The BLT: The Blog of Legal Times

Reed Smith Cuts First-Year Salaries, Billing Rates

Reed Smith has become the latest firm to announce that it was tweaking its first year salaries and billable hour requirements to meet client demands.  The firm said today that it was reducing first-year associate salaries in its 15 U.S. offices by about 20 percent.

In its largest U.S. offices, which include Washington, New York, Chicago, and California, that means associates will see their annual salaries drop from $160,000 to $130,000. In Philadelphia, first years will go from $145,000 annually to $117,500. In Pittsburgh, they will go from $135,000 to $110,000.

The salary adjustments will affect the class of 51 deferred associates who start in mid-January. Four of those will be in Washington.

As part of the reduced salaries, first-year associates will see their billing rates cut by 20 percent. Eugene Tillman, Reed Smith’s global head of legal personnel, said the firm does not comment on what actual billing rates are.

Tillman said the new salary structure will require first-year associates to bill fewer hours, dropping from 1,900 to 1,700 hours to “give them more time to focus on their development and training.”  He said the reduced hours are part of the firm’s move away from lockstep associate compensation. Late last month, Reed Smith announced that it was breaking away from lockstep compensation, opting instead for a hybrid lockstep/merit-based system. Starting next year, associates will be categorized as junior, mid-level, or senior associates depending on whether they’ve demonstrated certain core competencies.

“This is a move the firm is making to better meet client demands,” Tillman said. “We’ve been hearing from our clients for a while that they were uncomfortable paying for first-year associates to work on projects. These associates are exceptionally intelligent, but they don’t have the training or expertise that older associates have.”

In the past year, Reed Smith  has had two rounds of layoffs that affected both staff and associates. In December 2008, the firm cut 155 staff members in its U.S. offices and 11 associates and seven staffers in its London office.  In April, the firm pink-slipped 26 associates and 55 staff members.

Other firms that have reduced first year salaries include DLA Piper; Pillsbury Winthrop Shaw Pittman; Kilpatrick Stockton; Nixon Peabody; and Drinker Biddle & Reath.

Couple Sues AARP Over Health Plan Marketing

A Texas couple has filed a federal class action against AARP in the District of Columbia, alleging the group used misleading marketing to sell its health insurance policies.

The suit, filed yesterday in the U.S. District Court for the District of Columbia, claims that James and Allison Halpern purchased an AARP Medical Advantage Plan in March 2008, after receiving an advertising packet touting it as a “primary insurance plan.” The couple dropped their old health insurance policy. But after Allison Halpern was diagnosed with breast cancer, they learned their new plan only provided limited coverage, and would not pay for the cost of a crucial surgery.

According to the complaint, AARP’s advertising materials did not indicate that the health plan only provided limited coverage. AARP suspended sales of the policies earlier this year when Sen. Chuck Grassley (R-Iowa) opened a congressional investigation into their marketing.

“AARP has preyed upon Plaintiffs and thousands of Americans over age 50 by luring unsuspecting consumers in need of affordable health care to enroll in AARP’s health insurance program,” the complaint states.

The suit accuses the company of violating the D.C. Consumer Protections Procedure Act. It argues the D.C. court has jurisdiction because AARP is located in the District.

An AARP spokesman declined to comment.

A lawyer for the Halperin’s, Jerome Noll, of counsel with White Plains, New York-based Meiselman, Denlea, Packman, Carton & Eberz, said he knew of one other class action filed against AARP. That suit, also filed in D.C., targets United Healthcare as well, which partnered with AARP to sell the policies. A legal team from Venable including partner William Coston represents AARP in that case.

“We believe there’s a stronger case against AARP,” Noll said. “We allege that AARP’s marketing was deceptive and therefore in violation of the D.C. consumer protection act. [The Halperns] did not receive marketing materials from United Healthcare.”

Hunton & Williams to Add Virginia AG William Mims

Virginia Attorney General William Mims will join Hunton & Williams as a partner when his term ends in January, the firm announced today. Mims will practice in Hunton’s government relations practice in Washington and Richmond.

On February 26, 2009, Mims was selected by the Virginia General Assembly to complete McDonnell's term as attorney general after McDonnell resigned to run his campaign for governor full time.

Before being named attorney general, Mims was chief deputy attorney general from January 2006 until February 2009. He served in the Virginia Senate from 1998 to 2005, and in the Virginia House of Delegates from 1992 to 1997. He also served on Capitol Hill as chief of staff to Rep. Frank Wolf (R-Va).

Mims was recently named co-chair of Governor-elect Bob McDonnell’s transition team. He will serve on that team until McDonnell is inaugurated on Jan. 16 and will start at the firm two days later.

At Hunton & Williams, Mims, will advise and lobby on behalf of clients on a range of issues, including health care, energy, competition, and consumer products matters. Thurston Moore, who chairs Hunton’s executive committee, said Mims will represent clients both at the state and national level. “A lot of what he will be doing will be advising companies that could be affected by regulations and legislation or by policies of states’ attorneys general,” Moore said.  

Moore said Mims work as Virginia’s attorney general would only bar him from matters he handled in his official capacity. “There will be certain rules that would affect matters he was involved in, but we’re really looking to put him to work in new areas. He’ll have a unique perspective in Virginia but he won’t be limited to Virginia.

Mims was not immediately available for comment.

Obama Administration to Lobbyists: We Aren't Changing Our Minds

Lobbyists have been petitioning the Obama White House to rescind or loosen a policy that bans lobbyists from executive agencies' advisory boards. The message yesterday from Norm Eisen, special counsel to the president for ethics and government reform and the man seen as the driver behind the administration's restrictions on lobbyists: No dice.

In a post on the White House blog, Eisen wrote that he met with lobbyists and others who chair such advisory groups, and the administration won't change the policy.

Eisen wrote that lobbyists have the right to petition the government, but the public is best served "if we limited their ability to do so from special positions of privileged access within the government." For more, click here.

Eisen also posted a list of meeting attendees, a letter from lobbyists voicing objections to the policy, and his letter in response.

U.S., Russian Antitrust Officials Sign Agreement

It doesn't exactly rival the fall of the Berlin Wall, but here's another indication of how much the world has changed in 20 years: Today the Federal Trade Commission and the Department of Justice signed an antitrust memorandum of understanding with Russia's Federal Antimonopoly Service.

After all, just two decades ago, the Soviet Union was one big, state-run monopoly. Now, the United States and Russia are pledging closer cooperation and communication when it comes to antitrust enforcement.

The memorandum was signed in Washington today by FTC chairman Jon Leibowitz, Assistant Attorney General for Antitrust Christine Varney, and FAS head Igor Artemyev.

The agreement establishes a framework for cooperation and communication between American and Russian antitrust enforcers. In the agreement, the agencies pledge to “keep each other informed of significant competition policy and enforcement developments in their respective jurisdictions, including proposed legislative and policy changes.”

They also “recognize that it is in their common interest to work together in technical cooperation activities related to competition law enforcement and policy.”

Each agency will appoint a liaison to facilitate contact. In addition, officials anticipate holding periodic meetings to exchange information and even participating in each other’s training courses.

While the United States has several antitrust cooperation agreements with foreign jurisdictions, this is the first entered into on a direct, agency-to-agency basis.

A Justice's Curious Comment About ABA Guidelines For Death Penalty Lawyers

The Supreme Court this week, in an unsigned opinion, reversed relief granted by the U.S. Court of Appeals for the 6^th Circuit to a death row inmate because of his lawyer’s ineffective assistance. But Justice Samuel Alito wrote separately—and curiously-- to emphasize his view that no “special relevance” should be given to the American Bar Association’s guidelines on the appointment and performance of defense counsel in death penalty cases.

In Bobby v. Van Hook, the justices found that, among the 6^th Circuit panel’s errors, was its reliance on ABA guidelines announced 18 years after Robert Van Hook went to trial.

The per curiam opinion said the Sixth Amendment entitled defendants to representation that does not fall below an “objective standard of reasonableness.” Restatements of professional standards, the Court added, can be useful guides as to what reasonableness entails, “but only to the extent they describe the professional norms prevailing when the representation took place.” 

The Court said the 6^th Circuit made “matters worse,” by treating the 2003 guidelines not merely as evidence of what reasonably diligent attorneys would do, “but as inexorable commands with which all capital defense counsel `must fully comply.’” 

In a concurring opinion, Justice Alito said that the ABA is a “venerable” organization with a history of service to the bar, “but it is, after all, a private group with limited membership.” Its views, he added, do not necessarily reflect the views of the bar as a whole. 

Courts must decide whether a defense lawyer’s work meets the constitutional standard, he said, adding, “I see no reason why the ABA Guidelines should be given a privileged position in making that determination.” 

One conservative court watcher, M. Edward Whelan, president of the Ethics and Public Policy Center, voiced his pleasure with Alito’s comments in a post on the Bench Memos blog. 

“The American Bar Association’s pursuit of its ideological agenda is all the more obnoxious because the ABA purports to be `the national representative of the legal profession,’” he wrote. “I’m pleased to see that Justice Alito…rejects the ABA’s nonsense.” 

The ABA’s 2003 guidelines have been cited widely in decisions by state and federal courts, including the Supreme Court, most recently in Rompilla v. Beard, a 2005 decision finding ineffective assistance of counsel in a death case. 

“The law has always been that the ABA guidelines are only guides to putting content on the very vague Strickland standard,” said Eric Freedman of Hofstra University School of Law, a member of the steering committee of the ABA’s Death Penalty Representation Project. The original guidelines were approved in 1989 and revised and adopted without dissent in 2003. 

Freedman said that if the entire court had endorsed Alito’s comments, the justice would not have had to write separately; the comments would have been in the opinion. 

“No one is suggesting the ABA has some special role,” said Freedman, adding the guidelines are an “honest effort” to state what a reasonable attorney would do in these cases. 

“The ultimate point is courts are to decide the [ineffective assistance] issue,” he said. “If a judge is asked what was the standard of care in 1990, he or she has to find it somewhere. It certainly seems a sensible viewpoint, which the per curiam opinion doesn’t contest, that in seeking illumination, the carefully written ABA standards are one good place to look.”         

DOJ: Computer Hackers Stole $9 million from ATMs in Just Hours

Updated Nov. 11

A group of international hackers is charged with invading the computers of Atlanta-based credit card processing company RBS WorldPay and stealing more than $9 million in just hours from ATMs across the globe, the Justice Department announced today.

A grand jury in the U.S. District Court for the Northern District of Georgia has indicted four individuals on charges that include wire fraud, computer fraud and aggravated identity theft. It was not immediately known whether any of the defendants, who are detained overseas, have retained counsel in the United States. Four other defendants, each from Estonia, are charged with access device fraud.

The indictment alleges that the group breached a security system that protected data on payroll debit cards, which allow employees to withdraw salaries from ATMs, according to the Justice Department. RBS WorldPay, represented by Hunton & Williams partners John Delionado and John Woods, is a part of the Royal Bank of Scotland.

Prosecutors said in a statement that the alleged hackers stole millions of dollars from more than 2,100 ATMs in at least 280 cities in the United States, Canada, Japan and other countries. Justice officials said international cooperation was a “significant factor” in bringing charges. Government lawyers and investigators have worked with counterparts in Estonia, Hong Kong and in the Netherlands.

“Last November, in just one day, an American credit card processor was hacked in perhaps the most sophisticated and organized computer fraud attack ever conducted. Today, almost exactly one year later, the leaders of this attack have been charged,” Acting U.S. Attorney Sally Quillian Yates of the Northern District of Georgia said in a statement.

Kimberly Kiefer Peretti of the Justice Department’s Computer Crime and Intellectual Property Section is assigned the prosecution with assistant U.S. attorneys Lawrence Sommerfeld and Gerald Sachs in Atlanta.

FTC Seeks Contempt Charges Against Lawyer Who Won't Turn Over Fees

The Federal Trade Commission has filed contempt charges against an attorney for refusing to fork over fees he was paid by the operators of an illegal Ponzi scheme.

The lawyer, solo practitioner Jeffrey Benice of Costa Mesa, Calif., was ordered in March 2009 to turn over $238,300 to the FTC by a federal judge Nevada. The court also imposed a $18.9 million judgment on Benice’s clients for running a fraudulent "Internet kiosk" business in violation of the FTC Act and the agency’s franchising rule.

According to the FTC, the defendants – Charles Castro, Network Services Depot, Inc. and others, paid Benice a $375,000 retainer in January 2005.

Judge Lloyd George of U.S. District Court for the District of Nevada in March 2009 determined that Benice’s fee was derived from the defendants’ unlawful conduct and was subject to consumer restitution. He allowed Benice to keep $136,700 for his work but ordered him to return the balance - $238,300 - within 10 days.

The FTC says it is still waiting for Benice’s payment, and now asks the court to hold him in contempt.

Benice was a partner at Brobeck, Phleger & Harrison from 1986 until 1994, when he launched his own criminal and civil trial practice, according to his website. He is a 1978 graduate of UCLA School of Law and clerked for Justice F. Douglas McDaniel in the California Fourth District Court of Appeal in 1978.

Benice could not be reached immediately for comment.

In court papers, Benice argued that he could not afford to comply with the order, but offered to pay $2,500 a month. The FTC says this is not enough, noting that Benice in a deposition said he makes an average of $400,000 a year. The FTC also noted that he spends more than $3,100 a month in car payments alone, for a BMW, a Porshe Turbo, a Jeep Wrangler and a motorcycle.

The FTC wrote that Benice and his firm “have not explained why they have not put money aside every month to restore the funds that the Court found rightfully belonged to consumers. Apparently Benice did not heed the Court’s March 2006 warning that he should factor such a risk into his fee calculations.”

Why is Supreme Court Holding Onto Christian Legal Society Case?

The Supreme Court first considered the petition in the closely-watched case of Christian Legal Society v. Martinez at its Sept. 29 closed conference. It did not act then, and according to the Court's online docket, it has re-listed the case for five subsequent conferences, including the conference scheduled for this Friday, Nov. 13 -- an unusually long delay.

The petition challenges a decision of the University of California, Hastings College of the Law to deny official recognition to the Christian student group because it does not conform to the school's requirement that membership and leadership positions be open to all. The Hastings chapter of the society requires members to sign a statement of faith that vows devotion to Jesus Christ and has been interpreted to bar those with a "sexually immoral lifestyle." The U.S. Court of Appeals for the 9th Circuit, in an unpublished two-sentence ruling in March, said the law school's action was "viewpoint neutral and reasonable."

The society in its petition points out that the 9th Circuit decision is in clear conflict with a 2006 7th Circuit decision involving the same organization, Christian Legal Society v. Walker. In that case, involving the Southern Illinois University School of Law, the court found that the Christian group's ability to convey its message would be hampered if it was forced to accept members who disagree with it. It ruled that the state school had no compelling interest in imposing the policy on the organization.

The society, among others, is mystified at the high court's handling of the case. "We're going for the record books" in the number of conferences at which consideration of the case was put off, said Kim Colby, senior counsel of the Center for Law and Religious Freedom, the society's litigating arm. "But we're happy for them to keep thinking about it, and we remain hopeful."

She said the case deserves review because "there is such a dramatic split" between the circuits on the fundamental issue of whether the society has the "right to choose its own officers."

When the Court puts off cases for this long, it sometimes means that it is ready to deny review, but one or more justices is preparing a dissent from denial of review. It could also mean the Court is awaiting or considering a related case. On Oct. 29, the society informed the high court by letter that a similar case pending before the 11th Circuit had become moot, but that is unlikely to be the cause for the Court's hesitation. The Court's delay also could simply mean that a justice wants more time to consider the case. But a delay from late September to mid-November is unusual. If the Court decides to act on the case this Friday, its action would likely be announced next Monday. 

Morning Wrap

D.C. Sniper Execution: Barring a last-minute stay from Va. Gov. Tim Kaine, D.C. sniper John Allen Muhammad will be executed today for the attacks that terrorized Washington and the surrounding area for three weeks in 2002, The Associated Press reports. Muhammad's attorneys have asked Kaine to commute his sentence to life in prison because they say he is mentally ill. The U.S. Supreme Court turned down Muhammad's final appeal yesterday.

White House Denies Additional Troop Reports: The White House has denied reports that President Barack Obama has made a decision about whether to deploy additional troops to Afghanistan. CBS reported this morning that Obama had made a decision to send about 40,000 soldiers into the war-torn country, roughly in line with what Gen. Stanley McChrystal had requested.  The White House says the president has yet to make a decision.

Obama Says Change Abortion Language: ABC News' Jake Tapper reports that President Obama has called on Congress to  change abortion-related language in the health care bill passed by the House this weekend. Today, Obama will attend a memorial service at Fort Hood in Texasor in honor of the 13 killed in last week's shooting.

Korean Conflict: North and South Korean navy vessels exchanged fire this morning in what marks the first border fighting between the countries in seven years, The New York Times reports. The two Korean nations are technically still at war after fighting in the 1950-3 Korean War ended in a truce rather than a permanent peace treaty.