Wednesday, November 29, 2006
Julie Goldberg, right, a recruiter from Korn/Ferry, has a post over at Law.com on what it takes for an in-house law department to recruit lawyers away from law firms, particularly given the escalation in salaries at big firms in large financial centers.
I agree with most of it - though there is a certain irony to reading about the attractiveness to lawyers of precisely the stock-based compensation that academic corporate lawyers are wont to debate - but one paragraph caught my eye as being wrong:
Although in-house lawyers put in long hours, their schedules have one big advantage over those of lawyers working in firms -- predictability. Do not underestimate the appeal of knowing that weekend and vacation plans will not be ruined. Work/life balance is now openly acknowledged as a factor in employment decisions, and top-notch lawyers demand time for life outside the office.
I don't know which corporation Ms. Goldberg is thinking about. I'm pretty sure that if you counted up all the hours I would have billed, had I been billing them, in the first year after I left the law firm to go in-house, it would have been somewhere in the 2,700 hour range (compared to my high water mark, as I recall, in the law firm, of about 1,950). That year also included something like eleven trips to Germany in ten months negotiating a joint venture, one of which was on about four hours' notice in the middle of a vacation - on a Tuesday morning, I was sitting by a beach in northern Michigan, and at 1:00 p.m. on Wednesday, I was in a conference room in Munich.
The great difference, to me at least, was the primacy of the result versus the primacy of the clock. I know there are lawyers who can generate passion around what they do for others in the big firm context, but I couldn't. The billable hour clock was always ticking in the background. The 2,700 hours were fulfilling in a way the law firm hours never managed to achieve, and became something like the sense of time when you are fully engrossed in something other than watching the clock.
Tuesday, November 28, 2006
David Hricik (Mercer, right, and I swear that's the picture on his bio page!) over at Legal Ethics Forum had a brief note on a recent New Jersey ethics opinion. The opinion (if not Professor Hricik's picture - one assumes it was taken in connection with "International Talk Like a Pirate Day") is worth at least a little bemused puzzlement.
The question is whether it is ethical for an employer to require an in-house lawyer to sign what looks to me like the fairly standard employment non-disclosure agreement, which in this case, also includes the fairly standard non-compete clause. (Let's assume the non-compete is otherwise enforceable in terms of geography and time.)
1. The question itself, it seems to me, is problematic: "whether an employer's request that its in-house counsel execute restrictive covenants. . .violates the Rules of Professional Conduct." I can see that if I were the general counsel and a member of the New Jersey bar, my request to another lawyer would fall within the ambit of the RPC. But if I am the general counsel, and the agreement is presented to me by the Senior Vice President of Human Resources (after approval by the CEO and the Board of Directors), how are the lawyers' professional rules in any way incumbent on these non-lawyers?
2. The opinion says "it is conceivable that an in-house lawyer could obtain confidential information and/or trade secrets which would not be protected by RPC 1.6 or the attorney-client privilege. Therefore, it may be reasonable for a corporation to request its lawyers to sign a non-disclosure or confidentiality agreement, provided that it does not restrict in any way the lawyer's ability to practice law or seek to expand the confidential nature of information obtained by the in-house lawyer in the course of performing legal functions beyond the scope of the RPCs." I do not understand this at all. I knew lots of stuff at Great Lakes that undoubtedly came to me other than in my capacity as a lawyer. It has to be reasonable to expand the definition of confidential information beyond that which I learn in the course of giving legal advice. If the impact is that I may not be able to be the general counsel for my direct competitor, why should I get a pass, as a lawyer, that other senior executives don't get?
3. The opinion says that the "assignment of inventions" clause does not impact any ethical considerations. That may be, but what if you design, on the company's time, a neat system for monitoring outside counsel? Or develop your own store of Sarbanes-Oxley flow charts that you use in explaining the requirements of the law to the board of directors? Are those "designs, processes or know-how" (patentable or not), and thus the sole property of the Employer?
Friday, November 24, 2006
Posted by Jeff Lipshaw
Cranberry guru and co-editor Childress passes on this story from Law.com about new rules being passed to insure that in-house lawyers are licensed to practice in the state where they are employed.
Objecting to licensure of in-house lawyers would be the height of political incorrectness, and I don't intend to be politically incorrect here. When I moved from Michigan to Indiana in 1999 to become the general counsel of Great Lakes Chemical, I immediately applied for for full (not business counsel) admission. It was pretty cool, because in Indiana, you are only admitted on a foreign (that's Michigan) license conditionally until you have certified in each of five succeeding years that you have practiced more than half your time in Indiana. So every year, I would make my certification, pay my dues, and get a little sticker to put on my admission certificate.
Sometime in the last several years, like the other states in the article, Indiana passed its rules for admission on a business counsel license. So I was never faced with the possibility of having a limited license. But even under the limited license rule, you still have to fill out the form for the Committee on Character and Fitness, and that was the biggest part of the job. I was tracing old traffic tickets down, and trying to figure how where I worked during each summer of college.
Why does the cynic in me say this is all about the $800 fee and not about protecting the public? Certainly if you are holding yourself out to the public and taking fees, and appearing in the courts of a state, you should hold a license. But if you are licensed in any state and doing nothing but representing the corporation in-house, then additional requirements seem silly. Indeed, ABA Model Rule of Professional Conduct 5.5(d) says as much, providing merely that "a lawyer admitted in another United States jurisdiction, and not disbarred or suspended from practice in any jurisdiction, may provide legal services in this jurisdiction that . . . are provided to the lawyer’s employer or its organizational affiliates and are not services for which the forum requires pro hac vice admission. . . ."
Somehow, the licensing rules take me back to images of circuit riders, and reading the law in a lawyer's office. The ABA Model Rule recognizes the modern reality: even if the headquarters of my corporation is located in Indiana, I am rarely practicing "Indiana law." Doing anything more than what is dictated by the Model Rule says something about the guild or, more likely, about the fee revenue.
Tuesday, November 14, 2006
Topic is "Ethics 2006: Corporate & Legal," and includes SOX, internal investigations, "who is the client?", backdated options, and corporate attorney-client privilege. Live webcast is 3.25 hours on Monday, December 18, 1:30 pm EST.
Saturday, November 11, 2006
The Washington Post reported Saturday that the SEC has moved closer to issuing new guidelines to ease compliance and audit requirements under SOX, especially on smaller institutions and for certain types or levels of transactions. The article: "SEC, Accounting Board Officials To Weigh Sarbanes-Oxley Update." SEC leaders and a panel from the accounting profession will meet Sunday to discuss changes to accountability controls and internal audit procedures. If such industry meetings produce specific proposals, they are expected to be played out starting next month in open meetings with public comment.
This development, along with SEC Chair Christopher Cox's phone comments to the Post, apparently confirms earlier hints and suggestions that new 'SOX 404 guidance' would work toward more flexible and context-based expectations for companies. In addition, portions of a letter written by Cox and released this week supported cost-consciousness and flexibility in further implementation of SOX, four years later. Business groups had objected to compliance costs and uncertainty, and the SEC--among others--seems to have listened. [Alan Childress]
UPDATE: The Business Law Prof Blog has a nice rant on this 404 issue and especially the media's treating SEC steps as a big story when Congress needs to act.
Monday, November 6, 2006
Legal Fee Audits, Document Retention Programs, Tired Solutions, and Blockbusting for Lawyers: Part I in a Continuing Series About Creativity in Problem-Solving
Posted by Jeff Lipshaw
The Money and Investing section of the Weekend Edition of the Wall Street Journal (Saturday/Sunday, Nov. 4-5) has a piece on corporate audits of the bills that outside law firms submit for services rendered. This is but one example of the kind of fee-based offer of service you get as the general counsel to a big company. Document retention (euphemistic for document destruction) programs were another (a quick Google search shows you can buy one from Hunton & Williams, as an example and the ABA has materials out on them as well.) We would regularly get high-powered sales pitches from vendors who specialized in flyspecking bills (as to the audits) and the law firms themselves (as to the document retention). It was always a classic case of data against intuition, because it always seemed to me a real question whether there was any payoff, in either case, to what was sure to be a time and cost intensive activity.
This is too big a topic to handle in one blog post, but I want to lay some groundwork first, and then in later posts come back to the relationship between business law, business lawyers, and the theory and pedagogy of creative solutions to complex problems. Not to hide where I stand (because it may be a while before I get back to it), there's nothing wrong, per se, with legal audits or document retention programs. I merely think that they are tired and uncreative solutions to problems.* I have been thinking about the theoretical issues for a long time; nascent ideas about pedagogy are the result of a conversation I had yesterday about the courses you might build into a cutting edge business law curriculum, one of which might be an advanced seminar in creative problem solving techniques.
Let's start with some basics in organization and management learning and come back in subsequent posts to the professional (and I will argue, theoretical and pedagogical) issues for lawyers. This segment is devoted to what is known over in the business schools as "lean production" or "lean enterprise," a subset of which is the exercise in reduction of process variability (and therefore defect reduction) called "six sigma." These terms are, in no small part, the upshot of a global revolution in thinking and action that dwarfs relatively "easy" problems like law school curriculum reform. Over the last thirty years or so, an entire world (one in which most lawyers do not traffic) looked at the accepted and traditional ways of doing things in human organizations, and realized they were outdated. Talk about paradigm shift. If one has been in that world (and law firms generally don't count), then reading an article about auditing law firm bills as the solution to a problem is like having someone's fingernails run across a blackboard. (The closest I am aware of any legal scholars tapping into this area is the Virginia Law Review article by Margaret Blair (Vanderbilt, left) and Lynn Stout (UCLA, right): A Team Production Theory of Corporate Law.)
The first lesson, a description of the lean organization, and a couple relatively simple examples of the techniques, comes below the fold.
Tuesday, October 31, 2006
Posted by Jeff Lipshaw
Steven Schwarcz (Duke) continues his marvelous series of empirical studies on lawyering with To Make or To Buy: In-House Lawyering and Value Creation, just posted on SSRN. Here is the abstract:
In recent years, companies have been shifting much of their transactional legal work from outside law firms to in-house lawyers, and some large companies now staff transactions almost exclusively in-house. Although this transformation redefines the very nature of the business lawyer, scholars have largely ignored it. This article seeks to remedy that omission, using empirical evidence as well as economic theory to help explain why in-house lawyers are taking over, and whether they are likely to continue to take over, these functions and roles of outside lawyers. The findings are surprising, suggesting that in-house lawyers may now be performing as high quality work as outside lawyers and that the reputational value of outside lawyers may be significantly diminishing.
The quote in the headline of this post does not appear in Professor Schwarcz's paper. That is a line I used (and I lifted it from somebody else) in an interview several years ago with a reporter from Crain's Detroit Business, when I was the GC of a large division of a large company, recently recruited from partnership in a big law firm. It was precisely what you don't say if you don't want to be quoted. As you might imagine, it endeared me no end to my former partners at Prestigious But Regional Large Law Firm, who nevertheless stifled their bile for as long as we kept sending business their way.
Oh, by the way, the statement was true, and Professor Schwarcz's survey results bear that out.
Monday, October 30, 2006
Posted by Jeff Lipshaw
Imagine you are the chair of a Faculty Appointments Committee some time back in the mid-1970s, and this is the C.V. that comes across your desk: Harvard College, magna cum laude, Harvard Law School (winner of the Fay Diploma for graduating first in the class and Articles Editor of the Law Review), clerkships with Irving R. Kaufman on the Second Circuit and Supreme Court Justice William O. Douglas, then two years as Counsel to the Watergate Special Prosecutor, Archibald Cox. I suppose nowadays you'd want to see an article or two published as well.
This, of course, was the early resume of Peter Kreindler, the current Senior Vice President & General Counsel of Honeywell International, who hired me (a long time ago when Honeywell was AlliedSignal) and was my boss for five years. From the Watergate Special Prosecutor's Office, Peter went on to partnerships at Hughes Hubbard & Reed and Arnold & Porter before being hired at AlliedSignal by one of the great and charismatic business leaders of the last thirty years, Larry Bossidy.
I thought of Peter when I saw Brian Leiter's note (and Avery Katz's update) on one of every twelve Yale Law School alumni being a law professor. It made me wonder about all of the alums of the law-professor-producing schools who, like Peter, it seems to me, were probably minimally qualified to be law professors (note the sarcasm, please) but chose other careers. How many are there? Of the law review editors/Order of the Coif types at Harvard, Stanford, Chicago, Yale, etc., what percentage go on to be law professors? Of those who do not, are there particular kinds of practice to whom they tend to gravitate? Do they ever have second thoughts about the road not taken? Do they stay in touch with issues on the academic side of the profession? How do they see the subject of curricular reform of the kind discussed over at Money Law?
By the way, were it not for the fact that Peter is a great human being, having him as my direct supervisor for five years would have been (well, actually it was anyway) the most intimidating experience of my life. I have never met anybody in private practice, corporate life, or the academy, whose CPU ran faster than Peter's. The sheer speed at which he could deconstruct and reconstruct a problem was staggering. Peter's law department was also a school of sorts for general counsels: his former deputies moved on to be the top lawyers at Perkin-Elmer, FMC, American Standard, Medtronic, Visteon, Raytheon and others.
*HT to Marlon Brando and Elia Kazan
Friday, October 27, 2006
Posted by Jeff Lipshaw
A few days ago, I commented on the Kenny Rogers-Tony LaRussa pine tar (or clump of dirt) incident in Game 2 of the World Series. Steve Lubet (Northwestern and Legal Ethics Forum) commented:
Let's assume that Larussa did make a spontaneous decision to defer to his own sense of justice as opposed to the positive law. The problem is that he wasn't exactly playing poker with his own money. He was acting as the employee of an organization, managing a team of professional athletes. Everyone involved has a serious stake in the outcome of the series, financial and reputational. what would give Larussa -- a lawyer, after all -- the right to privilege his own sense of justice over the positive law, in a situation where others (whom he did not consult) may suffer the consequences?
Andrew Perlman (left, Suffolk) also over at Legal Ethics Forum has advanced the discussion with an analogy to the professional requirements of zealous advocacy. I was a litigator for ten years before I moved into the corporate and M&A world, but one of my aphorisms of practice was "every time I thought I was either sublimely clever in pressing a rule-based advantage, it turned around to kick me in the ass." But that's me, and it could well be I just wasn't very clever.
Yesterday, in BE class, we launched into teaching the Delaware Supreme Court opinion in Brehm v. Eisner, better known as the Disney shareholder lawsuit, concerning the compensation paid to Michael Ovitz upon termination after his fourteen month stint as Disney's president. (I confess: at one point, I couldn't help it and this came out: "certain as the sun, rising in the east, tale as old as time, Beauty and the Beast,"* at which point I teared up, sighed deeply, and moved on.)
One of the heretofore little-discussed professional issues was Sanford Litvack's conclusion that trying to assert that Ovitz could be terminated for cause was a "no-brainer:" there was simply no basis for bringing Ovitz's conduct, even if obnoxious or insubordinate, within the clause. And mind you, this was no small decision: fighting the "non-fault termination" aspect of the contract could well have saved Disney a portion of that $140 million in severance cost. Indeed, one of the plaintiffs' theories was that Litvack and Eisner breached the fiduciary duty of care by not asserting the claim.
Under the Lubet view, or under Andrew's zealous advocacy view, if Litvack concluded that Disney could pass Rule 11 muster (or the straight face test), did he have an obligation, moral or otherwise, to all the uninformed stakeholders (i.e. the shareholders) to pursue the claim, even if as nothing more than bludgeon to knock ten or twenty or thirty million dollars off the pay-out? The similarity between the LaRussa judgment and the Litvack judgment, it seems to me, is the extent to which you are willing to employ EVERY means at your disposal to win (no pun intended - but playing hardball).
That was always the toughest kind of call for me as a general counsel. Like Litvack, I would conclude that contesting a particular issue was a "no brainer" because in my judgment we had no case. But I always wondered in those instances: was I too nice? or too ethical? Somebody could cobble together enough of a position to cause some grief for the other side (because it seemed like people were always taking marginally ethical positions against us, and finding lawyers who would sign the pleadings!) And a distinction as between LaRussa and Litvack, perhaps, that the latter disclosed his view to his principals but the former didn't, doesn't hold - because if I reached a legal conclusion and expressed it to the board, it was the rare case that anybody would question it. In essence, my sense of ethics or my moral judgment, as the GC, became the moral judgment of the corporation. I am sure it was the same for Litvack (well, maybe not - the case says Eisner checked with everybody!)
Wednesday, October 4, 2006
posted by Alan Childress
One in-house lawyer facing indictment as the California Attorney General filed a criminal complaint today. Also named is the Chair, Patricia Dunn. The GC, Ann Baskins, was not named, nor were any outside counsel. Cold, or at least cool, comfort, I suspect, to Ms. Baskins.
Andy Perlman has comments at Legal Ethics Forum.
Update: The complaint filed is now available on line from the AG's office.