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Archive for 2008

Hawaii Unlicensed Contractor Liability

Tuesday, December 23rd, 2008

We are occasionally asked whether an unlicensed contractor is entitled to collect compensation for work provided to a contracting party. A corollary of this issue is whether the monies already paid to the contractor must be refunded to the contracting party.

HRS 444-9 requires that no person shall “act or assume to act, or advertise” as a contractor (under the definition contained in HRS 444-1) without a license previously obtained by the licensing board. Further, HRS chapter 444 imposes penalties for violation of this statute, including but not limited to HRS 444-22. HRS 444-22 provides that:

The failure of any person to comply with any provision of this chapter shall prevent such person from recovering for work done, or materials or supplies furnished, or both on a contract or on the basis of reasonable value thereof, in a civil action, if such person failed to obtain a license under this chapter prior to contracting for such work.

HRS 444-22 prohibits unlicensed contractors from recovering for work performed, materials and/or supplies furnished. There is a strong public policy behind this rule. The Hawaii Supreme Court has explained this policy:

HRS chapter 444, providing for the licensing of contractors, expresses a very strong public policy that contractors in this state should apply for, and retrieve licenses, and the provisions of HRS 444-22, which are sweeping in their terms, are obviously intended to produce harsh results in furtherance of this policy.

Butler v Obayashi, 71 Haw. 174, 177 (1990).

It has been contended that parties contracting with unlicensed contractors should be barred from bringing suit since they too are parties to the illegal contract. However, the Hawaii Intermediate Court of Appeals (“ICA”) in Jones v Phillipson found this argument unpersuasive. Jones v Phillipson, 92 Haw 117, 124-126 (1999). The ICA held that “a contract with an unlicensed contractor is not void ab initio, and this section [HRS 444-22] does not bar a member of the public, who is party to such a contract, from bringing suit to recover breach of contract damages from an unlicensed contractor”. Id at 126. The ICA determined that any other result “would defeat the purpose of protecting the public by providing a shield from litigation for an unlicensed builder.” Id; citing Domach v Spencer, 101 Cal.App.3d 308, 311 (1980) (In Jones the Hawaii Supreme Court cited Domach, a California case, because it recognized that the California statue was similar to the Hawaii statute).

Similarly, in Butler the Hawaii Supreme Court decided that, regardless of whether a contracting party knew that the contractor was unlicensed, an unlicensed contractor is still prohibited from recovering for work pursuant to HRS 444-22. Butler at 177. These two Hawaii cases, Butler and Jones, clearly establish that a party contracting with an unlicensed contractor may bring suit against the contractor regardless of whether they knew that the contractor was unlicensed.

In an analogous case, Domach v Spencer, the homeowners filed a claim against the contractor for breach of contract for failing to provide “workmanlike construction”. Domach at 308. In that case, the contractor demanded greater compensation than was originally contracted for to complete the home. Id. at 310. Although the homeowners paid the contractor the agreed amount, at trial the homeowners demanded that all the monies be returned since the contractor was not licensed. The Domach court found in favor of the homeowners and awarded an amount necessary to pay for reparation of any “unworkmanlike” construction. Id. at 314. Regrettably, the Domach opinion does not explain the extent to which damages were awarded (including whether the homeowners were allowed to recover the money paid to the contractor or simply money paid for repair of the defective construction).

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Hawaii Attorney Witness Preparation

Friday, December 12th, 2008

There are certain things that I tell witnesses to remember when testifying in a deposition.

1. The Witness’s testimony is under oath. Therefore, the Witness is subject to the penalty of perjury if she is untruthful. An example that most witnesses understand is when I remind them that former President Clinton’s impeachment was not for his sexual improprieties, but for his untruthfulness in his testimony under oath about those improprieties.

2. The deposition will be used to preserve trial testimony. In Hawaii, the deposition testimony of a party may be admitted into evidence even if the party appears at trial. Thus, the deposition transcript may be used in two ways. First, to cross-examine the Witness during her trial testimony. Second, to read segments of the transcript into the trial record even after the Witness testifies. Thus, it is imperative that the Witness is as accurate as possible during the deposition and that she realize that her testimony at the deposition is as important as if she were testifying at trial.

3. The Witness should remember several guidelines when testifying. The first is to speak slowly and clearly. By reacting slowly to the question and formulating a response in a careful manner, the Witness can make sure that she answers only the pending question. Often in conversation, we not only answer the question that is asked, but we add additional unrequested information in our response. In a deposition, the best way to respond to a question is to answer only the question that has been asked.

4. I repeat- answer only the question that has been asked. I cannot stress this point enough. When a witness is deposed, she is in a defensive posture. It is not your job to educate your opponent. You are simply there to answer questions. The easiest way to accomplish this objective is to answer only the question that has been asked. The Witness should listen clearly to the question and answer only that question. The Witness should offer no additional information.

5. The Witness must not speculate. When answering only the question that is asked, the Witness should only give information about which she has personal knowledge. The opposing counsel may ask the Witness to speculate or guess about certain occurrences. If the Witness has no personal first hand knowledge, the Witness should simply say that she does not know. She should not guess.

6. The Witness should be emotionally and physically prepared for an eight-hour deposition. It may not last that long. Prepare for the worst, hope for the best. Although she will be sitting and answering questions, it is an exhausting procedure. She should wear comfortable clothing and be prepared to sit for an extended period of time. Defense counsel should insist on taking breaks every fifty-five minutes even if the Witness claims that she feels fine. The deposition is a marathon, not a sprint.

7. If the Witness does not understand a question, she should ask the examiner to rephrase it. If a witness does not understand a word used by opposing counsel, she should not guess as to its meaning. The Witness should simply ask opposing counsel to ask the question in a different way.

8. During the deposition if the Witness’s attorney objects, the Witness should remain quiet until her attorney has completed his objection. Thereafter, the Witness should not speak until her attorney indicates that it is acceptable for her to answer the question. In a deposition, if the witness speaks immediately after her lawyer objects, and answers despite the objection, the answer will stand. It is therefore imperative that the Witness understand that if her attorney objects to a question, the Witness should refrain from speaking until her attorney indicates that she may answer.

9. The Witness must remember that the opposing lawyer is not your friend (no matter how courteous he may be).

10. Upon completion of the deposition, the Witness will be asked to review the transcript. If she wants to make changes to any answer at that time, she can. Therefore, once the Witness is given a deposition transcript it is imperative that the Witness and her counsel review it for its accuracy.

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Employer Liability in Hawaii

Wednesday, December 10th, 2008

In general, an employer may be held liable for the conduct of an employee acting within the scope of his or her employment. US v Hilton Hotels Corp., 467 F.2d 1000, 1004-1007 (C.A.9, 1972) See also Lucas v Liggett & Meyers Tobacco Co., 50 Hawaii 506, 480 (Hawaii, 1968)(A principal who puts a servant or other agent is a position which enables the agent, while apparently acting within his authority, to commit a fraud upon third persons is subject to liability to such third persons for the fraud.) Indeed, in certain cases a corporation may even be held responsible even if the acts of its employee or agent were done contrary to the corporation’s policy or employer’s instruction so long as it was within the scope of his or her “apparent authority”. Id. It is not determinative if the employee or agent is acting in his or her own interest when committing the act, it will not relieve the employer of liability. See Lucas v Liggett & Meyers Tobacco Co., 50 Hawaii at 483.

In the alternative, if a Court deems that the employee’s actions were outside the scope of employment, an employee may still be liable if “the conduct violated a non-delegable duty of the [employer], or… the [employee] purported to act…on behalf of the employer and there was reliance upon apparent authority, or [the employee] was aided in accomplishing the tort by the existence of the agency relationships”. Hardwicke v Boychoir School, 902 A.2d 900, 919-920 (N.J., 2006) citing Restatement 2nd of Agency sec. 219(2)(c) to (d)(1958). Restatement 2nd of Agency sec. 219(2) specifically provides that:

(2) A master is not subject to liability for the torts of his servants acting outside the scope of their employment, unless:
(a) the master intended the conduct or the consequences, or
(b) the master was negligent or reckless, or
(c) the conduct violated a non-delegable duty of the master, or
(d) the servant purported to act or to speak on behalf of the principal and there was reliance upon apparent authority, or he was aided in accomplishing the tort by the existence of the agency relation.

Restatement 2nd of Agency sec. 219(2) (Emphasis added).

In Hardwicke v American Boychoir School, the plaintiff, a former student of the American Boychoir School, was sexually abused by school employees and brought an action against the school. Hardwicke v Boychoir School, 902 A.2d at 902. Relying on these principals, the New Jersey Supreme Court held that the boarding school, as employer, could be held vicariously liable for common-law claims for the child abuse committed by its employees. Hardwicke v Boychoir School, 902 A.2d at 920. In particular, the court in interpreting Restatement 2nd of Agency sec. 219(2)(d), held that when an employer delegates authority to an employee to “control the work environment” and the employee abuses that delegated authority, than the employer may be held vicariously liable. Id.

Additionally, in certain circumstances the employer may even be held liable for failing to detect and stop an employee’s wrongdoing. US v Demauro, 581 F.2d 50, (2d Cir., 1978). See also Doe Parents v State, 100 Hawaii 34, 68 (Hawaii, 2002)(…if the State knew, or reasonably should have anticipated, that one of its employees would commit an intentional tort against a person to whom the State owed a duty of care, the State is liable for the negligence of those employees who were in a position to take reasonable precautions against the anticipated harm.). This claim of action is based on the negligence of the employer and/or employer’s supervisors. Id.

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Duties Owed By Hawaii Lawyers

Friday, December 5th, 2008

A lawyer owes his client basic duties and obligations. Although there are literally volumes written on this subject, there are certain Hawaii rules which are most basic. These include the duties (i) to keep the client informed, and (ii) of loyalty.

More specifically, Rule 1.4 of the Hawaii Rules of Professional Conduct (“HRPC”) provides as follows:

(a) A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information. A lawyer who receives a written offer of settlement in a civil controversy or a proffered plea bargain in a criminal case shall promptly inform the client of its substance unless prior discussions with the client have left it clear that the proposal will be unacceptable.

(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.

HRPC Rule 1.4.

With regards to an attorney’s duty of loyalty, pursuant to the HRPC Rule 1.7(2)(b), lawyers may not represent multiple clients without full and adequate disclosure. More specifically, the Rule states as follows:

A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client or to a third person, or by the lawyer’s own interests unless:

(1) the lawyer reasonably believes the representation will not be adversely affected; and

(2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.

HRPC Rule 1.7(2)(b)(emphasis added).

In addition, HRPC Rule 1.8(g) states,

A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients, or in a criminal case an aggregated agreement as to guilty or nolo contendere pleas, unless each client consents after consultation, including disclosure of the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement.

HRPC Rule 1.8(g) (emphasis added).

Finally, HRPC Rule 1.13(e) provides as follows:

A lawyer representing an organization may also represent any of its directors, officers, employees, members, shareholders or other constituents, subject to the provisions of Rule 1.7. If the organization’s consent to the dual representation is required by Rule 1.7, the consent shall be given by an appropriate official of the organization other than the individual who is to be represented, or by the shareholders.

Rule 1.13(e)

A Note to HRPC Rule 1.7 establishes that if a conflict of interest arises, then the lawyer should withdraw. Further, the Note to HRPC Rule 1.13 provides that, if a lawyer represents an organization and any of its constituents, a conflict arises when,

…the organization’s interest may be or become adverse to those of one or more of its constituents. In such circumstances the lawyer should advise any constituent whose interest the lawyer finds adverse to that of the organization of the conflict or potential conflict of interest, that the lawyer cannot represent such constituent, and that such person may wish to obtain independent representation. Care must be taken to assure that the individual understands that, when there is such adversity of interest, the lawyer for the organization cannot provide legal representation for that constituent individual, and that discussions between the lawyer for the organization and the individual may not be privileged.

HRPC Rule 1.13 Note [8].

It is clear from the rules that an attorney must disclose if there is a conflict of interest in his representation of a client. This includes an explanation of the risks and consequences related to dual or multiple representations of parties arising by either, (i) when the attorney represents two or more clients (ie. co-defendants) in the matter, or (ii) when the attorney represents an organization along with a constituent(s). In particular, if an attorney represents dual parties, the participation and consent of each party concerning settlement offers is essential.

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Depositions in Hawaii

Tuesday, December 2nd, 2008

Depositions are an essential aspect of civil litigation. Hawaii rules provide for many devices to obtain discovery. Depositions are one of the most effective. Specifically, H.R.S. Rule 26(a)- General Provisions Governing Discovery provides as follows:

(a) Discovery Methods. Parties may obtain discovery by one or more of the following methods: depositions upon oral examination or written questions; written interrogatories; production of documents or things or permission to enter upon land or other property, for inspection and other purposes; physical and mental examinations; and requests for admission.

H.R.S. Rule 26(a)

A deposition allows one party to question another party or witness under oath. Depositions are recorded by court reporter and/or videotape. I personally believe that depositions are particularly useful discovery tools since they “may be used by any party for the purpose of contradicting or impeaching the testimony of deponent as a witness” at “the trial or upon the hearing of a motion or an interlocutory proceeding.” H.R.S. Rule 32(a). In other words, deposition testimony is almost as important as trial testimony.

The Hawaii Rules provide that “any party may take the testimony of any person, including a party, by deposition . . .” H.R.S. Rule 30(a). However, “a party desiring to take the deposition of any person shall give reasonable notice in writing to every other party to the action.” H.R.S Rule 30(b). The other parties to the action may also cross-examine the witness. H.R.S. Rule 30(c).

If a witness is served with a deposition subpoena, it should be taken seriously. The sanctions for failing to appear can be harsh. The party who noticed the deposition may file a motion requesting that the Court impose the following orders:

(A) An order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order;

(B) An order refusing to allow the disobedient party to support or oppose designated claims or defenses, or prohibiting him or her from introducing designated matters in evidence;

(C) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party.

H.R.S. Rule 37(b)(2).

An order dismissing the action against the party who fails to appear for his or her deposition is a particularly drastic remedy. However, these sanctions are necessary to ensure that witnesses appear for depositions and participate in the discovery process. The easiest way to avoid this outcome is to ensure that the witness appears for his deposition.

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Things for Which I am Thankful- 2008.

Wednesday, November 26th, 2008

This is our eleventh Thanksgiving in business. Two years ago I wrote a Thanksgiving blog listing the “Things for Which I am Thankful”. Since this is the traditional season to give thanks, I thought it would try to expound on the things for which I am thankful.

1. I am thankful to all of my clients who have trusted me with their cases. I realize that when you select my office, usually to litigate against much larger law firms, it is because you have faith in me. I am always humbled by that trust. Clients have many options available to them and there are many fine lawyers in Hawaii. I am thankful to those many clients who have believed in me.

2. I am thankful that I live in Hawaii. Having practiced law for many years in New York City, I know just how lucky I am to be able to live and work in Honolulu. I have now lived in Hawaii for over fifteen years and I am confident that there is no place on earth that I would rather live.

3. I am thankful for my staff. Those of you that have interacted with my staff, know what a pleasure it is to work with them. They produce excellent work product and are dedicated to our clients. Almost weekly, a client or a member of the bar tells me how lucky I am. I agree and am grateful.

4. I am thankful that I practice law in the United States. It has been a rough few years for America. Although I am proud that in 2008 we had a historic election, I still think we are in for a few lean years, before the economy improves. However, although we have taken some “hits” recently, never forget that the United States has been an extremely positive force in history. Democracy was a “noble experiment” when this country was founded in 1776. Today, democracy has spread throughout the world. The Constitution of the United States, particularly the Bill of Rights, is one of the most important documents ever written. The American people take many of their basic civil rights for granted, because the Bill of Rights has been so actively enforced through the years. I am thankful that I am a member of a legal system that has so effectively protected our civil rights, that most Americans are able to take their civil rights for granted.

5. I am thankful that I am a Hawaii attorney. Being a lawyer is not always easy. Still it is a very rewarding profession. And if you follow the rules, it is a very noble profession. I am thankful that I have been given the honor and privilege to serve my clients in Hawaii.

6. Finally, I am thankful for my family. 2008 was an unbelievable year for me. On August 8, 2008 I was married. My wife, Sarah, is a wonderful woman. It is a “cliche” to call someone your “soulmate” but my wife Sarah is definitely my “soulmate”. I am thankful that Sarah and her daughter Fiona have become a part of my life.

Happy Thanksgiving.

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Design Professional Liability in Hawaii

Friday, November 21st, 2008

In Hawaii, architect liability is generally limited to that which is recoverable by contract. Id. This is called the “economic loss rule”. Id. In City Exp. Inc v Express Partners, 87 Hawaii 466, 469 (1998) the Hawaii Supreme Court discussed this rule as follows:

In the context of construction litigation, where a party is in privity of contract with a design professional, economic loss damages are limited to contractual remedies, and a [tort] negligence action may not be maintained.

Id .

The Hawaii Supreme Court defined economic loss as “those that pertain solely to the costs relating to the operation and value of the building itself” including but not limited to “additional costs, lost rent, the cost of remedying the alleged building defects, and the difference between the value of the building as designed and the value it would have had it had been properly designed.” Id.

Design professionals may incur additional risk by also agreeing to act as a project supervisor. There is no general duty of an architect to supervise or inspect a project. Whether a contract imposes a duty on an architect to supervise a project depends on the terms of the contract. Moundsview Independent School District v Buetow & Associates Inc, 253 N.W.2d 836, 839 (Minn. 1977) (consideration whether architect breached duty of supervision requires initial examination of contract between architect and owner of construction project to determine scope of architect’s supervisory obligation). See also Miller v Broken Arrow, 660 F.2d 450, 458 (C.A. Okl., 1981) (depending on contract of employment, architect may be held liable for failure to exercise care in execution of plans).

Often the scope of duties of a design professional are not well defined in the contract. In such cases, courts may examine other provisions in the contract to attempt to determine if the parties bargained for supervision of the project. For example, if the amount of the architect’s fee is large enough, or the architect is given a lot of authority over the project, then it may indicate that the defendant was to assume duties with respect to inspection or supervision of construction that normally would not be required in a standard architect’s agreement. See, e.g., Duncan v Pennington County Housing Authority, 283 N.W.2d 546, 548 (S.D., 1979); Loyland v Stone & Webster Engineering Corp, 514 P.2d 184, 188 (Wash App 1973) disapproved on unrelated grounds by Bayne v Todd Shipyards Corp., 568 P.2d 771 (Wash., 1977).

If there is no contract between an owner and the architect, then courts have turned to other contracts or practices between the parties to determine whether the architect owes a duty to the owner to supervise the project. Dickerson Construction Co. v Process Engineering Company, 341 So.2d 646, 650-51 (Miss 1977). See also Weill Construction Co. v Thibodeaux, 491 So.2d 166, 170-71 (La. App., 1986) (architect’s duties were specified in standard contract between owner and general contractor).

Finally, construction specifications contained in a contract may include language indicating the scope of the architect’s inspection or supervisory responsibilities. Moreover, the construction specifications may require the design professional’s presence or approval before certain steps in the construction process may be commenced. Dickerson Construction Co., 341 So.2d at 650-51. Further, building specifications could require the architect to give approval before fill work is undertaken or concrete poured. The contract also could require that the architect is present at certain stages of construction and to perform a final inspection.

In general, while strictly performing design services liability may be limited by contract to the “economic loss rule”. However, once the professional undertakes construction project supervision, entirely new potential liability arises.

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Hawaii Landlord Liability

Tuesday, November 18th, 2008

The general rule regarding landlord liability is that a landlord “is not liable to his lessee or to others on the land for physical harm caused by any dangerous condition, whether natural or artificial, which existed when the lessee took possession.” Restatement (Second) Torts 356.

Although it certainly appears from the plain language of this rule that a lessee or tenant may not have a case against their landlord if they are injured on rental property, there are exceptions to this rule.

Restatement (Second) Torts 358 is such an exception and provides as follows:

A lessor of land, who conceals or fails to disclose to his lessee any natural or artificial condition involving unreasonable risk of bodily harm to persons upon the land, is subject to liability for such harm caused thereby to the lessee and others on the land with the consent of the lessee or a sublessee after the lessee has taken possession, if

(a) the lessee does not know of the condition or the risk involved therein, and

(b) the lessor knows of the condition and realizes the risk involved therein and has reason to believe that the lessee will not discover the condition or realize the risk.

Restatement (Second) Torts 358; See also Restatement (Second) of Property, Landlord & Tenant 17.1 (emphasis added).

Relying on these Restatements for guidance, the Hawaii Supreme Court held that an “owner-lessor” has a “duty to warn the lessee of a known hazardous condition…” Kole v AMFAC, Inc., 69 Haw 530, 532-33 (1988). This is the current Hawaii law.

In addition to the landlord’s duty to warn tenants or lessees of dangerous conditions on their property, Landlords may also owe a duty to eliminate the risk of harm foreseeably caused by the dangerous condition. The Hawaii Supreme Court explained this landlord duty and premises liability as follows:

In our view, the substance of our many cases, dealing with possessors of land, and their duty toward persons using the land, is that, if a condition exists upon the land which poses an unreasonable risk of harm to persons using the land, then the possessor of the land, if the possessor knows, or should have known of the unreasonable risk, owes a duty to the persons using the land to take reasonable steps to eliminate the unreasonable risk, or adequately to warn the users against it.

Corbett v. Association of Apartment Owners of Wailua Bayview Apartments, 70 Haw. 415, 417 (Hawaii,1989)(emphasis added).

Accordingly, based on our examination of this issue, we believe that a landlord will be held to a duty to a tenant or lessee to make a known dangerous condition on the property safe or to warn a tenant about a known dangerous condition. If the landlord fails to meet this duty, then the landlord risks liability. For a discussion of our Real Estate Litigation Practice click the following link, Real Estate Litigation.

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Hawaii Civil Litigation

Friday, November 14th, 2008

We are frequently asked whether we handle criminal cases. We do not. Allow me to explain. There are two types of cases, criminal and civil. It is important to understand this distinction especially when searching for the right attorney to handle your case.

A criminal case is when someone is charged with a crime- either a felony or a misdemeanor. If you are charged with a crime, the government must prove the case beyond reasonable doubt.

Civil litigation usually involves claims for financial damages or to enforce rights. Although the government may be a party in a lawsuit, civil cases typically involve private individuals or companies. Because the cost of litigation has grown through the years, private parties now explore mediation and/or arbitration.

For access to more information on the distinction between these cases, please refer to the following link: Civil v Criminal Cases

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This Election Will Influence The Supreme Court

Friday, October 10th, 2008

As November 4th approaches, the issues in this election become more defined. Although the candidates and media seem focused on the economy, it should not be forgotten that our next President will be responsible for the appointment of Supreme Court Justices. Indeed, a President Obama or President McCain could, in fact, appoint three out of the nine Justices. In a recent article on CNN.com, Bill Mears, wrote as follows:

Many court watchers think any vacancy in the high court over the next four years would probably involve three left-leaning justices. John Paul Stevens is 88, but appears to be in good health, and court sources say he has no intention of retiring. Ruth Bader Ginsburg is 75 and has had past health problems, but she too has told friends she enjoys serving on the court. And David Souter, who turned 69 last month, has made no secret of his disdain of the Washington life and would be happier in his New Hampshire homestead. But his colleagues and friends say that while he is an extremely private man who does not reveal much personally, he has given no indication of leaving the bench anytime soon.

“The importance of the speculation is that all three of them are on the court’s list of possible retirements,” Goldstein said. “Nobody on the right is really thinking of leaving.”

For the entire article click, Election Could Decide Future of the Federal Courts.

Although this has been a difficult campaign, my hope is that both candidates will respect that the founding fathers intended the Supreme Court to be the third branch of the United States government. It may be naive, but perhaps President Obama or President McCain will select Supreme Court Justices based not on a “litmus test” created by special interest groups, but based entirely on the qualifications of each individual jurist. We shall see.

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