Keep your finger on the legal world's pulse
19th September 2023
Generative AI: Revolutionizing legal software development
The ability of generative AI to modify and interpret English allows it to automate legal processes and enhance software development in law firms and their tech offshoots. While generative AI enhances productivity and efficiency, it is not expected to replace legal software developers entirely. The technology is most useful for keystroke-intensive work and lightweight scripting, aiding troubleshooting and code syntax. However, there are limits to generative AI's capabilities, and it is not suitable for large-scale applications. Despite this, generative AI is likely to significantly increase the amount of software law firms and their tech spinoffs can develop. Hiring developers and data scientists will still be necessary due to the growing demand for software in the legal market. Generative AI is seen as a productivity tool that will increase the output of software and create a higher demand for developers. The impact of generative AI is comparable to previous advancements in coding technology, which streamlined development without reducing the supply of developers.
Texas Two-Step: Bankruptcy and mass tort litigation
Mass-tort bankruptcy cases, known as the "Texas Two-Step," have become a popular strategy for corporations to handle mass tort litigation claims. This involves dividing the company into two entities, with the one facing liabilities filing for bankruptcy and forcing claimants to pursue their claims through the bankruptcy courts. However, the fairness and effectiveness of this strategy are being questioned, leading to different outcomes in courts. Recent cases involving LTL Management LLC/Johnson & Johnson and Aearo Technologies LLC/3M have been dismissed for bad faith filing. The Supreme Court is expected to intervene to resolve the issue. Claimants argue that this strategy deprives them of their right to a jury trial. The controversy surrounding the Texas Two-Step highlights the need for clarity in bankruptcy laws regarding mass tort litigation.
ESOPs under scrutiny: IRS issues warning
McDermott Will & Emery's Allison Wilkerson and Christian Nemeth discuss a recent IRS notice regarding employee stock ownership plans (ESOPs). The notice warns against aggressive schemes involving ESOPs to avoid paying taxes. However, it lacks specifics on what could be considered questionable or impermissible. This has raised questions about IRS scrutiny in an area historically overseen by the Department of Labor. The bulletin aims to target dubious events that prioritize tax avoidance over retirement benefits. ESOP plan sponsors are urged to use the tools available without exploiting the unique opportunities of ESOP ownership. The IRS will continue to include ESOPs in their audit work plan, focusing on compliance with tax code requirements. Appropriately designed ESOP transactions should not be affected by the notice. Ms. Wilkerson and Mr. Nemeth conclude that they "don't believe the latest bulletin signals a change in how the IRS views ESOP requirements. The IRS will police and penalize truly abusive transactions, which stems from IRS enforcement steps dating back decades. For these reasons, we don't believe (and we do hope) this isn't a sea change in the ESOP enforcement space".
Complaint filed against Indiana AG for violating professional conduct rules
A complaint has been filed against Indiana Attorney General Todd Rokita for violating professional conduct rules in statements he made about a doctor who performed an abortion on a 10-year-old rape victim. The complaint alleges that Rokita violated confidentiality requirements and made false statements about the doctor prior to filing a complaint with the state's Medical Licensing Board. Rokita's office plans to respond to the complaint. The doctor, Dr. Caitlin Bernard, gave the girl a medication-induced abortion and received attention after speaking publicly about the case. Indiana was the first state to approve abortion restrictions after the Supreme Court's decision to overturn Roe v. Wade. Bernard later filed a claim against Rokita for making false statements. Rokita has filed a lawsuit against Indiana University Health for violating patient privacy laws. The doctor was reprimanded by the medical licensing board. The rapist has been sentenced to life in prison.
Starbucks faces lawsuit over lack of fruit in Refresher beverages
Starbucks has been ordered by a federal judge to face a lawsuit claiming that several of its Refresher fruit beverages lacked fruit. The judge rejected Starbucks' request to dismiss nine of the 11 claims in the proposed class action, stating that a significant portion of reasonable consumers would expect their drinks to contain fruit mentioned in their names. The plaintiffs alleged that Starbucks' Mango Dragonfruit, Mango Dragonfruit Lemonade, Pineapple Passionfruit, Pineapple Passionfruit Lemonade, Strawberry Açai, and Strawberry Açai Lemonade Refreshers contained none of the advertised fruit. They claimed that Starbucks' misleading names caused them to be overcharged, violating their states' consumer protection laws. The judge dismissed a fraud claim but allowed the lawsuit to proceed. The case is Kominis et al v Starbucks Corp, U.S. District Court, Southern District of New York, No. 22-06673.
Bed Bath employees launch 401(k) losses lawsuit
Bed Bath & Beyond is facing a proposed class action lawsuit brought by two former employees, who say the company's recent bankruptcy triggered the termination of one of their 401(k) investments, driving losses of more than $5m. The proposed class action filed in Newark, New Jersey, federal court, says the company's 401(k) committee breached its fiduciary duties by failing to replace a MassMutual "guaranteed investment account" with similar investment options, such as money market funds and stable value funds, that carried less principal risk if the company went bankrupt. According to the complaint, Bed Bath & Beyond knew as early as 2019 that its business model was not viable, and had "ample opportunity" in 2020 and 2021 to replace the account before rates began rising. The case is Harvey et al v Bed Bath & Beyond Inc 401(k) Savings Plan Committee et al, U.S. District Court, District of New Jersey, No. 23-20376.
Longest serving Muslim mayor files lawsuit over discrimination
Mohamed Khairullah, the longest serving Muslim mayor in the U.S., has filed a lawsuit against the White House over discrimination. Khairullah, who had previously been removed from the government's terror watchlist, was uninvited from a White House celebration without explanation. The lawsuit, filed by an Islamic civil rights group, argues that Muslims continue to face negative repercussions even after clearing their names from the list. The Council on American-Islamic Relations (CAIR) has filed several lawsuits challenging the watchlist's constitutionality, claiming that names are added without valid reason and that Muslims face scrutiny due to discrimination. The watchlist is estimated to include 1.5m people, mostly Muslims. CAIR's lawsuits have revealed that the list is shared with numerous government agencies and private entities. The government's response to removals from the watchlist has been discouraging, as names are retained in databases even after supposed removal. Khairullah's case highlights the ongoing challenges faced by Muslims in the U.S. due to their ethnic and religious background.
Partners to vote on proposed merger between A&O and Shearman & Sterling
Partners at Allen & Overy and Shearman & Sterling will soon vote on a proposed merger between the two firms. The partnership votes will take place between September 28 and October 13. The merger, if approved, would create a law firm with over 3,900 lawyers in nearly 50 offices worldwide and global revenues of about $3.4bn. The outcome of the partnership vote will be announced shortly after it concludes. The managing partner of Allen & Overy, Gareth Price, resigned in July for personal reasons, and Khalid Garousha will serve as interim managing partner until April. The firms have completed key transaction milestones and obtained approval for required changes to retirement and pension programs.
Cooley appoints rachel proffitt as new ceo
Cooley, the Silicon Valley-founded law firm, has announced that Rachel Proffitt will become its new CEO, succeeding Joe Conroy. Proffitt, who currently heads Cooley's San Francisco corporate practice, will officially take over the position on Janurary 1, 2024, making her the firm's first-ever female CEO. Proffitt has a strong background in corporate and securities law, having worked with various companies and investors throughout her career. Cooley's succession process began in 2022, and Proffitt's appointment comes at a challenging time for the firm, which has faced a slowdown in demand due to the transactional sector. However, Conroy remains optimistic about the firm's future growth. Proffitt aims to strengthen the firm's culture and continue shaping its strategic vision. Under Conroy's leadership, Cooley has grown into a global firm with over 1,400 lawyers and more than $2bn in gross revenue in 2023.
Paul Hastings hires Weil Texas litigation chair as Houston office co-chair
Paul Genender, the former Weil Gotshal & Manges Texas litigation head, has joined Paul Hastings as the Houston office co-chair and will lead the firm's Texas litigation practice. Genender expects most of his existing clients to move with him to Paul Hastings. The passage of Texas House Bill 19, which establishes a new business court in the state, is expected to bring more business to Genender. He plans to hire and recruit in Texas to grow Paul Hastings' Texas practice. Genender's move reflects the firm's strategic focus on Texas and its complex litigation and arbitration practice. The addition of Genender enhances the firm's capabilities for premier clients across Texas and nationally. Weil has also been seeking growth in the Texas market and its energy practice.


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