Keep your finger on the legal world's pulse

Cravath Swaine & Moore's decision to raise associate salaries is causing pressure on less-profitable law firms who may struggle to afford similar pay increases. While top-tier firms are likely to follow suit, others in the industry may be unable to do so. Michelle Fivel, a legal recruiter, predicts that fewer firms will be able to match Cravath's scale. Peter Zeughauser, a law firm management consultant, warns that firms that cannot offer competitive compensation may face increased poaching. Cravath, known for setting salary standards, will raise annual pay to between $225,000 and $420,000. Several other firms have already announced that they will match this scale. Miguel Zaldivar, CEO of Hogan Lovells, emphasized the need to compete for top talent. The salary increases come as a surprise during a period of decreased associate productivity. Some firms have even had to downsize. The pay raises are funded either through longer working hours or increased billing rates. The biggest 50 firms have seen stronger revenue growth compared to other firms, largely due to higher billing rates. Revenue gains this year were driven by an average billing rate increase of 8%.

 

Bloomberg Law

London-based legal technology provider Genie AI has launched a new AI-powered solution called "clause-by-clause real time negotiation." The feature allows multiple users to complete negotiations in real-time, asynchronously, by selecting "agree, disagree, unsure" icons for each clause within a document. The capability aims to cut down on costs and time constraints in document review and contract negotiations. Genie AI's CEO, Rafie Faruq, hopes that the new offering will enhance users' abilities to reduce reliance on law firms and lower costs. The feature works alongside Genie AI's legal AI assistant and Super Draft Editor, utilizing large language models and AI providers. Genie AI differentiates itself from competitors with its fully .docx compatible and real-time collaborative editor, end-to-end AI review capabilities, and chat functionality. The company's solution is targeted at in-house legal departments and business professionals upskilling to lawyers.

 

Law

A former lawyer at McDermott Will & Emery has filed a lawsuit against the firm, claiming that he was excluded from a major salary increase for U.S. partners. David Huberman, who is now a corporate shareholder at Greenberg Traurig, alleges that he was not included in the pay rise to $425,000 because he was living in Israel. Huberman argues that despite being based in Israel, McDermott required him to be licensed to practice in Illinois. The lawsuit claims that the firm violated the Illinois Wage Payment and Collection Act by refusing to pay him the difference between his initial base salary and the increased amount. McDermott has not yet commented on the case.

 

Law

Law

Reuters

Sidley Austin is making a bold move to challenge the top firms in the Big Law restructuring market. Led by Stephen Hessler, the firm aims to grow its restructuring group to 100 lawyers by 2027. While Sidley has made progress, it still has a ways to go to catch up to industry leaders like Kirkland & Ellis. The firm is targeting company-side representations and is advising six companies in preparation for filings. Sidley's international restructuring group has also been busy with cases stemming from China's property bust. The firm is keen to capture Chapter 11 filings from its private equity clients. Sidley's strategy is to leverage preexisting relationships while also seeking new work. The firm's efforts have already shown promising results, with significant fees earned from recent cases. Overall, Sidley Austin is determined to establish itself as a major player in the Big Law restructuring market.

 

Bloomberg Tax

Loeb & Loeb has elected Mitchell Nussbaum and Arash Khalili as co-chairs, replacing current chairman Kenneth Florin. The new leaders, both longtime lawyers at the firm, will take over on 5th February. Nussbaum and Khalili stated that the firm historically had a dual leadership structure with two co-chairs, allowing it to maintain active legal practices and have coverage on both U.S. coasts. Loeb & Loeb, which has about 450 lawyers across eight offices in the U.S. and Asia, is focused on growth in transactional and litigation work across various departments. The firm's priorities include getting people back to the office and expanding in technology, media, entertainment, sports, and IP-centric businesses.

 

Reuters

Foley & Lardner has rescinded a job offer for an incoming associate, Jinan Chehade, due to public comments she made following the Hamas attack on Israel. Chehade has filed a charge of discrimination with the Equal Employment Opportunity Commission, accusing the firm of illegal retaliation and discrimination. She plans to file a lawsuit in federal court in Chicago. Chehade claims that her advocacy for Palestine was framed as "supporting terrorism" by Foley. The incident adds to a growing list of job offers being revoked by law firms over comments about the Israel-Palestine conflict.

 

Bloomberg Law

The Financial Industry Regulatory Authority (Finra) has fined BofA Securities $24m for over 700 instances of spoofing in U.S. Treasury secondary markets. Spoofing involves fraudulent trading that creates the appearance of market activity to induce other participants to trade against executed orders. Finra found that a former supervisor and a former junior trader executed 717 instances of spoofing in a U.S. Treasury security. BofA Securities has settled the matter without admitting or denying the charges. The bank says it has has made significant investments to enhance controls and worked co-operatively with Finra.

 

The Wall Street Journal

PwC affiliates in Hong Kong and China have been fined $7m by the Public Company Accounting Oversight Board (PCAOB). The U.S. accounting watchdog found that more than 1,000 audit staff cheated on internal training exams between 2018 and 2020. Without admitting the allegations, PwC’s Hong Kong firm has agreed to pay a $4m settlement, while PwC China is to pay $3m. PwC said it was “highly regrettable” that staff had shared test answers. The PCAOB has ordered the firm to strengthen its policies to ensure staff act with integrity in internal training.

 

Compliance Week

Financial Times

Reuters

The Wall Street Journal

A U.S. appeals court has ruled that a lawyer's failure to appear in court for her client's race-bias lawsuit against a strip club does not justify dismissing the case. The court stated that while the lawyer may deserve sanctions, the penalty imposed by the judge was too severe. The plaintiff, Briona Hubbard, alleges that she was denied employment at the Birmingham strip club due to her race. The lawyer, Kira Fonteneau, and the club's operator's lawyer, W. Henry McGowen, both failed to attend scheduled conferences. The case was initially dismissed as a sanction, but the appeals court reversed the decision, stating that the lawyer's mistake was not enough to warrant dismissal. The court did not rule out the possibility of lesser sanctions. The case is Hubbard v. Best in Town, 11th U.S. Circuit Court of Appeals, No. 23-12194.

 

Reuters

A group of current and former employees at Peoples Gas, a Chicago utility, have filed a federal lawsuit alleging the company discriminated against them because they're Black. The 11 plaintiffs claim that Black workers were sexualized, faced racial slurs, and were forced to work in high-crime neighborhoods without security. The utility denies the allegations and asserts that it provides equal opportunities for workers. "The utility issued a statement Wednesday denying the allegations and insisting it provides equal opportunities for workers," reported the Chicago Sun-Times. The lawsuit against Peoples Gas highlights the mistreatment and challenges faced by Black employees in the workplace.

 

U.S. News

A Wells Fargo employee has filed a lawsuit accusing the bank of depriving hundreds of its U.S. branch workers of overtime pay. The proposed class action claims that Wells Fargo improperly classified "senior premier bankers" as exempt from overtime pay. The lawsuit alleges that these bankers often work unpaid overtime due to chronic understaffing. The lawsuit seeks unspecified damages, penalties, and legal costs.

 

Reuters

Software firm SUSE, whose software helps large companies run servers and whose clients include Microsoft and BMW, has tightened its scrutiny of commercial deals by creating a deal desk, aligning itself with other listed companies in the sector. The company's annual report for 2022 highlighted the importance of "commercial governance" as a newly identified risk. "SUSE may enter into high-risk or commercially inappropriate deals if it does not exercise effective control over the Sales organization," the company said in the report, noting that "'Commercial governance' is a newly identified risk this year" and a heatmap in the report ranked the risk as "possible" and its impact on the business as "high". The report said that the deal desk should review any deals greater than $500,000. Lawyers for SUSE's former CEO, Melissa Di Donato, stated that the deal desk was created after a joint decision by the executive team and the company's board.

 

U.S. News

A securities and white-collar lawyer with over a decade's Big Law experience has joined East Coast regional player Klehr Harrison. Catherine Wigglesworth, who previously worked at Dechert for 11 years, specializes in complex commercial litigation, securities actions, and white-collar crime mandates. She brings experience in trial and appellate proceedings from discovery to case preparation. Klehr Harrison's managing partner, Brad Krouse, expressed pride in attracting highly-skilled lawyers looking for alternatives to Big Law. 

 

CDR

A ruling by the U.S. Tax Court could require fund managers to pay self-employment taxes of over 3% on a significant portion of their income, potentially closing off a popular tax-reduction technique. The ruling, if applied broadly, would eliminate the ability for fund managers to exclude millions of dollars in income from self-employment taxes. The case was a loss for Soroban Capital Partners, and similar arguments have been made against other firms, including Point72 Asset Management. The IRS has been challenging investment funds on this issue and has been working on regulations to define limited partners more clearly. The ruling creates uncertainty and could result in limited partners being taxed more like wage earners and sole proprietors. The Biden administration has proposed taxing limited partners and S corporation owners to raise revenue. If the ruling stands, it would create a divergence between partnership members and S corporation owners who currently avoid self-employment taxes on their profits.

 

Wall Street Journal