JANUARY 1982

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Arkansas .

• Lawyer

"COURTROOM STUDY" WEST '79/THE LAW

JANUARY 1982

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January 1982 Vol. 16, No. 1

THE OFFICIAL PUBLICATION OF THE ARKANSAS BAR ASSOCIATION

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Arkansas Lawyer SPECIAL FEATURES

OFFICERS

James D. Cypert, President James L. Shaver, Jr., President-Elect

Cover Story Federal "Anti-trust" in Times of Change "Legal Action" in the Yellow Pages What You Need to Know about Generation Skipping Taxes A Securities Law Primer for the General Practitioner 1981 Annual Meeting Photo Highlights

44 William French Smith Cliff Jackson

6 16

Joseph M. Erwin

19

John M. Sheffey 32 38

EXECUTIVE COUNCIL

Clint Huey Floyd Thomas, Jr. Norwood Phillips Gus B. Wallon Charles Carpenter Robert Cearley Thomas Ledbetter D. Mac Glover Marcia Mcivor

Leroy Froman Tommy Womack Julian Fogleman

EX-OFFICIO

James D. Cypert James L. Shaver, Jr. Phillip Carroll W. Christopher Barrier Harry T. Moore Robert D. Ross

EDITOR

C. E. Ransick

REGULAR FEATURES President's Report .....•.•.•........... James D. Cypert 2 Juris Dictum ...................•.•..... Robert L. Lowery 28 Legal Economics . . . . . • . . . • . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 Law School News ...•...•.•..........................

24 Oyez-Oyez Carol Utley 30 InMemoriam................. ~ Executive Council Notes W. C. Barrier 14 Service Directory I.B.C. Addenda C. E. Ransick 43 Context W. Christopher Barrier 12 AICLE News Claibourne W. Patty, Jr. 26 The Arkansas Bar Foundation .. . . . . .. Herman L. Hamilton 10 To Wit S. Sponte, Esq. 36 Lawyer's Mart ,..........................

35 Young Lawyers' Update ....•............... H. T. Moore 15

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

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

EDITORIAL COMMITTEE

Robert T. Dawson E. Alvin Schay Cyril Hollingsworth

necessarily that of the Arkansas Bar Association, The Arkansas lawyer, or the Editorial Committee. Contributions to The Arkansas lawyer are welcome and should be sent in two copies 10 the Arkansas Bar Center, 400 West Markham, little Rock, Arkansas 72201.

All inquiries regarding advertising should be sent to The Arkansas lawyer above address.

January 1982/Arkansas Lawyer/1

PRESIDENT'S REPORT

by JAMES D. CYPERT

In considering subject matter for this report to you, I was tempted to select one principal topic for review and comment; however, I finally concluded that this space could be better used by brief review and comment on several topics of particular interest to the legal profession, as well as the membership of the Arkansas Bar Association.

JUdge Mehaffy Memorial Ceremonies: Memorial ceremonies honoring the memory of JUdge Pat Mehaffy, who served as Chief Judge of the United States Court of Appeals, were held in the U.S. Court House in St. Louis on September 15, 1981. It was my privilege to represent the members of the Arkansas Bar Association on the program and to present a statement which had been adopted by the House of Delegates, memorializing Judge Mehaffy. During the years that Judge Mehaffy was a member of the Bench and Bar, he was an active and visible member of the Arkansas Bar Association, and made lasting contributions to the activities and growth of our organization. The following is a part of the statement of the Arkansas Bar Association, which was made a permanent part of the memorial proceedings: "The Bar of Arkansas has lost one of its strong men, and this Court has lost an excellent jurist, but the outstanding contributions made by Judge Mehaffy to our society, as well as to our legal system and profession, will remain for generations to come."

Legislative Support: Probably no area needs more attention by the legal profession and by our membership than the influence which we need to bring to bear on the lawmaking process. Those who watch such things feel that the membership of the legal profession has such little unification that it is ineffective with regard to controversial legislation. I quickly acknowledge the success of the legislative package sponsored by the Arkansas Bar Association during the last session of the Arkansas Legislature; however, I should be quick to explain that such success is possible only through the fine and difficult work of the Bar leadership, the involved committees, and our Association lobbyists. We cannot assume that this record can be repeated in future sessions without attention and efforts from all of our members.

There are two ways lawyers can be more effective: (1) Be ready to and do contact your legislators relating to your position, and hopefully that of the Arkansas Bar Association, on all pertinent pieces of legislation. There is no substitute for such personal contact. (2) Financial support through contributions to LAWPAC. The lobbying effort by all organizations is now a fact of life. Often, the organization with the strongest and best financed lobbying activity wins. A fund 2/Arkansas Lawyer/January 1982

drive for LAWPAC is now underway, and each of you will have an opportunity to make a contribution. The standard contribution requested is $60.00 annually, payable $5.00 per month. I urgently request your support through such personal contact and financial contributions in hopes that the legal profession, through the Arkansas Bar Association, will be a positive force in law reform at all levels.

House of Delegates Meeting: The House of Delegates met at Bella Vista on September 12, 1981, to consider several items of important business. In addition to adopting the statement memorializing Judge Pat Mehaffy, the business of the House also covered: Pro Bono Publico-update of legal systems-report of ABA Delegate-report on excessive case load of Court of Appeals-specializationFederal Rules Seminar-sale of Wills and Trust Systemjudicial polls. For further details, see comments of Chris Barrier in this issue.

Fall Legal Institute: I think "a good time was had by all" who attended the Fall Legal Institute, September 9-12, in Bella Vista, Arkansas. The program on trial practice, planned by Dean Epstein and directed by Prof. Bill Bost, was excellent and well attended from start to finish. A special word of thanks goes to those who participated in the program, AICLE, Benton County and Washington County Bar Associations, the folks at Bella Vista, and all others who helped. Most importantly, our appreciation is extended to all the attendees and their spouses, whose presence and participation really assured the success of the Fall Legal. We look forward to more successful Fall Legal Institutes in Northwest Arkansas in the coming years.

Admission Ceremonies: On behalf of the Arkansas Bar Association, I was privileged to move the admission of 148 candidates to the practice of law in the state of Arkansas before the Arkansas Supreme Court on September 21, 1981. These young men and women give the appearance of being the "brightest and the best," and I have no doubt that they will make solid contributions to our profession and to the legal system. More than 60% of the admittees have indicated their interest in the Arkansas Bar Association by applying for membership at the end of the orientation program sponsored by the Young Lawyers Section following the admission ceremonies. The Arkansas Bar Association held a reception at the Bar Center for the new admittees and their guests after the orientation program.

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Pro Bono Publico: At this writing, there is no definite word on the funding for the Legal Services Corporation by the Federal Government. There is little doubt but that the funds for this service will be reduced considerably and, whether you favor the concept of this Federal program, the fact remains that the private Bar will be expected to give special attention, on an individual basis, to the delivery of legal services to the poor. The Arkansas Bar Association expects (because it should) to render assistance to the private Bar in recommending programs and procedures for providing services on a fair and equitable basis. In the meantime, I encourage every practicing attorney to give thoughtful consideration in planning his or her contribution to those who need legal services but cannot afford to pay. In many instances, the feeling that comes from serving in this area is one of the greatest rewards that a lawyer can experience in his professional life.

Another, and little mentioned, area of Pro Bono Publico effort involves contributions made by individual attorneys in the form of free work in civic affairs. Historically, the lawyer has provided leadership in these areas, and I am certain that much is being done today. I encourage all lawyers to look for these opportunities. Both the involved lawyer and the legal profession will certainly profit from such efforts.

Tax Seminar for G.P.: Atthe time of this writing, a special tax seminar for the general practitioner on the Economic Recovery Tax Act of 1981 is scheduled for October 23rd at the Camelot in Little Rock. This seminar is chaired by Wayne Boyce and is really a "must" for the general practitioner. For the future, AICLE and the Tax and Probate Section of the Arkansas Bar Association are considering such a seminar on an annual basis during the fall of each year. Like it or not, it seems that the general practitioners are becoming more involved with the tax implications of services rendered by them to their clients.

Mid-Year Meeting: The Mid-Year Meeting of the Arkansas Bar Association is scheduled for January 14-16, 1982. A program relating to law office management loss control, and tax problems in estate planning promises to be an outstanding one. You will note that the program includes trial competition on Thursday morning between teams from our two law schools. This should prove to be an interesting addition to the Mid-Year Meeting activities. Also, a segment of time has been set aside on Thursday morning for meetings of the committees of the Arkansas Bar Association. I urge the chairpersons of the various committees to take advantage of this opportunity to schedule committee meetings.

Young Lawyers: The Young Lawyers Section of the Arkansas Bar Association continues its fine record of work. At the Annual Meeting of the American Bar Association, our Young Lawyers received two first-place awards for projects which they completed last year. Chairman Harry T. Moore and his membership are charging hard on this year's activities. You should have already received the Guide to Statutes of Limitations in Arkansas, which represents a completed project of the Young Lawyers Section.

Court of Appeals Case Load: As most practicing lawyers in Arkansas are probably aware, the case load of the Arkansas COU~f Appeals is almost unmanageable at this time and, in spit of the devotion to duty and just plain hard work of the embers of this Court, the problem is growing. A detailed ~eport of this case load was presented at the House of Delegates Meeting by Judge David Newbern, past member of the Court, and his report clearly reflected that the problem is real. Chief Justice Adkisson and Chief Judge Mayfield are presently considering possible solutions to the problem. We anticipate that the House of Delegates will be asked to consider the proposed solutions when they are finalized.

Delay and Expense of Litigation: Surveys reflect that the public is complaining more and more that litigation costs too much and takes too long. Of course, this same pubiic should know that inflation and the increased number of cases filed may account for the growth of the problem. On the other hand, it appears that citizens are not attempting to identify the cause of the problem as much as they are demanding that work be done to solve it. It is my hope that a special committee of members of the Bench and Bar can study the problem and work toward a solution in Arkansas.

Accordingly, I have asked Charles L. Carpenter, Chairman of the Judicial Liaison Committee, to explore the possibility of such a joint effort when he attends the Arkansas Judicial Council meeting.

To Your Health: It appears that lawyers too often look after other people's needs more than their own. A recent report reflects that when compared to even the medical profession: Lawyers drank and smoked more; more lawyers have high blood pressure; they take fewer vacations and, generally, they are less happy with their practices than the doctors.

One serious problem in this area is alcoholism. Apparently, more lawyers reported problems with drinking-9% compared with only 3% of the physicians. (See also Addendum in this issue by Col. Ransick). A special committee has been appointed, chaired by Judge Dean Morley, to give attention and hopefuly find some solutions to the problems of alcoholism in our profession.

In Conclusion: I hope that the comments on topics in this report have been of interest. There are many activities of various committees of your Arkansas Bar Association which are not mentioned, but are equally important. During the period which I have served as President of our Association, I have discovered that the success of the organization certainly turns on the time and work donated by our members.

Today, each lawyer specifically, and the legal profession in general, faces changing problems in these changing times.

Fortunately, the Arkansas lawyer, generally, is a hard working, intelligent, innovative problem solver. It is these exact attributes which are needed collectively to meet the challenge of change. It is these exact attributes which I ask that each of you contribute, in some way, to the Arkansas Bar Association.

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January 1982/Arkansas Lawyer/3

LEGAL ECONOMICS

By Bernard Sternin

Word Processing: Its Myths and Mythconceptions Trying to picture and prepare for the office of the future is serious business for those of us who will have to live there.

Particularly in the area of word processing and the utilization of automatic typing equipment, changes are rapid, costs substantial, and the risks and consequences of going off in wrong directions far reaching. In those areas of practice in which paperwork costs are or are becoming a substantial part of total costs, the consequences of inaction or inappropriate action couid be monumental.

Along with the growing interest in automatic typing equipment has come a plethora of pens racing to tell us what it's all about. People have come from far away places to offer as insights propositions that have little foundation in reality.

We have sometimes had visited upon us a deluge of folklore and fairy tales embraced and disseminated as fact and understanding. Some of these contentions are simply misleading; others are downright untrue. Here are ten that quality for the scrap heap.

Myth:

Automatic typewriters are best used by the larger law firms.

Reality: Quite the contrary, it's the small firms that are making the most effective use of the equipment.

Some of its leading advocates among bar association speakers are solo practitioners or in firms of under five lawyers. Smaller firms tend to use the equipment heaVily for prerecorded applications; larger firms more for text editing applications. Productivity is much greater in the former type of use because keyboarding, the slowest part of word processing, is substantially reduced and sometimes almost entirely eliminated.

Myth: Automatic typewriters are basically text editing machines.

Reality: Automatic typewriters are basically symbol manipUlating devices. What you do with them is up to you. Editing text during the drafting of documents is one important use. The use of libraries of prerecorded systems materials is another. There are many other uses for these machines. I've put many of them together in an article called "Can You Use an Automatic Typewriter or Are You Utilizing the One You Have?" If you'd like a copy of it, send a self-addressed envelope with postage for two ounces to me at 5 Hawke Lane, Rockville Centre, New York 11570.

Myth: Pre-prints and automatic typing equipment offer alternative approaches.

Reality: Pre-prints and automatic typing equipment are supplementary tools in systems applications.

4/Arkansas Lawyer/January 1982

Pre-prints can make a valuable contribution in speeding paperwork output if you are working with well developed prerecorded materials. With planning, automatic typing equipment can be used to give pre-prints the flexibility they need. For example, you can use a group of prerecorded paragraphs to play out alternate language into a blank area on the form. Also, the equipment can be used to produce the referencing materials, court caption boxes, and the names and addresses of addressees, onto the form.

Myth: One of the reasons for getting automatic typing equipment is to reduce the number of secretaries you need to support the attorneys in the office.

Reality: That's looking in exactly the wrong direction. You should be trying to maximize the number of secretaries supporting each attorney, and to maximize the number of machines supporting each secretary. The goal is to increase the capacity and productiVity of our professional people.

That's what's behind the use of paralegals; that's what should be behind your use of equipment. In some of the most efficient offices each attorney is supported by several secretarial people and by a significant investment in equipment.

Myth: Getting your typing back in the fastest time possible is one of the reasons for using automatic typing equipment.

Reality: First-in-first-out is not the hallmark of a quality support staff. A really good staff examines incoming work and zeros in on what should be done first and what can wait, rather than doing it in the sequence in which it happens to arrive. The fetish of rapid turnaround time works to discourage thinking secretaries who are trying to balance highs and lows. Also, we should be trying to lay a foundation for the printing of as many materials as possi- . ble by equipment that feeds paper automatically.

That requires a degree of planning that's undercut by placing a premium on fast turnaround time.

What it all boils down to Is this: either a word processing facility is given the authority to run its own shop effectively, and in that way turn out everyone's work in ways that are best for the entire organization, or you resign yourself to its responding on a fire department basis to a group of disorganized lawyers who will be served in a sequence determined by politics, favoritism, or ability to yell.

Myth: Automatic typewriters are expensive and have to be kept going continuously to justify their cost.

Reality:

How much time a machine must go to justify its cost depends on how much the machine costs, how much your labor costs, and how much the machine is saving. If an automatic typewriter costs 25% of an operator's salary and increases output by a third, you're ahead of the game. You can pick up some excellent reconditioned equipment for a few thousand dollars and if you use it right you can significantly increase the productivity of a secretary whose salary and fringe costs are likely to be well into five figures. See my article "How Much Will an Automatic Typewriter Save?" For a free copy send a self-addressed envelope with postage for two ounces to me at 5 Hawke Lane, Rockville Centre, New York 11570.

Myth:

You should get ready for "word processing" by examining the documents that are coming into your typing facility to determine what kind of automatic typing equipment will best produce them.

Reality: Later. First let's examine the documents to see if they could be designed in some better way. Could this dictated text have been in part prerecorded?

Could this name and address have been captured as a by-product of a prior typing? Could this printed form have been tied into a tab grid? Could the format of this multi-indented, tri-columnar, single-double spaced intermix have been simplified? Could the document have been structured in a way that groups variables in one section and text without variables in another? Could it have been designed so that part of it could have been generated by selecting from among stored paragraphs? Unless documents are examined for better ways of structuring them initially your work will continue to come into your word processing facility in the same old way. Don't be like the pilot who announces that his plane is making excellent time, but that he's been going in the wrong direction.

Myth:

If you can afford the extra cost it's better to have a television screen display on your automatic typewriter so you can see the text being worked on.

Reality: There is more involved here than meets the eye.

When you have a TV screen on your trypewriter instead of a roller or platen, the typing or "printing" part of the machine has to be designed as a separate unit. Some kinds of work become hard to do if the keyboard is separated from the printer. Think

how you'd prepare a manuscript cover, a printed form, an affidavit of service, an envelope, a return receipt post card, or a typed check on a television screen. Typewriters using TV displays are excellent tools for text editing applications because you are working with only one kind of paper stock in your printing unit. But when you are working with an intermix of different kinds of paper stock a stand-alone automatic typewriter that prints directly onto its roller may be more versatile.

By measuring the quantity of output (lines proMyth: duced, etc.) you can judge the effectiveness of your word processing staff.

Reality: You can measure only the quantitative aspects of your staff's productivity. The qualitative aspects can only be jUdged. Word processing jobs are an intermix of both quantitative and qualitative factors, and many of the qualitative ones are in no way reflected by measuring output. These include such abilities as the capacity to resolve ambiguous, illegible or unclear dictation, to make intelligent format decisions, to determine the correct variable information to be added onto prerecorded materials without having to be told, to select the correct paper stock when it has not been indicated, or even when it has been indicated incorrectly, to prepare the customary number of carbon copies even though no copies were called for, to know when to consult a dictionary, to be able to handle basic correspondence on one's own, etc.

Above all, we need to have secretarial help that is capable of understanding how automatic typing equipment can be made to do all the jobs it's able to do, and how to design documents and encode magnetic media appropriately. What's really devastating is that the clock watching, line counting, time keeping efficiency experts with their quantity thinking, may in fact be screening out of the word processing environment the kind of quality support staff we most need in it.

Myth: The one-Iawyer-one-secretary arrangement is ineffective and must be replaced.

Reality: What's wrong with the one-Iawyer-one-secretary arrangement is that it's unthought about. Under some circumstances it may in fact be extremely effective. Where it is, it should be retained; where it's not, it shouid be replaced. But what's really important is that you ought to be thinking about continued on page 9

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Bernard Sternin is among "the best" as a systems analyst and consultant in the fields of word processing and automated typing, particularly as related to law office practice. He has probably pUblished more articles and lectures more times concerning these specialities than any other lawyer.

Mr. Sternin has served in the American Bar Association as Chairman of the Committee on Word Processing and Automated Drafting in the Section on Economics of Law Practice, as Vice-Chairman of the Committee on the Use of Modern Technology in the Section of Insurance, Negligence and Compensation Law, and on the Sub-committee on Equipment and Technology of the Committee on Economics of Law Office Management, in the Section of General Practice, and is on the council of the Section on Economics of Law Practice.

January 1982/Arkansas lawyer/S

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FEDERAL "ANTI-TRUST" IN TIMES OF CHANGE By: William French Smith Attorney General Of The United States

(Editor's Note: This speech by the Honorable William French Smith, Attorney General of the United States, at the Annual Meeting of the D.C. Bar on June 24, 1981, heralded the Reagan Administration's attitude towards antitrust laws and regulations. Suits have been dropped; policy varied; and enforcement modified. The Attorney General's comments should help clarify these important changes.)

The beginnings of the organized bar paralleled and contributed to the government reform movement at the end of the last century. Reacting to troubling trends in law and society, the bar began to organize and to focus public attention upon the need for national, more uniform efforts to further and improve economic and commercial progress. Through such efforts, by 1900 the organized bar had secured wide enactment of the uniform Negotiable Instruments Law-the predecessor to today's Uniform Commercial Code.

During the same period-and in response to the growing political and social need for some enhanced national authority-the Congress enacted the Interstate Commerce Act of 1877, the Sherman Act of 1890, and the Bankruptcy Act of 1898. Just as the organized bar was essential to the reform necessary to this Nation's continued economic and social progress so long ago, it is necessary today.

By one estimate, in recent years all levels of government-state, federal, and local-annually pass some 150,000 laws and two million new regu6/Arkansas Lawyer/January 1982

lations. The organized bar must today begin to playa more active role in the reassessment of the effectiveness of so many government commandments.

The sheer number of laws has clearly begun to erode the public's devotion to law itseif. In a free society, when laws become both all encompassing and generally incomprehensible to the public, review and reform are urgently needed.

As Attorney General, I am acutely aware of the need for greater clarity and certainty in our laws-as well as better public understanding and support. I am also very aware of the temendous number of laws and regulations because the most basic function of the Attorney General is to serve as chief legal adviser to the President, the rest of the Executive Branch, and the Congress.

Concerning that basic function, I recall a story about the British Prime Minister Stanley Baldwin. At the time of the constitutional crisis in England that necessitated the accession of Edward VII, Mr. Baldwin prepared a speech to the nation. Late on the night before the speech was to be given, one of his assistants discovered a marginal note on the latest draft: "Refer to A.G." of course, the loyal assistant did. The Attorney General and his staff spent most of that night studying the seemingly innocuous paragraph next to the note.

Only after the Prime Minister awoke the next morning did they learn that the very religious Mr. Baldwin had written the note only to remind himself to "Re-

fer to Almighty God" at that point in his address.

Indeed, some of the issues referred to the Attorney General of the United States could benefit from the attention of that higher level A.G. Their breadth and complexity might tax the judgment and resources of even a heavenly authority.

Like most things federal, the size itself of the Justice Department is staggering. The Department is the Nation's largest law firm-employing some 53,000 people, over 4,200 of whom are practicing attorneys. Our budgeteven after a nearly ten percent cut-is almost equal in unadjusted dollars to the federal government's total expenditures during this country's first 75 years.

The Attorney General is the chief executive officer of twenty-seven operating divisions, bureaus, and offices. the Justice Department is responsible for the largest number of non-military presidential appointees of any department-including all federal judges, as well as United States Attorneys, United States Marshals, and senior Justice Department officials. In our first five months, we have sent some ninety recommendations for appointment to the President.

Last fiscal year the Department was prosecuting or defending some 124,000 pending civil lawsuits alone, an increase of more than two-thirds over the equivalent number just five years ago. In addition, the Department filed over 35,000 criminal cases last year.

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Reflecting on the general growth of litigation in the federal courts, one author recently observed: "The tide of federal cases has been out of all proportion to any growth in population and reflects the outpouring of congressional enactments from the mid-1960s on that reach to the roots of private activity." [Jethro K. Lieberman, The Litigious Society, 1981) It is from that "outpouring of congressional enactments from the mid1960s on" that the pervasiveness of the Justice Department's role in American life has arisen. And it is that role itself that we are now reassessing and reforming in the light of experience.

For too long, the government as lawyer and litigator-and I might add as economic regulator-has pursued this theory and then that with too little reflection on the practical effects of its course. The confusion that has resulted throughout society-and the plain anger-have, however, at long last attracted government's attention.

As I consider the federal government in America today, including the Justice Department, I remember a story told about Oliver Wendell Holmes late in his distinguished career on the Supreme Court. Holmes, so the story goes, found himself on a train. Confronted by the conductor, he couldn't find his ticket. Recognizing the distinguished jurist, however, the conductor told him not to worry, that he could just send in the ticket when he found it. Holmes looked at the conductor with some irritation and replied: "The problem is not where my ticket is. The problem is, where am I going?"

As the result of the election of President Reagan, the critical question today is not just what the government has been doing, but where it is going now.

Today, I want to try to answer that question concerning one large area for which the Department of Justice is primarily responsible-antitrust enforcement. Although some believe that antitrust law is merely an arcane field for the specialist, all of you know that it is much more important than that. As President Franklin Delano Roosevelt himself wrote nearly four decades ago: "The Sherman and Clayton Acts have become as much a part of the American way of life as the

due process clause of the Constitution."

Federal antitrust law forms the constitution of our economic liberties.

In Northern Pacific Railway v. U.S. (1958), the Supreme Court described the Sherman Act as: "designed to be a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade. It rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress, while at the same time providing an environment conducive to the preservation of our democratic political and social institutions."

We subscribe fully, and without qualification, to this statement, and we embrace it as the goal of our antitrust efforts. The underlying theme of our antitrust activities will be the promotion of competition.

When originally enacted, the Sherman Act contained less than 1000 words. Together, the principal antitrust statutes-the Sherman and Clayton Acts-occupy fewer than twenty-five pages, including notes, in the United States Code. Nevertheless, the court decisions interpreting those few pages fill volumes upon volumes. In the first thirteen, formative years of federal antitrust law-to the time of Northern Securities, only 16 civil suits and seven criminal suits were instituted by government-and only 34 private suits were brought. Last fiscal year alone, the Justice Department's Antitrust Division itself filed 83 cases-55 of which were criminal cases-and opened over 360 formal investigations. As of this March, nearly 2800 private antitrust suits were pending in the federal courts.

In this context, I believe it essential for the federal government to make its enforcement goals as clear as possible. Compliance and enforcement both require greater certainty.

There is an old antitrust story concerning one of the "malefactors of great wealth," to use Teddy Roosevelt's words. This businessman was considering a new merger to expand his industrial empire. He cabled the details of his plans to his attorney to discover whether they would meet any difficulties under the federal antitrust laws. The attorney telegraphed a

four-word answer in return: "Merger possible; conviction certain." In addition to ensuring that our antitrust efforts fUlly consider competitive reality, we intend to pursue that kind of clarity and certainty as a goal.

We will seek out and prosecute those who engage in anticompetitive activities. When we find agreements between competitors to fix prices, allocate markets, or otherwise refrain from competition, we intend to bring criminal actions. We will not be satisfied by having corporations pay fines. In these cases of knowing violations of clear-cut antitrust prohibitions, indictment of, and prison sentences for, the individuals involved will be vigorously pursued.

This, of course, is not the first Administration to commit itself to promoting competition as the cornerstone of its antitrust activities. We believe, however, that we take more seriously than many others the goal of preserving free competition as the rule of trade. In the past, under the guise of promoting competition, other Administrations have pursued a number of misguided and mistaken concepts that have generated anticompetitive results in the name of antitrust enforcement. We intend vigorously to enforce the antitrust laws against clearly anticompetitive activities and to spare no effort in also eliminating anticompetitive governmental practices.

For example, some have argued that competition is synonymous with a large number of competitors. Economic reality, however, is more complex. The number of firms in any given industry does not always, without a great deal more information, reveal enough about the nature, quality, or vigor of competition in that industry. In some industries, competition yields a large number of competitors-in others, only a fewdepending upon the economics of scale, distribution costs, and other factors.

In any industry, however, competition will inexorably result in the elimination of some competitors-those that are least efficient. That process is, indeed, one of the results and purposes of the competitive process. We must recognize that bigness in business does not necessarily mean badness-and that success should not be automatically suspect.

The disappearance of some should not be taken as indisputable proof that something is amiss in an industry. In a race, the fastest runner is not penalized January 1982/Arkansas Lawyer/7

by being required to wear fetters around his or her ankles. Similarly, in an economy based upon unfettered competition as the rule of trade, efficient firms should not be hobbled under the guise of antitrust enforcement. The preservation by government of inefficient competitors inevitably leads to economic distortions that will disadvantage the consumer. Although the behavior of firms in industries with relatively few competitors will always deserve the attention of our Antitrust Division, evidence of anticompetitive behavior and of barriers to entry should be carefully analyzed prior to government's intervening in the private competitive process.

Another area in which erroneous concepts have found their way into interpretations of the Sherman Act concerns so-called "vertical restraints." Vertical arrangements between a manufacturer or importer and its distributors-such as exclusive territories, requirements contracts, or resale price maintenance-are not necessarily anticompetltive. To the contrary, these types of arrangements often are procompetitive by promoting cost-saving efficiencies along the chain of distribution. In analyzing any specific vertical arrangement, one must ask whether It has an antlcompetitive effect at any identifiable horizontal level. Where vertical arrangements do, we shall seek whatever relief is necessary to eliminate that anticompetitive effect.

We are aiso rethinking past policies with respect to mergers. Merely classifying mergers as horizontal, vertical, and conglomerate is not talismanic.

For antitrust purposes, there is no reason to distinguish between vertical and conglomerate mergers because the key question in analyzing any merger is whether it is likely to have a negative impact upon competition at any horizontal level. In addition, in the past, insufficient attention has been paid to entry conditions in assessing the competitive impact of mergers.

For these several reasons, we are planning to revise the merger guidelines issued by the Department in 1968. Through these revisions, which some may consider drastic in certain respects, we intend to focus attention upon the potential horizontal impact of nonhorizontal mergers and to increase the attention given to entry conditions in assessing horizontal mergers. That process is already under way, and will continue in the months ahead.

8/Arkansas Lawyer/January 1982

We are also considering possible revisions in the premerger notification rules. It may prove possible to raise the threshold at which transactions are covered by the rules and to reduce both the amount of information that must be reported in the initial filing and the number of burdensome second requests. Of course, we will coordinate any such efforts with the Federal Trade Commission.

We have begun a review of the more than 1200 judgments and decrees that have been entered and remain in effect in government antitrust actions to determine which might profitably be modified or vacated. For example, injunctions that pervasively regulate a firm or an industry can, with the passage of time, begin to hinder and not promote competition. Other injunctions may reflect erroneous economic analysis and thus produce continuing anticompetitive effects. Others may be merely superfluous, At the same time, we are imprOVing our ability to monitor compliance with those injunctions that, fully enforced, would further competition.

Litigation is not the only tool of the Department in the Administration's effort to encourage heightened competition in the American economy. The benefits of competition-lower prices and higher quality-are too important in these troubling economic times for the American consumer and workers.

Those goals require the full use of our Antitrust Division's expertise in the economic realities of competition.

As a general proposition, we would prefer to see more competition and less, or no, government regulation in every industry. A number of statutes mandate our advocacy of competition before federal regulatory agencies, and we intend to discharge those mandates fully. Both through our membership on the President's Task Force on Regulatory Relief and through the Antitrust Division we will actively support and encourage the Administration's overall effort to deregulate the American economy.

Too many legal decisions in recent years have been founded upon unsound, outdated economic theories.

Too many unsound cases have been settled just to avoid the uncertainty and expense of litigation-even where the underlying legal theory is dubious or counterproductive to procompetitive forces. As part of our effort to further competition in the real world of commerce, we believe that every effort

must be made to raise legal doctrine to the state of the art in assessing economic reality. We will therefore seek leave to participate as amicus or to intervene in selected private actions when our participation could positively influence the development of law.

Through such participation, we hope to persuade courts to eliminate anticompetitive doctrines that have found their way into law and to make less likely the adoption of such doctrines in the future.

From time to time, the federal government has been thrown into confrontation with state governments by urging courts to preempt state laws and regulations that conflict with federal law. To lessen the likelihood of confrontation, we are contemplating a more active role in support of deregUlation at the state level through advising states of any significant anticompetitive effects of legislation or regulation they are contemplating. By assisting the states when our participation is requested In their legislative and regulatory processes, we hope to avoid later having to contest significantly anticompetitive state legislation and regulation on the basis of federal preemption.

We will also undertake a broad reassessment of our antitrust enforcement practices concerning international commerce-and especially joint ventures by American businesses that are not likely to have anticompetitive effects on domestic markets. The federal government should not-and rational antitrust enforcement need not-impede American firms' efforts to compete internationally.

In addition, we are studying those serious problems caused by the extraterritorial reach of our antitrust laws.

Too mechanical and extraterritorial application of those laws fails adequately to take account of our own commercial interests as well as the legitimate interests of our trading partners.

When legislation now or in the future creates domestic or international antitrust concerns, we will ensure that both the Administration and the Congress have as full as possible an understanding of the competitive impact of that legislation. Although many such bills inevitably seek other worthy goals that should receive full consideration, the importance of competition to the prosperity of our economy demands the accurate weighing of competitive effects in the legislative balance. The price and quality of American goods and services-as well as the jobs of Ameri-

..

can workers-depend upon such due consideration.

These are exciting times of change in Washington. I can still remember not so long ago when many of the changes we are now actually implementing were no more than ideas that, if ever heard in Washington, were too quickly dismissed. In those days, the Governor of my home State used to tell audiences: "I always grew up believing that if you build a better mousetrap, the world will beat a path to your door.

Now if you build a better mousetrap the government comes along with a better mouse."

That speaker is now President, and he still believes government should foster rather than discourage new and beneficial commercial initiatives. This country was built by men and women who prized the freedom that made possible an ever-increasing prosperity.

In the months and years ahead, we intend to make government the partner of productive people-instead of their nemesis.

I believe that we truly have embarked upon a new beginning. The active involvement of this distinguished and knowledgeable bar can help to ensure that our efforts prove beneficial to the public as a whole. " "

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Legal Economics, continued from page 5 alternatives. You might get some good ideas about ways to regroup your support people in my article "An Easy and Effective Way to Reorganize Your Law Office for Automation." For a free copy, send a self-addressed envelope marked with the title and stamped with postage for two ounces to me at 5 Hawke Lane, Rockville Centre, New York 11570.

What is the ultimate reality? Perhaps it's that there is no one in charge of methods. Each lawyer and secretary do their thing in their own way. Sometimes well, sometimes poorly, sometimes differently than the time before.

Perhaps it's that no one thinks about how each job could have been done better, and no one asks how'the best method could be institutionalized.

Perhaps it's that no one cares about efficiency. Perhaps we delude ourselves with the belief that we somehow offer a service so unique that its efficient delivery is of no consequence.

Perhaps that will some day be seen as the ultimate my1h.

f......

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January 1982/Arkansas Lawyer/9

ARKANSAS BAR fOUNDATION by: Herman L. Hamilton, Jr. Chairman

Your Board of Directors met at Bella Vista on September 10th, with very good attendance, and disposed of a lengthy agenda. The next regular board meeting is planned in conjunction with the Mid-Winter Meeting of the Bar Association in January of 1982.

All Foundation members are invited and all board members are urged to attend. A list of Board members and the expiration of their terms in office is found at page 161 of The Arkansas Lawyer, October 1981 Edition.

Response by Bar Association members to my invitation to become Fellows of the Foundation has been very good.

Since July sixteen lawyers have either begun a new pledge or have made renewals and additional payments on a previous pledge in moving toward Fellowships. All members of the Bar who are not Fellows of the Foundation, or who have not pledged toward a Fellowship, should remember that at the end of this year the monetary cost of becoming a Fellow will increase, but that a pledge and partial payment before that time can lock them in at the present contribution level of $1,000.

Having begun a timely pledge, full payment can be made within five years to qualify toward a Fellowship. This should be a special enticement to younger lawyers who, because of bUdget strain, may need the option to spread the cash requirements over such a period and at the same time enable them to make a Fellowship contribution.

PUBLICATIONS Since your last report, the Foundation has participated in or fully sponsored several publications of interest.

A revised and updated handbook for jurors entitled "Jury Duty, An Honored Service" has been published and circulated to the seventy-five counties of Arkansas. From the response to that handbook it may be necessary to pre-

10/Arkansas Lawyer/January 1982

pare another printing during this year.

Its thrust is to explain to Arkansas citizens the requirements of jury service, to tell them what a jury does and how it works and to urge them to participate in this phase of public service.

Efforts are currently underway to update and reprint the" Arkansas Senior Citizens Handbook" and the Foundation plans to fund this project from its current budget. The Young Lawyers Section is revising and updating that booklet and has established a Speaker's Bureau with a view toward utilizing the booklet and providing programs for the elderly throughout Arkansas. With these efforts, our elderly can be made aware of some of their legal rights and can receive answers to some of the common and typicai iegal questions that they regularly encounter.

We have recently made a grant to the Arkansas Endowment for the Humanities to assist in publication of a booklet entitled "The Citizen and his Legislature". This booklet is designed to give the average Arkansas citizen a greater insight into the mechanics of the law making process in Arkansas.

EDUCATIONAL TV David Malone reported, at the Board meeting, that three of the educational television films sponsored by the Foundation are basically complete, subject to editing and final preparations. It is planned that one of these will be prepared for screening by the Foundation Board within the next few weeks at the Bar Center. When the film is ready, a notice of that event will be circulated in order that anyone who desires may see our first efforts on this project.

SCHOLARSHIPS Recently I became aware of the establishment of a major scholarship fund, honoring one of the leaders of the

Arkansas Bar, which is not to be administered by the Foundation. Although it is not always feasible for these scholarships to be set up through the Foundation, we should always be aware that the Foundation is the ideal vehicle for them and that the Foundation should be the first choice for administration 'of scholarships where possible. Your Foundation has been recognized by the Internal Revenue Service as a tax exempt organization and that status is the result of our stated purposes. Among those purposes are "...to promote... educational. .. purposes... , to promote study and research in the field of law... and the continuing education of lawyers". We all recognize the abilities and efforts of our Investment Advisory Committee and know that scholarship funds administered by the Foundation could not be in more capable hands. I urge every lawyer who has any grass roots opportunity to participate in the establishment of a legal education scholarship, to give his best efforts to see that the Foundation is the administering body for the fund.

In conclusion, you should be aware that the latest financiai statements for the Foundation indicate that the investment program and mix of investments are excellent and that the longterm investment policies confirmed at the June meeting of the membership are being followed. ' "

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CONTEXT

By W. Christopher Barrier

A Voice In The Wilderness Cry When this column started, its stated subject was relating the lawyer to his publics, the use of the plural being deliberate. A lawyer has to relate to many "publics"-his or her clients, employees, fellow lawyers, and other professionals.

But, we have obviously been overlooking a "public" with vast power to influence our practice and the interests of our clients-the Arkansas General Assembly.

Bill Wilson recently penned to Jim Cypert an eloquent summary of the problem and necessary steps to correct il.

As he had done a much better job than I could, I asked and received his permission to reproduce the letter as my column: Dear Jim: I want to continue my voice in the wilderness cry. It may not do any good-it has done very little in the past-but perhaps at least it will keep me from swelling up and bustin'.

Lawyer-legislators. ..

Until the 1960's, state legislatures across the country, including the Arkansas General Assembly, had a large number of lawyers in them (usually a majority). In view of this fact, practicing lawyers did not have to worry too much about their clients' interests or their own interests. (Such interests generally are identical, of course, although many bills are more or less procedural housekeeping bills which are important to the lawyers' practice, but not of crucial importance to the clients' interests.)

Unfortunately, there are now very few lawyers in the legislature, and some of those in the Arkansas General Assembly have law degrees but do not practice at all-others very little.

It is my firm opinion that there should be more lawyers in the legislature (even though many non-lawyers might disagree), but I do not see any possibility of an increase in the immediate, foreseeable future, and this means. if the lawyer's viewpoint is to be made known and hopefully acted upon, all of us are going to have to be more active in the legislative process.

Intellectual Foppery...

Back when I started practicing (in 1965), many of the best, blue-chip lawyers in the State considered it a mark of distinc12/Arkansas Lawyer/January 1982

tion that they had great disdain for politics, and the legislative process. They took great pride in the fact that they limited their practice to their offices and/or the courtroom and did not get out in the political realm. I was always of the opinion that this smacked of intellectual foppery, but, again, the problem was not acute in 1965 because there were still a good number of lawyers in the legislature.

Unfortunately, even though the number of lawyer-legislators has greatly diminished, I still see lawyers wearing their disdain for the legislative process as some sort of selfperceived badge of distinction. Even more unfortunately, this has too often been the case in the Bar leadership.

Fortunately, this has not been true of the Presidents of the Association, but it has been of the House of Delegates, too often. seldom is Heard. ..

As an example, in the last legislature, several calls went out to the members of the House of Delegates to contact legislators (or have someone contact them) about various items of legislation, and there was precious little response.

Time and time again, up until this last legislature adjourned, I had legislators tell me "none of my lawyers at home have talked to me about this."

We are going to be hurt and hurt badly if we do not do better. It hasn't happened yet, but I give you my solemn assurance that it is going to happen.

A few sessions ago, a near disaster occurred when the medical profession was able to pass a proposed Draconian constitutional amendment (to be submitted to the people at the next general election) which would have virtually eliminated medical negligence suits. This proposal was passed by an overwhelming majority despite a major last minute iobbying effort by leaders of the Bar. That proposal was utterly without social purpose, and we should have been able to beat it without much effort, but the doctors had done their homework, and we had not lifted a finger to assist legislators in understanding the lack of merit in the proposal.

Where Were You Guys?

That event scared some of us and we got somewhat active, basically through a trust fund (IMPACT), and we were in better shape the next session when the medical

profession proposed a bill which was totally unacceptable. A compromise bill was finally passed. I realize that many lawyers are critical of this bill, but where were these lawyers when Charlie Brown, and a few others, were spending day after day out at the legislature fighting a much, much worse bill?

My complaint about my fellow lawyers in the legislative field is not limited to tort legislation. Take a look at the act which would make title work so much easier for lawyers (and cheaper for clients). There is no reason on earth that lawyers could not explain this bill to their legislators at home so that it could be passed easily. Yet, a rather minor special interest opposes it, and it has languished.

Tooth And Toenail. ..

Please understand that I am not castigating the memqers of our profession generally. I love lawyers and the legal profession. In fact, after reaching the mid-point in life, some of my friends tell me that I have practiced law so long that I can't get along with anybody other than lawyers.

At the same time, it is beyond me why advocates who will fight you tooth and toenail on behalf of their clients in the courtroom, or in the purely legal arena, but will not even pay attention to what is happening to them and their clients in the legislature.

I want to note also that I am not castigating legislators.

When only one side of a proposal is explained to a legislator by an interested party back home, how can you expect him or her to understand our position?

An Urgent Agenda...

In addition to a change of attitude (which I hope will come

through education rather than as a result of devastation), we need the following things if we are going to be heard: 1. A full-time lobbyist during the legislative session, and a part-time lobbyist the year around. We have had a full-time lobbyist commencing with me in the 1973 General Assembly, but we have not been good enough on the year-around part. And, I should put double emphasis on the fact that the best lobbyist in the world can do very little if he does not get vigorous, fast assistance from the lawyers back home.

2. Start early-we need to continue to emphasize the importance to all lawyers, the various committees, the House of Delegates, etc., of getting legislation honed down, drafted and introduced early on-prior to the meeting of the General Assembly, if possible. Once you get well into a session even the mildest of bills may encounter defeat in the complications which arise.

3. Pay attention and stay in touch. During a legislative session the leaders of the Bar and the Bar lobbyist must meet every Friday afternoon or Saturday morning and call the lawyers back home, asking them to visit with their respective legislators. Pressure tactics back home won't work-but explanations will.

I don't know how this is going to be accomplished, but the lawyers back home must learn that they must contact their legislators immediately and report back to "command center" immediately. A nose count must be available Monday when the legislature reconvenes.

I have been through this process countless times, and my brother lawyers tend to want to say "I'll drop him a line", or "I'll try to see him at church Sunday morning", etc., and put it on the back burner. This will not get the job done in any shape, form or fashion, and has been the greatest failing in effective legislative involvement in the past few years.

Pass the LAWPAC hat. ..

We need to mount an active campaign to get more contributions to LAWPAC so that we will have the money to pay a lobbyist and support staff. I would undertake to chair this effort myself, but I am currently President of the Arkansas Trial Lawyers Association, and I have been on a membership drive. One person can go to the well only so often.

While this is not a concern of this Association, hopefully more and more lawyers will get involved in IMPACT which does directly get involved in political campaigns. Of course, LAWPAC definitely does not and should not. Neither should this Association . . . .and beat the drum..

Let me hasten to add that it would be my personal preference, too, to work only in the "pure" legal system and leave the legislative process to others whose interests run that way. Unfortunately, in the foreseeable future, we must either get interested in what is going into the legislature, or we are going to be in trouble. This warning applies to the corporate lawyer, the tax lawyer, the real estate lawyer, and all of us, regardless of how aloof and "above it all" a lawyer would like to be.

OK, kid, let's see you do your stuff...but, be quick about it. ..

I would urge you to put on a drive to get us ready for the 1983 session of the General Assembly.

f.... .

January 1982/Arkansas Lawyer/13

EXECUTIVE COUNCIL NOTES

by W. Christopher Barrier Secretary-Treasurer

House Of Delegates Highlights The House of Delegates squeezed in a meeting between the Fall Legal Institute at Bella Vista and the Tulsa game. The presence of a quorum was enhanced by a steady downpour on the fairways.

The "Most Important Item" Much of the discussion centered on legislation, which president Jim Cypert termed "the most important" item on the House's agenda. In particular, we are apparently sending out too many bills (although 26 of our package of 31 were passed last session). Aside from simply being demanding, having to tend to this many bills apparently makes it very difficult for Jim Rhodes to find the time to lobby as effectively as he would like to against bills which the Association opposes.

Bill Wilson noted that Association presidents, past and present, had been very helpful and extremely responsive when testimony was needed, and so forth. However, Association members generally and House of Delegates members in particular have been remiss in the extreme in even contacting their legislators one way or

14/Arkansas Lawyer/January 1982

the other on the Association's package.

Remembering Pat Mehaffy In other business, the House reminisced with Herschel Friday over the career of Judge Pat Mehaffy, who was memorialized i,n a service in SI. Louis the Tuesday fallowing the meeting.

Parliamentarian Charles Carpenter arrived with an elaborately wrapped cardboard box which was allegedly a present for Jim Cypert. However, he displayed a large hole in the bottom of the box, and claimed that his present had "gotten away". President Cypert reciprocated by awarding Charlie his

own Robin Hood hat----{;omplete with a turkey feather.

Appellate Problems Professor David Newbern, a former member of the Court of Appeals, and former Chief Justice John Fogleman squared off over the issue of expansion of the Court of Appeals. At the end of a long discussion of caseloads and related matters, the House decided to defer the matter until the midyear meeting, since it did not look like the matter would come up in a special session in the meantime.

Young Lawyer Accolades Harry Truman Moore announced several awards to the Association's Young Lawyers Section for their public service activities, presented at the American Bar convention in New Orleans. The YLS won with its speakers bureau on the 1980 constitution. (They were also advised that their activities on behalf of senior citizens would have also garnered them second place, if there had been one.)

Maybe we ought to pLit the Young Lawyers Section on the legislature...

f-

•

MIDYEAR MEETING

Camelot Inn, Litlle Rock January 14-16, 1982

•

NATURAL RESOURCES LAW INSTITUTE

Arlington, Hot Springs February 25-27, 1982

•

WORKERS COMPENSATION INSTITUTE

Camelot Inn, Litlle Rock March 26, 1982

•

ANNUAL MEETING

Arlington, Hot Springs June 9-12, 1982

YOUNG LAWYERS' UPDATE

By Harry Truman Moore YLS Chairman

Arkansas YLS Honored In New Orleans For the first time ever the Arkansas Young Lawyers Section participated in the Award of Achievement competition sponsored by the American Bar Association/Young Lawyers Division, and the results were gratifying. It was announced in New Orleans that our organization received the Outstanding Single Project Award in Class 1-0 for our "Speakers Bureau, Proposed Arkansas Constitution of 1980." This was the project which was headed by our former chairman, Louis B. "Bucky" Jones, Jr., of Forrest City and was cosponsored with the Arkansas Institute of Politics and Government. Over 40 Young Lawyers participated in this program which reached literally thousands of Arkansawyers through radio, television and seminar appearances.

Our YLS also received a Special Recognition Award for our efforts in the Comprehensive Area of Class 1-D. Included in the comprehensive application was our "Senior Citizens Handbook" project, which was chaired by Kaye Oberlag. Official notification of the award noted "the development of the program and material distribution network was most impressive. The public impact of the handbook was tremendous in reaching 90,000 senior citizens."

Participating in the Award of Achievement competition gave us not only the opportunity to be awarded and praised, but the opportunity to have our programs reviewed for constructive criticism by others. The judges were of the opinion that more membership involvement was needed. Steps have already been taken to achieve the goal of more membership involvement by revitalizing several of our former projects and initiating new ones, and we already have over 100 Young Lawyers working on projects of SERVICE to the pUblic and to the profession.

Current Projects And Committee Chairs We feel that we are already off to a "flying start" in making this year's bar year even better than last. By the time this article is published, we will have already completed several of our scheduled projects. Every member of the bar association has already received the "Guide to Arkansas Statute of Limitations." We solicit your comments and suggestions in the event the book is repUblished in some form in the future. Our special thanks go to Rather, Beyer and Harper and CNA Insurance Company for funding the printing and distribution costs of the guide. At the time this column was being written, our "Senior Citizens Handbook" was in the process of being re-edited for a second printing. Mike Hankins of Little Rock is in charge of this process. Frank C. EIcan, II, of Harrison is chairman of our Speakers Bureau Committee for distribution of the handbook.

Our Practice Skills Seminar, which was headed by Ralph E. Wilson, Jr., of Osceola, and Lawrence E. Chisenhall, Jr., Little Rock, again had outstanding attendance and participation and continues 10 be our oldest continuous project.

For the first time ever, we pursuaded the Arkansas Educational Television network to carry the "National Law Quiz," an ABA/YLD sponsored program. The law quiz was followed by a live "call-in" type program featuring Arkansas Young Lawyers answering questions phoned in by the general public. Don E. Tomlinson of Little Rock headed this committee.

Terry Clay10n Paulsen of Little Rock and Robert Ridgeway, Jr., of Hot Springs are serving as co-chairs of the Swearing-In Ceremony Committee and had outstanding attendance for the September program, as we know they will for the March program.

Our Disaster Relief Committee is being reactivated with Edward Tarvin

of Little Rock as chairman. Because of the success of the 1980 Speakers Bureau project, we are also planning a Speakers Bureau Project for the 1982 Constitutional Amendments, with Ann Henderson of North Little Rock and Raymond Abramson of Holly Grove chairing this committee.

There are four "new" committees.

The Law School Liason Committee, headed by George E. Butler, Jr., of Fayetteville and Patricia Stanley of little Rock, is working directly with officials at both law schools to provide career and placement oriented programs for students. In order to ensure continuity in our YLS programs, a Long-Range Planning Committee has been formed with Carl A. Crow, Jr., of Hot Springs as committee chair. In association with the ABA/yLD, we will participate in the first "National Community Law Week" which will be held in conjunction with the twenty-fifth anniversary of Law Day. James E. Crouch of Springdale and Richard L. Ramsay of Pine Bluff are co-chairs of this committee. Phillip Raley of Pine Bluff is chairing our Social Activities Committee, including our activities for the annual bar meeting in June.

Because of our past efforts in assisting the elderly, and because Arkansas has the nation's second highest percentage of elderly residents, many of our long-term efforts will be directed by our Committee for the Elderly. Frank C. Elcan, II, Chairman-Elect of the Arkansas YLS, has joined with me in asking Martha Miller McCaskill to chair this committee over the next two years.

Kaye Oberlag has agreed to chair the Subcommittee for Pro Bono Legal Services for the Elderly, a program which we feel will also take several months to develop.

Hopefully, you have spotted something of interest to you. If you have, contact one of the committee chairs listed above. If you have other ideas, continued on page 18 January 1982/Arkansas Lawyer/15

"LEGAL ACTION" In The Yellow Pages: Hard Sell, Soft Results

By Cliff Jackson • Fulbright Fellow • LL.B. With Honors • Highest Score Ark. Bar Examination (July 1972) • Member, American, Arkansas, Pulaski Bar Associations • Member, American And Arkansas Trial Lawyers Yellow page advertising by lawyers is not all it's cracked up to be, according to a survey I conducted recently of local allorneys who have display ads in the metropolitan lillie Rock phone book. (I practice in lillie Rock and have had a yellow page ad for the last two years.)

The results, according to my survey, are in sharp conflict with telephone company representations concerning the bonanza lawyers can expect from yellow page ads.

An 800"10 Return ... Phone company salesmen are telling lawyers that they can expect an $8 return for every $1 spent on a yellow page ad, and the salesmen even produce national bar association surveys allegedly supporting their claim. My survey of the Little Rock lawyers with yellow page ads, however, shows much different results.

Only one of the twenty-four lawyers surveyed professed to be totally "satisfied" with the financial return from his ad.

This lawyer, who asked not to be identified, said that he had made a "lot of profit" from his ad. "Quite honestly, Ijust had a couple of lucky clients," he said in explaining his "significant" return. ... Or "A Disaster" ... At the other extreme, several lawyers characterized their advertising experience as a "disaster" and indicated that they definitely would not renew their ads next year.

Typical of this group is Stephen D. Carver, who said he had received only two cases since February which he can definitely trace to the ad. "I think it [the ad] is absolutely useless," he said, adding that perhaps his poor response is due to his advertising a specialty (patent law).

Two separate dissatisfied lawyers, who asked not to be identified, even went so far as to suggest a "class action" lawsuit against the phone company for misrepresentation concerning the expected return from the ad. Another lawyer said that he felt "hoodwinked".

Just "Breaking Even" ... The bollom line for about ninety percent of the lawyers is that they are just "breaking even." In other words, the return from the ad pays for its cost and very lillie more. A typical comment is that of John Haskins, "I don't think it paid for itself. It's just about breaking even, maybe not even that."

16/Arkansas Lawyer/January 1982

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_' ,1' - - - - - - - - - - - - - - - - - /1 \ Everett O. Martindale, who is one of the pioneers in legal advertising in lillie Rock, says that he is thinking about not renewing to see if there is a large drop-off in his business.

"It's so expensive-l don't know really if I've gollen enough business to pay for it. Maybe it just paid for itself and, if that's so, what's the point?" Martindale asked.

Alternatives Considered ... Mike Hulen agrees and indicates that he and Phillip Cuffman will probably cut back to a postcard size ad in the alphabetical listings. They are thinking about pUlling their advertising dollars elsewhere, perhaps in radio.

Evans Benton says that his firm has gollen more response from newspaper ads than from the yellow page ad.

"Last year, the ad paid for itself, perhaps slightly more, but this year it's questionable whether it's even paid for itself," he said. He added, "The only people making any money [from yellow page ads] is the phone company."

David Williams and Paul Johnson, who do not plan to renew their ad, apparently feel about the same. "We haven't gollen twenty-five phone calls thus far," David Williams says, "The thing hasn't come close to paying for itself."

Time-Wasting Calls Cited... Both Bubba Madden and Basil Hicks say that they definitely will not renew their ads.

I'm not gelling any business, and what business I'm gelling is not productive," Madden says. "In addition, I get too many calls that aren't 'significant'. It just takes up too much of my time. It's simply not worth it.

On the other hand, most of the lawyers indicated that, despite their dissatisfaction, they planned to renew their ads next year. Of this group, only one lawyer said that he intended to buy a larger ad, while several lawyers planned smaller ads.

Expensive Experiments...Why do they plan to renew the ads if they're so dissatisfied with the results? There are several reasons. First, to quote John Haskins, "It's just an experiment with me. If it's almost paying for itself, I'm not losing much."John indicated that he planned to "give it one more year" and then, if the results are not better, take it completely out.

Gary Eubanks summarized perhaps the biggest reasons lawyers continue to advertise despite disappointing results: "I keep thinking that that quadriplegic might walk through the door." Of course, a quadriplegic could not walk through the door, and that is what would make such a case "significant" in size, I suppose.

In actuality, not one of the "yellow page" lawyers has yet gotten a "large" case from his ad. Only one lawyer said that he had a case, the eventual fee from which could be "somewhat less than $10,000."

The Only Yellow Pages In Town .. A third reason many of the lawyers continue to advertise is that they do not know what effect not advertising would have on their business.

"It's better to have the phone ringing, even with 'junk' calls, than not to have it ringing at all," one lawyer feels.

Another attorney put it this way, "I feel like I've got a tiger by the tail [in advertising] and it's [expletive deleted] all over me, but I'm afraid to turn it loose for fear it'll get its claws into me."

A fourth reason lawyers continue to advertise, despite lackluster results, is stated by Jim Tripcony, whose ad is "disappointing." He says, "I'm looking at the cumulative effect. You can't just judge it by the dollars brought in this year. Advertising could lead to satisfied clients later."

Betting On The Future... Another young lawyer who is betting on the future to the tune of several hundred dollars per month says, "My results are not nearly as good as expected, but I hope over a period of time the resulls will be better."

In addition to universal disappointment with the financial return from the ads, the lawyers agreed on a number of other matters. First the ads result in a large number of "nuisance calls," "trash calls," "nut calls," "free advice" and "price shoppers", to use some of the more unflattering terms used by some of the lawyers.

David Williams refers to these calls as "say-a-man" calls and relates one as follows: "Say a man is at the hospital, and they won't let his wife out?" "What's she there for?" Williams asked. "Because I beat her. How much would you charge to come down and get her out for me?" the caller asked.

Trashy Questions ...One person called me last year and refusing to identify himself, asked if a person took something from the garbage, could he be prosecuted. Chip Welch reports a similar such call from some lady who asked him, "I answered an ad for free room and board, and now they want me to move. Can I sue them for that?"

Yellow page lawyers would agree that you have to have a lot of patience and tolerance, combined with a sunny disposition, to handle calls such as these. On "bad" days, and in response to particularly "bad" calls, even these personality traits start breaking down.

The larger firms who advertise usually assign some lower-echelon associate to "screening" the calls, but for the

one-or two-man firms, God help the yellow page lawyer who doesn't like people and their problems!

The 3% Solution...Most of the calls, however, are "legitimate" calls from people with small legal matters looking for "free advice." According to my records last year, less than three percent of the yellow page calls resulted in fee-paying clients. The remainder of the people get free advice, which, of course, is at the lawyer's expense and perhaps at the expense of his fee-paying clients.

The experience of other lawyers seems to be similar.

"People see that lawyers don't charge for initial consullations, and they simply take advantage of it to ask all sorts of questions, many of which are non-legal," Bubba Madden reports.

In addition to a large number of non-productive calls, the lawyer who advertises must be willing to accept "no shows."

You Gotta Shop Around ... "We get a lot of people who make appointments and then don't show up," one lawyer reports. Perhaps these "no shows" are the same people as the "price shoppers"-they simply found a cheaper lawyer (among the other yellow pagers, no doubt).

"I find that people who respond to my ad are very priceconscious," Dick Walloch says. "There's a lot of price-shopping going on."

Another point all the lawyers agree on is that there will probably be a much larger number of ads in nex1 year's phone book, as younger lawyers in particular look to the "magic" of advertisement to build a practice.

Moreover, the lawyers agree that the larger the number of ads, the smaller the return for anyone advertiser. For example, Gary Eubanks says that last year, when there were only ten to twelve people advertising, the number of both calls and cases was "good." This year, he says, both the calls and cases have dropped considerably.

Location Counts... Another significant factor affecting results is the placement of the ad, a matter over which the lawyer has little control. The phone company handles placement, the only "choice" given the lawyer being whether he wishes to buy a larger or smaller ad. Larger ads are placed first, and these in an alphabetical order.

Yet, for the lawyer trying to enhance his position by buying a larger ad, the results can sometimes be counterproductive. Collins Kilgore, for example, believes that he bought himself right out of the market this year.

By associating Garry Brewer in the firm and buying a half-page ad, Kilgore "guaranteed" himself a spot near the front of the placements. "The placement of the ad is a disaster'" he reports, allegedly because he is in front of, and not in the middle of,the main body of the lawyers. Two years ago he had the same placement and again reports a "disaster." Last year his ad was further from the front, and he had better results.

Kilgore says his firm has not made a final decision on whether to renew. Perhaps they should change the firm name to "Kilgore and Brewer" to insure better placement. ...And So Does Quality ... Some lawyers surveyed felt that the quality of the ads is very important. "I feel that both the content of the ad and its layout matter very much," one lawyer said.

There seems to be no consistent pattern on several matters. Large ads generally resulted in larger revenues, but then the added cost seems to eat up the extra profit. There seems to be no consensus on whether red type produces better results, despite phone company representations to this effect.

January 1982/Arkansas Lawyer/1?

A Picture Is Worth ... Likewise, there seems to be no evidence supporting whether putting your picture in the ad is effective. Perhaps, as Craig O'Neal says of Gary Eubanks, if you look like Willie Nelson- - Finally, a lot of the yellow page lawyer's feelings are summed up by Gene Richardson as follows: "Basically, I'd like to see the whole thing [advertising] done away with," he says. "It doesn't benefit attorneys at al~nly Southwestern Bell makes a bundle on it."

Update, continued from page 15 we will give you every opportunity to develop additional programs for the YLS. ABA/YLD Involvement Arkansas's involvement in the ABA/YLD continues to be impressive, especially considering the fact that we are a relatively small state with only one ABA/YLD affiliate. Patrick H. Hayes of North Little Rock was elected without opposition to the very important position of Speaker of the General Assembly of the ABA/YLD. Pat just com-

Bundle Or Bungle? Perhaps, the public "makes a bundle on it" also in terms of easier access to legal advice, free legal advice and competitive pricing.

Perhaps, the public does not "make a bundle" either.

Perhaps, the old saying is correct: "You get what you pay for." Certainly a lot of non-advertising lawyers would agree.

Who knows? They may be right. In the meantime, I'm on the Ma Bell Yellow Page Special. "For Legal Action-Cliff Jackson!" Hurrahl Humph!

f-.

pleted a term as Clerk of the Assembly.

R. T. "Rick" Beard, III, of Pine Bluff is editor of "The Affiliate," the official pUblication of ABA/YLD, and Harry Truman Moore of Paragould serves as an associate editor of that publication.

Terry Clay10n Paulsen of Little Rock is State Membership Chairman for Arkansas.

We are also strengthening our ties with our neighbors through several "exchange" type programs. The Oklahoma Young Lawyers invited the officers of our section to attend their state meeting this past summer. The Mississippi Young Lawyers out-did them-

selves in providing hotel accommodations, receptions, food and just great good ole "southern hospitality" during the weekend of the Arkansas-Ole Miss football game in Jackson. I only hope we can return their hospitality next year in Little Rock.

On tap for next March is a one-day CLE program which we will sponsor with AICLE for the benefit of Young Lawyers. The seminar will be held on a weekend, in Hot Springs, and Young Lawyers from Texas, Oklahoma, Missouri and Mississippi have already expressed interest in attending. More details will follow. "

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What You Need To Know About Generation Skipping Taxes

By Joseph M. Erwin

,

The tax advantage which the generation skipping tax was designed to eliminate involves a situation familiar to many general practitioners who do even a small amount of estate planning. A sum of money, income producing property, or a life insurance policy is placed in an irrevocable trust, either inter vivos or testamentary, for the benefit of the grantor's children for life with the remainder to the grandchildren. An estate or gift tax was paid on the original transfer into the trust but no additional tax was imposed upon the shift in economic enjoyment at the death of the grantor's children. The tax savings realized by such an arrangement was magnified if the trust property substantially appreciated after the original transfer to the trust. Congress sought to remedy this inequity between those people whose circumstances (or foresight) justified the iegal expense of setting up trusts as part of their estate plan and those people whose circumstances prevented such action.'

The answer Congress found is the Generation Skipping Tax.' The generation skipping tax is a complement to the gift and estate tax provisions of the Internal Revenue Code. It is imposed when rights to trust principal shift from one level of younger generation beneficiaries to the next. II a shift in economic enjoyment occurs and no gift or estate tax is due Ihe reason, save certain exceptions, should be either (a) the transfer was not large enough 10 be a taxable estate or gift or (b) it is a generation skipping transfer and a generation skipping tax is due.

1. McCaffrey, Planning for Generation Skipping Transfers, 14 Real Prop., Prob. & Trusls J. 722, 723 (1979).

2. Tax Reform Act 011976, Pub. L. No. 94-455, 90 Sial. 1879.

3. All references to "§" or "§§" hereafter cited are to the Internal Revenue Code of 1954, as

amended, unless otherwise indicated.

DEFINITION OF A GENERATION SKIPPING TRANSFER Internal Revenue Code § 2611 (a)' defines generation skipping transfer as "a taxable distribution or a taxabie termination with respect to a generation skipping trust or trust equivalent."

Any trust with younger generation beneficiaries assigned to more than one generation is a generation skipping trust.' Each term in the preceding two sentences is a word of art for purposes of the generation skipping tax: "beneficiaries," "younger generation beneficiaries," "generation," and "generation skipping trust equivalent."

A beneficiary is defined as a person with an "interesf' or "power" in the trust.' The right to receive trust income or corpus gives a person an "interest" in the trust; a person who is a "permissible recipient" of trust income or corpus also has an "interest" in the trust.' This concept of an interest in the trust approximates an interest in a trust under common law. This is not true with the concept of a "power" for generation skipping tax purposes.

Section 2613 (d)(2) states that the person has a power if he has "any power to establish or alter beneficial enjoyment of the corpus or income of the trust". Although this does not include the mere right to manage trust property, the power to invade principal subject to an ascertainable standard relating to health, education, support or maintenance is to be treated as a power.' Therefore, a person with an interest or power or both is treated as a beneficiary whether his interest or power is a present or future interest or 4. 2611 (b).

5. § 2613 (c)(3).

6. § 2613 (d)(l).

7. McCaffrey, Planning for Generation Skipping Transfers, 14 Real Prop., Prob. & Trusts J. 722, 723 (1979), citing House Committee on Ways and Means, Report on H.R. 14844 (Estate and Gift Tax Reform Bill

Joseph M. Erwin is Trust Officer, Employee Benefit Plans, Union National Bank, Uttle Rock. He received his B.A. from University of Arkansas; and his J.D. and L.L.M. from SMU. His article is another in the series sponsored by the Taxation, Trust and Estate Planning Section of the Arkansas Bar Association.

The Section has announced that the article for the following issue of The Arkansas Lawyer will be by Thomas Overbey on estate taxes under the Economic Recovery Tax Act of 1981.

power.

The next step is to ascertain a "younger generation beneficiary". This requires that the grantor of the trust be determined. Although complications do arise, we will assume for purposes of this article that the grantor is the person whose donative transfer directly or indirectly created the trust.

This grantor is assigned to one generation. The child of the grantor is in the next generation and the grandchild of the grantor is in the third generation.

For individuals not descended from the grantor or not married to one of the grantor's decendants, the generation is determined on the basis of age differences. If a person is not more than 12 1/2 years younger than the grantor that person is assigned to the grantor's generation.' For instance, if the grantor is 60 years of age and individual A is 58 years of age, then individual A is of the same generation as the grantor. An inof 1976) H.R.Rep. No. 94-1380, 94th Cong., 2d 5oss., 46. 49 (1976).

8. § 2611 (c)(5).

9. § 2611 (d).

January 1982/Arkansas Lawyer/19

dividual born more than 12 1/2 but not more than 37 1/2 years after the birth of the grantor is assigned to a generation different than that of the grantor. A new \leneration is assigned for each 25 year age range.

A "generation-skipping trust equivalent" is treated as if it were a generation skipping trust.' A generation skipping trust equivalent is any arrangement which has substantially the same effect as a generation skipping trust even if it is not a trust. '0 Examples of generation skipping trust equivalents include life estates, estates for a fixed term, and, possibly, custodian accounts under the Uniform Gifts To Minors Act." To recapitulate up to this point (we are searching for the definition of generation skipping trust). a generation skipping trust is any trust with younger generation beneficiaries assigned to more than one generation. From the above we know what beneficiaries are and what a "younger generation beneficiary" is. The following example will illustrate a generation skipping trust and will also be the example used for discussion purposes below.

Grantor transfers $300,000 to an independent trustee to hold for the benefit of Grantor's Son for his life with the remainder to Grandchild. This is a generation skipping trust because: (1) this is a trust; (2) the trust has younger generation beneficiaries (the grantor is of one generation and the beneficiaries of the trust are of another generation); and (3) the younger generation beneficiaries, namely, Son and Grandchild, are assigned to more than one generation.

WHEN THE GENERATION SKIPPING TAX IS IMPOSED There are two categories of generation skipping transfers. The category which complements the estate tax provisions is called a "taxable termination" and is defined as the termination of an interest or power of any younger generation beneficiary in a generation skipping trust who is of a generation older than the generation of another beneficiary." The other category, "taxable distribution," which complements the gift tax, is similarly defined but there must be an actual distribution not out of income."

Using the example above, upon the death of the Son a taxable termination will occur. This is because: (1) the trust 20/Arkansas Lawyer/January 1982

is a generation skipping trust and (2) the interest (in the income of the trust) of a younger generation beneficiary (Son) who is of a different generation than the other person who is a younger generation beneficiary (Grandchild) terminates on the death of the Son. Had Son's interest been contingent upon some event, making his interest a future interest, the termination of that future interest by his death or the event is not a "taxable termination"."

A "taxable distribution" works identically as the taxable termination except that there must be an actual distribution of trust property other than income.

Using the example above, if the trust principal is distributed to Grandchild upon Son's death it is a taxable distribution. If, however, upon Son's death only income is payable to Gandchild a taxable termination occurs upon the death of the Son. Only in certain circumstances will there be any practical difference between whether the generation skipping transfer is a taxable termination or a taxable distribution."

EXCEPTIONS Transfers which are already subject to federal estate or gift taxes are not subject to the generation skipping tax." For taxable distributions there is also an income exception, by which distributions of trust income are not considered taxable distributions."

This exception is necessary to prevent the potential for a double tax which would occur if a distribution were subject both to the generation skipping tax and the income tax for either the trust or the beneficiary." The income exception is not available for taxable terminations, however.

The most important exception is the $250,000 "grandchild exclusion", an unfortunate label in that though it is an exclusion for grandchildren it is limited to $250,000 per "deemed transferor," regardless of the number of grandchildren." Section 2612 defines "deemed transferor" as the parent of the transferee who is more closely related to the grantor than the other parent of such transferee. Ignoring some inconsisten-

10. 1 2611 (d)(1).

11. McCaffrey, Planning lor Generation Skipping Transfers, 14 Real Prop., Prob. & Trusts J. 722, 729 (1979). See also Prop.

Regs. 1 26.2611-4 (b).

12. I 2613 (b)(1).

13. 12613 (a)(I).

14. Similary, if a taxable distribution occurs but the individual involved at no time had more than a future interest, then that individual

shall not be consIdered a younger generation beneficiary, 12613 (a)(1).

15. See, e.g. text accompanying 17-19 below and references cited therein.

16. §§ 2613 (a)(4) and (b)(5).

17. 12613 (a)(2).

18. McCaffrey, Planning for Generation Ski~ ping Transfers, 14 Real Prop., Prob. & Trusts J. 722, 731 (1979).

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cies in the statute, assume for purposes of this discussion that the term "deemed transferor" means the person whose interest has just terminated.

Using the example above, the deemed transferor would be, at Son's death, Son. If there were $300,000 in the trust, there would be a total of only $250,000 which could be excluded from the generation skipping tax computation. To reiterate, the $250,000 exclusion is per deemed transferor and once it is used up it cannot be used again in that generation skipping trust.

It is applied to distributions or terminations in the order in which they are made.'"

CALCULATION OF THE TAX The generation skipping tax is determined with reference to the § 2001 tax rate (gift tax or estate tax, as the case may be) of the person who is the deemed transferor for the transfer."

Once the deemed transferor is ascertained, the following steps produce the amount of the generation skipping tax: 22 (1) Determine the sum of: (a) the value of the property transferred in the generation skipping transfer; (b) aggregate value of all prior generation skipping transfers of that deemed transferor; (c) aggregate value of all prior adjusted taxable gifts made by the deemed transferor; and (d) if a deemed transferor died before or at the same time as this transfer, the amount of his taxable estate.

(2) Calculate the tax under § 2001 (c) on this sum.

(3) Calculate the § 2001 (c) tax on the items in (1) (b), (c) and (d).

(4) The difference between (2) and (3) is the generation skipping tax.

To the extent it has not been used previously the unified credit is available to reduce the generation skipping tax.

This computation is illustrated by the following example: Grantor transfers $300,000 to an independent trustee to hold for the benefit of Grantor's Son for his life with the remainder to Grandchild.

The $300,000 increases in value to $500,000. As discussed above, a

generation skipping transfer occurs at the death of the Son. Assuming Son's taxable estate is $500,000, the generation skipping tax is computed as follows: a. Gross value of generation skipping transfer $500,000 Less: $250,000 Grandchild exclusion (250,000) Net Value of Generation Skipping Transfer 250,000 b. Value of prior generation skipping transfers of Son 0 c. Value of prior adjusted taxable gifts by Son 0 d. Taxable estate of Son 500,000 Total $750,000 Estate Tax 248,300 Tax on items b, c, and d (155,800) Generation Skipping $92,500 Tax PLANNING AND DRAFTING PROBLEMS Liability for a generation skipping tax generated by a taxable termination is on the trustee of the trust." The liability for a generation skipping tax caused by a taxable distribution is upon the distributee personally."

The most direct way to avoid the generation skipping tax is to avoid setting up a generation skipping trust. Recall that a generation skipping trust requires at least two younger generation beneficiaries, each of whom is in a different generation within that younger generation. If the interests of those two younger generation beneficiaries are separated into different trusts there will be no generation skipping trust. The efficacy of this technique will depend on several factors including the marginal transfer tax rate on the date of the original transfer into the separate trusts and whether or not the grantor wishes to give the youngest beneficiaries (Le., grandchildren) an immediate interest in trust property. This technique is known as "layering" and when used in conjunction with the $250,000 "grandchild" exclusion may effectively eliminate all generation skipping tax problems. For instance, Grantor wishes to

19. § 2613 (b)(6).

Pub. L. No. 95-600. § 702(n)(1), 92 Stat.

20. Id.

2935.

21.

22.

23.

24.

§ 2602 (a).

Id. § 2603 (a)(1)(A). § 2603 (a)(1)(8).

25. Tax Reform Act of 1976, Pub. L. No. 94·455, § 2006(c). 90 Stat. 1879. as amended by

26. Economic Recovery Tax Act of 1981, Pub. L. No. 97-34, § 428, Stat.

27. Id. § 403 (a)(2)(8) and (e).

28. Two additional references which are invaluable for a thorough understanding of the

set up a trust with $500,000 in corpus for the benefit of Son for life with the remainder to two Grandchildren. At Son's death these would be a generation skipping transfer of $500,000 less than $250,000 grandchild exclusion for a net transfer of $250,000 subject to the generation skipping tax. If the $500,000 had been split into a $250,000 trust for the Son and a separate $250,000 trust for the Grandchildren there would be no generation skipping transfer at the death of the Son. The effective date of the generation skipping tax provisions is June 11, 1976." This effective date does not apply to irrevocable trusts in effect upon that date. These provisions also do not apply to any generation skipping transfers made by a will or revocable trust in existence on June 11, 1976 in the case of a decedent who dies before January 1, 1983." This exception for revocable trusts and wills does not apply if the trust or will was amended after the effective date and the amendment had the effect of increasing the amount of a generation skipping transfer. For instance, using the facts in the above example, the contribution of more property to the trust by the Grantor increases the amount of property passing to Grandchild. This is an increase in the generation skipping transfer and is therefore not a permissible amendment to the trust.

The only changes in the generation skipping tax provisions caused by the Economic Recovery Tax Act of 1981 involve the extension of the deadline for amending wills and revocable trusts (see note above) and the elimination of consideration of generation skipping transfers in computing the size of an estate for purposes of computing the marital deduction."

CONCLUSION This article is certainly not meant to be a comprehensive exposition of the nuances of the generation skipping tax.

The important thing is to be able to recognize a generation skipping transfer and know when further research need be done." ~

generaHon skipping tax are: S. Haberman and J. Gallo, Generation Skipping Trans-fers In Trust: Practical Aspects of Planning, Drafting, and Administration (1979); and R. Covey, GeneratlonSkipping Transfers In Trust (3rd ed. 1978. with Supp. 1979).

January 1982/Arkansas Lawyer/21

MIDYEAR MEETING

featuring MR. AICLE

by Chairman Richard A. Williams

MIDYEAR MEETING

COMMITTEE "ROUNDUP"

--

,,- - ~ JANUARY

14-16

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"

: /LUNCHEONS CAMELOT HOTEL

HANDOUTS

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HOUSE OF DELEGATES INTRODUCING THE PROGRAM

TECHNICAL CHANGES IN ESTATE PLANNING HOW TO COPE WITH THE ECONOMIC RE..z..>.- \, COVERY TAX ACT OF 1981 ~ : . ECONOMICS OF LAW PRACTICE ./: • LAW OFFICE MANAGEMENT .. :.-;,../ • LOSS PREVENTION • •

TRIAL ADVOCACY. TEAMS FROM UNIVERSITY OF ARKANSAS COMPETITION AND UALR LAW SCHOOLS ~. SPONSORED BY ARKANSAS CHAPTER, } AMERICAN BOARD OF TRIAL ADVOCATES ••• (ABOTA) •• •• " • THREE HOUR TRIAL DEMONSTRATION WITH ...... ' CRITIQUE ' .......... ......'

• HENRY WOODS ANNUAL AWARD FOR TRIAL ADVOCACY PLAQUE FOR WINNING TEAM • MAJOR CASH AWARDS TO PARTICIPANTS IN COMPETITION ~

22/Arkansas Lawyer/January 1982

21ST ANNUAL ARKANSAS

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FEBRUARY 25-27 1982

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January 1982/Arkansas Lawyer/23

LAW SCHOOL NEWS Dean David G. Epstein Assistant Dean Ellen Brantley

SCHOOL OF LAW, UNIVERSITY OF ARKANSAS AT LITTLE ROCK First Rockefeller Scholar Begins Law Studies Alice Faye Sprinkle of Pine Bluff has been named the first Winthrop Rockefeller Scholar. Ms. Sprinkle, who is a first year student at the UALR School of Law, was selected by a committee of black iawyers.

Ms. Sprinkle, 31, is a graduate of Lincoln University in Jefferson City, Missouri and has done graduate work in business administration at the University of Detroit. She has worked as an Industrial Relations Analyst, Labor Relations Representative, and college recruiter at Ford Motor Company and as a personnel administrator at the international Paper Company in Pine Bluff. She is the daughter of Mr. and Mrs. Calvin Sprinkle, Jr. of Pine Bluff.

Ms. Sprinkle has a two year old daughter, Aisha.

The Winthrop Rockefeller Scholars program was created by the Winthrop Rockefeller Foundation to increase the number of black attorneys in Arkansas.

Twelve scholars will be selected over a five year period.

Each scholar will receive a generous stipend as well as a full tuition scholarship. Professor O. Fred Harris, Jr. of the School of Law is the program's director.

Allen Farnsworth To Deliver Altheimer Lecture The first Ben J. Altheimer Lecture of the 1981-82 academic year will be held on Friday, January 28, 1981. The lecturer will be Professor E. Allen Farnsworth of the Columbia University School of Law. Professor Farnsworth, who holds the Alfred McCormack Professorship at Colurnbia, received his B.S. degree from the University of Michigan, his MA from Yale and his LL.B. from Columbia. He has served on the Columbia faculty since 1954. He is the author of 24/Arkansas Lawyer/January 1982

leading casebooks in Contracts and Commercial Law and serves as the United States representative to the United Nations Committee of International Trade Law. From 1971 to 1980 he was reporter for the Restatement (Second) of Contracts.

The lecture will be held at 7:30 p.m. in the South Courtroom of the Old Federal Building and will be followed by a reception at the Arkansas Law Center.

All members of the Arkansas Bar Association are invited.

Faculty News Professor Susan Webber and Professor Robert R. Wright, III served as faculty members at the Second Annual UALR-ASU summer program held August 13-14. Professor Webber spoke on Land Use and Professor Wright on Decedents' Estates.

Professor Webber visited the Western New England School of Law in Springfield, Massachusetts as a member of an inspection team for the American Bar Association Committee on Accreditation on November 9-11.

She attended the Annual Meeting of the ABA in New Orleans August 7-12.

The 1981 supplement to Professor Fred Peel's book, Consolidated Tax Returns, has been published.

Assistant Dean Ellen B. Brantley served as special commissioner on the Arkansas Public Service Commission from July 27 to August 5. On October 6, she appeared on a panel to discuss The Law and Its Effect on Women's Changing Roles at a program for working women sponsored by Women On The Go. As a member of a National Academy of Sciences Committee on Underground Coal Mine Safety, Professor Eugene Mullins toured underground coal mines in Illinois and Ohio this summer. He has written a short history of state and federal legislation pertain-

ing to underground coal mine safety for the Committee. His work, which traces legislative efforts to improve mine safety and health from the iate 19th century through the 1977 Federal Mine Safety and Health Act, will appear in the Committee's final report to be published in early 1982.

An article by Dean D. Fenton Adams, "Misrepresentation in Procurement of Insurance: The Arkansas Law" was published in Volume 4, Issue 1 of the UALR Law Journal. Dean Adams attended the annual meeting of the American Bar Association in New Orleans August 9-12, an Association of American Law Schools Workshop for Senior Administrators in Chicago September 23-25, and a program on Legal Education in the 1980s at the New York University School of Law on November 12-14 which was co-sponsored by N.Y.U. and the American Bar Association.

Professor Steve Goldberg spoke on Ethical Considerations in Evidence and Trial Tactics at the Arkansas Bar Association's Fall Legal Institute. Professor Goldberg attended a meeting of the American Bar Association Standing Committee on Association Standards for Criminal Justice in Chicago November 13-14. He has been named chairman of the Committee's Task Force on Police Encounters with Mentally Disabled Persons.

Professor John Sheffey's article, "Reinsurance Intermediaries: Their Relationship to the Reinsured and Reinsurer," appeared in the Summer 1981 edition of the Forum, the journal of the Section on Tort and Insurance Law of the American Bar Association.

Professor L. Lynn Hogue received the Arkansas Bar Association's Golden Gavel Award at the Association's annual meeting in June. He was honored for his service as Chairman of the Association's Committee on the Men-

tally Disabled. From August 12-20, Professor Hogue participated in a seminar on legal and oral philosophy sponsored by the Institute for Humane

Studies held at Mills College in Oakland, California.

Assistant Dean Clay Patty's work with the Arkansas Institute for Continu-

ing Legal Education is discussed in his separate article in this issue.

SCHOOL OF LAW, UNIVERSITY OF ARKANSAS, FAYETTEVILLE CLARK, CYPERT WELCOME FIRST YEAR CLASS On Thursday, August 20, 1981, the members of the class of 1984 were welcomed to the study of law by Attorney General Steve Clark, and James Cypert, President of the Arkansas Bar Association, and the faculty of the University of Arkansas School of Law. Other first day activities included registration, a two-hour class on briefing cases, and an SBA sponsored party at the home of David and Diane Epstein.

Six hundred pieces of fried chicken were eaten, a comparable amount of beer was consumed, and a comparable number of stories about "what law school is really like" were told.

The nex1 Monday, the 174 men and women of the first year class discovered for themselves what law school is really like. The first year experience for the Class of 1983 will probably be somewhat different than the first year experience of earlier classes in that:

(1) each first year student is again taking either contract, property, or torts in small classes of approximately 25.

(This small section program was started last year and was very well received by both students and faculty. In the small section classes, a professor is able to calion each student regularly and monitor closely the progress that each student is making.) This year, the small section teacher will also teach legal writing to the class.

(2) there are only 174 beginning students. For the second consecutive year, the University of Arkansas School of Law has significantly reduced the number of size of its first year class: from around 225 in 1979 to around 190 in 1980 to 174 in 1981.

These reductions make it possible for Arkansas to be one of the few law schools in the country that affords first year law students a course in legal writing conducted by fulltime faculty members. Additionally, each second year student will be given a similar learning experience. Each second year student will be required to write a substantial appellate court brief; this brief writing exercise will be closely supervised by the full-time faculty members.

NEW FACULTY The Class of 1984 is also benefitting from three outstanding new professors. Rob Glicksman, a 1977 magna cum laude, Law Review graduate of Comell with four years of practice experience with the Ceary, Gottlieb firm in Washington, D.C., is teaching one section of the first year property course. Bob Laurence, who has taught at Illinois, New Mexico, and North Dakota and recently published a book on future interests, is also teaching a section of property. And, Andrea Simonton, who has two years of teaching experience at the University of Miami Law School, is teaching a section of Legal Method. A fourth new faCUlty member, Neil Hamilton, a Coif and Law Review graduate of the University of Iowa College of Law with practice experience at the Farm Division of the Iowa Department of Justice, is teaching in the Law School's agricultural law program.

Robert Fairbanks has left the University of Arkansas School of Law; he has accepted a position at Louisiana State University Law School. Don Garner has returned to Southern illinois University School of Law as Associate Dean. Robert Knowlton has moved to Texas to practice law with his son for the 1981-82 school year. The Law School will not be the same without Fairbanks, Garner, and Knowlton.

I am pleased to report no other faculty losses. While other faculty members received inquiries and offers from more prestigious schools such as Iowa, Minnesota, and Missouri, they have decided to remain on the Arkansas faCUlty.

FEDERAL GRANT FOR LAW SCHOOL CLINICAL PROGRAM The University of Arkansas School of Law has again received a substantial grant from the United States Department of Education for its clinical program. At a time when the federal funds available for support of law school clinical programs was reduced by 25%, the amount awarded to the University of Arkansas School of Law's clinical program was increased over 25%. These additional funds will make it possible for the Law School to increase its ef-

forts to provide highly supervised, practical lawyering skills training for its students.

LEFLAR, NICKLES, AND EPSTEIN NEW BOOK CONTRACTS. Dr. Robert A. Leflar has recently entered into a contract with the Michie Bobbs-Merrill Company to write a casebook on conflict of laws. His coauthors are Professor Robert Felix of South Carolina and Professor Luther McDougal of Tulane.

Dr. Steve H. Nickles has also recently entered into a contract for the publication of a book. Steve's book will be on the use of pre-Code law in solving problems under the Uniform Commercial Code. His co-author is Professor Robert Hillman of the University of Iowa. The book will be pUblished by Warren, Gorham & Lamont.

I have contracted with the West Publishing Company to write a book for first year students on Legal Methods. My co-author is Professor Peter Glenn of South Carolina.

NATIONAL MOOT COURT COMPETITION Each semester, the University of Arkansas School of Law enters a national moot court competition. This fall a large number of second and third year students are competing in an intra-school competition to select the team that will represent the Law School in the regional round in Austin. Students writing a brief and making oral arguments include: Sam Whitfield/Chuck Stutte Bill Frye/John Holstine Cora Gentry/Pattie Evans Pati Hoffman/Buck Gwyn Cindy Fearno/Connie Griffin Rudy Rousseau/Rusty Sparks Tim Wallace/Jay Williams Ricky Gill/Scott Emerson Roger Jeremiah/Judy Houston Mike Lax/Jay Metzger Cheryl Naegler/Jed Molleston Mark Jennings/Jennifer Horan Pat Aydelott/Karen Ledbetter David Zwerner/Mark Johnson Albert Hall/Sharon Flippin Constance Akridge/Marcia Brinton Renee Sigman/David Schneider continued on page 29 January 1982/Arkansas Lawyer/25

AICLE NEWS

by Claibourne W. Patty, Jr. Executive Director Arkansas Institute of Continuing Legal Education

1981 Fall Legal Institute Returns To Northwest Arkansas For the first time in five years the Fall Legal Institute, which has traditionally been presented at the law school in Fayetteville, returned to Northwest Arkansas. This time it was held at the conference center at Bella Vista on September 10-11. The program, under the general chairmanship of Dean David G. Epstein with Professor Bill Bost presiding, was devoted to the general topic of practical evidence and trial tactics. Approximately 225 registrants attended the lectures and trial demonstrations which made up the program.

On Thursday morning Professor Ray Guzman lectured on the basic concepts of evidence under the Arkansas Uniform Rules of Evidence; and there was a trial demonstration concerning expert witnesses and opinion testimony presided over by Judge William Enfield with attorneys Hillary Rodham on direct and Jim Blair on cross with Hillary Rodham also acting as moderator. On Thursday afternoon U.S. District Judge Henry Woods lectured on expert witnesses and opinion testimony; and Bob Compton lectured on techniques of impeachment. On Friday morning Corneill Stephens, Esq. of Atlanta, Georgia, lectured on the subject of identification, certification and introduction of documentary evidence; followed by Bill Wilson who lectured on handling objectionable evidencemotions in limine, making and answering objections and offers of proof. Professor Steven H. Goldberg followed with a lecture on ethical considerations of evidence and trial tactics. On Friday afternoon there was a second trial demonstration on introduction of and objection to demonstrative and real evidence presided over by Judge Richard Arnold of the Eighth Circuit Court of Appeals with attorney Bobby McDaniel on direct and Bob Jones on 26/Arkansas Lawyer/January 1982

cross with Professor Mort Gitelman as moderator. This demonstration specifically dealt with the introduction of a model with the expert testimony of the person who made the model followed by an example of a videotape entitled "A Day in the Life of an Accident Victim" with an explanation of how these videotapes are made and for what purpose they are introduced. The demonstration Friday afternoon was followed by a videotape of closing arguments demonstrated by Henry Woods for the plaintiff and Win Drummond for the defendant based on the case involving a service station explosion in which the model in question was introduced.

This sort of program in the trial and evidentary area of the law was long overdue and it was met with an overall positive response by those attending.

Even though most of the people staying at Bella Vista enjoyed the experience, there appears to be an overwhelming sentiment to try the new FayetteVille Hilton Hotel next fall and then perhaps compare the two places.

It is even possible that we will alternate in future years so that every other year we will have the Fall Legal Institute in the resort setting of Bella Vista, and every other year in a traditional hotelconference center setting in Fayetteville.

Twenty-Second Annual Practice Skills Course Held In Little Rock The annual Practice Skills Course, jointly sponsored by the Young Lawyers Section of the Arkansas Bar Association and AICLE, is one of the longest running, continuous annual programs in the history of Arkansas continuing legal education. Its seniority is tied with the annual Mineral Law Institute, and exceeded only by the Fall Legal Institute. The approximately 85 registrants are made up of mostly recent admittees to the Bar with some lawyers returning for a refresher course plus some who only recently have become active in the practice of

law and needing more than just a "refresher" course. The two day program, held at the Camelot Inn, October 15-16, 1981; provided basic and practical instruction by experienced lawyers along with handout materials including checklists and current forms used by these lawyers in their respective areas of expertise. Typical subjects covered in this course from a practice-oriented rather than a substantive law manner included: real property transactions, representation of business clients, litigation, ethics and avoidance of malpractice, criminal practice, domestic relations and representation of creditors and debtors. The individual presentations and the handout materials were strictly oriented toward getting the new or recently active lawyer safely in and out of the courthouse and otherwise assist them in serving their clients and building their law practice during an initial three year period.

All of the above topics were presented "live" by teams of two speakers, each giving a different point of view on the particular subject. Some of the speakers were recruited from the ranks of the Young Lawyers Section, whereas others are more senior practitioners who are interested in sharing their experiences with those attorneys who have recently joined our professional ranks. This is an annual continuing legal education program which I expect to have a long and healthy existence as long as we have substantial numbers of new admittees joining our bar association each year.

A Tax Seminar For The General Practitioner The Economic Recovery Tax Act of 1981, recently passed by Congress and signed by the President, affects both individuals and businesses and involves changes not only in income tax considerations but also gift and estate tax. Since this new federallegislation will alter the tax planning for such a

large variety of clientele. it was deemed of the utmost importance by the AICLE Program Committee and Board of Directors to plan a special one day program in Little Rock at the Camelot Inn on October 23. 1981.to give a practical overview of these changes which will mostly effect the clients of the general practitioner.

The specific topics are as follows: highlights of the new tax act by Dick Hatfield; individual income tax changes

by James E. McClain. Jr.; business tax changes and practical application by Ted Drake; changes in estate and gift taxes by Byron M. Eiseman. Jr.; and how to deal with immediate problems of opportunities in the new act by F. H. Martin. At the conclusion of the morning and afternoon sessions there will be a panel made-up of the speakers which will answer questions and lead discussion on topics proposed by the audience.

Even though this course is not designed to make tax specialists out of the general practitioners who may attend. yet it is hoped by the program chairmen. Wayne Boyce and Dick Hatfield. that it will at least provide the basic information for those attending to keep abreast of the changes in the tax

laws affecting their clients and their law practice in general.

Variety Of Subjects To Be Presented At Midyear Meeting The 1982 Midyear Bar Meeting to be held at the Camelot hotel in lillie Rock on January 14-15. 1982. will include three mini-programs: the first on Thursday morning which will consist of the first annual trial advocacy competition between the University of Arkansas law schools at Fayetteville and little Rock. which will be sponsored by the Arkansas chapter of the American Board of Trial Advocates; the second on Thursday afternoon will include a panel discussion of the technical changes in estate planning resulting from the Economic Tax Recovery Act of 1981. and how to cope with the new law; and the third session all day Friday will be devoted to the subject of preventing legal malpractice which will be led by Jeffrey M. Smith. Esq. of Atlanta. Georgia. author of the book Preventing Legal Malpractice. _Winslow Drummond of Lillie Rock will be in charge of the Thursday morning part of the program concerning the trial advocacy competition and will award the winning team the "Henry

Woods Annual Award for Trial Advocacy" Inscribed with the name of the school and the team members. the plaque to be retained by the school until the next annual competition. In addition each member of the prevailing team will receive a cash award of $400 and each member of adversary team will receive a cash award of $300.

Richard A. Williams of lillie Rock is the general course chairman and will be presiding at the Thursday afternoon and Friday sessions. In addition to another out-of-state expert on the estate planning panel. the remaining panelists on Thursday afternoon and on the all day Friday session will be made up of Arkansas lawyers who are recognized experts in the respective areas.

The Midyear Meeting will include some very timely subjects which will be worthwhile for Arkansas lawyers to attend. In addition there will be committee and section meetings on Thursday morning and the House of Delegates will have its midyear meeting on Saturday morning at the Camelot hotel.

Portrait Of Dean Barnhart Unveiled A portrait of Dean Ralph Barnhart was unveiled at a reception held at the Arkansas Law Center on Friday. September 18. 1981. The portrait of Dean Barnhart was commissioned by a group of Arkansas Lawyers including former students and faculty colleagues of Dean Barnhart.

Dean Barnhart. who teaches Labor Law at the UALR School of Law. served on the faculty of the University of Arkansas School of Law from 1946 until 1974. From 1958 to 1973, he was Dean. He served as Dean when the Arkansas Law School became the evening division of the University of Arkansas School of Law. The portrait. which was painted by Vena A. McAninch of Lillie Rock, will hang in the UALR School of Law. Professor Ruth Brunson chaired the commillee which raised funds for the portrait.

Dean Ralph Barnhart and his wife. Mary. with his portrait.

January 1982/Arkansas Lawyer/27

~

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JURIS DICTUM

by Robert L. Lowery Executive Secretary, Judicial Department

Judicial Reapportionment The dust from the 1979 judicial reapportionment is still in the air, but even the short timespan since January 1 of that year has shown the inadequacies of that reapportionment. The 1981 General Assembly was made aware of the problems around the State by the number of bills introduced to create additional judgeships. Only one bill was enacted into law, and that was the one creating a separate circuit (11 East) for Arkansas County, leaving Jefferson and Lincoln Counties as 11 West. The Arkansas County judgeship will be a combined circuit-chancery judge. At the same time that this judgeship goes into effect (January 1, 1983), one of the chancery judgeships in the 8th Circuit will cease to exist, leaving the number of judgeships in the State the same as at present, that is, 63 judgeships. Of these, 30 are circuit judges, 30 are chancery judges, and 3 are combined circuit-chancery judges.

A map is appended showing the judicial circuits as of January 1, 1979.

This shows the distribution of the judgeships across the State.

Act 265 of 1981 created a temporary "State Board of Judicial Reapportionment". This Board was directed to submit a plan to the next regular or special session of the Legislature for not more than 67 circuit and chancery judgeships, an increase of four over the present number. This plan is to be submitted by the end of 1981, as that is the date that the Board will cease to exist. The membership of the Board is as follows: Chief Justice Richard B. Adkisson, Chairman Governor Frank White 28/Arkansas Lawyer/January 1982

Attorney General Steve Clark Secretary of State Paul Riviere President ProTem of the Senate Ben Allen Speaker of the House Lloyd McCuiston Chairman of Senate Judiciary Committee Max Howell Chairman of House Judiciary Committee Jim Shaver Governor's Appointee Odell Poilard

The initial organizational meeting of the Board was on August 24, 1981; the first regular business session was held September 24, 1981, in the Supreme Court Chambers of the State Capitol.

Several judges and bar association representatives addressed the Board about the needs of the judiciary, especially the increasing amounts of time between the filing of a case and the trial. One of the bar representatives suggested that he was well aware of the financial straits of the State, but that the financing for the additional needed

ARKANSAS COURT CIRCUITS -- EFFECTIVE ~ANUARY 1, 1979

judgeships could be done by a substantial increase in the filing fees.

The Board was informed that the Judicial Department's projections for 1985 were in excess of 2,000 cases per chancellor and in excess of 2,400 per circuit jt,Jdge. The Board was also informed that 1,500 cases per judge was a more than adequate caseload for the proper cjjspensation of justice.

The Board, at the suggestion of Governor White, instructed the Judicial Department to prepare figures showing the number of judges needed to attain a 1,500 per judge new filings caseload, and like~ise a plan to attain a 1,300 per judge new filings case/oad. He also suggested that based upon the comments made at the hearing, that the Judicial Department make an estimate of the amount of court filing fee increase needed to finance these additional judgeships.

emphasized that this would be a false economy, and that those who had to pay the price would be the people whose trials were unduly delayed or otherwise effectively denied access to their courts.

Please forward any suggestions or observations you may have on this pressing issue to me at the Judicial Department, Justice Building, Little Rock, Arkansas, 72201.1.....

The issue of whether or not the courts should finance themselves is not at issue. The question is simply how much of a filing fee increase is needed to finance the additional judgeships. These matters are presently being researched by the Judicial Department.

Chief Justice Adkisson stressed that the addition of four judgeships would leave us farther behind in 1985than we are now, insofar as filings per judge. He

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STUDENT BAR ASSOCIATION As noted above, the SBA sponsored a "welcome" party for the first year students at the start of the school year.

The SBA is also active in educational and public service projects. On October 1, the SBA worked with the Red Cross in holding a blood drive at the Law School.

SBA officers for the first semester are Ron Goodman, President; James Wilson, 1st Vice President; Velda West, 2nd Vice President; Renee Sigman, Secretary; Tim Vinson, Treasurer; Amanda Nixon, 3rd Year Representative; Rocky Tirozzi, 2nd Year Representative; and Sarah Gill, Student/Faculty Representative. ,., 1II "

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OYEZ 路 OYEZ II By: Carol Utley Publications Assistant

MARK A. STODOLA of Little Rock was elected during August to a twoyear term as national president of the Young Democrats of America at a meeting of the group at Philadelphia.

HARRY McDERMOTT III of Little Rock was featured in the Arkansas Democrat for his many talents and achievements. McDermott, 26, holds the rank of black belt in karate, has appeared in many Shakespearean plays and com路 munity theatre works, moonlights as a waiter at Cajun's Wharf, is well read, takes drawing lessons, and can occasionally be seen roller skating from his office to the county courthouse. His one complaint is never having the time to travel as much as he would like!!

Brinkley attorney STEVE;. ELLEDGE spoke to the Clarendon Lions Club this summer about several new laws passed during the 73rd General Assembly.

Elledge is Deputy Prosecuting Attorney for Monroe County. RICHARD D. O'BRIEN, after practicing law in Little Rock and a brief stint on the staff of Dallas County District Attorney Henry Wade, has become associated with the firm of Charles H. Robertson, Inc., 3016 Tower, Dallas. The firm specializes in family law. DAN FORD of Rogers, has joined the law firm of Tom J. Keith. Ford is a 1981 graduate of the U of A Law School. JIM McKEN路 ZIE of Prescott spoke to the Prescott Kiwanis Club on September 3 on "Changes in the Tax Law as it Affects Wills and Estate Taxes." He highlighted many of the changes the Economic Recovery Tax Act of 1981 has made in the current law.

STEPHEN E. KIRK and BILL MAYO have formed a partnership for the general practice of law in Siloam Springs.

Officers installed August 28, for the Arkansas Association of Women Lawyers include: JACQUELINE WRIGHT, President; CAROLYN WITHER路 SPOON, Vice-President; VIRGINIA TACKETT, Recording Secretary; BONNIE MacDOUGAL, Correspond30/Arkansas Lawyer/January 1982

ing Secretary; and, MEREDITH CATLETT, Treasurer. RICK T. BEARD, III has been appointed Editor of the Affiliate Newsletter of the ABA's Young Lawyers Division. FREDRICK S. WETZEL has become associated with the firm of Doug Woods and Associates in North Little Rock. TRIPPER CRONKHITE, a Litlle Rock lawyer employed at the federal Environmental Protection Agency in Dallas, has been named litigation manager for the EPA's Region 6, an area including Arkansas, Louisiana, Texas, Oklahoma and New Mexico. Charles Darwin Davidson announces the association of MATTHEW WOOD FLEMING with the firm. JOHN P. GILL, THEODORE C. SKOKOS, HAROLD H. SIMPSON II, TOM A. BUFORD and WILLIAM L. OWEN announce the formation of a partnership for the general practice of law with former Arkansas Supreme Court Justice JOHN A. FOGLEMAN of counsel to the firm. MICHAEL RAINWATER has also become associated with the firm.

ROBERT L. BARROW announces the relocation of his office to Suite 1700 First National Building in Little Rock.

Searcy attorney, CLARENCE PHIL SHOFFNER was the guest speaker at the annual meeting of the Associated Credit Bureaus of Arkansas in May. RUSTY PORTER of West Helena, has been honored with the Helena-West Helena Jaycee Distinguished Service Award. PETER G. ESTES JR. of Fayetteville, has been named president of the Washington County Bar Association. Other officers include JOE B. REED, vice-president and PRISCILLA KAREN POPE, secretary treasurer.

The Arkansas Trial Lawyers Association has awarded BILL R. HOLLOWAY of Lake Village, its Outstanding Trial Lawyer Award for 1980.

JIM BURNETT of Clinton, has been appointed to a five year term on the National Transportation Safety Board.

WAYNE A. GRUBER of Little Rock, has been elected board chairman of

Stepping Stone, Inc., a non-profit organization which provides counseling to runaways, homeless youth and youth on parole from Youth Service Centers. PHILLIP CARROLL of Little Rock, was featured In the Arkansas Democrat as one of three top professional men and how they select their clothes. DAVID BURNETT was selected by the University of California, Hastings Law School, to be a special faculty member for the Annual Trial Advocacy Program held July 31 through August 9. Little Rock lawyer and chef, GARY BARKET, was featured in the Arkansas Democrat Food Section with many of his own recipes.

Attorney JAMES B. SHARP attended a coffee in the Governor's Conference Room at which time he was honored "as one of those special individuals whose time, money and devotion, has helped make our state a better place to live." GEORGE M. CALLAHAN, JOHN H. WRIGHT, CARL A. CROW, JR., G. LATTA BACHELOR, III and GARY M. LAX announce the formation of a professional association for the practice of law in Hot Springs. Mitchell, Williams & Selig announce the relocation of their offices to 1000 Savers Federal Building in Little Rock, and that RICHARD C. JANS and JOHN C. LESSEL have become associated with the firm. The ROSE LAW FIRM has moved to 120 East Fourth Street in little Rock. A. JACK KING has been appointed Trust Officer for Bank of Ozark, Ozark, AR. WILLIAM R. WILSON JR., Little Rock, President of the Arkansas Trial Lawyers Association, has been certified as a criminal and civil trial specialist by the National Board of Trial Advocacy. He is one of seven lawyers in the country certified in both the civil and criminal areas. JAMES W. STANLEY JR., of the law firm of Blevins and Pierce in North Little Rock, has been appointed to the position of Legal Chairman of the Ozark Chapter of the Sierra Club. REGINALD ROBERT-

SON has been chosen as one of the Outstanding Young Men of America.

He is office manager and attorney for East Arkansas Legal Services in West Memphis. FRED LIVINGSTON, attorney from Batesville. became 1981-82 national president of the University of Arkansas Alumni Association. He is only the third person in the 103-year history of the organization to serve a second term. WILLIAM ALLEN of Little Rock was recently appointed chairman of the American Bar Association Standing Committee on Assembly Resolutions. He was also named to the Committee on Ethics and Professional Responsibility. ELTON RIEVES III of West Memphis and JIMASON J. DAGGETT of Marianna. have been inducted into the American College of Trial Lawyers. They are among 195 persons honored by the organization this year. Deputy Prosecuting Attorney CHUCK BANKS spoke to a group of Osceola residents at a ceremony dedicating a monument for the long unmarked grave of Thomas B. Craighead who was a lawyer. Senator and Congressman from Arkansas in the 1850s and for whom Craighead County is named. WILLIAM GARY HOLT has joined the Little Rock law firm of Gary Eubanks & Associates. He comes to the firm from the U.S. Attorney's Office where he was a paralegal specialist and a jurislegal computer operator.

The North Little Rock Chapter of the NAACP honored attorney JOHN WALKER of Little Rock with a dinner on Saturday. September 5. The theme of the program was "Yesterday and Today". DAVID BURNETT of Osceola. was selected to serve on a panel of experts at the annual meeting of the Association of Attorneys General held in New Orleans during August.

MITCHELL MOORE of Osceola. resigned his position as city attorney after 32 years. Osceola Mayor Dick Prewitt said that Moore had been involved in many of the good things that have come to Osceola over the past 30 years. JANET MOORE of Osceola has been appointed by Governor White to complete the term of the late Municipal Judge James Hyatt. The appointment marks the first time a woman has served as municipal judge in Mississippi County. KANEASTER HODGES JR. of Newport. has been elected to the board of directors of Arkansas Power & Light Company. JUDGE RICHARD S. ARNOLD of Eighth Circuit Court of Appeals. spoke to Arkansas State University's summer graduating class on

August 7. ALSTON JENNINGS of Little Rock was elected president of the American College of Trial Lawyers during its annual meeting in New Orleans.

He is the second Arkansas lawyer to serve as president following the late Edward L. Wright. LANE H. STROTHER and JUDITH C. STROTHER have formed the first husband and wife law partnership in Mountain Home. E. E. (SCOTTY) MAGLOTHIN of Fayetteville has joined the law firm of Putman. Gallman and Dickson in Fayetteville. JOHN ELROD, Rison businessman and attorney, was elected chairman of the Arkansas Forestry Commission at a meeting of the group early in September. He succeeds Beryl Anthony. Sr. who recently resigned from the commission.

FRANK L. WHITBECK and EDWARD M. PENICK were honored at the UALR Alumni Luncheon. Whitbeck received the Shield of the Trojan Award and Penick the UALR Builder Award. The luncheon was held on graduation day in May. JOHN NELSON FOGLEMAN has joined the firm of Hale. Fogleman and Rogers in West Memphis continuing a longtime family tradition which

began with his father in 1946 when he began practicing law. ROBERT FUSSELL of Little Rock was honored by KARK-TV and the Governor's Office of Voluntary Participation at the Community Service Awards banquet during September. He is recognized for his legal representation and work for the deaf in the community. THOMAS L. OVERBEY of Little Rock has been recognized by the Small Business Council of America. Inc. for his contributions toward helping small business in America. He is a member of the Legal Advisory Board of the Council.

The law firm of Wallace. Hiburn. Clayton. Calhoon and Forster in North Little Rock, announces that JOHN E. PRUNISKI III has become a partner with the firm and also that JOSEPH H. PURVIS, RUSH B. DEACON and PAULA J. JAM ELL have become associated with the firm. JOHN R. VANWINKLE of Conway. has resigned his position as deputy prosecuting attorney for Sebastian and Crawford counties and is now associated with the Charles R. Gamer law firm in Fort Smith.

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A Securities Law Primer For The General Practitioner

By John M. Sheffey ties transactions are particularly susceptible to sharp sales practices and to unfounded speculation. The primary means employed by the securities laws to afford protection to investors from such events are two-fold: mandated disclosure and the prohibition of fraud.

Many lawyers have had no exposure to the securities laws either in law school or in their practice and consequently assume that those laws are directed at large securities transactions but are simply not applicable to the comparatively smaller securities transactions which they may encounter in their practice with some regularity.

We all know, for example, that when General Motors seeks to raise additional capital by selling stock to the public it must comply with the securities laws. However, few would suspect securities law implications when a newly-formed, small business corporation raises capital by selling stock to the founder's brother-In-law. This misconception is a dangerous one not only because It is wrong, but also because the consequences of a viblation, even an inadvertent one, can be severe to both the attorney and his client. The fact is that the federal and state securities laws' may have application to many transactions commonly handled by the non-securities specialist. It is the purpose of this brief article to alert the bar in a general way to the provisions of the securities laws which are widely applicable and which are therefore often unknowingly violated.

The overall purpose of the securities laws is investor protection. Because of the intangible aspects of securities, which make any attempt to determine their Intrinsic value difficult at best, and the lure of financial gain from possible appreciation in market values, securi-

DISCLOSURE BY REGISTRATION Both the state and federal securities laws require detailed disclosure to investors whenever a corporation or other issuer of securities sells its own securities to the public.' The required disclosure includes, among other items, information concerning the corporation, its business and management, the industry in which it operates, how it will use the proceeds of the sale of securities, and comprehensive, certified financial statements. These disclosures are included In a registration statement filed with regulatory authorities and a prospectus to be delivered to prospective purchasers. The objective of this disclosure process, refered to as "registration" of the securities, is to give buyers all the relevant information necessary to make an informed and intelligent purchase decision. Although there is no guarantee that buyers will use the information, the thought is that such disclosure will make it more difficult to take advantage of unsuspecting and unsophisticated investors and will inhibit wild speculation.

The requirement of registration and

1. The two primary federal securities laws are the Securities Act of 1933, 15 U.S.C. §77, and the Securities Exchange Act of 1934, 15 U.S.C. §78. The Arkansas Securities Act

commences at Ark. Stat. Ann.. §67-1235.

2. Securities Act of 1933, §§5,7 and 10; Arkansas Securities Act. §§67-1241 through 671244.

32/Arkansas Lawyer/January 1982

John M. Sheffey is an Associate Professor of Law at the UALR School of Law (securities regulation, corporations, agency and partnership, and insurance). Previously, he was associated for seven years with the Chicago firm of Lord, Bissell & Brook.

He is a member of the State and Federal Securities Committee of the Arkansas Bar Association. He has authored "Credit Ufe and Disability Insurance Disclosures Under Truth-InLending: The Triumph of Form Over Substance," 8 Florida State University Law Review 463 (1980), "Reinsurance Intermediaries: Their Relationship to the Reinsured and Reinsurer," appearing in the Summer, 1981 edition of the Forum, and is presently at work on an article analyzing the securities law responsibilities of insurers to respond to rumors and other publicity. disclosure Is literally applicable to most every sale or offer of securities regardless of how small or personal the transaction. For example, section 5(a) of the Securities Act of 1933 states that without such registration and disclosure "it shall be unlawful for any person, directly or indirectly... to sell such security through the use or medium of any prospectus or otherwise." In other words, every sale of any security by any person without prior registration is a violation under this broadly-worded prohibition. The only exceptions are' when the transaction does not involve or affect interstate commerce (and because sending a certificate or check through the mail, or even placing an intrastate telephone call will be a sufficient connection with interstate commerce, virtually every transaction will satisfy this aspect),' or when there is an 3. Of course, there is no requirement that the transaction affect interstate commerce in order to trigger application of the Arkansas Securities Act.

applicable exemption from the registration requirement. Not surprisingly, many securities transactions take place in total disregard of these requirements and resulting inadvertent violations are frequent.

The registration and disclosure documents are long and complex and extremely expensive to prepare. At a minimum, attorneys and certified public accountants must be employed and perhaps even other experts must be engaged depending upon the type of business of the issuer. Printing costs alone can be substantial for a widespread offering. A fair guess is that full blown registration will cost the issuer at least $50,000 and in many cases much more.

Of equal concern is the liability which may ensue from a violation of the registration requirement. If securities are sold without the required registration, the seller is liable for rescission or damages to all buyers, who need not prove intent to defraud, reliance or causation in order to recover.' If the securities are registered but the disclosure documents are materially false or misleading, the issuer and a number of others connected with the issuer may be liable for damages to purchasers who again need not prove intent, reliance or causation. The defendants may prevail, however, if they prove that they exercised "due diligence" to avoid misstatements.' Even the attorney may face liability in these events if he holds office as a director of the issuer, expresses a legal opinion in the registration statement, or perhaps if his activities qualify for treatment as a "control person" or principal of, or aider and abettor with any other person who is so liable.

In order to avoid in advertent violations of the disclosure requirements, the exorbitant cost of compliance, and the potential liability for noncompliance, it is necessary, whenever possible, to avoid the registration requirements. This is accomplished by qualification for an exemption from registration. While there are numerous exemptions, included below is a brief description of those exemptions which should be of particular interest to the general practitioner: Security Exemptions-Certain 4. Securities Act of 1933,112(1).

5. Securities Act of 1933, § 11.

6. Securities Act of 1933, 113(a) (2)-(8); Arkansas Securnies Act, 167-1248(a).

7. Securities act of 1933, §4(2); S.E.C. Rule

1_-

types of securities, because they are regulated elsewhere or because regulation is felt inappropriate, are exempt from the registration requirement. Examples are securities issued by state and federal governmental agencies, banks and savings and loan associations, charitable organizations and common carriers. There are similar exemptions under state law.'

Private Placement-The registration requirement applies only to pUblic, not private offerings. Distinguishing between the two, however, is not always easy. The number of offerees is not determinative, and an offering to only one person may not qualify as a private placement. The significant facts are whether the offerees have access to the important information concerning the issuer and whether they are able to "fend for themselves" (i.e., have a degree of financial sophistication) in making investment decisions. There is a corresponding private placement exemption under the Arkansas Securities Act! Intrastate Offerings-Offers and sales of securities which take place entirely within one state, only to residents of that state, by an issuer incorporated in and doing substantially all of its business in that state, are exempt from federal registration. Such localized transactions are left to state regulation and there is, therefore, no corresponding exemption from state registration requirements.'

Small Offering ExemptionsThere are several exemptions from federal registration available for securities offerings raising relatively smaller amounts of capital. Each, however, has specific but different compliance requirements. For example, Regulation A applies to offerings of 1,500,000 or less but requires an abbreviated type of registration. Rule 240 exempts offerings of up to $100,000 but only by corporations with 100 or fewer shareholders. Rule 242 exempts offerings not exceeding $2,000,000 146; Securities and Exchange Com· mission v. Ralston Purina Co., 346 U.S. 119 (1953); Arkansas Securities Act, §671248(b) (14).

8. Securities Act of 1933, 13(a) (11).

but requires a simplified registration if sales are made to certain unsophisticated buyers. In a new addition to the Securities Act of 1933, section 4(6) exempts offerings raising as much as $5,000,000 so long as only banks, other financial institutions, and certain other sophisticated investors are offered the opportunity to buy.

Miscellaneous Exemptions Under State Law-There are no exemptions under the Arkansas Securities Act geared to the dollar amount of the offering. However, sales of securities to financial institutions, offers to 25 people or less, sales to the original organizers (if not more than 5) of a business, and sales in connection with the organization of a professional corporation are exempt from registration under state law under certain conditions.'

ANTI-FRAUD The second of the basic tools employed by the securities laws to promote investor protection is the prohibition of fraud. There are several socalled "anti-fraud" provisions in both the state and federal securities laws and rules, the most famous and the most widely applicable of which is rule 10b-5 of the Securities and Exchange Commission. That rule states with deceptive simplicity: "It shall be unlawful for any person, directly or indirectly, by use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, (1) to employ any device, scheme, or artifice to defraud, (2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statement made, in the light of the circumstances under which they were made, not misleading, or (3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.""

9. Arkansas Securities Act, 167-1248(b) (8) and (9); Rules of the Arkansas Securities Commissioner, Rule 14(b) (15) (A).

10. The rule was a model for the anti·fraud provision of the Arkansas Act, §67-1235.

January 1982/Arkansas Lawyer/33

Although in its more recent decisions concerning the rule of the U.S. Supreme Court has significantly limited earlier broad interpretations by the lower courts," the rule survives as a potent weapon against securities fraud. While the rule does not address the issue, a private cause of action for damages for breach has long been implied.

It is important to recognize that the rule applies to the purchase or sale of any security, regardless how small the amount involved or how private the transaction. The exemptions discussed earlier are exemptions from registration only and not from the antifraud provisions. The rule, therefore, will reach virtually every purchase and sale of a security. The only transactions immune from the rule are those which are accomplished without use of "any means or instrumentality of interstate commerce," but as discussed earlier almost every transaction will in some sufficient way touch interstate commerce.

The elements of a violation of the rule are the use of a manipulative or deceptive device, in connection with or relating to a purchase or sale of securities, by which material facts are misrepresented or omitted, committed with scienter (a degree of intent or perhaps even recklessness, but something more than simple negligence).

Those elements are sufficient for the SEC to seek injunctive relief. A private litigent seeking damages based upon an alleged violation of the rule must prove, in addition, that he purchased or sold the security, that he relied upon the misrepresentation (although reliance is presumed in the case of nondisclosure rather than misrepresentation). and that he suffered a resulting loss.

Privity is not a requirement. Consequently, the liability of a defendant found to have violated the rule may extend to many more than just his immediate purchaser or seller. This could potentially lead to damages which are truly "draconian," depending upon the number of contemporaneous buyers or sellers and the amounts of their individual losses. There does seem to be a recognition, however, that at least in some cases a reasonable limit, perhaps the defendants' profits, should 11. Aaron v. Securities & Exchange Commission, 446 U.S. 680 (1980); Chlarana v.

Unltad Stat. ., 445 U.S. 222 (1980); Santa Fe Industries, Inc. v. Green, 430 U.S. 462 (1977); Ematand Emat v. Hochleldar, 425 34/Arkansas Lawyer/January 1982

be placed on damage recoveries."

A comprehensive list of the types of activities which the rule prohibits is impossible here, but some of the more prominent examples will be instructive of the rule's reach. Clearly any material misrepresentations by the buyer or the seller to the other constitutes a violation, but the rule goes much farther. For example, purchases or sales of securities by the corporate issuer or by its insiders (officers, directors, key employees, major shareholders, and perhaps others) while in possession of secret, material information violates the rule. Likewise, materially false or misleading public statements by or on behalf of the corporation, even in the absence of trading by the corporation, may violate the rule. The rule does not, however, encompass fraudulant mismanagement of the corporation unrelated to deception or manipulation in securities transactions. But it is often difficult to distinguish between such mismanagement and fraud in connection with a purchase or sale of securities.

Again, the potential liability of the attorney should not be ignored. The attorney whose client is found liable for a 1Db-S violation may himself face liability as a controlling person of the client, a principal of the client or as an aider and abettor in the client's misconduct if his activities fall within those categories.

WHAT IS A SECURITY? The foregoing discussion was intended to alert the general practitioner to the often unanticipated application of the state and federal securities laws to his clients' transactions. Perhaps the most surprising extention of the securities laws comes from the broad statutory definition and even broader construction of the term "security." As a result, in addition to the stocks and bonds which all realize are securities, many instruments which to the uneducated eye do not appear to be securities are in fact covered by the securities laws and therefore subject to the registration, anti-fraud and other provisions.

Both the Arkansas and federal securities laws contain substantially similar definitions of "security:"

requires(1) The term 'security' means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, colateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, any interest or instrument commonly known as a 'security,' or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subcribe to or purchase, any of the foregoing.""

That definition by itself explicitly includes most everything the casual observer would consider a security and a few which normally would not be viewed as securities. The courts have gone even further when the following expansive explanation of "investment contract," one of the items listed in the statutory definition: "[A)n investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.. :'..

This definition has four parts: (1) an investment of money (or other consideration) (2) in a common enterprise (3) with the expectation of profit (4) solely (later cases have toned this down to "primarily") from the efforts of the promoter or a third party (i.e., someone other than the investor).

Appiying this definition, the follOWing are examples of transactions held to be the sale of an "investment contract" and therefore a security for purposes of coverage of the securities laws, even though they involve no securities per se:

"[U)nless the context otherwise

a) the sale, by deed, of small parcels of fruit groves where the seller was responsible for growing, harvesting, and marketing the crop and sending a check for the profits to the buyerinvestor;

U.S. 185 (1976); Blue Chip Stampa v.

Mannor Drug Store., 421 U.S. 723 (1975).

12. Elkind v. Liggett & Myera, Inc., 635 F.2d 156 (2d eir. 1980).

13. Securities Act of 1933, §2(1); Arkansas Securities Act, 167-1247(1).

14. securities & Exchange Commlâ&#x20AC;˘â&#x20AC;˘km v.

W. J. Howey Co., 328 U.S. 293 (1946).

b) the sale of a franchise where the franchise participated only nominaily in the business and received a share of the profits as a passive investor; c) the sale of limited partnership interests where, pursuant to the statutory requirements, the limited partner does not take an active role in the affairs of the partnership but does share in the profits; d) the sale of resort condominiums when, except for the brief periods during which the buyer occupies the premises, the seiler maintains and rents the property to other vacationers, remitting the profit to the buyer; e) the sale of thoroughbred race horses in connection with an agreement by the seiler or a third party to train, maintain and manage the horses, the interest and involvement of the buyer being substantiaily limited to receipt of profits. In these situations and many more like them, the courts have focused on the similarity between the sale at issue and a normal investment: the investor, once having contributed his capital remains passive in the enterprise with the resulting profits, if any, dependent on the efforts of others.

In recent years it has also been recognized that when those investment features are not present, the instrument should not be considered a security even though it might fit literaily within the list found in the statutory definition. In that event, the "economic realities" wiil control and the courts will appiy the statutory language very literaily, holding that aithough the interests might be a security by name, indeed the context does require otherwise. For example, although a promissory note is explicitly included within the statutory definition of security, if it is issued in a commercial or loan setting rather than as an investment, or if the note bears a "strong family resembiance" to one which does not exhibit the normal investment indicia, it wiil not be deemed a security." Likewise, a purchaser of a share of "stock" in a housing project who buys not as an investment (because the possibility of profit is remote) but because it is a prerequisite to securing an apartment in the project, has been held not to have bought a security." Generaily, if the buyer purchases primarily for the purpose of using or consuming the item rather

than earning a profit, the instrument may not be a security.

The above examples pertain to the definition of a "security" under the federai securities laws. As indicated, the statutory definition of that term in the Arkansas Securities Act is substantiaily the same and much of the federal interpretation would also apply under the Arkansas Act. However, the Arkansas Supreme Court has also suggested a much less structured approach to the definition in its 1977 decision in Schultz v. Rector-PhillipsMorse, Inc., 261 Ark. 769. The result is that the definition, and therefore the application of the statute, is even less predictable and potentiaily broader in Arkansas. " CONCLUSION Much to the surprise of the attorney who is unfamiliar with them, the state and federal securities laws may apply to many transactions he routinely handles. Hopefuily this discussion wiil alert the general practitioner to that possibility and to the most common ways securities laws may become involved in even relatively private and localized transactions. In many of those situations, however, violations can easily be avoided by a little careful planning.

Of necessity, the discussion has been brief and over simplified. In addition, many of the other provisions of the securities laws which are less frequently encountered have not been addressed. Should any of the suggested applications of the securities laws become a reality, or if any of those other provisions become involved in the client's affairs, it is highly recommended that the attorney not rely on this article alone but that he research those laws in greater depth.

One parting thought is that much of the securities reguiation field, including some of what is discussed above, may not be long standing. The American Law Institute, under the guidance ofthe preeminent scholar in the fieid, Professor Louis Loss of the Harvard Law School, has adopted a proposed Federal Securities Code. It is anticipated that the Code wiil soon be introduced in Congress. Although its success there is difficult to predict, enactment wouid not only result in codification but also considerable revision of the federal securities laws. ......

15. Exchange National Bank v. Touche Ross

v. Daniel, 439 U.S. 551 (1979).

17. The scope of the definition of "security" in Arkansas is ably addressed in Bell. "Real Estate and Unconventional Securities Concepts Under the Arkansas Securities Act," 3

and Co., 544 F.2d 1126 (2d Cir. 1976).

16. United Housing Foundation, Inc.,

see

Y.

Foreman, 421 U.S. 837 (1975). also, International Brotherhood of Teamsters

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January 1982/Arkansas Lawyer/35

TO WIT

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

EVERYTHING THAT RISES By my nature, I am an extremely private person, and I tend to harbor solitude like a squirrel gathers nuts. Perhaps because I have so often been obliged to forego that singular pleasure to attend to a client's arbitrary demand of service for fee, I now more than eVer hold dear those moments when I am left blessedly alone to drift with my own peculiar current.

Accordingly, while I count myself as ambitious as most. I do not aspire to a seat on the Bench, for I cannot imagine a more goldfish like existence than swimming in the Judiciary bowl. I relish neither public scrutiny nor personal power, and I abhor chicken dinners and fire halls. In addition, after so many years toil in the adversary arena, I do not believe I could withstand the artificial disciplines of civility, fairness and objectivity that the constraints of judicial temperament would impress upon my otherwise flagrantly biased psyche.

No, no, no, I am an extremely private person, and I fully intend to keep all by foibles entirely to myself.

I now stand again reminded, though, that many of my colleagues do not share my opinion of rising aspirations.

Our own Judicial District currently has two vacancies, one created by a stroke of the Legislature, the other by a stroke of the cerebrum, as a result of which 14 otherwise normal colleagues have broken from the pack to announce their candidacies. As a group, they no doubt represent a fair cross section of this, or any other, Bar. Some are possessed of intellect, others by the lack thereof, some are of good and reasonable judgement, some catastrophically myopic, some can listen, others prefer to be heard. All, however, are distinguished, a few by virtue of years of workmanlike service to and achievement in the profession, the others by their uniform lack of any basis upon 36/Arkansas Lawyer/January 1982

which to lay claim to the job.

While it is practically impossible to predict with any degree of accuracy what kind of judge a lawyer may make post hoc ascendente, a certain foretelling is possible from the campaign slogan by which a candidate chooses to expose himself. to the public. A number of years ago, one candidate, a particularly frivolous little assistant district attorney, sought a hard line prosecutorial motto to convey his own predilections to a certain constituency. Persuaded by close advisors that his first choice, "Death to Streetwalkers", was a little heavy handed, and if pursued would deprive some of the party faithful of family, he chose instead "Get The Criminal Off The Street-Put _ _ _ _ On The Bench." He was elected, and for years thereafter, it was his wont to demand a pre-sentencing report on every litigant found guilty of contributory negligence.

Experience with criminals and criminal law has become a very definite asset these days for promoting a judicial campaign, and that no doubt accounts for the recent rise in the number of candidacies of assistant district attorneys, public defenders and legislative assistants. It is quite common now for every candidate to use some form of the "slam the jailhouse door" gambit to create an issue the electorate can masticate upon OVer dinner. Even those whose distinguished careers have kept them almost exclusively within the confines of a civil practice feel thus inclined to rail against misfits, miscreants, malfeasants and liberal judges. One candidate in the current campaign, however, boldly intended to build his run around his years of excellent service as a civil practitioner, but his attempt to borrow brimstone from the present vogue appears to be a failure.

To date, he has failed to generate

much interest with his campaign theme, "Never Give A Tortleasor An Even Break."

When the various candidates are through stressing their intellect, temperament, experience, ability, fairneSS and maniacal hatred of criminals, the voters will make their choice on the basis of religion, nationality, sex, acquaintanceship, or, mercifully and supremely rare, the similarity of the candidate's name to that of another person the public knows and loves.

Some of the candidates then will be left with the responsibility of delivering justice, settling disputes and bringing order to the disarrayed lives of ordinary people. Others, being obliged to give up their practice, will move on to the Bench.

In truth it Seems an odd job for a lawyer. The hours are long and unpredictable, the pay horrendous, the rewards imperceivable, the abuse manifold and the prestige seriously erOded.

Any lawyer who desires to work under those conditions ought just as well stay put and at least avoid the plethora of fowl dinners.

For my part, from those elected I no longer expect miracles. I do not expect Learned Hands, not even Dancing Feet. I'll support any candidate who is competent, honest, fair and willing to acknowledge that my argument is generally superior to that of my opponent.

Oh, I know, I know, some will no doubt criticize that my notion of the qualifications for judicial office is short-sighted and selfish, and that it hardly encourages the impartial administration of justice. Well, while I have no ambition to be a judge, I work hard, and I am ambitious and clever, and by all rights I should win every case I take. Though some may disagree, to me, that's justiCe.~

Jln Jlemortam They that deal truly are His delight.

Proverbs 12:22

Fred Turner Fred W. Turner, 58, of Fort Smith died March 17 after a long illness. He was an attorney for Skelly Oil Company of Tulsa and had worked extensively in the rehabilitation of alcoholics in Arkansas.

He is survived by his wife, Jeanne Brasuell Turner; one daughter, Michelle Ann Turner of Fayetteville; and one brother, Charles Turner of Fayetteville. Arrangements were made through Edwards Funeral Home with burial in the U.S. National Cemetery.

Nathan L. SChoenfeld Nathan L. Schoenfeld, aged 68, of Hot Springs, an attorney and former state representative, died June 3. He served in the House of Representatives from Garland County from 1962to 1966 when he resigned for health reasons. He then became executive director of the Election Research Council.

He received his law degree from Harvard University and also attended Oxford University. SChoenfeld served in the U.S. Army during World War II and had worked for the U. S. Arch ives Depl. and Resettlement Administration.

He is survived by a son, Howard Schoenfeld of New York, N.Y., and a daughter, Nikki Schoenfeld of SI. Louis, Mo.

David Russell Boatright David Russell Boatright, 67, of 2741 Hardie died Wednesday, May 27, in a Fort Smith hospital.

He was a veteran ot World War II and the Korean Conflict and a member of Saint Johns Episcopal Church. He served as assistant U.S. Attorney for the Western District of Arkansas and as librarian for the Sebastian County Law Library.

He is survived by two cousins, Mrs. Kathleen Russell Womack of Van Buren and Bob Ed Covey of Little Rock; an aunt, Mrs. George Winfrey of Sun City, Calif.; and one uncle, Pearcy Boatright of Van Buren.

S. Hubert Mayes, Sr. S. Hubert Mayes, Sr., aged 76, of Little Rock, a iawyer and former State Police Commission chairman, died June 29. He was an outstanding trial lawyer and retired general counsel for the Missouri Pacific Lines.

He was a member of the Pulaski Heights United Methodist Church and the Pulaski County, Arkansas and American Bar Associations.

Survivors are a son, S. Hubert Mayes, Jr. of Little Rock; a daughter, Mrs. Patricia Mayes Janes of Fort Smith; a sister, Mrs. John M. Shackleford Sr. of EI Dorado, and eight grandchildren.

Harvey Hamp McAlister Harvey Hamp McAlister, 86, of Cash, a retired attorney and former state representative, died June 5 at SI. Bemard's Regional Medical Center in Jonesboro.

He was graduated from LaSalle University Law School in Chicago and served as city clerk and city attomey for Cash for many years.

Surviving are his wife, Mrs. Dallas Alexander McAlister of the home; three sons, Leon McAlister of Las Vegas, Nev., Floyd McAlister of Carmichael, Calif., and Edwin McAlister of Jonesboro; a brother, Ed McAlister of Cash; a sister, Mrs. Addie Leathers of Chesterfield, Ind.; five grandchildren and two great-grandchildren.

Greely Watson Greely Watson, 83, of Little Rock, a retired attorney and banker, died August 7. He was a Baptist, a Mason and was a member of the Arkansas Consistory.

Survivors include his wife, Mrs. Selma Tracy Watson; two daughters, Mrs. Elizabeth Ann Balsam of Memphis, Tenn., and Mrs. Lea Allen of North Highland, Calif.; a brother, Vester Watson of Fordyce; two sisters, Mrs. Mabel Ellis and Mrs. Nettie Felix, both of Little Rock; six grandchildren and two great-grandchildren. ~

January 1982/Ar1<ansas Lawyer/37

PHOTO Hiqhlights

ARKANSAS BAR ASSOCIATION 83RD ANNUAL MEETING JUNE 3-6, 1981

SHOWN HERE ON PAGES 38, 39, 40, AND 41.

ARLINGTON HOTEL HOT SPRINGS, ARKANSAS

~

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CODE Of

PROfESSIONAL RESPONSIBILITY

cs DON'T LEAVE HOME WITHOUT THEM (This series is re-printed, with permission, from the booklet of the same title, published by the Pennsylvania Bar Association.)

IT'S NOT ALWAYS RIGHTTO SHARE THE WEALTH. When dividing a fee with another lawyer who is not a partner or associate of your fU'm, you must be sure that such a division is justified. It is, if: "I) The client consents to employment of the other lawyer after a full disclosure that a division of fees will be made.

2) The division is made in proportion to the services performed and responsibility assumed by each.

J) The total fee of the lawyers does not clearly exceed reasonable compensation for all legal services they rendered the client."

Disciplinary Rule 2-107, Canon 2 Code of Professional Responsibility

SPLITTING FEES Sometimes it may seem desirable to retain the aid of another attorney to help you in a particular matter. This may be beneficial to the client, but you must first obtain the client's permission and explain that there will be a division of fees. Also, if you simply refer a client to another attorney, you are not thereby entitled to a fee for referral. EC 2-8 says, "A lawyer should not compensate another person for recommending him..."

ADDENDA

by C. E. Ransick Editor

ALCOHOLISM Seven (7) happenings about the same problem at the same time clearly establish the need for affirmative action. Obviously, the Arkansas Bar Association, as a voluntary organization, will always be limited as to the scope of such action.

THE HAPPENINGS (1) On August 6, 1981, The Texarkana Gazette reports that an Arkansas Judge has been committed to an alcohol center. The Arkansas Gazette follows with a front-page article that Grand Juries in two counties are reportedly seeking his removal from office.

(2) An Alcoholism and Drug Abuse Committee is authorized by Arkansas Bar Association President. Chairman Dean Morley is appointed, with membership to come from Past Presidents of the Association. Judge Morley is highly qualified to serve as Chairman.

He has been Chairman of the State Commission on Alcoholism, Chairman of Arkansas Alcohol Abuse Advisory Council, member of the State Alcohol and Drug Abuse Authority, and member of the Alcohol and Drug Abuse Council. He has received an award from the U.S. DOT for outstanding community service in conjunction with the Alcohol Safety Action Program.

The Association's Committee on Alcoholism and Drug Abuse initially is charged only with the responsibility for developing the guidelines for the Association's program in this connection. If the proposed gUidelines are adopted, the Committee will be reorganized to carry on. Obviously, any participation by members seeking assistance will be

voluntary and in confidence. One great benefit to any such member will be that a fellow lawyer will look after his law practice during any absence for treatment. The publications of a number of Bar Associations carry articles by admitted alcoholics (anonymous) indicating that these programs are effective and helpful.

(3) The American Bar Association's new MAP program published Package #1 on Alcohol and Drug Abuse Programs for Lawyers and Judges, an overview of the current activity in this area. It contains descriptions of individual programs at state and local levels illustrating different approaches to the problem, based on available resources, member needs and philosophy of the Bar. MAP Package # 1 has been ordered for consideration by the Arkansas Bar Association's new Committee.

If the ABA recognizes the need for its first MAP package to concern alcohol and drug abuse,then this problem for lawyers and judges must be national in scope. The solution for dealing with the problem, one might add, is vital!

(4) On August 21,1981, a new 18cent U.S. postage stamp, declaring alcoholism to be treatable and curable, was issued. The stamp reads, "Alcoholism. You can beat it!"

(5) In the Arkansas Gazette, August 24, 1981, Dr. G. Timothy Johnson, the syndicated columnist, writes: "Dear Readers: One of the most distressing things I continue to encounter are the needless tragedies that cost the lives of innocent people. I bring this up because I've heard recently of so many fatal acci-

1lIeohtiism You canbeatit!

USA18c January 1982/Arkansas Lawyer/43

auto crashes over the past decade.

Cover Story. ..

• About 26,000 citizens are killed in drunk-driving incidents yearly.

We are pleased to be able to present the fourth cover of The Arkansas Lawyer in recent years, featuring a painting from the exhibitions of art works sponsored by West Publishing Company, in cooperation with the Minnesota Museum of Art. The oil painting, "Courtroom Study", is by nationally recognized Artist Jack Levine of New York City, and was purchased for the West '79/The Law exhibition. In turn, it was purchased by Kennedy Galleries of New York; and then for the "Collection of Dr. and Mrs. Ronald Lawrence" of Malibu, California. We are indebted to Mrs. Lawrence for permission to show the painting on the cover of The Arkansas Lawyer.

• Nearly 70 Americans are killed in drunk-driving incidents every day.

• Over one million Americans suffer crippling and other serious injuries every year in drunk-driving incidents.

• The drinking-driver problem creates an estimated economic cost of over $5 billion annually.

• For Americans up to age 35, the No.1 cause of death is motor vehicle accidents, and more than half of highway deaths are caused by drunk drivers.

• On an average weekend night, one out of every 10 drivers on the road is drunk.

• 65 percent of drivers who kill themselves in single-car wrecks are drunk.

• Of every 2,000 drunken drivers, only one is arrested.

• 44 percent of all nighttime fatal alcohol-related crashes are caused by the 16 to 24 age group (this group comprises only 22 percent of the total licensed population).

dents in which drunk drivers were involved."

Dr. Johnson goes on to point that a "hugh percentage" of the deaths of the 50,000 people killed on U.S. roads annually is "directly attributable to drinking." He joins the police in urging, "If you drink, don't drive!"

(7) The Arkansas Bar Association has pending since May 1981 before the Arkansas Supreme Court a Petition, In RE: Trustee Proceedings for Disabled or Deceased Lawyers. The Petition seeks the adoption in Arkansas of the ABA Standards for Disability Proceedings. The trustee's function is to protect client files and monies in the lawyer's office in appropriate cases.

Trustee proceedings are another way for handling the alcoholic lawyer's practice for a short period of time.

IN GENERAL (6) In her column in The Arkansas Gazette, August 26, 1981 Dear Abby (Abigail VanBuren) gives some statistics provided by the National Traffic Safety Administration and the National Safety Council: • One quarter of a million Americans lost their lives in alcohol-related 44/Arkansas Lawyer/January 1982

The staggering estimate is that 10 percent of all lawyers are alcoholic.

The Arkansas Bar Association is entering into a sensitive activity with its Committee on Alcoholism and Drug Abuse. Its purpose is to be of assistance to members who voluntarily seek

It is interesting to note that Artist Lavine served as the Juror in the selection of the art works in West '80/Art And The Law from more than 1,200 entries in the competition. We will be priVileged to show two paintings from the second exhibition on future covers of The Arkansas Lawyer.

In his comments as Juror, Mr. Levine expressed confidence that the theme, "Art and the Law", has "proved to be a special stimulus in stirring the creative minds of artists"; and that the "subject matter included many of the current questions and issues that face us in contemporary times".

We appreciate the cooperation of West Publishing Company in making this series of covers possible.

help with their alcoholism. It is far better that such members use this "helping hand" approach, than to be subjected to proceedings under the Judicial Ethics Committee Act, 1977 Ark. Acts No. 853 (Ark. Stat. Ann. 22-1.001, et seq.); or under the Code oFProfessional Responsibility (Per Curiam Order, June 21, 1976); or under the Criminal Code.

Many lawyer and judge alcoholics in other states, as Iowa, Oklahoma, California, Washington, New York, Massachusetts, Ohio, and South Carolina, have benefitted by their Bar Association's help. We can do no less in Arkansas ...( \

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