Giving Tuesday: Great "On Point" Podcast

Today is Giving Tuesday and there was a great panel discussion on the On Point Podcast.  Definitely worth a listen. Great topics ranging from problems with IRS enforcement to the effect of Donor Advised Funds on overall giving.  Prof. Ray Madoff from BC gave her critique of these funds.  Good discussion on statistics of giving as well as the effectiveness of giving.

Click here for more on Donor Advised Funds.

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Mark Your Calendars for A Special Event with Clark Pager '84 of Restaurant Depot (Th. 1/14/16 from 4-6 in the Cherry Room)

Clark Pager '84 has a great story to tell.  He is a co-founder of the very successful and innovative Restaurant Depot national chain of "cash and carry" restaurant supply stores, as profiled in the recent issue of The Bridge.  He is coming to our school on Thursday, January 14, 2016 (4-6 in the Cherry Room), and will explain how his New England Law | Boston education was “instrumental” in growing a single store operation into today's multi-billion dollar company.

This special event is co-sponsored by New England Law’s Business Law Society and the Center for Business Law.  Mark your calendars for a fascinating discussion that promises to be of interest to all law students, alumni, and anyone interested in succeeding in the business world.  We will post additional details about the event as they become available.

Nice Profile on Amy Peterson, sports lawyer and low-profit LLC (L3C) Partner

Our alumni publication, The Bridge, was just published.  The issue included very nice profile on Amy Peterson who is associate general counsel for the Detroit Tigers.  Her work as a with the L3C is particularly interesting.

Events for the Week of 11/9

Three events on Thursday, Nov. 12

3:30-4:30  Room 501: CBL informal session on Sports Compliance and the Business Practice Credit.  Dana LoSasso and Ali Theodore will share their experiences in this exciting practice area. Contact elustig@nesl.edu for more information

5-6 Room 305: American Health Lawyers Association, Information Privacy Association and BLS: Ellen Giblin, privacy officer, Boston Children’s Hospital, will lead a discussion and Q&A session on health care compliance centered on the health care industry’s most notable compliance regime, the Health Insurance Portability and Accountability Act (HIPAA).  Contact Sean Nabil for more info.

5:30-7:30 CSO: Suffolk Law School (RSVP required).  Compliance Networking Event

CBL Podcast #2: Professor Emeritus Susan R. Finneran a/k/a "SRF"

Please join us as  the CBL takes to the road to chat with SRF and hear more about the founding the CBL, the Business Practice Credit, Compliance, and reflections on teaching.  And for those former SRF students, learn the truth about "Steve."

Listen to the podcast

ADR Event Today (11/4) at 6 in the Cherry Room

The BLS and ADR Society are sponsoring an ADR event today.  It looks to be really interesting and the recent coverage of ADR will be addressed.

Business Law and Alternative Dispute Resolution Society presentation

(Boston, Revised-10/28/15) New England Law | Boston: Discover how lawyers and businesses work together to “Get the Deal Done!”  This panel discussion will take place on Wednesday, November 4, 2015, from 6-8 p.m. in the Cherry Room at New England Law | Boston. 

Sponsored by the law school’s Business Law and Alternative Dispute Resolution (“ADR”) Society, the panel of distinguished attorneys will discuss how parties use different types of ADR processes to resolve conflicts that arise, for example, after a contract has been breached or to settle employment law or torts claims.

Attorney Brian Jerome '80

Alternative Dispute Resolution is a growing field in the American legal system, impacting the way parties solve their legal disputes.  According to the American Bar Association, “dispute resolution” is a term that refers to a number of processes that can be used to resolve a conflict, dispute or claim. Commonly referred to as alternative dispute resolution, there are several advantages to using these processes; it takes less time than litigation, and is also less expensive. ADR gives parties more flexibility in reaching a solution as well as more control over the outcome of the dispute. The three main types of alternative dispute resolution are arbitration, negotiation, and mediation.

Attorneys Brian Jerome '80, Conna Weiner, and John Wofford will discuss how lawyers today use the various alternative dispute resolution processes to solve legal and non-legal problems between parties when the deal goes bad.

Attorney Conna Weiner

Panelist Biographies

Attorney Brian R. Jerome is the founder and director of Massachusetts Dispute Resolution Services (MDRS), one of the first full-service ADR firms established in Massachusetts. Since 1991, Mr. Jerome has served exclusively as a mediator and arbitrator at MDRS, and has handled over 10,000 cases. Prior to founding MDRS, he worked in private practice at the Boston law firm Parker, Coulter, Daley and White, focusing on matters of civil litigation and trial, where he represented both plaintiffs and defendants on matters of civil litigation and trial.

Attorney Conna Weiner Attorney Weiner has over 25 years of experience as a litigator and in-house counsel in multinational corporations (including as a general counsel) and is now a mediator and arbitrator. As a neutral, she has served as an arbitrator in biotechnology evaluation, health plan provider termination, health plan coverage, franchise, creditor-debtor, general commercial and professional fee disputes (attorney-client). Ms. Weiner mediates regularly in connection with diverse matters, including construction, landlord-tenant, land, contract, and minor criminal disputes; Mediation Services of North Central Massachusetts; and other agencies.  Ms. Weiner currently serves on the panels of neutrals for the American Health Lawyers Association, International Institute for Conflict Prevention and Resolution (CPR), and Commercial Panel of the American Arbitration Association.

Attorney Jack Wofford

Attorney John ("Jack") Wofford is a mediator, facilitator and arbitrator with his own national and international practice based in Cambridge, MA. A lawyer, he has provided  impartial services for over 25 years in hundreds of matters in a wide range of subject areas, including commercial, construction, development, employment, environment, family business, insurance, organizations, public policy, real estate, small business, and transportation. He is a past co-chair of the ADR Committee of the Labor & Employment Law Section of the Boston Bar Association and has had his own dispute resolution practice since 1993.
 

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Compliance Career Networking Event

Massachusetts Law School Consortium & New England Law Boston

Present

“Careers In Compliance”

A networking event with compliance professionals from various industries

November 12 * 5:30PM-7:30PM * Suffolk University Law School

RSVP  to cso@nesl.edu as soon as you can

Dress Code is Business Casual

More from American Museum of Tort Law Grand Opening

Opening speech

Worst Toys Exhibit

Thanks to Peter Saradjian for pictures

New England Law Students attend Grand Opening of American Museum of Tort Law

Professor Lisa Laplante, Director of the Center for International Law and Policy, took a road trip with a group of students to the grand opening of the American Museum of Tort Law  in Winsted, Connecticut.  The delegation was sponsored by the Center for International Law and Policy (CILP) and the Center for Business Law (CBL).   Professor Laplante took the initiative to organize the delegation with Professor Lustig after receiving a phone call from Ralph Nader asking that the school be represented given that other law schools were also planning on being present.

More on the Museum via TortProf  Blog and the New Yorker

Here are the students with Ralph Nader

And here is an example of one of the exhibits

And, of course, who could forget the Corvair

Many thanks to Professor Laplante and the students for reporting back to us from the Grand Opening.

New England Rolls out Compliance Program

New England Law has rolled out our Compliance Program.  The CBL has been involved in the development of this important area and will continue to work to coordinate its various aspects now that it is in operation.

The posted story is great because it really ties together our school's strong alumni support and loyalty, experiential education, and hard-working students.

Eric Lustig

CBL Podcast: Preview of Upcoming Conference on UCC: Understanding Remedies

In our inaugural podcast, CBL faculty member Gary Monserud discusses the upcoming  UCC Conference on Remedies.  This is the fourth UCC Conference sponsored by the CBL.  Prof. Monserud has put together great panels and we hope that you can join us for the conference.

Please click here if you would like to subscribe to our podcast feed.

Prof. Schenkel on whether elite universities are abusing their tax subsidies

Professor Kent Schenkel adds his voice to the renewed controversy surrounding university endowments and tax exemption.  This post is cross-posted to the New England Faculty Blog.

Do Elite Universities Abuse their Tax Subsidies?

A recent op-ed in the New York Times with the provocative title “Stop Universities from Hoarding Money” once again raises the issue of university endowments. It focuses in large part on the extraordinary amounts elite universities either “hoard” or spend on fees to investment advisors and hedge funds in contrast to the much smaller sums spent on “tuition assistance, fellowships and prizes,” those things seen as the university’s true mission. The author, a tax professor, suggests that universities with endowments in excess of $100 million should be required to expend at least eight percent of their endowments each year. This is not a new proposal; similar proposals arise periodically. Of course entities with such large sums (Harvard’s endowment is reported to exceed $32.5 billion) are formidable players in politics so these calls generally go unheeded.

To understand why we all have an interest in these matters one must know a thing or two about federal tax law as it applies to charitable organizations. Universities are classified as “public charities” which status means that they can generally earn and accumulate money exempt from federal income tax. Policy experts sometimes refer to these benefits as a taxpayer “subsidy,” to the university, because exempting the university from tax is the same as taxing it like other entities and then returning to it its tax payments rather than using them for other public benefit. Imagine the potential tax liability of an institution like Harvard if its receipts (tuition, income and gains on investments) were subject to the income tax. That figure would reach at least tens of millions of dollars annually. The idea behind the tax exemption, of course, is that it allows universities to provide more research, knowledge and education—all seen as public goods. And tax-exemption is not the only federal tax subsidy from which universities benefit. Donors’ taxes are reduced when they make contributions to universities through generous tax deductions. Like exempting universities from the income tax, subsidizing donations to those institutions with taxpayer dollars increases the availability of the public goods produced by universities.

By implementing the foregoing tax benefits, Congress apparently assumed that we (the taxpayers) are getting what we pay for. But is that true as respects university endowments? Why does Harvard have $32.5 billion and what is it doing with all that money? Why did Yale pay $480 million to private equity fund managers compared with $170 million for tuition assistance, fellowships and prizes? Should these wealthy elite universities be spending more of their endowments on their core mission? That question has been considered by a couple of scholars. Unfortunately, the results seem to suggest that when it comes to at least some university endowments, we are not, in fact, getting what we pay for.

It seems to be generally accepted that a university should spend no more of its endowment than the endowment generates in income and (perhaps) capital appreciation. Many spend income only and allow capital appreciation to accrue, which will generally allow an endowment to grow much larger over time. These practices are justified on the basis of “intergenerational equity.” Maintaining the endowment’s value over time means that it can continue to support the university’s activities indefinitely. But a 1990 study found that the basis for the intergenerational equity argument had little merit. And the fact remains that elite university endowments are growing at substantial rates.

A more recent study, undertaken in 2010 sought to determine why universities, in the immediate aftermath of the 2008 financial crisis, slashed operating budgets, laid off employees, froze salaries, and delayed expansion projects, among other things, rather than dipping into multibillion dollar endowments. Reasons given by the universities were that pre-crisis spending was unsustainable, the endowments were legally restricted as to use, and that the investments were generally illiquid and difficult to access. This study found each of these reasons to be unpersuasive. The author concluded that the endowments served primarily as status symbols, and that universities would reach for any other source of funding to avoid diminishing their endowments.

There is certainly precedent for requiring tax-exempt organizations to expend a minimum percentage of their assets. Private foundations are different from public charities in that rather than being supported by a wide range of public contributions they might be funded only by one family or even one individual. Because private foundations are not “publicly-supported” federal tax statutes require them to expend at least five percent of their net investment assets on charitable endeavors each year. Failure to comply subjects them to a potentially crippling penalty tax. Under the same principle, universities should be using their tax-subsidized endowments to support their core charitable missions. Those who don’t should be penalized.

 

Kent D. Schenkel

kschenkel@nesl.edu

"The Universal Commercial Code: Understanding Remedies" symposium, October 1, 2015

The Center for Business Law's fall symposium, The Universal Commercial Code: Understanding Remedies, is slated for Thursday, October 1, 2015.  Please visit www.nesl.edu/UCCconference for details.

Upcoming CBL Events

We are hosting a couple of events and participating in a couple of other events.  Feel free to stop by.

• 9/8  Business Law Society General Meeting (3:15 room 305)

• 9/10 CBL Informational Meeting (5-5:55  room 501)

• 9/17 Introduction to the Academic Centers and Volunteer Opportunities at New England (4-5:30 Cherry Room)

• 10/1 Annual Uniform Commercial Code Conference: Understanding Remedies (12:30-5 Cherry Room)

Professor Hyman on King v. Burwell

Our first substantive post is cross-posted with the New England Law Faculty Blog.  Thanks to Wilton Hyman for his thoughts and comments on this important case.  And thanks to Brandon Arey and the Law Review on-line staff for their editing work.

Recent Supreme Court Term: King v. Burwell

by Professor Wilton Hyman

“The issue in this case is whether the Act’s [the Affordable Care Act] tax credits are available in States that have a Federal Exchange rather than a State Exchange.”King v. Burwell, 576 U.S. __ (2015) (p. 5). The Affordable Care Act (ACA) requires each state to create its own health insurance Exchange, however, if a state refuses to do so, then the Secretary of Health and Human Services (HHS) is authorized to “establish and operate such Exchange within the State.” Sec. 18041(c)(1).” (p. 5). Only sixteen States and the District of Columbia created their own Exchanges, while thirty-four States utilize the federal Exchange administered by the Department of Health and Human Services. (p. 6).

The tax credits, which are authorized by IRC sec. 36B, are allowed to “applicable taxpayers” who obtain health insurance through “an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care act….” (p. 5). The IRS addressed the availability of tax credits to individuals acquiring health insurance through an HHS Exchange by adopting the definition of “Exchange” as used in an HHS regulation, 45 CFR sec. 155.20, which provided that taxpayers are eligible for a tax credit if they are enrolled in an Exchange which serves the individual market, “regardless of whether the Exchange is established and operated by a State… or by HHS….” (p. 6).

In prior proceedings, the U.S. District Court for the Eastern District of Virginia granted the Defendants’ Motion to Dismiss, 997 F.Supp.2d 415 (2014), and the District Court judgment was affirmed by the U.S. Court of Appeals for the 4^th Circuit, 759 F.3d 358 (2014).

Justice Roberts, who was joined by Justices Kennedy, Ginsberg, Breyer, Sotomayor, and Kagan, wrote the majority opinion, and held that tax credits for health insurance under IRC sec. 36B applied to individuals acquiring coverage on federal health insurance exchanges under the Affordable Care Act (ACA), even though sec. 36B states that the credits apply to insurance plans that are enrolled in through “an Exchange established by the State under [42 U.S.C. sec. 18031].” Justice Roberts’ reasoning was based on the ambiguity reflected in sec. 36B when it was interpreted in connection with other provisions of the ACA, and the manner in which those ambiguities were either consistent or inconsistent with Congress’ intent that the ACA expand health care coverage, and lower the cost of health insurance as a means of facilitating that expansion of coverage. The Congressional intent to expand health insurance coverage through the ACA would have been undermined if the sec. 36B tax credits were not applicable to individuals enrolled in health insurance plans through the federal exchanges.

Justice Roberts discussed the history of health reform in the United States and how states which instituted guaranteed issue, which required insurers to cover persons regardless of health status, and community rating, which restricted insurers from taking health status into account in setting premiums, ultimately led to “adverse selection,” which occurred when a person would only seek insurance once they became sick or in need of health care coverage. Because insurers were required to cover persons regardless of health status and could not take health status into account in setting premiums for specific insureds, they were forced to raise rates for all insureds in order to account for the higher health costs, increasing the cost of coverage and reducing the numbers of individuals who could afford coverage. Justice Roberts wrote that “This led to an economic “death spiral.” As premiums rose higher and higher, and the number of people buying insurance sank lower and lower, insurers began to leave the market entirely.” (p. 2).

Congress, relying on the Massachusetts health reform effort in 2006, included in the ACA a guaranteed issue and community rating component, but also included an individual mandate requiring most individuals to maintain health insurance coverage (either employer-provided, private coverage, or government-subsidized coverage), or pay a penalty. For individuals whose household income is between 100% and 400% of the federal poverty level income amount, they are eligible for a tax credit pursuant to IRC sec. 36B. The tax credit lowers the cost of health insurance for working class and middle class taxpayers, while the mandate brings into the health insurance pool more young and healthy persons (who would otherwise not obtain coverage) whose premiums subsidize the cost of coverage for sick and older persons under the ACA. ( p.4).

Justice Roberts, in discussing Congress’ awareness of the necessity of the individual mandate and the tax credit to the reform effort, writes: “These three reforms are closely intertwined. As noted, Congress found that the guaranteed issue and community rating requirements would not work without the coverage requirement. Sec. 18091(2)(I). And the coverage requirement would not work without the tax credits. “The reason is that, without the tax credits, the cost of buying insurance would exceed eight percent of income for a large number of individuals, which would exempt them from the coverage requirement. Given the relationship between these three reforms, the Act provided that they should take effect on the same day—January 1, 2014....” (p. 5).

Justice Roberts determined that due to the “economic and political significance” of the tax credits and their central role in the statutory scheme Congress created under the ACA, “It is especially unlikely that Congress would have delegated” to the IRS the authority to resolve any ambiguities with the tax credit under its regulatory authority without expressly doing so. He concludes that it is the Court’s, and not the IRS’s duty to determine the correct interpretation of sec. 36B. (p 8).

Justice Roberts’ analysis first finds that the authority granted to the Secretary of HHS to “establish and operate such Exchange within the State,” pursuant to sec. 18041(c)(1) of the ACA, shows that the HHS exchanges and the state Exchanges under sec. 18031 “are equivalent” by virtue of HHS establishing “such Exchange” under 18041, or, that HHS is to establish “the same Exchange that the State was directed to establish under Section 18031.” (p. 9-10).

Justice Roberts then analyzes sec. 36B in context with other provisions of the ACA (sec. 18032 defining “qualified individual” and sec. 300gg-91(d)(21) defining “Exchange”) and determines that a federal Exchange may be considered as one “established by the State” in order for the federal Exchange to function consistently with those other provisions within the statutory scheme of the ACA, resulting in ambiguity in the interpretation of sec. 36B within the context of the ACA’s statutory scheme, as compared to a literal interpretation of “established by the State” under sec. 36B. (p. 10-13). 

Applying the principle of statutory interpretation that “the words of a statute must be read in their context with a view to their place in the overall statutory scheme,” Justice Roberts concludes that a strict interpretation of sec. 36B must be rejected because “it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very ‘death spirals’ that Congress designed the Act to avoid.” (p. 9, 15).

Justice Roberts holds that the sec. 36B tax credits are allowed for health insurance purchased on “any Exchange created under the Act.”

Justice Scalia wrote the dissenting opinion and was joined by Justices Thomas and Alito. Justice Scalia applies a literal interpretation of sec. 36B and concludes that the tax credits only apply to Exchanges established by the States, therefore, no tax credits are allowed for health insurance purchased on a federal Exchange. (p. 2).

In contrast to Justice Roberts’ broad-based ambiguity analysis, which relies on his interpretation of sec. 36B in the context of the purpose and design of the ACA and his conclusion that a literal interpretation of the statute would conflict with the ACA’s design and purpose, Justice Scalia focuses solely on the language of the statute itself in determining whether there is any ambiguity, and finding no ambiguity in the statutory language, concludes that there is no reason to consider the ACA’s purpose and design for the purpose of interpreting sec. 36B. (p. 13).

Justice Scalia suggests that the design of the ACA was intended to incentivize states to create and operate their own exchanges and that limiting the 36B tax credits to health insurance plans purchased on a state exchange was one means of encouraging states to create their own exchanges. (p. 15-16). In light of that suggestion, he finds that interpreting sec. 36B to allow tax credits for health insurance purchased on a federal Exchange eliminates any need on the part of the state to create its own Exchange since the tax credit will be available on a federal Exchange. (p. 16).

Justice Scalia also states that the majority, rather than interpreting sec. 36B is actually rewriting the statute, which is a duty belonging to Congress.

Discussion

This case, at its most basic level, is a statutory interpretation dispute. The lower courts which decided this case came to the same judgment as the Supreme Court, but each with slightly different reasoning.

Justice Roberts’ opinion applies a broad and policy-based analysis of both the legislative intent and design of the ACA in order to determine not only how the health insurance Exchanges were intended to operate, but also as a means of determining which interpretation of sec. 36B was most consistent with Congress’ purpose and design for the ACA.

Justice Scalia applied a more limited analysis, focusing solely on the statutory language of sec. 36B, and finding no ambiguity in the statute itself, determined that there was no need to analyze the purpose and the design of the ACA in interpreting the statutory language.

Justice Scalia’s criticism that the Court is rewriting the statute, not interpreting it, is very interesting. I think that your conclusion as to whether the Court is interpreting sec. 36B, or rewriting it, depends upon whether you agree with Justice Roberts’ or Justice Scalia’s approach in determining and analyzing statutory ambiguity. In light of the complex design and interlocking provisions of the ACA, and the need to analyze sec. 36B in the context of those aspects of the law in order to fully comprehend how it fit within the statutory scheme, Justice Roberts, as well as the lower courts, decided the case correctly.

Welcome to the New England Law|Boston Center for Business Law (CBL) Blog.  The CBL is one of three academic centers at New England Law.  Our mission in its most simple terms is to help students prepare for the practice of business law.  We define both business and practice quite broadly.

 The CBL faculty (Gary Bishop, Allison Dussias, Wilton Hyman, Peter Karol, Wayne Lewis, Eric Lustig, Gary Monserud, Kent Schenkel and Russ VerSteeg) bring a wide range of professional and scholarly background to our mission.  We also work with an extensive network of alumni and other professional contacts.

So please look at our website for more information.  And please follow us on Twitter (@NELBostonBusLaw)

Your input is welcome. Please let us know what you think.

Thanks for looking.

Eric Lustig
Director of CBL