Minimum Competence - Daily Legal News Podcast
Minimum Competence
Thurs 6/22 - Perkins Coie Delays Start Dates, US Needs Global Minimum Tax, NY Ban on Noncompetes Coming, FTC Wants MS Activision Acquisition Paused

Thurs 6/22 - Perkins Coie Delays Start Dates, US Needs Global Minimum Tax, NY Ban on Noncompetes Coming, FTC Wants MS Activision Acquisition Paused

Perkins Coie delaying start dates, the US stands to lose big if it doesn’t enact a global minimum tax, NY moves forward ban on noncompetes, the FTC wants Microsoft Activision acquisition paused.

On this day, June 22nd, in legal history, the Supreme Court handed down their decision in Escobedo v. Illinois, which held that suspects have the right to an attorney when they are questioned by the police.

The decision established that defendants have the right to counsel even before they are formally charged with a crime. The impact of the Escobedo decision was overshadowed by the subsequent Miranda decision two years later. Although later court decisions limited the application of Escobedo, the Supreme Court never directly overruled it.

The case involved Danny Escobedo, who was initially arrested for the murder of his brother-in-law but released after consulting his lawyer. When he was rearrested ten days later, his repeated requests to contact his attorney were denied. Escobedo's lawyer arrived at the police station and requested to see him but was refused permission. The police informed Escobedo that his alleged co-conspirator had confessed and implicated him. Escobedo demanded to confront his co-conspirator and, in that confrontation, made an incriminating statement. Based on this admission, the police obtained a written confession, leading to Escobedo's conviction for murder.

The Supreme Court's decision in Escobedo came shortly after the Massiah v. United States case, which ruled that the right to counsel attaches once an individual has been indicted. In Escobedo, the Court reached a similar result with a 5-4 decision. Justice Arthur Goldberg, writing for the majority, stated that Escobedo's right to counsel did not depend on a formal indictment. The Court overturned Escobedo's conviction, declaring that his right to counsel had been violated. Goldberg laid out several benchmarks for determining when a defendant's Sixth Amendment right to counsel is violated.

Many believed that the Escobedo decision would establish a broad right to counsel whenever a suspect is in police custody. However, two years later, the Supreme Court shifted direction in Miranda v. Arizona. The Miranda decision utilized the Fifth Amendment right against self-incrimination and held that statements obtained during incommunicado interrogation without full warning of constitutional rights were inadmissible. Miranda focused on whether a defendant was in custody or significantly deprived of freedom, rather than the "focus of investigation" test used in Escobedo.

Perkins Coie, a law firm based in Seattle, is postponing the start dates for some of its first-year associates to January 2024, following a trend among law firms facing a slowdown in demand. In a memo from managing partner Bill Malley, the firm explained that the move is a response to challenging market conditions affecting various areas of legal practice. The deferred associates, with the exception of those in the intellectual property practice, will now begin on January 16, 2024. Those joining the intellectual property group will start on September 18, 2023. To assist the deferred associates, Perkins Coie is providing a $15,000 stipend to cover their living expenses. Other law firms, such as Orrick, Herrington & Sutcliffe, Cooley LLP, and Fenwick & West, have also delayed the start dates for their incoming associates due to the sluggish demand for legal services. Some firms have implemented cost-cutting measures, including layoffs of attorneys and staff. The legal industry as a whole is navigating through the challenges posed by reduced dealmaking and a slowdown in the demand for legal work.

Perkins Coie Delays Starts for Some First-Year Associates (1)

A new analysis from the Joint Committee on Taxation suggests that the United States could face significant revenue losses if it does not enact a 15% global minimum tax alongside the rest of the world. 

A global minimum tax is a proposal aimed at imposing a minimum tax rate on corporate income worldwide through international agreement. In October 2021, 136 countries and jurisdictions endorsed a proposal by the Organisation for Economic Co-operation and Development (OECD) for a two-pillar solution to address tax avoidance practices and the digitalization of the global economy. 

The first pillar would redistribute over $125 billion in corporate profits annually for taxation in jurisdictions where the profits were earned, while the second pillar would generate an estimated $150 billion by applying a 15% minimum tax rate to corporate income. Implementation of the global corporate minimum tax requires each country to incorporate the rate and rules into its tax system. The United States, as a party to the agreement, needs to adopt the two-pillar plan and impose a 15% minimum corporate tax that aligns with the OECD model. The recently enacted Inflation Reduction Act of 2022 in the US introduced a 15% alternative minimum corporate tax, which brings the US closer to the OECD tax structure. 

However, further amendments may be required to ensure conformity with the OECD tax rules. If the US corporate minimum tax does not meet the standards of the global corporate minimum tax, Congress would need to pass amendments to the Internal Revenue Code, and bilateral and international tax treaties would also require modifications. Treaties in the US necessitate approval by the Senate and the president.

If the US fails to act while other countries implement the minimum tax in 2025, tax revenue in the US could decline by $122 billion over the next decade. On the other hand, if the US does enact the tax, its tax revenue could still decline by $56.5 billion. These estimates are based on a comparison with a baseline scenario where neither the US nor the rest of the world enacts the minimum tax. The analysis predicts that the US would lose revenue when other countries tax the foreign-source income of controlled foreign corporations and when other countries tax US income. However, depending on how companies respond to the new tax regimes and shift their profits, there are scenarios where the US could gain as much as $224 billion in revenue over the next decade. Conversely, the US could lose up to $174.5 billion if multinational corporations allocate their low-taxed profits to jurisdictions applying domestic minimum top-up taxes. The report emphasizes the level of uncertainty in predicting the outcomes and does not represent a likely outcome. 

The analysis was requested by Senate Finance Committee ranking member Mike Crapo and Ways and Means Committee Chairman Jason Smith, who criticized the Biden administration's handling of the global minimum tax negotiations. The report comes as Republicans remain skeptical of the international agreement signed by nearly 140 countries to establish a minimum tax rate of 15% for multinationals worldwide. In response, the Ways and Means Committee introduced a bill to impose retaliatory taxes on the US income of foreign investors and businesses in countries that impose minimum tax rules on US multinationals.

US Could Lose Billions Under Global Minimum Tax, JCT Report Says

JCT: U.S. Stands to Lose Revenue Under OECD Tax Deal

Legislation that would ban employee noncompete agreements in New York is heading to Governor Kathy Hochul's desk for review. The measure, similar to a recent law enacted in Minnesota, would apply to contracts signed or modified after it becomes effective. Noncompete agreements, which currently cover about one-fifth of the US workforce, have faced criticism from federal and state policymakers. The Federal Trade Commission is in the process of finalizing a nationwide ban on such contracts, and the National Labor Relations Board's general counsel has stated that noncompetes violate federal labor law in most situations. While business groups argue that noncompetes are necessary to protect trade secrets, policymakers and worker rights advocates argue that they are often misused and hinder low-wage workers from seeking better job opportunities. The New York legislation would still allow employment contracts that protect trade secrets and confidential client information, as long as they don't unreasonably restrict competition. The bill has already passed the state Senate and Assembly.

New York Ban on Employee Noncompetes Heads to Hochul’s Desk

The U.S. Federal Trade Commission (FTC) is set to argue in federal court for a preliminary injunction to temporarily block Microsoft's acquisition of Activision Blizzard, the videogame maker. The FTC wants the deal to be put on hold until its in-house court rules on whether the merger would harm competition in the video game industry. The agency is concerned that without intervention, the combined company could alter Activision's operations and give Microsoft access to sensitive business information. The administrative hearing within the FTC is scheduled to begin on August 2. Microsoft has asserted that a temporary block could jeopardize the deal, but courts typically do not consider real-world consequences in their decisions.

FTC to argue Microsoft's deal to buy Activision should be paused | Reuters

A group of Credit Suisse AT1 bondholders has filed a class action lawsuit accusing three former CEOs of the Swiss bank, Thomas Gottstein, Tidjane Thiam, and Brady Dougan, along with other executives, of being responsible for the bank's collapse. The lawsuit, filed in a New York court, alleges that the executives engaged in excessively risky trades to achieve short-term returns and bonuses, disregarding sound risk management and compliance with the law. The collapse of Credit Suisse led to the decision by Switzerland's regulator to render around $18 billion of the bank's Additional Tier 1 (AT1) debt worthless, which sparked numerous lawsuits. The class action suit highlights the loss of trust in the bank and the culture of prioritizing profits and self-dealing over responsible risk management.

Three former Credit Suisse CEOs accused of excessive risk-taking -court filing | Reuters

Minimum Competence - Daily Legal News Podcast
Minimum Competence
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