Jennings Strouss Attorney Richard Lieberman Appointed to American Heart Association’s Board of Directors

Jennings Strouss is pleased to announce that Richard Lieberman, a member in the firm's Phoenix office, has been elected to the Board of Directors for the American Heart Association's (AHA) Greater Phoenix Division.

"I am honored to have this opportunity to help the American Heart Association continue its critical role in research, educationand legislative initiatives impacting the heart and stroke health of all Arizonans," said Lieberman."The work of the AHA impacts so many lives, and the Board continuously strives to broaden its reach."

The American Heart Association's mission is to build healthier lives, free of cardiovascular disease and stroke. Its dedication to reducing heart disease and stroke is approached through education, research and advocacy. Here in Phoenix, the AHA has a rich tradition of fighting heart disease and stroke. The organization has received tremendous success. Most work places in Arizona are smoke free, the redesigned Halle Heart Children's Museum educates more than 30,000 elementary school students each year, and more Valley residents than ever receive powerful information about heart healthy living.

"The AHA seeks to touch the lives of each of us through its myriad of events and programs, like the Heart Walk, Jump Rope for Heart, Go Red for Women, the Heart Ball,and My Life Check, just to name a few," Lieberman said."The goal is to improve the quality of lives, not just prolong them," he continued.

Richard Lieberman is Chair of the firm's Corporate, Securities and Finance Department and serves on the firm's Management Committee. He has extensive experience in a broad range of business law issues, including mergers and acquisitions, securities, corporate governance, finance and banking, employment, executive compensation, bankruptcy and corporate restructuring, litigation and legislation.

He earned a J.D. from the University of Illinois School of Law and a B.A. also from the University of Illinois.

Arizona Case Law Updates Related to Anti-Deficiency Statutes

By David W. Elston

Arizona’s anti-deficiency statutes were enacted in 1971.  The purpose of the anti-deficiency statutes is to bar a homeowner’s personal liability after losing a qualified residential property to foreclosure under certain circumstances.  The statutes prohibit execution against and attachment of a borrower’s assets when the property foreclosed upon either judicially or through a trustee sale is (i) a qualified property and (ii) the debt is a qualified loan. The scope and breadth of the statutes have been the subject of three recent Arizona judicial decisions of which a brief summary of each are as follows: 

1.           In M&I Marshall & Ilsley Bank v. Mueller, 228 Ariz 478 (2011), the Arizona Court of Appeals expanded the scope of the Arizona anti-deficiency statutes to protect borrowers from a deficiency judgment after a foreclosure of a mortgage securing their loan in which the loan proceeds were used to construct the borrowers’ unfinished house.  Under Arizona’s anti-deficiency statutes, “utilization” of the house as a dwelling is one of three requirements that a borrower must meet in order to be protected from a deficiency judgment.  The Arizona Court of Appeals held that the Mueller case was distinguishable from prior Arizona cases in that in Mueller the borrowers used the loan proceeds to purchase and construct the property with the intent to occupy the dwelling upon its completion.  Therefore, the borrowers were protected from a deficiency judgment even though the house was not completed and had never been lived in.  On August 28, 2012, the Arizona Supreme Court denied the request of many lenders to overturn this Court of Appeals ruling.

2.           In Helveta Servicing, Inc. v. Pasquan, 229 Ariz. 493 (2012), the Arizona Court of Appeals held that a lender may obtain a deficiency judgment after a judicial foreclosure for any non-purchase money loan proceeds disbursed to the borrower (i.e., the loan proceeds were not used solely by the borrower to purchase the property, or in the case of a refinance transaction, the loan proceeds were not used solely by the borrower to pay off existing purchase money loan debt) to the extent that the non-purchase money proceeds could be segregated and traced.  The ruling, however, only applies to cases whereby a lender foreclosures upon the property in a judicial foreclosure action.  If the lender had elected to foreclose the property non-judicially pursuant to a power of sale provision, it would not have been entitled to recover a deficiency judgment against the borrower regardless of whether the refinanced loan proceeds were purchase money debt or non-purchase money debt.

The Court of Appeals in Helvetica also ruled that a construction loan qualifies as a purchase money loan if the loan proceeds are actually used to construct the house that otherwise qualifies for protection under the Arizona anti-deficiency statutes, and if the deed of trust securing the loan encumbers the land and the house built thereon.

3.           More recently, in Independent Mortgage Company v. Alaburda, 230 Ariz. 181 (2012), the Arizona Court of Appeals ruled that the owners of a vacation home (the owners owned a fractional interest in the property and they were entitled to use the property for a maximum of 28 days per year) qualified for protection under Arizona’s anti-deficiency statutes because the statutes do not limit its protection to only those that own all of the property.  The Court of Appeals rejected the lender’s argument that a 1/10^th interest in a vacation accommodation was not a “dwelling” entitled to anti-deficiency protection under the Arizona statutes in holding that what constitutes a one–family or two-family dwelling is not determined by how many families pass through the residence, but on the number of families there at a time.

Short Sale - Applicability of Anti-Deficiency Statutes.

Generally, while the specific language of the Arizona anti-deficiency statutes refer to qualifying properties sold by “trustee sale” or through a “judicial foreclosure”, any deficiency is also waived by the lender if it approves a short sale and releases the deed of trust or mortgage securing the debt, unless there is evidence of an agreement to the contrary made by the lender and borrower (i.e., where the lender agrees to release its mortgage or deed of trust to allow the short sale but requires that the borrower sign documentation thereby agreeing that a portion of the debt is still owed to the lender upon the short sale closing and release of the deed of trust or mortgage by the lender). 

Jennings Strouss Gains Six New Attorneys and Two New Areas of Practice

Phoenix (September 4, 2012) – Jennings, Strouss & Salmon, PLC is pleased to announce that six attorneys have joined the firm’s Phoenix office, expanding the firm’s services to include Surety, Fidelity and Family Law.   

Jay M. Mann, Richard S. Wisner, Scott F. Frerichs, Andy J. Chambers and Patrick F. Welch are members of the firm’s new surety and fidelity law practice, and bring additional experience in the areas of construction law and commercial litigation. Norma Izzo Milner leads the firm’s family law and domestic relations practice.

“Jay Mann, Dick Wisner and their team are Arizona’s preeminent attorneys in the area of surety and fidelity law. They fit very well in the firm’s overall plan for growth,” states J. Scott Rhodes, managing attorney at Jennings, Strouss & Salmon, PLC. “Norma Izzo Milner has established herself as a leading practitioner in family law and domestic relations, especially in the areas of mediated and collaborative divorces. Norma’s addition to the firm illustrates our commitment to evolve our services to meet the needs of the community.”

Jay M. Mann is chair of the firm's Surety and Fidelity Group. He is a frequent lecturer and author in the areas of construction, surety and fidelity law. Mann is also active in numerous professional and civic organizations, including the American Bar Association, where he serves as a Vice Chair of the  Fidelity and Surety Law Committee, the State Bar of Arizona, the Maricopa Bar Association, as well as numerous other organizations focused on construction, surety and fidelity law. He earned a J.D., with honors, from Loyola University of Chicago and a B.A. from the University of Illinois.

“Jennings Strouss is a high caliber firm with a reputation for quality client service,” says Jay M. Mann, chair of the firm’s new Surety and Fidelity Law Group. “We look forward to building on the Jennings Strouss legacy with the addition of these new legal services.”

Richard S. Wisner is special counsel in the Surety and Fidelity Group.  He is recognized as a leader in the fidelity and surety field, and  is the recipient of Lifetime Achievement Awards from the American Bar Association, Fidelity and Surety Law Committee ("FSLC") and the National Bond Claim Association. Wisner is a Past Chair of FSLC and currently serves on the Board of Directors of the Surety & Fidelity Claims Institute. Wisner earned a J.D. from DePaul University and a B.A. from Loyola University.

Scott F. Frerichs is a member in the Surety and Fidelity group. He focuses his practice in the areas of commercial and construction litigation, personal injury defense, professional and products liability, and appellate law. Frerichs earned both a J.D., cum laude, and B.S. from Arizona State University. 

Andy J. Chambers is a member in the Surety and Fidelity group. He focuses his practice on fidelity law, commercial litigation, and surety and construction law. Chambers earned a J.D., cum laude, from the Washington College of Law at American University and a B.A. from the University of California, Santa Barbara.

Patrick F. Welch is an associate in the Surety and Fidelity group. He focuses his practice in the areas of commercial litigation, construction, fidelity and surety, and employment. Welch earned a J.D. from the New England School of Law and B.A. from Connecticut College.

Norma Izzo Milner is a member and leads the firm’s Family Law and Domestic Relations practice, which includes collaborative divorce, mediation, arbitration, parent coordination, custody and child support.  Ms. Izzo Milner has been appointed as a judge pro tempore for the Family Court Division and IV-D Court of the Superior Court of Arizona in Maricopa County. She also serves on the State Bar of Arizona Committee for Family Law Rules of Practice and Procedure and on the Board of Directors for the Maricopa County Bar Association. She earned a J.D. from Arizona State University and a B.A. from Northern Arizona University.

“Jennings Strouss is a firm with a long history of providing top notch service to their clients,” states Izzo Milner. “I look forward to being a part of such a dynamic team of attorneys.”

About Jennings, Strouss & Salmon

Jennings Strouss & Salmon is one of the Southwest's leading law firms, providing legal counsel for nearly 70 years through its offices in Phoenix, and Peoria, Arizona; and Washington, D.C. The firm's primary areas of practice include bankruptcy, reorganization and creditors’ rights; corporate, securities and finance; energy; family law and domestic relations; health care; intellectual property; labor and employment; litigation; real estate; sports and entertainment; surety and fidelity; tax; and trust and estates.  For additional information please visit www.jsslaw.com.

~JSS~

Contact:  Dawn O. Anderson  |  danderson@jsslaw.com  |  602.495.2806

Zoning and "Horse Privileges" on Your Residential Property

By Rodney Q. Jarvis

Just what are "horse privileges"? We see them touted on "For Sale" signs, but what are they and who has them and how does a property get them?  The short answer is that cities and towns and counties often have zoning ordinances that speak to the keeping of horses, and many residential properties enjoy "horse privileges," within certain parameters.  Deed restrictions might limit what residential property owners are allowed to do, but absent those deed restrictions, under the zoning laws many residential properties may be used in some way for horses.

This article offers a quick review of the "horse privileges" zoning laws in the City of Phoenix, the City of Scottsdale, and in unincorporated areas of Maricopa County. The laws will vary from city to city, town to town, and county to county, so legal assistance is advised.

CITY OF PHOENIX 

The Phoenix Zoning Ordinance restricts the keeping of horses to occupant (owner or tenant)-owned horses on single-family residential property of 10,000 sq. ft. or greater.  There is no limitation on the number of horses which may be kept on a single-family lot, so long as they are all occupant-owned. Public stables or riding academies require a special permit approval and a site of a minimum size of 10 acres. Commercial stables cannot be permitted as a home occupation on residential property. The City of Phoenix provides specific regulations regarding the keeping of animals: health nuisances due to a presence of flies, odors, dust or accumulation of manure are prohibited.  Manure is to be removed at least twice each week. A premises upon which a horse is kept is expressly required to be sanitary and is subject to Health Officer inspection.

The ability to board horses for others is very limited in the City of Phoenix. No structures should be placed or erected without proper permitting. Setbacks will apply. Structures which violate setback or spacing requirements will need variance approval, and legal assistance is advised (see discussion of County below).

PART I: U.S. Supreme Court Upholds Affordable Care Act

Some Aspects of the Act Will Take Effect Soon

By Bradley V. Martorana

This Alert is Part I of two Alerts relating to the recent decision of the U.S. Supreme Court upholding most of the Patient Protection and Affordable Care Act ("PPACA" or the "Act").  Part I discusses the decision.  Part II discusses its practical  effects as respects aspects of the Act which will become effective soon.

On June 28, 2012, the U.S. Supreme Court upheld the vast majority of PPACA.  Many of its provisions were effective upon enactment.  Others will not take effect until January 1, 2013 and beyond.  Those provisions will take effect as scheduled unless Congress and the President act to the contrary.  This Alert summarizes the Supreme Court's decision. 

Background and Court Decision.

In National Federation of Independent Business v. Sebelius, the U.S. Supreme Court was asked whether two provisions of the Act were within the U.S. Congress' legislative powers under the U.S. Constitution.  Those two provisions and a preliminary issue are discussed below. 

The Preliminary Issue.

The Court [1] first considered whether it could hear the case.  Under the Anti-Injunction Act, no person may sue to prevent the collection of a tax.  Instead, a person must generally pay the tax and then sue for a refund.  Thus, the Court examined whether Congress intended the penalty imposed by the individual mandate to be a "tax" within the meaning of the Anti-Injunction Act.  The Court reasoned that, because the Act refers to the fee as a "penalty" and not a "tax", Congress must have intended that the fee should not be a "tax" as that term is used by the Anti-Injunction Act.  

The Individual Mandate.

First, the Court was asked to consider whether the "individual mandate" was a valid exercise of Congress' power.  The individual mandate imposes a "penalty" upon individuals who fail to maintain minimum essential health insurance coverage.  For tax years beginning after December 31, 2013, non-exempt U.S. citizens and legal residents who do not maintain that coverage will be required to pay that penalty. 

Predictive Coding - Is it the Way of the Future for Discovery of Electronically Stored Information

By Mike Palumbo

The May 21, 2012, edition of The National Law Journal featured several articles on recent technological and legal trends in electronic discovery. Coincidentally, the Monday, June 18, 2012, edition of the Wall Street Journal (Marketplace Section) also contained a discussion of similar topics. The information contained in these articles is important for lawyers and their clients. The salient points of these articles are summarized herein. The essential message is that, while searching ESI is a complex, costly task, the process is being made more efficient by "technology-assisted research" (TAR).

 "Keyword" searching has been the standard method of culling through massive amounts of electronically stored data. In keyword searching, documents are loaded into a program and lawyers input search terms to find relevant documents.  However, courts and commentators have long recognized the limitations of keyword searches as an efficient means of obtaining relevant documents from ESI. Although many courts have been skeptical of keyword searching, few alternatives have gained general approval of the courts. So, courts and litigants have been looking for an acceptable, efficient computerized review regime that can gain general acceptance. Recently, the focus of that search has been on various forms of TAR, including "predictive-coding", a software tool that uses algorithms to automatically tag documents.

Jennings Strouss Foundation Supports “Leap into Learning” Book Drive

Jennings, Strouss & Salmon, PLC, a leading Phoenix-based law firm, is pleased to announce that the JS Foundation selected Gateway Elementary School in the Creighten School District to be the recipient of its "Leap into Learning" book drive, which was held for four weeks during March and April. The drive served two purposes: 1) provide books to assist in the development of reading skills for first graders and 2) present the school's library with a wide range of classic and popular books to be enjoyed by all students.

The first component of the drive involved working with a first grade teacher to determine which books were needed for her 26 students. Presented with titles covering three reading levels, the Foundation's goal was to purchase enough books so that the students would have their own copy to read in class and then take home to share with their families.

The second component of the drive rallied the support of the Jennings Strouss personnel to purchase new books for the school library from a "wish list" provided by the librarian. A "Leap into Learning" collage was displayed in two of the firm's common areas, with the book titles written on paper frogs. Participants were able to choose which book they wanted to purchase by pulling the designated frog off the wall. They could also opt to make a cash donation.

The drive was a huge success! Thanks to the overwhelming support of the firm's personnel, the 26 first graders received their own book at their reading level and the library was presented with 74 new books, bringing the total donation to 100 books!

Jennings, Strouss & Salmon Expands Phoenix Office with the Addition of Shanna Orlich

Jennings, Strouss & Salmon, PLC, a leading Phoenix-based law firm, is pleased to announce that Shanna N. Orlich has joined the firm as a litigation associate in the Phoenix office.

“Shanna is a talented and enthusiastic individual who brings Wall Street experience to our firm. We are fortunate to have her as part of our litigation team, and I anticipate that she will have a very bright future at the firm,” stated Frederick M. Cummings, Chair of the firm’s Litigation department.

Orlich will focus her practice in the area of complex commercial litigation. Prior to joining Jennings, Strouss & Salmon, she was a trader and analyst in Goldman Sachs’ Capital Structure Franchise Trading Group, which specializes in distressed assets and other litigious special situations.

Raised in Yuma’s farming community, Orlich also has a passion for assisting the agribusiness industry with agricultural and environmental issues, such as food safety.

“Jennings Strouss is a well-respected law firm with a long history of serving the legal needs of Arizona businesses,” stated Orlich.  “I am excited to have the opportunity to work with the firm’s talented attorneys and look forward to contributing to the firm, working with its clients, and being involved in the business and legal communities.”

Orlich earned a J.D. from Columbia University School of Law, an M.B.A with a concentration in Accounting from Columbia Business School, and a B.S.E. in Industrial Engineering from Arizona State University. She currently resides in Phoenix, Arizona.

Jennings, Strouss & Salmon Hires Attorney, Author and Entrepreneur Joseph P. Martori

Jennings, Strouss & Salmon, PLC, a leading Phoenix-based law firm, is pleased to announce that Joseph P. Martori has joined the firm as Of Counsel in the Phoenix office. 

“Joe’s legal experience and entrepreneurial background will greatly enhance the services we offer our clients, especially those in the real estate, hospitality and banking industries.” states J. Scott Rhodes, Managing Attorney of Jennings, Strouss & Salmon. 

Martori will focus his practice in the areas of corporate, real estate and banking law, including commercial transactions; finance, banking and securities; real estate acquisitions, development and disposition; resort development; mergers and acquisitions; estate planning; and taxation. 

“It’s my distinct pleasure to join Jennings, Strouss & Salmon, a firm that I have known and respected for many years,” said Martori. “I look forward to once again being active in the legal community, and hope to bring a business dimension that complements the skills of the attorneys at the firm.”

Martori practiced law in Arizona for more than 25 years before founding ILX Resorts Incorporated, a developer, marketer and operator of vacation ownership resorts in the western United States. He served as Chairman and CEO of the company from 1995 to 2010. 

Martori also served as Vice Consul of the Republic of Italy for the State of Arizona for ten years. He earned a J.D. from Notre Dame Law School, graduating first in the class, an M.B.A. in Finance from New York University Graduate School of Business Administration, and a B.S. in Finance from New York University. Martori is the author of Street Fights: A Novel Based on a True Story, and currently resides in Phoenix, Arizona.

Can You Recover Costs for E-Discovery Services as an Expense of Litigation

By Michael Palumbo

Much has been written about the exploding costs of commercial litigation as a result of discovery of electronically store information ("ESI"), in legal opinions, in law reviews, blogs and in the growing number of publications produced by service providers in this cottage industry. For example, for the year 2009, electronic discovery vendors had revenues equaling approximately $2.8 billion. See Erin Greenwood, Law Practice: A New View, Part 2: E-Discovery Changes Have Some Seeing a Career in Document Review, 97 ABA J. 27 (2011).

To date, a great deal of the discussion has related to duties and obligations of the litigants to preserve and produce ESI and the various techniques and methods available to accomplish those duties and obligations in the most cost-effective manner.[1] Now that a few years have gone by and cases where e-discovery has played a significant role in the litigation have wound their way through the court system to a conclusion, a new issue that is of significant interest to litigants in these cases is coming to the fore: that issue is can a successful litigant recover the tens of thousands (maybe even hundreds of thousands) of dollars spent on e-discovery from the other side as taxable costs. A relatively few appellate courts have addressed this issue, and, as might be expected, there is no uniformity of opinion.

Every jurisdiction has a cost recovery statute (or rule of court). These statutes define what litigation expenses can be "taxed" to the losing party (meaning recovered from).[2] In Arizona, the cost recovery statute is A.R.S. § 12-331, et seq.[3] A.R.S. § 12-332 provides that the following categories of litigation costs can be taxed to the other party: fees of officers and witnesses, costs of taking depositions, compensation of referees, costs of certified copies of papers or records, sums paid to a surety company for any bond or other obligation, and other disbursements incurred pursuant to a court order or agreement of the parties. Of course, this statute, and the opinions interpreting it, arose in the pre-ESI era. In fact, A.R.S. § 12-332 was last amended in 2001.

The pertinent question is how is the taxable cost statute and similar statutes to be applied to ESI-era cases. An opinion from the United States Third Circuit Court of Appeals, Race Tires of America, Inc. v. Hoosier Racing Tire Corp, et al., 674 F.3d 158 (3^rd Cir. 2012), provides some insight.

Hoosier Racing involved antitrust claims in federal court, so the federal cost recovery statute, 28 USC § 1920, was the focal point of the analysis. Expenses that can be recovered per the federal statute are similar to those approved in the Arizona statute. They are (1) fees of the clerk [of the court] and [federal] marshal; (2) fees for printed or electronically recorded transcripts necessarily obtained for the use in the case, (3) fees and disbursements for printing and witnesses, (4) fees for exemplification and the costs of making of any materials where the copies are necessarily obtained for use in the case, (5) docket fees, and (6) compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of [other] special interpretation services.

Hoosier Racing was the successful party, and it applied to the District (trial) Court for the recovery of more than $365,000 in charges imposed by its electronic discovery vendors for such services as hard drive imaging, data processing, keyword searching and format conversion. The District Court, concluding that the E-discovery services fell within sub-section (4) of the statute-fees for exemplification and making copies, awarded Hoosier the amount that it sought, and RTA appealed.