In House: June 2009 Archives
In House - The FindLaw Corporate Counsel Blog

June 2009 Archives

After years of delays and denials from the Bush EPA, California finally has permission to impose strict regulations on the amount of greenhouse gas emissions produced by cars in the state. 

The formal waiver under the Clean Air Act allows California to require automakers to increase the efficiency of the vehicles they intend to sell in California by 40% over the next seven years, resulting in an average fuel economy of 35.5 miles per gallon by 2016.

President Obama proposed a national standard for automobiles in May that would largely mirror California's plan.  Since many states have already signaled their intention to follow California's lead, today's decision could speed implementation of the national standard.

This would be good news for the auto industry, since they could focus on one standard rather than 50. 

This national standard would be just the first step in the Obama administration's plan to expand regulation of pollution linked to climate change. 

As I wrote last week, many corporate counsel in energy and manufacturing companies have already begun consulting with environmental experts to get a sense of their current greenhouse gas impact, and to explore ways of complying with the eventual regulations.

Madoff Gets 150 Years for "Evil" Ponzi Scheme

Bernard Madoff will be spending the rest of his life in prison.  Earlier today, the King of Ponzi was sentence to the maximum possible term of 150 years for defrauding his clients out of billions.

The harsh sentence renders the request by Madoff's attorney, Ira Lee Sorkin, for a twelve year term almost laughable. 

The judge called Madoff's crimes "extraordinarily evil."  Now, I was never a litigator, but I'm pretty sure that's never a good sign.

Madoff did apologize to his victims, for whatever that's worth.  At this point, though, I'm pretty sure that they don't give a damn how sorry he is.

Obviously, the 71 year-old Madoff won't be serving the full sentence, but the judge said that it was necessary in order to deter others from running the same kind of Ponzi schemes.

So let this be a lesson for in house counsel that you can pass along to the heads of your companies: apologizing is nice and all, but not stealing the money in the first place is probably the better strategy.

See Also:
Bernard Madoff gets maximum 150 years in prison (AP)
Madoff's 150-Year Sentence: Long But Not Longest (WSJ Law Blog)
Breaking: Madoff Sentenced to 150 Years (Above the Law)

Regulators in China Will Scuttle Hummer Deal, State Radio Says

When GM announced the sale of its Hummer brand, it was a rare bit of good news for the troubled automaker as it entered bankruptcy.  Unfortunately, it looks like the honeymoon's over for the Hummer deal.

GM sold Hummer to a dark horse Chinese company that specializes in manufacturing heavy trucks and highway equipment.  Any sale would have to go through Beijing, and state radio is reporting that regulators will likely reject the deal.

Bernanke to Congress: I Am Not a Bully

Testifying on Capitol Hill today, Federal Reserve Chairman Ben Bernanke told a House committee that he didn't put the screws to Bank of America executives in order to force them to acquire Merrill Lynch.

That deal wound up costing taxpayers $20 million, and Bank of America CEO Kenneth Lewis stated that the Treasury Secretary at the time, Henry Paulson, and other federal regulators threatened his job after he expressed doubts about the deal.  Bernanke told the committee that he was not involved in any such intimidation.

Bernanke also denied that he or any other member of the Fed had instructed BoA to cover up information about Merrill's deep financial troubles, arguing that failing to disclose that information would have violated the executives' fiduciary duty to the company's shareholders.

In addition, Bernanke defended the deal as necessary to avoid a complete meltdown of the financial system at a time when Lehman Brothers had just collapsed and lending was essentially frozen. 
After the Supreme Court's decision in Massachusetts v. EPA, which found that the agency has the ability under the Clean Air Act to regulate greenhouse gas emissions from new motor vehicles, the Bush administration dragged its feet when it came to actually regulating the gases. 

The Obama administration, on the other hand, is moving forward at full speed.  On April 17, the EPA released a finding that carbon dioxide and four other greenhouse gases are harmful to public health.  This now obligates the EPA to set rules for the emissions from new automobiles.

Exceptional Lawyers, or Lawyer Exceptionalism?

A note to in house counsel everywhere: You aren't special.

At least that's the thrust of a post in Rees Morrison's Law Department Management Blog.

It's not like it sounds, though.  Morrison is simply taking law departments to task for engaging in "lawyer exceptionalism" - the idea that lawyers are somehow exempt from the rules and practices that govern the work of other employees within a company.  He's not actually making qualitative judgments about the lawyers themselves, of course.
The Obama administration's plan to alter regulations governing financial institutions will undoubtedly significantly impact those institutions' legal departments.  The proposal promises to profoundly alter the regulatory scheme that such institutions work under.  Nowhere is this prediction more pronounced than on the subject of mandatory arbitration of claims against lenders and brokers. 

Under the present system, individuals with a claim against lenders or brokers usually sign contracts that bind them to mandatory arbitration of their claims.  This arbitration can occur in a jurisdiction unrelated to the individual and their claim, and the right to choose the arbitrator is generally reserved for the financial institution. 
As if banks haven't had enough to worry about recently, now the Obama administration is planning the biggest financial reform in two generations. 

In a speech today, President Obama outlined his plans for the new financial regulations scheme.  Among the changes: the administration will eliminate the Office of Thrift Supervision and place the Federal Reserve in charge of overseeing systemic risks.  The goal of the changes is to streamline bank supervision and reduce risk that could spread out from the financial sector and threaten the broader economy.

Companies Cut Corporate Counsel Compensation

Yesterday I wrote about a recent survey that showed that in house counsel were generally quite satisfied with their careers.  That trend might change rapidly, however, given the results of a new study that reveals how corporate counsel compensation has cratered recently.

According to the post in the InHouse Insider Blog, companies have begun cutting benefits like 401k matching contributions and stock options.  Also on the chopping block are bonuses, which are tied for the most part to the company's performance.  In a down economy, that means that bonuses will be small or nonexistent. 

In House Counsel Are Plentiful and Plenty Happy

Rees Morrison over at the Law Department Management Blog had an interesting post today about a survey that was recently cited in Researching the Law, Vol. 20, Spring 2009 at 1.

The study examined over 4,000 lawyers in its first round, then interviewed over 70 percent of the first group along with an 26% new attorneys.

The researchers found that only 2.2% of attorneys worked in house two years after they graduated.  Five years later, however, and 19% of the attorneys were working in a corporate legal department.

The IRS Is Coming After Employee Work Phones

The IRS really wants to help businesses comply with tax laws regarding employee cell phones, so the agency has issued a new proposal that would have employers assign 25% of the cost of an employee's cell phone as taxable benefit.

This represents a shift to stricter enforcement of a rule that treats cell phones as a benefit to the employee, rather than an instrument of the employee's work.

Yahoo's Stable of Attorneys Is Two Lawyers Lighter

It's no secret that Yahoo has been tossing executives and employees aside frequently lately as the company tries to stop its long slide towards obscurity and irrelevance.  Six months ago, Yahoo's top IP lawyer, Joe Siino, left the company, and now two more attorneys have decided to jump ship. 

Reggie Davis, Yahoo's "click fraud czar" has left to become general counsel at Zynga, a video game company.  Davis was the subject of some controversy a few years back after another Yahoo lawyer, Eulonda Skyles, accused Davis of sex and race discrimination after she came back from a maternity leave.  Davis was associate general counsel at the time, and the accusation is widely credited as prompting his move into the Search Marketing Division, although Yahoo denies this.
After a whirlwind trip to the Supreme Court, the Chrysler-Fiat deal has finally gone through.  The deal involved the purchase of the bulk of Chrysler's assets by the Italian automaker, and the creation of a new company outside of bankruptcy protection. 

The new company also has significantly less debt, fewer dealerships and reduced labor costs.  Fiat CEO Sergio Marchionne becomes the CEO of the new company, Chrysler Group LLC.

Sotomayor's Top Five Rulings on Experts

Guest author Robert J. Ambrogi is the only person ever to hold the top editorial positions at both national U.S. legal newspapers, the National Law Journal, and Lawyers Weekly USA. An experienced attorney, ADR professional, writer and legal technologist, Bob formerly served as director of the Litigation Services division at American Lawyer Media.

Much is made of the fact that Sonia Sotomayor was a federal district judge before she was named to the federal appeals court. After all, if confirmed to the Supreme Court, she would be the only one of the nine justices to have sat on the trial bench.

General Counsel Pressuring Firms Amid Recession

The following article was written by Brett Tarr, general counsel for eMag Solutions, based in Atlanta, GA:

Times are tough for everyone. The economy continues to falter, and both corporate legal departments and outside counsel are facing unprecedented pressures. Law firms are downsizing and corporate legal department budgets are being slashed. In the midst of this economic crunch,   general counsel have increased pressure on their outside law firms, demanding lower fees, predictable bills and improved service. At the same time, general counsel are wondering what law firm cost-cutting measures will mean to corporate clients in terms of quality of service and how much in the way of cost savings will be passed on to them.

Of the numerous budget issues facing general counsel, the spiraling cost of outside counsel fees and their lack of predictability are the two biggest worries. According to a survey that Altman Weil conducted in November 2008 amongst 115 general counsel, almost three-quarters of those polled reported that they are implementing 2009 budget cuts ranging anywhere from 6 percent up to 35 percent.  How, then, do law departments manage growing legal and e-discovery issues with a shrinking budget and uncertain outside legal costs? 

Who Bought Hummer? Now We Know.

Could it be?  Is Hummer moving to China? 

Yes, that quintessentially American vehicle - the lane-straddling, gas-guzzling Hummer - will soon be owned by a Chinese machinery company, according to a report by CNBC.

If the deal does in fact go down, it will constitute the first purchase of a major American car brand by a Chinese company.

Tips to Help In House Counsel Preserve Privacy

Virtually every company collects data about its customers.  This ensures that almost every company is subject to some privacy law or another.  Most likely, a company's activities fall under a combination of state and federal laws and regulations, which can make keeping track of legal requirements - and any changes to those requirements that may occur - a difficult job for the company's legal department.

To help alleviate this dilemma for in house counsel, Matthew Savare, Mary J. Hildebrand and Robert D. Chesler have written an article in The Metropolitan Corporate Counsel outlining the various privacy concerns most commonly faced by companies.  While the article doesn't go into every privacy law and regulation, it does give a good introductory outline of the types of things companies should watch out for.