Category: News Feeds

The only time I see local news broadcasts is in a momentary flash when flipping upward through the channels in a hotel room. But somebody’s apparently watching them, with annual local TV station advertising revenue averaging around $20 billion (the local stations tend to do a bit better in election and Olympics years).

And doing its best to grab as many of those ad dollars as possible, while simultaneously ensuring your local television isn’t really all that local, is Sinclair Broadcast Group, Inc. Sinclair owns 191 television stations throughout the United States. If you’ve heard of Sinclair at all, it was probably in the John Oliver segment decrying the way Sinclair makes its supposedly local anchors parrot the exact same conservative talking points instead of doing real journalism.

Trying to fly under the radar is kind of Sinclair’s thing. A couple years ago, Sinclair was set to merge with Tribune Media Company in a $3.9 billion deal. Had Sinclair successfully acquired Tribune, Sinclair would have been in 73 percent of American households. What other company that three-quarters of us have never heard of has been set to sneak into three-quarters of our homes?

The deal didn’t go through though, in the face of a wave of bipartisan criticism that it would have given Sinclair a television broadcasting oligopoly. After the launch of an investigation by the FCC’s Office of Inspector General, the FCC unanimously declining to approve the merger. Of this, Sinclair president and CEO Chris Ripley said in a 2018 statement:

We unequivocally stand by our position that we did not mislead the FCC with respect to the transaction or act in any way other than with complete candor and transparency.

Well, fast forward to May 2020, when the FCC announced a $48 million civil penalty against Sinclair related to its attempted acquisition of Tribune. This is the largest civil penalty ever imposed in the 86-year history of the agency (the previous record was only half that, a $24 million penalty paid by Univision in 2007). Compared to Sinclair’s CEO, FCC chairman Ajit Pai had quite a different take on the Sinclair-Tribune deal, saying in a press release:

Sinclair’s conduct during its attempt to merge with Tribune was completely unacceptable.

The $48 million fine is part of a consent decree Sinclair entered into to resolve three separate ongoing FCC investigations. According to the FCC, the investigation into the proposed Sinclair-Tribune deal found that Sinclair attempted to deceive regulators by selling off stations in markets where it would have controlled multiple outlets (which it would have had to do to avoid antitrust issues) to two companies that actually had deep ties to the family behind Sinclair itself. The second FCC investigation found that 64 Sinclair stations aired sponsored content as news more than 1,400 times without disclosing that these were paid-for segments. Sinclair also shared these segments with several non-Sinclair stations, which aired them hundreds more times without telling viewers that they were sponsored content. To put that in English, Sinclair was airing paid advertisements as news. The third investigation closed out by the consent decree was into “whether the company has met its obligations to negotiate retransmission consent agreements in good faith,” and if you can translate what the FCC means by that into plain English, you’re a better wordsmith than I.

So, basically Sinclair was trying to circumvent the rules meant to keep it from owning a majority of local television media outlets and was hiding how it was doing it. Sinclair was also airing paid content as real news, and it was doing something inexplicable but shady when it was negotiating whatever retransmission consent agreements are. Now, Sinclair has to abide by what the FCC calls “a strict compliance plan” and pay a $48 million penalty.

Still, go back to the first paragraph and review the annual revenue up for grabs in local television media markets. Even pre-attempted Tribune acquisition, Sinclair was already involved in something close to 40 percent of local TV markets throughout the U.S. I think they’ll be fine. And I’m willing to bet this is far from the last we’ll hear from Sinclair Broadcast Group, Inc.

Jonathan Wolf is a litigation associate at a midsize, full-service Minnesota firm. He also teaches as an adjunct writing professor at Mitchell Hamline School of Law, has written for a wide variety of publications, and makes it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.

It wasn’t that long ago that we were reporting on Perkins Coie’s assurances to associates that salary cuts and layoffs were not in their future. Though the partnership were deferring ~19 percent of their compensation, the firm had no plans for further austerity measures.

But that was last month. A little over a month later (even though it feels like several years ago now), and the firm has changed its tune. Today, in an all-attorney call, the firm announced that pay cuts were coming, beginning in their June paychecks. Non-partner attorneys will see a 15 percent cut, staff making $200,000+ will also have a 15 percent cut, and staff making $125,000-$200,000 will have compensation cut by 10 percent. Below is an internal slide describing the cuts:

Tipsters at the firm describe the cuts as indefinite and that, “Management says they don’t know if it will extend to 2021 or 2022. Won’t answer questions whether temporary or not.”

But, the good news at least, is that the firm is leaving the door open to a “special payment” to make whole top billers. And, as of now, there are no attorney layoffs.

The firm also provided insiders a look at how the austerity measures were impacting the partnership:

We reached out to the firm for comment, but have yet to hear back.

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).

There will be no in-person classes in Fall 2020 at any California State Universities due to continuing COVID-19 concerns. That means a total of twenty-three universities will only have online instruction unless a viable vaccine is introduced before the start of the Fall semester.

How could twenty-three schools in a state the size of California agree that it is not safe for students to attend classes, but allow those same students to engage in contact sports? It does not seem possible that a reasonable justification can be made for those schools to participate in intercollegiate athletics while preventing students from sitting in a classroom.

Thus, the precedent has been set for a cancellation of college sports for the remainder of the year. In early May, NCAA president Mark Emmert even hinted that he could not envision college sports taking place if students are not allowed on their respective campuses.

“All of the Division I commissioners and every president that I’ve talked to is in clear agreement: If you don’t have students on campus, you don’t have student-athletes on campus,” Emmert said. “That doesn’t mean it has to be up and running in the full normal model, but you’ve got to treat the health and well-being of the athletes at least as much as the regular students. So if a school doesn’t reopen, then they’re not going to be playing sports. It’s really that simple.”

The twenty-three universities in the California State University system include Fresno State, San Jose State, and San Diego State. It is the largest four-year public university system in the United States.

Marc Isenberg, a Vice President and Director of Financial Education at Morgan Stanley’s Global Sports & Entertainment division, believes it is very unlikely that a university will close its doors to in-person classes yet allow athletes to engage in contact sports.

“Schools may try to move forward, but probably would require player to indemnify, which obviously should be a nonstarter,” Isenberg said.

Yet, it is possible that certain schools, such as those in the California State University system, be excluded from participating in college sports in Fall 2020 while other schools that do not feel the same coronavirus concerns plan for full participation of their college athletes. Southeastern Conference commissioner Greg Sankey is on the record as stating that there is room for different conferences to make different decisions, which means the college sports landscape could be composed of a smaller number of schools than what has been seen in prior years.

Darren Heitner is the founder of Heitner Legal. He is the author of How to Play the Game: What Every Sports Attorney Needs to Know, published by the American Bar Association, and is an adjunct professor at the University of Florida Levin College of Law. You can reach him by email at heitner@gmail.com and follow him on Twitter at @DarrenHeitner.

Welcome listeners to this COVID-19 Special Report podcast presented by our friends at Wolters Kluwer and hosted by Evolve the Law Contributing Editor, Ian Connett (@QuantumJurist).

This report features Nicole Pinard, Vice President & General Manager of Legal Education at Wolters Kluwer, who brings exceptional experience leading cross-functional teams to develop innovative learning solutions for law students, professors and the entire legal education industry.

Listen in as Nicole and Ian explore COVID-19’s impact on the rapidly evolving law school model, how professors are adapting to virtual innovation, and what law students must do at this time to finish this semester strong and prepare for the months and years ahead.

Students looking for something to do this summer may want to consider stepping up to offer their services to benefit organizations trying to stem the legal calamity that’s following the cornavirus pandemic. After all, summer programs are shortening and canceling right and left, so students have to keep their research skills honed somewhere.

At the University of Michigan Law School, rising 2L Maiya Moncino founded the MLaw COVID Corps and, to date, some 200 law student volunteers have provided pro bono help to Michigan organizations.

Organizations that have worked with the group are grateful for the help in these busy times:

“The COVID Corps supported several of our high priority COVID-19 rapid response projects, including outreach, writing, legal analysis, and data gathering,” said Liz Ryan, President & CEO at Youth First Initiative, an organization calling for the release of incarcerated youth amid the pandemic. “They did an outstanding job on these projects. We were so impressed with their dedication, professionalism, and high quality work!”

The MLaw COVID Corps is organized into four task forces: Decarceration, Workers’ Rights and Small Business Support, Housing Rights, and Voting Rights. They boast 15 projects at the moment and are still looking for more now that finals are finished. Organizations looking for help can sign up here at COVIDCorps.

If your law school hasn’t organized something like this, it’s a project worth considering. While students can lead the charge like they did here, law schools could also consider building impromptu clinics out of these challenges. However groups like these form, the need is out there, so get to it.

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

As this website has reported at length, many Biglaw firms have implemented austerity measures to contend with the ongoing COVID-19 pandemic. Some firms have laid off employees, and other shops have implemented furloughs or relied on dreaded stealth layoffs to deal with the current economic environment. However, the most widespread tactic used by Biglaw firms to contend with COVID-19 is salary reductions. Although salary cuts differ from firm to firm, most shops have implemented salary reductions of around 10 to 20 percent, however some firms have implemented even deeper cuts.

The salary reductions of firms in the current environment is markedly different than the tactics used by Biglaw shops during the Great Recession. During that time, firms relied on mass layoffs to deal with economic conditions. Most Biglaw firms never reduced their starting salaries during that time, and salaries at many Biglaw shops remained mostly constant for around a decade. Of course, reducing salaries versus mass layoffs seems like a gentler way to contend with economic issues. However, the position taken by many Biglaw firms in the present has made me wonder: why didn’t Biglaw shops try lowering salaries during the Great Recession? Although some smaller firms reduced salaries during the Great Recession, Biglaw shops maintained extraordinarily high salaries during the prior economic downturn, which increased the salary stratification between Biglaw firms and other shops.

I am no expert on Biglaw or the Great Recession. Although I attended law school during the height of the Great Recession, I did not enter the legal workforce until 2012. In addition, I only spent a little more than a year at a Biglaw shop (no one should consider the year and change I spent at dearly-departed Sedgwick LLP to be Biglaw experience!). I am really hoping that people reach out to me with their own theories, and I usually get insightful emails from readers. However, here are a few of my own spitballed ideas (in the 900 words of so I have) about why Biglaw firms are now implementing salary cuts when they did not do so in prior economic downturns.

One theory why Biglaw shops are trying salary reductions in the current environment is that management at these firms believe that the current economic downturn is temporary. At the beginning of the crisis, it may have been thought that the current situation would not last long, and that economic issues because of COVID-19 would be resolved within a relatively short amount of time. As a result, firms would only experience an economic downturn for a short period, and firms wanted to lower salaries rather than terminate employees to keep people on the payroll in case the economy recovered. The Great Recession may have been seen as a much more problematic and long-lasting issue for law firms, necessitating that shops terminate employees rather than merely lower salaries.

What makes me worried about this theory is that it appears that economic issues caused by the COVID-19 pandemic will not disappear anytime soon. Although the stock market has improved, many retailers, restaurants, and other companies are facing lagging issues because of social distancing guidelines and safer-at-home orders. This could affect the demand for legal services for a long time to come, which could have a lasting impact on the legal sector. If the economy does not recover soon, the unique salary reductions implemented during the present economic crisis may transform into the layoffs seen in prior economic downturns.

Another theory why Biglaw firms did not implement salary reductions during the Great Recession is since many Biglaw shops have issues “keeping up with the Joneses.” Biglaw firms typically move in lockstep with each other so that firms which have all types of metrics can plausibly include themselves in the elite tier of law firms in the country. For instance, numerous Biglaw shops implement a uniformly high starting salary to keep up with the Joneses. However, some firms just have the illusion of paying a high starting salary, and actually use nonpartnership track and staff attorney programs to pay many lawyers as little as possible. In addition, Biglaw firms often take cues from each other when it comes to bonuses, vacation policies, summer programs, and other initiatives.

If a firm lowered salaries during the Great Recession while other shops did not, it could signal that the firm that lowered salaries was not a shop that should be considered part of the elite tier of law firms, or that they were experiencing unique financial challenges. In addition, since other law firms were laying off attorneys during the last economic downturn, it provided cover for other shops to implement similar strategies. However, in the current economic environment, some of the earliest firms to announce austerity measures implemented salary cuts instead of laying off employees. This accordingly gave other firms the cover they needed to also lower salaries without seeming like they were out of step with the other top law firms.

All told, it remains to be seen how far law firms will go to stay afloat given the current economic realities. If the ongoing economic crisis deepens, it is possible that Biglaw shops will react with widespread layoffs as occurred during the Great Recession. However, it is interesting how law firms in the present at least initially lowered salaries to deal with the current crisis while shops during the Great Recession went straight to laying off hordes of attorneys and staff.

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.

No one is immune from the COVID-19 pandemic, not even law firms that have attempted to be “prudent” with their cost-cutting measures. What do you do as a newly merged megafirm that’s facing down a worldwide health crisis amid maddeningly declining markets? In this case, you first slash partner pay, and then turn to other costs at the firm.

Today’s news comes from Faegre Drinker Biddle & Reath, the firm that was formed after Faegre Baker Daniels finalized its merger with Drinker Biddle & Reath on February 1. If you recall, the prospective Am Law 50 firm with more than 1,300 lawyers was one of the very first to close its doors over coronavirus concerns.

Faegre Drinker’s partners took a “sizable” hit for the team at the start of April when announcing that they’d deferred their distributions by one-third for the second quarter. Now comes news that later that month came firmwide salary reductions, coupled with staff furloughs. Here’s a relevant excerpt from the firm’s statement (available in full on the next page):

In response to the uncertainty caused by COVID-19, Faegre Drinker’s partners led in absorbing the impact of the economic downturn by deferring a portion of distributions beginning on April 1. Following an internal announcement in mid-April, the firm also implemented a temporary, firmwide reduction in pay of 15% for other lawyers effective May 1. Professional consultant and staff pay has been reduced on a variable, compensation-based schedule, with no reductions for staff or consultants earning less than $50,000 graduating up to a 15% reduction for the most senior employees effective May 1. Faegre Drinker has also temporarily furloughed less than 1.5% of firm personnel, many of whom have responsibilities which are primarily office-based. Furloughed employees are maintaining firm benefits during the furlough period and also have access to state and federal benefits programs.

In addition to these furloughs, we’ve also heard about the layoffs of some personnel at Faegre Drinker. This is what the firm had to say about that:

Separately, Faegre Drinker’s leadership team has continued to advance a variety of combination-related integrations and synergies following the firm’s February 1, 2020 merger. Faegre Drinker completed the planned elimination of a small number of redundant staff positions created by the merger, representing 1.5% of total headcount, and continues to unify firm policies and procedures to realize combination-related efficiencies. Employees whose positions were eliminated due to the combination were provided with enhanced severance packages.

On top of all of that, the firm has deferred the start of its summer associate program to no earlier than July 6, 2020, and will likely be postponing the start date for its incoming first-year associates, but is “still considering options.”

Best of luck to those who suddenly find themselves without a steady paycheck in the middle of a pandemic/economic decline.

If your firm or organization is slashing salaries, closing its doors, or reducing the ranks of its lawyers or staff, whether through open layoffs, stealth layoffs, or voluntary buyouts, please don’t hesitate to let us know. Our vast network of tipsters is part of what makes Above the Law thrive. You can email us or text us (646-820-8477).

If you’d like to sign up for ATL’s Layoff Alerts, please scroll down and enter your email address in the box below this post. If you previously signed up for the layoff alerts, you don’t need to do anything. You’ll receive an email notification within minutes of each layoff, salary cut, or furlough announcement that we publish.

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.

A few weeks ago, when the Paycheck Protection Program (PPP) was announced, there was a mad frenzy for the money mainly because of the limited funds and the opportunity to have the loans forgiven. The money was depleted within a matter of days with many people being unable to obtain loans. There was a backlash against large, publicly traded companies that were able to get these loans due to suspicions of preferential treatment and because they had access to other sources of capital.

Now, with a new round of funding with a reminder of certain conditions from the Small Business Administration, the rush seems to have died down a bit. Large, public companies have either reconsidered applying or have returned the funds. A portion of the funds were allocated exclusively to smaller banks. And the large banks have upgraded their systems so that more smaller businesses can have their applications submitted. The latest reports indicate that $120 billion remains in the second round of funding.

Over the past few weeks, since the publication of my earlier column on the PPP loan, I helped a number of people obtain funding, and I want to share some common issues I have seen in the process.

Getting the loan amount right. Many people had trouble calculating the correct loan amount to determine their average monthly payroll. There are a number of reasons for this. Some people incorrectly added 1099 independent contractors as employees. Others were unable to produce necessary paperwork such as W-2s or Form 941s. S-corporation shareholders were only allowed to use their W-2 employee salary amounts instead of their total withdrawals for the year. And some of these people paid themselves a very low salary to avoid payroll taxes.

Others didn’t add correctly or just missed some numbers because they didn’t understand the rules since they had little time to read them. And in some cases, the banks did not want to follow the rules.

As a result, these people did not get the amount they hoped for.

Some of these problems can be remedied while others cannot. If you think you should get more, have someone familiar with the PPP rules review your loan application and supporting documents. You might have to change lenders if you suspect they are not following SBA guidelines.

Have an employment plan set up as soon as possible. Another common problem applicants had was that they had trouble maintaining previous employment levels, which is required to qualify for full forgiveness. This was usually because employees they previously laid off were unwilling to come back. This was because they found another job or they were financially better off not working due to the weekly $600 Pandemic Unemployment Assistance supplement to their unemployment benefits.

This can be remedied by hiring replacements for those unwilling to come back to work. Or, under a new SBA rule, the employer can make a good-faith rehire offer to the laid-off employee. If the employee refuses to return, then the loss of that employee will not count against the business’s loan forgiveness application.

But the more prudent thing to do is to have an employment plan for the next eight weeks following the receipt of PPP funding. This should be done before the application is submitted or soon afterward. Make sure the employees will be available for those eight weeks and plan to have replacements in case one of the employees does not want to come back to work or leaves in the middle of the eight-week period.

Have a budget and segregate PPP funds. For PPP funds to be forgiven, at least 75% of the proceeds must be used for payroll costs. The remaining 25% can be used for rent, business mortgage interest, and non-home-based utility costs. Ideally, 100% of the funds should be used for payroll costs, while the rent and utilities should be used as backup once payroll costs have been met.

So while you are setting up the employment plan described earlier, set up a budget to ensure that the funds will be used for forgivable purposes.

It is generally a good idea to have a separate bank account for the PPP funds for easier accounting and tracing. But if you plan to have only a few transactions during the eight-week period, a detailed journal with supporting documents should be enough. This tends to be the case for sole proprietors with no employees.

Do you really need the money? The CARES Act states that to qualify for PPP funding, the borrower has to certify that current economic conditions makes the loan necessary to support ongoing operations.

Recent SBA guidance states that the borrower must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. The SBA guidance gives an example stating that a public company with substantial market value and access to capital markets is unlikely to make this certification in good faith.

The SBA recently made a similar determination for private companies with adequate sources of liquidity.

The SBA also stated that in consultation with the Department of the Treasury, it will audit all loans over $2 million and other smaller loans as appropriate.

With all of this scary language, is it appropriate to request the money if you have an existing credit line, a cash hoard, or another source of funding? It seems like the risk for government scrutiny is greater when the loan amount is higher and the size of the company (along with its reputation) is bigger.

Honestly, I don’t know. Every business’s situation is unique. Also, a lot of ambiguities require clearer guidance from the SBA. But in my opinion, I doubt that businesses that receive less than $1 million should be worried so long as they use the PPP money for the intended purposes.

The SBA should provide more detailed guidance on businesses using other sources of capital. Should the business owners be forced to exhaust their savings? Or should business owners be forced to take a loan against their retirement savings? Or max out their credit cards? Or all of the above before they finally qualify for PPP funding? I’ll tell you this much: a lot of business owners will just let most employees go instead of going into further debt or exhausting their savings. Only a few star employees will be kept.

Barry Melancon, the President and CEO of the American Institute of CPAs, in a blog post stated that it is nearly impossible to find a company whose financial situation has not been negatively impacted to some degree. The last thing this economy needs is small businesses laying off employees and closing shop for good because they chose to return PPP funds or not apply at all.

While the truly needy should be given priority, banning and punishing fiscally conservative small businesses that apply for PPP funds seems to send a message that saving for a rainy day is for suckers.

Businesses that want to make the most of their PPP money should plan to use it for its intended purpose and as allowed by law. To maximize forgiveness of the loan, they should borrow no more than necessary, have a spending plan before funding is received and make sure that all of their employees will be available. I believe that most small businesses should apply for the loan because the down economy will affect them eventually. But for those who feel that the PPP money is not for them, they have until May 14 to return the funds with no questions asked.

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.

Post published in: Business