Publications

THE HOWE & HUTTON REPORT
July 2008 - Volume 2008, Issue 7

PAGE ONE ARTICLE

DO WE HAVE TO REGISTER AS A LOBBYIST? - From time to time associations and other NFPs are asked or see a need to communicate with their federal or state legislators on specific legislation. Is that lobbying, and additionally does it require registration under federal or state lobbyist registration laws? In general the answer is yes as to the first and no as to the second. Lobbying involves attempts to influence executive branch members, legislators and top-level regulators at the federal or state level on specific proposed, pending or existing legislation or regulations coupled with a stated position in favor of or opposing the legislation. There are various federal and state laws about registration for lobbyists, but one must come within the specific definitions of “lobbyist” set forth in the statutes. Most associations, staff and their members do not come within the definitions unless they are paid or paying someone else to lobby. Lobbying and advocacy are not synonymous and this sort of lobbying really falls more under advocacy. Associations and their members communicating their views on specific legislation and regulations, and urging a vote for or against the legislation may be lobbying in the broad sense, but they typically are not required to register under federal or state laws. Association executives and volunteer leaders should be aware of the requirements of federal and state lobbyist registration laws, check to determine if they apply, where and what to file, and the penalties for failing to do so. We can help you if you are unsure if you need to register. So jump in and communicate with your federal and state legislators on matters of interest to you. They could benefit from your information and active participation in the legislative and regulatory process.

ARA EXEC BLAMES CITIES - Thieves all over the U.S. are stealing manhole covers from city streets. Manhole covers cost in excess of $200 and bring about $10 to thieves who sell them to metal recycling operations as scrap. An executive at the American Recycling Association is quoted as blaming the cities for not putting locks on every manhole cover (apparently regardless of cost and time) instead of acknowledging that perhaps it is wrong for recycling companies to accept obviously stolen manhole covers. Not one of the better public relations responses to a growing cost and safety issue for cities and drivers.

NOT-FOR-PROFIT LAW DEVELOPMENTS

NONPROFIT SECTOR GROWS IN RAW NUMBERS AND IMPORTANCE - U.S. nonprofits employ almost 13 million people, pay nearly $490 billion in wages, and make up about 5 percent of the gross national product, a new report by Urban Institute Press says. The number of nonprofits in the U.S. grew to 1.4 million in 2006, up from 1.1 million in 1998. Over the past decade, total giving has doubled to $295 billion, with $245 billion from individuals, $36 billion from foundations and almost $13 billion by companies. 61 million Americans said they volunteered in 2005, giving a total of 13 billion hours or the equivalent of over 7 million full-time employees. The infusion of volunteer time was worth an estimated $215 billion in wages, effectively increasing the nonprofit workforce by more than half, and reducing tax burdens on government. As the sector grows in size, new forms of public and private accountability are developing for governance, fundraising and administration. In order to reduce administrative costs and increase public understanding, new electronic tools have the capacity to reduce duplicative and costly filings. Such new tools have costs to develop, such as nonprofit filings of the new IRS 990 form for 2008 filings with a 3-year phase-in for nonprofits with revenues under $1 million in 2008, $500,000 in 2009 and $200,000 in 2010.

DONOR “BILL OF RIGHTS” RECOMMENDED BY CPA FIRM - CPA firm Selden Fox, Ltd. recommends that charitable entities have a “Donor Bill of Rights,” endorsing the set of model standards by the American Association of Fund-Raising Counsel. Selden Fox reports that numerous not-for-profit groups endorse the standards. Among the key points included are the right to be informed of an organization’s mission and who is serving on the organization’s governing board; to receive assurance that donations will be used for the purpose for which they are given; to be informed whether those seeking contributions are employees, volunteers or hired solicitors; access to the organization’s most recent financial statements; to be able to opt out of solicitations; and, in general, to be free to ask questions and get answers. Call it a donor’s bill of rights or just plain good practices, entities seeking public support and contributions would be well advised to be aware of this model donor bill of rights and to implement it or something similar.

PARTIAL WIN FOR U.S. GOLF ASSOCIATION ON ANTITRUST COMPLAINT - A federal district court in Delaware has granted a motion to dismiss a pro se antitrust complaint filed against the U.S. Golf Association (“USGA”). The complaint basically alleged USGA labeled the plaintiff’s golf club as nonconforming, and that essentially barred the golf club from the market. The pro se plaintiff’s response to USGA’s motion to dismiss provided more detail than the original complaint, and that was enough for the court to deny USGA’s position that the pro se plaintiff should not be permitted to file an amended complaint. Courts often give pro se plaintiffs more latitude in pleading than plaintiffs represented by attorneys. That can make defending against such complaints more difficult. If a plaintiff is unable to persuade a lawyer to take an antitrust complaint on a fee or a contingency fee basis, the plaintiff can proceed anyway and put the defendant through all the costs and uncertainties of dealing with antitrust litigation. If you must defend against a pro se complaint, take it seriously from the beginning.

REGULATORY LAW DEVELOPMENTS

FTC CONTINUES “GREEN GUIDES” WORKSHOPS - The Federal Trade Commission (“FTC”) is conducting a series of public workshops as part of the FTC’s regulatory review of its “Guides for the Use of Environmental Marketing Claims,” commonly known as the “Green Guides.” A third in the series was conducted July 15, 2008 in Washington, D.C. As more associations and members trumpet their environmental citizenship, touting best practices, “green” products and services, the FTC is committed to more stringent review of such claims. There are other “green” guidelines in addition to the FTC guides, including those from the International Standards Organization and other not-for-profit entities. You might want to check out these standards and guides if you are thinking about undertaking such a program to avoid confrontations with the FTC or bad press from environmental activists. Canada has a similar regulatory green guide.

FTC ASKS FOR EN BANC REVIEW OF RAMBUS DECISION - H&H Report Update: The Federal Trade Commission (“FTC”) has asked the U.S. Court of Appeals in D.C. for an en banc rehearing of a three-judge panel decision which reversed an earlier FTC decision against Rambus, Inc. in connection with a standard-setting organization activity. The FTC had determined that Rambus was in violation of Section 5 of the FTC Act in connection with the technology used as part of an industrywide standard-setting effort. The three-judge panel overturned that decision earlier this year, and the FTC is now seeking review by all of the D.C. Circuit’s judges. It ain’t over ‘til it’s over. The FTC’s earlier Rambus decision received wide coverage in antitrust and standard-setting circles. The D.C. panel’s overturning that decision was also widely noted and presents problems for standards-setting organizations. What sort of disclosure and what sort of licensing will now be required? We will continue to follow and report on this precedent-setting standards and antitrust litigation.

EMPLOYMENT LAW DEVELOPMENTS

AN EMPLOYER’S BURDEN TO ESTABLISH GROUNDS UNDER ADEA - In one of its last 2007-2008 term decisions, the U.S. Supreme Court announced the initial burden is on employers to establish a rationale for terminating workers covered by the Age Discrimination in Employment Act (“ADEA”). The Court’s 7-2 decision was hailed by many who claimed the Supreme Court has become too pro-business. The appeal involved a New York employer who laid off 31 workers, 30 of whom were covered by ADEA. The Court ruled the burden is on the employer to establish a factor or factors other than employees’ age as the basis for terminating the employees rather than requiring the employees to individually come up with reasons why they were wrongfully terminated. Extreme facts allow for broader rulings. The lopsided terminations here almost preordained the Court’s ruling. Now the appeal goes back down to the lower court for further litigation. The court’s ruling opens up the prospect that employers must justify the termination of almost any employee age 40 and older until this is further sorted out in the lower court. A reasonable severance package including release of all claims may head off ADEA litigation.

MEETING & TRAVEL LAW DEVELOPMENTS

AIRLINES TO OFFER IN-FLIGHT WI-FI ACCESS BUT NOT VOICE ACCESS - American Airlines has already announced that it will offer in-flight Wi-Fi access, probably this month, on at least three routes between New York and Los Angeles, San Francisco and Miami, for starters. The fee is expected to be $12.95 for flights of three hours or more, and $9.95 for shorter flights. Virgin America may also offer Wi-Fi access on its flights later this year. It is expected that as more people on a flight use the service, the service will be slower, but that remains to be seen. Flyers will be able to use computers, Wi-Fi-equipped BlackBerries and iPhones. They will be able to send and receive e-mails on Microsoft Outlook and Apple Mail, conduct instant-message chats on AOL Instant Message and Google Talk, and use the major browsers. Some flyers will love it and others will hate it, but it is here at last. No cell phone voice service in the U.S - so far.

SOME AIRLINES GIVING ELITE FREQUENT FLYERS A PASS ON BAGGAGE FEES - In the wake of some airlines imposing $15 or more in fees for first bags to be checked and higher fees on the second or third bags, some airlines are exempting their elite frequent flyers. American and United have waived first-bag fees for Advantage Gold and higher and Premier and higher flyers respectively. With American, United and U.S. Air imposing such fees and Southwest abstaining from such fees, the question is what Continental, Delta and Northwest will do. It is also unclear if the bag size limitation the airlines announced they will impose will be strictly enforced against frequent flyers. That will be another hassle at the gate for all concerned, and a potential source of delay if bags have to be checked at the gate. It should be an interesting learning process for frequent and leisure flyers and the airlines.

TAX DEVELOPMENTS

IRS RAISES MILEAGE DEDUCTION RATES FOR REMAINDER OF 2008 - The Internal Revenue Service announced it has increased the mileage deduction for business use of autos from 50.5 cents to 58.5 cents per mile for the remainder of 2008 for those who keep track of their auto mileage for business purposes, reflecting the jump in U.S. gasoline prices to more than $4.00 per gallon. This is a small but helpful offset to rising gas prices. The IRS also raised the mileage deduction for medical and moving purposes from 19 cents to 27 cents for the remainder of 2008. The charitable use deduction remains at 14 cents per mile. The new rates are effective July 1 through December 31, 2008, unless changed again. Those who use their personal autos for business, medical and moving, or charitable uses should keep track of their mileage for tax deduction or reimbursement purposes.

MAJOR EDUCATIONAL EFFORT NEEDED FOR SMALL NOT-FOR-PROFITS - Not-for-profit entities previously not required to file forms 990 or 990EZ will be required to file Form 990N annually, a postcard tax form, or risk losing their tax-exempt status if they fail to file for three straight years. The IRS conducted a study which came up with some problematic results. It appears that slightly more than half of the entities listed in the IRS Exempt Organizations Business Master File are still in business, based on a survey of such entities. While many of those still in the system are aware of the new requirements and plan to file, the IRS also learned that smaller entities are much more mail-oriented and less attuned to electronic communications. This makes communicating with them more difficult, and makes it more difficult for them to file electronically. CPA firms, lawyers and consultants dealing with these small not-for-profit entities should be particularly aware of their capabilities and the new requirement to file Form 990N for 2008.

INTELLECTUAL PROPERTY & COMPUTER LAW DEVELOPMENTS

PHOTOGRAPHER AWARDED $12 MILLION FOR MISUSE OF SEVEN PHOTOS - A federal court in Florida has awarded $12 million in damages for the unauthorized distribution of copyrighted photographs. The plaintiff photographer provided seven photographs to a real estate developer for the limited use in the company’s advertising. The defendants (the developer and his corporation) failed to respond to the lawsuit complaint, and a default judgment was entered. At the hearing on damages, the plaintiff testified that she was a professional photographer with registered copyrights on the images in question. The defendants disseminated the photographs to third parties without authorization; that she would have charged the defendants $58,760.00 for an unlimited non-exclusive license for the photographs at issue; and that the defendants’ gross revenues were just over $12 million. The court combined these figures in reaching its damages award and found that there was a sufficient nexus between the revenue and the use of the photographs because three of the copyrighted pictures were distributed by the defendant and the properties generating this revenue were sold after such distribution. The court noted that, due to the defendants’ default, they lost the ability to demonstrate that elements of their profits were attributable to factors other than the infringement of the plaintiff’s copyrighted work. There are valuable lessons to be learned from this decision both as to the potential value of copyrighted works and, perhaps more importantly, the importance of responding to a lawsuit. The defendants may have been able to demonstrate many elements of their profits which were not attributable to the infringement had they taken the opportunity to respond to the lawsuit. They opted not to and suffered disastrous consequences.

OTHER ISSUES, TRENDS & DEVELOPMENTS

OSHA TRUMPS OKLAHOMA LAWS - A federal judge in Oklahoma concluded that the Occupational Safety and Health Act (“OSHA”) requirement that employers provide a safe work site conflicts with two Oklahoma statutes which make it a crime for an employer or business entity to have or enforce a policy prohibiting anyone (other than convicted felons) from transporting or storing firearms in a locked motor vehicle on property set aside for vehicles. These statutes directly conflict with policies maintained by many employers that employees may not bring guns on company premises even if locked in employees’ cars, safety policies widely recommended by consultants. Acknowledging that the conflict presented a close question, the judge finally decided the Oklahoma statutes impermissibly conflict with the federal statute and they are enjoined to the extent they are preempted by the OSH Act. Employers have not heard the end of this issue, whether in Oklahoma or elsewhere. With the U.S. Supreme Court’s June 26, 2008 decision overturning the District of Columbia ban on guns by area residents, and the National Rifle Association, its state affiliates and other organizations planning to challenge state and local gun bans all across the county, employers will face challenges to policies prohibiting or restricting employees from transporting and storing guns in their cars while on company premises. And will they try to bring guns into the workplace? To be continued….

REMEMBER THIS FROM WORLD WAR II DAYS? - “Use it up. Wear it out. Make it do or do without.” It still applies. Before lamenting how difficult the times are and whatever happened to the comfortable life we have become accustomed to, think back to more difficult times when rationing was in effect during the war. Not just gas, or cars, or comfortable transportation - rationing affected food, clothing choices, and just about every facet of daily living. Americans have lived through tougher and more dangerous times than the present. How quickly we forget.

ANONYMOUS BLOGGERS BEWARE. YOU MAY BE IDENTIFIED - A trial judge in New York’s Westchester County has imposed a standard for uncovering the identity of anonymous persons posting comments on the Internet which may be deemed libelous by those addressed in the comments. A former congressman and his wife were accused by anonymous postings on a website maintained by a local newspaper of various frauds including paying bribes to local officials. The couple sued the anonymous writers of the postings in a John Does proceeding. The couple used the site to notify the anonymous writers of their right to intervene anonymously in the lawsuit. No one responded. The judge ruled the couple could pierce the writers’ free speech rights (by requiring the site provider to disclose information identifying the anonymous writers), citing a four-part test adopted by a New Jersey court. The steps include notifying the anonymous writers they are the subject of a subpoena or order of disclosure; the precise statements which are allegedly defamatory; evidence to support each element of the cause of action; and finally the court must balance the writers’ First Amendment rights against the interests of the persons claiming they were injured by the writers’ comments. The ease of anonymously publishing allegations, whether well-intentioned or done with malice, to a wide audience leaves the target of the allegations with little recourse. This judge’s approach seems to balance the conflicting rights of those posting comments and those targeted by the comments. Associations and their members should take note.

H&H DEVELOPMENTS

In July:

John M. Peterson presented a program on legal issues for trade associations to the staff of an association that operates regional offices throughout the country.

Barbara F. Dunn provided information regarding hotel contracts and liability issues to a meeting industry group.

C. Michael Deese discussed nonprofit corporation director fiduciary duties with an association board of directors. He also participated on a panel, with the session entitled “Due Diligence before Acquiring a New Client” at a meeting held in conjunction with an association executives’ annual meeting.

Samuel J. Erkonen spoke to a state society of association executives on association and hospitality law developments.

Contributors to this issue...
Jonathan T. Howe, Terrence Hutton,
John M. Peterson, Nathan J Breen, Layton E. Olson

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