Inside 3Q2009
2-3...Haynes and Boone Raises the Bar on Client Value
4-5...ACCA-DFW’s Margolies Memorial Scholarship Awarded
to Law Students Pursuing Summer Internships with Pro
bono agencies
5-6...KPMG and Prescott Legal Search Present Results of
In-House Counsel Compensation Survey
6-7...Personal Risk Mitigation for In-House Counsel
focus
President’s Message
Marcia Stuart Ceplecha
It’s Been a Great Year for Our DFW
Chapter!
We are coming to the close of our
fiscal year and have completed elections
for the Officers and Directors for the
2009-10 year. And we are just coming off
our signature Golf & Spa event – a time
for networking, great golf at the world
class Four Seasons resort, and fabulous spa
treatments. Now is the time for reflecting
on how the year has been proceeding. The
DFW Chapter hit important milestones
this year and rolled out some exciting new
initiatives. The most
significant milestone was that the Chapter
crossed the 600 member mark in January
and continues to grow! Just five years ago,
the Chapter membership was in the 300s.
Our goal is to ensure the Chapter
continues its impressive growth while we,
as a Board, seek to provide even more
value to our members. We revamped our
sponsorship packages this year to
provide improved programs to our
members while increasing sponsor
effectiveness and satisfaction. As part of
this commitment to member value, we
instituted our In-Sight program series,
challenging our sponsors and the Board
leadership to include in-house counsel
panelists on as many presentations as
possible. I’m proud to say that we have
exceeded our expectations – nearly all of
our presentations this year included distinguished in-house panelists sharing
critical and useful insight, unique to inhouse
experience. As part of our
Chapter improvement, the
Board also expanded in size
last year not only to increase
the diversity of ideas and
experience, but to provide
greater opportunities for
participation in Chapter
leadership. We will continue
to work on new programs
and events, so look for these
over the next year. Our DFW area has also
experienced its share of hardship from
the troubled national and world economy.
ACC has expanded its services to include
more in-transition assistance programs
and services, and we, as the local face of
the in-house bar, are introducing our own
new initiatives for in-transition members.
Our Chapter established an In-Transition
Member Committee to develop ideas and
programs to assist those members
transitioning between jobs. I take this
opportunity to invite you to contact us if
you wish to participate on this Committee
as we strive to improve services for all our
members.
And I want to take this opportunity to
thank all of you for the privilege of serving
as your Chapter President. I am proud to
have worked with such a vibrant group of
attorneys and can sincerely say that our
Chapter is one of the best in ACC. The
DFW Chapter is fortunate to have so many
distinguished attorneys in its midst, and
remains a fantastic home for
networking,
development, friendship
and just plain fun! For
me, ACC and our DFW
Chapter, is the place to
be for in-house counsel
and I look forward to
seeing and working with
you all in the future -- in
our home, the Big D and
Cowtown!
ACC-DFW 2009/10 Board of Directors
Officers
Todd Martin (President), Bank of America
Penny Phillips, (1st Vice President),
Pinnacle Partners in Medicine
Kenneth Johnson (2nd Vice President),
Quest Diagnostics Incorporated
Jeff Everett (Treasurer), Sabre Holdings
Corporations
Richard Mosher (Secretary), Loctronix
Corp.
Marcia Stuart Ceplecha (Past President)
Lockheed Martin Aeronautics Company
Directors
Christopher Ducanes, Allegro
Development Corporation
Michael Cameron, Ericcson Inc.
Rhonda L. Lenard, PNMR Services
Company
Bipasha Mukherjee, Cinemark, Inc.
P.J. Putnam, Gearbox Software, LLC
Robert Robinson, BancTec
Haynes and Boone Raises the Bar on Client Value
All of us have read about the challenges
law firms are facing in the light of the
prevailing economic conditions, and
with several well-known firms laying off
attorneys, sky-rocketing first-year associate
salaries seem a distant memory. However,
prior to these developments, the ACC
formulated its Value Challenge - a national
coordinated effort by corporate counsel to
enhance the value our clients receive from
outside counsel. In support of the Value
Challenge, the DFW chapter has hosted
several events focusing on various aspects
of the relationship between outside counsel
and their corporate clients, and our June
Chapter Meeting, sponsored by Haynes
and Boone, was one of the most compelling events we have held this year.
On June 23rd (Fort Worth) and July 9th
(Dallas), Haynes and Boone lawyers and
a panel of distinguished general counsel
discussed this sacrosanct relationship
with frankness and goodwill during a
panel discussion titled “The Changing
World of Pricing and Cost Management
of Legal Services.” Tony Bangs – Senior
Vice President, General Counsel for
The Neiman Marcus Group, Inc.; David
Goldberg, Vice President, General Counsel
and Corporate Secretary for Union
Drilling, Inc.; and Bob Robinson – Vice
President, General Counsel for BancTec,
Inc., served as in-house panelists. Lawyers
from Haynes and Boone included partners
Brian Barnard, Terry Conner, and Steve
Jenkins. During the session, the panelists
assumed that a transformational change
from the traditional billable hour model to
client value-based models will occur and
discussed how law firms and in-house legal
departments can work together to navigate
the changing world.
Jenkins, Chairman of Haynes and Boone’s
Client Value Task Force, noted that in their
firm’s view, the transformational change is
certain to come and likely to come sooner
than many law firms anticipated, primarily because of the extraordinary economic
uncertainty of the past year and the reality
that every company is actively looking for
ways to reduce costs. He described the
2 Dallas Fort Worth Chapter FOCUS 3Q09
resulting push by in-house counsel for
greater predictability, improved efficiency
(less cost) and improved value in legal
services as a “tsunami effect” that will
accelerate transformational change. “Last
year we thought it would happen, but we
thought it might occur over ten years; but
this year, it has become clear that these
changes will happen much sooner than we
first thought,” Jenkins said. When asked
if they thought these changes are perhaps
merely a fad, in-house panelists at the
Fort Worth presentation, Robinson and
Goldberg, agreed with Jenkins that these
changes are imminent.
But Haynes and Boone is doing quite a bit
more than forecasting – they are leading
the change and shaking things up along
the way. In their presentation, Haynes and
Boone shared how they see the industry
models for fee arrangements changing
(See Figure 1 – Change in the Mix and Use
of Fee Arrangements). No one would be
surprised to see that “Hourly Rates”
arrangements presently dominate among
current fee arrangements. And while
Haynes and Boone believes that “bet the
company” matters (“BTC”) will remain
fairly constant, they are planning for the
likelihood that everything else will change.
Figure 1 – Change in the Mix and Use of
Fee Arrangements
Current
BTC
Future
BTC
Hourly Rates/
Efficiency
Expectations
Hourly Rates
Budgets with Implications
Fixed Fees
Budgets with
Implications
Fixed Fees
Jenkins predicted that within the next
three to five years, the industry-wide use
of “Fixed Fee” arrangements and “Budgets
with Implications” will dramatically
increase . . . specifically because clients
want greater predictability and improved
efficiency. Haynes and Boone is not waiting to see if this transformational change
will, in fact, occur. Instead, Haynes and
Boone is proactively taking steps now to be
ahead of the curve. For example, the firm
is building tools for enhanced budgeting,
including a data warehouse to contain historical fees across the firm for all matters
handled, broken down by phases of the
engagements. They intend to use this tool
to offer fixed fee arrangements or project
budgets at levels that will be competitive
for clients and reasonable for the firm.
Building such a data warehouse that can
meaningfully serve this purpose will be no
small undertaking, but they are undeterred
and have identified several key impediments that will need to be overcome. In
addition to the data warehouse, the firm
has already developed a real-time cost
management tool that allows the client and
the Haynes and Boone lawyers the ability
to track costs (including unbilled time) in
real time against a budget. Finally, Haynes
and Boone is working on a firm-wide
project management training program that
they expect to roll out this fall.
While billing by the hour will continue
to be the arrangement of choice for many
matters, Haynes and Boone expects that in
the relatively near future, the open ended
billing by the hour approach will be used
far less often and then with important
changes which they refer to as “Efficiency
Expectations” . . . common sense best
practices such as front end discussions of
anticipated range of costs, cost transparency, and surprise avoidance alerts, as well
as increased emphasis on and improved
use of technology, knowledge management and project management. Haynes
and Boone has heard clients’ demands
for greater predictability of costs and
increased efficiency, and they are working to formalize ways to improve on both
counts.
(continued on page 3)
Haynes and Boone Raises the Bar on Client Value
(continued from page 2)
As an example of “Budgets with
Implications,” Haynes and Boone foresees
its use of “risk sharing” alternative fee
arrangements playing a significant role in
the firm’s Client Value initiative in engagements that might not be appropriate for
a Fixed Fee arrangement. As seen in the
illustration below (See Figure 2 – Risk
Sharing), this arrangement blends predictability for the client with sharing of savings
and risk with the firm.
If the firm is able to conclude the
matter under the mutually agreed
budgeted amount, the client keeps the first
10% of savings and shares evenly with the
firm the savings in excess of 10%. If the
costs exceed the budgeted amount, the
firm is responsible for anywhere from 50%
to 100% of the fees exceeding the budgeted
amount.
The actual percentages vary depending
on the type of engagement and actual
circumstances, but the intent of the firm
in offering a “risk sharing” alternative fee
arrangement is to demonstrate to the client
a dual focus on doing a great job substantively while at the same time being very
alert to managing the costs of the engagement within the client’s expectations as
reflected in the budget.
Perhaps your outside counsel would be
willing to take similar committed steps
to enhancing the value they offer to your
client. Why not ask them and further the
dialog of the ACC’s Value Challenge?
At Your Feedback, right, see how you can
help Haynes and Boone and other firms
identify opportunities for greater
predictability and improved efficiency.
Your Feedback
Whether you use Haynes and Boone or one
of their competitors, all of our clients stand
to benefit significantly from Haynes and
Boone’s efforts. What are the inefficiencies
you’ve seen at law firms that you have used?
Please send your feedback to Kathleen
Yarborough at execdir@accdfw.com with the
words “Law Firm Feedback” in the subject
line. We will pass your comments along to
Haynes and Boone and other ACC-DFW
sponsors on an anonymous basis to assist
them in finding ways to enhance the value
they deliver to all of our clients.
1 Budget Target
Figure 2 – Risk Sharing
In conclusion, Jenkins noted that for
Haynes and Boone and the legal industry
as a whole, this is not a trend but a “sea
change,” and they are determined to be
at the front of the curve as a thought and
action leader, rather than being behind the
curve by taking a wait-and-see approach.
They believe that by working together,
clients and law firms can achieve a
“win-win” result.
3
ACCA-DFW’s Margolies Memorial Scholarships Awarded to Law Students Pursuing
Summer Internships with Pro bono agencies
By Penny Phillips, Corporate Counsel, Pinnacle Partners In Medicine; ACC’s DFW Chapter Secretary and Pro bono Committee Chair
Our chapter awarded two Margolies
Memorial Scholarships this year. The
memorial scholarship was named after
Larry Margolies, a former DFW chapter
board member who was active in pro bono
efforts. The scholarships are provided to
area law students, selected by the Board
through an application process, who pursue
summer pro bono work at approved legal
services organizations. Organizations that
have received such help from the chapter’s
scholarship recipients in the past include
Legal Aid of North West Texas, Catholic
Charities and Central Dallas Ministries’
LAW Center. This year’s scholarship recipients attend Southern Methodist University’s
(SMU) Dedman School of Law in Dallas
and Texas Wesleyan University (TWU)
School of Law in Fort Worth.
Both of this year’s scholarship recipients
are currently providing their services at the
Central Dallas Ministries Legal Action
Works (LAW) Center. The Legal Action
Works (“LAW”) Center has served over
2,000 low-income people since opening in
1999. The LAW Center has three full time
attorneys and two legal assistants representing Dallas County residents who cannot
afford traditional legal services. Over 80%
of the LAW Center’s cases involve women,
and nearly half of these involve some
form of domestic violence. Most of the
cases involve Family Law, which includes
Divorce, Suits Affecting the Parent-Child
Relationship, Adoption, Motions to Modify,
Protective Orders, Temporary Restraining
Orders and Temporary Injunctions. The
rest of the LAW Center’s cases are a mix of
Probate and Heirship proceedings, drafting simple wills, consumer matters, Social
Security Disability appeals, employment
related claims and other matters.
As summer interns, Ms. Sohn and Mr. Redd
are assisting the LAW Center’s legal team
with legal tasks including the drafting of
pleadings, filing of motions, setting of hearings, interviewing clients and other tasks
approprite for their skill and
experience level.
4 Dallas Fort Worth Chapter FOCUS 3Q09
Both of our scholarship recipients will be
honored at our chapter’s annual
meeting on September 11, 2009, which is
held at the luncheon portion of our signature Golf & Spa event, with members of the
Margolies family present.
SMU Law student Yon Sohn
Prior to attending law school, Yon Sohn
earned two Bachelor of Science degrees
and a Master of Science degree. One of
her bachelor degrees is in Professional
Chemistry and the other is in Materials
Science & Engineering. Her M.S. degree
is in Metallurgical Engineering. Ms. Sohn
told the panel that her interest in serving in
the area of pro bono arose from her “desire
to open [her] mouth for the mute, for the
rights of all who are destitute and to judge
righteously, defend the rights of the poor
and needy” and that this desire is so fundamental to her that it is what lead her to seek
to become a lawyer.
“Experiential education is at the core of
learning the legal practice, and I am grateful for being able to work in a fast-paced,
non-profit family law office serving indigent
clients who cannot afford traditional legal
representation. Observing a case from
in-take to post-judgment is hard to do in
six weeks of internship, but, because of
high volume of cases that Central Dallas
Ministries L.A.W. Center handles, I get to
see each piece of the puzzle from several
different cases. Most rewarding of all, I can
see why the attorneys at the L.A.W. Center
continue to enjoy their work despite the
scanty salary when the clients thank them
profusely for resolving their crises. It has
been a tremendous experience for me, and I
am deeply appreciative of ACCA’s financial
support.”
Yon S. Sohn
Candidate for Juris Doctor, 2012
SMU Dedman School of Law
TWU Law student DeJon Redd
Prior to starting
law school, DeJon
Redd served on
active duty in the
United States Air
Force for over
seven years. He
has a bachelor of
Business
Administration
in marketing and
a Master of Art degree in journalism and
mass communication. When asked to
explain his desire to serve in the pro bono
arena, Mr. Redd told the panel, “I have
never viewed public service as a hobby or
an interest, but more as a mandatory
requirement.” Mr. Redd is enjoying his
internship, as he eloquently expressed in his
gracious thank you to the chapter for this
scholarship, below.
To the ACCA-DFW Chapter:
After completing my first week as an
interning fellow with the Central Dallas
Ministries’ LAW Center, I write to express
my gratitude. My initial time with CDM
has been both wonderful and
sobering. Working with the attorneys and
staff has been a privilege and joy beyond
my expectations. Yet, the need for their
expertise and services is also well beyond
my expectations.
I have also been surprised by the breadth
and diversity of CDM’s legal aid services,
and I appreciate having seven more weeks
to learn and assist. It is only due to ACCADFW’s contributions on my behalf that I
have this opportunity. I am thankful and
indebted.
Very respectfully,
DeJon Redd
(continued on page 5)
ACCA-DFW’s Margolies Memorial Scholarships Awarded to Law Students Pursuing
Summer Internships with Pro bono agencies
By Penny Phillips, Corporate Counsel, Pinnacle Partners In Medicine; ACC’s DFW Chapter Secretary and Pro bono Committee Chair
(continued from page 4)
Texas Pro bono Requirements
While Texas does not have mandatory pro
bono requirements, the State Bar of Texas
Board of Directors has a Pro bono Policy,
which establishes an aspirational goal of
50 hours of pro bono legal services to the
poor each year for each Texas attorney. In
addition, Section 6 of the Preamble to the
Texas Disciplinary Rules of Professional
Conduct, 1995 revision, provides the
following guidance on our professional
obligations to the poor:
A lawyer should render public interest
legal service. The basic responsibility for
providing legal services for those unable
to pay ultimately rests upon the individual
lawyer, and personal involvement in the
problems of the disadvantaged can be one
of the most rewarding experiences in the
life of a lawyer. Every lawyer, regardless of
professional prominence or professional
workload, should find time to participate
in or otherwise support the provision of
legal services to the disadvantaged.
The provision of free legal services to those
unable to pay reasonable fees is a moral
obligation of each lawyer as well as the
profession generally. A lawyer may discharge this basic responsibility by providing public interest legal services without
fee, or at a substantially reduced fee, in one
or more of the following areas: poverty law,
civil rights law, public rights law, charitable
organization representation, the administration of justice, and by financial support
for organizations that provide legal services
to persons of limited means.
KPMG and Prescott Legal Search Present Results of In-House Counsel Compensation Survey
KPMG and Prescott Legal Search
presented the results of the In-House
Counsel Compensation Survey conducted
by ACC-DFW at breakfast meetings on
August 19th and 20th in Fort Worth and
Dallas, respectively. Russell Weifling, Dave
Swiney, and Steve Law attended on behalf
of KPMG, and Mark Prescott attended
on behalf of Prescott Legal Search. While
in-house attorneys across the state of Texas
were invited to participate in the survey,
these presentation focused on the aggregate responses received from in-house
counsel in the DFW area. Weifling said
that the survey results had been compiled
into a PowerPoint presentation exceeding
100 pages. While that document will be
made available to ACC members and survey participants, the presentations in Fort
Worth and Dallas highlighted the most
meaningful findings. Reflecting on 2008,
Prescott noted that the in-house job market in Texas has slowed as a result of the
economy and depressed oil and gas prices.
But in looking forward, he said he has seen
signs of thawing and believes growth and
hiring will return to Texas in the latter
part of Q1 of next year. He added that the
temporary attorney market, which Prescott
Legal Search serves as well, is getting
stronger and typically precedes a
strengthening of permanent attorney hires.
Approximately 450 in-house counsel participated in the survey throughout Texas,
168 of whom indicated that they work in
the DFW area. Among the other participants, 207 were from the Houston area,
59 were from San Antonio, 6 were from
Austin, and approximately 10 were from
elsewhere.
significant increases from 2007 to 2008.
Senior Counsel average base salary
increased from $133,333 to $148,333,
and Staff Attorneys saw a year-over-year
increase from $116,694 to $133,036. Over
the same period, CLOs, GCs and Deputy/
Assistant General Counsel saw increases of
6.7%, 6.3% and 6.4%, respectively.
The average base salary of DFW participants was $181,136, which is $5,378 higher
than the average base salary of all Texas
participants, but the average total compensation for DFW participants was $3,860
lower than the statewide average. While
the average base salaries for Chief Legal
Officers (CLOs) and General Counsel
(GCs) in DFW is about the same as the
average base salary for all Texas CLOs and
GCs, DFW CLOs and GCs average total
compensation lags behind the average
total compensation for all Texas CLOs and
GCs by around $27,000. In fact, except for
Deputy/Assistant General Counsel, DFW
participants had lower average total compensation (grouped by titles) as compared
to average total compensation for all Texas
participants.
The average cash bonus for DFW participants in 2008 was $41,121, an increase of
about 3% from 2007. While, CLOs saw a
24% decrease ($26,667) in their average
cash bonuses in 2008, Staff Attorney participants saw their cash bonuses for 2008
increase by 114% ($7,898), as compared to
the prior year. Average cash bonuses for
GCs decreased by 4% ($2,151), and Senior
Counsel experienced an increase of 4%
($850).
The average base salary of $181,136 for
participants in the DFW area represents
an increase from 2007 to 2008 of 6.6%.
Among DFW participants, Senior Counsel
and Staff Attorneys saw the most
In an effort to gather information on the
impact the economic downturn has had
on in-house counsel compensation, the
survey also asked participants to report
on changes they had seen in their annual
raises or bonuses for 2009. As of the date
of the survey, more than 70% of the DFW
participants indicated that annual raises,
or merit increases, and bonuses were down
over the prior year, with nearly 30%
indicating that their raises or bonuses had
declined by more than 10%.
(continued on page 6)
5
5
KPMG and Prescott Legal Search Present Results of In-House Counsel Compensation Survey
(continued from page 5)
More detailed information about
compensation changes occurring from
2008 to 2009 will be covered in next year’s
survey.
However, more than 40% indicated that
upon separation, their employer would not
provide them with continuation of their
healthcare benefits (or reimbursement) for
any period of time.
In light of the rise in unemployment and
reports of lay-offs in late 2008 and 2009,
this year’s survey inquired about benefits
available to in-house counsel in the event
of a job loss. More than 70% of DFW
participants indicated that their company
would pay them some form of cash severance, with nearly 40% reporting that they
would receive between 25% and 100% of
their base salary as severance.
We appreciate the participation of everyone who took 5-10 minutes to complete
this year’s compensation survey online.
All ACC members and survey participants
will receive a complimentary copy KPMG’s
full report by email. If you did not receive
a copy of the report for the DFW area by
email, or would like a copy of KPMG’s
reports for the Houston or Austin/San
Antonio areas, please contact Kathleen
Yarborough at execdir@accdfw.com.”
Personal Risk Mitigation for In-House Counsel
By Jon G. Sheperd, Alston & Bird LLP
There are many misconceptions about the life of an in-house lawyer: Forty hour
work weeks, weekends off, shunt the hard
issues off to outside counsel, etc. Another
common misconception is that going
in-house means you can’t be sued for
legal malpractice and similar claims. The
numerous lawsuits filed against in-house
lawyers over the last several years demonstrates how untrue the latter misconception is. In-house lawyers at both public
and private companies are at risk of having
claims arising out of the performance of
their duties for their employers asserted
against them. Additionally, companies
continue to bring complex legal tasks once
performed by outside counsel in house.
What does not follow those tasks, however,
is outside counsel’s liability insurance.
In-house lawyers often do not consider
that they can face liability as a result of the
professional advice they provide to their
employers or from actions that they take in
the course of their employment.
Second, a bankruptcy trustee or receiver
might assert claims against an in-house
lawyer if the company finds itself in the
bankruptcy courts. Third, shareholders
might bring derivative or other lawsuits directly against in-house counsel.
Fourth, governmental entities – such
as the Department of Justice, Securities
and Exchange Commission, and State
Attorneys General – may pursue civil,
criminal, or administrative claims against
in-house attorneys. Fifth, various third
parties – such as banks doing business
with the company – may bring claims
against in-house counsel.1 Even if such
claims are ultimately determined to be
unfounded, defending against them likely
will be an expensive and time-consuming
process. However, there are steps that inhouse counsel can take to provide protection in the event disaster strikes.2
6 Dallas Fort Worth Chapter FOCUS 3Q09
One potential method to minimize the
liability of in-house counsel is to broaden
the employer’s Director & Officer (“D&O”)
policy. Many companies specifically
include the general counsel as a named
insured.3 It also is sometimes possible to
include other in-house counsel positions
as named insureds under a D&O policy,
particularly where the employer is not a
public company. Increasing the number of
named insureds may cause an increase in
the cost of the policy, but the cost increase
typically is not substantial for most
companies.
3
An insurer still may argue that the general counsel is protected only for those
actions taken in the capacity as an officer or director and not for legal advice
provided to the company; accordingly, the policy also should contain a description
of the general counsel’s duties to prevent the insurer from arguing that he or she
1
See, e.g., JP Morgan Chase Bank v. Winnick, 406 F. Supp. 2d 438 (S.D.N.Y.
2005) (syndicate of commercial banks sued, among others, company’s general
was protected only for acts undertaken in the D&O capacity but not for legal advice
being provided to the company.
counsel and a second in-house attorney).
2
The potential parties who may pursue
claims against an in-house lawyer are
numerous. First, the employer might
assert a claim, particularly following a
management change or change in control.
1. Broaden The Company’s Insurance
Coverage
This article focuses on general steps that in-house counsel may take to minimize
risk. Of course, there are many other risk minimization actions counsel may pursue
depending on the particular situation. For example, counsel employed by a parent
company but asked to provide advice to a subsidiary could seek a conflict of interest waiver to reduce exposure in the event the advice provided is beneficial to the
corporate employer and detrimental to the subsidiary.
(Continued on page 7)
Personal Risk Mitigation & In-House Counsel
(Continued from page 6)
Unfortunately, most D&O policies exclude
claims brought by one insured against
another, thereby providing in-house counsel with no protection should the corporate employer, or someone standing in the
shoes of the employer, decide to bring a
claim against counsel. As a result, most
efforts to broaden the company’s D&O
coverage to include in-house counsel, even
if successful, will leave a substantial gap in
coverage.4
2.
Amend The Company’s By-Laws
A second potential method for
decreasing in-house counsel’s exposure
is to amend the company’s bylaws to
specifically list the general counsel as an
officer of the company and the duties of
the office to include the provision of legal
services on behalf of the company. Even
if the general counsel is not specifically
listed as a named insured under the company’s D&O policy, the policy arguably
still should provide coverage for anyone
holding the office given the company’s
by-laws.5 Additionally, other members
of the in-house legal department can be
named in the by-laws as assistant officers,
although such a designation ultimately
may not provide any additional protection
to the individuals holding those positions.6
You also should review the company’s D&O policy to determine whether it
4
contains a “professional services” exclusion as such an exclusion would negate
coverage for in-house counsels’ provision of legal services to the company.
This also should provide the general counsel with any indemnification protections
5
afforded to officers and directors under the applicable state corporate indemnification statute. See, e.g., Del. CodeAnn. tit. 8, § 145.
The company’s Errors & Omissions (“E&O”) policy likewise will typically not
6
3.
Obtain Contractual
Indemnification Rights
In addition to indemnification
provided by operation of state corporation
statutes, an in-house lawyer might seek
contractual indemnification rights from
the corporate employer or the employer
might offer such an inducement to its
lawyers. In Texas, such arrangements are
not prohibited by the Texas Disciplinary
Rules of Professional Conduct so long as
the employer is independently represented
by counsel in making the agreement.7
This also is consistent with the ABA’s
Model Rules of Professional Conduct.8
However, in-house counsel should review
the applicable ethical obligations for her
state to ensure that seeking or entering
into an indemnification agreement with
the corporate employer is not prohibited.9
Moreover, given the ethical requirements,
in-house counsel should be wary of negotiating the terms of an employment agreement solely with the company’s human
resources department and instead should
verify that the company is being represented by counsel in connection with the
agreement.
4.
Purchase ELP Insurance
Insurers now offer companies the
option of purchasing employed lawyers
professional (“ELP”) liability insurance
policies. ELP insurance essentially is a
type of malpractice insurance for in-house
counsel and typically provides protection to in-house lawyers for claims that
could be asserted by both their employers – or someone standing in the shoes
of their employers – and third parties.10
For example, ELP policies may provide
coverage not only for malpractice claims
brought by the employer, but also for
charges resulting from Sarbanes-Oxley
violations.
provide protection to corporate counsel. These policies usually cover only errors
When purchasing an ELP policy, in-house
counsel should carefully review the terms
to confirm full coverage. For example, the
policy form should provide coverage for
claims brought by one insured (e.g., the
company) against another insured (e.g.,
the lawyer). Other coverage concerns
include “severability as to application
defenses and exclusions [and] trigger language in personal conduct or fraud exclusions.”11 The ELP policy also should clearly
state that the coverage being provided is
in addition to and not in derogation of the
coverage provide by any other policy, such
as the company’s D&O or E&O policies.
Additionally, many ELP policies do
not provide coverage for disgorgement,
restitution, and civil and criminal fines.
Similarly, an ELP policy cannot insure a
lawyer against reprimand, suspension, or
disbarment by the state bar association.
Consequently, ELP insurance is not a
standalone solution to the risk
minimization problem.
CONCLUSION
As with life, disability, and health
insurance, ELP insurance is a critical
component of the insurance protection
package that a business should offer to
its in-house counsel. Particularly when
combined with broad D&O coverage and
contractual indemnification rights, an ELP
policy provides substantial protection to
an in-house lawyer in the event claims are
asserted by the corporation, bankruptcy
trustees, shareholders, governmental
entities, and other third parties.12
See, e.g., Va. Legal Ethics Op. 877 (Apr. 1, 1987) (“It is not proper for an
9
attorney to solicit indemnification from a corporate employer which limits the
liability of the attorney’s own legal malpractice.”), overruled by Va. R. Prof.
Conduct Rule 1.08(h) (allowing in-house lawyers to arrange for the same
indemnity available to other officers and employees where employer is
independently represented in making the arrangement).
One side benefit is that many policies also should provide coverage for
10
in-house lawyers providing pro bono services.
and omissions occurring in the performance of services that the company
7
See Tex. Disciplinary R. Prof. Conduct Rule 1.08(g) (“Alawyer shall not make
provides to third parties, not in-house legal services. Additionally, E&O
an agreement prospectively limiting the lawyers liability to a client for malpractice
Docket at 115 (Sept. 2008).
John C. Tanner et al., Does the Gatekeeper Lawyer Need Insurance?, ACC
policies frequently exclude claims arising out of the rendering of services to
unless permitted by law and the client is independently represented in making the
12
another insured.
agreement”).
article, see id. at 94-117.
11
For a more fulsome description of some of the issues discussed in this
SeeABAModel R. Prof. Conduct Rule 1.08(h).
8
7
Board Members and Contacts
President
Todd Martin
Asst. General Counsel
Bank of America
214-209-3061
todd.a.martin@bankofamerica.com
1st Vice President
Penny Phillips
Corporate Attorney
Pinnacle Partners in Medicine
972.663.8527
pphillips@pinnaclepartnersmed.com
2nd Vice President
Kenneth Johnson
Director, Legal Compliance
Quest Diagnostics Incorporated
972.884.1063
kenny.a.johnson@questdiagnostics.com
Treasurer
Jeff Everett
Deputy General Counsel
Sabre Holdings Corporation
682.605.1560
Jeff.everett@sabre-holdings.com
Secretary
Richard Mosher
Chief Legal Officer
Loctronix Corporation
214-252-6124
hajime01@msn.com
Past President
Marcia Stuart Ceplecha
Chief Counsel, Business Integration
Lockheed Martin Aeronautics Company
817.763.2332
marcia.s.ceplecha@lmco.com
Board of Directors
Christopher Ducanes
Michael Cameron
Rhonda L. Lenard
Bipasha Mukherjee
P.J. Putnam
Robert Robertson
Welcome New Members
Charles Boehler,
PepsiCo, Inc.
Adrienne Brown,
PepsiCo/Frito-Lay
Nic Cheneweth,
Friendship
Developmental
Services
Ellen Curnes, Logile Inc.
Julie Davis, Verizon
Business
Joseph Dearing, Nortel
Networks
James Doyle, Celanese
David Ehrhart, Lockeed
Martin Auronautics
Company
Jana Ferguson,
PepsiCo/Frito-Lay
Joseph Ferretti, FritoLay Inc.
Stephanie Giotes, ePP
Management, LLC
Otto Grunow,
American Airlines
Mary Holohan, Fluor
Corporation
Jeffery Hunt, Ratheon
Company
William Imwalle,
Halliburton Energy
Services
Steven Kemps, Dean
Foods Company
Marc Kesselman, FritoLay, Inc.
Dale Kimball, Cadbury
Melanie Stapp,
MetrcPCS
Communicatons,
Inc.
Wayne Lewis,Dr.
Pepper Snapple
Group
Shauna Martin,
GENBAND
Philippe McAllister,
Alcatel Lucent
Scott Wilson, Eagle
Materials Inc.
Melissa Winchester,
Attorney
Brian Wittneben,
First Southwest
Company
Donna McNamara,
Attorney
Chirstopher McRorie,
Highlander
Partners, LP
John Neumann, Bank
of America, N.A.
Linda Newman, Bank of
America, N.A
Ruairid Ross, HewlettPackard Company
Thad Schaefer,
Comerica
Incorporated
Clay Scheitzach,
Affiliated
Computer Services,
Inc.
Thomas Schur, FritoLay, Inc.
Ty Simmons, Union
Standards
Insurance
Company
Sarah Smith, Behringer
Harvard
Sinead Soesbe, Energy
Future Holdings
James Stafford, BT
North America Inc.
Jeffrey Tschirhart, MGC
Mortgage, Inc.
John Vestal, HewlettPackard Company
Executive Director
Kathleen Yarborough
214.819.9709
kathleen@amchouston.com
8 Dallas Fort Worth Chapter FOCUS 3Q09
8