Firm Represents Chicago, Milwaukee Railroad Shareholders in Bankruptcy
On this day in 1977, the Chicago, Milwaukee, St. Paul, and Pacific Railroad filed for bankruptcy. The firm represented the Milwaukee’s shareholders and, after the bankruptcy’s successful conclusion, the reorganized debtor, Heartland Partners. At the time of the Milwaukee’s bankruptcy filing, the line carried 18,000 commuters daily and operated a 9,251-mile system in 17 states, according to the Chicago Tribune. And it was the second Chicago-based railroad to file for bankruptcy within three years; the Chicago, Rock Island & Pacific Railroad – its largest shareholder also represented by Jenner & Block – filed in 1974.
Firm Successfully Defends American Academy of Pediatrics in Case Focusing on Polio Vaccine
Don Harris successfully defended the American Academy of Pediatrics in a case that focused on the Academy’s recommended polio vaccine. At issue were two types of vaccines: the popular Salk vaccine, which was a “killed” vaccine, and the Sabin vaccine, which was a “live” vaccine and therefore had a “herd” immunity effect. Because of the Sabin vaccine’s “herd” effect, the Academy recommended its use over the Salk vaccine. But when a Michigan child contracted polio after using the Sabin vaccine, the family sued the Academy, charging that its recommendation resulted in the child getting polio. On this day in 1983, Don prevailed, despite the celebrity adverse expert testimony of Dr. Jonas Salk, the famed inventor of the vaccine that bears his name. The case showed that the Academy – and not supporters or detractors of any particular vaccine – should guide public health policy.
Operation Greylord - Undercover Probe into Corruption - Becomes Public
The undercover Operation Greylord investigation became public on this week in 1983. Tom Sullivan launched the joint investigation with the FBI after he became U.S. attorney for the Northern District of Illinois in 1977; Chuck Sklarsky was among its architects during his time as an assistant U.S. attorney. Ultimately, the operation led to the conviction of about 90 individuals, including judges, lawyers, deputy sheriffs, police officers and court clerks, on a range of charges including conspiracy and bribery. In an interview with the Illinois Supreme Court Commission on Professionalism, Tom recalled facing the difficult decision of whether to use real or fake cases to snare corrupt members of the Cook County judiciary. Although it would have been easier to have undercover FBI agents defend real cases, ethical and liability concerns caused the team to use fake cases. “If we use real cases and [the prosecutor or judge] takes a bribe and a guy is released from a minor crime and then goes out and commits a really horrible crime, I’m going to get blamed for it. So you can’t use real cases; you have to use fake cases. We had these wonderful FBI agents, just marvelous people who came up with this whole scenario of faking the reasons for being arrested,” Tom recalled. The probe continued under Tom’s successors, Dan Webb and then Tony Valukas. The investigation was made public and prosecutions begun during Dan’s tenure; Tony pursued and concluded the operation. When Tony left office in 1989, the Chicago Tribune observed that “corrupt judges, bankers, drug dealers, police officers, lawyers, business executives, aldermen, defense contractors, state legislators, sports agents -- all have been brought to justice by Valukas and his staff during his four years as U.S. attorney in the Chicago region.” In the aftermath of Operation Greylord, Jerry Solovy was appointed to lead a special commission to recommend ways to reform the system. Known as the “Solovy Commission,” the panel proposed the merit selection of judges, among other reforms, and issued several reports addressing disclosure rules regarding the judicial selection process.
Click here to download a copy of The Special Commission on the Administration of Justice in Cook County Report.
Senate Confirms Tom Sullivan's appointment as U.S. Attorney for the Northern District of Illinois
After Jimmy Carter was elected president in 1976, U.S. Sen. Adlai Stevenson III recruited Tom Sullivan to serve as U.S. attorney for the Northern District of Illinois. On this day in 1977, the U.S. Senate confirmed Tom’s appointment. Tom was ready to move into public service, although he knew at the outset that he would limit his tenure to four years. During that time, he investigated fair-housing violations and discrimination cases in schools and challenged police hiring practices. He also started the undercover Operation Greylord probe of corruption in the Cook County judiciary, a long-running investigation that would continue under his predecessors, including current firm Chairman Tony Valukas while he served in the same role from 1985-1989. When Tom left the office to return to the firm in 1981, the Chicago Tribune celebrated his “exemplary record.”
Firm's Victory for MCI Changes Telecommunications Nationwide
The storied “David-and-Goliath” battle between MCI and AT&T literally changed the way we communicate. In the early 1970s, MCI had one microwave system in the Midwest while AT&T was the nation’s “Ma Bell,” the sole provider of telephone service across the country. At issue was a 1971 order by the Federal Communications Commission that opened the way for companies like MCI to launch competitive long-distance service with the Bell System nationwide. AT&T responded by directing its local Bell companies around the country to deny MCI access to local switching systems needed to reach its customers. After nearly going out of business In 1974, MCI sued and complained to the U.S. Department of Justice about these anticompetitive tactics. In turn, the Justice Department brought suit to break up AT&T.
On this day in 1980, a federal court ordered AT&T to pay MCI $1.8 billion after a jury found that Bell had violated federal antitrust laws in denying service to MCI. “The award was stunning to AT&T both monetarily and psychologically,” the New York Times reported, “because the MCI victory could generate other actions against the communications giant.” Because of the victory, it became inevitable that the government would proceed to trial in its divestiture case.
The award would later be reduced after appeal, but the impact of the case could not be overstated. On January 8, 1982, AT&T and the U.S. Department of Justice announced that AT&T would split up its $136.8 billion domain. AT&T and DOJ representatives said the move -- with AT&T relinquishing 22 operating regional subsidiaries -- would lead to increased competition for telephone service and equipment and eventually lower long-distance rates. The move revolutionized the telephone and computer industries.
By the early 1980s, MCI, based in Washington, DC, invited Jenner & Block to establish a presence in the Capital. And in 1982, when the firm opened its Washington, DC office, MCI was its anchor client.
"Army" of Firm Talent Scores Victory for UV Industries in Long-Running Dispute
On this day in 1984, the court gave final approval to a settlement between firm client UV Industries and Reliance Electric, a subsidiary of Exxon Corporation, ending nearly four years of litigation and relying on an “army” of firm talent. In 1979, Reliance purchased Federal Pacific Electric Company from UV. But around the same time, the Consumer Product Safety Commission investigated the circuit breakers that Federal Pacific manufactured, and Reliance complained that the circuit breakers were faulty and prone to cause fires. In 1980, Reliance sued the liquidating trustees of UV Industries for $345 million in damages or for rescission relating to its purchase of Federal Pacific. The UV Trust retained Jerry Solovy, who soon deployed what he referred to as his “UV Army,” consisting of more than 20 lawyers and numerous paralegals, most of whom spent the majority of their time working on the case for the next two to three years. The lawsuit came after the UV Trust had distributed more than $600 million to unit holders and held up UV’s distribution of another $400 million. Under the settlement, UV refunded Reliance $41,850,000 of the purchase price of Federal Pacific, enabling the UV Trust to distribute its remaining funds.
Firm's Supreme Court Argument Strikes Death Knell for Chicago's Time-Honored Patronage System
On this day in 1976, John Tucker argued Elrod v. Burns before the U.S. Supreme Court. The case involved the City of Chicago’s time-honored party patronage system that typically governed how non-civil service positions were staffed. In this case, the new Democratic sheriff had been discharging employees who were “sponsored” by appointees of the previous Republican sheriff. On June 28, 1976, the Court struck down the patronage system, ruling that the First Amendment protects state and local government employees from being fired for partisan political reasons. While dissenters complained that the 5-to-3 vote dismantled a “practice as old as the Republic,” Justice William J. Brennan wrote for the majority that “the process functions as well without the practice, perhaps even better.” The Washington Post noted the significance of the ruling, observing that “the decision struck directly at the political machine of Mayor Richard J. Daley of Chicago, but it is expected to safeguard the jobs of thousands of public employees across the nation.”
Jerry Solovy Successfully Dismantles "Antediluvian" Law that Flouted the First Amendment
April has been dubbed “First Amendment Awareness Month” by some universities; in recognition, we recall Jerry Solovy’s successful argument before the Supreme Court in Bolger v. Youngs Drug Products Corp. Jerry defended Youngs Drug Products Corp, which in the early 1980s wanted to send unsolicited advertisements for contraceptive devices through the U.S. mail. Unfortunately for Youngs, its plan ran afoul of the 1865 Comstock Act, a federal law that made it a crime to sell or distribute materials that could be used for contraception or abortion or to send materials or information about such materials through the mail. Calling the Act “antediluvian,” Jerry argued that it was an unconstitutional restriction of commercial speech. In June 1983, the Court ruled that the government’s interest in purging mailboxes of contraceptive advertisements was outweighed by the harm that results from denying mailbox owners the right to receive truthful information on birth control.
Albert Jenner Argues before Supreme Court on Behalf of Serbian Diocese
Albert Jenner successfully represented the Serbian Eastern Orthodox Diocese of the United States and America in a dispute between the Diocese and a defrocked bishop. The matter dated back to 1964, when the Mother Church, based in Yugoslavia, defrocked Bishop Dionisije Milivojevich, based in Libertyville. Bishop Dionisije sued, seeking to have the courts declare him the “true diocesan bishop” of the undivided diocese. The Illinois Supreme Court sided with the bishop, determining that the Mother Church had violated its own procedures and internal regulations in defrocking him. On this day in 1976, Bert argued on behalf of the Diocese before the U.S. Supreme Court. On June 21, 1976, the firm secured its victory for the Diocese when the Supreme Court reversed the Illinois Supreme Court, holding that its ruling violated the First and Fourteenth Amendments. “For where resolution of the disputes cannot be made without extensive inquiry by civil courts into religious law and polity,” the majority opinion read, “the First and Fourteenth Amendments mandate that civil courts shall not disturb the decisions of the highest ecclesiastical tribunal within a church of hierarchical polity, but must accept such decisions as binding on them, in their application to the religious issues of doctrine or polity before them.”
Court Strikes Down "Repugnant" Railroad Bankruptcy Law after Firm's Challenge
On this day in 1982, the U.S. Supreme Court ruled in favor of our client Henry Crown, the largest bond holder in the Chicago, Rock Island and Pacific Railroad Co., in Railway Labor Executives' Assn. v. Gibbons. The case arose out of the railroad’s bankruptcy reorganization, which commenced on March 17, 1975. In 1980 -- three days before the bankruptcy court would order the railroad abandoned, with no obligation on the part of the railroad to pay employee labor protection out of its assets -- Congress passed special legislation called the Rock Island Railroad Transition and Employee Assistance Act (RITA), which required the railroad to pay employee benefits of up to $75 million, to the detriment of its secured bond holders, including Col. Crown. In oral argument before the Supreme Court, Dan Murray argued that RITA represented an uncompensated taking of private property and an unconstitutional non-uniform law in bankruptcy. The Supreme Court declared RITA “repugnant to … the Bankruptcy Clause of the Constitution” because it was a non-uniform bankruptcy law. In its unanimous opinion authored by then-Justice William Rehnquist, the Court called RITA “nothing more than a private bill such as those Congress frequently enacts under its authority to spend money.”
Contract Buyers League
In honor of “Black History Month,” we look back at the Contract Buyers League (CBL) cases of the late 1960s and 1970s. It was a time when racial segregation still marred one foundation of the American Dream for hundreds of Chicago African-American families: buying a home.
Read More It is impossible fairly to summarize in a few paragraphs the extensive litigation, in both federal and state courts, spanning more than 15 years, involving hundreds of African-American home owners who were our clients. They purchased homes on the west and south sides of Chicago after the end of World War II. On the west side, the sellers engaged in blockbusting-panic tactics, purchasing from frightened white owners with predictions that black buyers were moving into their neighborhoods. The houses were then sold at highly inflated prices to unsophisticated black families. Owing to racial prejudice, the buyers were unable to obtain regular mortgage financing, because Chicago-area banks were unwilling to make mortgage loans to African-Americans, and the federal supervisory agencies were not authorized to take corrective action. As a result, the buyers were required to make significant down payments and sign contracts that extended for many years. The terms of the contracts provided that if the buyers missed a single payment, the sellers were entitled to declare the contracts terminated, retain all previous payments, and repossess the homes. The same situation existed on the south side, except that the homes were newly built, but were sold at similarly inflated prices on land contracts with the same harsh forfeiture provisions.
We filed two cases in the federal District Court in Chicago, one for the west side buyers, and the other for the south side buyers. We also brought suit against the federal lending agencies, alleging illegal racial discrimination in refusing to provide mortgage financing. We litigated the cases in the Court of Appeals for the Seventh Circuit.
To prepare the cases for trial, we held countless weekly meetings at churches located on the west and south sides. The lawyers from Jenner & Block included Tom Sullivan, John Tucker (deceased), Dick Franch, John Stifler (deceased), Carol Thigpen (deceased), Jeff Colman, and many others, including paralegals who served without fee. We were assisted by several Jesuit seminarians, including Jack Macnamara, the instigator of the CBL movement, and the young lady who later became his wife, Peggy. We were assisted by two of the finest lawyers in Chicago, William R. (Bob) Ming (deceased) and Thomas J. Boodell, Jr.
When we were unable to settle the cases or obtain a trial, the clients staged what became known as “the hold outs” — they refused to make their monthly payments, thus risking being foreclosed and evicted. Wide publicity followed. We sought relief from evictions from both the Illinois Supreme Court and then Mayor Richard J. Daley. Many of the evictions were halted, and settlements obtained. Eventually, we renegotiated contracts for over 450 families, which yielded a savings to the buyers of at least $7 million, or more than $30 million in today’s dollars.
The CBL cases resulted in two jury trials and a bench trial in the federal court. The publicity engendered by these cases, including that related to the holdouts, contributed to the end of exploitive contract sales, the availability of mortgage financing for African-American home buyers, and significant restrictions on racial profiling in the housing market.
The CBL cases have been the subject of numerous news and magazine articles, several books, and have been the subject of master and doctoral theses. We made lifelong friends of many of the client members of the Contract Buyers League.
Apart from the savings obtained by our CBL clients, the publicity engendered by the CBL cases were a major influence in bringing about a number of major reforms:
• Changes to the Illinois Forcible Entry and Detainer Act(the eviction law), to allow buyers to raise defenses for non-payment, and to remove the requirement that they post an appeal bond of one year’s payment.
• Passage of an Illinois statute requiring contracts to be treated like mortgages.
• Passage of the federal Home Mortgage Disclosure Act, which forced banks to disclose where they made their loans, thereby making it possible to prove that banks were racially discriminating in their lending policies.
• Passage of the federal Community Reinvestment Act, which by the early 1990s was responsible for the reinvestment of $18 billion dollars in more than 70 U.S. cities.
The Stamler Case and the Demise of HUAC
When the 94th Congress opened on this day in 1975, one of its first moves was to officially abolish the Internal Security Committee, born in 1938 as the House Un-American Activities Committee (HUAC). Charged with investigating alleged Communists, HUAC’s influence peaked during the anti-Communist fervor of the Cold War. By the 1960s, Americans had for a generation witnessed the damage the Committee inflicted on innocent lives. In 1965, the firm began representing a prominent Chicago cardiologist whose long fight against the Committee would endure up to its dying days. Rather than bow to the Committee’s subpoena, Dr. Jeremiah Stamler engaged Albert Jenner and the firm to sue the Committee, seeking to have its mandate declared unconstitutional. After eight and a half years of litigation, the government agreed to drop its indictment against Dr. Stamler for contempt of Congress, and the doctor agreed to drop his civil suit against the Committee. By this time, “the Committee, under pressure from impending judicial review, had sharply curtailed its activities and mandate. A year after the Stamler case ended, the House voted to terminate the Committee altogether,” wrote Tom Sullivan, Chet Kamin and Arthur Sussman in a law review article about the matter.