Fee Tracker: Michigan State's Legal Bills Surge Amid Sex Scandal
A look at some of the notable legal bills behind clients in the news.
January 26, 2018 at 07:44 PM
11 minute read
In this era of increased competition in the high-end market for legal services, it helps to know what your rivals are making—or missing—from certain engagements. Fee Tracker will periodically seek to help you sift through public records and other data showing the money behind the myriad bankruptcies, IPOs, litigations, lobbying registrations and M&A deals that emerge each month. If you know of anything we missed or wish to share a confidential tip, contact me at [email protected].
The criminal case against disgraced former USA Gymnastics national team doctor and Michigan State University osteopathic physician Lawrence Nassar has helped give a voice to 156 women, from Olympic star Aly Raisman to Rachael Denhollander, the Louisville lawyer and stay-at-home mom who in 2016 filed the first police complaint against Nassar for abusing her when she was a teenager.
But Nassar's legal troubles, which resulted this week in a sentence of between 40 to 175 years in prison for the serial sex abuser, have also resulted in millions of dollars in legal bills for Michigan State, from which president Lou Anna Simon resigned on Jan. 24 with a letter that left some crisis communications experts perplexed. Simon's resignation came after mounting criticism over the school's handling of the crisis.
Michigan State faces potentially millions in liabilities from its role as Nassar's former employer, with dozens of his victims having sued the school and USA Gymnastics. The American Lawyer reported in June on Skadden, Arps, Slate, Meagher & Flom litigation partner Patrick Fitzgerald—a former top federal prosecutor who joined the firm's Chicago office in 2012—and Detroit-based Am Law 200 firm Miller, Canfield, Paddock and Stone being retained by Michigan State.
At the time, the university had paid a little over $1 million to both firms. But even after Nassar pleaded guilty in November—he received another 60-year prison sentence in December on federal child pornography charges—Michigan State's legal costs have continued to rise. (The New York Times reported over the weekend on Fitzgerald's work for Michigan State.)
Earlier this month, Michigan's WXYZ reported that in less than a year Skadden's bills—the firm has reduced its normal hourly rates—on behalf of Michigan State had approached at least $4.1 million. Miller Canfield's tab stood at $433,739. And besides the civil litigation, Michigan State is now facing regulatory scrutiny about when and what it knew about Nassar from the U.S. Department of Education and the National Collegiate Athletic Association (NCAA). Corporate Counsel reported Friday that the legal and regulatory issues plaguing Michigan State and its general counsel Robert Noto from the Nassar affair are not likely to abate anytime soon.
The NCAA announced this week that it would investigate how Michigan State handled complaints against Nassar during his decades on the school's faculty. Donald Remy, a former Latham & Watkins partner serving as the NCAA's general counsel, said in a statement that the organization had requested information from Michigan State about potential rules violations. (The NCAA paid nearly $7.3 million to Latham and almost $5.9 million to Skadden in 2015-16, according to the most recent federal tax filing by the Indianapolis-based nonprofit.)
On Friday, it emerged that NCAA president Mark Emmert had been informed in 2010 about 37 other instances of alleged sexual misconduct involving athletes at Michigan State. Katherine Redmond, founder of the National Coalition Against Violent Athletes, reportedly met with Emmert, then six months into his NCAA leadership role, to discuss the school.
ESPN.com also recently reported that Michigan State—advised by Husch Blackwell—has been under a U.S. Department of Education review since 2014 for its alleged mishandling of sexual assault and gender discrimination cases. Jones Day also released a report in June 2017 commissioned by Michigan State to examine potential violations and compliance issues involving its high-profile football program.
Despite a pattern of sexual assault, violence and gender discrimination at Michigan State, in September, Education Secretary Betsy DeVos rescinded Title IX guidelines on sexual misconduct, two days after a meeting with Simon, who began serving as the university's president in January 2005.
Michigan State isn't the only institution to find itself in the spotlight as a result of the Nassar scandal.
U.S. Olympic Committee CEO Scott Blackmun ordered Friday that the remaining board members at USA Gymnastics who had not already stepped down do so immediately. Blackmun, a former partner at predecessor firms to Bryan Cave and Hogan Lovells, had threatened to strip USA Gymnastics of its status as the sport's governing body in the U.S. if the holdout board members did not comply, which all had done as of Friday evening.
The American Lawyer reported nearly a year ago on Faegre Baker Daniels' longtime relationship with USA Gymnastics. According to the most recent federal tax filing by the Indianapolis-based nonprofit, USA Gymnastics paid $191,547 to Faegre in 2015.
Denhollander, the first woman to come forward as a victim of Nassar, had asked all of USA Gymnastics' executive officers to resign last summer. How decades of his sex crimes remained hidden for so long is something that Denhollander and The Indianapolis Star began to unravel in 2016, thanks in part to the work done by a team of Baker & Hostetler lawyers representing the newspaper in an open records fight with USA Gymnastics.
Capitol Hill Coinage
The first full year of federal government lobbying under the Trump administration was a boon to several big firms, thanks in part to late year advocacy efforts ahead of the GOP's tax bill, according to reports by The Hill and Politico.
Of the top 20 highest-earning lobbying practices for 2017, a group that includes government affairs shops and public policy consultancies, a half-dozen Am Law 100 firms scored top marks. There are: No. 1 Akin Gump Strauss Hauer & Feld ($38.78 million); No. 2 Brownstein Hyatt Farber Schreck ($29.18 million); No. 3 Squire Patton Boggs ($24.3 million); No. 5 Holland & Knight ($22.38 million); No. 10 Covington & Burling ($17.81 million); and No. 11 K&L Gates ($17.54 million).
Capital Markets Cash
Apollo Global Management LLC-backed ADT Corp. raised nearly $1.42 billion through an initial public offering a week ago on the New York Stock Exchange, which priced well below its expected range. Securities filings show that the IPO by the Boca Raton, Florida-based security services company generated $3.1 million in legal fees and expenses for ADT's lawyers at Paul, Weiss, Rifkind, Wharton & Garrison led by Taurie Zeitzer, who joined the firm three years ago this month from Kirkland & Ellis. ADT's chief legal officer is P. Gray Finney. Simpson Thacher & Bartlett took the lead for underwriters on the float.
Gates Industrial Corp., a Denver-based transmission belt and industrial equipment manufacturer owned by buyout giant The Blackstone Group LP, raised $731.5 million through an IPO this week that securities filings show disgorged $3.365 million in legal fees and expenses to the company's lawyers at Simpson Thacher. Davis Polk & Wardwell represented underwriters on the listing. Former Thompson & Knight partner Jamey Seely serves as Gates' general counsel.
Houston-based Nine Energy Service Inc. raised $161 million through an IPO on the NYSE that generated $1.5 million in legal fees and expenses for its lawyers from Vinson & Elkins, according to securities filings. Kirkland advised underwriters on the offering by the oilfield services company, whose general counsel is former Vinson lawyer Theodore Moore.
One Madison Corp., formed by the former CEO of holding company HRG Group Inc., raised $300 million through an IPO earlier this month that securities filings show yielded $500,000 in legal fees and expenses for the New York-based blank check company's lawyers at Davis Polk and offshore firm Maples & Calder. Skadden advised underwriters on the offering.
Loose Change
As the #MeToo movement spreads nationwide, statehouses across the U.S. are looking to outside counsel to handle various sexual misconduct probes. In Florida, former state Sen. Jack Latvala has tapped his campaign fund to pay $100,000 to Tallahassee litigator Steven Andrews and $12,705 to Adams and Reese, according to the Tampa Bay Times. Latvala resigned from the Sunshine State legislature in December amid allegations that he had sexually harassed an aide. The Daily Business Review in Miami reports that other Florida legislators could also come under scrutiny.
The Indianapolis Star reported on Jan. 17 that Vice President Mike Pence had paid $256,745 in leftover gubernatorial campaign funds to Barnes & Thornburg, which has been handling the release of emails from his time as governor of Indiana. Pence used a personal AOL email account to conduct state business during his four years in office. The Star reported a year ago that some of those emails had been hacked.
The Law School Admission Council (LSAC) is firing back at a California state agency in the latest round in a long-running court fight over disability accommodations for individuals taking its law school entrance exam, according to The Recorder. Norton Rose Fulbright is representing LSAC in the matter. According to the most recent federal tax filing by LSAC, the Newtown Square, Pennsylvania-based nonprofit paid $276,244 to Norton Rose Fulbright in 2015-16. Morgan, Lewis & Bockius received another $343,839 from LSAC during that fiscal year.
Buzzfeed reported this month that the Trump administration has agreed to pay more than $3 million in legal fees and costs to Jones Day—the firm had initially sought up to $29 million—in order to settle contraception mandate suits filed by the firm during the Obama administration. The American Lawyer reported last year on Jones Day's close ties to the Trump administration.
Holland & Knight secured a $10 million award for attorney fees and costs as a result of its efforts in snagging a $13 million verdict for the estate of Subway sandwich chain co-founder Fred DeLuca, according to the DBR.
Whitefish Energy Holdings LLC, a small holding company based in the Montana city of the same name, paid $150,000 to Foley & Lardner during the fourth quarter of 2017 to lobby Congress on its behalf as it seeks to secure a contract repairing Puerto Rico's devastated electrical grid in the aftermath of Hurricane Maria. Public records show that Foley & Lardner has five individuals working on the matter for Whitefish.
Out of Pocket, In the Red
The American Lawyer reported earlier this month on the eight firms—including now-defunct Sedgwick—holding the bag on more than $550,000 in unpaid legal fees disclosed in the bankruptcy of Penthouse Global Media Inc. Several other recent bankruptcy cases have revealed a string of other Big Law creditors.
Hobbico Inc., the largest distributor of radio control and general hobby products in the country, filed for bankruptcy in Delaware earlier this month and terminated 332 employees. The Champaign, Illinois-based company noted in court papers that it owed more than $1.22 million to Drinker Biddle & Reath, which has represented Hobbico in patent litigation. Chicago's Neal, Gerber & Eisenberg and Delaware's Morris, Nichols, Arsht & Tunnell are advising Hobbico in bankruptcy court.
Sea Star Holdings Inc., the parent company of Seaborne Puerto Rico LLC, Seaborne Virgin Islands Inc. and other affiliates, also filed for bankruptcy in Delaware this month as part of a plan to sell itself to Silver Airways LLC. Stinson Leonard Street and Delaware's Landis Rath & Cobb are advising Sea Star in its Chapter 11 case. The company owes $310,594.34 to Puerto Rico's McConnell Valdes, according to court records.
Excelsior, Minnesota-based Sheer Wind Inc. filed for Chapter 7 in Minneapolis on Dec. 29, as the wind turbine startup noted that sales had fallen to a mere $4,500 by year's end. Court filings show that the debtor owes money to three local firms: $66,066 to intellectual property shop Billion & Armitage; $4,145 to Gray Plant Mooty; and $1,512 to Beck Law. Sheer Wind has paid $2,000 to solo practitioner Jacqueline Kuiper to handle its liquidation.
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