Ken Lewis' Testimony Before the House Committee Reminded Me When I Did Not Cave to Threats by the United States Supreme Court
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.
