Category: Uncategorized

How Plaintiff Firms Can Make Names for Themselves in a Crowded Landscape

The competitive landscape for plaintiff lawyers is perhaps more challenging than any other area of law. The market seems to get more crowded every day, and the fight for clients is fierce. Moreover, plaintiff lawyers often have to overcome the unsavory, ambulance-chasing reputation inaccurately associated with this practice. With all of these obstacles, establishing your marketing strategy can seem like an uphill battle.

Yet, even in this difficult atmosphere, it’s possible for plaintiff firms to stand out from the rest. This was the topic of “David vs. Goliath: The Competitive World of Plaintiff Firm Marketing,” a session at this year’s Legal Marketing Association Annual Conference. Speakers Pamela Foster, Director of Marketing and Business Development at Howie Sacks & Henry LLP; Danelsy Medrano, Marketing Manager at Feldman Shepherd Wohlgelernter Tanner Weinstock Dodig LLP; Adrian Dayton, Founder of ClearView Social Inc.; and Erin Watson, Director of Communications and Marketing at Motley Rice LLC discussed best practices and lessons learned from their years as legal marketers for plaintiff firms. We recapped the session on our LMA Conference webinar and broke down their strategies into three areas:

Use Marketing 101: Differentiation

There are lots of firms that do plaintiff work, from auto accidents to slip and falls to medical malpractice. A quick Google search can tell you as much. So, when compared to all the other firms out there, what makes you different? It could be that you’ve been doing it the longest, that you’re more hands-on than anyone else or that your firm is all women. It doesn’t matter what makes you different; it only matters that you know what that differentiation is and then market it.

This is marketing 101, because you can’t communicate a message without understanding exactly what you bring to the table. Being clear and focused in your message not only resonates better with prospective clients, but it also makes your marketing budget go further, too. Truly understanding what makes you unique will make the rest of your marketing strategy fall into place and differentiate you in the minds of prospects.

Go Beyond SEO

A decade ago, it was possible to write a few blog posts with keywords and do reasonably well in search rankings. That’s no longer the case. Online marketing has gotten more complex and detailed, and it takes expertise to do it well. Today’s legal marketers need to understand much more than SEO; they also need to understand syndication, what kind of content ranks high and which algorithm changes can upend their approach.

Especially in plaintiff law, where the landscape is crowded and firms need to rank high to survive, DIY search marketing doesn’t cut it. Whether you have an in-house marketing team or hire an outside agency to help, you need to be sure that the person in charge of your search strategy is a true expert.

It’s true that investing in good marketers and digital strategy can be costly, but the return on investment is just too good to pass up. Digital marketing offers so much insight and opportunity for measurement. Where are your clients coming from? What search terms are they using to find you? Once clients do find you, where are they losing interest—or where are they making contact? Digital tools can help you find the answers to these questions and track clients at every stage of the decision-making process.

Be Proactive, Not Reactive

Plaintiff lawyers know better than anyone that the best time to seize an opportunity is before anyone else does. The same goes for your marketing. Rather than waiting for things to come down the pipeline, anticipate and identify where they’re coming from before your competitors do. It’s all about being proactive rather than reactive.  When you’re ahead of the curve you’re at an advantage, at least for a little while—and that time can make all the difference.

Click here to watch our LMA Annual Conference Webinar Recap.

© 2019 Berbay Marketing & Public Relations

For more in legal marketing, see the National Law Review Law Office Management section.

Chicago Workers to Earn $15 Minimum Wage by 2021

On Nov. 26, the Chicago City Council approved Mayor Lori Lightfoot’s proposal to increase the city’s minimum wage from $13 per hour to $15 per hour. This puts the Chicago minimum wage four years ahead of those mandated by the state of Illinois, which will not hit a minimum wage of $15 per hour until 2025. Our previous coverage of the Illinois minimum wage hike cited a 2017 report by the National Employment Law Project finding that 41 percent of all workers in Illinois currently earn less than $15 per hour.

Chicago’s minimum wage will increase in waves, first to $14 per hour on July 1, 2020 and then to $15 per hour on July 1, 2021. After that, it will rise annually with the consumer price index. For tipped workers, sub-minimum wages will increase to $8.40 per hour in 2020, up from the current $6.40 per hour, and to $9 per hour by 2021. Tipped wages will also increase annually after 2021, to remain at 60 percent of the minimum wage.

Mayor Lightfoot stated that these wage increases would address wage stagnation, affecting hundreds of thousands of workers, as the cost of living in Chicago continues to increase. It would likewise eliminate exemptions for disabled workers and minors. Specifically, employers will no longer be able to pay disabled residents below the minimum wage, starting in 2024. Workers below the age of 18 will receive a gradual increase in wages, starting at $10 an hour in 2020 and ultimately reaching $15 an hour by 2024, until the minimum wage exemption for minors is eliminated in 2025.

There is some relief for small employers, as employers with fewer than 20 workers will have until 2023 to increase wages to $15 per hour, and businesses with fewer than four employees are exempt from all increases, with a few exceptions.

Mayor Lightfoot cited support for her proposal from elected officials as well as labor and business leaders, but some employers are concerned that the higher wages will harm their businesses or force them to hire fewer workers. However, Mayor Lightfoot views her proposal as a compromise, as it keeps tipped workers below the minimum wage – a move the restaurant industry applauded. While employers are legally required to pay the difference if an employee’s tips do not add up to the minimum wage, workers’ advocates allege that this does not always happen in practice.

The minimum wage increases in Chicago and Illinois will have far-reaching consequences for employers and employees alike. Employers will need to adjust their budgets and financial projections to prepare for these anticipated wage increases. Employers should also consider reviewing their payroll practices, both to verify they will be paying the appropriate wage and overtime rates for employees affected by the minimum wage increases and to ensure their tipping practices comply with the new law.

© 2019 BARNES & THORNBURG LLP

More on minimum wage increases across the US, via the National Law Review Labor & Employment law page.

Three Ways Litigation Finance Can Help Corporate Legal Departments

Corporate legal departments are generally measured by their ability to control legal costs, manage risk, and deputize external litigation resources, especially when their company is involved in litigation. Although a common feature of modern business, litigation is an increasingly costly proposition that is fraught with risk. In recent years, commercial litigation finance has emerged as an effective means of shouldering case costs and redistributing risk. While the number of law firms that have seized the advantages of this type of financing has grown exponentially, general counsels (“GCs”) and corporate legal departments have been slower to recognize the many benefits that it can offer, which has handicapped their companies by keeping a potent tool needlessly out of reach. Here are three things every GC should know about litigation finance.

Litigation Finance Offsets Risk

Litigation costs and other financial risks inherent to the legal process pose a daunting challenge to GCs. As a result, companies often forgo bringing lawsuits due to their impact on financial performance. Yet even when legal departments decide to forge ahead with legal claims, their outcome is often far from certain. The decision to bring a lawsuit, therefore, has the power to make or break entire companies. This risk is even more acute for smaller companies and those facing financial headwinds. A victory could revive a company’s fortunes, while a poorly conceived effort might precipitate the firm’s demise. Litigation finance mitigates that risk through funding “without recourse,” which allows a company to shift costs to a third party and only share an agreed-upon portion of proceeds with the funder at the successful conclusion of the claim. If a case is lost and no proceeds are recovered, the company is under no obligation to repay the funding amount.

Consider the following example: Suppose a small tech startup sues an industry giant for theft of its trade secrets relating to a revolutionary new product. The startup’s case against its unscrupulous competitor is seemingly strong as the brazen theft greatly damaged the fledgling company. Unfortunately, the lawsuit comes with a steep price tag, forcing the startup to spend more than $100,000 each month on attorneys’ fees and associated costs. Small and vulnerable, the startup is quickly exhausting its cash reserves as its better-capitalized opponent employs a panoply of defensive tactics designed to delay and frustrate plaintiff’s efforts at all stages of litigation. As legal bills continue to mount, the startup may need to abandon its lawsuit or accept a paltry settlement far below the actual value of its claim.

Faced with an existential threat, what the startup really needs is a cash injection from a litigation finance provider to pay for the escalating litigation costs while also providing a much-needed insurance policy against unforeseen financial difficulties that can result from litigation. The startup’s GC is surprised to learn that this type of funding is an increasingly common financing option that is available to companies large and small. In a typical transaction, a third-party funder can finance most, or all of the legal expenses associated with the lawsuit in return for a portion of any recovery. The funds may be used to hire top legal talent or procure additional expert resources. Essentially a corporate finance transaction, this type of funding can even be used to supplement the company’s working capital or clean up arrears to legal service providers.

The example above is just one of the ways that litigation finance can be used to hedge litigation risk. More creative GCs have been able to offset their institution’s litigation costs entirely by using a portfolio-based approach to finance all of their legal claims.  This type of structure typically provides a much larger financing commitment but requires cross-collateralization of several litigation matters. Where portfolio financing is utilized, it may provide a greater degree of certainty about long-term future litigation spend.  If the funding amount is substantial enough, GCs may no longer need to allocate for litigation budgets on an annual basis and take a longer-term approach instead.

Litigation Finance Can Transform Legal Departments into Profit Centers Through Balance Sheet Management

Under GAAP, litigation costs are reflected as expenses, which can negatively impact a company’s financials and quarterly performance. This is especially troublesome for public companies that are valued on earnings or cash flow or require certain financial criteria to be met to comply with credit covenants. For such companies, litigation costs paid from company funds must be recorded as expenses immediately when incurred, thereby diminishing reportable earnings. Worse yet, recoveries from successful legal matters may not offset the adverse impact of lawsuit-related costs because such recoveries are generally treated as below-the-line items that do not increase earnings. Moreover, some actions may result in favorable judgments which then take months or years to enforce, leaving a temporary hole in a company’s cash flows despite a successful ruling.

It is no surprise then that corporate legal departments are frequently perceived by management as cost centers, necessary to put out fires or navigate the laws applicable to a particular industry, but not as potential revenue generators. Traditionally, GCs who have identified a roster of affirmative litigation likely to yield significant recoveries will still need to convince their c-suite to take on the risk and immediate financial burden of funding lawsuits from the company’s own balance sheet. Enter litigation finance. When both the risk and burden are shifted to litigation finance providers in exchange for a portion of any recoveries, a company’s legal department can focus on unlocking the hidden value of its legal matters without the risk of negatively impacting its financials, becoming a potential profit generator for the company.

An Experienced Litigation Funder Can Help Optimize Litigation Outcomes

The quality and breadth of resources that litigants are able to deploy can greatly impact outcomes in legal disputes.  For example, the skill of the legal team, the quality of expert witnesses and other litigation consultants are important drivers of how courts and juries perceive the merits of legal claims. With litigation financing mitigating the burden of paying for legal costs, GCs have greater flexibility in assembling a first-rate litigation team. A legal department buttressed by litigation finance can focus on the skill and effectiveness of its team without worrying about negotiating for the lowest possible fees. Access to the support of top-quality counsel and litigation consultants can improve a company’s overall likelihood of success and the magnitude of any recovery.

Experienced litigation funders can provide access to these top litigation support channels by leveraging their network.  In addition, they can provide an invaluable outside perspective on the merits of a case during the due diligence process and throughout the pendency of the claim. When choosing a litigation funder, consider the expertise of the funder’s team and if there are any practice areas which they target in their investment strategy.

A trusted litigation finance firm should demonstrate the highest professionalism, abide by the explicit understanding that a third-party funder should have no involvement in the litigation or strategy, and should protect attorney-client privilege and confidentiality at all times.  When these essential confidences are met, engaging with a third-party funder can be enormously helpful in assessing the merits and risk of a case, budgeting litigation spend, and providing access to first-rate litigation support.

Conclusion

As litigation finance continues to gain popularity among law firms, GCs should also take notice. As businesses continuously seek to gain a competitive advantage over their peers, the ability to mitigate the risks associated with litigation should be an important consideration, especially since poorly conceived strategies can often carry existential consequences.  GCs, therefore, should recognize litigation finance as an indispensable asset that has the potential to offset the risk of litigation, provide effective balance sheet management while unlocking the hidden value of prospective legal claims, and improve outcomes for meritorious cases.

 

© 2019 LexShares, Inc. All rights reserved.

ARTICLE BY Matthew Oxman of LexShares.

NJDEP Releases Report on Sea-Level Rise in New Jersey

On December 12, 2019, the New Jersey Department of Environmental Protection (“NJDEP”) released a report discussing historical sea-level rise (“SLR”) in New Jersey and estimating SLR for the next 100+ years. The Rising Seas and Changing Coastal Storms report (“Report”) was commissioned by NJDEP and prepared by Rutgers University’s New Jersey Science and Technical Advisory Panel.

The historical data provided in the Report evince New Jersey’s particular vulnerability to SLR, as SLR along its coast has consistently remained higher than the total change in the global average sea-level. For example, from 1911 to 2019, SLR along the New Jersey coast rose 17.6 inches (1.5 feet) compared to 7.6 inches (0.6 feet) globally. In addition, over the last 40 years, the average rate of SLR on the New Jersey coast was 0.2 inch/year compared to 0.1 inch/year globally.

According to the projections in the Report, it is likely that SLR in New Jersey will continue to rise but at even higher rates over the next 30 years. The Report estimates that there is, at minimum, a 66% chance that New Jersey will experience SLR of 0.5 to 1.1 foot/feet between 2000 and 2030, and 0.9 to 2.1 feet between 2000 and 2050.

Interestingly, the Report presents three different scenarios when taking into account SLR projections after 2050. The Report states that such projections “increasingly depend upon the pathway of future global greenhouse gas emissions.” Under a “high-emissions scenario, consistent with the strong, continued growth of fossil fuel consumption,” New Jersey will likely experience SLR of 1.5 to 3.5 feet between 2000 and 2070, and 2.3 to 6.3 feet between 2000 and 2100. Under a “moderate-emissions scenario, roughly consistent with current global policies,” New Jersey will likely experience SLR of 1.4 to 3.1 feet between 2000 and 2070, and 2.0 to 5.2 feet between 2000 and 2100. Under a “low-emissions scenario, consistent with the global goal of limiting to 2°C above early industrial (1850-1900) levels,” New Jersey will likely experience SLR of 1.3 to 2.7 feet between 2000 and 2070, and 1.7 to 4.0 feet between 2000 and 2100.

As stated by Governor Phil Murphy in NJDEP’s press release regarding the Report, “New Jersey is extremely vulnerable to the impacts of climate change and we must work together to be more resilient against a rising sea and future storms.”

© 2019 Giordano, Halleran & Ciesla, P.C. All Rights Reserved

For more on state environmental concerns, see the National Law Review Environmental, Energy & Resources law page.

FDA Issues Warning Letters, Cautions Consumers on Unapproved CBD Products

Nearly a year after the 2018 Farm Bill legalized hemp nationwide, the legal status of one of its most popular products, cannabidiol (CBD), is becoming clearer.

On Nov. 25, the U.S. Food and Drug Administration (FDA) issued a revised consumer update regarding unapproved CBD products and issued a new round of warning letters to CBD retailers selling products in violation of the Food, Drug and Cosmetics Act (FDCA). The agency also warned of potential health risks and safety concerns associated with numerous unapproved CBD products. The FDA publicized its determination that CBD cannot be considered as Generally Recognized as Safe (GRAS) under federal law, foreclosing one of the regulatory paths available to the FDA for allowing CBD as a food ingredient.

These recent actions underscore the FDA’s interpretation that food products, unapproved drugs, dietary supplements and cosmetics containing CBD sold in interstate commerce often violate the FDCA.

FDA warning letters

In this recent round of enforcement efforts, the FDA issued fifteen warning letters to CBD companies selling a variety of products in interstate commerce, including balms, capsules, oils, tinctures, lotions, gummies, chews and sprays that were marketed for use by adults, children and animals.

The letters outline the FDA’s legal analysis which concludes that the products at issue were marketed in interstate commerce as unapproved new drugs, misbranded drugs, adulterated foods or improperly labeled as dietary supplements in violation of the FDCA. The crux of this analysis is that CBD is an active ingredient in an approved drug as well as other drugs under clinical investigation.

These products triggered FDCA violations in a variety of ways:

  • Unapproved new drugs – CBD products making claims to prevent, diagnose, mitigate, treat or cure serious diseases, such as cancer, AIDS, schizophrenia and diabetes.
  • Misbranded drugs – CBD products marketed as drugs that also fail to bear adequate directions for use.
  • Dietary supplement labeling – Improperly using the label “dietary supplement” when it does not meet the definition under the FDCA.
  • Adulterated human food – CBD products marketed as conventional human foods and contain a drug approved by the FDA.

Each warning letter identified an “unapproved new drug” violation with products making aggressive health claims surrounding cancer or other similar serious conditions, suggesting the FDA continues to focus its efforts at “egregious, over-the-line” health claims as referenced by former FDA Commissioner Scott Gottlieb.

FDA consumer update

The FDA simultaneously issued a consumer update, signaling that unapproved CBD products remain prohibited under the FDCA. The agency noted it has seen only limited data about CBD safety and that some of the data points to risks that should be considered before taking CBD.

The FDA warned that unapproved CBD products may pose safety risks and make unproven health claims. The FDA fears consumers may put off getting proper diagnosis, treatment or supportive care due to unsubstantiated claims associated with CBD products.

Additionally, the FDA noted the information it currently has “underscores the need for further study and high quality, scientific information about the safety and potential uses of CBD.” The consumer update further notes:

  • No FDA evaluation of CBD products – There has been no FDA evaluation of whether unapproved CBD products are effective for their intended use, what the proper dosage might be, how they could interact with FDA-approved drugs or whether they have dangerous side effects or other safety concerns.
  • Potential health risks – Specifically, the FDA also identified some of the potential risks associated with using CBD products, including liver injury and male reproductive toxicity. Other potential health risks remain unknown to date, including the effects of sustained daily usage by adults as well as the effects on children, breastfed newborns and developing fetuses.
  • Side effects – Other side effects include drowsiness, gastrointestinal distress and increased irritability and agitation.
  • Unregulated manufacturing process and product safety is unknown – The manufacturing process of unapproved CBD drug products has not been subject to FDA review and the effects of CBD containing potentially unsafe levels of contaminants, such as pesticides and heavy metals, are unknown.

CBD remains a legal product

Despite this recent action from the FDA, hemp-derived CBD remains a legal product under federal law, but it must be marketed without violating the FDCA. Additionally, the warning letters and consumer update highlight that the FDA is targeting its enforcement to companies engaged in interstate commerce and making egregious, unsubstantiated health claims.

As is the case with other cannabis issues, the disconnect between state and federal law means companies are finding ways to bring products to market while limiting their risk. However, stakeholders must be aware of the risks under state and federal law when marketing any product containing CBD.

Expect more information from the FDA soon

The consumer update also notes that the FDA is “evaluating the regulatory frameworks that apply to certain cannabis-derived products that are intended for non-drug uses, including whether and/or how the FDA might consider updating its regulations, as well as whether potential legislation might be appropriate.” More information will be coming soon from the FDA, but it may be awhile before CBD can be marketed legally as a food ingredient or dietary supplement under federal law.

Copyright © 2019 Godfrey & Kahn S.C.

More on FDA CBD Regulation via the National Law Review Biotech, Food & Drug law page.

Marketing Ethics for Lawyers to Follow in 2020 and Beyond

Advertising and marketing have always played an important role in increasing a company’s brand awareness and in helping them acquire new customers to reach their corporate financial goals. Law firms are no exception. With the increasing competitiveness among law firms, it is extremely important that they understand the fundamentals of marketing in a competitive marketplace.

As early as the 1970s, most states didn’t allow lawyers to engage in any type of marketing efforts. In 1977, the US Supreme Court case of Bates v. Arizona, 433 US 350, changed all this and held that advertising regarding attorneys’ services was “commercially protected speech,” according to the First Amendment, and that truthful advertising should be allowed as a matter of public policy. The court held that lawyers serve society and that allowing them to advertise their services would provide consumers with valuable information about available legal assistance.

After this landmark case, attorneys could advertise to obtain clients. They relied on traditional marketing methods, like display ads, brochures, business cards, and word-of-mouth advertising. Although these marketing strategies are still effective in 2019 and beyond, lawyers must also combine them with other creative marketing strategies—including, but not limited to, pay-per-click; search engine optimization; email, article, video, and digital marketing; and social media marketing.

Additionally, attorneys who want to stay ahead of the marketing game must have stellar and properly optimized web content, engaging social media and blog posts, informative guest articles, engaging display ads, and more. However, unlike regular corporations, law firms are held to a higher standard of responsibility, in terms of marketing, than their corporate counterparts.

Law firms have to remain in compliance with rules and regulations concerning ethics and professional responsibilities, especially in advertising. This means that attorneys and their law firms have to be careful when treading the path of marketing their legal services. They have to engage in ethical and truthful marketing practices and have to steer clear of false or misleading marketing strategies.

That said, what are the ethics of marketing legal services? What should attorneys avoid to ensure that they don’t engage in any professional responsibility violations? Well, let’s have a look at the dos and don’ts of legal marketing.

Abide by Prospective Clients’ and Existing Clients’ Wishes

As an attorney, you have to be mindful when engaging in electronic marketing strategies. In my home state of Illinois, attorneys can’t continue to contact prospective and/or existing clients if they tell that attorney to not contact them. See Rule 7.3(b) of the Illinois Rules of Professional Conduct for details.

Basically, this regulation stipulates that you should never spam someone’s email or regular mail, even if they initially agreed to give you their email or physical mailing address in exchange for a free report or other offering. Therefore, if the individual asks you to “Take me off your list,” you must do so immediately. If you don’t, you will be in violation of Rule 7.3(b) or another professional conduct rule in your state.

Also note that certain state professional conduct rules, like Rule 7.3(c) in Illinois, require the words, “Advertising Material,” on the outside of every physical envelope mailed to everyone, as well as at the beginning and the end of every recorded or electronic solicitation—unless said contact person is exempt from this rule.

Avoid Making Misleading or False Claims

An important ethical element of legal marketing is that you practice honesty and refrain from making unsubstantiated or false claims that can’t be verified. Rule 7.1 of the Illinois Rules of Professional Conduct states that a law firm or an attorney cannot engage in misleading or false communication in reference to their service offerings. Any such miscommunication is a clear violation of the Illinois Rules of Professional Conduct.

One rule of thumb: Would a rational person read such statement and be misled by it? What would they believe to be true? If they would be misled by such statement, then you must alter the content so that you don’t violate any ethics rules. Always double-check facts before making any statements. Additionally, if you include any statistical information in your ads, make sure that it is correct.

Don’t Set Unrealistic Expectations in Your Ads

Whenever you create online and off-line marketing strategies, make sure that you maintain high ethical standards and don’t engage in any type of marketing efforts that might lead the reader to false assumptions. That is, set realistic expectations for your clients and be clear that “Results may vary.”

Yes, you can have a testimonial page but don’t include statements like “My lawyer got me more money than I ever dreamed of.” Although it might be true for this one client, this statement might create an expectation in the reader that you can do the same for all your clients. Instead, you should only include testimonials that share verifiable factual information and don’t forget to add disclaimers to keep client expectations in check.

  1. Never Use Comparative Statements If Your State Disallows It

Some states have specific rules about using comparative statements in your advertising copy. So, if you’re in a state that disallows this wording, you should avoid it. For instance, in Illinois, you are not allowed to use comparative declarations, like, “We are the best bankruptcy law practice in Illinois.” The fact that such statements cannot be proven with verified facts leads them to fall under the category of “false and misleading communication.” On the other hand, you may be allowed to mention a few successes of your firm through statistical data, like recent court cases won. But make sure that such data is factual and verifiable and current. Either way, check your state’s professional conduct rules and then find a way to creatively convey your skills and instill confidence in prospective clients without violating any rules.

Avoid Claiming to Be an Expert

Several states have rules prohibiting attorneys from portraying themselves as an expert or a specialist. These rules have been created to ensure that no individual practicing law can make misleading claims in relation to themselves and/or their services.

I often recommend that law firms work with a marketing consultant that has legal experience for just this reason. I recently reviewed a prospect’s website and it stated among other things, that the firm specialized in family law. This is a big mistake in Illinois. Had the prospect worked with a marketing consultant who was also an attorney or who had legal experience, this could have been avoided.

In Summary

At the end of the day, effective marketing is the key to having a successful law practice. However, law firms must practice honesty in all their marketing and advertising efforts. By following the above-mentioned guidelines, firms can avoid ethics violations, can win the trust of clients, and can bolster long-term growth for their law firms, while assisting those who need the legal help the most.

Copyright © 2019 LawFull Marketing. All rights reserved.

For more on legal marketing, see the National Law Review Law Office Management section.

Dealing With “Attitude” at Work, Part 3 – Helping Staff Help Themselves

In the first two posts in this series, I looked at the law around workplace attitudes which might stem from some form of disability. But what if your employee is fit and well in all respects bar being exceptionally painful to work with?

He may be relentlessly negative, make heavy weather out of every instruction, or just operate on a very short fuse, often perfectly civil but prone to detonation when colleagues overstep some clearly very important, but also absolutely invisible, line in their dealings with him. He is, in every sense, grit in the gearbox of your business. But without obvious performance or conduct concerns, what can you do?

Probably the first point is to ascertain whether the employee himself recognises the problems he is causing to his colleagues. This won’t be an easy conversation but it forces him to confront the problem head-on. He may demand to know who has complained and require detailed examples of where others have been offended. By the very nature of a poor attitude, however, individual manifestations of it seem trivial and raising them individually with the employee like a series of miniature disciplinary charges is just going to lead to a precipitous further decline in workplace relationships. So I would suggest in many cases that the attitude issue is put as a collective perception without the identification of either individual complainants or specific examples. This is the view people have on you. You don’t need details of individual complainants or examples to decide whether you recognise that as having any truth in it. If you do accept that there is something in it, you can do something about it. If you can’t/don’t do anything about it, the employer will need to do so instead.

That meeting will best take place in private and without any offer of a companion, so it is not disciplinary action and cannot be relied upon as a warning at a later stage. It is intended to be no more than a word to the wise.

This leaves the employee with some choices. Is he going to be wise or not? If secretly he recognises that this is how he might come across, then without admission and without formal disciplinary proceedings he can amend his behaviours and all will be well at minimum disruption and cost. Alternatively he may flatly deny those behaviours both to you and (more importantly) to himself. However, he will then have to address in his own head the question of why so many of his colleagues say otherwise. Or he may accept the behaviours in broad terms, but allege that they are the product of some treatment he has received from the employer or his colleagues. He withdrew from social interaction with them because they withdrew from such interaction with him, and they did it first, so there. He is being passive-aggressive because they are being aggressive-aggressive. He doesn’t trust them because they didn’t support him about something a long time ago which he has been unable to get over, and so on.

Of course, you can make such a response the subject of a formal grievance and disciplinary process, but this will have more oh yes you did and oh no I didn’t than the average Christmas panto and at the end of it you will find the same two things every time: first, that no one is completely blameless and second, that by conducting the effective artillery duel which those formal procedures encourage, you have converted a relationship which didn’t work very well into one which no longer works at all.

Therefore if you can catch your employee’s attitude issue early enough to avoid having to go through a formal process, why not try to mediate a resolution? Use the safe space created by that process to exchange some views about how each side’s conduct makes the other feel. It may be the first time your employee has heard this “from the heart”. Ideally this should be in non-aggressive terms – “You intimidate me” cries out to be whacked back over the net with added topspin, but “I feel intimidated by you” cannot so easily be argued with because it is about what someone feels, not what someone else did.

You might reasonably expect emotion and tears at such a mediation (dawning self-awareness can be very painful) so it won’t necessarily be an easy process. But at the end, if it works, you will have a newly functioning working relationship and not the cratered and smoking wreckage of what used to be the team spirit.

If it doesn’t work? More next week.

 

See Parts 1 & 2:

© Copyright 2019 Squire Patton Boggs (US) LLP

For more on workplace attitudes, see the National Law Review Labor & Employment law section.

Media Education Is Crucial to Preparing Young Attorneys to Speak on the Record

Last month, a photojournalist for The Daily Northwestern, Northwestern University’s campus newspaper, captured photographs of student protestors who rushed a lecture hall where former Attorney General Jeff Sessions was speaking on campus. One of the pictures the photojournalist published featured a protestor sprawled on the floor. Students involved in the protest reacted with sharp criticism: being photographed in public had caused the protestor trauma, they argued. In addition, the reporters who used the student directory to attempt to contact protestors for quotes had invaded those students’ privacy.

In response to this pressure, editors at the newspaper took the photographs down and published an apology — steps that were immediately scorned by seasoned media professionals who explained that reporting on public events, through gathering quotes and taking pictures, is one of the most basic functions of journalism.

As with many stories that go viral, overheated Twitter commentary led to cross-generation attacks, straw-man arguments and handwringing over the death of traditional media. But when you push aside the noise around this story, it becomes clear that what happened at Northwestern illuminates an interesting disconnect between young people on the cusp of the Millennial-Z generations and the rest of us: we have different ideas about the purpose and function of traditional media.

What does this have to do with legal marketing? The oldest members of Generation Z are preparing to enter law school in the fall of 2020, which means firms are just a few years out from welcoming this new crop of lawyers. Forward-thinking law firms have long understood the value of media training in helping their attorneys build fruitful relationships with reporters and manage individual and firm brands across multiple channels. The Northwestern case, however, demonstrates that firms must also be prepared to offer some basic media education to their business development curriculum.

Younger lawyers may have a steep learning curve if they want to launch their careers with a productive media strategy. Here are three lessons firms will need to figure out how to teach them:

It’s hard to understand what you don’t consume. As social media has become such a central part of the way we broadcast and receive information, it fills the role traditional media used to play in some people’s lives. Not only does this mean that fewer people are reading the newspaper and relying on quality objective journalism to understand the world, but that inexperience with traditional media also breeds ignorance about what reporters, including specialists in the legal media, do all day and why they do it.

A young attorney who does not read the most important media outlets in the legal industry may not have a proper understanding of how law leaders use the information and data reporters publish to make business decisions and innovate at the practice and firm level. While managing partners may not always be pleased with the coverage of their firm, they understand and accept that the health of the industry relies on these sources of objective information. What’s more, for every article that makes a law partner squirm, there is one that amplifies a firm’s accomplishments for the entire industry to see.

Those media mentions are worth their weight in gold, but you have to respect and understand the institution of legal journalism as a whole to ever have a chance at winning one for yourself or your firm.

Not all media is the same. The media landscape of 2019 exists across four categories: paid, owned, shared, and earned. Paid media is sponsored content and pay-to-play awards and features. Owned media is the content your firm creates and distributes through your website and newsletter. Shared media is social media and all the content it spreads so rapidly. And earned media encompasses mentions in traditional media outlets.

A sophisticated communications strategy creates a plan for all four categories and, importantly, recognizes the strengths and weaknesses of each one. The first step to making sense of it all is to recognize the tension between control and authority. Media that allows your firm complete control over the content — your Twitter feed, for example — does not carry much authority. Consumers understand that anyone can make any claim they like on the internet. Media outlets that carry authority in the industry — such as Bloomberg Law or the Wall Street Journal — are not going to offer you much control over the content. Their independence is what gives them authority.

Attorneys who are too focused on controlling the message will miss out on the chance to see their work featured in an outlet that prospective clients and recruits actually trust.

Your right to privacy is not unlimited in scope. While individuals, of course, have the right to live their private lives free from interference, attorneys engaged in work on behalf of law firms and companies, which in many cases involves actions that are matters of public record, should expect to occasionally face questions about that work. Fearing these encounters or, worse, painting this healthy professional interaction as some kind of victimization, is bad for both the legal industry and an attorney’s own career development. Attorneys who understand the role traditional media plays in their business development make themselves available to reporters and are ready to speak off the cuff about their cases, clients and the broader context of legal questions they spend time on.

Savvy lawyers have confidence that their integrity and expertise will stand up to scrutiny by a reporter, and they extend professional courtesy to journalists doing the hard work of chronicling a complex and dynamic industry.

As the media landscape continues to evolve, marketers and firm leaders will have to work harder than ever to play in all four media categories — paid, owned, shared and earned — and prepare their attorneys to build productive relationships with the reporters who can help them reach their desired audience.

© 2019 Page2 Communications. All rights reserved.

This article was written by Debra Pickett of Page 2 Communications.
For more advice for young lawyers, see the National Law Review Law Office Management section.

2019 Year-End Estate Planning: The Question Is Not Whether to Gift, But How to Gift

Federal and Illinois tax laws continue to provide opportunities to transfer significant amounts of wealth free of any federal gift, estate and generation-skipping transfer (GST) taxes. However, because certain beneficial provisions “sunset” on January 1, 2026, now is an ideal time to revisit estate plans to ensure you make full use of this opportunity.

Current Exemption Levels

The federal gift, estate and GST exemptions (i.e., the amount an individual can transfer free of any of these taxes) are currently $11,400,000 for each individual, increasing to $11,580,000 in 2020. For married couples, the exemptions are currently $22,800,000, increasing to $23,160,000 in 2020. However, on January 1, 2026, the federal gift, estate and GST exemptions will be cut in half.

Federal and Illinois estate tax laws allow for a marital deduction for assets passing outright to a spouse or to qualifying trusts for the benefit of a surviving spouse. Thereafter, the federal estate tax rate is 40 percent. Illinois imposes a state estate tax based on a $4,000,000 threshold, which is not adjusted for inflation, at effective rates ranging from 8 percent to approximately 29 percent. (The Illinois estate tax paid is allowable as a deduction for federal estate tax purposes.) The only way to take advantage of the increased federal exemptions is to utilize planning strategies such as gifting in advance of the sunset date.

Gifting Options

Lifetime utilization of transfer tax exemption. A simple and effective planning opportunity involves early and full use of the high exemptions. Lifetime gifts utilizing the exemption amounts will almost always result in overall transfer tax savings, unless the assets that have been transferred decline in value. As with any gifting strategy, all income and future appreciation attributable to the gifted assets escapes future gift and estate taxation.

Assuming that assets appreciate, the sooner a planning strategy is implemented, the greater the estate tax savings will be. On November 22, 2019, the IRS issued final “anti-clawback” regulations expressly acknowledging that, when the exemptions are decreased, gifts made using the current high exemption amounts and which are in excess of the future reduced exemption amounts will not be subject to any additional gift or estate taxation. Thus, now is clearly the time for a “use it or lose it” strategy.

Annual exclusion gifts. Making use of annual exclusion gifts remains one of the most powerful estate planning techniques. The “annual exclusion amount” is the amount that any individual may give to any other individual within a tax year without incurring gift tax consequences. This amount, indexed for inflation, is currently $15,000 per donee.

Married couples can combine their annual exclusion amounts when making gifts, meaning that a married couple can give $30,000 per year to a child without using any transfer tax exemption (although filing a gift tax return may be required in some circumstances). When the spouses of children are included in the annual exclusion gifting, the amount that can be gifted is doubled again, meaning that a married couple can give a total of $60,000 per year to a child and the child’s spouse without using any transfer tax exemption.

Annual exclusion gifts can result in substantial transfer tax savings over time, as they allow the donor to remove the gift amount and any income and growth thereon from the donor’s estate without paying any gift tax or using any transfer tax exemption. Annual exclusion gifts also reduce a family’s overall income tax burden when income-producing property is transferred to family members who are in lower income tax brackets and not subject to the “kiddie tax” or the 3.8 percent net investment income tax.

Tuition and medical gifts. Individuals can make unlimited gifts on behalf of others by paying tuition costs directly to the recipient’s school or paying their medical expenses (including the payment of health insurance premiums) directly to a health care provider.

Gifts to spousal lifetime access trusts. Most people consider $11,400,000 to be a very large gift and either cannot, or do not want to, give away that much, as they may need or want it for themselves. A gift to a properly structured “spousal lifetime access trust” lets an individual make a completed gift now, and use the temporarily increased transfer exemption, but allows the individual’s spouse to be a beneficiary of the trust and have access to trust assets if needed. If the spousal lifetime access trust is implemented properly, the assets of trust (and the growth thereon) will not be subject to estate tax at the death of the grantor or at the death of the grantor’s spouse.

Grantor trusts. When planning with trusts, donors have great flexibility in determining who will be responsible for the payment of income taxes attributable to the assets in a trust. As an enhanced planning technique, trusts can be structured as “grantor trusts,” in which the trust is a disregarded income tax entity and the donor—not the trust or the beneficiaries—is responsible for paying tax on the trust’s income. By structuring a trust as a grantor trust, a donor can make tax-free gifts when paying the tax attributable to the trust’s income. This technique promotes appreciation of the trust assets while simultaneously decreasing the size of the donor’s estate, producing additional estate tax savings.

Combining gifting and selling assets to grantor trusts. Additional estate tax benefits can be obtained by combining gifts to grantor trusts with sales to grantor trusts. Because the grantor is treated as the owner of the trust for income tax purposes, no capital gains tax is imposed on the sale of assets to a grantor trust. The trust can finance the sale with a promissory note payable to the grantor, which provides the grantor with cash flow from the trust. The growth on the assets that are sold would then escape estate taxation at the grantor’s death.

Considerations When Making a Gift

Use of trusts when gifting. As with any gifting strategy, assets may be gifted outright so that the recipient directly controls the assets, thereby exposing the assets to the claims of the beneficiary’s creditors. Alternatively, assets may be gifted in trust, which 1) protects the gifted assets from the beneficiary’s creditors, including the spouses of beneficiaries in the event of divorce, 2) determines the future use and control of the gifted assets, and 3) shelters the gifted assets from future gift, estate and GST taxes through the allocation of the GST exemption.

Valuation discounts and leveraging strategies in the family context. “Minority interest,” “lack of marketability,” “lack of control” and “fractional interest” discounts can still be applied under current law to the valuation of interests in family-controlled entities and of real estate and other assets that are transferred to family members. Such discounting provides for estate and gift tax savings by reducing the value of the transferred interests. Leveraging strategies (e.g., family partnerships, sales to grantor trusts and grantor retained annuity trusts) can also be utilized to advantageously pass tremendous amounts of wealth for the benefit of many generations free of federal and Illinois transfer taxes.

State of Illinois estate tax laws. Illinois continues to tax estates in excess of $4,000,000, which is not adjusted for inflation and not allowed to be “ported” to a surviving spouse. Given the disparity between the $11,400,000 federal estate tax exemption and the $4,000,000 Illinois estate tax exemption, married couples domiciled in Illinois should make certain that their estate plans are structured to take advantage of the Illinois estate tax marital deduction. Otherwise, an estate plan that is designed to fully utilize the federal exemption can inadvertently cause an Illinois estate tax in excess of $1,000,000 upon the death of the first spouse.

The obvious and most direct strategy to address the Illinois estate tax is to simply move to one of the many states that do not currently impose an estate tax. In the event that a change of domicile is not possible or is not desired, all of the traditional planning techniques described above (in addition to others) are available to address this state liability. Because Illinois does not impose a gift tax, enacting gifting strategies will reduce future Illinois estate taxes.

Income tax basis changes. We continue to enjoy an income tax basis adjustment for assets received from a decedent upon his or her death (commonly known as the “step-up in basis,” although if values go down it can also be a “step-down” in basis). With the increase in the federal gift, estate and GST exemptions, and even with Illinois’ $4,000,000 exemption, transfer taxes are no longer a concern in many circumstances, and there is increased emphasis on income tax planning (specifically, planning with the goal of obtaining an income tax basis step-up at death). For many clients, it may be advisable, if possible, to “reverse” prior estate planning techniques, including trusts that were established on the death of a first spouse to die, to allow for a step-up in basis.

Traditional Estate Planning Still Matters

There is no time like the present to make certain that estate planning documents accurately reflect current wishes and make beneficial use of the federal and state transfer tax exemptions (to the extent not utilized during lifetime), federal and/or state marital deductions, and federal GST exemptions. Revisions may also be needed if family circumstances have changed since documents were originally executed.

Your estate planning goals may have changed. Many people no longer have taxable estates for federal estate tax purposes and may be able to adjust their estate plans accordingly, while others have existing plans that automatically adjust to the increased exemptions and do not desire more aggressive planning. Still others may want to take prompt action to aggressively utilize the new exemptions.

The above summary is not intended to enumerate all available estate planning techniques. Non-tax reasons to review and implement estate plans include:

  • Planning for probate avoidance
  • Planning for individuals with special needs (or who otherwise require specialized planning)
  • Implementing advance health care directives (such as living wills and health care powers of attorney)
  • Planning for incapacity
  • Planning for business succession
  • Planning for minor children and designating guardians
  • Planning for charitable giving

New Trust Code for 2020

On January 1, 2020, a new Illinois Trust Code will become effective, making many significant changes with regard to the administration of trusts. Of note:

Notice and designated representatives. Under the new law, for trusts that become irrevocable on or after January 1, 2020 (for example, a revocable trust becomes irrevocable upon a settlor’s death), the trustee is required to provide a copy of the trust agreement to all current and presumptive remainder beneficiaries. However, you can name a designated representative to receive such notice on behalf of any current and remainder beneficiaries.

Accountings. Under current law, a trust can be drafted so that accountings only need to be provided annually to current beneficiaries, not presumptive remainder beneficiaries. Under the new Illinois Trust Code, for trusts that become irrevocable on or after January 1, 2020, a trustee will have to provide annual accountings to current and presumptive remainder beneficiaries.

However, a trust agreement can be drafted to forego the requirement of providing the annual accountings to the remainder beneficiaries or potentially to provide that the accountings be provided to a designated representative for a remainder beneficiary rather than the remainder beneficiary himself or herself (although the remainder beneficiaries will be entitled to accountings when the current beneficiary’s interest terminates). This could mean, for example, that children who are remainder beneficiaries of a marital trust created under their father’s estate plan for their mother’s benefit will receive an annual accounting during their mother’s life unless they waive their right to receive it or the trust provides otherwise.

The Secure Act

Finally, pending in Congress is a bill known as the Secure Act. This legislation, if enacted in its current form, would push back the age of required minimum distributions from 70½ to 72 and eliminate the “stretch IRA.” If the Secure Act becomes law, we will send a supplement to this bulletin.

© 2019 Much Shelist, P.C.

More estate planning considerations on the National Law Review Estates & Trusts law page.

HHS HIV Drug Lawsuit: Setting Precedent for Other High Priced Medications or Government Collaborations?

On November 6, 2019, the bonds between the U.S. government and pharmaceutical companies were stretched when the U.S. Department of Health and Human Services (“HHS”) filed a patent infringement lawsuit against Gilead Sciences in Delaware federal court regarding Gilead’s popular HIV drugs, Truvada® and Descovy®.  HHS rarely sues for patent infringement.  In fact, the U.S. government and pharmaceutical companies typically have collaborative relationships.  For example, Gilead provided the Center for Disease Control and Prevention (“CDC”) with free drugs for government experiments to expand treatment for certain diseases.  So, what happened?

In 2004, Gilead—after receiving patent protection—began selling Truvada® to treat people already infected with HIV.  The CDC later investigated whether Truvada® could be used as a prophylactic to prevent HIV in monkeys and received patent protection for four key patents that “generally cover processes for protecting a primate or human host from a self-replicating infection by an immunodeficiency retrovirus, including HIV.”  (Complaint, ¶ 196).  Specifically, the claimed inventions provide protection “by a combination of nucleoside reverse transcriptase inhibitor, such as FTC, and a nucleotide reverse transcriptase inhibitor, such as tenofovir, or esters/prodrugs of tenofovir, such as TDF or TAF.” Id. Gilead donated the FTC, TDF, and tenofovir used in the CDC’s research, but its personnel do not appear to have otherwise assisted in the research.

The government alleges that first, it helped develop the drug with Gilead, and second, that Gilead “repeatedly refused to obtain a license from CDC to use the patented regimens” and “profited from research funded by hundreds of millions of taxpayer dollars[,]” without paying any royalties to the CDC.  HHS seeks damages and royalties for Gilead’s alleged infringement.  Many speculate that HHS’s motivation goes beyond royalties to something deeper: to increase access and decrease the price of Truvada® and Descovy® for pre-exposure prophylaxis (“PrEP”).

One goal identified by the Trump administration is to eradicate new cases of HIV and AIDS by 2030.  In fact, the administration requested $291 million for this initiative in May 2019. Truvada® and Descovy® play a critical role in PrEP.  PrEP is stated to be a highly-effective HIV prevention strategy that may play a vital role in ending the global HIV and AIDS epidemic.  However, PrEP is not as widely used as it could be.  Some allege that the limited use is related to limited access to the drugs—which in turn could be due in part to the high cost.  In the United States, Truvada® costs roughly $1,782 a month.[1]  Some have speculated that this suit is part of the Trump administration’s initiative to lower PrEP prices and end the HIV epidemic in the United States.  But is there more?

Political anger and public outcry over drug costs has increased over the years.  Three years ago, a national controversy erupted over the price of EpiPen injectors manufactured by Mylan pharmaceuticals.  In 2008, EpiPens cost about $100.  In 2016, that price rose to $600.  This price increase outraged customers and put the company at the forefront of the debate over drug costs.  Public outrage, coupled with a whistleblower lawsuit, led Mylan to finalize a $465 million settlement with the U.S. Justice Department over claims that it overcharged the government for EpiPens.

The EpiPen controversy, coupled with the HHS lawsuit against Gilead, may signal to pharmaceutical companies across the country that the U.S. government is ready and willing to step in and demand lower drug prices.  Accordingly, this case may be an important bellwether and should be followed by those with interests in these areas.

[1] Descovy® is new to the market, so the average monthly cost is unknown.

©1994-2019 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

ARTICLE BY Aarti Shah and  Kara E. Grogan of Mintz.
For more on drug patents, see the National Law Review Intellectual Property law page.