At its 76th Annual Meeting in San Francisco on May 17-20, the Institute completed its revision of and approved Restatement Third, Torts: Apportionment of Liability, as well as the revised versions of both Article 2 (Sales) and Article 2A (Leases) of the Uniform Commercial Code. Also approved in May were major portions of the Third Restatement of Trusts and of the ALI’s Federal Judicial Code Revision Project.

Final approval of the Revised Proposed Final Draft on Apportionment did not come without a number of closely contested votes on contentious issues. A motion that the Institute take the position in Comment c of § 1 that negligence by the plaintiff does not reduce a defendant’s liability for an intentional tort – an issue upon which the draft was neutral – was defeated by a vote of 127-108. Another motion that a pro tanto credit for partial settlement of a claim replace the comparative-share credit provided for in § 26 lost by a 133-85 vote. Although a motion to eliminate most of the factors for assigning shares of responsibility enumerated in § 8 was also defeated, it was agreed that the section would be revised and clarified in light of the discussion at the Meeting, with the revised version distributed to interested members and made available on the Institute’s Web Site (www.ali.org). (The revised section has now been distributed and posted.) Nevertheless, the section will not be brought back to the membership, and the vote to approve the draft as a whole cleared the way for publication of the official text within the next year.

The Proposed Final Drafts of Revised Articles 2 and 2A were both approved, as modified by subsequent changes agreed to by their respective Drafting Committees set forth in memorandums distributed to the membership, and subject to the monitoring by ALI ad hoc committees of subsequent changes. A motion to postpone approval for another year of the Article 2 draft, which reflected a number of late compromises agreed to by representatives of consumer interests but which remained unsatisfactory to many representatives of business interests, was defeated by a voice vote before the final vote of approval. (At its own annual meeting in Denver in late July, however, the National Conference of Commissioners on Uniform State Laws, the Institute’s partner in drafting the UCC, failed to complete action on both Articles 2 and 2A. In part this was because continued business opposition to certain sections of the Article 2 draft led NCCUSL’s leadership to conclude that achieving uniform enactment in the States would be a challenge and that taking another year to reconsider the controversial provisions would be wise.) A draft of the former UCC Article 2B, which will now be proposed as a freestanding uniform act by NCCUSL alone, was presented and discussed for informational purposes only in San Francisco. As agreed by the leadership of both ALI and NCCUSL, what is now known as the Uniform Computer Information Transactions Act (UCITA) will not be part of the UCC and the Institute will consequently have no further responsibility for its development.

Tentative Draft No. 2 of Restatement Third, Trusts, which essentially comprised Part 3 on the Elements of Trusts and Part 4 on the Nature of Beneficiaries’ Rights and Interests, was approved without major change. Discussion revealed some sentiment for removing the draft’s preservation of the traditional leniency toward spendthrift trusts, but it was agreed that there was insufficient support in United States law to justify such a change. Also approved was Tentative Draft No. 3 of the Federal Judicial Code Revision Project, which contained proposed revisions to the sections of the Code dealing with the right of removal from state to federal courts. Consideration will be given to publishing the combined official texts of this draft and the draft approved last year on supplemental jurisdiction before turning to additional segments of the project.

The membership also extensively reviewed Discussion Drafts for two new projects, Restatement Third, Torts: General Principles, and Transnational Rules of Civil Procedure, but, as planned, no votes were taken on either draft. The Torts material, primarily dealing with negligence, is expected to be revised in light of the discussion and brought back as a Tentative Draft after a year’s hiatus. Reporter Gary Schwartz will be joined at that time by a Co-Reporter, Harvey S. Perlman, former Dean of the University of Nebraska College of Law and Co-Reporter for the Institute’s Restatement of the Law of Unfair Competition. The Civil Procedure draft, for which Director Emeritus, Geoffrey C. Hazard, Jr., is serving as Co-Reporter, was subsequently reviewed in June at meetings of International Advisers in Japan and Singapore, and will next be presented for discussion in August at the World Congress on Civil Procedure in Vienna. The project, which is now to be cosponsored by Unidroit, the International Institute for the Unification of Private Law based in Rome, will also return for consideration at a subsequent Annual Meeting.

The 1999 Meeting included reports on two other international projects, Transnational Insolvency and International Jurisdiction and Judgments. A draft for Phase II of the Transnational Insolvency Project will be submitted to the Canadian, Mexican, and United States Advisers in September and is expected to reach the floor of the Institute next year. The Council approved the undertaking of the Jurisdiction and Judgments project just before the Annual Meeting, and work on it will begin later this year. See the accompanying article on the decisions to undertake this and two other new ALI projects.

A complete listing of actions taken on the drafts considered at the 1999 Annual Meeting will appear in the fall issue of the Reporter. An edited transcript of the entire Annual Meeting will subsequently be published in the 1999 Proceedings.

Reporters’ Study on Taxation of Private Business Enterprises Due Out Shortly

The latest installment of the Institute’s ongoing Federal Income Tax Project, an extensive Reporters’ Study by George K. Yin of the University of Virginia and David J. Shakow of the University of Pennsylvania on Taxation of Private Business Enterprises, will be published in mid-August.

The new Reporters’ Study explores in depth the consequences of the flexibility presently available to owners of private business enterprises to determine how their businesses should be classified for federal income-tax purposes and thus the extent of their income-tax liability. In the interests of greater fairness, consistency, and simplicity, the Study recommends that current law should be replaced by a system whereby all private business firms, no matter what their form of organization and organizational characteristics, would be taxed as conduits for income-tax purposes, with tax liability passed through the company to the individual owners. It sets forth a coherent set of specific proposals, drawing upon modified versions of the present rules for Subchapters K and S, to that end.

Because it was the view of most of the project’s Consultants and Advisers that a fully satisfactory solution to the problems presented had not been achieved but that the analysis and recommendations were stimulating and valuable, it was decided not to attempt to reach a consensus on the floor of the Institute but instead to publish the work as a Reporters’ Study. The 496-page softbound volume (order no. 6135) will be available from the Institute at the regular price of $50, plus shipping and handling. It will be available to all ALI members, however, at half price, $25, plus shipping and handling. Orders should be placed with the Institute’s Customer Service Department, 4025 Chestnut Street, Philadelphia, PA 19104-3099 (telephone: 1-800-CLE-NEWS, extension 7000; fax: 215-243-1664; online: http://www.ali.org).