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The New Jersey Supreme Court has made the Fifth Amendment discussion surrounding compelled production of passwords/ passcodes more interesting. And by interesting, I mean frustrating. (h/t Orin Kerr)

The issue is far from settled and the nation’s top court hasn’t felt like settling it yet. Precedent continues to accumulate, but it’s contradictory and tends to hinge on each court’s interpretation of the “foregone conclusion” concept.

If the only conclusion that needs to be reached by investigators is that the suspect owns the device and knows the password, it often results in a ruling that says compelled decryption doesn’t violate the Fifth Amendment, even if it forces the suspect to produce evidence that could be used against them. Less charitable readings of this concept recognize that “admitting” to ownership of a device is admitting to ownership of everything in it, and view the demand for passcodes as violating Fifth Amendment protections against self-incrimination. The stronger the link between the suspect and the phone, the less Fifth Amendment there is to go around.

This decision [PDF] deals with a crooked cop. Sheriff’s officer Robert Andrews apparently tipped off a drug dealer who was being investigated. The dealer tipped off law enforcement about Andrews’ assistance with avoiding police surveillance — something that involved Officer Andrews telling the drug suspect to ditch phones he knew were being tapped and giving him information about vehicles being used by undercover officers.

Two iPhones were seized from Andrews who refused to unlock them for investigators. Investigators claimed they had no other option but force Andrews to unlock them. According to the decision, there was no workaround available at that time (at some point in late 2015 or early 2016).

According to the State, its Telephone Intelligence Unit was unable to search Andrews’s iPhones — an iPhone 6 Plus and an iPhone 5s — because they “had iOS systems greater [than] 8.1, making them extremely difficult to access without the owner/subscriber’s pass code.” A State detective contacted and conferred with the New York Police Department’s (NYPD) Technical Services unit, as well as a technology company called Cellebrite, both of which concluded that the cellphones’ technology made them inaccessible to law enforcement agencies. The detective also consulted the Federal Bureau of Investigation’s Regional Computer Forensics Laboratory, which advised that it employed “essentially the same equipment used by” the State and NYPD and would be unable to access the phones’ contents. The State therefore moved to compel Andrews to disclose the passcodes to his two iPhones.

Apple implemented encryption-by-default in September 2014. Andrews was arrested in July 2015. This would be about the same time the DOJ was trying to force Apple to crack open an iPhone for it in the San Bernardino shooting case. This was ultimately resolved by an outside contractor (most likely Cellebrite), but it appears that no one had a workable solution when investigators in this case attempted to crack the seized phones.

Andrews challenged the compelled production of passcodes, claiming this violated his Fifth Amendment rights. The trial court disagreed, as did the state appeals court. The state’s top court arrives at the same conclusion.

The state argued it actually knew far more than what’s needed to clear the “foregone conclusion” bar.

[T]he State argues that communication between co-conspirators has no special privacy status, that the State “has established . . . that it already knows what is on the phone[s],” and that the State has a superior right to the contents of the phones because of the unchallenged search warrant.

The court finds in favor of the state, but it does recognize that passcodes are more testimonial than fingerprints or other biometric features used to unlock devices.

A cellphone’s passcode is analogous to the combination to a safe, not a key. Communicating or entering a passcode requires facts contained within the holder’s mind — the numbers, letters, or symbols composing the passcode. It is a testimonial act of production.

It also recognizes there may be no clear way to distinguish between passcodes and biometrics when dealing with compelled production.

We also share the concerns voiced by other courts that holding passcodes exempt from production whereas biometric device locks may be subject to compulsion creates inconsistent approaches based on form rather than substance. The distinction becomes even more problematic when considering that, at least in some cases, a biometric device lock can be established only after a passcode is created, calling into question the testimonial/non-testimonial distinction in this context.

The court says the state has proven enough to be granted the “foregone conclusion” exception to the Fifth Amendment.

The State’s demonstration of the passcodes’ existence, Andrews’s previous possession and operation of the cellphones, and the passcodes’ self-authenticating nature render the issue here one of surrender, not testimony, and the foregone conclusion exception to the Fifth Amendment privilege against self-incrimination thus applies. Therefore, the Fifth Amendment does not protect Andrews from compelled disclosure of the passcodes to his cellphones.

The dissent disagrees. It says that although the tech has changed, the underlying principles of the Fifth Amendment haven’t. And it’s not just the dissent saying this. It’s also the nation’s top court, which has never held that the compelled production of incriminating testimony complies with the Constitution.

In a world where the right to privacy is constantly shrinking, the Constitution provides shelter to our innermost thoughts — the contents of our minds — from the prying eyes of the government. The right of individuals to be free from the forced disclosure of the contents of their minds to assist law enforcement in a criminal investigation, until now, has been an inviolate principle of our law, protected by the Fifth Amendment and our state common law. No United States Supreme Court case presently requires otherwise. No case from this Court has held otherwise. That protection deserves utmost respect and should not be lessened to authorize courts to compel a defendant to reveal the passcode to a smartphone so law enforcement can access its secured contents.

Given the current split in both federal district courts and state courts on the issue, the dissent says the New Jersey Supreme Court shouldn’t be an enabler of potential Fifth Amendment violations in the absence of US Supreme Court precedent.

Until the Court clarifies its intentions about application of the act of production doctrine in this setting, I would follow the only sure directional signs the Court has given…

Things may be slightly harder for investigators at the moment, but it’s not the court’s role to make things easier for the government. They’re supposed to be a check against government power grabs, not an ally in its attempts to limit the protections it supposedly granted to its citizens. We live in a “golden age of surveillance.” There’s more information available in unencrypted form than there’s ever been. And the arms race between device makers and encryption crackers is ongoing. It hasn’t ended and device encryption has not been declared the winner.

Law enforcement must find another means of obtaining access to the encrypted substantive information on two cell phones whose contents it wishes to search and for which the government has a search warrant. Technological barriers must be overcome without sacrificing constitutional, deep-seated historical protections against governmental intrusions forcing individuals to become assistants in their own prosecutions. Modern technology continues to evolve, bringing new problems; but it also may bring new solutions.

But that’s just the dissent. The majority says the Fifth Amendment can be bypassed if the state can find enough connective tissue between the locked device and the person who refuses to unlock it.

New Jersey Supreme Court Says ‘Forgone Conclusion’ Trumps Fifth Amendment In Crooked Cop Case

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The Internal Revenue Service recently issued a memorandum declaring that companies offering daily fantasy sports services should be required to pay a federal excise tax of 0.25%. The opinion held that the tax should not be applied to season-long fantasy sports competitions that may be held by those same companies.

DraftKings and FanDuel would be burdened the most by the imposition of a new 0.25% excise tax on their operations. In 2017, the Federal Trade Commission authorized legal action to block a proposed merger between the two companies based on an understanding that a newly formed combined entity would control more than 90% of the U.S. market for paid daily fantasy sports contests. The companies never merged, but still maintain their dominance over the industry.

“Our expectation is that DraftKings and FanDuel will use the substantial amount of ambiguity present in the opinion and corresponding statute to argue for a delay in implementation,” said Chris Grove of Eilers & Krejcik Gaming, a research firm focused on the U.S. gambling industry. “We believe they will likely be successful in obtaining this delay. What follows from there is less certain, as the potential impacts range from a nominal settlement to a material impact on each company’s bottom line. Smaller fantasy operators may be even more vulnerable to that potential range of outcomes as they lack the balance sheet and customer values that will insulate DraftKings and FanDuel.”

The statute referred to by Grove and included in the IRS memo is 26 U.S.C. § 4401, which states that there shall be imposed on any legal wager an excise tax equal to 0.25% of the amount of such wager. The ambiguity is in the definition of “wager” as it is used in that federal statute.

A definition for “wager” is provided in 26 U.S.C. § 4421(1), but it is not very helpful. In fact, the statute basically says that a wager is a wager, which makes it an impossibility to appropriately determine whether a daily fantasy sports entry fee should be construed as a wager for the purposes of applying the stated excise tax. The statute says,

The term “wager” means— (A) any wager with respect to a sports event or a contest placed with a person engaged in the business of accepting such wagers, (B) any wager placed in a wagering pool with respect to a sports event or a contest, if such pool is conducted for profit, and (C) any wager placed in a lottery conducted for profit.

It is one of the worst crafted definitions that I have ever seen. While companies offering daily fantasy sports options are certainly providing a service based on a sports event, the definition does not in any way help determine whether those companies are in the business of accepting wagers or whether the entry fees are wagers.

The IRS also recognized the lack of clarity and pivoted to applying the term’s “plain, obvious, and rational meaning” by citing to the Random House College Dictionary, which defines a wager as something risked or staked on an uncertain event, or a bet. It thus conveniently concluded that a daily fantasy sports entry fee fits into the definition of wager.

However, as my colleague Daniel Wallach astutely pointed out, numerous courts have held that the risk of loss element must be present on both sides of a transaction for the transaction to be considered a wager. For instance, an individual who places a bet with a sportsbook for the Miami Heat to beat the Indiana Pacers is, in effect, placing a wager because both the individual and the sportsbook has the risk of losing based on the outcome of the game. With daily fantasy sports, the operator does not bear the same type of risk; the only risk to the operator is that it will guarantee a certain prize pool and lose money if not enough people pay entry fees to cover the pre-set guaranteed prizes.

The IRS apparently does not believe there is any ambiguity, Grove says there could be ambiguity that the likes of DraftKings and FanDuel may be able to take advantage of, and Wallach’s position is the same as that of the IRS — there is no ambiguity — but comes to the total opposite opinion as the governmental entity.

Yet, the most important part of the IRS memorandum may be that it is not binding. As such, DraftKings, FanDuel, and other daily fantasy sports companies may continue to spurn the opinion, as there is currently no true threat that an excise tax will be enforced against them in the near future.

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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.

There’s a global pandemic raging and the economy is a wreck, but the federal government has bigger problems today. They’ve got to save the world from mean tweets directed at the president’s delicate, orange ears!

The same president who demands free rein to tout quack cures to his hundreds of millions of followers wants the Supreme Court to give him the right to block his critics from seeing or interacting with his Tweets.

Back in July of 2017, Knight First Amendment Institute at Columbia sued on behalf of seven twitter users who’d been blocked by the president. The U.S. District Court in the Southern District of New York said he couldn’t do that. The Second Circuit agreed. And then a panel of the Second Circuit refused to rehear the case en banc, affirming that the president has converted his personal account into a public forum and “when the President creates such a public forum, he violates the First Amendment when he excludes persons from the dialogue because they express views with which he disagrees.”

So now the DOJ is running to Chief Justice Roberts with a 187-page cert petition in hand, begging him to preserve Donald Trump’s right to shit-tweet at will without fear of comment by American citizens. Because what better use of taxpayer dollars than putting the entire Solicitor General’s Office on the case, right?

And so we are treated to yet another exegeses on OKAY, GRANDPA, TWITTER IS LIKE …

Twitter enables users to interact with each other in a variety of ways. Users can “favorite” or “like” another user’s tweet by clicking on a heart icon that appears under the tweet. Users can also “mention” another user by including the other user’s handle in a tweet. A Twitter user mentioned by another user will receive a notification that he or she has been mentioned in the other user’s tweet. In addition, users can “follow” other users, which enables them to receive notifications every time that other user posts a tweet. . And they can “retweet[]”—i.e., repost— the tweets of other users onto their own timelines. [Citations omitted.]

Acting Solicitor General Jeffrey Wall argues that Trump’s shitposts are simply the rantings of a private citizen. And like a soapbox preacher, Trump’s nattering about DEEP STATE and HOAX and DEMOCRAT CITIES are not subject to the First Amendment’s prohibition on government regulation of speech. But this requires a certain suspension of disbelief.

Unlike the town drunk whose words have no effect, the president routinely uses his account to make and announce federal policy and personnel changes. For example, the ban on transgender Americans serving in the military was announced on Twitter. (In point of fact, he hadn’t consulted his generals. The nine minute pause between these tweets sent the Pentagon into a panic that he was about to declare war on North Korea.)

And Secretary of Homeland Security Kirstjen Nielsen learned that she’d been fired the same place the rest of us did — from the president’s Twitter account.

Nevertheless, the SG argues that Twitter is not government speech, or in the alternative, if it is government speech, then it’s simply a one-way megaphone where the president has no obligation to allow anyone to talk back.

“[T]he President uses his account to speak to the public, not to give members of the public a forum to speak to him and among themselves,” he insists, likening the platform’s blocking feature to “a Congressman who forbids the placement of certain yard-signs on his front lawn.”

Neither the trial judge nor the Second Circuit bought this argument, but who knows what will happen at SCOTUS. Maybe they’ll kick the can down the road until the issue gets mooted in January if and when Joe Biden is sworn in. (We hear Justice Kavanaugh likes cans.) Maybe they’ll order briefs on Twitter’s exciting new feature limiting who can reply to a Tweet.

Or maybe they’ll break with precedent and refuse to grant the SG’s cert petition because … for the love of God, WHO EVEN CARES?

Donald J. Trump v. Knight First Amendment Institute at Columbia University [Petition for Certiorari]

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Elizabeth Dye lives in Baltimore where she writes about law and politics.

As states and cities across the nation are in different phases of reopening amid an ongoing pandemic, employers and their attorneys are tasked with getting back to business while implementing new health and safety precautions. Here are the top three things  you need to help your clients do to keep their business running smoothly.

1. Create a Safe Work Environment. Employers need an action plan for reopening, based on CDC, state, and local guidelines. The CDC recommends employers promote healthy hygiene practices and social distancing, encouraging behaviors like hand washing and wearing a face covering, and retrofitting the workspace to allow for extra spacing between employees. Where possible, employees should still be encouraged to work from home, and employee shifts and breaks should be staggered for those on site to have minimal contact with each other.

2. Monitor Employee Health. Screening employees can help prevent the spread of COVID-19. Self-screening should be encouraged as the first line of defense: employees with a fever or who are exhibiting symptoms should not enter the workplace. If an employer implements health screening measures onsite, such as temperature checks and active symptom checks, the guidelines for what temperature and symptoms will bar entry should be made clear and focus on new symptoms, not pre-existing conditions. If screening will take place on site, proper safety precautions should be in place to protect the screener’s health as well.

3. Protect the Business from Liability. A top concern among employer-side attorneys is the liability employers may face if an employee contracts the virus. While it may seem appealing to have employees sign liability waivers to establish a contributory negligence defense, courts are unlikely to enforce such agreements, especially for current employees. Also, keep in mind that while every state requires employers to maintain workers’ compensation insurance, the extent of the coverage will vary. So far, 14 states have expanded coverage to include Covid-19.

For more information about PPP loans, liability waivers, and other business considerations, check out the recent CLE Reopening Workplaces During COVID: Rehiring Staff and Mitigating Risk through Health and Planning a Return-to-Work During the COVID-19 Pandemic.

This article was prepared with help from Max J. Cheslow, a Seton Hall Law student.

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It’s a sign of desperation. I want to know: When did police officers get their law degrees, when did they get voted into being judges, and when does four people do the job of … [a] jury?

— Selwyn Jones, uncle to George Floyd, commenting on court documents filed by Earl Gray, an attorney for Officer Thomas Lane, where Gray argued that Floyd “killed himself” by dying of a fentanyl overdose and an underlying heart condition, and that the police officers involved “were doing their jobs.” Officer Derek Chauvin knelt on Floyd’s neck for nine minutes during the arrest that led to his death. “None of these guys — even Chauvin — actually killed him,” Gray said. Lane is charged with aiding and abetting second-degree murder and aiding and abetting second-degree manslaughter in connection with Floyd’s death.

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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.

The coronavirus pandemic has been a fairly unmitigated disaster for any and all who serve the now non-existent travel industry: Airlines, car-rental agencies, duty free, hotels. You might expect that short-term vacation rental sites would be among. Certainly, that’s how things looked early in the crisis, when Airbnb stopped paying its hosts, raised billions to stay afloat, cut advertising and slashed a quarter of its workforce.

As it turns out, however, COVID-19 may be the best thing that ever happened to Airbnb. As Americans began self-righteously fleeing their urban homes for the presumed safety (for themselves, of course: the risk of their bringing the disease into previously unaffected small communities never seems to be a consideration) of the suburbs and beyond, the leaner, meaner Airbnb was there for them. And now its ready for its payday.

Judge Paul M. Sushchyk of Worcester, Massachusetts, has been accused of groping a court employee at a court-sponsored event. A hearing officer assigned to the matter found the judge engaged in misconduct by touching the woman without her consent and gave false statements during the course of the investigation.

As reported by the ABA Journal, the hearing officer found the judge’s behavior clearly crossed the line of propriety:

“The line crossed here is not a murky one,” said the report by the hearing officer, Bertha D. Josephson. “The touching engaged in here was offensive and an affront to one’s bodily integrity and dignity.”

The incident took place in April of 2019, when there’d been a conference followed by a happy hour, followed by a dinner, followed by a trip to a pub. According to the woman, Sushchyk brought a flask of whiskey with him to these events. At the pub, the hearing officer’s report says the woman “felt the distinct sensation of a hand grabbing the left side of her buttocks and applying a full-handed squeeze to it.” “The contact lasted several seconds. Stunned, [the worker] froze in place, making no move to acknowledge the affront or the culprit. She was aware at that moment that Judge Sushchyk was the only one passing behind her.”

The woman decided to report the incident, and the judge initially said he “couldn’t have done something like that” but failed to disclose his flask of whiskey in his first account.

But Sushchyk’s story of exactly what happened would change:

In a written statement to the chief justice, Sushchyk said he “was somewhat unsteady on [his] feet, feeling the effects of past hip replacement surgery, the long day, the evening meal and the alcohol consumed.”

He said after returning from the restroom, he passed the worker and placed his hand in the direction of her chair, reached out to steady himself, and “came into momentary contact with a portion of her lower body.”

The story changed when Sushchyk testified under oath, the report said. Sushchyk denied any physical contact with the worker at all. Because he didn’t think the worker would lie, Sushchyk said, he had concocted a scenario in the written statement to rationalize what she said.

The hearing officer said the court worker “gave a cogent, credible, consistent account of what occurred,” while “Judge Sushchyk has not been honest in his accounts.”

The hearing officer wrote that this lack of forthrightness doomed the judge’s credibility:

“One problem with lying is once it begins, it’s hard to know when it ends,” the hearing officer wrote. “Judge Sushchyk’s lack of candor at the inception of this matter undermines his credibility at hearing. His initial response suggests that he did what he was accused of doing and sought to minimize his culpability for it. I do not find Judge Sushchyk’s testimonial denials of intentional contact with [the worker] reliable or believable.”

The hearing officer’s recommendation is that the judge be removed from office, or be allowed to retire.

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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).

Over my years as a commentator on the legal profession, I have made many predictions. And many of my predictions have turned out to be wrong.

But sometimes I am happy to be wrong. And this is one of those times.

Back in April, when law firms were truly reeling from the coronavirus pandemic and economic downturn, I predicted that we were only at the beginning of the bad times. I predicted that the list of law firms enacting COVID-19 austerity measures would continue to grow for quite some time.

And for a while, I was correct. In April and May, more firms continued to tighten their belts, engaging in salary cuts, layoffs, furloughs, and other money-saving steps.

But then we got a pleasant summer surprise. Finding that things weren’t as dire as they expected, firms started to reverse some of their salary cuts and other cost-cutting measures, at least in part. As reported yesterday by Christine Simmons and Dan Packel at Law.com, about a dozen Am Law 100 firms have reversed, at least partially, their compensation cuts for lawyers and staff. Just this week, three firms joined that happy club. (You can track developments by following ATL’s coverage of salary cuts, which includes their reversal.)

Of course, we aren’t out of the woods just yet. I have written before about the significant perils posed by the pandemic to the world of Biglaw. If the economy gets worse, if the (seemingly unstoppable) stock market takes a tumble, or if we get the second spike in COVID-19 cases that many fear, we could see a reversal of the reversals — or worse.

But right now — based not just on the publicly reported news, but also on the many conversations I have each week as a legal recruiter with partners and associates around the country, in many different practice areas — I’m cautiously optimistic. In the past few weeks, I’ve spoken to a partner whose firm is down in revenue year to date by just low single digits, another partner whose firm isn’t down at all (flat is the new up), and an associate who has hit two of his record months for billables during the pandemic.

Lawyers remain busy — and not just bankruptcy lawyers. Even with many courts closed, in whole or in part, litigators have been doing their thing — and elite litigation boutiques are even busy enough to be in hiring mode.

Transactional lawyers are doing fine too. M&A is a bit slow — the pandemic and downturn complicate many parts of the process, including coming up with valuations and doing due diligence — but other practice areas, including finance and fund formation, are busier than you might think.

Just because times aren’t as terrible as some expected, however, doesn’t mean that they’re good. So associates who are hoping to see bonuses on last year’s Cravath (or should we say Milbank) scale are probably going to be disappointed.

The current bonus scale, starting at $15,000 for first-years and going up to $100,000 for seventh-years, has been with us for six years (during which associates also saw two increases in base salaries, the Cravath-led move to the $180K scale in June 2016, and the Milbank-led move to the $190K scale in June 2018). The current bonus scale dates back to 2014, a very exciting bonus cycle in which Simpson Thacher (not Cravath) led the way, then got beaten by Davis Polk — and the Davis scale then got adopted by pretty much everyone else, including Simpson.

What about this year? As discussed, some firms — including many of the firms at the top of the profitability charts, who tend to set the pay scales — are doing just fine. They could definitely afford to pay the same bonuses as last year. And keeping bonuses at the same level could yield some advantages for them, such as putting the screws to the less profitable firms — and causing the star associates at those firms to seek more prestige and pay by “trading up” (a trend we saw in lateral associate hiring for the past few years, until this year).

But I don’t think we’re going to see that — not because of firm finances, but because of optics. In dark times for the country — COVID-19 deaths closing in on 200,000, millions of Americans out of work, companies filing for bankruptcy left and right — it might strike some as unseemly for Biglaw to take a “business as usual” approach.

General counsels who are seeing their companies suffer — well, at least if their companies aren’t named Apple or Amazon — probably won’t take kindly to seeing associates at their outside law firms taking home the same amount of money as last year. In fact, keeping bonuses the same would mean that many associates at firms that didn’t cut salaries would actually fare better financially in 2020, since many of their expenses — dining out, entertainment, commuting costs, gym memberships — have disappeared or dipped dramatically during the pandemic.

How much lower will bonuses go? It’s anyone’s guess, but if I had to guess — which I suppose I do, since it’s kinda my job — I’d say that 2020 bonuses will clock in at 2013 levels. In that scale, first-years got $10,000 and seventh-years got $50,000, meaning that bonuses were half to two-thirds of the 2014-2019 scale. It’s a significant cut, but not a cataclysmic one — and in these trying times, it’s no cause for complaint.

Of course, a consequence of lowering bonuses for associates by that much could mean that at some firms, we could see partners take less of a financial hit than their associates, thanks to lower compensation costs — the biggest expense of a law firm. And at some firms, especially ones with strong bankruptcy and restructuring practices, we might even see profits per partner increase. But we won’t find out about that until, well, the Am Law 100 numbers come out in spring 2021 — by which point things might be better (or at least improving), meaning that clients might not be as upset.

But spring 2021 is still a long time away, and a lot can happen between now and then. The year 2020 has been full of surprises, many of them quite awful — and it is far from over.

In addition to reversing their cost-cutting measures, some firms have picked up their hiring, at least in select practice areas. Here at Lateral Link, we are quite busy (and even in hiring mode ourselves).

Right now, despite a generally slow market, I have multiple associate and partner candidates interviewing at top Biglaw firms and elite boutiques. If you’re a candidate who might benefit from working with a recruiter — and the best way to tell is if you’re already getting emails and calls from other recruiters — please feel free to reach me by email at dlat@laterallink.com. I have extensive knowledge of (and deep connections within) Biglaw, from having worked in and written about this world for some two decades, and I’d be happy to have a confidential conversation with you about your career, the state of the market, and possible new opportunities.

More Firms Are Partially Restoring Pay, but Full Salaries May Wait Until 2021 [Law.com]

Earlier: ATL coverage of salary cuts (and reversals of them)

Ed. note: This is the latest installment in a series of posts from Lateral Link’s team of expert contributors. This post is by David Lat, a managing director in the New York office, where he focuses on placing top associates, partners and partner groups into preeminent law firms around the country.

Prior to joining Lateral Link, David founded and served as managing editor of Above the Law. Prior to launching Above the Law, he worked as a federal prosecutor, a litigation associate at Wachtell Lipton Rosen & Katz in New York, and a law clerk to Judge Diarmuid F. O’Scannlain of the U.S. Court of Appeals for the Ninth Circuit. David is a graduate of Harvard College and Yale Law School. You can connect with David on Twitter (@DavidLat), LinkedIn, and Facebook, and you can reach him by email at dlat@laterallink.com.

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Lateral Link is one of the top-rated international legal recruiting firms. With over 14 offices worldwide, Lateral Link specializes in placing attorneys at the most prestigious law firms and companies in the world. Managed by former practicing attorneys from top law schools, Lateral Link has a tradition of hiring lawyers to execute the lateral leaps of practicing attorneys. Click here to find out more about us.

Yet another Biglaw firm has walked back some of its COVID-19 austerity measures. Back in April, Pillsbury — a firm that came in 62nd place in the most recent Am Law 100 rankings, with $677,320,000 in gross revenue in 2019 — announced a series of pay cuts designed to avoid layoffs. First, the reduced partner monthly draws by a minimum of 25 percent. Then in May, the firm reduced associate and counsel compensation by 20 percent and cut all staff compensation by up to 15 percent for those who make more than $100,000 and by 10 percent for those making between $75,000 and $100,000 (with chief officers volunteering to take higher reductions, commensurate with those of partners).

Now, the firm is not only rolling back the cuts, but its repaying all employees who lost money during the height of the coronavirus crisis. From the American Lawyer:

Pillsbury said in a Thursday statement that its financial performance in the first and second quarters was strong. “Consequently, all reductions in compensation incurred in the first half of 2020 are being repaid in full and we are reducing all temporary salary reductions,” the firm said.

The adjusted salary cuts for Pillsbury associates and counsel are now 15%, down from 20%. For staff making more than $100,000, the pay cut is 10%, down from 15%, and for staff making between $75,000 and $100,000, the pay cut is 5%, down from 10%.

We believe that Pillsbury is the first firm to commit to repaying all of its employees in full for the money they lost due to the salary cuts. (Others have offered “bonus” payments as repayment, but not as an across the board policy.)

Congratulations to everyone at Pillsbury. This is great news for a great weekend.

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).

More Firms Are Partially Restoring Pay, but Full Salaries May Wait Until 2021 [American Lawyer]

Earlier: Am Law 100 Firm Cuts Pay For All To Avoid COVID-19 Layoffs

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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.

HBR Consulting’s roots in analyzing and advising law firms stretch back to the disco era, so when you get a chance to sit under the learning tree with HBR CEO Nicholas Quil, you take it. Over the course of the interview he graciously granted me, Quil shared his thoughts on overcoming the structural problems of law firms, how the industry can transition through the COVID-19 crisis, thriving in the coming decade, and more.

Ways Law Firms Are Structured To Fail

I’ve often argued in this space that the legal industry suffers from a lack of entrepreneurial thinking. When I asked Quil about that concept, he was quick to defend us. “Lawyers do have, I think, pretty entrepreneurial minds, pretty creative minds. It’s just how you lead an organization and create a culture that is aligned to addressing those that I think is challenging.”

In Quil’s view, what law firms really suffer from in comparison with other market sectors is a lack of incentive to reinvest the firm’s profits back into growing the business. He chalks this up to some basic structural impediments inherent in most firms.

First, lawyers and legal staff command a lot of salary. Quil sees firms as engaged in a “war for talent” that generally ensures those salaries keep creeping higher every year. Individual attorneys have little incentive to cut their own salaries for the benefit of the larger entity. Firms that try to make those cuts may see their best talents and biggest clients walk out the door to another firm that will keep that comp high. All that money spent on payroll leaves little for structural improvements.

All of this is exacerbated by the dominant law firm financial model, where the partnership cashes out at year’s end. Since there’s no inherent mechanism for retaining earnings and building up a war chest, many firms struggle to even think about investing long-term in the firm’s growth, much less systematically build out their infrastructure over a series of years.

This all means that law firm leaders hoping to push for reinvestment in the firm itself don’t have many sticks, and so they need to get creative on using carrots. “I think the challenge for a law firm leader is how do you shape a culture, how do you create a vision and a consistency in communication and alignment, that brings people together on the journey of what you’re trying to do in growing your law firm.” It takes conscious effort and buy-in from the partnership to grow an entity, but the firms that can pull it off will be far better off to grow and expand than those that simply ride their current momentum and drain the coffers every year.

Quil On COVID-19

Most of the issues being raised by the COVID-19 crisis are, in Quil’s view, nothing new. “The pandemic has just accelerated some known issues or opportunities that have persisted for a long time.”

That said, the opportunity for change is real. The shared burdens and tragedies of this crisis are creating bonds and culture that otherwise wouldn’t likely exist among law firm members. For example, whereas most law firm leaders would traditionally communicate with their firms from a podium wearing full business formal, the shift to more casual, informal Zoom meetings (with kids and pets occasionally breaking into frame) allows those same leaders to come to their teams from “a much more authentic place.”

Quil also senses that many leaders in the industry are seeing COVID-19 as not just a crisis, but an opportunity. “We’re starting to see a shift toward asking ‘How do we make some strategic transformational bets in this period of time?’ And I think people who acknowledge that you can make tough decisions but implement them compassionately given what’s going on in the world around us, that can be an exponential differentiator versus a mindset of, ‘Let us get through this period, and then we’ll tackle all these things on the other side.’”

As for how to handle those risks, Quil sees financial discipline as key. “Not having a real enough assessment of where we are in this journey” is the biggest mistake Quil sees firms making right now. “Firms right now are in an interesting spot [compared to] the projections that they modeled in spring; they fared better than those. Not as good as the original plan, but I think generally speaking firms are in a better spot than they anticipated.” Quil continued, “A lot can happen in the last three to four months of the year. You can’t overestimate the importance of continuing to have strong financial discipline.” Rather than simply distributing unexpected cash to the partners, Quil suggested that investing in infrastructure or bringing aboard new talent are likely stronger long-term plays to keep firms primed to compete and grow.

Lean Into Who You Are

Quil added that he sees many firms as suffering from a lack of internal identity. “There’s probably not enough true reflection across the industry of what business or what segment of the market we are in as a law firm, and doubling down on what makes [a firm] unique. I think there are firms who are doing that, and I think they are excelling. They’re probably less impacted by competition and price sensitivity to their clients because their clients value them for who they are; they’re not trying to be all things to all people.”

Quil advises firm leaders to spend this time figuring out who they are as a firm and using that knowledge to double down on their key clients. “What can you do to go engage proactively with a certain segment of your client base to say ‘Here’s some observations around what’s happening in the portfolio of work that we’ve done with you historically, here’s some observations on what’s happening from a regulatory standpoint in the industry, and here’s how we think we should be thinking more proactively with you?’”

Most firms struggle to engage in that kind of self-reflection, whether due to a lack of training in such analysis or the more general pressures of the billable hour model to always be moving on to the next chargeable project. “It’s tough to do that in a law firm environment just given the way information flows as well as the metrics that are measured,” Quil said. Spending that non-billable time on self-examination can be worth it, however, for firms that find ways to unlock new value for their clients. In an ever-more-competitive market, clients appreciate the firms that appreciate their budgets and outcomes and are visibly working on improving both.

Tomorrow’s Firms Today

Lastly, I asked Quil to peer into his crystal ball and tell me what the legal industry looks like in 10 years. Quil said that he sees the current flexibility of the COVID-19 quarantine remaining largely in place, even after a vaccine is found. Firms that continue to offer that flexibility and that tailor their cultures around it, will be best situated to continue waging Quil’s war for talent.

Quil also spoke of the market continuing to segment away from all-in-one firms and more toward specific firms for specific needs. “It’s not a great analogy, but think about the automobile industry. They’re all cars, right? But what’s the purpose of the vehicle you need? Is it a heavy-duty pickup truck? Is it a sedan? An SUV? A sports car?” Quil anticipates the legal service market moving in the same direction, with law firms filling niches depending on the sophistication and cost needs of their clients, with ALSPs and the Big Four nipping at our heels all the way.

The moral of the story for today’s law firm leadership is to focus on understanding what niche their firm fills and expanding into that identity. “The opportunity for law firms is in understanding who you are as a law firm, understanding what makes you unique. It’s not what you believe makes you’re unique but what your clients believe makes you unique and really leaning into that. Don’t get distracted with a homogeneous narrative on what the legal industry is doing. Run your own playbook.”

Game on, Mr. Quil.

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James Goodnow is the CEO and managing partner of NLJ 250 firm Fennemore Craig. At age 36, he became the youngest known chief executive of a large law firm in the U.S. He holds his JD from Harvard Law School and dual business management certificates from MIT. He’s currently attending the Cambridge University Judge Business School (U.K.), where he’s working toward a master’s degree in entrepreneurship. James is the co-author of Motivating Millennials, which hit number one on Amazon in the business management new release category. As a practitioner, he and his colleagues created and run a tech-based plaintiffs’ practice and business model. You can connect with James on Twitter (@JamesGoodnow) or by emailing him at James@JamesGoodnow.com.