Tuesday, December 16, 2008

Discrimination Claims By Attorney Remanded

The New Jersey Supreme Court remanded a case involving an employment discrimination claim brought by a former staff attorney against UBS PaineWebber,Inc.("PW"). During a previous employment, the attorney had "experienced severe depression, and was terminated after being critized both for her work and for failing to keep up her personal appearance." She had initially received positive performance evaluations and a management assignment at PW, but later received an evaluation that "criticized her judment, her temperment and her work habits."

The attorney had sued on a claim of sexual discrimination based on two incidents involving her supervisor. At a wedding, she had introduced her boyfriend to her PW co-workers and the supervisor said: "Everyone at the table with a cock used to have [her] reporting to him." She did not immediately complain but sought medical assistance, leading to a diagnosis of bipolar disorder. The second incident took place a few days after the attorney had misidentified the division where she worked at a legal department function. The supervisor loudly said in the office that he nearly "wet his pants" at the misidentification. The lawyer immediately complained to PW's HR department.

The wrongful termination claim was based on a different series of events. She had expressed concern about an ethical conflict in her role as an investigator of customer complaints and had also sought a work schedule accomodation for her biploar condition. Shortly thereafter, she was terminated.

Following a lengthy trial, a jury ruled in favor of PW on the substantive claims. While the jury was deliberating on bifurcated claims of negligent destruction and fraudulent concealment of evidence, a settlement on those claims was reached that preserved her right to appellate review.

Here, the court held that the lawyer was entitled to the benefit of an adverse inference instruction on the spoilation of evidence claim, that the trial court had erred in determining that certain evidence could not be considered in relation to claim that the attorney had engaged in protected activity, that defense counsel made improper remarks in summation and that summary judgment was improperly granted to PW on a common law wrongful termination claim. The case was remanded for further proceedings. (Mike Frisch)

December 16, 2008 in Law & Business | Permalink | Comments (0) | TrackBack (0)

Driving In Crete

An Illinois hearing board has recommended a one year suspension with automatic reinstatement in a case involving neglect of a client matter and a series of problems with respect to an alcohol-related traffic offense. The driving violation had taken place in the Village of Crete:

Pagorek [the prosecutor]testified that Respondent’s cases were pending an unusually long time, and were handled by ten or twelve different judges. The fact that the case file was two inches thick was also extraordinary. Pagorek typically concludes cases in nine to twelve months, and has never handled any other matter that lasted as long as Respondent’s cases or had as many warrants for arrest issued. Pagorek noted a pattern of Respondent’s failure to appear for scheduled court dates and then presenting motions on days when Pagorek was not present. He stated that Respondent’s actions frustrated the orderly prosecution of the cases. On cross examination, Pagorek acknowledged that having a motion to quash and recall a warrant heard in the absence of the village prosecutor is not abnormal.

A dissent would find an additional violation of dishonest billing in the client matter and impose an additional "until further court order" requirement as part of the discipline. (Mike Frisch)

December 16, 2008 in Bar Discipline & Process | Permalink | Comments (1) | TrackBack (0)

Monday, December 15, 2008

Selling BigLaw Short

[by Bill Henderson, cross-posted to the ELS Blog]

It is mid-December and the vast majority of large law firms are frantically pressing their clients for their fees in order to pay down the firm's credit lines and generate a profit pool that can hold the partnership together.  See, e.g., Susan Beck, Collecting, But Hardly Calm and Cool, Am Law Daily (Dec. 10, 2008).  Every investor knows that leverage can be a wonderful thing in boom times but a killer in a down market.  In the last few years, law firms have expanded the use of two types of leverage:  (1) bank financing, often for working capital, and (2) salaried lawyers, in the form of contract attorneys, staff attorneys, associates, of counsel, and income partners, who each generate profits for the equity partners. 

Yet, with the potential for historically low collection rates, a large proportion of Biglaw firms are in one hell of a vise.  Salaried lawyers represent fixed costs. And even if you lay them off, managers are under intense pressure to pay a reasonable severance (e.g., 6 months pay) to preserve the firm's reputation for an eventual recovery.  Further, firms with the most human capital leverage will nonetheless be stuck with vast expanses of Class A office space under lease terms negotiated during the salad days.  If Biglaw revenues go down 20% for the fiscal year, which is certainly in the realm of possibility for many firms with large capital market practices, profits could dive by 50% or more. 

Similar to what happened at Heller Ehrman, the grim financials could put the firms in violation of their bank lending agreements, see Drew Combs, Why Heller Died, The American Lawyer (Nov. 2009), thus requiring partners to pony up more cash.   Sensing trouble, lawyers with the most options start heading for the doors, initiating a sudden and rapid death spiral.  In short, there is good chance that several hallowed Biglaw firms, particularly those with weak balance sheets, will cease to exist sometime in early to mid 2009. 

Through the Law Firms Working Group, I have access to detailed financial reports for law firms in the Am Law 200 and the NLJ 250.  Here is what the revenues per lawyer (RPL) figures for Thelen and Heller Ehrman looked like for fiscal years 2003 to 2007:
Thelen
Heller

Most firms in the Am Law 200 posted steady rises in RPL during the 2003 to 2007 time period.  But it is pretty amazing that in the cases of Thelen and Heller Ehrman, both old-line firms with established brands, seemingly modest diminutions in revenues were precurors to total collapse.  As noted by Marc Galanter and I in The Elastic Tournament, large law firms have become immensely fragile institutions.   As large firm lawyers, many of them young and connected to clients, flood the streets over the next several months, look for a new model of corporate law practice to emerge that is modest, thrifty, and more sustainable.

Closer to home for us academics, the collapse of Biglaw could have a signficant impact on law schools, particularly those at the top of the food chain who could pass along ever higher debt loads onto students because of a virtual lock on lucrative Biglaw jobs.  Cf. Mike Cahill, Legal Education Bubble?, PrawfsBlawg (Dec. 15, 2008).  Even if law school follows the usual countercyclical pattern of higher admission volumes, the lack of cheap capital in combination with the lack of high paying jobs may stifle enrollment.   It is time to pay attention and carefully evaluate assumptions we have formerly taken for granted.

December 15, 2008 in Law Firms | Permalink | Comments (2) | TrackBack (0)

Convicted Lobbyist Reinstated

A prominent Maryland lobbyist who had been convicted of mail and wire fraud was ordered reinstated to Pennsylvania practice by the Pennsylvania Supreme Court. The criminal case involved a scheme with a Maryland state representative to falsely indicate an intention to introduce legislation that would adversely affect the lobbyist's client and "was simply a ploy enabling [the lobbyist/lawyer] to earn excessive fees from certain clients." The conviction and sentence took place in 2000.

One of the witnesses in the reinstatement proceeding was Baltimore Orioles majority owner Peter Angelos, who considers the petitioner "to have a first rate legal mind and...is held in high regard by the legislators." The Disciplinary Board cited Angelos' opinion as "persuasive testimony."

Reinstatement was deemed appropriate because "[h]e expressed regret for his criminal involvement and has implemented safeguards to avoid any such problems in the future. Due to his past misconduct Petitioner has resolved to be more circumspect in his dealings with those he lobbies." (Mike Frisch)

December 15, 2008 in Bar Discipline & Process | Permalink | Comments (0) | TrackBack (0)

In Court Battery Merits Significant Suspension

In a case that has received our attention before, the Louisiana Attorney Disciplinary Board filed a recommendation on December 8 that has rejected as unduly lenient a proposed 30 day suspension of a lawyer convicted of simple battery on opposing counsel in open court.

At a motion for an accounting of costs, attorney Greenberg called attorney Lewis a "jackass." Lewis responded, "Your mother is a jackass." The battery by Greenberg on Lewis followed and the board notes: "After extensive research for further guidance, we can find no other case in Louisiana where an attorney physically  assaulted opposing counsel in front of a judge during a court hearing." The most comparable case was a lawyer who threatened opposing counsel with a firearm after a deposition: he got suspended for a year and a day.

The board here recommends the same sanction for Greenberg:

Having an officer of the court physically assaulting another during a hearing harkens back to the days of settling differences by duels, and therefore undermines our system of civilized justice. These facts cause Mr. Greenberg's actions to be construed as a whole new category of misconduct within the jurisprudence, requiring a greater sanction to serve as an example for deterring this type of serious misconduct.

The board proposes a reprimand of Lewis for the vulgarity in open court. It also notes that Greenberg is a former district attorney in the parish where the incident took place  and "received considerable television coverage after he was arrested and led from the courthouse that day in handcuffs." (Mike Frisch)

December 15, 2008 in Bar Discipline & Process | Permalink | Comments (6) | TrackBack (0)

Another Victim Of Hurricane Katrina

A Louisiana attorney was retained for a $200 fee to help the client in a landlord-tenant matter. She received a settlement check for the benefit of the client of slightly over $4,200 but fled from Hurricane Katrina before it could be deposited. She cashed the check rather than deposit it in escrow. Her office was flooded and practice severely interrupted by the disaster. The attorney was relatively inexperienced, having been in solo practice for four months.

The Louisiana Supreme Court found that the violations were "largely negligent" and imposed a one-year suspension with six months probated. The client had not suffered any prejudice. A dissent agrees with the Attorney Disciplinary Board that the circumstances merit a fully-probated suspension, concluding that the hurricane and flooding were the reason that the misconduct occured and that further disruption of her previously unblemished legal career was the wrong response. I'd have to say that I agree. (Mike Frisch)

December 15, 2008 in Bar Discipline & Process | Permalink | Comments (4) | TrackBack (0)

Conviction Reversed For Ineffective Assistance Of Counsel

The South Carolina Supreme Court held that the court below had erred in concluding that defense counsel had adequately prepared for trial in a case involving charges of armed robbery and kidnapping. The client was convicted of kidnapping and sentenced to life without parole. Post conviction relief was appropriate:

Newell [the attorney] did not articulate a strategy because he did not testify at the PCR hearing.  Although Newell did state to the trial court he believed the witnesses would not add much to petitioner’s defense, we find this was not objectively reasonable given the defense theory of the case.  The only defense Newell presented to the jury was that petitioner and Garrett knew each other through drug dealing.  If witnesses other than petitioner were willing to testify to this fact, certainly that would have added significantly to the credibility of petitioner’s case.  Thus, we find the PCR court erred in finding that Newell offered an objectively valid strategic reason not to call these witnesses.

Furthermore, both the trial transcript and petitioner’s PCR testimony inescapably point to the conclusion that Newell simply had not adequately prepared the defense case.  Newell himself admitted to the trial court he had only learned of defense witnesses that morning, and therefore they had neither been interviewed nor subpoenaed.  Petitioner corroborated this at the PCR hearing when he stated Newell had only spoken to him about the case on the morning of trial.

We hold the evidence clearly shows that Newell inadequately prepared for trial.  See Ard v. Catoe, supra (at a minimum, counsel has the duty to interview potential witnesses).  This was unreasonable in light of the fact that Newell had several months’ notice that petitioner was facing LWOP if convicted.  Therefore, we find counsel deficient in this regard. 

As to the prejudice resulting from counsel’s deficient performance, we believe petitioner clearly was prejudiced by Newell’s failure to subpoena and call witnesses who would have supported petitioner’s own testimony at trial.  With its not-guilty verdict on the armed robbery charge, the jury necessarily rejected several aspects of Garrett’s account, and accepted as true certain parts of petitioner’s testimony.  Moreover, the jury’s questions during deliberations indicate it also struggled with whether petitioner was guilty of kidnapping.  Thus, we find that if additional witnesses had confirmed petitioner’s testimony, there is a reasonable likelihood the result of the trial would have been different on the kidnapping count.

Accordingly, the PCR court erred in not finding ineffective assistance of counsel on this issue.

The court further found ineffective assistance of counsel in closing argument. (Mike Frisch)

December 15, 2008 in Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Charges Allege Conspiring Against Client

The Illinois ARDC has filed a complaint charged two partners of of a self-adevertised "boutique law firm" with using a client's confidences and secrets of a former client. The charges allege that the lawyers had agreed to provide legal services to a client that provided them with computer services. The client was the sole shareholder of a company that provided hardware and software computer services. An exchange of legal for computer services on a "work trade" basis was arranged.

The key allegations relate to the "lead employee" of the client's business. The lawyer learned that the client was receptive to offering an ownership interest in the business to that employee and that the client had no "anti-competition" agreements with any of his employees.

The firm allegedly conspired with the employee to start a competing business and lure away the client's work force.  One of the partners allegedly "formulated a plan to start a computer services business that she knew would compete directly with {the client's] business" on behalf of the employee and entered into a business arrangement with the new entity. The client continued to be represented by the firm and was not advised of the firm's dealings with the employee. The client's relationship with the employee was destroyed and his business had to be closed.

Thus:

As an attorney for James Throgmorton [the client], Jackson was acting as a fiduciary with respect to Throgmorton’s business plans regarding Computer Warehouse and M.O.C.C.I., LLC. Because of this fiduciary relationship, Jackson was obligated to exercise at all times the highest degree of honesty, loyalty and good faith regarding her handling of Throgmorton’s business matters and was prohibited from taking action for her own benefit or enrichment. As a consequence of this fiduciary duty and relationship, Jackson was prohibited from engaging in actions that gave preference to her own business and personal interests over the interests of Throgmorton and his business interests.

Jackson knew that Mayer [the employee]intended to hire Throgmorton’s Computer Warehouse employees as NCS employees. Jackson further knew that Computer Warehouse employees had no employment agreement which constricted their ability to bring the clients they served at Computer Warehouse with them to NCS. When she assessed the potential viability of opening a computer services business with James Mayer, Jackson knew she was using confidential knowledge that she had gained about Computer Warehouse while representing Throgmorton.

By going into business with Mayer, Jackson acted on confidential knowledge she had gained while representing Throgmorton; including, but not limited to, knowledge from Throgmorton that Mayer was receptive to a business arrangement that would permit him to gain an ownership interest in a computer business which provided the same services as Computer Warehouse, and knowledge that Computer Warehouse employees were free to leave Computer Warehouse unfettered by anti-competition clauses in the terms of their employment.

The charges are brought in a single complaint against both partners in the law firm, although most of the interaction with the employee was through a single lawyer. Indeed, it appears from the above quote that only lawyer Jackson is charged with the core offenses. It is alleged that the other partner was involved in the representation of the client and took an interest in the new business entity. If the charges are proven, it appears that there may be a legitimate questions concerning whether both partners are equally culpable.

Update: I was attempting to describe the charges made by the Administrator and have no idea about the quality of the underlying evidence or any prediction as to what the outcome will be after the evidence is presented. (Mike Frisch) 

December 15, 2008 in Bar Discipline & Process | Permalink | Comments (5) | TrackBack (0)