Corporate Counsel Guide

The Business Magazine For In-House Counsel
corpcounsel.com April 2014
CALL IT PROGRESS
THE NUMBER OF FEMALE TOP LEGAL OFFICERS AT BIG COMPANIES HAS GROWN, BUT SLOWER THAN SOME WISH BY SUE REISINGER
Katherine Kate Adams of Honeywell International
PLUS: THE NLRBS NEW GC COMES OUT SWINGING
THE LONG, STRANGE LITIGATION OVER DATATREASURY
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CONTENTS
4 2014
MORE: corpcounsel.com < < < <
FEATURES
90
WOMEN AT THE TOP
Women have made slow but steady progress rising to the top of Fortune 500 legal departments. Until last year, when (for the first time) the number dropped.
By Sue Reisinger
98
THE 11-YEAR WAR
At more than a decade (and counting), few litigations can match the lengthand the strangenessof DataTreasury Corporations twisted legal saga.
By Jan Wolfe
INBOX
13
THEYRE BAAACK
16
YOURE OUT!
The new NLRB and its full-fledged GC have taken on Wal-Mart, alleging retaliation.
By Rebekah Mintzer
Against a backdrop of turnover at the top, two high-profile GCs were shown the door.
By Sue Reisinger
14
GAMERS
17
PREET SPEAKS
In-house lawyers are playing games and learning about ethics and compliance.
By Sue Reisinger
The U.S. attorney in Manhattan talks about going after banks and bankers.
By Julie Triedman
COVER STORY
90
>>>
IN THE NEWS THIS MONTH
JORDAN HOLLENDER (TOP)
15
16
17
20
13
Today women are leading the legal departments at 21 PERCENT OF FORTUNE 500 COMPANIES, compared with 17 percent in 2009 and only 15 percent a decade ago [Womens Work, page 90].
C ORPORATE COUNSEL APRIL 2014
4 2014
CONTENTS
< < < < MORE: corpcounsel.com
DEPARTMeNTS
COLUMNS
23
DEALS & SUITS
71
Suntory gets into bourbon with Jim Beam; Google dabbles in household products.
FROM THE EXPERTS
59
As companies expand globally, managing their workforces across borders grows ever more complicated.
By Bill Wright and Celia Joseph
CANADIAN DEALS
A Toronto real estate company consolidates control; Fortis looks again at the U.S.
77
IN-HOUSE TECH
63
MOVES
Halliburton snags a Big Law litigation chief. Scheck Industries hires a woman who knows construction law. And a former TV Guide Network lawyer goes home.
The state of the art of e-discovery, at least how its seen by the courts.
By Cecil Lynn and Lauren Schwartzreich
110
OUTBOX
87
The Bitcoin Foundations general counsel has had a wild ride this year. And its not over.
By Marlisse Silver Sweeney
DC WATCH
Five agencies are supposed to implement the new Volcker Rule. Whos in charge?
71
ALSO
10
The Business Magazine For In-House Counsel
EDITORS NOTe 23
corpcounsel.com April 2014
23
CALL IT PROGRESS
THE NUMBER OF FEMALE TOP LEGAL OFFICERS AT BIG COMPANIES HAS GROWN, BUT SLOWER THAN SOME WISH BY SUE REISINGER
Katherine Kate Adams of Honeywell International
PLUS: THE NLRBS NEW GC COMES OUT SWINGING
THE LONG, STRANGE LITIGATION OVER DATATREASURY
QG_Cover;17-revoked.indd 1
3/6/14 12:41 PM
COVER PHOTO BY JORDAN HOLLENDER
87
63
63
>>>
Corporate Counsel (ISSN 1524-7597) is published monthly by ALM Media, LLC. Chief Executive Ocer: Bill Carter. Main oce: 120 Broadway, New York, NY 10271, (212) 457-9400; info@corpcounsel.com. Subscription rates: free to general counsel and sta attorneys upon direct request; all others $169 for one year (12 issues). For Canadian and foreign subscriptions, the rate is $245. The publisher reserves the right to determine qualication for free subscriptions. Periodicals postage paid at New York, NY, and additional mail ing oces. POSTMASTER: Send address changes to: Corporate Counsel, Subscription Department, P.O. Box 5080, Brentwood, TN 37024. Please allow 46 weeks for address changes. Subscription inquiries: Subscription Department, (615) 850-5320 or custservice@corpcounsel.com. Advertising inquiries: Mike Medwig, mmedwig@alm.com; (212) 457-9470; fax (646) 822-5035. Current and back issues are available exclusively from this oce. Vol. XXI, No. 4, April 2014. Copyright 2014 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. The Copyright Act of 1976 prohibits the reproduction by photocopy machine or any other means of any portion of this issue except with the permission of the publisher. For permission to photocopy or to use material from Corporate Counsel electronically, please contact Syndia Torres, director of reprints, at (347) 227-3382 or reprints@alm.com, or the Copyright Clearance Center, Inc., at (978) 6462777 or customercare@copyright.com. CCC is a not-for-prot organization that provides licenses or registration for a variety of users.
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EdITORSNOTE
4 2014
VIvE LA DIFFRENCE
IT DAWNED ON ME A FEW YEARS AGO. A COUPLE OF iN-
house lawyers from a large company in the Midwest were in town. They were regular readers of the magazine (this was before our website was a daily news operation), and they wanted to meet for lunch. We went to a new Italian place near our offices in Manhattan and had a terrific meal: sleek atmosphere, good food and intelligent conversation. Now Ill confess. We New Yorkers grow up with certain preconceptions about people from cities smaller and supposedly less cosmopolitan. Its wrong, I know. And I was shown just how wrong I was when these lawyers talked about how the global nature of their company influences how they do their jobs. As the meal progressed, I found out that one of them was involved in a dual-national marriage, shuttling back and forth to Italy every couple of weeks. And the other had lived in more places than Id ever hope to visit. In fact, in one short afternoon I got the impression that our readership was widely traveled and had concerns far beyond the borders of the United States. And by now, its become a clich. Todays corporate counsel needs to keep track of different privacy regimes, antibribery laws, and European Commission directives, as well as how sourcing concerns might blow up the next shareholder conference. So this past winter it was interesting to see how our across-the-pond friends live and work. The occasion was a conference given by the U.K.based law firm Eversheds for their European clients in Copenhagen. In some ways, theyre remarkably like their American counterparts. They fret about costs, theyre looking for ways to trim expenses and theyre trying to think about novel ways of delivering their services. In other ways, though, theyre not as far along as an established corporate institution as their
American versions. Part of it is cultural: Few countries are as lawyered-up as the United States. So theres less litigation risk, there are fewer go-to-the-mats lawsuits, and class actions are not much of a concern. And big, established corporate legal departments are a newer phenomenon. A lot of the conference was devoted to, for want of a better term, internal press relations. How to show your worth to the corner office. How to condition your business-side colleagues to rely on your advice. How to communicate to the company what exactly the department is there for in the first place. As a legal journalist who sees the legal departments worth as every day as ATMs and the Internet, it was a enlightening to me to see how much Americans have evolved, and how much our ever-smaller world still doesnt move in lockstep.
This mOnths cOVeR stORy, hOweVeR, shOws a
facet of the U.S. corporate legal department thats seen slow evolution. Women now account for about one in five top company lawyers in the U.S., but women have been almost half of American law school classes for decades. Theres a disconnect there. Progress had been steady, but stalled recently. Theres an interesting theory behind that, though. Some analysts see it as a sign of progress for the legal department in general. Once the province of lawyers seeking a gentler work/life balance, going in-house has become just as prestigious, and perhaps as much of a pressure cooker, as life in Big Firm law. So more men are pouring into the top slots. Check out Sue Reisingers story, with her profiles of women attorneys who have made it to the top. You can find it on page 94.
TONY GALE
Anthony Paonita apaonita@alm.com
SEDGWICK RULE #72
IMPOSSIBLE
ITS
GREAT LAWYER
TO BE A AND A
LOUSY LISTENER.
At Sedgwick, we take the time to know our clients as people, whats going on with their company, and the impact a case can haveon them, their people and their business. First, we listen to our clients. Then, we become their voice. www.sedgwicklaw.com
INSiDE THiS MONTH

who are gamers. * Lawyers Can an idea be both dumb and smart? * The disappearing general counsel. * The scourge of insider trading speaks. *
INBOX
4 2014
BACK IN THe GAme

The NLRB began the year with a high-profile complaint against Wal-Mart.
THERES A NEW SHERIFF At tHE NAtIONAL
[ BY REbEKAH MIntZEr ]
Labor Relations Board, and after a few months as the boards general counselits first GC with Senate approval since 2010Richard Griffin Jr. has come out with guns blazing. For his first major complaint, Griffin chose to take on the most high-profile of adversaries, Wal-Mart Stores Inc. In challenging the countrys largest retailer, Griffin is armed not just with legal arguments. He has the legitimacy of a board that was confirmed by the Senate and is untainted by the recess appointments that dogged the previous board. In the consolidated complaint he filed in January, Griffin accused WalMart of threatening, watching and retaliating against nonunion workers who conducted short-term strikes against the company in 2012 and 2013. Its significant not only because its a major step by a newly empowered board, but because its an effort by the NLRB to protect a nonunion workforce at a time when there are far more workers outside organized labor than in it. The idea of the NLRB filing a complaint against an employer who has fired employees who complain, thats nothing new. Ive seen that for 20 years, 30 years, says Marcia Goodman, a partner at Mayer Brown, which does not represent Wal-Mart. But what I think is a growing trend is the idea that one of the mainstream ways employees are seeking to improve their working conditions are strikes that are not union-represented strikes. The labor boards complaint, filed through official charging party the Organization United for Respect at Walmart (OURWalmart), an advocacy group for Wal-Mart workers, consoli-
dates the grievances of more than 60 employees across 13 statesincluding 19 who allege that they lost their jobs for protesting. The complaint details incident after incident of employees engaged in protected concerted activity by striking in protest of wages and working conditions, only to be discharged or given verbal and written warnings by supervisors. The complaint even goes so far as to say that the company issued a memorandum outlining a policy that interfered with employee rights to strike, and that a Wal-Mart executive threatened employees who would strike with unspecified reprisals during an interview on national television. In its response, Wal-Mart argued that the employee actions portrayed by the NLRB as protected by Section 7 of the National Labor Relations Act (NLRA)
GROUPS SUPPORtING WAL-MARt WORKERS PROtESt IN NEW JERSEY ON NOV. 23, 2012.
were in fact made-for-media intermittent work stoppage events outside the acts scope. Kory Lundberg, a WalMart spokesman, says that many of the employees named in the complaint failed to show up for work for days without notice or explanation. Wal-Mart is really no different than any other company in terms of having an attendance policy that helps ensure that customers are being taken care of, he says. I would argue that any reasonable person would agree that if someone is scheduled to work, they are expected to show up or to call in to say why they couldnt make it. Lawyers who specialize in labor and employment (and are not involved in Wal-Mart litigation) say that this
STAN HONDA/GETTY IMAGES
13
INBOX
4 2014
case raises an important question about strikes. The term intermittent, as used by Wal-Mart, presents legal ambiguities, they say. Some have interpreted intermittent strikes as those that hit the employer repeatedly within a given time period or give a company little notice before workers walk off the job. Theres no real bright-line test of what an intermittent strike is and when employees lose their protection, says Mark Featherman, a partner at Willig, Williams & Davidson who represents unions. Workers like Wal-Marts who protest without union representation have become, in the view of some experts, the labor boards latest pet cause in its bid for increased relevance. Theyve filed or pursued complaints in a variety of cases over the last four
or five years related to nonunion workforces where people in the NLRBs estimation were engaged in protected concerted activity, and as a result they are using that as a basis for pursuing nonunion employers, says Donald Schroeder of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo. He adds that another method the board has found to reach workers outside unions is through social media. With this new complaint, Griffin appears to be continuing in the steps of his predecessor, former Acting General Counsel Lafe Solomon, who began a drive to raise the boards profile among nonunion workers by issuing several memos on what sorts of statements made by employees on social media about their jobs qualify as protected concerted activity under the NLRA.
Goodman says that she was initially surprised that a Rust Belt agency like the NLRB was issuing rules about a tech-heavy issue like social media. But she now believes that the agency sees it as a way to stay relevant. The NRLB is now the dominant force you think of when you advise an employer on what to do about social media policies, she says. The No. 1 thing you have to think about is, What does the NLRB say? The next step for Wal-Mart and the NLRB will be a hearing before an NLRB administrative law judge, which at press time had not yet been scheduled. Schroeder says that in the meantime, employers can continue to anticipate a more assertive NLRB. This is just what I would consider to be the opening chapter, he says. So theres more to come.
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A former litigator moves in-house and designs videos that teach ethics.
MICHELLE MOYER WENT FROm BEING A
MORALITY PLAY
full-time litigator at Kirtland & Packard to playing video gamesor at least helping to design games that businesses use for instruction. Think Xbox meets Compliance and Ethics 101. Moyer now works as an in-house counsel for LRN Corporation, a New Yorkbased advisory company that uses innovative techniques to teach employees about law and ethics and create a healthy compliance culture. How did she happen to become a game developer? A while ago we were talking about how to further reengage employees who have become bored with traditional modes of education in the workplace, Moyer recalls. So we decided to apply gaming techniques and design to legal and ethical concepts. The result was the first of a planned seven-part series of video games released in February 2013. Called the Resolver, the game focuses on corporate conflicts of interest. Players are awarded points and shown their place on a leaderboard that includes colleagues scores.
The success of this project may have more to do with the competitive nature of her colleagues than their interest in compliance and ethics. When LRN employees played the Resolver, Moyer says, for the first time in our history we had employees repeating their educationso they could be higher on the leaderboard. They became very competitive in a fun way. A second game, not yet released, will allow the player/employee to travel the world and save the company by intervening in potential corrupt situations. Called the Honesty Project, this game will give players four choices on what to advise a colleague to do in certain scenarios. The feedback with each answer, Moyer explains, will illustrate the impact of the answer. It will also convey reactions from the employee, the company, shareholders, regulators and the community where that company was situated. So employees of companies understand how their decisions can impact real people, she added. Its not just about obeying the law or
getting punished; its that you can hurt real people. Moyer says there are three to four in-house lawyers working on creating the games, depending on their fields of expertise. Future games are planned around codes of conduct, privacy, information security and possibly antitrust. I was a litigator for 17 years, cleaning up messes, she notes. Now Im on the other side of it, helping companies keep from getting into trouble. Its fun, and its nice being on the preventative side for a change. SUe Reisinger
ROBERT RECKER/CORBIS
14
INBOX
4 2014
A coffee shop risks a lawsuit to make a splash.

IN THE END iT WAS THE LOS ANGElES
THERES NO SUCH tHING AS DUMB PUBLICItY
Legally, a brand owner has to prove that the alleged infringing product is likely to cause confusion. Starbucks would probably have a tough time, says Patel. A brand owner could also try to prove brand dilution, and in this case, Patel says, Starbucks might win, But Patel, who has never represented Starbucks, says that she and DUMB STARBUCKS iN LOS ANGElES, PHOTOGRAPHED her colleagues have DURiNG iTS (BRiEF) MOMENT OF GlORY ON FEB. 9, 2014 debated what they would would be confused and found that the advise a client to do in similar circummarks were only minimally similar. stances. Some feel it best to do nothing. Then, in December, Starbucks got hit Others say that the brand owner should with more negative publicity when it send a nice letter asking the infringer to sent a cease and desist letter to a brewstop. Still others opine that the brand ery in Missouri because the use of the owner should send a demand letter and name Frappicino to describe one of pursue a preliminary injunction. the brewerys beers too closely resemJonathan Moskin, a partner who spebled Starbucks Frappuccino. The letter cializes in IP at Foley & Lardner, argues said the similar names (albeit spelled differently) might cause customers to These are usually lose-lose propositions for brand owners, says Jonathan mistakenly believe that this beer is affiliated with or licensed by Starbucks. Moskin. If they win, theyre seen as BEATING UP ON AN ARTIST The brewery sent an amusing letter to a Starbucks attorney that purported to be an apology but clearly mocked that big companies are often better off coffee shop, for legal reasons Dumb Starthe big company for its legal action letting the infringement slideespebucks needs to be categorized as a work even sending a check for $6 for the full cially if action is likely to bring negaof parody art, the message said. So, in amount of the profit gained from the tive attention. These are usually losethe eyes of the law, our coffee shop is sale of the three beers sold under the lose propositions for brand owners, actually an art gallery and the coffee Frappicino name. he notes. If they win, theyre seen as youre buying is considered the art. The incident was covered by major beating up on an artist, and if they lose, The shop never actually sold coffee media outlets, including USA Today, then they come away with a black eye. or anything else. For the few days it was CNN and National Public Radio. It Starbucks has been especially vuloperating, it offered all items for free. The went viral, Patel observes. Starbucks nerable to black eyes lately when asserthealth department finally closed it down has a bad history when it comes to proing its intellectual property. In Novemfor operating without a license. tecting its mark. ber the company lost a 12-year legal The uncertainty of trademark law With the Dumb Starbucks shop now battle with a small New England coffee makes it difficult to determine whether closed, it seems unlikely that Seattleproducer in New Hampshire after takthe parody argument would prevail. based Starbucks will take legal action. ing issue with its Charbucks roast, But even if Starbucks could make a But the potential does still exist: Nathan which Starbucks claimed infringed its good case for infringement, it might be Fielder says he plans to open another mark and diluted its brand. The small better off doing nothing, lawyers say. Dumb Starbucks, this time in Brooklyn. coffee roaster acknowledged that the You have to think of the ramificaIt looks like he is trying to bait StarCharbucks name was an unflattering tions, says Haynes and Boone partner bucks to get more publicity, Moskin reference to Starbucks coffee, but the and trademark practice group chair says. Otherwise, this Dumb Starbucks U.S. Court of Appeals for the Second Purvi Patel. Its usually not a good would just be pretty dumb. Circuit nonetheless said that Starbucks idea for big companies to go after small had failed to prove that consumers oneseven if they have a legal case. Lisa Shuchman County Health Departmentnot intellectual property lawthat forced Dumb Starbucks to close. The satirical pop-up coffee shop opened in Los Angeles in February, garnering tons of media attention because it had the look and feel of a real Starbucksbut the word Dumb preceded the name on everything from a Dumb Frappuccino to a Dumb Venti. The shop turned out to be a publicity stunt by Comedy Central TV show host Nathan Fielder, whose show, Nathan for You, revolves around Fielder giving prank advice to small business owners. But before that connection was known, Starbucks Corp. made statements about its trademark, saying that the interloper could not legally use its name. Dumb Starbucks countered by posting a message in its store defending its action by calling it a parody. Although we are a fully functioning
DAVID LIVINGSTON/GETTY IMAGES
15
INBOX
4 2014
Attorney-client privilege may not survive after a company is sold.

ATTORNEY-CLIENT PRIVILEGE MaY ENDURE
UNTIL DEATH OR MERgER DO uS PART

Equity Fund, the plaintiffs acquired a company called Plimus through a merger. But after the transaction was completed, they sued, claiming that the defendants lied about the business. During the litigation, the plaintiffs discovered confidential emails between the defendants and their outside counsel. The defendants claimed that these communications were privileged and should not be introduced into evidence. But the court relied on a statute that says all privileges are the property of the resulting corporation. The statute did not expressly includeor excludethe privilege between a lawyer and a client, and the court ruled that the emails could be used as evidence. Accordingly, the Court of Chancery held that the defendants had no ability to assert the attorney-client privilege because when the business was sold, the right to assert privilege with respect to communications between the company and its counsel passed to the new owners as part of the sale, explains Davidson. So, companies that hope to maintain attorney-client privilege after a merger or a sale had better put it in the contract, he warns.
MaRlissE SilVER SWEENEY
until deathbut not upon the sale of a company. At least thats what the Delaware Court of Chancery ruled recently. According to Shep Davidson in Burns & Levinsons The In-House Advisor, the gist of the judgment was that the new owners of a business can waive the privilege with respect to communications that the former owner had with company counsel solely to use those communications as evidence against the former owners. Say what? In the case before the Delaware court, Great Hill Equity Partners v. Sig Growth
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Its been a shaky time for general counsel who like their jobs.
IF GENERaL COUNSEL aRE FEELING a
GOINg, gOINg
little jittery about going to work these days, they can be forgiven. In February, BTI Consulting Group revealed that 10 percent of large companies started 2014 with new GCs at the helm, according to its survey. Then Wellpoint Inc., the nations secondlargest health insurer, abruptly fired general counsel John Cannon. It was the second surprise termination at a major company in recent months. In December, Pfizer Inc. announced that its GC, Amy Schulman, was leaving immediately even though she was supposed to become president of a new Pfizer division on Jan. 1. And at press time, the GC at a third big company was under fire. Deutsche Bank is considering replacing general counsel Richard Walker after a series of financial scandals, according to the German magazine Manager. Deutsche Bank is apparently under pressure from Germanys
financial regulator, BaFin, to address the banks alleged role in currency manipulation and rate rigging by dismissing Walker, and possibly other executives. (Bonn-based BaFin has declined to comment.) While Walker remains twisting in the wind, Cannon is out in the cold. In a two-sentence 8-K filing with the U.S. Securities and Exchange Commission, Wellpoint said: On Feb. 19, 2014, John Cannon was terminated without cause from his position as executive vice president, general counsel and chief public affairs officer effective immediately. He was let go one day before the Indianapolis company filed its annual 10-K with the SEC. The companys profits dropped 68 percent in the fourth quarter of 2013. Cannon had served as interim CEO for Wellpoint from August 2012 to March 2013, until the company hired a new chief executive. SEC documents show that he earned a total
FORMER WELLPOINT GC JOHN CaNNON
of $6.5 million in 2012, in salary, stock, bonus and an adjustment for his CEO service. (The 2013 numbers werent available at press time.) Cannon joined Wellpoint in 2007, after spending 19 years with CIGNA Corporation, including a stint as deputy general counsel. In 2011 Cannons legal team was named a finalist as one of Corporate Counsel magazines Best Legal Departments. Apparently, the new CEO didnt get the magazineor didnt agree with our assessment. SuE REisiNgER
16
INBOX
4 2014
QUESTIONS & ANSWERS PREET BHaRaRa
HOLDING ThE BaNKS (aND BaNKERS) aCCOUNTaBLE

The Southern District uses all the tools at its disposal, from wiretaps to expansive interpretations of old laws.
MaNHaTTaN U.S. ATTORNEY PREET BHaRaRa HaS HaD HIS SHaRE OF BIG WEEKS SINCE
taking office nearly five years ago. But even for him, the first week in February was a doozy. Bharara netted his 79th straight insider trading conviction, securing a guilty verdict against former SAC Capital Advisors portfolio manager Matthew Martoma. And his office started the week with a record-breaking False Claims Act settlement against a bank, inking a $614 million deal to resolve allegations that JPMorgan Chase & Co. duped two government agencies about loans that it underwrote or originated. The top prosecutor in the Southern District of New York since 2009, Bharara has spearheaded nine major cases against Wall Street banks since 2011. During his tenure, the 50-lawyer Civil Division has become an activist, risk-taking department, using some of the most powerful civil laws at the U.S. Department of Justices disposal and applying them in new ways and against new financial targets. In the process, Bhararas office has prompted several important precedents vastly expanding the scope of both the False Claims Act and a savings and loan crisisera statute, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). Senior writer Julie Triedman recently spoke to Bharara about his approach to pursuing postfinancial crisis cases. An edited version of their conversation follows.
> > >
Q: In your first few months on the job, your counterpart in Brooklyn lost a landmark criminal trial against two Bear Stearns hedge fund managers. Since then, the DOJ has relied primarily on big-ticket civil settlements. Why arent we seeing any criminal indictments of top executives involved in mortgage market frauds? A: Weve had great success in the whitecollar area convicting people who have committed financial crimes like insider trading, but that does not mean that every kind of conduct, whether its negligent or reckless, can be brought criminally. It is very hard to convict someone criminallyand it should be. But that doesnt mean that just because something cant be brought criminally, that you should just call it a day. At the beginning of 2010 we were talking generally about how we might use civil statutes to accomplish things where the criminal statutes either were not adequate or appropriate to use. Among other things, civil cases had a quality to them that smart lawyers can become enamored of: the preponderance
standard. And we wanted to bring to bear powerful tools, some of which had not been used as aggressively as they might be or had not been used for specific industries, so we could hold institutions and individuals both accountable, to cause reforms to happen where appropriate, and to exact penalties that would actually mean something. On top of that, we wanted to make sure that if there were resolutions, there were admissions of conduct, so that people understood why we were bringing the cases and so that the whole world would see and understand the bad conduct.
Q: In your offices first three FIRREA lawsuits targeting mortgage underwriting banks, civil prosecutors overcame objections by the defendants that the law doesnt apply in cases where the affected bank was both victim and perpetrator of alleged fraud. It must have been far from clear to your team that judges would agree with an expansive, self-reflexive interpretation of the statute. What was your thinking going into the first test cases?
A: This place is great because lawyers here think within the constraints of the law, but outside the box. Thats exactly what happened here. Initially, our view internally was even though theres some risk when you use a statute in a particular new way, it is worth itbecause if people werent going to use a statute in that way because theres no precedent, thats the effective equivalent of having bad precedent. Q: Is the case against Bank of America/ Countrywide, which resulted in a big trial win for your office on Oct. 23, the template for a new approach to civil enforcement against the big banks? A: Right. Its not a criminal case, but it is an incredibly significant civil case that has a lot of ramifications for that bank, and a lot of impact on the thinking of other banks because of all the things aired in a public courtroom. Sure, it would have been risky had we lost, but the value for the government in having won in a massive case with very sophisticated counsel on the other sidewho were maybe overconfidentis that the
JORDAN HOLLENDER
17
INBOX
4 2014
next institution knows that were not afraid to go to trial. Too long on the civil enforcement side in a lot of places theres been a fear of going to trial. Not just a fear but concern about the enormous amount of resources that it takes. But you cannot go credibly into a litigation where you hope to get the result you want if you are afraid toor if it is perceived that you are afraid togo to trial in front of a tough judge and prove your case.
Q: All of the civil suits youve brought against the major mortgage market participants have been the work of a sixlawyer civil frauds unit that you created in March 2010. Why was creating a specialized unit so important? A: The problem is that the more difficult and time-consuming and laborious your defensive docket gets, the less time you can spend on the affirmative stuff. And unlike the Criminal Division,
which is all affirmative, on the civil side most of its responsibility is to defend agencies and individuals in the government who are sued for things. We realized that one way to make sure that we didnt lose sight of the affirmative goals was to have a dedicated group of people who basically did not have any defensive docket, and their only job was to wake up and figure out what affirmative cases to do to ferret out fraud.
> > >
A story made for the tabloids raises an interesting employment question.

IS iT LEGAL TO FiRE AN EMPLOYEE FOR
TOO CUTE TO WORK?
being too cute? According to court documents, thats what happened to yoga instructor and massage therapist Dilek Edwards. She was fired last year from her job at Wall Street Chiropractic and Wellness in New York because, she claims, she was too good-looking for her boss and his jealous wife. Edwards filed her claim against the husband and wife co-owners of Wall Street Chiropractic, Charles Nicolai and Stephanie Adams, citing sexual harassment, gender discrimination and unlawful termination of employment violations under New York state and New York City Human Rights Law. The owners fired back, asserting that allegations of spousal jealousy do not give rise to gender discrimination claims. According to Edwards filing, she began work in April 2012, and her rapport with Nicolai was strictly professional, although he once told her that his wife might become jealous because she was too cute. Adams, whom Edwards claims she only encountered in person once, apparently sent her an angry text message last October, asking her to stay away from Nicolai and his office. Edwards was fired soon after. Keisha-Ann Gray, a partner at Proskauer Rose and cohead of the firms employment group, says that the case isnt likely to get far. Being attractive is not going to fall under the umbrella of gender discrimination, she says. Calling Edwards too cute was an
evaluation based not on gender, but on physical attractiveness, Gray notes. Unlike gender, race and other traits, attractiveness is not a protected characteristic under Title VII of the Civil Rights Act of 1964. This concept is constantly coming up every couple of years, Gray continues. But she doesnt see it gaining legally protected status anytime soon. Beauty is both subjective (in the eye of the beholder) and mutable. Other protected characteristics, Gray says, are for the most part objective and permanent. The case is reminiscent of an employment dispute last year in Iowa, where the states supreme court struck down sexual harassment and discrimination claims filed by a dental assistant whose boss fired her because he found her
to be irresistible and was afraid he would cheat on his wife. Though they were both about employers allegedly attracted to their employees, there were important differences between the cases. Maria Greco Danaher, a partner at Ogletree Deakins, points out that the Iowa case contained specific allegations about how the relationship between the dentist and his assistant was having an adverse effect on the dentists marriage. Then the court extrapolated from that, Danaher observes, and said because it was based on emotion, not on gender, it didnt violate that statute. According to Gray, the best way for in-house attorneys to reduce the volume of employment suits like the ones in New York and Iowa is to keep careful track of employee behaviors and performance. Document it in real time, dont document it after you get the lawsuit, she advises. Document your reasons for taking any employment action, positive or negative. While its hard to prevent disgruntled employees from taking initial legal action, she adds, good solid documentation will help stop actions from proceeding very far. Even if plaintiffs dont see the flaws in their cases, their attorneys will. Rebekah MintZer
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18
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INBOX
4 2014
WORlDBEAT IN-HOUSE AROUND THE GlObE
RATTLING THE WALLS

Cross-border disputes are keeping in-house lawyers busy.
LEGAl DISPUTES THAT TAKE PlACE IN MUl-
tiple national jurisdictions or between parties based in different countries are posing challenges for corporate boards, CEOs and general counsel. And the problem isnt likely to go away. These complex and costly crossborder disputes are expected to grow in the coming years, according to Global Currents: Trends in Cross-Border Disputes, a survey of about 150 GCs and chief legal officers conducted by Hogan Lovells. More and more companies have been going global, so it makes sense that they are seeing more crossborder litigation than in the past, says Dennis Tracey, the Hogan Lovells partner in charge of the study. But the increase is changing the way companies are managing litigation. Certain jurisdictions are particularly problematic, the survey found. Countries that topped the list included Brazil, China and India. But the most difficult jurisdiction, the survey concluded, was the United States. The U.S. was more challenging than China, Tracey says, noting that global companies are not necessarily used to the jury system, class actions and contingency cases.
For nearly half the respondents, cross-border disputes increased in the past two years. They said 90 percent involved two or three foreign countries, although some cases involved as many as 50 jurisdictions. And more than half said they expect to see more such disputes in the next two years. They pose a threat to companies reputations and to their business models, and even boards of directors are playing a role in trying to keep them under control, Tracey notes. Companies spend an average of $6.6 million a year to manage cross-border disputes, the survey found. A significant proportion of cross-border disputes involve commercial or contractual issues. But 18 percent of the survey
respondents said intellectual property issues were behind cross-border disputes at their companies. With the high level of intellectual property litigation were seeing, its not surprising wed see an increase in IP cross-border disputes, says Andreas von Falck, a Hogan Lovells partner in Germany who specializes in intellectual property. When youre doing business in multiple jurisdictions and a patent dispute arises, its highly likely that it will be disputed in several places. IP owners are increasingly using IP rights as a revenue-producing tool, and companies are tending to sue wherever they can use the threat of an injunction to force a settlement, von Falck says. To cope with the intensity of crossborder disputes, companies are now hiring in-house counsel who have experience handling such issues. And GCs are adopting preventive measures developing stronger compliance programs, engaging proactively with competitors and redoubling due diligence before entering into joint ventures. The idea is to try to avoid these disputes in the first place, Tracey says.
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2014 The Bureau of National Affairs, Inc. 0214-JO11169
INSiDE THiS MONTH

Suntory acquires Jim Beam. * Japans Google picks up Nest Labs * JPMorgan settles Madoff charges * Judge: $545M in legal fees OK * Tiffany loses big to Swatch * Milk antitrust case revived *
DEALS
& SUITS
04 2014
SUNTORY BEAM
Japanese whiskey and beer producer Suntory Holdings Ltd. is moving into bourbon. The family-owned company agreed on Jan. 13 to pay $13.6 billion in cash for Beam Inc., which makes Jim Beam bourbon as well as Markers Mark and Knob Creek bourbon, Canadian Club whiskey and Courvoisier cognac. Suntory will pay $83.50 a share in stock for Beam, a 25 percent premium to the targets closing price on Jan. 10, the last trading day before the deal was announced. The buyer will also assume $2.4 billion in Beam debt. The deal would create one of the worlds largest liquor companies, and it caps the restructuring of Beams predecessor, Fortune Brands Inc. Under pressure from investors, the company sold its golf unit, Acushnet Co., for $1.23 billion to a group of buyers including Fila Korea Ltd. and Mirae Asset Private Equity in 2011, and later that year split into Beam Inc. and Fortune Brands Home & Security Inc., which now has a market capitalization of about $8 billion. Suntory and Beam hope to close their transaction in the second quarter of 2014 pending approvals from regulators and Beam shareholders. For acquirer Suntory Holdings Ltd. (Osaka, Japan)
In-House: General managers Mihoko Oshima and Yoshihisa Yamamoto and deputy general managers Senjiro Kourai, Miku Maeda and Eikichi Nishioka. Cleary Gottlieb Steen & Hamilton: M&A: Benet OReilly, John Palenberg, Paul Shim, associates Andrew Coombs, Paul Imperatore, Jiun Kim, James Langston, Joseph Lanzkron and international lawyer Jaime Andrs Salas Vergara. Litigation: Mitchell Lowenthal. Financing: Margaret Meme Peponis and associates Daniel Fernandez and Greg McKay. Competition: Mark Nelson, Robbert Snelders, senior attorney Matthew Bachrack and associates Katia Colitti, Charlotte Emin, Maxim Izvekov and Emma Johansson. Executive compensation and employee benets: Arthur Kohn, counsel Kathleen Emberger and associates Nicolette Lotrionte and Julia Rozenblit. Intellectual property: counsel Daniel Ilan and associate Lisa Connolly. Tax: Partner Jason Factor and senior attorney J.J. Giord. Environmental: counsel W. Richard Rick Bidstrup. (All are in New York except for the following: Kim is in Paris. Nelson and Bidstrup are in Washington, D.C. Snelders, Colitti, Emin and Johansson are in Brussels. Bachrack is in Hong Kong. Izvekov is in Moscow.) Cleary has done M&A work for Suntory for more than 30 years. Potter Anderson & Corroon: Corporate: Mark Morton. Litigation: Matthew Fischer and Donald Wolfe Jr.
(All are in Wilmington.) Beam is incorporated in Delaware. Buchman Law Firm: Nicholas Bergman, Valerie Karasz and Mark Koslowe. (All are in New York.) The rm is Suntorys regular U.S. beverage counsel. For target Beam Inc. (Deereld, Ill.) In-House: General counsel Kent Rose. Sidley Austin: Corporate: Thomas Cole, Beth Flaming and senior counsel Frederick Lowinger. (All are in Chicago.) Sidley advised Fortune Brands Inc. on the 2011 spino of Fortune Brands Home & Security Inc., after which the parent company was renamed Beam Inc. Morris, Nichols, Arsht & Tunnell: Corporate: Frederick Alexander. Litigation: S. Mark Hurd and Kenneth Nachbar. (All are in Wilmington.) DaVid MaRcus
* * * * * *
GOOgLE NEsT LAbs

Google Inc. is trying to move from the cellphone and the computer screen into the home with its planned $3.2 billion purchase of Nest Labs Inc., a deal announced on Jan. 13. Nest founder Tony Faddell helped develop the iPod when he was an executive at Apple Inc., and he formed Nest to apply similar cuttingedge technology to household devices. The company introduced a thermostat
>>>
Paul Shim Cleary
Beth Flaming Sidley
David Segre Wilson Sonsini
John Savarese Wachtell
Keila Ravelo Willkie Farr
Franz Schwarz Wilmer
Neil Gilman Hunton & Williams
23
DEALS&SUITS
04 2014
in late 2011 and a smoke and carbon dioxide detector last year. Google could integrate such products into its Android mobile-device operating system Googles venture capital arm invested in Nest in 2011 and 2012. Venture capital funds Kleiner Perkins Caufield & Byers, Lightspeed Venture Partners, Shasta Ventures and Venrock also put money into Nest. The parties hope to close the deal with a few months pending regulatory approvals. For acquirer Google Inc. (Mountain View, Calif.) Wilson, Sonsini, Goodrich & Rosati: Corporate: Denny Kwon, David Segre and associates Scott Blumenkranz, Aby Castro, Jerey Kao, Anson Lau and Derek Liu. Technology transactions: Suzanne Bell, Michael Murphy and associate Sharon Lee. Tax: Eileen Marshall and associate Myra Sutanto Shen. Employee benets and compensation: David Thomas and associate Brandon Gantus. Employment law: Rico Rosales and associate Rebecca Stuart. Corporate nance: John Mao. (All are in Palo Alto except for the following: Kwon, Lau, Liu, Gantus and Mao are in San Francisco. Marshall is in Washington, D.C.) Wilson advised Google on its 2004 IPO and often works with the company. For target Nest Labs Inc. (Palo Alto) In-House: General counsel Richard Chip Lutton Jr. Orrick, Herrington & Sutclie: M&A: Mark Seneca. Emerging companies: Mitchell Zuklie, counsel Adam Lin, senior associate Anik Guha and associates Andrew Erskine, Owen Kirshner and Reed McBride. Technology transactions: Daniel Yost. Executive compensation and benets: Nancy Chen and managing associate Michael Yang. Antitrust: of counsel Patricia Zeigler. Tax: Steven Malvey. International trade and compliance: Harry Clark. (All are in Menlo Park, California, except for the following: Guha and Malvey are in San Francisco. Erskine is in Los Angeles. Zeigler and Clark are in Washington, D.C.) Orrick advised an investor in Nests Series A nancing and has represented the company since then.
For Kleiner Perkins Caueld & Byers (Menlo Park, Calif.), Generation Investment Management LLP (London), Lightspeed Venture Partners (Menlo Park), Shasta Ventures (menlo Park) and one other venture investor In-House: At Kleiner Perkins: general counsel Paul Vronsky. Goodwin Procter: M&A: Lawrence Chu. Technology: James Riley Jr. and associates Jerey Cheng and Mark Schenkel. Tax: E. Kelsey Lemaster. Securities litigation: Stephen Poss. (All are in Menlo Park, except for San Franciscobased Lemaster and Boston-based Poss.) D.M.
* * * * * *
U.S. V. JPMORGAN CHAsE BANK N.A.

On Jan. 7 JPMorgan Chase & Co. agreed to pay $1.7 billion to settle criminal charges by the U.S. Department of Justice that the bank had helped facilitate Bernard Madoffs multibillion-dollar Ponzi scheme. Prosecutors called the amount a record recovery for violating the 1970 Bank Secrecy Act. JPMorgan will pay $350 million more to resolve civil charges, and $543 million to settle claims by the Bernard L. Madoff Investment Securities LLC liquidation trustee, Baker & Hostetlers Irving Picard. As part of the settlement, the bank signed a twoyear deferred prosecution agreement and agreed to an extensive statement of facts in connection with alleged violations of the Bank Secrecy Act. It also agreed to continue reforms of its compliance programs. The bank tapped Wachtell, Lipton, Rosen & Katzs John Savarese for the civil resolutions, and Sullivan & Cromwells Steven Peikin on the criminal side. JPMorgan general counsel Stephen Cutler and global litigation head Jill Centella also played key roles. According to documents filed in Manhattan federal court related to the agreement, JPMorgan had served as Madoffs primary bank since 1986. As
far back as the early 1990s, the bank had concerns that Madoff was engaged in suspicious transactions. But it never alerted U.S. regulators about its concerns, and its U.S. compliance officers did little to investigate those suspicions. Many documents filed in the governments case echo claims made by the Madoff trustee in earlier litigation. The trustees 2010 suit against JPMorgan was packed with incriminating emails, such as the now-infamous June 2007 email that the government cites from the banks chief risk officer to his colleagues that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme. A series of unfavorable court rulings, however, blocked Picard from recovering much of what he sought for Madoffs investors.
SUsan Beck, wiTH RebekaH MinTzer
* * * * * *
IN RE PAYmENT CARD INTERcHANGE FEE ANTiTRusT LiTiGATiON

In the largest attorney fee award ever in a private antitrust case, a federal judge in Brooklyn granted a group of plaintiffs attorneys $545 million for their work in a class action on behalf of 12 million merchants against Visa Inc., MasterCard Incorporated, and a group of banks. U.S. District Judge John Gleeson gave the firms all but $25 million of the amount they requested, noting that the case involved years of extraordinary efforts and high risk. A similar earlier case had failed, and the lawyers didnt piggyback on a government action, he noted. The lions share of the fees will go to three plaintiffs class action firms that filed suit in 2005. Leading the charge were K. Craig Wildfang and Thomas Undlin of Robins Kaplan Miller & Ciresi, Bonny Sweeney and Patrick Coughlin of Robbins Geller Rudman & Dowd, and H. Laddie Montague Jr. and Merrill Davidoff of Berger & Montague. The three firms contributed about 55 percent of the hours in the fee
>>>
in a private antitrust case$545 millionIN A CREDIT CARD FEE SUIT. A judge approved the largest attorney fee award ever
24
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2014
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DEALS&SUITS
04 2014
request, which suggests they could split about $270 million. In December, Gleeson approved a $5.7 billion settlement resolving claims brought by merchants. Retailers accused the defendants of conspiring to fix the so-called interchange fees that retailers are charged when customers pay with a credit card. Before the settlements approval, 10 of the 19 named plaintiffs and several large retailers opted out. Objectors argued that it unfairly released Visa and MasterCard from future liability and would do little to affect interchange fees. Representing Mastercard were Kenneth Gallo of Paul, Weiss, Rifkind, Wharton & Garrison and Keila Ravelo of Willkie Farr & Gallagher. Visa tapped Robert Vizas and Mark Merley of Arnold & Porter. The settlement and fee award are the largest ever in a private antitrust case, according to the National Association of Legal Fee Analysis. But the fee award is a third lower than the $688 million granted to lawyers who represented Enron Corporation shareholders in a $7.2 billion settlement in 2008. Several retailers filed notices that they intend to appeal the settlement and the fee.
ROSS TODD, WItH R.M.
* * * * * *
SWATCH GROUP V. TIFFANY & CO.

Wilmer Cutler Pickering Hale and Dorr partner Franz Schwarz helped deliver a nice Christmas gift to client The Swatch Group SA, persuading an arbitration panel on Dec. 21 that the watchmaker is entitled to more than a half-billion dollars from former business partner Tiffany & Co. The arbitration panel, associated with the Netherlands Arbitration Institute, ordered Tiffany to pay $450 million for undermining a joint venture with Swatch. The panel also awarded Swatch interest and about $9.6 million in attorney fees and costs. The panel also dismissed Tiffanys $500 million counterclaim for breach of contract. Tiffany, best known for its jewelry, has long been eager to capture the market for high-end timepieces. In
2008 Tiffany and Swatch entered into a 20-year agreement to sell and distribute Tiffany-branded watches, but by 2011 the companies had terminated the partnership. Swatch filed an arbitration in April of that year. Swatchs CEO told the Financial Times that Tiffany pushed for the partnerships creation in 2008 but then neglected it and blocked its development. Tiffany, for its part, alleged that Swatch failed to provide sufficient distribution for the watches. The ruling follows hearings held in October 2012. The proceedings took place in Amsterdam, since Dutch law controlled the agreements at issue. (Tiffany and Swatch presumably wanted any disputes resolved on neutral turf.) Schwarz, an Austrian-born international arbitration specialist based in London, served as lead counsel for Swatch, which is based in Biel, Switzerland. The Wil mer team also included London-based partner Duncan Speller. The Dutch firm NautaDutilh was Wilmers cocounsel and advised on Dutch law. Tiffany was represented by Brian King, Elliot Friedman and Walter Stuart of Freshfields Bruckhaus Deringer. Lawyers on either side declined to comment. But in a public statement, Tiffany conceded to investors that Swatchs liability theory carried the day, while Tiffany prevailed substantially in its damage calculations. While Schwarz didnt get all he was seeking Swatch wanted $4 billion-plus in damagesthe ruling is still a major win for Swatch.
JAN WOLFE, WItH R.M.
* * * * * *
IN RE: SOUTHEAsTERN MILK ANTITRUsT LITIgATION

A federal appeals court on Jan. 3 reinstated an antitrust complaint against Dallas-based Dean Foods Company, and remanded the case to U.S. District Judge J. Ronnie Greer in Greeneville, Tenn. Food Lion LLC and other retailers allege in a complaint filed in 2007 in Tennessee that there was a conspiracy between Dean Foods and its subsidiary, a new milk processor, the National
Dairy Holdings L.P., half-owned by the Dairy Farmers of America Inc., to restrict milk output, forcing up prices for processed milk. The National Dairy processing partnership was originally set up to compete with Dean Foods under a settlement with federal regulators related to Dean Foods 2001 merger with Suiza Foods Corp. The lawsuit alleges that Dean Foods subsequently teamed up with Dairy Farmers of America to undercut its own subsidiary in order to raise milk prices. The retailers accused Dean of striking a secret deal to buy the raw milk it needed while Dairy Farmers restricted milk output, harming National Dairys ability to compete and raising milk prices for retail milk buyers. Greer dismissed three of five counts in 2010. Defendants successfully moved for reconsideration of his decision to allow two counts, but during hearings on the motion, Greer excluded key expert testimony by a former director of the economics bureau at the Federal Trade Commission that concerned the relevant geographic market for the antitrust claims. In 2012 Greer threw out both remaining counts, ruling that the retailers lacked proof of injury and failed to establish the relevant antitrust geographic market. The retail milk buyers appealed. A U.S. Court of Appeals for the Sixth Circuit panel, in reversing Greers ruling on the count of a conspiracy not to compete, wrote that the trial judge used the wrong standard for excluding an expert witness, incorrectly believing the expert could consider only the facts in the case record. In fact, the panel ruled, experts are not thus limited. Food Lion looked to Richard Wyatt Jr., litigation co-head at Hunton & Williams; R. Laurence Macon of Akin Gump Strauss Hauer & Feld; and Gordon Ball to lead the underlying case. Wyatts colleague Neil Gilman argued the retailers appeal. Paul Friedman, a Washington, D.C. partner at Dechert, argued for Dean Foods, and Steven Kuney of Williams & Connolly represented the Dairy Farmers.
SHErI QUALtErS, WItH R.M. Email: bigsuits@alm.com
26
Special sponsored section
Global Currents: Trends in Complex Cross-Border Disputes 2014
Table of contents
Executive summary Headline findings The scope of the challenge What challenges do cross-border disputes present? How are cross-border disputes being managed? What does the future hold?
3 6 8 15 18 22
Methodology 26
Global Currents: Trends in Complex Cross-Border Disputes
Executive summary
Private companies based in Barbados and the Netherlands separately seek arbitration against a Latin American country, claiming its government has expropriated their assets. A Kazakh bank les suit in London, accusing a former employee now living in Italy of billions of dollars in fraud. Three aerospace companies, based in France, Denmark, and the United States, battle it out in a New York courtroom over a contract to supply aircraft oxygen systems.
Get ready to see more and more scenarios like these. Cross-border disputes are legally complex. They are hard to plan for or predict. And should they occur in a jurisdiction with an uncertain or difficult legal environment, they can become a serious burden. Hogan Lovells leading Litigation and Arbitration practice surveyed 146 senior lawyers and executives across 18 industries from the worlds largest multinational corporations to determine how cross-border disputes have affected the legal landscape. The surveys most revealing findings involve location. Companies report that they are routinely challenged by certain geographical locations and jurisdictions. The countries where they have most frequently had to manage cross-border disputes in the past two years are China, England, France, Germany, and the United States. Companies say the most challenging markets are the United States, China, Brazil, and India. The difficulties that businesses and their lawyers routinely face when they find themselves in court, especially in those four countries, can seem daunting: getting familiar with overseas rules; managing differences in legal systems and often unexplored interfaces between them; and overcoming issues involving long distances and different time zones, cultures, and languages. The greatest challenge by far, though, is locating quality local counsel, especially in these difficult regions. Our survey measured the volume, proportions, and costs of cross-border disputes. We asked about trends, including how companies currently manage their multi-jurisdictional disputes and how they see regulatory agencies influencing litigation. We asked survey respondents to share the challenges that cross-border disputes present in specific countries, and to tell us which jurisdictions they believe are the most favorable and why. We encouraged respondents to share strategies and tactics they have used successfully to ease the burden of cross-border disputes. We inquired about how they avoid such disputes now and how they plan to approach them in the future. And then we drew on the insights of a dozen Hogan Lovells partners who focus on global cross-border disputes to apply their own experiential analysis to the survey results. It must be said that cross-border disputes are not always a bad thing. Yes, handled badly, they can be difficult and expensive to navigate. Yet, skillfully managed, they can provide extraordinary opportunities to protect or promote a companys market position. In a globalized economy, cross-border disputes are becoming ever more complicated, taking companies into disputes and courts in countries they could never have anticipated. Furthermore, regulatory agencies are subjecting corporate transactions to closer scrutiny and mounting coordinated enforcement actions across multiple jurisdictions.
Hogan Lovells
Lawyers who work in the international arena are blazing new trails in courts in countries where they have never had to handle such complex disputes. To reassure boards of directors and chief executives about the legal risks of pursuing business opportunities in emerging markets, senior in-house counsel are having to develop new and complex global dispute management skills. They are finding new and proactive ways to prepare for cross-border clashes before there is even a spark of trouble. A majority of survey respondents even those who had not yet cemented an approach to managing complex international disputes said they viewed a cross-border litigation strategy as imperative. This report confirmed a lot of what Ive seen happening in the marketplace, says Michael Davison, a partner in Hogan Lovells London office and co-head of the global Litigation and Arbitration practice. What I took from it is great concern about risks posed by international business disputes. The world is becoming increasingly more litigious. Indeed, survey participants in a wide range of industries voiced this sentiment. For almost one-half of our respondents, cross-border disputes have become more frequent in the past two years. They reported that 90 percent of these disputes involved two or three foreign countries, although some cases involved as many as 50 jurisdictions. And just over one-half of those surveyed said they expected an increase in crossborder disputes in the next two years.
According to our respondents, such disputes accounted for almost one-third of their legal caseloads. And 45 percent said board scrutiny of cross-border disputes is intensifying. Directors worry about what these disputes mean for corporate reputations and what the cost and exposure to risk mean for their business models.
their organizations, 10 percent had encountered competition and antitrust disputes, and 8 percent cited product liability issues. Much of the news related to cross-border disputes is positive. Respondents are learning to control costs and reduce the time and energy sucked up by cross-border disputes with new methods. Some are turning to a single firm with a global network of offices to manage the litigation an approach that allows general counsel to focus on the strategy. And many are implementing new measures such as early case evaluation and a deliberate strategy for settling disputes. Companies are taking a more proactive approach, writing efficient and effective arbitration procedures into contracts or selecting friendlier governing law jurisdictions. Others have increased their internal crossborder expertise, bringing in lawyers with technical experience or especially strong project or case management skills. A number of companies are building stronger relationships with international law firms. And many are focusing on resolving disputes more quickly even if it means settling instead of fighting to the bitter end. The cross-border dispute problem does not have a cookie-cutter solution, says Megan Dixon, a Hogan Lovells partner and head of the San Francisco and Silicon Valley offices. Going forward, I expect to see either constant or even higher numbers of cross-border disputes due simply to the shrinking global market
This report confirmed a lot of what Ive seen happening in the marketplace. What I took from it is great concern about risks posed by international business disputes. The world is becoming increasingly more litigious. Michael Davison Partner at Hogan Lovells and co-head of the global Litigation and Arbitration practice
Customers were the main source of cross-border disputes all over the world. Other sources, including suppliers, regulatory entities, and competitors, varied by region. The most common disputes involved commercial or contractual issues. Eighteen percent of respondents reported intellectual property issues as an area of law under which crossborder disputes had occurred at
phenomenon of which we are all so acutely aware. But what I hope will happen concurrent with that trend is a decrease in the number of disputes caused by failure to anticipate or address easily resolved issues in advance. Part of the overall solution will be improved coordination among regulators and lawmakers across the globe so that the inherent differences in law or practice do not result in unnecessary confusion, delay, or conflict as our world economy continues to overlap and interact in new and more expansive ways. The world economy is not yet as flat and uniformly global as we might wish. But will a rising tide of crossborder disputes deter entrepreneurs or international corporations from continuing to expand into uncomfortable legal environments? No. After all, the countries whose legal systems our survey respondents highlighted as being the most difficult the United States, China, Brazil, and India also offer some of the worlds most exciting economic opportunities. To successfully access these markets, companies and their advisors will have to work together to overcome the legal challenges standing in their way.
The cross-border dispute problem does not have a cookiecutter solution. Going forward, I expect to see either constant or even higher numbers of crossborder disputes due simply to the shrinking global market phenomenon of which we are all so acutely aware. But what I hope will happen concurrent with that trend is a decrease in the number of disputes caused by failure to anticipate or address easily resolved issues in advance. Megan Dixon Partner at Hogan Lovells and head of the San Francisco and Silicon Valley offices
Hogan Lovells
Headline findings
Several key themes emerged from survey respondents around the challenges, sources, management, geography, trends, and future of cross-border disputes. These six headline ndings are takeaways of the report and are further explored in the pages ahead. Our ndings depict what the future holds for multinationals and general counsel when faced with cross-border litigation.
THe CHaNgiNg LaNdscaPe
WHere Are THese DisPutes HaPPeNiNg?
30%
One-half of respondents expected an increase in crossborder disputes over the next two years Thirty percent of respondents caseloads consisted of cross-border disputes
WHat Are THese DisPutes AbOut?

Customers and suppliers were the main sources of crossborder disputes One-quarter of organizations faced cross-border disputes with regulators Most often, respondents disputes involved: China, England, France, Germany, and the United States were the most common jurisdictions involving cross-border disputes Respondents found Brazil, China, India, and the United States the most challenging
90%
Ninety percent of disputes involved two or three countries, but some crossed into as many as 50 jurisdictions
Respondents dene favorable jurisdictions as those with:

A culture that respects the rule of law High-quality court systems Predictability of outcomes Associated costs and timescales Practicality and familiarity to the internal team
44% 18% 10% 8%
Commercial and contractual issues Intellectual property Competition and antitrust Product liability
WHAT CHALLENGES DO THEY PrESENT?
Respondents reported that their biggest challenges were:

Lack of familiarity with the territories involved Coordinating local counsel across jurisdictions Board scrutiny intensifying around cross-border disputes
Finding experienced counsel
Managing differences in legal systems
HOw ArE THEY BEING MANAGEd?

Companies are implementing new measures: Early case evaluation Settlement strategy More focus on regulatory impact Handling more in-house Using secondments Introducing a formal panel
WHAT DOES THE FUTUrE HOLd?
Future strategies for managing cross-border disputes include:
Avoidance, including proactive reviews of procedures, contracts, and base jurisdictions
Stronger relationships with firms, leading to better business understanding and readiness for action
75%
Three-quarters of respondents write arbitration provisions into their contracts, but only one-quarter of disputes involve arbitration
Increased internal expertise, including relevant experience, technical excellence, and project or case management skills
A resolution focus, including strategies for early case assessment, settlement, alternative dispute resolution (ADR), arbitration, and choice of jurisdiction
US$6.6 million
The mean annual overall spend to manage cross-border disputes One-half of respondents had used a single coordinating counsel
Hogan Lovells
The scope of the challenge

The changing landscape Changing and complex legal and regulatory developments around the world are presenting new challenges and opportunities. Not surprisingly, almost one-half of interviewed corporate legal officers have seen cross-border disputes rising over the last two years, and they expect them to continue to grow over the next two years. A number of respondents cited increased disputes with competitors, increased regulation, and a more litigious environment, or they were concerned about a specific project, strategy, or plan that would draw their organizations into new foreign territory. There are major shifts under way in the sources of litigation around the world. Litigation brought by consumers used to be most prevalent in the United States, owing to that countrys well-organized and wellfunded plaintiff bar. Now you see a much more structured plaintiff bar in Europe and in the world in general. It used to be very U.S.-centric, says Thomas Rouhette, a Hogan Lovells partner who is head of the Paris Litigation practice and head of the global Product Liability practice. There are targeted attacks on some industries throughout Europe by the plaintiff bar. They went after drugs and medical devices. Next it will be chemicals. Rouhette also stresses the evolving potential for exposure to criminal law, which he believes many companies have not yet recognized. One area that I think should be the most worrisome is exposure to criminal law. In countries like Italy, Spain, and France, corporations can be sent to criminal trial very easily. Business litigation in Europe is increasingly criminal and the exposure there really matters. Damages are under control, but whats less under control is that corporations can be hit with criminal fines, which can damage a companys reputation. I believe many corporations have not yet picked up on the relevancy and importance of that exposure.
One area that I think should be the most worrisome is exposure to criminal law. In countries like Italy, Spain, and France, corporations can be sent to criminal trial very easily. Business litigation in Europe is increasingly criminal and the exposure there really matters. Thomas Rouhette Partner at Hogan Lovells, head of the Paris Litigation practice and the global Product Liability practice
Where are these disputes happening? Cross-border litigation makes up nearly one-third of all disputes in our respondents caseloads and increasingly, where they occur is becoming a concern for companies. It is especially worrying for companies expanding into countries like the United States, China, Brazil, and India, the legal landscape of which many of our respondents regard as the most difficult to navigate. On average, respondents handled 15 cross-border disputes annually. However, they reported a vast range in the volume of disputes some dealing with just one or two a year, others more than 1,000. Respondents said that 90 percent of their cross-border disputes involved just two or three countries, but that some involved as many as 50. Though cross-border disputes constituted a smaller proportion of cases for U.S. respondents, the volume of cross-border disputes was similar to that in other countries because U.S. companies have a higher volume of disputes in general. Collectively, respondents have faced cross-border disputes in more than 90 countries. The United States, England, Germany, China, and France were the most common countries for the adjudication of cross-border disputes. Brazil, Canada, Italy, and the Netherlands were also significant for at least 10 percent of respondents. The most challenging regions Those surveyed said the most challenging jurisdictions in which to navigate a crossborder dispute were the United States (21 percent) and China (20 percent), followed by Brazil and India. Although Europe is the region most likely to be involved in cross-border disputes, respondents did not generally flag specific countries as particularly challenging. Given the quasifederal European political structure, this is not surprising.
Historical and forecast trend in volume of cross-border disputes
Last two years
18%
34%
46%
Next two years
11%
36%
51%
10
20
30
40 %
50
60
70
80
90
100
Decrease
Static
Increase
Dont know
Base: WEIGHTED Last two years (146); Next two years (146)
Proportion of cross-border disputes covering various numbers of countries
4+ countries 2-3 countries
10%
90%
Base: WEIGHTED (127)
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Countries involved in cross-border disputes and those that were most challenging
U.S. UK Germany China France Brazil Canada Italy Netherlands Japan India Mexico Turkey Spain Hong Kong Switzerland Norway Poland Australia Austria Nigeria % 0 2% 0% 1% 0% 0% 0% 2% 1% 0% 2% 5 7% 7% 6% 6% 6% 5% 5% 5% 5% 5% 10 15 20 25 30 35
Active Challenging
21% 6% 3% 32% 23% 20% 23% 10% 2% 6% 1% 3% 10% 9% 9% 10% 14% 14% 13%
40% 39%
5%
The U.S. justice system continues to be seen as particularly difficult and problematic for non-U.S. corporations. There are aspects of the U.S. system that seem normal to those of us that live here, but not to people in other parts of the world, says Marc Gottridge, a New York-based partner and co-head of Hogan Lovells global Financial Services Litigation practice. For example, non-U.S. companies find it concerning that ordinary Americans with little or no understanding of complex legal issues generally serve as jurors in trials, or that elected judges may take campaign contributions from plaintiffs lawyers. By contrast, judges are appointed in England. There are many aspects of the U.S. courts that can seem scary, Gottridge says. We have many different regulators with overlapping jurisdiction. You are subject to the U.S. Securities and Exchange Commission, the U.S. Department of Justice, and any number of other state and federal regulators that can spark a cascade of investigations, which is happening increasingly in financial cases. Europe is viewed as a less challenging jurisdiction for cross-border disputes because, according to Ina Brock, a partner in Hogan Lovells Munich office and co-head of the global Life Sciences industry sector team, it is advanced, stable, and predictable. In Europe, there are fewer threatening features like juries, punitive damages awards, and, in most jurisdictions, mechanisms directly equivalent to the U.S. class action.
100
40
45
50
Base: WEIGHTED Active (146); Challenging (137)
Regions involved in cross-border disputes vs. most challenging

71% 55% 47%
Europe Americas Asia Pacic Africa Middle East % 0 16% 11% 9% 7% 10 20
24% 38% 33%
30
40
50
60
70
80
90
Base: WEIGHTED Active (146); Challenging (137)
Compared to the United States, damages exposures in Europe are relatively low, Brock says. In the commercial and personal injury space,
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there are no punitive damages. While some countries in Europe are getting more challenging, like France, in general, Europe is seen as a place where cases are decided on their legal merits, without a lot of theater. China, which deals mostly with cross-border disputes with the United States or Europe, is considered the second most challenging setting for a multitude of reasons. Foreign lawyers cannot practice law in China, although they can consult with local law firms (this is also true of Brazil and Singapore). Eugene Chen, a Shanghaibased Hogan Lovells partner in the Litigation and Arbitration practice, explains some of the issues: Theres a fundamental question in China about how business disputes will be decided, Chen says. There are a lot of external influences in the court system. Its common to have local government interference. And,
generally speaking, depending on the type of case, you often find bias against multinational parties. Chen says he expects to see more cross-border litigation disputes in China in the future. Regulatory changes will create more litigation between private parties who have entered into deals with the expectation that the law will behave a certain way, and then it changes, he says. Chinese parties arent that litigious by nature. They dont like litigation. But thats changing, too. Chinese parties are finding out that litigation can be used offensively and defensively. Youre going to see more Chinese companies involved in litigation. China is exiting its shell and investing all over the world. Conflicts will arise that have to be resolved. When navigating disputes in China, Chen says, Having a well-defined exit strategy is important. A lot of
what we do is help clients get out of a deal and help them enforce shareholder rights. Defendants can often have little say in where a case is heard. A major challenge for businesses is to minimize the risk of appearing in a court they do not know and to maximize the chances of appearing in a more favorable court. We are very likely to be representing a financial institution as a defendant, so we dont have a huge amount of choice in where to try the case, Marc Gottridge says. The best thing you can do is include a forum selection clause in any agreement. As long as it is properly drafted, it will generally be enforced. It may also be possible to win a motion for forum non conveniens dismissal in a U.S. court, if you have made a strong factual record.
Patrick Sherrington, Hogan Lovells Hong Kong-based Regional Managing Partner for Asia and the Middle East, explains the challenges of a changing legal landscape in Asia: The nature and quality of a countrys legal system almost invariably changes in response to developing market norms because international businesses expect greater transparency and a semblance of predictable laws and even-handed justice where they do business. The result is that, as nations seek to develop economically, so too often do their legal systems.
China remains a very difficult jurisdiction for all sorts of reasons language, culture, unfamiliar procedures, political influence, and local protectionism, to name some of the continuing challenges. But it has come a long way, as has the Chinese legal profession, over the last 20 years as China has developed its economy. Exposure to international legal norms invariably influences immature legal systems. Of course, it will have to improve still further if China is to realize its ambition of establishing Chinese law as a major alternative to English law and New York law in international corporate transactions.
If a countrys legal system continually disappoints and denies justice for any of these reasons in relation to China, and many more besides or simply because the delays to getting anywhere are unacceptable, and if in addition international legal advice is not available locally, people will invariably look elsewhere to resolve disputes wherever possible. This will affect the pace of a countrys economic development. India is a case in point.
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Hogan Lovells
Main sources of cross-border disputes (last two years)
100 90 80 70 60 50 40 30 20 10 0 Customers (55%) Suppliers (44%) 56% % 64% 50% 49% 44% 32% 27% 15% Regulatory entities (25%) 15% 18% 14% 41% 33% 27% 14% 17% 15% 14% Employees (16%) 19% 13% 5% Competitors (23%) Other govt bodies (19%) Shareholders (14%)
UK/Europe
Americas
Middle East/Asia Pacic/Africa
Signicant difference
Base: WEIGHTED Total (146); Americas (58); UK/Europe (58); Middle East/Asia Pacic/Africa (29)
Areas of law in which cross-border disputes most frequently occurred (last two years)
Commercial/contract disputes Intellectual property Competition and antitrust Product liability Corporate transactions, including M&A Employment Security/investments/shareholder disputes Construction, infrastructure, and project nance Regulatory Professional negligence White collar and anti-bribery Trade and export regulation Finance Insolvency/restructuring Directors and ofcers liability 0 4% 3% 3% 2% 2% 2% 5 10 15 20 25 %
Base: WEIGHTED Total (146)
44% 18% 10% 8% 8% 6% 6% 6% 6%
Signicantly higher among those with more disputes overall, and/or those predicting an increase Competition also higher for UK/Europe Intellectual property less for U.S.
30
35
40
45
50
13
What are these disputes about? Customers were the most cited source of cross-border disputes, accounting for one-half of such disputes in all regions. Thereafter, the pattern by region varied. One striking regional difference was that competitors were a more likely source of conflict for European respondents than for respondents from the Americas. In the Americas, suppliers were a close second to customers, followed by regulators and other government bodies. In Asia Pacific, the Middle East, and Africa, regulatory entities were the second biggest source of crossborder disputes. Twenty-five percent of respondents reported that regulatory entities were a source of their cross-border disputes and specifically cited the U.S. Department of Justice, the U.S. Federal Communications Commission (FCC), the European Commission, and the U.S. Securities and Exchange Commission. In general, the larger the organization, the more likely it was to face disputes with regulators and government bodies. One trend that weve identified is the cooperation internationally among regulatory agencies that conduct enforcement proceedings against companies, says Peter Spivack, a Hogan Lovells partner based in Washington, D.C. who is co-head of the global Investigations, White Collar and Fraud practice. So think about it like a single game of chess played on multiple boards. We have to make sure all our moves match on each of the boards.
Companies need to look to establish internal control systems and to vet third parties carefully, especially in new jurisdictions, he continues. In general they need to position themselves in a way that anticipates regulatory enforcement and creates the best argument should regulatory enforcement occur. Michele Farquhar, a Washington, D.C.-based partner who is head of Hogan Lovells Communications practice, says she mostly helps companies navigate the complexities of communications regulation in the United States and in other countries. She says the FCC has been making it easier for foreign companies to invest in America by loosening regulations. Other countries look to the FCC, she says, as a model to ensure competition thats more neutral and transparent, but they each still have their sovereign interests, which make them different from country to country. The FCC recently pushed forward with liberalizing foreign ownership rules for spectrum ownership, she says. The United States is more aware of the need for foreign investment and thats a positive development. Farquhar says that it is also important to understand the different data privacy issues in different countries that most countries have much tighter restrictions on how to use personal data than the United States. However, over time, she expects to see the nature of global regulations become more melded. As the world moves toward wireless, and the Internet continues to evolve, there will be a period of time when regulations
You will have more companies trying to serve the global market, and they will need to know what rules they must abide by in what countries. In the long term, though, countries will work together to make it easier for companies to offer common platforms. Michele Farquhar Partner at Hogan Lovells and head of the Communications practice
are complex and unclear, she says. You will have more companies trying to serve the global market, and they will need to know what rules they must abide by in what countries. In the long term, though, countries will work together to make it easier for companies to offer common platforms. Forty-four percent of all respondents said commercial or contract disputes were the most common type of cross-border disputes. Intellectual property and competition and antitrust came in second and third as areas of law where cross-border disputes most frequently occurred. Respondents who said cross-border disputes were on the rise were more likely to name competition and antitrust issues, and mentions of this area were higher in Europe. As European regulators clamp
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Hogan Lovells
down on cartels, follow-on litigation has exploded as the cartel members try to pass the blame and monetary fines on to others. The fourth most cited type of crossborder disputes was product liability. Ina Brock suggests that we will be seeing more cases from this area. Its a constant trend weve been observing, Brock says. It isnt possible for manufacturers to adopt a country-by-country strategy for dealing with product liability issues. You have to look at it globally from the very beginning as the publicity given to a recall in one country rapidly spreads to other markets through the Internet and through regulators sharing information.
When there is an issue, it happens in several countries. Only 3 percent of respondents said white collar and anti-bribery concerns were a cause for crossborder disputes. Since the U.S. Foreign Corrupt Practices Act of 1977 and anti-bribery compliance are top of mind for many general counsel these days, this seemed surprising to Marc Gottridge, who commented that although other areas may have received more attention recently, it would be wrong to think that enforcement agencies in the United States and elsewhere are not prioritizing anti-bribery investigations. The opposite is true, and this is an area to keep your eye on, Gottridge says.
Indeed, companies fret over the possibility, no matter how remote, that they could become embroiled in a cross-border investigation or dispute involving allegations of serious wrongdoing. The matters that will keep the major financial institutions up at night are regulatory investigations, criminal prosecutions, and consequential class actions, as opposed to comparatively routine variety commercial disputes, says Gottridge.
Intellectual property disputes These disputes are often bet the company cases, says Andreas von Falck, a partner in Hogan Lovells Dsseldorf office and global head of the Intellectual Property, Media and Technology practice. They involve brand disputes or patent disputes that define a companys identity or determine how its product works. Being enjoined from using ones brand may amount to a complete sales ban. And the most hotly contested issues these days relate to standard essential patents, where a patented solution has found its way into a standard for, say, mobile telephones. An injunction on the patent makes it impossible to market any other phone that is not compliant with that standard. Certain industries face their own unique challenges in intellectual property disputes. For example, one important trend that we are seeing in the pharmaceutical world is the ever increasing number of biotechnologyrelated disputes, von Falck says. Some of the early basic patents in this area are very broad and can be seen today as covering solutions that nobody thought of at the time of the initial application. This touches on some very fundamental questions of patent law. Practicing patentees will often want to leverage these patents to enforce monopoly rights in their own products. However, we also see a rapidly increasing number of patent lawsuits in the pharmaceutical world that are being launched by nonpracticing entities (e.g., universities and financial investors) that are trying to leverage patents to generate licensing revenues from operative pharmaceutical companies. It is critical for companies to remain vigilant in all countries where they operate.
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What challenges do cross-border disputes present?

Finding qualified local counsel and other main concerns Finding experienced local counsel is the greatest concern for respondents (31 percent). Getting the right local counsel its very critical that we have counsel who understand and can educate us on the law and operations of the judicial system, said one of our survey respondents. The next biggest challenge (27 percent) for respondents was a lack of familiarity with laws and rules of foreign territories. Managing differences between legal systems can present multiple challenges for complying with litigation and discovery requirements. For example, because courts in the United States allow much broader discovery than do courts in most other countries, a plaintiff who seeks broad discovery requests whether to gain information or to impose the burden of U.S.-style discovery on the defendant may seek to venue all or a portion of a dispute in the U.S. courts, even when the dispute centers on witnesses and actions in Europe, Asia, or elsewhere. Several countries have enacted statutes to prevent U.S. discovery, such as the French blocking statute, which provides for criminal penalties for disseminating information in response to U.S. discovery requests. A harsh reality for non-U.S. and multinational companies engaged in disputes venued in the United States is that they often must choose between complying with broad U.S. discovery requirements and complying with restrictive non-U.S. laws governing confidentiality and trade secrets, says Jon Talotta, a Northern Virginia-based Litigation practice partner and chair of Hogan Lovells global Electronic Information group. Successfully navigating cross-border discovery conflicts requires advanced planning, country-specific expertise, and effective communication with opposing counsel and U.S. tribunals.
A harsh reality for non-U.S. and multinational companies engaged in disputes venued in the United States is that they often must choose between complying with broad U.S. discovery requirements and complying with restrictive non-U.S. laws governing confidentiality and trade secrets. Jon Talotta Partner at Hogan Lovells and chair of the global Electronic Information group
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Hogan Lovells
In addition, companies faced with cross-border litigation must account for data protection laws that restrict the disclosure of personal data, including data about the companys employees, for use by parties in litigation. Several European countries have enacted the concepts found in the EU Directive on Data Protection into their national laws, which impacts the ability of parties in those countries to transfer data outside of Europe for a litigation matter. Data protection and privacy laws in Argentina, Canada, Hong Kong, Japan, Mexico, Singapore, South Africa, and elsewhere also impact cross-border access to data, particularly data about individuals, maintained in those countries. In contrast, U.S. law allows litigants in foreign courts to obtain U.S.-style discovery in certain circumstances.
Companies should evaluate the data protection and privacy laws not only in the jurisdictions where they plan to litigate, but also in the jurisdictions where the key evidence and information may be located, says Michelle Kisloff, a Washington, D.C.-based partner and co-head of Hogan Lovells Privacy Litigation practice. These laws often impact the discovery that will be available, and in some cases may affect the choice of a litigation forum. Companies involved in cross-border disputes must factor the data protection laws into their litigation strategy. Coordinating lawyers across jurisdictions and addressing differences in language, culture, time zones, and typical costs were reported as additional issues unique to crossborder disputes.
Multiple legal systems add complexity and often direct conflict to crossborder disputes. This may affect counsels ability to gain or enforce judgments consistently across the jurisdictions involved. Coordinating counsel in different jurisdictions can also be challenging, particularly when lawyers are at different firms. Finally, cross-border disputes tend to drag in numerous other parties, all of whose interests must also be managed. Board scrutiny Since the market troubles of the early 2000s and the financial crisis of 2008, boards have been forced, through a combination of regulation and pressure from shareholders and other stakeholders, to be more accountable for the actions of their companies. This has meant greater collaboration between the board and their in-house and external lawyers at the highest level. General counsel are still working through best practices in managing their expectations, and globalization continues to bring new and different challenges in this arena. Forty-five percent of respondents said their boards are increasing internal scrutiny of cross-border disputes. Their main concerns are financial, but involve both the cost of handling the dispute and broader exposure stemming from it, including reputational risk. At their worst, these disputes may threaten ongoing business. Boards are also concerned about uncertainty and the drain on internal resources.
Board concerns in relation to cross-border disputes

31% 29% 24% 10% 8% 7% 5% 5% 10 20 30 40 50 60 70 80 90 100
Cost Reputational risk Exposure/liability Impact ongoing business Readiness/strategy Ability to predict outcome Uncertainty Internal resource % 0
Base: WEIGHTED Scrutiny (146); Concern (66)
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Internal legal teams are under increasing pressure to analyze cases, involve the appropriate teams within the business, develop and adjust a strategy, and inform the relevant constituents throughout the project. Those that seek the input and preparation from external counsel then risk raising budgetary concerns. I think [boards are] concerned about the cost, said one respondent. I think theyre concerned about
the unpredictability in terms of the outcome of being involved in a foreign or cross-border dispute, and I think theyre concerned about the potential reputational or press impact because cross-border disputes, I think often, will get more press than a local dispute. Costs The mean annual overall spend by organizations to manage cross-border disputes was US$6.6 million.
However, annual spend on crossborder disputes was highly variable. Organizations with less than US$10 billion in revenue reported a mean annual spend of US$3 million on cross-border disputes, while organizations with over US$10 billion in revenue reported a mean annual spend of US$17.2 million.
A perspective: Shimano Intellectual property is the second largest cause of cross-border disputes, according to our survey. It is a world Atsushi Komatsu knows well. As Manager, Patent & Trademark/ Engineering at Shimano in Japan, he has seen the number of cross-border disputes grow since he started at the company in 2001. Shimano is one of the top producers of bicycle and fishing components in the world, and it also produces rowing equipment. Komatsu deals exclusively with intellectual property, and says the recent growth in cross-border disputes for his company has come mainly from China, Germany, and Taiwan. Twelve years ago, there were very few companies that copied our products, Komatsu says. However, in the past 10 years, many Chinese companies have entered into the bicycle component business, and they are starting to infringe. To deal with the increasing number of disputes, Shimano has added staff to its intellectual property department. Komatsus department tries to avoid disputes by monitoring patent applications around the world. Its very important to find applications from competitors as quickly as possible, Komatsu says. We can analyze the patents and design around them to avoid disputes in the future. If the company cannot avoid a dispute, Komatsu usually prefers to go to court instead of arbitration. He has found that in arbitration, the other side does not necessarily follow the decision of the arbitrator. The legal system offers the kind of enforcement that arbitration is missing. This is especially the case in China. Although Komatsu will always start a case in court in China, it is not unusual for the parties to negotiate some kind of an agreement before the case has run its course. According to our experience, we settle in 70-80 percent of the cases in China, Komatsu says. He says he tries to avoid lawsuits in the United States, mainly due to the high cost of litigation in this jurisdiction. Hes not alone. The United States topped the list of countries that are the most challenging for crossborder disputes. Twenty-one percent of respondents said the United States is the most difficult place to try cross-border disputes, putting it ahead of China and Brazil. His biggest worry when it comes to cross-border disputes is having a judge hand down an injunction stopping Shimano from selling a product. So far, that hasnt happened. Even though Shimano lost a case in Germany, the company was able to negotiate to avoid an injunction.
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How are cross-border disputes being managed?

Changes in approach Businesses have implemented many positive changes in the way they approach cross-border disputes over the past two years. The preferred and by far the most effective approach is a deliberate strategy for settling disputes that is identified as early as possible. Sixty percent of respondents said they have used a targeted strategy to settle disputes, and 85 percent reported a positive impact. Having an analytical early assessment of pros and cons of pursuing the dispute is important, Michael Davison says. Get the case in and look at it and decide if its going to get better by prolonging it or if its better to settle now. Early case evaluation was the next most implemented change: 56 percent of respondents had tried it, and 79 percent reported a positive impact. Cross-border litigation should never come as a surprise in this global economy, so plan ahead. Chris Hardman, a Hogan Lovells partner based in London who handles complex and multi-jurisdictional CIS-related disputes, advises investors seeking to do business in high-risk, high-return markets like Russia to assume from the start theyll get into litigation. Document properly and provide robust dispute resolution clauses, he says. Try to ensure that whatever dispute arises you deal with it, and youve got a good starting point for when a dispute does arrive. The use of secondments detaching lawyers from their regular positions to temporary assignments and handling more disputes in-house were reported as effective by some, although secondments have not been widely adopted.
Having an analytical early assessment of pros and cons of pursuing the dispute is important. Get the case in and look at it and decide if its going to get better by prolonging it or if its better to settle now. Michael Davison Partner at Hogan Lovells and co-head of the global Litigation and Arbitration practice
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Arbitration On average, respondents said 29 percent of their cross-border disputes involved arbitration. However, 73 percent of international contracts included a provision selecting arbitration as the dispute resolution mechanism. The energy, resource, and mining sectors are more likely to include arbitration provisions in contracts industries that regularly have multinational operations and are subject to governmental regulation. These agreements are more likely to focus on the privacy of the parties involved, the ability to select a neutral tribunal composed of industry experts, neutrality of forum, speed of proceedings, and the transparency or integrity of a legal system when choosing a juridical seat. They often emphasize boards of directors concern over reputational risk and favor London as the seat of arbitration. Oliver Armas, a partner in Hogan Lovells New York office who handles complex domestic and international disputes, sees practical advantages in choosing arbitration over litigation in a public court. Parties can keep their disputes private or even confidential (if confidentiality is provided for in the arbitration clause or by the arbitral tribunal). This sort of confidentiality is usually not available in a court proceeding. Arbitration is also more flexible, and usually more can be resolved procedurally than in court. International arbitration is becoming more acceptable worldwide. You have different regions that have really
Proportion of international contracts including arbitration provision
Contracts include arbitration provision Do not include arbitration provision
7% 20%
Dont know
73%
adopted arbitration as part of the local culture, Armas says. Local laws have been written to support international arbitration because it helps provide inbound investors with additional reassurance. Arbitration in cross-border disputes is a preferred dispute resolution mechanism among multinational players. There are a variety of reasons for this, explains Daniel E. Gonzlez, a partner in Hogan Lovells Miami office and co-head of the global International Arbitration practice. There is an absence of home-court advantage and an ability to recognize and enforce arbitral awards made in
other contracting states as a result of the New York Convention, adopted by member states of the United Nations, and the Panama Convention, adopted by member states of the Organization of American States. It is not necessarily any cheaper than litigation, though, or faster. Arbitration is not an alternative to dispute resolution it is a mechanism for dispute resolution. But there are other ways to solve the problem. Before and during an arbitration the parties may choose dispute resolution boards, mediation, or other alternative dispute resolution mechanisms to resolve a controversy, Gonzlez says.
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Hogan Lovells
A mediator drives both sides toward an agreement, while an arbitrator decides the case, as a judge would. Most favorable jurisdictions Globally, common law wins out: 28 percent of respondents preferred U.S. law and 23 percent preferred English law for resolving cross-border disputes. However, within that, there is an overwhelming preference for U.S. courts by American respondents, whereas English law has a wider international appeal, for example, for many Russian investments or certain industries. We try to take a
jurisdiction that is most similar to our own, one respondent commented. We try to avoid jurisdictions that have elements of law that are unknown to us basically staying close to home is key; our own law and our own jurisdiction. Another respondent said that the most important consideration was the countrys commitment to the rule of law, by which I mean stable rules that are reliable and reliably enforced with an absence of corruption. However, despite the wealth of global legal experience businesses have gained over the years, they still prefer to
litigate in their home jurisdiction and pursuant to domestic law. There are several key factors in determining the most favorable jurisdiction. Enforceability and respect for law are top factors, but so are predictability and reliability, home convenience and familiarity, cost of proceedings, reputation, maturity, and integrity. Respondents understandably did not favor jurisdictions subject to corruption or political interference. Respondents also valued speed of process along with other practical factors such as proximity. Quality
Preference for legal system to resolve cross-border disputes
The volume of each circle represents the % per country who reported favoring the U.S. or English legal system Scale
= 10% English Law = 10% U.S. Law
Outside of U.S. and English law, respondents preferences for legal systems tended to focus on their own countries of residence. Base: WEIGHTED All (146); U.S. law (41); English law (33)
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and availability of local counsel made the list as well. Finally, so did specific circumstances that made a jurisdiction favorable for a certain type of case. Different jurisdictions have different approaches to questions of jurisdiction. Its really up to the domestic law of the jurisdiction to decide if thats the right place for a case to be resolved, says Jon Holland, a partner in Hogan Lovells London office and co-head of the global Financial Services Litigation practice. The United States has a reputation for having an expansive view of jurisdiction and will sometimes take on civil claims (and regulatory enforcement actions) that appear to have little or no real connection with the United States. Other jurisdictions, England for example, are more willing to
decline jurisdiction if they dont think they are the right place to decide a dispute or pursue an investigation into alleged misconduct. Use of counsel Many respondents (69 percent) preferred to use a single firm to handle all of the work related to a given cross-border dispute. Those who preferred multiple firms said they looked for local counsel with the relevant expertise for each specialty required for the case. Cost is a key factor in choosing multiple firms. The use of a single firm is significantly more common in the Americas, with 80 percent of respondents reporting this preference. This compares to 64 percent of respondents in the United Kingdom and Europe, and only 52 percent of respondents in the Middle East, Asia Pacific, and Africa who preferred a single firm.
Most respondents said it was important to use a firm that provides its own global network, for reasons of time, cost efficiency, and ease of management and communication. With a global network of offices, international firms have local experts in multiple jurisdictions and do not need to seek outside counsel. Having a single point of contact was also key a coordinating counsel who facilitates communication and management of the dispute. These factors combine to provide an efficient and cost-effective experience.
Delivering results through efficient project management Litigation is like any major business undertaking. It needs to be delivered to scope and to budget. Expert knowledge of sophisticated project management techniques allows lawyers to scope the litigation, budget it rigorously, identify the timeline, and work with clients to deliver what has been agreed, at the time that it has been agreed, and on budget. Clients need to manage litigation, and it is the role of lawyers to work with them to deliver the best results. Identifying not only the scope of and the right budget for litigation but using a project manager to report, monitor, and assess developments on a case is a simple way of reducing the risks that clients face in managing complex cross-border disputes. Cases that involve many different cultures and legal traditions require the best project management skills. This is an area where experience will deliver results for clients.
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Hogan Lovells
What does the future hold?

Companies that are hoping to better manage or avoid crossborder disputes uniformly agree: the approach needs to be global, coordinated, and consistent, and it needs to be implemented as soon as possible. It also helps to make maximum use of local knowledge. What we try to do and weve had real success with this is to have in place lawyers who are experienced investigators and experienced with local regulators in key enforcement districts around the globe, says J. Evans Rice, III, a Hogan Lovells partner based in Washington, D.C. in the Investigations, White Collar and Fraud practice. The issues in each country are very different, and theres no replacing on-the-ground expertise. Across the board, respondents said they needed to polish their early negotiation techniques, learn to draft effective arbitration clauses, and establish systems for reviewing transactions or contracts before they are finalized. We would try to have more vetting of the parties we deal with, so that we would end up in disputes less, said one respondent. So we are dealing [only] with parties that are well known and have good reputations, so that payment issues and contract disputes dont arise. A large majority of respondents (78 percent) have defined strategies they hoped to put in place over the next two years. Those surveyed say they are developing processes that include preventive measures, established steps to ease dispute resolution, better counsel, and improved dispute management (such as designating project managers). In terms of future plans, we are currently examining a lot of different things, said another survey respondent. Creating internal centers of excellence for managing these kinds of matters, whether in the investigation area or otherwise, is something that is under consideration. We need a more formalized process internally as to how we handle cross-border disputes, said another. A dispute will come in and, you know, well be reactive to it. Id rather have a proactive strategy in place for how we handle cross-border disputes. We just dont do that. We try to be increasingly proactive, said another respondent. Our internal legal team will work with the project team more extensively at the beginning and throughout the duration of performance of a contract so that were alert to issues and hopefully avoid litigation or ADR altogether, and so weve been increasingly focused on ensuring that timely legal service is sought and that legal advice is involved right from the outset.
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Phoebe Wilkinson, a partner in Hogan Lovells New York office who handles complex domestic and international disputes with a focus on product liability, offers, Its always best for clients to inform their counsel as soon as they receive a regulatory inquiry. Sophisticated companies know to get litigators/disputes counsel in the room immediately so they can proactively shape the companys response to managing all of the relevant risks, including litigation risk. Some of the risk management
strategy is done very early, and it requires foresight and experience on the part of the in-house and external teams. Those surveyed said they would continue to rely on proven measures for dealing with cross-border litigation such as early case evaluation, deliberate settlement strategy, building in-house expertise, and secondments, as well as the use of formal panels to help outside counsel better understand their business.
What often happens is disputes bubble up at the local level, Michael Davison says. A classic example is a significant dispute for an international company with a product in the Ukraine. They didnt know there was a problem until they got the notice for arbitration. If they had found out about the problem earlier they never would have ended up in arbitration in the first place.
Early case assessment: steps to success 1. The key to successful dispute management is a rigorous early assessment of the pros and cons of your position. 2. Identification of the real commercial problem is key: Is it a case of cant pay or wont pay? 3. If it is cant pay, then getting as much out of the situation as quickly as possible is essential. 4. If it is wont pay, then what is the answer to the question Why wont they pay? 5. Is your opponent actually right about the issues, or at least some of them? If so, then accept that fact and agree now on the best way forward. 6. It is likely that your opponent is right about some, but not all, of the issues. If so, then identify now where they are right and where they are wrong. 7. Where your opponent is wrong about the issues, what do you do now to identify and assert your best position on those issues? 8. How much are those issues worth to your company? 9. What do you need to assert your position effectively and put pressure on your opponent to back down? 10. Who and where is your key witness? What and where are your key documents? What are your best legal arguments? 11. Identify clearly the commercial benefits and risks of escalating a dispute to formal litigation. How do they balance? 12. What is your exit strategy from litigation? Once you have begun the litigation, how can you stop it? 13. Early case assessment is a project management tool that answers these questions in an analytical, commercial, and cost-effective way.
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Hogan Lovells
Early avoidance is key once people get stuck, it can be hard to back down, Davison emphasizes. Having a really effective early-warning system is a highly efficient way of avoiding cross-border disputes. Davison recommends an early assessment weighing the benefits and disadvantages of pursuing a dispute. Some cases might be well served by settling early, while others might be better off prolonged. General counsel need to have some risk assessment about what are the most likely forms of dispute, where it is most likely to happen, and what are the contingency plans if it does happen, he says. Its getting in early and making sure youre equipped for it. It will happen.
Megan Dixon agrees. Conduct your due diligence and anticipate legal or regulatory problems you might have, she says. In some cases, you might go to the regulatory entity and selfreport some conduct or ask for guidance from them on potential regulatory or legal issues they might have with your event or transaction. Sometimes, if you anticipate an issue that you know will become a dispute, and there is no way to pre-settle that problem, you can prepare defenses in advance so that if and when you get sued, you can really hit the ground running. She says a dose of preventive medicine will go a long way to help lawyers avoid or mitigate cross-border disputes. Hire a team of smart, creative counsel experienced in all
facets of the cross-border business activity you contemplate, and work with them early and often to develop a strategy and an approach to implementing that strategy across all potentially affected jurisdictions. Finally, legal departments might consider systemic tracking of crossborder disputes. As organizations put preventive measures in place, it is critical to assess return on those investments. Metrics can provide evidence to the organization of the effectiveness of the legal department. Without tracking and measurement, scrutiny tends to land on the losses or exposures as they stand, rather than the additional losses the legal team was able to prevent.
A perspective: TV Rheinland When your company spans more than 100 markets worldwide, it is challenging not to end up in crossborder disputes. But for TV Rheinland, those disputes are not always clear cut. The German-based company is a leading provider of technical services worldwide. TV provides safety, certification, and technical services to clients in fields like construction, transportation, and industry. Because TVs business is certifying products, not creating them, the company is often called into lawsuits that are already in progress when a plaintiff decides to look for more companies to sue. This means getting up to speed and preparing defense for jurisdictions around the world in a very short time frame. When it comes to these types of challenges, you need to make quick decisions, says Bjrn Clsserath, head of corporate legal at TV Rheinland. You dont get extra time because youre in Germany and the suit is in South America. You have to deliver in the time given to you. To speed the process, TV has put strict standards in place to deal with disputes. There are clearly defined teams, which handle different parts of the dispute and adhere to specific timelines and standards to clearly establish where the company stands and to do internal investigations. Even though the people involved in the teams might change depending on the nature of the dispute, by keeping the standards in place, teams are able to form and work together quickly.
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Strategies for managing disputes
Prevention
Formal review of contracts and procedures Risk avoidance Improved management of contracts
Proactive steps to ease resolution
Stating base jurisdiction in contracts ADR clauses Increased in-house resources Enhanced internal expertise (center of excellence) Formalized defined process Ready panel of specialist external counsel Preparing panel with knowledge of business Early settlement Bringing disputes in favorable jurisdictions Using ADR or arbitration Stronger case management (project managers)
Improved management of disputes
Measurement of disputes
Measuring volume, cost, and causes Tracking impact of changes to approach
There has been an evolution in the sense that the standards have been clearly defined, Clsserath says. We have shared servers to create team rooms. You can always rely on the same standard setting when things kick off. At the same time, TV is working hard to prevent disputes from cropping up in the first place. The company often gets dragged into cases brought by consumers who do not understand the scope of TVs certification on a product. The issue in the case might have nothing to do with the components that TV has actually certified, but the plaintiff does not realize that.
To help head off these kinds of disputes, TV is using advanced technology to put more information into its test marks on products. The test marks now include bar codes that link to technical information about what, exactly, TV tested. This should help plaintiffs lawyers understand when it makes sense to pull TV into a lawsuit, and when it does not. Im convinced that this will help us be able to answer certain questions weve seen in the past, says Clsserath. Well be able to more easily do the explaining part in the legal conflict.
The codes should make TVs services more transparent to courts around the world. With these new initiatives, and help from firms with expertise in different jurisdictions, Clsserath is confident TV will be able to handle future cross-border disputes.
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Hogan Lovells
Methodology
Hogan Lovells commissioned a research study among the FT Global 500 largest global multinationals, as well as a selection of its own multinational clients, during the fourth quarter of 2013 to capture metrics and opinions in relation to the management of cross-border disputes. Interviews were conducted among 146 general counsel, senior lawyers, and executives across the Americas, Europe, the Middle East, and Asia Pacific. Average annual revenue of respondents was US$16.5 billion. Seventy-one percent of organizations that responded were listed companies. Regional weighting was applied to the data to achieve the desired distribution.
Respondent region
Americas UK/Europe Middle East/ Asia Pacic/Africa
20% 40%
40%
Breakdown by industry
Manufacturing Energy/utilities TMT Financial services Automotive Trans/logst/dist Pharma/bioscience Business services Retail/wholesale Food/farming/sh Construction Banking Engineering Real estate Insurance Resources/mining Healthcare Investment % 0 3% 3% 2% 2% 2% 2% 1% 1% 5 10 15 20 25 6% 6% 5% 5% 5% 5% 7% 10% 14% 17%
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Hogan Lovells
About Hogan Lovells

Hogan Lovells is a global legal practice that helps corporations, financial institutions, and governmental entities across the spectrum of their critical business and legal issues globally and locally. We have over 2,500 lawyers operating out of more than 45 offices in the United States, Europe, Latin America, the Middle East, Africa, and Asia. Hogan Lovells offers:
Hogan Lovells is distinguished by a highly collaborative culture that values the contribution of our diverse team both within Hogan Lovells and in the wider community. Our style is open, service focused, and friendly. We believe that our commitment to client service, commerciality, and teamwork provides benefits to our clients and enhances effective business relationships. Our team Our Litigation and Arbitration practice has a long track record of achievement in complex, high-stakes international disputes. With more than 700 lawyers based in 40 of our offices worldwide, we bring exceptional industry knowledge and provide cutting-edge advice. Because our lawyers are leaders in their local jurisdictions and function across offices as one team, we are positioned to deliver both local insight and global perspective to meet our clients interests in multijurisdictional matters. Our worldwide excellence and commitment to our clients is reflected in the top rankings we earn from leading legal directories and third parties. We regularly function at the intersection of business and regulation, combining industry knowledge and a proven ability to guide clients through courts, tribunals, and governmental bodies worldwide. Our experienced trial and appellate lawyers litigate and win commercial disputes across all industries and geographies. Our arbitration lawyers have in-depth knowledge of the
an exceptional, high-quality transatlantic capability, with extensive reach into the worlds commercial and financial centers; particular and distinctive strengths in the areas of government regulatory, litigation and arbitration, corporate, finance, and intellectual property; and access to a significant depth of knowledge and resources in many major industry sectors, including hotels and leisure; telecommunications, media, and technology; energy and natural resources; infrastructure; financial services; life sciences and healthcare; consumer; and real estate.
distinct customs, rules, and procedures of tribunals such as the International Chamber of Commerce, the International Centre for the Settlement of Investment Disputes, the United Nations Compensation Commission, and the World Trade Organization. Our investigations, white collar, and fraud lawyers bring decades of experience in dealing with a full range of corporate investigations, whether initiated by the government, in response to a whistle-blower complaint, or as a result of allegations of fraudulent activities. Contacts Michael Davison Partner, London T +44 20 7296 5981 michael.davison@hoganlovells.com Dr. Detlef Hass Partner, Munich T +49 89 29012 214 detlef.hass@hoganlovells.com Stephen J. Immelt Partner, Washington, D.C. T +1 202 637 3660 stephen.immelt@hoganlovells.com Dennis H. Tracey, III Partner, New York T +1 212 918 3524 dennis.tracey@hoganlovells.com
Our practice breadth, geographical reach, and industry knowledge provide us with insights into the issues that affect our clients most deeply and enable us to provide high-quality business-oriented legal advice to assist them in achieving their commercial goals.
Please visit our website at: www.hoganlovells.com/globalcurrents
Our appreciation and gratitude to all those who contributed their views and shared their experiences.
www.hoganlovells.com
Hogan Lovells has offices in: Alicante Amsterdam Baltimore Beijing Brussels Budapest* Caracas ColoradoSprings Denver Dubai Dsseldorf Frankfurt Hamburg Hanoi Ho Chi Minh City Hong Kong Houston Jakarta* Jeddah* Johannesburg London Los Angeles Luxembourg Madrid Miami Milan Moscow Munich New York Northern Virginia Paris Philadelphia Prague Rio de Janeiro Riyadh* Rome San Francisco So Paulo Shanghai Silicon Valley Singapore Tokyo Ulaanbaatar Warsaw Washington, D.C. Zagreb*
Hogan Lovells or the firm is an international legal practice that includes Hogan Lovells US LLP and Hogan Lovells International LLP. The word partner is used to refer to a member of Hogan Lovells International LLP or a partner of Hogan Lovells US LLP, or an employee, or consultant with equivalent standing and qualifications, and to a partner, member, employee or consultant in any of their affiliated businesses who has equivalent standing. Where case studies are included, results achieved do not guarantee similar outcomes for other clients. Attorney advertising. For more information, see www.hoganlovells.com Hogan Lovells 2014. All rights reserved. 00791 * Associated offices
CANADIANDEALS
04 2014
BROOKFIELD PROpERTY PARTNERS BROOKFIELD OFFICE PROpERTIES

Bermuda-based Brookfield Property Partners L.P. increased the cash portion of an offer for Brookfield Office Properties Inc. of New York by $1 a share in late December, after talks with the independent committee vetting the bid. Brookfield Property first offered to buy the office landlord in September with a bid valued at $5 billion. Both companies are units of Toronto-based Brookfield Asset Management Inc.; the deal would group the parents commercial real estate investments under one umbrella. Brookfield Office shareholders can choose to receive either one limited partnership unit of Brookfield Property or $20.34 in cash. The board of Brookfield Office said on Dec. 20 that it intended to recommend that shareholders accept the revised offer, which has a value of $5.1 billion. Brookfield Property already owns 51 per cent of Brookfield Office. Brookfield Offices board said an analysis by Morgan Stanley Canada Ltd. found the fair value of its common shares to be $18.50 to $21. Brookfield Office owns the 8 million-square-foot Brookfield Place New York and is lower Manhattans largest office landlord. In October the company bought MPG Office Trust Inc. to become the biggest office owner in downtown Los Angeles, where it already owns Bank of America Plaza. In Houston, the company owns the Allen Center complex, and in Toronto, it controls First Canadian Place. The company also has properties in Australia and the United Kingdom.
Brookfield Property said it would make its formal revised offer in the first quarter of 2014 and expects to complete the deal around the middle of the year. In its original offer, it said that the combined entity would have $45 billion in assets. For acquirer Brookeld Property Partners L.P. (Hamilton, Bermuda) In-House: Senior vice president and counsel Murray Goldfarb. Torys: M&A/Securities: Andrew Beck, Karrin Powys-Lybbe, Mile Kurta, Cornell Wright and associates Miranda Callaghan, James Miller, Matthew Murphy and Jason Zhou. Tax: Corrado Cardarelli, James Guadiana, David Mattingly, counsel Richard Johnson and associates Leila Ross and Jonathan Weinblatt. Employment: counsel Lynne Lacoursire. (All are in Toronto except Kurta, Beck, Mattingly, Zhou, Guadiana and Weinblatt, who are in New York.) Torys represented Brookeld Asset Management Inc. in the creation and spino of Brookeld Property Partners in 2013. As part of the spino, Brookeld Property Partners acquired nearly all of Brookeld Asset Managements commercial property operation, including its interest in Brookeld Oce Properties. Appleby Global: Corporate/Securities: James Bodi. (He is in Hamilton, Bermuda.) For target Brookeld Oce Properties Inc. (New York) Davies, Ward, Phillips & Vineberg: M&A: William Ainley, Jason Galbraith, Peter Hong, Jerey Nadler and Gerald Shepherd.
Tax: Siobhan Monaghan, Peter Glicklich and Raj Juneja. (All are in are in Toronto except Shepherd, Nadler and Glicklich, who are in New York.) * * * * * *
FORTIS UNS ENERGY

Canadas Fortis Inc. is once again expanding into the United States as part of its diversification plan, this time with a $2.5 billion acquisition of Tucsonbased UNS Energy Corporation. Fortis is Canadas largest gas and electricity distributor; it is based in Canadas easternmost province, Newfoundland and Labrador. Two years ago, Fortis bought Vermont-based CH Energy Group for $1.5 billion; it also owns Central Hudson, a utility in upstate New York, and Griffith Energy Services, which provides propane and heating oil to mid-Atlantic states. In addition, Fortis owns utilities in the Caribbean and power-generating assets in Belize. Overall, Fortis serves more than 2.4 million customers. Fortis offered $60.25 a share for UNS on Dec. 11. The deal includes the assumption of $1.8 billion of UNSs debt, bringing the total value to $4.3 billion. Fortis CEO John Marshall said the UNS deal further mitigates business risk for Fortis by enhancing geographic diversification. For acquirer Fortis Inc. (St. Johns, Newfoundland and Labrador) Davies, Ward, Phillips & Vineberg: Corporate/Securities: Richard Fridman, Jerey Nadler, James Reid, Scott Semer, Scott Tayne, Robin Upshall and associate Michael Jemczyk. Banking: Carol Pennycock. Tax: Raj Juneja and Siobhan Monaghan. (All are in Toronto except Nadler, Semer and Tyne, who are in New York.) White & Case: M&A: John Reiss, Matthew Kautz and associates Sunny Kim and Luke Laumann. Finance: Earl ODonnell, counsel Jane Reuger and associate Jennifer Mersing. (All are in New York except ODonnell, Reuger and Mersing, who are in Washington, D.C.) Snell & Wilmer: The rm, which did not identify the lawyers
All valUes in this aRticle aRe in U.S. dollaRs
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Karrin Powys-Lybbe Torys
William Ainley Davies
Richard Borins Osler, Hoskin
Jerey Lloyd Blakes
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CANADIANDEALS
04 2014
working on the deal by press time, is Arizona regulatory counsel. For lead underwriter Scotiabank Stikeman Elliott: Corporate: Joel Binder and associate Johan Mann. (They are in Toronto.) Paul, Weiss, Rifkind, Wharton & Garrison: Christopher Cummings and Edwin Maynard. (They are in Toronto.) For target UNS Energy Corporation (Tucson) Baker Botts: Corporate: William Lamb, Michael Didriksen and associates Brendan Dignan and Brittany Utho. Global projects: Don Lonczak. Environmental: Matthew Kuryla and associate Zachary Craft. Tax: J. Rob Fowler and associate Brandon Essigman. (All are in New York except Lonczak, who is in Washington, D.C., and Kuryla, Fowler, Craft and Essigman, who are in Houston.)
* * * * * *
securities: Paul Fitzgerald and Ava Yaskiel. Tax: Adrienne Oliver. Antitrust: Kevin Ackhurst and associates Andres Afandor, Santiago Gonzales Rojax, Matthew Hall and Krista Treasure. (All are in Toronto except Neher, who is in Bogot, and Hall and Treasure, who are in Calgary.) .
million of the interest-paying notes in January. BlackBerry said late last year that it was no longer seeking a buyer and would continue as an independent, publicly traded company. For investor Fairfax Financial Holdings limited (Toronto) McCarthy Ttrault: The rm did not identify the lawyers working on the deal by press time. Shearman & Sterling: Capital markets: Jason Lehner, Ethan Siller and Kevin Roggow. M&A: Scott Petepiece, Sean Skington and Cody Wright. Antitrust: Jessica Delbaum. Litigation: Alan Goudiss. Finance: Joshua Thompson. Executive compensation and employee benets: Doreen Lilienfeld. Tax: Larry Crouch. For BlackBerry Limited (Waterloo, Ontario) In-House: Chief legal ocer Stephen Zipperstein, deputy general counselcorporate and acquisitions Phil Kurtz, senior legal counsel Orysia Semotiuk and commercial counsel Gregory Best. Torys: M&A/Capital markets: David Chaikof, John Emanoilidis, Glen Johnson and associates Stephen Abrahamson, Dean Kotwal, Paulina Taneva and Kevin Wall. Plan of arrangement: James Tory. Regulatory: J. Robert Prichard. Competition: Omar Wakil and associate Arezou Farivar. Lending: Tom Zverina. Intellectual property: Edward Fan. Employment: Lisa Talbot and counsel Lynne Lacoursire. Tax: Jerald Wortsman and Andrew Wong. Blakes: M&A/Capital markets: Tim Andison, Jerey Lloyd, Eric Monik, John Wilkins and associates Adrian Cochrane, Richard Turner and Joseph Zed. Technology: Cheryl Slusarchuk. Tax: Ron Richler. (All are in Toronto except Slusarchuk, who is in Vancouver.) Skadden, Arps, Slate, Meagher & Flom: M&A/Capital markets: Stephen Arcano, Christopher Barlow, Richard Grossman and Neil Stronski.
LaUra KIng Email: editorial@alm.com.
For target Petrominerales Ltd. (Calgary) In-House: General counsel Andrea Hatzinikolas and senior corporate counsel James Maclean. Torys: Corporate/M&A: Tony Cioni, Janan Paskaran and associate Yvan Moquin. Lending: Kevin Fougere. Securities: associate Christopher Roehrig. Tax: James Guadiana, David Mattingly, Craig Maurice, counsel Richard Johnson, and associates Ari Feder and Leila Ross. (All are in Calgary except Roehig, Guadiana, Feder and Mattingly, who are in New York, and Johnson and Ross, who are in Toronto.) Torys has been outside counsel to Petrominerales since 2012. McCarthy Ttrault: The rm did not identify the lawyers working on the deal by press time. For lender Bank of America Merrill Lynch Osler, Hoskin & Harcourt: Financial services: Richard Borins. Corporate: Mark Trachuk. Tax: Gregory Wylie. (All are in Toronto.) Osler has acted as Canadian counsel for Bank of America on many of its nancings.
* * * * * *
ACIFIC RUBIALES ENErGY P PETrOMINErALES

The biggest deal in Canadas energy sector in 2013 closed on Nov. 28, when Torontos Pacific Rubiales Energy Corp. took over Calgary-based Petrominerales Ltd. in a transaction worth $909 million plus the assumption of $600 million in debt. Both firms operate mainly in Latin America and announced the friendly deal in late September. Pe t ro min e r a l e s s h a re h o l d e r s received $11 per share plus one share of a new Brazil-focused exploration and production company known as ResourceCo. Pacific Rubiales says it is the largest oil and gas exploration and production company in Colombia. For acquirer Pacic Rubiales energy corporation (Toronto) In-House: General counsel Peter Volk. (He is in Toronto.) Norton Rose Fulbright Canada: Corporate: Jorge Neher. M&A: Crispin Arthur and Terrance Dobbin. Corporate and
FAIrFAX FINANCIAL BLACKBErrY

Troubled BlackBerry Limited completed the $1 billion financing on Jan. 16 that it announced in November after Fairfax Financial Holdings Limited altered a proposal to buy the company for $4.7 billion. Regulatory filings show that more than half of the money came from two institutional investors: $300 million from Canso Investment Counsel Ltd. of Richmond Hill, Ontario, and $250 million from Fairfax, BlackBerrys largest shareholder. Fairfax and the other investors bought an additional $250
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Acquisition target Brookeld Oce Properties is lower Manhattans largest oce landlord.
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James Dickson, QC, P.Eng.

Partner, Stewart McKelvey
Karin McCaskill
Senior Vice-President, General Counsel & Secretary, Sobeys Inc.
We ch ose th e righ t legal team to guide us th rough one of our most exciting transactions.
Karin McCaskill, Senior Vice-President, General Counsel & Secretary, Sobeys Inc.
The Right Perspective

Experienced. Precise. Creative. Tactical. Necessary traits of any great business transactions lawyer. Yet, our clients have come to expect more from us perspective. It is this perspective that Sobeys relied on during their acquisition of Safeways Canadian business in a landmark deal worth $5.8 billion (CAD). Our core team, led by Jim Dickson, remained focused on Sobeys throughout the duration of the project, while lending a multi-dimensional perspective to the conversation. It is this combination that allowed our team to work with Sobeys to achieve the best possible outcome.
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We're tenacious in the courtroom and tenacious in addressing our clients' needs. Our commitment to product defense goes beyond the legal winits about defining a win with our clients, and getting there together. In the boardroom, at the bargaining table, and at trial, Bowman and Brooke delivers a formidable defense for any global product. Tenacity. Accept nothing else.
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bowmanandbrooke.com
INSiDE THiS MONTH

a role in-house. * Building A utility player. * Card-carrying lawyer. * Now on the air. *
MOVES
4 2014
TakInG THe WHeeL

Halliburtons new general counsel, a former Big Law litigation chief, now tries to steer clear.
ITS A TOUGH JOB, BUT SOMEONE HAS TO
do it. In December, Halliburton named Robb VoYLeS as its new general counsel. Voyles, former chair of the litigation department at Baker Botts, replaced ALberT CorneLISon , who had been head of the oil services companys legal department since 2002. Cornelison, who will retire officially in April, is staying on for the time being to help with the transition. Voyles certainly has his work cut out for him. Halliburton has more than 75,000 employees in approxiRobb Voyles mately 80 countries. The firms recent history has been colorful, to say the least. And legal headaches have abounded. In the aftermath of the April 2010 Deepwater Horizon explosion and oil spill, a presidential commission held Halliburton partly accountable for the disaster. The company eventually pled guilty to charges that it destroyed evidence related to the spill. Earlier the company faced controversy over its role as a major government contractor in the Iraq war, including its connections to Halliburtons former CEO turned U.S. vice president, Dick Cheney. Then, in 2005, Halliburton was accused of selling key nuclear reactor components to a private Iranian company. Halliburtons CEO, David Lesar, praised Cornelison and Voyles in a statement. Bert has played a key leadership role in legal matters related to our companys growth and expansion for the past 20 years, said Lesar. We are grateful he will be able to assist with the transition of his responsibilities and are fortunate to have an executive of
HALLiBURTON PROViDES PRODUcTS AND SERVicES TO THE ENERGY iNDUSTRY.
Robbs caliber to step into the leadership role at this time. Voyles joined Baker Botts in 1987 and became litigation chair in 2005. He served on Baker Botts executive committee and helped expand the firms antitrust practice. He also played a key role in orchestrating the addition of a Baker Botts office in Belgium in 2012.
RebeKah MiNtZer
* * * * * *
One of Illinois most prominent women attorneys has made the move
CONSTRUcTiNG A NEW ROLE
in-house. In January, Karen LaYnG , who was a partner at Vedder Price and chair of the construction law group and compensation committee, and a member of the board of directors of the firm, was named general counsel at industrial contractor Scheck Industries. Layngs construcKaren Layng tion and general commercial business experience is invaluable to help us achieve our future goals, said Richard Scheck, chairman of Scheck Industries, in a statement.
PETE LACKER PHOTOGRApHY
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Layng has extensive transactional and litigation experience and is a member of the American Arbitration Associations Panel of Arbitrators for commercial and construction disputes. In addition, she has been a member of the Leading Lawyer Advisory Panel for construction for the past 10 years and was the first female president of the Seventh Circuit Bar Association. MaRlissE SilVER SWEENEY
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The Abu Dhabibased international energy company TAQA appointed MICHAEL MCGUINTY as its new general counsel and company secretary. McGuinty replaced STEVEN PHILLIps , who retired at the end of 2013. The legal department is based in Abu Dhabi, and McGuinty, who will report to CEO Carl Sheldon, also joined the companys executive management team.
ENeRGIZeD
We are delighted that Michael is joining TAQA, Sheldon said in a statement at the time of his appointment. He has an excellent track record, and his experience in the energy industry gained across the world will be an asset to the company, the CEO said. Prior to joining TAQA, McGuinty held a series of senior Michael McGuinty legal positions at the oilfield services company Schlumberger Limited, including most recently serving as deputy general counsel and director of compliance. A Canadian national, McGuinty previously worked at two Canadian law firmsDavis Ward Phillips & Vineberg and Cassels Brock & Blackwell. He holds a bachelors degree from the University of Ottawa and a bachelor of laws, both civil and common, from McGill University.
MaRlissE SilVER SWEENEY
REVERSE COMMUTE
A top in-house lawyer getting a new job: priceless. NOAH HANFT, currently the general counsel and chief franchise ocer at MasterCard, is retiring April 1 and has been appointed the new president and chief executive ocer of The International Institute for Conict Prevention and Resolution. He is replacing Kathleen Bryan, who announced her retirement plans last year. We are delighted that Mr. Hanft has decided to join CPR, said William Webster, chairman of the board of directors, in a statement. He brings a wealth of global experience in complex organizations where he has a proven track record of strategically resolving complex antitrust, commercial, employment and other legal matters through ADR and litigation. At MasterCardwhich he joined in 1984Hanft was a member of the executive and operating committee and was responsible for overseeing legal and regulatory aairs, public policy and compliance, as well as franchise development, global diversity, corporate security and information security. He left the company only briey, between 1990 and 1993, to be the senior vice president and assistant general counsel at AT&T Universal Card Services. He was named general counsel in 2001. He will be replaced at MasterCard by TIm MURpHY [see prole of Murphy, above]. Hanft has extensive alternative dispute resolu-
tion experience. He serves as an independent arbitrator, is on the mediation panel for the Southern District of New York and lectures on the value of ADR in resolving litigation. I passionately believe in the mission of CPR to drive alternatives to costly litigation, he said in a statement, and am honored to have been chosen to lead CPR, the preeminent organization in the eld.
MarLissE SiLVEr SwEEnEy
One of the worlds largest payment card companies has a new general counsel. MasterCard Inc. announced in February that it had promoted TIm MURpHY to GC and chief franchise officer, effective at the start of April. Murphy replaced NOAH HANFT, who retired from the company and joined the nonprofit commercial dispute resolution organization International Institute for Conflict Prevention and Resolution as president and CEO [see Reverse Tim Murphy Commute, below]. MasterCard is an extraordinary company, and I truly appreciate the opportunities it has given me to work across a range of areas and with excellent people around the world, Murphy said in a statement. I know my experience will help me to build on Noahs strong legacy. Murphy was most recently MasterCards chief product officer, a position he took in 2009. In this job, he led the management, development and commercialization of the companys core payment solutions. He first joined the payment card giant in 2000, advancing up in the ranks to associate general counsel, then to group executive, customer business planning and analysis, and then to president of MasterCards U.S. region. Tims legal background coupled with his extensive experience leading important portions of our business makes him the ideal candidate to take our company forward, said Ajay Banga, president and CEO of MasterCard, who added that the promotion reflects the companys thoughtful approach to succession planning. Banga also praised the contributions made by Hanft to the growth and evolution of MasterCard. Hanft spent 27 years with the company, and played a key role in its transition to publicly traded status in 2006. Before moving in-house at MasterCard, Murphy spent time as an asso ciate with Cleary, Gottlieb, Steen & Hamilton in New York and London. His job as chief product officer will be filled by Craig Vosburg, who currently holds
MOVING UP
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the title of group executive, U.S. market REBEKAH MINTZEr development.

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Roku Inc., maker of a popular streaming software platform, announced in December that it had hired Hogan Lovells partner STEPHEN KAY as its general counsel. Kay, managing partner of the firms Los Angeles office and coleader of the firms global technology, media and telecommunications group, joined the company in the Stephen Kay beginning of the year. He replaced KIm FUNk, who had joined the company in 2011 as its first GC. Roku CEO Anthony Wood said in a statement at the time of the appointment that Kay will be a great asset to the Roku executive team, and his experience will be instrumental in guiding
STREAMING IN STYLE
the company as we take it into the next stage of growth. Roku is headquartered in Saratoga, Calif., and in 2008 it debuted the first device to bring Netflix to television. As of last year, the company had raised more than $77 million in venture funding, and it has worked over the years to expand its set-top device offerings by inking deals with a range of content providers. Kay, who has focused on transactional work within the digital media, cable and broadcast spaces, started his career in 1987 at predecessor firm Hogan & Hartsons New York office. He practiced there until 2003, when he joined GemstarTV Guide, a Hogan client, as general counsel. The company was sold in 2008, and Kay rejoined the firm in 2009. CHElsEA AllIsoN
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After a seven-year commercial break, attorney DAVId MANdELL is back
BACK ON THE AIR
on the air at TV Guide Networknow known as TVGNwhere he took the role of executive vice president and general counsel in December. Im excited to be back at TV Guide Network, where hed served as senior vice president, business and legal affairs of the affiliate sales and marketing group from 2003 to 2006, Mandell said in a statement. Mandell, who David Mandell is based at the networks Los Angeles headquarters, will be responsible for overseeing TVGNs corporate development, content distribution agreements, production and programming acquisition deals, and intellectual property rights, as well as other elements of legal and business affairs. The new general counsel is back where he worked when it was still GemstarTV Guide International. TVGN, viewed in more than 80 million homes, has since changed hands and became
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a joint venture of Lionsgate Entertainment Corporation and CBS Corporation when CBS acquired a 50 percent stake in the company in March 2013. With CBS and Lionsgate as its joint venture parent companies, the network is well positioned to realize its tremendous potentialand I look forward to being a part of the team that continues to build the network with new original programming and expand the distribution footprint, Mandell said. During his hiatus from TVGN, Mandell worked as executive vice president and general counsel for Mandalay Digital Group Inc., a global media and communications company specializing in mobile services. There he managed corporate development and strategic planning, business and legal affairs and corporate governance and regulatory matters. In a statement, Dennis Miller, president of operations for TVGN, welcomed Mandell back to the company. David is a best-in-class legal adviser who brings a wealth of experience in negotiating content production, acquisition and
distribution matters, he said. He will play a critical role at TVGN, as we continue building the network with new original programming and expanding our distribution footprint in full-screen and HD. RebeKAh MintZer
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ROBErT BOsTrOm may have been spotted late last year tossing his suit and tie and heading to the mall for a new wardrobe. In January he became Abercrombie & Fitch Co.s new senior vice president, general counsel and corporate secretary. (His predecessor, Ronald Robins Jr., rejoined his former law firm, Vorys, Sater, Seymour and Pease.) Most recently Bostrom had donned his white collar at Greenberg Traurig, where he served as cochair of the financial regulatory and compliance practice. Previously, he was the executive vice president, general counsel and corporate secretary of the Federal Home Loan Mortgage Corporation (aka Fred-
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die Mac), and before that the executive vice president and general counsel of National Westminster Bancorp. According to his firm profile, Bostrom received a B.A. from Franklin and Marshall College, a masters of international affairs at Columbia University and a J.D. from Boston College Law School. He is a member of the Robert Bostrom New York bar. Bob brings more than 30 years of experience in the legal field and will be a great asset to Abercrombie & Fitch, said Mike Jeffries, the companys chairman and CEO, in a statement. The appointment came at a turbulent time for the retailer. In recent months investor Engaged Capital called on the company to replace Jeffries after the stock price fell about 21 percent last year. Jeffries contract was nevertheless renewed in December, with a revised incentive plan.
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FROM THE EXPERtS

4 2014
THe WorLD oN A StrING

Lawyers confront the challenges of managing global workforces.
NO LOnGER IS THE GLOBAL MARKET
[ BY BILL WRIGHT AND CELIA JOSEPH ]
reserved for large-scale multinational corporations with thousands of employees. Even companies with fewer than 1,000 or 500 employees are expanding globally. According to the U.S. Department of Commerce, exports by small and medium-size businesses totaled $440.1 billion in 2011, which represents 33 percent of total U.S. exports. These companies are creating sales teams in countries such as Brazil, Australia, China and Mexico. With these obligations, corporate counsel have an enormous responsibility to navigate complicated and often voluminous international legislation. COMMOn COMPLIAncE ISSUES U.S. employers are most familiar with the employment-at-will system. Essentially, this allows employers to discharge employees without notice and with or without any reason, as long as the reason does not violate the law, a contract or public policy. Employees outside of the U.S. generally have greater rights by contract, statute and/ or common law. International employment relationships are usually contractualwhether written, oral, express or impliedand the terms are based for the most part on minimum standards imposed by applicable legislation of the jurisdiction. These contractual obligations reach all aspects of employment, including hiring, compensation and benefits, ongoing employment relationships and separation (both voluntary and involuntary). You must consider them all when hiring abroad. HIRInG New employees are subject to contractual, statutory and/or common law entitlements that employers should review before initiating an employment relationship. Typically, the terms are spelled out in the employment contract or in an offer letter, which in some
JAMES OBRIEN
jurisdictions could become the written employment contract. In many countries the employment contract must be in writing. You can run into problems down the road if you fail to include key components at the onset of the relationship. And its a mistake to think you can work it out later. The contract will affect all HR and legal decisions from the first day of employment to the exit interview. Fail to comply, and the court or labor tribunal will impose their terms or give the benefit of the doubt to the employee. The failure to conclude a written employment contract within a specified period of time can have serious financial consequences. COMPEnSATIOn Compensation is a key component in any employment relationship, but
in situations in which the relationship is contractual, it needs to be spelled out carefully within the contract. It cannot easily be modified without creating a breach, which triggers notice and possibly severance benefits. Analyze compensation issues carefully before making agreements with employees. If this is not done, changes to compensation could essentially be a change to the contract and/or employment status, and must be done according to the proper legal procedure. In most countries outside the United States, under most circumstances employees are owed notice before involuntary termination, or payment in lieu of notice (except termination for just cause, such as violating an employers policy against divulging trade secrets). Keep in mind that com-
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FROM THE EXPERtS

4 2014
pensation components are also the basis upon which separation and notice pay are calculated in many jurisdictions. What a U.S. employer would consider a bonus, some countries may count as base compensation. The court can consider stock options, equity compensation, stock purchase opportunities and other alternative forms of compensation when calculating separation pay or a retirement benefit later down the road. Therefore, you should carefully review contractual language with respect to salary, benefits, alternative forms of compensation and bonus and spell out the details. EMPLOYMeNT ReLATIONSHIPS Jurisdictions outside the United States generally accord even greater importance to employee policies, privacy and other components of ongoing employment relationshipsespecially labor tribunals, courts and other authorities that review employee complaints. Often contractual relationships will reference these policies and considerations, which may be incorporated into a contract, even if this was not intended by the parties. Make sure to put policies and procedures in place that are consistent with local laws that govern employee complaints. You must have a firm understanding of both the regulatory and legal environment of the jurisdiction, as well the differences between the companys U.S. and international policies. You must not apply U.S. laws to international circumstances and relationships unless there is a careful review of the appropriateness and legality of that approach. Also, learn about the prominent role of unions and other organizations that represent employees outside the United States, such as entities in Europe known as works councils. These can affect the terms and conditions of employment as well as employee-related communications and policies. TerMINATION OF EMPLOYMeNT Separation from employment can be a complicated issue in any country. In the United States, we tend to deal with these largely from the perspective of the myriad federal and state laws
protecting employees, such as federal and state family and medical leave laws, or Title VII of the Civil Rights Act of 1964 (and local antidiscrimination statutes). However, outside the United States, advance notice pay, or pay in lieu of notice, is usually a critical component. In addition, many jurisdictions have bILL WrIGHT CeLIA JOSePH laws that require terminations to be conducted in a fair manner. Many familiar with the variations in the law countries have laws related to unfair internationally. dismissal. These allow an employee to bring claims against the employer ReLATIONSHIPS WITH COuNSeL in connection with any separation that If you have employees working was conducted through an unfair proabroad, the management and complicess. The redundancy processes in variance obligations are significant. Many ous countries often include a process by companies engage local counsel to which candidates are identified, scored, advise and assist them in the implemenevaluated and consulted with before tation of their policies and procedures any final decisions are made. Failure so that they can be consistent with the to adhere to such processes can result laws of the local jurisdiction. If you in unfair dismissal claims and raise arent familiar with the area, it may be liability issues beyond that of the typichallenging to assess local counsel. You cal severance set forth in the contract. can end up receiving incorrect informaMany countries have statutes with spetion or advice thats lost in translation. cific separation protections and entitleThe result can be a confusing tangle ments for employees, which may be of HR concepts and practices that you based on their length of service. Make dont understand. Many companies are sure these compliance rules are carecentralizing management of their global fully followed. operations to ensure consistency and compliance. This also helps translate U.S. LAW APPLICATION legal concepts across borders. Be mindful of U.S. laws when operating abroad as well. Even if manageTHe BOTTOM LINe ment is applying local laws in internaIf youre already global or youre tional locations, there is still potential going global, compliance with internafor claims to be brought in the United tional employment laws can affect your States due to the jurisdiction of the comfinancial success. Dont wait until the pany within our borders, as well as the last minute to develop a legal strategy. long-arm application of numerous Think about how to align the big picture U.S. employment laws, such as Title VII of international employment law with and others. your business goals. You can reap the full value of going global if you have compliATTOrNeY-CLIeNT PrIVILeGe ant employment processes in place. In many international jurisdictions, attorney-client privilege is weaker Bill Wright and Celia Joseph are attorneys with than it is in the United States, espeFisher & Phillips, a labor and employment law cially when communications involve firm that represents employers. They can be in-house attorneys as opposed to outreached at wwright@laborlawyers.com and cjoside counsel. For this reason, become seph@laborlawyers.com.
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GET READY FOR CANADAS NEW ANTI-SPAM LAW

Canadas new anti-spam legislation, known as CASL is one of the strictest in the world. In general, CASL requires consent before sending commercial electronic messages and requires that all such messages meet certain form and content requirements. This seems simple but, as always, implementation can be complicated. This article explains the legislation and walks through some real-world scenarios to demonstrate compliance.
On July 1, 2014, a majority of the provisions of one of the strictest anti-spam laws in the world will come into eect: Canadas Anti-Spam Legislation (CASL)1. CASL prohibits the sending of a commercial electronic message (CEM) to an electronic address unless the person to whom the message is sent has consented to receiving it and the message itself complies with prescribed form and content requirements. A CEM is dened broadly as an electronic message (e.g. email, text message, social media message) designed (in whole or in part) to encourage participation in a commercial activity, whether or not the person who carries it out does so in the expectation of prot. In general, consent to receive a CEM must be express. To be valid, a request for express consent must be sought separately (i.e. must not be subsumed in a request for consent to the general terms and conditions of use or sale) and must set out clearly and simply: i. the purpose for which consent is being sought ii. specic information about the person seeking consent and, if applicable, the person on whose behalf consent is being sought iii. a statement that the recipient can withdraw their consent Although CASL generally requires express consent, consent may be implied in limited circumstances, such as where the sender and recipient have an existing business relationship as that term is dened by the legislation. Note that once CASL comes into force, an electronic message requesting consent to send a CEM will itself be considered a CEM for which consent is required. In addition to the consent requirement, CEMs must comply with prescribed form and content requirements. In particular, each CEM must include specic information about the person sending the message and, if applicable, the person on whose behalf the message is being sent as
Corporate Counsel April 2014 1
The full text of the law is available at http://laws-lois.justice.gc.ca/eng/acts/E-1.6/index.html
well as prescribed contact information. Each CEM must also provide an unsubscribe mechanism, which must also meet prescribed requirements. Certain messages may be exempt from CASLs anti-spam provisions altogether while others may be exempt from the consent requirement only. These exemptions are summarized in the sidebar on page 3.) Subject to limited exceptions, the law applies to all businesses that send CEMs to (or from) computer systems located in Canada. Companies and individuals located anywhere in the world can therefore be exposed to liability under this legislation. The potential penalties for non-compliance with CASL are signicant and include administrative monetary penalties of up to CDN $1,000,000 for individuals and CDN $10,000,000 for corporations per violation. It will also be an oence to aid, induce, procure or cause to be procured the doing of any act contrary to certain sections, including the provisions relating to sending CEMs. Directors, ocers, and agents who have directed, assented to, acquiesced in, or participated in the violation(s) may be held personally liable. CASL also creates a private right of action for persons who have been aected by a contravention of CASLs anti-spam provisions. Although these provisions will not come into force until July 1, 2017, industry should be aware that risks of claims nonetheless exist and should strive to achieve compliance with the law prior to it coming into force. CASL also contains provisions regarding the unsolicited installation of computer programs. These provisions will not come into force until January 15, 2015 and are not discussed in this paper. To demonstrate how CASL will aect you, consider the following six scenarios.
the sender and recipient have engaged in certain specied types of business together in the two years preceding the date on which the CEM is sent (for example, the purchase or lease of a product, or existence of a written contract) or where the recipient of the CEM has made an inquiry to the sender in the previous six months. In Scenario 1, consent is implied, but only for the two-year period immediately following the purchase (i.e. the period of time during which an existing business relationship can be held to exist). Express consent under CASL is not limited in time and will remain valid until the customer withdraws his or her consent (for example, by unsubscribing). Accordingly, consider seeking express consent (in the manner prescribed by the legislation) from the customer at the time of check out.
SCENARIO 2: You are attending a trade show and meet a prospective customer, who gives you her business card. Can you add this customer to your marketing list?
Here, the answer is again most likely yes. Consent is implied under CASL where the recipient has disclosed his or her electronic address to the sender without indicating that he or she does not wish to receive CEMs and the CEM is relevant to the persons business, role, functions or duties in a business or ocial capacity. Accordingly, if the business card includes the customers e-mail address and she did not ask not to receive CEMs, you can send her CEMs as long as they relate to her business or her role.
SCENARIO 1: A customer purchases a product from your online store. During the checkout process, the customer provides his or her e-mail address for the purposes of obtaining an e-receipt. Can you add this customer to your marketing list?
Yes, but only for the 2-year period immediately following such purchase. Consent to receive CEMs is implied where the sender and recipient have an existing business relationship as dened by the legislation. An existing business relationship exists where
2 Corporate Counsel April 2014
SCENARIO 3: You buy a marketing list from a vendor who assures you that all individuals whose e-mails are on the list consented to the sharing of their e-mail address with select third-party partners for marketing purposes. Can you use this list?
It depends. CASL provides that a person may, on behalf of an unknown third party, obtain the express consent of a person to receive CEMs from the unknown third party, as long as certain (somewhat burdensome) conditions set out in CASL and its accompanying regulations are met. As noted above, a request for express consent under CASL must include specic information about the person seeking consent and, if applicable, the person on whose behalf
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consent is being sought. When express consent is sought on behalf of an unknown third party, CASL allows for the provision of information about the person seeking consent only. However, in this instance, the person seeking consent and the unknown third party must comply with additional conditions imposed by the regulations in order to be able to rely on this consent. Namely, the person who obtained the consent must ensure that the unknown third party (the authorized user) includes in any CEM sent relying on such consent: (i) the identity of the person who obtained the consent; and (ii) an unsubscribe mechanism that, in addition to meeting the prescribed requirements for all unsubscribe mechanism allows the recipient to withdraw his/her consent from the person who obtained consent or any other person who is authorized to use it.
While CASL is quite broad, it is not all encompassing. The following are exempt from CASLs anti-spam provisions: CEMs between those with a personal or family relationship CEM responding to an inquiry, request, or complaint CEMs within organizations, or between organizations in a relationship, if the message concerns the activities of the recipient organization CEMs that deliver legal notices CEMs from electronic messaging services provided certain condition are met CEMs from secure limited-access accounts where messages can only be sent by the person who provides the account CEMs sent from Canada to one of a list of prescribed foreign countries so long as the messages comply with the law of the recipient country that addresses conduct that is substantially similar to conduct prohibited under CASL CEMs for fundraising by charities and political parties The following messages are exempt from CASLs consent requirement, but not its form and content requirements. In each case, in order to benefit from the exemption, the activity described below must be the messages sole purpose: CEMs that provide a requested quote or estimate for the supply of a product, good or service CEMs that facilitate, confirm or complete a commercial transaction that the recipient previously agreed to enter into CEMs that provide warranty, product recall, or safety information on a product or service used by the recipient CEMs offering factual information about a subscription, membership, account, or loan CEMs delivering ongoing information about the recipients employment or benet plan CEMs delivering a product or service, including updates/upgrades, as part of a pre-existing, agreedupon transaction
SCENARIO 4: Historically, your organization has used an opt-out form of consent for receipt of marketing communications from customers who purchased goods and services from you online. Will these consents continue to be valid once CASL comes into force?
No. However, your organization may be able to continue to send CEMs based on an opt-out form of consent during the three-year transitional period if as of July 1, 2014 you ever had an existing business relationship or existing non-business relation with the recipient (i.e. without having regard to the 2 year time limitation) and that relationship included the sending of CEMs.
SCENARIO 5: Your organization offers court reporting services to law firms in Toronto, and you would like to send an e-mail to litigators at Toronto law firms to inform them of your services. Can you?
Yes, provided the litigators have conspicuously published their e-mail addresses on their website, and there is no notice that they do not want to receive unsolicited CEMs.
Corporate Counsel April 2014
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Consent to receive CEMs is implied under CASL where a recipient has conspicuously published his or her electronic address, the publication is not accompanied by a statement that the recipient does not wish to receive unsolicited CEMs, and the CEM is relevant to the persons business, role, functions or duties in a business or ocial capacity. Be aware that automatic harvesting of e-mail addresses is prohibited by CASL and other statutes, so you must collect this information manually.
2. Seek express consent in accordance with CASLs requirements. Since requests for consent will constitute CEMs after the law comes into force, requests for consent should be sent out before July 1, 2014. 3. Track and document implied consents and ensure there are systems in place to identify when an implied consent expires. Consider requesting express consent, which is not time limited and remains valid until consent is withdrawn. 4. Render fully operational unsubscribe mechanisms that meet the requirements of the legislation. 5. Develop and implement policies and procedures for compliance with CASL and train employees. 6. Review contracts with vendors and referral sources to ensure they are contractually obligated to comply with CASL. Companies that can demonstrate that they exercised due diligence to prevent a violation of CASL may be able to mitigate their potential liability.
SCENARIO 6: You are a strictly online business and communicate with customers by e-mail and text message only. After a customer purchases a product, you send the transaction receipt by email or text message. Will this have to change because of CASL?
You can still send the transaction receipt by email or text message but you may need to make changes to the message itself to comply with CASLs form and content requirements (discussed above). CEMs that are sent to satisfy a legal or juridical obligation are exempt from CASL altogether. Accordingly, if you have a legal obligation to send the transaction receipt, the message may be exempt. If you are not legally obligated to send the transaction receipt, the message may still be exempt from CASLs consent requirement, since CEMs that solely facilitate, complete, or conrm a commercial transaction where the recipient previously agreed to enter into the transaction are exempt from CASLs consent requirement but are still subject to CASLs form and content requirements.
ABOUT THE AUTHORS:

Tricia Kuhl and Wendy Mee, Blake, Cassels & Graydon LLP Tricia Kuhl is a partner in the Blakes Montreal oce. Her practice focuses on mergers and acquisitions, corporate and commercial matters, and intellectual property law. She represents clients in the pharmaceutical, technology, fashion and renewable energy industries. Tricia has advised clients in the technology sector on complex arrangements relating to all aspects of intellectual property and privacy concerns. She also advises clients in relation to Canadas proposed anti-spam legislation. Wendy Mee is an associate in the Blakes Toronto oce. She practices primarily in the area of privacy law, where she advises a wide range of clients, including in the life sciences, nancial services, education, retail, food and consumer goods sectors, on a variety of privacy and data protection issues. Wendy also advises clients on marketing and advertising issues generally, including in respect of Canadas anti-spam law, the CRTCs do not call rules, misleading advertising and contests and promotions.
CONCLUSION: Preparing to Comply

The stringent provisions of CASL will aect businesses and individuals around the world and compliance with the U.S. CAN-SPAM Act 2003 does not equal compliance with CASL. It is therefore important that U.S. organizations doing business in Canada take steps to bring themselves into compliance prior to July 1, 2014. Here are six steps U.S. organizations should consider taking immediately: 1. Review the types of electronic messages that your organization sends out and determine which ones are subject to CASL.
4 Corporate Counsel April 2014
ABOUT THE FIRM:

As one of Canadas top business law rms, Blake, Cassels & Graydon LLP (Blakes) provides exceptional legal services to leading businesses in Canada and around the world.
IN-HoUSeTeCH
4 2014
GeTTING THere
A look at the state of e-discovery, and what this year promises.
UNDER THE CuRRENT STATE OF THE LAW,
[ BY CEcIL LYNN aND LaUREN ScHWaRTZREIcH ]
identical conduct can result in a wide variance in sanctions depending upon the court and jurisdiction. For example, in In re Pfizer Inc. Securities Litigation, U.S. Magistrate Judge Henry Pitman declined to award sanctions for negligent conduct and echoed a reminder from the U.S. Court of Appeals for the Second Circuits 2012 Chin v. Port Authority decision that a finding of gross negligence merely permits, rather than requires, a district court to give an adverse inference instruction or to award other sanctions. Pitman found that Pfizers conduct in failing to preserve E-Room content was, at most, negligent, and plaintiffs bare assertion that some documents were missing was insufficient to establish relevance. Yet, in Sekisui American Corp. v. Hart, U.S. District Judge Shira Scheindlin issued a reminder that, at least in her court, grossly negligent conduct resulting in destruction of electronically stored information triggers a presumption of prejudice to the nonspoliating party. Magistrate Judge Frank Maas had declined to issue sanctions, holding that the defendants had failed to show any prejudice resulting from the destruction of the ESI. Scheindlin awarded an adverse inference jury instruction where the plaintiff acted with gross negligence by, among other things, waiting 15 months to issue a litigation hold and another six months to notify its outside vendor to preserve relevant documents. She clarified, however, that the jury instruction was one in which the jury may still determine that [defendants] were not prejudiced by [plaintiffs] willful destruction of ESI and decline to draw any adverse inference. APPELLATE COURTS The federal appellate courts are equally at odds. In Hallmark Cards Inc. v. Murley, the Eighth Circuit reiterated its requirement that a district court must find bad faith and prejudice prior to giv-
ing an adverse inference instruction and inferred that the district court made the requisite findings in that instance. Similarly, in Grosdidier v. Board of Governors, although the D.C. Circuit upheld a lower courts grant of summary judgment in an employment discrimination matter, it noted that the district court erroneously required evidence of bad faith to deny an adverse inference/spoliation instruction. Noting that the Second and Fourth Circuits do not require evidence of bad faith as a prerequisite to an adverse inference sanction, the D.C. Circuit reasoned that the negligent destruction of interview notes was sufficient for a permissive jury instruction that would have allowed the fact finder to draw reasonable inferences in favor of plaintiff based upon the nonaccidental destruction of two of three sets of interview notes. However, the court ultimately held that this was harmless error because all of the reasonable inferences that could be drawn in plaintiffs favor from the lost notes still would not have allowed the fact finder to find that the
destroyed notes would have established the pretext alleged, let alone discrimination, thus, dismissal of the case via summary judgment was appropriate. The saga continued in EEOC v. Original Honeybaked Ham Co. of Georgia Inc. In response to the defendants discovery requests that sought (among other things) social media evidence and text messages to dispute the class members claims and damages, U.S. Magistrate Judge Michael Hegarty ordered all class members in a sexual harassment action to turn over to a special master their relevant cellphones for forensic collection and review, and to provide access to any relevant social media and email accounts, as well as websites or cloudstorage accounts that they used to post communications or pictures (D. Colo. Nov. 7, 2012). In 2013, after the EEOC first refused to produce the ESI and later reversed its position on various issues related to the production, Hegarty went further and awarded attorney fees and costs to the defendant as a result of the EEOCs failure to comply with basic discovery obli-
SHAW NIELSEN
77
IN-HOUSE TeCh
4 2014
gations, dilatory cooperation efforts, and somewhat cavalier execution of its responsibilities to the court. COOPERATION In years past, cooperation and EDD competence have been singled out by judges. This year was no exception. In U.S. Bank National Association v. PHL Variable Insurance Co., U.S. Magistrate Judge James Francis IV urged litigants to take seriously their cooperation obligation to reduce the number of disputes that could be resolved without court intervention. This is not an unexpected charge, given that the U.S. District Court for the Southern District of New York implemented a pilot program two years ago to increase awareness and cooperation in e-discovery. PROPORTIONALITY Courts have placed an increased and immediate focus on parties meaningful efforts to streamline discovery and consider the cost and burdens associated with discovery requests. See, e.g., In re Morgan Stanley Mortgage Pass-Through Certificates Litigation.
issues involved and the parties agreedon 30,000 search terms. Likewise, in Connecticut General Life Insurance v. Earl Scheib Inc., U.S. Magistrate Judge William Gallo underscored that, while data accessibility is an important factor in determining whether a discovery request places an undue burden on the producing party, an equal (if not greater) consideration should be given to the cost of the discovery when compared with its benefit in litigation. Gallo denied plaintiffs motion to compel discovery of 219 gigabytes of data from 19 different email accounts that would have cost the defendant more than $121,000 to collect, search and produce. Gallo reasoned that if plaintiff believes that this information is important to its case, then plaintiff can perform its own cost-benefit analysis and determine whether it wants to fund the discovery. COST REcOVERY There was a significant increase in the number of reported cases dealing with prevailing parties recovery of
cEcIL LYNN
L. ScHWARTZREIcH
The number of 2013 reported cases discussing the use of predictive coding was IN THE SINGLE DIGITS.
In Morgan Stanley, U.S. Magistrate Judge Sarah Netburn was asked to resolve the parties impasse related to the number of custodians whose electronic data should be searched and the relevant time period for the search. Before ruling, Netburn walked the parties through the proportionality considerations of Federal Rule of Civil Procedure 1 (with an eye toward a just, speedy and inexpensive resolution of cases) and 26(b)(2)(C) (a court must limit discovery that is unreasonably duplicative, more easily obtained from another source, or is burdensome or expensive when compared to its likely benefit). Applying the principles, Netburn reduced plaintiffs requested 80 custodians to 34, finding that the burden to the defendant in terms of both reviewing duplicative material and reviewing false search hits would not be insignificant given the scope of the EDDrelated expenses. Generally, a prevailing party is entitled to recover costs, including fees for exemplification and the cost of making copies of any materials where the copies are necessarily obtained for use in the case. (See FRCP 54(d) and 28 U.S.C. 1920(4).) While there is no consensus among the courts as to what EDD costs fall within the exemplification category, the Fourth Circuit closely followed the Third Circuits 2012 ruling in Race Tires that limited cost recovery to the conversion of native files to .tiff and the scanning of documents to create digital duplicates. Yet, other jurisdictions interpret Section 1920(4) more broadly and permit the recovery of a wide range of e-discovery-related expenses. PREDIcTIVE CODING In 2012, the uniform prediction was that more parties and courts would be
drawn to technology-assisted document review (aka predictive coding) in lieu of traditional search terms and human review. But the number of 2013 reported court cases discussing the use of predictive coding was in the single digits, and the majority of those cases did not involve a partys actual use of the technology. See, e.g., Chevron Corp. v. Donziger (S.D.N.Y.; questioning whether predictive coding could be used to reduce the burden and effort required to comply with a subpoena); Hinterberger v. Catholic Health Sys. (deeming moot plaintiffs request to force defendant to meet and confer regarding the implementation and use of predictive coding software because the parties agreed to confer). If anything, the 2013 case law underscored that traditional keywords and document review may appropriately be used in conjunction with technology-assisted review. While 2013 did not produce any bombshell e-discovery opinions, it did underscore that EDD standards are far from settled, including because of variances among circuits (and often individual judges). Whether the proposed amendments to the FRCP that address EDD will bring more uniformity to the field remains an open issue for 2014. We will also have to wait and see whether the courts will resolve splits of authorities and build an even stronger foundation for consistency upon which all litigants can rely in the year to come.
Lauren Schwartzreich (lschwartzreich@littler. com) is e-discovery counsel at Littler Mendelson, based in New York. Cecil Lynn (celynn@ebay. com) is the director of e-discovery and technology at eBay Inc., based in Chandler, Ariz. Statements made express the authors views and do not necessarily reflect those of Littler or eBay.
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ALSO
establishment * Televisions opens a chink in what had been Aereos invincible armor.
IPINSIDER
4 2014
PTO UNCHAINeD
The agency makes its own moves to tackle patent trolls.
AS CONGRESS cONTINUES TO DEBaTE THE
[ BY LISA SHUCHMAN ]
intricacies of proposed patent reform legislation that is designed to stop patent trolls from decimating the U.S. patent system, the U.S. Patent and Trademark Office is taking steps of its own to make life harder for patent trolls. Acting PTO Director Michelle Lee has formally proposed a new set of rules that would require clear identification of patent owners. The rules stem from President Barack Obamas announcement in June that he would take executive action to improve patent quality, encourage innovation and end frivolous litigation. This particular set of newly proposed rules regarding the identification of a patents owner are intended to create more transparency about patent ownership, which should help thwart efforts by some patent owners to hide their identity as they assert their patents. The office is proposing in this document to require that the attributable owner, including the ultimate parent entity, be identified during the pendency of a patent application and at specified times during the life of a patent, the proposed rule says in the Federal Register. The office is specifically proposing that the attributable owner be identified on filing of an application (or shortly thereafter), when there is a
TONY AVELaR/AP IMaGES
The new rules will, according to the patent offices filing, reduce risk of abusive patent litigation by helping the public defend itself against risk of abusive assertions.
anyone with a financial interest in either the patents at issue or the patentee, and must also disclose the ultimate parent entity of the patentee. A corresponding patent reform bill in the U.S. Senate is still pending. It is clear, however, that the White House wants the transparency rules coming from the Obama administration to make a difference regardless of whether Congress acts. The penalty for those who fail to comply with the rules would be abandonment of the patent. The PTOs proposed rule goes on to say that most additional reporting will need to be done by companies that have complicated corporate structures and licensesstrucAcTING PTO DIREcTOR MIcHELLE LEE IS pROpOSING NEW tures often used by the RULES TO maKE paTENT OWNERSHIp cLEaRER. patent assertion entities that are known as patent trolls. change in the attributable owner durThe new rules will, according to ing the pendency of an application, at the PTO filing, reduce risk of abusive the time of issue fee and maintenance patent litigation by helping the public fee payments, and when a patent is defend itself against risk of abusive involved in supplemental examinaassertions by providing more information, ex parte reexamination or a trial tion about the parties that have an interproceeding before the Patent Trial and est in patents or patent applications. Appeal Board (PTAB). Comments on the proposed rules In a similar vein, proposed patwere due by the end of March. The PTO ent reform legislation that has passed prefers comments via email, but says in the U.S. House of Representatives it will accept submissions by old-fashwould require a patent owner involved ioned snail mail as well. in infringement litigation to disclose
81
IP I NSIDER
4 2014
Televisions establishment continues its assault on upstart Aereo.

TELEVISIONS OLD GUARD FINALLY OPENED
nOT inVinCiBLe
a chink in Aereo Inc.s armor this week, winning a ruling that left the Internet TV upstart and its lawyers fighting to limit the damage ahead of arguments at the U.S. Supreme Court in April. U.S. District Judge Dale Kimball in Salt Lake City issued a sweeping 26-page decision in February granting a bid by a group of broadcasters for a preliminary injunction blocking Aereos service in Utah, Colorado, Kansas, New Mexico, Wyoming and Oklahoma. Aereos lawyers at Durie Tangri immediately sought to appeal the ruling to the U.S. Court of Appeals for the Tenth Circuit and asked the judge to stay his decision in the meantime. I think [Kimballs ruling] destroys the myth that Aereo is invulnerable and invincible, said Jenner & Blocks Richard Stone, who represents Fox Broadcasting Company in the Utah case and before the Supreme Court. Its useful for the Supreme Court to see yet another court step back and use a commonsense approach. Aereo is engaged in a multifront copyright battle with television broadcasters, the fate of which is likely to be decided in a Supreme Court showdown to be argued April 22. Aereo streams third-party network programming to paying subscribers using a vast array of tiny, individually assigned anten-
nas. The company says it doesnt need to pay the broadcasters retransmission fees for its serviceas cable companies dobecause it simply gives customers a way to capture over-the-air signals, combined with the equally legal functions of a DVR service. The broadcasters, of course, vehemently disagree. Until now, however, theyve never persuaded a judge to pull the plug on Aereo. Their biggest setback remains an April 2013 ruling by the U.S. Court of Appeals for the Second Circuit, which ruled that Aereos
AREO CEO CHEt KANOJIA SAID HE WAS DISAPPOINtED BY tHE UtAH RULING.
service didnt constitute a public performance of the broadcasters copyrights and therefore didnt run afoul of the law. (An Aereo rival, FilmOn X, has had a much spottier record making similar arguments.) Judge Kimball strongly rejected the Second Circuits rationale for siding with Aereo, instead aligning himself with a sharp dissent by Circuit Judge Denny Chin. Like Chin, Kimball didnt
JIN LEE/BlOOMbERG/GETTY IMAGES
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BEST LEGAL DEPARTMENTS 2013 CAESARS ENTERTAINMEN
YOU CANNOT we do MANAGE WHAT same time, and MEASURE, YOU DO NOT SAYS GC TIM offensive at the notes. DONOVAN. if they are government that a lot, Holloway give comps to, explains. S PROMOlitofficials, Carletta terms and HOLLOWAY revised Caesarss overall strategies. labor and Donovan also compa- BEFORE His team is he headed Caesarss company While many also actively handle TION, igation strategy. group. (The Donovans pursuing in-house lawyers larger agenda the employment Appel, a veteran labor nies let their and beyond. for this year and outsource Richard Strauss For example, the routine cases to law firms with hired from Akin Gump the post Donovan and Wiegand are ones over working with complicated does the attorney RAPID & Feld, to take to the necesHong Kong a lawyer in GERBER Hauer S. expertise, Caesars ON CAESARSS Caeto expand Caesarss BY MAX of 2012, PHY com- special July 1subject TO KEEP TABS operations, At the start PHOTOGRA centralized the and beginning Asian where Donovan approvals.) Holloway changes, Donovan under Carletta. She opposite. OF the litigation regulatory sary greatest employcentralized sees the TO CONSIST named opportunity the labor and newly pliance departmentgroup in Las Vegas sars HAPPENS for wealth group under says handling eration. Caesars UNIT THAT He small FOR A BUSINESS. of the most difficult genplus operations Holloway. supervises a TO WORK issues is one AS A BUSINESS Duane now has an deal GROUPcounsel Singapore and is the only lawyer, OF HISchief at each ment the legal department. To WHO HAPPEN in which she employees a golf course office in his TO THINK operations lawyers THAN LAWYERS of jobs in 83 compliance To expand oversees Donovan and RATHER in Macau. handling THE GC LIKES the burden, she oversees through into the LAWYERS, with coordinates who report a multidisbusiness will the hotel and/or casino in Las property, different proper- group began developing around the country a require difficult-toproblems at Carlettas group and helps approval from team to implement regional heads. handles similar global issues, ciplinary labor Chinese officials. obtain all properties two units: One ties, identifies And the GC Vegas includes them. The strategy, cohesive strategy across developing investigahas and internal policies to fix the The set number a list Business Under the all diligence of ness goals. ago. due other busiMagazine For has cut and He wants to second coordinates In-House Counsel 2011 two years Holloway says, the law department continue supin half from tions, while the porting the major plan, in 2012 and major develcompanys our major cases Logo has a .5 handled the corporate initiatives key employee, of balance sheets by accessing stroke human resources new more equity the range each HR department Every to 2012. opments. Every is amazed at doing more markets and issues, while consult to to be licensed. Holloway class has counsel financing and corpcounsel.co has to for example, from serious m June 2013 chasing. His used an outside debt repurAnd Caesars of a department cases he sees, legal team suits. He cited on day-to-day matters. have to of restructuring on how to supporting is also busy the regulators. We actions to frivolous the opening be cleared by sued because more HR employees place. The nos in Cincinnati, of new casicompany continually, one family who room trained in the first monitor the TV in their litigation something if effecBoston, avoid channel for because more this year. and Baltihas been especially Carletta says, small as premium movies inappropriate something as the new strategynegotiations. showed Whats more, changeseven The family settled in labor titlewe have DEPARTMENTS 2013 Donovan helps with Caeaccess tiveBEST LEGAL their children. online gaming also sees changing an executives to have free The strategy labor business growing the the state regulators. case for the right years, Holloway Thats because in the next to go back to two fast sarss growth. year or two, what Caesars to the pool for with Caesars and others are several class issues pervade much of pushing for properties, Holsays. More serious accusing legalized online gambling. millions and to do with new has The companys actions seeking excessive tries says. Now the labor team ing venues social gamencouraging labor loway WE LIKE: could the casinos of on establishing the AND INNOVATION into full-blown easily be expanded those with addictions. TEAMS ENERGY set guidelines . All gambling by won an important peace in new developments national appeal, gambling sites with Caesarss load Caesars recently has reduced if other states COULD DO BETTER: one such suit. allow it. In cases, planning labor and employment cases precedent in February, Nevada would PRO BONO, DIVERSITY other favorite accordof major the 2012, In two of his in nations passed 60 Holloway JANE SANDRA TIM DONOVAN is CHRISTINE first in 2011 to made a profit. he says, for from 85 LEUNG poker and other law allowing online WASMAN CAESARS HELWICK the company sued The key, Holloway. over $100,000 that the claimants ACORDA BRISTOL-MYERS ENTERTAINMENT decisions in CALIFORNIA con- ing to only for players gambling gamesbu service make laborrequiring Car- explains dont the t THERAPEUTICS STATE UNIVERSITY an attorney. approval in Nevada. that weSQUIBB of dollars over are the feds. of cases fer a federal Wed And then there anymore. The result, include millions two separate matters. Caesars rebranded. Cohen says, solution, Donovan prevacuumto freealso in that her duties up attorneys They has helped with based on a is mingo, but were letta explains Internal tracts says, to in The strategy counterclaims happy with Imperial Palace, include the Flabe more proactive as the SEC, the says that whats going well at the state Bills From as these we chose finalists, IN OUR SECOND YEAR OF Holloway THE interacting with the Federal Election formulatedfraud. During discovery, Hall, and control. on offer as much level so sistency in OSheas. Filled Gambling twice to more proof cost con- vated and each was asked to submit Depart- spent EX panded Best Legal how politi- suspected lawyers uncovered Revenue Service, company And the GCs far. contracts with reno2009 the across 2012, with casinos, (over Caesarss as in are handled Caesarss eyes start settlements the fees detailed information. It wasnt restaurants, new indoor and ments packagelast year we counsel country. Commission when he talks dancing and lobbying), of the fraud. While the on outside to labor outdoor going both and easy to select the four departjumped the number of departof the fees cal action committee Holloway says property: the about another Caesars litiga90 percent will be anchored retail shops, The Linq She also monitors confidential, suits World Series ONE their ments featuredlaw and ments we honored from one to employment and other agencies. Foreign Corrupt are by a 55-story 20 in these pages, tion wheel, of Poker. If negotiations OF THEhad LEGAL asked to dismiss orDEPARTME the 15 feel con- received observa- the tournament could webut most we comfortable with fourwe the deepthe High Roller, Holloway bribery plaintiffs compliance with creative A SMALL he NTS expand to allow tion. Back then counterclaims. board, projects and billed as the online gamblers which prohibits firm, is rising our the choices. And, like last worlds highest. DEPARTM and widest set the of submisnot and the stand est rates all over Practices Act, across the ENT SHOWS firms, withstreet reduced across from The law applies joinWHY his bosses to plan nation to in, it Caesars It will open years, each one is distinct, and sions Caeyet. The number in vinced will HOUSE convergence a was team of foreign officials. Palace. THE be good for But of ended up paying in phases, recalls. Scott outside law firms, The foreign properties Donovan business, WINS the plaintiffs a perfect BY beginning represents chief a novel twist on the later this year. up substantially, number the quality to six Wiegand, notes, only to Caesarss Africa, the counsel to settle. It was The legal team SUE REISINGE the enterprise developme alternafrom for every Egypt, South understatem R ent of with the practiced business state of the art. seemed better, andan the range of savings but sars millions handles nt, Asia, Canada, detail of the is overseeing billing. withthe array building between Caesarss a card shark. and Uruguay, phased only projects marriage and not of But well leave no finalist of departments was as broad Kingdom, ment, Wiegand fees, The Linq, We manageUnited casinos. fees, fixed the open-air tiveretail, legal aspirations. but visitors to U.S. dining, behind. says, which In the coming monthswhy astook wed the hoped. and entertainm also to foreign we treat and explains Sommella the matter, trict. ent It will be careful how was well publish shorter snapshots We heard from lawyers atliterally We have to who we defended link Caesars dis- sewer departmen dispatched to the to other here, such as of the others, each ofPalace which had huge multinationals that smaller are t after lunch. people coming properties that not about Its has control, much to recommend it. All finalhousehold names, from small acquired, Caesars he adds, but Reprinted renovated, about coordinatio and are ists, by the way, eligible to start-ups wed never heard with in some n. The client CORPORATE permission from the to us for judgments June COUNSEL looks LLC. All rights apply again next year. (Winners of, and from more than a few 2013 ALM 2013 edition of Media Properties, reserved. on commercia permission are ineligible for five years.) nonprofits. We did our best to duplication l 877-257-3382is prohibited. Further For information, without or reprints@alm.com Thanks to all participants. examine each on its own terms. contact .#
comanything the waters. Almost doing, from new at has pany is looking to new employees, developments or compliance some sort of regulatory Carletta says. review to it,
06 2013
OUTBOX
INTERVIEW ANDREW JOHNSON
BUILD IT, AND THEY WILL COME

General Counsel 3D Systems
3D SYSTEMS CORPORATIONS Andrew Johnson has fond memories of a summer spent touring the country with a multiact music festival. No, the now general counsel wasnt in a band. He did promotional work for a record label associated with the tour, managing its on-the-road music store and sharing new music with fans. Back then, it was all CDs, says the 38-year-old Johnson. The only constant truly is change, and nobody knows that better than Johnson. Before becoming assistant general counsel for 3D Systems in 2006, he was doing mortgagebacked securitization work with Hunton & Williams. Johnson didnt know much about content-to-print technology when he joined the Rock Hill, South Carolina based 3D Systems. He was excited to take part in developing strategy for a company at the cutting edge of the 3D printing revolution. 3D Systems was founded in 1986, and it has acquired more than 30 companies in the last several years. The company reported sales of more than $353 million in 2012, an increase of 54 percent from the previous year. Johnson became head of the legal department last April. He spoke with Corporate Counsel about the limitless possibilities of 3D printing (and how the technology could even turn him into a rock star).
> > >
IN PRINT, DIGITAL, AND INTEGRATED MEDIA

[ BY SHANNON GREEN ]
AJ: I have a Cube, and I move it between my home and my office. I brought it home a while ago and had all of the kids on my street flock to my front yard to build toys. Its pretty powerful to witness kids ages 8 to 13 seeing the power of a 3D printer for the first time. CC: How is the 3D content platform Cubify utilized? AJ: It allows people to buy, sell, share, and communicate with 3D content. We have designers who can post their newly designed files and sell them through Cubify. 3D Systems also has applications that allow people to customize consumer products. They could have something made, such as a guitar. That wouldnt be printed on the Cube, but it would be printed using another one of our technologies, such as our SLS (selective laser sintering) technology. They could place that order and have a guitar sent to their doorstep. CC: What does this technology mean for manufacturing in the future? AJ: We see 3D printing as an opportunity to relocalize manufacturing. Thats something that our CEO and our business leaders talk about all the timethat our technology actually presents an opportunity to bring manufacturing back to the United States. CC: The application 3D Me lets consumers put their heads on figurines of vampires, superheroes, and the like. Have you made a 3D Me version of yourself? AJ: I have not made one, but I really like the rock guitarist. When I purchase a 3D Me, it will definitely be the rock guitarist.
October 2013
WHO REPRESENTS AMERICAS BIGGEST COMPANIES
HAIL CAESAR S!
2013
BEST LEGAL
DEPARTMENTS
DANIEL HERTZBERG (ILLUSTRATION)
3,400 g about ls are averagin ranging from that paralega ons per year, g deals INSIDE BEST LEGAL DEPARTMENTS: transacti to marketin group, explains also team nal rules Squibb services in Atlantic page 68 | Caesars Entertainment page 72 Acorda Therapeutics page 64 | Bristol-Myers . The promotio corporate act contracts applications ls may work they report es Caeparalega to lounge e else, but on permeat stellar the some licensing requests. At handles City or anywher Such innovati ent. One ty subpoena l is juggling quality in Las Vegas. departm by the lawn to the team is to churn out dizzy- and third-par sarss legal implemented time, a paralega transactio across idea do it at a any one Their job with any and money business ns, and they s they have to 50 matters, saved time legal group cretransactio yers has the up Using template ent. The l team to two years, the departm onal paralega general ing pace.d over the past develope ated a transacti s. Deputy Caesars Entertainment contract heads the generate Cohen, who Michael counsel
016-06-13-04
CORPORATE COUNSEL: How large is your legal
department?
ANDREW JOHNSON: There are three lawyers
| California State University page 76
CC: What might a buyer expect to shell out for a basic model? AJ: Our home printer, the Cube, retails for $1,399. There are other consumer printers in that range, although ours is truly for home use. CC: I assume you have a 3D printer at home.
PAUL DILAKIAN
We take pride in the fact that if you include both patents issued and patents pending (a total of 1,060), we have almost as many patents as employees (1,200).
Welcome/Willkommen/Bienvenue/Benvenuto to the latest edition of our survey of companies and the law firms that represent them. Youll find our customary wealth of charts in these pages, but this year law firm mentions have expanded, thanks to a broader survey of court documents. We like to do something different each year as we examine that close clientlaw firm relationship. Last year we stayed home and talked to U.S.based companies and firms. This year we decided to cross the pond to see if Europes continuing financial woes have sparked a reappraisal of how legal work is done.We wanted to know whether the crisis has left in-house lawyersthe clientsdictating the terms when it comes to fees and staffing and such. Lawyers over there had much to say.
COMPANY 2012 REVENUE (MILLIONS)
ALLSTATE
$33,315
TERRY MANIER
and a couple of paralegal/administrative positions. We have an IP person in-house.
FORTUNE 500 RANK

92
CONTRACTS LITIGATION
Akerman Senterfitt Akin Gump Baker & Hostetler Ballard Spahr Bennett Bricklin Bowles Rice Brown & James Gibson Dunn King & Spalding
IP LITIGATION
N/A
LABOR LITIGATION
Drinker Holland & Hart Meckler Bulger & Tilson Seyfarth Shaw
TORTS LITIGATION
Cozen Huie Fernambucq & Stewart Littler Mendelson Meckler Bulger & Tilson Thompson Coe Turner Padget White & Williams N/A
PATENT PROSECUTION
Banner & Witcoff DLA Piper Kirkland & Ellis
Reprinted with permission from the June 2013 edition of CORPORATE COUNSEL 2013 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 or reprints@alm.com. # 016-09-13-05
126
NIKE
$24,128
Banner & Witcoff Benesch Friedlander DLA Piper Haynsworth Sinkler Boyd Lewis & Roca Banner & Witcoff Katten Muchin Rosenman LeClairRyan
N/A
Banner & Witcoff DLA Piper Lewis & Roca
PLUS: PERILOUS
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IP I NSIDER
4 2014
Export tariffs. Exchange rates. Clogged bridges.

Some cross-border issues are inevitable. Workplace issues dont have to be.
buy the notion that Aereos use of mini antennas insulates the company from copyright liability. Based on the plain language of the 1976 Copyright Act and the clear intent of Congress, this court concludes that Aereo is engaging in copyright infringement of plaintiffs programs, Kimball wrote. Fox and its local affiliates are represented in the case by Jenner & Block and Hatch, James & Dodge. Nexstar Broadcasting, Inc., owner of the ABC affili-
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ate in Salt Lake City, is represented by Arnold & Porter and Snow, Christensen & Martineau. Jenners Stone says that its important that Kimball refused to hold off ruling on the injunction before the Supreme Court weighs in, and instead stayed the case with an injunction in place. Otherwise Aereo could have continued its expansion within the Tenth District, he said. Aereo passed along a statement from founder Chet Kanojia apologizing to customers. We are extremely disappointed that the district court in Utah has chosen to take a different path than every other court that has reviewed the Aereo technology, the statement said. Consumers have a fundamental right to watch over the air broadcast television via an antenna and to record copies for their personal use. The Copyright Act provides no justification to curtail that right simply because the consumer is using modern, remotely located equipment. Durie Tangris Daralyn Durie, who represents Aereo, didnt immediately respond to calls for comment.
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INSiDE THiS MONTH

shares the whistle. * SEC FTC still has a hot hand. * New regulators on the block. *
DCWATCH
4 2014
REGULATORY ROULETTE
As five agencies get ready to implement the Volcker Rule, banks wonder whos in charge. [ BY JENNA GREENE ]
ARE THERE TOO MaNY COOKS? aS FIVE
federal agencies begin implementing the massiveand massively complex Volcker Rule, financial institutions have one overriding question: Who will they answer to? Megabanks fear that conduct that one regulator blesses another will forbid, creating a legal minefield when it comes to proprietary trading. In February the agency heads offered alarmed members of Congress a threeword panacea: interagency working group. The leaders of those agenciesthe Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commissiontold the House Committee on Financial Services that their new group, which is composed of representatives from each agency and which met for the first time on Jan. 23, will try to head off contradictory decisions. The real key is going to be oversight, supervision and enforcement of the compliance requirements, FDIC Chairman Martin Gruenberg said. Thats why we made a point of establishing this working group. SEC Chairwoman Mary Jo White agreed: Consistency in enforcement is very much under discussion by all the agencies. But lawyers who represent financial institutions say that their clients are uneasy about the prospect of conflicting enforcement decisions. It is a concern, says Mayer Brown banking and finance partner David Sahr. For example, how can banks establish that they are making a good-faith effort to comply with the rules still uncertain requirements? It might be appropriate to consult with the regulator to get clarification, but dif-
ferent regulators may come out with different answers, he says. The 932-page Volcker Rule, finalized in December, bars banks from making risky bets with their customers money. It goes into effect on April 1, but the conformance period has been delayed until July 21, 2015. The agency leaders stressed their commitment to cooperation, noting that they jointly adopted the final rule, going beyond the congressional requirement to simply coordinate their actions. It was, in my view, very important that the agencies, if possible, adopt the same rule that could be consistently applied and implemented based on continuing consultation among the agencies, White told the committee. Still, members of the panel questioned which agency would take the lead in making decisions. Im sitting here listening, and I must have heard at least 40 times, interagency group,
said Rep. Shelley Moore Capito (RW. Va.). I have yet to hear really who is in charge. Capito questioned what would happen if nobody makes a decision, or you make a decision over one another, and then all of a sudden there are three or four different decisions? The agency leaders explained that there is no dominant regulator. Each agency has a statutory mandate from Congress for oversight of a particular entity, Federal Reserve Board Governor Daniel Tarullo said. The Fed, for example, is the primary regulator for state member banks and foreign broker-dealer subsidiaries of U.S. bank holding companies, while the SEC oversees domestic broker-dealers. But what if a large broker-dealer also engages in banking and trades on an interest-rate swap? asked Rep. Mick Mulvaney (R-S.C.). Is there a clear path that bank could follow in setting up a compliance regime?
ALISON SEIFFER
87
DCWATCH
4 2014
Given that Mulvaney described the company first and foremost as a broker-dealer, the SEC would be the first stop, White responded. As the primary regulator, we would initiate those discussions. Tarullo agreed. If its a brokerdealer, and the SEC is OK with the practice the broker-dealer is pursuing, none of the rest of us has the authority under the Volcker Rule statute to say thats incorrect. The point, he added, is to make sure >>>
that the same kind of activity pursued by a broker-dealer or a London-based subsidiary of a U.S. bank holding company is treated about the same, even though they have different primary regulators. Thats the reason for the coordination. The Fed, the FDIC and the comptroller of the currency are used to working closely together, Tarullo noted. He called it a normal state of affairs that typically runs smoothly. But prudential banking regulators
are a different animal than the SEC and the Commodity Futures Trading Commissionrule-based market regulators with enforcement regimes that allow for less wiggle room when wrongdoing is detected. Isnt this conflict in regulatory models going to become an issue? asked Rep. Ed Royce (R-Calif.). Before the agency heads had a chance, Royce answered his own question. I know what youre going to sayyou have a working group.
After courts disagree, the SEC adds its voice to the debate on whom whistleblowers should report to.
THE U.S. SECuRItIEs AND EXCHANGE COM-
WEIGHING IN
mission filed an amicus brief in February stressing that whistleblowers are entitled to the Dodd-Frank Acts full protection against retaliation whether they report their employers wrongdoing internally or go straight to the agency. In July the U.S. Court of Appeals for the Fifth Circuit contradicted other courts that have considered the matterand the SECs own ruleswhen a panel of judges held that employees are protected against retaliation only if they go to the SEC. The same question is now before the Second Circuit. In a forceful amicus brief, the SEC came down on the side of businesses anxious to protect their painstakingly developed corporate compliance programs. The commissions whistleblower program both encourages whistleblowers to report wrongdoing and protects them when they do, said Sean McKessy, who heads the SECs Office of the Whistleblower, in a written statement. Todays filing makes clear that under SEC rules, whistleblowers are entitled to protection regardless of whether they report wrongdoing to their employer or the commission. In January 2013 Meng-Lin Louis Liu, who worked for a Siemens A.G. subsidiary in China as a compliance officer, sued the company in U.S. Dis-
found that Dodd-Franks trict Court for the Southantiretaliation provision ern District of New York. did not apply to conduct He alleged that he was overseas, especially in a fired because he uncovcase involving a Taiwanered evidence of a kickese resident suing a Gerback scheme in violation man company for actions of the Foreign Corrupt in China. Practices ActwrongdoStill, Pauley touched ing that arose even after on the reporting issue, Siemens agreed to pay writing that he found $1.6 billion in fines for the Fifth Circuits deciviolating the act in 2008. sion appealing in that it Siemens demoted, avoids rewriting the statharassed, suspended sEAN MCKEssY HEADs tHE ute, but that there is no and then discharged Liu WHIstLEBLOWER OFFICE need for the court to wade because of his objections into this debate. and complaints about violations of the On appeal, however, the Second FCPA, states the complaint. Siemens Circuit might. The SEC weighed in countered that as the Fifth Circuit with a 30-page amicus brief urging the recently held, Dodd-Frank protects court to hold that Dodd-Frank whistleonly those who blow the whistle to the blower protections apply irrespective SECsomething Mr. Liu admits he did of whether the individual makes a sepanot do until months after the alleged rate report to the commission, accordretaliation. ing to the brief by SEC general counsel In July the Fifth Circuit in Asadi v. Anne Small, deputy general counsel G.E. Energy held that an employee who Michael Conley, assistant general counwas fired after reporting suspected sel William Shirey and senior counsel wrongdoing internally was not entitled Stephen Yoder. to protection under the Dodd-Frank Act If the rule were invalidated, the because he didnt take his grievance lawyers added, the commissions directly to the SEC. authority to pursue enforcement actions But in Lius case, U.S. District Judge against employers that retaliate against William Pauley III in New York sideindividuals who report internally stepped the issue of where wrongdowould be substantially weakened. ing must be reported. Instead, he dismissed the case in October because he Jenna GReene
88
DCWATCH
4 2014
The FTCs record draws criticism and charges that the forum is rigged.
ITS NOT JUST LAS VEGAS WHERE THE
THE HOUSE RULES
FRESH FACES AT THE SEC

iN FEBRUARY THE U.S. SECURi-
house almost always wins. For nearly two decades, the Federal Trade Commission has come out on top in nearly every administrative lawsuit involving allegations of unfair methods of competition. In fact, the only time it lost in the last 19 years was in February, and even then it was more of a loss by default. The commissioners deadlocked 2 to 2 along party lines, which meant that no action was taken and the administrative law judges ruling against the commission on a key point was final. Still, lawyers and members of Congress challenge the FTCs too-good-tobe-fair record, and question whether the forum is evenhanded. Last Christmas Eve, for example, Commissioner Julie Brill agreed to recuse herself in a pending case involving medical testing company LabMD Inc.s patient information data security practices. But she did so only after LabMDs counsel vigorously complained. The FTCs administrative process appears to be rigged against respondent, argued the companys counsel from Dinsmore & Shohl and Cause of Action, a nonprofit government
worth putting up a defense at all, said House Antitrust Subcommittee Chairman Spencer Bachus (R-Ala.) during a November 2013 hearing. FTC Commissioner Joshua Wright, who has bluntly criticized aspects of the process, agreed. Most companies facing an in-house FTC trial opt to settle rather than going through lengthy and costly administrative litigation in which they are both shooting at a moving target and have the chips stacked against them, he wrote in a recent antitrust journal article.
Most companies facing an FTC trial opt to settle, knowing they HAVE THE CHIPS STACKED AGAINST THEM, wrote an FTC commissioner.
accountability group. Brills public statements show she has prejudged the facts of LabMDs case, they said, citing pretrial speeches that included references to the company. Brill, a Democrat with a reputation as a tough public interest advocate, said the motion to disqualify her was without merit, but agreed to step aside to avoid an undue distraction. Concerns about the FTCs administrative process have percolated up to members of Congress as well. With this kind of record and an unbeaten streak that Perry Mason would envy, a company might wonder whether it is Still, the FTC does not have the final wordagency decisions can be appealed to the relevant federal circuit courts of appeals. But according to Wright, a Republican who was previously a professor at George Mason University School of Law, The FTCs own decisions are reversed by federal courts of appeal at a much greater rate than those of generalist district court judges with little or no antitrust expertise. A Federal Trade Commission spokesman declined to comment on the agencys administrative litigation because it is at issue in the pending LabMD suit.
Jenna Greene
ISTOCKPHOTO/INA PETERS/SiLBERKORN (CARD DEALER)
ties and Exchange Commission announced three senior appointments to key legal jobs, including the rst head of the agencys new Oce of the Investor Advocate. Rick Fleming, deputy GC with the North American Securities Administrators Association, will lead the new investor oce created as part of the Dodd-Frank Act. The SEC also named Paul Leder to head the Oce of International Aairs and David Fredrickson to serve as chief counsel in the Division of Corporation Finance. The Oce of the Investor Advocate is charged with assisting retail investors when dealing with the SEC, considering Rick Fleming how proposed rules would aect investors, identifying problems they have with nancial service providers and proposing change to promote investors interests. Leder, the new head of international aairs, was previously a partner at Richards Kibbe & Orbe in Washington, D.C. At the SEC, hell advise on cross-border enforcement and regulatory matters and coordinate the SECs involvement with regulatory authorities outside the United States. Fredrickson, the next Corporation Finance chief counsel, is currently assistant general counsel in the SECs Oce of General Counsel, where he is responsible for providing legal and policy advice to the Division of Corporation Finance. Hell start as chief counsel in March, and will oversee the work of the divisions Oce of Chief Counsel and Oce of Capital Markets Trends. Jenna Greene
Versions of these stories appeared in The National Law Journal, an affiliate of Corporate Counsel.
89
COVER STORY
Womens Work
A quarter of a century after the rst woman was named top lawyer of a Fortune 500 company, theres been plenty of progress. But a stall last year has raised questions about the future.
BY SUE REISINGEr
AEROSPaCE PRODUCTS, aUTOMaTION aND HIGH
technology, transportation systemscan a woman be a successful general counsel at such a hardhat company? Katherine Kate Adams, senior vice president and GC at Honeywell International Inc., is living proof that one can. At age 49, Adams is atop a rising wave of women who are becoming the top lawyers at Fortune 500 companies. She joined Honeywell in 2003, working her way up from deputy general counsel for litigation, to three years as general counsel of one of Honeywells major business divisions, performance materials and technologies. And then she was promoted to general counsel in late 2008. She makes it all sound so easy. Her previous practicein environmental law at Sidley Austin Brown & Woodgave her experience working with oil companies and other traditionally male-dominated industries.
PHOTOGRApHY BY JORDAN HOLLENDER
90
KATHERINE KATE ADAMS, GC AT HONEYWELL INTERNATIONAL
COVER STORY
So, she says, Honeywell was a comfortable fit. It didnt feel alien to me, Adams recalls. And these traditionally heavily engineering companies have a more diverse perspective, and are more open to promoting women. Decades ago, women lawyers faced tougher prospects. When CCH Incorporated, an information service provider, promoted Mary Ann Hynes to general counsel in 1979, the company probably didnt realize it was kicking off a major trend in hiring. Hynes was the first woman to serve as GC at a Fortune 500 company, but dozens more soon joined her. By 1999 the Fortune 500 touted 44 female GCs, according to the first annual survey of women in the job by the Minority Corporate Counsel Association (MCCA). As more women entered law schools that once barred themthe last gender barrier dropped in 1970the GC numbers kept rising. By 2004 MCCA listed 75 women GCs of top corporations. And five years later that figure swelled to 86, and then to 106 in 2014, according to the latest numbers compiled by Corporate Counsel. (Corporate Counsel counts only companies where the top legal officer is a woman, whether her title is general counsel or chief legal officer.) Today women are leading the legal departments at 21 percent of Fortune 500 companies, compared with 17 percent in 2009 and only 15 percent a decade ago. And one of them, Karen Roberts at Wal-Mart Stores Inc., heads the legal team at the nations largest corporation. In fact, there are four women GCs in the top 17 companiesnearly 25 percent. Clearly these statistics show solid progress. Its a positive trend, Adams notes. I wish it were faster, but at least its going in the right direction. I think at a very broad level, legal training has been more egalitarian and has created more opportunities for women than have other professions. Agreeing with that assessment is Joseph West, MCAAs president and chief executive, and onetime in-house counsel at Wal-Mart. West admits that the numbers at first blush are not as high as you might hope or expect, considering that nearly half of all law school graduates are now women. But like Adams, he recognizes the long-term results, noting, The increase has been steady, and the trend is very positive, very strong.
WOMEN LAWYERS HAVE BEEN MOVING IN-HOUSE FOR
A erospace and Defense

TOP LEGAl OFFICER
KATE ADAMS RUTh BEYER ShEiLA ChESTON ANN DAViDSON MARYANNE LAVAN
COMPANY NAME
HONEYWELL INTERNATiONAL PRECiSiON CASTpARTS NORThROp GRUMMAN EXELiS LOCkhEED MARTiN
a variety of reasons. Professor Joan Williams, founding director of the Center for WorkLife Law at the University of Californias Hastings College of the Law, says that many women who entered law firms and wanted to have children found a better work/life balance at corporations that TOP InDUStRIES offered eight-hour workdays. Also, she says, FOR TOP WOmEn 20 years ago, going in-house was seen as less lAWyERS prestigious than being in private practice. It was seen as a second choice, and therefore open to women, Williams explains. But times have changed, Williams notes, and
today a quest for diversity can push a company to seek a woman GC. Lee Udelsman, managing partner of the executive search firm Major, Lindsey & Africa, explains that theres a much lower percentage of women chief executives and chief financial officers, about 4 percent of CEOs and about 11 percent of CFOs. So hiring a female GC, Udelsman says, is an opportunity to inject some diversity into the C-suite. Whatever the reasons for the increase, some critics still see a glass more than three-quarters empty. And behind the sheer numbers lie several worrisome details for women. For one thing, the percentage of female GCs in the Fortune 501 to 1000 tier is a lowly 17 percentthough that percentage also has been rising through the years. And last year, for the first time in history, the number of Fortune 500 women GCs dipped slightly from the previous yearby three. No one is sure why, but it wasnt for lack of openings. Ten percent of large organizations started 2014 with a new general counsel in place, according to the BTI Consulting Group. BTI said it was the largest change in GC leadership in the 13 years it has been doing the benchmarking survey. Yet, West and others still emphasize the brighter side of the numbers. For example, West says women lawyers are making more career progress in-house than they are in major law firms. Female partners in U.S. law firms have been hovering around 19 percent for the past five years. And equity partners drop precipitously, to about 3 percent, he adds. Another bright spot is that some women GCs are crashing through glass ceilings to become CEOs or
INSURANCE: 9 WOMEN FOOD CONSUMER PRODUCTS: 7 SpECiALTY RETAiLERS: 7 HEALTh CARE: 6 UTiLiTiES (GAS AND ELECTRiC): 6 WhOLESALERS: 6 AEROSpACE AND DEfENSE: 5
92
COVER STORY
For me, it was learning how a winch works rather than how a pharmaceutical compound works.
ON MoVING fRoM PHARMA To MANUfACTURING
IVONNE CABRERA, GC AT DOVER
members of boards of directors. And others, like Adams, continue breaking out of traditional industries to move into the hardhat realm. Adams says about half of Honeywells 250-lawyer legal department is female, and its huge aerospace division also has a woman general counsel. Gender is just not an issue, Adams says. I find the atmosphere very results-oriented, just get-the-job-done, she adds. In that way, big industrial companies with that clarity of purpose may actually be easier [for women].
CLEARLY WOMEN GCS ARE NO LONgER BEINg TIED
down to the softer companies. Connie Collingsworth, general counsel of the Bill and Melinda Gates Foundation, says she meets many women in-house counsel in what was once viewed as traditionally male industries. I dont think you can peg them into just human resources or health care any more, Collingsworth agrees. Besides Honeywell, four other major aerospace and defense contractors sport women general counsel. And United States Steel Corporation recently named Suzanne Rich Folsom as GC, while Deere & Company last year picked Mary K.W. Jones to lead its legal team. And they join dozens of other women GCs in the once all-male domains
of oil companies, industrial machinery firms, railroads and big gas and electric utilities [see chart showing industry groups on page 96]. One such GC, Ivonne Cabrera, didnt flinch when she was asked to leave an in-house job at Bristol-Myers Squibb Company and join heavy industry as a deputy GC in 2004. Last year Cabrera was promoted to senior vice president and general counsel at the company, Dover Corporation, a manufacturer of diversified machinery near Chicago. She says she found the 2004 transition from drugs to machinery relatively simple. For me, it was learning how a winch works rather than how a pharmaceutical compound works, she says. The progress that women are making in the field of law encourages Cabrera. But she, too, would like to see women represented in corporations in numbers more similar to law school enrollments, especially as CEOs and directors. Women GCs are ascending at a faster pace, Cabrera notes, and Im not sure why that is. A few observers suggest the answer is stereotyping. Last year, in an article in the publication Chicago Business entitled Why the General Counsels Job Is Becoming Womens Work, Carrie Hightman and others questioned the higher
ROBErT TOLCHIN
93
COVER STORY
Who and Where

TOP LEGAl OFFICER
Elizabeth Abdoo Kate Adams Susan Alexander Audrey Andrews Marcia Backus Michelle Banks Sharon Barner Colleen Batcheler Suzanne Bettman Ruth Beyer Susan Blount Angelee Bouchard Maureen Brundage Kim Brunner Ivonne Cabrera Sharon Cheever Sheila Cheston Kelly McNamara Corley Pamela Craven Dorian Daley Jennifer Daniels Sheila Davidson Ann Davidson Janet Dhillon Susan Frank Divers Paulette Dodson Stacy Dor Carrie Dwyer Sheri Edison Ellen Fitzsimmons Suzanne Rich Folsom Elisa Garcia Monica Gaudiosi Rachel Gonzalez Maria Green Grace den Hartog Patricia Hatler Lucy Helm Kirsten Hewitt Carrie Hightman Stephanie Hildebrandt Mary Ann Hynes Lisa Iglesias Julie Jackowski Julie Janson Paula Johnson Mary Jones Nicole Jones Ellen Oran Kaden Denise Keane Janet Langford Kelly Sylvia Kerrigan Catherine Kilbane
COMPANY NAME
Host Hotels & Resorts Honeywell International Biogen Idec Tenet Healthcare Occidental Petroleum Gap Cummins ConAgra Foods R.R. Donnelley & Sons Precision Castparts Prudential Financial Health Net Chubb State Farm Insurance Cos. Dover Pacic Life Northrop Grumman Discover Financial Services Avaya Oracle NCR New York Life Insurance Exelis J.C. Penney AECOM Technology PetSmart Energy Future Holdings Charles Schwab Bemis CSX United States Steel Ofce Depot UGI Dean Foods Illinois Tool Works Owens & Minor Nationwide Starbucks Whirlpool NiSource Enterprise Products Partners Ingredion WellCare Health Plans Caseys General Stores Duke Energy Phillips 66 Deere Cigna Campbell Soup Altria Group ConocoPhillips Marathon Oil Sherwin-Williams
TOP LEGAl OFFICER

Jeannette Knudson Hilary Krane Nancy Laben Roberta Lang Maryanne Lavan Diane Lazzaris Christine Leahy Susan Lees Sandra Leung Erin Lewin Kathleen Mahoney Deborah Majoras Lori Marco Ann McCauley Denise McWatters Laura Meagher Carol Meltzer Susan Miller Elizabeth Moore Sara Moss Marie Oh-Huber Amy Fliegelman Olli Amy Perry Teri Plummer-McClure Sarah Powell Teresa Rasmussen Catherine Reynolds Christine Richards Karen Roberts Karla Robertson Teresa Wynn Rosenborough Kim Rucker Michelle Russell Kay Rustand Sharon Ryan Gloria Santona Teresa Sebastian Laureen Seeger Rachel Seifert Karen Shaff Jane Sherburne Marianne Short Kim Sinatra Laura Stein Amy Tangeman Rhonda Taylor Gayla Thal Kelly Tompkins Leslie Turner Leila Vespoli Robin Walker-Lee Martha B. Wyrsch Lisa Zell
COMPANY NAME
J.M. Smucker Nike Booz Allen Hamilton Holding Whole Foods Market Lockheed Martin WESCO International CDW Allstate Bristol-Myers Squibb Avnet Nash-Finch Procter & Gamble Hormel Foods TJX HollyFrontier VF Spectrum Group International Avery Dennison Consolidated Edison Este Lauder Agilent Technologies CA NuStar Energy United Parcel Service Advance Auto Parts Thrivent Financial for Lutherans CMS Energy FedEx Wal-Mart Stores Supervalu Home Depot Kraft Foods Group YRC Worldwide Reliance Steel & Aluminum International Paper McDonalds Darden Restaurants McKesson Community Health Systems Principal Financial Bank of New York Mellon Corp. UnitedHealth Group Wynn Resorts Clorox Expeditors International of Washington Dollar General Union Pacic Cliffs Natural Resources Hershey FirstEnergy TRW Automotive Holdings Sempra Energy CHS
94
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COVERSTORY
percentage of female GCs over other executives. Hightman, general counsel at NiSource * Inc., said she was the only woman in her Indiana companys C-suite. She neednt feel lonely. The article went on to say that nine of the 25 largest Chicago public companies listed female general counsel, but only three other senior-level women. This is my pet peeve, Hightman said. But is stereotyping really to blame? Cabrera, for one, doesnt think so. The GC job is different, more complex and more important today than it was 15 years ago, she says. So employers cant take a chance on someone solely for the sake of gender diversity. Cabrera and Udelsman both say that law schools are filling the pipeline with female talent. Theres really a lot of highly, highly qualified female lawyers out there right now, Udelsman stresses. The position hasnt gotten softer, insists Collingsworth. There was a time, she says, when some women might have said, I dont want to be partner or a rainmaker, so Ill just go in-house. But thats not true today, and especially not true of a general counsel, she adds. The role of the general counsel has evolved to be a strategic adviser to the CEO, she says. Few other positions can see all the issues from that broad of a perspective. Honeywells Adams also disagrees with the gender stereotyping theory. She sees it as more of a professional pathway choice made by men as well as women. If you want to be a CEO, basically you have to have run a business to get there, she points out. If you come up as a lawyer youre probably not going to have that kind of experience regardless of gender.
THE NEXt FIVE YEARS OR SO COULD tELL US MUCH
1979: 1
THE fIRSt fEmaLE GC IS NamED tHIS YEaR
age of women on public company boards has hovered around 1516 percent for the past three years with little progress, Collingsworth notes. There are a lot of qualified women lawyers out there, some who have advised CEOs in the boardroom, and who are lifting up their heads and saying, Dont I belong there as much as anyone else? she says. The future also holds the answer to another important question: Was last years dip in women GCs an anomaly or the beginning of a new trend? Williams, the law professor who has a forthcoming book (What Works for Women at Work: Four Patterns Every Woman Should Know, NYU Press), notes the expanding role and importance of GCs these days. Although she has not studied the issue, Williams says she believes going in-house has shifted sharply [up] on the prestige-o-meter. I suspect more men are heading in-house, and that could help explain the stall in last years number of women GCs. If her suspicion is correct, 2015s numbers could bring gloomy news for women. But Udelsman, who specializes in searching for qualified general counsel, isnt worried. He doesnt expect the number of women GCs to level off or decrease. He even hazards a bold prediction. Probably in the next five years or so, one-third of all Fortune 500 general counsel will be women, he says. And it will keep increasing. There are so many talented women lawyers out there.
more about women GCs progress. If MCCAs Workplace 2020 study of Generation Y attorneys (born after 1980) is any guide, the future will be an increasingly diverse one. MCCA says the data NUMBER OF marked a generational trend when a majority of Gen Y-ers said that a diverse legal profesFemALe GCS In sion is important, regardless of whether such FOrTune 500 a priority would not benefit them personally. COmPAnIeS For Adams, the future means that women need to work harder. The more that women can become successful GCs, she says, they pave the way for more female CEOs, CFOs and directors. I 44 dont think we can rest until representation at the seniormost levels in companies and law firms are more representative of the profession, Adams stresses. No one agrees more than the Gates Foundations Collingsworth. She spoke in January at the DirectWomen Board 1999** Institutes program that grooms selected women lawyers many of them veteran GCsto be directors. The percent-
106 86 75
2004**
2009***
2014***
SOURCES: * Courageous Counsel: Conversations with Women General Counsel in the Fortune 500, by Michele Coleman Mayes and Kara Sophia Baysinger. ** Minority Corporate Counsel Association survey. *** Corporate Counsel magazine
96
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BUSINESS LITIGATION
Eleven Years
WAR
BY JAN WOLFE
AT MORE THaN a DECaDE (aND COUNTING), FEW LITIGaTIONS CaN MaTCH THE LENGTHaND THE STRaNGENESSOF DaTaTREaSURY CORPORaTIONS TWISTED LEGaL SaGa.
HOPING TO STRIKE IT RICh ThROUGh LITIGATION? Brace yourself:
You could become a litigation magnet yourself. Consider the tale of DataTreasury Corporation (DTC), a tiny Long Island company that has generated at least $400 million through patent litigation against deep-pocketed defendantsso-called patent trolling. Since DTC only has a few employees, thats a huge sum of money. For as long as the money has been pouring in, DTC has been fighting off former business associates who want a piece of the fortune. DTCs former chief operating officer says he was wrongfully denied a stock option allegedly worth $100 million. And a purported investor in the company sued for an eye-popping $15 billion in damages, alleging hes been unfairly left out in the cold. Both men are represented by Robert Del Col, the head of a small law firm in Smithtown, N.Y. To say that the litigation has been acrimonious would be an understatement. Tempers really began to fly in 2010, when DTCs legal team, led by Richard Friedman of McKenna Long & Aldridge and Scott Mollen of Herrick, Feinstein, accused Del Col of trying to extort a settlement check out of DTC. After reviewing the claim, the Nassau County Dis-
ILLUSTRATiON BY PHiL WRiGGLEwORTH
98
BUSINESS LITIGATION
trict Attorneys Office set up a sting operation and indicted Del Col in 2010. But a judge dismissed the extortion charges on the grounds that the D.A.s office improperly outsourced a grand jury proceeding to an attorney in private practice. Disappointed with that outcome, DTCs lawyers have tried to discredit Del Col through a civil suit brought under New York Judiciary Law Section 487, an attorney deceit statute that makes it a misdemeanor for a lawyer to lie to a judge. In that case, DTC alleges that Del Col lied in order to win an uncontested restraining order freezing the companys assets. (A judge refused to dismiss DTCs claims on a preliminary motion, and the case is now in discovery.) Del Col has made some bombshell allegations of his own. In a 2011 civil suit, he alleged that DTC bought his indictment by bribing Nassau County D.A. Kathleen Rice, now a candidate for U.S. Congress. Friedman and Rice are named as defendants in Del Cols pay-to-prosecute suit, which seeks $370 million in damages. (Rices office denies the allegations.) The litigation has moved slowly, but the last year has brought good news for DTCs executives. In May 2013, a judge dismissed Del Cols clients suit, which sought $15 billion in damages, on statute of limitations grounds. And in October 2013, after a 41-day bench trial, a different judge sent the former COO home empty-handed. Del Col has appealed in both cases. The real question, at this point, is what happens to the lawyers. Will Del Col be able to back up his remarkable claim that DTC bribed Rice? Or will DTC discredit Del Col through the attorney deceit case?
DTC WAS FOUNdEd IN 1998 BY a software engineer
named Claudio Ballard. The company sold equipment that allowed small businesses to process credit card transactions over the Internet, rather than through a phone line. Ballard also held patents on technology that would allow banks to store digital copies of personal checks. In its early years,
DTC had about 100 employees and millions of dollars in funding from investors. DTC never became profitable. By the mid-2000s, Ballard and the companys other leaders had laid off staff and switched their primary business to patent licensing. DTCs CEO since 2002, Keith Delucia, has overseen the changes. It made sense to focus on wringing money from Ballards check imaging patents. Soon after the 9/11 terrorist attacks, when airplanes carrying checks were grounded, Congress had passed a law, known as Check 21, that encouraged banks to transfer digital copies of checks instead of the checks themselves. DTC struggled to find patent lawyers willing to take its case. It was planning to sue some powerful financial institutions, including Bank of New York Mellon Corporation and Bank of America Corporation. Among plaintiffs lawyers, big banks were known for being stubborn litigants that dont settle unless they absolutely have to. A Texas firm, Nix Patterson & Roach, eventually agreed to take DTCs case on a contingency basis. Nix Patterson was one of five firms that shared $3.3 billion in attorney fees from a $17 billion settlement with the tobacco industry in 1998, so it could afford to represent DTC for years without seeing a settlement or verdict. The banks lived up to their hardnosed reputations, but by 2011 DTC had secured dozens of settlements. That year, The New York Times called Ballard, DTCs founder, the bank industrys biggest patent foe. The Credit Union National Association was less charitable. In a 2013 press release, it called DTC one of the earliest patent trollsthose much-maligned entities that sue over patents rather than selling products and services. DTCs lawyers dispute the characterization, calling Ballard a visionary whose innovations in check imaging technology were copied by the banking industry. DTCs few remaining employees have become very wealthy men. Delucia, the CEO, testified in a recent court
A Long and Winding Road

1998
Data Treasury Corporation (DTC) is founded in Melville, N.Y.
KEY DATES IN THE DTC LITIGATION
1999
DTC is granted its first patent on check imaging technology.
2002
Keith Delucia becomes chief executive officer of DTC. Michael Trimarco becomes chief operating officer.
2003
Delucia fires Trimarco for alleged disloyalty. Trimarco sues over his compensation, at one point claiming $100 million in damages.
2006
DTC moves its headquarters to Texas, where it is pursuing patent infringement cases against banks.
2008
Several banks agree to pay money to license DTCs patents.
100
BUSINESS LITIGATION
I dont think I have any obligation to have him necessarily completely in the know. Delucia fired him on the spot in April 2003. In court documents, Trimarco tells a different version of the events: He says he quit DTC after his attempts to help the company were rebuffed. He also argues that the salespeople he tried to hire didnt constitute DTC employees, so there was nothing disloyal about his conduct. As part of his employment contract, Trimarco had been promised the option to purchase 1.5 million shares of DTC common stock at 80 cents per share. After he left DTC, Trimarco tried to partially exercise the option. Delucia ignored the request, so Trimarco brought a breach of contract lawsuit In court filings, DEL COL ALLEGES HE SPENT TWO NIGHTS in 2003 in New York state court in Riverhead. TriIN A dEPLORABLE cELL, where toilet paper [was] marco retained Del Col in January 2009. (Del Col did stuck to virtually every inch of the cell walls. not respond to multiple requests for comment.) Theres nothing unusual about companies being sued by former employees. But things got weird in late 2009, when Del Col began purDTCs CEO. One of his first acts was to hire Trimarco. Delusuing a claim against DTC on behalf of another plaintiff: cia figured that Trimarco could use his Harvard connecTed Doukas, a real estate developer on Long Island. Doukas tions to raise venture capital funding. alleges that in 1995 he loaned $1 million to Ballard, DTCs The partnership quickly soured. DTC puts the blame on founder, so that he could research his check imaging patTrimarco: About a year after joining DTC, it says, Trimarco ents. In exchange, Ballard allegedly agreed to give Doukas tried to lure some of DTCs employees to a competing part ownership of the patents. business venture his family had invested in. A DTC sales Before filing a lawsuit, Del Col wrote a letter to Friedrepresentative alerted Delucia to the scheme and showed man, DTCs lawyer at McKenna Long. Del Col wrote that him emails about it. Trimarco later testified that he told the he wished to discuss a precommencement settlement representative to keep the new venture as much of a secret and ended the letter with the following postscript: Get as possible because, again, I wanted to make a clean break back to me on this before he is compelled to testify in a way from Keith Delucia for all the reasons that I said before, and proceeding that he received more than $20 million in dividends. By way of comparison, when he joined DTC in 2002, his annual salary was in the low six figures, he says. Del Cols lawsuits have dampened the victory celebrations. One plaintiff is Michael Trimarco, a graduate of Cornell University and Harvard Business School. He went to junior high school with Delucia, though they werent particularly friendly. While Trimarco was at Cornell, Delucia dropped out of high school. Their lives crossed again in 2002. After obtaining a GED and building a business career, Delucia had just become
2009
Trimarco hires attorney Robert Del Col. Months later, Del Col threatens more litigation against DTC on behalf of a unrelated plaintiff, Ted Doukas, a purported early investor in DTCs patents.
2010
After a sting operation, the Nassau Country District Attorneys Office indicts Del Col and his client Doukas for allegedly trying to extort DTC. A judge dismisses the indictment on the grounds that prosecutors improperly allowed an attorney in private practice to present to the grand jury.
2011
In a civil complaint seeking $370 million in damages, Del Col alleges his indictment was the result of a pay-to-prosecute scheme in which DTC bribed Nassau Country District Attorney Kathleen Rice through campaign contributions. (A spokesman for Rice denied the allegations at the time, and her office declined to provide further comment.)
2013
Del Cols clients Trimarco and Doukas both lose their suits against DTC at the trial court level.
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BUSINESS LITIGATION
that could potentially harm [DTC] in its action against the various banks. At the time, DTC had several pending infringement cases. In DTCs view, the letter constituted extortion. In a patent infringement case, the defendant has an absolute defense if it can prove that the ownership of the plaintiffs patent is disputed. So DTC figured that Del Col was making a veiled threat: Cut Doukas a check, or he would tell the banks about how his investment agreement supposedly gives him rights to DTCs patents. Youre allowed to attempt to settle litigation, but it crosses the line and becomes extortion when testimony depends on whether litigation has been settled or not, says Mollen, DTCs lawyer at Herrick. The truth should not vary. DTC contacted the Nassau Country D.A.s office. After reviewing the claim, prosecutors set up a sting operation. According to court filings, DTC representatives met Doukas and Del Col in February 2010 at a conference room in the Garden City Hotel on Long Island. With audio recording equipment rolling, the duo reiterated their position and left with a check for $75,000 and a promise for future payments. Police arrested them at the hotel.
IN A 2011 COMPLAiNT, DEL COL alleges that he spent two nights in a deplorable cell, where fecal-stained toilet paper [was] stuck to virtually every inch of the cell walls. Del Col says his arrest has caused his family mental anguish. When it came time to indict Del Col and Doukas, Rices office delegated the grand jury presentation to a former prosecutor who had recently gone into private practice, giving the lawyer the title special assistant district attorney. A judge dismissed the indictment in 2011, ruling that Rice improperly empowered [the attorney] with a position that does not exist under New York criminal law. The judge gave Rices office the option of holding a new grand jury proceedingthis time with an assistant district attorney presenting the evidencewithin 45 days. But Rice stuck to her guns and appealed. A three-judge appeals panel affirmed the dismissal, and Del Col and Doukas were off the hook. Del Col says in his complaint that after his arrest, he began investigating contributions to the Rice campaign. He learned that Ballard and DTCs general counsel had made at least $6,500 in contributions to Rice. Del Col also alleged he spotted another $143,500 that he believes came from friends and business partners of DTC and its patent counsel, Nix Patterson. Del Col alleges that DTC arranged for the contributions in exchange for Rices promise to find a way to discredit Del Col and his clients. Mollen, DTCs lawyer at Herrick, calls the bribery accusations absurd. He says that DTCs founders donated the $6,500 because they saw Rice as an up-andcomer. The donations occurred several months before Del Col sent the allegedly extortionate letter, Mollen adds. In a court filing, DTC wrote that it is implausible that Dis-
The Players
RICHArD FrIEDMAN Partner at McKenna Long & Aldridge, counsel for DTC.
SCOTT MOLLEN Partner at Herrick, Feinstein, counsel for DTC.
KATHLEEN RICE District attorney for Nassau County, N.Y. Her office conducted a sting operation targeting Doukas and Del Col, but their subsequent extortion indictment was thrown out on appeal. (A spokesman for Rice denied the allegations at the time, and her office declined to provide further comment.) CLAUDIO BALLArD: A software engineer who founded DTC in 1998. He holds patents on technology that allows banks to store digital copies of personal checks. RObErT DEL COL: Solo practitioner in Smithtown, N.Y., who has brought two major suits against DTC.
PETER KRAMER/NBC NEWSWIRE (kATHLEEn RIcE)
KEITH DELUCIA: DTCs CEO. He brought Michael Trimarco to the firm. MICHAEL TrIMArCO: A former DTC employee, Del Col represents him in a breach of contract suit against the company. TED DOUkAs: A real estate developer on Long Island. Del Col represents him in a suit alleging he is part owner of Ballards patents.
102
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BUSINESS LITIGATION
motion to dismiss in 2012, though a judge dismissed some trict Attorney Rice would accept small, previously made of Del Cols legal theories. The suit is now in discovery. contributions as a bribe. Mollen says that since all allegations are presumed true The Trimarco case culminated in a bench trial in 2013. during the pleading stage, its no surprise that the judge The New York judge assigned to the case, Emily Pines, kept the case alive. Del Col, however, told sibling publicascheduled a 41-day trial over the course of 10 months. tion New York Law Journal that an overwhelming majorAccording to Friedman, DTCs lawyer at McKenna ity of cases like this do not survive a motion to dismiss. Long, Trimarco would occasionally scoff at the testimony The attorney deceit case against Del Col is also pendfrom witnesses, speak directly to the judge, and demand ing. That case relates to a motion Del Col filed in January that his lawyer ask a question. 2011, in which he affirmed under oath that DTC was fleeing Trimarco always thinks hes the smartest guy in the the jurisdiction of New York and trying to shield its assets room. says Friedman. I think it always bothered him that from Trimarco. The next day, a judge issued a so-called ex Keith Delucia, who only obtained a GED after dropping out parte temporary restraining order (TRO) that prohibited of high school, engineered the success of a company that DTC from disposing of assets. generated hundreds of millions of dollars in licensing revenue, while Mr. Trimarco, not withstanding all of his impressive academic credentials, had not. Things got testy between the DEL COL ANGRILY TOLd FRIEdMAN not to stand near lawyers, trial transcripts show. At one point during the trial, him. Hes like, breathing in my ear, Del Col Del Col angrily told Friedman not to stand near him. Hes, said, according to a court stenographer. THE LAST like, breathing in my ear, Del GUY THAT dId THAT TO ME GOT cLIPPEd. Col said, according to a court stenographer. The last guy that did that to me got clipped. After Friedman lodged a series of objections to Del Cols questioning of a witness, Del Col said: Now well go to the DTC didnt know about Del Cols motion. Del Col used Rich Friedman School of Law. I dont think so. a rule that allows him not to notify his opponent if doing In May 2013, while the Trimarco trial was unfolding, a so would further obstruct and impair the ability to recover. different judge dismissed Doukas case on statute of limitaMollen says he was astonished by Del Cols conduct. tions grounds. According to Mollen, he had spoken with Del Col the night Del Col sustained another setback in October 2013, before Del Col filed the emergency motion. If a company is when Judge Pines returned her verdict in the Trimarco represented by counsel in New York, its hard to claim that case. Siding with Friedman and Mollen, Pines rejected Triits fleeing the jurisdiction, Mollen argues. In Mollens view, marcos breach of contract claim. She concluded that DTC Del Col knew from his work in the Trimarco case that DTC could avail itself of the so-called faithless servant doctrine, had moved its headquarters to Plano, Texas, in 2006 but still a seldom-invoked New York legal doctrine that holds that maintained a presence in New York. employees who try to undermine their employer arent DTC got a boost in July 2012, when New York trial judge entitled to promised compensation. Trimarco became John Jones Jr. refused to grant Del Cols motion for summary angry and secretly attempted to procure the business judgment. Del Col has not established that at the time he for himself, Pines wrote. The contemporaneous emails filed the ex parte application for a TRO he had reason to describe Trimarcos plans in detail. Del Col filed a notice believe DataTreasury had fled or was fleeing the jurisdicof appeal in the Trimarco case on Jan. 18. tion. Instead, the admissible evidence establishes that DataI dont agree with the courts interpretation of the faithTreasury was represented by counsel, Jones wrote. less servant doctrine, Del Col told sibling publication the DTCs lawyers say theyd like to see Del Col punished. Litigation Daily in November. According to Del Col, TriI think that lawyers that engage in misrepresentations to marcos allegedly disloyal conduct occurred after his right the court should be ordered to pay sanctions. Friedman to the stock split had vested, and the doctrine cant be used says. to retroactively deprive someone of their compensation. No doubt, Del Col feels the same way about Friedman and Mollen. In his complaint in the civil case, he accused DTC and its lawyers of engaging in shocking, disreputable WHILE THE UNDERLYING OwNERSHIP SPAT is likely comand illegal practices. ing to a close, Mollen and Friedmans battle with Del Col One wonders if DTC misses the days when its critics is far from over. Del Cols pay-to-prosecute case against were content just to call it a patent troll. DTC, Friedman, and District Attorney Rice survived a
104
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Toyota Distributors, LLC Lung Transplant Foundation
Ethanol production from citrus waste through limonene reduction Mercantil Commercebank Royal Caribbean FCC Environmental Southeast Latino NextEra Gulfstream Media Group
Thieno-pyridine derivatives as LOS ANGELES
Frequency-domain
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April 2014
OUTBOX
4 2014
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INTERVIEW PATRIcK mURcK
ReAL LAW IN A VIrTUAL WorLD

General Counsel The Bitcoin Foundation
[ BY MARLISSE SILVER SWEENEY ]
WHEN PATRIcK MURcK TOOK THE LSAT IN 2002 ON A DARE FROm
his wife, he could barely imagine being a lawyer, never mind the chief one at (and a founding member of) The Bitcoin Foundation in Washington, D.C. Indeed, back then the worlds most popular and well-known form of virtual currency likely wasnt even a string of code in the eye of its anonymous creator. After law school, Murck spent three years at D.C.s Fletcher, Heald & Hildreth. Then, in the middle of the recession, he and his wife headed to Seattle, where he took a job at BigDoor, a startup company interested in virtual economies. It was there that Murck, now 38, started on his path to becoming an expert in the practice of emerging payment law. Bitcoin has had a turbulent run these past months. From high-profile arrests, including that of Charlie Shrem, another founding member, to the possible collapse of the most prominent Bitcoin exchangewhose chief executive, like Shrem, resigned from the foundationthe issues are as fast-changing as the valuation of the currency, and are keeping this GC, who fittingly works virtually from Seattle, pretty busy.
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CORPORATE COUNSEL: How do you explain Bitcoin? PATRIcK MURcK: Bitcoin solves an age-old problem in com-
puter science: How do you have a public, distributed ledger that people can transact on safely and securelywithout the threat of somebody counterfeiting transactions or doublespending? Its like email for asset management.
CC: The mission of the foundation is to standardize, protect and promote Bitcoin. What does this mean in practice? PM: We provide financial support to the developers who are actually writing the code. Prior to the foundation, there was no compensation structure for them. We issue grants to people who want to advance the technology. And were building a public policy platformwhich has been mainly my role. CC: Ross William Ulbricht was recently charged with a variety of offenses for the Silk Road, a black-market website that sold drugs, computer hacking services and forged documents using Bitcoin. What do you think of the fact that the currency has been used for illicit purposes? PM: Operations like the Silk Road were a double-edged sword. It moved adoption [of the currency] through the media, but at the same time it gave Bitcoin a bad reputation. One of the most positive events from last year was when authorities took down the Silk Road and arrested the alleged founder. The price of Bitcoin shot up.
CC: And the (former) vice chair, 24-year-old Shrem, was charged with conspiring to commit money laundering. Are you involved in this case? PM: None of the actions involved the foundation, and we arent involved in the case. CC: So there have been a lot of negative stories about Bitcoin. What are some of the more positive legal dealings? PM: I feel completely blessed to have had the opportunity to be in the space at all. Its incredibly fast-moving, interesting, novel work and theres nothing that you can ask for as a lawyer more than to know that every day when you wake up, the things that youre going to work on are both completely new and world-changing. CC: Virtual currency was obviously not a course you took at The Catholic University of America, Columbus School of Law. How did you learn the ins and outs? PM: Ive taken the approach: Move fast, be thoughtful, have a plan and learn constantly.
AMANDA KOSTER
CC: Are you paid in Bitcoin? PM: One hundred percent of my salary is paid in Bitcoin. But
that doesnt mean I hold everything in Bitcoin because I have to pay my mortgage, and they dont yet take Bitcoin.
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