Article

Forecast for Legal Work Under Obama

January 01, 2009

By: Maria Kantzavelos

When Chicago's own Barack Obama is sworn in this month, making history as the nation's first African-American president and inheriting an economy in crisis and two wars, lawyers in the city will be among the many observers on the lookout for how the next four years will play out.

About two months before Obama was to take office, local lawyers talked with Chicago Lawyer, offering their predictions for how an Obama administration might impact certain practice areas.

From more regulation in banking and increased federal regulatory oversight in general, to an emphasis on addressing global warming and workers' rights, lawyers prognosticated about some of the legal changes that could come with the administration of the former Chicago law firm lawyer who ran for the presidency on a platform of change.

Here are some highlights of those speculations.
 

Financial factors

Chicago-based lawyers and law firm consultants said they see a changing climate that features more governmental regulatory oversight -- in such areas as the environmental arena and consumer product safety. And, more certainly, lawyers foresee increased oversight of the financial sector.

"Any area that involves government regulation is going to be a focus of the new administration," said Nathan P. Eimer, name partner in the corporate litigation firm of Eimer Stahl Klevorn & Solberg. "If you have a regulatory practice in terms of compliance or litigation, I would expect an increase in activity as a result of the change in administration."

Whether that focus means new federal regulations and stricter enforcement of existing rules or both, it's bound to have an impact on lawyers and the work they do, said Joel F. Henning, senior vice president at the law firm consulting company Hildebrandt International.

"Where there's law and regulation, there's lawyers," Henning said.

Corporate and financial lawyers with regulatory, transactional, and litigation practices who represent financial services clients -- including banks, investment funds and hedge funds -- are likely to see some changes under the new administration and an economic crisis.

"Obviously, we're going to have a re-regulation of some sort," said Ward Bower, a principal at legal consulting firm Altman Weil Inc. "That's something a lot of firms are gearing up for."

Increased regulation and greater oversight of financial institutions is in Eimer's forecast.

"I think the government is going to extend its reach to regulate things it had done in the past, but hasn't done much of in the last eight or 10 years," Eimer said. "The financial crisis has clearly pointed out the lack of regulation over financial transactions. I think the government is going to go forward and increase regulation of banks and bank holding companies."

Changes in financial regulation are imminent, lawyers said, especially in light of government plans to use taxpayer dollars for financial bailouts to jump-start the economy.

"It's pretty apparent that with all the bailout money and programs to support the financial sector, part of the trade-off for it will be increased regulatory overlay and scrutiny," said corporate lawyer Linda K. Myers, a partner at Kirkland & Ellis. "One of the things lawyers are going to have to understand is the regulatory scheme that will be imposed as a result. ... I think there will be more for us to do with respect to learning to interpret these regulations, and how they're going to apply to our clients."

What is not yet clear, Myers said, is what form those regulations would take.

But across the corporate arena, Myers continued, stricter credit standards for business loans would likely have an impact on the work of transactional lawyers. And, she added, "Bankruptcy lawyers will be more busy. And, it is possible that there may be some overhaul in some of the bankruptcy laws as well."

Corporate lawyer Helen R. Friedli, a partner in the Chicago office of McDermott Will & Emery, pointed out a new player in the financial arena: insurance companies. That development, Friedli said, could amount to more work for lawyers with insurance and banking expertise.

"Some companies, particularly insurance companies, are buying small banks -- subjecting themselves to regulations," Friedli said. "Those insurance regulatory lawyers will be busier."

Corporate and finance lawyer Craig R. Culbertson, the managing partner of McGuireWoods, stressed that speculations about how an Obama administration might impact law practices must now be evaluated in light of the current economic climate. It's a matter of looking at the types of initiatives the administration could take to increase regulations, he said, while balancing the need to stimulate the economy.

"It's a situation where, under more normal economic, financial, and business climates, an Obama presidency would almost certainly increase the volume of work for lawyers, because there would be increased governmental regulation in the financial arena, in the securities arena, certainly in antitrust reviews of potential business combinations and potential violations of antitrust laws," Culbertson said. "The economy is going to have a slowing effect and a counterbalancing effect on the amount of work that law firms would otherwise see generated from an Obama administration and a Democratic-controlled government."

For example, Culbertson said, there might be a temporary slowdown in the implementation of more scrutiny over the anti-competitive effects of business combinations -- a position historically taken by Democrats.

"In antitrust review, you're not going to see a lot of scrutiny where strong banks are going to pick up troubled banks," Culbertson said.

When it comes to the issue of antitrust enforcement, Eimer sees increased scrutiny -- in general.

"Antitrust enforcement may increase because of the concern that activity may have on the economy," Eimer said. However, he acknowledged, "There are going to be exceptions to where the government is trying to patch the economy, and certain keystone portions of the economy are going to be propped up without regard to the immediate consequence to competition."

For example, Eimer said, "I expect oversight of mergers may lessen in some areas, and enforcement of laws against price-fixing will increase."

Altman Weil's Bower also sees an emphasis on antitrust-related issues under the Democratic administration.

"A lot of big firms, in their litigation section, have antitrust groups. They haven't been very busy in the last eight years," Bower said. "I think they're going to get busy."

Jeffrey E. Stone, a partner at McDermott Will & Emery who heads the firm's trial department, said he sees a "perfect storm brewing on the horizon."

"You've got a collapsing economy, increased attention on the stability and management of financial institutions, and you've got an activist Democratic administration coming in to be a new sheriff on the block," said Stone, a former assistant U.S. attorney in Chicago whose practice focuses on white-collar criminal defense matters and complex commercial litigation.

"There's going to be increased legal work in defending and representing the parties that are affected by the convergence of those three factors."

Stone predicts an increase in white-collar criminal investigations.

"There's a general economic climate that makes those investigations much more palatable, and an administration that's going to be much more inclined to pursue them," Stone said. "The investigations are going to run the gamut, from the traditional insider trading, self-dealing fraud-based investigations, to much more systemic kinds of investigations."

"It's not unusual, historically, when there is any kind of market collapse, that there is a governmental need to identify responsible villains," Stone continued. "That search for the identification of villains will motivate a lot of prosecutors and investigators in the new administration -- in the U.S. attorney's office, the SEC, the white-collar component of the FBI."

More investigations, Stone said, means more need for sophisticated legal representation of senior executives and corporate and financial institutions, including banks, hedge funds, investment firms and insurance companies.

"Anybody who is a player in the upper reaches of the economy, in addition to the standard, Fortune 500 companies, is likely to be drawn into the civil litigation or government investigation side," Stone said.

Gearing up for green light

On the hot-button issue of global warming, the big question for environmental lawyers isn't whether they expect to see legislative action -- it's when.

"The Bush administration for seven-and-a-half out of eight of its years has resisted any meaningful activity having to do with global warming. They've clearly left that to the next administration," said Janine M. Landow-Esser, a partner with Quarles & Brady whose practice focuses on environmental law.

"I think we'll have an almost 180-degree change. It will take time and, in light of our current economy, there's going to be a lot of debate over who bears the cost, but I think there will be some action on this question."

Climate change regulatory work and litigation could very well be on the horizon under an Obama administration, environmental lawyers predicted.

James D. Brusslan -- who is of counsel to Levenfeld Pearlstein, where he leads the firm's environmental law service group -- was quick to predict the likelihood for global warming legislation requiring reductions in greenhouse gas emissions to become a focal point for lawyers in his practice area and beyond.

"When I go to the ABA seminars they all say, most of your time will be spent on global warming issues for the rest of your career," Brusslan said.

"Whenever you have a major law that's passed, it's going to spur a lot of legal work."

"It's probably going to start with utilities, some of the big manufacturing companies, then down to smaller industries," Brusslan said. "I would think somebody in Franklin Park that might have a 100- or 200-employee company very well could be regulated. They're certainly going to ask lawyers, `Are we subject to this?' and `What do we need to do?'

"After that happens, I just think there's going to be a lot of litigation relating to who the law applies to, failure to comply, how to calculate the baseline," Brusslan said. "There will be conflicts with state standards. I'm sure there will be questions about the constitutionality of the act. ... There are going to be loopholes companies will try to jump through, ambiguities, and many lawsuits."

For some companies, a greenhouse gas emissions program under such legislation could result in significant changes to the way they do business, Brusslan pointed out. "Let's say a utility burns coal in order to generate electricity. If they're going to have to reduce emissions substantially, they may have to change the way they generate electricity."

Brusslan said a vastly different approach to global warming, under the Obama administration, could amount to new regulations on a wide range of industries -- translating to more work for lawyers whose practices focus on areas ranging from lobbying and environmental law to business and transactional matters.

Considering Obama's professed commitment to invest capital in green technology and alternative energy sources, "there will be new companies and industries created," Brusslan said. "There will be opportunities for lawyers to assist green entrepreneurs in creating and operating these companies. Your average corporate and transactional lawyer may have new businesses that are alternative-energy related."

Quarles & Brady's Landow-Esser, who represents clients in the utility sector, predicted that lawyers like her "are going to be very busy, hopefully, with new projects, permitting and siting of new facilities, and agreements for purchase and sale of energy."

In connection with prospective legislation addressing global warming, lawyers anticipate the establishment of a nationwide cap-and-trade system for greenhouse gas emissions. Under such a system, Brusslan explained, if a company is unable to meet requirements on reducing carbon emissions, the company would be afforded an opportunity to purchase "credits" from another company that has reduced its carbon emissions by more than the required amount.

"If one company can reduce [carbon emissions] more cheaply than another company, that company has a marketable commodity it can sell to another company," Brusslan said. "That's what's going to happen, almost certainly, under the global warming legislation."

With a cap-and-trade system in play in Europe, lawyers in the London office of McDermott Will & Emery are already engaged in assisting clients with transactions involving energy credits, said McDermott's Friedli.

Friedli said it's only a matter of time before a nationwide cap-and-trade system comes to the U.S.

"We already advise clients of that in Europe, so we'll be ready when it comes to the United States," Friedli said. "It's something an Obama administration is likely to support. ... It's a good time for lawyers to retool to some extent."

Chances are, said Levenfeld Pearlstein's Brusslan, more lawyers here might eventually find themselves dealing with international transactions involving energy credits. He believes the U.S., under an Obama administration, will likely join the Kyoto Protocol, an international treaty among many different nations that aims to reduce greenhouse gas emissions.

"It's likely that there's going to be an international market here and it's going to be huge, and lawyers are going to have to get involved," Brusslan said. "There will be opportunities for companies here to trade with not only domestic companies, but also international companies to buy credits. There's probably going to be a much more international focus than we've ever had."

Brusslan also predicts a climate for more cases to be brought by plaintiff lawyers seeking damages caused by global warming. And, he anticipates an Obama administration to be more forthcoming with scientific studies related to the environment -- such as the impacts of certain chemicals on the public -- which could open the door to even more litigation.

"Under the Bush administration, it's my understanding that some of these studies have been suppressed -- [studies on] the impacts of global warming, arsenic and other chemicals. ... Because, in disclosing this information it may be detrimental to industry," Brusslan said. "I don't think the Obama administration is going to hold back any of their studies.

"This new availability of information will assist the public in identifying risks. I think the public will be armed with additional information, which could be used by plaintiff and public-interest environmental lawyers to file citizen suits to stop the problem or, possibly, toxic tort cases if citizens are injured."

In the works for labor lawyers

Labor and employment lawyers are predicting a possible up-tick in the amount of work expected to hit the "traditional" labor law arena.

"The president was supported in the general election by, virtually, every union in existence and, during the primaries, with the major unions," said James Franczek, Jr., a veteran labor and employment lawyer and a founding partner and president of Franczek Radelet & Rose. "As in any political race, he's going to have an indebtedness to those unions to come forth with a legislative policy that's dramatically different from what was the case under Bush. He's made it very clear that he intends to support some very aggressive pieces of legislation."

A marquee issue, Franczek said, is the Employee Free Choice Act, which has drawn a great deal of attention in recent years. Lawyers are predicting that some form of the proposed legislation, which Obama had supported as a senator, would likely come to pass under the new administration and Congress -- possibly resulting in fundamental changes to the rules in labor-management relations.

Widely viewed as a vehicle that would make it easier for unions to organize employees in the workplace, the Employee Free Choice Act would effectively eliminate secret-ballot elections, requiring employers to enter contract talks when a majority of workers sign union cards.

Under the current system, union organizers in workplaces today start the process by petitioning the Labor Relations Board to hold a secret-ballot election if they present an initial showing of interest from a sufficient number of employees to organize, said Joseph M. Gagliardo, managing partner of the labor and employment law firm Laner Muchin, where he chairs the litigation department. Then, Gagliardo explained, the Labor Relations Board sets the mechanism for an election, allowing a campaigning period for both union leaders and employers to share information with employees in an effort to gain support for their respective positions prior to a vote.

"This [the legislation] takes out of the equation the employer's ability to counter the union's organizing activities," Gagliardo said. "For the company, it means the company loses its ability to campaign to keep its workforce non-union."

Along with eliminating secret-ballot union elections in favor of "card check" certification, the legislation in its current form would impose labor contracts on employers through binding arbitration if no first contract is reached after 120 days of bargaining. It also calls for increases in penalties against employers for certain labor practices deemed unfair.

For the lawyers whose practices focus on labor and employment matters, said Adam C. Wit, a shareholder in Littler Mendelson, such legislation "has the greatest potential to revolutionize a good portion of the practice of traditional labor law."

"It would radically change the way union organizing occurs, and it would also radically change the collective bargaining process for a first contract," said Wit, who has been practicing labor and employment law since 1995. "It's going to require a change in how we approach and advise companies in the area of union organizing and the role we play as management-side labor attorneys."

The push for passage of the Employee Free Choice Act comes at a time when union organizing has been on the decline nationwide, Gagliardo pointed out. He predicts such legislation would create a significant upswing in union activity and a process that would offer unions a greater chance at success.

"The passage of that act is going to result in a significant increase in union activity, which will result in a significant increase in employees becoming unionized," Gagliardo said. "As the unions step up their organizing efforts, our clients are going to have questions about the meaning of the [legislation]. Then they're going to need assistance in terms of collective bargaining negotiations with unions."

Lawyers said other possible changes to the labor and employment legal landscape could come in the form of legislation that would amend federal statutes to make it illegal for an employer to discriminate with respect to an individual's sexual orientation.

Lawyers also have their eyes on the Lilly Ledbetter Fair Pay Act, which might have a better chance at passage under the new Congress than it had in 2008. The legislation would essentially undo a Supreme Court decision in Ledbetter v. Goodyear Tire & Rubber Co., which dealt with the statute of limitations on pay discrimination claims.

"These are very significant pieces of legislation that are going to have, if they pass, a very profound effect in the workplace," Franczek said.

Inevitably, lawyers speculated, the potential changes could translate to more litigation and more work for lawyers on both sides of a labor and employment matter.

With the prospect of new laws designed to give greater employee rights, Gagliardo predicted, "there will be an increase in our need to counsel employers, but usually, an increase in disputes, which results in more litigation."

Preemption and product liability.

Litigators on both sides of product liability lawsuits are pointing to a 2008 U.S. Supreme Court ruling involving the issue of federal preemption, and a similar question yet to be decided in another case argued before the high court in November, as a key issue that could impact their practice area when it comes to disputes over medical devices and pharmaceuticals.

As they anticipate a ruling from the Supreme Court in Wyeth v. Levine -- on the question of whether, once the federal Food and Drug Administration has approved the warnings about a drug, a plaintiff may bring state law action for damages on the grounds that those warnings are inadequate -- lawyers foresee a battle brewing in Congress.

"Preemption is this year's business issue of the century," said Mark Herrmann, a partner in the Chicago office of Jones Day, where his litigation practice focuses largely on pharmaceutical liability cases. "It is a very high-profile issue. You are seeing an awful lot of behind-the-scenes lobbying and public relations going on about that case."

And lawyers aren't underestimating the importance of the issue.

"This is as significant an issue in product liability law as there is right now," said Thomas R. Hill, managing member of Dykema's Chicago office, where his practice focuses on product liability litigation, as well as commercial litigation. "It has the potential to have a very significant impact, which is why Congress has started to talk about it already."

Just as the high court's 2008 ruling in Riegel v. Medtronic, Inc. put limits on product liability lawsuits against manufacturers of complex medical devices, effectively barring most state law product liability suits involving such devices, a ruling in favor of Wyeth pharmaceutical company could limit similar lawsuits against drug companies.

"Those rulings from the Supreme Court, based on the preemption statute, could wipe out vast swaths of personal injury litigation related to medical devices and pharmaceuticals," said Matthew M. Neumeier, a partner in Howrey's Chicago office, where he chairs the firm's product liability and mass tort class action practice group.

At issue in Wyeth v. Levine, which involves the anti-nausea drug Phenergan, is whether the FDA's approval of warnings on drugs licensed for sale preempts any state liability claim that a drug manufacturer failed to adequately warn consumers of possible side effects or medical risks associated with the drug.

Considering the earlier Supreme Court ruling in Riegel v. Medtronic -- which effectively blocked most state tort actions over complex medical devices, such as pacemakers and cardiac catheters -- some lawyers are speculating that the high court is likely to rule in favor of the pharmaceutical company in Wyeth.

"Then these cases where people potentially could be injured due to side effects, they'd just be barred," Dykema's Hill said. "Many, many cases against drug manufacturers are brought in state court. This would be a tremendous result for the drug manufacturers and then would limit an individual's right to bring state product liability action for failure to warn. They wouldn't be able to pursue them any more in state court on those theories, which is generally where they're brought."

Plaintiff lawyer Joseph A. Power of Power, Rogers & Smith said such a result would be a dire one for consumers.

"No matter what was done regarding a particular drug, you could not sue the manufacturer -- whether they inadequately tested it, hid dangers from the FDA," Power said. "Potentially, because the FDA approved the product, they could be immune from suit."

But lawyers following the case said it would not be surprising to see reaction under an Obama administration and a Democratic Congress in the form of legislation and revised regulations that would make it clear that there could be state law claims.

"To the extent the Supreme Court cuts back, I suspect Congress and the new people in the FDA will react to that and try to restore it to where it was -- more status quo," Neumeier said.

If his prediction comes to pass, lawyers like Neumeier would have more cases to defend. And plaintiff lawyers like Bruce R. Pfaff of Pfaff & Gill would likely bring more suits.

"There are areas of dangerous products we can't even touch right now because of recent Supreme Court decisions," Pfaff said. "The products I might know are unsafe but, where federal courts have said federal liability is preempted, you can't even file a lawsuit without money being thrown out the window."

Power said he remains hopeful that Congress will "right the wrongs that have occurred today, and that President Obama would sign such legislation making it clear that it was not the intent of Congress to allow for preemption when the FDA has approved a drug or medical device."

But he is not as quick to predict the outcome of prospective legislative action on the issue.

"I can't predict what they'll do, because the pharmacy lobby is extremely strong," Power said. "You can't ever underestimate the power of their lobby."

"With Congress and the new administration we're hopeful, because it certainly will be more consumer-oriented than what we've seen over the last eight years."

Reprinted with permission from Law Bulletin Publishing

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