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Mayer Brown's Andy Pincus, Defender of Arbitration, Takes on CFPB Rule

An appellate lawyer who is likely to figure prominently in the anticipated challenge to the Consumer Financial Protection Bureau’s arbitration rule took aim at the new regulation Wednesday, saying it was “not rooted in reality” and showcased the pitfalls of insulating an agency from the political process.

Speaking at an event hosted by the U.S. Chamber of Commerce, Mayer Brown partner Andy Pincus said it was “quite an extraordinary moment to see this agency, notwithstanding the election, six months into the new administration, issue this very dramatic and far-reaching rule,” which bans arbitration agreements that prevent consumers from banding together to file class actions.

“One of the things we looked at, in fact, is how unusual is it for an independent agency to issue such a far-reaching rule so far into the administration of a new president when the agency has no representation appointed by that new president. And the answer is it doesn’t ever happen,” Pincus said. “Even the agencies like the NLRB that remain controlled by a majority of Democrats are not engaging in dramatic new policymaking. They’re respecting the results of the election and the political process.”

In November 2010, Pincus argued on behalf of AT&T in a Supreme Court case in which the justices, ruling 5-4, established that companies could use arbitration agreements to forbid consumers from joining together for class actions. Since the court’s 2011 decision, in AT&T v. Concepcion, arbitration agreements have proliferated.

More recently, as the CFPB and other agencies took steps under the Obama administration to restrict arbitration, Pincus has worked closely with the U.S. Chamber of Commerce on the issue.  Last month, he filed an amicus brief for the U.S. Chamber urging the Supreme Court to rule that workplace arbitration agreements with class-action waivers do not violate federal labor law. In May 2016, the same month the CFPB proposed its ban on class-action waivers in arbitration clauses, Pincus appeared before the House Financial Services Committee to testify against the rule on the U.S. Chamber of Commerce’s behalf.

“Andy has been one of the leading litigation strategists in defense of forced arbitration in the Supreme Court and in other venues. He’s a talented lawyer, and I wish he would join our side,” said Deepak Gupta, a former CFPB enforcement attorney and founding principal at Washington’s Gupta Wessler, who argued against Pincus in the AT&T v. Concepcion case.

Pincus’s work for the U.S. Chamber has taken on the CFPB in other contexts. Last year, he filed an amicus brief for the U.S. Chamber of Commerce to help the financial services company J.G. Wentworth LLC fight an administrative subpoena from the CFPB. The agency withdrew its subpoena—known as a civil investigative demand—in June.

Echoing remarks he made before the House Financial Services Committee last year, Pincus on Wednesday said the CFPB based its rule on a flawed arbitration study. The rule is set to take effect in 60 days and will apply to contracts entered into more than 180 days after that date.

“I think, given the vast number of companies that are going to be subject to this rule, it probably is not going to be enough time, and that’s going to obviously make the cost of compliance much greater,” Pincus said.

The rule will effectively do away with a “user-friendly” form of dispute resolution for consumers, Pincus said. Corporations, he said, typically pay “all or virtually all” of the fees associated with arbitration. “That’s obviously not true in court,” he said.

“If you say to the company, ‘Oh, we’re going to force you back into the class-action system with its huge, huge defense costs, the rational corporate decisionmaker is going to say, Well, you’re forcing me to bear these mandatory costs over here. I’m not going to pay twice. So you’re forcing me to get rid of the arbitration system,” Pincus added. “So in the real world … arbitration will go away if the CFPB’s rule takes effect. That’s just the rational corporate decision.”

Pincus is considered likely to lead any legal challenge to the arbitration rule. But that court challenge may not be necessary.

After the CFPB issued the final rule on July 10, GOP lawmakers including Sen. Tom Cotton and U.S. Rep. Jeb Hensarling, chairman of the House Financial Services Committee, almost immediately called for Congress to mount a challenge under the Congressional Review Act—a legislative tool that Republicans have wielded so far this year to wipe out more than a dozen Obama-era regulations.

At the chamber event Wednesday, Cotton said he believes every Republican member of the Senate banking committee will co-sponsor a Congressional Review Act resolution to undo the CFPB’s arbitration rule. With Wednesday’s publication of the rule in the Federal Register, Congress has a 60-legislative-day window to challenge the rule.

Cotton said he plans to “do all I can to repeal this regulation in the next three weeks of this congressional session.”

“Since President Trump came into office, Congress has used [the Congressional Review Act] 14 times to repeal midnight Obama regulations,” Cotton said. “And that’s our plan now.”

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Source: Law Journal

Advice to Hiring Managers: The Less You Know the Better

When trying to figure out if job candidates are a good fit, for hiring managers it’s okay to be boring—a tip that extends to small talk you make during the interview to what kind of questions you ask about their background on the application.

Keep it simple and stick to concrete questions that focus on the ability to perform the job, said Andrea Stempel, associate general counsel and head of employment law for Ernst & Young, as part of a panel discussion Wednesday hosted by the Practising Law Institute that gave advice on how to avoid common pitfalls in the hiring process.

Don’t ask about trips to Thailand, for instance, or what year he or she graduated from high school or go too far in an attempt to make personal connections when getting to know a candidate.

This type of practice, and others, can keep employers in the clear when it comes to litigation.

The experts on the panel, Stempel and Orrick, Herrington & Sutcliffe lawyers Jill Rosenberg and Lisa Lupion, offered advice about the changing landscape in hiring. Here are four takeaways.

Keeping It Simple During the Interview

Be careful during interviews even with seemingly innocent questions as some areas of inquiry could be problematic, Stempel said.

Asking about a candidate’s graduation year in discussing education could elicit information about a candidate’s age. Suggesting that someone is “overqualified” for a position could give rise to an age discrimination claim. Questions about availability on weekends could lead to religious accommodation issues. Even questions about birthplace or language proficiency could provide unnecessary and inappropriate information regarding national origin or citizenship.

Stempel also said she is wary of a new trend of video resumes. “Less is more early in the application process,” she said.

Navigating the Social Media Legal Landscape

Social media has become a factor in the hiring process. The majority of hiring managers, roughly 60 percent according to a recent CareerBuilder survey, use search engines to research candidates. Of those who looked into social networking sites, 49 percent found content that caused them not to hire the candidate and 32 percent said they found content that made them more likely to hire the candidate, according to the survey.

“Employers find these tools useful,” Rosenberg said. She warned, however, there are privacy issues and managers should only look at public profiles and avoid asking applicants for passwords. As a result of that trend, she said many states and cities banned employers from providing access to private pages.

“The biggest risk is that it provides too much information from an employer point of view,” Rosenberg said. There is a hazy line with photos posted. A picture of someone drinking may not be cause but other actions, like illegal drug use or “dancing naked on a table,” could show poor judgment and potential harm to the company. “This is an area where there is a lot of gray,” she said. She added, “It’s important to implement best practices. It’s unrealistic to completely ban managers and human resources from social media. They will be doing it anyway.”

Rosenberg advised there should be a policy and protocol to screen applicants in a uniform manner, create a list of the social media used to search each applicant and determine what types of lawful information to obtain. She also suggests to keep searches to the job-related information and even conduct the search after the interview.

Asking About Prior Salary Not Business As Usual

Discussion about the gender pay gap has only grown in recent years, and one way states and large cities have worked to combat the disparity is to ban employers from asking about previous salary. In effect, such measures would eliminate bias or further perpetuate the cycle of lower pay.

“The idea is to fix the problem by not asking about previous salary history” Lupion said. She noted several city and state measures that have addressed this issue that bans employers in most cases from asking applicants about previous salaries, including Massachusetts, New York City, Oregon, Philadelphia and Delaware. Illinois, New Jersey and San Francisco have pending ordinances. California passed a law that prohibits employers from relying exclusively on prior salary in justifying pay differences but does not prohibit inquiring about salary history.

Lupion said the hodgepodge of regulations could be tricky ground for employers. She advised keeping records to document the rationale for the offer and a record of how the negotiations ended in a final offer. Lupion also suggested setting a salary range prior to interviewing candidates.

Should Employers ‘Ban the Box’?

An initiative took root, sparked by the U.S. Equal Employment Opportunity Commission and advocacy groups, to encourage employers to ban application boxes that ask if a prospective employee has ever been convicted of a crime. Critics argue this box has a disparate impact on African-American and Latino job candidates.

Rosenberg said more than 28 states and 100 cities have passed laws that prohibit employers from asking about criminal background checks. The laws in these states differ, however, and have exceptions. She said many companies have adopted a one-size-fits-all policy. In general, employers should have a policy in place. “It’s not just picking and choosing where you think it might be a good idea,” Rosenberg said.

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Source: Law Journal

Holder Will Meet With NY Minority Lawmakers for Airbnb

Former U.S. Attorney General Eric Holder is slated to meet with members of the state Black, Puerto Rican, Hispanic and Asian Legislative Caucus Friday to discuss Airbnb’s anti-discrimination efforts.

The powerful New York Hotel Trades Council, a union that has been adamantly campaigning against Airbnb, has threatened to picket the meeting between Holder and lawmakers.

In January 2016, amid complaints of discrimination and racism by hosts, Airbnb hired the former U.S. Attorney General, who is a partner at Covington & Burling, to help create an anti-discrimination policy.

Holder, according to the invitation sent to members Monday, will be “on hand to discuss Airbnb’s anti-discrimination work, and have an open discussion about how home sharing impacts communities of color.”

“This meeting is for information-sharing purposes, and will not reflect caucus support for any particular policies, at this time,” says the invitation for the meeting at 250 Broadway in Manhattan.

In an email to caucus members, Assemblyman N. Nick Perry (D-Brooklyn) said that it is lawmakers responsibility to learn from all sides on various issues.

“As a caucus of 56 Members from all across the state of New York, we must allow for information-sharing so that we can work to achieve a consensus among our membership that runs the spectrum,” Perry wrote in an e-mail obtained by the New York Law Journal.

According to a copy of the invitation, members of the caucus have been invited to “discuss home sharing and Airbnb in New York” with Holder and Laura Murphy, a former director of the American Civil Liberties Union’s Washington legislative office who compiled a report in September on how Airbnb plans to fight discrimination. Murphy’s report found that, while there have been positive experiences between hosts and guests, there have been “too many unacceptable instances of people being discriminated against on the Airbnb platform because of who they are or what they look like.” The report included a pledge by Airbnb to require members to affirm a commitment to non-discrimination effective Nov. 1, 2016; to recruit more diverse hires at the company and to encourage more minorities to host on the platform. A spokesman for Airbnb did not immediately respond to request for comment.

Airbnb, like many other so-called new economy companies, have received a tepid reception in New York (NYLJ Nov. 4). In October, Gov. Andrew Cuomo signed a bill into law (NYLJ, Oct. 21) that would impose heavy fines for illegal advertising of short-term rental units on websites such as Airbnb. The law sets fines of up to $7,500 for each instance where hosts advertise apartments for short-term use when their rental is illegal under state or New York City laws.

Despite Albany’s chilly reception, Airbnb has had a steady presence in lawmakers’ campaign coffers. A political committee backed by the home-rental company spent nearly $1.3 million on various campaigns last year, according to financial disclosures with the state’s Board of Elections, making it one of the top 10 campaign donors.

The company has also maintained a steady lobbying presence, employing it’s own lobbyists, as well as four other firms this year, according to disclosures filed with the state’s lobbying arm.

Airbnb employs government relations and public relations firm Bolton St. Johns at $12,500 a month, and the strategic consulting and lobbying firms Capalino + Company and Lavera Strategies, started by a former aide to state Attorney General Eric Schneiderman, and the law firm Dentons at $7,500 a month each, according to lobbying disclosures. Hinman Straub law firm is also on retainer for $7,500 a month.

The meeting with members of the minority caucuses comes roughly a week after an Airbnb host, who refused to rent her Southern California house to a UCLA law student because she is Asian, was fined $5,000 in damages. The host, Tami Barker, is also required to take a college-level course in Asian-American studies, the agreement from the California Department of Fair Employment and Housing stated.

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Source: Law Journal

Accused 'El Chapo' Associate Fights Treasury Sanctions in DC

In a lawsuit filed Tuesday in D.C. federal court, a Belizean banana farmer challenged the U.S. Treasury Department’s decision to sanction him over his alleged ties to Mexican drug lord Joaquín “El Chapo” Guzmán.

John Zabaneh claims the Treasury Department’s Office of Foreign Assets Control’s decision to designate him as a narcotics trafficker in 2012 caused him, his family and businesses to “experience onerous obstacles in their day-to-day lives,” including the “deterioration” of his farm. Zabaneh, represented by D.C. lawyer Erich Ferrari, said Treasury is unreasonably delaying his administrative appeal and provided limited information on why he received the designation.

“Not only have the welfare of [Zabaneh] and his family been gravely prejudiced since his August 7, 2012 designation, but on a much broader scale, so has the welfare of the hundreds of persons in Belize who lost their jobs as a collateral consequence of the designation action, and who continue to be unemployed in a region where fruit farming is a major source of employment,” the lawsuit said.

In announcing the designation, Treasury’s press release said Zabaneh played “a prominent role” in Guzmán’s drug trafficking organizations. Treasury also designated Zabaneh’s nephew, Dion Zabaneh, and an associate, Daniel Moreno.

Guzmán faces an April 2018 trial in New York for overseeing an international drug trafficking operation. He’s also charged with kidnapping and murder.

The designation, pursuant to the Foreign Narcotics Kingpin Designation Act, bars Zabaneh from conducting any financial or commercial transactions with U.S. persons and forced him to give up property and assets in the U.S.

Neither Ferrari nor the Treasury Department immediately responded to a request for comment.

Zabaneh’s lawsuit asks the court to revoke his designation and to “consider other forms of relief that are deemed just and proper.” Zabaneh alleges that the designation was “arbitrary and capricious” in violation of the Administrative Procedure Act.

Zabaneh claims he had to close his banana and citrus farms, which hurt his family and Belize’s economy. In 2016, Reuters reported that blacklisting Zabaneh had a “marked impact” on Belize’s overall banana exports. Zabaneh claims companies outside the U.S. decided not to work with him because of the blacklisting, which further damaged his business.

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Source: Law Journal

New Baker Hostetler Partner Says Trump Administration's Cybersecurity Agenda Still 'A Big Question Mark'

Cybersecurity keep you up at night? For Laura Jehl, it’s become focal to her career. From her time in-house with companies like AOL and Anthem Insurance Cos. Inc. to her years in private practice with the likes of Sheppard, Mullin, Richter & Hampton, Jehl has handled cybersecurity from both sides of the isle. Now, she has recently moved to Baker & Hostetler, where she is a partner and privacy and data practice lead.

Looking back on her years counseling major corporations, managing a major health care breach response effort and working with the government on cybersecurity issues, Jehl chatted with ALM about the threat landscape of today and tomorrow and how major corporations are addressing cybersecurity under the Trump administration.

ALM: Tell us about your new role and how it draws on your cybersecurity expertise.

LJ: The areas of privacy and cybersecurity are very busy. There’s a lot going on, and particularly recently, it’s been hard to get away from it. So it’s exciting for me to be part of a practice that’s recognized and sophisticated. Baker was out ahead of a number of firms in recognizing that this cybersecurity was going to grow and be important.

My role is to strengthen that team and lead the Washington piece of it, because so many of the issues around cyber and privacy have, at least until January of this year, involved the federal government. Whether it’s the FTC regulating privacy, or working with the national security folks on state-sponsored issues, or the FCC.

ALM: From the inside, do you see a noticeable shift in how the federal government addresses cybersecurity?

LJ: No one really knows. I spent the last year going around talking to businesses, and I told everybody enforcement is ramping up all over the place. At that point, the FTC had these privacy and cyber rules, the FCC was getting active; everyone was sort of turning up the heat to see who could be the roughest regulator on both privacy and cyber issues. And then it got really quiet after November.

There’s a big question mark, in my mind and I think in the mind of others, around what this administration thinks about these issues. I feel like I still don’t know. We’ve seen them pull back from the FCC rules, but that’s really about it.

ALM: How has this impacted the private sector’s handling of cybersecurity?

LJ: The other question about this administration is what their view is. There was at least one high-profile indictment coming out of [the] DOJ with state-sponsored activity around Yahoo. But beyond that, there’s some directives about getting Homeland Security a more active role, but still a lot of it is in the ‘yet to be seen’ category. We’re still sort of trying to read tea leaves still.

That makes it an interesting time to talk to clients because everyone is feeling the threat level, between things like these giant ransomware attacks to the distributed denial of service (DDoS) attack last fall that harnessed all the internet of things devices. People are sort of realizing there are a bazillion ways that being connected to the internet can be risky, that it’s not just credit card data or personally identifiable data being breached. But then they sort of say, ‘Well what are our obligations, what do we have to do and what will we get in trouble with the government for?’ And it’s hard to answer that question.

ALM: So are corporations just waiting to see what happens?

LJ: I think recognizing the variety of threats and the seriousness of those threats is on the uptick, though you still see a fairly broad diversity in views about that in corporations. But I think that the technological piece is, ‘Should we be shoring up our IT systems, should we be taking more precautions?’ And that’s important, but what matters on the legal side is it’s hard to say will the government think that what you’ve done is enough. Do you have legal exposure in addition to the almost inevitable incidental exposure?

ALM: What’s the biggest technology issue facing large corporations today?

LJ: It’s kind of embarrassingly simple: It’s being connected to the internet. Anything that’s connected pretty much can be compromised. This is so cliché that it’s kind of embarrassing to say, but the big risk is the fact that human beings are using it. And people fall for phishing attacks, which is where the vast majority of these things come from. A lot of them are not really sophisticated state-sponsored threat attacks. They’re on the rise, I wouldn’t want to rule those out, but a lot of it is people being fooled and social engineering. It’s been going on for years, it’s getting increasingly sophisticated. That’s what makes it so hard. A technological fix might be expensive, but you can do things like encryption and firewalls and multifactor authentication.

This industry has evolved so quickly. I was at AOL early enough on that the big threat was spammers—it wasn’t the cybersecurity stuff—and we were pretty secure given the amount of data we held, but the issues were nowhere near as sophisticated and the internet was a more innocent place. There was bad stuff out there, but it’s become just so full of this kind of risk.

ALM: What’s on the threat horizon that no one sees coming?

LJ: I hope people are keeping an eye out for it, but the stuff that really concerns me, without being a total alarmist, is the state-sponsored attacks like on the power grid in the Ukraine, and the consistent but fairly low-level of concern registered about attacks on critical infrastructure like nuclear power plants and the power grid.

So whether bad actors, state-sponsored or not, decide to create more mayhem, my biggest next generation fear is sort of the mayhem of taking down the power grid, taking down airports, taking down critical infrastructure. Some of the ransomware attacks have been more about mayhem than getting the 300 bucks they charge for ransom. So my fear is that’s the next wave.

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Source: Law Journal

FBI Nominee To Senate: Trump FCPA Probe Not Off Limits

On Monday, the Senate Judiciary Committee received answers from Christopher Wray to questions that directly addressed Wray’s perception of his firm and the legal enforcement he may do if confirmed as FBI director.

The highly compensated King & Spalding partner clarified which politically fraught matters he did and didn’t work on while at the firm—including whether they were Trump- or Russia-related. He was also pressed about whether the FBI would investigate a “credible allegation” of possible foreign-corruption violations by the Trump Organization.

Sen. Dianne Feinstein, the California Democrat who serves as the committee’s ranking member, posed the question this way: What will Wray do if the Trump Organization or family may have violated the Foreign Corrupt Practices Act? Feinstein cited a New Yorker story that raised questions about the Trump Organization’s ventures in Azerbaijan.

“I am not familiar with the media reporting referenced in your question,” Wray responded. “As I have testified, if confirmed, I would be committed to following the facts and law, wherever they might lead, and regardless of the target. If the FBI is provided credible evidence suggesting that a crime had been committed, I would expect the FBI to investigate appropriately and, if merited, to support the prosecution of such crimes.”

Feinstein also asked about Wray’s representation of New Jersey Gov. Chris Christie in the George Washington Bridge shutdown investigation. Wray said Christie, a Republican who campaigned for Trump, apparently wasn’t involved when the White House first considered him, though since then Christie has supported Wray’s nomination.

Wray said he and the governor never discussed the investigation into the Trump campaign’s ties to Russia nor Trump’s decision to fire former FBI Director James Comey.

Sen. Mazie Hirono, a Hawaii Democrat, asked Wray about King & Spalding’s work, and about how his law firm online biography changed this year. (The firm reportedly said Wray made changes to his bio page “in an attempt to make the material more current.”)

Hirono pointed out how King & Spalding partner Bobby Burchfield earned the appointment to serve as ethics adviser to the Trump companies, which are now structured as a trust to prevent conflicts of interest.

“Does your partner’s status as ethics adviser pose any conflict of interest for you if matters arise involving the Trump Organization and questions about whether President Trump has truly separated himself from those business dealings?,” Hirono asked.

Wray said he did not participate in the firm’s work on that matter. He added: “To my knowledge, King & Spalding has not represented members of the Trump family individually.”

Hirono also zeroed in on King & Spalding’s work for Russian corporate clients.

Hirono: Your current law firm, King & Spalding, has provided extensive representation to large Russian state-owned oil companies Rosneft and Gazprom, and to companies doing business with Rosneft and Gazprom. In fact, your biography on the firm’s website used to include as one of your clients: “An energy company president in a criminal investigation by Russian authorities.” While at King & Spalding, did you participate in any matters involving Rosneft or Gazprom, or share any confidential information with either company, or with entities engaged in business with either company?

Wray: No.

Hirono: What assurance can you give that the FBI will aggressively pursue investigations that touch on or involve your firm’s Russian clients?

Wray: My loyalty is to the United States. I have never represented a Russian company or any individual connected with the Russian government. If there are or were to be investigations in which King & Spalding was involved as counsel, I would consult with the appropriate ethics officials and take appropriate action with regard to my participating in such investigations.

Wray testified before the Senate Judiciary Committee one week ago. Senate Majority Leader Mitch McConnell is pushing to hold Wray’s confirmation vote before the Senate breaks for its August recess.

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Source: Law Journal

FBI Nominee to Senate: Trump FCPA Probe Not Off-Limits

On Monday, the Senate Judiciary Committee received answers from Christopher Wray to questions that directly addressed Wray’s perception of his firm and the legal enforcement he may do if confirmed as FBI director.

The highly compensated King & Spalding partner clarified which politically fraught matters he did and didn’t work on while at the firm, including whether they were Trump- or Russia-related. He was also pressed about whether the FBI would investigate a “credible allegation” of possible foreign-corruption violations by the Trump Organization.

Sen. Dianne Feinstein, the California Democrat who serves as the committee’s ranking member, posed the question this way: What will Wray do if the Trump Organization or family may have violated the Foreign Corrupt Practices Act? Feinstein cited a New Yorker story that raised questions about the Trump Organization’s ventures in Azerbaijan.

“I am not familiar with the media reporting referenced in your question,” Wray responded. “As I have testified, if confirmed, I would be committed to following the facts and law, wherever they might lead, and regardless of the target. If the FBI is provided credible evidence suggesting that a crime had been committed, I would expect the FBI to investigate appropriately and, if merited, to support the prosecution of such crimes.”

Feinstein also asked about Wray’s representation of New Jersey Gov. Chris Christie in the George Washington Bridge shutdown investigation. Wray said Christie, a Republican who campaigned for Trump, apparently wasn’t involved when the White House first considered him, though since then Christie has supported Wray’s nomination.

Wray said he and the governor never discussed the investigation into the Trump campaign’s ties to Russia nor Trump’s decision to fire former FBI Director James Comey.

Sen. Mazie Hirono, a Hawaii Democrat, asked Wray about King & Spalding’s work, and about how his law firm online biography changed this year. (The firm reportedly said Wray made changes to his bio page “in an attempt to make the material more current.”)

Hirono pointed out how King & Spalding partner Bobby Burchfield earned the appointment to serve as ethics adviser to the Trump companies, which are now structured as a trust to prevent conflicts of interest.

“Does your partner’s status as ethics adviser pose any conflict of interest for you if matters arise involving the Trump Organization and questions about whether President Trump has truly separated himself from those business dealings?” Hirono asked.

Wray said he did not participate in the firm’s work on that matter. He added: “To my knowledge, King & Spalding has not represented members of the Trump family individually.”

Hirono also zeroed in on King & Spalding’s work for Russian corporate clients.

Hirono: Your current law firm, King & Spalding, has provided extensive representation to large Russian state-owned oil companies Rosneft and Gazprom, and to companies doing business with Rosneft and Gazprom. In fact, your biography on the firm’s website used to include as one of your clients: “An energy company president in a criminal investigation by Russian authorities.” While at King & Spalding, did you participate in any matters involving Rosneft or Gazprom, or share any confidential information with either company, or with entities engaged in business with either company?

Wray: No.

Hirono: What assurance can you give that the FBI will aggressively pursue investigations that touch on or involve your firm’s Russian clients?

Wray: My loyalty is to the United States. I have never represented a Russian company or any individual connected with the Russian government. If there are or were to be investigations in which King & Spalding was involved as counsel, I would consult with the appropriate ethics officials and take appropriate action with regard to my participating in such investigations.

Wray testified before the Senate Judiciary Committee one week ago. Senate Majority Leader Mitch McConnell is pushing to hold Wray’s confirmation vote before the Senate breaks for its August recess.

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Source: Law Journal

Justices Reject Trump Plea to Narrowly Define 'Close' Family in Travel Ban

A large crowd rallies on the steps of the U.S. Supreme Court, led by top Democrat lawmakers, to denounce President Donald Trump’s executive order banning immigration from 7 Muslim-majority countries, on January 30, 2017.
A large crowd rallies on the steps of the U.S. Supreme Court, led by top Democrat lawmakers, to denounce President Donald Trump’s executive order banning immigration from 7 Muslim-majority countries, on January 30, 2017.

Photo: Diego M. Radzinschi/ALM

The U.S. Supreme Court on Wednesday, rejecting a Trump administration challenge, said grandparents, aunts, uncles and other family members with close U.S. relatives can travel here from six predominantly Muslim nations. But the court continued to bar refugees with sponsorship agreements with U.S. resettlement agencies.

The court’s unsigned order rejected the government’s request that the justices clarify their June 26 order that modified a Hawaii district court injunction blocking President Donald Trump’s so-called travel ban. The justices in June narrowed the injunction, allowing parts of the ban to take effect, and put the case on the court’s fall calendar. The court has set argument for October 10.

The high court in June had held that the travel ban applied only to foreign nationals with no connection at all to individuals or entities in the United States. For travel by individuals, the justices said, a close familiar relationship with someone in the United States was required. As for entities, there must be a relationship that is formal and documented.

The Trump administration, implementing the justices’ order, excluded from the definition of “close” family, grandparents, aunts and uncles, among others. And it said the travel ban applied even to refugees who had a sponsorship-assurance agreement with a U.S.-based resettlement agency.

Hawaii, represented by Hogan Lovells’ Neal Katyal, challenged the administration’s interpretation as it applied to those two categories. The Hawaii district court concluded the government too narrowly implemented the high court’s order. The government on July 14 returned to the Supreme Court and at the same time, filed an appeal in the U.S. Court of Appeals for the Ninth Circuit.

The high court’s order Wednesday rejected the government’s motion for clarification without comment. It also stayed the district court’s injunction on the refugees covered by assurance agreements pending the outcome of the government’s appeal to the Ninth Circuit.

Justices Clarence Thomas, Samuel Alito Jr. and Neil Gorsuch said they would have stayed the Hawaii district court’s order in its entirety. Those three justices had also dissented from the high court’s June 26 opinion, saying they would have allowed the travel ban to go fully into effect.

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Source: Law Journal

Settling Ashley Madison Data Breach Lawsuit Was Likely 'Inevitable'

It does not come as a surprise to academic experts in legal strategy that the parent company of the Ashley Madison dating website wanted to settle the well-publicized case. In fact, William H.J. Hubbard, a professor at the University of Chicago Law School, said the “settlement was probably inevitable in this case.”

“In a highly publicized, class action lawsuit involving sensitive information for all parties involved, settlement is basically a foregone conclusion,” Hubbard told Legaltech News. “The defendant wants to settle because the data breach was a PR nightmare, and it wants to put the fiasco in the rearview mirror. The plaintiffs and class members presumably want as much confidentiality as possible, too, for obvious reasons. And the lawyers representing the class, who wield tremendous discretion and influence, given that the class is a diffuse group of individuals whose stakes are small relative to the case as a whole, want to make sure they get paid, and a class action settlement will inevitably provide for that.”

The settlement relates to the class action lawsuit filed following a data breach and release of personal information from customers of Ashley Madison, an online dating website owned and operated by Ruby Life Inc.

As part of the proposed settlement of the pending case in Missouri, Ruby “denies any wrongdoing” and “the parties have agreed to the proposed settlement in order to avoid the uncertainty, expense, and inconvenience associated with continued litigation, and believe that the proposed settlement agreement is in the best interest of Ruby and its customers,” the company said in a statement.

“A major benefit of settlement is that it keeps sensitive or embarrassing information that otherwise might be produced in court documents or at trial from becoming part of the public record,” Hubbard explained. “Even when the embarrassing information is already in the public domain, ongoing litigation can have the effect of keeping an event in the news, thereby magnifying concerns about the rehashing of embarrassing information.”

Hubbard said context is important in the decision to settle. “For example, preserving a reputation for toughness or for standing on principle may mean refusing to settle, especially in well-publicized cases. But when embarrassing material is on the line, or when a lawsuit arises out of a public relations fiasco for the defendant, as in this case, I would say settlement becomes almost imperative,” Hubbard said.

Jon Mills, director of the Center for Governmental Responsibility at the University of Florida’s Levin College of Law who is also counsel at Boies Schiller Flexner, added the case is “obviously very high profile” and there was a “lot of incentive to settle.” By settling, it also may help prevent more “public display” of negligence, he said.

Noting the amount announced in the settlement, $11.2 million, “There may be companies that would consider that a bargain,” Mills said.

When asked about the presence of embarrassing information in this case, Andrew Pollis, a professor at Case Western Reserve University School of Law, said, “In most cases of cybersecurity breach, publication of consumers’ financial data [e.g., credit-card information] is more of an annoyance than an embarrassment. But most juries would be very angry at the company that allowed the breach to occur and would be predisposed to find in favor of the consumers and against the company that allowed the breach to occur.

“In this case, there is an added level of potential embarrassment given the nature of Ashley Madison’s business. But some jurors might be less sympathetic to the class members given their willingness to pay for Ashley Madison’s services, so that’s actually a risk that might have cut both ways or even tipped against the plaintiffs. It really would depend a lot on jury selection, which is always a crapshoot. … My sense is that no one wanted to run the risk of what a jury would do with a case like this,” Pollis said.

When considering whether to settle, at a basic level, parties “evaluate the cost of a loss and the chances of a loss. The product of those two variables is one way to land on a settlement that makes economic sense, at least from a purely risk-management standpoint,” Pollis said. “But most settlements involve more complex dynamics, including attorney fees, business disruption, adverse publicity/loss of goodwill, risk tolerance, and [depending on the nature of the case and the litigant] emotional factors.”

Adam Hoeflich, a professor at Northwestern School of Law and a partner at Bartlit Beck Herman Palenchar & Scott, said Ruby “likely understood that even if they had valid arguments against class certification and strong defenses regarding liability, they had genuine risk from litigation given that customer data had been revealed. While a damages settlement creates the potential for opt outs, it also creates a meaningful step toward closure. It may also be that Ruby felt that they received a fair settlement and a reach chance for closure given that many of the plaintiffs would not have felt comfortable coming forward during litigation about the actual harm that they suffered.”

Hubbard further confirmed that the Ashley Madison case is different from something like the LabMD case, which involved a regulatory enforcement action. “The government in an enforcement action may not be as interested in a monetary settlement in the same way that a class of plaintiffs would be,” Hubbard said.

Contact Ed Silverstein at esilverstein@alm.com.

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Source: Law Journal

'Bristol-Myers' Disruptive Effect Nearly Instant in Missouri Talc Case, Transcript Shows

On a June Monday, lawyers in a trial over Johnson & Johnson’s talcum powder scrambled to explain to a St. Louis judge whether a U.S. Supreme Court decision handed down that morning doomed their case.

One attorney was still downloading the opinion to his computer. Another told the judge he was “literally on my cellphone trying to learn facts,” according to a recently released transcript of the hearing. Yet defense attorneys assured 22nd Circuit Court Judge Rex Burlison that the Supreme Court decision in Bristol-Myers Squibb Co. v. Superior Court, which limited where defendants could be sued, threw “a monkey wrench” into the case and had disrupted matters so thoroughly that he could do nothing less than grant a mistrial.

But plaintiffs lawyers had a surprise: A company called Pharma Tech Industries. When asked to address Bristol-Myers, W. Wylie Blair of Onder, Shelton, O’Leary & Peterson in St. Louis began to introduce the judge to Pharma Tech, a company that was “doing the packaging and labeling, distributing, of talc-based body powders right here in Union, Missouri.”

“Roll that again,” Burlison interrupted. “Pharma Tech Industries was doing what?”

Plaintiffs attorneys went on to tell him about letters, forms, emails, monthly checks and sales documents allegedly showing Pharma Tech’s plant in Missouri had bought raw talc from Imerys Talc America Inc., another defendant in the case, which alleged Johnson & Johnson’s talcum powder caused three women to die from ovarian cancer. Pharma Tech then made products for Johnson & Johnson, they said. The talc had a cancer warning on it, but Pharma Tech, at J&J’s direction, removed it when manufacturing, bottling and labeling its products.

Though intrigued, Burlison wasn’t convinced to proceed with the trial, in which two of the three plaintiffs hadn’t lived in Missouri. He granted Johnson & Johnson’s motion for a mistrial.

Going forward, he said, would be like “trying to master a square into a round hole.”

“We do have allegations in this case that would constitute what the Bristol-Myers court refers to as relevant acts, however, we don’t — we do not have pleadings sufficient to anchor those relevant acts to a third party, that being the Pharma Tech Industries here in Missouri,” Burlison said.

But he reset the case for trial on Oct. 16 and permitted plaintiffs attorneys to move forward on discovery over Pharma Tech, a family-owned manufacturer of pharmaceutical powders based in Athens, Georgia. Founded in 1972, Pharma Tech has been run by the same family since 1989. It has a plant in Union, Missouri.

The Pharma Tech evidence could prove essential to the claims of more than 1,360 other women and their families who have sued in Missouri, where juries have awarded verdicts of more than $300 million. Pharma Tech has come up in plaintiffs’ motions this month to remand 20 cases back to Missouri. Johnson & Johnson removed them to federal court under Bristol-Myers just before the scheduled depositions and subpoenas on the Pharma Tech evidence. Plaintiffs’ attorneys also want the Missouri Court of Appeals to let them to add the Pharma Tech evidence to a case on appeal.

A Johnson & Johnson spokeswoman declined to comment.

“None of the cases tried to date have alleged any conduct by Imerys in Missouri, and the vast majority of cases filed against us in St. Louis are by plaintiffs who similarly have no connection to St. Louis or Missouri,” said Imerys spokeswoman Gwen Myers. “We will look to overturn those cases that were already improperly tried in this jurisdiction and will seek to apply this ruling to those that are still pending.”

The defense bar has been emboldened by Bristol-Myers, in which the Supreme Court ruled plaintiffs who sued over injuries attributed to blood thinner Plavix had failed to establish specific jurisdiction because there wasn’t enough of a link between their claims and California, where they brought their “mass action.” Most of the 600 plaintiffs didn’t live in California, and Bristol-Myers is based in New York. The court also found that a California distributor, McKesson Corp., didn’t have enough connection to the claims.

But Pharma Tech does, say plaintiffs lawyers in the talcum powder litigation.

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Source: Law Journal