The Heritage, Conception, Life, and Death of Arizona’s S.B. 1062. And Why It’s Important

On February 19, 2014, Arizona’s two houses of legislature passed S.B. 1062. Though the bill does not explicitly mention homosexuality or Christianity, it became both a lightning rod and a rally flag, depending on which side of the culture war onlookers identified themselves. Facing intense pressure from businesses, professional sports organizations, and national politicos, Governor Jan Brewer vetoed the bill.

Objective observers of S.B. 1062 would probably agree that the dialogue surrounding the bill generated more heat than light. One need only glance at the “comments” section of almost any article covering the bill to see the belligerents calling each other names and impugning each other’s motives. For example, one commentator on a Powerline article suggested those opposed to S.B. 1062 were “agents of intolerance, hatred and darkness.” http://www.powerlineblog.com/archives/2014/02/no-this-is-not-jim-crow-for-gays-understanding-arizona-s-b-1062.php.

On the other side of the debate, one well respected news reporter let his anger cloud his logic so much that he blatantly contradicted himself in less than a minute’s time. In a news piece titled “Keeping Them Honest,” CNN’s Anderson Cooper first accused one of the interest groups that helped draft the bill of acting strange for not coming on his show since “they were not keeping [their role] secret” and then, less than a minute later in his monologue ominously suggested that what was wrong with the groups’ activity was not their activism but that they were keeping their role a secret. See http://mediamatters.org/blog/2014/02/28/cnn-and-msnbc-expose-the-anti-gay-group-behind/198280, first posted clip at 1:30 to the end.

Another gay-rights activist described the controversial bill as “a wretched, conceived-in-hate piece of trash.” http://americablog.com/2014/03/arizonas-sb-1062-egregiously-misrepresented-critics.html. Actually, instead of “hate,” the controversial bill’s conception is intertwined with First Amendment jurisprudence and historical legislative (both federal and state) reactions to that jurisprudence.

The First Amendment

Ratified in 1791, the First Amendment forbids Congress from prohibiting the free exercise of religion. Since that time, courts have struggled to find a correct balance between an individual’s freedom of religion and society’s demands of each individual. For example, at one extreme, although a worshipper of Moloch might feel religiously compelled to offer her child as a burnt sacrifice to the ancient Ammonite god, Texas Penal Code §19.03 defines such conduct as capital murder, punishable by death or life imprisonment without parole. Does Texas Penal Code § 19.03, therefore, “prohibit[] the free exercise of” religion? The answer is easy, and must be an emphatic “no.” Otherwise, the First Amendment “would . . . make the professed doctrines of religious belief superior to the law of the land, and, in effect . . . permit every citizen to become a law unto himself.” Reynolds v. United States, 98 U.S. 145, 167 (1878). President Lincoln (though not in reference to freedom of religion but as justification for firing on Fort Sumpter) framed the dilemma as follows: “Must a government, of necessity, be too strong for the liberties  of its own people, or too weak to maintain its own existence?” See Minersville School Dist. v. Gobitis, 310 U.S. 586, 596 (1940).

As history attests, drawing the line of demarcation using clear legal standards that adequately balance both the individual’s First Amendment interests and society’s demands of each individual, can be challenging.

Where To Draw the Line?

Early Supreme Court decisions, lacking the balancing tools of the later-promulgated levels-of-scrutiny constitutional jurisprudence, drew a severe line, limiting religious freedom’s scope to protecting belief but not action. For example, the Reynolds Court, when faced with the issue of whether a law prohibiting plural marriage violated a 19th-century polygamous Mormon’s First Amendment rights, ruled that “Congress [is] deprived of all legislative power over mere opinion, but [is] left free to reach actions.” Id. at 164 (emphasis added). In other words, because Mr. Reynolds’ sentence to two years’ hard labor was based on his actually marrying a second wife instead of merely holding the opinion that doing so would be morally right, the Court found his First Amendment rights to remain intact despite the sentence. The same Court, however (likely fearing a Pandora’s box that would lead to anarchy, especially if the Court granted a First Amendment right to participate in what “has always been odious among the northern and western nations of Europe”) ignored the thorny fact that the First Amendment protects “free exercise of religion,” not mere opinion. Id.; U.S. Const. amend. I.

The Reynolds bright line began to blur in 1943 with West Virginia State Board of Education v. Barnette, in which the Court ruled that a state could not compel a Jehovah’s Witness school child to pledge allegiance to the flag. 319 U.S. 624. Though the Court packaged the ruling with a consciousness of the Reynolds language (claiming that making a symbol and stating a vow was intimately linked with belief) the holding nonetheless undoubtedly weakened Reynolds’ assertion that “legislative power . . . [is] left free to reach actions.” Reynolds, 164.

In 1968, that line blurred to breaking, when the Court addressed the issue of whether a Seventh-Day Adventist could be required to accept work on Saturdays to receive unemployment benefits. Sherbert v. Verner, 374 U.S. 398. The Court ruled in favor of the Seventh-Day Adventist. The Court wholly discarded the Reynolds bright line rule and instead analyzed the issue through the constitutional “levels of judicial scrutiny,” created by United States v. Carolene Products Company, 304 U.S. 134 (1938). The Court examined the law with strict scrutiny, further stating that “only the gravest abuses [of religious exercise] give occasion for permissible limitation” by the state. Sherbert at 406.

 Religious Freedom Restoration Act

In 1990, with Employment Division v. Smith, the Supreme Court again demonstrated the precariousness of the balance between individual religious liberty and public safety, peace, and order. 494 U.S. 872. There, the Court decided whether a user of an illicit drug could seek First-Amendment refuge from criminal prosecution. In Smith, the Court returned to a more Reynolds-like position, expressly rejecting the compelling interest requirement for government actions that burdened the exercise of religion. Id. at 888-889. The Court held that if the religious conduct burdened (in this case, smoking peyote) is prohibited by law (whereas in Sherbert observing a Saturday Sabbath was not prohibited by law, a distinction the Court was careful to note), then no heightened scrutiny applies. The only question for reviewing courts in such situations is whether the law is “generally applicable” (the inverse being whether the State is specifically targeting or exempting a religion) and whether the law in question has a rational basis.

It is perhaps no coincidence that the three decades preceding Smith saw not only a rising crime rate but also a rising drug-related crime rate. Thus, it is quite possible that the Court’s sudden jerking back of the religious freedom reins was informed by the same fear that informed Reynolds: “every citizen . . . a law unto himself.”

Although it is only arguable that Smith was a reaction to three decades of increasing lawlessness, there is no question that the Religious Freedom Restoration Act was passed in reaction to Smith. See City of Boerne v. Flores, 521 U.S. 507, 513 (U.S. 1997). In effect, Congress said to the Court, “if you will not find stronger protections of religious exercise in the Constitution, we will craft our own statutory protections.” In 1993, the Democrat-controlled House and Senate passed (with only three total dissenting votes) and President Clinton signed, the Religious Freedom Restoration Act (“RFRA”). Among other things, RFRA restored strict scrutiny as the lens through which Courts must evaluate religion-burdening state actions. The Court, however, soon made clear that RFRA had not once and for all settled the balance.

Supreme Court Strikes Down RFRA As To States

In 1997, in City of Boerne v. Flores, the Supreme Court struck down much of RFRA, holding that the Constitution did not grant Congress the authority to impose RFRA’s requirements on the states, though RFRA’s restrictions continued to apply to the federal government. 521 U.S. 507.

In response, many states passed their own version of RFRA. One of those states was Arizona. Arizona’s RFRA was a precursor to S.B. 1062. Events in other states led Arizona legislators to believe that additional RFRA protections and an expansion of the Arizona RFRA were required.

In 2013, the Supreme Court of New Mexico upheld a fine imposed on a photographer by the New Mexico Human Rights Commission (NMHRS) for refusing to photograph a gay “commitment ceremony.” Elane Photography, LLC v. Willock, 2013-NMSC-040, 8 (N.M. 2013). The NMHRS based its fine on the New Mexico Human Rights Act of 2007, which prohibits public accommodations from discriminating against people based on their sexual orientation. That same year, bakeries in Oregon and Colorado were subject to fines for refusing, on religious grounds, to bake a wedding cake for a gay couple. The Oregon bakery faces the possibility of hundreds of thousands of dollars in fines, and the state’s Labor Commissioner has spoken of a desire to “rehabilitate” the bakery.

In reaction to these cases, and to protect orthodox Christians from being forced to participate in activities contrary to their beliefs, many states moved to enact their own RFRA or broaden the RFRA they currently had. Arizona was one such state. Arizona’s S.B. 1062 attempted to broaden its RFRA so as to extend the Act’s protections to not only churches but also individuals and legal entities. S.B. 1062 would also have allowed use of the new RFRA in a lawsuit as a claim or defense regardless of whether the government was a party to the proceeding.

The rest is history. When both houses of legislature passed the bill, a media firestorm erupted, decrying the bill as something intended to legalize discrimination against homosexuals in places of public accommodation (something that was already legal in Arizona, by the way). Almost everyone in the public sphere had something to say about the bill—from the National Football League to two failed Republican presidential nominees—most weighing in against passage. In an unprecedented turn of events, three legislators who voted for the bill shortly thereafter publicly expressed regret for their vote.

Jan Brewer, whose own administration helped draft the legislation, exercised her veto, stating that she did not see how the bill was necessary.

The Troubling After-Taste of S.B. 1062

Reasonable people can disagree on whether S.B. 1062 was a “solution in search of a problem,” as one of the GOP legislators described the bill to justify his opposition thereto after voting to pass it. Reasonable people can also disagree on where, exactly, the balance ought to lie in protecting freedom of conscience, particularly within the developing corpus of gay rights. The troubling aspect of S.B. 1062’s life and death, however, is that instead of a principled discussion taking place regarding these issues, name-calling and outright deceit were used to attack those on the opposite side of the argument. Those supporting the bill should not be labeled hate-filled bigots by virtue of their support of the First Amendment, just as those opposed to it should not be vilified as anti-religious deviants.

Also troubling to people of faith is the question of where not only religious liberty but liberty in general stands in the wake of S.B. 1062’s demise. If such measures as S.B. 1062 become taboo, while measures like New Mexico’s NMHRA become commonplace, is there any space left for those opposed to participating in events that run contrary to their deeply held religious beliefs? If an orthodox Christian must choose between actively participating in a gay wedding and losing her livelihood, why not pass a statute forcing an Evangelical Christian to photograph a Latter-day Saint couple after a temple wedding? Why not pass a statute forcing a Muslim-owned food company to sell grape juice to a distillery whose sole function is to produce wine used at a Catholic Mass? Why not force a gay accountant to give tax advice to a Muslim mosque that teaches homosexual acts should be punished by death? The intended beneficiaries of such statutes would all belong to historically persecuted groups, and all could argue that they feel ashamed and discriminated against without these statutory protections.

But if such laws are passed and enforced, who decides who gets to force whom to do what? In other words, at one point does liberty—both of gay-rights activists as well as orthodox Christians—disappear, only to be replaced by the rule of the strong? When does a law that forces someone to choose between acting in accordance with their religious beliefs and providing for themselves and their families not “prohibit the free exercise of religion?”

Of course, as with the hypothetical child-sacrificing Moloch-worshipper discussed above, there must be some limitations to the free exercise clause. But no one would disagree that the state has a compelling interest in prohibiting child sacrifice. There is plenty of room for disagreement, however, as to whether the state has an interest strong enough to override First Amendment rights in protecting individuals from feelings of shame and embarrassment—however real those feelings might be for gay couples who are denied wedding services. Furthermore, if the state arrogates to itself the role of affirmation czar, why should it not be equally concerned with the feelings of the Christian couple who were forced to close their Oregon bakery? Surely the protests, death threats, and administrative proceedings instilled in them feelings of shame, embarrassment, and fear.

In answering these questions, we should remember religion’s great importance to America’s conception of liberty. “We have not government armed with power capable of contending with human passions unbridled by morality and religion . . . . Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.” John Adams, letter, October 11, 1798. “Americans [have historically] combined the notions of [religion] and of liberty so intimately in their minds, that it is impossible . . . to conceive the one without the other.” Alexis de Tocqueville, Democracy in America, vol. 1, trans. Henry Reeve (New York: Geroge Dearborn and Co., 1838), 287. They “are intertwined, interlinked, and interlocked so tightly that when one of them . . . is cut, the other . . . will bleed.” Jeffrey R. Holland, “Faith Family and Religious Freedom,” Clark Memorandum, Fall 2013, 29.

Obama Administration Seeks Common Sense Change in Immigration Law

United States immigration laws currently allow immigrant spouses and children of U.S. Citizens and Legal Permanent Residents to apply for a green card (legal permanent residency) even if they initially entered the country without inspection. However, the law currently requires most of these folks to apply for their green card from their country of origin.

The Problem

The catch, however, is that in most cases leaving the United States, after entering without inspection, triggers a 10-year ban that Congress enacted back in 1996 — even for those individuals who are already fully eligible to become legal permanent residents.

The Solution

To remedy this catch-22 situation, Congress crafted a series of waivers for the laundry list of violations that may lead to a finding of inadmissibility under section 212(a)(9)(A) or (C) of the Immigration and Nationality Act (INA).

The most commonly utilized of these waivers is the I-601 Unlawful Presence Waiver. To qualify for this waiver, an applicant must have a U.S. Citizen or Legal Permanent Resident spouse, or parent, that will suffer “extreme hardship” if the applicant cannot return to the United States, or if they have to relocate outside the U.S. to be with the applicant.

“Extreme hardship” is vaguely defined as greater than the normal hardship a qualifying relative can be expected to experience if the intended immigrant is denied admission. An example of extreme hardship is being unable to provide care for a disabled family member living in the United States.

It is important to prove BOTH why the qualifying relative cannot move abroad AND why the qualifying relative cannot simply live in the U.S. without the intended immigrant. It is not enough to merely assert that the qualifying relative will miss the immigrant’s company, as this is considered a “normal” hardship, not extreme hardship.

Oddly enough, and unfortunately,  the applicant’s children, of any age, are not considered qualifying relatives for the purpose of the I-601 Waiver. Thus, a waiver cannot be granted solely on the basis of your relationship to your U.S. Citizen or Legal Permanent Resident child. However, documenting that you have a U.S. Citizen or Legal Permanent Resident child will help you establish extreme hardship with respect to your spouse or parent; as any hardship that befalls your child will likely also impose a hardship upon your spouse. Also, applicants with more than one unlawful entry into the United States after April 1, 1997 may not be eligible for this waiver.

Currently, the intending immigrant must submit their waiver packet at the U.S. Embassy or Consulate abroad, where it can take several months and even years for United States Citizenship and Immigration Services  (USCIS) to make a decision on the waiver — and all of this happens while the family remains separated from each other.  Likewise, sometimes waivers are not approved at all, and immigrants end up becoming permanently separated from their American families. As a result, many couples who need this waiver choose to lay low in the United States, rather than go through the waiver process and risk facing the 10 year ban.

A Much Better Solution

However, USCIS is now proposing a small tweak in the waiver process for the spouses and children of U.S. Citizens (not Legal Permanent Residents) who are seeking waivers only for their own unlawful presence.  This proposed rule (which is currently only a “notice of intent” to publish a proposed rule) would provide eligible immigrants with “provisional waivers” in the United States, before leaving abroad to pick up a green card in their country of origin. Leaving with the waiver in hand will allow these immigrants to depart the U.S. knowing that they will almost certainly be allowed to return to the U.S. to be with their families.

It is important to remember that the provisional waiver rule WILL NOT allow applicants to receive their green cards in the U.S.; it is only the provisional waiver itself that they will receive in the U.S.  Applicants will still have to travel abroad for the issuance of the immigrant visa/green card by the U.S. consulate in their home country.  However, USCIS is seeking to cut down on the amount of time immigrants will have to wait abroad to pick up their green cards, from the current wait time of several months, to a much more manageable wait time of about two weeks.

The Politics of Immigration Law

It should come as no surprise that this recent move was greeted with broad praise from immigration attorneys, as well as immigrant and Latino groups, which have recently been critical of the high rate of deportations under President Obama. And, with the 2012 Presidential Election on the horizon, and President Obama needing to shore up lagging support among Latinos, the timing of the announcement from the White House was clearly political. So, as to be expected, a few anti-immigrant groups have cried foul because this particular tweak in the law is one of a number of recent measures by the Obama administration that do not require the approval of Congress.

However, the fact of the matter is that those who would criticize this measure have little ground to stand on… because the proposed rule change does not change any laws, nor does it provide any new benefits for undocumented immigrants. What it does, however, is improve compliance with current law, as waivers were originally designed to ease the effects of contradictory or outmoded statutes on immigrant communities, and to prevent the hardship of family separation.

Also, it is important to note that not only has this proposed rule been in the planning stages for years, but it has also been recommended by multiple non-partisan governmental and non-governmental organizations. Accordingly, assertions that it is nothing more than election year politics by the President are unfounded.

How Many Waivers Were Approved Last Year?

In Fiscal Year 2011, USCIS received 23,262 I-601 Waiver applications, and approved 17,790 of them… roughly a 76 percent approval rate. According to USCIS, however, the approval rate in Ciudad Juarez, Mexico last year was even higher — closer to 90 percent.

 What Happens if My Wavier is Denied?

Individuals whose waivers are denied would be subject to USCIS guidance and law enforcement priorities for issuing Notices to Appear (NTA) in immigration court. For example, convicted criminals, public safety threats, and those suspected of fraud, among others, will receive NTAs to appear in Immigration Court for removal proceedings.

Anyone else who is denied a I-601 Waiver will have the choice to either abandon the process (while still remaining in the United States) or appeal the denial — while staying in the United States for the two or three years it typically takes to adjudicate the appeal.

Of course, the I-601 Waiver does not guarantee admission into the United States. The U.S. Consulate can always, after the initial consular interview, discover new grounds of inadmissibility, which may or may not, have an applicable waiver that can cure the inadmissibility.

What’s the Bottom Line?

The bottom line is that those who abandon the waiver process, or who have their waiver appeals denied, if not priority cases for ICE, will be back to square one—undocumented and married to U.S. Citizens. But at least they will be with their families in the United States, rather than separated from them, or forced to move under duress.

Can I Apply For A Waiver Now?

Short Answer: No.

Long Answer: It’s important to note that the provisional waiver system is not yet in effect, and won’t be in effect until USCIS publishes a final rule in the Federal Register that specifies the effective date the new law will go into effect. Some reports indicate that it may take as long as up to a year before the rule goes into effect. Therefore, DO NOT send in an application requesting a provisional waiver at this time, as USCIS will not accept these applications until a final administrative rule implementing the new law goes into effect.

Also, you need to be aware that some unauthorized practitioners of immigration law, as well as some unscrupulous immigration attorneys, may wrongly claim that they can currently file a provisional I-601 Waiver on your behalf.

Be assured, they cannot.

So, it goes without saying, or it should go without saying, that if you already have an immigrant visa interview scheduled with the U.S. Department of State, you still need to attend that interview. The State Department may cancel your immigrant visa registration if you fail to appear for your scheduled interview.

  ________________________________________________________________________________________

Refining the Focus of Disability Discrimination

Though persons with disabilities have constituted a protected class since the effective date of the Americans with Disabilities Act of 1990 (ADA), that class has been relatively small, due to the limitations the U.S. Supreme Court placed on the definition of “disability” under the act. In Sutton v. United Airlines, 527 U.S. 471 (1999), the Court ruled that an impairment’s limitation on a life activity must be considered in light of any mitigation to that impairment. As a result, persons whom United Airlines would not hire as pilots because of impaired but corrected vision could not successfully sue under the ADA. In Toyota v. Williams, 534 U.S. 184 (2002), the Court stated that the standard in determining whether a condition qualified as a disability was “demanding.”

With the passage of the ADA Amendments Act of 2008 (ADAAA), these definitional limitations have been removed, and covered employers (those engaged in interstate commerce and having 15 or more workers), public entities, and places of public accommodation need to be careful now more than ever not to discriminate based on a person’s disability. Though the ADAAA does not change the words for the definition of disability—a physical or mental impairment that substantially limits a major life activity—it adds numerous measures broadening that definition (for the complete text of the Act, see http://www.law.georgetown.edu/archiveada/documents/S3406FinalEngrossed Version.pdf):

• The ADAAA explicitly overturns the standards enunciated in Sutton and Toyota, stating, “The purposes of this Act are to reject” them.
• The Act broadens the protected class “to the maximum extent permitted by the terms of this Act.”
• It provides a non-exhaustive list of “major life activities,” including caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working.
• As part of “major life activities,” it also includes “the operation of a major bodily function,” which includes functions of the immune system, normal cell growth, digestive, bowel, bladder, neurological, brain, respiratory, circulatory, endocrine, and reproductive functions.

These measures and others found in the ADAAA emphatically broaden the sweep of potential liability for discriminating against persons with disabilities by shifting the focus of the inquiry from whether an individual is disabled to whether discrimination occurred. As the case law begins to develop, employers and other covered entities should be aware that conditions held by federal courts not to constitute a disability under the ADA (such as epilepsy, HIV/AIDS, diabetes, cancer, vision in only one eye, and asthma) will (along with all other physical impairments) get a very strong second look by the same courts under the ADAAA. As a result, employers will need to defend disability discrimination lawsuits more on the merits, and cannot rely on early dismissal of such lawsuits in the future. Of course, such lawsuits can still be defeated by disproving discrimination.

The Immigration Maze

Very few things are more complicated and personal than immigration. In order to understand some of your immigration options, it is  important to know some of the most basic immigration terms. First, you need to know if you are allowed to legally be in the United States.

There are four immigration statuses that you can have under the U.S. Immigration System:

• You can be an undocumented immigrant, with no legal right to be in the U.S.
• You can seek to obtain a non-immigrant visa that allows you to spend a limited amount of time in the U.S., usually for a specific purpose.
• You can seek to become a Legal Permanent Resident (Green Card holder), which allows you to live in the U.S. indefinitely, with most of the rights of a U.S. Citizen.
• You can be a U.S. Citizen.

If you are an undocumented immigrant, you will need to get a visa or other legal status as soon as possible, otherwise you are subject to removal (deportation) from the U.S. If you qualify, however, the U.S. does offer several ways to become a Legal Permanent Resident. A Legal Permanent Resident is someone who has been granted authorization to live and work in the U.S. on a permanent basis. As proof of that status, a person is granted a Legal Permanent Resident card, commonly known as a “Green Card.” A Green Card enables a person to live and work in the U.S. for the rest of their lives, so long as they do not abandon their residence by staying outside the U.S. for too long, or by engaging in conduct which renders them subject to removal (deportation).  Legal Permanent Residents can qualify for U.S. citizenship five years after obtaining status, or they can choose to renew their Green Card every ten years.

There are several different ways to become a Legal Permanent Resident. Most individuals are sponsored by a family member or U.S. employer. U.S. citizens can petition for their spouses, children, parents, and siblings, while Legal Permanent Residents can only sponsor their spouses and children. The fastest method (usually under one year) is when a U.S. citizen files for immediate relatives such as a spouse, parent, or minor child. The longest method is when a U.S. citizen petitions for a sibling. In some instances this can take up to fifteen years.

Can I Become a Legal Permanent Resident Even if I Have Overstayed My Visa?

One of the most frequent immigrations questions we hear is: “Can I still become a Legal Permanent Resident even if I have overstayed my visa?” The answer is yes, if your last entry into the United States was lawful, and you are married to a U.S. Citizen. Lawful Admission  means an entry into the U.S. after inspection and authorization by an immigration officer. This is the case regardless of how long you have overstayed your visit to the U.S. However, if you are not married to a U.S. Citizen, and you have overstayed your visa, the best thing for you to do is to leave the U.S., sooner rather than later. This is because if you leave before you have overstayed your visa for six months, there are no penalties. However, if you overstay your visa by 180 to 365 continuous days, you can be barred from returning to the U.S. for three years. And, if you overstay for more than one year, you can be barred from the U.S. for up to ten years.

Arbitration Agreement Unconscionable? “See You in Court”

Have you made a significant purchase lately? Or perhaps agreed to “terms and conditions” to access web services? Maybe you’ve recently signed an employment agreement. If so, there is a good chance you have waived your right to an in-court trial with respect to any disputes that may arise out of your transaction.

It’s called an arbitration clause. Arbitration clauses find their way into all sorts of settings: consumer purchases, work contracts, high-dollar corporate transactions, you name it. They are agreements to resolve disputes before a private arbitrator rather than a judge or jury. By signing them, a person may be agreeing to vindicate rights arising out of the transaction in front of arbitrators sympathetic to the interests of the other party—and maybe even in a forum many hundreds of miles away! It is not surprising that folks often sign arbitration clauses without any knowledge of their meaning or effect.  Because of the Federal Arbitration Act (FAA), once signed, arbitration clauses are not easily avoided.

FAA

Congress passed the FAA with the specific intent of keeping courts and state governments from voiding arbitration clauses. Section 2 of the FAA states that arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” In other words, arbitration agreements must be treated the same as any other contract under state law.

Texas courts may void arbitration agreements for unconscionability because the doctrine of unconscionability applies to all contracts.

Applying Unconscionability to Arbitration

The general standard for unconscionability is a bit nebulous (not to mention extraordinarily difficult to establish). Fortunately, courts have further explicated this doctrine as it applies to arbitration clauses.

If a claimant’s substantive rights cannot be successfully vindicated in the arbitral forum, there is a healthy possibility a Texas court will find the arbitration clause unconscionable. See In re Olshan Foundation Repair Co., LLC, 328 S.W.3d 883, 893 (Tex. 2010). A key issue related to a claimant’s “substantive rights” is whether the arbitration proceeding will be an “adequate and accessible substitute to litigation.” Id. at 894.

The Texas Supreme Court has identified a number of factors for determining whether  an arbitration proceeding is “an adequate and accessible substitute.” These include the actual cost of arbitration compared to the total amount of damages the plaintiff is seeking and the claimant’s ability to pay the arbitration fees and costs. Id. at 895. In addition, the Texas Supreme Court has stated that the most important factor is a comparison of the costs of the arbitral and the traditional litigation forums. Id. at 894-95. An important inquiry related thereto is whether such cost differential will “deter individuals from bringing valid claims.” See Id. at 893.  

If a claimant can present substantive evidence in support of these factors, evidence that goes beyond “merely speculat[ing] about the risk of possible cost,” Id. at 895, the chances of blowing up the arbitration agreement and enforcing the claim in a court of law rather than an arbitral forum greatly improve.

Why is it so hard to do good? The non-profit battlefield

Non-profits play a critical role in our communities. They provide us educational, artistic, religious, and athletic enjoyment. The laws governing non-profit organizations are complex and interesting — to say they are a battlefield is an understatement. Particularly complex are the Internal Revenue Service (“IRS”) regulations and rules. Section 501(c)(3) of the tax code provides tax exemption for non-profit organizations that perform an exempt function. Section 501(c)(3) organizations include churches, schools, hospitals, arts and environmental groups, and other organizations that are considered charitable. To obtain exempt status under Section 501(c)(3), an organization must meet the following tests:

(1) Organized as a nonprofit corporation, or as a “community chest, fund, or foundation.”

(2) Organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, to foster national or international amateur sports competition, or to prevent cruelty to children or animals.

(3) No part of its “net earnings” may inure to the benefit of any private shareholder or individual.

(4) No “substantial part” of the organization’s activities may consist of certain lobbying activities.

(5) The organization may not participate or intervene in any political campaign on behalf of or in opposition to any candidate for public office.

 

The IRS presumes that any organization formed after October 9, 1969, is a private foundation. An organization must notify the IRS if it is not a private foundation. This “notification” process requires the completion of an intensive and complex IRS form.  Most non-profits are not private foundations. Private foundations are organizations that receive most of their income from a small group of people – usually an individual, family, or corporation. A public charity, however, receives a bulk of their money from gifts or fees. There are substantial tax consequences associated with each and any forming organization should seek legal and financial counsel before filing with the IRS.

In order to satisfy the IRS that an organization is not a private foundation, an organization must, among other things, show that it meets the requirements of Section 509(a)(1)-(4). For example, Section 509(a)(1) organizations include churches, schools, hospitals, and other organizations that receive their public support primarily from gifts, grants and contributions from a broad group of people. In addition, Section 509(a)(2) covers organizations that receive their support from a combination of gifts, grants and contributions and fees for their exempt services. Organizations that are identified or described in 509(a)(1)-(4) are considered public charities.

For the sake of example, Section 509(a)(2) organizations encompass organizations that normally receive more than 1/3 of their support from a combination of:

(1) Gifts;

(2) Grants;

(3) Contributions;

(4) Membership fees; and

(5) Gross receipts from performing exempt function activities.

In addition, a Section 509(a)(2) organization must not receive more than 1/3 of its support from investment income and/or unrelated taxable income. The major difference between this type of organization and other public charities is that a 509(a)(2) organization receives support from gross receipts from an exempt function activity – such as ticket proceeds from a museum, opera or symphony.

Non-profits really are important for our communities. The services and entertainment they provide are invaluable. People want to provide these charitable services and to also associate with them both with time and resources. But, it is a battlefield.  There are mine fields and launched grenades to watch for when filing with the IRS.  While the end result may be a very successful and beneficial non-profit, anyone contemplating forming a non-profit should be prepared for all that comes their way.