Tuesday, July 29, 2008

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.

Monday, July 28, 2008

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
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Thursday, July 24, 2008

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.

Monday, July 21, 2008

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
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Friday, July 18, 2008

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
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Thursday, July 17, 2008

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
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Wednesday, July 16, 2008

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
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Tuesday, July 15, 2008

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
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Thursday, July 10, 2008

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

Wednesday, July 09, 2008

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
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Thursday, July 03, 2008

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
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Wednesday, July 02, 2008

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
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Tuesday, July 01, 2008

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
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