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July 1985 Vol. 19, No. 3
LCtARKANSAS
r
THE PUBUCATION OF THE ARKANSAS BAR ASSOCIATION
omCERS
SPECIAL FEATURES
REGULAR FEATURES
William R. Wilson. Jr.. President Don M. Schnipper. President-Elect Annabelle D. Clinton. Sec路Treasurer David M. "Mac" Glover. Council Chair
107 108
Wm. A. Martin, Executive Director Judith Gray, Assistant Executive Director
112 117
EXECUTIVE COUNCIL Jack A. McNulty W. Kelvin Wyrick Gary Nutter William Russ Meeks.III Kaye S. Oberlag Tom Overbey Robert S. Hargraves Robert Hornberger Joe Reed David Solomon Stephen M. Reasoner James A. McLarty
Toward the Bicentennial Part II by Robert D. Cabe and G. Ross Smith The Grand Gulf Cases: A Summary by Dana Daniels Nixon
New Arkansas Bar Association Officers for 1985-86
EX-omCIO William R. Wilson. Jr. Don M. Schnipper Dennis L. Shackleford Annabelle D. Clinton Martha M. Miller David M. "Mac" Glover
Changes in Divorce Taxation: The Tax Reform Act of 1984 by William T. Marshall
EDITOR Ruth M. Williams
The Arkansas Lawyer (USPS 546-040) is published quarterly by the Arkansas Bar Association. 400 West Markham, Little Rock. Arkansas 72201. Second class postage poid at Little Rock. Arkansas. Subscription price to non-
Point of View/Letters Generations in the Law W. Harold Flowers: Mentor. Advisor and Inspiration by Andree Roof Law. Literature & Laughter
118 123 128 129 130 132 135 136 137 138
Lawyers' Mart
In Memoriam
Executive Director's Report t
Young Lawyers' Update
Arkansas Bar Foundation In-House News
ON THE COVER:
members of the Arkansas Bar Association SIS.00 per year and to members
$10.00 per year included in annual dues. Any opinion expressed herein is that of the author. and not necessarily that of the Arkansas Bar Association. or The Arkansas Lawyer. Contributions to The Arkansas Lawyer are welcome and
should be sent in two copies to the Arkansas Bar Center. 400 West Markham. Little Rock. Arkansas 7220 I. All inquiries regarding advertising should be sent to The Arkansas Lawyer at the above address.
President's Report
Pat Patterson
The Arkansas Bar Association's newly elected president. Don M. Schnipper, and his wile Mary Ann, of Hot Springs, are pictured al the Hot Springs National Park's promenade on North Mountain. Behind them slands the Arlington Hotel on Hal Springs' Central Avenue. President Schnipper assumed his position on June 8 at the close of the Association's Annual Meeting. Other 1985-86 oflicers elected are Richard F. Hatfield, of Annabelle Davis Searcy. president-elect, Clinton, of Little Rock, to a fourth term as secretary-treasurer. Richard L. Ramsay, of Pine Bluff. chair of the Young Lawyers' Section, and Marlin G. Gilbert, of Pine Bluff. president of the Arkansas Bar Foundation. Philip E. Dixon, of Little Rock, was named chair of the Executive Council by Schnipper in April.
July 1985/Arkansas Lawyer/l05
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THE PRESIDENT'S REPORT ... Liberty lies in the hearts of men and women; when it dies there, no constitution, no law.
no court can save it; no constitu-
In Honor or Defense of the ACLU By William R. Wilson, Ir. There are many mundane, bread-and-butter issues facing the organized bar which probably need comment; but, somehow, my muse has nudged me to write in
honor of (in defense of?) the American Civil Liberties Union. As we all know, this organization is the favorite whipping boy of many poli ticians and the conservative media. Despite the constant abuse heaped upon it, the ACLU is this country's foremost advocate of our Bill of Rights (in a time when, as one pundit remarked, the Bill of Rights couldn't get out of committee today). Of course the freedoms guaranteed in our Constitution are con-
stantly extolled, in general. in political speeches, but honoring them in action is often a horse of a
different color. To talk favorably of freedom of speech in the abstract is one thing, it is quite another to defend this right when a person wi th views obnoxious to our own speechifies in public. We should keep in mind at all times that the Bill of Rights is not self-executing. Learned Hand put it beautifully:
tion. But. on a day by day, year in and year out basis, it has been the ACLU (and kindred spirits) which has taken the lead in establishing
tion, no law, no court can even
and maintaining our freedoms for
do much to help it ... It does not particularly disturb me that many politicians lead (or join) the hue and cry of the hour. Those who drafted our Constitution expected this. On the other hand, it does disturb me when I hear the leaders of our profession disparage those few lawyers who step front and center to represent the poor, the disfranchised, the despised. When a citizen, without power or position. wishes to espouse his unpopular cause and the forces of government are brought to bear against him, who will step for-
all citizens. For my part, I salute these stalwarts who have faced the heat in the face of every type of adversity. We who work within the organized bar must not let breadand-butter issues claim all of our energy. We must not look the other way with the demurrer, "We ain't got no dog in that fight." Securing to all citizens their rights and privileges under law is the es-
ward to represent him in securing
are now in agreement regarding
his rights by due process of law? Not I. for I must hie myself over to Traffic Court to earn my daily bread. Not my brother or sister over at XYZ firm for he/she must attend a corporate board meeting, or jet off to Washington to lobby for Acme Company. Then who? We know the answer. Time after time idealistic ACLU lawyers have jumped into the fray. What is their reward? It obviously isn't money (even with various attorney fee statutes, it is still "pore city" for those who regularly do this type of work). Is it for public, popular acclaim? How many cocktail parties have you attended in honor of some young storefront rights case? It must be the self-satisfaction that the true advocate feels when he or she has stood virtually alone by the side of some wronged citizen who has no other champion; and by perseverance and dogged advocacy has vindicated a right secured to this citizen by
the approach we should take to the F.T.C. fight. As you may know, the American Bar Association objected to certain language which the American Medical Association had submitted to amend the Federal Trade Commission Reauthorization Legislation. The ABA feared that the AMA's language would encourage F.T.C. attempts at regulating the discipline procedures of the professions, rather than discourage it. As it now stands, the professions are all in agreement that the proposed reauthorization legislation should simply remain silent on licensure and disciplining, and the F.T.C.'s authority in this area, or lack thereof. should be left up to interpretation by the courts. While some of us might prefer specific language which would stop in trusion in this area by the F.T.C., there is no reasonable possibility that satisfactory language could be adopted as an amendment to the basic legislation. So, silence seems to be the
our Constitution.
best course.
Over the years, there have been shining examples of this type of advocacy by lawyers with no connection with the ACLU - and [ do not discount their vital contribu-
This session of Congress is young and, as things develop, the membership of the Association will be kept abreast of significant developments. [j
lawyer who just won a major civil
sence of our profession.
Good news from the Nation's Capitol. A representative of the American
Bar
Association
has
advised that all of the professions
July 1985/Arkansas Lawyer/107
POINT OF VIEWILETTERS Lawyers Get a'Bum Rap' By Lawrence H. Averill,
Jr.
"The first thing we do, let us kill all the lawyers." - Shakespeare. Henry VI. Part II, Act 4, Scene 2. How many times have you heard that phrase. particularly by non-lawyers. I bet a lot. Why are lawyers so castigated and criticized. Why do people wish that lawyers do not exist? I must say that personally this bothers me a great deal. My con-
Several years ago a friend who returned from Russia teased me that Russia might not be such a bad place because it did not have many lawyers. I was quick to point out that the people in Russia do not have freedom of the press, freedom to work at what or where they want to work, freedom to travel, freedom to read what they want to read, freedom to leave the country at will. freedom to be se-
at least three steps that should be taken and, if properly taken, would significantly improve the image of the legal profession in the eyes of the public. Public Service
both sides may feel dissatisfied
First. we must try to provide better services to the public. With some obvious exceptions and a need always to improve our abilities. the legal profession as a whole does a reasonably adequate job in providing adequate skills in our litigation and technical functions. We. of course. need always be diligent in improving those skills. Mandatory continuing legal education would be a meritorious step in this direction. In addition to this type of training. we need to get actively involved in non-litigative methods of settling disputes. Commonly referred to as alternative methods of dispute resolution. the concept includes arbitration. negotiation and mediation. [ would urge that
member of a group which was con-
with the results. One's natural
the legal profession take an active
sidering an attempt to overthrow the government and the establishment of a totalitarian regime. The speaker felt it was necessary to eliminate all the lawyers in order to be successful. If the lawyers remained. freedom would remain and their scheme would fail. In many ways this is the same misor non-understanding about the legal profession that exists today.
reaction is to blame his or her
part in honing skills related to these matters. Clearly. legal training and the ability to separate the wheat from the chaff with regard to disputes are outstanding foundations for properly administering arbitration, negotiation and mediation. The law schools are becoming much mOTe involved in these techniques and the teaching of a foundation for their use is becoming an important part of
cern is not because I am a dean of
a Law School and because I am protecting my own domain. I feel concerned because [ believe that lawyers are getting a "bum rap." I think the legal profession is as misunderstood as is the previously famous quote from Shakespeare. Most think that Shakespeare was castigating lawyers. In truth. Shakespeare was emphasizing the importance of lawyers to a free society. The party who made the above quote was a
cure from unwarranted searches
and seizures. freedom to own property. freedom of opportunity. etc. If you are in a society that denies these freedoms. you do not need many lawyers. In addition, a portion of the criticism of the legal profession is inescapable in that it is inherent in the nature of legal work. In every case where people are making contentions against other people. there is always a loser and in many cases. particularly those where settlements aIe involved,
lawyer if the result is unsatis-
factory. Furthermore as a whole. lawyers should never seek mere popularity. Just as there are winners
and losers in each dispute. any aggressive representation of an-
other. particularly of a controversial person or issue, will cause
some or maybe most to dislike the lawyer or even lawyers in gen-
Editor's Note: Lawrence H. Averill. Jr.. is dean of the University of Arkansas at Little Rock School of Law. He is a former professor of law at the University of Wyoming College of Law and received a LL.M. /rom George Washington University and a J.D. from
the
American
University.
Dean Averill is an Academic Fellow of the American College of Probate Counsel and a member of the Bars of the District of Columbia. Maryland. Wyoming and Arkansas. 108/Arkansas Lawyer/Ju1y 1985
eral. If a good public image means we have to be liked by everyone. we should reject it. If a good public image means the profession is honest. trustworthy and effective. we should embrace it. It is toward these latter attributes that we should put our emphasis and set our goals. The end result is that there are some attributes of the legal profes-
their curricula.
Another area of concern with regard to service to the public is of a broader nature. The legal profession is a high profile profession. This is one of its main attractions
not to say there is nothing we can
and why many people wish to become a lawyer. I think it is very important for the legal profession to continue this status. In return lawyers need to be actively involved in all segments o[ our society. We need to be leaders in all our activities. We need to do-
do about it. I believe that there are
nate our time and service to pub-
sion that will never permit us to
have a good public image. This is
lie service and to attempt to solve problems outside of our own economic desires. Frankly, we need to generously provide our time for public service endeavors. There is a motto in some service clubs that
each person should give back at least as much as he or she takes. This clearly applies to all members of the legal profession. Most lawyers [ believe satisfy this responsibility very well. One specific area of service that has recently had a decline in lawyer participation is service in
the state legislatures and state governments. I realize that there are a large number of economic and political reasons for this phenomenon. I personally feel. however, that it is damaging to those institutions and to the public in general for lawyers not to be significantly represented in these governmental bodies and agencies. Lawyers are often criticized
for how poor the law is and yet quite frequently we have very little to say as to its form or substance or both. We end up enforcing or opposing inadequately drafted legislation and then getting the blame for its inadequacies. The solution to this is for more lawyers to take an active part in state government and legislatures, both from the outside and from the inside. In particular, [ hope we can develop in the future more interest in members of the legal profession to actively pursue positions in our legislatures. The same point is applicable to positions on administrative boards, as well. Certainly, the salaries for these positions are going to have to be significantly improved before very many members of the legal profession will be seeking out these positions. Consequently, I would urge the legal profession to take an active part in attempting to improve the salary condition of many of these very important public service positions in state govern-
ment. Media Communication The second area that I want to discuss concerns our need to im-
prove the image of the legal profession in the press and other media. I have never understood why the media appears to find
some kind of sadistic joy in criticiz-
ing the legal profession. Lawyers and the Press should be natural allies, not enemies. You need both to have our free society. Without the free press there would be no lawyers; without lawyers there would not be a free press. The two professions are sometimes antagonists. however. Con-
sider the lawyer who wishes to deny the press ready and unlimited access to a case in order to
protect a client. Consider, on the other hand, the press' call to provide the public with knowledge about important people and events. Unfortunately, our relationship with the media is often dillicult and strained. I believe greater communication between these two insti-
tutions would greatly help to reduce the friction we often see. One suggestion that might help in this regard would be the creation (or activation, if they already exist) of joint media relations committees to specifically deal with communication problems. These committees will not cure the problem entirely but they should help to reduce friction, misunderstandings and inaccuracies.
Another factor with the media
media and how it functions. We need to be tolerant of both lawyer and media transgressions from
ideal median exposure. Both professions must be aggressive in their nature and aggressive ac-
tion will inevitably produce undesirable results sometimes. Lawyers' Self Esteem Third and surprisingly, we need to gain a better opinion of our-
selves. Recent studies indicate that lawyers are as negative about themselves as the lay populace is. This I think is unfortunate. I believe the legal profession should be proud of itself. The whole foundation of our society is based on law and the rule of law. Lawyers have been a predominant force throughout our history. They have constantly shaped our nation's policies and actions. From the very beginning of our country's existence, the lawyer and the judicial system helped significantly to shape its destiny. It is no wonder that even today many people are seeking entry into the legal profession because they feel it is the place where the action is, and where they can make
a
significant
mark
on
society. Consequently, we need to stand
issue is that lawyers must realize
up for ourselves. We sometimes
that the media is in the business of selling "news." Consequently,
as a group are too self-critical. We need to take to heart the philosophy embodied in the old saw, "[ don't agree with what you say, but I will fight for your right to say it." This is the spirit of our judicial and legal system in this country. In particular, we need to be very careful about our public utterances about other lawyers, judges and the legal profession. Critical
controversy and conflict are ex-
tremely newsworthy because they sell. This puts the legal profession in a particular!y visible posi tion because by definition controversy and conflict are a part of the profession. Although we cannot and should not run away from this phenomenon, we should realize its dangers to the profession. Like all "institutions," opinions of the individual are not necessarily the opinions of the institution. All lawyers should be careful to make and maintain that distinction. We will also have to recognize that no matter how hard we try, media reports will not always be presented in the manner in which the lawyer desires the matter to be presented. There will always be risk in dealing with the media. It should not stop us, however, from dealing with the media under appropriate circumstances.
We need to learn more about the
comments aTe given far greater
credence than they typically deserve.
We often assume that the lay populace knows more than it does about the legal profession and its operations. We need to get out there and sell our profession at every opportunity that we can. We are the greatest society on earth because of our freedoms and our protection of freedoms and these may only be maintained by a strong and independent legal profession.
Otherwise, "the first thing we do, let us kill all the lawyers." July 1985/Arkansas Lawyer/l09
LETTERS Dear Editor: The students and sponsors of our mock-trial team want to take this opportunity to express to you our appreciation for the recent Statewide Mock Trial Competition. Each of us is very impressed that members of the Arkansas Bar Association expended their valuable time to answer our many
the Association will continue to sponsor this high school competition in the future. We admit we were disappointed in the "loss," but we gained experience through the preporation and the participation.
malpractice cases.
pating the opportunity to be involved next year. Again, we say "Thank you."
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James Ward, Sponsor Robert Goeller, Sponsor
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WllHINSrA-CllIlOU ARE WEEKSAHEAD OF1IIE • July 19851Arkansas Lawyer/Ill
Generations in the Law: A Series By Andree Roof n June 6. 1985. W. Harold Flowers of Pine Bluff was honored as a fifty year member of the Arkansas Bar Association at the annual meeting of the Association in Hot Springs. Harold Flowers. often referred to as the Dean of the black bar in Arkansas. has been admitted to the practice of law in Arkansas longer than any other black attorney in the state. In addition. he is the patriarch ot a lamily of lawyers and mentor.
O
advisor and
inspiration to the
younger members of the black bar. His careers as lawyer. champion for human rights and religious leader have spanned an era of dramatic social changes. especially with regard to the condition 01 black Arkansans. He has played a leading role in helping to bring about these changes. On October 16. 1911. W. Harold Flowers was born into a prom-
inent family in the small town of Stamps. in Lafayette County.
W. Harold Flowers
Pine Bluff Commercial
Arkansas. He was the oldest of
three sons born to Alonzo William Flowers. Jr.. a businessman. and Beulah Lee Flowers. a public school teacher. One brother. Cleon Flowers. became a physician and practices medicine in
Pine Bluff. His youngest brother. Curtis V. Flowers. attended Texas Southern School of Law. graduating in 1950. He practiced law in Houston. Texas until his death in 1976. Harold Flowers' father was a manager for Universal Life Insur-
ance Company and a state leader of the Masons. and as a boy. Flowers was impressed by the steady stream of prominent black businessmen. leaders and professionals who visited his parents'
home in Stamps. Among these visitors was Scipio Jones of Little Rock. one of the first black lawyers in Arkansas. who served as
an early role model for young Harold. Harold Flowers' mother. an educated woman and community leader in her own right. was re-
ferred to as "the aristocrat of black Stamps" by Maya Angelou. a native of Stamps. in her best-selling autobiography. I Know Why The Caged Bird Sings.' Mrs. Flowers. who was also portrayed in the
film version of this autobiography. was further described by Ms. Angelou as "one of the few gentlewomen I have ever known". 2
Harold Flowers credits his father with initially instilling in him the desire to be an attorney. While he was still a young boy. his father would often take him to the Lafayette County Courthouse Editor's Note: Andree Roaf. of Little Rock. is an attorney with the Woodson Walker & Associates law firm. After nearly 12 years as a research scientist. Roof enrolled at the University of Arkansas at Little Rock School of Law. commuting from Pine Bluff. She graduated in 1978. Since joining the Woodson Walker firm she devotes 50 percent of her time to a commercial practice.
W. Harold Flowers Mentor, Advisor and Inspiration 1I2JArkansas Lawyernuly
1985
in Lewisville, where he would listen to the court proceedings being conducted there. In those days, the court sat only in February and August. and Flowers has lond memories and yet mixed feelings about this experience. He recalls sitting in the
I\W\\llllll(\\ ·\lIlt \~IIII\\
courtroom in February. the room
flU rovt..'l-.l1 .... 111 II
heated by a big potbellied stove surrounded by a sandbox-like contraption to catch ashes and sparks, with blacks seated on one side 01 the room and whites on the other. During the August term, he recalls that it was usually more comfortable to sit outside the building beneath the open court room windows and listen to the proceedings from a cooler vantage point. There, young Harold would listen to the arguments and oratory 01 local attorneys such as Tillman B. Parks, then prosecuting attorney and later U.S. Congressman, and Steve Carrington, among others. He would then return home and conduct mock trials belore his young playmates, practicing the oratorical skills and techniques he had learned. Another early influence was Noah Parden, a well known black attorney whom Flowers met in East SI. Louis, Il1inois at the age 01 14.
flEl ro IlJCSHlr f.lltll\
Flowers, like many blacks 01 his era, had to come to Little Rock to further his education. There he attended Philander Smith for both high school and college. While at Philander Smith, he witnessed a black man being dragged down the streets 01 Little Rock to be lynched and recalls that this horrifying
experience
served
to
further strengthen his resolve to become an attorney. In order to pursue this goaL he traveled to Washington, D.C. where he attended the Robert H. Terrell School 01 Law, an all black law schooL graduating in June 1937. He
returned
to
Arkansas
In
February 1938, having already taken and passed the Arkansas Bar exam in June of 1935. He lormally opened his law office in Pine Bluff in February 1938, in the Masonic Temple Building on the corner 01 Fourth and State Streets in Pine Bluff. This historic building housed the offices of most of the black professionals in Pine Bluff at that time, and was a focal
• The Freedom Pledge
)1\
IIIl \ • \1
flli TO STt"O KlIII!II I IHl" IIl.lIT fl[[10~
Ilnl I IUllll'.U\c.
mI TO (J(MIj[ DUS[ QO 00'011.' M\ (('II \11'
lIIS 1UfT"'l OF FlD.OOJl
I PIIDCl TO I rtIOLD Rlllnll1 """UL tmu,'i:D
Harold Flowers and The Freedom Pledge, 1955
W. Harold (left) and Curtis V. (right) Flowers in 1967 at National Bar Association meeting in Houston. Texas.
point for the black community in Jefferson County and surrounding areas. Flowers recalls that it was
said at that time that you needed only three books to practice law, "an appointment book, a statute book and a receipt book." He remained at the Masonic Temple for 25 years before moving his office to his present location, at 104 South Mulberry Street in Pine Bluff, where he has maintained a private practice to the present date. Although he has been a solo practitioner for most of his prac-
tice. he was associated with two attorneys in the 1950s, Ed Trimble, now deceased, and L. Clifford Davis, now a District Court judge
in Fort Worth, Texas. When Harold Flowers returned to Pine Bluff as a new lawyer in 1938, there were only 12 black attorneys in the entire state. two
in Pine Bluff and the remainder situated in Little Rock.' As a young lawyer, Harold Flowers played the role that his family upbringing. environment and edu-
cational accomplishments had destined him to play, that of crusader for the rights 01 his people, both in and out of the court room. Harold Flowers' experiences over the past 50 years range from being warned by The Ku Klux Klan to leave Arkansas in 1952 to being considered by President Eisenhower for appointment to luly 1985/Arkansas Lawyerll13
State NAACP in 1948 and was president of the Pine Bluff Chapter from 1946 to 1948. during which time it became the largest branch ever in the history of NAACP in Arkansas, enrolling over 5000 members. He was a founder and leader of the National Bar Association, the largest association of black lawyers in the U.S., and served as its vice president in 1947 and president in 1953, and continues to occupy a leadership position in this organization.' In 1938, Flowers helped to organize the first state bar association for black attorneys m Arkansas, which was initially called the Wonder State Bar Association. During the 1960s. with the advent of black awareness, the organization's name was changed to Arkansas Black Lawyers Association, In 1981, the association formally changed its name to the W. Harold Flowers Law Society. to recognize and honor Harold Flowers for his service to the bar, and his pioneer work on behalf of human rights. In 1977, he was the first black to serve as special Circuit judge for lefferson County. In 1980. he was appointed Associate lustice of the Arkansas Court of Appeals by Governor Bill Clinton. serving out the remainder of the term of ludge George Howard, Ir.
A "fiery orator:' Flowers is pictured at the First Baptist Church of Pine Bluff
in the 1940' s. the U.S. Supreme Court in 1954. He has fought racism and discrimination across the U.S. and as far afield as Cuba. His accomplishments are too numerous to attempt to recount. Some of the high points which he treasures are not the celebrated criminal trials which kept his
1141Arkansas LawyerlJuly 1985
name in headlines across the nation during the 1940s. He recalls with special pride taking Silas Hunt. the first black to attend the University of Arkansas Law School. to Fayetteville in 1948. His role in building the NAACP in Arkansas was especially notable. He served as president of the
In 1969, the tragic death of his daughter, Frances, led Harold Flowers to a new calling. Long active as a layman in his church, he became an ordained minister in the United Methodist Church. Continuing his role as a trailblazer, he served as the first black pastor of an integrated United Methodist Church, co-pastoring Hunter Memorial United Methodist Church in Little Rock from 1978 to 1981. He is now pastor of Duncan United Methodist Church in Little Rock. In his role as a minister, he has relentlessly crusaded for racial harmony and understanding in the churches of Arkansas. and his impassioned message has reached and touched a new cons~ituency of Arkansans. Harold Flowers has had a significant impact upon all who have come in contact with him. Wiley A. Branton, formerly dean of Howard University Law School in Washington. D.C .. and now part-
ner in a major Washington. D.C. law firm. began his legal career in Pine Bluff. He credits his early association with Harold Flowers as having influenced him to study law. A high school student when Flowers first returned to Pine Bluff to practice law. Branton recalls that Flowers was"a gifted orator" who was frequently called upon to defend blacks accused of heinous crimes and whose cases no other lawyer would take. He states that before Flowers' arrival. the other two black attorneys in Pine Bluff had practices limited to uncontested matters. He recalls that Harold Flowers was a fiery speaker and civil rights advocate who was considered extremely radical because he "had the audacity to advocate equal oppertunity for blacks in the 1940s." He states that Flowers travelled all over the state of Arkansas suggesting that biacks should be employed as firemen. policemen and in other public positions. and that he also filed several early school cases in which he sought. not integration. but equality of teachers' salaries and school facilities. which was also considered radical in those days. Another Jefferson County attorney who was greatly impressed by Harold Flowers was Lawrence E. Dawson. now a Jefferson County Chancery judge. Judge Dawson recalls that he first met Flowers in June of 1948 when he came to Pine Bluff as a newly licensed attorney. He remembers
that Flowers had a heavy case load and was frequently in court litigating cases. especially criminal matters. Judge Dawson says that. in making closing arguments to the jury. Flowers "had no equal" and that he was so impressed with his oratorical skills that he would often come and sit in the rear of the courtroom when he knew that Flowers was scheduled to make a closing argument. Judge Dawson says that in his 37 years as a practicing attorney and judge. he has not known any attorney to match Flowers' unique abili ty to move juries.
fn addition to being impressed with Flowers' legal skills. Judge Dawson has found Flowers' uplifting personality and strength of
I
This photograph of W. Harold Flowers' children includes W. Harold Ffowers. Jr.. center. Stephanie. seated. at far left. and Gretchen. next to Stephanie. character to endear him to others.
He observes that Flowers "never speaks unkindly about anyone" and that his strong religious faith has enabled him to weather personal storms while maintaining a positive outlook on life. The first in his family to pursue a legal career. Flowers has begun a family tradition that should continue for generations to come. He
and his late wife Margaret were the parents of nine children. The oldest son. W. Harold Flowers. Jr.. attended the University of Colorado undergraduate and law schools. and has practiced law in Boulder. Colorado since 1973. A daughter. Stephanie Ann Flowers. attended Texas Southern Law School and has practiced law in Houston. Texas since 1981. Gretchen Flowers Wiggins. a second year law student at Texas Southern University and wife of John Wiggins. the president of the
Harold Flowers has said that he would like to be remembered as having been like a "middle buster plow - one who came through and made the soil tillable for the finer tooled implements which followed." He describes himself as a crusading social engineer who has helped to pave the way for black lawyers who have come after him. Of the many changes that he has surely witnessed in the past 50 years. he believes the most significant and gratifying change to be that black Arkansans no longer live in a state of
fear. Civil rights activist. lawyer. judge. minister and religious leader. Harold Flowers has provided inspiration for young black attorneys. and has set an example of dedicated and committed public service for all Arkansans. IJ FOOTNOTES I
Angelou. Maya. I Know Why The Caged
Association,
z
Bird Sings. p. 77 (I9701. Id. 01 p. 78.
has become the third Flowers child to enter the legal profession. In addition to his eight surviving children. Flowers has ten grandchildren. Members of the Flowers family will surely continue to be involved in the legal profession in the future. as a result of the legacy and tradition which has been established by Harold Flowers.
1
Houston
Lawyers
In 1970. there were only 10 block allorneys in the slale 01 Arkansas. Segal, Ger-
aldine R.. Blacks In the Low. University 01 Pennsylvania Press. p. 276 (983). There are now approximately 6S licensed black allorneys in Arkansas according to the records 01 the W. Harold flowers Law Society. • Blacks were denied membership in the American Bar Association until after 1943, when the Association passed a resolution stating that "membership in the ABA shall not be dependent upon lace, creed or color." Id. at p. lB.
Juty t985/Arkansas Lawyerll15
Consider the evidence. You be the judge: What better location for an attorney in Little Rock is there? The Rogers Building stands within a block of the Pulaski County Courthouse, UALR Law School • and Library, and the -' Arkansas Bar Association. • It offers a parking deck, • private health club and skywalk access to the Excelsior Hotel and the I t Statehouse Convention Center Complex. And it features the office space consulting services of famed Andre Staffelbach -absolutely free. We rest our case.
IR>
DOYLE ROGERS COMPANY Corporate Iivi1lg like llever before. For leasillg illformatioll,
116/Arkansas Lawyer/July 1985
COli tact
till! Doyle Ragers Comp(wy, 221 West Second Strt't'f, Suitt' 800, Littl, Rock, Arkallsas 72201, (501) 375-1662.
Law, Literature & Laughter
My New Year's resolutions included a provision to log more billable hours. As though in response, I received a letter December 31 instructing me to report for jury duty on January 3. Notwithstanding my resolution, I opted not to excuse myself under Ark. Stat. Ann. ยง39-108(c). Jury service is a civic duty. Besides, people, especially nonlawyers, highly resent other people, especially lawyers, who take advantage of legal technicalities. Two weeks after orienta1ion I was called to the rail. After voir dire and peremptory strikes by four lawyers whom I know, I found myself sitting as juror number 10. Either I have a reputation for honesty and fair dealing, or each side presupposed the other would
"I guess we elect a foreman." "You're elected." It was my first political victory since eighth grade. Someone asked whether each person might state their views on the case. Without objection I granted that request. For half an hour people talked about clutches, brakes, insurance, warranties. agency, hear-
strike me.
As often occurs, the case was simpler than the lengthy presentation warranted.
P took his recently-bought used car to D's repair shop to have his clutch inspected. D diagnosed a brake problem covered by p's special one-year warranty. The work was done. P drove away in his car. D filed a warranty claim, which was denied. P returned to D's shop a month later for another problem. While D's employees were working on the car D told P of the claim problem and insisted P pay the $400.00 brake job bill before driving away again. The car was on the rack at the time, so P had a slight edge in the discussion. Space limitations dictate the omission of certain details. P paid the bill, got his car, then sued, alleging fraud (in that the brakework was not really needed) and conversion (for the refusal to release the vehicle until the allegedly fraudulent bill was paid). P wanted his $400.00 back plus $50,000.00 punitive damages.
By Vic Fleming Alter four hours of testimony, the judge submitted the case to us, the jury, saying, 'Tm giving you this case without any instructions. You'll never see this happen again. It's rare. But the lawyers have agreed to submit it to you that way." That's right! No instructions! Not even the preliminary AMls. Each side's counsel then argued the case under the "do-right rule." Then we, the jury, retired to consider our verdict. My comrades knew I was a lawyer. One of them said to me, "What do we do?"
say, breach of contract, and possible reasons why the warrantor had not been sued. The clock crept past 5:30. I announced, "The foreman has clearly lost control of the delibera1ions." I asked for a show of hands on punitive damages. No takers. For a show of hands on a $400.00 verdict for P? No takers. For a defendant's verdict? Six hands. For a plaintiff's judgment of half the disputed bill? Five takers. I singled out the person, other than me, who had not raised her hand at all. "What do you think?" I asked. She said she thought P was entitled to something, but $200.00 was too much. For another five minutes the discussion dragged on. Jurors offered their opinions on the attorneys' preparation, mannerisms, dress. etc. It was most educational (unfortunately, I cannot write off the lost income). Again I struggled to regain control. I asked whether four of the six D-verdicters and four of the five P$200.00 verdicters would join the most recent speaker in a $100.00 judgment. All five P-$200.00 folks immediately shifted. Two of the Dverdicters conver1ed.
I then assumed the role of an auctioneer with the others. "Will you go $100.00 for P? Will you ... ?" The second or third pointee raised his hand. I filled out the verdict form and passed it around for nine signatures.
Ain't justice wonderful? 0 luly 1985/Arkansas Lawyer/I 17
u Toward the Bicentennial u scene. or inappropriate materials.
School Board Censorship
thereby ensuring that teachers and materials used in the schools will instill social, moral. and political values of the "traditional
Undemocratic and Unconstitutional
By Robert D. Cabe The proposition that school boards should be required to review educational materials and school course content for the purpose of removing indecent, ob-
American" variety. is. unless very
carefully limited, antithetical to the very foundations of American democratic ideals and notions. Generally speaking, two types of review might be undertaken by a school board. One would be an across-the-board, top-to-boltom review of all materials, both curricular and library; the other would be a case-by-case review of specific materials (course or library) that are called into question for whatever reason. fn the case of the former, impracticality becomes a factor and suggests that. absent extremely unusual circumstances,
such
a
review
should not be undertaken. fn the case of the latter, a school board may have to review the materials
to fulfill its general supervisory responsibility for all courses and materials. but the manner and
method of the review should reflect a sensitivity to the rights, needs for opportunity for expanded learning, and capabilities of the students. An excellent statement of the role of education in our demo-
"Toward the Bicentennial" will
erotic form of government is found in the concurring opinion of Justice Blackmun in Board 01 Education.
Island Trees Union Free
ment to its constituency," and "is
School District No. 26 v. Pica, 457 U.S. 853, 102 S.Ct. 2799, 73 L.Ed. 2d 435 (1982): Indeed, the Constitution presup-
the very foundation of good citizenship," the Court turned to the inculcative function: ... Other authorities have perceived public schools as an "assimilative force" by which di verse and conflicting elements in our society are brought together on a broad but common ground. See, e.g., J. Dewey, Democracy and Education 26 (1929); N. Edwards & H. Richey, The School in the American So路 cial Order 623-624 (2d ed. 1963). These perceptions of the public
poses the existence of an in-
formed citizenry prepared to participate
in
governmental
affairs, and these democratic principles obviously are constitutionally incorporated into the structure of our government.
It therefore seems entirely ap-
propriate that the State use "public schools [tol ... Inculcat[e] fundamental values necessary to the maintenance
of a democratic political systern." Ambach v. Norwick, 441 US, at 77, 60 L. Ed. 2d 49, 99 S. SI. 1989. It is in the execution of the inculcative function that the school board must be exquisitely sensitive to not only the First Amendment rights of students, but also to the example they set for students and the message they send when deciding issues of course materials, course content.
Amendment issues to launch the 1987 bicentennial observance 01 the U.S. Constitution. In this issue, Robert D. Cabe and G. Ross Smith discuss school board review of educational materials and school
and library holdings. If the school
be the locus 01 Phillip Carroll and Prolessor Albert M. Witte and cable television programming will be discussed by Robert M. Cearley, Jr .. and J. W. Dickey, Jr.. in the next two issues of The Arkansas Lawyer.
1I8/Arkonsas Lowyerl)uly 1985
was required of any person em-
ployed to teach in the schools. After noting that public education "go[es] to the heart of representative government," "fulfills a most fundamental obligation of govern-
feature a series of articles on First
course content. Newspapers will
discussion is found in Ambach v. Norwick, 441 U.S. 68, 99 S. Ct. 1589, 60 L. Ed. 2d 49 (1979). The issue before the court was the validity of a New York statute which required U.S. citizenship (with some exceptions not relevant to the case) of any person who wished to be certified to teach in the public schools of the state; certification
board is insensitive to these con-
cerns and disqualifies content or materials with a heavy hand, it runs the risk of contradicting and denigrating the right of free speech and free access to ideas which is, by any measure, fundamental to and of prime importance in our democratic system of government.
It is helpful to examine the breadth and depth of the inculcalive function. The most extensive
schools as inculca1ing fundamental values necessary to the maintenance of a democratic
political system have been con路 firmed by the observations of social scientists . ..
441 US, at 77. The court went on to refer to the inculcative function. but always
Editor's Note: Robert D. Cabe is a Little Rock attorney with the Allen, Cabe & Lester law firm. Until 1981. he was a member 01 the Wright. Lindsey & Jennings law firm in Little Rock, where he chaired the /irm's Labor Law Section. He has served as chair 01 the state's Quality Higher Education Study Committee and as chair 01 the Little Rock School District Superintendent Search Committee. He received a LL.B. from Duke University and a B.A. lrom Hendrix College. His two children, Meredith, 16, and Matthew, 13, attend Little Rock Public Schools.
limited it to those activities which are directed to the students' understanding of and preparation for effective functioning as citizens in a democratic society. In descriptions of or references to this func-
tion, the Court used such terms as development of "students' attitude toward government and understanding the role of citizens in our society," 441 US, at 78; influencing "the attitudes of students toward government, the political process, and a citizen's social responsibilities," 441 US, at 79; and promotion of "particular values and attitudes toward government," 441 US, at 79, n.lO. Thus, the teaching and provision of materials regarding sociaL moral and political values is a proper function and responsibility of the school board, to the extent of this specific and narrowly defined function: that which is necessary to enable students to appreciate the benefits, duties, and responsibilities of citizenship in a democratic society. The wholesale review of all materials to eliminate those which might, by some unspecified definition, be "obscene, indecent, or inappropriate" is a horse of another color, is wide of the mark, and is totally unjustified. In the first place, the concept of obsceni ty or indecency is necessarily in the eye of the beholder, and is one with which the United States Supreme Court has struggled on many occasions without having arrived at any particularly helpful definitions. There is also a practical problem because of the nature of school boards, certainly in Arkansas, and in other states, as well. School board members are unpaid public servants who have by and large, neither the time, the training, nor the inclination to undertake such a review. In virtually every school district. the initial decisions regarding course materials, course content. and library acquisitions are made by educational professionals hired to perform those and other functions. To expect that a school board member should take the time to master the details and actually review all such materials is an unwarranted assumption and
imposition on the time of such officials. If school boards did not rely on professionals to perform these tasks, they would become so hopelessly mired in detail that the task would not be done, or would be done superficially and poorly. fn addition, the likelihood of finding any objectionable materials is not great. certainly not in the case of textbooks. By and large, textbooks are written in such a way as to appeal to as many school systems as possible and to be as unobjectionable as possible; the publishers' profit motives assure that this is so. Some of the same considerations apply with respect to library acquisitions. Most acquisitions are the result of a number of factors: teacher requests for materials to supplement course materials; a desire for balance wi thin the library collection among the major topics or categories of books according to guidelines published and generally followed by the library profession; the academic, social. and economic characteristics of the student population being served; and requests by students and others. In Island Trees, the Court quoted with approval the observations of a district court with respect to the nature and purposes of a school library: "[A] student can literally explore the unknown, and discover areas of interest and thought not covered by the prescribed curriculum ... Th[e] student learns that a library is a place to test or expand upon ideas presented to him, in or out of the classroom." Right to Read Defense Committee v, School Committee, 454 F. Supp. 703, 715 (Mass. 1978). The court then noted that the board's discretion in carrying out the inculcative function, at least as to the removal of books from the library, is not unfettered. The dissent suggested that the plurality's holding required school libraries to act as conduits for the distribution of or access to published materials; the majority did not choose to refute that charge. Practically speaking, there is a good reason to allow greater lati-
tude of materials in the library: because of the often watered-down nature of many textbooks, it is only in the library that students will have access to materials that will benefi t them in preparing for college admission tests, in writing essays for college applications, and in acquiring the enrich-
ment of background that will be essential to their success in a college environment and in increasingly sophisticated and diverse work environments.
The situation with respect to patron complaints about specific materials is somewhat different. The school board has, of course, the ultimate responsibility for the content of courses taught. the materials used, and the library materials made available as a complement to the required courses and materials. On occasion, a complaint might be received about such materials and the board must respond in appropriate ways. First and foremost, the board should establish clearly defined and regularly followed procedures for such complaints. The absence of such procedures or the board's departure from them weakens any decision that may ultimately be made, because it suggests that there may have been less than a full and fair exploration of the educational value of the challenged materials. At a minimum, the board should require the complainant to specifically identify the materials and the parts alleged to be offensive; the harmful results which the complainant fears would follow use of the materials; the age group of students for which the complainant thinks the materials appropriate; the extent of the complainant's familiarity with the materials and with reviewers' and
critics' opinions of the materials; the action requested; and the identification of materials which might be substituted for the allegedly offensive materials. There should then be a procedure for review of the materials by a committee which includes educators (teachers, administrators.
and librarians) and parents. Finally, the board, if called on to make the ultimate decision, July 1985/Arkansas Lawyerll19
should determine whether the educational value of the materials outweighs the perceived threat to community values. In Island Trees. the Court specifically treated the removal of library books. and articulated a standard tied to the board's motivation for the removal decision. 457 US. at 871. To its decision-making process, the board should also add a measure of sensitivity to the academic freedom of the faculty. The issues of alleged obscenity or indecency are most likely to arise in the context of literature courses and library holdings. In Island Trees. the Court held that the board could not remove a book from the school library if it thereby intended to deny student access to ideas with which the board disagreed, and if the intent was a substantial factor (one in the absence of which the decision would have been different). The Court carefully limited its opinion to the removal of library books. and did not treat ei ther curricular decisions or library book acquisitions.
The board has ari obligation to the students who depend on it for their education to not unduly narrow the scope of that education. Our society and world are changing so rapidly, and the diversity of our nation is such that the board does students a distinct disservice when they elect to remove materials for which there is any substantial educational purpose. A particular danger is that a board might tend to be too parochial in its viewpoint. on the theory that it is bowing to community notions of decency; the students are the losers, because a great many of them will be required to function in a society much larger than that of their hometown, and to restrict their educational opportunities and their
acquaintance
with
the realm of optional reading materials. Parents can and should, if they feel the necessity to do so, instruct their children not to read an unassigned book. More importantly, these suggested rules and procedures do not in any way inter-
fere with the abilities of parents to discuss and explain their views with respect to a particular work or idea, or to make available to the child the benefits of other instruction, either through a church, the reading of alternative works, or through the literature of any number of groups or organizations. If the board is to truly enhance and support traditional American values, it must not tread on the concept under! ying the first and most important of the Bill of Rights: maximum personal freedom is attainable only in an environment where there is a free ex-
change of ideas, and where the best ideas acquire that status because they are constantly challenged by new ideas and survive that challenge. The schoolroom and school library, of all places. should be free marketplaces of ideas; otherwise, they become inconsistent with the fundamental right of freedom of speech and. by their example. encourage intolerance and even limitation of this
basic and precious right.
School Board Review To What Extent?
new
ideas is to put them at a disadvantage when competing either in colleges and universities or in the employment marketplace. None of this is intended to interfere with the right and obligation of parents to educate their children and to determine what their children will read, at least in 1201Arkansas Lawyernuly 1985
By G. Ross Smith Since the adoption of the First Amendment to the Constitution of the United States and subsequent court
decisions
extending
its
reach to state action. the case law which has developed to establish the scope and substantive content
of the rights enumerated in the Amendment has been overwhelming, if not always clearly articulated. One reason for the volume and frequency of litigation is that the rights protected are not absolute and cannot be stated or applied with mathematical precision. Rights such as freedom of speech must often be applied in contexts which require a balancing of free speech interests with other legitimate and competing concerns.
In June, 1982, the United States Supreme Court was called upon to balance the long-established principle favoring deference to local school officials on matters of public educational policy and administration with the alleged
speech rights of public school students. In Board of Education. Island Trees Union Free School District v. Pica.' the Court addressed (in eight separate opinions) the constitutionality of actions of local school boards and their individual members in appiying their personal moral. social and political values to make content-based decisions regarding selection and removal of school library books and curriculum design. Five junior and
senior high school students liled suit under 42 U.S.C. ยง1983 alleging that such actions violated their constitutional rights of free Editor's Note: G. Ross Smith, with the G. Ross Smith, P.A.. law firm of Little Rock, received a B.S.B.A. Degree from the University of Houston in 1966. He was associate editor of Houston Law Review from 1964 to 1966. He was counsel for the Defendants in the United States Supreme Court cases of Wood v. Strickland and the Board of Education v, McCluskey, In Wood v. Strickland. the Court was for the first time confronted with the issue of the liability of individual members of boards of education for civil rights deprivations. Smith is a member of the National School Boards' Association and the National Council of School Attorneys. He authors a monthly column in the Arkansas School Boards' Association newsletter.
speech. While there was admittedly no abridgment of actual speech. the students argued that their challenge should properly be construed as within the protection of speech rights. The District Court granted summary judgment for the school officials. noting that: "the board acted not on religious principles but on its conservative educational philosophy. and on its belief that the nine books removed from the school library and curriculum were
irrelevant,
vulgar.
im-
moral. and in bad taste. making them educationally unsuitable for the district's junior and senior high school students." 102 S.Ct. at 2804. The Court of Appeals reversed and remanded for trial and the Supreme Court granted certiorari. Prior to Island Trees. the Supreme Court had not addressed the exact issues involved. It had however decided other cases requiring resolution of first Amendment controversies in the public school context. One of the most notable was Epperson v. Arkansas.' where the Court expressly acknowledged that local school boards have broad discretion in the management of school affairs and that the federal judiciary should not "intervene in the resolution of conflicts which arise in the daily operation of school systems"
unless
"basic
con-
stitutional values" (emphasis added) are "directly and sharply implicated" in those conflicts. ' Although Epperson involved the Establishment of Religion Clause of the First Amendment, the cited language is the acknowledged test to determine the propriety of federal intrusion in public school matters where constitutional vio-
lations are alleged. Also prior to the Supreme Court's decision in Island Trees. a conflict on the library book removal issue had developed in the Courts of Appeal for the Second and Sixth Circuits. In President's CounciL District 25 v. Community School Board No. 25.' the Second Circuit sustained school board action on library book removal primarily predicating its holding on the Epperson rationale and a concomitanl finding that the
issues asserted by the plaintiffs
adequately substantiated; (4) con-
were not of constitutional magni-
sideration of distinctions in deci-
tude and did not involve the deprivation of federally protected rights which would warrant federal intrusion. To the contrary. in Minarcini v_ Strongville City School District.' the Court of Appeals for the Sixth Circuit concluded, by reasoning which some
sions to remove library books from the shelves vis a vis decisions not
have characterized as specious.
that public school students possessed a First Amendment "right to know." The cases cited in support of that assertion pertained to the rights of adult citizens in nonschool contexts and although arguably involved the right to receive information. did not address situations where the defendants had a right or duty, as do school boards, to prescribe and regulate the substantive content of an educational program. The Court's ultimate "resolution" of the Island Trees controversy is perhaps one of the most perplexing series of opinions in re-
cent years. No clear majority emerged. Justice Brennan wrote the plurality opinion. joined by Justice Marshall. Justice Stevens and, in part. by Justice Blackmun. Justice White concurred solely in the judgment. Separate dissents were advanced by Chief Justice Burger. Justice Powell. Justice O'Connor and Justice Rehnquist. Justices Powell. Rehnquist and O'Connor joined the Chief Justice and Justice Rehnquist was joined by the Chief Justice and Justice Powell. The legal issues on which the Justices diverged included not only the basic issue whether the right of free speech afforded any protection to students protesting library book removal but also a variety of tangential issues which arose once the threshold issue was decided by the plurality in favor of the students' position. Once the decision was made that freedom of speech was in fact implicated in library book removal. the Court was faced with issues such as: (I) the substantive content of the legal test to be applied in determining the propriety of removal; (2) the proper allocation of the burden of proof; (3) explication of specific criteria which would unquestionably permit removal if
to acquire books for indusion in
the library inventory and decisions not to include materials in curriculum resource materials: (5)
assuming vulgarity or obscenity to
be an appropriate reason for re-
moval of books. must such obscenity or vulgarity
be pervasive
or would "random" vulgarity in a book suffice for removal; (6) the extent to which the adequacy of internal school board review procedures should affect the judicial review process; and (7) the extent to which any legal test which might be articulated would effectively erode the discretion of school board members and permit or require the substitution of a federal judge's notion of appropriate library materials by invalidating decisions based on the values of locally elected school officials. As noted, the plurality opinion authored by Justice Brennan held that library book removal did indeed implicate rights of free speech and, in appropriate cases, warrant
fecleral
court
interven-
tion. Justice Brennan stated that federal review and possible intervention was necessary to protect
the students' "right to receive information." a right which he found to be implied in the right of free speech. He referred to what he perceived to be the unique role of a public school library and suggested that a student's right to receive ideas was "0 necessary predicate to the recipient's mean-
ingful exercise of his own rights of speech, press. and political freedom.'" In a holding which came closest to securing a consensus
(eight justices), Justice Brennan did concede that local school boards have a legitimate role in establishing an educational program so as to impart traditional community values and to promote
respect for authority and traditional values "be they social. moral or political."7 However, if it can be established that the decisive factor in library book removal was "0 narrow partisan or political" motivation or an intent to suppress ideas. it was impermis-
sible. Justice Brennan did specify luly 1985/Arkansas Lawyer/121
that criteria such as pervasive vul-
garity.
educational
suitability.
eral encroachment into the altairs of local school districts emanates
board that book removal is inappropriate. they have alterna-
age
from such a bizarre combination
tive sources to the same end.
group. space limitations and obsolescence would be acceptable. hut that is presumably qualified by the language on impermissible
Books may be acquired from book stores. public libraries. or
also decided that the internal review procedures in the Island Trees case were suspect and that a trial was necessary to explore
of opinions as is found in Island Trees. The divergence of views manifested in the eight opinions may be the most persuasive evidence that the plurality opinion is simply wrong. from both legal and policy considerations. Almost everyone would concede that public students generally benefit from exposure to a wide spectrum of varying ideas. However. to suggest that exposure to library materials is a matter of federal
issues pertaining to the motiva-
constitutional dimensions is sim-
tion of the boord members. The
ply to arrogate unto the federal judiciary additional authority to further erode local control of pub-
ing objective. as opposed to subjective. criteria. Yet. the Island Trees Court has articulated almost totally subjective criteria to be employed by a federal judge
Blackmun}
lic school operation when other
reviewing library book removal
were aghast at what they perceived to be fatal flaws in the plurality's reasoning. Foremost in
direct and indirect means of ob-
decisions. The ominous prospect seems to be that the inventory of public school libraries will be determined more by litigious teenage students and federal judges than publicly elected school officials. Although the question posed here for debate is whether local school boards should be required to review educational materials to ensure the installation of traditional social. moral and political values. Island Trees suggests that the real inquiry. at least in the case of library book removal. is the extent to which they can do so. The plurality seems to insulate curriculum and book acquisition decisions from federal judicial review. at least for now. The dissenters' position that none of the three categories of decisions meet the parameters of Epperson is preferable. 0
inappropriateness
for
an
motivation. Justice Brennan ex-
pressly stated that his views related only to library book removal and not to initial acquisition or curriculum content decisions. He
case was thus remanded.
The dissenting Justices {and to some
extent
Justice
their concern was Justice Brennan's announcement of a pub-
lic school student's "right to receive
information"
which
was
termed "previously unheard of" and "wholly unsupported by our previous
decisions. "8
The
dis·
senters also professed their inability to fathom how a school board could eltectively inculcate traditional community values (whether moral. social or political) in light of the largely subjective and restrictive test prescribed
by the plurality. Moreover. if. as admitted by the plurality. a board may transmit its notions of appropriate values without federal review in the curriculum and in book acquisition decisions. what
possible rational basis could there be for severely restricting their discretion in library book removals. The dissenters also cogently noted that. not only was speech per se not involved. but that any alleged denial of access to information did not rise to the
standards of Epperson as a material
and
substantial
taining access to a divergence of
educational materials are readily available. Chief Justice Burger observed in Island Trees: "We can all agree that as a matter of educational policy students should have wide access to information and ideas.
But the people elect school boards. who in turn select administrators. who select the
teachers. and these are the individuals best able to determine the substance of that policy. The plurality fails to recognize the fact that local control of education involves democracy in a microcosm. In most public
schools in the United States the parents have a large voice in
running the school. Through participation in the election of school board members. the parents influence. if not control. the direction of their children's education. A school board is not a giant bureaucracy far re-
moved from accountability for its actions; it is truly 'of the people and by the people.' A school board reflects its con-
encroach-
stituency in a very real sense
ment of a basic constitutional right since (I) no such right had been previously recognized; (2)
and thus could not long ex-
the removed books were avail-
books. If the parents disagree with the educational decisions of the school board. they can take steps to remove the board members from oltice. Finally.
able from other sources and (3) no effort was made to suppress or in-
hibit classroom discussions of the ideas discussed in such books. It is unfortunate that this newly sanctioned basis for further fed1221Arkansas Lawyer/luly 1985
ercise unchecked discretion in its choice to acquire or remove
even if parents and students cannot convince the school
other alternative sources un-
connected with the unique environment of the local public schools." In civil rights cases from other contexts. the federal judiciary has stressed that defendants. to the extent possible. must make decisions (particularly in the employment discrimination area) utiliz-
FOOTNOTES • 102 S.Ct. 2799 (1982). , 303 U.S. 97 (1968). , Id at 104. • 457 F.2d 289 (2d Cir. 1972). cert. denied. 409 U.S. 998 (1972). , 541 F.2d 577 (6th Cir. 1976). See also Right to Read Defense Committee of Chelsea v. School Committee of the City of Chelsea. 454 F.Supp. 703 (D. Mass. 1978) and Salvail v. Nashua Board of Education. 469 F.Supp. 1269 (D.N.H. 1979). • 102 S.C!. at 2808. , 102 S.C!. at 2806. • 102 S.C!. at 2830.
The Grand Gulf Cases A summary of decisions, issues and arguments on state v. federal jurisdiction in utility regulation Middle South Utilities, Inc. (Middle South), is the parent to lour wholly-owned utility companies: Arkansas Power & Light (AP&L), Louisiana Power & Light (LP&L), Mississippi Power & Light (MP&L), and New Orleans Public Service, Inc. (NapS!) (collectively referred to as the operating companies). In the early 1970's, Middle South planned the Grand Gull nuclear project as a two-unit gener-
ating plant to be located near Port Gibson, Mississippi. to produce 1250 megawatts of power per unit and to serve and be individually financed by Mississippi Power & Light. Middle South determined subsequently that MP&L did not alone possess financial strength sufficient to finance construction of the project and in February 1974 organized Middle South Energy, Inc. (MSE), as a wholly-owned generation subsidiary to take over the interest of MP&L and facilitate financing and construction.
The existing financing framework for Grand Gull (to date involving a sum exceeding some
$3.4 billion) has been developed through a complicated series of Middle South, the operating companies, Middle South Energy, Inc. and third party lenders - a con-
performed its duties and obligations under the agreement. Beginning in 1974, MSE executed a number of bank loan agreements and indentures to obtain construction financing, in the
sortium of domestic and foreign
COllrse agreeing to enforce its
banks. The first such agreement, known as the Availability Agreement, was executed by Middle South Energy, Inc.. and theoperating companies in June 1974. Under its terms, the four operating companies agreed to take and pay for power from the Grand Gull unit according to their respective needs based upon a formula set out in another document known as the 1973 System Agreement.' In effect, under the Availability Agree-
rights as to the operating companies arising from the Availability Agreement and to neither terminate nor modify the agreement without the consent of the lenders, MSE also agreed to assign to its lenders its rights under the Availability Agreement to receive payments from the operating com panies as security for the
financing
agreements
among
ment. the operating companies
agreed to jointly reimburse Middle South Energy, Inc. for the cost of construction of Grand Gull by paying depreciation over 27.4 years, plus amounts equal to MSE's operating expenses and interest on debt, whether or not it received necessary government authorizations to perform its duties
under the agreement or actually
Editor's Note: Dana Daniels Nixon of Little Rock, was senior and chief Administrative Law judge from 1980-84 at the Arkansas Public Service Commission. She attended RandolphMacon Women's College and the University of Arkansas at Fayetteville School of Law, where she was a member of the Arkansas Law Review staff. Nixon plans to return to law practice in the fall.
By Dana Daniels Nixon July 1985/Arkansas Lawyerll23
loan agreements. Between June 1977 and October 1984, AP&L and the other operating companies joined in 12 agreements related to the assignments in which they agreed to make payments pursuant to the Availability Agreement directly to the banks in the event MSE defaulted in its payments to the lenders, and to make the payments due even if regulatory approval for the plant was never secured and even if the plant never produced any power. The operating companies also agreed to make the payments due MSE under the AvaHability Agreement even though a regulatory agency might prohibit the operating companies from making them, in the form of unsecured "advances," or loans from the com-
panies to MSE, which would become "subordinated indebtednesses" of MSE to them. In effect, then. the operating com panies agreed to make "loans" to MSE if the making of "payments" were to be prohibited. The rights of the operating companies to collect the debts owned them by MSE would, under the terms of the assignments of the Availability Agreement. be inferior to ("subordinated") MSE's' pre-existing debts to the banks - which would be paid to the banks with the proceeds of the "advances" made to MSE by the operating companies. AP&L built its plants in Arkansas and, by 1980, had a greater portion of coal and nuclear baseload generating capacity in relation to its customers' needs
than the other operating companies. In recognition of this, the operating companies agreed in a
July 1980 Memorandum of Understanding to reallocate their obligations to take power from and to pay for Grand Gulf. In this agreement, formalized a year later in a Reallocation Agreement approved by the federal Securities and Exchange Commission
("SEC")', AP&L relinquished all of its interest in Grand Gulf. The other operating companies agreed that AP&L should be allocated none of the energy capability of the project and agreed they would indemnify or "hold harmless" AP&L for any obligations that might ever be imposed on it due to the 1974 Availability Agreement and assignments of MSE's 1241Arkansas Lawyer/Ju1y 1985
rights thereunder. The other three companies further agreed to execute an agreement to be filed with the Federal Energy Regulatory Commission ("FERC") establishing the terms, rates, and conditions for the sale of Grand Gull power in conformity with the Reallocation Agreement. As noted, however, the Availability Agreement could not be modified by MSE to comply with the Reallocation Agreement's zero allocation of capability to AP&L without the permission of those lenders financing construction of
the project. The lenders refused to release AP&L from its obligations altogether but did agree to a fixed allocation of 17.1% of the total financing cost of the project as AP&L's obligation. In November 1981, with the consent of the lenders, an amendment to the Availability Agreement was executed wherein AP&L expressly assumed the obligation to pay for that share of the costs. Each of these documents was, in accordance with the Public Utility Holding Company Act of 1935, IS U.S.C. ยง79 et seq.. filed with the SEC for approval. The 1973 and 1982 System Agreements were filed for approval only with the FERC. On June 10, 1982, the operating companies and MSE entered into
power from Unit 1 of Grand Gulf and bear 36% of its cost. (The fate of Unit 2 was not decided.) On April 30, 1982, Middle South Services, Inc.. the service subsidiary of Middle South, filed the 1982 System Agreement for approval in Middle South Services, Inc,' (hereinafter cited as the System Agreement case). This document was meant to replace
the 1973 System Agreement as the governing agreement for wholesale buying and selling transactions among all the public utility subsidiaries of Middle Sou th except those from Grand Gulf, which was covered by the Unit Power Sales Agreement.' In early 1983, testimony and exhibits were filed in the System Agreement case by the FERC Staff, the Louisiana PSC, and the City of New Orleans. Each proposed major changes in the assignment of production costs among the Middle South operating companies to effectively equalize such costs among the companies and shift substantial portions of the costs from the other operating companies to AP&L. One major consequence of equalizing production costs on the Middle South system would be to transfer the benefits associated with two-thirds of AP&L's low-cost coal and nuclear plants to the op-
a formal agreement known as the
erating companies in Louisiana
Unit Power Sales Agreement which was filed as a wholesale rate in Middle South Energy, Inc.' (hereinafter cited as the Grand Gulf case). This agreement detailed terms for the sale and purchase of Grand Gulf power pursuant to the fixed allocations in the Reallocation Agreement and, therefore, granted no entitlement to capacity and imposed no cost obligations on AP&L. The agreement was filed with FERC for approval on June 18, 1982. MSE justified its allocation plan on the grounds that each operating subsidiary should have adequate baseload generation and a diversified fuel mix, and that AP&L's
and Mississippi, while shifting onto AP&L one-third of the cost impacts of the more expensive Grand Gulf and Waterford nuclear plants. Quite obviously, the net result of such equalization
generation
currently
met
such
needs. On February 3, 1984, FERC Administrative Law Judge Ernst Liebman rejected the provision of the Unit Power Sales Agreement that AP&L had no obligation to purchase power and held that AP&L should receive 36% of the
would be a dramatic escalation in
AP&L's costs of electricity. On February 2, 1984, the day before the initial decision in the Grand Gulf case, Middle South Services, Inc. filed a "Notice of Separate Positions" of the operating companies and advised the FERC that they would take different positions on the Middle South System's
production
cost
allocation issue.' Subsequently, Louisiana Power & Light, Mississippi Power & Light and New Orleans Public Service, Inc., called for use of allocation methods designed to bring about equalization of production costs among the operating companies
while AP&L adhered to the position advanced by MSS at
previous evidentiary hearings in
1983; which reflected a zero allocation of Grand Gulf to AP&L pursuant to the Reallocation Agreement.
In March 1984, following the decision by Judge Liebman to impose 36% of the Grand Gulf costs on AP&L, the Arkansas PSC began actions on its own. First. it
instituted two investigatory proceedings into the facts and circumstances underlying the contractual relationships involving Grand Gulf among AP&L, its affiliates, and Middle South.' It then issued an Order to Appear and Show Cause in August 1984 in which it directed AP&L to show cause why certain agreements
which purported to obligate it in connection with the Grand Gulf project should not be held void ab initio as a matter of law.' The Order referenced a number of documents involved in the Grand Gulf financing scheme but indicated that the only documents subject to being declared void were the agreements actually executed by AP&L. It did not address either the System Agreement or the Unit Power Sales Agreement. A hearing date was set and documents and testimony filed with the Arkansas PSC. Before the hearing took place, MSE filed suit on August 31, 1984, for declaratory judgment and injunctive relief in Middle South Energy, Inc. and Arkansas Power & Light Co. v. Arkansas Public Service Comm'n et aJ.' Seven days after a brief court hearing on the matter, District Judge Henry Woods permanently enjoined the PSC from conducting further proceedings pursuant to the Show Cause Order on the ground of federal preemption. The PSC's Motion to Amend the District Court's Order was denied, and the matter was appealed." Oral arguments were held on April 8, 1985, and a decision is pending in that case. DECISIONS, STATUS Of CASE, ISSUES, AND RATIONALES (BRIEfLY) The underlying issue in these cases is the proper division of jurisdiction and power between a
state and the federal government in the regulation of public utilities. There are, of course, numer· ous other issues involved in each
case, factual and legal. and pro-
cedural and substantive, not sum· marized due to space constraints.
In the Grand Gulf case, Judge Liebman issued his initial decision on february 3, 1984. He found that generation capacity owned by operating companies in the Middle South system, including Grand Gulf. is planned and can· structed to meet the needs of the entire system rather than the indio vidual needs of the separate operating companies; that the current level of baseload capacity for each operating company is due to system planning; and that MSE's justifications for the proposed Grand Gulf sales were inadequate. He concluded that MSE's proposed allocation of Grand Gulf power and costs unduly discriminates against Louisiana and
Mississippi retail ratepayers and must be modified; that the Louisiana PSC proposal to allocate Grand Gulf power and energy to the operating companies based upon equalization of costs from
the nuclear units on the Middle South system is just and reasonable; and that the fERC has the power to force AP&L to purchase power from MSE despite the fact that AP&L has no contractual right or duty under the Unit Power Sales Agreement to purchase such power. In the System Agreement case, Administrative Law Judge Head issued his Initial Decision on february 4, 1985. His decision contains several findings of fact and conclusions of law which are diametrically opposed to those made by Judge Liebman in the Grand Gulf case: he rejected the pro· posals for equalizing production costs among the operating companies on the Middle South sys· tem and concluded that such proposals were unjust. unreason-
able, and unduly discriminatory. He found that any cost equalization scheme would be foreign to the traditional operation of the Middle South pool and that the evidence clearly showed that the individual operating companies of the system have operated and do operate independen tl y of their parent so that generation additions, with the exception of Grand Gulf. have been made to satisfy individual company needs and have not been planned or built as system plants.
Since he found Grand Gulf had been built as a system plant, Judge Head ordered that AP&L should purchase a portion of its power and bear a part of its cost. He based its share upon the ratio of its annual demand for energy (kilowatt hours) to the annual demand of the system as a whole" and ordered that this formula be integrated into the 1982 System Agreement. Both the System Agreement case and the Grand Gulf case are now on appeal to the full fERC. Both
cases
involve
as
major
issues the general power of the fERC to order involuntary equal· ization of production costs against
one member of an affiliated power pool and, more specifically, the power of the fERC under the federal Power Act, 16 U.S.C. §824 et seq.. to require that a separate
electric utility purchase power from another utility, albeit an affiliated one, where the purchas. ing utility has no contractual right or obligation to purchase power from the selling utility and where the selling utility is contractually required to sell all of its power output to other affiliated utilities. Underlying the arguments of the Arkansas parties l2 in both cases is
the question of the extent to which the federal agency may properly intrude on the regulatory authority of the state. The Arkansas parties argue that there are few situations beyond the one involved in these cases in which Congressional in-
tent not to preempt state authority could be more pronounced. They note that the federal Power Act was designed to Ii 11 the gap in regulation of the electric industry left by Public Utilities Comm'n. V. Attleboro Steam & Electric Co. " which denied the states the right to regulate the price of electric energy across state lines. The primary purpose of the Act was to give a federal agency power to so regulate. 14 The Act was "conceived entirely as a supplement
to, and not a substitute for state regulation. "I:' In referring to what
is now the Act. the House noted that probably "no bill in recent years has so recognized the re-
sponsibilities of state regulatory •.
commlsslOns ...
"16
While the Arkansas parties recognize the interstate nature of July 1985/Arkansas Lawyer/125
sales in general among the Middle South operating companies. and. specifically. sales of the energy from Grand Gulf. they contend that the mere complexity of the transactions and the interstate nature of the transactions do not. in and of themselves. render every aspect of their regulation subject only to (ederal authority. The Arkansas PSC. however. admitted that Congress could. if it so desired. render the agreements completely subject to (ederal authority. As the Supreme Court stated in Connecticut Light & Power Co. v. FPC:": It has never been questioned that technologically generation.
transmission,
distribu-
ambit of [its] statutory authority."" In their opinion. to lawfully equalize production costs among
operating
companies
would require equalizing their costs of service. an accomplishment only achieved by allocation o( ownership of generation plant. directly or indirectly. Such allocation is beyond the pawer o( FERC to make. since it has no jurisdiction over generation facilities.
either indirectly or directly.'" Further. the Arkansas parties argue that Judge Liebman has exceeded the jurisdiction o( the FERC by considering the retail ratepayers o( the jurisdictional consumers.
the opera1ing com-
tion. and consumption [of electric energy] are so (used and interdependent that the whole
panies. While they agree that the Federal Power Act has as its primary purpose the protection o( consumers. they assert that the
enterprise is within the reach of the commerce power of Con-
beneficiaries of such protection
Sierra doctrine. developed in United Gas Pipeline Co. v. Mobile Gas Service Corp.~ and FPC v. Sierra-Pacific Power Co.." the pawer o( the FERC under the Federal Power Act to abrogate jurisdictional contracts is severely circumscribed: the FERC may change the contractual terms impacting rates only if the FERC linds. under §206(a) o( the Act" that the rate adversely affects the public interest to the point that the financial ability o( the utility to continue service is impaired. or
when the rate is unduly discriminatory to or places an excessive
burden on other jurisdictional (wholesale) consumers. The FPA. according to the Arkansas parties. is premised on voluntarily devised contractual relations among its jurisdictional utilities and con-
crosses a state line. Such a broad and undivided base (or jurisdiction of the Power Commission [the predecessor of the FERCI would be quite unobjectionable and perhaps highly salutary if the United
The Arkansas parties go on to argue that. even if it has jurisdiction generally to do so. the FERC
States were a unitary govern-
cannot allocate any power from or
ment and the only conflicting
cost responsibility (or Grand Gulf to AP&L because it has no contrac-
tern plates abrogation of these contracts by the FERC only in circumstances of unequivocal public necessity. Further. they argue that the FERC may not force AP&L to purchase capacity that it has not agreed to purchase and note that the Eighth Circuit has held that title need not pass in order to constitute a prohibited sale pursuant to §202 o( the Federal Power Act. 16 USC §824(a). in Otter Tail Power Co. v. F.P.C.". Nor. they assert. does the Commission precedent support a "forced purchase"
tual vehicle through which it may
in a similar situation.:zI
do so." The Arkansas parties contend that under the Mobile-
The cost equalization parties in both the Grand Gulf and System
gress. neither on the basis that it is. or that it affects interstate commerce if at any point it
interests to be considered were those of the regulated com ponies. The Arkansas position is. sim-
ply. that Congress has not chosen to give the FERC such a brood jurisdiction to date. The most basic arguments o( the Arkansas parties are that the FERC lacks authority to equalize costs because it would
be an impermis-
sible allocation o( generation plant andlor an impermissible setting o( retail rates by FERC. They contend that the FERC is clearly prohibited from allocating generation plant under Section 201(b) o( the Federal Power Act' : The Commission shall ... not have
jurisdiction.
except
as
specifically provided ... over (acilities used (or the generation of electric energy ...
While they note thot the FERC may make "pragmatic adjustments" in agreements before it to relieve unduly discriminatory or unreasonable impact, they assert
that it may do so only "within the 126 Arkonsos Lawyer July 1985
are these jurisdictional consumers (the operating companies in this case) rather than the ultimate retail consumers. 21 Only in extreme cases, such as a price squeeze. may the Commission
consider the impact of its determinations on retail rates. Z!
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Agreement cases contend that FERC may (and should) modify either of the agreements to equalize production costs on the system. In doing so, they use three main
rationales
for
such a decision. First. they contend
supporting
that the
issue is not whether or not costs
should be equalized or redistributed but how the massive new costs, some $6 billion, associated with the Grand Gull units and Waterford 3 (a Louisiana nuclear plant scheduled to begin commercial operation in mid 1985), should be distributed. Second, they contend that there is no issue as to the jurisdiction of the FERC to adopt cost equalization. because jurisdiction is clear-
ly existent due to the pervasive interstate nature of the operations of the system, the subjection of the System Agreement to the FERC for approval, and precedent both at the FERC and in the courts." Third, they assert that the issue is not whether the Middle South system should be treated differently than other power pools in the country by forcing cost equalization
upon
some
members
which have not voluntarily agreed to acceptance of equal costs. Rather, they argue, the Middle South system operates as a monolith and the individual corporate identities of the separate operating companies have, for many years, been ignored for purposes of system generation planning, so the matter is one of distinguishing the Middle South system from voluntary and unaffiliated (in the holding company sense) companies for cost allocation purposes. These parties view cost equalization, if not supported by precedent. as a response to the "real world" economic and structural characteristics of the Middle South system which operates over a four state area and has, in its new nuclear units. ventured into
construction of units with gigantic physical and generational size as well as gigantic costs. Their rationale is that active and effective regulation by the federal agency is mandatory to protect the systems' (retail) ratepayers since state commissions cannot be expected to fairly deal with
consumers in other states. They
also suggest that FERC should move into cost equalization to spread risks assumed by companies constructing such gigan tic plants. In response to the arguments of the Arkansas parties that cost equalization would either require an impermissible forced sale of the generation plant or, failing that. require a state commission to set retail rates based on aver-
age system costs rather than the actual operating costs of the individual utilities (which would violate all traditional concepts and legal standards of traditional ratemaking), the proponents of cost equalization assert that their plan would do neither. It would merely reallocate costs and is permissible under Municipalities of Groton v, FERC" and Central Iowa Power Coop, v. FERC." They also rely on Georgia Power Co. v. FERC." where the FPC refused to equalize costs among the Southern Company subsidiaries because the system agreement did not provide for it. and Connecticut Light & Power Co. v. FERC." wherein the FERC did order cost equalization because the Northeast Utilities system agreement did so provide. The cost equalization parties also use these cases in which voluntary cost equalization has been approved by FERC as support for their argument that FERC has the power to modify the System Agreement to force cost equalization,
arguing that FERC has, at least implicitly, found cost equalization to be just and non-discriminatory since it could not have approved an agreement that resulted in unjust or unlawfully discriminatory rates.
Finally, in Middle South Energy v. Arkansas PSC. supra, the substantive question is one of the
proper regulatory roles of the FERC, the SEC, and the Arkansas PSC with respect to a number of financial documents executed by AP&L in support of the Grand Gull project since 1974. The PSC argues that the District Court erred in finding that the FERC has exclusive
jurisdiction
over
the
agreemen ts which were subject to the Order to Appear and Show Cause. ~ It also contends that the District Court abused its discre-
tion by granting injunctive relief that was overbroad; that the District Court lacked subject matter jurisdiction because the appellees failed to exhaust their administrative remedies and the matter was not ripe for adjudica-
tion; and that the District Court should have abstained from judgment pending the outcome of the PSC proceeding. The PSC and supparting intervenors argue that there is con-
current jurisdiction between it and the SEC to regulate securities and other evidences of indebtedness issued by public utilities which are subsidiaries of public utility holding companies, since this jurisdiction is recognized ex-
plicitly in the Public Utility Holding Company Act of 1935. 15 U.S.C. §79g. The PSC also asserts that whenever a state regulates the securities of electric utilities, the FERC is ousted in jurisdiction over such securities by express provision of the Federal Power Act at §§824c(f) and 825q. MSE and AP&L argue that the lower court properly found that state jurisdiction over the subject financial
agreements
was
pre-
empted by the Act under Narragansett Electric Company v. Burke." that state regulation of the Grand Gulf agreements would
be an unreasonable interference with interstate commerce in viola-
tion of the Commerce Clause, ~ and that the PSC's proceedings in the Show Cause docket were ripe for injunctive relief by the District Court. 31 However, nowhere in his Mem-
orandum Opinion did Judge Woods address the securities and "evidence of indebtedness" arguments raised by the PSC in its Show Cause Order and briefs to the Eighth Circuit. It is anticipated that the Eighth Circuit will, if it reaches the merits of the preemption issue, address the relative roles of the FERC, SEC, and Arkansas PSC in regulating securities of subsidiaries of public utility holding companies. The Court, of course, may decide to abstain from deciding the substantive issues presented and remand
the case to the PSC for further proceedings and a final order in the Show Cause docket. A decision from the Eighth Circuit in this case is expected this summer. 0 July 1985/Arkansos Lawyerl127
FOOTNOTES
I
The System Agreement. signed in 1973 and laler amended. covers the buying and selling of power at wholesale among the four operating companies; it
was succeeded by the 1982 System Agreement which is the subject of one of
the coses discussed in this article. Middle South Energy. Inc.. et 01.. S.E.C .. Holding Company Act Release No. 22280 (November 18. 1981). , FERC Dockel No. 82-616·000. • FERC Dockel No. 82·483-000. t
~
MSS
acted as the representative agent
of the four operating companies for this
filing. In October 1982. LP&L. MP&L. the Stote of Mississippi. and the Mississippi Legal Services Coalition jointly moved for consolidation of this case with the Grand Gulf case: the motion was denied in November 1982. 6 Traditionally. each operating Middle South company has buill its own generating plants and assumed financial responsibility for its own production costs. approved by the state commissions. • In Re An Investigation into the Operations of Arkansas Power &: Light Co.. APSC Dockel No. 84·04·011; In Re An Investigation into the Operations of Arkansas Power 8t Light Co.. APSC Dockel No. 84-041-011. I In Re an Order for Arkansas Power &: Light Co. to Appear and Show Cause which Certain Agreements Should Not Be Held Void Ab Initio. APSC Docket No. 84·l90-U. The order referenced Ark. Stat. Ann. §73-2SS, which provides that a public utility may not issue "stock, bonds. notes or other evidences of indebtedness" without authorization from the Arkansas PSC and stated that the obligations assumed by AP&L for Grand Gulf costs "may constitute evidence of indebtedness" under the Arkansas statutes. All of the documents included in the Order. including the Availability Agreement and its amendments and assignments executed by AP&L. had been filed with and approved by the SEC. • Dockel No. LR·C-84·778 (E.D.PJk.). AP&L intervened in support of MSE. and the Attorney General of Arkansas and Ratepayers Fight Back. a consumers' group. intervened as defendentintervenors. Arkansas Public Service Comm·n. et al. v. Middle South Energy. Inc. and Arkansas Power &: light Co.. Docket Nos. 84-2409. 2410. ond 2480. Judge Head admitted that an argument could be made that he lacks jurisdiction to require sales or purchases of Grand Gulf power because the UPSA is the subject of the Grand Gulf case in Footnote 1. n For purposes of this article. reference will be to the arguments of the parties as those made by "the Arkansas porties" or "the cost equalization parties"; the geographical division between groups is not exactly reflected in the division of legal and philosophical arguments but is for the most part. and the references serve the purpose of brevity in this article due 10 the number of par· ties in the various cases: for example, in the System Agreement case. the parties are: MSS; the four MSU operating companies; Arkansas PSC; jointly. the Cities of Benton. North Little Rock, Osceola. and Prescoll. Arkansas. and Farmers' Electric Cooperative Corporation; jointly, the cities 01 Conway and West Memphis. Arkansas; the Louisiana PSC; the City 01 New Orleans; the
128/Arkansas Lawyernuly 1985
City of Lafayette, Louisiana; the Mississippi PSC; Mississippi Representatives Wayne Dowdy and Webb Franklin; the Missouri PSC; the Missouri Office of Public Counsel; AMAX; International Paper Co.; Occidental Chemical Corp.; Georgia-Pacific Coo; Mississippi Industries; Mississippi Legal Services Coalition; the Municipal Energy Agency of Mississippi; Arkansas Industries <Reynolds Metals Co.. Rice· land Foods. Associated Industries of Arkansas. and Weyerhaeuser Co.); Union Carbide Corp.; Louisiana Representative W. J. Tauzin; the Attorneys General of the states of Arkansas. Mississippi, and Louisiana; Congressional Delegations of the states of Arkansas. Missouri. and Louisiana; and. the Stall of the FERC. " 273 U.S. 83 (1927). 16 See H. Rep. No. 621. 74th Congo 1st Sess. 17 (1935). I~ Hearings on H.R. 5423 before House Comm. on Interstate and foreign Com.. 74th Congo 1st sesS. 1638 (935). " H.R. Rep. No. 1318, 74th Congo 1st Sess. 7 (1935). " 324 U.S. 515 (1954). " 16 U.S.C. 884(bl. " Ohio Power CO. V. fERC. 668 f.2d 880 (6th Cir. 1982). quoting FPC National Go. Pipeline Co. 315 U.S. 575 (1942). 'Xl In Re Pacific Gas and Electric Co.. 45 F.P.C. 1153. aUd sub nom .. Northern California Power Agency v. FPC. Sl4 F.2d 184 (D.C. Cir. 1971). cerl denied. 423 U.S. 863 (1975); See. Richmond Power &: Light Co. v. FERC. 574 F.2d 610 (D.C. Cir. 19781. 21 See. Pennsylvania Weier Power &: CO. V. FPC. 343 U.S. 414. 418 (19521; Flo. Power & Lighl Co. v. FERC. 617 F.2d 809. 816 (D.C. Cir. 1980); Towns of Alexandria. Minne.olo v. FPC. 555 F.2d 1020. 1028 (19771. Z1 FPC. V. Conway Corp.. 426 U.S. 271 (1976). ZJ In the Grand Gulf case, AP&L is a signatory only for the purpose of consenting to the terms of the contract; it has no rights or obligations under the Unit Power Sales Agreement to take power from or pay for Grand Gulf. In the System Agreement case, the allocation 01 power and cost of Grand Gulf is not provided for since it is covered by the UPSA. and the owner of the plant. Middle South Energy. Inc .. is a party to neither the SA itself nor the case. 24 350 U.S. 332 (956); See. Permian Basin Area Rate Cases, 390 U.S. 747 (968). ~ 350 U.S. 348 (1956). 'lIl 16 U.S.C.§824e. which provides: When· ever the Commission shall, after a hearing.... find that any rate ... demanded ... for any ._. sale subject to the jurisdiction of the Commission ... is unjust. unreasonable. unduly discriminatory or preferential. the Commission shall determine the just and reasonable rate and shall fix the same by order ... _" n 473 F.2d 1253 (81h Cir. 19731. :II Southern Co. Services. Inc.. 20 FERC 61(19821. 2! See. e.g.. Nantahala Power 8t Light Co. v. FERC. 727 F.2d 1342 (41h Cir. 19841; Ohio Power Co. v. fERC, 668 f.2d 880 (61h Cir. 1982). ~ 587 F.2d 1296 (D.C. Cir. 1978). " 606 F.2d 1156 (D.C. Cir. 1979); ludge Heed also voiced this opinion in his decision at page 97. :l2 S2 F.P.C. 1343 (974). This case is also heavily relied upon by the Arkansas par· ties. ~ 324 U.S. 515 (19451. J6
In his order enjoining the Arkansas PSC from further review or regulation of the financial agreements entered into by AP&L beginning in 1974. federal District
Judge Henry Woods found that the Avai1~ able Agreement and related financial agreements are so "inextricably bound" to the wholesale sale of power in interstate commerce that they are subject to the exclusive jurisdiction of the FERC. Judgment and Memorandum Opinion in Dockel No. LR-C-84-778. (Sept. 14. 1984) at 7-8. :r. 119 R.I. 559. 381 A.2d 1358. cert. denied. 435 U.S. 972 (1978). :l6 United States Constitution. Art. 1. §8. cl.
3. 71
Public Utilities Comm·n. of California v. United States. 355 U.S. 534 (958).
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S.C. Reporter (Vols. 21-101) Contact Dan Hollingsworth. Central Arkansas Legal Services. 209 W. Capitol. Little Rock. AR 72201 or call 376-3423.
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New 1985-86 Officers Newly elected President Don M. Schnipper, of Hot Springs, (see front cover) assumed his position on Saturday, june 8, at the close of the Arkansas Bar Association's Annual Meeting at the Arlington Hotel. Hot Springs. Richard F. Hatfield, of Searcy, was elected president-elect. and Annabelle Davis Clinton, of Little Rock, was named to a fourth term as secretary-treasurer. Richard L. Ramsay was elected 1985-86 chair of the Young Lawyers' Section and Martin G. Gilbert was elected president of the Arkansas Bar Foundation. Both are from Pine Bluff. A partner in the Wood, Smith & Schnipper law firm, Schnipper is an alumnus of the University of Arkansas at Fayetteville School of
Richard F. Hatfield
Annabelle D. Clinton
Richard L. Ramsay Clinton is a graduate of Smith College in Massachusetts and the UALR School of Law where she
Martin G. Gilbert Ramsay, Cox, Lile, Bridgforth, Gilbert. Harrelson and Starling law firm and an alumnus of the U of A at Fayetteville School of Law. He is a member of The American Trial Lawyers of America and the Board of Directors of United Cerebral Palsy of Central Arkansas. Gilbert, also a partner in the Ramsay Cox Law Firm, was elected Foundation president on Wednesday. june 5. He is an alumnus of the U of A at Fayetteville School of Law, a former president of the jefferson County Bar Associalion and a former chair of the Association's Banking Law Committee, and serves on the AlCLE Board of Directors. 0
Law and is a former national pres-
ident of the U of A Alumni Association. He is a member and former
chair of the State Board of Law Examiners.
former
chair
of
the
Arkansas Institute for Continuing Legal Education and was twice appoin ted in 1976 as special associate justice of the Arkansas Supreme Court. Schnipper is a 1980 recipient of the Association's Golden Gavel Award for exceptional service to the Association. He is a former chair of its Young Lawyers' Section and Executive Council. a former member of the House of Delegates and a former member and chair of the Association's Legal Education Committee. Schnipper is a Little Rock native. Hatfield, a partner in the Hatfield, Hodges, Marshall and Jordan law firm, is chairman of the Arkansas Supreme Court Committee on Legal Specialization. He was appointed a special justice to the Arkansas Supreme Court in 1983 and was named an Outstanding Alumnus of the U of A at Fayetteville School of Law. A Texarkana native, Hatfield received the Association's Golden Gavel Award in 1976.
was
comments
editor
for
the
Arkansas Law Review. She also attended the Institute for Paralegal Training in Philadelphia and the University of Houston, Bates College of Law, where she was a candidate for the Houston Law Review. A former circuit judge for the Fifth Division Circuit Court, Pulaski and Perry Counties, Clinton is with the Wright. Lindsey & jennings law firm and is a Heber Springs native. Ramsay was elected YLS chair on Thursday, june 6, in Hot Springs. He is a partner in the
July 19851Arkansas Lawyerll29
IN MEMORIAM
Storey was a member of the Pulaski County Bar Association, the Arkansas Defense Attorneys' Association, the American Judicature Society and the International Association of Insurance Counsel. For eight years Storey was a member of the Arkansas Chapter of the Multiple Sclerosis Society and was its chairman in 1971-72.
James D. Storey, aged 61. of Little Rock, died Saturday, February 23, 1985. Storey was a member of the Wright, Lindsey and Jennings firm in Little Rock for 32 years. In 1984 he was inducted as a Fellow in the American College of Trial Lawyers. Storey was a former president of the Pulaski County Bar Association (1978-79). Born in Flint. Mich., Storey was an Army veteran of World War II and the Korean War. He served as the Army's youngest officer at age 18. In 1949, Storey graduated from the University of Arkansas School of Law at Fayetteville. He was recently honored by the school as an outstanding alumnus. A member of the Arkansas Bar Association for 28 years, Storey was a former chair of its member-
ship, public information, civil procedures, and professional utilization committees. He had served on the Association's Executive Council and had chaired annual Association meetings.
130IArkansas Lawyer/July 1985
via
correspondence
school. He was one of three among 32 men to poss the bar exam in 1934. Spears, the son of an Imboden, Ark., farmer, quit elementary school in the sixth grade to help support a large family. He entered high school at age 22 after work-
member and former
ing for little more than a year with-
chairman of the Little Rock Traffic Safety Commission and was a member of the Governor's Advisory Board for Trailic Safety from 1970-75. He was also a member of the Pleasant Valley Country Club and the Club's Legal Advisory Board. He was a member of the Heights Optimist Club and served the club three times as president. Storey was an elder in the Westover Hills Presbyterian Church for 25 year~.
out pay at the Imboden railroad depot to become a telegraph operator. He passed the telegrapher's test in 1923 and enrolled in high school while assigned to the night shift at Marion. He later passed the University
He was a
James D. Storey
school but. instead, learned his profession
Survivors are his wife. Norma
Ivy Storey of Little Rock; a son, J. Michael Storey of Little Rock; two daughters, Kathryn Mainard of Carrollton, Tex., and Penny Storey of Minneapolis, Minn.; his mother, Cora Crockett Storey of Paragould; a brother, Robert Storey of Paragould; a sister, Joanne Alexander of Madisonville, Ky.; and three grandchildren.
John Herman Spears John Herman Spears, aged 84, 01 West Memphis, died Monday,
April 8, 1985. Spears was a portner in the law firm of Spears, Sloan and Johnson and was a former West Memphis city attorney. The West Memphis Evening Times described Spears as a "selfmade man." A practicing Crittenden County attorney for 50 years, Spears never "set foot" in a law
of Arkansas' entrance exam but,
due to money problems, returned to his Marion railroad job. He then accepted a telegrapher's job in the Memphis Frisco yards and attended Memphis State University for three years. He took a job in Grandin, Mo., as the Depression hit in the early 1930's and completed a law course by mail while there. It took him IS months. Spears took a railroad job in Turrell in 1934 and practiced law on the side until 1940. From '1940 to 1944 he was deputy prosecuting attorney and in 1945 he moved to West Memphis to fill the city attorney's position. He served as city attorney until 1951. A 3D-year member of the Arkansas Bar Association, Spears
was honored at the 1984 Annual Meeting of the Arkansas Bar Association for his outstanding contribution to the legal profession and the community and lor serving the profession with dignity and honor. He was a trustee of the Crittenden Memorial Hospital. the attorney for the Bank of West Memphis, and a member of the West Memphis Chamber of Commerce. He was a former trustee of the Baptist Memorial Hospital in Memphis and of the Southern Baptist College in Walnut Ridge.
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Survivors are his wife, Willie Sue Robertson "Bill" Spears and three brothers, Ernest Spears of Richland, Wash., and Richard and ada Spears, both of Imboden.
Joseph Leo Tresp Joseph Leo Tresp, aged 62, of North Little Rock, died Wednesday, February 14, 1985. Tresp was retired as a former regional counsel from the Small Business Administration, where he had worked for 30 years. A native of Dallas, Tex., Tresp was a World War II Navy veteran, a past president of the Diocesan School Board and a 4th-degree Knight of Columbus. Tresp was also a member of the National Association of Retired Federal Employees and the German-American Club.
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He was a member of the Arkansas Bar Association and St. Patrick's Catholic Church. Survivors are his wife, Emma Francis Harbrecht Tresp of North Little Rock; a son, Leo Joseph Tresp of Okinawa; eight daughters, Sister Rose Marie Tresp of Springfield, Mo., Nancy Marilyn Tresp of Bangui. Central African Republic, Mary Margaret Marineau of St. Louis, Mo., Virginia Susan McAnally of Copperas Cove, Tex., Teresa Ann Tresp of Sacramento, Cal., Patricia Karen Tresp of Houston, Tex., and Geri Lynn King and Lisa Yvonne Tresp of North Little Rock; a brother, Bruce Tresp of Dallas, Tex.; four sisters, Margaret Burns of Dallas, Elizabeth Davis of Woodinville, Wash., Leontine Benton of Albuquerque, N.M., and Nancy Ladowski of Syracuse, N.Y.; and six grandchildren. D
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July 1985/Arkansas Lowyerll31
Changes in Divorce Taxation The Tax Reform Act of 1984
By William T. Marshall The Tax Reform Act of 1984 (TRA) passed by Congress on June 22, 1984, and signed into law by President Reagan on July 18, 1984 has changed the rules relating to divorce taxation. The TRA is the first major reform in federal divorce tax law in over forty years. This article briefly discusses how the TRA modifies the alimony rules, the dependency exemption rules, the allocation of the medical expense deduction rules, and the property transfer rules, including the repeal of Davis. The author presented a more in-depth outline and presen tation of the new tax law as it relates to Divorce Taxation at the Arkansas Bar Associa-
were for "a legal obligation for support" - alimony; or whether the payments were for "interests in mari tal property" - property settlement). Now, for the second time, Congress has attempted to develop a federal concept of alimony. The 1984 attempt should prove much more successful because the tax consequences will be largely determined by how the parties characterize the payments, rather than how state law would classify the payments. To qualify as alimony or separate maintenance payments, the
tion's annual meeting in June at
payments must satisfy five requirements;' (I) they must be in cash; (2) be received under a di-
Hot Springs. A copy of this outline
vorce or separation instrument; (3)
is available to Association mem-
if the payments are made pursuant to a decree of divorce or sep-
bers upon request. NEW ALIMONY RULES In 1942, Congress attempted to create a uniform federal concept
of alimony. The actual application of the alimony rules, however,
soon
became
dependent
upon state law (i.e. state courts determined whether the payments
Editor's Note: William T. Marshall is a certified public accountant and attorney. He obtained his Bachelor of Science, Master of Business Administration and juris Doctor degrees all with honors from the University of Arkansas. Prior to practicing with the Hatfield, Hodges, Marshall & jordan law firm in Little Rock, he was a tax partner at House, Wallace, Nelson & jewell, P.A. 1321AJ-kansas Lawyer/July 1985
arate maintenance. the spouses cannot be members of the same
household when the payment is made; (4) the divorce or separation instrument must state that the payor has no liability to make payments past the payee's death; and (5) if payments in any calendar year are to exceed $10,000, then payments must be called for at least six consecutive calendar years, beginning with the first year in which a payment which otherwise satisfies the requirements of alimony is paid. in
order for any of the paymen ts to be treated as alimony.2
In addition, alimony or separate maintenance payments made
in any of the first five calendar years of payments may not be more than $10,000 larger than the alimony or separate maintenance
payments made in any succeeding year of the first six years of
payments. To the extent the eaTlier payment does exceed a later year's payment plus $10,000, the difference is recouped as income
to the payor and is allowed as a deduction for the payee on their respective returns for the later year. This recapture front loading rule is cumulative in effect in that any decreased payment in a later year is measured against the amount
paid in each of the preceeding years as reduced by the amount of excess recouped in any intervening year.:!
There are three circumstances in which these recomputation rules do not take effect, even though a prior year's payment exceeds a later year's payment by more than $10,000; (I) if either spouse dies or the payee spouse remarries and the alimony or separate
maintenance
payments
cease for that reason, there is no recomputation for that year or any later year; (2) payments made under a suppart order or similar temporary court decree are not considered alimony or separate maintenance payments for this purpose (i.e.. the recomputation rules do not start until payments are made under a decree of divorce or separation or a written
separation agreement); and (3) payments are not counted to the extent the payor's liability is to pay a fixed portion of the income from a business or property or from compensation.
As under prior law, payments which are fixed as child support are not alimony or separate main-
tenance payments. However, the TRA makes a significant change from the way prior law was interpreted. Under the TRA, to the extent any payments are reduced due to a contingency relating to a child, such as attaining a certain age, marrying, dying or leaving school, the amount of the reduction in the payment would be deemed child suppart. Payments which terminate at a time that can be clearly associated with a childrelated contingency would have the same effect. such as payments which
terminate
in
the
same
month as a child's 18th birthday.' The TRA will continue the existing rule that payments are first allocated to child support. Thus, there can be no alimony until all
child support payments in arrears have been satisfied.' If all of the foregoing requirements
are
met,
then
payments will be treated as alimony or separate maintenance
which are deductible by the payor spouse and includable by the payee spouse as taxable income. Tbe parties can, however, designate that the payments are not to be taxable to the payee and are not deductible by the payor. A court may also make this designation in a decree or order.
The option to make the payments not alimony could be exercised by including in an agreement the words, "Such payments are not includable in gross income under I.R.C. Section 71 and not deductible under I.R.C. Section 215." Without these words, all payments otherwise qualified will be treated as alimony. The TRA alimony rules apply to all divorce or separation instruments executed after 1984. Instruments executed before 1985 and thereafter modified will be subject to the new alimony rules if such modification expressly provides that the instrument is to be subject to the 1984 Act. If a decree of divorce or separate maintenance executed after December 31, 1984, incorporates or adopts without change the terms of the alimony or separate maintenance poyments under a divorce or separation instrument executed before 1985, such decree will be treated as executed before 1985. DEPENDENCY EXEMPTIONS
As in the case of property settlements and alimony, the spouses can determine by agreement who will be allowed the dependency exemption for their children. Under the general rule, the parent with custody of the child for more than one-hall of the calendar year will be allowed the dependency exemption. This is true even though the noncustodial spouse provides most or all of the child's support.' The TRA provides that on a yearby-year basis the custodial parent can surrender the dependency exemption to the other parent by executing a written declaration to that ellect.' The form of the written declaration will be pre-
MEDICAL EXPENSES AND READOF-HOUSEHOLD STATUS
scribed by regulations from the Treasury Department. Rather than handling the matter on a year-by-year basis, however, the temporary regulations indicate that the parties can, and in most cases they probably should, decide the dependency exemption issue for all future years in the divorce or separation agree-
ment. If the exemption is released for more than one year, the original release must be attached to the noncustodial spouse's return and a copy of such release must be attached to his or her return for all succeeding taxable years for which he/she claims the dependency exemption.' These TRA amendments apply to taxable years beginning after December 31. 1984. Since dependency exemptions are determined on a calendar year basis, the new law will apply to support payments beginning January I, 1985, and to tax returns filed for years beginning in 1985. If a decree or agreement was executed prior to
1985 and provides that the noncustodial parent may claim the dependency exemption then such provision will continue to control provided the noncustodial parent provides at least $600 support to the child in such year claimed.
The TRA allows either parent to deduct the medical expenses paid by that parent for the child, regardless of which parent is entitled to the dependency exemption for the child.' The TRA redefines head-ofhousehold status to include any household which otherwise meets the definition for more than onehall instead of an entire taxable year. Therefore, a custodial parent will now be able to qualify as head of household in more situations. For example, the custodial parent can file as head of household in the following situations: (I) when spouses are still married at year-end but lived apart for the last six months of the year and (2) although the noncustodial parent is entitled to claim the dependency agreement under an agreemenL 10
PROPERTY TRANSFERS
Probably the driving force behind the persistent and ultimately successful ellorts by the tax bar to change the property division rules was the almost universal dissatisfaction with the results of applying Davis". In Davis, the transferor was required to recog-
nize as
ain the dillerence be-
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tween the fair market value and the basis of property he transferred to his spouse at divorce in satisfaction of her inchoate marital rights. The transferee, in turn, took the property with a basis stepped up to its value as 01 the date of the transfer. According to the supplemental report of the new act by the Committee on Ways and Means, the government wanted the change for two reasons: First. the current rules governing translers 01 property between spouses or former
spouses incident to divorce have not worked well and have led to much controversy and litigation. Second. in divorce cases, the government often gets whipsawed. 12 The transleror will not report any gain on the transfer. while the re-
cipient spouse, when he or she sells, is entitled under the Davis rule to compute his or her gain or loss by reference to a basis equal to the lair market value of the property at the time received. The TRA added new I.R.C. §1041 which provides that no gain or loss will be recognized on transfers 01 property to a spouse. Trans-
the transler ("carryover basis") and the transferee is treated as having held the property as long as the transferor did ("tracking" 01 holding period)." This non-
od 01 such potential liability . Such records must be preserved and kept accessible by the trans-
recognition applies even if the
The domestic relations provi-
parties are dealing with each other at arms-length in a non-
sions in the Tax Relorm Act of 1984 more clearly described the parameters by which parties can determine, by agreement, the tax con-
divorce or separation situation.
Therelore, the subsequent tax consequences of the transleree should be taken into consideration when negotiating the purchase price. The temporary regulations impose notice and recordkeeping requirements with respect to transactions under I.R.C. §1041. A transferor 01 property under Section 1041 must, at the time 01 the transler, supply the transferee with records sufficient to determine the adjusted basis and holding period of the property as of the date of the transfer. In addition, in the case 01 a transfer 01 property which carries with it a potential liability lor investment tax credit recapture, the transferor must. at the time of the transfer, supply the transferee with records sufficient to determine the amount and peri-
feree. 17
CONCLUSION
sequences
of
transactions
pur-
suant to divorce. Therefore, a tax advisor should be consulted to assist in the settlement process as well as the preparation 01 the settlement documentation. 0 FOOTNOTES I Internal Revenue Code (I.R.C,) §7l(b)(1). , l.R.C. §7I(fXl). 'l.R.C. §7I(fX2). • l.R.C. §7I(cX2). , l.R.C. §7I(cX3). 'l.R.C. §152(eXI). , l.R.C. §IS2(eX2). • Temp. R"\!. §1.l52·4T. , l.R.C. §213<b). w l.R.C. §44A(lXIS). " U.S. v. Davis. 370 U.S. 651 (1962). 12 Supplemental Report of the Committee on Ways and Means, U.S. House of Rep· resentatives on H.R. 4170 at 1491. "l.R.C. §1041. "l.R.C. §104I(c). "Temp. Reg. §l.104-IT(bl. " l.R.C. §104I(b). 17
Temp. Reg. §1.l04-IT(e).
fers to a former spouse are also
nontaxable, if the transfer is incident to a divorce." New I.R.C. §104l(c} provides that the transfer is incident to divorce if such transfer: (l) occurs within one year after the date on which the marriage ceases, or (2) is related to the cessation of the marriage. This provision could cover any transfer required by the divorce instruments' even if made many years alter the divorce. It To prevent divorcing spouses
from
choosing certain
transfers on which they want taxable treatment. the IRS has taken an expansive view of which translers are related to the cessation of the marriage. The Temporary Regulations provided that a transfer of property is treated as related to the cessation 01 the marriage if the transfer is pursuant to a divorce or separation instrument. and the transfer occurs not more
than 6 years alter the date on which the marriage ceases. l~
For measuring the taxable gain or loss of the transleree on the sale of the property alter the transler, the transferee's basis in the property is deemed to be the transleror's basis in the property before 134IArkansas Lawyerlluly 1985
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EXECUTIVE DIRECTOR1S REPORT Long Range Planning Conference to be Held
By William A. Martin New Members We added 67 new lawyer members to the Arkansas Bar Association in April. Last January your House of Delegates amended the Association's By-Laws to provide free memberships to newly admitted lawyers without the necessity of making an application for the balance of the bar year in which admitted (until the following July). We welcome these new mem-
the new lawyers to walk over to the old Supreme Court Room in the Capitol. listen to numerous pitches about almost every bar group imaginable, then rejoin their families and come to the Arkansas Law Center for a recep-
ning seemed to be lagging last
format and hope more practicing attorneys will come to the recep-
year after a series of conferences
tion.
IOLTA The Arkansas IOLTA Foundation, Inc., the non-profit corporation authorized by the Arkansas Supreme Court to handle interest on lawyers' trust accounts, has
encourage these new attorneys in your community to volunteer for committee work - either Young Lawyers' Section committees or
achieving recognition of tax ex-
had its organizational meeting. Associate justice David Newbern was elected the first president of the corporation. The work of empt status and working out banking arrangements is underway.
work. The Association's president and Young Lawyers' chair cannot read your mind and they do not
When these jobs are completed, Norwood Phillips, chair of the IOLTA Education and Recruitment Subcommittee, will start contacting lawyers to put their nominal and short term trust funds which are too small to draw interest for individual clients into IOLTA accounts where they will, as justice P. A. Hollingsworth noted: "... be
want to leave out anyone who
a very significant source of in路
wants to be involved. If you did
come for the benefit of public interest programs related to the legal profession." (Re: Ark. Bar Assn. Pet. for IOLTA Program, 283 Ark. 252, 675 S. W. 2d 355 (984) ).
ahout your interests in committee
not return a preference sheet, you
can still tell us of your interests and there is still room for added members on many committees.
For the Admission Ceremony this spring, we tried something new - a reception in the lobby of the justice Building, handouts of information and absolutely no speeches. We had many of our leaders there with name tags so the new lawyers could easily identify and meet with them and the judges on an informal basis. This change seemed well received and a welcome contrast to trying to get
cause interest in long range plan-
tion. We plan to continue our new
bers and hope they will be active in the work of the Association and will pay dues when the first bill comes. We would like for those of you who have been members to
Association committees. They have a lot to contribute and will grow in the profession if they get involved. - For everyone - please tell us
where we are as an Association
and where 路we should be going in the next few years. We skipped having a conference this year partly because of the emphasis on our legislative work and partly be-
Long Range Planning David M. "Mac" Glover has accepted President Don Schnipper's invitation to chair the Associa-
tion's Long Range Planning Conference next spring. Association
leaders will gather Thursday through Saturday, May 1-3, 1986, at the Sheraton Hotel on Lake Hamilton, Hot Springs, to look at
each year. Preparation is a key to a successful conference and we would like to have volunteers who would like to be involved and we would also like your suggestions about issues which should be considered. Please let Mac, Don or me hear from you. Dues Arkansas ranks 38th in the amount of annual dues out of 55 state bors and bar associations, according to a survey conducted by the Florida Bar Association. In coming up with this figure, the Supreme Court license fee and similar charges were added to the dues of voluntary associations such as ours to enable a compari-
son to states with unified bars. Our $125 total for lawyers in practice more than ten years is far
below the top of $310 for Alaska, $300 for Delaware, $275 for Connecticut and $273 for Hawaii. Ten others have dues of $200 or more. At the low end of the scale are Alabama, Georgia, Louisiana and Oklahoma - all states in which every attorney is compelled to belong to be licensed - with yearly dues of $100. The 55 figure - instead of 50 is accounted for by including the District of Columbia and by Virginia, North Carolina, West Virginia and the District of Columbia having two associations -
a man-
datory one which handles discipline, admission and similar mat路
ters and a voluntary one.
0
July 1985JArkansas Lawyerl135
YOUNG LAWYERS' UPDATE Ramsey Elected YLS Chair By Martha M. Miller, Chair On Monday April 8, 1985, 67 new lawyers were admitted to the Bar of Arkansas. In their honor the Young Lawyers' Section, in cooperation with Arkansas Supreme Court Clerk Dona Williams, entertained these new lawyers and their families at a reception in the foyer of the Justice Building immediately following their induction. Several special guests also attended: Arkansas Supreme Court Chief Justice Jack Holt, and Associate Justices George Rose Smith, Darrell Hickman, Robert Dudley, John Purtle, David Newbern, and Steele Hays; Arkansas Court of Appeals Judges Donald Corbin and Melvin Mayfield; Attorney General Steve Clark; Fayetteville Law SchQol Assistant Dean Jim Miller; Arkansas Bar Association President William R. Wilson, Jr.; ABA President Elect Don Schnipper; and ABAlYLS Chair Elect Richard L. Ramsay. Congressman Beryl Anthony also was present to watch his spouse Sheila Foster Anthony receive her license. At the suggestion of Chairman Edward Boyce of Newport, the program format was changed deleting all speeches from the YLS portion of the ceremony and making the event much more enjoyable. Criminal Defense Handbook The final draft of the Criminal Defense Handbook will be going to the printer sometime during
June, and will be available at the ABA Fall Legal Institute September 19 and 20, 1985. The Fall Legal program will be devoted to previewing portions of the Handbook and is shaping up to be one of the finest seminars YLS has been associated with. Racehorse Hayes has agreed to be the keynote speaker for this event, and Co-Chairman Sam Perroni deserves yet another pat on the back t36/Arkansos Lawyernuly 1985
for his continuing fine efforts in both editing the Handbook and serving as Program chairman of
the Fall Legal Institute. Mark your calendars now; you won't want to miss this one. Chair-Elect Richard L. Ramsay attended the American Bar Association
Young
Lawyers
Division
Affiliate Outreach Project Bar Leadership Institute in St, Petersburg, Florida this post May. Rick acceded to the office of chair of Young Lawyers' Section during the Annual Meeting in Hot Springs in June. Other YLS officers and members of the Executive Council were elected on June 6 during the Annual Meeting in Hot Springs. Thomas Ray of Little Rock was the only candidate who filed a nominating petition for the office of chair elect, Since this is my last edition of the YLS Update, I want to thank everyone who helped make this year a successful one for the Young Lawyers' Section. Although I can't possibly name each of these individuals due to space
limitations, I do want to recognize the officers and Executive CounciL and each of the committee chairs for their time and efforts. Several "old" lawyers have also contributed to our efforts and deserve special mention: ABA President Bill Wilson; John Stroud, chairman of the Bar Foundation Special Projects Committee; and other members of the Bar Foundation who made many of our programs possible due to their generous funding. And, finally, two non-lawyers must be mentioned. Ruth Williams of the ABA staff has devoted a great deal of time and attention to two new major YLS projects, the Mock Trial competition and the AETN video series "Ways of the Law." The other non-lawyer is ABA Assistant Executive Director Judith Gray. Those of you who have ever worked with Judith know that her contributions are truly invaluable. She has been involved in every facet of the YLS program and we owe her a very
special "Thanks!".
o
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ARKANSASBARFOUNDATION By Robert L. Jones, III The Foundation banquet held in conjunction with the Mid-Winter Bar Association meeting in January 1985 in Little Rock was again a success. Scholarship and re-
came Fellows. The Foundation now has 355 living Fellows. In the July 1983 issue of the Arkansas Lawyer, then Chairman, Randy Ishmael, printed the Foundation's linancial status. I believe it is good practice to periodically furnish the Association membership with this information. Printed below you will lind the balance sheet of the Arkansas Bar Foundation as of March 31, 1985.
search grant recipients were hon-
ored. The dinner was open to Foundation members and their guests. Chief Justice Jack Holt spoke on the need for higher and better quality of justice. Over 175 persons attended. Membership in the Foundation has continued to grow. During the last nine months 24 attorneys be-
o
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5666,273.71
$
684.99
51,151,927.78
$1,285,126.79
5666,273.71
581.902.72
52,033,303.22
S
684.99
54,369.22 883,869.63
Current Year Excess Revenues over Expenses
Restricted Surplus TOTAL MEM8ERS' EQUITY TOTAL LIABILITIES 8< MEMBERS' EQUITY
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IN-HOUSE NEWS Law Schools. AICLE and House of Delegates
UNIVERSITY OF
ARKANSAS SCHOOL OF
LAW AT FAYETIEVILLE By J. W. Looney Alumni Day Activities Alumni Day, 1985, was highlighted by a luncheon which featured a tribute to the trial judges of Arkansas including the Federal District Court judges and Circuit and Chancery judges. William Wilson, Jr. and Winslow Drummond honored the judges. A second feature of the program was a tribute to Dr. Robert A. Leflar upon the forthcoming release of his latest book "One Life and the Law: A Sixty-Year Review." Judge J. Smith Henley reviewed
the
career
and contributions of Dr. Leflar. Jack Gordon, a 1969 graduate of the law school presented a bronze bust of Dr. Leflar to the law school and Dr. Leflar then spoke in
celebration
of
the
60th Anniversary of the School of Law. Also a featured part of the program was the announcement by the Womens Law Caucus of the first Gayle Pettus Pontz award to be given annually to an out1381Arkonsas Lawyer/July 1985
standing female lawyer. The award was presented to Mrs. Pontz, as the first female graduate of the law school and in recognition of her distinguished career. The Student Bar Association announced the selection of Professor Richard Atkinson for the "Professor of the Year" award. Professor Atkinson teaches property, decedents estates and real estate transactions.
Faculty Activities Charles Carnes has an article in the most recent issue of the Journal of Agricultural Taxation and Law, entitled "Worker CompensationTexas Extends Coverage to Agricultural Workers." Linda Malone has a featured article in Agricultural Law Update. the newsletter of the American Agricultural Law
Association
en-
titled "The Future of Transferable Development Rights in the Supreme Court." Jake Looney's article "Modification of Arkansas Water Law: Issues and Alternatives" appeared in the Arkansas Law Review. John Watkins article "Open Meetings Under the Arkansas Freedom of Information Act" also appeared in the Arkansas Law Review.
Rodney Smolla has an article in Constitutional Commentary entitled "The Supreme Court
and the Temple of Doom: A Short Story." Chris Kelley has an article in the Arkansas Law Review, entitled "The Southern Pulpcutter and the Short Stick: The Mississippi Uniform Pulpwood Scaling and Practices Act." Dr. Robert Leflar spoke at an Arkansas Union Program Symposium on "Our Judge Made Law." Wylie Davis delivered an Oxford Lecture, of "The Emergence 'Good Faith' and 'Bad Faith' as Major Legal Norms."
Linda Malone moderated a panel on "International Perspectives on Food, Development and Peace" at the Third Annual Fulbright Institute Sym-
Soviet lawyers, judges and government officials to study Soviet law. Arkansas lawyers in the study group included Truman Yancy of Fayetteville; Bill and Marion Penix of Jonesboro; Greg Smith of Fort Smith; John Harris Jones of Pine Bluff and Maurice Cathey of Paragould. Moot Court Team Winners Selected Chief Justice Jack Holt, Jr., and Associate Justices Steele Hays and David Newbern served as judges of the final rounds of competition for selection of the University of Arkansas Moot Court Team. The national team members
selected were Mike Rosenthal. Leanne Johnson, Stephen Garner
posium.
and the alternate. Ken
Dean Jake Looney conducted a workshop at Lake Louise, Alberta, Canada on "Estate Planning for Alberta Farmers and Ranchers:" spoke in Orlando, Florida on "The Effect of Member Bankruptcy on Cooperatives" to the Florida Council of Cooperatives and on the same topic at the UniFlorida versity of School of Law. Dean Looney also
Treece. Best brief score award was to Mike Rosenthal and Outstanding Team Award was given to the team of Mike Rosenthal and Lewis Steenken.
served as educational
leader for a legal study tour of the U.S.S.H. A group of lawyers and their spouses, from Arkansas, Oklahoma,
UNIVERSITY OF
ARKANSAS AT LITTLE ROCK SCHOOL OF
LAW By John M. Sheffey
Louisiana and Kansas
toured four cities in the U.S.S.H. and met with
ALTHEIMER LECTURE Professor Victor J.
Stone of the University of Illinois College of delivered the Law Spring Altheimer Lecture on Friday. March 8. The title of his address was "Approaching Two Hundred: Is The Judicial Check In Balonce?".
Professor
Stone. who is a Constitutional Law and Civil Procedure Scholar. argued forcefully and persuasively that strict construction of the Constitution by the United Stales Supreme Court would be inappropriate. His thesis was that the Constitution can remain a living document which adapts to modern issues only if
the Supreme Court is allowed some flexibility in its interpretations.
While on the Law School campus. Protessor Stone also spoke to the law studen ts about his recent experience in arguing a case before the Supreme Court of the United States. In addi tion to his legal scholarship interests. Professor Stone has been very active in
the Association of American University Professors, serving tha1 orga-
nization in numerous capacities on the uni-
versity. state and national levels. He served as presiden t of the national organiza-
tion from 1982-1984. ALUMNI ASSOCIATION MEETING The UALR Law School Association
continued
to hold its monthly luncheon meetings in Little Rock. In February Carolyn Long. anchor person for KARK TV News Center 4. spoke on her involvement in the libel suit of KARK vs. Simon. She also shared her re-
actions to and thoughts about libel suits against broadcast journalists. The April meeting heard Sheffield Nelson. an alumnus of the Law and former School chairman and chief executive officer of ARKLA. discuss deregulation. Nelson is opposed to deregulation in general. fearing that it will result in both a reduction in services and an increase in prices.
FACULTY NEWS Professor Glenn E. Pasvogel. Jr. led a panel discussion of "Bankruptcy and Banks - Current Trends." at the Banking Law Seminar sponsored by the Arkansas Institute for Continuing Legal Education and the Arkansas
Bar
Association.
Professor Pasvogel presented a series of questions focusing on eUTrent issues in Bank-
ruptcy Law that affect banks. and then moderated the discussion among several experts
in the area. Professor Fred Peel participated in a panel discussion on Economic Development in Arkansas. The panel. which was sponsored by Phi Kappa Phi, included representatives of other
departments at UALH, as well as Tom MacRae of the Winthrop Rockefeller Foundation. The UALR International Trade Center presented an exporting seminar on February
Professor Philip D. Oliver has been appointed Visiting Professor at the University of Florida College of Law for the Fall. 1985 semester. He will teach in both the J.D. and LL.M. Tax Programs. Donaghey Distinguished Professor of Law Robert R. Wright chaired a joint ABAAALS Inspection of the University of Alabama Law School in March. Professor Richard A. Burke. a native of Arkansas who recently joined the faculty from the University of South Dakota School of Law. which he served as both dean and professor. spoke to the Helena Rotary Club on "Increasing Litigation and the Supreme Court of the United States." He also addressed the Jonesboro Rotary Club where his topic
was,
"Business and Professional Ethics." Professor Burke. an outspoken advocate of greater attention to legal ethics. also spoke on professional ethics issues on
KARN radio. An article entitled. "The Unconstitutionality of State Insurance Takeover Statutes: An Unfortunate But Not Necessarily Final Resuit." by Associate Dean and Professor of Law John M. Sheffey. was published in Volume 69 of the Minnesota Law Review.
under American and foreign law and the Vienna Treaty of 1980. and con-
Professor James R. Cromwell will edit the 1985 update to the Arkansas Legal Services Support Center Poverty Law Practice Manual. He will also author the 1985 update for the Unemployment Compensation Chapter. Professor Cromwell
flicting tracts.
continues to be active on a subcommittee of
22. Professor Arthur G. Murphey was one of the speakers. and he addressed the subjects of agency. oral contracts
for the sale of goods. formation
of
contracts
terms in con-
the Arkansas Bar Association Civil Procedures Committee concerned with the proposed aboli tion of local court rules.
Librarians Ruth Brunson. Dana Davis, Pau-
line Ghidotti and Mike Hankins attended the Southwestern Chapter of Law Libraries annual meeting in Fayetteville on March 28-30. Professor Susan Webber Wright spoke at the Twenty Fourth Annual Arkansas Natural Resources Law Institute. Her topic was "Fiduciary Duties Arising From Ownership of Oil and Gas Interests." ATLA PROGRAM AT UALR
UALR School of Law was host to a National College of Advocacy Basic Course in Trial
Advocacy on March 2429. The course was sponsored by the Association of Trial Lawyers of America. Over 100 practicing trial lawyers
participated. This was the largest number of students ever to attend a National College course. The large enrollment was due in no
small part to the organizational efforts of Walter Niblock of Fayetteville. The faculty was composed of outstanding trial lawyers from all parts of the nation, as well as several
of Arkansas most respected trial lawyers. UALR law professors Paula Casey and Dent Gitchel also served on the faculty. The course consisted of six days of intensive lectures. demonstrations. workshops and one-an-one video
critiques of student performance.
There
was
general agreement that the program was a resounding success.
luly 1985 Arkansas Lawyer/139
programs will continue
~.I.C=;.~.~. N~WS By Claibourne W. Patty, Jr. 1985 Banking Law Seminar
This year's biennial Banking Law Seminar, co-sponsored with the Association's Banking Law Committee was held March 22-23 at the Sheraton Inn, Hot Springs. The program, chaired by Mark Lester, tackled usury, one of the oldest problems for Arkansas lawyers, and the Organized Crime Controf Act (RICO), and bankruptcy, one of the fastest growing problems. A panel composed of Martin Gilbert. Baker Currus, Chris Barrier and Steve Watson discussed usury problems; Professor Glenn Pasvogel. Jill Jackoway, bankruptcy judges Robert Fussell and James Mixon, David Po;"'ell and W. E. Ayers discussed bankruptcy problems, and Jerry Jones and John Lisle discussed RfCO issues. The program was attended by 73 persons, two thirds of whom were lawyers, with the remaining
one
more Arkansas lawyers realize this unique opportunity to attend lirst class CLE programming with a minimum
licers of local labor unions and state and federal employees. A number of people attended from Southern Missouri. Western Tennessee, Mississippi.
expense
Louisiana,
to increase as more and
third
bankers. TV Satellite Programs Two t.v. satellite pro-
in
time and
travel. Other t.v. satellite programs were on buying and using computers in law offices, May 8; evaluating a personal injury case - the brain damaged child, May 14; UCC strategies under Articles Two and Nine, May 15; and Cable Communications Policy Act of 1984, June II. Labor Law Institute The Labor Law Institute, jointly sponsored with the Association's Labor Law Section, Region 26 of the National Labor Relations Board, UALR Labor Education Program and the American Arbitration Association, was held April 1920 at DeGray Lodge, Arkadelphia. The ISO registrants represented attorneys specializing in
various
areas
of
labor law and employment discrimination, personnel
managers,
business agents and of-
Texas
and
Oklahoma. Topics included refusal of unsafe work; sex
discrimination;
duty of fair representation; arbitration; wage determination and comporable worth; plant closures and the duty to bargain; public sector bargaining; "hot issues under the National Labor Relations Act; employment at will; current trends in
collective bargaining and the Fair Labor Standard Act. Judge Richard Arnold made a presentation on
the update of relevant labor in em ploymen t relations decisions in the Eighth Circuit. Tax Awareness Institute The 7th annual Tax Awareness
Institute.
jointly sponsored by the Association's
Taxation
Section was held at the UALR Conference Center in Little Rock on April 26. This year's program, chaired by John
C. Lessel. of Little Rock, focused on the following topics: real estate transactions; divorce; time value of money
concepts; tax shelters; income shifting/splitting, and compliance and record keeping. Ray Keenan, director of the Internal Revenue Service Center for the Southeast Region in Memphis, spoke on the transition of IRS jurisdiction over Arkansas
from Southwest to Southeast regions. This program was enthusias-
tically received by 100 registrants.
Irving Younger Returns AICLE and the Arkansas Trial Lawyers Association are jointly sponsoring a one day seminar featuring Pro-
fessor Irving Younger on Friday, September 6 at the UALR Conference Center. Professor Younger's topics will include hearsay in the morning and credibility and crossexamination afternoon.
anti-trust
laws,
were
presented simultaneously at Little Rock and Fayetteville on February 26, March 26 and March 20. Approximately 40 people total have attended these programs. It is antici-
pated that attendance at these t.v. satellite 140/Arkansas Lawyer/July 1985
the
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