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Delaware Vice Chancellor Travis Laster is pretty miffed at the Biglaw firm of Gibson Dunn. The specifics of it don’t matter much — well, if you care about whether COVID-19 counts in a contract’s exception for calamities or natural disasters, you might care about the case AB Stable VII v. MAPS Hotels and Resorts and you should feel free to read the 243-page opinion yourself — but we are so here for the benchslap.

Gibson Dunn represents Anbang Insurance, which was trying to sell luxury hotels to Mirae Asset. But even before the global pandemic threw a monkey wrench into the proceedings, Laster says Anbang — and their attorneys — withheld key information that should have been disclosed to the buyers.

As reported by Allison Frankel of Reuters:

According to Laster, Gibson Dunn deliberately withheld key information from Mirae and its lawyers at Greenberg Traurig, instead providing “misleadingly incomplete” representations about disputed deeds on some of the Anbang hotel properties. The firm also “sadly … misled the court,” about Anbang’s own investigation of the disputed deeds, the vice chancellor wrote.

“Put bluntly, (Anbang and Gibson Dunn) committed fraud about fraud,” the judge said.

Ultimately, Laster found, the decision by Anbang and its lawyers to withhold critical information from Mirae and the lenders that were slated to provide billions in financing ended up backfiring when the information came to light. The funders were spooked, the closing was delayed and COVID-19 proceeded to decimate the hotels’ business. If Gibson Dunn and its client had been “candid” from the beginning, Vice Chancellor Laster wrote, “the transaction likely would have closed, and this litigation would never have happened.”

According to the judge, a “shadowy and elusive” character concocted a scheme involving forged deeds to claim ownership of some of the properties. In a separate case — also in front of Judge Laster, World Award Foundation v. Anbang — over the ownership of the properties, Gibson Dunn represented that they didn’t know anything about the scheme. That was in January of 2020, however, the judge notes, “Gibson Dunn had … embarked on a massive investigation in August 2019, and it had uncovered considerable information.” That’s… not a great look.

According to the opinion, Gibson Dunn and Anbang did not disclose the World Award case to Mirae, and when the case was found by Goldman Sachs investigators, the signing got postponed. This pushed the closing of the deal into COVID times, and well, that’s how we get this case.

Gibson Dunn hasn’t commented on the matter, but as Frankel notes:

In Anbang’s final post-trial brief, the firm said that the disclosure issue was a red herring because the disputed deeds were obvious fakes. It also said that Mirae hadn’t shown any impact from any delay in revealing the extent of the fake deed dispute, since “those matters were disclosed before a closing date had been set.”

But Mirae’s counsel, Michael Carlinsky of Quinn Emanuel, has a different take, saying, “We are extremely gratified with Vice Chancellor Laster’s thorough and detailed opinion finding that Mirae Asset was justified in terminating the transaction based on (Anbang’s) breaches and pattern of deception.”

I just bet they are.

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Kathryn Rubino is a Senior Editor at Above the Law, and host of The Jabot podcast. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).

It’s final exam season for law students and that means it’s final exam botching season for professors and administrations. A couple of T14 schools have already stumbled out of the gate. Joe and Kathryn also take a deep dive into whether or not it’s ever appropriate for a J.D. to call themselves “Doctor” — and it isn’t. Finally, we discuss holiday shopping for lawyers.

As many legal professionals know from firsthand experience, LinkedIn can be a powerful resource for law firms and lawyers. Of course, LinkedIn is a great networking platform that enables legal professionals to show their information to prospective clients and other people within the legal field. For this reason, many law firms (as well as businesses in other industries) have embraced LinkedIn. However, numerous law firms should improve their LinkedIn practices to ensure that employees are not pressured into engaging with their employer’s content on LinkedIn and other social media platforms.

Many law firms across the country, both big and small, post content on LinkedIn and other social media platforms. Sometimes, the content involves a recent victory of the firm, and other times it involves a client update that provides useful information meant for individuals and companies facing a specific legal issue. Often, law firms send emails to employees mentioning that a post has been published by the firm on LinkedIn and encouraging employees to like and share the content on social media. Of course, it is fine to suggest that employees circulate content a firm creates, and sharing such content might present a good opportunity to develop business and cultivate contacts.

However, it is probably inappropriate if a law firm makes it somewhat mandatory that employees like and share the firm’s content on LinkedIn. Of course, law firms rarely say that employees are required to like and share content on LinkedIn, since law firms understand that they would receive a significant amount of blowback if they explicitly co-opt the LinkedIn accounts of employees.

However, some firms seemingly reward employees for liking and sharing firm content on LinkedIn and apply pressure to employees who do not. Many law firms reward “firm citizenship,” a notion that employees of a shop should go above and beyond for the good of a firm (like wearing more than 15 pieces of flair, for all fellow Office Space fans!). I have heard of some firms conveying that liking and sharing firm content on social media is part of “firm citizenship,” and “firm citizenship” is often part of the attorney evaluation and promotion process. In addition, I have worked at firms at which partners and administrators have publicly lamented the fact that not enough employees have been sharing and liking content on social media, and employees were strongly encouraged to do so.

All of this implied pressure and rewards lead to some unfortunate outcomes. I once worked at a firm that strongly promoted itself on LinkedIn and pressured employees to engage with firm content on the platform. As such, I liked the firm’s page soon after being hired so I could seem like a team player from the start. For as long as I was an employee at that firm, each time I saw our firm’s logo on a social media content, I instinctively liked the post, usually without even reading what the post was about.

I also found myself liking pretty much anything that partners posted on LinkedIn no matter what the post was about or even if I read the post at all. Since that firm was really engaged with LinkedIn, I thought I could best demonstrate my “firm citizenship” by liking posts written by bosses even if I wouldn’t normally like the post if anyone else had posted it. It would be interesting to investigate if the seemingly high number of likes on posts published by some bosses is because of the value of the posts or if employees just want to appease their bosses.

Along similar lines, employees should not be pressured into creating LinkedIn profiles in the first place. I created my LinkedIn profile after I attended a business development presentation given by a firm that strongly encouraged everyone to create profiles in order to connect with prospective clients. However, LinkedIn is not for everyone, and with the rise of Instagram, many people are looking to Facebook to fill a role that LinkedIn once occupied among professionals. In addition, some people are private individuals who do not want to provide the information needed to set up a LinkedIn profile. Still others are not attracted to the corporate and often serious nature of LinkedIn, or do not wish to engage with social media at all. Firms should not judge people for not having a LinkedIn account, especially since there are many ways to connect with prospective clients.

All told, I am not a hater of LinkedIn, and I believe the platform provides value to the legal profession and other industries. However, employees should have the right to do what they wish with their own LinkedIn accounts, and they should not have their speech co-opted by their employers. Many law firms and other employers may believe that their current policies are appropriate because they do not explicitly force employees to like or share content. However, sending subtle cues that creating a LinkedIn profile and liking law firm content is highly encouraged may be just as powerful as explicit policies. Law firm managers should carefully evaluate how their actions impact the speech of their employees and ensure that workers have an actual choice about how they engage with the social media content published by their employers.

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Jordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at jordan@rothmanlawyer.com.

According to the Wall Street Journal, in 2017 and 2018, President-elect Joe Biden avoided paying payroll taxes on $13.3 million in income by setting up an S-corporation for his royalty and speaking fees. Presidential candidate John Edwards similarly avoided payroll taxes in on $26 million in income by setting up an S-corporation for his law practice. This technique saved him $600,000 in Medicare taxes.

Around this time, many small businesses — including law firms — are contemplating starting a separate entity in the new year. The most popular entity for a solo law practice and a few small firms is the S-corporation. They are relatively easy to start up, and there is no double taxation, unlike C-corporations.

Today’s column discusses only some general principles to think about when starting an S-corporation. I am avoiding calculations and comparisons since every small business is unique, and state laws are different. Instead consider the issues below and decide whether it is worth it for your practice to become an S-corporation.

Limited liability protection is … limited. While corporations are famous for providing shareholders, directors, and officers with limited liability protection from lawsuits and judgments, that is not always the case. Lawyers cannot use a separate entity to protect themselves from malpractice.

Also, courts can pierce the corporate veil under certain conditions. While these conditions vary by state, most states will do so for the following reasons: using the corporation to perpetuate fraud, not following corporate formalities, commingling corporate and personal funds, being undercapitalized (usually due to looting corporate funds in anticipation of a lawsuit), or if the court feels that not holding the shareholders or officers liable will promote an injustice.

The best way to maximize your chances of limited liability protection is to follow all corporate formalities such as annual shareholder meetings and taking minutes. Even if your corporation qualifies as a “close corporation” and by law does not have to follow corporate procedures, it is best to do it anyway to keep a record. Also, avoid commingling personal funds with corporate funds.

Potential tax savings. For tax purposes, self-employed businesses are sole proprietorships by default. Self-employment taxes are basically the equivalent of employee payroll taxes for business owners. This means you report your income and expenses on the Schedule C. Your remaining net profit is subject to self-employment tax on top of the income tax. For 2020, the first $137,700 of income is subject to a 15.3% self-employment tax. Any income above that is subject to a lower 2.9% self-employment tax.

An S-corporation’s net income passes through to the shareholders. But this net income is not subject to the self-employment tax. Keep in mind that shareholders will be taxed whether they personally receive the money or not.

However, the IRS is aware of this tax avoidance tactic so they require all S-corporation shareholders to be paid a “reasonable salary” as an employee. This means that a shareholder of the corporation (particularly if they are managing the business as an officer) must be treated like an employee of the corporation and paid as such. This means issuing paychecks with income and payroll taxes withheld.

The shareholder’s salary is deductible from the corporation’s tax return as a business expense. But the salary is included in the shareholder’s income on their personal tax return.

How much is reasonable? That depends. The IRS generally looks at how much others in the same position are paid. However, what the IRS really wants is all distributions from the corporation to the officer-shareholders to be treated like a salary subject to payroll taxes.

The problem is that every small business is different and, in theory, reasonable compensation should be considered based on individual circumstances. For example, what if a business incurred substantial debt and the owners want to use the profits to pay off the debts as soon as possible? An argument can be made that management salary should be lower under this condition.

So the strategy for an S-corp shareholder is to receive a salary that is high enough to meet the “reasonable salary” standard but not too high so that all of the corporate net income will be subject to payroll taxes.

So let’s say you anticipate your S-corporation will save you $2,000 in taxes per year. That isn’t too bad for a small business on a cumulative basis. But there is another factor to consider.

Costs of maintaining a corporation. Costs will vary depending on the state in which you practice but for the purpose of simplicity, I’ll use a few common costs and estimates. As noted above, shareholders must be paid a reasonable salary as an employee. This means hiring a payroll company or purchasing payroll software annually. For one employee, this can run about $300 per year at a minimum. Which should include filing all federal and state employment taxes.

Since you have an employee, there are also additional employee payroll taxes. This includes state unemployment, and disability insurance taxes. Your state may have other taxes. These taxes vary although most tend to max out at $1,000 per year.

The federal government also has an employee unemployment tax. For most small businesses this is paid annually as the tax is not a large amount, usually up to $42 per employee annually. However, this tax can increase if your state government borrowed money from the federal government to pay unemployment benefits and did not pay it back. Presently, due to the pandemic and government shutdown orders, 20 states have borrowed money and most are not likely to pay them back anytime soon. So if your state is on the list, your FUTA tax may increase on average between $100 to $200 per employee.

Your state may have annual corporation fees. In California the annual corporation fee is $800, even if you did not do any business at all that year. Also, there is a $25 fee when submitting the annual list of directors and officers to the state.

Also, there are tax return fees. Corporations file separate tax returns that can get complicated. For example, if your corporate income receipts for the year exceed $250,000, the corporation has to file a Schedule L which lists the corporation’s balance sheet. This translates into higher fees for tax returns and additional fees for tax planning.

For simplicity, let’s say all of the taxes and fees described above total to $3,000. This means you will need to save at least $3,000 in taxes to break even.

So is it worth it to set up an S-corporation? In the final analysis, tax planning is about saving money. If you are paying $3,000 in annual corporate maintenance costs to save $2,000 in taxes, you are doing it wrong.

Even if you are breaking even, the additional work required to maintain a corporation may not be worth it. Most self-employed people hate being on payroll because of the filing and withholding requirements. It’s a lot easier to make owner draws instead.

In my opinion, the earliest time to consider starting an S-corporation for tax purposes is when your business consistently earns over $100,000 per year and has at least one employee. If you have a payroll account, it is not hard to add an additional employee. Also, if your business profit is high enough, you can adjust shareholder salaries so that they meet the IRS “reasonable salary” requirement without subjecting all of the business income to payroll taxes. Ideally, the savings should more than enough to pay for annual corporate maintenance costs.

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Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at sachimalbe@excite.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

The winter holidays and the new year are almost upon us, so why not let some new law school rankings bring you good cheer? The Princeton Review recently released its annual law school ranking, covering the best 164 law schools in the country (down from 167 last year, and disregarding the fact that there are ~200 law schools with varying degrees of accreditation by the American Bar Association). Our condolences to the thirty-odd law schools that were unable to make the cut for the Princeton Review’s 2021 edition of the rankings — it must sting knowing that your institution is part of the small sliver of law schools that aren’t among the “best.”

We’ve focused on one of the 14 rankings categories that we thought people would be the most interested in: The law schools where graduates have the best career prospects. It wasn’t long ago that the Princeton Review’s loose definition of “career prospects” meant an entire class of law graduates could be putting the “bar” in “barista,” but thankfully the methodology was changed about five years ago, and these career rankings actually mean something now.

Princeton Review’s “Best Career Prospects” results are now based on highly relevant data reported by law school administrators, including median starting salaries, the percentage of students employed in jobs requiring bar passage (and not employed by the school), and the percentage of students who were able to pass the bar exam on their first try. The Princeton Review also relies on responses from student surveys.

Here are the top 10 law schools on the Princeton Review’s “Best Career Prospects” list for 2020. Things really changed for T14 schools over the course of the past year:

1. New York University School of Law (no change)
2. Stanford University School of Law (ranked #4 last year)
3. University of Michigan Law School (ranked #9 last year)
4. University of Virginia School of Law (ranked #2 last year)
5. Duke University School of Law (ranked #3 last year)
6. Harvard University Law School (ranked #5 last year)
7. University of Chicago Law School (no change)
8. Columbia University School of Law (no change)
9. Northwestern University Pritzker School of Law (ranked #6 last year)
10. University of California Berkeley School of Law (not ranked last year)

What on earth happened here to create such a huge shakeup in the rankings? For the answer, let’s return to Princeton Review’s methodology. Each law school was given a “career rating,” which on top of all of the statistical data reported by law school administrators, includes the following information:

This rating measures the confidence students have in their school’s ability to lead them to fruitful employment opportunities, as well as the school’s own record of having done so. … We ask students about how much the law program encourages practical experience; the opportunities for externships, internships, and clerkships; and how prepared to practice law they expect to feel after graduating.

Princeton Review continues to rely much too heavily on students’ feedback over actual data. Once again, people who felt like they’d get great jobs were more important than the people who were actually able to get great jobs. This may explain why Penn Law, ranked #10 last year, with 89.2 percent of the class of 2019 employed in full-time, long-term jobs where bar passage was required (discounting six school-funded positions) fell off the 2021 rankings completely, while Berkeley Law, with 85.7 percent of the class of 2019 employed in full-time, long-term jobs where bar passage was required (discounting 15 school-funded positions), rose to take its place.

Did your law school or alma mater make the cut? If it did, do you think it was ranked fairly? If it didn’t make the list for best career prospects, do you agree with that assessment? Please email us or text us (646-820-8477) with your thoughts. Thanks.

Best Law Schools 2021 [Princeton Review]
Best Career Prospects 2021 [Princeton Review]

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Staci Zaretsky is a senior editor at Above the Law, where she’s worked since 2011. She’d love to hear from you, so please feel free to email her with any tips, questions, comments, or critiques. You can follow her on Twitter or connect with her on LinkedIn.

Amanda Troxler is an attorney with model good looks. Pair that with a genetic clean bill of health and deeply ingrained compassion for others, and she is an ideal egg donor. And, she was. Six times. Resulting in at least eight children. You probably even googled her to check her out before finishing this paragraph.

Fittingly, Troxler’s legal expertise focuses on assisted reproductive technology law, frequently helping other donors or recipients navigate the legal issues involved with a gamete donation and expectations around the future relationship of the donor, recipients, and any resulting offspring. Unsurprisingly, Troxler is one of the go-to legal experts when it comes to all things egg donation. Among her many appearances, she was a guest on the podcast that I co-host on assisted reproductive technology issues, I Want To Put A Baby In You, and was recently featured in a magazine published by the organization We Are Donor Conceived. Definitely check both out to learn more of Troxler’s unique path, including being raised by a single father in the LGBTQ+ community and meeting her own biological mother when she was an adult.

I recently had a chance to catch up with Troxler to discuss the hottest issue in egg donation (as well as sperm donation and embryo donation) these days: anonymity. After all, direct-to-consumer DNA tests such as 23andMe and Ancestry are changing our access to information in a big way.

Is Anonymity Dead?

Troxler shared, in her humble opinion as a legal expert and as a person whose life is intricately involved in donation, that one of the biggest improvements that can be made is to increase transparency. One thing we have learned from the donor-conceived community, is that the shock of learning that one is donor-conceived can be traumatic — forcing a person to suddenly adjust to finding out basic truths about themselves and their family that are not what they always believed.

For a lot of people, it’s fun to find out about unexpected Swedish roots or a previously unknown third cousin. But for others, it’s less fun to find out that the people you believed to be your genetic parents may not be, or that you have over 100 genetic siblings.

Troxler emphasizes counseling both donors and recipients that any contractual promise of anonymity is likely to be illusory, if not legally unenforceable, given technology and information access. Troxler also believes that psychological counseling is key. She explains that counseling for recipients can help resolve grief over infertility, and as expert Carole LieberWilkins (another previous podcast guest!) would say, that makes room for the child that the recipients will have. Appropriate counseling also helps donors to empathize with donor conceived offspring, and to understand what their obligations toward such offspring may be.

What Do The Numbers Say?

In the 2020 survey conducted by We Are Donor Conceived, when donor-conceived people were asked what type of relationship was desired with the donor, the survey found that “[t]he largest segment of respondents (31%) indicated they hope to form a close friendship, while 21% seek a casual acquaintance, and 19% desire a mentor/adviser-type relationship.” 14% percent of respondents said they would ideally like to have a parent/child relationship. Only 9% do not desire any form of relationship with the donor.

Love Is Not Like A Pie.

Troxler explained that it’s fundamentally human to want to know where we come from. It contributes to the origin stories that we form about ourselves, which helps us establish our identities. It’s also fundamentally human to desire connection with other people. Troxler also emphasized that this does not in any way diminish the relationships between donor conceived people and their parents. “Because love is not like a pie.” Just as parents can love more than one child, donor-conceived people can form meaningful relationships with genetic relatives while continuing to love their parents.

Should Anonymity Be Outlawed?

In many jurisdictions abroad, including parts of Australia, governments have moved to prohibit anonymous gamete donation. The logic behind such prohibitions is that a donor-conceived person has a right to know their biological history. I asked Troxler if the U.S. should be trying for similar legislation. Troxler pointed to newer laws in states such as California and Washington that default to providing donor-conceived people with identifying information about the donor when the individual turns 18. Troxler thought such laws were positive. And while donors may opt out, it at least shifts the default in the right direction, and increases awareness with donors.

But to answer the question, Troxler was not interested in legally requiring people to do what are referred to as “known donations.” Her concerns were two-fold. First, such a requirement could cause people seeking donated gametes to go abroad, to avoid local laws. In countries where you can’t legally participate in anonymous arrangements, people sometimes do specifically go to other countries or jurisdictions to circumvent the law. The resulting effect is additional distance between donor-conceived people and genetic relatives.

Second, Troxler explained that on a larger scale, a law prohibiting anonymous donations is unlikely to address what she sees as the main problem — a lack of awareness over the potential needs of donor-conceived people. “A law might compel some people to participate in known donations, but it doesn’t inform them of the reasons why known donation is in the best interests of everyone involved.”

What Would Help Then?

While anonymity wasn’t where she saw the need for legislation, Troxler did see a number of points where regulation could make improvements. For one, Troxler would be in favor of mandatory psychological counseling for donors and recipients.

Another issue Troxler thinks needs regulating is the lack of limits on the number of donor-conceived offspring from one donor. True to the Vince Vaughn classic Delivery Man, offspring exceeding 100 or even 200 genetic siblings sometimes result from sperm donation. The sheer size of the group has an effect of making it difficult, if not impossible, for donor-conceived people to have any semblance of a meaningful relationship with the donor/genetic provider as well as to form relationships with their genetic siblings. Troxler points out that many other countries place reasonable limits on the number of children conceived from one donor. Ten is a popular limit. Other countries are at five or 15. In the United States, however, there is very little oversight regarding the number of offspring resulting from gamete providers.

Of course, a law limiting how many children can be conceived from one donor does require a system for tracking, which may not be practically feasible, especially when gamete providers are working with multiple programs. On the other hand, even without strict tracking or enforcement, limits may still have a positive effect.

Troxler’s main interest is changing the culture around gamete donations. She hopes people will realize that the relationships between gamete providers, recipients, and donor conceived people are complex and nuanced, like all meaningful relationships, and she hopes that, on a greater scale, people will see these relationships as meaningful.

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Ellen Trachman is the Managing Attorney of Trachman Law Center, LLC, a Denver-based law firm specializing in assisted reproductive technology law, and co-host of the podcast I Want To Put A Baby In You. You can reach her at babies@abovethelaw.com.