Today's General Counsel, September 2021

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contents

SEPTEMBER 2021 Volume 18 / Number 6

4 EDITOR’S DESK GENERAL COUNSEL INTERVIEW

8 Q&A WITH STEVEN ROUTBURG Offices in seven countries complicate compliance.

COLUMN / CLIMBING THE LEGAL DEPARTMENT LADDER

10 THE GC, THE CFO AND NUMBERS No way up without understanding the financials.

By Andrea Bricca LITIGATION

12 MASS ARBITRATIONS Remedy for a million dollar-headache.

By Kennen D. Hagen

FEATURE 14 PANDEMIC PRIMES LEGAL DEPARTMENTS FOR A NEW NORMAL Some surprise positives for legal operations in 2020.

By Hillary McNally

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EDITOR’S DESK

G

eneral counsel have to possess many skills. Being a math whiz isn’t one of them, but in her column this month, recruiter Andrea Bricca makes the case that GCs who

want to become CEOs or board members should overcome any aversion to numbers they might have and become conversant enough about the financials to connect with the CFO. That partnership is the key to the C-suite, in her opinion.

In other articles, Hillary McNally reflects on the way the pandemic separated nimble law departments led by true generalists from those that were slow to adapt, and Ken Hagen discusses a method for mass arbitrations that minimizes filing fees. For our General Counsel Interview we talk to Steven Routburg, GC of Rotary International.

Bob Nienhouse, Editor-In-Chief bnienhouse@TodaysGC.com

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General Counsel Interview with Steven Routburg

S

teven Routburg joined Rotary International’s staff in 1996 and has been General Counsel since

1999. He graduated from the University of Michigan Law School and received his undergraduate business degree from the Wharton School of the University of Pennsylvania. He and his staff counsel the leadership of Rotary International, The Rotary Foundation and the Secretariat staff on a wide range of issues about law, and legal and corporate policy. The Office of the General Counsel also supports the organization’s Council on Legislation and manages the grant stewardship function for The Rotary Foundation. steven.routburg@rotary.org

What are the key issues you deal with?

Routburg: Variety is one of the most appealing aspects of my job. Rotary is everywhere, with over 40,000 member clubs engaged in service activities and charitable work in over 200 countries and geographic areas, including all 50 states. With administrative offices in seven countries, maintaining compliance globally can be daunting. Not surprisingly, evolving tax-exempt and data privacy regulations are two challenges we face. We simply don’t have the resources to operate customized processes in numerous jurisdictions. For instance, as privacy laws such as the General Data Protection Regulation are implemented, we have generally been forced to apply restrictions on a global basis. Our systems can’t easily apply different processes for different regions.

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How big is your staff?

Routburg: We have a staff of 20, including six lawyers, located in Evanston, Illinois and New Delhi, India.

We handle the legal matters of a global non-governmental organization, including contracts, personnel matters, litigation, trademark protection, and corporate and tax compliance matters. We also facilitate Rotary’s governance process, manage a grant compliance assurance program for The Rotary Foundation and operate a goods licensing program.

What do you look for in lawyers and other personnel who you hire in-house?

Routburg: Different positions require different skills, but what keeps the team engaged is a desire to be part of an organization that strives to make the world a better place. That’s the common denominator. Rotary surveys its staff periodically on a broad range of topics. Responses to the questions “I believe Rotary is improving communities worldwide” and “I am proud to work at Rotary” are consistently 100 percent positive in the office of the General Counsel.

What is the most problematic compliance area for you right now?

Routburg: As I noted previously, emerging privacy laws worldwide continue to be a challenge. Another area that has been evolving in recent years is a combination of strict Know Your Customer banking regulations, increasing scrutiny and distrust of the activities of non-governmental organizations by certain countries, as well as restrictive anti-terrorism financial regulations. This makes it difficult for our clubs to operate independently in these countries, and makes it difficult for Rotary to move funds to support our grant projects.

are most efficiently and effectively handled by outside counsel. A main determinant is jurisdiction.

Much of our work is based outside the United States, which generally requires local expertise.

What are some of the foreign countries in which you’ve hired local counsel, and how do you start that process?

Routburg: Well, it might be easier to list countries where we don’t have local counsel. I just signed off on invoices from firms in Japan, Pakistan, India, Korea and the UK. We work with trademark counsel in the 80 countries where we have registrations. In numerous jurisdictions, there are not many lawyers who have experience in our not-for-profit tax and corporate compliance issues — especially in those countries where the civil society is not as robust.

We rely on referrals from current counsel in other nearby regions or in other areas of specialty. We also have the benefit of a global membership that can assist.

What’s the biggest mistake general counsel make when selecting outside counsel?

Routburg: Identifying counsel with expertise is generally not too challenging. My biggest problem is in anticipating the responsiveness of counsel, which I’m not sure how to predict prior to engagement. In any event, most mistakes in selecting outside counsel can be rectified by terminating an unsatisfactory relationship earlier rather than later. So the hardest part, and the biggest mistake, is failing to determine early on that there is a bad fit, whether it be lack of expertise, effectiveness, responsiveness, overbilling, or taking timely action to resolve the issue.

It sounds like your work requires you to be a true generalist. Is there any area of law that you especially like? And the reverse, is there any area in which you look for outside counsel because you dislike it intensely?

Routburg: I love the diversity of work and especially its internationality — getting to know people from all over the world. Our team does have areas of specialty, including contract, employment, trademark and privacy law. The key is to know which matters BACK TO CONTENTS

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COLUMN/CLIMBING THE LEGAL DEPARTMENT L ADDER

The General Counsel, the CFO and the Numbers

By ANDREA BRICCA

M

ost lawyers recall a day in law school that went something like this: The torts professor is discussing damages for a case, puts a bunch of numbers on the board and someone in the class shouts out, “If I was good at math, I would

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have gone to medical school, not law school.” If you are a general counsel or aspire to be one, here’s hoping that person was not you.

In-house lawyers need to understand the business’s numbers if they want to be true advisors. One place to bolster this understanding

TODAYSGENERALCOUNSEL.COM SEPTEMBER 202 1

is through your relationship with your organization’s CFO. Successful general counsel want to be consiglieres to the CEO, trusted advisors to the board, and business partners with other C-suite executives. No general counsel can be those things BACK TO CONTENTS

without a grasp of the financials that drive the business. Every CEO and board we speak with when conducting searches for general counsel, or even lowerlevel in-house counsel roles, wants a lawyer with business acumen.

That requires understanding what drives a business, and in forprofit organizations, a key driver is numbers.

You don’t have to be an accountant or an MBA, but you do need to understand the basics of what is required from a reporting standpoint to provide solid legal advice, push back when necessary and help mitigate risk for the organization. You should have an understanding of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), cash flow, operating profit margin, and so forth.

Connecting with your CFO is a good starting point. Have regular conversations. Talk with him or her about Investor Days and communications with investor groups.

Find ways to take on projects with the CFO that are not always

has always been important,” he wrote, “because the finance function and the legal function are truly the nervous system of the corporation, sending critical signals to all parts of the company about the accuracy of the financials and compliance with law.”

General counsel demonstrate business acumen by understanding the business and financials, and by working closely with the CFO to keep the “nervous system” operating effectively. This could play out in litigation. As general counsel, you will be focused on defending the company, while the CFO is focused on the organization’s financial well-being and the litigation’s impact on financial statements. These two positions are not mutually exclusive. Your working relationship with the CFO will allow for a healthy dialogue that considers the financial implications and any required disclosures if you are reporting publicly.

Historically, we have seen corporate and securities lawyers rise to the top of public companies.

companies. As a member of leadership, the general counsel plays a role in an organization’s success or failure, and knowledge of the business and company financials are key. Understandably, there are factors beyond their knowledge or control. However, better knowledge might help them avoid a costly career move.

If your long-term goal is to move beyond the general counsel role to CEO or a board position, your demonstrated knowledge of company financials and business acumen will be your table stakes.

Andrea Bricca is a Partner with global legal search firm Major, Lindsey & Africa. She matches employers and lawyers to advance organizational and career goals. abricca@mlaglobal.com

Find ways to take on projects with the CFO that are not always related to filings and disclosures. related to filings and disclosures — maybe a new software integration that impacts both the legal and finance functions. A relationship with the CFO built on trust and communication outside the heat of battle will help the organization when hot issues need to be addressed.

Ben W. Heineman, Jr., former general counsel of GE, wrote a Harvard Business Review article, How the CFO and General Counsel Can Partner More Effectively. “The CFO-GC alliance BACK TO CONTENTS

This could be attributed to the fact that those lawyers, compared to most, have a better understanding of financial statements. It is always surprising when a lawyer is interested in a job with a public company and has not pulled the company’s SEC filings. Securities lawyers do not make that mistake.

Others often do.

A general counsel is expected to have good judgment. This can come into question when a lawyer is looking for a new role after working at a series of failed SEPTEMBER 202 1 TODAYSGENERALCOUNSEL.COM

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LITIGATION

Mass Arbitrations

By KENNEN D. HAGEN

M

ass arbitrations are becoming the new class actions, and a multimillion-dollar legal headache for many companies.

Employment agreements and many consumer-facing contracts have arbitration clauses mandating that the parties use large arbitration firms and requiring that the companies pay these arbitration firms up-front arbitration filing fees for every claim filed.

When plaintiffs’ lawyers, representing thousands of claimants, file thousands of claims, companies are required to pay millions in filing fees even though there

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may never be an arbitration — often on claims that would settle for a fraction of these filing fees.

By way of example, the Wall Street Journal reported that “plaintiffs’ lawyers flooded Amazon with more than 75,000 individual arbitration demands on behalf of Echo users. That move triggered a bill for tens of millions of dollars in filing fees.”

Plaintiffs’ lawyers have used these filing fees as a weapon to turn the advantages of private litigation against the companies seeking to use it.

General counsel and their outside counsel are doing legal

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gymnastics to solve the problem that these up-front filing fees cause. Initially, companies unsuccessfully attempted to avoid them by rewriting the arbitration provisions after the claims had already been submitted. Leading arbitral firms realized that it was unfair to charge companies millions in filing fees for arbitrations that would probably settle. They have reduced their fees and written new arbitration procedures, but these haven’t been entirely successful.

MULTI-DISTRICT LITIGATION A procedure already exists in the federal rules that is adaptable for BACK TO CONTENTS

solving these very issues. Multidistrict litigation (MDL) is a case-hardened procedure that is familiar to most litigants. FedArb recently announced an MDL-like procedure for mass arbitrations that reduces fees, treats all claimants equally and gives litigants consistent results based on legal principles applied by leading jurists.

With this procedure, plaintiffs’ lawyers can use the web-based interface FedArb has developed

of millions in arbitration fees. And fourth, by embracing a procedure that back-ends individual issues, the front-end costs and administration expenses are significantly reduced.

From the plaintiff’s perspective, this process treats all claimants equally and avoids the problem of disparate results inherent in batch arbitrations or test cases.

It also expedites the resolution of the matter, eliminating the need for a series of test cases or

Companies are required to pay millions in filing fees, even though there may never be an arbitration. to submit their verified claims.

Because the cost of processing these claims is automated, and there is relatively little arbitration work to be performed until later, filing fees are nominal.

All individual arbitrations are then stayed, and all claims go before a panel of three respected former federal court judges selected by the parties. The panel decides all legal, discovery and other issues that are common to all claimants. These decisions are binding on all claimants.

This procedure has numerous advantages. First, there is uniformity among all claimants, with everyone being treated identically. Second, having a panel of three former judges helps ensure that the results are reasoned and based on the law. Third, it provides the opportunity to reduce any individual issues to factual matters that could be addressed in a claims form, as is done in class action litigation. As a result, there will be little need for individual arbitrations, thereby expediting payment and greatly reducing costs — including the elimination BACK TO CONTENTS

mandatory mediation — both of which take time and necessitate delay. This reduces costs and gets money to a company’s employees and customers in a uniform, fair and expeditious manner.

As is often the case, the best answer is hiding in plain sight.

While we applaud the inventiveness and creativity of other arbitral institutions in fashioning new rules with multiple steps, we prefer the advantages of a straightforward system that is familiar to litigants. Our procedure offers the advantage of decisions made by a panel of three former federal judges, which is more likely to produce reasoned decisions on critical issues that all parties can abide by.

Kennen D. Hagen is CEO and president of FedArb. FedArb has the largest grouping of former federal judges who specialize in arbitrating and mediating complex civil disputes in the U.S. ken@fedarb.com

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FEATURE

Pandemic Primes Law Departments for a New Normal

By HILLARY MCNALLY

T

he Covid-19 pandemic has stress-tested the current operations of corporate law departments and legal professionals generally, placing increased pressure on the people, processes and technology needed to get the job done. Successful corporate law departments used the pandemic as a catalyst to think differently about how they approach work and support their organizations both during a crisis and moving

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forward. This is especially true of the challenges presented by remote work, which led to siloed workforces.

The divisions between modern departments that were able to quickly pivot and acclimate to the unique challenges of the past year and traditional law departments that lost time trying to adapt to changing conditions have been vast. But the teams that remained steadfast throughout have come

TODAYSGENERALCOUNSEL.COM SEPTEMBER 202 1

out stronger, with practices in place to carry them well into the future.

All too often, legal teams are thought of as the department of “no.” Sometimes the phrase “I need to check with legal” translates to “bottleneck” in the collective mind of the C-suite. Despite that problem, forward-thinking teams have been able to use pandemic-related industry shifts to their advantage, re-branding not only the way legal is viewed by the business as a whole but also how the segments work together.

Covid-19 acted as a bridge between general counsel and the broader business, enabling both to work more closely as a team.

Moving forward, law departments must be intentional regarding communicating and collaborating with their business colleagues while continuing to map back to key business objectives.

Although general counsel are frequently forced to be generalists — a role requiring smarts and savvy on topics often outside their purview — the pandemic took this mentality to the next level.

No two crises are the same. The pandemic brought with it never before addressed legal questions and tossed unknowns into the mix every day.

Virtual work also created new walls that needed to be torn down and new silos that BACK TO CONTENTS

legal departments were forced to address. Remote teams were required to quickly find ways to stay up-to-date on changing laws and regulations to protect the business, many while working virtually for the first time. Innovative departments turned to new technology solutions to help fill crucial gaps in knowledge in real time.

They will likely retain that technology well into the future.

cost-saving technology continues to be critical to meeting the expectations of the business.

Additionally, investment in supplementary resources is essential to the general counsel’s ability to keep more work in-house.

Without an investment in the correct technology and tools, law departments will only end up adding more to their workload.

COVID-19 EXPOSED TECHNOLOGY GAPS

Of all the industry disparities illuminated by the pandemic, the necessity for general counsel to be more strategically aligned with business needs stands out. This has created a significant demand for legal operations positions, with nearly 81 percent of legal depart-

Corporate law departments are tasked with safeguarding the company and their employees.

There is little margin for error on a good day, and the pandemic raised the stakes considerably.

LEGAL OPS

Innovative departments turned to new technology solutions to help fill crucial gaps in knowledge.

Fifty-eight percent of corporate law departments experienced a surge in workload — more than eight times the number that experienced a reduction — while suffering significant budget cuts.

The unprecedented disruption, crisis management and shifts to new ways of working revealed critical shortcomings within departments. Although many legal teams were able to correct course through the implementation of new technology and processes, others were not. Law department leaders who quickly realized that traditional methods could evolve while still meeting department goals were able to pivot faster and more successfully during the unexpected challenges of 2020.

With budgets under more pressure than ever, strategic investment in efficiency and BACK TO CONTENTS

ments hiring for these roles over the last year.

Legal ops specialists are increasingly seen as the driving force behind process optimization, technology and systems, budget allocation and management, and even culture — ensuring that law departments have the tools and resources in place to handle each component as they feed into broader business objectives.

With this comes general counsel’s next big hurdle, finding qualified candidates to fill legal ops roles. Since individuals working in legal ops are not always lawyers — often coming from communications backgrounds instead — it’s important for departments to recognize when the need for this role arises, and strategically work to fill it. This task presents corporate law departments with a unique opportunity to bolster

their in-house team with talent from anywhere in the country by continuing to offer a flexible working environment.

Although the pain points caused by the Covid-19 pandemic were devastating, they also had the potential to act as catalysts for innovation for in-house counsel.

Those that embraced technology and remote working prior to the pandemic were more efficiently able to support their organizations with the crisis management work that came as a result. Departments that openly embraced technology solutions found new ways to keep their businesses afloat, often driving greater value for the company overall.

In 2021, legal departments may find that the impacts of 2020 contain as many positives as it did negatives, giving leaders an opportunity to accelerate their change agenda this year and beyond. Forward-thinking law departments are poised to continue rapid acceleration, investing in the technology, processes and smart resourcing required to optimize value.

Hillary McNally is the General Manager of the Corporate Legal Segment at Thomson Reuters.

She has been with Thomson Reuters for more than 20 years, serving both in-house legal and law firm customers. hillary.mcnally@thomsonreuters.com

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