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A major accounting firm and medical malpractice defendants won big victories from the Georgia Supreme Court on Monday, but lawyers on both sides of those cases could find themselves winners courtesy of another decision by the Georgia justices. The high court held unanimously that the city of Atlanta’s $400 per lawyer annual occupation tax is an unconstitutional precondition to practicing law. Records produced in the suit behind the decision showed that the city collected around $2 million each year from the tax. But the decision could force the cash-strapped government to cough up millions more in taxes collected since 1996, as the court rebuffed pleas from the city’s lawyers to apply the decision only to future taxes. Writing for the court, Justice Robert Benham noted that Atlanta lawmakers who passed the current occupational tax scheme did not apply all of the lessons from a 1997 decision striking down a similar tax in Jonesboro, Ga. Besides, Benham added, “Atlanta has had the use of the money it collected under the occupation tax ordinance and the lawyers from whom it was collected have lost that use.” The lawyer tax case was one of 16 decisions the court handed down on Monday, a batch that included several other high-profile and high-stakes matters. Among those, the court threw out a $44 million negligence verdict against accounting firm BDO Seidman and rejected claims that a common jury charge presuming that medical malpractice defendants performed “in an ordinarily skillful manner” unfairly prejudiced juries against plaintiffs. The lawyer tax decision extended from the court’s 1997 ruling in Sexton v. City of Jonesboro, 267 Ga. 571, in which the justices struck down a Jonesboro tax. The Sexton decision held that municipalities were not barred from taxing lawyers as long as the taxes did not run afoul of the Georgia Supreme Court’s exclusive role as regulator of the legal profession. Among the problems with the Jonesboro tax cited by the Sexton decision were the law’s requiring lawyers to pay the tax before engaging in business for the coming year and subjecting delinquent payers to criminal sanctions. Atlanta amended its ordinance in light of the Sexton decision, but the changes did not go far enough, as civil rights lawyer Sonja L. Salo launched a challenge in 1998 and two dozen lawyers from Gambrell & Stolz and Decker & Hallman filed a challenge in 2000. Handling both cases, Judge Rowland W. Barnes of Fulton County, Ga., Superior Court last year found that the Atlanta ordinance required payment of the tax in advance of the coming year and subjected delinquent payers to incarceration. Both amounted to unconstitutional preconditions to practicing law, Barnes held, a decision affirmed by the Georgia justices on Monday. City of Atlanta v. Barnes, No. S02A1338 and City of Atlanta v. Salo, No. S02A1478 (Sup. Ct. Ga. March 10, 2003). The decision did not affect other professionals subject to the city’s occupational tax, such as doctors, dentists, optometrists and psychologists, but the city still could suffer a hard financial hit. Decker & Hallman partner Robert D. Feagin, a plaintiff and one of the lawyers representing the attorney class, said, “We have no way to know” how many lawyers are entitled to refunds from the tax. He noted that there are roughly 10,000 lawyers in the city. Barnes will have to figure out who will be entitled to a refund when the case returns to him from the high court. He also will have to rule on attorney fee petitions brought by Feagin and Irwin W. Stolz Jr., who handled the case. City Attorney Linda K. DiSantis had not yet seen the court’s decision, but she said, “I’m disappointed.” Justice Carol W. Hunstein recused herself from the case; she was replaced on the court by Judge William A. Foster III of Paulding County Superior Court. GETTING WHAT YOU PAY FOR In the accounting case, the justices extended a decade-long fight that has seesawed between Chicago-based BDO Seidman and a Georgia-based buying group called Mindis Acquisition Corp. The buying group claimed that a faulty BDO audit misled the group into overpaying for a scrap metal company called Mindis Consolidated Corp. The group, which included two officers from Mindis Consolidated, paid $40 million for the company. A subsequent audit showed that BDO overestimated the value of Mindis’ inventory by $70 million. In 1999, a Fulton County Superior Court jury awarded Mindis Acquisition $44 million. But later that year, Judge Alice D. Bonner threw out the verdict because she said the buying group was not justified in relying on BDO’s figures, arguing that the former Mindis officers in the buying group should have known BDO’s estimate was questionable. Last year, the Georgia Court of Appeals reversed Bonner, among other things taking issue with how damages had been calculated. The appeals court held that negligent misrepresentation cases should be viewed as fraud cases, in which damages are measured in terms of what the plaintiff expected by relying on the bad information — or $44 million in this case. But on Monday, the high court held unanimously that damages in negligent misrepresentation cases should amount to the plaintiff’s out-of-pocket losses. That measure “is commensurate with the culpability of the tortfeasor, who acted negligently, rather than intentionally or maliciously,” wrote Chief Justice Norman S. Fletcher. BDO Seidman v. Mindis Acquisition Corp., No. S02G0788 (Sup. Ct. Ga. March 10, 2003). One of BDO’s lawyers, S. Lawrence Polk of Sutherland, Asbill & Brennan’s Atlanta office, said he was very pleased but referred inquiries about the case to the client. BDO General Counsel Scott M. Univer said the buying group’s out-of-pocket damages amount to nothing. The buying group paid $40 million for Mindis, he said, “and we are confident we will be able to prove this company was worth at least $40 million.” Alston & Bird’s Oscar N. Persons represented the buying group, but he could not be reached to discuss the case. Last year, a lawyer for the buying group suggested that by the out-of-pocket damages measurement, the group would be entitled to $24 million — calculated by subtracting the $16 million inventory from the $40 million purchase price. AN UNUSUAL MOVE The medical malpractice case stemmed from a 2000 case in Carroll County, Ga., where a jury took just 15 minutes to deliver a verdict for a doctor and medical center accused of negligently administering morphine and causing a woman brain damage. In 2001 a panel of the Georgia Court of Appeals dispatched the plaintiffs’ appeal in a two-paragraph, unpublished decision. Last year the Georgia high court denied the plaintiffs’ petition for certiorari by a 6-1 vote. But, in a highly unusual move, the justices reversed course and decided unanimously to hear the matter. At issue was a common jury charge, used in the underlying trial, that Georgia law presumes that medical services were “performed in an ordinarily skillful manner, and the burden is on the Plaintiffs to show a want of due care, skill, and diligence.” Lawyers for the woman and her husband argued in court briefs that the jury charge is “highly prejudicial” and “grossly unfair” by overemphasizing a plaintiff’s burden of proof. Lawyers for the doctor and the hospital responded that the presumption dates back to the time of Aristotle and is rooted in a 1957 state high court precedent. They took issue with the plaintiffs’ state-by-state analysis, pointing out that each state decides its standard of care and that at least three states have taken similar positions to Georgia’s on the presumption. In the majority decision by Fletcher, five justices held that the presumption is “a correct statement of substantive law in Georgia.” “It does not suggest to jurors that they must hold the plaintiff to a standard of proof beyond preponderance of the evidence,” Fletcher added. Despite the accuracy of the jury charge, the majority concluded that the wording of the presumption charge needs to be revised. Specifically, Fletcher wrote that the jury needs to be instructed that the law presumes that medical professionals perform services in an ordinarily skillful manner. But the plaintiff may overcome this presumption, he added, with expert medical testimony as proved by a preponderance of the evidence. Presiding Justice Leah Ward Sears concurred with the result of the majority decision, but she added that a presumption charge is “redundant” and “unnecessarily created opportunity for confusion and error.” Hunstein dissented, arguing that the presumption charge unfairly hurt the plaintiff and that the majority’s modification “does nothing to reduce the potential to mislead or confuse the jury into believing the plaintiff bears a double burden of proof.” Beach v. Lipham, No. S02G0721 (Sup. Ct. Ga. March 10, 2003). Russell B. Davis of Marietta, Ga.’s Downey & Cleveland, who represented the defendants at the oral argument, could not be reached to discuss the decision. Foy R. Devine, who represented the plaintiff, said only the Georgia General Assembly could remove the presumption charge from the law — an unlikely prospect in today’s political climate, in which medical malpractice tort reform is being seriously considered. Of the changes in the presumption charge suggested by the majority, Devine said, “I don’t think it really solves the underlying problem” — that of juries being instructed that the defendant is presumed to have acted in an ordinarily skillful manner.

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