Remember the case of Felicia Salazar, the 20 year-old Texas woman who was ordered, as a condition of probation, not to have children? Salazar had admitted to failing to provide protection and medical care to her then-19-month-old daughter, who suffered broken bones and other injuries when she was beaten by her father.

The case interested us so much that we revisited some of those Con law classics like Buck v. Bell and Skinner v. Oklahoma, did some reporting of our own and penned a column on Salazar’s case for today’s paper, which you can read here.

In the course of reporting, we received some notable comments from the three lawyers in the case — the judge, the prosecutor and Salazar’s defense attorney — and an uninvolved professor who’s represented a male defendant who received a similar order.

The Judge: “Under Texas law, judges can impose any condition on probation so long as it’s reasonable,” Judge Charlie Baird, who fashioned the no-pregnancy order for Salzar, told the Law Blog.



“She has a fundamental right to reproduce, so I couldn’t order her to be sterilized. But she can be forced to forfeit certain fundamental rights.” He added: “I’m not even preventing her from having intimate sexual relations. I’m only preventing her from becoming pregnant.”

But how about enforceability? If Salazar becomes pregnant, must she choose among concealing the pregnancy, abortion or incarceration? Alternatively, could Judge Baird order her to carry a pregnancy to term but then give the child up for adoption?

Not likely, Judge Baird told us, though he made clear he was merely hypothesizing. Should she become pregnant, he said, he could revoke her probation and put her in prison. Or, he says, he could remove the condition or impose a new one—that she get prenatal care, for instance. “It’s only limited by your creativity.”

The Prosecutor: Allison Wetzel, the Travis County assistant DA who prosecuted Salazar, said, “I’ve been doing this almost 21 years and I’ve never seen a judge do this. This was not something that the defense and the prosecutor agreed on. This was something that Judge Baird added himself after the plea agreement had already been made.” She added: “I think when the average person hears a story of a mom who failed to protect a child, their instinct is that she doesn’t deserve to have a child. But we don’t get to decide that for her.”



The Defense Lawyer: “I’ve never handled a case where this kind of order was entered,” said Kent Anschutz, the defense attorney for Salazar. “Generally, for someone who’s worked in the criminal courts for over 20 years, there’s certainly a sense that if you don’t have child abuse you can eliminate one of the major causes creating future criminals. It’s just an obvious thing that children that are unwanted, unloved and abused end up with problems of many kinds, and end up ultimately in the criminal justice system.”

When we asked Anschutz whether he agreed with Judge Baird’s no-pregnancy order, he said: “I certainly understand the motivation of the trial judge in entering the order. Ultimately, whether these kinds of orders are constitutional — that’s a whole other legal question.”

The Professor: In 2002, Harvard Prof Laurence Tribe repped a Wisconsin man who received a probation order similar to Salazar’s.



David Oakley, a father of nine children who pleaded no contest to charges that he intentionally failed to pay child support, was ordered not to father any more children until he could show the court he was capable of supporting the ones he had. The Wisconsin Supreme Court, in a split decision, upheld the constitutionality of the order. (The U.S. Supreme Court denied cert.)

When we asked Professor Tribe what he thought about Salazar’s case, he said that Judge Baird’s order is “tantamount to sterilization” and abridges Salazar’s reproductive freedom as guaranteed by Roe v. Wade.

Imagine this: No six-week LSAT review course. No struggling with those blasted “logic” problems. No horrendous pre-game anxiety dreams in which you show up at the testing site without pants or No. 2 pencils (or maybe that was just us).

A world of LSAT-free law school admission is coming to Michigan law school, according to a report on its Web site announcing the Wolverine Scholars Program. Here’s how it works: UM undergrads who have at least completed their junior year and at most are scheduled to graduate in Winter or Spring 2009 and who have a cumulative GPA of at least 3.80 are eligible to apply to the law school without taking the LSAT.

The Web site says:

The Law School’s in-depth familiarity with Michigan undergrad curricula and faculty, coupled with significant historic data for assessing the potential performance of Michigan undergrads at the Law School, will allow us to perform an intensive review of the undergraduate curriculum of applicants . . . and have confidence in our ability to assess an applicant’s academic strengths and the likelihood of outstanding engagement with the Law School. For this select group of qualified applicants, therefore, we will omit our usual requirement that applicants submit an LSAT score. . . Because we wish to encourage broad participation in this program, we will waive the usual application fee for anyone applying under the Wolverine Scholars program.

With the October 7 trial date approaching in the MySpace Suicide case, we called up H. Dean Steward, the defense lawyer for Lori Drew, to see whether we should prepare Law Blog One for a journey to California.



Judge George Wu, Jan. 19, 2006, in Los Angeles. (AP Photo/Los Angeles Times, Robert Gauthier)

We’re glad we called. Yesterday, says Steward, at what was supposed to be a pre-trial conference, U.S. District Court Judge George Wu told Steward and AUSA Mark Krause, who’s prosecuting the case, that he was having trouble with a few issues.

Before we get to them, a quick refresher on the case: According to this New Yorker article and the May indictment, Drew — under the guise of “Josh” — struck up an online relationship with Megan Meier, a 13-year old MySpace member, that lasted for several weeks. “Josh” — who was the MySpace handle of at least three other individuals in addition to Drew — allegedly told Megan she was “sexi” and made other suggestive overtures. He later told Megan that the world would be a better place without her. Distraught, Megan went to her bedroom where she hanged herself in her closet. (For past LB discussion of the case, click here, here and here.)

According to Steward, Judge Wu requested briefing on the following three issues:

What terms of service matter? Are all violations of the Myspace terms of service tantamount to the “unauthorized access” required by the Computer Fraud and Abuse Act? If not, who decides which violations are relevant? MySpace? A jury? Or the court?

Here’s why it matters: The government’s theory of the case seems to be that when Drew registered on MySpace she agreed to certain terms of service that required her to, among other things, provide “truthful and accurate registration information” and “refrain from promoting information that” she knew was “false or misleading.” For violating the terms of service, the feds have charged her with conspiracy to access MySpace without authorization.

Where’s the theft? According to Steward, Judge Wu says he’s found some support for the idea that the object of the Computer Fraud and Abuse Act is to prohibit theft of information. So Judge Wu wants to know what, exactly, Lori Drew stole. According to Steward, AUSA Krause likened Drew’s alleged unauthorized access to a trespass on land. “That’s all well and good,” Steward told the Law Blog, “but then show me in indictment where you allege that Lori Drew stole information.”

Back to Con law 101: In what Steward says was a surprise to him, Judge Wu wanted to know where “the interstate connection” was, given that the alleged acts occurred in Missouri. The government brought the case in California because MySpace is based in Beverly Hills.

“I’m an old war horse,” says Steward. “So for me, it’s always been the case that if you use the mail or a wire, then there’s an interstate connection. I assumed that, under these facts, that would apply. But the judge isn’t so sure. I can’t tell you how delighted I am to dig into that issue. I know there has been a narrowing of it over the years.”

A call to Krause’s office was not immediately returned. Steward predicts the trial date will get pushed back to December.

While Raymond Zwego was on probation from a bank fraud conviction, he decided to try his hand at mortgage fraud, purchasing 61 Missouri properties by, in many cases, using straw buyers and falsified paperwork. He racked up $16.9 million in mortgages, almost all of which eventually fell into foreclosure. Here’s the story from the Kansas City Star.

Zwego’s scheme collapsed, reports the Star, when he tried to purchase a home from Katheryn Shields and her husband, lawyer Philip Cardarella. In that deal, Zwego obtained an inflated $1.2 million appraisal of the Shields home, which had been listed for about $700,000. While Shields and Cardarella were promised their asking price, Zwego sought to obtain the difference in “management fees.” The FBI stopped the deal before it went through.

Why do we bring you this provincial story of mortgage-fraud? For starters, we wanted to round out our legal coverage of the sub-prime fallout, which typically focuses on the bigger fish. But mainly, we were intrigued by the argument that Zwego’s lawyer, Daniel Harrington, put forth at Zwego’s sentencing hearing yesterday.

According to the Star, Harrington, appearing before U.S. District Judge Fernando Gaitan, acknowledged that the bygone days of anything-goes mortgage lending contributed to Zwego’s crimes. “If the mortgage industry was then what it is now, this wouldn’t have happened,” Harrington said.

Judge Gaitan, noting that Zwego’s conduct has had a “long-range and devastating impact on our community,” didn’t seem all that sympathetic. He sentenced Zwego to 10 years in prison and an additional three years for violating probation on his bank fraud conviction. Gaitan also ordered Zwego, 60, to pay $5.6 million in restitution.

“I’m sorry, your honor, for the things I have done that have brought me here today,” said Zwego, whose rap sheet also contains federal convictions for wire fraud and interstate transportation of forged securities.

In addition to Zwego, eight other co-defendants pleaded guilty or were convicted at trial. They reportedly included straw buyers, a loan officer, a title company closer, an appraiser, a real estate agent, a certified public accountant and Zwego’s office help.

On Friday, we addressed the problems associated with a judge ordering a woman, as a condition of probation, to abstain from having children. In another case that implicates reproductive law, Iris Kievernagel has been told by an appellate court in California that she can’t use her deceased husband’s frozen sperm to inseminate herself. Here’s the story from the San Fran Chron, and here’s the opinion.

Citing precedent for the proposition that the “the right of procreational autonomy is composed of two rights of equal significance–the right to procreate and the right to avoid procreation,” the court writes:

In this case we must decide whether a widow has the right to use her late husband’s frozen sperm to attempt to conceive a child where her late husband signed an agreement with the company storing the frozen sperm providing that the frozen sperm was to be discarded upon his death. We conclude that in determining the disposition of gamete material, to which no other party has contributed and thus another party’s right to procreational autonomy is not implicated, the intent of the donor must control.

According to the court, Joseph Kievernagel, a Sacramento County sheriff who died in a 2005 helicopter crash, wished not to father a child after death.

The new ruling “provides some much-needed guidance in an area where reproductive technology has clearly outstripped the legal system,” said Jay-Allen Eisen, lawyer for the husband’s parents, who opposed the widow’s request.

Suzanne Alves, a lawyer for Iris Kievernagel, said the court failed to address “the near-impossibility of determining someone’s intent when they pass away” and leave no will. She said her client would consider an appeal to the state Supreme Court.

Interestingly, the court said the situation would be different, the court said, if the dispute involved frozen embryos - fertilized eggs - which would require that both spouses’ wishes be considered.

Photo: iStockPhoto

Back in March, we wondered about the absence of Carlos Spinelli-Noseda, a former Sullivan & Cromwell partner who’d left the firm without explanation. At the time we called up firm leader Rodgin Cohen, but he declined to comment.

Today, the NYLJ’s Tony Lin nails the story: Spinelli-Noseda (Yale, Harvard law) has reportedly resigned from the bar for billing clients and the firm for more than $500,000 in fraudulent expenses.

In an affidavit of resignation he submitted to the disciplinary committee of the First Department, Spinelli-Noseda (pictured) admitted he could not successfully defend himself against charges of professional misconduct, reports Lin. Spinelli-Noseda said his misconduct dated from about July 1998 to February 2008, with around two-thirds of the falsified expenses arising in client matters. He said he is working with the firm “to quantify the precise amounts involved and to make appropriate restitution.”

In a statement S&C reportedly said: “Upon discovery, the matter was promptly referred to the appropriate authorities. The Firm fully cooperated with those authorities, contacted affected clients and made restitution.”

Around the time Spinelli-Noseda was leaving S&C, Samuel Fishman, a former Latham & Watkins partner, pleaded guilty to one count of mail fraud for bilking clients out of more than $300,000 to pay for personal and non-existent business expenses. In 2006, a former WilmerHale IP partner relinquished his law license after admitting to conduct similar to Fishman’s, including falsifying expense reports and assigning associates to perform “pro bono” work for friends and family. He claimed more than $109,000 in false personal expenses. Meanwhile, Willkie Farr & Gallagher and the former Kronish Lieb Weiner & Hellman have also terminated partners for fraudulent conduct that involved seeking reimbursement for personal expenses.

Another week, another free speech flap in our nation’s public schools. This time, we head to Colorado, where 11-year-old Daxx Dalton (insert snide “Daxx” comment here) has been suspended for refusing to remove a homemade t-shirt that reads: “Obama is a terrorist’s best friend.” Dalton’s suspension was reportedly for willful disobedience and defiance, not for wearing the shirt.

The response from Dalton — a fifth grader at Aurora Frontier K-8 School who wore the shirt on a day when students were asked to to show their patriotism by wearing red, white and blue — demonstrated some lawyer promise: “They’re taking away my right of freedom of speech,” he said. “If I have the right to wear this shirt I’m going to use it. And if the only way to use it is get suspended, then I’m going to get suspended.”

Dann Dalton, Daxx’s father, told MyFOXColorado.com that the school is making a mistake by suspending his son and that he intends to sue the district. “It’s the public school system,” he said. “Let’s be honest, it’s full of liberal loons.”

The school district would not discuss the case with Fox, but said the district “respects a student’s right to free speech, such as the right to wear specific clothing” while reserving the right to review any situation that interrupts the learning environment.

E. Christopher Murray, a partner at New York law firm Reisman, Peirez and Reisman and the president of the New York chapter of the Civil Liberties Union sent the Law Blog the following in an e-mail: “The wearing of this t-shirt can only be prohibited if it could cause a risk of material disruption at the school,” wrote Murray. “It is hard to see how this t-shirt could be viewed this way. Students have a constitutional right to express their opinions about politics, and this t-shirt was not vulgar or anything other than a political statement. While the courts have recently cut back on student’s rights of expression, this case clearly seems to be an illegal curtailment of this student’s rights. ”

When law firms talk merger, it’s common, apparently, for the smaller firm to protect itself with a non-solicitation agreement. That prevents the larger firm from using merger negotiations as a pretext for poaching lawyers.

Turns out, those agreements may be worthless, according to an opinion last week from a New York court. As AmLaw reports, a Judge Kenneth Fisher ruled that Nixon Peabody was within its rights to recruit a dozen Taylor Wessing partners, even though the two firms had agreed in 2007 not to hire from each other for two years as a condition of merger talks that eventually collapsed. Judge Fisher ruled that non-solicitation agreements, though they may be common, are unenforceable because they restrict the right of lawyers to work where they want.

“This ruling should make law firms considering being acquired feel great trepidation,” says William Brennan, a mergers expert at law firm consulting group Altman Weil. “Once they enter into direct contact with a buyer, they are no longer protected.”

So will Fisher’s ruling chill merger talks? Perhaps not. Lisa Smith, a mergers consultant at Hildebrandt International, calls the contracts mere “gentleman’s agreements.” She adds: “I don’t know if any firm has every thought they were enforceable.”

But Dreier’s Marc Dreier, who represented Taylor Wessing in litigation stemming from the failed talks, contends the type of agreement at issue in the Nixon-Taylor case is different. It is not a blanket prohibition on mobility, but a contract barring a limited number of lawyers from moving to one particular firm. That scenario, Dreier tells AmLaw, does not fall under the case law Fisher cited.

Photo: iStockPhoto

On Friday, angry creditors pushed and shoved to get into Judge James M. Peck’s court. On several occasions a security guard yelled at the crowd. Harvey Miller, lead counsel for Lehman on the bankruptcy filing, needed someone to clear a path for him to get in the room and to the front of the court. — The Wall Street Journal, September 20, 2008

The Law Blog was enjoying the weekend until Saturday night, when we took a nasty spill off our bike while riding over the gauntlet that is Brooklyn’s 3rd Street bridge. Dragging back home, we thought, this is pretty traumatic, but maybe it’s not as bad the Lehman bankruptcy hearing.

Here’s your Midday Meltdown Roundup:

Judge Peck saddened by Lehman bankruptcy: Though he admitted to understanding the Barclays-Lehman deal “Not in every aspect, but in broad outlines,” Judge James Peck approved the deal.



“Lehman Brothers became a victim,” said Judge Peck, “in effect the only true icon to fall in the tsunami that has befallen the credit markets, and it saddens me. I feel I have a responsibility to all of the creditors, to all of the employees, to all of the customers, and to all of you.”

For atmospherics of the crowded hearing, click here for a report from our Deal Journal colleagues. For the modified terms of the $1.75 billion sale (which could wind up being closer to $1.5 billion), click here.

Ropes and Cleary to see action on Lehman sell-off: With private equity firms Bain Capital and Hellman & Friedman reportedly in talks to take out Lehman’s investment-management unit, the AmLaw Daily reports that, while Weil Gotshal, Lehman’s bankruptcy counsel, is handling negotiations for Lehman, Ropes & Gray is advising longtime client Bain and Cleary is advising Hellman & Friedman.

Short-sellers shoot back (or at least saber-rattle):

As short-selling bans spread out to cover the earth, the Telegraph reports that a group of “the world’s biggest hedge funds” plans to sue the U.K.’s Financial Services Authority for losses incurred as a result of the regulator’s ban on short-selling.



One lawyer told the Telegraph: “The FSA’s remit is to maintain orderly markets — the markets were working fine, only the banks were going bust. With one swoop, the regulators have wiped out perfectly legitimate businesses and have cost some funds millions. . . it’s outrageous and illegal.”

As for suits on this side of the pond, could the investment community challenge the short-selling ban on a Fifth Amendment “takings” theory? Bruce Hiler, the head of Cadwalader’s securities enforcement group, was doubtful. “The SEC has pretty broad powers,” Hiler told the LB. However, Hiler does foresee legal challenges partly designed to force regulators to act with more predictability in the future.

Davis Polk fortifies its ranks:

With Davis Polk the most visible firm on the front lines of the financial crisis — repping Freddie Mac, the Fed, the Treasury Dept and Citi — you wouldn’t think they need anymore firepower.



But they’re getting it. Former SEC Commissioner Annette Nazareth (Brown, Columbia law) is joining the financial-regulation practice at Davis Polk, where she used to be an associate. Here’s the WSJ report.

“Right now my role is helping people navigate through this crisis and keeping them abreast of the changing landscape,” said Nazareth, 52. “There will be a big role going forward, after hopefully things settle down, with the restructuring of the financial-regulatory architecture.”

PHOTO: Getty Images

Vincent Bugliosi, left, speaks at a news conference in Burlington, Vt., Thursday, Sept. 18, 2008. Bugliosi, the author of the book, “The Prosecution of George W. Bush for Murder,” was in Vermont to support the candidacy of Charlotte Dennett, the Progressive candidate for attorney general of Vermont. (AP Photo/Toby Talbot)

Now here’s a possible lawsuit that, if filed, would render some vituperative opinion pieces in the nation’s newspapers: the prosecution of President Bush for murder.

It’s reportedly in the playbook of Charlotte Dennett, 61, the Progressive Party’s candidate for Vermont Attorney General. On Thursday, Dennett said that, if elected, she would bring such a suit. Here’s the AP story.

Dennett, an attorney and investigative journalist, says Bush must be held accountable for the deaths of thousands of people in Iraq — U.S. soldiers and Iraqi civilians. She said she would appoint a special prosecutor: former Los Angeles prosecutor Vincent Bugliosi, the author of “The Prosecution of George W. Bush for Murder,” a book we’ve blogged on before.

“Someone has to step forward,” said Dennett, flanked by Bugliosi at a news conference announcing her plan. “Someone has to say we cannot put up with this lack of accountability any more.”

Bugliosi said any state attorney general would have jurisdiction since Bush committed “overt acts” including the military’s recruitment of soldiers in Vermont and allegedly lying about the threat posed by former Iraqi dictator Saddam Hussein in speeches that were aired in Vermont and elsewhere.

“No man, even the president of the United States, is above the law,” said Bugliosi.

The White House press office didn’t respond to a request for comment Thursday. But Republican National Committee spokesman Blair Latoff denounced Dennett.

“It’s extremely disappointing that a candidate for state attorney general is more concerned with radical left-wing provocation than upholding the law of Vermont,” said Latoff. “These incendiary suggestions may score points among the most fringe elements of American society, but can’t be settling for anyone looking for an attorney general.”

LB Readers, the floor is yours.

In the opening scenes of David Mamet’s “The Verdict,” the lead character, Frank Galvin, a personal injury lawyer played by Paul Newman, scours the obituaries for accident victims, infiltrates the funeral parlor, pretends he knew the decedent, and then passes off his business card to the grieving widow.

Newman’s Frank Galvin is one of the more cutting depictions of lawyer-as-lost-soul. Apparently, it was this kind of popular perception of personal injury lawyers that motivated Ben Glass (pictured) to try to reform attorney advertising. “When lawyers run ads that show fistfuls of cash and gory accident scenes and the jurors see these ads they think of us as ambulance-chasers, as people trying to get money for nothing, as people trying to exaggerate claims,” Glass tells the WaPo in a weekend profile.

In his efforts to combat these images, Glass (William and Mary, George Mason U. Law) found a side business: advising other malpractice lawyers on how to advertise. He named it Great Legal Marketing and promised an “effective, ethical and outside-the-box” approach. In 2006, Glass created a toolkit for building a personal injury practice including sections on how to craft the right Yellow Pages message, how to build a Web site attractive to Internet search engines and to potential clients, and how to write consumer books.

Check out the financials: Glass sells the packages for $3,995, but they’re free if lawyers join his $497-a-month coaching program. He also offers membership in a “mastermind” group, where, for $15,000 a year, 25 lawyers convene three times a year (and by conference call the other months and on an e-mail discussion group) to work on their businesses. In 2007, the gross revenue from Glass’s marketing business was $300,000, reports the WaPo, about 60 percent of which was profit, and he anticipates grossing $450,000 this year.

Glass says that the marketing business has certain advantages over legal practice. “Everything a personal injury lawyer does, the other side is telling you you’re wrong,” he says. “In the marketing business, if they don’t like me, they just don’t become a client or customer. They’re not, like, yelling at me.”

Remember the mezuzah case that sparked such a ruckus in the Seventh Circuit? Judge Frank Easterbrook, in rejecting a family’s complaint over a condo association rule that prohibited “objects of any sort” from being placed in the hallways, wrote that the court “cannot create an accommodation requirement for religion (race, sex, and so on).”

Religion refresher: Mezuzah means “door post” in Hebrew. It consists of a case in which a small hand-written scroll of parchment, called a klaf, is placed. The scroll contains the words of the “Shema Israel” (”Hear Israel”) — a passage from Deuteronomy in which God commands Jews to keep His words constantly in their minds and in their hearts.

The issues in the case could be taken up by Congress, reports the NY Sun’s Josh Gerstein. Under legislation introduced in Congress by Rep. Jerrold Nadler of New York, residents of condominiums and co-ops would be guaranteed the right to post religious displays, such as the mezuzahs, outside apartment doors.

“This legislation is a straightforward attempt to clarify the Fair Housing Act and prevent co-op and condo associations and landlords from interfering with residents’ free exercise of religion,” Nadler told the Sun in an e-mail. “If not creating a public nuisance, residents should clearly be allowed to affix crosses, mezuzahs, or other religious symbols to their doors, no matter where they live.”

The bill is reportedly being co-sponsored by two Republicans, Trent Franks of Arizona and Lamar Smith of Texas, and one Democrat, Robert Wexler for Florida.

The ruling from the 7th Circuit Court of Appeals is not binding in New York, Gerstein notes, but legal experts said there is no clear right to similar religious displays under state law.

By now, many of you have read Adam Liptak’s piece in today’s NYT — his latest in his “American Exceptionalism” series, on the diminishing influence of the U.S. Supreme Court around the world. The main thesis: Due to several factors — among them our own Court’s general unwillingness to consider foreign rulings, the maturation of other constitutional democracies, and the Court’s tilt to the right –:

American legal influence is waning. Even as a debate continues in the court over whether its decisions should ever cite foreign law, a diminishing number of foreign courts seem to pay attention to the writings of American justices.

To some quoted in Liptak’s article, this is a bad thing. “One of our great exports used to be constitutional law,” said Anne-Marie Slaughter, the dean of the Woodrow Wilson School of Public and International Affairs at Princeton. “We are losing one of the greatest bully pulpits we have ever had.”

The Blawgosphere has been all over the story today; but for our money, one need look no further than to the Balkinization blog for two provocative takes.

Michael Stokes Paulson writes:

I am relieved, heartened, even delighted that U.S. Supreme Court decisions less often are being cited, adopted, borrowed, or stolen by the courts of foreign nations! Since so much of what passes for “constitutional interpretation” by the U.S. Supreme Court is simply ad hoc judicial policymaking with (at best) tenuous connection to our America constitutional text.

Earlier, also on Balkinization, Sandy Levinson offered up this:

“American exceptionalism” has really become synonymous with boorish provincialism, which not only leads to increasing hostility to the US around the world, but, even more to the point, leaves us mired in smug satisfaction, especially on “Constitution Day,” that we really have a Constitution we ought to mindlessly venerate instead of one that we might actually analyze and even make better than it is now.

LBers, any takes on the takes?

The U.S. financial system resembles a patient in intensive care. The body is trying to fight off a disease that is spreading, and as it does so, the body convulses, settles for a time and then convulses again. The illness seems to be overwhelming the self-healing tendencies of markets. The doctors in charge are resorting to ever-more invasive treatment, and are now experimenting with remedies that have never before been applied. — The Wall Street Journal, September 18, 2008

No end yet in sight, shriek today’s headlines. Here’s a mid-day meltdown round-up:



Will a lawyer snatch a larger stake in Morgan Stanley? The biggest of today’s Wall Street Meltdown news is Morgan Stanley’s possible tie-up with Wachovia, or with a number of other banks around the world. Bloomberg reports that Morgan Stanley could sell a larger stake to China Investment Corp, which bought a 9.9 percent stake in Morgan last year. According to this Esquire profile, Gao Xiqing, the general manager of CIC, is a lawyer. As the head of CIC, Gao (Duke Law) runs one of the largest sovereign wealth funds in the world.



Milbank scores counsel role in Lehman bankruptcy: The NYLJ reports that Milbank has been named counsel to the creditors’ committee in the Lehman bankruptcy. Leading the way for the Milbank team will be the firm’s restructuring practice group leader, Dennis F. Dunne. Lehman is being repped by Weil’s Harvey Miller. Milbank and Weil, notes the NYLJ, were similarly paired in the Enron bankruptcy, when Weil acted as debtor’s counsel and Milbank repped the creditors’ committee.



If WaMu collapses, more bad news for Heller Ehrman? As the WSJ reports, Washington Mutual is on the prowl to either raise more capital or potentially sell itself (though as our Deal Journal colleagues tell us, if WaMu wants a buyer it better move fast.) AmLaw takes a look at which firms stand to lose business in the event of a WaMu failure. At the top of the list: Heller Ehrman, a law firm that could be facing its own dissolution. Other firms that could lose out on WaMu business are Edwards Angell, Reed Smith, Simpson Thacher, Goodwin Procter, K&L Gates and Ballard Spahr Andrews & Ingersoll.

The prominent immigration firm Fragomen, Del Rey, Bernsen & Loewy has spent the last few months fretting a Labor Department audit. Now it can breathe easy.

In what appears to be somewhat of a mea culpa, the department called off the audit yesterday, reports the WSJ, on the grounds that its own prior rulings had created confusion about the proper role of immigration attorneys in the green-card application process.

At issue were the federal rules that require a company, as a condition for sponsoring a foreign worker for a green card, to certify to the Labor Department that the company has not been able to find a “minimally qualified” U.S. worker to fill the job. Lawyers are limited from advising companies as to whether an American worker can be deemed qualified, according to Labor Department regulations. These regulations are aimed at preventing lawyers from helping clients find reasons not to hire qualified Americans. Click here, here and here for prior posts on the Fragomen audit.

Fragomen had relied on earlier rulings, by the department’s Board of Alien Labor Certification Appeals, that the limits apply only to firms that represent both the employer seeking a green card and a foreign worker for whom a green card is sought. The department has clarified that going forward its regulations will apply to firms that represent only an employer.

Fragomen did not respond to a request for comment.

Not long ago we told you the auction-rate securities party might be drawing to a close for big financial institutions that were cashing out. We may have spoken too soon.

Despite settling a fraud lawsuit filed brought by New York Attorney General Andrew Cuomo by agreeing to buy back $19 billion of auction-rate securities from clients who got stuck with them, UBS continues to fend off litigation.

Today, a federal judge in Albany, N.Y., ruled that a fraud suit filed by a New York energy company that got stuck with more than $60 million of auction-rate securities could move forward, denying UBS’s motion to dismiss. The company, Plug Power Inc., said UBS lied to its CFO last year by saying the ARS were safe and liquid, despite spikes in their interest rates that suggested otherwise.

Here’s the WSJ story from Amir Efrati (that’s me), the amended complaint, and a transcript of today’s hearing.

The UBS settlement with regulators said securities held by institutional clients are expected to be bought back by 2010, but “we need the funds before 2010, and they’re not providing us a [guarantee] that they will be able to pay us in 2010,” says George Carpinello (pictured), a lawyer at Boies Schiller, which is representing the plaintiff.

The case is being widely watched by institutional investors holding billions of dollars worth of auction-rate securities they can’t easily sell. Unlike small businesses and individuals, larger institutional investors didn’t benefit from most of the agreements made by numerous financial institutions to buy back many of the securities they sold.

A UBS spokesman said in a statement: “We are disappointed that this case wasn’t dismissed today and we intend to vigorously defend ourselves in this action.”

What with the summer SCOTUS break we’ve been having a bit of Justice Scalia withdrawal around here. But recently he’s been back on tour, stopping yesterday at his teaching alma mater, University of Chicago Law School, where he served up a withering critique of what he sees as the school’s new liberal bent.

According to this piece in the Chicago Sun-Times, Scalia told 500 members of the Federalist Society that, back in the days when he used to teach at Chicago — from 1977 to 1982 — the courses had more rigor and the school had a more conservative ethos.

“I regret it,” Scalia said. “I don’t think the University of Chicago is what it was in my time. I would not recommend it to students looking for a law school as I would have years ago. It has changed considerably and intentionally. It has lost the niche it once had as a rigorous and conservative law school.”

Scalia also had advice for students. “I took nothing but bread-and-butter classes, not ‘Law and Poverty,’ or other made-up stuff,” said Scalia, a Harvard law grad. “Take serious classes,” he urged students. “There’s so much law to learn. Don’t waste your time.”

And of course a Scalia speech wouldn’t be a Scalia speech without a shot at his perceived “activist” colleagues on the Court. “What did I learn at Harvard Law School or at my practice in Ohio or in the federal government that qualifies me to determine whether there ought to be — and therefore is — a right to abortion or to homosexual sodomy or a right to suicide?” Scalia asked. “I don’t know any more about that than Joe Six-pack.”

Back in May, the Feds unsealed an indictment against a former UBS banker, Bradley Birkenfeld, for allegedly helping one of the world’s richest men, Igor Olenicoff, evade taxes on $200 million held in Swiss and Liechtenstein bank accounts. When Birkenfeld pleaded guilty, a month later, he explained that he participated the alleged scheme to help Olenicoff evade taxes. “I was employed by UBS,” said Birkenfeld, “I was incentivized to do this business.”

Yesterday, the UBS-Olenicoff plot thickened, when Olenicoff, a billionaire property developer, sued UBS and nearly a dozen current and former executives of the bank in federal court in Santa Ana, Calif. Here’s the NYT report.

The suit reportedly accuses UBS, a small Swiss firm, and two private firms based in Liechtenstein and their employees of luring Olenicoff into becoming a client and a participant in a deceptive investment scheme intended to cheat the IRS of millions in taxes. The suit also contends that Birkenfeld, the former UBS banker, received a large settlement from UBS after complaining that it had encouraged its private bankers to violate U.S. tax laws.

The suit claims that UBS turned over Olenicoff’s name to the IRS, a move that would have been surprising for a Swiss bank that follows a centuries-old tradition of banking secrecy. Olenicoff is accusing the defendants of fraud and breach of fiduciary duty, among other things.

UBS said it had not seen the complaint and thus could not comment upon it.

In December, notes the Times, Olenicoff pleaded guilty to criminal charges of tax evasion and lying on his tax returns, all in connection with his offshore private banking accounts. He agreed to pay $52 million in back taxes.

This morning we speculated on the fate of lawyers who made a living, at least in part, by servicing Lehman Brothers. But how about Lehman’s in-house lawyers? Their prospects are in limbo too.

Legal Week reports that around 50 of Lehman’s in-house lawyers in the UK are searching for work in the wake of the bank’s bankruptcy filing, and that in-house recruiters are now working in and around the bank’s Canary Wharf offices amid widespread expectations that Lehman’s 5,000 UK staff “will be made redundant.” (In London, Linklaters, Freshfields and Clifford Chance are reportedly among the firms handling the UK insolvency procedure.)

Last year, notes Legal Week, Lehman had a total of 145 in-house lawyers, headed up by general counsel Thomas Russo. But if the fate of Bear Stearns’ in-house lawyers in London is any indication, Lehman’s London-based legal eagles need not fret — providing they don’t mind going the law firm route. Legal Week says that “a stream of firms,” including Simmons & Simmons, K&L Gates, Brown Rudnick and Bingham McCutchen have recruited senior lawyers from Bear since it was sold to JPMorgan last spring.

Ricky Mui, legal director and banking specialist with recruitment firm Robert Walters, told Legal Week: “Competition for this pool of talent will undoubtedly be high across the financial services and commercial sectors.” But, he added: “In direct response to the volatility of the financial sector, many banking lawyers are actively looking at career options outside the financial services sector, with many heading back to private practice or considering careers overseas in areas such the Middle East.”

For those following the fallout from the meltdown, let’s get you up to speed with a little legal news from the front lines.



Boom times for Weil? Wow. What a difference a couple of days make. The once-vaunted- then- lightly-diminished bankruptcy department at Weil Gotshal has had a nice stretch. First, Weil and its eminence grise, Harvey Miller, were tapped to handle the Chapter 11 filing for Lehman. Now, let’s just say that if AIG files, we wouldn’t be surprised to see the name of Weil’s Marcia Goldstein’s on the filing. Why? Weil’s Goldstein (pictured) handled the Worldcom bankruptcy back when Anastasia Kelly was Worldcom’s general counsel. Kelly has run the legal department at AIG since 2006. (Notably, after leaving WilmerHale in 1995, Kelly became GC at Fannie Mae.) Weil would confirm only that, as of now, AIG is a client of the firm.

More distress for Lehman? Over at Fortune’s Legal Pad blog, Roger Parloff poses the following question: Will bankruptcy laws cushion the impact of Lehman’s insolvency on our financial system or inadvertently exacerbate the problem? Parloff explains:

An ordinary bankruptcy petitioner, like an airline or a steel mill, gets immediate protection from its biggest creditors by the operation of law: as soon as it files for bankruptcy, an “automatic stay” takes effect which prevents those creditors from going forward with lawsuits and seizing the debtor’s assets. Metaphorical runs on the bank are prevented, and management gets time to organize its affairs in a way that will, theoretically, maximize value for all creditors, and maybe even allow the company to reemerge in sound health. . . .With a financial institution, however, the automatic stay offers no protection against many of its most important creditors. In a trend that began in 1978 and was greatly expanded in amendments passed in 2005, most financial contracts — including securities contracts, swaps, repurchase agreements, commodities contracts, and forward trades — are unaffected by automatic stays.

A Merrill shareholder suit? Reuters reports that Gregory Nespole, a plaintiffs lawyer at Wolf Haldenstein Adler Freeman & Herz, which happens to have at least three cases pending against Bear Stearns, plans to file an investor lawsuit over the proposed buyout of Merrill Lynch, contending the terms of the $50 billion deal are inadequate for Merrill stockholders.

But after checking in with our friends at Deal Journal, we’re not so sure about the merits of a Merrill shareholder suit. After all, BofA is paying $29/share for Merill, a nearly 70% premium to Friday’s close and a 9% premium to where Merrill shares traded before last week’s slide.

Davis Polk handles the credit facility: On Sunday night, a group of ten global banks and securities firms — including JPMorgan, Morgan Stanley, Goldman and BofA — announced a $70 billion loan program that financial companies can tap to help ease the credit shortage that threaten global financial markets. The firm had the lead role in drafting the term sheet for the $70 billion credit facility and are now representing the Consortium as document counsel.

Davis Polk partners Donald Bernstein, Lawrence Wieman, Laureen Bedell and Bjorn Bjerke took the lead in drafting the term sheet for the credit facility. (According to a source close to Davis Polk, the firm is also counsel to Citi — Lehman’s biggest bondholder — on matters relating to the Lehman bankruptcy, and the firm has “a material role in the AIG matter.”)