For many large law firms, the rush into China has turned into a retreat, our colleague Andrew Goudsward reports, in a review of new data and interviews with lawyers and legal industry experts. Plus, the DOJ’s bankruptcy watchdog wants law firm Jackson Walker to return millions in legal fees, in the aftermath of a federal bankruptcy judge’s resignation; thousands of Black women claim hair relaxers gave them cancer; and Donald Trump is due to testify this morning at his fraud trial in New York. It’s a huge week in the courts. Let’s dive in.
The convergence of economic and geopolitical challenges, and an environment increasingly difficult for foreign businesses, have stopped a rush by U.S. and global law firms to expand into China, our colleague Andrew Goudsward reports.
Of the 73 largest U.S. law firms with a presence in China, 32 shrank their attorney presence in the last decade, according to a Reuters review of data from Leopard Solutions, which tracks law firm hiring. In Beijing, 26 of the 48 largest U.S. law firms drew down their presence since 2018.
Data shows U.S.-based firms in China grew their headcounts there just 3% between June 2018 and June 2023, after a race to gain market share during China’s decades-long economic boom. “The Chinese market has really become somewhat obsolete for those big law firms,” Jingzhou Tao, former managing partner in Beijing for law firms Dechert and DLA Piper, told Goudsward. “The economic dynamics have completely changed.”
China remains the world’s second-largest economy. Despite the headwinds, roughly as many U.S.-founded law firms expanded their presence across the country in the last five years as have shrunk their footprint, data show.
The DOJ’s bankruptcy watchdog is seeking to force law firm Jackson Walker to give back millions of dollars in fees it earned in cases presided over by a top Texas bankruptcy judge after he confirmed he had been in an undisclosed romantic relationship with one of its lawyers. The Office of the U.S. Trustee began filing motions in several corporate bankruptcy cases seeking to reverse decisions by Houston-based U.S. Bankruptcy Judge David Jones to award fees to Jackson Walker.
Patent owner PersonalWeb Technologiesowes Amazon nearly $5.2 million in legal fees for litigation against the tech giant and its customers. The Federal Circuit in a 2-1 decision agreed with a California federal court that PersonalWeb’s claims were “objectively baseless” and litigated unreasonably.
A California state judge is soon set to rule whether former President Donald Trump’s personal lawyer John Eastman should lose his law license. The trial, which first began in June, was due to wrap up on Friday, one day after Judge Yvette Roland said she would issue a preliminary finding that Eastman was “culpable” for violating attorney ethics rules when he tried to help Trump undo Joe Biden’s win in the 2020 U.S. presidential election. Eastman has denied violating attorney ethics rules.
That’s the decrease in the average number of new first-year associates at Am Law 100 firms this September compared with the average from the previous two years, according to the Thomson Reuters Institute’s latest Law Firm Financial Index. The index, which tracks key financial metrics across 177 large and midsize U.S.-based law firms, also showed that first-year class sizes were down an average 25% among the Am Law 200 firms, while midsize firms brought in 9% fewer first-year associates. Whether the hiring slow down will be enough to make 2023 a profitable year remains uncertain.
A new 3rd Circuit decision addressing fee awards for class action lawyers asks a piquant math question: If a trial judge opts to calculate fees based on a percentage of the class fund, should that percentage be based on the total size of the fund available to class members? Or should lawyers for the class receive only a percentage of the money actually paid out to class members? Alison Frankel examines how the 3rd Circuit answered those questions. Spoiler alert: It’s complicated.
“The First Amendment right of defendants and their attorneys to comment on my staff is far and away outweighed by the need to protect them from threats and physical harm.“
—Justice Arthur Engoron in state court in Manhattan, who is overseeing the civil fraud case against former President Donald Trump, issuing a gag order barring all lawyers from making public statements about the judge’s communications with his staff. Defense lawyers had made repeated objections about the working relationship between Engoron and his principal law clerk.
Donald Trump is set to testify in a civil fraud trial accusing the former U.S. president and his family businesses of manipulating their asset values, days after his three adult children took the stand, Jack Queen reports. Eric Trumptestified on Friday that he relied on accountants and lawyers to verify the accuracy of financial documents that a judge has ruled to be fraudulent, in a trial that threatens to hobble his father’s real estate empire. Trump’s daughter Ivanka Trump is due to testify later this week. Donald Trump has denied any wrongdoing.
A 5th Circuit panel in New Orleans will consider whether a federal ban on the sale of handguns and handgun ammunition to adults who are under the age of 21 is unconstitutional. “There is no evidence of anything like the handgun ban from the Founding era. In fact, the evidence shows 18-to-20- year-olds at the time had full firearm rights,” Cooper & Kirk’s David Thompson, lead counsel for the plaintiffs, told the appeals court. Circuit Judges Edith Jones, Rhesa Barksdale and Jennifer Walker Elrod will hear arguments.
In San Francisco, “Fortnite” video game maker Epic Games is set to challenge Google Play Store’s app distribution policies at an antitrust trial in federal court. Epic’s lawyers at Cravath and Faegre Drinker are seeking an injunction against the Alphabet unit. Attorneys for Google at Munger Tolles and Morgan Lewis contend in a counterclaim that Epic breached Google’s developer agreement. Google last week settled with another plaintiff, dating app maker Match. U.S. District Judge James Donato is presiding over the litigation.
Court calendars are subject to last-minute docket changes.
Later this week
On Tuesday, the U.S. Supreme Court will hear arguments over whether a 1994 federal law that bars people under domestic violence restraining orders from possessing firearms violates the U.S. Constitution’s Second Amendment. The justices agreed to hear an appeal by President Joe Biden’s administration of a lower court’s ruling that said the regulation fell outside “our nation’s historical tradition of firearm regulation.” The case involves a Texas man charged with illegal gun possession while subject to a domestic violence restraining order after assaulting his girlfriend.
On Wednesday, the New Orleans-based 5th Circuit will hear an appeal from Texas state officials challenging a preliminary order blocking the state from implementing a new law that would ban “sexually explicit” books from public schools. A coalition of booksellers, authors and publishers won an early ruling against the measure. The law is one of several passed in Republican-controlled states seeking to restrict books that conservatives say contain age-inappropriate content on topics such as sex, LGBTQ issues and race. Critics argue the bans are too subjective and amount to politically driven censorship.
On Thursday, U.S. District Judge Jed Rakoff in Manhattan will take up JPMorgan Chase’s $290 million class-action settlement with Jeffrey Epstein’s accusers. The proposed settlement, which is awaiting court approval, has drawn an objection from many U.S. states, which say the accord could limit their ability to seek compensation for sexual abuse victims. The settlement resolved claims that the largest U.S. bank turned a blind eye to Epstein’s sex trafficking because he had been a lucrative client between 1998 to 2013, when it terminated his accounts.
Also on Thursday, the D.C. Circuit will weigh former Donald Trump adviser Steve Bannon’s conviction and sentencing for contempt of Congress for refusing to cooperate with lawmakers investigating last year’s U.S. Capitol attack. Bannon was found guilty in July on two counts of contempt of Congress for failing to provide documents or testimony to the House committee investigating the Jan. 6, 2021 attack. Bannon’s attorney David Schoen said Bannon relied on the advice of his lawyers not to comply with a congressional subpoena after Trump invoked executive privilege.
On Friday, the Federalist Society’sannual convention will feature a “fireside chat” with FTC Chair Lina Khan, whose agency is suingAmazon in a blockbuster antitrust case in Seattle federal court. Another panel — featuring Stanford Law’s Michael McConnell and William Baude of the University of Chicago — is titled “insurrection and the 14th Amendment.” Some scholars argue that Donald Trump can be barred from public office under a provision of the post-Civil War 14th Amendment that punishes officials who have “engaged in insurrection or rebellion.”
In the courts
A 7th Circuit panel upheld an Illinois state ban on assault-style weapons and high-capacity ammunition magazines enacted after a 2022 mass shooting in Chicago’s Highland Park suburb that left seven people dead and dozens more wounded. In a 2-1 vote the panel threw out a lower-court injunction imposed against the firearms restrictions in one set of cases and affirmed decisions keeping the law intact in another batch. (Reuters)
U.S. District Judge Thomas Durkinordered T-Mobile to face a lawsuit from AT&T and Verizon subscribers who claim T-Mobile’s deal for rival Sprint hurt competition and caused them to pay billions of dollars more for wireless service. (Reuters)
The U.S. Supreme Court took up Coinbase’s appeal of a lower court’s ruling that the trading platform had effectively waived its right to arbitrate a dispute stemming from a 2021 sweepstakes that users later alleged was false advertising. At issue is whether it is up to a judge or an arbitrator to decide which of two apparently conflicting agreements is controlling in the dispute. (Reuters)
The U.S. Supreme Court will decide whether a New York state official stifled the free-speech rights of the National Rifle Association in pressuring banks and insurers to avoid doing business with the group. The justices took up the NRA’s appeal of a lower court’s decision to throw out the group’s lawsuit against Maria Vullo, a former superintendent of New York’s Department of Financial Services. (Reuters)
Gunmakers urged the 2nd Circuit to strike down a New York law that allows the state and people affected by gun violence to sue the industry, arguing it is barred by the Protection of Lawful Commerce in Arms Act, a federal law that shields the gun industry from lawsuits over crimes committed with their products. U.S. District Judge Mae D’Agostino upheld the New York law last year, finding that it fell within an exception in PLCAA allowing gun companies to be sued if they knowingly violate a state law. (Reuters)
McDermott hired commercial litigator Jonathan Hawk in the firm’s Los Angeles office. Hawk was previously at White & Case. (McDermott)
While manufacturers that have purposefully included PFAS in their products remain a primary focus of litigation, companies that may not have been aware of the presence of PFAS in their products are now at risk of becoming defendants. Miles Scully, Todd Murphy and Britanny Jocius of Gordon Rees Scully Mansukhaniexplainhow companies can avoid liability associated with a chemical that is often described as “forever” and “everywhere.”