CCBJ May-June 2020

Corporate Counsel Business Journal May  June 2020

VOLUME 28, NUMBER 3

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CORPORATE COUNSEL BUSINESS JOURNAL

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Corporate Counsel Business Journal May  June 2020

VOLUME 28, NUMBER 3

Making It Happen SCOULAR’S MEGAN BELCHER TALKS ABOUT BUILDING INCLUSIVE IN-HOUSE TEAMS INSIDE

Law Departments Move Up Maturity Curve

Over a Barrel, Fighting to Stay Afloat

Answering Clients’ Questions About COVID-19 Relief

Optimizing the Business of Law

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

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In This Issue

MAY  JUNE 2020 VOLUME 28, NUMBER 3

Corporate Counsel Business Journal LAW BUSINESS MEDIA

Kristin Calve

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

CO-FOUNDER AND PUBLISHER

Making It Happen

Kristin Calve

Kimberly Fine

MANAGING DIRECTOR PROGRAMMING

Dylan Shepard

GRAPHIC DESIGNER

Neil Signore

SVP & MANAGING DIRECTOR OF EVENTS

Lainie Geary

DIRECTOR OF BUSINESS DEVELOPMENT

Amy Lemel

DIRECTOR OF BUSINESS DEVELOPMENT

Jennifer Coniglio VP FOR EVENTS & SPECIAL PROJECTS

Matthew Tortora

SENIOR DATABASE MANAGER

Pat Hanelt

OFFICE ADMINISTRATOR

Rob Williams WRITER

Taylor Highbloom SOCIAL MEDIA

FRONT . . . . . . . . . . . . . . . . . . . . . . . . . 5 PULSE . . . . . . . . . . . . . . . . . . . . . . . . . 11 11 Over a Barrel, Fighting to Stay Afloat

David Sweeney, Sarah Schultz 15 Tips for Dealing with Bankruptcies

Caused by the COVID-19 Shutdown

Mark Silverschots, Luma Al-Shibib,

Dennis Nolan

18 Competitor Collaboration in the

Era of COVID-19

Randy Gordon

21 Guidance for HR Antitrust Compliance

Peter Mucchetti, Michaela Spero

25 Go Fund My Dispute: Litigation Finance Takes Center Stage in a Crisis

Christopher DeLise

30 Coming Face-to-Face with Virtual

Alternative Dispute Resolution

Frank Donaghue

42 Disruptions, Disputes and Dialogue

EDITORIAL ASSISTANT

Rachel Dwyer

39 Betting on the Future of the

Casino Industry

Ranse Howell

45 EEOC Issues Updated Guidance

on COVID-19 and Federal Disability

Discrimination Laws

Esther Lander, Anastasia Marie Kerdock, James Crowley

OPS . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 50 Optimizing the Business of Law

Keith Maziarek, Justin Ergler

55 3 Challenges at the Heart of

Third-Party Risk

Sarah Robinson

58 The Language of Data Hygiene

Nicole Thompson

61 Paying Attention to Trends,

Even in Uncertain Times

Ken Crutchfield

65 How Legal Departments Can

Overcome Tech Phobias

Rekha Shenoy

Richard Byrne

Omeda

FULFILLMENT MANAGEMENT

IDEAS . . . . . . . . . . . . . . . . . . . . . . . . . 33 POSTMASTER: Please send address changes to Corporate Counsel Business Journal, P.O. Box 3248, Northbrook, IL 60062; by emailing ccbj@omeda.com; by visiting our online portal at ccbjournal. omeda.com/ccbj/r-login.do; or by calling 847-559-7559.

33 Answering Clients’ Questions

About COVID-19 Relief

CORPORATE COUNSEL BUSINESS JOURNAL (ISSN: 1073-3000), March 2020, volume 28, number 2. 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.

36 Employer-Sponsored Health

and Welfare Benefit Plan Changes

Under the CARES Act

Bruce Steen, Peter Farley, John McDonald, Carolyn Trenda

Charles Newman

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.

CORPORATE COUNSEL BUSINESS JOURNAL

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Kristin Calve At the Table

Making It Happen  Megan Belcher, senior vice president and general counsel of Scoular, a $4 billion supply chain solutions company for end users and suppliers of grain, feed ingredients and food ingredients, based in Omaha, talks about building inclusive and collaborative in-house teams that get things done.

CCBJ: What led to your current position?

Megan Belcher: After six years of big-firm experience, I started my in-house career in 2007 at Conagra Brands, where I held roles of increasing responsibility until 2016, when I decided to make the jump to a general counsel role. After briefly returning to big-firm practice, I joined Scoular in June 2017 to lead the company’s legal, brand marketing, and corporate communications teams.

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

My passion in leadership is around building inclusive and collaborative teams to solve complex problems, drive clarity in times of confusion, and create opportunities to drive my business partners forward.

I have been influenced by a number of critical mentors and sponsors over the years, as well as an executive coach who was pivotal in my leadership journey and created the opportunity for a turning point in my career. In addition, there have been a handful of inspirational women general counsel, like Michelle Banks, former global GC of Gap Inc.,

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who have provided inspiration and mentorship along my climb to being a general counsel.

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

I look for collaborative leaders with a “make-ithappen” approach. I favor continuous learners with a growth orientation and mindsets, as well as seeking skillsets we don’t already have at the table.

It’s also vital that they have an inclusive perspective derived from diverse experiences.

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

It is critically important to sort through information to determine what are facts and what are feelings.

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

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

It’s critically important to sort through information

McGuireWoods LLP McNees Wallace & Nurick LLC

to determine what are facts and what are feelings.

National Association of

Most of the time the facts are simply data for your

Corporate Directors (NACD)

consumption and use, while feelings are about context or your or other people’s motivations.

Sills Cummis & Gross P.C. Weil, Gotshal & Manges LLP

What are some changes you’re hoping to see

Advisors

within the profession?

American Arbitration Association Exterro FRONTEO FTI Consulting iDiscovery Solutions JAMS LexisNexis CounselLink NAM (National Arbitration and Mediation) OpenText™ Discovery Wolters Kluwer’s ELM Solutions Zapproved

I’d like to see greater diversity at the highest levels of legal leadership, across all practice venues, and recognition of the high value lawyers bring to the table, especially women lawyers, as board members and board leaders. I’d also love to see more collaboration among in-house leaders to drive crowdsourced leadership and development opportunities for high-potential team members and tomorrow’s leaders. Related to that is a growing

Contributors

focus and recognition of the value of personal

AlixPartners LLP Anderson Kill AST Brainspace Burns & Levinson ContractWorks Cornerstone Research

development and inclusive leadership skills across all practice venues. Finally, for law firms I’d like to see continued evolution of their compensation models to drive team rewards and incentivize inspirational and inclusive leadership. 

Fish & Richardson IPro Tech Legal Suite Septeo Group QDiscovery Stradling Yocca Carlson & Rauth

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

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When resolving your dispute requires industry expertise, trust the American Arbitration Association®

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EXPERTISE Matters.

MAY • JUNE 2020 ©2020 American Arbitration Association, Inc. All rights reserved.

Law Departments Move Up Maturity Curve

Front Average Maturity Rate for EachMaturity Function Average Rate for Each Function

The 2020 Legal Operations Maturity Benchmarking Report, prepared by the Association of Corporate Counsel, in partnership with Wolters Kluwer Legal & Regulatory, is a serious effort. Based on the ACC Legal Ops Maturity Model and responses from 316 legal departments across 29 countries and 24 industries, the report assesses in-house performance with a granularity rarely seen. By looking across 15 functions and 92 sub-functions, ranging from financial management and information governance to strategic planning and innovation management, the survey uses a six-point scale to come up with an average maturity rate among participating law departments:

COMPLIANCE 3.46 FINANCIAL MANAGEMENT 3.34 INFORMATION GOVERNANCE 2.95 CONTRACT MANAGEMENT 2.90 EXTERNAL RESOURCES MANAGEMENT 2.85

Level of Maturity Scale EARLY STAGE

1 1= 2= 3= 4= 5= 6=

2

INTERMEDIATE STAGE

3

4

TECHNOLOGY MANAGEMENT 2.73

ADVANCED STAGE

5

6

STRATEGIC PLANNING 2.70

Maturity level is early stage 1.

Maturity level is early stage 2 and is transitioning to intermediate stage.

Maturity level is intermediate stage 1.

Maturity level is intermediate stage 2 and is transitioning to advanced stage.

Maturity level is advanced stage 1.

Maturity level is advanced stage 2 and is pioneering new developments in this competency.

Among many other takeaways, the study clearly shows that companies with legal ops professionals are further along on the maturity journey. That’s not surprising. What is surprising, however, is how far most corporate law departments still have to go. In 12 of 15 areas, the average maturity level is the beginning of intermediate stage 1. Only two functions, compliance and financial management, score above 3. The lowest scores are for change management (2.38), e-discovery/litigation management (2.37), and innovation management (2.09). Finally, while the top 10% of law departments are operating at an advanced stage on the maturity curve, not a single one reports being at an advanced level across all functions. So even for those departments doing well, there is still plenty left to do. For much more data, including industry-specific information, check out the full report at acc.com/maturity-benchmarking2020.

KNOWLEDGE MANAGEMENT 2.69 INTELLECTUAL PROPERTY MANAGEMENT 2.60 PROCESS & PROJECT MANAGEMENT 2.59 INTERNAL RESOURCES MANAGEMENT 2.53

Lo re

METRICS & ANALYSIS 2.50 CHANGE MANAGEMENT 2.38 eDISCOVERY & LITIGATION MANAGEMENT 2.37 INNOVATION MANAGEMENT 2.09

CORPORATE COUNSEL BUSINESS JOURNAL

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Use All Your Levers to Control Legal Spend

Briefly Akin Gump announces Chad Nichols has joined the firm as a partner in its corporate practice in Houston.

Akin Gump international trade counsel Devin S. Sikes has been named to the U.S. roster for North American Free Trade Agreement (NAFTA) Chapter 19 disputes.

According to a recent survey of GCs and CLOs by Corporate Counsel Business Journal, Exterro and the Blickstein Group, the best way to control legal spend is by negotiating discounted rates. However, in a commentary in the survey report, longtime industry consultant Brad Blickstein cautions corporate counsel not to confuse negotiation of rates with a strategic approach to cost reduction. Rather, he says, in-house counsel should pursue tighter partnerships with outside firms by integrating them into dayto-day operations. “Rather than battling over rates all the time,” he writes, “make them a partner and incentivize them based on what you value. Such a strategic approach will be much more effective in the long term.” Read more about spend control, data privacy and e-discovery practices in corporate law departments in the 4th Annual Study of Effective Legal Spend Management.

AlixPartners announces that consumer products and digital expert Rob DeNardo has joined as a Managing Director.

Litigation – 51%

Martin H. Redish joins Barnes & Thornburg in Chicago.

Burns & Levinson LLP elevates two attorneys, Andrea Dunbar and Alex Khalarian, to the firm’s partnership.

Clifford Chance announces the promotion of five new partners in the Americas.

Clifford Chance announces that David A. Goldstein has joined the Firm’s Private Funds Group as a partner in New York.

Corporate Counsel Business Journal, published by Law Business Media, announces its inaugural webcast series, THRIVE: A Users Guide to Mental Strength, beginning on May 6, 2020, and will extend throughout the year.

EDRM announces its new EDRM Hub, a global online job, event and service provider portal.

EisnerAmper LLP announces that the leadership and staff of compensation consulting firm Compensation Resources, Inc. (“CRI”), have joined EisnerAmper.

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Compliance – 22%

Where Are Your Cost Risks?

Allen R. Wolff, a shareholder in Anderson Kill’s New York office and co-chair of the firm’s Construction Industry Practice Group, has been appointed to Law360s 2020 Construction Editorial Advisory Board.

M&A – 12% Business Units – 7% Privacy – 7%

Gender Pay Gap Persists A new study by recruiting firm Major, Lindsey & Africa (MLA), the 2020 In-House Counsel Compensation Survey, shows that top in-house lawyers at U.S. companies earn substantially more than lawyers in comparable positions outside the U.S. The MLA study, conducted in partnership with business advisory firm Western Management Group and based on 3,900 responses, took place last year before the coronavirus took its toll on some in-house pay packages. The study also shows that gender pay inequity persists. (See chart below.) At U.S. companies with more than $10 billion in annual revenue, male law department leaders earn 49% more than their female colleagues, according to MLA, averaging $1.11 million in total cash compensation compared to $739,436 for females in similar roles. MLA’s in-house counsel recruiting leader, Lee Udelsman, told Bloomberg Law he was surprised that in-house lawyers in the U.S. earn 45% more than those elsewhere, attributing the disparity to different views of lawyers in the U.S., where more top in-house counsel report directly to the CEO and are part of the executive leadership team. Udelsman says that has a direct impact on effectiveness and compensation. As for gender disparity, the survey shows there is still work to be done to close a stubborn gap.

“What the data obviously reflects is that we’re not there yet—women are still getting paid less for doing the same work,” Udelsman said. Check out the full survey here.

CLO/GC

CCO

DAGC

COUNSEL

MALE

$519,528

$401,426

$356,382

$211,679

FEMALE

$455,796

$389,121

$329,455

$192,328

Reimagining Productivity: Tips & Tricks In this piece from AICPA, the world’s largest association for the accounting profession, Amy Vetter, a CPA, Yogi and top inspirational speaker, provides a series of hard-andfast tips – life hacks – that serve as performance optimizers, including monotasking, using website blocking apps, employing the “Pomodoro Technique,” and more. One is called the Eisenhower Decision Matrix, used by Dwight Eisenhower to organize his days by dividing tasks based on their urgency and importance: urgent and important tasks were handled promptly by him; non-urgent but important tasks were set aside with a clear due date; urgent but less important tasks were delegated to others; and non-urgent and unimportant tasks were dubbed superfluous. There is, however, a caveat: “These strategies do not comprise a program that I’m advocating,” she writes. “Some of the techniques may work for you; others may not. That’s totally fine. Use the techniques presented below if they make sense for you and deliver results. We all work differently. And we can all work a little smarter.”

Ten Things: In the latest installment of his popular blog, 10 Things You Need to Know as In-House Counsel, Sterling Miller dives into electronic signatures with his usual mix of wit and wisdom. “The current pandemic crisis with its discouraged human interaction is the perfect launching pad for thinking about ‘signing’ documents remotely and e-signatures are the perfect solution for that,” he writes. He includes a brief history of signatures that takes us back to the Egyptian and Persian empires, through the requirements of the 1677 Statute of Frauds, when written signatures became necessary for certain contracts to be formed. “Over time,” he continues, “what constitutes a signature got looser, anything from singing an “X” for your mark (which evolved from the practice of signing documents with the sign of the cross) to using a rubber stamp to the elaborate use of notaries (especially in civil law countries) to authenticate signatures on documents. For most of us, we simply sign with a blue-ink pen (a ‘wet signature’) and move on.” Read more at Miller’s 10 Things blog.

Michael Sandnes joins EisnerAmper LLP director in the Financial Advisory Services Group.

Exterro Inc. and the Association of Corporate Counsel announce a new addition to their Legal GRC Platform.

Fish & Richardson announces that Katie Abbott has joined the firm as Director of Marketing and Communications.

Joy Backer Kete joins Fish & Richardson as an associate in its litigation group.

FRONTEO announces the successful creation of a pathway map for the novel coronavirus infection (COVID-19), using its proprietary AI system “Cascade Eye”.

FTI Consulting, Inc. announces the appointment of Christian Jensrud as managing director in its health solutions practice.

William Parker joins FTI’s strategic communications segment as managing director.

FTI releases findings of its 2020 U.S. Loan Market Survey, providing a glimpse into bank and non-bank lenders’ views against the backdrop of the COVID-19 pandemic and oil market price disruptions.

Abby B. Silverman, Esq. joins JAMS. JAMS announces the addition of Hon. John H. Sugiyama (Ret.) to its panel.

NetApp GC Asks, “Do You Work for an Ethical Company?”

Matthew K. Fawcett, senior VP, general counsel and corporate secretary for NetApp, knows a thing or two about developing and leading high-performance organizations.

In this piece from Bloomberg Law, he addresses a not-so-comfortable question: Do you work for an ethical company? That doesn’t mean an organization, Fawcett cautions, that trumpets its commitment to doing business the “right way,” but an organization that has made the “careful, values driven, long-term leadership choices” needed to avoid situations such as those faced by Google, WeWork and Theranos. Fawcett lays out 7 tangible markers of companies with ethical cultures, including how hiring decisions are made and how compliance is woven into the company’s cultural fabric. “As a GC,” he writes, “I expect everyone on my team—and the entire company—to realize that the standard isn’t, ‘Is it legal?’ or ‘Can we get away with it?’ It should be: ‘Is this the right thing to do?’”

McNees announces that Kathleen Duffy Bruder, Esq., was recently reappointed as a member of the Civil Procedural Rules Committee by the Supreme Court of Pennsylvania.

McNees announces the expansion of its pro bono efforts.

Francesca Titus joins McGuireWoods as a partner in the firm’s government investigations & white collar litigation department.

CORPORATE COUNSEL BUSINESS JOURNAL

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McGuireWoods launches the LIBOR Transition Blog to track key regulatory and market developments and monitor potential replacement rates.

NAM (National Arbitration and Mediation) announces Honorable John P. DiBlasi, J.S.C. (Ret.)’s invitation to participate in a CLE webinar conducted by the New York County Lawyer’s Association’s Civil Practice.

OpenText™ Legal Tech Cloud Editions (CE) 20.2 introduces innovations that bring even more efficiency-enhancing tools for a remote and changing environment.

OpenText™ announces a new global strategic collaboration agreement with Amazon Web Services (AWS).

QuisLex announces the appointment of Andrew Banquer as vice president of corporate solutions.

Sidley Austin LLP welcomes Nathan Greene and Jay Baris as partners in its Investment Funds group in New York.

The USPTO announces that it is exercising its authority under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to extend certain patentand trademark-related filing and fee deadlines by 30 days from the initial date it was due.

Weil announces that Michael Moiseyev joins the firm as partner.

Weil is advising Providence Equity Partners as lead investor, together with Ares Management, in a $400 million acquisition of convertible preferred shares of OUTFRONT Media, Inc. Wolters Kluwer ELM Solutions announces enhancements to the Wolters Kluwer ELM Solutions Consulting Partner Certification Program.

Zapproved LLC and Nuix announce Digital Discovery Pro ®, powered by Nuix.

Submit your announcements to editor@ccbjournal.com

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MAY • JUNE 2020

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.

DATABASE: Stanford Law School COVID-19 Memo Database Looking for a cheap and ready resource for all things coronavirus? We’ve got just the thing for you – and it’s cheaper than cheap.

It’s free! Cornerstone Research, working in collaboration with the Rock Center for Corporate Governance at Stanford Law School, has assembled a searchable database of memoranda related to legal, regulatory, accounting and governance issues from the nation’s leading law firms, audit firms, and other business advisors. “We are drowning in COVID-19 information,” says Joseph Grundfest, W. A. Franke Professor of Law and Business, senior faculty of the Rock Center, and chair of the audit committee at KKR & Co., Inc. “I see literally dozens of terrific memoranda every day from high-quality law firms, but have no way of quickly finding the most recent information specific to a problem I am researching. This database is a practical solution to a real-world problem that can also serve as a great resource for scholars and educators.” Check out the Stanford Law School COVID-19 Memo Database at covidmemo.law.stanford.edu.

PODCAST: Legal Talk Network Legal Talk Network is a podcast network for legal professionals with hosts from wellknown legal organizations and brands – more than 20 podcasts covering all aspects of the industry. To give just one example, LTN’s “On the Road,” recorded on the conference floor at major legal events, delivers highlights and interviews so you can attend events without attending. While event season has stalled due to COVID-19, you can check out their archive at legaltalknetwork.com and listen to an interview from the ABA Tech Show in Chicago featuring keynote speaker Mary Shen O’Carroll, director of legal ops at Google and president of CLOC, who discussed the transition from the “age of law firms” to the “age of ecosystem.” Among other interesting LTN podcasts is In-House Legal, which covers issues pertinent to GCs and corporate law departments.

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.

Luma Al-Shibib is a shareholder in Anderson Kill and a member of its insurance recovery group. She has represented Fortune 500 companies, hedge funds, banking and lending institutions, and state and governmental entities in coverage disputes. P.15 Richard P. Byrne, Esq., is a member of NAM’s Hearing Officer Panel and is available to arbitrate and mediate cases throughout the US. He has successfully mediated issues in a wide variety of specialty areas, including commercial matters and employment discrimination claims. P.30 James Crowley, of counsel with Akin Gump, focuses practice on complex labor and employment litigation and strategic advice. Crowley counsels clients on a variety of strategic labor and employment questions. P.45 Ken Crutchfield is the vice president and general manager of legal markets for Wolters Kluwer Legal & Regulatory Legal & Regulatory U.S. In his role he sets the vision and strategic approach on developing digital products. P.61 Christopher DeLise is the founder, CEO and co-chief investment officer of Delta Capital Partners. Since 2011, he has overseen and guided all aspects of the company’s affairs.

DeLise also serves alongside the CFO as co-chief investment officer where he is responsible for evaluating the merits of all Delta investments. P.25 Frank Donaghue, of counsel with McNees, practices in the Corporate & Tax and Gaming Practice Groups.

His expertise is in gaming, regulatory affairs, BSA/AML compliance, consumer protection, workplace & government investigations and vendor due diligence. P.39 Justin Ergler is the director of alternative fee intelligence and analytics at GlaxoSmithKline. He works with in-house counsel and law firms to develop non-hourly, valuebased Alternative Fee Arrangements for Legal engagements. P.50

Peter Farley is a partner with McGuireWoods. With significant experience in employment, benefits and business and commercial litigation, Farley’s practice encompasses a diverse litigation background representing clients in many different matters. P.33 Randy Gordon is a partner with Barnes & Thornburg in their Dallas office. He focuses his practice on helping a range of entities with antitrust, RICO, class-action, university-related, securities, and intellectual-property matters. P.18 Ranse Howell is a member of the senior management team and oversees international efforts at JAMS. He supervises a global team with representatives in multiple markets across the United States as well as in China, Mexico and the United Kingdom, among other countries. P.42 Anastasia Marie Kerdock, senior counsel with Akin Gump, counsels clients on a wide range of labor and employment matters arising under federal, state and local law. Kerdock litigates employment-related disputes in federal and state courts, as well as in arbitral forums. P.45 Esther Lander is a partner with Akin Gump. She focuses on high-stakes workplace internal and government investigations as well as complex employment discrimination laws. Lander previously served as principal deputy chief of the Employment Litigation Section within the Civil Rights Division of the Department of Justice. P.45 Keith Maziarek is the director of pricing and legal project management at Katten Muchin Rosenman LLP, where he is responsible for building the firm’s formal pricing and legal project management functions. He frequently speaks at industry events and publishes articles. P.50

John McDonald is the managing partner of McGuireWoods’ Charlotte office. He regularly represents clients in employee mobility matters including counseling and litigating over non-compete, non-solicit and trade secret issues. P.33 Peter Mucchetti is a partner with Clifford Chance, specializing in antitrust litigation matters. He has more than two decades of antitrust litigation, investigations and merger clearance experience, with expertise in the healthcare, paper and lumber products, and consumer goods and retail sectors. P.21 Charles H. Newman, of counsel with Sills Cummis & Gross P.C. has more than 30 years of experience in a broad range of transactional matters primarily focusing on the health care industry. The views expressed are his and do not necessarily reflect those of Sills Cummis & Gross P.C. P.36 Dennis Nolan is a shareholder in Anderson Kill’s New York office and concentrates his practice in commercial litigation with an emphasis on insurance recovery.

He also has extensive experience litigating complex chapter 11 reorganizations. Nolan co-chairs the firm’s bankruptcy group as well as its marine cargo industry group. P.15 Sarah Robinson is a senior director in the FTI Technology practice based in Washington D.C.. As a member of FTI Technology’s IGP&S Services practice Sarah brings over 15 years of experience spanning public policy formation to advising on challenges at the intersection of business operations, cyber security, and enterprise risk management. P.55 Sarah Schultz is a partner with Akin Gump. She handles large, complex restructuring cases and out-of-court corporate reorganizations for public and private companies, as well as for alternative investment funds. Schultz routinely handles representations for both debtors and creditors. P.11

Rekha Shenoy is chief product officer with Zapproved. Her appointment is helping drive Zapproved’s product and infrastructure growth.

Shehas 20+ years of experience that span across product, engineering, corporate/business development, product strategy and delivering compelling products to market. P.65 Mark Silverschots is co-chair of Anderson Kill’s Bankruptcy & Restructuring Practice Group. He has worked in the field since 1981, representing secured, unsecured, and subordinated creditors. P.15 Michaela Spero is an associate in Clifford Chance’s US antitrust practice. Shes advises clients on antitrust issues in government civil and criminal investigations, private party civil litigation, compliance with the US merger control laws and antitrust best practices. P.21 Bruce Steen is a partner with McGuireWoods and chair of the firm’s labor and employment practice. He represents employers and management in labor and employment matters. P.33 David Sweeney is a partner with Akin Gump. His experience spans the full natural resource value chain, from exploration, production, processing and infrastructure, to monetization.

He has advised on mergers and acquisitions, energy finance transactions and operational matters. P.11 Carolyn Trenda, senior counsel with McGuireWoods, regularly advises employers on a range of employee benefits topics. She designs and assists clients with the ongoing administration of tax-qualified retirement plans. P.33 Nicole Thompson is the head of customer success at Onna. She was formerly an experience designer & strategist at Intelligent Mobile as well as a communications manager at EP Business in Hospitality. P.58

CORPORATE COUNSEL BUSINESS JOURNAL

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MAY • JUNE 2020

The Better Solution®

Pulse Over a Barrel, Fighting to Stay Afloat  David Sweeney and Sarah Schultz, partners with Akin Gump’s oil and gas and restructuring practice groups in Houston and Dallas, discuss the current state of the industry, and how oil and gas companies are navigating these turbulent times.

CCBJ: What activity are you seeing in the oil and gas landscape right now, and what insights do you have about what might be fueling it?

David Sweeney: We all know what’s going on with COVID-19 right now and the effect it’s having on the economy, but the traditional fossil fuel energy space has been hit by a double whammy. We already had low demand. People look at pre-2014 and think of that as normal, when oil was $100 a barrel, but that hasn’t been the case in years. COVID-19, however, has exacerbated that. We’ve had relatively low demand, plus a lot of relatively easy money, and the result has been considerable oversupply.

Unsurprisingly, that means low prices. A very prominent trader made a comment in the news some time ago that called negative oil prices. Obviously, circumstances for many are fairly dire, and, for the oil and gas industry, this may not be alleviated by the end of social distancing. These problems are much more deeply seated.

It affects different companies in different ways. Let’s divvy the oil and gas world up into two broad categories. You have the majors and the independents. I would break the independents into three different tiers. Tier ones are large companies with large, multi-basin assets that may or may not have international assets. Then, you have tier two, which are midsized. They have much less in the way of asset diversity and may even be pure-play. These companies tend to have a higher debt load. Tier three is occupied by smaller, general private equity sponsored companies. The midstream and service and supply sectors can be parsed in a similar way. Tier 1 companies have the asset base to manage their debt loads and keep assets in place and will likely survive this (and may even grow). The outcome for Tier 2 companies is fact-dependent – can any particular CORPORATE COUNSEL BUSINESS JOURNAL

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As oil prices have fallen again, many companies are simply not going to be able to continue to be viable.

— SARAH SCHULTZ

company transact to manage its debt load and keep leases from expiring? A lot of Tier 3 companies are going to have to do some fancy dodging to survive.

The industry has become increasingly overcrowded and overleveraged. Not to editorialize, but perhaps too much debt was taken on based on a “lease and flip” model. Never mind whether the company worked in terms of making money from its core business, production of barrels of oil and net cash flow of gas.

What are some common restructuring themes you are seeing among private and public companies?

Sarah Schultz: We’ve spent a lot of time, even before the current crisis, restructuring oil and gas companies. In many cases, those restructured companies maintained the absolute maximum debt that they could post-restructuring, sometimes with the assistance of their lenders, because it made it easier to get the deal done. As oil prices have fallen again, we’re seeing companies that cannot produce economically.

Their general and administrative (G&A) expenses are not supported by their production, and they are simply not going to be able to continue to be viable.

We’re seeing these companies, some of whom already restructured in the last 12 to 18 months, come back to the market and acknowledge that they need to restructure again.

In some cases, we’re seeing a true, traditional restructuring.

We’re seeing stakeholders who are willing to equitize, which is more of a traditional restructuring, or those who are willing to recast their notes into a longer tenure, or at

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a different interest rate, etc. Those options are available for larger companies, companies that have a solid management team and, frankly, are primarily being impacted by the crumble of commodity prices that will need some time to recover. So I think that traditional restructuring may continue to be available to companies that are in a position to recast their debt in such a way that it gives their creditors – and in particular their funded debt – a piece of paper that trades closer to par. We saw this with Whiting Petroleum.

We’re seeing it with some other cases as well, and it looks to us like the ones who are going to be the most successful are those that limit the amount of time spent in Chapter 11.

That’s not unusual, of course; typically cases are the most successful that way. However, this route, traditional restructuring, isn’t going to be available to every company, perhaps for quite some time.

The other thing we’re seeing is consolidation, in a couple of ways. There are all of these companies out there that have pools of assets, and in many cases, we’re seeing that their G&A expenses far exceed what they should be. So we’re seeing consolidation, via mergers and acquisitions, and frankly, in this market, we’re seeing tremendous downward pressure on price. For example, take a company with an asset purchase agreement that had a $330 million face value on it before Sarah Schultz is a partner with Akin COVID-19. That could be Gump. She handles large, complex restructuring cases and out-of-court adjusted downward by $100 corporate reorganizations for public million in this new climate. and private companies, as well as for There are large purchase alternative investment funds. Schultz agreements that are going routinely handles representations for both debtors and creditors. Reach her to be terminated or otherat sschultz@akingump.com. wise renegotiated given the changes in the market.

The other thing that we’re seeing in the traditional M&A space is that the capital markets are generally not available for fossil fuel purchases. I have a client who was prepared to make an offer on some assets, and he went to his bank and asked, “What can I get? What kind of availability do I have?” And the answer, unfortunately, was “not much.”

And it’s not that the client was a particular credit risk or anything like that – just that the capital markets are not prepared right now, whether it’s through traditional bank lending or otherwise, to invest more in the fossil fuel market, given the current volatility.

What are some other options for addressing these issues that the industry is currently facing?

Sweeney: That’s the million-dollar question – or actually, the billion- or trillion-dollar question, depending on who’s asking, depending on what level we’re talking about. You’ve got traditional M&A, which, as Sarah was saying, has dried up in a way that is pretty unprecedented. So that creates an interesting state of affairs. Restructuring is another solution if it’s implemented correctly.

There are political solutions as well. The Texas Railroad Commission is contemplating prorationing, which hasn’t been done for a long time. It’s hard to say how it would work in practice now. If you’ve ever seen a picture of Kilgore, Texas, from that era, for example, the legs of the derricks were literally touching each other because people were drilling so closely together and damaging reservoirs.

The Railroad Commission in essence limited production and implemented well spacing and density rules.

The Railroad Commission – and the industry generally – is divided about this issue. Some independents who are heavily weighted toward Texas production, specifically in the Permian Basin, are very much in favor of prorationing, but I think there are going to be a lot of other people howling about it, if it actually ends up happening. Letters to the Railroad Commission offering testimony for and against

have actually been published on its website. These are a fairly interesting read. There are other actions being considered as well, such as limits on flaring gas, that are arguably easier to implement and might have a similar effect, albeit with consequences allocated in a different way.

In the short term, however, there are a lot of companies that are in quite a bit of trouble. Immediate and urgent restructuring, in many cases, may be the single best solution.

The best thing that companies can do right now is engage with their stakeholders, and do it frequently, because that does more for an orderly restructuring or rightsizing of your particular company than any political solution will.

Schultz: Absolutely, it’s imperative that these companies engage with their shareholders and stakeholders, because right now a lot of them are looking at a portfolio that’s had a substantial amount of its value dissipate literally overnight.

Anything that these companies can do to provide stakeholders with a measure of increased recovery is something that will be very well received. What I caution companies against doing is waiting too long. If you wait too long to start engaging with your stakeholders, you’re going to be left with one play in your playbook, and that tends to be a disposition of assets, which is unfortunate because oftentimes there are alternatives that would have been available to the company had they’d engaged early on.

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What is the current appetite for financing deals or infrastructure projects?

Sweeney: There’s a sentiment out there in the banking industry called “extend and pretend,” which is the idea that if you just put a company into a state of stasis – don’t do anything, cut G&A to the bone – you can absorb some level of losses, maybe get a bit of help, then come out on the other side after there’s been a bunch of consolidations and/or restructurings and/or liquidations and be both healthier and an attractive acquisition target. That may not be a realistic solution in the oil and gas industry though.

Schultz: Right, in other industries, extend and pretend is potentially viable, if you can shutter a lot of your costs and bring your overhead and your G&A in line. But in this industry, in particular, a lot of companies are already running on incredibly narrow margins. There just isn’t a lot of wiggle room for them, because the market was already in a very low trough as relates to commodity pricing, and frankly we’re in unprecedented territory now.

David Sweeney is a partner with Akin Gump. His experience spans the full natural resource value chain, from exploration, production, processing and infrastructure, to monetization.

Sweeney has advised on mergers and acquisitions, energy finance transactions and operational matters. Reach him at dsweeney@akingump.com.

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The other problems that we’re seeing are the environmental liabilities associated with these assets, as well as real safety liabilities.

Boards of directors and management teams need to be careful that they don’t create a situation where the business is operating at such a razor-thin margin that it doesn’t have the ability to respond to a busted pipe or a blown-out well.

These types of scenarios can create a very significant

Since the advent of unconventional drilling, the industry has become increasingly overcrowded and overleveraged.

— DAVID SWEENEY

liability if they can’t respond appropriately. We hear a lot people saying, “Well, maybe they should just stop producing.”

The problem with that is that in a lot of instances their leases are held by production. So as soon as you stop producing in paying quantities, your lease goes away. You’ve got these small companies that have built these large portfolios of oil and gas leases, and if they can’t afford to produce, the net result is that their underlying assets revert back to the mineral owner. I just don’t know that it’s a viable option for most companies in this market environment.

Sweeney: I have seen advertisements on LinkedIn and other social media platforms for litigation-type lawyers who are trying to drum up clients who want to terminate leases. The United States is unique in terms of its oil and gas exploration and production industry in that you have leases that will expire if they don’t continue to produce in paying quantities. This is in contrast to a lot of the rest of the world, where the government owns and controls the oil and gas in the ground, and operators have more of an ability to produce - or not - without worrying about assets terminating. Elsewhere, you likely have one landowner – the government. Here in the U.S., you can have thousands of owners per well. It certainly has made the U.S. model more profitable during the best of times – and there are reasons why the industry is so different in this country, both the good and bad, and private mineral ownership is a big part of that. But in the worst of times, which we’re certainly in now, the U.S. model encourages things like a lack of coordination and supply overhang. We’ll have to see how things play out in the next several months. As with everything right now, there are just a lot of unknowns. 

Tips for Dealing with Bankruptcies Caused by the COVID-19 Shutdown MARK SILVERSCHOTS, LUMA AL-SHIBIB, & DENNIS NOLAN ANDERSON KILL

 In this excerpt from their “10 tips guide”, Mark Silverschots, Luma Al-Shibib and Dennis Nolan of Anderson Kill offer a few thoughts on how creditors can protect their interests from bankruptcies brought on by the COVID-19 pandemic.

Bankruptcies happen. They happen in booming economies as well as in recessionary ones, and they likely will massively occur in the frozen business environment caused by the COVID-19 pandemic. The suddenness of the pandemic’s onset is unprecedented. For many, consequently, dealing with those bankruptcies will be an unwanted and unanticipated new experience. Nevertheless, corporate and individual creditors of those prospective – or already-filed – debtors will want to do what they can, when they can, to protect their interests and minimize the damage to their own operations.

This article, excerpted from a longer “10 tips guide,” offers simple tips to help achieve those protections. “Your mileage may vary,” as the saying goes, but it remains important to buckle your seatbelt.

1. Review your contracts and credit terms.

When a customer enters a Chapter 11 bankruptcy, the automatic bankruptcy stay prevents creditors from commencing or continuing any efforts to collect a debt that relates to the period prior to the bankruptcy filing date. That means that a creditor cannot sue, cannot write demand letters, and cannot verbally demand payment of “pre-petition” accounts receivable. That does not, however, mean that one should do nothing.

First, a creditor would be well advised to collect and preserve all documents relevant to their business relationship with the debtor. These will include contracts, delivery confirmations, bills of lading, credit agreements, and anything else that provides the factual and legal basis for claims against

the debtor. Proofs of claim (the formal documents establishing creditors’ rights to payment through the bankruptcy process) must provide adequate detail to prove one’s claim, and it is never too soon to assemble that support.

Second, because in Chapter 11 a “debtor-in-possession” typically will continue to operate following the commencement of its bankruptcy case, creditors must decide whether they wish to continue to do business with a debtor subsequent to the filing. Often debtors will reach out to suppliers to secure specific post-petition credit terms, sometimes with the assistance of the creditors committee.

That said, each creditor must make their own assessment of the post-petition creditworthiness of the debtor. Many Chapter 11 cases are unsuccessful and “convert” to liquidations under Chapter 7, often leaving those who supplied the debtor post-petition burned twice.

Third, irrespective of whether you are going to do postpetition business with the debtor, file your “proof of claim” in order to avoid being barred from your rightful recovery from the debtor’s bankruptcy estate.

2. Payments to creditors made within 90 days of the bankruptcy should be protected from clawback as preferential transfers if those payments are made in the ordinary course of business.

One of the most frustrating experiences businesses confront is when they are sued for the recovery of a “voidable preference” by a company which they

Mark Silverschots is co-chair of Anderson Kill's Bankruptcy & Restructuring Practice Group. He has worked in the bankruptcy and reorganization field since 1981, representing secured, unsecured, and subordinated creditors. Reach him at msilverschotz@andersonkill.com.

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have supplied, which likely still owes money for goods or services delivered but unpaid, and where little to no recovery is to be obtained on account of their resulting claim. “Preferences” concern (in most basic terms) the right of the debtor (or trustee) to recover payments made to a creditor during the 90-day period prior to the commencement of a bankruptcy case, provided that certain criteria are met and in the absence of bankruptcyspecific defenses.

A preferential transfer is one made of the debtor’s property (usually money) on account of an “antecedent debt” (think of a payment of a past-due bill), to or “for the benefit of” the creditor (look in the mirror), while the debtor was insolvent (a legal “rebuttable presumption” during the 90-day period before the bankruptcy case commenced), that gave that creditor more than they would have received had the debtor been liquidated on that petition date (a virtually guaranteed fact). The two most viable defenses to a lawsuit seeking to recover a preference will be that the payment was “in the ordinary course of business” (either between the parties or otherwise within the relevant “industry”) – often expensive to prove – or that the creditor gave “new value” to the debtor (basically meaning you are unpaid for new goods and services delivered followLuma Al-Shibib is a shareholder in Anderson Kill and a member of its ing the date you received insurance recovery group. She has the preference, subject represented Fortune 500 companies, to certain limitations not hedge funds, banking and lending institutions, construction services relevant here). companies and developers, and state and governmental entities in coverage disputes. Reach her at lal-shibib@andersonkill.com.

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The idea behind the preference statute is to bring back those payments

“into” the bankruptcy estate and redistribute them to all creditors on a pro rata basis. One that returns a preferential payment, by statute, is given a general unsecured claim for the amount returned. The means of achieving “fairness” is not universally viewed as actually fair, either in theory or in practice, but it is the way the statute works.

If one is dealing pre-bankruptcy with a customer in financial distress, any change in credit terms may deprive a future preference defendant of the “ordinary course of business” defense. Further, if “pressure” is brought to bear on the customer, and late payment thereafter is made, such

payments similarly may be deemed “outside” the ordinary course. Some suppliers of a company in trouble will begin to require pre-payment for goods, or request payment of current invoices under standard terms and forego the payment of seriously past-due invoices in order to maintain “regularity” of payment during the period leading up to a bankruptcy filing. These techniques may deprive a plaintiff of being able to successfully assert that the payment they seek to recover is actually on account of an “antecedent debt.”

3. In a Chapter 11 case, a supplier of goods may qualify for priority payment status above other unsecured creditors under Section 503(b)(9) of the Bankruptcy Code.

Bankruptcy Code Section 503(b)(9) allows trade creditors who have supplied goods to the debtor, in the ordinary course of business, within 20 days before debtor’s

bankruptcy filing, to assert an “administrative expense” claim for the value of those goods. In this way, 503(b)(9) provides “priority” status to such suppliers of goods over other unsecured creditors, thereby increasing these creditors’ chances to recover the full payment of their claims.

Although priority status under 503(b)(9) is afforded only to trade creditors that supply goods, some courts have extended 503(b)(9)’s priority status to creditors in mixed claim cases, i.e., those that involve both goods and services.

The law on this issue is not uniform, however, and it is important to know the applicable law in your particular jurisdiction if your claim involves such mixed transactions.

While granting priority status to suppliers of goods, 503(b) (9) does not require the immediate payment of allowed 503(b)(9) claims. Bankruptcy courts have discretion in determining whether a vendor is “critical” so as to require immediate payment.

This determination is based on various factors, including the prejudice to the debtor, the hardship to the creditor, and the potential hardship to other creditors.

A creditor with a potential 503(b)(9) claim must pay close attention to the bar date notice and any applicable local rules in the jurisdiction where the bankruptcy case is proceeding to determine the procedures for asserting a

Dennis Nolan is a shareholder in Anderson Kill's New York office and concentrates his practice in commercial litigation with an emphasis on insurance recovery.

He also has extensive experience litigating complex chapter 11 reorganizations. Nolan co-chairs the firm's bankruptcy group as well as its marine cargo industry group. Reach him at dnolan@andersonkill.com.

timely 503(b)(9) claim.  CORPORATE COUNSEL BUSINESS JOURNAL

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Competitor Collaboration In the Era of COVID-19

Randy Gordon, partner at Barnes & Thornburg, discusses various ways that the coronavirus pandemic is affecting antitrust laws and government enforcements, especially in the health care space.

CCBJ: How is the coronavirus affecting the practice of antitrust law in the United States?

Randy Gordon: One of the effects of this crisis is that those of us who counsel clients in the antitrust space are taking a step back from business as usual, and clients who may be considering antitrust laws on their own are doing the same. What I mean by that is that the internal compliance officers, and those of us in private practice who counsel clients, often scare employees away from communicating with competitors. Because usually what we’re counseling clients against are hardcore violations of the antitrust laws, like price-fixing and so forth. Right now, those kinds of enforcements are still happening, but there is also collaboration happening between competitors that is perfectly fine. One of the things that we’re trying to impress upon clients, particularly those in the health care space, is that because of the extraordinary situation we’re in right now, certain kinds of collaboration are allowed to go forward. The government has acknowledged that, and the Federal Trade Commission (FTC) and the Department of Justice (DOJ) Antitrust Division have issued a joint antitrust statement about COVID-19, which is designed to give some comfort to competitors. Collaboration is necessary to help fight this pandemic.

You mentioned the new Joint Antitrust Statement Regarding COVID-19. What is the statement trying to achieve?

It is communicating to the market that the FTC and DOJ recognize that we’re in unusual circumstances, and that 18

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they’re promising to do two things. First, they want market participants to know that competitor collaborations are going to be reviewed speedily. They have essentially promised that when they’re presented with a proposed collaboration that is related to COVID-19 – someone seeking a business review, for instance – they will do it on an expedited basis. Second, they want to give some comfort to market participants by letting them know that not all competitor collaborations are suspect. Since 2000, there have been guidelines in place that emphasize the pro-competitive aspects of certain kinds of collaboration. Research and development, for instance, and some joint purchasing arrangements are necessary during this crisis – and need to be achieved quickly. So those are the two things I would emphasize: speed and comfort to the market.

Because of the extraordinary situation we’re in right now, certain kinds of collaboration are allowed to go forward.

What would you say the Joint Statement’s impact will be on mergers and acquisitions?

It may be that M&A activity, as a business matter, is going to be on hold for a bit, while we’re in this locked down economy. So there may not be a lot of activity in the space anyway. But one of the things that has been top of mind lately, for the last couple of years, is that the DOJ and FTC have been relatively aggressive in challenging mergers and acquisitions in general. The challenge to the AT&T and Time Warner merger was in the news a lot, for instance, since it was one of the first challenges to a vertical

merger in the last 50 years, and it’s certainly the largest deal that has been challenged. So people are understandably speculating about how these transactions will be affected by the COVID-19 crisis. I think the short answer is simply that there is not going to be a lot of activity. The Joint Statement has underscored that sentiment – unless the transaction falls within the Hart-Scott-Rodino Antitrust Improvements Act. In other words, unless something hits the reportable threshold, which is typically a dollar amount, the review is not mandatory. So what we’re counseling clients to do is to simply fall back to the competitor collaboration guidelines, as opposed to the merger guidelines.

What will the Joint Statement’s impact be on joint ventures and other competitor collaborations?

This is where the rubber is really going to meet the road.

The FTC and DOJ are encouraging certain types of competitor collaborations, for the time being. For instance, CORPORATE COUNSEL BUSINESS JOURNAL

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purchasing arrangements, as I mentioned, research and development, those sorts of things, are areas where collaboration is being actively encouraged. The agencies have even said that they will facilitate collaborations that

Collaboration is necessary to help fight this pandemic.

are sponsored or encouraged by certain other agencies – Health and Human Services, for instance. There may be

The short answer is yes. This Joint Statement emphasizes

some military collaborations, as well. But I think the one

that a crisis like this can encourage good behavior, but it

that’s going to be the most important is the joint purchasing arrangement for companies in the health care arena, which the FTC and DOJ have reiterated that they’re not going to challenge. As long as those purchasing arrangements aren’t impacting more than, say, a third of the purchases in the market, I think they’re going to be fine.

Can a company still run afoul of the antitrust laws during this period of relaxed enforcement?

can also provide fertile ground for bad actors to do things that are anticompetitive and anti-consumer. The agencies have reiterated that they’re still going to be actively going after competitor arrangements that fix prices, reduce output, or lead to price gouging, all of those sorts of things. We can safely say that they’re still going to be looking for that sort of bad market behavior. Even though there are things that competitors can do jointly, like lobby the government, there are other things that they can’t do. So although the government is encouraging certain collaborations, especially in health care, they’ve also made it clear that this is not an opportunity to commit hardcore antitrust violations.

This article should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation. 

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Randy Gordon is a partner with Barnes & Thornburg in their Dallas office. He focuses his practice on helping a range of entities with antitrust, RICO, class-action, university-related, securities, and intellectual-property matters.

Reach him at rgordon@btlaw.com.

Guidance for HR Antitrust Compliance PETER MUCCHETTI & MICHAELA SPERO CLIFFORD CHANCE

Peter Mucchetti and Michaela Spero of Clifford Chance lay out a framework for applying the antitrust laws in the employment context and provide guidance on how to avoid potential pitfalls.

Human resources (HR) may seem like the last place to look for potential anticompetitive conduct, but as federal and state enforcers have made clear of late, they can and will prosecute violations including no-poach, wage-fixing, and other anticompetitive employment agreements.

In its July 2019 antitrust compliance guidance, the Department of Justice Antitrust Division (DOJ) made clear that companies must monitor and provide antitrust training to HR professionals, as well as appropriately tailor any employment agreements with other companies. The Federal Trade Commission (FTC) announced in February 2020 that it had embarked on a massive study of all acquisitions by five major technology companies, including requiring the companies to provide information on any agreements to hire key personnel from other companies and post-employment covenants not to compete. And in April 2020, the DOJ and FTC issued a joint statement warning that they would enforce the antitrust laws against any employer who suppressed competition for labor amidst the COVID-19 pandemic.

If there were ever a time to “clean house” and ensure HR departments are antitrust compliant, it is now. This article lays out a framework for applying the antitrust laws in the employment context and provides guidance on how to avoid potential pitfalls.

ANTITRUST FRAMEWORK The Antitrust Laws Federal antitrust law prohibits agreements among competitors to prevent, restrict, or distort competition.

Each state also has its own antitrust laws, which often track federal law but can vary, as can state enforcement priorities. In addition, employment agreements can also violate state consumer protection statutes.

DOJ has exclusive authority to prosecute criminal antitrust violations against both companies and individuals, with companies facing fines up to $100 million for each offense, and individuals facing fines up to $1 million and ten years in federal prison per offense. Civil enforcement actions are also available to DOJ, FTC, and State Attorneys General, as well as private plaintiffs.

Analysis Standards When evaluating potentially anticompetitive agreements, the first question is whether the agreement between the parties is horizontal or vertical. A horizontal agreement is reached between competitors, whereas a vertical agreement occurs within a supply chain or franchise. The second question is whether the agreement is ancillary to a lawful agreement, i.e., whether it is “reasonably necessary to achieve its procompetitive benefits.”

In general, antitrust authorities view horizontal agreements, such as no-poach and wage-fixing agreements, that are not ancillary to another agreement as per se violations of Section 1 of the Sherman Act, which are deemed so anticompetitive that they are declared unlawful on their face.

On the other hand, horizontal agreements that are ancillary to a lawful agreement, such as non-compete provisions within acquisition agreements, are generally viewed under a “rule of reason” analysis. This analysis also applies to vertical agreements. Rule of reason analysis involves a back-and-forth burden-shifting framework in which the plaintiff must first demonstrate anticompetitive effect, after which the defendant must demonstrate a procompetitive justification.

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employment markets, including no-poach and wage-fixing agreements. In 2018, DOJ reached civil settlements with Knorr-Bremse and Wabtec relating to the companies’ anticompetitive no-poach agreement. DOJ noted it would have criminally prosecuted the defendants if their conduct had not ended prior to DOJ’s publication of the Antitrust Guidance for Human Resource Professionals in October 2016.

DOJ has also filed Statements of Interest in several private cases, reiterating its position on the application of antitrust laws to employment agreements. In re: Railway Industry Employee No-Poach Antitrust Litigation saw former employees file a class action lawsuit alleging that railroad companies had entered into agreements to “refrain from soliciting or hiring each other’s employees without the consent of the current employer.” In its Statement of Interest, DOJ took the position that horizontal no-poach agreements among competing employers are per se unlawful, Demonstrating that horizontal agreements not to compete can be procompetitive in limited situations, DOJ itself has imposed no-poach provisions on parties that are divesting businesses to obtain clearance for a transaction. For example, the consent decree resolving DOJ’s challenge to CVS’s acquisition of Aetna limited CVS’s and Aetna’s ability to re-hire employees that the buyer of the divested business had hired from Aetna.

Recent Enforcement Employment agreements are and will continue to be a target area for federal and state antitrust enforcers moving forward.

The DOJ Perspective In recent years, DOJ has confirmed it will criminally prosecute certain horizontal agreements that limit competition in 22

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unless ancillary to a separate, legitimate business transaction.

DOJ took a similar position in Seaman v. Duke University, in which a professor at Duke School of Medicine was denied employment at the University of North Carolina School of Medicine because of a no-poach agreement between the schools. Duke University later settled the case for $54.5 million and injunctive relief. DOJ took the unprecedented step of intervening to join the proposed settlement to obtain the right to enforce the injunctive relief entered by the court against Duke.

DOJ believes that one type of agreement likely should be analyzed under the rule of reason: no-poach agreements in the franchise context. For example, in Stigar v. Dough, Inc. and related cases, former employees of fast food franchises alleged that franchise agreements prohibited franchisees from hiring employees from the franchisor’s corporate offices or other franchisees. DOJ penned a Statement of Interest arguing that a typical franchise no-poach clause is vertical and can be adequately policed under the rule of reason.

View From the Bench Federal courts agree that naked no-poach agreements are per se illegal but differ in their treatment of franchise no-poach agreements. In Blanton v. Domino’s Pizza, the Eastern District of Michigan denied the defendant’s motion to dismiss after determining it needed more factual development to decide which analysis standard would apply to the plaintiffs’ allegation that Domino’s’ franchise no-poach clause violated the Sherman Act. The court held that the plaintiffs had plausibly argued the agreement was unreasonable under both per se and quick-look analysis, as the no-poach provisions were between franchisees, i.e., horizontal competitors.

But in another franchise case, Arrington v. Burger King Worldwide, Inc., the Southern District of Florida granted the defendant’s motion to dismiss, holding that the plaintiffs

did not sufficiently allege that Burger King and its franchisees were separate economic actors for antitrust purposes, and thus, the franchise’s no-hire agreement was an “internal ‘agreement’ to implement a single, unitary firm’s policies.”

State Attorneys General Enforcement A group of state attorneys general have formed a coalition to take on anticompetitive employment

Peter Mucchetti is a partner with Clifford Chance, specializing in antitrust litigation matters. He has more than two decades of antitrust litigation, investigations and merger clearance experience, with expertise in the healthcare, paper and lumber products, and consumer goods and retail sectors.

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agreements and has obtained settlements with numerous fast food chains to eliminate the no-poach provisions in their franchise agreements. The coalition has also urged the FTC to help stop the use of non-compete provisions in the workplace, particularly for low-wage workers. The FTC appears open to the issue and has held two workshops—the most recent in January 2020—asking the public for comments on non-compete clauses.

Congress Weighs In Congress is also attuned to these issues, and several prominent politicians have discussed or proposed legislation that would prohibit anticompetitive provisions in employment agreements. For example, Senator Amy Klobuchar announced in February 2019 that she would reintroduce legislation that “would clarify that a merger could violate the statute if it gives a company ‘monopsony’ power to unfairly lower . . . wages it offers because of lack of competition among . . . employers.”

Cleaning House: Suggestions for Avoiding HR Antitrust Pitfalls To ensure their employment agreements do not come under scrutiny from antitrust enforcers, companies should undertake the following steps as part of their antitrust compliance programs: First, train HR professionals and executives responsible for hiring to ensure that they understand the antitrust laws.

HR should be included in regular antitrust trainings and advised to seek counsel from an antitrust expert if in doubt about the permissibility of a proposed employment agreement.

Second, review and revise current employment contracts to ensure that they do not contain any problematic clauses.

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Companies should implement procedures that allow for continuous monitoring of employment terms and industry engagement, focusing first on agreements where these clauses are most likely to be found. Currently, antitrust enforcers are targeting provisions covering hourly and low-wage workers. Such clauses may also be found in agreements related to highly trained employees, such as engineers, IT experts, and designers.

Third, understand that the antitrust agencies can search for anticompetitive agreements in merger and other investigations.

Proactively reviewing and implementing antitrust compliance measures around HR and employment agreements can help avoid unwanted scrutiny when submitting merger filings.

Fourth, should a company identify problematic clauses in its employment agreements, it should consider taking remedial action.

In the case of a per se illegal no-poach or wage-fixing agreement with horizontal competitors, companies should consider a leniency application to DOJ and other remedial action.

Conclusion As labor markets continue to take center stage for both antitrust enforcers and Capitol Hill, it is advisable to review antitrust compliance policies surrounding HR and employment agreements with antitrust counsel. 

Michaela Spero is an associate in Clifford Chance's US antitrust practice. Shes advises clients on antitrust issues in government civil and criminal investigations, private party civil litigation, compliance with the U.S. merger control laws, regulatory review of mergers and acquisitions and implementation of antitrust best practices.

Go Fund My Dispute: Litigation Finance Takes Center Stage in a Crisis

Christopher DeLise, founder and CEO of Delta Capital Partners, discusses what sets Delta apart from other litigation finance firms, including its work on algorithms for a predictive litigation engine.

CCBJ: Tell me a little bit about your background and how you came to found Delta.

Christopher DeLise: I grew up in Concord, Massachusetts, and went to business school at Boston University. I was a financial analyst before going to law school in Chicago. I practiced law for 15 years, representing private investment funds and their managers and investors at some of the world’s largest law firms. In 2011, I left the law to found Delta’s predecessor. It was just me, a pool of capital, and my outside counsel at Skadden Arps and Nixon Peabody.

My first five cases were all against hedge fund managers who had defrauded some of my European institutional investor clients. They were not interested in spending $1,000 an hour for me to chase fund managers and possibly come away with nothing because the money was gone. I knew about litigation finance through my international work and met with some funders in London. Ultimately, I secured funding and pursued these five claims for 18 months and got back about 65% of their capital. At that time, the funding industry really had not begun to any large extent in the United States. Instead, ad hoc groups of investors and hedge funds were betting on one-off cases.

I recall that there was a great deal of skepticism back then.

Yes, while there was a lot of interest from law firms, large corporations and potential investors, there was also much concern over whether commercial litigation finance was a viable asset class/business. I was convinced it was and formed the current iteration of Delta. Moreover, the thenexisting model used by UK funders was rather old-school

and very conservative. They were run almost exclusively by former litigators who wanted to only do funding in the London/UK market. They were not very aggressive in marketing or risk-taking. I used my marketing savvy and experience as a financial analyst and then as a lawyer and applied them to this industry in the U.S. I felt it was a significantly improved model.

Is that basically Delta’s differentiator?

In part. We have developed what we call the “Delta difference” – 10 things that set us apart from our competitors.

It starts with speed – we are faster than our competitors in originating, vetting, diligencing and closing deals. We have almost 30 personnel, including nine litigators and transactional attorneys. We also have developed proprietary technology, including an artificial intelligence engine to help us vet and diligence investment opportunities. And we are now operating across the world: we are based in Chicago, but we source as many deals outside of the United States as we do within. Actually, some of our first deals were in China and the Middle East. Other funders thought I was nuts funding cases in those regions until they learned of our success. Now several funders operate in those regions. In my opinion, there is no material difference doing deals in any advanced region: you need to analyze the local courts, the local judges and attorneys, and the applicable rules of law, and most importantly you need to properly and comprehensively assess the risk and price it accordingly.

Do you work mostly with law firms, in-house law departments, or both?

We mine work from many different organizations, claimants and channels. Our latest numbers show that about 60%- 65% of our deals come from law firms. The next biggest source is investigators and intelligence firms (about 15%), and then corporations (10%). We work with Fortune 500 and mid-sized CORPORATE COUNSEL BUSINESS JOURNAL

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and smaller companies as well. Media and PR firms account for about 5% of our cases. The balance comes from intermediaries and blind inquiries over the website, phone or via email.

Litigation funders would seem to be well-positioned to benefit from the current crisis by, for example, supporting insurance coverage litigation that takes time to resolve.

That's correct. Inquiries from law firms looking for credit facilities and other liquidity solutions to help them meet operating expenses have sky-rocketed over the last six weeks.

We also have a product, litigation-collateralized loan, which allows a claimant to borrow against unresolved claims or litigation where that is the only collateral. That has been a big thing for us since we launched it last fall. Covid-19 and the global economic downturn resulting therefrom will result in massive insurance coverage litigation. This will be the full employment act for lawyers for the next 10 years.

Inquiries from law firms looking for credit facilities and other liquidity solutions to help them meet operating expenses during these unprecedented times are skyrocketing.

Tell us about Delta Liquidity Solutions.

DLS is a catchy name for a set of credit-like products we have developed to meet the liquidity needs of law firms, businesses and individual claimants by leveraging our expertise in underwriting litigation for purposes of making equity investments. Basically, we can provide credit facilities, loans and other credit-oriented products. Law firms can use their contingency cases or a portfolio of matters as the only collateral. It is typically an off-balance-sheet arrangement that does not adversely affect existing lending arrangements. It usually does not require partner guarantees. Law firms have not yet jumped all over it because the money is more expensive than a bank’s money, but conditions have changed, and banks are being much tighter in renewing and granting new loans and facilities. And now firms are worried about making payroll and laying people off, so they have become quite interested in the last several weeks and I expect that interest to continue to grow in the coming months.

As I previously mentioned, we started offering litigation collateralized loans last fall in Europe. The construction and transportation industries have a lot of regularly occurring litigation against governments for failure to timely pay the full amounts owed under infrastructure and construction contracts. This type of litigation usually settles over time but these firms need liquidity sooner and banks will not lend against such collateral. We analyze this type of litigation, put a value on it, and let the companies borrow against it on terms more expensive than a regular bank loan but without

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the same requirements of banks – the loan is repaid only if they win the case. If the cases go under, the borrower pays Delta nothing. That is why the money is more expensive.

We've had this product since last fall but once things started to slow down at the beginning of this year in Asia and then rolled West, interest in these loans significantly picked up.

There are a lot of companies that have litigation that they ordinarily would not consider an asset and now they realize that they can borrow against it. It is found money to them.

Is there stuff that you won't touch? What do you avoid?

We have a high-risk appetite but stay away from cases in Russia. We do cases all over North America, South America, Europe, Asia, the Middle East and Africa – basically everywhere except Russia. While there is a lot of litigation there and originating there, we cannot get comfortable with it.

Even places like Cypress and Panama, where historically there has been a lot of fraud and corruption, is not an absolute no. We analyze every case and jurisdiction in the same comprehensive way, whether an opportunity in the U.S. or Asia.

We also avoid funding cases where there is a serial fraudster involved. They are so used to being chased that they become battle-hardened and will not settle. As such, these cases take an enormous amount of time and money. There are so many other attractive cases that we have come to realize that it is not worth pursuing those. That is one of the great things about this industry - even if we triple in size, we will only be scratching the surface in terms of meeting global demand for litigation finance.

How does a typical engagement work? How do you develop business?

We are all about building long-term, mutually beneficial relationships rather than chasing opportunities. I spend at

Are you involved in international arbitration?

least half my time sourcing business across the globe. I need

Yes, that is about 20% of our funded cases, we love them.

They take more time and money, but they involve all sorts of interesting things like geopolitics and the media.

The damages are usually very high, and the practitioners

on in the market, what needs are being met and what are not

are exceptional.

way that are bake-offs or beauty contests among many

to be out there sourcing so I can understand what is going so that we can modify our offerings and marketing efforts. I believe in building relationships because when you pursue an opportunity, it is usually too late. Sure, things come our

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funders and we participate in those. But we like to educate our channels so that when they have an attractive opportunity, they think of us and call us first.

I tell all Delta personnel that all sourcing is local. People are quick to forget you when you leave their geography.

Sourcing is the lifeblood of this firm. As such, we do marketing campaigns, sponsor conferences, join podcasts, etc. but I am a firm believer that marketing must permeate the culture of the organization for it to be successful. I was a businessperson and worked in finance before I was a lawyer, and I learned early on that there is no substitute for building mutually beneficial relationships. We do not love big bakeoffs where you put a ton of time in and are usually selected based solely on how low you are willing to price your funding. We do not want to be known as the low-cost funder, we want to be known as the valued funding partner.

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Do you have any influence on how cases are handled?

The textbook answer is that funders are purely passive investors and do not control anything about the cases they fund. In reality, many funders exert control over aspects of their cases and I have seen some funders act as if they were the client. Our approach is to spend a lot of time making sure we have backed the right claims and the right lawyers so we do not have to be a Monday morning quarterback. In 80% of our cases, we are just providing money as a purely passive investor and therefore we do not have any control and little influence. Maybe we are asked to make recommendations for expert witnesses or counsel and we will, but we never say, "If you want our money, you have to do this."

However, we actively manage about 20% of our cases either because we are buying a claim, judgment or award for our own portfolio, or a claimant or their lawyers have asked us to get involved because, for example, they got an award and are trying to enforce it and do not have the requisite money

Delta’s approach is to make sure it is funding the right claims and the right lawyers so it does not have to be a Monday morning quarterback. and/or expertise to do it. In such cases, we are not acting as lawyers or investigators, but we have a good perspective on how things should be run and so we can best instruct counsel and investigators in those cases.

Your use of AI is interesting. Is that something that's common in litigation funding?

Not that I am aware of. Being from Boston, with a father who worked in high technology and with venture capital, I was always one of those kids who loved technology.

About seven years ago, I started to fund a side business to build a predictive engine for litigation. I was overconfident that it could get done for a reasonable price and in a reasonable period of time and I was primarily focused on building Delta. After spending a lot of money and time, it did not get accomplished so I shelved it for a few years but last year we dusted it off because recent advancements in machine learning and AI drove the prices way down. I am now optimistic that we will have the first fully integrated AI engine in the industry by the end of this year.

If you ask most litigators, I think they will tell you that there are too many variables for a machine to replicate their thought process. In my opinion, it is more a question of spending the requisite amount of time and money to do it and that's what we eventually did. We took our collective knowledge about underwriting cases, memorialized it and embodied it in a set of algorithms. Now we are on track to finish work by Autumn and then beta test the engine against past cases and data so that we can launch the system in

January 2021 and run it in parallel with our existing manual system until we are confident that the two produce similar outcomes.

As there is a lack of talent in this industry, if Delta continues to grow as it has then we will need smart, well-trained undergraduates with the right AI system doing up to 50% of the diligence work currently being done by highly-trained, very expensive lawyers if we want to run the business lean and maintain investment discipline – which of course we do. In my opinion, there is enough information available for certain types of cases that you can use algorithms for a predictive engine and that is what we are trying to accomplish with our platform.

Sounds a little like clients are disaggregating their work, taking some of the lower end work and are finding other ways, like using AI, to do it.

It's more about cost-effective, efficient scaling of our business, consistency of analysis and pricing, and comprehensive data tracking. It will be a tool to help us make better and more consistent decisions. That is what I am always focused on: how to lower our transaction costs and maintain investment discipline. Lawyers, investigators and investment professionals are expensive and our payroll is by far our largest expense. Therefore, I am constantly evaluating ways for Delta to work more cost-effectively and to make better decisions. 

Christopher DeLise is the founder, chief executive officer and cochief investment officer of Delta Capital Partners. Since 2011, he has overseen and guided all aspects of the company’s affairs. DeLise also serves alongside the CFO as cochief investment officer where he is responsible for evaluating the merits of all Delta investments. Reach him at cdelise@deltacph.com.

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Coming Face-to-Face with Virtual Alternative Dispute Resolution

Richard Byrne, commercial law specialist and mediator with NAM (National Arbitration and Mediation), talks about why NAM was able to move its proceedings online so efficiently in a time of crisis, and why client reactions have been so overwhelmingly positive.

How is NAM dealing with the effects of COVID-19?

Richard Byrne: It’s remarkable how quickly NAM was able to move its platform from traditional face-to-face mediations and arbitrations to virtual ones – or VirtualNAM, as we call it. They flipped the entire book of pending cases on its back, re-established everything as videoconferences, and we’re working that way now. If you had said to me at the beginning of March, when I was still in the office meeting with people in person, “Rich, in a week and a half, you will be in your home, conducting all of your mediations over the Internet,” I would have said, “How on Earth are we going to get this done?” But you know what? They did it.

To NAM’s credit, they had the foresight to start moving toward virtual alternative dispute resolution (ADR) a number of years ago, so they’d already trained us on how it works. People would take advantage of it from time to time, although there was a certain amount of hesitation.

Most human beings don’t really like change. Nobody wants to try to fix something that’s not broken. But all of a sudden, due to this outbreak of COVID-19, suddenly there was this immediate need. And fortunately, NAM already had this infrastructure in place, so they simply moved all of the parties, all of the cases, online, and got everyone assigned to virtual proceedings.

And you know what? I’m busier than ever. It’s actually a little intimidating looking at my calendar right now. It’s super full, and the technology is just amazing. It’s just 30

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remarkable. You literally forget that you’re not in the room with these people. And it’s more than just the ability to have a videoconference, which, of course, is important when you have all of the parties in “one room,” so to speak.

The ability to employ breakout rooms is crucial, as it lets people feel secure, knowing that they’re in a protected setting where we can speak confidentially without any concern about anything bleeding through a virtual wall. I held a mediation recently where I had five breakout rooms, and I just went from room to room to room to room to room.

Sometimes I’d put a couple of the parties back together, sometimes I would break them up, but it was really easy.

That’s what people come away with once they try it.

If they haven’t done it yet, that hesitation remains. But under the present circumstances, quite frankly, people are going to be forced to do business this way. I was joking a bit the other day, and I said, “You know, we call it alternative dispute resolution, because years ago it was looked as an

everyone before me on my screen. I’m given control, as the host of the session, which allows me to open the breakout rooms and move parties, as I mentioned, to individual rooms or separate groups within breakout rooms. It’s actually very much akin to a normal mediation. Once people give their opening statements and exchange information, everyone tends to forget that they’re not literally in the same room with each other. Just being able to see each other is huge. Being able to share documents is critical. People can make PowerPoint presentations. It’s pretty darn close to the real thing.

alternative to the court system. Well, the court system isn’t operating right now, so we’re actually the primary dispute resolution.” In all seriousness, we’re dealing with very difficult circumstances, of course, but people still have to get their matters resolved. This technology has stepped into the breach, and it’s allowing people to continue to make progress on their matters.

How is Virtual NAM helping to facilitate mediation and arbitration?

It’s giving parties as close to the feeling of the real experience as is possible. When I open a mediation session, I have

I do see this as a game changer down the line, too, as we come out of this crisis, because companies are going to be very mindful of their bottom line. So you know what: No more using half a travel day before mediation and half a travel day afterward. The ability to just log in at 9 in the morning from wherever you are and actively participate, to see the other side and the other side’s principals, to have the exchanges that we’d be having if we were in a conference room together, that is remarkable. I don’t know how it’s going to impact business travel, quite frankly. The airlines are having a terrible time right now, but I think a lot of corporations, a lot of the commercial participants in mediations, are going to say, “Look, if I can do this from my own conference room, why do I need to fly halfway across the country? Why do I need to book a hotel room? You know what? I can be much more productive staying right here.”

That said, I do think some people will always want to do ADR in person, when possible, and that’s fine. It’s not that I think traditional mediation won’t exist after this. It will. But I do think we’re going to see a measurable and significant change as far as what people opt to do as their first choice. Just think of the ease of scheduling. Say you have a case coming up for trial in the near future. There might be multiple parties involved, so there are going to be headaches involving scheduling the lawyers and the clients and everybody else, getting them all to a certain location at a certain time.

Now, all of that evaporates. All we need is a date and time.

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The whole goal of this transition is to get it to operate as smoothly as possible, to help people overcome that fear of the unknown.

— RICHARD P. BYRNE, ESQ.

How effective and successful has Virtual NAM been?

Remarkably successful. Every person I have teleconferenced with has said, “Oh my goodness, this is amazing, and it’s easy.” That’s one of the things NAM has tried to do – make it easy for the participants – because, listen, everybody’s got a bugaboo about technology. I’ll tell you, I certainly did, but when I did my original training with this technology a few years ago, I thought, “Wow, this could really be something.”

I did a case about a year and a half ago, a very complicated insurance coverage case where I had three underwriters from Lloyd’s over in London on the screen all day. They were sitting at a conference room table, and honestly, after a while, I’d come in and out of the room, and I forgot they weren’t actually in the room physically. I’d walk in, say, “Oh, hello, fellas.” And there they are: “Oh, Hi Rich. We’re ready.” I was already thinking to myself at that time, “Look at the savings in time and money for these three fellows who were active participants.” The savings on a transatlantic flight, and all of the time it would take, and we got the case settled at the day’s end. I haven’t had anybody say to me, “Oh, I don’t like this process. Oh, I’m not comfortable with this.” The only people who say anything like that are the ones who haven’t tried it.

It just goes back to that fear of the unknown, and that’s why NAM’s trying to make it as easy as possible for people.

They get an invitation, and they can log on as easily as just clicking on the link. It’s really easy, and it works well. And if there is any kind of glitch, the NAM IT folks are right 32

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there. They’re shadowing the proceedings. If it’s a multiparty case, they may be there to help open things up, to make sure everybody gets settled. They might ask, “Is anybody having any technical issues? All right, let me go offline with you for a minute.” That gives people comfort in itself.

Nobody’s being left adrift. Nobody’s being left in the wilderness. The whole goal of this is to get it to operate as smoothly as possible, to help people overcome that fear of the unknown. And the proof is in the pudding. Everyone is telling me it’s just remarkable.

What steps should clients take if they’re interested in mediating or arbitrating a case with Virtual NAM? If you have an account with NAM, and a lot of law firms and companies do, just contact your Account Executive, and they’ll get everything set up. If your company is new to NAM, they should contact Jackie Silvey, Esq. ( jsilvey@namadr.com). She is the General Counsel at NAM. She and her staff oversee the handling and scheduling of all of the commercial mediations and arbitrations, and she’ll get your people set up right away.

I really would encourage people to try it as soon as they have the need. There’s nothing to lose. I believe wholeheartedly that once people do, they’ll be very accepting of it. The technology is already known, it’s tested, and it’s reliable. It’s been the future of ADR for some years already. Now, it’s the present. 

Richard P. Byrne, Esq., is a member of NAM’s (National Arbitration and Mediation) Hearing Officer Panel and is available to arbitrate and mediate cases throughout the United States.

He has successfully mediated issues in a wide variety of specialty areas, including commercial matters and employment discrimination claims.

Reach him at rbyrne@lbcclaw.com.

Ideas Answering Clients’ Questions About COVID-19 Relief When the coronavirus pandemic hit the U.S. in February, McGuireWoods swiftly established a Response Team to answer their clients’ most pressing business questions.

the focus of our industry teams, along with our partners at McGuireWoods Consulting and their crisis communications team.

McGuireWoods established a COVID-19 Response Team to help clients navigate legal and business issues and government relations challenges arising from the pandemic. Why was it important to take this approach, and how has it been effective in helping clients?

Two emergency measures enacted by Congress in response to COVID-19 – the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act – created new paid leave policies and provided emergency relief for individuals and businesses. What were the most urgent questions or concerns you were hearing from business clients in response to these measures?

In mid-February, we identified the COVID-19 pandemic as a unique event for our clients that would require a creative way for us to marshal our resources to respond as effectively and efficiently as possible to their needs and issues. While other law firms undertook similar actions, we established our Response Team to be able to call on the depth and breadth of our practice groups and

These two laws have provided a number of different benefits and programs for our clients. Regarding the FFCRA, many have been asking questions about how the leave is calculated, how the sick leave and extended family leave work together, and the rules that the Department of Labor issued regarding the specific reasons for sick leave. In addition, there have been a number of issues CORPORATE COUNSEL BUSINESS JOURNAL

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regarding what constitutes the ability to work or telework.

For the CARES Act, there are a number of regulations that still need to be issued. But for the Paycheck Protection Program through the Small Business Administration (SBA), there have been a lot of questions about the rules for affiliates, and how related companies may or may not be considered together for SBA purposes. These rules differ from the usual joint-employer questions that we often see.

How should businesses manage the new sick and family leave policies?

The FFCRA is effective until December 31, 2020. Thus, we recommend clients develop separate policies for these leaves instead of modifying existing policies. That way, when the law expires, their existing leave policies don’t need to be changed again. In some instances, existing paid leave may be taken as part of the new family medical leave. This is another reason to have one policy for both the new sick leave and the new family leave, so that they can seamlessly work with existing policies. If the FFCRA gets extended or new regulations come out, modifying one policy should be more efficient.

We knew this crisis would require a creative way for us to marshal our resources to respond as effectively as possible to our clients’ needs.

What are the key employment issues and developments under the CARES Act? The key CARES employment issue relates to the enhanced and extended unemployment benefits. Because of the interplay with state unemployment schemes, this new law greatly changes the calculus for clients in evaluating furloughs versus permanent layoffs, while at the same time ensuring the continuity of the workforce. Indeed, some employees will receive more compensation on unemployment than their regular wages.

Also, we have had a number of questions related to employee head count for purposes of qualifying for the Paycheck Protection Program and/or the Employee Retention Credit, as well as other questions about how various short-term compensation program provisions will work. The tax credit has been one area of strategic focus for clients as they balance cash flow with payroll obligations and navigate how to manage the benefits the tax credit provides.

What employee benefits considerations should companies evaluate in light of the new COVID-19 laws and the options they provide?

The workforce changes arising from COVID-19, including terminations, furloughs, reduced hours and rising medical costs, have put tremendous pressure on employee benefit plans. In addition, COVID-19-related legislation has had a major impact on employee benefit plans, most of which is designed to ease the financial impact on plan participants

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and plan sponsors. For example, for 401(k) plans, the CARES Act eased the limitations on participant loans and early withdrawals, created a specific new “coronavirus-related” distribution, and suspended required minimum distribution rules for certain plan participants.

The CARES Act also eased the funding requirements for defined-benefit pension plans. For group health plans, the CARES Act builds on the provisions of the Families First Coronavirus Relief Act requirement that group health plans provide access to COVID-19 testing, diagnosis and treatments. The CARES Act also eases some deductible rules for high-deductible health plans with health savings accounts for purposes of COVID-19, adopts a safe harbor for providing telehealth services, and relaxes certain reimbursement restrictions for pretax accounts such as health savings accounts. The CARES Act also imposes limits on executive compensation paid by businesses that receive loans, loan assistance or other financial assistance under the act,

Bruce Steen is a partner with McGuireWoods and chair of the firm's labor and employment practice. He represents employers and management in labor and employment matters and his practice is divided into three primary areas. Reach him at bsteen@mcguirewoods.com.

Peter Farley is a partner with McGuireWoods. With significant experience in employment, benefits and business and commercial litigation, Farley’s practice encompasses a diverse litigation background representing clients in many different matters. Reach him at pfarley@mcguirewoods.com.

and, at least temporarily, provides tax-free status to employer-paid student loan repayment programs.

Do you expect there to be permanent changes in labor regulations or policies that will affect the way your clients do business when the pandemic is behind us?

This is a difficult but fascinating question. Once employers and their workforces get used to a new statutory or regulatory reality, it is difficult to go back to the former status quo. Furthermore, there has been tremendous activity at state and local levels related to the COVID-19 crisis. This is an acceleration of the pattern that we have seen over the last five to 10 years, as states, cities and localities, even more than the federal government, have become very active in regulating the employment relationship and are implementing their own paid leave laws, minimum wage statutes and ordinances, and other workplace protections. 

John McDonald is the managing partner of McGuireWoods’ Charlotte office. He regularly represents clients in employee mobility matters including counseling and litigating over noncompete, non-solicit and trade secret issues. Reach him at jmcdonald@mcguirewoods.com.

Carolyn Trenda, senior counsel with McGuireWoods, regularly advises public, private and non-profit employers on a range of employee benefits topics. She designs and assists clients with the ongoing administration of tax-qualified retirement plans. Reach her at ctrenda@mcguirewoods.com.

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Employer-Sponsored Health and Welfare Benefit Plan Changes Under the CARES Act CHARLES NEWMAN SILLS CUMMIS & GROSS LLP

Charles Newman, of counsel with Sills Cummis & Gross LLP, explores recently enacted programs and provisions impacting employers providing health and welfare benefit plans.

Amid the flurry of newly enacted programs and laws included in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed into law on March 27, 2020, are provisions that have significant impacts on health and welfare benefit plans provided by employers. This article summarizes the key provisions affecting such plans.

Coverage of Diagnostic Testing Section 3201 of the CARES Act expands upon the diagnostic tests and services initially provided for under the Families First Coronavirus Response Act (FFCRA) signed into law on March 18, 2020.

Section 6001(a) of the FFCRA required all group health plans and health insurance issuers offering group or individual health insurance coverage to provide coverage for diagnostic testing for the virus causing COVID-19, without any cost sharing, including deductibles, copayments and coinsurance, and without requiring prior authorization or satisfaction of any other medical management requirements. This mandate was limited, however, to the cost of FDA approved diagnostic products, and any services furnished during an office visit that resulted in the ordering or administration of the test. The FFCRA made clear that only services related to furnishing the test and evaluation for the purpose of determining the need for the test. The CARES Act expands the type of testing that is covered to include the following: • tests developed where the developer has requested or intends to request emergency use authorization from the FDA unless and until the request is denied or a request is not submitted within a reasonable time; 36

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• tests developed and approved by a State, where the State has notified the Secretary of Health and Human Services (HHS) that it intends to review such tests; and • any other tests that HHS approves in guidance.

Pricing of Diagnostic Testing Section 3202(a) of the CARES Act includes a provision governing the pricing of the diagnostic testing services required to be covered under Section 3201.

• If the health plan or health insurance issuer had a negotiated rate in place with a provider for the covered services prior to the declaration of the public health emergency, that rate must be honored throughout the duration of the emergency.

• If there was no such rate negotiated prior to the emergency declaration, as would be the case for out-of-network providers, the plan or issuer is required to reimburse the provider at the cash price published by the provider on its website, unless a lower rate is negotiated.

Disclosure of Diagnostic Test Pricing As a corollary to the pricing provisions of Section 3202(a), Section 3202(b) requires any provider of a covered diagnostic test to publish its cash price for the test on its publicly available website. It is worth noting that no alternative means of publication is indicated for sole practitioners and other small practices that do not necessarily maintain a website. Though such practices are becoming less and less common, they do continue to exist.

Any provider that is not in compliance with these pricing disclosure requirements and has not completed a corrective action plan to comply with such requirements will be subject to a civil monetary penalty in an amount not to exceed $300 per day for each day that the violation exists.

Rapid Coverage of Preventive Services and Vaccines Under the Affordable Care Act (ACA), non-grandfathered health plans are required to provide coverage, without any cost-sharing, for certain preventive services, including: • “(1) evidence-based items or services that have in effect a rating of “A” or “B” in the current recommendations of the United States Preventive Services Task Force; and • “(2) immunizations that have in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved.”

to be treated as an HDHP solely because it fails to have a deductible for telehealth and other remote care services.

This safe harbor provision only applies to plan years beginning on or before December 31, 2021.

Over-the-Counter Medical Products Prior to enactment of the Affordable Care Act (ACA), various over-the-counter medical products were considered “qualified medical expenses” that could be paid for with HSA funds. The ACA inserted the following sentence at the end of Section 223(d)(2)(A) of the Internal Revenue Code:

Mandatory coverage would begin for the plan year that begins one year after the applicable recommendation. The CARES Act makes the foregoing provision applicable to any “qualifying coronavirus preventive service,” which is defined as an item, service or immunization intended to prevent or treat COVID-19. Furthermore, it requires coverage of a qualifying coronavirus preventive service to commence within fifteen (15) days after the applicable recommendation. Unlike many other provisions of the CARES Act and the FFCRA, which apply only during the declared emergency, the accelerated mandatory coverage for coronavirus preventive services is permanent.

Telehealth Services Certain tax-favored contributions by an individual to a health savings account (HSA) are permitted if the individual is covered by a “high deductible health plan” (HDHP) as defined in Section 223(c)(2) of the Internal Revenue Code.

The IRS previously issued a notice on March 15, 2020 whereby a plan would still be considered a HDHP, thereby allowing contributions to an HSA, notwithstanding that the plan covered testing and treatment related to COVID-19 with no deductible or a lower deductible than the applicable threshold. Under Section 3701 of the CARES Act, an additional safe harbor was created whereby a plan will not fail CORPORATE COUNSEL BUSINESS JOURNAL

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Such term shall include an amount paid for medicine or a drug only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin. Section 3702 of the CARES Act repeals the above quoted sentence, thereby restoring the ability to use an HSA to pay for overthe-counter medical products. It also adds a provision allowing HSAs to be used to pay for menstrual care products.

It also makes similar revisions to Sections 106 and 220 of the Code with respect to Archer MSAs. Takeaway The key measures specifically targeted at the current public health emergency - expanded availability of coverage for coronavirus testing, accelerated coverage for preventive services and vaccines once they become available, and expanded availability of telehealth services – promise to make testing, treatment and prevention more widely available to participants in employer sponsored health 38

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plans. Not only are these important measures from a strictly humanitarian perspective, but they will hopefully contribute to a shortening of the duration of the current emergency, maintenance of a healthy work force, and resumption of normal business activities. Furthermore, the expanded coverage for telehealth services, if shown to be effective, has the potential to make healthcare more affordable and accessible beyond the current emergency. 

Charles H. Newman, of counsel with Sills Cummis & Gross P.C., has more than 30 years of experience in a broad range of transactional matters primarily focusing on the health care industry. The views expressed are his and do not necessarily reflect those of Sills Cummis & Gross P.C. Reach him at cnewman@sillscummis.com.

Betting on the Future of the Casino Industry

Frank Donaghue, of counsel with McNees Wallace & Nurick, discusses the effects of COVID-19 on the casino gaming industry, and how his work in the public and private sectors prepared him for a career in compliance.

CCBJ: You’ve held several leadership positions in your career. What makes a good leader, in your opinion?

Frank Donaghue: My experience has been that most attorneys would rather concentrate on their practice of law, as opposed to supervising attorneys or other employees. However, I’ve enjoyed leadership roles throughout my career, and I’ve had the opportunity to supervise attorneys in a number of my prior positions. One of the things I’ve always tried to do over the years, especially when discussing a complex issue, is to ask them what they think the best options are to resolve the issue. Then, I follow up by asking for their recommendation regarding those options. Those two questions really tell you a lot about the person you’re working with. Their answers let you see whether they’ve put in the time to think through a complex issue and determine what the various options for addressing it are, as well as whether they have confidence in suggesting ways that the issue should be dealt with. I’ve found that, more often than not, I will go with the suggested course of action, and that builds a lot of confidence in them, especially if you’re dealing with a young attorney.

What were some of the biggest challenges in going from the public to the private sector?

First, I want to say that some of the finest lawyers I’ve worked with in my career come from the public sector.

Earlier in my career, I had an opportunity to work at the Pennsylvania Office of Attorney General, as the director of the Bureau of Consumer Protection. I also dealt with lawyers in other sections of the office, including those

leading criminal investigations and complex civil matters, and they were truly some of the finest attorneys I’ve ever worked with. The same goes with the Pennsylvania Gaming Control Board, where I was the first Chief Counsel. We had to get that agency up and running ourselves. It was the first independent state agency to be created in Pennsylvania in more than 40 years, and we literally started with the initial procurement processes: from buying paperclips to computers and everything that goes with running a large organization. Then, right away, we started writing new regulations based on the laws and we launched a multimillion-dollar industry in about a year.

What I’ve experienced on the private side is that you must do more with fewer resources. My most recent position was as the Chief Compliance Officer at Penn National Gaming, which is a publicly traded corporation. The leaders of that company are committed to the interests of their shareholders, and they often wanted to know my thoughts in terms of my experience with government and how government officials might react to specific proposals. The transition from public to private has been fun for me. I’ve worked with a lot of great people on both sides, and I’ve found that my past experiences in state government have really helped on the private side.

What prepares a person for a career in compliance?

Over the last several years, more and more lawyers have become interested in a compliance career, which makes sense. When I was working at Penn National Gaming, we began hiring attorneys for the compliance officer positions at many of our larger casinos, and we found it to be a very successful approach. Attorneys are detail oriented, which compliance officers need to be as well. There are also numerous opportunities on the compliance side, whether it’s in banking, gaming, health care, you name it.

But I would suggest that people who are thinking about CORPORATE COUNSEL BUSINESS JOURNAL

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going into compliance consider starting off in government, whether it’s the state or federal government, as it will really give them good experience in drafting regulations and standard operating procedures, as well as in analyzing and interpreting regulations and the law.

What are the critical elements that a successful Compliance Committee ought to have?

First, have a strong written compliance plan. At Penn National Gaming, where I was the Chief Compliance Officer, we had four members on the Compliance Committee. Two of them were members of our Board of Directors. Two were consultants. We made sure that we had a strong written plan in place. Another critical element is maintaining independence of the Compliance Committee members so that they can review and take up matters objectively. It’s also crucial for the Compliance Committee to meet on a regular basis. We had quarterly meetings at Penn and would also call special meetings as warranted. The Committee would be presented with a comprehensive report in advance. We would maintain minutes as well as have participation from the executives, such as our general counsel and the president of the company.

What makes you uniquely qualified to represent gaming clients?

I’ve been an attorney on both the public side and the private side, first as the director of the Bureau of Consumer Protection with the Pennsylvania Office of Attorney General, then as the Chief Counsel to the Pennsylvania Gaming Control Board; so I know how regulators and government officials think. As the first Chief Counsel to the Pennsylvania Gaming Control Board, I dealt with virtually every aspect of gaming.

When you’re representing gaming clients, it’s important to not only know how the gaming regulators think but also how the business operates and how the executives and management team want to approach issues.

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Operators, whether it’s in gaming or any other industry, are obviously under a lot of pressure to perform for their owners and shareholders, so you’ve got to have a critical eye toward regulations. You should be able to interpret the laws and really give your client proactive suggestions in terms of how they can continue to advance the objectives of the company, while at the same time maintaining good relationships with the regulators. For instance, you’ve got to know how and when to ask for waivers or exceptions to the various rules and regulations – while ensuring that there will not be any compromise of the integrity of gaming itself.

What are some of the biggest challenges facing the gaming industry going forward?

COVID-19 has shut down virtually every commercial and tribal casino in the country, so that’s obviously the main issue the industry is dealing with right now. Sports wagering recently became legal in the U.S., and many

states have enacted laws to authorize it. But now there are no sports being played, except for wagers that are being placed on things like table tennis or other niche sports.

One of the opportunities that states and gaming operators can look into is reexamining whether they should offer online casino games such as online slots or poker. Currently, only a few states offer online casino games, and they are definitely benefiting from the revenues that are coming in from those games. These states, like Pennsylvania and New Jersey, are seeing a significant increase in online play while the physical casinos are closed. There’s a lot of speculation about whether this current shutdown will lead to renewed efforts by other states to legalize online casino games. What states are going to examine is whether the technology and revenue potentials are there to justify going forward with either state legislation or possibly emergency powers to authorize online casino games.

What compliance or regulatory changes will be faced by gaming companies as they reopen their businesses?

The moment that the casino operators closed their doors to protect the safety of the public and took care of their employees as best they could, they also began looking at what kinds of efforts are going to be necessary to put the gaming regulators in a comfortable position to allow them to reopen their doors. They have begun to draft standard operating procedures to address issues under the current COVID-19 crisis, making sure that they have enhanced sanitizing efforts and things like that. Maybe they’re looking at limiting the slot machines available, such as every other one, which would encourage social distancing. They’ll also have to think differently about food services. For example, many casinos have buffets, but now they may want to look at made-to-order food options instead.

The other important thing that they’re going to have to look at is the use of modern technology. Casinos require

Over the last several years, more and more lawyers have become more interested in a compliance career. identification when a person comes onto the casino floor, which means the patron is handing their ID card to a security officer. Now, however, casinos are going to have to take a closer look at technology like ID scanners. Biometrics can also help the casino industry and the gaming regulators maintain integrity within the industry by making sure that underage people are not getting access to the gaming floor while also encouraging social distancing.

The final piece is that the gaming regulators are going to have to carefully review and monitor these issues themselves, and maybe begin to allow the casino industry to do things a bit differently than they currently do, since it’s in everyone’s interest to get the casinos back up and running. According to the American Gaming Association, there’s about $41 billion in revenue Frank Donaghue, of counsel generated annually from with McNees, practices in the casino gaming, and about Corporate & Tax and Gaming 1.8 million jobs are supPractice Groups. He has extensive expertise in gaming, ported by the U.S. gamregulatory affairs, BSA/AML ing industry. COVID-19 compliance, consumer has deeply impacted the protection, workplace & industry; but casinos government investigations and vendor due diligence. Reach him are very resilient, and it at fdonaghue@mcneeslaw.com. won’t be long before they get back on their feet.  CORPORATE COUNSEL BUSINESS JOURNAL

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Disruptions, Disputes and Dialogue

 Washington, D.C.-based Ranse Howell, who oversees international efforts at JAMS, discusses the importance of being proactive and maintaining good business relations even in the midst of a dispute.

CCBJ: Supply chain management has been a key issue during the COVID-19 pandemic. How have you been advising attorneys to deal with supply chain disruptions?

Ranse Howell: I first saw this as a potential challenge for businesses when the initial outbreak happened in China.

An article in The Economist on February 13 included a graph showing where supply chain challenges would happen and when. I then wrote a blog post predicting a disruption and asking what we can do to deal with some of these challenges. We know that some goods will not be delivered and that manufacturing may be interrupted.

Given that information, rather than waiting until a conflict occurs, have a conversation with your suppliers about what needs to be done, including finding alternative sources of supplies and/ or services. You want to maintain these relationships while continuing Ranse Howell is a member of to do business. the senior management team and oversees international efforts at JAMS. He supervises a global team with representatives in multiple markets across the United States as well as in China, Mexico and the United Kingdom, among other countries. Reach him at rhowell@jamsadr.com.

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Of course, that was in February, and now we’re in a very different situation.

Concerts have been canceled, and businesses have been shut down. There are going to be commercial difficulties due to the

interruption of supply chains, and businesses are going to suffer. There may be remedies, if you look at your contract, but there is also a benefit in maintaining relationships.

Parties want to stay in business, because they know this will end at some point.

Our role in mediation and dispute resolution is to facilitate that dialogue, but there’s another opportunity as well, which is to have a mediation process before litigation occurs, before claims are filed, before parties become entrenched in their positions. Typically, mediation is used at a later stage in a conflict. And if you do need a determination, you could use an expedited form of arbitration, as that can provide a speedy resolution.

What would you tell attorneys about how to prevent disputes during these uncertain times?

This series of events has magnified, or is very similar to, the repercussions we saw after both 9/11 and the financial crisis to some degree. I always stress to think about what’s important to you and your commercial partners. You’re both in business to supply goods and/or services; you’re not in business to seek retribution or commercial difficulty.

The first step is to understand your options: Work with your entire legal team. Consider all the permutations and prepare to have a conversation with your suppliers. Have a plan and say, “We are best set to do business together and survive together if we can communicate and we have a plan.”

Be aware of all the remedies that are available, rather than canceling a contract or walking away.

If a dispute cannot be avoided, what should attorneys do?

Certainly, there are some situations that require a remedy.

If a dispute cannot be avoided, then understand the various mechanisms that are available, as well as the ramifications

and the time frame of a particular path of dispute resolution. Of course, you can go to court, but that will take time and energy, and at the moment, it might not be the most desirable course of action. So some sort of a dispute resolution mechanism — mediation, arbitration or adjudication — should be selected.

Businesses should understand what their end game is. What are your goals? If you want enforcement and recognition, then choose arbitration. If you want the parties to come to the table and consider a variety of options, mediation is the way to go. It’s about considering dispute resolution methods you might not have considered because of the nature of your business or the sector you’re in. For example, if you’re used to arbitration, then look at other forms of dispute resolution because, at this moment, they might be more appropriate.

What advice would you give to those trying to anticipate the new normal?

Consider the future now. Don’t wait until this is over to ask, “What are we going to do in the future?” You have to

plan now so that tomorrow will be what you want it to be.

As you’re going through this process, consider what you are learning. What are we doing? How could we do this going forward? What’s the messaging we’re projecting to businesses? How are we going to work with others? If we say that we as a business have a certain ethos, are we embodying that as we’re going through this process?

Then learn from what you’ve experienced and do a lessons-learned exercise. In this situation, it is essential that people step back and ask themselves, “What have we just experienced? What did we learn?” Celebrate the successes and recognize the challenges and how people are dealing with them.

But first, give yourself time to process what’s happened.

Some people deal with conflict and trauma overtly; others, quite subtly. However, everyone is dealing with it. It’s about making sure that there are conversations about what has happened. What did we experience as a group? For there to be continued support, people need to feel supported. Yes, they’ve been supported through the CORPORATE COUNSEL BUSINESS JOURNAL

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process, but as they are grieving the loss of, potentially, a loved one or a role or a career, it’s about what that is going to look like going forward.

As you plan for the future, take the time to check in. Are we doing what we said we’d do? It may be easy for us to go back to our normal daily lives, once everything reopens, but realize that this gives us a chance to say, “We don’t necessarily have to make, if there were mistakes, the same mistakes again. Did we use the electronic medium appropriately? Did we reach out to all the people that we could’ve reached out to? Did we keep people informed?

And if we didn’t, how can we bring them on board?”

Have a plan and say, “We are best set to do business together and survive together if we can communicate and we have a plan.”

What should corporate counsel uniquely consider?

There are a number of things that people want to be aware of, from both a cultural and a disputes management perspective, such as how we deal with risk and identify opportunities for dialogue, for dispute resolution and for other forms of dealing with commercial difficulty.

Consider what sort of environment has been created and if the individuals have enough information to recognize and manage commercial disputes. Are we dealing with the conflict and working with our internal clients? Are we more likely to increase our disputes or decrease them?

Just because people have access to tools doesn’t mean they are comfortable using them. When this is over, there is no guarantee that life will return to how it used to be.

Be aware of all your options, and make sure that you and everybody else on your team and in the organization understand the benefits of being proactive in dealing with disputes, managing them effectively and resolving them when they need to be resolved.

Then think about all of the mechanisms in our arsenal, both in the teams and the processes, so that when something like this happens again, we have processes in place to deal with it. I’m not saying to have a dispute system designed particularly for a catastrophic pandemic, but there are many opportunities like this. It’s important for individuals to feel that they have the knowledge and confidence to manage a range of commercial conflicts so that they can provide the most appropriate guidance and advice to their internal clients. 

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EEOC Issues Updated Guidance On COVID-19 and Federal Disability Discrimination Laws ESTHER LANDER, ANASTASIA MARIE KERDOCK, & JAMES CROWLEY AKIN GUMP

 Esther Lander, Anastasia Marie Kerdock and James Crowley of Akin Gump discuss the Equal Employment Opportunity Commission’s new guidance regarding how employers can appropriately respond to COVID-19 in hiring new employees, protecting current ones and bringing them back to work.

On Friday, March 27, 2020, the Equal Employment Opportunity Commission (EEOC) released a webinar addressing questions about the interrelation between federal disability discrimination laws and employer responses to the COVID-19 pandemic. The webinar supplements two COVID-19 related publications previously released by the EEOC—a March 19, 2020, webpage titled “What You Should Know About the ADA, the Rehabilitation Act, and COVID-19” and a March 21, 2020, update to the EEOC’s pandemic preparedness guidance, which was originally issued in response to the H1N1 pandemic in 2009. While federal antidiscrimination laws continue to apply during the COVID-19 pandemic, the EEOC stresses that those laws do not interfere with an employer’s ability to follow guidelines issued by the Centers for Disease Control and Prevention (CDC) or state and local health authorities. The EEOC’s updated guidance includes key considerations related to hiring new employees, protecting current employees, and bringing employees back to work.

Hiring New Employees While much of the workforce is retracting, companies providing essential services are staffing up to meet increased demand. For these employers, ensuring that new hires do not spread COVID-19 to their workforce is critical. The EEOC has clarified that employers are permitted to screen job applicants for COVID-19 after making a conditional offer of employment without violating the Americans with Disabilities Act (ADA), so long as the employer does so for all entering employees in the same type of job (employers

remain prohibited from making disability-related inquiries or conducting medical examinations before a conditional offer of employment is made). If an applicant has COVID-19 or associated symptoms, the employer may delay his or her start date or withdraw the conditional offer (if the employer needs someone to start immediately), given existing CDC guidance that individuals with COVID-19 cannot safely enter the workforce.

Protecting Current Employees The EEOC has clarified that employers are able to take a number of precautions to protect employees still physically reporting to work from contracting COVID-19, again based on current guidance from the CDC regarding how to limit community spread.

Requiring Temperature Checks Before Entering the Workspace Employers may take employees’ temperatures before allowing them into the workplace without violating the ADA. Generally, measuring an employee’s body temperature is a medical examination prohibited by the ADA unless done for a permissible purpose, such as determining whether an employee’s medical condition makes them unable to safely perform their essential job functions with or without an accommodation.

The EEOC’s updated pandemic guidance expressly states that, based upon the

Esther Lander is a partner with Akin Gump. She focuses on high-stakes workplace internal and government investigations as well as complex employment discrimination laws.

Lander previously served as principal deputy chief of the Employment Litigation Section within the Civil Rights Division of the Department of Justice. Reach her at elander@akingump.com.

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CDC and state/local health authorities’ acknowledgment of COVID-19 community spread, and the attendant precautions that have been recommended as of March 2020, employers may measure employees’ body temperatures.

However, the EEOC has cautioned that some people with COVID-19 do not have fevers. Employers who decide to conduct temperature checks should do so uniformly for all employees physically reporting to work unless the employer has a reasonable belief, based on objective evidence, that would justify singling out a specific employee for a temperature check. Also, as with all medical information, the fact that an employee had a fever is would be subject to ADA confidentiality requirements.

Asking Employees about COVID-19 Exposure, Symptoms or Diagnoses Employers may ask all employees physically entering the workplace if they have COVID-19, if they have been tested for COVID-19, if they have symptoms associated with COVID-19 or if they have been in contact with anyone who has been diagnosed with or is experiencing COVID-19 symptoms. Employees who have a confirmed case of COVID-19, those who have a fever or other symptoms of COVID-19 or those who refuse to answer the employer’s questions may be excluded from the workplace. Note, however, James Crowley, of counsel with Akin that as with temperature Gump, focuses practice on complex checks, these measures labor and employment litigation and should be applied equally strategic advice. Crowley counsels clients on a variety of strategic labor to all employees physically and employment questions. Reach reporting to work. An him at jcrowley@akingump.com. employer who singles out a particular employee 46

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must have a reasonable belief based on objective evidence that the person may have the disease (for example, if the employer has noticed that a particular employee has a persistent cough). Employers generally should not ask similar questions of employees who are teleworking and not physically interacting with coworkers, given that the same workplace safety concerns are not implicated.

Notifying Employees of Potential Exposure According to the EEOC’s guidance, employers may disclose limited information about an employee who tests positive for COVID-19 or has associated symptoms. A supervisor who learns of an employee’s actual or potential COVID-19 diagnosis may report the information to the appropriate employer officials, so that the employer can take appropriate action with respect to the rest of the workforce and notify public health authorities. However, disclosure of the individual employee’s identity should be limited to those who need to know, such as to a designated person who can interview the employee about who he or she has come into contact with in the workplace. Employers may then notify the affected employees of their potential exposure, without revealing the identity of the diagnosed employee.

While not endorsed in the EEOC’s guidance, employers may have some flexibility if the employee discloses his or her diagnosis voluntarily. The ADA requires that employers maintain as strictly confidential medical information received from an employee in response to an employer’s medical inquiry (such as an employer asking questions to determine whether an employee has COVID-19 or an employer requiring all employees to report to the employer if they test positive for the virus). However, courts have found that the confidentiality obligation does not extend to medical information or a medical diagnosis that an employee voluntarily discloses to the employer. Likewise, although employers cannot require an employee to agree to the disclosure of his or her COVID-19 diagnosis, the

employer can ask for employee consent to the disclosure if done in a manner that is purely optional and cannot reasonably be construed as a requirement. Obviously, this is a sensitive area and employers should proceed with caution.

Employers also should consider any state privacy laws that may come into play.

Finally, with respect to medical information that is obtained in response to an employer inquiry, the EEOC’s guidance cautions that the ADA’s confidentiality requirements continue to apply to managers and supervisors who obtain medical information while working remotely. For example, the employer should electronically store medical information in online locations that other employees cannot access.

Similarly, supervisors and managers may want to use an employee’s initials rather an employee’s full name in written materials to provide additional safeguards of electronically stored confidential medical information.

Protecting Vulnerable Employees While employers have a duty to provide a safe working environment to all employees, during the current pandemic employers may be particularly concerned about employees who are at a higher risk of serious illness from COVID-19. However, employers remain limited in their ability to protect vulnerable employees against their will. For example, the EEOC’s

Anastasia Marie Kerdock, senior counsel with Akin Gump, defends and counsels clients on a wide range of labor and employment matters arising under federal, state and local law.

Kerdock litigates employment-related disputes in federal and state courts, as well as in arbitral forums. Reach her at akerdock@akingump.com.

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guidance makes clear that employers may not require that employees who are over the age of 65 stay out of the workplace simply because the CDC has identified this age group as being at higher risk. Doing so would violate the Age Discrimination in Employment Act (ADEA). Similarly, an employer may not make furlough or layoff decisions based on which employees fall into a high-risk category.

An employer also may not ask employees who are asymptomatic whether they have a medical condition that would place them in a high-risk category unless the inquiry is made for a permissible purpose under the ADA. For example, when an employee in a high-risk category that is considered a disability under the ADA requests an accommodation (such as telework) to minimize the risk of contracting COVID-19, the employer has an obligation to provide a reasonable accommodation so long as doing so would not cause an undue hardship on the employer. The EEOC advises that given current circumstances, employers and employees should both try to be as flexible and creative as possible when engaging in the interactive process.

Employers should, however, consider how accommodations granted in response to COVID-19 may affect their accommodation obligations after the pandemic ends. For

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example, while the EEOC states that an employer allowing telework in response to COVID-19 is not automatically required to grant telework to every disabled employee once the pandemic ends, the agency also states that temporary telework granted in response to COVID-19 may be relevant to considering renewed requests made later on. COVID-19 telework could serve as a trial period for determining whether the employee was able to perform the essential functions of his or her job while working remotely.

Bringing Employees Back to Work At some point the COVID-19 pandemic will end, and employees will begin to return to their physical workplaces. The EEOC’s guidance states that employers may require employees who have been away from the workplace during the pandemic to provide a doctor’s note certifying fitness to return to work. Practically, however, given the demands on health care workers during and immediately after the pandemic, employers may need to consider other documentation that would provide similar assurances, such as a stamp or email from a local clinic.

The EEOC’s full guidance is available here. 

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OPS Optimizing the Business of Law  Keith Maziarek, director of pricing and legal project management at Katten Muchin Rosenman LLP, and Justin Ergler, director of alternative fee intelligence and analytics at GlaxoSmithKline, discuss the evolving nature of legal operations and management, the new face of negotiations between law firms and corporate clients, and the collaborative nature of their jobs.

CCBJ: Can you talk briefly about your respective roles and how they’ve evolved in recent years?

Keith Maziarek: I joined Katten Muchin Rosenman two years ago, so I’m on the law firm side of this equation.

I’m the director of pricing and legal project management for the firm. It’s been interesting from an evolutionary standpoint, because I’ve seen the beginning of this journey since the creation of these disciplines during the Great Recession – trying to institute more sophisticated ways of going to market, from a financial and operational standpoint, and better ways of partnering with clients. You start to demonstrate value pretty quickly as far as the 50

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types of things you’re doing, which helps spur the adoption cycle throughout the organization. One of the things that’s different now at Katten is that the adoption cycle is more accelerated than it used to be in the early days, which has led to greater momentum internally. Within a year and a half, we grew the team from just me to now there being four of us.

We’ve really seen a growing appreciation for what pricing and budgeting using legal project management and analytics can bring to the table. The current global health crisis and resulting economic and legal challenges many clients are, and will, face is likely to even further highlight and accelerate the adoption of these functions across the industry.

Justin Ergler: I’ve been at GlaxoSmithKline (GSK) for 14 years, in my current role as director of alternative fee intelligence and analytics for the last seven. My job over the last few years has been more about refinement and improvement than building something completely new.

The biggest change is that I’m dealing with a lot more business folks at law firms than I ever did before. More law firms are buying in and seeing the value that people

in roles like Keith’s can play. Before, I would be largely interacting with the partners and lawyers at a law firm, and the business folks would be more in the background.

Now, they’re a lot more client-facing, so I have a lot more interactions with folks that speak my language. These conversations start out at more of a business level, as opposed to being driven by the partners at a legal level then getting shifted to a business conversation later on.

So the biggest change for me is not so much a big overhaul of what we do at GSK, or my role or what I’m expected to do – it’s more that externally the environment has changed. And I think it’s been a change for the better.

When a large corporation like GSK needs to engage a law firm, how does the process for putting a fee arrangement in place work?

Ergler: I look to our lawyers as the subject-matter experts in the legal work and in what needs to be done. And on the law firm side, it’s the same thing – there are partners there who are the experts about what needs to be done from a legal standpoint. So I rely on my internal subject-matter

experts, our internal lawyers, who will say, “OK, here’s what we want to accomplish. We want to divest this bundle of products.” Then, on my side, on the business end, I look at it and think, “OK, where’s an example of something similar we’ve done in the past, and how did we do it? How did we structure the compensation arrangement or the plan for that work?” And Keith, or the person in Keith’s role on the law firm side, is doing the same thing. He’s thinking, “Where have we done this for similarly situated clients in the past? How did we do it? What did it look like?” So when Keith and I come together, we’ve gotten the information from our subject-matter experts about what needs to be done, and then we start comparing what they’ve said and start talking about, “OK, from a business standpoint, what do we need to do to make this work?” We are both trying to find that proverbial “win-win,” right? So I’ll come into that conversation with what I’m expecting from a proposal, what I’m expecting to pay as a fee, for that piece of work.

Based on the value that we’re hoping to get from that law firm’s expertise and work product, here’s what we’re expecting to pay. If that’s not lining up with what Keith’s firm is expecting to be paid, then we can have that discussion

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and try to understand, “All right, what are your assumptions?

What is the work that you’re expecting to have to do? Where is it not lining up with our expectations on the client side?

And how can we figure out how to make those two those two worlds align?”

Maziarek: Absolutely. There’s a level of transparency and communication that has to take place to help reconcile differences and expectations on both sides of the fence. And that helps to streamline the interactions between firms and clients. Usually the business collaboration will start once a decision has been determined that this is the right client-firm pairing for whatever the work is. Up until that point, we’re involved in the process from our respective sides of the fence. We really come together and start working together once we have an internal understanding and agreement on the assumptions. But you do form these ongoing relationships, where it just becomes standard operating procedure, like “Hey, we’ve got this new thing, call Justin.

Let’s figure out our part, see where they’re at, and then get things going.” So you really get into a rhythm within that relationship where you understand what the expectations are going to be. You’ll start to figure out where the disconnects tend to be, which then lets Keith Maziarek is the director you head potential probof pricing and legal project lems off at the pass. If a management at Katten Muchin partner, for instance, says, Rosenman LLP, where he is “Oh, we need to get back to responsible for building the firm’s formal pricing and them with XX,” I can anticlegal project management ipate and say, “They don’t functions. He frequently want XX. They’re looking speaks at industry events and for Y. Trust me, we’ve dealt publishes articles. Reach him at keith.maziarek@katten.com. with this before.” This prevents wasting time going 52

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back to the client and proposing things that aren’t aligned with patterns established in prior dealings. So that streamlining that happens is another benefit of that ongoing relationship and the collaboration that develops over time.

What’s your advice to in-house counsel who are frustrated by certain pricing approaches from law firms, and vice versa? How can the two sides really make sure they’re on the same page?

Ergler: We are extremely rigorous about financials, about what we’re paying law firms, about the way we structure our process with significant matters. For example, the way we bid out significant new matters is competitive. If firms are not able to understand their numbers and understand the meat behind them, they’re not necessarily going to feel comfortable being aggressive and competitive with their fees. The flip side of that is when they don’t understand their numbers but they are still aggressive with their fees, which can lead to problems down the road.

In a sense, we really force them to take a hard look at their numbers, because we’re not asking them to just take the old-school approach of saying, “Just give us an estimate or what you think this might cost.” We’re saying, “We’re going to have you commit to this fee up front, based on this scope of work that we’ve defined.” And that is going to be the fee unless there is a significant material change in the matter at hand. On the back end of that, there is also the management of it, and since we have committed to that fee, there’s an understanding between firm and client that that’s what we’re going to be paying you so you need to manage accordingly.

From a client like GSK’s standpoint, from the outset, the rigor that we put firms through in getting the work comes with an expectation that we will hold their financial feet to the fire, so to speak – in a fair and transparent way. If there’s a significant material change to the work, we definitely work with the firms to make appropriate adjustments. And again,

that’s why these relationships, like the one Keith and I have, are so important. It really gives the lawyers on Keith’s side the opportunity to say, “Hey, there’s been a few twists and turns and wrinkles that are going to cause us a substantial amount of additional work.” And then Keith can come to me and say, “Hey, here’s what I’ve been told is going on,” and I know it’s coming from a place of good faith. Then we have that conversation: “Based on these changes, in order for this to make sense for us going forward, we’re going to need to talk about an adjustment, and the range is going to be X, Y and Z.” But there’s going to be that rigor there. It’s not just going to simply be, “We’ll send you an overage bill that’s above and beyond our quote estimate that we had told you at the outset.”

Maziarek: When I hear from clients that they’re unhappy with a pricing approach, it’s usually one of two things.

One, they’re looking for nontraditional approaches that the lawyers at the firm are not offering or seem to be tone-deaf to. For instance, if everything comes back to billable hours, as opposed to proposing alternatives – if not enough thought is being given to different ways of approaching the work from a financial perspective, in order to give that client the peace of mind that they want – which, usually, is certainty. The client wants to know: “How much certainty can you give me around the cost and what am I getting for that cost?”

Other than just being dissatisfied with the firm’s ability or willingness to think outside the box and try and put together a financial proposal that’s more aligned with what the client’s objectives and needs for predictability are, the other issue that comes up is when firms provide an estimate despite massive uncertainty surrounding the actual scope.

Somebody may give an estimate like, “We’ve done a couple of matters like this. The last one was about 150 grand, so this one should be about 150 grand.” But nobody says anything about exactly what was purchased or delivered for $150,000.

Then things happen that are far different than what happened in that one data point that was used. An expectation was set

with the client, and then the client gets a bill for double that.

And the law firm goes, “Yes, well, it turned out to be much more complicated, because a month ago we had this happen or that happen, and we weren’t really anticipating it.” So there was no transparency or consensus at the front end surrounding the basis of estimate, so naturally the client will be upset when they’ve anchored on—and budgeted—for the agreed price that didn’t take into consideration the risk factors that could make that figure inaccurate.

Ergler: Over the years, in decades past, it used to be that the balance of power was more on the law firm’s side. Basically, they would just say, “Hey, we’re going to charge you by the hour, and can’t tell you what it will cost.” But now, with the pressures of the market and with clients having to control CORPORATE COUNSEL BUSINESS JOURNAL

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“We really force law firms to take a hard look at their numbers, because we’re not asking them to just take the old-school approach of just giving us an estimate.”

— JUSTIN ERGLER

costs and gaining more sophistication, being able to understand the fees that the firms are charging, it has really forced firms to work collaboratively with the clients to achieve more appropriate and fees. So there’s this new world, right? But a lot of lawyers grew up in a world where it would be the exact opposite. Getting the lawyers who grew up in that world to adapt to this brave new world can be a challenge.

What can you tell our readers about your new venture, the Legal Value Network?

Maziarek: We’ve been involved in producing the P3 Conference, focused on pricing, project management and process improvement in the legal services industry – in different capacities over the last seven years, and during that time it gained substantial momentum within this community of business of law professionals that we’ve been talking about. The numbers increased, as did the sophistication of involvement of members of the community’s client-firm relationships. We’ve actually seen the event quadruple in size, in terms of the number of attendees. What’s been striking too is that every year you see the type of programming and topics that are on people’s minds evolving. The content has continued to be fresh and dynamic, and more people are getting involved.

We’d been operating for many years as a subgroup of the Legal Marketing Association, which has been a really great relationship. They helped us find our footing and have always been a great partner to us. But as we looked at the growth and evolution of the conference and community, we determined that these new roles in the legal industry – roles 54

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like mine and Justin’s, which are more oriented toward pricing and operations, as well as toward the interactions and collaborations between law firms and corporate clients – this area really started to feel like it had its own identity.

It’s a new segment of the market. And we wanted to create a home that was very much dedicated to that and focused on growing that community of professionals. At a certain point, we felt like we’d reached the maturity level where this could become its own thing. So we wanted to leverage the platform that we’d developed with the P3 Conference and take it to the next level, to really create a home for the broader market of folks that are involved in these business roles.

So, that’s what the Legal Value Network is. It’s really an industry organization dedicated to furthering the evolution of the business of law in the commercial legal services sector.

We wanted to create an environment that’s a balanced ecosystem, where we’ve got representation from firms and clients and the vendors that are helping to support the work we’re doing and the rules that we have. We are also inclusive of people at all skill and seniority levels, ensuring that people coming up through the ranks are supported, and that veterans have a place to connect and trade ideas. We’re not looking to be competitors or take anything away from other Justin Ergler is the director of groups. There are some othalternative fee intelligence and er great organizations in the analytics at GlaxoSmithKline.

In his role he works with industry, obviously, and we in-house counsel and law want to be complementary firms to develop non-hourly, and be very collaborative value-based Alternative with them. And so far we’ve Fee Arrangements for legal engagements worldwide. Reach gotten a lot of great feedhim at justin.r.ergler@gsk.com. back, and people are really excited by it. 

3 Challenges at the Heart of Third-Party Risk

particular geography, can quickly become a global issue.

 Sara Robinson, senior director in the FTI Technology practice, discusses the Venn diagram of enterprise risk management.

CCBJ: Why is Third-Party Response such a big topic across the C-suite, and why should general counsel be particularly focused on this area?

Sarah Robinson: The entire topic of third-party risk (TPR) management is complex and increasing in the challenges and number of players involved. At its heart is a very old proverb: Every chain is only as strong as its weakest link.

The problem today involves three very interrelated factors.

One is volume, which has increased exponentially in the past 5 to 10 years. With the recession in 2008 and increased technical sophistication, there’s been a significant uptick in use of third parties across businesses of all sizes and across almost every industry. People are outsourcing whatever they can and trying to increase their margins with ever more complicated global supply chains.

Two is that regulatory scrutiny and fines continue to increase, sometimes to the tune of hundreds of millions of dollars. Regulatory scrutiny can be related to security, data privacy, and more traditional legal concerns. The interplay of increased scrutiny and higher fines means that lack of follow-through to address these concerns in a meaningful way can present a number of pain points that grow – and potentially compound over time.

Three is reputational impact. There’s a feeling across both our personal and professional lives that the technology we use must always be "on" and usable - so there’s less room for error from that perspective. News cycles and pervasive social media mean that something that 10, 15 years ago might’ve been a local problem, or potentially localized to a

Between volume, regulatory scrutiny, and reputational impact, few parts of any organization are left untouched.

And that, frankly, is why so many C-suite executives are talking about the challenges (or should be), whether they are labeling them as third-party risk or not. A general counsel’s play in this is related to being a trusted adviser who can help their organization navigate across all of the stakeholders while obviously keeping a close eye on the regulatory and legal ramifications.

Multiple studies indicate that somewhere between 42 percent and 59 percent of companies have had a data security breach from a third party. Perhaps even more important, only 29 percent of those companies believe that their partners will actually notify them of a compromise. So the challenge is large, it’s complicated, it’s sophisticated, and it requires a thoughtful approach to address the plethora of resulting issues.

What TPR governance risk issues should be considered?

Third-party risk management brings into focus what I call the Venn diagram of enterprise risk management. There are security implications, as well as compliance matters, which in third-party risk really implicates many data

Sarah Robinson is a senior director in the FTI Technology practice based in Washington D.C.. As a member of FTI Technology’s Information Governance, Privacy and Security Services (IGP&S) practice Sarah brings over 15 years of experience spanning public policy formation to advising on challenges at the intersection of business operations, cyber security, and enterprise risk management.

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Thinking through an enterprise-wide governance strategy that takes into play all of the relevant stakeholders is critical to success. privacy laws. Business lines are focused on getting to market and positioning themselves with the best capabilities; they focus on revenue and services. Timing is an important component for them, understandably. Their focus is not on how can they make sure that they’re compliant with various regulations or safeguarding their reputation in the marketplace. Thinking through an enterprise-wide governance strategy that takes into account all of the relevant stakeholders is critical to success.

Why can’t TPR simply be met with a good contract?

That’s intimately related to the reality that every business is a technology business today. The flow of data, the flow of technology, the requirements of technology bring into the same room stakeholders and business leaders from almost every part of a company. Contracts are certainly helpful and under privacy regulations they can be a requirement. But the technology-centered nature of companies and the increased regulatory scrutiny that we talked about earlier effectively mean that organizations are held much more accountable for appropriate follow-through.

Did you share data appropriately? Did you delete it appropriately? Did you process it in a manner that was agreed upon? Under current legislation, individuals can initiate regulatory review in some cases. Bad actors within an organization can consciously or unconsciously expose the company to a plethora of risk based on their actions. And companies are being held accountable in ways that they have not been held accountable before. No longer can they construct a paper trail and have that serve as the bulwark 56

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of defense, particularly when facing enforcement actions.

These challenges are dynamic, and they require organizational agility like never before to address them. How can organizations prevent lines of business or individuals from creating new third-party relationships that expose the company to greater enterprise risk?

This gets to the crux of overall governance. Fine-tuning a governance model that works for your organization and has a direct correlation with effective change management is the cornerstone of successfully managing the complexities of these challenges.

Change management isn’t just about creating good PowerPoint presentations to educate folks within an organization. Change management really needs to provide the tools and training and drive home the context for why and how we must change the way we do things. Adopting new

Will there be some latitude from the public and regulators since everyone is scrambling to make due during this crisis?

Unfortunately, I think that’s highly unlikely. Let’s take data privacy regulations. Two regulations of particular concern globally are the General Data Protection Regulation (GDPR) and the California Consumer Privacy (CCPA) Act. Both of these laws were passed long before COVID-19 changed the way we live and do business. These regulations call into focus the degree to which organizations are good stewards of the personal information of individuals.

Saying that you didn’t know or you weren’t ready, when these regulations were passed with plenty of time to at least develop a thoughtful approach, is unlikely to sit well with regulators.

As enforcement actions are showing, GDPR and related privacy regulations have already triggered numerous significant enforcement actions, with fines into the technology, or making sure there’s sign-off on something before proceeding, requires many individuals to approach their jobs in slightly different ways. Having a governance model that’s appropriate to your culture has everything to do with whether or not your employees will absorb what you’re asking them to and behave accordingly.

These are complex issues, but ultimately, it’s a technologycentered problem. Roll out communication plans and job aids, whatever else might be contemplated to arm professionals to embrace this new way of doing things, and adjust accordingly. In essence, the governance style needs to be closely aligned with your culture. Adequate resources should be expended to ensure proper training and support materials are created and usable. It is a dynamic problem that requires dynamic solutions, and that includes ongoing efforts and continuous monitoring.

hundreds of millions of dollars. It would be a little bit late to say that this pandemic has put my organization in a place where I cannot prepare or I was not prepared.

Can standards of care during a crisis actually create greater liability?

In the United States there is case law that indicates that ‘reasonable standards of care’ in the regular course of business is considered a lower standard of care than what is expected in a time of crisis. As we know, there are greater potential ramifications of failing to meet that higher standard than ever before. The thought process is, in crisis we need to be able to rely even more upon people doing their jobs more carefully, taking a harder look at what they’re doing, why they’re doing it, and how they’re doing it.  CORPORATE COUNSEL BUSINESS JOURNAL

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The Language of Data Hygiene

 Nicole Thompson of Onna advises legal departments to understand not only the tools being used across their organizations but also the types of data they are storing.

CCBJ: What should our general counsel and in-house counsel readers know and understand about the data their companies are producing and storing?

Nicole Thompson: In-house counsel and general counsel know better than anyone that data is being produced at exponential rates. Around 90 percent of companies use some sort of cloud service, and 60 percent of companies use cloud technology to store confidential data. But that doesn’t even scratch the surface of how much data is in a company’s chat platform, file storage, project management, contract repository and so much more. Rather than fight the proliferation of data and onboarding of beneficial collaboration tools, we should strive to better understand the nature of the tools that our companies are adopting.

Nicole Thompson is the head of customer success at Onna.

She was formerly an experience designer & strategist at Intelligent Mobile as well as a communications manager at EP Business in Hospitality. Reach her at nicole@onna.com.

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The truth is that these new collaboration tools are positive enhancements in technology. They’re filling a gap in organizational productivity and benefitting the teams using them. It’s up to legal and IT to work together and get a handle on data hygiene. What I mean by data hygiene is regularly going through a data inventory exercise, understanding the ins

and outs of these platforms and the type of data being created. Doing so will empower in-house counsel to react appropriately when the time to collect from their data sources inevitably comes.

How can corporate legal departments use surveys and interviews to enlist the knowledge of other key stakeholders?

This goes back to simply having good data hygiene. One of the successful techniques that we’ve seen is when legal works with stakeholders cross-functionally. Essentially, legal identifies a point-person from each department in the organization to go to when they need to better understand the tools they’re using. This is an opportunity for businesses to double down on information governance and make finding the right information easier. Building relationships with these stakeholders now will benefit your team for the long-run. If any urgent questions or matters come up down the line, you won’t need to scramble for the right person to talk to.

Explain data inventory. How are you advising clients on how to use it?

A data inventory is simply an evolving record of tools your organization is using. For many companies it looks like a list of data sources across departments, an outline of how they’re used, and what types of data are stored. A data inventory gives legal more control over their organization’s data, and enhances their ability to understand the data being produced. This is especially important because there are regulatory requirements like CCPA and GDPR. Take the below scenario to get started: Let’s say you want to understand what tools your organization is using. First, list the popular options, whether it’s chat, project management, or a file storage platform, make sure you cover all of your bases. Then, reach out

to the stakeholders and typical users — have interviews with those stakeholders to get details around usage, and set regular check-ins to make sure this inventory is up to date. There is a good chance that departments within your organization will be using tools that you’ve never heard of as within the legal environment. Once you better understand the tools that are being used and the type of data stored, you can better assess your level of preparation for different scenarios, i.e., e-discovery requests, compliance alignment and basic information governance.

At Onna, we have a questionnaire to help clients get to know the platforms they need to be collected from to help lay the foundation. We also encourage legal departments to learn more technical terms. There is a base technical language that today’s counsel and legal operations managers should become comfortable with. Whether it be determining user roles, or understanding API connections, we can’t stress asking questions about these topics enough. By doing so, you can have more effective conversations with IT and better understand what to look for in legal tech solutions.

What are some of the best practices on collaborating with IT?

On the flipside, it’s equally as important to help IT understand motives on the legal side. For example, we hear of clients who don’t have data retention policies in place, which poses problems for compliance reasons. It’s critical for legal to not only communicate the need for a data retention policy to their IT team, but also to communicate the why behind it.

Understand whether the tools have a native retention policy. If so, are you going to be implementing it? If not, what can be done to respect a retention policy? Asking these questions creates alignment, motivation and a better understanding of the "why" behind your team’s IT requests.

Being a solution in the legal tech space, here at Onna, we frequently see the need for legal and IT departments to meet in the middle. Whether they’re collecting from Slack, Google Drive, or Confluence, legal teams need IT assistance to understand and kick off the process 99% of the time.

Having those initial conversations about collaboration is key regardless of the data source.

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You referenced a questionnaire that corporate legal departments can use. With what frequency should that be used, and how does it relate to data usage?

The questionnaire we provide is to help IT and legal bridge the knowledge gap previously mentioned. The questions are mainly ones that IT would be able to answer and help give legal visibility to better do their job. Frequency of the questionnaire is highly dependent on the size of your organization and the industry you’re in. If you’re a small

There is a base technical language that today’s counsel and legal operations managers should get comfortable with so that when the need arises, you can have more efficient, more effective conversations with IT. organization, perhaps you check in quarterly, whereas if you’re a medium to large organization, you check in monthly.

We also suggest making sure that legal is part of the onboarding process for new tools from the get-go. Rather than responding to certain inventory questions regularly, advising legal from the start will save both parties time.

Any final thoughts?

All legal teams hate getting to the point where they’re told that they need to collect information from tools they don’t understand. When this time comes, it’s important to ask certain questions. How can we get information out of the tool? Does it have native exports? If not, does it have an API that we can collect from?

Onna is a perfect example of a tool that can use API to collect information from data sources. We process and index that information. We extract the metadata so that we create an index that is easily searchable. But then we also help our users export information to review platforms. If sources have an API, these are places that we can collect information from. There are other ways of getting data out of a system, but it is helpful for legal to understand prior to actually having to collect the data how they would do so. It puts everyone in a better place. 

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Paying Attention to Trends, Even in Uncertain Times

 Ken Crutchfield, vice president and general manager of legal markets with Wolters Kluwer, talks about ongoing shifts in the legal industry, from the changing dynamic between in-house counsel and outside firms to the impact of technology and COVID-19.

CCBJ: How are the dynamics changing between in-house counsel and the outside law firms and other legal services providers in the industry?

Ken Crutchfield: If you look at it broadly, there is a confluence of events. You’ve got additional focus from groups like the Corporate Legal Operations Consortium (CLOC) and a bit more attention from the chief financial officer, who is looking at budgets, and specifically at the technology that’s being applied broadly within a corporation, and asking, “All right, where else can it be applied? What about the legal department?” And the technologies that are right for the work that attorneys do are being embraced by corporations more so than by law firms, at least right now. Profit motivations, because these corporations are publicly traded, are potentially really big driver. As a result, with legal operations, you’re starting to get into a situation where the ultimate business reasons for working through a legal issue are becoming more important, and that causes a change in dynamic, because now corporate legal departments are expecting more out of outside counsel. They want more context than they had in the past, and they want to be able to more readily relate the work that’s being done by outside counsel to something that benefits the ultimate business goal.

So the general counsel and senior legal executives have become business advisors as much as they are legal advisors, right?

Yes, that’s definitely true, to a certain extent, but there’s

a balance. General counsel is the face of legal, but they also are part of the business.

You’ve talked a bit about why this dynamic is shifting now. Going back to the last financial crisis, a lot of changes that were already underway in 2008 and 2009 accelerated after that. Do you see that same dynamic playing out in response to COVID-19 pandemic crisis?

It’s too early to know for sure, of course, but is it possible that things will continue to accelerate and that even more power will be shifted to in-house counsel, which is what happened in 2008 and 2009?

Necessity is the mother of invention, and when any group or organization goes through a crisis like this, it causes people to rethink those key orthodoxies and beliefs about what’s important to how your business operates. Those entrenched beliefs get questioned, and some may have to be changed or addressed in some way. If a legal department is being told, “We’re limiting outside spend to protect head count,” for example, it’s not just the corporate legal department, now everybody is looking at contractor spend and outside services too. We’re going to cut those before we do anything to employees, because we want to retain human capital in these difficult times. I think it forces a change in thinking about how you are going to get certain tasks done.

You talk a lot about metrics and data-driven decisionmaking, which strikes me as a real opportunity, but it’s not necessarily something that’s been easy for in-house legal departments or outside law firms to embrace.

Do you think that will change now?

Yes, there’s going to be more emphasis on looking at places where you can apply data to the decision-making process.

There’s a lot more that’s measurable nowadays than there ever has been in the past, which managers are increasingly able to use to make decisions about which outside counsel can best represent the company on a particular case based CORPORATE COUNSEL BUSINESS JOURNAL

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Also, another thing I’d like to say about COVID-19 specif-

General counsel is the face of legal, but they also are part of the business. on their previous track record. The data is there, and it’s more and more possible to pull that information together and look at it and make meaningful decisions.

Also, the internal key performance indicators (KPIs) that are developed by a corporate legal department are necessary to understand what the goals are for a particular year, whether it’s an initiative around going green or managing expenses or containing headcount or growing overseas. When you have specific goals like that, having metrics and KPIs that the legal department can use to score itself and outside counsel are crucial. Let’s say that coming out of this era of COVID-19 there’s a new emphasis

ically is that we quickly went through and did what we call a Smart Chart, which is basically an inventory of the 2,000 executive orders that we were able to find related to COVID, plus specific laws and regulations. We’ve been updating that chart regularly and making it available at no charge to anybody in the community, without any registration or anything, through our marketing web pages.

It’s a simple productivity tool that we’ve made to

on digital and paperless work, does that cause corporate

help law firms and corpo-

legal to look at collaboration differently, and does outside

rations respond quickly

counsel to need to be more proactive in terms of how they

to the changing dynamics

how they deliver or work on drafts of content?

of this crisis.

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Ken Crutchfield is the vice president and general manager of legal markets for Wolters Kluwer Legal & Regulatory Legal & Regulatory U.S. In his role he sets the vision and strategic approach on developing digital products. Reach him at ken. crutchfield@wolterskluwer.com.

You've spoken about the need for law departments to

Be mindful of the technology that corporations are gravitating toward, and what your clients are gravitating toward.

work faster to embrace technology. Talk about the embrace of technology by both inside and outside counsel.

I’m going to keep it slightly high level here, but I would say that when adopting technology, make sure it’s not just the

Lawyers value close relationships with their clients and their coveted position as the go-to expert. That status, however, has been slipping away as others, including in-house legal operations professionals, get more involved. With people working remotely, it seems it may get even harder to stay close to clients.

Can you talk a bit about that?

shiny new thing. Look at it from the standpoint of what it does for improving the quality of relationships and services –

Historically speaking, if the general counsel has had an issue, they’ve been able to pick up the phone and know just who the necessary person is to engage about it. I’ll go back and put my tax and accounting hat on for a little bit.

All of the decisions that came out of the Sarbanes-Oxley Act – the controls and managing and being able to make attestations about policies that could affect financials – I think they’re kind of swinging back at law firms now, because law firms are a supplier, and so you have procurement and you need to make attestations to the market and to customers about how you conform with the policy and support it when you affect their financial controls too.

It plays back into the procurement of legal services. When a company has, say, a policy around diversity, and they only want to work with vendors that have a policy that’s consistent with what they’re doing – well, that bleeds into law firms now.

Maybe it wasn’t part of the first group of organizations that they looked at, but when you go down the list of all of your suppliers, you have to ask, what about law firms? So that’s one of the places where I say there’s probably been a significant change in dynamic – that and cybersecurity, since there is a lot of sensitive information that passes to a law firm, and if there’s a breach, how do you make sure that’s addressed?

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making things better, faster, cheaper. It comes down to productivity and profitability. To your point, there are plenty of technologies out there. I’ve heard that there’s something like 1,200 legal technology companies out there right now, and obviously there are going to be winners and losers in mix. So you have to be mindful of what corporations are gravitating toward and what your clients are gravitating toward, because you want as much consistency as possible.

If you have three different practice areas serving the same clients with these different technological approaches, and that client is working with numerous outside counsel firms, you can easily see how this fragmentation creates challenges, since there isn’t that harmonization that’s necessary for things to move slowly.

CCBJ and Wolters Kluwer are going to participate in a webinar together for the first time. What can you tell us about that?

The value of webinars and webcasts has certainly increased in recent weeks, given how many legal professionals have moved to remote work settings. There’s an opportunity to involve a larger audience in virtual events, and an opportunity to address some of the same pain points that the industry is experiencing right now. We’re looking forward to working on our first webinar with CCBJ in the coming months.

Is there any guidance you’d like to share – advice from

because the panels get hard to manage. It’s not like sitting

people who’ve done really well on panels with you

on a stage, where you can cue each other just by looking at

in the past?

Our last big event in the legal space was a couple of months before this crisis hit. It was a legal operations event, and the

somebody and knowing that they want to say something.

Without that ability, people can step all over each other, so I think it helps to keep the panel on the smaller side. I also

panels were very popular. That was a live event.

think it’s important to make sure that the webinar isn’t just

Webcasts have to be thought of differently than a live event.

to presenting content that will be interesting but also truly

With a webcast, you don’t want too many people involved,

useful to the corporate counsel audience. 

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informative, but also actionable, so we’re looking forward

How Legal Departments Can Overcome Tech Phobias

 Rekha Shenoy points legal professionals toward understanding their data and collaborating with IT teams on technology systems that are straightforward and self-service.

CCBJ: What are some key technologies that legal professionals have developed fluency in and why?

Rekha Shenoy: In today’s modern world, when you think about collecting evidence for litigation of any type, much of that evidence is in digital form. Key technologies are essentially anyplace communication or documentation that’s relevant to litigation is present. A lot of it happens in emails, which are probably the most common area where evidence is gathered. Understanding your email stack, like Microsoft Office and its suite of products, becomes a critical task for legal professionals.

But the complexity has grown dramatically beyond email.

There are both internal and cloud-based places where critical evidence gets stored – SharePoint, Google Vault, Dropbox, Slack, and so on. A wide variety of data is created and stored in these areas. For a legal professional, it’s important to know where company data is stored and which sources are relevant for typical litigation; to have a process, everything from information governance to legal holds to preservation collection; and then finally, to process this data.

What is technology competency within the legal profession, and why is it important?

Legal technology represents an interesting cross section of professionals. They deeply understand the electronic discovery process, so they recognize the legal implications of collecting, preserving, and storing information relevant to litigation, as well as making sure that the

necessary safeguards are in place. They also understand technology from the IT side of the business, in terms of what is relevant and how to use it.

More importantly, when you think about large corporations, the sheer magnitude of electronic data that gets processed in a given year is so large that automation becomes critical. Technology competence within large enterprises often involves a team that understands how to preserve, collect, and process electronic information relevant to the large amount of litigation that they are subject to.

How are you coaching and advising customers on technology issues? How can you help them move past any technology phobias within their legal departments?

We see many concerns from a technology perspective when it comes to automating standard legal processes. Many times when companies are growing, they don’t have a significant legal burden, so they typically depend on outsourced legal counsel for much of this work. The company gets charged for these services in the form of billable hours, and it’s a model that works fine for most companies until they get to a certain size.

At some point, the real imperative for the company is cost savings, to pull some of that work, some of that

Rekha Shenoy is chief product officer with Zapproved. Her appointment in December, 2019 is helping to drive Zapproved’s product and infrastructure growth. Shenoy has 20+ years of experience that span across product, engineering, corporate/business development, product strategy and delivering compelling products to market. Reach her at rekha.shenoy@zapproved.

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cost burden, in-house and manage it internally. I’ve seen companies take an employee from the IT side and train them on legal. I’ve also seen the legal function evolving to becoming more technology savvy.

Often, when the legal department is suddenly tasked with doing something that they’ve previously outsourced, there is a big fear of adopting the technology. One of those fears is around legal holds and preservation and discovery of data, and getting their arms around where all of this data is. The other guiding factor — and the real technology phobia — is going from outside counsel that deeply understands how to do this for hundreds and hundreds of clients to building that competency in-house.

The common perception is that the technology required for a corporate team to manage litigation response themselves is difficult and cumbersome to use. Zapproved understands this very real fear. Unlike complicated e-discovery tools, which require dedicated experts, our Digital Discovery Pro software is simple enough for everyone in the legal department to master with minimal training.

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The sheer magnitude of electronic data that gets processed in a given year is so large that automation becomes critical.

As the world continues to become more digitally dependent, and the sheer amount of litigation makes a fully outsourced approach too expensive, building e-discovery competency in-house is a non-starter.

In that process, we always begin with the most prevalent source of information, and it’s usually the Microsoft stack.

That alone is enough of a challenge and getting more complex, with Office 365 and things of that nature, for legal departments to track where this data is. How relevant is it? How do I preserve and collect it? Then how do I process it in an efficient manner? Most importantly, when we say efficiency, we mean processing the data in a timely way so that they can serve the needs of the legal team.

How will those who resist technology be at a disadvantage as our professional environment only continues to progress?

The preponderance of evidence that’s needed for everything from small cases to very large class action lawsuits happens to be, especially when it comes to corporations, in electronically stored information. In this world, to support the needs of the corporation with early case assessment all the way up to every sort of litigation, it’s important that legal professionals understand how to appropriately collect, preserve, and provide for the disposition of data that is no longer in physical form – it’s all in an electronic form. To fulfill a responsible legal function in large corporations, this becomes a blind spot for professionals unless they get comfortable with it.

The role of a lot of legal technology is to be simple enough that departments’ reliance on IT professionals is less.

Technology can also mimic the legal function and be more self-service oriented. legal mandates that IT professionals need to follow.

Meanwhile, IT is looking at who owns that function going forward, because in the past it was something that they might have owned (and struggled with).

Across the board, there is plenty of opportunity for legal and IT to collaborate around information governance, and there’s never been a better time to get started. 

What best practices can legal departments and IT professionals collaborate on?

A variety of new technologies in legal tech today serve two purposes. One, they represent the legal point of view. Legal Hold Pro from Zapproved and other products like it are designed to mimic what the legal process requires. At the same time, they require less hand-holding from IT. Often, the challenge with creating a program around electronic discovery is that legal departments are waiting for IT resources or IT support. The role of a lot of legal technology is to be simple enough that their reliance on IT professionals is less and it can mimic the legal function and be more self-service.

When it comes to collaborating with IT professionals, the starting point of conversations is around data retention policies and information governance in general. Who should have what data? How much should they have?

How long should that data be stored and retained? When must it be purged? With privacy becoming a bigger and bigger part of corporate governance, those often become CORPORATE COUNSEL BUSINESS JOURNAL

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