August 2010 Archives

Congratulations, it's a merger, or very nearly. The Justice Department announced on August 27 that it has approved the Continental and United Airlines merger. Late last Friday, the DOJ completed its anti-trust review of the merger with the addition of some final details. One specific addition was the agreement to lease landing and take-off rights at Newark Liberty International to Southwest to increase competition at that airport. Currently, United and Continental together offer 442 daily flights at Newark.

According to the report by USAToday, Continental CEO Jeff Smisek, who has been named to run the new company under the name United, said the lease of Newark slots to Southwest is "a fair solution that would allow Continental and United to create an airline that will provide customers with an unparalleled global network and top quality products and services, while enhancing domestic competition at Newark."

The insurance company for indicted financier R. Allen Stanford would like to be released from its responsibility to pay the massive legal fees mounting on Stanford's behalf. Stanford and two of his former company executives stand accused of bilking investors out of $7 billion in a massive pyramid scheme. Insurer Lloyd's of London argued to a federal judge the accused lied to investors and falsified financial statements and therefore should be disqualified from having their legal fess paid under the insurance policy.

U.S. District Judge Nancy Atlas heard the first day of arguments on Tuesday, August 24, according to the Associated Press. At this point, Stanford has received more than $15 million to pay his legal fees and those of his executives, Gilbert Lopez and Mark Kuhrt, in their criminal and civil cases. The policy will pay up to $100 million. Reportedly, Stanford has spent more than $6 million by hiring and firing attorneys from at least 10 different law firms.

In an exceedingly rare event, General Motors has filed paperwork to go public (again). The move would allow the federal government to sell its stake in the company. It's a welcome bit of good news for a still struggling economy. The IPO could be the second largest in the history of the country. It could be as large as $10 billion to $20 billion. GM will now undergo a review by the Securities and Exchange Commission. The IPO could take place later this year.

It is a particularly unique event as the U.S. government technically owns a massive stake in GM and will soon begin selling its stake in the company. The U.S. Treasury will play a role in setting the prices for the stock. The New York Times reports that those briefed on the matter believe the Treasury will sell about one-fifth of its shares, which would bring the taxpayers' stake in GM under 50 percent. The Treasury Department, in a statement, said it "will retain the right, at all times, to decide whether and at what level to participate in the offering."

Executive misdeeds certainly are not limited to Hewlett-Packard, although the company's track record of late does make some wonder. On August 6, embattled CEO Mark Hurd was released from his employment with HP via a Separation and Release Agreement. This document may be of use (or inspiration) to in-house legal counsel unfortunately faced with the same or similar situation.

Like most contracts of this type, the Agreement begins by clarifying the separation date and some of the terms. A list of benefits and separation pay is included. It may seem quite unreasonable to lay people that a man who will receive $12,224,693 under the Severance Plan for Executive Officers was brought down by allegedly fudging a mere $20,000 in expense reporting.

Attorneys with iffy typing skills or bad drafting habits throughout the nation (or at least throughout the 7th Circuit) are drawing a sigh of relief today. On August 10, the 7th Circuit Court of Appeals held that everyone makes mistakes -- and some shouldn't cost your client $1.67 billion dollars.

The court found in favor of Verizon Wirless and will allow the company to correct a mistake in a 1996 pension plan that it inherited from its predecessor, Bell Atlantic, according to Reuters. The court upheld the decision of the district court finding the company should not be held liable for the "scrivener's error."

Hewlett Packard saw their stock prices drop ten percent after sexual harassment claims against the company's CEO, Mark Hurd caused the sudden resignation of the widely-respected CEO this past Friday. In addition to building the company's software and corporate services division, the Silicon Valley-based HP stock soared 135% during the five years that the married Hurd served as CEO.

Hurd released a statement regarding his departure: "It would be difficult for me to continue as an effective leader at HP and I believe this is the only decision the board and I could make at this time. I want to stress that this in no way reflects on the operating performance or financial integrity of HP," reports Business Week. The sexual harassment claims against Hurd were determined to not be in violation of HP's sexual harassment policy, but the board's investigation revealed that Hurd did violate established standards of business conduct. Whether the stock drop will be a temporary response to the resignation or a more permanent concern over new HP leadership is still yet to be determined.

While many attorneys in the US are concerned about losing their jobs due to legal outsourcing, others are using outsourcing to benefit their clients. India has become a hotbed for the outsourcing of American legal work. The New York Times published an article on August 4, profiling Christopher Wheeler, a former assistant attorney general in New York who moved to India to take a job managing 110 Indian lawyers at a legal outsourcing company called Pangea3.

The lawyers he manages do the work that would otherwise be assigned to new associates in the United States, for far less money. The Indian lawyers cannot actually advise American clients, but they can do much of the work that a junior associate would do. Outsourcing firms often charge as little as one-third to one-tenth what an American law firm charges on an hourly basis.

"This is not a blip, this is a big historical movement," said David B. Wilkins in The New York Times. Wilkins directs Harvard Law School's legal profession program. "There is an increasing pressure by clients to reduce costs and increase efficiency..."