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DPA, NPA deals are not up to the judge

By Jim Bowman, Maggie Carter and David Kirman

In the past 10 years, a number of federal district judges have balked at accepting the types of deferred pros- ecution agreements (DPAs) routine- ly entered into by corporations and the Department of Justice because of disagreements with the terms of the agreement. This has caused anxiety on both sides of the aisle, as companies and prosecutors continue to rely on DPAs and non-prosecution agreements (NPAs) to resolve civil and criminal prosecutions against corporations. A recently issued and

See Page 8 — RULING

corporations. A recently issued and See Page 8 — RULING CIVIL LAW Civil Procedure: Erroneous exclusion,


Civil Procedure: Erroneous exclusion, as untimely, of declaration establishing existence of agreement to arbitrate results in reversal of denial of petition to compel arbitration and remand. Espejo v. Southern California Permanente Medical Group, C.A. 2nd/4, DAR p. 3943

Copyright: Writer’s claim against James Cameron

fails as writer cannot show required ‘substantial similarity’ between his pitched project and Cameron’s 2009 film, ‘Avatar.’ Ryder v. Lightstorm Entertainment, C.A. 2nd/8, DAR

p. 3952

Employment Law: In wage and hour class action, dispute regarding practicability of employer’s combined rest break schedule precludes summary adjudication of employee’s rest break claim. Rodriguez v.

E.M.E. Inc., C.A. 2nd/4, DAR p.


Workers’ Compensation:

Workers’ Compensation Appeals Board order annulled where it erroneously interprets and applies law to find petitioner’s psychiatric injury was caused by extraordinary employment condition. Travelers Casualty & Surety Co. v. Workers? Compensation Appeals Board, C.A. 1st/4, DAR p. 3949


Criminal Law and Procedure:

Habeas relief granted to Pelican Bay State Prison inmate who was disciplined for participating in planned hunger strike to protest state’s solitary confinement practices. In re Gomez, C.A. 1st/2, DAR p. 3927

Criminal Law and Procedure:

Deputies’ safety justified brief detention of second driver whose vehicle was sandwiched between patrol car and lead vehicle that deputies intended to stop on outstanding warrant. People v. Steele, C.A. 3rd, DAR

p. 3960

VOL. 122 NO. 80


© 2016 Daily Journal Corporation. All Rights Reserved

Daily Journal photo Justice Laurie D. Zelon of the 2nd District Court of Appeal said

Daily Journal photo

Justice Laurie D. Zelon of the 2nd District Court of Appeal said Monday that the State Bar’s access-to-justice work should remain part of its regulatory mission even if the agency is divided.

Bar leaders debate how agency could be split

By Lyle Moran

Daily Journal Staff Writer

State Bar leaders grappled Monday with where some of its activities would wind up if the agency split into a reg- ulatory board and a separate trade as- sociation for attorneys, though several members of the legal community said the bar’s access-to-justice work should remain part of its core mission. The bar task force studying the agen- cy’s structure and governance also was urged to take steps to limit antitrust li- ability for the agency in the aftermath of a 2015 U.S. Supreme Court decision. The discussion about potential de-unification of the bar came as some current and former bar trustees have called for the agency’s split to ensure the bar’s so-called “trade associa- tion-like” activities don’t distract the bar from its mission of protecting the public. 2nd District Court of Appeal Justice Laurie Zelon and Los Angeles City At- torney Mike Feuer were among several speakers who urged the bar’s Gover- nance in the Public Interest Task Force to keep access to justice part of the bar’s regulatory mission whether the agency is de-unified or not. Zelon said public protection involves

much more than attorney admissions and discipline. “I specifically include the bar’s work

in ensuring access to the courts, in making sure procedures are fair for lit- igants, that adequate representation is provided to those in need of represen-

tation and that the ability of people to solve their legal problems is protected and preserved,” said Zelon, speaking for herself and not the court where she serves. “I would submit to you that without the structure that is provided by the support of the State Bar that those things which seriously keep people


Bar Trustee Miriam Krinsky said she had yet to hear a clear consensus from proponents of de-unification about which of the bar’s elements they do not consider regulatory. “I have heard very different concep- tualizations around what is a trade as- sociation function and what isn’t,” she said. Trustees Dennis Mangers and Joan- na Mendoza, who recently released a de-unification plan, have said that the bar’s core functions of attorney admis- sions and discipline would be among those activities remaining with a new regulatory board if the bar split up, as would law school accreditation. Their plan suggests that areas to be separated off would most prominently include the agency’s specialty practice groups, known as sections, as well as

would be absent,” she said.

some of the agency’s committees and commissions. Mangers stressed in an interview Monday that the plan he supports re-

quests that the Legislature require the bar to de-unify by 2019, but also direct the bar to craft its own plan for how its programs should be transferred to

a new regulatory board and nonprofit

professional association. “The truth of the matter is a number of them could be separated, and have been in other states,” said Mangers,

adding that his personal preference would be for access-to-justice activities

to be considered regulatory activities.

Robert C. Fellmeth, the leader of the University of San Diego School of Law’s Center for Public Interest Law, raised antitrust concerns about the bar’s cur-

rent governance structure. He said a U.S. Supreme Court de- cision released last year held that li- censing boards are not immune from federal antitrust scrutiny unless they are controlled by public members (not licensees) and the state has created a

mechanism to actively supervise the acts of the board. North Carolina State Board of Dental Examiners v. FTC, 135 S.Ct. 1101 (2015). Fellmeth said the bar’s board having far more attorneys than non-attorneys

is an issue, as is the lack of active super-

See Page 3 — STATE

By Matthew Blake

Daily Journal Staff Writer

A proposed lawsuit settlement be- tween Uber Technologies Inc.and the company’s California and Mas- sachusetts drivers could face a road- block from plaintiff lawyers who say the agreement’s terms would end their own Uber litigation. As of Monday afternoon, one ob- jection had been lodged with U.S. District Judge Edward M. Chen in the landmark employment mis- classification case in which an up

to $100 million settlement was an- nounced on Thursday. Also, three additional plaintiff lawyers litigating four separate cas- es against Uber said in interviews on Monday they would soon file their own objections. Chen is slated to hold a preliminary settlement ap- proval hearing on June 2. O’Connor v. Uber Technologies Inc., CV13-3826 (N.D. Cal., filed Aug. 26, 2013). At issue is a provision tucked into the 154-page agreement that “all wage-and-hour claims and lit-

igation” pending in California and Massachusetts will close, listing 14 lawsuits that will end if Chen ap- proves the deal. A few of the listed lawsuits have claims largely redundant to O’Con- nor’s central contention that Uber mislabels their drivers as indepen- dent contractors instead of employ- ees, a classification status the settle- ment would not change. Some lawsuits, though, deal with different subjects, including a puta- tive nationwide class action claim-

Learning His Value

Amador County Superior Court Judge J.S. Hermanson overcame a motorcycle accident to be a

bench officer.

Former Capital One lawyer joins Laurus

Real estate investment and development firm Laurus Corp. announced the hiring of Simran S. Bindra as

Page 3

the company’s first general counsel.

Page 2

Logging In

Jonathan Runyan, general counsel of San Francisco- based Okta Inc., focuses on worker data.

Page 4


Sidley Austin LLP advised Hansen Medical Inc. in its

sale to Auris Surgical Robotics Inc.

Page 5

Former dean files grievance

Former UC Berkeley School of Law leader disputes punishment

By Phil Johnson

Daily Journal Staff Writer

Former UC Berkeley School of Law Dean Sujit Choudhry claims he never would have agreed to his ini- tial punishment for violating campus sexual harassment policy — a sentence his former assistant, who is now su- ing him for sexual harassment, perceived as light — had he known a second punishment could come months later. Facing what his attorneys consider a form of double jeopardy, Choudhry sent a grievance letter Friday to the UC’s Committee on Privilege and Tenure. The letter describes UC President Janet Napolitano’s statements since the March 8 filing of a sexual harassment suit in Alameda County Superior Court by Tyann Sorrell as de- famatory. Choudhry, who served an administrative role as dean, remains a tenured faculty member. He is now challeng- ing the propriety of a second investigation into his faculty role. A finding against him could lead to revocation of his tenured status. The grievance letter also implicates Chancellor Nicho- las Dirks for the first time. Sorrell v. Regents of the Univer- sity of California et al., RG16806802 (Alameda Sup. Ct., filed March 8, 2016). The letter says Napolitano’s well-publicized announce- ment that Choudhry is banned from campus lacks legal backing. Choudhry also takes umbrage with the lan- guage Napolitano used March 9 when she met with the Sacramento Bee editorial board. One day after Sorrell’s suit was filed, Napolitano said “people ought to be able to come to work without fear of being groped.” Choudhry, who admitted to hugging, kissing and rub- bing Sorrell, just not as often as she claims, said Napol- itano’s actions have been “reckless, unprofessional and incredibly damaging” to his reputation. His touching of Sorrell, he says, could not be groping because it was not motivated by sexual desire. Requests for comment from Napolitano, Broughton and Dirks all went unreturned Monday. Former Executive Vice Chancellor and Provost Claude Steele originally punished Choudhry with a 10 percent pay cut and a requirement that he undergo sexual harass- ment training on his own dime. Choudhry also wrote a six-sentence letter of apology to Sorrell. Citing concerns for his wife’s health, Steele resigned April 15. Choudhry resigned as dean March 10. What Choudhry considers double jeopardy, the univer- sity sees as the letter of its policy according to the aca- demic personnel manual. While Choudhry says Steele, Dirks, Broughton and Christopher M. Patti, chief cam- pus counsel, all described the initial punishment as “war- ranted and appropriate” for the violations he admitted, Choudhry says he was never told the punishment related only to his role as dean.

See Page 3 — FORMER UC

sponded in an email that the under- lying credit check suit claim would not be wiped out by an O’Connor set- tlement, but instead a smaller state Private Attorney General Act claim that is part of the complaint. The lawyer stressed a settlement would only kill off wage-and-hour related matters in the other lawsuits. But Andrew P. Lee, partner at Goldstein, Borgen, Dardarian & Ho, and plaintiff’s lawyer in the credit check case, noted there is no

See Page 3 — PLAINTIFF

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Plaintiff lawyers object over Uber settlement

ing Uber violated the Fair Credit Reporting Act by not giving drivers notice of credit checks. In Re Uber FCRA Litigation, CV14-5200 (N.D. Cal., filed Nov. 24, 2014). An objection plaintiffs filed in the credit check lawsuit, which is also before Chen, complained that Shannon Liss-Riordan, plaintiff’s lawyer in the O’Connor case, did not consult them about the settlement terms. Liss-Riordan, of Boston-based Licthen & Liss-Riordan PC, re-

of Boston-based Licthen & Liss-Riordan PC, re- Pay-to-play in Hollywood Despite being illegal, some say

Pay-to-play in Hollywood

Despite being illegal, some say pay-to-play casting “workshops” still persist in Tinseltown. By Jared


FCPA pilot program

The DOJ recently announced a voluntary disclosure

program for companies seeking mitigation credit for

FCPA violations.

PAGE 2 • TUESDAY, APRIL 26, 2016


Learning His Value

Amador County Judge J. S. Hermanson overcame a motorcycle accident to be a bench officer.

By Laurinda Keys

Daily Journal Staff Writer

T he biggest award Judge J.S. Hermanson won when he was practicing was a $6.1 million verdict

that he later lost in the appellate court. But that’s not why it’s mem- orable. “It involved a child of 12 who had a mental illness and was in a private school,” Hermanson said. “He ran away. The school didn’t look for him. An individual picked him up and raped him. Ultimately the child com- mitted suicide.” As Hermanson recalled, in closing arguments in the suit against the school, “the attorney from the other

side in essence arguing that the life

of the child, because he was broken,

was not worth as much as another child. I just remember thinking, ‘How absurd!’ How do you quantify the love of a parent for a disabled child?” Hermanson is now presiding judge on the Amador County Supe-

rior Court, working with one other judge and a commissioner. He knows first-hand what it is

to be a disabled child. A few weeks

before his 15th birthday, he was in

a motorcycle accident that caused

nerve damage to the left side of his body. “The next few months of my life were instrumental in forming my character,” he said. “If I accepted my presumed fate, I could grow apathet- ic. If I challenged it, I could strive for greatness despite my limitations.” He learned to walk again. “I learned to push myself beyond the limitations imposed by others and more importantly beyond those that were self-imposed,” he said. Hermanson’s left arm remains par- alyzed. He went on to graduate from Westmont College, a Christian lib- eral arts college in Santa Barbara, then earn his law degree from the University of La Verne. He worked as an advocate for the disabled, and ran a sole practice in San Bernardi- no for 10 years. He also participated on the U.S. cycling team in the 1996 Paralympic Games in Atlanta. Hermanson and his wife moved to Amador County in 2007 to provide a better life for their two young chil- dren and he went to work for the dis- trict attorney’s office. Five years lat- er, after winning several high-profile cases, Hermanson was preparing to run against Amador County Judge David Richmond, who had been on the bench for 14 years. Richmond retired, throwing his support to longtime county defense

J.S. Hermanson

Superior Court Judge

Amador County (Jackson)

Career Highlights: Elected judge of the Amador County Superior Court, June 5, 2012, sworn in Jan. 7, 2013; deputy district attorney, Amador County, 2007-2012; sole practitioner, San Bernardino, 1997-2007; client’s rights advocate, Inland Regional Center, San Bernardino, 1992-97

Law School: University of La Verne, 1992

attorney Jeffrey Seaton. Hermanson won the June 2012 election with over 61 percent of the vote. One of those who voted for Her- manson was defense attorney Rob- ert Schell, who tried many cases against Hermanson. “I’ve been doing this for 20 years and I don’t get along with most DAs, who will do anything to win,” Schell

said. “I never saw him do one single thing I would consider unethical. He

has a very strong moral compass.” Schell said that defendants with a long track record of similar behavior such as drug use, failure at rehabil- itation or domestic violence “better watch out” in Hermanson’s court- room, “and not unfairly. I don’t think he suffers fools too much.” At the same time, Schell said, “He’s going to let you run your case and give a defendant a fair He’s ruled against the district attor- ney’s office enough times to give me confidence that he’s going to be fair and follow the law.” More than one attorney spoke of Hermanson’s efforts to settle land- lord-tenant cases so that the nonpay- ing tenant doesn’t get a judgment on his record but the landlord gets the property back. Ethan Turner remembers one case in which “the parties were at total loggerheads and wouldn’t give an inch to one another. They wanted to have it out in court.” Turner said the judge “mitigated a lot of conflict by dealing with each party separately. He took each party into his chambers and negotiated a fair deal that saved judicial resourc- es and spared everyone what would have been a very ugly court battle.” Turner said that Hermanson is also respected for the way he deals with the local battered women’s shel- ter residents. Turner handles their family law cases.

shel- ter residents. Turner handles their family law cases. “He’s very deferential and he al- ways

“He’s very deferential and he al- ways pays a lot of attention to their cases,” particularly the violent as- pects, Turner said of Hermanson. “He’s more sensitive to those kinds of issues than some judges.” Being a part of the community is important to Hermanson. “In a small county, you have to remember who you are outside of the courtroom is as important as inside,” the judge said. “You see almost everybody dai-

ly, at a restaurant, gas station, little league field. If you expect people to behave in a particular manner in the courtroom, you better have their re- spect in the community as well,” he said. “In private practice, I tried to maintain cases that had a particular purpose,” Hermanson said. He worked as a client’s rights advocate, helping the disabled at the Inland Regional Center in San Bernardino that became the target of a terrorist shooting in December


Hermanson still has family in San Bernardino and his father was a police officer, whom he described as one-third social worker and one- third peacemaker in the community. Since the terror attack, Herman-

son said, “My parents and friends will have a sense of insecurity now that will permeate out through that area in everyday life. It will be in the back of their minds.” It’s paramount for Hermanson to have a lot of patience, especially in dealing with pro pers. “I want the court to be dignified, where people believe they can be heard,” he said, “an absolutely fair place, with no pre- conceived biases when you walk in my courtroom.” “His demeanor, although he’s

a former prosecutor, is very low key,” said Patrick Keene, who has handled about 30 family law and landlord-tenant cases before Her- manson. “He listens well. He wants

to make sure he’s heard everyone

before he makes a decisions. Keene said the judge “is a good listener and a patient judge, some- times to a fault. He listens, more than I would want him to, to other arguments when there really aren’t other arguments. But it’s part of his personality.” Keene said Hermanson doesn’t take a cookie-cutter approach; he doesn’t rule the same way in similar cases regardless of the individual particularities. Hermanson credits advice from re-

tired Placer County Superior Court Judge James Garbolino, who took him aside and said, “You don’t have to be the smartest man in the room. You just have to be the wisest.” Hermanson said he aims to “listen thoroughly and make a good, sound decision based on what you’re hear- ing and what the law is.” He added, “It is daunting at times to sit back and look at what you have to learn.”

Here are some of Judge Herman-

son’s recent cases and the attorneys involved:

People v. Aroz, 15-CR-23620 —

forcible lewd act upon a child

For the prosecution: Gabrielle

Stidger, district attorney’s office For the defense: James Clark

People v. Jopes, 15-CR-23159 —

assault with a firearm on a peace

officer For the prosecution: Melinda Ai-

ello, now with Yolo County district attorney’s office For the defense: Todd Penix, Rich- ard A Ciummo & Associates, Jack- son

People v. Cheney, 05-CR-08104

— three strikes resentencing For the prosecution: Todd Riebe, district attorney, Amador County

Bill Lavallie / Special to the Daily Journal

For the defense: Randall Shrout, Ciummo & Associates, Jackson

People v. Renaud, 13-CR-21138-1

— marijuana cultivation For the prosecution: Robert Trud-

gen, district attorney’s office For the defense: David Beyers-

dorf, Richard Ciummo & Associates

Pine Grove Business Alliance v.

County of Amador, 14-CVC-9062 — CEQA For the plaintiff: Brett Jolley, Shore McKinley & Conger LLP, Stockton For the respondent: Carissa Bee-

cham, Stoel Rives LLP, Sacramento

Gautham Thomas contributed to this report.


An April 20 article, “State Fund asks judge to reconsider DQ,” in- correctly stated that the State Com- pensation Insurance Fund sued Paul Randall in the case State Compensa-

tion Insurance Fund v. Michael Dro- bot et. al. Randall is a third-party de- fendant. The article also incorrectly

stated that another case, State Com- pensation Insurance Fund v Capen et. al., was a consolidated lawsuit. Capen is a related case.

A profile of Margaret Stevens in

the April 20 Top Women Lawyers supplement misidentified her role in the Los Angeles County Bar Associ- ation. She is president elect. The Daily Journal regrets the er- rors. A corrected version of these ar- ticles are at


For Reprints, E-Prints and Frames of articles in The Daily Journal, please contact Jeremy Ellis at jeremy@reprintPros. com, (949) 702-5390 or online at


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Led Zeppelin members’ court appearance in doubt

Conditions set on Charter-TWC deal

By Steven Crighton

[multichannel video programming

distributors] to restrict or discour- age programmers from licensing their content to [online video dis- tributors].” Despite Wheeler’s support, the FCC’s approval is still dependent on New Charter receiving a majority of votes by his fellow commissioners. Commissioner Michael O’Reilly has expressed hesitation about the deal. “At first blush, it appears that the Commission may have operat- ed well outside the four corners of the merger application to pursue unrelated matters and policies. I will carefully consider the item put before me and vote in a timely man- ner,” O’Reilly wrote in a statement. Jonathan Kramer of Telecom Law Firm said the merger looks to be the first major market consolidation to occur after regulation of cable TV companies was handed to the California Public Utilities Commis- sion. Previously, cable TV franchise transfer approvals would have been left to local government bodies. “Had this been processed under the old system, it would have taken a lot longer and there would have been a lot more consumer-friendly conditions imposed on the deal.”

By Steven Crighton

ing to a shift in venue from a Penn- sylvania court. “They chose this forum, they said they wanted to play ball in this court, and now, they’re saying they won’t take the field,” Malofiy said following a pretrial conference Monday. A request for comment from Pe- ter J. Anderson of Santa Monica, a defense attorney for Led Zeppelin,

things work.” Asked whether a late appear- ance from Plant and Page could impact the case, Jacobs said it was likely irrelevant. “The jury is going to evaluate based on the evidence. They’re obviously going to be waiting to hear from these guys in partic- ular, because they’re the core of Led Zeppelin. But whenever they hear them, first, fourth, fifth — it doesn’t matter.” While Page and Plant could ap- pear, arguments based on their supposed drug and alcohol use will likely not. Klausner granted tenta- tive approval to a motion seeking to exclude the topic. He also ten- tatively blocked arguments based on the validity of charitable dona- tions made by Wolfe’s trust and other lawsuits alleging copyright infringement by Led Zeppelin. The judge also laid out a rough timeline for the case, which he an- ticipates will take four to five days, and is demanding a clean fight. “If there’s any lack of civility at all, I wouldn’t want to be in your shoes,” Klausner said. The trial is set to begin May 10.

Daily Journal Staff Writer

Daily Journal Staff Writer

F ederal regulators signaled approval Monday of Char- ter Communications’ $88 billion acquisition of Time


L OS ANGELES — The venue is set in the copy- right infringement law- suit over Led Zeppelin’s

“Stairway to Heaven,” but attor-

Warner Cable and Bright House Networks, albeit with a few caveats to ensure competitive pricing and quality of service. The Department of Justice and the Federal Communications Com- mission’s chairman, Tom Wheeler, approved the merger, with Wheel- er’s approval conditioned on a num- ber of seven-year stipulations “that will directly benefit consumers by bringing and protecting competi- tion to the video marketplace and increasing broadband deployment.” The merged company, referred to as “New Charter” in a press release, will be prohibited from requiring agreements that would pressure programmers to limit their content to one or more online video distrib- utors. The department said in a written statement that it “would continue to closely monitor developments in the industry and vigorously enforce compliances with the proposed set- tlement to ensure that New Charter does not use the influence it will have as one of the nation’s largest

neys say the band might not be ready to take the stage.

A request for questions by U.S. District Judge R. Gary Klausner


the end of a pretrial conference

was directed to a spokesman for Warner/Chappell Music, who de- clined comment. Robert A. Jacobs, co-chair of Manatt, Phelps & Phillips LLP’s entertainment and media litigation practice who is not involved in the case, said that it’s not abnormal for named defendants to resist such requests, particularly when dis- tance or availability are an issue. As famous musicians who reside in England, Page and Plant are likely no exception. “In my experience, named plain- tiffs like Page and Plant would show when it doesn’t pose an un- due burden. They have lives,” Ja- cobs said. “So while they’re going to respect the process and respect the judge’s orders, by the same

Monday prompted plaintiff’s attor- ney Francis A. Malofiy to inquire about appearances by band front- man Robert Plant and guitarist Jimmy Page. According to a proposed pretrial conference order submitted Sun- day, Malofiy — counsel to plaintiff Michael Skidmore, representing the trust of Spirit member Randy Craig Wolfe — argued defense counsel “are refusing to accept subpoenas on behalf of their cli- ents,” including Page and Plant. Michael Skidmore v. Led Zeppelin

et. al., 15-CV03462 (C.D. Cal., filed May 31 2014). Malofiy said that Page and Plant, who are named defendants in the case, are “hiding behind counsel


the U.K.” to avoid appearing on

token, they can’t drop everything they’re doing. That’s not how


the witness stand, despite consent-


TUESDAY, APRIL 26, 2016 • PAGE 3

Landmark plaintiff returns to SCOTUS seeking fees

Former Capital One lawyer is Laurus GC

By Kibkabe Araya

By Adam Liptak

“just trying to punish those who took unreasonable positions.” The Copyright Act, he said, also sought to ensure that people sued for copy- right infringement did not fold at the outset. “It wanted to encourage parties to advance important principles even where the other side’s arguments are good; indeed, I would say, espe- cially where the other side’s argu- ments are good,” he said. “When a defendant is trying to decide wheth- er to fight for a principle, the avail-

solved, advancing the development of the law. Justice Stephen G. Breyer said it was often hard to tell when the law was moving forward, and Justice Anthony M. Kennedy spoke up for stability. “I can see the excitement about granting fees if there’s some break- through, something we’ve never thought about,” Kennedy said. “On the other hand, there’s something that’s commendable about applying the law consistently, routinely, in regular cases. That advances the law.” The case, Kirtsaeng v. John Wiley & Sons, No. 15-375, opened a window on the cost of litigating a Supreme Court case. Kirtsaeng’s lawyers sought about $125,000 for their work in the lower courts and $1.9 million for their work in the Supreme Court, including, according to a brief from Wiley, “$531,085.25 for time spent soliciting and coordinating” sup- porting briefs “from sympathetic business groups.” Wiley said it had spent $300,000 on its own Supreme Court case, an amount Kirtsaeng’s lawyers, in their own brief, called a “flat, bargain-basement fee its law firm charged for the firm’s own business reasons.” Wiley’s brief also noted that Kirt- saeng “had no obligation whatsoever to pay the Supreme Court counsel who represented him even as they racked up millions of dollars in fees.” Chief Justice John G. Roberts Jr. seemed put off by that argument. “It seems to me that’s quite an in- trusion into the relationship between the party and counsel,” he said of in- quiries into fee arrangements.

Daily Journal Staff Writer

quires and repositions real estate as- sets in the hospitality, office, retail and residential spaces. At Ethika, Bindra said he largely focuses on compliance subsequent to the firm receiving Securities and Exchange Commission approval as a registered investment adviser. Earlier this year, Laurus ac- quired the Vail Cascade Resort and Spa in Colorado. A $35 million ren- ovation started this month. “With a robust background in real estate law and an impressive tenure consulting with Fortune 500 companies, Simran will be an instrumental member of our team as we undertake new ventures, ex- pand to different markets and con- tinue the success we’ve realized over the past several years,” said Laurus chairman Andres Szita in a statement. Before spending two years at Capital One, Bindra was an asso- ciate at Milbank, Tweed, Hadley & McCloy LLP for two years. He orig-


inally went in-house as senior coun- sel at CapitalSource for four years after starting his legal career at the defunct Heller Ehrman LLP. Bindra received his law degree from UC Berkeley School of Law.

New York Times

R eal estate investment and development firm Laurus Corp. announced the hir- ing of Simran S. Bindra as

W ASHINGTON — Three years ago, a Thai student who had helped finance

his U.S. education by selling im-

the company’s first general counsel and director of corporate affairs Monday. Bindra, who started in January, was most recently the senior direc- tor and associate general counsel at Capital One Financial Corp. He will handle the legal and compliance af- fairs at the Los Angeles-based Lau- rus, as well as its affiliate private eq- uity firm, Ethika Investments LLC. “What really drew me to Laurus was the growth path and the growth potential,” Bindra said. “If you look at the assets now, the growth is ex- ponential. The scale and scope of those assets are tremendous, and you see a growth pattern you don’t quite see with other private equity firms.” Launched in 1999, Laurus ac-

ported textbooks won a major Su- preme Court victory, persuading the justices that it is lawful to buy copyrighted books abroad and resell them in the United States. The rul- ing, which clarified an ambiguous phrase in the Copyright Act, applied




all manner of products, including

ability of attorneys’ fees can make all the difference in that decision, and in turn can make all the difference in whether the public’s rights are vindicated.” Several justices appeared unper- suaded by the argument. Justice Ruth Bader Ginsburg asked whether Kirtsaeng might just as easily have been dissuaded from mounting a defense for fear of having to pay the publisher’s legal fees. Justice Elena Kagan agreed. Hav- ing won, she said, Kirtsaeng had “a great David-versus-Goliath story to tell.” In general, though, she said she wondered whether making it easier for the side to recover legal fees “is not going to harm the Kirt- saengs of the world.” Paul M. Smith, a lawyer for Wiley, made a similar point, saying that making it easy for the winner to recover fees would “suppress litiga- tion.” “People simply aren’t going to

books, records, art and software. The student, Supap Kirtsaeng, returned to the Supreme Court on Monday, seeking more than $2 mil- lion in legal fees from John Wiley & Sons, the publisher that had sued him. The usual rule in U.S. civil litiga- tion is that each side pays its own lawyers regardless of who wins. But the Copyright Act allows judges to “award a reasonable attorney’s fee to the prevailing party.” Federal appeals courts apply dif- ferent standards in deciding when fee awards in copyright cases are warranted. The judge in Kirtsaeng’s case, in New York, awarded him nothing, relying on a decision from the federal appeals court there that focused on whether the losing side’s position had been “objectively rea-

sonable.” The publisher easily met that stan- dard, the judge said, as it had won

Former UC Berkeley law school dean files grievance

Continued from page 1

after Napolitano was unhappy with the results of the first. The fact that Choudhry feels duped after believing his first punishment would end sanctions against him caught the attention of Sorrell’s attorney, John D. Winer. Winer believes Choudhry and Steele were involved in a deal in which Steele went light on Choudhry as thanks for appoint- ment to a faculty position in the law


he accepted the light sanctions im- posed upon him by Steele ‘as part of a settlement,’ Winer wrote in an email. “To me this confirms the fact that at the time Choudhry and Steele were working in cahoots at reach- ing a backroom deal on Choudhry’s discipline, rather than Steele acting in the best interest of Tyann and the University,” he added, While Steele had previously men-

According to a letter sent by Pat- ti, that is exactly the university’s position. In a letter to William W. Taylor III, a partner at Zuckerman Spaeder LLP, who successfully de- fended former International Mon- etary Fund manager Dominique Strauss-Kahn against criminal sexual assault charges and is rep- resenting Choudhry, Patti said the school is allowed to launch a second


$600,000 judgment against Kirt-

keep fighting,” Smith said. “They’re going to find a way to get out of the case.” Rosenkranz disagreed, saying incentives were needed to ensure that difficult legal questions were re-

saeng, won an appeal and lost in the Supreme Court by a 6-3 vote. E. Joshua Rosenkranz, a lawyer for Kirtsaeng, told the justices that there was more to the analysis than


investigation into Choudhry’s role as a faculty member. Choudhry says he learned of the second investigation in an email from Broughton on March 15. His letter suggests Broughton launched the second investigation

school in which Steele would not teach and would have received no additional pay. Unanimously approved for ap- pointment, Steele declined before resigning. “It is disturbing that Choudhry writes in his letter that

tioned discussing his punishment with Broughton in a letter to the Daily Journal, he had never men- tioned speaking with Dirks.

Obama stresses need to monitor data in fighting terrorism

Obama stresses need to monitor data in fighting terrorism By Mark Scott New York Times B

By Mark Scott

New York Times

B ERLIN — The trans-At- lantic debate over digital privacy rights versus the surveillance needs of in-

telligence agencies was put under

a spotlight Monday, as President

Barack Obama called for continued access by law enforcement officials to thwart terrorism, while some European privacy advocates urged greater restraint. “I want to say this to young peo- ple who value their privacy and spend a lot of time on their phones:

The threat of terrorism is real,” Obama said at a trade show in Ha- nover, Germany. “I’ve worked to reform our sur-

veillance programs to ensure that they’re consistent with the rule of law and upholding our values, likeprivacy — and, by the way, we include the privacy of people out- side of the United States,” he add- ed.

Obama’s message comes at a sensitive time, as cities like Brus- sels and Paris are still recovering from recent terrorist attacks. But his words are unlikely to slow Eu- ropean efforts to expand people’s control over their digital lives. Europe is at the heart of a glob- al debate over the way companies like Google and Facebook, as well as national intelligence agencies, handle people’s digital data. Some regulators in the 28-member bloc

have called on companies and gov- ernments, particularly that of the United States, to comply with the region’s tough privacy regulations. “Those who want to play in our backyard must play by our rules,” Viviane Reding, a member of the European Parliament from Luxem- bourg and a former top European Union official, said Monday at a pri- vacy conference in Berlin. “Protec- tion of our personal data shouldn’t have a national barrier.” Reding is an author of a EU pri- vacy law that will go into force in 2018. It will be able to impose fines of up to 4 percent of a company’s global revenue for the most serious breaches of European data protec- tion rules.

Plaintiff lawyers in Uber cases object to settlement

Continued from page 1

language in the settlement stating just wage-and-hour claims would be severed from the extant disputes. “Without an express carve-out, we’re concerned it does release our claims,” Lee said. “That may be what Shannon has in mind, but we’re not sure how Uber understands the agreement.” Messages left with Uber and its lead counsel, Theodore J. Boutrous of Gibson, Dunn & Crutcher LLP, were not returned.

Other lawyers who say they’ll file objections include Christopher J. Hamner at Hamner Law Offices APC, who has two cases with vari- ous federal law claims against Uber; Douglas Caiafa, a sole practitioner whose own misclassification lawsuit is stayed in Los Angeles County Su- perior Court; and Alec Segarich of Lohr Ripamonti & Segarich LLP, who is battling Uber in state appel- late court on whether his worker compensation insurance claims should go to an arbitrator.

Other lawyers were on the fence about objecting, including Randall Aiman Smih of Aiman Smith & Mar- cy, who said Liss-Riordan should not get blame for failing to reach out to him and other plaintiff lawyers. “I wasn’t consulted but that doesn’t surprise me,” Smith said. “No way you could have herded all those cats together.”

State Bar considers debate on split of its functions

Continued from page 1

vision of the board’s decisions by the state Supreme Court. “This group is a walking antitrust violation,” said Fellmeth. Among the reforms he suggested were the bar shifting to a super-ma- jority of non-attorney members, with

the added provision that no vote may be taken unless a majority of those voting are public members. State Bar General Counsel Vanes- sa Holton said in an interview that her office is actively studying the general implications of the North Carolina decision, as well as its im-

pacts on potential de-unification of the agency. The bar’s governance task force, after concluding its sec- ond public hearing this month, plans to complete a final report on its work by July.

TUESDAY, APRIL 26, 2016 Logging In Dominic Fracassa / Daily Journal Jonathan Runyan, general counsel of

Logging In

TUESDAY, APRIL 26, 2016 Logging In Dominic Fracassa / Daily Journal Jonathan Runyan, general counsel of

Dominic Fracassa / Daily Journal

APRIL 26, 2016 Logging In Dominic Fracassa / Daily Journal Jonathan Runyan, general counsel of San
APRIL 26, 2016 Logging In Dominic Fracassa / Daily Journal Jonathan Runyan, general counsel of San
APRIL 26, 2016 Logging In Dominic Fracassa / Daily Journal Jonathan Runyan, general counsel of San

Jonathan Runyan, general counsel of San Francisco-based Okta Inc., focuses on worker data.

By Banks Albach

Daily Journal Staff Writer

T he meteorological term

okta, a unit of measure-

ment for cloud cover, is

a good fit for the cloud-

based startup that adopted the name when it launched in 2010. The company, focused on design- ing and managing applications that handle employee login data for large corporations. Okta’s apps range from mobile to workplace — any- where an employee decides to log in to any part of their employer’s digital presence. The company boasts more than 2,000 clients including LinkedIn Corp, Groupon Inc. and Informatica Corp. Okta is headquartered in San Francisco with additional offices in Seattle, London, Sydney and the Netherlands, employing roughly 700 people in all. Jonathan T. Runyan joined the company as lead counsel in January last year after a lengthy stint with Sil-

icon Valley firms focused on technol- ogy startups. He was a senior asso- ciate at Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP for four years before moving to Goodwin Procter LLP. And he made partner at Goodwin in late 2013 be- fore going in-house at Okta. Daily Journal staff writer Banks Albach recently with Runyan about his work as Okta’s lead counsel. Be- low is an edited transcript of their conversation.

Daily Journal: Break down what Okta does. Runyan: For our customer’s em- ployees, Okta is effectively the “front door” to work. It is the one single login they use to access their devic- es — phones, laptops, tablets and mobile phones — and all of the apps and services they use every day. It’s one single login for everything, which makes users’ lives simpler, more efficient and more productive. For the IT leaders that purchase Okta, we manage and secure identi- ties for every app, service and device

Jonathan T.


General Counsel

Okta Inc.

San Francisco

Size of legal department:

4 attorneys

across their organization. Our ser- vice helps them ensure that the right people have the right level of access at the right times, and that when an employee changes jobs, their access level changes, or when an employee leaves, they can no longer access corporate systems. We also provide a mobility management and authen- tication service, which verifies that the right people are logging in to corporate systems. Another grow- ing area of Okta’s business is what we call the Okta Platform. With the Okta Platform, developers are able to build Okta’s identity services into applications and portals that they are building so that they can authen- ticate, manage and secure custom- ers, partners or contractors. DJ: The Identity-as-a Service, or IDaaS, industry is growing increasingly competitive. What does Okta offer as an advantage? Runyan: Okta is the category cre- ator and the leader in the category. When the team pioneered the IDaaS industry seven years ago, many of our current competitors didn’t see the strategic advantage of identity. Now that the opportunity has been validated technically and by custom- er demand, others have rushed into the market only to discover that the first mover advantage was gone. In terms of advantages, unlike many of our competitors, Okta offers custom- ers the freedom and ability to use any application and/or architecture they need to transform their busi- ness. We also have the industry’s broadest and deepest set of app in-

tegrations that make it easy to man- age authentication and provision for users. DJ: Okta counts some big players, such as Activision Pub- lishing Inc. and Allergen Inc. as clients. Why have they turned to Okta for service? Runyan: I think the line between technology companies and non-tech- nology companies is fading pretty fast, and environments are getting more complex, security risks are more abundant — and public — and user expectations are more intense. Technology now unquestionably plays an important strategic role in driving business success and since founding Okta, our team has worked closely with thousands of CIOs and CISOs to help them realize a vision of technology-driven productivity. Activision and Allergen are two great examples and we are very for- tunate to partner with them.

firm where I was a partner before joining Okta full time, is our out- side corporate counsel. I can’t say enough great things about Good- win in general and their technology company practice in particular. I was very fortunate to have a front-row seat and a hand in helping establish their Northern California technol- ogy company practice, really from scratch starting around 2010. It is truly amazing what it has become and I take a lot of pride in having been a part of that success. The rea- son they have been so successful in what is really a crowded market — i.e. providing legal services to technology companies and venture capitalists in the Bay Area — is that they actually “get” tech companies. What I mean by that is, they take a very practical approach to solving legal issues for their clients — they have seen whatever movie you are showing them 1,000 times before

‘My personal North Star is my integrity - and I exepect the same from outside counsel as they are a reflection of Okta and, by extension, of me.’

DJ: How is your legal depart- ment structured and sorts of matters do you keep in-house? Runyan: Currently, we are a de-

partment of six. I obviously head the department and report to Todd McK- innon, our CEO. I and am very ably supported by Larissa Schwartz, my AGC and Maryam Baer, our director of commercial transactions. They report directly to me. We also have

a corporate paralegal and a manager

of stock administration who report into Larissa and Kim Woodward, our senior corporate counsel, who reports to Maryam. When I arrived

a little over a year ago, it was just

Maryam — so we have been expand-

ing fairly rapidly. DJ: When do you seek outside counsel and what firms do you work with? Runyan: Goodwin Procter, the

and know how it ends — so they are able to cut through the noise and give you advice to help you obtain the best possible outcome, as quick- ly as possible and with a little “brain damage” as possible. The attorneys I rely on most at Goodwin are Anthony McCusker for corporate and securities, Rick Kline for securities and capital markets, Larry Chu for transactions, Lynda

Galligan on executive compensa- tion and Sarah Axtell, also on se- curities — all of whom are truly as good as it gets in this business. We use, among others, Baker McKenzie

on international matters; Shartsis Friese and Paul Hastings for real estate; Fenwick and Goodwin on pat- ents; Barnes and Thornburg in Indi- anapolis for trademarks. We rely on Andre Perey at Blakes for Canadian matters and James Rozsa at Johnson

Winter & Slattery for legal work in Australia. DJ: What are the traits you look for in outside counsel? Runyan: First and foremost, they will have been referred to me by an- other lawyer I trust and respect who has previously engaged them for a similar matter — the Bay Area GC network is incredibly strong and an invaluable and generous resource. Following that, I look for counsel that can be, and are willing to be, a real business partner to Okta over the long run — not someone who views a matter as a one-off transac- tion and their one chance to extract value from Okta. I am very turned off by outside counsel that takes a short-sighted view to the relationship. Customer success is at the core of everything we do at Okta and, I suppose, I am looking for like-minded outside counsel. I want counsel that is will- ing to invest the time to get to know the company, how we operate and view the world and are willing and able to serve as an extension of the company in whatever area of the law we are addressing for that engage- ment. My personal North Star is my integrity — and I expect the same from outside counsel as they are a reflection on Okta and, by extension, of me. And they have to be respon- sive — huge pet peeve. That was something I prided myself on in pri- vate practice, much to my family’s dismay. DJ: Okta handles a large amount of consumer data. What laws do you contend with, and how do you interact with the agencies that enforce them? Runyan: That is actually a bit of a misconception about Okta. The con- sumer data we process and house is generally limited to usernames and passwords of our customers’ employ- ees and their partners and custom- ers — this depends on which aspects of our service a particular customer is using. That said, security is a ma- jor component of the Okta platform

and something we take incredibly seriously. We are fortunate to have an amaz - ing team supporting us on that front including, among others, our CSO David Baker, Hector Aguilar our CTO and Tony Schilling who runs our tech-ops group. I partner with this team very closely on data pri- vacy matters. In terms of the laws we contend with in this area of com- pliance, we, like everyone else with customers in the EU, had to deal with the recent termination of the EU Safe Harbor. Fortunately, we were able to read the tea leaves a bit on that one and, prior to the Schrems ruling and the subsequent termina- tion of Safe Harbor, we proactively developed, with the help of Lothar Determann at Baker McKinzie, a data processing addendum that in- corporated the EU model clauses. DJ: In the evolving technical landscape that you work in, what legal issues keep you thinking? Runyan: The recent discussion around encryption technologies spurred by the Apple-FBI spat and the controversy around the planning of the horrific terrorist attacks in EU has obviously been top of mind. I am also fascinated to watch the continu- ing evolution of software patents and where that industry might be head- ed. DJ: What kind of litigation and resulting settlements have you contended with since joining Okta? Runyan: Knocking on wood here, but we have been very fortunate and not had any litigation to date and, unfortunately, any settlements we have been involved with are subject to confidentiality restrictions. DJ: Are you hiring, looking to expand Okta’s legal department? Runyan: Not at the moment, but likely in the not too distant future. I anticipate my next hires will be IP/ Product Counsel and UK-based cor- porate/commercial counsel.


TUESDAY, APRIL 26, 2016 • PAGE 5



JOURNAL TUESDAY, APRIL 26, 2016 • PAGE 5 DEALMAKERS Venture Capital Waltz Networks lands $8.15M Series

Venture Capital Waltz Networks lands $8.15M Series A with help from Fenwick

Fenwick & West LLP advised Waltz Networks Inc., the San Francis- co-based operator of a cloud platform for automatic high performance traffic management applications, in its $8.15 million Series A financing, a deal an- nounced April 19. The company raised $6.75 million from New Enterprise Associates, a global venture capital firm, and $1.4 million in National Science Foundation grants. Waltz Networks’ solutions provide real-time network control, allowing businesses higher bandwidth utilization and lower latency, according to a news release. The capital will be used to expand hiring and product develop- ment efforts, according to a news release. The Fenwick transaction team was led by Mountain View partner Michael T. Esquivel (pictured) and associate Debbie Li.

Michael T. Esquivel (pictured) and associate Debbie Li. ESQUIVEL Energy Akin Gump advises in energy deal


Energy Akin Gump advises in energy deal

Akin Gump Strauss Hauer & Feld LLP advised Diamond Generating Corp., a subsidiary of Mitsubishi Corp., in acquiring a 50 percent stake in Tenaska Westmoreland Generating Station, a roughly 925 megawatt natural gas-fueled power project, a deal announced April 19. Financial terms were not disclosed. Affiliates of Tenaska Inc., the original developer of the project, will own the remaining 50 percent. Tenaska is an Omaha, Neb.-based independent power producer. The project also closed on about $780 million in commercial financing led by MUFG Union Bank N.A, BNP Paribas, Citigroup Inc. and Industrial and Commercial Bank of China. Construction began on the project in Westmoreland County, Penn., near

Pittsburgh, earlier this year and is expected to be completed by the end of


Diamond Generating, headquartered in Los Angeles, owns 11 operating power generating facilities throughout the country. Los Angeles partner Dino E. Barajas (pictured) and counsel Vladimir Fet and Courtney Matsuishi led the Akin Gump team with support from partner Anthony R. Salandra along with associates Rachel A. Ramos and Daniel Shlomi.

along with associates Rachel A. Ramos and Daniel Shlomi. BARAJAS BERGSTROM M&A Trio of firms tapped


with associates Rachel A. Ramos and Daniel Shlomi. BARAJAS BERGSTROM M&A Trio of firms tapped for


M&A Trio of firms tapped for technology company acquisition

Latham & Watkins LLP advised Bridgepoint, a European private equity firm, and served as lead counsel in its deal with Summit Partners and Calyp- so Technology Inc., a transaction announced April 19. Bridgepoint and Summit Partners will acquire Calypso Technology. Finan- cial terms of the transaction were not disclosed. Wilson Sonsini Goodrich & Rosati PC advised Calypso Technology, a pro- vider of capital markets software headquartered in San Francisco. Kirkland & Ellis LLP advised Summit Partners, a growth equity invest- ment firm. Calypso offers an integrated suite of trading and risk management solu-

tions. It has more than 34,000 users in over 60 countries, including profes- sionals at banks, clearing houses, insurance companies and corporations. The deal will support Calypso’s next phase of growth along with the company’s work in capital markets technology, according to a news release. Goldman Sachs Group Inc., UniCredit S.p.A., Crédit Agricole S.A., Mizuho Bank Ltd. and Bank of Ireland provided debt for the transaction. The transaction is subject to standard closing conditions and regulatory clearances. Partners Olivier du Mottay in Paris and Luke J. Bergstrom (pictured) and Chad G. Rolston in Menlo Park led the Latham team with support from partner John “J.D.” Marple and associates Saad S. Khanani and Benjamin A. Liss. Associates Julie D. Crisp in San Francisco and H. Jia Jia Huang in Los Angeles aided the effort. The Kirkland team was led by partners James L. Learner in London and Brian C. Van Klompenberg in Chicago. San Francisco partner Michael S. Ringler led the Wilson Sonsini team which included partner John Mao along with associates John H. Olson, Michelle S. Fernandes, Jennifer L. Sayles Brandon M. Gantus and Jonathan P. Adams. Palo Alto partners Kira Kimhi, Ivan H. Humphreys, Scott T. McCall and Marina C. Tsatalis provided support along with associates Tracy D. Rubin, Myra A. Sutanto Shen, Matthew C. Norgard and Dana J. Hall.

M&A Medical robot makers combine in $80M deal with help from trio of firms

Sidley Austin LLP advised Hansen Medical Inc. in its sale to Auris Surgical Robotics Inc., a deal with an equity value of roughly $80 million, announced April 20. Auris Surgical will acquire Hansen Medical for $4 per share in cash, rep- resenting a premium of about 39.9 percent over the closing sale price of com- mon stock of Hansen Medical a day before the deal was announced. Certain significant stockholders of Hansen Medical have agreed to invest roughly $49 million into Auris at the same time the deal closes. Hansen Medical, headquartered in Mountain View, designs and manufac- tures medical robotics for positioning and control of catheter-based technol- ogies.

Morris, Nichols, Arsht & Tunnell LLP advised the Hansen Medical special committee of the board of directors. Morrison & Foerster LLP advised Auris, a San Carlos-based robotics technology company whose products aim to assist in medical procedures. The combined capabilities of Auris and Hansen Medical will accelerate the growth of medical robotics to advance patient care, said the president and CEO of Hansen Medical in a news release. Significant stockholders that have about 65 percent of Hansen Medical’s outstanding shares, including the compa- ny’s executive officers and directors, have entered into voting agreements with Auris and have agreed to vote in favor of the transaction, according to a news release. The deal is expected to close in the middle of the year if certain customary closing conditions, such as shareholder approval, are met. Partners Jennifer F. Fitchen, (pictured) a partner in Palo Alto and Sharon R. Flanagan in San Francisco led the Sidley team which included associate Sally M. Wagner Partin. Century City partner Russell G. Weiss and Palo Alto associate Ruchun Ji provided support. Patricia O. Vella, a partner in Wilmington, Del., led the Morris Nichols team. Palo Alto partner Michael J. O’Donnell led the MoFo team along with partner Mika Reiner Mayer leading on cer-

tain aspects. Counsel Walter S. Wu provided support along with associates Jae I. Yoo and Aria Kashefi. San Francisco partners Aaron P. Rubin and David A. Lipkin aided the effort along with Aaron J. Schohn, an associate.

aided the effort along with Aaron J. Schohn, an associate. FITCHEN Venture Capital Diamanti raises $12.5M


Venture Capital Diamanti raises $12.5M Series A with help from Wilson Sonsini

Wilson Sonsini Goodrich & Rosati PC advised Diamanti in its $12.5 million Series A funding round, a deal announced April 19. The round included participation from Goldman Sachs Group Inc. along with Charles River Ventures, Draper Fisher Jurvetson and GSR Ventures. Diamanti, headquartered in San Jose, is a datacenter infrastructure com- pany. Diamanti products aim to solve networking challenges and storage re- quirements that organizations face when moving containerized workloads from development into production. Robert P. Latta (pictured) and Mark B. Baudler, partners in Palo Alto, co- led the Wilson Sonsini team.

partners in Palo Alto, co- led the Wilson Sonsini team. LATTA Venture Capital Latham helps biopharma


Venture Capital Latham helps biopharma company raise $46.2M Series B

Latham & Watkins LLP advised Second Genome Inc., a privately-held biopharmaceutical company based in South San Francisco, in its $42.6 Million Series B financing, a deal announced April 20. Pfizer Venture Investments and Roche Venture Fund co-led by the oversubscribed round which included participa- tion from Digitalis Ventures, LifeForce Capital, MBL Venture Capital Co. Ltd., Advanced Technology Ventures and many others. The latest financing round brings the combined total investment in the company to $59 million. The funds will be used to further expand the company’s products and for clinical investigations, according to a news release. The executive director of Pfizer Venture Investments and the head of Roche Venture Fund will join the Second Genome board of directors. Latham’s team included Menlo Park partner Mark V. Roeder and associate Alexander T. White.

M&A Fenwick helps HP assets change hands in $170M deal

Fenwick & West LLP advised Hewlett Packard Inc. in the roughly $170 million sale of certain customer experience software and services assets to Open Text Corp., a deal announced April 18. OpenText is an independent software provider of Enterprise Information Management headquartered in Canada. A spokesperson from the company could not be reached for comment. HP TeamSite, a multi-channel digital experience management platform for web content management, HP MediaBin, a digital asset management solution and HP Qfiniti, an intelligent workforce optimization solution, are among the software assets that will change hands, according to a news re-


The customer experience software business is expected to generate be- tween $85 million and $95 million in annual revenues and become a part of the OpenText operating model within the first year after the deal closes. The transaction is expected to finalize in the fourth quarter the current fiscal year, subject to customary regulatory approvals and closing conditions.

The acquisition is expected to enhance OpenText’s customers multi-channel digital experience by providing them with software products in marketing optimization, mobile marketing and voice of the customer programs, according to a news release. The Fenwick team was led by Mountain View partner David W. Healy (pictured), with support from partners Mark

S. Ostrau, Stuart P. Meyer, William R. Skinner and Andrew J. Kim. Counsel Glenn Borromeo also advised along with

associates Priscila Bastazin, Christopher N. Gorman, Victoria C. Wong, Alex Y. Galev, Christopher D. Joslyn, Joseph Schenck and Meng Wu. San Francisco associate Scott A. Behar aided the effort.

Wu. San Francisco associate Scott A. Behar aided the effort. HEALY IPO Gemphire Therapeutics will go


IPO Gemphire Therapeutics will go public with guidance from Honigman Miller, Cooley

Honigman Miller Schwartz and Cohn LLP is advising Gemphire Thera- peutics its initial public offering announced with the Securities and Exchange Commission, April 18. Pricing and share volume details have not been disclosed. Gemphire Therapeutics is a Northville, Mich.-based clinical-stage bio- pharmaceutical company that develops and commercializes therapies that for cardiovascular disease. Cooley LLP advised the syndicate of underwriters, led by Jefferies LLC and Cowen and Co. LLC. Phillip D. Torrence, Joscelyn C. Boucher and Meredith Ervine, partners in Kalamazoo, Mich., led the Honigman Miller team. The Cooley team was led by partners Divakar Gupta in New York, Nicole

C. Brookshire in Boston and Charles S. Kim in San Diego (pictured).

in Boston and Charles S. Kim in San Diego (pictured). KIM Financing Jet engine lessor revs


Financing Jet engine lessor revs up credit facility with help from Pillsbury

Pillsbury Winthrop Shaw Pittman LLP advised Willis Lease Finance Corp., an independent jet engine lessor headquartered in Novato, in expanding its $700 million revolving credit facility to $1 billion, a deal announced April 21. The 5-year term credit facility includes a $110 million accordion feature and additional flexibility. Willis Lease and its subsidiaries will use the ex- panded credit facility to continue growing its lease portfolio, which included nearly $1.5 billion of owned and managed assets as of the end of last year, according to a news release. The revolving credit facility is provided by a syndicate of thirteen banks. MUFG Union Bank N.A. is serving as administrative agent, joint lead arrang- er and joint bookrunner, Bank of America N.A. and Wells Fargo Bank N.A.,

are serving as co-syndication agents. Merrill Lynch, Pierce, Fenner & Smith Inc. and Wells Fargo Securities, LLC are serving as joint lead arrangers and joint bookrunners. U.S. Bank National Association is the documentation agent, joint lead arranger and joint bookrun- ner. Capital One, N.A., is the senior managing agent while The Huntington National Bank, serves as managing agent. CIT Bank, N.A. and Apple Bank for Savings are two new banks that have joined the syndicate. Willis Lease leases large and regional spare commercial aircraft engines, auxiliary power units and aircrafts to airlines, aircraft engine manufacturers and maintenance, repair and overhaul providers in 120 countries, according to a news release. The company expects this expanded credit facility to be a significant tool for the company as it continues to grow and prepare for the future, said the chairman and CEO of the company in a news release. Philip J. Tendler (pictured), a partner in San Francisco, led the Pillsbury team with support from associates Alicia M. McKnight and Katie P. Vorhis.

from associates Alicia M. McKnight and Katie P. Vorhis. TENDLER — Melanie Brisbon


— Melanie Brisbon

PAGE 6 • TUESDAY, APRIL 26, 2016



A major win for criminal defense attorneys

By Thomas A. Zaccaro, Nicolas Morgan and Jenifer Doan

D efense attorneys across the United States cheered recently when the U.S. Supreme

Court bolstered a defendant’s right to counsel under the Sixth Amend- ment. In a 5-3 plurality opinion writ- ten by Justice Stephen Breyer, the Supreme Court concluded that an asset freeze violates a defendant’s Sixth Amendment right to counsel when such asset freeze prevents the defendant from using untainted funds — in other words, funds not connected to any criminal act — to retain the counsel of his or her choice in a criminal action. Luis v. United States, 2016 DJDAR 3037 (March 30, 2016). How will Luis affect parallel civ-

il proceedings? At a minimum, it seems clear that the Supreme Court’s holding empowers criminal defendants to apply for relief from asset freezes of untainted funds to the extent they impede a criminal defendant’s ability to retain counsel of his or her choice. However, it re- mains to be seen how Luis will be applied at the district and appellate court level with regard to open is- sues such as tracing or reasonable- ness of fees.

11th Circuit Holds No Right to Use Untainted Assets to Hire Counsel Until her indictment on Oct. 2, 2012, petitioner Sila Luis was in the health care business, owning and operating two home health care agencies which served patients at their homes. Her indictment charged her and two other co-own- ers with conspiracy to commit health care fraud (violation of 18 U.S.C. Section 1349), among other violations, by way of paying kick- backs for patient referrals and bill- ing Medicare for unnecessary ser- vices. The government alleged that Luis’ two companies had fraudu- lently received $45 million in Medi- care reimbursements, and sought forfeiture in that same amount. Simultaneously, the government also brought a civil action against Luis seeking a temporary restrain- ing order (TRO) and an injunction under 18 U.S.C. Section 1345 to freeze all of Luis’ personal assets, however obtained. The TRO and injunction were granted the next day, and the government succeed- ed in freezing nearly all of Luis’ assets totaling approximately $2 million. Left with little to fund her criminal defense, Luis moved for a release of untainted funds from the freeze in the civil action, arguing that enjoining her from spending untainted assets to defend related criminal charges violated the Fifth and Sixth Amendments. The gov-

charges violated the Fifth and Sixth Amendments. The gov- New York Times In a recent ruling,

New York Times

In a recent ruling, the Supreme Court said that an asset freeze violates a defendant’s Sixth Amendment right to counsel when the asset freeze prevents the defendant from using untainted funds to retain the counsel of his or her choice in a criminal case.

ernment opposed.

The U.S. District Court for the Southern District of Florida issued

a published opinion denying Luis’

motion for release of assets to re- tain counsel, holding that “there is no Sixth Amendment right to use untainted, substitute assets to hire counsel.” Luis appealed the ruling to the 11th U.S. Circuit Court of Appeals but was also unsuccess-

ful there. The 11th Circuit issued

a per curiam, unpublished opinion

rejecting the constitutional claims, finding that the arguments made by Luis in this appeal were fore-

closed by prior U.S. Supreme Court and 11th Circuit decisions.

Supreme Court Reverses in a 5-3 Opinion After the 11th Circuit denied Luis’ petition for rehearing en banc, the Supreme Court issued a writ of cer- tiorari to consider “[w]hether the pretrial restraint of a criminal de- fendant’s legitimate, untainted as-

sets (i.e., those not traceable to an alleged criminal offense) needed to retain counsel of choice violates the Fifth and Sixth Amendments.” Notably, all 10 amicus briefs filed

in the Supreme Court case support-

ed Luis’ position — contributing entities included the U.S. Justice Foundation, the Cato Institute, the American Bar Association and the National Association of State Leg- islators. Reversing the judgment of the 11th Circuit, Justice Breyer wrote the plurality opinion joined by Jus- tices John Roberts, Ruth Bader Ginsburg and Sonia Sotomayor.

The plurality held that “the pretri- al restraint of legitimate, untainted assets needed to retain counsel of

choice violates the Sixth Amend- ment” under three basic consider- ations. First, the plurality reasoned that the fundamental Sixth Amend- ment right to assistance of counsel outweighed the government’s and victim’s interest in securing resti- tution. Second, the plurality found no support in Monsanto, Kaley or

Caplin (nor in common law) for the authorization of unfettered, pretri- al forfeiture of the defendant’s own untainted property. Kaley v. United States, 134 S. Ct. 1090 (2014); Ca- plin & Drysdale, Chartered v. Unit- ed States, 491 U.S. 617, 631 (1989); United States v. Monsanto, 491 U.S. 600, 616 (1989). Lastly, the plurali- ty considered the potential erosion of right to counsel that could ensue from a ruling authorizing the pre- trial taking of untainted assets. For those reasons, the plurality held that Luis has a Sixth Amendment right to use her own “innocent” funds to pay a “reasonable” fee for the assistance of counsel. (Jus- tice Clarence Thomas concurred in the plurality’s result for rea-

sons that rested “strictly” on the Sixth Amendment’s text and com- mon-law backdrop.) Justice Anthony Kennedy (joined by Justice Samuel Alito) and Justice Elena Kagan dissented from the opinion. Their dissents highlight- ed, among other things, the plural- ity’s “arbitrary” and “illogical” con- clusion that there was a difference between untainted and tainted funds. Specifically, the dissenters

noted that the plurality’s opinion would reward defendants who know how to make criminal pro- ceeds look untainted, or defendants who preserved their own untainted assets and spent stolen money.

The Application of Luis to Parallel Proceedings With the outcome of Luis, courts overseeing civil actions can expect to see an uptick in motions for re- lease of frozen funds when parallel criminal proceedings are pending. To be clear, Luis itself involved a motion for release of frozen funds

in a civil action to fund defense costs in a related criminal action. Government agencies (such as the SEC) often bring civil actions and obtain asset freezes, and Luis will allow defendants to apply to have untainted assets unfrozen to de- fend parallel criminal proceedings. However, as Justice Kennedy em- phasized, the line between “taint- ed” and “innocent” assets may be difficult for courts to draw, partic- ularly with respect to white-collar crime and securities cases. For ex- ample, if an executive is criminally charged with falsely certifying a

company’s financial statements, will salary and bonus compensa- tion for periods covered by the fi- nancial statements be found to be “innocent” or “tainted”? And what about options or stock benefits that vested before the fraud occurred, but sold after? Cases involving com- plex compensation schemes will require even more thought. Cer- tainly, some circuits — like the 9th Circuit which has not developed much tracing precedent — have their work cut out for them to for- mulate a suitable test. Other questions remain open with respect to the “reasonable” fees aspect of the plurality’s hold- ing. How will courts determine the reasonableness of a defendant’s choice of counsel for a criminal case without impeding on Luis which seems to suggest it is unjust to enjoin a defendant from using untainted assets freely? And, will that analysis be altered if, for exam- ple, defendant retains the same law firm for the criminal and civil case?

Conclusion The Luis holding drastically alters the landscape of the American court system — reining courts away from their strong preference for preserving assets for victims versus a criminal defendant’s attor- ney fees. Counsel and individuals alike should continue to monitor this issue as courts provide addi- tional clarity and reasoning to Luis.

Thomas Zaccaro and Nicolas Morgan are former SEC trial coun- sel and partners in Zaccaro Morgan LLP. Jenifer Doan is an associate with the firm. Zaccaro Morgan is a boutique trial firm specializing in complex civil litigation, government and corporate investigations, and white collar defense.


Appellate courts could help out counsel with draft opinions

M yron Moskovitz’ article,

“Oral argument: if not

necessary, waive it good-

bye” (April 18), was quite thought provoking. As a preliminary matter, many practitioners, including my- self, are concerned that, if we waive oral argument, we might inadver- tently (and incorrectly) communi- cate to the appellate court that the appeal is not all that important to our clients and/or the development of the law in our state. Perhaps, the courts can do more to allay this longstanding and reasonable con-

cern of ours. Even more usefully, the appel- late courts of our state could help

the parties and their attorneys by providing them with copies of their draft opinions at the time that they ask the attorneys if they want oral arguments. This would be similar to what most of the trial courts in our state already do when they post their tentative rulings before law and motion hearings. This proposal would help appel- late parties and their attorneys: (1) decide whether to incur the expense and further delay of requesting an oral argument; and (2) address the appellate justices’ specific concerns at oral argument. I have been in- volved in at least two appellate cas- es, resulting in published decisions,

where the appellate court based its decision on grounds that were not raised by either the appellant or the respondent in their briefs. This was very frustrating, wasteful, and un- fair. Had the appellate court simply done the parties the courtesy of pro- viding them with a copy of its draft opinion, the attorneys could have provided the court with a far more meaningful argument. The bar and the bench of our state need to start working together to resolve these longstanding and unnecessary problems.

— John K. Haggerty Santa Clara

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TUESDAY, APRIL 26, 2016 • PAGE 7

Pay-to-play schemes persist, despite law

By Jared Milrad

“I t is difficult to get a man

to understand some-

thing, when his salary

depends on his not un-

derstanding it.” — Upton Sinclair More than two decades ago, Tom Cruise told us that we couldn’t han-

dle the truth. It’s become abundant-

ly clear that Hollywood can’t either. That’s because a few weeks ago,

the Hollywood Reporter released

a now infamous investigation de-

tailing the cottage industry in Hol- lywood known as casting “work- shops.” In it, the Reporter revealed how actors early in their careers were routinely paying $50 or more to attend so-called “educational work- shops,” where they perform a scene for casting directors or assistants, purportedly to receive constructive feedback on their craft. But as the article details, these workshops are de facto paid audi-

tion opportunities: a job interview with a hefty fee and no guaranteed outcome. Despite the practice being explicitly illegal under the Krekori- an Act of 2009, the industry has all but shrugged at every exposé and investigation over a period of de- cades. But before diving into this Hol- lywood drama, let’s start with the prequel. The casting workshop cottage industry began at least as early as the 1980s, when casting directors were being paid to attend “showcas- es,” where numerous actors would perform a variety of scenes in front

of them. In a revised policy dated

August 1986, the Casting Society

of America (CSA) banned the prac-

tice, stating that “no member shall accept compensation for attending a showcase,” and threatening expul- sion from the CSA for those who did.

JARED MILRAD Actor, lawyer and entrepreneur
Actor, lawyer and entrepreneur
those who did. JARED MILRAD Actor, lawyer and entrepreneur New York Times Despite being illegal under

New York Times

Despite being illegal under the Krekorian Act of 2009, some say pay-to-play schemes, in which actors pay money to attend “workshops” for casting directors, are still common in Hollywood.

Yet, the practice of casting directors charging actors to perform at show- cases — and later, workshops — continued to worsen. In response, the CSA formed a “Teaching Com- mittee” in the 1990s, supposedly to ensure that members who offered

educational opportunities for actors were actually offering educational

opportunities — instead of sticking actors with the bill. In 1996, a mem- ber of the CSA board of directors, Joe Reich, wrote that “it is vital to the future activities of those of us that choose to teach that we make every possible effort to conform to our by-laws.” But instead of addressing a fester- ing problem, the CSA board actu- ally voted to disband the Teaching Committee — leaving not even the fox in charge of guarding the hen house. Fast forward to 2001. The Califor- nia State Labor Board conducted a lengthy investigation into prolifer- ating pay-to-play workshops, and determined that such workshops were “presumptively in violation of the provisions of section 450 of the Labor Code.” As a result of their investiga-

tion, more than a dozen workshop companies were put on notice to either shut down or abide by the law. But instead, the state adopted “guidelines” in 2002 that essential- ly enabled the practice to continue unabated, and the CSA quickly fol- lowed suit. By 2009, there were dozens of workshop companies offering more pay-to-play schemes. In response, State Rep. Paul Krekorian and the Los Angeles city attorney’s office helped pass The Talent Scam Pre- vention Act of 2009, Assembly Bill 1319, a law intended to address much of the abuse. Passed with the overwhelming support of actors’ unions, the California Labor Com- mission, L.A. County Department of Consumer and Business Affairs, major studios and networks, and several well-respected actor advoca- cy groups, AB1319 — now known as The Krekorian Act — was supposed to be the beginning of the end for pay-to-work schemes. In response to the act and in con- sultation with the L.A. city attor- ney’s office, the CSA adopted nine new workshop guidelines in 2010 that are still in force today:

“Classes taught by Casting Direc- tors and Associates must be for in- structional purposes only and not a ‘paid audition.’ The workshop must clearly post that taking part in the class you are teaching is not a guar- antee of employment.” As part of these new guidelines, the CSA required workshop pro- viders to post a “disclaimer,” which states in part that the workshop “is a learning experience. It is not an au- dition or employment opportunity.” Yet, oddly, the practice of paid workshops continued to grow. Last year, in the face of a problem obvi- ous to everyone except those prof- iting from it, L.A. City Attorney Mike Feuer held a press conference stating that they would enforce the Krekorian Act and crack down on illegal talent scams, including work- shops. Rigo Reyes from the L.A. County Department of Consumer and Business Affairs, Duncan Crab- tree-Ireland, lead counsel for the SAG-AFTRA, as well as the law’s lead author, Paul Krekorian, now in the L.A. city council, joined them. Around this time, I moved to L.A., one among thousands angling for an acting career. But I came to the

industry not only armed as an actor, but with a background as a lawyer, activist and advocate. Which is precisely why the work- shop phenomenon instantly struck me as odd. Veteran actors told me that not long ago, casting offices would have free meetings with ac- tors — widely known as “generals” — and would regularly attend free showcases created by actors them- selves. But all I heard from agents and managers was that workshops were the place to “get seen.” Like every- one else, I started attending these workshops — shelling out $40 or $50 to read scenes for in-demand casting directors, assistants, and even agents and managers. I quickly learned that the most prodigious actors do their research first. A workshop actor can visit (for an annual fee, of course) and find out wheth- er the casting office hosting the workshop is actually casting any projects. In many instances, they’re not, and instead have projects “on hiatus.” If they are, that often makes for a more expensive evening. Once at the workshop, staffers

normally reiterate the CSA dis- claimer about the workshop not be- ing “an audition or employment op- portunity.” For example, at Actor’s Link — the company now tarnished by Casting Director Scott David’s firing at “Criminal Minds” — this disclaimer was often haphazardly announced by another actor who volunteered to run the workshop for the evening, in exchange for the chance to read for the visiting cast- ing office. After sharing a version of the disclaimer in part or full, the vol- unteer would often add, with a wink:

“But you all know why you’re here.” And everyone did know why they were there — including the casting directors and assistants, who often take home hundreds of dollars per workshop. Despite the trend, not all cast- ing directors are onboard with the workshop gravy train. Casting di- rectors Billy DaMota and Dea Vise are among its most vocal opponents, and Marci Liroff (“Mean Girls”) and many others won’t do them, either. As increased media attention on this issue continues to make Hol- lywood squirm, the CSA recently announced the formation of yet an- other “Casting Workshop Commit- tee” to, you guessed it, “preserve and enhance the educational value of casting workshops.” Ironically, several of the committee’s members regularly host their own pay-to-play workshops. Which brings me back to Upton Sinclair’s point from nearly a cen- tury ago, revised only slightly for 2016: You can’t expect an industry to change that profits from the very thing that needs changing. But what we can expect — and, indeed, should expect — is that our elected officials and enforcement authorities will do their jobs. They should, at last, launch immediate investigations into these so-called “educational workshops,” and ex- pose them for what they are: pay-to- work schemes that routinely exploit actors. In the absence of that, we all might as well find another line of work.

Jared Milrad is an actor, lawyer and entrepreneur living in Southern California. He created an online peti- tion to “Urge Los Angeles Officials to Stop Pay-To-Work Casting Scams in Hollywood.” To sign, visit thepetition- His latest project is “Hurry Up and Wait,” a web series about young entrepreneurs making a differ- ence. Learn more at

Somehow we all made it through last Monday: Tax Day

By Dan Lawton

N o one wants to feel like a loser. But if you ever should want a reason to hate yourself a little

more, then do what I did last Mon-

day, April 18, Tax Day. Finish and sign your returns that day. Don’t file early or electronically. Procrasti- nate. After dark, drive your returns


the post office to drop them off,


the envelopes will bear the April

18 postmark. Then, endure the next two hours. In the days before electronic fil- ing, last-minute filers headed to the post office. Postal workers with big bins stood at curbside. They collect- ed returns from motorists whose cards crept forward as last-minute filers handed over the envelopes through car windows. In San Diego, this used to happen at the Midway Central Post Office — a hulking, rat-gray concrete structure on Mid-

way Drive. In those days, Midway CPO’s neighbors included Deja Vu Showgirls, a striptease club across the street. On the evening of Tax

Day, the club would station a couple

of dancers out in the parking lot to

jiggle and encourage last-minute

filers to come in after mailing their returns. One year one of them held

up a sign that read “Come on In and

Get an Extension!” I wonder how much Deja Vu’s business has fallen off on Tax Day since Midway closed last year. This year the IRS estimated that over 5 million Americans waited until April 18 to file their returns. But early last Monday evening, the

18 to file their returns. But early last Monday evening, the fact I had 5 million

fact I had 5 million fellow citizens for company offered cold comfort. I found myself signing my returns at

home at around 7 p.m. Earlier that day, I had gone online, to see where

I should go to drop them off. I found

a news article which read: “Procras-

tinators have only one option in San

Diego if they want to file their fed- eral tax returns at the last minute


11251 Rancho Carmel Drive[.]” That was 22 miles away. I fired up the Ford, hit the freeway, and headed up Interstate 15. When I arrived at the post office at Rancho Carmel Drive, the count-

the main post office at

ers were dark, closed and locked. A line of people snaked back from a single automated postage machine.

I counted 27 people in the line. It


was 8:20 p.m. Nearby, the half-dozen USPS em- ployees on their shifts walked back and forth, to no visible purpose. One was a nice woman in a navy pantsuit.

Another was a handsome young

man with heavily tattooed arms, a red T-shirt, and no attire suggest- ing he worked for the post office. As he walked toward a door, someone in the line tried to ask him a ques- tion. He didn’t slacken his pace as he replied, “I’m on my lunch right now.” Somewhere, a telephone rang endlessly. Whoever was calling was a patient person indeed. Evidently the USPS did not employ voicemail technology at the Rancho Carmel Drive facility. In 1792, Congress enacted the

first major postal law. It prohibited

the private transmission of any let- ter or packet “on any established


of the general post-office may be injured.” The monopoly Congress handed to the Post Office included criminal sanctions against anyone who dared trespass on it. Section 1696 of the Private Express Statutes still says this about that: “Whoever establishes any private express for

whereby the revenue

the conveyance of letters or packets,

shall be fined

or imprisoned

or both.” In north Jersey, the Dimeo crime family enforced its own mo- nopolies over trash haulage routes and untaxed cigarette sales in a sim- ilar way, only without the express authorization of the U.S. Congress. The line inched forward. The nice woman in the navy pantsuit now stood at its head, helping each cus- tomer with the keystrokes. But now she said something alarming: “The machine’s acting weird.” It was 10 p.m., two hours before the deadline. This was not good. She produced a key at the end of a long chain. She unlocked the machine. She pried it open. It looked like a big angry steel crocodile, jaws agape, with paper and gears inside. She squatted down on the tile, her hands inside the ma- chine. We all watched, helpless. I thought of the term “going postal,” which Merriam-Webster defines as follows: to suddenly behave in a very violent or angry way. “Here’s where it happens,” I thought. I uttered my worst fear: The ma- chine was broken, the nice lady in the pantsuit wouldn’t be able to fix it, there was nowhere else to go at this hour, no one would be able to stick return receipts onto enve-

lopes, and IRS would hit us all with penalties and interest for missing the deadline. And all for the want of a horseshoe nail. Each year, the USPS loses bil- lions of dollars. Electronic commu- nications, online bill paying, and services like Paperless Post have caused first class mail volume to plunge. Other countries in the same situation have privatized their post- al systems or opened them up to competition, but not the U.S. The USPS still enjoys a legal monop- oly on delivery of first class mail (letters under 13 oz.) and standard mail (bulk advertising items). It borrows billions of dollars from the U.S. Treasury at subsidized interest rates. It is exempt from all state and local taxes and fees. It has an expen- sive union workforce whose pay on average exceeds that of comparable private-sector workers and which has sometimes resisted the automa- tion of postal functions. I wondered if the single postage machine in a building staffed by several humans on this night attested to that. The navy pantsuit lady closed the jaws of the machine and pronounced it fixed. The line resumed its snail- like crawl. Now the tattooed guy took over at the head of the line, to help people who were too slow. Ev- ery couple of minutes, he slapped the machine, like your dad slapped the side of the balky family TV set in the 1960s. I turned around and laughed out loud. By 10:25 p.m., I had reached the front of the line at last. I bought my postage, stamped my envelopes, and dumped them in a collection bin. By 11:30 p.m. I was back home

and in bed. I lay there feeling a mixture of self-hatred and satisfac-

tion that the deed was finally done.

I thought about the long line, the

single machine, and how it might all be different if the USPS were privat-

ized. The USPS has said that is it the “one government agency that touch- es every American on a daily basis.”

It had sure touched me tonight. In a time when electronic commu-

nications bind the nation together in

a way that Congress in 1792 never

could have envisioned, preserving the USPS monopoly so that we can receive mostly junk mail in our mail-

boxes seems like an anachronism. If Donald Trump is elected president, maybe he’ll do something about that. In the meantime, somehow we all got through it last Monday night at Rancho Carmel Drive. And, as te- dious and painful as it seemed, no- body went postal.

Dan Lawton is the principal of Law- ton Law Firm in San Diego.

DAN LAWTON Lawton Law Firm
Lawton Law Firm

PAGE 8 • TUESDAY, APRIL 26, 2016



FCPA program continues focus on individuals

By Debra Wong Yang, Michael Li-Ming Wong and Wesley Sze

W hether or not to self-report viola- tions of the Foreign Corrupt Practices

Act has constituted a problematic and vexing question for companies — and their counsel — when con-

fronted with internal allegations

of potential foreign bribes. While

the U.S. Department of Justice has long made vague promises of rewarding self-disclosure with “credit” for cooperation, the lack of any specific guidance stymied companies’ abilities to quantify that potential credit in any mean-

ingful way. With the DOJ’s announcement earlier this month of their new “pilot program” for FCPA enforce- ment, the DOJ has finally provided transparency for companies seek-

ing to qualify for mitigation credit. Notably, the pilot program comes

on the heels of the Yates Memoran-

dum, which emphasized the DOJ’s renewed focus on prosecutions of individuals involved in corporate misconduct. The pilot program builds on DOJ’s focus by offering leniency to companies in exchange for relevant information about the misconduct, including the identi-

ties of the offending individuals. While the focus on individuals is not something new, establishing

a process where all prosecutors

will engage in an assessment re-

garding individuals culpability is a change. Moreover, in conjunction with the rollout of this new pilot program, the DOJ is devoting ad- ditional resources and personnel to its FCPA-related investigative and prosecutorial efforts, as well

as further strengthening coordina-

tion with its law enforcement coun- terparts around the globe.

The Nuts and Bolts of the New Pilot Program An accompanying guidance mem- orandum signed by Andrew Weiss- mann, chief of the Fraud Section, outlines the details of the pilot program. A company must satisfy three requirements in order to be eligible for mitigation credit un- der the pilot program: voluntary self-disclosure, full cooperation, and timely and appropriate reme- diation. • Voluntary self-disclosure. First, the company must voluntari-

self-disclosure. First, the company must voluntari- Shutterstock The pilot program comes on the heels of the


The pilot program comes on the heels of the Yates Memorandum, which emphasized

the DOJ’s renewed focus on prosecutions of individuals involved in corporate misconduct.

ly report all relevant facts regard- ing the FCPA-related misconduct “within a reasonably prompt time after becoming aware of the of- fense,” and “prior to any imminent threat of disclosure or government investigation.” The disclosure must include all facts known to the company, including identities of the individuals involved in the

potential FCPA violation. This last point, which may be a direct out- growth of the Yates memo, makes it amply clear to companies seek- ing self-disclosure credit that they will not be able to withhold from the government investigators the identities of the specific officers or employees engaged in the miscon-

duct. • Full cooperation. Second, the company must also “proactively” cooperate with the government in- vestigation, including affirmatively disclosing all relevant facts about the misconduct and individuals involved, preserving, collecting, and producing relevant evidence, making company officers and em- ployees available for interviews (including so-called “de-conflic- tion,” which requires a company to refrain from interviewing certain individuals until the government has had a chance to do so), and pro- viding timely updates on the com- pany’s internal investigation. The guidance notes, however, that what

constitutes “full cooperation” will depend largely on the particular circumstances of the case, taking into account “the scope, quantity, quality, and timing of cooperation” and size and sophistication of the company. • Timely and appropriate reme- diation. Finally, a company seek- ing credit under the pilot program will also be required to implement timely and appropriate remedia- tion measures. Although remedi- ation can be “difficult to ascertain and highly case specific,” the guid- ance suggests that appropriate re- mediation may include implemen- tation of a compliance and ethics program, discipline of employees responsible for the misconduct, and any other measures demon- strating recognition of the serious- ness of the company’s misconduct. The guidance states that the Fraud Section will continue to refine the benchmarks for reviewing compa- ny remediation efforts under the pilot program. In addition to these three re- quirements, a company must also disgorge all profits resulting from the FCPA violation to receive any mitigation credit. The potential mitigation credit is substantial. A company deemed to satisfy all the requirements will be eligible to receive up to a 50 percent reduction off minimum

fines under the Sentencing Guide- lines. In addition, a monitor will “generally” not be required for companies that implement effec- tive compliance programs as part of their remediation efforts. And finally, declination of prosecution will also be considered for compa- nies satisfying the pilot program’s requirements. The pilot program also provides for a limited credit of up to a 25 percent reduction off the Sentencing Guidelines minimum fine for companies that fully coop- erate and appropriately remediate, even if no voluntary self-disclosure was made.

The Murky Waters of FCPA Enforcement The pilot program is a welcome step in bringing clarity to an area that has traditionally been shroud- ed in uncertainty, as it has been notoriously difficult for companies to navigate the potential costs and benefits of a voluntary self-disclo- sure strategy. With this new pilot program, the DOJ has set forth in greater detail exactly what it ex- pects companies to do in order to qualify for mitigation credit. More- over, the potentional reduction in fines — which have constituted hundreds of millions of dollars in past FCPA settlements — is sig- nificant enough to warrant the at- tention of many chief compliance

Ruling encourages company cooperation

Continued from page 1

strongly worded opinion by the U.S. Court of Appeals for the District of Columbia Circuit, the first feder-

al court of appeals to address the

issue, held that the district court

“significantly overstepped its au- thority” when it rejected a DPA on

the grounds that it was “too lenient”

on the defendant corporation and its

employees. In light of DOJ’s renewed focus on the prosecution of individu-

als, as well as the creation of a “swat team” of federal prosecutors and agents who will reemphasize prose- cution of corporations and individu- als for violations of the Foreign Cor- rupt Practices Act, the D.C. Circuit’s opinion is significant. Prosecutors have substantial dis- cretion in initiating criminal charges. Although this discretion may include either initiating charges or foregoing them, prosecutors investigating cor- porate defendants have increasingly considered a third path, using DPAs and NPAs, especially in situations where corporations have voluntarily approached the government and ad- mitted wrongdoing. Under a DPA, the government files charges against

a defendant, but agrees to dismiss

those charges as long as the defen- dant abides by certain conditions. An NPA, in contrast, is an agreement between the government and the de-

fendant not to file criminal charges

as long as certain conditions are met.

Although companies under investi- gation should seek declination — the dropping of an investigation without any charges — and should evaluate fighting government allegations through litigation before agreeing to any resolution, NPAs and DPAs may the best option available.

In United States v. Fokker, 15-3016 (Apr. 5, 2016), the D.C. Circuit held that the district court exceeded its authority when it rejected a DPA,

relying upon Speedy Trial Act (18 U.S.C. Section 3161 et seq.), which sets deadlines for completion of dif- ferent stages of a criminal prosecu-

Fokker provides companies under investigation some certainty in an area already filled with uncertainty.

tion. The district court looked to the act’s “with the approval of the court” language as authority for him to re- ject the DPA. Among other things, the district believed that “the pros- ecution had been too lenient,” the

proposed monetary settlement too low, and criticized the lack of pros- ecution of individuals. The district court reached these conclusions de- spite the fact that defendant Fokker Services voluntarily disclosed po-

tential violations of federal criminal laws, cooperated with federal inves- tigators, improved its compliance program, and identified $21 million attributable to illegal transactions. The D.C. Circuit granted the peti- tion for mandamus and reversed the district court. Circuit Judge Sri Sri- nivasan wrote for the court, noting

that no court had ever withheld ex- cludable time under the Speedy Trial Act because it disagreed with the terms of a DPA. Discussing the act and analogous authority, Fokker held that the district court may not invade prosecutors’ traditional authority over charging decisions. Fokker provides companies under investigation some certainty in an area already filled with uncertainty. If a company finds itself in the unfor- tunate position of being the subject of a government investigation, the costs are unpredictable and poten- tially severe, and include legal fees, business interruption and reputa- tional harm. This is true even if the company did nothing wrong. If the investigation reveals corporate mis- conduct, the adverse consequences and uncertainties increase and may include possible criminal prosecu- tion, civil lawsuits, defense costs, harsh monetary penalties, addition- al reputational harm and lingering government oversight. Companies under investigation sometimes face difficulties in obtaining or retaining financing, and potential business transactions may be jeopardized. In deciding whether to litigate, cooper- ate or resolve a particular case, com- panies engage in a risk assessment, weighing factors such as strength of the government’s case, extent of the wrongdoing, consequences of a conviction, possible benefits of re- solving a case, and whether it trusts the government to exercise appro- priate discretion in resolving a case. Likewise, the government applies a number of factors in deciding how to handle a case including its views on the strength of the evidence, serious- ness of the offense, the company’s

pre-existing compliance program, extent of senior management in- volvement in wrongdoing, remedial actions, cooperation, collateral con- sequences (such as harm to employ- ees, shareholders and third parties), and other factors. Without the cer- tainty that Fokker provides, the will- ingness of both companies and the government to negotiate resolutions would be undermined. Fokker is also good for the govern- ment for another reason. On April 5, DOJ published a new FCPA pilot pro- gram seeking to encourage volun- tary self-disclosure of FCPA-related misconduct. This is just the latest of DOJ’s efforts to encourage compa- nies to cooperate when they discover corporate misconduct. One goal of the FCPA pilot program is to offer predictable outcomes. Although these predictable outcomes remain to be seen and cooperation with the government creates new uncertain- ties — including leaving a company’s fate to the discretion of prosecutors who are applying new and untested policies — Fokker at least allows the government to credibly encourage cooperation. If courts had the last say in deciding whether a DPA was appropriate, the benefits touted by the government in its new FCPA pi- lot program and elsewhere would be largely illusory.

Jim Bowman, Maggie Carter and David Kirman are White Collar Defense and Corporate Investigations partners at O’Melveny & Myers LLP and former federal prosecutors at the U.S. attorney’s office in the Central District of California. The opinions expressed in the article do not reflect the views of O’Melveny or its clients.

officers. Another upshot of the program is that it provides a road- map that companies can follow when crafting their own voluntary self-disclosure strategies. Indeed, the pilot program is an improve- ment over the highly subjective system of fine reductions and le- niency the DOJ has “historically provided” to cooperating compa- nies in the past — which has all but happened behind closed doors. At the very least, by knowing the key requirements and their potential range of benefits, companies now have a framework they can use to make better informed decisions. The guidance also gives compa- nies a concrete hook for making arguments as to why mitigation credit is deserved. Despite these benefits, the pilot program does not address every- thing and misses in at least two key respects. First, the guidance fails to set forth many objective criteria upon which companies can rely

to ensure compliance with the pi-

lot program’s requirements. For example, it fails to define what constitutes a “reasonably prompt time” for voluntary self-disclosure, or exactly how much “proactive” effort a company must put into its government cooperation. Nor does the guidance shed light on exact-

ly what it means for a company to

“demonstrate recognition of the

seriousness of [its] misconduct.”

In the absence of any more specific

and concrete criteria for evaluating each of the three requirements, the guidance falls somewhat short

of providing the clarity that compa-

nies truly need. Second, even if a company is found to have satisfied the require- ments, the pilot program nonethe- less vests complete discretion in the DOJ to determine exactly what mitigation credit — if any — will be offered. In this sense, the pilot program still fails to give any real reassurances to complying com- panies. The guidance only pro- vides the maximum benefits that are available under the program, promising that a company will re- ceive “up to” a 50 percent reduction

in fines, that a monitor will “gen-

erally” not be required, and that

a declination of prosecution will

be “considered.” Even companies seeking to fully comply with the pi-

lot program will face an element of uncertainty regarding what credit they will receive — which may ulti-

mately make the business case for a strategy of voluntary self-disclo- sure a much harder sell.

Looking Forward to the Year Ahead The pilot program articulates the DOJ’s balance between providing greater transparency to the public and greater certainty to compa- nies — all the while ensuring that the DOJ can retain the flexibility needed to effectively respond to the wide variety of circumstances that new cases may present. De- spite its shortcomings, companies and their counsel should be well advised to carefully examine and consider the guidance memoran- dum. Whether the pilot program’s incentives for voluntary self-dis- closure will in fact induce more companies to self-disclose FC- PA-related wrongdoing — and thus result in more prosecutions — remains to be seen. Already, the pilot program has garnered

significant attention and scrutiny, and the reaction has been decid- edly mixed. But hopefully the pilot program will accomplish its goals of accountability and transparen- cy by establishing clear, reliable, and predicable standards that will guide companies into establishing effective compliance strategies

that are equally rewarding to both the DOJ and companies alike. And so perhaps it is fitting to re-

turn to the two key themes of ac- countability and transparency. At the end of the pilot program’s year, we will see if the DOJ has lived up

to these values itself — perhaps by providing the data to show that mitigation credit is indeed a real and substantial possibility for companies considering voluntary self-disclosure. In addition, the DOJ should consider giving addi- tional clarification and guidance as to the specific steps companies should take to comply with the pro- gram’s requirements. And perhaps then, by demonstrating account- ability and transparency itself in the implementation of the pilot pro- gram, the DOJ will also succeed in establishing an equitable and ef-

fective means of securing compa- ny cooperation as part of its FCPA

enforcement regime.

Debra Wong Yang and Michael Li-Ming Wong are partners, and Wesley Sze is an associate, at Gib- son, Dunn & Crutcher LLP.

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