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October 1983Vol. 7, NO.4

THE OFFICIAL PUBLICATIONOF THE

ARKANSAS BAR ASSOCIATION

(§Ie

ArkansasLawyer

SPECIAL FEATURESTax-Savings Opportunities in the Purchaseor Sale of a Corporate Business John B. Peace 152

OFFICERS Organizational Directory 1983-84 159

Dennis L. Shackleford, PresidentWilliam R. Wilson, Jr., Pres·ElectAnnabelle Clinton, Sec-TreasurerJames H. McKenzie, Council Chairman

EXECUTIVE COUNCIL

Norwood PhillipsW. Kelvin WyrickGary NutterRobert M. CearleyKaye S. OberlagTom OverbeyMarcia McivorRobert HornbergerJoe ReedTommy WomackJulian FoglemanJames A. McLarty

EX-OFFICIO

Dennis L. ShacklefordWilliam R. Wilson, Jr.J. L. Shaver, Jr.Annabelle ClintonCarl A. Crow, Jr.James H. McKenzie

EDITOR

C. E. Ransick

ASSOCIATE EDITOR

Carol Utley

A Practical Introduction to InternationalBusiness and Commercial Lawfor the Non-Specialist Mark W. Grobmyer 167

Cases and Materials on American Conflicts Law:A Book Review Lawrence H. Averill 178

REGULAR FEATURESPresident's Report Dennis L. Shackleford 142

Arkansas Bar Foundation Report Cyril Hollingsworth 143

Executive Council Notes Annabelle Clinton 144Young Lawyers' Update Carl A Crow, Jr. 146

Law School News 148

Juris Dictum . . . . . . . . . . . . . . . . .. Robert L. Lowery 150

In Memoriam 158

To Wit ..............................•.............. 171

Code of Professional Responsibility . . . . . . . . . . . . . . .. 172

Oyez-Oyez . . . .. Carol Utley 174

Methods and Means Bernard Sternin 176

Legal Economics Kline D. Strong 180

AICLE News . .•.•..... Claibourne W. Patty, Jr. 182Fall Legal Institute ...•.•............................ 184

Service Directory ....................•...•.•........ IBC

The Arkansas Lawyer (USPS 546-040) is published quarterly by the Arkansas BarAssociation, 4()() West Markham, Little Rock, Arkansas 72201. Second classpostage paid at Little Rock, Arkansas. Subscription price to non·members of theArkansas Bar Association $6.00 per year and to members $3.00 per year includedin annual dues. Any opinion expressed herein is that of the author, and notnecessarily that of the Arkansas Bar Association, The Arkansas Lawyer, or theEditorial Committee. Contributions to The Arkansas Lawyer are welcome andshould be sent in two copies to the Arkansas Bar Center, 400 West Markham, LittleRock, Arkansas 72201.

All inquiries regarding advertising should be sent to The Arkansas Lawyer aboveaddress.

October 1983/Arkansas Lawyer/141

PRESIDENT'S REPORTby DENNIS L. SHACKLEFORD

Legislation And The LawyerThis was the most comprehensive

report coming out of the conference. Itdeals with such subjects as Lawpac,limitation on the number of bills spon­sored by the Association in the Legis­lature, and effective lobbying. The re­port of the Legislative Oversite Com­mittee was extensively reviewed.Changes were recommended. Thereis a recommendation that Bar­sponsored bills be limited to ten foreach legislative session. It is recom­mended that a legislative board beestablished with authority to act for theAssociation in approving amendmentsto Bar-sponsored bills, or to opposeother legislation.

Future Of The Organized BarThe Association is urged to continue

its activities of public information andyouth education. These programs ofthe Association have met with goodsuccess. The work of the Public Infor­mation Committee under Sam Perroniis commended, as is the videotapeprogram produced by David Malone.

There is available to Associationmembers advisory ethical opinionsand other research on ethical prob­lems through the Association's Pro­fessional Ethics and Grievance Com­mittee. The information comes fromIn-House Services of the AmericanBar Association.

continued on page 173

there is a strong interplay betweenmandatory continuing legal education,specialization, and lawyer discipline,all coming together under the broadumbrella of professional competence.

The Association is asked to studythe present system of recompensingthe client through the client securityfund. This would include a review andevaluation of the need and purpose ofany changes, or whether a recom­mendation should be made to drop theprogram.

Professional CompetenceAnd Accountability

And Lawyers' ResponsibilityTo The Community

An important recommendation ofthe report is the implementation of aprogram for mandatory continuinglegal education. A committee will beappointed to study and propose a planin the Arkansas Supreme Court.Specialization is in the formativestages. Lawyer discipline has beenstudied and a petition is to be filed withthe Arkansas Supreme Court to re­vamp the present method of handlinggrievances and discipline. Clearly

spring of 1983. The product of theretreat was the report of the SPCwhich has now been approved by theHouse of Delegates.

There were seven planning topics atthe conference and included in thereport. Some of the immediate ac­tivities to implement the plan duringthis Bar year are set forth as follows:

Access Of The PublicTo Lawyers And

Allocation Of Legal ResourcesThe Association is to assist the re­

cruiting activities of the YoungLawyers Section for pro bono lawyersin the representation of the low­income elderly.

The Committee on Interest onLawyer Trust Accounts under the ableguidance of Herman L. Hamilton ischarged with the responsibility to pur­sue this plan to obtain approval by theArkansas Supreme Court. In spite ofthe denial of an earlier petition, it isbelieved the program has such greatmerit that a new petition would befavorably received by the Court.

The funding and structure of a de­fense to indigents in criminal cases isa matter to be studied by an Associa­tion committee. The necessary legisla­tion is to be prepared for inclusion inthe 1985 Association-sponsored legis­lation.

On June 11, 1983, the House ofDelegates of the Arkansas Bar As­sociation unanimously approved thereport of the Special Planning Commit­tee. By this action the House of Dele­gates affirmed its commitment toplanning as a way of life in the Associ­ation. This is my first report to themembers of the Association as presi­dent. I intend to inform you of the workof the Special Planning Committee, itsreport, and the short-range future oflong-range planning within the As­sociation.

In September, 1978, then Associa­tion President Wayne Boyce called theArkansas Bar's first long-range plan­ning conference. It was thought thisapproach would overcome deficien­cies that result from the short-termyear-to-year planning occurring withthe annual change of Bar presidents.The foremost topic on the minds of theconferees was "lawyer competence."

In mid-April, 1982, members of theHouse of Delegates and other Barleaders were called to meet by As­sociation President Phillip Carroll forthe purpose of deciding projects, bothshort and long range, which should begiven priority for the Arkansas BarAssociation. SUbjects discussed in­cluded mandatory continuing legaleducation, law reform through aggres­sive promotion of Bar legislative pack­age, reducing the cost of legal ser­vices, providing financial support toimprove the judicial system, access tolawyers and meeting the need for legalservices, and the economic delivery ofquality legal services.

President James D. Cypert namedthe first Special Planning Committeeto function during his 1981-82 term.This committee conducted the long­range planning conference in lateApril, 1982. From that conferencecame the framework of a five-yearplan for the Association. President JimShaver appointed Robert K. Walshchairman of the SPC and charged himto organize the planning retreat in the142/Arkansas Lawyer/October 1983

ARKANSASBAR fOUNDA TION

by: Cyril Hollingsworth

/

Each year the Arkansas Bar Foun­dation looks forward to a new year,mindful of its origins and history andthe sacrifices of lawyers who gavegenerously of money and time in thepast. This is true particularly this year.

The service of Randy Ishmael lastyear as Chairman of the Foundationreminds us of all those lawyers whohave served in various capacities tomake the Foundation a reality. Theretirement of Colonel C. E. Ransick asExecutive Secretary of the Foundationis a signal event. Colonel Ransick hasbeen untiring in his efforts to build asolid financial base for the Foundation,and he leaves the Foundation in excel­lent financial condition. The Founda­tion is participating in the establish­ment of a scholarship at each of ourtwo Arkansas law schools in the nameof Colonel Ransick. In addition, inrecognition of his outstanding contri­butions and service, the Board of Di­rectors has designated Colonel Ran­sick a Fellow of the Foundation andhas also established the Colonel C. E.Ransick Award of Excellence to beawarded for exceptional service to thelegal profession. A plaque bearing thenames of the recipients will hang in theArkansas Bar Center.

The Foundation has revised itsConstitution and By-Laws. The newConstitution and By-Laws contain nomajor changes, and continue a TrustCommittee composed of seventeenpersons, twelve serving six-yearterms, to be responsible for the prop­erty and assets of the Foundation and

to have the final approval for allocationof income and resources. The TrustCommittee and the Board of Directorsare to communicate so that the ongo­ing work of the Foundation and theallocation of funds are coordinated forthe maximum effectiveness of theFoundation's programs. The Presi­dent, Vice-President, and Treasurer ofthe Foundation, who are Board Mem­bers, serve on the Trust Committee. Inaddition, three members of the Boardof Directors will serve on the SpecialProjects Committee, which is a com­mittee created by the Trust Committeeto consider various proposals andprojects. The amendments to theConstitution and By-Laws also providefor the rotation of the offices of Presi­dent and Vice-President among thefour bar districts in the state, whichhas been the custom prior to theamendment.

As we look to the future, and recallthe purposes of the Foundation, theissue for me is where can the Founda­tion furnish needed support thatmakes a difference. The answer tothat question will not always be easyand will change from time to time. TheFoundation nevertheless welcomesthe opportunity to consider such is­sues and looks forward to the samecontinuing support of lawyersthroughout the state as we go forward.

Our goal this year is to increasecommunication of what the Founda­tion is doing and to increase theinvolvement of Arkansas lawyers. Weseek to keep members of the Founda-

tion informed and to encourage otherArkansas lawyers to join us as mem­bers of the Foundation. We will usethis column as one way of informingArkansas lawyers about the Founda­tion.

One of the ways the Foundationrecognizes contributions to theadministration of justice and the legalprofession is through the presentationof awards. Two awards which theFoundation can make as often as an­nually, if there are deserving recip­ients, are the Outstanding LawyerAward and the Outstanding Lawyer­Citizen Award. The remarks madeabout the two persons receiving thisyear's awards call to mind the pastand the future and the type of examplethe Foundation hopes to foster. Eachrecipient is recognized' as an excep­tional practitioner of law and each re­cipient has been strongly involved incommunity affairs. It was pointed outthat each of them shuns accoladesand the spotlight. In describing onerecipient, Foundation ChairmanRandy Ishmael noted that lawyersoften would ask themselves when fac­ing a particular situation or difficultywhat the recipient would do in thatsituation. The two recipients, DavidWalker of Jonesboro as OutstandingLawyer, and Robert Lindsey of LittleRock as Outstanding Lawyer-Citizen,are representative of many other law­yers who promote the system of jus­tice and the legal profession on a dailybasis by way of personal example.

~~,

October 1983/Arkansas Lawyer/143

EXEcurlVE COUNCIL NorESBy Annabelle ClintonSecretary-Treasurer

Minutes Of The Annual MeetingOf

House Of Delegates

,\..

,

The House of Delegates of the Ar­kansas Bar Association met at 9:30a.m. in the Arlin9ton Hotel in HotSprings on June 11, 1983. PresidentJim Shaver, Jr., presided.

Jim Shaver gave his President'sReport. The House of Delegates ac­cepted the minutes of the last execu­tive counsel meeting; the membershipreport; the financial report; and thebudget for 1983.

James R. Rhodes, III reported thatthe Association did not fair well in thelast legislative session. Specifically, allfour proposed uniform bills did not getpassed. The Association's replevinbill, attorney ad litem expenses forindigents bill, juvenile bill, and pro­posed constitutional amendment for afour-year term for executive officers,all failed to get passed.

Herman Hamilton reported that theArkansas Supreme Court denied theAssociation's petition asking the Courtto adopt a program establishing andgoverning interest on lawyer's trustaccounts. The House directed theCommittee on Interest on Lawyer'sTrust Accounts to proceed with theapplication to the ABA for grant moneyto finance an educational campaign onthe validity of an IOLTA plan, andauthorized the expenditure of$1,500.00 as a matching fund for thegrant.

Clay Patty reported on the ArkansasInstitute of Continuing Legal Educa­tion. The number of CLE programsgrew from 11 to 16 during the pastyear and attendance grew from 1,678to 1,900 registrations. However,based upon a review of all the registra­tions, it appears that between 700 and900 individuals attend CLE events outof a total Association membership of3,000. Attendance at regional pro­144/Arkansas Lawyer/October 1983

grams was lower this year than inprevious years. Mr. Patty reviewed theroster of seminars presented duringthe past year, including the Associa­tion Section sponsoring each seminar.Finally, Mr. Patty noted that.. to theextent there may be a CLE require­ment with the advent of specialization,the Association has the organizationand means to adequately promoteCLE programming.

Mr. William S. Arnold, Chairman ofthe Arkansas Statute Revision Com­mittee, reported that the ArkansasLegislature passed bills in the lastsession which expand the authority ofthe Statute Revision Commission andprovide funding whereby that Com­mission can employ an executive di­rector. The objective of the Commis­sion will be to prepare a computerizedindex of the statutory laws of the Stateof Arkansas within two years.

John P. Gill reported on the work ofhis committee in developing proposedrules of the Supreme Court regulatingthe professional conduct of attorneys.The House passed a motion authoriz­ing the filing of a petition with theArkansas Supreme Court, includingthe payrnent of filing fee, for the adop­tion of the committee's proposed rulesof the Arkansas Supreme Court reg­ulating professional conduct of attor­neys at law. One of the rules providesthat the disciplinary hearing will beconducted in private and that, if disci­pline is awarded, the results of thediscipline and the record of the disci­plinary proceedings will be made pub­lic. There was a lengthy discussionregarding this provision of the pro­posed rules.

The House of Delegates voted infavor of a resolution endorsing theenactment of additional bankruptcy

judges who are qualified to exercisethe federal judicial power under ArticieIII of the Constitution of the UnitedStates. The House also voted to adopta resolution favoring minimum com­pensation to attorneys for services toindigent people involved in the crimi­nal system, and to adopt a resolutionthat law professors who have taughtlaw in an accredited school for threeyears be admitted on motion to thepractice of law in the State of Arkan­sas.

Richard F. Hatfield, Chairman of theSupreme Court Committee onSpecialization, reported that a noticewill be published in the Arkansas Ad­vance Sheets for those persons oror9anizations interested in applyingfor a specialty to present proposals.

The House of Delegates approvedthe appropriation of $60,000.00 for theacquisition of a computer system,hardware and related other expensesnecessary to the installation of a sys­tem. The House also voted to enterinto a contract with UALR to providethe UALR Law Journal to eachmember of the Association, just aseach member is entitled to a copy ofthe Arkansas Law Review.

The Section of Taxation and EstatePlanning will now be called the Sec­tion of Taxation and the Probate LawSection will now be called the Sectionon Probate and Trust Law. TheEconomics of Law Practice Commit­tee was accorded Section status witha proposed $10 membership fee.

Two proposals relating to the As­sociation's group plan of rnajor medi­cal insurance and group disability in­surance were approved by the House.

The House voted to adopt the fol­lowing amendments to the Associa­

continued on page 177

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October 1983/Arkansas Lawyer/145

YOUNG LAWYERS'UPDATE

by Carl A. Crow, Jr.YLS Chairman

YLS By-Laws RevisedThe Young Lawyers Section

adopted significant revisions to its by­laws during the annual meeting in HotSprings June 9. The changes are de­signed to encourage more participa­tion in section activities and to in­crease opportunities for service.

The new by-laws expand sectionmembership to include not only as­sociation members under the age of36, but also all those who have beenadmitted to practice five years or less.

The revisions also provide for elec­tion of the Chair-Elect during the an­nual meeting on a bar district rotationbasis, beginning in 1984 with theSouthern District, followed in order bythe Central, Northeast and NorthwestDistricts. A candidate must haveserved on the YLS Executive Commit­tee or as a committee chair and mustbe nominated by a petition signed byfive members of the candidate's bardistrict, to be submitted prior to theannual meeting.

These revisions assure broad geo­graphical representation in YLS activi­ties and continued effective leader­ship, which are essential to maintain­ing the YLS' highly successful publicservice programs while providing theresources necessary to increase ser­vices to YLS members. This is thesection's principal goal for 1983-84.

Evidence and Trial TacticsIn Cancun, Mexico

Cancun, Mexico, was the site of aseminar on evidence and trial tacticssponsored by the Young Lawyers Sec­tion July 18-21. Featured were IrvingYounger tapes on hearsay, trial evi­dence and trial techniques, togetherwith panel discussions. The seminarwas very successful, due largely to theefforts of Phillip Raley and Rick Ram­say of Pine Bluff and Frank Elcan of146/Arkansas Lawyer/October 1983

Harrison and the assistance of theUniversity of Arkansas at FayettevilleLaw School, which provided the videotapes. Participants included both YLSmembers and other members of theAssociation. The section plans tosponsor more such educational oppor­tunities in attractive locations in thefuture.

Officers, Executive Council AndCommittee Chairmen Named

Martha McCaskill of Little Rock waselected Chair-Elect and Rick Ramsaywas elected Secretary-Treasurer ofthe section at the annual meeting.They will also serve as Chair and ViceChair, respectively, of the YLS LongRange Planning Committee, whichassures continuity of leadership withinthe section.

Members of the YLS ExecutiveCouncil for 1983-84 are: Southern Dis­trict, Phillip Raley (1984) and PatrickBurrow of Pine Bluff (1985); CentralDistrict, Kaye Oberlag of Little Rock(1984) and Ann Henderson of NorthLittle Rock (1985); Northwest District,Morse Gist (1984) and Mike Crawford(1985), both of Hot Springs; andNortheast District, Jesse (Rusty) Por­ter of West Helena (1984) and JohnFogleman of West Memphis (1985).The Executive Council is the represen­tative body of the section and meets atleast quarterly to consider matters ofpolicy concerning the YLS.

Among the YLS committee chairsand vice chairs appointed for 1983-84are the following: Economics of LawPractice, Kaye Oberlag, Chair; ProBono, Rick Ramsay, Chair, and WalterPaulson of Little Rock, Vice Chair;Legal Services to the Elderly, BryanTilley of Heber Springs, Chair, andBob Depper of EI Dorado, Vice Chair,and Senior Citizens Handbook Revi­sion Subcommittee, Lucky Crumpler

of EI Dorado, Chair; National LawWeek, Marcie Hearnsberger of HotSprings, Chair, and Tom Ray of LittleRock, Vice Chair; Practice SkillsSeminar, Bob Lambert of Springdale,Chair, and Elizabeth Robben of LittleRock, Vice Chair; Swearing-In Cere­monies, Bob Ridgeway, Jr., of HotSprings, Chair, and Sammye Taylor ofLittle Rock, Vice Chair; Disaster Re­lief, John Moore of Mountain Home,Chair, and Jim Burton of Jonesboro,Vice Chair; Ways of the Law (LawExplorers), Jesse (Rusty) Porter,Chair, and Mike Crawford, Vice Chair;and Hot Springs CLE Meeting, MorseGist, Chair.

In addition, potential projects arebeing studied by ad hoc groupschaired by Sam Perroni of Little Rock(criminal defense handbook), SamJones of Little Rock (federal practice),and Jim Crouch of Springdale Uuryinstructions).

Executive Council Meeting,September 9

The YLS Executive Council willmeet September 9 at 8:30 a.m. inconjunction with the Fall Legal Insti­tute at the Fayetteville Hilton. Commit­tee chairs will report and other mattersregarding YLS projects will be consi­dered. You are encouraged to attendand participate.

Opportunities For ServiceIf you are interested in YLS projects,

you can participate immediately bynotifying me or Judith Gray at theArkansas Bar Center. YLS activitiesare expanding rapidly and there areoutstanding opportunities for service.The chance to join with other younglawyers in rewarding bar activities isyours for the asking, and I encourageyou to do so. f.......

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LAW SCHOOL NEWS

Dean J. W. LooneyDean Lawrence H. Averill, Jr.

SCHOOLOFLAW, UNIVERSITYOFARKANSASATLITILE ROCK

Report To TheArkansas LawyerSpecial Remarks

As my first year as Dean has cometo an end and I begin the second year,I thought it would be appropriate to bethe author of the Report from the LawSchool. It has been an exciting andchallenging year for me.

I want to express my sincere appre­ciation to the many people who are apart of the Arkansas Bar Associationfor their outstanding assistance andsupport during this last year. Clearly,the Bar support is one of the pluses forthe law schools in Arkansas, and Iwant to compliment all those involvedfor their efforts. I especially want toexpress my appreciation to ColonelRansick for his kindness and assis­tance during this year. I wish him wellin his retirement and hope that he willbe able to remain active in Bar Asso­ciation work.

It is also appropriate to express myappreciation to Ellen Brantley who hasserved so outstandingly as Assistantand Associate Dean of the LawSchool. At her request, Ellen, after fiveyears of service in this capacity, re­turns to a full time teaching positionwithout administrative responsibilities.Ellen has performed in an excellentmanner and I know the Law School isgoing to miss her wise administration.

Fortunately, an excellent replace­ment has been found. Associate Pro­fessor John M. Sheffey has been ap­pointed Associate Dean. John willcarry on, I am sure, in the same highlevel manner that his predecessorEllen Brantley did.

Justice Rehnquist To BeAltheimer Lecturer

Justice William Rehnquist of theUnited States Supreme Court will give148/Arkansas Lawyer/October 1983

the fall 1983 Ben J. Altheimer Lecture.Justice Rehnquist was appointed tothe Supreme Court by President Nixonin 1971. Prior to his appointment, hepracticed law in Arizona and served asan Assistant Attorney Generai of theUnited States. Justice Rehnquist re­ceived B.A., MA, and LL.B. degreesfrom Stanford University. The lecturewill be given on Friday, September 23.All members of the Association willreceive an invitation to attend the lec­ture and a reception to be held fol­lowing.

CommencementThe School of Law conferred de­

grees on 102 students at Com­mencement ceremonies on Sunday,May 15. Degree candidates were pre­sented their J.D. hoods by Dean Law­rence H. Averill, Jr., at a law schoolconvocation Sunday morning. FormerDean Robert K. Walsh addressed thegraduates and their families at thisceremony. Degrees were awarded byPresident James Martin and Chancel­lor James H. Young at UALR's Com­mencement Sunday afternoon.

Law WeekLaw Week activities at the School of

Law began with a softball game andpicnic on Saturday, April 2. During theweek of April 2-9, members of theStudent Bar Association visited localelementary schools and conductedmock trials. Luncheon speakers at thelaw school included Douglas Buford ofWright, Lindsey, and Jennings, whospoke on interviewing and SheriffTommy Robinson who discussed thepenal system. On Friday, April 8, apanel of attorneys from around thestate participated in a program on"Law Practice Far From the CivilizingInfluence of Central Arkansas." Par­ticipants were Kandy Webb of Harri­son, Raymond Abramson of Holiy

Grove, Tom Russell of Paragould, andTom Wynne of Fordyce. The programwas sponsored by the Young LawyersSection of the Arkansas Bar Associa­tion. Mike Crawford of Hot Springs,Chairman of the YLS Law StudentLiaison Committee, organized theprogram.

Walsh PortraitA portrait of former Dean Robert K.

Walsh was formally presented to theLaw School on Friday; April 29. Thepresentation was made by ProfessorD. Fenton Adams who served as Act­ing Dean in 1981-82 and the portrait,which was painted by Vena McAnnichof Little Rock, will hang in the LawSchool's courtroom. The portrait wasgiven to the school by friends andcolleagues of former Dean Walsh.

The unveiling took place at thehome of Sheffield and Mary Lynn Nel­son, who were hosts for a party forLaw School Alumni and friends follow­ing the presentation of the portrait. Mr.Nelson is a graduate of the Little RockDivision of the University of ArkansasSchool of Law and former president ofthe UALR Law School Association.

Alumni Meet At Hot SpringsThe annual meeting of the UALR

Law School Association was held inconjunction with the annual meeting ofthe Arkansas Bar Association in HotSprings on Thursday, June 9. Afterbreakfast, alumni heard reports fromthe outgoing president, Mike Beardenand Dean Lawrence H. Averill, Jr. Amovie, "The Law School That TimeForgot," which was produced by lawstudent Jeff Hogue of Weiner gavealumni a look at the school throughstudent eyes. Officers for 1983-84 areDianne Mackey, President; HermannIvester, President-Elect; Mary DaviesScott, Vice President; James Spears,Secretary; and Clay Patty, Treasurer.

Faculty NewsAssociate Professor Ellen Brantley

has been named to the Civil ServiceCommission of the City of Little Rock.Professor Brantley attended a confer­ence on the Recruitment and Reten­tion of Minority Students in SI. Louison April 26 and 27. On May 16 shespoke on Pitfalls to Avoid in FederalPractice at a Seminar on FederalPractice for Newly Admitted Attorneyssponsored by the Arkansas Institute ofContinuing Legal Education and theArkansas Association of WomenLawyers.

Associate Professor O. Fred Harris,Jr., spoke to a class of gifted and

talented students at Rose City JuniorHigh School on Friday, May 13. Histopic was "Civil Rights Under the U.S.Constitution of Students."

Assistant Dean Claibourne W.Patty, Jr., lectured at the 1983 TrustSchool sponsored by the ArkansasBankers Association at the Universityof Central Arkansas. His topics were"History of Trusts" and "Trust Ter­minology." Dean Patty spoke to thelawyers admitted to the bar on April 18at an orientation program sponsoredby the Young Lawyers Section of theArkansas Bar Association. He discus­sed continuing legal education in Ar­kansas. Dean Patty addressed the

Texarkana Bar Association. He talkedabout continuing legal education inArkansas and developments at thelaw school. Dean Patty's work with theArkansas Institute of Continuing LegalEducation is discussed in his separatearticle in this issue.

Professor Glenn Pasvogel hascompleted the update of the Debtor­Creditor System. The Update will bethe subject of the Fall Legal Institute,September 8-19, 1983, at the Fayette­ville Hilton.

Associate Dean Sheffey attendedthe Annual Convention of the NationalAssociation of Law Placement in SanAntonio on April 16-19.

SCHOOL OF LAW, UNIVERSITY OF ARKANSAS, FAYETIEVILLEGraduation News

Joe C. BarrettCommercial Law Award

Scott Ransick was selected as therecipient of the Joe C. Barrett Com­mercial Law Award in recognition ofhis accomplishments in commerciallaw. This award is sponsored by abequest in the will of Mr. Barrett to theArkansas Bar Foundation.

Craig Stearne AwardIn Estate Planning

And TaxationPati Hoffmann was selected as the

recipient of the Craig Stearne Award inrecognition of her accomplishments intaxation and estate planning courses.

Outstanding GraduatesJames W. Cherry, Jr., Richard Tim­

othy Donovan, Robert M. Honea,Michael F. Lax, Danny P. Richey andGary N. Speed were recognized ashonor graduates. Pati L. Hoffmann,James Leon Holmes, Bobby G. Pryor,and Scott E. Ransick were recognizedas high honor graduates.

FaCUlty ArticlesProfessor Joan Hartman's article

"Racial Vote Diiution and Separationof Powers: An Exploration of the Con­flict Between the Judicial 'Intent' andthe Legislative 'Results' Standards"appeared in the George WashingtonLaw Review.

Dr. Robert A. Leflar's article "Qualityin Judicial Opinions" appears in theSpring issue of the Pace Law Review.

Lonnie Beard and Jake Looneyhave an article in Trusts and Es­tates entitled "Retirement Planning forFarmers." LL.M. graduate Karin Littie-

john of Winston-Salem, NC, and JakeLooney have an article in the Journalof Taxation entitled "Handling theSpecial Tax Treatments for Fishermanand Fish Farmers." Jake Looney alsohas an article in Law Notes for theGeneral Practitioner, "Farmers andthe Law; A Survey of Exemptions andExceptions. "

Howard Brill's article "The Citizen'sAction Against Inactive Federal Offi­cials" has been accepted for publica­tion by the Akron Law Review.

FaCUlty ActivitiesCharles Carnes taught during the

summer at the Judge Advocate Gen­eral's School, Charlottesville, VA andprepared a chapter for a teachingmanual on "Grievance and Arbitrationin the Federal Sector".

Mort Gitelman was recipient of the"Civil Libertarian of the Year" awardfor 1983 from the A.C.L.U. of Arkan­sas.

Joan Duc. Chapman was selectedas a member of the People-to-PeopleInternational Mental Health Delegationwhich visited six European cities todiscuss mental health law subjectswith European academic and govern­ment specialists.

Carlton Bailey was selected as"Professor of the Year" by the StudentBar Association in recognition of hissignificant contributions in the lawschool's teaching program.

Phil Norvell taught at Baylor LawSchool during the first summer ses­sion.

Wylie Davis taught at Texas Techduring the first summer session.

Robert Laurence taught at theAmerican Indian Law Center in NewMexico during the summer term.

Robert B. Leflar spoke to the Arkan­sas Public Health Association in HotSprings. He helped plan and organizethe CLE program on Health Lawsponsored by the Health Law Commit­tee of the Arkansas Bar and is servingas co-chairman of the planning com­mittee for the 1984 mid-year bar meet­ing.

Ellen Liebman spent the summer atthe University of Chicago School ofLaw conducting research on twoconstitutional law projects.

New FacultySix new faCUlty members have

joined the law school commencing inthe fall. Chauncey Brummer, who vis­ited at the law school during 1982-83will remain as a permanent facultymember to teach Torts, Juvenile Lawand Domestic Relations. LonnieBeard, who visited during the springsemester of last year has accepted apermanent position to teach taxcourses both in the J.D. curriculumand in the LL.M. program. LindaMalone, who is completing an LL.M. atthe University of Illinois will teachEnvironmental Law and InternationalLaw in the J.D. curriculum andcourses in the LL.M. program. RodneySmolla, previously on the faculty at theUniversity of Illinois will teach Consti­tutional Law, Torts and Jurisprudence.John Watkins previously at Baylor, willteach Civil Procedure, AdministrativeLaw and Mass Communications Law.Don Pedersen, previously at CapitalUniversity, has assumed duties as thenew Director of the Graduate Programin Agricultural Law. _

t--

October 1983/Arkansas Lawyer/149

..............1111 JURIS DICTUM

by Robert L. LoweryExecutive Secretary, Judicial Department

UNIFORM COURT COSTS: SOME ARE, SOME AREN'TThe issue of court costs seems to

arise at every session of the GeneralAssembly. While there is some degreeof uniformity for general jurisdictioncourt costs, the limited jurisdictioncourts are not as fortunate.

Eighteen (18) Acts of 1983 apply tocosts in municipal courts. These are inaddition to those already in effect forpurposes such as the state police re­tirement fund, the legal educationfund, the municipal judges and clerksretirement fund, the purchase andmaintenance of alcohol testing de­vices, the prosecuting attorney fees,the city attorney fees, the small claimscourts and the criminal justice funds.

The 1983 Acts provide for costsran9in9 from $.25 to $250.00 for suchmatters as county jail revenue bondfunds, counsel for indigents beingcriminally committed, judicial retire­ment benefits, deputy prosecuting at­torney salary and expenses, prosecut­ing attorney fees, services to victims ofcrimes and to witnesses of crimes,public defenders, statute revisionfund, jail renovation and expansion,administration of justice, and highwaysafety special funds.

may request the quorum court of hiscounty to provide an additionalemployee for his office to be known asthe "victim of crimes case coor­dinator." The salary will be determinedby the quorum court. This position willbe in addition to any other positionavailable by the office of the prosecut­ing attorney. The quorum court mayprovide for an additional cost, not toexceed $5.00, upon each case filed inall courts in the county for the purposeof defraying the expenses of this posi­tion.

An example of Acts limited is thatthey apply to named counties in Act335 of 1983, providing that the Nine­West Judicial District (counties ofHoward, Little River and Sevier) may,by quorum court ordinance. levy a$10.00 cost on each criminal actionand traffic violation filed in any courtwithin the county. The proceeds are tobe used to help defray the salary andexpenses of the deputy prosecutingattorney within the county.

Other acts referring to specific coun­ties or judicial districts are Act 299 of

1983 (Third Judicial District consistingof Jackson, Lawrence, Randolph, andSharp Counties and Sixteenth JudicialDistrict consisting of Cleburne, Fulton,Independence, Izard and Stone Coun­ties); Act 485 of 1983 (Fifth JudicialDistrict consisting of Franklin, Johnsonand Pope Counties); Act 610 of 1983(Sixth Judicial District consisting ofPerry and Pulaski Counties); and Act803 of 1983 (Craighead County Munic­ipal Court).

The Legislative Council, through ajoint interim committee, is presentlystudying the issue of court costs andtheir lack of uniformity under a resolu­tion adopted during the regular ses­sion.

The Judicial Department is survey­ing the counties to determine the costswhich have been enacted at the locallevel. This will enable us to have acurrent list of court costs in each juris­diction. f.......

Most of these eighteen acts areeither permissive in that they permitquorum courts to levy the costs orlimited in that they appiy to certainnamed counties or to certain countiesby population.

An example of the permissive actsis Act 226 of 1983 providing for thelevy by quorum courts of a court costnot to exceed $10.00 per convictionfor felonies and misdemeanors. Thiscost is to be used for the "County JailRevenue Bond Fund." Act 526 of 1983provides that any prosecuting attorney

150/Arkansas Lawyer/October 1983

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October 1983/Arkansas Lawyer/151

By John B. Peace

TAX-SAVINGOPPORTUNITIES IN

THE PURCHASEOR SALE OF

A CORPORATEBUSINESS

You have a unique opportunity tostructure the sale of a corporate busi­ness to give your client-whether thebuyer or the seller-the maximum taxbenefit. Here are some of the alterna­tive planning techniques and the re­sulting tax consequences.

In the sale of a corporate business,form often prevails over substance.Therefore, practitioners have greatflexibility in choosing the form oftransaction that provides the greatestadvantage to their clients-but only ifthey are thoroughly familiar with all ofthe alternatives and know which partywill benefit most under each.

This article will explore the variousalternatives and their tax conse­quences, first from the seller'sstandpoint and then from the buyer's.Although a corporate business can besold in either a taxable or a tax-freetransaction, we will concentrate ontaxable sales.

Stock Or AssetsThe initial question in planning the

sale of a corporate business iswhether the transaction is to be a saleof stock or a sale of assets.

The Seller's StandpointFrom the seller's standpoint, there

152/Arkansas LawyerlOctober 1983

are certain advantages to a sale ofstock:

1. The transaction is simpler. The par­ties usually enter into a stock pur­chase agreement, with the sellersimply transferring the stock certifi­cates to the buyer at the closing.

2. The tax considerations and thecomputation of gain or loss are alsosimpler. The recognized gain orloss normally is the difference be­tween the selling price and the seI­ler's adjusted basis for the stock(normally cost).

3. Gain is generally taxed as capitalgain.

4. There is no expense in liquidatingthe corporation, since only thestock is sold.

5. The seller is relieved of the corpo­ration's contingent liabilities (un­less he agrees to indemnify thebuyer).

6. Since the corporate entity remainsintact, there is no recapture ofdepreciation or investment taxcredit (with certain exceptions forSUbchapter S corporations discus­sed below).

7. A sale of assets generally requiresshareholder approval and may en­tail appraisal rights of dissentingshareholders. '

8. A sale of assets is generally a morecomplicated transaction, requiringan appraisal of assets, allocation ofthe purchase price to each asset,compliance with the state's bulksales law, possible recapture prob­lems and more paperwork. All ofthis results in increased legal andaccounting fees.

9. On the sale of assets followed by aliquidation, the seller may face adouble tax, one at the corporate

level when the assets are sold andanother at the shareholder levelwhen the corporation is liquidated.However, Section 337 can alleviatemuch of this problem, as we willsee.

The Buyer's StandpointFrom the buyer's point of view,

there are certain advantages to apurchase of assets:1. The purchase price of the assets

becomes the basis for deprecia­tion, which generally is higher thanthe corporation's basis.

2. The investment tax credit applies tothe used tangible personal propertypurchased, up to a maximumpurchase price of $125,000($150,000 for taxable years begin­ning after 1984).'

3. New Section 179 can be used toexpense (in lieu of ACRS) up to$5,000 of qualifying capital expen­ditures in 1982 and 1983, $7,500 in1984 and 1985, and $10,000 after1985.

4. There is no carryover of the oldcorporation's unfavorable tax attri­butes (e.g., earnings and profits,accounting methods, taxable year,etc.).

5. There is no responsibility for con­tingent liabilities of the corporation.

Notwithstanding a buyer's generalpreference for a purchase of assets,there are certain circumstances inwhich a buyer might prefer to pur­chase stock:1. Where there is a carryover of

favorable tax attributes, such asnet operating losses and invest­ment tax credit carryovers, whichthe buyer can utilize.

2. Where there are certain non-tax

attributes, such as nonassignablepatents or contract rights, whichthe buyer may want.

If the only viable method is a pur­chase of stock, some of the tax disad­vantages to the buyer can be al­leviated by using Section 338 to obtaina stepped-up basis in the assets toreflect the cost of the stock purchased.We will discuss this in greater detaillater.

Weighing the FactorsThe weight which each party places

on the above factors will vary witheach transaction. One factor often isso important as to sway the decision.However, in most cases, several or allof the factors will influence both thestock-or-assets decision and thenegotiated price. Now that we haveoutlined the basic factors, let's look atsome of them in greater detail to seehow to advise our clients about them.

Advising The SelJerWhile sellers normally opt for a sale

of stock to get long-term capital gain,'ordinary income will result if the cor­poration is collapsible.' In addition,any portion of the sales price allocatedto a covenant-not-to-compete or to aconsulting agreement will be taxed asordinary income' (and is deductible bythe buyer). From a negotiating stand­point, then, the seller should try tominimize the portion of the sales priceallocated to a covenant-not-to-com­pete or to a consulting agreement.

If assets are being sold, the partiesgenerally will want to allocate thepurchase price to each specific asset.The seller should seek the lowest pos­sible allocation to assets that, whensold, will generate ordinary income or

recapture of depreciation or invest­ment credit.

EXAMPLE: A corporation will sellall its assets (basis $225,000) for$500,000. The corporation is notgoing to be liquidated under Sec­tion 337. Exhibit 1 shows the ad­justed basis of the corporation's as­sets and the tax results of two dif­ferent purchase allocations-onewith goodwill and the other without.As can be seen, the allocation withgoodwill favors the seller (and theallocation without goodwill favorsthe buyer).

With goodwill, the seller is able toallocate $100,000 to capital assetsthat would otherwise go toordinary-income assets, thus limit­ing the tax on this $100,000 to thealternative corporate tax rate of28%.' (This leaves the buyer with alower basis for the ordinary-incomeassets, Le., accounts receivable,inventory and depreciable equip­ment, and a higher basis for non­depreciable goodwill.)While it may seem strange that the

IRS allows the parties such wide flexi­bility in allocating the purchase price,these allocations will usually be ac­cepted since they are determined inarm's-length negotiations by partieswith adverse interests. "Strong proof"is generally necessary to overcomethe negotiated allocations between theparties.' Therefore, it is extremely im­portant in a sale of assets for theallocation agreement to be written.

Liquidation Under Section 337When planning a sale of assets, the

seller must decide whether to liquidatethe corporation after the sale. Sinceshareholders usually want the sales

proceeds, most corporations will beliquidated. By using Section 337,these corporations can sell their as­sets and not recognize gain or loss atthe corporate level, with certain excep­tions. The principal tax occurs at theshareholder level, and normally is atthe more favorable capital gainsrates.'

To qualify under Section 337, thecorporation must adopt a plan of com­plete liquidation before the actual saleof assets and distribute to its share­holders all of its assets, less thoseretained to meet claims against thecorporation, within 12 months afteradoption of the plan.' However, Sec­tion 337 will not always eliminate theentire tax at the corporate level. Salesof the following types of assets willresult in ordinary income (or loss) tothe corporation:1. Inventory, unless substantially all

the inventory is sold in bulk to asingle purchaser in a single trans­action. lo

2. Installment obligations attributableto sales of property before the planof liquidation was adopted orattributable to non-bulk sales of in­ventory during the 12 months fol­lowing adoption of the plan."

3. Accounts receivable on whichthere is a reserve for doubtful ac­counts, to the extent that the fairmarket value of the receivables ex­ceeds their face amount less thereserve (assuming additions to thereserve resulted in tax benefits inprior years)."

4. Depreciable assets, which are sub­ject to depreciation recapture" andinvestment credit recapture."

5. Expensed items, such as supplies,continued on page 154

John B. Peace, J.D., CPA, is a partner in the Little Rock law firm of Overbey,Peace, McClain and Yancey, and a member of the Arkansas Bar Association'sSection on Taxation. He has had many articles on taxation published in variousprofessional publications. This article is reprinted with permission from ThePractical Accountant, January 1983.

October 1983/Arkansas Lawyer/153

By using Section 337, Jones hassaved $15,000 in tax ($92,500 less$77,500).

Advising The BuyerAs we have discussed, most buyers

prefer to purchase assets rather thanstock since they can choose exactlythe assets they want, obtain both ahigher basis and the investment taxcredit, and minimize the possibility ofinheriting any contingent or unknownliabilities. However, in many cases, apurchase of stock is necessary. Wewill look at some of the ways in whichthe disadvantages of a stock purchasecan be alleviated.

and makes no allocation to good­will. Jones, the sole shareholder, isin the 50% tax bracket and has anadjusted basis of $225,000 in hisstock. The corporation is to beliquidated immediately following thesale.

Without Section 337, the corpora­tion's gain would flow through toJones and he would pay a tax of$92,500 ($125,000 x 50% plus$150,000 x 20%). Jones would notrecognize any gain from the liquida­tion, since the basis in his stock isincreased by the $275,000 gainpassed through from the corpora­tion, giving him a basis of $500,000.

If Section 337 is used, the cor­poration would be subject to taxonly on $75,000 ($50,000 of depre­ciation recapture on the equipmentand the $25,000 gain on the sale ofexpensed supplies). Because of theSub S election this all passesthrough to Jones, and his tax is asfollows:

Tax Saving. ..continued from page 153

small tools, etc., which probablywill have to be restored to incomeunder the tax benefit theory."

Where installment notes arisingfrom the sale of corporate assets dur­ing the 12-month period are dis­tributed to the shareholder, theshareholder is taxed on the paymentsreceived under the note, and not onthe receipt of the note itself."

EXAMPLE: Smith, the sole share­holder of a corporation, has a$10,000 basis in his stock. Thecorporation adopts a 12-month planof liquidation under Section 337and sells all of its assets for$10,000 cash plus a $90,000 ten­year installment note (the first in­stallment being due after the calen­dar year of sale). Within the 12months, the corporation liquidatesand distributes to Smith the$10,000 cash and the note. Smithwill report $9,000 (90% x $10,000)gain in the year of sale and 90% ofeach principal payment will consti­tute taxable capital gain.

"There are several advantagesto an individual using a

corporation to acquire stock."

Retaining the Corporate EntityThe decision to liquidate a corpora­

tion and distribute all of its assets toshareholders should not be automatic.There are situations in which the seI­ling corporation should be maintainedas a private investment vehicle for taxreasons. For example, when a cor­poration has a relatively high basis forits assets (Le., little or no realizedgain) and the shareholders have arelatively low basis for their stock (Le.,subject to a large capital gain tax), itmay be wise not to liquidate thecorporation since liquidation will leavethe shareholders with only the after­tax proceeds to invest. By not liquida­ting, the corporation will have more ofthe proceeds to invest.

The corporation could invest thesales proceeds in listed stocks ofdomestic corporations and take ad­vantage of the 85% dividends re­ceived deduction." (The double taxcost of maintaining a corporation inthis situation should be relativelyinsignificant.) Keep in mind, though,that the passive income will be subjectto the personal holding company tax"154/Arkansas Lawyer/October 1983

(i.e., a 50% surtax on undistributedpersonal holding company income).However, by distributing all of the PHCincome, the penalty tax may be av­oided.

Alternatively, by investing the salesproceeds in tax-free bonds, the cor­poration would not only avoid incometax, but would be able to accumulatethe funds tax-free without exposureeither to the accumulated earnings taxor to the personal holding companytax.

Where the shareholders are elderly,delaying liquidation of the corporationuntil after their deaths can be desir­able. The stock will acquire astepped-up basis and a liquidation orredemption could be accomplishedwithout any tax to the estate or bene­ficiary. "

Sate of a Sub S CorporationWhen the business being sold is a

SUbchapter S corporation, there arecertain peculiarities and unique oppor­tunities. Whether it is the stock or theassets that are being sold, the indi­vidual shareholders will have to recap­ture any investment tax credit attribut­able to property held less than therequisite period." Otherwise, the taxconsequences turn on whether thesale is one of stock or of assets.

Sale of stock. The tax conse­quences of a sale of stock by a Sub Scorporation are not entirely the sameas for a regular corporation. The basisfor the Sub S seller's stock is not itshistorical purchase price (as it gen­erally is for stock of a regular corpora­tion) because it is adjusted each yearfor distributions and items of incomeand expense." When a corporationhas been under Subchapter S from itsinception, the shareholders' basis fortheir stock should approximate thecorporation's adjusted basis for its as­sets. Thus, the shareholders shouldhave no preference for a sale of stockas compared to a sale of assets.

Sale of assets. When the assetsare being sold, the seller does nothave to be concerned with Section337 if the only gains will be capitalgains and the Sub S election has beenin effect for the three prior years, sinceall capital gains are passed through tothe shareholders." However, whenthe assets being sold are ordinaryincome assets, such as inventory,Section 337 may make a differencesince it may convert some of this ordi­nary income into capital gains.

EXAMPLE: The corporation inExhibit 1 has a valid Sub Selection

Total received uponliquidation

Less: Adjusted basis instock ($225,000 plus$50,000 depreciationrecapture on the equip­ment and $25,000 of ex­pensed supplies)

Total gain on liquidation

Computation of tax:50% of $75,000 (corpo­rate income passedthrough to shareholder)

20% of $200,000 (gainon liquidation)

Total tax

$500,000

300,000

$200,000

$ 37,500

40,000

$ 77,500

\

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liability: Evaluation of re-employment potential after partialor total permanent disability

the subsidiary's taxable income, thusachieving an overall tax benefit for thecontrolled group.Buying A Loss Corporation

While a buyer of assets cannot ob­tain the benefit of a purchased corpo­ration's net operating loss carryover,unless there is a "e" reorganization, abuyer of stock may be able to. Thecarryover can be beneficial wheneither (1) the buyer believes he canmake the business profitable or (2) acorporate buyer will be able to use thepurchased corporation's net operating

continued on page 156

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ing a new corporation borrow thefunds to purchase the stock can gen­erate a tax benefit when repaying theloan. Repayment of the loan withafter-tax dollars is "cheaper" for acorporation than for an individual sincecorporate tax rates are lower. Ofcourse, for this transaction to work, theparent corporation must obtain thefunds to repay the loan. This can bedone by having the subsidiary paydividends tax-free to the parent." Theparent and subsidiary could file con­solidated returns, so the interest onthe loan paid by the parent will offset

Using Corporation To Buy StockWhen a buyer is required to pur­

chase stock, for whatever reason, theuse of an intermediary corporation andan election under Section 338 canalleviate many of the disadvantages."To utilize Section 338, the buyer wouldform a corporation, which would pur­chase the stock and elect within 75days of the purchase to obtain astepped-up basis in its subsidiary'sassets equal to the basis in the sub-

, sidiary's stock.The tax result under a Section 338

election should be approximately theI~ same as if the buying corporation had

purchased the assets directly. It willnot always be identical, however, forthree major reasons (which buyersshould consider when negotiating astock purchase):

1. An election under Section 338 canresult in recapture of depreciationand investment tax credit."

2. It is anticipated that IRS regulationswill provide that the cost basis inthe subsidiary's stock will be allo­cated to the assets not according tothe values negotiated by the par­ties, but according to fair marketvalues (thus, an appraisal may berequired).

3. The tax attributes and tax history ofthe subsidiary are lost" (includingboth net operating loss and in­vestment tax credit carryovers, al­though the subsidiary can probablyobtain the investment tax credit onSection 338 property subject to thedollar limits on acquisition of usedproperty)."

In addition to obtaining a step-up inthe basis of the assets, there are otheradvantages to using a corporation toacquire stock. When an individual is tobuy the business through the pur­chase of stock, the entire purchaseprice will be allocated to his basis inthe stock, and any withdrawals offunds from the acquired corporation

I will be taxable either as dividends orfrom the sale of the stock. However,

\ by forming a corporation to purchasethe stock, the buyer has some flexibil­ity to allocate his contributions to thenew corporation (which will be equalto the purchase price of the stock ofthe corporation being purchased) toeither equity or debt, subject to thedebt-equity regulations" The portionallocated to debt can be recovered bythe individual from the parent corpora­tion as a tax-free return of capital.

If an outside lender is going to fi­nance part of the purchase price, hav-

October 19831Arkansas Lawyer/155

Exhibit 1/Effect of Alternate Allocations on Sale of Assets

Assets Tax Basis

AllocationWithout

Goodwill

Gain or Loss

SectionOrdinary 1231 or AllocationIncome Capital Gain W/Goodwill

Gain or Loss

SectionOrdinary 1231 orIncome Capital Gain

Accounts receivable $ 50,000Inventory 75,000Equipment (net of$50,000 SiL depreciation) 50,000

Land and building(net of $75,000S/L depreciation) 50,000

SuppliesGoodwill

$225,000

RegUlar corporate tax (1982 rates)

Alternative tax (28%)

$ 75,000100,000

100,000

200,00025,000

$500,000

$ 25,000 $ 50,00025,000 75,000

50,000 50,000

$150,000 200,00025,000 25,000 $25,000

100,000

$125,000 $150,000 $500,000 $25,000

$106,750

$ 79,750

$150,000

100,000

$250,000

$106,750

$ 74,000

\

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PROVIDED ATREASONABLE RATES

Tax Saving.continued from page 155

losses to offset future income.For stock sales in taxable years

beginning before July 1, 1984, the losscorporation must continue to carry onits same trade or business or it willlose its net operating loss carry­overs." For taxable years beginningafter June 30, 1984, outright sales of aloss corporation's stock will result in aloss of the NOL carryovers, regardlessof whether the same trade or businessis carried on after the transfer.

Under present law, an acquiringcorporation can get the benefit of thecarryovers only by liquidating or merg­ing with the subsidiary. However, if anelection under Section 338 is made,the net operating losses will be lost."Therefore, the acquiring corporationmust decide whether it is more benefi­cial to have a step-up in basis or thecarryovers. if the step-up in basis ismore important, the Section 338 elec­tion should be made. If the carryoversare more important, the Section 338election should not be made and thesubsidiary should be liquidated ormerged into the parent.

important, the motivations for a boot­strap acqUisition generally are moreeconomic, particularly for buyers whoare cash poor or unable to secureoutside financing. (In the typical boot­strap transaction, the buyer first ac­quires some of the seller's stock andthe acquired corporation then re­deems its remaining stock.)

In structuring a bootstrap acquisi­tion, keep in mind that (1 ) the seller willwant to be assured of capital gaintreatment" and (2) the buyer will wantto be assured that the corporation'spayments to the seller are not con­structive distributions to the buyer.Also, the buyer must be confident thatthe business has long-term value,keeping in mind that the commitment

of earnings to pay the purchase pricemay adversely affect future liquidity.(By using present or future earnings toacquire the business, the buyer actu­ally acquires 100% of an ultimatelysmaller business.) Both parties mustbe careful to structure the purchaseprice and payments at a level that thebusiness can meet. Moreover, the re­demption must comply with state lawsdealing with the use of accumulatedearnings to redeem stOCk."

• • •

The purchase or sale of a corporatebusiness presents a unique opportun­ity for the practitioner to recommend

J

Bootstrap AcquisitionsA purchaser may want to consider a

bootstrap acquisition, with the assetsor earnings of the acquired businessbeing used to finance part or all of thepurchase price. The principal advan­tage is that the seller is paid for thebusiness with corporate after-tax dol­lars rather than individual after-tax dol­lars. Although tax considerations are156/Arkansas Lawyer/October 1983

FOR MORECOMPLETE INFORMATION

CONTACT:

ED DANIEL224-4300

•

the alternatives that will be of greatesttax benefit to his or her client. Ofcourse, each transaction will have itsown peculiarities and problems, butthere are certain basic considerationsin every transaction, e.g., whether theseller should sell stock or assets,whether the corporation should beliquidated or retained after the sale,and whether the buyer should form acorporation to make the purchase.This articie should provide a soundstarting point when a client asks foradvice.

FOOTNOTES

1. The extent of dissenting shareholders' ap­praisal rights depends on state law. see,e.g., Section 80 of the Model BusinessCorporation Act.

2. Section 48(c)(2).3. If the stock is Section 1244 stock, and its

sale results in a loss, up 10 $50,000($100,000 if a joint return is filed) will betreated as ordinary loss rather than capitalloss.

4. section 341.5. Rev. Rul. 69-643.6. Section 1201.7. See. e.g .. Danielson. 44 TC 549 (1965);

vacated and remanded, 67·1 USTC ~19423,

19 AFTR 2d 67-568 (CA-3. 1967); Johnson.TCM 1966-31.

8. An exception to the general rule is wherethe corporation is "collapsible" under Sec­tion 341.

9. Sectk," 337(a).10. Sections 337(b)( 1)(A) and 337 (b)(2).11. Sections 337(b)(1)(B) and 337(b)(2).12. See Rev. Ru/. 57-482; Bird Management,

fnc., 48 TC 586 (1967); Citizens Accep­tance Corp.• 72-2 USTC 9510.29 AFTR2d 72-1441 (DC Del., 1972).

13. Sections 1245 and 1250.14. Section 47.15. See Rev. Rul. 77-67.16. Section 453(h).17. Section 243(a)(.I).18. The personal holding company rules come

into effect if five or fewer individuals ownmore than 50% of the corporation's out·standing stock, at any time during the lasthalf of the year and at least 60% of the

corporation's gross income (after certainadjustments) is personal holding companyincome, as defined by Section 543(a). Per­sonal holding company income generallyincludes dividends, interest and other typesof passive income. See Section 541, et seq.

19. Section 1014.20. Reg. 1.47-4(a)(1) and (2).21. Section 1367.22. Section 1374(c).23. Section 338 was added to the Code by

Section 224 of the Tax Equity and FiscalResponsibility Act of 1982.

24. Sections 47, 1245 and 1250.25. Section 338(a)(2).26. See Section 338(a)(2) and Rev. Ruls.

70-391 and 73-461.27. The proposed regulations under Section

385, which were scheduled to go into effectseveral times (most recently on July 1.1982), have been postponed again.

28. Section 243(a)(3).29. Section 382(a).30. Seclion 338(a)(2).31. See generally, Zenz v. Ouinliven, 54·2

USTC ~ 9445. 45 AFTR 1672 (CA. 6.1954).

32. See e.g., Section 45 of the Model BusinessCorporation Act. ~

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October 1983/Arkansas Lawyer/157

In ,memoriamHe that keepeth the law, happy ;s he.

Proverbs 29:18

EDWARD C. THACKEREdward C. Thacker, aged 88, of Hot

Springs. died April 21. 1983. in a HotSprin9s hosp~al. He had lived andpracticed law in Hot Springs since1934.

He was a graduate of CumberlandUniversity SChool of Law in Lebanon,Tenn., and was a member and pastpresident of the Garland County BarAssociation. He was past state com­mander of the Veterans of ForeignWars, the Masonic Order, SumpterLodge 419 F & AM. the Sahara Tem­ple. Scottish Rite, and a member ofthe National Park Christian Church ofHot Springs.

He is survived by two daughters.Virginia Tisdale of Harrisburg, Pa.•and June Morgan of Stiltwater, Okla.;four sisters. Ella Harmon of Mar­tinsburg. W. Va., Hazel Self. NannieMitz and Pearl Hart. all of Fred­ericksburg, Va.; five grandchildren andsix great-grandchildren.

•••

JAMES F. MILLERJames Franklin Miller. aged 54, of

Fayetteville, Ark.• died June 12. 1983.in a Fayetteville hospital. He was anative of Clarendon.

He was graduated from the Univer­sity of Arkansas w~h a degree in elec­trical engineering and also receivedhis law degree from the University ofArkansas SChool of Law. He was amember of the American and Arkan­sas Bar Associations. The AmericanLegion. the Elks Club. the ArkansasAlumni Association. and was a vete­ran of the Korean War.

Survivors are his wife, MarjorieMaxine Rickert Miller of the home; two

158/Arkansas Lawyer/October 1983

brothers, Kenneth Miller and John Mil­ler, both of Wisner, La.; two sisters.Mrs. Audry Bowman of RollingHeights. Calif.. and Mrs. AlmaReynolds of Springfield, Ore.; andseveral nieces and nephews.

• • •

MAJOR J. VICTOR HARVEYMajor J. Victor Harvey, aged 59, of

2718 DorChester Drive, Uttle Rock.died June 8. 1983. He was retired fromthe U.S. Army.

He was graduated from the Univer­sity of Arkansas SChool of Law andwas employed by the Arkansas Rev­enue Department. He was a memberof the Arkansas Bar Association andthe Retired Officers Association.

Survivors are his wile. Martha JaneSunderland Harvey; two sons, RobertB. Harvey and Christopher Harvey ofWashington, D.C.; a daughter, VictoriaHarvey Page of Arlington, Va.; fourstepdaughters, Mrs. Bobby Minick ofPoteau. Okla.. Sunday Sizelove ofGarland, Tex., Mrs. Chris CatheyKetcher of Tulsa, Okla.. and PamLema of Kirkwood. N.J., his father andstepmother, Mr. and Mrs. J. V. Harveyof Canton, Tex.; a sister, Mary ObaraKega Curtis of North Little Rock and agrandchild.

• • •

ARTHUR S. (TODD) HARRISONFormer Circuit Judge Arthur S.

(Todd) Harrison, aged 62, ofBlytheville, died April 6, 1983. Heserved on the bench 13 years beforehis retirement in 1gao.

Judge Harrison was graduated fromthe Arkansas Law School, was a

World War II veteran and a member ofthe First Presby1erian Church. He wasa member of the Judicial Council ofArkansas and the Arkansas and Mis­sissippi County Bar Associations. Hewas chairman of the board of theMississippi County Union Mission.

He is survived by his wife. LonnieJohnson Harrison; two sons, zal Har­rison of BIy1heville and Capt. Arthur S.Harrison. Jr. of Tucson; twodaughters. LoNell Tumer of Little Rockand Priscilla Harrison of BIy1heville;three brothers. Dr. William V. Harrisonof Folkston, Ga., Dr. Pat E. Harrison ofBrinkley and Judge Max Harrison ofBIy1heville; a sister, Jeanne H. Carterof Little Rock, and a grandchild.

• • •

JOE E. RHODESJudge Joe E. Rhodes, aged 85. of

Beaumont. Texas. formerly of LittleRock, died April 4, 1983. He was aformer circu~ judge for the 6th and17th Judicial Districts.

He was a graduate of TraskwoodHigh SChool and received his law de­gree from Tyler Commercial College inTyler, Texas. Judge Rhodes was acourt reporter and law clerk for thePulaski County Circuit Court beforehis appointment as circuit judge bythen Governor Orval Faubus. ,

He was a 5O-year member of theAlbert Pike Masonic Lodge and theArkansas Bar Association.

Survivors are his wife. Mrs. LuveniaMcGraw Rhodes; a daughter. Mrs.Howard L. Barron of Little Rock; astepson, Lester L. Fulmer of Beau­mont. Texas; a grandchild, three step­children and seven step-great-grand­children.

JUSTICE BRANDEIS

idA II'ade aSSOCiation is an organization fOI"

mulual benefit which substitutes knowledge fOI"

ib'11on.lllce, l'lImO", guess and sllspicion. It tendsto sllbstitute "cscarch and "easoning fOl' gallJ~

bling and pi"HCy, without closing the dool" toad"enlul"C 01' lessening the value of p"ophetic

. "I·casonmg.

"Every man owes part of his time and money tothe profession in which he is engaged."

DANIEL WEBSTER

"There are many objects of great value to manwhich cannot be attained by unconnected indi­viduals, but must be attained, if at all, by associ­ation."

Arkansas Bar Association

EXECUTIVE COUNCILPresident

(862-5523)

Dennis L. Shackleford100 E. Church

EI Dorado, AR 71730

Secretary Treasurer

(371-0808)

.....•............ Annabelle Clinton2200 Worthen Bldg.

lillie Rock, AR 72201

President-Elect

(375-6453)

William R. Wilson, Jr.Box 71

lillie Rock, AR 72203

Chairman, YLS

(321-1200)

........................ Carl A. Crow, Jr.Box 1620

Hot Springs, AR 71901

Immediate Past President

(238-2317)

J. L. (Jim) Shaver, Jr.Box 592

Wynne, AR 72396

Chairman, Executive Council

(887-2601)

James H. McKenzieBox 599

Prescoll, AR 71857

SOUTHERN BAR DISTRICT

Norwood Phillips 1984 EI DoradoW. Kelvin Wyrick ......•........1985 TexarkanaGary Nutter 1986 Texarkana

NORTHWESTERN BAR DISTRICT

Marcia Mcivor 1984 FayettevilleRobert Hornberger 1985 Fort SmithJoe Reed 1986 Springdale

CENTRAL BAR DISTRICT

Robert M. Cearley 1984Kaye S. Oberlag 1985Tom Overbey 1986

Little RockLittle RockLittle Rock

NORTHEASTERN BAR DISTRICT

Tommy Womack 1983Julian Fogleman 1984James A. McLarty 1985

......... Jonesboro....... W. Memphis........... Newport

LIAISON NON-VOTING MEMBERSChairman, LegalEducation Committee .....•........... Don M. Schnipper

123 MarketHot Springs, AR 71901

President, ArkansasBar Foundation .........•••.......... Cyril Hollingsworth

P.O. Box 3363Little Rock, AR 72203

Executive Director

Delegate to AmericanBar Association Herschel H. Friday

2000 First National Bldg.Little Rock, AR 72201

Arkansas JudicialRepresentative .......•............. JUdge Henry M. Britt

Garland Co. CourthouseHot Springs, AR 71901

Executive DirectorAdministrative AssistantPublications AssistantMembership SecretarySection/Committee SecretaryLawyer Referral Service Secretary

160/Arkansas Lawyer/October 1983

STAFFWilliam A. Martin

Judith Gray

Lisa LewisPatricia Newman

Virginia Hardgrave

Arkansas Bar Association400 West Markham

Little Rock, AR 72201(501-375-4605)

HOUSE OF DELEGATESPresident

(862-5523)

Dennis L. Shackleford100 E. Church

EI Dorado, AR 71730

Secretary Treasurer

(371-0808)

................... Annabelle Clinton2200 Worthen Bldg.

Little Rock, AR 72201

President-Elect

(375-6453)

William A. Wilson, Jr.Box 71

Little Rock, AR 72203

Chairman, YLS

(321-1200)

......................... Carl A. Crow, Jr.Box 1620

Hoi Springs, AR 71901

Immediate Past President

(238-2317)

J. L. (Jim) Shaver, Jr.Box 592

Wynne, AR 72396

Chairman, Executive Council

(887-2601)

James H. McKenzieBox 599

Prescott, AR 71857

VOTING MEMBERS

District NO.1 District No. 10 District No. 18 District No. 24R. Gary Nutter George D. Ellis B. Richard Allen Bobby Shepherd6 Slate Line Plaza Box 211 Box 601 215 N. WashingtonTexarkana, AR 75502 Benton, AR 72015 Newport, AR 72112 EI Dorado, AR 71730Term Expires 1985 Term Expires 1986 Term Expires 1986 Term Expires 1986

District NO.2District No. 19

District No. 24Garvin Fitton District No. 11 Michael R. LandersP.O. Box 249 Howard L. Martin A. F. Thompson, III Box 127Harrison, AR 72601 Box 9 P.O. Box 3891 EI Dorado, AR 71730Term Expires 1984 Cabot, AR 72023 Batesville, AR 72501 Term Expires 1984

Term Expires 1984 Term Expires 1985

District NO.3 District No. 25Gary R. Cottrell District No. 20 Martin G. GilbertBox 328 District No. 12

David Osmon Box 8509Van Buren, AR 72956 John D. Eldridge, III

Box 724 Pine Bluff, AR 71611Term Expires 1985 P.O. Box 479

Mt. Home, AR 72653 Term Expires 1984Augusta, AR 72006

Term Expires 1986District No.4 Term Expires 1985 District No. 25David K. Harp Jack McNUlty#1 Main Place District No. 21 Box 7808Russellville, AR 72801 District No. 13 Pine Bluff, AR 71611

David Solomon Beth Gladden CoulsonTerm Expires 1986

215 Cherry Box 186 Term Expires 1986

District NO.5 Helena, AR 72342 Perryville, AR 72126District No. 26

David Maddox Term Expires 1986 Term Expires 1985Troy Henry

520 Church St. 630 S. MainMena, AR 71953 District No, 14 District No. 22 Jonesboro, AR 72401Term Expires 1986 Richard L. Proctor Richard H. Smith Term Expires 1984

Box 468 Box 569District No.6 Wynne, AR 72396 Bentonville, AR 72712 District No. 26Glenn Vasser William B. HowardBox 599

Term Expires 1986 Term Expires 1986Box 1491

Prescott, AR 71857 Jonesboro, AR 72401Term Expires 1984 District No. 15 District No. 22 Term Expires 1985

District NO.7Julian B. Fogleman Sidney H. McCollum

District No. 27Box 1666 Box 447

Paul E. Lindsey W. Memphis, AR 72301 Bentonville, AR 72712 Jim SpearsP.O. Box 777 Term Expires 1984 Term Expires 1985 616 GarrisonCamden, AR 71701 Ft. Smith, AR 72901Term Expires 1984 Term Expires 1984

District No. 16 District No. 23District NO.8 Janet K. Moore Robert Hargraves District No. 27Michael W. Lansberry 401 West Hale 520 Ouachita Ave. P. K. Holmes, IIIBox 571 Osceola, AR 72370 Hot Springs, AR 71901 Box 1626Monticello, AR 71655 Term Expires 1984 Term Expires 1985 Ft. Smith, AR 72902Term Expires 1985 Term Expires 1986

District NO.9 District No. 17 District No. 23 District No. 27Herman Hamilton T. Joe Holifield Robert Ridgeway G. Alan WootenBox 71 Box 754 127 Hawthorne Box 1626Hamburg. AR 71646 Paragould, AR 72450 Hot Springs, AR 71901 Ft. Smith, AR 72902Term Expires 1986 Term Expires 1985 Term Expires 1986 Term Expires 1984

October 1983{Arkansas Lawyer/161

District No. 27Thomas E. Robertson, Jr.615 N. B SI.FI. Smith, AR 72901Term Expires 1985

District No. 26Marcia Mcivor26 E. CenterFayetteville, AR 72701Term Expires 1984

District No. 28Thomas F. ButtBox 135Fayetteville, AR 72702Term Expires 1984

District No. 26James E. CrouchBox 1400Springdale, AR 72764Term Expires 1986

District No. 28David MaloneU of A School of LawFayetteville, AR 72701Term Expires 1985

District No. 29Jack Lessenberry807 W. ThirdLittle Rock, AR 72201Term Expires 1986

District No. 29Martha M. McCaskill1700 First Nail. Bldg.Little Rock, AR 72201Term Expires 1986

District No. 29Frank B. SewallNail. Old Line, LegalLitlle Rock, AR 72201Term Expires 1986

District No. 29James M. Simpson, Jr.2000 First Natl. Bldg.Little Rock, AR 72201Term Expires 1986

District No. 29Robert L. Henry1500 Union Nail. PlazaLittle Rock, AR 72201Term Expires 1986

District No. 29Charles L. Carpenter1405 Main StreetNo. Litlle Rock, AR 72114Term Expires 1984

District No. 29Randy Coleman300 Spring BuildingLittle Rock, AR 72201Term Expires 1984

District No. 29Victor A. Fleming210 Commercial Natl. Bk.Little Rock, AR 72201Term Expires 1984

District No. 29Wm. Russell Meeks1151 First Natl. Bldg.Little Rock, AR 72201Term Expires 1984

District No. 29Kaye S. Oberlag2224C S. MainLittle Rock, AR 72206Term Expires 1984

District No. 29Markham Lester1290 Worthen Bldg.Litlle Rock, AR 72201Term Expires 1985

District No. 29Robert R. Wright400 W. MarkhamLittle Rock, AR 72201Term Expires 1985

District No. 29Jeff Pence319 W. Second, Ste. 30Little Rock, AR 72201Term Expires 1985

District No. 29Thomas M. Carpenter807 W. Third SI.Little Rock, AR 72201Term Expires 1985

District No. 29Thomas B. Staley1550 Tower Bldg.Little Rock, AR 72201Term Expires 1985

District No. 29Gene O'DanielBox 2153Little Rock, AR 72203Term Expires 1985

Law StudentSteve GundersonU of A School of LawFayetteville, AR 72701

NON-VOTING MEMBERSPast Presidents

andTenure Delegates

LeRoy AutreyP.O. Box 960Texarkana, AR 75502

Charles Carpenter1405 Main StreetNo. Little Rock, AR 72114

Robert D. Ross400-300 Spring Bldg.Litlle Rock, AR 72201

William R. Wilson, Jr.P.O. Box 71Little Rock, AR 72203

Cyril Hollingsworth, PresidentArkansas Bar Foundation

Henry M. Britt, MemberArkansas Judicial Council

LIAISON NON-VOTING MEMBERSHerschel H. FridayArkansas Bar Association Delegateto American Bar Association

E. Harley Cox, Jr., ChairmanInstitute of Continuing Legal Education

PAST PRESIDENTS' COMMITTEEPhillip Carroll Little RockA. F. House Little RockTerrell Marshall Little RockJ. L. Shaver WynneJohn A. Fogleman W. MemphisOscar Fendler BlythevilleLouis L. Ramsay, Jr. Pine BluffBruce T. Bullion Little RockMaurice Cathey ParagouldWilliam S. Arnold CrossettJ. Gaston Williamson Little RockRobert L. Jones, Jr. Fort Smith

162/Arkansas Lawyer/October 1983

Chairman1946-491951-521953-541958-591962-631963-641964-651966-671967-681966-691969-70

J. C. DeaconPauiB. YoungHenry WoodsJames WestJames B. SharpRobert C. ComptonHerschel H. FridayWalter R. NiblockWayne BoyceE. Hartey Cox, Jr.James D. CypertJ. L. Shaver, Jr.

JonesboroPine BluffLittle RockFort SmithBrinkleyEI DoradoLittle RockFayettevilleNewportPine BluffSpringdaleWynne

1970-711971-721972-731973-741974-751975-761976-771977-761976-791979-801981-821982-83

.-

SECTION CHAIRPERSONSCriminal Law Section ...••.....•......... Tom Carpenter

807 W. ThirdLittle Rock, AR 72201

Economics of LawPractice Section , ........•........... William D. Haught

2200 Worthen Bank Bldg.Little Rock, AR 72201

Family Law Section Robert M. Cearley, Jr.Box 1510

Little Rock, AR 72203

Labor Law Section ....•.....•.... Jay Thomas YoungdahlBox 6030

Little Rock, AR 72203

Law Student Section .........•......... Steve GundersonU of A School of Law

Fayetteville, AR 72701

Natural ResourcesLaw Section William J. Wynne

308 NBC PlazaEI Dorado, AR 71730

Probate Section • .. . . . . . .. .. Dan StriplingBox 388

Clinton, AR 72031

Real Estate Law Section .,.,.,., ... , .. , .. Gerald Halpern1315 Edgehill Dr.

Fayetteville, AR 72701

SaVings and Loan Section ....•....... " Roy R. Gean, Jr.1st Federal Bldg.

Fort Smith, AR 72901

Taxation, Trust &Estate Planning Section Randall Ishmael

Box 4096Jonesboro, AR 72401

Workers' CompensationSection Ronald Griggs

431 N. WashingtonEI Dorado, AR 71730

Young Lawyers Section Carl A. Crow, Jr.Box 1620

Hot Springs, AR 71901

COMMITTEE CHAIRPERSONS

Agricultural Law Committee , J. W. LooneyAlternatives To Litigation .......••.... ,.,. D. Mac GloverAnnual Meeting ., , , John F. StroudAnti-Trust & TradeRegulations Committee , , •.. , .. , Steve Napper

AUditing Committee , .. , John L. JohnsonAutomobile "No Fault"

Insurance Committee Bobby McDanielAviation Law Committee Stephen M. ReasonerBanking Law Committee , .. , Martin G. GilbertCameras In The Courtroom

Committee Thomas M. CarpenterCivil Procedures , .. Mike HulenConsumer Law " , .. ,., Bill IsaacsConstitutional Reform Committee , .. , Georgia K, ElrodCreditors' Rights Tom S. StreetmanEconomics Of Law Practice , , William D. HaughtEnvironmental Law Charles R. NestrudFederal Legislation

& Procedures .. , , ,.,. E. Charles EichenbaumGroup Insurance , ,., .. , Odell PollardHealth Law Committee .. , ..•......... Michael W. MitchellHouse Committee Charles L. CarpenterInterest On Lawyers'Trust Accounts ..............•..... Herman L. Hamilton

Investment Committee .....•............ James B. SharpJudicial Council Liaison ....•....... Charles L. CarpenterJUdicial Nominations .. " .. " ", John F. StroudJUdiciary Committee " .. , .• , W. Kelvin WyrickCommittee To StudyJudicial Polls ." .... , .......•..... Stephen A. Matthews

Juvenile Justice Standards Marcia McivorLaw School Committee Robert C. ComptonLaw Student Liaison Michael CrawfordLawyers Helping Lawyers Dean R. MorleyLawyer Referral Service ..........•........ Frank Elcan, IICommittee On Legal Services

For The Deaf Kaye S. OberlagLegislative Oversight Jack McNultyLocal Court Rules Ben D. RowlandMalpractice Education Joseph L. BuffaloMaritime Law Gordon S. RatherCommittee On Mentally Disabled Randy PhilhoursPrepaid Legal Services Harold H. Simpson, IIPublic Information Samuel A. PerroniResolutions CommitteeSecond Chair Program Phillip Carroll

Senior Task Force E. Charles EichenbaumSpecialization And Advertising Tim BoeSpecial Planning Tommy WomackState & Federal Securities John S. SeligArkansas Statute Revision William S. ArnoldUniform Law """ .. " Phillip CarrOllVA Orientation Program Joe RossYouth Education Mary Thomason McKinnonLegal Services Committee Martha M. McCaskillJurisprudence & Law Reform Jack A. McNultyLegal Aid Committee G. Alan WootenLegal Education Committee Don M. SchnipperLegislation Commitee Glenn VasserProfessional Ethics & Grievances John P. Gill

October 1983/Arkansas Lawyer/163

Arkansas Bar FoundationOFFICERS

President .........••................. Cyril HollingsworthP.O. Box 3363

(376-4731) Little Rock, AR 72203

Secretary Richard F. HatfieldBox 1170

Searcy, AR 72143

Vice-President Robert L. Jones, IIIBox 2023

(782-7203) Fort Smith, AR 72902

Treasurer Martin G. GilbertBox 8509

(534-5221) Pine Bluff, AR 71611

Executive Secretary ......•............ William A. Martin400 W. Markham

Little Rock, AR 72201

DIRECTORSRichard F. Hatlield .. 1984 SearcyJerry W. Cavaneau 1985 SearcyJames A. McLarty, III 1986 NewportJohn R. Elrod 1984. . .. Siloam SpringsRobert L. Jones, III 1985 Fort SmithRichard H. Wooton 1986 .. . Hot Springs

EX-OFFICIO: Dennis L. Shackleford, President• Arkansas Bar Association

Cyril Hollingsworth 1984 Little RockRobert D. Ross 1985 Little RockJames M. Moody .. 1986 Little RockJames H. McKenzie 1984 ..... . . . . .. PrescottSamuel N. Bird . .. . ... . .. 1985 MonticelloMartin G. Gilbert 1986 Pine Bluff

Randall W. Ishmael, Past-ChairmanArkansas Bar Foundation

COMMITTEE CHAIRPERSONSAwards .Criminal Justice Standards ReviewHouseInvestment Advisory .

.. Cyril HollingsworthJohn A. Fogleman

Charles L. Carpenter. . . .. James B. Sharp

Membership Robert D. CabePublic Awareness Samuel A. PerroniSpecial Projects . John F. Stroud, Jr.Trusts . . . . . . . . . . . . . . . . . . .. William S. Arnold

Arkansas Institute Of ContinuingLegal Education

BOARD OF DIRECTORSDon Schnipper, President 123 Market lawrence Averill(624-1252) Hot Springs, AR 71901 (371-1071)

J. W. Looney U of A School of Law Carl A. Crow, Jr.(575-3706) Fayetleville, AR 72701 (321-1200)

MarVin L. Keiffer McAdams Trust Cyril Hollingsworth(932-1120) Jonesboro, AR 72401 (376-4731)

Dennis L. Shackleford 100 E. Church Robert L. Jones, III(862-5523) EI Dorado, AR 71730 (782-7203)

William R. Wilson, Jr. Box 71 E. Harley Cox, Jr.(375-6453) Little Rock, AR 72203 (534-5221 )

EXECUTIVE DIRECTOR 400 W. Markham EXECUTIVE DIRECTORArkansas Bar Association Little Rock, AR 72201 Claibourne W. Patty

(371-2268)164/Arkansas Lawyer/October 1983

UALR School of LawLittle Rock, AR 72201

Box 1620Hot Springs, AR 71901

Box 3363Little Rock, AR 72203

Box 2023Fort Smith, AR 72902

P.O. Box 8509Pine Bluff, AR 71611

400 W. MarkhamLittle Rock, AR 72201

YOUNG LAWYERS SECTIONEXECUTIVE COUNCIL

Hot SpringsHot Springs

......... W. HelenaW. Memphis

......................... Frank C. Elcan, IIP.O. Box 549

Harrison, AR 72601(741-4646)

NORTHWEST DISTRICT

Morse U. Gist, Jr. . 1984Michael Crawford 1985

NORTHEAST DISTRICT

Jesse E. Porter, Jr 1984John N. Fogleman 1985

Secretary-Treasurer .....•••.....•.... Richard L. RamsayP.O. Box 8509

(534-5221) Pine Bluff, AR 71611

Past Chairman

Pine BluffPine Bluff

. . . .. . .. Little Rock. .. ... N. Little Rock

Chairman Carl A. Crow, Jr.P.O. Box 1620

Hot Springs, AR 71901

Chairman-Elect .....•............... Martha M. McCaskill1700 First Nail. Bldg.

Liille Rock, AR 72201(372-7442)

SOUTHERN DISTRICT

Phillip Raley 1984Patrick A. Burrow 1985

CENTRAL DISTRICT

Kaye S. Oberlag 1984Ann Henderson 1985

(321-1200)

LOCAL BAR ASSOCIATIONS

Bobby McDanielJon R. ColemanR. James Lyons

ARKANSAS ASSOCIATION OF DEFENSE COUNSELPresident Ben CoreVice-President John C. (Jack) DeaconSecretary-Treasurer Robert L. HenryARKANSAS ASSOCIATION OF WOMEN LAWYERSPresident Carolyn B. WitherspoonPresident-Elect Terry PaulsonSecretary Susie PointerTreasurer ,.... Susan McCainARKANSAS COUNTY BAR ASSOCIATIONPresident Russell D. BerryVice-President Malcolm R. SmithSecretary-Treasurer Virgil MoncriefARKANSAS PROSECUTING ATTORNEYSPresident Kim SmithVice-President David KlingerSecretary-Treasurer Ron FieldsASHLEY COUNTY BAR ASSOCIATIONPresident William E. JohnsonVice-President . , Gary M, DraperSecretary-Treasurer , " , Bruce D. SwitzerBAXTER COUNTY BAR ASSOCIATIONPresident David L. OsmonVice'President Norman C. WilberSecretary·Treasurer Phil DixonBENTON COUNTY BAR ASSOCIATIONPresident Stephen P. SawyerVice'President Douglas R. SchrantzSecretary·Treasurer Richard SmithBLYTHEVILLE BAR ASSOCIATIONPresident .. Jeff GardnerVice'President , .. John BradleySecretary·Treasurer Bruce HarlanBOONE COUNTY BAR ASSOCIATIONPresident Frank C. Elcan. IIVice-President Donald J. WestSecretary-Treasurer Fred C. KirkpatrickBRADLEY COUNTY BAR ASSOCIATIONPresident H. Murray ClaycombCARROLL-MADISON COUNTY BAR ASSOCIATIONPresident Russell C. AtchleySecretary-Treasurer , , .. Kent CoxseyCHICOT COUNTY BAR ASSOCIATIONPresident , , , , , .. ,., Jerry MazzantiVice-President , , .. , James W. HaddockSecretary-Treasurer C. S. Dermott

CLARK COUNTY BAR ASSOCIATIONPresident Don P. ChaneySecretary-Treasurer Steven G. BeckCLEBURNE COUNTY BAR ASSOCIATIONPresident David W. HarrodVice-President F. W. JeffcoatSecretary ,............. Patrick GardnerTreasurer , , , ' ... , . , . , .. Earl N. OlmsteadCOLUMBIA COUNTY BAR ASSOCIATIONPresident ., , William T. FinneganVice'President David TalleySecretary-Treasurer Elliott CleggCONWAY COUNTY BAR ASSOCIATIONPresident Nathan GordonSecretary-Treasurer William J. CreeCRAIGHEAD COUNTY BAR ASSOCIATIONPresident .Vice·President .Secretary-Treasurer .CRAWFORD COUNTY BAR ASSOCIATIONPresident . . . . . . . . . . . . . . . . . .. Marril HarrimanVice-President , Bob MarquetteSecretary-Treasurer ,.,., Gary R. CottrellCRITTENDEN COUNTY BAR ASSOCIATIONPresident Michael R. MaytonVice-President James A. Johnson, Jr.Secretary-Treasurer William C. AyresCROSS COUNTY BAR ASSOCIATIONPresident Richard L. ProctorSecretary-Treasurer J. L. Shaver. Jr.FAULKNER COUNTY BAR ASSOCIATIONPresident .... , .... ' , . , . , . , ., William Clay BrazilVice-President ' . , , . , Phil StrattonSecretary-Treasurer Larry GradyW. HAROLD FLOWERS LAW SOCIETYPresident Eugene McKissicVice'President Marion HumphreySecretary Rodney SlaterTreasurer Zimmery Crutcher, Jr.FRANKLIN COUNTY BAR ASSOCIATIONPresident Joe RamosSecretary-Treasurer Jim MaynardGARLAND COUNTY BAR ASSOCIATIONPresident ,............ Michael G. RothmanVice-President , Richard SlagleSecretary-Treasurer Bruce MacPhee

October 1983/Arkansas Lawyer/165

. . . .. Marjorie Kesl

Michael E. Kelly. Kenneth R. Smith

.. Judith C. Bearden

David Maddox.... Bob Keeter

Patricia Tucker

Jimmy S. Featherston. . . . . . . . .. Phillip Clay

Charles Yeargan

Joe N. Peacock. . . . . . . . . . . . . . John Eldridge, III

. . .. Ray A. Waters

PHILLIPS COUNTY BAR ASSOCIATIONPresident . . . .. L. Ashley HigginsVice-President DUlWood W. KingSecretary-Treasurer . Charles P. AllenPIKE COUNTY BAR ASSOCIATIONPresident .Vice-President . .Secretary-Treasurer .....POINSETT COUNTY BAR ASSOCIATIONPresident . L. D. GibsonVice-President Wayne MooneySecretary-Treasurer .. Michael EverettPOLK COUNTY BAR ASSOCIATIONPresident .Vice-President .Secretary-Treasurer . .POPE COUNTY BAR ASSOCIATIONPresident . . . . . . . . John M. BynumVice-President . James R. PateSecretary-Treasurer Ruth TealPULASKI COUNTY BAR ASSOCIATIONPresident Robert K. WalshVice-President H. William AllenSecretary-Treasurer Frank B. SewallST. FRANCIS COUNTY BAR ASSOCIATIONPresident . . . .. Steve RoutonSecretary-Treasurer Brad J. BeaversSALINE COUNTY BAR ASSOCIATIONPresident Greg BrownVice-President . Ray BaxterSecretary Joe HardinTreasurer . Pete LancasterSEBASTIAN COUNTY BAR ASSOCIATIONPresident . . . . . . . . . . . . . . . . . . .. Robert R. CloarVice-President Troy R. DouglasSecretary-Treasurer Joel JohnsonSOUTHEAST ARKANSAS LEGAL INSTITUTEPresident Robert WellenbergerSecretary Billy J. HubbellSOUTHWEST ARKANSAS BAR ASSOCIATIONPresident . . . . . . . . . . . .. Winford L. Dunn, Jr.Vice-President . . . . . . . . James H. Pilkinton, Jr.Secretary-Treasurer Duncan M. CUlpepperTEXARKANA BAR ASSOCIATIONPresident John F. Stroud, Jr.Vice-President Chartes BlielSecretary-Treasurer Robert E. DodsonUNION COUNTY BAR ASSOCIATIONPresident Denver L. ThorntonVice-President Ian VickerySecretary-Treasurer Beverty CarpenterWASHINGTON COUNTY BAR ASSOCIATIONPresident Truman H. SmithVice-President . David S. HerdlingerSecretary-Treasurer Mary Ann GunnWHITE COUNTY BAR ASSOCIATIONPresident . . . . . . . . . .. Chris RaftVice-President Mike MillarSecretary-Treasurer Watson BellWOODRUFF COUNTY BAR ASSOCIATIONPresident ...Vice-PresidentSecretary-Treasurer

GRANT COUNTY BAR ASSOCIATIONPresident . John W. ColeVice-President Joseph W. SwatySecretary-Treasurer . Harold KingGREENE-CLAY COUNTY BAR ASSOCIATIONPresident . . . . . . . . . . .. Joe HolifieldVice-President . Mike ToddSecretary-Treasurer.. . . . . '" Steve HardinHEMPSTEAD COUNTY BAR ASSOCIATIONPresident . James H. Pilkinton, Sr.Vice-President Royce WeisenbergerSecretary-Treasurer Christiana McQueenHOT SPRING COUNTY BAR ASSOCIATIONPresident Fenton StanleyVice-President . David M. GloverSecretary-Treasurer Donald M. SpearsINDEPENDENCE COUNTY BAR ASSOCIATIONPresident Jerry PostVice-President John PurtleSecretary-Treasurer Jay DilbeckJACKSON COUNTY BAR ASSOCIATIONPresident Marvin D. ThaxtonSecretary-Treasurer Max O. BowieJEFFERSON COUNTY BAR ASSOCIATIONPresident . . . . . . . . Martin G. GilbertVice-President . F. Daniel HarrelsonSecretary-Treasurer. .. .. . .. . .. . . . . .... John RushLAWRENCE-RANDOLPH COUNTY BAR ASSOCIATIONPresident . . . . . . . . . . . . . . . . . . . . . Wm. David MullenSecretary-Treasurer .... . .... David ThroeschLEE COUNTY BAR ASSOCIATIONPresident W. H. DaggettVice-President . . . . . . . . . . . . . . .. Carrold E. RayLONOKE COUNTY BAR ASSOCIATIONPresidentMARION COUNTY BAR ASSOCIATIONPresident .Vice-President .Secretary-TreasurerMONROE COUNTY BAR ASSOCIATIONPresident . John W. MartinVice-President . .. James D. SprottSecretary-Treasurer James D. SprottNEVADA COUNTY BAR ASSOCIATIONPresident .... . . . . . . . . . . . . . . . .. A. Glenn VasserVice-President Danny P. RodgersSecretary-Treasurer . James E. FranksNORTH CENTRAL ARKANSAS BAR ASSOCIATIONPresident . . . . . . . . . . . .. Samuel F. BellerVice-President . . . . . . . . . . . . . Larry D. KisseeSecretary-Treasurer Don A. BrownNORTH PULASKI COUNTY BAR ASSOCIATIONPresident . Mackie M. PierceVice-President . . . . . . . . . . . .. Henry OsterlohSecretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Randy MorteyTreasurer ... . . . . . . . . . . . . . . . . Art StuenkelNORTHEAST ARKANSAS BAR ASSOCIATIONPresident . . . . . . . . . . . . . . . . .. Bill E. RossVice-President . . . . . . . .. Harry Truman MooreSecretary-Treasurer. . . " . Chadd DurrettOSCEOLA BAR ASSOCIATIONPresident Chuck BanksVice-President Janet K. MooreSecretary-Treasurer Whit BartonOUACHITA COUNTY BAR ASSOCIATIONPresident Hamilton H. SingletonVice-President . . . . . . . . .. Edwin A. KeatonSecretary-Treasurer. .. . .. .. .. . . V. Benton Rollins

166/Arkansas Lawyer/October 1983

A PRACTICAL

INTRODUCTION TOINTERNATIONALBUSINESS AND

COMMERCIAL LAW FORTHE NON-SPECIALIST

by Mark W. Grobmyer

Increasingly Arkansas lawyers arefielding clients' questions and inquiriesthat relate to the general area of inter­national business and commerciallaw. Arkansas is one of the largestagricultural exporting states in thecountry and each year more Arkansasmanufacturing plants are engaging inexport activities. As an adjunct to theexport area, Arkansas attorneys rep­resent with increasing frequency for­eign entities in matters that relate toArkansas business or real estate in­vestments.

While the typical Arkansas lawyermay feel little or no need to becomefamiliar with international law, it is be­coming more difficult to avoid the sub­ject. Although a thorough understand­ing of international law may be desir­able to some practitioners, few at­torneys deal with international .Iaw ona large enough scale to justify acomprehensive attempt to familiarizethemselves with this complex area oflaw. However. a basic awareness andunderstanding of certain aspects ofinternational business and commerciallaw is important to attorneys who areperiodically faced with inquiries in thisarea.

While this article raises many pointswhich should be considered whendealing with individuais or businessesengaged in foreign trade or finance. itis not intended to be a comprehensive

treatment of the subject matter. There­fore. the references contained in theBibliography and footnotes should beconsulted for additional information onspecific topics.

I. General overview and PracticalConsiderations, When dealing withforeign citizens. businesses. orgovernments it is important to realizethat the laws governing transactionswill probably differ significantly fromthe laws that govern transactionswhich take place entirely in the UnitedStates. Moreover. it is as important tounderstand the domestic and busi­ness customs of a foreign country as itis to understand its laws. If Americanbusinessmen and attorneys under­stand and respect foreign customs.they are less likely to offend theirforeign counterparts and their busi­ness projects are more likely to suc­ceed. In general. one should be slowto conclude that business or legal suc­cesses can be repeated by merelytransplanting domestic techniques.principals and philosophies to interna­tional business transactions. Also.regardless of what foreign country theinternational business transaction mayconcern. there are overriding UnitedStates federal laws and even statelaws that require compliance effortswith respect to what is done bothwithin the United States and outsideits borders.

The attorney representing a clientdesiring to engage in the export busi­ness typically should first assist theclient in determining whether or notthere is a need for employment of anagent in a foreign country to assist theclient in dealing with the foreign cus­tomers. The World Trade InformationCenter' can be extremely helpful inselecting a foreign agent and is gen­erally a good source of informationand assistance in setting up an exportprogram. A Basic Guide to Export­ing, published by the United StatesDepartment of Commerce is an excel­lent guide to use when attempting tolocate a foreign agent. Domestic con­sulting firms known as "Export Man­agement Companies" also are useful.'in addition. reports on foreign agentscan be obtained from the UnitedStates Foreign Service-Department ofState. and are available from theUnited States Department of Com­merce. These reports contain suchinformation as the type of businessorganization of the agent. year estab­lished. number of employees. etc.These government agencies can alsoassist your client in verifying the repu­tation and credibility of the foreignagent.

Once a trustworthy foreign agent islocated. the lawyer can be instru­mental in preparing some type ofagency agreement. The exact terms

October 1983/ArI<ansas Lawyer/167

will depend upon whether the foreignagent is merely a sales agent or adistributor. The agreement will containmany standard and some non­standard terms of agency agree­ments. 3

In addition to United States domes­tic laws, it is usually encumbent uponthe Arkansas lawyer to determinewhat laws of the foreign nation may beapplicable to the client's transaction.Therefore, it may be necessary to re­tain counsel in the foreign country toassist in the transaction. It should beremembered that even the word "law­yer" may not be translatable into thelanguage of the foreign nation in whichyou are dealing. Also it is important tonote that in many foreign countriesduties among members of the legalprofession are divided into specializedsubprofessions (solicitors/barristers,notari/avocat, avoue' / conseil juri­dique, etc.). In summary, in manycountries you may not need whatwould normally be thought of as a"lawyer" but may need an accountant,notary or other professional.

As a practical matter in dealing withforeign professionals which youemploy, it is wise to have some idea inadvance as to what questions to ask,how to phrase the questions, and whatanswers to expect. Although it may beextremely difficult to communicatewith a foreign professional, it is helpfulif you explain to the foreign pro­fessional, in basic terms what yourgeneral needs are and let the foreignprofessional give you some sug­gestions as to how he would approachthe problem rather than telling himwhat you think ought to be done. Ifpossible, it is helpful to have previ­ously researched the law of the foreign

country. For this purpose the Martin­dale-Hubbell Law Digest' providesinformation of the law of some 52countries. Martindale-Hubbell is alsoof assistance in selecting foreign law­yers in many countries as is the UnitedStates Department of State. TheUnited States Embassy in a givencountry will generally know which law­yers it has dealt with in the past andwhich are reputable. Banks are also agood source of information aboutforeign attorneys or other pro­fessionals.

The next section of this review con­sists of a listing of many of the moreimportant United States laws andareas of law that have some impact oninternational business transactions.

II. United States Laws That May BeApplicable to International Busi­ness Transactions

Agricultural Foreign InvestmentDisclosure Act of 1978'-This Actrequires that any foreign person whoacquires or transfers any interest,(basically 5% or more) other than asecurity interest, in agricultural landmust report the transaction to theAgriculture Department. There arealso substantial restrictions within thisAct on foreign ownership of real estatein several states within the UnitedStates.'

Anti-trust laws-Generally anti­trust laws are applicable to foreigntransactions even where the chal­lenged activity takes place wholly out­side the United States.' In additionthere may be applicable foreign anti­trust laws.

Banking restrictions-Interna-

tional Banking Act of 1978'-ThisAct provides restrictions on foreignbanks which enter and operate in theUnited States market and restrictionson the nationality of directors of banks.There also may be applicable statelaws in this area.

Currency and Foreign Trans­actions Reporting Act of 1970'­This Act, administered by the Depart­ment of Treasury, requires various fi­nancial institutions, including brokerdealers, to report and maintain rec­ords regarding, among other things,domestic currency transactionsexceeding $10,000, imports or exportsof currency or monetary instrumentsexceeding $5,000, and any financialinterest in or authority over a bank,securities or other financial accountsin a foreign country.

Export Administration Act of1979"-This Act controls exports ofcertain products which would "make asignificant contribution to the militarypotential of any other country orcombination of countries which wouldprove detrimental to the security of theUnited States" and it also attempts tocontrol exports where necessary tofurther foreign policy of the UnitedStates or to fulfill its declared interna­tional obligations or where it is neces­sary to protect the domestic economyfrom the excessive drain of scarcematerials or to reduce inflationary im­pact of foreign demand. One mustconsult the Export AdministrationRegulations 15 C.F.R. 368 et seq. tofind out whether or not the goodswhich your client seeks to export willbe governed by the Export Administra­tion Act and what type of license maybe necessary.

Certain shipments require a vali-

About the Author:

Mark W. Grobmyer is a graduate of Washington and Lee University and theUniversity of Arkansas Law School. He has studied International Law andInternational Business Transactions at the University of Exeter at Exeter,England. Mr. Grobmyer is a member of the American Bar Association Section onInternational Law and the Arkansas Bar Association Committee on InternationalLaw. He is a partner with the Little Rock law firm of Davidson, Horne,Hollingsworth, Arnold & Grobmyer and serves as counsel to certain firmsengaged in international business transactions. Mr. Grobmyer has done postgraduate securities law studies at Harvard Law School and currently serves asthe State of Arkansas liaison to the American Bar Association Federal and StateSecurities Law Committee. Assisting Mr. Grobmyer in the preparation of thisarticle was the Arkansas Bar Association Committee on International Law, andMr. Michaela. Parker, a tax partner in Mr. Grobmyer's law firm.

168/Arkansas Lawyer/October 1983

dated license for the particular prod­ucts; other products may be shippedunder a general license. Part 371 ofthe regulations is helpful. The com­modity control list, Section 399.1 of theregulations, is useful in determiningwhether or not the product is "strate­gic" or in "short supply" or in "anyother category" subject to severe re­strictions. The Export AdministrationAct of 1979 must be carefully reviewedto determine what licenses or destina­tion control statements must be ob­tained. Information can be obtainedfrom the exporters service staff of theOffice of Export Administration inWashington or the nearest Depart­ment of Commerce District Office.There are efforts to encourage exportsby favorable legislation currently pend­ing in Congress and the ExportAdministration Office should be con­sulted for additional information in thisregard.

Foreign Agents Registration Actof 1938"-When dealing with foreignnationals, the lawyer should be waryof the need to register under theForeign Agents Registration Act of1938. This Act basically provides thatno person shall act as an agent of aforeign principal unless he has filed aregistration statement with the Attor­ney General or unless he is exemptfrom registration by one of the exemp­tions contained in the Act. An attorneycan easily fit into the category ofagents required to be registered, anda willful violation of the Act is punish­able by a fine of up to $10,000 orimprisonment of up to 5 years.

Foreign Corrupt Practices Act of1977"-1t is extremely important tosatisfy yourself of the reputation of anyforeign agent. This Act basicallymakes it illegal for U.S. companies tooffer or give money or anything ofvalue to foreign government officialsor foreign political parties or candi­dates either directly or through in­termediaries for the purpose of in­fluencing official actions or decisionsaffecting the payor's business. TheFCPA is enforced with respect tonon-public companies by the JusticeDepartment and with respect to thepublic companies by the SecuritiesExchange Commission. The FCPA isan extremely difficult Act with which tocomply, particularly when encount­ering customs in foreign countries. It isrecommended that you fully familiarizeyour client with the FCPA. There havebeen recent attempts to amend the

FCPA to make it easier for businessesto interpret and comply with it."

Domestic and Foreign Invest­ment Improved Disclosure Act of1977"-This Act among other thingsamends the reporting requirements ofSection 13(d) of the Securities Ex­change Act of '34 to add citizenshipand residence to the facts that must bedisclosed by beneficial owners of 5%or more of the equity securities ofUnited States issuers. The Act isclearly directed to foreign investorsand tends to improve the monitoring offoreign investments of the UnitedStates.

International Investment SurveyAct of 1976"-This Act provides clearand unambiguous authority for thePresident to collect information oninternational investments and to pro­vide analysis of such information toCongress, executive agencies and thepublic. The President by executiveorder has delegated responsibility forstudying direct investment to theCommerce Department and portfolioinvestment to the Treasury Depart­ment. The President was directed alsoto establish a system for monitoringforeign investment in United Statesreal estate. Generally when a foreignownership of a U.S. corporation orunincorporated entity reaches 10%, asizeable report must be filed with theBureau of Economic Analysis of theDepartment of Commerce. This Act isparticularly important in light of foreignnationals attempting to obtainnonimmigrant visas as E-2 treaty in­vestors. E-2 status grants significantbenefits to certain qualifying foreignnationals who invest in United Statesbusiness ventures."

Mining laws"-Generally alienindividuals are not allowed to explorefor, or extract mineral deposits on fed­eral lands, unless they have declaredtheir intention to become UnitedStates citizens.

Securities laws-Under certaincircumstances the securities laws ofthe United States are applicable toforeign dealings. Certain cases haveemphasized the United States cannotbe used as a "base for manufacturingfraudulent security devices for export,even when these are peddled only toforeigners."" Particular review shouldbe made in this area if it is felt that yourclient's transactions in any way relateto securities matters." This is an ex­tremely complex area and should be

treated with extreme caution. Also ofimportance is the question of whetheror not foreign nations have securitieslaws that are applicable to a particulartransaction.'"

Shipping Act of 1916 and Mer­chant Marine Acts of 1920, 1928 and1936"-These acts purport to restrictforeigners owning U.S. shipping ves­sels and Merchant Marine equipment.

Tax laws Generally-Much hasbeen said of the so-called "Tax Ha­vens" that lead many into the area ofinternational law. The area of foreigntaxation is extremely complicated andshould be thoroughly reviewed in anyinternational transaction. A number ofactivities will lead to double taxation ofa foreign corporation and on its UnitedStates shareholders whether or notdividends are actually distributed.

A general principal in this area isthat a domestic corporation doing bus­iness abroad is taxed on its worldwideincome, regardless of where such in­come is earned, although foreign taxcredits are available. An important ex­ception to this rule is a Domestic Inter­national Sales Corporation ["DISC"I acategory created by the Congress topromote foreign trade by awarding taxdeferrals"

In order to qualify for DISC treat­ment at least 95% of a corporation'sreceipts must be from export salesand rentals, an election must bemade, and certain other requirementsmust be met. Once qualified, one-halfof the DISC's income is taxed to itsshareholders as dividends whether ornot distributed, and the other one-halfescapes taxation until actually dis­tributed, the stock is sold, or thecorporation no longer qualifies as aDISC. DISC rules were SUbstantiallychanged in 1976 with an increase incomplexity and substantial reductionin benefits. An important feature of thischange was to apply favorabie treat­ment primarily to increases in exportsover time. Obviously, this substantiallyreduces effective DISC use though therule does not apply to DISCs withtaxable income of $100,000 or less fora taxable year. Unless substantial andincreasing export sales are involvedthe administration of a DISC is socostly and cumbersome it is frequentlynot favorable for a small U.S. exporter.

Just as the general rule for a domes­tic corporation (other than a DISC) isthat income is subject to U.S. taxationregardless of where it is earned, thegeneral rule for foreign corporations isthat income from foreign operations

October 1983/Arkansas Lawyer/169

escapes U.S. taxation, regardless ofwhether the stockholders are U.S. citi­zens. This is what tax haven planningis based on.

As might be expected, there areimportant limitations to the generalrule. If the corporation is a "contrplledforeign corporation" r"CFC"l (gener­ally, 50% of the voting interest ownedby U.S. shareholders), then earningsfrom insurance of U.S. risks, earningsfrom U.S. operations, earnings involv­ing certain related party transactions,and earnings invested in U.S. propertyare taxed to U.S. shareholderswhether or not distributed. In addition,there are numerous special rules, ex­ceptions and other tax traps and publicpolicy provisions surrounding applica­tion of these rules. Examples of publicpolicy provisions include application ofspecial adverse treatment to activitiesinvolving bribes or boycotts.

The general area of tax havens hasrecently come under intense scrutinyby the Internal Revenue Service. InJanuary of 1981 a 235 page reportentitled "Tax Havens and Their Use byUnited States Taxpayers-An Over­view" was submitted by the InternalRevenue Service and policymakingofficials in the Justice and TreasuryDepartments. It is believed that thisreport will eventually lead to importantand adverse changes in law and regu­lation.

Trademarks and LicensingLaws--{)ne should be careful in deal­ing with international trading to not dosomething to waive protection of atrademark or other proprietary in­terest. Many treatises exist on thesubject of international licensing andshould be consulted."

Trading With the Enemy Act"­This Act restricts trading with certaincountries designated by the UnitedStates Government. There are nu­merous reporting requirements thatmust be reviewed when dealing withforeign nationals in the UnitedStates." The reporting forms areavailable from the InternationalInvestment Division (BE-SO), Bureauof Economic Analysis, U.S. Depart­ment of Commerce, Washington, D.C.20230.

The Export Trading Company Actof 1982"-This Act provides for thecreation of export trading companiesand provides for a new loan guarantyprogram for use by exporters underthe U.S. Export-Import Bank. Addi-

170/Arkansas Lawyer/October 1983

tionally, it substantially modifies anti­trust laws to ease the risk that U.S.companies would inadvertently violateanti-trust laws in engaging in foreigntrade. Because this Act was onlysigned on October 8, 1982, there hasnot been much actual utilization of theAct, but it is reasonable to anticipatethat the prOVisions of the Act will sub­stantially assist United States com­panies in promoting exports and com­peting with foreign trading companies.

III. Summary-Because detailedexplanation of intracacies of interna­tional financing is beyond the scope ofthis Article, the author has compiled abibliography that contains informationrelated to financing, exchange ratesand controls, and other matters thatare of importance in internationaltransactions.

From a practical standpoint, onemust approach the international areawith much caution and trepidation, butbecause the export market is so hugeand the potential for investment in theUnited States is likewise immense,there is no doubt that there will beincreasing interest in the area byclients of Arkansas lawyers and thusattorneys should strive to be at leastfamiliar enough with the subject toassist the client in making the initialevaluation of the decision of whetheror not to become involved in interna­tional trade.

FOOTNOTES

1. The World Trade Information Center is aservice of the Port Authority of New Yorkand New Jersey funded in part by theUnited Stales Agency for International De­velopment.

For more information write:

Director Export Development and Informa-tion Group

The World Trade InstituteOne World Trade Center, 55th FloorNew York. New York 10048.

2. Ozark Regional Commission Handbook, anIntemationallrade reference guide and ser­vice directory for the Ozark Regional States(1979).

3. See ALI-ABA resource materials: Interna­tional Trade for the Non-specialist 332(1979). 332. See also Schmilthoff, ExportTrade, the Law and Practice of InternationalTrade (7th ed. 1980)

4. 7-8 Martindale-Hubbell Law Directory(1982).

5. 7 USC I 3501·3508 (SUllO. IV. 1980).6. Marans, Williams, Griffin, District of Colum­

bia Bar Assoc., Foreign Investment in theUnited States-legal Issues and Tech­niques (1980).

7. Commit1ee to StUdy Foreign Investment inthe United States, Section of Corporation,Banking and Business Law, ABA, A Guideto Foreign Investment under United StatesLaw (1979).

8. 12 USC 113101·3108 (Supp. IV 1980). Seealso Vila, Legal Aspects of Foreign DirectInvestments in the United States. 16 Int'ILaw. 1 (1982).

9. 31 USC 111051-1122 (1976).10. 50 USC App. 112401·2420 (Supp. IV 1980).11. 22 USC 11811-621 (1976)12. Pub.L.No. 95·213. til. I. 1101, 91 Sial. 1494

(amending 15 USC 1178m, 78ff (1976) andcodilied al 15 USC 1178dd-l. 78dd-2(Supp. IV 1980».

13. Atkenson, The Foreign Corrupt PracticesAct of 1977: The International Application ofthe SEC's Corporate Government's Re­lorms. 12 Inn Law. 703, (1978); Baruch,The Foreign Corrupt Practices Act. 57 Harv.Bus. Rev. 32 (1979); Sprow and Benedicl.The Foreign Corrupt Practices Act of 19n:Some Practical Problems and SuggestedProcedures. 1 Corp. L. Rev. 357 (1978).

14. Pub.L.No. 95·213, IiI. II. 1201. 91 Sial. 1498(amendin9 15 USC 1178m, 780 (1976».

15. 22 USC 113101·3198 (1976 and Supp. IV1980).

16. Immigration and Nationality Act of 1952 asamended. 8 USC 1101(a)(15)(E)(ii) (1976).

17. 30 USC 122 (1976) (Iollowing Ihe Miningand Minerals Policy Act of 1970, 30 USC121(a) (1976».

18. lIT v. Vencap, Lid., 519 F.2d 1001 (2d Cir.1975).

19. For a discussion of securities aspects ofinternational law. see Howard C. Busch­man, III. Antifraud and the Water's Edge:Transnational Transactions. Rule 10b-5.and the Federal Securities Code, 7Sec.Reg.L.J. 232 (1979'80).

20. Committee 'C'-Securities Issues andTrading, Section on Business Law, Interna­tional Bar Association. Comparative Surveyof Securities Laws (1980).

21. 46 USC 11801 el. seq.• 861 el. seq.. 1101et seq., as amended (1976 and Supp. IV1980).

22. LR.C. 11991. 992 (1982).23. Glickman, Franchising, Mat1hew Bender

(1982).24. 50 USC App. 111-100 (1976 and Supp. IV

1980).25. 15 CFR 8. 808 el seq.• 42 Fed.Re9. 64315

(Dec. 22. 1977). 43 Fed. Reg. 2169.January 16. 1978 as amended at 43 Fed.Re9. 54624, November 22. 1978; 44 Fed.Re9. 32586. June 6. 1979; 46 Fed. Reg.23226. Apr. 24.1981; 46 Fed. Reg. 60191.Dec. 9. 1981.

26. Pub.L.No. 97·290; 96 Sial. 1233 (1982).

Note: Complete bibliography available uponrequest.

i--

ANYBODYTALKIN' POLITICS?

Tell 'em they beller lalk 10

JERRY RUSSELLArkansas' Premier Polilical Consultan.

(9 oul II winners in '112 primar}')

Campaign Consultan.s, Inc.P.O. BOll 1111/1501) 11S·J996

UII~ Rock. AR 11111

TO WITBy S. Sponte, Esq.

"S. Sponte is the nom de plume of a lawyer who practices and is generallybewildered in Westmoreland County, Pennsylvania."

My office workday, like that of mycolleagues, consists of innumerableinterruptions compressed like a crimeagainst nature into a limited span oftime. As with any rare commodity, Iguard what time I have against anywould-be usurpers, and I have cometo regard any unscheduled derailmentof my train of thought, unladen thoughit may well be, with the same disdainotherwise reserved exclusively for realestate brokers nee housewives.

I trust you can appreciate my dis­pleasure when some months ago alaw book salesman, one Liberman byname, outflanked my secretary,rushed into my office unannouncedand presented me with Volume 1-A ofthe proposed 150 volume set onAdmiralty Law in the State of Kansas.With a face as straight as I have everseen on his genre, he assured me thatthis set would catapult me from themelancholy mediocrity of a small townpractice directly into a performancebefore the U.S. Supreme Court ofsuch scintillating brilliance that at itsconclusion, the Chief Justice wouldproclaim me competent and insist thatI autograph his copy of my brief. Inanticipation of the future worth of mysignature, he requested a sample, af­fixed to a check as a deposit. Hepromised me instant exaltation if Iacted at once, and I promised himinstant extantation if he didn't vanish.In the next instant, I was alone againon the track.

Such devastating directness has notcome easily to me, for early on in mycareer, I was every law book sales­person's Valhalla. It has taken meyears to dislodge the trappings of civil­ity in these matters, a period whichhas, for the lack of that ability, cost medearly and annually. In those forma­tive years, I adhered out of sheer

terror to the notion of literary osmosis,the belief that acquisition of the bookswas somehow akin to the acquisitionof the knowledge contained therein. Iwas sole, young, unlearned and inex­perienced, and above all else, I fearedmortification, the root word of whichmeans death, at the hand and mindsof more learned adversaries. It was, tomy mind, a clear case of purchase orperish.

Oh, and it was so analgesic, nomoney down, no interest, only $37.50per set per month per infinitum, and atacit promise never to sue for failure topay. All those lovely books surroundedme with the cherished aura of compe­tence, and as long as I didn't actuallysay or do anything, I appeared to allthe world, if not the Bar, as aLAWYER. My library grew by leapsand bound volumes, but to my dismay,all I acquired was an avid following oflaw book salespeople, who congratu­lated me on my practice, obviouslybooming to require such a vast library.They treated me with great respectand some of them even stopped spit­ting on my carpet. Even after I hadbought all they had to sell, still theycame, making sure I was not somelegal fiction by keeping their fingersfirmly in my pocket parts.

No longer a pauper in forms, I drewwrits of quo warranto, trover andcoram nobis, storing them as againstsome gloriously litigious day of reckon­ing. I Shepardized every decision onthe Rule in Shelly's Case, awaitingthat frantic call from the heirs of A. Iprayed for a fertile octogenerian like aBedouin prays for rain, and I knewexactly how to empower an entireposse comitatus if need be. That noone really wanted a posse comitatuswas of no moment. I would nonethe­less be ready. I took to quoting chapter

and verse on the law at every chance.Before long however, even my profes­sional friends stopped discussing theircases with me, and unless a booksalesman was in town, I ate lunchalone.

It did not take me very long torealize that something was amiss. Allthe law book salespeople I knew droveLincolns and Cadillacs while I rode thebus. I gained that first painful thrust ofinsight the day a client called to askme how his case was coming. I an­swered him by citing from memoryevery case on point from the Pennsyl­vania Reporter, including, of all things,those from the Superior Court. "That'sreal nice," he said when I was fin­ished, "but what's my case worth andwhen do I get the money? I'm lookingat a new car." I told him I didn't knowand shortly thereafter he got anotherlawyer. His case was settled in threemonths, just the length of time it wouldhave taken me to research and draft amasterful brief in support of the pre­liminary objections to my opponent'snew matter.

In due time, I really did become alawyer, and eventually I learned howto make my living at it. Many of thebooks I still have, and some I even usefrom time to time. The rest are packedaway somewhere, mildewed anddusty, gathering apt tribute to a fresh­man's folly. The salesmen no longerflit around like drones to a queen, andwhile I may not be as learned assome, I do all right. And it's only oc­casionally any more that I wake up inthe middle of the night, wonderingwhat to do if a client's boat runsaground and goes belly up in Kansas.Copyright '980-$. Sponfe. Esq " ....

October 1983/Arkansas Lawyer/171

CODE Of

PROfESSIONAL RESPONSIBILITY

Confl icts Of Interestby Professor Howard W. Brill

School Of LawUniversity Of Arkansas

The Supreme Court of Arkansashas for the first lime recognized thedisqualification that flows to an at­torney who simultaneousiy representsa client and in a separate law suitbrings an action against that client. InCity of Little Rock v. Cash, 277 Ark.494 (Dec. 6, 1982), taxpayers andwater consumers in Little Rock chal­lenged the enactment of municipalprivilege tax upon water meters. Onthe merits, the Court agreed that thecity had no authority to enact such atax. At the trial court level the de­fendant, City of Little Rock, moved todisqualify the plaintiff's attorney be­cause the attorney was simulta­neousiy representing the City in acase pending in Federal Court. TheSupreme Court agreed. Even if 99% ofthe federal cases had been resoived,disqualification was mandatory. TheCourt did not rely upon any prior Ar­kansas cases or upon a specific provi­sion of the Code of Professional Re­sponsibility. Instead, the Court simplyfound that the conduct of the attorneyin both suing and defending a client atthe same time does not adhere to thehighest standard of professional con­duct and the necessity of avoidingeven the appearance of impropriety.

The dissent contended that theplaintiff's attorney had been misled byactions of the city board in suggestingthat the federal case would not beused as a basis for a motion to dis­qualify. But a lawyer must adhere tothe highest ethical standards of theprofession. The client is to rule uponthe appropriateness of the ethicalconduct. The client cannot sanctionunethical behavior.172/Arkansas Lawyer/October 1983

Although the trial court erred in fail­ing to disqualify the plaintiff's attorney,the Supreme Court did not reverse thejudgment on the merits. (The SupremeCourt does allow an interlocutory ap­peal of an order disqualifying an attor­ney but it does not allow such anappeal of a refusal to disqualify anattorney. See Ark. Rule of AppellateProcedure 2(a) (8), as amended July12, 1982.) Instead the remedy grantedwas to refuse to approve an attorney'sfee even though authorized by statute.The loss of an attorney's fee of$316,190 should provide sufficientwarning not to simultaneously rep­resent and oppose a client.

Conflicts of interest present them­selves in numerous contents. Conflictsmay arise when one lawyer attemptsto represent multiple criminal co-de­fendants, see Mann v. Britt, 266 Ark.100, 583 SW. 2nd 21, 1979, when thelawyer appears as both an attorneyand a witness, see the Arkansascases collected in 33 Ark. Law Rev. p.605, fn. 13, when there are businessrelations between the plaintiff and hisclient, see Fletcher v. Long, 271 Ark.943,611 SW. 2d 779 (Ct. App. 1981).In State of Arkansas v. Dean FoodProducts, Co., Inc., 605 F.2d 380(8th Cir. 1979), a leading case on aconflict between a present client and aprior client, the federal court disquali­fied an assistant attorney general whofiled an antitrust law suit on behalf ofthe state of Arkansas, Previously hehad been an associate with a law firmwho had represented and continued torepresent a defendant in the action.Because there was a substantial rela­tionship between the prior representa-

tion and the current lawsuit, the assis­tant attorney general had to be dis­qualified, even though the motion todisqualify was tardy. As an ethicalmatter, disqualification lies in the pub­lic's interest; and laches by a partycannot justify the continuing breach ofthe Code of Professional Responsi­bility. In addition, not only must theassistant attorney general be dis­qualified, but his entire staff also-notbecause they were imputed to haveconfidential knowledge, but becausetheir continuation on the case wouldpresent to both the public and the Barthe appearance of impropriety.

That issue was also raised in City ofLittle Rock v. Cash. The plaintiff'sattorney had been an assistant cityattorney for Little Rock for a sevenyear period, terminating three yearsbefore the commencement of the lawsuit. During his employment with thecity of Little Rock, he had played somerole in the annual enactment of theordinances approving the privilegetax. The city's argument was that heshould be disqualified from repre­senting the plaintiffs because while inhis former employment as a city attor­ney, he had gained knowledge of theordinances and it would be unfair toallow him to use that knowledgeagainst the city. The majority did notrely upon that argument in disquali­fying the attorney. The rule developedin the cases is that a lawyer is disquali­fied from proceeding against a client ifthere is a substantial relationship be­tween the present representation andthe prior legislation, the concern beingboth the appearance of improprietyand confidential information that might

have been available during the courseof the prior representation.

In a recent case the Arkansas Su­preme Court did not extend these dis­qualifying policies to legal secretaries.In Herron v. Jones, 276 Ark. 493, 637SW. 2d 539 (1982), the defense firmhired a secretary who had previouslyworked for the plaintiff's law firm. Thecourt concluded that the appearancesof impropriety rule under Canon 9does not apply to secretaries. There­fore, while an attorney who had beenhired from the plaintiff's firm wouldresult in not only in his disqualificationbut the disqualification of the firm, thehiring of a secretary did not requiredisqualification of the firm. Even

President's Reportcontinued from page 142

The Judicial SystemThe most important goal of this area

is an amended judicial article to theArkansas Constitution. It is suggestedthat a small committee of lawyers beappointed to draft a judicial articlewhich addresses such issues asjuvenile court system, merit selectionof judges, increasing jurisdictionamount for inferior courts, restructur­ing the jurisdiction of courts alongfunctional lines, and establishment ofa centralized office of public defender.

Alternatives To LitigationThe Uniform Laws Committee will

be asked to draft legislation for thepurpose of extending application ofthe Uniform Arbitration Act to includecontroversies involving insurance dis­putes and employer/employee cases.

Future Of The JudiciaryOf significant importance in this

area is the request for the appointmentof an Association committee to studyand propose legislation establishing a"Judicial Compensation Commis­sion." The function of such a commis­sion would be to handle all aspects ofjudicial compensation including salary,retirement, insurance, etc.

A high priority was given to a studyof the judicial election/selection pro­cess. Also rated high for action isincreasing the participation of thejudiciary in Association activities.

though the appearance of improprietyrule does not apply, the requirement ofconfidentiality under Canon 4 thatbinds attorneys and their employees iscontrolling. In this instance she hadbeen isolated from knowledge whileworking for the plaintiff's firm and shewas not working on the case while withthe defendanfs firm. Notice the dif­ference between hiring a secretaryfrom an opposing firm and hiring anattorney from an opposing firm. If anattorney had been hired from an op­posing firm, Canon 4 (confidentiality)would mandate the disqualification ofthat attorney. In addition, the entirefirm would be disqualified under DR5-105(0) which imputes the confiden-

The Association is grateful to itsmany members who participated inthe LRPC. The Special PlanningCommittee is entitled to individual rec­ognition for organizing the conference.The members of the committee in ad­dition to Chairman Walsh wereRichard Williams, Tommy Womack,Wayne Boyce, John Stroud, GeneMatthews, Jr., Garvin Fitton, and AllanW. Horne.

The implementation of these im­mediate plans will be a function of theExecutive Council. A meeting of theExecutive Council is planned at whichtime the report of the SPC will beanalyzed, committees identified to per­form the tasks set forth by the report,and a schedule of action developed tocomplete the tasks.

Much remains to be done in order tocarry out the long-range plans of theAssociation. The SPC report wasmade to the House of Delegates as abeginning. The planning function ofthe SPC will be continuing. The Com­mittee chairman for 1983-84 is TommyWomack. There will be a LRPC heldMarch 29-31, 1984, at Red Apple Innto review the progress made this year,and changes as needed in the Associ­ation's long-range plan.

There is a job for every Associationmember to carry out these long-rangeplans. You will have an opportunity toparticipate in and benefit from the ad­vent of long-range planning in the Ar­kansas Bar Association.

tial knowledge to all members of thefirm and requires its disqualification.

The Court has also refused to dis­qualify a prosecuting attorney who,thirteen years earlier, had representedthe accused when he was convicted.Williams v. State, 178 Ark. 9 (De­cember 13, 1982). If the earlier convic­tion were used as an aggravating cir­cumstance, the prosecuting attorneywould be in a position to use confi­dential information to the detriment ofthe former client. Since the prosecutorused only the conviction itself and notany circumstances surrounding theconviction, no prejudice was shown.

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OCtober 1983/Arkansas Lawyer/173

OYEZ · OYEZ II

MARCHPAT AYDELOTT became the newdeputy prosecuting attorney for WhiteCounty. Ozark attorney TED YATESwas guest speaker at the monthlymeeting of the Arkansas Valley Voca­tional-Technical Chapter of Phi BetaLambda. JUDGE TIM TARVIN wasguest speaker for the Hamburg HighSchool Social Studies Class. Hespoke to the group about the ArkansasJuvenile Court System. ALICE ANNBURNS, assistant state attorney gen­eral since 1979, was named deputyattorney general in charge of the crim­inal justice division. JOE T. GUNTERof Cabot was promoted from vice­president to senior vice-president andgeneral counsel by Fairfield Communi­ties, Inc. Magnolia's CAROLYN JANECLEGG and STEPHEN R. CRANEwere named "Outstanding YoungArkansans" by the Arkansas Jayceesand Jaycettes for their outstandingcontributions to the community. W. B.PUTMAN, E. E. MAGLOTHIN, JR.and JIM ROSE, III announce theformation of a partnership for the gen­eral practice of law at P.O. Box 760,Fayetteville, AR 72702. The firm isunder the new name of Law Offices ofW. B. Putman. RICHARD C. BUTLERof Little Rock, chairman of the PeoplesSavings and Loan Association, re­ceived the William F. Rector MemorialAward for his contributions to the city'sgrowth and development. Arkadelphiaattorney OTIS TURNER was ap­pointed to the Arkansas IndustrialDevelopment Commission by Gover­nor Bill Clinton. JIMMIE GLYNNDUNLAP of Marked Tree announcedthe opening of his law office at 106Frisco Street. JAMES M. ROY, JR.,MICHAEL H, MASHBURN andJAMES D. CYPERT announced thatJAMES E. CROUCH and WILLIAMM. CLARK, JR. became partners inthe firm. Others in the firm include:Robert J. Lambert, Jr.; Charles L.Harwell and Kent Hirsch. James B.Blair and Leslie L. Reid are of counsel174/Ar1<ansas Lawyer/October 1983

By: Carol UtleyCommunications Director

to the Springdale firm. RAMSAY,COX, L1LE, BRIDGFORTH, GIL­BERT, HARRELSON AND STAR­LING announced that L. LAYNE LIV­INGSTON and J. MARC HESSE havebecome associated with the firm inPine Bluff. LITTLE, McCOLLUM &MIXON announced that DAVID C.GEORGE became a partner in the firmnow known as LITTLE, McCOLLUM,MIXON & GEORGE at 102 E Centralin Bentonville.

APRILJAMES D. SPEARS of Fort Smith wasnamed by the Arkansas Workers'Compensation Commission to theposition of Administrative Law Judge.JUDGE EDWIN KEATON of Camdenwas guest speaker at the Mt. TaborBaptist Church Baccalureate worshipservice. JIMMY D. DILL joined the lawfirm of Brockman, Brockman and Nor­ton in Pine Bluff. He was associatedwith Reliable Abstract and Title Com­pany of Pine Bluff as executive vice­president. GRISHAM A. PHILLIPS ofBenton opened an office for the gen­erai practice of law. JOSEPHINE L.HART of Mountain View was pro­moted to lieutenant colonel in the U.S.Army Reserve Command and becamedeputy judge advocate general.NATHAN M. NORTON, former chair­man of the Public Service Commis­sion, has joined the firm of Wright,Lindsey and Jennings in Little Rock.LILLIAN WILLIAMS, Clarksville at­torney, won first place in the 10thAnnual National Whistlers Conventionin Louisburg, N.C. First place honorsin the "oldest" category were awardedthe 90-year-old greatgrandmother forher renditions of Paderewski's"Minuet", her own composition of "Ar­kansas Blues" and Sousa's "Starsand Stripes Forever." "Miss Lillian"has been whistling since 1918 but didnot begin "competitive whistling" until1979. Little Rock attorney JOHNWALKER was guest speaker at UAPBFounder's Day Ceremonies during the

110th observance. CHARLES LED­BETTER of Fort Smith was elected tothe board of trustees of Hendrix Col­lege. He is a partner of the firm ofShaw and Ledbetter in Fort Smith anda 1960 graduate of Hendrix. JOHNWESLEY HALL JR. of Little Rock,was elected a Fellow of the AmericanBoard of Criminal Lawyers. BOBMOREHEAD of Pine Bluff was ap­pointed by Gov. Clinton to the UAPBBoard of Visitors. MICHAEL J. DEN­NIS joined the law firm of BRIDGES,YOUNG, MATTHEWS, HOLMES &DRAKE. BEN CORE of Fort Smithwas reappointed as Arkansas StateChairman of the Defense ResearchInstitute for 1983-84. DOUG ANDER­SON of Helena, was elected to aone-year term as Chairperson of theAlcohol and Drug Abuse AdvisoryCouncil. SKIP MOONEY JR. joinedthe Jonesboro law firm of Mooney andBoone. He was graduated in 1982from the University of Arkansas atFayetteville Law School. JuvenileJUDGE A. WATSON BELL of Searcywas featured speaker for the FlagRetirement Ceremony at the WhiteCounty Fair Ground sponsored by theGirl Scouts of White County. DANBOWERS joined Harrison attorneyBILL DOSHIER in the practice of lawat his law office located at 215 WestRush Street. STEVE VOWELL ofBerryville, a 1968 graduate of GreenForest High School received the 1983"Outstanding Alumnus Award" fromthat group's Alumni Association.DENNIS R. MOLOCK opened his lawoffice in Stuttgart at 310 S. MainStreet. MEREDITH MILLER WINE­LAND joined the firm of PATTEN,BROWN and LESLIE in Little Rock.GENE RAFF of Helena was honoredas an Outstanding Alumnus of theUniversity of Arkansas Law School.CLARK S. BREWSTER joined the lawfirm of BOSWELL and SMITH inBryant. DAVID MATTHEWS of Lowellwas featured speaker during the Ro­gers High School academic awards

attorney WALTER R. NIBLOCK ad­dressed the Association of Trial Law­yers of America during the Eigth Cir­cuit Seminar on Trial Advocacy held inLittle Rock. FRED LIVINGSTON ofBatesviile, was elected to theDevelopment Council for the Univer­sity of Arkansas at Fayetteville. JOHNW. CONE was named JeffersonCounty deputy prosecuting attorney.JAKE LOONEY, dean and professorof law at the University of Arkansas,was speaker at the Hatfield FFA club'sannual banquet. DARREL STAYTONof Pine Bluff joined the law firm ofMULLIS, DAVIS and CHADICK. He isa former deputy prosecuting attorneyin Jefferson County.

JUNEClinton State Bank in Clinton hasnamed JOHN L. JOHNSON asChairman of the Board. SHERRISTEWART of Newport, was nameddirector of the state Natural andScenic Rivers Commission. LittleRock attorney MARTHA MILLERMcCASKILL received the DecadeAward from Arkansas College duringthe annual Alumni Weekend. DecadeAwards are presented by the collegeto members of the class who havedistinguished themselves most in theirrespective fields. JOHN S. SELIG ofLittle Rock was appointed staff judgeadvocate for the 122nd U. S. ArmyReserve Command which coversArkansas. Louisiana and Oklahoma.MARCIA HEARNSBERGER of HotSprings, was named a trust officer withFirst National Bank in Hot Springs.The Bassett Law Firm of Fayetteviileannounced that WILLIAM ROBERTSTILL, J R. became associated withthe firm. Jonesboro attorney JUDYHENSON was awarded a Citation ofHonor by the National Federation ofBusiness and Professional Women'sClub, Inc. The Lawyer's Co-OperativePublishing Company of Rochester,New York honored Hamburg attorneyWILLIAM E. JOHNSON for his assis­tance in preparation of the lead articlein "American Law Reports, Fourth."WILLIAM E. KEADLE opened his lawoffice in Glenwood. PAUL W.HOOVER, JR., partner in the firm ofHoover, Jacobs, and Storey in LittleRock, was elected to the board ofdirectors of Metropolitan NationalBank. JEANNE ANN WHITMIRE an­nounced the opening of her law officeat 117 South 2nd, Rogers, Ark. CircuitJudge RANDALL WILLIAMS of Pine

continued on page 177October 1983/Arkansas Lawyer/175

TER, both of West Helena, werenamed to serve on the Board of Di­rectors of the East Arkansas RegionalMental Health Center. Harrison attor­ney DONALD J. ADAMS was namedOutstanding Trial Lawyer for 1982-83by the Arkansas Trial LawyersAssociation. MORT GITELMAN ofFayetteviile was honored as CivilLibertarian of the Year by the Ameri­can Civil Liberties Union of Arkansas.Hope attorney JAMES H. PILKIN­TON, JR., a member of the law firm ofPilkinton & Pilkinton, was elected tothe Board of Directors of the FirstNational Bank of Hope. ROBERT R.CLOAR of Fort Smith, was electedpresident of the Arkansas Trial Law­yers for 1983-84. TROY HENRY ofJonesboro is the president-elect. At­torney BOBBY E. SHEPHERD wassworn in as EI Dorado municipalmagistrate. Rector attorney JOECALVIN spoke to the Eta EpsilonChapter of Beta Sigma Phi sorority onestate planning. MARK LINDSAY andWAYNE BALL announced the forma­tion of a partnership known as BALL& LINDSAY at 118 N. Block in Fay­etteville. Wright, Lindsey & Jenningsannounced that SAMMYE L.TAYLOR became associated with thefirm and that JAMES T. DYKE joinedthe firm as counsel. OLAN PARKER,JR. was named Outstanding TrialJudge of the Year by the ArkansasTrial Lawyers Association. Fayetteviile

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MAYJAMES D. SPROTT of Brinkley waselected vice-president of the HendrixCollege alumni Association's board ofgovernors. W. D. MURPHY of Bates­viile, was chosen as Arkansas Col­lege's distinguished alumnus for 1983.KATHLEEN BELL and RUSTY POR-

program. LEON NICHOLSON ofNewport, joined the law firm of THAX­TON-HOUT in that city. TIM WATSONof Newport, was installed as presidentof the Newport Area Chamber ofCommerce. He is a member of the lawfirm of Pickens, Boyce, McLarty andWatson. BECKY and TERRY LYNN,both Heber Springs attorneys, ad­dressed the Business and Profes­sional Women's Club with a program

, on legislation. ERIC HANCE has relo­ca.ted his law office at 330 CollegeStreet in Batesviile. JOHN CLAYTON

,of North Little Rock was guest speakerat the Batesviile Rotary Ciub meeting.Bob Keeter announced that JANE E.BROWN became associated with himin the general practice of law. Officesare located at 612 Mena Street, Mena,Ark. Juvenile Referee RANDYWRIGHT was guest speaker at theHope Rotary Club meeting. Heexplained the county's juvenile courtsystem to the group. ROY C. "BILL"LEWELLEN, JR. opened his law of­fice in the Gerrard Building at 14 W.Main in Marianna.

office

Methods And MeansBy: Bernard Sternin

The Bottom Line: Document Design

The same is true to my own knowledge, except as to thosematters therein stated to be alleged on information and belief, andas to those matters I believe them to be true.

I, 1 }, being duly sworn, depose and say:

I am 1 } in the within matter. I have read the foregoing1 } and know its contents.

...........................................

ments it might also be helpful for youto review in your own mind just whatrelevance the technique being dis­cussed would have for each of theselatter two ways of producing final copy.

Display Sheets. Placing a formdocument on a specially designeddisplay sheet can be extremely help­ful. The sheet serves several func­tions.

1. It identifies the form document asa form document. This very mundanefunction is important and often notrecognized.

95

55.:

75 80 85 9070

2. It gives the person in charge ofyour document design a way ofconveying certain basic informationabout the document in graphic, non­verbal ways. The particular displayused here shows the user that thepaper is to be inserted between 20and 105 in the typewriter and that theleft margin is at 35 and the right at 95.A tabular stop at every fifth space isalso depicted by the scale shown online 5.

3. It provides numbered lines. Thatmakes it easy to refer to a particular

45 50 55 60 6540

I__}

Subscribed and sworn tobefore me on/__l

State of New YorkCounty of I__}

Notary Public

Dated:I__}

3556789

101112131415161718192021222324252627282930313233343536

Good document design can makeall the difference between mediocreword processing applications and re­ally effective ones. That's true whetheryou are typing your documents manu­ally, or using printed forms. But it isespecially true when you start usingautomatic typing equipment.

Document design means that youexpressly plan how documents willread, with the goal in mind of makingthem easier to produce. There are ahandful of techniques that are involvedin good document design. Once youzero in on them, you'll be able to applythem over and over to almost all of thedocuments your office produces.

The impact on productivity will beenormous. With an investment of afew minutes spent in planning howyour documents are designed, youcan gain hours of time, year after year.With the expenditure of no additionalmoney you can increase the return onthe thousands of dollars invested inyour automatic typing equipment.There are very few areas in law officemanagement that will get you so largea benefit for SO limited a commitment.

This article will spell out some ofthese techniques by depicting an ac­tual document, and making some re­lated comments. The documentshown is a verification form. Thecomments are intended to spell outwhy the style of its design will increaseefficiency when a needed copy is pro­duced. To get the most from the ap­proach used here try to relate eachtechnique commented on to variousother form documents you use in youroffice.

The document shown here was de­signed for production by automatictyping equipment. However, youcould construct it as a printed form oryou could type it manually. As youreview the document and the com­176/Arkansas Lawyer/October 1983

line when you want to give instruc­tions.

The sheet shown here is availablethrough the Circle West Corp., P.O.Box 186, Elmont, NY 11003, and iscalled a "Layout Sheet."

Lines 10 and 11 : The name of thestate will be fixed. The name of thecounty may vary. Consequently, if youelect to use "55.:" put it on the firstline, following the name of the state.By keeping it off the second line, the

• use of county names of varyinglengths will not involve the "55:" sym­bol.

• Line 13: The use of the word "I" atthe variable places the verification inthe first person. First person pro­nouns, I, my, mine, me, are not af­fected by the gender of the personsigning the verification. You therebyavoid the need to be concerned withthe gender dependent pronouns as­sociated with use of the third person:he, she, his, hers, him, her.

Line 15: The use of the articles "a"and "the" at the variable are avoided.Hence, the variable inserted on thisline could read in any number of ways:

the plaintiffone of the defendantsa party.Line 18: This closing sentence of

the verification has been structured asa paragraph. Notice that this para­graph has no variables. The para­graph that precedes it has two. Duringuse, the variables added into the pre-

Executive Council Notescontinued from page 144

tion's Bylaws: The creation of a com­mittee on legislation; the preparationof a legislative package of bills not toexceed 10 separate bills; and a resolu-

, tion procedure allowing the filing ofany resolution 30 days before an an­nual or semi-annuai meeting, with re­ferral to the resolution committee.

Robert K. Walsh reported on thelong-range planning conference, thegoal of which was to set goals andpriorities for the Association over thenext five years. The report of theseven study groups was adopted bythe House as its five-year plan.

New Executive Council membersare: Joe Reed, Northwest; Jim Mc­Larty, Northeast; Gary Nutter, South;and Tom Overbey, Central. TheHouse appointed Hariey Cox to a full

ceding paragraph will require that lineendings be rearranged throughout thebalance of its text, until the end of theparagraph. Some lone words might bemoved to a point beyond the rightmargin, and those will need an opera­tor's decision regarding hyphenation.The design used here limits any suchdecisions to the preceding short para­graph.

Line 24: The style of date intendedis straight forward: "December 31,1981," not the inverted "31st day ofDecember, 1981." If the style used isthe same as that used on letters, theday's date may be stored for the dayand played out automatically, both onletters and on legal instruments.

Line 26: The use of a series of dotsas the signature line is preferable tothe use of a solid underscore, forseveral reasons.

1. The name of the person signing isusually typed under the line. The useof dots rather than underscoring pro­vides a bit more separation of the linefrom the typed signature. That may beaesthetically more pleasing.

2. Sometimes it's helpful to be ableto count the number of character thatcompose the iine. You can count dots.It's not easy to count the characters ina solid underscore.

3. If a typewriter is out of alignmenta solid underscore doesn't look like aclean line. Further, the underscore iinecan sometimes cut through the topsheet of paper. Dots will not give youeither problem.

three-year term on the Board ofAICLE. The following elections werecertified: William R. Wilson asPresident-elect for 1983-84; new del­egates to the House of Delegates for1983-84; and Annabelle Clinton assecretary-treasurer for 1983-84.

Incoming president DennisShackleford reported that progress onthe search for a new Executive Direc­tor will be reported to the House andthat under the Constitution andBylaws, the Executive Council wouldhire the Executive Director, subject tothe approval of the House of Dele­gates.

James H. McKenzie will be Chair­man of the Executive Council in1983-84.

The meeting was adjourned at12:37 p.m. ~

"

4. When giving people written in­structions where to sign, the use of thephrase "sign on the dotted line" iswidely understood. "Sign on theunderscore line" is awkward.

Line 27: The name of the personwho is to sign should be typed underthe dotted iine. Make it a practice tobegin it under the first dot of the line,as opposed to centering it under theline. Both the dotted iine and the loca­tion of the typed signature begin at thecenter point of the paper and may gocompletely to the right margin, to pro­vide maximum room.

This form document is a very im­portant one to encode, if you are usingword processing equipment. It is likelyto be dupiicated many times andstored with many documents. Gettingit done right, once and for all, cantherefore be extremely important. Youmight find it helpful to see how I'vedone it. If you have an automatictypewriter that uses mag cards, sendme a biank mag card together with aself-addressed return envelope, andI'll send the card back to you, encodedwith this document. I'll also includevarious other materiai that will illus­trate certain further ideas aboutdocument design that relate specifi­caliy to automation. Write to BernardSternin, 5 Hawke Lane, DeskRockville Centre, New York 11570.

Oyez-Oyezcontinued from page 175

Bluff, was elected chairman of thestate Adult Probation Commission.Walters, Rush and Arnold establisheda new office at 1101 H Street in Barl­ing. DALE ARNOLD is the attorneypracticing at that location. WILLIAMG. WRIGHT and DONALD P.CHANEY, JR. announced the firm'sname change to WRIGHT &CHANEY, P.A. and that TRAVIS R.BERRY became associated with thefirm.BERRY became associated with thefirm. FRANK C. ELCAN, II, ImmediatePast-Chairman YLS, has announcedthe opening of his new law office at600 Pine Street, P.O. Box 549, Harri­son, Arkansas 72601.

October 1983/Arkansas Lawyer/1??

Cases And Materials OnAmerican Confl icts Law

A Book Reviewby

Dean Lawrence H. Averill, Jr.

Cases and Materials on AmericanConflicts Law, By Robert A. Leflar,Luther L. McDougal III and Robert L.Felix. The Michie Company, Law Pub­lishers, Charlottesville, Virginia, 1982.pp. xxi, 564. $28.00.

Robert A. Leflar, Distinguished Pro­fessor of Law and Dean Emeritus,University of Arkansas at Fayettevilleand Professor of Law Emeritus, NewYork University, had been a paragonin the area of Conflict of Laws formany years before I took the course inlaw school in 1964. When I became alaw teacher one of the first courses Iwas assigned to teach was the courseon Conflicts. During my years of teach­ing this course, I looked upon Profes­sor Lellar's writings as a great aid inmy preparation for class. I used hisideas as a model of analysis and prin­ciple. His lucid and profound text andarticles (particularly in the choice oflaw area) were suggested and oftenrequired reading for my students. Itwas with great enthusiasm then that Iresponded to the news that ProfessorLellar's imprint had been put into aConflict of Laws course book. EntitledCases and Materials on AmericanConflicts Law,' it was prepared byProfessors Luther L. McDougal andRobert L. Felix in collaboration withProfessor Leflar. My perusal of thisbook has not dampened my originalemotion and in fact has rekindled thethought of teaching the subject again.

The foundational strength of Leflar'sCases and Materials is the pervasiveinclusion of Professor Leflar's writingson the subject. From frequent quota­tions from Professor Leflar's (nowcompanion) text on the subject,American Conflicts Law,' to excep­tionally well selected excerpts from his178/Arkansas Lawyer/October 1983

other writings, the class book consti­tutes a thorough overview of his con­flicts philosophy and analyses. Frommy point of view, this is extremelymeritorious. Professor Leflar's writingshave always been a beacon in a sea ofdarkness particularly in the choice oflaw area. Although others have writtenoutstanding theoretical analyses of theissues and answers in the area, Pro­fessor Lellar's approach to choice oflaw recognizes that from a practicalstandpoint conflicts issues and theiranswers must be dealt with by thecourts under specific fact situationsand not solely by professors and stu­dents in the classroom where answersare not needed. It is clear that thispractical application of his philosophyhas been the reason courts have re­lied upon it as their underlying theory.'

This is not to discount the theo­retical justification for his analysis butis intended only to emphasize thegreater potential influence hisanalyses posses because they aremore easily employed by the courtsthan are other theories.

Clearly, and despite Professor Lef­lar's eminence in the field of conflicts,Leflar's Cases and Materials would besubstantively deficient if the analysisof the other eminent scholars had notbeen included. This, of course, is not aproblem because Leflar, McDougal,and Felix include either relevant andpoignant excerpts or carefully writtensummaries of the selected writings ofthese other authorities. Significantly,you are introduced to various analysesby such conllicts supernotables asCavers, Currie, Ehrenzweig, Cheat­ham, Von Mehren, Trautman, Wein­traub, Reese and Beale. The ideas ofmany others are included as well. The

inclusion of a vast array of analysesmakes Leflar's Cases and Materialsan excellent teaching tool for bothbackground and thought provokingpurposes.

Leflar's Cases and Materials alsoexcels when analyzed from otherpedagogical standpoints. The authorsindicate the materials were designedfor the typical three-semester-hourcourse in a law school curriculum andclearly they carry out that intent. Al­though most professors will probablydo a little trimming, the quantity ofmaterial provided is reasonable for theamount of class time suggested for thecourse.

On this point, Leflar's Cases andMaterials does not commit what I feelis the common sin of most recent classmaterials in Conflicts as well as inmany other subject, i.e., too muchmaterial to cover for the class timeallotted to the typical course. Althoughthe publishers often encourage thistendency by suggesting that a "kit­chen sink" approach is necessary tosell classroom materials, I personallyprefer materials that are designed forthe typical course. My trouble with the."kitchen sink" approach, is that, infact, as the teacher I have to becomethe editor and, in effect, almost a co- .author.' I like the class materials thathave the imprint of the author'sphilosophy on them. If I do not like thatimprint, I may go to a competitor'sversion. That decision is part of theselection process. I usually do notwant to create my own book out ofsomeone else's book. This problem isparticularly applicable to the beginningprofessor who does not have thebackground to create his or her ownversion of the materials. I realize that

Arkansas Criminal Code, 1982By publisher's editorial stafT700 pages, softbound . $17.50'

Arkansas Court Rules, 1983By publisher's editorial stafTAppx. 775 pages, softbound $22.50'

Arkansas Model Criminal Jury Instructions, 1979Drafted by Arkansas Supreme Court Committee onCriminal Jury Instructions389 pages, looseleaf with 1982 supplement $65.00'1982 supplement separately 25.00'

FOOTNOTES

1. For convenience and in no way to downplaythe importance of Professors McDougal'sand Felix's substantial contribution 10 thebook, the book will hereinafter be referred toas Leflar's Cases and Materials.

2. (3d ed. 1977).3. See. e.g., Health v. Zellmer, 35 Wis. 2d 578,

151 NW.2d 664 (1967). reproduced in Lel­lar's Cases and Materials, 393.

4. The other major class materials availableand their length are as follows: Cramton.Currie and Kay, Conflict of Laws (3d ed.1981) (West Pub. Co.. pp. 1026); Martin.Conflicl of Laws-Cases and Materials(1978. 1982 Supp.) (Li"le Brown & Co. pp.757); Reese & Rosenberg, Conflict of Laws(7th ed 1978. 1982 Supp.) (FoundationPress, pp. 997): Scoles & Weintraub, Casesand Materials on Conflict of Laws (2d. ed1972,1978 Supp.) (West. Pub. Co. pp. 965);Vernon, Conflict of Laws: Theory and Prac·tice (2d ed. 1982) (Matthew Bender & Co.,pp. 1203).

5. See, e.g., Shaffer v. Heitner, 433 U.S. 186(1977), reproduced in Leflar's Cases andMaterials. 72.

6. See, e.g., Pennoyer v. Neff, 95 U.S. 714(1878), reproduced, in part. in Leflar's Casesand Materials, 21,

i--

October 1983/Arkansas Lawyer/179

for customer service contact:ALLIN R. JONESP.O. Box 1306Conway, Arkansas 72032(501) 327-6526

ther add to the merits of the materials.First, the Table of Contents is thor­ough and well-organized. Such fea­tures aid the student because it makesreview and personal outlining easier.

Second, the Index is excellent. Al­though some might feel this is irrele­vant, I have found that a high qualityindex is essential for maximum ef­fective use. This index not only in­cludes references to the significantterms relevant to conflicts, but it alsoincludes, for example, references tothe location of excerpts by the otherauthorities included. Whoever pre­pared the index should be compli­mented.

Clearly my opinion of Leflar's Casesand Materials is very favorable. Pro­fessors Leflar, McDougal, and Felixhave produced an excellent product. Iwill use it as my class materials when Iteach Conflicts. I would recommendothers to consider it also. J believe it

would also be useful to the practitionerwho needs an overview of the subjectand an analysis of the relevant cases.

~THE I[BICHIE~J

Arkansas Statutes Annotated, 1947 Edition25 hardbound volumes with 1983 cumulativepocket-part supplements

·plus shipping, handling and sales tax where applicable

Arkansas Advance Annotation Service, 1983·84By publisher's editorial stafT3 pamphJets per year $45.00'

Probate Law of Arkansas, 1961By publisher's editorial stafT465 pages, hardbound with 1981-82 cumulativesupplement . . . . . . . .. $35.00'1981-82 supplement separately ..... 20.00'

there is a difference of opinion on thisissue. Notwithstanding, Leflar's Casesand Materials clearly fits into mymodel and I highly endorse itstechnique.

Several other beneficial features ofthese materials also deserve mention.As indicated, the book contains areasonably generous amount of col­lateral materials including excerptsfrom the Restatements and law reviewarticles. This is not to imply that sig­nificant cases are lacking, however.As the title indicates, it is a traditional

"casebook and it meritoriously includesboth the recent superstar cases' aswell as the Conflicts professor's oldfriends and hall of fame decisions.'This feature not only lets you knowwhere you are, but also how you gotthere.

Furthermore the notes after thecases are relevant and helpful. Theytypically update the case, explain orembellish its principle or ask reason­able and profound questions. Whatmore can a student or professor askfor?

Several nonsubstantive matters fur-

LEGAL ECONOMICSBy: Kline D. Strong

CPA, JD, PhD

Software, The Solution To Lawyers' NeedsAs was forecast in the previous arti­

cle, once a law office has determinedits needs, the next step is not to golooking for hardware-the next stepis to find software which will satisfythose needs. The last step is to findacceptable hardware!

Actually, there are several reasonswhy hardware is last. First, softwarecannot usefully be written in a vac­uum, so whoever wrote the softwarewill already know on which micros itwill run and-for time-saving, atleast-where NOT to look. Secondly,without adequate software, the finesthardware can be assembled in ga­rages as the saying goes, so there arealways a staggering number of optionsto consider if you start there; whereasspecialized applications packagessuch as legal software are relativelyfew if you limit it to equipment costing$tO,OOO or less-the true micro-sostarting with software saves untoldhours of potentially fruitless searching.

What To Look For InData Processing Applications

In point of fact, all legal softwareprograms can be sorted into one oftwo classifications...

those that perform only the'time/accounting and billing'functions-called TAB forshort-andthose which integrate the TABfunctions into the general ledgerof the office where all asset, liabil­ity, equity, income and expenseaccounts are kept. This lattercategory is sometimes referred toas a 'fully-integrated generalledger or GL' program.

One of the principal deficiencies ofrunning a TAB system only-the taxtrap of not reporting the reimburse­ment of some kinds of client advanceswhile at the same time deducting thesame amounts-has been fully dis-lBO/Arkansas Lawyer/October 1983

cussed in another article. Some of theother critical deficiencies to avoid andsome of the crucial subsystems to besure are included in a TAB systemare...t. Billing rates. Some systems will

not permit-or permit onlyinflexibly-the changing of stan­dard rates by timekeepers. Unlikeother portions of a program whichmust be rigidly adhered to, com­plete flexibility in fixing and chang­ing rates is a must. Similariy, someprograms will not permit more thanone timekeeper to bill at the samerate...this, too, is nonsense.

2. Handling prepayments and othercredit balances. Some systemshave no provision for allocatingclient prepayments later, i.e. whenbills are prepared, between client'advances'-clients costs 'ad­vanced' by the law office-and ser­vice fees. Yet, more and morelawyers realize the economicnecessity of obtaining such pre­payments. Worse, even if no 'ad­vances' were involved or the creditbalance arises as a result of over­payment (or even misapplied pay­ments, where more than one mat­ter for a client is being handled,many systems do not contain amechanism for allocating suchcredit balances among affectedtimekeepers! Either no credits aregiven for lawyer-productivity-reportpurposes, or the first-named lawyergets it all, regardless of the con­tributions of others.

3. Correcting errors. Some systemshave no way to detect inputtingerrors such as entering time oradvances or receipts before suchdata is 'set into concrete' by beingwritten to disk. [As explained inother articles, there are variousremedies for this deficiency, one ofthe better of which involves the use

of Hash Totals.] Thus, the first ap­prehension of an error may be en­countered on the proposed bill toa client-which, of course, beatshaving the detection occur afterthe bill has been sent, especiallyby the client! But how are correc­tions made, whenever the errorsare detected and, insofar as lawyerproductivity records are concerned,how are adjustments made.

In this case as in many others,Murphys Law holds that

anyone who claims computersmake no errors is either a

computer salesman or a Martian!

4. Providing audit trails. There aretwo so-called audit trails-writtenrecords that can be traced to re­construct or to verify how computerresults were obtained-which mustbe maintained at all times and at allcosts because negligence-to saynothing of static eiectricity andother 'acts of God- can and fre­quently do destroy magnetic rec­ords wholesale. These two audittrails are (1) books of original entrysuch as time sheets, checks andcheck books, bank deposit formsetC.-the kinds of records you al­ways must keep, even for manual·systems-and (2) micro journalprintouts for each function per­formed on the computer. To illus- .trate, the first kind of records re­ferred to will verify for all time whatshould have gone into themicro-so if a disaster struck, itcould all be reconstructed-andthe second kind of record-themicro 'journals' which should beprinted out periodically-would ver­ify item-by-item what actuallywent into and came out of themicro.

Because of these system-savingI .... .•

capabilities, these micro 'journals'are in reality more important by farthan many of the 'reports' somelegal software programs produce,yet many such systems cannot runsuch journals.

5. Training manual. Of the dozens ofother desirable micro functions tolook for, an ancilliary considerationis vastly more important than manybecause, in this day of limited per­sonal support, if the so-called'documentation' that accompaniessoftware is not 'user friendly' aswell as accurate and kept up todate, no amount of sophisticatedprogramming can compensate.Like the necessity of being able torepair hardware-which is every bitas important as getting the rightmachine in the first place-soft­ware without an adequate trainingmanual is like putting in for sickleave for the 4th of July... a totalwaste!

Where To Look ForSoftware Packages

Data processing software written forlawyers by micro hardware vendorsis very rare whereas word processingsoftware is quite normal. Moreover,several 'transportable' word proces­sing packages-especially thosewhich run under the CP/M operatingsystem-can be run on micros,

whether or not the vendor also hassuch a package.

So the problem is not usually wordprocessing software, it is data proces­sing software which presents prob­lems. Worse, though a host of compu­ter periodicals and services advertisesoftware, they are, alas, usually of littlehelp because...

they are written almost exclu­sively for general businesses---{)rcomputer specialists-which'know not' our legal peculiarities,andfew lawyers know how to findsuch publications, let alone justifythe expense of subscribing to andreading them, and most of theleads are either (a) to minicom­puters or mainframes, i.e. notmicros or (b) to business or ac­counting applications in generalrather than to legal packages.

Hence, there are fewspecialized sources of .informa­tion regarding data processingprograms for lawyers. Thesesuch sources are...

1. A brochure available from the ABAEconomics Section, 1155 East60th Street, Chicago, IL 60637 enti­tled LOCATE. Re-compiled in 1982by Bruce D. Heintz of Arthur Youngand Co., CPAs, this source mustbe carefully studied to be certainthe suppliers are (a) still in busi-

ness (b) run their software on mi­cros you can afford, (c) provideadequate service, and (d) other­wise qualify under the checklists forselecting hardware and softwarewhich have been developed.

2. Robert Wilkins, former chairman ofthe ABA Economics Section, pub­lishes "The Lawyers Micro­computer"-RPW PublishingCorp., P.O. Box 1046, Lexington,SC 29072-a monthly periodicalwhich will be carrying informationabout suppliers of 'legal' softwarefor a variety of purposes includingword and data processing. This isnot the main purpose of this period­ical, so coverage is not intended tobe comprehensive.

3. NIRAD, Law Division, 1039 VistaView Drive, Salt Lake City, Utah84108, has compiled a short list ofsuppliers of legal software not onlyfor data processing but also (a) forsubstantive specialties such asprobate, collections, etc, (b) forboth internal and external retrievalsystems and (c) for docket control.

The foregoing is a very generalsummary of the subjects referred to.More details can be obtained fromABA monographs and other sourcesavailable from the author. If more in­formation is desired, please enclose astamped and self-addressed en­velope.~

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October 1983/Arkansas Lawyer/181

CLE ACTIVITY INCREASESDURING SIXTH YEAR OFOPERATION

The Arkansas Institute for Continu­ing legal Education (AICLE) has com­pleted its sixth year of operation. Dur­ing the period July 1, 1982 to June 30,1983, the number of programs, thediversity of topics and the overall at­tendance by members of the BarAssociation and members of other in­terested professions have exceededthe previous year. Statistically speak­ing AICLE directly sponsored or co­sponsored 19 separate programsconsisting of a total of 164 lec­ture/demonstration hours presented toapproximately 1900 registrants for anaverage of 100 registrants per pro­gram-session. Of the total programsfour were videotape replays of the1982 Fall Legal Institute, one day de­voted to the subject of real estatetransactions and the other day de­voted to domestic relations update.The videotape regional replays werefirst introduced in Arkansas during thefiscal year 1980-81, and they havecontinued to be generally well re­ceived by the members of the Bar,depending on the subject matter andthe avoidance of conflicts of schedulewith local trial courts. I expect thatfuture years will bring more videotapereplays of this nature as CLE de­mands increase, especially with theadvent of designation of specialties bythe practicing Bar and the concurrentneed for CLE updates on those re­spective areas. Also from aneconomic standpoint the use of video­tape replays preserves intact out­standing presentations of speakerswho would not otherwise be availableto travel around the state on a regionalbasis for the benefit of those lawyerswho, due to preference or circum­stances beyond their control, will notor cannot attend major programminglike the Fall Legal Institute in Fayette­ville or the Mid-year Bar Meeting inLittle Rock.182/Arkansas Lawyer/October 1983

AICLE NEWSby Claibourne W. Patty, Jr.

Executive DirectorArkansas Institute of

Continuing Legal Education

By necessity (and now by tradition)AICLE relies on the members of theArkansas Bar Association to patronizethe various CLE presentations duringthe Bar year, not only as registrantsbut also by participating as programplanners, chairman or moderators,lecturers and panelists and authors ofcourse materials-all of which is donewith little or no honoraria and minimalreimbursement of personal expenses.Not only have individuals been in­volved, but various committees andsections of the Arkansas Bar Associa­tion participating during the past yearsuch as: The Young Lawyers Secton;Taxation Section; Agricultural LawSection; Economics of Law PracticeCommittee; Labor Law Section; Bank­ing Law Committee; Arkansas Associ­ation of Women Lawyers; Real EstateLaw Section; Family Law Section; andthe Federal Practice Committees ofthe U.S. District Courts of the Easternand Western Districts of Arkansas.Chairman of the Young Lawyers Sec­tion and the Legal Education Commit­tee of the Bar also sit ex officio on theboard of AICLE along with Bar Asso­ciation executives, Bar Foundationexecutives and members of the Houseof Delegates. The leadership of theArkansas Bar Association is to becommended for its support of strongBar section and committee activity inthe CLE area, and the sections andcommittees indicated above have re­sponded overwhelmingly. The mem­bership of the Bar has responded byenthusiastically participating in the var­ious programs as faculty or plannersas well as providing overwhelming at­tendance as registrants. And last butnot least, the two cosponsoring LawSchools at the University of Arkansasat Fayetteville and UALR have pro­vided leadership and program plan­ning through their respective deans,who are also members of AICLEboard. More importantly, the LawSchools have provided generous fac­ulty support as program planners, pre-

Itsiders and participants as well as au­thors of systems and program ma-'terials. In this sort of climate it is nowonder that AICLE has continued tothrive and grow to mee) the challengesfor providing continuing legal educa­tion programming since its inception in1977. The Bar membership will con­tinue to benefit by the availability of thequality CLE programs in the ensuingyears which will be on a variety oftopics, basic and advanced, with regis­tration costs modest by national com­parison.

LAW OFFICE AUTOMATIONTHEME OF NEW CLE PROGRAM

As a result of a questionnaire cir­culated to members of the ArkansasBar Association in 1981, which wasdeveloped and compiled by theEconomics of Law Practice Commit­tee, the idea evolved to sponsor aprogram on Law Office automation-ATeam Approach for Lawyers and StaffPersonnel. This program came to fru­ition on April 15, 1983 at the RiverfrontHilton in North Little Rock, and it wasattended by 60 persons including notonly lawyers but their administrativestaff members. The program was ajoint effort of William D. Haught,chairman of the Economics Law Prac­tice Committee and James W. Hyden,member of the committee and pro­gram chairman. The topics presentedwere: Evolution of the Automated Law'Office; Evaluating, Selecting, Ac­quiring and Using Equipment; Law Of­fice Automation-Where Are You·Now? Where Are You Going?;Development of Use of "Systems" onWord Processing EqUipment; Effec­tive Utilization of Word ProcessingEquipment and Operating Person­nel-The Attorney's Viewpoint; andthe same topic from the secretaries'viewpoint. Since it became apparentduring the question and discussionperiod that most of the people in at­tendance had already taken a steptoward law office automation, the

Economics of Law Practice Commit­tee has already began to plan a pro­gram during the next Bar year whichwill evaluate the experiences of lawfirms around the state and take a lookat the total concept of law officemanagement rather than focusing onautomation alone.

TAX PLANNING FOR BUSINESSORGANIZATIONS THEME OF

· TAX AWARENESS INSTITUTEThe Fifth Annual Tax Awareness

Institute, jointly sponsored with theTaxation Section of the Arkansas BarAssociation was held at the RiverfrontHilton Inn at North Little Rock on April22, 1983. This year's program, chairedby Michael O. Parker, focused on thebasic tax planning consideration forthe formation, operation and dissolu­tion of business organizations, and itincluded such topics as: Sole Proprie­torships; General Partnerships; Se­curities Laws; Corporate Formation; SCorporations; Corporate Operations;and Liquidations and Sales. Not onlywere attorneys invited but also CPA'sTrust Officers and Life Underwriters. Ahypothetical situation was used as amodel at the program, and the speak­ers drew examples from that fact situa­tion where possible.

This program was enthusiasticallyreceived by 110 registrants, and plan­ning is already in progress for nextyear's Tax Awareness Institute.

WOMEN LAWYERS COSPONSORFEDERAL COURT ORIENTATIONPROGRAM

Another "first" in Arkansas CLE wasa Federal Court Orientation Programjointly sponsored with the ArkansasAssociation of Women Lawyers, whichwas held at the Federal Court Housein Little Rock on May 16, 1983. Thisprogram was chaired by Jacqueline S.Wright, and all of the faculty participa-

· tion other than Federal judges andcourt staff were supplied by membersof the Arkansas Association ofWomen Lawyers. Along with actual

· walk-through tours of the DistrictClerk's Office, the Bankruptcy Courtand office, U.S. District judges' officeschambers, the Federal Court Law li­brary, and U.S. Probation Office thefollowing substantive topics were pre­sented: Duties and Filing Procedure,U.S. District Court and U.S. Bank­ruptcy Court; U.S. Court of Ap­peals-Eighth Circuit Practice; Prac­tice and Procedure of the Federal Dis­trict Court (a panel discussion by a

U.S. District Court Judges); and Pit­falls to Avoid a Federal District Court.The highlight of the afternoon preceed­ings was the swearing in ceremonyconducted in the main federal trialcourtroom with Judge Roy.

This program came about becausethe Arkansas Association of WomenLawyers had been looking for a CLEproject, and at the same time thefederal jUdges of Arkansas were con­cerned that newly admitted attorneysfrom 0-5 years experience needed todeal with the most basic fundamentalsof Federal Court Practice in order tobecome more comfortable and confi­dent when they made their first fewappearances in federal court. Thisprogram was attended by 50 persons,and it is anticipated that this, too, willbecome an annual event on the CLEcalendar, having been adopted as a"pet" project of the Arkansas Associa­tion of Women Lawyers with the un­qualified blessing of the FederalJudiciary.

AICLE GOES SATELLITEFOR THE SECOND TIME

A second satellite T. V. program, co­sponsored with the Practicing Law In­stitute of New York was heid on June28 at Conway, Arkansas KETSStudios concerning the general topic"Doing Business with Troubled Com­panies". This program was designedto advise legal practitioners, housecounsel, credit managers, senior loanofficers and accountants about theproblems and pitfalls in doing busi­ness with the corporate candidate forChapter XI or the Chapter XI Debtorunder the Bankruptcy Act, and how toavoid these pitfalls to the extent possi­ble. This program was not designedfor the bankruptcy specialist, butrather for the trade creditor or advisorto the trade creditor with occasionalcontacts with the bankruptcy system.Therefore not only were the ArkansasBar members invited, but also seniorloan officers employed by memberbanks of the Arkansas Bankers As­sociation. The specific topics includedthe following: Structuring PrepetitionCredit Transactions; Pros and Cons ofParticipating in Attempted Out of CourtStructuring; Consideration in Filing anInvoluntary Bankruptcy Petition; PostPetition Remedies; Extending Creditto the Debtor-In-Possession; Shouldyou Serve on the Creditors' Com­mittee?; Litigating with the Trustee orDebtor-In-Possession After MarathonPipeline; and a review of individual

creditor's rights in Chapter XI.

NOTE FALL 1983 CLE SCHEDULE!Medical Tort Seminar, jointly

sponsored with the Health Law Com­mittee, will be held at the ExcelsiorHotel, Little Rock, on August 26. Thisseminar will cover these topics: Re­view of Malpractice Law in Arkansas;Informed Consent and Products Lia­bility; Evaluation of the Plaintiff's Med­ical Malpractice Case; Physician andHospital Liability (emphasis on pedia­tric neurosurgery, O.B. physician,pre-natal diagnosis, ultrasound, etc.);and Medical Products Liability.

The 1983 Fall Legal Institute willbe held at the FayetteVille Hilton in theUniversity of Arkansas ConferenceCenter in downtown FayetteVille, Sep­tember 8-9. This institute will be de­voted to debtors/creditors law and sys­tem update with recent developmentsin the federal bankruptcy law whereappropriate.

Bob Wilkins of South Carolina willconduct a one day seminar on Draft­ing Wills and Trusts-a System Ap­proach at the Camelot Hotel in LittleRock on September 16.

The 24th Annual Practice SkillsCourse (formerly Bridging-the-Gap),jointly sponsored by AICLE and theYoung Lawyers section of the Arkan­sas Bar Association will be held at theRiverfront Hilton, North Little Rock onOctober 6 and 7.

AICLE will again cosponsor with theAgricultural Law Section of the Arkan­sas Bar Association A Third Agricul­tural Law Institute in Little Rock atthe Excelsior Hotel on October 13 and14.

The Annual Arkansas-FederalTax Institute will be co-sponsoredwith the Arkansas Society of CertifiedPublic Accountants and held at theExcelsior Hotel in Little Rock on De­cember 1 to 2.

October 1983/Arkansas Lawyer/183

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CREDITORS'/DEBTORS' RIGHTSLAW AND SYSTEM UPDATE

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SEPTEMBER 8-9, 1983THE FAYETTEVILLE HILTON

ATTORNEY'S ECONOMICCONSULTANTS

"A Division o( Education andResearch Associates, tnc."

SERVING THE LEGAL PROFESSION WITH EXPERTISE INTHE FOLLOWING AREAS:Workmen's Compensation (Lump-Sum Settlement Calcula·

lions)Evaluation of Lost Earnings Capacity from Partial Of Total

Permanent Disability or Wrongful DeathEconomic Valuallon of Pecumary Damages in Busmess Tort.

Contract and Anti·Trust CasesValuation of MinOrity Stock Holdmgs in Estate SettlementsValuation of Future Earnings Capacity for Stock IssuanceEconomic AnalysIs for Charters or Branch Applications lor

Financial Instllut_ons

QUALIFIED AS EXPERT WITNESS INARKANSAS AND

OTHER JURISDICTIONSP.O. Box Drawer 34117

Little Rock, Arkansas 72203(501) 661-0161Telex: 78-3081

MISSING

AND UNKNOWN HEIRS LOCATED

NO EXPENSE TO THE ESTATE

WORLD·WIDE SERVICE FOR

COURTS - LAWYERS - TRUST OFFICERSADMINISTRATORS - EXECUTORS

American Archive:J A:J:JocialionINTERNATIONAL PROBATE RESEARCH

449 WASHINGTON BUILOING

WASHINGTON. D. c.

MID-SOUTH SECURITYSERVICES, INC.

10010 Rodney ParhamLittle Rock, Arkansas

224-5845 or 227-7812(Formerly Baker Securities, Inc.)

Services OfferedVideo Recorded Depositions

Private InvestigationAccident Analysis

Court Room VideoUndercover Investigation

TOMMY L. BAKERVICE PRESIDENT-GENERAL MANAGER

Service Directory

LEGAL BRIEF PRINTINGPARAGON Printing & Stationery Company

has been printing BRIEFS for over 35 years.May we be of service to you?

311 East Capitol 375-1281Little Rock

•BEACH ABSTRACT & GUARANTY COMPANY

REPRESENTING:PIONEER NATIONAL TITLE INS. CO.

ABSTRACTS-ESCROWS-TITLE INSURANCE100 Center St. - Little Rock. Ark. 376·3301

•BAKER SECURITIES INC.

Video Recorded Depositions; Private Investigation;Accident Analysis; Court Room Video; Undercover

Investigation

Two Financial CentreLittle Rock, Arkansas

224-5845

Our expanded Texas branch provides fast, convenient service.

Excelsior-Legal Southwest, Inc.p.o. Box 5683, Arlington, TX 76011, (817) 461-5993

Toll free line-1-800-433-1700

Black Beauty is America's most popular corpo-rate outfit. Here are some of the reasons­

• Everything (including seal) is insidethe "all-in-one" corporate outfit. • Im­proved corporate record book and slipcase in lustrous black vinyl with highquality gold stamped border. Thesturdy, dust-proof slip case reservesplace on shelf when corporate recordbook is removed.• Hidden rivets andgold label window on spine for attrac­tive appearance and quick identifica­tion .• Interior pocket neatly holds loose

documents:...._----~"'

• Improved I\<\" extra capacity boosterstandard three ring metals. BlackBeauty "all-in-one" outfits include:• Customized seal in zipper pouch.• 20lithographed share certificates in a sepa­rately bound section with full page stubs.Each is numbered and imprinted with cor­porate name, capitalization, state and of­ficers' titles.' 50 sheets, rag content paper.Or printed Minutes and By-laws with taxmaterials updated to conform with theEconomic Recovery Tax Act of 1981. Min­utes and By-laws include up-to-date IRC§1244 Resol ution, Subchapter S Mate-

rials, MedicallDental reimbursement plan,appendix of forms, instructions, work sheets

and 20 blank sheets. Special editions are availa­ble for CA, CT, DE, FL, GA, IL, Ml, MO, NJ, NY,

PA, TX and Blank State (Model Business CorporationAct).• Our exclusive corporate record tickler.• Mylar,....- reinforced tab indexes with five posi­

tions.• Transfer ledger, 8 pages bound inseparate section.

Complete Black Beauty· OutfitNo. 70 (Green No. 71)50 sheets blankminule paper $39.50

No. 80 (Green No. 80 withprinted minulesand by-laws$43 .00

Charge to American ExpressMasterCard or Visa

You may also select Green Beautywith the same fine features.

Request C<ltalog- ofLaw Products and Services----------

Excelsior-LegalNew York· Georgia· lIlinois • Texas

--------------------------------TO: EXCELSIOR·LEGALSOI!fHWEST. INC.P.O. Box 5683Arlington. TX 76011

o No. 70 0 No. 71 ..$39.50Please Ship: 0 No. 80 0 No. 81 ..$43.00

Please include $1.00 fOT shipping lind handling.

State year _

4Print corporaU' ntlnlf! ...."ctly Ill. (In c@rtific,u-",orincorporation. Ir lon~er than 'IS chnroctc... und 8PUct'~. lldd 17.00 fur 2" die Ileol.,

Ship to________________________ Zip Code AZ

-------------------------------------

Certificates signed by President and 0 Ship via Air-$5.00 extraISecrel.8ry·treosurer. unlell! otherwise speo::ified)

DIRe !H244 complete set-resol., dir. min .. treatise, law etc., $4.95 extra.o AM EX

Charge 0 MCo VISA Number Expires Sif,.'1lalUre

Shipment within 24 hoursafter receipt of order.

SHIP VIA AIR:$5.00 ADDITIONALWITHIN THE 48 CON·TIGUOUS STATES.($6.00 ELSEWHERE.)

authonzed shareso NPV or 0 PV $__--=:;:-_

eachCapitalization $