Independent Articles

Media Articles

"Lawyers Stake a Claim on Bias Lawsuits; With More Cases in Litigation, Firms Cash In on a Billable-Hour Bonanza."
The Washington Post 1-27-97 by David Segal.
New York attorney Daniel Berger hit a Texas-sized money gusher recently, and the windfall has caused him to consider a career shift. For more than a decade, Berger earned his living by suing companies on behalf of disgruntled shareholders.

Then, in 1994, he was approached by a colleague to work on a race discrimination lawsuit against Texaco Inc. Now Berger will earn a share of the nearly $29 million in lawyers’ fees requested recently as part of a December settlement -- not bad for a case that lasted just two years.

Now, as more companies such as Texaco produce huge billable-hour bonanzas for lawyers, a crowd of attorneys is clamoring for a piece of the action, turning bias lawsuits into one of the legal industry’s hottest practice areas. A growing number of plaintiff’s lawyers are prowling for aggrieved employees to represent -- membership in the Metropolitan Washington Employment Lawyers Organization, for example, has more than doubled, to 209, in the past five years.

Meanwhile, the business of defending companies against accusation of discrimination -- and advising executive on how to avoid suits -- is brisk.

And some lawyers who once were on corporate payrolls are switching allegiances, deciding that they would rather accuse companies of discrimination than defend them against such allegations. "I find it a lot more fun," said James Finberg, a California attorney who leaped to the plaintiff side shortly after defending State Farm Insurance Co. in a huge bias suit in 1992.

It is also, very often, more profitable. Because of 1991 change to the Civil Rights Act, lawyers who prevail in employment bias cases get a rare deal: They are able to charge the companies they sue double the usual hourly rates -- and sometimes more -- for time spent working on a case. Because these cases can drag on for years and are much more likely to be settled than decided at trial, lawyers’ fees in class-action suits often are enormous and invariably leave attorneys with the largest chunk of the money.

When State Farm settled a class-action gender discrimination case in 1992, for example, lawyers at the Oakland firm of Sapperstein, Goldstein, Demchak & Baller walked away with $65 million of the $250 million award.

Though the State Farm case was larger than most, in recent years there have been hefty settlements for employees against restaurant chains Shoneys’ Inc. ($132.5 million) and Denny’s ($54 million), and against the Lucky Stores supermarket chain ($107 million). On Friday, Florida grocery chain Publix Super Markets Inc. agreed to pay $81.5 million to settle a class-action sex discrimination case.

Figures such as those, lawyers and legal experts said, are among the reasons that in the past five years the number of class-action race an gender discrimination lawsuits has more than doubled, to 68 in 1996 from 30 in 1992, according to the Equal Employment Opportunity Commission."There’s a lot of competition in this field these days," said Barry Goldstein of Oakland’s Sapperstein firm, which has won more than $600 million in damages and fees in bias cases since 1991.

The bias litigation boom is in large measure traceable to key changes in the Civil Rights Act of 1991. These amendments made employment litigation highly lucrative by allowing plaintiffs in class-action cases to sue for as much as $300,000 in damages for pain and suffering, rather than simply recovering their pay. Lawyers bringing these cases also were given the chance to earn a multiple of their standard hourly rates if they win, reflecting the risks of working on cases that pay nothing if lost.

And the law made it easier for workers to prevail by giving them the right to have their cases heard by juries, rather than by judges who had, in many instances, become increasingly hostile to employee discrimination lawsuits....one good victory can yield lottery-size returns, especially for lawyers.

In 1993, for example, Shoney’s agreed to pay $105 mil in an out-of-court settlement to a group of 20,000 African American employees who had alleged that they were unable to get waiting and hosting jobs at the restaurant chain.

Plaintiffs were awarded an average of $5,000,.... Attorneys in the case, meanwhile, received $20 million in fees.

"Worker Bias Cases Are Rising Steadily; New Laws Boost Hopes for Monetary Awards."
The Washington Post 5-12-97 by Kirstin Downey Grimsley.

Employment discrimination cases are surging into the federal courts in record numbers, more than doubling in the past four years because of new laws and new attitudes in the workplace.

Employment experts cite new federal laws expanding civil rights protections to sexual harassment victims and the disabled; workers and employers turning increasingly combative; and a backlash against corporate downsizing, which left many workers feeling unfairly treated.

In 1996, American workers brought more than 23,000 lawsuits alleging race, sex, disability or age discrimination to federal courts, more than double the 10,771 that were brought in 1992, according to the U.S. Courts’ administrative office.

In the past four years job-discrimination lawsuits have been rising at least 20 percent per year....Ann Reesman, general counsel of the District-based Equal Employment Advisory Council, which represents 300 large Fortune 500 companies, said employers are being buffeted by these waves of lawsuits, brought by workers who see dollar signs dancing before their eyes. "The increased level of litigation could -- and should -- have every employer concerned," Reesman said....money damages have become more available for alleged victims of discrimination.

Early last month, for example, the EEOC announced it had reached a record $1.3 million settlement in a case involving 17 women who claimed they were sexually harassed by the Minneapolis office manager of a Cleveland-based executive headhunting firm, Management Recruiters International Inc....Reesman, of the employer group, said news of big settlements can inspire workers suffering perceived grievances to come back again and again with monetary demands.

She said these demands are making some companies more combative and more willing to fight cases all the way through the courts."If they settle one case, then they get another, and another," Reesman said. "If you settle one, it seems to send a message that this is an easy way to make some money. Eventually they will need to turn off the faucet."

Another big reason for the increase...was the passage in 1990 of the Americans with Disabilities Act, which prohibited discrimination against physically or mentally handicapped workers. ...Numbers provided by EEOC...provide a clear indication of the growth of disputes in this area.

The EEOC reports that in the first year after the ADA was passed, 15,242 disability discrimination complaints flooded in to the agency, rising to 19,778 two years later.

Since then, the numbers have declined somewhat, to 17,954 complaints filed in 1996. Not all complaints to the EEOC turn into lawsuits because some are resolved before they get to court.

According to the EEOC, the fastest-growing area of employment discrimination complaints is sexual harassment, with 15,342 complaints filed with the EEOC last year, up from 6,127 in 1990.

A final reason for the increase, experts said, is that workers got mad, really mad, during the downsizing phenomenon of the past few years."There’s no question it has produced a huge number of cases," Seymour [director of the employment discrimination project at the Lawyers Committee for Civil Rights] said. "What produces a case is when a person feels he has been treated unfairly. People will swallow a lot at work, but once they are canned, they have nothing left to lose if they sue."

"Chamber of Commerce Battle Cry: Kill all the Lawyers."
Business Week 3-2-98 by Susan B. Garland.

For decades, business and trial lawyers have squared off in courtrooms over everything from dangerous toys to unfair employment practices.

Now, the U.S. Chamber of Commerce intends to intensify -- and politicize -- the battle.

In March, it will unleash a multimillion-dollar campaign against its longtime foes -- and the fight is sure to get ugly. It’s no coincidence that trial lawyers are among the biggest givers to the Democratic Party, while the chamber’s political arm predominantly supports Republican causes.

According to the Center for Responsive Politics, the Association of Trial Lawyers of America (ATLA) ranked No. 3 -- at $3.5 million -- among organizations making political donations in the 1995-96 election cycle.

The chamber’s attack is sure to energize some lawsuit-weary businesses, but it faces obstacles both internal and external. Many chamber members are themselves lawyers already steamed over the campaign.

And then there’s that citadel of lawyers on the Hill. That’s a lot of angry bogeymen.

"Job-Bias Lawsuits Skyrocket: Lawyers Step Up To Take Advantage Of 1991 Law." Investor’s Business Daily 10-13-97 by David A. Price.

...the real impact of the law [the 1991 Civil Rights Act Amendments] has come from provisions that got little notice at the time [the law was debated in 1991].

One of them lets plaintiffs seek far more damages than before, including compensation for emotional distress and punitive damages.

Another lets plaintiffs opt for jury trials, generally thought to be a more sympathetic forum for plaintiffs than the judge-only trials mandated under the 1964 Civil Rights Act.

Companies "really preferred the regime where they could simply turn a blind eye to what was going on, confident in the expectation that employees would have no remedy," said Richard Seymour, director of the employment litigation project at the Washington-based Lawyers Committee for Civil Rights Under Law, which brings discrimination suits.

And proponents view juries as providing a needed real-world perspective."Judges don’t work on factory floors," Seymour said. "They often don’t have a clue about the way the real world works."Plaintiffs’ firms have been doing well under the new law.

Last month, Home Depot USA Inc., settled an $87.5 million sex-bias class-action suit filed on behalf of 8,000 female employees. The employees get $65 million; the lawyers get the rest.

The same month, a federal judge approved a $3.75 million settlement by the Hooters restaurant chain -- which features scantily clad waitresses -- of a class action brought on behalf of men who claimed they couldn’t get jobs as waiters and bartenders. Of the settlement, $2 million will go to class members and $1.75 million to the plaintiffs’ attorneys.

In late August, Mitsubishi Motor Manufacturing of America settled a sex-harassment suit brought by women in the firm’s Normal, Ill., plant. The terms of the settlement are confidential, said Mitsubishi attorney Walter Connolly. According to press reports, Mitsubishi agreed to pay $9.5 million.

In May, the EEOC got a $2.5 million settlement from Randall Food & Drugs Inc., a Houston grocery chain. The class-action suit alleged racial bias in hiring.
Publix Super Markets Inc. of Lakeland, Fla., paid $81.5 million in February to settle a suit charging the firm with keeping women from moving into higher-paying jobs. Some $18 million went to the lawyers filing the suit.
Texaco Inc. settled a $172 million race discrimination class action in November. In July of this year, the federal judge in the case awarded $19.1 million to the plaintiffs’ attorneys.
In 1994, American Stores Co.’s Lucky Stores unit, which operates in California and Nevada, paid more than $107 million to settle a sex-bias suit. The firm was charged with bias against 20,000 women employees in job placements and promotions.

Companies are caught in a bind. Going to trial risks bad press and a large verdict. But generous settlements make corporate America look like an easy mark.Settling a case early doesn’t necessarily end a firm’s woes. "Once you settle a lawsuit, there is a fair likelihood that it is going to get out, even if you have a confidentiality agreement," said David Fram of the National Employment Law Institute in Washington, D.C. Firms that settle easily invite more lawsuits, Fram says.

"Pulling Up the Drawbridge."
Forbes 4-27-92 by Graham Button.

With an APT [asset protection trust] ...the trust is established in a foreign jurisdiction whose obstacle-course laws make it very hard for judgment-enforcing lawyers to reach the assets.

The Cook Islands don’t recognize judgments of foreign courts, so new litigation must be brought there to reach the assets.

A physician faced over 200 malpractice claims after being the subject of a negative story on local TV. Fifteen of the suits weren’t covered by insurance.

The physician’s total exposure on those claims was $7 million, but because most of his assets had been transferred to a Cook Islands trust, eh wound up settling the suits for $18,000.

The plaintiff lawyers didn’t want to go to trial because any judgments in their favor would probably have been uncollectible.

With judges and juries as unpredictable as they are today and with negligence lawyers as hungry as they are, asset protection trusts do make sense for some people. ...a financial planner based in San Juan, P.R., set up a Cook Islands trust. His motivation: peace of mind feeling secure that no matter what happens, you or your family are going to wind up with the money, not somebody that’s going to sue you."

"Show me the money? (Not on your life)."
Success 11-97 by Colum Lynch.

As wealthy people have known for years, an offshore trust can help you protect your assets against lawsuits that would otherwise devour them Pac-Man-style.

In effect, it’s a legal fortress around your money, investments, and property -- one that makes it extremely difficult and costly for your creditors to get anywhere near them.

There’s a catch: they’re expensive to open, if you want to do it right. Costs start at about $20,000 for the best ones.

And they’re a little like fire insurance -- there’s no point to buying it after your house has burned to a crisp. The basic thrust is to put assets out of the reach of future creditors, not existing ones.... If you wait until you’ve been sued to set one up, a judge can declare it invalid.

Still, with litigation on the rise, it’s no surprise that the number of these trusts has exploded in the past decade.

An estimated $2.5 trillion in private assets is invested in offshore accounts, and the figure is expected to grow by 10 percent annually, according to a study by Chase Manhattan Private Bank.

"Asset protection strategies du jour."
Journal of Financial Planning 12-96 by Richard W. Duff.

Asset protection is the process of planning to protect against those risks that threaten accumulated wealth.

To be effective, it must be implemented in advance of a particular risk materializing rather than after it has occurred. We have protected estates that range in value from a few hundred thousand dollars to over a billion dollars, and include persons in all professions and businesses. ...Roughly five percent have come under attack over the course of time...with very favorable results.

[Question] Typically, for how much would those five percent settle their cases?

[Answer] About 15 cents on the dollar.

"Dodging the litigation explosion."
Chief Executive 5-93 by Barry S. Engle.

Combination Strategies: The optimum protection strategy may involve the combination of APTs [asset protection trusts] and FLPs [family limited partnerships]. ...The combination can be achieved merely by one or more gifts to the APT of interests as a limited partner in the FLP.

"Trust us."
International Business 3-93 by Richard F. Janssen.

The U.S. traditionally has been the safest location for American executives and their companies. But companies now are increasingly concerned over recent boxcar-size damage suits that could outstrip their liability insurance and, in the case of closely held midsize companies, even sink the business.

Key executives might find their family savings also wiped out. To shield themselves, more executives have begun making use of an asset protection trust (APT), a nice offshore place for sheltering financial assets.

By definition, an APT is a bank trust account in a land...where local courts don’t automatically honor judgments handed down in some other country, such as the U.S.

Even though some of the venues have been prized as tax havens, advocates stress that APTs are set up to be tax neutral, with all income from them routinely reported on an individual’s Form 1040.

These trusts have to be set up before the executive is sued or even threatened with a suit, lest an island court give in to the creditor on grounds of fraudulent conveyance on the part of the executive.

Most tax experts say establishing an APT is worthwhile if an executive is protecting at least $500,000. The APT is an answer to the litigation explosion and the Robin Hood mentality of juries.

In fact ...it was a favorable Internal Revenue Service ruling in 1987 that opened the door to wider use of the trusts.

Initially, physicians and surgeons fearful of medical malpractice suits were among the main users of APTs. But now they’re catching on with businesspeople, too.

The rise of product liability and pollution suits has made business proprietors, major shareholders, directors and partners all well aware that they might be vulnerable to blockbuster damages.

When a company’s liability insurance isn’t enough to cover a multimillion-dollar award, the creditors will pursue personal assets as well -- regardless of whether the individual who’s being sued had a part in the incident.

"Personal preservation: Developers go offshore to save skin."
Crain’s Chicago Business 5-12-91 by Steven R. Strahler

....legal advisors, buttressed by such well-publicized collapses as Donald Trump’s, are starting to convince more and more still-solvent real estate clients to play it safe.... Lawyers’ latest efforts are focused on asset-protection trusts that are located in foreign jurisdictions, making it more difficult for creditors to collect from defaulting debtors.

These offshore trusts don’t necessarily keep lenders from making rightful claims to assets in the trusts. But they decidedly complicate the process of retrieving them. The trusts are transparent from a tax point of view.

The appeal of asset-protection trusts was spurred in late 1989 when three foreign jurisdictions...reduced the ability of creditors to void transfers of assets into such trusts.

Citing a flood of liability suits over the past 20 years, the attorneys believe offshore trusts help offset what they consider the U.S. justice system’s tilting too far toward creditors’ rights.

"Cover your assets. (asset protection trusts put assets beyond reach of lawsuits)." The Economist 4-8-89.

American who don’t take out their frustrations with a gun tend to do so with a lawsuit. Doctors, lawyers, accountants and other professionals live in terror of their clients.

Recent absurdities of the tort litigation system have included the parents of a teenager who had committed suicide suing the Catholic church because a priest allegedly gave their son poor advice, and a series of bankrupt borrowers suing their banks for lending them too much money.

Now clever lawyers have figured a way for nervous professionals to guard their wallets from other clever lawyers intent on raiding them: an "asset protection trust" (APT).... The assets need not leave America.

However, a straightforward APT means giving control of your assets to the trustees. A better, if more complicated, way is to combine an APT with an American "limited partnership" in which the trust has a 99 percent share while you retain a 1 percent share and effective control. You then carry on life as normal, except that most of your assets are beyond the reach of lawsuits.

"Safe Harbors."
ABA Journal [American Bar Association] 9-92 by Rick J. Taylor.

The current...perceived assault by the courts on private property rights is causing many people to consider whether their assets might be safer outside the United States.

For those people, the offshore asset-protection trust is a mechanism worth considering.

While there are generally no tax advantages to establishing such a trust, there can be a number of other benefits. Primarily, it may insulate the grantor’s assets from litigation awards or settlements, and, if properly structured, it may also provide limited protection from creditors.

This type of trust is created in a foreign country that generally does not enforce judgments from U.S. courts or aid in the collection of U.S. tax deficiencies. The offshore asset-protection trust requires that there be at least one foreign trustee, that the foreign country’s law control the trust administration and that the trust assets be located outside the United States.

Those elements would qualify the trust as a "foreign trust" for tax and related purposes, under definitions developed by the courts and the Internal Revenue Service.

"Are your clients completely protected?"
Planner [American Institute of Certified Public Accountants] 2/3/95 by Gideon Rothschild.

In response to the litigation plague, asset protection planning has come of age.

Asset protection planning that goes beyond attempts to limit liability through steps such as incorporating a business or purchasing insurance is simply the process of arranging a client’s assets and activities to protect them from loss from some future financial disaster.

Asset protection planning not only protects the client’s assets from creditors but also allows clients to retain some beneficial enjoyment or control. Family limited partnerships and offshore trusts can be used to protect assets.

Timing of transfers is crucial in asset protection planning to avoid fraudulent conveyance problems. ...the time to create an asset protection plan is before there are any clouds on the horizon....Given our legal climate, where the extent of a defendant’s liability often seems based on net worth rather than culpability, any client...with a bank account can be wiped out by a lawsuit.

Physicians are obvious targets of creative lawyers, but lawyers themselves, in addition to accountants, architects, members of corporate boards of directors, real estate developers and other "deep pockets" are equally at risk.

Nonetheless, there are specific, completely legal steps your clients can take to safeguard their assets.

"Asset Protection Offers Safe Places to Stash Your Cash."
Star-Ledger [Newark, NJ] 2-23-97 by Edward R. Silverman.

Need to keep creditors guessing? Worried your spouse will find out how much you’re really worth? If you’re looking for a safe hideaway to stash your cash...think about opening an offshore bank account, otherwise known as an asset protection trust.

The high degree of secrecy helps explain why trusts are so popular with individuals whose work makes it likely they’ll become embroiled in a lawsuit. The list includes doctors, lawyers, accountants and just about any type of entrepreneur.

If you get sued and happen to have assets in a foreign country, it’s difficult for someone to get their hands on the money.... But let’s be clear about one important thing.

It’s a haven to protect your assets, not to protect you from taxes. If you’re a U.S. citizen, everything placed in an asset protection trust is still taxable and the Internal Revenue Service expects you to report it, no matter where you live.

Of course, some foreign banks may not send the required 1099 forms to the IRS.

But you’re still liable, even if the IRS never learns what you’ve got or how much interest accrues.

"Foreign asset protection trusts should be part of your client’s financial strategy." Planner 10-11-97 by J. Ben Vernazza, CPA. [American Institute of Certified Public Accountants]

Foreign Asset Protection Trusts make sense for certain clients who have high risk exposure to lawsuits or for people who just want to put aside a "nest egg" that can’t be garnisheed.

Although most FAPTs will be tax neutral for U.S. tax purposes, the other advantages are substantial. The greatest advantage is the protection provided against creditors’ lawsuits.

This protection assumes that the original transfer to the FAPT was not fraudulent and the client was not made insolvent by the transfer. Only a portion of the client’s portfolio...is transferred to a FAPT to avoid creating a problem relative to the Uniform Fraudulent Transfer Act.

Foreign jurisdictions that have asset protection legislation usually have some, if not all, of the following characteristics:

The local trust law is binding and does not recognize judgments from the United States.
The fraudulent transfer laws in the Statute of Elizabeth are overridden by local statute.
The Statute of Limitations for a creditor to initiate an action is as low as two years compared with four to seven years in most states in the U.S.
The burden of proof is on the creditor and must be beyond a reasonable doubt. This is a high standard for a creditor to meet.
A significant bond or cash deposit may be required by the local court in order to pay the defendant’s fees and court costs in the event the creditor does not prevail.
Community property law is recognized by statute in order to be sure that the surviving spouse also gets a "step up" in basis on half of the community property as well as the decedent’s one-half share.
Not all, but most FAPTs are tax neutral and they are subject to not only U.S. income taxes, but also U.S. estate taxes.

"Judgments often tough to collect; Losing defendants can hide assets."
The New Orleans Times-Picayune 3-2-97 by Vivian Marino, AP business writer

For the wealthy, the most common "judgment-proof" strategy, often used by doctors fearful of malpractice suits, is to set up offshore trusts to which only the account holder has access.

Such trusts aren’t registered in this country, making it impossible to ascertain whether someone has one. A corporation can separate problem divisions from other subsidiaries and shift away most of their assets. Individuals can keep part of their wealth in business partnerships, where asset distribution is controlled by others.

"Protecting your assets against lawsuits."
The Plain Dealer [Cleveland, OH] 1-18-98 by Armond Budish.

People today sue for almost anything. When a person can buy a hot cup of coffee, put it in her lap while driving, spill it, file a lawsuit for millions of dollars against the fast-food company that sold it and win, you know we live in an excessively litigious society.

Many lawsuits are legitimate, but others are not.How can you protect your home and savings from lawsuits? Most of us purchase liability insurance, but you may be sued for more than your coverage. While liability insurance is necessary, it may not be sufficient.

State and federal laws give you a variety of other strategies to protect your life savings.

Offshore Trusts: There are certain countries that do not recognize judgments of United States courts. Trusts can be set up in these countries to protect assets from creditors.

"Americans Move Piggybanks Offshore."
Christian Science Monitor 10-9-97 by Paul Ames.

Once the shadowy tax havens of mafia bosses and global jetsetters, offshore banking operations are going mainstream.... From a doctor protecting his savings from an onerous malpractice suit...to an investor gambling on high-risk offshore mutual funds.

Experts say the growth has been dramatic, particularly in the past five years.

The number of people actually reporting offshore accounts to the IRS -- something rarely done in the past -- has jumped almost 25 percent in the past three years alone. They now number close to 200,000.

A conservative estimate puts $5 trillion in banks, mutual funds, and trusts in the world’s 35 international offshore banking centers. These range from European states like Ireland and Luxembourg to exotic Caribbean islands like the Caymans and Antigua.

All have no or low taxes, flexible regulations, and, quite often, strict secrecy laws designed to attract capital.Americans are opening offshore "asset protection trusts" at unprecedented rates. While they offer no direct tax benefits, they do provide protection from liability suits. "What this does is put whole categories of people beyond the legal system of their country."

"The Offshore Trust: A Shield Against Certain Swords."
The New York Times 7-20-97 by Nick Ravo.

What do you do if you are a well-to-do professional, a wealthy entrepreneur or just plain filthy rich and you want to keep your assets safe from judgments and divorce decrees, but still within your reach?

Increasingly, members of the moneyed class are turning to offshore asset protection trusts. Since the trusts began about eight years ago, thousands of them worth hundreds of billions of dollars have been set up in a dozen or so offshore financial centers, far-flung fly-speck havens like the Cook Islands in the South Pacific and Nevis in the Caribbean.

The trusts came into vogue largely to protect professionals from huge jury awards. But they are not necessarily a panacea: they will not offer protection from the Internal Revenue Service; they are expensive and complex, and they can be cracked occasionally, too. And with some trusts that are offered at cut-rate prices, you may get what you pay for.

Still, an offshore asset protection trust created by an expert lawyer can create a large moat around your assets and may be an effective maneuver, if the assets are large enough and if you may be vulnerable to lawsuits.

Basically, these offshore trusts enable affluent Americans to be the beneficiaries (generally, in the United States, the creator of a trust cannot also be a beneficiary) and the trust’s assets and income cannot be seized – at least not easily.

Despite the shady reputation of some offshore financial centers, the offshore asset protection trusts are legal -- as long as they are not being used to evade taxes. Someone who has one is required to disclose the trust to the I.R.S.

And the trusts are effective -- as long as they are in place for a reasonable period, one to three years, before any legal action to seize the assets is started.

Setting up such a trust just before a divorce, a bankruptcy or lawsuit is filed is almost asking for a court to rule the trust a "fraudulent conveyance."

Most clients understand it’s like fire insurance: you hope you never need it, but if you do and you have it, you are protected. You have to put it in place before the fire. Once the fire starts, it’s hard to get coverage.