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April 1989 Vol. 23, No.2 OFFICERS Philip E. Dixon, President David M. "Mac" Glover. President-Elect Sandra Wilson Cherry. Sec.-Treasurer

REGULAR FEATURES

SPECIAL FEATURES

jack A. McNulty, Council Chair

46 48 49

William A. Martin. Executive Director Judith Gray. Assistant Executive Director

EXECUTIVE COUNCIL Madison P. Aydelott III H. Murray Claycomb Robert L. jones III James H. McKenzie Paul D. McNeill Martha M. Miller R. Gary Nutter Robert G. Serio james M. Simpson Jr.

Applicability of Article 2 of the U.C.C. to Oil and Gas Contracts, by J. Thomas Hardin

Carolyn B. Witherspoon

EX-OFFICIO Philip E. Dixon David M. "Mac" Glover john F. Stroud Jr. Sandra Wilson Cherry jack A. McNulty Edward Boyce

EDITOR Ruth M. Williams. Director of Communications

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

Rock, Arkansas 72201. Second class postage paid at Little Rock, Arkansas. In all counts, POSTMASTER: send address changes to The Arkansas Lawyer. 400 West Markham, Little Rock, Arkansas 72201. Subscription price to non-members of the Arkansas Bar Association $15.00 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 72201. All inquiries regarding advertising should be sent to The Arkansas Lawyer at the above address.

Campaign Finance in Judicial Elections, by James D. Gingerich

Law, Literature & Laughter Point of View/Letters

52

Congressional Update -New Fair Housing Law -by Bill Massey

57 61

Arkansas IOLTA Program

Mark Cambiano Ronald D. Harrison

The President's Report

66 74

Disciplinary Actions

76 78

In Memoriam

82 83 85

The Developing Law Executive Director's Page Young Lawyers' Update In-House News

ON THE COVER: The role of money in election campaigns has been at the center of the political and social science research agenda for more

than 30 years. In "Campaign Finance in judicial Elections," James D. Gingerich of Little Rock defines the state of money in judicial elections in Arkansas. Reports that judicial campaign costs have skyrocketed and that lawyers contribute most of the funding for judicial campaigns is not borne out by the evidence. Gingerich concludes. Aprill989/Arkansas Lawyer/45


THE PRESIDENT'S REPORT

AMost Important Event By Philip E. Dixon This will be my last opportunity -- by means of this publication -- to visit with you before the Association's Annual Meeting on june 15, 16 and 17 in Hot Springs. I truly believe that the Annual Meeting represents the culmination of the Bar's activities for a full year. And, perhaps more importantly, it alfords our membership the forum to enjoy and participate in the camaraderie, learning experiences, social events and communication which are such important aspects of our profession. Our most recent survey shows that the vast majority of our lawyers voice a need for, and an interest in, "trial practice techniques." In response to these indications, this year's Annual Meeting will include a one-and-one-half day "mock trial" entitled "Trial by jury." Participants will include many of the outstanding trial lawyers in Arkansas, selected from the fellows of the American College of Trial Advocates. Fellowship in the American College is limited to no more than one percent of the licensed attorneys in Arkansas who have practiced law at least 15 years and devote the major portion of their practice to trial work. ABOTA members are required to complete, at a minimum, 20 civil jury trials to conclusion as lead attorney in federal or state court. Participants in the "mock trial" are: Dennis L Shackleford Vincent W. Foster 11. Douglas O. Smith 11. David H, Blair Nicholas H, Patton lames M, Moody Bobby McDaniel 461Arkansas Lawyer/Aprill989

gonzo to be presented on June 16. To those of you who have musical and singing talents that you would share, contact Professor Dent Gitchel at the UALH Law School. Invite the judges and attorneys in your area to be present to cheer you on as you participate in the "Grand Ole Uproar." AssociationIFoundation Awards

Elton A. Reives III Donald I, Adams William R. Wilson 11. Otis H. Turner Floyd M, Thomas 11. Eddie N, Christian Winslow Drummond w.w. Bassett Ir. William H, Sutton Richard Earl Griffin Stephen A. Matthews The case will be heard and decided by a jury composed of Garland County jurors; hopefully, a video camera in the jury room will allow you to monitor their deliberations. I submit to you that you could not attend a program or seminar in the United States and see and hear as outstanding a group of trial attorneys as you will see and hear in Hot Springs in june. Grand Ole Uproar By now, each of you has received notice of the Friday night extrava-

One of the highlights of the Annual Meeting is the presentation of awards to the outstanding local bar associations. I call your attention to a letter recently sent by me to all local bar association presidents: "During the first half of my year as president of the Arkansas Bar Association, I have enjoyed meeting with several local bar associations at monthly meetings and visiting with others of you during the Bar Leaders Conference last fall. I continue to be impressed with your community ellorts to help the public's perception of the law. "I want to personally call your attention to the Arkansas Bar Association and the Arkansas Bar Foundation Awards Program and to encourage you to enter your local bar association for consideration as an Outstanding Local Bar Association. Up to three Outstanding Local Bar Association awards may be given annually and normally such awards are spread among local bars of varying sizes. I also encourage you to nominate local lawyers who deserve recognition. You may submit as many nominations as you wish. "I sincerely urge you to consider nominating your local bar association for an award and to make sure deserving attorneys in your crec are nominated."

Please make plans to attend the Annual Meeting and participate in this most important event. 0


April 19891Arkansas Lawyer/47


LAW. IJTERATURE &LAUGHTER

(cited hereinafter as "LLL") In January, LLL devoted itself to unnerving transcription errors from dictation, longhand and sworn testimony. Being somewhat old lashioned, in that column I relerred to these little (and sometimes not so little) bugbears as "typos." I stand corrected. I am told that, to keep up with the times, they now are called "word processos." As though I had opened a floodgate, new examples have been pouring in. Requests lor anonymity are being honored. Someone "conlesses" the lollowing was done so hurriedly, in a last minute addendum to closing documents, that the lawyers did not catch the mistake until months 101lowing the closing: "The parties acknowledge that the buyer's right to reject a portion 01 the assets was exercised; accordingly, the purchase price was reduced and the closing documents were amended to reflect the exercise 01 this writer projection."

One lawyer says he will never lorget receiving a copy 01 opposing counsel's letter to a judge and reading these words: "I would like to take this opportunity to capsize my client's case." Recalling the results, the contributor wishes his opponen t's case had capsized belore it went to the jury. Here is one, from dictated min-

utes 01 a committee meeting, that the writer was lortunate enough to catch belore it went out 01 the office: "The chairman reported that the 'new books' list lor the library was being held in obeyance." Speaking 01 meetings, obviously I mumbled a bit in dictating my recollection 01 a gathering geared toward settling a case, resulting in this transcription: "My notes 01 our summit conference indicate..... Occasionally, the processo may

By Vic Fleming reek 01 a Freudian aroma. For instance, in a letter to a colleague who had taken the writer to his hometown lunch meeting at which local lawyers discussed the cases in the Advance Sheets, this transcription occurred: "I appreciate your taking me to the most educational session 01 the Advanced Speech Committee." These gremlins do not lurk exclusively in word processors. Often they invade the conversations 01 ordinary people and the

FACED WITH A DRINKING PROBLEM? Perhaps Alcoholics Anonymous Can Help

Write to P. O. Box 5415, Fort Smith, AR 72913 or Call (SOl) 783-0123 48/Arkonsas Lawyer/April1989

telephonic airwaves. During the December lundraiser lor educational television, a caller inquired 01 a volunteer, "What happened to 'Dr. Who?'" The volunteer, alas, did not know that "Dr. Who" is a science liction show that has been something 01 a PBS phenomenon in recent years. The volunteer replied courteously: "I don't know, but if you'll hold the line, I'll try to lind out." She then asked the volunteer on her right. who responded, "I think it was cancelled." Perhaps he mumbled, or, given the competing noises during the pledge break, she just did not quite understand him. Or perhaps it was the gremlins to which I've been relerring. In any event. the lirst volunteer went back on the line and said, ''I'm so sorry to tell you this, but he died 01 cancer." I'm not sure what you would call that one. Perhaps a "pledge break whispero?" And I'm positive I don't know what to call this one (which, by the way, is lilted from J. Buchmeyer, "Et Cetera," Texas Bar Journal aan. 1989), at 105). In a deposition taken in Cuyahoga County, Ohio, a plaintiU was telling 01 the incident in which he was severely shocked in an industrial accident. Alter vividly telling 01 the electrical jolt, he continued: "They drug me out 01 the bucket. And by that time, I guess several people came out, and somebody called the paramedics. And once Mr. Sistrunk got me out 01 the bucket, he gave me artificial insemination, you know, mouth to mouth..... I'm not sure even a good woodshedding could have prevented that one. And, last but not least, I was sorely tempted to let this one go out, seeing as how it was a confirmation letter to a civic club regarding a speech I was to give on humor and law. The meeting was at a motel. the name of which you should be able to guess. The processo read: "I look forward to meeting you at the Admirable Bimbow."

0

(COPYRIGHT 1989, VIC FLEMING.l

,


POINT OF VIEWILETTERS

Litigators as Peace-Makers A RETURN TO LINCOLN'S APPROACH TO JUSTICE

"D iscourage litigation. Persuade your neighbors to compromise whenever you cao.

Point out to them how the nominal winner is often the real loser in fees, expenses, and waste of time, As a peace-maker, the lawyer has a superior opportunity of being a good man, There will still be business enough," -- Abraham Lincoln, Law Lecture, July I, 1850 Why do we, as lawyers, get labeled with every sort of distasteful and villainous character trait one can imagine? Why has our public image seemed to tarnish so deeply in recent years, making us the targets of derogatory jokes? (For example, "What's the difference between a dead snake lying in the road and a dead lawyer lying in the road? There are skid marks in front of the snake''') Our purpose is a very noble one -- to assist our clients in avoiding conflict and obtaining justice, Yet, win, loose or draw, ooe thing seems for sure: participants in the civil justice system often see lawyers as fee-greedy, dilatory and self-motivated. We are unfairly charged by Some as being "the problem" Editor's Note: George E. Bentley of Denver is a former chair of the Alternate Dispute Resolution Committee. He is a former member of the Davidson Horne and Hollingsworth law firm of Little Rock.

rather than part of the solution. While it would be myopic not to acknowledge that our attitudes and conduct as lawyers can be a part of the problem, times are changing, and we are too. Our profession has started to take corrective action, and I believe we will soon bask in the glow of a regenerated respect our profession has not seen since the times of Abraham Lincoln. The Problem Our profession has historically changed to meet the demands of our constituency, which has meant becoming very aggressive and litigious in recent decades. The result -- civil trials under today's procedural and evidentiary rules require

our courts, and lawyers, to constantly manage a barrage of complex, multi-level disputes. Often there are literally disputes within disputes. The truth of the matter is, when all factors are considered, litigation seldom produces a satisfactory result: it aggravates the differences between the parties and typically leaves at least one of them the loser. Whether it's a divorce, a business dispute or a tort matter, our civil trial system has its limitations and has become congested with disputes that don't necessarily belong in the public courts.

The fact that 95 percent of all lawsuits settle before trial is a

By George E. Bentley

compelling indication that more than nine out of every 10 disputes don't require "adjudication" in public courts. The result of filing these lawsuits. however. is that significant civil litigation can take years to get to trial, and U.S. corporations alone dole out in excess of $20 billion each year to their litigation attorneys. (McLaughlin, "Resolving Disputes in the Financial Community: Alternatives to Litigation:' 41 Arb.]. 19 (1986)). One can see why critics have plenty of ammunition to charge that the only real winners in these cases are the lawyers. The current problem facing the legal profession is a natural one -our constituency is once again changing. Only now they are demanding that we rescue them from the complexity, expense and delay of their more litigious past. We, in turn, are in the prepubescent phase of changing the way we handle their disputes. It is a difficult and uncomfortable metamorphosis for many of us to go through and some lawyers may not. as yet, realize that it is happening. But. we have already started a return to simpler, more creative dispute resolution techniques. Lincoln's Philosophy I am reminded of a story about Abraham Lincoln, who always discouraged unnecessary litigation and was never greedy for fees. A man came to him in a passion. asking him to bring suit for $2.50 April 19891Arkansas Lawyer/49


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against an impoverished debtor. Lincoln tried to dissuade him, but the man was determined upon revenge. When he saw the creditor was not to be put off, Lincoln asked for and got $10 as his legal fee. He gave half of this to the defendant. who willingly confessed to the debt and paid up the $2.50, thus settling the matter to the entire satisfaction of the irate plaintiff. Lincoln practiced law in a time that permitted lawyers the privilege of trying cases without much hyperbole, to be "trial lawyers" in the truest sense. Society has certainly changed since those simpler times. to say the least. While the current codes of professional conduct might foreclose quite as much creativity as Lincoln was permitted. we are now realizing that his philosophy of keeping all disputes but those absolutely necessary out of court is exactly the way we avoid overburdening our public courts and curtail the seemingly relentless attacks by the numerous critics we now face. Just as in Lincoln's time. a good litigator in our current legal climate is as much negotiator as trial lawyer .. one who will resort to trial only when all else fails. The reason for a 95 percent settlement rate is that we tend to file suit, then negotiate. But. what process is there for "prefiling" dispute resolution? We are now starting to explore what resolution processes are available and best suited for the disputes we must handle in today's changing society. There is no way to cover in this article all the alternative dispute resolution techniques now in use. However, there is one alternative that has a potential for use in almost all disputes and provides an effective "pre-filing" process. Mediated Negotiations Mediated negotiation is an alternative that is often overlooked. Mediation has been commonly employed for many years to resolve labor disputes and disputes under international law. In California. for example, mediation has been mandatory in child cus-

tody disputes since 1981. However, in recent years. mediation has begun to be recognized as an excellent tool for resolving ordinary civil disputes. Mediation facilitates negotiations. It is an invaluable tool for: "exploring the possible acceptance of a proposal without requiring either party to commit to it;

.opening communication between parties who are unwilling to meet face to face; .creating numerous options for resolving the dispute; and "providing both parties an opportunity to assess whether litigation will satisfy its interests, before committing to the process. In mediation. unlike public trials. arbitration or other adjudicatory systems, the disputants retain complete control of the process. The parties and their counsel develop the procedures for the mediation and control the result. The only binding resolution to mediated negotiations is an agreement to which all parties voluntarily submit. The proceedings are very informal. with no submission of evidence or production of documents and witnesses; although the parties may exchange information and make wi loesses available informally, if they choose. The mediator does not make findings of fact or conclusions of law. He or she functions more as a facilitator or umpire and meets with the parties in either joint or individual sessions (called caucuses). The success of the mediation process is directly related to the parties' prior agreement that all disclosures to the mediator are confidential and privileged. We are fortunate in Arkansas to have legislative endorsement for confidentiality in mediation processes. The Arkansas Mediation and Conciliation Service Nondisclosure Act. Ark. Code Ann. ยง11-2-201. et seq., establishes the state policy to encourage mediation and provides that effective mediation requires a reputation for impartiality and integrity. Information provided in


a mediation process will not be di vulged by the mediator and he or she cannot be compelled to testify or produce documents in a judicial proceeding. This legislation was passed within the ambit of our labor laws, but the same public policy would arguably apply to all disputes. As a result, the parties can advise the mediator, privately, of facts they would not want disclosed to one another. or a judge. but which may facilitate settlement. There is no giving away of positions, arguments or evidence. unless the party chooses to do so. Conclusion We are addressing the necessary changes in our system of civil justice and it is unfair of our eritics to blame lawyers. exclusively, for all the ills we now face. Certainly. litigation remains available as an invaluable alternative method of dispute resolution from which to choose. However, when considering the vast range of disputes that OUf profession must resolve. mediated negotiation. at least as a first step. is far more effective than litigation or even arbitration. We must work hard. bear up under the assaults and. most importantly. use the creative tools of mediation and other alternative dispute resolution processes to preserve our professional mission -- insuring that regardless of social change. access to justice remains available to all. We are doing just that! 0

G.A. Tomlinson P.E. 8425 So. 73rd East Ave. Tulsa. OK 74133 (918) 252-1905 Born 2-12-24. Amarillo. Texas; U.S. Navy. 1943-1946: Okl..homa Siale Univcrsity. 1946-1949. B.S. Mceh. Engil1l,."'Cring: Unit Rig & Equipment Co.. Tulsa. 1949-1982: Responsible for all cngineering fUllClions 1957-1975: Formed Company for Unit Rig in Bmlil 1976: General Manager. Canadian Operalions. 1977; In charge Unit Rig Product Litil:alion 1977-1982.

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TOUGH NEW FAIR HOUSING LAW BECOMES EFFECTIVE egislation to put teeth in feder-

mechanism and generally tough-

al housing discrimination laws

ens penal ties for engaging in discriminatory practices.

L

became effective March 12, 1989, exactly 180 days alter its enactment. The new law protects handicapped persons and breaks completely new ground by protecting families with children from discrimination, a provision unique in

federal law. The Fair Housing Amendments Act (Pub. L. No. 100-430) was passed by overwhelming votes in both houses alter successful but lengthy negotiations among realtors' groups, a coalition of civil rights activists, key members of Congress and the Reagan Administration ended an eight-year impasse. The bill also got a boost from an endorsement by then-Vice President George Bush, who saw it as an opportunity to beef up his civil rights credentials three months before the presidential election. In a nutshell, the new law gives the Department of Housing and Urban Development (HUD) new power to stop discrimination in the rental or sale of housing, for the first time protects the handicapped and families with children, creates a new administrative enforcement

Editor's Note: Bill Massey. a native of Malvern, is chief counsel to Senator Dale Bumpers. He received a J.D. from the University of Arkansas School of Law at Fayetteville in 1973, and a Master of Laws from Georgetown University Law Center in 1985. 521Arkansas Lawyer/April1989

BACKGROUND Title VIII of the Civil Rights Act of 1968,' popularly known as the Fair Housing Act, was enacted following the assassination of the Rev. Dr. Martin Luther King Jr. It forbade discrimination in the rental. sale or financing of housing because of race, color, religion, sex or national origin. Although the act was broad in scope, HUD enforcement authority did not extend to prosecuting complaints of discrimination. Although complaining individuals could file suit in federal court. the statute oflimitations was an incredibly short 180 days, punitive damages were lim-

ited to $1.000 and lawyers' fees could be recovered only if the plaintiff could not afford to pay. HUD's authority extended only to securing voluntary compliance through persuasion and conciliation. The Department of Justice could bring a suit only to stop an alleged "pattern or practice" of housing discrimination. In short. the national policy against dis-

June 1988 House Judiciary Committee Report accompanying the reform legislation described the pervasiveness of the problem as follows: "The Department of Housing and Urban Development estimates that 2 million instances of housing discrimination occur each year. In the most recent national study of housing discrimination, HUD concluded that a black person who visits 4 agents can expect to encounter at leas t one instance of discrimination 72 percent of the time for rentals and 48 percent of the time for sales.'" In the light of such stunning statistical evidence, a bipartisan consensus was reached that housing discrimination laws needed teeth. President Reagan in a 1983 message to Congress characterized the need for change: "Since its passage, however, a consensus has developed that the Fair Housing Act has delivered short of its promise

crimination was clear, hut the enforcement mechanism was

because of the gap in its enforcement mechanism.

weak. Thus, 20 years after the passage of the Fair Housing Act. discrimi-

"The gap in enforcement is the lack of a forceful back-up

nation and segregation in housing continues to run rampant. The

By Bill Massey

mechanism which provides

an incentive to bring the parties to the conciliation table with serious intent to resolve

the dispute then and there.


When conciliation fails, the Secretary has no place else to go. In those few cases where good will is absent. the exclusive reliance upon voluntary

resolution is, in the words of former Secretary Carla Hills, an 'invitation to intransigence.'

"Reform of the Fair Housing Act is a necessity that is acknowledged by all."3 In fact. serious reform efforts had begun in 1977 with the introduction of legislation and the hearings that followed. In 1980. the House of Representatives by a vote of 310-95 passed the Fair Housing Amendments Act of 1980, H.R. 5200. The bill extended protection to handicapped persons and resolved the enforcement gap by beefing up HUD enforcement powers and allowing claims to be litigated before administrative law judges within HUD. The legislation died after a lengthy Senate filibuster in a lame-duck session following the stunning Republican takeover of the Senate and the sweeping election of Presiden t Reagan in November 1980. Opponents, with the fierce backing of the National Association of Realtors. claimed among other things that the administrative enforcement mechanism ran afoul of the Seventh Amendment's guarantee of a right to a jury trial. Reform efforts lay mostly dormant until the Senate Committee on the Judiciary favorably reported S. 558 on June 27. 1987.' The House Judiciary Committee reported similar legislation. H.R. 1158, almost a year later. and after defeating weakening amendments the House passed its bill June 29, 1988, by the strong vote of 376-23. When Majority Leader Robert C. Byrd promised to take up the bill in the Senate on August 1, serious negotiations among key senators,

housing groups. civil rights activists and administration officials led to a compromise that passed the Senate August 2 by a vote of 94-3. The eight-year logjam was broken by agreement on an enforcement procedure that allows the aggrieved individual. the alleged violator or HUD to choose a full-blown trial in federal court. If all agree, however. the complaint can be resolved by an administrative law judge within HUD. This compromise version of H.R. 1158 was then approved by voice vote in the House on August 8. and was signed in to law by President Reagan on September 13. 1988.

in rules. policies, practices or services is also required.? New multi-

family housing intended for first occupancy no earlier than March 13, 1991. must include several specified features to make them accessible to persons in wheelchairs.' Since handicap can include a communicable disease or mental derangement, the new law exempts from protection those whose residency "would constitute a direct threat to the health or safety of others ... [or] would result in substantial physical damage to the property of others.'" Over the years. Congress has documented widespread housing discrimination against families

KEY PROVISIONS Although it is beyond the scope of this article to describe the provisions of the new law in great

detail. its key provisions are as follows: New Protected Classes In addition to prohibiting discrimination on grounds of race, color. religion. sex or national origin. the new law extends protection to handicapped persons and families with children. The House Committee Report characterized the legislation as a repudiation of stereotypes and ignorance about the handicapped and their exclusion from the American mainstream. S The new

law defines a handicap as a physicalor mental impairment that substantially limits one or more major life activities.' Specifically excluded from the definition, however. is a person who is addicted to a con-

trolled substance or who is a transvestite. In addition to the typical methods of discrimination in the sale. rental or financing of housing, discrimination is defined to include a refusal to permit a handicapped person at his own expense to make reasonable and necessary modifications of existing premises. Reasonable accom-

modation to handicapped persons

with children. lo Citing a U.S. Supreme Court opinion character-

izing the family as "perhaps the most fundamental social institution of our society," the House Committee Report accompanying the legislation pointed to a 40-yearold federal commitment to the goal of a decent home for every American family and concluded that discrimination against families with children is preventing the realization of this goal. 11 According1y, the new law prohibits discrimination against a

family with a family member who is pregnant. under 18 years of age or in the process of securing legal custody of someone under 18.12 Exempted from this discrimination prohibition is "housing for older persons:' defined as a state or federal housing program specifically designed for the elderly. housing intended for and solely occupied by persons 62 years of age or older or housing intended to be occupied by at least one person aged 55 or older per unit. I' (Lawyers interested in more detail about the older persons exemption should of course consult the statute and recently-issued regulations.)I' Enforcement by HUD An aggrieved person has one

year after the alleged discriminaApril 1989JArkansas Lawyer/53


tion to file a complaint with the secretary of Housing and Urban Development.l> In the absence of a complaint HUD may investigate housing practices and may itself bring a complaint. l • Where prompt judicial action is necessary to carry out the purposes of the act. the secretary may authorize the attorney general to file suit and request appropriate temporary relief. including a temporary restraining order and a preliminary injunction against unlawful discrimination 17

Within 100 days of the filing of an administrative complaint. the secretary generally must complete his investigation and make a determination whether "reasonable cause exists to believe that a discriminatory housing practice

has occurred. "" If reasonable cause exists. he must immediately issue a charge on behalf of the aggrieved person. 19 Within 20 days after service of the charge any party may elect in writing to have the case heard in the U.S. district CQurt. 20 -Hearing before ALI

If no such election is made within the 20-day period. however. the case will be heard before an administrative law judge (AL)).21 All parties have the right to be represented by counseL to subpoena. examine and cross-examine witnesses and to have expeditious discovery.22 The ALI is authorized to grant appropriate relief. including actual damages. injunctive relief and civil penalties -- up to $10.000 for a first ollense. $25.000 for a second and $50.000 for a third" -- and may award the prevailing party a reasonable attorney's fee and costS. 24 The secretary may review any

finding or order of the ALI within 30 days; otherwise it becomes finaL" and may only be reviewed further by the filing of a petition for judicial review in the U.S. court of appeals for the judicial circuit in 541Arkansas Lawyer/April 1989

which the alleged discriminatory practice occurred.26 -Civil Action in U.S. District

Court If any party does elect to pursue federal court litigation within 20 days after service of the charge. the attorney general must file a civil action on behalf of the aggrieved person in U.S. district court within 30 days after the election." The court may grant appropriate temporary and permanent injunctive relief and may award the aggrieved person actual and punitive damages." In its discretion the court may award the prevailing party a reasonable attorney's fee and costs." Enforcement by Private Persons An aggrieved person may bypass the administrative complaint process entirely and instead file a civil action in federal or state court within two years after the discriminatory practice is alleged to have occurred.:Il Moreover. such

an action may be filed even during the pendency of a complaint of discrimination, with two exceptions: where an ALI has already commenced a hearing on the complaint or where the complaint is the subject of a conciliation agreement obtained with the consent of the aggrieved person." In such a civil action. the court may grant the same kinds of relief (described above) that may be granted in an action by the attorney generaL including reasonable allorney's fees and costs to the prevailing party.32 Enforcement by the Attorney General

Even absent a formal complaint of discrimination. the allorney general may bring a civil action in U.S. district court whenever he has reasonable cause to believe that "a pattern or practice" of discrimination has occurred or when a denial of rights protected by this act raises an "issue of general public importance."" The court may grant

the same kinds of relief described above. and in addition may impose a penalty of up to $50.000 for a first violation and up to $100.000 for any subsequent violation." CONCLUSION The Fair Housing Amendments Act is being hailed as the most dramatic and significant improvement in civil rights law in the last 20 years. With vigorous enforcement perhaps it will in fact be an important step toward achieving the 40-year-old federal goal of a decent home and suitable living environment for every American family. 0

Footnotes I Pub. L. No. 90-284. 42 U.S.C. § 3601. It was amended by Section 808(b) of the

Housing and Community Development

Act of 1974. Pub. L. No. 93-383. which among other things added sex as a prohibited basis for discrimination.

H.R. Rep. No. 711. 100th Cong.. 2d Sess. 15 (1988). 3 Id. at 16-17. • S. 558. l00th Cong.. 1st Se55. (1987). 5 H.R. Rep. No. 711. 100th Cong .. 2d Sess. 18 (1988). • 42 U.S.C. § 3602(h). The section also

2

defines it as a record of having such an impairment or being regarded as hay· iog such an impairment. 7 42 U.S.C. § 3604(fX3XA) & (B). • 42 U.S.C. § 3604(fX3XC). 9 42 U.S.C. § 3604(fX9). 10 See generally H.R. Rep. No. 711. l00th Cong.. 2d Sess. 19-21 (1988). The report

cites HUD findings that 25 percent of

all rental units do not allow children and 50 percent were subject to restric-

tive policies that limited the abilities of families to live in them. In a separate HUD survey 99 percent of respondents reported incidents of housing

discrimination against children. 11 H.R. Rep. No. 711. 100th Cong .. 2d Sess. 19 (1988). 12 42 U.S.C. § 3602(k) 13 42 U.S.C. § 3607(b)

14

The final rules were promulgated

January 23. 1989 and appear at 54 Fed. Register 3232. See also 24 C.F.R.. Parts 14. 100. 103. 104. 105. 106. 109. 110. 115 and 121 (1989).


" 42 U.S.C. § " 42 U.S.C. § 17 42 U.S.C. § 18 42 U.S.C. § 19 42 U.S.C. §

361O(a)(l)(A)(i). 361O(a)(l)(A)(iii). 361(J(e). 361(J(gXl). 361O(g)(2)(A).

20 21

22 23

24

42 42 42 42 42

42 U.S.C. § 3612(h). 42 U.S.C. § 3612(i). v 42 U.S.C. § 3612(oXl). 28 42 U.S.C. § 3612(oX3). 29 42 U.S.C. § 3612(p). " 42 U.S.C. § 3613(a)(l)(A) & (a)(2). 31 42 U.S.C. § 3613(a)(2) & (3). 32 42 U.S.C. § 3613(c). 33 42 U.S.C. § 3614(a). ,. 42 U.S.C. § 3614(dXl). Similarly. under § 3614(d)(2) the court may award the prevailing party a reasonable attor-

U.S.C. § 3612(a). U.S.C. § 3612(b). U.S.C. § 3612(c) & (d). U.S.C. § 3612(gX3). U.S.C. § 3612(p).

25 26

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A

GENERAL

PRACTITIONER'S

PRIMER

Applicability of Article 2of the Uniform Commercial Code to Oil and Gas Contracts

By]. Thomas Hardin The Uniform Commercial Code's impact on traditional oil and gas law has been limited. But this pattern may change as courts become more willing to impose the UCC " ". either directly or by analogy into '." areas historically governed by " -, J common law rules. This trend is likely to develop since the UCC is a • , •• the most comprehensive legislative statement of modern contract ", :. ,:., ,', .... -~ .• ~ • ••!> principles. Although many aspects , . of oil and gas transactions may be . affected by the UCC, Article 2's sales provisions are some of the most important. I

,

0 ....

::.'

APPUCABIUTY AFTER EXTRACTION Article 2 applies to "transactions in goods:" Assuming a lease is a transaction, the question is whether oil and gas are "goods:' TraditionaI oil and gas law recognizes that: [a]lthough there are differing Aprill9891Arkansas Lawyer/57


A

GENERAL

views regarding the character of ownership of oil and gas as

they reside in the earth, there is uniformity in the conclusion that once oil and gas is extracted from the earth, it becomes tangible personal property.' It has been uniformly held that extracted oil and gas are "goods" within Article 2's scope. For example, oil and gas purchase and sale contracts are clearly governed by Article 2.-

APPLICABILITY BEFORE EXTRACTION The more complicated question is whether oil and gas before extraction are Article 2 goods. When considering the nature of oil and gas, courts have olten applied traditional real and personal property concepts by analogy. Oil and gas interests have been compared with wild animals, timber and crops, among others.' The VCC's definitions are more explicit. Section 2-105(1) defines goods as "all things...which are moveable at the time of identification to contract for sale ...Goods also includes ...other

identified things attached to realty as described in §82-107:' Section 2105(1)'s comment recognizes that §2-107 con trois "con tracts to sell... minerals...to be removed from the land." In turn, §2-107(1) states "a contract for the sale of minerals or the like, including oil and gas...is a contract for the sale of goods.. .if they are to be severed by the seller:' Whether unextracted oil and gas constitute goods depends on who is extracting the oil and gas, the seller or buyer. It

PRACTITIONER'S

oDirect Applicability of Article 2 to Oil and Gas Leases In Casper v. Neubert6 an owner

sold his oil and gas leases to a person who subsequently defaulted in payment. The trial court denied the owner's claim for a real property vendor's lien under Oklahoma law, finding that oil and gas leases were not "real property" within the meaning of the vendor lien statute. The Tenth Circuit Court of Appeals reversed. Its conclusion was based on Oklahoma's concept of oil and gas leases as "interests in land." But the Court went further, holding that unextracted oil and gas were

not Article 2 goods, relying on §2107(1)'s requirement that the oil and gas be extracted by the seller. Neubert is generally cited for the proposition that oil and gas leases are not Article 2 transactions in goods.' This generalization, however, seems too broad. Neubert factually addresses the question of whether the sale of oil and gas leases is an Article 2 transaction in goods, not whether oil and gas leases themselves are transactions in goods. Clearly, oil and gas leases envision the extraction of oil and gas. Vpon extraction, such oil and gas do become goods. Because Article 2 covers "transactions" and is not limited to "sales:" it is possible to argue that oil and gas leases are transactions in goods. Such reasoning runs afoul of traditional oil and gas law and no case law supports it. There are, however, two possible arguments for treating oil and gas leases as Article 2 transactions. First. if oil and gas lessors also

is impossible in this article to

obtain a working interest in oil and

apply this scope rule for the myriad of oil and gas transactions which lead to purchase contracts. As the first link in the chain of agreements which bring oil and gas to the user, it is appropriate to examine whether Article 2 applies to oil and gas leases.

gas leases, then they would be involved in severing the leasehold oil and gas. Since working interest owners are analogous to sellers. this capacity may satisfy §2-107(1)'s requirement. It is also consistent with §§2·105(2), (3) and (4)'s definition of goods, in that working inter-

58/Arkansas Lawyer/April 1989

PRIMER

est owners have percentage undi-

vided shares of the whole amount and their oil and gas is identifiable at the point of extraction. oApplicability by Analogy The concurring opinion in McGinnis v. Clayton' suggests a second route to apply Article 2 to oil and gas leases. That case considered an 1893 lease which provided a !18th royalty for oil production but only $100 per year for all gas production. Following deepening of the original welL significant amounts of gas were collected and the lessor brought an action to reform the gas royalty to aI/8th royalty. Reversing denial of reformation, the West Virginia Supreme Court held that under certain circumstances reformation might be an appropriate remedy. Supporting this result, the concurring opinion argued that the VCC's broad remedial rights were available to the lessor by analogy: Gas and oil contracts are construed and interpreted by courts in the same general manner as other contracts. One would be blind to pretend they are anything but business contracts that tangentially involve aspects of real property law. They are closer to contracts to the sale of goods than typical property leases. 1O Article 2 has been applied by analogy in other areas, including equipment leases, franchise and distributor agreements and construction and commission contracts, all of which only peripherally deal with goodS. 11 Courts have willingly imposed Article 2's concepts of good faith, commercial reasonableness and unconscionabili ty and, sometimes, formation and remedy rules in to these areas. The new VCC Article 2A codifies this approach for equipment leases. In making analogies, however, courts must look to the underlying character of


A

GENERAL

the entire transaction, and whether its essence is for the provision of goods from one party to another. 12 Applying this limiting rule to oil and gas leases, there is no doubt that leases, with luck, may lead to the sale of goods (i.e. extracted oil and gas). Additionally, lessors are analogous to sellers in that they always reserve interests in the

income stream generated by sale of the extracted oil and gas. But ultimate sale only occurs after exploration, drilling, operating agreements and separate sale contracts between working interest owners and purchasers. Because

of this remoteness, courts must be careful in applying Article 2 by analogy to oil and gas leases. EFFECT OF APPLICABILITY Application of Article 2 to oil and gas leases can have important ramifications because of Article 2's rules for formation, interpretation and remedies. For example, consider how these rules might apply to spot market transactions which are often based on brief written offers to buy or sell gas -- a contract for sale under Article 2. -Formation While there are many parallels between Article 2 and common law contract principles, Article 2's "provisions on the formation of contracts for the sale of goods have ... radically altered sales law ...[Article 2) makes contracts easier to form and it imposes a wider range

of obligations than before."" Under ยง2-204(l) "a contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract." Article 2 goes further by providing so-called "gapfillers" which ensure a basis for finding a contract, which might otherwise fail for indefiniteness. Consider the following: Indefiniteness. Section 2-202(1) permits an open term contract if

PRACTITIONER'S

the parties intend to make a contract and there is a reasonably certain basis for giving an appropriate remedy. Writing. Under ยง2-20l a contract may be evidenced by writing which is "sufficient to indicate a con tract for sale has been made. " No Price Term. Section 2-305(1) allows contract formation even though price is not settled.

OutputlRequirements Contracts. Section 2-306(J) permits quantity terms measured by actual output or requirements as they may occur in good faith. oMerchants Under the uee Section 2-104 classifies certain persons who deal in the goods which are the subject of. or the type of goods which are involved in, the transaction. The term includes people like the jewelers, hardware store owners, furniture salesmen

and occupations such as electricians, plumbers. carpenters. boat builders, landsmen and the like. Section 2-104's definition is broad enough so that oil and gas companies, pipeline companies, producing companies and the like are well within its scope. Even individuals who own a significant number of working interests and sell their oil and gas may be merchants." Being classified as a merchant imposes high contractual standards such as the following examples: Statute of Frauds. Under the uee. a contract for the sale of goods for $500 or more must be in writing. For merchants. however, a written confirmation of an oral contract satisfies this writing requirement unless the other party objects within 10 days after receipt of the confirmation. Offer and Acceptance. Between merchants, a definite expression of acceptance of an offer sent within

a reasonable time operates as an acceptance of a con tract. even though it states terms additional to or different from those offered or

PRIMER

agreed upon. If additional terms are proposed by one merchant. they become part of the contract unless: the offer expressly limits acceptance to the terms of the offer; they materially alter the offer; or notification of objection to them has already been given or is given within reasonable time after notice of them is received. IS Warranties. The implied warranty of merchantability under ยง2314 arises if the seller is a merchant.

Good Faith. A merchant's standard of good faith under ยง2103(l)(b) includes honesty in fact and the objective observance of reasonable commercial standards. -Interpretation The common law's parole evidence rule generally requires that writings be treated as a complete expression of an agreement and do not permit extrinsic evidence to explain the terms. The UCC restricts this rule and comes closer to assuming that a writing is not a complete expression of the agreements between the parties. Consequently, ยง2-202 provides that. although the final terms of an agreement may not be contradicted by evidence of any prior agreement or of a contemporary oral agreement. they may be explained or supplemented by course of dealing," usage of trade,l? course of performance l8 and even evidence of consistent additional terms unless the wri ting is found to have been intended as a complete statement of the agreement's terms. even where the contract is not ambiguous. 19 oSeller Remedies under the uee uec remedies for breach, although consistent with the common law, are very broad and can be quite useful to plaintiff's lawyers. For example. excess availability and depressed prices in the gas market have forced many sellers to look to their UCC remedies for failure to take. 20 Sec-

April 19891Arkansas Lawyer/59


A

GENERAL

PRACTITIONER'S

tion 2-703 provides that upon buyer's breach of contract the seller may: withhold or stop delivery of such goods, resell and recover damages as provided in §2-706, recover damages for nonacceptance, or in a proper case, the price. under §§2-708 or 2-709. and cancel. These remedies have been invoked often in the recent take-orpay cases. Generall y, the UCC does not allow sellers to recover the full purchase price from buyers for breach of a natural gas contract since undelivered oil and gas usu-

UCC contains specific references to the mitigation of damages and reasonableness. Comment I to §l106 states that the UCC "makes it clear that damages must be minimized." Common law mitigation principles arguably also supplement the UCC through §1-103. -Good Faith Finally, it is important to note §l203's imposition of a good faith standard under all UCC transactions. Oil and gas law has imposed a common law standard of good faith only in certain situations. and even then the stan-

ally remains in the ground. Under

dard is not so high or exact as that

§2-706(l), if goods are retained by the seller and resold, the measure of damages is the difference between the contract price and the price of resale. Where such goods are not resold after repudiation by the buyer. §2-708(l) provides that the measure of damages is the contract price less the market price at the time and place for tender. Sellers may sue for the contract price under §2-709 only if the goods are lost or damaged, which usually does not occur to unextracted natu-

of Article 2. Generally, the UCC term "good faith" means "honesty in fact in the conduct or transaction concerned." In the case of Article 2 transactions involving merchants, however. §2-103(b) clearly imposes an objective standard of reasonable commercial standards of fair dealing. When combined with the fact that many courts recognize an affirmative cause of action for breach of the duty of good faith. this objective standard can become very meaningful to litigants. particularly in light of recent litigation establishing the tort of bad faith breach of contract."

ral oil and gas. Furtherl an action

for contract price is applicable only if the goods are "identified to the contrac!." In Piney Woods Country Life School v. Shell Oil Company, the court stated that "gas underground is future goods; no particular gas is sold until it is identified -- i.e., brought to the surface."" As such. natural gas which has not been produced is not "identified to the contract." and therefore the remedy of contract price was not available." Further. §2709(l)(b) allows recovery of contract price only if "the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing." In today's current market. it is unlikely that sellers would be able to meet this test. Sellers should also note that the 60IArkansas Lawyer/April 1989

CONCLUSION Courts have not traditionally applied the provisions of UCC Article 2 to oil and gas transactions. No question exists. however, that the UCC controls oil and gas purchase/sale contracts. Using the scope analysis previously presented in this article. it is possible to argue that the UCC applies to related oil and gas contracts such as oil and gas leases. whether

directly or by analogy. Article 2's more lenient contract formation

and interpretation rules, liberal remedies and objective standards of good faith for merchants may well lead imaginative attorneys to attempt to broaden this area of the law. 0

PRIMER

Editor's Note: f. Thomas Hardin is Q director of Hartzog. Conger & Cason, P'C., of Oklahoma City. Oklahoma. He has a B.S. from Purdue University and a J.D. from the University of Arkansas. FOOTNOTES See Harrell and Dancy. Oil and Gaa Financing Under Uniform Commercial Code, Article 9. 41 Okla. 1. Rev. 53 (1988). 2 V.C.C. § 2-102. 3 E. Kuntz. Treatise on the Law of the Oil and Ga •. Vo1s. 1-7. § 2.5 (1987 ed.). -4 See Amoco Production Co. v. Western Slope Gas Co.. 754 F.2d 303 (10th Ci,. 1985): Pine Woods Country Life School v. Shell Oil Co.. 726 F.2d 225 (5tb Ci,. 1984): Pem120il Co. v. Federal Energy Regulatory Commission. 645 F.2d 360 (5tb Ci,. 1981): Amoco Pipeline Co. v. Admiral Crude Oil Co,?.. 490 F.2d 114 (10tb Ci,. 1974): and Fo,ay LR Fo,k. 912 (1981 ad.); Legg and Dacy. The Applicability of the Uniform Commercial Code to Natural Gas Contracts. 36 Oil and Gas Tax Court. Vol. 3. p. 67 (1987). 5 Summers. Oil and Gas. Vol. IA. Section 152 at 371 (1981 ed.). s 489 F.2d 543 (lOtb Cir. 1973). 7 R. Anderson. Uniform Commercial Code. Vol. I. § 2-107:12 (3rd ed. 1981). 8 See generally. 4 ALR 4th 85. §§ 3 and 4 (1981 Ed.). , 312 S.E.2d 765 (W. Va. 1984). 10 ld, 01772. 11 4 ALR 4tb 85. §§ 8. 9, 10. 17.21 and 22 (1981 Ed.). 12 See Sally Beautyeo. Inc. v. Nexus Products Co.. Inc.. 801 F.2d 1001 (7th Cir. 1986) (applying Texas law). 13 White and Summers. Uniform Commercial Code. § I-I (1980 ed.). 14 See Columbia Gas Transmission Corp. v. Larry H. Wright. Inc .. 443 F. Supp. 14 (S.D. Obio 1977). 15 V.C.C. § 2-207. 16 V.C.C. § 1-205(1). 17 V.C.C. § 1-205(2). 18 V.C.C. § 2-208. 19 Se. Paragon Resources v. Natural Fuel Gas Disl.. 695 F.2d 991 (5tb Cir. 1983). 20 See Madino. McKinsey & Danial. Take or Litigate: Enforcing tbe Plain Meaning of the Take-Or-Pay Claus. in Natural Gas Controct., 49 Ark. L. Rev. 185 (1987). " 726 F.2d 225. 22 ld. 23 See Comment. The New Tort of Bad Faith Breach of Contract: Christian v, American Home Assurance Corp.. 13 Tulsa t.J. 605 09_); Comment. Tortious Breach of Contract in Oklahoma. 20 Tulsa t.J. 233 (l9~. 1


ARKANSAS IOLTA PROGRAM

IOLTA Becomes an Adult By Susanne Roberts IOLTA is still growing. There are maturational stages in the growth of any entity, and the IOLTA program is now an adult. In its youth, IOLTA's growth was astounding: We enrolled 662 lawyers or 18 percent of the eligible bar by the end of 1986, 1019 lawyers or 27 percent by the end of 1987 and 1125 lawyers or 31 percent by the end of 1988. We signed up 46 financial institutions in 1986, had 76 participating by the end of 1987 and closed with 83 IOLTA financial institutions in 1988. Deposits totaled $18,591.17 in 1986, $159,931.28 in 1987 and $245,891.45 in 1988. The growth of the Arkansas IOLTA program is approaching its ceiling. American Bar Association statistics show that attorney participation in voluntary IOLTA programs falls between 20 and 30 percent of the state's eligible bar. Our philosophical and experiential bases are also maturing. In April 1987, we granted $40,000 to the state's legal services programs and law schools without an application process. This ear!y grant was a good-faith demonstration that we wanted to put IOLTA money to use. In 1988, we developed an application format to enable us to set criteria and evaluate applications based on those criteria. In 1989, the board of directors has narrowed its focus even more; we prefer special project funding over general funding so that IOLTA money will encourage implementation of diverse projects which could not otherwise exist. The board's language contained in our grant application says it best: Mission Statement "The Arkansas IOLTA Foundation's mission in 1989 is to increase access to the justice system for every deserving person. The Foundation intends this year to height-

en community awareness about

IOLTNs goals and its commitment to Arkansas. We encourage creative and innovative grant applications from individuals or groups whether the applicant be a corporation or an individual dedicated to improving his community. An application's source is much less important to this Foundation than the proposal and plan of action it contains. The Arkansas laLTA Foundation wants to fund projects which will provide services that could not otherwise be offered. It will also fund existing programs when an laLTA grant will measurably improve existing services. The Arkansas laLTA Foundation is particular!y interested in projects which offer legal assistance to the poor, proposals to educate Arkansas citizens about the law and programs which aid students to obtain a legal education." Grant Considerations The Foundation's board has not set

a percentage of funds collected under the program to be earmarked for any project eligible for IOLTA grants. The board recognizes that laLTA funds cannot meet the entire needs of anyone program. However, laLTA funds will not only be used to supplement programs which are also funded by other sources, but these funds will also be used to implement worthy proposals which cannot obtain funding elsewhere. The board of directors prefers specific project funding in each category. Proposals which are one-time projects needing seed money that thereafter will be selfsupporting or concluded within the grant period will also be preferred in each category. Procedures and priorities may change in the future as revenues grow and as resources and needs change. All grants funded by the Foundation are wholly discretionary and do not imply that a program will receive funds for the next grant cycle. 0

April 19891Arkansas Lawyer/61


ATTORNEY HONOR ROLL Ganuary 16, 1989) ARKADELPHIA

Steve DeMott Hankins Law Office McMillan, Turner & McCorkle Henry Morgan Sanders & Hill janice Williams Wheeler Wright, Chaney & Berry ASHDOWN Hawkins & Metzger ASH FLAT Samuel F. Beller Dan M. Orr BATESVILLE Steve Bell David M. Clark Hance & Hance Harkey, Walmsley, Belew & Blankenship Highsmith, Gregg, Hart, Farris & Rutledge Hively & Ketz Murphy, Post, Thompson & Arnold Gary Vinson BENTON Sandra Tucker Partridge BENTONVILLE Burrow & Sawyer Clark & Clark Gocio & Dossey Lawrence & Huffman Little, McCollum, & George BLYTHEVILLE John H. Bradley East Arkansas Legal Services Brent W. Martin CAMDEN Edwin Keaton David McMahen Roberts, Harrell & Lindsey CAVE CITY Kei th Watkins CHEROKEE VILLAGE Stewart K. Lambert CLARENDON Raymond R. Abramson CLARKSVILLE Roderick H. Weaver Swindell & Bradley CONWAY Brazil, Clawson & Adlong Clark & Adkisson Kenneth Fuchs Hartje, DuPriest & Collier David L. Reynolds Troxell Law Office M. Watson Villines CROSSETT Arnold, Hamilton & Streetman 621Arkansas Lawyer/April 1989

DERMOTT Gibson & Gibson Don E. Glover DUMAS Gill. johnson, Gill & Gill ELDORADO james B. Bennett Worth Camp Law Firm Compton, Prewett, Thomas & Hickey Ronald L. Griggs Law Offices Henry C. Kinslow Landers & Shepherd Legal Services of Arkansas Shackleford, Shackleford & Phillips Spencer, Spencer, Depper & Guthrie Denver L. Thornton ENGLAND William Reed FAYETTEVILLE Arens & Alexander Ball, Mourton & Adams George E. Butler, jr. Gary L. Carson Davis, Cox & Wright Curtis E. Hogue Larry R. Froelich William Russell Gibson Hanks, Gunn & Borgognoni James R. Jackson Jill R. Jacoway Phyllis Hall Johnson Jones & Reynolds Mark Lindsay Mashburn & Taylor McAllister & Wade Ronald M. McCann Richard 1. Miller Rudy Moore Jr. Niblock Law Offices Odom, Elliott & Martin Richard P. Osborne Ozark Legal Services Joe B. Reed ]im Rose ill Raymond C. Smith Lanny K. Solloway Jay N. Talley Westphal & Steenken FORT SMITH Bethell. Calloway, Robertson & Beasley Robert S. Blatt Brittain Law Offices Christian & Beland Orville C. Clift Robert R. Cloar Daily, West, Core, Coffman & Canfield

Davis & Cox David L. Dunagin Mark E. Ford Gean, Gean & Gean Hardin, Jesson & Dawson Harrison & Hewett Josef V. Hobson Stanley M. Holleman Jones, Gilbreath, Jackson & Moll Barry D. Kincannon James E. O'Hern Paul R. Post Pryor, Robinson & Barry Rose, Kinsey & Cromwell Sargent Law Firm Stephen M. Sharum Shaw, Ledbetter, Hornberger & Arnold Philip J. Taylor Walker & Morris Warner & Smith Western Arkansas Legal Services GREENWOOD Walters Law Firm HAMBURG Arnold, Hamilton & Streetman Tarvin & Byrd HARRISBURG VanAusdall & VanAusdall HARRISON Donald E. Bishop Elean & Sprott Thomas D. Ledbetter Meadows, Davis & Goldie Walker & Campbell HELENA East Arkansas Legal Services HOPE Graves & Graves HOT SPRINGS Daniel D. Becker Central Arkansas Legal Services Cook & Cruz Evans, Farrar, Reis & Love Frances M. Finley William W. Green Robert S. Hargraves Henry, Cox & MacPhee Hobbs, Longinotti. Bosson & Naramore

Lane, Muse, Arman & Pullen Miller, Goldman & Ridgeway Ray Owen, Jr. Eudox Patterson Byron Cole Rhodes Thacker & Pennick Wood, Smith, Schnipper & Clay JACKSONVILLE Vaughan & Bamburg


JASPER Martin Law Firm Karen B. Walker JONESBORO Barrett, Wheatley, Smith & Deacon Anthony W. Bartels Rick A. Burch Bill D. Etter Martha P. Gilpatrick Michael R. Gott Hugh W. Harrison Henry, Walden & Davis Paul E. Hopper Howard & Howard Randall W. Ishmael Legal Services of Northeast Arkansas Lyons & Emerson McDaniel & Wells Donn Mixon Law Firm Penix Law Firm Val P. Price Rees Law Firm Seay & Bristow Walker, Snellgrove, Laser & Langley LAKE CITY Woodruff & Huckaby LINCOLN Boyce R. Davis LITTLEROCK H. William Allen Anderson & Kilpatrick Arnold, Grobmyer & Haley Brent Baber Barber, McCaskill, Amsler, Jones & Hale Barron & Barron Cynthia 1. Brandon Robert 1. Brown Catlett, Stubblefield, Bonds & Fleming Cearley Law Firm Central Arkansas Legal Services Ralph M. Cloar, Jr. Tripper Cronkhite Davidson, Horne & Hollingsworth Neil Deininger Richard C. Downing Eichenbaum, Scott, Miller, Liles & Heister Kathryn P. Eisenkramer Jack P. Files Donald Frazier Friday, Eldredge & Clark Gill Law Firm Giroir Law Firm Givens & Buzbee John Wesley Hall Jr. Hardin & Grace John T. Harmon & Associates Hartenstein, Lassiter & Oberlag Richard Hatfield Hollingsworth Firm Hoover, Jacobs & Storey

House, Wallace & Jewell Lewis A. Huddle Jr. Mike Hulen Ivester, Henry, Skinner & Camp Jack, Lyon & Jones Kaplan, Brewer & Miller Collins Kilgore Laser, Sharp & Mayes Lavey, Harmon & Burnett Richard L. Lawrence Legal Services of Arkansas B. Frank Mackey, Jr. Madden, Byarlay & Johnson Mays & Crutcher Robert McHenry McMath Law Firm Meeks & Carter Martha M. Miller Overbey Law Firm Matthews & Sanders Mitchell & Roachell Mitchell, Williams, Selig & Tucker Owens, McHaney & Calhoun Perroni, Rauls & Looney George N. Plasliras Mary J. Pruniski Richard Quiggle Riddick & Riddick Robinson, Hodges, Staley & Marshall Rose Law Firm Ross & Ross Shults, Ray & Kurrus Walter Skelton Skokos & Rainwater Simmons S. Smith Garner 1. Taylor Jr. Morris W. Thompson Walker, Roaf. CampbelL Ivory & Dunklin Wallace, Hamner & Arnold Velda P. West Whetstone & Whetstone Wilson, Engstrom: Corum & Dudley Wright, Lindsey & Jennings Youngdahl & Youngdahl MAGNOLIA Anderson, Crumpler & Bell Michael G. Epley Keith, Clegg & Eckert Woodard & Kinard MALVERN Glover, Glover & Roberts MENA Joe H. Hardegree Legal Services of Arkansas MONTICELLO Gibson, Gibson & Hashem Legal Services of Arkansas MORRILTON Scott Adams Mark Cambiano Gordon & Gordon Steve Kirk Dale Lipsmeyer

MOUNTAIN HOME Roy Danuser Frederick S. Spencer The Strother Frim NEWPORT Boyce & Boyce Hodges, Hodges & Hodges Legal Services of Northeast Arkansas James McLarty Thaxton, Hout, Howard & Nicholson NORTH LITTLE ROCK Steven R. Davis Gruber Law Offices Basil V. Hicks, Jr. McCracken & Sims Ed Phillips Barry A. Sims Charles R. Singleton Wood Law Firm PARAGOULD Goodwin, Hamilton & Moore Jon A. Williams PINEBLUFF Baim, Gunti, Mouser, Bryant & DeSimone William W. Benton Bridges, Young, Matthews, Holmes & Drake Central Arkansas Legal Services Betty C. Dickey Dickey Law Firm Sharon M. Fortenberry James 1. Hall Jr. Eugene Hunt Leon N. Jamison Jones & Petty Maxie G. Kizer Margaret Turner-Marshall Gene McKissic Edward M. Owens Thurman Ragar Jr. Ramsay, Cox, Lile, Gilbert. Harrelson & Starling Wilton E. Steed Richard Turbeville POCAHONTAS RiffeL King & Smith Wilson & Castleman PRESCOTT McKenzie, McRae & Vasser ROGERS Croxton & Boyer Stephen A. Geigle Jim Johnson James G. Lingle Slinkard & Halbrook Thurston Thompson Marian J. Wagner Williams, Brinton, Jackson & Pace RUSSELLVILLE Bullock Law Firm Laws, Swain & Murdoch PeeL Eddy & Gibson April 1989/Arkansas Lawyer/63


Sanford & Pate Shermer & Walker Sutterfield Law Firm Western Arkansas Legal Services SEARCY Jerry W. Cavaneau Steven B. Jordan Margaret Bunn Meads Odell Pollard SILOAM SPRINGS Elrod & Lee SPRINGDALE Cypert. Crouch. Clark & Harwell Charles Davis & Associates

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John E. McAllister, P.E.

EXPERT WITNESS

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FINANCIAL INSTITUTION HONOR ROLL Uanuary 16. 1989} Financial institutions denoted by a double asterisk have expressly waived all charges for IOLTA accounts. and institutions denoted by a single asterisk have to date remitted interest to the Foundation without deducting a fee. ARKADELPHIA Elk Horn Bank • Merchants & Planters Bank & Trust Co. ASHDOWN First National Bank ASH FLAT First National Bank of Sharp County BATESVILLE The Citizens Bank of Batesville • First National Bank • Independence Federal Bank CAMDEN First National Bank of Camden CAVE CITY • Bank of Cave City CHEROKEE VILLAGE Fust National Bank of Sharp County CONWAY First National Bank • First State Bank CROSSETT • First National Bank of Crossett DUMAS Merchants & Farmers Bank ELDORADO •• The Exchange Bank & Trust Co. • National Bank of Commerce ENGLAND • The Citizens Bank FAYETTEVILLE First National Bank McIlroy Bank & Trust •• Northwest National Bank FORT SMITH •• City National Bank of Fort Smith •• The First National Bank The Merchants National Bank of Fort Smith GREENWOOD Farmers Bank HAMBURG • Farmers Bank HARRISBURG The Bank of Harrisburg HARRISON The Security Bank HOPE • Citizens National Bank

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April I9891Arkansas Lawyer/65


661Arkansas Lawyer/April 1989


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CAMPAIGN FINANCE IN JUDICIAL ELECTIONS

An analysis of the Arkansas data shows that attorneys have played a much less important role.

BY JAMES D. GINGERICH

The role of money in election campaigns has been at the cen ter of the political and social science research agen-

da for more than 30 years.! In his exhaustive work on

political finance in 1960. Alexander Heard first defined the issues which guided researchers for many years.

Almost all of the attention in the early years was focused upon campaign financing in

presidential elections. Later. the research was extended to consider federal and state legislative elections and state gubernatorial elections. Throughout this period. there was a dearth of information available concerning the fin-

ancing of judicial elections. This was true even though almost every state

main-

tained a system of electing at least some of their judges.' More recently. however. the headlines of the nation's newspapers have

been filled with articles raising concerns about the use of money in judicial elections. In California. it was reported that 1978 was the "year of big money" in judicial elections.' In that year the average cost of an election jumped to $19.363. more than double the cost of an election in 1976. These costs were insignificant. however. when compared with the California Supreme Court

April 19891Arkansas Lawyer167


election of 1986. In an effort to unseat Chief Justice Rose Bird and Associate Justices Reynoso

and Grodin, campaign committees raised and spent a combined total of well over $10 million.' In Texas, it was reported that supreme court justices received

more than $9 million in campaign contributions during the past five years and that approximately $7 million will be spent during the 1988 supreme court campaign.' The main issue raised during the campaign concerned the contributions which justices had received from lawyers who argued cases

before them. Attention was sparked by the court's refusal to review the $10.3 billion court judgment awarded to Houston-based Pennzoil Company in 1985 in its suit against Texaco.

Pennzoil's

attorney, Joe Jamail, had been a leading contributor to the justices. It was reported that the eight supreme court justices together received some $400,000 in contributions while the appeal was pending. Three of the justices who received contributions were

not up for re-election. In Ohio, the 1986 race for chief justice cost $2.7 million, compared to less than $100,000 only six years

elections for Arkansas appellate judges.' Members of the bar also expressed concern for the reliance upon attorneys for the financing of the campaigns. These headlines from across the country have heightened public interest in the issue which has, in turn, led to a growing number of researchers undertaking the study of judicial elections. 1O These studies have tended to examine campaign financing in

the larger context of the various systems by which judges are chosen. Many of the articles have reached some fairly standard conclusions: (I) Costs of judicial elections are skyrocketing and growing higher every year; (2) Campaign fund raising has become a barrier to office; (3) Too much money is contributed by lawyers; and (4) Those with the

tions in Arkansas.

METHODOLOGY The research for this project is based upon an examination and

analysis of the campaign finance reports filed by each candidate for judicial office in Arkansas since 1976. Campaigns before 1976 were not analyzed since the reporting requirements were not

in effect until that time. Of the 307 candidates who sought office during this period, only one failed to submit a campaign finance report. Of the 306 reports which were analyzed. serious deficiencies were noted in at least one

most money can "buy the elec-

section of six of the reports. The data is completely accurate, therefore, for 97.7 percent of the candidates. The Arkansas Campaign Practices Act requires that all candidates file pre-election and postelection reports of all

tion."

contributions and expenditures

The problem with these conclusions is that they are, for the most part, based upon absolutely no

received or incurred on behalf of their campaign. 12 For contribu-

single campaign or single year was analyzed in an attempt to

tions in excess of $250, the name, address and occupation of the contributor must be disclosed." The Act also bars the acceptance

support the conclusions reached.

of contributions from one individ-

Nothing, however, suggests that the examples cited are reflective

ual in excess of $1,500 per eleclion." As for expenditures, the candidate must show the total

empirical data. In many cases a

eo-flier. S In New York. three candi-

of judicial elections as a whole or

dates for the Manhattan surrogate court spent more than $800,000. In Rochester, New York, one judicial candidate alone spent more than $800,000, the most by any countywide office seeker in the United States.'

a part of any trend. In a recent article analyzing judicial elections in California, Philip Dubois noted, "Although the problems

amount spent during the cam-

associated with money and judi-

reports were analyzed were seek-

cial elections have been discussed intermittently, campaign financing has usually been raised only as one of the many evils said

ing one of five types of judicial office. Trial court posilions include circuit judges, who have a four-year term, chancery judges,

Even in Arkansas, journalists

have begun to raise questions about judicial campaign spending. In the 1988 race for a chancery court position in the

Sixth

Judicial

Circuit,

Arkansas Gazette criticized

the ODe

All of the candidates whose

to be associated with elections as

who have a six-year term. and cir-

a method of selecting state judges. With very few exceptions, there has not been the same kind of searching empirical inquiry into judicial campaign finance

CUit/chancery judges, who have a six-year term. Appellate court

candidate for spending in excess of $100,000. 8 This concern was at least partly responsible for the recent action by the House of Delegates of the Arkansas Bar Asso-

with other kinds of elections."" The purpose of this article is to attempt to respond to these defi-

ciation supporting a constitution-

ciencies and define more clearly

al amendmen I abolishing judicial

the state of money in judicial elec-

681Arkonsas Lawyer/April 1989

paign in one of 15 different categories. IS

that there has been in connection

positions consist of the six mem-

bers of the Arkansas Court of Appeals and the seven members of the Arkansas Supreme Court. each of whom have an eight-year term.

DEMOGRAPHICS It is interesting at the outset to note the makeup of the typical


Description 01 Candidates Arkansas Judicial Campaigns 1976·1988 100%

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judicial candidate. Table 1 shows incumbents and of the candia breakdown of candidates by the dates who ran in non-contested type of office sought, party identiraces, 88 percent were incumbents fication, race and sex. Approxi(see Table 2). Even more dramatic mately 85 percent of the candiis the election success which dates sought election as trial incumbents enjoy. Judicial incumjudges while the remaining 15 bents in Arkansas seldom lose. percent sought appellate court Of the incumbent candidates who positions. Candidates where sought office since 1976, only five overwhelmingly male (96 percent), percent were defeated (see Table 3). members of the Democratic Party (93 percent) and all were white. The power of incumbency is The average age of candidates for even more dramatic when a distrial court positions was 50 while tinction is drawn between trial the appellate court candidates court elections and appellate averaged 51.5 years of age. The court elections. No incumbent oldest candidate to seek office candidate from the Court of was 75 years of age while the Appeals or Supreme Court has been defeated since 1976 (see youngest was 32. Also noted in the analysis is Table 4). Trial court incumbents whether the candidate was an were successful 94 percent of the time (see Table 5). incumbent and whether he was running in a contested or non-conCONTRIBUTIONS tested race. Research involving Of all the issues which have elections and, more specifically, been discussed in the literature involving judicial elections has involving judicial campaigns and found that judges, once they reach types of judicial elections, the office, tend to remain in office and item which has received the most seldom draw opposition. This attention is the amount of money data generally supports those which is sought from and confindings. Thirty-nine percent of tributed by attorneys. Writers the candidates since , - - - - - - - - - - - - - - - - - - - - - - - - , Effect Of Incumbency On Election Success 1976 have been

I'

(Appellate Judges)

TABLE I

Number Row %

Effect Of Incumbency On Existence Of Opposition

Won

Lo.t

13.0

0.0 0.0 0.0

Column % Number Row%

Contested

Non·Contested

Column % Incumbent

Non·Incumbent

14.0

106.0

11.7 8.8 146.0

88.3 72.1

78.1 Column Totals

91.3 lSO.0 52.1

41.0 21.9 27.9 147.0 47.9

Row Totals 120.0 39.1%

Incumbent

100.0 46.4 15.0 44.1

Non-Incumbent Column Totals

187.0

SO.9%

100.0%

Lost

Column % 114.0 Incumbent

95.0 52.8 102.0

Non-Incumbent

54.5 47.2 Column Totals

216.0 70.4

6.0 5.0 6.6 85.0 45.5 93.4 91.0 29.6

34.0 72.3% 47.0 100.0%

TABLE 4 Effect Of Incumbency On Election Success

(Trial Judges) Number Row%

Effect Of Incumbency On Election Success (All Judges) Won

19.0 55.9 100.0 19.0 40.4

13.0 27.7%

307.0

TABLE 2

Number Row%

53.6 28.0 59.6

Row Totals

Row Totols

Won

Lost

101.0

6.0 5.6 8.3 66.0

Column % 94.4

Incumbent

53.7 87.0

120.0

56.9

Non-Incumbent

39.1% 187.0

Column Totals

46.3

43.1 91.7

188.0

72.0

72.3

27.7

Row Tolals 107.0 41.2%

153.0 58.8% 2SO.0 100.0%

SO.9%

TABLE 5 307.0 100.0%

TABLE 3

Judicial incumbents in Arkansas seldom lose. Of those who sought office since 1976. only five percent lost. April 19891Arkansas Lawyer/59


have discussed the possible conflicts with the Code of Judicial Conduct,17 various states' attempts to combat the problem lB and, most often, have raised the issue as a

In a recent article on judicial elections in California, Philip Dubois argues that most of these criticisms have been based upon inadequate data or faulty analy-

means of arguing that judges

sis of data and argues that. at

should not engage in campaigns and should not, therefore, be chosen by election.

least in California, attorneys have not played as important a role as had been thought." In his study

Percentage of 1btal Contributions by Source 50

o Allorney • Over $250 • Candidate

of the 1980 elections, lawyers were found to have contributed less than 40 percent of the total dollars and in relatively small amounts. A New York study found that 44 percent of the contributions to the state's surrogate court candidates were from attorneys.20 An analysis of the Arkansas data shows that attorneys have played a much less important role. For the period 1976 through 1988, the percentage of total contributions received from attorneys averaged 10 percent (see Table 6). That figure is the same for trial and appellate court races. There is also no evidence of any trend for a greater or lesser percentage

10

o+--r-----r---.----.---.-------.---.-~ 1980

1976

1982

1984

1988

1986

TABLE 6

Average Thtal Spending in Arkansas Judicial Canlpaigns 54‫סס‬oo

S20000

.'Irinl D Appellate

$1‫סס‬oo

All

...

so-'--~--~---~---~---~---~--~-'976

1978

1980

'98'

'98'

'986

,

TABLE 7

Coznparison 01 Total Spending Contested And Non-Contested Races

of contributions from attorneys. In appellate races, the highest percentage of lawyer contributions was in 1986 and averaged 21 percent. The lowest percentage was in 1982 and averaged only one percent. For trial court races. the highest percentage came in 1976 and averaged 16 percent. When only contested races are considered, the percentage of attorney contribution drops to only nine percent of the total. Where then do judicial candidates receive most of the money for their campaigns? It is quite clear that the largest percentage is provided by the candidates themselves. During the 12-year research period, a full one-third of all contributions were provided by the candidate. This figure includes both personal cash contributions and personal loans which the candidate had obtained. The percentage of personal contributions was 23 percent for appellate judges and 38 percent for trial judges. It is also clear that judicial candidates do not rely on very large contributions for their campaigns.

Of the total contributions during the period, only 22 percent of the funds were in the form of contributions in excess of $250 (see Table 6). Surprisingly, appellate court candidates averaged a TABLE 8

70/Arkansas Lawyer/April 1989


smaller percentage of larger contributions (20 percent) than did trial judges (22 percent). These figures remain constant when only contested races are considered. A slightly smaller percentage (21 percent) of the contributions are greater than $250 in these races. There does not appear to be a trend toward a greater percentage of large contributions. COST OF CAMPAIGNS The average cost of a judicial campaign in Arkansas from 1976 through 1988 was $14.826. Appellate court campaigns during this period averaged $31.211 as compared with $11.927 for trial court campaigns. When analyzed over time, it is difficult to note any real trend for increasing costs (see Table 7). The average for all judges ranges from $8,255 per campaign in 1978 to $31.343 in 1988, wi th the average having risen and fallen consistently throughout the period. The higher expendi tures in a particular year may be driven by such factors as a greater number of contested races, a g'reater number of appellate races or the presence of a particularly expensive race during that year. These issues will be explored further in a future articleo At present, it can simply be noted that there is no general trend of increasing campaign costs in Arkansas judicial elections. When only those candidates who ran in contested races are considered, there is also no trend apparent (see Table 8). The average cost of a contested campaign during the period was $24.607. Contested appellate races averaged $31.211 as compared with $11,927 for trial court campaigns. Over time, the expenditures range from a low of $13,759 in 1978 to a high of $36,725 in 1980. Since the use of averages can sometimes be misleading, it is also helpful to consider the number of races in which an extremely large amoun t of money has

been spent in order to determine if these ins-

tances are on the increase. Tables 9 and 10 show the total amount of money spent in each campaign according to the type of judge and over time. It should be noted that only four Arkansas judicial candidates have spent more than $100,000 in a campaign. The first instances occurred in 1984 by two candidates and were followed by one candidate each in 1986 and 1988. The highest total campaign expenditure since 1976 was $138,932. The lowest expenditure during the period was $120. A breakdown of the types of expenditures shows that, on the average, the single most expensive item in a judiciaI campaign is the filing fee (see Table II). These fees are set by the local political parties in each county. The filing fee has also shown the most consistent percentage increase of all items over the period. both in trial and appellate races. The

.-.... ...... ...... c_I- ...::... ........ ......

Ellect Of Candidate Type On Total Spending Circuil

c_

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Col_ •

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44.0 35.8 4.2.7

39.'

27.0

8.0 13.1 24.2

'.0

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44.3 21.8

20.0 32.8 19.4

15B

11.1

26.0 40.0 2>.2

7.0 10.8 212

10.0 15.4 52.6

'.0 6.2 IU

65.0

S 1‫סס‬oo 10 sz;(DJ

18.0 27.7 14.5 180

43.,

7.0 17.1 U

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8.0 195 29.6

.,» 13.4%

'» 41.7

0.0 0.0

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145 2» 16.7 1.6

S5IXXXllo SlllOOX>

0.0 0.0 0.0

Over SIOOXKl

124.0 40.'

Column Tolal.

13.0 10.6

123.0 40.2%

59.0 48.0 47.6

Under $5OCX)

15B

M 0.0 0.0 0.0

0.0 0.0 0.0

75.0 ILl

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19.0 6.2

27.0 8.8

25.0 1.0

".7

14.8

0» 0» 0»

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103.0

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61.0 19.9%

21.2'<

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TABLE 9

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Total Spending (1976-1988)

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27.0 22.0 41.5

2.0 1.6 7.7

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7.0 11.5 18.4

15.0 24.6 23.1

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61.0 19.9%

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21.1

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10.0 15.4 15.4

10.0 15.4

21.5

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6.0 14.6 7.6

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8» 195 21.1

10» 24.' 15.4

6.0 14.6 23.1

4l.0 13.4%

0» 0» 0»

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1.0 8.' 1.7

0» 0.0

20 16.7 11

"., ,.'"

0» 0.0 0»

0.0 0.0 0.0

QO

QO

0.0 0.0

0.0 0.0

20 50.0

,.,

1.0 25.0 1.5

1.0 25.0 '.8

.» 1.3%

15.0 '.9

79.0 25.8

25.0 8.2

".0 19.0

38.0 12.4

65.0 21.2

26.0 8.'

"'.0 100.0%

20.0 51.9 " ".,

8» 6.' 32»

"""'0 Sloooo

6.0 '.8 .QO

15.0 24.6

••• 120

17.0

SIlXQ)lo S25IUl

'.0 '.6 2110

S25IUl.o S5IXXXl

'.0 7.' 20»

S5IXXXl <0 SlllOOX>

SlllOOX>

Column Toto:l.

I.

23.6 50.0

UnderSSCXXl

""..

'''' '" 29.0

'.0

I~O 26~

M

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'"

120

TABLE

10

Iiiiiii

riling r. 1tIeriaioo

....

~

NeWspapel_

au.. Ado Direct Mail

--~

Oflice Equipment

Average Expenditures By Type AU Judges (1976·1988)

RK'

Pb_

...... ....1

u:uerta1rlment . . .

eo. \\brken

C>he'~ o

1000

E.panllitures ill Dollars

m>

mJ

TABLE 11 April 19891Arkansas Lawyernl


average filing fee in 1976 of $1.879 rose 135 percent over the period to $4,421 in 1988. The average appellate filing fee in 1988 was almost $7,000. Various types of advertising were the next items on which candidates spent the greatest amount. Over the 12-year period, judges spent more on newspaper advertising ($2,534) than on other advertising such as billboards and print literature ($2,285) or television advertising ($1.820) and finally radio advertising ($1,675) (see Table 12). When only candidates for appellate positions are considered, television becomes the most expensive item. The candidates averaged $5,487 over the period for television, $5,306 for newspaper, $3,640 for other ads and $3,403 for radio. It is somewhat obvious that statewide races require different forms and methods of advertising to reach the voters than do local elections. Trial court candidates by comparison have relied most heavily on print materials and billboards ($2,045) and spent the least amount on television advertising ($1.171). These findings are consistent with studies of other types of elections. Finally, it has been suggested that those candidates who are able to raise and spend the most

money in the campaign will win the election, thus, depriving qualified candidates who do not have access to funds from the possibility of service. As early as 1960, Alexander Heard demonstrated that, at least in presidential and congressional elections, the "rich" candidates do not always win.'l This finding is substantiated by the Arkansas data. Of the 69 contested elections which have taken place since 1976, the candidate who spent the most money was successful 65 percent of the time. More than one-third of the "big spenders" failed to gain election. The appellate candidates who spent the most money were successful more of the time with a 71 percent success rate. Trial candidates won in 64 percent of the races (see Table 13). CONCLUSION It is not the intent of this article to suggest that there are no problems inherent in Arkansas judicial campaigns. Rather, it has been noted that much of the discussion which has taken place in Arkansas and around the country has been based upon incomplete or erroneous empirical data. The reports, for example, that judicial campaign costs have skyrocketed and grown beyond the reach of most prospective judicial candidates, and that lawyers contribute most of the funding for judicial

Expenditures For Advertising In Judicial Campaigns===-

=='"

---

Editor's Note: James D. Gingerich is execu tive secretary of the Arkansas Judicial

Department. He received a J.D. from the University of Arkansas School of Law, Fayetteville in 1980 and an LLM. in 1982 from the University of Bristol. Funding for a portion of the research conducted for this article was provided by the University of Central Arkansas Research Council.

Effect Of Spending On Election Success

TABLE 12

721Arkansas Lawyer/April 1989

campaigns, are simply not borne out by the evidence. There are, however, still many questions which remain. With our new understanding of the actual role of lawyers and their contributions, are there steps which can be taken by the Arkansas Bar Association or others to respond to the possible ethical problems presented by such activity? With our new understanding of those elements of the judicial campaigns which are the most expensive, are there steps which can be taken to reduce those costs? With our new understanding of the types of expenditures made by judicial candidates, are there factors which make a candidate more or less likely to succeed such that certain activity would increase a candidate's chances for success? It is hoped that this article will work as a catalyst for future research and mark what is only the beginning of a thorough understanding of judicial campaigns in Arkansas. 0

"Big Spender" Won

"Big Spender" Lost

Appellate Judges

71%

29%

Trial Judges

64%

:l6%

All Judges

65%

35%

TABLE 13


Footnotes I Alexander Heard, The Costs of Democracy, University of North Carolina Press: Chapel Hill (1960). 2 Arkansas is one of 24 states which elects its appellate judges and one of 32 states which elects its trial judges. See generally. State Court Organization 1987, National Center for State Courts: Williamsburg (1988). 3 Larry Berg, "1978 Judicial Elections: The Year of Big Money," 20 California Courts Commentary 1 (980). 4 John Wold and John Culver, "The Defeat of the California Justices: the Campaign, the Electorate, and the Issue of Judicial Accountability," 70 Judicature 348 (l987); Edwin Chen, "Fund Raising Ills: For Judges the Stakes are Rising." Los Angeles Times. March 4, 1988. p. 1. 5 Peter Applebome, "Rubber Stamp is Gone in Texas Judicial Elections," New York Times. October 21, 1988. p. B7; Nicholas McBride, "Pressure Grows in Legal Profession to Get Judges Out of Politics," Christian Science Monitor, August 14, 1987. p. 5. 6 See Chen, Note 6. Supra. 7Id. a Arkansas Gazette, March 10, 1988. p. lB. 9 Arkansas Gazette, January 22. 1989, p. 78. 10 See generally, Philip Dubois, "Financing Trial Court Elections: Who Contributes to California Judicial Campaigns," 70 Judicature 8 (I 986}; Philip Dubois, "Penny For Your Thoughts," Western Political Quarterly 265 (985); Roy Schotland. "Elective Judges' Campaign Financing: Are State Judges' Robes the Emperor's Clothes of American Democracy," 2 Journal of Law and Politics 57 (1985); Marlene Nicholson, "Funding Judicial Campaigns in the Circuit Court of Cook County," 70 Judicature 17 (1986). II See Dubois, Note 12 at 8-9. 12Ark. Code Ann. §7-6-20l et seq. 13 Ark. Code Ann. §7-6-207Ib)(I). 14 Ark. Code Ann. §7-6-203(a). 15 Ark. Code Ann. §7·6-212. 16 See generally, Philip Dubois. From Ballot to Bench, University of Texas Press: Austin (I980) and Harry Stumpf, American Judicial Politics, Harcourt Brace Javonovich: San Diego (988). 17 Keith Anderson. "Ethical Problems of Lawyers and Judges in Election Campaigns," 50 American Bar Association Journal 819 (964); Victor Baum, "Should Judges Know Who Gave to Their Campaign?" 60 Judicature 258 (l977); Note, "Disqualifying Elected Judges From Cases Involving Campaign Contributions," 40 Stanford Law Review 449 (1988); Survey. "The Ethical Dilemma of Campaigning for Judicial Office," 14 Fordham Urban Law Journal 353 (1986). 18 Ivan Baris, "Judicial Campaign Funding: A Small But Useful Improvement" 59

Michigan Bar Journal 161 (1980); E.G. McMahon, "Abrahams Backs Payment Limits for Candidates," 199 New York Law Journal 1 (I988); Gerald Richman, "A New Solution to an Old Problem: The Dade Judicial Trust Fund," 50 Florida Bar Journal 478 (1976); Robert White, "New Approach to

Financing Judicial Campaigns,," 59 American Bar Association Joumal1429 (973). 19 See Dubois, Note 12, Supra. 20 William Blair, "Panel. Faulting Role of Politics, Seeks "Appointive Surrogates," New York Times, November 30, 1986. p. 56. 21 See Note 3, Supra.

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DISCIPLINARY ACTIONS November to January The Arkansas Supreme Court Committee on Professional Conduct in November and December 1988 and January 1989 issued three letters of reprimand, two letters of caution and six warnings. The Committee took no action of a disciplinary nature on 124 informal complaints against attorneys and voted "no action warranted" on 14 formal complaints. In other actions: -The Arkansas Supreme Court accepted the surrender of license in January from William Birney Barry of Fort Smith. Barry pleaded guilty in December 1988 to firstdegree murder and in November 1988 to three counts of mail fraud concerning the embezzlement of $225,000 from the late Joseph E. Safreed and his wife, Kathleen. Barry was sentenced to life in prison in January in the death of his client. James C. Cox, age 71; -The Supreme Court in December denied a petition by Sam Sexton Jr. of Fort Smith for relief in his fight with the Committee on Professional Conduct. A complaint against Sexton was filed with the Committee in 1987 alleging misconduct during 1983, when the Code of Professional Responsibility was in effect. The Committee charged Sexton under the Model Rules of Professional Conduct, adopted in 1985. After a hearing, the Committee suspended Sexton's law license for one year. The Supreme Court reversed that decision because Sexton was not charged under the rules in effect at the time of the alleged misconduct. The Court said the Committee could proceed if Sexton was properly charged. The Committee charged Sexton under the Code and set a hearing for December 3. Sexton asked the Court to order the Committee to follow the Standards for Lawyer Discipline and Disabil74/Arkansas Lawyer/April 1989

i ty Proceedings adopted by the American Bar Association, to order the Committee to deem requests for admissions admitted and to order certain Committee members to disqualify themselves from hearing his case.

MICHAEL SALAMO Letter of Reprimand Michael Salamo of Fayetteville was issued a letter of reprimand in

December for violation of Rule 1.3 of the Model Rules of Professional Conduct. Judge Francis T. Donovan of Conway filed the complaint against Salamo. Judge Donovan learned at a hearing on a Rule 37 peti tion in March 1988 that an appeal which should have been filed in 1986 by Salamo had not been filed. He ordered the defendant released from jail. Salamo claimed there was a breakdown in the attorney/client relationship which prevented him from fully representing his client. Salamo said he was not aware of the Rule

37 petition in Judge Donovan's court.

SALLIE L. STROUD Letter of Reprimand Sallie L. Stroud of Bentonville was issued a letter of reprimand in November for violation of Rules 1.3 and 1.4 of the Model Rules of Professional Conduct. The complainant said he hired Stroud to represent him in a lawsuit concerning the purchase of defective trailers. It was his understanding the statute of limitations would expire in October 1986. In mid1987, the complainant said Stroud assured him the lawsuit was progressing. In late 1987, he discovered that Stroud had moved from her office in Springdale. He was unable to locate her for several months. Stroud maintained that

she had never represented the complainant in any capacity.

ROBERT R. WHITE Letter of Reprimand Robert R. White of Fayetteville was issued a letter of reprimand in December for violation of Rule 8.4 of the Model Rules of Professional Conduct. The complaint against White was instituted by the Committee on Professional Con-

duct. White pleaded "no contest" to charges he wrote hot checks in Arkansas. White admitted to writing hot checks and said he had been advised by counsel that since no fine resulted from the charges and incarceration time was deferred, that technically there was no conviction. He said the checks were written when his law practice was faltering.

LEROY BLANKENSHIP Letter of Caution Leroy Blankenship of Batesville was issued a letter of caution in

December for violation of Rule 3.5 of the Model Rules of Professional Conduct. Judge Francis T. Donovan of Conway filed the complaint against Blankenship. During a court recess in a case in Stone County, Blankenship, the defendant's attorney, refused to return a piece of paper he took from the table assigned to the plaintiff's attorney. A hearing was held in chambers and Judge Donovan declared a mistrial.

JAMES P. MASSIE Letter of Caution James P. Massie of Little Rock was issued a letter of caution for violation of Rule 1.4 of the Model Rules of Professional Conduct. Massie was hired to represent his client in an uncontested divorce.


Massie failed to appear at a September 1986 hearing. The client waited nearly two hours for Massie before being told by a court employee that Massie's office had called and that he was out of town. Massie later told her the hearing had been rescheduled for October 1986. When she met Massie at the courthouse, he advised her the judge was on vacation and did not have any hearings scheduled. At about that time, the judge dropped by the courthouse to pick up some paperwork and, following an argument with Massie, agreed to hold the hearing. Massie told his client he would send her a decree but she never received it. In August 1988, Massie told her he'd closed his files in her case because she had waited too long to pay him. The client said she paid Massie $75 initially and sent him the remaining $75 in $25 increments. 0

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IN MEMORIAM

James Wood Chesnutt Judge James Wood Chesnutt, age 72, of Hot Springs, a retired chancery and probate judge, died

HANDWRITING EXPERT Scientific examination of Handwritten, Typewritten, Printed, Altered, Obliterated, Charred and Office Copier Documents; Ink and Paper Analysis, Dating and other document-related problems. Diplomate of the American Board of Forensic Document Examiners, Inc. Member of the American Academy of Forensic Sciences.

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Friday, December 3D, 1988. Judge Chesnutt was a native of Hot Springs and a 1933 graduate of the Hot Springs Public Schools. In 1938, he graduated from Princeton University with degrees in history and political science. In 1947, he graduated from the University of Arkansas School of Law, Fayetteville. Judge Chesnutt served in the U.S. Army Air Corps from 1943-46 during World War II and earned the rank of 1st Lieutenant. In 1948, he began practicing law with the law firm of Wood, Chesnutt and Smith. In 1968, he was elected chancellor for the Third Chancery Circuit. 18th Judicial District. Judge Chesnutt served as chancery and probate judge for nearly 17 years, until his retirement in 1984, when he became an associate of the Wood, Smith, Schnipper and Clay law firm. He attended the National Judicial College in Reno, Nevada, in 1976. Judge Chesnutt was a 40-year member of the Arkansas Bar Association and a member of the Garland County Bar Association, American Bar Association, American Judicature Society, Arkansas Judicial Council. United Fund Board, Red Cross Board, Levi Hospital Board. Garland County Hospital Board and Garland County Library Board. He was a member of the First Presbyterian Church. Survivors are his wile, Mary Murphy Chesnutt of Hot Springs; one son, James Hollingsworth Chesnutt II of Beaumont, Texas; one daughter, Mary Chesnutt Hunt of Gurlord, Conn.; his sister, Marnette Chesnutt Trotter of Little Rock; and nine grandchildren and one great-grandchild.

James Edward Lightle Jr. James Edward Lightle Jr., age 77, of Searcy, a former state senator and state representative, died Friday, November 11, 1988. Lightle was a graduate of Searcy

High School and attended Washington and Lee University, where he was a member of Sigma Alpha Epsilon fraternity. He graduated in 1932 from Harvard University with a degree in civil engineering. He was a captain in the U.S. Army Air Corps Intelligence Service during World War II and served 14 months with the Eighth Air Force Corps in England. He was city attorney of Searcy from 1938-42 and an assistant U.S. district attorney from 1939-42. Lightle also served on the state Board of Law Examiners and the

Arkansas Supreme Court's Client Security Fund Committee. Lightle served one term in the Arkansas House of Representatives in 1947-48 and two terms in the Arkansas Senate from 1963-70. Lightle practiced law in Arkansas for more than 52 years. He was the senior partner in the Lightle, Beebe, Raney and Bell law firm. He was a graduate of the University of Arkansas School of Law in Fayetteville. He was a 53-year member of the Arkansas Bar Association and a member of the White County Bar Association and the American Bar Association. He was a fellow of the Arkansas Bar Foundation and an organizer of the Searcy Industrial Development Commission. Lightle was active in the Searcy Chamber of Commerce. Lightle served on the board of directors of the First National Bank of Searcy and the SI. Vincent Infirmary Medical Center Development Council. He was a 44-year member and former president of the Searcy Kiwanis Club. Lightle was a lifelong member, vestryman, lay reader and senior warden of Searcy Trinity Parish Episcopal Church and served on the Bishop's Diocesan Council. Survivors are his wife, Marion Foster Lightle of Searcy; a daughter, Alice Lightle Holcomb of Little Rock; a sister, Elizabeth Lightle Yingling of Savannah, Georgia; and a grandchild. 0


US. POIUI Ser"iu

STATEMENT OF OWNERSHI Rtf/";'"

ANO CIRCULATION JMANAGEMENT 19 J6/jJ) by

U.S.C.

lB. PUBLICATION NO.

I A. TITLE OF PUBLICATION

1'he

Arkansas

Lawyer

514161-101410

12.

1

DATE f')F FILING

9-23-88

3A. NO. OF ISSUES PUBLISHED 38. ANNUAL SUBSCRIPTION

J FReaUENCV OF Issue

ANNUALLY

Quarterly

4

PRice

$15.00

4. COMPLETE MAILING ADDRESS OF KNOWN OFFiCE OF PUBLICATION ($mtl. Cily. Co,,,,'y, S,,'t ...d ZII'*4 COOt) (No' prinltrll

400 ~vest Markham Street Little Rock. AT 72201 5. COMPLETE MAILING ADDRESS OF THE HEADQUARTERS Of GENERAL BUSINESS OFFICES OF THE PUBLISHER (Not p'/""'1

Same as above

G. rUll NAMES AND COMPLETE MAILING ADDRESS OF PU8LISIlEA. EDITOR. AND MANAGING EOITOR (T'1ou I'tlll />lUST NOT tJt bl.lIIkJ PUBLISHER IN."'t end Corr,pltU J,f.iIi..,.Ad,Jr(JI)

Arkansas Bar ASSoC1atlon 400 West Markham Street, Little Rock, AT

EDI rOR

r4Imlt

Ru h Williams 400 West Markham Street, Little Rock, AT

MANAGING EDITOR

(Mmllt dnd

72201

Complltlt M"m", Add,us"

Ruth Williams 400 West Markham Street, Little Rock, AT

'.

72201

.nd Co,npll/It MIl/lin, Add'ltu}

72201

OVINER (I!o .....,'tol by a co,pOllu;on. its n"",1t a",/ adol,ltss must bit st"Ud a"d also j",,,,,d;'tdy thlt.ltu.,d" th, "a",u alld add'ltssu o{stDCkl,oId"s o_,in, 0' holdi", I puc"" ( I I "'0"' oltot.'.,.,ou"' O{SIDC"_ I{lfol o_'ltd by .. C",-p",.,jo... Ill, ,.amu.rod .dd'ltss,s o{ II" {""....du.1 O....lt'. mun bt ,i~I" II Okftl'd by" p"t.."Jhip Ot 0111" Ilnit.ro,po,.'td /lr".. Its """,'and II"I1dlOl, U will as Ih'" o{lach '"diridll.1 mllSl bl ,i.. II Iht pUll/in· lio" is publoshltd by. no..,.,olil OI,.nlntlon, lIS add,us ,n..n b. SllIlltd.} (II.", ....." bit compllud.)

It".

.""".nd

FULL NAME

COMPLETE MAILING ADDRESS

400 West t-1arkham Street ILLU Little Rock , AR

hrkansas BaT Association (voluntarv ornanization 8.

'WOWN OONDIlOLOEJ1S, MORTGAGEES, AND OTliER SECURITY Il0lOERS OWNING OR 1l0l0lNG I PERCENT OR MOllE OF TOTAL AMOUNT OF BONOS. MOll rGAGI;S on OTlIEIl SECUnlTIES (I{ thuc .,,: "UIIC, SU sl"ul FULL NAME

COMPLETE MAILING ADDRESS

None

..

FOR COMPLETION BY NONPROFIT ORGANIZATIONS AUTHORIZED Tfl MAil AT SPECIAL RATES ISutfon 413 12 OMM o"'y) Th. PUIPOS', function, .nd nonp'OIlIIlI1US 01 Ihis OI91ni~'lion.na Ih, ...mpl Ullus '0' Fad".1 income IIx PU'POles IChtck onc}

~

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III HAS NO"T CIIANGED DURING PRECEDING 12 MONTHS

o

121

(Stc imlructio". 0" I,I'''.1t sidc)

3900

-0-

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3590

3777

3590

3777

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3783

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179

117

2. RUu,n Itom N.wS Agents

-0-

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3775

3900

2. MlI.1

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(P,,'d a"dlo, ,tquultdJ

C. TOTAL PAID AND/OR REaUESTED CIRCULATION IS"'" 0/1081 a"d lOBI) I).

E.

FnEE DISTRIBUTION BY MAll, CARRIER OR OTHER MEANS SAMPLES, COMPLIMENTARY, AND OTHER FREE COPIES TOTAL DiSTRIBUTION (Sum o{CIJIld DJ

f. COPIES NOT DiSTRIBUTED

G. ".

ACTUAL NO. COPIES OF SINGLE ISSUE PUBUSHED NEAREST TO FlUNG DATE

3775

PAID ANDIOR REOUESTED CIRCVLATION I. Salts IhlOu,," delll'l$ .nd cllHi,n. ,.It'l vendOI$ lind counler ul'1

TOTAL IS..", o{ E. FI .Ild 1-should tqua/n" press

I certify that the sliltement5 made by me above are correct and complete

ru" ,1'0"'" i"

)

AJ

01

cI'4I"'c .....tl. 'his slatltmcnt.)

AVERAGE NO. COPIES EACH ISSUE DURING PRECEDING 12 MONTH5

EXTENT AND NATURE OF CIRCULATION

A. TOTAL NO. COPIES (Nltl P,us Run)

B.

(l{ch.",coI, publi.h" ",ust IUb",it upl"n",fOll

UAS CHANGED DVnlNG PRECEDING 12 MONTHS

tJ~;~:lV~e~~::::UBC:Cl~~~ANAGEn. on OWNEIl

April 19891Arkansas Lawyerrl7


THE DEVELOPING LAW

Resale of Restricted Securities: What's an Insider to Do? .. . statement covering the oth-

By James T. Pitts and Heartsill Ragon III

erwise restricted securities

Corporate insiders many I-----,L.~~~ times find themselves in possession 01 restricted securities. i.e .. securities

acquired in a transaction or series of transactions not

involving a public ollering,

"".

as a result of a merger.

acquisition or other corporate reorganization. or as a result 01 benefits received under an employee stock bonus arrangement. Shares in the corporation acquired through such a private placement cannot thereafter be translerred without compliance with the Securities Act 01 1933 and applicable state "blue-sky" requirements.

Persons who are

sought to be sold would cure the registration disabilities 01 resale, that is a ~,."......-----ltime-consuming and expensive process. This article will outline the other alterâ&#x20AC;˘ â&#x20AC;˘ natives available to the cort porate insider who wishes to sell his restricted stock. The exemptions from registration most commonly relied on in the resale 01

'.

fA,..

â&#x20AC;˘

..

_l~-....:._L

......

restricted securities are

.:..:_:r~~j~ the status 01 the seller as an

deemed to be in "control" 01 ' - ' ' - - - - blue-sky statute) or it must qualify a corporation by virtue 01 their stock ownership level or position for an exemption from registration either because 01 the nature 01 the in the company must be particusecurity or because 01 the circumlarly carelul. as their control posistances 01 the transaction. Moretion makes them an "alliliate" 01 the issuer corporation lor purposes over, the anti-fraud provisions apply even in the case 01 securiof determining the circumstances ties exempt lrom registration. Full under which they may dispose 01 their stock. and lair disclosure must be made in connection with the sale of It is a lundamental tenet 01 the securities laws that every security every security as significant civil and even criminal penalties can that is ollered and sold must either be registered under the attach lor a failure to comply. Securities Act (and corresponding While an effective registration 781Arkansas Lawyer/April 1989

those lound in: Rule 144; the ' . so-called section 4(1-1/2) exemption; Securities Act - section 3(a)(ii); and to a lesser extent, Regulation A. The ellicacy 01 one exemption over another depends on a variety 01 lactors including

alliliate or nonafliliate, the public availability 01 inlormation regarding the company, the value 01 the securities sought to be sold, the length 01 time the securities have been held by the seller and the number, identity and residence 01 the prospective purchasers. In addition, the Securities and Exchange Commission recently proposed to expand the "sale harbor" contained in Rule 144 to include unlimited resales 01 certain restricted securities to "quali-

fied institutional buyers" (a term


defined in the proposed rule) and to other "institutional investors."

This proposed rule, dubbed Rule 144A, would legitimize the expanding secondary market in restricted

securities beyond that currently available. (SEC Release No. 336806). The comment period on the rule proposal closed December 31. 1988. RULE 144 Rule 144 provides a "safe harbor" for the sale of restricted securities by an affiliate under Securi ties Act section 4. Strict compliance with all the provisions of the rule is necessary. however, or the seller may be deemed to be an underwriter as defined in Securities Act section 2(11) and hence a participant in an unlawful distribution of unregistered shares. Conditions of Sale: a) Public information substantially similar to that required of a reporting company with shares registered under section 13 of the Securi ties Exchange Act of 1934, must be available regarding the company. The rule requires that any such filings be current, i.e., not more than 90 days old. b) The seller of the securities must have fully paid for and held the shares for two years prior to the sale for which the exemption is claimed. The rule discusses installment purchases, short sales, options and other methods of "purchase" as triggering the two-year holding period calculation. c) The dollar volume of securities which may be sold under this rule on behalf of anyone person cannot exceed one percent of the shares outstanding for the company or the average weekly reported volume of trading on all the national exchanges or NASDAQ during the four calendar weeks prior to the filing of the notice of sale with the SEC. d) The securities may only be sold through a registered broker, Le., "brokers' transactions," under

circumstances which indicate that the seller is not an underwriter. e) A Form 144 (three copies)

must be filed with the SEC in Washington, D.C., and with any exchange on which the shares are listed (one copy) if the proposed sale would exceed 500 shares during any three-month period or if the sale price in the aggregate exceeds $10,000. A person filing the notice is required to have a bona fide intention to sell the securities within a reasonable time after filing the notice. If the seller of the securities is not an affiliate, on the other hand, Le.. does not control. is not con-

trolled by or is not under common control with the issuer, and has not been in such capacity for the preceding three months and has held the securities for three years, then compliance with the above provisions is not required as a prerequisite to resale. In addition, unregistered shares acquired by nonaffiliates pursuant to certain stock bonus arrange-

ments are not deemed to be restricted securities under the socalled "no-sale theory" and may be redistributed without compliance with either the registration provisions or Rule 144 if the following three conditions are satisfied: (I) the issuer of the securities is subject to the periodic reporting requirements of Section 13 or 15(d) of the Exchange Act; (2) the stock being sold is actively traded on the open market; and (3) the number of shares being sold is relatively small in relation to the number of shares of that class issued and outstanding. (Securities Act Release No. 6188 (2-11-80) and In the Maller of Milton Roy Company, SEC No-Action Leller, (CCH) Fed. Sec. L. Rep. [1980 Transfer Binder] , 76,460 (June 23, 1980)). Control persons, however, must

either register their securities received under the Plan or comply with Rule 144. In addition, care should be taken by such control persons in the redistribution of Plan shares that have been registered on Form S-8. Affiliates may not rely on a Form S-8 Prospectus to resell securities. The affiliate would either have to effect resales

in reliance on Rule 144 or pursuant to other applicable registration statements.

Securities Act Section 4(1-112) Transactions The so-called section 4( 1-1/2) phenomenon has developed primarily through SEC no-action letters and other interpretive releases. It describes a method by which a person may privately resell restricted securities initially issued in a private placement without SEC registration. The name "4(1-1/2) transactions" evolved from the SEC staff's requirement that the resales meet some of the criteria of Securi ties Act section 4(1) and some of the criteria of section 4(2). The sales typically would not meet all the criteria of either section, but the staff has been of the view that such private transactions do not necessarily need the full protection of the securities laws. However, because the section 4(1-1/2) transactions are creatures of staff letters that were wri!ten over a period of years rather than from clearly identified criteria contained in statutes or regulations. there are considerable internal inconsistencies which are clearly a trap for the unwary. Section 4(2) of the Securities Act exempts from registration transactions by an issuer not involving a public offering. Section 4(1), on the other hand, exempts transactions by any person other than an issuer, underwriter or dealer. The evolution of the 4(1-1/2) "exemption" results from the combination of the definition of the terms underwriter. as contained in section 4(1), which includes a person who purchases securities with a view to their distribution (an undefined term), and the "public offering" portion of section 4(2). The SEC staff has introduced the touchstones of a "public offering" in 4(2) to define a distribution under 4(1). Thus, the so-called 4(11/2) exemption. Care must be taken by the seller to avoid underwriter status. The seller must have purchased the April 19891Arkansas LawyernS


shares wi th the appropriate investment intent and must not be acting for the issuer in connection with a distribution. Otherwise. the transaction would involve an illegal public offering of securities. (An affiliate can be an issuer for purposes of determining whether a purchaser is an underwriter

under section 2(11). Most commentators agree. however. that section 4(1) does not create an independent source of determining whether an affiliate is an issuer so as to bring the transaction within the section 4(2) exemption.) The extent to which a controlling shareholder may rely on the section 4(1-112) exemption to sell restricted securities is not well established. There is support in the legislative history of the Securities Act that section 4(1) was to govern all resales and that the inclusion of the term underwriter in that section defined the limit to which a control person could resell his securities without registration. {House of Representatives Report No. 85 (May 4. 1933Âť. In that context, at least one court has determined that section 4{l) is available to a control person if the person to whom the securities are sold is not purchasing for distribution or with a view to dis-

tribution and hence is not an underwriter (Value Line Income Fund. Inc. v. Marcus, [1964-1966 Transfer Binder] Fed. Sec. L. Rep. (CCH) 1 91.523 (SONY 1965Âť. Moreover, such resales may be

made immediately after the shares are acquired by the purchaser (not the control person). provided the ultimate purchasers are persons to whom the issuer

could have made a valid direct sale under section 4(2). The securities would have had to have previously come to rest in the hands of the control person. however. for the Section 4(1) exemption to apply. The SEC staff has studiously avoided identifying the specific statutory nexus for the 4(1-1/2) exemption. Even though section 4(1) is generally considered by most observers to be the authoriz-

80/Arkonsas Lawyer/April 1989

ing section. a control person seeking to sell under 4(1-112) would be well-advised to structure the transaction to build in the protections of section 4(2). e.g.. the offeraes must have access to the same type of information regarding the issuer as would be available in a registration statement and the offerees must be a limited number of sophisticated investors. In addition. there can be no general advertisement or other solicita-

tion. A no-action position leller from the SEC staff would also be advisable. In any event. what are the trip wires to watch when selling shares in reliance on the so-called 4(1-1/2) exemption? First. the transaction must clearly be private as opposed to public. No specific restriction on the number of purchasers or offerees. however. has been articulated. Whether the transactions must be executed solely through "brokers' transactions" is also subject to debate. Second. no specific holding period has been identified as indicating a purchase with appropriate "investment intent" to avoid underwriter status. Curiously. the staff has declined to take noaction positions in cases having relatively long holding periods if there is no public information available on the issuer or if the transaction involves a significant portion of the issuer's securities outstanding. Neither of those factors go to the investment intent of the seller but probably reflect the stafl's concern regarding the general protection of investors.

In

fact. some no-action lellers appear conditioned on the representation that the purchasers be sophisticated as required by section 4(2). Third. certain information regarding the issuer must be furnished or otherwise made available. Whether that equates to registration type information, reporting company type information or otherwise is not clear. The anti-fraud provisions must, of course, be considered in this con-

text. but what other information is affirmatively required cannot with certainty be told. Fourth, restrictions on re-transfer by the purchaser mayor may not attach. The staff has been inconsistent on this issue. In some situations the staff has opined that it has no authority to require a continuation of the restrictions on re-transfer into the hands of the next holder. In other situations. however. the staff has imposed restrictions to make certain that the exemptions from registration are not utilized as part of an otherwise public offering. Counsel should be consulted. Securities Act Section 3(a)(Il)-The lntrastate Offering Exemption A secondary offering by a controlling person in the issuer's state of incorporation may be made in reliance on a section 3(a}(ll) exemption. provided the exemption would be available to the issuer for a primary offering in that state. It is not essential. however, that the controlling person be a resident of the issuer's state of incorporation. (SEC Release No. 33-4434.) Once it is determined that the 3(a}{l1) exemption is available. securities may be offered without compliance with the formal prospectus requirements applicable to registered securities. It should be emphasized. however. that the civil liability and anti-fraud provisions of sections 12(2) and 17 of the 1933 Act nevertheless apply. and may give rise to civil liabilities and to other sanctions applicable to violations of the statute. All securities of the issuer offered, offered for sale or sold during six months just preceding or six months after the sale in question may be integrated. thus defeating the 3{a)(1l) exemption. depending on the following factors: 1. Are the offerings part of a single plan of financing? 2. Do the offerings involve issuance of the same class of security? 3. Are the offerings made at or


about the same time? 4. Is the same type of consideration to be received? 5. Are the offerings made of the same general purpose?

Regulation A Regulation A was adopted by the SEC pursuant to Securities Act section 3(b) and exempts from registration: (il offerings by issuers or affiliates of up to $1.500,000, provided that the aggregate offering price of securi ties offered or sold on behalf of anyone affiliate does not exceed $100,000; and (ii) offerings by persons other than the issuer or its affiliates, of up to $100,000, provided that the aggregate offering price of securities offered or sold on behalf of all such other persons does not exceed $300,000. This regulation would appear to provide the broadest and most easily available exemption to an affiliate seeking to resell restricted securities. As a practical matter, however, the requirements contained within Regulation A are substantially as formal and rigorous as a registration statement. making the exemption rarely utilized. Moreover, certain disqualifications attach to companies that have been in existence for less than one year and to companies or their affiliates or predecessors that have been the subject of administrative or judicial sanctions. State Blue-Sky Requirements In addition to compliance with federal securities law, the seller of restricted securities must also abide by state blue-sky requirements and restrictions. Most states have enacted transactional exemptions from the registration process for securities sales to a limited number of offerees or purchasers. Authority exists, however, for the proposition that sales of securities made in multiple states are integrated together for the purpose of determining the total number of offers or sales allowable under the chosen transactional exemption. Thus, the jurisdiction with the lowest offeree/purchaser ceiling should be chosen to govern

the extent of the "nonpublic" offering. In Arkansas, the transactional exemptions that appear most likely to govern the resale of restricted securities are the "isolated nonissuer transaction" (Ark. Code Ann. ยง23-42-504(a)(J), Rule l4(b)(J) of the Rules of the Arkansas Securities Commissioner), and the "limited offeree" exemption (Ark. Code Ann. ยง 23-42-504(a)(9), Rule 14(b)(9) of the Rules of the Arkansas Securities Commissioner). These transactional exemptions are commonly referred to as the l4(b)(J) and l4(b)(9) exemptions, respectively. Whether a control person can rely on the l4(b)(J) exemption to sell restricted securities depends on whether the sale is viewed as being directly or indirectly for the benefit of the issuer. If so, then this exemption would not apply and the seller would need to qualify for another transactional exemption. Even if it is determined that the contemplated transaction is of no benefit to the issuer the transaction must still be truly isolated, as repeated or successive transactions will be prima facie evidence that the exemption is unavailable. Additionally, although not codified in her regulations, the Arkansas securities commissioner will not consider this exemption to apply to any transaction whereby 10 percent or more of the stock of the issuer will be sold. The l4(b)(9) transactional exemption also appears readily applicable. Although by statute this exemption is applicable to any offeror, the regulations which describe the method of compliance with this exemption require that financial and other information regarding the issuer be submitted to the securities commissioner. Generally, this information could only easily be obtained by an issuer or its affiliate control persons. The advantage to an offer in reliance on the l4(b)(9) transactional exemption as opposed to the

l4(b)(J) exemption is the number of potential persons to whom an offer can be directed. Under the l4(b)(9) exemption, an offer can be made to up to 25 persons in the state. An offer under l4(b)(l) presumes a much more limited number of offerees. Persons seeking to rely on the l4(b)(9) exemption, however, are cautioned to consult legal counseL as this exemption is not "self-proving" as is l4(b)(J) and a "proof of exemption" must be filed with the Arkansas securities commissioner prior to the transaction in order to perfect compliance with l4(b)(9). Among other things, the "proof of exemption" filing must include a representation that no commission or other remuneration will be paid for soliciting prospective offerees, a representation that each purchaser will sign an "investment intent" letter, a description of the method by which full disclosure of material facts relative to the investment will be made to offerees, curren t financial statements of the issuer and a representation that the investment will not exceed 20 percent of the purchaser's net worth. CONCLUSION The resale of restricted securities by controlling shareholders is specifically governed by SEC Rule 144. However, as noted above, Rule 144 is not the exclusive method by which such sales may be effected. Primarily because of the two-year holding period, corporate insiders sometimes wish to explore alternatives. In addition, state law requirements must be addressed. Caution should always be exercised in structuring any securities sale, as the penalties for noncompliance are potentially very severe. 0 Editor's Note: James T. Pitts manages the Washington, D.C.โ€ข associate office of the Wallace. Dover and Dixon law firm of Little Rock. Heartsill Ragon Ill, former corporate counsel for Fairfield Communities. Inc.. is a member of Wallace, Dover and Dixon. Aprill9891Arkansas Lawyer/8l


EXECUTIVE DIRECTOR'S PAGE

Quality ofLife Enemies By William A. Martin

some point in the legal profession. Perhaps it is an outgrowth of computerization -- counting the things a computer can count rather than those that do count, such as the

"W:; have met the enemy and he is us. -- Pogo That quotation irom Walt Kelly's

value of legal services to the client.

comic strip gives the bad news.

There are few defenders of goalsetting, perhaps an indication that

The good news is that lawyers are thinking and talking about quality of life issues. Examples of efforts to look at our profession and seek to define the problems from within include: oThe crowd for a breakout session on "The Lawyer's Quest for Quality of Work Life" at our MidYear Meeting for exceeded expec-

we are ready to reexamine our

practices. At least the time has come

tations.

oThe crowd again exceeded expectations at "Stress: Its Effect on the Profession and Private Life of the Lawyer" during the recent National Conference of Bar

THE ARKANSAS FREEDOM OF INFORMATION ACT by John J. Walkins Acomplete source of material on freedom of information problems; thorough exposition on open meetings and access to records. The book contains extensive citation of authority, including all relevant opinions of the Attorney General. The attorney will also find cross-references to federal legislation, an appendix setting forth all the statutory material, and, most usefully, an appendix of forms, including modei complaints and answers. Satisfaction guaranteed; may be returned within 30 days for full refund. Price: $16.95 plus $1.25 shipping Send check for $18.20 payable to:

m & m Press P.O. Box 338 Fayetteville, AR 72702 821Arkansos Lowyer/Aprill989

to reevaluate our fees.

Consider that an outside continu-

Presidents meeting.

oThe Maryland Bar Association recently conducted a pilot study on "How Attorneys View the Quality of Their Work Lives." oThe American Bar Association Commission on Women in the

Profession, chaired by Hillary Rodham Clinton, has found that many of the issues affecting the family life of lawyers are concerns shared by both women and men. A pervasive theme running

through the discussions hits at the enemy -- the things we do to produce dissatisfaction and stress. Among the first to be denounced

is goal-setting or requiring upwards of 2000 billable hours per year from ourselves. This trend was decried for making lawyers miserable, too tired to do a good job, unavailable for bar association and other civic work and, in some instances, devastating our family life. Goal-setting originated at

ing legal education organization recently tried to sell us computer software that "easily calculates hourly rates to achieve a firm's desired profitability." Maybe we will finally get back to Rule 1.5 of the Model Rules of Professional Conduct which simply states: "A lawyer's fee shall be reasonable." The public sees lawyers as greedy. This damage to our image causes stress. worry and dissatis-

faction within the profession. We see other lawyers as greedy. Following the "Trial of Today's Lawyers" at our Mid-Year Meeting, the audience was asked to answer

interrogatories: 17 per cent said they personally were more con-

cerned with being paid for their services than in rendering services

as a professional: 71 per cent said lawyers are greedy; and 80 per cent said lawyers have a misconception

about serving the public. We confront the enemy when we recognize that problems exist with-

in the profession. Talking about what we do that produces stress, ways to make the profession more human, how to have better relationships with other lawyers and how to become more professional and less excessively money orient-

ed starts us on the road to finding better ways to practice law. 0


YOUNG LAWYERS' UPDATE

ANew Judicial Article -Getting the Word Out modification of the judicial article of the Arkansas Constitution. Mr. Eichenbaum, having studied that portion of the Constitution for a number of years, decided to take the ball and run. A committee of the senior bar has been formed to study the proposed article. A forum on the Model Judicial Article was held at the Mid-Year Meeting in January. You too can take part in this proposed revision. The real difficulty in dealing with a new judicial article is getting the word out and convincing the people that we need the article

By Edward Boyce There is no other profession that provides the variety lawyers enjoy in the practice of law. The only lawyer who might question that premise is the poor fellow who gets stuck in the back room with a stack of abstracts to read, but even he can find humor and variety in some of the old wills he'll run across. For laymen, Judge Wapner's "The Peoples' Court" and that show's producers are proof positive of the variety of conflicts we face in the law. While clients' legal problems are not to be made light of, the small messes some people can get themselves into are amazing. The municipal courts and, in particular, their small claims divisions do a great service to the legal profession and the public in providing a forum for the resolution of those disputes. In 1985 the Arkansas legislature proposed and in 1986 the people approved Amendment 64 to the Arkansas Constitution. Amendment 64 raised the monetary jurisdiction of the municipal courts to $3,000 in matters of contract, in sui ts for the recovery of personal property and in suits for damage to personal property. The small claims division of municipal court is a side of the law not frequently seen by lawyers busy practicing high-dollar law. On the other hand the legislature has attempted to provide a procedure that does not require three years of law school and a course in trial procedure in order to try your case. One wonders whether the parties in Judge Wapner's court understand "Why?"

in order to improve our system. We

must convince them that a change

The small claims divisions and Judge Wapner are the only courts seen by a great number of people, yet the Arkansas Code and Constitution provide for more than a dozen: police court, mayor's court, chancery court. county court. justice-of-the-peace court, circuit court. probate court, juvenile court. municipal court. city court, court of common pleas, corporation court. supreme court and court of appeals, to name more than a few. Of the foregoing, the majority of our practice is in circuit, chancery, probate, municipal or one of the appellate courts. The others may have a place in history, but they make for a cumbersome process in modern times.

E. Charles Eichenbaum of Little Rock has recognized this need for reform and has undertaken to do something about it. At the Bar Leaders Conference in October 1988, one of the hot topics was a

of this sort will deliver faster, cheaper and more efficient justice. The next time you are faced with one of those perplexing jurisdictional questions that is puzzling only because our forefathers thought it necessary to create this court or that court. think about it and ask yourself. "How could the ends of justice be met to solve this matter more expeditiously?" 0

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April 19891Arkansas Lawyer/83


LAW SCHOOLS, A.I.C.L.E. AND HOUSE OF DELEGATES UNIVERSITY OF ARKANSAS SCHOOL OFLAW, FAYETIEVll..LE By J. W. Looney Faculty Activities oDuring the spring semester Jake Looney will be on off-campus duty assignment working on a number of

agricultural law research projects and a study of the history of the Arkansas Supreme Court. He will lead a legal study tour to China and spend six weeks as a visiting scholar at the Universi ty of Sydney. He spoke on water law to the Arkansas Forage and Grassland Council in Little Rock; on presidential politics to the Upward Bound Program in Fayetteville; to the Graduate Builders Institute in Fort Smith on construction con-

tracts and the law; on the Soviet legal system to the Sebastian County Bar Association; at a Plant Variety Protection Act symposium in Fayetteville; to the BiState Corn-a-Rama in Covington. Indiana, on the "Myths of Farm Management"; to the Fort Smith Rotary Club on

the Soviet legal system; to the Bella Vista Methodist Men on change in the Soviet Union; and to the Jefferson County Agri-Expo on Issues in Arkansas Water Law. His article "Director Liability and Risk Reduction appeared in American Cooperation 1988. He served as chair of the Agricultural Law Section of the Association of American Law Schools and organized and moderated a panel discussion on International Agricultural Trade at the Association's Annual Meeting in New Orleans in January. Looney was appointed vice chair of the Agricultural Law Committee of the General Practice Section of the American Bar Association. He received

the Distinguished Service Award for 1988 from the American Agricultural Law Association.

oDon Pedersen was elected president-elect of the American Agricultural Law Association at its annual meeting in Kansas City. He prepared a paper for the panel on "International Agricultural Trade" which was read at the Annual Meeting of the Association of American Law Schools in New Orleans. oBob Laurence's article "The Bald Eagle, the Florida Panther and the Nation's Word; An

Essay on the 'Quiet' Abrogation of Indian Treaties and the Proper Reading of United States v. Dian" appeared in the Journal of Land Use and Environmental Law. He spoke at a Special Institute on Mineral Development on Indian Lands in Albuquerque, New Mexico. opaul Schwartz spoke at the Goethe-University, Frankfurt-amMain. West Germany, on "New Developments in American Data Protection Law." oRobert B. Lellar. spending the academic year as a Fulbright Scholar in Japan. spoke to the Tokyo Bar Association's Section on

Environmental Issues on "Food Safety Regulation and the American Consumer" and the Nagoya Society of Legal Medicine on "Patient Autonomy in the United States: Theory and Practice." His article "Public Accountability and Medical Service Regulation has been accepted for publication by the Harvard Journal of Law and Technology. oRobert A. Lellar and colleagues have completed the manuscript for the Second Edition of Lellar, McDougal and Felix, Cases and Materials on Conflict of Laws. to be published by The Michie Company.

oLonnie Beard spoke to a workshop on "Farming and Ranching Taxation" at the Federal Tax Institute in Hot Springs and prepared a short article for the Agricultural Law Update concerning tax changes in the 1988 Tax Bill which will affect agriculture. oMilt Copeland was elected chair of the Campus Faculty and was selected as one of the two campus representatives on the Task Force for Faculty Evaluation and Tenure created by President Thornton. oAI Witte was elected president of the National Collegiate Athletic Association. oJanet Flaccus article "A Comparison of Farm Bankruptcies in Chapter II and the New Chapter 12" appeared in the University of Arkansas at Little Rock Law Journal. She spoke at the 1988 Heartland Labor and Employment Law Conference in Kansas City. oCharlie Carnes will serve as acting dean

while Jake Looney is on off-campus duty assignment. His comment on selected aglabor topics appeared in the Journal of Agricultural Taxation and Law. AALA The National Office of the American Agricultural Law Association opened its NationApril 19891Arkansas Lawyer/8S


al Office at the Law School in January. William P. Babione is the Association's first executive director. Babione has a B.A. in Business Administration

from

George Washington University, a Masters in Education from Pepperdine and a J.D. from the Law School. He is currently in the Class of 1988-89 in our Masters in Agricultural Law program. Babione is a veteran of the U.S. Air Force. The Office, located in Waterman Hall. Room 30 I. is open from 8:00 a.m. to 4:30 p.m. weekdays. The telephone number is (SOl) 575-7389. The FAX number is (501) 575-2053. Agricultural Center oJulia Wilder of the Center staff spoke to the annual meeting of the Arkansas Association of Conversation Districts. oAllen Hoberg and Alicia Tocco were speakers at the annual meeting of the American Agricultural Law Association in Kansas City. oAllen C. Hoberg, Center director. complet-

ed two additional working papers. They are "Some Cases on Takings -- When is Compensation Required for Destruction of Agricultural Property" and "Beekeeping Inspections and Other Administrative Searches -- Constitutional Parameters." oThe Center co-sponsored a symposium on the Plant Variety Protection Act with the Department of Agricultural Economics.

Student Activities oThe local chapter of the Black Law Student Association celebrated its 10th anniversary on campus with a symposium and banquet in

86/Arkansas Lawyer/April 1989

February. Antoinette Barksdale is the current Chapter president. oLisa Pruitt of Jasper and Chris Kirby of Fayetteville represented the Law School in the regional rounds of the National Moot Court Competition in Houston where they placed third overall. oTim Brooks of Fayetteville and Steve Coney of Hot Springs have been selected to represen t the school in the ABA Negotiations Regional Competition. oLisa Pruitt has been selected as a recipient

of a Marshall Scholarship for Study in Britain funded by the British Government. She will study at the University of London. 0

UNNERSITY OF

ARKANSAS AT UTIlE ROCK SCHOOL OF LAW By Paula Casey The UALR Law School Association's board of directors held its annual meeting on January 19, 1989, at the Law School. Association President Phil Farris conducted the meeting. The Law School is sponsoring a Law Explorer Post in conjunction with the Boy Scouts of America. Exploring, which is open to young men and women between the ages of 14 and 21. is a separate division

for St. Thomas University in Miami. Florida. She spoke at the Arkansas Natural Re-

oA scholarship in honor of Harry L. Ehrenberg, Sr.. a prominent local businessman, has been established by Harry L. Ehrenberg, Jr.. for the benefit of UALR Law School students. Funds for the scholarship will be matched by the Ohio National Life Insurance Company. Student News oAlexis Hatten, Jay Moody, Kathryn Pryor, Denise Martindill. Sylvia Borchert and Glenn Neel participated in the Henry Woods Trial Competition, the Law School's intramural trial competition, during the Mid-Winter Meeting of the Arkansas Bar Association. The competition is sponsored by the Arkansas Board of Trial Advocates. The teams will also participate in the National Trial Competition sponsored by the American College of Trial Lawyers, the American Bar Association Section on Li tigat ion and the Texas Young Lawyers Association in Raleigh, North

sources Law Institute in

Carolina.

Hot Springs. oprofessors Robert R. Wright and Susan Wright attended the Fall Council and Committee Chairmen meeting of the American Bar Asso-

oBill Burton, Ricky Hicks and Roger McConkie represented the Law School in the Regional Moot Court Com-

of the Boy Scouts designed to allow young people to participate in activities related to their career interests. Profes-

sor Andrew J. McClurg serves

as

the

Law

School's representative and as one of our advisors to the Post. Other advisors are Little Rock attorneys Tracy Barger, Jerry Malone and Susanne K. Roberts. Faculty Activities oProfessor Fred Peel's article "Capital Losses: Falling Short on Fairness and Simplicity" has been published in the University of Baltimore Law Review. 路Pro1essor

Gene

Mullins has completed "An Academic Perspective on Codification and the Arkansas Code of 1987 Annotated," to be published in Volume 11 of the UALR Law Journal. 路Professor Susan Wri路 ght was a member of the American Bar Association site inspection team

ciation Section of General Practice in Coro-

nado, California. .Professors Fenton

Adams, Frances Fendler, Charles Goldner, Dennis Hansen, Arthur Murphey, James Spears, Susan Wright and Robert Wright, and Associate Deans Paula Casey and Scott Stafford attended the annual meeting of the Association of American Law Schools in

New Orleans, Louisiana, in January.

petition

in

Houston,

Texas. oThe Arkansas Bar Association's Labor Law Section awarded its first scholarship to Patty Lueken. 0

AlC.L.E. NEWS By Rae Jean McCall During the last six months, the AICLE Program Committee has


been actively reviewing

encouragemen t given

potential programs to be delivered during the coming year. This is not an easy task. There are many ideas for potential GLE offerings and many different approaches available for delivering these programs. Under the leadership of J. Thomas Ray, the task of identifying a tentative program of work for fiscal year 1989-90 is almost complete. The work of the committee and the practice area advisory committee is enhanced by the efforts of individual members of the bar who pre sent program ideas for consideration. The committee is deeply appreciative of these efforts and encourages others to contribute their ideas. If you have an idea for a GLE program or just want to visit about programs you would like to see presented. contact the AICLE staff. I can assure you that your suggestions will be welcomed. On Saturday, January 21, the AICLE board of directors met in conjunction with the Mid-Year Meeting. In addition to the regular items of business, a Search Committee was appointed to hire a new executive director. It is with a great deal of sorrow that I must leave this position to relocate to Washington, D.C., with my husband. The work of AIGLE has been a very large part of my life and will be missed. I am certain that AIGLE will continue to provide high-quality programs and services because that is what the lawyers of Arkansas demand. I will be eternally grateful for the support and

me in this position and wish only the best for AICLE in the future. Preview of Upcoming Programs oThe 12th Annual Labor Law and Labor Relations Seminar at DeGray State Park Lodge is scheduled for April 7 and 8. Co-sponsored by the Labor Law Section of the Arkansas Bar Association, the National Labor Relations Board, the American Arbitration Association, the UALR Labor Education and Management Education Program and AICLE, this program will cover major areas of most critical concern to the practitioner in labor-management relations. Topics will include employee assistance programs and drug testing, arbitration, employee benefits under state law and collective bargaining. oA double-header of CLE will be presented on April 20 and 21 at the Little Rock Hilton Inn. On Thursday, a six-hour seminar entitled The Most Common Legal Ethics Complaints -- and How to Avoid Them could save you a lot of headaches. On Friday, April 21. an innovative program called Effective Time Management for Lawyers will be presented. Both programs will feature a widely acclaimed and dynamic speaker, Forest J. Bowman. Professor Bowman, a professor of law at West Virginia University, appears frequently at CLE seminars throughout the country and serves as an expert witness in lawyer malpractice cases. His combination of expertise and practical applica-

tion gives him a unique insight into the problems lawyers face as they handle the complaints that are part of the everyday practice of law. Don't miss these programs! oFriday, April 28, is the date for a one-day seminar entitled Real Estate Practice in Arkansas. Co-sponsored by the Real Estate Law Section of the Arkansas Bar Association, this program will concentrate on recent developments in the law in addition to providing practical help for the practitioner who handles real property matters. oThe Annual Tax Awareness Seminar is scheduled for Friday, May 5, at the Little Rock Hilton. This year's program will concentrate on tips and traps for the practitioner who does not have a tax practice. The Section of Taxation of the Arkansas Bar Association will co-sponsor this program. For additional information on these programs or to provide your suggestions for future programs, contact AIGLE at 375-3957. 0

ARKANSAS

BAR

~IATION

HOUSE OF

DElEGATES 11EETING Jcmuary 21, 1989 The Mid-Year Meeting of the Arkansas Bar Association's House of

Delegates was held on January 21. 1989, at the Excelsior Hotel in Little Rock. President Philip E. Dixon presided. The House approved the minutes of its October I. 1988, meeting, an unaudited financial statement for November/December 1988, the Annual Report of the secretary-treasurer and the Audit Committee report approving the Annual Report. Reports oThe House approved the authority of the Investment Committee, acting through its chair, to place or direct the executive director to place Association funds in federally-insured financial institutions, to move funds between such financial institutions and to direct the purchase of federallybacked notes and bonds. The secretary-treasurer or executive director is directed to sign any documents required by the financial institutions to reflect approval by the House of the depositor investment of funds. -Frank Hamlin, vice chair of the Paralegal Committee, moved to suspend the rules in order to amend a proposed resolution by the Committee. The resolution was amended to read that the Association urge "the establishment of a legal assistance training program at a state-supported university in the state of Arkansas. oRuss Meeks III reported that the membership of the Arkansas Continuing Legal Education Board incl udes Harry Truman Moore, First District; Odell Pollard, Second District; Robert Claar, Third District; John April I9891Arkansas Lawyer/87


T. Stroud Jr.. Fourth District; Judge H.A. Taylor. Fifth District; and Russ Meeks Ill. Sixth District. At large members are Jerry 1. Malone. Donna Gay. Judge Robin Mays and non-voting members Dennis L. Shackleford. U of A Dean J.w. Looney and UALR Dean Lawrence H. Averill Jr. Meeks also reported that the reporting period has been changed to April L 1989. to June 30, 1990. The hour requirement will be 12 hours, measured at 60 minutes per hour. -Ralph Brodie reported to the House on the Study of Mandatory State and Federal NonCompensated Appointments in Civil and Criminal Cases and requested that the House consider three resolutions addressing proper compensation. The first resolution was amended and approved. It states: "RESOLVED. that the Arkansas Bar Association. following the lead of the American Bar Association, recommends

that all state and federal

jurisdictions

in

Arkansas provide by statute or rule of court that attorneys appointed to represent persons

who have a consti tutional or statutory right to counsel receive rea-

sonable compensation and full reimbursement for costs and expenses. The second resolution was amended and approved. It states: "RESOLVED. that the Arkansas Bar Association authorizes the Pre-

siden t to appoint a commi ttee to prepare proposed legislation for the 1991 legislative session that will achieve the purpose of the 881Arkansas Lawyer/April 1989

Resolution to (A) provide adequate compensation with full reimbursements for costs and expenses for all appointed counsel with

the compensation levels of the judicial system and. whereas. the current method of providing for salary increases for the judicia-

ed and passed. It was moved and seconded that the House direct the Committee to oppose any provision in the family abuse bill permit-

payments to be made.

ry tied to the increases

and (B) increase maximum fees allowed in Ark. Code Ann. ยง16-92108 for state criminal appointments." The third resolution was approved. It states: "RESOLVED, that the Arkansas Bar Association go on record approving a constitutional challenge in State courts to the statutory maximum fee schedules in Ark. Code Ann. ยง16-92-108 (formerly Ark. Stat. Ann. ยง43-

for Congress is unsatisfactory, therefore. be it resolved the Arkan-

ting police to arrest anywhere without a war-

2419).

"FURTHER RESOLVED. that the Arkansas Bar Association authorizes the preparation of an Amicus Curae brief on behalf of the Bar Association challenging the constitutionality of statutory maximum fee schedules in Ark. Code Ann. ยง 16-92-1 08 (formerly Ark. Stat. Ann. ยง43-2419) and directs the President to appoint

a committee to draft the brief." -Sidney P. Davis reported for the Resolutions Committee that the Committee unanimously recommends approval of a proposed resolution regarding the salary of federal judges. The resolution failed by a vote of 21 to 19. Carolyn Witherspoon moved for reconsideration. The motion was seconded

sas Bar Association

requests that the Arkansas delegation support separate legislation to provide for salary increases to adequately compensate the federal judiciary. Davis reported on an amended resolution regarding establishment of a legal assistant training prgram.

The

resolution was adopted as amended by a vote of 23 for, 19 against. -Vincent Foster Jr. reported on the amended proposed constitutional amendment on merit

selection

and

moved that the amendment be approved. The motion was seconded and approved. A motion to reconsider failed by a vote of 19 to 16. The record reflects that Delegates Robert R. Estes and Stephen Sharum supported reconsideration

of

the

vote.

-Martha Miller. the Association's lobbyist. moved that the House authorize the Legislative Policy Committee to review any future pro-

posed amendments to the putative father registry bill to determine whether to modify or amend the bill. The

and approved. A substi-

motion was seconded

tute resolution was sec-

there currently exists

and passed. Miller discussed H.B. 1189 to levy a tax of $110 on professionals. including lawyers. Immediate Past President John F. Stroud Jr. moved for approval.

marked inadequacy in

The motion was second-

onded and approved. The resolution states: "WHEREAS, the Arkansas Bar Association

is of the opinion that

rant. but adopt any provision which is not violative of the Fourth Amendment. It was further approved that the Committee oppose legislation which would extend the limitation of liability for a garnishee which failed to answer; that the House favor a venue-type statute with time limitation for establishing residency for divorce filings; and that the Committee be authorized to review any pro-

posed amendments to the anatomical gifts act bill and determine whether it should be amended. -Ralph Cloar. chair of the Group Insurance Committee, moved for adoption of a new health insurance carrier -- American Investors Life Insurance Company. The previous insurer.

Commercial

Insurance Company of Newark. New Jersey. cancelled its coverage effective March 1. The motion was seconded

and passed. Carpenter Award The House established the Charles Carpenter Memorial Award to the outstanding member of the House. Appointments -The House appointed David Powell as chair 01 the Alternate Dispute Resolutions Committee and Will Griffin as chair of the Lawyers for Literacy Committee. 0 Respectully submitted, Sandra Wilson Cherry


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APRIL 1989