance program. Unfortunately, sometimes things happen," Kelley said. "When the last backup happened, we found a sewer blockage and we took care of it. I think it's probably a problem we missed the first time (two years ago), but now we fixed it." Lawyer Steve Liddle, who is representing Mashni plans to ask that it be made a class-action suit filed in Wayne Circuit Court. He blames the sewage backups on an old system that hasn't been maintained. Liddle speculates that the flooding happens when storm water during heavy rain overflows into sewer lines, so the lines can't handle the normal sewage flow. Then the sewage backs up in the pipes into basements. He thinks the system needs more than just cleaning out. "It's not just happening to one home," Liddle said. It's happening to entire neighborhoods and causing tens of thousands of dollars of damage to many of the homes, he said. Mashni estimates the damage to his home to be at least $ 15,000. "Who knows how much the real damage is. Who will ever buy my house with this problem?" Mashni said. The flooding also prompted Mashni to lock the basement so his young children can't get in. He's worried about health problems from bacteria left behind even after he brought in cleaning crews. "We want (the township) to pay for the damages they've caused and remove the incentive to allow it to continue, so they will fix their sewer system," he said. (The Detroit News Nov-17-1999) SECURITY GUARDS: LA Suit Says The Homeless Are Harrassed And Assaulted ---------------------------------------------------------------------- Claiming they've been harassed and assaulted by private security guards patrolling public streets in downtown Los Angeles, 12 homeless residents on November 16 filed suit against three security companies and the local property owners that employ them. The class-action lawsuit, the first of its kind in the nation, challenges a fast-growing economic development movement that has put brightly uniformed private security forces on the streets of Los Angeles and other major U.S. cities. The civil complaint alleges that organizers of four of these local "Business Improvement Districts," or BIDs, have bankrolled a "systematic, concerted campaign" to chase homeless residents off public property in violation of their civil liberties. According to the complaint filed in Los Angeles Superior Court, skid row indigents have been roughed up, interrogated and falsely imprisoned by private security guards trying to intimidate them into moving to other areas. Representatives of the local BIDs strongly deny that their security forces have done anything wrong. Still, the plaintiffs are seeking an injunction to force the private guards to stop their alleged illegal behavior. "This is about rogue security guards breaking the law in an effort to sweep the streets clean of people they don't like," said Michael Small, chief counsel for the American Civil Liberties Union Foundation of Southern California, one of the attorneys representing the homeless plaintiffs. "Just because they don't like homeless people doesn't give them license to break the law." The lawsuit also raises questions about just how far the private sector can go in reclaiming crumbling public spaces. Privately funded BIDs have flourished in an era of shrinking government spending, as merchants and business owners in older urban areas have ponied up funds on top of their existing tax assessments to pay for extra security, sanitation and other services. But the proliferation of private guards in public spaces alarms some observers, who worry that these security forces are beholden only to the business groups that employ them. "There is a question of accountability," said Douglas Lasdon, executive director of the Urban Justice Center, a nonprofit advocacy group that has tangled with New York City BIDs over a variety of issues. "BIDs don't have the same kind of democratic controls that government does. They have an incentive to just push social problems out of their areas." Representatives of L.A.'s Fashion District, Toytown, Downtown Industrial District and Historic Core BIDs said they hadn't seen copies of the lawsuit and so could not respond to specific allegations. But Kent Smith, executive director of the Fashion District BID, denied that his organization has ever encouraged its yellow-shirted security forces to cleanse its territory of homeless residents. He said the group has worked hard to make downtown cleaner and safer for everyone, including the hundreds of indigent men and women that call the streets their home. "In many cases, our safety teams have assisted homeless people who have been victimized by crimes," Smith said. "Our role is to make sure that community standards are enforced for everyone, whether you're homeless or a white-collar worker." The Fashion District BID is operated by the Downtown Property Owners Assn., which represents landlords in an 82-block area bounded roughly by 7th Street, the Harbor Freeway, Main and San Pedro streets. Other organizations named in the lawsuit include the Central City East Assn., which operates the Toytown and Downtown Industrial District BIDs; the Historic Core Business Improvement District Property Owners Assn., which operates the Historic Core BID; and security firms Burns International Security Services Corp., Totally Secured Inc. and International Services Inc. Created in Canada in the 1960s and copied in the United States a decade later, BIDs provide a means for business owners to harness the taxing arm of government to spruce up their business districts. Essentially, merchants or property owners agree to tax themselves extra to pay for additional services. The city collects the revenue and returns it to the business district, which decides how to spend it. More than 1,200 BIDs are operating in North America, an estimated 150 to 200 of them in California. Los Angeles didn't form its first BID until the mid-1990s, when Mayor Richard Riordan made the private-sector funded initiatives a centerpiece of his economic development strategy. Local merchants and property owners quickly embraced the concept. Now, with 25 active BIDs and 20 more on the drawing board, Los Angeles is on pace to supplant New York City as the nation's BID capital. BIDs are credited with helping restore the luster to a slew of once-faded business districts, including Santa Monica's Third Street Promenade and Old Town Pasadena. Longtime downtown businessman Robert Clinton, whose family's Clifton's Cafeteria lies within the Historic Core BID, said the area has changed for the better in recent years thanks to the network of special zones now blanketing downtown Los Angeles. Brightly dressed private security and maintenance patrols now can be spotted throughout the downtown area, tidying streets, giving directions and keeping an eye out for disturbances. "It's cleaner, more pedestrian-friendly, it's less smelly, there's less graffiti," Clinton said. "They are filling in where the city leaves off. . . . Just like shopping centers have mall managers, urban business districts have BIDs." But the special zones also have generated controversy about who has control of public spaces. In New York, former employees of one of that city's largest BIDs went public in 1995 with allegations that the group organized "goon squads" to roust homeless people from its territory. No lawsuit was filed in that incident, but fallout from the accusations resulted in that BID's loss of a federal grant later that year. The November 16 class action was filed on behalf of "predominantly homeless individuals in the downtown Los Angeles area." In their complaint, the 12 homeless plaintiffs described a number of alleged abuses at the hands of private security guards employed by the four named BIDs. Those allegations include: * Guards in the Historic Core BID reportedly rousted plaintiff Jerry Nave from where he was sleeping near 9th Street, then used pepper spray on him when he returned to the area. * Guards in the Downtown Industrial District BID are alleged to have searched the pockets of Armando Cervantes without consent, removing the pain medication he was taking for his broken leg. Cervantes was handcuffed and forced to walk without his crutches for 30 yards to a private patrol car, where he was detained for nearly half an hour. Cervantes was released after Los Angeles police officers arrived. * Guards in the Downtown Industrial District BID are said to have kicked plaintiff Joe Trotter in the leg, then to have struck him with a stick when he refused to get up from the sidewalk where he was lying. * Other allegations depict a pattern of harassment in which homeless people are routinely asked for identification, searched without permission and told to move along. "Poor people don't have any less right to walk the streets of skid row than those fortunate enough to frequent Melrose Avenue and trendier parts of town," said Dan Marmalefsky, co-counsel for the homeless plaintiffs. "Bottom line, these BIDs appear to have made the decision that the homeless are bad for business." Marmalefsky likewise contends that the BIDs have compiled extensive written and photographic records of the homeless residents in their districts. Tracey Lovejoy, executive director for the Central City East Assn., said security patrols for the Toytown and Downtown Industrial District BIDs only make written field reports and take photographs to document potential crime scenes. She "categorically" denied allegations that her BID's security team is running roughshod over anyone's rights. On the contrary, she says, the private guards routinely advise homeless residents where they can obtain help and social services. In addition, Lovejoy said her association established a system this summer to follow up on any complaints about its private security. To date, she says the group hasn't received a single formal complaint. (Los Angeles Times Nov-17-1999) XEROX CORP: Contract Workers File Suit In Conn. Seeking ERISA Benefits ---------------------------------------------------------------------- Claiming Xerox Corp. breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA) in denying enrollment in the company's pension and welfare benefits plans, 12 Xerox contract workers have filed a proposed class action in Connecticut federal court seeking plan participant status and back benefits. Montesano v. Xerox Corp. Retirement Income Guarantee Plan et al., No. 99-CV-1197 (D CT, complaint filed June 25, 1999). The suit, headed by contract worker George Montesano, names as defendants Xerox and the company's three pension plans and two welfare benefits plans. The worker's attorney, William D. Frumkin of Sapir & Frumkin LLP, White Plains, NY, said Xerox was trying to cut costs by denying enrollment to the workers, even though they fit the common law test for employee benefits eligibility under Nationwide Mutual Ins. Co. v. Darden (U.S., 1992). The test weighs a number of factors based on the amount of supervision and control a company has over its workers. "They're really losing out on some of the bigger perks," Frumkin said. The suit seeks the plaintiffs enrollment in, and benefits from, the Xerox Corp. Retirement Income Guarantee Plan, the Xerox Corp. Stock Ownership Plan, the Xerox Corp. Profit Sharing Plan, the Xerox Corp. Life Insurance Plan, and the Xerox Corp. Medical and Dental Plans. According to the complaint, Montesano and his colleagues were wrongly classified by the plans as supplemental contract workers simply because their salaries were paid by outside employment agencies and not by Xerox. In 1997 to further distance itself from an employee/ employer relationship, Xerox adopted a policy of severing employment for contract workers after 18 months of work. "Upon information and belief, Xerox's sole purpose for restating this policy and instituting the aforementioned time limit was to prevent supplemental contract workers from becoming eligible for benefits in defendants' benefit plans," the complaint asserts. Frumkin noted that after a "hiatus" of a few months, the agency would recycle the workers back into the same jobs or same kinds of jobs at Xerox. In addition to the ERISA allegations, the suit also makes claims for vacation benefits under New York Labor Law. "If they don't work, they don't get paid," Frumkin said, noting that all of Xerox's regular employees received vacation benefits. According to the complaint, this failure to pay vacation benefits violates Sec. 193 of the state law. The suit claims that under the New York law, the plaintiffs are owed back wages for unpaid vacation benefits as well as additional liquidated damages calculated as 25 percent of the total amount of wages due. Under the ERISA claims for breach of fiduciary duties and interference with protected rights, the suit seeks an injunction prohibiting Xerox from further ERISA violations as well as back benefits, the right to receive future benefits, prejudgment interest, and attorneys fees. (See Document Section G for the complaint.) (Pension Fund Litigation Reporter, Vol. 10; No. 18; Pg. 10, Sept-24-1999) * Lobbyists Use State Farm Case To Fight For Class Action Reform Bill --------------------------------------------------------------------- Business groups and the insurance industry have started using a blockbuster judgment against Bloomington-based State Farm as Exhibit A in their lobbying effort to pass a controversial legal reform bill. The legislation, which passed the House in September, would give federal courts jurisdiction in class-action lawsuits if any of the numerous plaintiffs resides in a different state than the defendant. Proponents of the bill say it would keep state juries and judges from making rulings that have national implications and would halt "venue shopping," where trial lawyers look for the most sympathetic jurisdiction to argue their cases. In the national class-action suit against State Farm, a state-court jury in Marion, Ill., delivered a $ 456-million verdict against the insurance giant for using auto repair parts of questionable quality. The judge in the case then piled on another $ 730 million in actual and punitive damages after determining State Farm had committed fraud. The ruling could affect insurance regulations in numerous other states that allow the use of "after market" parts, which don't necessarily meet manufacturer specifications. "You have a state court judge in downstate Illinois nullifying the authority of insurance commissioners and state legislatures all over the country," said Sherman Joyce, president of the American Tort Reform Association, a business-backed group. Of course, trial lawyers see things a little differently. "We are totally opposed to the bill. It absolutely tramples states rights," said Richard H. Middleton Jr., president of the Association of Trial Lawyers of America. "It serves no benefit to consumers and it assumes that judges in the state court system are not intelligent enough to handle class-action matters or handle them in an objective fashion." The Senate has yet to take up the bill, which narrowly passed the House. (The State Journal-Register (Springfield, IL) Oct-29-1999) * Paper Says United Health Group Shows Market Can Force HMO Quality ------------------------------------------------------------------- The extraordinary announcement by the United Health Group that it will let practicing physicians make medical necessity decisions is a tribute to the growing HMO accountability movement and the shift on Wall Street that it has provoked. Only Wall Street could force the nation's second-largest health insurer to heed patients' concerns about unnecessary intrusion by HMO bureaucrats and to admit that corporate bureaucrats cost more than they save. Yet only the growing HMO liability movement could cause HMOs and their investors to be as serious about managing care as they have been about making profits. United Health's move comes as Wall Street is increasingly questioning how HMOs will weather a growing wave of class-action suits and new state laws that hold managed health care insurers legally accountable for the quality of services that people receive. Suddenly, HMOs with healthy short-term profits have been downgraded because of concerns over the viability of their medical care delivery systems. For the first time since investor-owned HMOs took hold in the early 1990s, quality of care is poised to become a basis for national competition in the market. The entire health system could save huge sums of money as untold human misery is avoided by timely delivery of needed care. Such a revolution, however, must be nourished by Wall Street, which should use its clout to force other HMOs to accept a market where quality matters. The early signs are encouraging. United Health's stock shot up after its announcement. Robert Hoehn, an analyst with ING Barings, said the higher stock price indicates investors' belief that United Health's change will "further insulate them from the risk of litigation." HMOs that fail to deliver good care will be likely to face expensive lawsuits, media exposure and long-term vulnerability in terms of market share. Investors, in turn, will scrutinize managed care companies more on the basis of long-term viability, not just short-term profits. The California change comes after years of turmoil. Huge companies have taken the local, nonprofit HMO model and created national, investor-owned firms with a propensity to emphasize short-term profit over quality health care. Years of investor indifference to quality have taken a toll on the California health care system. For many Californians, premiums are rising in the double digits because of HMO mismanagement, greed and waste. By contrast, in Texas, where HMOs have been liable for punitive damages since September 1997, premium increases have been consistently less than the national average because HMOs have deferred to doctors' treatment requests and delivered appropriate treatment in a timely way, when it is less costly. Until this year's introduction of HMO accountability for the quality of services in California, the investor-controlled market was not really free. For instance, an arrangement between HMOs and California doctors called "physician capitation," in which doctors accept flat monthly fees for all of a patient's treatment expenses and purchase their own insurance against extreme loss, has traditionally been encouraged on Wall Street. This model will never deliver high-quality health care and has driven up health care costs because patients are treated only after illness progresses to a serious level, rather than through preventive medicine. HMO liability has forced a collusion between the interests of Wall Street and Main Street. If UnitedHealth can start the race to quality health care, there is no reason other HMOs, prodded by quality-conscious investors, should not follow. (Morning Star (Wilmington, NC) Nov-17-1999) ********* 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. 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