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The In-House Advisor

Published by Shepard Davidson & Renee Inomata

NFL Could Learn From New MA Domestic Violence Law

Posted in Compliance, Policies & Notices

Baltimore Ravens running back Ray Rice, Carolina Panthers Pro Bowl defensive end Greg Hardy, and San Francisco 49ers defensive end Ray MacDonald all have something in common (and it’s not just that they are incredibly talented professional football players):  They have all been indicted for engaging in conduct that constitutes domestic violence.  In Hardy’s case, he has been convicted for domestic abuse.  And just a few days ago, Minnesota Vikings running back Adrian Peterson was indicted for abusing his son and is now under investigation for abusing another son.

The National Football League’s travails with perpetrators of domestic violence have been numerous and storied, and after years of dealing with player domestic abuse instances, the NFL finally instituted a Domestic Violence Policy.  While the NFL’s policy is directed towards perpetrators of domestic violence, Massachusetts employers now are required to protect employee victims of domestic violence. Continue Reading

Tips To Ensure Recovery of “Prevailing Party” Legal Fees

Posted in Contracts, Pre-Litigation Considerations

While it may not be standard practice when drafting contracts to include a clause stating that “if litigation between the parties ensues the prevailing party will recover its legal fees,” such provisions do appear in a variety of contracts from time to time. A recent First Circuit opinion, Thompson v. Cloud, involves such a clause and also serves as a good reminder that it can be dangerous to take lightly even seemingly simple provisions in an agreement.

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10 Most Overlooked Executive Separation Agreement Clauses – Part 2

Posted in Confidentiality and Non-Disparagement, Separations, Layoffs & Terminations

In Part 1 I shared with you five commonly overlooked terms in executive separation agreements. Here are five more.

6. Release Timing. If the executive is excused from performing work or coming to the office well before her last day of employment, the company may want to have the executive sign an agreement close to the day the executive is notified about her separation because the company will remain exposed to liability for the period of time between the executive’s signing the separation agreement and her actual last day. In addition, I recommend having the executive sign a second release on her actual last day of employment – and make signing that second release contingent upon receiving any post-termination severance benefits.

7. Post-Termination Restrictive Covenants and the Integration Clause. Many agreements contain a boilerplate integration provision, reciting that the agreement is the entire agreement between the parties and that the executive is not relying on anything not contained in the written document. If the executive has signed a prior agreement containing restrictive covenants which are intended to survive termination of the executive’s employment, such a general integration clause could void the prior post-termination restrictive covenants. An alternative would be to include a provision in the separation agreement that ratifies the executive’s obligations in the prior agreement and incorporates that agreement into the separation agreement. Also, if there are specific lists of customers or types of information in the prior restrictive covenant agreement, be sure to take the opportunity in the separation agreement to update such lists to better reflect the customers and types of information the executive has access to closer to the time of termination, rather than relying on the initial list at the commencement of his employment, which is when many executives tend to sign restrictive covenant agreements.

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10 Most Overlooked Executive Separation Agreement Clauses – Part 1

Posted in Separations, Layoffs & Terminations

Executives in this market are moving in and out of companies with greater frequency.  With the myriad legal claims that an executive could assert against an employer, whether meritorious or not, more companies are opting to give executives some compensation or other benefits on the way out the door in exchange for a release and other post-employment obligations to ensure that the executive will be a “good leaver.”  While the concept of a separation agreement is pretty straightforward, multiple devils can lurk in the details.  Here are the first five of my top 10 often overlooked terms in executive separation agreements. Continue Reading

In-House Advisor’s Renee Inomata Included in The Best Lawyers in America

Posted in Uncategorized

Please join me in congratulating my In-House Advisor co-publisher, Renee Inomata, for being selected for inclusion in The Best Lawyers in America® 2015 in the Employment Law – Management category. Best Lawyers® is based on an exhaustive peer-review survey in which more than 52,000 leading attorneys throughout the country voted on the legal abilities of other lawyers in their practice areas. Congratulations, Renee, on this well-deserved honor!

-Shep

Please Nominate The In-House Advisor for ABA Journal Blawg 100

Posted in Uncategorized

Please indulge us today as we ask for a very quick  favor. The American Bar Association Journal is accepting nominations for the 2014 ABA Journal Blawg 100, an annual list of the 100 best legal blogs. If you’ve found The In-House Advisor helpful and enjoyable to read, we would be grateful for your nomination, which you can submit here. The nomination form, which asks for your contact information and a quick sentence or two about why you’re fan of the blog, will take just a couple minutes to fill out.

Nominations are due by 5 p.m. ET on Aug. 8, 2014. Thank you so much for the support!

Shep & Renee

The Attorney-Client Privilege and Individuals Who Are the “Functional Equivalent” of Employees

Posted in Attorney-Client Privilege

Communications between attorneys and clients that are not private, and/or communications between attorneys and third parties, cannot be protected from disclosure by the attorney-client privilege.  When the client is an individual, it generally is easy to discern if a communication is private, and it usually is obvious if an attorney is communicating with a third party.  When the client is a corporation or some other entity, however, it can be much less clear as to whether a particular person will be deemed to be the client or a third party.  One scenario where this issue routinely arises is when company counsel communicates with an individual who is an independent contractor or some other person working closely with the company, but who is not an employee. Continue Reading

Beware: Individual Liability for Equityholders Under MA Wage Act

Posted in Wage & Hour

Under the Massachusetts Weekly Payment of Wages Act (“Wage Act”), the President, Treasurer and “any officers or agents having the management of such corporation” are considered to be employers and are subject to individual liability for failing to comply with its requirement. In a previous blog post, Managers of LLCs Can Be Personally Liable Under the Massachusetts Wage Act, I had written about Cook v. Patient Edu, LLC, where the Massachusetts Supreme Judicial Court clarified that managers of limited liability companies (not just the officers of a corporation) could be held individually liable under the Wage Act.  In Cook, the SJC concluded that it did not matter whether the entity was a limited liability company or corporation, and determined that “individuals with the authority to shape the employment and financial policies of an entity [were] liable for the obligations of that entity to its employees.”

In a recent unpublished decision, Segal v. Genitrix, LLC, the Massachusetts Appeals Court, relying on Cook, appears to have expanded the scope of individual liability under the Wage Act to certain equity holders of limited liability companies.

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Post-Wimbledon Fee-Shifting Ideas for In-House Counsel

Posted in Contracts

ATP Tour, Inc. is a Delaware membership corporation that operates as the governing body for the major (and some minor) men’s professional tennis circuits.  (A “membership” corporation does not have stockholders like a traditional corporation and often is the corporate form of choice for non-profits, although for profit companies can be membership corporations, as well.)  In the early 1990’s, ATP adopted a bylaw stating that:

In the event that (i) any [current or prior member or Owner or anyone on their behalf (“Claiming Party”)] initiates or asserts any [claim or counterclaim (“Claim”)] or joins, offers substantial assistance to or has a direct financial interest in any Claim against the League or any member or Owner (including any Claim purportedly filed on behalf of the League or any member), and (ii) the Claiming Party (or the third party that received substantial assistance from the Claiming Party or in whose Claim the Claiming Party had a direct financial interest) does not obtain a judgment on the merits that substantially achieves, in substance and amount, the full remedy sought, then each Claiming Party shall be obligated jointly and severally to reimburse the League and any such member or Owners for all fees, costs and expenses of every kind and description (including, but not limited to, all reasonable attorneys’ fees and other litigation expenses) (collectively, “Litigation Costs”) that the parties may incur in connection with such Claim.

In 2007, “Federations,” an ATP member, brought suit against the corporation in the Federal District Court for the District of Delaware. Ultimately, however, Federations failed to prevail on any of its claims, and ATP moved for an award of fees based on the above bylaw.   Federations challenged the validity of the fee-shifting bylaw, and, because the District Court felt that its ruling turned on unresolved questions of state law, it sent several certified questions to the Supreme Court of Delaware.  That court then responded to one of the certified questions as follows:

Delaware follows the American Rule, under which parties to litigation generally must pay their own attorneys’ fees and costs.  But it is settled that contracting parties may agree to modify the American Rule and obligate the losing party to pay the prevailing party’s fees. Because corporate bylaws are “contracts among a corporation’s shareholders,” a fee-shifting provision contained in a non-stock corporation’s validly-enacted bylaw would fall within the contractual exception to the American Rule. Therefore, a fee-shifting bylaw would not be prohibited under Delaware common law.

While this ruling technically is limited to “non-stock” corporations, nothing in the decision suggests that it would have been any different if ATP were a different type of closely held corporate entity (although if ATP were a public company, a very different analysis probably would apply).  As such, in-house counsel of closely held businesses (particularly those formed under Delaware law), may want to suggest that their internal clients consider enacting a similar fee-shifting provision to limit the potential for frivolous/nuisance suits that sometimes arise when internal disputes amongst insiders erupt.  Doing so could end up converting a near service ace into a return winner.

Tips From the Inside: Neal Winneg, Former General Counsel, Jumptap, Inc.

Posted in Uncategorized

In this installment of The In-House Advisor, we interview Neal Winneg, who was most recently the General Counsel of Jumptap, Inc., a mobile advertising company, until its sale to Millennial Media, Inc.  After starting his legal career at Skadden Arps, Mr. Winneg has been an executive officer and general counsel of numerous public and private companies, including The Learning Company, Upromise and The Princeton Review.  Mr. Winneg also teaches in the Transactional Law program at Boston University School of Law.

The In-House Advisor (IHA): The role of in-house counsel has changed a lot over the years.  How do you see that role changing going forward and how can today’s in-house counsel prepare for those changes?

Neal Winneg (NW): It’s not news that advances in technology over the last 20 years have created extraordinary opportunities along with concomitant challenges for virtually everyone, both in business and our personal lives.  So, too, for in-house counsel.  Our businesses are becoming more agile and automated, and they are benefiting from vastly more and better data in virtually all functions.  The challenge for in-house lawyers associated with this trend has been the need to handle substantially more complex and technical legal requirements and tasks on a day-to-day basis.  Fifteen years ago you might have negotiated a pretty simple agreement with a storage facility to store various company records, and the hardest part about it was determining when various documents should be purged.  Today that agreement will be for cloud storage of electronic data, and you have to consider data security issues, EU privacy issues, and a variety of other technical and regulatory issues.  The business makes decisions every day that have legal and regulatory implications, and so it has become increasingly important that knowledgeable in-house counsel are available within the business to make quick decisions, or at least identify when specialized counsel should be consulted.  Similarly, the globalization of commerce has increased the likelihood that the laws of a variety of foreign jurisdictions may be implicated, significantly exacerbating complexity.

Among the implications of this are that in-house counsel need to be prepared to learn new, technical areas of the law in addition to the areas where they are already strong.  In-house managing counsel need to be prepared to hire more specialists (either in-house or outside), and to do so cost-effectively.  The days of one or two law firms handling most of a business’s legal needs are over.

IHA: While in-house counsel routinely save their companies money, Legal Departments generally are viewed as cost centers that add nothing to the bottom line. How can in-house counsel get across to the business people the value that in-house lawyers add to the company?

NW: I tend to focus my clients less on absolute cost, and more on the quality of the legal services.  At least in my experience, the number one factor on which clients focus in evaluating their counsel is responsiveness, and that is an area where in-house counsel have a leg up on outside counsel, in several respects.  First and foremost, we’re physically available.  We’re at the
meeting when an idea is being kicked around and can offer input on the fly.  Or a client with an emergency can bang on our door, so to speak.  That’s a lot harder with outside counsel, who simply aren’t as accessible on a minute-to-minute basis.  Second, we’re familiar with the business.  Most often, we’re in a position to provide advice more quickly, needing less background information about how the business operates, because we already know it.  In those circumstances, it also should be less expensive to use us than outside counsel. Of course, it’s critical to develop metrics relating to responsiveness for the entire legal staff, and to evaluate them on it, to ensure that you really do deliver.

One needs to be careful about client expectations regarding cost savings, though.  I recall interviewing for the general counsel job at an early stage company that had not previously had a general counsel.  As the company had grown, the CEO was becoming concerned about the increased fees it was paying to outside counsel.  He hoped bringing in a general counsel would dramatically reduce the costs.  I had to tell him (at the risk of not getting the job) that while there would likely be areas where outside fees could be reduced, it was equally likely that once in the job I would identify areas of real legal risk that the business had not previously considered, and that certain other legal costs might increase rather than decrease.

IHA: What should in-house attorneys not say or do to try to show their value?

NW: Legal compliance is important, and it’s a critical part of the job.  But in most businesses, it’s not the area that’s generally going to impress the CEO.  It’s very hard to demonstrate all the possible costs you helped avoid by being on top of legal compliance.  In my experience, lawyers who focus clients on those aspects of the job tend to be viewed as the type of lawyers that say “no” a lot.  Focus on those projects that are most aligned with the company’s goals and objectives, particularly on the revenue side of the business:  numbers of contracts negotiated and signed; new products vetted and supported; results of client satisfaction surveys;  specific areas where you can demonstrate true cost savings by moving from outside counsel to in-house counsel, for example.

IHA: What is the best advice you have received that has helped you succeed as an in-house attorney?

NW: “You can’t know it all, and don’t try to convince your clients that you do.”  The legal landscape is becoming more technical and increasing in complexity.  Despite this, there is a tendency for the business clients to expect you to know it all.  It’s common for the CFO to believe that the reason you were hired was to avoid calling outside counsel, and to put pressure on you to figure it out yourself.  Obviously, in-house counsel need to consistently increase the depth and breadth of their legal knowledge relevant to the business they represent.  But while many judgments can and should be made by in-house counsel, we also have to know when to get advice.  Doing so in the face of a disapproving CFO demonstrates strength, not weakness.