Advocacy

DON’T SUE AFTER READING THIS: ACC files California amicus brief supporting employment arbitration

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Sorry to do this to you. But take the words in the next sentence, and sing them to the song from Barney:

“I sue you, you sue me, we live in court and pay money.”

First, please don’t sue us for implanting the Barney song into your head — it’ll go away in a week or so. Second, you’re maybe thinking that spending time with Barney sounds like a lot more fun than living in court and paying money to lawyers.

Correct! That’s how much people and companies hate litigation. And that’s why in-house counsel encourage arbitration, even before disputes get going. No one wants to waste time and money on lawyers and courtrooms. That’s especially true when it comes to employment disputes. According to one study, in-house counsel use pre-dispute arbitration in employment matters more than in anything else.

Well, it’s not true that nobody likes litigation. The lawyers who get paid to litigate like it. So it’s not surprising that there’s a case out in California trying to poke holes into an arbitration agreement. That shouldn’t happen. The U.S. Supreme Court back in 2011 shut down one attempt to do that, saying that under the Federal Arbitration Act, California can’t use its laws on unconscionability to wiggle out of an arbitration contract. But some lawyers are trying again, this time saying that other California laws, known as a “private attorney general statute,” should allow an employee to effectively join a class action even when the arbitration agreement prohibits that. The case, in the California Supreme Court, is Iskanian v. CLS Transportation.

ACC’s brief essentially says that in-house counsel use arbitration because it’s so much more efficient than litigation — it’s cheaper, and it takes less time. That’s what one study after another has shown. It’s what the U.S. Supreme Court has pointed out in a long string of cases. And it’s why Congress passed the Federal Arbitration Act in the first place.

The brief also points out that California is itself a pretty big place where a whole lot of companies do business. If lawyers can’t count on arbitration agreements working there, they’ll need to draft multiple versions of all their arbitration agreements, one for California and one for everywhere else in the US. In addition, if the California Supreme Court provides back-door exits from arbitration, other states will probably try to follow suit.

Finally, the brief points out that the Federal Arbitration Act gets its power from the Supremacy Clause of the U.S. Constitution. If the California Supreme Court starts to weaken the constitutional protection of this one federal law, in-house counsel might well see the fallout in a whole lot of other areas where they rely on the Supremacy Clause.

And, while we didn’t put this in the brief, Barney’s never seemed like the litigious sort, anyway. Definitely an alternate dispute resolution dinosaur if there ever was one.

— Evan Schultz

 

 

The SEC’s Division of Corporate Finance meets with ACC members

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Guest blogger:  Lily Hughes is VP & Associate General Counsel of Ingram Micro Inc., a Fortune 100 global leader in IT distribution, mobile device lifecycle services and logistics solutions.  Lily advises the company’s senior executives and business teams on corporate securities and regulatory requirements, corporate governance, finance & treasury matters, investor relations and communications, tax, executive compensation, mergers & acquisitions, equity plans, and strategic vendor and customer agreements.

Even without a permanent director, the Securities and Exchange Commission’s Division of Corporate Finance is clear on its priorities and the work it plans to finish.  On Friday, May 10, 2013, ACC Advocacy and the Corporate and Securities Law Committee hosted our annual ACC-members only meeting with the Division.

Acting Director Lona Nallengara, his deputy directors and other key staff had a robust dialogue with members on a wide range of topics.  These included the work of the Office of the Whistleblower, credit rating agencies, conflict minerals, pledging and hedging, CEO to employee pay ratios, institutional shareholder advisory firms, 10b5-1 plans, the Iran notice and smaller reporting companies, among other topics.

From the discussion, it was clear that, under the leadership of new SEC Chair Mary Jo White, the Division is focused on completing its rulemaking mandates under the Jumpstart Our Businesses Startup Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Members found the event exceptionally valuable for networking, peer learning, and of course for access to SEC staff leadership.  Special thanks to Alston & Bird, the Committee Sponsor for hosting this event and to ACC members John Saia, Bart Wu, Desmond Eppel, and ACC Advocacy for their facilitation.

TASTES WORSE, MORE FILLING: Washington State thinks about making life more difficult for in-house lawyers

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ACC recently wrote a letter to protest something bad. The state of Washington is thinking about changing its rules that apply to in-house counsel. It may increase the hassle for Washington lawyers who work in-house and whose law licenses come from elsewhere. And it may charge for the privilege, to boot. Meaning, the pending proposal is essentially the ethics rules equivalent of “tastes worse, more filling.”

Specifically, Washington is considering whether to trash one of the best systems in the country for in-house counsel whose licenses come from elsewhere. Right now, the system is pretty perfect — lawyers who get hired to work in-house in Washington, and who have already passed for the bar elsewhere, just need to show up and work. That’s it — no registration, no background checks, no fees, no friction.

That’s precisely the model that ACC has advocated for years. In-house lawyers work all over the place − in different states and in different countries. They move in and out of spots where their clients operate. They handle deals and even litigation in far-flung spots from their home offices. And they might not know where they’ll need to go or work next. To accommodate those changing demands, in-house counsel need flexibility. The most flexible system we can think of is to treat law licenses like drivers’ licenses. If you pass the driving test in one state in the US, you can travel all over the country. Why? Because roads go everywhere. Same thing should apply to in-house counsel. In-house work doesn’t screech to a halt at the state line.

But now Washington wants to hit the brakes. The state’s supreme court is considering a proposal to force these in-house counsel to both register and pay. We protested last year the Washington State Bar Association came up the proposal. But the proposal didn’t die, and we protested again last week to the Washington Supreme Court.

The proposal has other problems, too:

— It would exempt “temporary” work from the registration requirement, but never defines the term. That means in-house counsel risk stepping over an invisible line that could lead to serious sanctions.

— It would give registered in-house counsel only 90-days to find a new job after leaving their old one. In today’s job market, it often takes much longer to get new employment — but in-house counsel would need to go through the hassle and pay the fees all over again.

— It would require in-house counsel to use special business cards and letterhead, which risks making in-house counsel look like second-class citizens.

— It wouldn’t allow registered in-house counsel to appear in court without first going through the standard pro hac vice rigamarole.

— And the proposal would do nothing to make it easier for registered in-house counsel to practice pro bono work.

We’re all for thoughtful rules changes. But here, there’s no evidence at all that the current system has caused any problems.  And there’s certainly no evidence to support the specific changes in the proposal.

But if Washington really wants to change its rules, then how about this: take the current show-up-and-work system and EXPAND it, to also include pro bono work. That’s a win-win, for in-house lawyers and for all the people and organizations who need legal aid but can’t afford it. That’s a proposal we’d be thrilled to support.

–Evan Schultz

Progress on Right to Practice Rolls On, This Time Stopping in Illinois

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Of all the issues on which ACC advocates, which one is the easiest to rally the support of our Chief Legal Officer members? Arguably, the right to practice pro bono.  As devoted readers of this page surely know, one of ACC’s highest advocacy priorities is to promote the right and ability of in-house counsel to provide pro bono service in their communities, regardless of where they are licensed.  A number of states are working to make it easier for in-house counsel to give back by amending their rules of practice to allow registered house counsel to provide such services.  This helps fulfill a great need for access to justice among the legally underserved.

This week, Illinois moved to the head of the class by implementing a new rule that allows registered house counsel to provide pro bono services without the requirement to work under the supervision of attorneys with Illinois law licenses or of pre-approved legal aid organizations.  This change positions Illinois as a national leader on in-house right to practice pro bono.  ACC and its Chicago Chapter filed a letter in support of the rule changes in early March.  Adding significantly to the impact of the letter was the support of 61 Illinois Chief Legal Officers from companies of all sizes, who lent their names to the effort along with ACC headquarters and Chapter leaders. Click here to read the text of the new rule.  ACC’s press release on the Illinois development is here.

With all the talk about “big, bad corporations” these days, the general public might be surprised to learn of the substantial support and resources many companies devote to providing access to justice for the legally underserved.  The leadership of our Chief Legal Officer members has been critical in moving this issue forward and is one on which they readily step up to lead.  In addition to Illinois, ACC has filed similar letters of support in Florida, Minnesota, and with the Conference of Chief Justices, notably with the signatures of 339 General Counsel.

ACC and its members will continue to work to move this important issue forward and the leadership of our Chief Legal Officer members is critical to the continued success of these efforts. To read about a great in-house pro bono program in action, click here to access our March CLO Perspectives interview with IBM’s Bob Weber in which he talks about fostering a spirit of service that allows pro bono to flourish at IBM.

It’s a Buyers’ Market – Let’s Treat It That Way In The Courts

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ACC filed an amicus letter with a federal court in Manhattan on Friday, March 15th, joining a protest against the plaintiffs’ lawyers larding on profit to fees for temp lawyers (also known as contract lawyers).  Just as in a real estate market with an excess of houses for sale, buyers wouldn’t pay more than the “asking price;” no paying client would ever accept marked up fees when there’s a glut of qualified lawyers for hire.  It’s a great opportunity to communicate to the judiciary what we have been pointing out since launching the ACC Value Challenge in 2008 – that there’s a better way.  Legal fees can be set much the same way they are in other professions, balancing the true cost of service delivery and value to the client.

And though the balance of power has shifted to in-house counsel, the movement to value-based relationships between inside and outside counsel has been a collaborative one. Those honored as ACC Value Champions include outside counsel who have worked with their clients to reduce spending, improve predictability and achieve better legal outcomes – very often through value-focused approaches to fees and staffing matters.   And law firms as well as law departments contribute practical resources on ways to improve value in legal spending to the ACC Value Challenge resource library, which is accessible by all seeking guidance and sample tactics (ACC membership is not required).  And several times a year, law firm and law department executives come together for workshops to build their “value muscles” through business school style case exercises applying value-based fees as well as project and process management tools to learn how to work together more efficiently and effectively.  Put simply, the idea is to make sure that clients get the predictability they need, and plenty of added-value input from their outside counsel, while law firms still achieve a healthy profit – the proverbial “win-win.”

When the over-supply in the legal market has subsided, value-based fees will not cede the considerable ground gained relative to the use of hourly-based fees.  Why?  Because clients want to buy high quality legal services at a fair price, not hours (and certainly not hours at rates that are marked up by orders of magnitude).  And because suppliers of legal counsel prefer to be trusted advisors who are consulted early and often, not as seldom as possible because it would start the hourly clock ticking.  It’s a more satisfying way of practicing law.