Fall 2005

Summary of Activities and Accomplishments

The Duke Law School Community Enterprise Clinic (the “Clinic”) completed its seventh semester of operations in December, 2005. Although the Clinic operates on a year-round basis, the end of a semester is a good time to pause and reflect on our recent activities. This past semester was an exciting time of sustained development for the Clinic. We worked on a number of challenging matters for both new and returning clients.

Overview

This fall the Clinic worked with a total of 9 Duke Law students and represented numerous clients, several of whom had multiple matters. Collectively, these students and the Clinic’s faculty provided more than 1,350 hours of legal services to these clients. This represents at least $200,000 worth of legal services offered at no cost to the Clinic’s clients 1. The cost of operating the Clinic during this period was approximately $65,000. Thus, the resources of the Clinic were leveraged at a rate of more than 3 to 1 to create a substantial community impact.

The Clinic successfully met its dual mission of providing substantial community benefits, as well as valuable educational opportunities for the Duke Law students enrolled in the Clinic. Students developed critical legal skills and deepened their substantive legal knowledge. As a result, students indicated that they felt the Clinic helped to prepare them to successfully transition into practice and many said that the Clinic was the highlight of their Duke Law experience.

This summary briefly describes the Clinic’s activities and accomplishments over this past semester in each of the following areas: organizational development, legal education and community impact.

Organizational Development

During the fall semester, the Clinic enrolled 9 students. This was a slight reduction from prior semesters, but was still a large group of students in light of Noemi Flores’ decision to leave the law faculty to return to private practice prior to the start of the semester. Noemi, the Clinic’s Supervising Attorney since the fall semester of 2003, is greatly missed and managing the Clinic with only one faculty member is a significant challenge. We will recruit for a replacement in the spring of 2006 and look forward to having additional Clinical faculty in place by the summer.

In November, 2005, the Clinic was awarded a two-year, $100,000 grant by the Z. Smith Reynolds Foundation. This grant provides the Clinic with the resources to work in a targeted fashion with a select group of community-based development organizations that are using social enterprise strategies2 to strengthen their organizations and improve their communities. Over the term of the grant, we will not only meet the legal needs of the clients with whom we work, but will evaluate the efficacy of these strategies to promote community change and will identify barriers to success created by current law. It is expected that this project will help advance the field and will also lay the foundation for future law reform efforts.

Finally, it is important to highlight that the Clinic engaged in a brief strategic planning process during the semester. This involved looking back over the first three years of the Clinic’s operations to identify strengths and opportunities, as well as looking into the future to consider how the Clinic can most effectively meet its educational and community service missions. This process involved the Clinic’s faculty, its advisory board, several former students, as well as the Dean of the Law School. The process reaffirmed the Clinic’s commitment to providing high-quality, transactional legal services to community-based development organizations. Additionally, there was consensus that, outside of Durham, the Clinic should be more targeted in its client selection policies in order to ensure it is working with effective organizations and on projects that have the potential to both expose students to complex legal problems and have significant community impacts. Further, it was agreed that the Clinic should explore the possibility of becoming a regional resource center for community-based development in the Southeast. We will be working to determine how to best achieve this latter objective early in 2006 and look forward to embracing this expanded role as the year evolves.

Educational Activities and Accomplishments

The Clinic represented a variety of nonprofit organizations on a broad array of community development matters. These cases offered the students enrolled in the Clinic meaningful opportunities to develop critical legal skills. Each student in the Clinic this semester had primary responsibility for at least two matters and most students were responsible for either multiple clients or multiple matters. Students also engaged in a 4-week simulation of a client transaction through the classroom portion of the Clinic. The simulation and direct client representation provided all of the students with extensive opportunities to develop fundamental legal skills such as client interviewing, client counseling, drafting and case management.

Furthermore, students had the chance to develop legal skills that are particular to a transactional practice. Specifically, students engaged in drafting and negotiating transactional documents and working with clients to structure business arrangements, taking into account corporate, tax, securities and other areas of law. In some cases, students counseled clients on the structure of their transactions or organizations and drafted the relevant documents. In other matters, students took on a counseling role where they provided valuable advice to clients. In all cases, students indicated that having the opportunity to counsel clients and negotiate on behalf of clients was an extremely valuable experience that strengthened their skills and gave them more confidence as they prepared to transition from Duke Law to practice.

Through their work in the Clinic, students also had the chance to increase their knowledge across a wide variety of substantive legal areas including: real estate law, corporate law, securities law, non-profit law, tax law, employment law and intellectual property law. The matters this semester were both diverse and complex. As a result, students were able to work on cases that deepened their understanding of a particular area of law while they were engaged in important skills development. The following examples highlight the multiple educational opportunities offered to students through their enrollment in the Clinic.

  1. Virginia Frasure and Kieran McCarthy, both third-year students, assisted a nonprofit client to negotiate the terms of a joint venture with another nonprofit through which the two organizations will begin operating a manufacturing facility in spring 2006. Over the course of the semester, the students were actively engaged with our client in planning all phases of this transaction. They played a particularly critical role by identifying various tax and other legal risks associated with the proposed business and working with the client to develop strategies to mitigate these concerns. Through this project, the students honed their interviewing, negotiation, research and counseling skills. In addition, they got valuable experience learning how to manage the tension between a client’s desire to “get the deal done” and the lawyer’s obligation to ensure that all material risks are identified and addressed.

  2. Jessica Bodack, a third-year student, assisted a Clinic client to draft a shareholder proposal to a publicly held financial institution. The proposal focused on the institution’s lack of diversity and called on the company’s board to implement policies and procedures to address this concern. For our client, this is a critical issue of institutional equity that it believes must be addressed not only to create an open workplace, but also to improve its lending practices with respect to low-income and communities of color. Jessica researched federal law to learn about the shareholder proposal process and the requirements that must be met in order to get such a proposal included in a company’s annual proxy statement. She then developed the facts to support the client’s position and drafted the proposal. Through this project, Jessica improved her research, analytical and writing skills. In addition, she learned a great deal about the securities regulations and SEC pronouncements related to shareholder resolutions.

  3. John Wroldsen, a third-year student, represented a clinic client in connection with the formation of a real estate investment fund that will focus on revitalizing commercial properties in low-wealth communities. Throughout the semester, he worked closely with the client to structure the fund and to draft the disclosure documents needed to properly solicit capital from prospective investors. Through this project, John strengthened his interviewing, counseling and drafting skills. He also developed a deep expertise with the corporate and securities laws that pertain to private equity funds.

These are just three examples of the Clinic’s activities and accomplishments with respect to its educational mission this semester. While each student worked on different matters, each student had a similar educational experience. As a result, all of the students indicated that the Clinic was a key part of their education at Duke Law and that participation in the Clinic helped to position them for a successful transition to their post-graduation activities.

Community Service Activities and Accomplishments

The clients of the Clinic also benefited greatly from our services. The Clinic is able to provide sophisticated legal services at no cost, substantially reducing the transaction costs associated with our clients’ activities. This helps make a wider range of transactions more feasible and allows clients to begin considering legal issues associated with their transactions much earlier in the process. Even more important, however, is the counseling that the Clinic provides to clients. Our knowledge of financing options and strategic advice enabled many clients to initiate impact-oriented community development projects that they would have been otherwise unable to undertake.

Some significant results of the Clinic’s work this fall, in addition to those described above, include the following.

  • Assisted a community development corporation to structure a joint venture that will redevelop an abandoned tobacco factory into more than 100 condominium units. The Clinic worked closely with the client to structure the joint venture in such a way that its interests, as well as those of the community, are protected. As a result of this project, a significant source of blight will be removed from the community and the new housing will attract people back into the CDC’s target neighborhood. It is expected that this will be the first of many significant projects by this client that, collectively, will transform the community in which they work.

  • Assisted two nonprofit organizations to organize a steel manufacturing company. As noted previously, two students in the Clinic assisted a client to organize (with another nonprofit organization) a new, for-profit manufacturing company that will produce steel to be used in commercial and residential development. Once operational in 2006, the company will directly create at least 13 jobs, 10 of which will be entry level, and will help provide building supplies to, among others, the developers of affordable housing in North Carolina.

  • Assisted a community development financial institution to apply for an allocation of New Markets Tax Credits. The Clinic took the lead in preparing the allocation application for its client–a significant amount of work that was only made possible by a clinic student starting her client service prior to the start of the fall semester! If awarded, the funds would provide $35,000,000 in federal tax credits that this CDFI could use to attract private investment to capitalize two new loan funds. The first fund would provide deeply discounted loans to finance commercial real estate projects being developed by CDCs and the second would provide working capital loans to businesses operating in very low-income communities.

  • Represented a community development corporation in a property tax appeal matter. In this matter, the Clinic represented a nonprofit that is developing over 100 lots to be sold as affordable single-family housing in a rural county in Eastern North Carolina. Based on our research, it appeared that the county had improperly assessed property tax on these lots and, to remedy the problem, the Clinic helped its client to file an appeal with the North Carolina Property Tax Commission. If successful, this appeal will significantly reduce the development costs of this project and enable the nonprofit to sell the homes at much lower costs than would otherwise be the case.

These are a few examples of the many things that the Clinic helped its clients achieve this fall. We are very excited about the results that this on-going collaboration with community-based organizations has produced and expect to achieve greater impact in the future.

Conclusion

The Clinic continues to develop and demonstrate that it is well positioned to meet both its educational and community service missions. Duke Law students enrolled in the Clinic continue to have outstanding opportunities to build their legal skills and strengthen their substantive knowledge of law through the learning experience offered by the Clinic. In addition, these students work with the Clinic’s faculty to provide high-quality, sophisticated legal services to clients that often would not have access to legal services. This has enabled the Clinic’s clients to achieve significant results and improve communities throughout North Carolina. It is exciting to see the multiple educational and community benefits provided by the Clinic and we look forward to the Clinic’s continuing development.


1 The portion of this figure attributable to time worked by Duke Law students is based on an assumed billing rate of $85/hour for a rising second-year law student and $100/hour for a rising third-year law student. These rates are similar to those charged at large law firms in North Carolina for law clerks.

2 For the purpose of the Clinic's project, social enterprises are generally for-profit businesses owned and operated by nonprofit organizations or social entrepreneurs that provide needed goods and services in under-resourced communities and that are expected to generate revenue to support the parent's social mission.