Tuesday, April 21, 2015

Sony's Hacked Emails a Treasure Trove for Attorney-Client Relations

, The Am Law Daily

Internal emails hacked from Sony Pictures Entertainment (SPE) late last year have been released in database form by WikiLeaks. The document dump reveals frank discussions between the company’s in-house lawyers and outside counsel on everything from legal fees and conflict waivers to pitches for business.

The documents were stolen late last year by hackers that the U.S. government has linked to North Korea, but were not readily searchable online at the time. WikiLeaks—the hacktivist collective that made its name with the disclosure of 92,000 classified U.S. military documents in 2010—has now consolidated those files into a central and searchable database.

“This archive shows the inner workings of an influential multinational corporation,” said a statement by WikiLeaks editor-in-chief Julian Assange, who for the past three years has been confined to the Ecuadorean embassy in London. “It is newsworthy and at the center of a geopolitical conflict. It belongs in the public domain. WikiLeaks will ensure it stays there.”

Not surprisingly, Sony, which in December hired Boies, Schiller & Flexner to push back against media companies across the country and around the world that published details extracted from the massive cybersecurity breach, has a different take.

“The cyberattack on Sony Pictures was a malicious criminal act, and we strongly condemn the indexing of stolen employee and other private and privileged information on WikiLeaks,” said a statement by a Sony spokesman. “The attackers used the dissemination of stolen information to try to harm SPE and its employees, and now WikiLeaks regrettably is assisting them in that effort. We vehemently disagree with WikiLeaks’ assertion that this material belongs in the public domain and will continue to fight for the safety, security and privacy of our company and its more than 6,000 employees.”

In a letter sent to multiple news outlets, including The American Lawyer, Boies Schiller wrote, "Despite its purported committment to free speech, WikiLeak's conduct rewards a totalitarian regime seeking to silence dissident speech, and imposes disincentives on entities such as SPE who depend on trade secrets, confidential information and protection of intellectual property to exercise their First Amendment rights every day.” (The alleged North Korea connection, as noted earlier this year by sibling publication Corporate Counsel, remains in dispute.)

Sony has also retained Wilmer Cutler Pickering Hale and Dorr to handle shareholder class actions filed against the company in the wake of last year’s cyberattack, which some security firms skeptical of the North Korea narrative have publicly pinned on corporate insiders or nationals from other countries.

The Am Law Daily combed through thousands of emails released by WikiLeaks covering the period between late 2013 and late 2014 to glean Sony’s interactions with its outside lawyers and find out which Am Law 100 and Global 100 firms have been getting work from one of the world’s largest media companies. The emails show which firms were considered for certain assignments, who they beat out for the work and how outside lawyers go about seeking work from their in-house counterparts.

Those questions are a central focus of The American Lawyer’s mission: the business of law. Details about Sony’s internal legal machinations have already been made public. Corporate Counsel reported in December on SPE general counsel Leah Weil’s thoughts about the company’s email retention policy, and The New York Post reported Friday on a $1 million contract by a Sony subsidiary to a high-profile Hollywood lawyer from a non-Am Law 100 firm.

The Am Law Daily reached out to SPE’s Weil, Sony general counsel Mark Khalil and his predecessor Nicole Seligman—she was the company’s top in-house lawyer until her promotion to president last year—for additional comment on their cybersecurity efforts and decisions to retain certain outside law firms and set aside the entreaties of others.

“The information you are asking about was stolen from Sony and we decline comment,” a Sony spokesman wrote in response.

Below is a snapshot of some of the 30,000 Sony emails released by WikiLeaks covering 15 different firms, which are listed alphabetically. All of the firms mentioned either declined to comment or did not respond to requests for comment.

Boies, Schiller & Flexner
Boies Schiller invited Sony lawyers to a lunch last year during which cybersecurity expert Richard Clarke discussed threats facing U.S. businesses. An email exchange indicates that the Sony lawyers did not attend the event, but a Boies Schiller partner suggested in several emails that the firm set up a separate meeting with company executives.

Bryan Cave
In November 2013, a lawyer in Bryan Cave’s Santa Monica office sent an email to its top in-house lawyers offering up his firm’s services. “We would love to represent you,” wrote the Bryan Cave lawyer, a former member of SPE's in-house legal staff, who was quickly told that Sony already had legal counsel in the employment issue at hand.
The Bryan Cave lawyer touted the expertise of a relatively new labor and employment partner hired by the firm in Los Angeles, one whose personality quirks were discussed in emails between Sony’s top in-house lawyers a few months later in trying to determine whether to hire the firm to advise the company as one of its executives prepared to depart for a competitor.

Cleary Gottlieb Steen & Hamilton
A corporate partner in the firm’s New York office helped SPE’s top executive invest in ephemeral messaging service Snapchat—as noted in recent media reports looking at how Silicon Valley technology deals get done—and the London property market, as well as evaluate rental properties in Martha’s Vineyard, Massachusetts.

Cleary Gottlieb, which advised Sony on its $1.5 billion acquisition of a European joint venture in 2011, also had a role counseling the company last year on its purchase of the U.K.’s CSC Media Group. The firm was one of four chosen to make presentations at Sony’s global legal meeting and also handled broker-dealer issues for the company.

Nonetheless, Sony nixed Cleary Gottlieb's effort to obtain a conflict waiver to advise the Raine Group on a litigation matter. The firm also saw its efforts to advise Sony on some European antitrust issues fall short.

Davis Wright Tremaine
Long known for its First Amendment and media work, Davis Wright’s entertainment transactions chair brought up the rather delicate issue of the firm’s new 2014 billing rates in January 2014, after grabbing dinner with SPE’s legal chief.

The rates put forth by Davis Wright were a 10 percent reduction on up to $750,000 in fees, a 12 percent reduction on fees over that amount and a 15 percent discount on fees in excess of $1.5 million. The fees were to be aggregated across entertainment, employment and litigation for all SPE units, but didn’t include fees subject to alternative billing arrangements. Davis Wright also secured a conflict waiver from Sony last summer to advise Fortress Investment Group.

Despite being the world’s largest firm by attorney head count after a spate of recent mergers, Dentons still has to compete for work like everyone else. When Sony mulled acquiring a London-based broadcaster a year ago, the firm was one of several to potentially compete for the legal work.
Dentons’ ability to offer lower rates was cited in an email exchange as separating the firm from higher-priced competitors such as DLA Piper and British firms Clifford Chance, Freshfields and Olswang. Dentons also demonstrated a willingness to “come up with flexible arrangements, e.g., busted deal discount and potentially some sort of soft cap” on fees, says one Sony legal department email.

Nonetheless, when Dentons solicited a conflict waiver last summer to do some work for another client in Canada, one in-house lawyer noted the request was surprising given “how much work the firm has done/is doing for us lately.”

Another Dentons partner who left the firm to set up her own shop also asked SPE’s general counsel to transfer company files to the new firm, as “even if we are not doing any work for you … no one who is still at Dentons may be familiar with these matters to be of much help.”

Freshfields Bruckhaus Deringer
Sony reached out to the Magic Circle firm in November 2013 to determine whether Freshfields would be in a position to be adverse to Apple, Google, Microsoft and Nokia. Discretion was requested on the conflict check, since Sony would be the client, and Freshfields’ global managing partner promptly responded to the inquiry and informed Sony that the firm did no work for Google.

Freshfields had “limited relationships” with Microsoft and Nokia, and thus would need to get more specifics on the matter at hand, but completely ruled out taking any action against Apple, a firm client. The Freshfields leader did run afoul of SPE’s general counsel when he didn’t make her the point person for a stateside visit with Sony staffers. The London-based legal giant did incur roughly $26,000 in fees in early 2013 to handle a French “pay TV deal” for Sony, according to invoices submitted through the company's legal department.

Gibson, Dunn & Crutcher
It’s not exactly a state secret that outside lawyers often entertain their clients. In one overture, a Gibson Dunn practice leader invited SPE’s general counsel to sit at his table at an Association of Corporate Counsel dinner where Hillary Clinton was to give a talk. The general counsel had to decline, however.

Gibson Dunn did grab a role advising Sony on a $185 million deal with International Game Technology to license the company’s “Wheel of Fortune” and "Jeopardy!” brands for its cross-platform games. The firm and Sheppard, Mullin, Richter & Hampton were also considered to represent the company in a home video class action.

Jenner & Block
The firm’s correspondence with Sony’s legal team goes back to November 2013, when the co-chair of Jenner & Block’s content, media and entertainment practice was chosen as the new general counsel of the Motion Picture Association of America, the trade organization representing most of Hollywood’s major studios.

The New York Times reported earlier this year that fissures have emerged in the relationship between the MPAA and Sony since the cyberattack against the company last year. Some of those tensions were already apparent a year prior when the MPAA’s new general counsel sought a lunch meeting with Sony’s in-house team to discuss improving his organization’s “legal function,” aggravating SPE’s general counsel, who preferred a more private gathering.

“I think it was odd and a bit presumptuous on his part to believe that it was ‘business as usual’ and for him to send a note to ‘the Sony team’ without reaching out to me or you about who might be included in that,” the SPE legal chief wrote to the company’s head of litigation. “He needs to understand that his previous role and his current one are very different.”

Jenner & Block and a litigator who rejoined the firm in 2012 took the lead for the MPAA in January 2014 when the Sherman Oaks, California-based nonprofit worked with Mississippi’s attorney general in arranging a meeting with a battery of top Google executives and their counsel from now-defunct Bingham McCutchen. (The purpose of the meeting, as widely reported elsewhere, was to push anti-piracy policies contained in the scuttled Stop Online Piracy Act of 2012.)

In an email to the MPAA that was then forwarded to in-house lawyers at Sony and other major studios, the lead Jenner & Block partner handling the matter wrote that one of the two Bingham McCutchen lawyers advising Google—a former attorney general of New Hampshire—“sells himself as a fixer with the AGs.”

Jenner & Block’s lead partner working on the matter was deleted from another email thread between the MPAA and in-house lawyers for the big studios detailing the firm’s fees. Jenner & Block incurred about $60,000 in fees in 2013 for its work engaging with state attorneys general, followed by another $30,000 through the first quarter of 2014.

The MPAA’s legal chief, himself a former partner at the firm, said his former colleague representing the trade association had been a “good sport” about trying to keep fees down, but anticipated them rising to up to $40,000 per month as his workload increased. Federal tax filings show that the MPAA paid more than $4.5 million to Jenner & Block in 2013.

Manatt, Phelps & Phillips
In numerous email exchanges, in-house counsel at various Sony subsidiaries consulted each other for their opinion of various outside lawyers and their firms.

In one exchange, a Sony Music in-house lawyer asked his counterparts at SPE about a Manatt litigator recommended by the firm’s entertainment and media litigation co-chair to represent Sony Music when suits were filed by pop star Kesha and music producer Dr. Luke against each other.
The Sony Music lawyer said he was looking for a firm with a blend of litigation and employment expertise. When he suggested Gibson Dunn, his counterpart at SPE agreed, saying one of the Gibson Dunn partners under discussion—the same lawyer who made the Hillary Clinton event invite—was very “hands on” and had handled high-profile cases before.

But Manatt still got its fair share of Sony work. The firm’s entertainment and media practice co-chair took the lead for the company last year on a $200 million film finance deal with Lone Star Funds and Citigroup, one that saw him honored as a leading Hollywood dealmaker by trade publication Variety. (A May 2014 invoice from Manatt for that deal show fees of at least $103,507.)

Emails show that the Manatt partner also invited SPE’s legal chief to the firm’s annual retreat at the La Costa Resort in Carlsbad, California—the invitation was declined—and bought gifts for in-house lawyers at the company. Another Manatt partner, a relative of California’s governor, befriended SPE’s top executive. The Los Angeles-based firm, which has a robust entertainment practice, was successful in obtaining numerous conflict waivers from SPE to advise other companies doing business with it in the movie industry.

Orrick, Herrington & Sutcliffe
When an antitrust complaint was filed against Sony affiliates in the Northern District of California, an Orrick partner sent an email to SPE’s in-house staff offering his services, as well as those of some colleagues at the firm. In response, SPE in-house lawyers discussed the strong relationship between Sony and Orrick, one that had become “quite good” after a rough patch.

SPE’s head of litigation notes that the company “should be able to secure a pretty good discount on fees” from Orrick. The firm was one of many vying for the work. Emails show that Arnold & Porter; Boies Schiller; Manatt; Mayer Brown; Munger, Tolles & Olson; O’Melveny & Myers; Paul Hastings; and Sheppard Mullin were all considered by SPE.

Orrick’s lawyers were called “smart, careful, creative, experienced,” but SPE’s in-house counsel also noted that the firm was sometimes “overly thorough,” which could mean higher fees. In the end, Orrick got the work and succeeded in scuttling an anti-poaching antitrust suit this month, as noted by sibling publication The Recorder.

Paul, Weiss, Rifkind, Wharton & Garrison
The Sony email hack last year revealed that the U.S. Securities and Exchange Commission was investigating the distribution of company films in China. In a January story based on the leaked emails, The Wall Street Journal reported that the SEC was looking into whether bribery laws had been violated when the film “Resident Evil: Afterlife” was distributed in China.

Paul Weiss was hired by Sony to conduct an internal investigation. An emailed invoice, which was sent to Sony’s in-house counsel for approval, shows that the firm charged the company just over $1.6 million for work accrued from November 2013 through January 2014.

Another email exchange made it clear that Sony wasn’t happy with the bill, which was broken into three installments that arrived on the same day, making moot any monthly staffing adjustments. One SPE lawyer wrote that more time was spent on the matter than the company expected.

Pillsbury Winthrop Shaw Pittman
An advance conflict waiver in order to take on an unspecified project was not something that endeared Pillsbury to SPE’s legal chief, who noted in an email that lawyers from the firm “aren’t folks we typically use.” Still, Pillsbury advised Sony on whether or not to do business with certain Russian banks in the aftermath of EU sanctions levied following the crisis in Ukraine.

Reed Smith
When David Cassidy, a former star of “The Partridge Family,” sued Sony in late 2011 seeking profits from reruns of the 1970s sitcom, the company turned to Reed Smith to handle the litigation. In a string of emails with a top Sony executive, a legal department vice president estimated that fees incurred by Reed Smith would hit $400,000 by February 2014.

The Sony official responded that it’s “crazy” for the company to have spent that much on lawyers when it could have just cut Cassidy a check for one-fourth of that amount. The in-house lawyer noted that Cassidy had previously refused to settle for anything less than $1 million. This past January, after arbitration, Cassidy ended up with nearly $158,000.

Sidley Austin
In February 2014, the lead Sidley partner advising Fortress in ongoing litigation with bankrupt hedge fund and film financier Aramid Entertainment over a busted film finance agreement with SPE sought a limited conflict waiver from Sony to serve SPE with a subpoena for certain documents and depositions.

SPE’s head of litigation noted that Fortress and Sidley were expected to conduct “a friendly cross-examination” of a top Sony studio executive and nothing more.

“If there is any chance that Sidley lawyers will need to get hostile against SPE or an SPE employee, then I would ask them if they really would want to run that risk, considering the possible implications on the Sony relationship,” wrote Sony’s legal chief. “Good luck with it!”

Skadden, Arps, Slate, Meagher & Flom
Want tickets to the see the Los Angeles Lakers? Skadden, a firm that advised Sony on the $1.1 billion sale of its former New York headquarters in 2013, offered its friends on the in-house side at Sony their choice from a handful of box seats to Lakers games late last year and earlier this year.

In a different email exchange, the firm suggested rates for handling a real estate deal for SPE’s studios in Culver City, California. A ground lease would cost between $400,000 and $500,000; a sublease $300,000 to $400,000; and construction contracts ranged from $50,000 to $100,000. Total tab: $750,000 to $1 million in fees for its client. (The firm was ultimately tapped for the project.)
Skadden’s real estate lawyers in New York, who handled the 2013 skyscraper sale for Sony, were praised for their previous work for the company, even though they “didn’t have the time to even negotiate a rate or caps.” SPE’s legal chief felt that if “$ is less of an issue,” hiring Skadden over another Los Angeles-area firm, Cox, Castle & Nicholson, made sense in order to get a deal done quickly.

Read more: http://www.americanlawyer.com/id=1202723948968/Sonys-Hacked-Emails-a-Treasure-Trove-for-AttorneyClient-Relations#ixzz3XxTjjmiQ

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