Practicing Law in a Lawless Time

There have been many periods in our nation’s history where serious and legitimate questions were raised about the effectiveness and integrity not only of corporate governance practices, but about the corporate bar itself, such as during the financial crisis.  With power and influence come corresponding responsibility.  At the turn of the 19th into the 20th century, figures like Elihu Root and Louis Brandeis advocated for corporate lawyers to counsel America’s burgeoning large corporations to conduct themselves in a law-abiding manner.  In the wake of the market-shaking frauds associated with the savings and loan crisis in the 1980s and companies like Enron and Worldcom around the turn of this century, the legal profession came under close scrutiny again.  The same was true when it came to light that law firms had helped tobacco and other companies develop approaches to shield the harmful impact of their products from public disclosure.

But this moment is different for a fundamental and disturbing reason.  In prior moments, the assumption was that those charged with enforcing the law in an even-handed manner were committed to doing so in good faith.  The questions in prior moments were whether corporations and their legal advisors were taking advantage of the inevitable inability of regulators to catch every violation or to update regulations rapidly enough to address new innovations in areas like finance that hazarded fraud and financial failure.  That is, it could mostly be taken for granted that the government, regardless of which party was in charge, would in the large main be true to the enacted laws of the nation and apply them in a fair, non- retributive, non-discriminatory way.

That is not so now.  The evidence of that unprecedented reality is voluminous and grows daily. Think for yourself just how extensive the deviations from a traditional respect for the rule of law are and what instances stand out most to you.  But, consider these examples of special pertinence to business lawyers:

• Announcements by elected officials and regulators that they will not enforce duly enacted statutes.
• Admonitions by elected officials that enforcement action should be taken by supposedly independent regulatory agencies and even by criminal prosecutors against specific people and organizations the elected officials do not like.
• Suggestions by elected officials that companies should fire their top executives, followed by government action to demand concessions from those companies.
• Statements by elected officials that regulatory obstacles might be erected, or negative regulatory actions might be taken against companies, followed by government action to demand concessions from those companies.
• Musings by elected officials that they might block a transaction unless the current owners of a specific business sell it to owners who will run it in a manner more pleasing to the elected officials.
• The use of regulatory authority under statutes addressing discrete subjects such as antitrust generally or concentration in a particular industry to extract concessions from companies on issues entirely unrelated to those subjects.
• The advertisement of opportunities to make donations to pet causes of elected officials or to invest or partner with business interests affiliated with the families of elected officials during a period where the elected officials are actively making policies and influencing regulatory actions relevant to those to whom the opportunities are offered.
• The involvement of family members of elected officials as counterparties to transactions or as beneficiaries of economic concessions in order to better assure that government regulators will approve a transaction subject to regulatory approval.
• Selective enforcement of statutes against perceived political opponents while not engaging in enforcement in similar situations against perceived political allies.
• The filing of criminal charges with shaky factual and legal predicates against political enemies grossly disproportionate to the alleged crimes in a manner, and employing a decision-making process, in stark contrast with long-standing practice under administrations of either major political party.
• The granting of pardons and other concessions to businesspeople who make investments in businesses affiliated with family members of elected officials.
• The targeting of proxy advisory firms and threatening their ability to freely provide advice to their institutional investor clients.

And, of course, this troubling and unprecedented conduct:

• The targeting, intimidation and extraction of concessions from law firms for representing clients and causes that those in power disfavor.

This summary is incomplete and, if anything, understates the threat to the rule of law now posed by those most duty-bound to respect it.  But it suffices for present purposes.  This list embeds an assumption.  The rule of law is only what we as Americans think of the rule of law if the law applies equally to everyone in like cases and is not used selectively to target or exempt particular people or causes based on the self-interest and caprice of those currently in power.  Many of history’s worst regimes used show trials that purported to adhere to traditional procedures of due process to punish enemies and terrify their citizens.  That is not because those regimes respected the rule of law; it is because they did not.  They used the law as a façade to legitimize their arbitrary exercise of power.

And the threat right now is not limited to criminal law, to antitrust law, or to labor law.  It also extends to consumer protection laws, environmental laws, human rights law, and laws designed to ensure public integrity and responsible business conduct.  All the laws designed to secure our ability to thrive safely as free citizens of an American republic may now be perversely misused.

It is thus a moment where clients may begin to ask questions like these:  Why should we worry about complying with the law as written when those charged with enforcing it have said they won’t?  If we bring in [insert family member of an elected official] as a co-investor, can we tilt the regulatory process in our direction?  Should we remind the proxy advisory firms that someone associated with our proposed transaction is close to [the administration of an elected official] and that its displeasure with them would grow if they recommended against our deal?  Wouldn’t financing the transaction in part with a stable coin from a company affiliated with an elected official also be helpful in creating the right regulatory context for approval?  Why is an antitrust agency asking us about our commitment to not discriminate against Black people, women, and others who have suffered de jure and de facto legal discrimination, and if we drop that commitment will it secure approval of our deal?  The [pick your favorite environmental statutes] require that we do the following things in siting, designing, constructing, and operating this new facility, but compliance has costs and why shouldn’t we just proceed without doing so because everyone knows that these laws are not being enforced?

And as law firms, questions like these may arise:  We would have taken on this pro bono matter any other time, but if we do it right now, will government power target us for taking on a cause disfavored by [pick your elected official]?  Should we allow our partners to sign on to amicus briefs in their personal capacity given the similar potential for blowback?  Our client is asking us to do something uncomfortable and not consistent with our prior view on the law, but aren’t all of our competitors in the same situation, and if we don’t do it, will we lose business to them?  To what extent can we blind ourselves to concerning conduct by our client — such as what appears to be purposeful inducements to affiliates of key elected officials — designed to secure favorable governmental treatment, but for non-merit reasons, so long as we do not directly involve ourselves in it?  If there is public disclosure of the fact that these affiliates were involved and on what basis, are we comfortable crafting an SEC filing that leaves out the controversial “why” they were involved because that “why” is arguably “immaterial”?

In this year’s David S. Ruder Lecture at the Securities Regulation Institute, the full text of which can be accessed here, I addressed this difficult moment for the corporate and securities bar in a manner intended to help those who do the challenging and important work of providing legal advice to corporations.  The lecture encourages us all to think deeply about questions of this kind for ourselves and provide some directional impetus toward greater collective integrity by our profession at this perilous time.

In doing so, the lecture traces the two competing conceptions of the role of lawyers in society, and argues that the sound one is the most traditional:  The one emphasizing the special duty of lawyers to counsel clients toward full respect for not just the letter, but the obvious spirit, of the law is the sound one.  Lawyers have special privileges that rest on our acceptance of unique responsibilities to the rule of law.  And that is especially true for the corporate lawyers given the reality that the stakes for society and the future of humanity if corporations with vast impact act in a lawless manner are in fact existential.  For that reason, it is important that corporate lawyers and top corporate leaders stand their ground on a basic non-partisan proposition — we are a nation under law and the law should apply to everyone in an equal, non-discriminatory manner.

Toward that basic objective for citizens of a republican democracy, the lecture identifies forensic indicators for lawyers that will help them and their clients recognize when the current moment might be causing a slide into legal, ethical and moral quicksand.  The lecture then discusses the pragmatic and high-minded reasons why business lawyers and their corporate clients are best served by honoring the letter and spirit of the law in this perilous moment, regardless of whether those charged with enforcing the law are doing so with fidelity.

The lecture concludes on a note of optimism and with a belief in confidence in the legal profession.  No human being is perfect.  None of us will always be able to discern what is the right thing to do nor always have the courage to do it.  Certainly not me.

That lack of perfection is also true of the corporate and securities bar.  But the fact that corporate legal advisors are human and prone to lapses does not mean that lapses are the rule.  They are the rare exception we should not allow to become more common, by the atrophy that will come from a failure to exercise our moral muscle in this moment.

And that is the more assuring reality I wish to stress:  Corporate and securities lawyers counsel clients on a daily basis to comply with the law, to avoid edgy law-skirting tactics, and listen to the better angels of their nature.  The unfair conflict transactions that don’t happen; the initial, materially incomplete or misleading disclosure drafts that get corrected to include the material facts in proper context; and the product, workplace, or environmental safety shortcuts that are not taken don’t end up causing harm and thus don’t end up in the newspapers.  The corporate bar, both outside and within corporations, helps clients pursue profitable strategies by law-abiding, ethical means and, as important, helps clients shape corporate cultures that embed expectations to respect stakeholders like consumers, communities of operations, and workers, and the laws of society.

So, during this unprecedented, and hopefully fleeting moment, corporate legal advisors are acting as important safeguards for the rule of law.  And the facts that are uniquely difficult and unsavory pressures resulting from official departures from the principled adherence to the rule of law do not mean that the corporate and securities bar supports those departures nor that it is lightly bending to those pressures.

But because those pressures are not just unprecedented, but strong, it is critical that our profession acknowledge them openly and resolve to live up to our best traditions together.  If we all do our best and behave in a law-respecting way in our work, it is more likely that corporate clients themselves will be under less pressure to stray from accepted legal and ethical norms.  By collectively doing the right thing, we can perform a genuine public service and do our part to continue the tradition that corporations compete within the bounds of society’s rules and thus that their pursuit of profit increases the welfare of our society as a whole.  Real economic growth occurs through innovation that creates better products and services, not through socially harmful externalities or concessions granted from elected officials and regulators for improper reasons, such as often happens in nations like Russia.

We are not Russia. We are way better than that.  We are way stronger than that.  We are the United States of America. A nation that competes on quality.  A nation whose best attribute is a creedal commitment to the principled rule of law.  A commitment that recognizes and celebrates the equality of each person before the law and where no person, regardless of office, is above the law.

Corporations have been made citizens of this nation under law on the explicit condition that they only do lawful business by lawful means.  The law remains the law.  No momentary officeholders can take that away from us.  Because the law remains the law, so, therefore, does the duty of corporations to obey it.

Those of us privileged to be their lawyers are uniquely positioned to make sure that American corporations honor their charters to society.  Those of us privileged to be their lawyers are uniquely positioned to help our nation’s best traditions and fundamental premise survive this dangerous moment.

Let’s resolve as siblings at the bar to make this another proud moment for a proud tradition associated with much of what is most admirable about our nation — that of the citizen-lawyer.  Corporate and securities lawyers have less at risk than the many members of our profession who are being counted, at great personal cost, when it most matters.  Let’s honor them, the oaths to the rule of law and our nation that we freely took, the duty we owe to our children, and the call of our consciences.  Let’s try to do our best when our nation most needs our best.