Appellate Practice: Coping With Financial Crisis Complexities

Sunday, February 1, 2009 - 00:00

Paul D. Clement served as U.S. Solicitor General from June 2005 to June 2008, having previously served for more than four years in the Office of Solicitor General. His earlier government experience included service as Chief Counsel of the U.S. Senate Subcommittee on the Constitution, Federalism and Property Rights. Prior to serving in the Office of Solicitor General, Mr. Clement headed the appellate practice of King & Spalding. He returned to the firm in November 2008. Located in its Washington, DC, office, he heads its national appellate practice group.

Editor: Paul, much of your legal career has involved an in-depth knowledge of constitutional law, starting with your law school experience as Supreme Court editor of the Harvard Law Review. Why was this branch of the law of such interest to you?

Clement: Constitutional law has been fascinating for me because some of the issues it addresses, especially some of the separation of powers issues, go to the very heart of the polity we have and our system of laws. It is an amazing and enduring document that prescribes very specific ways in which the three branches of the federal government interact with each other, the way that the federal and the state governments interact with each other and the way that certain things are put off limits by the bill of rights and some of the other amendments.

The U.S. Supreme Court has drawn my interest from the time I served as Supreme Court editor of the Harvard Law Review because only the Supreme Court can so dramatically affect the legal landscape for the whole nation in one decision. Whatever issue comes before it the Supreme Court will resolve it - once and for all, if it is a constitutional issue, and, unless Congress gets involved, pretty much once and for all if it is a statutory issue.

Editor: In view of your prestigious background, you had a wide choice of firms. Why did you choose to return to King & Spalding?

Clement: First and foremost, King & Spalding was home for me. I had been here before as a partner in the appellate practice group before I went into the Justice Department, a lot of my friends are at the firm and I had a terrific experience both at the firm generally and particularly in the Washington office.

King & Spalding has a tremendous base of strength as a litigation firm. As an appellate lawyer, that's obviously something you're looking for. And, with its strong traditional regional base in the Southeast, the firm has developed strong relationships with some of the nation's largest corporations - something like 50 of the Fortune 100 companies.

Finally, the Washington, DC, office of King & Spalding has both a stellar white collar criminal practice and a strong legislative practice focusing on congressional investigations. In this tougher legal and regulatory environment, a lot of companies are going to face problems where it is essential to have a firm with the ability to handle highly complex matters that manifest themselves in civil or criminal litigation and to deal with Capitol Hill to the extent that some of the problems get addressed up there.

Editor: Do you see the appellate practice group playing an important counseling function?

Clement: Given the complexity of some of the causes of the present crisis, our counseling practice can help some clients steer through these difficult times. I think our real strength is our ability to guide a company or an industry that gets in the sights of both the executive branch and Congress and help it find a path through those problems.

Editor: You have been characterized as an advocate who does meticulous preparation yet argues cases without notes and whose answers to the Justices' questions flow effortlessly and convincingly. Although you have strong personal policy convictions, you have said that your real love is the litigation and the legal issues. Do you see those skills as being particularly important in view of the complex factual and legal issues related to the crisis?

Clement: The complexity of the financial litigation growing out of the current situation makes it absolutely critical that the complicated financial and transactional issues be presented in a way that's readily digestible by judges at all levels.

The present situation can generate very strong initial reactions from people who have lost significant amounts of money. Given the strong emotions involved, clients need counselors who can take a step back and look at the legal principles with the broad perspective that an understanding of the Constitution and statutes provide. It is absolutely essential that the client have an advocate who can provide a dispassionate analysis of events that stir strong passions.

Editor: So that ability to simplify a complex matter and put it in terms judges can relate to without losing any of the content is going to be very important in this new context?

Clement: Yes. I often thought the Solicitor General's office provided a kind of translation service. We dealt with some incredibly complex and detailed federal regulatory regimes and coordinated with people in the federal government familiar with those details, but we then had to explain them in readily understandable terms to Justices who aren't as much concerned with the details of the regulatory regime as with how it interacts with the constitutional principles at stake. They're certainly going to expect the lawyers in front of them to be conversant with the details of the regulatory regimes and 100 percent accurate when they are explaining how that system works, but the Justices' real focus is on the broader principles. In the same way, when you're dealing with some of these underlying transactions that have all of the complexity of the federal regulatory regime it's incumbent on the lawyers involved to be able to explain them in a way that doesn't lose any accuracy but nonetheless is readily accessible. The only way to do that is through substantial preparation and coordination with individuals at the client who are the masters of the details of the particular problem and the circumstances that led to the litigation.

Editor: Surveys indicate that the crisis has triggered public cynicism about large corporations that could lead to an increase in legislation and litigation that can place undue burdens on business. Do you feel that in this atmosphere the U.S. Supreme Court will play a moderating role?

Clement: Yes, but with the caveat that it will depend on the exact issues that come to the Supreme Court and the time at which they get there. I expect there will be a tendency for the Supreme Court to act as something of a counterweight. Part of that is just the institutional role of the Supreme Court as guardians of constitutional principles. They are often expected to take the long view interpreting the text of statutes and ascertaining what they in fact mean, as opposed to what in the heat of the moment somebody would like them to mean. The second thing that's going to reinforce that tendency is the timing of the appellate process, which may allow the Supreme Court to decide these cases in an atmosphere where some of the immediate smoke is cleared and they can look at these things more dispassionately.

Editor: What is the likelihood of preemption of state legislation that burdens the federal system?

Clement: The Court is generally concerned about situations where you end up with multiple state regulators instead of one source of coherent regulation. You saw this, for example, in the Riegel case last year involving medical devices. Eight of the nine justices found preemption. In the right statutory context, this Court can be receptive to arguments that federal law preempts state law. However, it's important to remember that Congress, if it's clear enough, can preempt - or not preempt - state law. So this is a situation where the Supreme Court is a very important player, but an area where it does not have the final word. The way the doctrine of preemption is constructed Congress's intent will ultimately govern.

Editor: Do you expect the Supreme Court to set limits on punitive damage awards?

Clement: The Court is struggling to establish rules that allow reasonable limits on punitive damages awards while at the same time enabling the states to fashion their own rules. When the Supreme Court considers whether punitive damages awards are constitutionally excessive, it generally looks only at cases decided by the state court systems. The State Farm and BMW of North America v. Gore cases really ushered in a regime of constitutional limits on state punitive damage awards. It's going to take a few more cases before the rules of that review are definitively set, so the Supreme Court will continue to be involved. This may include cases arising out of the current financial crisis, because it is likely that in some of these cases jurors may react to the crisis in a way that leads to the kinds of large awards that the Supreme Court could use to continue refining these rules of punitive damages review. That may also be one very real way in which the Supreme Court ultimately acts as a bit of a counterweight.

Editor: Are there other doctrinal areas similar to these which you would feel are more or less in the developmental stage but should be watched closely by the business community?

Clement: Another trend we've seen is that of state governments taking initiatives that address not just state but national problems. California's initiatives to deal with greenhouse gases is an example of a state trying to tackle a national issue, and I think those efforts are going to implicate some constitutional constraints on the states' authority. It's an issue that I believe will ultimately produce a Supreme Court determination.

Editor: Chief Justice Robert's Annual Report on the Judiciary makes a strong plea for increases in judicial compensation. Do you agree?

Clement: I completely agree with the Chief Justice. This is obviously a point he has made repeatedly and he's really picking up where Chief Justice Rehnquist left off. Although this has been a long-term concern for the judiciary, it's really a concern that every member of the bar should share.

There is a tendency to take the federal court system for granted, but it is really a crown jewel of our overall governmental system. In the cosmic scheme, appropriations for the federal judiciary are extremely small and yet so central to our overall governmental system that under-investing in the judiciary is really a mistake.

There may be a tendency to say, "Well, we still have qualified people lining up to be federal judges, so what really is the problem here?", but that looks at it the wrong way. The Constitution specifically contemplates that judges will have life tenure. That's not just a protection for the judges, but reflects the fact that having a career on the federal bench is an important part of our judicial system.

Tying judicial salaries to congressional salaries or salaries of other government officials misses the fact that we ask of our judges something we don't ask from members of Congress or the Executive Branch, which is to take on this public service really for the rest of their careers. Today's levels of judicial compensation just do not reflect that. A Senator is paid what a Senator is paid and then he or she has the option afterwards to engage in other activities that are substantially more financially rewarding, but that's just not an opportunity that I think we want our judges to be looking forward to. Good judges are leaving the bench and entering practice or going into arbitration and making more money that way, but we lose a tremendous amount of value if judicial salaries are not high enough to sustain a lifetime commitment.