Financial Services: protecting investors

By James J. Eccleston
Shaheen, Novoselsky, Staat, Filipowski & Eccleston

Recently, the Securities and Exchange Commission published for public comment its proposed new rule aimed at protecting investors, especially senior investors, against the abuses associated with the marketing and sale of equity indexed annuities.

Sales of equity indexed annuities have grown dramatically in recent years, with $25 billion sold in 2007, for a total value of $123 billion of equity indexed annuities held by investors.

Let’s examine why the SEC is concerned, what it proposes to do, and how the proposed rule will protect investors.

First, the SEC is concerned because complaints associated with equity indexed annuities have risen dramatically. Commentators quip that the products are ‘’sold, not bought,” to imply that high-pressure sales tactics often are involved. State securities regulators identify the products ”as among the most pervasive products involved in senior investment fraud.”

Likewise, a 2005 notice to members issued by the National Association of Securities Dealers (now the Financial Industry Regulatory Authority) cited concerns ”about the manner in which persons associated with broker-dealers were marketing unregistered indexed annuities and the absence of adequate supervision of those sales practices.”

That notice also ”expressed NASD’s concern with indexed annuity sales materials that do not fully describe the features and risks of the products.”

A joint examination conducted in 2007 by the SEC, FINRA, and state regulators ”identified potentially misleading sales materials and potential suitability issues” related to investment products, commonly including indexed annuities, at so-called ”free lunch” seminars. Accordingly, working with state regulators, the SEC has made ”cracking down on fraud in this area a top priority,” and the ”proposed rulemaking is a big part of that effort.”

Second, let’s examine what the SEC is proposing.

As background, the challenge for the SEC has been to make a convincing argument that this kind of annuity is less of an insurance product and more of a securities product that should be regulated as a security.

Why the challenge? Sec. 3(a)(8) of the Securities Act provides an exemption for certain insurance contracts. Additionally, the U.S. Supreme Court has weighed in on what constitutes insurance, to be regulated by state insurance commissioners, and what constitutes securities, to be regulated by the SEC.

According to the Court, Congress intended to include in the insurance exemption only those policies and contracts that include a ”true underwriting of risks” and ”investment risk-taking” by the insurer. The assumption of a risk does not ”by itself create an insurance provision under the federal definition.”

With that Supreme Court guidance in mind, the SEC proposes: ”Individuals who purchased indexed annuities are exposed to a significant investment risk i.e., the volatility of the underlying securities index Indexed annuities are attractive to purchasers because they promise to offer market-related gains. Thus, these purchasers obtain indexed annuity contracts for many of the same reasons that individuals purchase mutual funds and variable annuities [both of which are securities], and open brokerage accounts.”

The SEC also addresses a feature of the equity indexed annuity that removes some risk from the product; a guaranteed certain minimum value to the purchaser. The SEC states that, although the insurance company guarantees this certain minimum value, that value typically is less than 90 percent of the money contributed.

As a result, the SEC concludes: ”Such indexed annuity contracts provide some protection against the risk of loss, but these provisions do not, ‘by [themselves,] create an insurance provision under the federal definition.’ Rather, these provisions reduce but do not eliminate a purchaser’s exposure to investment risk under the contract. These contracts may to some degree be insured, but that degree may be too small to make the indexed annuity a contract of insurance.”

Accordingly, the SEC proposes a new definition of ”annuity contract” that would define a class of indexed annuities that are outside the scope of Sec. 3(a)(8) of the Securities Act.

Third, how will this proposal protect investors? If adopted, investors no longer will suffer from the shortcomings of a patchwork of state insurance commissioners. Instead, equity indexed annuities purchasers will receive the full protection of the securities laws. Investors will receive ”the benefits of federally mandated disclosure and sales practice protections.”

More specifically, the SEC states: ”These investor protections include registration under the Securities Act, and our requirements related to truthful and complete disclosure of the investment to potential purchasers. In addition, investors would enjoy the benefits of protections against fraud and misrepresentation, and would benefit from additional safeguards against abusive sales practices by unscrupulous marketers. In the future, these protections may significantly reduce the problem of investors being harmed by inappropriate sales of equity indexed investments.”

Let’s hope so!

jeccleston@snsfe-law.com

Info Tech Law: Privacy and liability in a connected world

By Alan S. Wernick
Wernick & Associates

Computing connectivity is usually equated with convenience. Plug in the USB memory device you carry in your pocket to the company network, download the business data, and off you (and the data) go. Quick. Easy. And potentially fraught with legal risks and liabilities for you, the business, and the customer or client.There are a number of ways to get connected to data nowadays, including Universal Serial Bus (USB) devices, Bluetooth devices, Infrared (also called IR or IrDA [Infrared Data Association]) devices, Radio Frequency Identification (RFID) devices, WiFi (wireless fidelity), and hand-held hard drives that can hold many gigabytes of data.

Many of these devices are small enough to put on the end of a key chain or carry in a shirt pocket. Each of these devices can enable the user of the device to copy significant amounts of confidential personal data in less time than it took you to read this paragraph.

In the future, the myriad of electronic connectivity devices will be shrinking in size while increasing in storage capacity. Small, portable, high-capacity hard drives without any moving parts are already entering the marketplace. Consider the potential of a physician being able to carry a patient’s entire medical history in the palm of the hand along with, and integrated with, medical and drug interaction reference texts. And consider the potential of patients being able to carry a card in their wallet that has their entire medical history from birth to present. Now, consider the potential liabilities for the loss of this valuable data or the inaccurate recording of this critical data.

Various state legislators and U.S. Congress have given considerable thought and analysis to these potential risks and liabilities for this valuable, critical data. The federal laws include some familiar names, such as the Health Insurance Portability and Accountability Act, Financial Services Modernization Act (otherwise known as Gramm-Leach-Bliley), and Sarbanes-Oxley Act.

The courts are weighing in on this subject as well. When actual harm, either economic or physical, results from identity theft, the courts have awarded damages.

Indeed, a number of states have passed data-breach legislation. Businesses may also experience liability for damages as a result of failing to act in accordance with all of the applicable data-breach laws. Which data-breach law applies may depend on the residence of each of the affected individuals in the compromised database, and not the location of the entity that experienced the data breach.

While financial damages to a business from a data breach can be significant, they can pale in comparison to a potentially far more deadlier damage the loss of trust by those who entrusted you to protect their personal identifiable information. This loss of trust can potentially have a far greater negative impact on your business than any out-of-pocket financial damages award.

What can businesses do to manage the risks of liability for data breach as a result of interconnectivity? Steps for consideration include:

– Have a legal audit done by knowledgeable legal counsel (preferably one with a technology background and familiarity with data privacy, security, and compliance). A legal audit includes interviewing people in your organization, Illegal ‘X-value’ for character STYLs voided here reviewing your practices and procedures (for instance, reviewing your vendor contracts for data privacy and related risks), and identifying the strengths and weaknesses of your compliance with the applicable statutes and laws, as well as identifying potential risks regarding data privacy and data security.

– Have a security audit done by a knowledgeable security professional working with knowledgeable legal counsel. o Use encryption to secure the data at all times.

– Require users to use at least two security elements for interconnectivity access: (1) something they know a strong password (that is changed periodically), and (2) something they must carry with them (in addition to the interconnectivity device), for example, a security token that generates a unique random number linked to the network’s main server.

– Obtain appropriate insurance coverage for data breach losses.

– Educate users about data security and data quality.

– Finding the balance between interconnectivity and risk management for data privacy, data security, and data quality will not be easy. Putting together a team from within your organization along with outside advisers is one proactive, preventive approach to finding that balance and managing the risks. While this approach may be expensive, it will be far less expensive than the increased lost management time, and increased legal expenses involved in having a court or government agency handle the problem for you.

Interconnectivity issues will only increase over time as new technologies allow for new ways to access data. While the legal risks can be managed, they may not be entirely removed. It is a process. As the old Chinese saying goes, ”If you don’t know where you are going, any road can take you there.”

Which road will you take to connect with your data?

(C) 2008 Alan S. Wernick

alan@wernick.com

Counsel’s Table: Quality in the details

By Russell B. Selman
Katten Muchin Rosenman - Restaurant Critic

Years ago when I transitioned from my job with the Feds to a large prosperous D.C. law firm, I had some trepidation about fitting into my new surroundings. My sense of dread deepened when I went out to lunch with my new partners to an ersatz deli and watched as each of them took a pickle and, using their knives like scalpels, they cut their respective pickles into eight separate slices, and then used a fork to transition the slices into their mouths.

My ever-humble approach to fitting-in led me to use my mitts to pick up my pickle and thrust the pickle into my mouth and then chomp until completion. In that mandibular moment my die was cast I would not ever fit in, as this episode repeatedly played out over my brief tenure. (Indeed my secretary came into my office within 20 minutes of my infamous lunch faux pas and said as much: ”I’ve seen’em come and go and you are just a bit too interesting to stay.”) I realized that I was just not a ”monkey-see, monkey-do” kind of get-along guy so dear to the firm leadership.

I got my second wind here in Chicago and, while I have swell anecdotes from my past professional associations, I am now somewhat attentive to the local mores of my environs. When congratulatory e-mails go out over some major litigation win regarding how we prevailed in a Deep South litigation regarding the alleged misconduct of a notary using a rubber stamp rather than the historic embossing seal, I join in on the celebration congratulations sometimes I am even the first to e-mail, ”great job!” When in Rome, eat the spaghetti or else.

Such happy thoughts of fitting-in lubricated my hopes for C-House, the Chicago cousin of New York’s Aquavit restaurant. Aquavit is one of my favorite places, with an emphasis on Scandinavian-styled seafood, ”quiet” and superb presentations and an absurd (and very delicious) emphasis on herring.

I worried that the herring sacraments (and the very restrained and complex New York style) would be excommunicated by a Midwestern-style papal bull. Exactly how a herring might face such severe sanctions, I was uncertain but still worried.Location-wise, C-House is challenged. Located in a hotel nobody has ever heard of (the ”Affinia,” which sounds like a Latin medical phrase for irritable bowel syndrome) and next to one of those lousy pizza joints (that all Iowa tourists MUST visit), C-House is easy to miss off Michigan Avenue. Indeed, I had to push through a sweaty scrum of teenage burpers exiting the pizza inferno.

That said, life is funny sometimes, as C-House is as attractive as can be. Serene and confident styling dominates the living room/dining room with teak furnishings, copper orb lighting and nautical photos casually placed here and there. Oddly, the room feels important, almost like a UN diplomat’s lounge. Except here, all of the secrets are maintained in the chef’s cookbook.In the evening, the musical mood is set by Dido, at lunch it’s jazz and the atmosphere is sophisticated, upscale but warm. The starting courses, ”C-House tastes,” can be ordered individually but should be ordered in groups of three, five or seven for several dollars each. The wagyu beef taste is a swirl of deep, flavorful peppery emotion that had me plumbing the depths, and I only surfaced when a tart caperberry brought me back to the surface. The fish tacos are 21-jewel-like mechanisms of time using seasoned yellow tail enrobed in and underlain by corn -a totally perfect composition. Nothing flashy if the comparison is to a watch, we are talking Patek, not Rolex, with the quality inside.

At lunch, I had a crab sandwich that was d’bomb. The essence of summer present, better than the memory of summers past, and free of all restraint. Perfectly fried, bright with promise and totally unhinged a crab sandwich that I simply cannot lie about in the plain light of day.

Not all is perfection. A short rib-filled agnolotti was a bit pallid without the expected zing from the horseradish consomme bath. And a chorizo mac and cheese was hearty but a bit heavy. However, the seared tuna with sea urchin had me overlooking such inconsistencies, as the salty/sweet flavors extinguished the occasional missteps.

That C-House is excellent is not in question. The quality is in the small details, the wonderfully nuanced flavors, pretty presentations and quiet confidence. With an ever-increasing Chicago audience for fine dining, C-House should fit in very well and maybe one day, Chicago will get the herring.

Pleadings:
C-House
166 E. Superior, 312-523-0923

Court costs:
Tastes $ 3 - $6
Small Plates $ 9 - $16
Entrees $19 - $48

Verdict:
Four Gavels

Clifford’s Notes: Using video properly

By Robert A. Clifford
Clifford Law Offices

A 31-year-old man suffered traumatic brain injury when his cargo van was struck from behind by a school bus. During trial, the court admitted as demonstrative evidence a silent day-in-the-life film of less than five minutes of his going through physical therapy. Donnellan v. First Student, Inc., No. 1-06-2418 (1st Dist., decided June 19, 2008).

Despite the depiction of obvious pain, the court found that ”the very purpose of these videos is to illustrate evidence regarding a party’s life at the time of trial.” Id., at 7.

I have used video at trials and routinely include digital DVDs in settlement brochures. I recall the first time the court allowed a day-in-the-life tape to be run with sound because the court ruled that it accurately portrayed the plaintiff’s condition, and that its probative value outweighed any prejudicial effect.

It was the case of an 11-year-old Boy Scout who was severely injured in an accident while traveling to a Boy Scout jamboree. He lay in a coma for eight months with a broken skull and severe permanent injuries. That case resulted in a $14.2 million verdict in 1990.

As trial lawyers, we have moved from diagrams to computer animations, simulations, and reconstructions as the public becomes more technologically savvy. It is clear that, regardless of the type of presentation, lawyers must lay a proper foundation in introducing the evidence with experts or other witnesses.

Computer-generated animations generally are used to explain or illustrate a witness’s testimony and are allowed as a demonstrative aids with the proper foundation and after the court determines they are relevant, accurate, and not unduly prejudicial. More courts are accepting such animations, comparing them to charts or diagrams that are drawn by a computer instead of by hand or mechanically.

Although courts use the term computer animation interchangeably with computer-generated simulations, the latter typically are re-creations based on scientific principles and reliable data. The reconstruction of events really becomes a transference of data from one reliable medium to another reliable medium video that assists the jury in understanding engineering functions and other technical details through a fair and accurate depiction of the events.

In Illinois, a computer animation was allowed as demonstrative evidence in Dillon v. Evanston Hospital, 199 Ill.2d 483, 771 N.E.2d 357 (2002). The Illinois Supreme Court affirmed the use of video animation in explaining an expert’s testimony that depicted a bacterial infection in the heart that spread to the brain.

The court concluded that, even though the video displayed a type and location of infection different from the infections that the plaintiff might suffer in the ”the video animation would be helpful in explaining to the jury the general development of endocarditis, a condition for which plaintiff is now at risk.”

In a brief discussion, the Illinois Supreme Court found that cross-examination of the plaintiff’s expert about the videotape would have avoided any confusion for the jury.

Computer animations are being used routinely by lawyers in airplane crash cases, truck accidents and even in criminal cases. In Jones v. Kearfott Guidance & Navigations Corp., 1998 WL 1184107 at 3, 4 (D.N.J.1998), the court allowed the introduction of animated videos of eyewitness observations of a helicopter crash and of the simulated engine failure.

Not only did the court find them relevant, it held that the engine failure video was not hearsay because ”it is not a statement offered to prove the truth of the matter asserted; rather it is offered to illustrate the expert witness’s theory.” Id., at 4.

In Datskow v. Teledyne Continental Motors Aircraft Products, 826 F.Supp. 677, 686 (W.D. N.Y.1983), the court held that computer video demonstrations are permissible as demonstrative evidence to illustrate an expert’s version of the events so long as the jurors do not believe that they are ‘’seeing a repeat of the actual event” but instead understand that ”they are seeing an illustration of someone else’s opinion of what happened.” Id., at 686.

In quoting ”Jack Weinstein on Evidence,” the court reiterated, ”’If audio or visual presentation is calculated to assist the jury, the court should not discourage the use of it … Jurors, exposed as they are to television, the movies, and picture magazines, are fairly sophisticated. With proper instruction, the danger of their overvaluing such proof is slight.”’ Id., at 685, quoting, 1 J. Weinstein & M. Berger, ”Weinstein’s Evidence,” par. 403[5] at 403-88 (1992 ed.).

Generally, I introduce video demonstrative evidence under two circumstances: case-specific video that has been created in concert with the experts or treaters who vouch for its accuracy; or ‘’storeroom shelf,” ready-made video that is available and case-neutral that can be fairly used by both sides as an aid for the jury.

Certainly, video can be a powerful tool. The unique attributes of video animation and other types of moving images can be used at trial, with proper foundation and instruction, to better inform the jury of issues that may not be explained as well through diagrams and other one-dimensional demonstrative evidence. I would not enter a courtroom without this type of helpful evidence.

Closing Argument: Lessons from the big dog

By Peter S. Stamatis
Law Offices of Peter S. Stamatis

A little more than a year ago, Chicago lawyer Michael W. Coffield died at his desk. Mike was a friend and mentor to all and a lawyer’s lawyer. Those who had the privilege of knowing Mike knew that there was always some nugget of wisdom glistening in the frenetic frenzy. Mike was always teaching us how to be better better lawyers, better friends, and better people.

In the fall of 1996, I read an article in Chicago Lawyer about Michael leaving Coffield Ungaretti & Harris and going solo. On a lark, I picked up the phone and introduced myself.

”Call my secretary Monday and schedule a time to come over for coffee,” he said. With Mike, it was always that simple. Everyone was welcome.At our first meeting, Mike was gracious. He was always gracious. We drank coffee, he looked at my resume, and he talked about ”Moby Dick.” For nearly the entire next decade, I had the privilege of practicing law in the office directly next to his.

Mike was a mentor par excellence. Though it’s a certainty I missed many of them, here are 10 of Mike’s lessons, in no particular order:

Lesson 1 Always be civil.

”Do you know who is the most important person in a courtroom? It’s not the judge — it’s the judge’s clerk. Treat the clerk better than you treat the judge.”

It’s doubtful that there has been a lawyer in the history of Chicago who befriended more adversaries than Mike Coffield. Of course, Mike fought hard for his clients. But when a case was over, his opposing attorney was usually added to his list of friends. Many would come to him for advice.

Lesson 2 Dress like a lawyer.

No one dressed better than Mike. His haberdasher shed many a tear at his funeral. Mike never bought in to ”casual Fridays,” and when I’d show up to the office in jeans, he’d shoot me a look that said, ”C’mon Peter, you’re a lawyer. You don’t work at the rodeo.”

Lesson 3 Read.

Mike was an avid reader of The New York Review of Books. Whatever interested him, he bought, reading multiple books at the same time.

”I’ve got one going in the bedroom, one in the bathroom, one in the car, one in the kitchen, and one at the office.”

He read novels, history, politics, and art, and encouraged everyone to do the same.

Lesson 4 Share, and don’t keep score.

Mike couldn’t just take one person to lunch. He’d take everyone to lunch. If a book sounded especially interesting, he’d order multiple copies and hand them out. He bought tickets to just about everything and gave most of them away. And most importantly, he never kept track of any of it.

Lesson 5 Leave something on the table.

Many believe that the best negotiators are those who can squeeze the last nickel out of a transaction. Mike didn’t. ”Always take the long view. You are better off at the end of the day with a little goodwill than you would be with the few extra dollars.”

Lesson 6 Lead.

One might think that Mike’s selflessness might have made him a human doormat. Not the case. He was honored constantly and elected president of just about every organization he ever joined, accepting each role with vigor, throwing himself wholeheartedly into and improving everything he touched.

Lesson 7 Think of others.

Mike was lavish in his praise and congratulations, usually by way of a personal note scribbled with huge letters in blue, green, or purple marker. And no occasion was too small to celebrate: ”Congratulations, I heard you had lunch yesterday. I wish you all the best. Mike.”

Lesson 8 Mentor.

Mike was proud of his role in the Inns of Courts and its mentoring of young lawyers. ”How does one pay back a mentor?” he once asked. ”The only way to do it is to pass along what you’ve learned to someone else. Pay it forward.”

Lesson 9 Take it as it comes.

Mike had his fair share of challenges, especially in the last few years of his life. In handling the steady deterioration of his wife’s health due to Alzheimer’s disease, not to mention living with his own health issues, he never whined. ”Getting old ain’t for sissies,” is all he’d say, quoting his mother.

Lesson 10 Leave ‘em wanting more.

”The best place to sit at a party is with your back to a wall and with a clear shot of the door. From there, you can see people come and go and can spend at least a little time with everyone.

”And when do you leave? Leave right at the point when you’re having the most fun you ever had. Why leave then? First, it’s never going to get any better. Second, leave when everyone still wants you to stay. Leave ‘em wanting more.”

These, of course, were just a few of Mike’s lessons. But when you boil everything down, perhaps the greatest lesson was to enjoy being alive. Mike did that by living ”big,” adopting what can only be called the ”Golden Rule Plus:” Treat others better than you could ever hope to be treated.

And that was, perhaps, his greatest lesson.

In the Woodpile: Addressing civility

By Shawn Wood
Seyfarth Shaw

Every other year, the Illinois State Bar Association holds its Allerton Conference, where judges and lawyers spend a few days at the Starved Rock Lodge in Utica to confront an issue impacting our profession.

The topics tackled in prior years have ranged from reforming the jury system to ”The Quest for Justice: Cost, Efficiency and Fairness for All.” In 2008, the Allerton Conference focused on ”Civility Initiatives for Civil Litigation.” When I heard this topic, I’ll confess, I was a little skeptical.

I appreciate that incivility remains a serious issue in our profession. It impacts our day-to-day lives, and, in extreme cases, has caused good lawyers to leave the practice of law.

It’s just that, I attended a civility seminar in DuPage County a few years ago, and I walked away with mixed feelings. The speakers inspired me, but when I attempted to strike up a dialogue with one during the reception, he didn’t show any sincere interest in solving ”the civility crisis.” He was more focused on stalking the waiter for more crab Rangoon.

The articles I’ve historically encountered regarding professionalism and civility often seem well-intentioned, but short on solutions. There’s also a tendency to blame incivility on the younger generation while waxing about the glory days of the profession.

Dishing out this discouraging, ”you missed out” message leaves new lawyers feeling like William Miller in ”Almost Famous,” when legendary rock critic Lester Bangs tells him ”you’re damn good, too bad you missed out on rock ‘n’ roll.”

So imagine my surprise when I attended this year’s Allerton Conference and the entire civility program steered clear of rose-colored nostalgia. In fact, to use a description befitting the professionalism emphasized throughout the conference, it totally rocked.

The speakers at this conference grabbed attendees by the lapels from the outset, providing numbers on the rates of depression, anxiety, hostility, paranoia, social alienation, isolation, alcoholism, divorce, and suicide among lawyers.

The conference then moved quickly to identifying core reasons for the problems, outlining solutions and exploring whose responsibility it is to implement those solutions.

One commentator explained that the very nature of civil litigation involves two lawyers (often Type A personalities) squaring off against one another under circumstances where there will be a winner and loser, and part of each lawyer’s job will be to capitalize on any possible error in judgment that the other side makes.

Others emphasized that client expectations often drive incivility, as the perception lingers that clients favor machismo in their lawyers and make their hiring decisions accordingly.

Another speaker cited the pressures to increase profits-per-partner in firms and outlined what he called ‘’strategic incivility,” positing the well-received theory that most lawyers are not inherently mean-spirited, but are driven to act as such because they believe incivility to be a profitable strategic tactic in litigation.

This lawyer proposed that the solution to the problem of strategic incivility lies in making it unprofitable through a new Illinois Supreme Court Rule, patterned after 28 U.S.C. 1927, sanctioning ”vexatious” conduct.

While further commentary during the conference suggested that the Illinois Supreme Court justices and members of its rules committee in attendance were not enamored with the idea of a new Supreme Court rule governing this issue, courts and local bar associations have made significant strides in identifying and reducing incivility in civil practice.

These programs have included the appointment of respected members of the bar who personally meet and work with attorneys or judges whose conduct fails to satisfy established standards of civility and professionalism.

Some of these measures have met with resistance when tried in other jurisdictions. In California and Arizona, for example, rules which required lawyers to ”abstain from all offensive personality” [insert own joke here] were amended following a 9th Circuit ruling which held this phrase to be unconstitutionally vague.

In other states, lawyers facing charges of incivility have sought to raise First Amendment defenses.

These types of challenges must be considered by any court or bar association seeking to strike a balance between remedying incivility and triggering other legal challenges.

The final point I learned at this conference was that the alleged ”loss of civility” within our profession is something that has been raised and debated over the last three decades.

From the ABA’s Stanley Commission Report (to address a perceived shift away from the principles of professionalism in the 1980s) to the Haynsworth Report (”to better inculcate a higher sense of professionalism among American Lawyers” in the 1990s), every new generation has encountered the same jibe from prior generations who insisted that standards of professionalism were declining.

This provided me with a new, optimistic perspective, because if this perceived decline in civility has been raised for the last 30 years, at least the current leaders are working harder than ever to do something about it.

I accordingly left the seminar with my faith in our profession restored. Or, in Lester Bangs’ parlance, I realized I hadn’t missed out on rock ‘n’ roll after all.

Practical Matters: What makes a good mediator

By David M. Heilmann
Clausen Miller

”Look, you two need to come together, express your emotions, defuse the anger, and work on your ongoing relationship.”

Sounds like Dr. Phil, doesn’t it? Actually, these are a few of the reasons why, according to the American Bar Association, you mediate a case.

Expressing our emotions.

For some reason, I can’t picture myself lying on a couch as former Judge Don O’Connell asks, ”Tell me how you feel today. Are you angry at opposing counsel? Do you think he’s a bitter little man?”

And as for the ongoing relationship part, well, that’s out.

I’ll say, ”hi,” in the elevator and be friendly, but don’t expect dinner.

The ABA is not alone. There are fairly standard definitions of what the mediation process is to entail. In defining the role of the mediator, JAMS notes on its website that ”the mediator does not decide what is ‘fair’ or ‘right,’ does not assess blame nor render an opinion on the merits or chances of success if the case were litigated. Rather, the mediator acts as a catalyst between opposing interests, attempting to bring them together by defining issues and eliminating obstacles to communication, while moderating and guiding the process to avoid confrontation and ill will.”

Is that our expectation of the mediation process?

Is it just someone to facilitate communication? Or is it someone who has knowledge of the legal issues and will give an opinion on where he or she believes the weight of the evidences lies?

The ABA leans toward the former. ”Mediation doesn’t rely on specific points of law. People solve their own problems by looking to the future instead of finding fault or blame. In contrast, the courts make judgments based upon the law.”

If that’s the case, then why do we see so many former judges as mediators? The courts make rulings based upon the law.

Further, a judge is elected or appointed primarily because of his or her legal experience, not expertise in counseling, anger management skills, or the ability to promote loving and harmonious relationships.

As a matter of fact, one or two judges have been known to be downright crabby themselves.

Judge Gomberg yelled at me 20 years ago and I’m still not over it. But I digress.

The traditional definitions of mediation may not comport with what we, in practice, want and expect from a mediator. Many attorneys select mediators, including former judges, precisely because of their knowledge of the law and their ability to offer some legal insight into the issues.

Peter McCabe, a senior partner at Winston and Strawn, offered these thoughts.

”In selecting a mediator, I look for (1) a lawyer with actual experience trying cases involving the subject matter of the litigation; (2) a trial judge who has had many years of experience trying cases involving the subject matter of the litigation; or (3) a lawyer or layperson with substantial knowledge and experience of the particular industry in which the litigants find themselves.”

Key was the knowledge and experience with the subject matter. Why?

”I want someone who will have credibility while making the case to either my opponent or his client — or perhaps to my own client — that a particular settlement makes good business and litigation sense. If the mediator doesn’t fall into one of these categories, then I generally find that the mediation will be doomed from the start.”

Veteran trial attorney Robert Heyne of Tressler, Soderstrom, Maloney & Priess had similar sentiments. ”A mediator has to be prepared for discussions of the fact issues and the law. Then, through meetings with the parties, there comes a narrowing of the factual and legal issues and that suggests the value of the case.”

Again, more than facilitating communication, the preferred effort from the mediator was working on narrowing the legal issues.

One of my partners, Scott Ritchie, agreed.

”Every mediator should have a good command of the relevant law, be willing to devote the time necessary to learn the important facts creating the controversy, and then objectively explain the relative strengths and weaknesses of the merits of the case to each of the parties to direct the parties to resolution.”

Many mediators and attorneys will tell you that the most successful mediations are those where it is the attorneys who have worked in advance with their clients to put emotions aside and to have realistic expectations from the process.

”There is some point beyond which a client would not accept settlement, so the lawyers must help the client find that point of indifference and commit in advance to accepting any offer that is superior to that point or position, offered Robert Knuepfer, a senior partner at Baker & McKenzie.

”Going for everything inevitably leads to failure. Mediation is compromise, not a winner-take-all exercise.”

Unless of course you’re really, really angry and need that time on the mediation couch.

Pro Bono: The right to counsel

By Margaret C. Benson
Chicago Volunteer Legal Services

Happy birthday, America. You look great! Can you believe it’s been 232 years? It seems like only yesterday when our guys were sweating it out in Philly. Sure, you’ve had some growing pains, but, for the most part, it’s been a pretty good ride.

Normally, we’d sing the Happy Birthday song, but let’s celebrate your special day with Irving Berlin’s great ”God Bless America.” Not only is it a classic, but an immigrant, one of millions who have contributed to your greatness, wrote it.

Just ask founding father James Madison. He said, ”America was indebted to immigration for her settlement and prosperity. That part of America which had encouraged them most had advanced most rapidly in population, agriculture and the arts.”

Thomas Jefferson said, ”Our ancestors … possessed a right, which nature has given to all men, of departing from the country in which chance, not choice has placed them.”

Consider that: immigration as a right. That’s a very American concept. We Americans have always prided ourselves on spreading our gospels of democracy, human rights, and the rule of law around the world.

So, consider the young man seeking asylum from a repressive regime that wants to silence him for speaking out against the persecution of minorities. He believes in freedom of speech.

That’s American.

Consider the couple who emigrated here to find a better life for their young children. They want citizenship so that they can vote. How American is that?

And the adult children who want to bring their aging parents here so that they can comfort and support them in their remaining years. American family ideals, right?

Consider the immigrant who wants to flee an abusive marriage, but can’t because her home-grown husband threatens her with deportation. Protecting her and their children is the American thing to do.

And, finally, consider that America is a nation of laws, and that the protection of our laws and our legal system extends to everyone within our borders, including those here illegally.

People need attorneys to access the law. More importantly, our legal system uses attorneys to guarantee its protections.

That’s where you come in. Although the law gives non-U.S. citizen-immigrants the right to counsel, they have to find and hire attorneys on their own. That’s pretty hard to do with limited English skills and limited resources. It’s nearly impossible when you are sitting in a Homeland Security detention cell awaiting deportation.

Attorneys who are interested in handling pro bono cases for immigrants get compelling cases that help them acquire new legal skills or hone existing ones.

Want litigation? Asylum cases, which nearly always go to trial, provide invaluable practical litigation experience.

Or, would you prefer a different type of heart-tugging case? Represent a detained adult or juvenile fighting a deportation order, or a woman who qualifies for immigration benefits under the Violence Against Women Act (VAWA) because she’s been abused by a U.S. citizen or a permanent resident.

Not really a Perry Mason or Denny Crane type? Then help people complete and file their applications for lawful permanent residence or citizenship.

If you’d prefer to limit your pro bono work to non-immigration cases, don’t worry there’s plenty you can do. Newly arrived Americans are more likely to need legal assistance, and less likely to find it on their own. Thanks to sleazy landlords, cheating employers, illegal ”notario publicos,” and similar miscreants, Chicago’s immigrant community has plenty of need for pro bono attorneys.

Ethnic bar associations and neighborhood organizations can verify that. Amicus Poloniae, a Saturday-morning legal aid clinic on Milwaukee Avenue in the heart of Chicago’s Polish community, is always packed with Poles who need legal help. The Indo-American Bar Association hosts a Saturday afternoon clinic near Devon Avenue, where Indian, Pakistani, and Bangladeshi clients see volunteer attorneys for help with immigration, consumer, employment, and any number of garden-variety legal issues.

American law protects us all native-born and immigrants. So, whether you believe that our current immigration policy should be strictly enforced, or is a joke, whether you favor a wall or open borders, celebrate America’s birthday by representing an immigrant, pro bono.

It’s the red, white, and blue thing to do. Contact the National Immigrant Justice Center for asylum, immigration, and VAWA trainings and cases.

Contact Veronica Rodriguez at Chicago Volunteer Legal Services at (312) 332-1649 if you are interested in volunteering at Amicus Poloniae, the Indo-American Clinic, Asian Human Services Legal Clinic, or several other neighborhood clinics that serve primarily immigrant clientele.

Check out www.illinoisprobono.org to find other organizations that represent or offer legal services to immigrants.

3L and the City: Hire me!

By Maria Vasos
Chicago-Kent College of Law

I am a recent J.D. graduate with a certificate in criminal litigation and a lot of practical litigation experience through externships and clinics. If you are looking to hire a young trial attorney at a firm or government agency, e-mail mariavasos@gmail.com.

For this, my last column, I have decided to shamelessly hawk myself to the magazine’s readers in hopes that someone will offer me a permanent position. This should come as no surprise to those in tune with the realities of the job market these days.

For example, last month Sonnenschein Nath & Rosenthal laid off 37 lawyers, including six partners, four of counsel, and 27 associates — mostly in the areas of real estate and litigation. These, combined with its support staff layoffs, represented 7 percent of its 1,700-person workforce, in response to a falloff in work due to the economic decline.

New graduates not only have to compete with each other for the scarce decent availabilities left open in the bad economy, but they also have to compete against experienced attorneys who also find themselves in need of employment.

This especially does not bode well for new graduates, like myself, who are interested in hard-hit fields, like litigation.

It used to be that to get into the courtroom right away and gain valuable trial experience, young attorneys could join the state’s attorney’s or public defender’s offices for at least a few years to learn the ropes. With the county budget crisis still looming overhead like a dark storm cloud, this is no longer the case. Not only is there a hiring freeze, but actual assistant state’s attorneys and assistant public defenders are struggling and barely able to hold onto their jobs.

Earlier in the year, before the sales tax increase passed, there was talk of a 13 percent cutback in the criminal justice division, which would have resulted in the layoff of almost 200 assistant state’s attorneys and over 130 assistant public defenders, along with the closing of at least two suburban courthouses.

It is not just the poor, unstable economy that is making job searching difficult, it is also the increasing number of law students flooding the market. There are more graduating law students, in part because of the enrollment of hopeful students, and in part because universities are starting up more law schools. Since 1995 alone, the number of ABA-accredited law schools has increased 11 percent to 196.

There is a great Wall Street Journal online article from September 2007 entitled, ”Hard Case: Job Market Wanes for U.S. Lawyers.” It talks about how the legal market is not keeping up with general inflation and how the supply of lawyers is drowning the demand. It is a very sobering piece to those of us who are embarking on a legal career. I read and re-read this article regularly to give myself a reality check during my job search.

And graduating law students should be worried, because they have a huge burden of student-loan debt to pay that their predecessors did not have to worry about. Tuition rates at law schools have almost tripled the rate of inflation over the past 20 years.

The wsj.com story reported that, according to the ABA, 2006 graduates of public and private law schools had borrowed an average of $54,509 and $83,181, up 17 percent and 18.6 percent respectively.

Having gone to a private law school, I can say unequivocally that those numbers are low-balled compared with the actual numbers of the majority of my colleagues and myself.

Undoubtedly those figures take into account trust-fund babies who had their legal education handed to them on a silver platter, which skew the results. This also does not take into account undergraduate loan amounts that many students also have to shoulder upon graduation. Many students find themselves saddled with ”a mortgage” in student loans when the reality hits that only very few new lawyers will land a highly lucrative position.

I, too, have delusional hopes of getting my dream job, where I do exactly what makes me happy and get paid loads for doing it, but I always come to my senses shortly thereafter.

My most recent smelling-salt was the loan calculator feature during my online ”exit loan counseling” for my financial aid package. By inputting the total amount of all of your student loans, the calculator will determine how much you need to make in order to ”live comfortably.”

According to my numbers, the calculator said that I need to earn $173,000+ annually. This, of course, nauseated me to no end because that is a pipe dream if I ever saw one in my life. But I have made my peace with my studio apartment and cheap Asian-import car, which should help balance my expenses.

What stings now is being incessantly asked what job I have lined up. After giving my standard response that I’m focusing on the bar right now, for some reason people proceed to tell me about how their daughter/nephew/ neighbor was hired at [insert big firm here], but then turned it down to work at [insert other lucrative opportunity here], like somehow that bit of news would make me feel better about my own desperate situation.

So, please save me from any more exercises in self-deprecation and hire me. I am great, you’ll see.

Info Tech Law: Three strikes and you’re out

By Alan S. Wernick
Wernick & Associates

The U.S. Supreme Court says the right of publicity protects the proprietary interest of an individual to ”reap the reward of his endeavors.” Zacchini v Scripps-Howard Broadcasting Co. (1977). How does the right of publicity fare against the First Amendment? In a recent case, Major League Baseball stepped into the arena of the federal courts with this question, and struck out while trying to enforce rights of publicity.

Strike One

In C.B.C. Distribution and Marketing Inc. [CBC] v. Major League Baseball Advanced Media L.P. [MLB], (E.D. Mo. 2006), CBC filed a declaratory judgment action seeking to use, without license, the names of and information about major league baseball players in connection with CBC’s fantasy baseball products. CBC uses its Internet website (www.cdmsports.com) to sell its fantasy sports products, which incorporate the names, statistics, and biographical data of major league baseball players.

As the case evolved, the key issues became (1) whether the players have a right of publicity in their names and playing records as used in CBC’s fantasy games, and, if the players have such a right, whether CBC is violating the players’ claimed right of publicity; and (2) if the players have a right of publicity that has been violated by CBC, whether the First Amendment applies and, if so, whether it takes precedence over the players’ claimed right of publicity.

To determine the elements of the right of publicity, the district court cited the Missouri Supreme Court in Doe v. TCI Cablevision (Mo. 2003). In the TCI case, the Missouri Supreme Court held that ”the elements of a right of publicity action include: (1) That defendant used plaintiff’s name as a symbol of his identity (2) without consent (3) and with the intent to obtain a commercial advantage.” The district court held that CBC ” … is not violating the players’ claimed right of publicity.” The district court held that the First Amendment takes precedence over the right of publicity.

Strike Two

MLB stepped up to the plate in the 8th U.S. Circuit Court of Appeals (CA8, 10/16/2007). In examining the right of publicity issue, the court of appeals disagreed with the district court: ”Because we think that it is clear that CBC uses baseball players’ identities in its fantasy baseball products for purposes of profit, we believe that their identities are being used for commercial advantage and that the players therefore offered sufficient evidence to make out a cause of action for violation of their rights of publicity under Missouri law.”

However, the court of appeals agreed with the district court that CBC’s First Amendment rights supersede the players’ rights of publicity. The 8th Circuit noted that, although this ” … dispute is between private parties, the state action necessary for first amendment protections exists because the right-of-publicity claim exists only insofar as the courts enforce state-created obligations that were ‘never explicitly assumed’ by CBC.” The U.S. Supreme Court directed in Zacchini that ” … state law rights of publicity must be balanced against first amendment considerations.” The appeals court concluded … that the former must give way to the latter.”

The 8th Circuit found persuasive a California decision, Gionfriddo v. Major League Baseball (Cal. Ct. App. 2001), in which MLB was, in effect, in CBC’s shoes seeking to protect MLB’s First Amendment rights, and defending MLB’s use of players’ names, likenesses, and information against the players’ asserted rights of publicity.

The Gionfriddo court stated that ”Major league baseball is followed by millions of people across this country on a daily basis … The public has an enduring fascination in the records set by former players and in memorable moments from previous games … The records and statistics remain of interest to the public because they provide context that allows fans to better appreciate (or deprecate) today’s performances.”

Also, the ”recitation and discussion of factual data concerning the athletic performance of [players on MLB's website] command a substantial public interest, and, therefore, is a form of expression due substantial constitutional protection.”

Turning its attention to CBC’s use of the Internet, the 8th Circuit states: ”We also find no merit in the argument that CBC’s use … is not speech at all. We have held that ‘the pictures, graphic design, concept art, sounds, music, stories, and narrative present in video games’ is speech entitled to first amendment protection. See Interactive Digital Software Ass’n v. St. Louis County, Mo. … (8th Cir. 2003).

Similarly, here CBC uses the ‘names, nicknames, likenesses, signatures, pictures, playing records, and/or biographical data of each player’ in an interactive form in connection with its fantasy baseball products. This use is no less expressive than the use that was at issue in Interactive Digital.”

Strike Three

On June 2, 2008, the U.S. Supreme Court denied MLB’s petition for certiorari.

Game over.

The bottom line: the right of publicity is a viable legal right, but must be interpreted through the lens of the First Amendment.

© 2008 Alan S. Wernick

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