Summer, 1995

I will be out of the office for several days this summer. For the week of June 22 through June 26, I will be on a "working vacation", which will include some educational seminars. I will be returning calls during this period, but will be directing all calls to my voice mail service. Please note that my voice mail service is linked to my pager and all voice messages will be returned within 24 hours. Otherwise, the office will be closed completely for the July 4 holiday, and for the week of July 10-17. Again, my voice mail will be activated. However, my paging service will not because I will be out of the area. In the event of an emergency, please contact the receptionist, Michelle, at (909) 242-1453, who has the ability to reach me under those circumstances

Soft Tissue Injuries----Soft Settlement?

I have repeatedly emphasized this for all my personal injury clients. Even where fault is established, insurance companies rarely make substantial offers unless there has been convincing proof of injury or trauma which is related to the accident. Often, the injuries take the form of what the medical field refers to as nonspecific, subjective soft-tissue damage. In large measure, the reasons for this are traced to past abuses, bureaucratic caution over fraudulent claims, and a growing body of medical and biomechanical literature. Often, even when diagnostic and other film studies display objective abnormalities, the negotiation process can become stalled. Let me share some of the sources and barriers to what many often feel are clear and convincing evidence of injury.

For instance, some fairly recent medical studies concerning the use of CAT scans and MRI’s are casting a "shadow" concern over subjective injuries, where the prominent proof consists of complaints of pain. These studies suggest: 1/ that spinal abnormalities exist in a clear majority of adults after age 25; including medically significant herniations as well as bulging discs; 2/ that the great proportion of abnormalities therefore exist without any symptoms, and, 3/ inferentially preexisted trauma. In addition, some recent "biomechanic" studies coming out of the insurance industry are being used to argue that the amount of "trauma" sustained in low impact auto cases is no worse, or of less degree than that often incurred in aggressive physical therapy or chiropractic manipulation.

The point to recognize here is that effective personal injury advocacy and representation must be experienced, prepared, and sufficiently versed in both the legal and medical issues, from both the claimant and defense perspective, if the best result is to be obtained. Often, a "good" result depends on the reputation of the attorney or health care provider the ability to recognize unique features of the claim or claimant, and basic knowledge of the litigation process as it applies to injury claims. It is no longer a field of first impression in the law, nor the place to "cut one’s teeth".

The Business of Law

Despite the fact that local law schools are reporting enormous increases in admission applications, some by as much as 30% over last year, (due, according to some commentators, to the broadcasting of the O. J. Simpson trial), the litigation trend in the law continues downward. According to statistics recently released by the California Judicial Council, since 1987 the number of personal injury lawsuits has dropped by 48% in Riverside county, with the statewide average per county drop at 43%. Other counties, such as Orange county, are reporting even more drastic drops. Similar trends are being reported in other fields of litigation. The lawyer's role in delivering solutions, remedying wrongs, and providing results is rapidly changing and it is important for both consumers and business persons to recognize the qualities which increase the probability of a successful and acceptable outcome:

1. An experienced lawyer should be able to evaluate. This basically means that he or she should be able to give you a general sense of the potential outcomes, the process and potential turns a litigated matter will take. Although the strengths and weaknesses of claims or defenses are not clearly known in the absence of discovery or investigation, an experienced litigator should be able to detail some of the "smoking" gun concepts crucial to the merits of the claim or defense.

2. An experienced lawyer should be cost conscious, irrespective of whether or not the matter is being handled on a contingency fee basis. Litigation, after all, is a process of wealth transfer. That process inherently involves cost versus benefit.

3. An experienced lawyer should be direct and unequivocal in expressing recommendations and opinions. And the most important issue requiring that directness because of the expense involved is whether or not a matter can be resolved without trial.

4. An experienced lawyer should display the signals of efficiency. Those signs include returning calls, written updates, literacy in basic office technology, contacts in other fields and a "consulting" network with other professionals groomed over a period of years.

5. Finally, an experienced lawyer should be a good listener. Lack of patience, or refusal to provide phone time without always billing for it is often a signal of an overloaded practice or inherent discontent with the "business of law".

The Law of Business

The Southern California White House Conference on Small business was held on March 14. At that Conference, a pamphlet profiling small businesses in California was distributed. The statistics are facinating and, as is much the case with "stereotypical" media handling of legal and business issues, in what is clearly an indication of the vitality of small business in California, the statistics speak loudly. The profile was prepared by the U. S. Small Business Administration:

1. The population in California rose from 24.8 million in 1982 to 31.4 million in 1993. There are 9.9 million workers in the California private work force as of 1993. This represents nearly 10% of the national private labor force. There were 2 million defined small businesses operating in California in 1991 (less than 500 employees, including self-employed)----99.7% of all business entities are small businesses.

2. From 1982 to 1987, women owned businesses in California increased by nearly 60%. As of 1987, women owned businesses constituted approximately 31% of the total.

3. In the same period, African-American owned small businesses in California increased 23%, and as of 1987 represented approximatey 3% of the total.

4. Similarly, Hispanic owned businesses increased a phenomenal 88%, and now represents over 7% of the total.

The 1980’s represented the greatest growth in small business, regardless of population and income grouping, ever experienced in American history. It is clear the engine for future tax policy, regulatory policy, and general trends in the law will be "what is acceptable to the small business community", because it is here where American initiative, job and economic growth is leading.

From the above statistics, one can understand why the current "hot button" issues in business and tax law and policy are as follows:

1/ Reduction in the capital gains tax; 2/ Conversion of the income tax system to a national sales or flat rate tax; 3/ Complete modification of the payroll tax procedures and reduction of these rates; 4/ Clarification of independent contractor rules; 5/ Parity and rationality for health insurance premium deductions for self-employed; 6/ elimination of estate and gift tax so that businesses can be passed from generation to generation.

From conferences such as these, I remain hopeful that more and more of the burdens on small business can be reduced, so that new opportunities can be provided.

Speaking of Gift Taxes . . . .

Gifting and estate planning, because so few of us have the resources which can generate useful and cost effective savings, is one of the least understood areas of the law. Because this is not part of my day to day practice, and I tend to refer out such matters to specialists, I would like to pass along some simple rules which have helped me keep the field "straight" and clear in my mind. Any plan to give a gift worth more than $10,000 must take into consideration the gift tax consequences. Gifts in excess of this amount within a one year period and made to a person or noncharitable institution are subject to the federal gift tax. The giver, not the receiver, is liable for the tax.

The idea of the tax is to supplement the estate tax, which confiscates, in essence, property at death. Estate planning has to do with transfers and formation of transactions and entitites to preserve as much of the estate wealth with as much flexibility of use and access as is legally possible. The estate tax technically does not apply below $600,000 of wealth. Therefore, technically, the both taxes may not be triggered as long as the donations are less than $10,000, and do not total during the lifetime more than $600,000.

Another way of saying this is that one can give away up to $600,000 without tax consequences. Also, your estate "value" will include appreciated real estate as well as the proceeds of life insurance policies. Gifts can also be given for tax exempt reasons: charities; $10,000 to one recipient in one year; or gifts to spouses. Gifts to minors can be made even though the minor isn’t given control of the property. (Conditions apply.) Gifts to relatives in lower income tax brackets of income producing property are often one feature of an overall estate plan to lower federal and state income taxes. In short, gifting is one weapon in the "arsenal" of tax and estate planning.

More Credit, Bankruptcy Tips

Bill collecting is a multibillion dollar industry. The dimensions of bill collecting are spawning cottage industries and seminars as educators, insiders and entrepreneurs still on the "inside" pass along and market the secrets of the industry which often take bankruptcy and other professionals years to pick up.

Here are some in brief:

1. Collectors and agencies get commissions on what they collect. The percentage falls between 20-50%. Keep this in mind when negotiating a debt or claim.

2. Payment deadlines set by collectors are purely "psychological". The real significance is cost, and the only criteria here is at what point are attorneys fees incurred, which is sometimes a function of the size of the claim, and the statute of limitations.

3. Financial information need not be provided. A collector’s total motivation in obtaining information is for "enforcement" and levying purposes only.

4. Yes, you can stop all calls. Federal law simply requires a written request.

5. Yes, they can find out how much you have in the bank without your authorization. Legitimate creditors are exempt from certain privacy restrictions. 6. If the collector is from "out of state", you have a great deal of time before any "hammer" will fall.

7. Yes, you can limit student loan repayment installments. Under the 1992 Higher Education Act, if you are behind in repayment, you can apply for "reasonable and affordable payments".

8. Finally, regardless of Bankruptcy, most states have exemptions limiting the amount of enforcement against wages and other "necessities". In California, the exemption process is very consumer favorable, requiring a judgment creditor to make a motion to challenge the assertion of an exemption.

Credit worthiness is a necessity in our society today. Yes, there are ways to restablish, repair, build or maintaining credit. Some of the methods and tips used by the experts include:

1. A "leap-frog" technique using small savings accounts at multiple institutions for cash collateral loans. The deposits are pledged, and readily repaid, the loan being used to open other accounts. Often the cost of "creating" a history of repayment is simply some minor fees usually charged by banks for loan processing;

2. Use your department store credit card to purchase gift certificates. Purchase a small item using the certificate and get back cash. Make certain repeated use is repaid timely;

3. Jewelry Stores have a reputation for not running Credit Reports on people that have a stable source of income and a small down payment for a purchase. Opening these types of Accounts is usually fast and relatively easy. Just make All payments on time.

4. Consider a secured Visa or Mastercard. They can be used anywhere regular credit cards are used. Sometimes they are referred to as "debit" cards. These types of credit cards usually require you to open a savings account at the sponsoring bank. Once you have established an account at the bank, the bank will in turn issue you a Visa or Mastercard with the limit equal to the amount in or some portion of your savings account. The important thing to note is this type of "credit" arrangement is also reported on your credit files.

5. Unsecured Visa and Mastercards can be obtained by "proxy", through a friend or relative having another card issued to you as an "authorized" user. By doing this you will receive a Visa or Mastercard in your name but under your friend’s, relative’s or spouse’s account. The little secret to this is that on your credit report the card will show up as yours, thereby establishing credit for you. Another variation is through the use of cosigners. Some life insurance companies will co-sign you on one of these major credit cards if you start a life insurance policy with them. You'll have to shop around to find one of these insurance companies. Debit and secured card providers can be established through brokerage houses as well. They are often advertised in national magazines and newspapers such as USA Today, the National Enquirer or Star. Be careful to check for all fees and charges.

Remember, your purpose is to create a favorable credit history, which will require discipline and caution. Your objective is to accelerate the process of repair, not to circumvent it.

My further updates will follow. With best regards, Gerald Spala June 15, 1995