KING & SPALDING’S REVERSAL OF FORTUNE

It was an impossible task. Take a multimillion-dollar a year big law partner with unambiguously conservative Republican credentials and make him look like a combination of Atticus Finch and Clarence Darrow as he pursues the far right’s ideological agenda. Somehow, while working at cross-purposes, Paul Clement and King & Spalding pulled it off. What should have been a non-event became a major story because the firm said yes to Clement’s representation of House Republicans in Defense of Marriage Act (DOMA) litigation – and then it said no.

But the issues are more complicated than the headlines and current talking points.

With words befitting the talented advocate that he is, Clement relinquished his lucrative equity partnership saying, “Defending unpopular clients is what lawyers do.”

Dutifully, Hays fell on his sword in expressing the firm’s official non-explanation for its about-face: “inadequate vetting.”

Attorneys across the political spectrum condemned Clement’s former firm while praising him for adherence to the maxim that everyone deserves representation. Even President Clinton’s solicitor general, Seth Waxman, commended his allegiance to the “highest professional and ethical traditions in continuing to represent a client to whom he had committed in this very charged matter.”

Let’s suspend the hyperbole for a moment of analysis and reflection.

– “They’re Not Entitled to Me”

The target audiences for Clement’s lofty rhetoric were the media and the public, not King & Spalding’s Chairman Robert D. Hays, Jr. — the resignation letter’s addressee. Clearly, Clement scored a public relations bullseye.

He began with the suggestion that his personal “thoughts about the merits of DOMA are as irrelevant as my views about the dozens of federal statutes that I defended as Solicitor General.” Not quite. The solicitor general must always take the same side – the government’s; attorneys in private practice can say no. As Harvard Law Professor Alan Dershowitz told my classmates and me 35 years ago: “In our system, everyone is entitled to representation. But that doesn’t mean that everyone is entitled to me.”

When attorneys wrap themselves in their roles as advocates for unpopular people and positions, it’s worth pausing to consider whether such nobility is easier because it coincides with their ideological leanings. Clement urged that “being on the right or wrong side of history is a question for the clients.” But whether to represent a client is always a question for the attorney. Would Clement have taken the other side in DOMA cases? Based on his record, that seems unlikely.

His new home is Bancroft PLLC, now an eight-lawyer firm that looks like a Republican government-in-waiting. Clement’s conservative dots connect easily to his newest employer: beginning with clerk to Justice Scalia to associate in Kenneth W. Starr’s appellate group at Kirkland & Ellis to solicitor general for President George W. Bush. Pursuing a far right rallying cry doesn’t look like much of an ideological stretch. There’s nothing wrong with that; it’s just true.

– What Went Awry?

Wholly apart from any proximity between his client’s position on DOMA and Clement’s personal politics, King & Spalding missteps created the story. If the firm had simply failed to approve Clement’s initial request to take the cases – as big firms often do – no one would have noticed or cared. That didn’t happen, but what did happen at King & Spalding could have arisen elsewhere throughout big law. Here’s how.

First, money matters. DOMA was never a pro bono affair for King & Spalding. In the prevailing big law model, a revenue dollar is a revenue dollar and new business is new business. Cases and deals generating media attention are especially attractive, in part because they help in The American Lawyer’s annual “Best Departments” competition.

The House of Representatives, a high-profile client, agreed to pay a blended rate of $520/hour with taxpayer dollars. Clement charges more than that for his time, but blended means that every lawyer on the case — all the way down to first-year associate — bills out at that $520 hourly rate. Although appellate matters are top-heavy, partners typically control staffing to make money on blended rate deals. (A $500,000 cap was subject to negotiated increases.) The case also offered another win-win possibility: attracting other conservative clients.

Second, someone at King & Spalding underestimated the backlash. I don’t know what Hays meant by “inadequate vetting,” but partners typically brag to firm colleagues about noteworthy new business as they’re trying to land it. Somewhere amidst the backslapping, they can forget other considerations that matter. Here, the intense adverse reaction came swiftly, certainly and, apparently, surprisingly. The surprise would have been a byproduct of myopic revenue generation; magical thinking at the outset can assume away all potentially bad consequences.

Third, once a new client matter is approved, firms typically let the partner in charge finalize the details. I don’t know whether King & Spalding did that here, but I wonder if anyone at the firm other than Clement read the retention agreement prior to its execution. If so, the implications of silencing an entire national law firm (including staff) must have arisen. A gag provision barred everyone in the firm from engaging “in lobbying or advocacy for or against any legislation (i) that is pending before the [House] Committee…[through January 3, 2013], or (ii) that would alter or amend in any way the Defense of Marriage Act and is pending before either the U.S. House of Representatives or the U.S. Senate or any committee of either body….”

Whose idea was that? Private employers can impose lots of restrictions on employees, but some observers have suggested that this sweeping ban violates state law where King & Spalding has offices, including California and New York. In any event, personnel throughout the firm might have been astonished to discover that, as of April 14, their jobs now required that they forego free speech on personal matters near and dear to many of them. The provision certainly didn’t astonish Clement, who signed the agreement on his firm’s behalf.

– The Road Not Taken

Clement concluded with Judge Griffin Bell’s statement that an attorney who undertakes a representation should finish it. But that proposition is far from immutable. Attorneys decide whether to leave clients all the time, but without the underlying morality play that developed here. Examples: A lawyer laterals into a new firm after saying good-bye to clients that would pose a conflict if he brought them along; or the new firm sends an existing client packing to accommodate the lateral’s more lucrative business; or a firm simply jettisons an existing client in favor of a more financially promising one. Here, the ink was barely dry on the April 14 agreement before Clement resigned from his firm eleven days later. If he’d chosen to stay, the client would have faced little hardship in transitioning to replacement counsel.

The firm now weathers a storm of critics who argue that it has forsaken the profession’s finest traditions by abandoning a client with an unpopular position. Some will distort the issues for political gain, as Virginia’s attorney general already has.

Meanwhile, Clement retains a moral high ground that some people have been too quick to give him. Did he consider the gag provision’s breadth, scope, or potential enforcement problems? Would he have counseled a client — any client — to agree to it? Imagine the outcry if tobacco companies tried to prevent all employees of their outside law firms from using weekends and evenings to advocate anti-smoking legislation.

As an outstanding appellate advocate who has been mentioned as a possible U.S. Supreme Court candidate in a Republican administration, Clement knows that final decisions should be based on a complete record that includes all of the evidence. The current judgments identifying the heroes and villains in this saga are premature.

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13 thoughts on “KING & SPALDING’S REVERSAL OF FORTUNE

  1. An extremely thought provoking and interesting piece on the issue.

    This affair is reminiscent of the great controversy surrounding the ACLU’s decision in 1994 to defend the right of Nazis to conduct a march in largely Jewish Skokie. The ACLU defended its decision to serve as counsel as an obligation to defend freedom of speech for all. In the end, the ACLU prevailed in the litigation, but lost 3,000 members and saw its fund-raising efforts suffer. The march did take place with a small scraggly group of Nazis, far outnumbered by counterdemonstrators.

    Every act, as we tell our kids has consequences. This morning, the NRA fired King & Spalding advising it “We believe King & Spalding’s decision is indefensible and raises serious concerns about its ability to be a reliable and effective advocate for any client facing potentially controversial litigation.”

    But, for once, I find myself disagreeing with you on two matters you raise: First, a law firm may not, under the Model Rules of Professional Responsibility, fire an existing client in order to take on a lateral who represents adverse interests. Second, the $500,000 “fee cap” is well understood by all not to be a cap, but the amount that would have been billed and presumably paid. My bet is that K&S may have already burned that amount of (unbillable) time at standard rates internally debating the issue and dealing with the continuing public debate.

    Jerry Kowalski

    • Thanks, Jerry. I think we disagree less than you think. My point about laterals and conflicts wasn’t meant to cover the “hot potato” situation — dropping one client to take on another that is directly adverse in the same matter or proceeding. As you correctly note, whether via a lateral hire’s incoming business or otherwise, that sort of switching sides is generally impermissible. Rather, I was alluding to the business decision that law firms sometimes make, namely, to take on a lateral and his or her clients, even when it poses a problem for the firm’s less lucrative existing clients. Feel free to correct me if I’m wrong, but I don’t think the Model Rules bar that behavior. In fact, lawyers representing the firm’s incumbent client sometime leave with that lesser-valued client. My point about what others call the “cap” is that it wasn’t. The provision itself acknowledged the possibility that it could be “raised by written agreement between the parties with the approval of the Committee….” (para. 2) $500,000 was the opening budget, not a fixed fee set in stone.

  2. When I was a litigating partner at a significant New York law firm, my firm and I were retained to act as special counsel to a creditors’ committee to pursue a $900,000,000 lenders’ liability against a bank group in what was then one of the largest Chapter 11 proceedings pending at the time. The official equity holders committee, represented by another prominent New York law firm, successfully petitioned to join the case as a party plaintiff.

    In the midst of discovery proceedings in the case, the firm representing the equity committee merged with a major national law firm. That latter law firm regularly represented major lenders and the firm’s management committee instructed the lawyer in charge of the equity committee representation to withdraw from the case, since it might adversely affect the firm’s relationship with its bank client base (none of that firm’s banking clients were parties in the litigation). The lawyer refused, saying, among other things, that the firm was well in to the case and withdrawal would prejudice the firm’s client – the equity committee, to which it had an existing duty. The management group told him if he wouldn’t file a motion to withdraw, it would have another partner file the application.

    In fact, the firm did precisely that and filed, over the signature of a different partner, a motion to withdraw, based on the claim that the firm had a substantial bank client base and an adverse holding in the case might adversely affect the firm’s other clients in future similar litigations. The lawyer at the firm responsible for the creditors’ committee representation actually filed a brief in opposition, citing, among other things, the duty to the existing client and a lawyer’s duty to zealously advocate on behalf of a client, regardless of a lawyer’s personal beliefs or views.

    The hearing on the motion certainly had a bit of a circus-like atmosphere about it, as partners in the same firm vigorously took opposing views. Since I didn’t have a dog in that race, I did not file any papers in connection with that motion. But, after hearing the tow law partners growling at each other, the bankruptcy judge asked me if we had any position on the matter.

    I rose and said “Your Honor, before Abraham Lincoln entered politics, he achieved great success as a prominent trial and appellate lawyer. On one occasion, he appeared before the Illinois Supreme Court and argued vigorously and eloquently on behalf of one of a railroad company, one of his major clients. The argument concluded and Lincoln took his seat and an hour later a different case was called and Lincoln rose and approached the podium again. In connection with this new case, Lincoln advocated, equally forcefully on behalf of a claimant against a different railroad company, on facts remarkably similar to the earlier case and involving identical legal issues. The Chief Justice turned to Lincoln and said, ‘Mr. Lincoln, moments ago, we heard you make a masterful presentation taking a diametrically opposite point of view. Surely, sir, you do not expect to win both cases, do you?’ ‘No, sir,’ Lincoln replied, “but I don’t expect to lose them both either.’”

    I took my seat.

    The bankruptcy judge took a brief recess and upon his return gave the other side a severe tongue lashing about a lawyer’s duty to an existing client, stating it was the highest duty of a lawyer to advocate zealously on behalf of a client, regardless of a lawyer’s personal views. The court went on to address the unseemliness of a lawyer abandoning an existing client to curry favor with a different or even a potential new client. The motion was denied and an outstanding law firm succeeded in only embarrassing and demeaning itself.

    Change of fortune, indeed.

    Jerry Kowalski

    • Great story. I assume the judge based his decision on the “material adverse effect” that withdrawal would have on the client that the firm was trying to abandon. (Model Rule of Professional Conduct 1.16) That requirement remains, but law firm mergers and lateral movement of attorneys — coupled with standard waiver language in retention agreements and Chinese walls — have had a dramatic impact on the frequency with which firms now drop clients. (See the comments to Rule 1.7, 1.9, 1.10) Obviously, it’s even easier in non-litigation matters that don’t require any court involvement. But it happens in litigation, too. I agree that this development hasn’t enhanced the reputation of firms that do it.

      Of course, none of this matters to the Clement/King & Spalding controversy. If Clement thought abandoning his client violated a Rule of Professional Conduct, he’d have cited it in his resignation letter.

  3. Yes, the judge based his decision on the “material adverse effect” as well as the far more rigorous standards that were required under the former rules to withdraw from a pending case once counsel made an appearance in the case. Among other things, you needed to show either a breakdown in the attorney/client relationship (the client, the equity committee, had filed an affidavit attesting to the strong ongoing relationship as well as the trust and confidence the committee had with the lawyer handling the case); a fraud that the client was perpetrating on the court or some other form of egregious behavior. Non-payment of fees (not an issue in that case) wouldn’t warrant leave to withdraw.

    A “Chinese Wall,” which was first coming in to vogue at the time, wasn’t relevant, since there was no direct client conflict. The only concern the other firm’s management had was that the litigation would result in a precedent that lenders might cite against banks in the future, assuming we prevailed, asserting lender liability.

    The case actually was ultimately settled on terms most favorable to our side.

    Jerry Kowalski

  4. I would be very interested to see the public reaction that would have resulted if Clement’s client had been a progressive darling, fired because the rest of the law firm were staunch conservatives.

    If the retention agreement did impose a gag, I agree with you that that portion was inappropriate. I’d have supported the law firm in demanding the removal of the gag, on pain of withdrawing from the representation if the client refused. I have heard nothing to suggest that any such solution was pursued.

    Otherwise, this is no different from a white-shoe law firm that demands the withdrawal of one of its liberal partners from the representation of a famous liberal activist in lawsuits or criminal charges brought against him by conservative administration.

  5. I would suggest that the Model Rules of Professional Responsibility requires the law firm to and each of its lawyers to have an undivided duty of loyalty to a client and that advocacy inconsistent with the best interests of the client is a breach of the law firm’s obligations to the client. Thus, the language in the retainer agreement precluding inconsistent advocacy or lobbying efforts adverse to the client’s interests, I would submit mere surplus sage.

    For example, a law firm that might regularly defend utilities against claims of environmental damages caused by their operations would be precluded, as a matter of professional responsibility and ethical propriety to mount a lobbying campaign, either for a paying client or on a pro bono basis, for more stringent regulatory enforcement or enhanced penalties for polluters. Or, while K&S was representing the NRA, the same rules precluded it from lobbying for more stringent gun controls.

    These rules apply to all sides of the political spectrum. A law firm engaged by an environmental protection group to advance its causes similarly would be precluded from lobbying for lowering pollution protections.

    Yes, this might theoretically infringe on a lawyer’s freedom of speech rights, but the Model Rules and various local court rules are replete with constraints on a lawyer’s otherwise unfettered freedom of speech and thus frequently infringe on those rights.

    When you took your oath upon admission to the bar, you did leave many rights behind.

    Jerry Kowalski

    • Now we disagree. The House Contract for Legal Services didn’t limit the gag provision to lawyers. It reached all K&S personnel, regardless of whether the employee had any involvement in the DOMA matter. Particularly given the limited scope of the retention itself, that’s not surplusage; it’s stunning (at least to me). Moreover, the Contract doesn’t define or limit the term “advocacy” at all, much less in the way you suggest.

      For better or worse, the Model Rules have developed to permit techniques that don’t square with the much broader “duty of loyalty” definition that you imply. Among those techniques, waivers and Chinese walls allow a single firm to engage in multiple simultaneous representations that, on their face, would run afoul of your construct. These tools are one of the ways that big law has grown so big.

  6. One thing I have not seen remarked on is how this relates to how firms work. For one thing, they are managed by people. For another, though personal political views have some impact, it is mostly about money. The way this would have happened at any firm I’ve been in would be that some one or more partners with a big book of business in the firm, probably on the management committee, decided the representation would hurt their book of business. Not the firm’s overall, which is but a secondary consideration, but theirs personally. And he or they had the clout to make Clement decline it or leave. This happens with “business conflicts”, which are something different than actual ethical conflicts, all the time in firms. The powerful partners tell the less powerful partners what will happen, in order to protect the more powerful partners’ revenues. (And no, I don’t buy the excuse of the offending provision in the agreement. That smells like an after-the-fact justification. Firms sign all types of engagement letters with odd provisions without thinking about it all the time.)

    Personally, where there is no actual ethical conflict, I don’t think lawyers should veto prospective clients based on whether they anticipate other clients will like them. But law firms are businesses that allow that all the time.

    • Your “business conflicts” point is well-taken.

      As for the gag provision, no one at King & Spalding has raised it as an “after-the-fact justification” for the firm’s actions that led to Clement’s departure. To the contrary, the firm’s official statement has remained limited to “inadequate vetting” — and nothing more. Rather, I raised the issue because the provision was so remarkably broad that it should have raised red flags somewhere during the vetting process. I don’t know if it did, but it’s possible, as I suggested that K&S leaves it to individual partners-in-charge to work out the details of a retention agreement once overall client approval has occurred. At a minimum and without a more complete record — which we may never have — the fact that Clement personally signed the agreement containing the onerous provision should give rise to questions that haven’t been answered (like who’s idea was it — who signed off — what were they thinking).

      At a minimum, those questions should give pause to some of the unrestrained enthusiasm that Clement’s resignation has generated in some corners. In 30 years of big firm practice, I’ve never seen a gag provision so broad. And my firm took on many controversial, politically charged matters across the entire political spectrum.

  7. Regardless of whether the K&S decision on undertaking the DOMA defense was appropriate when initially made or defensible when the firm decided to disengage itself from the matter, the firm was inadequately prepared to handle the media storm that followed. Every law firm needs to have in place a crisis communication plan when the day comes that it is under media attack . We’ve seen, as you have so well catalogued, the fact that firms have actually slipped under the seas because of their inadeqautely responding to press inquiries or being inadequately prepred for press scrutiny when the law firm itself finds itself under the media microscope. (http://kowalskiandassociatesblog.com/2011/04/21/law-firm-crisis-management-planning-developing-and-implementing-a-public-relations-and-communications-program-for-law-firms/ )

  8. The fact is that certain types of clients in certain categories will insist you sign their engagement letter or not do the work. It is not just the US Congress that has overbroad or other provisions that could cause future problems, it is often corporate America. Sometimes lawyers see the issue when reviewing the letter, but sometimes they don’t. Some of the issues can be quite subtle. If they do, sometimes they decide to push back, but sometimes they don’t, figuring it is something that will never arise. I’m not saying that the questions should not have been raised about that provision in particular, or that there are not some good questions about how firms vet these in general. I am saying, however, that I’d be surprised if K&S or any other large firm had not signed lots of engagement letters with just as bad a provision or worse, that are sitting in files that will never be looked at unless something goes wrong.

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