Trouble in River City Episode 5: Confidence Restored

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When I walked into my GC’s office, she saw the signs of concern inscribed across my expression. “Superstar ?”, she asked without hesitation. “Yes”, I said. “He wants me to economically model our litigation,” the words came spilling out without any apparent exercise of volition on my part. “I have never heard of economically modeling litigation; I went to one of the best law schools in the country and I have never heard of it. I have a lot of CLE, I have simply never heard of it. I heard of ADR, mediation, arbitration, third party neutrals, and I got A’s in civil procedure and federal jurisdiction—I have simply never heard of economically modeling cases”.

“Don’t worry,” she said, “I haven’t either”. “But I have heard that since Superstar has come back from the MBA program at this local University, he has appeared to have acquired a number of new notions about the law and lawyers—it is a passing fad. These unusual ideas have not made their way into any of the well known, established schools. Moreover, I am sure that there is a simple explanation that we can get from Professor Prestige, at my law school. He wrote the authoritative case book on civil procedure. I have remained in touch and we can call him and get an explanation; I will help you prepare your response to Superstar.”

Professor Prestige had a national reputation. He was often a talking face on TV and sought out by the media to opine on noteworthy litigation. His case book, The Essentials of Civil Procedure, had become the standard text around the country and was in its fourth addition.

My CG placed a conference call. “Nonsense,” said Professor Prestige, “Economically modeling cases—never heard of such a thing.” The imperial tone of his response gave one a sense of confidence. As the conversation was ending, Professor Prestige, was complementing my GC on her career: “Well Ms. Ruddock (he was known for addressing everyone in this formal manner; it distanced him from his students) you have had quite a successful career. If you are near the Law School be sure to stop by; we would love to have you talk to the students.”

As the conversation was ending, I said automatically, “Professor how many cases have you actually tried?” The question was like sending an electric shock. ‘Tried!” said the Professor with the most imperial tone of the entire conversation. “I study the law and I am up to date with every reported appellate case on civil procedure,” he said in manner the suggested that further conversation on this topic was not welcome.

-Larry Salibra
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A different type of gift

I attended a graduation tonight. I was not a graduate, but I received a gift.

The graduates were five adults who were graduating from "Read To Succeed", the adult literacy program run by the YMCA in which I am a volunteer tutor. This is not an English as a second language course. This is for English speakers (with some dual language speakers) who have never learned to read. Some made it through public schools. Some dropped out. What they have in common is a desire and commitment to better themselves. Some want better jobs. Some just want to read to their children or grandchildren.

Most of them work full time and go to school four nights a week for two hours per night. Some have two jobs. One woman works nights and comes straight from work to class. Many yawn through their lessons, but most make it through the two-year program.

Each gave a graduation speech that they wrote. The common thread was how the inability to read had completely eroded their self-confidence.

I was most touched by Lisa, a mother of about forty- five. Lisa said that she had grown up as one of nine children in a French-Canadian home. Her parents spoke neither French nor English well and only one of her siblings graduated from high school. She said she was ridiculed in school for her poor vocabulary and hid her inability to read by avoiding people. At parent-teacher conferences, she told the teachers that she would not be able to help her kids with homework because she had a learning disability. She was constantly ashamed. She now reads two newspapers a day and may start her GED. Luis, Seth, Iman and Iris each had a similar story to tell.

The gift that I got was helping each of these people take a big step up in life. Each day that I helped someone learn that "an e at the end of a word is silent and the vowel before it is long", I was one rule closer to helping that person become literate; to take the fireman's exam or to read "Cloudy With a Chance of Meatballs" to their kids.

I know that this sounds like a United Way public service announcement. Well maybe it is. My point is that this volunteer work, teaching one-on-one and seeing adults go from reading the alphabet to reading one syllable words to reading three and four syllable words is one of the most rewarding things I've done. It helps them and it makes me feel good.

As a group, adult illiterates are invisible. I'm sure that there is some group in your city that's like "Read To Succeed". Find a little bit of time to teach one evening a week. Best thing you've ever done.

-Mike Schnipper
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Today's IP Committee Legal Quick Hit Continued

In Quanta Computer, Inc. v. LG Electronics, Inc., the Supreme Court recently addressed the 150 year old doctrine of patent exhaustion. The doctrine limits “the patent rights that survive the initial authorized sale of a patented item[,]” arguably forcing patent holders to collect royalties from one level of distribution, rather than from every subsequent level of buyer and sellers. The case has implications for downstream licensing, as a defense to patent infringement, perhaps altering the focus of claim drafting, and emphasizing contractual remedies in patent licensing.

The Supreme Court reversed the Federal Circuit’s ruling, holding that LGE’s authorized sale of microprocessors and chipsets to Intel exhausted both their system and method patent rights. The Court considered the arguments in three stages.

First, the Court addressed the notion that method patents could not be exhausted, holding that “[n]othing in [the] Court’s approach to patent exhaustion supports LGE’s argument that method patents cannot be exhausted.”

Second, the Court “consider[ed] the extent to which a product must embody a patent in order to trigger exhaustion.” Relying on Univis, the Court found that all of LGE’s patents were exhausted. In Univis, the lens blanks had no utility until they were made into lenses. Similarly, the microprocessors at issue only functioned when incorporated into buses and memory to form a computer system. The Court concluded that both the lens blanks and microprocessors “constitute a material part of the patented invention and all but completely practice the patent.” The key determination for the Court here was that Quanta was not required to make any creative or inventive decision when adding the Intel parts to its computer system, holding that “Quanta had no alternative but to follow Intel’s specifications in incorporating the Intel Products into its computers . . . .”

Finally, the Court addressed whether the sale of the patents to Quanta exhausted LGE’s patent rights. Noting that only an authorized sale will trigger exhaustion, the Court held that “[n]othing in the License Agreement restricts Intel’s right to sell its microprocessors and chipsets to purchasers who intend to combine them with non-Intel parts.” LGE gave Intel the authority to sell regardless of whether Quanta promised to abide by the restrictions put on third parties in a side agreement. The Court did leave open the possibility that LGE could recover other damages, stating that it expresses “no opinion on whether contract damages might be available even though exhaustion operates to eliminate patent damages.”

-Ken Godlewski
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***DISCLAIMER*** Treasury Department Circular 230 Disclosure: To ensure compliance with requirements imposed by the Treasury Department, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein...

Political Confusion

I am at sea about the upcoming election.

John Kennedy was my only childhood hero (aside from perhaps The Cisco Kid or Hopalong Cassidy).

I am a liberal democrat who came of age in the sixties. At Columbia, many of the SDS members were classmates and, even though I did not occupy a building in 1968, my sympathies were more with than against those who did.

My first two jobs after law school were representing the labor movement.

If someone said that we could provide health care to all Americans if I paid $1,000 more in taxes, I would gladly do so.

I was raised by parents who lived through the Depression and who did not have credit cards. Following their example, I saved, paid off my credit cards every month, made reasonable investments, never bought a house that I could not afford to carry and generally acted as a financially responsible citizen.

Here's the dilemma.

I cannot vote for John McCain for lots of reasons that I'm not going to detail.

With some trepidation (similar to that with which I supported Jimmy Carter) I want to vote for Obama. However, I have reached that stage of life at which my retirement funds have to last for perhaps thirty or more years (my parents are 94 and 95 and pretty darned healthy). Obama's position on raising the capital gains tax seems to be that it would be "fair" to do so, his example being "the top 50 hedge fund managers made $29 billion last year--$29 billion for 50 individuals". I'm no hedge fund manager, and doubling the tax puts a substantial crimp in my plans.

I have always voted for the person who, I felt, was best for the country.

When, if ever, is it appropriate (if that's the right word) to vote my self-interest? Do I abstain when I go into the booth this year?

I guess I have five months to figure it out.

-Michael Schnipper
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Trouble in River City: Episode 4

I felt relatively confident that I could handle any question Superstar could put to me and my recommendation for a response to our escalating litigation claims was clear. We needed a comprehensive compliance program. It seemed clear from Super Lawyer’s presentation that our focus on ADR had dramatically reduced our costs.

When I walked into Superstar’s office, he had been working feverishly with some papers. He looked up as I walked in and motioned to me to sit on the sofa in the far left corner of the office. I did so and spread the charts and graphs on the coffee table.

He walked over and quietly surveyed the collection of papers I had spread out. “I see you have been working on the problem—bottom line first,” he said. “What do you recommend?” The quick question caught me off guard—I had fully prepared to take him through the same analysis that Superstar had done and demonstrate how effective we had been in keeping our costs under control through our use of ADR to set the stage for the conclusion.

“A compliance program,” I uttered, involuntarily. “Compliance on what,” he asked. “Well product liability for sure,” I said. “What about the other cases?” I had not really thought about them? “How do you know it will work?” That question really caught me off guard. “Well,” I said “ we are already keeping our litigation costs under control through ADR, more aggressive litigation would simply increase those costs, compliance is the only other alternative and we can do it for a lot less than trying cases.”

He looked up at me, stared me straight in the eye and said “You did not sort these cases by economic modeling so you really do not know what factors you can control.” I was shocked, not because I had not done it, but because I have never heard of it. Superstar did not let me answer—he said: “I suggest you allocate these cases among a set of economic models that permits us to evaluate what we can control—then let’s talk.”

I left the room and headed straight to my GC’s office.

-Larry Salibra
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Trouble in River City Episode 3: Super Lawyer’s Opinion

I called Super Lawyer to explain my problem. He said he would get together with the head of his litigation department and review the cases they had for that division. We had to center all the litigation at Super Lawyer’s firm because we believed that we could save money since the firms lawyers would not have to relearn the nature of our business, the technology of our product line and there would be economies of scale with similar litigation.

When I arrived a few days later at the ACE firm, Super Lawyer and his colleagues had collected and charted out litigation. It fell into three categories, product liability claims in our widget product line, a couple of employment claims and a substantial tax claim disputing the constitutionality of a certain tax that was hurting our ability to import raw materials in order to be competitive with non-domestic supplier.

The firm had graphed the claims over a 5 year period. Only the product liability claims of which there was a great number showed a study increase. They also graphed the division’s quarterly expense of the litigation and it became immediately clear why Superstar had focused on this area. Costs had been going up steadily and when taken as a whole over time, it was clear why it was something he was interested in.

I asked Super Lawyer whether he thought could control this escalation of claims? He suggested that we undertake a comprehensive program to review both our quality control procedures and our product labeling. He also suggested
a series of presentations by his firm to operations personal that would increase their sensitivity to product liability exposure.

What about more aggressive litigation posture? We considered that he said as he produced another graph. We have taken the position that ADR and cost reduction was a key policy objective. We have graphed amount we would have spent if we had litigated to a resolution and the amount we settled for. In almost every case we paid less in settlement than it would have cost to litigate. This does not seem to be an economic option.

I left the meeting with the recommendations in hand to present to Superstar.

-Larry Salibra
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Opinions of In-house Counsel

In our discussion regarding opinions of in-house counsel, we noted that the inside counsel who signs a closing opinion has personal responsibility for satisfying the duty of care owed to the recipient. The manner in which this risk is managed by corporate counsel will depend upon the right of the corporate counsel/opinion giver to be indemnified and the availability of insurance. Each company’s situation will be different. In addition to directors and officers liability insurance, some companies procure malpractice insurance for their corporate lawyers. It would be interesting to know whether it is common practice for companies to obtain Employed Lawyers Professional Liability Policies and, if so, whether adequate attention is being paid to the integration of the policy with the directors and officers liability insurance. Any comments regarding your experience with Employed Lawyers Professional Liability Policies would be of benefit to the group.

Check out the agenda and minutes from the ACC Small Law Department Committee Calls

-John R. Miller
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As Father's Day Approaches

Excuse me for taking a short break from writing the last episodes of “THERE MAY BE TROUBLE IN RIVER CITY”, but I was watching CNBC this morning, a channel to which I had become somewhat addicted after my retirement. This morning the commentators were in a tizzy about Lehman Brothers 2.8 Billion loss and their need to raise 6.0 billion in capital. How could the Chief Financial Officer not know said one commentator? Lehman had said all was fine not too long ago.

Before I begin, let me make my bias clear. I was against the Bear Stearns bailout notwithstanding the claims by the sophisticated that it was necessary to prevent financial collapse. I have a similar position on attempts by the government, of all forms, to deal with the housing crisis. We got there without government help; we will just have to get out of it without government help.

So how did we get here and what does my father and grandfather (on my mother’s side, my Dad’s father died before I was born) have to do with this? Neither was well educated. My father completed high school and my grandfather who emigrated from Italy did not make it that far. They certainly would not been able to carry on a conversation with graduates of Harvard or Wharton Business Schools. But to paraphrase the wizard in the Wizard of OZ, what did they have that the graduates of these schools did not have-“common sense.”

What they were not able to do, or perhaps unwilling to do was to engage in semantic calisthenics to disguise the obvious. Let me share with you how I think they would have redefined the standard terms used to describe the present and continuing financial crisis.

“EXOTIC FINANCIAL INSTRUMENT": My father and grandfather would describe this as lending money at an unusually high interest rate to a borrower who had no hope of servicing the debt or repaying the principle.

“COMPLEX AND NOVEL FINANCIAL INSTRUMENT": My father and grandfather would describe this as a lot of people lending a lot of money at an usually high interest rate to a lot of borrowers who had no hope of servicing the debt or repaying the principle.

“CREATIVE ACCOUNTING": My father and grandfather would describe this as ignoring the fact that you had lent a lot of money at an usually high interest rate to a lot of borrowers who had no hope servicing the debt or paying back the principle.

“WALL STREET BONUS": My father and grandfather would understand this to mean getting paid an amount of money they could not imagine any human being needing or productively using in their lifetime for selling a lot of “Complex and Novel Financial Instruments” to people who because of the education you would expect to know better.

The sad thing about this is that there were no doubt many in our profession who participated in this activity and should have known better as well.

-Larry Salibra
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There May Be Trouble in River City- episode 2

EPISODE: 2 SUPERSTAR’S FIRST ASSIGNMENT

As my GC warned the day came when Superstar called and asked that I come to see him in his office. Since my meeting with my GC the official announcement of Superstar’s appointment of division president took place, and for the next couple of weeks a flurry of additional announcements took place describing new assignments in the Superstar’s division as he replaced or rearranged the management structure to his liking. This was not unusual; of course, management changes typically took place when new leadership was installed in a division. However, there was a different tone to these changes.

In the past one could somewhat predict the changes in personnel—it was sort of musical chairs, people changed chairs but the people were the same. This was different. Positions were filled by people no one had heard of before. Serious change was in the air.

When I arrived at Superstar’s office, he invited me in and was very cordial, but it was clear I was under review. He explained that it was his intention to re-examine every aspect of the division’s operation, including the way its legal issues were managed. His review of the legal area suggested that major expenses were being incurred in the litigation area. He said it was his intention to understand why that was occurring and then determine the appropriate response. He wanted me to undertake that effort.

As I walked out, two obvious options occurred to me, a more strident defense posture as a deterrent or a compliance program to improve the employees understanding of their legal obligations. But I was not sure, so I decided to consult Super Lawyer at our outside law firm, the ACE firm in downtown River City. We had long ago established a partnership (see partnership debate in prior blogs) in the manner in which we related—they could help I thought.

There May Be Trouble in River City

Your GC has just called you into her office to tell you that there may be difficult times ahead for the law department. Superstar has just been appointed to run your division and he is the head on favorite to become President and CEO. Superstar was an engineer by training and his aggressive management style that resulted in the complete turn around of a plant that had been scheduled to be shut down had caught the attention of senior management and the Board.

They are grooming him for the top spot and had sent him off to get his MBA at some college that was in the fly-over-zone (that is the vast area between the coasts where perhaps only one or two academic institutions are taken seriously). Typically, this would not be considered a problem; however, this particular graduate school had apparently developed a new approach to teaching law in their curriculum—they not only taught doctrine, they apparently give their students an analytical paradigm that provided them with the ability to effectively manage legal issues and their lawyers. They could understand the economic implications of different choices in designing and implementing contracts and they expected their lawyers to integrate business alternatives in their contractual design (yes, they called it design not drafting).

The GC said she also understood that they also were challenging the validity of traditional case analysis as an effective way to predict legal outcomes, and appeared to understand the economic implications of legal procedure. The GC conceded that although she was a graduate of Super U Law School, she did not recall being exposed to much of this. She said that she had heard that Superstar was concerned about the extent of litigation in his division and one of his priorities was to contact you to address this problem. She wanted you to know and said she would do all she could to help you, but simply did not know what to expect.

You walked out of her office waiting for the call from Superstar.

-Larry Salibra
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A Good Point About The Relationship Between Litigation Experience and Transactional Law

If you have not read David Mowry’s piece in the June “Change is Good” I commend it to you. David describes his change from outside litigation lawyer to inside transactional lawyer. He makes a good point about how much his litigation experience has contributed to his new role as a transactional lawyer because he approaches it with a “seer’s perspective.”

Don’t get me wrong transactional lawyers are nice people, I even did acquisitions and divestures, but I try not to publicize it too much. The problem is that transactional lawyers sometimes tend to become mesmerized by their language skills. They describe a concept, or sometimes just string together a rather impressive collection of words with out any real sense as to how those words will be implemented in a litigation context.

I have had the opportunity to try contract cases involving large commercial agreements that were drafted by law firms of substantial reputation. They were even bound. Notwithstanding the imposing appearance of these documents one is amazed at the level of ambiguity that can exist that I am sure was not apparent to its drafters, but might be to someone like David who is accustomed to looking at these agreements in their least flattering light.

David’s perspective might well distinguish between three alternative ways of addressing an issue because his knowledge on civil procedure can reveal one to have the most cost effective manner of developing facts and getting them into evidence to support a claim than the other two alternatives.

Great point David—good luck in your new career. By the way I was close friends with former Xerox, General Counsel and ACC founder, Bob Banks, who had lawyers who worked for him that argued Xerox cases before the US Supreme Court—there is history there at Xerox that may get you back in court for your employer some day!

Rule of Law or Rule of Men?

We in the US promote the notion that our society is based on the Rule of Law, not the Rule of Men. However, each day judicial decisions come down that suggest that we may only be fooling ourselves.

One of the most adamant proponents of the notion that law is an immutable doctrine whose meaning is set at the time the legal doctrine is established is Justice Scalia. Scalia’s originialist doctrine asserts that the US Constitution is not a living document which adapts to the times; its meaning was frozen at the time it was written. Scalia’s thesis is that if you permit flexibility, then there are no restraints on what judges can do.

The Scalia thesis makes sense and I believe he applies it equally to the interpretation of statutes. He is not enthusiastic about looking at legislative history, knowing full well that unsuccessful legislators who lose in the legislative process try to pack the history with statements that sympathetic judges can latch upon to rewrite the statute.

Perhaps the most obvious excuse that judges use to impose their own views is the notion that a statute can be interpreted beyond the bounds of its language “because that statute is a remedial statute.” When judges used that rationalization on me I challenged them to give me one example of a statute that was not remedial.

Unfortunately, even Scalia has stumbled off the wagon when political expediency required. In a case I argued before the Supreme Court a number of years ago, the foreign national companies and associated amicus countries had trapped the Supreme Court into facing the issue of the constitutionality of worldwide combined apportionment (a state tax that included non-domestically derived income in the apportionment the tax base) in the context of whether a foreign parent had standing because its income was being taxed. Since foreign parents had no state remedy, the Tax Injunction Act did not bar a federal court remedy. Three circuits, one en banc, had held with no dissents that the Tax Injunction Act did not bar a foreign parent action.

The political reality of those days was “states rights” of the Reagan Era. A disingenuous Supreme Court held that resolving the standing issue was “too hard”, but they did not have to face the issue since they dismissed the case 9-0 holding the Tax Injunction Act barred the federal action. The Tax Injunction Act clearly did not apply to this situation as the Circuit Courts had uniformly held because Congress never conceived of such a tax situation when the Act was passed. However, even Scalia will breathe life into a document if the political forces are in the right direction.

Why should you be concerned? Your clients require a predictable legal system, and the economic incentives of your outside counsel are inconsistent with predictability. Perhaps one of the most outrageous challenges to the Rule of Law is the persistence of the notion of non-precedential opinions. The idea that similarly situated parties can be treated differently is so antithetical to notion the rule of law it is surprising to me that in-house bar has largely been silent. At Congressional hearings on the topic a few years ago, I was the only in-house representative at a hearing largely unattended except for the judiciary and a couple academics.

Except for the late Judge Richard Arnold, the federal judiciary seems to accept the notion that they do not have to treat similarly situated parties the same. The Supreme Court has been silent on the issue because they are consumed with promulgating legal doctrines regardless if anybody pays much practical attention to them.

Take Erie v. Tompkins, the lower courts have long ago reversed The Supreme Court in practice. Numerous Circuits, outstanding among them the Ninth Circuit, of course, refuse to certify issues to the State Supreme Court for determination even though there was strident disagreement in the Circuit as to what the state law is—the majority preferring to impose their own views and paying lip service to Erie by claiming it was state law.

Then there is the chilling observation of Federal District Court Judge Polster, who said that after he was appointed to the Court and began reviewing the recent rulings of the Sixth Circuit, it became clear to him one could not determine what the law was until you knew who was on the panel making the decision—Rule of Law or Rule of Man?

-Larry Salibra
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Ruminations about Retirement

When I first thought about retiring, it seemed that a new industry had sprung up overnight. Every newspaper, magazine, television new program and web site wanted to give me advice or sell me something. Borders seemed to have a full wall devoted to books about retirement. AARP began sending me greetings. Aside from the tower of child-rearing books that teetered on my night table twenty-odd years before, never had so much been written with me in mind.

I read some stuff, mostly articles in the Wall Street Journal that my wife starred as “must read” and a really good book called “The Number” (which is NOT about figuring out your number), but some things became clear to me without aid of experts, some of it much too late. If you figured this all out already, forgive me for wasting your time. If any of this helps you, it’ll make me feel good.

First of all, it’s not about “how much do I need to retire”. Its more like “how much can I put away for retirement to make sure that I can afford the double wide and the moist cat food without living like an ascetic for the next X years”. You can’t do more than you can do, so advice like “you’ll need 80% of your pre-retirement salary” is not helpful. Why is 80% the correct number? If you are making a hefty salary in your last year of work (let’s pick $300,000) how in the world are you going to accumulate enough to pay you $240,000 a year from age 60 or 62 through 90 (since we will all live to be 90)?

Start early. Yeah, if you’re 30 and reading this, keep reading. Some practical thoughts in no specific order (I don’t give advice and I don’t fix up my single friends):

1. Find a financial advisor, preferably one who charges for his services and not one who makes his money by selling you things like whole life insurance or annuities. Ask the senior executives in your office for a referral. If you need to plan for college and retirement, it’s good to get some help as early in your career as you can.

2. Find out how much your pension will really pay you (if your company has a pension plan). The company internet site or the HR person may not have the full scoop. My pension, fairly typical, was calculated by multiplying my average salary during the ten years prior to retirement by 1.6% and then again by my years of service. So, on its face, if I worked for 25 years for the company, for each $100,000 of final average earnings, I would have $40,000 in pension. Right? Nope. From that sum we deduct: (i) 4% for each year that I collect my pension prior to age 62 (yours may be 65), (ii) a portion of my projected social security calculated pursuant to a formula (yes they take a credit for social security), and (iii) a further reduction if I want my spouse to continue to get 50% of my pension after I shuffle off (the standard way of planning)

3. When you retire, your life does not become cheaper. If you retire on Friday, what expenses have you shed by Monday? Dry cleaning? Hah! Commuting expenses? Probably. What big expenses do you lose? Let me tell you. Nothing. What expenses do you pick up? How about COBRA and long term care insurance. I can assure you that those costs more than offset the dry cleaning and commuting savings (and yeah, I’ll even throw in the cost of eating lunch out). How about “I’ve always wanted to spend a month in that little village in Tuscany, but I could never do it when I was working”?

4. Directly related to the paragraph above is the reality that if you have done everything you should do by the time you retire (your kids are out of college and your mortgage is paid) the final few years prior to retirement will give you more disposable income than you’ve ever had. You can travel, buy lots of stuff and basically do whatever you want. Then you run some numbers and realize that when you retire you may just have to give up that daily double latte from Starbucks.

5. “I can always get a job consulting” is much easier said than done (even though I have just started doing some consulting). You should not assume that someone will pay you a whole bunch of money to work 10 hours a week imparting thirty years of your knowledge to groups.

6. Notwithstanding the book that the guy just wrote about how working at Starbucks turned his life around, the bottom line is that $10 per hour for 20 hours per week (even with the medical benefits and free pound of coffee) doesn’t really cover the new roof.

I didn’t mean to scare you. I’m doing fine. I’m a volunteer teacher in an adult literacy program, sit on two boards of not-for-profits and spend time in the gym and cycling. My consulting work is nice, but not regular, and I’d rally rather volunteer than be on someone ‘s work schedule for $10 per hour.

The point is that you may live thirty plus years after retiring, most of them active. No one is going to take care of you. Your parents money may all be spent on caring for them in their last few years, so don’t bet on that inheritance. Powerball tickets are not a substitute for planning.

-Michael Schnipper
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High Performance with High Integrity

A corporate president for whom I once worked called me into his office when I was promoted to General Counsel and told me that he expected me not only to be the chief legal officer, but to be the conscience of the organization; to not only come to him when I thought a potential action was illegal, but when I thought an action was wrong. Ben Heineman makes precisely this point about in-house counsel in a new book to be published next month.
Ben Heineman, for those of you who don’t know him, was the General Counsel and later the Senior Vice President for Law and Public Policy at General Electric during the Jack Welch days. Ben, who I had the pleasure of retaining on behalf of my client when he was in private practice, retired from GE with his sterling reputation as one of the finest lawyers (in house or private practitioner) in the country intact. That in itself seems to be too much of a rarity these days, but to leave a corporation with a reputation as one of the most ethical practitioners in country, particularly when working for a CEO well known as one of the most aggressive in the country, is a feat indeed.
Ben’s book will be of keen interest to any in-house counsel. The title of Ben’s new book, High Performance with High Integrity, suggests that CEO’s and other high corporate officials would also do well to read this volume. The book, which will be published by Harvard Business Press, grew out of an April 2007 article that Ben wrote for the Harvard Business Review. According to a review of the book to be published in the June ACC Docket, Ben’s “main precept is that proper corporate governance is fundamentally the job of the CEO and senior managers, not the Board of Directors.” That strikes me, as one who practiced in-house for many years, as a reasonable belief. We know from our experience that even the most diligent Board of Directors can only hope to delve in-depth into a small number of the issues that corporate officers deal with on a daily basis.
And Heineman believes that pay should not only be linked to performance but to demonstrated integrity, as well. It will be interesting to see if Heineman suggests how corporations monitor and document integrity if it is be tied to pay. That strikes me as perhaps a difficult task.

-Steve Bokat
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Other Characteristics a Mediator Must Have to Increase the likelihood of a Successful Settlement

The only one I can think of is the ability to creatively solve problems and the willingness to look outside of the legal process for a solution. Tragically, law schools,(and the big name law schools are probably the biggest offenders) have restricted curriculums that limit rather than expand the breath of their students abilities to solve clients’ problems. Law students enter their institutions with a broad understanding of the complexities of the forces that order society and often leave with obsessive undeserved respect for the mechanics of a legal process, which is costly and at times dramatically out of touch with reality. See: A MUTED FURY: Populists, Progressives, Labor Unions Confront the Courts, 1890-1937, William G. Ross, Princeton University Press, 1994.

Law schools claim they teach their students to think like lawyers. Your mediator should understand how lawyers think, but also have broader and richer interests. You should find someone who can appreciate the nuances of economics, production marketing, R&D and social relationships that make up the complex institution we call a business enterprise. I have settled cases, admittedly outside of the mediation context,(that is why mediation was not necessary) that involved unanticipated joint ventures, renewed and unexpected sales, shared fruits of R&D and other creative solutions to a lawsuit, where the legal remedy would have been limited to a judgment for an amount certain.

If your prospective mediator is only capable of a appreciating a solution which involves “reaching the right number” you should keep on looking if your objective a successful settlement.

Should The Mediator Have A Special Demeanor?

Your chance of getting a successful settlement with a mediator whose primary life experience was a law clerk or a judge in my view is very low. There are a lot of judges out there in the ADR world, perhaps because ADR started primarily in the arbitration context. However, mediation seems to be the dominant form of ADR now and rebuilding a business relationship is not an effort where a judgmental demeanor, particularly a legal one, is helpful.

The mediator has to be supportive of both sides and uncritical even while coaxing the parties to take a critical look at their positions. When dealing with the parties the mediator has to encourage the party to view the merits of his response to his opponent’s position by asking the party help the mediator formulate a persuasive position in reply not by expressing his opinion.

The mediator should not a have propensity to be directly critical of the lawyer’s legal position, particularly in front of his client. That is not easy for judges since that is their style. That is where the trial experience helps, since the mediator can reach back to relate his own unsuccessful effort in similar situation while agreeing that position has merit. The evaluative process is not judgmental, right or wrong, but a sharing of experiences among colleagues.

The mediator has to be perceived as someone trying to reach an accord that supports the interests of both parties. If he appears judgmental in tone or demeanor as well as explicit conduct, you might get a settlement, but it is not likely to be a successful settlement.

-Larry Salibra
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Contract Management Systems & The In-house Counsel

Today Jason Mark Anderman, of Becton, Dickinson and Company, and I presented a "legal quickie" for ACC's Law Department Management Committee on the topic of "Contract Management Systems." This is becoming a hot topic for law departments, as more forward-thinking general counsel are realizing that their departments can make a significant contribution to corporate performance (as well as Sarbanes-Oxley compliance) by implementing better systems and processes to manage their contracts, contract processes, and contract-related information.

Jason described the steps that his company has taken to streamline their contracting processes, including flexible and comprehensive templates for procurement contracts and better processes and systems to manage the contract lifecyle and contractual information.

But as impressive as Becton, Dickinson's results have been, the kinds of processes Jason described can only take you so far. Any company with a significant volume of contracts or contract activity should be looking at a contract lifecycle management system (CLM -- also known as an enterprise contract management system) to help manage and automate the entire contract lifecycle. A CLM system can be defined as:

An integrated system that applies business rules to manage contracts of the enterprise on a worldwide basis, from request, through contract creation, negotiation, approvals, distribution, and filing in a central, searchable repository, and that allows people and systems within the organization to access, analyze, and act on contract-related information to improve efficiency, consistency, reporting, and control.

Companies that have implemented CLM systems have reported significant improvements in these and other measures. Many companies have been able to decrease the involvement of their legal departments in routine contracts by using CLM systems to implement controlled self-service contract creation processes. There are many examples of revenue improvement through better management of contract renewals and escalation clauses that in some cases are enough to pay for the costs of the systems.

Finally, tangible benefits to corporate law departments include better control and visibility of contracts and contract-related risks, the ability to share contract-related knowledge across the enterprise, and the ability to allow highly paid legal resources to focus their efforts on higher-value activities rather than administrative tasks. Many of these systems also allow legal departments to measure and report on performance and performance improvements, something many general counsel struggle with.

We didn't get a chance to discuss the latest trend in contract management, which is CLM systems that combine a technology platform with a team of offshore or onshore resources to help manage the often labor-intensive process of inputting information into the system (especially legacy contract information), configuring the system, and mangaging and maintaining it, but more information on that is available here.

For more information on contract lifecycle management systems and a list of vendors, click here.


The International Association for Contract and Commercial Management (IACCM) is also a great source of information regarding contracting and contract management systems.

-David Munn
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Can A Business Man Get A Successful Settlement?

A business man certainly has the business credentials; however, once the dispute has become heavily entangled in the litigation process, the mediator has to manage the legal expectations of the advocates as well as the business issues, and without real trial experience the business man and, even an in-house attorney without this experience, are at a serious handicap.

The lawyers for the parties in a lawsuit are not typically engaged to think about a business solution to the case—their focus is on prevailing in the dispute. They are important players in the litigation and exercise a great deal of influence and control over their clients. Once the business relationship breaks down, the businessman turns to lawyers in part because they are convinced they no longer have the ability to control events. That results in a large psychological dependence on the lawyer and the mediator must have the lawyer invested in the process and have her trust, particularly if mediator thinks it is time for the lawyers to step back and let the business men have another chance at reconciliation.

A mediator with real litigation experience will be able to establish an empathy with the lawyers for the parties that is hard to duplicate with out that shared experience of battle.

-Lary Salibra
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What Do You Look For In A Mediator If I Want A Successful Settlement?

Experience as an in-house attorney would be a good mediator trait. For a mediator to get a successful settlement his focus must be on reestablishing the business relationship. This requires a number of key characteristics that in-house counsel is most likely to possess.

First, the mediator has to understand the nature of business relationships; living among them daily certainly helps. You must have the skill and desire to learn about the nature of the business in which the dispute arises. The parties can teach you about the business and most likely will have to since it may not be one in which the mediator has direct experience, but the mediator must have the knowledge base and skill to ask the questions that drives the education.

Second, the mediator must have the facility for and enjoy solving business problems. If mediator does not want to listen to how these businesses are built and operate and can only focus on the legal issues and a legal solution, you may get a settlement, but it almost certainly will not be successful. Businessmen understand that winning a lawsuit against your best customer may not be the best long term solution to the dispute.

-Larry Salibra
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How Do You Know If You Have A Successful Settlement?

Perhaps the best indication of the whether the settlement was successful is whether there is a distinct change in the demeanor of the parties. Litigation by its very nature creates animosity among the parties. The lawyers may go out for a drink together after court because they are adversaries at a professional, not personal level.

The parties in a lawsuit are in a very different state. For them the lawsuit is personal. Parties will come in with substantial animosity. Often it is overt; sometimes it is disguised with a thin veneer of cordiality, but it almost always there. Successful commercial mediations convert that animosity into trust and respect.

I knew my mediation was successful when, after mediation was over, the parties relationship had changed. During the private session of the mediation the veneers came down and the defendant described in the plaintiff in terms that left no doubt about the existence animosity. The plaintiff was equally expressive about his view of the defendant as untrustworthy.

At the end the mediation, the plaintiff had accepted as part of the settlement a promise that was legally unenforceable to insure further compensation by providing accommodating business arrangements. The defendant, who had just stipulated to a substantial judgment and had earlier described the plaintiff in the most unflattering terms, invited the plaintiff and his attorney to lunch. The trust, respect and accommodation of the business relationship had been reestablished—the settlement was successful.

-Larry Salibra
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