Unfinished Business: 19 Judicial Nominations Left Unconfirmed by 111th Congress

Nan Aron on Huffington Post:

The 111th Congress wrapped up its business last night, and a last-minute flurry of action resulted in some important victories for the Administration and its allies, especially the long-overdue repeal of the "Don't Ask, Don't Tell" policy. Discrimination and hate should never be enshrined in our laws and it is heartening to see our nation move one step closer to the day when all Americans are treated fairly and equally.

But in spite of this wonderful victory, and the passage of other important legislation, one very important thing was left undone as a result of unrelenting Republican obstruction. Nineteen federal judicial nominees were left unconfirmed at the end of the session, just half of the number waiting on the Senate floor for a final yes-or-no vote.

Three circuit court and 16 district court nominees approved by the Senate Judiciary Committee were prevented from receiving votes, including even the most noncontroversial individuals, many of whom are actually supported by Republican Senators. Here is the tragic fact: as a result of unprecedented Republican political gamesmanship, President Obama ends the first half of his first term with a smaller percentage of his nominees confirmed than any previous president.

Our federal courts are in crisis. The Administrative Office of the U.S. Courts has identified 44 "judicial emergencies," where there aren't enough judges to hear the cases brought to them by the American people. Even the top judges in the Ninth Circuit Court of Appeals, led by Chief Circuit Judge Alex Kozinski, a Reagan appointee, wrote a letter to the Senate complaining about the "desperate need for judges."

We know what needs to be done. The whole process will begin again in January in the new Congress and we urge the President to re-nominate all those who were left unconfirmed, including superb, widely respected nominees like Goodwin Liu and Edward Chen, who were the special targets of Republicans. Of course the vast majority of the nominees they blocked at the end of the session, and the dozens they had obstructed over the past two years, are not controversial at all. Obstruction for obstruction's sake is the hallmark of the Republican leadership. That has to stop.

The appointment of judges is one of the most important and long-lasting legacies of any president, and should be one of President Obama's most urgent goals, particularly when more than one out in ten judgeships is vacant. The President's great success with the confirmations of Supreme Court Justices Sonia Sotomayor and Elena Kagan shows what can be done when the nominations process is respected in the Senate and obstructionist tactics are set aside.

In the next session of Congress, confirming this administration's judicial nominees should be one of the highest priorities for the Democratic leadership in the Senate. The legislative successes of the past few days show what can be done when our leaders and everyday Americans unite to fight with determination and skill against obstructionist tactics and indiscriminate opposition to important goals. We hope that same energy is applied to judicial nominations in the 112th Congress to ensure that the endless abuse of Senate procedures is not repeated and that all vacancies in the federal judiciary are filled.

Read Nan Aron on Huffington Post

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Now you tell us, Senator Specter!

Outgoing Senator Arlen Specter from Pennsylvania is now complaining that Supreme Court Justices John Roberts and Samuel Alito, both of whom he eagerly voted to confirm, weren’t being completely honest about their intentions during their confirmation hearings.

Specter said on the Senate floor Tuesday:

Ignoring a massive congressional record and reversing recent decisions, Chief Justice Roberts and Justice Alito repudiated their confirmation testimony given under oath and provided the key votes to permit corporations and unions to secretly pay for political advertising - thus effectively undermining the basic Democratic principle of the power of one person, one vote. Chief Justice Roberts promised to just call balls and strikes and then he moved the bases.

None of this surprises us, of course. We made the case against both of them, but he wouldn’t listen. Sorry, Arlen, but this comes just a little too late.

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Senate Confirms Two District Court Nominees

Yesterday the Senate confirmed two long-obstructed district court nominees, Benita Pearson and William Martinez. After the Senate vote, Judiciary Committee Chairman Patrick Leahy (D-VT) remarked that “The obstruction of these district court nominations is unprecedented, a sign that a different standard is being applied to President Obama’s nominees that has never before been applied to the nominees of any President, Democratic or Republican…. It is time for the Senate to act on the dozens of judicial nominees that have been kept from final consideration before we adjourn. A number of those nominations were reported unanimously by the Senate Judiciary Committee.”

Twenty-four judicial nominations are still awaiting final confirmation votes. Eighteen of the nominations were reported by the Judiciary Committee unanimously. Two additional nominations received the support from a majority of Republican Senators on the Judiciary Committee. Of the 24 nominations pending, 14 of them are to fill vacancies designated as “judicial emergencies” by the nonpartisan Administrative Office of the U.S. Courts.

For the most up to the date and comprehensive information on judicial nominations, visit the Alliance for Justice’s Judicial Selection Project website.

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Sears was even a lousy dirt play?

The New York Times had a good piece on the five year anniversary of Kmart buying Sears and becoming Sears Holdings.  At the time, I said that Edward Lampert's acquisition of the retailing icon was as much a real estate acquisition as it was a retail deal.

Unfortunately on the retail side, the attitude of many people is, as the last sentence of the piece states succinctly, “Honestly, I’d rather go to Target.”  Sears and Kmart are still doing poorly, and many think the future -- if there is one -- lies in the Sears strategy of trying to become an Amazon.com style retailer.  (Go it its website with all the amalgamation of other sellers there and you will see what I mean.)  Apparently Sears Canada is the company's saving grace.

The fallback point?  Dump the dirt at some point. But given the current market even that isn't so attractive according to some analysts, and that makes sense.  For every hot Sears or K-Mart location, according to analyst cited in the Times, there are three other locations that have four legs and bark. And that does not include the specialty stores such as Sears Hardware, outlets and the like.  Perhaps the big buck stores can make enough money, but don't be surprised if there is ever a big liquidation of locations, you see a lot of empty or re-purposed stores.  Given the co-tenancy clauses you see in many leases with national retailers, this can have a domino effect on shopping centers.

But that all puts the cart way before the horse. (Nor am I convinced this analysis is correct.) Many people had Sears Holdings dead a while ago, and they've hung on this far. One or two hit brands or lines (such as apparel, which I thought they figured out by buying Land's End some years ago, but I was wrong) can revive sales -- which are needed given a decline in its traditional dominance in appliances -- in a hurry, and that Chicago-based lady can be humming a happy tune again.

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Senate Confirms Eight Nominees Over Weekend

This weekend the Senate confirmed 8 judicial nominees:

• Albert Diaz to the Fourth Circuit Court of Appeals (voice vote)
• Raymond Lohier to the Second Circuit Court of Appeals (92-0)
• Ellen Lipton Hollander to the District of Maryland (95-0)
• Edmond E-Min Chang to the Northern District of Illinois (voice vote)
• Leslie E. Kobayashi to the District of Hawaii (voice vote)
• Carlton W. Reeves to the Southern District of Mississippi (voice vote)
• Denise Jefferson Casper to the District of Massachusetts (voice vote)
• Susan Richard Nelson to the District of Minnesota (voice vote)

With the confirmations of Judges Diaz and Lohier, the Blog of the Legal Times reported that “The U.S. Court of Appeals for the 2nd Circuit again has a majority of active judges appointed by Democratic presidents,” and the 4^th Circuit now will now “have a 9-5 Democratic majority.”

With these new confirmations, there are now 26 nominees who are awaiting final votes on the Senate floor.

For the most up to the date and comprehensive information on judicial nominations, visit the Alliance for Justice’s Judicial Selection Project website.

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Alliance for Justice Hails "Don't Ask Don't Tell" Vote and Calls for Swift Implementation

Alliance for Justice President Nan Aron issued the following statement on the repeal of the “Don’t Ask, Don’t Tell” policy that has prevented gay and lesbian Americans from serving openly in the military:

The long-overdue repeal of the military’s reprehensible “Don’t Ask, Don’t Tell” policy is a heartening step forward in our nation’s progress toward a society unequivocally rooted in fairness and equality for every citizen. There must never be a place in our laws for officially sanctioned discrimination, and this action will help wipe away the stain of a policy that has done so much damage to tens of thousands of patriotic men and women who only sought the right to serve honorably in the nation’s armed forces. We strongly urge President Obama and the military leadership to certify with all possible speed that the new policy is ready to be implemented and announce that during the interim period all discharges and investigations will be suspended.

The repeal of “Don’t Ask, Don’t Tell” is a great moment for our country as one more bastion of discrimination falls away and we come closer to the day when the full promise of American liberty is made available to each and every American. There remains much work to be done, but this action is an important step forward, and the Congress and the President are to be commended for their courageous action on behalf of gay and lesbian service members, their families, and the nation as a whole.

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New York Times Reports on the Corporate Court

The New York Times this weekend reported on the Roberts Court’s corporate favoritism, noting that the Chamber of Commerce enjoys significantly disproportionate influence in business cases before the Court. The article details the concerted effort that the conservative big business group has undertaken over the past 40 years to gain influence before the Court – an idea initially propounded by Justice Lewis Powell. Robin Conrad, executive vice-president of the Chamber, touted the Court’s pro-corporate bias noting that “[t]here has been a return on investment, not to sound too crass.”

The article reported on a new study of how business interests fare before the Court, conducted by law professors Lee Epstein and William Landes, as well as the conservative Seventh Circuit Judge, Richard Posner. The study found a significant increase in the percentage of business cases the Supreme Court has agreed to hear under John Roberts’ leadership, as has the number of cases in which pro-corporate forces have prevailed.

An excerpt from the article is below, and the full version is available here.

The chamber now files briefs in most major business cases. The side it supported in the last term won 13 of 16 cases. Six of those were decided with a majority vote of five justices, and five of those decisions favored the chamber’s side. One of the them was Citizens United, in which the chamber successfully urged the court to guarantee what it called “free corporate speech” by lifting restrictions on campaign spending.

The chamber’s success rate is but one indication of the Roberts court’s leanings on business issues. A new study, prepared for The New York Times by scholars at Northwestern University and the University of Chicago, analyzed some 1,450 decisions since 1953. It showed that the percentage of business cases on the Supreme Court docket has grown in the Roberts years, as has the percentage of cases won by business interests.

The Roberts court, which has completed five terms, ruled for business interests 61 percent of the time, compared with 46 percent in the last five years of the court led by Chief Justice William H. Rehnquist, who died in 2005, and 42 percent by all courts since 1953.

Those differences are statistically significant, the study found. It was prepared by Lee Epstein, a political scientist at Northwestern’s law school; William M. Landes, an economist at the University of Chicago; and Judge Richard A. Posner, who serves on the federal appeals court in Chicago and teaches law at the University of Chicago.

The Roberts court’s engagement with business issues has risen along with the emergence of a breed of lawyers specializing in Supreme Court advocacy, many of them veterans of the United States solicitor general’s office, which represents the federal government in the court.

These specialists have been extraordinarily successful, both in persuading the court to hear business cases and to rule in favor of their clients. The Supreme Court’s business docket has stayed active in the current term, which began in October. In a single week this month, the court heard arguments in a case brought by the chamber challenging an Arizona law that imposes penalties on companies that hire illegal workers, and it agreed to hear two cases that could reshape class-action and environmental law.

The chamber had urged the court to hear both cases. It said one of them, an enormous sex-discrimination class-action lawsuit against Wal-Mart, posed “grave risks for American business.” It said the other, a suit by eight states against power companies over carbon dioxide emissions, “has potentially disastrous implications for the U.S. business community.”

The court’s docket is studded with other important business cases as well, including ones concerning consumer class-action suits and claims of employment discrimination and securities fraud. The chamber has filed supporting briefs in all of them. In AT&T Mobility v. Concepcion, for instance, the chamber urged the court to allow companies to use standard-form contracts that in essence forbid consumers who sign them from pursuing class-action suits. In Thompson v. North American Stainless, the chamber asked the court to forbid some employment discrimination claims, saying that “it costs, on average, over $120,000 just to defend a wrongful-discharge claim.”

Next month, the court will hear arguments in 11 cases. The chamber says it will file briefs in seven of them.

Go to thecorporatecourt.com to learn more about this issue.

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Senate confirms four judicial nominees

Last night the Senate confirmed four of the 38 judicial nominees pending on the senate floor: Kimberly Mueller, nominee to the Eastern District of California, James Bredar, nominee to the District of Maryland, Catherine Eagles, nominee to the Middle District of North Carolina, and John Gibney, nominee to the Eastern District of Virginia.

Politico reports:

'Regan Lachapelle, a spokesperson for Senate Majority Leader Harry Reid said that the four confirmations Thursday are "just a start" to clearing the backlog during this session.

"We are still working through the list and are committed to confirming as many judges as we can," said Lachapelle. "We’ll take them when we can get them.'

There are still 34 nominees who are awaiting final confirmation votes, including Goodwin Liu, Ed Chen, Louis Butler, and Jack McConnell. For the most up to the date and comprehensive information on judicial nominations, visit the Alliance for Justice's website.

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E-ticket deals in a B-ticket market?

I could not resist the old Disneyland ticket system analogy in thinking about the Chicago market right now.  (For you younger folks, search the term and you will understand.)

The great news in Chicago?  Two trophy properties are trading.  The Hyatt Center is under contract to
The Irvine Company (Billionaire Donald Bren is the long time head of TIC) at what is understood to be just over a 6-cap, or $625 million/$419 per square foot.  I suppose that is not a B-ticket price for that great property.  Then you have 353 North Clark trading from a Mesirow/Friedman Properties venture to Tishman with a purchase price, they say, of $385 million/$321 per square foot.  The difference? Well, while I like both buildings, Hyatt is perhaps better located, but even more important is that little detail of a $374 million construction loan at Clark Street. 

So, does this mean we are back?  Not for all of us.  Institutional buying is back to some extent for the right (meaning, Class A) property at the right price, whatever that may be to the buyer.  What it could mean, though, is a little melting that will eventually reach to the non-trophy deals. 

Once again, it is a matter of unclogging a logjam at the lender level and at the investor level, where money sits without the ability to finance deals at what many players consider acceptable returns for the risk.  (Remember, pension funds and institutional folks often have completely different objectives than, say, opportunistic funds or developers.)

So yes, I'm glad to see properties trading.  But I want to see different types of deals and financing and more volume before I can say the corner is really turning.

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Nan Aron Joins Senator Tom Harkin to Call for Senate Rules Reform

“We’ve all been involved in fights over judicial appointments, but what’s happening now is well beyond anything we’ve ever encountered. There is nothing that can possibly justify this abuse of the process and the traditions of the Senate,” Nan Aron said today at a panel on Senate rules reform organized by Common Cause. The panel, “Shackled Senate: How the Filibuster is Holding Hostage our Congress, A Case for Senate Rules Reform,” took place this morning at the National Press Club and featured remarks from Senator Tom Harkin (D-IA), who expressed his frustration at the misuse of the filibuster by the minority to obstruct and delay, calling the Senate “totally dysfunctional,” and “the only democratic body in which the minority gets to determine what passes.” Senator Harkin said he would push for rules reform on January 5.

Nan Aron discussed how the abuse of Senate rules has damaged our courts. “Every single nominee has been subjected to filibusters, threats of filibusters, or secret holds,” she said. “The impact of obstruction on our system of justice is enormous. Our courts are in crisis.”

Norman Ornstein, Resident Scholar at the American Enterprise Institute and Wade Henderson, President of the Leadership Coalition on Civil and Human Rights, joined Nan Aron on the panel, which was moderated by Bob Edger, President of Common Cause. Larry Cohen, President of the Communications Workers of America introduced Senator Harkin.

Update: watch a video of Nan Aron's remarks, embedded below. Go to Common Cause's YouTube channel to watch more videos from the event.

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AFJ Opposes Blanket Ban on Transfer of Guantanamo Detainees for Criminal Prosecution

This morning the Senate introduced an omnibus spending bill for 2011 which includes a provision preventing Guantanamo detainees from being transferred to the U.S. – even for purposes of prosecution. This blanket ban would override the executive branch’s prerogative to decide the best forum to try suspected terrorists and prevent the Obama Administration from obtaining criminal prosecutions in federal courts. Under current law, Guantanamo detainees cannot be transferred to the United States, except for purposes of criminal prosecution.

Alliance for Justice recently joined a broad coalition of human rights organizations in signing a letter opposing a ban on blanket transfers. The letter pointed out that:

If a blanket ban on transfers were to become law, it would obstruct the Obama administration from bringing terrorism suspects to justice in the most experienced and proven forum. These are the very same federal courts that have been used by the Justice Department during the Bush and Obama administration to convict more than 400 individuals of terrorism‐related crimes since 9/11. The Federal Bureau of Prisons has also proven fully capable of securely detaining individuals convicted of the most serious crimes of terrorism, such as co‐conspiracy in the 9/11 attacks, the 1993 World Trade Center bombing, and the 1998 East African embassy bombings, without harm to the surrounding communities – and, of course, without escape.

. . .

If Congress imposes a blanket transfer ban, it would greatly hinder efforts to put to rest a legacy of failed detention policy. There is widespread agreement among our country’s leading national security and foreign policy experts – including General David Petraeus, General Colin Powell, Secretary of Defense Robert Gates, and five former Secretaries of State from both parties – that closing the Guantánamo Bay detention facility is essential to U.S. counterterrorism efforts and to repairing the standing of the United States as a country committed to human rights and the rule of law.

Alliance for Justice strongly opposes the blanket ban and urges Senators to vote against it.

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AFJ Decries District Court Ruling on the Constitutionality of Health Care Law

Alliance for Justice President Nan Aron issued the following statement today on the ruling by U.S. District Court Judge Henry E. Hudson that portions of the health care law passed by Congress earlier this year are unconstitutional:

If anyone needed proof that judges matter and that the current battle in the Senate over judicial nominations is a fight worth having, they need look no farther than today’s ruling by Judge Henry Hudson, a former conservative Republican politician from Virginia, on a lawsuit filed by a current conservative Republican politician from Virginia, state Attorney General Kenneth T. Cuccinelli. So far, only judges appointed by Republican presidents have found the conservatives’ case to have merit, in spite of almost 70 years of precedent on commerce clause issues that argue for the opposite conclusion.

There are 38 judicial nominees languishing on the Senate floor today, blocked from final consideration by an obstinate, obstructionist Republican Party bent on preventing President Obama from filling federal district and circuit court judgeships, even those in courts facing “judicial emergencies.” Today’s decision puts the stakes in stark relief as the President’s agenda and many other important social and economic policies are challenged in federal court. It’s long past time that all those who care about health care, civil liberties, worker rights, or any core principle or issue, get serious about our courts and work to ensure the confirmation of President Obama’s nominees, before it’s too late.

Click here to read a report by Alliance for Justice on the career of Judge Henry E. Hudson (PDF).

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Liquidated damages

In my first year Contracts class in law school, we learned about liquidated damages; i.e. a clause stating that a  certain amount of money is a reasonable estimate of a party's damages in the event of a default and that, in lieu of litigating the question of damages, the stipulated amount will serve as actual damages and not as a penalty. 

Liquidated damages play an important role in many real estate contracts.  I like them for both sides.  It can limit the buyer's downside and quantify the seller's compensation if a deal goes bust.  Most every big deal I run across has a lengthy liquidated damages clause, and more often than not the amount of the earnest money deposit is the stipulated sum.  But this excellent article (about, of all things, the opulent former Adelphia Communications headquarters in Pennsylvania) reminds us that liquidated damages (a) should be tightly drafted; and (b) are supposed to be a reasonable estimate of the actual damages, not a number thrown out there. (I have not read the contract in question here.)  It also reminds us that a seller can sometimes have a windfall in the event of a buyer default; in this case when the buyer defaulted the seller found a buyer who closed at a slightly higher price.  The court nevertheless agreed that the provision was not a penalty, particularly because of evidence of what the actual damages could be.  The fact that there were no little or no actual damages didn't matter.

Of course, the other big lesson is to have an honest lawyer.  The buyer wired its lawyer $2 million to send to the escrow agent, who then let another client borrow the money.  That other client tried to flee the country but was caught.  The lawyer, of course, defrauded his client and was disbarred.  Ouch.

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House Judiciary Committee Calls For Torture Accountability

Representative John Conyers (D-Mich.) yesterday called on President Obama to investigate and prosecute Bush officials who authorized torture. Conyers, chair of the House Judiciary Committee, presided over a hearing on “Civil Liberties and National Security.” Conyers noted that President Obama has made some positive steps, such as banning torture and the use of secret “black sites,” but called on the President to investigate those who approved or ordered crimes such as torture and waterboarding.

Representative Conyers noted that such an investigation should include those who were responsible for the decision to authorize torture – including President Bush, who as Conyers noted, “has admitted personally approving these crimes.” In his recent memoir, Decision Points, Bush admits authorizing torture (“damn right”) and suggests that he was justified in doing so because his lawyers told him it was okay – a defense that has been discredited since Nuremberg.

Conyers noted that not only has our government failed to conduct an investigation into torture, it has also worked to “squelch” other countries’ investigations.

The recently released Wikileaks cables revealed that the Bush Administration exerted pressure on the German government to drop planned prosecutions of CIA agents involved in the torture and rendition of a German citizen. As recently as 2009, government officials have interfered with Spanish efforts to prosecute high-ranking Bush officials, including the infamous “torture memo” authors John Yoo and Jay Bybee. The cables indicate that the U.S. warned that continuing with the prosecution would “harm bilateral relations,” and the U.S. Embassy in Madrid interfered with the judicial process by trying to steer the case toward sympathetic magistrates.

Conyers was also critical of the repeated use of the state secrets privilege to block suits involving torture, rendition, and illegal domestic surveillance, preventing many key details about the interrogation and rendition program from being made public.

Other witnesses who testified at the hearing include Laura Murphy, director of the ACLU’s Legislative Office; Bruce Fein, associate deputy attorney general in the Reagan administration; Thomas Pickering, former U.S. Ambassador to the United Nations; Michael Lewis, law professor at Ohio Northern University Pettit School of Law; trial attorney Jamil Jaffer; and Nation reporter Jeremy Scahill.

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Activists organize screenings of Crude Justice throughout the country

Last Tuesday was the deadline for Gulf Coast residents impacted by the explosion of the Deepwater Horizon oil rig to file claims for emergency payments from the BP compensation fund administered by Kenneth Feinberg. More than 400,000 claims were filed before the deadline, and approximately 150,000 individuals and businesses have received an estimated $2.2 billion. The next phase in this process is the negotiation of lump-sum final settlements for those affected by the spill, a process which will play out over the course of three years.

This fall, AFJ released Crude Justice, a short documentary film narrated by actor and environmentalist Ed Begley Jr., that highlights the impact of the oil spill on individuals, families and small business owners, and explores the legal landscape they are facing while seeking justice and fair compensation from BP and other liable parties. Along with over 5,000 online viewers, scores of activists have organized screenings of Crude Justice throughout the country. Here are a few highlights:

On October 6, the Eric R. Neisser Public Interest Program at Rutgers School of Law–Newark sponsored, “Crude Oil: Legal Implications of the Deepwater Horizon Oil Spill,” an event that included a screening of Crude Justice and a panel discussion exploring the environmental and community impact of the BP disaster in the Gulf. The panel was moderated by Steve Gold, Director of the Environmental Law Clinic at Rutgers-Newark and a former senior attorney in the Environmental Enforcement Section of the U.S. Department of Justice, and included Sarah Chasis Senior Attorney, Natural Resources Defense Council, and Rachel Jacobson, Principal Deputy Solicitor, U.S. Department of the Interior.

On October 25, the Environmental Law Society at the University of Mississippi School of Law organized a screening of Crude Justice and a discussion of the legal options open to Gulf residents. The discussion was led by professor David W. Case, who teaches environmental and toxic torts and environmental law, and professor Stephanie Showalter, who serves as Director of the law school’s National Sea Grant Law Center. The event drew over 50 students from the campus community.

A screening of the film organized at Golden Gate University School of Law on October 25 by the Environmental Law Journal, Environmental Law Society, and American Constitution Society featured a discussion with Deborah Behles, an associate professor of law and clinical staff attorney at the GGU Environmental Law and Justice Clinic; Leila Monroe, an attorney for the Natural Resources Defense Council; and Thomas Azwell, a doctoral candidate in Environmental Science, Policy and Management at UC Berkeley.

Harvard Law School’s Environmental Law Society held a screening of Crude Justice on October 27. Following the film screening, a panel of students who performed pro bono legal work in the Gulf spoke about their experiences. The event drew a record number of attendees for a Harvard Environmental Law Society event.

On November 3, University of the District of Columbia School of Law chapters of the Environmental Law Society, American Constitution Society, and National Lawyers Guild brought together more than 50 students for an event that featured a screening of the film and a discussion with Danielle Franco-Malone, Dorot Fellow, Alliance for Justice, and Jenny Rasmussen and Kate Degravelles, attorneys with the American Association for Justice. Law professor John Brittain moderated the discussion. Event organizer Diane Saey opened the screening, saying “My hope is that, after the film and discussion, each student will leave with a quick, short list of ways to contribute toward the betterment of the environment.” At the conclusion of the event, scores of students pledged to join with the Alliance for Justice to monitor the situation in the Gulf Coast and urge BP CEO Robert Dudley to make the Gulf and its people whole again.

Crude Justice calls on all of us to join the fight for justice and full recovery in the Gulf. Sign up today to bring Crude Justice to your campus and community and ensure that the people of the Gulf continue to be heard!

Connect with Alliance for Justice online to stay updated on legal and environmental developments and take action to help the people of the Gulf.

Click here to view the 17-minute film online.

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A quick note of thanks....

If you look at the blog regularly but do not follow me on Twitter, you will see my updates here on the right of your screen.  I use Twitter for short thoughts (duh) and quick information about what is going on in real estate that interests me.  Long form writing, of course, will remain here.

I just wanted to take a moment to thank one of the better bloggers and Twitter folks out there, Duke Long, for including me in his list of the Top 50 Commercial Real Estate People You Must Follow on Twitter. I appreciate the recognition and will try to live up to those standards.

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Judicial Obstruction During President Obama's First Two Years: Updated Reports

As a service to those writing about the crisis of judicial nominations during the final weeks of the 2010 lame-duck Congress, Alliance for Justice is reissuing and updating several recent reports on the record of Republican obstruction and the increasingly dire number of judicial emergencies plaguing the federal courts.

* * *

Judicial Obstruction During President Obama’s First Two Years:
A Compilation of Alliance for Justice Reports

During the Obama Administration’s first two years, Republicans in the Senate have implemented a strategy to delay and obstruct his judicial nominations to the Courts of Appeals and District Courts, contributing to the severe staffing crisis in the federal courts. The Republican tactics are no mystery. As Minority Leader Mitch McConnell (R-Ky.) has told the New York Times, “I am amused with [Democrats’] comments about obstructionism. . . . I wish we had been able to obstruct more.” (1)

The level of Republican obstructionism during the first two years of the Obama Presidency is unprecedented, as demonstrated in the attached Alliance for Justice reports. As of November 23:

• The rate at which President Obama’s judicial nominees have been confirmed is significantly lower than it was for the five previous presidents, both in aggregate numbers (41 judges) and in the percentage confirmed (­43% of nominations).
• President Obama has seen a smaller percentage of his nominees confirmed at this point in his presidency than any president in American history.
• During President Obama’s first two years, the number of judicial vacancies has nearly doubled, from 55 to 108, whereas under Presidents Bush and Clinton, the number of vacancies declined from 80 to 59 and from 107 to 68, respectively, in the same period.
• The political motivation for the Republicans’ tactics of delay and obstruction are made clear by the fact that 16 of the 23 nominees currently being blocked on the Senate floor were reported out of the Senate Judiciary Committee on unanimous, bipartisan votes, and another sailed through with only one Republican in opposition.
• The number of “judicial emergencies,” as defined by the Administrative Office of the U.S. Courts, has dramatically risen from 20 at the beginning of the Obama term to 50. Thirty states face the situation where there are not enough sitting judges to handle the case load, causing serious delays and jeopardizing justice for plaintiffs and defendants. Many of those states have Republican Senators.
• Of the 23 nominees who have been blocked from receiving final floor votes after being approved by the Judiciary Committee, 11 would fill seats considered to be “judicial emergencies.” Overall, there are 54 nominees pending, 31 of whom would fill seats considered judicial emergencies. (2)
• Senate Republicans have placed secret holds on each of President Obama’s judicial nominees currently on the Senate floor, even on those that are uncontroversial and have the support of Republican home-state senators. Secret holds have been repeatedly placed on all of President Obama’s nominees to obstruct the confirmation process. (3)
• President Obama’s nominees are the most diverse in American history. In fact, 44% of his nominees are female, doubling the rate of women appointed in the Bush Administration, and 42% are African-American, Hispanic, or Asian-American, including Goodwin Liu and Ed Chen, both of whom were rated unanimously well-qualified by the American Bar Association and who would serve on courts where Asian Americans have been historically underrepresented.. Only 18% of George Bush’s appointees were non-white.
• At the end of the Bush Administration, 59.5% of all active federal judges had been appointed by Republicans, but even after almost two years of a Democratic administration, Republican appointees still accounted for ­58.7% of judgeships, reflecting the glacially slow pace of confirmations in President Obama’s first term and exposing the goal of Republican tactics.

(1) Carl Hulse, No Reveling for Democrats, Despite Achievements, N.Y. Times, Aug. 14, 2010, available at
http://www.nytimes.com/2010/08/15/us/politics/15memo.html?_r=2&scp=5&sq=mitch%20mcconnell&st=cse.

(2) The Senate Judiciary Committee has scheduled an Executive Business Meeting for December 1, 2010, at which the Committee could report an additional 12 nominees to the floor.

(3) For example, on February 5, 2010 Senator Sessions placed a secret hold on all of Obama’s judicial nominees, http://thehill.com/blogs/blog-briefing-room/news/79923-reports-shelby-places-blanket-hold-on-obama-nominees. In June, 2010, NPR learned that secret holds again blocked all Obama nominees, http://www.npr.org/templates/story/story.php?storyId=126528338.

* * *

This information, and more, can be found in the following Alliance for Justice reports, all but the last of which have been updated through today’s date, and which are available online:

• Judicial Nominations in the Clinton, Bush, and Obama Administrations: Which One of These is Not Like the Others?
  
• Judicial Selection Snapshot
  
• Judicial Emergencies Report
  
• Judicial Nominees Being Blocked by Republican Senators
  
• The State of the Judiciary: The Obama Administration: The First 20 Months
  

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A quick thought on pop up stores

Pop up stores by national chains is supposedly the latest "phenomenon" in retail.  Of course, this has been going on in a smaller scale by small tenants and even national retailers such as Hickory Farms for many years.  The leases, being short term, are figured out and conformed and done.  But what about the long term?

Some say this trend will continue over the long term.  I tend to agree.  Unfortunately I think it will depress prices unless lenders and buyers figure out a way to quantify and underwriter the pop ups, or pops enter into long term seasonal leases as a compromise, if landlords are willing to do so (and I would do so if the landlord had a cancellation right if it leases up the rest of the space in the mall -- there are all kinds of legal things we can do!)  In a way, it makes a lot of sense.  Cut down labor costs and dirt costs, concentrating on the couple of months that matter most.

What do I think might also happen?  It will hurt the have nots.  Let's face it: everyone wants to be in the major, in demand malls in major markets where your per sf sales are high enough to justify the year round store.  But in the have not malls with 20%+ vacanies?  You get the picture.  And that triggers co-tenancy clauses, and that triggers -- dead malls.  So, if you like to go to Water Tower Place or another mall that is basically 100% full, no change.  If you go to my local mall (which I don't, by the way)...thjings could be a-changing.

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Want to make money? Get out of New York and DC!

This Globest.com piece might be the best I have read in a while.  Why?  Because it makes sense:

“Everybody got so burned by the downturn that they want safety and liquidity,” said Jonathan Gray of Blackstone Real Estate Advisors, during New York University Schack Institute’s 43rd Annual Conference on Capital Markets in Real Estate. Partly because everybody is chasing those same few deals in New York City, Washington, DC and a few other key markets, that means more opportunities in properties that are high-quality yet impaired....

Bingo.  If you want to make good money, get out into the rest of the country where the rest of us are not seeing a recovery as much as others.  And the story is also telling as to the amount lenders are putting out there.  Even though everyone says lenders are lending, transaction volume is still down 50%, 60% and more from a few years ago (not that we should be at those volumes again anyway). And even if you get that deal, the LTVs and rates are not exactly often going to knock you out.  So the deals better be good.

That said, the fire sale of the 90s is not a reality right now, or so says someone who ought to know more than most anyone:

For one thing, while the next few years will see hundreds of billions of dollars in annual commercial mortgage maturities, it’s not at all clear that this will lead to a flood of distressed assets, said panelist Neil Bluhm. “The product is coming out much more slowly and in a rational way” compared to the ‘90s, said Bluhm, managing principal of Walton Street Capital.

For another thing, Bluhm said later in the discussion, it’s not certain whether the capital flow will continue. “Most of the money we were talking about earlier, we raised a few years ago,” he pointed out.

(So yes, money is out there and just sitting on the sideline, just as everyone has said for almost as long as we can remember now.)

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A borrower hit from both sides

This was published in Crain's a week ago, but it bears writing about, however briefly:

The long and short?  Mega Chicago restaurateur Phil Stefani guaranteed a $7 million construction loan used to renovate the building where his office is located, and which is owned in part by Stefani and others, including the well-known local developer Keith Lord..  The loan is past-due and the lender, Harris Bank, is pushing what he described as tough new terms for an extension, including new equity and prepaid interest.

Why is the project under water? In large part, because its anchor tenant, Amcore Bank, went under.  But here is the real kicker.  Amcore was also the lender for the project!  When it was shut down by the FDIC, the feds rejected the lease at Stefani's building and handed over the loan and Amcore's operations to Harris. So...now Harris is putting on the squeeze because the lease of its predecessor in interest tanked the value of the property.

You can read about the rest of the case going on in the Crain's article, but that story sort of left me out of sorts.  It seems like the banks get to have their cake and eat it, too.  Call it an application of the Golden Rule, I suppose.  And I have seen other similar situations where banks or government entities really play hardball for one overarching reason: because they can.  But Stefani has some very smart lawyers here, and I'll be interested in seeing how this plays out.

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AFJ signs letter with over 50 groups calling for immediate votes on judicial nominees

AFJ today joined with over 50 other organizations in sending a letter to Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell calling for immediate action on President Obama’s stalled judicial nominations. With the clock running out on the 111th Congress, the groups demanded an end to the Republican tactic of blocking all nominees, even those with bipartisan support, and that votes are called on all of the two dozen pending nominees.

The letter reminded the leadership that, “The obstruction of many of President Obama’s nominees through filibuster threats and anonymous ‘holds’ is hindering the important work of our judicial branch, particularly in the many areas of our nation that now face judicial emergencies due to unfilled vacancies on the bench.”

As AFJ has pointed out before, the unprecedented tactics of delay and obstruction used by Republicans have wreaked havoc in the court system by preventing judges from taking their seats. The letter makes that case that “Due to arcane floor procedures that allow a single member to impede the important business of the Senate, our judicial branch has reached a state of crisis. Out of 872 federal judgeships, 106 are currently vacant, with 50 of those vacancies now characterized as “judicial emergencies” in which courts are being overwhelmed by filings that cannot be considered. As a result, a growing number of Americans, from all walks of life and across all economic strata, are finding it increasingly more difficult to assert their legal rights and to have their fair day in court.”

AFJ’s position is clear: Enough is enough. It’s time to vote.
To view the letter, go here: http://www.judgingtheenvironment.org/library/letters/End-backlog-groups-11-17-10-JUDICIAL-NOMINATIONS-letter.pdf.

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Judicial Council of the Ninth Circuit calls on Senate to "Act on Judicial Nominees Without Delay"

The Judicial Council of the Ninth Circuit has drafted a powerful letter calling on the Senate to "act on judicial nominees without delay." The signatories include the Chief Judge of the Ninth Circuit, five other prominent circuit judges, and the Chief Judges of the district courts in Alaska, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. These leading jurists, appointed by both Republican and Democratic presidents, wrote "to emphasize [their] desperate need for judges," stating that courts "cannot do their work if authorized judicial positions remain vacant."

Two nominees to the Ninth Circuit Court of Appeals--Goodwin Liu and Mary Murguia--and three district court nominees--including Ed Chen, nominee to the Northern District of California--are awaiting final confirmation votes in the Senate. Liu, Murguia, and Chen would fill seats considered to be "judicial emergencies" by the Administrative Office of the U.S. Courts.

The full letter is available at: http://legaltimes.typepad.com/files/111510-letter-from-9th-circuit.pdf

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Dramatic Disparity in Record of Senate Action on Judicial Nominees for Clinton, Bush, and Obama in First Two Years

As we reach the two-year mark of his presidency, President Barack Obama has faced unprecedented obstruction of his judicial nominees in the U.S. Senate and has fared far worse than his immediate predecessors both in having nominees approved and in relieving the federal courts of the burden of “judicial emergencies.”

With the clock ticking in the current lame-duck session of Congress, AFJ has released a report entitled, Judicial Nominations in the Clinton, Bush, and Obama Administrations: Which One of These is Not Like the Others? The conclusions are stark:

• The number of vacancies in the federal judiciary has nearly doubled, from 55 to 107, since President Obama took office.


• Officially designated “judicial emergencies” have risen from 20 to 50, affecting courts in 30 states.


• Both Presidents George W. Bush and Bill Clinton had large numbers of vacancies and emergencies in their administrations, but were able to significantly reduce them by the end of their second year in office. In contrast, due to Republican tactics of obstruction during the first two years of the Obama Administration, both vacancies and emergencies have dramatically increased since January 2009. The federal courts are in worse shape than when the Obama term started. The opposite was true for Clinton and Bush.


• Precedent exists to use the lame duck session to approve large numbers of judicial nominees. In the 2002 lame-duck Congress, a closely divided Senate confirmed 20 of President Bush’s judges, all but one on a voice vote.

AFJ believes there is no excuse for not using the remainder of this congressional term to vote on President Obama’s nominees to the federal bench. The Senate’s constitutional obligation to fully staff the courts does not stop just because the calendar is crowded and time is short. The final votes on all the nominees currently being held hostage by Republican obstruction could be dealt with expeditiously, exactly as they were in 2002 for President Bush’s nominees in similar circumstances. The ability of our courts to deliver justice to the American people is at stake, and there is no more time to waste.

A copy of the report can be found here: http://www.afj.org/judicial-selection/obama-judicial-nominations-obstruction-vs-recent-presidents.pdf.

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Alliance for Justice presents “Forced Arbitration and the Roberts Court: How Hidden Clauses in Everyday Contracts Can Take Away Your Rights”

On November 10, 2010, Alliance for Justice hosted a panel in San Francisco to discuss the importance and potential ramifications of the U.S. Supreme Court case, AT&T Mobility v. Concepcion.

The panel comprised three distinguished attorneys who practice in the fields of consumer and employee rights: Arthur Bryant of Public Justice, Cliff Palefsky of McGuinn, Hillsman & Palefsky, and James Sturdevant, AFJ board member and Principal of The Sturdevant Law Firm.

This event was held just one day after the Supreme Court heard oral arguments in AT&T v. Concepcion, which may have the effect of severely restricting individuals’ ability to seek justice in the courts by use of class action law suits.

All three panel members emphasized the immensity of what is at stake in this case – the ability of large corporations to effectively shield themselves from liability for their wrongdoings and prevent everyday citizens from grouping together to address these wrongdoings in a class action lawsuit.

The panelists agreed that Tuesday’s oral arguments went better than they had anticipated, but that it is still quite unclear exactly how the Court will decide. Although the panelists expressed a reserved optimism that the Court would decide this case favorably, they maintained that regardless of the Court’s decision in this case, there are a number of other cases the Court will be decide on similarly pivotal issues concerning access to justice. Forced arbitration clauses and restrictions on class action suits are but two examples of ways in which large corporations are skewing justice in their favor.

The event was held in collaboration with National Employment Lawyers Association, The Employee Rights Advocacy Institute for Law & Policy, Public Justice, and the Bay Area Lawyers Chapter of the American Constitution Society.

For more information on the details of this case, AFJ has released this report, and AFJ President Nan Aron has written this article for Change.org.

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Nan Aron on Huffington Post: Rule of Law Takes a Holiday While Bush Admits Torture and CIA Gets Off the Hook

This week, along with the spectacle of former President George W. Bush bragging on national television about authorizing torture, federal prosecutor John H. Durham allowed the statute of limitations to expire without pressing charges against C.I.A. agents and attorneys who participated in the destruction of videotapes chronicling the interrogations and mistreatment of Abu Zubaydah and Abd a-Rahim al-Nashiri.

Alliance for Justice is extremely disappointed that once again no one in the United States government is being held accountable for criminal acts undertaken as part of the Bush Administration's policy of abusing and torturing prisoners. The decision by Mr. Durham not to prosecute C.I.A. officials who destroyed evidence of detainee mistreatment is yet another example of the government officials involved in torture and other illegal conduct being given a free pass for their actions. We believe that Mr. Durham owes the country an explanation and should release a report of his findings and publicly explain the reasoning for his decision to allow C.I.A. officials off the hook.

Mr. Durham's decision is particularly disturbing in light of the admission this week by George W. Bush that he willingly authorized torture and that his actions were acceptable because a lawyer told him he could do it. Since Nuremburg, the world has understood that lawyers cannot provide immunity for crimes against humanity. We have also come to understand that the lawyers who enable such crimes themselves violate the law and can be prosecuted, whether they work for the Department of Justice or the C.I.A. Each time our government fails to face up to the crimes of its leaders, the United States slips further toward lawlessness and diminishes its hard-won ability to lead the world toward respect for the rule of law and human rights.

In light of President Bush's admissions and with abundant evidence available of egregious and criminal behavior, John Durham and the Justice Department must accelerate and intensify the investigation into the Bush Administration's illegal torture practices. It is long past time for the Obama Administration to take seriously its commitment to uphold the law of the land and bring to justice both the senior leaders who authorized torture and the lawyers who served as their enablers. To do otherwise makes a mockery of the men and women of the military, who, since George Washington, have treated prisoners humanely and of our long-professed belief that the rule of law should guide the world.

Read Nan Aron on Huffington Post

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Holiday Inn -- a great F&B idea or another darn upgrade?

According to this WSJ article Holiday Inn has just completed " a sweeping, global overhaul that upgraded their hotels' bedding, signs, lobbies and showers, among other things, at an average cost to [franchisees] of $300,000 a property."

In the industry this is called a PIP.  So now what? On to the next one?  The next idea is to incorporate breakfast buffets (a la Embassy Suites?), socialize the meal process and streamline food and beverage service to cut back on labor costs.  This will, however, be implemented gradually, starting with some test markets to see if the idea works.  Although I am not a frequent HI, I actually like this idea.  That said, while the whole social networking thing is an interesting concept, most lobbies I see aren't usually big hubs of activity unless there is free food.  Also, just because you finish one program does not mean you should not be on to the next idea to maintain relevance.  It is almost like the people who redesign the menus at casual restaurant chains -- finish one and start the next!  I also wonder if some franchisees will try to incorporate the cheaper portions of this idea faster to cut labor cost.  I'll be interested to see whether and how this is implemented and whether this and the other HI upgrades pay off.

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Completely OT: an immigration and tourist visa proposal

Okay, I'm taking a risk here, especially after the whole "I think Sarah Palin is a lousy speaker" debacle at ICSC.  And I know this has almost nothing to do with commercial real estate. But what the heck.

I am a firm believer in common sense when it comes to immigration.  As the husband of a legal immigrant, I believe in open borders -- to an extent.  If someone, for instance, is most likely going to make a significant contribution to our country, why not let that person in? Take my wife, for instance.  She jumped through years and years of hoops to obtain a green card and her "blue passport" (meaning US citizenship).  Her marrying me had nothing to do with it.  And she is a most productive member of society, treating our children and paying oodles and gobs of taxes to boot.  I want the best and brightest of the world -- doctors, engineers, software pros, etc. -- to come here to the maximum extent possible.  We have some programs available to encourage this, and I want more.

What has stuck in my mind for the last decade or so is our visa policy in some cases.  I am seeing my family driven crazy by i.  Take my highly-educated niece, for example.  When her father was dying, our government refused her a visa on the grounds that she was a "flight risk" and not likely to return home because her application to join her family in the US was still pending. Because we did not to do anything illegal or risk her application, she never got to see her father again.  She subsequently obtained her green card (after an eleven year wait) and promptly found a high-paying job as a software consultant.

My nephew's wife is going through a similar problem: her sister and father cannot visit her here because of "insufficient ties to the home country."  She is literally in years because she'd like them to see the wonderful life she is building here with my family. 

Let me say it isn't all bad.  My mother-in-law, brother and law and his family have been back and forth several times now, with of course absolutely no flight risk.  Many thanks to the consular officials who saw the honesty in them.  My mother-in-law's tourist visa is up for renewal next year. I cannot imagine her being denied given her record of traveling back and forth, although if it is we will immediately file a petition for permanent residency.

Don't get me wrong.  I absolutely see the other side of the coin.  We don't want people overstaying their welcome as tourists and potentially becoming liabilities on our government.  I totally get that and support it.  But isn't there a solution? 

My middle of the night idea, which for all I know exists or has been proposed already, is to have some method of sponsorship for someone who wants to be a tourist but is perceived in the government's opinion to be less likely to go home.  In other words, if I want relative X to visit, I will personally guarantee his return to the home country, and put up a significant deposit or bond (be it a lump sum of x% of net worth) and be required to pay for all enforcement and deportation costs if that return does not happen.  It should be a draconian amount, in my opinion -- one that no one will want to pay, and perhaps on a sliding scale based on income.  That way no one will sponsor someone that isn't really, really, going back.  Perhaps the privilege should only be available to citizens, or to green card holders with the possible penalty of losing your permanent residency.  I don't know.

All this may be impractical or pie-in-the-sky.  But darn it, I have family members who want to visit this country and go home again, and I'm willing to put my money where my mouth is to guarantee it.  There is nothing legal we would not have done to let our niece see her father before he died (and no, we did not have sufficient time or clout to push a Private Member's Bill through Congress, which a friend of mine actually did receive some years ago).  Is there another way?

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Why I'm skipping ICSC Chicago Deal Making

Several people have asked whether I would be at the Chicago ICSC Deal Making conference tomorrow and Friday.  I'm going to pass on this one, but will probably be at one or more in the future.  I am also skipping the legal conference this year as it is in Florida, but I do plan to attend next year's law conference as it will probably be somewhere in the west, where I prefer to travel. I also have some personal and business commitments that would limit my ability to be there anyway.

The ICSC conferences are great.  I love meeting people with whom I have been in touch, be they lawyers, deal people, brokers, clients and even people who were on the other side in past deals. (I have converted more than one of those into clients in the past.) But a lawyer's function, when the focus is major league deal making, is helping get that deal done.  Right now non-retail matters are keeping me busy.  On the off chance a deal was being worked out where I need to be involved I'd rather be near the office where I can literally crank out a first draft overnight and keep the ball rolling.

So what about RECon?  I'll probably go to that every few years or so, although I reserve the right to change my mind.  I see RECon as mainly a function of keeping my name out there and networking with people and learning more about the industry rather than actually getting anything substantive done.  My clients are rightfully too busy doing deals.  That is one down side to being the back room guy, so to speak. 

But for those heading to the conference, do me a favor: get some deals done!  Everyone keeps talking about the market picking up (yeah, tell me about the Water Tower Place refi...if that wasn't a no-brainer loan then they don't exist) but while I am busy personally I would sure like to see more evidence of it! (Case in point: I am blogging on a Wednesday, my usual day off.)

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Filling in the GAAPs?

Let me preface this post by saying I am NOT a CPA or tax lawyer (see the Disclamer for that) and no expert on matters pertaining to accounting.  But that said, I run across issues related to accounting all the time.  Many times in leases or loan agreements or other real estate documents you will encounter language requiring that financial matters be prepared in accordance with generally accepted accounting principles, or GAAP.

Some of my clients hate this language.  Why? Because they believe that while they are often close to GAAP reporting, it isn't "quite" GAAP and it rarely is in the real estate industry.  (Oh, and it can be expensive, especially for smaller players.) They fear that a tenant or lender could use this as a trap to find a ticky-tack default.  These clients often prefer seeing the language "sound accounting principles consistently applied."  Of course, there is a counter argument to that phrase; namely, what does it really mean?  Could "sound" mean "Enron?" GAAP, they contend, has sufficient flexibility to work in real estate without creating a trap; thus the word "generally."  And the counter to that is that sound accounting means just that -- something that is not tricked up but meets normal, everyday standards but is still more flexible and easier than GAAP without being bad.  In other words, sound does not mean Enron.

So who is right?  No one, in my view.  It can be deal dependent or negotiation dependent and sometimes even accounting firm dependent.  I personally tend to prefer not stating GAAP, but I have been persuaded otherwise, too.  And sometimes the opposite has occurred.  Lesson here for me?  Talk to the spreadsheet guys -- the CPAs.  They have their expertise and you have yours, and if you work together as a team you are far more likely to get to a common sense solution that works for your client.

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Capital Expenses, Laws and Cost Savings

When I saw a piece captioned "Building Owners Toss Equipment for New Technology" it reminded me of a lease I negotiated recently.

When negotiating a net lease, tenants will often request that a building's operating expenses will not include capital expenditures.  That makes sense.  But when I am representing the landlord and that is the business deal, I try to add two carveouts. 

The first is legal compliance costs. If you are saying, "Huh?" let me explain.  Say a new law comes into effect after the lease is signed requiring landlord to install a widget in the building and that widget costs $25,000.  While that is a capital expenditure, it was something that has to be installed to keep the building in compliance with the new code.  That in my humble opinion is an expense that can be amortized as a non-capital expense.  Now, if the code had already existed and the landlord just failed to comply -- that is a different story and should not generally be on the tenant's nickel.

The other cap ex that I think needs to be carved out is one that achieves actual cost savings.  There is a sound reason for this in my opinion because it helps encourage such savings.  Let's say a landlord opts to replace the old (but still working) HVAC system with a new, highly efficient one that costs $200,000 and will last twenty years.  (For simplicity we'll amortize it in a straight line without interest at $10K a year.)  If the new system saves $10K or more a year, then I think that cost should be passed through to the tenant. Why?  Because the tenant is in no worse position than if the system had not been installed at all, and it will be less likely to have an HVAC failure with a new system than an old, creaky one. And if the savings exceed $10K, then the tenant will still realize savings. 

But what if the savings are only $5,000?  I think the tenant has a strong argument that only the $5,000 should be passed through.  The point is to put tenant in the same position it would have been, and I think that is usually fair.  (There is always an exception to everything, from my experience.)

In any event, this just one of many, many issues that come up in commercial leases.  I find that a good balance between the landlord and tenant's needs will often get the job done, and in a fair and efficient manner to boot.  Yeah, that cuts down a little on my fees if I am billing at an hourly rate, but it just gets us to where we'd almost always end up anyway in the negotiation.

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An Interesting Poll

I'd be very interested in having all my readers participate in this poll at NREI Online:

What outcome in the midterm elections Nov. 2 would be best for the U.S. commercial real estate industry and the economy? 

• A GOP takeover of the House and Senate
• Democrats retain control of both the House and the Senate
• A GOP takeover of the House, while Democrats retain control of the Senate
• A purge of ineffective incumbents, Democrat or Republican
• This is all a sideshow. Only time will heal the ailing real estate market and economy.

Take a minute and answer the question at their website.  If you have your own thoughts, please comment (or not).

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On the CRE Podcast

I had a great time with Jason Sandquist and Duke Long yesterday recording the CRE Podcast with some thoughts on legal issues and real estate in Chicago.  You can find the podcast here.  Enjoy!

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The October 7, 2010 Post Lacking a Title

Creative, huh?

Lots going on but I will just touch on a couple quick items for now.  If there are ever any topics about which you'd like me to write, just let me know.


There has been a lot of commentary lately about the new GGP board(s).  It is a good bunch of people; almost a Who's Who.   And what about no Bucksbaums on the board -- is that fair in that they still own 7% of the company?  It isn't shocking in light of the turn of events that occurred.  That said, however, the company did turn out doing better in bankruptcy than many pundits expected and -- perhaps more important to many -- retained its independence (so far).  My thought?  Some day, maybe.  Right now, no. Let's get some wind under these sails.

Are the rumors I am hearing of a strong 4th quarter true?  And if so is that because more capital is coming in to save properties, more lenders are foreclosing, both or none?  But hey, we heard this all last year too.  Since I am trying to cut back on sodium I will take it with a grain of salt.

Not being an accountant and all, I will admit I am still trying to get up to speed on FAS 13 changes.  One take is that it will lead to shorter retail lease terms and less aggressive expansion.  Gee, thanks.  That'll do wonders for property values.  (Here is another view from earlier this year.)



Last and certainly not least, I will be appearing on the crePodcast next week, talking about ways a buyer or seller can make a contract better and general real estate type stuff.  I'll try to do a good job!

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A lease is just a lease? Yeah, right.

This is a story of knowing your client.  Here's why.

I love it when people -- usually ones not too experienced in the industry -- tell me, "Oh, leases are all pretty much the same. You have a landlord, a tenant, a building and a term.  Just plug in the magic words and off you go."

In a word, wrong.  In fact, this is wrong on so many levels that I felt I needed to write about it.

First of all, who is the tenant and what is the building?  Different buildings and different tenants require completely different types of leases.  Yes, some of the language can be the same but the needs are completely different between, for example, office and industrial and retail uses.

Here is just one example.  Most commercial leases contain a clause requiring the tenant to use and occupy the premises throughout the term of the lease.  Now, many of my landlord clients really do not give a hoot whether an office or industrial tenant actually uses the premises, so long as it keeps writing that rent check every month.  But retail?  BIG no-no.  And that is why so many retail leases have very heavily negotiated "go dark" clauses.  The reason?  Landlords want to make sure a retail space is full and vibrant and has foot traffic, and even more so if there is a percentage rent component to the deal.  Tenants, on the other hand, want flexibility in the event a particular location is not working out.  Another really important reason you want tenants up and running is to prevent violating any co-tenancy clauses.  But that is another time, another post.

There are exceptions to this, of course, which is why I said "most."  The moral of the story?  Any good real estate lawyer absolutely HAS to know his or her client.  Each one has different so-called "hot buttons."  We already mentioned one of many, many retail hot buttons.  Sometimes the hot button is environmental issues.  Other times it is parking.  Often opportunistic investors concentrate on clauses such as the estoppel and SNDA sections that some other clients don't even think about much.  Why? Because they are thinking ahead to refinancing or sale.  Issues can be building specific, based on past problems the client has had to address or just a client's own personal preferences.

Furthermore, each lease has a certain objective, which may lead to negotiating or even drafting a lease one way or another.  I'm not going to elaborate on that there, but it is important to remember, as a good real estate lawyer can help a client work through those issues and turn a proposed lease into reality faster.

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A Tale of Two Loans

Today's Wall Street Journal profiled two big Larry Freed projects that have had problems discussed here before: Block 37 and the old Carson Pirie Scott building, which some people might actually call Sullivan Center.  They are probably the same folks who call Sears Tower the Willis Tower.

Before I go further: it isn't just the same developer we are talking about here.  Both properties are in the same city, Chicago.  And they are on the same street, State Street.  Indeed, the two projects are what -- a whopping one block apart from each other.

Bank of America, as successor to LaSalle National Bank is the lender on Block 37; PNC, as successor to National City, is the lender on the Carson's building.  As we know, B of A is trying to foreclose and appoint a receiver on the ill-fated Block 37, which has been through more developers and concepts than I can even remember at this point.  PNC, on the other hand, has negotiated an extension -- for now.

Why?  Oh, the story pretty much says it.  It is, in my humble opinion, a question of numbers and hope and perhaps upside potential than one of a particular lender's style.  I'm sure readers here can point out examples where Bank X was "lenient" on one deal and "aggressive" on another.  I can.  (I note, however, that the comments at WSJ to date were none too kind about B of A, and I know people who have the same opinion.  I take none myself.)

There are all kinds of factors that come in to play.   How willing is the borrower to play ball on renegotiating?  How are other lenders in the syndicate reacting to the deal? (I say this because both of Fried's deals are syndicated.)  Does the lender still trust the developer?  (I say THIS because of court filings by B of A respecting a receiver for Block 37.)  Is there a potential deal (namely, Target) that can save the project?  Is the project almost "too big to fail?"  Is there long range upside potential by dumping the borrower?  (This one is pretty rare, as lenders are often loath to hold, especially in deals like these.  But remember these are both high-profile properties.)  And sometimes -- more often than not -- it is just about the money and the lease-up of a project.  We don't know where each project is with respect to its DSCR or other benchmarks for performing properties.  Case in point: the State Street office space at Carson's is doing well, but the retail is holding things back.  A retail comeback changes things, although Target is not generally know to pay high prices for its dirt.  (Legal side issue: since Target also virtually always owns its dirt, the vertical subdivision of that property must have been a lot of fun with all its twists and turns.)

PS: Here is a good video on Crain's about commercial cash out refinancing.

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