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Law Firm Dress Codes

This month we take a break from other legal news to provide insight into a recent poll taken by Virginia Lawyers Weekly on Dress Codes.

You may work for an employer with a very strict and specific dress code or you may work for an employer with no written code. Of the people responding to the Virginia Lawyers Weekly survey, sixty percent [60%] confirmed that their firm had no written code but many thought that their were certainly unspoken expectations for how attorneys should dress.

Not Acceptable for Either Men or Women

Nose Rings
Visible Tattoos

Not Acceptable for Men

Unshaven or stubbly look
Lack of a tie in court

Encouraged for Men

Long Sleeve Shirts
Ties in court and when meeting with clients

Not Acceptable for Women

Short Skirts
Cleavage and plunging necklines

Encouraged for Women

High heels of an appropriate height, conservative color and closed toe
Pantyhose with skirts and dresses

Not Even Discussed

Jeans and Shorts
Objectionable Jewelry
Political Statements
Flip-flops
T-Shirts
Makeup
Hair styles and colors

Summary

A law firm should have a clear policy on appropriate dress for attorneys and other staff members.

The policy might take into account the type of clients the firm serves as well as the likelihood that an attorney will be called upon to appear in court during the day.

And I would pose one further question for an attorney to ask themselves regarding any questionable fashion - Would you hire you as an attorney if you were wearing ____________?

Myspace, Students, and Free Speech

In separate cases, two public school students used MySpace to post disparaging comments about each of their principals. Each of the students was punished with a suspension from school, and each made a federal case out of it, literally, by suing on the basis of alleged infringement of the right of free speech. Both cases arose in the same state, and the same federal appellate court decided appeals in the cases on the same day. The parallels end there, however, because one student succeeded in his First Amendment argument while the other student did not.

The explanation for the different outcomes in the cases boils down to different conclusions as to whether the speech engaged in by the students had at least the potential to be substantially disruptive of school activities, even though both forms of speech occurred off of school grounds. No doubt, in both cases, the targeted principals had bruised feelings, at the very least, but that was not the pivotal consideration.

Profile Goes Too Far

In the unsuccessful case, an eighth grader's suspension was upheld after she created a personal "profile" of her principal in which she went so far as to suggest that he was a pedophile and a sex addict. The court acknowledged that criticisms of school officials, even when in bad taste, are not to be censored. However, more than simply being critical or disrespectful, the language used by the student was highly offensive, potentially very damaging to the principal and the school, and maybe even illegal. The insinuations, even if made in jest, went right to the heart of whether the principal was fit to serve in his position, undermining his authority within the school.

Parody May Be Allowed

By contrast, the same court found that a school had gone too far when it suspended a high school student after he created a profile of his principal on MySpace, using his grandmother's home computer. In this case, the content of the posting could be described as a parody, as it made fun of the principal because of his large size. The parody used some offensive language, but on the whole it did not disrupt, or have the potential to disrupt, the student's school, even though it was highly embarrassing for the principal.

It bears emphasizing that in both cases the students enjoyed much more freedom of expression, although not without limits, than they would have had while at school or in school-sponsored activities. In those settings, as the court noted in one of the cases, there is no First Amendment protection for lewd, vulgar, indecent, and plainly offensive speech, and school officials do not offend the First Amendment by exercising editorial control over student speech so long as their actions are reasonably related to legitimate pedagogical concerns. In short, the lesson for students from these cases could be not only "don't try this at home," but also, and more emphatically, "never try this at school."

SCULPTOR SLAYS GOVERNMENT GOLIATH

Some 20 years ago, a World War II veteran and prominent sculptor won a government competition to sculpt a memorial to Korean War veterans in Washington, D.C. His creation depicts a platoon of stainless steel, larger-than-life foot soldiers arranged in what has come to be called "The Column." Five years later, another veteran, an amateur photographer, took photographs of the memorial. One of these photographs eventually was used by the federal government on a widely distributed postage stamp, for which the government paid the photographer $1,500.

As for the sculptor, he had not been informed of the stamp in advance, nor had anyone sought his permission for it or paid him anything for it. He sued the government for copyright infringement. Certainly, there were principles at stake, but there was also potentially a lot of money in play. The Postal Service received more than $17 million from sales of the stamp, not to mention additional income from the use of the stamp on retail goods such as commemorative panels and framed art. The sculptor wanted a share of that money.

At a trial before the Court of Federal Claims, the court determined that the sculptor was the sole copyright owner of "The Column," rather than a joint owner with the government, and that "The Column" did not qualify for an exclusion from copyright infringement liability as an architectural work under the Architectural Works Copyright Protection Act. However, the court also determined that the government was not liable for copyright infringement because the government's use of "The Column" was a fair use. The fair use doctrine requires courts to avoid rigid application of the copyright statute when it would stifle the very creativity that the law is designed to foster.

On appeal, a federal appellate court reversed on the pivotal issue of fair use, and sent the case back to the court below for consideration of the sculptor's damages. The Postal Service's stamp containing an image of the soldier sculptures did not "transform" the character of the sculptures so as to support a finding of fair use under established copyright law. Rather, both the stamp and the sculptures shared the common purpose of honoring veterans of the Korean War.

While the stamp altered the appearance of the sculptures by adding snow and muting the color, those alterations did not impart a different character to the work. In addition, although the stamp did not harm the market for derivative works, which is another consideration in fair use analysis, the appellate court concluded that allowing the government to commercially exploit a creative and expressive work would not have advanced the purposes of copyright in this particular case.

May 2010 - What Is an S Corporation?

An S Corporation is a form of business classified for federal income tax purposes as a corporation that has elected to be taxed as a pass-through entity, in a manner similar to a partnership or sole proprietor. Unlike a regular corporation, or C corporation, an S corporation (both names derive from sections of the Internal Revenue Code) generally is not subject to federal income tax. Instead, its income is reported on the tax returns of its shareholders, and they have the responsibility for paying the tax. If there are losses suffered by the corporation, they also pass through and are reported on the shareholders’ income tax returns.

Because only the shareholders, and not the corporation, are taxed, S corporations avoid the problem of double taxation associated with C corporations. This is the biggest draw for creating an S corporation, particularly for closely held corporations.

Shareholders in an S corporation, like shareholders in a C corporation, generally have limited liability arising from corporate matters, even though they pay taxes as if they were partners or sole proprietors. In addition, when the corporation eventually is sold, there can be reduced taxable gains, as compared with the sale of a business operating as a C corporation.

On the downside, the limitation on classes of stock in an S corporation provides less control over the company and the value of its stock. Potential outside investors likely will not be attracted by the pass-through tax characteristics of an S corporation, nor by the limit on the number of shareholders. Although corporate taxes are avoided, there is still a requirement for filing an informational tax return every year for a corporation with more than one owner. Finally, if avoiding formalities is an important consideration, it should be noted that, like any other corporation, an S corporation must follow the requirements for having regular meetings and keeping company minutes.

The balancing of the advantages and drawbacks of S corporation status in any given case is sufficiently complex that it is advisable to seek professional advice before making this important choice.

TAX CREDITS FOR HISTORIC PRESERVATION

For over 30 years, the federal government has been using tax incentives to help preserve historic buildings. Originally, federal law allowed accelerated depreciation on rehabilitated buildings, but subsequent changes have made preservation and revitalization efforts even more attractive to taxpayers.

Today, there is a general business credit equal to 20% of qualified rehabilitation expenses for a certified historic structure, or a 10% tax credit for the qualified rehabilitation of non-historic, nonresidential buildings first placed into service before 1936. Eligibility for the tax incentives is determined by the National Park Service.

Tax credits are often more beneficial to taxpayers than deductions are, since every dollar of a tax credit reduces the amount of income tax owed by one dollar.

The 20% credit for the rehabilitation of a certified historic structure applies to commercial, industrial, agricultural, rental, or residential properties, but not to properties used exclusively as the owner’s private residence. A certified historic structure must be a building as opposed to another type of structure. To have the required historic status, the building must be either listed individually in the National Register of Historic Places or located in a registered historic district and certified as being of historic significance to the district.

Eligibility for the 20% credit also depends on meeting some additional requirements. For example, the building must be depreciable, that is, used in a trade or business or held to produce income. The rehabilitation must be substantial, generally defined as entailing expenditures exceeding the adjusted basis of the building and its structural components. Generally, this requirement must be met within two years or within five years for a project completed in multiple phases.

Qualified rehabilitation expenses include such items as architectural and engineering fees, site survey and development fees, legal expenses, and other construction-related costs, so long as they are added to the basis of the property, are reasonable, and are related to services performed.

The owner of the rehabilitated building must hold it for five years after completion of the rehabilitation or else pay back all or part of the 20% credit. A sale in the first year means that the entire credit is recaptured. The recapture amount is reduced by 20% per year for properties held between one and five years.

The 10% credit for non-historic buildings constructed before 1936 shares some of the requirements for the 20% credit, such as that the rehabilitation be substantial and the property be depreciable. However, only buildings rehabilitated for nonresidential uses qualify for the 10% credit. In addition, so that the identity of the original building is not lost in the process, projects undertaken for the 10% credit must meet specific tests based on retention of minimum percentages of the building’s walls and internal structural framework.

WHEN DOES A GIFT VEST UNDER A TRUST?

Just when it seems that every issue concerning the concept of vested versus contingent interests under a will or trust has been litigated, another case pops up. The Supreme Court of Virginia dealt with the question of the vesting of remainder interests under a trust in the recent case of Harbour v. Sun Trust Bank, 278 VA 514, 685 S.E. 2d 838 (2009).

The grantor of the trust, Mollie Boaz Johnson, directed that the income and the corpus of the trust be used for her benefit during her lifetime and for the benefit of her husband, Harry B. Johnson, for his lifetime, provided he survived the grantor. The grantor then provided as follows in section 7 of the trust, entitled "disposition of the Trust":

C. Payment of Estate Tax at Spouse's Death. Upon the death of the Grantor's spouse, the Trustee shall divide the trust res, including any undistributed income and the remaining principal, into four equal shares to be distributed as follows:

One such share shall be paid and delivered to my brother, James Clayton Boaz; the second such share, shall be paid and delivered to my brother, Herbert Alan Boaz; and the third such share shall be paid and delivered to my sister, Hazel Boaz Harbour.

The fourth such share shall be delivered to the Stuart Baptist Church in a separate trust account entitled "Mollie Boaz Johnson Educational Found", to be used for scholarships for deserving students from Patrick County in accordance with... My Last Will and Testament.

If any of my brothers or sister shall fail to survive me, his or her share shall lapse and such share shall be added to the trust fund for Stuart Baptist Church, previously mentioned.

The grantor died in 1999 and was survived by her husband and two of her siblings, Hazel Boaz Harbour and James Clayton Boaz. These siblings predeceased the grantor's husband, who died in 2007. Harbour was survived by one child, Steven M. Harbour, and Boaz was survived by one child, James Aubrey Boaz; these individuals were thus nephews of the grantor.

The trustee, SunTrust Bank, filed a complaint seeking guidance in interpreting the trust. The action pitted Stuart Baptist Church against the nephews. The church claimed that it was entitled to all of the remaining trust assets on the basis that the shares of all the grantor's siblings lapsed because none of the siblings was alive at the time of the husband's death. The nephews contended that, under the plain language of the trust, each was entitled to the share that his parent would have received if the parent had survived the grantor's husband, because the parent's survival of the grantor prevented the lapse of those interests. The circuit court found that, based on a reading of the trust in its entirety, the church's position was the more compelling.

On their appeal, the nephews contended that the circuit court had erred in failing to adopt the plain meaning of the trust language, which they contended vested the remainder interests in their parents upon their survival of the grantor. As quoted by the court, the news relied on the following portion of the trust provision, with the requirement of survival of the grantor and not of the husband:

"If any of my brothers or sister shall fail to survive me, his or her share shall lapse and such share shall be added to the trust fund for [the] church."

Alternatively, the nephews argued that under the rule of construction favoring the early vesting of estates, the remainder interests of their parents vested at the grantor's death because the trust agreement did not manifest a clear intent to postpone vesting. The church countered that the rule of early vesting did not apply, because the plain language of the trust manifested the grantor's intent that the remainder interests vest at the husband's death, when the trust assets were to be distributed.

The court, in finding for the nephews, recognized the rule of early vesting, but made the important point that such rule, a rule of construction, was not to be resorted to if the matter in question could be resolved by the plain meaning of the grantor's words. As the court stated:

"The language chosen by the grantor referenced her own death, not the death of the husband, as the event determined whether the share of a sibling would lapse. Thus, under this language, a sibling's share would lapse only if that sibling failed to survive the grantor."

"At the time of the grantor's death, both Hazel B. Harbor and James C. Boaz survived the grantor, thereby having the present capacity to take possession of their remainder interests should the husband's existing possession become vacant. Accordingly, under the trust language, those surviving siblings received a vested remainder interest in the trust assets when the grantor died..."

"The church's contrary position would require us to add the phrase " and my husband" to the grantor's directive that "[i]f any of my brothers and sisters fail to survive me ..." A court has no authority, however, to insert words into a trust document."

The case highlights the importance of precision in drafting a will or trust. Precise drafting would have provided for the intent of the grantor and avoided this litigation.

VIRGINIA HOME FOR BOYS AND GIRLS V. WILLIAM RAY PHILLIPS, ET AL

This case involves a dispute between a devisee under a Will and a relative of the testatrix claiming under an oral agreement. The Virginia Supreme Court applied the Virginia Statute of Frauds [Virginia Code § 11-2] and the "Dead Man’s Statute [Virginia Code § 8.01-397] to the facts of this case.

In an appellate proceeding the facts of the case are stated in the light most favorable to the prevailing party at trial. William Ray Phillips [Phillips] grew up in Sussex County. He lived with his parents near the farm of his uncle and aunt, Wayland and Margaret Council. At the age of ten, Phillips moved to the Council home and lived with them. He helped with farm work until he graduated from high school. The Councils had no children and Phillips was described by another relative as like a son to them.

In 1977, Wayland Council asked Phillips to come to the farm to discuss a proposal. During the conference at the kitchen table, Wayland Council proposed that Phillips move to the farm. The Councils proposed to sell Phillips a parcel of land on which he could build a home for his family. Phillips would work on the farm and assist his uncle until the uncle’s retirement in 1980.

After the uncle’s retirement, Phillips would take over the farming operation, pay rent to the Councils for the land, machinery and farm equipment and a wage to Wayland for any farm work he performed. Phillips was also asked to be available for any business or personal help the Councils might need in their later years. In return for Phillips help, the Councils would leave him their assets real and personal when the survivor among them died.

This agreement was entirely oral and no written record of it ever existed. No one else was present at the meeting between the Councils and Phillips.

Phillips sold his existing home and moved to the farm near the Council’s. He performed the agreement outlined above

In 1982, Wayland Council died and his wife probated her husband’s Will. At the clerk’s office, Margaret Council informed Phillips that her will was exactly the same as her husbands. [In estate planning this type of will is often called a mirror will.]

After Wayland’s death, his widow, Margaret, became angry, very eccentric, and very reclusive. In 1992, she gave Phillips a general durable financial power of attorney, but revoked it in 1996. She also changed her Will and informed Phillips that there were changes in her estate plan. Margaret died on April 6, 2005.

Margaret Council’s Will was admitted to probate and except for a few household furnishings, all of her real and personal property was bequeathed to the Virginia Home for Boys in Richmond, Inc.

Phillips filed a complaint in the circuit court naming the Virginia Home and the Executrix of Margaret Council’s Will as defendants. He sought imposition of a trust on Margaret’s assets and specific performance of the parol agreement he made with the Councils in 1977. [A parole contact is one that is not in writing.] Phillips did not contest the validity of Margaret Council’s second Will that was admitted to probate nor her testamentary capacity to sign the second Will.

The circuit court heard the evidence, reviewed the briefs and arguments of counsel and by a memorandum opinion ruled in Phillips’ favor. The trial court found that his part performance of the parol agreement was sufficient to take the case out of the Statute of Frauds and the existence of the agreement between the Council’s and Phillips was sufficiently corroborated by circumstantial evidence. The trial court issued an order directing transfer to Phillips all the net personal estate and real property of Margaret Council.

On appeal, the Virginia Supreme Court analyzed the Virginia Statute of Frauds and the Dead Man’s Statute and reversed the lower court.

The Virginia Statute of Frauds’s is found in the Code of Virginia § 11-2 and provides in pertinent part:

Code § 11-2 When written evidence required to maintain action.

Unless a promise, contract, agreement, representation, assurance, or ratification, or some memorandum or note thereof, is in writing and signed by the party to be charged or his agent, no action shall be brought in any of the following cases:

6. Upon the contract for the sale of real estate, or for the lease thereof for more than a year; ...

This section has been repeatedly been held applicable to oral contracts to devise real estate.

A parol contract to devise land may be taken out of the Statute of Frauds by evidence of part performance on the promisee’s part. To prevail, the promisee must establish: (1) that the parol agreement relied on is "certain and definite in its terms," (2) that his acts of part performance were done "in pursuance of the agreement proved," and (3) that the agreement has been "so far executed that a refusal of full execution would operate a fraud" upon him. [Clark v. Atkins, 188 VA 668, 674-675 (1949)]

The Virginia Home contended that Phillips’ evidence did not take the case out of the Statute of Frauds because he failed to show proof of an agreement.

Phillips contended that circumstantial evidence abundantly corroborates the existence of an agreement.

Virginia’s Dead Man Statue is found at Virginia Code § 8.01-397 and provides in part:

Corroboration required and evidence receivable when one party incapable of testifying. In an action by or against a person who, from any cause, is incapable of testifying, or by or against the committee, trustee, executor, administrator or heir, or other representative of the persona so incapable of testifying, no judgment or decree shall be rendered in favor of an adverse or interested party founded on his uncorroborated testimony.

At common law, when one party who would have been a party to the litigation died, the other party to the litigation was disqualified as a witness in his own behalf on the ground of self-interest. The Dead Man’s Statute substituted the more flexible requirement that the testimony of the surviving litigant-witness be corroborated by an independent witness..

The Virginia Supreme Court noted that it is well established that corroboration may be shown by circumstantial evidence, and that not every point must be corroborated but need only serve to strengthen the surviving litigant-witness’ account. Nevertheless, one essential requirement is implicit in all Virginia cases: evidence, to be corroborative must be independent of the surviving litigant-witness. It may come from any other competent witness or legal source, but it must not come from the interested party.

The Virginia Home argued that the trial record is devoid of any independent evidence substantiating the agreement with Phillips. Without independent evidence at trial substantiating the agreement between Phillips and the Council’s, Phillips could not meet the exception to the Statute of Frauds and his claim to the proceeds of Margaret Council’s estate was denied.

The moral of this story:

To avoid this result, Phillips or the Council’s could have put their agreement in writing. Sometimes a little legal help and advice can go a long way to ensuring the result originally intended by the parties.

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