ABA Recommends States Change Lawyer Ethics Rules to Permit Multidisciplinary Practice; ISBA Resolves to Vote to Postpone for Study. In a decision potentially affecting the practice of every lawyer, the American Bar Association has recommended that the States revise their ethics rules to permit lawyers to become partners of and engage in practice with non-lawyers. The rule changes would permit "one-stop shopping" businesses combining lawyers, accountants, financial planners, realtors, and so on. Such a proposal would take U.S. practice closer to the European model, in which large Public Accounting firms employ most lawyers. The ABA House of Delegates will vote on the recommendations on August 9, 1999 at its annual meeting in Atlanta, Georgia. The full text of the ABA report can be found at http://www.abanet.org/cpr/mdpfinalreport.html . Meanwhile, the Illinois State Bar Association, citing the Report's lack of substantive data, and concerned with potential conflicts of interest and loss of independence that such a dramatic rule reversal would bring, voted on June 26 at its Annual Meeting to ask the ABA House of Delegates to postpone voting on the recommendations in order to give the States time to study the proposed changes and their impact on the practice of law for all concerned. The ISBA is taking comments online at its site at http://www.isba.org.
Attorney Acting as Accountant Loses Attorney-Client, Work Product Privilege for Tax Audit Work Papers. The IRS Restructuring & Reform Act of 1998 extended to accountants, with respect to tax advice, the same confidentiality which would apply to communications with an attorney. Now, the 7th Circuit has ruled that tax-audit work papers prepared by a tax attorney are not necessarily privileged. Noting that there is no common law accountant's or tax preparer's privilege, Chief Judge Richard A. Posner wrote that "To rule otherwise would be to impede tax investigations, reward lawyers for doing nonlawyers' work, and create a privileged position for lawyers in competition with other tax preparers." U.S. vs. Richard A. Frederick, et al, No. 94 C 1281, USCA, 7th Cir., http://www.kentlaw.edu/7circuit/1999/may/98-2644A.html
New Illinois Electronic Commerce Security Act Effective July 1, 1999. In a boost to E-Commerce, the new Electronic Commerce Security Act authorizes the Secretary of State to certify security procedures which identify a message as belonging to a particular person, or which may detect error or alteration in electronic content. The Act will permit contracts to be formed by digital signature, and provides that, "Information, records, and signatures shall not be denied legal effect, validity, or enforceability solely on the grounds that they are in electronic form." http://www.legis.state.il.us/ilcs/ch5/ch5act175articles/ch5act175artstoc.htm
Compromise Federal Y2K Legislation Moves Forward. H.R. 775, in various versions, has been passed by both the House and Senate, but with differences in caps on damages, and punitive damages provisions. As we go to press, a compromise has reportedly been reached. Under the compromise, caps on punitive damages would remain for small businesses (those with fewer than 50 employees), but remain unlimited for businesses with 50 or more employees. Small businesses would be liable for three times compensatory damages or $250,000, whichever is less. In addition, the compromise calls for proportional liability between multiple defendants, rather than joint and several liability. Governmental entities are exempt from punitive damages. When posted, the new bill, previously numbered H.R. 775, will be found at http://thomas.loc.gov .
U.S. Supreme Court Limits Scope of Americans With Disabilities Act. In a case which will affect approximately 100 million people who have health impairments that can be corrected through medication and medical devices such as hearing aids and eyeglasses, the U.S. Supreme Court has ruled that the Americans With Disabilities Act does not apply to people with such correctable conditions. Sutton, et al vs. United Airlines, Inc., # 97-1943; http://supct.law.cornell.edu/supct/html/97-1943.ZS.html;June 22, 1999; Murphy vs. United Parcel Service, Inc., No. 97-1992, http://supct.law.cornell.edu/supct/html/97-1992.ZS.html; June 22, 1999; Albertsons, Inc. vs. Kirkingburg, http://supct.law.cornell.edu/supct/html/98-591.ZS.html; June 22, 1999.
Seventh Circuit Approves Insurer's AIDS Cap Under ADA. Charging that Mutual of Omaha's lifetime AIDS payment cap of $100,00 and $25,000 for each of two plaintiffs was discriminatory under the ADA when compared to the $1 million cap for other serious illnesses, Plaintiffs sought to have such caps held unenforceable. Mutual of Omaha stipulated that it could not show that its AIDS Caps were based on sound actuarial principles, experience, bona fide risk classification, or state law, but argued that under the McCarran-Ferguson Act, State law governed the question, and not the ADA. http://www.kentlaw.edu/7circuit/1999/jun/98-4112.html
Patients Bill of Rights for HMO's May Lead to More Self-Insured Businesses. Under legislation, portions of which are to take effect immediately upon coming law, HMO patients would have increased access to specialists and other physicians for second opinions, HMO's could not prevent doctors from advising patients regarding their treatment options, and patients would have the option of buying drugs from local pharmacies rather than the large chains typically used by HMO's. Self-insured plans are exempt from most provisions, which may lead some businesses to form their own insurance plans. The new law can be found at http://www.legis.state.il.us/legisnet/legisnet91/sbgroups/sb/910SB0251LV.html
Increase in Paid In Capital for Tax and Accounting Purposes Is Increase for Franchise Tax Purposes. Following a stock sale transaction between Plaintiff's former sole shareholder (Seller) and Buyer, Buyer elected to re-characterize the transaction as a sale of assets under IRC 338, and increase their value, which could then be depreciated. As a result, Seller's paid-in capital was increased by nearly $58 million, and its franchise tax bill was increased by more than $512,000. Plaintiff filed suit. The court held that an increase in paid-in capital for tax and accounting purposes is also an increase for franchise tax purposes. E&E Haulling vs. Ryan, No. 1-97-3174 (1st Dist.) http://www.state.il.us/court/appellates/1999/1973174.htm
Private Postal Boxes to be Required to Disclose Renter's Name and Address. Comments are being taken on a new proposed Federal Regulation, under which the recorded business name, address, and telephone number of the addressee using a Commercial Mail Receiving Agency (CMRA) private mailbox (PMB) for the purpose of doing or soliciting business with the public will be furnished to any person upon request without charge. The proposed new regulation also requires that a person proposing to rent such a box must provide two forms of identification, at least one of which contains a photograph, and the other a serial number traceable to that person, such as a social security number. Direct comments to Manager, Administration and FOIA, U. S. Postal Service, 475 L'Enfant Plaza SW, Room 8141, Washington, DC 20260-5202. Comments will be received via U.S. mail only, and must be received by July 9, 1999.
What Ever Happened to That Legislation? With so much legislative activity in the last few months, you might have lost track of the bills you were following. In Illinois, many have gone to the Governor's desk. To find out, go to http://www.legis.state.il.us/legisnet/legisnet91/91gatoc.html To track Federal legislation, go to http://thomas.loc.gov/.