Legal Briefing: The Lehman Repo 105 Lawsuits Begin


A daily look at legal news and the business of law:

Civil Suit Claims $1 Million Loss From Misleading Lehman Accounting

When the bankruptcy examiner detailed Lehman Brothers' manipulation of its balance sheet via Repo 105, a short-term financing tactic misleadingly characterized as a sale, civil suits seemed sure to follow.

According to Bloomberg, one has just materialized. Retirement Housing Foundation has sued Lehman and former executives, including ex-CEO Richard Fuld, charging that it lost $1 million on Lehman bonds because the accounting trick materially misrepresented Lehman's financial condition. Assuming the suit survives a motion to dismiss and the case doesn't settle, discovery should prove interesting. Will anything emerge that the bankruptcy examiner's report missed?

Toyota Lawsuits Are Headed to Central California

The first round of legal jockeying is over. The massive Toyota (TM) litigation -- both economic and injury claims from unintended acceleration -- has been assigned to U.S. District Judge James Selna in central California. Selna, an appointee of President George W. Bush, drew high praise from both sides' lawyers. The location was apparently the logical choice, as Toyota has headquarters there, and over a quarter of the cases have been filed there, more than anywhere else.

However, one of the key bits of gamesmanship is not yet over -- the lead plaintiffs' counsel hasn't yet been decided. The attorneys will organize themselves into a steering committee and decide upon roles. Once it becomes clear who they are, some of the first winners in this litigation will be known.

Although Toyota had to be grateful for the lawsuit's location -- it greatly simplifies Toyota's logistical challenges -- bad news came on another front. The New York Times reports that regulators are considering more fines against Toyota and they pointedly noted that but for a statutory cap on fines, the total levied would be in the billions, not millions.

And in the Business of Law...

Above the Law reports that a recent conference on the future of legal education included panelists who trashed the "education" given to law students, calling for change. Some criticisms include: "First- and second-year associates...are worthless," and "graduating 3L [third-year] students are worthless; they're really, really awful." The conference was hosted jointly by Harvard Law School and New York Law School, and the 75 deans in the audience similarly represented a broad swath of legal education. I'll admit that very little I learned in law school, beyond how to "think like a lawyer" and how to stay focused while reading really boring stuff, was directly applicable to firm work. I'm not surprised that clients are starting to balk at paying for on-the-job training of associates at hundreds of dollars an hour.

Willkie Farr incoming associates received disappointing news, reports Above the Law. Instead of starting this autumn as originally promised, they'll be starting in January with only a $20,000 repayable salary advance to cover their bills until then. While ATL acknowledges that many might consider $20,000 for six months of doing nothing a good deal, it notes that many of these would-be attorneys have to cover all the expenses of moving to and living in New York, plus several other considerations that make the offer sound less than generous.