Civil Justice Reform – Part II; New England Legal Foundation: A Voice For Business

The Metropolitan Corporate Counsel
Pg. 40

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

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

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

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

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

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

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

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

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

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

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

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


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