COURTS BEGIN PUTTING THE BRAKES ON "TAKINGS"
The power of government to take private property for a public use, with payment of fair compensation, has been nearly
unassailable in our legal system. In most condemnation cases, the right to take the property is a foregone conclusion,
and the parties litigate only the amount of compensation. Courts generally have deferred to the government's articulation
of a public purpose for the taking, even when private parties also benefit.
In recent years, there has been a trend toward closer scrutiny of a proposed condemnation to find a paramount public
purpose, and even to stop the proceedings where one is lacking. Property owners targeted for a taking are receiving a
more sympathetic hearing when they contend that the true beneficiary of the proceedings is not the public but simply
another private party with designs on the property.
Although they were largely unsuccessful, challenges to takings as lacking a public purpose first arose in urban renewal
cases. The government would condemn blighted property so that it could be redeveloped, usually by private developers.
The government could point to the overriding public benefits from such revitalization of property and could successfully
argue that benefits to private parties were incidental.
In successful attacks on use of the condemnation power, it is harder to find the public use and easier to see private profit
as the motivation for the taking. For example, in one case, the developer of an automobile racetrack wanted some
neighboring land for a parking lot, but the company that owned the land did not want to sell it. The developer reached
an agreement with a regional authority that had condemnation powers, by which the developer would pay for
proceedings to condemn the land in return for getting the property from the authority immediately after the
condemnation. A state supreme court found that this transparent arrangement to take land so that it could benefit the
racetrack developer was a misuse of the eminent domain power. As the court put it, that power "is to be exercised with
restraint, not abandon."
In another successful challenge to a condemnation, a city tried to take land owned by a church in order to turn the land
over to a major discount retailer. The property had been vacant for a decade, despite having been declared a blighted
area. The city tried to use blight removal and redevelopment of the property to justify its actions. This reasoning was
undermined by the city's denial of permits sought by the church for more church buildings on the property, even though
such a use would have eliminated blight just as well as the commercial use favored by the city.
The more believable motive for the city was its desire to generate more revenue by putting a taxable business on what
had been tax-exempt church property. But the city had other ways to generate revenue. As to both of the city's ostensible
goals--blight removal and generation of revenue--the city was "using a sledgehammer to kill an ant." In issuing an
injunction against the condemnation proceedings, the court characterized the condemnation as resting only on "the
desire to achieve the naked transfer of property from one private party to another."
CASE BY CASE
Long-Arm Jurisdiction Falls Short
Robert found just the excavator he wanted advertised on an Internet auction site. Before making the successful bid, he
contacted the seller through e-mail and received assurances from her that the product was in good condition. Robert
then traveled to the seller's home, which was several states away, and bought the excavator. When the equipment did
not perform as expected and the seller did not respond to Robert's request for a partial refund, Robert sued the seller in
his home state.
Robert's lawsuit failed because the seller was not subject to the jurisdiction of the courts in Robert's home state. For a
nonresident to bring herself within the reach of a state's "long-arm" jurisdiction, she must purposefully have benefited
from the privilege of doing business in that state. Perhaps the seller could have foreseen that residents of any state might
bid on the excavator, but that was insufficient to bring her into the courts in Robert's state. She had no control over who
would ultimately be the winning bidder, nor could she exclude bidders from particular jurisdictions.
Also weighing against subjecting the seller to litigation was the isolated nature of the transaction and the fact that she
was not a commercial seller and was using a third party's site. A different result might have been achieved against a
business that used its own website to advertise itself and make transactions across state lines.
Liability for Independent Contractors
In another case, a manufacturing company contracted with a security firm to provide a security guard. The guard shot
and killed an individual who was trespassing, but not for criminal purposes, on company property, after the person had
obeyed the guard's order to lie on the ground. The company argued that it could not be held liable for the negligent acts
of an independent contractor, but a state supreme court ruled otherwise.
The court agreed that the security firm and its guard were independent contractors. The manufacturing company's
downfall was an exception to the rule of no liability for acts of independent contractors. If the work to be performed is
inherently dangerous, the work can be delegated to an independent contractor, but the duty to use reasonable care cannot
be avoided by the employer. Work is inherently dangerous when it involves a foreseeable risk of physical harm to others
and requires special precautions.
In the case of the trigger-happy security guard, who was armed and instructed to "deter" thieves and vandals, dangerous
confrontations between the guard and persons entering the property were contemplated. In the context of such danger,
the independent contractor status of the guard became a mere legal technicality that did not shield the manufacturing
company from liability.
ADA AND SMALL BUSINESSES
The Americans with Disabilities Act (ADA) prohibits disability discrimination in employment for employers with 15 or
more employees. The prohibition is far-reaching and covers hiring, firing, and everything in between, such as
promotions, benefits, and harassment in the workplace. The smallest of businesses are not affected by the ADA because
of the 15-employee threshold for coverage. The ADA does apply, however, to many of the roughly 25 million small
businesses in the nation.
Who Is Protected?
The ADA protects three categories of individuals: those with a physical or mental impairment that substantially limits
one or more major life activities (like sitting, standing, or sleeping); those with a record of such an impairment, such as
a person who had debilitating cancer but is now in remission; and those who are regarded by employers as having such
an impairment, even though the individuals otherwise are not so impaired as to be "disabled" under the ADA.
Regardless of the category, the ADA protects only persons who are qualified, that is, they meet job-related requirements
and can perform essential functions for the job, with or without a reasonable accommodation.
While an employer can ask an applicant a wide range of questions concerning job qualifications, the ADA does not
allow medical examinations or questions about disability until the employer has made the applicant a conditional job
offer. An exception is recognized for questions directed to an apparently disabled applicant about whether a reasonable
accommodation will be required.
After a job offer is made, an employer can ask any disability-related questions and require medical examinations, so
long as these requirements apply to everyone in the same job category. For example, if, during a medical examination
required of all employees in a job involving the use of dangerous machinery, it is revealed that an applicant has frequent
and unpredictable seizures, the employer can withdraw a job offer to that individual.
Once a person is on the job, the ADA allows required medical examinations or questions about a disability only where
there is a reasonable belief, based on objective evidence, that a particular employee will not be able to perform essential
job functions or will pose a direct threat because of a medical condition. As an example, if a normally reliable employee
has told her employer that a new medication she takes makes her lethargic, and she begins to make many mistakes, the
employer can ask her how long the medication can be expected to affect job performance.
The ADA differs from most other employment discrimination laws in imposing an accommodation duty on employers.
If a disabled person needs a reasonable accommodation in order to apply for, or perform, a job, the employer generally
must provide it unless to do so would create an undue hardship. An undue hardship means significant difficulty or
expense, based on an employer's resources and operations.
Most accommodations are not expensive or burdensome. A diabetic employee may need regular breaks to eat properly
and monitor blood sugar and insulin levels, or a blind employee may need someone to read information posted on a
bulletin board. If more than one accommodation will work, the employer may take the option that is less costly or easier
In addition to the undue hardship defense, an employer need not provide an accommodation which:
* assists an individual off the job;
* removes or alters the essential functions of a job;
* lowers production or performance standards; or
* excuses violations of rules on good conduct.
The Equal Employment Opportunity Commission, which is charged with enforcement of the ADA, has issued a new
handbook to help small businesses comply with the ADA. The handbook provides many examples of factual situations
with which small businesses could be confronted. The ADA primer can be accessed online at www.eeoc.gov.
SOLO 401(K) RETIREMENT PLANS
As a result of recent tax law changes, a new retirement savings account is now available for "owner-only businesses."
An "owner-only business" is either a business that employs only the owner and immediate family members or a business
that employs only the owner and employees who by law may be excluded from participation in retirement plans.
Excludable employees include employees under age 21, employees with less than a year of service or who work less
than 1,000 hours per year, certain union employees, and certain nonresident alien employees.
The new plan, sometimes called an Individual (k) plan, can be set up both by incorporated businesses or unincorporated
businesses such as sole proprietorships and partnerships. When compared with other types of business retirement plans,
an Individual (k) plan allows more flexibility in its funding and larger contribution amounts.
The two components of an Individual (k) plan are a profit-sharing contribution from the employer (up to 25% of
compensation) and an employee salary deferral (up to $12,000 in 2003). Combining those two components, the
maximum contribution on behalf of any one business owner is a whopping $41,000 in 2003. Contributions are
discretionary each year.
The maximum salary deferral amount will increase by $1,000 per year through 2006. In addition, for individuals who
are age 50 or older, the Individual (k) plans, like 401(k) plans for larger businesses, allow "catch-up" contributions in
amounts that will increase annually through 2006. For 2003, the maximum catch-up contribution is $1,000.
Business owners are eligible to take personal loans from Individual (k) plans, so long as the plan document allows for
plan loans. They may borrow as much as $50,000 in cash, or 50% of the balance in their account, whichever is less.
Borrowing from an Individual (k) plan carries the same downside as with conventional 401(k) plan borrowing, however,
making this move a last resort for many. Aside from undermining the accumulation of a large balance growing tax-free
in the account, a loan, if not paid back on time, will be considered a distribution by the IRS, triggering income taxes and
a 10% penalty.
CREDIT REPORTING AGENCY HELD ACCOUNTABLE FOR ERRORS
Judy discovered that her credit report from a large credit reporting agency erroneously included about a dozen accounts
for a different person, also named Judith. The report identified Judy as using that person's name as an alias.
Unfortunately, the "other" Judith, who did exist, had a checkered debt-paying history that was erroneously presented as
Judy's in the credit report.
Judy's own spadework revealed that the credit reporting agency had merged her information with that of the second
Judith because they had similar first names, were born in the same year, were from the same part of the country, and,
most importantly, their Social Security numbers differed by only one digit. This initial computer mistake was bad
enough, but what ultimately led to a very large damages verdict for Judy was the inadequate response of the reporting
agency once Judy had brought the errors to its attention.
The agency deleted some of the accounts that did not belong in Judy's report, but it kept most of them after supposedly
verifying them with creditors. This "verification" was very superficial and did not convey to the creditors the
information Judy had provided. In effect, the agency simply asked each creditor, "Is this what you reported?" Fully three
years after Judy notified the reporting agency of the erroneous information in her report, some of it remained, and the
undeserved stain on her credit was as obvious as ever. To add insult to injury, some of the deleted information from the
second Judith even reappeared on Judy's report.
The situation came to a head when the erroneous credit report caused Judy to be denied a mortgage. By supplying still
more information to the agency, including a supportive letter from the "other" Judith, and contacting creditors herself,
Judy eventually cleaned up her credit report and got out from under the shadow of a stranger's unpaid debts. By then,
however, she was a wreck emotionally, and the damage to her credit reputation was only beginning to be restored. A
jury verdict made the credit reporting agency pay for these injuries, but sent an even louder message in a large award of
The success achieved in Judy's lawsuit was largely due to her own diligence. The steps she took are practically a
blueprint for what someone should do when credit reporting errors are made and then left uncorrected by an agency. It
took years in her case, but Judy prevailed in the end by making telephone calls, keeping notes and documents,
contacting creditors directly, and even enlisting the aid of the debtor whose poor credit history had appeared in Judy's
Banks that rely on the Internet and other low-cost ways to provide service, as opposed to "bricks and mortar" branch
offices, can save on expenses and pass the savings along to customers in higher returns on deposits and lower interest
rates on loans. Online banking also gives customers the convenience of being able to monitor their accounts and
complete transactions around the clock, without waiting for mailed statements or being limited by office hours.
The flip side of online banking is that, if a problem arises, you cannot sit down face-to-face with someone from the bank
to resolve it. There is also a premium on doing research to check out the legitimacy of an unfamiliar and remote
institution before you entrust it with your money and private information. A good place to start is the "About Us"
section of a bank's website, which should at least give basic contact information. If it does not, that in itself should raise
suspicions. Other warning signs include names or websites that are only slightly different from those of well-known
institutions and rates of return that are far out of line with what other banks are offering. It is a good idea to confirm that
an institution is federally insured by contacting the Federal Deposit Insurance Corporation or searching its "Institution
Directory" at www3.fdic.gov/idasp.
Like any bank customer, users of online banking institutions are well-advised to safeguard private identification
information, keep good records, and monitor transactions and balances regularly. Online banking customers also have
the protection of federal laws such as the Equal Credit Opportunity Act, the Truth in Lending Act, and the Truth in
Savings Act. Those who decide to do their banking solely in front of a computer screen especially should know about
the Electronic Fund Transfer Act, which deals with consumer rights involving electronic banking transactions.