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VOL. 122 NO. 80

© 2016 Daily Journal Corporation. All Rights Reserved

dean files


Former UC Berkeley
School of Law leader
disputes punishment

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 prosecution agreements (DPAs) routinely 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

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

By Phil Johnson
Daily Journal Staff Writer

some of the agency’s committees and
Mangers stressed in an interview
Monday that the plan he supports requests 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 current governance structure.
He said a U.S. Supreme Court decision released last year held that licensing 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-

Former UC Berkeley School of Law Dean Sujit
Choudhry claims he never would have agreed to his initial punishment for violating campus sexual harassment
policy — a sentence his former assistant, who is now suing 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 defamatory.
Choudhry, who served an administrative role as dean,
remains a tenured faculty member. He is now challenging 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 Nicholas Dirks for the first time. Sorrell v. Regents of the University of California et al., RG16806802 (Alameda Sup. Ct.,
filed March 8, 2016).
The letter says Napolitano’s well-publicized announcement that Choudhry is banned from campus lacks legal
backing. Choudhry also takes umbrage with the language 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 rubbing Sorrell, just not as often as she claims, said Napolitano’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 harassment 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 university sees as the letter of its policy according to the academic personnel manual. While Choudhry says Steele,
Dirks, Broughton and Christopher M. Patti, chief campus counsel, all described the initial punishment as “warranted 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 — STATE

See Page 3 — FORMER UC

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 regulatory board and a separate trade association 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 agency’s structure and governance also was
urged to take steps to limit antitrust liability 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 association-like” activities don’t distract the
bar from its mission of protecting the
2nd District Court of Appeal Justice
Laurie Zelon and Los Angeles City Attorney Mike Feuer were among several
speakers who urged the bar’s Governance 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 litigants, that adequate representation is
provided to those in need of representation 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
“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
protected ... would be absent,” she said.
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 conceptualizations around what is a trade association function and what isn’t,” she
Trustees Dennis Mangers and Joanna Mendoza, who recently released a
de-unification plan, have said that the
bar’s core functions of attorney admissions 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

Plaintiff lawyers object over Uber settlement
By Matthew Blake
Daily Journal Staff Writer

A proposed lawsuit settlement between Uber Technologies Inc.and
the company’s California and Massachusetts drivers could face a roadblock from plaintiff lawyers who say
the agreement’s terms would end
their own Uber litigation.
As of Monday afternoon, one objection had been lodged with U.S.
District Judge Edward M. Chen
in the landmark employment misclassification case in which an up

to $100 million settlement was announced on Thursday.
Also, three additional plaintiff
lawyers litigating four separate cases against Uber said in interviews
on Monday they would soon file
their own objections. Chen is slated
to hold a preliminary settlement approval 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 approves the deal.
A few of the listed lawsuits have
claims largely redundant to O’Connor’s central contention that Uber
mislabels their drivers as independent contractors instead of employees, a classification status the settlement would not change.
Some lawsuits, though, deal with
different subjects, including a putative nationwide class action claim-

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
Liss-Riordan, of Boston-based
Licthen & Liss-Riordan PC, re-

sponded in an email that the underlying credit check suit claim would
not be wiped out by an O’Connor settlement, 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

Learning His Value

Logging In

Pay-to-play in Hollywood

Amador County Superior Court Judge J.S.
Hermanson overcame a motorcycle accident to be a
bench officer. 
Page 2

Jonathan Runyan, general counsel of San Franciscobased Okta Inc., focuses on worker data.

Despite being illegal, some say pay-to-play casting
“workshops” still persist in Tinseltown. By Jared
Page 7

Former Capital One lawyer joins Laurus
Real estate investment and development firm Laurus
Corp. announced the hiring of Simran S. Bindra as
the company’s first general counsel.  Page 3

Page 4

Sidley Austin LLP advised Hansen Medical Inc. in its
sale to Auris Surgical Robotics Inc.  Page 5

FCPA pilot program
The DOJ recently announced a voluntary disclosure
program for companies seeking mitigation credit for
FCPA violations. 
Page 8

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


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 memorable.
“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 committed 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
Hermanson is now presiding
judge on the Amador County Superior 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
“The next few months of my life
were instrumental in forming my
character,” he said. “If I accepted my
presumed fate, I could grow apathetic. 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 paralyzed.
He went on to graduate from
Westmont College, a Christian liberal 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 Bernardino 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 children and he went to work for the district attorney’s office. Five years later, 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 Hermanson was defense attorney Robert 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 rehabilitation or domestic violence “better
watch out” in Hermanson’s courtroom, “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 chance. ...
He’s ruled against the district attorney’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 landlord-tenant cases so that the nonpaying 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 resources 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 shelter residents. Turner handles their
family law cases.

Bill Lavallie / Special to the Daily Journal

“He’s very deferential and he always pays a lot of attention to their
cases,” particularly the violent aspects, 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
“You see almost everybody daily, 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 respect in the community as well,” he
“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 onethird 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 preconceived 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 Hermanson. “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, sometimes 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
Keene said Hermanson doesn’t
take a cookie-cutter approach; he
doesn’t rule the same way in similar
cases regardless of the individual
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 hearing 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 Hermanson’s recent cases and the attorneys
• 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
For the prosecution: Melinda Aiello, now with Yolo County district
attorney’s office
For the defense: Todd Penix, Richard A Ciummo & Associates, Jackson
• People v. Cheney, 05-CR-08104
— three strikes resentencing
For the prosecution: Todd Riebe,
district attorney, Amador County

Conditions set on
Led Zeppelin members’
court appearance in doubt
By Steven Crighton

By Steven Crighton
Daily Journal Staff Writer


venue is set in the copyright infringement lawsuit over Led Zeppelin’s
“Stairway to Heaven,” but attorneys say the band might not be
ready to take the stage.
A request for questions by U.S.
District Judge R. Gary Klausner
at the end of a pretrial conference
Monday prompted plaintiff’s attorney Francis A. Malofiy to inquire
about appearances by band frontman Robert Plant and guitarist
Jimmy Page.
According to a proposed pretrial
conference order submitted Sunday, 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 clients,” 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
in the U.K.” to avoid appearing on
the witness stand, despite consent-

ing to a shift in venue from a Pennsylvania 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
A request for comment from Peter J. Anderson of Santa Monica, a
defense attorney for Led Zeppelin,
was directed to a spokesman for
Warner/Chappell Music, who declined 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 distance or availability are an issue.
As famous musicians who reside in
England, Page and Plant are likely
no exception.
“In my experience, named plaintiffs like Page and Plant would
show when it doesn’t pose an undue burden. They have lives,” Jacobs said. “So while they’re going
to respect the process and respect
the judge’s orders, by the same
token, they can’t drop everything
they’re doing. That’s not how

things work.”
Asked whether a late appearance 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 particular, 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 appear, arguments based on their
supposed drug and alcohol use will
likely not. Klausner granted tentative approval to a motion seeking
to exclude the topic. He also tentatively blocked arguments based
on the validity of charitable donations 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 anticipates 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


ederal regulators signaled
approval Monday of Charter Communications’ $88
billion acquisition of Time
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 Commission’s chairman, Tom Wheeler,
approved the merger, with Wheeler’s approval conditioned on a number of seven-year stipulations “that
will directly benefit consumers by
bringing and protecting competition 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 distributors.
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 settlement to ensure that New Charter
does not use the influence it will
have as one of the nation’s largest

[multichannel video programming
distributors] to restrict or discourage programmers from licensing
their content to [online video distributors].”
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 operated 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 manner,” 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 Commission. 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.”

For the defense: Randall Shrout,
Ciummo & Associates, Jackson
• People v. Renaud, 13-CR-21138-1
— marijuana cultivation
For the prosecution: Robert Trudgen, district attorney’s office
For the defense: David Beyersdorf, Richard Ciummo & Associates
• Pine Grove Business Alliance v.
County of Amador, 14-CVC-9062 —
For the plaintiff: Brett Jolley, Shore
McKinley & Conger LLP, Stockton
For the respondent: Carissa Beecham, Stoel Rives LLP, Sacramento
Gautham Thomas contributed to
this report.

An April 20 article, “State Fund
asks judge to reconsider DQ,” incorrectly stated that the State Compensation Insurance Fund sued Paul
Randall in the case State Compensation Insurance Fund v. Michael Drobot et. al. Randall is a third-party defendant. The article also incorrectly
stated that another case, State Compensation 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 Association. She is president elect.
The Daily Journal regrets the errors. A corrected version of these articles are at

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TUESDAY, APRIL 26, 2016  •  PAGE 3

Landmark plaintiff returns Former Capital One
to SCOTUS seeking fees
lawyer is Laurus GC
By Adam Liptak
New York Times



Three years ago, a
Thai student who
had helped finance
his U.S. education by selling imported textbooks won a major Supreme Court victory, persuading
the justices that it is lawful to buy
copyrighted books abroad and resell
them in the United States. The ruling, which clarified an ambiguous
phrase in the Copyright Act, applied
to all manner of products, including
books, records, art and software.
The student, Supap Kirtsaeng,
returned to the Supreme Court on
Monday, seeking more than $2 million in legal fees from John Wiley &
Sons, the publisher that had sued
The usual rule in U.S. civil litigation 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 different 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 reasonable.”
The publisher easily met that standard, the judge said, as it had won
a $600,000 judgment against Kirtsaeng, 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

By Kibkabe Araya

“just trying to punish those who
took unreasonable positions.” The
Copyright Act, he said, also sought
to ensure that people sued for copyright infringement did not fold at the
“It wanted to encourage parties to
advance important principles even
where the other side’s arguments
are good; indeed, I would say, especially where the other side’s arguments are good,” he said. “When a
defendant is trying to decide whether to fight for a principle, the availability 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
Several justices appeared unpersuaded 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. Having 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 Kirtsaengs 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 litigation.”
“People simply aren’t going to
keep fighting,” Smith said. “They’re
going to find a way to get out of the
Rosenkranz disagreed, saying
incentives were needed to ensure
that difficult legal questions were re-

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
“I can see the excitement about
granting fees if there’s some breakthrough, 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
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” supporting 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
Wiley’s brief also noted that Kirtsaeng “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 intrusion into the relationship between
the party and counsel,” he said of inquiries into fee arrangements.

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


ERLIN — The trans-Atlantic debate over digital
privacy rights versus the
surveillance needs of intelligence 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 people 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 Hanover, 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 outside of the United States,” he added.
Obama’s message comes at a
sensitive time, as cities like Brussels and Paris are still recovering
from recent terrorist attacks. But
his words are unlikely to slow European efforts to expand people’s
control over their digital lives.
Europe is at the heart of a global 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 governments, 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 Luxembourg and a former top European
Union official, said Monday at a privacy conference in Berlin. “Protection of our personal data shouldn’t
have a national barrier.”
Reding is an author of a EU privacy 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 protection 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
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 various federal law claims against Uber;
Douglas Caiafa, a sole practitioner
whose own misclassification lawsuit
is stayed in Los Angeles County Superior Court; and Alec Segarich of
Lohr Ripamonti & Segarich LLP,
who is battling Uber in state appellate 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 & Marcy, 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

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-majority 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 Vanessa 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 second public hearing this month, plans
to complete a final report on its work
by July.

Daily Journal Staff Writer


eal estate investment and
development firm Laurus
Corp. announced the hiring of Simran S. Bindra as
the company’s first general counsel
and director of corporate affairs
Bindra, who started in January,
was most recently the senior director and associate general counsel at
Capital One Financial Corp. He will
handle the legal and compliance affairs at the Los Angeles-based Laurus, as well as its affiliate private equity 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 exponential. The scale and scope of
those assets are tremendous, and
you see a growth pattern you don’t
quite see with other private equity
Launched in 1999, Laurus ac-

quires and repositions real estate assets 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 acquired the Vail Cascade Resort and
Spa in Colorado. A $35 million renovation 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, expand to different markets and continue the success we’ve realized
over the past several years,” said
Laurus chairman Andres Szita in a
Before spending two years at
Capital One, Bindra was an associate at Milbank, Tweed, Hadley &
McCloy LLP for two years. He orig-

inally went in-house as senior counsel 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.


Former UC Berkeley law
school dean files grievance
Continued from page 1

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

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 appointment to a faculty position in the law
school in which Steele would not
teach and would have received no
additional pay.
Unanimously approved for appointment, Steele declined before
resigning. “It is disturbing that
Choudhry writes in his letter that

he accepted the light sanctions imposed upon him by Steele ‘as part
of a settlement,’ Winer wrote in an
“To me this confirms the fact that
at the time Choudhry and Steele
were working in cahoots at reaching 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 mentioned discussing his punishment
with Broughton in a letter to the
Daily Journal, he had never mentioned speaking with Dirks.


Dominic Fracassa / Daily Journal

Logging In

Jonathan Runyan, general counsel of San Francisco-based Okta Inc., focuses on worker data.
By Banks Albach
Daily Journal Staff Writer


he meteorological term
okta, a unit of measurement for cloud cover, is
a good fit for the cloudbased startup that adopted the name
when it launched in 2010.
The company, focused on designing and managing applications that
handle employee login data for large
corporations. Okta’s apps range
from mobile to workplace — anywhere an employee decides to log in
to any part of their employer’s digital
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 Silicon Valley firms focused on technology startups. He was a senior associate 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 before going in-house at Okta.
Daily Journal staff writer Banks
Albach recently with Runyan about
his work as Okta’s lead counsel. Below is an edited transcript of their
Daily Journal: Break down
what Okta does.
Runyan: For our customer’s employees, Okta is effectively the “front
door” to work. It is the one single
login they use to access their devices — 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 identities for every app, service and device

Jonathan T.
General Counsel
Okta Inc.
San Francisco

Size of legal department:
4 attorneys

across their organization. Our service 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 authentication service, which verifies that
the right people are logging in to
corporate systems. Another growing 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 authenticate, manage and secure customers, 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 creator 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 customer 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 customers the freedom and ability to use
any application and/or architecture
they need to transform their business. We also have the industry’s
broadest and deepest set of app in-

tegrations that make it easy to manage authentication and provision for
DJ: Okta counts some big
players, such as Activision Publishing Inc. and Allergen Inc. as
clients. Why have they turned to
Okta for service?
Runyan: I think the line between
technology companies and non-technology 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 fortunate to partner with them.

firm where I was a partner before
joining Okta full time, is our outside corporate counsel. I can’t say
enough great things about Goodwin 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 technology 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 reason 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 department structured and sorts of
matters do you keep in-house?
Runyan: Currently, we are a department of six. I obviously head the
department and report to Todd McKinnon, 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 expanding 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 quickly 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 compensation and Sarah Axtell, also on securities — 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 patents; Barnes and Thornburg in Indianapolis for trademarks. We rely on
Andre Perey at Blakes for Canadian
matters and James Rozsa at Johnson

Winter & Slattery for legal work in
DJ: What are the traits you
look for in outside counsel?
Runyan: First and foremost, they
will have been referred to me by another 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 transaction 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 willing 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 engagement.
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 responsive — huge pet peeve. That was
something I prided myself on in private practice, much to my family’s
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 consumer data we process and house is
generally limited to usernames and
passwords of our customers’ employees and their partners and customers — this depends on which aspects
of our service a particular customer
is using. That said, security is a major component of the Okta platform

and something we take incredibly
We are fortunate to have an amazing 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 privacy matters. In terms of the laws
we contend with in this area of compliance, 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 termination of Safe Harbor, we proactively
developed, with the help of Lothar
Determann at Baker McKinzie, a
data processing addendum that incorporated 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 continuing evolution of software patents and
where that industry might be headed.
DJ: What kind of litigation and
resulting settlements have you
contended with since joining
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 corporate/commercial counsel.


TUESDAY, APRIL 26, 2016  •  PAGE 5

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

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

Fenwick & West LLP advised Waltz Networks Inc., the San Francisco-based operator of a cloud platform for automatic high performance traffic
management applications, in its $8.15 million Series A financing, a deal announced 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
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 development efforts, according to a news release.
The Fenwick transaction team was led by Mountain View partner Michael
T. Esquivel (pictured) and associate Debbie Li.

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 company. Diamanti products aim to solve networking challenges and storage requirements that organizations face when moving containerized workloads
from development into production.
Robert P. Latta (pictured) and Mark B. Baudler, partners in Palo Alto, coled the Wilson Sonsini team.



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

Trio of firms tapped for technology company
Latham & Watkins LLP advised Bridgepoint, a European private equity
firm, and served as lead counsel in its deal with Summit Partners and Calypso Technology Inc., a transaction announced April 19.
Bridgepoint and Summit Partners will acquire Calypso Technology. Financial terms of the transaction were not disclosed.
Wilson Sonsini Goodrich & Rosati PC advised Calypso Technology, a provider of capital markets software headquartered in San Francisco.
Kirkland & Ellis LLP advised Summit Partners, a growth equity investment firm.
Calypso offers an integrated suite of trading and risk management soluBERGSTROM
tions. It has more than 34,000 users in over 60 countries, including professionals 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.

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, representing a premium of about 39.9 percent over the closing sale price of common 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 manufactures medical robotics for positioning and control of catheter-based technolFITCHEN
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 company’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 certain 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.

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 participation 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.

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 release.
The customer experience software business is expected to generate between $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.

Gemphire Therapeutics will go public with
guidance from Honigman Miller, Cooley
Honigman Miller Schwartz and Cohn LLP is advising Gemphire Therapeutics 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 biopharmaceutical 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).


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 expanded 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 arrangTENDLER
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 bookrunner. 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.
— Melanie Brisbon

PAGE 6  •  TUESDAY, APRIL 26, 2016



A major win for criminal defense attorneys
By Thomas A. Zaccaro,
Nicolas Morgan
and Jenifer Doan

company’s financial statements,
will salary and bonus compensation for periods covered by the financial 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 complex compensation schemes will
require even more thought. Certainly, some circuits — like the 9th
Circuit which has not developed
much tracing precedent — have
their work cut out for them to formulate a suitable test.
Other questions remain open
with respect to the “reasonable”
fees aspect of the plurality’s holding. 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 example, defendant retains the same law
firm for the criminal and civil case?


efense attorneys across
the United States
cheered recently when
the U.S. Supreme
Court bolstered a defendant’s right
to counsel under the Sixth Amendment. In a 5-3 plurality opinion written 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 civil 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 remains to be seen how Luis will be
applied at the district and appellate
court level with regard to open issues such as tracing or reasonableness 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-owners with conspiracy to commit
health care fraud (violation of 18
U.S.C. Section 1349), among other
violations, by way of paying kickbacks for patient referrals and billing Medicare for unnecessary services. The government alleged that
Luis’ two companies had fraudulently received $45 million in Medicare reimbursements, and sought
forfeiture in that same amount.
Simultaneously, the government
also brought a civil action against
Luis seeking a temporary restraining 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 succeeded 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-

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 retain 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 unsuccessful 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 foreclosed 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 certiorari to consider “[w]hether the
pretrial restraint of a criminal defendant’s legitimate, untainted assets (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 supported Luis’ position — contributing
entities included the U.S. Justice
Foundation, the Cato Institute, the
American Bar Association and the
National Association of State Legislators.
Reversing the judgment of the
11th Circuit, Justice Breyer wrote
the plurality opinion joined by Justices John Roberts, Ruth Bader
Ginsburg and Sonia Sotomayor.

The plurality held that “the pretrial restraint of legitimate, untainted
assets needed to retain counsel of
choice violates the Sixth Amendment” under three basic considerations. First, the plurality reasoned
that the fundamental Sixth Amendment right to assistance of counsel
outweighed the government’s and
victim’s interest in securing restitution. Second, the plurality found
no support in Monsanto, Kaley or
Caplin (nor in common law) for the
authorization of unfettered, pretrial forfeiture of the defendant’s own
untainted property. Kaley v. United
States, 134 S. Ct. 1090 (2014); Caplin & Drysdale, Chartered v. United States, 491 U.S. 617, 631 (1989);
United States v. Monsanto, 491 U.S.
600, 616 (1989). Lastly, the plurality considered the potential erosion
of right to counsel that could ensue
from a ruling authorizing the pretrial 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. (Justice Clarence Thomas concurred
in the plurality’s result for reasons that rested “strictly” on the
Sixth Amendment’s text and common-law backdrop.)
Justice Anthony Kennedy (joined
by Justice Samuel Alito) and Justice
Elena Kagan dissented from the
opinion. Their dissents highlighted, among other things, the plurality’s “arbitrary” and “illogical” conclusion 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 proceeds look untainted, or defendants
who preserved their own untainted
assets and spent stolen money.

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 defend parallel criminal proceedings.
However, as Justice Kennedy emphasized, the line between “tainted” and “innocent” assets may be
difficult for courts to draw, particularly with respect to white-collar
crime and securities cases. For example, if an executive is criminally
charged with falsely certifying a

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 release of frozen funds when parallel
criminal proceedings are pending.
To be clear, Luis itself involved a
motion for release of frozen funds

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 attorney fees. Counsel and individuals
alike should continue to monitor
this issue as courts provide additional clarity and reasoning to Luis.
Thomas Zaccaro and Nicolas
Morgan are former SEC trial counsel 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


yron Moskovitz’ article,
“Oral argument: if not
necessary, waive it goodbye” (April 18), was quite thought
provoking. As a preliminary matter,
many practitioners, including myself, are concerned that, if we waive
oral argument, we might inadvertently (and incorrectly) communicate 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 concern of ours.
Even more usefully, the appellate 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 appellate 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 involved in at least two appellate cases, 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 unfair. Had the appellate court simply
done the parties the courtesy of providing 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


t is difficult to get a man
to understand something, when his salary
depends on his not understanding it.” — Upton Sinclair
More than two decades ago, Tom
Cruise told us that we couldn’t handle the truth. It’s become abundantly clear that Hollywood can’t either.
That’s because a few weeks ago,
the Hollywood Reporter released
a now infamous investigation detailing the cottage industry in Hollywood known as casting “workshops.”
In it, the Reporter revealed how
actors early in their careers were
routinely paying $50 or more to
attend so-called “educational workshops,” 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 audition opportunities: a job interview
with a hefty fee and no guaranteed
outcome. Despite the practice being
explicitly illegal under the Krekorian Act of 2009, the industry has all
but shrugged at every exposé and
investigation over a period of decades.
But before diving into this Hollywood drama, let’s start with the
The casting workshop cottage
industry began at least as early as
the 1980s, when casting directors
were being paid to attend “showcases,” 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 practice, stating that “no member shall
accept compensation for attending
a showcase,” and threatening expulsion from the CSA for those who did.


Actor, lawyer and entrepreneur

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 showcases — and later, workshops —
continued to worsen. In response,
the CSA formed a “Teaching Committee” 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 member 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 festering problem, the CSA board actually voted to disband the Teaching
Committee — leaving not even the
fox in charge of guarding the hen
Fast forward to 2001. The California State Labor Board conducted a
lengthy investigation into proliferating 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 essentially enabled the practice to continue
unabated, and the CSA quickly followed 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 Prevention 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 Commission, L.A. County Department
of Consumer and Business Affairs,
major studios and networks, and
several well-respected actor advocacy 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 consultation with the L.A. city attorney’s office, the CSA adopted nine
new workshop guidelines in 2010
that are still in force today:

“Classes taught by Casting Directors and Associates must be for instructional purposes only and not a
‘paid audition.’ The workshop must
clearly post that taking part in the
class you are teaching is not a guarantee of employment.”
As part of these new guidelines,
the CSA required workshop providers to post a “disclaimer,” which
states in part that the workshop “is a
learning experience. It is not an audition or employment opportunity.”
Yet, oddly, the practice of paid
workshops continued to grow. Last
year, in the face of a problem obvious to everyone except those profiting 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 workshops. Rigo Reyes from the L.A.
County Department of Consumer
and Business Affairs, Duncan Crabtree-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 workshop phenomenon instantly struck
me as odd. Veteran actors told me
that not long ago, casting offices
would have free meetings with actors — widely known as “generals”
— and would regularly attend free
showcases created by actors themselves.
But all I heard from agents and
managers was that workshops were
the place to “get seen.” Like everyone 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 whether 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 disclaimer about the workshop not being “an audition or employment opportunity.” 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 casting office. After sharing a version of
the disclaimer in part or full, the volunteer 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
Despite the trend, not all casting directors are onboard with the
workshop gravy train. Casting directors 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 Hollywood squirm, the CSA recently
announced the formation of yet another “Casting Workshop Committee” 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
Which brings me back to Upton
Sinclair’s point from nearly a century 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 expose them for what they are: pay-towork schemes that routinely exploit
In the absence of that, we all
might as well find another line of
Jared Milrad is an actor, lawyer
and entrepreneur living in Southern
California. He created an online petition to “Urge Los Angeles Officials to
Stop Pay-To-Work Casting Scams in
Hollywood.” To sign, visit His latest project is “Hurry
Up and Wait,” a web series about
young entrepreneurs making a difference. Learn more at

Somehow we all made it through last Monday: Tax Day
By Dan Lawton


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 Monday, April 18, Tax Day. Finish and
sign your returns that day. Don’t file
early or electronically. Procrastinate. After dark, drive your returns
to the post office to drop them off,
so the envelopes will bear the April
18 postmark. Then, endure the next
two hours.
In the days before electronic filing, last-minute filers headed to the
post office. Postal workers with big
bins stood at curbside. They collected 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 Midway 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


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: “Procrastinators have only one option in San
Diego if they want to file their federal tax returns at the last minute
Monday .... the main post office at
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 counters 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 employees 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 suggesting he worked for the post office. As
he walked toward a door, someone
in the line tried to ask him a question. 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 letter or packet “on any established
post-road ... whereby the revenue
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
the conveyance of letters or packets,
... shall be fined ... or imprisoned ...
or both.” In north Jersey, the Dimeo
crime family enforced its own monopolies over trash haulage routes
and untaxed cigarette sales in a similar 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 customer 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 machine. 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 machine 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 billions of dollars. Electronic communications, 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 postal systems or opened them up to
competition, but not the U.S. The
USPS still enjoys a legal monopoly 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 expensive union workforce whose pay on
average exceeds that of comparable
private-sector workers and which
has sometimes resisted the automation 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 snaillike crawl. Now the tattooed guy
took over at the head of the line, to
help people who were too slow. Every 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 satisfaction 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 privatized. The USPS has said that is it the
“one government agency that touches every American on a daily basis.”
It had sure touched me tonight.
In a time when electronic communications 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 mailboxes seems like an anachronism. If
Donald Trump is elected president,
maybe he’ll do something about
In the meantime, somehow we all
got through it last Monday night at
Rancho Carmel Drive. And, as tedious and painful as it seemed, nobody went postal.
Dan Lawton is the principal of Lawton Law Firm in San Diego.

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


hether or not to
violations of the Foreign
Corrupt Practices
Act has constituted a problematic
and vexing question for companies
— and their counsel — when confronted 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 meaningful way.
With the DOJ’s announcement
earlier this month of their new
“pilot program” for FCPA enforcement, the DOJ has finally provided
transparency for companies seeking to qualify for mitigation credit.
Notably, 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. The pilot program
builds on DOJ’s focus by offering
leniency to companies in exchange
for relevant information about the
misconduct, including the identities of the offending individuals.
While the focus on individuals is
not something new, establishing
a process where all prosecutors
will engage in an assessment regarding individuals culpability is a
change. Moreover, in conjunction
with the rollout of this new pilot
program, the DOJ is devoting additional resources and personnel
to its FCPA-related investigative
and prosecutorial efforts, as well
as further strengthening coordination with its law enforcement counterparts around the globe.
The Nuts and Bolts
of the New Pilot Program
An accompanying guidance memorandum signed by Andrew Weissmann, 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 under the pilot program: voluntary
self-disclosure, full cooperation,
and timely and appropriate remediation.
• Voluntary self-disclosure.
First, the company must voluntari-


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 regarding the FCPA-related misconduct
“within a reasonably prompt time
after becoming aware of the offense,” 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 outgrowth of the Yates memo, makes
it amply clear to companies seeking 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 misconduct.
• Full cooperation. Second, the
company must also “proactively”
cooperate with the government investigation, including affirmatively
disclosing all relevant facts about
the misconduct and individuals
involved, preserving, collecting,
and producing relevant evidence,
making company officers and employees available for interviews
(including so-called “de-confliction,” which requires a company to
refrain from interviewing certain
individuals until the government
has had a chance to do so), and providing timely updates on the company’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
• Timely and appropriate remediation. Finally, a company seeking credit under the pilot program
will also be required to implement
timely and appropriate remediation measures. Although remediation can be “difficult to ascertain
and highly case specific,” the guidance suggests that appropriate remediation may include implementation of a compliance and ethics
program, discipline of employees
responsible for the misconduct,
and any other measures demonstrating recognition of the seriousness of the company’s misconduct.
The guidance states that the Fraud
Section will continue to refine the
benchmarks for reviewing company remediation efforts under the
pilot program.
In addition to these three requirements, 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 Guidelines. In addition, a monitor will
“generally” not be required for
companies that implement effective compliance programs as part
of their remediation efforts. And
finally, declination of prosecution
will also be considered for companies 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 cooperate 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 shrouded in uncertainty, as it has been
notoriously difficult for companies
to navigate the potential costs and
benefits of a voluntary self-disclosure strategy. With this new pilot
program, the DOJ has set forth in
greater detail exactly what it expects companies to do in order to
qualify for mitigation credit. Moreover, the potentional reduction in
fines — which have constituted
hundreds of millions of dollars in
past FCPA settlements — is significant enough to warrant the attention 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 federal court of appeals to address the
issue, held that the district court
“significantly overstepped its authority” 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 individuals, as well as the creation of a “swat
team” of federal prosecutors and
agents who will reemphasize prosecution of corporations and individuals for violations of the Foreign Corrupt Practices Act, the D.C. Circuit’s
opinion is significant.
Prosecutors have substantial discretion in initiating criminal charges.
Although this discretion may include
either initiating charges or foregoing
them, prosecutors investigating corporate defendants have increasingly
considered a third path, using DPAs
and NPAs, especially in situations
where corporations have voluntarily
approached the government and admitted wrongdoing. Under a DPA,
the government files charges against
a defendant, but agrees to dismiss
those charges as long as the defendant abides by certain conditions.
An NPA, in contrast, is an agreement
between the government and the defendant not to file criminal charges
as long as certain conditions are met.
Although companies under investigation 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 different stages of a criminal prosecu-

Fokker provides
companies under
some certainty in
an area already
filled with
tion. The district court looked to the
act’s “with the approval of the court”
language as authority for him to reject the DPA. Among other things,
the district believed that “the prosecution had been too lenient,” the
proposed monetary settlement too
low, and criticized the lack of prosecution of individuals. The district
court reached these conclusions despite the fact that defendant Fokker
Services voluntarily disclosed potential violations of federal criminal
laws, cooperated with federal investigators, improved its compliance
program, and identified $21 million
attributable to illegal transactions.
The D.C. Circuit granted the petition for mandamus and reversed the
district court. Circuit Judge Sri Srinivasan wrote for the court, noting

that no court had ever withheld excludable 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 unfortunate position of being the subject
of a government investigation, the
costs are unpredictable and potentially severe, and include legal fees,
business interruption and reputational harm. This is true even if the
company did nothing wrong. If the
investigation reveals corporate misconduct, the adverse consequences
and uncertainties increase and may
include possible criminal prosecution, civil lawsuits, defense costs,
harsh monetary penalties, additional 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, cooperate or resolve a particular case, companies 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 resolving a case, and whether it trusts
the government to exercise appropriate 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, seriousness of the offense, the company’s

pre-existing compliance program,
extent of senior management involvement in wrongdoing, remedial
actions, cooperation, collateral consequences (such as harm to employees, shareholders and third parties),
and other factors. Without the certainty that Fokker provides, the willingness of both companies and the
government to negotiate resolutions
would be undermined.
Fokker is also good for the government for another reason. On April 5,
DOJ published a new FCPA pilot program seeking to encourage voluntary self-disclosure of FCPA-related
misconduct. This is just the latest of
DOJ’s efforts to encourage companies 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 uncertainties — 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 pilot 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 roadmap that companies can follow
when crafting their own voluntary
self-disclosure strategies. Indeed,
the pilot program is an improvement over the highly subjective
system of fine reductions and leniency the DOJ has “historically
provided” to cooperating companies 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 companies a concrete hook for making
arguments as to why mitigation
credit is deserved.
Despite these benefits, the pilot
program does not address everything and misses in at least two key
First, the guidance fails to
set forth many objective criteria
upon which companies can rely
to ensure compliance with the pilot 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 exactly 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 companies truly need.
Second, even if a company is
found to have satisfied the requirements, the pilot program nonetheless 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 companies. The guidance only provides the maximum benefits that
are available under the program,
promising that a company will receive “up to” a 50 percent reduction
in fines, that a monitor will “generally” not be required, and that
a declination of prosecution will
be “considered.” Even companies
seeking to fully comply with the pilot 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-disclosure 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 companies — 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. Despite its shortcomings, companies
and their counsel should be well
advised to carefully examine and
consider the guidance memorandum.
Whether the pilot program’s
incentives for voluntary self-disclosure will in fact induce more
companies to self-disclose FCPA-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 decidedly mixed. But hopefully the pilot
program will accomplish its goals
of accountability and transparency 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 return to the two key themes of accountability 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 additional clarification and guidance
as to the specific steps companies
should take to comply with the program’s requirements. And perhaps
then, by demonstrating accountability and transparency itself in
the implementation of the pilot program, the DOJ will also succeed in
establishing an equitable and effective means of securing company 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 Gibson, Dunn & Crutcher LLP.

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