Paul Hastings Warned AIG of Double Liability for Failure to Pay Bonuses

Lawyers at Paul, Hastings, Janofsky & Walker warned AIG that it faced double liability if it failed to honor contractual obligations to pay bonuses.

AIG confirmed that it was advised by Paul Hastings on bonus obligations, the American Lawyer reports. Hogan & Hartson lawyers were on hand when AIG chief Edward Liddy testified before Congress, but that firm refused to reveal its role in the bonus controversy, the story says.

Connecticut state law gives employees the right to obtain double damages and attorney fees if a company unlawfully withholds pay, according to the American Lawyer. The insurer’s troubled financial products unit is located in the state.

Paul Hastings employment partner Patrick Shea stated his opinion in a letter to the Federal Reserve Bank of New York.

"We believe there is a clear contractual obligation” to pay promised bonuses, the letter said. The bonuses could be withheld only if an employee is fired for cause or for failing to meet performance standards, or if an employee resigned without good reason.