Days Away

It's October 13th, and the first 2008 Annual Meeting sessions will begin in one week. Here at ACC headquarters, we're working hard to ensure that this meeting is as great as every other. The education and events staff leaves for Seattle this week to make sure that all logistics are covered. Months of preparation are coming together as we get down to the final days before the big show.

I, along with a few others, will be blogging live from the meeting- making sure to bring you the most exciting news and pictures for the days we're in Seattle. There is lots to cover! Sessions, the exhibit hall floor, the evening social gatherings, the list goes on . . .

Don't forget to sign up for the rss feed, and stay up to the minute with what's going on at Annual Meeting.

If you haven't had the chance, check out the exhibit hall floor and see who will be showcasing their products and services in Seattle.

And if you find yourself with some free time between October 19th- 22nd, register to attend Annual Meeting!

-Nichole Opkins

Different Methods of Billing: Fixed Rate

The NEO ACCA presenters offered a number of examples of new arrangements for billing. I have categorized them into three categories, none of which should be surprising. They are fixed rate, contingency and fixed rate-contingency. Another hybrid is the addition of hourly billing as a part of the models.

One of the fixed rate models was an agreement to handle all the cases that rose in a certain geographic area in a particular category, such as product liability for a given period.

Like any contract one had to define whether the geographic area meant where the case was filled, the location of facility where the product was made, the headquarters of the operational group or where the injury occurred. Similar issues arise in multiple causes of action cases. None of these issues were discussed and presumably had been addressed so that no controversy occurred.

The law firm covered all out of pocket expenses, such a deposition fees, travel etc. except trial was handled on an hourly basis and expert fees were billed directly to the client. The rationale for the distinction in the trial and expert fees was that inability to accurately predict these expenses. The trial exception makes some sense to me because they would be rare. I am not that sure why expert fees were excluded particularly if the product claims involved the same of similar products, but the issue was never fully explored.

The presenters claimed that this arrangement resulted in constant legal fees over a 5 year period while product input costs went up 178% and the number of cases rose as well. The constant nature of the legal fees is attractive if for no other than budgeting reasons. Because of extreme commodity inflation, the apparent savings would seem exaggerated. Comparison of legal fee inflation in the industry using data complied by a legal consulting firm survey might be a better reference.

One note they made, apparently thinking it was another indicator of success was that during the same period the litigation rate increased. It was an alarm bell to me because the one problem with fixed fee arrangements is that it creates an incentive for firms to under lawyer a case; nothing is perfect. When I raised this question they said that there was method of measuring the company’s liability, or somehow sharing the risk of that liability in the agreement. I am sorry but my notes don’t contain a description of what they said. It does, appear however, that the increase in the litigation rate was also attributed to some acquisitions, but I wonder why that would not have resulted in a revision to the contract price.

Bottom line, this is not a new idea and the prior renditions of this form of legal structure, some quite grand in nature involving all the legal work of a very large company, do not have appeared to stand the test of time.

That does not mean it won’t work. Success, however, seems to require that the purchaser must focus clearly on what their prime objective is—for this arrangement budgetary consistency may be worth other trade offs. What are they? One is probably less active control of the case since it is a lot of their dollars being spent. An incentive of the firm is to under lawyer a case—that may result in more costly future litigation exposure, not merely to save money under the present contract, but to create demand under the next.

And there is always that potential that you may under up over paying—a fixed price is not often the least expensive. In economic terms this looks a lot like buying legal services in an insurance agreement without the indemnification and, at least at present without a liquid market for price reference. If savings is the objective a better method of gauging that needs to be developed, and will likely have to be adapted to unique circumstances of every buyer.

Developing a method and data base, sort of a market approximation, might be one project to evolve from the ACC Value Challenge. Sorry Fred, I hate to suggest more projects for you.

-Larry Salibra
View Bio

Who Supports The Billable Hour?

I attended a NEO ACCA conference on alternatives to the billable hour a few days ago. In the next few blogs I will share some impressions, observations and thoughts.

First, let me make an observation.—it was fortunate I went because I contributed to making the audience slightly larger than the presenters. You would have thought there would have been far more interest.

There appeared to be a number of people who signed up for the program from the names at the welcome table, and the room was clearly prepared to accommodate many more participants, not mention the array of free food for breakfast.

I found the program quite interesting; and I tend to be skeptical of various schemes designed to reduce legal costs. So why was there no more interest? I have no idea, but I would like to hear from others who might have an explanation.

There was one explanation that arose from comments from the firm that was the focal point of the presentation—consumer resistance to change. The forum was not the typical situation where a series of in-house attorneys complained about the absence of alternative billing formats and representatives from firms resisted change or reluctantly expressed a willingness to consider alternatives after listing all the obstacles to change. It was a presentation where the law firm was actively promoting its willingness to participate in alternatives to the billable hour legal market. What they noted was the resistance of the market place to accept it. The lack luster attendance at the presentation certainly suggests market apathy.

In later blogs I will attempt to explain this anomaly.


-Larry Sailbra
View Bio

Flawed Business Models?

In the last week or so, we discovered that an entire banking model, the investment bank was a flawed business model. The last of the two investment banks, Goldman Sachs and Morgan Stanley reconstituted themselves into regulated bank holding companies.

In my last blog I suggested ,based on what was happening in the financial community, that traditional surrogates for competence, fees and office location, may not be particularly good indicators of competence in the practice of law as well.

The traditional law firm model has been subjected to scrutiny for many years, and it has persisted. But there has been a significant change, at least since WWII, and that is the growth of law firms that do not have intimate relationships with their clients. They look more like detached business organizations, whose success is not intimately tied to the fortunes of their individual clients.

Perhaps one of the biggest recent reformations in legal practice was the emergence of in-house practice, of which ACC is a direct reflection, but there has remained beneath the surface a continuing concern about the law firm model. NEO ACCA is sponsoring a session, which I hope to attend which is reexamining the validity of hourly billing. The notion is not new. Prior attempts to address this issue of which I am familiar have not been successful. Nor have any of the modifications to hourly rates revealed any model that seems clearly superior.

I read a summary of ACC’s Value Challenge in Legal BIZNOW in which the author noted that this issue of hourly billing had been raised before but “something felt different at the Reagan Building ….” Excuse me for being skeptical, but I have been there, done that.

I will let you know what I think over the next few blogs, but my gut tells me that the issue of cost control, hourly rate notwithstanding, is well within the control house counsel if they really wanted to control it. This is one big reason why as a guest lecturer at the University of Akron Graduate School of Business in October I will be describing how and why businessmen must assume control in managing lawyers and legal issues, because lawyers have not demonstrated a capability of managing either themselves or legal issues very efficiently.


- Larry Salibra
View Bio

Revolutionary Change vs. Evolutionary Change

Are these competing forces or can we implement both, resulting in a long
need change in the in-house/outside counsel relationship? We have a 20th
century structure trying to hold up a 21st century market. The seams are
giving way and cracks are in the foundation. We can no longer patch it
along the way with small concessions. ACC is calling for a monumental
change.

Get rid of the skyboxes! Get rid of the fancy recruiting of new attorneys!
And, get rid of those plush offices! This is the first step in reaching a
new structure, according to some leading in-house counsel.

Communicate! Communicate! Communicate better to the outside counsel your
needs, goals, and corporate values! This is the cry from the outside
counsel to reduce the friction between the parties.

In the end, I think it would be best to start with the premise that most
lawyers do not have a business background/education and we need to stop
trying to function as we do...and get some help from sound business minds.
It is sort of like the premise that only a fool for a lawyer represents
him/herself. May we begin the process today.

Learn more about the ACC Value Challenge at www.acc.com/valuechallenge

-Ellen Zavian, Associate General Counsel, ACC

Value Challenge Launched - Streaming Live from www.acc.com

Today, ACC launches it's Value Challenge- a program designed to create a constructive dialog and practical resources that help lawyers better align legal costs with client objectives and the value of the services provided.

About Value Challenge
Listen to the Launch (LIVE today at 1pm EST)
Read Today's Launch Agenda

How Do You Blog When The Financial System Is Apparently Collapsing Around You?

First, I did not know that Henry Paulson and Ben Bernanke were reading my blog—when I advocated a bailout for everybody I was joking. Apparently, they took me seriously or at least they are trying to do it for the entire financial industry.

Is there a lesson in this for lawyers? Remember the days when everyone admired those highly paid Wall Street investment bankers. They were all described as really bright. Their compensation, their offices we assumed had to be a reflection of their intellectual prowess.

What about lawyers—do the location of their office or the hourly rate really reflect intellectual prowess, or it merely a reflection of the same market aberration we are seeing in the investment community? Just a thought.

-Larry Salibra
View Bio

Words, Words, Words

In my last few blogs, I have been describing how we lawyers have used words to substitute for or manipulate reality, and how Judge Posner even wrote a book about it.

My last blog described how Hank Greenberg used words to draw an artificial distinction between the financial conditions of Lehman and AIG and suggesting that this excused us from re-examining the correctness of our conduct. Recently John Snow, former Treasury Secretary, and now the proud owner of Chrysler was on CNBC describing why the subsidized loans that Detroit automakers seek are not bailouts like Bear, Fannie, Freddie and AIG; he said they are “unfunded mandates”. This means he would like the same bailouts as the other entities, but he does not want shareholder value impaired or his management role terminated.

What were these mandates—Congress wanted the automakers to make fuel efficient cars. Like these automakers could happily skip along making SUV’s but for this Congressional mandate?



-Larry Salibra
View Bio

Plasticity of Legal Rhetoric

That phrase, “Plasticity of Legal Rhetoric” is not mine, but Judge Posner’s which he uses in his book, “Overcoming Law. However, I had recognized the concept long before I read it in Posner’s book, which, in fact, had been brought to my attention by a judge friend of mine who had been subjected to my ravings on the topic.

I decided to discuss this issue just after looking at the non-precedential conduct, because it fits into an underlying theme, we have a legal system that has very serious flaws—one of which is the ability to ignore real facts or create fictitious facts to get a result. If judges feel comfortable doing this, then non-precedential conduct becomes an extremely useful tool in helping, as Judge Arnold noted to hide the conduct.

So how did I describe plasticity of legal rhetoric? It is stating that a fact it true and repeating it two times in place of scientific evidence, or to refute scientific evidence to the contrary. Stated another way it is holding that a brick wall does not exist as matter of law and then making sure you are not in the vicinity of the brick wall as the speeding car approaches it.

It also has other very troubling manifestations.

The Rule of Three I’s

This rule is attributed to Warren Buffett, but I do not know that to be true. When I heard about it, I immediately thought about they way lawyers draft contracts

The rule says first come innovators, second there are imitators and finally come idiots. The commentator who described this rule and attributed it to Buffett was using the rule to describe how rational risk distribution became widespread and finally irrational.

I have litigated very bulky contracts drafted by very distinguished law firms, and was amazed at the level of confusion described in those large, undoubtedly very expensive, bound volumes.

The three I’s have an analogue in contract drafting. Initially a distinct problem is confronted by creative lawyers who draft a provision to address that issue. Then come the imitators, the bulk of our profession, they look at all those provisions in various contracts and copy them into their contract often without a complete understanding as to their relevance to the transaction—it is called boilerplate and tends to grow exponentially.

Then comes the last of the I’s. I actually saw a contract term that was in substance as follows: “In the event of two conflicting decisions by the United States Supreme Court on an issue addressed by this contract, the latter shall govern.”

Notwithstanding the extremely remote possibility that such a situation would exist, being invaded by an army from Pluto is probably more likely, this term does appear to state the obvious.

By the way, I did not make up this provision—someone was actually putting these in contracts.

New to In-House Committee Legal Quickie- online life

Any thoughts about what Ted Claypoole shared with the New to In-house Committee today on Second Life and the issues surrounding it?

Below is the description of the Legal Quickie from today's call:

Business Risks and Rewards in Online Virtual Worlds.

Moderator: Susanna McDonald, General Counsel, Claimant Management Systems
Guest speaker: Ted Claypoole, authority on internet law at Womble Carlyle Sandridge & Rice, PLLC

Topic Description:
Millions of people participate in online virtual worlds, and millions of dollars are spent in them. The three-dimensional immersive computing that characterizes these worlds will probably be the future of interactivity online for nearly all businesses. Companies are beginning to participate in these online communities, but the risks and rewards are not always clear.

This presentation will define and explain the significant online virtual worlds and will discuss who is participating in them. The speaker will discuss the various ways that corporations are playing and profiting from these social networks, and the new economies created by new worlds. Finally, the group will analyze and discuss the legal risks and business risks that your company may face if it chooses to play or profit in the virtual space.

In particular, the presentation will focus on legal risks highlighted bhttp://www.blogger.com/img/gl.link.gify the Second Life Banking Crisis of 2007-2008, and on case studies of corporate commitments to virtual worlds.

For more information on virtual worlds, including Second Life, visit the links below.

http://en.wikipedia.org/wiki/Virtual_world
http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=9018238&pageNumber=4
http://virtuallyblind.com/2007/05/04/trademark-infringement-vws/

What Are In-house Counsel Thinking—the Demise of Lehman and Merrill

I waited until Tuesday to write this because I wanted the emotion of the moment to fade. Those of you who have been reading my blogs have known that I have not been a fan of government intervention.

Today for those of you not in financial institutions your biggest concern maybe whether you will ever be able to afford to retire. But for our colleagues in financial institutions I am wondering what is going through their minds.

As a trial lawyer, the moment the jury went out or at the close of an appellate argument, I would begin reexamining every decision I made in the conduct of the trial or the argument and if the jury or panel returned with an adverse verdict, that re-examination would go on for weeks.

I am wondering if they are looking at those “complex financial instruments” and wondering like I did what they could have done differently, or whether their legal education even prepared them for this experience.

I was listening to Hank Greenberg this morning on CNBC attempting to distinguish AIG from Lehman. He said Lehman was insolvent, whereas AIG was simply illiquid. To me being illiquid means, there is money in my checking account, but I cannot cash a check today because the banks are closed; however, tomorrow it is virtually certain I will have the cash—I should have not problem pledging that check as collateral.

Insolvency means there is no money in the checking account. If AIG is in fact simply illiquid, why has it not been able to pledge its assets as collateral? I am wondering what AIG’s lawyers are telling their client—is illiquidity simply the asset owner’s euphuism for insolvency? Are we once again trying to make words dominate reality?

-Larry Salibra
View Bio

Judicial Imagination-- Making Believe We Are Competent

Recently, I had the opportunity to chat with a friend and former Chief Judge of a State Supreme Court. I was disappointed because, Illinois State Supreme Court that had apparently fought the politically correct position of adopting a mandatory CLE requirement had succumbed a few years ago.

I mentioned to my friend the fact that mandatory CLE was in my view a pointless exercise designed by the State Supreme Courts to avoid criticism for lawyer incompetence. Put another way if they adopted mandatory CLE they could avoid having to seriously address the issue or even think about it.

To my surprise, my friend readily agreed that mandatory CLE was a joke. Anyone hiring a lawyer who relies on the fact that the lawyer is up to date on his mandatory CLE is making serious misjudgment.

One has only to visit those CLE classes held between Christmas and New Year’s and look at the partially awake, well partied lawyers reading the paper, most of whom never had and never will practice estate planning to get a real a picture of the “well, it is got to be done” CLE.

Then there is the let’s make the best of it CLE, where tax planning in definitely a prime focus. You check in at the Royal Hawaiian, looking down the corridor at the blue Pacific and think to yourself, that a little torts and civil procedure is well worth the deductibility just for the view—not to mention that it is snowing back home. What this profession will do to insure they are fulfilling the public trust is remarkable.

Judges—do you really want to insure the public has cost effective competent legal service—competition is the answer—not mandatory CLE. Reduce artificial restrictions on access to practice and competition will solve the problem. In addition you will eliminate the administrative costs of monitoring CLE compliance.

-Larry Salibra
View Bio

Ready for a Legal Self-Examination?: Legal Issues and Trends to which Every Nonprofit Should Pay Close Attention

Just as you visit your doctor to get your annual physical, as an in-house attorney, it is prudent at least once a year to diagnose your nonprofit organization's legal health and well-being. Even if not an expert in every area of law, a successful in-house nonprofit counsel needs to be able to spot legal red flags and be able to effectively
manage them.

Later today on the Nonprofit Organizations Committee conference call, we'll be presenting a "legal quickie" on a number of the most significant legal issues faced by the typical nonprofit organization today. Topics will include everything from meeting contracts to tax exemption to lobbying disclosure to copyrights and trademarks and more.


Identified in our ACC Top Ten article on the same topic are ten key current legal issues and trends to which every nonprofit organization should pay close attention. Alongside each issue is a link to one or more articles on the topic, to provide you with additional information necessary to do some legal self-examination.

Why Federal Courts . . .Part 7

WHY FEDERAL COURTS DO NOT APPLY THE RULE OF LAW: Part 7: Epilogue

First, let me point out an error I made on the prior blogs. I stated that Anastasoff (blog 1) was seeking to have a prior unpublished opinion applied so she could obtain a refund. That is not correct; she wanted the prior case unpublished case ignored so she could get the refund. Although this error does not impair the point I was making that the essence of common law requires the similar treatment between similarly situated parties, I am a bit surprised no one pointed out the error.

There has been much written about this topic and you can access a lot of it at this site. Many of the articles have direct hotlinks to a pdf file of the article.

What is most troubling is the recent emergence of this practice in Britain, described by Lee Peoples in his article comparing the practices in the US and Britain. A review of the history of the development of the common law in this article incorporates a reference to the limitations that technology placed on publication. The obvious limitations of the oral decisions of judges and hardbound publication have largely been eliminated by technology. The justification for the emergence of this practice in England, efficiency, by saving lawyers judging time and money, basically the Alito position, Peoples describes as “a sharp break with centuries of tradition”.

Why now? Why with technology dramatically reducing both time and cost in seeking relevant cases are the courts so concerned about efficiency? Why didn’t they adopt a rule prohibiting the introduction of recollections of oral rulings and limit precedent to only the few cases they chose to be considered precedent centuries ago?

Perhaps more now than ever before the technology is doing to judges that which it is doing to the rest of us—making them more accountable for the quality and consistency of their decision making. We no longer have the luxury of arguing that we were not speeding at the time of the collision when the computer chip in our car says we were speeding.

More than any other branch of government, the judiciary is the most opaque—an in certain respects more dangerous. Perhaps it might not be able to reek cataclysmic havoc on us with the same overwhelming scale and intensity as the other branches—but such havoc has an important check—the fact that it impact is highly visible and strikes many at the same time, and therefore is far more likely to face strident opposition.

Judicial malfeasance is less visible, but its impact on those subject to its abuse is no less traumatic and in many cases the victims more defenseless.
In the web site I mentioned you will get many points of view, particularly from academics whose policy arguments often lack a critical perspective—that of looking down the barrel. For the criminal defendant who is denied a fair trial or the defendant unjustly forced to pay a judgment, efficiency may not seem to be a very important goal.

However, there is one major fallacy in the efficiency argument known to anyone who has tried a case and done a Lexis search on the law—the real cost of the litigation is generally not involved in preparation of your jury instructions or memorandum of law. It is in the development of the facts.

I have had the opportunity to find cases of judges with rulings contrary to the position they wanted to take with respect to my client, and watched them squirm when the ruling was brought to their attention—they do not like the feeling and that is why the non-publication—non citation rule exists.


-Larry Salibra
View Bio

It is a battle, not the war

No doubt that you all received e-mails from ACC including the personal note from Fred Krebs announcing the victory in changing DOJ policy on the attorney-client privilege. I want to extend my congratulations, particularly to Susan Hackett who has led the ACC effort.

However, in our enthusiasm, let us not forget that this was a joint effort among many organizations, including the National Chamber of Commerce, WLF and others and we need to jointly reaffirm our coalition because the job is not over. Winston S. Churchill said following the victory at El Alameinin in North Africa in WWII: “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

In a series of blogs I described the systematic erosion of federal business civil liberties detailed by a paper recently published by the Washington Legal Foundation. Steve Bokat detailed the extensive participation of many organizations that have worked alongside ACC and WLF to confront these issues as a community. The present victory corrects an important part, but just a part of the overall problem. The judicial expansion of the crime fraud exception, for example, has many of the same detrimental impacts on the attorney-client privilege.

Of course we need to recognize the present achievement, but we also need to reaffirm our cooperation with coalition of which ACC is a part and use this opportunity to renew our commitment to win the war.


-Larry Salibra
View Bio

Why Federal Courts . . . Part 6

Part 6, Justification #4: A non-precedential opinion can be argued for its persuasiveness, even though it is not precedential.

This position appears to be the present state of affairs in the federal courts—the old rule was that if you cite a non-precedential case you will be sent to the eighth circle of the Inferno; now such a citation simply risks being sent to Purgatorio.

The position was advocated by Justice Samuel Alito and unfortunately reflects a fundamental misunderstanding of the common law and the nature of precedent. It was advocated by him (when he was at the Third Circuit) at the Congressional Hearing on the topic and was justified by the argument that if every opinion was written to be precedential judges would not enough time.

First, the “I am overworked” argument of the federal bench is meritless. The reason we have an opinion is for the bench to explain to the litigants the legally operative facts, how the law applies to those facts and therefore, the result. We do this to insure as, Judge Arnold (blog 1) noted, that the judiciary has a legitimate basis for the decision. If the federal judge is overworked –too bad, get another job. There is a long line out there looking to replace you, including a number of state judges in Ohio, who have far larger caseloads where every case is precedential.

Second, it conflicts with Judge Becker’s(Blog 4) position that even if a case is not precedential, the judiciary should provide the litigants with an explanation for the outcome. It seems that such an explanation should include a description of the operative legal facts and a description of how the law requires that result under those facts. Is that not a description of precedent?

Third, a case is persuasive because it has the same operative legal facts as the case before the court and is not legally disguisable. It is in fact precedent and similarly situated parties require similar treatment. With all due respect to Justice Alito, whom I know, how else can a case be persuasive? The reasoning sounds good because it is written in iambic pentameter?

-Larry Salibra
View Bio

Time May Be Money, But No Time To Think May Cost You More Money

In my bio, I said that one of my objectives was to get you to think about things that the preoccupation of your careers and family duties would prevent. Today, I realized that time to think might be more scarce than I might have imagined. It just may be that the frantic pace of our lives to increase productivity might actually start to become counterproductive when the consequence of the pressure to produce begins to preclude our ability to think about what we are doing.

For those of you who do not know—I am a big time tool guy. Not only do I have the full panoply of wood working machinery, commercial quality of course, but I also have a metal lathe, welding equipment etc. During my career I did a lot of work with my tools, designing and building cabinets and furniture among the numerous other repairs and improvements that a house requires.

In the last 10 years or so of my formal working career I did less and less of this work and the jobs requiring attention around the house accumulated. When I retired the jobs needing attention was overwhelming. In addition, I was older, and the ability to use brute force to move things was not the alternative it used to be.

Have you noticed the change in the profession the last 15 years or so—the fact that you appear to have less time to think about what you are doing because of the pressure to get it done or is just me?

Well today I was tackling the repair of my 100+ year old stable (really a shed) converted to a workshop. Rafters had to be replaced—and there I was with 12 ft water-soaked rot resistant 2X6s. Brute force to get these into place under an existing roof was not an option. But do you know what I had—I had time to think about how to do it by myself. And with time to think about a solution, it turned out to be quite a manageable task. I have found that time and again lately—the time to think about a problem made its solution manageable and quite efficient.

It occurred to me that the same might be true if I had to confront a legal problem. Rather than being forced to leap in by time pressure for a solution—if I had time to think that solution might be better and more efficient--any thoughts?

Shortly, I will begin to develop my theories about why lawyers automatically apply legal process to solve problems and do not think about alternative, more efficient solutions at a graduate school of business. Hopefully businessmen will be able to recognize and manage the problem. Law schools are part of the cause of this problem, but not taking or having time to think about solutions might well be another.

-Larry Salibra
View Bio

A real win-win day for the privilege

It was a good day for attorney-client privilege junkies like me here at ACC
(and that means if you're corporate counsel, it was a REALLY good day for
you and your clients' rights): the DOJ finally issued its promised
revisions to the McNulty Memo and (are you seated?) actually reversed every
single issue we've protested in the Holder/Thompson/McNulty Memo process.
Every one. No more privilege waiver as a condition of cooperation; no more
assertion that work product claims aren't valid if the work product includes
otherwise non-privileged facts; no more forcing companies to fire employees
or revoke their right to attorneys fees before the facts are in and as a
condition of cooperation credit; no more tactics that suggest that companies
have to throw employees under the bus in order to defend themselves.

The link to the new document that governs US attorney consideration of the
criteria of corporate cooperation is not yet up on the DOJ's site, but we've
got a copy. And we've had the DAG's assurances - he was looking us in the
eye when he said so.

Now here's the really interesting part: DOJ didn't issue a new memo. They
instead inserted this new guidance into the US attorney's manual as a new
section of the manual. In case you're not familiar with it, the manual is
not a policy which can reside at the bottom of the fifth file cabinet down
the hall. It is on every prosecutor's desktop and is the bedrock governing
prosecutorial conduct. US Attorneys take it very seriously and are very
proud of it, too. What this signals is DOJ's attempt to not only amend the
policy with words, but also to convey to prosecutors in the field that their
feet will be held to the fire for non-compliance with this policy. That was
clearly not the message that the previous memos (residing in the fifth
cabinet down the hall) conveyed to prosecutors prior to this announcement.

And so ... I still want legislation that provides finality and comprehensive
coverage across every agency of the US government with a copycat McNulty
policy (since DOJ reversing it's policy does nothing to reign in the SEC,
the DOL, the HUD, the IRS, and so on), but I am proud to announce that we
have won a DOJ policy with teeth (and trust me when I tell you that we've
fought hard for this for over 3 years, so I'm serious when I say we've
"won"). We have a DOJ policy that includes paragraphs on the importance of
the attorney-client privilege to the responsible behavior of well-governed
and well-counseled companies. We have a Department that is committed to
assuring the success of this policy. And we have an agreement that
privilege belongs to the client, and it is not the province of DOJ to
request, demand, or dismiss its waiver at will.

After watching so much political convention coverage in the last few days, I
feel like I should end my post as virtually every speaker for the last 3
days has: "God Bless You, God Bless DAG Filip, and God Bless the Our Legal
System and its Protection of the Fundamental Client Right to Attorney-Client
Confidentiality!"

-Susan Hackett

The Emerald City

I’ve been doing a little research about the location of this year’s Annual Meeting- Seattle, WA. An interesting fact- Seattle was named one of the top ten green cities in the nation by National Geographic. In fact, the Washington State Convention & Trade Center (WSCTC) in downtown Seattle announced the availability of the nation’s first completely compostable water bottles available for convention center clients. The center’s new, .5 liter water bottles are made from corn-based resin (PLA) and the entire bottle, cap, label and contents are 100 percent recyclable, biodegradable and compostable. By contrast, traditional petroleum-based resin water bottles take up to 5,000 years to decompose.

We’re very proud to have our meeting in Seattle, as ACC continues to ‘go green’. Last year, we moved away from our printed course materials (books that were easily hundreds of pages of printed paper for each attendee) and gave everyone electronic versions of the materials. We’ll be doing the same this year.

I can see why Seattle is recognized as a clean, environmentally conscious city- they have wonderful national treasures to preserve. If you’re getting into Seattle before the meeting, take a walk through Pike Place Market, eat in the international district, or take an Orca spotting tour. Why not take in a Mariners/Seahawks game, or a dinner cruise on the Puget sound? Take a ferry ride, check out Discovery Park, the Space Needle or ride the monorail. And don't forget to take public transportation; all of the buses are either electric or run on biodiesel! These of course, are all things I hope to do while in Seattle. Do you have any other suggestions? Send them along!

Still haven’t registered for Annual Meeting? What are you waiting for? Register Now!

-Nichole Opkins

ACC’s Annual Meeting- Who’s Ready?

So we’re 7 ½ weeks out from the big show- The 2008 ACC Annual Meeting. This will be my 4th meeting with ACC, and I have to say, probably my most exciting since I’ve spent the last year working closely with 2 of our 16 committees- IT, Privacy & eCommerce, and New to In-house. These have been great committees to work with- the members are committed and interested in the monthly teleconferences, the creation of their programs for AM, and to the overall success of their fellow committee members. And, I am proud to announce that the New to In-house Committee won the Committee of the Year Award- A great accomplishment which they share with the Employment and Labor Committee. This was on top of a Sponsor of the Year Award given to NTI’s co-sponsor Womble Carlyle.

I look forward to attending the Leadership Dinner on Sunday, October 19th, at the Experience Music Project, where these awards will be presented.

-Nichole Opkins

Here We Go Again- And It's Not Even Father's Day Yet

In honor of the hard work, honesty and moral fortitude of my father and grandfather, I wrote an entry contrasting their behavior with the euphuisms bandied about Wall Street and the media to distract one’s attention from the fundamental causes of the credit crisis. Since then the government (both parties) have engaged in further conduct that disregarded the fact that people made blatantly bad choices and are now forcing the rest of us to bail them out. Bear Stearns was followed by foreclosure bailouts, and then Fannie and Freddie.

I suppose that I should not be surprised that the Detroit automakers are preparing to stick their hands out. For those of you in our profession who are helping them polish the cups that they intended to pass around Washington, you have my sincere condolences. But there is good news. I have found a solution that will solve all the problems that we face.

The solution is a comprehensive bailout for everyone. Rather than the piece meal approach, we simply prepare a bailout application form to be included in all the IRS form packages. The form will permit each US citizen to apply for a billion dollar bailout. They need simply fill out the form and answer a few simple questions to qualify for a check from Uncle Sam for a billion dollars.

Beyond the general identification information, they need to check one of four questions explaining their need for the bailout. The form will state as follows:

Please state your justification for requiring the bailout by checking one or more of the four boxes below:

1. I have run my business with the same skill as the CEO of GM, with similar results, but did not get anything near his salary.

2. I take private investors money, insuring them a great return by taking companies private and running them with my skill and judgment, and if things do not pan out, I will get my friends in DC to cover up my gross misjudgments.

3. Before I went to work on Wall Street I got a MBA from Harvard and no one there ever mentioned “risk” in the entire time I was at the Business School (My colleagues from Wharton, Yale and other business schools were not told about risk either).

4. None of the above applies to me, but they are such silly reasons, I deserve a bailout too.

Once every citizen gets his billion dollar check the housing crisis will disappear. People in foreclosure will be able to make their payments; prices will go up as the inventory is absorbed because everyone will be able to afford a minimum of four houses.

Admittedly, business in the US might suffer a little wage inflation because many will leave the workforce choosing a life of leisure. GM may have to move everything out of the country, but jobs for people in Michigan will be irrelevant.

Wait you say, we don’t have enough money to give out that kind of bailout. I thought about that –we are going to borrow it from China.

But what happens when it becomes clear that we cannot service the debt because we are not producing anything—China may threaten dire action—Got that covered too! We simply point out: “WE ARE TOO BIG TO FAIL.”


-Larry Salibra
View Bio

Why Federal Courts . . .Part 5

Part 5, Justification #3: Judges Need to Select The Proper Case As Vehicle to Announce A Principle Of Common Law Which Limits Its Misuse By Lawyers.


This justification is the most peculiar of the lot and to the extent I can determine is advocated largely by Judge Kozinski of the Ninth Circuit. His thesis is that by selecting the proper case to articulate a doctrine of common law one can minimize the improper use of opinion by lawyers to achieve a result unintended by the judges articulating that opinion.

There are a number of problems with this justification. First, research has demonstrated that judges are simply unable to predict which cases are likely to have long term precedential impact. See: Foa, Pamela, “A Snake in the Path of The Law: The Seventh Circuit’s Non-Publication Rule” 39 U Pitt Law Rev. 309 (1977-78). Thus the facts of the case you treat as non-precedential may have the most profound unintended consequences.

Second, there are costs to leaving an area of law unclear waiting for the perfect case. Any idea what the perfect case looks like?

Third, it is hard to believe that a reasonably competent judge can not explain why a result can be distinguished from or is comparable to a prior decision. If he is troubled by the quality of his explanation, perhaps as Judge Arnold (first blog on this topic) noted, this more likely signals a cause for concern about the quality of the decision rather than its potential for misuse.

Finally, who is to say it is a misuse. Would Anastastoff have been misusing a case because she felt that if a prior party was entitled to a refund even though the IRS received the application after the due date which was mailed before the due date that she was entitled to the same result if she mailed her application before the due date?

Seems to me she was simply asking for equal treatment under the rule of law.

-Larry Salibra
View Bio

Why Federal Courts . . . Part 4

Part 4, Justification #2- Federal Judges Are Overworked and Can Dispense With Cases Faster If They Are Unpublished and Non-Precedential

Read Justification #1

This argument posed by the late Judge Becker and his academic supporters can be viewed in full in “Controversial Cases Disappear”, CORPORATE LEGAL TIMES, November 1999, Vol 9. No.96. The late Judge Becker felt that as long as the court offered some explanation for the decision to the parties; it was otherwise fine for a case to be non-precedential because it relieved the court’s work load. The notion of speed of adjudication was supported by an Assistant Professor of Law at Auburn University, who cited a study that concluded that unpublished decisions speeded the resolution of cases. He stated in Corporate Legal Times Article: ‘“If justice is delayed justice is denied, then the limited publication rules do reduce the delay and denial of justice”…’

Both arguments demonstrate a profound misunderstanding of the common law. Precedential impact is important because at the very least it is a check on inconsistent judicial behavior. If a case is clear, undisputed then it should be a simple matter to describe the facts, the applicable law and the result, such that similarly situated parties are treated the same.

One could just imagine Vinny Gambini’s (My Cousin Vinny) response to these assertions applied to facts in the Anastasoff case that concerned Judge Arnold (Part 1): “ Are you telling me that plaintiff A, who mailed her tax refund at the same time as plaintiff B, before the deadline date and both refunds were received by the IRS after the deadline date, that A is not entitled to a judicial ruling that the IRS was compelled to honor the refund even though B got such a ruling because B’s ruling was non-precedential? Judge Becker says it’s OK because we explained the ruling to A—‘B’s decision was not precedential’ and the Auburn Professor says it was fast—therefore A got justice!”

I am done with this one!


-Larry Salibra
View Bio

PRO BONO—A Noble Endeavor . . .

. . .or How We Rationalize Our Maintenance of Artificially High Legal Costs

I want now to focus on another sacred cow of the profession—“pro bono”. I am not against insuring that everyone has access to legal services, I just don’t believe we should deprive people of the dignity of being able to pay for their own services by creating restrictions to practice that keep the cost of legal services artificially high.

For those of you who believe I alone have concerns about the economic-centric nature of this profession; it would be worth looking back more than 20 years ago to 1983 when I was a relatively young lawyer. The profession was trying to demonstrate to the world it was ethical, and ABA House of Delegates Approved the Model Rules of Professional Conduct. A then relatively young ethics professor at NYU, Stephen Gillers, wrote an article about those rules in 1985 in 46 Ohio St L.J. 243, 245-246 entitled “What We Talked About When We Talked About Ethics: A Critical View of the Model Rules. He summarized the article thus:

Close-up, I will argue, little that is flattering. The bar has drafted a code that proves the wisdom of its own precept against client-lawyer conflicts. The lawyers who approved the Rules looked after their own. They have given us an astonishingly parochial, self-aggrandizing document, which favors lawyers over clients, other persons, and the administration of justice in almost every line, paragraph, and provision that permits significant choice. It is internally inconsistent to the bar’s benefit. It continues the practice of using the language of ethics to mask the controls on the availability of services that in turn artificially inflate the cost of services.

My sense is that little has changed since then. Courts still impose artificial restrictions on practice by creating barriers to entry, even among lawyers. The Federal Courts are an embarrassment. If you wanted to try federal cases in the State of New York you have to get admitted 5 different times. The rules are not designed to protect the public; they are designed to protect the power and economic interests of the few, including the judges.

So what do we do; we lament that the lower income members of community do not have access to affordable legal services, because we have done everything we can to insure that is the case, and to make ourselves feel good we deprive them of their dignity by requiring them to take what we offer for free instead of letting the market provide affordable legal services tailored to their needs.

I recently got a request from my local chapter to participate in a pro bono effort they are arranging. I am not admitted in this state so giving advice to private parties would not be prudent, moreover, unless these people have created Superfund sites, have problems with international commercial transactions, or complex corporate tax issues, I would probably not be a lot of help.

-Larry Salibra
View Bio

Why Federal Courts Do Not Apply The Rule of Law

Part 3: Justification # 1—Outcomes in Non-Precedential Cases Are Not Subject To Reasonable Differences of Opinion

To my mind, the most persuasive justification for treating a decision in a non-precedential manner would be that the result is so obvious that there is literally no dispute concerning the nature of the outcome. Stated another way, no reasonable minded person would reach a different conclusion concerning who wins and who loses. Unfortunately, the objective data simply does not support this justification.

In an article in Forbes, entitled “Justice in the Dark”, October 10, 2000, the author debunks that myth with some startling statistics. In the 79% of the cases that are unpublished and non-precedential the district courts are reversed an astounding 37% of the time and there is disagreement among the panel that results in a dissent 24% of the time.

In the year these statistics were gathered there were 26,819 federal appellate decisions. There were 7,839 reversals in unpublished non-precedential opinions. There were only 5,682 precedential opinions in that year!

That great trial lawyer Vinny Gambini in My Cousin Vinny stated: “Are we to believe that water soaks into a grit faster in your kitchen than anywhere else on the face of the earth?” To paraphrase Vinny: “Are we to believe that there are more district court reversals in cases that are supposedly beyond dispute, than the entire universe of precedential cases, which presumably are intended resolve controversial situations?”

I am done with this one!

-Larry Salibra
View Bio

Why Does Historical Perspective Appear to Minimize the Impact of Change?

I looked at the ACC blog on e-discovery and read Nichole Opkins’ article, Online Social Networking and Your Career: Are You Staying Ahead of the Game?, ACC Docket, July/August 2008. Both describe dramatic changes in technology and their implications on the practice of law. I had heard these before over my career. No doubt I have seen much in the way of technological improvements in my career, and I am not that old. However, I can not say that I have the impression that a great deal has changed.

Lawyers fret today about the e-mails that people write because to an large extent people treat an e-mail like a telephone call, forgetting that an e-mail lives on. I have been in lawsuits where such e-mails were problems for our case, but, people being rather similar, I was also the beneficiary of similar e-mails from the other side. I am not convinced there was a net impact on the outcome of the case, the nature of the dispute or the justice system. I have not read the University of Denver materials referred to in the ACC blog that suggests huge potential for change as a result of e-discovery—they may convince me otherwise, but I have heard such claims before.

I recall a visit to ZEROX as the guest of Bob Banks, ACC’s first Chairman, who proudly showed me a new scanner, that was huge and expensive, and gobbling up documents fed to it by a battery of paralegals. The internet was in its infancy at the time; it would be years before we would get e-mail at my company. This ability to manage and sort all these documents was touted as something that was going to dramatically change the practice of law—it did in that everyone started collecting and collating thousands of documents, where before it may have only been hundreds. We all fretted about all those documents that were now accessible.

Believe or not, for you younger folk, we even fretted about the photo-copier. For those of us who remember carbon paper, the photo-copier was viewed as something that really impaired our ability to control troublesome documents because of the ease of proliferation; it was seen a portending huge changes.

I have won cases on very rare occasions because I was able to get the smoking gun through discovery. For those of you who, like me, still admire Perry Mason, we did not prevail like Perry because we were able to whip out the document at trial in a dramatic reversal of fortune, as we were on the edge of losing. Typically, the other side has the document too and congeniality returns to the litigation. What was notable about these documents is that they were the result of simple common sense document requests you would have requested and reviewed, even if the only technology was carbon paper.

Has technology resulted in changes in the profession-certainly? Has it been as profound as we might have thought it might be? Well, there is a possible answer in a very insightful observation that Nichole quotes from the CLO of Cisco at the beginning of her article: ‘[T]he legal industry seems to be “the last vestige of the medieval guild system to survive into the 21st century”.’ Does that need to change--certainly? Is technology likely to be a significant cause of the change—it has not been to date!

Whether the huge increase in available information will create untold potential impacts that Nichole outlines or whether in the end it will diminish the impact of any single piece of information by making readers and users more skeptical, less sensitive and more demanding in terms of confirmation is not clear to me, but it is definitely worth thinking about.

Why Federal Courts Do Not Apply The Rule Of Law Part 2

Click here to read Part 1

Part 2 In The Beginning

If you ask proponents in the federal judiciary to justify the practice of non-precedential, unpublished opinions, they list of serious sounding justifications—things like these cases have a clear and undisputed outcome and don’t add to the development of the law—things like that? Are these really the reason for the initiation of the practice?

Yes and no is the answer. We will review these explanations and the critical studies on their validity in future blogs. But the primary motivation for the practice was that books were too expensive. Presumably, there was some effort in selection to try to select the important cases for publication. However, trying to do that and successfully doing that are two different things and presumably, there can be some negative consequences if you are wrong—for instance when the facts of non-precedential cases prove to be more relevant to future circumstances than the case that is published.

The idea was that publishing all the cases put small practitioners at a disadvantage because they could not afford to maintain the libraries of large firms—by limiting publication the disadvantage would be minimized. Not such a bad notion if case law really had that much relevance to determining the outcomes of a case—a notion we will examine in a future blog.

However, not long after the policy was adopted its justification was eliminated by technology with services like Lexis and Westlaw, and now the internet generally. The potential technological impact of these new services was like solder-in vacuum tubes to make portable radios small (I have a few hanging around) that had a life span that was so short most people my age that lived through their existence, probably never saw one. Transistors eliminated the vacuum tube portable radio in a flash. Paper law libraries had a longer life span.

Paper libraries lived on in large firms long after technology made them irrelevant since they had become a marketing show piece for client tours as well as functional entities. Their cost was also hidden in law firm overhead and not separately charged, and of course, there was the ability to maximize associate billing time by making associates walk to the library and around it if the book they were looking for was out of the stack.

So why does the practice of un-published, non-precedential opinions live on? We will examine that in future blogs.


-Larry Salibra
View Bio

ACC Member Blogs

Last week, the chair of the ACC New to In-house Committee, Adam Palmer, was asked to be a guest blogger for The Washington Post. Thanks for letting us know about this, Adam. I encourage all of you to take a look at what he had to share.

Do you have a blog you'd like your fellow in-house counsel to know about? Let us know!

-Nichole Opkins
Assistant General Counsel, ACC.

Why Federal Courts Do Not Apply The Rule Of Law

This topic presented itself because of a phone call I received a couple of days ago from a lawyer who had a client that received second class treatment from the federal courts. Is it common? Last time I saw the number about 80% of federal cases treated the parties as second class citizens—the opinion is deemed non-precedential.

The lawyer called me because he believed I was a one man campaign against the practice of non-precedential opinions. There were a few others. The ABA opposes the practice, but not very loudly. Most law schools and law professors rather than being outraged and railing against the practice have largely been oblivious to the conduct, content to focus on the 20% of the cases that might appear in the case books.

In the next few blogs I will explore the history and review the attempts at judicial justifications for the practice. I will also try to pay tribute to a unique federal appellate judge who was equally troubled by this practice, and died tragically at far too young an age. Richard Arnold, was more than a fine judge—he was a fine person. Although I never met him in person, I enjoyed our numerous conversations on the topic.

Judge Arnold faced the consequences of this practice in its most blatant form. The government was arguing that the fact that a prior litigant whose position was factually indistinguishable had been found entitled to a refund could be ignored by the court who was free to rule against the present litigant because the prior decision had been designated by the Circuit as “non-precedential.” Judge Arnold expressed his concern like this:

If, for example, precedent is cited, and the other side offers a distinction, and the judges on the panel cannot think of a good answer to the distinction, but nevertheless, for some extraneous reason, wish to reject it, they can easily do so through the device of an abbreviated unpublished opinion, and no one will be the wiser… . Or after hearing oral argument, a judge in conference thinks that a certain decision should be reached, but also believes that the decision is hard to justify under the law, he or she can achieve the result, assuming agreement by the other members of the panel by deciding the case in an unpublished opinion and sweeping the difficulties under the rug…a system that encourages this sort of behavior, or is at least open to it, has to be subject to question in any world in which judges are human beings.

Anastasoff v. United States, 223 F. 3rd 898 ( 8th Cir. 2000); the opinion was vacated on other grounds.


-Larry Salibra
View Bio

Federal Erosion of Business Civil Liberties: Part 5

In the prior blogs on this topic I have hopefully persuaded you that this is a matter of considerable concern. Although the first reaction of many might have been less than sympathetic, it is clear that business is being faced with the potential for criminal prosecution that does not have the protection of the public good as its objective. Prosecuting authorities fabricate evidence and use it to intimidate the innocent in order to pursue their own agendas.

The exponentially expanding potential liability is growing faster than even the most arduous counsel can master, and the doing so in such an vague and confusing manner that determining a course of conduct to avoid liability is challenging at best, totally impossible at worse.

Civil remedies had been largely ineffective in discouraging abusive conduct and the federal courts, beyond acknowledging improper conduct, have done little to exercise their authority to sanction those who are guilty of even the most egregious conduct.

You might ask what more can happen. The answer is there is more—the development of governmental and judicial policies whose objective is to deprive business the effective representation of counsel. Beginning in 1999 the DOJ began the attack permitting business the right to effective representation of counsel using enforcement policy that encouraged the waiver of the attorney-client and work product privilege. Waiver of these privileges became a gauge of cooperation. Such a policy places a wedge between in-house counsel and their client who can never be sure whether waiver of the privilege will expose them to having their in-house counsel become an instrument that is adverse to their interests, causing company employees to be suspicious of in-house counsel and less than candid in their conversation.

The courts have also been a part of this problem by expanding the Crime –Fraud exception in a manner that threatened the exposure of counsel’s conversations with his clients in an environment where advice of counsel had become critically important. I had the privilege of writing the Introduction to a WLF monograph on the topic written by the Honorable Richard Thornburgh, “Attorney-Client Privilege and ‘Crime-Fraud’ Exception: The Erosion of Business Privacy”, Sept 1999.

What can you do? First, get the WLF monograph available from WLF, at www.wlf.org. It is far more comprehensive than my brief blogs and has detailed recommendations for change. Second, support WLF’s efforts. Third, support ACC’s efforts; it has also been in the fore front of the efforts to confront this challenge.

Protecting business rights is as important as protecting individual rights. When prosecuting authorities and the judiciary lose sight of the proper role of criminal enforcement with respect to business activities, it is only the naïve who believe that individuals will be immune from similar conduct.

More On The Federal Erosion of Business Civil Liberities

When Does Criminal Risk Arise?

In the prior blogs on this subject I have said that you and your clients are in an environment in which criminal prosecution could occur without reasonable expectation, and that enforcement agencies have demonstrated little judgment in exercising restraint.

In addition, other than expressing written outrage at some prosecutorial misconduct, the Federal Courts have demonstrated little inclination to exercise judicial sanctions to restrain or discourage even the most outrageous conduct.

I hope I convinced you that the extent of the potential liability is far greater than you imagined. After over 30 years of practice, the WLF report surprised me when it described the extent of potential federal criminal liability.

The next issue is whether the criminal laws are sufficiently clear that you can give your client advice with some reasonable degree of certainty that if they follow it they will avoid criminal exposure. The answer is no for two reasons.

The first is that many of these laws and regulations defy reasonable understanding. “I believe we have five people in the agency who understand what ‘hazardous waste’ is.” United States v. White . 766 F. Supp 873,882 (E.D. Wash. 1991). “Businesses and individuals are faced with a ‘regulatory hydra’, and regulatory terms suggestive of “Alice in Wonderland’ as one court put it . United States v Mills, 817 F. Supp 1546, 1548 (N.D. Fla. 1993)

The second is that the courts have diluted the mens rea requirement to the point of meaninglessness. One court in 1987 found the mens rea requirement was met when no individual in a company had the necessary intent, but combined they reached a “critical mass” under the so called “collective knowledge” doctrine.

As the WLF reports notes what makes matters worse is that targets of criminal prosecution include not only individuals who actually committed the regulatory offense, but also the company under the doctrine of vicarious liability, and corporate officers, under the so called responsible corporate officer doctrine, even though they were neither aware of nor condoned the conduct.

You have got your work cut out for you.



-Larry Salibra
View Bio

eDiscovery Resources

According to a recent national survey, electronic discovery is ranked as the issue that will have the biggest impact on the practice of law in the next five years. Recognizing the accelerating impact of e-discovery, the Institute for the Advancement of the American Legal System (IAALS) at the University of Denver has released two new publications on this major issue.

The first publication, The Emerging Challenge of Electronic Discovery, Strategies for American Businesses, provides businesses and organizations with strategies to proactively prepare for e-discovery. The second report, Electronic Discovery: A View from the Front Lines, presents a real-time snapshot of today’s electronic discovery landscape. Both publications may be downloaded free of charge by visiting our Web site, www.du.edu/legalinstitute.

IAALS is a national, non-partisan organization dedicated to improving the process and culture of the civil justice system. They provide principled leadership, conduct comprehensive and objective research, and develop innovative and practical solutions – all focused on serving the individuals and organization who rely on the system to clarify rights and resolve disputes.

Why Do Law Firms Grow?

This blog is another in a series of blogs around the fringes of ACC’s Value Challenge. As I said in my Bio, one of my purposes in these blogs is to give you an opportunity to think outside the box, a luxury that your daily routine may not permit.

So why do law firms grow? If you go to a big firm what are you buying. The firm would tell you that you are getting a great array of services. So why do you need a great array of services? One of the reasons you exist is to provide your client access to the precise legal service it needs. Perhaps that means giving the advice yourself. Or it may mean finding the expertise that is more cost effective and better than the big firm.

Well, you say big firms grow because they have the best talent, attract lots of clients because of the quality of service they provide—wrong answer. They grow because they have to grow—it is genetic. To be sure, going beyond the demand for services or at least the ability to artificially create demand does have limits and portends change

In the Tournament of Lawyers; the Transformation of the the Big Firm, University of Chicago Press 1991, the authors describe the tournament to become partner, and the need to create partners to give legitimacy to the tournament as the reason large firms get bigger and they predicted a lot of the changes we have seen since the book was published.

However, there is one thing that can have a very dramatic impact on the existence of the big firm—a rigorous, objective standard to evaluate actual quality of service. The first thing you are probably buying at the big firm is prestige—because in an environment where the ability to evaluate quality is hard and the costs of misjudgments (as distinguished from wrong judgments) is high, prestige becomes a surrogate for judging quality, or at least a source of cover for you if you selected that firm over a small firm who might have gotten the same adverse result for the same reason.

Please note that when I said judging quality was hard—I did not say impossible. We will explore some options in later blogs to see exactly what you are buying.

-Larry Salibra
View Bio

Federal Erosion of Business Civil Liberties

The extent to which the Federal government has criminalized conduct is extra-ordinary. By 1900 there were 165 federal criminal laws. That number had increased to around 2000 by 1970. In 1998 the number had grown to 3,300 and by 2004 to more than 4000.

This is only part of the problem. The Code of Federal Regulations contains many regulations that can be criminally enforced. Estimates are that there are as many as 300,000 criminally enforceable regulations.

So for those of you out there who considered yourself a civil lawyer and only watched Perry Mason for entertainment, think again. You may be closer to being a criminal lawyer than you think.

But you respond, we always gave advice on matters that could result in criminal prosecution—violating various securities rules for example. How about those other 290,000 and 3500 regulations and statutes that posses the potential for criminal sanctions, do you know what they are? More importantly, would you even recognize them if you saw them? Chances are you are thinking no is the answer to both questions.

Perhaps what is even more of a concern, even if you happened to be aware of the potential for a criminal sanction could you confidently give advice to avoid a violation?
We will address that in the next in this series.

-Larry Salibra
View Bio

Replacement Tenants and Remedies in Co-tenancy Clauses

An important aspect of a co-tenancy clause can be the types of replacement tenants that are deemed satisfactory to a tenant if the initial co-tenant ceases operations, particularly if the co-tenant has the right to cease operations under its lease, or is not otherwise bound by an operating covenant. A landlord that does not have the express right to replace co-tenants can be in an untenable position if a named co-tenant, or the co-tenant in a required category goes bankrupt or otherwise ceases operating, and often the specific named co-tenant is less important to a tenant than having a quality retailer that will continue to draw foot traffic into the shopping center. The replacement tenant concept is most likely to be acceptable to a tenant in an ongoing co-tenancy clause; tenants, as business people, generally understand that the landlord cannot control a tenant’s business model and can’t prevent a tenant from going dark or bankrupt. As the goal of a co-tenancy clause is mainly to keep the tenant in an active center, a replacement retailer bringing in comparable foot traffic should be acceptable. A clothing store co-tenant should be easily replaceable with an alternate clothing store of similar quality. With respect to a named co-tenant, the acceptable replacement co-tenants may not be in the same general category. A landlord would not want to be bound to replace a co-tenant Lowe’s only with Home Depot as the business reasons causing the first tenant to close will often be applicable to another retailer with such a similar concept. Instead, particularly with ‘big box’ tenants, landlords try to negotiate the right to break up large spaces and replace co-tenants with general categories like “national retailers” so that a Lowe’s can be replaced by 3 or more 20,000 square foot national retailers in any category.
With respect to remedies for co-tenancy failures, the standard ones are alternate rent and termination remedies. The loss of a co-tenant typically has an economic impact on the tenant so some adjustment or abatement of the tenant’s rent is the most direct way to compensate for the loss. A co-tenancy failure will often have more of an impact over time, so it is not unusual for there to be a ‘grace period’ before an alternate rent would be payable. This gives the landlord some time to exercise any remedies available against the co-tenant causing the failure and/or to seek a replacement co-tenant and mitigate the effect of the failure. An alternate rent remedy may allow a tenant to reduce base rent by a certain percentage, or to pay a percentage of gross sales in lieu of base rent during the continuance of the co-tenancy failure. In some cases, particularly if a co-tenancy failure continues for an extended period of time, a tenant may negotiate full rent abatement as a remedy. Landlords may require a tenant to show that the co-tenancy failure caused an economic impact by comparing gross sales prior to the failure to gross sales after the failure. Tenants generally resist such requirements. Whatever alternate rent structure is agreed upon, landlords often insist that a tenant continue to pay any CAM charges or bill backs for services that are owed as the tenant will still be taking advantage of shopping center services. If a co-tenancy failure continues for an extended period of time, tenants will argue that the business deal has changed substantially and it should have the right to terminate its lease. This is often the ultimate remedy on an escalating scale of remedies over the course of the co-tenancy failure. The tenant has had the opportunity to operate during the co-tenancy failure and can generally judge whether the impact has been great enough to require an exit from the center. In most cases, the landlord will want the tenant to exercise its termination right as soon as it has accrued, or waive it - a thirty (30) day window to exercise such a right is typical. If the co-tenancy failure has been ongoing for some months, the tenant has had time to evaluate the economic impact, and if the tenant elects not to exercise a termination right, the tenant has presumably determined that the location remains profitable. Under this theory, the landlord will require a tenant to revert to full rent if a termination right is waived. Similarly, if the tenant exercises a renewal option during a co-tenancy failure, a co-tenancy clause may deem that exercise a waiver of any remedies for the failure.

Sample Co-Tenancy Clause

-Connie Simmons Taylor
View Bio

Today’s Export Controls Legal Quick Hit Continued

A continuation of the legal quick hit which took place on today's New to In-house Committee Monthly Teleconference. For more information about committee teleconferences, click here.

The Export Administration Regulations ("EAR"), 15 C.F.R. §§ 730-774, promulgated under the authority of the Export Administration Act ("EAA"), 50 U.S.C. App. §§ 2401-2420, control the export and re-export of commodities having (i) both military and commercial applications (i.e. dual-use items), and (ii) strictly commercial applications. The U.S. Department of Commerce administers the EAR through its Bureau of Industry and Security ("BIS"). The EAR regulate “controlled” products, software, technologies, and materials designated on the Commerce Control List (“CCL”). Items on the CCL may be subject to licensing or other requirements, depending on end-destination, end-user, end-use, and the availability of prescribed exceptions.

Under the Arms Export Control Act ("AECA"), 22 U.S.C. § 2778 (1994), the U.S. Department of State, Directorate of Defense Trade Controls ("DDTC"), administers the International Traffic In Arms Regulations ("ITAR"), 22 C.F.R. §§ 120-130, which control the export of defense articles and related technology, information and services from the U.S. to foreign destinations and persons. The U.S. Munitions List (“USML”) designates those items subject to control by the ITAR, for which a license must be obtained prior to export. The ITAR also prescribe registration, record-keeping and reporting obligations for exporters and manufacturers of defense articles.

The EAR and ITAR are not the only controls on exports. Numerous other agencies’ regulations govern export of specialty items, such as controlled substances (Drug Enforcement Administration), fish and wildlife (Department of Interior), medical devices (Food & Drug Administration), natural gas and electric power (Department of Energy), nuclear materials and equipment (Nuclear Regulatory Commission), nuclear technology (Department of Energy), and patent filing data (Patent & Trademark Office).

In addition, the EAR also prescribe “antiboycott” regulations which prohibit the active or passive participation in boycotts or restrictive trade practices not supported by the U.S. See EAR Part 760. The antiboycott regulations require entities who receive requests by third parties to participate in a boycott to report to BIS the nature of the request, the entity or person making the request, the type of documents in which the request was received, and the response, if any, provided to the requester.

Also, both BIS under the EAR (see, e.g. EAR Part 746) and the U.S. Department of the Treasury, through the Office of Foreign Assets Control ("OFAC"), share responsibilities for the enforcement of economic sanctions on trade with foreign countries. OFAC administers the Foreign Assets Control Regulations (hereinafter "OFAC Regulations"), 31 C.F.R. Parts 500-597, issued pursuant to the Trading with the Enemy Act ("TWEA"), 50 U.S.C. §§ 1-44 and the International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. §§ 1701-1706. The OFAC Regulations implement statutory economic trade sanctions imposed against several foreign countries. The sanctions range from partial to full trade embargoes and are imposed in addition to other U.S. export control law penalties.

-James Kearney
View Bio

Adding Value by Mitigating Risk with VDRs in Upcoming Webcast

Adding Value by Mitigating Risk with VDRs in Upcoming Webcast

Recent surveys conducted by the ACC and a variety of other organizations reflect an increased concern among corporate counsel of risks associated with:

• Compliance with government regulations
• Records management and e-discovery
• Information security and privacy

There are a number of ways to decrease risk associated with all of the above, particularly a robust document management program. However, organizations need to assess and document their current methods before they can take steps to improve processes.

This can be challenging. One Fortune 500 energy company recognized compliance with federal, state and local regulatory agencies was critical to their success, as non-compliance can result in significant fines, penalties and reputation damage. They were faced internally with disorganized information across several operations and in various mediums, making it difficult to gather and share information with auditors and demonstrate compliance to regulatory agencies.

Their solution was to establish a secure online workspace where important compliance documents requested by regulatory agencies could be assembled, organized and managed to consistently expedite regulatory audits. They found this to be a quick, painless, no-hassle response to audits and compliance requests, reduced security risk, and intelligence to assist with future audits

In an upcoming webcast from IntraLinks and the ACC, in-house legal experts--Robert Roach, University Compliance Officer at New York University and Secretary for the Compliance and Ethics Committee of the ACC, and Kimberly White, director of Business Ethics & Senior Corporate Counsel Underwriters Laboratories Inc--will share their best practices as they discuss how to protect and add value by mitigating risk, as well as discuss how compliance officers and others view risk management; how to proactively manage compliance and associated risks; and specific principles and guidelines as a framework for analyzing risk.

Register now for the free webcast Adding Value by Mitigating Risk scheduled to take place on Thursday, July 17 at 2 p.m. ET.

Legal Marketing- Just No Product Differentiation

Did you ever fly fish? If you haven’t, you should try it because it will give you sense of the problem faced by those in the legal marketing community. You will see that in the bio’s that lawyers use to sell their services—they all look remarkably the same. Perhaps you can make some distinction based on the school they attended, but beyond that they all present themselves as extremely effective in what they do.

Since you are no doubt overwhelmed by legal marketing, you probably are not very sympathetic to my concern about the plight of these marketers since a lot seem to be gainfully employed. But they have got a real problem, since there are two major things they won’t and don’t do. First, they do not compete on price, at least openly, so that puts a real dent in what you can do on the internet. Second, they do not engage in comparative advertising. Even when I was a youngster you could compare yourself with Brand X, until somebody discovered it was not illegal to mention a competitor.

So what you get are three things. First, you get a line of serious faces with a blurb describing an unending series of victories. I mentioned to a close friend at a firm that I had seen his description on the firm’s internet site, and it appeared from his description that he had never lost a case. His brief reply was that he settled the ones he would lose. Funny, I lost cases I should have won. Second, if the marketers went to their convention and listened to ACC’s presentation, you get an unending series of firms claiming that would be better partners than Tonto was for the Lone Ranger—one could almost imagine an audio rendition of Sidekick Heaven by Riders in the Sky playing in the background. (See earlier ACC blogs on Partnering with Your Firm)

Then, of course, you get the thoughtful brochure courteously describing how you and your client are about to run afoul of one or more legal rules that are likely to subject your client to financial ruin—generally they don’t tell you how to avoid this result, but suggest they would be delighted to describe more if you just call, so they can bill you. I can not be too hard on lawyers. My cousin works for a medical group and every time I get put on hold, I don’t get elevator music, but rather a serious sounding fellow describing a series of maladies I did not know I had. I suppose if one is left on hold long enough you might decide to call 911 and summon an ambulance.

When you fly fish you learn there are a number of hatches of insects during the day. Rule one; match your insect to the one the fish are eating at the time. That is the simple part. The second is read the water to see where a fish is eating and place your fly upstream so the current takes it over the fish, and he eats your fly, rather than the other ten billion choices he has. That unfortunately is the predicament that legal marketers have when you don’t have product differentiation and price as two key components of your marketing plan.

-Larry Salibra
View Bio

Massachusetts v. EPA - Supreme Court Ruling

"In response to the U.S. Supreme Court's ruling last year in Massachusetts v. EPA, the Environmental Protection Agency (EPA) is on the verge of issuing an Advanced Notice of Proposed Rulemaking (ANPR) regarding regulating Greenhouse Gas (GHG) emissions under the Clean Air Act (CAA). EPA will need either to make an endangerment finding or explain why there is sufficient scientific uncertainty that it cannot make a reasoned judgment on this issue. EPA also intends to examine how regulation under one part of the CAA might lead to regulation of GHG emissions under other sections of the Act. Finally, EPA intends to respond to petitions and comments it has received requesting that GHG emissions be regulated under other sections of the CAA, such as in pre-construction permits or under the New Source Performance Standards."

By: Amy.Edwards@hklaw.com

The Relevance of the Duke Lacrosse Scandal

I know what you are thinking. He has gone off the deep end again. He is talking about the abuse of prosecution of some individuals—it was terrible, but what on earth does it have to do with in-house practice? Unfortunately, it is my task to tell you that it has a great deal to do with in-house practice.

The Duke situation involved a politically motivated prosecutor who undertook to destroy individual’s rights and liberties in what appeared to be the most blatant abuse of the legal system. As lawyers we all felt vindicated when the prosecutor’s credentials as a lawyer were removed. Problem solved! I am afraid not.

The Duke situation garnered widespread media attention which no doubt contributed to justice prevailing. However, everyday individuals, small businesses and large businesses are being subjected to abusive prosecution with little media attention perhaps because the prosecution derives from commercial activity and is therefore not seen as having the same importance. Tragically, prosecutorial conduct in these cases is often far more abusive than that in the Duke case, and the consequences just as personally destructive.

Equally concerning, is a judiciary, which on occasion expresses concern over the persecutor’s behavior in these commercially based prosecutions but rarely if ever holds the persecutors, often members of the United States Justice Department to same standard of accountability as we saw in the Duke case.

So who is leading the effort to expose this abuse, not the ACLU, but the Washington Legal Foundation whose well researched and documented publication, Federal Erosion of Federal Civil Liberties is a must read for every in-house lawyer. I have had the pleasure of working with WLF over my years of practice. In some of my most challenging litigation involving over zealous enforcement of regulatory legislation the WLF alone stood at our side while other free enterprise groups expressed sympathy at a distance.

I have the honor of writing the Introduction of a monograph , Attorney–Client Privilege and “Crime-Fraud Exception: The Erosion Of Business Privacy" authored by the Honorable Dick Thornburg which described in chilling detail the growing unwillingness of the judiciary to honor the attorney-client privilege in corporate prosecutions.

Over the next few blogs, I will describe some of the cases in which the WLF participated in the defense of the criminal prosecution of commercial conduct, which make the Duke situation look mild and the courts, in my opinion, unresponsive to their duty to control this conduct, and share my amazement of extent to which the criminalization of commercial behavior has permeated the regulatory area.

-Larry Salibra
View Bio

There May Be Trouble In River City Final Episode: Understanding

My guess is you are wrong –that statement shocked both me and my GC, but I began to think. What did a compliance program presume I was managing, and how did I know it was the cause of the problem? Suddenly, it occurred to me that it implied that we were producing and selling a lot of defective products, that was the bulk of the litigation caseload. “There is nothing wrong with our products,” my thought involuntarily verbalized itself. “I hope not,” said Superstar, “but that is where your analysis should start. Compliance programs only work where there is actual liability. These cases fall into what we call the Perry Mason Classic model. The other models are the Perry Mason Look Alike, where there are allegations of liability, but we believe none exists, and Government Policy Cases is the last model. The critical point is what you are able to control in the last two cases.”

My GC and I looked at each other, hoping each hoping the other had the answer. Suddenly my GC said: “Variable Transaction Costs.” “Exactly” said Superstar. “Now let’s get these cases modeled and if necessary I would like you to present me with a plan to control those costs.”

As we walked down the hall and were well beyond audible distance from Superstar’s office, I said to my GC: “How did you know-you did even sound like a lawyer with that answer.” “ACC blog” she said. “This blog, E=MC2 for In House Counsel. It had a formula that described how one could calculate settlement values, and what it demonstrated was that if transaction costs, which are the variable costs of defending a case, are high particularly in comparison to the litigation risk, those costs start determining your litigation strategy. It never occurred to me before but you could think you are saving money by settling a case and reducing your legal expenses, but its your high transaction costs that are driving the settlements and creating an incentive for illegitimate litigation. Without significant controls on defense costs, our management of litigation could be severely crippled. We need to have a structure that makes it economical to try these cases and that alone may result in fewer cases”


My GC stopped and looked directly at me. “Two things-- we are going to talk to those professors at Superstar’s business school about doing some in-house training for the law department and I will being accepting Professor Prestige’s invitation to speak at my law school and let them know what is going on in the fly over zone.”

- Larry Sailbra
View Bio

Shopping Smart- Is It In Vogue for In-house Counsel

Yesterday, I was at my yacht club. Did say yacht club? That title may suggest more prestige and status than actually exists by being associated with this club. Since I retired I finally consented to serving as one of the trustees. We do not meet in blazers emblazoned with the club’s logo, although I did see someone wearing one once. As a trustee you get to do really important things, like today I have to get up on the roof of our covered patio and patch a leak in the rubber roof membrane.

So what does this have to do with in-house counsel? Wait and I will tell you.

Many of the club’s members are small business owners who have done well, but are not outrageously wealthy. There is one college president, a financial advisor, a doctor, some school teachers and a few of us who worked for large companies. We do not have a restaurant in the facility and put on most of our own social events, except the end of the season commodore’s ball. One of our newest innovative forms of entertainment occurs on every Friday night during the season and the first Friday night of the month off season. Everyone brings a side and dessert to share and their own entrée, and we have dinner together.

Recently, our conversations had shifted. Some members pointed out that they were not getting a new car as often as they had in the past. Other discussed the fact that they were finding friends and acquaintances less concerned about appearance and were taking pride in being frugal. The Club had always been a place that focused on boating. If you wanted to be seen near your boat rather than on it there was another club that provided an environment for that at considerably higher cost.

When I returned home yesterday after one of these discussions, I was perusing the CNBC web site and found a blog entitled: “Cheap is Sexy.” Its author stated that the idea of shopping smart, thrifty and within your means was now becoming admirable. This was the first time she said that she can recall an economic downturn created a “high end validated shift-to-thrift.”

OK, now the in-house connection. At about the same time this was occurring I received a summer update to former ACC directors from Fred Krebs. Among the things he mentioned was an ACC initiative called “The ACC Value Challenge. “ The objective is to “reconnect value with the cost of outside legal services.” I, for one, am looking forward to seeing whether this effort has substance or whether it is simply another renamed ruse in a long line of ruses that Robert Banks, the first Chairman ACC described as in-counsels’ effort to look like they are managing outside legal fees rather than actually managing them. I did note that there was no mention of doing something like getting up and patching the patio roof yourself, but it could be one part of the process.

It will be interesting to keep our eyes on what develops. If it is half as successful as the Friday night dinner at my yacht club, it will be a real achievement.

-Larry Salibra
View Bio

Trouble In River City Episode 6: Trouble With A Captial “ T” That Rhymes With “P”

My GC called Super Lawyer and we discussed this notion of economically modeling litigation. He had not heard of such a thing, but called a friend who had gotten his MBA from one of those schools that was very close to an ocean, and therefore, a considerable amount of credibility. He confirmed that no such concept existed. With renewed confidence, we prepared a single sheet for Superstar that summarized the logic for recommending a compliance program as a solution to the growing inventory of litigation. It did not address economic modeling at all.

My GC arranged for my next meeting with Superstar and accompanied me. We entered the room. Superstar was cordial and invited us to sit down. My CG initiated the conversation, explaining that I had come to her with the issue of modeling. We thoroughly explored it together and with other significant figures in the both the legal and business community, and there was a consensus that the approach we described in this sheet was the best solution. She selected best solution approach because she did not want to come right out and say no such thing as economically modeling cases existed. She handed the document to Superstar.

Superstar leaned back and began reviewing document. He began to drift into deep thought and for a long time remained silent, in mesmerized state he stared above the paper and out the window to our left. Suddenly, he recovered from this thought and said: “Do you recall that song from the Music Man, where the Professor persuades the town of their need for a band by suggesting it is a solution to problems they did not perceive, such as the negative influence of pool on the town’s youth?” “Yes, ‘Trouble’ was the name of the song, ‘Trouble in River City’, but what on earth does that have with a legal compliance program,” said my GC.

“Nothing, directly, it just came to mind when I thought about the effort it might require to convince the legal profession they have a problem, Trouble with a Capital ‘T’ that rhymes ‘P’ that stands for ‘Process’.” Superstar continued, “In my MBA program we were given an analytical framework to evaluate the social and economic structure of legal issues. Law schools teach lawyers a process which they instinctively implement without a critical eye for the implications of that process in its social and economic context. In one case study we examined how this type of reflex response gave economic and legal reality to an alleged disease that had no scientific basis in fact. It was only the restructuring of the defense posture of the entire industry by few insightful industry lawyers that made success possible. When I asked you to economically model cases, I wanted you to step back and examine what were the manageable elements of the case. Your analysis presumes a certain manageable element and my guess is that it is wrong.’

-Larry Salibra
View Bio