Split decisions

Federal, state changes to maintenance shake up family law

Federal, state changes to maintenance shake up family law

By Tequia Burt
Chicago Lawyer correspondent

New legislation on both the federal and state level is affecting how family lawyers in the Chicago area conduct business.

“All the new legislative changes, both in Illinois maintenance and child support laws and in the federal tax laws and understanding how they all impact each other financially is one of the most important issues facing family lawyers today,” said Janet E. Boyle of Boyle Feinberg Sharma. “So many things that we’ve historically done and have been part of our way of doing things for many years have all of a sudden kind of been turned on their ear.”

Tremors from the federal Tax Cuts and Jobs Act of 2017 continue to be felt across the legal field. On Jan. 1, 2019, federal tax law permanently eliminated the ability of the spouse paying spousal maintenance, or alimony, to deduct the maintenance payments from gross income in their federal taxes.

Now, alimony payments are no longer tax-deductible for the maintenance payor and no longer included in the taxable income of the maintenance recipient.

“The Tax Cuts and Jobs Act at the federal level fundamentally sort of altered the landscape of maintenance,” said Brendan Hammer, a partner at Berger Schatz. “Maintenance going forward in new judgments is no longer tax-deductible. That has had an enormous impact on a lawyer’s ability to craft a creative settlement. Maintenance used to be deductible to the payor and includable in income to the payee, but now it is sort of tax-neutral. From a cash flow perspective, that sort of takes pieces off the table in terms of playing with tax treatment to arrive at a mutually advantageous figure.”

Previously, the tax deduction helped soften the blow to spouses reluctant to pay out huge alimony payments. The payor could deduct the payments, and the recipient got more money.

“Before the tax law took effect, high earners especially benefited — if you were taking maintenance dollars and making them tax-deductible at a high tax rate and then making them taxable at a lower tax rate for the payee, then both people ended up with more money because you were taxing the dollars that were being paid at alimony at a lower tax rate than they would be taxed at if the person paying maintenance were paying the tax,” explained Meighan Harmon, managing partner at Schiller Ducanto & Fleck. “For some families, it created a little bit of a tax arbitrage where you could end up with a little bit more net cash to give, to allocate between ex-spouses. Now we have to do the calculations based upon net income as opposed to looking at growth income and taking advantage of that tax arbitrage.”

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Originally published in August 2019 in Chicago Lawyer


The new legal eagles

In-house counsel step out of the back office and into the boardroom

In-house counsel step out of the back office and into the boardroom

By Tequia Burt
Chicago Lawyer correspondent

In the not so distant past, general counsels were thought of as strictly the “company lawyer,” largely responsible for litigation and doling out reactive legal advice. But in today’s ever more complex and sophisticated regulatory, technological, global and social landscapes, corporate legal leaders, including chief legal officers and general counsel, have leveraged their skills beyond the legal department into the C-suite and boardroom.

“The general counsel today versus the general counsel of 20 years ago is very, very different,” said Alan Tse, global general counsel and corporate secretary at Chicago Fortune 500 commercial real estate services company Jones Lang LaSalle, who serves on the board of the Association for Corporate Counsel.

“Now, we’re called upon to be business strategists and to be the gatekeeper of ethics. To lead compliance for the company, to lead, for the most part, a legal department as well as be part of the executive management team,” he said.

According the Association for Corporate Counsel’s annual 2019 survey of more than 1,600 legal leaders across the globe, chief legal officers and general counsels have more power than ever in their companies, finding that 93% of Fortune 500 chief legal officers report directly to the CEO.

In addition, almost 70% of chief legal officers indicated that the executive team seeks out their advice for business decisions, up 11 percentage points from last year. That means that general counsels are increasingly seen as top-level decision-makers charged not just with protecting the company from legal disaster but also for growing its business and leading its strategic direction.

“When my CEO looks over to me in a meeting and asks, ‘What do you think we should do?’ often that’s not asking me to make just a strictly legal analysis,” said Shelbie Luna, general counsel and vice president of administration at Bickerdike Redevelopment Corp., a nonprofit community development corporation concentrating its current efforts on Chicago’s Northwest Side.

“They are coming to me to make a pragmatic business decision. That decision-making certainly takes into account my legal knowledge, but also what I know that we’re trying to accomplish for the business — a means to an end,” she said.

Melvin Williams Jr., chief legal officer at Chicago Trading Co., stressed it’s of tantamount importance that today’s legal leaders really understand the ins and outs of their company’s business to be able to advise strategic direction.

“Sure, I’m giving legal advice all the time, but I’m also seeing, more and more, that I’m giving judgment advice when the issue isn’t so much a legal concern as much as a strategic business concern,” he said.

“And the better a lawyer understands the business, the better position they are in to advise the business, not just on the legal issues, but also beyond. Even though the law says you can do something doesn’t mean it’s in the best interest of the company’s business. What are the economic and reputational repercussions? What are the consequences?” he said.

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Originally published in July 2019 in Chicago Lawyer

Confidentially speaking

Do confidential settlements protect clients, or hide their secrets?

Do confidential settlements protect clients, or hide their secrets?

By Tequia Burt
Chicago Lawyer correspondent

People are talking about not talking.

“Last year alone we probably settled close to $40 million of settlements that were confidential, and it’s become more of an issue,” said Adria E. Mossing of Mossing & Navarre. “This was not happening 20 years ago — you may have had to negotiate a few, but it was very infrequent. Now, frequently, at mediation in particular, the issue of confidentiality comes up.”

Confidentiality agreements are designed to prohibit the parties to a settlement from disclosing the settlement terms and other details. Confidentiality presents numerous challenges for both the legal profession and society as a whole. For instance, how much of a right does the public have when it comes to knowing details of a medical-malpractice case? Or a case involving sexual abuse or harassment? And how much does keeping details secret handcuff attorneys who may be handling similar cases down the road?

Mossing, who began her career defending hospitals and doctors against insurance claims, now works on behalf of injured parties in complex medical-malpractice and personal-injury cases. Last year, her firm obtained settlements totaling more than $42 million, of which more than $35 million were confidential. She said that as the number of confidentiality settlements has risen, so too has her concerns that transparency at medical institutions is being eroded.

“The public needs to know when doctors and institutions do harm,” Mossing said. “Even if you don’t give the name of the institution, getting information out there about the settlement and the facts of the case at least gives patients the opportunity to ask their providers, ‘Is this something I should be concerned of? Do you have policies in place to handle this?’”

She added: “When a case is settled it’s important to be able to tell the public, ‘This catastrophic event happened at this hospital. But now, because of this terrible situation and our efforts to protect the family, now the public is more protected. Policies have changed.”

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Originally published in June 2019 in Chicago Lawyer

Playing defense

Special interrogatories, workers’ comp exemptions and BIPA are three trends to watch in Pritzker’s Illinois

Special interrogatories, workers’ comp exemptions and BIPA are three trends to watch in Pritzker’s Illinois - Photo by Lisa Predko

By Tequia Burt
Chicago Lawyer correspondent

Though Gov. Bruce Rauner was thwarted in his efforts to push damage award caps and tort reform, at least civil defense attorneys in Illinois rested easy during Rauner’s four-year tenure, knowing he would not actively work against them. But now that Democrat J.B. Pritzker has been elected governor, what is the defense bar expecting?“The ink isn’t even dry on Pritzker’s swearing-in papers, but we’ve seen a number of bills introduced in the House and in the Senate that are problematic, not only for the business community, but also for the defense attorneys that defend them,” said Brad Nahrstadt, president of the Illinois Association of Defense Trial Counsel (IDC) and partner at Lipe Lyons Murphy Nahrstadt & Pontikis.

Others like Bob Winston, a partner at Brady, Connolly and Masuda who has handled civil litigation matters for about 25 years, are taking a more measured, wait-and-see attitude to the election of the Democratic governor.

“We definitely expect a more liberal approach, but we’ve heard on the defense side that he is reaching across the aisle,” he said. “He has business support, which he needs to move his agenda forward. He doesn’t want to disturb that relationship, so we’re not looking for drastic changes.”

John Eggum, partner at Foran Glennon and vice chair of the defense association’s Legislative Committee, added that much of Pritzker’s agenda does not target areas that would affect the work of defense attorneys.

“The governor’s initiatives have not been very focused on the Judiciary Committees or the legislation that the Judiciary Committees are considering or might consider,” he said. “Pritzker has other priorities and campaigned on issues such as minimum wage and changes to the income tax structure — not really issues we’re concerned about.”

Rather than worrying about the governor, civil defense attorneys should be paying attention to the complete Democratic control of the General Assembly, according to Pat Eckler, partner at Pretzel & Stouffer and chair of the association’s Legislative Committee.

“For us, it’s less about the election of Pritzker and more about the supermajorities in the Senate and the House,” he said. “Even if Pritzker doesn’t want to do what the Senate and the House want to do, they can override anything he might veto. Pritzker will sign what they send him, I expect, but even if he didn’t, even if Rauner had been re-elected, they would be able to override his vetoes because they have super majorities in both houses.”

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Originally published in April 2019 in Chicago Lawyer

Right to repair

New exemptions will allow owners to repair everything from iPhones to tractors — without going to jail

New exemptions will allow owners to repair everything from iPhones to tractors — without going to jail

By Tequia Burt
Chicago Lawyer correspondent

Nicholas Percoco, an information security expert and co-founder of THOTCON, an annual nonprofit hacking conference based in Chicago, said that, as a hacker, he welcomes recent changes to the Digital Millennium Copyright Act, or DMCA, that could keep him out of prison.

“DMCA protects the manufacturers, but it really didn’t protect consumers or, especially in my world, did not protect the researchers,” he said. “Before these recent expansions, if you had a passion for doing security research and finding flaws in systems, you could step on the wrong toes and find yourself in jail.”

Last October, the Library of Congress and the U.S. Copyright Office expanded exemptions to the act that lets consumers and independent repair experts “jailbreak” their electronic devices to repair or maintain them. These exemptions to copyright law — which will apply to smartphones, tractors, cars and smart home appliances — enables owners to hack the software embedded on their devices without getting into legal trouble.

“This new ruling means you can’t block people from fixing electronics that they own,” said Nathan Proctor, director of the Campaign for the Right to Repair at consumer-rights organization US PIRG.

Advocates in the “right to repair” movement want people to have the ability to more easily maintain and repair their devices.

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Originally published in February 2019 in Chicago Lawyer

Approaching the bench

Exploring the ‘symbiotic relationship’ between lawmakers and the judiciary

Exploring the ‘symbiotic relationship’ between lawmakers and the judiciary

By Tequia Burt
Chicago Lawyer Correspondent

Illinois lawmakers generally emphasize the strict separation of powers between the judiciary and General Assembly.

“The relationship between us and the courts is arm’s length; it’s respectful and we recognize that we are co-equal branches of government,” said House Minority Leader Jim Durkin, R-Western Springs. “But their job is to rule on the laws and determine whether or not they abide with our constitution and nothing more.”

However, cooperation between the courts and lawmakers can be essential to pushing forward key policy and legislation in the state of Illinois, according to other lawmakers and experts.

“On the whole, there’s not enough interplay between the courts and lawmakers,” said former state Rep. Scott R. Drury, D-Highwood. “I’m not saying that the court should dictate what we do, and we certainly shouldn’t dictate to the courts how they should interpret our laws. But there is a symbiotic relationship, obviously, between the judicial branch and the legislative branch. And to the extent that there could be more lockstep cooperation, I think it would help everybody in the long run.”

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Originally published in January 2019 in Chicago Lawyer

Accruing interest

Will the states step up as the federal government rolls back consumer protections? Who’s going to regulate fintech? And what, under Trump, is a bank? A look at the trends affecting banking, financial and tax law

Will the states step up as the federal government rolls back consumer protections? Who’s going to regulate fintech? And what, under Trump, is a bank? A look at the trends affecting banking, financial and tax law

By Tequia Burt
Chicago Lawyer correspondent

As the Trump administration continues to loosen federal regulatory oversight, in particular those that protect consumers, what should banking and finance legal professionals be paying attention to?

Here are three areas to keep an eye on as regulatory uncertainty shows every sign of being an ongoing challenge for the banking and finance industry.

How will states react to the federal rollback of regulatory enforcement?

After he was appointed head of the Consumer Financial Protection Bureau last November, Mick Mulvaney made clear his goal was to “dramatically” shift the agency’s priorities.

“Anybody who thinks a Trump administration’s CFPB is going to be the same as an Obama administration CFPB is being naïve. Elections have consequences,” Mulvaney said at a news conference on his first day on the job.

An Obama-era consumer watchdog agency created in the wake of the financial crisis as part of the 2010 Dodd-Frank Act, the CFPB functions as one of the federal government’s main financial services regulators. The agency protects consumers by making sure financial companies are following the law; collecting and responding to consumer complaints; enacting protections to ensure consumers are treated fairly; and promoting financial transparency.

The CFPB has supervisory authority over banks, thrifts and credit unions with assets of more than $10 billion as well as their affiliates. Additionally, the agency has supervisory authority over nonbank mortgage originators and servicers, payday lenders and private student lenders of all sizes. During its seven-year history, the CFPB has taken on everything from the prepaid card industry to the mortgage servicing business.

During his tenure Mulvaney has moved to undermine the agency, including making a budget request of zero dollars this year, and has continually urged Congress to weaken the CFPB. The Trump administration has made a number of moves to diminish the agency’s power, including stripping the CFPB’s Office of Fair Lending and Equal Opportunity of enforcement power. Previously, the office had forced payouts in several well-known cases, including settlements from lenders it alleged had systematically charged minorities higher interest rates.

So how will the states’ attorneys general respond to this rollback on a federal level? According to several legal experts, states, including Illinois, are poised to fill the gap.

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Originally published in November 2018 in Chicago Lawyer

Mediation killers

The top reasons mediations fall apart — and how to avoid them

The top reasons mediations fall apart — and how to avoid them - Lisa Predko

By Tequia Burt
Chicago Lawyer correspondent

Imagine it’s mediation day. You’ve been preparing for weeks — or even months. You and one of your clients are on the same page and are working toward one goal: to settle the case.

As you sit in the mediation room and the minutes tick by, though, you begin to realize that one of the key decision-makers on the other side is not going to show up.

According to seasoned mediator Faustin “Frosty” Pipal of Chicago-based Resolute Systems, “that’s the No. 1 mediation killer, in my view.”

Pipal, who primarily oversees personal-injury, product-liability and professional negligence mediations, said that whether it’s an irate brother-in-law, a key insurance adjuster or a disgruntled business partner, the fact that the other side is not there can be a big obstacle to reaching an agreement that all parties are able to live with.

“Though not many of my cases fail, almost 100 percent of those that do, do so because one or the other decision-maker is not physically present at the mediation,” Pipal said. “It’s so important to have all persons involved in the process be in the room, where they can be a part of the give and take of the negotiation.”

“‘Being there’ is the very essence of a mediation and if someone is phoning it in, in my experience, it’s going to be harder to get the case settled,” he added.

And Pipal means that — literally. He recommended against having mediations via telephone or even online. Pipal said bluntly of online cases: “If we move toward online meetings, we’re going to have increased failure rates of mediations.”

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Originally published in September 2018 in Chicago Lawyer

Ins and outs of corporate counsel

How in-house and outside counsel can work together

How in-house and outside counsel can work together - Lisa Predko

By Tequia Burt
Chicago Lawyer correspondent

More than ever before, corporate legal departments are being viewed as strategic partners by the C-suite. The growth of complex legal and regulatory challenges coupled with increased cyber and data privacy risks have made the counsel from in-house legal teams central to business decisions. No longer considered just cost centers, the operations of the in-house counsel are being aligned with the overall strategic goals of their companies.

Hoping to boost their value and productivity, many in-house legal teams are re-evaluating their relationships with the outside law firms that they hire. According to the Association of Corporate Counsel’s Chief Legal Officers 2018 Survey, which polled 1,275 lawyers in September and November of last year, one in three chief legal officers fired outside counsel for failing to meet expectations in 2017.

Moreover, 43 percent definitely plan or are considering terminating an outside provider or firm in 2018, and, among those who let go of a provider or firm last year, one in 10 in-sourced at least part of the work permanently.

So what does that mean for Chicago-area law firms?

At a minimum, in-house counsel at Illinois-based companies expect outside counsel to be excellent attorneys who are experts in their respective areas of practice. To avoid the chopping block, however, law firms should strive to get a deeper understanding of their clients’ companies so that they are able to overlay a business context to their legal advice. Providing stronger communication, more billing transparency, as well as offering a roster of gender and racially diverse lawyers, are also important.

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Originally published in August 2018, Chicago Lawyer Magazine

Our New Best Place

Before moving into Matt Carmichael’s former house earlier this month, my husband and I had lived in Chicago’s Logan Square neighborhood for almost 15 years; it was our perfect place. We bought our Logan Square two-bedroom, one-bath condo in 2006 at the height of the real-estate bubble, unfortunately. Like a lot of young Americans in their early 30s who had just bought their first piece of property, the housing bust caused us to lose the little wealth we had accumulated. But we loved where we lived, and that lessened the sting a great bit.

And what’s not to love? Our adorable condo was a mere three blocks from the Blue Line (public transit) station and just a 15-minute commute into downtown, where we both worked. I love to cook and eat good food, and in recent years, a burgeoning gourmet scene down the street is what Bon Appétit now calls Chicago’s new restaurant row. I value eating locally and organically, and the co-op at the end of my block and the Sunday farmers market made that not only possible but also easy to do. When we first bought our apartment, we weren’t married.

Then life changed. We got married in 2008 and shortly thereafter had a son. While our living quarters were more cramped, we still liked living in our little Logan Square gem. We strolled along the wide and beautiful boulevards with our baby in tow; there were at least three great parks in walking distance. We found a good home day care provider who was already taking care of my 1-year-old niece and was located just a hop, skip and a jump away. But now, when we had only driven our car on the weekends, in the interest of saving time we drove our son to day care every day even though it was only about six blocks away. We didn’t sweat it, though, because the other end of the Blue Line train station was across the street from the babysitter, and it was still a convenient commute.

However, that organic meat-share I picked up from the farmers market every other month just wasn’t cutting it, and the astronomical prices of the co-op were not an option. While the neighborhood had a mix of bodegas and chichi locavore co-ops, it didn’t have a big grocery store. So we drove to one every weekend. But we persevered – we were in our perfect place.   Then life changed again. Our daughter was born and our 3-year-old son was now ready to begin preschool. What’s more, I changed jobs and was now working from home. Our two-bedroom was no longer livable. Even though we loved it, we realized we needed more space.

Parting is such sweet sorrow

So we began the hunt for a house. The first decision we had to make was where to look. Immediately, we narrowed to Logan Square – we wanted to stay in our neighborhood. Like most well-heeled young parents in Chicago, though, the thought of navigating the lottery-based Chicago Public School system had us second-guessing our decision. Logan Square has one decent elementary school, and we did not live in its district. The school across the street from our apartment was rated as below-average, and we didn’t want to send our kids there. So we narrowed further to the area surrounding the one good school in the neighborhood. Only problem was the houses were crazy-expensive there and we just couldn’t afford it. We were being priced out of the neighborhood that we’d helped to gentrify.

We did the unthinkable and started considering the suburbs. We struck out the far-flung ones like Naperville and the like straightaway and landed on Evanston and Oak Park. There are many good reasons to live in those suburbs. They are more city-like and racially diverse than others, they have excellent schools and even the restaurants are pretty good. But as a born-and-bred Chicagoan, I couldn’t do it – those places just aren’t my city. Plus, as city-like as those suburbs are, they are still suburbs.

My husband, who grew up in multiple suburbs, hates them. The one he hates the most is Overland Park, Kan., where he spent his middle and high school years and is incidentally on Livability.com’s list of best places to raise kids. He hated it because it wasn’t diverse – and not just in its racial makeup. It was, according to him, so homogenous that it made it hard for a kid like him who wasn’t a jock, who liked punk and ska, and whose family wasn’t conservative, to thrive.

We greatly value being able to raise our mixed-race kids in a city like Chicago, which has both urban culture AND urban diversity. But was our children’s education more important than our love of Chicago? I attended very good magnet schools here that were located about an hour’s drive away from my home. Would my kids test into schools like that and, most important, did I really want that for them? We thought long and hard and decided we wanted to invest in our city. Most middle-class people with kids our age flee to the suburbs, citing the poor academic performance of CPS.

For me, it’s more complicated. There are many examples of urban families here banding together to improve neighborhood schools both for their own children and disadvantaged neighborhood children. There are all kinds of communities to be had in a city, and we are in for the long haul. And then we found our perfect house, Matt’s former home. It is perfect for every reason he listed in his blog post. While he didn’t send his daughter to the neighborhood school, it is known for being a very good area school. And it’s in walking distance. And only 12 blocks away from our former hood. But best of all, it’s just a few blocks from my sister and her family. And now my children have a big backyard to play in with their cousins. We couldn’t be happier.

Our New Best Place was originally published at Livability.com on June 24, 2014