Keeping Company Secrets - James Boutrous Interview
May 1, 2009 | Filed Under Litigation, Unplugged - Audio
Many companies are consolidating operations and reducing headcount. Unfortunately, this difficult process can be made even more challenging as some employees depart with more than a severance check.
Today we have an interview on this subject with James Boutrous of the Butzel Long firm as the Wired GC goes:
James Boutrous
Butzel Long
Just press on the far left arrow to listen:
Time: 11:40
This subject, and others, will be addressed in greater detail at next week’s SuperConference in Chicago; program and registration information for this offering from Inside Counsel is available here.
William Lerach, Without Contingencies
March 6, 2009 | Filed Under Litigation, Regulation
The Daily Beast was able to sneak out a jailhouse letter from the former class-action lawyer William Lerach on how the government could go after alleged excessive compensation on Wall Street.
Even from behind bars, Mr. Lerach can be ingratiating at the highest levels:
Were I free and still able to practice law, I could propose this strategy to President Obama—who, as a Harvard Law School graduate, would “get it.”
Is Mr. Lerach hard at work on his next magnum opus?
(Source)
Private Equity and Litigation
January 8, 2008 | Filed Under Litigation
The rise of private equity equity has been a boon to law firms. Especially deal lawyers. When deals go awry, the PE crowd doesn’t doesn’t hesitate to move from the boardroom to the courtroom. The recent fast track litigation between Cerberus and United Rental demonstrates that.
But with private equity, there is always the discipline of calculation. The recent settlement of the proposed Blackstone-PHH acquistion shows clients with a lot of money still don’t like paying lawyers if the return isn’t right.
The Financial Times has more here (reg req $$), explaining why PHH’s changed fortunes (owing to market conditions and available financing) made it a no-go. The FT has a trenchant observation which captures how savvy business clients look at major litigation:
Blackstone’s decision means that there will not be a long drawn out legal battle with all the uncertainty and expense that entails.
I bet there will be more settlements like this. I termed this phenomenon “Litigation is Revealed as a Failure, not a Strategy.” It’s #3 in “The Wired GC Legal Top 10 for 2008.”
I promise to stop flogging that report if you subscribe here so I can send you a copy.
Dust Off That D&O Policy
November 28, 2007 | Filed Under Litigation, Governance
Whenever the business press writes about D&O insurance, I could always count on getting a call from a covered person. Or one who thought they were.
An example is this article from the Globe & Mail in Canada. While the focus is on lawsuits brought by the former Nortel Networks CEO and CFO, who are seeking coverage for defense from civil enforcement actions, there is also mention of lower-level officers who are struggling against mounting legal bills.
Consider former Nortel assistant controller MaryAnne Poland, who had her defense cost coverage terminated 10 months after leaving Nortel in 2005:
According to a motion filed by Ms. Poland in a New York district court earlier this month, Nortel was allegedly urged by its U.S. adviser to cut off legal payments to its ousted officials as a gesture of co-operation with the Washington-based staff of the SEC. Weeks after Ms. Poland dismissed her lawyer, her motion says, she and her three children and husband were detained by U.S. customs officials for an hour and a half before boarding a flight for a Florida holiday.
More officers are going to read these stories closely and start asking questions. While nearly all company bylaws require the purchase of D&O insurance to cover officers and directors against defined legal costs and liability, the reality of growing pressure from regulators pursuing enforcement actions makes it expedient for the “new regime” at the company to turn off the faucet before a determination of liability outside the scope of coverage.
One result? Individual D&O policies, according to Barry Reiter, a partner with Bennett Jones LLP:
As a result of the uncertainty, a growing number of executives are demanding individual D&O insurance contracts with their employers. Mr. Reiter estimates that today about 50 per cent of public company officials are protected by individual contracts.
A prudent practice for the public-company GC would involve seeking counsel on D&O coverage issues from experts other than the policy broker. They are sometimes known for explaining coverage broadly before policy inception or renewal.
But when the government knocks on the door, the same broker is not always so good about returning calls.
For Want of a Good Lawyer
August 12, 2007 | Filed Under Litigation, In the News
The Sunday New York Times profiles the litigation against Facebook founder Mark Zuckerberg by the founders of ConnectU, another social networking site. Mr. Zuckerberg allegedly did some work for ConnectU at prior to starting Facebook. Brothers Tyler and Cameron Winkelvoss claim Facebook as their own, while ConnectU founders (in the other sense of the term).
Unfortunately, the Brothers Winklevoss didn’t exactly put their ducks in a row at the time:
Here are the facts that are not disputed: In 2002, when the Winklevoss brothers were juniors at Harvard, they conceived what was initially called the HarvardConnection, which was to be a social network for the college. In November 2003, they asked Mr. Zuckerberg, who was studying computer science at Harvard, to develop the site’s software and database, promising to compensate him later if the venture prospered.
The brothers contend that Mr. Zuckerberg “procrastinated” about finishing up coding to “gain a competitive advantage.” The judge is not amused:
At a hearing on July 25, he scolded John F. Hornick, ConnectU’s lawyer, over what the judge saw as his inability to provide documentary evidence, saying, “Dorm-room chitchat does not make a contract.” He gave ConnectU two weeks to prepare a better case.
One wonders if the situation was reversed, and ConnectU wildly successful, would the Brothers Winklevoss cut Mr. Zuckerberg into the venture absent an agreement to do so?
I have seen time and time again otherwise bright entrepreneurs feel like they can do their own legal work with forms off the InterWeb. They either pick the wrong form, don’t respect it in any event, and then wonder why things don’t work out when they start to get some traction.
The worst part is when they give equity with no rhyme or reason, handing out shares like potato chips at a frat house kegger.
Lawyers who know how to counsel start-ups can be expensive. Wannabe entrepreneurs who skip this step in the process can learn that that the alternative to a few legal bills is way more expensive.
Check out ConnectU, by the way. Looks like the brothers didn’t spend much on a web designer, either.
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