Articles Posted in Clients

Mark Roellig, the general counsel of Mass Mutual, has published several thoughtful articles recently about law department management. His latest appears in the ACC Docket, March 2012 at 53. Deep in the piece he mentions something a few readers might have encountered and offers some advice.

If a company selects you to come in as the general counsel, what should you do about your secretarial-administrative person? “My experience is that you are generally better off to assume the incumbent assistant than to take the risk of the two of you learning together – or to bring along your current assistant, which is a huge mistake.” If the person stays, and most do because they have risen to the upper echelon of administrative assistants, keep him or her as your guide and go-between.

The slugfest of patent litigation unleashed by Apple related to Google’s Android operating system has proved to be frightfully expensive. Samsung, HTC and other companies are up in arms. Quoting Prof. Mark Lemley of Stanford Law School, Bloomberg BusinessWeek, April 2, 2012 at 63 said “these companies have paid their lawyers more than $400 million” over the past several years.

The hundreds of millions paid law firms represent only part of the legal department costs, to be sure. For this blog post, however, the exorbitant cost is not the point. The point is that when CEOs decide to pursue high-stakes business strategy with many tools, including litigation, the general counsel carries part of the water, extremely costly water. How can anyone hold a general counsel to a “budget” if crucial decisions depend less on legal analysis of rights and potential recoveries than on multi-front competition that transcends mere litigation?

A.C. Grayling, Ideas that Matter: the concepts that shape the 21st century (Basic Books 2010) at 63 discusses business ethics. Grayling states, matter of factly, that “the boundaries of legal permission in all capitalist economies lie outside those of moral acceptability.” If that statement is correct, that what lawyers can uphold as a legal action is often beyond what society would accept as moral, then it is difficult to hold in-house counsel up as the champions of integrity and ethical behavior. It means they constantly could say, “Legally you can do this even though ethically it is suspect.”

I like to think that the law comports for the most part with ethics, but that is a naïve and self-deluded view by some critics of our business mores and cultural values.

Office locations of in-house lawyers spring up alongside business units and executives. As the latter go global, so will their counselors. One management challenge arises from those foreign locations that this blog has discussed: the absence of attorney-client privilege (See my post of Feb. 16, 2008: attorney-client privilege with 18 references.). If lawyers protected by the privilege unthinkingly write or send something outside the geographic scope of its shield, the company could be harmed.

An article in New England IN-HOUSE, Jan. 2012 at 11, extends the analysis to some countries not previously covered here. The article says that “the majority of EU countries – including France, Austria, Finland, Poland and Germany – appear to have no privilege for communications with in-house counsel.” It adds that “Brazil is reported to recognize a strong form of attorney-client privilege … while in Russia there seems to be no privilege for in-house counsel.” Commentators are unsure about the privilege in India and “there appears to be no attorney-client privilege in China.” The language betrays unknowns and uncertainties, but that is part of the problem with the privilege.

Since my first metapost on the privilege, another baker’s dozen have appeared (See my post of Feb. 23, 2008: steps to protect attorney-client privilege for in-house litigators; Sept. 9, 2008: an intractable tension between giving business and legal advice; Feb. 13, 2009: technology may put privilege at risk; May 10, 2009: audits in a country by a law department seeking legal problems; Feb. 9, 2010 #1: possible change in France; March 9, 2010 #4: use outside counsel for internal investigations; March 22, 2010: argument to separate claims work from legal work; Dec. 16, 2010: e-mail practices and attorney-client privilege; June 17, 2010: equivocal comments about in-house lawyers in India and the privilege; Jan. 12, 2011: Gucci’s loss of privilege since GC was not admitted to practice law; April 25, 2011 #1: explanation of Akzo Nobel decision; Dec. 22, 2011 #4: litigation funding and loss of privilege; and Dec. 31, 2011: dual roles as GC and head of compliance raise privilege tensions.).

My writings on over-hyped “bet the company” litigation mostly has made the point that they are black swans (See my post of Oct. 27, 2011: bet-the-company with 8 references.). Which rare lawsuits fall into that cataclysmic category, where expense management flees, general counsel quake, and corporate futures hang in the gavel, is a journalist’s favorite joust, but a bit like defining obscenity.

Then I read in a two-part definition of “material cases,” (1) those that your company would consider significant – too loose a definition for me, or (2) those that would “impact an investor’s decision to buy, sell, or hold the company’s securities.” That second definition creates a standard that resonates with lawyers, at least with securities lawyers, makes sense, and pitches the significance of a case at the right level of major fiscal risk (or gain).

This blog has referred to hotlines a moderate number of times (See my post of Sept. 21, 2011: hotlines with 6 references.). Those anonymous reporting tools would seem to account for many of the disclosures of potential wrongs. Nevertheless, an article in Met. Corp. Counsel, Dec. 2011 at 38, draws on an informal study done by an in-house lawyer. That lawyer looked at reporting processes and discovered that “a majority of useful tips actually were communicated to the supervisors, not to the hotline.” Obviously, to tell your supervisor about a concern means that the supervisor is not the culprit and anonymity is not desired.

This question, asked of the chief legal officer of the Mayo Clinic, John Oviatt, elicited an interesting reply: “Very much so. Legal services are just one more of many shared services within an organization. That’s how the C-suite views it, and so I think having a close working relationship with purchasing is very important. There are numerous examples of law departments that have actually had an assigned purchasing employee who assists them on their work. It’s the purchasing folks’ bread and butter, but it’s often foreign to lawyers. It’s not that we can’t learn; it’s just we’ve never had any reason to be trained in those things before.”

“Numerous examples” may not rise to a trend. And what are these procurement people doing other than assisting with competitive bids? Are their inputs to the law department making a difference?

In this regard, readers may be interested to know that Professor Silvia Hodges, Adjunct Professor at Fordham University School of Law, has been researching and writing regarding procurement and legal departments. Earlier this month she spoke on Power of the Purse: How Corporate Procurement is Influencing Law Firm Selection at Harvard’s Program on the Legal Profession.

Having put another notch in my belt of legal risk posts (See my post of Dec. 5, 2011: three observations on legal risk.), I looked for other risk-related metaposts. As my previous one covered through mid-August of 2009 and yesterday’s covered from mid-2010 through now, I updated my posts during the gap period on the topic (See my post of Dec. 21, 2009: a “risk management checklist”; Jan. 19, 2010: shallow recommendations about legal risk and compliance; Jan. 19, 2010: methods to identify, measure, and review legal risks; Jan. 19, 2010: legal risk management by UK heads of legal; Jan. 19, 2010: too easy to prescribe risk reduction measures to take; Jan. 25, 2010 #2: more than 80 risk management frameworks; Feb. 16, 2010 #4: study of legal risk and compliance; June 25, 2010: move inside shifts from risk avoidance to risk management; Aug. 2, 2010: clues to seven koans on “legal risk”; Nov. 30, 2010: my column on legal risks avoided but never to be measured; and Dec. 7, 2010: ascendancy of risk management in innovative group of UK departments.).

Hence, with today’s, this blog has delivered five general metaposts on legal risk (See my post of Nov.15, 2005: legal risk with 7 references; March 23, 2008: risk management with 18 references; Aug. 17, 2009: controlling legal risks with 13 references; and Dec. 5, 2011: recent risk posts with 7 references.).

With some overlap from the general metaposts, there have been three more metaposts related to aspects of legal risk (See my post of Aug. 24, 2008: lawyers and risk averse behavior with 11 references; June 2, 2010: portfolio and risk notions with 7 references; and Nov. 28, 2010: risk or control functions – compliance, audit, risk management, and legal with 7 references.).

Economists would distill the corporate legal market into the DEMAND by corporations for legal services and the SUPPLY of those services.

Demand, what drives legal services, has been a topic returned to more than a few time on this blog (See my post of July 2, 2007: what drives a company to hire its first in-house lawyer; and Dec. 7, 2010: six primary drivers of total legal spending. Many topics reflect changes in demand for the advice of lawyers: global spread of business, regulatory requirements, complexity, intellectual property’s ascendance.

Supply, what meets the demand for legal services, has many forms. Foremost for organizations with a legal team of employees are inside lawyers followed by external counsel. Recently, LPOs have muscled in, along with educated clients who practice self-serve. Increasingly, online resources will be available to dispense legal guidance and documents (See my post of Oct. 31, 2005: online legal resources; Nov. 15, 2005: online resources; Jan. 10, 2006: lawyers and research online; Jan. 13, 2006: free online information; March 9, 2007: the price of legal information is being driven to zero; April 27, 2007: the internet and four generations of resources; Jan. 25, 2008: Martindale-Hubble and shared evaluations of law firms; Sept. 9, 2008: economics of information; and Jan. 11, 2010: Ning with 600+ IP blogs.).

In Charles Seife, Proofiness: How you’re being fooled by the numbers (Penguin 2010) at 108, a point is made that has bearing on the survey instruments in the header and their findings. “When surveys and polls depend on voluntary response, it’s almost always the case that people with strong opinions tend to respond much more often than those who don’t have strong opinions. This introduces a bias: the poll disproportionately reflects extreme opinions at the expense of moderate ones.”

Worse, “People are relatively silent when they’re reasonably content, but if they’re angry they tend to shout it from the mountaintop.” What might this phenomenon say about data on dissatisfaction with law firms, with law departments or with software vendors (See my post of May 3, 2009: data that belies this claim; and June 26, 2008: CEOs and their views of law departments.)? We hear from the loudmouths, not the silent majority.