In their announcement on the steps of City Hall, Grimes and Frederick News-Post Publisher George E. Randall said it was in the public's best interest to repair their fractured bond. Randall, who took over the family owned newspaper in March, said Frederick mayors and News-Post publishers have been friends for four generations.

"The mayor and I stand before you today to show the Frederick community we are working to solve our differences for the good of the community and our own personal friendship," Randall told a crowd of about 60 journalists, city workers, lawyers and curious residents.

Their relationship was strained by a dispute over documents that have become known as the "black book," the business records of an escort service whose clients reportedly included an alderman and other prominent public figures.

The News-Post and The Associated Press have asked under Maryland's Public Information Act for copies of the documents, which Frederick police seized in a raid. Grimes has refused. The issue is before the Frederick County Circuit Court.

Grimes criticized the newspaper last month, citing its coverage of the black book scandal as his reason for deciding not to seek re-election this fall.

His public reconciliation with Randall prompted some observers to speculate Grimes will run for a third, four-year term after all. +++++ ^Court reverses $3 million award to actor Dustin Hoffman

SAN FRANCISCO (AP) - A federal appeals court has reversed a $3 million award to Dustin Hoffman levied against Los Angeles Magazine, ruling that a computer-altered image of the actor was protected speech.

The 9th U.S. Circuit Court of Appeals said July 6 that the image, published in 1997, did not unlawfully use Hoffman's name and likeness. The panel said the photo was not an "exploitative commercial" use as the actor claimed and a federal judge ruled two years ago.

The altered image showed Hoffman in an evening gown and heels without his permission. The caption with the photo read: "Dustin Hoffman isn't a drag in a butter-colored silk gown by Richard Tyler and Ralph Lauren heels."

The appeals court noted that it is unlawful to use a celebrity's identity "entirely and directly for the purpose of selling a product." But the court said the illustration, which listed the cost of the clothes and where they could be purchased, wasn't necessarily an advertisement.

The court said that the photo, which was displayed with other captions and altered images of different actors, was editorial speech protected under the First Amendment.

"Viewed in context, the article as a whole was a combination of fashion photography, humor and visual and verbal editorial comment on classic films and famous actors," Judge Robert Boochever wrote.

During a four-day trial in Los Angeles federal court two years ago, Hoffman testified that he was turned into an unpaid fashion model.

"If I were to be asked to be a model selling clothes, it would be worth millions of dollars," Hoffman testified.

The magazine, published by Emmis Communications Inc., had repeatedly argued that it was protected by the First Amendment, and the computerized picture portrayed Hoffman's character in the 1982 cross-dressing comedy "Tootsie" rather than the actor himself.

The computer-generated photo layout in the March 1997 issue of Los Angeles Magazine was titled "Grand Illusions" and it featured classic movie stills with actors in the latest fashions. +++++

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AP-ES-07-09-01 1751EDT