Law And More

"A paradigm shift in the auto industry, creating sweet spot for paint," opines Wall St Expert, SHW shareholder

"Funny," our Wall Street expert, SHW shareholder and lead paint watcher observes, "the stores here were and are packed this weekend.  Maybe the profits will be down because of the price cuts but I don't anticipate a disaster.  A cottage industry seems to have sprung up preaching doom and gloom along with the gospel of frugality.  That industry may be thriving but I don't view it as making accurate calls."

Then our financial markets genius goes on to discuss what he opines is a paradigm shift.  Jump below.

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Our Wall Street Expert, off the record:

"There is going to be a paradigm shift - there has to be - in how the auto makers market cars.  They will migrate or simply leap into a buy-and-build system.  That will cut inventory as well as the massive cash needed to pre-build in order that dealers had a 100 cars on the lot.  We will be going to a dealer or some kind of middleman facility [perhaps online], order the car, and have it in 7 to 10 days.  Yes, this is will global.

"In that the paint and coatings companies like Sherwin-Williams will be in the sweet spot.  They will have a booming industry to supply around the world.  Think of all that pent-up demand as people like you with your 2003 Ford with 81,000 miles start to believe in the economy again.  You will order a 2009 whatever.  Some lucky paint and coatings company will be the vendor for the fit and finish on your new car.  Now, don't you feel good already just anticipating your cool driving experience.

"In addition, house repaint and repair will be going up, probably sooner than later.  Plus with mortgage coming down I sense that we will see a positive change in new home sales and re-sales.  More pent-up demand.  This is the age of affluence and we're not going back to austerity.  As soon as people begin to become less afraid they will long for a better or new nest.

"Of course, the lower oil costs came at the perfect time - for autos, paint/coatings, all of us except maybe the oil companies.  Not only will consumers be consuming more.  Manufacturers will be spending less to produce their products.  The paint industry sure uses plenty of oil.  And that killed it for a while.

"As things improve, bank liabilities go down.  Capital restraints lessen.  Loans go up.  And the costs of everything drop because oil is down where it was 3 years ago.

"To be more specific, I see stability in the first quarter and some upward movement by the second."

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Our financial markets guru ends his Thanksgiving-weekend message with the disclaimer "Only the shadow knows."  But he seems authentically confident.  He and his wife did some heavy-duty shopping.

Those Conspiracy Theories: Risk & Reward

Last night on "Law & Order: Special Victims Unit," the prosecution was trying to nail a medical doctor.  He denied his patients standard treatment for HIV and Aids.  Why?  As he told the court, he was convinced that the medical establishment and BigPharma cooked up that category of illness and drugs as part of a profit-making conspiracy.  What the prosecution feared was that the jury would "love the conspiracy theory" and let the alleged miscreant off the hook.  Fortunately, for the law and order crowd, the MD wound up taking a plea deal.

But do juries really love conspiracy theories?  In my experience, putting one forward in court entails enough risk to make the potential reward not seem worth it.  First of all, it's a build proposition. That involves complexity and time.  If juries don't perceive all that well invested, they're likely to turn against the party presenting it. 

A prime example of that were the multiple conspiracy theories presented by the plaintiff in the Rhode Island lead paint public nuisance trial.  They included:

• Trade group Lead Industries Association was attempting to sell more and more lead paint even though it and its member companies knew the substance was hazardous to health.  The problem was there was no evidence and the judge threw out this particular theory.

• Cute ads and puppets associated with lead paint were used to appeal to children.  The problem was that children are not the typical purchasers of this product and it's rare for kids to nag their parents into "more lead paint, mom."

• Material from secondary sources presented by two historians allegedly proving that the lead paint companies knew of the danger of lead.  When I interviewed the jurors they didn't perceive this as "evidence" and the historians as objective researchers.

• Corporations as profit-making organizations can be assumed to be up to no good.  The problem with that was that the jurors were primarily working class folks who were provided jobs by those evil corporations.

On the other hand, in the Mary Winkler [Preacher's Wife] murder trial, defense attorney Steve Farese applied conspiracy theory well.  Forces such as a damaged childhood, buttoned-up persona demanded of a minister's wife, and bizarre sexual coercion [famous platform heels and wig] conspired to render the defendant the victim of impulse.  A master of performance art, Farese wove the pieces of the theory together.

Another winning application was the government's case about plaintiff attorney Dickie Scruggs and the rest of All the king's men. The defendants took a deal.

Somehow, conspiracy theory seems guaranteed to be more successful in the media - e.g. law & order TV shows, films by Oliver Stone, books by Naomi Klein - than in the court room.  Jurors, both defense and plaintiff attorneys agree, take their responsibility seriously.  That can make them suspicious of grand schemes against the plaintiff or defendant.  

DUI Law - Wall St boozing up double-digits, starts earlier

For hungry attorneys who can ignore status, the practice to be in is DUI Law, at least around Wall Street.  At Delmonico's booze sales are up 15 percent.  And restaurants and bars say drinking is starting mid-afternoon.

In THE FINANCIAL TIMES, Greg Farrell reports that despite the downturn and uncertainty about what's next, Wall Streeters are not only drinking more and earlier but not pinching pennies.  The $14-a-glass cocktail is usual and some Chinese consume premium wines at $12,000 for two bottles of 1947 Petrus.

The possible wrench in the liquid relief is the drinker who drives from railroad station in Fairfield or Westchester counties and gets nailed by the police. So prevalent is this, even before the troubles on Wall Street, that Metro North commuter line debated shuttering the bar car.  That didn't happen. 

Even the routine DUI, without complications like a third offense or an accident with property damage and/or personal injury, is lucrative for attorneys.  With complications, clients will pay anything to dodge prison time.

Twitter goes mainstream during Mumbai crisis

Twitter.com, that microblogging medium that communicates in 140 characters or less, went mainstream during the Mumbai terror attacks.  Other media became unavailable and groups ranging from trapped victims to citizens journalists communicated by tweets or posts on Twitter.com.

In THE FINANCIAL TIMES, Rob Minto and Johanna Kassel report that Twitter, once a sort of underground digital tool, "was flooded with thousands of posts or 'tweets,' some from people trapped in the hotels where the attacks were taking place."  In addition, the medium was put to work for a way of recruiting blood donors, sending news to the outside world, and notifying the authorities of who was missing.

FT writers explain, "Twitter works by taking SMS or e-mail messages sent by users, and sending them to the author's followers by SMS, e-mail or Facebook, or example.  Messages can be public or restricted, and some users have thousands of followers."

Three users of Twitter.com, with those thousands of followers, brought Johnson & Johnson to pull its Motrin ads and issue a mea culpa for their tone which was perceived to be demeaning to mothers.  My hunch is that had J&J understood the medium of microblogging it could have fashioned a response that did not include killing the ads and making a total apology.

JDs with 1982 birthdate - Would Malcolm Gladwell rule 'em lost gen?

Success, demonstrates Malcolm Gladwell in his new book "Outliers," usually involves a combination of factors not usually taken into account.  At the top of the list of them is one's birthdate. 

In Chapter 5, Gladwell explains that attorney Maurice Janklow was doomed in his professional climb because he was born before 1911.  Those professionals in that generation were, Gladwell insists, "demographically unlucky." On the other hand, Janklow's son attorney and entrepreneur Mort Janklow was born in the 1930s.  Because the nation was starting to climb out of the economic depression and there had been a baby bust during those hard times, Mort was demographically lucky.

Newbie JDs and those in their first few years of serving as associates in BigLaw might be among the demographically unlucky.  Had they just been born five years earlier their careers would have coincided with the boom in the demand for and pricing of legal services.  Currently, those born around 1982 face reduced demand in many categories of legal services, pressure on pricing by recession-challenged clients, and an old-line profession being forced to operate like a business.  Even if this generation gets a job the odds are against them holding onto to it or rising in the legal-services food chain.

But there are other factors beyond demographics which can create success.  They include the ability to identify opportunity, an undaunted entrepreneurial spirit, hard work, and charm.  JDs can carve out untraditional paths to success. 

For instance, those at Axiom have launched a virtual firm that can underbid traditional models.  The firm is certainly receiving tremendous free publicity.

One venture I envision is a start-up providing web-based fundamentals, particularly on legal procedures, for pro se litigants. The number of those attempting to handle their own cases, even complex ones, is growing, reports Jennifer Forsyth on THE WALL STREET JOURNAL Law Blog.  The potential of that business is infinte: There are 50 states, federal jurisdiction, and the law is always changing.

Other enterprises can be related to career counseling - e.g. should law school be in the cards - as well as career transition for unemployed/underemployed attorneys.  Incidentally, my colleagues laid off in their own professions have been doing brisk business in this exploding category, everything from putting together premium resumes to coaching interviewing skills.

The rub here, of course, is that those attracted to law and then socialized by law school tend to look for and follow the rules vs. breaking them or making new ones.  Gladwell would call that situation being doomed by a mindset and early training.

Moving away from billable hr - Implications, e.g. separating "angel" from "devil" clients

Cravath, Swaine & Moore is experimenting with alternatives to the billable hour, reports Michael Orey in the current edition of BUSINESS WEEK.  And virtual firms like Axiom, with no fixed costs, are already providing legal services at about 50% less than what the Cravaths charge.

Of course those of us in other types of businesses can see the implications of lower fees.  At the top of the list is choosing clients more carefully.  The common term for that, introduced by Larry Selden, is identifying the "angel" from the "devil" clients/customers and then figuring out legal ways to avoid the latter.  For publicly owned companies, Wall Street usually looks for this cherry-picking of who the enterprise does business with.

In legal services, that means that some clients might have a tough time finding a quality firm to represent them. With the old billable hour, they could be "made" to pay for bringing in kinds of assignments not attractive to high-powered attorneys.  Given the complexity of the lead paint public nuisance litigation and its slow pace, one has to wonder if companies like Atlantic-Richfield and Sherwin-Williams would find it challenging in the world of the post-billable-hour to obtain the kind of representation they have had. 

Another implication is the reduction in demand for junior attorneys, that is, those who used to pile up those billable hours.  Branding in law firms might no longer be determined by the number of total attorneys but more by efficiency standards.  Individual attorneys would be valued not by how many hours they bill annually but new models they have created to produce quality results with less input.

A third implication might be what's occurring in the UK - that is litigation's being treated as investment vehicles.  Those masters of the universe we're so wary of now are devising ways to sell portions of law suits.  This helps bypass the constraints of the loser-pays system in the UK which can block access to the courts for most ordinary plaintiffs. Might we be purchasing parts of the Santa Clara County, California lead paint public nuisance litigation?

This upheaval in billing for legal services is happening at a time when business will probably be needing more of them in categories such as employment and securities law. Will companies ignored by the top firms wind up suing for being unfairly discriminated against as "devil" clients?

EU Imports U.S.-Style Consumer/Anti-Trust Movements: Excess not anticipated

Before the EU, national borders impeded consumer rights.  The toaster purchased in Belgium that broke down in Switzerland left the consumer without redress.  That's been changing.  Now both the EU and individual countries in Europe have been importing the American style consumer movement, including class-action suits.  In addition, the European watchdogs are becoming increasingly sensitive to constraints on competition.

One sign of all that is the EU's attack on BigPharma. In THE NEW YORK TIMES, James Kanter reports that the EU "accused drug companies of adding billions of dollars to health care costs by delaying or blocking the sale of less expensive generic medicines."  But the Commissioner for European Competition Neelie Kroes also targeted generic suppliers for patent violations. According to the European Commission, the pharmaceutical market is worth about $276 billion each year.

Legal experts do not anticipate U.S.-type excesses such as jackpot justice or aggressive trust-busting.  As one defense attorney explained to me, Europeans are not Utopians.  They endured two world wars on their own territory and seem to understand and accept the dark side of human nature.  Their objective seems to simply provide fairness to individuals and a level playing field for business.

Timing is everything: Class-action suits over 401(k) fees in company plans

Entrepreneurial personal injury law firm Schlichter, Bogard & Denton understands timing.  Its target is the fees in those 401(k) company plans. 

Everyone is losing money.  Why not give hope that they may be able to get some of it back.  I went along with the plaintiff lawyers who were supposed to be going to bat for me on the money I lost in WorldCom. They got me back about $19 of my original investment.

The approach of this kind of class-action lawsuit is the fees. Since few understand those plans anyway, never mind the fee structure, this is great. 

In Pointoflaw.com, Walter Olson reports that Schlichter used to represent railway workers.  Already it has filed lawsuits against deep pockets like General Dynamics, United Technologies, Lockheed, and Boeing.  The law firm, notes Olson, is also no slouch in forum-shopping.  Filings have been made in the Southern District of Illinois.

Given the timing, could this go the distance like asbestos, or better yet, tobacco?  Unlike lead paint and obesity suits, this kind might get some traction.

Attorney FOW [Friends of W] - Six Degrees of Separation

Six degrees of separation works both ways: It can bring jobs and consulting assignments via those connections or it can impede them. 

The latter is proving to be the situation for too many attorney FOW [Friends of W].  Unless those lawyers are directly connected with the finance scene, they are not being welcomed by law firms.  Given the glut on the market both inside and outside the beltway, the odds of work with conservative think tanks, media, and even organizations dedicated to the 2010 Congressional races aren't promising.

One solution is to simply put together fresh six degrees of separation.  The good news is that networks are becoming more just-in-time versus the permanent configurations that begin with play dates and prep school.  A useful read on that is by Yale law professor Yochai Benkler in "The Wealth of Networks."

Tips for reinventing oneself as a more marketable player include:

• Exploit social media to promote moderate views.  A helpful guide is "The Truth about Profiting from Social Networking" by Patrice-Anne Rutledge. 

• Volunteer to work on behalf of moderate pols for the 2010 races.

• Deconstruct the new administration's concepts and language.  Mirror those.  That's the first law of selling.

• Mea culpa is all the rage.  Confess how views have been altered.

• Analyze emerging models in professional life, e.g. how CISCO Chief Executive John Chambers is re-doing the company as flat, interactive, co-operative.  Chambers learned plenty during the dot.com meltdown.  A nice take on what he's been up to is in the December/January edition of FAST COMPANY.  In short, smart people are approaching work differently.  If we do likewise, they will let us in.

• Flee former colleagues who are digging in their heels. They must have a trust fund or some other means of independent wealth.

Putting together a new network takes time as well as trial and error.  Here's my story of struggle in free e-book short form Download Geezerguts.

More Credible FDA, Less Credible Plaintiff Bar, State AGs: Tweet Imperative

Of course, the FDA is in the soup again.  This time it's the melamine issue.  And since the industrial chemical is being found in a product - infant formula - which is consumed by children, this controversy is high-profile and not going away.

The short version is that the FDA first said that melamine in any amount can be harmful in infant formula.  Then it said that trace amounts are, well, okay. It's also being hammered because it didn't disclose the presence of this contaminant which killed and sickened too many babies in China sooner.

This latest stumble by the federal agency continues to give ammunition to the plaintiff bar and state attorneys general to take on the role of consumer protector.  Companies vulnerable to this 21-century muckraking, ranging from lead paint defendants to energy providers, have to go digital. 

U.S. industry has to tell the Obama Administration, which some contend made it into the White House through digital technology, on the web that strong, credible, well-funded federal agencies are the system fix the nation needs. It was just such a federal approach that saved the beef industry in the 1990s after the Jack-in-the-Box E-Coli crisis. Here Bill Marler of Marler Clark, which specializes in food-borne diseases, tells Congress why that approach worked, how it fell apart, and how it can be put back together  Download Testimonywaxmanfoodsafety and Download TestimonyEnergy.

One of the most effective digital weapons has become tweeting or microblogging.  It was a handful of alert media types on Twitter.com who brought Johnson & Johnson to not only pull its Motrin ads but also issue a mea culpa.  My take is that the power of Tweets took J & J by surprise and it went into a panic.  Some contend, had J & J understood online media, it could have prevented what become a global reputational crisis for the drug company.

In 2009, the lead paint defendants, ranging from DuPont to Sherwin-Williams, face more of the same [pending public nuisance litigation in Ohio and California] and perhaps some new kinds of guerrilla warfare.  Hey, states, counties, cities and individual citizens need money.  With digital having so much traction in the minds and hearts of Americans, it is no longer a public-opinion advantage to advocate on the web.  Not doing so can imply negatives ranging from arrogance to guilt.  The plaintiff bar, including Marler [his traditional blog is here], have their digital down cold.

To get tweeting?  All companies have to do is go to Http://twitter.com.  Accounts can be set up easily and for free.  I tweet here.   Being heard comes from trial and error.  There are no formulas for success in online communications. A helpful primer might be "Multichannel Marketing" by Akin Arikan.

Disclosure: Now and then I do digital editing for Marler Clark.