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For in-house counsel with a low tolerance for stress, this is not a good time to be working for an airline. Two major carriers are reeling from the murders of their passengers and crews in the Sept. 11 terrorist attacks. Most of the major airlines are in dire financial shape. And although the large layoffs announced by the airlines seem to have spared most lawyers, if business doesn’t pick up, the next round of cuts may not be so kind. To cope with what is universally acknowledged to be a crisis unparalleled in the industry, the legal departments of most of the largest airlines have asked outside counsel to cut their fees. Walter Brill, vice president and associate general counsel for Delta Air Lines Inc., acknowledges that his company has broached the subject, though he declines to discuss details. Lawyers at two Atlanta firms with which Delta has long-standing relationships, Kilpatrick Stockton and Rogers & Hardin, say in interviews that they were willing to slash fees. Hunter Hughes, a Rogers partner, says he didn’t wait to be asked. “We suggested it to them,” he says. Continental Airlines Inc.’s general counsel, Jennifer Vogel, says many of its outside firms agreed to a temporary 10 percent to 20 percent cut in straight billing rates. “And a number of them have agreed to do that unsolicited,” she says, adding that she cannot identify any of the firms. “We were sensitive to their request to keep it confidential because they obviously have other clients who would come after the same discounts,” she says. Some of the firms agreed to take work on a contingency or simply waive billing for certain types of work, such as labor work in connection with furloughs, Vogel says. Kevin Lewis, a partner in Houston’s Vinson & Elkins, one of Continental’s go-to outside counsel, says he’s discussed billing arrangements with the Houston-based airline since the Sept. 11 attacks and made some changes. V&E never discounts its hourly rates, Lewis says, but it does enter into billing arrangements that place some of the risk on the firm. V&E does corporate and finance work for Continental, and Vogel says it is Continental’s primary firm in Texas. Most of American Airlines Inc.’s outside counsel have agreed to reduce fees by 20 percent during the next six months, spokeswoman Andrea Rader says. And US Airways Inc. also has discussed fee reductions with its firms, according to executive vice president and general counsel Lawrence Nagin. He says he will not discuss specifics. Weil, Gotshal & Manges does transactional, litigation and antitrust work for American Airlines, with some of it done by lawyers in the firm’s Dallas office. Thomas Roberts, a New York-based partner who heads the firm’s corporate department, says the firm responds to client needs, but he declines to discuss billing arrangements. But, Roberts says, “I can confirm that American Airlines in good times and bad is a client that is very sensitive to legal fees and manages them very well.” As for layoffs, four of the nation’s six largest (in number of employees) carriers laid off lawyers. Only two will disclose details, so it is not possible to learn the total number of cuts. AMR, the parent company of American and TWA, laid off three of its 43 in-house lawyers, Rader says. US Airways laid off one of nine lawyers, Nagin says. United Air Lines and Northwest Airlines Inc., each of which employed 20 lawyers, acknowledges layoffs but refuses to divulge further details. Dallas-based Southwest Airlines Co. hasn’t laid off anyone because of the attacks. Lawyers at the airlines that did not suffer cuts were, like at every other airline, struggling to keep abreast of expanding workloads while searching for ways to limit costs. The additional work created by the cuts, lawyers at these companies suggest, is one reason their departments weren’t hit. “We weren’t simply trying to cut heads here. We were trying to cut costs,” Vogel, who oversees 17 lawyers at Continental, says. “If you cut the legal department in this sort of a crisis, you’re simply shifting the cost to a more expensive outside counsel. The legal work doesn’t go away. As a matter of fact, it’s increased as a result of these events.” Delta’s Brill says he won’t know for several weeks whether any of his company’s 44 lawyers will be released. First, Delta is trying to eliminate jobs through early retirement and furloughs. The success of that effort, with other cost-cutting measures, will determine whether additional cuts are necessary. Airline lawyers do not seem to be obsessing about job security, however. They are far too busy. “You have to hit a grand slam home run just to go home at night,” Nagin notes. Brill says that he and his colleagues were working “a lot of nights and a lot of weekends,” as are people throughout the company. “These are extraordinary times,” he says. NEW ISSUES Vogel says her department has found itself dealing with issues it never had dealt with before. For example, when all airports nationwide are closed, what are the carrier’s refund obligations? When screening procedures are changed dramatically, how early should customers be advised to arrive for flights? These are among the many issues her department had to consider, she says. As other airlines slid close to bankruptcy, Continental had to decide whether it ever would be paid if it honored tickets issued by those carriers. When Continental cut its capacity, contracts and leases on excess aircraft had to be renegotiated. “We had to take a fresh look at everything,” Vogel says. There was a blizzard of directives from the Federal Aviation Administration and the Department of Transportation involving everything from airport security to loan guarantees in the airline bailout legislation. On top of it all is the employment work. “When you furlough almost 12,000 employees worldwide, there is a tremendous amount of legal work associated with that,” she says. That is complicated by the need to analyze appropriate severance packages in many jurisdictions, including foreign countries. Vogel believes the events of Sept. 11 “will generate work for years to come.” United and American certainly will face years of litigation resulting from the hijacking of their planes and the deaths of 246 passengers and crew, Vogel says. But the other airlines may face breach-of-contract suits for services they or their vendors didn’t provide. Security is the main issue, particularly whether the responsibility for it will be removed from the airlines. “I think it should happen,” she says. In the past, the government has viewed security as an issue of passenger safety and therefore a duty of the airlines. “But as we have all seen by this recent tragedy,” she says, “it is really a public safety issue. And the safety of the public is better left to local and federal government.” Delta’s Brill doesn’t foresee enduring changes in the way his department does business. “It makes us busier,” he says, “but it really hasn’t changed us.” US Air’s Nagin isn’t sure what the fallout will be. The crisis “has brought new meaning to the term ‘force majeure.’ ” On the other hand, speaking on the day Reagan National Airport in Washington, D.C., reopened for business, his company seems to be settling into “ a new normalcy,” he says. Vogel sums up her view by reading from a news clipping she keeps hanging on her computer. Vice President Dick Cheney was asked if he knew of any law that would prohibit the United States from killing Osama bin Laden. “I’d have to check with the lawyers on that,” Cheney replied. To Vogel, that says it all: “In good times and in bad, unfortunately, the lawyers are always needed.” David Hechler is a staff reporter for The National Law Journal. Texas Lawyer senior reporter Brenda Sapino Jeffreys contributed to this report, as did Janet L. Conley of the Fulton County Daily Report in Atlanta.

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