Juris Magazine- Spring 1990

ABORTION: can the laws simply be

IBLACK land

JURIS The Duquesne Law School News Magazine

Inside This Issue of JURIS PAGE

Pamela J. Castrucci

Editor-l n-Chief Raymond Sekula

Jan Daschbach

Faculty Adviser

Administrative Assistant

Rosalie Pugliese

David Hvizdos

Executive Managing Editor

Executive Manager's Assistant

Catherine L. Waggle

Marilyn Gilman

Production Editor

A rticles Editor

Cheryl Cindrich

Susanne Kimberland

Production Assistant

A rticles Assistant

Kelly Scanlon

Ralph Karsh

Photographer

News & Recent Decisions Editor

Aileen Hickey

James Heneghan

Front Line Editor

News & Recent Decisions Editor

Diana Lynn Stavroulakis

Michael Ivory

Front Line Editor

Front Line Editor

Steven W. Zoffer

Molly Murphy Lauralee Snyder

Front Line Editor

Production Crew

Nwenenda Adele Ed Santillan

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LIFE: A RIGHT?

by Edgardo D. Santillan

10

Abortion is Wrong But Should Remain Legal

by Prof Bruce Ledewitz

11

Where Will They Draw the Line?

by Catherine L. Waggle

14

A CHILL WIND BLOWS

by Ralph Karsh

18

Insider Trading: Where Do We Go From Here? btJ Deanna L. Heasley

21

Mellon Plans Something New

by Chris Ferry

23

Capital Gains, Fairness and the Public Debate of Tax Policy

by Prof Joseph L. Schiffhouer

24

Recent Decisions

by Mike Silver

27

AMICUS CURIOUS

Production Crew Writing Staff Alan Fuehrer Jim Kocur Carmen Martucci Kim Oliver Ed Santillan Thomas Shope Lauralee Snyder Starla Williams Peter Wright

Chris Ferry Deanna Heasley Ella Kwisnek Molly Murphy Colleen Ramage Lisa Sciullo Mike Silver Daniel Taylor Bob Walter

JURIS is a student publication of the Duquesne University School of Law. Views and opinions expressed are not necessarily those of JURIS or Duquesne University.

All manuscripts and comments may be addressed to

JURIS Duquesne University School of Law 900 Locust Street Pittsburgh, Pennsylvania 15282 Telephone (412) 434-6305 Copyright Š 1990 Duquesne University

Congratulations!! !

Congratulations to Dan Pagliari and Katherine Palmer for capturing the Gourley Cup for the Duquesne University School of Law. Duquesne defeated Georgetown in the preliminary round and the University of Pittsburgh in the final round by a unanimous decision. Special congratulations to Dan Pagliari for being selected Best Advocate. Eight teams participated in the competition this year. The vehicle involved a personal injury suit for damages arising from a one-car accident. Congratulations to Katherine and Dan for reviving a great Duquesne tradition!

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Disclaimer All of the opinions contained herein are solely those of the particular authors and do not, IN ANY WAY, represent the views of Juris Magazine, Duquesne University School of Law, or Duquesne University.

Up Front Abortion. The very word - standing on its own - stirs up extreme emotions. Therefore, it is necessary to make some introductory remarks.

First and foremost, nothing within these pages is representative of the views held by Duquesne University, the Duquesne University School of Law or Juris Magazine. The opinions stated in any Juris article are solely those of the particular author. While this disclaimer is a normal staple of our magazine, it is especially crucial to this issue which contains a controversial subject. Because Duquesne University is, as most people already know, a Catholic institution of higher learning its stance on abortion is that of the Roman Catholic Church. Out of great respect for this view and for the University, we feel it incumbent upon us to urge as strongly as we can that nothing contrary to this view in these articles can be attributed to Duquesne.

Abortion is a highly controversial subject. All across the country, the issue of abortion is causing people to mobilize in a manner reminiscent of the 1960s and other periods of social consciousness. It is, perhaps, the most polarizing issue of the day. It has divided families and has become part of the political arena. Seats are won and lost on this issue alone. One politican in California was even excommunicated for her pro-choice stand .

Newspapers are filled with stories of marches and speeches. Television and movies have been quick to add abortion to their storylines. George Bush has made his anti-abortion sentiments well-known. It is curious, though, that Barbara Bush has said that the Bush women are pro-choice.

Attempts at categorizing abortion has evidenced the difficulty our highly varied society has in coming to some kind of agreement on it. Some have asserted that abortion is a women's issue, a children's issue, a religious issue or an issue of privacy.

And this is only the beginning of the problem. The number of classifications make it easy to understand why there are so many diverse stands on abortion, though most tend to side with either the pro-life or the prochoice movement.

People from all walks of life struggle with this issue every day. Not least

among those are college and university administrators and students.

Catholic colleges and universities are not immune to this dilemma. According to a recent issue of The Chronicle of Higher Education, this problem is widespread among Catholic higher institutions. In the article "Abortion Dispute Pits Principle Against Principle at Many Catholic Colleges and Universities," abortion has brought in to dispute "what advertising is appropriate for student newspapers, who may speak on the campuses, and whether beliefs about abortion are a legitimate litmus test to use in hiring faculty members." Supporting this statement is the following list of events at Catholic institutions: -(University of San Diego) The president of the University was pressured to dismiss the dean of the law school because she is pro-choice.

-(Marquette) The editors of the student newspaper, the Tribune, were suspended and the business editor was fired, for running a pro-choice rally advertisement.

-(Georgetown) The editors of the student newspaper, The Hoya, halted publication after the administration banned the publication of an oncampus pro-choice rally.

-(Loyola, Chicago) A "women's issues group" was barred from distributing contraceptives and pro-choice literature.

-(Catholic) Students were barred from forming any pro-choice groups on campus and from having Molly Yard (the president of NOW) speak on campus .

Some students even threatened to bum down the student newspaper "after it ran an advertisement paid for by NOW."

Santa Clara University and the University of San Francisco Law School were also mentioned in this article.

The issue of abortion is obviously taking its toll on our colleges. For this reason, Juris is grateful for the opportunity to explore this controversial subject.

The major difference between what happened at these other institutions and what Juris is doing is that Juris never attempts to take a stand on this issue. We merely seek to provide some of the various viewpoints. The people getting the press are usually at the opposite ends of the spectrum: pro-

life or pro-choice. But what about people in the middle?

Can there really be a "middle"? At least two "middle" positions exist.

Those who really do not know how they feel about abortion and the "exception" position. The "expcetion" position can be illustrated in this way : "I am pro-life, except in cases of rape, incest, spousal abuse or if the life of the mother is in danger:' "I am pro-choice, except in cases where the people want to use it as a means of sex determination or as birth control :'

Many find this type of position to be inconsistent. But, then again, there are many inconsistencies in the abortion issue, as you are sure to note when you read these articles. Perhaps, this may explain why there are people who do not know how they feel about abortion. Even though the pro-life and pro-choice activists may get the most media attention, the majority seem to fall somewhere in between.

Some of what has been printed here may offend some, but that is not our intention . This issue cannot be ignored. Those in the law must be aware of the legal ramifications and consequences of the decisions made in court. This is no exception. We hope the questions and facts we raise will cause you to question your own views.

In fact, we encourage responses to this issue. If received in time, we plan to print some of the responses in issue No.4.

There are also three articles in Juris not on the topic of abortion. Prof.

Schiffhouer's article on capital gains is sure to raise a few eyebrows. Chris Ferry, with the assistance of Professor Mark Yochum, wrote an interesting and informative article about the innovative solution used by Mellon Bank to revive their troubled business.

Deanna Heasley's article on insider trading is the type we all wish we had when studying for the corporations final. We also extend a special thanks to Prof. Ricci for the vast amount of time that he invested in this article. We also would like to welcome Mike Silver to the Recent Decisions team .

His first effort rates high with us.

Pamela J. Castrucci

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It is absurd to say that pleasure, or any

L IF E •• "I will give no deadly medicine to anyone if asked, nor suggest such counsel, and in like manner, I will not give to a woman a pessary to produce abortion:' Hippocratic Oath. This statement is part of the Hippocratic Oath which doctors have taken for centuries as a moral standard governing their work as physicians. These lofty words are framed and hanging in the halls of countless doctors' offices and hospitals . . . the very places where millions of innocent lives are taken yearly. How is it that doctors and nurses reconcile the idea of saving lives with the techniques for destroying them? Who places these lives in such compromising positions? We, the People.

The question that we must face as a society and as individuals is not whether we have a right to do what we please with our bodies or a right to choose; but, rather, whose rights are tantamount? We have all tactfully tried to address ancillary issues but have skirted the main issue; afraid of the answer, afraid of the consequences.

The only question needed to beasked is: When does life begin? Once this is answered and understood, all other subordinate issues become moot.

Today, biologists and philosophers acknow ledge, as did Aristotle, that one of the principal signs of organic integration is that the organism can take in nutriment and, by digestion or other metabolic processes, convert it into the material and the energy constituting the entire organism. Aristotle, De Anima II, 4 :41523-24,4169. When does an organism's metabolism begin to function? When does life begin to live on its own, independently, dependent solely on its environment for nutrients? On the day of its concep4

tion? On the day its mother's ovum was fertilized?

If food and warmth were made available to the dead for six weeks, there would be neither the slightest restoration of function, nor the arrest of decay and disintegration . On the other hand, when food and warmth are made available to the human conceptus for six weeks, a visible brain develops with detectable brain waves; a few more weeks of feeding permits consciousness; after a few more months smiles and protests are noticed; and so on, until there is viable human life - perhaps even a future philosopher ...

When we discuss the physiological facts which govern human life, we are talking about natural law. When philosophers discuss natural law, they are talking about the fact that there is a reality, whether one personally likes it or not. Natural Law is largely a philosophical view of law that was intended to denote a system of rules and principles for the guidance of human conduct which, independently of enacted law, might be discovered by man. These rules of human conduct were seen as promulgated by God solely through human reason .

See, Black's Law Dictionary 925 (5th ed .

1979). Pro-abortionists know and accept Jeremy Bentham's guiding principle: "pursue the greatest good for the greatest number." Jeremy Bentham, A n Introduction to the Principles of Morals and Legislation (1789: ed . J. H .

Burns and H . L. A. Hart, New York and London: Methuen, 1982), para .

13, noted (added by Bentham in 1822) .

For philosophers, that idea is a nonsensical proposal ... Supporters of abortion know that, even by itself, the idea of maximizing good is irrational.

other single good, is the only good .

Philosophers know that utilitarianism systematically loses sight of individual people; regrettably, aggregates, not individuals, matter. This critique of utilitarianism is advanced in John Rawls, A Theory ofJustice (Cambridge: Harvard University Press, 1971), 22-24, 27, 181, 183, 187; Robert Nozick, Anarchy, State and Utopia (Oxford: Blackwell, 1974),32-22; H . L. A. Hart, "Between Utility and Rights," 79 Columbia Law Review, 828, 829-31 (1979), reprinted in Hart, Essays in Jurisprudence and Philosophy (Oxford: University Press, 1983), 199-202.

Everyone knows that history and identity began, for each and every one of us, on the day we were conceived.

We inherited a vocation that could be frustrated only from external sources and by some denial of right, which is also a denial of the basic arguments of human reason. For this reason, abortion is one of the most destructive philosophical and practical errors perpetrated by modern culture. John Finnis, Natural Lawand The Rights of the Unborn, in Abortion and the Constitution 115-120 (D. Horan, E. Grant & P. Cunningham ed. 1987).

The right to life has been masked by the lesser right to an abortion. There are three historical misconceptions promulgated and ignorantly followed during the past 17 years: First, the history concerning abortion as incorrectly analyzed by Justice Blackmun in Roe v. Wade, 410 U.S. 113 (1973); Second, the issue: whether unborn children are protected within the United States Constitution; and third, the unaddressed issue of when life begins.

Justice Blackmun devoted more than one half of his majority opinion in Roe v. Wade to the history of abortion . If one can believe The Brethren, a gossipy history of the Supreme Court, Justice Blackmun considered himself an expert on medical affairs and history. (Blackmun served for ten years as general counsel to the Mayo Clinic). Robert Woodward and Scott Armstrong, The Brethren (New York: Simon & Schuster, 1979), 173-175.

Besides being strangely unconcerned about the technical realities of abortion at various points in history, Justice Blackmun's rendition of history was very selective in what he chose to report or stress. Justice Blackmun asserted that abortion was not a crime in the United States before the nine-

tee nth century, that the early laws did not punish abortion before quickening (implantation), and that abortion did not become illegal throughout the United States until after the Civil War. He even appeared to suggest that the process of declaring most abortions serious crimes was not completed until after 1950. Roe v. Wade, 410 U.s. at 139-140. Thus, Justice Blackmun painted a picture of abortion as a socially and legally acceptable procedure in England and America until the recent and brief aberration of the late nineteenth century and early twentieth century abortion statutes .

Careful reading of Blackmun's history of abortion shows that there was never a consensus in favor of abortion . He ignored the proffered explanation of desire to protect unborn humans in

A

tudes to the reality and attitudes today. This is not surprising as Justice Blackmun did not devise his version of history from the original sources .

Rather, he relied on the work of Cyril Means, a law professor and legal counsel for the National Association for the Repeal of Abortion Laws (NARAL), now the National Abortion Rights Action League. Means asserted that the nineteenth century statutes, which prohibited some (and later all) forms of abortion, were merely attempts to protect the health of the mothers since at that time abortions were very dangerous, with one-third or more resulting in maternal death.

Abortions gradually became safer, and by 1940 an early abortion was apparently safer than childbirth .

Means, The Law of New York Concerning

developments in medical technology for performing abortions.)

From 1200 to 1600, jurisdiction over abortions was usually relegated to ecclesiastical courts, as were other matters which today pass without comment as the proper subject of secular law. When occasional abortion cases did come before royal courts, the acts were considered wrong, but offenders went unpunished . See The Twinslayer's Case, YB. Mich . 1 Edw. 3, £'23, pl.28 (1327); or see generally, Dellapenna, The History of Abortion:

Technology, Morality, and Law, 40 U.Pitt . L.Rev. 359, 366-367, 379-389 (1979). The second phase of abortion laws lasted from 1601 to 1803. The laws developed in the common law courts to displace those of the church courts were, for all purposes, the same as

RIG H T

favor of a view to protect the life or health of mothers. Joseph Dellapenna, Abortion and the Law, in Abortion and the Constitution 140 (D. Horan, E. Grant&P. Cunninghamed .

1987). According to U.S. Surgeon General C. Everett Koop, M.D., just the opposite is true concerning abortion as a viable alternative to protect the mother's health . "Protections of the life of the mother as an excuse for an abortion is a smoke screen . In my 36 years of pediatric surgery, I have never known one instance where the child had to be aborted to save the mother's life. 1£ toward the end of the pregnancy complications arise that threaten the mother's health, the doctor will either induce labor or perform a Caesarean section . This intention is to save the life of both the mother and the baby. The baby's life is never willfully destroyed because the mother's life is in danger."

In short, Blackmun provided no method to compare the reality of abortion and the consequent historical atti-

Abortion and the Status of the Foetus, 1664-1968: A Case of Cessation of Constitutionality, 14 N.YL.F. 411 (1968), cited three times by Justice Blackmun; Means, The Phoenix of Abortion

Freedom: Is A Penumbral or Ninth Amendment Right about to A rise from the Nineteenth Century Legislative Ashes of a Fourteenth-Century Common-Law liberty? 17 N.Y.L.F. 335 (1971), cited four times by Justice Blackmun .

Strangely, Blackmun repudiated the Means thesis in Doe v. Bolton, 410 U.S. 179, 190-191 (1973) . This explains the tentative tone of Justice Blackmun's version of history, which consisted mostly of rambling and merely expressed theories and doubts without reaching any particular conclusions.

What was the actual history of abortion? Anglo-American law relative to abortion has gone through four phases. (Each stage was shaped, in part, by the evolution of social and legal institutions in England and the United States and, in major part to

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before . 1 W. Blackstone, Commentaries on the Laws of England 129-130 (1765); 4 W. Blackstone, Commentaries 198 (1765); M. Hale, History of the Pleas of the Crown 429-433 (1736); and W. Hawkins, Treatise of the Pleas of the Crown 80 (1716) . The third phase opened with the enactment of Lord Ellenborough's Act in 1803. This was the first comprehensive Crimes Against the Person Act in English law.

It included the first statutory prohibition of abortion in English or American law, prohibiting all abortions by drugs or poisons and providing for the death penalty if the woman was "quick with child." Further acts followed to gradually extend the scope of statutorily prohibited abortions gradually until, by 1861, all abortions by any means and for practically every purpose were criminal. A similar course was followed by legislatures in the United States, beginning with Connecticut in 1821. By 1860, 85% of the population lived in 75% of states prohibiting abortion . See generally, 5

Dellapenna, supra, at 389-407, 429-430 and Offenses Against the Person Act, 24 & 25 Viet.c.l00, ยง58-59 (1861) . By 1940, the last phase arose with the development of anesthesia, antiseptics, and antibiotics which made early abortions safer than carrying the child to term and giving birth. Development of greater employment opportunities for women and the necessity of child care created greater incentives for women to want abortions; simultaneously, the improved technology made the procedure safe and relatively painless. Under these circumstances, the elimination, by repeal in England in 1967 and by the Supreme Court of the United States in 1973, ushered in the present phase of almost complete freedom for women to abort. The abortion Act of 1967, 15 & 16 Eliz . 2, c.871967 (repeal of abortion prohibitions); Roe v. Wade, 410 U.S. 113 (legalizing abortion) .

Supposedly, Justice Blackmun's judgment as to what he saw as the essentially technical question of when life begins was condemned as incoherent when it was written because it lacked technological (medical) sophistication. Technical developments since then have forced such careful scrutiny.

See Akron, 462 U.S. at 455-458 (O'Conner, J., dissenting) . Critics note that Blackmun's opinion fails because he distorted history and because he made the intellectual leap from the erroneous factual conclusion that abortion laws were not enacted to protect the life of the fetus, to a normative conclusion that these laws could not serve such a purpose . Even the defenders of Roe v. Wade invariably begin by apologizing for Justice Blackmun's opinion, which they then ignore. See, e.g., Heyman & Barzelay, The Forest and the Trees: Roe v. Wade and Its Critics, 53 B.u.L.Rev. 765 (1973); Perry, Abortion, The Public Morals, and the Police Pawer: the Ethical Function of Substantive Due Process, 23 U.CL.A.L.Rev. 689, 690-692 (1976); and Tribe, Fonvard: Taward a Model of Roles in the Due Process of Life and Law, 87 Harv. L.Rev. 1,2-5 (1973). Joseph w.

Dellapenna, Abortion and the Law: Blackmun's Distortion of the Historical Record, in Abortion and the Constitution: Reversing Roe v. Wade Through the Courts (1987).

The Supreme Court has not precluded states from declaring that, in non-abortion contexts, human life begins at conception. In Roe v. Wade, the court stated that given the then 6

current knowledge available, the judiciary was "not in a position to speculate" as to when human life begins. Roe at 159. Constitutional prohibitions only come into effect when a state attempts to justify its regulation of abortion by adopting a particular theory of when life begins. Akron v.

Akron Center for Reproductive Health, Inc. 462 U.S. 416 (1983).

In [a] brief as amici curiae in su pport of appellant, in Websterv. Reproductive Health Services, No. 88-805, attorney James J. Lynch argued that a fetus is a person in the constitutional sense by virtue of the term posterity in the Preamble of the Constitution. The Court in Roe v. Wade, held that a state had no right to regulate abortions in the first trimester of pregnancy in view of the right to privacy of the mother; a state

""When does human life begin? . . . what is the legal status accorded a human being existing as an embryo?" could provide some regulation in the second trimester; and a state had a right to full regulation in the third trimester. In reaching this result, the Court noted that Texas had failed to demonstrate where in the Constitution the fetus was a person in the constitutional sense. Id. at 157-159. A reading of the Petition, Response, and Briefs on the merits by the parties and amicus in Roe v. Wade, shows the primary focus of the argument was on the term "person" as found in the 5th and 14th Amendments of the Constitution. 75 Landmark Briefs and Arguments of the Supreme Court of the United States. The opinion itself does not address the Preamble, nor any of the terms found in the Preamble.

The Court had used the term "posterity" on one prior occasion, United States v. Cruikshank, 92 U.S. (2 Otto) 542, 550 (1876), but has never before been called upon to define the term, and to, or for, whom it was intended to include. Since posterity, as it appears in the Preamble, has not been defined by the Supreme Court, one must turn to what the framers understood it to mean at the time the Constitution was adopted in 1789.

Posterity was understood [by the framers] at the time of adoption [of the Constitution] to include the descendents collectively of any person, which included all future generations. OED, op. cit. Accord, Breckenridge v. Denny, 71 Ky (8 Bush.) 523. The framers used the term posterity without reservation.

At common law, it was understood that fetuses were members of future generations. The fact that a fetus has rights was probably recognized as early as 322 BC Aristotle, Politics, VII 1335B, 24-26; Acquinas, Summa Theologiae, 1, q. 76, 1. 5 and q. 118, a. 2; Noonan, Contmception, 86-88 (Harv. U. Press, 1965). The Old Testament provided a remedy for anyone causing a miscarriage. 21 Exodus 22.

As the Preamble appears to confer rights upon "posterity" equal to "ourselves;' it is necessary to determine whether the framers intended that the rights be vested. [Of the 39 signers of the Constitution, at least 8 were lawyers, 2 appeared to study law extensively and 2 more were, or became, judges.] Hence it is fair to assume that the framers were not unaware of what they were doing, and how to secure what they wished to do.

See genemlly, Encyclopedia Britannica (1971) (Comparison with signers Volume 22, p. 695)].

It is clear that states have always determined the point at which unborn children are entitled to the protections of state law. For example, most states provide children a cause of action in tort for prenatal injuries inflicted by a person other than the child's mother.

See, W. Prosser, Handout on the Law ofTorts, 337 ยง55 (4th ed . 1971) ("when actually faced with the issue for decision, almost all the jurisdictions have allowed recovery even though injury occurred during the early weeks of pregnancy, when the child was neither viable nor quick") . See also, e.g.

Bonbrestv. Kotz, 65 ESupp. 138, 140-42 (D.C 1946) (child could maintain a cause of action for injuries sustained while in utero in part because "a child en ventre sa mere is not only regarded as [a] human being, but as such from the moment of conception - which it is in fact"); Kellyv. Gregory, 282 App. Div. 542, 543-44, 125 N.Y.S. 2d 696, 697 (1953) (child may recover for previability injuries in part because "what we now know makes it possible to demonstrate clearly that separability begins at conception").

Can a tort be inflicted upon a being

simultaneously with its conception?

The law of torts has been hesitant in recognizing what medical science has known, that life begins at the moment of conception, and what theology has longer thought, that from the moment of conception every human being has the rights of a "person." Blackstone wrote in contemplation of the common law that a child's life begins when it "is able to stir in the mother's womb:' Cooley, Blackstone's Commentaries.

Zepeda v. Zepeda, 41 Ill. App. 2d 240 (1963).

This question was dealt with in part in Renslow v. Mennonite Hospital et al.

367N.E.2d 1250 (1977). The Supreme Court of Illinois addressed the issue: Does a child, not conceived at the time negligent acts were committed against its mother, have a cause of action against the tort feasors for its injuries resulting from their conduct? The Court held that several Illinois cases allowing relief to an infant for injuries incurred in its previable state made it clear that a defendant may be held liable to a person whose existence was not apparent at the time of his act.

Wintergreen v. National Cooperage, 361 Ill. 95, 103 (1935). The court opined that it is therefore illogical to bar relief for an act done prior to conception where the defendant would be liable for this same conduct had the child, unbeknownst to him, been conceived prior to his act. Therefore, there is a right to be free from prenatal injuries foreseeably caused by a breach of duty to the child's mother. In the 18th century, Blackstone observed: "[F]or wherever the common law gives a right or prohibits an injury, it also gives a remedy by action; and, therefore, wherever a new injury is done, a new method of remedy must be pursued:' (3 W. Blackstone, Commentaries *123.) The Court opined "[ w]e have held that an action to recover for personal injuries resulting from a sudden traumatic event accrues when the plaintiff first knew of his right to sue, i.e. at the time when the injury occurred. The fact that there is a gap between the wrongful act and the time of injury will not bar the action. Here the wrongful act allegedly took place before conception, but injury attached at the moment of conception. It was only then when the cause of action arose."

Many states also provide a cause of action to parents for the wrongful death of their unborn children. (i.e., the Rhode Island Supreme Court held

such in Presley v. Newport Hospital, 117 R.I. 179,365 A.2d at 754.) As recently as 1983, the Missouri Supreme Court similarly held the term "person" as u sed in Missouri's Wrongful Death Statute "includes the human fetus en ventre sa mere" stating that its conclusion was "supported by a strong positive trend among other jurisdictions holding that the fetus is a 'person; 'minor' or 'minor child' within the meaning of their particular wrongful death statutes." O'Grady v. Brown, 654 S.W.2d 904,910 (Mo.banc 1983).

Most states also provide to, or recognize in, unborn children certain rights under property law. These rights date back to English common law which acknowledged that an unborn child was "entitled to all the privileges of other persons." Thelluson v. Woodford, I~

I will not give to a woman a pessary to produce abortion."

Hippocratic Oath ••

31 Eng. Rep. 117, 164 (Ch. 1798). The American states adopted the English common law and recognized the unborn child from the moment of conception with respect to numerous property rights. For example, an unborn child may receive an income interest prior to birth. Industrial Trust Co. v. Wilson, 61 R.I. 169, 200 A. 467 (1938). He or she may be a tenant in common with his or her mother. Biggs v. McCarthy, 86 Ind. 352 (1882). He or she is entitled to participate in damages received from the wrongful death of his or her father. Boise Payette Lumber Co. v. Larsen, 214 F.2d 373 (9th Or.

1954); Herndon v. St. Louis & S.F.R. Co., 37 Okla. 256, 128 P. 727 (1912). Unborn children are also recognized from the moment of conception as heirs to an estate, whether by devise or intestate succession. Biggs v. McCarthy, supra; Deal v. Sexton, 144 N.C. 157, 56 S.E. 691 (1907). Certain of these common law rules have been codified. For example, the Uniform Probate Code provides that unborn children are to be treated as though born within the lifetime of the decedent. Uniform Probate Code, §2-108; Uniform Probate Code Practice Manual, p.ll, § 1.11.

Finally, many states provide criminal sanctions for the intentional or

criminally negligent killing of an unborn child. For example, a number of states impose criminal sanctions in the nature of manslaughter for the killing of a viable fetus or unborn quick child. See, e.g. Ark. Stat. Ann. §41-2553 (1947); Cal. Penal Code §187 (West 1970); Fla. Stat. Ann. §782.09 (West Supp. 1983); Mich. Compo Laws Ann. §750-322 (West Supp. 1983); Nev. Rev. Stat. §§200.210, 200.220 (Supp. 1983); New York Penal Law §§ 125.00, 125.05 (McKinney Supp. 1983); Okla. Stat.

Ann. tit. 21 §§ 713, 714 (West Supp.

1983).

Recently, in State of Minnesota V. Merrill, C7-89-766 (Minn. 1990, en banc) (filed January 19, 1990) a Minnesota fetal homicide law was upheld. The case involved a defendant that has been indicted for first and second degree murder of a woman, and first and second degree murder of her "unborn child." The question before the Supreme Court of Minnesota was: Do the unborn child homicide statutes violate the Fourteenth Amendment of the United States Constitution as interpreted by the United States Supreme Court in Roe V. Wade, by failing to distinguish between viable fetuses and nonviable fetuses and embryos, and by treating fetuses and embryos as persons? The two statutes, enacted by the Minnesota Legislature in 1986, followed precisely the language of their murder statutes, except that "unborn child" was substituted for "human being" and "person:' Minn. Stat. §§609.2661(1) and .2662(1) (1988) ("Murder of an Unborn Child in the First Degree" and "Murder of an Unborn Child in the Second Degree") The term "unborn child" is defined as "the unborn offspring of a human being conceived, but not yet born."

Minn. Stat. §609.266(a) (1988). The defendant was claiming that the statutory classification, by not distinguishing between viable and nonviable fetuses, exposed him to conviction as a murder of an unborn child during the first trimester of pregnancy, while others who intentionally destroy a nonviable fetus, such as a woman who obtains a legal abortion and the doctor who performs it, are not murderers.

The Court held that a defendant who assaults a pregnant woman causing the death of the fetus she is carrying destroys the fetus without the concent of the woman. This is not the same as the woman who elects to have her pregnancy terminated by one legally authorized to do the act. The 7

fact that Roe v. Wade protects the woman's right to this choice does not protect, much less confer on, an assailant, a third-party unilateral right to destroy the fetus. The state's interest in protecting the "potentiality of human life" includes protection of the unborn child, whether an embryo or a nonviable fetus, and it also protects the woman's interest in her unborn child and her right to decide whether it shall be carried in utero. It was not necessary to prove, nor does the statute require, that the living organism in the womb in its embryonic or fetal state be considered a person or human being.

People are free to differ or obstain on the profound philosophical and moral questions of whether an embryo is a human being, or on whether or at what stage the embryo or fetus is ensouled or acquires "personhood:' Criminal liability requires only that the genetically human embryo be a living organism that is growing into a human being. Death occurs when the embryo is no longer living, when it ceases to have the properties of life.

Although the Supreme Court of Minnesota distinguished the right of a woman to elect to terminate her pregnancy and the state's right to protect unborn life from unauthorized fetal destruction, both views expressed in Minnesota v. Merrill can be reconciled. The Supreme Court in

Webster v. Reproductive Health Services, 109 Sup.Ct .Rep.3040 (1989) said that "nothing in the Constitution requires States to enter or remain in the business of performing abortions." In fact, the Court "did not see why the State's interest in protecting potential human life should come into existence only at the point of viability." It can be reasoned that the interest in protecting potential life would greatly increase once the "right to privacy" enumerated in Roe would be limited.

In Roe v. Wade, the Court recognized that the State has "important and legitimate" interests in protecting maternal health and the potentiality of human life. Roe at 162. It is therefore not surprising that states have begun the processes of determining what their public policies are, as well as answering the age old question of when life begins.

In September, 1989, (Davis u Davis, et ai, 1989 Tenn. App. LEXIS 641, *15), a Tennessee court, in a case of first impression, dealt with the following issue: When does human life begin?

More specifically, "What is the legal

8

status to be accorded a human being existing as an embryo, in vitro, in a divorce case in the state of Tennessee?"

The court came to the following finding of fact: Each human has a unique beginning which occurs at the moment of conception.

The court then proceeded to outline the order of human development from egg to a birthed individual. Such an outline is needed to break down the walls of ignorance that has kept society in the dark concerning the realities of human existence. When an egg is fertilized by the sperm, the entity becomes a zygote; and when the zygote divides, it is an embryo.

" R ight now, while people are trying to decide when life begins, abortion is destroying life it is murder."

When the first cell exists, all the "tricks of the trade" to build itself into an individual already exists. Shortly after fertilization at the three-cell stage, a"... tiny human being ..." exists. fertilization then results in ". . . the most specialized cell under the sun ..."; specialized from the point of view that no other cell will ever have the same instructions in the life of the individual being created. As soon as he/she has been conceived, a person is a person. Scientifically, DNA manipulation of molecules of human chromosomes reliably proves cell differentiation. This relatively new technique opens a tiny window to the world to see and be aware of the most intimate and intricate details of man from his very beginning. Andrews v. State of Florida, 533 So. 2nd 841, Dist. Ct. App. FI. (1988) (Reviewed Denied 1989).

Although doctors argue that an embryo is not a being because he or she has no (observable) organs or nervous system or no body parts, a person is a person. Upon fertilization, the entire constitution of the person is clearly, unequivocally spelled-out, including arms, legs, nervous systems and the like. Upon inspection via DNA manipulation, one can see the life codes for each of these otherWise unobservable elements of the unique individual. The life codes for each special, unique individual are resident

at conception. The argument that the human embryo may never realize its biologic potential is speculatively true but it is a hollow argument.

The recent Webster case leaves open the door for a state to establish its compelling interest in protecting even potential human life by legislation declaring its public policy. For example, in Pennsylvania, The Abortion Control Act specifically provides that "[i]n every relevant civil and criminal proceeding in which it is possible to do without violating the Federal Constitution, the common and statutory law of Pennsylvania shall be construed to extend to the unborn the equal protection of the laws and to further the public policy of this Commonwealth encouraging childbirth over abortion:' 18 Pa.c.S. ยง3202(c).

The Tennessee Court understood that both Roe and Webster dealt with questions of the constitutionality of abortion statutes and the Court's decisions in those cases have a profound effect on the state's compelling interest in the protection of human life, but only as it deals with the abortion issue. Webster may possibly leave the question open of whether a state may pass a constitutionally sound statute regulating IVF (In Vitro Fertilization) transactions since fertilization/conception is the commencement of human life. The Webster Court also declined consideration of the Preamble issue, stating it had no effect or bearing on the Webster issues, thus leaving unsettled whether the Preamble provisions passed relevant constitutional scrutiny.

The judgment of the Tennessee Court was that the tem porary custod y of the parties' seven cryogenically preserved human embryos be vested in Mrs. Davis for the opportunity to bring these children to term through implantation. And final custody and related issues were reserved to the Court for further consideration at such time as one or more of the seven cryogenically preserved human embryos are the product of live birth .

The answer then to the question: When does life begin? ... human life begins at the moment of conception; Conception: ". . . beginning . . ."

(Webster's New Collegiate Dictionary, Second Edition).

In conclusion, this writer believes that it is now established that independent life begins at conception. See Halley and Harvey, "The Beginning of

Life;' 69 J.Kans.Med .Soc. 384 (1968).

One medical authority has said: "Biologically, as well as ethically, the only logical and satisfactory view of the embryo is to regard it as a human being from the outset." Ollie Cheaney v.

State of Indiana, 259 Ind. 138 (1972).

There is no need to speculate as to when life begins. A baby human is biologically (little) different from a fish, frog or horse. For each, life begins at the moment of conception . Even Roe v. Wade, tacitly recognizes the viability of the child at 28 weeks. With modern science that, too, has dramatically changed. Biologically speaking, human life begins at the moment of conception. 42 Am.Jur.2d, Infants ยง2.

Medical authority has long recognized that the child is in existence from the moment of conception. W. Prosser, Torts ยง55 (4th Ed., 1971). Hollis v.

Commonwealth of Kentucky, 652 S.w. 61.

It would appear that a fetus has all the characterisics of human life : secretion, ingestion, respiration, irritation, and reproduction. A zygote (early fetus) is viable, in contradistinction to the sperm and ovum which are not.

Biology : Observation & Concept by Case & Steirs (1971), pp. 8, 51, 64, 77, 110-122, 141-165, 298-299, 324-329.

Whether or not it can be ascertained at

any point in time that it is human is an absurd proposition; assuming it goes to term, it cannot be anything but human. The fact that a zygote is not viable extrauterine does not negate the fact of life. Life exists in an environment .

Right now, while people are trying to decide when life begins, abortion is destorying life - it is murder. As long as the baby remains in the uterus it will be nourished. It will grow and be delivered at term . If we disrupt that in any way, knowingly and intentionally, we are killing a life. Therefore, we should ask ourselves: Are children things we throwaway?

As we examine the Preamble to the Constitution, we realize that the framers had something definite in mind when they incorporated the term, posterity. This should come as no surprise, for this country was based on religious values. Within that heritage our Constitution was formed. As we search for the answer of when life begins, we can be led to a source on which the Constitution was based: The Bible. "For you created my inmost being; you knit me together in my mother's womb. I praise you because I am fearfully and wonderfully made; your works are wonder-

fu\, I know that full well. My frame was not hidden from you when I was made in the secret place. When I was woven together in the depths of th~ earth, your eyes saw my unformed body. All the days ordained for me were written in your book before one of them came to be." 139 Psalm 13-16

NfV. The questions we face concerning life have already been answered by science and law. It is only now a question of time and of the heart. Human life begins at conception. That is no longer in dispute. It is time to stop throwing our children away, our future, our posterity, and begin protecting them as the framers of our Constitution intended them to be protected .

Edgardo D. Santillan is a third year day student. Ed earned his B.S. in Biology at Oral Roberts University, Tulsa, OK . He is presently a legal intern with the Beaver County District Attorney's Office.

9

Abortion

But

Is Wrong

Should

by Professor Bruce Ledewitz

Remain

The views or opinions contained herein are solely those of Prof. Ledewitz and are not intended to be, nor should they be taken as, representative of the Duquesne University School of Law. For me, the only question in the abortion controversy is whether I will be consistent. Will I support laws banning most abortions? The answer is no, though such laws follow with inexorable logic from my belief about the nature and value of developing human life. I am committed to keeping abortion a legal option. All that remains is to give some sort of account of this inconsistency, if I can.

When was the first day of your life?

By tradition, I su ppose your birthday, the day you were born. But that is because only in the last thirty years have we been able to see and hear the baby before birth. There is nothing about being born that changes the baby. The baby is alive before birth.

But if that is so, what day in the womb was the first day?

The first moment of our existence seems to me to be the union of egg and sperm at conception. That union determines all of our genetic makeup.

From that union to birth to adulthood is a continuum. That ball of cells soon to begin specialization is a developing human being.

I do not mean that a multiplying ball of cells is the same as a baby. It is not necessarily wrong to destroy a developing human being. There can be good reasons for doing so - the endangering of another's life or health, or a family's well being. But because these multiplying cells are the first days of a new and unique human being, destroying them is always a serious matter and not just a private one.

Once this ball of cells does specialize, does become recognizably human, with, for example, a beating heart at four weeks, then justifications 10

Legal for killing what is obviously a young human being are hard to imagine.

And the more advanced the development the more obvious the wrong of abortion.

What sort of law would logically follow from this position? Abortion, even certain forms of birth control, would be restricted and regulated, though not prohibited. At a very early point, perhaps five or six weeks after conception, almost all abortions would be banned.

That is what I think is the morality of the matter. And the fact that the moral issue is controversial and that there is no such thing as proof of personhood are not what deter me from supporting anti-abortion laws. After all, I support the use of criminal law to protect whales and birds, neither of which are human. I support forcing rich people to pay higher taxes to aid the disadvantaged, though the rich do not agree with the morality of it.

Something else - not privacy, not personhood, not moral controversykeeps me from supporting restrictive abortions laws. The easiest way for me to explain it is to ask if you have ever heard the phrase, "the crisis of unwed fathers"?

American society is so openly discriminatory against women that we do not think about it. It seems to us "natura!." In all important respects, men and women are equivalently able to raise a child. Yet in this society the significant burdens of children are placed on the woman.

To see this, imagine the example of a pregnant woman who is young, unmarried and poor and decides to give her baby up for adoption. In that case, for nine months, her life is totally

disrupted. She will drop out of schoo!.

Even in this modern day, her pregnancy will ostracize her. She will be removed from the national honor society. She will experience extreme discomfort. Her body will not be her own. And after she nourishes and protects this developing human life, and after the excruciating pain of childbirth, she will give her baby away to strangers, living with her guilt for the rest of her life.

Meanwhile, what will the father do during this time? He will play ball and get on with his life. The social discipline that would have forced him into marriage has broken down completely. He is not even expected to be supportive, or to be near. The national honor society will make no effort to find out his identity. He is not called on to make any commitment to the girl or to the baby. And, most of the time, he will not.

What if the girl decides to keep the baby? Then as a practical matter, her independent life is at an end. Whether she is rich or poor, but especially if she is poor, she faces two years or so of smothering dependence. She will certainly leave school, if she had been in schoo!. She may have to quit her job.

She faces an endless round of sleepless nights and worries about money.

Later there is the lessened but still burdensome dependence of childhood, of growing up, and then the financial burden of school for her child. We all have hopes and dreams for which we work. For a girl with an unwanted child, these hopes and dreams - law school, a career, enough income to be comfortable are over, or are deferred for so long they are not likely to be realized.

Meanwhile, what of the father? The likelihood is that he will be unaffected altogether. Only a minority of men are ever ordered to pay support for children. Even a smaller minority pay such support. And even if he does pay money, the $50.00 or so a week will not change his life. He will not quit schoo!.

He will still become a lawyer. She, on the other hand, will spend her years working at the check-out line at Giant Eagle.

It is unlikely that the boy and girl will marry. For they probably do not care much for each other. If he offered to do so, she would probably not want him for a husband. Such is the consequence of casual sex.

If they do marry, the burdens of an unwanted child still will not be distri-

buted between them. She will be forced to quit school or her job or interrupt her career. He, sociological studies tell us, will provide no real help in child rearing, married or not.

His job or career, if begun, will not be much affected. If a student, he might have to drop out of school to earn money. But in this society, he will be free to go to school at night. She will not. And when his delayed studies are finally completed, he may divorce his wife, impoverishing her and the child, and giving freedom to himself. He might, of course, be ordered to pay support. But, as study after study shows, divorce cuts the income of women and children and increases the income of men. Men have created a social environment in relation to children and family in which they are free to be irresponsible.

The pattern I describe here is onesided. There are men who do not act this way. I think they are a minority.

And I do not think the women these men love choose abortion.

I agree with many in the pro-life movement that abortion is usually a selfish act. But it is more often the man's selfishness that is greater than hers. Anti-abortion laws do not force custody on fathers. Do not force fathers to change their lives. Do not force fathers to work two jobs. Anti-abortion laws do not take the income and time and energy of fathers for the child. But in effect, a law banning abortion would do all these things to women .

What is abortion in this context but women's self-defense? Abortion is the declaration of independence that men already have and that they practice every day. Abortion is still wrong. But I will not force one partner to bear the burden of an unwanted child. It seems to me too unfair.

There is not much the pro-life movement can do to change all this. The attitude of men toward their children is not easily the subject of public intervention . The manifestations of this attitude - abandonment of family, divorce, resistance to even monetary support - are getting worse. This is why the right to an abortion is proving to be politically popular. A selfish society is not going to saddle itself with unwanted children.

But some actions can be taken. I doubt that society will ever try to force men to become more responsible. But it is possible that society will learn more about the humanity of life in the womb. Since 1973, agrowingconsen-

sus equates a later term fetus with a newborn child. The more we know about fetal development, the more difficult it becomes to destroy this human life. This growth of knowledge will continue. That knowledge may increasingly cause women to view abortion as wrong.

There is a role here for government to play. Government can act to discourage abortion. Not only can steps be taken at the point of pregnancy waiting periods and truly informed consent, for example - but efforts can be made in the schools to acquaint boys and girls with the surprising maturity and independence of the developing human being. Such steps commit the State to one side in the abortion debate. They are aimed at promoting a fundamental change in the way we look at life. But as long as abortion is a legal option, the burden of such actions on women is not great .

One important recognition of the independent life of an unborn child is legal protection . At least in the very late stages of pregnancy, a consensus in society is growing that the life in the womb is a baby and that killing that life is killing a baby. That recognition is important because it is a starting point. The point in pregnancy at which this realization occurs can move back in time.

Recognition of the importance of this human life should be manifested in constitutional protection. A legal effort should be made to define a late stage fetus as a "person" for purposes of the Fourteenth Amendment. This would not forestall many abortions today, for the vast majority of abortions are done at earlier stages of pregnancy. But it would place our fundamental law on the side of developing life. And such a decision would be a guide for the future.

Where Will They With the Supreme Court's decision in Webster v. Reproductive Health Services, 109 S.Ct. 3040 (1989), in the summer of 1989, the floodgates were officially opened for states to create their own guidelines for abortion. Since Webster, activist groups on both sides of the issue have mounted massive campaigns which continuously bombard state legislators with facts and statistics designed to influence their stance on abortion. These campaigns, both emphatically for or against abortion, are placing legislators in a very precarious position. In addition to the inevitable loss of votes for favoring one side over the other, reasons much more compelling than political popu1arity are at the heart of the abortion issue. Arbitrary decisions enacted to law could have a profound effect on the rights of women and their future children and could open a "Pandora's Box" to entertain any legal distortion of these laws that a creative attorney could imagine.

The Webster decision overruled a United States Court of Appeals determination that certain provisions of a Missouri statute were contrary to the Supreme Court's decision in Roe v.

Wade, 410 U.S. 113 (1973). The Missouri statute in question outlines the rights of the unborn, specifically stating that life begins at conception . Missouri Revised Statutes §§1.205.1(1),(2),

Draw Th e Line?

1.205.2(1986) . By accepting the premise that life begins at conception, new areas of the law must be created to address the rights of the fetus. By determining that life begins at birth, the rights of the unborn are left completely unrecognized and unprotected. By setting a standard somewhere in between, rights of both mother and child are affected. Regardless of the conflict, it is clear that a line must be drawn.

One area of the law that would undoubtedly benefit by a determination that life begins at conception centers around human life created outside the mother's body. With the discovery of the process known as in vitro fertilization, the mother's womb is no longer the exclusive place to conceive life.

Eggs can be fertilized in test tubes and cryogenically frozen until the mother wishes to have one placed in her womb. Questions surrounding the

(Continued on Page 12) 11

legal status of the frozen embryo have been raised since the conception of the process but the subject was relatively unknown to the American public until a divorce action in Tennessee received nationwide attention.

Mary Sue and Junior Davis were engaged in divorce proceedings when an interesting question arose as to the disposition of their seven cryogenically frozen embryos. Mr. Davis considered them to be "pre-embryos;' not human life, and, therefore, property subject to distribution. Mrs. Davis, on the other hand, considered them to be living beings and deemed them her children.

A decision was made late in September of 1989 by a Blount County Tennessee Circuit Court Judge. He ruled that the genetic blueprint of a human being is determined at conception giving each embryo its own distinct human characteristics. The judge decided, therefore, that life begins at conception. The embryos were not to be treated as property and custody was awarded to their "mother." With the granting of custody to Mrs. Davis the court added that she would be free to attempt implantation of the embryos. Davis v.

Davis, No. E-14496, 1989 Tenn. App. LEXIS 641. Mr. Davis' attorney has stated that he will appeal the decision.

The National Law Journal, Oct. 2, 1989.

The question surrounding the frozen embryo, although reasonably new to the American public, was settled in Australia several years ago. A recent article in the Wall Street Journal described a case of two "orphaned" embryos which led up to the eventual creation of laws to protect the rights of embryos in Australia. A California couple went to Australia to undergo the process of in vitro fertilization.

When they returned to the United States, they left behind two frozen embryos. Although the couple planned to return to Australia to have an embryo implanted in the mother's womb, their plans were interrupted when the couple died suddenlx in an airplane crash. The "parents' died intestate leaving an estate in excess of eight million dollars. The question facing Australian officials was whether these two frozen "orphans" were entitled to share in the estate. Wall Street Journal, Sept. 26, 1989.

Recognizing established law both in the United States and in Australia that beings in gestation are entitled to inherit, and responding to public out12

cry to preserve the embryos, legislators passed the Infertility Act. This act officially recognizes that the human embryo has basic human rights including a right to life. It provides for governmental protection of the organism plus care and maintenance for five years after fertilization.

The act also enumerates measures to be taken in the event of parental custody disputes and provides proced ural guidelines for the "adoption" of abandoned embryos.

In the United States, at least one state has a similar statute addressing the legal status of an in vitro fertilized embryo. The Louisiana Civil Code identifies the frozen embryo as a separate juridical person. It provides guidance for ownership rights to the organisms and imposes a duty on

physicians and health care workers for proper care. Louisiana Civil Code R.S. 9:121 et seq.

Many states win probably follow Louisiana by creating statutes giving some type of legal status to frozen embryos since the topic of embryo rights is increasingly important in the abortion debate.

Another area of the law that hinges on a state's determination of rights of the unborn concerns the criminal prosecution of pregnant alcoholics and drug users for harm caused to the fetus by the addictions of the mother.

With the increasing drug problem in the United States, more unborn lives are in jeopardy of being denied a right to life when their fragile body systems are invaded by drugs in the mother's bloodstream. One pregnant woman in Washington D.c. was sent to jail by a Superior Court judge who became aware of the mother's drug habit while

she was being charged with check forgery. The judge sent the mother to jail in order to protect the fetus from drug abuse. She was released shortly before the baby was born. ABA Journal, August 1989.

Statistics from the National Association for Perinatal Addiction Research and Education show that as many as 375,000 newborns each year may be affected by substance abuse. ABA Journal, August 1989, p.14. This alarmingly high rate has prompted prosecutors to pursue criminal charges against mothers-to-be to, in effect, "police" the pregnancy terms of abusing mothers. The problem, however, is that although many bills are being introduced in state legislatures to criminalize certain aspects of a woman's pregnancy, few have been adopted as law. As a result, prosecutors are having a difficult time in choosing the correct law in order to properly charge the mother with a violation. Pregnant women have been charged with involuntary manslaughter, child abuse, child neglect, delivering controlled substances to a minor and even violations of child support laws.

The lack of statutes dealing with this problem has lead prosecutors to realize very quickly that judges are not taken in by creative attempts to bend existing laws to include harm to a fetus. In 1987, a Los Angeles Municipal Court judge dismissed charges brought against Pamela Rae Stewart for violating state support laws. Due to a delicate medical condition, Stewart was advised by her doctor to avoid street drugs and a variety of other substances and activities during her pregnancy. She apparently ignored doctor's orders as amphetamines were later discovered in her newborn baby's system. The child did not survive. Prosecutors alleged that she failed to obey child support laws in contributing to her son's death by ignoring her doctor's orders. The judge ruled that the state had charged her improperly. Los Angeles Times Feb. 27,198Z In May of 1989, an Illinois mother was charged with delivering a controlled substance to a minor. Cocaine was found in her child's bloodstream shortly after it was born. Prosecutors alleged that the "delivery" of the cocaine occurred through the mother's umbilical cord. A grand jury disagreed and refused to indict her.

Wall Street Journal, May 30, 1989. A

woman in Florida, however, was convicted of a similar offense late in August 1989. After being found guilty of delivering drugs to her baby, the mother was sentenced to fifteen years probation and ordered to successfully complete a drug treatment program.

New York Times, Aug. 26, 1989. With this case, it seems that the interest of the state in protecting the life of a fetus is emerging as a fierce opponent of a woman's right to control her own body.

Various groups strongly object to the criminalization of pregnancy.

Critics fear that such measures, if enforced by state law, will discourage women with drug and alcohol problems from seeking proper pre-natal care. Others are afraid that the threat of prosecution will encourage more abortions by women fearing that carrying their child to term will subject them possibly to criminal sanctions or loss of custody.

Where to draw the line between fetal rights and a woman's right of privacy over her own body is a powerful question emerging from the abortion debate. If mothers-to-be are being proscuted for drug and alchol addiction, should not measures be taken to protect the fetus from cigarettes or caffeine? See AHA Journal of Hospital Law, Vol. 21 No.7 p.153, July, 1988. Opponents say that such action by the state will open a "Pandora's Box" subjecting a woman to criminal sanctions for not providing the perfect womb. ABA Journal, Aug. 1989, p.39.

Several times within the past few years, courts have been asked to place the state's interest in protecting the fetus above a woman's right to refuse consent to surgery when it is shown that the life of the fetus will be greatly harmed without the surgery. Courts are being asked to exercise increasing autonomy over the private right a woman has with respect to her own body. Court ordered caesarean sections are becoming more prominent even though most of the cases are completely unreported. See The Judge in the Delivery Room: The Emergence of Court Ordered Cesareans, 74 Calif. L.Rev. 1951.

The first reported case was in 1981.

In Jefferson v. Griffin Spalding County Hospital, 247 Ga. 86, 274 S.E.2d 457 (1981), the Supreme Court of Georgia affirmed an order by the Butts County Superior Court authorizing a caesarean section to be performed on a pregnant woman. Doctors determined that because the birth canal was blocked, the baby would not sur-

vive a natural birth. The mother, based on religious reasons, refused to consent to the caesarean section. The Superior Court, in granting the order, stated that the fetus, then thirty-six weeks old, was considered viable under Georgia law.

The state, therefore, had a compelling interest in prohibiting the arbitrary termination of its life.

In 1986, a Washington D.c. Superior Court granted a court order authorizing a caesarean section when it was deemed by physicians that the fetus, due to the abnormally long labor of the mother, was placed at risk of death or severe brain damage. The mother in this case also would not consent to the operation. In Re Maydun, 114 Daily Wash. L.Rptr. 2233 (D.C. Super.Ct. July 26, 1986).

In 1987, the Court of Appeals of the

District of Columbia filed an opinion outlining its reasoning in affirming a decision by the Superior Court to grant a court order authorizing a caesarean section. This decision proved especially difficult for the Court in light of the tragic circumstances surrounding the case. In Re A.C., 533 A.2d 611, 539 A.2d 203. The mother in this case was diagnosed in her twenty-fifth week of pregnancy as having terminal cancer. Conflicting testimony failed to establish whether the mother had granted or refused consent to the operation. Furthermore, given that the pregnancy was only it its twenty-fifth week, there was considerable doubt that the fetus would be able to survive outside of the mother's womb. The operation was performed in accordance with the court order. Both the mother and the child failed to survive.

When courts are asked to decide

between the privacy rights of a mother and the interest a state has in the preservation of a fetus, they are placed in a very awkward position. Courts have long held that consenting adults in most circumstances have the right to refuse necessary surgery, yet should a consenting adult have the right to give her consent for the fetus she is carrying? The Court of Appeals,. in In Re A.C. stated that it is a difficult task to balance a woman's interest in her own bodily integrity with the state's interest in a potential human life. This, the Court felt, was an undertaking that should appropriately be in the hands of the legislature. Laws stating a position that is to be taken in the event of such an occurrence would relieve some of the pressure that is placed on courts when these emergency requests are sought.

The Webster decision places the authority with the states to officially make their own determination of when life begins. Until such decisions are made, many lives are left hanging in the balance, but after these decisions are made, many lives may be terminated. Civil libertarians say that forced caesarean sections violate a pregnant woman's basic right of privacy, bodily integrity and selfdetermination. By consenting to become pregnant, they argue, a woman does not waive her rights as a citizen or a human being. Critics of court ordered caesarean sections analogize this issue to the improbable scenario in which a court would order a father to donate a kidney to a dying daughter. As unlikely as this may seem, however, a suit was filed by a mother in Roanoke, Virginia early in 1990 to force a father to be a donor of bone marrow to save the life of their infant daughter. Pittsburgh Press, Jan. 21,1990.

It is clear that states must strike a balance between the rights of a pregnant mother to bodily integrity and the interest of state intervention when a fetus is at risk. This impossible task must be undertaken responsibly and promptly to relieve the tremendous burden that is on the courts when they are forced to interpret conflicting views of morality. State legislators must soon draw the line. We can only speculate as to where that line will be.

Catherine L. Waggle is the Production Editor of Juris. She has a Bachelor's Degree in Journalism and Political Science from Duquesne University,

13

The following article will contain a review of abortion cases and recent legislation aimed at knocking the legs out from under Roe v. Wade, 410 US. 113 (1973) and its progeny. At the outset, it is imperative that it be unequivocally understood that the views expressed herein are those of the writer and do not reflect the views of Juris in any way. As will become clear, this author is of the opinion that women have, and should continue to have, a fundamental right to choose whether to have children. This fundamental right encompasses her ability to choose to use contraception and/or the righ t to have an abortion. It is also this writer's belief that any article on this volatile issue will necessarily be tainted by that writer's personal bias and, therefore, much of the legal analysis in this area seems particularly non-pervasive from either a "prochoice" or "pro-life" stance.

As an aside, this writer would like to state his disdain for the term "pro-life:' It is much more accurate to use the term "anti-abortion" or "pro-fetus."

There is obviously more than one life at stake when a woman becomes impregnated and the anti-abortion movement seems to have little or no concern for the quality of those lives.

The landmark case in the abortion controversy is Roe v. Wade, 410 US. 113 (1973) in which a pregnant woman challenged the validity of a Texas statute that made it a crime to procure an abortion, or to attempt one, except with respect to an abortion procured or attempted by medical advice for the purpose of saving the life of the mother. [d. at 117-118.

In a 7-2 opinion announced by Justice Blackmun, the Court stated that a right of personal privacy or a guaranty of zones of privacy exists under the Constitution and has been found in varying contexts in the First, Fourth, Fifth and Ninth Amendments in the penumbras of the Bill of Rights and in the concept of liberty guaranteed by the Fourteenth Amendment.

This right of privacy is broad enough to encompass a woman's decision whether or not to terminate her pregnancy. [d. at 152-153. On the issue of a woman's right to an abortion the District Court found this right in the Ninth Amendment's reservation of rights to the people. The Supreme Court felt it was based on the Fourteenth Amendment's concept of personal liberty and restrictions upon state actions.

14

A CHILL WIND BLOWS The Court noted the detriment a state imposes upon women when it denies the right to choose abortion altogether.

Specific and direct harm medically diagnosable even in early pregnancy may be involved. Maternity, or additional offspring, may force upon the woman a distressful life and future, psychological harm may be imminent. Mental and physical health may be taxed by child care. There is also the distress, for all concerned, associated with the unwanted child, and there is the problem of bringing a child into a family already unable psychologically and otherwise to care for it. In some cases the additional difficulties and continuing stigma of unwed motherhood may be involved.

[d. at 153.

The Court used a substantive due process analysis and determined that regulations limiting a woman's right to an abortion may be justified only by a compelling state interest and that legislative enactments must be narrowly drawn to express only the legitimate state interests at stake. [d. at 155.

Although Texas argued that life begins at conception and that, therefore, the State has a compelling interest in pro-

tecting that life from and after conception, the Court determined that the word "person" as used in the Fourteenth Amendment does not include the unborn. [d. at 158. The Court held that a state may not override the rights of a pregnant woman by adopting this theory of life. The Court did find that a state does have a legitimate interest in protecting the health of the pregnant woman, and that it has still another important and legitimate interest in protecting the potentiality of human life. These interests are separate and distinct. Each grows in substantiality as the woman approaches term and, at a point during pregnancy, each becomes compelling. [d. at 162-163.

The Court then announced its now famous trimester test and stated, "a state criminal abortion statute ... that excepts from criminality only a life saving procedure on behalf of the mother, without regard to pregnancy stage and without recognition of the other interests involved is violative of the Due Process Clause of the Fourteenth Amendment." [d . at 164. The trimester test may be paraphased as follows. In the first trimester the abortion decision and its effectuation must be left to the medical judgment of the physician . In the second trimester the State, in promoting its interest in the health of the mother, may regulate the abortion procedure in ways that are reasonablv related to the mother's health . I~ the third trimester, the State, in promoting its interest in the potentiality of human life, may regulate or proscribe abortion except when it is necessary for the preservation of the life or health of the mother. [d. at 164-165.

The Court's decision in Roe v. Wade was not, as some may contend, plucked from thin air. The cases cited are too numerous to list here but two worth mentioning are Griswold v. Connecticut, 381 U.S. 479 (1965) and Eisenstadt v. Baird, 405 U.s. 438 (1972).

In Griswold, a Connecticut law made the use of contraceptives a criminal offense and forbade the aiding or counselling of others in their use. The defendants were the director of a Planned Parenthood Association and its medical director. The Court found that this statute violated the zone of privacy found in the penumbras of the First, Third, Fourth, Fifth and Ninth Amendments. In Eisenstadt, the Court expanded the holding of Griswold when it dealt with a statute that

allowed only registered doctors and pharmacists to dispense contraceptives, and then only to married persons. The Court held that this statute discriminated against the married.

The Court stated, "It is true that in Griswold the right of privacy is inherent in the marital relationship ... If the right of privacy means anything, it is the right of the individual, married or single, to be free from unwarranted governmental intrusion into matters so fundamentally affecting a person as the decision whether to bear or beget a child:' Id. at 453.

The companion case to Roe v. Wade was Doe v. Bolton, 410 U.S. 179 (1973).

This case illuminated the procedural issues of abortion. The Court held that a state may not require all abortions to be performed in accredited hospitals, thus allowing appropriately licensed clinics to perform abortions in the first trimester. The state may not impose the requirement of consent by a doctor other than the woman's own personal physician.

These cases mentioned thus far have all withstood challenge until Websterv. Reproductive Health Services, 109 S.O. 3040 (1989). Prior to Webster a pivotal case was Akron V. Akron Ctr for Reproductive Health, 462 U.S. 416 (1983). In Akron, the Court struck down an Akron ordinance that required: all abortions performed after the first trimester be performed in a hospital; that there be notification of and consent by parents before abortions could be performed on unmarried minors below the age of fifteen; that the attending physician make certain specified statements to the patients to ensure that the consent to an abortion be truly informed consent; that there be a twenty-four hour waiting period between the time the woman signs a consent form and the time the abortion is performed; and that fetal remains be disposed of in a humane and sanitary manner.

The following rationales were advanced in reaching this decision.

First, the Court reaffirmed Roe v. Wade and stated that stare decisis is a doctrine that demands respect in a society governed by the rule of law. (In a footnote, the Court noted that Roe was a 7-2 decision and had been followed by numerous cases). The hospital requirement for a second trimester abortion was found to place a significant obstacle in the path of a woman seeking abortion because of the additional cost to the woman in utilizing a

hospital and finding an available facility. The Court noted that D&C procedures now provide for safe abortions in the second trimester. Id. at 435, 436. The parental consent portion was found unconstitutional because it was a blanket provision that did not provide an opportunity for case-by-case evaluations of the maturity of minors.

Id. at 439, 440. As to the physician being required to give specified statements concerning the abortion, these statements required a detailed description of the anatomical and physiological characteristics of the unborn child and described abortion as a major surgical procedure that could result in physical and psychological complications. These are, in fact, a parade of "horribles" intended to suggest that abortion is a particularly dangerous procedure. In fact, these abortion regulations are designed to influence the woman's informed choice between abortion or childbirth.

Id. at 444. The mandatory twenty-four hour waiting period was invalidated because it increased the cost of an abortion by requiring two separate trips to the abortion facility and no legitimate state interest was furthered

by this requirement. "A woman's decision to have an abortion should be final, if given appropriate counseling, when she signs her consent:' Id. at 150,45l.

Not all of the Court's decisions foreclosed states from asserting an interest in whether pregnancy ends in childbirth or abortion. In Maher v. Roe, 432 U.S. 464 (1977), the Court upheld a governmental spending statute that reimbursed indigent women for childbirth but not for abortion. This was deemed permissible because it did not add any restriction on abortion that was not already there. Id. at 474.

Cases such as Maher ignore a fundamental reality concerning women seeking abortion in this country. Indigent women are practically foreclosed from choosing to have an abortion when such statutes are enforced, unless they can find private facilities willing to perform the abortion for free. These unfortunate women will, out of a perceived necessity or desperation, resort to back-alley abortionists or perform abortions on themselves. This will have particular effect on minority women. Those with money will be able to continue to have abortions while those without will die or suffer debilitating physical trauma, all in the name of enforced morality or religious dictates or lack of compassion, as it may be. Webster v. Reproductive Health Services, 109 S.O. 3040 (1989) Blackmun dissent at 3077. (See also Cates & Rockett, Illegal Abortions in the United States: 1972-1974 8 Family Planning Perspectives 86,92 (1976)). It is these indigent women who will be forced to give birth to children with whom they are economically, psychologically and emotionally ill-equipped to contend. This is also seen by some to foreclose their ability to rise above the economic level in which they are already mired.

In Thornburgh v. American College of Obstetricians, 109 S.O. 2169 (1986), the Supreme Court upheld its Akron decision and ruled Pennsylvania's informed consent requirement unconstitutional. Pennsylvania would have required a physician to inform the woman seeking an abortion of detrimental physical and psychological effects of abortion and of all particular medical risks in addition to providing certain printed material to the patient.

The woman was also to be advised that benefits may be available should she carry the child to term and that the father would be responsible for financial assistance. These were all seen as a poorly disguised effort of the state to discourage a decision to abort. Pennsylvania's twenty-four hour waiting period was also struck down. The Court also struck down provisions of the Act which required physicians to employ abortion techniques most likely to protect or save the life of the unborn fetus unless, in the physician's good-faith judgment, the technique would present a significantly greater risk to the life or health of the pregnant woman as it would require a woman to bear increased medical risks in order to save a viable fetus. The Court 15

also struck down a viability reporting section as serving no legitimate state interest and as an interference with a woman's fundamental right to decide to have an abortion.

At this stage, Roe v. Wade and Akron Ctr for Reproductive Health seemed safe, but anti-abortion groups and various state legislatures continued to challenge their validity. In Webster v.

Reproductive Health Services, 109 S.Ct. 3040 (1989), the Court upheld provisions of a Missouri statute that require a physician to perform tests to determine the gestational age, weight, and lung capacity of an unborn child on any woman whom the doctor has reason to believe is twenty or more weeks pregnant. The act also prohibits public employees or the use of public facilities to perform or assist in abortions not necessary to save the mother's life .

It also prohibits the use of public funds, employees, or facilities for the purpose of encouraging or counseling a woman to have an abortion not necessary to save her life.

The Court, in an opinion announced by Chief Justice Rehnquist, upheld Missouri's testing requirement despite its acknowledgement that the tests in question increase the expense of abortion, regulate the discretion of the physician in determining the viability of the fetus, and that the tests will in many cases show that the fetus is not viable. The Court discounted evidence that these tests may endanger both mother and fetus .

Most importantly, the Court ignored stare decisis and abandoned Roe v.

Wade's trimester framework and laid the groundwork for discarding viability as the starting point for legitimate state interests. "The State's interest, if compelling after viability, is equally compelling before viability:' [d. at 3057.

Although these findings were surprising, the upholding of the state's prohibition of the use of public facilities, employees and funds is not surprising in light of the Court's decision in Mahr, supra.

It is important to note that the Webster Court was totally fragmented in this decision. Justice Blackmun's dissent, in which Justices Brennan and Marshall join, points out the plurality's failure to discuss whether the Constitution includes an unenumerated right to privacy that extends to matters of child-rearing and family life. The plurality adopts the holding that the Missouri testing pro-

16

vision permissibly furthers the State's interest in protecting human life .

Justice Blackmun notes with dismay that if the Court adopts the plurality's holding, women will only have a limited fundamental Constitutional right to decide whether to terminate a pregnancy. This would effectively overrule the heart of Roe v. Wade.

Where are we now? The Pennsylvania Abortion Control Act of 1989, 18 Pa. Cons. Stat. 3203 et. seq. will provide a fertile battle ground for the vitality of Roe v. Wade and its progeny.

Representative Stephen F. Freind, R. Delaware County, author of the legislation, has acknowledged that the legislation is intended in part as a possible challenge to the Roe decision.

(Pittsburgh Press, Nov. 15, 1989).

Opponents of the bill are cautious to challenge it as they do not want to give the Supreme Court the opportunity to overturn Roe. Among its provisions the bill would require : banning abortions after the 24th week of pregnancy except in cases where the mother faces irreversible harm or death; doctors to inform women about the procedure before performing an abortion; providing her with the likely age of the fetus and explaining risks and alternatives; prohibiting abortions because of the fetus' sex; establishing a 24-hour wait from the time a woman asks for an abortion until it is performed; mandating women to notify their husbands if they plan to get an abortion, with exceptions; and regulating the medical use of tissue from aborted fetuses . U.s. District Judge Daniel Huyett III of the Eastern District of Pennsylvania enjoined the sections of the law that required a 24-hour waiting period and notification of the husband before obtaining an abortion.

In a phone interview with Sue Roselle, the Executive Director of Women's Health Services in Pittsburgh, a facility that provides abortion services, she stated that Judge Huyett enjoined all sections of the act except ยง 3204 which dealt with the definition of "medical emergency," as it states a higher standard for abortion than all other health laws.

Ms. Roselle stated that if the injunction stands, the new law will create few changes, if any, as it is extremely rare for abortions to be sought based on the sex of the fetus or after the 24th week of pregnancy in Pennsylvania.

In fact, Ms. Roselle stated that Women's Health Services has never performed an abortion past seventeen

weeks. She stated that 10,000 women have been denied abortions in Pennsylvania since 1985. Most of these women were indigent. This has resulted in an increase in infant mortality, premature birth and the use of welfare services. Concerning the Parental Consent portion of the legislation, Ms. Roselle stated that parental consent should not be mandated but that parents should be involved. She did express concern that the antiabortionists might eventually attack the use of contraceptives that work between fertilization and conception such as the LU. D. or oral contraceptives, thus overruling Griswold.

In this writer's opinion Mr. Freind inserted sections into the new law as "Red Herrings" (the sex selection and 24 week provisions) to divert attention from the statute's more onerous provisions. The worst encroachment on the privacy rights of women is the spousal notice requirement. Under this section a woman must notify her h usband prior to obtaining an abortion. A woman may be excepted from this requirement if she provides the physician with a signed statement certifying one of the following : (1) Her spouse is not the father of the child . (2) Her spouse, after diligent effort, could not be located. (3) The pregnancy is a result of spousal sexual assault . .. which has been reported to a law enforcement agency having the requisite jurisdiction. (4) The woman has reason to believe that the furnishing of notice to her spouse is likely to result in the infliction of bodily injury upon her by her spouse or by another individual. Such statements need not be notarized, but shall bear a notice that any false statements made therein are punishable by law. 18 P.s.A. ยง3209.

The statute does not say how this proviSion will be enforced, i.e., how it will be determined that a false statement has been made and what the punishment will be for making a false statement. Section 3214 requires physicians to report whether an abortion was performed upon a married woman and if notice to her spouse was given. If no notice to her spouse was given, the report shall also indicate the reason for failure to provide notice. These provisions imply that each abortion obtained by a married woman and the reasons therefor may become available to the public. If a false statement is punishable by law how will these statements be reviewed and verified? The very reasons for

allowing the exceptions to spousal notice seem to be obviated by the physician's reporting requirement and the false statement punishable by law provision. Even if the Commonwealth guarantees the privacy of these statements many women may choose not to risk a breach of this guarantee when it may result in potential physical harm to the women or destruction of a healthy marriage.

Under color of the Commonwealth's interest in promoting the integrity of the marital relationship and to protect a spouse's interest in having children within marriage the legislature ignores the ramifications these requirements may have for married women. It is not the husband who must carry this fetus. He does not endure the physical hardships of pregnancy and the potential danger of childbirth. It is also not normally the husband who devotes the majority of his time to the child's needs during its early years, nor is the husband's career or education curtailed during this time. These burdens fall upon the mother and, therefore, the decision to have an abortion should be hers to make.

These encroachments on married women's privacy will certainly chill her interest in getting an abortion.

These provisions also place burdens on married women that are not required of their unmarried counterparts. Such unequal treatment seems inherently unconstitutional. Eisenstadt, supra. It causes no surprise to this writer that this section passed the legislature considering that body is predominantly male. What would possibly make a man vote against the ability to be informed of his wife's intention to procure an abortion? In this writer's opinion, if men had to endure the hardships of pregnancy there would be no doubt that a right to choose abortion would be perceived as a fundamental right protected under the Constitution.

If the trend continues, the Supreme Court will allow each state to regulate abortion as it sees fit. As the Washington Post pointed out in an article by T. R. Reid, April 17, 1989, if a pregnant 17-year-old in Connecticut were to walk into a clinic and ask for an abortion, she could have one without delay, by any medical professional and with total confidentiality. If she could not afford the bill the state would pay for it. If the same woman lived a few miles to the east in Rhode Island, none of the

above would be true.

My question is, if she is indigent, how does she get to Connecticut? For this writer, it is obvious that the states which enact legislation in the name of the mother's welfare or the sanctity of the family unit simply wish to curtail, based on their moral opinions, a woman's right to control her own destiny. These decisions will, in actuality, only prevent the poor and uninformed from access to abortion on demand. This situation should not be allowed. A woman's right to choose to give birth should not be dictated by her residence in a particular state.

As Justice Blackmun noted in his dissent in Webster: Thus not with a bang, but a whimper, the plurality discards a landmark case of the last generation, and casts into darkness the hopes and visions of every woman in this country who had come to believe that the Constitution guaranteed her the right to exercise some control over her unique ability to bear children. The plurality does so either oblivious or insensitive to the fact that millions of women, and their

families, have ordered their Jives around the right to reproductive choice, and that this right has become vital to the full participation of women in the economic and political walks of American life. The plurality would clear the way once again for government to force upon women the physical labor and specific and direct medical and psychological harms that may accompany carrying a fetus to term. The plurality would clear the way again for the state to conscript a woman's body and to force upon her a distressful life and future ...

For today, at least the law of abortion stands undisturbed. For today, the women of this Nation still retain the liberty to control their destinies.

But the signs are evident and very ominous and a chill wind blows.

Webster at 2W7, 3W9.

Ralph Karsh is a third-year day student.

He hopes that his daughters will still be able to point to Roe v. Wadeas the law of the United States.

17

Insider Trading Where Do We Go From Here?

'Nuwhere is this commodity (infonnation) more valuable or volatile than in the world of high finance, where facts worth fortunes while secret may be rendered worthless once revealed.'

Irvin R. Kaufman, Circuit Judge United States Court of Appeals Second Circuit "Insider trading" - many people are familiar with the phrase, but what exactly does it mean? The term has yet to be given a statutory definition.1 A look at the Congressional Record yields the following: "Insider trading is defined loosely as trading while in possession of material non-public information."2 How has insider trading evolved in the last decade? Are the current securities fraud laws adequately designed for the enforcement job, or do better alternatives exist? Most importantly, where do we go from here?

The three most often utilized and discussed securities laws are referred to as Rule 10(b)5 (15 u.s.es. 78j), Section 16(b) (15 u.s.es. 78p), and Regulation 14(e) (15 ues.e 78n). All three are promulgated under the Securities Exchange Act of 1934, by the Securities Exchange Commission.

Rule 10(b)5 is a very general, broad, "catch-all" provision against fraudulent, deceptive and manipulative practices, including insider trading.

Section 16(b), however, has traditionally had the more limited effect of deterring "short-swing" profits: corporate directors, officers, and those who hold ten percent or more of a company's shares must turn over any profits that accrue from purchases and sales of that company's stock within a six-month time period. Regulation 14(e) was basically designed to police proxies and tender offers: persons are not permitted to "buy up" more than 5% of a company's stock without having filed with the Securities Exchange Commission a statement giving certain pertinent information.

18

As insider trading has taken its place in the legal spotlight, theories on regulation and enforcement have grown, changed and evolved through both judicial interpretation and statutory amendment.

CASE HISTORY: A) Initial Theory: A decade ago, the United States Supreme Court heard argument in Chiarella v. U.S., 445 US. 219, 100 S.O. 1108, 63 L.Ed.2d. 348 (1980). Vincent Chiarella was an employee of a financial printer who, by way of an educated guess, ascertained the names of takeover target companies by examining documents delivered to his employer for printing. Chiarella used this information to purchase the stock of these target companies, and realized profits after the takeover attempts were made public. The Supreme Court found Chiarella not guilty of violating Rule 10(b)5. The Court held that Chiarella had no duty to disclose, and, therefore, had committed no fraud by his silence as to the information he had obtained. Duty to disclose was held to arise "from a relationship of trust and confidence between parties to a transaction" as historically defined by the common law fiduciary duty of care. The Court concluded that "mere possession of non-public market information" did not create a duty of disclosure.

The applicability of Rule 10(b)5 was further elaborated upon in Dirks v.

SEC. 463 US. 646, 103 S.O. 3255, 77 L.Ed.2d. 911 (1983). Dirks was employed as an officer of a brokerage dealer. While so employed, he received information from a former officer of an insurance company that the company's assets were overvalued because of wide-spread intracompany fraud. After corroborating his information through other company officials, Dirks disclosed these facts to clients and investors. Most notably, Dirks also attempted to gain public disclosure of the fraud (he urged the Wall Street Journal to publish an arti-

c1e in order to accomplish this - they declined to do so). The SEC censured Dirks, stating that he had "aided and abetted" violations of 10(b)5 by repeating these allegations to his clients. The Court of Appeals for the District of Columbia entered judgment against Dirks, but the Supreme Court reversed on the grounds that, under the circumstances, he had no duty to abstain from the use of the inside information he had obtained.

The Chiarella decision had declared that an outsider did not incur a duty to disclose merely by possession of nonpublic, material information; the duty instead arose from the trust relationship of parties to a transaction. In Dirks, the Court observes the existence of a "derivative" duty, best explained by the following. "Tipping" may be defined as "selective disclosure of material inside information."3 The "tipper" is the person delivering the information, and the "tippee" is the person receiving the information.

'A tippee assumes a fiduciary duty to the shareholders of a corporation not to trade on material non-public information only when the insider has breached his fiduciary duty to the shareholders by disclosing the information to the tippee and the tippee knows or should know that there has been a breach: Dirks, U.S. at 661.

This method of restricting only improperly disclosed information has been seen by some securities law scholars as an adequate balance of interests by permitting insider trading when information is received "properly."4 B) The Evolution of the "Misappropriation" Theory: The "Misappropriation" Theory of insider trading has its advent in recent years. Also know as "outsider trading:' misappropriation has been used by the SEC "to cover any stock activity in which a person 'misappropriates' confidential information from another (i.e. his employer), and uses it to achieve personal gains in the

market ."5 This theory does not require that a special relationship be shown in order to find liability, at least as it pertains to a criminal action.

The "Misappropriation" Theory was born of comments made by Mr. Chief Justice Burger in his dissenting opinion in Chiarella. The Chief Justice saw as paramount the manner in which the buyer acquires his information. This reasoning was refined and used by the courts to obtain criminal convictions in U.S. v. Newman, 664 F.2d 12 (2d Cir. 1981), aft'd after rem., 722 F.2d 729, and SEC v. Materia, 745 F.2d 197 2d Cir. 1984), cert. den. 855.0.

477. However, the theory did not pass the scrutiny of the Second Circuit Court of Appeals in Moss v. Morgan Stanley, Inc., 719 F.2d5 (2d Cir. 1983), with regard to a civil action, where no specific duty could be found . The courts seemed to indicate that, while any duty would support a criminal action, a civil action required a breach of specific duty.

In U. S. v. Newman, criminal charges were successfully brought against James Mitchell Newman, a securities trader. Newman and his compeers purchased stock in companies that were merger and takeover targets of clients of investment banking firms, based on information obtained by employees of those firms. The Court held that the criminal standing of the case called for "concern with the scope of the rule, as opposed to a plaintiff's standing to sue:' Therefore, instead of a breach of a special fiduCiary relationship, the court looked at the defendant's "deceptive practices" in order to convict.

In Moss v. Morgan Stanley, the Second Circuit Court of Appeals refused to permit complainant, a member of a "class of investors substantially damaged;' to recover damages from the defendant company. The Court refused recovery on this civil action because none of the defandants owed Moss a duty of disclosure regarding an impending tender offer for a company in which Moss, among others, owned

" ... investors are endangered equally by fraud by non-inside misappropriators as by fraud by insiders."

stock. The defendants had become aware of the upcoming offer through the tender offeror's investment adviser. Moss and the other investors did not have the information that Morgan Stanley did; therefore, he and the other investors sold their stock to Morgan Stanley immediately before the price skyrocked due to the tender offer announcement. The Court in Moss relied heavily on Dirks and Chiarella, reiterating that absent an "insider," or "fiduciary," relationship with the sellers of stock, a purchaser has no duty to disclose non-public market information. Since the actors in this case had no direct relationship with the target corporation, they could not be "insiders." Th us, in the view of the Court, a balance was struck between policing the market for improperly disclosed information, while encouraging the dissemination of market information properly obtained.

In SEC v. Materia, The Second Circuit of Court Appeals found that trading in securities on the basis of inside information, even if the information is attributed to "strangers" (persons not involved in a fiduciary relationship), could be founded upon a "misappropriation of information" theory. Materia's conduct constituted "a direct breach of (Materia's) fiduciary duty to his employer and his employer's clients." Again, the criminal nature of the proceeding was paramount: "Whether a defendant has breached a duty to a particular plaintiff ... (is) germane only in the context of private civil litigation:' One would note a distinct irony in the fact that Materia and Chiarella involved near identical situations regarding information released to publishing companies, yet Materia was convicted and Chiarella was not.

The evolution of the "Misappropriation" Theory permitted this conviction, through the addition of an explanation of the theory in jury instructions for Materia.

The Misappropriation Theory was also used in U.S. v. Carpenter, 791 F.2d 1024 (2d. Cir.), cert. granted, aft'd, 108 5.0.316 (1987), as a basis for conviction. Relying on that theory, the evenly divided Supreme Court upheld the convictions of R. Foster Winans, and his two associates for taking advantage of market fluctuations by making stock sales or purchases before Mr. Winans' widely-watched newspaper column "Heard On The

TI,e SEC may sue the "controlling person" of all illltividllal who violates insider tradillg provisions.

Street" appeared. Winans wrote columns analyzing information about certain chosen companies and their stocks. The conspirators would obtain the publication schedule for the column, and purchase stocks of the subject companies before the column appeared. When the articles were published, the companies' stock values reflected increased trading based on the commentary contained in the articles, hence the defendants were able to reap risk-free profits. In extending liability to Mr. Winans, the Court "broadly interpreted" the degree to which liability could be incurred, reasoning that "investors are endangered equally by fraud by noninside misappropriators as by fraud by insiders." However, because the case was affirmed by an evenly divided Court, the meaning to be derived from Carpenter is uncertain.

An interesting point to this case is the fact that the only inside information Mr. Winans could be accused of misappropriating is the Wall Street Journal publication schedule, because the information he used to write his column was public knowledge. However, this was enough to allow the conspirators to attain instantaneous, norisk profits from the stock market.

Winans recognized the effect his commentary had, and deliberately played upon it.

CURRENTDEVELOPMEN~

ENFORCEMENT AND REMEDY: What does all of this seemingly nebulous case law mean, and how have enforcement and remedy reacted to this evolution?

On November 19, 1988, President Ronald Reagan signed into law the Insider Trading and Securities Fraud Enforcement Act of 1988.6 Addressing criminal sanctions, the statute increased fine allowances from $100,000 to $1,000,000 against natural persons, and up to $2,500,000 for corporations.

The maximum jail term has been increased from five to ten years.

The new law requires every registered broker-dealer and investment 19

advisor to establish, maintain, and enforce procedures to detect possible insider trading . Private causes of action remain viable. The SEC may sue the "controlling person" of an individual who violates insider trading provisions. In other words, top management may be called upon to answer for employee violations.

The SEC may still seek up to three times the amount of profit incurred or loss prevented by the violator (this was first introduced by the Insider Trading Sanctions Act of 1984). Any organization found to be the controlling person of a violator may be subject to ITSA penalties if that person knows or recklessly disregards the fact that such a person was likely to engage in the violation and failed to prevent it.

In addition, an attempt to codify the Misappropriation Theory has been made (see 'i\nnual Review of Federal Securities Regulations;' The Business Lawyer, Vol. 44, May 1989, pp. 844-45 for an overview) . The 1988 Act adds Section 20A to the Exchange Act. This section creates an express private (i .e . civil) action for persons who "contemporaneously" sell or purchase securities of the same class as persons who improperly trade on inside information. Although "contemporaneously" is not defined in the new law or in the Securities Exchange Act of 1934, it is generally held to mean "covering that period of time between when the insider trading violation took place and when the inside information used in the trade becomes public;' Wilson v.

1537 (3d. Cir. 1988), cert. den ., 109 S.O. 131 (1988), the Court held that claims must be made within one year from the date of their discovery, and never more than three years after the date of the transaction in question .

ANTICIPATED DEVELOPMENTSI THEORIES: There are now, and always will be, imperfections in the market system.

Insiders, corporate officials and the like, have consistently earned aboveaverage returns when they buy securities of their own corporations? But in the words of Mr. Justice Powell, "Not every instance of financial unfairness constitutes fraudulent activity . .."

Likewise, even if insiders aren't aware of specific "material" information about their own companies, they may know "softer" information that is helpful in making investment decisions, but does not statutorily require disclosure.S "Soft information" may include, simply daily goings-on, or policies and trends within the company itself.

Insiders, corporate officials . .. have

consistently earned above average returns when they buy securities of their own corporations.

Comtech Telecommunications Corp. , 648 F.2d 88, 94 (2d Cir. 1981); Shapiro v.

Merrill Lynch, Pierce, Fenner & Smith, Inc., 495 F.2d 228, 237 (2d Cir. 1974) .

The concept of duty, then, includes not only those to whom a pre-existing fiduciary duty is owed (for example, an employer), but also to all traders who are in the market during the given time period. The number of possible plaintiffs is thus extraordinary, but damages are limited to profit gained or loss avoided, and may be offset by amounts disgorged to the SEC. One would note that this cal1s into question the validity of Moss v.

Morgan Stanley; the civil cause of action not permitted in that case is now statutorily defined .

In other developments, a uniform federal statute of limitations for implied causes of action under section 10(b) and rule 10(b)5 was created by the Third Circuit. In In re Data Access Systems Securities Litigation, 843 F2d 20

Some novel theories have been advanced to correct these imperfections.

For example, instead of an outright bar on equity ownership for corporate insiders, which would obviously hurt management incentive, one proposal would force insiders to disclose their trades 90 days in advance.9 In this way, publicized announcement would signal the market as to inside information and allow investors to respond .

Other persons have advocated the use of a statutory definition of "insider trading" to close regulatory "gaps." As opposed to concern with fiduciary relationships and breaches of trust, the definition would be directed at the unfair conduct itself.10 Specifically, such a definition could be structured to disallow the use of informational advantage. The expanded class of plaintiffs (traders "contemporaneously" in the market with the wrongdoers) created by the new 1988 law is

an example of less preoccupation with the fidUCiary relationship, but regulation has not yet become completely absorbed in the "unfair conduct" aspect of "insider trading."

The new 1988 law is in place providing a broad and coherent, if somewhat punitive, course of action for both civil and criminal securities violations. In particular, the new "controlling person" provision would seem to encourage better self-policing on the part of corporations, as they may be fined up to three times the profit gained or loss avoided by the controlled person's violation. Likewise, the attempted codification of the "Misappropriation" Theory expands the duty concept and allows the law to reach violations that were previously difficult to prove. However, the SEC must make Significant investments of time and money for appropriate enforcement. The legislation should be given an opportunity to work before Congress heeds any pleas for greater regulation. l"Insider Trading Laws Tougher," Robert Romano and Anne Flannery, New York Law Journal, Dec. 5, 1988, p. 39, col. 4.

2130 Cong oRec. S. 8912 (Daily Ed . June 29, 1984) (remarks of Sen. DAmato).

3"The Supreme Court's Highwire Act : Balancing SEC Enforcement and Market Efficiency in Dirks V. SEC," Elisabeth Milton, University of Pittsburgh Law Review, vol. 45. p. 927. See also A. Jacobs, Litigation and Practice Under Rule lOB5, 162 at 7-1 (2d ed.1983) .

4Id. at p. 923.

5Id. at p. 938. See also N.Y. Times, May 27, 1984, at F.21, col. 2.

6H.R. 5133, 100 Congo 2d Sess. (1988) .

7Insiders and Market Efficiency, Joseph Finnerty, 31 J. Fin. 1141, 1146 (1976).

B"The Prevention of Insider Trading : A Proposal For Revising Section 16 of The Securities Exchange Act of 1934," S.s.

Samuelson, Harvard Journal On Legislation, vol. 25, p. 519.

9Id. at 523-24.

IO"The Insider Trading Sanctions Act of 1984: Did Congress and The SEC Go Home Too Early?," Tammy L. and Timothy F. O'Leary, University of California Davis Law Review, vol. 19:497, 1986, pp. 516-523.

Deanna l. Heasley became interested in the topic of insider trading during her undergraduate studies in Finance and International Business at Clarion University of Pennsylvania, and the University de Quebec a Trois-Rivieres, Quebec, Canada.

After a series of unprofitable years, a business often takes aggresive action in order to reverse the slide. These steps include: layoffs and plant closings; austerity measures, such as wage reduction; or the sale of a portionof the business. By selling a subsidiary, the former owner can shed a losing venture and create an influx of capital that can be used to strengthen other areas. The purchaser obtains the subsidiary at a discounted price and hopes to rebuild it into a winner.

Bankers have less flexibility to deal with problems because of tight governmental regulation and the nature of the business. The nature of the business requires trust and confidence which, in tum, creates the need for federal and state supervision.

Depositors expect to be able to withdraw their deposits from a commercial bank while investors are willing to assume risk when they purchase securities.

Confidence waned when Mellon Bank lost $844 million in 1987. Rumors abounded that Mellon could be a future takeover candidate in 1990, when Pennsylvania becomes open to national banking. Mellon's future as a leader in its region appeared to be diminishing.

A segment of the problem stemmed from defaulted or non performing loans in Mellon's real estate and energy portfolios. The energy industry, specifically in Texas, was in a cyclical trough for much of the previous decade. With the downturn in profits for energy firms came the corresponding nonpayment of loans due. The demise of the energy industry resulted in unemployment for workers holding real estate loans with Mellon. Thereafter, many of the loans became classified as nonperforming.

This left Mellon with vast amounts of property mainly throughout Colorado, Louisiana, and Texas.

The losses throughout 1987 pushed Mellon's stock to a low point. The portfolios of non performing loans made it difficult to produce quarterly earnings. The nonperforming loans sat on Mellon's books and produced no income. Mellon desperately needed income to offset its losses.

Immediately, Mellon froze salaries and reduced staffing. This action was not enough to stem the tide. What else can a commercial bank do to turn losses into profits?

Bankers are in a unique position.

Their raw materials are the same as the

Mellon Plans Something New finished product. They need money to make money. Most of Mellon's options, such as making additional loans in other sectors, require the element of time. Foreclosure on the non performing loans would also take up valuable time and resources.

In October of 1988 Mellon decided to implement a new idea that was akin to the old concept of selling off an unprofitable subsidiary. Mellon's plan was to sell the non performing loans.

Unfortunately, none of the other banks had a need for nearly $1 biIlion in defaulted loans. So, the plan directs a traditional bank, such as Mellon, to sell its non performing loans at a discount to a newly created bank. Thus, Mellon created the Grant Street National Bank (in Liquidation). The new bank pays with proceeds from the sale of bonds collateralized by loans that have a face value greater than the price of the bonds. The traditional bank gets cash for bad assets while the new bank gets a possible windfall.

Mellon sold nearly $1 billion in nonperforming loans at a 43% discount, or about $575 million to Grant Street. In order to pay for the assets, Grand Street issued $225 million in class A-I notes and $288 million in class A-2 notes. Other funds were collected through the issuance of stock which was purchased by Mellon.

When a bank transfers its troubled loans to a separate bank, it is forced to declare as a loss the difference between the loans' stated value on its books and their true market value.

The stated value of the non performing loans sold was nearly $1 billion. The loans were discounted and sold to Grant Street at their true market value of $575 million. The difference between the nearly $1 billion and $575 million was Mellon's one-time loss on the loans. However, Mellon was able to take some additional steps to mitigate the loss to some degree.

In taking the loss commercial banks reduce their capital base which must

be restored. Congress, under Title 12 of the United States Code, has delegated authority to regulate bank reserves to the Federal Reserve Board of Governors. Through these regulations, commercial banks are required to have specified levels of capital available to satisfy depositors. In 1992, riskbased capital levels will be increased mainly in response to the massive problem of defaulted third world loans.

Stockholders in Mellon saw their book value shrink but benefited by reductions in overhead and cost of funds, with improvements in profits and stock prices. The maneuver reduced Mellon's nonperforming loans to 3.8% of total assets, from 8%.

The reduction will allow Mellon to concentrate resources in other problem areas. Instead of writing the loans down to their fair market value on their books, Mellon found a way to get cash for bad assets.

Grant Street National Bank is a bank in liquidation holding nearly $1 billion in non performing loans. Since the bank is in liquidation its primary purpose is to collect money owed on the unpaid loans. Grant Street's debts are limited to amounts expended in buying the loans from Mellon. Obviously, if Grant Street can collect more from the loans than they paid to obtain them, Grant Street's shareholders will profit. Since the loans were sold at a large discount, Grant Street has a chance to turn a large profit. However, the opportunity is very risky because the loans are non performing and may never be collected in some cases. Also, the loans must be collected quickly in order to maximize profits.

Mellon's plan carefully complies with the requirements of the GlassSteagall Act, otherwise known as the Banking Act of 1933. (June 16, 1933, ch.

89, 48 Stat. 162). The Act was a response to the speculative activities of commercial bankers leading to the Great Depression. The response was an attempt by Congress to separate 21

commercial banking from investment banking. The separation was designed to prevent the diversion of commercial banking funds into speculative operations. Congress was concerned with bank securities affiliates' underwriting and making markets in the securities issued by their bank affiliates. Where the underwriting subsidiary offers securities representing an interest in assets created by its affiliates; the temptation exists that the affiliates' least creditworthy assets would be securitized.

Ironically, the basis behind Mellon's plan is to securitize a traditional bank's least creditworthy assets. Yet, the plan manages to comply with the Act because of the novel creation of a new unaffiliated bank. Mellon is an operating privately owned bank and is distinguished from Grant Street.

Grant Street is a national bank in liquidation which does not accept deposits, is not insured by the FDIC and is not a member of the Federal Reserve System. Even though Mellon created Grant Street, they are separate entities and not affiliates. Therefore, Mellon has sold its non performing loans to another bank and not to an affiliate of the Mellon banking family.

Along with the reporting requirements of the Securities Exchange Act of 1934, Grant Street is subject to the requirements of 12 U.s.c. §§181 and 182 which established procedures for the voluntary liquidation of national banks, and pursuant to which Mellon as initial sole stockholder approved a plan of liquidation and Grant Street's directors appointed a liquidation agent. The liquidating agent must render annual reports to the Comptroller of the Currency and the stockholders. The Comptroller has authority to examine and restrict the affairs of Grant Street until the claims of all creditors, especially those holding the notes, have been satisfied.

Grant Street, as a national banking association, is under the primary supervision, examination and regulation by the Comptroller under the National Bank Act. All loans and advances made by Grant Street are restricted to the lending limits imposed on national banks by 12 U.s.c. §84. Grant Street has entered into an agreement with the Comptroller pursuant to which Grant Street has agreed not to modify the plan of liquidation without approval of the Comptroller. The agreement also requires Grant Street to reduce the amount of 22

assets by at least 10% annually, on a cumulative basis . Real property acquired in connection with the loan foreclosures falls under 12 U.s.c. §29, which limits the length of time that the property may be held by a bank before it must be sold . Also, Grant Street is not eligible to receive extensions of credit from Federal Reserve banks, and is not subject to the provisions of §23A of the Federal Reserve Act. Grant Street has already retired the issue of class A-I notes and has begun to purchase the class A-2 notes on the open market. This was possible because some liquidations occurred sooner than first planned. However, Grant Street now expects to collect less cash than originally planned because of certain depressed real estate markets. The effect of the Savings & Loan problems on real estate values in the years ahead may pose more difficulties.

Another healthy but troubled bank

Baukers are ill a unique position. Their raw materials are the

same as the finished product. has decided to follow Mellon. Premier Bancorp of Baton Rouge, Louisiana has submitted a plan to the Comptroller. Other banks have contemplated using the plan but are unable to absorb the one-time loss. In addition, the plan does not have the potential for success with other banks as with Mellon because most of Mellon's nonperforming assets are domestic credits backed by real estate.

Recently, the financial world has been plagued by scandals and mistakes. The Savings & Loan debacle is beginning to be felt by American taxpayers. Foreign loan defaults have some banks on the brink of disaster and insider trading has shaken Wall Street. In the midst of the turmoil, Mellon Bank made its little publicized move in conjunction with the Comptroller of the Currency. It will be several years before the success or failure of the plan can be fully assessed. Nevertheless, the concept of selling the rights, to collect on an asset,

for cash has been completed in the past. However, Mellon's plan is unique. Banks are highly regulated by our government because they hold the public's trust. Yet, Mellon found a way to maintain that trust and get rid of some problem assets .

BIBLIOGRAPHY Andrews, Suzanna. "The New Order at the Mellon Bank:' Institutiorwl Investor 22 Uanuary 1988): 68-71.

"Fed Gives Mellon OK To Create 'Bad Bank'." Altanta Constitution, 30 September 1988, sec. F, p. 2 col. 2.

Grant Street National Bank. 1988 Annual

Report.

Grant Street National Bank. Information Statement, 15 November 1988.

Halverson, Guy. "Banks Win Kudos for 'Take Charge' Moves:' Christian Science Monitor; 1 August 1988, p. 15 col. 2.

Kreuzer, T. "Born-Again Banks: Four Fabulous Turnarounds." Bankers Monthly 106 (April 1989): 14-18.

"Mellon Set to Shift Bad Loans." NI?W York Times, 26 July 1988, sec. D5.

"Mellon Will Shift $1 Billion in Bad Loans."

Los Angeles Times, 26 July 1988, sec. IV, p. 2 col. 6.

Oravecz, John D. "All the Numbers Point to Successful Recovery at Mellon." Pittsburgh Press, 16 July 1989, sec. 018.

Oravecz, John D. "Grant Street Bank Says Assets to Yield Less than Expected ."

Pittsburgh Press, 10 August 1989, sec. C7.

Oravecz, John D. "Louisiana Bank Tries Mellon's Strategy:' Pittsburgh Press, 2 August 1989, sec. C9.

PugliSi, K. F. "Assessing MeHon's Bad Bank Strategy." Bank Administration, 64 (October 1988): 30, 32.

"Questions Remain on Risk-Based Capital." ABA Banking Journal 81 (J une 1989): 24-32 .

Schifrin, M. "Right With Mike." Forbes, 15 May 1989, 164-165.

Schroeder, Michael. "Mellon's Turnaround Man Is Racing the Clock."

Business Week, 14 September 1987, 146.

"Selling Your Problems to Others." Forbes, 9 January 1989, 97.

"The Comptroller of the Currency:' Quarterly Report Under §13 of the Securities Exchange Act of 1934 for Quarter Ended March 31, 1989 - Grant Street Natiorwl

Bank.

Wall Street Journal, 4 October 1988, sec . B15.

Wall Street Jou mal, 24 October 1988, sec.

B12.

Wall Street Journal, 28 October 1988, sec.

C15.

earned his B.S. in Business Management at Edinboro University of Pennsylvania prior to attending Duquesne University School of Law. Chris is a second-year day student.

Christopher Ferry

Capital Gains, Fairness and the Public Debate of Tax Policy

By Professor Joseph L. Schiffhouer Once again the Congress, tax specialists both in and out of government, the major daily newspapers, and, to a considerably lesser extent, the public at large are debating the wisdom of lowering the income tax rate on gain from the sale of capital assets.

President Bush made lower capital gain taxes one of the primary substantive issues during his campaign. He is convinced that providing such a tax incentive is necessary to increase America's woefully inadequate savings rate and decrease our dependence on foreign capital. Not since the days of voodoo economics have we been promised such major rewards form a tax cut. Of course, others, mainly Democrats, contend that decreasing the capital gain tax is merely a giveaway to the rich. They point out that the preferential capital gain rates which existed from 1921 until 1986 did not prevent Americans from running up huge levels of private as well as public debt. In fact, these critics sometimes argue that the preferential rate does not give an incentive to save but merely an incentive to sell. Given Congress' fickle approach to tax policy, this argument may indeed have validity - that is, take the money and run before the rates go up again.

"When considering any change to our federal tax system, one cannot overlook the issue of complexity."

It seems likely and also unfortunate that this issue, to the extent it becomes public, is destined to be cast as a battle between the rich and the poor, or perhaps more accurately, the very rich versus the moderately wealthy. Rather than getting snagged by such rhetoric, however, it is important to consider the policy background in this debate.

We are told that the President's conviction in the im portance of a lower capital gain rate is based upon his experience as a young business man.

As he was building his business, he took little in the way of salary, leaving his earnings in the business to grow and develop. He feels strongly that entrepreneurs should not be "penalized" for these kinds of investments.

Many, perhaps most, feel that all taxes are penalties. They are, however, in the words of Justice Holmes, the price we pay for living in a civilized society. What makes taxing capital gain different? Few would contend that capital gain should not be taxed at all. Rather the argument is that something is wrong in taxing such gain at the same rate as we tax other income.

In this regard it is interesting to note that in periods of our history capital gain taxes were higher than they are today. For example, in the early 1970s, when ordinary income was taxed at a maximum rate of 70%, capital gainenjoyed a preferential rate of only 35%.

The most common argument in favor of a differential rate structure is that a large portion of the gain from the sale of capital assets is attributable to inflation and, thus, not "real" income. It is not clear, however, how the relative rates of tax on ordinary income and capital gain is relevant to this observation. Moreover, inflation also affects the ordinary income of millions of taxpayers. The "cost of living raise" is the most common example of ordinary income which merely keeps the taxpayer even so to speak in terms of overall purchasing power. Congress specifically addressed the problem of such inflation based income by requiring that both the rate bracket tables and the personal exemption be adjusted each year for inflation. It is hard to see why inflation generated appreciation in capital assets should be given the extra benefit of a lower rate.

Another common argument is that capital gain rates should be lower to avoid a "bunching" of income.

Because the gain on the capital asset was built up over a period of several years, this argument goes, it is unfair to recognize all of this income in the year of sale. There are several problems with this point of view. First, the

proposed remedy for this "problem" is very rough justice indeed. Since preferential rates have traditionally been granted for gain from assets held as little as 6 months or a year, it is not clear in how much of this tax favored gain built results from long term investments. Moreover, this argument overlooks the fact that, unlike the average wage earner, the taxpayer holding the capital asset is able, generally speaking, to time the incidence of taxation by deciding voluntarily when to sell and how much to sell. For example, taxpayers may decide to hold assets until years when their income is not high or they have experienced offsetting losses in order to avoid the brunt of the "bunching" problem.

... this issue, to the extent it becomes public, is destined to be cast as a battle between the rich and the poor, or perhaps more accurately, the very rich versus the moderately wealthy.

This "bunching" argument has also lost much of its force after the Tax Reform Act of 1986. The idea behind the bunching argument is that when gains are realized in bunches they push the taxpayer into a higher tax bracket than he would be if they were realized over the period the asset was held. The Tax Reform Act, however, eliminated most of our traditional tax brackets. In fact, married taxpayers who earn over $29,750 per year and file jointly will be in the maximum 28% bracket. Since, according to the Congressional Budget Office, most capital gains are realized by those with income over $100,000, there simply is no bunching problem. The people realizing the gains are already paying

23

the maximum rate. In those few cases where "bunching" is a problem, the correct solution is income averaging, not a lower rate.

Preferential capital gain rates are also said to encourage the mobility of capital. This is the argument that the President, perhaps unwittingly, is alluding to when he argues that lower rates will actually increase revenues.

As noted above, however, lower rates have been criticized on the same grounds, namely that lower rates are an incentive to sell, not save. This question is ultimately an empirical

RECENT DECISIONS The United States Supreme Court recently confronted the issue of whether the criminal collateral estoppel doctrine of the Double Jeopardy Clause should apply when the government seeks to introduce in a subsequent trial evidence relating to a prior criminal offense for which the defendant has been acquitted . The Court, noting that the admissibility of

facts relating to a prior criminal offense as proof of an element of the subsequently charged offense enjoys a lower burden of proof than that which was required for a conviction on the prior offense, held the doctrine of collateral estoppel inapplicable.

... the burden falls I~ on the defendant to demonstrate that the issue whose relitigatiol1 he seeks to foreclose was actually decided in the first case." ••

While "fairness" is an admirable goal, it is not an issue that can be viewed piecemeal. issue. What tax rate (presumably greater than zero) will encourage the optimum level of savings and investment. Whatever the answer to this question it does not appear, in principle, to support a differential rate for capital gain.

More, importantly, this argument is also based on the assumption, currently true, that we do not tax unrealized gain. Thus, the "penalty" that occurs on sale and the alleged encouragement of immobile capital. There are of course many arguments in favor of not taxing unrealized gains, not the least of which is the administrative difficulty in establishing their amount .

But does the fact that we provide this tremendous investment incentive support an argument for providing even more incentive in the form of lower rates once the gains are realized?

In addition, the immobility of capital is also encouraged, perhaps even to a greater extent, by the fact that on death assets are given a fair market value basis, thereby eliminating any tax on the gain attributable to the period the asset was held by the decedent. One suspects the sincerity of those arguing for the free movement of capital, since few who support lower capital gain rates would urge elimination of the step-up in basis at death .

When considering any change to our federal tax system, one cannot overlook the issue of complexity.

24

President Reagan's main goal in proposing the 1986 Tax Reform Act was simplifying our complex income tax system . It is widely recognized that the Act largely failed in this regard .

However, eliminating the preferential capital gain rate was the one area where true simplification did occur.

Stanley Surrey, a noted tax expert who served in the Kennedy administration Treasury Department, is said to have once remarked that half of the Internal Revenue Code could be repealed if we taxed all income at the same rate.

While this may be overstating the case, it is true that many complicated provisions of the Code designed to prevent taxpayers from transforming ordinary income into capital gain are moot since 1986. Eliminating this incentive for gamesmanship was a major advance toward simplifying the federal income tax. We should not sacrifice this benefit based on unsubstantiated claims that a lower capital gain rate will cause Americans to suddenly end their profligate ways and start saving.

The primary problem facing any one trying to make sense of the capital gain debate is what is "fair" when it comes to issues of federal taxation .

The old refrain "tax reform is someone else paying my taxes" is for most largely true. While "fairness" is an admirable goal, it is not an issue that can be viewed piecemeal. In debating capital gain rates, we cannot overlook the existing incentives for capital investment alread y existing in our tax system. As noted above, these incentives not only permit taxpayers to defer gains to a time when recognition is convenient or beneficial, but also to avoid recognition entirely if the assets are held until death.

In leveling the playing field of federal taxation, let's be sure which way it is tipped before kickoff.

In Reuben Dowling v. United States, 58 LW 4124, 1/9 /90, petitioner was charged with robbing a bank and various other crimes alleged to have been committed in the Virgin Islands.

Dowling pleaded not guilty to all charges. Dowling's first trial ended in a hung jury. He was tried again and convicted, but the Third Circuit reversed on appeal. After a third trial, Dowling was convicted on most counts and sentenced to 70 years imprisonment.

During petitioner's third trial, the Government over petitioner's objection called a woman named Vera Henry to the stand . Ms. Henry testified that a man she identified as Dowling had entered her home together with a man named Delroy Christian, two weeks after the bank's robbery.

Ms. Henry further testified that during the alleged incident Dowling had been wearing a knitted mask with cutout eyes and carrying a small handgun and that the alleged intrusion had led to a struggle in which Henry unmasked Dowling, providing the basis for her later identification testimony. As a result of this incident, Dowling has been charged under Virgin Islands law with burglary, attempted robbery, assault and weapons offenses, but had been acquitted after a trial held before his third trial in the bank robbery case.

The Government stated that it was

procuring Henry's testimony for two reasons. First, it believed that Henry's description of Dowling as wearing a mask and gun strengthened the Government's identification of Dowling, as the bank robber had been similarly masked and armed. Second, the Government sought to link Dowling with Delroy Christian, who had reportedly been parked in a car in front of the bank, with the car door open into the street, shortly before the robbery. However, prior to the robbery two police officers told Christian to leave the area, a request with which he complied. When the bank robber had left the bank, he commandeered a taxi in order to make his getaway. The Government theorized that the car that Christian had been waiting in was the intended getaway car.

Before opening statements, the Government disclosed its intention to call Ms. Henry and explained its reasoning, relying on Rule 404(b) FRE which provides that evidence of other crimes, wrongs or acts may be admissible against a defendant for purposes other than character evidence . The District Court ruled the evidence admissible under Rule 404(b). When Henry finished her testimony, the District Court instructed the jury that petitioner had been acquitted of robbing Henry and emphasized the limited purpose for which Henry's testimony had been offered and such was reiterated in the court's final charge to the jury.

After losing in the Third Circuit Court of Appeals, the Supreme Court granted certorari to consider petitioner's contention that Henry's testimony was inadmissible under both the Double Jeopardy and Due Proc'e ss Clauses of the Fifth Amendment.

The Supreme Court affirmed the conviction.

Justice White delivered the opinion of the Court, in which Rehnquist, C. J., Blackmun, O'Connor, Scalia, and Kennedy, JL joined. The Court first noted that the Double Jeopardy Clause incorporates the doctrine of collateral estoppel as per the Court's

decision in Ashe v. Swenson, 3CJ1 US 436 (1970). However, White quickly distinguished the present facts from those in Ashe v. Swenson by recognizing that here the prior acquittal clid not determine an ultimate issue. White went on to state that the Court would not "extend the collateral estoppel component of the Double Jeopardy Clause to exclude in all circumstances, relevant and probative evidence that is

III aJccornillg sllch significance to all acquittal reflects both an institutional interest in preserving the fmality of judgments alld a strong public interest in protectillg individuals agaillst government overreachi1tg." otherwise admissible under the Rules of Evidence simply because it relates to alleged criminal cond uct for which a defendant has been acquitted:' White then reminded petitioner that his acquittal verdict only meant that the jury was not able to find beyond a reasonable doubt that he was one of the intruders and that before a jury could consider facts relating to a prior criminal offense, as proof of an element of the presently charged offense, the jury need only conclude that the act occurred and that the defendant was the actor. The Court then noted that, consistent with prior decisions, "an acquittal in a criminal case does not precl ude the government from relitigating an issue when it is presented in a subsequent action governed by a lower standard of proof:' For support of this proposition, the Court referred to US v. One Assortment of 89 Firearms, 465 US 354 (1984) where the Court held that "a gun owner's acquittal on a charge of dealing firearms without a license did not preclude a subsequent in rem forfeiture proceeding, even though forfeiture was only appropriate if the jury in the forfeiture proceeding concluded that the defendant had committed the underlying offense:'

The Court next accepted the assumption that the collateral estoppel component of the Double Jeopardy Clause was applicable, but concluded that Henry's testimony was nevertheless admissible. White reasoned that where a previous judgment of acquittal is based on a general verdict, the burden falls "... on the defendant to demonstrate that the issue whose relitigation he seeks to foreclose was actually decided in the first case:' The Court noted that Dowling failed to demonstrate that his acquittal in his first trial represented a jury determination that he was not one of the men who entered Henry's home.

White then considered petitioner's due process argument addressing the issue of whether introduction of this type of evidence was so extremely unfair that its admission violates "fundamental conceptions of justice:' White noted that "[bJeyond the specific guarantees enumerated in the Bill of Rights ... the category of infractions that violate fundamental fairness .. :' is to be defined very narrowly inclusive of only that action which "... violates those fundamental conceptions of justice which lie at the base of our civil and political institutions:' The majority held that, "especially in light of the limiting instructions provided by the trial judge ..." no such violation was present.

In support of this holding, White noted the following: first, Henry's testimony was not inherently unreliable since the jury was "... free to assess its truthfulness and significance, and the defendant was free to rebut such evidence; second, this type of evidence did not create a constitutionally unacceptable risk that the jury

O[t}lze rule . .. protects a defendant agaillst being compelled to live ill a C01ltinuous state of anxiety and insecurity. . ," would convict the defendant on the basis of inferences drawn from the acquitted conduct" ". .. due to the court's authority to exclude potentially prejudicial evidence .. :'; third, " .. . inconsistent verdicts are constitutionally tolerable"; and fourth, "the tradition that government not force a person acquitted in one trial to defend against the same accusation in a sub-

25

sequent proceeding is amply protected by the Double Jeopardy Clause:' Justice Brennan, with whom Marshal and Stevens joined, dissented.

Brennan started his opinion by noting the particular significance that society attaches to an acquittal such that a defendant can not be retried for the same offense. He stated that, "[ a Jccording such significance to an acquittal reflects both an institutional interest in preserving the finality of judgments and a strong public interest in protecting individuals against government overreaching:' "The overriding concern is that to permit a second trial after an acquittal, however

There is a Iso a great danger in admitting extrinsic (~ffellse evidellce. mistaken the acquittal may have been, would present an unacceptably high risk that the Government, with its vastly superior resources, might wear down the defendant, so that even though innocent he may be found guilty." Brennan also indicated that "[tJhe rule . .. protects a defendant against being compelled to live in a continuous state of anxiety and insecurity about whether he will be retried and from the embarrassment, expense and ordeal of an actual prosecution ."

Brennan then explained that the collateral estoppel component of the Double Jeopardy Clause ". . . prohibits the Government from relitigating any ultimate facts resolved in the defendant's favor by the prior acquittal" and that to the extent that the defendant must in fact face relitigation of such facts the likelihood of an erroneous conviction increases.

The Dissent next took exception to the Majority's placement of the burden on the defendant to prove what issues were actually decided in the acquittal. Brennan observed that since the collateral estoppel doctrine ". . . serves to protect defendants against governmental overreaching .. . the burden . . ." should fall on the Government to prove "... that the issue it seeks to relitigate was not decided in the defendant's favor by the prior acquittal." "By putting the burden on the defendant to prove what issues were actually decided the Court essentially denies the protec-

26

tion of collateral estoppel to those defendants who affirmatively contest more than one issue or who put the Government to its burden of proof with respect to all elements of the offense." Brennan based this statement on the difficulty in determining the precise route of the jury's reasoning and the basis on which the verdict rests .. :' Due to the nature of this difficulty, the Dissent also raised the possibility of due process concerns whereby a defendant might be forced n . . . to choose between foregoing the protections of the Double Jeopardy Clause and abandoning the defense of general denial . . .

The Dissent next examined the majority's reliance on forfeiture cases for its conclusion that the existence of a lessor burden of proof in a subsequent action will permit the government to relitigate an issue already decided in a defendant's favor. Brennan quickly distinguished US v. One Assortment 0[89 Firearms as concerning a subsequent civil action, noting the Court's history of recognizing ".. . a distinction between governmental action intended to punish and that which is . .." compensatory as n • • • the concern for fairness in the former context is much more acute."

Finally, Brennan recognized some of the dangers inherent in the admission extrinsic offense evidence and the majority's decision including the possibility that the jury might convict the defendant not for the offense charged, but for the extrinsic offense, particularly where the jury feels that the defendant should be punished for the prior offense notwithstanding the prior acquittal.

N•

••

N

",hlle the risk may be millimal, it is,

1l01le-

tlzrless, a risk crented

by the majority's hypertecll1I ica I view of an important ConstitutioPlll1 right.

I believe that the Dissent in this case has taken a fairer approach to resolving this issue. The majority's approach seems to be hypertechnical, intended to increase the arsenal available to prosecutors. This very may well be a decision calculated to help in the country's

efforts to fight the drug war based on the history of drug offenders often committing more than one related offense in a lifetime. However, given the importance of the Double Jeopardy Clause as a constitutional protection, technical questions should be resolved in favor of the accused.

This conclusion is especially valid given the nature and purpose of the Double Jeopardy Oause, as defined in the Dissent, in the context of today's society where the government enjoys greater resources and where legal costs have skyrocketed. The majority

"an acqUIttal in a criminal case does not preclude the government from relitigtlting an issue wltell it is presented in a subsequent action governed by a lower sta1Uiard of pr0o.f." ignores the purpose and intention of the Double Jeopardy Clause at a time when the defendant in America is most vulnerable.

There is also a great danger in admitting extrinsic offense evidence .

An example would be where, as has happened occasionally in rape trials, a victim mistakenly accuses an innocent defendant. Assuming justice prevails and the defendant is acquitted, the defendant should now be free in body and spirit. However, there is nothing to prevent the identification testimony of the mistaken accuser from being used in a subsequent trial on a similar charge. When introduced in a subsequent trial where the burden of proof is only preponderance of the evidence, the prior indictment may be given new validity, thereby tipping the scales or even directly resulting, as introduced in the Dissent, in a subsequent conviction.

While this risk may be minima\, it is, nonetheless, a risk created by the majority's hypertechnical view of an important constitutional right.

Mike Silver is a second-year day student . He graduated cum laude with a B.A . in Political Science from Trenton State College in New Jersey.

A M I ? C? ?CURIOUS? ?•

?•

S

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