Minimum Competence - Daily Legal News Podcast
Minimum Competence
Tues 6/27 - KPMG and Lewis Brisbois Cuts, Rite Aid Also Cuts, SCOTUS Rejects Gerrymandering Appeal and Inventor Concerned about Judicial Competence

Tues 6/27 - KPMG and Lewis Brisbois Cuts, Rite Aid Also Cuts, SCOTUS Rejects Gerrymandering Appeal and Inventor Concerned about Judicial Competence

KPMG cuts, LA severs ties with Lewis Brisbois, Rite Aid cuts ties with connected firms, SCOTUS rejects an appeal of a Louisiana gerrymander map and an inventor concerned about judicial competence.

On this day, June 27th, in legal history, the Federal Housing Administration came into being. 

The Federal Housing Administration (FHA) was established in 1934 as part of President Franklin D. Roosevelt's New Deal program during the Great Depression. On June 27, 1934, the National Housing Act was passed which functionally created the FHA. The primary goal of the FHA was to stabilize the housing market and increase homeownership opportunities for Americans. It did so by providing mortgage insurance to lenders, enabling them to offer loans with lower down payments and longer repayment terms if those loans complied with certain underwriting conditions.

The FHA played a significant role in expanding homeownership, particularly for low-income and first-time homebuyers who were previously unable to secure traditional mortgages. It introduced standardized underwriting guidelines, making it easier for lenders to assess borrower creditworthiness. Additionally, the FHA established regulations for home construction and safety standards to improve housing conditions.

During its early years, the FHA primarily facilitated the construction of single-family homes. However, after World War II, it expanded its programs to include multi-family housing, aiding the construction of rental properties and helping address housing shortages.

Over time, the FHA's role evolved, and it became a vital institution in the mortgage market, ensuring the availability of affordable home loans. However, it faced criticism for some of its practices, including redlining, a discriminatory practice that disproportionately affected minority communities by denying them access to mortgage loans.

Despite its shortcomings, the FHA continues to operate today as part of the U.S. Department of Housing and Urban Development (HUD), supporting affordable housing initiatives and promoting access to mortgage financing for a wide range of borrowers.

KPMG LLP, one of the Big Four accounting firms, is planning to lay off nearly 5% of its US workforce, amounting to approximately 2,000 positions, citing challenging economic conditions and low turnover rates. This marks the second round of layoffs for the firm in 2023 and deviates from its earlier strategy of offering incentives to retain employees during the "Great Resignation" trend. The job cuts are expected to be completed by late summer, and affected employees will receive severance packages and access to career services and healthcare benefits. KPMG's decision aligns with similar actions taken by competitors like Deloitte, Ernst & Young, and Grant Thornton, who have also reduced their consulting businesses due to declining demand. Despite the layoffs, KPMG reported a 14% increase in revenue for its US affiliate in the previous year and expressed optimism about future growth opportunities. The firm's leaders noted a significant disparity between workforce size and the resources required to deliver services, citing economic headwinds and low attrition rates as contributing factors. While staff in tax and audit practices received immediate notifications, professionals in the advisory business and other areas were told they would have to wait until later in the summer to learn their fate. Unlike its counterparts, PwC has not announced any layoffs driven by market conditions but instead informed its staff to expect bonus pay and merit raises, with increased in-office presence.

KPMG Cutting US Workforce 5% in Second Round of 2023 Layoffs (1)

The County of Los Angeles has severed ties with law firm Lewis Brisbois Bisgaard & Smith following the release of racist, sexist, and antisemitic emails by two former senior partners. The county will no longer assign new matters to the firm and will review existing cases to determine if they should be transferred to other outside lawyers on a case-by-case basis. County counsel Dawyn Harrison emphasized the importance of promoting inclusion, diversity, equity, and anti-racism in law firms contracted by the county. The LA County counsel's office assigns cases to contract law firms for various government departments and has an apportioned budget of around $186 million for the current fiscal year. Lewis Brisbois has represented clients such as the LA County's Metropolitan Transportation Authority, Sheriff's Department, and Board of Supervisors. The firm is currently in discussions with the county but declined to provide further comment. This development follows the departure of leaders from Lewis Brisbois' labor and employment group, who left to launch a competing firm and subsequently prompted the release of offensive emails. Lewis Brisbois, known for its work in insurance defense, has undergone leadership changes and is now led by managing partner Gregory Katz.

LA County Cuts Ties With Lewis Brisbois After Racist Emails (1)

Rite Aid, the drugstore chain burdened by a $2.9 billion debt, has ended its relationships with two law firms, Bradley Arant Boult Cummings and Littler Mendelson, due to personal connections between their partners and Rite Aid's former and current senior executives. The decision was made to ensure that "related persons" do not have a significant interest in the company's legal matters. Rite Aid cited the presence of the sister of its former chief legal officer at Bradley, which represented the company in opioid-related litigation, and a Littler partner who is the brother of Rite Aid's chief financial officer. The company did not disclose the names of the lawyers involved. Rite Aid recently appointed Christin Bassett as its acting legal chief following the departure of its former chief legal officer, Paul Gilbert. Thomas Sabatino Jr., previously the top lawyer at Tenneco Inc., will succeed Gilbert as the legal group leader. Rite Aid is currently dealing with various legal issues, including opioid litigation and a growing debt load. Bondholders have engaged Paul, Weiss, Rifkind, Wharton & Garrison as they prepare for discussions on restructuring the company's debt.

Rite Aid Cuts Loose Law Firms With Personal Ties to Executives

The U.S. Supreme Court has dismissed a Republican appeal to defend a Louisiana electoral map that was challenged as discriminatory. The map, drawn by the Republican-led state legislature, was accused of unlawfully discriminating based on race. A federal judge had ordered the creation of two congressional districts where Black voters would be the majority, potentially benefiting Democratic chances in the upcoming elections. The Supreme Court's dismissal allows the case to proceed before the 5th U.S. Circuit Court of Appeals in New Orleans for review before the 2024 congressional elections in Louisiana. Black voters and civil rights groups had sued, claiming that the map disenfranchised and discriminated against Black Louisianans by packing them into one district and diluting their voting power in others. The ruling follows a similar decision in an Alabama case, where the Supreme Court found that the Republican-drawn map violated the Voting Rights Act by diminishing the voting power of Black Alabamians.

US Supreme Court tosses race-based dispute over Louisiana electoral map | Reuters

The U.S. Supreme Court has rejected an inventor's bid to challenge a patent ruling based on the grounds that one of the judges involved is facing a competency probe. Inventor Franz Wakefield argued that the investigation into Judge Pauline Newman of the U.S. Court of Appeals for the Federal Circuit raised concerns about due process and warranted a new hearing. However, the Supreme Court denied the petition without providing a written opinion. Wakefield had sued several tech companies for patent infringement, but the patent was invalidated in 2021 by a Delaware federal court and affirmed by a three-judge panel at the Federal Circuit that included Judge Newman. Wakefield claimed that the presence of a judge with a mental disability on the panel undermined the principle of a fair and impartial hearing. Judge Newman, who is 96 years old, has denied the claims and filed a lawsuit to halt the competency probe.

US Supreme Court won't reconsider ruling by judge facing competency probe | Reuters

In this week’s column, I lay out and compare some tax rates in the United States and Norway, pointing out that the top federal tax bracket in the US for 2023 is 37%, while in Norway, it reaches 55.8% – but the top US rate in 1944 was a staggering 94%, applied to income over $200,000 (equivalent to $3.45 million today). I acknowledge that advocating for such a high rate would be difficult. Instead, I propose a compromise: maintaining the current rate structure but adding a 100% tax rate for individuals earning over $1 billion.

The proposed tax would apply to both income and capital gains, without any loopholes or exceptions. At the outset I acknowledge the complexity of implementing such a tax, given the intricacies of the US tax code, but I’d argue that the lack of proper regulation ensuring billionaires pay their fair share is a result of political unwillingness rather than administrative obstacles.

There are a limited number of billionaires who earn over $1 billion per year in income, it is an elite group, and taxing just this elite group would generate relatively modest revenue (that is, approximately $6 billion per year). However, there are massive unrealized gains held by billionaires, which amount to around $2.7 trillion in the US. I thus suggest implementing a mark-to-market tax, requiring billionaires to recognize gains and losses on their investments at the end of each tax year.

By applying a mark-to-market tax rate of 100% on gains and income above $1 billion, I argue that it would prevent the further growth of billionaires' wealth and could generate significant revenue. For example, if the year ended today, it could raise around $335 billion from the top billionaires alone. 

I conclude by highlighting the ease of administering such a targeted tax due to the relatively small number of billionaires in the US (724). That said, the main obstacle to implementing a 100% tax rate is not administrative feasibility but rather the political challenges and resistance from a nation that aspires to wealth. 

It’s Time to Slap America’s Billionaires With a 100% Tax Bracket

Minimum Competence - Daily Legal News Podcast
Minimum Competence
The idea is that this podcast can accompany you on your commute home and will render you minimally competent on the major legal news stories of the day. The transcript is available in the form of a newsletter at