The BLT: The Blog of Legal Times

Business Groups Sue SEC Over New Proxy Rules

The U.S. Chamber of Commerce and the Business Roundtable filed suit against the Securities & Exchange Commission today, objecting to new proxy access rules for nominating corporate directors.

The groups assert that that the rules impose unjustified costs and empower unions and other special interest shareholders at the expense of regular investors.

The SEC adopted the final rules on Aug. 25 in a 3-2 vote. The rules require companies to include the nominees of "significant, long-term shareholders" in their proxy materials, alongside the nominees of management, according to the SEC. “This ‘proxy access’ is designed to facilitate the ability of shareholders to exercise their traditional rights under state law to nominate and elect members to company boards of directors.”

The suit, filed in the U.S. Court of Appeals for the D.C. Circuit, claims the rules are unlawful under the Investment Company Act, the Securities Exchange Act and the Administrative Procedure Act, as well as violating issuers’ rights under the First and Fifth Amendments.

Gibson Dunn & Crutcher partners Eugene Scalia and Amy Goodman are representing the petitioners. They’ve asked the SEC to stay the Nov. 15 effective date of the rules pending conclusion of the litigation. If the SEC says no, according to the complaint, “then a motion for a stay will be filed with this Court shortly.”

The suit alleges that the SEC erred in appraising the costs that proxy access would impose on American corporations, shareholders, and workers; ignored evidence and studies highlighting the adverse consequences of proxy access; will restrict shareholders’ ability to prevent special interest shareholders from triggering costly election contests; and is “arbitrary and capricious in its treatment of state law.”

“This special interest-driven rule will give small groups of special interest activist investors significant leverage over a business’ activities,” said David Hirschmann, president and CEO of the U.S. Chamber’s Center for Capital Markets Competitiveness in a statement. "This will undermine a company’s ability to grow and create jobs.”

Another For-Profit Educator Hires a Lobbyist

Westwood College, a for-profit education company in Denver, Colo., has hired Brownstein Hyatt Farber Schreck as its industry battles critics on several fronts in Washington.

The registration was effective Aug. 16 and received on Friday, according to U.S. Senate records. The National Law Journal reported Monday that several other for-profit higher education companies have hired lobbyists and lawyers in the past month as they prepare to defend how they operate.

The U.S. Department of Education is considering new rules for the industry, and the U.S. Government Accountability Office recently released the results of an undercover investigation. Meanwhile, Sen. Tom Harkin (D-Iowa), the chairman of the Senate Health, Education, Labor and Pensions Committee, has launched his own investigation, requesting documents from 30 companies. Westwood’s parent company, Alta Colleges Inc., is among those 30 companies.

A Westwood spokesman had no comment. Alfred Mottur, co-chair of Brownstein Hyatt’s government relations practice, also had no comment. The registration lists Mottur, policy directors Gina Mahony and Larry LaRocco, and senior policy adviser Kerrie Bentfield.

Westwood was not previously registered with a lobbyist, though Alta Colleges was registered with Sonnenschein Nath & Rosenthal from May 2008 until January 2010.

Senate Responds To Justices on Crush Videos

The first bill signed into law by President Barack Obama in the new 111th Congress in 2009 undid the Supreme Court’s ruling in a pay discrimination challenge involving Lilly Ledbetter. The last bill signed by the president in this congressional session may be a response to another ruling by the justices.

Congress spent roughly 16 months fighting over the Lilly Ledbetter Fair Pay Act of 2009. But it has taken only six months to move legislation through both houses to address the First Amendment implications of banning animal crush videos.

The Senate on Tuesday, by voice vote, passed the proposed Animal Crush Video Prohibition Act of 2010. The legislation was adopted as a substitute amendment to a similar House bill overwhelmingly passed by the House in July. The Senate version must return now to the House for its approval.

The Supreme Court on April 20, voting 8-1, struck down the federal Depiction of Animal Cruelty Act of 1999. The majority in U.S. v. Stevens found the law was overbroad. Under the 1999 act, it was a crime, punishable by up to five years in prison, to make, sell or possess “a depiction of animal cruelty” if done for commercial gain. The majority suggested that a narrower statute, one limited to crush videos, might pass constitutional muster. Justice Samuel Alito Jr. was the lone dissenter.

Crush videos, which appeal to a certain sexual fetish, generally involve scantily-dressed women in high heels stomping on small animals.

The Senate legislation would criminalize the creation, sale, distribution, advertising, marketing, and exchange of animal crush videos. The penalty for violations of the measure would be up to seven years in prison.

“Our legislation would ban animal crush videos that fit squarely within the obscenity doctrine, a well-established exception to the First Amendment. It also takes the important step of banning non-commercial distribution of animal crush videos, which is necessary given the nature of the Internet and the propagation of file-sharing and peer-to-peer networks that exist today,” said Sen. Jon Kyl (R-Ariz.), co-sponsor along with Sens. Jeff Merkley (D-Ore.) and Richard Burr (R-N.C.), in a statement on Tuesday.

The Humane Society of the United States has been a major supporter of the bill. It noted on Tuesday that there has been a “massive resurgence” of crush videos for sale on the Internet since the Supreme Court and lower court rulings.

The Morning Wrap

A-O: Akin Gump Strauss Hauer & Feld and Orrick, Herrington & Sutcliffe are talking about a merger. The BLT takes a look at what a marriage of the two firms would look like. The Akin-Orrick combination would create a firm with gross revenues of $1.57 billion and about 1,800 lawyers in nearly 30 offices around the world.

Signing Up: The National Law Journal reports more than 100 lawyers who are suing BP PLC over the Gulf of Mexico oil disaster are vying for a slot on the committee that will lead the multidistrict litigation. Meanwhile, a new CEO is shaking up management at BP, The Wall Street Journal reports today.

Texting: Drivers continue to text away despite laws than ban the activity, according to a new report from an insurance industry-funded research group that The Washington Post examines..

Capone Lives: The Eleventh Judicial Circuit Court and Miami-Dade County re-enacted the perjury trial of Alphonse Gabriel Capone in part to celebrate the court's 100th birthday, The New York Times reports.

Court Budget Woes: A group of lawyers in New Hampshire led by a former state Supreme Court justice are suing the state with the intent to restore about $4 million to the courts system, The National Law Journal reports. The suit in Merrimack County Superior Court was filed as a petition for injunctive and declaratory relief and writ of mandamus.

What an Akin-Orrick Merger Would Look Like

Akin Gump Strauss Hauer & Feld and Orrick, Herrington & Sutcliffe have confirmed that the two firms are in the early stages of merger talks. While that certainly doesn’t mean a combination is a sure thing, it does raise the question of what a union of the two firms would look like. The talks were first reported by The National Law Journal’s sibling publication The American Lawyer.

For starters, a combination would create a firm with gross revenues of $1.57 billion and about 1,800 lawyers in 29 offices worldwide, according to the most recent Am Law 100 numbers. That would immediately catapult the combined firm into the top 10 highest grossing firms on the Am Law Global 100, putting it neck-and-neck with Jones Day at No. 8. As The Am Law Daily reported, at $1.46 million, Akin had slightly higher profits per equity partner in 2009 compared to a PPP figure of $1.36 million for Orrick.

For Akin, which was founded in Dallas, wedding San Francisco-born Orrick would immediately give it a major West Coast presence. Orrick has more than 450 lawyers spread among its offices in Seattle and Portland in the state of Washington; and San Francisco, Silicon Valley, Los Angeles and Orange County in California. Akin currently has 86 lawyers in Los Angeles and 14 in San Francisco.

For Orrick, the deal would mean an office in Philadelphia and a huge entrée into Texas.

With its strong ties to the energy sector, Texas has become a target of such recent interlopers as Latham & Watkins, which opened a Houston office in January. Akin has 213 lawyers in the Lone Star State, spread among its offices in Austin, Dallas, Fort Worth, Houston, and San Antonio.

Orrick would also pick up one of the largest, and most profitable, offices in Washington, something the firm hasn’t been able to build on its own. Akin has 282 lawyers in Washington and ranked No. 13 on The NLJ's D.C. 25, our annual ranking of the top money-makers among Washington firms. Akin’s Washington office brought in $227.9 million in 2009. By itself, Orrick has about 90 lawyers in Washington and didn’t rank on the survey.

Additionally, the deal would give Orrick access to Akin's lobbying practice, which regularly places No. 1 on The NLJ's Influence 50 ranking of top grossing lobbying practices. In 2009, Akin's lobbying practice grossed $96.7 million.

But in the U.S., the real question would be New York, a city where both firms each have roughly 200 lawyers.

According to one former Akin lawyer, New York has been a sticking point in previous merger discussions involving Akin because lawyers in the Big Apple enjoy their place in the firm’s hierarchy. “They haven’t wanted to see their relative position in the firm change in the past,” the lawyer said.

Internationally, the two firms complement each other relatively well, overlapping in just Beijing, London, and Moscow. From the Akin side, the combined firm would add offices in Abu Dhabi and Geneva. (Akin acquired its Geneva office from Hogan & Hartson, which spun the office off ahead of its own merger with U.K-based Lovells earlier this year.)

From Orrick, which has a much larger international presence, the combined firm would also have offices in Berlin; Dusseldorf, Germany; Frankfurt, Germany; Hong Kong; Milan, Italy; Rome; Shanghai; Taipei, Taiwan; and Tokyo.

The combined firm would also have two dynamic leaders who have made no secret of their desire to expand their respective firms.

R. Bruce McLean, who chairs Akin, has acknowledged his goal of turning his firm into a top global player, even if it means merging with another firm. At a panel discussion hosted by The NLJ in December, McLean said he would “absolutely” entertain the idea of a merger, if it meant the firm could become a major international contender.

“If we found a merger partner that allowed us to take a big step in the direction of the implementation of the strategy, we would definitely enthusiastically explore that. While we haven’t come to the conclusion we have to find a merger partner, do we look at that? Absolutely, we do look at it,” McLean said. McLean did not return calls for additional comment.

And Ralph Baxter, Orrick’s chairman, has overseen several merger attempts during his tenure. Most recently, Orrick made a highly publicized and ultimately ill-fated attempt to merge with Dewey Ballantine in 2006. Though the executive committees at both firms approved the tie-up and recommended it to their partnerships for a vote, the deal fell apart when several Dewey rainmakers jumped to Covington & Burling and Weil, Gotshal & Manges, according to The Am Law Daily.

Regardless of Orrick’s botched union with Dewey, consultants say that on paper it matches fairly well with Akin. Tom Clay, a consultant at Altman Weil, which is not involved in the Akin-Orrick discussions, said, “I don’t see any real reason to take them out of the game.”

But given that the demand for legal services hasn’t returned to pre-recession levels, Clay said both firms would likely take a “more rigorous” approach to due diligence than in the past.

So is an Akin-Orrick combination in the cards? We’ll just have to wait and see.

Craigslist Predator Sentenced for Two Sexual Attacks

The man behind two sexual attacks just north of DuPont Circle was sentenced to 11 years in prison followed by 20 years of supervised release, U.S. Attorney Ronald Machen, Jr. announced today.

Brandon Petty, 26, used adult services ads on Craigslist to orchestrate each of the meetings in Northwest Washington, one at the Marriott Courtyard Hotel, at the corner of T Street and Connecticut Avenue, and one across the street, at the Hilton Washington Hotel, according to prosecutors. He used the same technique on each woman: he grabbed her hair, put a knife to her neck, and demanded money and oral sex. His attempt at the Marriott was interrupted by the woman's friend, but the attack at the Hilton was successful.

Petty agreed to the plea agreement that called for the maximum sentence allowable, 153 months, after authorities linked him to the two attacks, on Sept. 8, 2009, and April 21, respectively, and a third on April 2.

All three met with Petty through advertisements they placed on the District of Columbia Craigslist website.

Law enforcement officials began complaining earlier this month that Craigslist was not properly monitoring and removing adult services advertising prostitution and child sex trafficking.

Craigslist bowed to the pressure and announced at a House Judiciary subcommittee hearing on child sex trafficking Sept. 15 that it would remove all adult services ads from its site. The link, which Craigslist first redacted and replaced with the word "censored," is now permanently missing from its home page.

But William "Clint" Miller, director of customer service and law enforcement relations at Craigslist, has argued that those ads will simply move elsewhere on the site.

Federal prosecutors said in court papers that prior to this case, Petty was sentenced to five years of jail in May 2004 for distributing heroin, carrying a pistol without a license, possession of a firearm during the commission of dangerous crime, possession of an unregistered firearm and contempt, as well as a separate offense of attempted distribution of PCP. He was released in both cases on Dec. 18, 2007.

Appeals Court Stays Injunction in Human Stem Cell Case

A federal appeals court this afternoon sided with the Justice Department in temporarily blocking enforcement of a ruling that bans government funding for human embryonic stem cell research.

DOJ attorneys asked the U.S. Court of Appeals for the D.C. Circuit to stay the preliminary injunction issued Aug. 23 in Washington federal district court. Judges Judith Rogers, Thomas Griffith and Brett Kavanaugh heard oral argument yesterday. The court today issued a per curiam judgment granting the government's emergency motion for a stay pending appeal.

Federal law prohibits the government from funding research in which human embryos are destroyed. In August, Chief Judge Royce Lamberth of the U.S. District Court for the District of Columbia ordered an injunction that blocked the government from implementing National Institutes of Health guidelines that took effect last year.

The Justice Department’s Beth Brinkmann, who heads the Civil Division appellate section, argued Monday in the D.C. Circuit that putting Lamberth's ruling on hold was necessary to preserve millions of dollars in ongoing research. Gibson, Dunn & Crutcher partner Thomas Hungar, a lead attorney for the plaintiffs, argued the government had failed to show how the injunction caused any harm.

The D.C. Circuit said today it will expedite the appeal.

Lobbyists, Government Watchdogs Team Up For Earmark Reform

Who says lobbyists and government watchdog groups can’t work together? In a conference call this morning, a group of lobbyists and the leaders of several good government groups announced a set of earmark reform principles designed to reduce the influence of special interests and save taxpayers’ money.

After months of meetings, some of which were described as “heated” and “intense,” the coalition came up with five principles that both houses should take into account when coming up with a rules package when the new Congress convenes in January 2011.

Those principles are:

• In order to cut the cord between earmarks and campaign contributions, Congress should limit earmarks directed to campaign contributors.

• To eliminate any connection between legislation and campaign contributions, legislative staff should be barred from participating in fundraising activities.

• To increase transparency, Congress should create a new database of all congressional earmarks.

• To ensure taxpayer money has been spent appropriately, the Government Accountability Office should randomly audit earmarks.

• To promote congressional responsibility without stifling innovation, members of Congress should certify that earmark recipients are qualified to handle the project.

The discussion of how to come up with principles for earmark reform that could be embraced by Republicans, Democrats, lobbyists and government watchdog groups grew out of conversations between Holland & Knight lobbyist Rich Gold and Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington.

Gold said that he and Sloan began discussing the issue almost a year ago after sitting together on panels discussing earmark reform. From there, they reached out to other lobbyists and groups such as Citizens Against Government Waste, Taxpayers for Common Sense, and Public Citizen.

Gold said he was impressed at how the groups were willing to work together, given that Citizens Against Government Waste and Taxpayers for Common Sense are against earmarks in any form

“There was no reason why this whole thing couldn’t have fallen apart. But everyone came from the common ground that something needed to be done on earmark reform,” Gold said.

Leslie Paige, media director for Citizens Against Government Waste, said that while her organization would ultimately like to see a complete moratorium on earmarks, it will settle on increased transparency and accountability in the meantime. “We’re all just very, very frustrated with the slow and incremental reform we have seen on this issue. Something needs to be done,” Paige said.

James Walsh, a former Republican congressman from New York who now lobbies at K&L Gates, said it was “remarkable” to see such a diverse group of people come together on the issue of earmark reform. Walsh has been briefing House and Senate leaders from both parties on the coalition’s principles during the past several weeks. He said there has been “a lot of interest from everyone we have spoken with.”

The other drafters of the earmark principles are Tom Schatz, president of Citizens Against Government Waste; Steve Ellis, vice president of Taxpayers for Common Sense; Craig Holman, legislative representative at Public Citizen; Manny Rouvelas, a partner at K&L Gates; and Dave Wenhold, a name partner at Miller/Wenhold Capitol Strategies.

Akin, Orrick in Merger Talks

Updated 5:08 p.m.

Akin Gump Strauss Hauer & Feld and Orrick, Herrington & Sutcliffe are in merger talks, The American Lawyer reports.

Akin spokeswoman Kathryn Holmes-Johnson said in a statement, "Akin Gump and Orrick are in exploratory discussions regarding the possibility of a merger."

An Orrick spokesman also confirmed the talks.

In discussions with partners at both firms, it seems the discussions between the two firms have been kept between firm leaders. Several partners at both firms said they hadn't heard of the talks until news broke online.

Law firm consultants said they weren't surprised to hear of the discussions between the two firms because merger talks have greatly increased in recent months.

Tom Clay, a consultant at Altman Weil, which is not involved in the Akin-Orrick discussions, said, "Ever since the first quarter, the dam on merger talks has been broken. People are getting back to their strategic growth plans, which had largely been shelved in 2008 and 2009."

To read the Am Law story, click here.

Supreme Court Grants 14 New Cases, Kagan is Recused in 4

The Supreme Court this morning granted review in 14 new cases to be argued in its new term, adding to the 40 it had granted before it recessed for the summer. The order list is the product of the Court's so-called "long conference" Monday at which, in private, it considered the thousands of petitions that have piled up during the summer recess. It was Justice Elena Kagan's first such conference, and as junior justice it would have been her responsibility to report to the Court clerk all the cases the Court agreed to hear.

The list also indicated that Kagan has decided to recuse in four of the new cases, presumably because of her role at earlier stages as solicitor general. That makes for a at total of 25 cases out of the 54 the Court has granted so far in which Kagan will not participate. The new cases in which she has recused are: Astra USA Inc. v. Santa Clara County, a dispute between public hospitals and drug companies; FCC v. AT&T, which asks whether corporate "personhood" extends to the Freedom of Information Act which exempts the release of government documents that invade "personal privacy" (we wrote about the case here); United States v. Tinklenberg, a Speedy Trial Act case; and Schindler Elevator Corp. v. United States, a False Claims Act case.

The Court agreed to hear a pair of potentially important cases examining whether the government can sue a private party and then invoke the "state secret" privilege in a way that deprives the party from mounting a defense. The cases are General Dynamics Corp. v. United States and Boeing Company v. United States.

The celebrity bankruptcy case involving Anna Nicole Smith has returned to the high court, even though Smith, her former billionaire husband J. Howard Marshall II, and his son E. Pierce Marshall are all dead.The case is titled Stern v. Marshall.

In Connick v. Thompson, the Court today also rejected an effort by former solicitor general Paul Clement and a group of former federal prosecutors to obtain argument time on the side of the defendant in a case involving prosecutorial misconduct in New Orleans. We wrote about the effort here.

Finally, the Court's order list included "circuit allotments" for the justices -- which justice is assigned to each federal circuit for the purposes of handling emergency and other matters from the circuits. New Justice Elena Kagan has been assigned the Sixth and Seventh Circuits, which had been the province of her predecessor John Paul Stevens until he retired in June.