Monthly Archive for March, 2010

California Voters to Decide Question of Marijuana Legalization

Marijuana laws are complicated – several states have legalized medical marijuana, while the federal government continues its blanket prohibition on the cultivation, sale, and possession of marijuana. The federal government is still perfectly free to arrest and prosecute people for growing and selling medical marijuana, even if it’s completely legal under the laws of the states they live in. The Obama Administration has directed the Department of Justice to cease prosecutions of people who grow medical marijuana in compliance with state law, leading to an uneasy and paper-thin truce between growers and users of medical marijuana, and the federal government.

If the backers of an initiative headed to the November ballot in California get their way, the legal status of medical marijuana might get a little bit more complicated, at least when examining the relationship between federal and state marijuana laws. California’s Secretary of State is expected to certify for placement on the November ballot an initiative which would essentially legalize the recreational use of marijuana in California. The blogs have gone crazy over this, and with good reason. This is kind of a big deal.

Nowhere in the U.S. is the recreational use of marijuana legal. If this initiative passes, it will be legal for anyone who is 21 years old or older to buy and use marijuana. The sale of marijuana will be tightly regulated, and vendors will likely have to obtain licenses to sell it.

Perhaps more importantly (and the reason I think this initiative may actually have more than a snowball’s chance in Hell of passing), every legal sale of marijuana in California will be taxed. Marijuana, whether we like it or not, is a multi-billion dollar industry. It’s obvious that there’s a demand for the product, and people are meeting that demand. We’re simply seeing market forces at work. As a result, massive amounts of revenue are being generated from the sale of marijuana, all of which is going untaxed.

Given the current state of the California budget, the temptation to tap into a potentially-huge source of tax revenue must be quite strong, indeed. However, if this initiative passes, the government will have to be careful to not set the taxes on marijuana so high that legal marijuana is more expensive than illegal marijuana.

Anyone who’s been on a college campus or to a Phish concert can tell you that marijuana is readily available to just about anyone who wants to seek it out. From that fact, it follows that the “infrastructure” for the illegal cultivation and sale of marijuana is already firmly in place. If legalized marijuana (whose base market price will likely be significantly less than illegal marijuana, given the lower risk involved in selling it) is taxed to the point that it’s cheaper to get it illegally, people will probably continue to do so, just as they do today.

But even with a relatively low tax rate on marijuana, it should be a huge relief for a cash-strapped budget.

Of course, California legalizing marijuana won’t do anything about the fact that it’s still illegal under federal law, at least not directly. If this initiative passes and becomes law, we’ll likely still see arrests of growers and sellers in California by federal authorities.

However, if the legalization of marijuana doesn’t create any social problems beyond the ones that abuse of the drug already causes, while at the same time raising massive amounts of tax revenue for the state, and reducing the strain on the state’s prison system by reducing the number of drug offenders sent to prison, we’ll likely see other states follow suit, which might eventually cause the federal government to realize that it’s on the wrong side of history, and end its prohibition on marijuana. Of course, if this ever happens, it will probably be decades from now.

Another potential benefit of this law is a long-term reduction in California’s prison population. California is currently in the process of releasing 6,500 inmates from its prisons, due to budget constrains, and overcrowding so severe that it puts the safety of corrections workers and prisoners in danger.

Perhaps if fewer non-violent drug offenders were in prison in the first place, California would not have had this problem. LegalMatch case data from the last few months indicate that nearly a third of the alleged drug crimes in California involve marijuana. Considering the number of illegal drugs in existence, for a single one to account for almost a third of arrests is quite significant.

While I don’t pretend to know what effects legalization of marijuana will have on the state of California, I personally think that it’s at least worth a try, especially given its potential to raise tax revenue, reduce strain on the prison system, and promote the idea that adults can make their own decisions.

California Voters to Decide Question of Marijuana Legalization

Marijuana laws are complicated – several states have legalized medical marijuana, while the federal government continues its blanket prohibition on the cultivation, sale, and possession of marijuana. The federal government is still perfectly free to arrest and prosecute people for growing and selling medical marijuana, even if it’s completely legal under the laws of the states they live in. The Obama Administration has directed the Department of Justice to cease prosecutions of people who grow medical marijuana in compliance with state law, leading to an uneasy and paper-thin truce between growers and users of medical marijuana, and the federal government.

If the backers of an initiative headed to the November ballot in California get their way, the legal status of medical marijuana might get a little bit more complicated, at least when examining the relationship between federal and state marijuana laws. California’s Secretary of State is expected to certify for placement on the November ballot an initiative which would essentially legalize the recreational use of marijuana in California. The blogs have gone crazy over this, and with good reason. This is kind of a big deal.

Nowhere in the U.S. is the recreational use of marijuana legal. If this initiative passes, it will be legal for anyone who is 21 years old or older to buy and use marijuana. The sale of marijuana will be tightly regulated, and vendors will likely have to obtain licenses to sell it.

Perhaps more importantly (and the reason I think this initiative may actually have more than a snowball’s chance in Hell of passing), every legal sale of marijuana in California will be taxed. Marijuana, whether we like it or not, is a multi-billion dollar industry. It’s obvious that there’s a demand for the product, and people are meeting that demand. We’re simply seeing market forces at work. As a result, massive amounts of revenue are being generated from the sale of marijuana, all of which is going untaxed.

Given the current state of the California budget, the temptation to tap into a potentially-huge source of tax revenue must be quite strong, indeed. However, if this initiative passes, the government will have to be careful to not set the taxes on marijuana so high that legal marijuana is more expensive than illegal marijuana.

Anyone who’s been on a college campus or to a Phish concert can tell you that marijuana is readily available to just about anyone who wants to seek it out. From that fact, it follows that the “infrastructure” for the illegal cultivation and sale of marijuana is already firmly in place. If legalized marijuana (whose base market price will likely be significantly less than illegal marijuana, given the lower risk involved in selling it) is taxed to the point that it’s cheaper to get it illegally, people will probably continue to do so, just as they do today.

But even with a relatively low tax rate on marijuana, it should be a huge relief for a cash-strapped budget.

Of course, California legalizing marijuana won’t do anything about the fact that it’s still illegal under federal law, at least not directly. If this initiative passes and becomes law, we’ll likely still see arrests of growers and sellers in California by federal authorities.

However, if the legalization of marijuana doesn’t create any social problems beyond the ones that abuse of the drug already causes, while at the same time raising massive amounts of tax revenue for the state, and reducing the strain on the state’s prison system by reducing the number of drug offenders sent to prison, we’ll likely see other states follow suit, which might eventually cause the federal government to realize that it’s on the wrong side of history, and end its prohibition on marijuana. Of course, if this ever happens, it will probably be decades from now.

Another potential benefit of this law is a long-term reduction in California’s prison population. California is currently in the process of releasing 6,500 inmates from its prisons, due to budget constrains, and overcrowding so severe that it puts the safety of corrections workers and prisoners in danger.

Perhaps if fewer non-violent drug offenders were in prison in the first place, California would not have had this problem. LegalMatch case data from the last few months indicate that nearly a third of the alleged drug crimes in California involve marijuana. Considering the number of illegal drugs in existence, for a single one to account for almost a third of arrests is quite significant.

While I don’t pretend to know what effects legalization of marijuana will have on the state of California, I personally think that it’s at least worth a try, especially given its potential to raise tax revenue, reduce strain on the prison system, and promote the idea that adults can make their own decisions.

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Pets to be Included in Protection Orders

Minnesota is currently in line to become the fourteenth state that includes pets in a list of possible considerations for protection orders. Its purpose is to enable battered individuals to leave dangerous abusive situations, who often remain out of fear of what may happen to their pets if they leave.

The proposed bill is a seemingly natural merger of two undisputed values shared by the grand majority of the American people: we do not harm our women and children, and we do not harm our pets. Opposition to such legislation is arguably bad for your public relations health, but nonetheless the opposition came – in the form of the National Rifle Association.

Before any macabre conclusions can be drawn from that detail, the NRA’s interest is really what it has always been: the right to bear arms. Minnesota law withdraws gun rights for three years to life for those who violate protection orders. While proponents of the bill claim that pets act as a proxy for abusers to further inflict damage upon their victims, the NRA claims that the proposal is a proxy to further restrict gun ownership in the state of Minnesota. As the NRA so eloquently (and perhaps a bit impetuously) states on its website, “Conviction of violating a protective order, based on unjustified interference with, for example a gerbil, would result in an automatic three-year ban on handgun possession.”

Before any perverse conclusions can be drawn by that statement, note that while the NRA’s crusade against this bill is motivated by genuine concerns, these concerns are ultimately amiss once you actually read the proposal. To understand why, one should first understand the process of obtaining and enforcing a protection order.

The first step in obtaining a protection order is typically for the victim to file a temporary protection order, or TPO, asking for relief. A court may grant the TPO without a formal hearing, but the TPO only lasts a few weeks at the most, upon which a hearing must be held to determine whether a non-temporary restraining order may be issued. Violating a protection order may result in arrest and jail time, as well as fines.

One of the concerns is that the alleged abuser may not know the order exists if the victim obtained a TPO without his or her knowledge, and thus unknowingly violates the order. However, a TPO only becomes effective once it has been served on the restrained person so that he or she is aware of its terms and knows of his or her opportunity to be heard at the hearing. These rules are designed to address lack of notice concerns in TPOs generally, and a pet-included TPO does not alter the effect of such rules in any logical way.

Secondly, there is a fear that restrained persons may unintentionally come into contact with their pets, such as if a dog were to run towards its owner. However, the bill was amended to strike the no-contact provision, so that the new proposal reads to prevent the restrained person from “harassing, interfering with, abusing, or injuring any pet, without legal justification.”  Without a no-contact rule, pet owners would not be in violation of an order in the above enthusiastic-pet scenario.

While such remedial measures may still leave some NRA enthusiasts wary of the proposal’s intentions, their suspicions become somewhat absurd upon examination of a provision specifically pertaining to gun owners. Minnesota statute 518B.01 subdiv. 14(j) states that an alleged abuser’s gun rights are withdrawn only when he or she violates a protection order and “the court determines that the person used a firearm in any way during commission of the violation.” Considered with the deletion of the no-contact rule from the proposed bill, one would be hard pressed to find a plausible situation involving unintentional harassing, interfering with, abusing, or injury of a pet while using a firearm. Perhaps unintentional hunting with your pet? Unintentional shooting of your pet? Unintentional using your gun to teach your pet how to play dead, thereby impressing all your friends? Perhaps I am simply not imaginative enough.

May I suggest a different route for the opposition.  When a victim files for a TPO using a form provided by the Minnesota court system, the form will ask the victim to state with specificity all past incidents of abuse in a fact intensive manner. Using these statements, the court must find that sufficient facts exist to justify issuing a TRO without a hearing.

Considering that the proposal addresses the concern that victims may not leave abusive situations due to fear of potential abuse of a pet, would the proposal enable a victim to obtain a pet TPO despite a complete lack of actual pet abuse? Is a showing of such fear sufficient to take a pet away from its owner before giving that owner his day in court? Is the bill, aimed at protecting the abused, subject to being abused itself?

If the proposal passes, it would be interesting to see how the court forms are revised, and even more interesting to see how the judges handle these findings of fact, or lack thereof. Even more interesting than that is how the Minnesota family law practitioners will seize on this opportunity to engage in some serious creative lawyering. Even more interesting than THAT … I wouldn’t know -I don’t get out much.

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Insurance Claims in the Obama-Care Era

Ok, health care reform finally passed.  Finally.  You might feel like it’s the Rapture, where all believers are caught up together with Obama in the clouds.  Or you might feel like the bill slyly provided for the populace to be outfitted with the Mark of the Beast.  But on all sides, the response has certainly been of Biblical proportions.

But is all the clamor justified?  How much is really going to change?  Well, the bill certainly shakes up an area of litigation that is already pretty hot: insurance claims.  Insurance companies often try to save money by refusing to pay otherwise valid claims to their undersigned.  This often is seen as worth the risk of being sued, since many people experiencing a crisis do not have time to fight a legal battle with an insurance company.  Health care providers have sometimes done this, and will likely continue to do so in the future because the economic incentives are there.  Health care companies are businesses, and after all, businesses are in business to make money.

There are two main legal theories an insurance holder can pursue when they are cheated like this.  First, they can allege bad faith.  Bad faith is a general term that is used when a party acts with some sort of intent to cheat another party in a commercial setting.  It’s safe to say that even after health care reform, courts are going to continue to punish people for being dishonest with others.

The other theory, however, looks like it might change substantially.  An insurance claimant can also hold the insurance company accountable for the policy in contract.  The longstanding legal principle is that when both parties are free to enter into a contract or decline it, then they should be held legally accountable for their end of the agreement.  By putting aside things like punitive damages that can be awarded for bad faith, a claimant may find it easier to prove contract damages.  This is often done when the size of the actual claim is large, and thus bad faith damages are relatively too small to fight over.  One small catch is that insurance companies can file counter-claims here against those that have come short on their end of contracts, or otherwise cannot approach the suit free of wrong themselves.  But overall, this is considered a somewhat easier way for an insurance claim to prevail.

As was mentioned above however, a contract theory assumes basically equal footing of the parties and the freedom of each one to accept or deny the contract.  It is thought that in order to have an orderly free market economy, people should be able to choose between alternatives in a business setting.  This is referred to as freedom of contract.  This concept was shot to pieces on both angles by the health care reform bill.

Most importantly, insurance companies in 2014 will no longer be able to deny coverage to those with pre-existing conditions.  This was touted as a major goal of the reform, because it is a tragedy when insurance companies turn down someone who is sick for being too expensive to cover.  However, there could be legal problems as the government interferes with a company’s freedom to contract with whomever they choose.  For example, consider someone who is young and relatively healthy.  They may go without health insurance until they develop some easily treated condition, such as a cavity that needs to be filled.  They may then drop coverage immediately after their new insurance foots the bill, having paid very little for the short term policy.  Since the insurance companies are legally bound to insure them, the only thing that they could do would be to increase premiums.  However, even this is uncertain since health care providers are now restricted in their ability to increase premiums for a specific class of persons.  At best, this will balloon costs across the board.  At worst, this will weaken any legitimate cause of action against insurance companies in contract, since after their freedom to transact was deprived by government action, it looks a lot less like a contract as we understand it.

On the other side of the contract, there are also problems for claimants who have previously gone prolonged periods without health care coverage.  For the first time ever, the government has made moves to fine those who do not have health insurance.  And it’s done so in a curious way.  Instead of paying a ticket for violating a misdemeanor statute, like you would if you didn’t have car insurance for example, you’ll instead be assessed a penalty when you file taxes after 2014.  This makes the IRS the agency primarily responsible for enforcement of the statutory mandate, which is a strange police role for the agency to take.  The desired effect, presumably, is to remove the suggestion of wrong doing when someone refuses to buy health coverage like the law requires.

So far, the government has tried to show some amount of respect for the individual’s freedom to weigh the economic benefits, and simply appears as an innocent attempt to balance the scales a bit in one direction.  But despite this very technical distinction, statutory violations have often been used as the basis for why a contract should be held unenforceable.  The health care bill itself even suggests a tightening of this mandate, which might even make the denial of health care coverage a crime in the future.  There may come a day where exercising freedom to decline health coverage is a wrong of equal magnitude as endangering other motorists by driving without auto insurance.  In the case of vehicle insurance at least, companies can use this as a basis not to insure you.  It’s not inconceivable that insurance companies would even use the decision not to purchase health care coverage in violation of statute as evidence of bad faith or “unclean hands”.  Insurance claims cases are often denied because the undersigned did something as minor as making a payment late.  Imagine the wrong of exercising freedom from the health care regime!  Insurance companies will certainly look into this to see if it’s yet another avenue they can pursue to deny claims.

So on the one hand, there are huge new incentives for people to go uninsured, and on the other, the penalties for so doing may include the denial of future claims.  The economics are so sensitive that something unforeseen may happen, and as always, it will be the legal system that finally has to sort the whole mess out.

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How To Fight The IRS And Actually Stand A Chance At Winning

As we get closer and closer to that dreaded annual date in which we tell the government why they should take our money to fill their fat coffers, I can’t help but get angry from the fact that, like when you’re playing against the house, the U.S. Internal Revenue Service can never lose.

Well, that’s not necessarily true, sometimes the mighty IRS can be toppled, but usually it seems like this feat can only accomplished by someone with either a lot of money or a lot of time on their hands.

But what about the smaller battles, are those ever winnable and are they even worth it?  When the IRS is late with sending you notice to pay and impose penalties on you, or you believe that the IRS made an error in calculating how much you owe, or if, god forbid, you received the dreaded notice of audit, can you ever win those disputes?  Most would say no or that the legal nightmare you’ll have to put yourself through isn’t worth the effort.  However, this generally held belief isn’t necessarily true: you can win… sometimes.  I mean, that’s why there are tax attorneys, right?

Now if what I’m getting at is piquing your interest, and I think it is *wink wink*.  Either that, or you just read my headline.  Keep reading, because I’ve got five tips to help you take on the IRS.

However, before we go any further, I want to make one thing clear: fighting the IRS isn’t easy.  Like every possible legal issue, especially when it comes to the government, even if you know you’re right, you’re still going to have to prove it, and that takes a lot of time and diligence.  Now I’m not saying that you have to necessarily possess the vigilance of a tax protestor, but winning a dispute against the IRS is a lot of work and you have to stay on top of your game if you even want to have a chance to win without having to bring out the big expensive guns (meaning hiring a tax lawyer).  And what better way to segue into my first tip.

1.  Act Immediately

You know that notice you got from the IRS that says you owe them money?  Yeah, that’s not something that you just want to sit on.  Act on it right away.  If it’s an audit, get ready to file an appeal, or as the IRS calls it, a protest.  You don’t have to go to tax court and you don’t need your own lawyer, you can represent yourself if you desire.  Many people are unaware that the IRS actually has an internal appeal division called the Office of Appeals.  This is your first line of attack against the IRS.  Here you can present your case and show why you shouldn’t owe any money.  Just remember to do it within the 30 day time-frame.

2.  Evaluate Your Chances of Winning

This probably should be my first tip, but I’m too lazy to shift up.  Anyway, before you act, take an honest look at your chances of winning.  You need to have your supporting records in order along with any other documentation that can support your claim.  Evaluate whether or not your case is too complex to handle on your own, if it is you might have to hire a tax attorney to represent you.  Determine whether or not you need to seek the advice of a tax professional who can give you a better idea of your chances of winning.  But above all else, compare how much you are going stand to gain by winning your case versus how much you stand to lose to do it (i.e. lost wages to go to court, attorney fees, time, etc.).

3.  Ask the IRS for Help on Fighting the IRS

Taxpayer Advocacy Service (TAS), remember it as it might just save you a ton of money.  This is another little known service to most people.  The TAS is an internal office within the IRS designed to assist you on your tax issues.  Whether it’s supplying you with the necessary documents to help your case or suggests ways for you to go about your appeal, this service is designed to help taxpayers, as weird as that may sound.  They also use your feedback to suggest changes that may actually take affect within the IRS.

4.  Take Them to the U.S. Tax Court

If your issue still hasn’t been resolved to your liking and you want another avenue of appeal, then sue the IRS in the U.S. Tax Court, i.e. real court.  You can present your case here to judges who specialize in tax issues.  But if you’re going this far, you probably should be hiring a lawyer since it’s probably a pretty complex case; that or it’s just the principal, damn it.  Sure you can also sue the IRS in a district court, but this can be expensive as many of these courts may require you to pay what you owe upfront before hearing your case.  Of course if you win, you get your money back, but why chance it?

5.  Work Out a Deal with the IRS

So you’re done fighting, chances aren’t looking too good in your favor, or you’re just tired?  Regardless, if you just want to pay off your balance, call the IRS and see if they can cut you a break.  If you’re really broke or low on funds and have the documentation to prove it, the IRS may reduce the amount you owe.  They can also put you on an installment plan to make the amount you have to pay more manageable.  However, like my second tip, this is something you may want to consider early on.  Why?  Because the IRS charges you interest on the money you owe.

See, aren’t you glad you read this post?  Fighting the IRS can be tough, but hopefully these tips will help you out a bit.  You got to find a way somehow to stick it to their rude customer service reps.

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$1.5 Million Verdict for a Company that Can’t Adopt a New Technology

There’s this new technology called SawStop (click for a video demonstration – it’s not at all violent, but a few bits might be cringe-inducing nonetheless). It’s currently quite expensive, but it’s very, very impressive. Essentially, it’s capable of stopping and retracting the blade of a table saw the instant anybody’s skin comes in contact with it, protecting the user from serious injury. It appears that, at worst, the user might sustain a minor knick.

It would be wonderful if such technology became standard in table saws (imagine a world in which every woodshop teacher has all 10 fingers!). There’s a problem, however. It’s expensive, and it only works once (the blade and SawStop module are destroyed if it is activated. They can be replaced, but they’re not cheap).

So, it would clearly be very difficult for every manufacturer to add this technology to its products, unless the price comes down significantly.

At what point, then, should lack of such a feature in a table saw render it defective? Right now, according to a Boston jury. A man was using a saw which didn’t have this feature, and injured his hand in the process. It seems undisputed that this technology would have prevented his injuries. He sued the manufacturer of his saw, claiming that it was inherently defective because it lacked the SawStop technology. The saw maker had been in negotiations to license the technology, but the talks broke down, presumably due to the cost of licensing and implementing it.

The jury awarded him $1.5 million.

Now, to be clear, I am all for holding manufacturers liable for truly defective products – products which are unreasonably dangerous, even when they’re used as the manufacturer intended.

But this seems like a road we may not want to go down. One of the factors that courts usually consider when deciding if a product is defective is whether or not it could be made significantly safer, without seriously diminishing its usefulness, and at a reasonable cost. SawStop technology seems to meet the first 2 prongs of that test – it makes saws much safer, and they seem to be just as useful as they are without it. But it fails the final prong – it’s really expensive.

Furthermore, most saw makers declined to license this technology precisely because it would be too expensive for them, and for consumers, to implement. So if this verdict stands, it would mean that at least one court is saying that almost every table saw in America is inherently defective.

Over at TechDirt, a critic of the patent system (whose criticisms I don’t always agree with, but that’s for another post) notes that this verdict effectively punishes the saw manufacturer for not infringing upon SawStop’s patents. After all, they couldn’t afford to license the technology, so their only alternative would have been to use it without the owner’s permission – classic patent infringement. I don’t necessarily think that the parade of horribles that the author of the above post presents will actually come to pass. Still, the implications of this verdict are disturbing. If we follow some of the premises behind patent and products liability law to their logical conclusions, we could come to the bizarre result that SawStop effectively has a right to dictate who is allowed to make table saws.

Think about it – SawStop has an exclusive right to market its technology, under patent law. But now, under products liability law (according to at least one court) a saw not featuring the SawStop tech is inherently defective, so the manufacturer is subject to strict liability for every injury caused by the product, thereby making such products economically infeasible to sell. SawStop gets to decide who can use its technology, thereby deciding who can make table saws.

In reality, such a situation probably won’t come to pass. However, the mere fact that the law makes such a scenario at least technically possible is quite disturbing. Courts and legislatures are complex entities with a lot of moving parts, so they can’t always be aware of how the application of one law will affect the application of another, seemingly unrelated, law. But maybe a little more time should be spent considering the possible consequences of their actions.

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