News Type: Blogs

Eight million dollars. That’s the mind-bending potential value of an NIL deal recently signed by a 2023 five-star football recruit-a kid still in high school who’s now positioned to join the seven-figure club by the time he’s a college senior.

NIL deals were also front and center during March Madness. Several men’s and women’s basketball players participating in the tournament were endorsing footwear, apparel and the like in exchange for big bucks.

But this should come as no surprise. Last year, new state laws and NCAA rule changes dramatically shifted the landscape of college sports by allowing athletes to cash in by selling their name, image and likeness (NIL) rights. With that, more than a few student-athletes are now flush with cash, which is great for those reaping the benefits of endorsement and promotional agreements. Still, NIL mania is creating real problems in terms of athletic recruiting and is upsetting the balance of power in college sports programs nationwide.

It’s Tough to Compete With the Almighty Dollar

According to several Power 5 conference coaches, recruiting strategies pale in comparison to the availability of NIL opportunities. This explains the surge of donor-led collectives that are exploiting NIL rules and playing havoc with the ability of some universities to attract players to their schools, especially through the advent of the transfer portals, which allow student-athletes to freely transfer between schools without losing a year of eligibility

These collectives are funded by boosters and businesses that pool resources to lure student-athletes looking to monetize their personal brands with NIL deals. Between collectives, which are technically independent of universities, and local media markets, certain colleges, depending on their location and popularity, are essentially able to buy players-and given the NCAA’s relatively recent about-face on the sale of NIL rights, they can do so legally.

Human nature dictates that recruits will flock to the conferences and universities offering the greatest money-making opportunities. This reality hasn’t been lost on administrators, with athletic departments across the country now working to educate, engage and entice athletes with the specter of NIL paydays. This includes the creation of the aforementioned collectives that are committing millions to the cause.

Anything to Stay Competitive

In light of the new economics informing athletes’ college decisions, schools are getting rather creative, even beyond collectives. Some, like Oregon State and the University of Nebraska, are creating NIL marketplaces, platforms where businesses can access students and offer NIL opportunities. For their part, interested athletes can leverage marketplace technology to create profiles so that third-parties can contact, pitch and (ultimately) pay them. This is over and above the work brands are doing to connect directly with student-athletes for paid endorsements and other NIL arrangements. No matter the vehicle used to promote the promise of NIL riches, there can be no doubt that the collegiate playing field is no longer a level one, as universities and their boosters are looking for new ways to entice top talent to their athletic programs.

NIL-Related Legal Disputes on the Horizon

While some are lining their pockets in a big way, many other student-athletes are certainly being taken advantage of, with some likely signing away the exclusive rights to their NIL. Not only that, it’s inevitable that a share of NIL deals, big and small, will go south. And to make matters even worse, there’s an overwhelming lack of federal guidelines in place to protect the kids being hounded for their NIL rights. Parenthetically, the unregulated NIL marketplace will reach a tipping point at some point that’ll leave the NCAA and the federal government scrambling to enact protections for student-athletes and the very integrity of collegiate athletics.

Along with these potential problems, and the lawsuits that may eventually accompany them, comes a perceived lack of financial literacy on the part of those earning significant sums of money for the first time. The tax filing deadline is just days behind us, but how many student-athletes understand their tax liabilities, let alone what to do with a 1099? Bottom line: a flurry of disputes stemming from NIL agreements-tax-related or otherwise-are a virtual certainty.

Without question, NILs are turning the college sports world upside down. And to think we’re just in the infancy of the NIL frenzy. Watch this space.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

Just over a year ago, Michael Winkelmann-better known as Beeple-shook the art world when an NFT of his work, a digital collage titled “Everydays: The First 5000 Days, sold for $69 million through an auction at Christie’s. Some would say this is the eye-popping sale that cemented the NFT craze that continues to make headlines.

Since then, NFTs have expanded well beyond fine arts. In fact, non-fungible tokens have exploded, creating new business models across industries. This includes the music space, which has joined the chorus of NFT innovation.

With the steady stream of NFTs now disrupting the music scene, those creating and investing in these digital assets must be aware of the dangers that come with the territory. In fact, legal landmines associated with NFTs are already beginning to surface, as is litigation arising from less-than-diligent NFT practices.

But before diving into their potential pitfalls, let’s begin with an overview of how NFTs are starting to change the face of the music biz as we know it.

An Enhanced Relationship Between Artists and Fans

NFTs are digital assets stored on a blockchain used to record ownership. Among so many other things, songs, albums, album art, lyrics, soundbites and most anything else music related can all be tokenized. And musicians in the know are doing just that-creating and selling NFTs, which is decentralizing the business away from streaming services and record companies and, at the same time, markedly changing the way artists and fans interact.

Kings of Leon was the first band to directly release a complete album as an NFT. In addition to the group’s music, purchasers were able to unlock special perks, such as a limited edition vinyl, and secure front row seats to upcoming concerts. Kings of Leon also released a separate NFT which included exclusive audiovisual artwork.

The NFT options for acts like Kings of Leon are many. Blockchain technology allows musical artists to offer NFTs that include access to audio files, alternate mixes, and PDFs that deliver lyrics, album art or even personalized messages. Remember, the NFT itself is simply a token-or key-to gain access to any type of digital file or provide authentication for off-chain physical items; say, Kings of Leon merch, tickets for entry to exclusive shows, or the chance to hang backstage with the band.

NFTs can also be minted to be upgradeable. This means that songs can be released that fans or collaborators can build upon-an offering that bypasses the legal firewall normally in play when music is sampled or remixes are created. Parenthetically, these NFTs allow original creators to maintain a modicum of control and even profit directly when their works are “upgraded” (more on the pros of NFTs for artists in just a moment).

As NFTs become more mainstream within the world of music, it’ll become abundantly clear that, for fans, NFT purchases will far exceed the streaming experience or other methods of music listening.

A Potential Windfall for Musical Acts

NFTs can be a boon for musicians as well.

Artists typically earn a minority percentage from the sale or licensing of their music, regardless of the distribution channel. Music streaming to paying subscribers pays very low rates-rates that are significantly worse for ad-based streaming. It’s concert tours that provide the primary revenue source for many musical acts, but live events were an impossibility during most of the COVID-19 pandemic. This lack of touring income highlighted the low rates paid for streaming consumption and negatively impacted artist earnings over the past two years.

By selling music, collectibles, limited access events and similar items as NFTs, musicians are in the driver’s seat, able to increase revenues without relinquishing ownership or control to content platforms. In fact, when minting NFTs, musical acts can use smart contracts to decide the scope of rights to release, if any, and to whom those rights should flow. For instance, a performer who sells an NFT can continue to receive royalties automatically, even after the original buyer decides to sell the digital asset at a later date. Better yet, this process can continue each time the NFT is sold or re-sold-all because of the blockchain and the NFT’s own metadata that record and store transfers of ownership. And to the extent these offerings are sold directly by artists, they realize an additional income source not subject to recoupment by labels or publishers.

Artists can leverage NFTs to sell royalty streams along with their music too. That’s right, available technology can be used to embed rights into NFTs so that buyers can receive royalties from the songs or albums they purchase. However, allowing fans to become financial stakeholders in their favorite bands’ music can be a dicey proposition given the federal securities issues that may arise.

To be sure, selling music royalties to the general public by way of NFTs is a revolutionary strategy, though the scheme could be seen as soliciting investments to those expecting to turn a profit through no direct work of their own. This is risky and requires legal counsel, especially when federal regulators may be chomping at the bit to police NFTs and reprimand artists who knowingly or unknowingly attempt to skirt federal law.

The Perils of the NFT Trade

Without question, there are plenty of reasons why fans, investors and musicians would want to jump on the NFT bandwagon. But they’d all be wise to do so with caution. Here are but some of the reasons why.

As mentioned, certain NFTs may be regulated as securities; specifically, those that include participation in royalty streams, which will likely be scrutinized by the SEC or other securities regulatory agencies. If NFTs like these aren’t compliant with applicable securities law and they lose value for market reasons, buyers may have claims for recission of their investments and creators could face regulatory actions to boot.

NFTs sometimes incorporate the works or rights of others, without having the rights associated with the underlying IP. This is a real problem because the failure to secure permission from a copyright or other IP owner before including the protected material in an NFT could subject the originator of the digital asset to legal action and financial exposure in the form of infringement litigation. This has already come up in a case involving Roc-A-Fella Records and Damon Dash, Quentin Tarantino’s proposed NFT involving the Pulp Fiction script, and a StockX NFT involving a pair of Nike sneakers.

Another red flag is waved when NFTs are issued based on opaque licensing language or vague disclosures. To say the least, music licensing is extremely complex and requires a sophisticated knowledge of royalty streams, overlapping rights and related issues. In the context of NFTs, some underlying licenses are-or will be-just too ambiguous and related disclosures unclear, a combination likely to wind up being litigated when investors believe their NFTs include certain rights but issuers have something different in mind.

A Whole New World

Many in the music space treat NFTs like something out of the Wild West. Carrying this metaphor a step further, artists and buyers may soon find themselves embroiled in courtroom shootouts.

The peril of lawsuits and regulatory actions aside, NFTs look to be a win-win for fans and musicians alike. Blockchain technology facilitates unique offerings that heighten the fan experience and fosters a never-before-seen level of interaction between collectors and creators. Contemporaneously, musical acts have at their disposal an entirely new method of monetizing their art, albeit in a manner that-once more universally adopted-could potentially have a fundamental impact on the economics of the music industry.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

Cryptocurrency prices continue to hover in the stratosphere, yet volatility remains one of the hallmarks of these digital assets. It’s this instability, along with the consumer protection issues and national security and climate-related risks associated with Bitcoin, Ethereum and the like, that have driven President Joe Biden to action.

President Biden’s Statement on Digital Assets and Cryptocurrencies

Earlier this month (on March 9), President Biden signed an Executive Order on Ensuring Responsible Development of Digital Assets that places the U.S. at the helm of technological leadership when it comes to digital assets like cryptocurrencies. The EO does so by supporting innovation, all the while abating risks to consumers, businesses, the financial system and climate.

Consumer Protection and Financial Stability

Crypto scams, related get-rich-quick-schemes and cybercrime has resulted in losses to untold consumers. In response, the President’s executive order directs the U.S. Treasury Department to assess and develop policy recommendations addressing the rapidly growing digital asset sector and downstream changes in financial markets. Not only that, the EO encourages regulators to safeguard against systemic financial risks posed by digital assets and creates significant oversight. In terms of the latter, FSOC (the Financial Stability Oversight Council) has been tasked with detecting and mitigating such systemic risks and penning suggestions to address regulatory gaps and related concerns.

Mitigation of Risks Posed by Illicit Use of Digital Assets

One of President Biden’s intentions in signing the executive order is to focus the attention of U.S. federal agencies to detect and protect against illicit actors using digital assets to facilitate malfeasance. In an effort to root out illegal activity in the crypto space, he has asked for “unprecedented . . . coordinated action” among these agencies to minimize finance and national security risks posed by cryptocurrencies. President Biden is seeking international collaboration on these issues too. In fact, the EO stresses cooperation with allies and partners globally to provide a worldwide framework to combat against the unlawful use of crypto.

Promotion of U.S. Leadership and Supporting Technological Advances

By way of the executive order, President Biden is looking to give the U.S. a competitive edge over other countries when it comes to crypto development. The EO emphasizes U.S. leadership by directing the Department of Commerce to establish a framework as to how technologies can best be leveraged to ensure America’s standing as the world’s leader in the digital asset sector (including cryptocurrencies, NFTs and other blockchain-related properties). Toward that end, the President has further directed the federal government to study and support technological advances in the design of digital asset systems, while simultaneously prioritizing privacy, security and the reduction of negative climate impact.

Exploration of a Digital Dollar

Finally, the executive order calls for the exploration of a central bank digital currency (CBDC)-essentially, a digital dollar. While there are no plans on the current horizon for the U.S. to launch its own digital currency, the EO charges the federal government with assessing the infrastructure and capacity needs for a potential CBDC, while encouraging the Federal Reserve to continue its own research on the topic.

Given all of the foregoing, 2022 continues to be a monumental year for changes in the regulatory landscape of digital assets. The Corporate & Securities team at Michelman & Robinson, LLP will continue to monitor the space and report back with any significant updates.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

Last week, the California Supreme Court denied a petition and depublication request by California’s insurance commissioner and consumer organizations in a case entitled State Farm General Insurance Company v. Lara. The repercussions of this decision are potentially huge for carriers.

By virtue of the state supreme court ruling, State Farm will not have to refund approximately $100 million, as was previously ordered in 2016 by then-Insurance Commissioner Dave Jones, who determined that the insurer was charging excessive rates for homeowners, condo and renters coverage based on its expenses and investment income.

Back then, State Farm agreed to lower its rates for this insurance by 7%, as mandated by Commissioner Jones; however, the insurance company refused to pay the refunds as ordered and instead challenged the directive in court in its case against Jones’s successor, Commissioner Ricardo Lara.

Fast-forward, and the Superior Court of San Diego County agreed with State Farm’s position, finding that refunds were not necessary because insurers are legally entitled to charge rates that have-or had-been approved by the Department of Insurance, as was true in the case of State Farm’s homeowners, condo and renters policies. This determination ran counter to the Insurance Commissioner’s argument that Proposition 103 provided the authority to order rate refunds in order to ensure that Californians are charged fair rates.

The lower court ruling was affirmed by the California Court of Appeal in San Diego, which held last October that State Farm was actually required to charge the approved rate-that which the Department of Insurance ultimately deemed to be excessive-until a different rate had been authorized. It was that decision that was brought before the California Supreme Court.

The Fallout

By virtue of the recent denial by the state high court of the petition and depublication request filed by Commissioner Lara and company, State Farm is off the hook for the nine-figure refund. But the decision may not be limited in scope to that company, as the ruling casts doubts about the ongoing enforceability of Lara’s order that insurers refund an estimated $3.5 billion in overcharges collected from California motorists during the pandemic. Despite this cloud, it should be noted that carriers have returned more than $2 billion in premium relief to California drivers in the shadow of COVID-19.

Of course, if you have any questions regarding the impact of State Farm General Insurance Company v. Lara or other rate-related concerns, the insurance regulatory team at Michelman & Robinson, LLP is here with answers.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

In a rare show of bipartisanship, the U.S. Senate has just passed legislation arising out of the #MeToo movement that guarantees the victims of workplace sexual harassment or assault the ability to pursue litigation against their employers in court, as opposed to arbitration.

The bill, which made its way through the Senate on Thursday (February 10) after previously being passed by the U.S House of Representatives, now heads to the desk of President Joe Biden for signature. Of note, he supports the legislation, which the White House says, “advances efforts to prevent and address sexual harassment and sexual assault, strengthen rights, protect victims, and promote access to justice.”

Essentially, the new law will prohibit provisions in employment contracts that require third-party arbitration of workplace sexual harassment or assault claims. Once signed, the legislation will amend the Federal Arbitration Act, effectively banning agreements mandating arbitration in these instances. Of note, the bill is retroactive, voiding any mandatory arbitration clauses in contracts that have already been signed by employees. That being said, arbitration of these claims is permissible if the employee elects that method of dispute resolution.

It is important to emphasize the legislation is narrowly written, focusing only on sexual assault and harassment claims. As such, the law should not have the unintended effect of nullifying arbitration agreements in all employment contracts.

In the wake of this significant workplace development, employers should revisit their employment contracts and address conflicting language in existing arbitration provisions. Of course, the employment team at Michelman & Robinson, LLP is available to answer any related questions you may have.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

The securities professionals at Michelman & Robinson, LLP have identified certain policy items of importance to institutional shareholders going into 2022. These policies, flashing brightly on investor radar screens as they consider proxy statements soliciting votes, are set forth below.

In our estimation, public companies-those with significant blocks of institutional shareholders-that fail to pay heed to the guidelines discussed in this post may be unable to secure the proxy votes they need during proxy season and otherwise. As such, it is recommended that annual reports issued and the proxy statements filed by listed companies cover all of the following.

Climate-Related Risks

Institutional investors, companies and other market participants are particularly concerned about climate change and board oversight of climate-related risks and transition plans. Indeed, stakeholders are increasingly applying non-financial, ESG (environmental, social and governance) factors to identify growth opportunities, among other things.

Because investors are integrating climate considerations in their investment, engagement and voting processes, public companies-especially those that are significantly contributing to climate change-are encouraged to introduce related board accountability policies.

How important is it for board members to implement climate-friendly standards? So much so that Institutional Shareholder Services (ISS) is recommending votes against responsible incumbent directors in cases where the public company in question is not considered to have adequate disclosures in place or quantitative greenhouse gas (GHG) emission reduction targets.

Say on Climate (SoC) Plans

With climate in mind, public companies are expected to disclose climate-related risks, targets and transition plans on an annual basis in line with the reporting framework created by the Task Force on Climate-related Financial Disclosures (TCFD). By allowing shareholders to vote on these disclosures (including disclosure of operational and supply chain GHG emissions and the company’s commitment to be “net zero” for such emissions), entities can determine if they are meeting shareholder expectations on climate-related issues and institutional investors are able to make informed decisions.

For its part and when looking at management proposals asking shareholders to approve a given company’s climate action plan, ISS weighs the “completeness and rigor of the plan.” When it comes to shareholder proposals, ISS also takes into account the company’s actual GHG emissions performance; the existence of recent significant violations, fines, litigation or other GHG controversies; and whether the proposal is unduly burdensome or prescriptive.

Board Diversity

Last year, the SEC approved Nasdaq’s Board Diversity Rule, which aims to diversify the boards of directors for Nasdaq-listed companies. By way of the Rule, Nasdaq-listed companies will be required to have at least two diverse directors, one who self-identifies as female and one who self-identifies as an underrepresented minority (read: Black or African American; Hispanic or Latinx; Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander; or two or more races or ethnicities) or LGTBQ+.

This is a hot-button issues for many institutional shareholders, which underscores the need for public companies to institute related policies and guidelines. Note that board diversity requirements are not exclusively the purview of Nasdaq and the SEC. Similar requirements have been enacted in California, Washington, New York, Maryland, Illinois and Colorado, and several other jurisdictions are also considering comparable mandatory gender diversity legislation.

ISS has taken a stand here too, recommending that shareholders vote against the chair of the nominating committee (or other directors on a case-by-case basis) at companies in the Russell 3000 or S&P 1500 if there are no women on their boards. In addition, ISS recommends an against vote or withholding votes for the chair of such a nominating committee in the absence of racially or ethnically diverse board members.

Unequal Voting Rights

Public companies with unequal voting rights (read: provisions limiting the voting rights of some shareholders and expanding those of others) are increasingly frowned upon. Oftentimes such unequal voting is established prior to a company going public in order to protect the ability of founders to maintain control. A prime example is Facebook and the inability of shareholders to influence its polices due to Mark Zuckerberg’s 50%+ voting control.

ISS is recommending (with certain exceptions) that beginning in 2023 shareholders vote against the boards of directors (other than new nominees) at companies maintaining unequal voting rights structures. For newly public companies, ISS recommends voting against board members or withholding from the entire board (with the exception of new nominees) if, prior to the company’s public offering, an unequal, multi-class voting structure was adopted (especially one that does not include a sunset provision). Where such a structure was implemented and a sunset provision applies, the company at issue should disclose the rationale for its adoption and the reasoning behind the timing of the sunset provision (such as needing to maintain control in order to effectuate a series of planned, post-IPO acquisitions and the need to assure they are approved). If such a sunset provision allows the unequal voting structure to continue beyond seven years, that structure will be considered unreasonable. Consequently, entities would be wise to alter any contradictory policies accordingly.

A Final Word

Of course, M&R’s securities pros, including Megan Penick at mpenick@mrllp.com and Stephen Weiss at sweiss@mrllp.com, are available should you have any questions or need guidance regarding any the foregoing policies or recommendations coming from ISS.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

The new year has brought with it a new law impacting all those in Chicago who employ domestic workers.

Effective January 1, anyone who engages a housekeeper, nanny, caregiver or home health service provider in the Windy City must provide that worker with a written contract (in their primary language) that spells out the wage and work schedule agreed upon by the employer and the individual under their employ. Notably, such an agreement is mandated whether the domestic worker is considered to be an employee or independent contractor.

The reasoning behind the new requirement is to create a fair and equitable workplace and ensure accountability, transparency and predictability for domestic workers so they can plan for themselves and their families. According to Mayor Lori E. Lightfoot and the Chicago Department of Business Affairs and Consumer Protection (BACP), an environment of collaboration and dialogue should be created to ensure that the terms of the work agreement are mutually agreeable.

The following contract formalities apply:

  • The document should be reviewed and signed in person by the domestic worker, the employer and a witness;
  • The agreement can be printed or be provided in a printable communication in physical or electronic format, such as an e-mail; and
  • Contracts should be reviewed annually and when there is a change to the job description or scope of work.

Note that sample agreements can be found here.

For purposes of reference, all Chicago worker protections are enforced by the BACP Office of Labor Standards (OLS), which is dedicated to promoting and enforcing the city’s labor laws, including Minimum Wage, Paid Sick Leave, Fair Workweek, and Wage Theft Ordinance.

Employers and their domestic workers can learn about relevant protections and employee rights by visiting Chi.gov/Care. Of course, the employment law specialists at Michelman & Robinson, LLP are always available to answer your questions as well.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

Late last week, the U.S. Department of Justice announced criminal charges against 10 defendants for alleged kickback schemes at substance abuse disorder treatment facilities in Orange County. These charges are part of “The Sober Home Initiative”-a coordinated effort among federal and state law enforcement to investigate and prosecute fraud and corruption within licensed rehab and sober living facilities. In connection with the DOJ’s announcement, a lead prosecutor ominously told the Orange County Register, “This is the beginning, not the end.”

As alleged by the Justice Department, the newly-charged defendants associated with treatment facilities assigned values to patients based upon insurance coverage-values derived from the expected reimbursements the patients’ insurers would pay the respective facilities for providing treatment services. The DOJ further contends that the patient recruiters were paid kickbacks for each patient they referred.

Among the defendants are facility “controllers,” including an employee. As such, the Justice Department appears to be expanding its reach beyond facility owners. This is consistent with the broad language of EKRA, as well as California state law, both of which allow prosecution of any person or entity involved in alleged improper kickbacks. Consequently, facilities should be mindful of any actions their employees take that relate to marketing or attracting patients. Indeed, well-intentioned facilities should be on high alert if they suspect employees or independent contractors are violating EKRA or state law.

Another interesting development brought to light by way of the DOJ’s prosecution is that one of the alleged recruiters was also charged with possession with intent to distribute fentanyl, which is an entirely new-and dark-dimension to these cases.  The press release linked above also repeatedly uses the word “purported” with reference to treatment services rendered, suggesting that investigators are also focused on fraudulent billing in addition to body brokering.

As a testament to the strength and thoroughness of the government’s investigation, four of the 10 defendants have already pleaded guilty and are awaiting sentencing.  In fact, ongoing charges like these were anticipated in our previous reporting and discussed during our webinar last week titled, “Billing and Marketing In the Addiction Treatment Industry: Staying on the Right Side of the Law.”

We expect more cases like these as the federal and state governments coordinate their efforts and continue their intense scrutiny on the substance use disorder treatment industry. Those within the industry who seek advice on responding to criminal charges or investigations should contact Scott Tenley at stenley@mrllp.com and Kelly Hagemann at khagemann@mrllp.com.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

Law firms are dynamic and ever-changing, as is the marketplace for legal services. That being said, in my capacity as the Los Angeles Office Managing Partner at Michelman & Robinson, LLP, I am hyper aware of shifting behaviors and technological advancements that move the needle relative to the business and practice of law.

With 2022 fast approaching, I have identified five trends emerging within the legal industry that will shape law firm operations, recruitment and the client experience in the new year. The good news is that M&R has been well ahead of the curve when it comes to all of them, allowing the firm to differentiate itself among its peers, Big Law included, here in L.A. and throughout the country.

1. Talent Acquisition

Law firms are only as good as the lawyers and staff within their ranks. To paraphrase Jack Welch, former Chairman and CEO of General Electric: a company’s assets go up in the elevator in the morning and ride down at night. This means that attracting and retaining the best attorneys-from first-year associates up through the partner level-is a must for premier firms like M&R. However, by virtue of a challenging labor market, talent acquisition across virtually all practice areas is more difficult now than any time in recent memory.

No surprise, then, that the adoption of innovative hiring and retention strategies tops the list of emerging trends going into 2022. M&R has already made a splash in this category with its recent headline-grabbing announcement regarding associate compensation. Given our mission to have associates view us not as just an arbitrary place to practice law, but as a firm where careers are built and passions realized, we have significantly adjusted our compensation scale upward, making M&R associates among the highest paid in the legal industry beginning in 2022.

Our efforts in terms of talent acquisition do not end there. M&R is also planning to launch a student debt refinancing program and a first-time mortgage initiative for associates. All of this is in addition to the ordinary perks of working at M&R, which places an immense emphasis on culture, diversity, inclusion, professional development, advancement and attorney branding.

Non-lawyer recruitment at the executive level, which is becoming more commonplace in law firms big and small, also falls under the banner of talent acquisition. M&R struck early in this regard as well. For years, the firm has had a robust C-suite in place, which now includes a Chief Operating Officer, Chief Financial Officer, Chief Advancement Officer (charged with the development of the firm’s lawyers and professional staff) and Chief Innovation and Product Office (tasked with developing new ways to deliver superior outcomes for M&R’s client and expanding our already considerable innovation competence). Our executive team frees up our legal professionals to do what they do best-practice law.

2. Elevation of the Client Experience

Client service should always be the center of a lawyer’s professional universe, yet the client experience is not always prioritized in our profession. This is beginning to change and will likely continue to do so in 2022, with the marketplace for legal services becoming increasingly competitive. In response, law firms have looked to enhance the client experience by introducing alternative fee arrangements and value-added services, among other things.

At M&R, client service excellence and client inclusion have been our defining principles since we opened the doors in 1999. We view our work on behalf of clients as a collaborative process, and always work together with them to develop strategies directed to their specific needs and objectives. In doing so, we make it a point to stand out as thought leaders in our clients’ industries and keep them involved throughout any given matter, which is indicative of the firm’s focus on the client experience.

In addition to this level of collaboration (and as addressed below), we have committed to leveraging technology to enhance the way in which we are able to represent clients. This begins with industry leading communication technologies that allow us to accommodate our clients’ chosen platforms and facilitate more convenient and seamless client interactions, but also extends to process reengineering and new product development.

3. Digital and Technological Engagement

Technological trends are always a focus across industries, the legal space included. And within the law firm world, and certainly at M&R, there is an ongoing shift towards even more digital engagement, be it with clients, colleagues, opposing counsel or the courts.

COVID-19 and the stay-at-home restrictions imposed as a result forced us all to adopt video conferencing as a way of life. For attorneys, remote hearings, depositions and meetings with clients and co-workers have become commonplace. What we have learned as an industry-and at M&R more particularly-is that this ability to harness Zoom and similar tech as a means of communications has created efficiencies in the practice of law that will certainly outlive the pandemic. Consequently, we can expect to see advancements in digital interfaces made available to legal professionals and the public by courts and other governmental agencies.

Technological improvements, including improved AI, that enable improved automation of document review and discovery, legal research, litigation support and the “mining” of the vast amount of data we generate are well underway at M&R, and there are more resources on the horizon too. These advances will ultimately serve to optimize law firm operations, reduce costs and mitigate risk, and we as a firm remain committed to availing ourselves of best-in-class tech as it comes online and is proven secure and effective.

4. Optimizing the Legal Spend

As legal fees rise, GCs across the country are being asked to reduce costs. Yet this is a real challenge, especially with escalating associate salaries, not to mention the anticipated uptick in both litigation and corporate transactions coming out of the pandemic.

Given the current state of law firm economics and the surge in demand for legal services, those in charge of corporate legal departments are beginning to reframe their fiscal mandates. As we turn the page on 2021, GCs are increasingly focused on optimizing the legal spend and viewing their lawyers and law firms as assets to be leveraged.

To get there, a rising tide of GCs are seeking out legal service providers, like those at M&R, who possess specific- even niche-industry and subject matter expertise and who can provide next-level work product. The benefits of engaging such counsel are many. Attorneys that fit the bill are able to easily identify not just legal concerns, but broader business issues as well, which means that dollars spent on legal can actually benefit bottom-line corporate objectives.

5. Diversity & Inclusion

The most sought-after and admired law firms will continue to emphasize their collective commitment to a diverse and inclusive workforce in 2022 and beyond. At M&R, diversity and inclusion is a cornerstone of our culture, operations and recruitment efforts.

The firm prides itself on fostering an inclusive environment where everyone has a voice, no matter their background, culture, ethnicity, orientation or position. This encourages healthy internal debate and innovative, strategic thinking that inures to the benefit of our client base, which itself is as diverse as the firm.

While diversity and inclusion are trending topics across industries, at M&R, they are core values. In fact, for years our Diversity & Inclusion (DI) Committee has met bi-monthly to discuss and promote these issues-ones we view as being as important as ever before.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

Assembly Bill 1511 was recently enacted in California. The omnibus bill, which is a consolidation of multiple legislative efforts, amends, among other things, certain provisions of the California Insurance Code relating to (1) notices of renewal or nonrenewal concerning residential property insurance policies, (2) insurer investments, (3) claims against insurers, (4) the Insurance Commissioner’s authority in enjoining persons who violate the Insurance Code, (5) the Insurance Adjuster Act, and (5) the State Compensation Insurance Fund.

By way of this alert, Michelman & Robinson, LLP provides an overview of the law that goes into effect on January 1, 2022.

Offers of Renewal and Notices of Non-Renewal

The bill amends Section 678 of the Insurance Code as it relates to notices of renewal and nonrenewal. The provision now states that on and after July 1, 2022, current mailing requirements and response time periods apply to timely offers of renewal or notices of nonrenewal of residential property insurance. Those requirements oblige insurers to mail offers of renewal or notices of nonrenewal at least 45 days before a policy is set to expire but extends this period to 75 days for policies expiring on or after July 1, 2020. The amendment serves to lock in these mailing requirements-which also include specified extensions for mailing to recipients in California, outside of California but within the U.S., and outside the country-on and after July 1, 2022. Of note, the bill applies the current mailing and notice requirements to workers compensation policies in addition to residential property insurance.

Insurer Investments

Pursuant to the bill, limitations are increased through January 1, 2027, on domestic incorporated insurers making discretionary investments, including the purchase of, or loans upon, properties and securities.

As amended, the law now provides that investments under Section 1210 of the Insurance Code shall not exceed, in the aggregate, the lesser of either: (1) 5% of the insurer’s admitted assets or (2) 50% of the excess of admitted assets over the sum of capital paid up, liabilities, and the surplus required by Section 700.02 of the Insurance Code (determined by the insurer’s last preceding annual statement of conditions and affairs).

Insurance Adjuster Act

The bill also amends portions of the Insurance Adjuster Act by adding two new parties that are to be exempt from surety bond filing requirements: (1) licensed insurance adjusters, or an employee of a licensee who adjusts claims under the direction of a licensee qualified as a manager and who has filed a surety bond or certificate of insurance, and (2) licensed insurance adjuster, employees of a licensee, or a qualified manager who adjusts claims for an association, organization, partnership, limited liability company, or corporation that has filed a surety bond or certificate of insurance.

Furthermore, the bill specifies that a surety bond or certificate of insurance must provide the names of all licensed insurance adjusters, employees, and qualified managers who perform duties thereunder. A relevant form shall be provided by the Insurance Commissioner and any changes must be made within 30 days. If the requisite names are not provided, the licensure shall be immediately suspended.

State Compensation Insurance Fund

AB 1511 extends the investment authorization that the board of directors of the State Compensation Insurance Fund has to invest until January 1, 2027. The Insurance Fund may also make discretionary investments in properties and securities and invest in money market mutual funds until that same date.

Updated Fraud Warning

The bill requires that the fraud warning included on certain forms for applications of liability insurance policies and changes to existing policies be updated. According to the amendment, the applicable statement must read: “Any person who knowingly presents false or fraudulent information to obtain or amend insurance coverage or to make a claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison.” This language must be preceded by the following (or similar) verbiage: “For your protection California law requires the following to appear on this form.”

We understand that the American Property Casualty Insurance Association has received clarification from the Department of Insurance regarding the updated fraud warning requirement. Please let us know if you are interested in the details the Department has provided.

Replacement Value

Finally, AB 1511 amends Section 10103.7 of the Insurance Code relating to replacement values. Old law required insurers to pay replacement value of structures and contents, even if an insured did not actually replace anything. The law as amended continues to require insurers to pay replacement value, but removed the term “contents” from the statute. That being said, the amendment still requires insurers to offer payment under contents coverage for personal property not less than 30% of the policy limit applicable to the covered structure.

Conclusion

Without question, AB 1511 is far reaching and touches a myriad of provisions contained in the Insurance Code. Should you have any questions regarding the changes that take effect in January 2022, do not hesitate to contact David Hauge at dhauge@mrllp.com or Sam Licker at slicker@mrllp.com. Both may be reached by phone at 310.299.5500.

This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.

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