Tag: covid

Three Individuals Sentenced for $3.5 Million COVID-19 Relief Fraud Scheme

Three Individuals Sentenced for $3.5 Million COVID-19 Relief Fraud Scheme

On February 6, three individuals were sentenced for fraudulently obtaining and misusing Paycheck Protection Program (PPP) loans that the US Small Business Administration (SBA) guaranteed under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

According to court documents and evidence presented at trial, in 2020 and 2021, defendants Khadijah X. Chapman, Daniel C. Labrum, and Eric J.O’Neil submitted falsified documents to financial institutions for fictitious businesses to fraudulently obtain $3.5 million in PPP loans intended for small businesses struggling with the economic impact of COVID-19. Chapman was convicted in November 2023 of bank fraud. Labrum and O’Neil pleaded guilty in 2023 to bank fraud. Following their convictions, Chapman was sentenced to three years and 10 months in prison, Labrum was sentenced to two years in prison, and O’Neil was sentenced to two years and three months in prison.

Read the US Department of Justice’s (DOJ) press release here.

False Claims Act Complaint Filed Against Former President and Co-Owner of Mobile Cardiac PET Scan Provider

The DOJ filed a complaint in the US District Court for the Southern District of Texas under the False Claims Act (FCA) against Rick Nassenstein, former president, chief financial officer, and co-owner of Illinois-based Cardiac Imaging Inc. (CII), which provides mobile cardiac positron emission tomography (PET) scans.

The complaint alleges that Nassenstein caused CII to pay excessive, above-market fees to doctors who referred patients to CII for cardiac PET scans. The government alleges that the compensation arrangements violated the Stark Law, which prohibits health care providers from billing Medicare for services referred by a physician with whom the provider has a compensation arrangement unless the arrangement meets certain statutory and regulatory requirements. Claims knowingly submitted to Medicare in violation of the Stark Law also violate the federal FCA.

The complaint alleges that CII provided cardiac PET scans on a mobile basis and paid the referring physicians, usually cardiologists, to provide physician supervision as required by Medicare rules. From at least 2017 through June 2023, Nassenstein allegedly caused CII to enter into compensation arrangements with referring cardiologists that provided for payment to the cardiologists as if they were fully occupied supervising CII’s scans, even though they were actually providing care to other patients in their offices or patients who were not even on site. CII’s fees also allegedly compensated the cardiologists for additional services the physicians did not actually provide. The complaint alleges that CII paid over $40 million in unlawful fees to physicians and submitted over 75,000 false claims to Medicare for services provided pursuant to referrals that violated the Stark Law.

The lawsuit was originally a qui tam complaint filed by a former billing manager at CII, and the United States, through the DOJ, filed a complaint in partial intervention to participate in the lawsuit.

The case, captioned US ex rel. Pinto v. Nassenstein, No. 18-cv-2674 (S.D. Tex.), follows an $85.5 million settlement in October 2023 by CII and its current owner, Sam Kancherlapalli, for claims arising from this conduct.

Read the DOJ’s press release here.

San Diego Restaurant Owner Charged with Tax and COVID-19 Relief Fraud Schemes

On February 2, a federal grand jury in San Diego returned a superseding indictment charging a California restaurant owner with wire fraud, conspiracy to commit wire fraud, tax evasion, filing false tax returns, conspiracy to defraud the United States, conspiracy to commit money laundering, and failing to file tax returns.

According to the indictment, Leronce Suel, the majority owner of Rockstar Dough LLC and Chicken Feed LLC, conspired with a business partner to underreport over $1.7 million in gross receipts on Rockstar Dough LLC’s 2020 federal corporate tax return. From March 2020 to June 2022, Suel and the business partner then allegedly used this fraudulent return to qualify for COVID-19-related loans pursuant to the PPP and Restaurant Revitalization Funding program. In connection with those loans, Suel also allegedly certified falsely that he used the loan money for payroll purposes only. The indictment alleges that Suel and his business partner laundered the fraudulently obtained funds through cash withdrawals from their business bank accounts and stashed more than $2.4 million in cash in their home.

The indictment further charges that Suel failed to report millions of dollars received in cash and personal expenses paid for by his businesses as income, in addition to reporting false depreciable assets and business losses.

If convicted, Suel faces prison sentences up to 30 years for each count of wire fraud and conspiracy to commit wire fraud, 10 years for each count of conspiracy to commit money laundering, five years for tax evasion and conspiracy to defraud the United States, three years for each count of filing false tax returns, and one year for each count of failing to file tax returns.

Read the DOJ’s press release here.

© 2024 ArentFox Schiff LLP
For more on Regulated Industries, visit the NLR Biotech, Food, Drug section.

Employment-Based Immigration Updates for 2023

As we move deeper into the new year, the U.S. government continues to try to resolve the challenges facing the immigration system due to the disruptions of the COVID-19 pandemic and the resulting processing backlogs. These challenges may still continue, but new changes and updates have already taken effect—and more will likely come in 2023, impacting employers and the decisions they make with regard to their foreign national employees. Below are several updates the U.S. government has already released that impact employment-based immigration processes.

USCIS Proposed Fee Increases

On January 4, 2023, U.S. Citizenship and Immigration Services (USCIS) proposed changes to its fees for certain types of cases. The changes to the fees are dramatic increases to some employment-based visa types and are in an effort to make up for funding shortages that have impacted USCIS. Proposed filing fee increases for the following employment-based visa types include:

  • H-1B: $460 to $780
  • H-1B registration fee: $10 to $215
  • L-1: $460 to $1,385
  • O-1: $460 to $1,055
  • Adjustment of Status Application (I-485): $1,225 to $2,820

As we previously reported, the proposed rule—which is in the public comment phase—also includes a change to the existing premium processing timeline. The timeline would increase from fifteen calendar days to fifteen business days.

Continued Expansion of Premium Processing

On May 24, 2022, USCIS implemented a phased approach to expanded premium processing service. In 2022, premium processing was expanded to I-140 petitions, and on January 30, 2023, premium processing will be available to all EB-1C multinational executive and manager and EB-2 National Interest Waiver petitions. The January 30 expansion will include new filings as well as upgrades on pending petitions.

USCIS’s next phase of premium processing expansion will apply to the following applications:

  • Form I-539, Application to Extend/Change Nonimmigrant Status
  • Form I-765, Application for Employment Authorization

Foreign National Employees and RIFs

With changes in the U.S. economy and world markets, employers may start conducting reductions in force (RIF) to adjust to new budget goals. RIFs have the potential to impact foreign national employees. As we discussed in a recent podcast, employers may want to consider the potential impact of restructurings on workers who are in nonimmigrant status, those who are in the permanent residency process, and students working in F-1 status.

Equal Pay Transparency Laws

An increasing number of states and local jurisdictions—such as California, Colorado, Connecticut, New York State, New York City, Rhode Island, and Washington—have implemented equal pay transparency (EPT) laws that now require employers to make additional disclosures regarding offered salaries and/or benefits on job requisitions and postings. This will have a significant impact on the PERM process for green card applications in these jurisdictions by mandating employers list a salary or salary range on PERM and non-PERM recruitment materials. EPT laws vary across jurisdictions as to which types of postings or recruitment efforts will require additional information.

Nonimmigrant Visa Interview Waivers Extended Until December 31, 2023

In an effort to reduce visa wait times and processing backlogs at U.S. consulates, the U.S. Department of State has extended the authority of consular officers to waive in-person interviews for certain nonimmigrant categories through December 31, 2023.

Fiscal Year 2024 H-1B Cap Preparation

With the annual H-1B lottery just two months away, employers may want to consider the foreign national employees they plan to sponsor and enter into this year’s upcoming H-1B cap or quota process. The process will start with the initial registration period, which typically opens at the beginning of March and lasts for a minimum of fourteen calendar days each fiscal year (FY). USCIS will soon announce details about the FY 2024 H-1B registration period. If enough registrations are submitted, USCIS will conduct a random selection of the registration entries to determine who will be eligible to file H-1B petitions. If selected, the employers will have ninety days to file the H-1B petitions, starting April 1. So far, there have not been any changes in this process for this upcoming cycle.

Article By Awanti A. Damle of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

For more immigration legal news, click here to visit the National Law Review.

© 2023, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.

New York HERO Act Enhanced Workplace Safety Committee Enforcement Provisions Enacted

On December 28, 2022, New York Governor Kathy Hochul signed into law Senate Bill 9450, which added new enforcement provisions to the New York Health And Essential Rights Act’s (NY HERO Act) workplace safety committee requirements. The new law went into effect immediately upon the Governor’s signature.

As a reminder, the NY HERO Act was enacted in response to the COVID-19 pandemic. Section 1 of the NY HERO Act required employers to adopt and distribute an infectious disease exposure prevention plan (“safety plan”) and activate such safety plan upon the designation of an airborne infectious disease as a highly contagious communicable disease that presents a serious risk of harm to the public health. While no current designation is in effect (the designation of COVID-19 ended on March 17, 2022), employers should be prepared to activate their safety plan in the event of a designation, and should review their existing safety plan periodically for any updates as required by the NY HERO Act.

Section 2, the often-overlooked portion of the NY HERO Act, provides employees the right to establish and administer a joint labor-management workplace safety committee. The recent law adds new enforcement provisions, and serves as an amendment to this section of the NY HERO Act. It requires employers to recognize workplace safety committees formed by employees pursuant to the NY HERO Act within five business days of receiving a request from employees for committee recognition. Failure to do so will result in penalties of $50 a day until the violation is remedied. Previously, there was no explicit timeframe required for employers to recognize a workplace safety committee and no related specific civil penalties.

While the New York Department of Labor has issued FAQ guidance related to Section 1 of the NY HERO Act, the new law is the first development or update regarding Section 2 since the NY HERO Act was enacted and subsequently amended.

The new law serves as a reminder that the NY HERO Act, and, relatedly, COVID-19’s impact on the workplace, are not completely in the rearview mirror. Employers should confirm their compliance with the NY HERO Act by:

  • evaluating their existing safety plans and revising or updating them as needed;
  • distributing their safety plans to all new hires;
  • including their safety plans in all updated handbooks;
  • ensuring their safety plans are posted in a visible and prominent location in the workplace; and
  • reviewing the workplace safety committee obligations and requirements, especially in light of the added enforcement provisions.

Article By Susan Gross Sholinsky, Steven M. Swirsky, Robert J. O’Hara, Nancy Gunzenhauser Popper, and Christopher Shur of Epstein Becker & Green, P.C.

For more labor and employment legal news, click here to visit the National Law Review.

©2023 Epstein Becker & Green, P.C. All rights reserved.

Privacy Rights in a Remote Work World: Can My Employer Monitor My Activity?

The rise in remote work has brought with it a rise in employee monitoring.  Between 2019 and 2021, the percentage of employees working primarily from home tripled.  As “productivity paranoia” crept in, employers steadily adopted employee surveillance technologies.  This has raised questions about the legal and ethical implications of enhanced monitoring, in some cases prompting proposed legislation or the expanded use of laws already on the books.

Employee monitoring is nothing new.  Employers have long used supervisors and timeclock programs, among other systems, to monitor employee activity.  What is new, however, is the proliferation of sophisticated monitoring technologies—as well as the expanding number and variety of companies that are employing them.

 While surveillance was once largely confined to lower-wage industries, white-collar employers are increasingly using surveillance technologies to track their employees’ activity and productivity.  Since the COVID-19 pandemic started in March 2020, one in three medium-to-large companies has adopted some form of employee monitoring, with the total fraction of employers using surveillance technologies closer to two in three.  Workers who are now subject to monitoring technologies include doctors, lawyers, academics, and even hospice chaplains.  Employee monitoring technologies can track a range of information, including:

  • Internet use (e.g., which websites and apps an employee has visited and for how long);

  • How long a computer sits idle;

  • How many keystrokes an employee types per hour;

  • Emails that are sent or received from a work or personal email address (if the employee is logged into a personal account on a work computer);

  • Screenshots of a computer’s display; and

  • Webcam photos of the employee throughout the day.

These new technologies, coupled with the shift to remote work, have blurred the line between the professional and the personal, the public and the private.  In the face of increased monitoring, this blog explores federal and state privacy regulations and protections for employees.

What are the legal limitations on employee monitoring?

 There are two primary sources of restrictions on employee monitoring: (1) the Electronic Communications Privacy Act of 1986 (ECPA), 18 U.S.C. §§ 2510 et seq.; and (2) common-law protections against invasions of privacy.  The ECPA is the only federal law that regulates the monitoring of electronic communications in the workplace.  It extends the Federal Wiretap Act’s prohibition on the unauthorized interception of communications, which was initially limited to oral and wire communications, to cover electronic communications like email.  As relevant here, the ECPA contains two major exceptions.  The first exception, known as the business purpose exception, allows employers to monitor employee communications if they can show that there is a legitimate business purpose for doing so.  The second exception, known as the consent exception, permits employers to monitor employee communications so long as they have consent to do so.  Notably, this exception is not limited to business communications, allowing employers to monitor employees’ personal communications if they have the requisite consent.  Together, the business purpose and consent exceptions significantly limit the force of the ECPA, such that, standing alone, it permits most forms of employee monitoring.

In addition to the ECPA’s limited protections from surveillance, however, some states have adopted additional protections of employee privacy.  Several state constitutions, including those of California, South Carolina, Florida, and Louisiana, guarantee citizens a right to privacy.  While these provisions do not directly regulate employers’ activity, they may bolster employees’ claims to an expectation of privacy.  Other states have enacted legislation that limits an employer’s ability to monitor employees’ social media accounts.  Virginia, for example, prohibits employers from requiring employees to disclose their social media usernames or passwords.  And a few states have enacted laws to bolster employees’ access to their data.  For example, the California Privacy Rights Act (CPRA), which comes into full effect on January 1, 2023, and replaces the California Consumer Privacy Act (CCPA), will provide employees with the right to access, delete, or opt-out of the sale of their personal information, including data collected through employee monitoring programs.  Employees will also have the right to know where, when, and how employers are using their data.  The CPRA’s protections are limited, however.  Employers will still be able to use surveillance technologies, and to make employment decisions based on the data these technologies gather.

Finally, several states require employers to provide notice to employees before monitoring or intercepting electronic communications.  New York recently adopted a law,  Senate Bill (SB) S2628, that requires all private-sector employers to provide notice of any electronic monitoring to employees (1) upon hiring, via written or electronic employee acknowledgment; and (2) in general, in a “conspicuous place” in the workplace viewable to all employees.  The new law is aimed at the forms of monitoring that have proliferated since the shift to remote work, and covers surveillance technologies that target the activities or communications of individual employees.  Delaware and Connecticut also have privacy laws that predate SB S2628.  Delaware requires notice to employees upon hire that they will be monitored, but does not require notice within the workplace.  Meanwhile, Connecticut requires notice of monitoring to be conspicuously displayed in the workplace but does not require written notice to employees upon hire.  Accordingly, in many states, employee privacy protections exceed the minimum standard of the ECPA, though they still are not robust.

How does employee monitoring intersect with other legal rights?

Other legal protections further limit employee monitoring.

First, in at least some jurisdictions, employees who access personal emails on their work computer, or conduct other business that would be protected under attorney-client privilege, maintain their right to privacy for those communications.  In Stengart v. Loving Care Agency, Inc., 408 N.J. Super. 54 (App. Div. 2009), the Superior Court of New Jersey, Appellate Division, considered a case in which an employee had accessed her personal email account on her employer’s computer and exchanged emails from that account with her attorney regarding a possible employment case against her employer.  The employer, who had installed an employee monitoring program, was able to access and read the employee’s emails.  The Court held that the employee still had a reasonable expectation of privacy and that sending and receiving emails on a company-issued laptop did not waive the attorney-client privilege.  The Court thus required the employer to turn over all emails between the employee and her attorney that were in its possession and directed the employer to delete all of these emails from its hard drives.  Moving forward, the Court instructed that, while “an employer may trespass to some degree into an employee’s privacy when buttressed by a legitimate business interest,” such a business interest held “little force . . . when offered as the basis for an intrusion into communications otherwise shielded by the attorney-client privilege.”  Stengart, 408 N.J. Super. at 74.

Second, employee monitoring can run afoul of protections related to union and other concerted activity.  The General Counsel for the National Labor Relations Board (NLRB) recently announced a plan to curtail workplace surveillance technologies.  Existing law prohibits employers from using surveillance technologies to monitor or record union activity, such as by recording employees engaged in picketing, or otherwise interfering with employees’ rights to engage in concerted activity.  The General Counsel’s plan outlines a new, formal framework for analyzing whether employee monitoring interferes with union or concerted activity.  Under this framework, an employer presumptively violates Section 7 or Section 8 of the National Labor Relations Act (NLRA) where their “surveillance and management practices, viewed as a whole, would tend to interfere with or prevent a reasonable employee from engaging in” protected activities.  Examples of technologies that are presumptively violative include key loggers, webcam photos, and audio recordings.

Do I have a claim against my employer?

While federal and state restrictions on employee monitoring are limited, you may have a legal claim against your employer if its monitoring is overly intrusive or it mishandles your personal data.  First, an invasion-of-privacy claim, for the tort of intrusion upon seclusion, could exist if your employer monitors your activity in a way that would be highly offensive to a reasonable person, such as by accessing your work laptop’s webcam or internal microphone and listening in on private affairs in your home.  Second, you may have a claim against your employer for violating its legal duty to protect your personal information if data it collects in the course of monitoring your work activity is compromised.  In Dittman v. UPMC, 196 A.3d 1036 (Pa. 2018), employees at the University of Pittsburgh Medical Center and UPMC McKeesport (collectively, UPMC) filed a class-action complaint alleging that UPMC breached its legal duty of reasonable care when it failed to protect employees’ data, which was stolen from UPMC computers.  The Pennsylvania Supreme Court found for the plaintiffs, holding that employers have an affirmative duty to protect the personal information of their employees.  Because the Pennsylvania Supreme Court’s holding was grounded in tort principles that are recognized by many states (i.e., duty of care and negligence), it may pave a path for future cases in other jurisdictions.  Third, if any medical information is accessed and improperly used by your employer, you may have a claim under the Americans with Disabilities Act, which requires that employers keep all employee medical information confidential and separate from all other personnel information.  See 42 U.S.C. § 12112(d)(3)(B)-(C), (4)(B)-(C).

Conclusion

Employees are monitored more consistently and in more ways than ever before. By and large, employee monitoring is legal.  Employers can monitor your keystrokes, emails, and internet activity, among other metrics.  While federal regulation of employee monitoring is limited, some states offer additional protections of employee privacy.  Most notably, employers are increasingly required to inform employees that their activity will be monitored.  Moreover, other legal rights, such as the right to engage in concerted activity and to have your medical information kept confidential, provide checks on employee surveillance.  As employee monitoring becomes more commonplace, restrictions on surveillance technologies and avenues for legal recourse may also grow.

Article By Bonnie Henry of Katz Banks Kumin LLP

For more labor and employment legal news, click here to visit the National Law Review.

Katz Banks Kumin LLP Copyright ©

Global Dispute Resolution: The Future of Virtual Legal Proceedings Is Shaped by Soaring Travel Costs

While we may have passed through the worst of the global pandemic, it has unquestionably left a deep and lasting impact on our personal and professional lives. Restrictions that left everyone housebound for months on end resulted in adaptations to daily behaviors and how we do business—some of which are here to stay.

Progress in the Form of Virtual Proceedings

During the pandemic, keeping businesses afloat was challenging across the board in all industries. Videoconferencing was often the only option to connect with colleagues or to participate in a meeting of any kind, and the use of platforms like Zoom skyrocketed. Like most other businesses and professional organizations, legal forums around the world were closed for a time. When they began to reopen, they discovered a new (virtual) operational environment that arose out of necessity.

International arbitration centers and courts across the globe followed suit, reopening with a mandate to conduct business remotely. While they had already developed protocols for using technology to increase accessibility and efficiency before 2020, the use of videoconferencing in international arbitration centers and courtrooms took off rapidly and pervasively once the pandemic hit. The ramped-up schedule of online proceedings continues in international arbitration centers and courts now that they are increasingly comfortable with the virtual format, and protocols have been developed and vetted.

 

 

 

Many believe that these recent technological developments were long overdue. The pandemic essentially propelled the justice system to modernize its administrative and operational policies. Remote Courts Worldwide (a website created during the pandemic to encourage the global community of justice workers to exchange ideas related to remote alternatives to traditional court proceedings) documents that virtual hearings, arbitrations, and court proceedings are embraced by stakeholders in many countries.1 The consensus is that smart, efficient, industry-disrupting change has brought the international justice system into the twenty-first century. Virtual proceedings are a welcome change for many reasons, not the least of which is the prohibitively high cost of in-person attendance.

International Travel Costs & Virtual Legal Proceedings

The cost of air travel has increased markedly in 2022. Demand issues, inflation, and high fuel costs have driven up per-person airfares. According to the 2022 Global Business Travel Association’s Business Travel Index Outlook – Annual Global Report and Forecast, total international business travel spending is downby 50% from pre-pandemic levels, but individual airfares are on track to rise nearly 50% this year over 2021 and are predicted to continue to rise in 2023.2

An intercontinental long-haul business class ticket from the United States will usually average between $3,000 and $5,000 roundtrip onboard major national carriers. Fares are often the highest on flights longer than twelve hours (i.e., to the Middle East, Australia, or Southeast Asia) and may range from $5,000 to $12,000.3

COMPARING COSTS FOR IN-PERSON ATTENDANCE

The following is an example of a business travel cost profile for an international arbitration hearing taking place in London and involving three US attorneys, two Paris attorneys, two local witnesses, and three litigation support personnel. The average business trip to London is 5.8 days4, during which these travelers will require accommodations for five nights, food for six days, and ground transportation for six days.

INTERNATIONAL BUSINESS TRAVEL EXPENSES & TRAVEL TIME TO LONDON FOR ONE LEGAL PROCEEDING

 

 

Person Traveling Number Originating City Airfare Travel Time Hotel Food Ground Total
US Lawyers 3 Chicago $3,079 $5,850 $2,200 $750 $400 $36,837
Paris Lawyers 2 Paris $325 $1,950 $2,200 $750 $400 $11,250
Witnesses 2 London $0 $0 $1,500 $350 $250 $4,200
Trial Consultant 1 New York $2,325 $2,400 $2,200 $750 $400 $8,075
Trial Presenter 1 Los Angeles $3,944 $3,300 $2,200 $750 $400 $10,594
Graphic Designer 1 Dallas $3,079 $3,000 $2,200 $750 $400 $9,429
Total In-Person Attendance               $80,385

 

Notes: Airfares based on Delta business class in November 2022. Travel time based on Chicago to London 9hr. x 2(RT) @$325/hr.; Paris to London 3hr. x 2(RT) @$325/hr.; NY to London 8hr. x 2(RT) @$150/hr.; LA to London 11hr. x 2(RT) @$150/hr.; Dallas to London 10hr. x 2(RT) @$150/hr. 

As demonstrated in the chart above, the cost of travel time can be as much or more than the cost of flights to attend an international arbitration or other legal hearing. Spending many hours traveling to and returning from the various steps of an international proceeding is not only an expense for a client, but productivity is also lost for the legal professionals involved.

If time is money, there could not be a more direct equivalency than the legal industry’s billable hour, and often lawyers apply the same hourly rate for travel hours as for work hours. When complex matters demand a legal team, these costs are multiplied. Then there is the issue of witnesses who would need to travel and perhaps wait around to testify, not to mention the time commitment and expenses related to other on-site billers and support staff. Add in the unpredictability of airline delays, and costs will continue to mount.

VIRTUAL HEARINGS SAVE MONEY (AND THEY’RE HERE TO STAY)

 

 

 

With the cost of international air travel rising sharply, remote hearings are a practical alternative to in-person proceedings. International travel is expensive, and the virtual option means that it is no longer necessary to count travel as a “cost of doing business” when pursuing an international dispute. The widespread use of technology in global dispute resolution proceedings gives attorneys and their clients the option to participate remotely, which is a compelling cost saver for all parties.

Industry news reports tell the story:

Technology has become ubiquitous in international arbitration.5 Japan expedites court proceedings with Microsoft Teams.6 Beijing’s “Internet Court” enables people to file lawsuits online.7 In India, 19.2 million cases have been heard virtually in the High Court and district courts.8

Such reports are convincing evidence of the commitment to the continuation of virtual proceedings in legal forums around the globe. Remote and hybrid proceedings in the international legal setting appear to have a very secure future.

Put Your Best Foot Forward in Virtual Legal Proceedings

Technology in the courtroom is not particularly a new concept, and international arbitration centers were working in the direction of modernizing when they had to fast-track guidelines to convert to primarily virtual hearings.9 The wholesale adoption of online proceedings may have caught some firms unprepared from a technical production standpoint.

References:

  1. See www.remotecourts.org.
  2. See gbta.org.
  3. Keyes, Scott. The Complete Guide to Business Class Flights. Scott’s Cheap Flights. April 28, 2022.
  4. Johnson, Georgia-Rose. Business Travel Statistics. Finder.com. February 18, 2021.
  5. Vishnyakov, Mikhail. CIArb Guidelines on the Use of Technology, The Law Society Gazette. March 18, 2021.
  6. Yates-Roberts, Elly. Japan expedites court proceedings with Microsoft Teams. Technology Record. February 4, 2020.
  7. China: Beijing’s ‘Internet Court’ enables people to file lawsuits online. Remote Courts Worldwide. September 20, 2022.
  8. Harris, Joanne. Access to justice: India leads post-Covid shift in courts’ use of technology. International Bar Association. October 12, 2022.
  9. Caroni, Barnardo. Fast Track Arbitration and Virtual Protocols in the COVID-19 ERA: Some Suggestions from Asia. October 20, 2022.

Article By IMS Consulting & Expert Services

For more business of law legal news, click here to visit the National Law Review.

© Copyright 2002-2022 IMS Consulting & Expert Services, All Rights Reserved.

Buying, Selling, and Investing in Telehealth Companies: Navigating Structural and Compliance Issues

A multi-part series highlighting the unique health regulatory aspects of Telemedicine mergers and acquisitions, and financing transactions

Investors in the telehealth space and buyers and sellers of telehealth companies need to account for a set of health regulatory considerations that are unique to deals in this sector. As all parties to potential telehealth transactions analyze their long term role in the telehealth marketplace, two of the central issues to any transaction are compliance and structure – both in terms of structuring the telehealth transaction itself and due diligence issues that arise related to a target’s structure.

The COVID-19 pandemic, combined with strained health care staffing and provider availability, have accelerated the growth of the telehealth, and start-ups and traditional health systems alike are competing for access to patient populations in the telehealth space. However, as we adjust to life with COVID-19 as the norm, the expiration of the federal Public Health Emergency (PHE) looms, and the national economy contracts, we expect that the remainder of 2022 and into 2023 will see consolidation as the telehealth market begins to saturate and the long-term viability of certain platforms are tested. Telehealth companies, health systems, pharma companies and investors are all in potential positions to take advantage of this consolidation in a ripening M&A sector (while startups in the telehealth space continue to seek venture and institutional capital).

This is the first post in a series highlighting the unique health regulatory aspects of telehealth transactions. Future installments of this series are expected to cover licensure and regulatory approvals, compliance / clinical delivery models, and future market developments.

Telehealth Transaction Structure Considerations

The structure of any given telehealth transaction will largely depend on the business of the telehealth organization at play, but also will depend on the acquirer / investor. Regardless of whether a party is buying, selling or investing in a telehealth company, structuring the transaction appropriately will be important for all parties involved. While a standard stock purchase, asset purchase or merger may make sense for many of these transactions, we have also seen a proliferation of, affiliation arrangements, joint ventures (JV), alliances and partnerships.  These varieties of affiliation transactions can be a good choice for health systems that are not necessarily looking to manage or develop an existing platform, but instead are looking to leverage their patient populations and resources to partner with an existing technology platform. An affiliation or JV is more popular for telehealth companies operating purely as a technology platform (with no core business involving clinical services being provided). For parties in the traditional healthcare provider sector that provide clinical services, an affiliation or JV, which is easier to unwind or terminate than a traditional M&A transaction, can allow the parties to “test the waters” in a new, combined business venture. The affiliation or JV can take a variety of forms, including technology licensing agreements; the creation of a new entity to house the telehealth mission, which then has contractual arrangements with the both the JV parties; and exclusivity arrangements relating to use of the technology and access to patient populations.

While an affiliation or JV offers flexibility, can minimize the need for a large upfront investment, and can be an attractive alternative to a more permanent purchase or sale, there can be increased regulatory risk. Entrepreneurs, investors, and providers considering any such arrangement should bear in mind that in the wake of the COVID-19 pandemic and proliferation of telehealth, the Office of Inspector General of the Department of Health and Human Services (HHS-OIG) has expressed a heightened interest in investigating so called “telefraud” and recently issued a special fraud alert regarding suspect arrangements, discussed in this prior post. Further, the OIG’s guidance on contractual joint ventures that would run afoul of the federal Anti-Kickback Statute (AKS) should be front of mind and parties should strive to structure any affiliation or JV in a manner that meets or approximates an AKS safe harbor.

Target Telehealth Company Structure Compliance

Where telehealth companies are providing clinical services, and are not purely technology platforms, structuring and transaction diligence should focus on whether the target is operating in compliance with corporate practice of medicine (CPOM) laws. The CPOM doctrine is intended to maintain the independence of physician decision-making and reduce a “profits over people” mentality, and prevent physician employment by a lay-owned corporation unless an exception applies. Most states that have adopted CPOM impose similar restrictions on other types of clinical professionals, such as nurses, physical therapists, social workers, and psychologists. Telehealth companies often attempt to utilize a so-called “friendly PC” structure to comply with CPOM, whereby an investor-owned management services organization (“MSO”) affiliates with a physician-owned professional corporation (or other type of professional entity) (a “PC”) through a series of contractual agreements that foster a close working relationship between the MSO, PC, and PC owner and whereby the MSO provides management services, and sometimes start-up financing. The overall arrangement is intended to allow the MSO to handle the management side of the PC’s operations without impeding the professional judgment of the PC or the medical practice of its physicians and the PC owner.

CPOM Compliance Considerations and Diligence for Telehealth Companies

A sophisticated buyer will want to confirm that the target’s friendly PC structure is not only formally established, but is also operationalized properly and in a manner that minimizes fraud and abuse risk. If CPOM compliance gaps are identified in diligence this may, at worst, tank the deal and, at best, cause unexpected delays in the transaction timeline, as restructuring may be required or advisable. The buyer may also request additional deal concessions, such as a purchase price reduction and special indemnification coverage (with potentially a higher liability limit and an escrow as security). Accordingly, a telehealth company anticipating a sale or fund raise would be well served to engage in a self-audit to identify any CPOM compliance issues and undertake necessary corrective actions prior to the commencement of a transaction process.

Below are nine key questions with respect to CPOM compliance and related fraud and abuse issues that a buyer/investor in a telehealth transaction should examine carefully (and that the target should be prepared to answer):

  1. Does target have a PC that is properly incorporated or foreign qualified in all states where clinical services are provided (based on the location of the patient)?
  2. Does the PC owner (and any directors and officers of the PC, to the extent different from the PC owner) have a medical license in all states where the PC conducts business (to the extent in-state licensure is required)? To the extent the PC has multiple physician owners and directors/officers, are all such individuals licensed as required under applicable state law?
  3. Does the PC(s) have its own federal employer identification number, bank account (including double lockbox arrangement if enrolled in federal healthcare programs), and Medicare/Medicaid enrollments?
  4. Does the PC owner exercise meaningful oversight and control over the governance and clinical activities of the PC? Does the PC owner have background and expertise relevant to the business (e.g., a cardiologist would not have appropriate experience to be the PC owner of a PC that provides telemental health services)?
  5. Are the physicians and other professionals providing clinical services for the business employed or contracted through a PC (rather than the MSO)? Employment or independent contractor agreements should be reviewed, as well as W-2s, and payroll accounts.
  6. Is the PC properly contracted with customers (to the extent services are provided on a B2B basis) and payors?
  7. Do the contractual agreements between the MSO and PC respect the independent clinical judgment of the PC owner and PC physicians and otherwise comply with state CPOM laws.
  8. Do the financial arrangements between the MSO, PC, and PC owner comply with AKS, the federal Stark Law, and corollary state laws and fee-splitting prohibitions, to the extent applicable?
  9. Is the PC owner or any other physician performing clinical services for the PC an equity holder in the MSO? If so, are these equity interests tied to volume/value of referrals to the PC or MSO (i.e., if the MSO provides ancillary services such as lab or prescription drugs) or could equity interests be construed as an improper incentive to generate healthcare business (e.g., warrants that can only be exercised upon attainment of certain volume)?

Telehealth companies considering a sale or financing transaction, and potential buyers and investors, would be well served to spend time on the front end of a potential transaction assessing the above issues to determine potential risk areas that could impact deal terms or necessitate any friendly PC structuring.

Article By Hannah E. Zaitlin, Mitchell D. Lindstrom, David S. Sanders, and Natasha Allen of Foley & Lardner LLP

For more health law legal news, click here to visit the National Law Review.

© 2022 Foley & Lardner LLP

Twelve Tips for Effective In-Person Networking in the Post-Pandemic World

I recently got on my first flight since the pandemic. I had been avoiding travel and conferences for many reasons, but it’s time to stop hiding at home and behind my computer screen.

Over the next few weeks I am speaking at several lawyer retreats and industry conferences – I’m excited but nervous.

I feel like a fish out of water (I accidentally let my TSA pre-check expire as well as my passport during Covid). It’s also the first time I’m leaving my pandemic puppies (I think it’s more traumatic for me than them).

I’m looking forward to seeing familiar faces and meeting new ones, and getting to know my clients in a setting other than Zoom because human connections are important and powerful.

In-person networking is essential – it is the secret sauce to building long-term and meaningful relationships. Those relationships can lead to opportunities of all kinds.

Even as an extroverted extrovert, I’m a bit rusty on networking.

I have been doing countless presentations to a computer screen since March 2020 and so being able to see and interact with real people is a much welcome change. A return to “normalcy.”

But after years of being an “expert” network, I’m not actually sure what to do when I actually see people again in a profesional group setting.

Do I hug? (I’m Italian, we like to hug) Shake hands? Fist bump? Just smile and nod? So glad we aren’t bathing in hand sanitizer anymore or cloroxing everything with which we come in touch.

Many of us are in the same position after the past few years, and we don’t feel like the same person we used to be. But that’s okay. Let’s collectively give ourselves a break (and some grace). We are all in the same boat – together.

Here are 12 tips for effective in-person networking I plan to use:

  1. Ask people about themselves more then I talk about myself.
  2. Practice active listening.
  3. Say their names a few times when talking to them – it helps me remember them and makes people like you more.
  4. Write notes after each meaningful conversation.
  5. Exit conversations gracefully.
  6. Follow up and connect on LinkedIn with new and renewed contacts.
  7. Put my LinkedIn QR code on my iPhone home screen to facilitate easy networking. Here’s how.
  8. Add new contacts to my CRM.
  9. Immerse myself in the programming. I am not going to check my email every second or do unnecessary work.
  10. Write a key takeaways blog and LinkedIn post from the sessions I enjoyed and tag the speakers.
  11. Create an email OOO message that supports my brand and business (see example from Paula Edgar).
  12. Have an intimate dinner with my clients/colleagues to get to know them better.

Do you have any tips for in-person networking in the post-pandemic environment?

Article By Stefanie M. Marrone of Stefanie Marrone Consulting

For more legal marketing and business of law news, click here to visit the National Law Review.

Copyright © 2022, Stefanie M. Marrone. All Rights Reserved.

The Cost of Bicycle Accidents: Why Bike Safety Pays Off

Along with the COVID-19 pandemic’s stay-at-home orders and a worldwide pause on travel plans, 2020 marked the onset of another phenomenon: a boom in bicycle riding. Bicycles gave people a sense of exploration and adventure during this difficult time.

This rise in cyclists comes with some sobering statistics, including a 16% rise in preventable deaths and a 5% increase in non-fatal injuries. Of the 1,260 bicyclist deaths reported in 2020, 806 of those directly involved motor vehicles. These injuries come at a significant expense: the over 13,000 bicycle injuries each year cost more than $23 billion in the United States.

But no one wants to experience a bicycle accident or the long-term consequences of one. Here’s what you need to know about bicycle safety to protect you or your loved ones while exploring the world on two wheels.

Bike accident risk factors

While the rise in bike accidents and their associated medical costs is primarily due to the increased numbers of bicyclists, there are risk factors that can affect specific individuals more than others. Common bike accident risk factors include:

Age

While adolescents, teens, and young adults make up nearly one-third of all cycling injuries treated in emergency departments, bicycle death rates are highest in adults between the ages of 55-69.

Sex

Compared to female cyclists, the death and injury rates of males are 6 and 5 times higher, respectively.

Traffic

Most cycling accidents occur in urban areas, with 64% of deaths occurring away from intersections and 27% occurring at intersections.

Alcohol

Nearly one-third of bicycling fatalities involved alcohol, either from the motor vehicle driver or the cyclist.

Bike accident cost breakdown

Fatal and non-fatal alike, cycling accidents cost the US billions each year. In addition to the injuries and fatalities which occur as a result of road accidents, there are personal costs to account for as well:

  • Medical bills

  • Recovery/rehabilitation costs

  • Loss of wages due to missing work

  • Possible changes to earning potential

  • Possible funeral and burial expenses

In terms of costs, the individual cost of a serious adult bicycle accident has grown from $52,495—medical bills, missed work, loss of quality of life—to $77,308. Today, the number would be even higher.

Of course, that’s not to mention the emotional burden of a cycling accident—especially if a cycling accident results in a long-term injury or the loss of a loved one.

That’s why prioritizing bike safety is so important. To reduce these costs, communities need to create better conditions for cycling, including safer cycling infrastructure (cycling tracks, improved street lighting) and widespread education about safe cycling practices.

Bicycle safety measures at the state level

Personal safety while cycling is critical, but state legislators in New Jersey have been working to improve safety measures for cyclists as well.

The Safe Passing Law, which was put on the books in August of 2021, requires drivers to leave at least four feet of space between vehicles and anyone sharing the road, whether on foot or by bicycle. A violation of these rules can result in a $500 fine and two motor vehicle points if bodily harm is caused.

The Division of Highway Safety and the Department of Transportation has been running a social media campaign to spread awareness about the law, an effort that included a $78,342 grant to the New Jersey Bike & Walk Coalition to educate the public on the law and the community impacts of bicycle and pedestrian safety.

Improving your bicycling safety

It’s essential to take the necessary steps to promote safety—for yourself and for others who share the road. While bicycle safety courses and education are essential, having safe bicycles and gear should also be part of the equation.

Make sure to budget for safety

Appropriate bicycling kits, from bare necessities to high-end gear, can cost anywhere from $150 to $1,000; costs can vary depending on the type of riding you do, the features you prioritize, and your budget.

Helmets, for example, may cost as little as $25 or as much as $500. Active lighting—white front lights, red rear lights, reflective tape, gear, and accessories—will typically cost a minimum of $45. Pumps, multi-tools, and patch kits can cost between $10-30 or more. Of course, investing in bright, visible clothing to wear while riding is also a good idea.

Cyclists should also regularly maintain their bicycles to keep them in good order. Many cyclists perform routine maintenance on their bikes themselves, seeking assistance from bike shops for parts and guidance. This can run between $300-500 a year in expenses.

While the costs of your bike’s features and accessories can add up, keep in mind that the investment is well worth it, as the cost of getting into an accident can be much higher.

Article By Domenic B. Sanginiti, Jr. of Stark & Stark

For more personal injury legal news, click here to visit the National Law Review.

COPYRIGHT © 2022, STARK & STARK

Large Corporate Bankruptcy Filings Continue to Decrease through First Half of 2022

Most industry groups saw bankruptcy filings decline from mid-2020 pandemic highs.

New York—Following the spike in large corporate bankruptcy filings triggered by the COVID-19 pandemic, filings in 2021 and the first half of 2022 fell to levels below historical averages, according to a Cornerstone Research report released today.

The report, Trends in Large Corporate Bankruptcy and Financial Distress—Midyear 2022 Update, examines trends in Chapter 7 and Chapter 11 bankruptcy filings by companies with assets of $100 million or higher. It finds that 70 large companies filed for bankruptcy in 2021, down significantly from 155 in 2020 and below the annual average of 78 filings since 2005. In the first half of 2022, only 20 large companies filed for bankruptcy, compared to midyear totals of 43 in 1H 2021 and 89 in 1H 2020. The 20 bankruptcies in 1H 2022 were the lowest midyear total since the second half of 2014.

“U.S. government stimulus programs, low borrowing rates, and high debt forbearance helped disrupt predictions of continued growth in the number of bankruptcy filings,” said Nick Yavorsky, a report coauthor and Cornerstone Research principal. “Looking ahead, however, there are some concerns that increased corporate debt levels, rising interest rates and inflation, and a potential global recession may contribute to an increase in bankruptcy filings.”

In 2021, there were 20 “mega bankruptcies”—bankruptcy filings among companies with over $1 billion in reported assets—a substantial decline from the 60 mega bankruptcy filings in 2020. The first half of 2022 saw four Chapter 11 mega bankruptcy filings, compared to nine in the first half of 2021 and at a pace significantly lower than the annual average of 22 filings in 2005–2021.

Most industry groups saw bankruptcy filings decrease in 2021 and the first half of 2022, including those industries with the highest number of filings following the pandemic’s onset: Mining, Oil, and Gas; Retail Trade; Manufacturing; and Services.

Read the full report here.

Article By Allie Schwartz, Joseph B. “J.B.” Doyle, Nicholas D. Yavorsky, and Diego Vega San Martin of Cornerstone Research

For more bankruptcy legal news, click here to visit the National Law Review.

Copyright ©2022 Cornerstone Research

Legal News Reach Episode 4: The Perfect Storm: Law Firm Marketing & Business Development Budgeting with Beth Cuzzone, Global Practice Leader of Intapp

Welcome to Season 2, Episode 4 of Legal News Reach! National Law Review Managing Director Jennifer Schaller is joined by Beth Cuzzone, Global Practice Leader of Intapp. Together, they discuss the best budgeting strategies for legal marketing departments as firms emerge from the pandemic with a new set of priorities and perspectives.

We’ve included a transcript of the conversation below, transcribed by artificial intelligence. The transcript has been lightly edited for clarity and readability.

Jennifer Schaller

This is Jennifer Schaller, and I’m the Managing Director of the National Law Review. We’ll be speaking with Beth Cuzzone, who’s the Global Practice Leader of Intapp. Beth, can you tell us a little bit about your background and what you do at Intapp?

Beth Cuzzone

Thank you for asking, Jennifer. I think it’s an important table-setting question. So I recently joined Intapp in 2022. It’s a global technology firm, and it partners with investors and advisors to help them run their businesses. And it basically follows those companies through the lifecycle of their companies, whether it’s intake or relationship management, or deal management, or billing or marketing or risk, and so many other operational functions. But my role Intapp sits in the marketing and business development corner of those companies. So as a Global Practice Leader, I’m responsible for working with a team of subject matter experts who help clients align their strategic priorities with our solutions. It’s been an interesting and challenging shift, because I spent more than 30 years of my career in the very types of companies that Intapp now helps. So it’s been an interesting and exciting and challenging change all at once. And I think it also gives me a unique lens into what we’re going to be diving into today.

Jennifer Schaller

Okay, wow, it sounds like a spot-on match here we have today. So let’s dig into it. We’re talking about law firm budgets. So for this upcoming budget cycle, for firms who are either almost done with it, or in the process, or close to wrapping it up. What’s different this year than in previous years in law firm marketing and business development departments?

Beth Cuzzone

In one word, everything. If we take a step back and look at the easy formula that law firms have used traditionally when creating their budgets, there hasn’t been a lot of secret sauce. In its simplest form, and I am oversimplifying it for illustrative purposes, but in its simplest form, law firms for years and years and years, and year over year, would take into consideration their former budget number and give it an increase that aligned with the firm’s increase in their revenue for that year. And then the real work would begin on saying, Okay, we’re going to give ourselves a 2 or 3% increase, because we increased our revenue by 8%. So we’re going to take some slice of that, and we’re going to increase what we did last year, and then they would reallocate that number. And so if it was my budget was $1,000 last year, and you know, now I’m going to increase it by 3%, it’s going to be $1,300. And now let me just play around with the line items and see where we want to spend a little more, where we want to spend a little less. Given the years that we’ve had coming up to the 2023 budget season, we had 2020, when the pandemic hit, we had 2021, where we were still experiencing the effects of that. And then in 2022 as people tried to move back into some normalcy of spend market, you know, marketing, outreach, awareness, credibility, relationships, going back into the office, that sort of thing, the budgets are a little bit all over the place. So to answer your question, why is this coming year’s budget different? It’s because you don’t have last year’s budget that you get to just reset.

The interesting thing is that I think it actually is going to provide opportunities to relook at the way you think of your budget and think a little bit about very specific line items. You know, I do think one of the places that people are going to spend a lot of time thinking about is digital marketing. And, you know, a question I had for you is, have you seen an uptick in the digital marketing spend from law firms, where we were pre-pandemic, to pandemic to where people are moving towards?

Jennifer Schaller

That’s kind of a multi-layered question. I mean, over the last five years, there’s obviously been a switch to more digital. There’s a couple of different things going on in the larger digital advertising industry. Advertising rates right now as a whole are pretty suppressed digitally. So that’s impacting us a little bit, just because the baseline is down. But if you’re in a specific niche, like the National Law Review, where you know, we very much have the traffic and the audience, there’s always going to be a demand for it. What’s going to be super interesting to see is when cookies go away. People keep talking about that, because that’s going to make the content on the website far more relevant, as opposed to having retargeting ads and things like that. But the date keeps changing on that. So, you know, we’ll let you know when we know. And related to publishing end of it, there’s been a bit of a sea change on that. There always was sort of a pushback or a stigma somewhat attached to pay-for-play publishing. But a little bit of a difference with that is, over time, most marketing professionals, especially in legal, understand that there’s costs involved in running a quality publication, if you want to have analytics, if you want to have a responsive staff who’s around to make edits, that you have to pay for that, and that, you know, if you don’t have money coming in from subscriptions, if you’re a no login website, that there’s going to be cost. So there’s been a bit of a change there. There’s more receptiveness to it. And I think maybe because law firms themselves understand what it takes to publish, they’re a little more forgiving, and understanding that we have costs too, if that makes any sense.

Beth Cuzzone

It makes complete sense. It makes complete sense. And again, there’s no direct answer to some of these complicated questions that we’re asking each other today about where people are spending and where it’s going versus where it’s been when we’ve had this pause on so many levels. And like you said, I also just think that the lens of the marketing and business development departments and law firms are really starting to appreciate that looking at digital assets as a way to create awareness and credibility is going to be a leader in their budget.

Jennifer Schaller

Well, yes, especially since events have changed and gone away. And a lot of sponsorships have changed. And given that pandemic ripple effect of live events versus sponsoring tables at events, which used to be a part of legal marketing department spends, what’s becoming more the standard for law firm, legal marketing department and business development spend, is it changed? Is it reallocating? How is that working?

Beth Cuzzone

That’s a great question. So typically–I heard somebody say once, law firms are like snowflakes, everyone is different. And I know that when I look at industry statistics that talks about the swing of spend, that has to do with you know, the percentage of revenue of law firms, that it goes anywhere from 2 or 3% to 18, 19, 20%. And the reason that they have that swing is because in some marketing and business development department budgets, they include personnel when others don’t, okay, or in some marketing and business development, department budgets, it’s all marketing, whether it’s for the HR department, or legal recruiting, or the firm, and others. Those are each very separate departments and separate budgets. So there is this huge spread across the industry. But I think for most firms, we’re going to find that there’s that 3.5 or 4% to 8% budget target of revenue. And that’s kind of where people settle in. There are outliers on both sides. And interestingly, there’s often some surprises. I find that sometimes some of the smaller, mid-sized firms have larger percentage budgets. But I think that’s because they can’t enjoy the scales of economy that larger firms can. If you’re looking at your budget, and we can talk about this in a little bit, you know, in 2020 when the pandemic started, all discretionary budget items were removed from law firms, whether it was in marketing and business development or not. So it was like, “Unless we’re contractually obligated to pay something, we’re taking it off the table.” And so now firms are getting that opportunity to rebuild it. And again, that approach and that budgeting exercise is a real opportunity for these firms to say, “What haven’t we been asking ourselves?” Or, “What haven’t we done that we’ve wanted to? What’s not in our budget? What should be or what are the opportunities out there in terms of places or people or technology or intersections that we’ve never tried before?” So I think there’s some of those questions that are happening, too.

Jennifer Schaller

Yeah, I think if anything, this is just helpful to know, to have legal marketers or even law firm administrators, or management know how to ask questions about legal marketing budgets, that there is such a wide range, but the wide range prompts people to ask the question, “What’s in that figure and what’s not?”  I’ve never really had it broken down that well before. So thank you for taking the time to spell that out. Because it’s not spelled out a lot of different places. Many people will appreciate that.

When you’re talking about law firm marketing budgets, what’s the difference between acquisition marketing and retention marketing and preparing budgets? Should law firms dedicate more resources to one or the other? Or is it some sort of blend?

Beth Cuzzone

That is a very forward-thinking question that you’re laying out there. Because I think that law firms basically had two types of buckets, if you will: they thought of it as awareness and credibility building, or relationship building, it was one of the two. And so they had some things around awareness and credibility, we talked a little bit about it earlier, you know, it’s that one to many, the website, you know, the content, the newsletters, the big events, that sort of thing. And then the relationships are kind of those one-on-ones. It’s the spending time going out and sitting down with a prospective client to learn something, or having an entertainment budget or doing some small roundtables with thought leadership, or sitting down with different decision makers at a particular client site so that you’re staying close to them. And it was a little bit all over the place. And the shift that I’m starting to see happen is that law firms are starting to break down their budgets into exactly what you said: acquisition marketing, which is, “How are we getting new clients?” versus retention marketing, which is, “how are we keeping and growing the clients that we have, or the brands that we have, or the relationships that we have?” And by doing that, they’re also starting to do account-based marketing. And they’re able to put their budgets together and say, “We’re going to spend 70, or 60, or 80% of our budget on our existing relationships, because we know that it costs six to eight time more money, resources, people budgets to get a new client than it does to keep and grow an existing one. So when you look at the scale of acquisition versus retention, retention is going to get that bigger budget. And then the acquisition is going to have a smaller wallet share of the overall budget. But within that big budget, you’re going to start that retention budget, you’re going to start to see that being broken down a little bit by account-based marketing as therefore account based budgeting. Again, this is a little bit around the corner. And this is I think what firms are going to be dealing with over the next five years of exactly being able to measure their return on objectives or their return on investments and where their money is really being spent. Because they’re going to be tying it down to very specific objectives and very specific strategies, if you will.

Jennifer Schaller

Okay, so what would be some of the areas that there would be an overlap, like between acquisition and retention marketing, would that fall in the digital area? Or where would that be?

Beth Cuzzone

That’s a perfect example, please look at what we’re talking about like a Venn diagram, right, you’ve got your acquisition, you’ve got your retention and then there’s the place where they overlay. Digital assets are a perfect example that fall into both. It’s helping you in the marketplace. And it’s helping you find your next big relationships and clients and referral sources. And those are the same assets that you can use to add value and stay close to some of your existing relationships, places where they start to separate a little bit, again, is really by account or by client, client-based marketing versus account-based marketing. And so you might have a firm where you say, we’re going to spend a lot of our travel and entertainment budget on going to each one of their offices and doing junior executive training. So that we’re aligning ourselves with the next generation of decision makers, and that’s how we want to spend our money and our time and our budget and our resources and our people on that particular client this year, sort of thing. So it all depends, again, on the strategy. And it also depends a little bit on the firm.

Jennifer Schaller

Yeah, would it vary by practice group, or just like, if you had a firm that was, you know, just intellectual property law based, would there be differences in the ratio or the mix or network?

Beth Cuzzone

That’s a great question. So there are some firms and also practice areas where there’s annuity streams, if you will, right. There’s just an ongoing, “We represent this particular finance institution on all of these sorts of loans. And, you know, we do 5, 10, 15 a year for them.” Think about if you were actually a litigator, and you were representing financial institutions where you didn’t know how many you were going to have in a year or whether you were not going to have any for two years and how they think of you and they call us when it’s about the company or they don’t call us when it’s about the company so you have to again, look at the firm, its strategy, the cadence of those open matters, the cadence of when they’re being asked to help clients and then try to align your budget and the activities in your budget around those very objectives. Does that make sense?

Jennifer Schaller

Yeah, it does. A lot of what you’re breaking down is really helpful because people throw numbers out there, but they don’t go into the details of what moves the numbers up or down, like your example of depending on if the law firm is including the expenses for HR, or including the salaries of the marketing department in there, that should make a big difference. And nobody really spells that out. So that was very helpful.

Beth Cuzzone

What kinds of trends are you seeing…there’s this nuance that’s happening now Jennifer, where there was a period of time “back in the day” where all law firms took out one-page ads in some of the biggest business-to-business publications and journals, or like yours, very, very niche, industry-specific news-related channels. And it was “we want to be top of mind” with whoever the reader is, whether it’s our peers, whether it’s our competition, whether it’s a referral source, whether it’s a potential client, whether it’s somebody on the other side of the table, and over time, that awareness campaign started to move into that content campaign. And I’d really be interested to see how are law firms maintaining that mindshare in the marketplace? What are you seeing?

Jennifer Schaller

Some big change from print, and what’s really changed–COVID was sort of terrible for the world, but in a lot of ways good for law firms and legal publishing. Because there were so many rapid developments of a legal or administrative or regulatory nature going on, there was just a lot of content to be written on and a lot of people looking for that content. So there was inherently a lot of traffic just being driven by COVID and all the related changes to it. Now that that’s leveled out a little bit, what we’re seeing from law firms is when they do their informative writing, meeting, talking about cases that happened and why that’s important to a particular industry, or new regulations that are on the horizon, what’s a little bit different is they’re starting to impose–not impose, but impart–their personality a little bit more. We’re seeing more content come in where it talks about people’s journey in the legal profession, how they balance working from home or transitioning out of working from home in a little bit more with the content. So before there was very little of that. I mean, there was some. It’s pretty prevalent now where we’ll see many law firms just have entire blogs and podcasts and a whole kind of vertical dedicated to life balance, people’s career paths, and things like that, which is a bit different than what we’ve seen before. I think it provides a good opportunity for law firms to tease out their competitive differences just by letting people know who they are, because ultimately, with law firms, they’re buying the person and their knowledge and their background. And this is kind of a more forward way of doing it than what’s been done in the past.

Beth Cuzzone

You know, it’s so interesting to hear you say that. I don’t think I really put such a fine point on it until you just mentioned it. All law firms do the same thing. For the most part, a general practice firm does the same thing as the next general practice, you know, an IP boutique does the same thing as the next IP. But how you do it, who you do it with and the culture is what your differentiator is. And you’re right, as I’m thinking a little bit about the sorts of information that I’m seeing, either the types of information or the personality in which people are writing, it really is giving firms a way to showcase their culture and who they are and their differentiator as opposed to all sounding like really smart law firms.

Jennifer Schaller

It’s that and I think it’s a little bit recruiting as well. I mean, the whole world has experienced quite a bit of turnover. Law firms have always had more turnover than other industries. So we’d have some stuff coming in where folks are interviewing their summer associates. And they’re doing that on a couple different levels. I think it plays to people who may be interested to know how a person got a summer associate position at an Am law firm, but also, you know, it’s a big hug to that person, and it shows in a recruiting sense that that law firm really cares about folks at all levels of the organization. We wouldn’t have seen that 10 years ago, so that’s just really different.

Okay, so let’s get into the fun part: budgeting tips! You’ve been doing budgets for years, you work with an organization that helps law firms kind of balance competing things for their attention and help tease out what’s probably the best bet for the firm. Do you have a few tips to share with our readers, or our readers and our listeners today, concerning law firm budgets, what to include what to not get pushed back on?

Beth Cuzzone

Yes, I think that there are a few best practices out there that law firm marketing and business development departments want to be thinking about as they’re either negotiating their budgets with firm management, or if they’re actually putting it together. We talked a little bit about the fact that historically firms have used the previous year and that budget number is a benchmark. Ironically, in 2022 law firm marketing and business development budgets increased by more than 100%. And again, it’s because in 2020, and 2021, they were decimated, it was the place where there was the most discretion in the budget, there were things like they weren’t going to be doing sponsorships, they weren’t going to be holding webinars, they weren’t going to be traveling to see clients or things–like take it all out. So then when we started to move towards this normalcy of, “let’s get back to business in 2022”, with a kinder, gentler, more softer approach, they had to increase their budgets by more than 100%. So the first thing I would say is, do not prepare your 2023 budget based on your 2022 budget, because you’re going to show that there’s already been 100% increase, and there will probably be very little wiggle room. I would also scrap 2020 and 2021. So I think one of my tips or best practices is, use 2019 as your benchmark, not 2021 or 22. For the reasons we’ve just talked about.

The other thing, you just mentioned this in the way you asked the question, is that there is a very complex ecosystem in law firms, and the marketing and business development budget is one of many competing priorities. And I think understanding that budgeting is a long-term game, not one you win every year. And so what I’m trying to say is, take a panoramic view of where the firm is, what they’re trying to accomplish, what some of their major goals are for the next year or two, look left and look right at what other operating department budgets are going to be impacted by that, and prepare your budget within the context of what’s happening. So don’t ask for the greatest budget increase among every operations department, every year. There becomes a fatigue, where it’s like, “Nope, just give them the 2%, we’re not going to listen to why they deserve more every year, year over year than every other department.” So I think walking in and being able to communicate, “We understand that lateral growth is one of our top strategic priorities, and that you’re going to be spending a lot of our budget on legal recruiting. So this year, I’ve put in some particular items and activities that will support legal recruiting, and I’ve moved my budget request from a 6% increase to a 2% increase.” And again, you can negotiate two or three years in advance, then say, “I just ask that when we’re looking at my budget in two years, or in three years that we appreciate that I’m asking for a smaller increase this year, given where we are, what we’re doing.” You know, it also goes a long way when there’s been a down year.

So, so far we’ve said, use 2019 as your benchmark, don’t ask for the greatest budget increase among every operations department every year, try to negotiate for two or three years in advance at your firm, but also negotiate two or three years in advance with your partners or vendors, depending on what you call them. You know, to be able to say, “Listen, we want to do this. And we can’t be all-in this year because our budget isn’t going to allow us, but can we negotiate an 18-month relationship with you and spread it over a 24-month period?” Negotiate a little bit! These are companies that want to partner with you. I also think it never hurts to ask and get comfortable with, again, just partnering with your vendors. That’s why I always call them partners and not vendors. Be comfortable with partnering with them and saying, “Look here are two or three things I’m trying to accomplish. And I only see one of those things in the proposal that you sent to me. Are there some things that you can put in here that are revenue neutral? Or are there ways that you can reallocate our spend and help me hit these other budget objectives?” They’ll work with you. So negotiate with management and then partner with your vendors.

I’ve been talking with a lot of firms. And another thing that I’m seeing firms really start to do is ask themselves, “Where is the lowest risk and the highest return?” and vice versa, and making sure that your budget is representing that like, “Boy, this is the lowest risk and a really good return. So we’re going to do more of this. And this is a really high risk, very questionable return. We’re going to do less of this.” And by the way, having those conversations with your management committee or your manageing partners or your executive committee about the ways that you’re looking at risk versus return, or contextually where you are in the firm’s operational churn, if you will, those sorts of things will help you in the long run.

Jennifer Schaller

It’s really great that you point out the need to let your vendors know what your goals are. It’s very challenging sometimes when people are like, “What’s the price? You know, what, what, what is your best price?” What is important to you? It’s not really a negotiating technique, we want to know where to focus to best meet your needs. And if we have no concept of what your goals are, or what you’re trying to highlight, it makes it infinitely more challenging.

This year, or any historically, are there budget items that you would suggest CMOs pay more attention to this year than in previous years or anything that’s unique about this year that they might want to highlight other than the points that you made about using 2019 as a base point versus the previous two years? Which were just weird. Is there anything else different?

Beth Cuzzone

You know, I think this is the time everybody is peeking over the horizon wondering, “Is there a downturn? Is there a recession? Is there a down year coming? What do we do?” You know, you’ve got, you’re asking yourself all of those questions. I think this is also a year, when you’re looking at your budget, to look at things that are driving efficiencies, scalability, revenue generation, right? There’s a difference between cost and investment. Make sure that your budget has a nice healthy mix of, “These are things where we want to spend money to get more money. And then these are places where we want to spend money so that we can meet an objective,” and I call them return on objectives, and return on investments. “We want to be known in this new market. We want to open up an office in Texas. And so we’re going to be spending a lot of time and money and energy and budget on really getting the word out creating some top of mind awareness in Texas.” That’s an objective, right? If it is that we really want to get a little closer to the bottom quartile of our clients in terms of revenue and say, “How can we help them with more problems than we do now? How do we take them and really try to grow the wallet share that they spend on outside counsel?” That’s a return on investment. So you know, have that healthy mix on return on investment, and return on objective.

Jennifer Schaller

Fair enough. So briefly, your firm Intapp? How do they help law firms with their budgeting process? Are there specific things that they’re set up to do to help?

Beth Cuzzone

Thank you for asking me that and for being so gracious. Because yes, I think the answer is yes. So Intapp can help law firms create insights to find revenue, find where there’s work that’s more profitable, find where, you know, there’s whitespace, and opportunities, or be able to basically measure things, and have this one source of truth in your law firm, where you’ve got all of these technologies that help all of these different operating departments that all connect, that’s why it’s called Intapp, there’s an integration to this, and they all integrate and talk to each other. And those kinds of insights can inform law firms about the kind of money that they’re spending and the kind of return that they’re getting. And it can be as simple as looking at your marketing campaign open rate for your last email, all the way to looking at some very strategic insights of “here are some spaces or places in our firm where we could be working closer with clients, or an industry where we haven’t saturated as much as we could.” So it can go from tactical to strategic, and that’s what Intapp does. That’s why it’s such an amazing company.

Jennifer Schaller

So is Intapp more process or technology based or kind of marrying the both of them when they work with law firms?

Beth Cuzzone

That’s another great question. So it’s a technology company. And I think the thing I’ve been most surprised with is the brainpower that sits in Intapp and all of the people that are there to help clients successfully deploy, or change management professionals that help you get more engagement at your firm, or help you with use cases of smarter ways to use the technology.

So Intapp sells technology that has professionals that help you with the people in the process as well. It’s a little competitive secret.

Jennifer Schaller

Sounds like a good match. As always, we appreciate Beth’s time sharing her thoughts with us and her experience and kind of the trends that she’s seeing and marrying it with the experience that she’s had over the years. Thank you very much.

Beth Cuzzone

It was so great to see you, Jennifer. So great to see you. Thank you for inviting me and be well. True North.

Conclusion

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