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Protecting Investors from Unpaid Securities Arbitration Awards

August 15, 2010 by Brittany Grome

Michael Carroll, Executive Editor, Albany Government Law Review Member

Introduction


“McGinn, Smith invested nearly all of [Mr.] Steinkirchner’s life savings into a high-risk investment fund . . . ‘It virtually destroyed his retirement plan’ . . . ‘He had to go back to work.”[1]


McGinn, Smith, a once prominent investment firm in Albany, New York, has been accused by the Securities and Exchange Commission (“SEC”) of “running a $136 million [Ponzi] scheme that funneled cash from hundreds of investors into a sex-themed cruise line operation and other highly speculative businesses while funding a lavish lifestyle for [the] company[‘s] founders.”[2] According to the SEC, the alleged Ponzi scheme primarily concerned McGinn, Smith’s sale of private placement securities to over 900 different investors.[3] The SEC’s complaint alleges that the private placements carried “a high-degree of risk” due to the fact that these securities were unregulated and illiquid.[4] McGinn, Smith allegedly sold these products to investors by promising high rates of return (in some cases 13%) while reassuring the clients that the investments were safe.[5] The SEC’s complaint states that at least one investor claimed that he was “steered . . . away from investing in blue chip stocks like General Electric as too risky, and [was] told . . . that the Fund private placements were safer investments.”[6]

Since the beginning of 2010, and prior to the SEC lawsuit, several former McGinn, Smith customers were awarded damages in arbitration actions against the investment firm.[7] In fact, the author of this article worked on a successful arbitration action filed against McGinn, Smith while serving as a Law Intern in Albany Law School’s Securities Arbitration Clinic.  Additionally, as of April 2010, former customers of McGinn, Smith have been awarded over $3 million in damages by arbitrators,[8] and one attorney practicing in the Albany area claims to be handling 10 more arbitration actions against the firm.[9] For these aggrieved customers, there is a risk that they may never recover their losses.  Currently, McGinn, Smith is in receivership,[10] and the first report of the receiver calls into question whether the firm’s assets will be sufficient to cover its liabilities.[11] Potentially, this could leave investors from the Capital District (and elsewhere) with no chance of recovery.

Unfortunately, this is not a unique circumstance.  In 2001, an estimated 33% of securities arbitration awards throughout the United States “were not fully paid.”[12] In 2004, this rate was cut in half, as 15% of awards were unpaid.[13] Today, after the recent financial market collapse, it is safe to assume that defrauded investors will continue to face the prospect of never receiving arbitration awards from their fraudulent or out-of-business brokers.  This paper will briefly explain the securities arbitration process, analyze why unpaid awards should be reduced or eradicated, and evaluate two proposed solutions for resolving the issue of unpaid awards.

What is Securities Arbitration?

After the United States Supreme Court’s decision in Shearson/American Express v. McMahon[14] in 1987, arbitration has been the primary forum used to “resolve disputes between individual investors and broker-dealer firms.”[15] FINRA, an organization created in 2007, oversees the securities arbitration process.[16] Customers of brokerage firms “typically . . . initiate[] arbitration proceedings. . . . [And] the majority of claims . . . involve disputes related to brokers’ sales practices.”[17] One claim that customers typically assert against their brokers involves allegations that the broker recommended “unsuitable investments.”  Before making a recommendation to buy, sell, or hold a security, a broker must “have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts.”[18] These facts include the customer’s financial status, tax status, and investment objectives.[19]

Another claim that customers bring against their brokers is called “churning.”  A broker can churn a client’s account by engaging in “excessive trading.”[20] This excessive trading generates greater commission payments, and therefore, greater income for the broker.  If a customer brings an unsuitability or churning claim (among others) against a broker, the dispute is heard before “[o]ne or three arbitrators.”[21] The number of arbitrators is determined by the amount of money damages the claimant is seeking.[22] The arbitration “panel’s decision is final and [it] is only reviewable under limited, statutorily enumerated circumstances.”[23] If the arbitrators issue an award, it “must be paid within thirty days . . . unless an appeal is sought.”[24]

Why Should Unpaid Awards be Reduced or Eradicated?

According to FINRA, “over 80 percent of all unpaid awards involve a firm or individual that is no longer in business.”[25] For customers who win arbitration awards against “insolvent or vagabond brokers,” their chance of recovery is “hopeless.”[26] There are several reasons for trying to reduce or eradicate the number of unpaid awards that result from the securities arbitration process.  First, if an arbitration award goes unpaid, individual investors are forced to pay for the mistakes of financial regulators who failed to properly supervise brokers.[27] This amounts to “unfair burden-shifting” because customers should not have to pay for a regulator’s inability to identify “broker-dealer delinquency.”[28] Second, reducing the amount of unpaid awards would “contribute to the restoration of trust in the markets shaken by . . . [the financial collapse] and Wall Street scandals.”[29] This trust could lead to greater confidence in the U.S. market and “foster increased public participation in shareholding, which benefits the securities industry.”[30] Third, non-payment of arbitration awards undermines the securities arbitration process.  Permitting unpaid awards “constitutes a waste of [FINRA] resources” and fundamentally harms investors seeking justice.[31]

How to Remedy Unpaid Awards

Strong policy reasons exist for remedying the non-payment of arbitration awards.  One solution for reducing unpaid awards involves creating a fund administered by FINRA that would compensate investors.[32] This “FINRA fund” could be financed with “charges on investor transactions, fees on broker-dealers, or funds obtained from [FINRA] money penalties.”[33] Critics of this solution claim that it will increase costs to brokers and customers “in the aggregate” and should be rejected.[34] However, under current protocol, “the costs of unpaid awards are currently borne by an unfortunate few investors.”[35] As stated previously, this “misplaced burden . . . has the potential to erode investor confidence in the capital markets” because any individual investor could suffer a catastrophic loss without any chance of recovery.[36] These costs can be dispersed throughout the industry as a whole by implementing a “FINRA fund.”  This fund could remove the burden placed on “randomly-chosen investors” who currently bear the costs of failed regulatory oversight.[37]

A second solution advocated by legal scholars includes expanding the coverage of the Securities Investor Protection Corporation (“SIPC”) to compensate investors for unpaid awards.[38] The SIPC currently addresses claims for “securities and cash held in a customer’s account at the time a broker-dealer fails. . . . [T]hese claims [are protected] in amounts of up to $500,000.”[39] However, the SIPC does not cover “customer losses resulting from fraud, misrepresentation, [or] churning . . . [and the] SIPC does not cover unpaid arbitration awards.”[40] Critics of this solution have argued that increasing the coverage of SIPC would deplete the SIPC fund and eventually pass greater costs onto broker-dealers and customers.[41] Conversely, securities lawyer William Shepherd noted that the brokerage industry makes over $100 billion in annual revenues, and stated that “‘if but one percent of these revenues went to insure its members’ conduct, more than $1 billion would be available to compensate those harmed by wrongdoing.’”[42] It has also been argued that the SIPC is the organization best equipped to handle unpaid awards because the purpose of the organization is to “‘restore investor confidence in the capital markets,’” and the SIPC has experience dealing with broker-dealer failures and liquidations.[43]

Conclusion

The SEC’s case against McGinn, Smith demonstrates that Ponzi schemes and financial frauds may not only be limited to Wall Street.  It is an indisputable fact that arbitrators have found McGinn, Smith liable for compensatory damages in their dealings with certain investors.  If these awards continue to go unpaid, residents of the Capital District will unfortunately bear the cost of regulatory failure.  The two solutions proposed in this paper seek to illuminate this issue and foster debate on how to resolve the problem of unpaid securities arbitration awards.

[1] Larry Rulison, Albany Firm is Paying Price: Arbitrators Award Millions in Payments to Clients of Dormant McGinn, Smith, Times Union, Apr. 27, 2010, available at http://www.timesunion.com/AspStories/story.asp?storyID=925523&category=ALBANY&BCCode=&newsdate=4/27/2010&TextPage=1.

[2] Larry Rulison, McGinn, Smith Complaint: SEC Accuses Albany Brokerage of Running $136 Million Scheme, Times Union, Apr. 21, 2010, available at http://www.timesunion.com/ASPStories/Story.asp?StoryID=923587&TextPage=1.

[3] Complaint at 2, SEC v. McGinn, Smith & Co., No. 1:10-cv-457 (N.D.N.Y. filed Apr. 20, 2010), available at http://www.sec.gov/litigation/complaints/2010/comp-pr2010-62.pdf.

[4] Id. at 10, 17.

[5] Id. at 15, 22.

[6] Id. at 12.

[7] Rulison, supra note 1.

[8] Id.

[9] Id.

[10]Andrew L. Kaufman, The First Judge Cardozo: Albert, Father of Benjamin, 11 J.L. & Religion 271, 305 n.141 (1995) (“A receivership proceeding involves the appointment by a court of a ‘receiver’ who takes custody of the assets of a debtor in order to preserve them for, and divide them among, its creditors.”).

[11] First Report of the Receiver at 4–5, SEC v. McGinn, Smith & Co., No. 1:10-cv-457 (N.D.N.Y. filed June 4, 2010), available at http://www.mcginnsmithreceiver.com/reports/No49.pdf.

[12] Per Jebsen, How to Fix Unpaid Arbitration Awards, 26 Pace L. Rev. 183, 186 (2005).

[13] Id. at 187.

[14] 482 U.S. 220 (1987).

[15] Marilyn Blumberg Cane & Marc J. Greenspon, Securities Arbitration: Bankrupt, Bothered & Bewildered, 7 Stan. J.L. Bus. & Fin. 131, 134 (2002); Barbara Black & Jill I. Gross, Making It Up As They Go Along: The Role of Law in Securities Arbitration, 23 Cardozo L. Rev. 991, 991 (2002).

[16] About the Financial Industry Regulatory Authority, http://www.finra.org/AboutFINRA/ (last visited July 25, 2010).

[17] Cane & Greenspon, supra note 15, at 135.

[18] NASD Manual Rule § 2310(a), available at http://finra.complinet.com/en/display/display.html?rbid=2403&record_id=4315&element_id=3638&highlight=2310%28a%29#r4315.

[19] Id. § 2310(b).

[20] Id. § IM-2310-2(b)(2), available at http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=3640.

[21] Cane & Greenspon, supra note 15, at 134.

[22] Id.

[23] Id. at 134–35.

[24] Id. at 135.

[25] FINRA: Arbitration Case Flow, http://www.finra.org/ArbitrationMediation/Parties/ArbitrationProcess/ArbitrationCaseFlow/ (last visited July 25, 2010).

[26] Cane & Greenspon, supra note 15, at 138.

[27] Jebsen, supra note 12, at 195.

[28] Id.

[29] Id. at 194.

[30] Id.

[31] Id. at 193.

[32] Id. at 200.

[33] Id.

[34] Id. at 201.

[35] Id.

[36] Id.

[37] Id. at 202.

[38] Id. at 219.

[39] Id. at 220.

[40] Cane & Greenspon, supra note 15, at 138.

[41] Id. at 140.

[42] Id.

[43] Jebsen, supra note 12, at 224 (quoting Secs. Investor Prot. Corp. v. Barbour, 421 U.S. 412, 415 (1975)).

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No Fault Divorce: A Look at the Past and Future of New York Divorce Law

August 2, 2010 by Brittany Grome

Michael Telfer, Editing Chair, Albany Government Law Review Member           

            On July 1, 2010, the New York Assembly passed a bill making no-fault divorce legal in New York, following in the footsteps of the State Senate.[1]  As a result of Governor Patterson’s expected signing of the bill, New York will become the last state in the country to adopt some form of no-fault divorce.[2]  This new law will allow couples residing in the state “to dissolve their marriage by mutual consent and without requiring one spouse to accuse the other of adultery, cruelty, imprisonment, or abandonment.”[3]  Upon the law going into effect, one spouse will also be able “to divorce the other unilaterally.”[4] 

The Evolution of New York Divorce Law

            Divorce law in New York has evolved greatly from its first adoption in 1787, when the legislature relinquished its exclusive power to grant divorces and enacted a law “permit[ing] judicial divorce on the sole ground of adultery.”[5]  Both the legislature and the courts shared the power to grant divorces until 1846, when “[l]egislative divorce was constitutionally abolished.”[6]   In 1877 divorce law evolved further when the legislature authorized courts to “deny divorce, even where adultery had been proven, if the plaintiff had connived in the procurement of the evidence, condoned the offense, or was” also guilty of adultery.[7]  These three defenses to adultery remain in place today.[8]

            In order to avoid the strictness of New York divorce law, by the late 19th century some New Yorkers began to travel to other states which had less stringent divorce laws, where they established residency in order to “procure a divorce.”[9]  This practice was aided by the inaction of the Legislature, as “[b]etween . . . 1900 and 1933, fifteen different legislators sponsored bills to modernize the law” of which a majority failed to pass out of committee.[10] 

            The lack of support for divorce bills has been attributed to the strength of the Catholic Church and other voting blocs who opposed the liberalization of marriage.[11]  Relying on the strength of Catholic voters, “Democrats often avoided controversial divorce issues” as did Republicans who did not want “political risks involved in promoting divorce reform.”[12]  The strength of the Catholic resistance was seen when a Republican assemblyman in 1934 attempted to add desertion as a new divorce ground.[13]  Even though the bill had the strong support of bar associations and religious organizations, as it provided poor women to get out of their marriages after being deserted, the Catholic opposition defeated its passage.[14]  The opposition was so strong around the mid 20th century that “[a]s soon as a bill to liberalize divorce appeared before the New York legislature, a Catholic Welfare League representative would contact lawmakers to remind them that the church was opposed.”[15]

            Due to New York not allowing divorce unless adultery was committed, residents in the mid 20th century followed what their ancestors had done in the 19th century to end their marriages without actually divorcing in New York: traveling to other states to obtain divorces or obtaining annulments in New York.[16]   “By the 1950s, New York had the lowest recorded divorce rate in the country, [b]ut the incidence of annulments, migratory divorce, along with separations and desertions, combined to raise New York’s total rate of marital disruption well above the national average.”[17]

            With the passage of legislation in 1967, the grounds for divorce were expanded beyond adultery nearly 200 years after judicial divorce was approved in New York.[18]  “[T]he law now provided for divorce on the grounds of adultery, cruel and inhumane treatment, abandonment for two or more years, confinement in prison for three or more years, and living apart for a period of two years or more pursuant to an agreement or a judicial separation decree[judgment].”[19]  The two year provision for separation conversion into a divorce was reduced to one year in 1970[20] and the time period required for an abandonment claim was later reduced to one year.[21] 

            No single event caused this great evolution, but rather a multitude of factors combined to cause this change.  These factors included the 1965 Court of Appeals case, Rosentiel v. Rosentiel, which legalized bilateral Mexican divorce.  In Rosentiel, the Court of Appeals criticized the restrictive divorce law in the state as it showed that the rich could divorce, while the poor were unable to procure a divorce without proving adultery or travelling to other locations.[22]  Other factors included a report from the Legislature which heavily criticized the divorce law, increased media coverage of hearings which attacked the law as causing parties to perjure themselves to gain divorce, Governor Nelson Rockefeller’s support for expanding the law, the reapportionment of legislative districts which “increased representation by urban legislators,” thereby reducing the power of “upstate Republicans opposed to reform,” and the increased influence of “liberal Catholics,” who with “leading clergy of all faiths, gathered together in vocal support of reform.”[23]

            Today, with the two conversion grounds for divorce, the spouse is forced to wait one year after a judgment or agreement of separation.  “[I]n order to obtain [a] judicial decree or judgment of separation a showing of fault is required” and a divorce will be granted only after the parties show proof that they have followed through with the decree.[24]  The only ground that is somewhat characterized as no-fault, is when the parties have lived “pursuant to a [mutually agreed to] written agreement of separation filed either with the county clerk or with the court for at least one year.”[25]  After the one year has passed, one of the spouses can sue for no-fault divorce based on proof that the agreement’s terms were followed, including “resolution of issues such as custody, property distributions, and alimony which many couples [may] find difficult to work out.” [26] 

            “The current trend for couples who (1) both want out of the marriage, but (2) are unwilling to wait the required one-year separation term, and (3) have no recognized grounds under which to file, is to allege constructive abandonment based on a failure to engage in sexual relations.”[27]  Spouses who do not meet a fault ground or have a spouse who refuses to sign the separation agreement in the absence of no-fault divorce in New York have been forced “to live apart indefinitely without the prospect of a divorce” until abandonment can be raised successfully or a bilateral agreement can be worked out.[28]

No Fault Divorce Comes to New York

            In addition to the six mentioned grounds, one now will be able to procure a divorce by stating, under oath, that the marital relationship has “broken down irretrievably for a period of at least six months.”[29]  In order to safeguard the financial needs and other rights of spouses and children, no divorce will be granted

“until the economic issues of equitable distribution of marital property, the payment or waiver of spousal support, the payment of child support, the payment of counsel and experts’ fees and expenses as well as the custody and visitation with the infant children of the marriage have been resolved by the parties, or determined by the court and incorporated into the judgment of divorce.” [30] 

In addition, no-fault divorce will not become available until sixty days after the legislation is signed and will only affect divorce actions commencing after the effective date.[31]

            Similar justifications which were used in the 1960s to expand New York’s divorce law, were announced by the Legislature in expanding the law, including the fact that “many people divorce for valid reasons that do not fall under [the current] classifications” and that people are “forced to invent false justifications to legally dissolve their marriages.” [32]   The Legislature noted that “false accusations and the necessity to hold one partner at fault” often results in conflict which is “harmful to the [emotional well-being of] . . .  partners and destructive to the emotional well being of children [because] prolonging the divorce process adds additional stress to an already difficult situation.”[33] 

            Legislators also cited no-fault divorce’s impact on victims of domestic violence, since this new ground allows victims to get out their marriages without proving fault or relying on a bilateral separation agreement that their partners may not agree to.[34]  Legal Aid and the New York Bar Association have also come out in favor of no-fault divorce.[35]  These organizations noted that “the process of getting a divorce in New York has often . . . been criticized as taking too long, . . . costing too much in . . . emotional hardship,” and that with the enactment of no-fault divorce, money will be saved by spouses seeking divorces who will not have to pay attorneys to hire experts or private investigators in order to find a basis for fault claims.[36]

            While the law has supporters, it also has detractors.  The state chapter of the National Organization for Women (NOW) voiced its opposition to the passage of the law arguing that it “give[s] judges permission to ignore ‘cruel and inhuman treatment’” and that the “mon[ied] spouse (usually the husband) would have freedom to shelter the marital assets, hire an attorney, and start divorce proceedings before his wife ever suspects what is happening.”[37]  The Catholic Conference of New York has also stated its opposition to no-fault divorce, arguing that now it will be “too easy to end a marriage” given that “marriage is supposed to be for life.”[38]  It has noted that in other states and other countries that have adopted no-fault divorce laws, such as Canada and England, there has been an increase in divorce rates that negatively impact “children, adults, families, and society as a whole.”[39] 

Addressing the Opposition

            A representative from the Catholic Conference was quoted as saying no-fault divorce “makes it easier to get out of marriage than it is to get out of a cell phone contract.”[40]  This categorization of no-fault divorce is misleading, as a decision to divorce is not something a spouse makes on a whim, but rather is made after serious thought, discussion, and sometimes trial separations due to its impact on finances and the parties involved, including children.  Divorce results in a continued connection between the spouses for years, as one spouse will often have to provide maintenance for the other spouse for life or until the other spouse gets remarried.  The former spouses will also have to work together in regards to child custody and child support.  Furthermore, while New York has one of the lowest divorce rates in the nation,[41] having no-fault would not cause the marriage to end immediately resulting in an instant increase in the divorce rate, as a six month waiting period after the marriage has become unsalvageable and testimony under oath regarding the inability to salvage the marriage is required to end the marriage. 

            NOW’s argument that cruel and inhuman treatment may be ignored as a ground for divorce is valid, but their argument that marital assets would be shielded and the monied spouse can commence divorce proceedings without the other spouse’s knowledge, is mitigated by two other bills passed by the Legislature in conjunction with the no-fault bill.[42]  One of the bills establishes uniform guidelines for maintenance given that under the current law, “awards of maintenance differ widely for couples with similar incomes and similar length of marriage” which has been said by the Legislature to “undermin[e] confidence in the judicial system and encourage[e] costly litigation by impeding the settling of cases.”[43]  The second bill provides a “rebuttable presumption of interim attorney’s fees to the non-monied spouse in a matrimonial case or in proceedings to enforce a judgment” such as future maintenance which will ensure “all parties can afford counsel from the beginning of divorce proceedings.[44]  The bill also “authorizes the court to order expert fees to be paid by one party to the other during the course of the case to enable the party to carry on or defend the action” and further requires “parties . . . to provide financial information to the court to enable the court to make its determination regarding counsel and expert fees”[45]

            The New York City Chapter of NOW has noted that “post-marital compensation guidelines . . . are a critical step forward to creating monetary fairness for the non-monied spouse, most often the woman” and that “interim counsel fees . . . create an even playing field by ensuring that the non-monied spouse gains access to marital funds to cover legal fees.” [46] As a result, “no longer will the monied spouse be able to take advantage of the non-monied spouse by being the only one with legal representation.”[47]    

Conclusion

            Divorce is never an easy process for any of the parties involved.  The emotional impact of divorce affects former spouses, children, families, and friends for a lifetime.  By allowing divorcing couples the ability to claim no-fault after alleging six months of unsalvageable marriage, the Legislature has allowed these spouses to dissolve their marriage in a more efficient manner, rather than forcing them to prove fault or wait a year for a bilateral agreement or separation judgment.  By providing counsel fees, guidelines for maintenance, and ensuring the court will not grant no-fault divorce until maintenance, child support, equitable distribution, child custody, and other issues are worked out, the Legislature has addressed past marital laws which unfairly treated the non-monied spouse, whether a man or a woman.  There is no way to tell how the new law will affect the divorce rate until the law goes into effect.  However, the new law will result in easier divorces by allowing spouses, who do not meet any of the six grounds for divorce, a way to move on with their lives.

[1] Nicholas Confessore &Anemona Hartocollis, Albany Approves No-Fault Divorce and Domestic Workers’ Rights, N.Y. Times, July 2, 2010, at A21, available at http://www.nytimes.com/2010/07/02/nyregion/02albany.html.

[2] Id.; Kenneth Lovett and Glenn Blain, New York Legislators Approve No-Fault Divorce, Gov. Paterson Will Likely Sign Bill To Ease Splits, N.Y. Daily News, July 2, 2010, http://www.nydailynews.com/ny_local/2010/07/01/2010-07-01_new_york_legislators_approve_nofault_divorce_gov_paterson_will_likely_sign_bill_.html#ixzz0spfguEPL (last visited July 25, 2010).

[3] Confessore &Anemona Hartocollis, supra note 1.

[4] Id.

[5] J. Herbie DiFonzo & Ruth C. Stern, Addicted to Fault: Why Divorce Reform Has Lagged in New York, 27 Pace L. Rev. 559, 564 (2007).

[6] Id. at 565. 

[7] Id. at 566.

[8] N.Y. Dom. Rel. Law § 171 (McKinney 2010). 

[9] DiFonzo & Stern, supra note 5, at 567.

[10] Id. at 568.

[11] Id. at 569.

[12] Id.

[13] Id.

[14] DiFonzo & Stern, supra note 5, at 569.

[15] Id. at 570.

[16] Id. at 572–74.

[17] Id. at 576.

[18] Id. at 579.

[19] DiFonzo & Stern, supra note 5, at 579.

[20] Id. at 580.

[21] N.Y. Dom. Rel. Law § 170(2) (McKinney 2010). 

[22] DiFonzo & Stern, supra note 5, at 577.

[23] Id. at 577–79.

[24] Gabriella L. Zborovsky, Baby Steps to “Grown Up” Divorce: The Introduction of the Collaborative Family Law Center and the Continued Need for True No-Fault Divorce in New York, 10 Cardozo J. Conflict Resol. 305, 311 (2008).

[25] Id. at 312.

[26] Id.

[27] Id. at 313.

[28] Id.

[29] 2009 N.Y. Sess. Laws § 3890 (McKinney), available at, http://open.nysenate.gov/legislation/bill/S3890A.

[30] Id.

[31] Id.

[32] 2009 N.Y. Sess. Laws § 3890 (McKinney), available at http://open.nysenate.gov/legislation/bill/S3890A.

[33] Id.

[34] New York State Senate Majority Press, Majority Brings Marriage Law Into 21st Century, http://www.nysenate.gov/press-release/majority-brings-marriage-law-21st-century (last visited July 25, 2010).

[35] Id.; Ilya Marritz, No-Fault Divorce Law Passes State Senate, WNYC News, June 16, 2010.

http://www.wnyc.org/news/articles/156153?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wnyc%2Fnewsarticles+%28News+from+WNYC+New+York+Public+Radio%29 (last visited July 31, 2010).

[36] Id.

[37] Press Release, National Organization for Women, National Organization for Women–NYS Decries No-Fault Divorce Bill S3890a/A9753a; Women Senators Dance as They Throw Women and Children Under the Bus (June 16, 2010), available at http://www.nownys.org/pr_2010/pr_061610.html.

[38] David King, No-Fault Divorce Creates Strange Bedfellows, Gotham Gazette, http://www.gothamgazette.com/article/albany/20100520/204/3273 (last visited July 25, 2010).

[39] Id.

[40] Lovett and Blain, supra note 2.

[41] No-Fault Divorce: Let’s Call The Whole Thing Off, N.Y. Daily News, June 24, 2010, http://www.nydailynews.com/opinions/2010/06/24/2010-06-24_nofault_divorce_lets_call_the_whole_thing_off_why_does_ny_want_weaker_families.html (last visited July 25, 2010).

[42] National Organization for Women, supra note 36; 2009 N.Y. Sess. Laws § 7740A (McKinney), available at http://open.nysenate.gov/legislation/bill/S7740A; 2009 N.Y. Sess. Laws. § 4532A (McKinney), available at http://open.nysenate.gov/legislation/bill/S4532A.

[43] 2009 N.Y. Sess. Laws § 7740A (McKinney), available at http://open.nysenate.gov/legislation/bill/S7740A.

[44] 2009 N.Y. Sess. Laws § 4532A (McKinney), available at http://open.nysenate.gov/legislation/bill/S4532A; New York State Senate Majority Press, supra note 34.

[45] 2009 N.Y. Sess. Laws § 4532A (McKinney), available at http://open.nysenate.gov/legislation/bill/S4532A.

[46] Letter to the Editor, Sonia Ossorio, Letters: A New Path to Divorce, N.Y. Times, June 21, 2010, at A26, available at http://www.nytimes.com/2010/06/22/opinion/l22divorce.html?_r=1&scp=1&sq=ossorio&st=cse.

[47] Id.

Posted in Matrimonial Law | Tagged , , , , , , , | 1 Comment »

The Supremacy Clause v. S.B. 1070: Can Arizona’s Strict Illegal Immigration Law Withstand Constitutional Challenge?

July 18, 2010 by Brittany Grome

Michael Carroll, Executive Editor, Albany Government Law Review Member

Introduction

            Trackers searching for Rob Krentz could not locate him using a thermal imager.  His body was too cold.  Rob Krentz was dead.[1]

            Mr. Krentz was a member of “one of the best-known and oldest ranching families . . . in southeast Arizona.”[2]  On March 27, 2010, he was found dead on his 35,000 acre ranch after suffering fatal gunshot wounds.[3]  Prior to his death, Mr. Krentz was riding around his property in an all-terrain vehicle when he radioed to his brother that he “was aiding someone he believed to be an illegal immigrant.”[4]  Presently, the authorities are unsure who killed Mr. Krentz.[5]  However, because of the “radio transmission . . . and heavy drug and illegal immigrant trafficking in that area,” it is widely suspected that Mr. Krentz was killed by a cross border drug smuggler or human trafficker.[6]

            Prior to Mr. Krentz’s death, the Support Our Law Enforcement and Safe Neighborhoods Act (S.B. 1070) was introduced into the Arizona State Legislature.[7]  This strict immigration measure was initiated largely “because border authorities [in Arizona] arrest more people and seize more drugs than . . . any other state.”[8]  After Mr. Krentz’s death, he became the “face” of the Arizona immigration debate.[9]  Some politicians even pushed to name S.B. 1070 the “Rob Krentz law.”[10]  In fact, one month after Mr. Krentz’s mysterious death, Arizona Governor Jan Brewer signed S.B. 1070 into law.

            Following the passage of S.B. 1070, Hispanic families throughout Arizona have felt uneasy about living and working in the state.[11]  For example, Manuela Quintana and her husband lived in Phoenix for fifteen years.[12]  All of their children are American citizens because they were born in the United States.[13]  Both Manuela and her husband are illegal immigrants.[14]  They fear that S.B. 1070 will lead to their imprisonment, and therefore, separation from their children.[15]  Because of these fears, the Quintana family packed all of their belongings and decided to move to Colorado, a state with less stringent immigration regulations.[16]  Before making this trip, Manuela spoke to a reporter and reaffirmed her belief that although she traveled to the United States illegally, she was not a criminal.  She stated, “‘a criminal is someone who kills . . . I just want to work.’”[17]

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Posted in Constitutional Law, Criminal Law, Immigration Law, International Law | Tagged , , , , , , , , , , , , , , , , , , , , , | Leave a Comment »

American Needle, Inc. v. National Football League et al.: Should the NFL Be Considered a Single Entity?

July 5, 2010 by Brittany Grome

Adriana S. de Armas, Managing Editor For Tech. & Dev., Albany Government Law Review Member

            On January 13, 2010, the United States Supreme Court heard oral arguments in the American Needle v. National Football League case.[1]  The two questions presented to the Supreme Court were:[2]

(1) Are the NFL and its member teams a single entity that is exempt from rule of reason claims under [§ 1] of the Sherman Act[3] [hereinafter § 1] simply because they cooperate in the joint production of NFL football games, without regard to their competing economic interests, their ability to control their own economic decisions, or their ability to compete with each other and the league? 

(2) Is the agreement of the NFL teams among themselves and with Reebok International, pursuant to which the teams agreed not to compete with each other in the licensing and sale of consumer headwear and clothing decorated with the teams’ respective logos and trademarks, and not to permit any licenses to be granted to Reebok’s competitors for a period of ten years, subject to a rule of reason claim under [§ 1] of the Sherman Act, where the teams own and control the use of their separate logos and trademarks and, but for their agreement not to, could compete with each other in the licensing and sale of Team Products?[4]

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Albany Government Law Review Cited in Landmark U.S. Supreme Court Case

June 28, 2010 by Brittany Grome

 

The U.S. Supreme Court held today in McDonald v. Chicago that the  personal right to keep and bear arms applies not only to the federal government and its jurisdictions, but to state and local governments as well. In an epic dissenting opinion, and one of his last official acts on the Supreme Court, Justice John Paul Stevens cited an article by Carl T. Bogus, entitled Gun Control and America’s Cities: Public Policy and Politics, which was published in Volume 1, Issue 2, of The Albany Government Law Review.  

The slip opinion for McDonald v. Chicago is available on the Supreme Court’s website, www.supremecourt.gov (the citation is note thirty-five on page thirty-six of Justice Stevens’ dissent).  

For those that are interested in the current gun control debate, copies of Volume 1, Issue 2, Firearms, Militias, and Safe Cities: Merging History, Constitutional Law, and Public Policy, are available. To order a back issue or a subscription to the Albany Government Law Review please e-mail us at govlawreview@albanylaw.edu.

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Removing Administrative and Zoning Barriers to Wind Farm Construction: Re-powering New York State

June 20, 2010 by Brittany Grome

Shane Egan, Albany Government Law Review Member

          Energy independence is one of America’s most important, if not most illusive, goals.  Today, the United States imports large amounts of energy from hostile governments around the world.[1]  Here in New York, we rely on out-of-state energy for a significant percentage of our energy consumption.[2]  This and other factors contribute to high energy costs inside New York.[3]   With that in mind, New York should implement policies that stimulate the intrastate production of energy.   Enhancing the use of renewable energy in New York will help lower energy costs, create jobs, and lessen our reliance on imported energy.

            Wind power can and should play an important role in meeting New York’s energy needs.  This not a new idea.  New York already has a number of renewable energy goals, including the Renewable Portfolio Standard (RPS), which calls for thirty percent of the state’s energy to be derived from renewable sources by 2015.[4]  These renewable sources include wind power, and several large projects are already underway.[5]

          However, despite New York and Federal efforts aimed at stimulating the construction of wind turbines in the form of grants[6] and tax credits,[7] there are still many obstacles standing in the way of creating sustainable wind energy.  Two such obstacles are zoning regulations and permit requirements.[8]  In order to stimulate the construction of wind farms, New York should enact legislation to break down zoning barriers and streamline the number of permits required to construct wind turbines. 

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Posted in Energy Law, Land Use | Tagged , , , , , , , , , , , , , | 1 Comment »

Overriding Broad Public Use in the Face of Bad Faith Blight: In re Parminder Kaur and Redeveloping Eminent Domain in New York State

June 7, 2010 by Brittany Grome

Robert Barrows, Albany Government Law Review Editor-in-Chief

Introduction

            In 2005, the United States Supreme Court held in a controversial decision that the clearing and transfer of private property to a private developer for the purpose of economic redevelopment was a “public use” under the Takings Clause of the Fifth Amendment.[1]  The holding in Kelo v. City of New London not only outraged certain members of the Court[2], it also prompted forty-three states to pass legislation restricting the use of eminent domain.[3]  Although efforts were made to reform the state’s condemnation procedures, New York is not one of the forty-three.[4]  In the last eight months, however, New York courts have issued two decisions with strong implications for the state’s eminent domain powers.  In Matter of Goldstein v. N.Y.S. Urban Development Corp., the New York Court of Appeals endorsed the use of eminent domain to remove blighted properties in the Atlantic Yards neighborhood of Brooklyn for the development of a new arena for the New Jersey Nets as well as luxury apartments and office space.[5]  Decided within two weeks of Goldstein was In re Parminder Kaur v. N.Y.S. Urban Development Corp., where the First Department, in a complete turnaround from the Court of Appeals, sided with private property owners in the Manhattanville section of West Harlem who were fighting the City’s decision to use eminent domain for the purpose of expanding Columbia University’s campus.[6]  The court held that the taking was unconstitutional and failed to meet the state constitution’s “public use” requirement.[7]  The Court of Appeals will hear arguments for In re Parminder Kaur, in the beginning of June, and many land-use experts believe it will be overturned based on the logic employed in Goldstein.[8]  In re Parminder Kaur, however, could be the long invoked hypothetical case by the Court of Appeals that would justify a judicial halt to the condemnation proceedings even if the taking meets constitutional mandates.

The Law and The Kaskel Hypothetical 

          Reminiscent of the Fifth Amendment, the New York Constitution provides that “private property [shall not] be taken for public use, without just compensation.”[9]  Consistent with the Supreme Court’s decision in Berman v. Parker, the state has deemed blight removal, slum clearance, and redevelopment as public uses that would trigger eminent domain.[10]  The general test for whether private property is blighted is if the area is “substandard or insanitary”[11] and is determined by an objective study statutorily performed by the Empire State Development Corporation (ESDC), a state entity that liaises between the government and developers.[12]

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Posted in Constitutional Law, Land Use | Tagged , , , , , , , , , , , , , , | 2 Comments »

Second Circuit Strikes Down Restrictions on Legal Advertising

May 24, 2010 by Brittany Grome

Ted Rao, Albany Government Law Review Member

On March 12, the Second Circuit affirmed a lower court’s decision that certain restrictions on legal advertising were unconstitutional.[1]  In doing so, the court rejected rules governing the legal profession promulgated by New York’s Appellate Division that were originally slated to go into effect on February 1, 2007.  The court also upheld rules requiring that attorneys wait at least thirty days before soliciting accident victims as potential clients in personal injury claims.[2]

 The court’s opinion was authored by Senior Judge and former Yale Law School Dean, Guido Calabresi, joined by Judge John Walker Jr.  Prior to being nominated to the United States Supreme Court, Justice Sonia Sotomayor also served on the panel that heard oral arguments in the case.[3]

The Appellate Division’s new rules[4] restricted, among other things, “testimonials from clients relating to pending matters, portrayals of judges or fictitious law firms, attention-getting techniques unrelated to attorney competence, and trade names or nicknames that imply an ability to get results.”[5]

Plaintiffs were personal injury attorney James Alexander, his Rochester and Syracuse-based law firm Alexander and Catalano, and Public Citizen, a non-profit consumer advocacy organization originally founded by Ralph Nader.[6]  The Court described the firm’s advertisements as such:

[T]he firm’s commercials often contained jingles and special effects, including wisps of smoke and blue electrical currents surrounding the firm’s name. Firm advertisements also featured dramatizations, comical scenes, and special effects—for instance, depicting Alexander and his partner as giants towering above local buildings, running to a client’s house so quickly they appear as blurs, and providing legal assistance to space aliens. Another advertisement depicted a judge in the courtroom and stated that the judge is there ‘to make sure [the trial] is fair.’ The firm’s ads also frequently included the firm’s slogan, ‘heavy hitters,’ and phrases like ‘think big’ and ‘we’ll give you a big helping hand.’[7]

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Interested in Citing our Blog?

May 19, 2010 by Brittany Grome

The Bluebook does not contain a formal rule for citing legal blogs under Rule 18.2.4. Because our blog is the product of an official publication, The Albany Government Law Review, the staff of the Fireplace propose that a cite to our blog should be a fusion between Bluebook Rules 16 and 18.2.4.

We suggest that a cite to the Fireplace should feature the author’s name, the title of the post, the official name of the blog (The Albany Government Law Review Fireplace), as well as the posting date and the url to the article since it is only available electronically.

It should look something like this:

Name, Title, Alb. Gov’t L. Rev. Fireplace (Posting Date), URL for the post.

For example: Danielle Erickson, Paterson’s Proposed Soda Tax: Not the Cure for Obesity, Alb. Gov’t L. Rev. Fireplace (May 7, 2010), http://glrfireplace.albanygovernmentlawreview.org/.

Thank you to all our visitors!

- The Staff of the GLR Fireplace

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Paterson’s Proposed Soda Tax: Not the Cure for Obesity

May 7, 2010 by Marisa Floriani

Danielle Erickson, Government Law Review Member

          We live in an age where 60.5% of American adults are currently overweight, 23.9% are obese, and 3% are extremely obese.[1] Beyond that, one in every six school-age children is not just overweight, but obese![2]  The Centers for Disease Control and Prevention contend that the prevalence for obesity in school-age children has tripled since the 1970s.[3]  This is especially troubling when taking into account that early obesity leads to earlier onsets of obesity associated health problems such as: diabetes, high blood pressure, heart disease, asthma, pregnancy complications, arthritis, certain cancers, and depression.[4]  It has been estimated that between 300,000 and 400,000 deaths a year can be attributed to poor eating habits and obesity.[5]  This number is just shy of smoking related deaths and far surpasses the number of deaths caused by alcohol, car accidents, guns, or sexual disease.[6]  All in all obesity costs Americans an average of 117 billion dollars in obesity related medical problems as well as lost wages from illness and premature death.[7]

          In December 2008, New York Governor David Paterson proposed an 18% tax on soda and other sugary drinks containing less than seventy percent juice as part of what is now loving referred to as an “obesity tax”. [8]  Patterson declared childhood obesity a public health epidemic and compared it to smoking; citing statistics as staggering as one in four New Yorker’s under the age of eighteen is obese with the rate being closer to one in three in high poverty areas. [9]   The soda tax was aimed at reducing the consumption of soft drinks, which have been found to be one of the key factors in childhood obesity.[10]   Governor Paterson cites Harvard research which indicates that, “for each additional 12-ounce soft drink consumed per day increases the risk of a child becoming obese by 60 percent”, with the correlation for adults being equivalent.[11]  The Governor estimated that the tax would raise 404 million dollars, which would be used to fund public health programs but perhaps more importantly would reduce soda consumption by 5%.[12]

           However, by February 2009 Governor Paterson realized that his proposal for an 18% tax on soda would not pass in the legislature.[13]  As a result Paterson proposed a revised soda tax in January 2010, in which he seeks to gain approval for a penny per ounce tax on sugary drinks.[14]  The added tax would be less apparent to consumers as it would be figured into the retail price of the soda instead of added on at checkout, still it is estimated that it could reduce soda consumption by 10 to 15%, but would raise an estimated one billion dollars in revenue solely allocated to the heath care and education budget.[15]

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Posted in Civil Procedure, Finance, Health Law, Uncategorized | Tagged , , , , , , , , , , , , , | 1 Comment »

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