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New England Legal Foundation welcomes inquiries from the media. To contact us by e-mail, click here or call NELF’s President, Martin J. Newhouse, 617-695-3660 - ext. 201. 

Articles by and about NELF:

Whatever Happened to "No Harm No Foul"?

         - Boston Business Journal, May 2005
Misusing Courts Against Companies

         - The Boston Globe, May 2005

Maine Deserves a Business Court

         - Portland Press Herald, March 2004

Should Business Enjoy Less Freedom of Speech Than Individuals? 

         - Boston Business Journal, June 2003

Confidential Settlements: Is The Cure Worse Than The Disease?

         - Massachusetts Lawyers Weekly, May 19, 2003

New England Legal Foundation: A Voice For Business

          - Metropolitan Corporate Counsel, October 2002

A Bright Spot In The Court Crisis

          - Boston Business Journal, July 2002

It Just Got A Little Harder To Keep Your Business Out of Court ...

          - The Boston Globe, March 2002

The Palazzolo Decision

          - Rhode Island Lawyers Weekly, August 16, 2001

Rent Control Is Still a Bad Idea

          - The Boston Globe, June 4, 2001

New Legal Issues for a New Age

          - Women's Business, January 2001
What The Business Community Can Expect From The Genome Project

          - The Portland Press Herald, October 10, 2000
Everyone Will Benefit From The Business Court

          - Massachusetts Lawyer's Weekly, May 29, 2000

Why Are We Making Foreign Policy In Massachusetts?

          - The Boston Globe, February 29, 2000
Why Does Boston Dislike Taxi Service?

          - Boston Business Journal, September 10, 1999
Our Response to the Events of September 11

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The following article, by NELF's former President, Andrew R. Grainger, appeared in the Boston Business Journal in May 2005:

Whatever Happened “To No Harm No Foul”?

Are we suffering from a serious litigation shortage?  Do we need to encourage people to bring lawsuits against businesses even when nobody has been damaged?

A series of recent consumer cases has been developing the notion that any legal mistake, even unintentional and without consequence, can give rise to substantial monetary awards.   

This began in 1985 when the Supreme Judicial Court ruled that illegal language in a lease was actionable, even though the tenant was not aware of the language and the landlord never tried to enforce the improper verbiage. Nor was the landlord’s stated willingness to ignore any illegal language enough to protect him from a lawsuit and damages. This unfair result may have been partly brought about by the fact that the defendant was Harold Brown, not the Commonwealth’s most popular landlord. It does explain an expression used by lawyers: “Hard cases make bad law.”

Last year, the intermediate Appeals Court tried to repair, or at least limit, the damage by ruling that the 1985 case, Leardi v. Brown, only applied in the landlord-tenant context, and that you couldn’t sue someone if you weren’t injured, even if they had committed a technical violation of some kind. That case, Lord v. Commercial Union, involved an insurer that failed to provide a required notice to a policyholder who was already aware of the information that the notice would have contained.

Despite the face saving offer in Lord, our highest court plunged ahead in another “hard” case, Aspinall v. Phillip Morris, and decided that even individuals who had actually benefited from reduced toxin levels in so-called “light” cigarettes could join a class of plaintiffs asserting that the cigarette-makers’ claims of reduced harm were false because the benefit depended on your method of smoking. This latest decision, combined with the previous two cases, creates the interesting result that if you claim to have been actually damaged, you must show that the defendant was responsible - while if you don’t claim any damages you can sue anyway.

Now the Supreme Judicial Court has an opportunity to clean up the mess in three pending cases. Two of these, known as Roberts and Hershenow, involve rental car contracts. The plaintiffs in one case are claiming that some limits to coverage under collision damage waiver insurance listed in the rental contract are illegal; but the plaintiffs never made a claim for coverage. The second case involves a complaint that the contract should contain more emphasis of the possibility that renters already have such coverage through other policies; but these plaintiffs didn’t even purchase the insurance.  The third, Albats v. Town Sports, involves a health club contract containing an impermissible waiver for injury. The plaintiff has no injuries and the health club has removed the offending verbiage.

Even without damages most of these cases are for very real money. Consumer protection statutes and many other laws allow for a minimum award, punitive damages, attorneys’ fees, or all three. In the class action context, businesses can now be exposed to multiple six figure liability for innocent mistakes that caused no harm to anyone.  While businesses are hurt, consumers don’t benefit.  But the attorneys who bring these cases enjoy a windfall.

Andrew Grainger, Former President of New England Legal Foundation, which filed briefs in the Supreme Judicial Court in the Hershenow, Roberts, and Albats cases.

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The following article, by NELF's former President, Andrew R. Grainger, and current President, Martin J. Newhouse, appeared in the Boston Globe in May 2005:

 

Misusing Courts Against Companies

WITH SEVERAL investigations and criminal prosecutions of major corporations, it may be hard to believe that corporations could not always be criminally prosecuted.

Traditionally, a corporation was considered only a legal entity, with no actual physical, mental, or moral capacity of its own. In 1909, however, the Supreme Court held that a corporation could be prosecuted for the criminal acts of its officers and employees if those acts were committed on the job to benefit the corporation. While this formulation appeared to preserve for corporations the basic principle that criminal liability requires criminal intent, recently the principle has been all but abandoned.

Today, under federal law, a corporation may be found criminally liable for the criminal conduct of a single employee, even if the conduct was forbidden by corporate policy or the corporation took reasonable steps to prevent it. Thus, Arthur Andersen was criminally charged for crimes allegedly committed by a few partners and employees, regardless of whether the company had authorized, or even known about, the conduct.

Keeping pace with the expansion of criminal liability for corporations has been the equally striking expansion of penalties. Today a corporation may be excluded from any government business, or, in the healthcare area, from participation in all federal and state healthcare reimbursement programs if it is convicted of criminal activity or, in some cases, simply suspected. The threat of these penalties has become a shortcut of prosecutors pursuing corporations whose employees have allegedly committed criminal acts. Companies have decided they have no choice but to plead guilty and pay staggering criminal fines simply to survive.

Nowhere have federal prosecutors used this strategy of forcing companies to plead and pay more effectively than against the pharmaceutical industry. In the past seven years, they have won $2.8 billion in settlements from nine companies.

The US Attorney's Office in Boston alone was responsible for four of these, totaling more than $1.6 billion. Often the prosecutors are aided by whistleblowers, who, under federal rules, can recover a portion of a settlement. In the drug company cases brought in Boston, that has meant individual payouts of up to $77 million, an enticement that has led to a steady increase in whistleblower cases here.

Of course, because of the exclusion threat wielded by prosecutors, the allegations whistleblowers provide against companies are never tested in court because the companies cannot run the risk of a conviction.

The injustice of this strategy was dramatically demonstrated by the recent prosecutions in Boston of TAP Pharmaceuticals and individual TAP employees around the marketing of Lupron, a popular treatment for prostate cancer. Prosecutors extracted an $875 million criminal fine from TAP, the largest ever in a healthcare fraud case, and a guilty plea from one of nine individual defendants. The remaining individuals insisted on their right to a trial. All were acquitted. The US District Court then reopened the one individual guilty plea and, after reexamination, vacated it. The obvious conclusion is that if TAP Pharmaceuticals had gone to trial, it, too, would have been acquitted. But TAP could not take the chance of losing all federal reimbursement for Lupron, even though its president said the company ''fundamentally disagreed" with most of the prosecution's allegations.

This prosecutorial hunt for enormous, well-publicized settlements has not only set aside the presumption of innocence; it also threatens immediate and practical injuries to the public. In Massachusetts, it handicaps an industry that is vital to the economic well-being of the Commonwealth.

Additionally, suspension or exclusion of a drug company from government programs threatens to deprive patients of needed medications. These punishments should therefore be reserved until there has been an actual finding of guilt against a company that has failed to reform its practices, as opposed to the current system, where such measures can be imposed before prosecutors prove their case and even if companies have adopted strong compliance programs.

A greater risk is that the use of these threats to gain settlement payments from drug companies will divert financial resources from the research and development of new drugs and therapies. The $875 million TAP Pharmaceuticals payment represents enormous lost potential in healthcare research.

Prosecutors should do the work required by law to prove their cases instead of threatening corporate suspects with extinction if they seek a trial. And Congress needs to clarify when these threats are appropriate.

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The following article, by NELF's former President, appeared in the Portland Press Herald in March 2004:

Maine Deserves A Business Court

Maine Supreme Court Chief Justice Lee Saufley recently revived an important discussion that surfaced several years ago in the Maine court system – the concept of removing complex time consuming business cases from the general docket (“Business Court Is On To-Do List”, Portland Press Herald, 8/22/03).

More than a dozen states, including Massachusetts, Rhode Island and Connecticut, have introduced specialization into their courts to deal with business disputes. Some programs are recent and some, like those in New York and Delaware, have been operating for decades. The track record established by these programs demonstrates that everybody – not just business litigants – benefits from having them.  Already probate courts, bankruptcy courts and housing courts around the country help to apply expert knowledge where it is needed, and to release other resources where they can do the most good. Similarly, business courts have shown that they allow court systems to use their increasingly strained resources to better effect. 

The state as a whole, not just the court system and those who use it, derives an advantage from carving complex time-consuming cases out of the mainstream. Business needs speed and expertise to resolve disputes, and this is increasingly true in a world everyday rendered faster and more complex by technology. Businesses consider a number of factors, such as taxes and schools, in deciding where to locate and whether to move. The ability to resolve uncertainty quickly and predictably is high on the list. Maine ignores the business courts found in nearby states to its own disadvantage.

The current inability of many court systems to provide effective dispute resolution is causing businesses to seek private solutions, including arbitration, mediation and ADR. This has proven to be an interim solution for larger companies, or at least those with the resources to afford the additional expense. The solution is temporary because only the court system can create precedent and give us rules for future cases.  Private systems can’t resolve cases without an existing body of law on which to base decisions that both sides will accept.

Massachusetts recently completed a study of its Business Litigation Session, or BLS as it is called, with exceptional results. The BLS was instituted in October of 2000, and a report covering the first eighteen months of operation conducted by an independent survey firm, Atlantic Research and Consulting, was released last fall.

In the period covered by the survey, the Massachusetts BLS resolved over 200 complicated multi-party lawsuits. These commercial cases, together with other complex disputes such as medical malpractice, had previously consumed a disproportionate amount of public resources for much longer periods.

The numbers produced by the survey are dramatic. Fully three quarters of all the attorneys who appeared before the BLS took the time to respond to the survey, and more than half of these had more than one case in the Session. An astounding eighty-seven percent of these attorneys placed the Session in the top two of seven available ratings for overall satisfaction, while only three percent put it in any of the bottom four ratings. Eighty-three percent said that the BLS enabled them to give better legal service, citing the consistency of having one judge in charge of the case, the promptness of hearings and the promptness of decisions.

These respondents, who are experienced trial attorneys and not easily impressed, considered the Session as good or better than private dispute mechanisms by eighty-four percent. Their cases were of all kinds, involving contract disputes, landlord-tenant contests, shareholder fights, partnership dissolution, employment disputes - in short, the basic fabric of most civil litigation today. They won, lost and settled in relatively equal amounts, and praised the process regardless of which side they were on.

National and multi-national corporations will ultimately be able to absorb the inefficiencies that a slow and uncertain court process can create. Small and medium-sized businesses cannot. And these are a significant part of our region’s economic engine, not to mention an ever increasing part of the employment and tax base. The good news is that courts have shown they can achieve these efficiencies with very little, if any, additional cost simply by reallocating cases and judges to reflect interest and expertise. Chief Justice Saufley’s proposal is a good one, and should be given a chance. 

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The following article, by NELF's former President, appeared in the Boston Business Journal in June 2003:

Should Business Enjoy Less Freedom of Speech Than Individuals? 

One reason free speech is considered so important to our society is the concept of “enough rope.” Free speech gives everyone enough rope to hang themselves, at least in terms of reputation. The best way to generate good ideas and get to the truth is to engage, literally, in a free-for-all. Until recently, we have always trusted our ability to separate what is silly, wrong or misleading from what is genuine, useful and true. 

Slowly, in the past few decades, courts and legislatures are losing confidence. Courts, in particular, have carved out a difficult and dangerous exception to freedom of expression – so-called commercial speech. The assumption now is that the average citizen needs protection from sales talk. This extends not just to direct sales pitches, (“my oat bran will lower your cholesterol”) but also to corporate commentary on public issues (“dairy cooperatives don’t inflate the price of milk – they just support family farmers”) intended to influence opinion, enhance a business’ image, or both. Which is why the U.S. Supreme Court is currently faced with the case of Nike, Inc. v. Kasky.

Nike, like other shoe and clothing companies, has come under attack for the conditions under which its products are manufactured abroad. In response to sustained adverse publicity, Nike sent letters to University Presidents and Athletic Directors, bought newspaper ads, and made statements through press releases. Nike claimed that its labor practices were being misrepresented. The persons and organizations that had been complaining about Nike then claimed that the responses were inaccurate, and sued Nike for unfair competition and false advertising under California consumer protection laws.  Nike’s legal defense, based on the First Amendment, is that it should not have to risk a lawsuit for engaging in public debate. Each side claims the other was making false claims but only Nike, seeking to protect its corporate reputation, can be sued because another person has accused it of inaccurate statements.

Everyone has an agenda when they speak in public. They want you to vote for them, contribute to their campaign, buy their products or services, join them in a cause, contribute to their charity, give them name recognition, admire the rightness of their position or the clarity of their thought. The idea that a commercial motive sets you apart, and should therefore give you less freedom of expression, is based on several misconceptions. One misconception is that a business knows more about its products or services than anyone else, and enjoys an unfair advantage in public debate.  How this could be true, for example, in a debate between General Mills and the American Medical Association over the curative effects of oat bran remains to be explained.

Another misconception is that there is some sort of clear dividing line between “commercial” speech and the rest. The Nike case is a good example. The extent to which affluent Americans are exploiting workers in underdeveloped countries is a social and possibly a political issue.  It is also an issue which can affect Nike’s bottom line. Suit against Nike was upheld in California despite the fact that it was engaged in a debate on issues of public interest, because its remarks were directed to consumers and it was talking about its own business. In other words, a business is free to enjoy public speech like anyone else only if the subject is of no real interest to it. In today’s world of infomercials, product placement in films and a dozen other creative (if tasteless) techniques to sell the public what it does or doesn’t want, there is no real dividing line. It is unsettling to contemplate state regulators acting as speech police over expression that includes serious matters of public concern.

Freedom of speech is especially important when the government is involved. Public officials have essentially unlimited access to the media. While most everyone has a healthy skepticism of corporate messages, businesses at least have the resources to disseminate points of view that will differ from political pronouncements. We need to hear from commercial interests on subjects like NAFTA, the health care system, dividend taxes and many others. It is healthy to question a business’ motives and examine its statements carefully. It is unhealthy and socially self-destructive to erect barriers that will require a business to defend lawsuits because others disagree with what it has to say.

Everyone, including corporations, is liable for fraud, slander and similar harm inflicted through speech. Returning public discourse to a level playing field will not immunize anyone from improper behavior, but it will demonstrate that we still trust ourselves enough to give everyone enough rope.

Andrew Grainger is President of New England Legal Foundation, which filed an amicus brief with the U.S. Supreme Court in the Nike v. Kasky case.

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The following article, by NELF's former General Counsel, appeared in the Massachusetts Lawyers' Weekly on May 19, 2003:

Confidential Settlements:  Is the Cure Worse than the Disease?

There have been many shocking aspects to the scandal over the Catholic Church’s handling of allegations of sexual abuse by priests. One of the most compelling has been the coverage of the “secret” settlements between claimants and the Church. Although national newspapers reported on the Church’s confidential settlement of sexual abuse cases as long ago as 1988, these agreements are nonetheless blamed for hiding and perpetuating the abuse. These cases, together with the Bridgestone/Firestone tire settlements, other product liability settlements, settlements of environmental contamination, and other toxic tort cases, have given rise to an increased call to ban confidential settlements.

Attorneys and their clients can no longer assume that disputes which have been settled confidentially will remain private matters. This problem is not new – as long as two years ago Massachusetts Superior Court Associate Judge Connolly refused to approve a confidentiality provision in a settlement agreement and an assented-to motion to impound documents, ruling that the defendant’s privacy rights were outweighed by public’s right to know about a potentially dangerous product. Gleba v. Daimler Chrysler Corp., No. 98230, 2001 WL 1029678 (Mass. Super. Aug 06, 2001). Today, Massachusetts is among those states considering legislation regulating secrecy orders and agreements. Declaring that the public has a “right” to information about alleged hazards to the public, proposed Senate Bill No. 1021 would void confidentiality agreements under certain conditions. The heart of the bill, Section 3, provides that in actions alleging personal injury, wrongful death, or monetary or property damages allegedly caused by a public hazard or financial fraud, information concerning the public hazard or financial fraud “shall be presumed to be public information and may not be kept confidential pursuant to an agreement of the parties.” The bill would void confidentiality agreements, settlement agreements, or “other documents purporting to keep such information from the public.” Under Section 4 of the bill, a court could issue an order to keep such information confidential “for a period of time that the court deems appropriate.” To issue such an order, a court would be required to hold a hearing and to find that the information is a trade secret “which is not itself evidence of a defective product or an environmental hazard or a financial fraud,” or is information otherwise privileged (not merely confidential) under existing law. Alternatively a court must find that an overriding interest exists that overcomes the right of public access to information. In addition to finding this overriding interest, a court would need to find a “substantial probability” that the overriding interest will be prejudiced if the information is not kept confidential; that the proposed confidentiality is narrowly tailored; and that no less restrictive means exist to achieve the overriding interest.

In the last eighteen months, at least ten state legislatures have introduced bills that would limit the ability of citizens to agree to keep details of a dispute private as part of a settlement of that dispute. Last year federal district judges in South Carolina adopted local civil rule 5.03 providing that the court would seal no settlement agreement filed with the court, to the praise of newspapers, consumer groups, and plaintiffs’ lawyers across the country.

The media, which has a predictable industry bias against confidentiality (except, perhaps, when it comes to the ability of reporters to protect their sources) has been active in calling to an end to confidential settlements, publishing editorials like the Los Angeles Times’ September 2000 editorial entitled “Lethal Secrets” or the New York Times’ September 2002 call for “Ending Legal Secrecy.”

This seems to be an idea whose time has come – or is it?  Sex abuse, product liability, and toxic tort settlements are the sensational tip of what is a vast and commonplace iceberg—the routine settlement of claims and lawsuits with contracts that include a boilerplate promise of confidentiality. People make these agreements for legitimate and understandable reasons. Someone falsely accused may prefer to end unfounded rumors with a nominal payment in exchange for a promise of silence, rather than enduring the expense, unpredictability, and publicity of a lawsuit. Businesses may prefer a private negotiated resolution to a trial which will reveal valuable company information to competitors in open court. Not only defendants have reason to settle disputes confidentially. Even in this day of tell-all journalism, some people prefer not to make public their medical histories, the details of discrimination or harassment they endured, that they were taken in by a fraud or scam, let alone the fact that they are now in possession of a significant cash settlement. Courts generally encourage settlement, both because it conserves judicial resources and because an agreement reached by the parties themselves is often more practical and gratifying than a judgment imposed from above.

This issue is not a simple one, because it involves many basic, and sometimes contradictory, principles of American jurisprudence: the basic right of parties to contract, and the belief that a relatively unfettered right of contract assists society in making economically rational choices; the public policy encouraging settlement of disputes; individual and corporate privacy interests; protecting the public from dangers to health and safety; the public right of access to the courts; and the appropriate degree of judicial discretion.

The urge to prevent the devastation wrought by sexual predators, dangerous products, and environmental contamination is legitimate and understandable. It remains to be seen whether outlawing confidential settlement agreements will have that effect. There are several indications that it might not.

Since 1991 both Florida and Texas have had rules on the books—called by some the toughest in the nation—outlawing or regulating agreements that conceal information about public hazards. Yet both states experienced the tragic results of defective Bridgestone/Firestone tires, leading newspapers in both states in 2000 to call for—you guessed it—an end to secret settlements. Much of the legislation proposed in the wake of the Catholic Church scandal is modeled on these two states’ rules, suggesting that some evaluation of their efficacy—or lack of it—is in order before other states blindly follow suit.

In Massachusetts, the advocates on either side of the debate need to look closely at the proposed legislation. Critics of the “secret” settlements with the Catholic Church should question whether this legislation, if in place at the time, would have prevented those settlements. The proposed legislation applies only in “actions” alleging damages caused by a public hazard or financial fraud. Many of the Catholic Church settlements were reached prior to the filing of any action; and it is an open question whether they, or any pre-litigation settlement, would be covered under this language. Furthermore, the legislation applies to damages caused by a “public hazard,” which the statute defines as “any device, instrument, person, procedure, or product or a condition of any device, instrument, person, procedure or product that is alleged to have caused or is likely to cause injury or financial loss.” Under this definition, is a priest accused of sexual abuse a “public hazard”?

Lawyers and clients involved in cases comprising the rest of the vast and commonplace iceberg—the routine settlement of claims and lawsuits—need also be concerned about this legislation.  If a priest accused of sexual abuse is a “public hazard,” is there any client accused of causing injury or financial loss that isn’t? Can one trigger this new statutory right of public access to private information merely by filing a complaint alleging harm from a “public hazard” or financial fraud? What, exactly, constitutes “information concerning the public hazard or financial fraud” to which the public now has a “right” of access? Who has standing to assert this “right”? Is it analogous to the right of access to public records under M.G.L. c. 66? Are there exceptions to this “right”?

Finally, and perhaps most importantly, are confidential settlements the problem and is legislation the answer? Those opposed to confidential settlement agreements argue that they delay the discovery of public dangers. Thus, the reasoning goes, if confidential settlements are restricted or regulated, meaningful information about a danger will flow to those who can prevent the danger before it recurs. This presumption is based on any number of unproven assumptions: that some plaintiffs, having settled a claim to their satisfaction, will take it upon themselves to publicize a danger, that they will do so in sufficient numbers to be significant and worthy of notice, that the danger will be real,  that the information will be communicated in an effective way and will be sufficiently meaningful to permit the public to protect itself and regulators to act to prevent further danger, and that they in fact will do so. Implicit in this reasoning is the notion that the potential harms from restricting or regulating confidential settlement agreements are insufficiently serious to outweigh the benefits of enhanced information flow, or that those harms can be limited by court oversight and that the burden on the court of functioning in such an oversight capacity is also insufficiently serious to outweigh the benefits of enhanced information flow.

Much of this confidence in the benefits of increased regulation may be misplaced. The fact that public dangers have ultimately come to light despite the existence of confidential settlement agreements suggests instead that the agreements are a relatively short-term means of restricting the flow of information. The public dangers cited as justification for curtailing confidential settlement agreements—sexual abuse of minors, dangerous products, environmental contamination, medical malpractice, employment discrimination, and financial fraud—have all occurred in areas heavily regulated by state and federal agencies. Those agencies possess tools of investigation and enforcement that far exceed that of the average investigative journalist, including specialized technical expertise, familiarity with the regulated area, investigative authority that often includes subpoena power, and the authority to mandate reporting obligations through statute and regulation. That these agencies, with these tools, fail to uncover issues that became readily apparent to the press suggests, in the words of Harvard law professor Arthur Miller, that confidential settlement agreements may be “a convenient scapegoat for other failures in the flow of information in our society.” If this is so, then laws banning confidential settlement agreements, without more, are unlikely to increase the flow of relevant information to the proper authorities. They will, however, represent yet another inroad on the ability of private individuals and businesses to decide for themselves how best to resolve their disputes, and they will deprive the judicial system of a valuable tool to resolve disputes efficiently without further burdening already beleaguered court dockets. 

Christine Hughes is General Counsel of New England Legal Foundation and the author of the Foundation’s recently released White Paper on the issue of Confidential Settlements.

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The following article appeared in the Metropolitan Corporate Counsel in October 2002:

NEW ENGLAND LEGAL FOUNDATION: A VOICE FOR BUSINESS

What do taxi medallions in Boston, exports to Burma, ATM surcharges in Connecticut and Mexican migrant workers in Maine have in common?  At the moment they are among the approximately thirty subjects of litigation currently on the docket of New England Legal Foundation. They all figure prominently in cases that are destined to have a material impact on the ability of corporations and individuals to do business in a rational manner.

New England Legal Foundation is the only business-oriented, not-for-profit law firm in New England.  Since its founding in 1977, it has used  litigation to promote free market views and address pocketbook issues affecting New Englanders. In recent years, consistent with the nationalization and globalization of commerce, the Foundation’s cases have also come from other parts of the country and have occasionally involved foreign relations. 

There are very few such legal foundations in the United States.  The Atlantic
Legal Foundation, which is in New York, has focused on the misuse of “expert” witness testimony, the Pacific Legal Foundation in Sacramento emphasizes property rights and the Southeastern Legal Foundation in Atlanta recently concluded a successful battle to require actual headcounts (as opposed to sampling) in the 2000 census. NELF, as it is called, emphasizes two considerations: 1) it deals exclusively with business and commercial issues, staying away from social disputes such as abortion, school prayer and gun control,  and 2) even within the business context, it maintains a posture which NELF’s President, Andrew Grainger, describes as “determinedly non-ideological.”

“Our focus is on what we believe to be a rational and balanced solution to disputes involving the marketplace. In many cases, but not always, we favor nationwide regulatory schemes so that multi-state businesses can plan and administer their affairs with predictability. For example, last year we participated as amicus curiae in a United States Supreme Court case challenging California’s attempt to change the rules for claims notices in ERISA disability plans only in that state. In other cases, however, we might attack a bad law or regulation in one state even if it is mirrored in many others, because we intend to create precedent that can be used elsewhere. While an ideological approach might favor either a consistent states’ rights or big government bias, our scrutiny remains on what’s best for the conduct of  business.”

Exports to Burma are an example of NELF’s “fix it locally, think globally” approach. In  1996 Massachusetts enacted a so-called “selective purchasing” statute which punished any business having commercial contacts in Myanmar (formerly called Burma) by adding a 10% penalty to all bids for contracts to provide goods or services to the Commonwealth. In what former Governor William Weld freely conceded was an attempt to formulate foreign policy at the state level,  Massachusetts acted to discourage trade with Burma while simultaneously increasing the cost its own taxpayers might incur for goods and services. Agreeing with NELF, both the Federal District Court in Boston and the Court of Appeals for the First Circuit invalidated the law.  NELF’s amicus brief was filed with the United States Supreme Court in February of this year; it hopes that a favorable decision will remove such laws (and there are many) from statute books all across the United States.

NELF recognizes that government regulation of business is appropriate in many cases, and that taxation is a necessary evil. Its motto, “Providing a Balance”, is intended to signify that it believes in a moderate approach: usually, but not always, championing free market solutions to perceived or real  social problems. The recent battle with the State of Connecticut over ATM surcharges is a good example. In that case the state banking commissioner argued that a statute authorizing the use of ATMs by state chartered banks should be read to prohibit fees assessed to non-customers.  NELF’s amicus brief pointed out that, regardless of the questionable statutory interpretation advanced by the state, the supposed harm to consumers which the commissioner claimed to be averting was easily managed by the free market. Using Massachusetts as an example, NELF documented the establishment of a network of no-fee ATMs by small and medium sized banks seeking a competitive advantage. In what NELF’s Legal Director Loretta Smith termed a “gratifying recognition that market choice is superior to regulatory fiat,” the Connecticut Supreme Court rejected the commissioner’s arguments and specifically cited to the market alternative. (The network of no-fee ATMs featured by NELF in its brief has, in fact, spread into Connecticut since the case was decided).

In the case of the DeCoster Egg Farm located in Turner, Maine, NELF has paradoxically confronted a situation in which regulatory control is probably appropriate while private action, when the private actor is in fact a foreign government, is decidedly not. Following citation by OSHA of myriad working condition violations, DeCoster found itself defending a suit by its employees, many of whom are Mexican migrant workers or American citizens of Mexican descent. On the theory that, as a country of origin, it has been damaged by ill-treatment of its citizens and emigres, Mexico itself helped to initiate the suit as a plaintiff and sought separate damages on a parens patriae basis. “American businesses are faced with enough potential claimants and theories of recovery in today’s markets; it’s a really bad idea, and bad law,  to require them to fund foreign countries whose feelings have been hurt,” reacted Grainger to the Mexican suit. NELF’s brief, together with those of the parties, will be filed in the First Circuit Court of Appeals as this issue of Metropolitan Corporate Counsel goes to press.

From a market perspective, lawsuits are NELF’s “core business.” The Foundation, however, recognizes limitations to litigation, and has recently begun seeking alternate ways to pursue its mission. “Litigation is inherently reactive,” explains Grainger. “You need a specific case with the right set of facts on a particular issue in order to establish good precedent.”   For this reason, NELF has initiated seminar and panel presentations designed to provide a forum on issues confronting the business community, even when there is no lawsuit available. Recently NELF conducted a panel with judges and CEOs from New York and a number of New England states to debate the spread of specialized business courts designed to provide commercial litigants with greater speed and expertise on the bench. It has planned a seminar to be held later this year which will examine the application of genome mapping to insurance, corporate benefit plans and employee relations. Another topic on NELF’s radar screen is the convergence of the legal, consulting and accounting professions (which has been in the news lately as the SEC’s examination of auditor independence is likely to result in the separation of consulting practices from accounting firms, including the Big Five).

While most of the Foundation’s court appearances involve broad issues and the precedent setting confrontations exemplified by amicus and appellate work, it also has a tradition of pursuing a few cases in which NELF directly represents a party from the ground up, beginning at the trial court or agency level. Throughout most of the 1990s the Foundation represented the family of Paul Preseault of Burlington, Vermont, who suddenly found their residential property invaded every weekend by hundreds of backpackers and bicyclists as a consequence of the federally funded rails to trails conversion program. The Preseaults had quickly exhausted their own funds in their quest to be compensated for government action by which an abandoned railroad right of way in their back yard was transformed into a recreational thoroughfare. Their local counsel called the Foundation, and NELF assumed their case. After 8 years and a complete circuit from the Interstate Commerce Commission up to the United States Supreme Court and back again, the conversion of the right of way on the Preseaults’ property was recognized as a taking, and they received compensation. In looking back at the case, Grainger points out that NELF should not be described as opposed to the rails to trails conversion program, “...but we do believe that society must recognize the real cost of social objectives and not simply put the burden on certain individuals, in this case landowners.”

More recently NELF has represented Robert Lynch, an individual seeking to obtain a taxi medallion (license) from the City of Boston since 1988. After the Police Commissioner denied Lynch’s medallion application because the maximum number of approved medallions, unchanged for more than half a century, had already been issued, Lynch obtained an administrative order from the Department of Public Utilities requiring the City to issue additional medallions. Not until the Foundation filed a lawsuit in 1995, obtained a Mandamus Order from the Superior Court in 1997 and continued to apply pressure for another year and a half, did the City of Boston finally begin issuing medallions in January of 1999. 150 new medallions have now been issued and the City promises to issue another 110. “This case was about letting the market, supply and demand, determine the right number of taxis for Boston rather than maintaining an artificial shortage to keep medallion prices (fees to the City) high,” says Grainger. “Of course, it also evolved into a mission of forcing a public official, and a law enforcement official at that, to obey a court order.”

In addition to a Board of Directors comprised of General Counsel from major companies and a few senior law firm partners, the Foundation has developed a network of Advisory Councils, similarly consisting of senior in-house and firm attorneys, in each New England state. Although headquartered in Boston, NELF takes care to emphasize its regional constituency. The Councils are NELF’s “ear to the ground” to ensure that it knows about issues of importance to the business community in their formative stages in each state.

Because NELF charges no fees for any of its work, it relies entirely on tax deductible contributions from corporations, law firms, other foundations and individuals. Grainger, with the responsibility to make ends meet, puts it directly: “Like most non-profits, we don’t want anyone who understands and believes in what we do to be deprived of the opportunity to provide us with financial assistance. My message to readers of Metropolitan Corporate Counsel is: ‘Please call us with problems or cases in which we can be helpful, and please consider us an excellent choice for some of your charitable or community investment dollars.’ ”

New England Legal Foundation can be reached at 150 Lincoln Street, Boston, MA 02111
tel:(617)695-3660; fax:(617)695-3656

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The following article, by NELF's former President, appeared in the Boston Business Journal in July 2002:

A Bright Spot In The Court Crisis 

It is no secret that the Massachusetts court system is in turmoil. Funding for vital functions such as interpreters and court reporters is almost depleted or already gone. The Courts and the Legislature are locked in not one, but two, incipient constitutional crises relating to Clean Elections and to an unseemly power struggle over hiring and control of court employees. 

All of this is happening in the context of state-wide budget cutbacks and, as if that weren’t enough, an election year. A businesslike reform of the system to give litigants and taxpayers a rational cost effective system of justice and dispute resolution is desperately overdue. Supreme Judicial Court Chief Justice Margaret Marshall has recognized the need for management reform, and the need not to abandon the field to the legislature, by enlisting Boston College Chancellor Father Donald Monan to head a commission on improving court management. The coming months are likely to witness finger pointing and a struggle with the legislature over the line item budget by which it presently decides where, and on which clerical positions, to allocate funds. 

Neither legislators nor judges are automatically entitled to run the court system. The right result--effective and widespread access to justice at a reasonable cost to the public--is too important. Self-government of our court system makes inherent sense, but only if the judiciary can demonstrate that it will manage the courts in a cost effective and businesslike manner. Fortunately, a recent report on one judicially created program provides a model for good self-government. 

For the past twenty months, the Suffolk County Superior Court has produced exceptional results dealing with complex multi-party commercial disputes, and has done so without adding one dollar of additional expense. The Business Litigation Session, or BLS as it is called, was instituted in October of 2000 thanks largely to the foresight and determination of Superior Court Chief Justice Suzanne DelVecchio. The BLS takes advantage of the benefits of specialization and the hard work of a few very dedicated judges, principally Judge Allan van Gestel who has presided over the project since its inception. 

The BLS is monitored by a volunteer Resource Committee of in-house and corporate attorneys from large and small offices, and from different areas of the state. A report covering the first eighteen months of the Session sponsored by the Resource Committee and conducted by an independent survey firm, Atlantic Research and Consulting, was released last month. Both the statistical results and the opinions of close to 100 experienced trial lawyers who were interviewed for the survey show that with good organization and hard work Massachusetts courts can be second to none. 

In the eighteen month period covered by the survey, the BLS resolved over 200 complicated multi-party lawsuits. It should be emphasized that commercial cases and other complex disputes such as medical malpractice consume a disproportionate amount of public resources. By removing commercial cases from other dockets and closing so many in such a relatively short time, the Session has benefited everyone seeking access to the courts. 

The numbers produced by the survey are dramatic. Fully three quarters of all the attorneys who have appeared before the BLS took the time to respond to the survey, and more than half of these had more than one case in the Session. An astounding eighty-seven percent of these attorneys placed the Session in the top two of seven available ratings for overall satisfaction, while only three percent put it in any of the bottom four ratings. Eighty-three percent said that the BLS enabled them to give better legal service, citing the consistency of having one judge in charge of the case, the promptness of hearings and the promptness of decisions. 

Almost ninety percent of those interviewed wanted to expand the BLS to other courts and counties in Massachusetts. These respondents, who are experienced trial attorneys and not easily impressed, considered the Session as good or better than private dispute mechanisms by eighty-four percent. Their cases were of all kinds, involving contract disputes, landlord-tenant contests, shareholder fights, partnership dissolution, employment disputes - in short, the basic fabric of most civil litigation today. They won, lost and settled in relatively equal amounts, and praised the process regardless of which side they were on. 

The bottom line is that in a very difficult environment, the BLS has compiled a case resolution and customer satisfaction record that would be the envy of any business or institution. If judges and court administrators must demonstrate to the public that they will run the system cost effectively and at a high level of quality, Chief Justice DelVecchio and Judge van Gestel are doing just that with the Business Session. 

Andrew Grainger was President of the New England Legal Foundation, which supported the creation of the BLS and provided funding for a survey to measure its results.

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Andrew Grainger is the former President of the New England Legal Foundation, which supported the creation of the Massachusetts BLS and provided funding for a survey to measure its results.

 The following article, co-authored by NELF's former President, appeared in the Boston Globe Business Section in March 2002:

It Just Got A Little Harder To Keep Your Business Out of Court --
Supreme Court’s Waffle House Decision Throws Uncertainty on Arbitration Clauses in Employment Agreements

 Andrew Grainger and Thomas Royall Smith

Because this is also an age of widespread litigation, arbitration has become popular among businesses and individuals seeking a way to resolve differences without dedicating a substantial part of their time and assets to the process. Arbitration clauses have become exceedingly common in most business agreements, including employment contracts. And, until mid-January, lawyers were able to advise their clients that such clauses are generally respected and enforced by the courts.

  

Now a chink has appeared in the armor that these clauses are intended to provide. In a recent case, EEOC v. Waffle House, Inc., the U.S. Supreme Court has declared that the EEOC may go to court to seek all available remedies for alleged job discrimination regardless of the employer-employee agreement to resolve their disputes through binding arbitration. In Waffle House these remedies included reinstatement, backpay, compensatory and punitive damages – all of which the employee had agreed only to seek through arbitration.

 

Since the EEOC itself was not a party to the arbitration agreement between the company and the individual, the Court found the agency could pursue remedies in court for the alleged discrimination, including “victim-specific” relief. Once the EEOC files a charge, the Court noted, the agency becomes “the master of its own case ....” and is not considered a mere stand-in for the aggrieved worker. Unfortunately at the end of the day, it makes little difference to the company whether it had to undergo a lawsuit because it was brought by the EEOC on an individual’s behalf, or by the employee himself.

 

The situation the Supreme Court considered in the Waffle House case was unusual. As the Court noted in its opinion, the EEOC files a lawsuit in less than one percent of all charges that come before it each year. In fact, in fiscal year 2000, the Commission filed fewer than 300 lawsuits, representing less than five percent of all cases in which the agency itself found reasonable cause to believe discrimination occurred. In contrast, alleged victims of employment discrimination filed more than 21,000 lawsuits in the federal courts in 2000. Thus, it was a rare occurrence that the EEOC filed the lawsuit independently of the employee, alleging that Waffle House’s employment practices, including the discharge, violated the law. Although the employee had agreed to resolve any disputes with Waffle House through arbitration, in this instance he had instead gone directly to the EEOC with his complaint.

 

Where Does Arbitration of Employment Disputes Stand Now?

 

Many employers may be wondering whether this Supreme Court decision limits the enforceability or desirability of private agreements to arbitrate employment disputes. In theory, the answer is yes. But, as a practical matter, the Supreme Court is correct, at least temporarily, when it said that its decision “will have a negligible effect on the federal policy favoring arbitration.” The Court went on to say that, given the EEOC’s restrained litigation practice over the past 20 years, concerns that this decision will discourage use of arbitration agreements are “highly implausible.” Legal scholars may say that it is poor argument to defend a decision on the basis that it won’t apply very often, but to businesspeople it will make all the difference.

 

The reasons employers have turned to the private arbitration of employment disputes have not disappeared. In the past decade, the tremendous increase in employee lawsuits, the ability of plaintiffs to recover virtually unlimited damage awards, and the unpredictability of juries have combined to make employment litigation even more treacherous and costly for employers. Arbitration offers a change of forum, while still assuring the parties the same rights and remedies as a court or fair employment practice agency. The Waffle House decision has not, and cannot, change any of these facts. Let us hope that the Court’s predictions of restraint on the part of the EEOC are proven correct.

 

Attorney Thomas Royall Smith is the managing partner of the Boston office of Jackson Lewis Schnitzler & Krupman, which represented Waffle House before the Supreme Court. Andrew Grainger is President of New England Legal Foundation, which filed an amicus brief in support of Waffle House.

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The following article, by NELF's former President, appeared in the Rhode Island Lawyers Weekly of August 16, 2001:

The Palazzolo Decision

Two weeks ago the United States Supreme Court issued its decision in Palazzolo v. Rhode Island et al. 69 U.S. Law Week 4605. At first glance, Palazzolo is a familiar dispute between a landowner and a regulatory body over land use restrictions, in this case wetlands provisions. But the Court's decision goes well beyond the immediate context of the case, and strikes at the relationship between government and governed.

Through a corporation of which he was sole shareholder, Anthony Palazzolo owned roughly twenty acres of shoreland in the town of Westerly, Rhode Island. Eighteen of these acres were designated "coastal wetlands" by the Rhode Island Coastal Resources Management Council, an agency created in 1971 at which time Palazzolo, as shareholder, had owned the property for a decade. Seven years later, in 1978, Palazzolo's corporation was dissolved and he took title individually. Thereafter, Palazzolo submitted a series of applications which sought to fill part or all of the property for development.

The state's denial both of Palazzolo's applications and of his subsequent takings claim was upheld through the Rhode Island Supreme Court. The United States Supreme Court granted certiorari on four issues. Two of these, involving ripeness and the effect of residual value of an uplands portion of the property, are fact intensive and real estate law specific.

This article will discuss the remaining two issues:

    1. Whether Palazzolo had standing to challenge as unreasonable (and hence compensable) regulations which were already on the books at the time he acquired individual title to the property.

    2. Whether Palazzolo's "acquisition" of the property (the transition from shareholder to titleholder) after the wetlands designation was imposed impedes recovery because he cannot meet the so-called "Penn Central test" of having a "reasonable investment-backed expectation."

These two, it is submitted, are really a single issue splintered by overlawyering. Reduced to its operative core this issue is: Should transfer of property have any effect on the right to challenge existing regulations? The Palazzolo, decision, though in turn splintered by overjudging (six opinions from nine Justices), provides the right answer and, moreover, provides it in exactly the right context by ruling that under our system of government, the state must remain answerable to citizens.

The majority opinion, authored by Justice Kennedy, explicitly recognizes the social import of the case: "Future generations, too, have a right to challenge unreasonable limitations on the use and value of land." (Id. At 4611) "[Restrictions which are unreasonable] ...do not become less so through passage of time or title...[and therefore we cannot] absolve the state of its obligation to defend any action restricting land use...." (Id.)

The extent to which the opinion, as reflected by these statements, transcends the context of Palazzolo itself has been largely lost in the media's characterization of the decision as property law specific and anti-environmental. It is really neither, since in the final analysis there are many types of laws and regulations which state and local governments might wish to enact with the hope that passage of time or title will remove the need to defend their reasonableness or legality.

The Palazzolo decision does not permit development of Palazzolo's land, nor does it provide him with an award because his property use is restricted. It holds only that Palazzolo is entitled to be heard. Consistent with the burdens placed against summary judgments, directed verdicts and other automatic disqualifiers in our system, this is the right result.

If Palazzolo prevails on remand, the most likely legal result is a compensatory award. This, again, is probably a good result. The social policy behind takings claims is that society, not selected individuals, should pay for social programs. This brings us to Penn Central Transp. Co. v. New York City 438 US 104 (1978) which recognizes that the Fifth Amendment prohibition against taking private property for public use is "...designed to bar government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." Id. 123-124 citing Armstrong v. United States, 364 US 40,49 (1960). Because "fairness" and "justice" depend on the facts in each case, Penn Central identifies tests to be applied to each claim. One of these is "...the extent to which the regulation has interfered with distinct investment-backed expectations." Id. at 124. The Palazzolo majority simply notes that because Palazzolo was not given the opportunity to have his case analyzed under Penn Central, it should be remanded.

In an entertaining sideshow, Justices O'Connor and Scalia have issued sparring concurring opinions over the reasonableness of Palazzolo's investment-backed expectation in the face of regulations which, on their face, defeat the expectation. This issue was ignored by the majority opinion, and rightfully so, because it is completely circular. The reasonableness of an expectation which would violate a restriction depends on the unreasonableness of the restriction. An unreasonable restriction, accurately recognized as unreasonable by an acquirer, cannot suddenly be deemed reasonable because it existed before the change of title. Any other result would allow the state, by tautology, to bootstrap itself through Penn Central back to immunity from attack because title has changed. Unfortunately, and dangerously, as many as five Justices (the four dissenters plus O'Connor and possibly Stevens) would allow the pre-transfer existence of a regulation to be used to dispute a showing of expectation. In Palazzolo this remains dicta.

In yet another indirect attempt to immunize the state, Justice Stevens, in a partly concurring and partly dissenting opinion, engages in a back-to-the-future exercise by asserting that a "taking" can only occur when the restriction at issue is first imposed. From this he concludes that only the owner at the time of enactment has a takings claim. This is frankly difficult to swallow. It should be evident that the owner against whom an unreasonable restriction is imposed, and every subsequent owner to whom it applies, are deprived of property. Any them should be able to make a claim for compensation. Once one of them does so, the result will be reflected by the market in all subsequent transfers, thereby eliminating future claims.

The number of opinions, and the attempts in many of them to undermine the basic concept of fairness laid down by the majority, are unfortunate. But the Palazzolo decision currently brings to a halt attempts in many states, of which Rhode Island is but one, to avoid responsibility for the implementation of land use provisions.

Andrew Grainger is President of New England Legal Foundation, which filed an amicus brief in the United States Supreme Court on behalf of other Rhode Island property owners in the Palazzolo case. The author wishes to acknowledge the invaluable assistance of Staff Attorney Michael Malamut in preparing this article.

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The following article by NELF's former President, appeared on the Boston Globe's Op-Ed page on June 4, 2001:

Rent Control Is Still a Bad Idea

In 1994, by state-wide referendum, rent control was repealed in Massachusetts. State Senator Diane Wilkerson recently filed a bill which would allow cities and towns to reintroduce rent control to the Commonwealth. A similar bill has been filed in the House. These bills would allow municipalities to enact exact copies of the laws rejected by the voters eight years ago. This is surely excellent support for George Santayana's remark that those who fail to study the past are condemned to repeat it.

If we are truly concerned about providing widespread affordable housing in Massachusetts, rent control measures are a strange way of showing it.

Across the country rent control has not only failed to achieve its purpose, it has been counterproductive. In fact, rent control has consistently reduced the stock of affordable housing wherever it has been allowed to operate for any significant period of time. Santa Monica, California, enacted rent control in the early 1970s, at roughly the same time that we did so here in Massachusetts. In the decade from 1980 to 1990, Santa Monica's rental housing stock decreased by 5%, while comparable neighboring California towns without rent control saw an increase.

Closer to home during the 1980s, Cambridge and Brookline suffered decreases in rental housing units of 8% and 12% respectively, according to a study commissioned by Cambridge policy analyst Rolf Goetze of GeoData Analytics. With hindsight, the reason is obvious: if you regulate the price of a commodity, but allow the cost to fluctuate, suppliers will abandon the market.

Contrary to myth, low income and minority tenants are not those who really benefit from rent control. In the early 1990s in Cambridge the average income of those in rent controlled units was higher than that of market rate tenants, while minority occupation of rent controlled apartments was lower than in non-rent controlled units. In 1986 a study for the Rent Stabilization Association in New York City indicated that wealthy white families received the greatest benefit from rent control while poor black and Hispanic families received the least.

The preamble of Wilkerson's Senate Bill 657 contains a ritual finding that a serious public emergency exists with respect to the number and condition of rental units in Massachusetts. This language is automatically inserted into rent control statutes to justify taking property (in this case income) away from landowners, and is then promptly forgotten. For example, the Santa Monica statute made such a finding in the early 1970s. Apparently, three decades later the emergency continues to exist, as does the substantial public bureaucracy created to deal with it. Likewise in Cambridge the emergency found to exist in 1970 apparently was not extinguished until the 1994 repeal referendum.

Leaving aside the now well-known abuses of the system, there is something fundamentally unfair about rent control. Rent control requires support from only one small segment of the population - ironically those whose activity is already a part of the solution. According to the Small Property Owners Association, 75 percent of rental housing in Massachusetts is owned and operated by individuals and families. These suppliers must already navigate an intricate maze of laws and regulations to stay in the business of providing shelter to others. We should be encouraging them, not making it more difficult for them to stay in business.

If we really want to pursue the goal of providing decent shelter to everyone in one of the world's wealthiest countries - and we should - we must recognize the public cost. Through tax subsidies and other means we can encourage the creation of new housing and the maintenance of older dwellings most likely to become rental units. Affordable housing is a complicated issue which involves many different sectors of the economy and is impacted by factors such as interest rates, the labor market, the supply of capital to the construction industry and property use regulations, to name a few.

Our public officials shouldn't take a virtuous stance while they let the general public, and themselves, off the hook by making landlords alone pay the bill.

Andrew Grainger is President of New England Legal Foundation, a not-for-profit public interest foundation whose mission is promoting public discourse on the role of free enterprise and advancing free enterprise principles in the courtroom. The Foundation filed a Petition for Certiorari in the United States Supreme Court in the case of Santa Monica Beach Ltd. v. Santa Monica Rent Control Board.

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The following article co-authored by NELF's former Chair and former Vice-Chair, appeared in the January 2001 issue of Women's Business:

New Legal Issues for a New Age

Alicia R. Lopez and Laurie B. Burt

We are living in an era of breathtaking scientific and technological change. We are aware that the history books of the future will define ours as an age of revolution. One telling statistic of the dramatic changes taking place: until 1980, phone calls over copper wire could carry one page of information per second; today, a thin fiber optic wire can transmit 90,000 volumes per second. The new technologies of our age for example, in telecommunications and biology promise great advances in human productivity, prosperity, understanding, and health. But there are risks and tensions implicit in these new technologies that confront the business, legal, and policy-making communities with legal and ethical ramifications and challenges heretofore unknown.

No area of the law better illustrates these new challenges than that concerned with genetics. The preliminary mapping of the human genome will revolutionize the tools we have for predicting and ultimately treating our most common diseases, such as cancer, diabetes, and heart disease. Our growing ability to determine who is likely to develop certain maladies raises a number of important issues. Should such information be protected under a veil of privacy? Can employers rely on this same information to make employment decisions, given the rising costs of health benefits provided to employees? Should employers be permitted to use the results of genetic screening as a condition of employment or benefits? Are providers of health and life insurance entitled to use such information to make determinations of coverage? Today, when nearly two-thirds of New Englanders rely on employment-based health coverage, these questions are critical. Massachusetts already has enacted comprehensive genetic privacy legislation that also prohibits the use of genetic test results as a condition of employment or insurance. And over thirty other states have passed laws along similar lines. These laws represent just the beginning of society's efforts to come to grips with these changes that are sure to radically impact our personal lives and our business models.

Genomics confronts policymakers, legal professionals, and businesspeople with the need to make choices among competing, but equally compelling, values. Our society is predicated on a free market economy and the protection of individual rights and freedoms. But what happens when these clash? As is evident in the current U.S. economy, when business flourishes society benefits in the form of more jobs and higher wages. Thus, we believe that businesses should possess the freedom to make decisions that will allow them to succeed in a hyper-competitive and increasingly global economy. Today, one factor inhibiting U.S. competitiveness is the crisis of spiraling benefits costs, which is putting increasing pressure on corporate budgets, profits, and shareholder returns. Genomics might give business a means to better control these costs. Yet these tools may conflict with cherished individual privacy rights and raise serious concerns over discrimination in the workplace. Which right should prevail? Can these competing claims be reconciled?

These are the burning questions with which businesspeople, lawyers, legislators, regulators, and judges and juries will have to grapple. These are not issues that can be postponed to some indefinite point in the future. Employment, health care, and corporate lawyers will soon be fielding clients questions about privacy, discrimination, and benefit plan administration if they haven't already. We must begin to address the potential of genetic mapping and its impact on numerous social values and goals: access to health care for all Americans, the protection of individual privacy, and the prevention of discrimination.

A second area that illustrates these tensions is e-commerce and e-communications. Corporations and individuals increasingly rely on computers, modems, local area and wide area networks, e-mail and the Internet to transact business and to send and receive information. These advances in telecommunications have created efficiencies and opportunities that we are only beginning to tap. But this reliance also raises several thorny issues over security and the enforcement of intellectual property rights.

As was revealed in the course of the case of former CIA Director John Deutch, sophisticated hackers can intercept information sent electronically without leaving a trace. Of immediate and more practical concern is the growing reality of employee theft of company trade secrets and other confidential and proprietary information. Today, employees easily can and do download volumes of company-owned materials to themselves or third parties. Employers probably give little thought to the degree to which they are losing control of their electronic property. In a world where information is power, this declining control can lead to financial losses, the loss of technological advantage, and enhanced risk of competition.

The duplication, use and redistribution of trademarked and copyrighted information has become practically effortless. While widespread access to information on the Internet is desirable, businesses also have a critical interest in protecting their proprietary information. If e-commerce is going to fully realize its potential, issues of property rights must be resolved so that users can compensate producers of information. The huge profits that can be generated by developing commercial information before one's competitors (witness Microsoft) is what spurs entrepreneurs to invest their resources financial, intellectual, and time - and take enormous risks. But investment and risk-taking will take place only if intellectual property rights can be enforced.

As leaders of the New England Legal Foundation, we are committed to promoting public understanding and debate of the crucial issues raised by cutting-edge technologies. Towards this end, we have hosted a number of forums designed to spur freewheeling discussions of these challenges.

As in all of life, there is no such thing as a free lunch. Economists have a concept called opportunity cost, which tells us that a resource employed for one use cannot at the same time be employed for a different use. The concept alerts us to the costs implicit in the choices we make. The dramatic efficiency gains made possible by newer technologies simultaneously create new risks and a thicket of legal and ethical issues with which corporations must be prepared to grapple. These issues will be contentious because they go to the core of Americans' values.

Alicia R. Lopez is the Chair of the New England Legal Foundation and Corporate Vice President and General Counsel of Haemonetics Corporation. Laurie B. Burt is Vice Chair of the New England Legal Foundation and a Partner in the Boston law firm of Foley, Hoag & Eliot, LLP.

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The following article, by NELF's former President, appeared in the Portland Press Herald on October 10, 2000:

What The Business Community Can Expect From The Genome Project

Unless you've spent the last nine months on a Pacific atoll under rigidly enforced Outward Bound restrictions, you are certain to have heard of the Genome Project - the imminent ability of medical technology to identify and interpret our individual genetic data bases. In the past four months we've been treated to a Bioworld Convention in Boston, a White House reception and press conference as well as maneuvering by various Presidential hopefuls to be on the "right" (i.e., more popular) side of the death penalty/DNA testing dispute.

In addition to inmates on death row, the public imagination and press coverage have focused on embryo manipulation and food alteration. While these issues can be expected to continue to dominate much of the public debate on genomics, there will be other more immediate impacts on society, and especially on business. The predicted arrival of changes is being updated so rapidly that this writer, in preparing a brochure describing a seminar on commercial Genome Project effects to be held in Boston this fall, had to revise the forecasted time lines twice in a three week period. Changes which only a short time ago were thought to be on a two to three year track are now expected within six months to one year.

And what are these changes? What do business managers and their advisors need to anticipate and understand in order to do their jobs effectively in the next few years?

  1. We are likely to see dramatic changes in underwriting major forms of insurance. Life and health insurance will be hard pressed to continue their existence as a form of legalized gambling once medical technology can remove a large part of the unpredictability of our health care needs, and even our longevity. Regulators and the few state legislators who are beginning to grapple with this issue have quickly come to understand that major societal values are at stake. For example, in the last week before Labor Day, Massachusetts enacted comprehensive genetic privacy legislation which also prohibits the use of genetic test results "as a condition of employment or insurance." While most of us would probably not insist that we have an inherent right to buy life insurance, the issue of health care insurance or some other form of guaranteed access to health care provokes a very different reaction. Providers and insurers are already caught between our belief that they must provide health care to everyone regardless of financial ability, and the need to survive in a competitive marketplace. Now, through genetic mapping, we are about to complicate this state of affairs considerably by introducing the ability to determine with a far greater degree of certainty than ever before who will, and who will not, require significant medical attention. Maine and the other New England states are home to some of the country's largest insurers, and we boast some of the countries best and most advanced medical facilities. We have already seen the impact on our economy of consolidations, acquisitions and actual failures among hospitals, insurers and HMOs. Unless we address the potential of genetic mapping and begin now to integrate it with the goal of providing affordable health care to all Americans, an important sector of our economy will be placed in even greater conflict with the purposes it is intended to serve.

  2. The role of the business community as a significant source of health care, disability and even life insurance coverage will also be put to a severe test. According to the Employee Benefit Research Institute, employment based health coverage represents 65% of insured health care in New England today - in Maine it's even higher at 70%. Benefit plans are a major consideration for many individuals and families in choosing jobs. The cost advantage enjoyed by businesses and their employees in purchasing health care, disability insurance and pension plans relies on the leveling effect of a larger statistical base in planning for catastrophic events which require payment of claims or in subsidizing life spans which inconveniently exceed the amounts contributed to pension plans. It now appears that with a wave of the technological wand, we will soon have the ability to make unusually accurate projections for every individual - great news if your "book of life" has a plot free of serious crisis (in which case you presumably will be offered numerous insurance products you are likely not to require). The traditional paternalism of corporations and other employers in providing benefit plans and secure retirement packages has already been upset by the explosion of mergers and start-ups in the past few years. The potential erosion of group purchasing advantages will accelerate this trend and will affect even those who continue to work for large companies.

  3. This, in turn leads to ticklish questions about hiring, firing, promotion and privacy in the workplace. If businesses are unable to offer traditional benefit packages at a reasonable cost as they compete for employees, can we expect (or should we allow?) genetic screening as a condition of employment and/or a condition for various benefits? Will we develop two, three or more classes of employees, each entitled to different types of compensation packages? Americans generally don't believe in special privileges based on pure luck; at the same time most of us, for good reason, don't want government to dictate the terms of our private contractual dealings, including employment contracts. Privacy and security concerns about such highly intimate data will probably be more intense even than similar concerns raised today by e-commerce, especially if continuing workforce mobility leads to more portability of coverage from one employer to another.

Americans have never rejected the use of new technology, regardless of the dangers. Many of the practical and ethical issues described above are a result of the present gap between genetic technology's ability to predict illness and its inability to prevent it. Since we can't put the toothpaste back in the tube, we must understand how genetic mapping will change today's commercial landscape if we are going to develop fair and rational solutions to fast approaching economic and workplace issues.

Andrew Grainger is President of New England Legal Foundation which, with the American Society of Law, Medicine and Ethics, is co-sponsoring this fall's conference in Boston "Practical Applications Of Genetics: What the Genomics Revolution Means To You And Your Company".

For more articles relating to NELF and the Genome Project, see:

Boston Business Journal of March 16, 2001, "DNA Testing Raise Thorny Issues - Even For Business."

Massachusetts Lawyers' Weekly of October 2, 2000, "It's All In The Genes."

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The following article, by NELF's former President, appeared in the Massachusetts Lawyers' Weekly on May 29, 2000:

Everyone Will Benefit From The Business Court

Last week's Lawyers Weekly carried an article by Massachusetts Academy of Trial Attorneys' President Warren Fitzgerald about the proposed Business Court. Mr. Fitzgerald's article ("Justice Would Suffer with A Business Court") opposes the pilot project being advocated by, among others, the New England Legal Foundation, the Boston Bar Association and the business community in Massachusetts. His approach fails to take into account existing experience with such courts in other jurisdictions and overlooks the steps already taken towards specialization in today's multifaceted world of dispute resolution. In so doing he arrives at a conclusion which is not only wrong, but against the best interests of both the court system and the non-business litigants he wishes to protect.

Mr. Fitzgerald correctly points out that all trial lawyers have felt at one time or another that it would have been "more beneficial to our clients if the [assigned] judge had possessed more background or facility with the particular subject matter at hand." His analysis fails, however, when he speculates that specialization for complex commercial matters might hurt other cases and litigants.

In fact, we need not speculate. Roughly a dozen jurisdictions have created some form of the special docket now being proposed in Massachusetts. At New England Legal Foundation's forum on this subject last December, judges from Connecticut and New York, and individuals involved in promoting such initiatives in other states, recounted their experiences with special complex or commercial dockets. Without exception they reported that everyone who depends on the court system for rational and timely dispute resolution benefits from the advantages of carving complex and unwieldy commercial disputes out of the general docket.

Commercial matters unquestionably benefit from the scrutiny of judges who have been afforded the opportunity to familiarize themselves with current legal and economic developments. At the same time the rest of the docket is free to operate without the disproportionate burden to judges who are also expected simultaneously, and in a timely fashion, to handle every other kind of case that comes to them in rotation.

Removing such cases from the general docket provides exactly the same result that all businesses - and law firms - achieve by offering separate areas of expertise to the public. When was the last time a law firm was asked by a business client requiring representation in a shareholder derivative action to assign an attorney who had handled a medical malpractice case the previous month, a criminal case the month before, and so on? We have long ago accepted and adopted the advantages of specialization in every segment of our society. The high technology age which we have entered, and the bio-technology age in which we will shortly be immersed, will not be forgiving of inefficiencies resulting from the failure of our institutions to focus areas of effort.

It should also be pointed out that large profitable business corporations are not the ones that have the greatest need for faster and more specialized treatment of their disputes. These companies, by and large, have the resources to undergo years of costly litigation without having their existence threatened. Pick up the business pages on any day of the week and you will see evidence that large companies are becoming both larger and fewer in number. Corporate demographics today include an explosion of smaller and medium sized companies, start-up and high technology firms, family businesses and sole proprietorships. These are a vital part of Massachusetts' future economic growth. These businesses, no less than the large established survivors, must be attracted and retained. These are the business ventures that require expert and fast resolution of uncertainties that can affect their ability to do business; these are the businesses most in need of the current business court proposal.

There is one point entirely omitted from Mr. Fitzgerald's article. Like it or not, business litigants - and especially those with ample resources - already have a specialized docket. They have voted with their feet, as the mushrooming of ADR, mediation services and other private solutions testify. This may be temporarily a good solution for business, but it is bad for the judicial system. We need the court system to stay competitive, and to provide us with enforceable precedent by which future disputes can be tried or settled. We need to keep the judicial branch of government involved in fashioning the rules by which we pursue our livelihoods, seek security and aspire to one aspect of personal fulfillment.

The business court proposal presents one good way, but not the only way, for the system to "work smarter" with existing resources, which we all know to be inadequate. Our Superior Court judges have been required to operate with inadequate resources for far too long. Courtrooms, working spaces, technological support and staffing are among the areas where more support is needed. The business court itself would almost certainly be able to benefit from future adjustments (for example, different states have implemented a wide variety of subject matter jurisdictions) after being launched. Neither the fact that there is much other work to be done, nor the likelihood that this particular proposal could be improved with testing, should prevent us from any measure which will help the Superior Court achieve its fullest effectiveness.

Andrew Grainger is President of New England Legal Foundation.

For more articles on NELF and the Business Court, see:

Boston Business Journal of December 3, 1999, "'Business Court' Proposal Gets Aired While Bill Stays Mired In Committee."

Boston Business Journal of May 19, 2000, "The Jury Is Still Out On Creating A Business Court."

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The following article, by NELF's former President, appeared in the Boston Globe Business Section on February 29, 2000:

Why Are We Making Foreign Policy In Massachusetts?

Today, at the request of Attorney General Tom Reilly, the United States Supreme Court agreed to review carefully considered decisions by two lower federal courts, both of which have invalidated the so-called Massachusetts "Burma Law". The Burma Law, which is now unenforceable as a result of these rulings, is an attempt by the Massachusetts legislature to use taxpayers' money to punish, and perhaps overthrow, the government of Myanmar (formerly called Burma).

How is it supposed to work? Let's say a company you work for, or own stock in, or which simply has been doing business in Massachusetts is also exporting a product to the far east, including Burma. It could just as easily be importing a product or component from Burma, or producing one in that country. If any of these, or a large number of other possible Burmese connections exist, Massachusetts will impose a 10% penalty on that business whenever it wishes to supply goods or services to the Commonwealth. For example, if that company submits a bid of $1 million for a state contract, and the next bid is $95,000 higher, the state will pretend the second bid is the lowest and spend the extra funds

The reasons that our system restricts foreign policy decisions to the federal government are not mysterious. More than one foreign policy is no policy at all. In fact, if the federal government does not have sole authority in this area, there is no reason to rule out counties, cities or towns. Miami, in fact, has not hesitated to establish its own approach to relations with the island of Cuba, and New York City is well on the way to having a clearly defined middle east policy. Closer to home, it isn't hard to imagine Cambridge jumping into the ring with both feet.

It is undisputed that the present government of Myanmar is undemocratic and repressive. It shares that quality with many other regimes in many parts of the globe. If this law could pass constitutional muster, Massachusetts might choose to focus on Burma, while Delaware addresses obvious problems in China and Tennessee deals with Syria. While some U.S. companies have publicly stated that the Massachusetts Burma Law has caused them to reconsider doing business in that country, there is regrettably no evidence of any effect in Burma. It is not only unconstitutional to fractionalize our approach to foreign governments; it is a pretty good way to ensure that we will be unable to exercise influence anywhere.

There is probably no limit to the reasons why a state or local government might wish to try to impose economic sanctions on a foreign government. Displeasure with Canada (our largest trading partner) for fishing in disputed waters would be an equally strong motivation to impose penalties on companies that do business there.

In the 60s and 70s there was a strong movement to restrict investment in South Africa as a reaction to apartheid. This movement took the form of selective investment of pension funds and other monies. These restrictions were defended with the argument that the law should treat states and other governments like private parties and recognize the right to act as "market participants