⏩ Big Law firms got some of the biggest coronavirus loans
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This week: Large law firms cash in from PPP, and an unprecedented legal decision shuts down the Dakota Access pipeline. Plus: tips from a former Microsoft GC on managing resources during these lean times.
When the federal government passed the PPP, the forgivable loans were intended to be a lifeline for struggling small and midsize businesses. But plenty of bigger, well-connected fish quickly realized they could capitalize, too, and their familiarity with banks and complex paperwork gave them an advantage to securing these loans that mom-and-pop shops lacked.
Among those big fish? Several major law firms.
More than three dozen big firms received loans from the PPP: That includes five Am Law 200 firms that received at least $2 million.
Above The Law has the full list of firms: But some of the highlights include Boies Schiller Flexner, which has represented Harvey Weinstein, receiving between $5 million to $10 million. Kasowitz Benson Torres, which has represented Donald Trump, also received between $5 million to $10 million.
The estimated large firm payout
The Wall Street Journal estimated the total loan value to 45 top law firms, which each made at least $100 million in revenue last year, to be between $210 and $425 million. That’s an average of $4.7 million per firm at the low estimate and over $9 million at the high estimate.
But didn’t Big Law have to save jobs, too? Yes. Several firms have resorted to pay cuts and layoffs over the last several months. Still, a Wells Fargo survey revealed that while legal demand for large firms was down 1.4% the first few months of 2020 compared to last year, cash collections were up 3%.
A managing partner at Robbins Geller Rudman & Dowd LLP, which didn’t apply for a loan, was disappointed at other firms. He said the PPP was for companies that lacked reasonable alternatives for staying afloat during the pandemic -- an unlikely situation for large firms. “Our entire business model has been based on knowing you have peaks and valleys,” he told the WSJ.
Smaller firms, likely in much greater need than their highly-capitalized brethren, also received funding from the government. In all, some 14,000 law firms borrowed about $5 billion, for an average of $357,000 per firm.
Jessica Nguyen is GC for the Seattle-based AI startup Lexion. She also used to work at Microsoft and PayScale.
And when she wrote a post on LinkedIn in June about managing resources during these tough times it went viral. Here are some highlights of her advice from the LinkedIn post and an interview with Law.com:
Plan to make up for lost time: Especially if you’re a new GC or an attorney hired for a job by a company these next few months, realize that they’ve probably put off hiring you for a while and a backlog of work awaits. So plan ahead by setting goals for 90 days, 6 months and 12 months.
Look for outside help in nontraditional forms: Nguyen said her first hire at PayScale wasn’t another lawyer but a contract manager because that person best allowed her to handle volume and increase her workload.
Make sure your company knows the importance of legal: Because of the cost, Nguyen realizes that companies in financial trouble may look to do less with their legal departments. But she says it is important to remind them that the legal department is needed to finish the transactions necessary for growing business.
The long-protested Dakota Access pipeline was ordered to be shut down by a federal judge this week. Within 24 hours developers of the Atlantic Coast Pipeline canceled the project.
It’s a sign of how environmental activists are becoming more and more savvy with using the law and creating complications for pipeline companies.
Previously, judges typically maintained the status quo: And that meant not shutting off an active pipeline. The lawsuit turned on whether the Dakota Access pipeline posed an environmental risk under a federal law. The judge ruled that it needed to be halted until a review is completed (this could take several years). Previously, environmental activists had focused on oil wells for litigation. But pipelines require more federal and local permits, which are more vulnerable to litigation, according to Bloomberg.
The Dakota Access decision was unprecedented: SMU law professor James Coleman told Bloomberg that a judge had never shut down an oil pipeline because of environmental concerns.
“A turning point” for pipelines: Industry insiders say the end of the Dakota and Atlantic Coast will be a setback with lasting repercussions into the future, potentially leading to far fewer big projects. And the judicial ruling on the Dakota Access means other judges could agree that existing pipelines can be shut down.
Expect the litigation to continue. The environmental groups are playing the long game and want to use the law to block as many pipeline projects as possible, until it becomes so difficult to transport vast oil quantities that companies must consider more renewable energy options.
What else we’re forwarding
Facebook and other tech companies stand up to China: Because of China’s crackdown on Hong Kong, Facebook, Twitter and Google said they would stop processing data requests made by the Hong Kong government.
Jobs keep coming back to the legal industry after the losses of April and March: The legal industry added some 7,500 jobs in June. That comes after a gain of 7,000 in May and a huge loss of 68,000 in April.
See ya next week.