California bar in 'difficult financial position,' 3rd Circuit weighs attorney conduct rule, Purdue bankruptcy judge joins Skadden, and more ??

?? Good morning from The Legal File! Here are today's top legal stories:

??California state bar in ‘difficult financial position,’ audit finds

The State Bar of California has outspent its general fund revenue in recent years and should increase lawyer fees and sell off its San Francisco office building to cover its growing costs, according to a new state auditor report.

The latest annual report from the Auditor of the State of California identifies growing financial shortfalls at the largest mandatory state bar association in the United States, which is tasked with regulating California’s more than 250,000 lawyers. It concludes the organization should do more long-range financial planning.

Rising personnel costs have fueled the bar’s deficit spending, the audit found, and its general fund reserve has fallen from $19 million in 2020 to $12.4 million in 2022 — below the recommended minimum of more than $16 million. The state bar’s own budget projects a deficit of $4.3 million in 2023, the audit notes.

“We especially appreciate the audit's recognition that a licensing fee increase is needed to sustain State Bar operations, particularly if we are unable to sell our San Francisco headquarters building, or to use the proceeds from sale of the building to support our operations,” said State Bar Board of Trustees Chairman Ruben Duran in a statement.

??U.S. appeals court weighs free speech challenge to attorney conduct rule

A federal appeals court in Philadelphia on Thursday questioned whether a free-speech advocate and Pennsylvania attorney can pursue his First Amendment challenge against the state's adoption of an anti-harassment and discrimination professional rule for lawyers.

The 3rd Circuit U.S. Court of Appeals panel pressed a lawyer for plaintiff Zachary Greenberg on the threshold issue of Greenberg's standing to sue, asking whether his presentations as a program officer for the non-profit Foundation for Individual Rights and Expression would violate the rule.

The Pennsylvania rule, which is modeled after an American Bar Association rule, prohibits lawyers from knowingly engaging "in conduct constituting harassment or discrimination" based on race, sex, religion and other grounds.

Greenberg claims he is at risk of violating the rule because of presentations he gives about offensive and derogatory language. But the Pennsylvania Supreme Court's Office of Disciplinary Counsel has said it would not prosecute such conduct.

"It looks like you have an Office of Disciplinary Counsel doing its job in a way that doesn't portend any type of harm coming to Mr. Greenberg," Judge Thomas Ambro said.

??Judge who oversaw Purdue, Sears bankruptcies to join law firm Skadden

Judge Robert Drain, who retired from the U.S. Bankruptcy Court for the Southern District of New York last year, is joining Skadden, Arps, Slate, Meagher & Flom as of counsel, the law firm said Thursday.

Drain, who oversaw the bankruptcy of OxyContin maker Purdue Pharma LP and approved controversial legal protections for the Sackler family members that owned the company, will be part of the firm's corporate restructuring group in New York.

Drain faced criticism over releases he approved for Sackler family members in exchange for their $4.5 billion contribution to a settlement trust in the high-profile Purdue case. The Sacklers were accused by many states, municipalities and individuals of fueling the national opioid crisis by pushing Purdue to aggressively market OxyContin while downplaying abuse and overdose risks.

"His deep knowledge of bankruptcy law paired with two decades as a preeminent judge in one of the country’s busiest bankruptcy jurisdictions will be of tremendous value to our clients," Paul Leake, global head of Skadden's corporate restructuring practice, said in a statement.

??California cancer-label litigator swaps firms for Hogan Lovells

International law firm Hogan Lovells said Thursday it hired a class action litigator from rival firm Arnold & Porter Kaye Scholer who specializes in California's unique cancer-alert law.

Trenton Norris joined Hogan Lovells' San Francisco office as a partner. Norris was a co-leader of Arnold & Porter's consumer products and retail sector practice.

Hogan Lovells touted Norris as a leader in litigation relating to California's Proposition 65 -- a rule that requires the state to keep a list of chemicals and substances known to increase cancer risks to inform residents.

Norris has represented companies in litigation connected to that law including Monsanto Co and Pepsi Co. He is the lead lawyer representing the California Chamber of Commerce in a bid to stop the state from labeling the chemical acrylamide a carcinogen.

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