Legal News for Tues 7/30 - $79m Attorneys Fee Overturned, Big Law Ethical Dilemma in BK, ex-NRA LaPierre Banned, ABA AI Guidelines and New Online Child Safety Policies

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This Day in Legal History: Medicare Bill Signed

On July 30, 1965, President Lyndon B. Johnson signed the Medicare bill into law, marking a significant milestone in American healthcare. This landmark legislation, part of Johnson's Great Society programs, aimed to address the healthcare needs of the nation's elderly population. With the stroke of his pen, Johnson established Medicare, a federal program providing comprehensive health insurance to Americans aged 65 and older. The bill was signed at the Truman Library in Independence, Missouri, with former President Harry S. Truman by Johnson's side, recognizing Truman's early efforts to promote national health insurance.

Medicare went into effect the following year, in 1966, offering hospital and medical insurance to millions of senior citizens. This historic act transformed the landscape of healthcare in the United States, ensuring that older Americans would no longer face financial ruin due to medical expenses. Medicare's introduction also set the stage for future expansions, including the addition of prescription drug coverage and the establishment of Medicare Advantage plans. Over the decades, Medicare has become a cornerstone of the U.S. healthcare system, providing vital health services to millions of Americans and significantly reducing poverty among the elderly. The signing of the Medicare bill remains a pivotal moment in the pursuit of healthcare equity in the United States.

A federal appeals court overturned a $79 million attorneys’ fee award in T-Mobile US Inc.’s $350 million settlement of a data breach lawsuit. The US Court of Appeals for the Eighth Circuit ruled that the lower court abused its discretion by approving an excessive fee award in a case that settled quickly and without extensive legal proceedings. The court reversed the fee award, reinstated the objection of class member Cassie Hampe, and remanded the case for further proceedings.

The litigation stemmed from a 2021 data breach affecting 76.6 million people, with settlement approval sought in July 2022. Judge Brian C. Wimes initially approved the fee award in June 2023, dismissing objections from Hampe and Connie Pentz as abusive. However, the appeals court found no evidence of bad faith or extortion by Hampe and criticized the lower court for not adjusting the fee award based on the hours worked by class counsel. The court noted that class counsel’s fee request amounted to an hourly rate of $7,000 to $9,500, deemed unreasonable. The case was sent back for further consideration, with the involvement of multiple law firms representing the parties.

T-Mobile Deal’s $79 Million Attorneys’ Fee Award Gets Overturned

Big Law firms are reevaluating their strategies following a ruling in the Eastern District of Virginia that barred Vinson & Elkins from representing wood-pellet maker Enviva Inc. in its bankruptcy due to a conflict of interest with private equity firm Riverstone Investment Group LLC. This decision has raised concerns about potential conflicts when firms represent both private equity sponsors and their distressed portfolio companies in Chapter 11 proceedings. The ruling could force law firms to choose between lucrative private equity deals and bankruptcy cases, potentially reshaping their business models.

The court rejected Vinson & Elkins' proposal to separate their work for Riverstone and Enviva, citing ethical concerns. This outcome could lead to more aggressive challenges by the US Trustee and might require law firms to adopt stricter conflict management practices. Although some view the decision as specific to the case's facts, it signals a need for firms to better navigate ethical responsibilities.

The ruling has already influenced how law firms approach bankruptcy cases involving private equity-backed companies, with future decisions possibly reaching higher courts for further clarification. Despite this, experts like Nancy Rapoport and Bruce A. Markell believe that Big Law firms will adapt and continue to thrive by finding compliant ways to manage conflicts of interest.

Big Law Confronts Tail Risk Threat to Private Equity Bankruptcy

A New York state judge has ruled against appointing an outside monitor for the National Rifle Association (NRA) but banned former CEO Wayne LaPierre from serving as an officer or director for ten years. The decision by Justice Joel Cohen of the Manhattan Supreme Court comes from a four-year-old civil case initiated by state Attorney General Letitia James. Although a mixed outcome, the ruling followed a trial stage where jurors found LaPierre and others guilty of financial mismanagement, including funding LaPierre's lavish lifestyle. LaPierre was ordered to repay $4.35 million to the NRA, and former finance chief Wilson Phillips was ordered to repay $2 million.

James sued the NRA in August 2020, citing greed, poor oversight, and cronyism. Following the ruling, both parties were directed to negotiate governance changes that could reduce the NRA's board size and facilitate new board candidacies. Despite the lawsuit, the NRA has perceived the case as politically motivated. The NRA, founded in 1871, has seen its influence wane, including within the Republican Party, as its membership and revenue have declined. NRA President Bob Barr acknowledged the jury's findings and reiterated the organization's commitment to good governance. LaPierre, who resigned just before the trial's first stage, has not commented on the ruling.

Judge won't require monitor for NRA, bans ex-chief LaPierre for 10 years | Reuters

The American Bar Association (ABA) has issued its first formal ethics opinion on the use of generative artificial intelligence (AI) by lawyers, emphasizing the need for adherence to ethical obligations. The ABA's ethics and professional responsibility committee highlighted that lawyers must ensure competence, protect client confidentiality, communicate appropriately, and handle fees ethically when utilizing AI technology. While AI can enhance efficiency in legal tasks such as research, document drafting, and analysis, it also poses risks like producing inaccurate results.

Lawyers are advised to prevent unintended disclosure of client information and consider informing clients about their use of AI tools. The ABA's opinion serves as guidance for interpreting model rules, although these are not binding. The opinion cautioned against relying on AI-generated outputs without verification, noting instances where lawyers have cited nonexistent cases or inaccurate analyses, leading to potential misrepresentations in court.

Recent cases illustrate the consequences of unverified AI use, with a federal judge in Virginia considering sanctions for a filing that included fictitious cases and fabricated quotations. While some courts require lawyers to disclose their use of AI, others, like the 5th U.S. Circuit Court of Appeals, have declined to adopt such rules.

State bar associations have also been developing their own AI guidelines, recognizing the rapidly evolving nature of the technology. The ABA anticipates ongoing updates to their guidance to keep pace with developments in AI.

Lawyers using AI must heed ethics rules, ABA says in first formal guidance | Reuters

The U.S. Senate is poised to pass significant online child safety reforms through two bills: the Children and Teens' Online Privacy Protection Act (COPPA 2.0) and the Kids Online Safety Act (KOSA). These reforms aim to enhance protections for minors on social media platforms. COPPA 2.0 will prohibit targeted advertising to minors, restrict data collection without consent, and allow parents and children to delete their information from social media. KOSA will establish a "duty of care" for social media companies to design safer platforms for minors.

Despite bipartisan support in the Senate, with an 86-1 procedural vote, the bills face uncertainty in the Republican-controlled House, currently on recess until September. While some social media executives support KOSA, others, including leaders from Meta and TikTok, have expressed concerns. Critics, including tech industry groups and the American Civil Liberties Union, argue that the bills could limit access to important content for minors.

In response to these concerns, the bill's language was amended, reducing the enforcement role of state attorneys general. Supporters like Josh Golin of Fairplay for Kids argue that KOSA targets specific risks, such as promoting harmful content, without granting legal grounds for government censorship. The legislation's future now hinges on approval in the House of Representatives.

US Senate set to pass major online child safety reforms | Reuters

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