Category Archives: Business Law

February 2018 Tennessee Bar Results: Maximiliano Gluzman Passes, Nashville School of Law Posts Anemic 13% Passage Rate

By Daniel A. Horwitz:

Earlier this morning, the Tennessee Board of Law Examiners released the results of the February 2018 Tennessee Bar Exam.  Taken by 281 prospective lawyers, the exam resulted in an unusually low total passage rate of 35%.  Although Vanderbilt Law School and the University of Memphis School of Law posted respectable passage rates of 100% and 58%, respectively, the total rate of successful takers was dragged down substantially by another dismal performance by Nashville School of Law, which posted an overall passage rate of just 13%.

One notable bright spot in the exam was the success of Maximiliano Gabriel Gluzman, the “obviously very, very qualified” Vanderbilt Law School graduate who was denied the opportunity even to take the Tennessee Bar Exam until that denial was unanimously reversed by the Tennessee Supreme Court last summer.  Thereafter, Mr. Gluzman’s case resulted in substantial amendments to Tennessee’s bar eligibility rules for foreign applicants, which will enable the Volunteer State to play an increasingly large role in conducting international business and prevent continued discrimination against foreign applicants going forward.

Mr. Gluzman’s success, while unsurprising, is also particularly sweet for his lawyer (the author), who has spent much of the past year bristling at the Board of Law Examiners’ assertion—supplied by former Tennessee Supreme Court Justice William Barker—that most people like Mr. Gluzman who take the bar exam “don’t pass.”  Like his colleagues on the Board of Law Examiners, former Justice Barker specifically voted against permitting Mr. Gluzman the opportunity even to sit for the bar exam on the basis that: “I just hate for people to come spend all the time and money and years of their lives with no possibility of passing.”  Mr. Gluzman has since passed two bar exams, each on his first attempt.

Speaking of people who spend a huge amount of “time and money and years of their lives with no possibility of passing,” however, it is long past time for the Tennessee Board of Law Examiners to take a serious look at what has been going on at Nashville School of Law.  For context, in 2014, Nashville School of Law secured new leadership and pledged to improve its state-worst passage rate of what was then 65-70%.  Since that time, the school has posted overall passage rates of 50% (February 2015), 28% (July 2015), 30% (February 2016), 28% (July 2016), 35% (February 2017), 38% (July 2017), and 13% (February 2018).  In other words: the school is on a downward trajectory, and it hasn’t had a majority of its students pass the bar exam in years.  Thus, if the Board of Law Examiners’ concern—expressed passionately with regard to foreign applicants like Mr. Gluzman—that prospective students will spend time and money training for an exam that they have little hope of passing was genuine, then presumably, Nashville School of Law’s consistently anemic passage rate will at some point come under the Board’s microscope.

It should be emphasized that Nashville School of Law has produced many wonderful, capable graduates—including the author’s co-counsel in another major Supreme Court victory earlier this week.  Thus, the issue likely has less to do with poor instruction than it does an administration that has liberalized admissions standards and accepted applicants who statistically have no reasonable chance of passing the bar exam after graduating.  As the author has previously explained:

Driven by a rapid decrease in law school applicants over the past several years (the total number of law school applicants has declined precipitously since 2010, falling from a high of 87,900 to a low of 54,130 in 2015), the academic credentials of incoming law students have measurably decreased.  Controversially, many law schools have responded to this problem (and the corresponding loss of revenue) by decreasing their admissions standards, which has predictably resulted in lower bar passage rates post-graduation.

In other words: to make up for lost revenue, many law schools have simply let in anybody who is willing to pay tuition.  The result is a major disservice to countless students who ultimately waste years of their lives and tens of thousands of dollars (or more)—not including opportunity costs—in pursuit of a profession that they likely will never be able to practice.

If Nashville School of Law were accredited by the American Bar Association, it would have been subject to discipline for both its lax admissions standards and its atrocious bar passage rate a long time ago, as Duncan School of Law was earlier this week.  However, Nashville School of Law is not an ABA-accredited law school, and it is instead regulated directly by the Tennessee Supreme Court.  Hopefully, at some point soon, the Court will step in and force the school to improve its admissions standards in the name of protecting hundreds of future applicants from wasting their time and money on a degree that they will never be able to use.

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Tennessee Supreme Court Reforms Eligibility Rules for Foreign Attorneys

By Daniel A. Horwitz:

In an order issued late Friday afternoon, the Tennessee Supreme Court officially reformed its rules to provide a clear path for international lawyers to obtain licensure in Tennessee.  The Court’s amendment to Tennessee Supreme Court Rule 7 § 7.01, which governs admission requirements for attorneys educated in foreign jurisdictions, comes on the heels of a recent win by attorney Maximiliano Gluzman, whose victory before the Tennessee Supreme Court last summer made national news.

Despite acknowledging that Gluzman—who had graduated Vanderbilt Law School’s LL.M program with an eye-popping 3.919 GPA while competing against American J.D. students in his second language—was “obviously very, very qualified,” the Tennessee Board of Law Examiners still attempted to prevent him from taking the Tennessee bar exam because he had received his first law degree from Argentina.  After getting the Board’s denial overturned last August, however, Gluzman is set to take the Tennessee bar exam next month.  Based on the Court’s reforms, other international lawyers will now be able to follow his lead.

“The Tennessee Supreme Court should be applauded for implementing this sensible rule change, which will significantly benefit consumers, provide Tennesseans greater access to new markets, and help solidify Tennessee’s increasingly large role in conducting international business,” said Daniel Horwitz, Gluzman’s attorney.  “We’re proud to have set this change in motion, and we’re thrilled that other qualified international lawyers will now be able to follow in Mr. Gluzman’s footsteps.”

Tennessee’s law schools—which can now offer LL.M. programs with confidence that they will offer practical value to graduates—welcomed the news as well.   “We’re pleased that the Court was willing to revisit the rule and provide greater clarity to prospective students and law schools,” University of Tennessee College of Law Associate Dean for Academic Affairs Alex B. Long told the Nashville Post.

The Court’s rule changes were formally prompted by a joint petition initiated by the University of Tennessee College of Law and Vanderbilt Law School, which the two law schools had filed in support of Gluzman during his litigation against the Board.  Previously, based on the Board’s former interpretation of Tennessee Supreme Court Rule 7 § 7.01, lawyers “from the vast majority of countries around the world” were forever prohibited from taking the Tennessee bar exam regardless of their ability or qualifications, since only a handful of jurisdictions follow the American model of separate undergraduate and legal degrees.  As a result of the Court’s amendments, however, foreign attorneys are now eligible to take the Tennessee bar exam if they satisfy either of the following two criteria:

First, foreign lawyers can take the bar exam if an approved credential evaluation service determines that their foreign education was “substantially equivalent” to an American legal education.  In evaluating an applicant’s foreign education, approved credential services will focus primarily on the scope of the applicant’s curriculum, whether an applicant received instruction in common law, and the number credit hours that applicants completed in their home countries.  Thereafter, if the evaluation service determines that an applicant’s education was substantially equivalent to an American legal education, the applicant will be permitted to take the Tennessee bar exam.  During Gluzman’s case, the Board formally conceded that notwithstanding its prior interpretation of the rule, this standard should not be construed as requiring separate undergraduate and legal degrees.

Second, foreign lawyers who have actively practiced law “for at least five of the eight years prior to applying to take the Tennessee bar” are eligible to take the Tennessee bar exam if they obtain either an “LL.M. Degree from a law school that is accredited by the ABA” or an LL.M. degree from a Tennessee law school approved by the Tennessee Supreme Court.  Thus, obtaining an LL.M. degree—which is essentially a master’s degree in American law—can “cure” a defect in an applicant’s foreign education, thereby allowing the applicant to sit for the Tennessee bar exam after graduating.

Critically, however, all applicants must also pass the Tennessee bar exam before they will be able to practice law in Tennessee.  This, of course, is no easy feat, especially given the number of foreign attorneys who would be taking the exam in their second language.  Even for many American-educated students, the bar exam often proves insurmountable.  For example, over the past few years, the failure rate among Nashville School of Law graduates has consistently hovered around 70%.

Taken together, the Court’s reforms should be universally applauded.  Ensuring that Tennessee’s businesses have access to high quality international lawyers is critical to several of the state’s leading industries, from agriculture to automobile manufacturing to intellectual property to any number of additional sectors in between.  As such, attracting foreign legal talent—which is currently concentrated in jurisdictions like New York, Texas, California—will quickly benefit both Tennessee’s businesses and consumers alike.

Selected news coverage about the case is available at the following links:

-Nashville Post: Supreme Court amends bar eligibility rules

-Nashville Post: Supreme Court rules Argentine can take Tennessee Bar

-Bloomberg: Argentine LL.M. With 3.9 GPA Wins Bid to Take Tenn. Bar Exam

-Nashville Post: Argentine lawyer challenging Tennessee Board of Law Examiners

-Nashville Post: National conservative groups join local bar fight

-Above the Law: State Bars Foreign Student From Bar Exam — Next Stop, State Supreme Court

-ABA Journal: Vanderbilt law prof who taught Argentine LLM student backs his bid to take the bar exam

-The Tennessean: How Tennessee discriminated against a talented Vanderbilt law grad

-Cato At Liberty Blog: Even Lawyers Have the Right to Earn an Honest Living

-Beacon Center Blog: Banned From the Bar Exam

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Bill Introduced to Allow In-Home Beauty Services in Tennessee

Nashville, Tenn. – February 8, 2017 — State Senator Steve Dickerson, R-Nashville, and State Representative Sam Whitson, R-Franklin, introduced legislation today that would allow Tennesseans to purchase cosmetology services in the privacy of their own homes.

The reform comes after The Tennessee Board of Cosmetology and Barber Examiners filed a complaint last year against Belle, a popular Nashville-based technology company that provides on-demand health and beauty services.  The Board initially alleged that Belle was violating the state’s cosmetology laws, but withdrew its complaint after Belle formally contested the Board’s allegations.  The Board’s decision to withdraw its complaint was covered widely in local, state and national media including Forbes​, ​Yahoo, ​Reason, ​the Nashville Business Journal​ and ​​the Memphis Commercial Appeal, among others.

“As we move forward into the 21st century, we must update state rules and regulations to reflect the realities of the 21st century economy,” said Senator Dickerson.  “This bill will remove barriers that are denying Tennesseans the opportunity to develop and grow in their chosen profession. By removing these impediments, we allow the entrepreneurial spirit of Tennesseans to flourish, increase freedom and enhance choice for our state’s consumers.”

“The regulatory structure of our state must be thoughtfully crafted in such a manner as to allow for constant innovation and facilitate consistent growth in the new economy,” added State Representative John Ray Clemmons, D-Nashville, an early supporter of the reform.  “Tennessee must strive to attract entrepreneurial talent and new jobs.”

“Last fall, the Tennessee Board of Cosmetology unlawfully attempted to shut down one of Nashville’s most exciting new tech companies for the sole purpose of protecting an out-of-date industry competitor from competition,” said Daniel Horwitz, Belle’s attorney.  “This bill ensures that the Board will be prevented from engaging in such lawless behavior ever again.”

“The repeal of these outdated regulations means beauty professionals can freelance in a way that they see fit, and whether that’s with us or by themselves, I believe everyone has that right,” said Armand Lauzon, CEO of Belle. “This new legislation paves the way for further innovations and economic growth in Tennessee, and perhaps most importantly, it will allow consumers to have the right to make the choices they deserve.”

Read more about the case below:

Tennessee Regulators Drop Complaint, Won’t Block Beauty App From Operating

Tennessee Wants To Shut Down This Beauty And Health App For Offering ‘Highly Disturbing’ Competition

Regulators withdraw complaint against Nashville-based startups

Tennessee Cosmetology Board Admits it Doesn’t Have Authority To Regulate Tech Companies

How This Nashville Tech Company Challenged a State Regulatory Board and Won

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Tennessee Board of Cosmetology Backs Down, Withdraws Threatened Enforcement Action Against Project Belle

Nashville, Tennessee—The Tennessee Board of Cosmetology and Barber Examiners has officially withdrawn its threatened enforcement action against on-demand beauty services provider Project Belle, greenlighting the company’s business practices and enabling its continued growth throughout the State of Tennessee. The Board’s decision to back down comes after intense media coverage from local, state and national media outlets including Forbes, Yahoo, Reason, the Nashville Business Journal, the Beacon Center of Tennessee, and the Memphis Commercial Appeal.

The Board had claimed that the Tennessee Cosmetology Act of 1986 prohibited Belle from facilitating the purchase of beauty services in the privacy of a customer’s home. Accordingly, the Board demanded that Belle pay a civil fine, waive its right to judicial review, and cease and desist from operating. Instead, Belle lawyered up and formally contested the Board’s allegations, causing it to reconsider its threatened enforcement action. The Board’s decision to permanently withdraw its complaint soon followed.

“We are extremely pleased that the Board of Cosmetology has withdrawn its unlawful and overzealous threats against Project Belle, whose only crime has ever been to provide eager customers with convenient, premium quality beauty services at competitive prices in the privacy of their own homes,” said Daniel Horwitz, Belle’s attorney. “No government agency should be in the business of preventing popular, innovative businesses from serving willing customers just to protect entrenched industry competitors from competition. We look forward to working with the General Assembly in the coming months to make clear that the Board lacks the authority to deprive healthy, able-bodied consumers of their right to purchase their desired beauty services whenever and wherever they please.”

“The Board has decided to dismiss its complaint and Belle will continue its operations and growth efforts in Nashville,” said Armand Lauzon, Belle’s founder and CEO, who recently penned an op ed in The Tennessean calling on legislators to repeal Tennessee’s outdated cosmetology regulations. “We are delighted by the Board’s decision.  It means that beauty professionals who have built businesses with us can continue their success, and our clients can continue enjoying services that many of them desperately need. It also means that economic growth and innovation can continue expanding in Tennessee. We are proud to have helped pave the way on this important issue.”

“I also want to send a special thanks to the legislators who took time to voice their support on our behalf, including State Representative John Ray Clemmons, State Senator Steven Dickerson, and State Senator Mark Green,” added Lauzon.

For press inquiries, please contact Julia Bonner at julia@pierce-pr.com.  The individuals referenced in this release are available for comment at daniel.a.horwitz@gmail.com and armand@projectbelle.com.

###

Selected Case Documents:

Board Complaint and Demand to Cease and Desist

Respondent’s Response Letter Denying Liability and Refusing Consent Order

*Order Dismissing Complaint

Selected Media Coverage:

-Forbes: Tennessee Regulators Drop Complaint, Won’t Block Beauty App From Operating

-Forbes: Tennessee Wants To Shut Down This Beauty And Health App For Offering ‘Highly Disturbing’ Competition

-Reason Tennessee Decides It’s Not Actually Dangerous for a Cosmetologist to Do House Calls

-Nashville Business Journal: Regulators withdraw complaint against Nashville-based startups

-Reason: Tennessee Cosmetology Board Admits it Doesn’t Have Authority To Regulate Tech Companies

-Daily Signal: How This Nashville Tech Company Challenged a State Regulatory Board and Won

-The Federalist Society: Regulatory Hurdles for Entrepreneurs: The Story of Project Belle

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Five Pennsylvania insurance companies recoup $16 million in tax payments after Tennessee Supreme Court holds that retaliatory taxes were improperly assessed

By Daniel A. Horwitz

The American insurance industry is unique in many ways.[1]  Included among its quirks is an interlocking, state-by-state “retaliatory tax” framework that ensures that equally low taxes will be levied on insurance companies across the country no matter where they do business.  The gist of this “retaliatory tax” system is that if one state decides to impose a comparatively more onerous tax on insurance companies, then every other state will punish that state’s insurance companies by imposing a retaliatory tax against them in response.  With the sole exception of Hawaii, every state has enacted a retaliatory insurance tax statute for this purpose.[2]

To illustrate the practical effect of this framework by way of example, suppose that Alabama and Tennessee each tax insurance companies in exactly the same way, and further, that some number of Alabama insurance companies do business in Tennessee (and vice versa).  To close a budget deficit, however, Alabama decides to raise taxes on insurance companies that do business in Alabama.  Thereafter, in response, Tennessee’s “retaliatory tax” statute authorizes Tennessee’s insurance commissioner to levy a punitive tax on all of the Alabama insurance companies that do business in Tennessee.[3]  Additionally, every other state (except Hawaii) would punish Alabama’s insurance companies in exactly the same way.[4]  Considered broadly, this practice has been described as “holding hostages to coerce another sovereign to change its policies.”[5] Continue reading Five Pennsylvania insurance companies recoup $16 million in tax payments after Tennessee Supreme Court holds that retaliatory taxes were improperly assessed

Tennessee Supreme Court holds that businesses may lawfully refuse to hire employees solely because they’ve previously filed for workers’ compensation.

By Daniel A. Horwitz

Can a business refuse to hire you solely because you’ve previously filed a workers’ compensation claim?  According to the Tennessee Supreme Court, the answer is yes.

In Yardley v. Hospital Housekeeping Systems, the Tennessee Supreme Court accepted a certified question of law to determine whether the Tennessee Workers’ Compensation Act prohibits employers from refusing to hire a prospective employee solely because he or she “had filed, or is likely to file, a workers’ compensation claim incurred while working for a previous employer.”  In some states, discrimination of this sort is unlawful and gives rise to a claim for “retaliatory failure to hire.”  In an opinion authored by Chief Justice Sharon Lee, however, the Tennessee Supreme Court held that under Tennessee law, this practice is legal.

In 2010, Kighwaunda Yardley, a hospital housekeeping employee, was hurt on the job and began receiving workers’ compensation benefits.  She received treatment and continued performing “light duty work” for her employer until 2012, with the expectation that when she fully recovered from her injury, she would return to her job as a housekeeping aide.

Unfortunately for Ms. Yardley, in 2012, her job was outsourced to a separate company (“the New Company”).  The New Company re-hired most of the hospital’s housekeeping staff, but it declined to hire Ms. Yardley.  An internal email sent by the New Company’s Vice President revealed that he had written that Ms. Yardley had: “been out on Workers’ Comp with the hospital long before the [New] Company’s arrival,” that her shoulder was hurting her again, and that “bringing her on board with the [New] Company would seem to be a Workers’ Comp claim waiting to happen.”  The New Company’s Vice President also stated internally that he: “would advise against hiring Ms. Yardley IF we have that option.”   After she was not hired, Ms. Yardley sued the New Company for retaliatory failure to hire.

Continue reading Tennessee Supreme Court holds that businesses may lawfully refuse to hire employees solely because they’ve previously filed for workers’ compensation.

Summary of Tennessee’s For-Profit Benefit Corporation Statute

By Daniel A. Horwitz

On January 1, 2016, Tennessee’s For-Profit Benefit Corporation law will take effect.  Here’s a summary of the law and what it’s going to do.

1.  What is a For-Profit Benefit Corporation?

A For-Profit Benefit Corporation is defined under Tennessee law as: “a domestic business corporation . . . that intends to pursue a public benefit or public benefits.”[1]

2.  What’s the difference between a For-Profit Benefit Corporation and a “traditional” corporation?

By law, “officers and directors of a [“traditional”] for profit corporation are to be guided by their duty to maximize long term profit for the benefit of the corporation and the shareholders.”[2]

In contrast, “[a] for-profit benefit corporation shall be managed in a manner that considers the best interests of those materially affected by the corporation’s conduct, including the pecuniary interests of shareholders, and the public benefit or public benefits identified in its charter.”[3]  Thus, by law, directors of for-profit benefit corporations are obligated to take the interests of both shareholders and the corporation’s publicly beneficial purpose into account when discharging their duties.[4]

3.  What counts as a “public benefit”?

A “public benefit” is a positive effect (or a reduction of a negative effect) on one or more people, entities, communities, or interests other than the corporation’s shareholders.  This includes, but is not limited to:  artistic, charitable, cultural, economic, educational, environmental, literary, medical, religious, scientific, or technological benefits.[5]

4.  Does the “public benefit” have to be specified in any formal way?

Yes.  Under Tennessee law, Continue reading Summary of Tennessee’s For-Profit Benefit Corporation Statute