JANUARY 1983 by Arkansas Bar Association

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January 1983 Vol. 7, NO.1

THE OFFICIAL PUBLICATION OF THE ARKANSAS BAR ASSOCIATION

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Arkansas Lawyer SPECIAL FEATURES Cover Story: Chief Justices of the United States Bond Financing in Arkansas

OFFICERS J. L. (Jim) Shaver, Jr., President Dennis Shackleford, President-Elect Annabeile Clinton, Secretary-Treasurer Richard F. Hatfield, Council Chairman

EXECUTIVE COUNCIL Floyd Thomas, Jr. Norwood Phillips W. Kelvin Wyrick Charles Carpenter Robert M. Cearley Kaye S. Oberlag D. Mac Glover Marcia Mcivor Robert Hornberger Tommy Womack Julian Fogleman James A. McLarty

EX·OFFICIO J. L. (Jim) Shaver, Jr. Dennis Shackleford James D. Cypert Annabeile Clinton Frank C. Elcan, iI Richard F. Hatfield

EDITOR C. E. Ransick

EDITORIAL COMMITTEE Robert T. Dawson W. Christopher Barrier

Charitable Giving-Philanthroply Can Generate Tax Benefits Computers and the Law

...•............... 6 John S. Selig 20 W. C. Barrier Larry Yancey 44 James Hambleton 28 David Malone

The Lawyer and The Land Planner-a Team for the 80's ....•... Donald S. Manes Lawyers Helping Lawyers Committee Program Second Injury Law, Old and New-Part I W. W. Bassett, Jr. The Making of a Law School ....•...... Robert R. Wright

32 14 38 10

REGULAR FEATURES President's Report ....•.•.•.•.... J. L. (Jim) Shaver, Jr. Juris Dictum ........•.• . • . • . . . . . . . .. Robert L. Lowery Law School News ............•.•..................... In Memoriam Executive Council Notes Annabelle Clinton Service Directory C. E. Ransick Addenda AICLE News Claibourne W. Patty, Jr. The Arkansas Bar Foundation Randall W. Ishmael Lawyers' Mart Young Lawyers' Update Frank C. Elcan, II To Wit ........................•.....................

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The Arkansas Lawyer {USPS 546-040} is published quarterly by the Arkansas Bar Association, 400 West Markham, Little Rock, Arkansas 72201. Second class

postage paid at Little Rock, Arkansas. Subscription price to non-members of the Arkansas Bar Association $6.00 per year and to members $3.00 per year included in annual dues. Any opinion expressed herein is that of the author, and not

necessarily that of the Arkansas Bar Association, The Arkansas Lawyer, or the Editorial Commi"ee. Contributions to The Arkansas Lawyer are welcome and should be sent in two copies to the Arkansas Bar Center, 400 West Markham, Little Rock, Arkansas 72201. All inquiries regarding advertising should be sent to The Arkansas Lawyer above address.

January 1983/Arkansas Lawyer/1

PRESIDENT'S REPORT by J. L. (JIM) SHAVER, JR.

At the Special Meeting of the House of Delegates on September 11, 1982, at the Fayetteville Hilton, I discussed a number of matters of concern to the Bench and Bar in Arkansas. Here is my report thereon to our Association's membership. (1) Internal Public Relations. Whatever phrase is used-an association exists mainly for the benefit of its members. In line with this premise, our Public Information Committee's budget included $4,000 for "IPR". Two special projects have already been accomplished (1) mailout of the ABA booklet, "Avoiding Unintentional Grievances; and (2) Reprinting and mailout of the Association's Constitution and By-Laws, as amended June 12, 1982. These projects are intended to keep our members better informed. (2) Legislative Digest. This is another important publication in our internal "PR" effort. The first has been sent to the membership covering our legislative package to date. Even Bill Wilson has been impressed with the first issue-he wrote a letter to the Association saying that the "synopsis is superb". The Legislative Digest will be published throughout the next months and the Legislative Session. A lot of effort goes into screening all the bills dropped into the General Assembly's hoppers. Members are encouraged to read the Legislative Digest to check on non-Association bills of importance to the Bench and the Bar; and to bring such bills to the attention of our Legislative Committee and lobbyist. (3) LAWPAC We now have 119 contributors to our LAWPAC. The money is being used to help fund our legislative program, which is very ambitious. See the first Legislative Digest for details. (4) Ethics Opinions. Lawyers in Arkansas are unable to get advisory ethics opinions from the Arkansas Supreme Court's Committee on Professional Conduct. Chairman B. Frank Mackey of our Association's Professional Ethics Committee has advised that the plan to provide such opinions to our members will be submitted to the House for approval at its Annual Meeting in June 1983. (5) Specialization. The Arkansas Plan for Specialization has been approved by the Supreme Court, and is featured in our Association's News Bulletin, September 1982. I have submitted a list of our members who have envinced interest in this field, to the Court for consideration as members of the nine-member Board of Legal Specialization. The next step will be for our Association's Sections and Committees to consider specialization in their fields of interest. (6) Senior Task Force Committee. The Honorable E. Charles Eichenbaum presided over a segment of the National Conference of Bar Presidents' program at San Francisco in August. The topic concerned senior lawyers. One of the points made was that senior lawyers generally are being 2/Arkansas Lawyer/January 1983

overlooked in current Bar Association activities. One of the results of Mr. Eichenbaum's campaign is the so-called Senior Task Force, which will be available to deal with significant policy and procedural questions from time to time. In effect, we have been requested by the American Bar Association to appoint an Association Senior Task Force; and have done so. (7) Standards for Criminal Justice. The Committee studying the standards is now an Arkansas Bar Foundation Committee with Chairman John Fogleman. While the Committee's initial comparative study between Arkansas law and the standards has been funded by the Association and Foundation, the subsequent workshops with judges and lawyers will be delayed probably until late 1983. This is due to the fact that Chairman Fogleman will be unable to get a request for a grant from Winthrop Rockefeller Foundation heard as early as was anticipated. (8) Pre-paid Legal Services. The report from Chairman Hal Simpson of our Association's Committee is that only one-Pre-paid Legal Services, Inc. of Ada, Oklahoma-is still selling "legal insurance" in Arkansas. The other two companies that had been licensed in Arkansas, have surrendered their certificates of authority from the Arkansas Insurance Department. One other insurance company has an application pending. Another is considering the matter. (10) Legal Services Corporation. Funding seems safe for FY beginning October 1, 1982 at 75% of last year's budget-10% thereof supposedly for lawyers' programs. Three restrictions on activities have been imposed, viz., (1) Barring LSC attorneys from bringing any class action suits against state, county or local governments; (2) Restricting lobbying by LSC employees; and (3) Forbidding representation of homosexuals and illegal aliens. The Missouri Bar has gotten some $25,000 from its State LSC to fund a "Poverty Law System" and related workshops. Our Association's YLS will be working with our legal Aid Committee to come up with a proposal for a statewide "pro bono" program. (11) Federal Legislation. A bill to abolish diversity of citizenship as a basis of federal court jurisdiction has been approved by the House Judiciary Committee. There is also proposed federal legislation that would limit venue to, and would restrict location of federal courts to, major cities. Our House of Delegates is on record against these proposals, and the Arkansas Congressional Delegation has been so informed by the Chairman of our Federal Legislation Committee. .. Around the clock, your Association is working for you." "

ARKANSAS BAR fOUNDA TION by: Randall W. Ishmael

It Is generally known in the Arkansas legal community that the Arkansas Bar Foundation was established by Arkansas lawyers and, through the efforts and dedication of Arkansas lawyers, it has grown to become nationally recognized as a model of foundation organization and management. Unlike many non-profit organizations, the Arkansas Bar Foundation is self-supporting. By means of rents and other operating income we pay all of the necessary operating expenses, including the expenses of obtaining donations and pledges to the Foundation. Therefore, all of the gifts to the Foundation are used exclusively for the stated purposes. And, so far, all scholarships, programs, and projects have been funded with only the income from the scholarship and trust funds. Being able to make that statement as an introduction makes a pitch for your continuing contributions and support much easier.

tice, b) To promote study and research in the field of law, the diffusion of knowledge thereof, and the continuing education of lawyers, and c) To cause to be published and to distribute addresses, reports, treatises and other literary works on legal subjects and to acquire, preserve and exhibit rare books and documents, objects of art, and items of historical interest having legal significance or bearing on the administration of justice. These purposes have been well served in past years and with the continuing support of Arkansas lawyers, these purposes will be even better served in the future. We are justifiably proud of our Foundation and indeed fortunate that we have a viable organization to receive contributions for the profession. The Foundation is a qualified tax exempt organization and contributions to it are deductible for purposes of income tax, estate tax and gift tax. Thus, there are a number of ways in which gifts can be made with tax advantages, as: PLEDGES. These may be paid out over five (5) years in 10 semi-annual installments. All pledge payments are covered into the Trust Fund.

So, think for a moment on the professional obligation of the lawyer to make a contribution to the profession and consider the often quoted words of Theodore Roosevelt: "Every man owes part of his time and money to the profession in which he is engaged." Then consider the first three stated purposes from the Arkansas Bar Foundation Constitution: a) To improve and facilitate the administration of jus-

FELLOWSHIPS. Contributions of $1 ,250 until January 1, 1983 or more qualify the lawyer-donor for fellowship in Arkansas Bar Foundation. Previous contributions to the Foundation are to be included in the total. Fellows have their photographs in the Hall of Fellows, are Foundation members, and participate in the related social and professional activities. As of January 1, 1983, the amount is $1,500. Contributions may be paid out as pledges. SCHOLARSHIPS. Permanent scholarships with any desired re-

quirements may be set up in the names of lawyers-living or deceased. The contribution for each scholarship is set at $5,000 or more. The scholarships are listed in the Catalogs of the School of Law, University of Arkansas, and of UALR School of Law. SUBSCRIPTIONS. Various rooms and features, as the President's Room and Figure of Justice Banner, of the Bar Center may be named for, or sponsored by, an individual or individuals. The subscriptions vary and usually start at $10,000. MEMORIAL GIFTS. One's giftusually $25-is a beautiful way of honoring a former colleague. The family must be appreciative of such remembrance. The gift is noted in the Foundation's Memorial Book. Memorial cards are formal and are promptly delivered upon receipt of the memorial gift. THE MEMORIAL BORDER. In the Memorial Lobby of the Arkansas Bar Center, the names of over 100 deceased Arkansas lawyers-Judges, Governors, and others-are already enshrined in beautiful red-grained marble. This "Westminister Abbey" of the Bar is a continuing program. The contribution for each memorial is $1000. BEQUESTS. Of course, the Foundation may accept gifts by bequest and with various limitations or designations for the use of the funds. Most recently, the Foundation received a bequest of $15,000.00 under the will of Joe C. Barrett of Jonesboro. In addition to being a distinguished lawyer and friend of the Arkansas Bar Foundation, it is widely known that Mr. Barrett was one of the fathers of the Uniform Commercial Code. He chose to designate a part of his bequest to establish the annual Commercial Law Award at the UniJanuary 1983/Arkansas Lawyer/3

versity of Arkansas at Fayetteville. Just as Mr. Barrett had a particular field of the law that was dear to him, you may want to designate some particular area of the law or some area for research. If the designated purpose is within the purposes of the Foundation's Constitution, there should be no administrative problem. We thank Dick Hatfield of Searcy for the following examples of clauses for wills.

EXAMPLES OF WILL CLAUSES FOR CHARITABLE BEQUESTS TO THE ARKANSAS BAR FOUNDATION 1. (SCHOLARSHIP FUND). I give ($5,000 Minimum) to the Arkansas Bar Foundation and direct that the income from this fund be used for the purpose of establishing and maintaining (a) scholarship(s) at the University of Arkansas School of Law at _ The scholarship shall be used to pay tuition (and/or other expenses) authorized by the Arkansas Bar Foundation Board of Directors to this law school and shall be awarded on a yearly basis to (a) (first, second or third year) student(s) based upon I direct that the corpus of this fund shall be held by the Arkansas Bar Foundation and shall not be encroached upon unless the Arkansas Bar Foundation ceases to function as a charitable organization as defined by the Internal Revenue Code in which event the corpus shall be distributed to the University of Arkansas School of Law at _ _ _ _ _ This fund shall be named the (Donor's Name) Scholarship Fund. 2. (UNRESTRICTED BEQUEST). I give $ to the Arkansas Bar Foundation to be used for any purpose specified in its Constitution and By Laws. 3. (UNRESTRICTED BEQUEST WITH MEMORIAL). I give ($1,000.00 Minimum) to the Arkansas Bar Foundation to be used for any purpose specified in its Constitution and ByLaws, and I request that I be memorialized on the Memorial Border at the Arkansas Bar Center in Little Rock, Arkansas. " " 4/Arkansas Lawyer/January 1983

Juris Dictum

Lawyers'

continued from page 35 plicated by psychiatric, economic, social, or political issues. An attorney must be able to recognize these non-legal dimensions of legal problems and to suggest specialists outside the law for clients to consider consulting. A lawyer should not permit his or her interest in the legal dimensions of a problem to inhibit a client from securing necessary assistance from non-legal sources. (5) PROPERLY PREPARES AND CARRIES THROUGH THE MATTER UNDERTAKEN. An attorney should follow through a client's legal problem and undertake the actions and strategies formulated with the client in a timely manner. The client should be advised of the completion of actions, of delays, and of other circumstances that materially affect the problem's resolution including the continuing cost of handling the matter. Longrange problems should be reviewed periodically and legal strategies should be reassessed in consultation with the client as necessary. Competent follow through is dependent upon successful practice management and includes preventative practice of law for clients to whom an attorney provides continuing services.

(6) IS INTELLECTUALLY, EMOTIONALL Y, AND PHYSICALLY CAPABLE. An attorney must have the intrinsic intelligence to comprehend the intricacies of the law and legal problems. An attorney incapacitated by dependencies or by emotional, psychological, or physical problems may suffer lapses in motivation, care, or the ability to manage a practice efficiently..."

CONCLUSION These six standards are the culmination of much thought and effort by many members of the board bench. They are a concise statement of the principles governing the competent and able practice of law. They should be often read. They should be daily followed.

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Cover story- - - -

Chief Justices of The United States The cover is a reproduction of the fine, historical painting by Jerome F. Ryan In 1976. The painting Is a part of the West PUblishing Company's legal art collection. We are again privileged to have Wesrs permission to use the painting In THE ARKANSAS LAWYER. Over the last three years, art from West's collection has graced the covers of THE ARKANSAS LAWYER. Seldom, however, has a painting been as timely as "Chief Justices of the United States". 1) John Jay, 1769-1795 2) John Rutledge, 1795 3) Oliver Ellsworth, 1796-1600 4) John Marshall, 1601-1635 5) Roger B. Taney, 1636-1664 6) Salmon P. Chase, 1664-1673 7) Morrison R. Waite, 1674-1666 6) Melville W. Fuller, 1666-1910 9) Edward D. White, 1910-1921 10) William H. Taft, 1921-1930 11 ) Charles E. Hughes, 1930-1941 12) Harlan F. Stone, 1941-1946 13) Frederick M. Vinson, 1946-1953 14) Earl Warren, 1953-1969 15) Warren E. Burger, 1969-

6/Arkansas Lawyer/January 1963

Curtailment of the jurisdiction of the United States Supreme Court and the lower federal courts is a popular subject in The Congress lor the purpose of effecting changes in constitutional law. The House of Delegates of the Arkansas Bar Association, at its Semiannual Meeting on January 16, 1962, adopted the following resolution. RESOLUTION NO. 82-2 In the current session of Congress, more than thirty bills have been introduced to limit the jurisdiction of federal courts or to restrict the power of federal courts to grant certain kinds of relief. They focus on controversial substantive issues such as prayer in public schools, bussing, abortion, and sex discrimination in the Armed Forces. All of the bills would restrict the lower federal courts. Most would affect the Supreme Court's appellate jurisdiction. Some seek to remove completely federal jurisdiction of certain subjects; some dealing with remedy are so broad as to preclude federal court review in the areas involved. At the August, 1961 meeting of the American Bar Association, the House of Delegates declared its opposition to legislative curtailment of the jurisdiction of the Supreme Court and the lower federal courts for the purpose of effecting changes in constitutional law. This opposition was because the numerous proposals now before the Congress seek to circumvent the established amendment procedures with their extraordinary safeguards for changing the provisions of the Constitution; because the premise that unreviewed state court judges would be less hospitable to existing constitutional precedent and more responsive to popular notions of constitutional rights is pernicious; because transient

and vagrant interpretations of constitutional law would spread through the country without the unifying value of one Supreme Court exercising its powers under Article III of the Constitution. undergirded by the Article VI Supremacy Clause; and because there could be no limit, once begun, on legislative tampering with constitutional rights. Thus, there are both constitutional and public policy reasons for rejecting this body of legislation. The thirty plus bills now pending before the Congress do not represent a new development. In the last 45 years, there have been many attempts in the Congress to "overrule" decisions of the Supreme Court by limiting federal court jurisdiction. Between t 953 and 1966 there were 60 such bills. But to this time no legislative enactment upheld by the Courts has ever removed the authority either of the federal lower courts or of the Supreme Court to hear and decide issues of constitutional dimension or to grant relief in cases of constitutional violation. In the face of President Roosevelt's proposal to deprive all courts of the power of constitutional review, and of Senator Jenner's 1956 bill to partially withdraw Supreme Court appellate jurisdiction, and of Senator Thurmond's proposal in 1964 to remove jurisdiction concerning State legislature reapportionment from the federal courts, the Congress has demonstrated political restraint and resisted these and other efforts which would have changed the constitutional balance of the three branches of our government. Congressional forbearance in the past has avoided a constitutional confrontation between the federal courts and the Congress over legislative efforts to gut the capacity of the Supreme Court to preserve the unity and supremacy of federal law. The hearings conducted by the Senate Judiciary Committee this past summer indicate, however, that the forlbearance may be ending. Instead, determined spokesmen appeared for organized substantial constituences, attempting to use the legislative process to circumvent the constitutional safeguards provided by the amendment procedures. The Bar must therefore also come forth to assert again that the Constitution is the supreme law of the land, and that legislation should not be used to tamper with it because of transitory dissatisfaction with judicial decisions.

THEREFORE, BE IT RESOLVED THAT The officers, committees and membership of the Arkansas Bar Association uphold the integrity and uniformity of judicial review and the independence of the judiciary as vital parts of our system of government; and BE IT FURTHER RESOLVED THAT The Arkansas Bar Association in defending the independent judiciary opposes legislative curtailment of the jurisdiction of the Supreme Court of the United States or the inferior federal courts for the purpose of effecting changes in constitutional law; and BE IT RESOLVED THAT The officers and committees of the Arkansas Bar Association communicate the Bar's opposition to said legislative curtailment of jurisdiction to all members of the Arkansas Congressional delegation expeditiously.

••••• Chairman E. Charles Eichenbaum of the Association's Federal Legislation and Procedures Committee has furnished copies of the resolution to the members of the Arkansas Congressional Delegation. In addition, Resolution No. 82-2 is the work product of his Committee. MESSAGE TO THE CONGRESS On July 13, 1982, four former Attorneys General of the U.S., four U.S. Solicitors General, a former justice of the U.S. Supreme Court, a former cabinet officer, and leaders of five national legal organizations today urged Congress to reject all efforts to strip the federal courts of jurisdiction over constitutional rights and remedies. The message to Congress was signed by some of the nation's most prominent lawyers, legal officers, and former justices, representing both political parties and a broad spectrum of political philosophies. However, those signing the message were unanimous in their belief that court-stripping proposals now before Congress "pose a dangerous threat to the integrity and independence of the federal judiciary in our constitutional system of government." The message pointed out that the more than two dozen proposals in Congress deal with some of the most emotional and controversial social and moral problems of our time, like busing, prayer in schools and abortion. One such proposal, the Johnston-Helms anti-busing amendment, has already passed the Senate.

"As individuals, we hold varying views on the substantive policy issues which are the subjects of these proposals," the message said. "But we are united in the belief that these proposals threaten our fundamental constitutional principles: the independence and supremacy in constitutional questions of the federal judiciary, the separation of powers, and the system of checks and balances. The enactment of anyone of these proposals cUrbing the authority of the courts to hear cases or grant remedies for constitutional violations would establish an unworthy precedent." Those signing the message were: former U.S. Attorneys General Benjamin R. Civiletti (1979-81). Elliot Richardson (1973). Ramsey Clark (1967-69), Nicholas deB. Katzenbach (1965-66); former U.S. Solicitors General Wade McCree (1977-81), Erwin N. Griswold (1967-73), Archibald Cox (1961-64), J. Lee Rankin (1956-61); former Supreme Court Justice Arthur J. Goldberg, former federal appeals court judge Shirley Hufstedler; David R. Brink, president of the American Bar Association; Arnette R. Hubbard, president of the National Bar Association; W. Edwin Youngblood, president of the Federal Bar Association; E. N. Carpenter, president of the American Judicature Society; and Alston Jennings, president of the American College of Trial Lawyers. In a letter transmitting the message to Congress, ABA president Brink warned that these seemingly "instant legislative solutions" to controversial social problems would result in serious damage to the fundamental structure of our nation. This, Brink said, "is simply too high a price for this seemingly popular response to what some consider unpopular court decisions." The emotionally charged social issues that are the subject matter of these bills, Brink said, should not obscure the serious constitutional, legal and policy implications of the course being offered. Brink strongly urged Congress not to short-circuit the ongoing Judiciary Committee consideration of these bills in an attempt to force a vote on the issue before the November elections. "If the jurisdiction of the federal court to hear cases or grant essential constitutional remedies is to be altered by action of Congress, then it should be done by constitutional amendment," Brink said.

In his letter Brink also pointed out that opposition to the current Congressional efforts to restrict the jurisdiction of the courts in widespread throughout the legal community. He said that in addition to those signing the message to Congress, the Conference of Chief Justices, the deans of more than 50 law schools and the majority of state bar associations have gone on record in opposition to the process by which the pending bills seek to alter constitutional law.

••••• HOWEVER The status of major legislation in this connection before the 97th Congress as of July 15, 1982, was as follows: FEDERAL COURT JURISDICTION • H.R. 72, S. 158, et al. Divest Supreme Court or lower federal courts, or both, of jurisdiction in certain controversial areas, for example, abortion, busing, and school prayer. House: Judiciary subcommittee began general hearings, 6/3/81; S. 951 pending in Judiciary subcommittee and a discharge effort began 5/25/82. Senate: Passed S. 951, Department of Justice authorization for fiscal year 1982, which includes a busing jurisdiction amendment, 3/2/82; Judiciary Subcommittee on Separation of Powers approved S. 158, abortion legislation, 7/9/81, and approved S. 1647, busing legislation, 11/17/81; Judiciary Subcommittee on the Constitution approved S. 1760, busing legislation, 11/3/81, and approved S.J. Res. 110, which proposes a constitutional amendment prohibiting abortion, 12/16/81. Full Judiciary Committee approved S.J. Res. 110, 3/10/82. S. 1741, S. 1741, S. 1742, and S. 1743, abortion, school prayer, and busing legislation, placed on the Senate calendar, 11/2/81.

••••• On September 24, 1982, the Senate voted to preserve the integrity of our Constitution by rejecting the Helms court stripping amendments to the debt limitation bill. In so doing, the Senate prevented a serious and potentially fatal blow to our constitutional system of separation of powers and the principle of judicial review. It is hoped that the Senate's action will go a long way toward ending court stripping as a means of changing constitutional law. However, proponents have already indicated that the proposals will be re-introduced at the next session. continued on page 16 January 1983/Arkansas Lawyer/7

LAW SCHOOL NEWS Dean J. W. Looney Assistant Dean Ellen Brantley

SCHOOLOFLAW, UNIVERSITYOFARKANSASATLITTLE ROCK CALABRESI TO DELIVER ALTHEIMER LECTURE Guido Calabresi, Sterling Professor of Law at Yale University will deliver the seventh Ben J. Altheimer Lecture on Friday, November 19, 1982. Professor Calabresi will speak on Updating the Common Law: The Role of Courts in an Age of Statutes. Professor Calabresi, a native of Milan, Italy, graduated magna cum laude from Yale College, attended Oxford University as a Rhodes Scholar, and graduated from Yale Law School. At Yale he served as notes editor of the Yale Law Journal. He is a member of Phi Beta Kappa and Order of the Coif. After his graduation from law school, Professor Calabresi was law clerk to Justice Hugo Black. He returned to Yale Law School as an assistant professor in 1959. In 1962 he was named Professor of Law. Professor Calabresi has served as a visiting professor at Harvard Law School and as Arthur L. Goodhart Professor of Legal Science at Cambridge University. He has authored numerous articles in legal journals, and his books include The Courts of Accidents: A Legal and Economic Analysis; Tragic Choices; and A Common Law for the Age of Statutes. ORSINI TRIAL HELD IN COURTROOM The courtroom in the Old Federal Building of the law school is the scene of the murder trial of Lee Orsini. As this article is written, the jury has been selected and the trial about to begin. Both state and federal courts frequently use the courtroom, and law students have the opportunity to observe trials in a convenient setting. Dur8/Arkansas Lawyer/January 1983

ing the Orsini trial the glassed in balcony of the courtroom has been reserved for students, faculty, and staff of the School of Law. FOUR ROCKEFELLER SCHOLARS ENROLL The second year of the Winthrop Rockefeller Foundation's grant to the law school brought four new scholars. Cynthia Davis, Raymond Easterwood, Victor Hill, and Jerry Malone all entered as full-time students. Ms. Davis, a native of Little Rock, received her undergraduate degree from Oral Roberts University. Mr. Easterwood is from Conway and received his bachelor's degree from UCLA. Mr. Hill's hometown is Little Rock, and his alma mater UALR. Mr. Malone is from Earle; he graduated from U.CA Each of the scholars, who were selected by a board of black Arkansas attorneys, receives a full tuition scholarship and a generous stipend. The four 1982-83 scholars join Alice Fay Sprinkle of Pine Bluff, the first Winthrop Rockefeller Scholar, who entered UALR in 1981. The Rockefeller Scholarships are designed to provide minority leadership in Arkansas by assisting talented, committed black students in obtaining a legal education. FACULTV NEWS Donaghey Distinguished Professor Robert R. Wright participated in a panel discussion on "Alternatives to Zoning" at a regional meeting of the American Planning Association in Fayetteville on October 1-2; on October 22, he addressed members of the Arkansas Judiciary on "Recent Developments in

Probate Law." Professor Wright, who serves as Chairman of the Committee on Regional Institutes of the General Practice Section of the American Bar Association, will direct an institute on the Kutak report and professional responsibility in Birmingham, Alabama. Professor Wright, Dean Lawrence Averill, and Professor Susan Webber attended the ABA convention in San Francisco. Dean Averill has agreed to serve as Co-Chairman of the Mid-year Bar Meeting. He and Richard Williams are planning a program on Drafting and Estate Planning. Assistant Professor Norman Stein was a member of the People to People Juvenile Justice Delegation to Europe and the Soviet Union September 19 to October 9. Assistant Dean Claibourne W. Patty, Jr. spoke to business law classes at McClellan High School. On September 10, Associate Professor O. Fred Harris, Jr. spoke at the Fall Legal Institute held at Fayetteville. His topic was "Problem Areas Brought Into Focus by Recent Arkansas Appellate Court Decisions-Procedure, Jurisdiction, Venue, the Nonresident." Assistant Professor M. E. Mullins has served as a member of the Committees Underground Coal Mine Safety of the National Science Foundation since 1980. The committee's report Toward Safe Underground Coal Mines was published in August. Professor Mullins will continue his work with the committee, which is now dealing with special problems concerning the higher rate of fatalities in smaller mines.

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SCHOOL OF LAW, UNIVERSITY OF ARKANSAS, FAYETIEVILLE CLASS OF 1985 The 1982-83 entering ciass of 167 started the year with an orientation program featuring Attorney General Steve Clark as guest speaker followed by an introduction to legal study conducted by Professors Bob Knowlton and AI Witte. This year's ciass of 119 men and 48 women includes students from 40 Arkansas counties and from 17 states.

PLACEMENT Assistant Dean Jim Miller has arranged for placement interviews to be conducted by law firms from throughout Arkansas and surrounding states. Several Arkansas firms and an increasing number of out-of-state firms from various cities including Dallas, Tulsa, and Oklahoma City have arranged visits to the law school this fall.

RECEPTION AT FALL LEGAL INSTITUTE The School of Law hosted a reception for alumni and friends of the law school at the Fall Legal Institute. This event, attended by the 200 plus attendees of the Institute along with guests and other friends of the law school, is to become an annual activity at the Fall Legal Institute and is an opportunity for the law schooi to welcome alumni and friends back to Fayetteville.

PUBLICATIONS Howard Brill's article "The Arkansas Code of Judicial Conduct" appeared in volume 35 of the Arkansas Law Review. A summary of his use of simulation exercises to introduce first year students in civil procedure to an actual lawsuit appeared in a recent issue of the Journal of Legal Education. Neil Hamilton and Jake Looney have an article in the South Dakota Law Review entitled "Improving Protection for Depositors in Federally RegUlated Grain Warehouses." Bob Laurence's article "North Dakota's New Rules Respecting Garnishment and The Property Exempt Therefrom" appeared in the summer issue of the North Dakota Law Review. Pro-

fessor Laurence participated in a summer teaching program at the University of Oslo, Norway and is currentiy working on an article with Professor Jan Helgesen of the Oslo faculty dealing with U.S. Indian law and its applications to Norway. Richard Richard's new book Cases and Materials on Employment Discrimination was recently released by Little Brown & Company. Terence Centner, the first graduate of the LL.M. program, has had an article based on his thesis entitled "Retained Equities of Agricultural Cooperatives and the Federal Securities Acts" accepted for pUblication in the Kansas Law Review.

FACULTY ACTIVITIES Milt Copeland is serving this academic year as chairman of the campus faculty for the University. He has been activeiy invoived in campus activities and serves on a number of campuswide committees. David Newbern has addressed bar groups in fourteen Arkansas localities concerning the Arkansas Supreme Court rules on pleading, practice and procedure. He will be making similar presentations at other locations during the remainder of the year. Phil Norvell has been appointed to the Subcommittee on Oil and Gas of the Rocky Mountain Mineral Law Institute. Jake Looney was commencement speaker at Southern Arkansas University's summer commencement and spoke at the annual fall meeting of the Arkansas Farmers Union. He also spoke at the USDA Rural Development Recognition Program, the State Conservation Workshop, and at the Fall Legal Institute. Jake Looney and Neil Hamilton, along with LL.M. students Tom McGivern, Meg Scott and Chuck Stutte, attended the American Agricultural Law Association meeting in Des Moines. Professor Hamilton and former LL.M. student Chuck Culver were panel discussants for a paper presented by Dean Looney, "Marketing Farm Products: The Farmer As Creditor and Related Problems Of Bankruptcy." Dean Looney was elected President of the AALA for 1983-84 and will serve as program chairman for the 1983 meeting to be held in Little Rock.

UA NATIONAL MOOT COURT TEAM SELECTED The National Moot Court Team for 1982 consists of Kitty Gay, Carol Goforth, and Greg Stephens. The team was selected by the Executive Committee of the Moot Court Board and the faculty advisers based upon oral arguments and written briefs. Cindy Jones was named the team alternate. For the first time in more than a decade, the Regional Competition will be held in Fayetteville in November. Fourteen law schools from Texas, Arkansas, and Oklahoma are expected to send competitors. The top two teams qualify for the national finals in New York City in January. NEW LEFLAR FELLOW NAMED The 1982 recipient of the Robert A. Leflar Fellowship at the University of Arkansas is Richard Hutto, who received his bachelor's degree this past spring from Methodist College in Fayetteville, N.C. A 1973 graduate of Gosnell (Mississippi County) High School, Hutto, 27, has just completed eight years of service in the United States Army. During the last four of those years, he was assigned to intelligence duties. He was a staff-sergeant when discharged. Hutto moved to Arkansas with his family when his father, a career Air Force non-commissioned officer, was assigned to Blytheville Air Force Base. Hutto's parents, Mr. and Mrs. Tanksley Hutto, still live in Blytheville, though his father is now retired from the Air Force. Hutto is married and he and his wife, Jeannine, formerly of Terra Haute, Ind., have one child, a son, age 2. SCHOOL OF LAW SCHOLARSHIP RECIPIENTS The Law School Scholarship Committee has selected 15 students forvarious fall semester scholarships, and 11 students for scholarships provided through the Arkansas Bar Foundation. Students previously selected as recipients of scholarships prOVided by the law firms of House, Holmes and Jewell (1), Wright, Lindsey and Jennings (2), Friday, Eldredge and Clark (6), and the Rose firm (1) include Joel Huggins, Claudia Driver, Patrick Hollingsworth, Jo Carson, Carol Goforth, Evelyn Moorehead, Martin Thomas and Ellen White. "

....

January 1983/Arkansas Lawyer/9

The Making Of A Law School By: Robert R. Wright He sat alone reading one of the latest tomes to be sent him by one of the law professors who published in his field. It was past ten, now, and the news of liquor store holdups, truck wrecks on the interstate system, domestic violence, incoming storm systems, and athletes saying "you know" had passed into the night. If he read about Sherlock Holmes or even Oliver Wendell Holmes, he might become interested. But this law review article would surely put him to sleep. The phone rang. It was President John William Jones of the University of Arkansas. He was apologetic about the lateness of his call. He talked at some length. The basis of it all was that President Jones was asking him to chair a committee to study the future of the law schools in Arkansas. He had been recommended, it seems, by the Association of American Law Schools, of which he had recently served as president, as well as by the consultant on legal education to the American Bar Association. P. (for Phineas) Keith Jonson was in his late fifties. He was currently W. Blakemore Whittlesey Professor of Law at Sanscrit University and had previously served for ten years as its Dean. He was a prominent authority in his field of law, having written six books and numerous law review articles on the subject. He had grown up in the middle west and was proud of Sanscrit's reputation as "the Harvard of the middle west." (He privately referred to Harvard as "the Sanscrit of the East"). Anyone would have ranked Sanscrit among the top ten or fifteen law schools in America. But there was more-trial lawyers loved Dr. Jonson for his down home accent and expressions. He earned their highest merit: he was "practical," "logical," "one of the boys." He was a rare blend of the scholar and the practitioner. President Jones explained the situation. The University, he said, was strapped financially. It wanted to create excellence at every level, but there was only so much money to go around. It 10/Arkansas Lawyer/January 1983

had two fully accredited law schools, but only one engineering school, which was in danger of losing its accreditation. Since the engineers had admittedly fallen on bad times, perhaps it was time to retrench with regard to law schools and, at the same time, get a bonus out of it. If there were only one, would it be better than two? (Jones apologized for that suggestion. He did not know much about law schools, he said, and he had frankly tried to steer clear of them as was recommended by the University Presidents' Association, which instructs new college presidents on how to be president.) The committee that Jonson was to chair was already in place. They were all outsiders in the sense that none were connected with the University of Arkansas and only Jonson and one other had ever been to Arkansas before. They included, along with the parenthetical thoughts of Dean Jonson, the following: • Dean Bilbow Phogg of the University of Alabama. ["He talks like he is eating southern fried grits, but he has a million great stories about lawyers, whiskey, sex and mules, although not necessarily in that order."] • Professor and Librarian Millicent Marmaduke French of the University of Virginia, whom President Jones described as "somewhat crusty." ["Crusty, hell, she's a crustacean whose time has come and passed."] • Professor James Wedgewood Dandy of the University of California at Berkeley. ["He's one of those people out there who is always talking about 'Boalt Hall,' as if he taught in Canada or England. 'Berkeley' is a great name in American education, and it ought to be good enough for California pansies. Even Harvard and Yale are not that pretentious. "] • Professor William A. Armstrong of the University of Wisconsin. ["Thank God for another mid-westerner. I can talk about growing corn, and he can talk about raising cows."] Dr. Jonson accepted. It was substanlially south of Sanscrit and ought to be

(Editor's note: Professor Wright is eminently qualified to write this article. Currently, he is the Donaghey Distinguished Professor of Law at UALR School of Law. Prior thereto, he was Dean, College of Law, and Director, Law Center, at the University of Oklahoma. Before that, he was Professor of Law at the School of Law, University of Arkansas.) better in the winter. He then set about getting into Fayetteville. The initial soiution to this was to fly to Tulsa. It was snowing heavily. Fayetteville, he was told, was close by. So was Oklahoma City. Finally, about midnight, he and his "team" of consultants who had met each other there limped into Fayetteville along with the stranded Arkansas basketball team. ("You know, man, if we play the way we did, you know, tonight, you know we ought to go all the way, you know?") Jonson, frankly, had no idea. You know? The nex1 day, the team inspected the University of Arkansas Law School. They visited respectfully with the outstanding living authority in the country on the law of conflict of laws, Dr. Robert A. Leflar. They were somewhat distressed by the departure of an energetic young dean, David Epstein, a prolific scholar and respected professor throughout the nation. They found, however, other faculty members who had distinguished themselves in one way or another in teaching or in writing in their fields of law. It was not a large law school, barely medium size. Its student profile was not high, and the

school was trying to remedy that problem. It had embarked on an ambitious agricultural law program headed by the new dean, J. W. Looney, and was reaching out to the Bar through continuing legal education. Its facilities had been much improved under the previous tenure of Dean Wylie Davis. (Professor AI Witte, a superb classroom teacher, graciously translated the previous night's dialogue with the basketballteam.) The inspection team met the next morning with some prominent attorneys and judges. "I think you people need to be informed of something which is in the forefront of your visit," said one. "The entire purpose of this episode is to enable Little Rock, with the help and support of Eastern Arkansas and some forces in South Arkansas, to steal away our law school. This has been going on for years. It is a permanent project of the Little Rock Chamber of Commerce, whose influence has permeated the governing structure and operational apparatus of the Arkansas Bar Association. The latter, I might add, is a suspect group with excessively liberal tendencies which pervert its enunciated purpose in a manner which transcends the obligation of the legal profession to the appropriate consideration and respect for legal education in this State." Professor French, of Virginia, was startled. "Good heavens, extreme liberals," she said. Professor Dandy said that liberals were not bad, even when they belonged to the Chamber of Commerce. Dean Phogg told a joke about a drunk from Mobile who stumbled into a Ku Klux Klan rally and confessed to being a Communist because he thought that was where he was. (You see, the words "Communist" and "liberal" in Alabama... ) Professor Armstrong commented on the fact that the Holiday Inn served real butter. Dean Jonson ate his eggs and bacon. The flight to Little Rock was uneventful as a Skyways flight can be. The team met Dean Jonson in the airport lobby after he had disposed of his eggs and bacon. The team was met by some members of the faculty of the University of Arkansas at Little Rock law school. It was a downtown law school, unlike what any of them had been accustomed to in legal education either as students or faculty. It was a "new" or "now" kind of thing. Several mentions were made of Antioch, but these were refuted by the clinical education pro-

fessors who spoke highly of the value of traditional education. The team met the energetic new dean, Lawrence Averill, and some members of the faculty who had distinguished themselves in one way or another, including Dr. Morris S. (Buzz) Arnold, more recently of the faculty and administration at Penn. ("I know him," said Jonson. "And the only way that sonova-gun would have left Penn would have been for them to promise him the governorship or a senatorship within the next five years.") Professor French inspected the library. "It is adequate," she sniffed, "but so is Fayetteville's." The team was impressed with the commitment of the faculty and administration to service of the legal profession and service within the community. A visit with the administrators at UALR acquainted the team with the "urban mission" of the University. The law school, they were told, piayed an integral and important role in that regard. They also visited with the capable former Dean Robert K. Walsh, who was now a member of the largest law firm in the State. Dean Phogg recalled his days with a law firm in Atlanta, and Professor Armstrong reminisced about practicing in Chicago. It was time to caucus. They retired to their rooms, showered, dressed and met in Professor Jonson's suite. Professor Dandy of Boalt Hall was resplendent in his apricot pants and socks and his matching checked coat with an apricot and fuchsia tie. ("You don't have to ask where he came from," Jonson thought. '" just hope the police don't pick him up.") "Well, what do you thinkT asked Dr. Jonson. Professor Armstrong cleared his throat. "Neither place wants to lose its law school. In Fayetteville, it is symbolic of a dismembering of the campus in which segments of it are transported to Little Rock. In Little Rock, they are proud of their little law school and what they have achieved in so short a time." Professor Dandy chimed in, "Fayetteville feels threatened by UALR. UALR feels that Fayetteville is too pampered and always gets its way, to the detriment of Little Rock. They are in agreement that neither wants to give up anything, Each has its own nest, and neither is Willing to share the eggs." "Don't mention eggs, please," said Dr. Jonson, recalling his Skyways flight. "It is all very stupid," piped up Professor Millicent Marmaduke French. "If

you took both libraries and combined them, trading or selling unnecessary duplications, of course, you would have one of the finest research law libraries between Austin, Texas, and Charlottesville. Their professors, students and the lawyers in general would have a resource matched by only twenty or thirty other law schools in America. They would have a larger collection than Oxford and Cambridge combined," "They would have one of the larger law school faculties in the country, said Dean Phogg of Alabama, "and an excellent faculty-student ratio. Their curriculum could be more diverse and offer more opportunities for specialization. They could create a graduate program in law of some import. They could put us in the shade at Alabama, if they built a beautiful building to go along with it. You know, ours was designed by Edward Durell Stone." Dean Jonson pondered the foregoing as he tapped the ashes out of his pipe. "This is all so apparent," he said, "to people who are professional law teachers not associated with Arkansas that it is strange that it is not apparent here." "What we have heah is a failure to communicate," said Dean Phogg. "Precisely," said Dr. Jonson. "And we are here to do the communicating." The next afternoon, the inspection team gathered for a reception and final report at Trapnall Hall in Little Rock. Dean Phogg was surprised to hear Professor Armstrong say that the bUilding reminded him of one in Madison, because it was obviously not a Yankee building, and it reminded him of one in Montgomery. No matter. In attendance were members of the faCUlty of both law schools, administrative officials from both campuses, members of the Board of Trustees, and legislators and leaders in the Bar. After much chit-chat and substantial quanticontinued on page 12

January 1983/Arkansas Lawyer/11

路 .. A Law School continued from page 11 ties of wine and cheese, the team sat down behind a large table with the local hosts and guests seated or standing in a semi-circle facing the table. Yellow pads at the ready, the inspection team gave its views one by one. They were unanimous. Whether in Fayetteville, or as a separate division of the University System situated in Little Rock, these two law schools could-united-be one great law school rather than two of rather tapioca quality. Dean Phogg, for his part, waxed eloquent even beyond his own personal beliefs. "It could be like the reunion of the Naw1h and the South," he said. "Neithah would have amounted to as much without the othah." It was an appealing point, and you could tell why Dean Phogg was so popular a speaker at local bar functions in Anniston as well as at Tuscaloosa. Professor French's report was filled with figures, sterile yet compelling. Professor Dandy tried to match Dean Phogg's eloquence with a reference to all Arkansans being fellow voyagers on "spaceship Arkansas." Professor Armstrong pointed out that Wisconsin had more than twice the population of Arkansas and greater wealth, but had only one state-supported law school, as was also the case in nearby Minnesota and Iowa. The result, he said, was that those were highly respected law schoois in America. Dr. Jonson opened things up for questions and comments. There were a great number of people who used the word, "shocked," to express their views. The familiar cries from Fayetteville were heard about the loss of their law school. The UALR people said that the Fayetteville law school would be welcomed if it were simply to become a part of their law school at UALR. Otherwise, they did not want any part of this. Trustee after trustee stated his opposition. Bar leaders were silent, overwhelmed by the emotion that poured forth. Then a voice rose from the group. "Dawggone it," he said, "I've heard enough." It was the voice of Senator Buster (Biff) Bumbaugh of Scruffton, the powerful Senate liaison to higher education. "Yew done brought these stout thinkin' folks in here from all over the country. They have done told you what you 12/Arkansas Lawyer/January 1983

oughta do. They is gonna save you money and give you one of the finest law schools in the country at the same time. And you all is standin' around here like a kid who don't want to share his candy." He paused for effect. The room was deathly silent. "Well, you needn't worry about it no more. The legislature is goin' to mandate it, startin' a year from the time we pass the bill. We're gonna give you sumthin' good

whether you want it or not. Meetin's adjourned." Except for Dr. Jonson and Dean Phogg, the team members seemed startled and aghast at the turn things had taken. "Why are you not surprised?" they asked. "Because," said Dr. Jonson, "that is the way things are done in Arkansas."

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Thank you for taking the law into your own hands. As The Lawyers Co-operative Publishing Company-publishers of Am Jur and ALR--<elebrates its Centennial Anniversary, we'd like to thank you, our nation's lawyers, for playing d key role in shaping America's destiny. And for fulfilling your obligation so honorably. We have, through our continuing critical analysis of developments at the leading edge of the law, sought to inform and inspire the men ,md women of the legal profession. We too h.we aspired to sustain the fundament'll principle of American

civilization that the rule of law sh.1l! prevail. And we pause on this proud occasion to salute all of you whose support made our success possible. Because you took our lawbooks,1S well .15 the law-into your own hands, we can continue in our second hundred years to provide you with a complete, integrate-d, preresearched system of cross-referenced legal publications. May they help you continue to uphold the high standards of your most honor~ able profession.

Contact your nearestlCP Represcntlltivc in Arkansas:

Northeast Arkansas Lorraine Hall (501) 378-7038 Crittenden & Mississippi Counties H. Lynn Wilder (901) 377-6565

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Virginia-Houston

U.,._U.lf-RY\l;'

STATEMENT OF OWNERSHIP, MANAGEMENT AND CIRCULATION IIt...- lIt'" V.S.C. '-'S/ 1. TlTU OF I'UlllCA TOON

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ESTATE PLANNING SPECIALIST

We are searching for an attorney who has one or more years general practice experience, with experience or educational background in Estate Planning. Openings for this newly-created position exist in Northwest Illinois, South Central Illinois, Northeast Missouri and Northwest Arkansas. Some travel within the state is required. You will be responsible for providing estate planning assistance to local farm families while working closely with the family's local attorney. We offer a salary to the low twenties, an excellent benefit package and a company car. To be considered please send your resume and current annual income in complete confidence to: Vice President, Personnel P.O. Box 504 St. Louis, Missou;;,;ri..,;6;,;3..,;1,;;,66;;...._ _...1

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Lawyers Helping Lawyers Committee Program

WHAT IS ALCOHOLISM? It is not clearly understood why some drinkers become alcoholics and others do not. Alcoholism is defined by the American Medical Association as "an illness in which there is a preoccupation with alcohol and loss of control over its consumption."

PROGRAM The sole function of the program

will be to encourage afflicted persons to start down an appropriate

THE BAR EXAM The following questionnaire is reprinted with the permission of the South Carolina Bar Association and the South Carolina Commission on Alcohol and Drug Abuse. Experts say that two affirmative answers indicate a problem; three or more affirmative answers

The development of alcoholism usually takes a number of years and offers warning signals as it progresses. A first clue that alcoholism may be developing is when a few drinks no longer effect the anticipated sensation the drinker set out to accomplish. This is a sign that control over consumption is diminishing. Further warnings of a drinking problem are changes in personality when drinking. arrest as a result of drinking, and family or job problems because of liquor. The line between problem drinking and alcoholism is crossed when alcohol becomes the center of the person's life. Daily organization revolves around drinking, secretly or in public. And this is done with at least a subconscious knowledge of the destructive consequences. Alcohol dependence has been established. Final stages of the disease find the alcoholic SUffering withdrawal from alcohol in the morning instead of a hangover. The body is so dependent on the drug that it cannot operate without it. A drink in the morning stays the symptoms and the alcoholic can function again. In the most advanced depths of alcoholism, the person cannot pertorm at all in society. He is totally concerned with getting liquor, drinking and sobering up. 14/Arkansas Lawyer/January 1983

indicate a need for seeking help. YES

1. Have you failed to show up at the office because of a hangover? 2. Failed to appear in Court for the same reason? 3. Neglected to process mail promptly? 4. Neglected to pay obligations on time? 5. Frequently failed to keep appointments? 6. Showed up in Court or depositions 6. under the influence?

7. Are you drinking in the office during office hours? 8. Have you used, misused, co-mingled or borrowed clients' Trust Funds? 9. Have you failed to accept or answer telephone calls because you didn't feel good? 10. Have you gotten other attorneys to make Court appearances on your behalf? 11. Are you avoiding the resolutions of problems? 12. Are you regUlarly partaking of noon cocktails? 13. Is your ability to perform diminished in the afternoon? 14. Are you frequently blaming your secretary for the things that go wrong? 15. Is your relationships with your clients, staff and friends deteriorating?

16. Do you get drunk at Bar meetings and social gatherings?

17. Does your spouse complain you are drinking too much?

18. Are you missing deadlines for performance, like allowing the Statute of Umitations to run? 19. Are you losing control at social gatherings when professional decorum is called for? 20. Are these occurrences increasing in their frequency?

road to recovery. This effort will be confidential. In practice the proposed program will work as follows: 1. A concerned person will call or contact the referral program. The caller may be the afflicted person or a concerned friend or family member. 2. Trained volunteers will respond to the caller. These people will be lawyers and most of them will be recovered alcoholics who understand the problem from personal experience. Long experience with recovery programs such as Alcoholics Anonymous has shown that a suffering alcoholic who is determined to deny the problem and reject help responds best to one who shares the problem, and who is visibly happy being sober.

3. These volunteers also will participate in a professional training program modeled after programs offered by other states and organizations.

VOLUNTARINESS In some cases, harsh confrontation and ultimatums may be advisable. In most, it is hoped, some common sense advice and recommendations will suffice. The program will be voluntary. In no instance will intervenors force action by disclosure or referrals where help is rejected. Experience has proved that merely sitting down and talking with a lawyer who has an alcohol problem does wonders, because he or she becomes aware that help is possible and learns where to seek assistance without fear of disclosure or stigma. Whatever its merits, the effectiveness of the new program will depend almost entirely on the willingness of people to use it. Lawyers who have a partner or associate in trouble can turn to the program for guidance, not only for the afflicted person, but also for themselves. Spouses, clients and friends can do likewise. Most of all, the lawyer who has a drinking problem ought to be encouraged to contact the

program. Although results cannot be assured, the odds are very good that positive recovery will be achieved. In addition to establishing the independent referral and rehabilitation program, the committee intends to work with other Bar committees and with the Committee on Professional Conduct to establish the principle for all purposes that alcoholism is an illness and should be viewed as such. Several courts in other states have adopted the principle that alcoholism, being an illness, when identified as the cause of ethical misconduct, should result only in sanctions such as probation or suspension, not disbarment, so long as the person admits the problem and is recovering in a program. In all of its efforts the committee intends to educate the Bar about alcohol problems in order to remove the stigmas that prevent people from seeking help and to permit lawyers to identify and deal with the illness responsibility for the benefit of the individual, the profession and the public. continued on page 16

4. The interventions will take many different forms, depending on the particular circumstances of each case. Every effort will be made to select the most appropriate volunteers to handle each situation.

5. The intervenors will visit the caller, assess the circumstances and make a determination whether a problem exists and, if so, what response is appropriate. 6. The intervenors then will work to move the alcoholic person into an appropriate rehabilitation program. This may involve institutional treatment in some cases; it may involve therapy, counseling and attendance at AA meetings; and it may include a combination of appropriate treatments.

7. The Committee and volunteers are not Carrie Nations seeking to prosely1ize. Their only role is to respond to an individual request and render whatever help they can. Ultimately, the individual who has the problem must accept and acknowledge his or her problem if recovery is to be sustained. January 1983/Arkansas Lawyer/15

Lawyers Helping Lawyers Committee Program continued from page 15

ALCOHOLISM Alcoholism is not an easy subject to discuss in public, and this itself is regrettable. The word "alcoholic" carries with it in the average mind images and misconceptions that, though utterly false, contribute to syndromes of denial and rejection of help-for who wants to acknowledge that he or she is an "alcoholic?" Visions are conjured of destitute bums, moral weakness and bottles of cheap wine. A lawyer, welldressed, well-heeled, and justifiably proud of being able to solve any problem, finds it difficult to accept a condition that cannot be self-controlled. Denial is, therefore, much greater among professionals. It is generally held from empirical experience that doctors, lawyers, clergy and other professionals, otherwise highly intelligent, deny the existence of a condition that they cannot overcome without help far longer and more arrogantly than nonprofessionals. It appears that, because of their stations in life and their income levels, lawyers also are better able to conceal the problem until late stages. Alcoholism is very difficult to define because it manifests itself so differently among people. Quantity and frequency of use vary widely. Possibly the best definition is the practical one: anyone who regUlarly experiences any problem or concern rising from alcohol consumption and yet continues to drink excessively. The first irrefutable point is that alcoholism is a disease, and it is so recognized by law and by doctors through the American Medical Association. The second truth is that alcoholism can be overcome-but it cannot be "cured" in the sense of safe return to drinking. Complete remission is not only possible; it happens every day when someone acknOWledges the problem, seeks appropriate help, and begins to experience the daily life of abstention. No other effective remedy has ever been established. One famous study, which suggested that problem drinkers could return safely to social drinking, was retracted after further study. Learning to accept total abstention as a necessity of everyday life 16/Arkansas Lawyer/January 1983

does not seem easy-not nearly so each as accepting a daily insulin shot, but no different in principle. But it can be done, and it is done every day by more than a million people who formerly abused alcohol. These are the principal reasons why our committee has been laboring for months to create an acceptable, confidential and effective program. The experiences of other bar groups have demonstrated that a specialized response for professionals is effective and worthwhile.

PROCEDURES The following rules of procedure are suggested, if you know a lawyer or Judge whom you feel has a problem: 1. Do not hesitate to say to him or her, "Do you think you are drinking too much?" (Expect to hear all manner of reasons why it can't be.) 2. Suggest that he or she contact the Arkansas Bar Committee on Lawyers helping Lawyers. 3. Do not make it easy for him or her to avoid the consequences of failing to keep appointments or honor commitments, when you suspect the reason to be alcohol related. 4. If you cannot confront him or her personally, either because of position, monetary reasons, client protection, or just plain reluctance to personally intervene, you contact a member of the Committee concerning the problem. Your inquiry will be kept completely confidential; the person involved will not learn your identity; and any contact made with the person involved will be carried out in the utmost confidentiality. In this event, the person involved will be told, in essence, "a concerned friend has indicated he fears you are haVing a drinking problem, or that you are headed for trouble because of excessive drinking". If there is an indication of acceptance of a need for help, there will be help available. We work in a profession packed with pressure, demanding our undivided attention and our honesty, integrity and concern. Much is expected of us by the people we serve.

The rewards, financial and otherwise, are sometimes fulfilling, but often the whole process is frustrating and disappointing. We move in a sophisticated, evermore affluent society, where the cock1ail hour and the social drink are almost expected. Such activity is pleasant and can be a welcome diversion to the non-alcoholic. To the person, however, who finds, in alcohol, an escape from the pain of frustration, pressure, and disappointment; or the person to whom the first drink is the beginning of the periodic binge; or the person who "can't drink", such a program is not only dangerous, it is the beginning of a downward journey which will end when the person has reached his or her personal low point, where he or she is finally Willing to reach out for the help that is available. Our Committee stands ready to help the lawyer or judge who will accept it. Seeing that those who need it are willing to accept it is the duty of all of us who occupy this profession. ~

Chief Justices Of The United States continued from page 7 MESSAGE TO ASSOCIATION MEMBERS In his first President's Report in The Arkansas Lawyer, October 1982, Association President J. L. (Jim) Shaver, Jr. pointed up the importance of this effort against court stripping proposals. At the National level, I am concerned by the numerous proposals pending in Congress to restrict the jurisdiction of the Federal Courts. Regardless of how one may feel about the subject matter of some of these bills, it appears to me to be a dangerous trend for Congress to randomly strip away jurisdiction of the Federal Courts to hear an issue, simply by passing a bill in Congress. I am told that there are over thirty such bills now pending, among which is one doing away with diversity cases in Federal Court. If passed, this could eliminate access to these courts by many of our citizens, and eliminate a substantial number of us from practice in Federal Court. Our Association has taken a stand against these bills, and we must continue our efforts in this regard.

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TO WIT By S. Sponte, Esq. "S. Sponte is the nom de plume of a lawyer who practices and is generally bewildered in Westmoreland County, Pennsylvania."

How I Spent My Xmas Hiatus I'm alone in my office now, the mail long since answered. The telephone is rigorously mortised, and not a creature is stirring. My secretary is doing crosswords, impatiently drumming her little finger on the barren pages of her stenographic pad, waiting to go home early. It is yet another in the continuing caravan of silent nights, the onset of the Xmas drearies. I should have long ago learned how to handle this perennial Yuletide solitude, having experienced so many. During the rest of the year, I can be found silently praying for a respite, a su rcease from the responsibility of directing the collisions of little worlds. Now however, when actually confronted with peace on Earth, I find no solace. I will have unbillable time on my hands until the phones and the practice are resurrected by the gradual return of my clients to the frailities of the human race. I have tried to fathom the relationship between the brotherly love that fills the air as the year hurdles to a close, and the vacuum created in the lives of the lawyers as it rushes past. It's not that happiness and good will upset me, although I have been able to live very well so far without them. Rather the Xmas hiatus is a gentle reminder that we deck our halls by acts of folly, and there lurks within our professional souls a fear of a chronic outbreak of universal affection, history and human experience to the contrary notwithstanding. Oh, I am aware that not all of my colleagues are at this season abandoned by joyous tidings. For some, the parade of justice never falls out. Those brothers who answer the call of the profession on behalf of murderers, rapists, thieves and insurance companies always have the January Term to skirt. And those poor souls who slave for

THE FIRM, hoping against hope to find a lump of partnership in their stocking, can oft be found in the office, burning the Xmas oil before their fire dies. But for me at least, 'tis the season to be slow. So here I am, sputtering with

my flair for the inane, alone amidst a dozen unread journals, eleven lawsuits withering, then unbroken homes, nine unuttered slanders, eight wills uncontested, seven contracts honored, six crimes uncommitted, need I go on?

I have slashing interrogatories, but no one to interrogate, dogmatic depositions, but no one to depose, crafty complaints, but nothing to complain of, scandalous new matter, the worst you could suppose. I have bits of writs, and pieces of praecipes, plentiful petitions, and bountiful briefs, dramatic denials, admissions of nothing, exhibits extraordinaire, prayers for relief, grandiose garnishments, savory seizures. abundant attachments, and judgments galore, sadistic subpoenas, for fraudulent debtors, with writs of replevin, and oh, so much more. elaborate evidence, expert opinions, impeachment exciting, sublime sur reply, habeus corpuses, many mandamuses, writs of injunction to hold back the sky. Oh, oh, oh, oh, I yearn to sue and here I sit, a pax upon me. How cruel it is to be left so alone with one's own devices, especially at Xmas. Copyright

197~S.

Sponte, ESQ.

January 1983/Arkansas Lawyer/19

Revenue Bond Financing In Arkansas By John S. Selig and W. Christopher Barrier Lawyers representing local governments and industry may be asked questions from time to time about municipal bond financing. This type of financing can be a useful device for encouraging provision of needed services and industrial development. However, it may be underutilized because clients (and even lawyers) are intimidated by the aura of mystery and complexity which has come to surround the subject. The reluctance is unnecessary. Although overnight expertise cannot be expected in the area (anymore than it can in antitrust, tax, etc.), the general practitioner can become comfortable discussing the subject with clients and be prepared to perform the vital function of local counsel to the borrower. N.B. While the following discussion is designed to acquaint the general practitioner with some basic knowledge of how industrial type bond financing works, it does not purport to be a detailed and exhaustive treatment. It is simply designed to acquaint one with the subject. There is no substitute for careful study of the applicable laws and regulations. I. ACT 9 BONDS GENERALLY. The Arkansas Constitution and statutes provide for several different types of "revenue" bond issues, serving different purposes, the most common of which are "Act 9" bonds, (so named because they were authorized by Act 9 of the 1960 Special Session of the General Assembly,' after Amendment 49 to the Arkansas Constitution declared the securing and developing of industry to be a legitimate governmental purpose). These bonds involve no use of the taxing power of the issuer and are usually structured so that the issuer (a city or county) uses the proceeds of the bond issue to construct facilities, which are then leased or sold to the industry, in return for lease or installment payments at least sufficient to amortize the bonds over the life of the bond issue. The revenues from the industrial project are thus used to pay the bonds. The bonds can be sold either through bond underwriters to the public or they may be privately placed with 20/Arkansas Lawyer/January 1983

banks or other sophisticated investors. The lalter course is common with small bond issues. Act 9 bond issues, as well as other industrial bond issues, are governed both by Arkansas law and the federal tax law, since, when properly utilized, interest on these bonds is exempt from federal income taxation as well as Arkansas State income tax. This ordinarily results in a favorable interest rate, which may make feasible projects which would otherwise not be financeable. However, this combination of the state and federal laws creates the need to follow carefully the road map which it is the responsibility of bond counsel to provide. The legislature has added additional categories of bonds to promote economic growth-tourism revenue bonds; central business improvement district bonds; medical facilities bonds; health care bonds; public facilities board bonds-which will be briefly discussed later in this article. The purpose of all of these bonding authorizations is to enable local government to work in conjunction with private businesses or non-profit organizations in promoting economic development-specifically, to permit the acquisition of the use of facilities (and sometimes outright ownership) by means of local bond issues and to pledge the revenues from those facilities to repay the bonds. II. ACT 9 PARAMETERS. A. Authority. Act 9 establishes parameters for issuing industrial development bonds under its authority, and is the central statute upon which the others are based. Act 9 provides that cities and counties may acquire land and buildings and construct improvements thereon for industrial development. Cities must authorize the issuance of bonds by ordinance. Counties issue Act9 bonds upon order of the County Court. The land may be undeveloped or it may already have an existing facility on it, with the bonding authority being used to acquire the facility from an existing owner with a plan for expansion or improvement. Its use does not require new construction. B. Notices. Both Act 9 and federal

JOHN S. SELIG. Partner in the law firm of Mitchell, Williams & Selig. Arkansas Securities Commissioner from 1971 to 1974. Advisor to the American Law Institute's Federal Securities Code Project, 1974. Chairman of the Slate and Federal Regulation of Securities Committee of the Arkansas Bar Association. State Securities Uaison Representative of the A. B.A. State Regulation of Securities Committee and Member of the A. B.A. Federal Regulation of Securities Committee. Speaker on securities regulation and bond financing on numerous occasions on both the national and state level. tax law' require a public hearing before bonds are authorized by the city's governing body or by the County Judge, silting as the County Court'. Notice of the hearing must be published in a local newspaper at least 10 days prior to the hearing and copies of that notice filed with the Arkansas Securities Commissioner and the Arkansas Industrial Development Commission. C. Ordinances and Resolutions. The City's governing body, in order to authorize the issuance of the bonds, usually adopts two ordinances: (1) The bond ordinance which authorizes the issuance of the bonds and the execu路 tion of a trust indenture between the issuer and a bank which will act as the trustee for the bond holders, and (2) the ordinance authoriZing the execution of a lease between the city as lessor and the industry as lessee. The facility and the rentals under the lease are assigned to the trustee as collateral for the bonds. The rent under the lease, as

W. CHRISTOPHER BARRIER is a partner in the law firm of Mitchell, Williams & Selig in Uttle Rock. He coauthored "Usury in ArkansasRevisited, Revised and Reaffirmed," 2 UALR LAW JOURNAL 323 (1979); and published"Usury in Arkansas: Update and Countdown" in The Arkansas Lawyer, October 1982. He has served on the Real Estate and Banking Law Committees and as Secretary- Treasurer of the Arkansas Bar Association. He has appeared on a number of programs discussing governmental and judicial regulation of real estate lending.

noted previously, is usually at least sufficient to amortize the bonds over the life of the lease. Prior to issuing the bonds, the city may issue what is called an "inducement resolution." The purpose of adopting an inducement resolution is to begin the period, for federal income tax law purposes, when expenses made on behalf of the industrial facility may be paid out of the proceeds of the bond issue. The ordinance authorizing the issuance of bonds may also authorize the issuance of industrial development notes which can be used to provide short term financing pending the issuance of the longer term bonds. These industrial development notes usually provide for interest to be paid periodically, such as semi-annually or annually, are normally issued to lenders such as banks, and are paid for out of the proceeds of the permanent bonds. Since no general revenues of the city

are pledged to repay the bonds, Act 9 does not require an authorizing vote of the electors in order to issue the bonds. All that is necessary is the adoption of ordinances by the City Council following a public hearing. However, the voters in the city adopting the ordinances do have the right during the thirty-day referendum period to collect petitions sufficient to refer the matter back to the voters.

these payments is individually negotiated in each case between the issuer and the industry. However, a common method of determining the payment is to have the county assessor assess the property and for the industry to pay the same amount which it would have paid if the property were subject to ad valorem taxation.

D. Special Obligations. The Act 9 bonds are special obligations of the issuer-that is, they are payable solely and exclusively from the revenues pledged under the bond issue, which is in essence the obligation of the industry. The bonds are not considered an indebtedness within any constitutional or statutory limitation. Facilities constructed with Act 9 bond issues are also not subject to the general laws dealing with municipal purchasing requirements.

A. Exemption Requirements. As

E. Terms and Tests. Act 9 provides that the bonds may be issued for a term of not more than 30 years; however, because of marketing requirements, currently most issues are for a twenty year term or less. Previously, issuers could not pay more than 10% interest on the bonds, whether by coupon or by discount, but this restriction has been removed to correspond to federal preemption legislation and the bonds may bear interest at the same rate as business loans in the state. Act 9 bonds can be used for typical industrial facilities, such as manufacturing plants, as well as being used for non-manufacturing installations such as distribution facilities, warehouses, agricultural facilities and office facilities operated by an industrial concern. Basically, the test to be applied is whether the facility to be constructed is one which is felt to reduce unemployment and promote the economy of the area by assisting the industry. Purely commercial projects such as office buildings and retail businesses do not qualify.

F. Payments in Lieu ofTaxes. The facilities acquired with the proceeds of the bond issue are exempt from ad valorem taxation. Thus, the practice has arisen for the issuer to require the industry to enter into an agreement with the issuer to make payments in lieu of those ad valorem taxes. The amount of

III. FEDERAL TAX MATTERS. noted, when the bonds are issued in accordance with the provisions of Act 9, interest on those bonds is exempt from Arkansas State income taxation. Interest on industrial development bonds such as Act 9 bonds are also, under certain circumstances, exempt from federal income taxation. Generally speaking, for the interest on the bonds to be exempt from federal income taxation, the bonds must be one of two types: Either (a) they must be used for an exempt purpose or (b) they must qualify as an exempt small issue under the $1,000,000 limit or the $10,000,000 election. Industrial development revenue issues which meet rigid I.R.S. requirements and are used to construct residential housing facilities, sports facilities, certain types of docks, convention ortrade show facilities, airport facilities, pollution control facilities, waste disposal facilities, water facilities and for similar purposes are exempt from federal income taxation irrespective of the dollar amount of the issue. For most other projects, in order for the interest to be exempt, the bond must qualify as an exempt small issue. B. Exempt Small Issues and Elections. An exempt small issue is defined as an issue of not more than $1,000,000; however, the industry and the issuer can elect to increase the $1,000,000 to $10,000,000 by filing an election with the district director of Internal Revenue for the district where the industry files its tax return. The election to increase the limit from $1,000,000 to $10,000,000 for industrial development bonds must be received by the appropriate Internal Revenue office the day of issuance of the bonds, or earlier-you cannot put it off. If this election is made, then all capital expenditures made by the industry, or any related party, within the jurisdiccontinued on page 22 January 1983/Arkansas Lawyer/21

Bond Financing... continued from page 21 tion of the issuer for the three years immediately preceding the date of the bond issue and for the next three years after the date of the bond issue are added to the face amount of the bond issue. This total plus any outstanding prior bond issues cannot exceed the sum of $10,000,000, or interest on the bond issue will not be exempt from federal income taxes. C. Capital Expenditures. Capital expenditures are defined in the Internal Revenue Code as expenditures which may be capitalized, irrespective of whether or not the industry chooses to capitalize a given expenditure or expense that expenditure from an accounting standpoint. (Incidentally, if an Urban Development Action Grant is made by the United States Department of Housing and Urban Development and the bond issue is used to provide facilities with respect to which the grant has been made, then in essence, it is possible to increase the $10,000,000 capital expenditure limitation by up to an additional $10,000,000.) D. Other Requirements. At least 90% of the proceeds of the bond issue must go to acquire land and bUildings or construct facilities and purchase equipment which are subject to the allowance for depreciation. And, for interest on the bonds to be tax exempt, the bonds may not be held by a person who is a substantial user of the facilities, such as a major tenant. IV. ARBITRAGE. Finally, under federal income tax considerations, the bonds must not be arbitrage bonds or the interest on the bonds will be taxable. Arbitrage bonds are defined as bonds where the proceeds of the bond issue are invested at a materially higher yield than the interest rate on the bonds. You must put the bond proceeds into the project itself rather than investing funds borrowed at the low bond issue rate in higher-yielding deposit accounts. There is an exemption from the arbitrage rules for the period of time when the facilities are being constructed. V. TOURISM BONDS. After the adoption of Act 9 in 1961, the General Assembly in the years which followed passed authorization 22/Arkansas Lawyer/January 1983

for cities and counties to issue other types of tax exempt revenue bonds such as tourism bonds,' pUblic facilities board bonds' and central business improvement district bonds.' Tourism bonds may be issued to finance tourist facilities which are leased to private concerns. Those facilities may be a tourist attraction or they may be hotels, convention facilities, restaurant facilities in conjunction with tourism projects or other facilities which serve tourists.' VI. PUBLIC FACILITIES BONDS. Public facilities boards may be created by either cities or counties to authorize those boards to issue bonds for health care facilities, residential housing, parking facilities, waterworks, sewer facilities and other purposes. The public facilities boards themselves may be general purpos~that is, they may have the authority to engage in all the activities authorized by statute-<>r they may be single or multiple purpos~that is, they may only be able to act in the fields specified by the authorizing ordinance. These facilities are either owned by or leased to private individuals, governmental subdivisions, or non-profit organizations. VII. CENTRAL BUSINESS IMPROVEMENT DISTRICTS. Central business improvements districts utilize the improvement district concept, which in essence is a group of people banding together to form a district (in this case, in the central business section of the community), and having the authority to issue revenue bonds to make general improvements for the benefit of the district as a whole and to loan funds to property owners for renovation, acquisition, or construction of buildings. These buildings may be office buildings as well as other types of retail or commercial facilities to revitalize the downtown area. All of these bond issues are subject to regulations imposed by Section 103 of the Internal Revenue Code and all have limitations on interest and maturity similar to those of Act 9 bonds. Certain provisions of the recently passed Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA") will require authorization by elected public officials for bonds issued by facilities boards and business improvement districts. VIII. PITFALLS. Bond financing is a creature of sta-

tute, state and federal. Hence, it is important to review carefully the law applicable to your client's proposed transaction-for example, a nursing home and a medical clinic may both be financed under two separate state statutes,' with different requirements and procedures. Projects may not be re-financed with bonds if they have already been acquired through other financing-{jo not let your clients get in too big a hurry. Publication and Freedom of Information Act requirements must be met as to ordinances. The bond issue documentationwhich may run several hundred pages and over twenty separate documents-should reflect the requirements of the lender and the trustee like a conventionai loan. SUMMARY: Bond financin9 requires imagination, precision and attention to procedures and detail. It also requires a familiarity with the client's business which bond counsel will not usually possess. Local counsel will also take the lead in guiding the client away from potentially dangerous errors. However, this source of financing has become increasingly important in periods of high interest rates and tight money. Familiarity of local counsel with its potentials may be extremely valuable to clients and potential clients.

FOOTNOTES 1. Ark. Stat. Ann. § 13-1601·1618. 2. The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) added the Federal pro· cedural requirements of public hearing and approval by an elected official or governing body for all industrial development bonds. Sec. 26 U.S.C. § 103(k). These new federal requirements apply to bonds issued after January 1, 1983. 3. For ease in further discussion of Act 9 bonds this article will talk about the use of a lease rather than a sale agreement and about the use of the city's authority, rather Ihan the county's. However, the discussion in the article is also applicable to sale agreements and county bond issues. 4. Ark. Sial. Ann. § 13·1801-1814. 5. Ark. Stat. Ann. § 20-1701-1720. 6. Ark. Stat. Ann. § 20-1601-1624. 7. TEFRA's amendments to Section 103 of the Internal Revenue Gode severely limit the use of tax exempt financing for recreation and entertainment facilities. The feasibility of tourism bonds in Arkansas after January 1, 1983, cannot be determined at this time. 8. Ark. Stat. Ann. §§ 20-1701, et seq., §§ 19· 4713, et seq. respectiveIY.~

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EXECUTIVE COUNCIL NOTES By Annabelle Clinton Secretary-Treasurer

1982 Fall Meeting Of House Of Delegates The House of Delegates of the Arkansas Bar Association met in conjunction with the Fall Legal Institute in the Fayetteville Hilton, in Fayetteville, Arkansas, convening at 9:00 a.m. on Saturday, September 11, 1982. President Jim Shaver presided. President Shaver reported on delinquent members and requested that delegates assist in the membership drive by personally contacting delinquent members in their respective districts. Jim Shaver gave his president's report, in particular stressing the need for an increase in the number of contributors to LAWPAC in order to finance the Association's lobbying efforts in the Arkansas legislature during the next legislative session. Herman Hamilton reported on his committee's continuing efforts with reference to interest on trust accounts. A new non-profit corporation will be created to be the recipient of interest on trust accounts. A petition to the Arkansas Supreme Court to resolve ethical issues has been prepared and is being circulated among committee members. The House voted to authorize the filing of the petition in the Arkansas Supreme Court and the preparation, printing, and filing of a brief. Mr. Friday reported on the August

24/Arkansas Lawyer/January 1983

meeting of the American Bar Association, including the debate on the proposed Model Rules of Professional Conduct. Tim Boe reported that the Arkansas Supreme Court has approved the Association's petition to adopt the "Arkansas Plan of Specialization". The next step in implementing the plan is the appointment of a nine-member Board of Legal Specialization by the Supreme Court. Dick Hatfield reported upon legisiative attempts to restrict venue in civil cases in federal courts to those courts in primary population areas. The Arkansas Congressional Delegation opposes these attempts. The House adopted a resolution opposing any such restriction and favoring the retention of federal courthouses in the different districts. Bill Haught reported that the Association was presently investigating computer hardware and software to be used by the Association in connection with membership records, accounting, billing, and committee appointments. Dean Looney reported that the Agricultural Law Institute will be held in October, 1982, and that the new Agri Law System should be completed by the end of 1983. John Elrod is coordinating the project.

Georgia Elrod reported that the Constitutional Reform Committee has considered the proposed constitutional amendments for 1982 and recommends that Amendments 60 and 62 be supported and that Amendment 63 be opposed. The House voted to endorse Amendments 60 and 62 and to oppose Amendment 63. The Association had previously opposed Amendment 61. At the suggestion of Judge Fogleman, the House voted to support the Judicial Council in its efforts to maintain a good and viable judicial retirement system. Charles Carpenter reported on the Association's legislative package. The House voted to adopt amendments to the proposed Juvenile Code revision. The House did not take a position on the Attorney's Fees to Prevailing Party Bill. The House voted to table any action on the Uniform Extradition & Rendition Act and reconsider the bill at the mid-year meeting. W. Jane Knight, Pardon & Extradition Council for Governor White's staff, spoke to the House regarding some amendments to the Uniform Extradition & Rendition Act. The House adopted the report of the Jurisprudence & Law Reform Committee regarding a proposed recodification bill.

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communications, and patents materials. The Westlaw database contains the same type of documents as LEXIS does. Additionally, Westlaw includes headnotes, or edited summaries of the points of law in each case. The documents in Westlaw are arranged by "reporters," corresponding to the printed volumes of reported court cases pUblished by West. Arkansas court cases, then, are in the "SW' file, since these cases are reported in the Southwestern Reporter. Specialized files, such as one for federal tax, contain both court decisions and administrative law materials. Both LEXIS and Westlaw have a similar hardware configuration. A typewriter keyboard is joined to a cathode ray tube, which looks like a small T.V. set. Connection to the database itself is made by dialing an access number on a telephone next to the terminal. This dataphone is hooked to a modem which translates the signals into something both the main computer and the terminal can understand. When connection is made, the searcher enters an identification number, which is used for billing purposes. Law schools are allowed special usage contracts which are comparatively inexpensive. This contract dictates, however, that the terminals can be used only by bona fide law students and faculty in connection with law school course work. Understandably, students may not use either system when a fee-paying client is involved. Once "on-line," the user selects a library and file. Now the search begins. Using the keyboard, the searcher types on the screen the request, then transmits it to the computer. Both LEXIS and Westlaw are interactive, which means that the computer and the user "talk" back and forth until the user is satisfied with the information retrieved. After the computer processes the search request, it responds with the documents that satisfy that request. Once retrieved, documents can be displayed in full text, by citation, or by key-word-in-context (KWIC). In the KWIC format, LEXIS displays the search words highlighted, surrounded by twenty words on either side. The corresponding format in Westlaw, the "term" mode, highlights the search word as it appears in a full screen of text. The search itself can be made up of a single word or a combination of

words. A "word" to the computer is any unbroken string of alphabetic or numeric characters. Both "C3PO" and "court" are words which the computer could process. The searcher combines words or phrases using "connectors" between them. For example, the search "cat and dog" will retrieve any document in which both the word "cat" and the word "dog" appear. If the search "cat and dog" is entered, not only will documents with both words be located, but all documents containing only one word or the other. This "Boolean" logic is the basis for the syntax of both LEXIS and Westlaw. Besides locating a single word, phrase or combination of words and phrases in documents, each system can also locate words or phrases in close proximity to each other. In LEXIS, the search "trial w/3 jury" demands that the word "trial" occurs within a certain number of words of the word "jury." Cases which discuss a "jury trial" or "trial by jUry" will both be retrieved. A similar search in Westlaw requires that the two words be in the same sentence. By using these and other connectors, the searcher may tailor a request to retrieve just those cases needed. If LEXIS and Westlaw simply found cases with a certain configuration of words which occurred at random in a document, that alone would be helpful. Each system, however, has the additional capability of retrieving documents which have words located in a specific part or segment of the document. For example, a searcher may request that a case containing the word "black" be retrieved only if that word occurs in the part of the document which indicates who wrote the opinion. Thus only opinions written by Justice Black will be retrieved, rather than any case dealing with a black cat. This capability makes computer-assisted legal research much more flexible than manual research. The searcher may fashion a request to find cases after 1977 written by Judge Hickman involving implied warranties. Locating this kind of information could be very useful to an attorney about to argue a particular issue before a judge, and it is the kind of information almost impossible to retrieve using manual research aids. To find that case where the woman slipped on the banana peel in the store, where the tarantula bit the produce clerk, where the bottle of Coke exploded, the computer can be of in-

valuable help. But what are its disadvantages? One of the problems in using computer-based legal research is the literalness of the machine. People tend to think in concepts, which they then clothe in words. All the machine can understand is words; it can only match strings of alphabetic or numeric characters at an incredibly high speed. II the searcher looks for all cases on "jurisdiction," only the six with that misspelling of the word will be retrieved. II the document has typos when it is put into the system, the typos remain and a search with the correct spelling of the word may miss the case. Although spelling may seem minor, it can be a real problem in law. The name "M'Naghten" is spelled four different ways on one page of one court opinion. The redundancy in court opinion helps. A word misspelled in one sentence of the document may be spelled correctly somewhere else, so the document would ultimately be located. But doing a search by jurisdiction for a Texas case where, in the caption, the state is spelled "Taxes" will mean that case is forever lost. The partial solution is, of course, to list common misspellings and alternative search words. Never search for "arctic" without also looking for "artic." Since the computer is word-based rather than concept-based, the searcher must be extremely careful what words are chosen for the search. Law students are taught to think in "index terms" or, in common parlance, taught to think "like a lawyer." Yet if the searcher couches the request in broad index terms, rather than in specific fact or search words, the computer will not find relevant cases. Judges write opinions using descriptive words; they do not use index terms. An opinion does not say "This is a torts case," but rather, "Plaintiff was standing on a train platform when she was hit by falling scales." The word "tort" would not retrieve this case, but the words "platfomn" and "scales" would. Thinking like a lawyer will not help unless the user always keeps in mind how the machine operates. Traditional research requires an analysis of facts to isolate the underlying legal issues. When the points of law underlying the facts are determined, the attorney proceeds to an index or digest which is arranged by those points of law. The attorney using the computer must also analyze the continued on page 30 January 1983{Arkansas Lawyer/29

necessary showing for an injunction to be issued. None of these headnotes, however, indicate the facts in the case. By combining a word such as "abortion" with the headnote for injunction, the computer will retrieve injunction cases that deal with abortions. Learning how to use computer assisted legal research systems effectively is becoming increasingly important for law students. Employers are looking at whether candidates have had exposure to computer-based legal research. Arkansas students have a remarkable opportunity which few other law students have: the chance to familiarize themselves with both LEXIS and Westlaw. Instruction in computer-assisted research has been integrated into the first year legal research and writing program at Arkansas. There are two basic aspects of learning how to use any computer-based system. First, the student must master the mechanical operation of the terminal. This includes what keys to push to select a database, enter a search request, and view the retrieved documents. Second, the student must learn the special syntax of each system. This includes search logic, search strate-

Computers... continued from page 29 facts, but the search must be entered as a combination of fact words and specifically defined legal concept words. English is a very imprecise language. Even when the word is spelled correctly, it may have a dozen different shades of meaning, and the searcher is only interested in one of those dozen. If the user inputs "constitutional" hoping to retrieve cases discussing a particular concept of constitutional law, a retrieved case may only refer to an older gentleman mugged while taking his constitutional. Often for esoteric concepts, adding more search terms does not help. Computers are most effective when the search words have a narrowly defined meaning, or where they describe a particular fact situation. One of the advantages of using the Westlaw database is that an attorney may search by point of law, using the West headnotes, and combine with this "concept" search a few fact words which will pull out of the database only cases with similar facts. For example, all the headnotes under an "Injunction" key number describe what is a legally

gies, specialized segment or field searches and all the connectors which are used to link words together ihto more complex search requests. Both West Publishing and Mead Data have supplied various training aids to help students learn both mechanical operation and search syntax. Westlaw has two tutorial courses online which do just that. A "terminal training" course and a "Westlaw training" course can be used by students to become familiar with these operations. Mead has prepared for free distribution a LEXIS handbook which discusses in detail use of the system. Videotapes are available which also help in demonstrating searching techniques. To introduce students to the terminal, Mead has developed a cassette tape "simulator" which directs the student through a sample problem. By the end of this problem, the student has used all the keys on the keyboard. Using these vendor-supplied aids simplifies training law students to use computer-assisted legal research. The major problem is logistical: exactly how to give two hundred first year students fair and equal access to only two terminals, while upper class students are continued on page 31

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Address

YOUNG LAWYERS' UPDATE By Frank C. Elcan, II YLS Chairman

It was very gratifying to be representing the Young Lawyers' Section of the Arkansas Bar Association at the annual meeting of the American Bar Association held in San Francisco. The section was a double winner in the 1981-1982 Award of Achievement competition sponsored by the Young Lawyers' Division of the American Bar Association. The section received a first place award in the comprehensive application, division 1-C for state bar associations with less than 3,000 young lawyers. We were also awarded first place in the single project, service to the bar, for the Arkansas Guide to Statutes of Limitations handbook, which was published last year. The two first place awards are even more significant in view of the fact that only two applications are allowed to be submitted by an affiliated organization. These awards reflect the fine job that Harry Truman Moore, the executive council,

and various committee chairmen did during the past bar year. Our section was further honored to have Patrick Hayes of North Little Rock as the presiding Delegate Assembly Speaker at the San Francisco meeting. Pat relinquished the chair at the conclusion of the Delegate Assembly, and was presented a certificate of recognition by our section for the fine work he has done on behalf of Arkansas Young Lawyers in the Young Lawyers' Division of the American Bar Association. The section had a well-attended and enthusiastic executive council meeting in conjunction with the Fall Legal Institute held in Fayetteville in September. Sixteen executive council members and committee chairmen were present at the meeting. Status reports were presented on the projects underway. Walter Paulson of Little Rock did a fine job of organizing a reception and brunch for the Mississippi Young

Computers And The Law continued from page 30 also competing for terminal time. Today's students are very receptive to experimenting with new technology. A general familiarity with typewriter keyboards, machines, and television screens make students more comfortable in learning to use the computer and less intimidated by its complexities. The next generation of law students, weaned on TV-set electronic games, may take to computer-based research databases more readily than to the printed research tools. Many thousands of practicing at-

torneys currently use computer-assisted legal research. In the near future computer terminals will be as common in law offices as the ubiquitous sets of court reporters. In New York, Chicago, Dallas, and Houston some of the larger law firms have already leased up to a hundred terminals for use in individual attorney's offices. Giving students the opportunity to be trained on both LEXIS and Westlaw assures Arkansas graduates of an education which well prepares them for the future practice of law.

f.... .

Lawyers in conjunction with the Arkansas-Ole Miss Football Game in Little Rock. Terry Paulson of Little Rock and Robert Ridgeway of Hot Springs coordinated the activities in conjunction with swearing in the new admittees to the Arkansas Bar. The swearing-in ceremony was held on Monday, September 27. Immediately after the formal ceremony, presentations were made to the admittees by various bar groups and organizations. A reception was held at the Arkansas Bar Center after the ceremonies were completed. The annual Practice Skills Course was held on October 14 and 15 in Little Rock. Bob Lambert of Springdale and Donald Bacon of Little Rock presided as co-chairmen of the seminar. An excellent group Jf speakers was provided to acquaint new lawyers with the "nuts and bolts" aspects general law practice. Plans are now underway for the section to sponsor an Affiliate Outreach/Continuing Legal Education meeting in conjunction with the horse racing season in Hot Springs next spring. The meeting will consist of two one-half day sessions, one dealing with implementation and ideas for public service projects and the second session dealing with a particular aspect of trial practice. Young lawyers from all of our bordering states will be invited to participate in this two-day seminar. In addition, a block of rooms has been reserved at the Ramada Inn in Hot Springs and a block of two hundred seats has been reserved at Oaklawn Park on both days of the seminar for those who wish to partake of the "Sport of Kings." On behalf of the section, I want to congratulate all of the new admittees to the Arkansas Bar. I hope that each will become an active member of the Arkansas Bar Association, and particularly the Young Lawyers' Section.,..

....

January 1983/Arkansas Lawyer/31

The Lawyer And The Land PlannerA Team For The 80's by Donald S. Manes

Lawyers frequently are called upon by clients, estates or trusts to provide advice on how to proceed with a land development project, the conversion of a building's use, or some other aspect of a real estate deal. Unfortunately, the lawyer many limes is not called in to reflect on the terms of a sometimes ill-starred agreement until after the pact is made and someone "needs some papers drawn up". The lawyer then is cast in the role of obstructing the project, delaying it, changing the terms, or otherwise playing an adversary role. To the extent that the lawyer has an opportunity to provide early advice on a land development project or a proposed building conversion, the opportunity exists for bringing in the appropriate professionals. Not to be overlooked is the land planner. The land planner is the one professional who is schooled to focus on a property's longterm prospects and is trained to relate a particular property to all of the forces affecting its income stream or profit potential. These include its market potential, its physical characteristics, site design, financial feasibility, the structure of financing, and the effect of governmental regulations and restrictions. In the difficult decade ahead, characterized by a painful gap between the project's income achieved through rents and the project's costs, i.e. construction, land and interest, there will be an extraordinary premium on integrating sound planning into any decision to develop real estate, to convert a building's use, or otherwise to improve the property's economic position. To the extent that the lawyer can assure the presence of quality advice at every step along the decision-making path, he is elevating his own position of trustworthiness. 32/Arkansas Lawyer/January 1963

The Need for Competent Land Planning There are three trends that make it important to involve competent land planning on the front-end of a project-even at the cranial stage of wondering whether or not the land parcel or building property possesses a reasonable potential for increased economic productivity. One, only the soundest of projects will survive or get off the ground during this period of high interest rates and heavy equity demands from the lenders or the money partners. Great skill and care are needed at each stage of planning the project, particularly in conceptualizing the project. The economic health of a prospective project can be determined early by the skilled land planner. Two, there will be great pressure in the 1980's for development to occur on overlooked in-fill parcels. These are the parcels that were passed over in the development heyday of the 1960's. Several things are happening to stimulate interest in developing these parcels that previously were considered somewhat less desirable. The heavy cost of extending utilities into undeveloped areas and the expensive energy costs of servicing outlying developments combine to favor near-in development activity. The high price of money dictates that most of today's projects have greater density than in previous years; and the developer who has lost one zoning battle in or near a single-family detached subdivision is more prone to look the next time around at the property that is near-in, properly zoned or having such potential, and suitable for development or conversion. For instance, the 1981 ERTA places an undeniable premium

on property rehabilitation and conversion. For projects that have to survive on rents, there is a growing economic necessity for mixed-use development. In working with in-fill parcels, there are mandates on careful site planning and on relating the parcel to its market potential and economic feasibility. The third trend is the probable continuation of national policies of subsidies to real estate development and investment, rehabilitation, and use conversion. As evidenced by the Economic Recovery Tax Act of 1981, real estate has avoided the Nation's emerging attitude of cutback, get by on less, and tighten your belts. Rapid depreciation, investment tax credit, cost capitalization, and other available measures will continue to support real estate as a belter-than-average investment. But returns must be commensurate with cost and risk, and this emphasizes the need for specialized planning at every step along the way. Why Use A Land Planner? At the early stage of evaluating property's potential for conversion and/or development, a land planner should be called upon prior to engaging other professionals. I want to be careful not to step on the friendly-and familiar-toes of fellow professionals, as I believe that the planner can make his own light shine without blowing out others' candles. Essentially, the planner is trained to foresee the property's long-range potential and to relate the property to all the forces and factors that will affect its best utilization and highest economic productivity. Moreover, the planner's fees are independent of any actions or future events such as sell, build, or borrow. This is important, and it is a point which

lawyers can appreciate above most other professionals. The planner's fees are earned through the provision of analysis, recommendations, and advice; and his fees are equated to the quality of that advice. Lawyers and accountants are in this same position. Other land-based professionals are not quite so unfettered. The architect/engineer contract that yields compensation as a percentage of construction cost carries an undeniable bias in favor of building something, i.e. structures, streets, parking lots, etc. Fees are triggered by construction. The realtor's fee is contingent upon the sale of the property, an act which sometimes can be unrealistically hastened. In contrast, our firm has been involved in several projects in which the owner's land was folded into a partnership syndication-no sale, no real estate commission. Appraisers make excellent use of comparables to determine value on present use, but they are not trained to be as visionary as the planner in predicting future potential and in accounting for market demand and the practicality of conversion of use. Finally, the planner is the one professional who doesn't shy away from zoning battles and dealing with government's red tape; and he can always be of assistance to the lawyer in dealing with these matters. On many projects, the land planner can work alone. The land planner is trained to make an accurate assessment of the market potential of a proposed land use, to evaluate the property's suitability for the intended development, and to prepare the necessary economic feasibility study. In the early stages of large projects, the planner should be a member, if not

Land Planner's Activities The land planning consultant may be retained by either the lawyer's landowning client or by the lawyer when he is acting as trustee. Thus, the planner would report to either the lawyer or the client, or to both, depending upon the characteristics of the assignment and the client's wishes. In any case, the services of the planner would be tailored to assess the conversion potential of the property from present use to a higher and better use with an attendant increase in economic productivity. Preferably, the selected land planner would hold memberships in the American Institute of Certified Planners, the Urban Land Institute, and the American Society of Consulting Planners. Given this level of competency and experience, he would complete the assign-

Donald S. Manes is President of Manes, Castin & Massie, Inc.planning, management and land development consultants-North Little Rock, Arkansas. He is a member of the American Institute of Certified Planners, and holds a Masters Degree in Public Administration from Harvard (1960). After working for the U.S. Department of Housing and Urban Development's predecessor agency,

the Little Rock Housing Agency and the Fort Smith Urban Renewal Agency, Manes formed his own firm in 1963. After merging in December, 1981 with John A. Castin & Associates, he has acted as a land development consultant on a variety of private real estate developments and building conversion projects, office buildings, amusement parks, apartment projects, and industrial buildings.

the leader, of a design/development team involving an engineer, architect, lawyer, accountant, and perhaps a real estate syndicator. Land Parcels Held in Trust Oftentimes, the lawyer is the trustee of an estate or trust in which land parcels are held as significant assets. Since real estate assets are less volatile than other types such as stocks or other securities, they often are given less attention. In many cases, the client's basis in the property is almost zero and the economic return appears adequate. But the land parcel or improved property may have a potential that far outstrips its present economic position. The land planner is the logical choice among professionals to aid the lawyer in evaluating the development or conversion potential of properties he is managing as trustee.

ment through the following steps. First, he would undertake a market study to assess the property's market potential in light of local trends, socio-economic projections, and the competitive position of the land parcel in relationship to other comparable and nearby parcels. Second, the development and/or conversion capacity of the property is determined through an analysis of the physical characteristics of the property, topography, subsoil and drainage conditions, utility services, vehicular access, and adjacent uses. This activity comes to grips with the property's potential and limitations, off-site constraints, and the property's prospective strengths (and weaknesses) from a physical standpoint. Third, the planner quantifies and determines the amount and mixture of highest and best land uses, including an evaluation of realistic alternatives. At this point in time, the land planner prepares the conceptual plans or site design and preliminary layouts, a graphic illustration of how the land parcel could be developed. This is based on the preceding activities and should contain sufficient flexibility to accommodate changing market conditions. While the graphic illustration is not a set of detailed working drawings, it is sufficient to provide the basis for general cost estimating. After cost estimates are provided (often supplemented by input from an architect or engineer), the land planner prepares the necessary economic model to assist in determining the project's financial feasibility. This study results in realistic pro forma expectations for income, expenses, debt service, tax shelter, and return on equity investment. At this point, the planner procontinued on page 34

January 1983/Arkansas Lawyer/33

路 .. A Team For The 80's continued from page 33 vides the owner/client with a recommended development program, advising him on what to do with the property, e.g. sell, subdivide and develop, buy adjacent properties, procedures for zoning, platting, and other regulations that will have to be satisfied, and other steps to be taken in the conversion or development process. The work described above should be performed through frequent contacts with the client, as "go" or "no go" decisions need to be made at various stages. The planner's final activity is to document the property's potential with a report in a form suitable for the client's use in arranging financing, preparing offering documents, or merchandising the property to others. Once the planner finishes his evaluation of a potential development or land conversion project that is determined to be feasible, the owner/client is in the position of proceeding with implementation by bringing in the architect or the engineer, the syndicator or the money partner.

Importantly, the work outlined above may be authorized in total or in parts; and it may be terminated at any step along the way. If the land planner determines early that the land parcel has little or no development potential, or that the property's building is not suitable for conversion or rehabilitation, the owner/client is not obliged to proceed further with consideration or expense. Property Evaluation The description above is applicable to situations in which the lawyer's client is ready to do something with the land or the improved property. He is raring to go, but he needs competent help. The land planner should become a key actor. What about other parcels of land or property? What about those over which there is some uncertainty, but coupled with some hope? If the lawyer feels there might be some development or conversion potential, he should recommend that the property be evaluated. Examples of land parcels having development potential are those located in cities, adjacent to a

highway or good road access, on a decent river, accessible to public utilities, or in emerging growth corridors. Even forested land may have a higher value for recreational use than continued timber usage. The land planner's special expertise is with non-agrarian vacant land, although his skills are being directed more and more toward evaluating properties with buildings and improvements in light of the many financial incentives for conversion and rehabilitation. Thus, the lawyer should recommend the use of a land planner in evaluating the development potential of vacant land parcels. Enhancing Lawyer's Role The land planner's services are complementary to those of the lawyer and they are never competitive. To the extent that the lawyer can assure that his land-owning clients have expert advice along every step of the way in developing land or converting the use of an existing building-or even in evaluating the development potential of vacant land parcels-he is enhancing his own role of providing expert advice to his clients. ' "

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34/Arkansas Lawyer/January 1983

-THE~~-----

MICHIE~l

--~--

by Robert L. Lowery Executive Secretary, Judicial Department

The Conference of Chief Justices at its annual meeting in September 1982, adopted the report of its Task Force on Lawyer Competence. Part of that report concerned the definition of the problem and specifically, a statement of how to measure the subject matter of legal competence. These criteria are nearly the same as those developed by the American Law Institute-American Bar Association. The following standards are taken from the Task Force Report of the Conference of Chief Justices: LEGAL COMPETENCE IS MEASURED BY THE EXTENT TO WHICH AN ATTORNEY: (1) IS SPECIFICALLY KNOWLEDGEABLE ABOUT THE FIELDS OF LAW IN WHICH HE OR SHE PRACTICES. An attorney must possess a knowledge of the doctrine, rules, and legal concepts specific to his or her practice and an understanding of the laws in general and the procedures, powers, and limitations of legal institutions. An attorney must stay abreast of changes in practice and the law in his or her area of special competence. A lawyer may obtain a career-long education in the law by participating in continuing legal education programs, studying important new statutes, regulations and legal decisions, following current legal developments in periodicals and professional journals, and maintaining contacts and professional dialog with colleagues in his or her area of practice. (2) PERFORMS THE TECHNIQUES OF HIS OR HER PRACTICE WITH SKILL. Information Gathering. An attorney should compile an accurate and thorough set of facts pertaining to a client's problem from the client and from other relevant sources and record it clearly. An attorney should

put informants at ease and conduct interviews skillfully. Legal Analysis. The material issues raised by a client's problem should be formulated and the applicable law and alternative legal responses to the problem accurately defined. Strategy Formation. Strategies to solve or prevent a legal problem should be developed in close cooperation with the client and should conform to the client's goals and resources that are consistent with law and legal ethics. An attorney should discuss the risks and benefits of alternative strategies with the client candidly and should indicate new issues that may arise under different courses of action. Strategy Execution. Written and oral presentations of legal and factual positions should be clearly, accurately, and consistently rendered in consultations, negotiations, adjudications, and other activities that an attorney undertakes for a client. An attorney should be able to stand his or her ground with adversaries or be flexible when accommodation is in a client's interests. A legal strategy should be executed in the most economical manner under the circumstances and an attorney's actions should reflect a balanced response to the difficulty of a task and a client's needs. The needs of the client, not the pride of the lawyer, should be foremost in the development and execution of a legal strategy. (3) MANAGES HIS OR HER PRACTICE EFFICIENTLY. Practice Management. Legal work should be completed efficiently under effective management controls adopted by an attorney or a firm. Quality control, organization and delegation of tasks, time, money, docket, and billing control,

and maintenance of an efficient filing and recording system are the keystones of effective practice management. Excessive work commitments should be avoided and a firm or attorney should reject new matters that cannot be handled competently because of the press of other business. Professional Responsibility. Ethical issues raised by an attorney's practice should receive careful and explicit attention. Practice Evaluation. A legal practice should be monitored regularly to determine whether or not legal and organizational skills and procedures are keeping pace with developments in the practice. Training and Supervising Support Personnel. An attorney is responsible for the quality of work performed for clients by his or her subordinates. Procedures should be developed for the orientation, training, supervision, and performance evaluation of colleagues, paralegals, and clerical personnel under an attorney's direction. Work should never be delegated to a subordinate until the matter has been carefully explained and the lawyer knows that the subordinate can handle the assignment competently. (4) IDENTIFIES ISSUES BEYOND HIS OR HER COMPETENCE RELEVANT TO THE MATTER UNDERTAKEN, BRINGING THESE TO THE CLIENT'S ATTENTION. A competent attorney may develop special skills in one or more areas of practice but must maintain a general knOWledge of the law sufficient to appreciate the limits of his or her competence and to direct clients to specialists in other fields. Many of the legal problems that clients bring to an attorney are comcontinued on page 4 January 1983/Arkansas Lawyer/35

In Jlemoriam THE LABOUR OF THE RIGHTEOUS TENDETH TO

un.

P10l1Wbl1 10:16

FLETCHER CLEMENT Reicher B. Clement, a former resident of Nashville, AR, died Wednesday, March 3, 1982, in Bonham, TX, where he made his home. He was 89. Mr. Clement served two terms as state representative from Pike County during the 19305. He practiced law in Glenwood and at Nashville where he also served as city attorney up until the time of his retirement in 1972. A native of Kirby (Pike County), he was a World War I veteran and a member of the First United Methodist Church of Nashville. Survivors are his two sons, William T. Clement of Ponte Vedra Beach, FL, and E. D. Clement of Sun City Center, FL; eight grandchildren and five great-grandchildren.

CHARLES W. LIGHT Judge Charles W. Light, aged 88, of Paragould, circuit judge in the second Judicial District for 26 years, died Tuesday, March 30, 1982. He was graduated from Arkansas State Unlverslty and the University of Arkansas School of Law and had served as deputy prosecuting attorney for Greene County. He was one of two trial judges in the United States to be named to the American Bar Association's Committee on Standards of Judicial Administration. He was a former chairman of the Arkansas Judicial Council and a member of the Board of Directors of Methodist Hospital in Paragould. Survivors are his wife, Ann, and three sisters; Pearl Apperson of 36/Arkansas Lawyer/January 1983

ParagoUld, Juanita Wrzburger of New York and Jeanne Nelson of Illinois. W1WAM DONALD KELLY William Donald Kelly, aged 72, of little Rock, died Friday, April 2, 1982. He was a retired attomey for the state highway department and a member of the Pulaski Heights United Methodist Church. Survivors are his wife, Mrs. Emma Lee Burke Kelly; two sons, William Donald Kelly Jr. of LlttIe Rock and Arthur B. Kelly of Nashville, TN, and two grandchildren. Burial was in lakeside Cemetery in Stamps. R. JULIAN GLOVER R. Julian Glover, aged 72, senior partner in the law firm of Glover, Sanders, Parkerson and Hargraves, died Friday, April 9, 1982. He had served two terms as Garland County prosecuting attorney and as a United States magistrate during the 48 years he practiced law. He was graduated from Ouachita Baptist College and the UttIe Rock Law School. Mr. Glover was a member of the Garland County, Arkansas and American Bar Associations and was a fellow in the Arkansas Bar Foundation. He was a member of the Arkansas and American Trial Lawyers Associations and the American Judicature Society. Survivors are his wife, Loretta C. Glover of Hot Springs; three brothers, B. J. Glover of UttIe Rock and Lawson E. Glover and W. H. Glover, both of Malvern, and three sisters, Lennie Kilpatrick of Texas, Olive Kyle of Pine Bluff, and Marguerite McCoy of Malvern.

GILES S. DEARING Giles S. DearIng, aged 93. of Wynne. died Tuesday, April 6. 1982. He was a retired lawyer and a BaptIst. Survivors include a son, Giles CurIln Dearing of Wynne and one grandchild. Funeral services were held Wednesday, AprIl 7. under the direcllon of Kernodle Funeral Home with Interment in Cogbill Cemetery In Wynne

EUGENE B. HALE

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Eugene B. Hale, aged longtime rancher, businessman and lawyer from Prescott, died Friday, April 16. 1982. He studied agriculture at the University of Arkansas at Fayetteville, Iowa State University and ComelI Unlversity, and was graduated from the University of Arkansas Law SChool. Mr. Hale practiced law lor two years before returning to Prescott and f0undIng Grove Land and Timber Company. In 1928, he founded the Gene Hale Oil Company and IormecI a chain of retail and wholesale businesses which later were sold to lion Oil Company. He was appointed by former Governor Orval Faubus to the state VeterInary Board of Examiners In 1988 and served until 1960. He was a mernberof the First United Methodist Church. Survivors are his wife, Katherine Hale; three sons, Eugene B. Hale Jr. of Texarkana, Dr. Nathan Patrick Hale of St. Augustine, FL, and George Robert Stephen Hale of Baltimore. MD; a brother George Hele of Arkansas; two sisters Elizabeth McKeIthen of North Little Rock and Mildred Louhon of Tulsa; and two grandchildren.

JAMES CECIL HALE James Cecil Hale, aged 73 of Marion, Crittenden County lawyer and civic leader, died Friday, April 3D, 1982. Formerly of BIy1heville, he received his bachelor of arts degree and law degree from the University of Arkansas at Fayetteville. Mr. Hale was a charter member of the Marion Rotary Club, one of the organizers of the Marion Chamber of Commerce and served for 20 years on the Marion School Board. He was a member of the Marion United Methodist Church. He was a senior partner in the West Memphis Law Firm of Hale, Fogleman and Rogers and a law partner of Former Chief Justice John A. Fogleman of the Arkansas Supreme Court. Mr. Hale was past chairman of the Board of Governors of the Crittenden Memorial Hospital in West Memphis, past director of the West Memphis Chamber of Commerce, president of the West Memphis Industrial Development Corp., and director of the Bank of West Memphis. He also served as president of the Crittenden County Bar Association and was a member of the American College of Trial Lawyers. He served for 34 years as chairrnan of the Crittenden County Democratic Central Committee, served as representative for three terms in the state General Assembly and served three terms as prosecuting attorney for the 2nd Judicial District. Hale was past president of the University of Arkansas Alumni Association and Sigma Chi fraternity at the University of Arkansas at Fayetteville and past master of the Marion Lodge. In 1962, he received the Lawyer-Citizen Award from the Arkansas Bar Foundation and in 1961, was "Man olthe Year" for West Memphis. Survivors are his wife, Mrs. Jean Robinson Hale; two sons, James C. Hale Jr. of Proctor and Ralph Hale of Marion; a daughter, Jeanie Martz of Marion; and six grandchildren. DEAN R. LINDSEY SR. Dean R. Lindsey, Sr., aged 82, of Batesville, died May 30, 1982. He was a lifelong resident of Batesville and was graduated from Batesville High School and the University of Arkansas Law School. He was a member of the First United Methodist Church and served as chairman and secretary of its Administrative Board. He served as chairman of the Board of Trustees and the Fi-

MEMORIAL GIFTS "It is more blessed to give than to receive." However, a member profits both ways with a memorial gift 10 the Arkansas Bar Foundation. One's gift is a beautiful way of honoring a former colleague and friend. The gift is noted in the Foundation's Memorial Book and, of course, is rax deductible. The family of the deceased is most appreciative of such remembrance.

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One may record the Memorial Gift in two ways, viz.: (I) The new Memorial Cards have just been furnished each member for direct mailing in one's own business envelope 10 the family of the deceased. Thus, the family will be immediately notified of rhe thoughtfulness of the donor. The check is sent 10 the Foundation at rhe same time for notation in the Memorial Book. Additional Memorial Cards are available upon request. It is emphasized that these are new-type cards - never before available. (2) Memorial gifts may be senr directly 10 the Arkansas Bar Foundation, with request that the Foundation send a memorial acknowledgement to the fam i1y of the deceased, naming the contributor but not specifying the amount given. The memorial cards are formal and promptly delivered upon receipt of the memorial gift.

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Either way is most appropriate. One's thoughtfullness in making a memorial gift 10 the Arkansas Bar Foundation will not only meet with the complete approbation of the members of the family of the deceased, but will at the same time provide the Foundation with funds to carryon the noble purposes for which it has been dedicated.

nance Committee; president of the Baracca Bible Class; and, a member of the Commission on Evangelism. He was city attorney for Batesville for 25 years and also served as vice president of the Arkansas Municipal League. Mr. Lindsey helped to organize the Golden-Lindsey Insurance Agency 47 years ago and was active in the business until shortly before his death. He was a member of the Masonic Lodge; a charter member and past president of the Rotary Club; served as director of the Arkansas Wildlife Fed-

eration; and held an office as United States commissioner from 1936-1963. Mr. Lindsey is survived by his wife, Mrs. Claire Hodge Lindsey of Batesville; a son, Dean Ray Lindsey, Jr., of Scottsdale, AZ; two grandchildren, Laura Lee Lindsey and Stephen Ray Lindsey, both of Scottsdale; three brothers, Alvin Lindsey of Carthage, MO, Sterling Lindsey of Shreveport, LA, and Fay Lindsey of Batesville; and a sister, Mrs. Aline Noe of Batesville.

January 19B3/Arkansas Lawyer/37

Second Injury Law,

OLD AND NEW Part 1-

SECOND INJURY LAW PAST by W. W. Bassett, Jr.

The thought of the Second Injury Law, Second Injury Fund and Law of Apportionment conjure up from the deep dark recesses of the legal mind myriad questions. Unfortunately, the majority of these questions remain unanswered. What exactly do we meanwhen we speak of a second injury? What is the Second Injury Fund and correspondingly the Second Injury Law? And how does the term Second Injury Law differ from just plain Apportionment Law? What was the former Arkansas law regarding second injury cases and have the 1979 and 1981 Amendments affected existing case law, and if so, how? When one speaks

(Editor's note: The keynote speech at the 1982 Workers' Compensation Institute of the Arkansas Bar Association was on the "Second Injury Fund, Old and New" by W. W. Bassett, Jr. As indicated by the numerous requests for written copies of the speech, "Second Injury Fund, Old and New" is of special interest to Arkansas lawyers who practice in the workers' compensation field. Accordingly, the speech will be run in The Arkansas Lawyer in three sections, viz., Part I-Second Injury Law Past; Part 1/Second Injury Law Present; and Part I/I-Second fnjury Law Yet To Be. Part I is being run in this issue of The Arkansas Lawyer; Part /I will be in the April 1983 issue; Part III, in the July 1983 issue. Mr. Bassett will update Part I and Part /I before publication if necessary. Readers will be assured of current coverage ofthe subject matter, when published.) 38/Arkansas Lawyer/January 1983

of a prior injury, is he referring to prior impairments or disabilities or both? Do we have to have an actual "injUry" and must this injury be one of the compensation sense before it qualifies? Obviously, these and many other ancillary questions involving controversion, attorney fees and other matters of substance and procedure still remain to be answered. There are three separate stages involving the Second Injury Law: (1) Second Injury Law Past, (2) Second Injury Law Present, and (3) Second Injury Law Yet To Be. It is the Second Injury Law Past that we need to first examine. The second injury section has existed since the inception of the wee Act. It is found at Ark. Stat. Ann. 81-1313(f). We will want to review Section 13(f) because it is the cornerstone for all of the Second Injury Law. The real reason for the Second Injury Law to begin with is to attempt to strike a balance between the interest of the claimant and that of the employer. In theory, the Second Injury Law helps protect an injured worker by providing an inducement for management to hire the handicapped worker. The theory goes-who would hire a worker with one leg when you can hire one with two; or more importantly, why hire Old Harry Hardluck who has worked at the D-Lux in Fayetteville, when he has a 10% back impairment, when you can get a "whole man" or one that has never been involved in a compensation injury or one that comes to the work place without a pre-existing disability. If we follow a rule that allows credit, the worker is protected by allOWing him to

compete on an equal basis with those individuals who have never had compensation injuries, at the same time, the employer is not forced to "take the employee as he finds him" and is relieved from bearing the otherwise social responsibility for paying for an employee's prior injury. Likewise, the insurance carrier is protected because it can offer coverage at a premium which truly reflects the actual risk as opposed to one which builds in premiums to cover prior disabilities. Everybody is happy, right or wrong? Let's take a look at what has happened. Now as to the Second Injury Law Past, Section 81-1313(f) lasted from the inception of the Act until the recent Amendments in 1979 and 1981 and has spawned a great deal of supporting case law. The case law has often been contradictory in the short run, but overall, reflects an established trend. It will be helpfUl to review against the background of certain hypothetical cases. Our friend Harry, who received his injury in 1971 while at the D-Lux, continued to lift case after case of Budweiser until in 1981, while still working at the D-Lux, he received a second injury. The common factor in his case is that both injuries occurred at a time when he was employed by the same employer. Thus, his case falls squarely under Ark. Stat. Ann. 81-1313(f)(1). It makes no difference whether his injury was scheduled or to the body as a whole because both injuries were with the same employer. 81-1313(f)(1) then is not really second injury legislation at all. It differs greatly from 81-1313(f)(2) and its three sub-sections of the Act, and for that matter, the new 1979 and

1981 Acts. All Sub-section (f)(1) really does is to provide for additional benefits for the healing period and the additional permanent disability that is caused by the second or successive injury. In Wooten v. Mohawk Rubber Company, 259 Ark. 887; 536 S.w.2d 734 (1976), claimant received an injury in 1967 while employed by Mohawk which resulted in a laminectomy at the L-4 level on the right. He received a 20% disability rating to the body as a whole as the result of that injury. Four years later, in 1971, he was involved in another accident again involving the L-4 disc space but this time on the left. Keep in mind that Wooten was working for Mohawk on both occasions. The Court following the earlier case of Corbitt v. Mohawk Rubber Company, 511 S.w.2d 184 (1974), found that claimant was in fact permanently totally disabled but limited his recovery to the maximum benefits then payable under Section 10(a) of the Act, or then, $19,500. The Court made a distinction between Sub-section (f)(1), which limits recovery for permanent total disability to those benefits payable under Section 10(a) of the Act, and Section 10(c) which awards total permanent disability as the result of a single accident. Thus, the court early on made a distinction (and we shall see where this is important later) between totai permanent disability which results from a combination of two injuries and one that results from a single injury. Thus, a person who is permanently and totally disabled as the result of successive injuries receives far less than an individual who is permanently and totally disabled resulting from one injury. The Court passed on the constitutionality of such a differentiation in

the Corbitt case and has yet to change its position. Also, for a similar case, see Springston v. Jones Truck Lines, 268 Ark. 653; 595 S.w.2d 247 (1980). Sec. 81-1313(2) (i) applies only to a subsequent injury that is scheduled under Sec. 13(c), Sub-section (c) and to the same member. When that occurred under the old law, the employee was paid compensation for his healing period and for the permanent disability occasioned only by the subsequent injury, limited as to amount by the time specified in Section 13(c), Sub-section (c) of the Act. This part of the old law, Sec. 81-1313(f)(2) is distinguished only by what benefits the claimant could not receive if he had the misfortune to incur a scheduled injury under Sec. 13(c), Sub-section (c) and then re-injure the same scheduled member of his body in a subsequent accident while employed by a different employer. With that said let us pass on to what I call the "Law of Apportionment" and Sec. 81-1313(f)(2)(ii) & (iii). All in one way or another, deal with a claimant's successive injuries both to his body as a whole (i1) and scheduled injury(s) leading to total permanent disability (iii) when the claimant is subsequently and successively injured while working for a different employer. In International Paper Company v. Remley, 505 S.W.2d 219 (1974), ciaimant was injured in 1934 prior to being employed by respondent. He received an injury to his right hand equal to 20% and later in 1971, received a second injury where he received 15% impairment. Both injuries were to the right hand, but the last injury occurred when claimant was employed by

International Paper, a "different" employer. The Commission awarded the entire 35% disability but refused apportionment. The case went up on respondent's contention that it should have to pay only for the 15% impairment resulting from the second injury which had happened almost 34 years after the time that the claimant received his first or original injury. The Court agreed with the appellant but for policy reasons only. It reasoned that workers will not always benefit in the long run from a rule of non-apportionment. The court found that a rule of non-apportionment would cost workers re-employment opportunities-remember Old Harry. It's true that no employer would want to hire him or Remley if they also had to pay for an injury that occurred, in Remley's case, 34 years earlier. Remley then apportioned or gave credit for the prior injury as a social inducement to providing jobs for handicapped workers. Remley is silent as to the application of the Second Injury Fund and is deceptively mis-leading to group a case such as Remley with questions involving the Second Injury Fund. Remley merely reflects the rule of Apportionment that was and is still the law in Arkansas. The apportionment rule is probably best shown in the case of Davis v. Stearns-Rogers, 451 S.W.2d 469 (1970), and such rule may, or may not, simply reflect the language contained in 81-1313(f)(2)(i1). Regardless, by the year 1967, Davis had already suffered a series of disabling injuries totalling 75% (1960,10% in a compensable injury with a chemical company; 1961, 10% with the same company; 1962, 10% while employed at Tidewater Construction Company; 1964, 45% continued on page 40

W. W. Bassett, Jr. is a senior partner in the Bassett Law Firm in Fayetteville. He is a member of the American, Arkansas and Washington County Bar Associations, the American and Arkansas Trial Lawyers Association, the American Board of Trial Advocates, and Defense Counsel Bar of Arkansas. He has twice appeared as a featured speaker at Workers' Compensation Seminars in Little Rock sponsored by the Arkansas Bar Association. The author gratefully acknowledges the invaluable assistance of Jay N. Tolley in preparing this article.

January 1983/Arkansas Lawyer/39

路 .. Injury Law, continued from page 39 while working for Papco, Inc.). At the time of the claimant's t 967 injury, he had returned to the work force with the knowledge and blessing of the Social Security Administration who had been paying him full Social Security Disability Benefits. The full Commission relying on the older case of O. K. Processors, Inc. v. Dye, 241 Ark. 1002; 411 SW.2d 290 (1969) found: "The question to be decided is the extent of disability caused by the present injury disregarding all previous disabilities". (Emphasis supplied) Thus, under Dye, the Commission reasoned that if the evidence reflected total disability and if it was due to the last injury, the claimant was entitled to total disability. No questions askedand guess who paid for it?-all of it-the employer. In Mr. Davis' case, even though he had previously been paid 75% disability as the result of four separate injuries over a six-year period and even though he was receiving totai disability from the Social Security Administration and though he had returned to work to begin with only on a trial basis, he still was, according to the Commission, entitled to receive permanent and total disability benefits. Not so, said the Supreme Court-and here for the first time, we see reflected the Rule of Apportionment. "If prior disabilities are the contributing factor to the total disability then the employer, as a subsequent employer, is not liable for 100% of the permanent disability but only for the degree which would have resulted had the prior disability not existed." In Davis, the Supreme Court specifically rejected the "take 'em as you find 'em" rationale. There has never been a "take 'em as you find 'em" rule in Arkansas and most probably with the new legislation, there never will be. The main thrust of Davis is that the Commission may not disregard previous disabilities if the disabilities contribute to the overall total disability. The Rule of Apportionment was amplified in Rooney v. Charles, 262 Ark. 695; 560 SW.2d 797 (1978). Mr. Charles received an injury in 1976 which amounted to 20% functional dis40/Arkansas Lawyer/January 1983

ability to his body as a whole. However, Charles was 61 years old and had a third grade education. Further, he had a grade equivalency of first grade in reading and was unable to recognize almost all letters and words. In short, he was functionally illiterate. The Commission found that the claimant was permanently and totally disabied. Respondents appealed and contended they were in effect having to pay for the claimant's pre-existing condition which was nothing more than mental retardation which was not compensable and asked that a major portion of the claimant's disability be apportioned and that they be required to pay only the amount of disability resulting from the industrial injury or 20%. The Supreme Court rejected Appellant's argument and found the claimant permanently and totally disabled and refused apportionment. The Court found that Mr. Charles' mental retardation had not independently produced any disability before the accident and there was no evidence that his retardation prevented him from pursuing his employment as a manual laborer. But, the retardation coupled with the 20% injury was economically devastating and rendered him permanently and totally disabled. What have we learned from Davis and Rooney? We determined that the prior disability must be a contributing factor in causing total and permanent disability. If it is, then apportionment is in order, but to be apportionable, an impairment must have been independently producing some degree of disability before the accident, and must continue to operate as a source of disability after the accident. Now what about those cases which involve a successive injury, not scheduled, but instead an injury to the body as a whole? Those cases are statutorily covered by 811313(f)(2)(ii). In Naill v. Maynard, 271 Ark. 643; 609 SW.2d 352 (1980), the Court of Appeals was faced with a successive injury case and an Appellant who was arguing the application of Sec. (2)(ii). The claimant was 50 years old with a 7th-grade education. In 1962, he suffered an injury resulting in removal of a disc at the L-4, 5 level. He received a 10% disability as the result of this injury but returned to work. In 1967, he was again injured at the L-5 level and another disc was removed; and also again received an additional disability rating to his body as a whole but the

opinion does not state the percentage of second disability rating. Finally, in 1974, while employed by Naill, a third disc was removed at a different level, this time at L-2. After being released in July, 1975 from medical following the 3rd injury, Maynard was given a 75% disability rating. Although Maynard attempted to return to work for several months, he later terminated and sought permanent and total disability benefits. Surely, this is a case for application of the Second Injury Law and/or the Law of Apportionment. The claimant had been involved in several accidents all of which seemed to contribute to the 75% disability to the body as a whole. If the employer-carrier can prove that this case comes within Sec. 811313(f)(2)(ii), then it will be liable for "The degree of disability that would have resulted from the subsequent injury if the previous disability had not existed". Thus, the last employer would pay only for that degree of disability which was attributable to the last injury. Stated differently, if (f)(2)(ii) applies, respondent pays only for claimant's injury at the L-2 level and for no other prior injury. The Court recognized that the appellant's argument "gave support to the premise that claimant's total disability is a result of the combination of partial disabilities". However, there was one insurmountable problem. The Commission had found differently. The Commission had held that claimant's total disability was caused independently by the 1974 episode L (the L-2 episode) and not by a combination of any of the prior injuries. Consequently, the line of cases under (f)(2)(ii) turn on one simple fact, namely: if the total disability is caused independently by the last injury, the Second Injury Law does not apply and the employer's liability is for permanent and total disability limited only by the "lid" on the dollar amount in the statute. If, however, the total disability is the result of a combination of one or more of the injuries, then the Second Injury Law indeed applies and the employer is liable only for "the degree of disability that would have resulted from the subsequent injury if previous disability had not existed". In this case then, instead of the respondent being responsible for only a certain percentage of disability, it is liable for permanent and total disability simply because as a matter of proven fact, the claimant's disability was due exclusively to his last injury only.

This brings us finally to the last Subsection of the Second Injury Law Past which is found at 81-1313(f){2){iii), and which involves and has to do with scheduled injuries. Up until now, we have discussed a great deal of Second Injury Law without one single mention of the Second Injury Fund. The reason, I believe, goes back over 30 years to a 1950 Arkansas Supreme Court decision. After all, what prompted the Legislature to suddenly enact two substantive changes pertaining to the Second Injury Fund in 1979 and 1981? Whatever the reasons, and before the Second Injury Fund faced any real exposure at all, a formidable obstacle loomed in the path of such application. That obstacle was the case of Arkansas Workers' Compensation v. Sandy, 217 Ark. 821; 233 S.W.2d 382 (1950). Here the Court effectively "closed the door" on the application of the second injury fund early in its statutory review of compensation cases. Mr. Sandy had been injured in 1925 well before passage of the original Workers Compensation Act when he suffered an injury to his left hand and lost all fingers on that hand except his thumb. In 1943, after passage of the Act, Mr. Sandy suffered another injury, this time to his right arm which necessitated amputation above the elbow. Thus, we have Sandy with no forearm on the right and only a thumb on the left. He was paid compensation for his period of temporary disability and then received a lump sum award of 200 weeks which represented the scheduled loss of his right arm below the elbow. Thereafter, he filed a claim with the Commission and alleged that as a result of the 1925 injury and the loss of his right arm in the 1943 injury he was permanently and totally disabled. He sought additional compensation beyond that provided for in the schedule and sought to invade the sanctity of the Second Injury Fund. The Circuit Court reversed the Commission's opinion and found that Sandy was not permanently and totally disabled because he had not suffered a total loss or use of his left hand before his 1943 compensable injury. The court found that the claimant still had some "use" of his left hand because he still had a thumb! Our Supreme Court echoed the finding of the Commission and set the stage for a narrow application to any person attempting to invade the fund when it held:

"This fund, called the Second Injury Fund is a limited and restricted fund and is created specifically for the benefit of those employees who are found to be totally and permanently disabled and those who strictly comply with the provisions of Section 13(f){2){iii)".

volved. Prophetically the Supreme Court said:

The Court went on to indicate that it would pay lip service to the principal of liberal construction but the law of Sandy, which controlled for the next thirty (30) years, is as follows:

Remember this judicial quote because we will see it again later in 1979 and 1981 in substantive legislation involving the fund. The Supreme Court succeeded in protecting the Second Injury Fund and its limited means of funding for over 30 years. Who is to say, in retrospect, whether that was good or bad considering the position of that fund in 1982, which if means of adequate and realistic financing are not implemented, could someday actually become insolvent. (To be continued in subsequent issues of The Arkansas Lawyer.)

"To hold otherwise would open this special fund to a point of insolvency and provide no benefit for those who do comply with its provisions and who are entitled to benefits thereunder."

"In our opinion the 'loss of a member or organ' or the 'loss of use of a member or organ' as is provided for in Section 13(f){2){iii) means the total loss or total loss of use". (emphasis supplied) The Court concluded that before the Second Injury Fund [Sec. (f){2){iii)] applies, there had to be a total loss or a total loss of use of a member in-

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FIRST FINANCIAL PlANNERS January 1983/Arkansas Lawyer/41

OYEZ 路 OYEZ II By: Carol Utley Publications Assistant

Sebastian County deputy prosecutor ORVILLE CLIFT has resigned to enter private practice. Clift joined the Fort Smith law firm of Rose, Kinsey and Cromwell. Crowe and Dunlevy in Oklahoma City announce that GARY W. DAVIS has become a director of the firm and that GRAYSON P. VAN HORN, LARRY E. JOPLIN, ANTON J. RUPERT and C. GLENN McLOUGHLIN have become associates of the firm. SANDRA TUCKER PARTRIDGE has opened her law office in Benton. She was formerly assistant reporter of decisions of the Arkansas Supreme Court and Court of Appeals. JOE D. WRA Y has announced the opening of a part time law office in Montrose. Searcy attorney MIKE BEEBE was commencement speaker at the graduation ceremonies of Foothills Vocational Technical School in June. Municipal Court Judge HENRY MORRIS of DeQueen told of the functions and jurisdiction of Arkansas courts in an address to DeQueen Rotarians in June. J. T. SKINNER and SAM HEUER opened a new law office on the third floor of the Independence County Office and Library Building in Batesville. U.S. District Judge OREN HARRIS of EI Dorado received the first annual "Brooks Hays Memorial Christian Citizenship Award" from the Second Baptist Church in Little Rock in July. J. scon BROWN formerly of Siloam Springs, was one of 20 Americans selected nationwide to attend a three week seminar "Challenges to the Alliance" last July in Hamburg and West Berlin, Germany. EUGENE B, HALE, JR. has joined the staff of the State First National Bank of Texarkana as Vice President. His primary duties will be in the area of commercial lending. He has served as a Vice-President of Security SaVings Association ofTexarkana, Texas and as a Commercial Loan Officer and Correspondent Bank Officer at Union National Bank in Little 42/Arkansas Lawyer/January 1983

Rock. RICHARD A, RODERICK of Russellville has been promoted to assistant to the personnel director of Arkansas Power and Light in Little Rock. MARION A. HUMPHREY has announced the opening of his law office in Stuttgart. He was with Johnson and Humphrey in Pine Bluff. G. DAVID GEARHART was appointed director of development at the University of Arkansas at Fayetteville. He assumed his new post in August. Attorney General Steve Clark has announced that EARL JEFFERY STORY has joined his staff as an Assistant Attorney General in the litigation division in July. CHRISTOPHER R. KELLEY joined the Monticello office of Legal Services of Arkansas in July. AL SCHAY of Norman, Okla., formerly of Little Rock, addressed the summer meeting of the Oklahoma Judicial Conference on the operations of his office, the state Appellate Public Defender System. SUSAN McCAIN, Assistant Vice President and Trust Officer, The First National Bank in Little Rock, was elected Treasurer of Class XXV at the Southwestern Graduate School of Banking, Southern Methodist University, Dallas, Texas, and will serve in the position for three years. SHAWNA BROWN, formerly with the Department of Justice Tax Di-

vision in Washington, D.C. and Dallas, Tex., is now with a private firm in Dallas. The firm is Geary, Stahl and Spencer located at 2800 One Main Place, Dallas, Texas 75250. MIKE GIBSON was awarded a plaque for his outstanding service as president of the Osceola Rotary Club last year. Wallace, Hillburn, Clayton, Calhoon, & Forster announce that E, DEMAn HENDERSON has joined the firm located on the eighth floor of Twin City Bank Building in North Little Rock. JOHN MATTHEWS of lillie Rock spoke to a dinner meeting of the Purchasing Management Association held at the Coachman's Inn in July. New law offices of the West Memphis firm of NANCE, NANCE and FLEMING were officially dedicated inJuly with a ribbon cutting ceremony. JOHN E. MOORE has joined the law firm of Osmon and Wilber in Mountain Home. JIM GUY TUCKER has been named a partner in

the Little Rock law firm of Mitchell, Williams and Selig. He will work primarily in the firm's Litigation Department. PAMELA L. GIST recently completed her Masters of Law in Corporations at The George Washington University in Washington and is now associated with the communications firm of Nace

and Duffy. ROXANNE DeLAURELL formerly with Woodson Walker & Associates in Little Rock, is in Washington earning her Masters in International Law at The George Washington University. According to Pam Gist, the two live in the same building and are a self-appointed Washington greeting committee for members of the Arkansas bar. ZACHARY TAYLOR has been appointed to the Commercial Code Committee of the American Bar Association. The appointment was made by William M. Burke, Chairman, of Los Angeles. Approximately 100 lawyers from around the country make up the committee. WILLIAM DONALD KELLY, JR. announces the new location of his law office. It is 302 Thomas Street in Stamps. WINSLOW DRUMMOND, formerly with Wright, Lindsey and Jennings of Little Rock, became a partner in the McMath Law Firm on September 1, 1982. ART ANDERSON has also become a partner in the firm. V. BENTON ROLLINS has opened a new law office in Camden and DANIEL D. IVES has become associated with the firm. The offices are located at 137 Jackson Street. WAYNE LEE and GARY GREEN announce the opening of their Lonoke office at 106 N.E. Front Street in Lonoke. SUSAN BOONE, formerly with the Marshall office of Lee and Green, has been transferred to Lonoke. JOHN ALDWORTH is now in charge of the Marshall office. Mike Gibson and Michael Bearden announce that STEPHEN P. HALE has joined their firm in Osceola. RICHARD BYRD was named to the board of Directors of the Hamburg Chamber of Commerce in September. Wiggins, Christian and Garner in Fort Smith announce that GARY F. WENCE is associated with the firm. DON M. SCHNIPPER of Hot Springs was elected president of the University of Arkansas Alumni Association. JAMES R. EADS, JR., Chief Counsel of the Arkansas Department of Finance and Administration, has resigned to accept a position in the tax department of American Telephone and Telegraph Company, Long Lines Division. JAMES GRAVES formerly of Murfreesboro, has joined RUSTY DARLING in the practice of law in Nashville. RICHARD MATTISON, formerly Benton city attorney, and DANNY HARMON, former prosecuting attorney, have formed a partnership for the practice of law at 301 E. Sevier Street in Benton. Batesville attorney FRED LIVINGSTON recent/y accepted an appointment to the

board of directors of the University of Arkansas Foundation, Inc. RAY THORNTON, president of Arkansas State University, was selected as the 1982 Fellow of the Museum of Science and History in Little Rock. BILL ADAIR, a former partner in the Adair and Kirk John Deere farm implement agency, has announced the sale of his interest in the business to pursue the full-time practice of law. His new office is at 285 E. College Street in Batesville. Robert Shults and Thomas Ray announce that H. BAKER KURRUS has become a partner in the firm and that ALAN S. MILLER has become associated with the firm. RANDY WRIGHT of DeQueen is the new deputy prosecutor for the Ninth Judicial District. JIM BOB STEEL of Nashville is the new prosecutor. Clarendon attorney ROBERT SERIO was named as a deiegate to the Arkansas Issues '82 Conference in September. The conference is sponsored by the College of Liberal Arts UALR, the Arkansas Endowment for the Humanities, the Chamber of Commerce of Greater little Rock and the Winthrop Rockefeller Foundation. JOHN WILLIAM SPIVEY III of Little Rock has been named general chairman of the 1982-83 Hendrix College Alumni Loyalty Fund. GREG BROWN of Benton has become chairman of the board of Merchants National Bank in Benton. DAYTON G. WILEY of the San Antonio firm of Wiley, Garwood, Stolhandske and Simmons, brought to our attention a handsome eight-page brochure pro-

POSITION AVAILABLE TAX ATTORNEY-Minimum of two years experienceLLM preferred-Growing medium-sized firm in TUlsa, Oklahoma needs individual to assist in further development of tax practice. Our staff knows of this ad. Send inquiries clo The Arkansas Lawyer, 400 West Markham, Little Rock, Arkansas 72201.

duced by the firm featuring members of the firm, serviCeS available to clients, and areas of practice. Wiley, one of the founders of the firm, was graduated in 1949 from the University of Arkansas Law School. LOCAL BAR ASSOCIATION OFFICERS: BENTON COUNTY BAR ASSOCIATION President Georgia Elrod Vice President .. Stephen P. Sawyer SecretaryTreasurer ....R. Douglas Schrantz ASHLEY COUNTY BAR ASSOCIATION President William E. Johnson Vice-President Gary M. Draper SecretaryTreasurer Bruce D. Switzer WASHINGTON COUNTY BAR ASSOCIATION President Joe B. Reed Vice President Truman H. Smith Jr. SecretaryTreasurer Wm. Jackson Butt II TRI-COUNTY BAR ASSOCIATION (Izard, Sharp & Fulton) President Connie Barksdale Vice President Sam Beller Secretary Jim Short Treasurer Dwayne Plumlee

" CORPORATE ATTORNEY Company searching for Attorney with outstanding credentials-Experience preferred. Trial and Regulatory Experience Helpful.

Rep/y: clo The Arkansas Lawyer 400 West Markham Little Rock, Arkansas 72201

January 1983/Arkansas Lawyer/43

Charitable Giving-

Philanthropy Can Generate Tax Benefits By: Larry Yancey

Introduction and Scope The most common form of charitable giving in this country is an annual pledge of cash to a church or synagogue. Such contributors routinely claim these contributions as itemized deductions' on their federal and state income tax returns with full confidence that the deductions will withstand Internal Revenue Service ("IRS") scrutiny. Certainly charities emphasize the deductibility of a contribution as an additional incentive for charitable giving. In terms of pure economic analysis, the allowable tax deduction reduces the contributor's income tax liability thereby creating a tax savings. Such tax savings recoup a portion of the actual out-of-pocket expense of the contribution thereby reducing the net expense of the contribution. For example, a $1,000 cash contribution by a taxpayer in the 50% marginal tax bracket actually costs the taxpayer only $500, calculated as follows: Cash Contribution $1,000 Reduce by Tax Savings($1,000 x 50%) (500) Actual Cost of Contribution $ 500 The simplicity of this analysis for direct charitable giving is apparent. However, the one factor most com44/Arkansas Lawyer/January 1983

monly overlooked is the loss of future earning power of the contributed property. Typically, such factor is not a major concern because either (i) the amount of contributions are so small that future earnings would be inconsequential, or (ii) the contributor is unaware of any technique to make a tax deductible contribution and retain any further earnings therefrom. The first reason is well taken but the second reason is erroneous, and the scope of this article is intended to remedy such misconception. The origin of this discussion lies with each potential contributor because very few people consider giving away property without some underlying philanthropic intent. However, once the decision has been made to make a charitable contribution, the amount and method become substantially an economic decision, especially if a large contribution is considered. Charitable giving devices that provide both current tax savings and future earnings from the contributed property should then be considered. Such devices exist and are commonly referred to as split-interest gifts.' This article is intended to identify the existence and basic structure of these devices. A general review will be made of the relevant sections of the Internal Revenue Code of 1954, as amended ("IRC''), applicable Treasury Regulations ("Treas. Reg.") and IRS rulings for the purpose of identifying the provisions necessary to consider in making a split-interest gift. However, a detailed discus ion of such provisions simply is not possible in an article this brief.'

Allowance of Split-Interest Gifts Generally, a contribution of less than the taxpayer's entire interest in property will not entitle the contributor to a charitable contribution deduction. [Section 170(f) IRC.] However, certain transfers in trust are specifically listed therein for which the deduction is allowable, i.e. charitable remainder annuity trust, charitable remainder unitrust, and pooled income funds [all in Section 170(f)(2)(A)). Charitable Remainder Trusts The common name of charitable remainder trusts is descriptive. Such devices are an irrevocable contribution of property to a trust that provide for an income interest to be paid to the contributor, or other non-charitable beneficiary, for life or a specified number of years (not to exceed 20 years) and, upon the expiration of the income interest, the remainder must then be held (in trust or free of trust) exclusively for charitable purposes. If the grantor gives an income interest to anyone other than himself, gift tax implications must be considered. The income interest retained by the grantor, or other person, is guaranteed only to the extent trust assets. If trust assets are ever fully expended, the trustee's obligation to pay the income interest terminates. Two basic variations exist in the form of a charitable remainder annuity trust or a charitable remainder unitrust. Section 664(d)(1) IRC provides that a charitable remainder annuity trust (hereafter annuity trust) is required to pay, at least annually, a sum certain to a non-charitable beneficiary (one or

more) and such sum must be at least 5% of the net fair market value of trust assets on the date of transfer to the trust. Section 664(d)(2) IRC provides that a charitable remainder unitrust (hereafter unitrust) must pay to a noncharitable beneficiary (one or more), at least annually, a fixed percentage of the net fair market value of trust assets valued annually. Such fixed percentage must be at least 5%. Alternatively, a unitrust may pay the non-charitable beneficiary the lesser of (i) a fixed percentage (at least 5%), or (ii) the income of the trust for that year. The basic difference is that an annuity trust guarantees a fixed sum to the income recipient while the income recipient of a unitrust rides the fortunes of the trustee's investments.' Annuity trusts and unitrusts share many common provisions. In all circumstances, a written trust agreement must be used. In fact, mandatory and optional provisions of such trust instruments are set forth in Revenue Ruling 72-395, 1972-2 C.B. 340, as modified by Revenue Ruling 80-123, 1980-1 C.B. 205. Strict compliance with the mandatory provisions of these rulings is necessary. If the technical provisions are met, the annuity trust or unitrust will be exempt from federal income tax. (It is not uncommon to request a private ruling from the IRS regarding tax exempt status for the trusts.) The non-charitable beneficiaries cannot receive any amount other than the annuity or unitrust payment. However, a purchase of trust assets for adequate and full consideration appears to be allowable. The selection of a trustee is very important. The grantor, or spouse, may serve as trustee but particular attention

must be paid to avoid classification of the grantor, or spouse, as owner of the trust under the grantor trust rules (Section 671-677 IRC). Such classification would prevent the trust from qualifying as an annuity trust or unitrust. Additionally, the funding of the trust with appreciated real estate or closely-held stock is discouraged if the grantor, or subordinate party, is to serve as trustee. An independent trustee, inclUding a financial institution or the charitable remai nder beneficiary, will preclude the problems identified above although the effect of an annual trustee's fee must then be considered. Investment decisions of the trustee must be independent decisions. Generally, restrictions on, or direction of, investments contained in the trust instrument will cause the trust not to quality as an annuity trust or unitrust. Prior "understandings" between the grantor and trustee are equally discouraged. In fact, Treas. Reg. 1.6641(a)(3) provides that a trustee must be able to invest trust assets in a manner that will produce reasonable income or gain upon the sale of assets. The tax treatment of payments of the annuity trust or unitrust amounts to the non-charitable beneficiaries is both interesting and complex. The treatment is established by Section 664(b) IRC and those provisions override all other Code provisions. Basically, a tier system is established in that payments to the non-charitable beneficiary are treated (i) first, as ordinary income to the extent thereof received by the trust currently or undistributed from prior years, (ii) second, as capital gain to the extent of current and previous undistributed capital gain, (iii) third, as other income (e.g. tax exempt income) to the extent of current and prior undistribu-

ted amounts, and (iv) fourth, as trust corpus. For example, trust assets invested exclusively in certificates of deposit will distribute ordinary income to the non-charitable beneficiary. Also, a trust funded with cash and invested exclusively in tax exempt securities will distribute tax exempt income to the non-charitable beneficiaries. A potential contributor should be informed of such treatment if an annuity trust or unitrust contribution is considered. Certainly one of the major factors is the determination of the value of the contribution. This becomes particularly important when a large contribution is considered and a deduction in excess of the annual deduction limitation will occur.' Of course, excess charitable contributions may be carried forward for five years [Section 170(d)IRCJ but, even then, planning is important to be certain that none of the excess carryforward deduction is "lost". The definition of the value of an annuity trust or unitrust contribution appears simple, i.e. it is the fair market value of the remainder interest. In an annuity trust, it is determined by subtracting the present value of the annuity from the net fair market value of all property placed in trust. The determination of these amounts must follow the direction of Treas. Regs. 1.664-2 and 20.2031-10 (annuity tables). Calculating the value of the remainder interest in an unitrust is similar but more complex and the procedures for correct valuation are set forth in Treas. Regs. 1.664-4(b) and tables therein. A simple example of the value of an annuity trust contribution is as follows: Male, age 65, transfers $20,000 cash to annuity trust reserving $1,000 ancontinued on page 46

Editor's Note: The practicing Bar in Arkansas is indebted to the Taxation, Trust and Estate Planning Section of the Arkansas Bar Association for this series of related articles in The Arkansas Lawyer.

Harry Lawrence (Larry) Yancey is a member of the House, Holmes & Jewell, P.A., at Little Rock. He received his J.D., 1976, University of Arkansas School of Law at FayetteVille; and LL.M. in taxation, 1978, from the N.Y.U. School of Law, where he was Research Assistant to Professor James Eustice. He has lectured and written on his subject (Tax Incentives and Preservation Seminar of the Arkansas Historic Preservation Program; Tax Consequences of Investments in Historic Property by Producer's Roundtable; Tax Incentives for Historic Preservation, The Arkansas Lawyer, October 1980.)

January 1983/Arkansas Lawyer/45

路 .. Tax Benefits continued from page 45 nual payment to himself for life. Value of remainder interest is calculatedFMV of trust assets 'Less: Present value of annuity ($1,000 x 8.0353) FMV of remainder interest

$20,000 (8,035) $11,965

Therefore, the contributor is entitled to a charitable contribution deduction of $11,965 in the year of contribution.' Assuming the contributor is in the 50% tax bracket, the out-of-pocket expense is for the contribution reduced by $5,982.50 ($11 ,965 x 50%) and further mitigated by the gurantee of receipt of $1,000 annually for the remainder of his life. The foregoing discussion has related to inter-vivos transfers. The same devices are available for testamentary giving but the economic analysis of tax benefits becomes very important here. Certainly, much depends on the potential size of the gross estate, but often current income tax savings will be of more benefit than estate tax savings assuming all other factors are equal. Pooled Income Funds A pooled income fund follows the basic premise of the annuity trust and unitrust devices, i.e. a contributor makes a contribution to charity reserving an income interest to himself. The general rules for a pooled income fund are set forth in Section 642(c)(5) IRC. Pooled income funds are common trust funds maintained by charities to receive contributions of remainder interest that typically are too small to justify a separate annuity trust or unitrust for that single contribution. Donations to a pooled income fund are commingled with other donations to such fund and a donor may not be the trustee. Such donations are irrevocable. The income interest must be retained by the donor for his life or, if an income interest is created in another non-charitable beneficiary, for that life. An income interest for a term of years is not allowable. The income distributed to the income beneficiary is an amount equal to the proportionate interest of his or her contribution to all contributions to the fund. The character of the income is the same as it is to the fund. It should be noted here that pooled income funds cannot invest in tax exempt securities. 46/Arkansas Lawyer/January 1983

The valuation of the contribution of the remainder interest to charity is similar to the value of an annuity trust or unitrust contribution, i.e. the value of the remainder interest is calculated by subtracting the current value of the income interest from the value of all assets transferred to the fund. The value of the income interest depends on the actuarial life expectancy of the income beneficiary and the deemed rate of return earned by the fund. The trustee of the pooled income fund receiving the donation should provide the information regarding the second factor. The procedures for correct valuation are set forth in Treas. Reg. 1.642(c)-6. Again, the above discussion relates to inter-vivos transfers but testamentary transfers are also allowable. The same considerations apply here for the decision between inter-vivos and testamentary transfers as discussed for annuity trusts and unitrusts. Other Split-Interest Gifts Other split interest gifts may be made to charities and qualify for tax deductions. Two specific devises should be mentioned. First is the charitable income (lead) trust that is the reverse of the charitable remainder gifts. In such trusts, the charity receives the income for the term of the trust and the grantor, or his estate, or other noncharitable beneficiary, receives the corpus upon termination of the income interest. Such trusts have various forms and Section 170(f)(2)(B) IRC should be consulted to assure qualification for a charitable deduction for such a gift in trust. The second devise is a charitable gift annuity that is not a gift in trust, but is a direct transfer to charity in return for a fixed life-time annuity. Actually, it is a part gift and part annuity purchase. The income tax treatment on receipt of annuity payments is substantially different from annuity trusts, unitrusts or pooled income funds, and Revenue Ruling 72-438, 1972-2 C.B. 38 should be consulted. As to the determination of a charitable contribution deduction, please consult Treas. Reg. 1.170A1(d), Revenue Ruling 70-15, 1970-1 C.B. 20 and Revenue Ruling 72-438, 1972-2 C.B. 38. Charitable gift annuities are not commonly used but may still be viable in certain circumstances. One advantage over the remainder trust instruments is that all the assets of the charity support the annuity payments and not just the contributed assets of that donor.

Three other types of split-interest transfers are allowable under Section 170(f)(3)(B). Although not discussed herein, there existence should be noted, i.e. (i) contribution of a remainder interest in a personal residence or farm, (ii) a contribution of an undivided portion of the taxpayer's entire interest in property, or (iii) a qualified conservation easement. Summary The last three months of every calendar year always seem to produce the busiest season for tax planning. Typically the initial question of a concerned taxpayer relates to identifying methods to reduce the anticipated payment due on April 15 next following without going deeper in debt or parting with money or other property. It is truly rare that all objectives can be accomplished. Hopefully, the foregoing discussion has provided a few more arrows in the quiver of tax planning devices and identified some forms of charitable giving that combine current tax benefits with a retention of earning power of the contributed property. Many considerations are necessary before pursuing any of the above transactions but, in the right circumstance, clients will be happy with the economic benefits. FOOTNOTES 1. This assumes such taxpayers otherwise quat路 ify to itemize deductions. 2. An active debate currently exists regarding the applicability of the definitions in various

6. 7.

state and federal securities acts of an "investment contract" or "evidence of indebtedness" to the spliHnteresl giving de路 vices. If such definitions apply, compliance with the state and federal securities acts will be necessary. II is equally important to note other considerations customarily made in charitable tax planning that will not be discussed in this article, i.e. percentage of income limitations on deductions, direct charitable gifts, qualification of charity, limitations on contributed property other than long-term capital gain property, and rutes for non-itemizers. The income recipient cannot have the best of both worlds. Private LeUer Ruling 7848075 denied both annuity trust and unitrust status to a trust in which the income payments were to be the greater of a specified dollar amount or a stated percentage of the value of trust assets. The annual limitation on deductions for charitable contributions is set forth in Sections 170(b) and (eJ IRC. Treas. Reg. 20-2031-10(f), Table A(l), Column (2) - Annuity. The limitation of deduction in footnote 5 must also be considered. For this discussion, it will be assumed that the full amount is deductible in the year of contribution.

1-.. .

MIDYEAR MEETING

featuring MR. AICLE

by Chairman Richard A. Williams and Dean Lawrence H. Averill, Jr.

MIDYEAR MEETING

COMMITTEE "ROUNDUP"

,,-, JANUARY 13-15

;RECEPTIONS

: / LUNCHEONS

----

CAMELOT HOTEL

HANDOUTS

LITTLE ROCK

HOUSE OF DELEGATES INTRODUCING THE PROGRAM

• MODERN DRAFTING TECHNIQUES FOR WILLS AND TRUSTS • ESTATE PLANNING IDEAS AND TECHNIQUES FOR COMMON FACT SITUATIONS •

ESTATE PLANNING FOR THE LAWYER (OR OTHER PROFESSIONAL)

TRIAL ADVOCACY • COMPETITION

TEAMS FROM UNIVERSITY OF ARKANSAS AND UALR LAW SCHOOLS SPONSORED BY ARKANSAS CHAPTER, AMERICAN BOARD OF TRIAL ADVOCATES (ABOTA) THREE HOUR TRIAL DEMONSTRATION WITH CRITIQUE HENRY WOODS ANNUAL AWARD FOR TRIAL ADVOCACY PLAQUE FOR WINNING TEAM MAJOR CASH AWARDS TO PARTICIPANTS IN COMPETITION

~. • ••• ••• ....

} "

•

lit .. '

.......

..........''...

• •

January 1983/Arkansas Lawyer/47

AICLE NEWS by Claibourne W. Patty, Jr. Executive Director Arkansas Institute of Continu ing legal Education

ADDITIONS TO CLE TOPICS HIGHLIGHT FIFTH YEAR OF OPERATION

The Arkansas Institute for Continuing Legal Education (AICLE) has completed its fifth year of operation. During the period July 1, 1981 to June 30, 1982 the number of programs, the diversity of topics and the overall attendance of the bar have paralleled the year before. Statistically speaking, AICLE directly sponsored or cosponsored fourteen programs consisting of a total of ninety-one lecture/demonstration hours presented to 1670 registrants, or an average of approximately 120 registrants per program-session. Of the total programs, four were videotape replays of the Fall Legal Institute on the subject of trial practice and practical evidence, with at least one live presentation by Professor Jason Reynolds of UALR School of Law on the topic of identification, certification and introduction of documentary evidence at Little Rock, Monticello, Magnolia, and Jonesboro. The videotape regional replays were first introduced in Arkansas during the last fiscal year, and they have continued to be well received by the registrants. The success of these programs has been based partly on the fact that the best presentations of a two-day program are condensed into a one-day program with some "live" commentary and presentation of at least one topic in order to break up the monotony of sitting all day and looking at a television monitor. From an economic standpoint the use of videotape replays preserves intact outstanding presentations of speakers who would not otherwise be available to travel around the state on a regional basis for the benefit of those lawyers who, due to preference or circumstances beyond their control, will not attend the Fall Legal Institute in Fayetteville or the Midyear Bar Meeting in Little Rock. By necessity (and now by tradition) 46/Arkansas lawyer/January 1963

AICLE relies on the members of the Arkansas Bar Association to patronize the various CLE presentations during the bar year, not only as registrants but also by participating as program planners, chairmen or moderators, lecturers and panelists and authors of course materials-all of which is done with little or no honoraria and minimal reimbursement of personal expenses. Not only have individuals been involved, but the committees and sections of the Arkansas Bar Association participating during the past year are as follows: The Young Lawyers Section; Taxation, Trusts and Estate Planning Section; Agricultural Law Commillee; Economics of Law Practice Committee; Labor Law Section; and the Federal Practice Committees of the U.S. District Courts of the Eastern and Western Districts of Arkansas. Chairmen of The Young Lawyers Section and the Legal Education Committee also sit ex officio on the Board of AICLE along with bar association executives, bar foundation executives and members of the House of Delegates. The leadership of the bar association is to be commended for its support of strong bar section and committee activity in the CLE area, and the sections and committees as indicated above have responded overwhelmingly. The membership of the bar has responded by enthusiastically participating in the various programs as faCUlty or planners as well as providing overwhelming attendance as registrants. And last but not least, the two cosponsoring law schools, University of Arkansas at FayetteVille and the UALR School of Law have provided leadership and program planning through their respective deans who are also members of the AICLE Board. More importantly the law schools have provided generous faculty support as program planners, presiders and participants as well as authors of systems and program materials. In this sort of

climate it is no wonder that AICLE has continued to thrive and grow to meet the challenges for providing continuing legal education programming since ~s inception. The bar membership will continue to benefit by the availability of quality CLE programs in the ensuing years which will be on a variety of topics, basic and advanced, at registration costs modest by national comparison. TAX AWARENESS INSTITUTE RETURNS The Fourth Annual Tax Awareness Institute, having skipped last year, was reinstated by the joint efforts of AICLE, the Trusts, Taxation and Estate Planning Section and the Probate Law Section of the Arkansas Bar Association at the Camelot Hotel in Little Rock on April 23, 1982. This year's program, billed as a "nuts and bolts" workshop, focused on the basic tax considerations in estate planning and the administration of decedents' estates. It included such topics as pre-death planning, postmortem planning and administration; of the estate; how will provisions help administration; tax elections; preparation of the fiduciary income tax return and estate tax return; and fiduciary responsibility. The program was jointly planned by John B. Peace and Richard F. Hatfield, who also assumed responsibility for topic and speaker selection. As a departure from the past, not only were trust officers invited but also CPA's and life underwriters, since the factors discussed in considering basic estate planning and administration of estates would concern each member of the "estate planning team". Emphasis was also placed on the application of the Economic Recovery Tax Act of 1981 and recent Arkansas legislation. This program also used as a basis a hypothetical fact situation which served as a model, and the individual speakers drew examples from the fact situation where possible.

This program was enthusiastically received by 150 registrants, and planning is already in progress for next year's Tax Awareness Institute. FALL LEGAL INSTITUTE RETURNS TO FAYETTEVILLE The Fall Legal Institute, devoted to the dual topics of Real Estate Transactions and Domestic Relations Law and System Update, was held at the University of Arkansas Conference Center in downtown Fayetteville with luncheons and receptions at the Fayetteville Hilton adjoining the Conference Center on September 9-10, 1982. The Thursday morning program, chaired by Jerry Halpern, Vice Chairman of the Real Estate Law Section, consisted of the following presentations: Uniform Condominium Act by David M. Powell, Esq. of Little Rock; the Model Time-Share Act by L. Cody Hayes, Esq. of Fort Smith; Construction and Sale of Condominiums by Robert Chowning, Esq. of Little Rock; and Real Estate Aspects of the 1981 Tax Act by F. H. Martin, Esq. of Fayetteville. Tom A. Buford, Esq. of Little Rock, Chairman of the Real Estate Law Section, presided at the Thursday afternoon session which included the following presentations: Legal Aspects of Non-Institutional or "Innovative" Financing by S. Graham Catlett, Esq. of Little Rock; Oil and Gas Law-Some Practical Pointers for the General Practitioner by James E. West, Esq. of Fort Smith; and Crop and Pasture Leases-Some Drafting Considerations by Dean Jake Looney of Fayetteville. The Friday morning session, chaired by Robert M. Cearley, Jr., Esq., Chairman of the Family Law Section, consisted of the following presentations: Explanation of the Program and the Supplement to the Arkansas Domestic Relations System by Bob Cearley; recent U.S. Supreme Court Decisions in Federal Law since Orr v. Orr by Harry Truman Moore, Esq. of Paragould; Problem Areas Brought into Focus by Recent Arkansas Appellate Court Decisions by Professor O. Fred Harris, Jr., Esq. of Little Rock; A Review of the Entire Area of Child Custody by Breck Hopkins, Esq. of Batesville; and Separate Maintenance, Alimony, Separation Agreements and Property Settlements, Questions re Antenuptual Contracts by Phillip E. Dixon, Esq. of Little Rock. The Friday afternoon session, presided over by Ben D. Rowland, Jr., Esq., outgoing chairman of the Family Law Section, consisted of a presentation by James

E. Harris, Esq. of Little Rock on the topic of Income Tax Update with Respect to Divorce of Separation. This was followed by a panel discussion moderated by Ben Rowland concerning the role of Arkansas courts in deciding the "tough" cases involving Child Custody and Support, Enforcement of Orders, Property Division and Allocation of Tax Consequences, which panel consisted of Justice Darrell Hickman of the Arkansas Supreme Court, Judge Tom Glaze of the Arkansas Court of Appeals, and Chancellor Eugene S. Harris of Pine Bluff as protagonists with attorneys Robert M. Cearley, Phillip E. Dixon and Breck Hopkins as antagonists. This dual program was well received by the approximately 225 registrants and guests who attended the sessions. By blocking more rooms in the Fayetteville Hilton next fall for the CLE portion of the program we will expect to increase the attendance while stilileaving intact the "football" weekend package for those who wish to stay over and attend the football game. At this time we do not contemplate a House of Delegates meeting on Saturday morning. ARKANSAS-FEDERAL TAX INSTITUTE TO BE HELD IN HOT SPRINGS The Arkansas-Federal Tax Institute, jointly sponsored with the Arkansas Society of CPA's, will be held in Hot Springs at the Arlington Hotel on November 18-19, 1982. The faculty, made up jointly of lawyers and CPA's will discuss the following topics of mutual interest to lawyers and CPA's: Estate Planning After ERTA; Corporate Acquisitions and Liquidations; Income and Estate Tax Treatment of Qualified Planned Distributions; Tax Planning for the Professional; and Burned Out Tax Shelters and Special Partnership Allocations. The Friday afternoon session will be composed of the following workshops which will be repeated four times during the afternoon thereby allowing attendees to benefit from four different workshops of their choice: Income Taxation of Trusts and Estates; Tax Equity and Fiscal Responsibility Act (TEFRA) Provisions Affecting Business; TEFRA Provisions Affecting Individuals; Divorce and Related Problems; TEFRA Provisions Affecting Compliance; Bankruptcy Tax Act; Intra Family Income and Estate Planning; TEFRA Provisions Affecting Retirement Plans; the Ins and Outs of

Spin-offs and Split-ups; Tax Considerations and Corporate Liquidations under ยง333 and ยง337. Although this tax program has traditionally been given at an advanced level, I encourage those attorneys who consider themselves to be at the intermediate level to consider attending this important tax seminar, because the quality of the speakers is such that they can make the most complex tax concepts understandable to the practitioner who does not also happen to be a CPA or a tax specialist. Furthermore, the program format this year, as in past years, is designed around main speakers whose presentations are followed by workshops which are more informal and questions and discussion are encouraged. In addition, the workshop topics on Friday afternoon lend themselves well to the general practice of law. The practitioner who is at the intermediate level of taxation experience should not hesitate to broaden his or her horizons in this area, and should take advantage of this sort of seminar being held in Arkansas rather than to undergo the personal expense of attending out-of-state seminars on the same subject.

MIDYEAR MEETING The annual Midyear Meeting of the Arkansas Bar Association will be held at the Camelot Hotel on January 13-14, 1983; and will be devoted to the introduction of a handbook and drafting manual for wills and trusts in Arkansas, which will effectively update the existing Arkansas Wills and Trusts System. The general course chairman is Lawrence Averill, Dean of the UALR School of Law, with Richard Williams, Esq. of Little Rock as a main participant in the program. This should be a most timely and interesting program with more details to be mailed out to the Bar membership in the form of brochures approximately two months in advance of the program.

SECOND ANNUAL AGRICULTURAL LAW SEMINAR WELL ATTENDED The 1982 Agricultural Law Seminar, jointly sponsored with the University of Arkansas School of Law at Fayetteville and the AgriCUltural Law Committee of the Arkansas Bar Association, was presented on Friday, October 1, at the Camelot Hotel, Little Rock.

f.....

January 1983/Arkansas Lawyer/49

ADDENDA by C. E. Ransick Editor

Attorneys' Trust Accounts In recent issues, we have published suggested guidelines for attorneys' trust accounts and a bookkeeping system for handling such accounts in the law office. A number of State Supreme Courts are requiring "spot" audits of trust accounts by qualified certified public accountants. In the State of Washington, the State Supreme Court approved the Spot Audit Program in 1977. Roger P. Wilson, C.P.A., Director of Audits for the Washington Bar Association (a unified bar), reports that the program has been well received by lawyers in the State of Washington. In New Jersey, a small number of lawyers have been subject to random audits of their trust account records. One N.J. lawyer has written to the NJSBA President that "as a result I have a far better control over my trust account and in just a matter of minutes I am able to balance the account and trace the flow of funds in and out". In Iowa, two former IRS agents, who now work for the Iowa Supreme Court, conduct "spot" audits. They completed more than 300 surprise audits this year. Besides reconciling trust account books, the auditors verify whether a lawyer has filed state and federal tax returns. In Delaware, the auditors do not conduct an audit, but merely check whether proper trust account records are being kept. In New Hampshire, lawyers may certify trust account records themselves, or declare their willingness to submit to audits. While the primary object of a spot audit program is to evaluate a lawyer's or law firm's handling of client funds, securities and properties, the program is also designed to raise the standard of lawyer record-keeping and accountability to their clients. The Arkansas Bar Association has SO/Arkansas Lawyer/January 1983

again furnished its members with copies of the fine ABA booklet, "Professional Responsibility of the Lawyer-Avoiding Unintentional Grievances". Normally, the climax in any publication-perhaps not in The Arkansas Lawyer-is at the end. The final item in the booklet concerns "Commingling Funds", with the caveat, "Every lawyer and law firm should establish office management procedures designed to insure clear accountability of all funds and other property of each client". While the Arkansas Supreme Court is unwilling to address this subject, perhaps the Supreme Court Committee on Professional Conduct would change its policy and hand down an advisory ethics opinion in this connection. In the October-November 1981 issue of the Journal of Missouri Bar (a unified bar), the following precedent is published. ARE YOU UNKNOWINGLY COMMINGLING CLIENTS' FUNDS? Advisory Committee Sets Guidelines For Handling Client's Accounts The Advisory Committee of The Missouri Bar Administration, in a formal opinion adopted on September 11, 1981, warns attorneys that any commingling of client funds with those of the lawyer or law firm is expressly forbidden by DR9-102 of Missouri Supreme Court Rule 4. The Committee issued the formal opinion in response to growing evidence that many lawyers fail to recognize the importance of maintaining separate client accounts and to render to the client an appropriate accounting of funds in the account.

FORMAL OPINION NO. 116 USE OF TRUST ACCOUNT It is the opinion of the Advisory Committee that issuance of a formal opinion on this subject will be helpfUl to the practicing bar. DR9-102 of Rule 4, Missouri Supreme Court, specifically provides as follows: (A) All funds of clients paid to a lawyer or law firm, other than advances for costs and expenses, shall be deposited in one or more identifiable bank accounts maintained in the state in which the law office is situated and no funds belonging to the lawyer or law firm shall be deposited therein except as follows: (1) Funds reasonably sufficient to pay bank charges may be deposited therein. (2) Funds belonging in part to a client and in part presently or potentially to the lawyer or law firm must be deposited therein, but the portion belonging to the lawyer or law firm may be withdrawn when due uniess the right of the lawyer or law firm to receive it is disputed by the client, in which event the disputed portion shall not be withdrawn until the dispute is finally resolved. (B) A lawyer shall: (1) Promptly notify a client of the receipt of his funds, securities, or other properties. (2) Identify and label securities and properties of a client promptly upon receipt and

place them in a safe deposit box or other place of safe keeping as soon as practicable. (3) Maintain complete records of all funds, securities, and other properties of a client coming into the possession of the lawyer and render appropriate accounts to his client regarding them. (4) Promptly payor deliver to the client as requested by a client the funds, or other properties in the possession of the lawyer which the client is entitled to receive. We will endeavor to set forth specific examples to aid the lawyer to fulfill the ethical requirements under DR9-102. The examples are not intended to exhaust all possible factual situations that may arise. In this connection, we submit that the lawyer must not commingle any "funds in which the client has an interest" with those belonging solely to the lawyer. The lawyer should never put in the law office account any funds in which the client can claim an interest. In making that statement, we consider the law office account funds to be those which are used to pay expenses for operation of the office or personal expenses. In re Montrey, (Mo. Sup., Bane 1974) 511 S,W,2d 805(3). The lawyer has two duties under DR9-102. One is to keep the funds of the client separate and apart from the practitioners' own personal funds and two, to account to the client for all funds received on behalf of the client. To properly account to the clients the practitioner must establish an accounting system whereby a permanent record is kept on all amounts, incoming and outgoing, from the Trust Account. Each probate estate or trust should have its bank account separate from the general Trust Account.

It should be first noted that under DR9-102, that "advances for costs and expenses" are exempted from the general requirement that "funds in which the client has an interest" be

deposited in the Trust Account. The practitioner may well desire to place "unexpended expense funds advanced for a specific purpose" in the Trust Account. In a recent case styled Dillard v. Payne, et al., (1981) Mo. Sup. 615 S.w.2d 53, the Court held where the funds were placed for a specific purpose by the client and used for other than such specified purpose, such action subjected the holder to liability for conversion and possible punitive damages. We here set forth examples involving use of the Trust Account. They are not intended to exhaust all possible factual situations that may arise:

1. Ciient Jones retains lawyer A to represent him in a pending dissolution action on an agreed upon set fee of $350.00. Jones pays lawyer A the agreed upon fee. Does the iawyer have to put the fee into the Trust Account or can it be put in the law office account? Answer: The fee can be put in the law office account. (See informal opinion No.3, rendered April 4, 1980, Summary of Informal Opinions 4/1/1980 to 6/30/1980.) The Committee held when the attorney receives an attorney fee in advance of the work being done, it may be deposited directly into the law office account. If the entire fee is not earned before severing the attorney-client relationship, then an appropriate refund must be made to the client. 2. Client Jones retains the lawyer under an employment contract whereby the agreed upon compensation hourly rate was to be "$100.00 per hour plus expenses" and Jones would deposit the sum of $5,000.00 with the attorney, who was authorized to deduct the fee as earned and make periodic reports to Jones. Under this type of employment, clearly the funds deposited with the iawyer must be deposited in the Trust Account until earned by the attorney. It appears that the deposit was to secure future billings of the attorney and at the time of placing the funds in the hands of the attorney, the fees remain unknown and unearned.

Trust Account is the personal injury case. In most cases a written fee contract will exist but often is not specific enough. Disputes can arise between the attorney and the client on how the recovery is to be distributed. The proceeds should definitely be deposited in the Trust Account and no division made until a proposed written settlement distribution has been prepared for the client and approved by him. Then the settlement checks should be drawn in accord with that settlement distribution to the client, creditors and the attorney. If a dispute arises, the disputed amount must remain in the Trust Account. The Trust Account is used when funds are received for a client in form of a check from a debtor and it is not known whether the check will be honored. If run through the Trust Account it will delay disbursement to the client only a few days. This will avoid problems caused by premature disbursement to the client, if the check is not honored. 4. When dealing in real property transfers, the attorney is frequently called upon to act as an escrow agent under a written escrow agreement. When funds are received in such a capacity, the attorney must deposit such funds in the Trust Account. Distribution should be made in strict accordance with the escrow agreement. If disputes arise, the amount in dispute should remain in the Trust Account until the dispute is resolved by agreement or by legal determination. If the amount of funds is sufficient and the length of time the funds will be held is long, the attorney should consider deposit of the funds in an interest bearing account. The attorney should follow such procedure whether he represents one of the parties or whether he represents no party to the escrow agreement. Adopted September 11, 1981 Advisory Committee en bane Arkansas lawyers need and should be furnished proper guidance as to their trust accounts. In publishing this series of articles in Addenda, we trust that The Arkansas Lawyer has been of service to Arkansas lawyers.",

3. A common case involving use of the January 1983/Arkansas Lawyer/51

CNA INSURANCE COMPANIES CNA Plaza Chicago, fIlinois 60685

July 13, 1982

Frank A. Patalano Vice路 President Professional Liability

(312) 822路6863

Colonel C. E. Ransick Executive Director Arkansas Bar Association Arkansas Bar Center 400 West Markham Little Rock, Arkansas 72201

Dear Col one1 Rans i ck: Just finished reviewin9 the July issue of The Arkansas Lawyer and was impressed again with your commitment to loss prevention. One of the most important services we provide professionals is guidance in avoiding malpractice claims. As claims increase in frequency and severity, loss prevention becomes more and more critical. I don't know of any other State Bar Association that works as hard as the Arkansas Bar Association to get this information out to its members. Jeffrey Smith's article in the July Arkansas Lawyer, your seminars, The Guide To Arkansas Statutes of Limitations, have all been innovative activities. In fact, other associations have followed your lead in developing these kinds of materials. We are very pleased to be the sponsored carrier of the Arkansas Bar Association. It is particularly gratifying in an era of shifting loyalties and opportunities to be able to point to a 20 year partnership with you and with the Bar. We rely on you and your work with the Association as one of our most important programs. I look forward to meeting you one day soon. Arkansas and hope to visit there soon. Sincerely, ./

/,'

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Frank A. Patalano /asd cc:

Mr. James R. Harper Rather, Beyer & Harper 362 Prospect Building Little Rock, Arkansas 72207

52/Arkansas Lawyer/January 1983

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