In House - The FindLaw Corporate Counsel Blog

February 2017 Archives

Is It Time for an Ethics Adviser?

With ethics issues swirling around the White House, President Trump appointed an internal adviser and his company named an outside counselor to deal with ethics concerns of the businessman-turned-president.

According to reports, President Trump's outside counsel is preparing documents for his divestiture plan that suggest a new internal ethics and compliance function. The ethics adviser would be responsible for ensuring that The Trump Organization is "not taking any actions that actually exploit, or even could be perceived as exploiting, the office of the presidency."

The adviser would be responsible for giving written approval on any deals or actions that could "potentially raise ethics or conflicts of interest issues."

Verizon Drops $350 Million From Offer to Buy Yahoo Because of Data Breaches

When Yahoo disclosed last year that hackers had compromised 1.5 billion email accounts, Verizon saw a silver lining in the cloud over its offer to buy the company. Let's make that about $350 million worth of silver lining.

Verizon had offered to pay $4.8 billion for Yahoo's core internet business before the data breaches were discovered, but now the parties have agreed to $4.48 billion. According to reports, the deal will go to shareholders for approval in April.

"We have always believed this acquisition makes strategic sense," said Verizon's Marni M. Walden. "We look forward to moving ahead expeditiously so that we can quickly welcome Yahoo's tremendous talent and assets into our expanding portfolio in the digital advertising space."

California's Rights to Privacy and Compliance Programs

California is famous for Hollywood, Disneyland, and the Online Privacy Protection Act.

What? Did you think the Golden State was all fun and games? Californians do more than go to the movies and amusement parks.

In fact, they value the right to privacy so much they enshrined it in Article I of the state constitution. Not even the U.S. Supreme Court could do better in creating a constitutional right to privacy.

"Today, California leads the nation not only as an innovation hub for information technologies, but also with the most comprehensive, stringent and up-to-date information privacy laws," according to excerpts from a privacy practice guide by attorney Lothar Determann.

It's been a rough few weeks for Uber. First, the ride hailing company's mishandling of protests around the president's travel ban launched a #deleteuber campaign that saw thousands canceling their accounts. Then, last Sunday, a former Uber engineer's blog post detailing sexual harassment at the company went viral. Just days later, a New York Times article revealed the "aggressive," "Hobbesian," and potentially law-breaking culture inside Uber's offices.

Can such a culture be fixed?

Kraft-Heinz made a $143 billion bid to takeover Unilever last week. The potential merger would have brought iconic U.S. brands like Jell-O and Velveeta together with Unilever best-sellers like Ben & Jerry's and Knorr's instant pea soup, creating a packaged food powerhouse to rival the world's current biggest food company, Nestle.

The takeover didn't work out, with Kraft withdrawing the offer over the weekend. But, it could be a sign that more food industry mergers are likely in the future.

Does your legal department have an operations professional? If not, it could soon. The legal department operations professional, or LDO, is becoming a key role in many legal departments, according to the 2016 Thomson Reuters Legal Department In-Sourcing and Efficiency Report.

Twenty-one percent of departments have an LDO, according to the report, and that number appears to be growing. As corporate legal departments handle more work in house, with little commensurate growth in resources, an LDO can free up attorneys to focus on legal, rather than operational, tasks.

Concerned with law firm data breaches, more and more in-house lawyers are using encryption to communicate with outside counsel on sensitive matters. The increased focus on email data security comes after a series of reports on law firms being hacked, including, recently, hackers who targeted M&A firms, swiped sensitive information, then made millions on insider trades.

So, should you follow suit?

Is Your eDiscovery Vulnerable to Hacking?

In earthquake-prone California, it's become commonplace for residents to say, "Not if, but when the Big One strikes."

The threat of a massive earthquake hitting Los Angeles has spanned generations -- from Charlton Heston's "Earthquake" to Dwayne Johnson's "San Andreas." But the impact lasts only two weeks at the Box Office, at best. If a quake registers less than 5.0, Californians don't even get out of bed to put their shoes on.

The same can be said for cybersecurity breaches, especially at large companies like Yahoo. If the next email hack doesn't hit 1 billion users, consumers may not even change their passwords.

But for lawyers -- the gatekeepers of confidential information -- this is not the time to sit back and wait for the next big breach. It's not if, but when. This even applies to eDiscovery, which might be the next frontier for hackers.

HP Holds Back Fees to Encourage Diversity

Remember when we were kids, and our parents withheld our allowance or another privilege to compel certain behavior?

Or if you have kids now, and you turn off their cell phone to get across the message that you expect compliance with certain rules?

Well, say hello to some parental persuasion from Hewlett-Packard. Starting now, the rule is: be diverse or lose 10 percent of your fees.

According to Kim Rivera, chief legal officer and general counsel for HP, the company has implemented a "diversity holdback" mandate. "With this we can hold back up to 10 percent of all invoices billed by law firms that do not meet or exceed our minimal diverse staffing requirements," she said in a letter to law firm partners.

ACC Renews 'Value Challenge' to Help Law Departments Reduce Costs

It may not be as eye-popping as the ice bucket challenge for a coach at the end of a game, but then again you're not going to get wet with the corporate counsel "value challenge" and it just might open your eyes to new opportunities.

The Association of Corporate Counsel is continuing its challenge to help law departments reduce costs by re-imagining and better managing resources. Each year, the ACC acknowledges the winners by publishing their stories on its website.

Besides the accolades of industry recognition, the goal of the international challenge is for corporate counsel to: 1) reduce legal spending by 25 percent; 2) promote effective budgeting and fee structures; and 3) have fewer disputes, lower settlements, and faster turnarounds. For these companies, as they say in soccer, goal!!!

You like to get back to colleagues quickly. You don't like things piling up. You're aiming for the legendary "Inbox Zero." So when you get an email, you reply ASAP.

Maybe you shouldn't. Taking a few seconds before clicking a link, opening a file, or hitting reply could keep you from getting hacked.

Insourcing v. Outsourcing: The Dance of Legal Work

It's not as catchy as dancing the hokey-pokey, but corporate attorneys increasingly put one foot in and one foot out in the legal marketplace.

For in-house counsel, it's about balancing the bottom line between outsourcing or insourcing legal work. On the other side of the dance, outside counsel have to bend with changing demands for legal services.

The trend is toward insourcing core attorney work while outsourcing more legal tasks. As a result, lawyers are having to take a step back and reassess their skills.

Mark A. Cohen, a former corporate attorney and litigator, said law firms are feeling the squeeze. That's because legal service providers want the next dance.

After Anthem-Cigna Merger Blocked, What's Next for the Health Care Insurance Titans?

The writing had been on the wall for health care insurers for some time.

Citing anti-trust violations, a federal judge had blocked Aetna's plan to merge with Humana last month. Anthem had to see it coming for its deal with Cigna this week.

U.S. District Court Judge Amy Berman Jackson blocked Anthem's planned merger for similar reasons -- the companies are just too big for the competition. Together, the rulings snuffed out nearly $100 billion in deals between the health-care insurance companies.

As stocks rose and fell on the news, lawyers scrambled to put the pieces together. But it's not likely anyone can put them back together again. There is one thing for sure, however. The attorneys will be talking about whether Anthem and Aetna owe Humana and Cigna almost $3 billion in termination fees.

After more than two decades as general counsel at Bio-Rad Laboratories, Sanford Wadler was fired from the company after he attempted to report corrupt practices to the company's board, Wadler says. So he sued.

Last week, Wadler won his lawsuit -- and nearly $11 million. A federal jury awarded Wadler $2.9 million in back pay and stock options and $5 million in punitive damages. That award will increase another $3 million under the Dodd-Frank Act, which allows double back pay for damages in whistleblower retaliation cases.

President Trump campaigned on reducing government regulations and he didn't wait long to start moving in that direction. On January 30th, Trump signed an executive order that would require federal agencies to identify two regulations for elimination for every one new regulation they promulgate. Consider it a "buy one, lose two" deal.

Now, a coalition of consumer, labor, and environmental groups has filed the first suit challenging that order, claiming it oversteps the president's authority and violates administrative law.

Data Security Stressing Health Care Counsel

When thieves stole a laptop from a medical worker's car, who knew that it would become a big stressor for general counsel across the country?

According to a national survey of health care attorneys, more than 75 percent of the general counsel say that data security is the issue they worry about the most. The $5.5 million penalty against an Illinois-based health care group must have still been on their minds.

Advocate Health Care System agreed last August to pay $5.5 million to federal regulators for computer thefts from a doctors' office and a staff member's car. The group was also penalized for failing to protect records that somebody hacked at a company handling the hospital's billing.

In an age when cyber-insecurity has spread like a disease, health care providers have it bad. Because of heightened privacy requirements in the industry, their lawyers are on the forefront of the problem.

Just two weeks into his presidency and Donald Trump has moved quickly to upend the status quo when it comes to immigration. That includes, of course, his recent executive order banning entry of refugees and pausing immigration from seven nations. But it doesn't end there. Trump could have his sights set on visas for highly skilled workers as well.

A recently released draft executive order would overhaul the work-visa programs relied on by many industries, leaving some companies worried.

President Trump met with Wall Street executives on Friday, then emerged to sign an executive order that could be used to roll back Dodd-Frank regulations. The president also signed a memorandum instructing the Treasury Department to reexamine the new retirement broker fiduciary rule.

Taken together, the two directives could mark the beginning of the end for some signature Obama-era financial reforms. But they are just the beginning, the start of a process that could take months or longer to play out.

It's not unusual for employees who are fired to walk out the door with a bit of resentment. Even those who quit might leave on poor terms. But with the rise of social media, the anger of an ex-employee can be easily amplified. We're not talking about just a few upset tweets here, but things like potentially damaging, even defamatory, statements on review sites like Yelp or recruitment platforms like Glassdoor.

To help monitor and minimize such damages, managers may be tempted to track employee's social media post-firing. But what sort of legal issues might be involved?

Will Surge in Mergers Bring More Lawsuits?

As President Trump's economic policies take shape, observers predict a surge in mergers this year. It may also bring back merger litigation, which slowed down in the last years of the Obama administration.

Trump's new chairman of the Federal Communications Commission has already promised to "weed whack" many regulations, signaling his intent to follow the president's lead and keep hands off corporate America. With proposed mergers moving forward for giants like Verizon/Yahoo and At&T/Time Warner, this may be the year of the big deal.

It is ironic that media mergers seem to be on the forefront of a trend at the same time Trump has declared war on the media. In any case, cooler heads say media companies simply have to make moves to compete.

Facebook Loses $500 Million Verdict in Virtual Reality Case

Maybe Mark Zuckerberg should have taken the blue pill.

The "blue pill" reference comes from The Matrix, a sci-fi movie in which one character bemoans the day he realized the virtual world was not real. Zuckerberg, stunned by a $500 million verdict against a virtual reality company Facebook acquired in 2014, may be wondering whether this was worth it.

Zuckerberg will certainly have second thoughts about it. At least, his lawyers are contemplating an appeal.

A jury found in favor of ZeniMax Media against Oculus VR and its founders for breach of contract, copyright and other violations. Faceboook had purchased Oculus for $2 billion plus stock before the lawsuit, banking on the belief that the company's virtual reality headset was the next big thing.

What Are Your Goals as In-House Counsel This Year?

It's well past New Year's Day -- except in China and other southeast Asian countries -- but it's not too late to make resolutions for 2017.

In fact, if you work in-house for a multi-national or a company aspiring to grow into the international market, this may be the perfect time to make some goals.

With cyber criminals hacking away at internet services around the world, company attorneys must work strategically with technical professionals to avert future disasters. And as automakers choke on legal setbacks from Japan to Germany, their lawyers must be prepared to deal with civil and criminal challenges.

Here are a few areas that will definitely come into play for in-house counsel no matter where you work: