Opinion

Alison Frankel

From Aspen: America’s opportunity gap – and why it’s bad for lawyers

Alison Frankel
Jun 28, 2013 22:02 UTC

Near the end of a delightful interview at the Aspen Ideas Festival, CBS journalist Rita Braver asked Williams & Connolly superlawyer Robert Barnett – who also happens to be her husband of many decades – what advice he would offer to young attorneys. Could they, Braver asked, replicate his career path, which took him from a Supreme Court clerkship to the representation of publishing and political luminaries, and service as a sachem of the Democratic party? Barnett said no.

The competition to win a job at a firm like Williams & Connolly is fiercer than ever – Barnett said his firm received 6,000 resumes last year – and the prize at many firms is “drudgery.” (Barnett took care to except W&C’s work from the “drudgery” category.) “If I were a regular practicing lawyer at a megafirm, I would have been out of the law long ago,” he said.

It was a discouraging comment in an otherwise sparkling hour of conversation between Braver and Barnett, who met as undergraduates at the University of Wisconsin in the 1960s and have managed to balance their work and family life. Among Barnett’s specialties is preparing Democratic candidates for presidential and vice presidential debates, but Braver told the audience that he stepped aside in 1996, despite his long allegiance with Bill Clinton, so that she could serve as White House correspondent for CBS; Barnett joked that he won the Best Husband Award in his condominium that year.

For all of the charming give-and-take between Barnett and Braver (who was as delightful when we chatted in line for the women’s bathroom as she was in questioning her husband), Barnett’s pessimism about the practice of law matched the tone of some of the other panels I’ve attended as the Ideas Festival continued on Friday. It also tracks with the conversation I had with two big-firm lawyers Thursday night at a Thompson Reuters reception. They told me that they were troubled by this week’s mass layoffs at Weil, Gotshal & Manges, mostly because they’re convinced that Weil is the snowball that starts an avalanche of layoffs. They’re not worried about their firms, both of which rank high on the Am Law profitability charts, but about shops that haven’t proactively planned for changing times.

That conversation brought home a message from a panel I attended Thursday evening, in which Goldman Sachs chief Lloyd Blankfein discussed the bank’s $500 million program to train, mentor and provide capital to people running small businesses. On the panel with Blankfein were (among others) former Secretary of Education Margaret Spellings, who has taught community college professors how to implement Goldman’s training program, and New Orleans Mayor Mitch Landrieu, whose city has had 180 small business operators complete the Goldman program over the last six years. What all of them emphasized – including Blankfein – is the talent and brains of the small-business owners they’ve come to know. Blankfein said that the only difference between some of the graduates of the program and Goldman bankers is opportunity. Many of the small-business owners are first- or second-generation Americans who didn’t have the education of your typical Goldman banker. Or they didn’t have connections or access to capital. Fate put them on the wrong side of the opportunity divide.

Biggest idea at Aspen Ideas Fest: Don’t run from risk. Grab it.

Alison Frankel
Jun 27, 2013 23:14 UTC

It is a truth (almost) universally acknowledged that a law firm in possession of a strong client base must be in want of pretty much nothing. (Apologies to Jane Austen.) As a species, lawyers are risk-averse. The practice, after all, is paved in precedent and bad things can happen to you and your clients if you veer off-road.

Here at the Aspen Ideas Festival, however, risk is not a four-letter word. I attended four panels Thursday, on topics ranging from the future of the Republican Party to financing the energy projects of the future. The single theme that ran through all of them is that opportunity grows out of crisis, and the winners of the next decade will be the leaders who aren’t afraid of new ideas.

That might sound intangible, but there are practical implications for lawyers and law firms. In a breakfast session, for instance, U.S. Trust President Keith Banks, whose firm manages about $200 billion in assets for ultrawealthy people, predicted an imminent boom in mergers and acquisitions. Companies are under pressure from shareholders and directors to expand their revenues, he told me after the session, and can’t grow fast enough organically. With almost $1.45 trillion sitting in corporate treasuries, he said, bottom lines are strong, but with growth in the United States stuck at about 3 percent, top lines are still anemic. So in Banks’s view, companies are going to turn to expansion through acquisition. (Banks is generally bullish on equities and on the private sector broadly; he told the audience that he’s not worried about quantitative easing because he thinks the Federal Reserve will slowly decelerate to a phase he called quantitative maintenance.) A significant uptick in M&A means more work for law firms. If you’ve already got an M&A practice, make sure clients know about it. If you don’t, perhaps this is the time to start thinking about laterals.

Election savant Nate Silver: Why punditocracy gets politics wrong

Alison Frankel
Jun 27, 2013 18:19 UTC

If Nate Silver, the data-driven New York Times FiveThirtyEight blogger who nailed state-by-state results in the 2012 presidential election, had been a better baseball player or a more satisfied KPMG numbers cruncher, our current political discourse would be a lot less analytically savvy than it is today.

I had a chance to hear Silver answer questions from Katie Couric Wednesday night at the Aspen Ideas Festival, where political, business and art bigwigs (including lawyers such as Robert Bennett of Williams & Connolly and Robert Gruendel of DLA Piper) gather in this mountain-ringed and flower-bedecked city to talk about the big ideas of the day. I’ll be blogging and tweeting from the festival through Saturday.

The Silver session followed the opening reception and was mobbed. He and Couric justified the crowd. Silver said that he was drawn to statistics through his love of the Detroit Tigers (and his sad realization that he was not cut out for the pros), then realized he only cared about certain kinds of data analysis when he suffered through what he calls the worst job of his life at KPMG, resorting to baseball data analysis to keep himself amused. The result was his blog about baseball analytics, which eventually led to his brilliant political data analysis at FiveThirtyEight.

Wake up, shareholders! Your right to sue corporations may be in danger

Alison Frankel
Jun 25, 2013 23:10 UTC

Do you believe that securities class actions and shareholder derivative suits have any salutary effect on corporate governance – that directors and officers are less likely to misbehave when they’re liable to shareholders (their nominal bosses) in court? If so, you ought to be very worried about a pair of developments in the last week that offer a theoretical framework to end shareholder class actions. If, on the other hand, you’re of the view that shareholder litigation is merely a transfer of wealth from corporations to plaintiffs’ lawyers, with little actual return to investors, you might want to start thinking about how to use the new rulings to stop that from happening.

Let’s look first at the U.S. Supreme Court’s 5-3 decision last week in American Express v. Italian Colors. That case, as you know, was brought by small businesses that believed American Express was abusing its monopoly in the charge card market by requiring them also to accept Amex credit cards carrying higher fees than competing credit cards. The Supreme Court said that even though the merchants had statutory antitrust rights under the Sherman Act, they had given up their right to sue Amex as a class when they signed arbitration agreements barring such suits. It was of no matter, the majority said, that the cost of arbitrating an individual antitrust claim would dwarf the recovery of any single small business: The merchants signed contracts that included arbitration clauses and those contracts bound them. (Or, as Justice Elena Kagan put it in a memorable dissent: “Here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad.”)

The Amex ruling immediately drew the ire of consumer and employment rights advocates, who argued that it gives corporations the power effectively to insulate themselves against all sorts of legitimate claims by cutting off escape routes from class action waivers in mandatory arbitration clauses. But what about shareholders? In a very smart column on Monday, Kevin LaCroix of D&O Diary raised the question of Amex‘s potential impact on securities fraud and shareholder derivative class actions. Does the court’s ruling, he asked, mean that “the broad enforceability of arbitration agreements reaches far enough to include the enforceability of arbitration agreements and class action waivers in corporate articles of incorporation or by-laws?”

Journalists and the Espionage Act: Prosecution risk is remote but real

Alison Frankel
Jun 24, 2013 20:51 UTC

Meet the Press host David Gregory brought down the wrath of fellow journalists on Sunday when he asked a provocative question of Glenn Greenwald, the Guardian reporter who broke revelations from Booz Allen contractor Edward Snowden about the U.S. government’s monitoring of citizens’ phone and Internet data. After Gregory and Greenwald discussed the Justice Department’s new Espionage Act charges against Snowden, Gregory asked, “To the extent that you have aided and abetted Snowden, even in his current movements, why shouldn’t you, Mr. Greenwald, be charged with a crime?”

Gregory’s prosecutorial tone didn’t go over well with journalists trained to believe that the U.S. Supreme Court’s landmark 1971 ruling in The New York Times v. United States (better known as the Pentagon Papers case) gives them carte blanche to publish materials they’ve received lawfully from their sources, even if their sources broke the law to obtain the information. The court’s subsequent 2001 ruling in Bartnicki v. Vopper confirmed that the media cannot be punished for publishing information that sources obtained illegally, so long as the information is of public importance. But there’s actually a distinction in the law between the media’s right to publish sensitive national security information and the government’s right, at least in theory, to bring charges against reporters and publishers for possessing and disclosing classified information.

Gregory’s question, in other words, may have been inaptly posed but it addressed a legitimate, albeit remote, risk for reporters with hot national security stories. No journalist has so far been prosecuted under the Espionage Act for a story that reveals sensitive information (nor, for that matter, under other federal laws addressing classified information), and Attorney General Eric Holder has said publicly that he doesn’t intend to start charging reporters for doing their job. Nevertheless, there’s enough uncertainty about criminal liability that the government has used the threat of prosecution to try to squelch reporting, according to a fascinating 2008 paper, “National Security and the Press: The Government’s Ability to Prosecute Journalists for the Possession or Publication of National Security Information,” from the Communication Law & Policy journal.

The inherent conflict for lawyers who oppose Supreme Court review

Alison Frankel
Jun 21, 2013 19:52 UTC

As usual, the U.S. Supreme Court has saved the big stuff for the last week of its term. Among the 11 cases the justices have yet to decide are the four that garnered the most public attention this year: Fisher v. University of Texas, which addresses affirmative action; the voting rights case Shelby County v. Holder; and the two gay marriage cases, Hollingsworth v. Perry, which stems from California’s ballot-proposition ban on gay marriage, and U.S. v. Windsor, which challenges the federal Defense of Marriage Act. You can reliably expect frenzied coverage at the court until rulings come down in all four of these hot-button cases.

With all eyes on the Supreme Court, I wanted to revisit an issue I mentioned glancingly in a post earlier this week: Do lawyers who write briefs opposing Supreme Court view have an ethical conflict if they’re secretly hoping for a chance to argue before the justices? I posed the question as an afterthought in a story about experienced Supreme Court litigators taking over certiorari briefing in a $350,000 dispute between a union pension fund and a landscaping company when it became clear that the otherwise undistinguished case had a shot at Supreme Court review. (And, indeed, the court granted certiorari on Monday.) A Twitter reader very thoughtfully directed me to a 2012 article in the Harvard Journal of Law & Public Policy that attempts to answer the question with some hard data.

In “The Ethics of Opposing Certiorari Before the SupremeCourt,” then Stanford Law student Aaron Tang posited the theory that as the Supreme Court’s docket shrinks and oral arguments become increasingly restricted to an elite appellate bar, “the value associated with each rare opportunity to argue before the court continues to rise.” One way to get before the justices is to prevail with a cert petition for clients seeking review of adverse rulings, Tang said, but the other, of course, is to write an unsuccessful cert opposition brief. “Attorneys who lose at the opposition stage might nevertheless enjoy a personal ‘win’ in the form of an opportunity to argue at the Supreme Court,” he wrote. “As a result, there is an ex ante ethical dilemma for attorneys tasked with opposing certiorari. This dilemma, in turn, might well have important downstream effects on clients who prevailed below and who, unlike their attorneys, would therefore prefer not to be in the Supreme Court at all.”

What hope remains for consumers, employees after SCOTUS Amex ruling?

Alison Frankel
Jun 20, 2013 21:53 UTC

The U.S. Supreme Court’s ruling Thursday in American Express v. Italian Colors has narrowed to an irrelevant pinhole the so-called “effective vindication exception” to mandatory arbitration. Despite dicta in previous Supreme Court cases that suggested arbitration clauses are not enforceable when it is prohibitively expensive for claimants to enforce their rights through the arbitration process, the five justices in the Amex majority held that plaintiffs who sign arbitration agreements don’t have the right to pursue their claims on anything but an individual basis, even if the cost of that pursuit dwarfs their potential recovery.

The effective vindication exception “would certainly cover a provision in an arbitration agreement forbidding the assertion of certain statutory rights. And it would perhaps cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable,” Justice Antonin Scalia wrote for the majority. “But the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.” (As many early commentators have noted, Justice Elena Kagan wrote a memorable rejoinder for the three Amex dissenters: “Here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad.”)

The decision overturns a ruling by the 2nd Circuit Court of Appeals that permitted small businesses to proceed with an antitrust class action against Amex, despite arbitration agreements between the credit card company and the merchants suing over allegedly unfair fees. The majority’s reasoning will extend beyond arbitration over antitrust rights, however, and almost certainly beyond federal causes of action. There’s little doubt that one of the only other decisions to buck the Supreme Court’s 2011 pro-arbitration holding in AT&T Mobility v. Concepcion - a ruling last week by the Massachusetts Supreme Judicial Court, in a consumer case against Dell that raised similar issues of the affordability of pursuing individual claims through arbitration – will not survive Thursday’s Amex opinion. (Dell counsel John Shope of Foley Hoag told me that “it’s very clear” that under Amex, the Massachusetts ruling “is no longer good law, if it ever was.” The plaintiffs’ lawyer in the case,Edward Rapacki of Ellis & Rapacki, said his clients’ claims may yet survive under a slightly different theory.)

What hope remains for consumers, employees after SCOTUS Amex ruling?

Alison Frankel
Jun 20, 2013 21:51 UTC

The U.S. Supreme Court’s ruling Thursday in American Express v. Italian Colors has narrowed to an irrelevant pinhole the so-called “effective vindication exception” to mandatory arbitration. Despite dicta in previous Supreme Court cases that suggested arbitration clauses are not enforceable when it is prohibitively expensive for claimants to enforce their rights through the arbitration process, the five justices in the Amex majority held that plaintiffs who sign arbitration agreements don’t have the right to pursue their claims on anything but an individual basis, even if the cost of that pursuit dwarfs their potential recovery.

The effective vindication exception “would certainly cover a provision in an arbitration agreement forbidding the assertion of certain statutory rights. And it would perhaps cover filing and administrative fees attached to arbitration that are so high as to make access to the forum impracticable,” Justice Antonin Scalia wrote for the majority. “But the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.” (As many early commentators have noted, Justice Elena Kagan wrote a memorable rejoinder for the three Amex dissenters: “Here is the nutshell version of today’s opinion, admirably flaunted rather than camouflaged: Too darn bad.”)

The decision overturns a ruling by the 2nd Circuit Court of Appeals that permitted small businesses to proceed with an antitrust class action against Amex, despite arbitration agreements between the credit card company and the merchants suing over allegedly unfair fees. The majority’s reasoning will extend beyond arbitration over antitrust rights, however, and almost certainly beyond federal causes of action. There’s little doubt that one of the only other decisions to buck the Supreme Court’s 2011 pro-arbitration holding in AT&T Mobility v. Concepcion - a ruling last week by the Massachusetts Supreme Judicial Court, in a consumer case against Dell that raised similar issues of the affordability of pursuing individual claims through arbitration – will not survive Thursday’s Amex opinion. (Dell counsel John Shope of Foley Hoag told me that “it’s very clear” that under Amex, the Massachusetts ruling “is no longer good law, if it ever was.” The plaintiffs’ lawyer in the case,Edward Rapacki of Ellis & Rapacki, said his clients’ claims may yet survive under a slightly different theory.)

Should defendants fear new SEC policy on admissions in settlements?

Alison Frankel
Jun 19, 2013 22:23 UTC

Mary Jo White proved herself to be quite a shrewd strategist on Tuesday, when she made a surprise announcement at The Wall Street Journal’s annual CFO Network Event. The chair of the Securities and Exchange Commission said that the agency would no longer maintain a blanket policy permitting defendants to settle SEC cases without admitting to wrongdoing. “We are going to in certain cases be seeking admissions going forward,” White said, according to my Reuters colleague Sarah Lynch. “Public accountability in particular kinds of cases can be quite important and if we don’t get (admissions), then we litigate them.” White said that in cases involving “widespread harm to investors,” “egregious intentional misconduct” or obstruction of the SEC’s investigation, the agency may insist that defendants accept liability as a condition of settlement.

In an internal email Monday to the staff of the Enforcement Division, co-directors Andrew Ceresney and George Canellos provided a bit more detail than White did in her public remarks. “While the no admit/deny language is a powerful tool, there may be situations where we determine that a different approach is appropriate,” Ceresney and Canellos said in the email, which was provided to me by an SEC representative. “In particular, there may be certain cases where heightened accountability or acceptance of responsibility through the defendant’s admission of misconduct may be appropriate, even if it does not allow us to achieve a prompt resolution. We have been in discussions with Chair White and each of the other commissioners about the types of cases where requiring admissions could be in the public interest. These may include misconduct that harmed large numbers of investors or placed investors or the market at risk of potentially serious harm; where admissions might safeguard against risks posed by the defendant to the investing public, particularly when the defendant engaged in egregious intentional misconduct; or when the defendant engaged in unlawful obstruction of the commission’s investigative processes. In such cases, should we determine that admissions or other acknowledgement of misconduct are critical, we would require such admissions or acknowledgement, or, if the defendants refuse, litigate the case.”

That sounds like a major policy shift from an agency that has for decades permitted defendants to settle civil cases without admitting or denying the SEC’s allegations. Until last year, after all, even defendants who had already been convicted of financial crimes didn’t have to admit liability in settlements with the SEC. The neither-admit-nor-deny policy, as you know, has lately been criticized by a series of federal judges following the lead of U.S. Senior District Judge Jed Rakoff of Manhattan; and has been aggressively questioned by Senator Elizabeth Warren (D-Mass.). Given the public grumbling about the SEC’s perceived failure to obtain accountability from the financial institutions responsible for the economic crisis, it’s probably not an accident that White announced the agency’s new policy at an event well covered by reporters.

Supreme Court to resolve circuit split on timing of appeals

Alison Frankel
Jun 18, 2013 22:24 UTC

Once upon a time, ordinary lawyers appeared at the U.S. Supreme Court. If, by some chance, their client’s case defied long odds and made it onto the justices’ docket, lawyers who’d been on the litigation from its start would make a once-in-a-lifetime argument to the highest court in the land. Those days are mostly gone. As my brilliant Reuters colleague Joan Biskupic discussed Tuesday in a story about the competition to represent a pro se plaintiff whose petition for certiorari was granted last year, arguments at the Supreme Court have come to be the near-exclusive province of lawyers who specialize in this high-prestige, high-profile practice.

A case that the justices agreed Monday to hear in their upcoming term shows that the elite Supreme Court bar actually seems to be on the lookout for issues that will attract the justices’ attention even before cert petitions are filed. The case, Ray Haluch Gravel v. Central Pension Fund, raises the question of whether a federal district court’s ruling on the merits that leaves unresolved a request for contractual attorneys’ fees is a final decision – and thus appealable – or whether the decision is not appealable until the court has ruled on contractual attorneys’ fees. That’s a matter of consequence for parties deciding when to file their appeals, but certainly not a huge constitutional battle. Nor are the sums of money at issue – at most, about $350,000 in supposedly unpaid union contributions and attorneys’ fees – particularly notable, except for the Massachusetts landscaping company and union fund involved in the case. Both the landscaper and the union were represented in federal district court in Boston and at the 1st Circuit Court of Appeals by regional firms with fewer than 50 lawyers.

Yet both had top-notch Supreme Court counsel for their cert filings: Mayer Brown for Ray Haluch and the University of Pennsylvania Supreme Court Clinic for the union. Dan Himmelfarb of Mayer Brown and Stephanos Bibas of Penn declined to comment, but it’s a good bet that when the 1st Circuit issued its decision last September, noting a deep split in the federal circuits on whether contractual attorneys’ fees are collateral to the merits of a case, the Supreme Court bar suddenly became interested in an otherwise modest dispute between a small business and the union representing a few of its employees.

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