CCBJ March - April 2021

Corporate Counsel Business Journal March  April 2021

VOLUME 29, NUMBER 2

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Corporate Counsel Business Journal March  April 2021

VOLUME 29, NUMBER 2

Designing a Deep and High-Performing Bench GEORGIA INSTITUTE OF TECHNOLOGY'S LING-LING NIE SHARES HER INSIGHTS ON LEADERSHIP, INFLUENCE AND TALENT DEVELOPMENT

INSIDE

ALSPalooza:

Not So Alternative No More

Change is in the Air:

What Employers Should Expect Under the Biden Administration

PPP Fraud Compliance: The Best Payroll Protection A Company Can Have

Keeping Pace with Ever-Evolving Intellectual Property Disputes

Expectations For the Legal Industry Moving Forward

AT THE HEART OF BUSINESS® Uncommon value for clients who shape our everyday lives.

ATLANTA CALIFORNIA CHICAGO DELAWARE INDIANA MICHIGAN MINNEAPOLIS NEW YORK OHIO RALEIGH SALT LAKE CITY TEXAS WASHINGTON, D.C. BTLAW.COM B

JANUARY • FEBRUARY 2021

In This Issue LAW BUSINESS MEDIA

Kristin Calve

EDITOR & PUBLISHER

Kimberly Fine

MANAGING DIRECTOR PROGRAMMING

AT THE TABLE . . . . . . . . . . . . . . . . . . . 2

Developing a Deep Bench with Diversity, Adept Communication Skills and Integrity

Kristin Calve

Rachel Dwyer

FRONT . . . . . . . . . . . . . . . . . . . . . . . . . 7

GRAPHIC DESIGNER

Neil Signore

SVP & MANAGING DIRECTOR OF EVENTS

Lainie Geary

DIRECTOR OF CLIENT SERVICES

Amy Lemel

DIRECTOR OF CLIENT SERVICES

Jennifer Coniglio VP FOR EVENTS & SPECIAL PROJECTS

Matthew Tortora

SENIOR DATABASE MANAGER

Pat Hanelt

OFFICE ADMINISTRATOR

PULSE . . . . . . . . . . . . . . . . . . . . . . . . .13 13

Change is in the Air: What Employers Should Expect Under the Biden Administration

37 New Praise, and Pressure,

For the Pharma Industry

Amy Fix

40 Navigating the Complex Relationship

Between the U.S. and China Tatman Savio and Clete Willems

47 The Next Generation of

ESG Disclosure Consumers

Aaron Flynn, Allison Wood and Katherine DeLuca

51 Reckoning with the Size, Scope

And Power of Social Media Giants

Bob Fay

William C. Boak, Esq. and Micah T. Saul, Esq.

17 Representing Amici Curiae In High-Profile Appeals

Larry Ebner 20 A BRAVE NEW WORLD: Top 10 Topics for Directors in 2021

Akin Gump Strauss Hauer & Feld LLP

Rob Williams

23 New Developments in Emerging Coverage Disputes

Robert Chesler, Nicholas Insua

Taylor Highbloom

WRITER

VOLUME 29, NUMBER 2

Dylan Shepard

EDITORIAL ASSISTANT

MARCH  APRIL 2021

and John Lacey, Jr.

INTELLECTUAL PROPERTY . . . . . . 55 55 Keeping Pace with Ever-Evolving Intellectual Property Disputes

Betty Chen 59 Protecting Your Company’s IP: Winning Strategies in Changing Times

Rachel Elsby

OPS . . . . . . . . . . . . . . . . . . . . . . . . . . . .61

SOCIAL MEDIA

28 Using Data to Help Companies And Law Firms Win Big

Karl Harris POSTMASTER: Please send address changes to Corporate Counsel Business Journal, 104 Old Kings Hwy N., Darien, CT 06820; by emailing info@ccbjournal.com; or by calling 844-889-8822.

61 Expectations For the Legal Industry

Moving Forward

John Paransky

IDEAS . . . . . . . . . . . . . . . . . . . . . . . . . .31

64 Elevating the Role of Contracts

Within the Enterprise

CORPORATE COUNSEL BUSINESS JOURNAL (ISSN: 1073-3000), January/ February 2021, volume 29, number 1.

Published bimonthly by Law Business Media, 104 Old Kings Hwy N, Darien, CT 06820. Subscription price: $110 a year.

Periodical postage paid at Darien, CT, and additional mailing offices.

31 PPP Fraud Compliance: The Best Payroll

Protection A Company Can Have

Sarah Hyser-Staub, David Freed

68 New Law Leverages Nontraditional

Approaches to Improve Outcomes

The material in this publication contains general information, is not intended to provide legal advice and should not be relied on to govern action in particular circumstances. The sources of material contained in this publication are responsible for such material, and any views or opinions expressed are solely those of the source.

35 A Primer on RWI Coverage Scope

and James Clancy

James Grayer

Eric Laughlin

Robin Snasdell

Kristin Calve At the Table

Developing a Deep Bench with Diversity, Adept Communication Skills and Integrity

 Ling-Ling Nie serves as general counsel and vice president for ethics and compliance at the Georgia Institute of Technology, where she serves as chief legal counsel for the Institute and is a member of the President’s Cabinet. Here, Ms. Nie discusses her approach to her leadership style, the importance of diversity of experience, gender and race within your team and her hopes for the future of the legal profession.

CCBJ: What led you to your current role with Georgia Institute of Technology?

Ling-Ling Nie: A few years ago, when I was the chief compliance officer at Panasonic, I happened to be at the right place and at the right time in my career when Georgia Tech was searching for a general counsel.

I had never thought about working for a university before, but when I learned what they were looking for,

elevated the legal function as a critical component of

it became a really exciting opportunity. The president

business operations, and wanted to bring someone on

who hired me—he's since retired—wanted to build out

board who could set a new vision for the team as a

a compliance program at Georgia Tech that was based

high value-add, strategic partner.

upon what you see in the corporate world.

This challenge really piqued my interest from a professional He also wanted to develop a best-in-class legal

perspective, and when he explained that he was willing to

department that echoed what you might see in some

make the necessary investment to achieve that, I accepted

of the most respected companies in the world. He had

the role. It’s been a really rewarding two years of intense

recently completed an internal reorganization, which

learning and growth, and I'm enjoying it every day.

2

MARCH • APRIL 2021

with me as I moved on in my career journey, and I try to

I value diversity in the broadest sense – race and gender diversity are incredibly important, and so are things like diversity of experience and thought.

Tell us about your leadership style and who and what has influenced it.

I think the greatest professional influence on my leadership style has been Damien Atkins. He was my mentor while I was with Panasonic and also the general counsel during the majority of my time there. Even after he moved on to other roles, he continued to be someone who

be that type of leader to the many talented professionals who are currently on my team.

What qualities do you look for when you're hiring new people for your team?

I value diversity in the broadest sense—race and gender diversity are incredibly important, and so are things like diversity of experience and thought.

I want a team of people who have come from different types of working environments, like law firms, in-house organizations, government, and nonprofits, as well as different types of industries. I have found that bringing

was always in my corner and who invested valuable time

together professionals with a wide range of experiences

in coaching me and teaching me really effective mental

and perspectives allows us to find new and fresh ways of

performance skills I would need to help me be at my best.

overcoming challenges and getting the job done. So, when I'm looking at potential new hires, I look at where they've

He is also someone who cares about the people on his

worked and what problems they have solved, and I try to

team. At Panasonic, we weren't attorneys who were just

put together a team that collectively has a assortment of

there to do the work—we were human beings who had lives, who had outside interests, who had families, and he had a sincere curiosity about learning all those details.

And when someone genuinely has an interest in you as a person, you just want to do your best every day in the job.

It really motivates you.

He is also the type of leader who will give you the runway to do your job. He empowered everyone who

unique experiences and skill sets.

On an individual level, I look for people who are strong communicators. Specifically, I value people who can take a complicated problem and bring clarity to it by just putting it in really simple terms. And that's really important when you're an in-house lawyer—to be able to communicate in plain language with your clients.

worked for him so that we had the confidence to go

It’s actually a very difficult skill and one that people

forward and solve problems on our own and make

often assume they have, but when asked to do it, it can

decisions on our own. These are things that I've taken

be quite challenging.

CORPORATE COUNSEL BUSINESS JOURNAL

3

I also look for people who have good judgment and who can size up a situation quickly and make sound recommendations, and who also know when to involve others on the team or myself, if it requires that level of collective attention.

Integrity is also very important. I do think the legal

a virtual event brought to you by a virtual event brought to you by

department should be a model for the company in terms of ethics and integrity. It's important that we demonstrate that every day in the way we act and the

a virtual event brought to you by

things that we do.

Join leading professionals for in-depth discussion about the next generation of legal technology.

And I also look for people who have grit—someone who's

For In-House and Law Firm Professionals, use code: CCBJMAG21

not afraid of hard work and will utilize all the resources at their disposal to achieve the outcome that they’re trying to achieve. This high level of perseverance and follow-through is not something you find in everybody, but when you do find someone who has that quality, it's quite incredible, and it inspires the broader team as well.

Overall, I look at a team as a cohesive unit. You need to have the right people in the right positions, and they have to have the right chemistry and be able to relate to each other and have complementary skills.

REGISTER TODAY! elitelegaltechnologyleaders 2021.sched.com

What's the best career advice you've received?

I happened to be working at the U.S. Department of the Treasury during the financial crisis, and one of the privileges of having worked there during that time was interacting with some of the brightest minds from Wall Street who were lending their expertise to help our nation reset our economy.

4

MARCH • APRIL 2021

NETWORK The participants in the CCBJ Network demonstrate, through their many contributions, their unwavering commitment to the advancement and success of corporate law departments. The engagement and support of these “partners of corporate counsel” assure we continue to develop and distribute the news and information this unique and sophisticated audience relies on to meet the evolving legal and business needs of their organizations.

Strategic Partners American Arbitration Association

The pandemic has created a more empathetic environment where it is more acceptable to speak about these vulnerabilities openly.

Akin Gump Strauss Hauer & Feld LLP Barnes & Thornburg Clifford Chance H5 Jones Day

There was one executive in particular who shared his approach to his career, which was to treat it the same way as a financial portfolio. And he found that the key to a fulfilling, rewarding, interesting career is to diversify.

He encouraged me to be curious and to move across industries so that I would always be challenging myself and developing the depth of knowledge and life experience that comes with moving out of your comfort zone.

Are there any changes that you're hoping to see within the profession?

I'd like to see increased awareness and action to address the enormous pressure that attorneys face every day. When I began my legal career, a judge told me that lawyers suffer from the highest rates of substance abuse and depression among professionals, largely due to the tremendous stress of their roles.

McGuireWoods LLP McNees Wallace & Nurick LLC National Association of Corporate Directors (NACD) Nuix Weil, Gotshal & Manges LLP

Advisors Exterro FRONTEO FTI Consulting iDiscovery Solutions JAMS NAM (National Arbitration and Mediation) OpenText™ Discovery Wolters Kluwer’s ELM Solutions Wolters Kluwer’s Legal & Regulatory Zapproved

The pandemic has heightened this stress, but has also

Contributors

created a more empathetic environment where it is

Anderson Kill Ipro Tech Computershare Logikcull Cornerstone Research Morae Global Fish & Richardson

more acceptable to speak about these vulnerabilities openly, and I hope that the legal community’s response to that will persist into the future and reassure everyone that it is more than ok to want to take better care of their physical and mental health. 

Please help us improve and expand our services to corporate counsel by sharing your ideas with our publisher, Kristin Calve, at 844-889-8822 or kcalve@ccbjournal.com.

CORPORATE COUNSEL BUSINESS JOURNAL

5

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EXHIBIT A

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6

MARCH • APRIL 2021

Front Not So Alternative No More The pandemic has not dampened the enthusiasm of biz-of-law players and pundits for studies and surveys that show Big Law firms winning many battles – sustained revenue and profit growth – but still losing the war for clients. Over the last few months, the focus has been on Alternative Legal Service Providers, or ALSPs. We’re devoting a chunk of Front this issue to explore these unwieldy beasts purportedly eating Big Law’s lunch. There’s no doubt ALSPs have made progress, but their ascendancy seems overstated. The evidence most frequently cited comes from Thomson Reuters’ 2019 and 2021 ALSP reports, which show that ALSPs – including captives, independents, managed services providers, staffing outfits, and the Big 4 – grew from $8-$9 billion to $13-$14 billion from 2015 to 2019.

The ALSP Market: A BIG Tent Big 4

Captives

Independents

Deloitte

Allen & Overy

Cosilio

Axiom

Axiom

EY

Clifford Chance

DTI

Halesbury

Halesbury

KPMG

Eversheds

Integreon

LOD

LOD

PwC

~ 11%

Managed Services

Contract/Staffing

Orrick

KLDiscovery

Special Counsel

Special Counsel

ReedSmith

Mindcrest

Update Legal

Update Legal

WilmerHale

QuisLex

~ 3%

~ 69%

~ 7%

~ 10%

Artificial Lawyer, in a piece entitled, “The Rise + Rise of Legal Process Providers (AKA ALSPs)” cheers on the financial performance of ALSPs. “If you were an investor,” AL writes, “one would look at that growth rate and say, “Wow, this is a market I want to be in.” Maybe. But 60% growth in four years is hardly the stuff of investment legends. They save their wows for tenbaggers – a term coined by Peter Lynch, who managed the Fidelity Magellan Fund from 1977 to 1990 and grew it from $18 million to $19 billion in assets – a 29% average annual rate of return. That’s a tenbagger that will make any investor salivate.

CORPORATE COUNSEL BUSINESS JOURNAL

7

Briefly FTI announces the appointment of Kenneth R. Bernice and Robert Raymond as managing directors in the firm’s Real Estate Solutions industry practice within the Corporate Finance & Restructuring segment.

Jonathan M. Ishee and Janice M. Suchyta, and Andrea Lee Linna join McGuireWoods as partners in the firm's healthcare practice in Houston ad Chicago respectively.

Weil announces that Ackneil M. (Trey) Muldrow, III has joined the firm as a partner in its global Private Equity practice in New York.

Public finance partner, David Eric Reid, joins FisherBroyles in Chicago.

Robyn Maguire is added as a partner in Barnes & Thornburg’s Washington, D.C., office, where she is a member of the firm’s Litigation Department.

NAM (National Arbitration and Mediation) announces the addition of former appellate and Supreme Court justices to its panel of neutrals.

Zapproved and Onna jointly announce a new partnership that will integrate Zapproved’s ZDiscovery with Onna’s Knowledge Integration Platform. iDiscovery Solutions announces the launch of their updated brand identity and website.

BoardEx announces The BoardEx Diversity Network, bringing an added layer of intelligence to the profiles of board members, C-suite leaders, and senior managers across 2 million public and private organizations.

8

MARCH • APRIL 2021

What’s in a Name?

Former U.S. Supreme Court Justice Potter Stewart, attempting to define his test for obscenity in the 1964 case of Jacobellis v. Ohio, uttered one of the most famous lines in Supreme Court history: “I know it when I see it.” Definitions are also an issue for ALSPs. Way back in October 2020 (seems like “a long time ago in a galaxy far, far away”), the trendy legal PR firm Baretz + Brunelle set out to do a study of captive law firm ALSPs. Immediately, they ran into the “I know it when I see it” wall. “The term alternative legal service provider, much like alternative music, is commonly used but lacking a universal definition,” B&B says. So they decided to provide a definition. Easier said than done.

There’s a general fuzziness around who ALSPs are and what ALSPs do. From there, it gets a little convoluted. B+B trots out a two-step analysis, an 8-factor test, and a series of “not this” and “not that” caveats to group toward a universal definition.

First, ALSPs are not pure tech-based constructs (e.g., self-service offerings).

Second, they are not in the bucket of stuff that falls under the larger NewLaw umbrella (e.g., nontraditional pricing or service methods such as AFAs, virtual law firms, LPOs, or contract AI). B+B, which actually cloaks itself in the NewLaw mantle, sums it up: “As we see it, NewLaw encompasses a broad group of entities and innovations of which ALSPs are just a subset.” And that’s just Step 1. Next up is the 8-part multifactor test: Do you rely heavily on technology? Are you focused on process improvement? Is your work informed with data analytics? Do you employ alternative (non-lawyer) staffing? Is your work performed at an offsite service center? Do you maintain a separate P&L? Are your ALSP leaders separate from your law firm’s leaders? Do you use alternative fee arrangements?

Phew! And if that’s not enough, B+B doesn’t consider any of these features “dispositive.” Rather, each one makes it “more likely” your entity is a captive ALSP. Maybe looking at how companies are actually using ALSPs would help.

(See charts, next page.) Or maybe we should take a page out of Justice Stewart’s book. Alternative Legal Service Provider? I know it when I see it.

As part of Team CALIBRE Systems Inc., TangoAlpha3 is awarded a subcontract in support of the Veterans Affairs Transition Assistance Program (VA TAP).

JAMS announces the addition of Hon. Steven E. Kirkland (Former) to its panel.

8-PART MULTI-FACTOR TEST

Has Offsite Service Center Maintains Separate P&L Separate Leadership from Firm Uses Alternative Fee Agreements

Relies Heavily on Technology

STEP 1 HUMANS – NOT JUST TECH

Focuses on Process Improvement

STEP 2

Work Informed by Data Analytics

PASSES THE MULTIFACTOR TEST

Employs Alternative Staffing

Corporate Counsel Business Journal, published by Law Business Media, extends their educational product offerings to include CCBJ Perspectives podcast series.

Weil boosts its private equity and public M&A capability with the hire of Slaughter and May corporate partner Murray Cox. McGuireWoods expands its insurance recovery capabilities with the arrival of partners Anthony Tatum, Shelby Guilbert Jr. and Joseph Englert.

KPMG partners with legal tech company SirionLabs to help in-house legal teams improve the way they manage their contracts.

CURRENTLY USE ALSP

Litigation and Investigation Support

U.S. CORPORATIONS 11%

33% 38% 17%

Legal Research Services

Electronic Discovery Services

35% 34% 29%

Regulatory Risk and Compliance Services Document Review and Coding Services

Brightflag announces new reporting features that provide corporate legal departments with a simple solution for evaluating the qualitative performance of outside counsel.

56%

32% 11%

35% 32%

13% 28% 2016 -

Akin Gump advises on Golar LNG Partners’ $1.9 Billion acquisition by New Fortress Energy.

35% 2018 -

McNees announces it is opening its first office in the Philadelphia area with the hiring of three veteran local attorneys.

2021 -

Hon. Steven M. Gold (Ret.) joins JAMS in New York.

Stephanie Neal joins McGuireWoods as the firm’s chief human resources officer.

FTI announces that Bryan Zumwalt has been named a senior managing director and head of government affairs within the Strategic Communications segment.

CORPORATE COUNSEL BUSINESS JOURNAL

9

Corporate partners, Andrew Geier, Nicholas Isaacson and Kelley Smith join FisherBroyles in Chicago.

Diana Shafter Gliedman, Marshall Gilinsky and Robert D. Chesler, of Anderson Kill, have been named equity shareholders.

FTI announces the appointment of Xochitl Arteaga as a managing director in the firm’s Risk and Investigations practice.

James Grayer is appointed as counsel with Clifford Chance in New York.

Akin Gump advises Vista Credit Partners in financing of Premise Data.

Barnes & Thornburg adds new intellectual property and litigation attorneys to its Dallas, Indianapolis and South Bend offices.

FisherBroyles announces that entertainment and intellectual property attorney Steve Sidman has joined the firm in Atlanta as a partner.

Jess Hunt and Jeffrey Leventhal are appointed to Bodhala’s board of directors.

Dr. Rainer Bizenberger returns to AlixPartners as a managing director.

OpenText™ highlights recently launched OpenText™ Axcelerate™ Investigation platform during Legalweek.

Dentons launchesa new service unit on ESG and Sustainability, dedicated to integrated advice on sustainable finance and investments, corporate governance, environment and energy transition.

Eric L. Nelson is appointed to managing partner with Smith Curie in Atlanta.

SUBMIT YOUR ANNOUNCEMENTS TO editor@ccbjournal.com

10

MARCH • APRIL 2021

Required Reading Too busy to read it all? Try these books, blogs, webcasts, websites and other info resources curated by CCBJ especially for corporate counsel and legal ops professionals.

GLOSSARY: Latham’s Book of Jargon Given that ESG – Environmental, Social & Governance – is the acronym du jour, it’s kind of sad that we need a lexicon to tell us what it all means. Yet we do, and Latham’s Book of Jargon, which the firm has turned into an enduring franchise, is a welcome companion. The firm describes the Book, which is also an app, as an “interactive glossary of acronyms, slang, and terminology.” It launched in March 2012 with Restructuring & Special Situations and now extends across 14 areas ranging from Cryptocurrency & Blockchain to Corporate & Bank Finance. That includes the latest edition, Environmental, Social & Governance, a squishy amalgam of disciplines where an explainer is welcome. Maybe that’s why this edition needed a co-presenter, Rodney Irwin, managing director of the World Business Council for Sustainable Development’s Redefining Value and Education programs. Great stuff.

E-NEWSLETTERS: PinHawk We at CCBJ are excited to have completed our acquisition of PinHawk, a longtime publisher of electronic newsletters for lawyers and beyond. Joe Bookman, founder and guiding spirit behind PinHawk, has assembled a formidable array of editors who oversee the various newsletters, including Librarian News Digest; Law Technology Daily Digest; Leading Law Departments; and Legal Administrator Daily. To give just one small example, check out the short piece about innovation

by Jeff Brandt, editor of Law Technology Daily Digest, showcasing Josh Linkner’s essay, “How Tiny Bubbles Led to a $28 Billion Cost Savings.” Great stuff that’s a little off the beaten path of typical legal tech reporting. Sign up for a free trial of these or any of PinHawk’s more than 30 newsletters at www.PinHawk.com.

Contributors Thanks to the law firms, technology companies, alternative legal service providers, management consultants and other supporters of corporate law departments who share their insights and expertise through the CCBJ network. Your parti­cipation is appreciated.

William Boak practices in the McNees Labor and Employment Practice Group defending employers against claims of discrimination, wage and hour law violations, and breach of contract. He also handles matters to enforce non-compete agreements and other restrictive covenants. In addition, Bill’s experience includes general commercial litigation in which he represented companies and individuals in federal and state courts. P. 13 Betty Chen is a principal at Fish & Richardson P.C. in Silicon Valley, CA, where she regularly handles highstakes and high-profile patent, trade secret, antitrust, breach of contract, and fraud lawsuits, among other matters. P. 55 Robert D. Chesler is a shareholder in the Newark, New Jersey, office of Anderson Kill. He represents policyholders in a broad variety of coverage claims and advises companies with respect to their insurance programs.

Chesler has served as the attorney of record in more than 30 reported insurance decisions. P. 23 James T. Clancy practices in the McNees Litigation and White Collar Defense and Internal Investigations Practice Groups. James is a former assistant U.S. attorney in the Middle District. In that role, he prosecuted a multitude of cases, including a variety of frauds, tax evasion and false reporting, counterfeiting, money laundering, public corruption, child exploitation, threats, and capital murder. P. 31 Katherine DeLuca is a partner with McGuireWoods in their Richmond office. Her practice focuses on compliance with federal securities laws, mergers and acquisitions and corporate governance. She assists public companies with registered offerings of securities and collaborates with large and small public companies on their periodic reporting, proxy solicitations, shareholder communications. P. 47

Larry Ebner serves as executive vice president and general counsel of the Atlantic Legal Foundation, where he is responsible for all aspects of ALF’s nationally renowned amicus curiae (“friend of the court”) program.

Additionally, he ensures that the amicus program fulfills ALF’s overarching mission and strategic objectives. P. 17 Rachel Elsby is a partner with Akin Gump in their Washington, D.C. office. Her practice concentrates on patent litigation and appeals to the Federal Circuit Court of Appeals. She represents clients in a broad range of sectors, with focus on biotechnology, biologics and medical devices. She holds a ph.D. in immunology. P. 59 Bob Fay is the managing director of digital economy at CIGI. The research under his direction assesses and provides policy recommendations for the complex global governance issues arising from digital technologies. He brings to this position extensive experience in macro- and micro-economic research and policy analysis. P. 51 Amy Fix is a partner with Barnes & Thornburg in their Raleigh office. Her clients range from large international pharmaceutical corporations to smaller companies producing innovative drugs and drug products.

She prepares and prosecutes domestic and international patent applications and provides counseling and strategic guidance to build commercially valuable patent portfolios. P. 37 Aaron Flynn is a partner with McGuireWoods in their Washington, D.C. office. He represents utilities, national trade associations, oil and gas companies, and manufacturers in environmental litigation and regulatory matters across the country. He focuses on reducing clients' regulatory burdens under the Clean Air Act in particular. P. 47 David Freed practices in the McNees Litigation and White Collar Defense and Internal Investigations Practice Groups.

David is a former U.S. attorney for the Middle District of Pennsylvania. In that role, David supervised all operations of the office, both civil and criminal. P. 31

James Grayer, counsel with Clifford Chance, has more than 20 years of experience in private practice, and has most recently held an executive position as a representation & warranty insurance underwriter and policy specialist. In private practice, James has acted as counsel to C-suite executives and boards of directors in transactional, contract, compliance, governance and disclosure matters. P. 35 Karl Harris is CEO of Lex Machina, leading their strategy and operations.

Before becoming CEO, Harris led all product development, product strategy and engineering efforts at Lex Machina as CTO and VP of products through Lex Machina’s successful acquisition by LexisNexis. P. 28 Sarah Hyser-Staub practices in the McNees Litigation and White Collar Defense and Internal Investigations Practice Groups. Sarah litigates white collar crime issues and complex commercial disputes. She defends public and private entities in civil rights cases, represents witnesses before the grand jury, conducts internal investigations, and provides guidance on internal corporate compliance. P. 31 Nicholas M. Insua, a shareholder in Anderson Kill's Newark office, represents policyholder clients in catastrophic first-party property damage and business interruption claims and under D&O and E&O policies. He has represented clients under general liability insurance policies for all manners of underlying claims. P. 23 John P. Lacey, Jr. is an attorney practicing in Anderson Kill’s Newark office. He focuses his practice on insurance recovery and corporate litigation. P. 23 Eric Laughlin is CEO of Agiloft. A legal tech and legal services executive, Eric has spent his career helping legal teams modernize their work through use of data, technology, effective process and outsourcing. P. 64

Jonah Paransky is executive vice president and general manager of Wolters Kluwer ELM Solutions. In this role, he is responsible for leading the overall performance and growth strategy of the business unit globally. P. 61 Micah Saul practices in the McNees Labor and Employment Practice Group, where he concentrates on assisting clients through a host of complex issues, including employee discipline and discharge. Micah is well-versed in state and federal statutes, including the ADA, ADEA, FLSA, FMLA, Title VII, PPACA, and wage and hour laws. P. 13 Tatman Savio is a registered foreign lawyer with Akin Gump in their Hong Kong Office. She counsels clients on the extra-territorial impact of U.S. law and policy affecting international trade and business. She also represents clients in U.S. government investigations, internal investigations and compliance matters. P. 40 Robin Snasdell is a managing director with Consilio. He focuses on assisting global companies to improve their business performance by providing strategic consulting, process improvement, change management and technologyrelated solutions to the general counsel and chief compliance officer. P. 68 Clete Willems is a partner with Akin Gump. He advises clients, including investors, trade associations and multinational companies, on international economic law and policy matters.

Willems previously served in the White House as deputy assistant to the president for international economics. P. 40 Allison Wood is a partner with McGuireWoods in their Washington, D.C. office. She is nationally recognized as a leader in the field of environmental law, particularly in the area of climate change. She assists clients with complex and politically charged precedent-setting cases before the U.S. Supreme Court and several Courts of Appeals. P. 47

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Pulse Change is in the Air: What Employers Should Expect Under the Biden Administration WILLIAM C. BOAK, ESQ. AND MICAH T. SAUL, ESQ. MCNEES WALLACE & NURICK LLC  Employers have become accustomed to shifts in

federal labor and employment law during the past several Presidential transitions. Republican administrations tended to favor employer-friendly policies while Democrat administrations took union and worker-friendly stances.

The pendulum has begun to swing away from management in favor of organized labor and workers since the inauguration of President Joe Biden in January. As the landscape continues to evolve under the Biden administration, there are several areas that employers should monitor.

appointee. Robb, who had ten months left on his term, was terminated after he refused to resign. Peter Sung Ohr was tapped by the President to serve as Robb’s replacement. Immediately upon assuming office, the new general counsel rescinded ten general counsel memoranda issued by the Trump-era Board, including GC 20-13, which sought to limit unions’ ability to use neutrality agreements to boost membership. With the announcement, general counsel Ohr promised that additional policy guidance will be issued soon.

demanded the resignation of National Labor Relations

What other changes might employers expect from the Biden-era NLRB? Given that President Biden served as Vice President during the Obama administration, it is reasonable to expect that the Board will look back to restore some of the key labor-friendly policies implemented

Board (NLRB) general counsel, Peter Robb, a Trump

between 2009 and 2017. These include rules regarding

Labor Unions and Collective Bargaining Shortly after taking the oath of office, President Biden

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employer-owned email systems and “quickie elections.”

of discrimination routinely saw those charges dismissed

In the 2019 case Caesars Entertainment, the NLRB reversed

without much (if any) investigation by the commission.

its controversial 2014 Purple Communications decision,

With an increase in funding, that is likely to change.

which held that employees could use company-owned

Presumably, the EEOC will receive a cash injection under

email systems to engage in union and other activities

the Biden administration, and that would mean a larger

protected by the National Labor Relations Act. Caesars

complement of investigators and greater capability of the

effectively put control over company email systems back in

Commission to scrutinize the charges before it.

employers’ hands. A Biden Board is likely to restore purple communications and authorize employee use of company-

Pay data collection is also likely to center stage yet again.

owned email systems to engage in union activity.

In 2016, the EEOC was to begin collecting expanded pay data to monitor whether employers’ pay practices were

Reinstituting so-called “quickie elections” is also expected

discriminatory (a process that was never implemented

to be a priority of the NLRB over the next four years. In 2014

due to repeated litigation). The Trump administration

and 2015, the Board finalized rules that greatly reduced

did away with the practice before its effects were felt by

the time between the date an election petition is filed

employers. Now, the Biden administration could very well

(most petitions are filed by unions seeking to represent

take up the mantle again. If the Commission implements

a business’s employees) and the date of the election. The

similar procedures as those proffered under the Obama

post-petition, pre-election period is key for employers, since

administration, the EEOC would likely use pay data to

it is usually the only time an employer has to present its

raise claims of discrimination based on sex and/or race.

case to employees regarding the question of unionization.

In 2019, the Board promulgated a rule putting the brakes on

Wage and Hour

“quickie elections” and extending election timeframes.

A Biden-era NLRB is likely to reverse the rule (or at least

In the wage and hour arena, several actions by the Biden

significantly revise it) to make election procedures more

administration could significantly affect employers. First,

favorable to unions once again. If the Board takes such

the Biden administration will likely abandon the DOL’s rule

action, employers faced with these elections will be left

for classifying employees and independent contractors under

with little time to make their case before votes are cast.

the Fair Labor Standards Act (FLSA). Whether an individual

Whatever changes come from the NLRB in the next four

is an employee or independent contractor is important

years, expect organized labor to benefit.

because employees are entitled to the FLSA’s minimum wage and overtime protections, while independent contractors

Equal Employment Opportunity

are not. The rule, issued during the final days of the Trump administration, adopts an “economic reality” test to

Part of President Biden’s campaign platform was to

determine whether an individual is economically dependent

increase funding to, and thus the investigative capabilities

on a potential employer for work (an employee) or is in

of, the Equal Employment Opportunity Commission (EEOC).

business for him or herself (independent contractor). The

Over the past four years, the commission’s funding had

rule is perceived as making it easier to classify workers as

been cut and employers who were the subject of a charge

independent contractors and is therefore employer friendly.

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MARCH • APRIL 2021

The Biden administration has already moved swiftly. The

Second, the Biden administration may choose not to

DOL recently proposed delaying the effective date of the

defend the DOL’s joint employer rule, as it was defined

rule from March 8, 2021, to May 7, 2021, which could

under the FLSA in 2020. Joint employer status is

give it time to propose a repeal. Alternatively, President

important because joint employers are jointly and

Biden and his Democratic allies in Congress could invoke

severally liable for payment of all wages, including

the Congressional Review Act to kill the rule. But even

overtime, for all hours worked by the employee for

if the independent contractor rule goes into effect and

any and all such employers. The rule adopted a test for

Congress does not act – and it survives any legal challenge –

joint employment that focuses on the degree of control

the DOL could adopt a new standard to replace it. That

exercised by the putative joint employer.

standard is likely to be modeled on California’s onerous ABC test, which President Biden expressed support for

Several states and the District of Columbia challenged

as a candidate, and which presumes that a worker is an

the rule under the Administrative Procedure Act (APA).

employee unless its three requirements are met. Thus,

In September 2020, a New York federal judge found that

in contrast to the independent contractor rule, the ABC

the rule violated the APA and vacated it. The Trump

test makes it harder to classify workers as independent

administration appealed to the U.S. Court of Appeals for

contractors, meaning more workers would be entitled to

the Second Circuit, but the Biden administration could

minimum wage and overtime compensation.

drop the appeal. Moreover, the Biden DOL could move to CORPORATE COUNSEL BUSINESS JOURNAL

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adopt a broader definition of joint employment, embraced by the former Obama administration, that focuses on whether an employee is economically dependent on the putative joint employer. That test could expose more employers to potential liability under the FLSA. Third, the Protecting the Right to Organize Act (PRO), which President Biden supports, would ban employers from requiring employees to enter into mandatory arbitration agreements in which employees waive or relinquish their right to bring class or collective action claims. Claims under the FLSA and analogous state laws are often pursued as class or collective actions. Consequently, the PRO Act’s ban could open the door to a wave of class and collective action lawsuits that employers may have otherwise

their ability to organize. Moreover, the U.S. Citizenship Act of 2021, which President Biden proposed on his first day in office and which may be known best for providing a pathway to citizenship for undocumented immigrants, would increase penalties for employers of seasonal and migrant workers who violate labor laws. The bill would expand access to “U Visas” to undocumented immigrants who are victims of serious labor violations and cooperate with worker protection agencies. The bill would also protect from deportation workers who suffer retaliation in order to be interviewed by labor agencies.

In the labor and employment law sphere, the winds of change are blowing. Employers will do well to stay informed and ready to adjust in order to weather the coming storm. 

avoided through mandatory individual arbitration.

Fourth, President Biden has proposed reinstating and expanding the emergency paid leave program created under the Families First Coronavirus Response Act (FFCRA) that expired at the end of 2020. The Biden plan would, among other things, extend paid leave requirements to all employers, including employers with more than 500 and fewer than 50 employees who were exempt under the FFCRA; provide over 14 weeks of paid sick and family and medical leave; provide refundable tax credits to employers with fewer than 500 employees to reimburse them for the cost of the leave; and extend the emergency paid leave program to September 30, 2021.

Immigration The Biden administration’s immigration policy is also likely to be protective of worker rights and focus enforcement on employers instead of on workers. For example, President Biden has stated that he would end workplace raids so that concerns over workers’ status do not interfere with 16

MARCH • APRIL 2021

William Boak practices in the McNees Labor and Employment Practice Group defending employers against claims of discrimination, wage and hour law violations, and breach of contract. He also handles matters to enforce non-compete agreements and other restrictive covenants.

Bill’s experience includes general commercial litigation in which he represented companies and individuals in federal and state courts. Reach him at wboak@mcneeslaw.com.

Micah Saul practices in the McNees Labor and Employment Practice Group, where he concentrates on assisting clients through a host of complex issues, including employee discipline and discharge; workplace investigations; audits of employment practices by state and federal agencies; employee/ supervisor training; and discrimination and general defense. Micah is wellversed in state and federal statutes, including the ADA, ADEA, FLSA, FMLA, Title VII, PPACA, and wage and hour laws.

Reach him at msaul@mcneeslaw.com.

Representing Amici Curiae In High-Profile Appeals

 Larry Ebner, executive vice president and general counsel of the Atlantic Legal Foundation, discusses the organization and the important role that it plays by filing amicus curiae, “friend of the court,” briefs in key Supreme Court, federal court of appeals, and state appellate court cases that implicate the foundation’s mission areas.

CCBJ: Tell us a little bit about Atlantic Legal Foundation and its mission.

Larry Ebner: The Atlantic Legal Foundation (ALF), which was established in 1977, is a national, nonprofit, public interest law firm. We advocate for the rule of law through strict adherence to the Constitution’s Bill of Rights, the separation of powers, and principles of limited government and federalism. We also advocate for judicial conservativism, neutrality, and civil justice. Under these broad headings, we have six specific mission areas: individual liberty, free enterprise, protection of property rights, limited and efficient government, sound science in judicial and regulatory proceedings, and school choice.

Our nationally renowned amicus curiae program is the centerpiece of the foundation’s advocacy activities. We file amicus curiae briefs – in other words, friend of the court briefs – in the Supreme Court, federal courts of appeals, and state appellate courts in cases that implicate one or more of our mission areas. Our amicus program is particularly well recognized as the nation’s leading advocate for fostering use of sound science in the courtroom and in regulatory proceedings.

In addition to the amicus program, we publish materials such as our Leveling the Playing Field series, which promotes school choice by providing state-specific

information about charter schools. We’ve published three editions of Leveling the Playing Field for California, we’re currently updating the New York edition, and also have published editions for several other states.

Who are some of the key supporters of ALF, past and present?

Our broad base of supporters encompasses several categories, including foundations, major corporations, nationally and internationally respected law firms, the members of our distinguished Board of Directors and Advisory Council, and other individuals. Our supporters are listed by name in our Annual Reports.

Their support is primarily financial, but because our Board of Directors and Advisory Council includes so many prominent law firm and in-house attorneys, business executives, legal scholars, and scientists, we call upon their expertise to assist us with amicus curiae projects, with our school choice charter school program, and other projects.

Please describe your role as executive vice president and general counsel.

As general background, I’ve been an attorney for almost 50 years. After graduating from Dartmouth College in 1969, I received my law degree from Harvard Law School in 1972.

My first legal position was as an Honors Program attorney in the Civil Division of the U.S. Department of Justice. In 1974, I joined a relatively small law firm in Washington, D.C., which over the years, through mergers and acquisitions, evolved into what is now the world’s largest law firm. I stayed with that firm for 42 years, and headed its appellate litigation practice. In 2016, I decided to depart “Big Law” and launch my own appellate litigation boutique, Capital Appellate Advocacy PLLC. Last summer, the summer of 2020, I was selected by the Atlantic Legal CORPORATE COUNSEL BUSINESS JOURNAL

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Foundation to become its new senior vice president and general counsel, and was elevated to executive vice president and general counsel at the beginning of 2021. I was delighted to enthusiastically accept this important responsibility.

My primary role at the ALF is to be responsible for all aspects of its amicus curiae program. Amicus curiae briefs have become a well-accepted aspect of appellate litigation practice. I am the principal author of the foundation’s amicus briefs, and also monitor federal and state judicial developments in the Supreme Court and around the country to identify potential cases for ALF amicus participation. We also receive a steady stream of amicus support requests from attorneys handling appeals on behalf of clients, including from senior in-house counsel.

I review those requests and help determine the cases in which we’re going to file amicus briefs.

Since its establishment in 1977, the foundation has filed hundreds of amicus briefs on its own behalf, or on behalf of other organizations, prominent scientists, and other individuals. Once we identify a case for ALF amicus support, we strategize, conduct legal research, and then author the amicus brief. I am assisted by Nishani Naidoo, who joined the foundation in 2019 as vice president and associate general counsel. We closely coordinate with the foundation’s long-time chairman and president, Dan Fisk, who consults with the distinguished members of the Board of Directors and Advisory Council to decide which cases we’re going to participate in as amicus curiae.

What would you say ALF’s priorities are for 2021?

First of all, as part of our ongoing mission of conducting, expanding, and promoting our amicus curiae program, we certainly want to continue drawing guidance from our Board of Directors and Advisory Council members. Because of the pandemic, in 2020 the foundation was unable to hold its 18

MARCH • APRIL 2021

annual awards dinner, during which we recognize a distinguished honoree, and in some years, a lifetime achievement honoree, as well. The annual awards dinner is also a major source of revenue for the foundation, so we very much hope that in 2021 we will be able to resume our annual awards dinners. That’s certainly a priority as a key way for raising funds essential to the foundation’s ability to fulfill its mission.

Another priority is upgrading the foundation’s website and updating some of its publications, such as Leveling the Playing Field, which provides labor law and general guidance for charter school leaders in California, New York, and other states.

Since we've spoken about amicus curiae briefs at length, and since that's really the centerpiece of what ALF does, please share more about the function of an amicus brief.

Since we’ve spoken about amicus curiae briefs at length, and since that’s really the centerpiece of what the ALF

they’re handling appeals, and approach us and other orga-

Amicus curiae – “friend of the court” – briefs play an important role in appellate litigation.

nizations for amicus support. But one of the things I’ve tried to do over the years when writing and speaking about amicus briefs is also to get in-house corporate counsel to think about amicus support. Sometimes corporate counsel will seek amicus support from their industry trade associations,

does, I think it’s important for your readers to really understand the function of an amicus brief. It is to provide perspective, legal argumentation, or other information that does not duplicate the legal arguments or information provided by the parties themselves, but which enhances an appellate court’s understanding of a case, and the implications of the rule of law that the court is being asked either to accept or reject. This is why amicus submissions are often very helpful to courts and to parties. They give amici curiae a direct voice in the U.S. Supreme Court and in other appellate courts in cases that involve issues that are important to their businesses and industries. They are an important way for the ALF to participate in cases consistent with its mission, which is to advance the rule of law by advocating for individual liberty, free enterprise, property rights, limited and efficient government, sound science in judicial and regulatory proceedings, and school choice.

as well as from organizations such as the ALF, when their

How can interested parties become involved in supporting ALF?

dation, either by contacting

There are three principal ways that individuals, law firms, corporations, and other organizations can become involved.

One is to visit and use our website, atlanticlegal.org, which is a terrific resource for Supreme Court and other cases in which we have participated as amicus curiae.

Second, we very much would like attorneys, whether they are in-house counsel or outside attorneys, to alert us when they are involved in an appeal that implicates ALF’s mission and in which we may be able to provide amicus support.

Many law firm attorneys already “think amicus” when

company is involved in an appeal. And sometimes they will become aware of other appeals involving legal issues that are important to their companies or industries. It’s important for corporate counsel, when they see cases like that, to think about amicus support and let us know, either directly or through their outside attorneys. On our website, there’s a link to an Amicus Support Request that attorneys can complete and send to us, or they can just contact us directly.

The third thing that interested parties can do to get involved is to provide financial support. They can attend our annual awards dinner next time we have one.

They can make financial contributions to the founchairman and president Dan Fisk or any member of our Board of Directors or Advisory Council, or simply by clicking the donate button on our website.

For additional information about the foundation’s mission and activities, readers should refer to our Annual Reports, which are

Larry Ebner serves as executive vice president & general counsel of the Atlantic Legal Foundation, where he is responsible for all aspects of ALF’s nationally renowned amicus curiae (“friend of the court”) program. In addition to ensuring that the amicus program fulfills ALF’s overarching mission and strategic objectives. Reach him at lawrence.ebner@atlanticlegal.org.

available on our website.  CORPORATE COUNSEL BUSINESS JOURNAL

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A BRAVE NEW WORLD: Top 10 Topics for Directors in 2021 KERRY BERCHEM, DANIEL WALSH, JOHN GOODGAME, JEFFREY KOCHIAN LUCAS TORRES, ALICE HSU, GARRETT DEVRIES, AND FRANKLIN REDDICK AKIN GUMP STRAUSS HAUER & FELD LLP

The world has changed a lot since our 2020 report. A global pandemic; an ongoing reckoning on race, inequality and social justice; a climate crisis; an economic shock; and increased political polarization have created challenging dynamics for

2

companies and boards globally. The role of the

restrictions, but surging infection rates paused

unchartered territory facing businesses in this

directors and management must proactively

area, it is imperative for board members to take

embrace their stewardship roles in this brave new

1

ness operations. Over time, states relaxed these

on a moment’s notice. Given the complexity and

interlocking issues and offers insight on how

The 2021 Georgia Senate runoff

closing or severely restricting nonessential busi-

to emergency state and local orders and pivot

This report delves into these wide-ranging and

2020 ELECTION IMPACT AND ANTICIPATED CHANGES

ity of states implemented “stay at home” orders

reimposed. Companies need to be ready to adapt

ahead is more critical today than ever before.

in style. You can find the in-depth report here.

At the beginning of the pandemic, the vast major-

many reopenings, with business restrictions

board in managing risk and charting the course

world. These excerpts have been edited for length

COVID-19: LABOR IMPLICATIONS

an active role.

3

DIVERSITY AND INCLUSION In today’s workplace, corporate social responsibility has taken center stage and is swiftly becoming a business imperative. Events such as the horrible death of George Floyd have shined a spotlight on racism and implicit bias.

elections resulted in a seismic shift on

While stakeholder requests for diversity infor-

the federal policymaking front, cementing

mation are not new, the pressure is mounting

Democratic control of the Senate with a 50-50

as more and more companies disclose their

divide and Vice President Kamala Harris able

Equal Employment Opportunity data and make

to cast the tie-breaking vote for Democrats. As

public commitments to increase the represen-

a result, Democrats now have unified control

tation of minorities and women. Many compa-

in Washington – winning the White House and

nies are implementing wide-ranging diversity

narrowly securing majorities in the House of

and inclusion programs, often accompanied by

Representatives and Senate.

public proclamations about achieving certain minority representation goals within a set

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While Democrats will be driving the agenda,

timeframe. There is risk in well-intentioned

close margins in the House and Senate will im-

efforts to promote diversity in the workforce,

pact the entire policymaking landscape and likely

which may expose an employer to liability for

will contribute to a robust regulatory agenda.

reverse discrimination.

MARCH • APRIL 2021

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RISING PRESSURE FOR BOARD DIVERSITY 2020 was a difficult year – not least for corporate directors. In addition to safeguarding companies’ financial health, directors were expected to steer their institu-

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STAKEHOLDER GOVERNANCE Corporate boards are tasked with setting the “tone at the top,” overseeing strategic direction, monitoring business developments, overseeing known and newly identified risks and dictating risk tolerance levels. However, in

tions through a slow-burning health and safety

light of the dynamic dislocation of 2020, will

emergency, a rapid lurch to virtual and remote

boards continue to be principally motivated to

work, and a renewed focus on social and racial

maximize value for shareholders? We believe

justice. Furthermore, many have argued that the

that boards should define their company’s

sole focus of maximizing shareholder returns

mission and purpose and to weave oversight

should be supplanted by a multi-stakeholder

of sustainability strategy and environmental,

model taking other factors into account, including

social and corporate governance issues into

environmental impact and the larger community

the annual agenda. By harnessing a holistic

in which a business operates. Faced with these

approach to corporate governance, boards will

high stakes, board diversity is more relevant

be afforded the protections of the business

than ever, and legislators and regulators are

judgment rule and will lessen the likelihood of

increasingly focused on the issue.

government intervention and legislation, be rewarded with the respect of their employees and, we believe, be better drivers of long-term

ESG: SPEAKING THE LANGUAGE OF INVESTORS The onset of the pandemic increased the focus on environmental, social and governance (ESG) issues, including human capital, diversity and inclusion, and climate change. Investors and regulators want to understand the impact of the current environment and pandemic on companies and carefully review ESG disclosures, as many have identified them as critically important – although sometimes frustratingly difficult to decipher – indicators of the health prospects of a company. The need for boards to stay actively engaged continues to increase, as ESG considerations can influence all levels of company operations and increasingly call for direction and oversight from the board.

value creation and broad-based prosperity.

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RISK MANAGEMENT Given the disruptive events in 2020, it is now more critical than ever for businesses and their leadership to manage enterprise risk and to anticipate and proactively address not only risks endemic to their specific organizations, but also systemic risks in an ever-changing global landscape. Boards are increasingly delegating the risk oversight function to a committee, which means weighing the costs and benefits. In light of the riot and attack on the U.S. Capitol, boards in 2021 should be attentive to

CORPORATE COUNSEL BUSINESS JOURNAL

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their political activity, including donations and lobbying. Moreover, boards should focus on the following risks, each of which closely overlaps with (a) corporate purpose, strategy and culture, (b) ESG, (c) stakeholder governance and activism, (d) political and regulatory changes, (e) business

9

accountability and (f) board composition and

Last year brought an intense focus on the limitations of domestic supply chains as exacerbated

by COVID-19 and notable breaches of cybersecurity by foreign nations. From stark shortages in U.S.-made supplies of personal protective equipment to the abrupt shutdown of the Chinese consulate in Houston related to allegations of spying

succession planning.

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TRADE CONSIDERATIONS

and theft of intellectual property, 2020 highlighted significant shortfalls in the domestic supply chain. Looking to 2021, directors should expect a continued focus on the removal of Chinese tech-

PRIVACY AND CYBERSECURITY As data takes on a transformational role for businesses, boards of directors must treat data privacy and cybersecurity as top priorities. The one constant in privacy legislation in the United States is change. In its first year of enforcement, the California Consumer Privacy Act shaped a new phase of privacy compliance, which will require significant organizational efforts, so companies should start now to assess the steps they need to take for compliance.

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Biometric privacy violations are a bigticket risk point. If your company uses any type of biometrics – from fingerprints for clocking in to facial recognition for security – it likely has a target on its back. And directors should insist on regular cybersecurity updates to ensure that management is constantly assessing cyber risk, responding to risks unique to the industry and allocating appropriate resources to protect against intrusion.

nology from the supply chain of U.S. companies and government agencies and on Buy Americantype preferences, investment incentives/funding for domestic production and a continued hardening of U.S. information technology assets.

INVESTIGATION AND ENFORCEMENT TRENDS The change in presidential administration, new leadership at federal regulatory agencies and disruption to the economy and business operations caused by the COVID-19 pandemic all point to a dynamic period for government investigations and enforcement. While the factors contributing to the 2008 financial crisis and the resulting economic volatility are different in nature from those of the COVID-19 recession and downturn, corporate boards should look to the pattern of enforcement and oversight following the 2008 financial crisis as indicative of the type of possible government investigations that we anticipate over the next few years.

Corporate boards should accept as fact that government investigations and enforcement will ramp up during and following the COVID-19 crisis. 

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MARCH • APRIL 2021

New Developments in Emerging Coverage Disputes ROBERT CHESLER, NICHOLAS INSUA AND JOHN LACEY, JR. ANDERSON KILL cases, including suits in Missouri, New Jersey and

The global business landscape faced disputes beyond

Virginia, courts have found that COVID-19 constitutes

COVID-19 and it’s trickle-down effect in 2020. Robert D.

direct physical loss or damage. The parties will fight this

Chesler, Nicholas M. Insua and John P. Lacey Jr., of

issue in each state, and results will vary.

Anderson Kill, dive into the environment and social occurrences that resulted in insurance disputes and liability exposures.

Surprisingly, the virus exclusion has been less litigated, as many insurance companies have brought motions to dismiss based solely on the direct physical loss or damage

While history will remember 2020 as the year of the pandemic, other social and environment ills inevitably persisted.

Each of these sources of harm resulted in corporate liability exposures and concomitant insurance disputes. This article examines the insurance issues created by five areas of increasing social and business importance: COVID-19, sex abuse, pollution, opioids and biometrics.

issue. However, several courts have dismissed policyholder suits on the basis of virus exclusions. Policyholders, though, have also had victories in this area, most notably in the recent decision in Elegant Massage, in which a federal district court in Virginia ruled that the virus exclusion does not apply because the virus that causes COVID-19 (SARS-CoV-2) was not present at the plaintiff’s property

COVID-19 Business Interruption

and was not the basis for the income loss. Policyholders

This is the most recent and most litigated new insurance

or pollution name viruses, and even those that do may not

must remember that not all exclusions for contamination

coverage area. Estimates are that policyholders have filed

apply in all circumstances. Arguments are also likely to

nearly 1,500 coverage suits, with more than 100 decisions

be made about whether the virus exclusion was approved

to date. It remains far too early to make any predictions

by state regulators based on alleged misrepresentation by

about this litigation’s ultimate outcome; no appellate

the insurance industry when seeking regulatory approval.

court has ruled yet on COVID-19 business interruption coverage. However, several broad parameters exist.

Sex Abuse Insurance

COVID-19 business interruption insurance involves two

In 2019-20, many states extended (or effectively eliminated)

major coverage issues: whether COVID-19 business inter-

statutes of limitation for sex abuse claims, leading to a

ruption constitutes direct physical loss or damage, and

tsunami of claims by individuals asserting that they were

the effect of any virus exclusion. In a number of cases,

molested many years ago. This litigation wave has led to

insurance companies have successfully brought motions to

a second wave of coverage litigation. Sex abuse is bodily

dismiss COVID-19 suits on the basis that no direct physical

injury, and general liability policies provide coverage.

loss or damage occurred. However, in many of those

However, two coverage issues have emerged. First, when

cases, the complaints were poorly drafted and failed to

claims date back to the 1970s and even earlier, how does a

allege physical loss or damage. In several more recent

policyholder prove the existence and terms and conditions CORPORATE COUNSEL BUSINESS JOURNAL

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many cases to actively litigate whether the policyholder

Companies must be cognizant that they need not produce actual insurance policies to prove coverage but can prove coverage through secondary evidence.

In most states, the standard is the preponderance of evidence, and it may be possible to meet that burden with very limited evidence.

intended or knew of the abuse. Underlying plaintiffs assert that organizations ranging from the Roman Catholic Church to the Boy Scouts had knowledge of sex abuse and concealed it. Policyholders can expect careful scrutiny of their past practices by insurance companies seeking to deny coverage. Policyholders must remember that the duty to defend is much broader than the insurance company’s duty to indemnify, and as long as questions exist as to whether the insured acted intentionally or not, the insurance company should be required to defend.

of these old insurance policies? Second, policyholders must contend with assertions by insurance companies that the policyholder “intended or expected” abuse.

Companies must be cognizant that they need not produce actual insurance policies to prove coverage but can prove coverage through secondary evidence. In most states, the standard is the preponderance of evidence, and it may be possible to meet that burden with very limited evidence.

PFAS Groundwater Contamination The heyday of environmental insurance litigation was twenty or more years ago, but it may now be returning with intense regulatory and litigation scrutiny of per- and polyfluoroalkyl substances (PFAS), the so-called “forever chemicals” that spread quickly and persist in ground water. In 2020, legislation to control or clean up PFAS was introduced in more than half of U.S. states, and the EPA

In addition to the existence of the policy, the policyholder

issued an update on its 2019 PFAS action plan. PFAS raise

must also prove its terms, conditions and policy

issues long familiar to experienced coverage litigators.

limit. These can be proven through expert testimony, particularly since insurance companies typically used

The first issue will be the effect of the “sudden and

standardized policies.

accidental” pollution exclusion, generally introduced in 1973, and the so-called “absolute” pollution exclusion,

Locating old insurance policies is a challenge. Most

introduced in 1986. As a result of the absolute exclusion,

companies will not have easily accessible evidence of

no coverage for PFAS groundwater contamination exists

such policies from 30-40 years ago. Many policyholders

under post-1986 general liability policies. However, states

utilize insurance archaeologists who are trained in

differ as to whether they enforce the 1973 exclusion to

locating policies to perform the search.

foreclose coverage. In states that enforce the exclusion, coverage will only exist under pre-1973 policies, unless

Policyholders can expect their insurance companies in 24

MARCH • APRIL 2021

a so-called “boom” event caused the contamination. In

other states that interpret the sudden and accidental

commenced in 1980, and continued until discovered in 2020.

exclusion to mean essentially only “accidental,” coverage

In a pro rata state, every policy year from 1980 to 2020 is

will exist under pre-1986 policies. This too will raise the

potentially implicated. The issue then becomes whether the

issue of locating old policies.

policyholder or the insurance company is responsible for the post-1986 years when insurance coverage was unavail-

A bevy of allocation issues will also affect insurance recov-

able in the marketplace. Most states have yet to address this

ery for PFAS liability. The most basic issue is whether pro

issue. New Jersey has ruled favorably for the policyholder,

rata allocation, in which each year is assigned a percentage

while New York has ruled for the insurance company.

of liability, or ‘‘all sums” allocation, in which the policyholder can collect all of its damages in any one year, applies. The

Opioids

California Supreme Court in 2020 issued a major decision affirming the state’s commitment to the all-sums approach.

Opioid litigation continues apace, highlighted in 2020 by Purdue’s $8 billion-plus settlement with the Department

The “unavailability rule” also impacts allocation. Coverage

of Justice, and continues to produce insurance coverage

under liability policies for environmental liability ceased

litigation. One coverage issue for companies engaged in

in 1986. Assume that PFAS groundwater contamination

opioid litigation is whether the company expected or inCORPORATE COUNSEL BUSINESS JOURNAL

25

tended the injury that it caused. In one case, a California

liability policies typically do not provide coverage for “bodily

Court of Appeal, on the basis of the allegations of the

injury,” but for damages “because of bodily injury,” a much

underlying complaint, held that the policyholder inten-

broader coverage grant that encompassed the costs incurred

tionally and knowingly caused injury through its opioid

by the government as a result of opioid addiction in the state.

business and was not entitled to coverage. In other cases, though, where the underlying complaint alleges both

Biometric

intentional and negligent conduct, courts have required the insurance company to defend.

Illinois passed the Biometric Information Privacy Act in 2008, creating a private cause of action for misuse of an

In 2020, a court addressed a second issue. In many opioid

individual’s biometric information — personal identifiers

cases, the government is seeking the monies it incurred in

such as fingerprints and retina scans. The law produced a

combatting the opioid crisis. Insurance companies argue

wave of biometric litigation in Illinois, most often in the

that the government did not incur those costs “because of

form of class actions. Many states are now considering

bodily injury,” as required by the insurance policy. The court

passing biometric statutes similar to Illinois’, although

disagreed, and found coverage. It is noteworthy that general

most will include a private cause of action.

26

MARCH • APRIL 2021

West Bend Mut. Ins. Co. v. Krishna Schaumburg Tan, Inc.

Policyholders must be aware that the insurance industry

(2020 IL App (1st) 191834, (Ill. 2020), is a very import-

has inserted a variety of privacy and data exclusions into

ant case for policyholders. While biometric insurance

general liability and other types of insurance policies.

claims can arise under several types of insurance policies –

Insurance companies argue that these exclusions fore-

general liability, D&O, EPLI and cyber – West Bend

close coverage for biometric liability claims. This is

involved a general liability policy. Such policies typically include coverage for claims arising out of “personal injury,” which is defined in relevant part as “injury, other than bodily injury, arising out of oral or written publication of material that violates a person’s right of privacy.”

In West Bend, the underlying complaint alleged that Krishna, a tanning salon, provided a customer’s fingerprint data to a third-party vendor in violation of the law.

The insurance company argued that Krishna’s delivery

another battlefield for 2021 coverage litigation.

Conclusion Anderson Kill wishes all of its friends a 2021 free of COVID-19, sex abuse, opioid, pollution and biometric concerns. However, should you face liability in any of these, or any other area, please feel free to contact us to analyze the insurance implications. 

of its customer’s fingerprint data to a third-party vendor was not a “publication” because it had not been disseminated to a wide audience. The court disagreed, holding that “publication” is commonly understood to encompass both broad sharing of information to multiple recipients and a more limited sharing of information with a single third party. As a result, the court ordered West Bend to provide Krishna a defense in the

Robert D. Chesler is a shareholder in the Newark, New Jersey, office of Anderson Kill. He represents policyholders in a broad variety of coverage claims and advises companies with respect to their insurance programs. Chesler has served as the attorney of record in more than 30 reported insurance decisions. Reach him at rchesler@andersonkill.com.

Nicholas M. Insua, a shareholder in Anderson Kill's Newark office, represents policyholder clients in catastrophic first-party property damage and business interruption claims and as well as under D&O and E&O policies. He has represented clients under general liability insurance policies for all manner of underlying claims. Reach him at ninsua@andersonkill.com.

John P. Lacey, Jr. is an attorney practicing in Anderson Kill’s Newark office. He focuses his practice on insurance recovery and corporate litigation. Reach him at jlacey@andersonkill.com.

underlying matter.

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Using Data to Help Companies And Law Firms Win Big

 Karl Harris, CEO of Lex Machina, discusses how Lex Machina’s legal analytics technology can be used to improve processes and reveal key trends, ultimately helping lawyers win business and win cases.

CCBJ: Tell us a bit about Lex Machina and your role within the legal community.

Karl Harris: Lex Machina has pioneered the concept of legal analytics. We have a flagship product that helps companies win business and win cases by using data-driven decisionmaking. Just to give you an idea of what that means, we go through the briefs, the motions, the filings, all of the content that goes into litigation in the courtroom, and we use natural language processing and machine learning technology to extract specific information. For example: What is the judge’s likely behavior in a certain scenario?

What should your strategy be given your current case? How are opposing counsel and opposing parties likely to behave?

Big-picture things like that. We call it data-driven decisionmaking that helps you win business and win cases.

In terms of our role within the legal community, there are two separate things there. One is our role as a business. We’re a business provider. We sell Lex Machina to law firms and companies that are involved in litigation. So, in that sense, we’re a software services provider. But second, in terms of the community itself, one of the value statements at Lex Machina is to bring openness and transparency to the law.

We think that by making information and statistics about how cases progress in a courtroom available – for example, how long will it take, what’s the judge’s likely behavior, what are the likely damages or other outcomes, all those types of things – it brings transparency to the legal system, 28

MARCH • APRIL 2021

which ultimately is a better thing for our legal community. I think that kind of transparency also improves access to justice, because one of the reasons that many folks are hesitant to use the legal system or are underserved by it is because it’s such an opaque process to many people. Using data to explain what’s going on helps with both of those things.

How are in-house law departments using artificial intelligence, analytics and legal task automation for process improvement?

When I think about process improvement, there are all sorts of different processes that an in-house legal department is required to do. One of the first things that in-house departments do, generally, is select outside counsel to represent them in particular matters. There are obviously businesses that handle litigation in-house, but those are few and far between, and even those types of businesses usually end up partnering with outside law firms at some point or another. And when it comes to selecting outside counsel to handle particular matters, artificial intelligence and analytics can certainly help there. It’s actually one of the most common use cases for Lex Machina. In-house counsel can answer various questions this way: What’s the actual track record of this law firm in similar situations to mine? How have they performed in front of this particular judge? What has their experience been against a particular opposing party or opposing counsel, and what outcomes have they gotten? So, the first thing in terms of a process improvement is getting better at selecting the right outside counsel to handle specific needs, which is something that Lex Machina does very well. So, that’s the first chunk.

Now, let’s say you’ve selected your outside counsel, you have a litigation or a legal matter, and your goal is to manage it and, ideally, to get a favorable outcome for your company. That’s the next phase of legal analytics – winning cases. There are a few different ways that can

happen. Number one, legal analytics helps you manage the relationship with that outside counsel you’ve selected.

A good example of that: Let’s say your outside counsel recommends pursuing a particular motion, a motion for summary judgment, for instance, and you know that the motion is going to cost, big picture, $100,000. The law firm is saying, “We recommend this course of action.”

Well, that’s not quite a data-driven decision. You could use analytics to make a better data-driven decision by saying, “In front of this judge, with this counsel, this motion for summary judgment has, let’s say, a 26 percent success rate in similar situations.” Now, that’s a data-driven decision because then you can say, “I want to spend $100,000 for a 26 percent chance of success.” Or you may not want to do that. But either way, that’s a true data-driven decision.

What developments do you anticipate in these types of platforms and other legal technology in the near term?

I mentioned our value statement of bringing openness and transparency to the law. We also have a mission statement, which is to bring legal analytics to all areas of the law. So one of the things that I think will happen in the near term is that we will be able to build legal analytics for many more of the smaller state court systems where it’s not currently available, because I think that in the next few years more and more state court systems are going to come online and make their data accessible to legal analytics tools like Lex Machina.

Just to back up for a minute and give this some context: Lex Machina currently covers all of the U.S. federal district courts, which are the 94 federal district courts where the majority of federal district court litigation happens. Those are typically big cases. You’re in federal court for a variety of reasons, whether it be subject matter jurisdiction, diversity jurisdiction, the amount of controversy, etc. But the majority of litigation happens in state and local courts, and Lex Machina covers a lot of them, but there are more to go. So as

far as what I anticipate happening in the near term, that’s what I mean when I say I think more and more of those state courts will come online. We see more and more available every month and every year, and Lex Machina will ultimately bring legal analytics to all areas of the law. The idea is that any decision involving litigation uses data, and being able to bring that analytical capability to all of the state courts furthers our mission and brings it to its logical conclusion.

How do you expect the continued advancement and expansion of these tools to impact the practice of law?

We recently conducted a survey across large law firms, small law firms, all sorts of different practitioners like partners, associates, librarians, and companies and law firms, to figure out how they’re using legal analytics, and there are a couple of really cool themes from that survey.

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Number one is the continued advancement and expan-

is to be everywhere. Any place that litigates can use Lex

sion of these tools. More and more people are using legal

Machina to make data-driven decisions.

analytics. When we surveyed this large sample of folks and said, “Are you personally using legal analytics?” – well, 61

In terms of the technology, my vision for Lex Machina is to

percent of people came back and said, yes, they are, which

have it embedded in every step of the lawyer’s workflow.

is a great outcome for our industry. When we asked that question just a few years ago, it was nowhere near that number. So more and more people are becoming aware of legal analytics, and more and more people are using it in their practice. Next, we asked, “If you are using legal analytics, are you finding value in it in terms of improving your practice?” And 98 percent of people that use legal analytics said, “Yes, it adds value to my practice.”

Even more interesting, however, is that of those 39 percent of people who don’t use legal analytics, 80 percent of them said that they also see value in it for their practice. What that tells me in terms of trends is that legal analytics is growing and growing, and it will be everywhere soon. You’ve got 98 percent of people that use it saying that it’s valuable to them, and 80 percent of the people that don’t even use it think it’s going to be valuable. So that 61 percent number is going to continue to grow over time, and more and more people are going to have analytics as part of their practice.

What is your vision for the future of Lex Machina?

The easy answer is that we will continue to pursue our mission, which is to bring legal analytics to all areas of the law. So the top priority for our product and engineering team is to keep bringing Lex Machina into more and more courts, and my vision for the future of Lex Machina is that we’ll be in every single state court and every single federal court that has litigation. In the long run, Lex Machina will not necessarily be just a U.S.-focused business anymore.

There are lots of international markets that don’t have legal analytics now that could and should, and our vision 30

MARCH • APRIL 2021

Right now, one of the things that we’ve focused on doing is training folks to say, “Hey, here’s where you should be using Lex Machina. If you’re selecting outside counsel, you should be using it.” Or, symmetrically, “If you’re the law firm and you’re pitching a company to try to get business, you should be using Lex Machina to showcase your expertise. Then when you get involved in litigation, you should use it there.”

My vision is that we will no longer have to make that part of the training. It’ll already be integrated in people’s workflow, whether that means that analytics has a place in the training materials that law firms produce themselves, which our best customers already do, or whether analytics has integration points across all sorts of different products that they already use. Ultimately, my goal for Lex Machina is that we will cover every jurisdiction that has litigation, so that we’re everywhere in terms of access to the data, and then also that we’re everywhere in terms of the workflows, so that as people go through their days as lawyers or in-house counsel, they’re using Lex Machina, for data-driven decision-making at each step along the way. 

Karl Harris is CEO of Lex Machina, leading their strategy and operations. Before becoming CEO, Harris led all product development, product strategy and engineering efforts at Lex Machina as CTO and VP of products through Lex Machina’s successful acquisition

by LexisNexis. Reach him at kharris@lexmachina.com.

PPP Fraud Compliance: The Best Payroll Protection A Company Can Have SARAH HYSER-STAUB, DAVID FREED AND JAMES CLANCY MCNEES WALLACE & NURICK LLC

After nearly a year of crushing pandemic-related shutdowns and business interruptions, companies facing serious financial challenges are beginning to see the light at the end of the COVID-19 tunnel. Vaccine distribution is underway, and the latest round of Paycheck Protection Program (PPP) funding is here. That funding is part of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, which reauthorized the PPP from the CARES Act that ended in August 2020. The original CARES Act funding provided a total of $669 billion. The new COVID-19 relief bill allocates an additional $284 billion and has dual goals: to provide relief to small businesses that did not get it in the first round, and to allow additional funding for businesses that did obtain first-round loans.

PPP loans typically are made with 1 percent interest and may be forgiven under certain circumstances. The program

could once again mean “free money” for qualifying businesses. And at a time like this, who wouldn’t love to get their hands on free money?

As attractive as that prospect may be, reasonable caution is in order because this “free money” comes with significant strings attached. After the cash grab that was the first round of loan distribution, watchdog groups and enforcement agencies have uncovered significant PPP fraud, waste, and abuse. In October 2020, the House Select Subcommittee on the Coronavirus Crisis found that a considerable amount of PPP dollars went to large companies that had pre-existing relationships with big banks and, as a result, many genuinely small businesses were left out in the cold. Thus, loans made during this next round are likely to draw closer scrutiny. This article will outline the general eligibility requirements for the CORPORATE COUNSEL BUSINESS JOURNAL

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latest round of PPP funding and offer some advice for small businesses interested in taking advantage of the program, which is going to be a primary focus of fraud enforcement in 2021 and beyond.

Eligibility depends on first-round loan recipient status and revenue loss.

Businesses can take advantage of PPP funds by obtaining loans from the U.S. Small Business Administration (SBA) Preferred Lending Partners (PLPs). Congress appropriates and the Treasury doles out funds to these PLPs for distribution to eligible businesses. The funds are first come, first served, and each lender has its own application process. Some have an online form that can be filled in and submitted with supporting documentation loaded as part of the online submission. Others simply require supporting documentation be emailed to a loan officer who then determines eligibility. The lenders using an online form typically embed links to SBA forms that contain instructions and definitions. One thing is consistent: no matter what format is used by the lender, the SBA requires more than a dozen certifications by the borrower.

32

MARCH • APRIL 2021

Those certifications will form the basis for investigations and prosecutions down the road. By signing, applicants affirm they understand the application and meet eligibility requirements, including length of operations, proper use of funds, economic necessity, criminal history, and more.

With such a wide-ranging program, the huge amount of money being doled out, and the extraordinary scrutiny on all things pandemic, the effort to ferret out and punish PPP fraud will be long-ranging and have low thresholds.

Basic eligibility requirements for the maximum $2 million second-round loans depend on whether a first draw was obtained. First-time borrowers must have fewer than 500 employees (or be a food service or hospitality business with fewer than 300 employees per physical location); be a small business, 501(c)(19) veterans’ organization, tribal business or small agricultural cooperative that meets the SBA’s size standards; be a sole proprietor, independent contractor, or self-employed.

Previous PPP recipients must have fewer than 300 employees; have already used the full amount of their first draw; and demonstrate a 25 percent reduction in gross revenue from any quarter in 2020 compared to the

same quarter in 2019. As with the first round of PPP funds, qualified businesses can obtain loans up to 2.5 times their average monthly payroll costs. Hospitality and food service businesses can receive up to 3.5 times average monthly payroll costs. Quite simply, if business revenue declined at least 25 percent between the same quarters of 2019 and 2020, the business is eligible. For many businesses that had to close because of a governmental shutdown order, that benchmark will be easy to hit.

For a Schedule C business with no employees, eligibility can be determined by simply taking the number from Line 31 of the 2019 Schedule C, dividing by 12 and multiplying by 2.5. Other business structures, such as seasonal or farming operations, are a bit more complicated.

These business owners should consider seeking expert assistance to determine eligibility.

Once a lender makes a preliminary eligibility determination, the package is submitted to SBA for a PLP number (which is keyed to an EIN or SSN and helps prevent multiple applications by one business through different lenders). Once that clears SBA, the ball is back in the lender’s court. At that point, the lender prepares to make a loan just as any other business loan and might require additional certifications.

Both the eligibility and loan closing certifications provide a field ripe with possible fraudulent and false statements.

The federal government is dedicating an increasing number of resources to PPP fraud enforcement.

When the pandemic hit just one year ago and the federal government quickly recognized the need for financial help for struggling Americans, one of the first things the Department of Justice (DOJ) did was establish a national COVID-19 Fraud Task Force. Every one of the 94 U.S. Attorney’s Offices across the country was directed to designate a COVID-19 fraud point of contact who would manage the investigations stemming from complaints about fraud.

At the same time, DOJ formed a national Hoarding and Price Gouging (HPG) Task Force, again requiring a point of contact in every U.S. Attorney’s Office. More specific than the COVID-19 Fraud Task Force, the HPG mission was to aggressively combat hoarding and price gouging related primarily to Personal Protective Equipment.

Think of the many times we all heard about hand sanitizer and masks being priced through the roof. With that dust settling significantly, it should come as no surprise that the DOJ’s focus has shifted to PPP fraud. And that makes a lot of sense. The pandemic has wreaked havoc on the pockets, nest eggs, and life savings of many Americans, so scrutiny of and accountability for the billions of dollars of public money doled out is a no-brainer.

The DOJ isn’t going it alone on this one. Section 4018 of the CARES Act created a new, limited purpose Special Inspector General for Pandemic Recovery (SIGPR) within the Department of the Treasury Office of Inspector General.

While SIGPR has a specific mission related to Division A of the CARES Act involving funds dedicated for emergency relief to distressed industries such as airlines and businesses important to maintaining national security, the early steps taken by the SIGPR provide a window into what businesses may expect in the enforcement realm going forward.

The SIGPR quickly created Memorandums of Understanding (MOU) with several U. S. Attorney’s Offices to share information and institute a streamlined enforcement process.

The most recent MOU was announced by the USAO for the Middle District of Pennsylvania in Harrisburg on January 21, 2021. Acting U.S. Attorney Bruce D. Brandler stated: “This partnership is part of our on-going efforts to investigate and prosecute the fraudsters who have stolen millions of dollars from government backed relief programs during the pandemic. This is a high-priority area for our office and we look forward to working with SIGPR CORPORATE COUNSEL BUSINESS JOURNAL

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to hold accountable anyone who illegally profited at the expense of the American taxpayer.” (Emphasis added).

The MOU details the goals of the joint effort: (1) to provide a coordinated response to Cares Act funding fraud; (2) to speed up legal process, case intake and prosecution of CARES Act related fraud; (3) to link and associate CARES Act related complaints with larger schemes and related unlawful activity; and (4) to deter future CARES Act funding fraud by increasing awareness of both criminal and civil enforcement actions.

The USAO will be designating a criminal and civil assistant U.S. attorney to liaise with SIGPR for case-specific inquiries.

Moreover, according to SIGPR’s press release, the USAO has been asked to “create a streamlined, accelerated process for SIGPR investigations to obtain preliminary legal process, including grand jury subpoenas and... civil investigative demands.” (Emphasis added). In sum, we can expect these investigations to be dynamic, rapid, and to have deep pockets.

The focus of future PPP fraud investigations is likely to be outright fraud rather than good faith misunderstandings of the program and its requirements and definitions. In fact, a quick internet search produces several news stories regarding individuals currently facing prosecution for allegedly purchasing mansions, luxury cars, and boats with their PPP funds.

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MARCH • APRIL 2021

Sarah Hyser-Staub practices in the McNees Litigation and White Collar Defense and Internal Investigations Practice Groups. Sarah litigates white collar crime issues and complex commercial disputes. She defends public and private entities in civil rights cases, represents witnesses before the grand jury, conducts internal investigations, and provides guidance on internal corporate compliance.

Reach her at sstaub@mcneeslaw.com.

However, after the instances of overt fraud are rooted out, the government will no doubt turn to more nuanced cases. With that in mind, there are three things all businesses seeking a PPP loan can do right now to protect themselves: 1. Seek help applying as soon as possible; 2. Ensure eligibility is clear and adequately documented; and 3. Spend PPP funds only on qualified expenses and

in approved amounts.

Having experienced counsel review PPP applications and ready to quickly respond in the event government investigators come knocking is the best payroll protection any business can obtain. The newly expanded White Collar Defense & Internal Investigations group at McNees – which includes two former federal prosecutors – is uniquely positioned to help. 

David Freed practices in the McNees Litigation and White Collar Defense and Internal Investigations Practice Groups.

David is a former U.S. attorney for the Middle District of Pennsylvania.

In that role, David supervised all operations of the office, both civil and criminal. Reach him at dfreed@mcneeslaw.com.

James Clancy practices in the McNees Litigation and White Collar Defense and Internal Investigations Practice Groups. James is a former assistant U.S. attorney in the Middle District. In that role, he prosecuted a multitude of cases, including a variety of frauds, tax evasion and false reporting, counterfeiting, money laundering, public corruption, child exploitation, threats, and capital murder. Reach him at jclancy@mcneeslaw.com.

A Primer on Representation and Warranty Insurance Coverage Scope JAMES GRAYER CLIFFORD CHANCE Alternatively, if a client chooses not to do industry

Counsel James Grayer of Clifford Chance shares what he wishes clients knew when it comes to RWI coverage.

Transitioning back to private practice from being a Representation and Warranty Insurance (RWI) underwriter has taken some adjustment. It has also given me insight as to how best to advise clients seeking RWI coverage.

Coverage scope is an area of significant focus for clients, and my time spent as an underwriter has provided me with a good understanding into what an insurer is likely to cover and how to best position a client to obtain such coverage.

As a starting point, clients should understand what RWI is NOT designed to cover. This includes known matters or matters that could/would be known if proper/industry standard diligence was done. RWI coverage is for unknown matters; those not discovered through industry standard diligence.

If a client knows of an issue, it likely will be excluded from coverage unless otherwise immaterial (more on materiality below). For example, if in connection with acquisition diligence of a stapler assembler Buyer finds that the target does not have a time clock system or other procedures to track overtime, but the business requires overtime, an exclusion would likely be proposed to cover this known exposure. Coverage may be excluded even if some overtime payments are being made as diligence showed that there are not proper procedures/mechanics in place to give the RWI underwriter comfort that the proper overtime payments are being made. RWI coverage is not intended to respond to issues about which the Buyer knew prior to incepting the RWI policy. In the case above, the Buyer could have negotiated either a purchase price reduction or a special indemnity to address the known issue.

standard diligence in a particular area, the client should anticipate an exclusion covering such area. To go back to our stapler assembler example, the target will have some employees who are exempt from overtime pay and others who are non-exempt and for whom overtime pay is legally required to be made. If the Buyer decided against conducting a census review and engaging in industry-standard diligence to determine exempt/non-exempt status, they should anticipate an exclusion for such matter. RWI is not intended to cover areas in which the Buyer could have determined if there was a liability through industry standard diligence but chose not to engage in such process. Like the situation with a known issue, the Buyer is seen to be making an affirmative choice about the risk and, in these cases, shifting the risk to the RWI carrier is not appropriate.

No judgement Often when I proposed an exclusion when the client had chosen not to undertake a particular diligence exercise, such proposal was interpreted as a judgement about the diligence process undertaken or the underlying deal. The role of the RWI underwriter is not to "judge" the client; they are simply assessing risk profile. There are valid deal reasons not to engage in the diligence necessary to get RWI coverage for a particular area. In our stapler assembler, the RWI underwriter might require a phase 1 environmental report to be dated no more than 6 months prior to inception of the RWI policy; however, the assembler may be a leasee, an 18 month old phase 1 environmental report was available, diligence teams did site visits and were satisfied with environmental compliance, the target assembles parts but does not manufacturer parts so limited environmental contaminants are used, and the target has significant underlying environmental insurance with no change of control provision. Given the CORPORATE COUNSEL BUSINESS JOURNAL

35

cost of having a new phase 1 environmental report done,

facts based on deal size (e.g., a larger deal with a larger

relying on the other safeguards, such as the target's risk

retention may have fewer exclusions than a smaller

profile, the 18-month-old report, and the underlying

deal with a smaller retention). The RWI underwriter

environmental coverage, is a rationale choice.

will also consider whether the potential loss could be subject to a multiple claim which will factor into how

As with most transactional decisions, the determination is

materiality is assessed.

not "right" or "wrong" but rather a judgement based on the particular facts. The client's advisors (such as counsel with

Experience > Ease

both deal and RWI experience) can and should help guide the client to make rational decisions regarding diligence

If there is an area about which the client is particularly

scope considering the potential effect on coverage scope.

worried because there is a lack of ability to diligence such matter, or it is a known matter, experienced deal

Materiality

counsel with RWI experience will be able to determine if such matters may be better addressed through deal

There is often a "materiality" determination made by

mechanics, such as purchase price adjustments, indem-

the RWI underwriter as to whether an exclusion should

nities or other deal struc-

be proposed. Lawyers and advisors often say to the

ture mechanics rather

RWI underwriter "there could be some exposure, but

than anticipating if RWI

we don’t think it's material, so no exclusion is warrant-

coverage will be available.

ed…" For the overtime/no time clock scenario above, if you added that the target ran three shifts so there was

Using experienced deal

always a shift on regular time, it is a union shop and

counsel, especially coun-

minimal overtime is requested, the Buyer (or its advi-

sel who has represented

sors) would likely argue that the amount of overtime

underwriters, will assist

worked is small such that the issue is immaterial and no

in identifying potential

exclusion is warranted. While this argument may be val-

issues and determining

id, materiality must be viewed from the perspective of

what diligence would

the RWI underwriter, which is different from the views

get those issues covered.

of the M&A deal team. The RWI underwriter sees materi-

Engaging with counsel

ality based on the RWI policy retention which is likely

which has this combina-

much lower than considered by the M&A deal team.

tion of deal and RWI experience will streamline

RWI underwriters think in terms of what level of exposure

the process and create

is appropriate given the retention; once the retention

efficiencies for the client

is full eroded, the RWI policy pays out. The same RWI

that might not be other-

underwriter might take a different approach to the same

wise available. 

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MARCH • APRIL 2021

James Grayer, counsel with Clifford Chance, has more than 20 years of experience in private practice, and has most recently held an executive position as a representation & warranty insurance underwriter and policy specialist. In private practice, James has acted as counsel to C-suite executives and boards of directors in transactional, contract, compliance, governance and disclosure matters. Reach him at james.grayer@cliffordchance.com.

New Praise, and Pressure, For the Pharma Industry

ongoing research. But in the legal department, it actually

 Amy Fix, partner at Barnes & Thornburg, discusses the

effects of the COVID-19 pandemic on the pharmaceutical industry, including the ways that health and safety protocols have affected the R&D process, the pandemic’s impact on the patent and regulatory landscapes, and what the future of the industry may look like.

CCBJ: Your clients range from large international pharmaceutical corporations to smaller companies producing innovative drugs and drug products. Within the context of the COVID-19 pandemic, what have you

offered some of our in-house colleagues an opportunity to review a great deal of ongoing projects and get caught up on projects that had been placed lower in priority.

How do you think the pandemic will influence the future of R&D in the pharmaceutical space?

I think there will be some necessary changes in order to accommodate individuals and their particular sensitivities to the virus – like social distancing, appropriate spacing, appropriate partitioning, and other physical measures. The

observed among your clients?

availability of a vaccine will help, but getting it distributed

Amy Fix: At the outset, I think the pandemic caught

nated still remains a challenge. In the meantime, I do think

everybody by surprise. Many of my pharma and life sciences clients are focused on the research and development (R&D) of new medicinal products, and the lab-based business was hit particularly hard, because with social distancing and other required mandates, it was very hard to run research. Additionally, a lot of companies had trouble filling orders for the initial starting materials and required reagents used to perform their research, so there was a backlog associated with getting their R&D

and getting everyone vaccinated who chooses to be vaccithat there’s a longer-term shift that will continue. There will be a change in how a lab-based business can be run.

Because, again, people working for long hours in confined spaces just isn’t going to be an appropriate way to work for the foreseeable future. Instead, people will have to work in shifts or in some fashion like that, where one person is in the lab at a time, depending on space constraints. It will make things more difficult in terms of timing, and I think that is the biggest issue. Things that used to be able to be

operations back up and running – even once they were

done rather quickly are going to be on a different timeline,

able to work out some sort of program that allowed for

because the ability for people to be in the lab, in close

social distancing in a lab environment.

confinement, just isn’t available anymore.

The bigger companies fared better than the small com-

In R&D contexts, there’s a timeline associated with every-

panies, and it was often a matter of space. The larger

thing in pharma, and every development program is

organizations, again, had the ability to spread people

given a Gantt chart that says which activity has to happen

out, whereas smaller companies didn’t have the ability to

before the process can advance to the next activity, and if

space people or offer any sort of partition, so they really

everything is shifted because things can’t run in parallel

had to modify their work plans pretty aggressively. As

due to space constraints, then the expectations for these

a result, we had a lot of people slow down some of their

various programs have to be managed for the increased CORPORATE COUNSEL BUSINESS JOURNAL

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time periods. But I have noticed that a lot of people are

to offer a low-cost or no-cost vaccine. I agree with this

adapting their practices. For employees outside of the lab

scenario as it’s happening, as opposed to seeing a need

environment – so legal departments, for example, – their

for some sort of government intervention.

ability to stay connected to the lab has improved as a result of the pandemic. It used to be that everybody was on

The pandemic is such an unusual circumstance that

campus together, and it was wonderful to be able to have

having some sort of government mandate doesn’t seem

in-person meetings, but now that those can’t happen,

appropriate. Instead, it seems like something that the

there’s been a shift into making use of technology to

market can work out for itself. To make broad overarching

keep things running efficiently.

rules seems inappropriate to me, because they could be misapplied in the future. It’s much better to focus on

How have other areas of the life sciences sector reacted,

what’s going on right now and to try to get the vaccine

and have you observed changes in pricing policy,

out to the communities that need it.

patents and generics?

Another thing I’ve definitely noticed is that the pandemic My primary focus in the life sciences arena has been on

has had a positive impact in terms of showing the impor-

the patent landscape, and there is a lot of information

tance of innovative health care. The world now, more

there that’s associated specifically with the virus and

than ever, appreciates the need for medicinal innovation.

the vaccines that are available and the patent pressure

And the relative quickness with which the health care

associated with the companies that have developed those

community was able to mobilize an effort to address the

vaccines. Interestingly, most of the companies are opting

virus, come up with a solution, and distribute it – it wasn’t

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MARCH • APRIL 2021

The pandemic is such an unusual circumstance that having some sort of blanket government mandate doesn’t seem appropriate.

What should our readers know about the regulatory landscape?

The pressure on the Food and Drug Administration (FDA) specifically was tremendous. But I do think that the FDA put forward the necessary resources to be able to look at the packages, the dossiers associated with each of the vaccines, while still addressing patient safety.

perfect, of course, but it should give confidence to the com-

This is such a delicate balance, because of course the

munity about the benefits of pharmaceutical innovation.

nature of medicine is that you never want to do harm,

A lot of people focus on the need for cheap medicines, and it becomes difficult when health care seems to be too expensive to achieve. I think we really do need to realize that innovation costs money. There is a lot of time and effort and materials associated with pharmaceutical innovation.

I’m hoping that we can come out on the other side of the pandemic appreciating that balance a bit more.

and the desire to offer hope to the patient population always drives the market.

For the pharmaceutical companies and for the regulatory agencies, their primary goal is treating patients. It’s what makes working in the pharmaceutical industry so rewarding. It’s one of the rare industries where you’re not making widgets;

What should we expect in terms of new funding

you’re not making some

in this area?

sort of consumer goods.

There will definitely be more funding associated with research, because COVID-19 has brought to light the full impact that something like a pandemic can have. Beyond the loss of life, which has been terrible, the economic impact as businesses and communities have had to shut down has also been dreadful. So if pharmaceutical and biotechnical innovation can address that in a relatively

You really are making a difference. That aspect of it is unbelievably rewarding. At the same time, it’s a difficult environment in the sense that you’re asking people to make a distress purchase, and there’s a balance that

quick manner, it’s going to be commercially beneficial.

has to be made between

The amount of interest in new innovation and in bringing

providing health care

new medicines to market is going to increase rather than

and having a commercial

decrease. The pandemic has hopefully allowed the mar-

market to attract inves-

ketplace to appreciate the importance of new medicines.

tors to the industry. 

Amy Fix is a partner with Barnes & Thornburg in their Raleigh office. Her clients range from large international pharmaceutical corporations to smaller companies producing innovative drugs and drug products. She prepares and prosecutes domestic and international patent applications and provides counseling and strategic guidance to build commercially valuable patent portfolios. Reach her at amy.fix@btlaw.com.

CORPORATE COUNSEL BUSINESS JOURNAL

39

Navigating the Complex Relationship Between the U.S. and China

obvious from what the Biden folks have said in their

 Tatman Savio, registered foreign lawyer and partner

at Akin Gump, and Clete Willems, partner at Akin Gump, discuss the current state of U.S.-China relations, what will (and won’t) be different under the Biden administration, and how businesses and investors in the region should proceed going forward.

confirmation hearings. Additionally, if you look at the actions that President Biden is taking, he’s signing a huge number of executive orders and regulatory actions, largely overturning many of the policies of the Trump administration. But notably absent are any efforts to overturn Trump administration actions toward China. What that signals is that you are going to have a high-level continua-

CCBJ: It’s hard to imagine a more confounding situation than what companies and investors – not to mention their lawyers – are facing when it comes to the contentious relationship between the United States and China. Give us your high-level view of the situation as the Trump administration ends and the Biden team grapples with a troubled situation.

Clete Willems: It certainly has been a very contentious situation, as well as a disruptive and confusing time for many companies and investors, given the significant number of actions the Trump administration took with regard to China over the last several years. Even during the last 10 days of the Trump administration, there were five or six very significant actions, ranging from sanctions on Hong Kong to a withhold release order (WRO) that is going to make it much more difficult to import cotton or products made from cotton from the Xinjiang region, based on the view that they’re made from forced labor. We’ve also seen other companies classified as Communist Chinese Military

tion of those policies. The Biden administration will likely have a much more predictable, thorough process, but I don’t believe the trajectory of the policy itself is going to change in a significant way. This is an issue that really has bipartisan agreement.

One last point to consider, of course, is how China views this – what does China want to do? I think it’s clear that China would like to reduce the temperature a bit. They have revamped their trade team, and they’re talking about potentially engaging in some form of negotiations with the Biden team. But it’s going to take quite some time. I sense that the Biden team will proceed slowly and cautiously, try to get a handle on the situation and coordinate with other countries before they actually negotiate with China. They may open up some dialogue, just to show that it’s important to talk to each other, but I don’t expect substantive negotiations in the near future.

With tensions high and optimism hard to come by, how do

Companies (CCMC), which means U.S. investment into

you counsel clients who need to make potentially costly

them is prohibited. There’s a lot going on, and it’s been

business decisions in the face of the chaos that has envel-

very difficult for people to understand how these actions

oped the world’s most important geopolitical relationship?

affect them and how they all relate to one another.

Tatman Savio: It can be a minefield for companies that As we’re transitioning from one administration to the next,

are doing business in China, but even so, there are a mul-

I believe there will be a similar policy trajectory. This is

titude of opportunities in the Chinese market, as well as

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MARCH • APRIL 2021

It’s important for companies to understand the overall

It’s going to be a much more thorough interagency decision-making process.

Then, once a decision is made, that decision will likely stick.

– CLETE WILLEMS

policy landscape, so that they can piece together the U.S. government’s actions against China within a broader framework. The actions stem from very particular policy positions by the U.S. government. Those include concerns about China’s stated policy of “Military-Civil Fusion,” and the ways in which China has focused on breaking down barriers between its civilian and defense sectors

entrenched business relationships between U.S. companies and Chinese companies that remain important.

There has been a flurry of activity, as Clete described, related to actions targeting Chinese companies, and we’ve seen the U.S. export control rules and sanctions rules leveraged against Chinese companies in ways that we’ve never seen before. The rapidity and frequency of those

to advance its military. The Military-Civil Fusion policy has generated scrutiny from the U.S. government because there is concern that items that are being sent to China by U.S. companies are not being used for civil purposes but are instead being passed along to the Chinese military.

Another Chinese policy about which the U.S. government has expressed concerns is “Made in China 2025.” This is

actions can be dizzying for U.S. as well as non-U.S.

China’s strategic plan to become a leader in high-technol-

companies that are doing business in that market.

ogy manufacturing, including in the fields of artificial

CORPORATE COUNSEL BUSINESS JOURNAL

41

intelligence, telecommunications, robotics, and other

with companies on that list. This is more expansive than

areas, by the year 2025. Here again, you see U.S. actions

the Commerce Department’s Entity List, which generally

targeting the technology sector of China based on concerns

prohibits exports and re-exports of items subject to U.S.

about the way China is trying to promote domestic champions in these high-tech areas.

As Clete mentioned, the U.S. government also has concerns about alleged human rights abuses in Xinjiang Province, and you see the response to that playing out in Entity List and sanctions designations that target companies that are engaged in business there. And the last area I’ll note is the South China Seas, and the U.S. government’s focus on companies that it views as supporting the Chinese government’s activities and buildup there.

export control jurisdiction to listed companies without a license. And the Entity List itself is broader than the Commerce Department’s more recent Military End User List, which creates export license requirements for a more narrow subset of items subject to U.S. jurisdiction.

Then you have the recently created CCMC list, where U.S. persons are prohibited from investing in securities of designated companies. I’m just scratching the surface with these examples, but as you can tell, there are a tremendous number of measures for companies to sort through when doing business in China.

Of course, in addition to understanding the policy rationale underpinning U.S. government enforcement actions, it’s

Willems: I’ve heard from so many clients who are trying

critical for clients to understand the actions themselves

to understand the differences between all of these differ-

and, specifically, what they mean from a legal perspective

ent actions, and the implications of each of them. First of

and the related requirements under U.S. sanctions and

all, many of them are just confused by what’s going on;

export controls laws. In that regard, sanctions restrictions generally apply to the activities of U.S. persons, whereas export control restrictions apply to exports and reexports of items that are subject to U.S. export control jurisdiction, so the consequences of particular enforcement measures can vary significantly.

Related to this, we’ve seen the U.S. government increasingly use denied and restricted party lists to penalize Chinese companies and advance foreign policy and national security objectives. These lists are not created equal, and they can lead to vastly different legal consequences

but secondly, when they do find out what’s going on, in many cases it actually becomes very disruptive for them.

So I do think that optimism is hard to come by for many of these companies, especially those with deep roots in Asia.

However, just to put a slightly different spin on it, I will note that for some companies, where there is a disruption there also is also an opportunity. You have a large number of U.S. companies saying, “OK, I see where this policy is going, now how do I find a way to take advantage of that?” If the U.S. is concerned about supply chains with China, for instance, and your supply chain is with Japan,

and obligations. For example, the Treasury Department’s

or with another region that is considered to be more of a

SDN List functions as a sanctions blacklist, and U.S. persons

trusted partner of the United States right now, there may

are generally prohibited from engaging in transactions

be opportunities there.

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MARCH • APRIL 2021

morning thinking about the trade deficit. That’s not who

Investment and other business opportunities in China can be significant, but companies must look at them in the proper context and be equipped to understand and manage the risk.

– TATMAN SAVIO

Despite the rhetoric, a new administration brings a certain amount of optimism, but not everyone expects smooth sailing. For example, former U.S. Ambassador to China, Terry Branstad, recently told Bloomberg Television, “I don’t see a likelihood of a big change in the policy with the change of administrations.” Do you agree? What do you expect from a new administration?

Willems: I touched on this a bit already, but yes, I do agree with what Ambassador Branstad said. On a general level, there is strong bipartisan support for a tough policy on China that encompasses both the human rights issues and the issues around economic practices and foreign policy. That said, there are some areas where I believe there will be differences between the Trump administration and the Biden administration. One of the things that will be different is that trade is not going to be such a front-page issue, where you’re seeing new headlines and actions taken day in and day out. President Biden has talked about wanting to focus on domestic issues first.

The United States faces several crises right now, from the

Joe Biden is. On China, Joe Biden wakes up thinking about broader foreign policy, not economic policy, and that has always been the way he’s approached these kinds of international issues. So you’re going to see more discussion about what’s going on in Hong Kong, maybe more discussion about the South China Sea, or Xinjiang, or Taiwan, and less about export controls and tariffs.

Similarly, you’re not going to see policy by tweet anymore.

You’re not going to see rapid shifts from one day to the next. It’s going to be a much more thorough interagency decision-making process. Then, once a decision is made, that decision will likely stick. You’re going to see a much more multilateral approach, and one of the things that President Biden has spoken at length about is trying to work with partners and allies of the United States that have similar concerns with China’s policies. You’re going to see an attempt to pursue these issues through a multilateral framework, including the World Trade Organization.

The last thing I will mention is that even if there is still a significant amount of tension between the United States and China, you are going to see an effort to have more dialogue, and to find other areas where we can cooperate.

For instance, there’s been a great deal of discussion about cooperation with respect to climate, as people look for ways that the U.S. and China can work together to tackle that issue.

Savio: I’ve seen a fair amount of optimism among U.S. and

coronavirus to the economy, and Biden has talked about

non-U.S. companies with the change in Administration for

wanting to make those areas his emphasis.

the reasons that Clete mentioned. People do not expect smooth sailing altogether, but they do expect calmer waters.

When it comes to China, you’re not going to have this

The optimism is rooted in part in the opportunity for every-

situation anymore where the president wakes up in the

one to catch their breath a bit, to have a reset with this new CORPORATE COUNSEL BUSINESS JOURNAL

43

administration. As I said before, the pace of the enforcement

ing process and the way the U.S. government makes and

actions under Trump was dizzying, and companies have had

announces policy changes and legal actions.

to expend significant resources and brainpower trying to get their arms around everything that occurred. So people are looking forward to a pause, and Biden has indicated that there will be a pause and an examination of certain policies.

People are also looking forward to a more regular order process – a return to the predictability of the policy-mak-

The Trump administration sanctioned more than 200 Chinese entities, municipal governments, and universities since 2019, catching some companies in the crossfire.

“There is an escalation of tit-for-tat,” said Alex Capri, a research fellow at the Asia-based Hinrich Foundation.

“From a corporate governance perspective, multinational companies and individuals will find themselves increasingly whipsawed.” Tell us how investors and companies can navigate such an environment without taking on undue risk.

Savio: Go in with eyes wide open, with a recognition that there are risks, of course, but knowing that there are ways to manage and mitigate them. That goes back to being informed and having an understanding of the policies that are leading to these trade restrictions, and then also understanding the ways in which these different measures overlap, intersect or, in some cases, are completely different from one another There are many different U.S. agencies involved in administering laws that impact the relationship with China and the activities of U.S. companies in China. I’ve already mentioned the Department of Commerce, which administers the export control rules and the Entity List and the Department of Treasury, which administers the sanctions laws, including the SDN List and the CCMC List. The Department of Defense and the State Department also play role in export control and sanctions issues.

It’s really important for companies to understand who their business partners are, and to be equipped to comply

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with varying restrictions that may exist on those

have been more subdued in recent months. On January

business partners. It’s critical to do a screening and

9, there was an issuance of blocking measures by China’s

diligence of your transaction to evaluate whether your

Ministry of Commerce, which has been interpreted as

counterparty is subject to U.S. trade restrictions and to

China’s response to the recent proliferation of U.S. sanc-

analyze whether it might become so in the future.

tions and the export control restrictions. The important

Once you’ve gone through that screening process, if you

thing to note about these blocking measures at the outset

determine that your counterparty, or someone involved

is that it remains to be seen how the Chinese government

in your transaction, is on one of these restricted party

will enforce them. These blocking measures are not com-

lists, it’s crucial to understand what that means for you

pletely uncommon or unusual, and the European Union

and your company. As I noted earlier, jurisdiction applies

and Canada and other jurisdictions have similarly worded

in different ways, and the restrictions can be quite broad –

blocking measures that target extraterritorial laws that

amounting to a blacklist and a prohibition on doing

are deemed contrary to international law and impact the

business with the company at all – or they can be quite

activities of their companies.

nuanced and particular. Not all of these lists are created equal, and not all of the restrictions and jurisdictional

As an initial matter, the China blocking measures are

bases are the same. For this reason, the fact that a counter-

targeted at understanding the ways in which Chinese

party is on a particular list can have a tremendous impact

companies are being impacted by extraterritorial laws.

on a transaction or no impact at all.

The rules impose an obligation on Chinese companies to report foreign laws and measures that restrict or pro-

Beijing issued new rules on foreign sanctions meant

hibit them from engaging in certain economic activities.

to protect local firms from “unjustified” overseas

The Chinese government will take the input from these

enforcement actions by allowing Chinese citizens or

companies and potentially issue blocking measures

companies to sue for compensation in Chinese courts.

that will create a prohibition on complying with certain

Observers differ on how serious this action is. “The

extraterritorial laws. Now, it remains to be seen which

new rules are more than anything a signaling mecha-

laws could be captured within that blocking order. On its

nism to both Chinese companies and U.S. companies

face, the China blocking measures could be read to only

in China. We now have a legal ability to counteract the

cover secondary sanctions laws, which are, from the

long arm jurisdiction of U.S. domestic law,” said one

U.S. perspective, laws that don’t require any U.S. nexus

analyst of Chinese politics and economics. What, if any,

for the U.S. government to assert jurisdiction and take

lasting impact will such “signaling” moves have?

enforcement action.

Savio: This is an interesting and important development

There’s a significant amount of discussion and commen-

on the China side. The actions coming out of the U.S. have

tary as to what might come down from the Chinese side.

been fast and furious, but the reactions on the China side

I believe it will depend in part on the Biden administraCORPORATE COUNSEL BUSINESS JOURNAL

45

tion’s articulation of its policy toward China, and how it

upside of which can be huge if companies look at them in

may or may not adjust the temperature with respect to

the proper context and are equipped to understand and

U.S.-China relations. China, meanwhile, will be obtaining reports from its companies as to the precise impact that they’re experiencing as a result of extraterritorial laws, and it will make decisions accordingly.

manage the risk. Obviously, there is a great deal at stake for both the U.S. and China in terms of the trajectory of the relationship. When pursuing business opportunities, it’s important to navigate the parameters effectively. This

If you could give one piece of advice to skittish

can be done by being informed, having good advisors,

investors and businesses focused on the region,

ensuring that you have a good process for identifying and

what would it be?

analyzing potential risks, and undertaking measures – whether via contractual safeguards, compliance reviews,

Willems: Realistically, investors and businesses need to

or other mechanisms – to ensure you don’t run afoul of

realize that the tension in this relationship is here for the

ever-changing U.S. legal requirements. 

foreseeable future, and they’re going to have to proceed with eyes wide open, and really make sure that they are accounting for these risks and protecting against them, so that any damage that occurs can be mitigated. But you need to be realistic and realize that this is the world we’re going to be in for a while, and the smart move is to be prepared, and to take action in advance to be able to mitigate any consequences from that tension.

The second point, which I hear from companies and from investors, is that this disruption can also create opportunity. You have many things changing in the region, and you need to try to understand the trends, predict the trends, and take advantage of them.

Savio: From my perspective as a trade lawyer advising on the application of U.S. law in Asia, I think that companies and investors need practical tools to navigate investment opportunities and business transactions in China, the 46

MARCH • APRIL 2021

Tatman Savio is a registered foreign lawyer with Akin Gump in their Hong Kong Office. She counsels clients on the extra-territorial impact of U.S. law and policy affecting international trade and business. She also represents clients in U.S. government investigations, internal investigations and compliance matters. Reach her at tatman.savio@akingump.com.

Clete Willems is a partner with Akin Gump. He advises clients, including investors, trade associations and multinational companies, on international economic law and policy matters.

Willems previously served in the White House as deputy assistant to the president for international economics. Reach him at cwillems@akingump.com.

The Next Generation of ESG Disclosure Consumers

Allison Wood: If you went back 10 years when the Carbon

 Investors are increasingly applying environmental,

social and governance factors in analyzing risk and growth opportunities. In this interview, McGuireWoods partners Aaron Flynn, Allison Wood and Katherine DeLuca discuss the growing demand for ESG disclosure and how disclosure requirements could change in the Biden administration.

Disclosure Project first came out, you could just ignore it if you were a company and not complete the questionnaire. You can’t ignore ESG now. Failing to report or to say anything is bad for your company. This is something that a company now has to grapple with and needs to give real thought to regarding what they are disclosing – not just environmental issues, but also the social and governance aspects. What are they thinking about how climate change

CCBJ: In a recent report, the CFA Institute noted that we are entering “a true mainstreaming phase of ESG investing” and that the COVID-19 pandemic has intensified discussions around sustainability. The credit rating

is going to impact their business in the future? What are they doing around diversity and inclusion? What is their carbon footprint, and what are they doing to try to minimize it? Those are the types of questions that companies now have to answer.

industries are now issuing ESG scores. How is the growing demand for ESG disclosure changing reporting practices and expectations for public companies?

Aaron Flynn: When we first started talking about ESG and the companies that were making disclosures, we were talking about industrial sectors like oil and gas, coal, electric utilities – companies that had a lot of experience dealing with emissions reporting and environmental issues in general. As the scope of ESG expanded to include not just environmental impacts, but also social issues and activities that affect your supply chains, more and more companies have been pulled into this space. So it is not just energy companies that are doing ESG reporting. It’s retailers, grocery stores, banks – every company is being touched by this issue now, one way or another.

And because ESG funds have performed much better than traditional funds and investments – especially during the pandemic – companies want to be candidates for inclusion in an ESG fund.

Katie DeLuca: Public companies are getting a lot of pressure from institutional investors who are starting to demand ESG disclosure, and this pressure is no longer just coming from investors. They also are getting these questions from their customers, for example. So you see a lot more companies doing ESG reports, which are separate documents that are not filed with the SEC-required documents. I have seen a lot more public companies and even non-public companies that have ESG reports posted on their websites. That is in response to a variety of different constituencies; it is not just shareholders anymore.

Different constituencies want different types of ESG information. Without uniform reporting requirements, companies are using voluntary reporting structures to disclose sustainability information to investors. What are some key considerations for companies in striking a balance between disclosing ESG information and minimizing risk?

DeLuca: I talk about this a lot with my clients. If a company is going to publish ESG information, anything from carbon emissions to workplace diversity, it is very CORPORATE COUNSEL BUSINESS JOURNAL

47

important that they clearly describe how the numbers

a question about the accuracy of the numbers or how they

are calculated, what is included, what is excluded and any

were calculated. The last thing a company wants to do is

important exceptions or exclusions they make in a given

to be accused of “cherry-picking” their numbers or some-

period. It is important that the statistics are calculated consistently across periods, and if there are any special, one-time adjustments, they need to identify them. You don’t want an investor or any other constituent to characterize the numbers as false and misleading. Even if a public company is making disclosures on its website or outside of its SEC filings, those statements are also subject to liability under the security laws, so you can’t be materially false and misleading.

Also, it is important that companies keep backup for

how tinkering with them to make themselves look good.

Wood: There is a cautionary tale that exists about making sure you are consistent in terms of how you are characterizing ESG information. The company in question had used one metric for evaluating the social cost of carbon – putting a price on carbon in their public ESG reports – but used a different, much higher number internally when they were assessing their climate risk. This was disclosed and was obviously not a good situation for that company. It highlights the

these numbers and that appropriate procedures are put

importance of being consistent and making sure that every-

into place to make sure that they are accurate and consis-

thing you are doing within the company works together, and

tent and that the backup is preserved in case there is ever

that you can’t be accused of “cherry-picking,” as Katie said.

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I think there is a chance this rule will be revoked through

We have this “whole-of-government” approach to climate and environmental issues coming our way.

the Congressional Review Act or modified substantially through the regulatory process because most of the constituencies for the Democratic Party and this administration do not support it. The practical effect of repealing it will be to make ESG products even more appealing.

And the other thing you need to know when you are doing

What other regulatory developments are you

your ESG reporting – even beyond your formal reporting

monitoring that could trigger major changes in ESG

on SEC documents – any types of statements that you

disclosure requirements?

make on your company website are going to be scrutinized.

You can’t make certain pledges on your website or commitments and not be backing them up with some action.

The SEC’s Investor Advisory Committee recommended last year that the SEC amend its reporting requirements to include ESG factors. Is the SEC likely to require more rigorous reporting under the Biden Administration?

Aaron Flynn: This rule is really all about what type of investments are permissible in plans governed by ERISA. The rule puts some guardrails around whether ESG funds and ESG investments can be a default investment for ERISA plans, or whether they can be included even just as an option. The emphasis of the rule revision was to put the primary focus of these investment decisions on pure, black-and-white financials and not on more qualitative environmental, social and governance-type considerations. This is a rule that was unpopular with the financial industry, because it places additional burdens on investment companies looking to promote or offer ESG funds to

Wood: To date, most reporting is strictly voluntary and has been done through a myriad different platforms. One of the things that we are seeing right now and that we are monitoring for clients is that a lot of the voluntary reporting platforms are coming together to try to come up with a uniform reporting structure. If that occurs, it may well be something that the Biden administration then endorses through some type of regulatory mechanism – be it through the SEC or another way to require that a uniform structure be used.

This will be good for companies in a lot of ways because, right now, there are so many voluntary structures that a lot of companies end up reporting multiple times through multiple different voluntary platforms. When that happens, you run a risk that the ways in which the different platforms calculate emissions can end up with different figures. That’s problematic because of Katie’s earlier caution about making sure you’re being consistent in how you report your ESG information.

their customers, but there were other industry groups that

Flynn: We’re going to see a lot of new regulation related

did support aspects of the rule. It was also unpopular with

to climate and environmental justice coming out of this

environmental groups, because it was viewed as under-

administration. It’s going to come from EPA, it’s going

mining efforts to raise the profile of ESG issues.

to come from the Department of Transportation, from CORPORATE COUNSEL BUSINESS JOURNAL

49

the Treasury Department – all over the place. We have

DeLuca: It’s going to be interesting to see how much of

this “whole-of-government” approach to climate and

this will be driven by rulemaking or if the SEC will instead

environmental issues coming our way, which means a lot of companies that have not had to deal with substantial regulations from EPA, that don’t know what it’s like to

use the comment letter process and issue guidance indicating that issuers should be including more ESG

be targeted by some of these environmental rules, are

disclosure in their filings. There’s also already a pri-

going to experience this for maybe the first time. They

vate ordering occurring, similar to what happened with

are going to have to incorporate those new regulato-

proxy access, which may mean that the SEC doesn’t need

ry risks into their disclosures, either with the SEC or

to dictate disclosure by the rulemaking process. For ex-

through these more voluntary ESG platforms.

Looking ahead, do you expect ESG disclosures to be

ample, you’re seeing a lot of companies including human capital disclosure and social justice topics in their proxy

driven more by investor demand or perhaps I should

statements – and it’s not because the rules require it, it’s

say market demands or by regulatory requirements?

because investors want to see it. 

Wood: To date, a lot of the disclosures have been driven more by investor demand. We’ve talked a lot about how increased regulatory requirements will drive more disclosure, but I don’t think that will stop investor demand. You’ve seen a lot of large institutional investors requiring companies to produce more ESG information. You see where large institutional investors are forcing boards of directors to have more people on the board with more of an ESG focus.

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MARCH • APRIL 2021

Aaron Flynn is a partner with McGuireWoods in their Washington D.C. office. He represents utilities, national trade associations, oil and gas companies, and manufacturers in environmental litigation and regulatory matters across the country. He focuses on reducing clients regulatory burdens under the Clean Air Act in particular. Reach him at aaronflynn@mcguirewoods.com.

Allison Wood is a partner with McGuireWoods in their Washington, D.C. office. She is nationally recognized as a leader in the field of environmental law, particular in the area of climate change. She assist clients with complex and politically charged precedentsetting cases before the U.S. Supreme Court and several Courts of Appeals. Reach her at awood@mcguirewoods.com.

Katherine DeLuca is a partner with McGuireWoods in their Richmond office. Her practice focuses on compliance with federal securities laws, mergers and acquisitions and corporate governance. She assists public companies with registered offerings of securities and collaborates with large and small public companies on their periodic reporting, proxy solicitations, shareholder communications. Reach her at kdeluca@mcguirewoods.com.

Reckoning with the Size, Scope And Power of Social Media Giants

 Bob Fay, managing director of digital economy research and policy at the Centre for International Governance, discusses the Federal Trade Commission’s pending antitrust lawsuit against Facebook, as well as broader issues around data privacy, competition and regulation in the digital age.

CCBJ: Please explain the background and potential effects of Facebook’s purchase of Instagram and WhatsApp. The Federal Trade Commission (FTC), for instance, has brought an antitrust lawsuit against the social media giant, claiming that it has harmed competition by buying up these smaller companies.

Bob Fay: Last summer, the Committee on the Judiciary released a very comprehensive report on the state of online competition. It brought out a number of very

The real power of Facebook today comes from its treasure trove of data and its control over it. billions of dollars in cash that they have amassed through their economies of scale, scope, network externalities and first-mover advantage. And they can use this cash like a venture capital fund: to take out the competition. In fact, one arm of their operations is essentially a venture capital fund. We know about the public takeovers such as WhatsApp and Instagram. What we know much less about are the takeovers of small innovative private firms that might have had the potential to bring substantial competition: those companies that enter the kill zone.

These takeovers could have serious implications for innovation, welfare and consumer choice.

important points, focusing on the role of digital platforms as gatekeepers (Google for search, Apple for apps, Amazon as a sales platform, Facebook for social media) and their ability

What has this lack of competition meant for consumers?

to control markets. It also discussed broader issues including

The FTC alleges that “this course of conduct harms

for a free and diverse press, innovation and privacy.

competition, leaves consumers with few choices for personal social networking, and deprives advertisers

The FTC’s lawsuit is much narrower than these issues:

of the benefits of competition.”

It alleges that Facebook’s purchases of Instagram and WhatsApp have essentially led to less competition in the

What does that actually mean?

marketplace than would otherwise have been the case. Instead of competing, Facebook chose to purchase these emerging

A very concrete example is in Germany, which is also

threats. In other words, instead of innovating and competing,

currently suing Facebook. The lawsuit essentially says that

it chose an action that ultimately leads to less innovation

according to the service/consent agreement consumers

overall and has negative implications for consumer welfare.

are forced to allow Facebook to combine their data from its various platforms, and if a consumer refuses this consent,

The takeovers raise the very important issue of “kill

they do not have access to any of the platforms – i.e., it is all

zones.” Social media platforms like Facebook sit on

or nothing. What appears to be a choice is no choice at all.

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How do you think the U.S. Federal Trade Commission’s lawsuit against Facebook will play out?

If history is any guide, it will be a long, drawn-out

We need to be more creative in how we view consumer harm in the digital age.

process. And over the ensuing period, Facebook will further entrench its market position not only through the

others’ use of it. Even if one could argue that data

continued integration of its platforms but also through

that results from their algorithms is proprietary,

the acquisition of data – and this is the point that really

it isn’t clear at least to me that the data gathered

needs to be stressed. Data gives the platforms their

as part of user engagement should be. Opening up

power. Even if ultimately WhatsApp or Instagram could

data would allow smaller companies to scale and

be split off, Facebook will still have enormous data troves

compete since lots of data is required to develop the

(as would the spinoffs).

algorithms that are the basis of the platforms. In a related point, the personal data treasure chests allow

If this lawsuit is successful, what would the breakup of

Google and Facebook to expand their market power

Facebook look like for platform competition?

via revenues they get through targeted advertising.

There is a need to address the concentration in this

The FTC has not announced what remedies it would seek,

market too, as the House Committee noted. And their

though a breakup could be one possibility. But I am not

data stores could give them large market power in

convinced that a breakup would meaningfully increase

other markets too – e.g., financial services provisions,

platform competition. I think there are other actions

if they move more determinedly there, so we need to

that would need to be taken to generate competition and

think about the broader implications of these data

consumer choice, which would ultimately benefit society

hoards for competition in other sectors.

more generally.

• Can you elaborate on that a bit?

Another option that is often discussed is data portability – i.e., allowing consumers the right to port their data to another platform. But where would a

The real power of Facebook today comes from its treasure

consumer port the data to? Would there be a platform

trove of data and its control over it. That is what needs

that meets a desire for greater privacy for example? In

to be addressed. Creating more competition requires the

today’s environment, would the option of portability

opening up of the data held by Facebook. This could be

necessarily lead to the rise of an alternative platform? I

done in a couple of ways:

don’t think so. We need a focus on system interoperability, ensuring that social media platforms can talk to each

•

Split off the data from the platform and allow other

other seamlessly, in ways that are transparent to the

firms to access it. Some argue that the data is the

end user, in addition to data portability.

intellectual property of the firm, so this can’t be

52

done. I am not convinced. But in any event, data is

Second, even as we deal with how to regulate data, we

non-rival: Facebook’s use of data does not preclude

need to be more creative in how we view consumer

MARCH • APRIL 2021

harm in the digital age. Clearly, the impact on prices will always be important, and prices and consumer welfare are inextricably linked. But in the digital world, this is an insufficient focus, given that what is taking place is the barter or exchange of data for digital services. People may not realize what they are actually bartering or the “implicit” price that they are paying in the barter. Some examples: •

Individuals use of a digital platform releases their private information, and there is substantial opaqueness around this release and the implications of how the personal data is used. Any notion of prices would have to take this into account – in effect quality-adjust the price.

•

Moreover, an individual’s use may also reveal information about others that they interact with on the platform who have not given permission to platforms for use of their data. What is the “price” that they pay?

•

stakeholder approach – input from government, the platforms, civil society, businesses and consumers.

Fourth, and related to the above point, the focus on Facebook and competition is too narrow. Antitrust actions will not likely deal with the greater societal harms that are becoming increasingly apparent with social media platforms. Would we expect a breakup of Facebook to deal with the harms that arise to democracy from the amplification of information by the underlying algorithms designed to keep users engaged? We have just seen this play out on the streets of Washington, D.C. Conversely, aggregated data can be used to drive innovation and will impact all sectors of the economy.

And it can be used for social good. The question, though, is how to balance individual rights versus societal good.

Finally, we need a new concerted focus on digital technologies both nationally and globally. Tom Wheeler

How should this externality be compensated?

and Gene Kimmelman have

As the FTC notes, harm could result from consumers

Platform Agency in the

being left with fewer choices, or as the German case points out, binary choices.

Third, greater antitrust enforcement is a necessary but not sufficient condition for more competition. We need comprehensive actions that cover many dimensions. We need standards for data portability, use, consent, system interoperability and so on. We need more effort on data and artificial intelligence governance. We need to think about the intersection of data and artificial intelligence governance with competition, privacy and with innovation.

argued for a new Digital U.S. that is antitrust based and digitally focused. But platforms like Facebook operate globally, and there are shared concerns across countries. At the same time, there are very different national values and regulatory approaches, and we need to find a way to reconcile or at least

We need to experiment with different regulatory

recognize them. At CIGI

approaches. We can do this via sandboxes, as has been done

we have argued that a new

in financial regulation reform to ensure that regulations

global organization is

achieve their intended goals and that compliance costs

needed for global digital

are minimized. And it will necessarily require a multi-

governance. 

Bob Fay is the managing director of digital economy at CIGI. The research under his direction assesses and provides policy recommendations for the complex global governance issues arising from digital technologies. He brings to this position extensive experience in macro- and micro-economic research and policy analysis. Reach him at bfay@cigionline.org.

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APRIL 2021 CORPORATE COUNSEL BUSINESS JOURNAL

A

Intellectual Property

Keeping Pace with Ever-Evolving Intellectual Property Disputes wait-and-see approach (nor should they) before trying to

Betty Chen, principal with Fish & Richardson, talks about

gain a market foothold. Instead, I think we’ll see prominent

the potential impact of widespread 5G rollouts on global

players engaging in an arms race to build their own

patent litigation, how clients are addressing SEP and FRAND

Standard Essential Patent (SEP) portfolios so that they

issues, and where she sees these trends going in the future.

have assets of their own to deploy should they be drawn into a 5G patent dispute. One trend that could soon reveal

CCBJ: The next major wave of global patent litigation

itself, however, may involve companies and products that

is expected to focus on 5G. How do you think that will

are not immediately associated with the telecom industry

affect the rollout of 5G technologies, and which industry

being drawn into SEP and fair, reasonable and non-dis-

sectors are most likely to be impacted?

criminatory (FRAND) litigation as easier initial targets.

For instance, startup companies developing autonomous

Betty Chen: There is a substantial threat of prolific 5G

vehicles or home products may find themselves at the cen-

patent litigation, but I don’t believe that will stop the rollout

ter of standards-based patent litigation to the extent their

of actual technologies at all. Nobody is going to take a

products/services may be alleged to depend upon evolving CORPORATE COUNSEL BUSINESS JOURNAL

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5G technology, especially if the company itself lacks a

been subject to significant efforts to achieve harmonization

portfolio of patents sufficient to serve as a counterweight

across international jurisdictions, legal precedents

against entities that have played in the telecom space for

concerning FRAND royalty rates have developed differ-

a longer period of time.

ently and – from some perspectives – discordantly. This divergence can make it difficult to develop consistent and

You do quite a bit of work for major telecommunications

coherent licensing and negotiating strategies that work

and consumer electronics companies. What common

across borders.

concerns do you see among these clients regarding SEP and FRAND issues, and how do you address them?

Another concern that seems to persist, regardless of jurisdiction, is that the framework for pricing FRAND licenses

An ongoing concern for companies who do business

has not yet reached the level of stability or predictability

globally is to develop FRAND strategies that are consistent

that companies would prefer. Some of the more seismic

and workable across international borders. Although there

shifts in patent law that I have seen over the years are

are certain areas of intellectual property law that have

those affecting the nature and scope of a patent holder’s

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MARCH • APRIL 2021

It can be difficult to develop consistent and coherent licensing and negotiating strategies that work across borders.

What other major trends do you see on the horizon for 2021 and beyond?

I foresee a few major trends, one of which is driven by the 5G rollout itself and another that is wholly powered by externalities.

available remedies. This goes for patent litigation in many technology areas, but it is acutely true for litigation

The first is that if the U.S. 5G rollout proceeds fast enough

based on SEP portfolios.

to make litigation worthwhile, we may well see an increase in active litigation or arbitration of 5G patent

Fish is one of the top firms for handling complex, high-

portfolios. The current coronavirus pandemic has not

stakes technology disputes. How is the firm innovating in

necessarily depressed revenues or profits across the telecom

this space, particularly regarding SEP and FRAND disputes?

industry, as numerous companies are still seeing solid demand for their products. For those companies whose

I can think of several examples. From a purely practical

market share may have suffered, however, there will be a

perspective, Fish has spent the last decade developing

temptation to utilize patent litigation as a means to gain

new pricing models aimed at creating better client-firm

that share back or even to improve their existing posi-

alignment, increased value and superior overall outcomes.

tion against rivals. SEP patent owners in particular may

Given the sheer volume of cases Fish handles, we now

be encouraged to file damages-oriented suits in the U.S.

have significant data that we can use in patent cases, with

due to the continually evolving law surrounding FRAND,

pricing informed by a wide array of factors, including the

particularly more recent developments casting FRAND

nature of the technology (SEP, for example), venue, parties

as a jury issue rather than an antitrust problem.

and, of course, client objectives.

The second is that although we are also in the midst of We are also always looking to turn our firmwide thought

a national COVID-19 vaccine rollout, no one yet knows

leadership on FRAND jurisprudence into actionable

exactly how fast that effort will proceed or when we will

strategies, even if that means taking a shot at making new

get back to “normal.” Courts that have had to curtail op-

law. When you see Fish attorneys offering commentary on

erations due to health concerns will likely face a jury trial

new directions SEP and FRAND disputes might take, it’s

deluge in the latter part of 2021, and civil trials concerning

not just an academic exercise. You can bet they are already

patent disputes likely will be of lower priority than other

thinking about how to shape the evolving landscape and

cases, especially criminal matters, that are backlogged on

help our clients navigate it.

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to trial during this interim period are matters pending

to succeed. It’s therefore incumbent upon me to lead by

before the International Trade Commission, as well as cases

example and to help

brought under the Hatch-Waxman Act, since bench trials

position my colleagues

are logistically far easier to conduct than jury trials.

and mentees to achieve their own success. I often

You are one of the youngest leaders at Fish, and you were

think back on ways I was

the first minority woman to serve as the firm’s global hiring

trusted and supported by

principal. How does your unique perspective influence

my mentors, and I try to

the way you approach your work and serve your clients?

support our more junior attorneys in those same

Fish has a very strong culture of camaraderie and mentorship,

ways, specifically by

and the firmwide mentality is appropriately described by

ensuring that litigation

the credo “nothing will work unless we do.” That’s a motto

teams are diverse and that

that I personally endeavor to live by as well.

major standup opportunities are given to

In that spirit, the firm has certainly given me opportunities 58

MARCH • APRIL 2021

diverse associates. 

Betty Chen is a principal at Fish & Richardson P.C. in Silicon Valley, CA, where she regularly handles high-stakes and high-profile patent, trade secret, antitrust, breach of contract, and fraud lawsuits, among other matters. Reach her at bchen@fr.com.

Protecting Your Company’s IP: Winning Strategies in Changing Times

watching, is who's going to replace Director Iancu at

 Rachel Elsby is a partner with Akin Gump’s Intellectual

Property Practice and holds a Ph.D. in immunology. In her role, she focuses on biotech, biologics and medical devices. Here she discusses the current state of patent litigation, shares insights on collaboration within the pharmaceutical and other healthcare organizations, and outlines best practices for engineering and maintaining a strong IP portfolio.

The COVID-19 pandemic has been a great example of our system working well. What has the landscape been within patent litigation and appeals to the federal circuit court of appeals? And what if any changes do you anticipate with the Biden administration?

Rachel Elsby: We've seen an uptick in patent litigation

the Patent and Trademark Office (PTO). Director Iancu did a number of things to improve processes at the PTO, improve examination of patent applications and bring more balance to inter partes review (IPR) proceedings.

I'll be watching who takes on that role under the Biden administration, and whether they’ll continue to pursue the initiatives that Director Iancu initiated.

What do you anticipate down the road with the COVID-19 vaccine?

From the perspective of a patent lawyer who focuses on the biotech industry, the COVID-19 pandemic has been a great example of our system at work. Biotech and pharmaceutical companies rushed to action in response to the

over the last year, even though we've been in this pandemic, and I believe that's going to continue at least in the short term. I also think we'll see more of a shift to Biologics Price Competition and Innovation Act (BPCIA) cases and competitor versus competitor biologics litigation, with even fewer Hatch-Waxman cases.

In terms of the Federal Circuit, I anticipate that we'll see some turnover in judges in the next few years, and we're also going to have a new chief soon. How that will impact the court, I'm not sure. Patent issues do not tend to cut along political party lines, so it is hard to predict whether a judge appointed by Biden will bring a pro-patent perspective. One thing to watch is whether the court will be more willing to hear cases en banc. There have been very few cases taken en banc over the last couple of years.

In terms of the Biden administration, I'm not sure that's going to have as much direct impact on patent law, at least not President Biden himself. But the one thing I'm CORPORATE COUNSEL BUSINESS JOURNAL

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public health emergency, setting up new partnerships, developing new technologies, engaging in new licensing agreements, and really being collaborative in the process.

I focus on the pharmaceutical industry because that's my practice, but it's happening in other industries as well.

It's remarkable to see this sort of activity in the pharmaceutical industry, and, as we look forward, that work will probably translate into new and better medicines. And I hope patent law is able to provide the protection these companies need to continue to invest in research and development, so they're able to respond in a similar way to future public health emergencies.

You regularly represent some of the world's most innovative companies like 3M and Bristol-Myers Squibb (BMS). What are some of the best practices companies can adopt to protect and secure trade secrets and protect intellectual property The companies that protect their IP the best do so through a combination of mechanisms, including patents and trade secrets. Those companies also implement their policies consistently over time, and have great communication between the legal department and the scientists and engineers who work on developing new technologies. I'm not sure you need a precise practice. The key is using the appropriate means of protection, being consistent in how you implement your practices, and maintaining open communication within the company. You mentioned 3M and BMS, two companies that exemplify what it means to have a collaborative work environment, which is a key element in establishing and maintaining a strong IP portfolio.

Please tell us about willful infringement, as it relates to patent law and litigation. What should our readers and their colleagues understand about this element of patent law and litigation?

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MARCH • APRIL 2021

Willful infringement gets a lot of attention in patent litigation, because it has the potential to result in enhancement of damages of up to three times what a jury or the court awards for actual damages. The important analysis under current law for willful infringement focuses on the subjective beliefs of the accused infringer. In some ways, this goes back to your question about best practices. It's setting up practices internally, so if you find yourself in litigation you have the proofs in place to show that you acted reasonably. Have you set up enough of an internal system to address when you learn about IP that may be a concern for your company or for technologies you're developing?

Can you show you took the proper steps to address that?

Is there anything we missed?

I would be remiss if I didn't mention the importance of diversity in our profession. Investing in our junior attorneys, building diverse teams, and making sure everyone has an opportunity to develop is crucial. It makes our teams stronger and better at what we do. I've certainly benefited from opportunities that were provided to me throughout my career. BMS, for example, was a company that trusted me and gave me Rachel Elsby is a partner with Akin opportunities when I did not Gump in their Washington, D.C. have that much experience. office. Her practice concentrates on I would not be where I am patent litigation and appeals to the Federal Circuit Court of Appeals. She today without those opporrepresent clients in a broad range of tunities. I feel like all of us, sectors, with focus on biotechnology, as we become more senior biologics and medical devices. She hold s a ph.D. in immunology. Reach in our careers, have an obliher at relsby@akingump.com. gation to pay that forward to the next generation. 

Ops Expectations For the Legal Industry Moving Forward Jonah Paransky, executive vice president and general manager of Wolters Kluwer’s ELM Solutions, reflects on the effects COVID-19 will have on the legal industry moving forward, as it relates to diversity, alternative legal service providers, and what he’s both concerned and excited for looking ahead.

CCBJ: At a high level, what effects do you expect COVID-19 to have on the legal industry in the near term and moving forward?

Jonah Paransky: I expect to see acceleration of all the trends we were already seeing before the pandemic.

In particular, on the professionalization of the legal department, I think there will be an increased focus on cost optimization. All the major trends related to spend control will continue, and many will become more important under the pressure of our current and near-term environment.

Those leveraging technology in these efforts, and who have a comfort with using technology, will clearly be in a good position coming out of the COVID-19 pandemic.

The willingness for corporate law departments to adopt technology certainly has increased in this environment.

Before early 2020, if you had told corporate legal departments that they could relocate all of their employees to work from home using technology, they would have full on laughed at you. Now that organizations have proven they can drive acceptance of technology and don’t need to be technology laggards, I think the biggest question that will come out of this time is whether that can accelerate.

On the law firm side, there may be a remix of roles within the firm. They have always relied upon significant staffing support for practicing attorneys. Suddenly, they're working remotely and attorneys are managing to do more of the work themselves, so we may see a shift in investment CORPORATE COUNSEL BUSINESS JOURNAL

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inside of law firms between prior staff roles and other functions. I think law firms may also be more comfortable with the idea of investing in technology than they were in the past because they've seen the benefits during this time.

I don’t expect that one day, all of a sudden, COVID-19 disappears and six months later we're back to exactly where we were before. For corporate law departments, how they are doing depends partly on how the company is doing overall. Certainly, there are corporations that are in big trouble. However, legal is largely a white-collar profession that can be done from home. It's weathered the crisis significantly better than some other functions or sectors of the economy, broadly speaking.

During this last year, what has changed about the role of the legal function?

Certain kinds of lawsuits are down, others are up, depending largely on the industry you're in and what's going on in your environment. And so, to me, it’s more useful to think about the bigger trends. Any time there's a strong economic crisis, corporations push legal to be more efficient. Legal's influence on managing risk has become more prominent through this because legal teams have been incredibly involved in managing reopening risk and backto-office activities. So legal's seat at the corporate table may have become more influential through this crisis.

What do you think it the future of the distributed, remote workforce in legal?

Technology adoption has proven that you can keep the lights running. Has it proven that you can take first year associates and turn them into second and then third year associates in this environment, with the right level of learning and management on the law firm side? I don't think anyone knows yet. Nor do we know whether it’s possible to grow good corporate attorneys when everyone is remote.

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MARCH • APRIL 2021

At this point we haven’t re-imagined legal to be a fully distributed enterprise. As we all start going back to offices, it will be fascinating to see how that shakes out.

However, much of the legal profession assumes a significant amount of in-person interaction, and I'm not sure we will get away from that when the culture flips back to having some set of people in the office. We'll see. I do think the model where employees work a couple of days each week remotely and a couple in the office will be popular for a while as people start thinking about how to run teams that are more remote.

What about diversity in the legal industry?

We’ll see an increase in the focus on diversity in legal, driven in large part by corporate diversity programs.

In particular, corporate programs that look at vendor diversity in addition to their own internal team’s diversity, will have lasting and meaningful continued impacts on law departments. I see that pressure increasing. Sometimes this work is done in conjunction with procurement, sometimes it's done separately. As these programs continue, corporations put out corporate diversity reports, and there's additional focus on the subject, outside counsel spend will fortunately be a part of that.

There is continued realization that diverse voices at the table drive better outcomes. I would make the argument that this is no different in the legal function than anywhere else. There is radical under-representation of many demographics, particularly in senior legal circles, and that needs to change.

Will the changes in legal be likely to make alternative legal service providers (ALSPs) more popular with corporate legal departments?

I think there are a couple of possibilities for how that could go. One is that corporate legal departments recognize

the efficiency of employees working remotely from their headquarters, but they may still want teams together in an office. So, there could be a continuation of the trend to hire attorneys in lower cost markets. ALSPs are one possible version of that, but there's also an in-house version of that paradigm, where companies can save on costs by putting a big percentage of the corporate legal offices in less expensive communities. We will likely see continued acceleration of these options to optimize legal costs, but which method wins depends on the organization. I think there is likely to be a broad mix.

How will expectations of the legal function be different in a post-COVID-19 industry?

In 2020, you could be a hero just by keeping the lights on. In 2021, though, you need to have a plan. This year, you really should have taken the learnings from 2020 and built a plan to meet your corporation’s needs in 2021 and beyond. So, if the company is uncertain about its profitability, what's your plan to save money? If your corporation needs to prepare for major litigation, how are you staffing up? For 2021, your plan has to be more than to keep doing what we're already doing.

The reality is, while we're seeing light at the end of the tunnel, we are not likely to be back to normal in the first half of the year, and economic conditions will continue to be incredibly uncertain. In a time of uncertainty, what companies want is options about where they place their bets. The question for the law department is how do you, as a department, help provide more options and manage the risk profile better?

What can law departments do to prepare for future unknown risks or disasters?

Every corporation has run exercises for years around the unexpected stuff that can throw your company into chaos.

Many organizations didn’t take this particularly seriously with respect to the types of big, unexpected risks that we've seen in

this last year. So, at least for a period of time, people will start taking that work more seriously. In my experience, the reality is that organizations quickly forget and stop preparing. So, the key is ensuring that we do not forget and do not stop.

What are you most concerned about for the legal community?

The most difficult thing is the continued uncertainty of the environment we're working in, combined with a desire for an accelerated return to normalcy. It adds execution risk for everyone. We have to both keep going in our current mode and figure out how to get back to normal at the same time, which is a genuine challenge. We also don't know what will happen to the economy after the pandemic. Legal is a broad industry that tracks broad economic trends, so continued economic contraction isn't great for legal, just as it isn't great for anybody else.

What are you most excited about for the legal community?

I’m excited for the continued realization that attorneys, and organizations with many attorneys, can figure out and embrace technology. So many of the goals of law departments and their parent organizations can be met through adoption and smart use of the right technologies. As comfort with tech grows among Jonah Paransky is executive vice all of the team members president and general manager of ELM Solutions. In this role, he is responsible in the legal function, for leading the overall performance they are positioned and growth strategy of the business to make strides and unit globally. Reach him at jonah.paransky@wolterskluwer.com. accelerate the progress they’ve been making.  CORPORATE COUNSEL BUSINESS JOURNAL

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Elevating the Role of Contracts Within the Enterprise

 Eric Laughlin, CEO of Agiloft, talks about the

evolution of contract lifecycle management, how the pandemic has heightened awareness of blind spots that many companies have around contracts, and why the most successful organizations think of their contracts as “relationship DNA.”

to be supercharged in terms of sales and marketing and alliances. So after working with the founding team, I helped them raise capital – and then I joined as CEO. Tell us what solutions Agiloft offers enterprises in their contract management process.

Eric Laughlin: I’ve spent my career in legal tech and in tech-enabled services, and over the years, I’ve worked with legal departments undergoing transformation – and that’s what gets me excited. I see the possibilities when legal departments embrace modern approaches to processes, and particularly contracts. And that’s what I want to be part of. Agiloft was particularly attractive to me because of its contract lifecycle management platform, which is our core offering. We don’t think of it as legal tech, but rather as enterprise technology. We’re on a mission to elevate the contract and make it a firstclass citizen within the enterprise. To do that, we offer enterprise-grade software that connects contracting professionals to their internal clients. It allows them to fully embrace contracts as data, not just as documents.

At its core, our platform is a contract lifecycle management (CLM) software platform. It really is fully featured, end to end, all the way from requesting contracts to authoring contracts – meaning collaboration and clause libraries, playbooks, routing approvals and signing contracts, contract repository, and analytics on top of that repository. And then there’s the ability to manage your obligations that underlie the contracts in the system. Under the hood, we’ve developed robust artificial intelligence that rivals anything in a legal engine. And the amazing thing is that underlying our CLM application is the Agiloft platform itself, which takes a no-code approach to enterprise software. Agiloft was founded on the idea that enterprise software should be more successful than it is, and that some of the failure points around enterprise software are around the configurability and custom code that becomes brittle.

So Agiloft was built as a no-code platform, and the CLM platform is an amazing use case for that, because that agile approach to software really responds to the changing needs of the business, including the changing needs of the contract department over time.

I actually started working with Agiloft while I was still with EY. We set up a partnership with Agiloft, and a few months later I started consulting with Agiloft, and I helped Colin Earl, the founder, raise capital from FTV. I knew it was the first thing we needed to do to make this company great, because Agiloft has been around for quite some time and has an amazing product foundation. It had already proven its ability to execute with 600 customers, and it was ready

We have some of the most impactful organizations in the world as our customers – in technology, pharma, health care, defense, manufacturing, government, education. I think one of the things that they all have in common is that they value the contract as more than a shield. They value a contract as relationship DNA, and as a valuable data asset for the company. I think that’s a really important approach to take when you think about contracts.

You joined Agiloft in August 2020, as the CEO, after the company received a $45 million growth equity investment from FTV Capital. Please tell us about Agiloft and what drew you to this opportunity.

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How has the pandemic accelerated the need for contract lifecycle management and digital transformation within the legal industry?

There’s no doubt that the pandemic has changed the way that we think about contracts. I hear it in the stories our customers tell us.

There are a couple of changes in particular that I think are worth noting. At a high level, the pandemic has served as an example of just how fast modern businesses need to be able to react to changes. While I certainly hope that there is not another pandemic of this scope, there will be other unexpected things that change how we do business. That’s an important lesson for us to take away from all this.

To dive a little deeper, I think the pandemic has heightened the awareness of blind spots that many companies have around contracts. When the pandemic hit, I’m sure that most general counsel were frantically searching their

contracts for performance clauses, for force majeure clauses, for an understanding of what the impact might be on their relationships. That’s something that might have been a blind spot until the pandemic emerged.

Another effect of the pandemic is that it showed just how important speed to contract is. For example, among our nearly 700 customers, we are grateful to have some of the most prominent vaccine makers and health care systems.

Those organizations had very singular missions this year: Create vaccines, expand testing, expand bandwidth for patient services. Those missions demanded very fast speed to contract with new suppliers, with new means of distribution.

For instance, one of our clients was trying to set up a new drive-through clinic. They did it rapidly, and they realized that old and rigid manual contracting processes would have failed under the stress of trying to set something like that up so quickly. But by using Agiloft, they were able

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In the long term, CLM can create a better connection

CLM can create a better connection between the contracting organizations and the commercial clients that they serve internally.

between the contracting organizations and the commercial clients that they serve internally. Again, contracts need to be thought of as relationship DNA. They can’t just be something that is created and put away on a shelf.

Contracts really have to understand and communicate with all of the commercial needs of the business, with

to take agile processes and use the technology to keep up with everything that was required. They were able to have very fast speed to contract and still maintain all the necessary compliance standards.

The pandemic has also showed us how mobile the workforce has become. Agiloft is a remote organization, and on my own team people have been taking advantage of this moment to move to locations they wouldn’t have been able to live in before remote working. It’s been very clear that organizations that can’t run efficient, virtual contracting processes are struggling. It really points to the need for automation, for virtual processes.

What short- and long-term value can organizations derive from highly effective contract lifecycle management?

The short-term value includes some no-brainers. First, having contracts all in one place, digitized and searchable, promotes the knowledge of risks and opportunities that can be found in your contracts. Second, improved speed to contract, which means faster to agreement, faster to revenue, faster to moving forward with your relationship.

Third is increased compliance and lower risk, because you know what’s actually in your contracts. Fourth, increasing bandwidth for complex agreements. If you do the contract process correctly, then those highly skilled professionals who can work on highly complex agreements have more time to do that.

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the regulatory environment of the business, with the relationship needs that the commercial and internal clients have. Using CLM to connect the contracting department to the rest of the organization and to your relationship partners is a great long-term goal and benefit.

The other long-term impact of CLM is that it can create more resilient contracting organizations that can flex quickly to meet the evolving needs of the business. Once you leverage technology to create a process and give yourself more data – and more data visibility – that allows you to react quickly, as long as your CLM tool is set up in a way that allows it.

What are the primary pain points CLM solves for in-house legal and other business professionals?

Too often contracts are treated as shields, when companies really should think of them as relationship DNA. Using a contract merely as a shield separates you from your business partners, it separates you from your customers, it separates you from your vendors. Instead, you really should find out what’s in the DNA of those relationships – and that’s in the contracts. There could be risks there, yes, but there could also be hidden opportunities. It’s all about proactive discovery of what’s in that code, what’s in that set of instructions for the relationship. Rather than pulling out the contract at the last minute as a defensive mechanism, companies should think of contracts as valuable digital assets for their relationships.

The second pain point I’ll mention is that I think too often

The fourth pain point is that legal departments that are

companies end up putting their contracts into a digital

already pursuing contracts as a process may take too

dead-end storage place. Contracts have certainly migrated

rigid of an approach. They might think, “If we lock in a

from the old paper dead ends, like an Iron Mountain

process, it won’t change, and it never can change.” But

storage box, into something better, which is a digital

that’s the wrong approach. You need to have a process,

representation of that paper. But too often, they still get

yes, but that process also needs to undergo a continuous

stuck in a digital dead end, like someone’s hard drive.

effort of improvement – to make it faster, to get better

Our idea is that contracts should be housed in a system of record. And they shouldn’t just be digital representations of paper; they should be digital assets. The data underlying the contracts should be populating that system of record.

Agiloft makes sure that contract data is accessible to those in the organization who need it, not just the requester or the drafter. We want companies to start thinking of contracts as digital assets, and make sure that their CLM tool is connected to the rest of the company in a way that

compliance, to acknowledge the realities of the business and its commercial goals. Since those business goals are always changing, you need to take an approach that is really agile thinking around process. In order to do that, you need agile technology.

The last pain point I’ll mention is that I hate the notion that legal departments get a bad reputation as “the department of no.” It’s my mission, through Agiloft,

facilitates relationships.

to elevate contracting professionals into a position of

Another source of pain is around bandwidth. If you treat

the idea that they’re

contract drafting as something that can only be practiced by those who are skilled in the art of self-defense, you restrict contract drafting to a very small number of

being connected business partners, and to eliminate “the department of no.” And in order to do that, I need to make

people within the company. At Agiloft, we take a very

sure that contracting

different view, which is that contracts can benefit from

professionals have data

process and can often be democratized with tools such

at their fingertips – to

as self-service drafting and self-service authoring.

generate insights, to see

Something like self-service authoring puts the pen into

risks emerging, and to be

the hands of the person closest to the relationship. And

connected to the business

because the process is facilitated by the platform, it

processes of their internal

maintains the compliance standards of the company.

commercial clients. I think

Self-service can actually improve the work lives of highly

CLM – especially a robust

skilled contracting professionals, allowing them to use

end-to-end CLM process

their time and ability on more complex agreements. At

like the one Agiloft

the same time, it improves the speed and compliance of

provides – can do all of

everyday contracts.

those things. 

Eric Laughlin is CEO of Agiloft.

A legal tech and legal services executive, Eric has spent his career helping legal teams modernize their work through use of data, technology, effective process and outsourcing. Reach him at eric.laughlin@agiloft.com.

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New Law Leverages Nontraditional Approaches to Improve Outcomes

The banks are thinking about how to do this, and the

 Robin Snasdell, managing director at Consilio,

discusses the concept of “new law,” how technology is transforming various legal processes, and where improvements can still be made in the future.

process is really ripe for technological enablement.

Usually, it would involve reviewing these heavily papered loan agreements, anywhere from 100 to 400 pages in length. Those agreements would have to be poured over by a human lawyer, and it would take hours just to find the

CCBJ: Consilio defines “new law” as the delivery of legal services in nontraditional ways that offer greater value to the buyer. Can you describe some of the evolving new law solutions that you are developing?

Robin Snasdell: When we’re looking at opportunities

appropriate language that’s necessary for the repapering process. Then the repapering process itself involves typing up new paperwork, etc., which is also a huge deal.

But now the artificial intelligence (AI) / machine learning technologies in the marketplace have come such a long way that they’re actually highly effective in terms of going through a review process like that. To begin with, they’re

that would fall under “new law,” we tend to focus on legal

able to find the appropriate terms and clauses that should

service delivery models that have not been improved in

be used in the repapering process, and if you’re able to use

years – ones that still rely on human muscle and labor

AI in that capacity, you’ve basically taken a multi-hour task

but where there’s actually something about the process

and condensed it to minutes.

that lends itself to technological enablement. As an example, we’re seeing many clients needing to repaper old agreements and legacy contracts. There are a number of reasons why they have to repaper them, but one of the biggest right now is that many financial institutions have their loan agreements tied to one of the interbank offered rates – the London Interbank Offered Rate (LIBOR) being the most common. LIBOR has come under incredible scrutiny over the years for fraud and rate fixing, so the powers that be have decided it should cease to exist.

Originally, the cessation date was December 2021. It’s recently been changed to June 2023, because everybody realized that the banks and other financial companies had no way of completing this project by the end of this year.

Essentially they have to take all of their loan agreements

The next step is understanding the language that is being extracted, making sure it’s all correct. AI can help with that part too, though obviously there’s human quality control in place. Then it’s handed to the lawyers to actually do the repapering, and those activities can also be accelerated by technology, since now we can rapidly assemble documents based on templates and fallback language that is appropriate for each scenario. That can all be built into the technology. And then from there, it can be sent off for the necessary e-signatures.

So what we’re trying to do with new law is to take a process like that and condense the amount of time it takes and increase the accuracy and quality of the resultant work product. And because it takes less time, and because

and financial instruments, find the LIBOR language or the

the technology costs less than the human cost would be,

index language in it, amend it, and then have it executed

now you’ve got a process that is technologically enabled,

with the borrowers. It’s a big mess.

with superior quality and accuracy, for a lower price.

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How are new law solutions identifying contracts

it was so large in terms of the number of hours, it was

containing outdated language?

usually cost-prohibitive to even use AI. But now, since it’s been on the market for a while, there are a lot of

There are a number of AI tools in the marketplace at this

different use cases that have been established as normal

point, and many of them have success stories associated

for AI as relates to contracts. Things along the lines of

with them. Several years ago, in 2013 or 2014, AI that is

M&A due diligence, for instance, as well as other types of

specifically designed for contract review and contract

repapering exercises, such as LIBOR, which we already

data extraction really started hitting the market. Since

discussed. There are also numerous new regulations

then, more and more new players have entered, and there

around privacy, like the General Data Protection

are lots of variations on what AI can do now, not only as

Regulation and the California Consumer Privacy Act,

far as how it looks for the clauses and terms that you’ve

and many companies are seeing that their legacy privacy

instructed it to look for but also how it learns.

agreements need to be updated as a result.

AI’s ability to learn in a feedback loop from the humans

Another big area where we’re seeing AI being used in

that are quality controlling the extraction has really

the contracts process is pre-execution review. Let’s say

improved. It used to be that you couldn’t necessarily

two companies want to do business together, and they

rely on the AI, and the amount of effort needed to train

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whole new set of tools that will analyze that pre-executed

the Board, and then it comes back down to the auditors

contract and compare it to the company’s identified

and accountants to make sure everything is in line with

standards, which helps the review process because the

Sarbanes-Oxley. That whole process is often handled

technology allows the lawyers involved to be drawn

in a cumbersome way, usually over email. There’s an

directly to the language that is a problem, as opposed to having to review the whole thing.

How are new solutions working to ensure compliance within the regulatory landscape?

As we look at our clients, law firms and corporate legal departments, there are a lot of compliance processes that are still typically done over email. Let’s say that your current Sarbanes-Oxley compliance or workflow is such

opportunity in those types of scenarios to utilize process automation tools, where the entire process gets captured in a structured environment and is more transparent.

All of the boxes that need to be checked are coded into the platform, and you either can’t get around them or there are plan B’s that are built in. So now people feel more comfortable that all of the boxes are being checked, that the right people are involved, that there’s audit capability in terms of who touched what, in terms of the data. The digitization of the process leads to high-quality results, better compliance with regulatory

that accountants come in and audit the numbers, and

requirements, more transparency into the process, and

then the numbers need to be reviewed by the executives,

more capabilities for reporting and analytics, which

and then those communications need to be reviewed by

feeds into improvement of the process.

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particular client, in order to provide companies with a

If you’re able to use AI, you’ve basically taken a multi-hour task and condensed it to minutes.

different lens as they’re looking at those legal bills. There are a lot of analytics in there about things like how law firms staff their projects – what’s their utilization of associates versus partners versus paralegals? What kind of rates do they have? How do those rates compare? So Sky

How is Consilio specifically leveraging AI and advanced

Analytics provides great insight into the legal marketplace

analytics to create technology-driven workflows?

of law firms serving their clients. And that has benefited

Consilio has a lot of experience with AI. When it comes

their outside counsel, have a better understanding of what

to something like contracts or any other workflow, the

their outside counsel are doing well, and what they’re not

question, of course, is does the AI work? Does it help with

doing well. And it leads to conversations about overall

the process? Does it achieve the goals that we’re trying to

improved performance.

our clients greatly in terms of being able to negotiate with

achieve with better results, more efficiency, lower cost, etc.? What we’ve had to do, because the market is quite

What type of solutions are available for revising budgets?

dynamic in terms of what solutions are available to us, is do a proof of concept internally, in order to keep track of

The budgeting process is universally poor, across the board,

which solutions do what, which ones are strong in certain

as it relates to outside counsel and the formulation of

areas and weak in others. So we have a smorgasbord of AI

budgets from in-house counsel. Most companies are doing

technology available to us. When a client comes knocking,

it in an arcane, inadequate way. Maybe with spreadsheets,

depending on the requirements of the task that they’re

maybe with email, maybe even through a conversation,

asking us to help with, we can bring our tool set to the

which is really not helpful when it comes down to it, because

table and utilize the best one for the scenario at hand.

one of the things that chief financial officers want to see is fewer surprises when it comes to legal spend.

We’re constantly looking at the new vendors that are out there, what they’re capable of, what they say they’re

I’ll just give a bit more background here. There are multiple

capable of versus what they actually deliver, who is

budgets when it comes to the relationship between in-house

better under which circumstances, so that we can make

counsel and outside counsel. One budget is how much the

sure that when our clients come through the door, we’re

outside counsel thinks a particular project or matter is

recommending the best solutions to them.

going to take. That may differ from the budget allocated by the in-house person who, for other reasons, thinks that the

We’ve got a tool here at Consilio called Sky Analytics,

budget the outside counsel has come up with is not correct.

which was created several years ago specifically to analyze

It is either too low or too ambitious or not ambitious

legal bills, external counsel bills that are submitted to a

enough, for whatever reason.

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should be collected – quarterly, annually, per licensed

We’ve seen a general improvement in the way budgets are being handled in mattermanagement/e-billing systems and better collaboration between outside counsel and in-house counsel.

project or licensed asset, etc. The matter management/ e-billing technologies have done a good job of enabling that process. When it comes to setting budgets and revising budgets for matters in particular that involve external counsel, we recommend that clients utilize their mattermanagement e-billing tools in an effective way to get their arms around it.

Then there’s the budget being tracked at the law department level and even the practice area level. All of

Unfortunately, not enough companies we work with have

those budget numbers are related in many ways, and they

done that yet, so there is definitely more opportunity

should be aggregated together, but legal departments

for improvement. In terms of the departmental budget

typically they don’t have an enterprise resource planning

that goes to the in-house employees, the associations

(ERP) system that is actually managing the complete

that they are paying dues for, the various other internal

financials of the department. They rely on their finance

costs that are not associated with external spend,

department to track things like that.

typically those are all tracked in the enterprise financial management system, which is a bit unfortunate, because

However, legal departments have matter management/

if you’re a general counsel,

e-billing systems that have typically been used for

you have to rely on your

the management of external spend. These differ from

internal finance group to

financial management systems because they enable

tell you what your internal

tracking costs using the nomenclature that lawyers

numbers are, and your

and law firms use. There are some standards in the

mattermanagement/e-

marketplace that set what terms are being used between

billing tool to tell you what

in-house and outside counsel. And, of course, what goes

your external numbers

along with that is a budget. Should outside counsel be

are. As of today, there’s

billing as much as they are?

not necessarily a winning technology that helps

We’ve seen a general improvement in the way budgets

combine all this and

are being handled in mattermanagement/e-billing

allows it to be managed in

systems and better collaboration between outside

one place. So there are still

counsel and in-house counsel. Meaning, the technology

a number of opportunities

is enabling both parties to collaborate around what

to improve the overall

those budgets should be and how frequently they

financial processes. 

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Robin Snasdell is a managing director with Consilio. He focuses on assisting global companies to improve their business performance by providing strategic consulting, process improvement, change management and technology-related solutions to the general counsel and chief compliance officer.

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