Keep your finger on the legal world's pulse

U.S. corporate bankruptcy filings have reached their highest point since 2010, indicating a significant increase in bankruptcy activity. Factors contributing to this surge include inflation, supply chain disruption, interest rate hikes, and the cumulative impacts of the COVID-19 pandemic. However, unlike the previous spike in bankruptcies in 2010, the presence of a mature legal finance industry in the U.S. has provided a new alternative for managing the bankruptcy process. Legal finance firms offer capital to bankruptcy estates, allowing them to pursue or monetize valuable litigation assets and increase creditor recoveries. This trend has been growing since 2010, with legal finance becoming a common tool for well-capitalized businesses and those with cash constraints. Companies facing bankruptcy can now finance, monetize, or sell litigation claims against third parties, providing significant cash for operations or distribution to creditors. The increased bankruptcy activity is expected to continue in the coming years, with legal finance solutions playing an increasingly important role for debtors, creditors, and trustees.

 

Law

Almost half of security chiefs at global companies expect to significantly increase their budgets in response to rising cases of theft, fraud, and the leaking of sensitive information. A survey of 1,775 chief security officers by security and staffing company Allied Universal found that companies lost over $1tn in revenue in 2022 due to non-cyber security incidents. The survey also revealed that high-end goods and intellectual property were being lost both internally and externally, with North America being particularly affected. The report highlighted economic and social unrest, climate change, and deteriorating living standards as factors contributing to security breaches. In response to these challenges, 46% of security chiefs said they would increase their budgets significantly. Additionally, 42% of respondents expressed their intention to invest in artificial intelligence and AI-powered surveillance to detect threats more quickly. Allied Universal, the American security and staffing company that conducted the survey, aims to understand the cost and scale of security breaches and the driving factors behind them.

 

Reuters

Ryne Miller, the former U.S. general counsel of cryptocurrency exchange FTX, has started his own New York-based firm, Miller Strategic Partners, to advise digital asset and blockchain companies as well as traditional financial firms on regulation, regulatory investigations, and crisis management. Miller, who left FTX in March, said that his experience with trading, markets, digital assets, and government investigations made it logical for him to establish his own firm. Miller Strategic Partners has already taken on clients and is attracting interest in investigations. Miller's first partner is William Schroeder, a seasoned litigator and white-collar investigations expert. Miller plans to expand the firm and bring in more attorneys. He emphasized the importance of not mistaking something illegal for something that requires advice and counsel to correct.

 

Corporate Counsel

In early 2022, nearly half of the general counsel seeking jobs wanted to work remotely, but CEOs are now requiring their legal teams to be in the office. While some GCs may be allowed to work remotely in certain situations, the trend is towards in-office collaboration. CEOs believe that being on site fosters greater collaboration, deeper relationships, and greater creativity. The end of the COVID-19 pandemic has emboldened company leaders to impose more stringent return-to-office policies. Many legal departments now operate with a "hard hybrid" model, where employees are required to come to the office on specific days. Some firms that hired fully remote general counsel are now asking them to relocate. However, smaller firms may still be willing to hire remote GCs. The change reflects the belief that in-person interactions are crucial for the development of early-career employees.

 

Corporate Counsel

Help-wanted advertisements in New York will have to disclose proposed pay rates under a new salary transparency law. The law, signed by Gov. Kathy Hochul in 2022, applies to employers with at least four workers and requires them to disclose salary ranges for any job advertised externally or internally. The aim is to prevent discrimination based on age, gender, race, or other factors unrelated to skills. Similar laws are already in effect in New York City, California, and Colorado. Compliance may be challenging for some employers, and there are concerns about the administrative burden. However, State Senator Jessica Ramos sees the law as a win for labor rights groups, stating that workers are demanding transparency in pay. The law also covers remote employees reporting to a supervisor or worksite in New York. The National Women's Law Center supports the law, emphasizing the importance of pay transparency for achieving equal pay for equal work.

 

U.S. News

Labor Board prosecutors have accused Amazon of imposing illegal secrecy rules on its staff, potentially forcing the company to change its confidentiality rules. The complaint, filed on behalf of the Labor Board's general counsel, alleges that Amazon violated federal law by requiring a worker on its drone program to sign a confidentiality agreement as a condition of employment. The agreement prohibited the sharing of business and financial information, as well as information about the company's techniques, technology, practices, operations, and methods. The National Labor Relations Board's Seattle regional director stated that this violation affects employees at all of Amazon's locations in the U.S. Cheddi Skeete, the former drone project manager who brought the case to the NLRB, expressed concern about how overly broad confidentiality clauses make it difficult for workers to network and job-hunt. He hopes the NLRB will help strike a reasonable balance between companies' need for privacy and employees' need to discuss their work.

 

Bloomberg

A federal judge has ruled that Intuit cannot insinuate or suggest that its TurboTax product is free. The lawsuit, launched by the Federal Trade Commission (FTC) last year, accused Intuit of overstating TurboTax's Free File option to the point where it considers such marketing a deceptive trade practice. While the commercials have a disclaimer saying the free option is only for simple returns, the FTC did not think the disclosure was adequate due to the small size of the words, the short amount of time they're on the screen, and the fact that voiceovers don't mention them. Intuit argued that the claims were not credible, and that it would fight the charges. Executive vice president and general counsel Kerry McLean said in a statement that the company's advertising campaigns have grown the number of people who file for free, and have been central to raising awareness of free tax prep options. But Chief Administrative Law Judge D. Michael Chappell disagreed with the defense and concluded that Intuit's marketing was indeed deceptive, noting that only a minority of filers would ever be able to take advantage of the free filing option.

 

Accounting Today

Texas Attorney General Ken Paxton has been acquitted of all charges at a historic impeachment trial. The trial, which divided Republicans, resulted in Paxton's full clearance by Senate Republicans. Paxton's wife, state Sen. Angela Paxton, attended the trial but was not allowed to vote. Paxton, who still faces trial on felony securities fraud charges and remains under FBI investigation, issued a triumphant statement after the verdict. The Senate also voted to dismiss four impeachment articles, allowing Paxton to reclaim his role as Texas' top lawyer. The trial highlighted fractures within the GOP and raised questions about Paxton's political durability. The case centered on allegations that Paxton misused his office to help a donor who was under FBI investigation.

 

Bloomberg Law

The Columbian

Plaintiff-appellants are asking the Georgia Court of Appeals to order two former trustees to return $4.7m in attorney fees paid by a dynasty trust. The trust had paid the fees under a now-defunct court order. The original legal action arose when the directors of the Glass Dynasty Trust sold the trust's company against the founder's estate plan. The Court of Appeals reversed the ruling that required the plaintiff-appellants to pay the trustees. The plaintiff-appellants argue that the former trustees should pay their own legal fees as the company is already covering them. Defendant-appellee counsel argues that the plaintiff-appellants are wasting their money on a lawsuit. The case is ongoing in the Georgia Court of Appeals.

 

Law

Sweetgreen is being sued by a group of Black and female employees at seven of the salad chain's New York City locations who claim they faced racial and sexual harassment. The complaint filed on Thursday in New York state court in the Bronx, which broadens a lawsuit first filed in March, claims that workers faced anti-Black racial slurs and female employees were subjected to sexual comments and unwanted touching. Managers also refused to promote Black workers and showed preferential treatment to Hispanic employees, according to the lawsuit. "We take these accusations seriously and do not tolerate any form of harassment, discrimination, or unsafe working conditions," the company said. The workers are seeking damages for economic losses and emotional distress, and punitive damages for what they said was Sweetgreen's "malice or reckless indifference to plaintiffs' rights."

 

U.S. News

Facebook and the IRS have reached a settlement in a Freedom of Information Act (FOIA) lawsuit over a tax audit. The lawsuit was filed by Facebook in 2016 to uncover documents related to the IRS' audit, which determined that the social media company undervalued almost $13.9bn in intangible assets transferred to an Irish subsidiary. The parties filed a stipulation of dismissal, ending the years-long dispute. The settlement states that each party will bear its own costs, attorney fees, and expenses.

 

Bloomberg Tax