Legal News for Weds 6/12 - Paul Weiss Aggressively Recruits, GETS Tech in Power Grids, Musk Withdraws Lawsuit Against OpenAI, Adobe Responds to AI Fears and J&J Settles Talc

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This Day in Legal History: Loving v. Virginia

On June 12, 1967, the United States Supreme Court issued a landmark decision in the case of Loving v. Virginia, striking down state laws prohibiting interracial marriage. Richard Loving, a white man, and Mildred Jeter, a Black woman, were married in Washington, D.C., in 1958 but were arrested upon their return to Virginia for violating the state's anti-miscegenation laws. The Lovings were convicted and sentenced to a year in prison, with the sentence suspended on the condition that they leave Virginia and not return together for 25 years.

Challenging their conviction, the Lovings argued that Virginia's laws violated the Equal Protection and Due Process Clauses of the Fourteenth Amendment. The Supreme Court, in a unanimous decision authored by Chief Justice Earl Warren, agreed with the Lovings. The Court held that Virginia's anti-miscegenation statutes were rooted in racial discrimination and served no legitimate purpose other than to maintain racial segregation. This decision effectively invalidated similar laws in 15 other states, affirming that marriage is a basic civil right that cannot be restricted by racial classifications. The Loving v. Virginia decision was a significant step forward in the civil rights movement, reinforcing the principle that all individuals are entitled to equal protection under the law.

Paul Weiss has been aggressively recruiting top-tier mergers and acquisitions and private equity partners, hiring over 20 from prominent firms such as Kirkland & Ellis and Latham & Watkins. This hiring spree, focused mainly in London and New York, reflects a broader trend of escalating compensation for elite lawyers, with some earning over $20 million annually. To fund these high-profile hires, Paul Weiss revamped its partner pay system and adopted a "black box" approach, where pay details are kept confidential among partners. The firm also introduced a new tier of non-equity partners to retain senior attorneys without sharing profits.

This strategy mirrors moves by other top firms like Simpson Thacher & Bartlett and Davis Polk & Wardwell, which have adjusted their compensation structures to remain competitive. Paul Weiss’s London office has notably expanded, recruiting high-profile partners from Kirkland to build a comprehensive practice there. The firm’s longstanding relationship with Apollo Global Management continues to bolster its M&A and private equity profile. Despite lagging behind top deal advisors like Kirkland & Ellis and Wachtell Lipton Rosen & Katz, Paul Weiss’s aggressive hiring positions it well for future market share gains.

The firm’s recruitment efforts underscore the importance of attracting top legal talent to handle complex and lucrative deals, reflecting a fiercely competitive legal market.

Paul Weiss Hiring Binge Shows Big Law’s Dealmaker Recruiting War

Power grid technologies (GETs) have gained traction recently as a way to integrate more renewable energy and meet increasing power demands without building new transmission lines. Historically, US electric utilities preferred constructing new lines because they offer guaranteed returns and are seen as less risky, despite the high consumer costs and long timelines associated with them. However, grid congestion in 2022 raised consumer bills by nearly $21 billion, pushing utilities to consider GETs. These technologies optimize existing infrastructure, offering significant cost savings and increased grid capacity.

The Federal Energy Regulatory Commission's new rule requires regional grid planners to consider using GETs. Additionally, a White House meeting led to a federal-state initiative involving 21 states to upgrade 100,000 miles of transmission lines in five years. Studies indicate that implementing GETs could save billions annually and facilitate the connection of more clean energy projects.

Despite their benefits, GETs face challenges due to the traditional utility business model that favors large capital investments. Some states like Minnesota and Virginia are now mandating GETs in resource planning and offering incentives. Vermont Electric Power Co. and AES Corp. are examples of utilities testing GETs, such as dynamic line ratings and valve technology, to improve efficiency and reliability. As utilities and technology providers collaborate more, the industry aims to reduce the need for new transmission lines and overcome the associated regulatory and logistical hurdles.

Grid Upgrades Gain Favor to Meet Power Demands of AI, Clean Tech

On June 11, 2024, Elon Musk moved to dismiss his lawsuit against OpenAI and its CEO Sam Altman. The lawsuit, filed in February, accused OpenAI of deviating from its original mission to develop artificial intelligence for the benefit of humanity. Musk's attorneys did not provide a reason for the dismissal, which was filed in San Francisco Superior Court. The dismissal was without prejudice, allowing Musk the option to refile later.

Musk co-founded OpenAI but has since expressed dissatisfaction with its direction, particularly its focus on profitability following substantial investments from Microsoft. The lawsuit sought to compel OpenAI to release its research and technology to the public and prevent its use for financial gain.

OpenAI countered that Musk's claims were baseless and motivated by his desire to compete with OpenAI through his own AI venture, xAI, which recently raised $6 billion in funding. The court was scheduled to hear OpenAI's motion to dismiss the case the day after Musk's withdrawal. Neither OpenAI nor Musk's legal representatives commented on the latest development.

Elon Musk withdraws lawsuit against OpenAI | Reuters

Adobe faced significant backlash over updates to its terms of use, which users feared allowed the company to seize intellectual property and use data to train AI models. The controversy highlighted the need for clear communication of legal terms, especially in the context of evolving technologies like generative AI. In response, Adobe pledged to revise its terms, explicitly stating it won’t train AI models on cloud content, with new terms set to be issued on June 18.

The uproar began after Adobe’s February update, which included provisions for automated and manual review of user content to screen for illegal material. Users, notified in May, expressed concerns on social media, fearing their confidential content could be exploited. Adobe's general counsel, Dana Rao, emphasized that the language had long been part of Adobe's agreements and was essential for practical tasks like uploading content to the cloud.

Industry experts noted that such terms are common among cloud service providers but acknowledged the heightened sensitivity among creatives towards potential misuse of their work for AI. Adobe's commitment to clearer, user-friendly legal terms aims to rebuild trust, recognizing the unique and personal relationship users have with its products. The incident underscores the importance of transparent communication and the need for companies to preemptively address user concerns in the AI era.

Adobe Responds to AI Fears With Plans For Updated Legal Terms

Johnson & Johnson has agreed to a $700 million settlement with 42 U.S. states and Washington, D.C., resolving an investigation into the marketing of its talc-based products, which were allegedly linked to cancer. The settlement, announced on June 11, 2024, addresses accusations that J&J misled consumers about the safety of its talc products. While J&J did not admit any wrongdoing, it continues to assert that its products are safe and asbestos-free.

This settlement, led by Florida, North Carolina, and Texas, marks a significant step in consumer product safety, according to Florida Attorney General Ashley Moody. Despite the settlement, J&J still faces tens of thousands of lawsuits related to its talc products, primarily from women with ovarian cancer and some with mesothelioma. As of March 31, approximately 61,490 individuals were suing the company.

J&J ceased the global sale of talc-based baby powder last year, opting for corn starch instead. The company has made several attempts to resolve the litigation, including two failed efforts to use bankruptcy to manage its talc liabilities. On May 1, J&J proposed a $6.48 billion settlement to resolve most of the litigation through a third bankruptcy filing and has allocated an $11 billion reserve for talc liabilities. Erik Haas, J&J's worldwide vice president of litigation, stated that the company is pursuing various strategies to achieve a comprehensive resolution of the litigation.

Johnson & Johnson reaches $700 million talc settlement with US states | Reuters

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