Spring 2003

Summary of Activities and Accomplishments

The Duke Law School CED Clinic recently completed its second semester of operations. Although the Clinic operates on a year-round basis, the end of a semester is a good time to pause and reflect on our activities. This past semester was an exciting time of growth and accomplishment.

Overview

This spring the Clinic enrolled nine Duke Law students and represented 24 clients. Collectively, we provided more than 1,350 hours of legal services to these clients, several of whom had multiple matters. This represents at least $175,000 worth of legal services offered at no cost to non-profit organizations working to promote community development in North Carolina and through the southeast. The cost of operating the Clinic during this period was approximately $53,000. Thus, the resources of the Clinic were leveraged at a rate of more than 3 to 1 to create a substantial community impact.

While providing these important community benefits, the Duke Law students enrolled in the Clinic developed critical legal skills and deepened their substantive legal knowledge. As a result, all of the students indicated that they felt the Clinic helped to prepare them to successfully transition into practice and many said that the Clinic was the capstone to their experience at Duke Law.

During this period, the Clinic also went through an important period of organizational development that positions the Clinic for long-term success with respect to both its educational and community service missions. This summary briefly describes the Clinics activities and accomplishments in each of these three areas during the first part of 2003.

Organizational Development

In addition to more than doubling the Clinic’s enrollment over the previous semester, several other important organizational development milestones were achieved this semester. Among the most important, the Clinic’s Advisory Board was convened and it held its first meeting. The Advisory Board’s membership consists of CED practitioners, Duke Law alumni, Duke Law or Duke University faculty and staff and other friends and supporters of the Clinic. It is currently working with the Clinic’s Director to establish priorities for the Clinic, market its services, raise funds to support the Clinic and evaluate its effectiveness.

The Clinic also worked to establish its identity as a regional resource for the CED field by holding its first conference on March 21, 2003 in Durham, North Carolina. The conference, Emerging Issues in Community Development Law: Stimulating Affordable Housing and Economic Development in the Southeast, attracted more than 100 business, legal and public policy professionals to discuss critical developments in this area of law. The conference raised the profile of the Clinic and generated more than $20,000 of revenue for the Clinic.

In addition to generating income from activities like the conference, the Clinic continued to have success raising funds to support its work from private foundations. Significantly, the Clinic received a two-year, $75,000 grant from the Fannie Mae Foundation in April. The support of this leading foundation at such an early stage in the Clinic’s development is a tremendous vote of confidence in the Clinic and should help leverage support from other national foundations. The Clinic also submitted grant requests to several other foundations, including the American Express Foundation, the Ford Foundation, The NCBA Foundation Endowment and the Oprah Winfrey Foundation. Results of these and other efforts should be forthcoming over the summer.

Finally, the Clinic continued building its collaboration with the University of North Carolina School of Law’s Community Development Law Clinic (the “CDL Clinic”). The directors of the two clinics meet at least monthly to coordinate their work and to identify possibilities for greater collaboration. Additionally, the Clinic and the CDL Clinic jointly market the legal services of the two programs in public forums and refer cases between the clinics to ensure that all clients get prompt and effective legal services. The Clinic is very pleased with the development of this relationship and is committed to its long-term success.

Educational Activities and Accomplishments

The Clinic represented a significant number of clients on a wide range of matters this semester. These cases offered the Duke Law students enrolled in the Clinic meaningful opportunities to develop critical legal skills. For example, each student had primary responsibility for at least one client and most students were responsible for either multiple clients or multiple matters. This provided all of the students with extensive opportunities to develop fundamental legal skills such as case management, client interviewing and client counseling.

Because the Clinic primarily represents clients in transactional matters, the students also had the chance to develop legal skills that are particular to this type of practice. Specifically, all students engaged in drafting and negotiating transactional documents and working with clients to structure business arrangements, taking into account corporate, tax, securities and other legal considerations. In several cases, students were able to assist their clients with all phases of a transaction, from conception to closing. Several students indicated that having the opportunity to counsel clients, structure transactions and participate in a deal from start to finish was an extremely valuable experience and gave them both better skills and more confidence as they prepared to enter private practice.

Through their work in the Clinic, the 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, the law of corporate and real estate finance, administrative law, employee compensation and benefits law, tax law and the law of tax-exempt organizations. The Clinic’s clients presented a surprisingly diverse number of issues. As a result, students were able to handle cases that deepened their understanding of a particular area of law while they were engaged in skills development. The following three examples highlight the multiple educational opportunities offered to students through their enrollment in the Clinic.

  1. Peter Christoffersen, a third year student who will be practicing real estate law with a private firm in Dallas, represented a client in connection with a major commercial redevelopment project in a small city in eastern North Carolina that is expected to create more than 100 new jobs. Peter provided extensive counseling to the client to help it structure the transaction in order to limit its liability, protect its tax-exempt status and facilitate raising the capital needed for the project. He then formed two subsidiary companies for the client and drafted all of the authorizations and consents required for the transaction. Finally, Peter drafted a term sheet for the client to use with potential investors. Throughout his representation of this client, Peter deepened his understanding of real estate development and finance. In addition, he got substantial experience with client counseling, drafting and negotiation, and client and case management.

  2. Caroline Wainright, a third year student who will be practicing corporate law with a private firm in New York City, represented a client based in the Triangle region of North Carolina with the acquisition of a limited liability company. In this matter, the target LLC owns a twelve unit building that provides affordable housing to very low-income women and children as well as one undeveloped parcel of land that can be developed for additional affordable housing units. Caroline interviewed the client to determine what its objectives were and then presented a range of options for structuring the deal to the client’s board of directors. Once the structure was agreed to, Caroline drafted the purchase agreements and other documents needed to consummate the acquisition. She also analyzed all of the contracts and loan documents to which the LLC was a party in order to identify the third party consents that the client had to obtain before the transaction could be closed. She then drafted and negotiated all of those consents and prepared the resolutions required to authorize the client to acquire the LLC and assume all of its obligations. In handling this matter, Caroline got full exposure to the issues involved in a basic corporate transaction and developed her client interviewing and counseling, drafting and negotiation, and structuring skills.

  3. Erica Schohn, a third year student who will be practicing employee compensation and benefits law with a private firm in New York City, represented a client that operates a community development venture capital fund. In exchange for its investments, the client requires its portfolio companies to agree to a series of community development covenants pursuant to which the companies will hire low-income workers and provide them with asset development strategies. One such strategy is the use of stock options or other similar employee compensation tools. Erica extensively counseled the client as to the variety of tools available to its portfolio companies to promote individual asset development. Once the desired range of tools was identified, she drafted an analysis of the relative strengths and weaknesses of each of these tools incorporating control, cost, tax, administrative and other considerations. Finally, Erica worked with the client and two of its portfolio companies to design and structure stock option plans for the employees of those two companies. This representation gave Erica the opportunity to engage in extensive client counseling as well as drafting and business planning. It also gave her the chance to get a much deeper understanding of the substantive area of law in which she will be practicing.

These are just three examples of the Clinic’s activities and accomplishments with respect to its educational mission this semester. Each student had a similar 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

As the above examples suggest, the clients of the Clinic also benefited greatly from our services. At the most basic level, the fact that the Clinic is able to provide sophisticated legal services at no cost substantially reduces the transaction costs associated with our clients’ activities. This helps to make a wider range of deals more feasible. Even more important, however, is the counseling that the Clinic provides to clients. Our knowledge of public and private sector financing options, assistance with structuring transactions and strategic advice enabled many clients to initiate impact-oriented CED projects that they would have been otherwise unable to undertake.

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

  • Represented a non-profit affordable housing corporation in the development of a second mortgage program for first-time homebuyers. The Clinic helped the client design the program and then drafted all of the loan and other transactional documents required in connection with its implementation. This program will help to make home ownership a real possibility for a significant number of low-income working families in North Carolina’s high housing cost Triangle region.

  • Assisted a community development corporation (“CDC”) with the preservation of twelve units of transitional housing for homeless women and children. The Clinic is also representing this client in the redevelopment of a multi-family housing complex. Combined, these two this projects will provide more than 100 units of affordable housing to very low-income individuals and families.

  • Represented a community development financial institution that received an allocation of federal New Markets Tax Credits (“NMTC”) in the start-up phase of its NMTC investment work. The Clinic helped the client to develop a structure to leverage the NMTC to increase the amount of capital available for investing in low-income communities and worked with it to expand its service area beyond North Carolina to include multiple states in the region. Through this work, the Clinic helped to make nearly $30,000,000 in new capital available to finance economic development activities in low-income communities in the Southeast.

  • Represented a CDC with the formation of a real estate company subsidiary. The client will operate this subsidiary as a social venture. It is expected that the new company will help the client to achieve its mission of preventing land loss and gentrification in the low- and moderate-income minority communities in which it works. In addition, it will generate revenues that the CDC can use to finance its operating expenses.

  • Represented a statewide trade association with the research, drafting and introduction of legislation addressing manufactured housing in North Carolina. If passed, the legislation will dramatically improve the financing system for manufactured housing and will increase consumer protections for both owners and renters of manufactured housing. As of the year 2000 there were more than 600,000 manufactured housing units in the state. Thus, this public policy initiative has the potential to have far reaching impacts and to serve as a national model for this segment of the housing market.

  • Represented a regional community development intermediary with an analysis of the state resources available to finance rural economic development activities in Georgia. This tool included an analysis of the barriers that rural CDCs might have in accessing these resources to support CED strategies in their communities. The Clinic will continue to work with this client to develop both a community education strategy and a public policy agenda designed to increase the availability of public financing for asset-based rural development.

  • Initiated an asset development project targeting low-income taxpayers. This semester the Clinic undertook a pilot project designed to increase the rates at which low-wage workers in Durham, North Carolina claim the federal Earned Income Tax Credit. Specifically, students in the Clinic obtained certification from the IRS to provide free tax preparation services to low-income taxpayers and then assisted qualified individuals with their federal income taxes. Seven low-income taxpayers benefited from this pilot project and the Clinic expects to continue this project on a larger scale in the future.

These examples are but a few of the things that the Clinic helped its clients to achieve this semester. As the Clinic grows and expands its capacity, it will be even better able to help community-based organizations successfully undertake CED initiatives that will significantly benefit the residents of low-income communities in North Carolina and throughout the region.

Conclusion

Since it began operations nearly a year ago, the Clinic has grown quickly and demonstrated that it is well positioned to meet both its educational and community service missions. To date, all of the Duke Law students enrolled in the Clinic have had tremendous opportunities to build their legal skills and strengthen their substantive knowledge through the hands on education offered through the Clinic. In exchange, these students have worked with the Clinic’s faculty to provide high-quality, sophisticated legal services to clients. This has enabled our clients to achieve significant results for the communities that they serve. It is exciting to see the multiple benefits provided by the Clinic and we look forward to its continued development.


[a] 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 second year law student and $100/hour for a third year law student. These rates are similar to those charged at large law firms in North Carolina for law clerks.