Kathryn Rubino: Hey!
Joe Patrice: Welcome to another edition of Thinking Like a Lawyer.
Kathryn Rubino: How are you?
Joe Patrice: That was seamless.
Kathryn Rubino: It’s almost like we’ve planned these things.
Joe Patrice: We did not in this instance. I’m Joe Patrice from Above the Law and I am joined as per my usual by Kathryn Rubino and Chris Williams also of the aforementioned Above the Law to talk about weekly news and the law. But obviously, before we do that we need to catch up and kind of seem like we’re people or folks like when they —
Kathryn Rubino: That we actually appear like humans?
Joe Patrice: Yeah, people like that.
Kathryn Rubino: It’s so weird.
Joe Patrice: Like and just to have that kind of human touch. I don’t know.
Chris Williams: Human talk for people listeners.
Kathryn Rubino: Yes.
Joe Patrice: Be well, I mean we need to do that to full ChatGPT that we’re real.
Joe Patrice: This brings us to the beginning of our small talk section. Chris, how are you feeling?
Chris Williams: A lot better.
Joe Patrice: Good.
Chris Williams: A lot better as the French say, “I had the shits” as a food poisoning last week. And it’s a way to lose two-pant sizes in a day.
Kathryn Rubino: Not recommended.
Chris Williams: I don’t recommend it. I don’t. No, no. This is not a Pro-Ana podcast. That shit was for a forum like don’t do it. Yeah, I’m glad I can like eat solid meals again. It was rough for a bit. I got past the point where I don’t have to be afraid of my farts anymore. I can trust that they’re farts, you know.
Joe Patrice: Come on.
Kathryn Rubino: I think we need some cerebral warning on this podcast.
Joe Patrice: So, yes. So, that way we start way differently than “Yeah, it was really bad I had to go to the hospital but I’m feeling better now” which is kind of weird I thought that was going to count.
Chris Williams: No, that’s private information. I’m just talking about me shitting.
Joe Patrice: Oh, no. It’s private because of HIPAA. Yes, so that’s good that you’re alive and all. So, Kathryn, are you okay?
Kathryn Rubino: I’m significantly better than all of that. I must feel bad about complaining about minor inconveniences after hearing that story.
Joe Patrice: Yeah. No, and I’m good as you know.
Kathryn Rubino: Though nobody asked.
Joe Patrice: No and that ends Small Talk.
Joe Patrice: All right.
Kathryn Rubino: That is classic.
Joe Patrice: Yeah.
Kathryn Rubino: A classic right there.
Joe Patrice: I know so, what are we talking about first here?
Kathryn Rubino: There is a law firm in North Dakota that has been getting a lot of attention from one Joe Patrice.
Joe Patrice: It has but not just me. It’s also getting attention from a lot of news outlets. This is a law firm in North Dakota, we wrote about them originally a bit ago when the story that percolated up is that this is a law firm that had parted ways with two associates, fired one, and the other one had resigned to take a new job. And then sent them bills the firm did saying, “they did not meet their minimum hourly quota” and the firm wanted them to pay the firm their salary back for the shortfall.
Kathryn Rubino: Wild.
Joe Patrice: Yeah, so this is.
Kathryn Rubino: This is terrible.
Joe Patrice: Yes, so this is terrible. But now as it turns out the North Dakota supreme court has now authorized this business model because there was an agreement that they signed, that the associates signed an employment agreement, and nestled within the said employment agreement was a provision that said that they could call for this. This is what firms call the “Larsen Laytham Huettl.” I don’t know how to pronounce it. Anyway, in North Dakota, if they have this provision that said that they could go after shortfalls. So, as opposed to a normal situation where not making your hours might mean you don’t get a bonus.
Kathryn Rubino: Or get fired.
Joe Patrice: Or potentially get fired. They go that one step better than firing people and I put better in all air quotes “available” of saying, “Well, we’ll keep you on, and then at the end of the year we’ll bill you for your salary back.” For now, of course this only becomes a problem as you might imagine because – I don’t know if you will remember 2020?
Kathryn Rubino: I tried not to remember it.
Joe Patrice: So, some things went down and particularly at the beginning.
Kathryn Rubino: It went down.
Joe Patrice: In particular at the beginning of the year, there was this lockdown that really slowed down legal work while most firms recovered on the backend and actually had kind of a banner year.
Kathryn Rubino: And that kind of depends on what your mix of business.
Joe Patrice: Sure.
Kathryn Rubino: For sure.
Joe Patrice: But there was definitely no work for a while and a lot of people struggled with the idea of whether or not that we’re going to lay folks off and stuff like that, but this firm didn’t because this firm had built-in protection for themselves where they could just avoid having to train new people and force folks to keep being on the payroll.
Kathryn Rubino: And if they didn’t bill enough because the partners didn’t bring in enough work, they were going to get paid anyway.
Joe Patrice: Right. So, the partners who are the only ones who are bringing in this work are prepared to get paid anyway because of their own failure to generate work, they could take out on the associate on the backend. Now, the State Supreme Court agrees that this is what’s in the document. I do think putting aside whether or not this meets the State’s definition of unconscionable or anything like that, I definitely think there was an uphill battle here, given that the people involved were lawyers. It’s a lot harder to say, “Hey, this is an unconscionable contract when you’re an attorney and theoretically in a position to know what you’re signing.”
And I think that became a problem. I don’t know if that should be the excuse, but I definitely think that was a factual problem in the case of the folks challenging this. But that all true, and it raises a question about what the better part of valor is because this is a few thousand dollars that the firm wants to get back. And they did this at the expense of everybody in the world knowing this firm’s name.
Kathryn Rubino: And not in a good way.
Joe Patrice: And no one thinks in a good way.
Kathryn Rubino: Not all publicity is good.
Joe Patrice: No one thinks in a good way. No one wants to work there anymore. Not that it’s a huge legal market or anything. But if you to the extent there’s a talent pool in North Dakota.
Kathryn Rubino: You have to imagine people are saying, “Go anywhere else.”
Joe Patrice: Anywhere else.
Kathryn Rubino: Anywhere else.
Joe Patrice: Yeah.
Kathryn Rubino: Because it’s also, it’s not just, “Oh, the actual sort of you don’t make your hours, you owe them money sort of consequence there.” It’s also I think, deeply reflective of the sorts of folks that are running the firm.
Joe Patrice: Right.
Kathryn Rubino: And if this is what they’re willing to do over, you know, literally a time when we were in the middle of a pandemic, who the hell knows what’s next on there but they are willing to do?
Joe Patrice: Yeah.
Kathryn Rubino: And for whatever situation you find yourself in.
Joe Patrice: Well, you know, here’s the thing. So, it would be great like obviously, times were tough, and I’m sure they had bills to pay, and we’re nervous about spending on this salary. It would be great if there was a federal program.
Kathryn Rubino: Hah!
Joe Patrice: For instance, —
Kathryn Rubino: During a pandemic.
Joe Patrice: During the pandemic for instance gave money –
Kathryn Rubino: In order to pay paychecks.
Joe Patrice: to employers to pay paychecks. Yeah.
Kathryn Rubino: Yeah, that would be great.
Joe Patrice: And then they wouldn’t have had to worry about any of this.
Kathryn Rubino: Right. They just could have paid the paychecks. And then, you know, the chances that those loans will ultimately be forgiven.
Joe Patrice: As it turns out –
Kathryn Rubino: Yeah, pretty high.
Joe Patrice: The PPP loans which we’re talking about, were largely forgiven. So, this firm, as it turns out, took out $792,000 worth of PPP loans from the federal government for the express purpose of continuing to pay people’s salaries. It got those forgiven, so it pocketed $792,000 of taxpayer funds.
Kathryn Rubino: And then food the associates to get back the salary.
Joe Patrice: The money back on the argument that they weren’t able to do the necessary work to earn the salary, even though the purpose of the PPP, as far as I could tell is to pay people knowing that they aren’t going to be able to produce for that. Maybe at the time that they signed up to get PPP, they did not expect to be clawing money back. Or maybe they wouldn’t have if these folks had not left mid-year or something. But I don’t know.
Kathryn Rubino: It does present troubling facts.
Joe Patrice: Well, yeah, because if you have in your employment agreement, any provision that suggests you could get that money back, it would make me nervous to then go to the federal government and say, “I need money to pay this or else.”
Kathryn Rubino: Unless you were if there’s some sort of an explicit waiver of that provision on your behalf.
Joe Patrice: Yeah, I don’t know and obviously, we don’t know how all of those forms work, but certainly not a place you want to put yourself. But yeah, so now we’ve got this group of folks with this business model, which was already somewhat tilted in favor of management and it becomes extra-tilted when we find out that we actually paid for these people’s salaries before they clawed them back. But real heads I win, tails you lose scenario.
Kathryn Rubino: Indeed.
Joe Patrice: You know so, it’s an interesting place this story.
Kathryn Rubino: We at Above the Law have not heard of any other firms having these sorts of provisions in their employment contracts, but it’s certainly the green light that the State Supreme Court has given this sort of contract is definitely worrying for the industry, I would say.
Joe Patrice: Yeah, what one ray of light I suppose too it is that there were a number of arguments made in the case that the Supreme Court weighed and kind of hand waved away saying that they had not been properly raised in a timely manner below, so they didn’t have to consider them.
And who knows in a different fact pattern where those could have been raised earlier, perhaps it would have been different. Among them things like some of the associates were raising, “you have this provision about you’re going to claw back all this money, but in previous years, when we didn’t meet those hourly requirements, you actually gave us bonuses on top of our salary.”
Kathryn Rubino: Right.
Joe Patrice: Which tends to suggest that you’re modifying that contract in that way, which I think is compelling not just on a — it’s kind of like a change to the contract. But it’s extra compelling when it makes that provision seem like it really only exists for the scenario where there’s a pandemic that they’re screwed in, and therefore, they can claw back money, you know, like it makes it seem like it’s extra arbitrary, and aimed at punishing people for partnership failures on the backend. But yes, hopefully, this does not become a trend. Hopefully, everybody in the North Dakota market is going out of their way to tell legal talent that they’re not going to make a trend so that they can scoop those folks up. And because one firm has kind of dropped the ball on that.
Kathryn Rubino: That it makes it harder of course for folks currently at the firm to leave for more welcoming firms because they might be on the receiving end of a lawsuit.
Joe Patrice: Yeah, really, really problematic. But yeah, we but my whole take, on it is whether or not it’s legal. And it seems like as I said, the lawyers involved it’s written there, and yada, yada. The fact that some things are legal sometimes is not the same as you should do it.
Kathryn Rubino: Right. It’s about should have and not could have.
Joe Patrice: Yeah. And man, this seems like a very high likelihood of maybe somebody should have sat down and said, “Hey, is it worth 30 grand or whatever across two associates for us to —
Kathryn Rubino: Litigate, right?
Joe Patrice: —light our name on fire nationally.
Kathryn Rubino: Yeah, and spend all this money on litigation as well, right? Time and hours that you could be spending on billables for example.
Joe Patrice: Yeah, you know.
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Joe Patrice: So, with Clarence Thomas.
Kathryn Rubino: Well, a bill to have a statue to Clarence Thomas’s honor is making its way through the Georgia legislature, it has passed the Senate, and I believe is now going to be up for debate in the House. And if it passes there, obviously will go for the signature of the governor. But there’s been a bunch of controversies as one might imagine about the proposed statue to the second black justice on the Supreme Court, Clarence Thomas. He’s a native of Georgia. So, that’s sort of the “why Georgia element of it?” You may not be aware of that because I had a bit of his history.
Joe Patrice: Well, no, I mean, in my experience, people in Georgia exclusively drink Coca-Cola and not Pepsi.
Kathryn Rubino: Okay. Okay. See, this is some of the controversy right there that you’re hinting at. Obviously, Joe’s references. Oh, oh, okay.
Kathryn Rubino: Yeah. Joe’s reference there is to some of the more shocking testimony from Anita Hill’s testimony alleging
Joe Patrice: Sexual harassment.
Kathryn Rubino: sexual harassment by Clarence Thomas. And there have been a number of other controversies that Thomas has courted in his time on the court since then, he doesn’t have a great civil rights record, he has not recused himself despite mounting ethical concerns about his wife’s advocacy work and those issues coming before the court. And so, you know, there are lots of reasons why people may not want a statue to Thomas’s honor. And so that’s something that is currently being discussed.
Joe Patrice: Well, so and there’s there was a negative reaction from some folks.
Kathryn Rubino: Oh, absolutely.
Joe Patrice: That was the story.
Kathryn Rubino: The vote in the Senate went down exactly on party lines and state senator Emanuel Jones very much went for the jugular calling Clarence Thomas an Uncle Tom for portraying his own community. So, you know, definitely, definitely, some harsh words for the justice not that they necessarily had any impact since, as I said, it did pass the Senate.
Chris Williams: Did they reveal any sort of schematic or what this would look like? Because quite frankly, after what they did for Caretta, and my Martin Luther King, Jr., the most recent statue was harmless, and it looks like holding a very hefty penis. I’m thinking, “Hey, give the dude a statute.”
Joe Patrice: I mean, “Long Dong Silver” is still alive, and I believe so, it could be a model for it.
Kathryn Rubino: That could be a very different statue and far as I know, I’ve not seen any schematics for the proposed statue, the detail, but I have is that it would be paid for by private funds, which I guess helps little bit.
Joe Patrice: I actually just had to do the Google that to make sure Long Dong Silver is still alive. And he is.
Kathryn Rubino: Oh, good. Oh, good. I’m glad you weren’t lying to our audience.
Joe Patrice: Yeah.
Chris Williams: Shouts out to, the Long Dong Silver.
Joe Patrice: Yeah. So many, and like Chris, you would have been too young for this. But like so many formative things happen when you know, as a kid who watched those hearings that are stuck now permanently in my brain, but I can’t get rid of like for instance, the name Long Dong Silver.
Kathryn Rubino: And I do think it’s interesting some of you know, the controversies that have come up around the potential statute are the former host of Thinking Like a Lawyer, Elie Mystal was on Twitter commenting on Senator Jones’s words, saying that “he thinks it’s more complicated than just Clarence Thomas as an Uncle Tom that he’s an independent thinker who happens to be wrong about everything, holds a dystopian social Darwinist view of racial emancipation, none of which mean you should, of course, get a statue in your honor.
Joe Patrice: Generally speaking.
Kathryn Rubino: And, you know, those are a lot more nuanced take that is probably harder to sell to a constituency than Uncle Tom.
Joe Patrice: Right, right. Obviously, Ellie’s not trying to get elected than he –
Kathryn Rubino: Sure, sure.
Joe Patrice: –at the present moment, yeah which I could understand.
Chris Williams: But he is trying to get people to buy his book, which you should do if you haven’t done yet.
Joe Patrice: Well, wow, well done. Your clients are expecting you to know a lot of things about a lot of things. Even topics like domain names,
Kathryn Rubino: Domains were definitely not covered in my law school classes.
Joe Patrice: Worse yet, your client might want a domain name to protect their brand or support a product launch that’s already taken.
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Joe Patrice: All right, talk to me. What’s up next?
Kathryn Rubino: We also did a story this week about our favorite law firm Jones Day.
There you go.
Joe Patrice: Yeah, so Jones Day is back. What have these people done this time?
Kathryn Rubino: It is not necessarily on its face political.
Joe Patrice: Oh, okay.
Chris Williams: That’s a strong start.
Kathryn Rubino: But I don’t know if you’ve heard about Texas Two-Step, a bankruptcy proceeding maneuver that was innovated by Gregory Gordon of Jones Day. And it’s when there’s sort of these mass tort decisions or actions, class actions and judgments. That’s where it was actually before. Judgments against these large multinational sorts of big corporations. And without actually being insolvent, they spin off the liabilities into a separate vehicle and then declare bankruptcy on that entity while that sort of parent company remains there is able to do business. Johnson & Johnson used it as a result of their talc litigation. And that is actually what is been under attack recently.
The Third Circuit came out and it was like, not so fast. And part of the Texas Two-Step is that they will be refiled in North Carolina, which changes the burden of proof. In North Carolina, people who are objecting to bankruptcy have to prove that it was done in bad faith, whereas in New Jersey, it’s the opposite the party filing for bankruptcy has to prove that they are doing it in good faith. So, that obviously changes the calculus considerably.
So, now we have at least one federal jurisdiction saying that this Texas Two-Step, declaring the bankruptcy of Texas refiling in North Carolina, which changes the burden of proof, saying that that is not okay. And you can just cut the sort of primary jurisdiction out of the equation and that there needs to be some sort of finding of insolvency for the parent company.
Joe Patrice: It somewhat makes a mockery of the concept of corporate veils, right? It’s one thing to offer protection to a separate company under the Johnson & Johnson umbrella that happens to make cancer-contributing chemicals. But you got to, you know, do that before. You don’t get to claim that “oh, they’re part — they roll up into our major profitable organization for years, find out after they get hit with causing cancer and say, ‘Oh, just kidding.’” Now we’re going to make them a separate corporation, and therefore you can’t touch the main corporation. Like you got to be consistent here.
Chris Williams: One of the things I think was brilliant about the Two-Step maneuver, and the Johnson & Johnson talc asbestos issue, is they were saying that the people who got cancer will be benefited by this, because if it was to move through bankruptcy court that they’d be paid out quicker than if they were to get the claims in civil court. So, what was interesting was that they had to have some, at least some facial defense would be like, “Hey, this is actually being done in good faith. And not just a, you know, a quick pay less scheme.”
Kathryn Rubino: Well, I mean, certainly, if they’re able to make a showing of good faith, regardless of the jurisdiction, that is, you know, something that they can defend. And they’ve certainly said that turning these plaintiffs into creditors expedites the payment process. But given how hard that the plaintiffs have been fighting across multiple different forms, or multiple different cases, where this Texas Two-Step has taken place, how hard they’re fighting against it certainly we’ll have a side eye there.
Joe Patrice: This is also what Alex Jones was trying to do with the defamation victims. He was trying to push everything into a bankruptcy vehicle, and then claiming, “Oh, this will work out better, I’m going to fund it with this amount.” But obviously, one, when you do something like that you are setting an upper bound on what that fund is. That’s the real problem. They can claim all day want that this is going go faster, but what they’re really doing is artificially capping the amount of money that’s going to be available, which becomes a problem.
Two, the other thing that they’re doing is they’re buying into this absolutely disingenuous garbage that these kinds of right-wing agitators who are anti-torts and class actions do are claiming that the lawyers who took upon the case by you know, put out all the money to litigate this case for multiple years to get to this point, they’re owed money for that, right? They took a huge risk, they could have ended up with nothing, they’ve won, and they take a portion of the award. And there’s this right-wing movement to show up after the case has been completed, and then challenge draping themselves in the “just caring about the poor victims” and claim that the lawyers should be cut out and not get any money.
Obviously, if you put this in a bankruptcy setting, now the lawyers become creditors on the same level as everyone else, and theoretically, that award could be slashed down. So, this is more of an effort to make it costly for these lawyers. And, you know, on a superficial level, you think, well, the victims should get more money. On a real level, those victims would be getting exactly zero money if it weren’t for these public interest law firms taking on millions of dollars’ worth of free work for years in the hope that maybe they will end up with a share of this.
Joe Patrice: So, unless you want to publicly fund vast trusts, not mass trusts, mass torts, then you have to live in a world where the lawyers are going to take some of this money. And that’s another element of why this bankruptcy scheme is so objectionable. Y
Kathryn Rubino: Yeah, and I think what else is interesting is that despite the sort of lip service that folks at Jones Day have been giving to, “Oh, this actually helps the folks who’ve been injured get paid faster.” The truth is that despite the Third Circuit’s ruling bankruptcy, commentators are saying that it still behooves companies to attempt this Texas Two-Step, even if other jurors, you know, as they try, and maybe other jurisdictions wind up adopting the same test that New Jersey did, or the Third Circuit did as a result.
And you know, it’s still in their benefit not just to do the maneuver, but to fight the maneuver through the appellate process, as they tried to find out what is acceptable in the different, you know, appellate circuits in this country.
Joe Patrice: Yeah.
Kathryn Rubino: You know, and, of course, this sort of capper is how much money has Jones Day taken in as a result of the fees that they’ve generated in all of the Texas Two-Step bankruptcy filings that they’ve done?
Joe Patrice: A lot.
Kathryn Rubino: Yeah. A $107 million, just for this particular move.
Joe Patrice: Yeah, and you know.
Kathryn Rubino: I mean, listen, I’m not against lawyers who are having innovative solutions to complex problems, which listen, like it doesn’t like it have a public policy interest against it or not, this is an innovative solution to a large problem that their clients were facing.
Joe Patrice: Yeah, they get a C for clever.
Kathryn Rubino: C’s get degrees.
Joe Patrice: Yeah. Ugh, anyway.
Chris Williams: I wouldn’t said, D for devious, but I understand.
Joe Patrice: Oh, that’s fair. I’d give them an F for fu–! Anyway. That I think brings us to the conclusion of at least the scheduled topics unless somebody had anything else. Then in that case, yeah, you should be listening to this show every week instead of maybe just this week. Hopefully, you’re listening to all the time. But if this is your first time you can subscribe that way you get welcome. You’re welcome. You really get new episodes when they come out. You should be giving reviews, and stars, and write something, all of that helps other people find the show because that’s how search engines work.
Joe Patrice: At least for now, I guess the Supreme Court is hearing an oral argument on blowing up the internet today. So, maybe it won’t be that way next week. But for now, you should give reviews, you should be reading Above the Law so you can see these and more stories as they come out throughout the week. Follow everybody on social media, the blog is @ATL blog. I’m @JosephPatrice. She’s at @Kathrynone. Chris is at Rights for Rent.
You should be listening to The Jabot, Kathryn’s other podcast.
Joe Patrice: I’m a guest on the Legal Tech Week Journalists’ Roundtable. There are a bunch of other shows from the Legal Talk Network that we aren’t on but that are also fun to check out. And I think with that, we’ve covered everything. So yeah, talk to everybody soon.
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