The Arkansas Lawyer Summer 2018

Lawyer The Arkansas

A publication of the Arkansas Bar Association

2018-2019 Arkansas Bar Association President Suzanne Clark

Vol. 53, No. 3, Summer 2018 online at www.arkbar.com

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PUBLISHER Arkansas Bar Association Phone: (501) 375-4606 Fax: (501) 375-4901 www.arkbar.com EDITOR Anna K. Hubbard EXECUTIVE DIRECTOR Karen K. Hutchins EDITORIAL BOARD Anton Leo Janik, Jr., Chair Haley Heath Burks Luke K. Burton Dr. Frankie Martin Griffin Judge Brandon J. Harrison Ashley Welch Hudson Jim L. Julian Philip E. Kaplan Tory Hodges Lewis Drake Mann Gordon S. Rather, Jr. David H. Williams OFFICERS President Suzanne Clark Board of Governors Chair J. Cliff McKinney II President-Elect Brian M. Rosenthal Immediate Past President Anthony A. “Tony” Hilliard Secretary Glen Hoggard Treasurer Joseph F. Kolb Parliamentarian Aaron L. Squyres Young Lawyers Section Chair Sarah C. Jewell BOARD OF GOVERNORS James Paul Beachboard Kandice A. Bell Margaret Hobbs Benson Earl Buddy Chadick Brian M. Clary Grant M. Cox Carol C. Dalby Bob Estes Robert (Skip) L. Henry III Joshua D. McFadden James E. McMenis Brandon K. Moffitt Brant Perkins Colby T. Roe Amy Lee Stewart Albert J. Thomas III Robert M. Veach Andrea Grimes Woods H. Wayne Young, Jr. LIAISON MEMBERS Judge Stephanie A. Casady Patti Julian Judge John N. Fogleman Sarah C. Jewell Jason B. Hendren Harry Truman Moore Lori D. Howard Richard L. Ramsay Karen K. Hutchins

The Arkansas Lawyer (USPS 546-040) is published quarterly by the Arkansas Bar Association. Periodicals postage paid at Little Rock, Arkansas. POSTMASTER: send address changes to The Arkansas Lawyer, 2224 Cottondale Lane, Little Rock, Arkansas 72202.

Subscription price to non-members of the Arkansas Bar Association $35.00 per year. 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 to Anna Hubbard, Editor, ahubbard@arkbar.com. All inquiries regarding advertising should be sent to Editor, The Arkansas Lawyer, at the above address. Copyright 2018, Arkansas Bar Association.

All rights reserved.

The Arkansas

Lawyer Vol. 53 No. 3

features

10 2018-2019 Arkansas Bar Association President Suzanne Clark

By Anna Hubbard Cover photo by KT Photography, Fayetteville 18 Way(un)fair: United States Supreme Court Decision Ends State Tax Physical Presence Nexus Test By Matthew C. Boch 26 Has Congress Killed the Goose that Lays the Golden Eggs? Charitable Giving Strategies in the Wake of the Tax Cuts and Jobs Act of 2017 By Erin Anderson and Steve Bauman 31 Bowen School of Law Launches Program to Narrow Justice Gap

By Amy Pritchard 32 Tax Cuts and Jobs Act Limits Business Expense Deduction for Settlement of Sexual Harassment Claims

By Trey Cooper 36 Not Enough Green: Sticky Problems from Insolvency in the Marijuana Business

By Andrew King 40 Don’t Let the Future of Trucking Leave Your Practice Behind

By Ben Jackson 46 Office Optional: Flexible Work Arrangements and the Rise of Virtual Law Firms

By Bourgon B. Reynolds 50 Updates from JLAP Contents Continued on Page 2

Lawyer The Arkansas Vol. 53, No. 3

in this issue ArkBar News

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2018-2019 ArkBar Officers

6

Arkansas Bar Association Annual Meeting

14

columns

President’s Report

7

Suzanne Clark

Young Lawyers Section Report

9

Sarah C. Jewell

Board of Governors and House of Delegates Report 24 Disciplinary Actions

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Arkansas Bar Foundation

57

In Memoriam

59

Classified Advertising

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Lawyer A publication of the Arkansas Bar Association

Vol. 51, No. 1, Winter 2016 online at www.arkbar.com

Inside: Same-Sex Marriage Judicial Campaign Finance The Arkansas Supreme Court During World War II Arkansas LLCs Guardianships of Minors

Advertise in the next issue of The Arkansas Lawyer.

Opportunities also available on ArkBar’s website & weekly ebulletins. www.arkbar.com/for-attorneys/ publications/the-arkansas-lawyer/ advertising

Arkansas Bar Association

2224 Cottondale Lane, Little Rock, Arkansas 72202

HOUSE OF DELEGATES Delegate District A-1: Geoffrey Denzil Hamby, Susan K. Kendall, George M. Rozzell, Ryan Scott, Vicki S. Vasser-Jenkins Delegate District A-2: Payton C. Bentley, Earl Buddy Chadick, Leslie Copeland, M. Scott Hall, Jason M. Hatfield, Brian C. Hogue, Sarah Coppola Jewell, Jarid Markus Kinder, Alan Lee Lane, Richard Kyle Lippard, John Pesek Delegate District A-3: James A. Arnold II, Craig L. Cook, Keith M. Kannett, Joseph Karl Luebke, Samuel M. Terry Delegate District A-4: Justice Paul Danielson Delegate District A-5: Johnny L. Nichols Delegate District A-6: Delegate District A-7: Samuel J. Pasthing Delegate District B: Darryl E. Baker, David Biscoe Bingham, Jordan Broyles, Bart W. Calhoun, Tim J. Cullen, Thomas J. Diaz, Tony Anthony DiCarlo III, Jason W. Earley, Edie Ervin, Jesse J. Gibson, Shana Woodard Graves, Christopher Heil, Glen Hoggard, Ashley Welch Hudson, D. Michael Huckabay, Jr., Amy Dunn Johnson, Jamie Huffman Jones, Joseph F. Kolb, Victoria Leigh, Kathleen Marie McDonald, J. Cliff McKinney II, Jeremy M. McNabb, David Stockley Mitchell, Jr., Meredith S. Moore, Ruthanne Nash Murphy, Jordan Rogers, Molly S. Shepherd, Scott Michael Strauss, Jonathan Q. Warren, David H. Williams, Heather Goodson Zachary Delegate District C-1: Robert F. Thompson Delegate District C-2: Delegate District C-3: Robert J. Gibson, Warren Curt Hawkins, Ryan M. Wilson Delegate District C-4: Kara Lynn Byars Delegate District C-5: Christopher Michael Bryant, Matthew Coe, Kathie A. Hess Delegate District C-6: Danny M. Rasmussen Delegate District C-7: Ginger M. Stuart Delegate District C-8: Margaret Dobson, George A. Lea, Carla M. Martin Delegate District C-9: Katelyn Burch Busby, Lee Douglas Curry Delegate District C-10: Amy Freedman, Joshua R. Thane Delegate District C-11: Sterling Taylor Chaney, Taylor Andrew King Delegate District C-12: Kurt J. Meredith, Brenda Sue Simpson Delegate District C-13: Brian M. Clary, John Andrew Ellis Law Student Representatives: Clayton Rowe, University of Arkansas School of Law; Kristina Lee Farmer, UA Little Rock William H. Bowen School of Law

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Securities offered through Voya Financial Partners, LLC (member SIPC).

Voya Financial Partners is a member of the Voya family of companies (“Voya”). Voya, the ABA Retirement Funds, and the Arkansas Bar Association are separate, unaffiliated entities, and not responsible for one another’s products and services.

CN1018-37928-1119D - 2017

ArkBar News Introducing the New ArkBar 2018-2019 Committee Structure During the last year, the Governance Committee met frequently to discuss ways to modernize the Association’s structure and bring more efficiency. The Governance Committee identified the existence of more than 30 committees as one of the leading sources of inefficiency. The Board of Governors voted at its April 2018 meeting to decrease the total number of committees. With the exception of the Arkansas Law Review Committee, which was disbanded at the request of the law school, this change did not eliminate any of the functions of the existing committees. Below is a list of the new committee structure and the 2018-2019 chairs. As noted below, two super committees have sub-committee chairs who will be responsible for specific sub-committees. In addition to the chairs listed below, the following three members will serve as annual event chairs: Vicki VasserJenkins, Annual Meeting Chair; Jamie Huffman Jones, Mid-Year Meeting Chair; and Larry W. Burks, Annual Sponsorship Chair. The new committee structure will streamline communications and lead to more productive committee work. —J. Cliff McKinney, Governance Committee Chair Committee Name

Chair

Audit Committee Continuing Legal Education Committee Editorial Advisory Board - The Arkansas Lawyer Finance Committee Governance Committee Jurisprudence & Law Reform Committee Legislation Committee Legal Related Education Super Committee Law School Sub-Committee Mock Trial Sub-Committee Membership Super Committee Member Benefits Sub Committee Website & Social Media Sub Committee PAC Personnel Committee Professional Committee Professional Ethics Committee

Ledly S. Jennings Lori D. Howard Anton Leo Janik, Jr. Joe F. Kolb J. Cliff McKinney II Paul W. Keith Aaron L. Squyres Beverly Brister Harry Light Anthony McMullen Denise Hoggard Kandace Bell and David Mitchell Will Gruber and Jordan Rogers Brent J. Eubanks Mark W. Hodge Margaret Hobbs Benson Brad L. Hendricks

YOU ARE THE EXPERTS

Contact the Association if you have article ideas for The Arkansas Lawyer magazine.

Email: ahubbard@arkbar.com For more information on the submission process, go to http://tinyurl.com/ thearkansaslawyermag or call 501-375-4606

New Deans Began at Both Law Schools Theresa Beiner, a nationally recognized law professor for innovative teaching and scholarship, has been selected after a national search as the first permanent female dean of the William H. Bowen School of Law at the University of Arkansas at Little Rock. She began her new appointment on July 1, 2018. She previously served as the law school’s Associate Dean of Faculty Development and as the Associate Dean of Academic Affairs.

Dean She assumed the deanship July 1, 2018, Theresa Beiner succeeding John DiPippa, who joined the Bowen faculty in 1983 and began serving as interim dean on July 1, 2017. He was Bowen dean from 2008 to 2012 before returning to the classroom as Dean Emeritus and Distinguished Professor of Law and Public Policy.

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Margaret Sova McCabe, professor at the University of New Hampshire School of Law, has been named dean of the University of Arkansas School of Law. She assumed her duties effective July 1, 2018.

McCabe will be the School of Law’s third successive female dean and the 13th dean since its founding in 1924. She was selected

by Provost Jim Coleman, on the recommendation of a campus search committee followDean ing a national search that drew candidates Sova McCabe from coast to coast.

Sova McCabe will replace Stacy Leeds, who has served as dean of the School of Law since 2011. Leeds was named interim vice chancellor for economic development in 2017 and will continue in that role on a permanent basis.

ArkBar News

Oyez! Oyez!

ACCOLADES John E. Tull III of Quattlebaum, Grooms & Tull PLLC received the Freedom of Information Award from the Arkansas Press Association. Arkansas Business selected the following members for inclusion in the 2018 “40 Under 40” Class: Jane A. Kim, Wright Lindsey Jennings, R.J. Martino, iProv, Amber Davis, Quattlebaum, Grooms & Tull PLLC and Adam Wells, Lumber One Home Center. The American College of Environmental Lawyers announced it has elected Alan Perkins of PPGMR Law in Little Rock as one of its newest fellows. Todd Wooten of Dover Dixon Horne PLLC has been invited to join the International Association of Defense Counsel. Craig Cockrell, of Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C. in Rogers, has been accepted into the inaugural class of the Heart of America Fellows Institute of the American College of Trust and Estate Counsel.

APPOINTMENTS AND ELECTIONS Karen K. Hutchins, Executive Director of the Arkansas Bar Association, is serving as the 2018-2019 President of the National Association of Bar Executives.

Former Chief Justice Howard Brill has returned to the Judicial Ethics Advisory Committee and will serve as Committee Chair. David Sachar is the national president of the board of directors for the Association of Judicial Disciplinary Counsel as well as serving on the advisory board for the National Center for State Courts–Center for Judicial Ethics.

WORD ABOUT TOWN PPGMR Law announced it is expanding its footprint with a new office in Stuttgart. Long-time Stuttgart resident R. Scott Morgan and Stuttgart native Patrick B. Feilke will lead the firm’s new location in the Arkansas County Bank Building at 620 East 22nd Street, Suite 206. Dequeshia Prude has been hired as an associate attorney at the Law Group of Northwest Arkansas LLP in Fayetteville.

Snellgrove, Langley, Culpepper, Williams & Mullally, of Jonesboro, announced that J. Chad Owens has been made partner in the firm. Emily Abbott has been hired as the Deputy Executive Director of the Judicial Discipline & Disability Commission.

Please send Oyez announcements to ahubbard@arkbar.com.

ArkBar Welcomes New Staff Member

Polly Deems

Polly Deems joins the association’s staff as Membership and Meetings Director. Polly has event management, volunteer management, and fund raising experience in the non-profit arena most recently with the Arkansas Foodbank and Hospice Home Care. And, she has over 30 years of volunteer service in areas such as the arts, hunger relief, and children’s health and education. She is a member of the vestry at Saint Mark’s Episcopal Church and is a new member of the Potluck board. Polly has two sons, Taylor and Alex, an adopted dog named Kylie, and a cat named Patches. She enjoys the outdoors and loves to bike and hike in our great state and out west in the mountains.

Filing Petitions Due October 31, 2018 For 2020-2021 ArkBar President The President-elect of the Arkansas Bar Association is elected by the vote of the entire membership of the Association. The position rotates each year among the three state Bar districts. The next president-elect designee will come from Bar District C. Nominating petitions must be filed with the secretary at the Association’s office no later than October 31, 2018. The petitions must be signed by at least 75 Association members. The petition signers must include at least 25 signatures from Association members residing in each of the three state Bar districts of the Association. Please contact Karen Hutchins at 501-801-5663 for a petition.

The member elected this fall will assume the office of president-elect at the June 2019 Annual Meeting in Hot Springs and will become the Association president in June of 2020.

ArkBar 2018-2019 Section Chairs Administrative Law: J. G. (Gerry) Schulze Agricultural Law: J. Travis Baxter Alternative Dispute Resolution: Frank S. Hamlin Business Law: J. Don Overton Civil Rights Law: Christine A. Cryer Construction Law: Carl J. Circo Corporate & In-House Counsel: Matthew David Mitchell Criminal Law: Andrew C. Gill Debtor/Creditor: Paul T. Bennett Disability Law: Sydney L. Brown Elder Law: Ashley Stepps Environmental Law: Jordan P. Wimpy Family Law: Victor R. Richardson Government Practice: Angela C. Lowther International & Immigration Law: Kathleen M. McDonald Labor & Employment: Joseph E. (Jess) Sweere Natural Resources Law: William C. Warren Probate & Trust: Lillian Dee Davenport Real Estate Law: J. Cliff McKinney II Section of Taxation: Blake D. Lewis Solo, Small Firm & Practice Mngt.: William Phillips Allison Tort Law: Robert Lamb Beard Young Lawyers’ Section: Sarah C. Jewell

Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

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Meet the 2018-2019 Arkansas Bar Association Officers The Arkansas Bar Association began its 2018-2019 Bar year on July 1, 2018. President Suzanne Clark and the ArkBar officers welcome you and thank you for your membership.

The Arkansas Bar Association is your statewide professional network—your connection to over 5,700 lawyers across the state.

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President Suzanne Clark

President-Elect Brian M. Rosenthal

Clark Law Firm, PLLC Fayetteville

Rose Law Firm Little Rock

Board of Governors Chair J. Cliff McKinney II Quattlebaum, Grooms & Tull PLLC LIttle Rock

Secretary Glen Hoggard

Treasurer Joe F. Kolb

Parliamentarian Aaron Squyres

Hoggard Law Firm North Little Rock

j.kolb Little Rock

Wilson & Associates, PLLC Little Rock

The Arkansas Lawyer

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Immediate Past-President Anthony A. “Tony” Hilliard Ramsay, Bridgforth, Robinson and Raley, LLP, Pine Bluff

Young Lawyers Section Chair Sarah C. Jewell Daniels Law Firm PLLC, Fayetteville

PRESIDENT’S REPORT

Tag—We’re It—Continued Suzanne Clark Suzanne Clark is the President of the Arkansas Bar Association. She is the founder of the Clark Law Firm, PLLC in Fayetteville.

If you were not able to make it to Hot Springs in June—we missed you! It was wonderful to see so many friends and colleagues at our 120th Annual Meeting. Many thanks to Judge Mary Spencer McGowan, Nate Looney and the Association staff for all of their hard work making it such a successful event. We celebrated 35 lawyers and judges with 50 years of membership in the association, and recognized many award winners, both during the meeting and at the Bar Foundation dinner, for pro bono service and professional excellence. This month, on the national level, our own Executive Director, Karen Hutchins, was sworn in as the President of the National Association of Bar Executives, and former Arkansas School of Law Dean Cyndi Nance was honored at the American Bar Association Annual Meeting with the 2018 Margaret Brent Award for her accomplishments and service to the profession.

Arkansas is well represented with outstanding lawyers who give their time and talent to serve their communities and our profession.

Keep that in mind as we move into the fall and the deluge of television ads appear advocating for Issue 1. There is a mountain of corporate money that will be focused on demon-

izing lawyers and lawsuits. We are used to the lawyer jokes and most of us ignore them or laugh them off. But this time there is nothing funny about it. This time the attack on us includes an attack on the rule of law. The fundamental concept of separation of powers—the checks and balances that are foundational to our system of democracy—is at risk.

The Association has been in vocal opposition to what was first SJR8 and is now Issue 1 for the last two years. As you are well aware by now, Issue 1 will transfer the rulemaking authority from the Supreme Court to the General Assembly. It opens the door to special interests influencing the rules regarding how litigants get to court, what evidence may or may not be offered in support of their claims, and when or if an appeal may be taken from those decisions.

We had vigorous debate about Issue 1 at the Annual Meeting. We appreciate the judges, lawyers, and legislators who participated in our programs and panel discussions.

There is no question Issue 1 will diminish the ability of individuals and small businesses without significant financial resources to get relief in our justice system.

Issue 1 opens the courthouse doors to lobbyists seeking to make the rules to protect special

interests from liability. We’ve all heard that cynical twist on the golden rule—he who has the gold makes the rules. That will be true with the passage of Issue 1.

When it comes to the rulemaking component of Issue 1, at our meetings, we are preaching to the choir. Lawyers know how devastating the transfer of rulemaking to the legislature could be to access to justice.

Unfortunately, the average voter does not understand the separation of powers issues and the negative impact to an independent judiciary. We need to help provide that education. Former Justice Paul Danielson and Past President Brian Ratcliff have organized a speaker’s bureau of attorneys who have volunteered to speak across the state. We need your help with the outreach effort. Lawyers are community leaders. You participate in your communities, through your Rotary Clubs, PTOs, local libraries, etc. If you will speak to your local groups, we can provide Issue 1 talking points.

If you identify a meeting willing to give time to Issue 1, we will provide a speaker.

We have a few short months left before voters will decide whether to amend our State Constitution in a way that will negatively impact the rule of law for generations. It is imperative

that we help voters understand what they are really voting for, and it is certainly not to “help the economy.” Retired Justice Annabelle Imber Tuck has been tirelessly working across the state to get the word out. The legislative question committee she is chairing, Defending Your Day in Court, does not have the financial resources the corporate advocates of Issue 1 have at their disposal. She cannot do this alone. We need to be foot soldiers in the effort to defeat Issue 1—one voter at a time.

Voters will laugh at the lawyer jokes, but they trust their own lawyer. They trust you. Explain the impact a vote in favor of Issue 1 will have on access to justice.

This is the most important vote affecting, not only our profession, but justice itself. We need to do our part to protect the judiciary and the rule of law.

If you want to get involved and are not sure how, contact me, Justice Tuck, or Justice Danielson. If Arkansas lawyers do not stand against Issue 1’s attack on the rule of law, we will have to live with the result. Tag, we’re it. 

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Arkansas Bar Association Political Action Committee (ArkBar PAC) Committed to supporting, funding and electing more lawyers to the legislature.

Things to Know 1. There are over 9,000 active attorneys in Arkansas per the Arkansas Supreme Court Clerk’s Office.

2. Of those, 5,700 attorneys, or 61.2%, are members of the Arkansas Bar Association.

3. Only 16 active attorneys are serving as members of the Arkansas State Legislature. a. Of those 16, only 11 are members of the Arkansas Bar Association. b. That means we have only 8.1% direct representation in the current Legislature.

4. The Arkansas Bar Association Political Action Committee’s primary purpose is to elect more members of the Arkansas Bar Association to the Arkansas Legislature.

5. During the 2017-2018 Bar Year, current members of the Arkansas Bar Association have contributed an average of only $0.56 to the PAC.

Non-Partisan With us, it’s not about the party, but the problem.

Help us—Help yourself.

Minimum membership dues are only $30 annually. https://cqrcengage.com/arkbar/pac

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6. We need more from you.

YLS REPORT

By Sarah C. Jewell Sarah C. Jewell is the Chair of the Young Lawyers Section. She is an attorney with the Daniels Law Firm, PLLC in Fayetteville.

At the 120th Arkansas Bar Annual Meeting in June, the Young Lawyers Section celebrated a great year with Eric Marks at the reigns. YLS hosted a well-attended (read: hot and crowded!) reception in the hospitality suite at Hotel Hot Springs. The next morning, YLS honored outgoing Chair Eric Marks and held elections to fill leadership positions, then got to work setting goals and planning events for the coming year.

The YLS Executive Council will meet in Fayetteville in September to solidify plans for the coming year. We will host a tailgate for all bar members on Saturday, September 15th when the Razorbacks host North Texas. This year, YLS will offer Wills for Heroes in multiple locations throughout Arkansas. Wills for Heroes is a free legal clinic wherein volunteer attorneys thank those who serve the public by providing veterans, firefighters, first responders, and police officers with a simple will, living will, durable general power of attorney or durable power of attorney for health care. Watch for the opportunity to volunteer!

YLS will host a hospitality suite at the ArkBar Mid-Year Meeting in February and the 2nd Annual YLS Derby Day at Oaklawn this Spring. Throughout the year, YLS will draft a Local Practice Guidebook covering every county in Arkansas. We hope this resource will be useful to all practitioners whether new or experienced. The Local Practice Guidebook will be available online as a PDF so it can be easily accessed and downloaded. YLS will also revive the YLS quarterly publication, In Brief, under the direction of Editor and YLS Chair-Elect Stefan McBride.

2018-2019 YLS Executive Council

From left: Samantha Vitale, Sarah Jewell, Jake Potter, Stefan McBride, Josh Potter, Eric Marks, Ray Slaton, Dequeshia Prude, and Robbie Wilson.

2018-2019 YLS Executive Council: Sarah Jewell (Chair) Stefan McBride (Chair-Elect and In Brief Editor) Eric Marks (Immediate Past Chair) Dequeshia Prude (Secretary/Treasurer) Samantha Vitale (District A Rep) Robbie Wilson (District B Rep) Josh Potter (District C Rep) Jake Potter (At-Large and Social Committee Chair) Ray Slaton (At-Large)

2017-2018 YLS Chair Eric Marks with fiancĂŠ Katie.

Eric Marks passes the gavel to incoming YLS Chair Sarah Jewell.

Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

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2018-2019 Arkansas Bar Association President

Suzanne G. Clark

S

uzanne Clark was sworn in as the 121st president of

the

Arkansas

Bar

Association during the association’s annual meeting in Hot Springs on June 15, 2018.

Suzanne is known for taking on challenges, working tirelessly for her clients and community, and for being tenacious. She has a

Article by Anna Hubbard. Photo by KT Photography in Fayetteville.

reputation for being friendly, approachable, kind and genuine. Suzanne’s colleagues describe her as having an uncanny way of communicating complex issues and solving problems. All of these attributes will serve the bar association well during this challenging year for the legal profession.

Only 10 years after receiving her law degree, Suzanne is serving as the sixth female president of the association. The law is Suzanne’s second career; her first was in the semiconductor industry, first as a process engineer and then in various senior management positions for a Fortune 500 corporation. She received a Bachelor of Science degree in chemical engineering from the University of Connecticut and is a summa cum laude graduate of the University of Arkansas School of Law, where she served as Editor-in-Chief of the Arkansas Law Review. She began her litigation practice with Kutak Rock LLP in 2008 and founded Clark Law Firm PLLC in 2012.

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From left: Justin, Katie, Campbell and Jackson Tennant with Suzanne and Steve Clark. Photo by Mike Pirnique.

Like many of her female colleagues in the legal profession, Suzanne helped pave the way for women in the male-dominated corporate chemical industry. Suzanne spoke about some of the challenges of her early career in a February 4, 2018, article by Lara Hightower in the High Profile section of the Arkansas Democrat-Gazette: “When I got my first regional manager job, I was the first woman who was being put in this job, and there were three other men at my level. One of them said, ‘I was kind of irritated that we didn’t get to vote on it or anything.’ It was sort of like, ‘This is clearly going to change the dynamics of our meetings,’ and he thought he should have a say on whether they should let a woman on the team.

“As Clark rose in the ranks, she took pains to do her part to change the culture of her company. ‘As you get more senior and get more power in your own right, you can have some impact in terms of how that dynamic is,’ she says.”

Suzanne said she experienced all the typical issues most women of her generation did as they moved through the management ranks.

She speaks of those challenges with the same temperament and friendly demeanor as she does most challenges.

“My corporate career allowed me to travel extensively, to China, Singapore, Korea, Taiwan, Malaysia, Japan, all over Europe. I always found it amusing when a driver would be at the airport to pick me up when traveling in Asia, the sign invariably said ‘Mr. Clark.’” Suzanne also says that, while she dealt with challenges typical to wom-

en in a male-dominated industry, she had wonderful male mentors who championed her career as well.

Having always had an interest in the practice of law, she decided to change directions after she met her husband Steve. At that time she was working in Austin, Texas, as the Vice President of sales and field operations for North America for Mykrolis, a biosciences company. The extensive travel was not appealing to her with her new family. Suzanne spoke about her decision in the High Profile article: “I realized I wasn’t going to law school just because I wanted to be a lawyer; I wanted a lifestyle change. I wanted to be able to be involved in my community. I wanted to be involved with our grandchildren.”

Suzanne and Steve live in Fayetteville where Steve is President and CEO of the Fayetteville Chamber of Commerce. Suzanne said she has much more control over her schedule now which allows her to keep up with their five grandchildren.

“Steve and I will be married 20 years in November,” she said. “We focus a great deal of our time around our grandchildren. The balance comes in establishing priorities. There are times when critical client matters must be addressed, but I put family events on my calendar and plan around them so the kids know they are our priority.”

Suzanne and Steve both believe in public service and enjoy playing an active role in their community. Suzanne has served as president of the Board of Trustees of the Fayetteville Public Library, on the Board Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

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“‘Suzanne really is an elegant leader; she understands business and garners respect and confidence because she earns it. She’s a consummate professional and a genuinely kind person who exhibits empathy and understands the way life works and the role the law plays in the current environment. You won’t ever catch her unprepared or ill-informed and you can rest assured that she has the Arkansas Bar’s best interest in mind.’”

of Directors of the Northwest Arkansas Free Health Center (now WelcomeHealth) and the Board of Directors for Decision Point, Inc., a substance abuse treatment center. She was appointed in 2008 to Mayor Lioneld Jordan’s Transition Team.

Suzanne gives credit to Steve for helping her make the leap to the practice of law. “He is my everything,” she said. “I would not be a lawyer today but for him. I certainly would not be the president of the Bar Association but for him. His love and support and encouragement is unwavering.”

Suzanne has three siblings and is from a close family. Suzanne credits her parents for being examples of family, integrity and honor that she relies on to this day. Suzanne grew up in Newport, Rhode Island, where her parents still live.

“My parents were high school sweethearts and have been married 64 years,” Suzanne said. “Family was always the priority and they expected all of their kids to excel. Newport, Rhode Island, is a pretty idyllic place to grow up. It is a small town in a beautiful setting. I was at the beach most days of the summer. I really did not appreciate just how special a place it is until I grew up and moved away.”

Suzanne, a litigator, often works with attorney James W. Smith and his partner Rebecca Hurst in Rogers. Smith said that he is not surprised that Suzanne has ascended to the presidency of the Arkansas Bar Association so quickly. “To me, it is just another reflection of the confidence and good will 12

The Arkansas Lawyer

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that our lawyer community has in Suzanne.

It’s not that different from the manner in which she conducts her legal practice and represents her clients’ best interest. She is not afraid to take a position, she’s not one to ride the fence, and her position will be one that is well thought out, that considers all sides and all people involved, and that is grounded in reasoned judgment.”

That was clear during her swearing-in speech. Suzanne spoke about the Bar Association’s position on Issue 1 (originally referred to as SJR8), a proposed constitutional amendment on legal fees and court rules.

The association’s position in opposition is based on the fact that Issue 1 would transfer the authority for court rulemaking from the Arkansas Supreme Court to the Arkansas General Assembly.

While a pro-Issue 1 ballot campaign committee calls itself Arkansans for Jobs and Justice, Clark said that “Issue 1 is not about jobs and it is most certainly not about justice. They are going to have an awful lot of money to throw at this and will try to demonize lawyers and lawsuits in order to convince the voters that this is about runaway juries and greedy lawyers. And that’s not what it is about. It is about usurping the authority of the judiciary. This is about taking over what is supposed to be a co-equal branch of government.”

Suzanne stressed the importance of the bar association being the voice for lawyers to educate voters regarding the danger to access to justice if the legislature takes control of the judiciary’s rule-making process.

Having served on the Civil Practice Committee, she understands how much time and energy is put into drafting the rules before

they are put out for attorneys and the public to provide input. Referring to the annual meeting’s “Keep Politics Out of Our Courts” panel discussion with Chief Justice Dan Kemp, retired Justice Paul Danielson and retired Justice Annabelle Imber Tuck, Suzanne said she had several people come to her after the discussion telling her that they were “fired up.”

“That’s fabulous,” she said. “We need people to be fired up. Frankly, if you attended that discussion and you were not fired up, I think you need to check and be sure you still have a pulse.”

Referring to another panel discussion during the Annual Meeting on Issue 1, Suzanne said Issue 1 “would go down in flames if the voters understand that this is literally about diminishing the role of a branch of government that is fundamental to our democracy.”

Past President Charlie Harwell (20122013) recognized Suzanne’s talents and leadership qualities when she served on the House of Delegates, just one year into her law practice. He encouraged Suzanne to continue her leadership track in the association.

“I first met Suzanne Clark after she was elected to the Arkansas Bar Association House of Delegates,” Harwell said. “She struck me as an energetic, enthusiastic, and extremely capable individual. Her reputation was that she was a smart and talented lawyer. She has demonstrated that time and time again. She will be a great President of our Bar Association.”

“She has great people skills,” he added.

“As talented as she is, she comes across as friendly and approachable. She commu-

Above: Suzanne on the big screen during her swearing-in speech; Top left: Steve and Suzanne; Bottom left: Arkansas Supreme Court Chief Justice Dan Kemp administered the oath of office to Suzanne. Photos by Mike Pirnique.

nicates well. I admire her ability to absorb information quickly and apply her criticalthinking skills toward solving the problem, whatever it may be. These are the characteristics that make her a great lawyer. Being a lawyer is about solving problems for your clients and no one does it better than Suzanne. Although she is tenacious in fighting for her clients and her beliefs, she has the maturity to see the approach needed to get the best result. She works tirelessly for her clients and her community. I continue to see her doing great things not only in her profession, but also for the good of this community.”

James Smith echos Harwell’s endorsements. “I think the primary reason that I am such a big fan of Suzanne as a person, a friend and a lawyer is because she is genuine and interested,” Smith said. “She’s very serious and means business when it comes to advocating on behalf of her client and her community, yet she is kind and generous– and objective. She’s a client pleaser because of her pleasant demeanor yet she also obtains the confidence of her peers and clients because of her obvious intellect and willing to go to great lengths to be fully prepared for any court proceeding.”

“Suzanne really is an elegant leader; she understands business and garners respect and confidence because she earns it,” he added. “She’s a consummate professional

and a genuinely kind person who exhibits empathy and understands the way life works and the role the law plays in the current environment. You won’t ever catch her unprepared or ill-informed and you can rest assured that she has the Arkansas Bar’s best interest in mind.”

Suzanne is committed to service to the Bar and the legal profession. She has served on the Board of Governors and House of Delegates and numerous committees including the Professional Ethics, Jurisprudence and Law Reform, Long Range Planning, 2020 Commission, Task Force on Professional Liability Insurance and the Lawyers Helping Lawyers Committee, where she served as chair. She is a Fellow in the Arkansas Bar Foundation. She served as chair of the Governance Committee in 2016 where she played an active role in establishing a strategic plan with goals for moving the association forward.

During her swearing-in speech, Suzanne introduced some of the changes ahead for the bar association. “We have been taking a look at how we operate as an association.

The practice of law has been changing rapidly. The bar association has invested heavily in being sure that we are keeping pace with technology to be sure that our members have at their fingertips what they need for communication and research tools. We also have been looking at how we are structured

in terms of moving forward as an association in the future.

“The way that we have been structured in terms of our governing bodies has been in place for roughly 50 years. We’ve had to take a hard look at how it functions in order for the association to be most effective and efficient. As we’ve asked some of these tough questions and done the research there’s been some pretty strong indications that we need to make some changes. Returning again to Issue 1. One of the things that absolutely will not change for the Arkansas Bar Association is the fact that we, within our state, are the ones who can stand up and be the most vocal about our support for the judiciary and the rule of law.

“I am asking each and every one of you to stand up for the rule of law. Do not let them demonize lawyers in the process. We are the ones who people reach out to when there is an injustice and when people need help seeking recourse in the courts. Issue 1 is about denying people that opportunity. We need your help. We need your engagement in the association. We have an exciting year ahead. I hope you will all join me.”

Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

13

HOT SPRINGS CONVENTION CENTER

The Annual

ArkBar

2018 JUNE 13-15th

The Arkansas Bar Association held its 120th Annual Meeting and Joint Meeting with the Arkansas Judicial Council at the Hot Springs Convention Center June 13-15, 2018. More than 800 attorneys, judges and guests attended the three-day meeting that was complete with CLE seminars, receptions and award ceremonies. Judge Mary Spencer McGowan chaired this year’s Annual Meeting along with Nate Looney as Vice Chair. Sponsorship opportunities for 2019 are now available at http://www.arkbar.com/about-arkbar/sponsorships.

See the complete photo gallery online at http://www.arkbar.com/annualmeeting/home.

1 2 0 th A r k B a r A n n u a l M e e t i n g

The Big Event

Incoming President Suzanne Clark presents 2017-2018 President Tony Hilliard with a gift for his service during the House of Delegates meeting.

Chief Justice Dan Kemp presented the “State of the Judiciary Address” following the presentation of the colors by the U.S. Air Force Honor Guard.

Annual Meeting Chair Judge Mary Spencer McGowan moderates a judges panel.

Prizes, Networking and Photo Opportunities

President Hilliard introduced Governor Asa Huthinson

The traditional Friday Firm reception was held at the Hot Springs Convention Center for the first time this year. Pictured right: Shep Russell, Price Gardner, Michael Moore and Brian Smith.

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THANK YOU 2018 ANNUAL SPONSORS DIAMOND LEVEL Arkansas Bar Foundation

ArkBar benefActor MeMbers

ArkBar PAtron MeMbers

PLATINUM LEVEL

Answerfone.com/ArkBar

a tla

GOLD LEVEL

SILVER LEVEL business lAw section of ArkBar

William A. Martin

criMinAl lAw section of ArkBar

RamsayBRidgfoRth

Kirby and Rosalind Mouser

Ramsay, BRidgfoRth, RoBinson and Raley llP

Attorneys at Law

reAl estAte lAw section of ArkBar Hilburn, Calhoon, Harper, Pruniski & Calhoun, LTD

civil litigAtionsection of ArkBar

BRONZE LEVEL Daggett, Donovan & Perry, PLLC

Jack, Nelson, Jones, P.A.

Congratulations to Members Celebrating 50 Years

President Tony Hilliard honored members celebrating 50 years of practice at a luncheon on Thursday. Thank you to the following sponsors of the 50-year luncheon: the Barber Law Firm; Daggett, Donovan & Perry, PLLC; Gill Ragon Owen, P.A.; Jack, Nelson, Jones, P.A.; Rose Law Firm; Williams & Anderson PLC ; Wright Lindsey Jennings.

Ben F. Arnold Charles W. Baker Allen W. Bird, II Judge David B. Bogard Justice Robert L. Brown Gene C. Campbell Judge Robert J. Donovan Robert R. Durden Larry W. Garrett Judge Donald Goodner Michael E. Hale Donis B. Hamilton Philip E. Kaplan R. David Lewis Judge John R. Lineberger Richard Leon Mays, Sr. Ed W. McCorkle James “Jim” A. McLarty III

Benjamin C. McMinn Judge Andre E. McNeil George L. McWilliams Max C. Mehlburger Sheffield Nelson Charles C. Owen William L. Owen Judge John M. Pittman Judge Richard L. Proctor Donald C. Pullen Judge John “Buddy” W. Raines Gordon S. Rather, Jr. Richard H. Smith James V. Spencer III Judge William A. Storey Michael Kenneth Wilson Ronald E. Worthen

Save the Date for June 12-14, 2019 Hot Springs Convention Center Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

15

The Annual

ArkBar

2017 - 2018 Arkansas Bar Association Award Recipients 2017 - 2018 Association President Anthony A. “Tony” Hilliard selected the following members as award recipients for their outstanding work and service. The awards were presented during the Annual Meeting.

Golden Gavel Awards William A. Gruber, Pulaski County Civil Attorney’s Office, Little Rock, received the award for his work as chair of the Social Media Committee.

Mark W. Hodge, Barber Law Firm, Little Rock, received the award for his work as chair of the Personnel Committee.

Cindy W. Kolb, Cross, Gunter, Witherspoon & Galchus, P.C., Little Rock, received the award for her work as co-chair of the 2018 Mid-Year Meeting.

Presidential Awards of Excellence

16

F. Thomas Curry, McMillan, McCorkle, Curry & Bennington, LLP, Arkadelphia, received the award for his work as Association Secretary for 12 years.

Joe F. Kolb, j.kolb, Little Rock, received the award for his work as co-chair of the 2018 Mid-Year Meeting.

Judge Audrey R. Evans, Retired U.S. Bankruptcy Judge for the Eastern and Western Districts of Arkansas, received the award for her work as co-chair of the 2020 Commission.

Nathan C. Looney, Waddell, Cole & Jones, PLLC, Jonesboro, received the award for his work as Vice Chair of the 2018 Annual Meeting.

Howard “Baker” Kurrus, Attorney at Law, Little Rock, received the award for his work as co-chair of the 2020 Commission.

David Mitchell, Jr., Rose Law Firm, Little Rock, received the award for his work as co-chair of the Member Benefits Committee.

Judge Mary Spencer McGowan, Circuit Judge, Sixth Judicial Circuit, received the award for her work as the chair of the 2018 Annual Meeting.

Dr. Casey Rockwell, University of Arkansas at Little Rock, received the award for her work as chair of the CLE Committee.

J. Cliff McKinney II, Quattlebaum, Grooms & Tull PLLC, Little Rock, received the award for his work as chair of the Governance Committee.

Jordan Rogers, Arkansas Access to Justice, Little Rock, received the award for his work on the Social Media Committee.

Annabelle Imber Tuck, Retired Arkansas Supreme Court Justice, received the award for her work as chair of the SJR8 Task Force.

Brian M. Rosenthal, Rose Law Firm, Little Rock, received the award for his work as co-chair of the Member Benefits Committee.

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The Annual 2017 - 2018 Arkansas Bar Association Award Recipients (cont.)

ArkBar Arkansas Bar Foundation and Arkansas Bar Association 2017 - 2018 Annual Joint Award Recipients

Other Awards Judge Brandon J. Harrison, Arkansas Court of Appeals, received the Maurice Cathey award for his valued contributions to The Arkansas Lawyer magazine

Outstanding Lawyer Award Ralph M. Cloar, Jr., Cloar Law Firm, Little Rock, received the award in recognition of excellence in the practice of law and outstanding contributions to the profession.

Sarah C. Jewell, Daniels Law Firm, PLLC, Fayetteville, received the Judith Ryan Gray Outstanding Young Lawyer award and the Frank Elcan award in recognition for her commitment and dedication to the Young Lawyers Section.

Outstanding Lawyer-Citizen Award Rosalind M. Mouser, Simmons Bank, Pine Bluff, received the award for outstanding participation in and excellent performance of civic responsibilities and for demonstrating high standards of professional competence and conduct.

Paul W. Keith, Gibson & Keith, Monticello, received the Outgoing Board of Governors Chair award.

C.E. Ransick Award of Excellence Bobby McDaniel, McDaniel Law Firm, PLC, Jonesboro, received the award in recognition of outstanding contributions to the profession.

Jacob S. Potter, The Potter Law Firm, Texarkana, received the YLS Award of Excellence.

James H. McKenzie Professionalism Award Ralph C. Williams, Attorney at Law, Bentonville, received the award in recognition of sustained excellence through integrity, character and leadership to the profession and the community.

U.S. Magistrate Judge Joe J. Volpe, Little Rock, received the CLE Award for elevating the quality of continuing education provided through ArkBar CLE.

Equal Justice Distinguished Service Award Mark Mayfield, Womack Phelps Puryear Mayfield & McNeil, P.A., Jonesboro, received the award in recognition of his commitment to and participation in equal justice programs, including pro bono efforts through legal services programs.

Jordan P. Wimpy, Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., Little Rock, received the CLE Award for elevating the quality of continuing education provided through ArkBar CLE.

Special Award of Merit Bill W. Bristow, Bristow & Richardson, PLLC, Jonesboro, for distinguished service and accomplishments in the legal profession.

Katelyn Busby of Monticello received the Lawyer Community Legacy Award in recognition of her volunteer public services.

Judge Edwin Alderson, posthumously, of El Dorado received the Lawyer Community Legacy Award in recognition of his lifetime of exemplary service to our state, our community, and the bench and bar.

• • •

Outstanding Local Bar Associations Benton County Bar Association Grant County Bar Association Sebastian County Bar Association

Arkansas Bar Foundation Writing Awards Drake Mann received the general writing category award for his article in the Winter 2018 issue of The Arkansas Lawyer: “Advising a Client Considering the Cloud.” Justice J. Brooks, I received the legal writing category award for his article in the Spring 2017 issue of The Arkansas Lawyer: “The Ethics of Representing Marijuana-Related Businesses.”

Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

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Way(un)fair?

United States Supreme Court Decision Ends State Tax Physical Presence Nexus Test

By Matthew C. Boch

The United States Supreme Court’s June decision in South Dakota v. Wayfair1 ended the traditional physical presence requirement for a state to be able to impose a tax obligation. In its place the decision suggests a balancing test between the taxpayer’s real or virtual presence and the administrative burdens of a tax system. States are quickly moving to update their laws and regulations to take advantage of this expanded taxing power. Taxpayers selling across state lines face increased risks and compliance burdens as they navigate this new environment.

Matthew C. Boch is a member of Dover Dixon Horne PLLC in Little Rock, where he focuses his practice on state and local taxes and incentives.

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The Physical Presence Rule Came Under Attack as E-Commerce Grew For 50 years or more, the question of whether a state could impose tax requirements looked to whether the taxpayer had a physical presence in the state. This standard was set out in 1967 in National Bellas Hess,2 which held that a business whose contacts were limited to mail and deliveries by common carrier could not be required to collect tax. A generation later, states tried again with the Quill case,3 where the Supreme Court upheld the physical presence rule in large part under stare decisis despite broader changes in underlying Dormant Commerce Clause jurisprudence. For the past 26 years, states, taxpayers, and courts have applied the Quill rule that a taxpayer must have more than the slightest physical presence before tax collection obligations can be imposed.

The physical presence rule was crucial to the rise of online commerce. E-commerce websites generally did not collect tax, giving them a competitive advantage over brick-and-mortar retailers that had to collect sales tax. (While consumers have an obligation to self-assess and pay use tax on purchases where tax was not collected, they generally did not do so and states did not make serious efforts to enforce consumer use tax.)

Under this paradigm, states sought to maximize their taxing powers by pushing Quill to its limits or circumventing it. To maximize Quill, they enacted attributional nexus laws imputing the physical presence of in-state affiliates or independent contractors to the out-of-state seller. This included click-through nexus laws targeting referral marketers. To circumvent, states distinguished income, gross receipts, or other business activity taxes as distinct from sales and use tax collection obligations, and they were generally success-

ful in doing so.4 They also successfully began enacting statutes that required out-of-state sellers to provide notice and information reporting if they did not collect tax,5 a trend that would have become widespread if Wayfair had upheld the physical presence rule.

It was in a decision involving a jurisdictional question on a challenge to Colorado’s use tax information reporting statute where Justice Kennedy’s concurrence suggested reconsideration of Quill.6 Several states took up the invitation, one of which was South Dakota.

South Dakota’s law establishes nexus if a taxpayer has more than $100,000 of sales or 200 transactions into the state in a calendar year.7 To speed adjudication, the law was fast tracked by authorizing a state declaratory judgment action with limited discovery and direct appeal to the South Dakota Supreme Court.8 To avoid unfairness to taxpayers, the law’s effect was enjoined while the declaratory judgment action was pending, such that the effect of the law would be prospective only after the Quill challenge was litigated.9 Litigation ensued against several noncollecting out-of-state sellers, and the South Dakota Supreme Court followed Quill in holding the South Dakota eco-

nomic nexus law unconstitutional.10 South Dakota appealed and certiorari was granted.

United States Supreme Court Overturns Physical Presence Rule as Artifact of Outdated Jurisprudence The Wayfair majority opinion overturned Quill and reversed and remanded the case to South Dakota for further proceedings. Both doctrinal and policy reasons compelled this result. From a doctrinal perspective, Quill was inconsistent with modern Complete Auto Commerce Clause tax jurisprudence11 and had been wrongly upheld under stare decisis principles. From a policy perspective, the physical presence rule had evolved into a “judicially created tax shelter” under which interstate commerce avoided paying its fair share of taxes. Physical presence test reliance arguments were rejected since lawfully due state sales and use taxes were being avoided under the physical presence rule.

Instead, under Wayfair, a taxpayer’s “virtual presence” becomes relevant to the question of nexus. The South Dakota economic nexus thresholds are reasonable because “[t]his quantity of business could not have occurred unless the seller availed itself of the substantial privilege of carrying on business in

South Dakota.” In addition, the defendants were “large, national companies that undoubtedly maintain an extensive virtual presence.”

Wayfair leaves open the question of what constraints remain on state taxing power. The majority opinion notes that “[c]omplex state tax systems could have the effect of discriminating against interstate commerce.” Perhaps a Pike12 balancing test between the state’s taxing power and the costs of complying with the state’s tax regime is the appropriate analysis. The Wayfair Court observed that South Dakota’s regime appeared designed to avoid discrimination or undue burdens for three reasons: (1) reasonable de minimis thresholds, (2) prospective-only application, and (3) tax simplification as part of the Streamlined Sales and Use Tax Agreement.

The 5-4 opinion came with concurrences from Justice Thomas and Justice Gorsuch.

These call into question the dormant Commerce Clause more generally and should not practically affect the application and implementation of the majority opinion authored

by Justice Kennedy. The dissent, authored

by Chief Justice Roberts, would have upheld the physical presence rule based on stare decisis and concerns over the administrative burden on taxpayers.

Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

19

“Wayfair has overruled Quill but it has not provided a clear alternative, instead offering essentially a balancing test of contacts and burdens. Expect to see continued controversy and development as states expand their taxing powers and remote taxpayers attempt to resist.”

States Are Updating Their Sales Tax Laws and Regulations to Capitalize on Wayfair The South Dakota economic nexus law gives a clear framework for states to follow, and states are moving quickly to adopt, update, or implement statutes or regulations. Expect most-to-all states with a sales tax to have an economic nexus statute in effect within a year. Many states adopted copycat laws while Wayfair was pending that are now coming into effect. Some states can adopt regulations under broad statutory language as to who has a tax collection obligation. Others will require statutory changes either in a special session or the next regular legislative session. This will be a fast-evolving area, as more and more states put requirements into effect.

A big question for states with laws or regulations on the books is whether to also seek any retroactive assessments. Thus far almost all states seem to be taking a prospectiveonly approach (with the possible exception of Massachusetts).

States do not have to copy South Dakota in setting their economic nexus thresholds. Perhaps some states will edge down to $75,000 of sales or 150 transactions, or even lower. Minnesota, for example, has adopted thresholds of (1) 100 or more retail sales shipped to the state or (2) 10 or more retail sales shipped to the state that total more than $100,000.13 Expect to see big states at least copy South Dakota in setting their thresholds, even though the same thresholds for a big state will tend to capture smaller sellers.

Some states face a question of whether and how to simplify their tax systems. About half, including Arkansas, do not have this problem: they are members of the Streamlined Sales and Use Tax Agreement, which requires certain tax structures, definitions, safe harbors, and other simplifications. But the remainder, including the biggest states, have idiosyncratic sales and use tax systems that will be difficult to simplify.

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Without simplification, they may be limited in the extent to which they can require out-of-state sellers to collect. Expect many states to develop special simplified tax regimes for out-of-state sellers while leaving in-state sellers to navigate the complexity of existing systems. Louisiana, for example, has created the Louisiana Sales and Use Tax Commission for Remote Sellers, which may administer a simplified tax system for outof-state sellers while in-state businesses continue to face the state’s notoriously complex state and local sales tax system.14 The fiscal impact from taxing remote sales should be substantial. The United States Government Accountability Office has estimated an $8 to $13 billion revenue gain to the states from expanded tax collection authority.15 The competitiveness impact for brick-and-mortar retailers is also significant and should help slow the decline of traditional retailers.

Businesses Now Face Escalating Compliance Obligations and Nexus Risks Wayfair affects almost every company doing business across state lines. The immediate, obvious impact is mid-to-large remote retailers. They need to begin collecting at least in those states with economic nexus laws in effect. Many foresee the inevitable and are registering for sales tax nationwide.

Smaller remote retailers need to monitor states’ economic nexus thresholds and begin complying where such thresholds are exceeded. The compliance costs for retailers just over the thresholds can be onerous in comparison with the tax being remitted.

Retailers should not forget about Colorado-style use tax information reporting obligations either. Many states have enacted such laws which are presently in effect. While these use tax reporting laws seem unlikely to spread further given the option of copying South Dakota’s economic nexus law, those

that are on the books require compliance (or else registering and collecting tax).

Wholesalers should not think that they are immune. South Dakota’s law, for example, does not distinguish between taxable and exempt sales. Wholesalers should consider registering where required to do so, even if the tax obligations will be nominal. At the very least, wholesalers need to make sure that they are current on customer resale certificates so that they will be prepared to defend themselves if they get audited.

Remote service providers face a difficult situation. While states generally impose sales tax on all sales of tangible personal property, services are generally nontaxable unless they are enumerated services specifically taxed under state law. States vary exceptionally as to what services are taxable and as to the underlying definitions of taxable services. A remote service provider needs to proceed carefully.

“Cloud-based” service businesses face particularly hard compliance challenges. Most tech startups providing services over the internet have relied on the physical presence rule for protection from a complicated state tax landscape. Different states may tax a business providing services over the internet as data processing services, information services, digital automated services, software licenses, or other theories. Taxability becomes very state- and fact-specific. Many tax compliance software services tend to err on the side of taxation, potentially leading to overcollection and competitive disadvantage.

The Wayfair decision is also an opportunity for businesses of all stripes that have potential physical presence nexus exposure for back years to try to come into compliance. Instead of a traditional voluntary disclosure agreement (“VDA”) project that would involve paying a few years of back tax and interest, a business can simply register in connection with Wayfair and a state’s new economic nexus law and then begin complying prospectively. While potential audit exposure for prior years would remain, states are going to be dealing with a flood of new registrants and the audit risk may be remote.

Wayfair’s impact is not limited to sales and use taxes either. The new nexus principles would seem to bless imposing income or gross receipts taxes on remote businesses as well. While states had asserted economic nexus for income taxes when Quill was the rule, expect them to become more aggressive now that Wayfair has replaced Quill.

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PRESERVE THE JURY TRIAL Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer 21

The federal nexus preemption for sellers of tangible personal property under Public Law 86-27216 remains good law, however. Businesses claiming protection of Public Law 86272 need to be careful that their activities do not exceed allowable solicitation. Public Law 86-272 does not apply to sales of services or intangible property, and states imposing gross receipts taxes (Nevada, Ohio, Texas, and Washington) generally are not restrained

by Public Law 86-272.

In addition to advising their clients, law firms should consider their own state tax compliance positions and risks. While most states do not impose sales tax on legal services, a handful do so (including, oddly enough, South Dakota). States imposing income taxes with market-based sourcing rules also create risk. As applied to legal services, sourcing rules may suggest sourcing to a client’s location or to the situs of a particular matter. A lawyer appearing pro hac vice in an out-of-state tribunal or advising on an out-of-state real estate transaction may be creating a tax obligation with that state. As a practical matter, most states are not going after small law firms for incidental matters.

As state tax agencies’ big data resources improve, however, one can envision agencies scraping court records or other public data to identify out-of-state firms to target for tax nexus enforcement.

Arkansas Must Update Its Statutes or Regulations and Determine How to Use the Revenue Gains To capitalize on Wayfair, Arkansas needs a statutory or regulatory change. For remote sales, the critical question is whether a seller is a “vendor” required to collect use tax. The statutory definition of “vendor” does not specify what kind of connection a person has to have in order to be a vendor subject to use tax collection obligations, and so it does not necessarily require amendment.17 A Department of Finance and Administration (DFA) regulation, however, has articulated the physical presence rule and requires updating or a superseding statutory change: a seller must collect use tax if it “has a physical presence ... to the full extent allowed under the United States Constitution...”18 DFA could change its regulation, which could happen in the next few months. Or the General Assembly could pass legislation adjusting the definition of “vendor,” either in the 2019 legislative session, or conceiv22

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ably in a special session later in 2018. Since Arkansas is a Streamlined Sales Tax state, adoption of South Dakota nexus thresholds on a prospective basis through regulation or statute should be straightforward.

The DFA has estimated a $43 million revenue gain from remote seller collection: $24 million for general state revenue, $11 million for dedicated state special revenue, and $8 million for local sales and use taxes.19 These revenue estimates are on the low end compared to what some speculation had been. For example, the GAO report had suggested a revenue gain of between $123 and $169 million.20 The Arkansas policy response will need to take into account statutory triggered tax cuts as well. The special low-rate sales tax on groceries is scheduled to go down to a zero rate now that federal law allows remote seller collection, so long as net available general revenues from such remote sellers exceed 150% of the revenue from the low rate sales tax on groceries.21 It is anticipated that this condition will be met and that the tax cut will be triggered.

In addition, there is a triggered income tax cut if remote tax collection receipts exceed $70 million.22 Any such excess revenues would go to reducing the tax rate in one of the brackets in the “middle class” bracket schedule.23 Given the DFA revenue estimate, it seems unlikely that this cut would be triggered. It would not be surprising for the General Assembly to repeal the triggered cut as part of an overall tax reform bill, and particularly if the tax reform bill simplification includes returning to a single bracket schedule.

Wayfair Is Not the Last Word; Expect More Nexus Controversy and Changes Wayfair has overruled Quill but it has not provided a clear alternative, instead offering essentially a balancing test of contacts and burdens. Expect to see continued controversy and development as states expand their taxing powers and remote taxpayers attempt to resist. Potential areas of controversy or development include: •Disputes over the complexity of sales and use tax compliance in non-Streamlined states; •States pushing the limits in reducing the de minimis compliance thresholds lower than those used by South Dakota; •Increased tax collection or compliance

obligations for marketplace providers or other intermediaries; •Challenges to the more tendentious assertions of nexus from minor physical presence where the economic presence is limited; •Refund claims or disputes where cautious retailers overcollect from customers; •Accelerating development and cost reduction in online sales tax compliance, particularly as artificial intelligence is employed; and •Increased use of big data by states to target businesses for nexus.

Congressional action on state tax nexus is possible but seems unlikely at this time.

Congress never took up the opportunity to change the Quill physical presence rule.

Thus far it seems unlikely to do so given reasonable state responses to Wayfair. If states become abusive in going after small, out-ofstate taxpayers, however, pressure for congressional action may mount.

The question of when a state has enough authority to tax a remote person doing business across state lines is a fundamental challenge of our federal system of taxation, where states and some localities administer their own taxes. Wayfair is arguably an overdue modernization of nexus principles. But by removing the physical presence rule while providing no firm guidance on the outer limit of state taxing power, Wayfair leaves uncertainty and exposure, and particularly for small-to-mid-sized businesses engaged in interstate commerce. This unsettled situation will see development in the years to come.

Endnotes: 1. South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018).

2. National Bellas Hess, Inc. v. Dep’t of Revenue of the State of Illinois, 386 U.S. 753 (1967).

3. Quill Corp. v. North Dakota, 504 U.S. 298 (1992).

4. See, e.g., Crutchfield Corp. v. Testa, 151 Ohio St. 3d 278 (2016).

5. See Direct Marketing Ass’n v. Brohl, 814 F.3d 1129 (10th Cir. 2016).

6. Direct Marketing Ass’n v. Brohl, 135 S. Ct. 1124, 1134 (2015).

7. S.D. Codified L. § 10-64-2.

8. S.D. Codified L. §§ 10-64-3, 10-64-5.

9. S.D. Codified L. § 10-64-4.

10. South Dakota v. Wayfair, Inc., 901

N.W.2d 754 (S.D. 2017).

11. See Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977).

12. Pike v. Bruce Church, Inc., 397 U.S. 137 (1970).

13. Minnesota Department of Revenue, “Frequently Asked Questions” for Remote Sellers (accessed Jul. 31, 2018) (available at a link from http://www.revenue.state. mn.us/businesses/sut/Pages/Remote-Sellers. aspx).

14. See 2017 La. Acts 274 (H.B. 601).

15. “Sales Taxes: States Could Gain Revenue from Expanded Authority, but Businesses Are Likely to Experience Compliance Costs,” GAO-18-114 (Nov. 2017).

16. Codified at 15 U.S.C. § 381.

17. See Ark. Code Ann. § 26-53-102(31) (“a person engaged in making sales of tangible personal property, specified digital products, digital codes, or taxable services by mail order, by advertising, or by agent, by peddling ... by soliciting, or by taking orders for such sales for storage, use, distribution, or consumption in this state.”).

18. Rule UT-3(M)(2) (defining “vendor”).

19. Letter from DFA Deputy Director and Commissioner of Revenue Walter Anger to

the Tax Reform and Relief Legislative Task Force (Jul. 20, 2018).

20. GAO-18-114 at 48 (Appendix II). The DFA’s letter of July 20, 2018, using GAO’s information and adjusting for tax already being collected, put the range at between $38 to $88 million total new revenue.

21. See Ark. Code Ann. § 26-52-317.

22. Ark. Code Ann. § 26-51-201(e).

23. The bracket schedule provided by Ark. Code Ann. § 26-51-207(a)(7). Recall that Arkansas is unique in having not only a progressive income tax, but also three separate bracket schedules for incomes below $21,000, between $21,000 and $75,000, and in excess of $75,000. The reduction would apply to the “middle class” bracket schedule. 

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Report from the April 2018 Board of Governors Meeting and the June 2018 House of Delegates Meeting

By Karen K. Hutchins The Association’s Board of Governors met April 20-21, 2018, in Jonesboro. The board reviewed and approved the new, more streamlined committee structure for 2018-2019. See page 4 of this magazine for more information. The Board also approved the association’s 2018-2019 budget. The Board recognized and thanked the 2020 Commission and Governance Committee for their two-year review resulting in recommendations to implement further analysis of the association’s governance structure and evaluation of required resources to fullfil our mission. The remaining part of the meeting was focused on an extensive discussion with governance consultants, RR Consulting Group, on how the association can meet the challenges of the changing legal profession and be structured to best serve our members. Following an interactive and engaging review of the association’s governance structure the Board members provided feedback and suggestions that will be one of the bases for a Strategic Governance Task Force that will be formed in the Fall of 2018. Prior to this board meeting the consultants also met with the association’s leadership, the 2020 Commission and the Governance Committee to solicit their input and experiences regarding the need to make changes to best respond to the changing legal community. The meeting closed as the association’s current Outgoing Board Chair Paul Keith was recognized for his service as were the governors whose terms had ended.

President Tony Hilliard convened the House of Delegates on June 15, 2018, during the Association’s Annual Meeting in Hot Springs. Jurisprudence and Law Reform Committee Chair Tom Curry proposed four bills for inclusion in the association’s 2019 Legislative Package. After discussion and review all four bills were approved to be included. They are: Uniform Protected 24

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Series Act; Uniform Directed Trust Act; Issue One Implementation Bill; and Registration Requirement For Lobbyists Clarification Bill.

For more information on the bills, login to www.arkbar.com and find the “Legislative Resources” tab under “For Attorneys.”

The full House of Delegates voted to elect Joe Kolb as treasurer and Glen Hoggard as secretary for the 2018-2019 bar year. Each state bar district met during the meeting to elect a representative to the Legislation Committee for a term of three years. George Rozzell was elected to represent District A; Cliff McKinney was elected to represent District B; and Lee Curry was elected to represent District C. Each of the representatives took their seats effective July 1, 2018.

The House of Delegates also discussed and reviewed ways to improve the Association’s value to Arkansas attorneys as they faced challenging questions posed

by Buck Rhyme and George Brown of RR Consulting Group. The Delegates broke into small discussion groups to discuss: •

• • •

ArkBar’ mission and the resources required to adequately fulfill its purpose going forward.

The effectiveness and timeliness of its governance process.

Divided authority and communication between governing entities.

Level of engagement and attendance.

Members explored solutions and provided feedback on ways the association can address these issues. There was a strong consensus that change is needed to keep up with the changes in the legal profession, many driven by technology.

The next step will be for a Strategic Governance Task Force consisting of ArkBar members nominated by the leadership, the

Board of Governors, and the House of Delegates to meet this fall. In both the Board and House meetings the groups recommended members to be considered for this task force.

The task force will prepare changes to the by-laws, constitution and existing policy using the feedback gathered throughout this previous two-year process. Work product will be utilized from these meetings to develop a strategic governance plan to be presented to the Board and House in February 2019. This plan will guide the ArkBar to an even more successful future that will benefit the members and the public we serve.

The House of Delegates closed with then President Hilliard recognizing the outgoing delegates and the YLS Chair. He then passed the gavel to incoming President Suzanne Clark. President Clark recognized the service of Immediate Past-President Hilliard and announced her appointment of Cliff McKinney as Chair of the Board of Governors. She also named Vicki Vasser-Jenkins as chair of the 2019 Annual Meeting, Jamie Huffman Jones as the chair of the 2019 Mid Year Meeting, and Aaron Squyres as Parliamentarian.

The next meeting of the Board of Governors will be held August 24-25, 2018 in Fayetteville. The next meeting of the House of Delegates will be held February 8, 2019, during the Mid-Year Meeting in Little Rock. 

Karen K. Hutchins, J.D., CAE, is the Executive Director of the Arkansas Bar Association.

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Has Congress Killed the Goose that Lays the Golden Eggs?

Charitable Giving Strategies in the Wake of the Tax Cuts and Jobs Act of 2017

By Erin Anderson and Steve Bauman

A

Anderson

Bauman

Erin Anderson and Steve Bauman are lawyers with the Rose Law Firm in Little Rock who represent clients on estate planning, taxation and business transactions.

26

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mericans are among the most philanthropic people in the world.

In 2016, the U.S. topped the list of the most generous nations with the highest rate of charitable donations as a percentage of gross domestic product.1 In 2017, charitable giving in the United States exceeded the $400 billion mark for the first time.2 A substantial majority of these gifts, 70%, were made by individuals.3 These gifts went to a variety of sectors, with the religious sector receiving the most donations at 31%, followed by the education and human services sectors, a distant second and third, receiving 14% and 12%, respectively.4 Although statistics on charitable giving are readily available, research on why individuals make charitable gifts is harder to find.5 In one survey, 54% said they gave to charity because they believed in the mission of the organization, while only 18% attributed their giving to tax benefits.6 Congress has long used the tax code to promote certain behaviors, and there are provisions in the tax code meant to encourage, if not reward, charitable giving, including a charitable income tax deduction for individuals and corporations and a charitable estate tax deduction. The Tax Cuts and Jobs Act of 2017 (the “Act�) introduced numerous changes to the tax law, but none of those changes reduced or limited the deductions available for making charitable gifts. Nevertheless, one of the most talked-about changes

was the Act’s potential impact on charitable giving, with many predicting a downturn in charitable giving.7 In this article, we will discuss the Act’s income and estate tax changes and how they may affect deductions for charitable gifts, as well as a variety of gifting strategies that will allow donors to continue to receive the benefit of a charitable deduction for such gifts moving forward.

Income Tax Changes. Two of the most significant income tax changes under the Act were changes to the standard deduction amount and the availability of certain itemized deductions. Before discussing these changes, an understanding of how taxable income is calculated is necessary in order to appreciate why these changes are important.

Taxpayers are not taxed on every dollar of their gross income. It is well known that the tax code permits certain deductions, such as the charitable contribution deduction and home mortgage interest deduction, which are subtracted from gross income in determining a taxpayer’s taxable income. These are called “itemized deductions.” In lieu of itemizing deductions, the tax code gives every taxpayer a “standard deduction” amount, which reduces taxable income, whether or not the taxpayer has actually incurred such expenses. Taxpayers must choose between itemizing their deductions and taking the standard deduction. Generally, taxpayers will opt to itemize deductions when these expenses exceed the standard deduction amount.

Under the Act, the standard deduction amount is nearly doubled: $12,000 for unmarried individuals, $18,000 for heads of household, and $24,000 for married couples filing jointly (up from $6,300 for unmarried individuals, $9,300 for heads of household, and $12,600 for married couples filing jointly in 2017).8 At the same time, the Act also eliminated several itemized deductions and limited several other common itemized deductions, including the deduction for state and local income, sales and property taxes, which is capped at $10,000 annually,9 and the mortgage interest deduction, which is limited to interest on qualified residence loans up to $750,000.10 (However, qualified residence loans of up to $1,000,000 incurred on or before December 15, 2017 are grandfathered.11)The congressional intent behind doubling the standard deduction was not only to lower taxes on individuals, but

also to simplify tax reporting burdens, and this combination of higher standard deduction amounts coupled with limitations on itemized deductions is expected to significantly reduce the number of individuals who choose to itemize their deductions. This shift away from itemizing deductions is important because if individuals do not itemize their deductions, they do not get the tax benefit of the deduction for their charitable donations.

It is likely that this shift away from itemizing deductions will occur mainly among middle income taxpayers.

For example, Allen, an unmarried individual and lifelong Arkansan who lives in a condo he rents in downtown Little Rock, will no longer itemize his deductions. Allen has approximately $100,000 a year in taxable income and pays approximately $6,000 in state and local income taxes. Allen generally gives about $3,500 each year to support local charitable organizations, motivated at least in part by the tax savings. Under the prior law, Allen itemized his deductions; however, going forward, Allen will no longer itemize deductions because the amount of his itemized deductions ($9,500) will no longer exceed the amount of the standard deduction ($12,000).12 Similarly, Michael and Lisa Marie are a married couple who file a joint return. Life has been good to them: they are retired, their house is paid off, and they are able to give $12,000 a year to their favorite charities. They have $200,000 a year in taxable income and pay approximately $9,000 in

state and local income taxes and $5,000 in real property taxes (now capped at $10,000).

Under the prior law, Michael and Lisa Marie itemized their deductions because their total itemized deductions ($26,000) exceeded the standard deduction amount ($12,600).

Under the Act, they will no longer itemize deductions because their total itemized deductions ($22,000) will no longer exceed the standard deduction amount ($24,000).

Notice that under the Act, both Allen and Michael and Lisa Marie will receive the benefit of lower taxable incomes using the standard deduction amount, regardless of whether they make any charitable contributions going forward.

On the other hand, Bethany, an unmarried individual living in Fayetteville, who owns her home, will continue to itemize her deductions. Bethany has approximately $250,000 a year in taxable income and pays approximately $20,000 in state and local income and property taxes (now capped at a $10,000 deduction). Bethany has deductible home mortgage interest of $13,000 a year. Bethany regularly makes $5,000 in charitable gifts each year to various causes.

Under the prior law, Bethany itemized her deductions, and moving forward, she will continue to itemize her deductions because the amount of her itemized deductions ($28,000) is greater than the amount of the standard deduction ($12,000).

In addition to the changes in the standard deduction amount and itemized deductions, the Act also lowered marginal income tax

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“Even though the number of individuals who may receive the benefit of an income or estate tax deduction from making a charitable donation is likely reduced under the Act, it remains to be seen whether this will dramatically impact charitable giving, as a tax benefit does not appear to be a significant motivation for most donors.” rates for nearly every tax bracket.13 Under the Act, the highest marginal rate is 37%, which is applied to income in excess of $500,000 for unmarried individuals and to income in excess of $600,000 for married individuals filing joint returns.14 Lower marginal tax rates will reduce the “value” of deductions, including the deduction for charitable gifts, for most taxpayers. For example, Allen was in the 28% marginal tax bracket in 2017, meaning his $3,500 charitable gift deduction reduced his taxes by $980.15 Under the Act’s revised tax brackets, Allen’s marginal tax rate will be 24%, which means that same $3,500 charitable gift deduction would reduce his taxes by only $840.16 However, as is often the case, this does not hold true for all taxpayers. To continue using the above examples, Bethany was in the 33% marginal tax bracket in 2017, which meant her $5,000 charitable gift deduction reduced her taxes by $1,650. Under the Act’s revised tax brackets, Bethany’s marginal tax rate will actually be higher at 35%, meaning her $5,000 charitable gift deduction would now reduce her taxes by $1,750.

Finally, the Act also increased the amount an individual may deduct for cash gifts to public charities and certain private foundations from 50% up to 60% of the donor’s contribution base.17 A donor’s “contribution base” is his or her adjusted gross income computed without regard to any net operating loss carryback.18 The increased deduction amount, however, is one of the provisions that will sunset at the end of 2025.19 Options for Tax Efficient Charitable Giving under the Act. Moving forward, several options are available for donors wanting to make charitable gifts that maximize the tax efficiency of those gifts, including “bunching” gifts, making gifts through a donoradvised fund, making gifts using an IRA charitable rollover, and making a planned gift through a trust or annuity.

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The simplest option available is for a donor to “bunch” together gifts that the donor would ordinarily make over several years into a single year, and in succeeding years, the donor would forego making charitable donations and take the standard deduction.

In other words, the idea is to bunch together enough charitable gifts into a single year so that the donor has enough deductions to exceed the standard deduction amount, and therefore, the donor can receive a tax benefit from the donor’s charitable gifts. For example, Allen (our lifelong Arkansan living in Little Rock) could make $7,000 (or $10,500) in charitable donations in 2018 (an amount that is two to three times his normal annual charitable giving) and then forego making any donations in 2019 (or 2020). By bunching his gifts, Allen is able to support the charitable organizations he cares about while also receiving a tax benefit.

A second option is to make gifts using a donor-advised fund. A gift to a donoradvised fund is a contribution to a master foundation that will then in turn distribute the funds to charitable organizations in accordance with the donor’s wishes. A donor-advised fund allows the donor to make a donation and to take a tax deduction in the year the donation is made. The donor-advised fund then pays the money to the donor’s selected charitable organizations over time. (Note that the charitable deduction is allowable in the year the contribution is made to the donor-advised fund, and there is no additional charitable deduction allowable when the funds are subsequently distributed from the donor-advised fund to charitable organizations.) In substance, a donor-advised fund is another form of bunching, but it adds flexibility by allowing the donor to decide the recipients and the amounts distributed in future years. Another advantage of using a donor-advised fund is that the money donated to the donoradvised fund will be invested, which poten-

tially increases the amount of donations that can be subsequently distributed. Donor-advised funds are not new, and there are several national and local options available. National options include funds associated with financial services companies, such as Fidelity, Vanguard, and Charles Schwab. One local option is the Arkansas Community Foundation, which offers donors several alternative funds based on different factors, such as the donor’s giving timeframe and how involved the donor wants to be in making future distributions. There are fees for using donoradvised funds, but they are relatively minor.

A third option is to complete an IRA charitable rollover (also known as a “qualified charitable distribution”), which does not require a donor to itemize deductions in order to receive a tax benefit. With an IRA charitable rollover, the donor directs that an amount (such as the donor’s required minimum distribution for the year) be distributed from his or her IRA directly to an eligible charitable organization.20 One point of caution: the IRA custodian must distribute the IRA charitable rollover amount directly to the charitable organization; if a distribution is made to an individual and then rolled over to a charitable organization, it will not qualify. On the other hand, if a check from an IRA is made payable to a charitable organization and delivered by the IRA owner to the charitable organization, the payment will be considered a direct payment for purposes of making an IRA charitable rollover.21 Eligible charitable organizations are generally limited to public charities, which includes churches, hospitals, museums, and educational organizations; private foundations and donor-advised funds are not eligible recipients.22 The IRA charitable rollover qualifies as part or all of the account owner’s required minimum distribution.23 Although the donor does not receive a charitable deduction for the amount distributed to the charitable organization, the amount distributed is not included in the donor’s gross income,24 which essentially reduces the donor’s gross income in the same way a charitable deduction does. Another benefit is that the amount of an IRA charitable rollover is not included as part of the donor’s maximum allowable charitable deductions, meaning that IRA rollover gifts do not count toward the 60% adjusted gross income limitation on charitable gifts of cash (mentioned above).

In order to be eligible to complete an IRA

charitable rollover, the IRA account owner must have attained age 70 ½ before the distribution is made.25 The IRA charitable rollover is limited to $100,000 a year, and there is no carryover provision—charitable distributions in excess of $100,000 will not qualify as a charitable rollover and will be included in the account owner’s gross income for the year.26 Another limitation is that this option is available only if the distribution is made from an IRA; distributions from Simplified Employee Plans (SEPs), Savings Incentive Match Plans for Employees (SIMPLE plans), Section 403(b) and Section 401(k) plans do not qualify.27 However, the distribution can be made from an IRA held for the benefit of a beneficiary after the death of the IRA owner (sometimes referred to as an inherited IRA), as long as the distribution is made after the beneficiary has attained age 70 ½ years.28 Finally, making charitable donations using charitable split-interest trusts, such as charitable remainder or charitable lead trusts, or a charitable gift annuity, remain beneficial options under the Act. A full discussion of the use of these options is beyond the scope of this article, but they continue to provide flexible planning opportunities after the Act, particularly for wealthy donors.

Estate Tax Changes and Estate Planning under the Act. In addition to the numerous changes to the income tax, the Act also significantly increased the estate tax exemption amount (the amount a person can gift taxfree during life or at death) from $5,490,000 per person in 2017 to $11,180,000 in 2018.29 The increased exemption amount, however, is not permanent and will expire at the end of 2025, returning to the pre-Act exemption amounts (adjusted for inflation) beginning January 1, 2026, assuming Congress does not act.30 For now, the increased exemption amount will mean fewer estates are subject to estate tax, and consequently, individuals whose gross estates are less than the exemption amount may receive little to no tax benefit from charitable bequests.

Because individuals whose estates are less than the exemption amount may no longer receive an estate tax benefit from making a charitable bequest, they may want to consider converting their charitable bequests into lifetime gifts in order to take advantage of the income tax benefits instead. Another option for individuals whose estates include

an IRA is to fund their charitable bequests using their IRA. An IRA is classified as “income in respect of a decedent,” and as a result, withdrawals by the IRA beneficiaries are ordinary income subject to tax.31 However, if a charity is named as the IRA beneficiary, the withdrawals by the charity will be income tax free. Funding the charitable bequests with an IRA allows an individual’s non-charity beneficiaries to receive other assets without built-in income tax liability. Or, instead of making a charitable bequest, another option is to request that beneficiaries, if they survive the decedent, make a charitable contribution from their inheritance. For example, a husband could make the following bequest: “I give to my wife $10,000, if she survives me, and request that she donate this amount to the Save the Ivory-Billed Woodpecker Foundation; if my wife does not survive me, I give $10,000 to the Save the Ivory-Billed Woodpecker Foundation.” This type of request is not binding on the beneficiary, and as a result, the donation will be from the beneficiary, and the beneficiary will receive the income tax charitable deduction, if the beneficiary itemizes his or her deductions.

For those donors still likely to be subject to estate tax, the estate tax charitable deduction is alive and well, and charitable bequests continue to be fully deductible.

Looking Ahead. Even though the number of individuals who may receive the benefit of an income or estate tax deduction from making a charitable donation is likely reduced under the Act, it remains to be seen whether this will dramatically impact charitable giving, as a tax benefit does not appear to be a significant motivation for most donors. The techniques and mechanisms described above can be used for those donors who are tax motivated or who would like to make charitable donations in the most tax-efficient manner. Bunching and donor-advised funds are simple and effective methods of charitable giving, and IRA charitable rollovers or funding a charitable bequest with an IRA offer additional methods of tax-efficient giving for many individuals.

Endnotes: 1. See Loulla-Mae Eleftheriou-Smith, America, New Zealand and Canada top list of world’s most generous nations, Independent (February 2, 2016, 17:26), https:// www.independent.co.uk/news/world/

americas/america-new-zealand-and-canadatop-list-of-world-s-most-generous-nations-a6849221.html.

2. See Giving Statistics, Charity Navigator (citing Giving USA 2018: The Annual Report on Philanthropy for the year 2017 (Chicago: Giving USA Foundation, 2018)), available at https://www.charitynavigator. org/index.cfm?bay=content.view&cpid=42; see also Giving USA 2018 Infographic (Chicago: Giving USA Foundation, 2018), available at https://givingusa.org/see-thenumbers-giving-usa-2018-infographic/.

3. Giving USA 2018 Infographic (Chicago: Giving USA Foundation, 2018), available at https://givingusa.org/see-the-numbersgiving-usa-2018-infographic/.

4. See Giving Statistics, Charity Navigator (citing Giving USA 2018: The Annual Report on Philanthropy for the year 2017 (Chicago: Giving USA Foundation, 2018)), available at https://www.charitynavigator. org/index.cfm?bay=content.view&cpid=42; see also Giving USA 2018 Infographic (Chicago: Giving USA Foundation, 2018), available at https://givingusa.org/see-thenumbers-giving-usa-2018-infographic/.

5. For an interesting discussion on charitable giving based on how individuals view themselves, see Daisy Grewal, Wealthy People Give to Charity for Different Reasons Than the Rest of Us, Scientific American (July 25, 2017), available at https://www. scientificamerican.com/article/wealthypeople-give-to-charity-for-different-reasonsthan-the-rest-of-us/.

6. The 2016 U.S. Trust Study of High Net Worth Philanthropy (October 2016), available at https://www.ustrust.com/publish/ content/application/pdf/GWMOL/USTp_ ARMCGDN7_oct_2017.pdf.

7. See, e.g., Megan O’Neil and Dan Parks, Tax Law Eliminates Giving Incentive for 21 Million Americans, Study Says, The Chronical of Philanthropy (January 12, 2018), available at https://www. philanthropy.com/article/Tax-Law-WipesOut-Giving/242227; see also Gleckman, Howard, 21 Million Taxpayers Will Stop Taking Charitable Deductions under the New Tax Law, Forbes (January 11, 2018), available at https://www.forbes.com/sites/ beltway/2018/01/11/21-million-taxpayerswill-stop-taking-charitable-deductionsunder-the-new-tax-law/#77efc7b4238f.

8. 26 U.S.C. § 63(c)(7).

9. 26 U.S.C. § 164(b)(6).

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10. 26 U.S.C. § 163(h)(3)(F).

11. 26 U.S.C. § 163(h)(3)(F).

12. The use of examples throughout this article is modeled on similar examples used in Martin Hall et al., Giving in a Post-Tax Reform World, Trusts & Estates (June 2018).

13. The marginal rate for the lowest tax bracket was not changed, remaining at 10 percent before and after the Act. 26 U.S.C. § 1(j).

14. 26 U.S.C. § 1(j). However, the lower marginal rates will expire at the end of the 2025 tax year. See id.

15. For simplicity, we have assumed that the charitable deduction dollars “come off the top” at the highest marginal rate.

16. As set forth previously, Allen would be unlikely to itemize deductions under the Act, but for ease of illustration, in this hypothetical it is assumed he received some bad advice and chose to itemize.

17. 26 U.S.C. § 170(b)(1)(G).

18. 26 U.S.C. § 170(b)(1)(H).

19. 26 U.S.C. § 170(b)(1)(G).

20. 26 U.S.C. § 408(d)(8)(B); Notice 20077, Sec. IX, Q&A 35, 2007-5 IRB 395.

21. 26 U.S.C. § 408(d)(8)(B)(i); Notice 2007-7, Sec. IX, Q&A 41, 2007-5 IRB 395.

22. 26 U.S.C. § 408(d)(8)(B); Notice 20077, Sec. IX, Q&A 35, 2007-5 IRB 395.

23. 26 U.S.C. § 408(d)(8)(B); Notice 20077, Sec. IX, Q&A 34, 2007-5 IRB 395.

24. 26 U.S.C. § 408(d)(8)(A); Notice 20077, Sec. IX, Q&A 34, 2007-5 IRB 395.

25. 26 U.S.C. § 408(d)(8)(B)(ii); Notice 2007-7, Sec. IX, Q&A 37, 2007-5 IRB 395.

26. 26 U.S.C. § 408(d)(8)(A); Notice 20077, Sec. IX, Q&A 34, 2007-5 IRB 395.

27. Notice 2007-7, Sec. IX, Q&A 36, 2007-5 IRB 395.

28. Notice 2007-7, Sec. IX, Q&A 37, 2007-5 IRB 395.

29. 26 U.S.C. § 2010(c)(3); Rev. Proc.

2017-58; Rev. Proc. 2018-18. The estate tax rate remains at 40 percent.

30. 26 U.S.C. § 2010(c)(3).

31. 26 U.S.C. § 691(a). 

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Bowen School of Law Launches Program to Narrow Justice Gap The UA Little Rock William H. Bowen School of Law’s Rural Practice Incubator’s first cohort of attorneys will begin serving rural Arkansas communities on September 1, 2018. This represents a part of a growing trend to better prepare law school graduates for the practice of law and increase access to attorneys for underserved communities. The first legal incubator was launched in New York in 2007.1 There are now 60 existing or planned programs in 33 states and four countries.2 Bowen’s Rural Practice Incubator, the state’s first law firm incubator, will provide affordable legal services to Arkansans with modest incomes and serve a necessary role in the professional development of entrepreneurial lawyers as they create sustainable practices that narrow the justice gap.

According to Amy Johnson, Executive Director of the Arkansas Access to Justice Commission: “Attorneys are still largely inaccessible and unaffordable for most Arkansans.

At least 80% of the most serious civil legal problems experienced by Arkansans every year go unaddressed, so the need is overwhelming. We see an opportunity, through this incubator, to help attorneys provide services in different, innovative ways, such as limited scope representation. Arkansas Access to Justice is excited to support this project because we see this as being a way to improve access to justice for all Arkansans, particularly in rural communities, which are the most underserved.”

Research done by the Arkansas Access to Justice Commission shows that Arkansas has an attorney shortage.3 The national per capita ratio is 4.11 attorneys per 1,000 residents.4 Arkansas’s ratio is 2.04 attorneys per 1,000 residents.5 However, in the 25 most rural counties in Arkansas, the ratio is 0.72 attorneys per 1,000 residents.6 The population of attorneys in these counties is aging; 28% of these counties have no attorneys licensed

in this millennium, and only 14 attorneys moved to any of these counties between 2008 and 2013.7 In addition to these considerations, many lawyers in rural communities “wear two hats” in their practice, serving as a county/ city attorney and in private practice. In some cases, the lack of local attorneys means residents are waiting for legal assistance or representing themselves. Bowen’s Rural Practice Incubator is designed to address the need for attorneys in these counties by supporting new attorneys as they establish a practice in the community.

Bowen is already reaching out to fill this gap. Bowen students are involved in existing programs in rural counties such as the Delta Experience and the Delta Clinic, the Business Innovations Clinic, and the Judicial and Prosecutor Practica. The Rural Practice Incubator is the next logical step to helping Arkansas’ residents and the legal community as a whole. Program partners include the Arkansas Bar Association, Arkansas Access to Justice, the Pulaski County Bar Association, and the Arkansas Trial Lawyers Association.

The Incubator program will support Bowen alumni in building solo practices and small law firms in underserved Arkansas counties. Each program participant will receive training and mentoring, free access to case management and legal research tools, access to legal referrals, and a small stipend for business related expenses.

Program participants were selected based on their practice plan, their commitment to solo practice and the program goals of public service and increasing access to justice, and their connection to and experience working in their proposed client community. At the end of the 18-month incubator term, participants will have the skills, professional network, and client base to continue in practice on their own.

“A number of our students have come to law school because they see a need in their hometowns and communities. They want to give back, and the Rural Practice Incubator gives them the opportunity to do that,” said Bowen’s Dean Theresa M. Beiner. “It is also a perfect example of Bowen’s core values of professionalism, public service, and access to justice in action.”

For those wishing to support the program, Bowen is seeking attorney mentors, office space, and financial support. For more information, contact Amy Pritchard at 501-3249441 or ampritchard@ualr.edu.

Endnotes: 1. A.B.A. Standing Comm. on the Delivery of Legal Servs., 2016 Comprehensive Survey of Lawyer Incubators, American Bar Association (August 2016), https://www. americanbar.org/content/dam/aba/administrative/delivery_legal_services/ls_del_comprehensive_survey_lawyer_incubators.authcheckdam.pdf.

2. Id. 3. Lisa R. Pruitt et al., Access to Justice in Rural Arkansas, Arkansas Access to Justice (March 2015), https://arkansasjustice.org/wp-content/uploads/2017/04/ AATJPolicyBrief2015-0420.pdf.

4. Id. 5. Id. 6. Id. 7. See id. 

Amy Pritchard is the Incubator Director and Visiting Assistant Professor of Law, William H. Bowen School of Law

Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

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Tax Cuts And Jobs Act Limits Business Expense Deduction For Settlement of Sexual Harassment Claims

By Trey Cooper

A

Trey Cooper is an Associate at Little Rock law firm Dover Dixon Horne PLLC. He focuses his practice on employment law, insurance defense, and commercial litigation.

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ccording to statistics compiled by the Equal Employment Opportunity Commission (“EEOC”), there were 6,718 sexual harassment charges filed in the United States in 2017.1 In Arkansas, from 1997 to 2017, there have been an average of nearly 146 charges of sexual harassment filed with the EEOC each year. One thing is clear: Arkansas businesses are not immune to claims based on sexual harassment.

Before settling a claim of sexual harassment or sexual abuse, employers and employees should consider a little discussed provision of the newly passed Tax Cuts and Jobs Act (the “Act”), which could affect their taxable income.

Whether a settlement or payment related to a sexual harassment or sexual abuse claim is deductible will depend on whether the settlement or payment is subject to a nondisclosure agreement. This new provision regarding nondisclosure and settlement of sexual harassment or sexual abuse claims should be considered before settling any claims related to sexual harassment or sexual abuse.

The Tax Cuts and Jobs Act was signed into law by President Trump on December 22, 2017. Employers attempting to assess how the Act will affect their business should note a significant change that could impact employment-related business deductions and tax credits. While the media pundits have focused on the corporate tax rate, little mention has been made of restrictions on deductions for payments made in connection with sexual harassment and abuse claims. As a nod to the “MeToo” movement and high profile sexual harassment claims recently in the national spotlight, the Act eliminates the deduction from taxable income of any settlement or payment related to sexual harassment or sexual abuse, including attorneys’ fees, if the settlement is subject to a nondisclosure agreement. The Act adds to Section 162 of the Internal Revenue Code subdivision (q) which states: (q) Payments related to sexual harassment and sexual abuse. No deduction shall be allowed under this chapter for— (1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or (2) attorney’s fees related to such a settlement or payment.

Prior to passage of the Act, the law permitted tax deductions for confidential settlement agreements and attorneys' fees incurred in connection with sexual harassment or sexual abuse claims. The new provision, without the benefit of regulations or rules from the Internal Revenue Service (“IRS”), raises a number of questions that remain unanswered.

Section 162(q) appears to apply to all nondisclosure agreements related to sexual harassment or sexual abuse claims whether they bar disclosure by the employer, the employee, or both. Section 162(q) applies to all taxpayers regardless of revenue, size or number of employees as its application is not limited to subsets of employers. Neither the settlement payment to the claimant nor the attorneys’ fees incurred in investigating, negotiating, litigating, and resolving the claim appear to be deductible under Section 162(q). Taken at face value, without the benefit of regulations or rulings from the IRS, employers must choose between keeping settlement of a sexual harassment or sexual abuse claim confidential without a tax benefit or keeping a tax benefit for the settlement without any confidentiality.

The Act could have unintended consequences for claimants as well. First, the claimant may want a settlement to be confidential in order to protect his or her personal life and/or future job prospects. Because Section 162(q) provides an incentive to employers to settle without confidentiality, a claimant who wants confidentiality now has less leverage and may be forced to accept a lower settlement amount in return for a nondisclosure agreement. Because settlement amounts and legal costs are no longer deductible if there is a nondisclosure agreement, early settlement of claims based on sexual harassment or sexual abuse may be less common and settlement amounts may be lower.

Second, the Act on its face applies to claimants as well as employers. The language of the Act does not restrict only employers from deducting attorneys’ fees. The specific language states, “no deduction shall be allowed under this chapter.” The chapter deals with deductions for both business and individuals.

Claimants could end up being in a worse position financially than they were before passage of the Act. Prior to the Act, claimants could take an above-the-line tax deduction on attorneys’ fees paid by the claimant, and therefore, claimants only paid taxes on the net portion of the settlement they received. Pursuant to the Act, claimants may have to pay taxes on

the entire settlement amount. Until the IRS issues clarifying guidelines, claimants may be wise to require employers to cover the claimant's possible additional tax liability as part of the settlement, which could further hinder settlement.

The Act could have unintended consequences in regard to separation agreements.

Employers regularly require employees to sign separation agreements in order to receive severance payments. Generally, a separation agreement is going to include a broad general release and a nondisclosure agreement. It is possible the IRS could take the position that a general release of employment-related claims includes claims based on sexual harassment or sexual abuse, and a separation payment is related to the release of potential sexual harassment or sexual abuse claims. Employers may be wise to consider including, in separation agreements, representations from the employee that the employee has not asserted and has no knowledge of any claims of sexual harassment or sexual abuse. Employers wishing to go a step further may want to expressly exclude claims of sexual harassment and sexual abuse from the nondisclosure and non-disparagement provisions in separation agreements.

Settlement of sexual harassment or sexual abuse claims where the claimant has alleged multiple other claims is not addressed by the Act. If the claim is not based on allegations that reasonably meet the legal standard for sexual harassment or abuse, counsel for the employer may be wise to meet and confer with counsel for the claimant in an attempt to have the claimant voluntarily abandon and/or dismiss the sexual harassment or sexual abuse claim before settling the case. If a lawsuit has

been filed, a motion for the court to dismiss or grant summary judgment on a sexual assault or sexual abuse claim may pave the way for a quicker settlement. In fact, some cases (where the allegations of sexual harassment or sexual abuse are weak) may demand that the employer attempt to have the court dismiss or grant summary judgment on sexual harassment or sexual abuse claims before even attempting to settle. The third option is to settle the sexual harassment and/or sexual abuse claim in a separate agreement than the remaining claims not related to sexual harassment and/or sexual abuse. Because attorneys’ fees related to settlement of sexual harassment or sexual abuse claims subject to a nondisclosure agreement are not deductible, counsel should track time and costs separately for sexual harassment or sexual abuse claims. Without guidance on what “related to” means, it is unclear whether legal fees are nondeductible only as they relate to settlement or payment, or whether the investigation of or response to a complaint of sexual harassment or abuse as well as other claims are also not deductible pursuant to the Act. If settling multiple claims in separate settlement agreements, counsel should keep in mind that, if challenged by the IRS, the allocation of the settlement payments must be defensible. According to Lexis Tax Advisor,2 some ground rules for assessing the appropriateness of allocations are as follows: (1) While the express language in a settlement agreement is the most important factor in evaluating allocations, the Tax Court has indicated that it is “not bound… by any factor or factors that

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are inconsistent with the true substance of the taxpayer’s claim, nor is it bound by express allocations in a written settlement agreement if the parties did not engage in bona fide, arm’s length, adversarial negotiations.”3 As noted by the Tax Court, the goal in evaluating allocations is to determine “in lieu of what were damages awarded” or paid.4 In determining the answer to the “in lieu of what” question, courts will consider all evidence and will specifically consider the intent of the payor.5 As an alternative to the “in lieu of what” test, courts . . . have also used the “origin of the claim test” or the “primary purpose” test6 to determine the appropriate characterization of payments received as a result of lawsuits.

(2) If no lawsuit was instituted by the taxpayer receiving a settlement, courts will evaluate the appropriateness of allocations by considering any relevant documents, letters, and testimony.7 (3) If a lawsuit was filed but not settled, or if settled but the parties made no express allocations among the various claims (i.e., there is just a lump sum paid to the injured party), courts will consider the best evidence available, including pleadings, jury awards, or any court orders or judgments as well as any other facts and circumstances that will assist the court in determining why a payment was made.8 Payor’s intent again is an important factor.9 (4) Where the taxpayer fails to establish the specific amount of a payment that is allocable to a claim that would give rise to an exclusion, the entire amount of the payment will likely be deemed nonexcludable.10 When allocating payment between the settlement of sexual harassment or abuse claims and other employment related claims, careful planning and drafting of settlement documents may be necessary to minimize the potential impact of the Act. Attorneys should track time spent on issues related to the sexual harassment or abuse claim separate from the other claims. Correctly allocating the settlement payments between a non-confidential settlement of claims based on sexual harassment or sexual abuse and a confidential settlement of other claims may allow at least a portion of the total settlement payment and 34

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attorneys’ fees to be deducted.

Until or unless the statute is amended or the IRS releases interpretive guidance, employers and employees alike should carefully consider the plain meaning of the text before settling any claims based on sexual harassment or sexual abuse. According to the general counsel at a large corporation located in Arkansas who wishes to remain anonymous, tax implications brought about by Section 162(q) will not drive decision making when trying to settle sexual harassment or abuse claims. The general counsel explained that confidentiality comes first, and the optics of a sexual harassment claim could cause far more monetary damage to the company than elimination of the business expense deduction for related settlement payments and attorneys’ fees. That being said, each business and individual employee should carefully consider the new tax implications of confidentiality and settlement of sexual harassment or sexual abuse claims in order to make the best decision possible when negotiating a settlement.

Endnotes: 1. https://www.eeoc.gov/eeoc/statistics/ enforcement/sexual_harassment_eeoc_only_ by_state.cfm.

2. 1A-1A:9 Lexis Tax Advisor–Federal Topical § 1A:9.01 (2015) (Internal citations are contained in the footnotes within the block quotation).

3. McKay v. Commissioner, 102 T.C. 465, 482 (1994), vacated on other grounds, 84 F.3d 433 (5th Cir. 1996) (wrongful discharge action in which the Tax Court accepted the express allocation in a settlement agreement where facts indicated that the allocations were made as a result of arm’s length negotiations between hostile adversaries). See, e.g., Burditt v. Commissioner, T.C. Memo.

1999-117 (1999); LeFleur v. Commissioner, T.C. Memo. 1997-312 (1997); Robinson v.

Commissioner, 102 T.C. 116 (1994), aff’d in part, rev’d in part, 70 F.3d 34 (5th Cir. 1995), cert. denied, 519 U.S. 824, 117 S. Ct. 83, 136 L. Ed. 2d 40 (1996).

4. Id. See, e.g., Metzger v. Commissioner, 88 T.C. 834 (1987), aff’d without published op., 845 F.2d 1013 (3d Cir. 1988); Bent v.

Commissioner, 87 T.C. 236 (1986), aff’d, 835 F.2d 67 (3d Cir. 1987); Glynn v. Commissioner, 76 T.C. 116 (1981), aff’d without published op, 676 F.2d 682 (1st Cir. 1982).

5. Metzger v. Commissioner, 88 T.C. 834 (1987), aff’d without published opinion, 845

F.2d 1013 (3d Cir. 1988); Fono v. Commissioner, 79 T.C. 680 (1982), aff’d without published opinion, 749 F.2d 37 (9th Cir. 1984); Knuckles v. Commissioner, T.C. Memo.

1964-33 (1964), aff’d, 349 F.2d 610 (10th Cir. 1965). Where settlement has occurred post-judgment, courts have often focused on allocations in the judgment to determine whether allocations in the post-judgment settlement agreement are appropriate. See, e.g., Francisco v. United States, 267 F.3d 303 (3d Cir. 2001); Rozpad v. Commissioner, T.C. Memo. 1997-528 (1997), aff’d,154 F.3d 1 (1st Cir. 1998); Bagley v. Commissioner, 105 T.C. 396 (1995), aff’d,121 F.3d 393 (8th Cir. 1997).

6. The Supreme Court in Commissioner v.

Schleier, 515 U.S. 323, 115 S. Ct. 2159, 132 L. Ed. 2d 294 (1995), for example, in effect concluded that, under IRC § 104(a)(2), if a claim had its origin in a personal injury then all damages that compensated for that injury would be excludable. The Supreme Court has also stressed the origin of the claim doctrine in determining the deductibility of payments made as a result of lawsuits. See, e.g., Woodward v. Commissioner, 397 U.S. 572, 90 S. Ct. 1302, 25 L. Ed. 2d 577 (1970); United States v. Gilmore, 372 U.S. 39 (1963); United States v. Patrick, 372 U.S. 53 (1963).

7. McKay v. Commissioner, 102 T.C. at 482–483. See, e.g., Fitts v. Commissioner, T.C. Memo. 1994-52 (1994).

8. McKay v. Commissioner, 102 T.C. at 483.

See, e.g., Miller v Commissioner, T.C. Memo.

1993-49 (1993), supplemented by, T.C. Memo. 1993-588 (1993). See also Rev. Rul. 75-230, 1975-1 CB 93 and Rev. Rul. 85-98, 1985-2 CB 51 (emphasizing the importance of the complaint).

9. Agar v. Commissioner, 290 F.2d 283 (2d Cir. 1961), aff’g, T.C. Memo. 1960-21 (1960); Stocks v. Commissioner, 98 T.C. 1 (1992); Metzger v. Commissioner, 88 T.C. 834 (1987), aff’d without published op., 845 F.2d 1013 (3d Cir. 1988); Bent v. Commissioner, 87 T.C. 236 (1986), aff’d, 835 F.2d 67 (3d Cir. 1987); Threlkeld v. Commissioner, 87 T.C. 1294, aff’d, 848 F.2d 81 (6th Cir. 1988); Glynn v. Commissioner, 76 T.C. 116 (1981), aff’d, 676 F.2d 682 (1st Cir. 1982).

10. Taggi v. United States, 35 F.3d 93 (2d Cir. 1994); Wise v. Commissioner, T.C. Memo.

1984-4 (1984). See also Getty v. Commissioner, 91 T.C. 160, 175–176 (1988), aff’d on this issue and rev’d on other issues, 913 F.2d 1486 (9th Cir. 1990). 

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Not Enough Green: Sticky Problems from Insolvency in the Marijuana Business

By Andrew King

This article provides an overview of the issues that arise when a participant in the marijuana industry becomes insolvent, including the unavailability of relief under the United States Bankruptcy Code and state-law insolvency remedies.

D

Andrew King is a partner at Kutak Rock LLP in Little Rock.

His practice includes business litigation and representation of financial institutions.

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espite some delays caused by litigation,1 in 2018 the Arkansas Medical Marijuana Commission has awarded five cultivation licenses2 and is expected to award 32 dispensary licenses3 under Arkansas Constitution Amendment 98, the Arkansas Medical Marijuana Amendment of 2016.4 State officials estimate that between 20,000 and 40,000 patients will obtain identification cards to purchase medical marijuana.5 From this pool of patients, the Arkansas medical marijuana industry is expected to generate $30 to $60 million in annual revenue.6 Marijuana businesses will face unique challenges to their bottom lines, including annual licensing fees,7 competition from the illicit market,8 and the inability to deduct ordinary business expenses related to the sale of marijuana on their federal tax returns.9 Despite these risks, the Commission received hundreds of applications for cultivation and dispensary licenses. And although the Commission seeks assurances that licensees will have solid financial backing, the laws of economics will still apply. As in any other industry, some percentage of marijuana businesses will eventually fail or need to reorganize.10 When that need arises, creditors and investors will find that relief under the United States Bankruptcy Code is not available. They will also find unique rules that may affect the enforceability of contractual obligations related to a marijuana business.

Careful drafting and consideration of long-disregarded insolvency laws will ensure that investors and creditors can realize their contractual expectations.

Avoiding Unenforceability for Illegality Because the possession and sale of marijuana is illegal under federal law, the first issue that creditors and investors may face is the long-held doctrine that contracts will not be enforced if they are for an illegal purpose or concern an illegal business.11 Based on this rule of Arkansas law, courts have refused to enforce contracts for the sale of human organs because such a transaction is prohibited by federal law,12 and held an insurance agreement was unenforceable because it violated state workers’ compensation laws.13 To determine whether a contract is enforceable, courts consider whether the contract requires an illegal purpose14 and whether the party seeking enforcement did anything in furtherance of the illegal purpose.15 Similarly, in the context of marijuana businesses, courts in other states have examined whether the contractual objectives can be achieved without resort to illegal conduct.

For example, despite the federal prohibition against marijuana,16 a federal court in California was willing to enforce a contract to pay for the sale of a medical marijuana business because requiring full payment of the purchase price would not necessarily require the buyer to engage in the marijuana industry.17 Similarly, the Arizona Court of Appeals upheld a lease to a medical marijuana dispensary in part because the lease permitted subleasing, which meant that it was possible under the contract for the rent not to derive from a marijuana business.18 While state-law policy in favor of marijuana legalization may overcome the illegality issue, these cases suggest that contracts should be drafted so as not to specifically require or contemplate that either party engage in a marijuana business.

Bankruptcy courts “just say no” As a matter of federal policy, bankruptcy trustees are unable to administer marijuana assets or the income from a marijuana business.19 As the Director of the United States Trustee Program explained in a letter to all Chapter 7 and Chapter 13 Trustees: It is the policy of the United States Trustee Program that United States Trustees shall move to dismiss or object in all cases involving marijuana assets on grounds that such assets may not be administered under the Bankruptcy Code even if trustees or other parties object on the same or different grounds.20

“At the time of investment, prospective investors and lenders to marijuana businesses should consider whether unavailability of a federal bankruptcy process will put them at greater risk for suffering losses from business failure. Arkansas attorneys should anticipate and address the risk of insolvency through strong drafting and careful study of Arkansas’ long-forgotten insolvency laws.”

The Trustee Program’s policy extends to indirect participants in the marijuana industry, such as landlords, suppliers, and investors.21 For the same reasons, a debtor-inpossession cannot fund a chapter 11 plan of reorganization from income generated by a marijuana business.22 As a result, bankruptcy courts have dismissed cases under Chapters 7, 11, and 13 where assets of the estate include marijuana or proceeds of marijuana sales.23 Even in a case where an individual debtor is an employee in the marijuana business, he or she may be required to discontinue employment or else face dismissal of the case.24 With bankruptcy relief unavailable, distressed marijuana businesses and their creditors will need to consider alternative forms of relief under state insolvency laws.

State-court alternatives Supposing a marijuana business entity wishes to liquidate its assets and dissolve, it can employ the procedures for dissolution and winding up its affairs as provided by the statutes under which it is organized.25 Unlike a bankruptcy action, the statutory procedures will permit the administration and distribution of proceeds from a marijuana business to creditors and equity owners under a predetermined order of priority. Presumably the license to cultivate or dispense will be among the company’s most valuable assets, and can be transferred with the approval of the Medical Marijuana Commission.26 Marijuana businesses that wish to continue operating, however, must navigate insolvency laws that have largely lain dormant for several decades due to the primacy of federal bankruptcy.27 The most familiar state-law insolvency remedy is a receivership, and remains in occasional use today. Under Rule 66 of the Arkansas Rules of Civil Procedure, any person in interest may petition a circuit court for the appointment of a receiver “for any law-

ful purpose.”28 Receivership is often sought when a property owner does not have sufficient funds to maintain property or carry out its operations.29 The remedy is designed to protect the interests of all creditors and the parties to the action and to protect property from injury or threatened loss or destruction.30 The receiver will be required to give a bond, take an oath, and make regular reports to the court of his or her activities.

In the context of a marijuana cultivator or dispensary, the receiver would likely need to obtain a temporary license from the Medical Marijuana Commission to operate the business.31 Under the circuit court’s direction, the receiver could operate the business and effectuate a reorganization for the benefit of creditors and other stakeholders.

While most receiverships these days are initiated by creditors, the Arkansas Code provides that an insolvent debtor may petition a circuit court to be declared insolvent, name its creditors as defendants, and request that its property be distributed among the creditors.32 Similar to the turnover provisions of the bankruptcy code,33 the debtor must turn over all of his or her non-exempt property to the receiver and execute any instrument necessary to transfer property to the receiver.34 The receiver may then liquidate the property,35 and after deducting his or her expenses, pay all creditors who “file in the court a stipulation for the use of the debtor to the effect that . . . the debtor shall be acquitted of all further liability in personam to such creditor.”36 Conceivably this procedure could be used by individual debtors who find themselves insolvent but wish to continue employment in the marijuana industry.37 Among the disadvantages of a state insolvency proceeding is that it will be limited to creditors and property within the personal jurisdiction of the state’s courts, which may require a corresponding proceeding in an-

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other state. The state court also has far less power to halt ancillary litigation than would a bankruptcy court. Nonetheless, a statecourt insolvency proceeding can be an effective means to end creditor lawsuits and effectuate the orderly disposition of assets outside of bankruptcy.38 Conclusion At the time of investment, prospective investors and lenders to marijuana businesses should consider whether unavailability of a federal bankruptcy process will put them at greater risk for suffering losses from business failure. Arkansas attorneys should anticipate and address the risk of insolvency through strong drafting and careful study of Arkansas’ long-forgotten insolvency laws.

Endnotes: 1. Arkansas Dep’t of Fin. & Admin. v. Naturalis Health, LLC, 2018 Ark. 224; Associated Press, Arkansas halts review of medical marijuana dispensary applications, Marijuana Business Daily, Apr. 12, 2018, https:// mjbizdaily.com/arkansas-halts-review-ofmedical-marijuana-dispensary-applications/.

2. Ark. Med. Marijuana Comm’n, Top 10 Scored MMC applications, http://www. mmc.arkansas.gov/top-10-scored-mmcapplications1 last visited Mar. 13, 2018; see Associated Press, Five companies picked to grow medical cannabis in Arkansas (Feb. 27, 2018), available at https://mjbizdaily. com/five-companies-picked-grow-medicalcannabis-arkansas/.

3. Omar Sacirbey, Bart Schaneman, & Kristen Nichols, Week in Review: Massachusetts recreational marijuana delay, Arkansas’ MMJ growers & hemp victory, Marijuana Business Daily, Mar. 2, 2018, https:// mjbizdaily.com/week-review-massachusettsrecreational-cannabis-delay-arkansas-mmjgrowers-hemp-victory/.

4. Ark. Const. amend. 98, available at http://adh-staging.ark.org/images/uploads/ pdf/The_Arkansas_Medical_Marijuana_ Amendment_of_2016.pdf (hereinafter “Amendment 98”).

5. Brian Fanney, Medical marijuana industry expected to bring new jobs to Arkansas, Arkansas Democrat-Gazette, Aug. 27, 2017; Associated Press, Arkansas finalizing medical cannabis industry rules (Jun. 6, 2017), available at https://mjbizdaily.com/ week-review-massachusetts-recreational-cannabis-delay-arkansas-mmj-growers-hemp38

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victory/ (last visited Mar. 13, 2018).

6. Special Report: The Big Business of Medical Marijuana, KNWA, Nov. 17, 2017, http://www.ozarksfirst.com/news/specialreport-the-big-business-of-medical-marijuana/859537563 (estimating at least $38 million in annual revenue); Wesley Brown, Arkansas’ untried medical cannabis market projected to see sales of $67 million by 2025, Talk Business & Politics, Jun. 27, 2017, https://talkbusiness.net/2017/06/arkansasuntried-medical-cannabis-market-projectedto-sees-sales-of-67-million-by-2025/.

7. The annual licensing fee is $100,000 for a cultivator and $22,500 for a dispensary.

Arkansas Medical Marijuana Comm’n, Rules & Regs. Governing the Application, Issuance, and Renewal of Licenses for Medical Marijuana Cultivation Facilities and Dispensaries in Arkansas, §§ IV.13.c., V.13.c., http://www.mmc.arkansas.gov/Websites/ mmsar/images/MMCMedicalMarijuanaRules.pdf (hereinafter “AMMC Licensure Rules”). Therefore, the combined annual licensing fees for the state’s industry will be $1,220,000.00.

8. See, e.g., Joseph Peña, How marijuana entrepreneurs can outsmart black-market competitors, Marijuana Business Daily, Mar. 20, 2018, https://mjbizdaily.com/ marijuana-entrepreneurs-can-outsmartblack-market-competitors/. One report estimated the illicit marijuana market in Arkansas to be approximately $93 million based on data from the federal government.

Divya Raghavan, Cannabis Cash: How Much Money Could Your State Make from Marijuana Legalization?, Nerdwallet, Sep. 22, 2014, https://www.nerdwallet.com/blog/ studies/how-much-money-states-makemarijuana-legalization/.

9. 26 U.S.C. § 280E. See Olive v. Comm’r of Internal Revenue, 139 T.C. 19, 20 n.2, 38 (2012) (holding that Section 280E applies to dispensary’s expenses, but “expenses” does not include Cost of Goods Sold).

10. According to the Small Business Administration, an average of 78.5% of new businesses survived one year during the period from 2005 to 2015. United States Small Business Administration, Frequently Asked Questions About Small Business at 1, August 2017, https://www.sba.gov/sites/default/ files/advocacy/SB-FAQ-2017-WEB.pdf.

11. E.g. Hollenberg Music Co. v. Berry, 85 Ark. 9, 106 S.W. 1172 (1907) (discussing sale of piano to a bawdy house).

12. Wilson v. Adkins, 57 Ark. App. 43, 46, 941 S.W.2d 440, 441 (1997).

13. Wal-Mart Stores, Inc. v. Crist, 855 F.2d 1326, 1333–35 (1988).

14. Hollenberg Music Co., supra, 85 Ark. at 9, 106 S.W. at 1172.

15. Potomac Leasing Co. v. Vitality Ctrs., Inc., 290 Ark. 265, 269, 718 S.W.2d 928, 930 (1986).

16. 21 U.S.C. §§ 802, 812, 844.

17. Mann v. Gullickson, Case No. 15-cv03630, 2016 WL 6473215, at *7 (N.D. Cal. Nov. 2, 2016).

18. Green Cross Med., Inc. v. Galley, 395 P.3d 302, 305, 309 (Ariz. Ct. App. 2017).

19. In re Arenas, 535 B.R. 845, 852 (B.A.P. 10th Cir. 2015).

20. Clifford J. White III, Director’s Letter to Chapter 7 and Chapter 13 Trustees, U.S. Dept’t of Justice Executive Office for United States Trustees (Apr. 26, 2017), available at https://www.justice.gov/ust/file/ marijuana_assets.pdf/download.

21. Clifford J. White III & John Sheahan, Why Marijuana Assets May Not Be Administered in Bankruptcy at 2–3, U.S. Dep’t of Justice Executive Office for United States Trustees (Dec. 2017), available at https://www.justice.gov/ust/file/ abi_201712.pdf/download.

22. In re Arm Ventures, LLC, 564 B.R. 77, 85 (Bankr. S.D. Fla. 2017) (“[T]he very fact that the Amended Plan is based on income derived from the sale of marijuana can be deemed ‘bad faith.’”).

23. In re Arenas, 535 B.R. at 854 (chapters 7 and 13); In re Medpoint Management, LLC, 528 B.R. 178, 188 (Bankr. D. Ariz.

2015) (chapter 7); In re Rent-Rite Super Kegs West Ltd., 484 B.R. 799, 807–08 (Bankr. D. Col. 2012) (chapters 7 and 11).

24. In re Johnson, 532 B.R. 53, 59 (Bankr.

W.D. Mich. 2015).

25. See, e.g., Ark. Code Ann. §§ 4-271401–1440 (corporate dissolution); Ark. Code Ann. §§ 4-32-901–908 (limited liability company dissolution); Ark. Code Ann. §§ 4-46-801–807 (winding up of partnership); Ark. Code Ann. § 4-47-801– 812 (dissolution of limited partnership).

26. AMMC Licensure Rules, supra, §§ IV.16, V.17.

27. There has been little development of Arkansas insolvency law since the enactment of comprehensive federal bankruptcy laws in 1938 and 1979. For 40 years, state provisions for insolvency were deemed

preempted by the Bankruptcy Act of 1938.

When the Bankruptcy Reform Act of 1978 came into existence, express federal preemption gave way to a more lenient conflict preemption standard, but state insolvency laws remained little-used. 15A Fletcher Cyclopedia of the Law of Corporations § 7366; In re State of Missouri, 7 B.R. 974, 982 (E.D. Ark. 1980). Nonetheless, the laws are still part of the Arkansas Code and may have new vitality given the unavailability of bankruptcy relief for businesses in the marijuana industry.

28. Ark. R. Civ. P. 66(a). There are several provisions in the Arkansas Code regarding receivership, but it is unclear whether they remain in effect given the Arkansas Supreme Court’s authority over all matters of pleading, practice, and procedure. See Ark. Code Ann. §§ 16-117-203–210; Mendoza v. WIS Int’l, Inc., 2016 Ark. 157, at 8, 490 S.W.3d 298, 303–04 (holding that statutory rule regarding admissibility of seat-belt use is an unconstitutional intrusion into the Arkansas Supreme Court’s procedural authority); Johnson v. Rockwell Automation, 2009 Ark. 241, at 6, 308 S.W.3d 135, 140–41 (striking down non-party fault statute as an impermissible rule of procedure).

29. Williams v. Brushey Island Publ. Water Auth., 368 Ark. 219, 227, 243 S.W.3d 903, 908 (2006).

30. Union Planters Bank v. E. Cent. Ark. Dev. Corp., 340 Ark. 706, 709, 13 S.W.3d 578, 580 (2000).

31. AMMC Licensure Rules, supra, §§ IV.18, V.19. Presumably an existing cultivation or dispensary licensee would be a suitable candidate to serve as a receiver, subject to the limitations on multiple licensure.

32. Ark. Code Ann. § 16-117-301.

33. 11 U.S.C. § 542.

34. Ark. Code Ann. § 16-117-302.

35. Ark. Code Ann.. § 16-117-305.

36. Ark. Code Ann. § 16-117-306(a)(2).

37. See In re Johnson, 532 B.R. at 59 (requiring chapter 13 debtor to discontinue marijuana employment or else face dismissal of bankruptcy).

38. See Geoffrey L. Berman, General Assignments for the Benefit of Creditors at 5 (3d ed. 2015).

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800-455-0581 www.DarrenOQuinn.com Representing: Doctors Pharmacists Nurses Healthcare Providers The Law Offices of Darren O’Quinn 36 Rahling Circle, Suite 4 Little Rock, Arkansas 72223 Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

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Don’t Let the Future of Trucking Leave Your Practice Behind

By Ben Jackson

The rapidly approaching and radically different future of the trucking industry will bring new challenges and opportunities to nearly every corner of the Arkansas legal community.

F

Ben Jackson is a lawyer at Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C. 40

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rom interstates and highways to city streets, from the 18-wheeler “big rig” to the garbage truck outside your house, commercial vehicles are the lifeblood of our state’s economy.

The food we eat, the clothes we wear, the gasoline we need to drive, and anything we buy in store or online gets hauled from its source to us, usually in a truck.

And just as the trucking industry permeates nearly every supply chain in our nation’s economy, so it also permeates the legal profession. The trucking industry impacts legal practices including litigation, taxation, regulatory consulting, transportation and logistics, labor and employment, privacy rights, the environment, intellectual property, cybersecurity and more. And Arkansas, with vibrant farming, national retailers, numerous transportation and oil companies, and more, is no different.

The world of trucking is undergoing a technological revolution.

Self-driving cars carry the headlines and are the talk of Congress right now, but make no mistake, the industry with the most incentive to get driverless vehicles on the road involves 18-wheelers, not family sedans. The trucking industry in this country projects a shortage of more than 100,000 truck drivers by 2022.1 And those truck drivers still on the road require sleep, food, and climate control—all things that impact the industry’s bottom line.

The result is that the trucking industry is sprinting into the future.

In order to keep your practice current, and to strategically plan for the changing legal environment surrounding this industry, you need to keep up.

This article discusses three of the newest developments for the trucking industry—one happening now (driver monitoring), one happening soon (truck platooning), and one likely to hit highways much sooner than you think (self-driving trucks). Each of these developments will impact a broad spectrum of legal practices, and in fact, the extent of that impact is still hard to predict.

Happening Now: Driver Monitoring The trucking industry, partially on its own and partially due to government mandate, is dramatically increasing its monitoring of drivers on the road. The result so far has been a heated privacy debate, a battle of regulatory interests, new and radical labor and employment issues, and a dramatic increase in the amount of sensitive data that is being recorded and distributed to and from our highways and interstates.

On December 18, 2017, the Congressionally mandated requirement that all commercial motor vehicle operators implement electronic login devices (ELDs) went into effect.2 The mandate requires interstate and intrastate motor carriers and drivers who are required to maintain records of duty status (driving hours) to do so electronically.3 This method will replace the paper log books previously utilized by truck drivers.

The ELDs will track when a truck is running, its movement, the miles driven, its speed, and how long the engine is running. The idea behind the mandate is to replace paper logs, which were subject to human error or even intentional “fudging” by drivers known to be under intense pressure to meet deadlines more and more efficiently. The hope is that ELDs will more accurately and effectively enforce the “Hours of Service” requirements issued by the Federal Motor Carrier Safety Administration (FMCSA) to govern how many hours truck and other commercial drivers are permitted to spend driving, working and resting.

Also beginning in December, Department of Transportation officers at Arkansas weigh stations, and across the country, will have the power to issue citations for trucks without ELDs in use. Notably, fleets that already had ELDs equipped in their trucks will have until December of 2019 to ensure that the systems comply with the published specifications.

Not surprisingly, the ELD mandate has been met with concern and criticism by some, including the truck drivers themselves. Many truck drivers consider the ELDs to be an invasion of privacy. Generally, many drivers dislike the idea of speed, location and movement being constantly tracked because it restricts the ability of the driver to use his or her own professional judgment to ensure delivery of the cargo safely and efficiently, both to the economic benefit of the driver and the customer. There are also concerns that the system has flaws, such as requiring a driver to take another 30-minute break simply because he

or she turned on the engine to move the truck 15 feet, or forcing a driver to stop for hours only five miles from the destination even if the driver is not tired. And of course, the ELDs cost money to install, utilize and maintain.

All this detailed information regarding the movement of commercial vehicles creates a number of legal issues that touch on a variety of Arkansas legal practices. For example, how is the data protected for the benefit of employee privacy? How will companies ensure that data is stored and transmitted in compliance with cyber security standards? What are the implications of a hacker obtaining, or perhaps worse, altering the information, when it comes to privacy, data security and regulatory compliance? And finally, what if any of this information will be discoverable during litigation or admissible in court?

These questions could go on and on, and their answers will play out in state and federal court over the next few years. But one thing is certain now: a lot more data about how commercial trucks are being operated on Arkansas streets and highways is going to be available electronically, and it needs to be reliably stored, secured and transmitted.

Regardless of the formats for data transfer used in ELDs,4 the data must be protected from wireless access. Perhaps equally concerning is the practical reality that a would-be hacker could easily identify the locations of frequent transfers—trucking weigh stations and other DOT checkpoints.

For attorneys who represent the trucking industry or its employees, who regularly engage in trucking-related personal injury litigation, or those practicing in the areas of privacy rights or data security, the ELD mandate will open up a variety of legal and regulatory issues in the coming months and years regarding the availability, protection, and limitations on how the collected data will be used, how it will be transferred, and how access to that in-

formation, both before and during data transfer, will be restricted and protected.

Coming Soon: Driver Assisted Automation and the “Vehicle to Vehicle Network” Unlike driverless cars and commercial vehicles, “truck platooning,” in a form that includes drivers with limited roles, will hit the roads for real this year. For example, Peloton has predicted that it will begin using truck platooning with an actual commercial customer around midyear in Texas. The program would conduct a 250–300 mile linehaul with pairs of trucks, according to Peloton’s market vice president, Rod McLane.5 Daimler Trucks has already completed extensive testing on semitruck platooning in Europe, and intends to do more in Japan in 2018.6 Volvo Corp and Mercedes Benz also have conducted a large number of successful track platooning test runs in multiple countries including the United States.

What exactly is “truck platooning,” you ask? Truck platooning is the electronic linking of trucks driving down the highway. It involves a lead truck which predominantly controls one or more other trucks following it. The trucks are designed to drive very close together, 40 or 50 feet apart, in a high-speed harmony that utilizes a wireless, “vehicle to vehicle” (“V2V”) network to synchronize speed, braking, and more. The idea is to reduce air turbulence between the tractor-trailers, thus reducing fuel costs.

For context, in its 2016 report, the North American Council on Freight Efficiency (“NACFE”) wrote that testing showed a 4% fuel use reduction when comparing two platooning trucks to a pair running separately.7 The testing showed a 7% reduction in fuel use when the trucks were traveling at highway speeds.8 In 2013, the National Renewable Energy Laboratory conducted tests using Peloton's technology and found that vehicles loaded at 65,000 pounds and running at up to

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The Future of Driver Monitoring There are several products being developed to monitor driver alertness beyond ELDs. For example, BHP, a global resource company, has created a technology called SmartCap, which takes the form of a strip that is placed inside of headwear to measure the wearer’s brainwaves and identify patterns of fatigue over time. It then reports to both the driver and supervisory employees to recommend any appropriate intervention.

A company called Seeing Machines has developed a product called Guardian that uses “face-and-gazetracking algorithms” to monitor and measure the driver’s eye lids and head movements while also capturing road conditions at the time of any event. The information obtained is transmitted wirelessly, and can even be viewed live on a secure network.

Mercedes Benz plans to roll out a driver vest that would identify when a driver is having a heart attack and warn the driver or stop the truck. Other car makers are testing products to monitor drivers and identify diabetic emergencies.

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70 miles per hour between 20-75 feet apart saw fuel savings of up to 5.3% for the lead truck, and 9.7% for the trailing truck.9 In the world of mass-trucking, 5.3% savings in fuel costs across the board would be game changing.

Of course, fuel costs are only the beginning; the ultimate plan is the reduction of human drivers and the costly things that we humans require, like sleep, restroom breaks, and air conditioning. As the NACFE called it, truck platooning is a “pathway to autonomous vehicles,” and it is not hard to see why.10 Nine state legislatures have approved commercial use of driver-assisted truck platooning—Arkansas, Georgia, Michigan, Nevada, North Carolina, Ohio, South Carolina, Tennessee and Texas. Twenty-three other states allow “reasonable following distance” for commercial trucks, which would permit certain versions of truck platooning that involved drivers in each vehicle. With each passing legislative session, more and more states are adopting or amending laws to become part of this developing technology.

The Role of the V2V Network in Autonomous Trucking While V2V communications are not necessarily required for an automated vehicle to work, it is required for truck platooning, because the vehicles in the platoon must necessarily be in constant communication with each other for the system to work. But V2V networks, in some form, will likely play a role in how all autonomous vehicles, especially those operating in the midst of urban and local traffic, operate and communicate with each other.

Truck platooning will begin as “driver assistive truck platooning” (“DATP”), which is a type of Level 1 automation (using Society of Automotive Engineers (SAE) levels).11 With DATP, each truck in the platoon has a driver, but the trucks following the leader are in automated mode with the exception of steering.

V2V communications ensure that when the lead truck brakes, the trailing truck brakes as well, and in sufficient fashion to maintain appropriate separation within the platoon. The same goes for acceleration, and presumably, alteration of the space between the trucks depending upon the weather, traffic conditions, or even the occasional car “cutting in” between the two trucks. V2V technology allows the trucks to react nearly simultaneously—far faster than human reaction times and communication—which allows for the close trailing distance and decreased drag.

Obviously, maintaining the communication between the vehicles is critical, but we know that loss of signal can—and will—occur. Platooning trucks are therefore equipped for such instances with systems to handle degradation or loss of communications. If a satellite loses contact, the DATP system has a sensing subsystem to maintain spacing until a connection can be re-established. There are other operational systems in place in the event of other failures.

It is not hard to see that V2V communication will be an important part of future autonomous cars. Any system which fills our cities and highways with driverless vehicles necessarily involves a method by which those vehicles communicate. Using a V2V network, likely along with a V2I (Vehicle to Infrastructure) network, the hope is that automated vehicles can reduce accidents, increase efficiency of traffic flow, and generally make life a bit easier and better for all of us. As long as the data transmitted is sufficiently secure.

The implications of this new technology, from its impact on labor and employment, to regulation, to insurance, litigation and cyber security, is limitless. But any understanding of how to adapt your practice for truck platooning and the V2V or V2I networks that will soon be commonplace would be shortsighted without also looking a bit further into the future of autonomous trucking.

Sooner than You Think: Self-Driving Trucks Coming to a Highway Near You Actually, self-driving trucks are making deliveries right now. That’s right, driverless trucking technology is not on the distant horizon; it is already here. Autonomous trucks (currently with a human driver to get them on and off the interstate) have been carrying Frigidaire refrigerators from Texas to California since last year.12 The same companies that are developing the V2V network and truck platooning technology discussed above are also experimenting with driverless technology for both long haul trucking and commercial transportation in more urban settings. For example, Volvo is currently developing and testing autonomous sanitation trucks in Switzerland designed to navigate city streets.13 Waymo has been testing self-driving trucks in California, Arizona and Atlanta in a partnership with Alphabet and Google.14 Others include Uber,15 Embark (whose self-driving truck has successfully completed a 2,400 mile cross-country haul),16 and more.

The only thing restraining this autonomous trucking future from becoming the autono-

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mous trucking present is the absence of full statutory blessing and regulation. Currently, there is no pending legislation, either in the Arkansas legislature or Congress, relating to the use of autonomous vehicles on a regular basis.17 But make no mistake, more regulation is coming. And when it does, the autonomous trucks will have already been designed, built and field tested, both in the United States and in other countries. There will be little, if any, lag time between the passing of autonomous commercial vehicle legislation and the reality of hundreds of autonomous trucks and truck platoons travelling our highways and city streets.

The new opportunities and responsibilities for a variety of attorneys in Arkansas that will develop from these changes are so numerous that the ultimate legal impact is difficult to quantify. When more regulation arrives, trucking companies, their employees, and the manufacturers, miners, refiners, farmers, distributors and vendors that rely upon them, will need to prepare for, respond to and implement policies to comply. The battle between the various vested lobbying interests will be epic. The insurance coverage issues related to multiple categories of autonomous commercial vehicles will have to be written, implemented, and developed through our court system. The privacy 44

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issues for employer, employee and customer will need to be argued, regulated, enforced, interpreted and litigated. An entire new area of employee will have to be designed, trained, supervised, compensated and regulated in order to supervise, secure and manage both the autonomous fleets and the data they collect, utilize and disseminate. A new and controversial cache of evidence regarding trucks, including their movements, speed, and reaction times will begin to flood into personal injury litigation, worker’s compensation disputes, and criminal cases. And of course, the risk of cyber breaches, hackers and terrorists obtaining sensitive intellectual property and financial, tracking and logistical data from trucking companies, or worse, control over the movements of the trucks themselves, must be regulated, prevented, and responded to, both with legal consultation, litigation and yet more government regulation.

The fascinating future of trucking in Arkansas and the United States is coming, and the legal profession needs to get up to speed before the industry passes it by.

Endnotes: 1. https://www.usatoday.com/story/money/2018/04/26/truck-driver-shortage-raises-

prices/535870002/ (citing American Trucking Associations) (last visited May 15, 2018).

2. https://www.fmcsa.dot.gov/hours-service/ elds/implementation-timeline (last visited May 15, 2018).

3. 80 Fed. Reg. 78292-01; available at https://www.gpo.gov/fdsys/pkg/FR-2015-1216/pdf/2015-31336.pdf.

4. According to the ELD rule technical specifications from the FMCSA, the data can be transferred either wirelessly on demand or by e-mail to an authorized safety official, or using USB2.0 or Bluetooth®. https://www.fmcsa. dot.gov./faq/what-are-options-electronic-logging-devices-elds-electronically-transfer-data.

5. http://www.ttnews.com/articles/pelotonpromises-commercial-platooning-2018 (last visited May 15, 2018).

6. http://media.daimler.com/marsMediaSite/ en/instance/ko/Daimler-now-testing-platooning-technology-for-more-truck-efficiency-alsoin-Japan.xhtml?oid=32920883 (last visited May 15, 2018).

7. Matteo Muratori, Jacob Holden, Michael Lammert, Adam Duran, Stanely Young and Jeffrey Gonder, Potentials for Platooning in U.S. Highway Freight Transport, SAE International Journal of Commercial Vehicles 10(1), 2017.

8. Id. 9. Id. 10. Id. 11. Society of Automotive Engineers (J3016) Autonomy Levels.

12. https://www.wired.com/story/embark-selfdriving-truck-deliveries/ (last visited May 15, 2018).

13. http://money.cnn.com/2017/05/18/technology/volvo-garbage-truck/index.html (last visited May 15, 2018).

14. https://www.fastcompany.com/40542125/ waymo-is-testing-self-driving-trucks-in-atlanta (last visited May 15, 2018).

15. https://ihsmarkit.com/research-analysis/ Uber-Waymo-Starsky-Robotics-confirm-selfdriving-truck-tests.html (last visited May 15, 2018).

16. https://techcrunch.com/2018/02/06/embarks-self-driving-truck-drove-2400-milesacross-the-u-s/ (last visited May 15, 2018).

17. In Congress, the Self Driving Act (H.R. 3388 – 115th Congress) passed by the House of Representatives is currently stuck in the Senate. The Senate’s AV START Act (S.1885 – 115th Congress) is similarly stalled. However, neither of those bills is intended to address commercial vehicles. 

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Office Optional: Flexible Work Arrangements and the Rise of Virtual Law Firms

By Bourgon B. Reynolds

A

dvances in technology and changes in demographics are effecting a profound change in traditional legal jobs.

Analysts estimate that by 2025, 75% of the workforce will be millennials, a group defined as adults born between 1981 and 1996.1 Indeed, the generation will soon surpass the Boomers as the largest generation in the United States.2 And as these millennials are graduating law school and starting their careers, they are prompting employers and entrepreneurs to adapt and innovate by bringing their new ideas, perspectives, priorities, and skills to the legal industry.

One area where this is most apparent is in the rise of “virtual law firms� and flexible work arrangements. Virtual law firms, such as Arkansas-based Law to Go and MyVirtual.Lawyer, are changing how attorneys practice law by using technology to deliver legal services to consumers. Additionally, traditional brick and mortar law firms are embracing flexible work arrangements that help attorneys balance career and family. For instance, Rose Law Firm recently hired me under such an arrangement.

This article will explore advances in technology and changes in demographics as they relate to these trends. It will also explore the effects these changes will have on attorneys and employers as they navigate an increasingly unconventional and interconnected legal world.

Bourgon Reynolds is an attorney with the Rose Law Firm. She handles a wide variety of civil disputes including contract litigation, antitrust and class action litigation.

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A. Technology is connecting attorneys to their practice in new ways.

A few decades ago, attorneys were required to go to the office to receive calls, review files, or conduct research. But technology changed all that. Today, approximately 77% of Americans have a smartphone and 73% have broadband access at home.3 One result of this widespread internet access? The necessity of in-office legal work is diminishing. Lawyers can draft briefs, review files, conduct research, and even attend depositions or hearings, whether they are

“Technological advancements have changed, and will continue to change, the practice of law. Attorneys are no longer tied to the office in the same way they were a few decades ago.

Entrepreneurs are also reimagining what the practice of law looks like and capitalizing on new opportunities.”

sitting in their office, the courtroom, or at home. Courts are adapting too. Now, even filing deadlines are met via computer.

Employers are embracing these technological advancements. To stay current, many employers continually update their software capabilities in an effort to streamline the practice of law and make it more cost effective for clients. For instance, many firms give their attorneys access to products like Citrix Sharefile, cloud computing technology, or virtual private networks (VPN). These tools permit attorneys and clients alike to securely upload, access, and review documents from any place in the world.

Technology also ensures that attorneys can obtain the valuable face time that going to the office provides. Video conferencing, audio conferencing, and screen share allows users to interact “face to face,” or to simultaneously review documents.

B. Shifting demographics are changing traditional notions of legal work and careers.

Technological advances have changed the practice of law. But that is only part of the story. The influx of millennials into the workforce is prompting employers to reimagine what legal work looks like and to consider flexible work arrangements for employees.

As a group, millennials conceptualize careers and personal fulfillment differently than their Boomer parents or Gen Xer counterparts.

For instance, 64% of older Americans rate making money and learning new skills as their top priority in a job.4 In comparison, 57% of millennials say their top priority is to have a job they find enjoyable or that makes a difference in society.5 Millennials are different in their personal lives, too. 57% have never married, compared to 17% of Gen Xers and 10% of Boomers.6 They also are waiting longer to have children than any of the prior generations7 and millennials who do decide to have children continually rate family life as central to their career aspirations.8 As a result, they often seek career paths that permit them to take time off to raise

children or to work from home.9 Studies show that these desires are shared equally between the sexes, with millennial men tending to have significantly more egalitarian views on family, gender roles, and careers than the previous generations.10 These new attitudes mean millennials are searching for careers that combine the best of both worlds: advancement and flexibility. In response, employers wishing to capture the talent pool are offering unique flexible work arrangements that are in contrast to the traditional 8–5 office job. The arrangements can take various forms: full-time flexible, which typically means full-time work but with the ability to control when and where those hours are worked;11 parttime, which offers substantially reduced hours or the option to work from home; or a mixture of both, which often means an arrangement that changes depending on the needs of the employer and the desires of the employee.

Joan C. Williams, Distinguished Professor of Law and Director of the Center for Worklife Law at UC Hastings, divides employers who offer flexible arrangements into two groups: New Models and Big Law, a term she uses to refer to traditional brick and mortar law firms. According to Williams, New Models intentionally structure their business around flexible arrangements in a way that permits them to capitalize on untapped talent, many of whom are women, while reducing overhead and increasing cost savings for clients.12 With the help of technology, New Models can offer robust legal services to their clients while maintaining the flexibility their employees want.

The New Models have given rise to the virtual law firm, a business model that utilizes technology for the delivery of legal services to consumers.13 For instance, Stephanie Harris started her Arkansas firm Law to Go as a way to assist clients navigating the courts on their own, but without the burdens of traditional practice, such as heavy caseloads or lengthy case commitments. With Law to Go, Harris enjoys the flexibility to work from anywhere using online case manVol. 53 No. 3/Summer 2018 The Arkansas Lawyer

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agement, automated workflows and forms, and virtual communication methods. “The future is now,” Harris said. “The public is trying to navigate the court system online. But if people don't know what they need, Google can't provide the right answers. We lawyers can monetize the process by helping those individuals find the right answers. And that is what I hope to accomplish with Law to Go.” Another Arkansas firm, MyVirtual.Lawyer, is a multi-jurisdictional law firm providing unbundled legal services to self-represented individuals and businesses in the areas of family, estate, and business law—entirely online. Founder Brooke Moore notes that, “By utilizing technology, MyVirtual.Lawyer can provide personalized, convenient, and affordable client-centric legal services.” To that end, the firm relies on law practice management software, which allows attorneys to communicate internally and with clients, draft and share documents, calendar events, video conference, and accept payments. The firm even utilizes virtual receptionists, which further reduces overhead and streamlines services. For Moore, “Virtual lawyering offers attorneys the flexibility to work when, where, and how best suits their lives and their firm, all while providing clients with convenient access to quality legal services.

By using technology, all firms can improve efficiency, reduce human error, and decrease overhead.”

On the other side of Williams’ spectrum is Big Law, which she contends has been less willing to offer flexible arrangements or to promote and destigmatize the use of flexible policies already in place.14 Personally speaking, however, there are exceptions. I was delighted when Rose Law Firm offered me a flexible arrangement after I had taken a year off to stay at home. Like many working parents, staying at home was never part of my plan. But it’s not uncommon, particularly among women. In fact, about 43% of highly educated women leave their careers after having children.15 Although I knew I wanted to return to my career, there were certainly unknowns. Would there be opportunities when I returned?

I contacted Rose after my family relocated to Northwest Arkansas. I was an associate there a few years prior, and Rose had just announced the opening of a new location in Fayetteville. I must admit that asking a potential employer for a flexible work arrangement was slightly unnerving. But of 48

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all the firms to ask, I told myself, it was the best and it was where I wanted to be. Robyn Allmendinger was newly elected as the first female managing partner of the firm, and the firm has numerous female partners and associates who serve in management and committee positions, as well as a rich history of promoting and supporting women, including counting Hillary Clinton among its alumni. Because of their willingness to embrace flexibility, I am now practicing again with the help of strong mentors, support staff, and a solid VPN that plugs me into my firm no matter where I am located.

Allmendinger has spoken of how the firm was flexible with her when she was starting her family, and she recognizes how important that is in today’s world. “I am fortunate that I have been able to advance in my legal career, while prioritizing my family life, as a result of the support I have received from Rose Law Firm and the flexibility in work scheduling offered by today’s technology.”

She continues that, “We hear a lot about retention issues in the legal industry, especially with young women who are starting a family.

I think most employers and firms would find that increasing flexibility in exchange for higher retention is more advantageous than the turnover the industry has experienced in the past.”

Technological advancements have changed, and will continue to change, the practice of law. Attorneys are no longer tied to the office in the same way they were a few decades ago. Entrepreneurs are also reimagining what the practice of law looks like and capitalizing on new opportunities. And as millennials continue to enter the workforce, there will be substantial opportunities for employers to attract and retain young talent through flexible work arrangements.

More of these exciting changes are sure to come.

Endnotes: 1. Brandon Rigoni & Amy Adkins, What Millennials Want from a New Job, Harv.

Bus. Rev. (May 14, 2018, 5:00 PM), https://hbr.org/2016/05/what-millennialswant-from-a-new-job; Thomson Reuters, Infographic: The Face of the Legal Department is Rapidly Changing. Are you Ready? (May 14, 2018, 5:00 PM), http://www.legalexecutiveinstitute.com/infographic-changinglegal-department/.

2. Brandon Rigoni & Amy Adkins, What

Millennials Want from a New Job, Harv.

Bus. Rev. (May 14, 2018, 5:00 PM), https://hbr.org/2016/05/what-millennialswant-from-a-new-job; Thomson Reuters, Infographic: The Face of the Legal Department is Rapidly Changing. Are you Ready? (May 14, 2018, 5:00 PM), http://www.legalexecutiveinstitute.com/infographic-changinglegal-department.

3. Aaron Smith, Record Shares of Americans now own smartphones, have home broadband, Pew Research Center (May 14, 2018, 4:00 PM), http://www.pewresearch. org/fact-tank/2017/01/12/evolution-oftechnology/.

4. Gillian B. White, Millennials in Search of a Different Kind of Career, The Atlantic (May 14, 2018, 5:00 PM), https://www. theatlantic.com/business/archive/2015/06/ millennials-job-search-career-boomers/395663/.

5. Id. 6. Richard Fry et al., How Millennials today compare with their grandparents 50 years ago, Pew Research Center (May 14, 2018, 5:00 PM), http://www.pewresearch.org/ fact-tank/2018/03/16/how-millennialscompare-with-their-grandparents/.

7. Gretchen Livingston & Kristen Bialik, 7 facts about U.S. moms, Pew Research Center (May 14, 2018, 5:00 PM), http://www. pewresearch.org/fact-tank/2018/05/10/ facts-about-u-s-mothers/.

8. Bentley University, Millennials in the Workplace (May 14, 2018, 5:00 PM), https://www.scribd.com/doc/158258672/ CWB-MillennialReport?secret_ password=2191s8a7d6j7shshcctt.

9. Id. 10. Claire C. Miller, Millennial Men Aren’t the Dads They Thought They’d Be, N.Y. Times, Jul. 30, 2015, https://www.nytimes. com/2015/07/31/upshot/millennial-menfind-work-and-family-hard-to-balance.html.

11. Joan C. Williams et al., Disruptive Innovation: New Models of Legal Practice, 67 Hastings L.J. 1, 16 (2015).

12. Id. at 7–9.

13. Id. 14. Id. at 13.

15. Sylvia A. Hewlett & Carolyn B. Luce, Off-Ramps and On-Ramps: Keeping Talented Women on the Road to Success, Harv. Bus. Rev. (May 14, 2018, 8:48 PM), https:// hbr.org/2005/03/off-ramps-and-on-rampskeeping-talented-women-on-the-road-tosuccess. 

CONNECT THE

FACTS

INTERACTIVE TIMELINE SEE WHAT YOU’VE BEEN MISSING WITH DATA VISUALIZATION TOOLS. FREE TO MEMBERS OF THE ARKANSAS BAR ASSOCIATION. LEARN MORE AT:

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Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

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Updates from JLAP Arkansas JLAP is proud to welcome Andre Lewis as its new Executive Director. Andre replaces a stalwart supporter of JLAP, Dr. Sarah Cearley who retired in May. Andre comes to JLAP from the University of Arkansas at Monticello where he served as Director of the Social Work Department and assistant professor. He has 26 years of experience in mental health, substance abuse treatment and adminisAndre Lewis tration in Mississippi, Tennessee and Arkansas. Andre received his BSW from the University of Mississippi and his MSW from the University of Southern Mississippi and is currently a candidate for the PH.D. in Marriage and Family Therapy Systemic Studies program at the University of Louisiana-Monroe. Andre and his wife Bearlain are excited about relocating to Little Rock to join hands with the legal community to create positive changes for all of Arkansas. He feels extremely fortunate to inherit the current team in place at JLAP, which consists of Laura Laser, Assistant Director and long-time therapist and Jessica Johnson, a highly skilled and devoted Administrative Assistant.

Among his immediate plans are to position JLAP to more effectively serve the entire state of Arkansas by transforming the current program into a comprehensive wellness program that allows all of Arkansas’ judges and lawyers and their families to access tools to help them prosper at work and home. To this end, he will work extensively with the board and foundation to increase opportunities for innovative programs and access points across the state and call on all judges and attorneys, law firms and businesses as well as concerned citizens to support the program with financial contributions, time, physical efforts, (volunteering) community outreach, training and education from every corner of our beautiful state.

Chief among outreach efforts is the annual Advocates Dinner which depends on sponsorship to raise funds to award grants for services to clients statewide. Each year the JLAP Foundation hosts an Advocates Dinner to raise funds in support of suffering lawyers, judges, their families, and law students, and to celebrate and thank JLAP’s supporters. This year’s Advocates Dinner will be held on November 2, 2018, at the Statehouse Convention Center in Little Rock. We expect at least 300 lawyers, judges, family members, friends, and leaders of the legal community to

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enjoy a reception, silent auction, awards ceremony, and dinner.

For JLAP to continue this important work for the legal community of Arkansas it is imperative that we continue to attract generous support from Arkansans statewide. Therefore, we are grateful to all our sponsors and donors for allowing us to carry out our mission of helping Arkansas’ legal community live with and recover from mental-health and substance-abuse challenges.

Finally, Andre would like to express his immense gratitude to the Justices of the Arkansas Supreme Court and the JLAP Committee and Foundation for placing their confidence in him by selecting him to lead this profoundly important organization.

He truly believes that JLAP’s best days are ahead and is eager to work on behalf of the Arkansas judiciary.

ARKANSAS JUDGES & LAWYERS ASSISTANCE PROGRAM FOUNDATION

Save The Date JLAP Annual Advocates Dinner 2018 Sponsorship Opportunities

Friday November 2, 6:00 - 8:30 pm Wally Allen Ballroom, State House Convention Center

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Dr. Sarah T. Cearley, PhD, LCSW 2018 Justice Robert L. Brown Community Support Award

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Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C. 2018 Distinguished Service Award Go to: arjlap.org/events Call us: 501.907.2529

Specializing in Public Utility (Electricity And Water) Cases For over 40 years, Dave Wilson has specialized in regulated and unregulated public and private service provider utility cases, both at state and federal levels. He’s maintained ongoing relationships within industries doing business in Arkansas and would be a valuable ally when the need arises.

His work includes regulatory hearings, mediation, contract matters, trials, and appeals. In addition to being admitted to practice before the Supreme Court of the United States and the Washington D.C. Circuit Court of Appeals, his experience includes working closely with State and Federal authorities in Washington D.C. and Arkansas: • The Federal Energy Regulatory Commission (FERC) • The Arkansas Public Service Commission • Arkansas General Assembly and US Congress, and many local and cooperative boards and city councils • The Arkansas Department of Environmental Quality (ADEQ) • The Environmental Protection Agency (EPA) • The Pollution Control and Ecology Commission • The Nuclear Regulatory Commission

To visit with Dave about a legal matter where he may be of service, call 501-376-4090. To learn more about Dave’s practice, and to see case examples, visit zacharydavidwilsonpa.com.

References available upon request

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ARKANSAS CHAPTER The following attorneys are recognized for

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DISCIPLINARY ACTIONS

Judicial Discipline & Disability Commission Actions On June 8, 2018, the Arkansas Judicial Discipline and Disability Commission announced the filing of formal charges against Pulaski County Circuit Judge Wendell Griffen in Case #17-172, 17-171 and 17-173.

On July 13, 2018, the Arkansas Judicial Discipline and Disability Commission announced an agreed public Censure against Judge Mary Spencer McGowan, 9th Division Circuit Court, Sixth Judicial District. The letter of sanction is included in the full press release and resolves a total of four case files that were pending before the Commission: 17-143, 17-148, 17-161, and 17-197.

The full press releases can be found online at http://www.state.ar.us/jddc/ decisions.html.

Attorney Disciplinary Actions

Final actions from April 1, 2018 June 30, 2018, by the Committee on Professional Conduct. Summaries prepared by the Office of Professional Conduct (OPC). Full text documents are available on-line either at http:// courts.arkansas.gov and by entering the attorney’s name in the attorney locater feature under the “Directories” link on the home page, or also on the Judiciary home page by checking under “Opinions and Disciplinary Decisions.” [The “Model” Rules of Professional Conduct are for conduct prior to May 1, 2005.

The “Arkansas” Rules are in effect from May 1, 2005.]

DISBARRED: ROBERT BRENT CREWS of Jonesboro, Bar No. 91237, in Supreme Court Case No.

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D-14-67 opened in early 2014 was ordered disbarred by the Arkansas Supreme Court on May 10, 2018, for his default pre-trial and in the sentencing phase in a case involving six separate client complaints, from Paula Rondell, Warren Graddy, Georgia McCabe, Thomas Ashcraft, Jr., James Houston, and Hinane Zitan. Crews was placed on license suspension for 12 months in October 2011 from an earlier matter and then on interim suspension in December 2013 for the disbarment case. In March 2014, Crews filed a general denial to the six-matter petition for disbarment and basically filed nothing thereafter, including his required trial witnesses list. As a sanction for that omission and others, his Answer was struck, he was left in default in the case, a sentencing hearing was set for February 15, 2018, Crews failed to attend, and the Special Judge thereafter entered findings of fact, conclusions of law, and a recommendation for the sanction of disbarment. The case

was set for briefing to the Supreme Court with Crews to brief first. He failed to file a brief. The Court disbarred him.

SUSPENSION: CHARLES DWAIN OLIVER of Hampton, Bar No. 2001009, on a complaint by Melvin Junior related to representation in a bankruptcy matter,

by Committee Findings and Order filed May 30, 2018, in No. CPC 2018-002, for violations of Rules 1.1, 1.3, 1.4(a)(3), 8.1, and 8.4(c), had his law licensed suspended for four months and was ordered to pay $1,500 restitution. For failing to file a response to the complaint, Oliver was assessed a separate reprimand. In September 2015 Junior employed Oliver to file a Chapter 7 bankruptcy and paid him a $1,500 fee. Thereafter Junior was unable to contact Oliver, Oliver filed no bankruptcy for Junior, Oliver did not refund any fee to Junior, and Oliver failed

Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

53

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to respond to several Rule 8.1 requests for information from OPC, resulting in the filing of the Complaint in early 2018.

CAUTION: VICKY BUSSEY INGR AM of El Dorado, Bar No. 94168, on a complaint by Frederick Rainey, by Committee Findings and Order filed June 25, 2018, in No. CPC 2018-011, for violations of Rules 1.1, 1.3, 3.4(c), 8.1 and 8.4(d) was cautioned. She was also separately reprimanded for her failure to file a response to the complaint.

Ingram, a public defender, represented Rainey on appeal from a 192 month prison sentence in Cleveland County Circuit Court, an appeal in which Ingram had problems filing a rule-compliant brief.

Ingram failed to file a rebrief after being ordered to do so by the Court of Appeals, resulting in her removal from the appeal on October 8, 2014, and new appellate counsel being appointed.

cautioned. After the deaths of their father and then their mother, the five Lohstoeter siblings had disagreements about family assets and trusts. Two siblings, using Vaughn, a friend, apparently as pro bono counsel, sued the other siblings and other defendants in 2008 and refiled the lawsuit in 2009. The litigation ended in September 2011. The defendants collectively expended about $85,000 in the litigation. Vaughn had become a fulltime staff appellate attorney for the state public defender commission in October 2001, where she was thereafter prohibited from engaging in private law practice. In the Lohstoeter litigation, Vaughn used state resources (telephone, email, and her office time) on behalf of her private clients and used state “sick leave” at least once when she attended a lengthy meeting at a law firm on behalf of her clients. Vaughn retired from her state job shortly before the Committee final order was filed. 

JANICE W. VAUGHN of North Little Rock, Bar No. 84161, on a complaint by James Cameron Lohstoeter, by Committee Findings and Order filed April 2, 2018, in No. CPC 2013-027, for violations of Rules 1.16(a)(1) and 8.4(c), was Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

55

TSCHIEMER

From the ordinary to the most complex, no appeal is too small or large

LEGAL BRIEFING

Writing Briefs to the Arkansas Court of Appeals, the Arkansas Supreme Court, the Federal Circuits and the United States Supreme Court

Handling all your briefing needs Robert Tschiemer is the author of the Arkansas Bar Weekly Case Summaries, available at www.arkbar.com.

For a complete list of decisions see www.tschiemerlegalbriefing.com

Robert S. Tschiemer

Ark. Bar 84148 P.O. Box 549 Mayflower, AR 72106-0549 501.951.3303 (p) 501. 377.9866 (f) robert@tschiemerlegalbriefing.com www.tschiemerlegalbriefing.com

FORENSIC PSYCHIATRY GERALD S. STEIN, M.D. Cell: 479-244-6582 FAX: 970-987-5100

e-mail: jerrysteinmd@gmail.com See CV: www.geraldsteinmd.com

Office Manager Rebecca Stein 479-244-5060

645 CR 235, Eureka Springs, AR 72632 56

The Arkansas Lawyer

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Arkansas Bar Foundation 2224 Cottondale Lane, Little Rock, Arkansas 72202 www.arkansasbarfoundation.com • 501.801.5670

Memorials and Honoraria

Jason B. Hendren Elected Arkansas Bar Foundation President Jason B. Hendren began his term as President of the Arkansas Bar Foundation Board of Directors for the 2018-19 bar year immediately following the Annual Meeting in mid-June 2018. He earned his B.A. from the University of Arkansas with Honors and his Juris Doctorate from the UALR Bowen School of Law with Honors. Jason is a partner with the law firm of Wright Lindsey Jennings in Rogers. With almost 20 years of experience, he represents a wide variety of medical professionals, hospital companies and facilities throughout Arkansas in professional malpractice cases as well as drug and medical device product liability cases.

He has been a Fellow of the Arkansas Bar Foundation since 2012 and is a Sustaining Fellow. Jason has served the Foundation as a member on the Board of Directors, as Secretary-Treasurer and Vice President, and a member of the Trust, Special Projects, Annual Awards and Development Committees. He has also been appointed to serve as a Special Associate Justice of the Arkansas Supreme Court.

Jason served as President of the UALR Bowen School of Law Alumni Board of Directors and now serves on the Dean’s Advisory Council; Chair of the Arkansas History Commission; and a member of the Bentonville Public Schools Foundation Board of Directors. He is a past president of the Arkansas Association of Defense Counsel and a past State Representative for DRI. He and his wife, Tracey, have four children.

The Arkansas Bar Foundation acknowledges with grateful appreciation the receipt of the following memorial, honoraria and scholarship contributions received during the period January 1, 2018 through July 31, 2018.

In Memory of Russell D. Berry James F. Dowden Hyden, Miron & Foster, PLLC

In Memory of Joe Peacock Judge Bill Wilson and Judge Cathi Compton

In Memory of Judge G. Thomas Eisele Judge Susan Webber Carter

In Memory of John E. “Jack” Pruniski Rosalind and Kirby Mouser Ginger and Rex Terry

In Memory of Frank C. Elcan Richard L. Ramsay

In Memory of Louis L. Ramsay Clair and Rick Ramsay

In Memory of Judge Robert Fussell Judge Susan Webber Carter Rosalind and Kirby Mouser Hayden and Gordon S. Rather, Jr. Mike Wilson

In Memory of Charles B. Roscopf Helena Rotary Club

In Memory of Allan W. “Dick” Horne Hyden, Miron & Foster, PLLC Judge Bill Wilson and Judge Cathi Compton Mike Wilson In Memory of Ronald May Patti and Charles Coleman In Memory of Judge Lee Munson Jennifer and Randy Coleman In Memory of William Robert “Bob” Nixon, Jr. Mike Wilson

In Memory of Jeffrey Owen Scriber Michael Gott Scholarship Contributions and Gifts In Honor of Gordon Rather, Jr. for 50 years of practice at Wright Lindsey Jennings Sylvia and James Van Dover Arkansas Bar Foundation Marion Burton Walter B. Cox A new Memorial Medallion has been added to the Memorial Wall: In Memory of Wayne W. Owen (1908-1980)

SAVE THE DATE! Arkansas Bar Foundation Second Annual Friendraiser

Woo Pig Soirée!

Friday, October 5, 2018 5:00 p.m. – 7:00 p.m.

21c Museum Hotel Bentonville, Arkansas

Libations, heavy Hors d’Oeuvres and music $50.00 per person

Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

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The Arkansas Bar Center 2224 Cottondale Lane • Little Rock • Arkansas • 72202

Your Professional Hub We Welcome You to Enjoy and Utilize Your Bar Center Your office away from home with the Visiting Attorney’s Office.

Meeting rooms for small and large groups. Wi-Fi and state-of-the-art technology.

Hold your depositions and meetings (complimentary to members) and arbitrations and mediations (for a fee).

Rooms available: Board Room, Conference Center, ADR, Inc. Mediation Office, and Deacon Visiting Attorney’s Office

Pictured below: Friday, Eldredge & Clark Board Room; Wright, Lindsey & Jennings Plaza; Mitchell Williams/Altheimer Foundation Conference Center

Call Michele at 501-375-4606 Ext. 101 or email mglasgow@arkbar.com to reserve your space.

Or just stop by for a cup of coffee.

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IN MEMORIAM Fines F. Batchelor, Jr., of Van Buren died April 22, 2018, at the age of 91. Fines served in the United States Air Force during World War II and the Korean Conflict, and was a Lieutenant Colonel when he completed his reserve duty.

He was an attorney-at-law for Batchelor and Batchelor Law Firm in Van Buren. He was a member of the Arkansas Bar Association where he served on the House of Delegates.

Judge Robert Foreman Fussell of Little Rock died on May 1, 2018, at the age of 80. He earned a degree in business and a law degree from the University of Arkansas in Fayetteville. A twoyear stint as a U.S. Army officer came next, followed by another two years with the National Labor Relations Board in Kansas. He then returned to Arkansas to practice law and begin his fabled career in public service. He was appointed Assistant United States Attorney for the Eastern District of Arkansas. In 1983, he was appointed a U.S. Bankruptcy Judge. He was a member of the Arkansas Bar Association and a Sustaining Fellow of the Arkansas Bar Foundation. The Association and Foundation awarded him with the Outstanding Lawyer Award in 2016.

Robert Brandon Holitik of Little Rock died May 28, 2018, at the age of 50. Born and raised in Little Rock, Mr. Holitik attended Marion Military Academy, and was a graduate of Little Rock Central High. His love for the Natural State drew him to the University of Arkansas, where he received his bachelors degree in communications, and a law degree from the University of Arkansas School of Law. His solid beliefs in the legal system and his desire to help those in need led him to multiple fields as a general practitioner. His affinity for family law and class action lawsuits evolved into a partnership with the firm of

Hale, Holitik, and Young in Marion, Arkansas. He was a member of the Arkansas Bar Association and a Fellow of the Arkansas Bar Foundation.

Michael Joseph Nicodemus of Fayetteville died on April 14, 2018, at the age of 31.

Michael graduated from the University of Arkansas and earned his juris doctorate from the University of Arkansas School of Law. He was a member of the Arkansas Bar Association.

Bob Nixon of Anacortes, Washington, died March 29, 2018, at the age of 67. In 1969 he graduated from Pine Bluff High School. He was student body president at Vanderbilt University and earned his BA in 1973. Bob completed his law degree at Vanderbilt in 1976.

He practiced commercial and bankruptcy law in Little Rock, first with Griffin Smith, Sr., and then with the Nixon, Light, and Buzbee law firm. He was a member of the Arkansas Bar Association and had the highest rating in the Martindale-Hubbell peer review. Bob married Pam Nixon in 1987 and moved to Anacortes, Washington, in 2001.

Jeffrey Owen Scriber of Jonesboro died April 24, 2018, at the age of 42. Jeff was an exceptional student while attending the University of Arkansas School of Law, graduating in the top five percent of his class. That commitment to learning the law continued in his practice of the law as well and he was highly respected as an accomplished trial lawyer. He was a member of the Arkansas Bar Association.

enrolled at the University of Arkansas. He graduated with a BS degree in zoology and a minor in geology in the spring of 1948. He and Loretta moved to Fort Smith where he was employed by the Arkansas Game and Fish Commission prior to receiving his law degree from LaSalle University in Chicago.

He practiced criminal law in Fort Smith for 30 plus years. He was a member of the Arkansas Bar Association and Sebastian County Bar Association.

John E. Pruniski, III (Jack) of Little Rock died July 11, 2018, at the age of 70. He graduated from Christian Brothers College in 1969 and earned his juris doctorate from the University of Arkansas in 1976. He served as Associate Editor for the Arkansas Law Review. He was a staff attorney for the Arkansas Securities Department from 1976-1978. Jack practiced law for nearly 40 years at Hilburn, Calhoon, Harper, Pruniski and Calhoun. He was a member of the Arkansas Bar Association.

Jack Sims of Little Rock died June 7, 2018, at the age of 89. Jack had a thriving law practice in Little Rock for more than 40 years. Jack honorably served his country in the United States Air Force. He was a member of the Arkansas Bar Association.

The information contained herein is provided by the members’ obituaries.

Douglas W. Parker of Fort Smith died May 6, 2018, at the age of 93. He served in World War II as a fighter pilot and after receiving an honorable discharge in November of 1945 he Vol. 53 No. 3/Summer 2018 The Arkansas Lawyer

59

Index to Advertisers

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PAGE LAW PRACTICE AND LOCATION FROM 1972 FOR SALE Mike Kelly, attorney, is offering his law practice for sale. Business consists of fully remodeled

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FOR SALE: Arkansas and California Law Book Libraries. Great for office. Make Offer.

Call Marvin. Cell: 501-548-1232

Become a Benefactor or Patron Member

2018-2019 Your gift strengthens the Association by helping to support its mission and many projects.

You will receive: • recognition as individual sponsors in The Arkansas Lawyer magazine • a specialty ribbon for your name badge at the Annual Meeting • recognition at the Annual and Mid-Year Meetings

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ARKANSAS BAR ASSOCIATION

CLE CALENDAR 2018-2019

12 OCT

Health Law Little Rock

19 OCT

Government Practice Little Rock

2 NOV

Legislative Advocacy Little Rock

6-7 DEC

57th Annual Federal Tax Institute co-sponsored with ASCPA Little Rock

6-8 FEB

Mid-Year Meeting Little Rock

27 FEB-1 MAR

58th Annual Natural Resources Institute Hot Springs

7-8 MAR

42nd Annual Labor & Employment Law Conference Little Rock

28-29 MAR

23rd Annual Debtor/Creditor Law Conference Little Rock

1-3 MAY

23rd Annual Environmental Law Conference Eureka Springs

12-14 JUNE

121st Annual Meeting Hot Springs

Watch for brochures, registration, full agendas and more seminars.

WWW.ARKBAR.COM

New this fall Webinar Wednesdays Two webinars each month September-November with bonus webinars the last week of November.

“THE ‘BUSINESS OF LAW’ IS OFTEN MORE CHALLENGING THAN THE PRACTICE OF LAW.” Paul D. Waddell Waddell, Cole & Jones, PLLC

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