InHouse ACCess : InHouse ACCess: Association of Corporate Counsel : ACC : The In-House Counsel Bar Association

I must admit that I seldom look at my law school’s magazine. I generally find these self-promotional efforts a little tedious, and given the number of schools that were attended by my wife and kids we are deluged by these periodicals which never focus on the serious issue of how to get costs down and quality up, but seem to promote an underlying premise which is we will tell you how great we are and you will give us money.

However, in the last issue of the Gargoyle, the publication of the University of Wisconsin Law School, there was a note on program involving internships at law firms in Asia. It caught my attention initially because I thought this was a response to the declining access to internships in the US. It was not, although who knows what the future will bring.

The program has apparently been around for a while. When I was there a foreign internship was Denver. Although it was and still is small in size, for someone like myself who worked for a global company, tried cases in international forums, tried cases involving significant international disputes and worked daily with colleagues around the world, this program has a real potential of beginning to change the focus of legal education in this country which has tended to focus on our legal traditions as the only game in town.
 

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I saw Ken Lewis’ when he attempted to explain to skeptical Congressmen why he did not cave to threats of government officials to fire him and his Board if he declared a materially adverse condition in the Merrill acquisition, but only considered it as an expression of the seriousness of the economic condition with “other factors” in deciding to go forward with the acquisition. Frankly, that explanation was too complex for me—sounds like he caved or he was not being candid about the threats.

However, it reminded me of a situation most of you likely never heard of or imagined was possible. That you as a lawyer could be threatened by the US Supreme Court to be sent to federal prison if you did not refuse to abide by your client’s request  to represent it. I am pleased that I did not cave to the US Supreme Court threats. It was not something simple like trying to represent a client before a court in which you were not admitted to practice. It is a troubling situation in which the Supreme Court, in my view attempted to impose its notion of administrative efficiency above the client’s interest in being adequately represented. It is a reflection of an unfortunate tendency of courts to forget that they are there to serve public interest, not have the public serve their interests.

The situation developed in the context of a major international tax dispute in which certain states had undertaken to tax subsidiaries of non-domiciled foreign parents using a formula that included the foreign parent’s income in the subsidiaries’ tax base—it was called worldwide combined apportionment. My client, Alcan, Inc., was a leading challenger of the constitutionality of this tax in the courts, and for a long time the only challenger. As our efforts began to achieve success other foreign parents were attracted to file their own cases. One was ICI, Plc, a British company that followed our novel approach of obtaining jurisdiction of California outside of the 9th Circuit. It copied us by filing a case in the 7th Circuit. When our case prevailed by having the district court rule that Alcan had standing, ICI moved to have its case consolidated with ours.

After a successful appeal before the 7th Circuit, California filed a cert petition that was granted; however, the Supreme Court ordered that only one attorney could appear for both clients. My client for relatively rational reasons insisted that I represent it before the Court. We had developed the litigation strategy and implemented it alone until our success attracted others. ICI had moved for consolidation; we did invite them; they wanted to take advantage of our success. However, now ICI wanted to take control of the case. Undoubtedly prompted by their outside counsel who had no intention of letting an in-house attorney argue the most prestigious tax case of the century, ICI insisted that they would not consent to my arguing the case. There was an impasse. When I approached the clerk of the US Supreme Court to resolve the issue it created, the reaction was a threat that if I was unable to settle the matter it was likely that the Court would order my incarceration in federal prison. Norm Krivosha, former ACC Chairman, and Chief Justice of the Nebraska Supreme Court offered to help. He said that if I could get sent to a prison in Minnesota his daughter would bring me warm cookies. It is funny now—it was not so funny then.

Unlike Ken Lewis, I did not find other reasons to conclude that it was in the best interest of my client not to argue the case; in the last minute ICI’s outside counsel apparently caved—they consented to my arguing the case. Perhaps they were concerned about federal prison and were able to discover other reasons why it was in their client’s interest for me to argue the case.

However, there is a lesson in this—as a lawyer you must ultimately defend the interests of your client—even in appropriate circumstances, against the United States Supreme Court.
 

 

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I know you are waiting for my insight into the local rule making process, but I just have to respond to the news about the Mayer Brown Associates sent in-house at a fraction of their former salaries and without any guarantee that they will remain employed. The question is what does that mean for in-house salaries.

These were lawyers who were making $200,000 and are now making $60,000 working for United Air Lines and Fortune Brands just to name a few. Apparently, the deal was worked out as an alternative to unemployment; Mayer Brown has apparently let over 70 lawyers go since last November. When I first took on this role of blogger for ACC one of the topics that it was suggested that I write about was the high salaries of associates’ at large firms. What a change has taken place in a year. Now the topic is how the new low salaries for associates at law firms might be harbingers of things to come in-house.

In house lawyers who expressed concern about outside firm salaries probably never imagined that the solution might have a direct impact on their own salaries, but the implication is hard to miss. Competition is good and I never really believed that the associates deserved the salaries they were making because they could not deliver the value that justified it. The same principle applies to in-house attorneys—time in grade alone does not justify salary increases (remember those things in your remote past).

Today I had a conversation with a long time friend in large firm and he expressed the view that when the economy turns (we both agreed it would be a lot later than are optimistic political leaders) it was not likely that the practice as they new it would return. People would not be willing to pay as they did in the past and delivery of legal services had to be fundamentally rethought.

Those in legal marketing are likely going to have to reinvent themselves as the old shibboleths that defined the kernels their sales pitch may become irrelevant. Who knows, you may even see prices on law firm web sites.

What does it mean for in-house—at the very least it means a lot more people vying for a lot fewer jobs and a level of competition which may well change the culture of the practice.
 

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For those of your who do not try cases this should be eye opening—for  those of you who do it should be annoying.

Let’s start with law school, Federal Civil Procedure to be precise. Remember your professor with great intonation telling about the adoption of these rules—relatively stable these rules governed practice throughout the federal system, or at least that was what you were led to believe.
Then there was reality; in fact, every district court had taken it upon itself to modify, annul or in some cases totally obliterate those federal rules by adopting a set of local rules. Added to that was a series of standing orders by individual judges.

By the time you were finished the Federal Rules of Civil Procedure which were supposed to bring uniformity to federal practice which you had worked so hard to master in law school had been relegated to a quaint historical footnote.

File a motion for summary judgment without a statement of undisputed facts, or was that in the district court in another state, and gotcha. Sure you could keep looking up these rules but try it with 10 or 15 cases going on all over the country.

Did I mention tentatives (tentatives are rulings by court on motions handed out before oral argument) . You guys in California will recognize them. They are a state court practice—yep in federal court too, but only in California. In a global world we have a federal court system that gives new meaning to the term: parochial. State practice is typically more uniform than federal court practice in the same state.

Sure I have complained about this for years, so why am I writing about it now. I am conducting an ADR study for the federal court and in connection with that study I was asked to address the local federal court local rules advisory committee. This was the first time I witnessed the how and why these rules are adopted—an experience I will share with you in part 2.
 

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It was not the day I was first admitted to practice, or the day I won my first jury trial, or the day I argued at the United States Supreme Court. It was this morning.

I was coming home from a dinner meeting at the Cleveland Committee on World Affairs. I was driving our small Hyundai and was the first car in line exiting the expressway. Turning right on red is prohibited. As I moved forward slowly waiting for the light to change, the driver behind me accelerated more than he intended, and hit the back of my car.

We got out and he was very gracious, conceding he was at fault.  He was also concerned as to whether I was hurt, which I assured him I was not. Two police cars that had stopped someone across the road saw the incident and came over.

When the police arrived he was very explicit concerning his fault, violating every rule that lawyers and insurers had developed. It was dark and there was no apparent damage, but we agreed that I should confirm that fact. He had voluntarily given me his contact information. We signed a document agreeing not to file a formal complaint—believing we could work this out fairly.

The next day I noticed a slight bend in the plastic bumper and that one of the fasteners was sheared. I was most concerned that the impact had violated the integrity of the rust-proofing. I called the fellow who hit me and left a message asking him to send me his e-mail so I could send him a picture so he could see there really was a problem. I also told him I was intending to take the car to the Hyundai dealer for a repair quote, but wanted to clear it with him first.

He promptly returned my call, but I was not around and a visit from a former law school classmate and his wife delayed my return call. He called this morning before I could return his call —I was surprised that the caller ID identified him as a lawyer from a large firm. … He was acting like a responsible human being.  Before I could say anything he said he did not need a picture just send him the bill. I said that I would not do that, I would get an estimate from the dealer first to insure that he felt it was fair and did not have better alternative—then I apologized for not getting back to him sooner telling him a law school classmate and his wife were visiting and I had become distracted.

The silence was amazing as he realized I was a lawyer too – to his surprise I was acting like a responsible human being. He had accepted his responsibility for fault—I had accepted my responsibility for not abusing that fact. Why did I not see this conduct in the profession before I retired; I hope civility is returning to the profession, and this experience not was merely an aberration.

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Many of us in-house types work for business types who have gotten their MBA’s at Harvard, Wharton and similar business schools. A short time ago I did a blog on how these schools were attempting to improve their tarnished image by doing such creative things as instituting a course on risk—very creative.

We lawyers need to keep up with these developments so we can better serve our clients. Last night I was watching the rerun of Fox Business News “HAPPY HOUR” and they interviewed a venture capitalist who was looking for government guaranteed loans for his portfolio of companies because he said no one would lend them money. Needless to say the two FBN anchors who interviewed him where more than bit skeptical of his claim that this was not a request for a taxpayer bailout. Listening to the discussion it became clear to me that there were a set of rules here that the Dean of Harvard and other business schools should be developing in the course on risk management. We lawyers will be ahead of the game and help them build their arguments.

Rule #1 Never Admit That Your Business Venture Was Risky.

Even if you are a venture capitalist always claim that the businesses that you funded were not speculative, and that their present state of distress was due to forces beyond their control. You know the stick—it was the economy, the weather, the gods, but never admit there was ever any risk involved.

Rule # 2 Never Ask for Government Money Always Ask For Government Loans or Guarantees.

By putting your request in this format you are able to deny that you are asking for any money from the taxpayers. NO, NO you repeat with authority—we are not asking for any money from the taxpayer.

Rule # 3 Always Claim that Your Motive Is Altruism. 

The idea for this came to you because you saw the great benefit to the economy. For example, you note that your start-up who has burnt through 10 million in capital (your clients’ unfortunately) and has 200 employees, now is ready to grow to 800 employees (and burn through 40 million in capital), but the economy’s present state (not their flawed business model) has resulted in no one being willing to give them any money.

Rule # 4 Point Out How Helping Your Portfolio Is Going To Earn Money For The Taxpayer.

If you have no examples to make your point use the first Chrysler bailout and hint Lee Iacocca may be coming out of retirement.

Rule # 5 Avoid Being Asked Why They Don’t Just Stay At The Present Size and Use Their Earnings To Grow More Slowly.

Making your earphone fall out of your ear or claiming that there is a bad audio connection is the best way to deal with this question—if you there in person cough or feign a heart attack; don’t worry Harvard, Wharton and Stanford are collaborating on a course that address earnings; they just got delayed because of the effort they put into the courses on stock options. 

If none of these work refer the matter to your lawyer and he or she will say something no one will understand—remember they drafted those toxic instruments.
 

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The former CFO of my former company called me this morning outraged by an article in the Cleveland Plain Dealer touting the hourly rates that Jones Day lawyers were charging Chrysler in the Chrysler bankruptcy. They apparently billed 18.9 million since November trying to keep Chrysler out of bankruptcy. Not bad for being unsuccessful, even with the weight of the US government on your side.

The article goes on to say that they may be awarded up to 115 million by the court when the bankruptcy is over. With hourly rates from 950/hr to 400/hr, the number is not hard to imagine given the minutia law schools teach you to considered no matter how tangential the relevance—and of course unrestrained hourly rates reward.

Perhaps what makes this entire thing a bit ironic is that the effort is to save the US auto industry is apparently being accomplished by making it Italian. I am a dual US-Italian citizen, having recently had my bloodline Italian citizenship recognized, and I ride a Vespa, so to me Italian is sort of American, unlike Toyota and Hyundai among others who have had auto plants in the United States for years. Good job Jones Day—you saved the American auto industry by making it Italian; and guess who is paying for this effort—us taxpayers. Enjoy some of our money on the Amalfi coast and in Tuscany.

Hey Susan Hackett—you might want to rethink the ACC Value Challenge over a cappuccino—do not worry about the cost of the cappuccino just send the bill to the Treasury.

 
 

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I know you are quite surprised, having just written a blog on robot judges, I am writing about something as mundane as a decision that just came down from the United States Supreme Court. Well, I have a special interest in this case having filed an amicus brief in support of the Petitioners on behalf of the Washington Legal Foundation and because the topic was of considerable concern to me because it involved the quality of our legal system.

If you read the opinion, it may appear to you to be a simple interpretation of CERCLA. Shell was one of the parties. The district court and the 9th Circuit had concluded that Shell arranged for the disposal of a hazardous waste, simply because it knew that some of the product it sold could be spilled when unloaded.

The 9th Circuit also rejected the apportionment that the district court adopted in limiting the liability of the parties suggesting that apportionment was only available by meeting a standard of proof which the dissenting members’ en banc pointed out was essentially impossible to prove.

My brief demonstrated that this conduct by the courts was not an aberration, but a systematic effort to substitute their judgment as to who should be liable for that of the Congress, taking them step by step through a series of cases I litigated where the courts perverted common meanings and concocted legal standards to escape liability that were incapable of being achieved. These were merely efforts to cloak their improper conduct.

Although our case was cited by the Supreme for the principle that the Supreme Court finally required the 9th Circuit apply, not simply pay lip-service, I was saddened that my client had essentially been robbed by a judiciary who did not understand their role. In many respects the facts of our case were far more compelling than the Burlington facts. For example, you could only conclude that our waste was a hazardous substance if you concluded every substance in the universe was a hazardous substance and that the proof the courts required to establish to divisibility was not extremely difficult as in the Burlington case; in our case it was impossible. So why did we not get cert granted although were had wide spread amicus support. I suspect it was because it was the heyday of the environmental movement. Although the court voted 8 to 1 in favor of the Petitioners, not a close case, taking our case was simply not the cool thing to do—the Supreme Court had more important things to do than protect the rights and property of my clients; I wonder what that might have been?


 

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You have just completed the final review of your brief for summary judgment and have electronically sent it to your, administrative assistant, a software program that will automatically put the brief in the filing format required by the court and send it along in a few nanoseconds.
As you lift your finger from the enter button, your e-mail announces that you have just received notice from the court that a decision has been filed on your motion. You quickly open the opinion and go to last page—you lost. You begin reading to find out why and as you do it becomes clear to you that the software judicial decision simulation package you bought a few months ago and used to give your client an optimistic assessment of the outcome must have had a bug.
You pick up the phone and make a call to the simulation software vendor, hoping to get an explanation before you call your client. He tells you that you are the fifth call he has had concerning the problem—the programmers are reviewing the software and the problem does not seem to be in their system; the judicial conference had announced that the robot judges had just been reprogrammed with the amendments to the statute and the bug must be in their newest patch.
Sound crazy—perhaps not as crazy as you think. I just took a look at the last edition of WESLEYAN,  the magazine produced by my alma mater, and noticed an article entitled “Can Robots Tell Right From Wrong”. It was about a book, (Moral Machines: Teaching Robots Right From Wrong, Oxford University Press 2009) by a former class mate, Wendell Wallach ’68, and his presentation at one of the seminars at Home Coming.
I have not read the book and the article was more about Wendell and how he got to this point, but there was one notable feature in his background that was particularly interesting. Wendell had applied to Harvard Law School and was wait listed, but was accepted at the Divinity School which he attended for a year, apparently continuing to explore a series of post graduate educational experiences which never resulted in degrees, but obviously contributed to developing a creative and thoughtful mind and spirit.
So are Robot Judges in our future? Wendell, who is now has been consulting at Yale’s Interdisciplinary Center for Bioethics, says that “[n]o one has convinced him that we understand enough about human intelligence” to be able to program a machine to make moral and ethical decisions like humans. He describes himself, however, as a “friendly skeptic”. What is a friendly skeptic?   To me a friendly skeptic is someone who grew up watching with amazement the fictional computer of the Enterprise in Star Trek who is typing this on a laptop which is far more powerful, often depends on my GPS to tell me which is the fastest way to a given location and has a portfolio whose value can dramatically change based on the decisions of numerous machines as to when to buy or sell.
   
 

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