Jul Aug 2021
VOLUME 29, NUMBER 4
Leading with Collaboration and Pragmatic-Efficiency in Mind
Growing Up – Slowly
Investing in Energy, Efficiently
Cyberattacks on Cryptocurrency Assets: Risk Mitigation and Insurance Coverage
Make Way for Version 3.0 of CLOC
JEROEN OUWEHAND AND THAIS GARCIA, PARTNERS WITH CLIFFORD CHANCE, DISCUSS THE GROWING SCOPE AND INFLUENCE OF ESG DEVELOPMENTS.
LAW BUSINESS MEDIA
Kristin Calve EDITOR & PUBLISHER
Kimberly Fine MANAGING DIRECTOR PROGRAMMING
Dylan Shepard EDITORIAL ASSISTANT
Austin Waters GRAPHIC DESIGNER
Neil Signore SVP & MANAGING DIRECTOR OF EVENTS
Lainie Geary DIRECTOR OF CLIENT SERVICES
Amy Lemel DIRECTOR OF CLIENT SERVICES
Jennifer Coniglio VP FOR EVENTS & SPECIAL PROJECTS
Matthew Tortora SENIOR DATABASE MANAGER
Pat Hanelt OFFICE ADMINISTRATOR
Rob Williams WRITER
Jeroen Ouwehand and Thais Garcia
Jennifer Kafcas, Susan Rodriguez, Donald Ensing, Barlow Mann, and James Gelman
Joshua Gold and Stephen D. Palley
Jonathan
Kerry Berchem, Cyntia Mabry, Kenneth Markowitz, Jeffrey Lazar Kochian and Kevin Schott
POSTMASTER: Please send address changes to Corporate Counsel Business Journal, 104 Old Kings Hwy N., Darien, CT 06820; by emailing info@ccbjournal.com; or by calling 844-889-8822.
CORPORATE COUNSEL BUSINESS JOURNAL (ISSN: 1073-3000), July/ August, volume 29, number 4. Published bimonthly by Law Business Media, 104 Old Kings Hwy N, Darien, CT 06820. Subscription price: $110 a year. Periodical postage paid at Darien, CT, and additional mailing offices.
The material in this publication contains general information, is not intended to provide legal advice and should not be relied on to govern action in particular circumstances. The sources of material contained in this publication are responsible for such material, and any views or opinions expressed are solely those of the source.
Brendan Miller, Troy Zander, and Jordan Carr
Jay Grant, chief legal officer at The Trade Desk, focuses on leadership that encompasses inclusive input and context, and expresses his desire to hire with curiosity in mind.
CCBJ: What led you to your current role with The Trade Desk?
Jay Grant: I started as a litigator at Manatt, Phelps and Phillips and joined Univision Communications in-house on the opportunity to be a generalist in the early years of the company’s growth. I had the good fortune to have a practice anchored in multiplatform media enterprise growing over a couple of decades while rounding out my skills. I saw only a few companies with both a laserfocused commitment to mission as well as the reach and ability to shift the global media experience. The Trade Desk (TTD) was one.
My conversations with the TTD executive team, board members and department attorneys confirmed the company’s vision, discipline and commitment to culture. Working with the team, I have seen that we have the heart and grit to realize that mission. I feel compelled to get up every day and work toward that common goal.
Please tell us about your leadership style. Who and what has influenced it?
I focus on four things: collaboration, pragmaticefficiency, inclusive input and context. Collaboration leads everything because it is about the enterprise not a personal desire or solo achievement. Companies
with a strong mission and purpose can focus a team driving everyone equally while minimizing friction and distractions that prevent goal achievement.
We are in the practical solution business – not the theory business. If we make the best practical decision in an efficient manner, without letting analysis-paralysis, fear of failure, or perfection overcome a solid commercial solution, then we have a good chance for success. Lead with choices you know that you will live with, not ivory
I try to be pragmatic: We are in the practical solution business – not the theory business. If we make the best practical decision in an efficient manner, without letting analysisparalysis, fear of failure, or perfection overcome a solid commercial solution, then we have a good chance for success.
tower pronouncements. Inclusive input is a key component to achieving pragmatic, efficient solutions. Huddle meetings and impromptu squad meetings – 3 or 4 people getting as much input in early – bring the best ideas out early and often. You get to better answers sooner.
Context is essential. I try to spend time sharing the background on issues that we are trying to solve and to connect the dots regarding priorities or focal points around the company. This helps our team understand the underlying issues that need to be addressed. This means getting people involved early in matters. My father used to say he would be there for me at the crash, but I had to let him be part of the take-off to be of any help. I try to apply that in working with our team daily.
I am influenced by professional heroes like Vernon Jordan and early mentors. In my early career at the law firm and beginning in-house years, I reported to several partners and general counsel who were female, which at a time was not common. Watching them navigate situations, persuade others and lead teams, despite underrepresentation, helped shape my approach significantly.
The participants in the CCBJ Network demonstrate, through their many contributions, their unwavering commitment to the advancement and success of corporate law departments. The engagement and support of these “partners of corporate counsel” assure we continue to develop and distribute the news and information this unique and sophisticated audience relies on to meet the evolving legal and business needs of their organizations.
American Arbitration Association
Akin Gump Strauss Hauer & Feld LLP
Barnes & Thornburg
Clifford Chance
H5
Jones Day
McGuireWoods LLP
McNees Wallace & Nurick LLC
National Association of Corporate Directors (NACD)
Nuix
Weil, Gotshal & Manges LLP
Exterro
Computershare
Contract Logix
FRONTEO
FTI Consulting
iDiscovery Solutions
JAMS
Logikcull
NAM (National Arbitration and Mediation)
OpenText™ Discovery
Wolters Kluwer’s ELM Solutions
Wolters Kluwer’s Legal & Regulatory
Anderson Kill
Cornerstone Research
Fish & Richardson
Herbert Smith Freehills
Ipro Tech
Morae Global
Zapproved
Please help us improve and expand our services to corporate counsel by sharing your ideas with our publisher, Kristin Calve, at 844-889-8822 or kcalve@ccbjournal.com
I hope and expect to see continued advancements in underrepresented groups helming leadership positions at law firms and in-house: women, people of color, LGBTQ+ individuals or others.
What qualities do you seek when hiring people for your team?
A natural curiosity for our business goes a long way. Critical thought based on a variety of inputs, questioning assumptions and reasoned logic toward solutions are trademarks of our team. Our best team members have a combination of EQ, judgment and a balance of legal/business acumen that makes them solutions-oriented and strategic thinkers not tactical thinkers. We value vision, openness, agility and grit among other traits.
We are a data-driven company with a big mission to maintain a free and open internet and larger media ecosystem. I look for people who can telescope between the details or data and the lofty goals and business strategic objectives. These people are best suited to synthesize the complex and isolate the critical. If you can do that and remain authentic about who you are, then I want to be on a team with you.
What’s the most valuable career advice you’ve received?
The best advice related to listening and discomfort. One: never underestimate the power of actively listening. You would be surprised where that mindset takes you when you consider all the inputs you are receiving rather than
thinking about how you will respond. Two: most of your career is about optimal anxiety. You will have doubts about what you know and can accomplish. You will feel like the most ignorant person in the room. Those traits will force you to reach for the best in yourself and others. It will humble you to do things you could not imagine. Be comfortable with the discomfort.
What changes or advancements are you hoping to see within the legal profession?
I hope and expect to see continued advancements in underrepresented groups helming leadership positions at law firms and in-house: women, people of color, LGBTQ+ individuals or others. Diversity is a strength at TTD and any company hoping to be at the forefront of industry because the output can only be as rich as the input. We see that globally at TTD, and I expect that the legal profession has learned that embracing diversity as a strength and enhancing inclusion separates the leaders from the laggards.
I also am looking forward to technology, artificial intelligence and machine learning expanding the role of legal professionals. TTD provides AI products to our clients (e.g., Koa™) to their benefit and our profession can take advantage of the same. These advances will expand opportunity to focus on the strategic advice. E-discovery, contract management and electronic billing are only the beginning of freeing attorneys to focu s on their role as trusted advisor and business partner.
If you would like to nominate a speaker for an At The Table interview or one of our Perspective podcasts, please contact dshepard@ccbjournal.com.
The Association of Corporate Counsel, in partnership with Wolters Kluwer Legal & Regulatory, recently released a survey report on the maturity of legal departments across 15 legal ops functions. Using a maturity scale of 1-100, the mean for the combined score of all 15 functions is 34.2, which as the chart shows means that the average department is just nudging into the intermediate stage – not exactly something to write home about.
What the surveyors do write home about is the importance of legal ops professionals. “Departments that employ at least one legal ops professional are more advanced across all 15 functional areas compared to those with no dedicated ops professional,” the report says. Interestingly, the most mature functions are compliance and financial management. The least mature functions (below) are innovation management, e-discovery and change management –none of which is beyond early stage maturity.
Clifford Chance announces the appointment of Megan Gordon to the role of Washington, D.C. office managing partner.
BigHand releases a global legal management workflow report revealing that support operations functions are flawed for most firms.
FTI Consulting, Inc. announces the addition of senior managing director Antonio Gesteira to the firm’s Technology segment.
Herbert Smith Freehills advises Coronado Global Resources Inc. on its U.S.$100 million capital raising by way of an underwritten accelerated non-renounceable entitlement offer.
Demetra Liggins joins McGuireWoods’ Restructuring & Insolvency Department as a partner in Houston.
Real Estate and Energy partner, Joseph DiRago, joins FisherBroyles in Denver as a partner.
Barnes & Thornburg announces that entertainment and media attorney Andrew Velcoff has joined the firm as partner in the Atlanta office.
Morrison & Foerster advises OpenInvest in its sale to J.P. Morgan.
Akin Gump releases a report examining COVID-19-era private debt market.
Stroock adds Richard Morvillo, Scott Morvillo and Ellen Murphy as white collar/ securities litigation partners.
Onna and Zapproved announce a direct integration between Onna’s Knowledge Integration Platform and Zapproved’s ZDiscovery platform.
Wolters Kluwer’s Future Ready Lawyer Survey of 700 legal professionals in the U.S. and Europe offers a unique perspective on the impact of the global pandemic on the profession. The 2020 survey was issued in January 2020, just before the crisis took hold in the U.S. and Europe. The 2021 survey was issued in March 2021, a full year into the crisis, which clearly accelerated trends and priorities already in place, particularly the importance of technology as a key driver of improved performance and heightened productivity. “The digital transformation of the industry gained unprecedented momentum, which continues today,” the report says. “In the past year, technology was a lifeline to the legal profession, in serving clients, connecting with colleagues and driving efficiency and productivity.” See the chart on this page for a list of changes in-house counsel are expecting in the way their departments deliver service.
Greater use of technology to improve productivity
Greater collaboration & transparency between la ts
Increased emphasis on innovation
Greater use of alternative fee arrangements
Greater use of third-party or outsourced resources
Greater insourcing of legal work
Greater use of
Greater use of alternative legal source providers
Greater use of non-legal
The Association of Corporate Counsel has unveiled its 2021 Value Champions, recognizing a dozen law departments, and their outside partners, for using technology and data to optimize legal services and drive value. “As law departments evolve at a rapid pace, these leaders are on the cutting edge of both developing and implementing transformative approaches,” said Catherine J. Moynihan, associate vice president of legal management services at ACC. Chosen by a panel of past honorees, the champions represent an array of companies across diverse industries.
ABBVIE (Chicago) . . . partnered with its top firms to increase meaningful work by underrepresented attorneys, exceeding their five-year targets in just three years.
CHANGE HEALTHCARE (Alpharetta, GA) . . . through “Project Jupiter,” which revamped sales contracting, the company cut outside counsel spending by 27% and the cost of sales contracting by 25%.
COMPASS GROUP USA (Charlotte, NC) and SHOOK, HARDY & BACON (Kansas City, MO) . . . teamed up to transform an out-of-control docket of lawsuits handled by 65 firms into a single portfolio, reducing claims by more than 50%.
CROWDSTRIKE (Sunnyvale, CA) and SCALEGAL (New York, NY) . . . built an integrated e-billing, e-discovery, contract lifecycle management, and compliance platform that cut e-discovery administrative overhead by 80%.
DXC TECHNOLOGY (Tysons, VA) and UNITEDLEX (Overland Park, KS) . . . these two-time co-champions deployed technology to enable high-velocity, risk-calibrated contracting to realize cost savings of 41% and data quality improvement of 70%.
IBI GROUP (Toronto) . . . this five-person legal department created a global legal services platform that reduced external legal spend by 70%.
JAMES HARDIE INDUSTRIES (Dublin) and PWC'S NEWLAW (Australia) . . . these cochampions in just 12 months achieved 25% savings against average annual external legal spend and set up JHI with a new ops model.
MARSH MCLENNAN (New York, NY) - . . . Marsh’s Legal Innovation & Technology team reduced spend 80% for global contracting, 70% for data processing and hosting, and 50% for document review.
NETAPP (Sunnyvale, CA), KEESAL PROPULSION LABS (San Francisco, CA), LEXCHECK (New York, NY) and QUISLEX (New York, NY) . . . created an AI tool for contract approval that has reduced approval time by 80% and reduced the escalation rate from 80% to 10%.
NOURYON (Radnor, PA) and LKGLOBAL (Scottsdale, AZ) . . . with an innovative budgeting matrix tool and selective outsourcing, this partnership helped Nouryon reduce its global IP budget by 41%.
RIO TINTO (Melbourne, AU) and ELEVATE SERVICES (Los Angeles, CA) . . . Rio turned to Elevate for help creating the “Spend Excellence Program,” which by the end of the first year generated average savings on RFPs of around 30%.
UBS (Zürich, Switzerland) . . . the UBS Outside Counsel Management team implemented decision trees for external engagements, bringing fees consistently down 15% - 20%.
Clifford Chance advises alterDomus on its acquisition of Investors Economic Assurance (IEA).
James Holt, a McGuireWoods complex commercial litigation associate in Tysons, will join American Petroleum Institute.
Wolters Kluwer ELM Solutions releases second quarterly LegalVIEW Insights report.
Squire Patton Boggs hires private investment specialist Steven Ward from Paul Hastings in London.
Morrison & Foerster announces the arrival of Stacy Cline Amin as a partner in its Life Sciences + Healthcare practice.
Weil announces Chantale Fiebig has joined the firm’s Washington, D.C. office as a partner in the complex commercial litigation practice.
Alanna Fishman is named a managing director within FTI Consulting’s Strategic Communications segment.
Wolters Kluwer releases new Future Ready Lawyer Survey.
FisherBroyles, LLP announces Gregory McKenzie has joined the firm in New York as a partner.
Onna announces its eDiscovery Cloud Transfer capability and additional export enhancements.
Clifford Chance announces the appointment of Jamal El-Hindi as counsel in its Americas Litigation & Dispute Resolution practice.
Legal industry leader Chris Iconos joins Quovant as chief revenue officer.
CLOC publicly endorses the SALI Alliance project, developing legal matter standards across the industry.
Buying Legal® Council releases its sixth annual survey of legal services procurement.
IPRO announces a partnership with Complete Discovery Source (CDS) to offer IPRO’s eDiscovery Enterprise solution to U.S. government agencies.
Lighthouse announces the acquisition of H5
Garen E. Dodge returns to Jackson Lewis P.C.’s Washington, D.C. region office as a principal.
Keir Gumbs is appointed to chief legal officer of Financial Solutions, Inc.
AIG announces strategic partnership with Blackstone Real Estate Income Trust
JAMS announces the addition of N. Damali Peterman, Esq., to its panel.
Weil advises American Securities in its pending $1.575 billion sale of Henry Company to Carlisle Companies Incorporated.
Akin Gump advises LUKOIL in $435 million Gulf of Mexico project.
Exterro launches Smart Breach Review helping law firms and LSP's find compromised data.
Kevin Dreher and Caroline Upton join Barnes & Thornburg in Chicago as partner and of counsel respectively.
William Levi, former DOJ chief of staff, rejoins Sidley Austin's litigation practice in Washington, D.C.
Lou Andreozzi, former chairman of Bloomberg Law, is appointed to the board of directors of Integreon
Too busy to read it all? Try these books, blogs, webcasts, websites and other info resources curated by CCBJ especially for corporate counsel and legal ops professionals.
This looks at the bright side of a global pandemic that turned the world upside down. “The after-effects of 2020 will likely contain as many positives as negatives,” says the Executive Summary. Especially noteworthy is a list of the 10 most effective ways to control outside counsel spend, as identified by corporate law departments. Perched high above the other nine, with 81% of respondents citing it, is “general enforcement of billing guidelines and reduction of invoice fees and expenses.” From there we get standard discounts on rack rates (32%); regular budget review (51%), volume discounts (45%) and, at #10, preferred panel programs (28%). Check out the entire top 10 and the whole report at tmsnrt.rs/3iA1PTN
This missive, from Betsi Roach, executive director of the Corporate Legal Operations Consortium, is worth a look. Using CLOC’s regular Around the CLOC newsletter, she calls attention to a wealth of legal ops resources CLOC unveiled during the pandemic. “Over the past year,” she writes, “CLOC found new ways to provide education, drive connections, and make progress on our shared vision of industry transformation.” One of the resources she highlights is called “Community Connect,” a dedicated online space for members to connect, learn and collaborate. Another is “In-House Huddle,” which is triggered when an In-House Forum conversation gathers enough momentum that CLOC schedules a virtual meeting to keep the buzz building.
Thanks to the law firms, technology companies, alternative legal service providers, management consultants and other supporters of corporate law departments who share their insights and expertise through the CCBJ network. Your participation is appreciated.
Ron Carey is chief revenue officer at Esquire Deposition Solutions, LLC, responsible for designing and driving the company’s revenue strategy and managing sales, marketing, field operations and sales enablement. He aligns these departments under a unified strategy with a clear vision and focused go-to-market approach, which ensures Esquire delivers premium service, creating clients for life. P. 66
Jordan Carr is a partner with Barnes & Thornburg. He focuses on community and economic development, including low-income housing, new markets and historicrehabilitation tax credits. P. 63
Scott Curran is the founder and CEO of Beyond Advisers. He helps nonprofits, businesses, and law firms scale social impact. Following a decade of service to the Clinton Foundation, Scott founded Beyond Advisers to help social innovators, philanthropists and nonprofit and private sector leaders design and build their organizations and initiatives to achieve sustainable impact and measurable results. P. 26
Josh Dazey is general counsel with U.S. Energy Development Corp. He is responsible for leading and managing strategic transactions and advising the firm on legal matters. Previously, he was executive vice president-legal and corporate secretary of Approach Resources Inc. P. 13
Donald Ensing is a partner with McGuireWoods in Chicago and co-chair of the firm’s financial institutions industry team. His experience includes syndicated, secured and unsecured senior debt, acquisition financing, real estate financing and complex intercreditor issues. His lending clients include both regulated banks and alternative non-bank lenders. P. 42
Thais Garcia is a member of the Clifford Chance Latin America Group. She specializes in cross-border M&A, restructurings and joint ventures, with a particular focus on the Latin America and U.S. markets. Garcia regularly represents private equity houses, pension funds, infrastructure funds and other investors in their investments in the region. P. 35
James Gelman is a partner with McGuireWoods in New York. He focuses his practice on the representation of commercial banks, investment banks and other financial institutions in their capacity as agents and lenders, as well as corporate borrowers, in a variety of financing transactions. P.42
Joshua Gold is a shareholder in Anderson Kill’s New York office and chair of Anderson Kill’s Cyber Insurance Recovery Group. He regularly represents policyholders in insurance coverage matters and disputes concerning arbitration, time element insurance, electronic data and other property/casualty insurance coverage issues. P. 46
Mike Haven is president of CLOC. A trained attorney, he has over two decades of experience in law and legal operations, including roles with K&L Gates LLP, NetApp, and Gap Inc. As a board member, he has been a staunch advocate for bringing the entire legal ecosystem together in the CLOC community to address and solve the most challenging obstacles standing in the way of industry progress. P. 58
Jennifer Kafcas is a partner with McGuireWoods in London. She has over 19 years of experience in representing major investment banks and private equity funds in respect of derivatives products and has worked on a considerable volume of high profile transactions in the European and U.S. markets. P. 42
Barlow Mann is a partner with McGuireWoods in Charlotte, North Carolina. He represents public and private companies in securities transactions and other general corporate matters. He represents both issuers and underwriters in initial public offerings, secondary offerings of debt, equity, derivative and hybrid securities. P. 42
Brendan Miller is legal operations advisor - practice innovation with Barnes & Thornburg. He leads their practice innovation team and works closely with the firm’s attorneys and other professionals to achieve greater value and excellence in its partnerships. P. 63
Jeroen Ouwehand is a global senior partner with Clifford Chance. He is an experienced disputes lawyer and, until recently, led the firm's European Litigation & Dispute Resolution practice. Ouwehand specializes in financial, commercial and corporate litigation and arbitration and has ample experience in acting in cross border disputes. P. 35
Stephen D. Palley is a partner in the Washington, D.C. office of Anderson Kill. He is co-chair of the firm’s Technology, Media and Distributed Systems Group and a member of the Insurance Recovery Group. P. 46
Susan Rodriguez is a partner with McGuireWoods in Charlotte, North Carolina. She co-chairs the firm’s financial institutions industry team and primarily focuses on government investigations and complex civil litigation. P. 42
Jonathan A. Solomon is a principal at Fish & Richardson P.C., a global intellectual property law firm. He focuses his practice on patent prosecution and portfolio management in a number of technical fields, including computer software, telecommunications, and financial technologies. P. 51
Michael Vernick is a partner with Akin Gump. He leads the firm's government contracts group and focuses his practice on the higher education and health care and life sciences sectors. His FCA experience extends into all aspects of higher education and United States government research funding, contracts and grants. P. 49
Jennifer Will is a member with McNees Wallace & Nurick and is cochair of their Labor and Employment Group. Will works with executives, in-house counsel and human resources professionals to help implement the strategies necessary to achieve their business objectives while staying in compliance with labor and employment laws. P. 49
Christian Wolgemuth is an associate in Litigation and Privacy & Data Security practice groups in McNees Wallace & Nurick. Prior to joining McNees and the legal industry, Christian had a successful career as a cybersecurity consultant for some of the world’s largest consulting firms. He takes pride in helping clients of all types overcome complex mixes of legal and technical challenges on their way to success. P. 31
Troy Zander is a partner with Barnes & Thornburg. He is partner-in charge of their San Diego Office and focuses his practice on the representation of lenders in documenting technology, life sciences and middle market financing transactions. P. 63
JOSH DAZEY U.S. ENERGY DEVELOPMENT CORPORATION
Josh Dazey, general counsel and corporate secretary for U.S. Energy Development Corporation, discusses his role as solo general counsel at an award-winning upstream oil and gas firm, as well as why he finds working in the energy sector so fascinating.
CCBJ: Upstream oil and gas firm U.S. Energy Development Corporation recently brought you in as general counsel. Please tell us a bit about what that entails.
Josh Dazey: I am the solo general counsel here, so my responsibilities are wide-ranging in a legal sense. I manage all legal issues, ranging from general corporate legal matters to litigation. This covers everything from managing litigation, assisting our business development team in negotiating transactions, negotiating commercial
and financial contracts, reviewing policies and procedures, advising on compliance and regulatory matters, all the way down to negotiating nondisclosure agreements and advising on human resources matters. As a solo general counsel, I am responsible for matters ranging from the very top, strategic level, all the way down to putting paper in the copy machine when necessary. One of the primary skills of a solo general counsel is to understand when you can handle matters on your own, and when it is best to consult outside legal experts. I think being able to strike the right balance in that respect comes from experience, and just living through enough similar matters to understand when it’s advisable to bring in a subject matter expert.
In addition, given my prior experience in oil and gas and particularly upstream companies and executive management, I bring a certain amount of strategic
experience to the table. Part of any good counsel’s job is to point out to your clients when you’ve seen particular situations before, and to take advantage of the different ways that you’ve seen folks address the issues that arise in the operations of an oil and gas company.
How will you utilize your past experience, whether that’s education or previous job experience in your new position with U.S. Energy?
My experience has been very broad. I went to law school at Georgetown and knew that I wanted to be a corporate lawyer. I began my career in the corporate law department at Baker Botts in Houston – a historic Texas-based law firm. While there, I primarily worked on securities matters and mergers and acquisitions.
After I’d been there for several years, I moved to a satellite office in Palo Alto that had much more venture capital work, where I got involved with some alternative energy clients as well. I moved from there to a private equity–backed hybrid, upstream and midstream master limited partnership, where I was their Associate General Counsel of Securities and Finance and Assistant Secretary. And from there I became the general counsel at a Permian-based upstream oil and gas company headquartered in Fort Worth. So, I have a very extensive energy-based background, and I’ve worked on everything from public company securities and M&A, all the way down to being a solo general counsel advising on human resources issues or commercial issues, oil and gas purchase contracts, credit agreements, and so on.
Having that deep background in energy, and in Texas as well, allows me to provide more value to my clients here.
My background has provided me with familiarity regarding a variety of unique issues that might arise in this industry, and helps me to solve for matters that may not be apparent on the front end. Where I have seen complexities arise with other clients or at other jobs, I am able to say, “Hey, as we’re solving this issue that’s in front of us right now, let’s look at the future too. I’ve seen this come up, let’s make sure we address certain matters on the front end.” Having that deep background in energy, and in Texas as well, allows me to provide more value to my clients here.
What makes you passionate about the energy industry in particular?
One of my favorite things about being a lawyer is being able to learn about the industries of my clients. It’s hard to be a successful lawyer without understanding your client’s industry and being prepared to address the unique issues that may arise. When I was working in private practice, that was always one of my favorite homework assignments. Sometimes you may have a client with exposure to an industry that you may not have great experience with, and getting up to speed and learning a new business is one of the most appealing parts of the job.
That goes double for the energy industry. I first started working with energy clients at the beginning of my legal career, and obviously it’s been pretty energy focused since then. One of the things that I’ve enjoyed most has been learning the actual business. That goes
beyond just the financial statements, and by the way, any corporate lawyer is going to need to learn more about accounting and financial statements than they ever teach you in law school. It’s a fundamental part of understanding how that side of the business works, but with energy, you add something else too. There’s an entire engineering aspect, as well as an entire geology aspect, in the upstream industry in particular. Those are vast fields that people spend their entire careers working in and continually learning about.
Josh
is general counsel with U.S. Energy Development Corp. He is responsible for leading and managing strategic transactions and advising the firm on legal matters. Previously, he was executive vice president-legal and corporate secretary of Approach Resources Inc. Reach him at jdazey@usedc.com
As a lawyer, you will never be on their knowledge level, but you must be able to speak with them and understand what they’re telling you. Learning the geology, engineering and accounting to get to that point – it’s all a lot of fun. There’s a limitless pool of things that you can spend time researching. And frankly, it’s fascinating. As a kid, my dad would take me out rock hunting. I didn’t expect that later in my career, I’d be reading college textbooks on geology and rock formations, and that this subject matter would encompass so much of my career. It’s so important to the energy industry. And that’s one of the parts of energy industry – and one of the parts of the legal practice overall – that I love the most. You never stop learning the law, as well as everything else that your client needs you to know to be an effective advisor.
As a lawyer, I view my role as supporting clients. I’m not joining as general counsel to say, “These are the strategic goals for the company.” My job is to support my clients and help them to achieve their strategic goals. Therefore, my personal goals, in order to achieve that, include building trust, building communication, and being a trusted advisor at all levels of the company.
I have an open door policy, meaning, I want every employee to feel comfortable coming to me with questions about anything that might be related to legal. Anything that they may feel I’m in a good position to answer, I want them to be comfortable knocking on my door and asking me that. As a lawyer, we all know that issues addressed ahead of time are much simpler than ones that are brought to you afterwards. So part of the soft skills relevant to being an in-house attorney are making sure people are not reluctant to talk with you. Having been here three months now, continuing to develop that trust and communication is an important short-term goal.
Beyond that, as a solo general counsel, one of the goals that you’re always working on is smoothly and efficiently integrating with all the other departments in the company and making sure that they understand the value that you can provide. You want future interactions to be smooth, efficient, and for everybody to benefit from the legal counsel that’s sitting in the building with them.
Company wise, the goals for the future of U.S. Energy, on a larger scale, are probably what most upstream energy companies want – to gain efficiencies, operate efficiently, to mitigate risk, increase profitability, sustain a focus
You never stop studying the law, as well as everything else that your client needs you to know to be an effective advisor.
on compliance, and to operate safely. If you ask most upstream companies what their long-term strategic goals are, like us, they will typically be related to increasing your footprint, increasing reserves and production, developing efficiency innovations, and maintaining a focus on safety and environmental compliance.
Are there any projects and initiatives you would like to mention that may be of interest to our readers?
We’re committed to environmental stewardship, social responsibility and corporate governance (ESG). We have ESG initiatives aimed at being responsible corporate citizens, being a responsible upstream energy company, and achieving overall ESG compliance. There is a constant push to have a positive corporate culture. Collaboration is important. Everybody here is a hard worker, and everybody gets along well. Our employees are proud to be here and are committed to making the company a good place to work. You can see it when walking around our headquarters and it’s in large part why I chose this job, as opposed to doing something else in the industry. And that’s something that companies should work on constantly. You can’t say, “Hey, employees seem valued. Let’s move on.” It’s something that the people in charge in every department need to focus on. And I think we do a really good job of that.
Artificial intelligence brings exciting new possibilities to companies trying to navigate the expanding realms of data and compliance.
We live in the era of Big Data. The exponential pace of technological development continues to generate reams of digital information that can be analyzed, sorted, and utilized in previously impossible ways. In this world of artificial intelligence (AI), machine learning, and other advanced technologies, questions of privacy, government regulations, and compliance have taken on a new prominence across industries of all kinds.
With this in mind, e-discovery and technology-assisted review provider H5 recently convened a panel of experts to discuss the latest compliance challenges that organizations are facing today, as well as ways that artificial intelligence (AI) can be used to address those challenges. Other key points covered in the discussion included:
• Use cases involving technical approaches to data classification
• Data classification, methods and approach
• How to set expectations within your organization for the deployment of AI technology
• How to keep an AI solution compliant
• What companies can do to keep from introducing bias into their AI models
The conversation was moderated by Doug Austin, editor of the eDiscovery Today blog, and the panel consisted of Timia Moore, strategic risk assessment manager for Wells Fargo; Eric Pender, engagement manager at H5; Kimberly Pack, associate general counsel of compliance for Anheuser-Busch; and Alex Lakatos, partner at Mayer Brown.
The rapidly evolving regulatory landscape, vastly increased data volumes and sources, and stringent new privacy laws present unique new challenges to today’s businesses. Whereas in the recent past, it may have seemed liked regulatory bodies were often in a defensive position, forced to play catch-up as powerful new technologies took the field, these agencies are increasingly using their own tech to go on the offensive.
This is particularly true in the banking industry and broader financial sector. “With the advent of fintech and technology like AI, regulators are moving from this reactive mode into a more proactive mode,” said Timia Moore, strategic risk assessment manager for Wells Fargo. But the trend is not limited to banking and finance. “It’s not industry specific,” she said. “I think regulators are really looking to be more proactive and figure out how to identify and assess issues, because ultimately they’re concerned about the consumer, which all of our companies are and should be as well.”
Indeed, growing demand by consumers for increased privacy and better protection of their personal data is a key driver of new regulations around the world, including the General Data Protection Regulation (GDPR) in the European Union and the California Consumer Privacy Act (CCPA) and various similar laws
here in the United States. It’s also one of the biggest compliance challenges facing organizations today, as cyber attacks are now faster, more aggressive, and more sophisticated than ever before. Other challenges highlighted by the panel included:
• Siloed departs that limit communications and visibility with organizations
• A dearth of subject matter expertise
• The possibility of simultaneous AI requests from multiple regulatory agencies
• A more remote and dispersed workforce due to the pandemic
In order to meet these challenges head on, companies are increasingly turning to AI to help them keep in compliance with new regulations. Some companies are partnering with technology specialists to meet their AI needs, while some are building their own systems.
Anheuser-Busch, the largest brewing company in the United States, is once such company that is using an AI system to meet compliance standards. As Kimberly Pack, associate general counsel of compliance for Anheuser-Busch, described it: “One of the things that we’re super proud of is our proprietary AI data analyst system BrewRight. We use that data for Foreign Corrupt Practices Act compliance. We use it for investigations management. We use it for alcohol beverage law compliance.”
She also pointed out that the BrewRight AI system is useful for discovering internal malfeasance as well. “Just general employee credit card abuse. … We can even identify those kinds of things,” Pack said. “We’re actively looking for outlier behavior, strange patterns or new activity. As companies we have this data, and so the question is how are we using it, and artificial intelligence is a great way for us to start being able to identify and mitigate some risks that we have.”
Artificial intelligence can also play a key role in reducing the burden from alerts related to potential compliance issues or other kinds of wrongdoing. The trick, according to Alex Lakatos, partner at Mayer Brown, is tuning the system to the right level of sensitivity – and then letting it learn from there. “If you set [it] to be too sensitive, you’re going to be drowned in alerts and you can’t make sense of them,” Lakatos said. “You set it [too far] in the other direction, you only get the instances of the really, really bad conduct. [But] AI, because it is a learning tool, can [become] smarter about which alerts get triggered.”
Lakatos also pointed out that when it comes to the kind of explanations for illegal behaviors that regulators usually want to see, AI is not capable of providing those answers. “AI doesn’t work on a theory,” he said. “AI just works on correlation.” That’s where having some smart people working in tandem with your AI comes in handy. “Regulators get more comfortable with a little bit of theory behind it.”
H5 has identified at least a dozen areas related to compliance where AI can be of assistance, including:
• Records retention and categorization
• Updating contracts as regulations change
• Automating contract reviews
• Training using videos and AI for process improvement
• Identifying behaviors and general policy violations to help enforce compliance
• First-line level reviews of alerts
• Training/preparation for regulatory exams
• LIBOR rate determinations
• Classification of internal-only and confidential materials
• Personal identifiable information (PII) location and remediation
• Policy applicability and risk identification
• Human resources candidate identification and classification to eliminate bias
There are various methods and approaches to data classification, including machine learning, linguistic modeling, sentiment analysis, name normalization, and personal data detection. Choosing the right one depends on what companies want their AI to do.
“That’s why it’s really important to have a holistic program management style approach to this,” said Eric Pender, engagement manager at H5. “Because there are so many different ways that you can approach a lot of these problems.”
Supervised machine learning models, for instance, ingest data that’s already been categorized, which makes them great at making predictions and predictive models. Unsupervised
machine learning models, on the other hand, which take in unlabeled, uncategorized information, are really good at data pattern and structure recognition.
“Ultimately, I think this comes down to the question of what action you want to take on your data,” Pender said. “And what version of modeling is going to be best suited to getting you there.”
Once you’ve determined the type of data classification that best suits your needs, it’s crucial to set expectations for the AI deployment within your company. This process includes third-party evaluation, procurement, testing, and data processing agreements. Buying an off-the shelf solution is a possibility, though some organizations – especially larges ones, like Anheuser-Busch – may have the resources to build their own. It’s also possible to create a solution that features elements of both. In either case, obtaining C-suite buy-in is a critical step that should not be overlooked. And to maintain trust, it’s important to properly notify workers throughout the organization and remain transparent throughout the process.
Allowing enough time for proper proof of concept evaluation is also key. When it comes to creating a timeline for deploying AI within an organization, “it’s really important for folks to be patient,” according to Pender. “People who are new to AI sometimes have this perception that they’re going to buy AI and they’re going to plug it in and it just works. [But] you really have to take time to train the models, especially if you’re talking about structured algorithms and you need to input classified data.”
Education, documentation and training are also key aspects of setting expectations for AI deployment. Bear in mind, at its heart implementing an AI system is a form of change management.
“Think about your organization and the culture, and how well your employees or impacted team members receive change,” said Moore of Wells Fargo. “Sometimes if you are developing that change internally, if they’re at the table, if they have a voice, if they feel they’re a meaningful part of it, it’s a lot easier than if you just have some cowboy vendor come in and say, ‘We have the answer to your problems. Here it is, just do what we say.’”
When deploying an AI system, the last area of consideration discussed by the panel was how to keep the AI solution itself compliant and free of bias. Best practices include ongoing monitoring of the system, A/B testing, and mitigating attacks on the AI model.
It’s also important to always keep in mind that AI systems are inherently dependent on their own training data. In other words, these systems are only as good as their inputs, and it’s crucial to make sure biases aren’t baked into the AI from the beginning. And once the system is up and running – and learning – it’s important to check in on it regularly.
“There’s an old computer saying, “Garbage in, garbage out,” said Lakatos. “The thing with AI is people have so much faith in it that is become more of “garbage in, gospel out.’ If the AI says it, it must be true … and that’s something to be cautious of.”
In today’s digital world, AI systems are becoming more and more integral to compliance and a host of other business functions. Educating yourself and making sure your company has a plan for the future are essential steps to take right away.
The entire H5 webcast, “New Rules, New Tools, AI and Compliance,” can be viewed on demand at https://bit.ly/3foJl6J
MICHAEL VERNICK AKIN GUMP STRAUSS HAUER & FELD LLP
Michael Vernick, government contracts partner with Akin Gump, discusses various aspects of the False Claims Act, including the potential for increased enforcement activity under the Biden administration, especially actions related to the CARES Act, and how companies and institutions can mitigate whistleblower and compliance related risks.
CCBJ: Your decision to join Akin Gump after a long career with Hogan Lovells was a momentous career move at what feels like a momentous time in your practice, particularly as the False Claims Act (FCA) seems poised to become an even more powerful civil enforcement tool in the government’s arsenal. So, why Akin and why now?
Michael Vernick : I have nothing but good things to say about Hogan Lovells and my former colleagues, but the opportunity to join Akin Gump was one that was simply too exciting to pass up. As you said, much of my practice focuses on False Claims Act matters, specifically in the areas of education, life sciences and government procurement. Akin Gump has a topflight white collar and investigations practice, with incredible depth across the entire country. It’s just an ideal platform for the work I do and the clients I support. Ultimately, what drew me to Akin Gump was a chance to join a team that can combine vast FCA experience with underlying regulatory expertise, particularly when it comes to higher education and government procurement.
Another key factor for me was that over the past couple of years I’ve been very active in matters related to allegations of foreign influence over U.S. government–
sponsored research, and Akin Gump has a global reach, particularly in China where many of these cases are focused. Akin’s global reach has really enhanced my ability to support university and research institute clients on cross-border investigations.
The Department of Justice’s FCA recoveries dropped to $2.2 billion in 2020, the lowest level since 2008. Yet at the same time, new FCA cases increased from 786 new matters in 2019 to 922 new matters in 2020. Tell us about your practice in 2020 and how you navigated what must have been a very uncertain and stressful year. Did your approach to counseling clients change?
A large part of the reason that FCA cases have continued to increase is that we are seeing an ever greater number of whistleblower/qui tam cases being filed. In fact, regarding the stats you just mentioned, the Department of Justice (DOJ) announced that more than 670 of the FCA suits filed in 2020 were qui tam cases. As DOJ noted that’s an average of more than a dozen whistleblower cases filed per week. So one of the things we did in 2020, given the significant increase in FCA cases, and whistleblower cases in particular, was to spend a lot of time working with clients on compliance programs, specifically helping them navigate potential whistleblower situations and reducing the risk of a case being filed.
Even so, sometimes organizations get sued and have a FCA case to manage. A critical part of FCA defense is the investigation phase of the matter during which DOJ decides whether it is going to intervene. In 2020, as we do generally, we worked very hard to persuade the Justice Department not to intervene in our clients’ matters. Now, even if you succeed in persuading DOJ
to decline the case, that doesn’t necessarily mean that the matter is going to go away, because the relater can proceed without the Justice Department. But if you’re able to persuade the DOJ not to intervene, it’s generally a real step in the right direction.
Early signs suggest a resurgence of FCA and related activity in the offing. Tell us what you and your team at Akin are seeing in that area now, and what you expect to see as the Biden administration settles in.
I agree, I do think we’re going to see increased FCA activity under the Biden administration. I think they’ve been pretty clear that they are going to aggressively pursue FCA cases and when that is combined with, among other factors, the very substantial government spending related to the pandemic I suspect we’ll see more FCA activity. DOJ has also touted its use of data analytics to detect potential fraud in the healthcare
space; it would not be surprising to see that approach applied more broadly.
In addition to the traditional areas of healthcare and government procurement, cybersecurity is a developing area of FCA risk. U.S. government contractors are becoming subject to an ever increasing number of cybersecurity requirements and certifications. As a result, cyber is an area that we’ve really been focusing on with our government contractor clients, in terms of helping them understand and navigate an ever evolving array of contractual obligations that drive FCA risk.
In addition to cybersecurity, I think we’re also going to see an emphasis on FCA enforcement related to the pandemic, particularly with respect to some of the Coronavirus Aid, Relief, and Economic Security (CARES) Act money.
If you’re able to persuade the DOJ not to intervene, it’s a real step in the right direction.
Finally, educational and research institutions have been subjected to a steady stream of FCA cases over the last decade. It’s likely we will continue to see robust enforcement activity there, whether it’s related to CARES Act funding, or related to foreign influence, or more traditional charging issues around U.S. government grants and contracts.
In recent years, there seems to have been an expansion of the number of industries targeted for FCA enforcement, such as those arising from the opioid crisis and the individuals pursued. What does this mean for your practice? For example, are you representing more private equity clients caught up in FCA enforcement actions against their portfolio companies?
There does tend to be an industry-centric focus for FCA activity. We’ve talked about a few of them already – health care, life sciences, education and government procurement.
What many of these targeted areas have in common is a complex series of underlying statutes and regulations. Our team has really benefitted from our deep understanding of those requirements. I mentioned previously the cybersecurity requirements applicable to U.S. government contractors, which is a perfect example because the underlying regulatory requirements are rather complicated. And they are constantly evolving. So we’ve been working with clients across all sectors of the government contracting
space to help them deal with the risk that comes with meeting those requirements and will be able to leverage our regulatory expertise in the event they get caught up in an FCA case.
Similarly, when we talk about the education industry, we continue to see active False Claims Act cases related to research funding. We’ve really been able help our clients in that space by being able to bring to bear tremendous underlying knowledge about what can and can’t be charged to government grants, administrative requirements, and scientific obligations.
Regarding private equity clients and their portfolio companies, I would say that given that they tend to touch so many different sectors, they face a unique type of FCA risk. We’ve found that PE clients can benefit not only from FCA experience when they do get sued but also from our ability to help them develop sound compliance programs that can be used to mitigate risk regardless of the sector in which their portfolio companies operate.
There has been quite a bit written about the U.S. Supreme Court’s 2016 opinion in the Escobar case –Universal Health Services, Inc. v. United States ex. rel. Escobar – in which the court adopted the implied false certification theory of liability under the FCA. What has the impact of Escobar been on clients, and what do you expect from the circuit courts as the law continues to evolve?
Escobar was and remains a very significant False Claims Act case. While it did uphold the implied false certification theory of FCA liability, it also has some language in it that has been helpful to False Claims Act defendants.
For example, one element of the FCA is the materiality of the claim. Escobar explained that the FCA’s materiality test is one that is “rigorous and demanding.” It also includes some language explaining that if the government knew about allegedly problematic conduct and paid the claim anyway, that’s an indication that any noncompliance wasn’t material. So while Escobar did uphold the implied certification theory, it also provides defense counsel with some important arrows for their quiver.
When it comes to the circuit courts, not surprisingly, there are some inconsistencies in terms of how they apply Escobar. Those variances arise in a number of different and elements of the FCA, including materiality and the viability of a specific implied certification cause of action. It will be interesting to
see if the Supreme Court steps in and provides some clarification for the lower courts on how to apply Escobar.
Given all of the government action arising from the global pandemic, particularly measures adopted in the CARES Act, it’s easy to envision FCA enforcement activity related to relief efforts. What have you seen so far, and what do you expect to see in the next couple of years?
I do think we’re going to see FCA activity related to the CARES Act. We’ve already seen some activity related to the Paycheck Protection Program (PPP), and we’re likely going to see more in the future.
One interesting aspect of PPP that we’ll see play out is whether either the DOJ or the relaters bar begin to
develop strategies that are more focused on lenders than borrowers, where they may be able to achieve greater recoveries by virtue of lenders having made large numbers of PPP loans.
More generally, the CARES Act was an incredibly broad statute that provided support to a variety of different sectors of the economy, and I don’t think we’re going to see FCA enforcement being limited to PPP. For example, the CARES Act made millions of dollars available to universities. Some of those funds were to help students, and some were made available to the institutions themselves. There was a fair amount of controversy about whether universities with particularly large endowments should be taking that CARES money. Some did, some didn’t. Those that did accept the CARES Act funds had to make relatively broad certifications about what they were going to use the money for, what they were going to do in terms of keeping employees on board and avoiding layoffs, etc. Given the politically charged nature of the decision to accept those funds, along with the broad certifications, I wouldn’t be surprised if to see some false claims activity there as well.
More than half of the FCA settlements and judgments reported by the government in 2020 arose from lawsuits under the qui tam provisions of the FCA. During the same period, the government paid out $309 million to individuals who exposed fraud and false claims by filing actions. Given the expansion of these suits and the government’s very active encouragement of whistleblowers, how do you counsel clients to help assure that they do not become the headline of the next DOJ press release?
Mitigating whistleblower risk is something that we spend a lot of time working with clients on. We take
Mitigating whistleblower risk is something that we spend a lot of time working with clients on.
great pride in our ability to help clients develop and implement effective compliance programs. We try to do that in a way that really focuses on identifying and removing barriers to compliance rather than just writing policies and procedures.
What we have found over the years when it comes to trying to mitigate whistleblower risk is that it really is important to work with clients to identify those barriers to compliance. They could be anything. It could be an antiquated financial system that makes it difficult to bill accurately. It could be reporting lines that create challenges for employees and may make them feel uncomfortable in their ability to do their jobs. We work with clients and really dig in to help them identify those challenges to institutional compliance. It’s a practical way to reduce FCA risk, because if those barriers to compliance are addressed it means the company or institution has removed some of the reasons why employees may opt to cut corners or behave in a noncompliant way, which in turn reduces their whistleblower risk.
Michael Vernick is a partner with Akin Gump. He leads the firm's government contracts group and focuses his practice on the higher education and health care and life sciences sectors. His FCA experience extends into all aspects of higher education and United States government research funding, contracts and grants. Reach him at mvernick@akingump.com
SCOTT CURRAN BEYOND ADVISORS
Scott Curran, founder and CEO of Beyond Advisers, discusses the nature of his social impact consultancy, how his experience at the Clinton Foundation informed his current venture, and what law firms and legal departments can do to recognize and expand upon their own social impact practices.
CCBJ: Please tell us about Beyond Advisers and what it does.
Scott Curran: Beyond Advisers is a full-service social impact consulting practice – in boutique form. Many people are still trying to understand what “social impact” means in this context, so it invites some intrigue. A simple definition for an audience of my brethren corporate lawyers would be that we take the best of what you’d get with a full-service corporate law practice and combine it with traditional consulting in the rapidly evolving social impact landscape. We have more than a decade of experience serving nonprofit social enterprises, the private sector, and cross-sector social impact initiatives at scale. Basically we put all of those things together in a small boutique with a small number of people, serving that space with a tool kit that combines all of that aforementioned experience. That’s what it means to be a full-service social impact consulting firm.
We tell our clients, “We are lawyers, but we’re not your lawyers in this case. We are consultants.” We’re marrying these very different but interrelated skill sets, along with the best advice, guidance and tools in the world, combining all that with the best ideas and efforts to change the world for the better.
The clients we serve primarily include: 1) nonprofits; and 2) private sector businesses that are trying to do
good in the world with their business model. We work with law firms as well, which we consider part of the private sector. People tend to refer to the private sector as traditional businesses that are not law firms, but law firms are businesses and they provide products and services to clients – so we consider that part of the private sector. And the third area we serve is crosssector partnerships. These are initiatives born from the work of all of the above, nonprofits working with for-profits, or working with government in various combinations. So we say nonprofits, the private sector and cross-sector partnerships. That’s what Beyond Advisers is – a social impact consultancy, full-service work based on unprecedented experience.
Five years after taking a job out of law school, you decided to pivot and pursue a master’s degree in public service. What was the motivation behind that decision?
I always knew I was likely to do something beyond being a corporate lawyer or a private law firm team member. I was always looking for what would come next. I went to law school in the late 1990s, which was a very exciting time because it was before the first dotcom bubble, and everybody got jobs afterward. The issue wasn’t whether you’d get a job coming out of law school, it was which job you would get. So going to law school opened up many, many doors. But I was definitely one of those people who wasn’t planning on having a traditional legal career. I entered law school thinking it would be a great, exciting, vibrant education, which would open a lot of doors, but I was always planning to look at what other doors might open later too.
I wound up falling into the traditional pattern that most law students naturally fall into, which is oncampus interviews, getting a summer associate
Recognize that you already have a social impact practice, whether you realize it or not.
position after my second year, getting an offer at a corporate law firm. So I became a corporate law associate, but I still had that desire to look for what else I might do hardwired into me. I soaked up every day of those five years as a corporate lawyer, not knowing where it would take me but knowing it was going to be helpful for whatever came next.
I saw an opportunity to apply to a brand new graduate program that was offering the first-ever master’s degree in public service. I thought it sounded really interesting. As somebody who was deeply committed, throughout my life, to various forms of public service, I thought, “This could be an educational opportunity, just like law school was, that might open more doors.”
I applied to the program, got in and went for it. I thought it would be an adventure. Life is more fun when we have adventures.
The program was at the University of Arkansas, Clinton School of Public Service, which at the time was the newest presidential school. So I went to Arkansas, for what I expected would be an 18-month visit, the length of the master’s degree program, with no expectation of staying in Arkansas. I initially had no intention of working in philanthropy, or for the Clinton Foundation, but that’s exactly what happened. As part of the public service program, I did an internship that introduced me to the Clinton Foundation. Then, when I graduated from the program, I took a one-year fellowship with the Clinton Foundation, in a role focused on rural philanthropy in pervasively poor parts of rural America, looking at how the foundation might create programs that would serve that part of our country.
Halfway through the year, I began doing legal work which led to more and more of the same as the Clinton Foundation and corresponding in house needs grew.
Ten years later, when I left the Clinton Foundation in 2016, I left as general counsel, with an in-house team of 16 people and about a dozen outside law firms supporting the global work of one of the fastestgrowing, most diverse and dynamic global operating charities the world has ever known. I’m really proud of the work we did there. It was a heck of a ride.
Please explain what you think Beyond Advisers can teach other companies regarding social impact law.
First of all, that it exists. It’s a real thing and people are practicing it now, whether they realize it or not. There are law firms that are designing and building social impact practices. Remember, social impact is the broadest definition of a lot of work that is included underneath that umbrella. Nonprofit law is social impact law. Corporate law, serving corporate clients doing social impact work, is social impact law.
This kind of law is already being practiced, and it is increasingly blurring lines. You have nonprofits that are acting more like businesses, meaning they are seeking to create earned revenue models. Similarly, for-profit endeavors are acting more like nonprofits than ever before, by infusing social good into what they’re doing as a business. They’re doing good while doing well.
Social enterprises can be defined differently as it encompasses the “blurred line” space between doing good and doing well, but generally revolves around businesses that solve a social challenge with a market driven approach. Whatever the enterprise or entity type, they are all leaning on lawyers to help them navigate this space. People often say, “We’re going to do good in the world, but we’re also going to make revenue. Should I be a nonprofit or for-profit?” The answer is often: “it depends!”
But when it comes to law, and especially Big Law, which has such a big voice and such a big platform, they’re doing so much of this work already, so the first step is to recognize it’s happening.
I challenge the Am Law 100 to update the way they measure social impact.
That’s step one: Recognize that you already have a social impact practice, whether you know and have actively built it or not. And once you recognize that you have a social impact practice, you will increasingly be motivated to design, build and grow it as such.
Step two: Organize around what you are already doing, with clients that are already in the social impact space, whether they’re nonprofit, for-profit, a hybrid, a social enterprise, or a cross-sector partnership. Take a minute to look at what kinds of clients you have, and what you’re already doing to support them in their social impact work. I guarantee you’ll find something, with very few exceptions.
Step three: Market it! Tell the story of what you’re doing. It’s not just client services. It’s also what you, as a firm, are doing. Sometimes firms are making their own philanthropic contributions through their own charitable foundations or other giving strategies. Sometimes they have volunteer and service days –that’s a part of a social impact approach too. It’s not client service per se, but it is part of a comprehensive and engaging social impact footprint that matters to your team and clients alike. And that effort is not captured by “pro bono” in most cases, which is a really important point. Pro bono, in its traditional definition of free legal services, is amazing and awesome and historically it’s what most people in our profession refer to when asked how they do good. But it’s no longer a big enough construct to capture all that’s happening at law firms and with lawyers and their clients when it comes to social impact work. We tend to define pro bono as free legal advice, where we don’t send a bill, but that does not adequately capture all the social good
that law firms are doing. That’s an extremely important point for us to recognize and organize around when discussing social impact in the profession.
Step four: Measure it. This is my call to the entire profession – measure your impact. Pro bono is a really important part of it, but like I said, it is no longer sufficient. I challenge the Am Law 100 to change the way they measure social impact, by adding a true social impact metric to how they measure the ways in which law firms do good. Pro bono alone is no longer sufficient. It can be the heaviest weighted factor, to be sure, and it should be a crown jewel of law firm social impact measurement, but it can no longer be the only jewel in that crown.
Recognize; Organize; Market and Measure for social impact. That’s my call to the legal community. Including, but not limited to, law firms. That’s where the greatest social impact journeys of our profession begin. And we’re happy to support anyone working toward that end!
You recently developed a social impact tool kit. What insights can you offer into that?
The tool kit is really just a manifestation of my five years of corporate law work, plus the 10 years of really expansive work helping to design, build, and grow the Clinton Foundation’s organization, operations, and programs infrastructure, which included nonprofit, wider philanthropy, and plenty of social enterprise work that we were doing in the early days before some of it even had a name or commonly understood definition. That entails a lot of the cross-sector work between the nonprofit and for-profit spaces, with these new and dynamic models, creating social enterprises that support social impact work, not necessarily intended
for profit in most cases, but using these hybridized approaches to create sustainable and scalable funding mechanisms to support the work long-term.
When I was leading the in-house team at the Clinton Foundation, I realized that I was fortunate enough to be sitting in the department that was effectively an aggregator of tools, guidance and simplified approaches that supported social impact work at scale. The Clinton Foundation had about 14 different initiatives, including global health, climate change, international development, supply chain innovation, early childhood education, childhood obesity, women and girls empowerment, the work of the Clinton Center in Arkansas, a series of conferences that fell under the umbrella of the Clinton Global Initiative, and much more.
The tool kit we developed as an in-house legal team there had to support all of that different work, and all of the thousands of employees and volunteers who did that diverse work. We were a relatively modest team – about 16 people, not all lawyers. We ran the gamut of different functions, and then there were all of the outside law firms too. We had to support that team, which was very fast moving and wanted very simple answers – very usable, understandable tools that could help them do their work. The sun never set on that work. It was always in process, by virtue of being a global organization. That work was happening 24/7/365. The tools we deployed had to meet and serve a common set of expectations, so that we could be a well governed, compliant, legally sound, and efficiently operating organization.
What I realized was that we effectively produced this tool kit that can work for anybody, anywhere, with all our various partners all over the world. Knowing
how to engage and support people doing the work, whether those are your employees, contractors, vendors, volunteers – we have to be able to equip that incredibly diverse, global team with the necessary tools to support that kind of work – from NDAs to MOUs, policies and procedures, and practical day to day operations that consistently worked and supported our vast and diverse global operations. It all had to work, and work well.
That’s what we refer to, generally, as the tool kit. It’s advice, guidance and tools themselves that help social impact initiatives, whether nonprofit, for profit, or cross-sector scale with clarity, confidence, and with simplicity at the core.
That tool kit has proven to work, almost without fail, with the myriad of clients we’ve had the good fortune to serve over the past five and a half years – knock on wood! I don’t want to jinx anything! All of that experience, now serving A-list social innovators, including big brands, brains, and businesses. Now our goal is to make it more widely known, more widely available, and more easily actionable by any and every services firm (law firms especially included!) trying to help anyone and everyone “do more good, better!”
is the founder and CEO of Beyond Advisers. He helps nonprofits, businesses, and law firms scale social impact. Following a decade of service to the Clinton Foundation, Scott founded Beyond Advisers to help social innovators, philanthropists and nonprofit and private sector leaders design and build their organizations and initiatives to achieve sustainable impact and measurable results. Reach him at scurran@beyondadvisers.com
CHRISTIAN WOLGEMUTH M C NEES WALLACE & NURICK
Christian Wolgemuth, associate with McNees Wallace and Nurick LLC, explores the modern-day passenger vehicle. As new technological features have emerged, so has the presentation of more indepth vehicle data.
The purpose of the passenger vehicle – to transport its occupants from one location to another, wherever and whenever they want to go – has remained relatively unchanged since Carl Benz dreamt up a gasolinepowered, three-wheeled, two-seater in the late 1800s. While modern passenger vehicles have certainly become more comfortable, capable and advanced over the last 130 years, their core functionality has remained generally the same. However, as automotive manufacturers have integrated more technological features and conveniences to entice new buyers, they have also created new commercial opportunities for those vehicles to the benefit of the manufacturers and other third parties in the tech industry. With every mile traveled by the driver and every digital “tick” of the odometer, modern vehicles generate incredible amounts of valuable data, and every party gathering, sharing or using that data needs to be aware of the responsibilities and implications that come along for the ride.
The information associated with a vehicle now includes more than just make, model, year and mileage. These modern vehicles generate, and manufacturers and other parties collect, vehicle data that now includes:
• Vehicle health data, such as odometer reading, fuel level, oil life, diagnostic codes and other maintenance information.
• Remote data, such as status of powered doors, windows, hood, trunk, sunroof, hazard lights, fuel economy and trip distance.
• Driving data, which includes acceleration rates and vehicle speeds, steering and breaking usage and travel direction.
• Data relating to the vehicle occupants’ usage of multimedia screens.
• Voice prompts and voice recordings.
• Historic GPS and precise vehicle location data.
Just like data generated from an internet user’s browsing or online shopping history, data generated from vehicles is incredibly valuable to manufacturers and third parties integrating consumer-friendly technology. The generation and mining of this data has generally not gotten the same level of public attention as internet browsing or cell phone data, but it does need to be treated similarly by the controllers and processors of that data to make sure that the applicable privacy laws are not violated. Given the size and sophistication of modern automotive manufacturers operating in the United States, they are certainly cognizant of their obligations toward consumer online privacy stemming from domestic legislation like the California Consumer Privacy Act (CCPA), California Privacy Rights Act (CPRA), Virginia Consumer Data Privacy Act (VCDPA) and international legislation like the European Union’s General Data Protection Regulation (GDPR). A quick glance at most of their online privacy policies will confirm as much, but some manufacturers still have room for improvement in how they acknowledge their use of data generated by their vehicles.
To be fair to the manufacturers, the current body of applicable privacy law does not address data generated by vehicles as clearly as it could or should. Although tighter legislation could potentially decrease the commercial value of data if it restricts how that data can be used, more coherent legislation can have the beneficial effect of providing clarity to companies so that they can structure their use of data in ways that limit their exposure to lawsuits by consumers and fines by regulatory agencies.
The CCPA and CPRA define personal information as any information that directly or indirectly identifies relates to, or describes a particular consumer or household or is reasonably capable of being associated with or could reasonably be linked to a particular consumer or household. This includes geolocation data. The VCDPA similarly defines personal information as any information that is linked or reasonably linkable to an identified
or identifiable natural person (where an identified or identifiable natural person is a person who can be readily identified, directly or indirectly). Continuing the theme, the EU’s GDPR defines personal data to be any information relating to an identified or identifiable natural person (data subject). An identifiable natural person is one that can be identified, directly or indirectly, by reference to an identifier, such as name, ID number, location data or online identifier.
Focusing only on vehicle information data, it does not take much imagination to see how historic GPS and precise vehicle location data could be associated with a particular consumer or household. Even if the data is anonymized so that the driver’s name is not connected to the vehicle, that data will clearly show where the driver lives and works based on where it is regularly parked and driven during certain times of the day. The very nature of that location data makes it nearly impossible not to
Law enforcement agencies and the courts are beginning to grapple with the complexity of constitutionality questions surrounding the use of precise geolocation recordings.
be associated with or linked to a particular consumer or household. Despite the hassle and potential confusion of having to cross-reference multiple legislative acts and bodies of law, the good news for automotive companies is that the definitions of “personal information” are uniform in their inclusion of and applicability to vehicle location history.
Given the sensitivity of location data that shows where individuals live, work, travel, and spend their free time, companies need to be keenly aware of the risks of running afoul of privacy laws through their use of that data or failure to adequately protect that data. Under the CCPA, CPRA and VCDPA the respective states’ Attorneys General can bring actions for civil penalties of up to $7,500 per violation if the acts were intentional (e.g. selling data in violation of their own privacy policy or the opt-out requests of their customers). The GDPR likewise allows its enforcement authorities to bring administrative fines of up to 20 million euros or 4 percent of global revenue, whichever is higher.
To give an example of the risks to companies for inappropriately selling location data and running afoul of privacy laws, in February 2020 the FCC (under Republican leadership) proposed $200 million in fines to Verizon, AT&T, T-Mobile and Sprint for sharing their customers’ data in violation of the Telecommunications Act. While that amount of money is certainly substantial, some lawmakers in Washington, D.C. thought it was “comically inadequate” when compared to the $350
billion in combined revenue those four companies had in the previous year. Given the value and quantity of data being generated by vehicles and the overall earnings by automotive manufacturers, they too should be focused on avoiding the types of fines being slammed on other industries for using and sharing data inappropriately. Ford, Toyota and Hyundai (to name just a few) all have privacy policies on their respective websites that acknowledge their collection of precise vehicle location information over time. Those privacy policies also disclose the fact that vehicle location information may be shared or sold for marketing or analytics purposes. While sharing this information is not per se a violation of consumer privacy statutes, automotive companies must ensure that their practices adhere to the requirements of applicable laws if they wish to avoid the types of penalties levied upon Verizon, AT&T, T-Mobile and Sprint.
Precise historical vehicle location data has great value to other parties as well – law enforcement. While the previously discussed privacy laws are designed to limit or restrict the disclosure of personal information, automotive companies may inevitably find themselves in situations where they are required to disclose that data in cooperation with criminal investigations. Law enforcement agencies and the courts are beginning to grapple with the complexity of constitutionality questions surrounding the use of precise geolocation recordings. Analogies are being made to the use of cell phone location data to retroactively track a suspect’s movements. A federal court in Illinois made just such a comparison in 2019 when it held that it was unconstitutional for the police to obtain a vehicle’s location information from a third party without a warrant and attempt to use it against the driver of that vehicle. However, in May of 2020 the Ninth Circuit Court of Appeals held that a criminal defendant had no reasonable
expectation of privacy in his movements as revealed by the historical location data of his rental vehicle after failing to return the vehicle by the contract due date. That defendant therefore lacked standing to challenge the warrantless search of the vehicle location database that contained evidence leading to his arrest.
In October of 2020, the same federal court in Illinois held that there was probable cause to issue a search warrant for cell phone geofence location data held by Google in the investigation of a string of arsons. Law enforcement wished to obtain Google account identifier and subscriber information for any device that happened to be located within the specific places and timeframes where the arsons occurred. The court stated that there was probable cause that evidence of the crimes would be located at Google because location data on cell phones at the scene of the arsons and the surrounding streets could provide evidence on the identity of the perpetrators and witnesses to the crimes. The court was willing to grant that search warrant even where there was no direct evidence to suggest that the perpetrators or witnesses
would have had cell phones on them at the time.
As for automotive companies, the precise and historic vehicle location data they now possess could provide the exact type of evidence that law enforcement sought from Google. Automotive companies need to be prepared to handle similar requests and warrants for data.
Nothing in this article constitutes legal advice. If you have a question about data privacy laws may apply to you or your business practices, you should contact a qualified attorney.
Christian Wolgemuth is an associate in Litigation and Privacy & Data Security practice groups in McNees Wallace & Nurick. Prior to joining McNees and the legal industry, Christian had a successful career as a cybersecurity consultant for some of the world’s largest consulting firms. He takes pride in helping clients of all types overcome complex mixes of legal and technical challenges on their way to success. Reach him at cwolgemuth@mcneeslaw.com
JEROEN OUWEHAND & THAIS GARCIA CLIFFORD CHANCE
Jeroen Ouwehand and Thais Garcia, partners with Clifford Chance, are members of the firm’s ESG Board. Ouwehand, who is the firm’s senior partner serves as the ESG Board’s chair. Here, they discuss the growing scope and influence of ESG developments, what it means for businesses worldwide, particularly around environmental issues, and the important role general counsel play in the picture.
CCBJ: Are environmental, social and corporate governance factors (ESG) a risk or an opportunity for businesses out there?
Jeroen Ouwehand: Both a risk and an opportunity, which explains why ESG has really risen to the top of the agenda for many general counsel (GC) and boards of directors.
Companies are increasingly aware that a failure to address ESG matters can be detrimental to their business, both financially and reputationally. There’s a tidal wave of investors, employees, customers and stakeholders putting pressure on companies to drive for a more sustainable future, environmentally and socially, organized through good governance.
Risk mitigation is important, but at the same time, ESG creates tremendous opportunities for businesses. Look at investment funds for example: S&P Global has recently reported that in the first 12 months of the COVID-19 pandemic, many large investment funds with ESG criteria outperformed the broader market.
What else is driving organizations to prioritize ESG, particularly around environmental matters?
Thais Garcia: Public policies are a key driver behind
this increased focus on ESG, particularly when it comes to the environment. It is very interesting to see the different policies that governments across the world are implementing and how much the agenda changes depending on which party has power.
For instance, the Biden-Harris administration has made it clear from day one that tackling the climate crisis is a priority. At the Climate Change Summit earlier this year, President Biden declared, among other things, that the United States would cut its global warming emissions by at least half by the end of the decade.
Public policy can accelerate the pace of change. There is no question that entire businesses and industries are impacted by these policies, and they in turn help shape the businesses of the future. Here’s a concrete example from the International Climate Finance Plan announced by the Biden-Harris administration at the aforementioned summit: the Development Finance Corporation (DFC) will now update its development strategy not only to include climate for the first time but also to make investments in climate mitigation and adaptation top priorities. They’re committed to scaling back public investments in carbonintensive fuel and fossil-based energy. That will also apply across the spectrum of other agencies and entities, with a goal of transitioning the portfolio to net-zero emissions by 2040. This will release calls for applications for climate-focused investment funds and other climaterelated investments. Two years from now, in 2023, at least one-third of all of its investments should be linked to addressing the climate crisis. This creates a new wave of opportunities for climate-focused businesses.
At the same time, we see legislative initiatives going in the opposite direction, such as the two bills that were recently advanced by the Texas Legislature in an attempt
Being a purpose-driven business is actually good for the bottom line.
–Jeroen Ouwehand
to protect the state’s oil and gas industry from efforts to reduce greenhouse gas emissions. The bills require state entities – including state pension funds – to divest from companies that cut ties with or boycott fossil fuel companies. The proposed legislation essentially pushes back at investors that have pulled financial support for the oil industry in an effort to curb carbon emissions that contribute to climate change.
Ouwehand: As Thais suggests, the pace of progress is not the same in every country and region, but overall we have seen many developments in the fight against climate change and environmental degradation.
The European Union (EU) is still driving the ESG movement globally at the moment, particularly when it comes to climate change. Europe is determined to become the first climate-neutral continent. The goal is to achieve that mark by 2050, and the EU is driving that agenda through compulsory requirements such as the Sustainable Finance Disclosure Regulation, which lays down harmonized rules for financial market participants and financial advisers on transparency with regard to the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes. The European Commission recently unveiled a number of proposals under the "Fit for 55" initiative that aim to help it achieve the EU's new target of a 55 percent reduction in greenhouse gas emissions by 2030 (against 1990 levels). One such proposal is a Regulation on a Carbon Border Adjustment Mechanism (CBAM) to deal with the long-
standing problem of 'carbon leakage' that impedes the EU's decarbonisation plans, and protection for European firms against lightly regulated rivals; a regulation on imports which would mean foreign companies would pay a levy to sell polluting products to the EU. Other EU requirements include a provision about sustainabilityrelated information with respect to financial products, and the EU Taxonomy, a classification system established to clarify which investments are environmentally sustainable, in the context of the European Green Deal.
In China, while historically we have seen relatively few regulatory interventions when it comes to the environment, they’ve announcement net-zero targets for 2060, which is huge. Japan has pledged to reach net-zero by 2050. If we couple that with the return of the United States to the Paris Agreement and some of the new policies of the Biden-Harris administration, there is just so much momentum, and rightly so. The environment is the biggest issue of our generation.
How is your firm positioning itself to be at the forefront of some of these environmental challenges?
Ouwehand: With regard to public policies, at the World Economic Forum this year, I spoke at the Greening Trade panel, and we announced that Clifford Chance would be working with the World Economic Forum on the Climate Trade Zero Project. We are interviewing businesses globally to really understand what obstacles and policy changes are needed for them to achieve their net-zero commitments and climate goals. We’re focused on obstacles and policy changes, and more specifically on trade obstacles and how trade policies can help them achieve those targets.
We are also working with the International Human Rights and Business Organization to develop policies and a white
paper around Just Transition, a framework developed by the trade union movement to encompass a range of social interventions needed to secure workers’ rights and livelihoods when economies are shifting to sustainable production, primarily combating climate change and protecting biodiversity.
As to our own commitments, we have committed to becoming net-zero by 2030. We are also a founding member of the Net Zero Lawyers Alliance.
Garcia: We have been helping our clients design and implement net-zero strategies for companies and carbon offsetting (many were firsts of their kind), and we’ve assisted clients with managing shareholder activism around climate.
We have also been very active in helping clients navigate standards and requirements across the globe in relation to sustainability and ESG reporting. It’s a complex area for GCs and boards to navigate, because there are numerous different frameworks. It is really important for companies, especially those with cross-border operations, to approach these matters from a global perspective.
ESG carries quite a broad definition. Beyond environmental, what other topics you are discussing with your clients?
Ouwehand: The social (S) aspects of ESG are at the forefront of many GCs and boards’ minds. The S really focuses on how a company manages its relations with its stakeholder groups – its employees, suppliers, customers and the communities in which it operates. It broadly encompasses areas such as business and human rights, as well as corruption, transparency, supply chain management, consumer protection issues, investments in local communities, labor and employment issues, and obviously diversity, equality and inclusion. As we emerge from the pandemic, there’s also a lot of concern around public health, mental health, social justice and economic stability. These are all areas that are not new, obviously, but there’s a big spotlight on them right now, and that will continue.
An active example is our current work for extractive sector multinationals on the management of human rights risk within business relationships through contractual provisions – this includes guidance for the
It’s a complex area for GCs and boards to navigate, because there are numerous different frameworks... especially those with cross-border operations, to approach these matters from a global perspective.
–Thais Garcia
business on use of contractual clauses and issues in negotiations. All of this is also relevant in the context of Just Transition, which is driving the energy transition in a way that also respects human rights. We think Just Transition is becoming an increasingly important theme and trend, and rightly so.
We are also advising private-equity firms, manufacturers and other businesses on their approach to business and human rights in due diligence and management of portfolio companies or targets once acquired. Relating directly to people – we advise on reporting requirements for the Gender Pay Gap regime, internal investigations into human rights abuses in supply chains, risk mapping as it relates to forced labor, and we provide counsel in the context of operation expansion and expropriation or relocation of local communities.
Garcia: I would say the intersectionality between the E, the S and the G is a big topic. The G – governance – is often the piece that brings the puzzle, the E and the S, together. There’s an increased focus lately on developing management structures to ensure that good governance is in place, including good ethical standards as well as a focus on corporate responsibility.
Companies are under high scrutiny these days and boards and GCs need to be prepared to manage that. More and more, we’re advising clients on the full spectrum of governance-related issues, from compliance reviews to implementing corporate governance structures and crisis management. Corporate management of social-related issues, including human rights, employee well-being and community relations, as Jeroen mentioned earlier, is a key part of that.
Ouwehand: Another element of ESG that I find particularly interesting that permeates all of these issues is corporate purpose and ethics. There’s been a significant amount of discussion around whether corporations must have a defined purpose and set of values, beyond just profit generation, that will guide their governance, decision-making and long-term strategy.
This discussion around purpose and profit is sometimes framed as this sort of dichotomy, which I believe is actually a false dichotomy. It’s suggested that businesses have to choose: It’s either purpose or profits, but actually there’s plenty of evidence that having a clear purpose, and being a purpose-driven business, is good for the bottom line as well. It’s good for business.
Over the past months I’ve been interviewing board members from many different businesses, as well as representatives from nongovernmental organizations (NGOs), governments and academia, about business ethics and purpose. Because of the pandemic, many businesses have really been looking in the mirror, and as we know, this is also part of a trend whereby many businesses are moving away from a purely shareholderdriven model to a larger stakeholder model.
You both mentioned risks earlier – what other trends should GCs be thinking about as it relates to ESG?
Garcia: The rise in ESG litigation and shareholder activism is a growing risk for businesses across a range of sectors. We are seeing investors begin to pursue claims against companies for inaccurately representing their ESG credentials or for failing to manage and disclose climate change and other ESG risks.
Shareholder activism as it relates to ESG is also on the rise. We have just seen two significant climate change–related votes take place at the general meetings of ExxonMobil and Chevron. At ExxonMobil, a majority of shareholders selected at least two of the four directors nominated by the activist hedge fund Engine No. 1, which claimed that the company faces an “existential risk” because of its focus on fossil fuels. It was the first time the company has faced a contested shareholder vote of this nature. Meanwhile, Chevron’s shareholders voted for a resolution calling on the company to substantially reduce its Scope 3 emissions.
Ouwehand: Regarding litigation, another interesting trend is NGOs using litigation in efforts to combat climate change and protect human rights, often as part of a strategy to call attention to these issues and drive legislative and regulatory changes.
In Germany, a group of German activists, backed by NGOs including Greenpeace and Germanwatch, challenged Germany’s Climate Change Act. The plaintiffs invoked the “Right to a Future” and argued that Germany’s climate change targets to reduce CO2 emissions by 55 percent by 2030 were too low. In another landmark ruling, Germany’s Federal Constitutional Court held earlier this year that certain provisions of the act were
indeed incompatible with fundamental constitutional rights, that the reduction targets provided for in the Climate Change Act were imbalanced as they shift major reduction burdens to the future, which could result in a considerable limitation on the freedom of future generations. In response, the German cabinet has approved a reform of the Climate Change Act with a new target of a 65 percent cut to CO2 emissions.
There is another very interesting case brought by NGOs and other individual claimants that was recently ruled on by the District Court of The Hague. In a landmark judgment on May 26 of this year, Royal Dutch Shell (RDS) was ordered by the District Court of The Hague to reduce its CO2 emissions by 45 percent by 2030, as compared with 2019 levels. This is the first time that any court has ordered a company to reduce CO2 emissions. The judgment may have significant consequences for companies with significant CO2-emissions that have a link to the Netherlands. This is clearly an issue for companies headquartered in the Netherlands, but it cannot be ruled out that this judgment might affect other companies that have a clear connection with the country as well. Also, we may well see other similar cases brought in other jurisdictions on the back of this Dutch Shell judgment. Companies doing business in different regions need to prepare themselves; they may need to adapt their processes to stricter requirements and accelerate the transition sooner than they think.
Also recently, climate organization Urgenda announced a new case against the state of the Netherlands, claiming the forfeiture of penalties for the alleged failure of the state to live up to an earlier judgment obtained by Urgenda in which the state was held to reduce carbon emissions in the Netherlands by 25 percent by 2020 compared to 1990. This judgment was the first of its kind
The environment is the biggest issue of our generation.
–Jeroen Ouwehand
and got a lot of international attention. Urgenda has also announced that it intends to address the European Court of Human Rights in relation to this matter.
Garcia: The point Jeroen is making is a very important one. Businesses with cross-border operations will face increasingly complex and sometimes very different requirements. Even though climate-related litigation has had limited success in the U.S. federal courts to date compared to what we are seeing in Europe, companies should prepare themselves with a comprehensive strategy for adapting to this ever-changing environment, and that applies across the spectrum of ESG.
How can GCs help their companies navigate this new ESG environment?
Ouwehand: ESG is here to stay. But the E, the S and the G are constantly evolving, so the way companies and their GCs approach these issues also needs to evolve. They must now look at the full spectrum from A to Z of ESG and the intersectionality between the various ESG factors.
More and more, I see the focus on ESG moving away from a mere risk-management exercise. ESG is taking center stage and becoming a key component of companies’ value-driven propositions, and GCs have a role to play in driving such a strategy forward. I see that across all sectors and jurisdictions.
Garcia: As ESG evolves, this new reality means that the role of general counsel is also evolving. The GC’s role
has always encompassed identifying and dealing with risks, conflicts of interests, whistleblowing and the like. However, as ESG evolves, coming back to Jeroen’s earlier point, there is an increasing tendency for GCs to be expected to be attuned to the broader spectrum of ESG matters, and often to act as moral arbiters, while also focusing on the technical, legal and regulatory issues. It’s a very interesting shift.
We also have to be mindful that not every company is at the same stage of development when it comes to ESG, or may not have dedicated ESG functions or the resources necessary to really invest in the full spectrum of ESG, which puts even more burden on GCs. Prioritizing certain elements of ESG and developing a strategy around these issues is key.
Jeroen Ouwehand is a global senior partner with Clifford Chance. He is an experienced disputes lawyer and, until recently, led the firm's European Litigation & Dispute Resolution practice. Ouwehand specializes in financial, commercial and corporate litigation and arbitration and has ample experience in acting in cross border disputes. Reach him at jeroen. ouwehand@cliffordchance.com
Thais Garcia is a member of the Clifford Chance Latin America Group. She specializes in crossborder M&A, restructurings and joint ventures, with a particular focus on the Latin America and US markets. Garcia regularly represents private equity houses, pension funds, infrastructure funds and other investors in their investments in the region. Reach her at thais. garcia@cliffordchance.com
With the benchmark London Interbank Offering Rate, or LIBOR, scheduled for replacement at the end of 2021, banks and other market participants in the United States and United Kingdom are preparing for the transition. McGuireWoods partners Donald Ensing, Jennifer Kafcas, Susan Rodriguez, James Gelman, and Barlow Mann are part of the firm’s LIBOR Transition team helping financial institutions with their transition efforts. They assess where the transition stands and key issues facing market participants in the months ahead.
CCBJ: Where does LIBOR transition stand and how prepared is the financial industry for this shift?
Jennifer Kafcas: LIBOR transition efforts are well underway at most financial institutions and other entities impacted by the transition, but preparedness varies by product type and jurisdiction. The administrator/publisher of the IBOR rates (the ICE Benchmark Administration), and its UK regulator (the UK Financial Conduct Authority, or FCA) confirmed in March of this year that most versions of U.S. dollar (USD) LIBOR (the most commonly used reference rate) will no longer be published after June 30, 2023, but that IBOR rates in all other currencies (Pound Sterling (GBP), Euro (EUR), Swiss Franc (CHF) and Japanese Yen (JPY)) will no longer be published after December 31, 2021. For this reason, we are seeing most institutions really focusing on transitioning multicurrency products completely this year with transition for other USD LIBOR products planned for this fall and next year.
Susan Rodriguez: In the U.S., regulators have pushed financial institutions to focus on LIBOR transition efforts by announcing that examiners will be evaluating
progress and will deem it a safety and soundness issue if financial institutions come up short in their planning efforts. In fact, in March 2021, the Federal Reserve in its Supervision and Regulation Letter encouraged examiners to take supervisory action if an institution is not ready to cease issuance of new LIBOR-based contracts by the end of 2021. Financial institutions have heeded this warning and most are on track, but we have seen challenges with deciding on appropriate replacement rates and, for some, dealing with the practical challenges of amending agreements.
What trends are you seeing on replacement rates in the marketplace?
Kafcas: In the UK, the FCA has been very active in advancing a replacement reference rate for contracts denominated in GBP, so the UK market has been moving earlier and more uniformly to replace GBP LIBOR with the Sterling Overnight Index Average (SONIA). The FCA has required: (i) all financial contracts denominated in GBP entered into after March 31, 2021 to reference SONIA and not GBP LIBOR, (ii) that all legacy GBP LIBOR products should be converted from LIBOR to SONIA (or have robust fallback paths in place) by September 30, 2021 and (iii) financial institutions to be fully prepared for the end of GBP LIBOR by December 31, 2021.
Donald Ensing: Progress in the USD LIBOR cash products market has been more of a mixed bag. The Alternative Reference Rates Committee (ARRC) recommended the Secured Overnight Financing Rate (SOFR) as the replacement benchmark rate for USD financial instruments, and the primary U.S. regulatory authorities monitoring LIBOR transition (the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System and the Federal Deposit
Insurance Corporation (FDIC)) require that USD financial instruments should have a “robust” fallback path to a specific replacement benchmark– but without directing the use of any particular replacement benchmark.
Several product types have adopted SOFR relatively quickly. For example, the markets for floating rate notes (FRNs) and government mortgaged backed securities have already seen robust use of SOFR as a reference rate. But the commercial loan market has lagged behind, largely because SOFR is different than LIBOR in two primary ways. First, SOFR is a “risk free” rate, meaning it is based on overnight borrowing secured by U.S. treasury securities, and so in times of economic stress reacts differently than LIBOR, which is based on unsecured interbank borrowing for a forward-looking term, and is sensitive to the borrowing bank’s credit profile. Second, until recently, it seemed unlikely that a forward-looking term variety of SOFR (i.e., flexibility to lock a rate for a forward-looking 30, 60 or 90 day period, as with LIBOR) would be available by the end of 2021 due to insufficient trading in SOFR futures and swaps, which results in various challenges in “operationalizing” SOFR as a replacement for LIBOR.
Barlow Mann: And, to add to that, although the ARRC continues to recommend SOFR, market demand for a credit sensitive alternative to SOFR has sparked rapid advancement over the last year or so in the development of competing benchmark replacement options. All of these SOFR competitors offer forward-looking term options, including: Bloomberg’s Short Term Bank Yield Index (BSBY), the ICE Benchmark Administration’s ICE Bank Yield Index, IHS Markit’s Credit Inclusive Term Rate and the American Financial Exchange’s AMERIBOR.
BSBY, in particular, has seen early uptake in the market, with a number of major financial institutions issuing floating-rate notes, bank notes and certificates of deposit linked to the rate. We also understand that there are a number of deals pending in the syndicated and bilateral loan markets that use BSBY as a reference rate. However, certain regulators including Treasury Secretary Janet Yellen and Securities and Exchange Commission chair Gary Gensler have publicly expressed concerns about the use of credit sensitive replacement rates such as BSBY and the others mentioned previously.
The progress by these alternative benchmark rate options appears to have accelerated the development of a forward-looking term rate for SOFR as well. In late April CME Group announced the publication of 1, 3 and 6 month SOFR term rates, and in a May 21 press release the ARRC announced that it has selected CME Group as the administrator it plans to recommend for term SOFR, noting that “a recommended term rate is now in clear
sight.” And on June 8, 2021, the CFTC announced its “SOFR First” initiative, recommending that interdealer brokers switch U.S. dollar swap trading conventions from LIBOR to SOFR by July 26, to better establish the forward curve for forward looking term SOFR rates. However, the ARRC also has stated that it will recommend best practices for the use of term SOFR, and it is not clear yet which product categories the ARRC is likely to recommend for term SOFR use.
James Gelman: The reception for SOFR in the business loan market (outside of large syndicated credit facilities, where SOFR seems to be well established as a fallback rate) has been less than enthusiastic, and some large financial institutions have publicly expressed interest in endorsing options alongside SOFR, such as BSBY, which is getting substantial traction in recent weeks, and AMERIBOR. Some banks have questioned the clarity of regulatory guardrails around USD LIBOR between December 31, 2021 and June 30, 2023 – can existing USD LIBOR loans be extended or renewed after the former date so long as they expire before the later date?
What is clear, however, is that banks will need to start offering options other than USD LIBOR in the second half of 2021, and corporate borrowers will need to evaluate the pros and cons of SOFR and its alternatives.
What is happening with LIBOR transition in the derivatives market?
Kafcas: With respect to the derivatives market, ISDA has amended its 2006 ISDA Definitions via their 2020 IBOR Fallbacks Supplement and Protocol. The Supplement allows market participants to incorporate ISDA’s fallbacks into their future trades by incorporating the amended 2006 ISDA Definitions, and
the Protocol allows adhering parties to incorporate the fallbacks into their legacy trades. For sterling LIBOR, the rate will fallback to the term adjusted SONIA rate plus the spread relating to sterling LIBOR, as published by Bloomberg. For USD LIBOR, the rate will fallback to the term adjusted SOFR plus the spread relating to USD LIBOR, as published by Bloomberg. Therefore, the path in the derivatives market is well-established.
In addition, ISDA recently published its 2021 ISDA Definitions which consolidates over 70 supplements from the 2006 ISDA Definitions into a newly main book. The 2021 ISDA Definitions also include risk-free rate floating rate options.
What are the greatest obstacles financial institutions and companies are facing as they prepare for the transition away from LIBOR?
Mann: Financial institutions must ensure that their systems have been updated to handle the transition to risk-free rates. Currently, some financial institutions have systems set up that are capable of calculating their cash flows based on a term rate (i.e., LIBOR). Because they are overnight rates, risk-free rates do not have this same term structure, which means that financial institutions must ensure that their systems are set up to calculate cash flows on an overnight basis. While risk-free term rates are beginning to emerge, the jury is still out on how these will play out and for what categories of products these terms rates will be recommended. Borrowers face a similar challenge – corporate treasury groups will need time to adjust their own systems to the LIBOR alternatives being offered by their banks and lenders, and until the banks settle what those alternatives look like, treasurers are in a wait-and-see mode, and will need to catch up once their options become more clear.
Ensing: One of the biggest obstacles that financial institutions are facing in these latter stages of the LIBOR transition is how to deal with the transition of their legacy LIBOR-referencing contracts. The legislation passed in New York, and the legislation being considered at the federal level, address a relatively small subset of contracts that are difficult to amend. But many financial institutions are party to a huge number of contracts that fall outside the scope of those legislative fixes. The lack of consistency across financial products regarding fallback language and amendment procedures means that there is no “one size fits all” approach. Financial institutions have been very active over the last year or so in analyzing their legacy contracts, and will be devoting significant resources over the coming 18 months to efficiently and effectively transitioning them. In the work we’ve done with our clients on this, we’ve seen AI tools as helpful, but by no means a silver bullet. It’s a huge task for bank legal, treasury, and risk departments.
Gelman: With respect to multicurrency facilities, financial institutions need to impress upon borrowers that the clock is running out. No one should expect that publication of the LIBOR rates in non-USD currencies and the 1-week and 2-month USD LIBOR will be extended.
You had mentioned that the Federal Reserve provided guidance to supervised financial institutions to help them assess progress in preparing for the LIBOR transition. What will Federal Reserve examiners be scrutinizing when they assess institutions’ transition plans?
Rodriguez: Although it is likely we will see more regulatory guidance come out this year on LIBOR Transition, the Federal Reserve has published guidance
that highlights some of the issues examiners may be reviewing when evaluating transition plans, including:
• Financial exposure measurement and risk assessment: Financial institutions should identify where they have LIBOR exposure and risk. Most institutions appear to be nearing completion of their assessments.
• Operational preparedness and controls: Financial institutions should also think about internal and vendor-provided systems that use or require LIBOR and determine what adjustments will be needed upon the cessation of LIBOR, and of course, establish a backup plan in case a system fails.
• Legal contract preparedness: All LIBOR-referencing contracts should be identified (sometimes, we refer to that as “bucketing”) and develop a plan to remediate any contracts impacted, that is modify those contracts prior to LIBOR’s cessation. Most institutions have begun their remediation efforts but there is still much work to be done to ensure a successful transition away from LIBOR.
• Communication: Institutions should not forget about key communications with clients, counterparties, and any other internal and external stakeholders about the LIBOR transition. Most of the larger institutions are implementing training for employees on the LIBOR transition, including developing and implementing a plan to communicate the implications of the transition externally.
Oversight: This probably goes without saying, but institutions will want to keep their senior management and regulators proactively apprised of their LIBOR transition plans and provide regular updates. This is important to stay on top of emerging issues and avoid and mitigate future litigation and enforcement risks.
Cryptocurrency assets now top $1.5 trillion globally, attracting a wave of cyber crime.
Cybertheft of assets held in Bitcoin and other cryptocurrencies is escalating. It’s a target-rich environment: Cryptocurrency assets now top $1.5 trillion globally. The rise in Bitcoin prices this year and the heightened interest in cryptocurrencies from large institutions announcing their intentions to deal in these new currencies have raised the stakes. As more mainstream businesses find themselves drawn into cryptocurrency transactions, security and insurance coverage issues will have to be taken into account.
In addition to targeting individuals, recent thefts of cryptocurrency executed by hackers have gone after companies in finance, energy and other industries. An alert published last summer by the Cybersecurity and Infrastructure Security Agency (CISA) warned that
“North Korea’s widespread international bank robbery scheme that exploits critical banking systems may erode confidence in those systems and presents risks to financial institutions across the world.”
FBI, CISA and Treasury Department Warnings About “AppleJeus”
In an advisory issued on February 17, 2021, the Federal Bureau of Investigation, together with CISA and the Department of Treasury, highlighted the threat to cryptocurrency posed by North Korea’s “AppleJeus” code exploit. These actors, according to the report, “are targeting cryptocurrency exchanges and accounts to steal and launder hundreds of millions of dollars in cryptocurrency.” There are variations on the scam, but a common tactic uses a copy of a legitimate-sounding cryptocurrency trading platform or “wallet” to steal credentials and other vital information from victims in the United States and elsewhere. According to the
Cyberthieves have targeted organizations for cryptocurrency theft in more than 30 countries.
advisory, this scam has targeted organizations for cryptocurrency theft in more than 30 countries during the past year alone. It is likely that these actors view modified cryptocurrency trading applications as a means to circumvent international sanctions on North Korea – the applications enable them to gain entry into companies that conduct cryptocurrency transactions and steal cryptocurrency from victim accounts.
Another malware trap involving cryptocurrencies is a program known as “Union Crypto trader.” According to CISA’s analysis, “The program … loads a legitimate-
Joshua Gold is a shareholder in Anderson Kill’s New York office and chair of Anderson Kill’s Cyber Insurance Recovery Group. He regularly represents policyholders in insurance coverage matters and disputes concerning arbitration, time element insurance, electronic data and other property/casualty insurance coverage issues. Reach him at jgold@andersonkill.com
Stephen D. Palley is a partner in the Washington, D.C. office of Anderson Kill. He is co-chair of the firm’s Technology, Media and Distributed Systems Group and a member of the Insurance Recovery Group. Reach him at spalley@andersonkill.com
looking cryptocurrency arbitrage application – defined as ‘the simultaneous buying and selling of securities, currency, or commodities in different markets or in derivative forms to take advantage of differing prices for the same asset’ – which exhibits no signs of malicious activity. … When launched, it collects the victim’s host information … , combines the information in a string that is MD5 hashed and stored in the auth signature variable before exfiltration, and sends it to a C2 website."
According to CISA’s February 17 advisory, companies impacted by the exploit should make immediate contact with law enforcement, along with taking a number of technical steps outlined in detail therein. CISA also recommends these “Pro-Active Mitigations”:
• Verify the source of cryptocurrency-related applications.
• Use multiple wallets for key storage, striking the appropriate risk balance between hot and cold storage.
• Use custodial accounts with multifactor authentication mechanisms for both user and device verification.
• Patronize cryptocurrency service businesses that offer indemnity protections for lost or stolen cryptocurrency.
• Consider having a dedicated device for cryptocurrency management.
Insurance markets are rolling out dedicated insurance products specifically meant to cover cryptocurrencies. Substantial limits may be available for business with assets in cold storage (under a specie policy) or assets in hot wallets.
Cold storage refers to cryptocurrency that is kept secure using offline storage, not connected to the internet. This will typically will involve a hardware device, but it could also include private keys written on a piece of paper and kept in a safe. Specie policies were originally created to cover things such as precious metals, diamonds or currency, kept in bank vaults. The coverage has been innovated in recent years to provide similar protection for crypto assets in cold storage. Large cryptocurrency exchanges and custodians may secure this coverage on their own behalf for client assets. Cryptocurrency custody and trading platform BitGo, for example, has reported that it maintains $100 million in specie coverage.
Crime policies are typically used to cover assets in hot wallets, which is to say assets that are available online,
via the internet. Crypto exchange Coinbase reported in 2019 that it had secured $255 million in coverage for hot wallet assets, placed through Lloyds syndicates.
Individual corporate policyholders who custody their own cryptocurrency may also have coverage under their dedicated cyberinsurance and commercial crime coverage policies, as well as potentially under personal lines insurance policies. However, this is not an absolute certainty, and any company that has a position in crypto assets and intends to use self-custody should carefully review their own policies and determine whether their risk-management philosophy makes a third-party custodian with well-developed security protocols and coverage in place a safer approach, albeit one that provides less control over the assets themselves.
While some insurance companies have taken the position that cryptocurrency is not “personal property” subject to coverage, this argument is contrary to established principles of insurance policy interpretation. Questions may also arise regarding valuation of a loss and the amount to be reimbursed –that is, whether at the spot price of the currency at the time of the loss, the time of acquisition, or the time the claims payment is made. Here, the correct position may turn on facts, circumstances and policy language, but given the volatility in crypto markets, reaching the right answer is ever more important for a policyholder who has suffered a significant loss.
As with all insurance products, review the fine print and work with a seasoned insurance broker. Certain insurance companies will not hesitate to apply the fine print in a manner that frustrates, if not completely undermines, the whole point of purchasing the insurance in the first place.
Jennifer Will, member with McNees Wallace & Nurick, brings to light the challenges that businesses faced with unions during the pandemic, as well as any effects that this brought to a business’s ability to bargain.
CCBJ: What were some of the unique challenges that businesses with unions faced during the early days of the COVID-19 pandemic?
Jennifer Will: Wages, hours and working conditions are mandatory subjects of bargaining under the National Labor Relations Act. Businesses able to keep running because they were deemed “essential” or could implement all of the CDC safety protocols or were able to transition to a work-from-home model - still received demands to bargain over things like safety, PPE, and hazard or hero pay.
Did employers have to bargain with their unions over all of those things – hazard pay and PPE?
Not necessarily. Many employers determined that they could continue doing business within the parameters of their Collective Bargaining Agreement (CBA) with the Union.
Parties already with a CBA that set forth employee wages, hours, safety and remote working could not be compelled to come to the table just because the unions or the employees wanted more money or different working conditions.
Still, many employers found themselves unable to follow all CBA provisions and went to the table to bargain voluntarily.
What was bargaining during a pandemic like?
Initially, many businesses wanted to pursue contract extensions and defer collective bargaining for a month or even a year. Others wanted to proceed with bargaining but moved to a virtual platform.
Traditional labor negotiations over a Zoom platform are, well, not ideal. Rather than everyone committing to coming to a conference room for three days to hammer out a successor contract, negotiations dragged on for weeks or months, with shorter sessions that lacked focus and urgency. Where negotiations were live, they were surreal – taking place in giant rooms, with masks and sanitizer, but without the handshake at the end.
What about businesses that did not have unions?
During the pandemic, we saw increased organizing efforts by unions, citing workplace safety concerns as a means of getting employee attention or promises of hazard pay for employees who were being forced to go to work rather than work from home.
Were union organizing campaigns different during the pandemic?
Navigating a business through its first union organizing campaign
executives, in-house counsel and human resources professionals to help implement the strategies necessary to achieve their business objectives while staying in compliance with labor and employment laws. Reach her at jwill@mcneeslaw.com
during a pandemic was no easy task. Where employees were working from home, there was much less “buzz,” and employers may have been blindsided. Large group meetings – where an employer has a great opportunity to address a union’s campaign promises and the company’s feelings on unionization – were impossible during the social-distancing era.
They really are. I have been flying to in-person negotiations since last fall. The masks are starting to come off, and many union business agents admit that the employers really did have employee safety top of mind, even if they were not willing to engage in midcontract negotiations for hazard pay.
We will be feeling them for years, no doubt. The best advice I can offer non-union businesses (that wish to stay that way) is to listen to their employees’ concerns – safety or otherwise. If you don’t listen, a union organizer will. I would also recommend training your managers and supervisors on the right to organize, ensuring that they understand the company’s position on unions. It is vital that managers and supervisors – the people who deal directly with your employees –know the company’s position and understand what they can and cannot say about unions. A manager who says the wrong thing could get the employer embroiled in an unfair labor practice proceeding before the National Labor Relations Board.
JONATHAN SOLOMON FISH & RICHARDSON P.C.
Jonathan Solomon, principal with Fish & Richardson, discusses the state of the cryptocurrency industry – what kinds of technologies his clients are looking to patent, the challenges of obtaining patent protection in this area, and where he sees the industry heading in the future.
CCBJ: How did you get involved with cryptocurrency?
Jonathan Solomon: I started working with blockchain and cryptocurrencies about four or five years ago. My clients were starting to get into using blockchain to make payments, so a lot of my work was focused on making the payment process more secure. My smaller clients are generally looking for the ability to take and process cryptocurrency payments. My larger clients are looking for more general integration of blockchain technology and are trying to figure out nontraditional ways to use it, including technologies such as software distribution and identity verification – although payments certainly remain a huge focus.
How is the cryptocurrency scene changing?
It’s become significantly more diverse. In the past, Bitcoin was pretty much the only major cryptocurrency in use, whereas now you have hundreds of different types of coins and payment devices. As a patent attorney, I have to make sure that I understand the types of coins that are being developed and how the technologies differ, as well as their respective similarities. I’ve also noticed that security is increasingly becoming a main focus of the industry – now that the foundational blockchain technology is in place and working the way it’s supposed to, more efforts are being made to increase the safety of those systems. Lastly, cryptocurrencies are now entering
the mainstream, whereas in the past the interest was limited to a fairly small group of tech enthusiasts. Even with the pace of innovation over the last decade, it’s only within the last year or two that cryptocurrencies have gained widespread popularity among “regular” people. Now it is a regular occurrence to see stories and coinbased discussions all over social media and in traditional news outlets, in addition to the niche discussion boards and sites where they have traditionally taken place.
What technologies are cryptocurrency companies trying to patent?
Many cryptocurrency companies are trying to patent improvements to existing technologies, including faster computing, additional bandwidth, better data storage, tighter data security, and safer authentication that will improve the speed, efficiency and, above all, security of transactions. Now that the technology has matured a bit, companies are also looking to expand blockchain technologies beyond cryptocurrencies, into areas such as software distribution, inventory and supply chain management, and even increasing consumer confidence. For example, one of my clients developed a solution that used blockchain to confirm that the coffee it sold was Fair Trade Certified.
What are the challenges of obtaining patent protection for cryptocurrencies?
Section 101 – subject matter eligibility – remains a major hurdle for companies seeking patent protection for their cryptocurrency technologies. Under current § 101 jurisprudence, simply implementing a traditional solution using blockchain technology is not enough to confer patent eligibility. Applicants must show that they have actually changed the underlying technology
to achieve a specific result. Many of the applications I work with concern solutions that either change how the blockchain works or how the user interacts with it. An understanding of how a client’s solution works – as well as the ability to translate that solution into patent claims that will survive § 101 – is the key to success in patent prosecution for cryptocurrency technologies.
As with any emerging technology, the body of prior art in the cryptocurrency space is rapidly expanding. With delays from filing to publication of typically 18 months in the United States and China, much of the current relevant prior art is hidden. When drafting patent claims, I have to be sure that I have a clear description of the current technology and where it’s going in the next two, three or four years, to allow my clients an ability to adapt their focus on the fly when new prior art pops up, as well as when the technology shifts for further filings.
What is the current state of patent litigation in the cryptocurrency space?
Litigation is very quiet at the moment. Most cryptocurrency patents have been issued only recently, and most companies have patented their own versions of the blockchain, so there hasn’t been a lot of time or opportunities for infringement issues to pop up.
One consideration for future litigation is that detecting and proving infringement can be a challenge due to the distributed nature of cryptocurrency systems. Most blockchain and cryptocurrency solutions are so nuanced and live so deep in the system that it can be difficult to detect what other users are doing with them and whether infringement has occurred just by looking at the end result. There’s often no outward manifestation that would at least raise a suspicion of infringement.
Patent owners may be able to allege divided infringement, but that theory of liability requires the plaintiff to show that one entity directs or controls another entity’s actions or that the entities are part of a joint enterprise.
Further, with operations occurring at multiple nodes across the blockchain, it can be difficult to pursue an infringement claim against one specific actor when no single actor owns the blockchain, particularly depending on the claims as allowed. Patent owners may be able to allege divided infringement, but that theory of liability requires the plaintiff to show that one entity directs or controls another entity’s actions or that the entities are part of a joint enterprise, which could be very difficult to do in this context. In other words, the patents to be litigated need to be expertly written and focused, where possible, on a single actor or controlling entity within the solution.
While there isn’t much litigation activity occurring now, it’s likely that we will see an uptick over the next three to five years as more big players start buying into these technologies.
Are cryptocurrencies being used in the legal profession? If so, how?
I’ve heard of a few firms now accepting cryptocurrencies as payment, but those are very early adopters and tend to be smaller firms. Law firms are famously risk-averse, and cryptocurrency remains quite a risky investment – for example, a single joke on Saturday Night Live can take 20 percent off the value of a cryptocurrency, or a tweet about one currency’s issues from a trusted source can
send that currency’s value falling, while other coins can reap the benefit. With that said, as more major players start to get involved in the cryptocurrency scene, it’s likely only a matter of time before national law firms join in.
It’s hard to say. I think that mainstream acceptance of cryptocurrency will continue to grow, especially because cryptocurrency adopters tend to be an evangelistic bunch. Improvements to the user-friendliness and security of cryptocurrency trading platforms, as well as increased comfort levels around non-fiat currencies generally, which will come with the further normalization of crypto, will also make cryptocurrencies more accessible to mainstream audiences.
Jonathan A. Solomon is a principal at Fish & Richardson P.C., a global intellectual property law firm. He focuses his practice on patent prosecution and portfolio management in a number of technical fields, including computer software, telecommunications, and financial technologies. Reach him at solomon@fr.com
On the patent side of things, we’ll likely see cryptocurrency companies pursuing narrower, more specific applications of the technology, rather than large-scale, seismic shifts, so attorneys are going to be drafting claims that go after relatively small and focused changes. The federal government is almost certainly going to take an interest in this technology going forward, particularly the Internal Revenue Service and financial regulators. The cryptocurrency industry has largely been like the Wild West until now, but it’s highly unlikely that that will continue for long.
KERRY BERCHEM, CYNTHIA MABRY, KENNETH MARKOWITZ, JEFFREY LAZAR KOCHIAN AND KEVIN SCHOTT AKIN GUMP STRAUSS HAUER & FELD LLP
Climate activists' election to Exxon’s board of directors, Chevron’s approval of emissions cuts to its energy products and a court ruling ordering Shell to lower carbon emissions by 45 percent are a series of ESG events presented to the world just weeks ago. What does this have in store for the energy industry?
On Wednesday, May 26, 2021, a series of events transpired that could have long-lasting impacts on the energy industry and which seem likely to accelerate that industry’s evolving responses to environmental, social and governance (ESG) issues. In what is being widely reported as a significant victory for shareholder activists focused on climate issues, Engine No. 1, supported by some of Exxon’s largest investors, gained three seats on Exxon’s board of directors. In addition, a significant majority of Chevron’s shareholders approved a resolution backing a call for the company to cut emissions from the end-use of its energy products. Finally, in what is being characterized as a “landmark” ruling with significant implications for the energy industry and beyond, a Dutch court found that Shell has contributed to climate change and ordered one of the world’s largest energy producers to slash its carbon emissions by 45 percent by the end of 2030.
In what may prove to be a significant development in terms of how climate issues may impact corporate governance more broadly, three directors nominated by Engine No. 1 won seats on Exxon’s board of directors. Engine No. 1 nominated four directors for consideration at the company’s annual meeting of shareholders. Two nominees were elected following the initial vote count during the meeting, while the status of the third nominee was not clear until the company disclosed “preliminary”
voting results in a Form 8-K filed on June 2, 2021. A fourth nominee was not elected. The relatively small investment fund’s efforts were backed by some of Exxon’s largest investors, including BlackRock. As we discussed in February, BlackRock and other large asset managers have been updating proxy voting guidelines and are at the forefront of pushing boards of directors to “address board quality and composition issues, emphasizing its commitment to net zero emissions and climate risk disclosures.” In Exxon’s case, BlackRock, which reportedly owns approximately 7 percent of Exxon’s issued and outstanding common stock, indicated that Exxon’s board needs to “further assess the company’s strategy and board expertise against the possibility that demand for fossil fuels may decline rapidly in the coming decades.” Following the election of its third nominee, Engine No. 1 stated that “Exxon’s future financial stability depends on the company diversifying its operations.”
In another significant ESG-related development for the energy industry, Chevron’s shareholders adopted a resolution requesting the company to slash carbon emissions by consumers of its fuel products. The resolution, which was supported by approximately 61 percent of the company’s shareholders, calls on Chevron to focus on cutting what are known as “Scope 3” emissions, which are emissions generated by the end-users of energy products. The resolution reflects broader efforts by climate-focused activists to compel energy producers to focus on selling fewer products that contribute to climate change, rather than producing energy in a more environmentally friendly manner or producing “cleaner” products.
In what is widely being characterized as a watershed, albeit controversial, ruling, a Dutch court found that Shell has significantly contributed to climate change and ordered the energy company to cut its carbon emissions by 45 percent no later than 2030. The court’s ruling comes shortly after its shareholders approved the company’s “energy transition strategy.” Several media reports characterized that strategy as containing “detailed plans of the company’s targets and actions to reduce emissions and promote a net zero future, including short- mediumand long-term emissions reductions goals, the company’s decarbonization strategy and milestones and its capital allocation plans.” The judge in the case, however, was not persuaded, stating that the company’s transition strategy was subject to too many conditions and not sufficiently specific relative to achieving milestones. While several energy industry observers do not believe the judge’s ruling will survive on appeal, this ruling is likely to cause
market actors to continue evaluating how climate issues present operational, reputational and legal risks to their businesses, as well as reinforcing the need for mitigation strategies relative to those risks. Shell’s CEO recently stated that while it disagrees with the ruling and intends to appeal, it will nonetheless “rise to the challenge” of meeting the court’s ruling and it does not change Shell’s commitment to reducing emissions. Rather, the ruling represents “an acceleration of our strategy…to become a net-zero emissions business by 2050, in step with society’s progress towards achieving the goal of the Paris Agreement.”
Each of these developments may be expected to have significant impacts in the United States, as well as in Europe and the United Kingdom. In the United States, for instance, the impact of these developments, taken together with recent pronouncements by the U.S. Securities and Exchange Commission (SEC) and others, suggests that companies across a wide array of industries need to continue focusing on ESG issues, particularly in areas relating to climate change. The SEC is clearly concentrating on a wide variety of ESG-related issues, having recently launched an ESG-focused web page and announcing that ESG issues are expected to be a point of emphasis for 2021 examinations. Relatedly, as we discussed recently, at the Conference on Market Regulation, SEC Chair Gary Gensler discussed the SEC’s ongoing efforts to develop a robust reporting framework for ESG issues and it has been widely reported that SEC staff and other federal lawmakers are particularly focused on developing more qualitative and quantitative disclosure requirements for climaterelated issues. For instance, congressional Democrats recently reintroduced the “Climate Risk Disclosure Act,”
which is intended to require the SEC to promulgate one or more rules requiring public companies to include disclosures regarding how climate change potentially affects their business operations and how these risks are being mitigated. It is clear from the Exxon board vote that shareholder activists are committed to making a significant push for companies to more aggressively address ESG considerations as part of their broader strategic and commercial decision-making processes.
In addition, across Europe, governments are continuing to expand the scope and applicability of regulations relating to climate risk disclosures as well as announcing new measures. As we discussed in a recent blog post, for instance, the Financial Conduct Authority (FCA) recently launched two consultation papers on new mandatory climate-linked disclosure requirements for FCA-authorized asset managers, certain investment advisors, life insurers, certain pension providers and standard listed companies. Additionally, European energy
companies also continue to face increasing levels of shareholder activism regarding their energy transition strategies consistent with the shareholder activism faced by corporates in the United States. One shareholder activist group, Follow This, was, once again, very active in the annual general meeting (AGM) season this year, proposing climate related resolutions at the general meetings of a number of traditionally oil and gas focused companies which, broadly speaking, called for a more aggressive reduction in emissions. Finally, we also expect to see increasing levels of climate change litigation across Europe targeted at corporates and governments. As a recent post-Shell example, environmental activists have recently launched a claim in the European Court of Human Rights requesting the court to rule that Norway’s drilling for oil in the Arctic breaches human rights–an indication that a new wave of human rights based litigation (as opposed to liability based litigation seeking damages for past actions) may be on the horizon following the Shell decision.
CCBJ sat down with Mike Haven, recently introduced CEO of CLOC, the leading membership organization for legal operations professionals. In this interview, Mr. Haven discusses the future and culture of this highly influential organization.
CCBJ: CLOC has a model of core competencies for gauging the maturity of corporate law departments. As you settle in as the new president of the organization, talk about CLOC’s evolution and its own maturity arc.
Mike Haven: It is a relatively young organization, but the growth trajectory has been off the charts. CLOC 1.0 essentially was us standing up. That started almost 10 years ago as a book club of in-house operations professionals blazing a trail. CLOC became an official
organization in 2016, and that year we hosted our first Institute with five hundred people attending in San Francisco. That was an amazing start. The next year we moved it to Vegas and doubled attendance. In 2018, we doubled attendance in Vegas yet again and added institutes in London and Sydney. That was phase one of becoming an industry-leading organization.
In CLOC 2.0, the last two years under Mary O’Carroll’s leadership, we added a staff and executive director to run CLOC’s day-to-day business. We also added law firm membership, and then brought in the entire ecosystem. These were major leaps forward. Throughout, membership has increased steadily and CLOC is now a well-known and reliable resource for the entire legal ecosystem. It's been a really crazy ride. It shows how much the industry craved the transformation that our members are driving.
Matt Fawcett is a trailblazer. He has been at the forefront of innovation in the legal industry for at least the past decade.
The functional maturity of our field has evolved, and CLOC has evolved along with it. In 2019, we refreshed our original 12 core competencies and released the CLOC Core 12, which better reflect the modern scope of legal operations. They encompass matters of the mind, as I say, such as legal finance management and business intelligence. But matters of the heart are central to all functional areas and will be a focus in the next phase of our development in CLOC 3.0. We have to support progress in diversity, equity, inclusion, belonging, access to justice, and more. We have to show up for our community by keeping these areas front and center. They are critically important to the success of our industry.
You spent part of your career at NetApp, where former CLOC CEO Connie Brenton continues to work. What is it about GC Matt Fawcett’s law department that resonates with legal ops professionals?
Matt Fawcett is a trailblazer. He has been at the forefront of innovation in the legal industry for at least the past decade. When he arrived at NetApp, his first hire was Connie, another trailblazer, and that move in and of itself is a perfect example of how Matt was and is way ahead of his time. Together, Matt and Connie have done so much for our industry. They're not afraid to go first. They're not afraid to experiment. They're not afraid to fail and change course. They're early adopters and they're always innovating. What resonates most is their willingness to share learnings from those experiments and innovations. That sharing culture
has permeated the industry and is fundamental to the success of CLOC and its members. Sharing knowledge and helping each other is central to our core. That's something Matt and Connie, and many others, have given us that stuck as a permanent trait of the CLOC community.
Andy Grove, the former CEO of Intel wrote a book, High Output Management, that I know you admire. In it, Grove emphasizes the importance of process improvement from a “factory floor” perspective. Talk about the Intel culture and how it might influence your approach to legal operations going forward.
I love this question. High Output Management is a visionary book. The principles explained by Andy Grove in that book have remained omnipresent in Intel culture and are as relevant – or more relevant – than they ever have been. They can be applied to every industry, including legal, and are very much what we believe and are doing in CLOC. I can give a few examples.
First, Mr. Grove teaches us to think about managing our teams in manufacturing terms – to apply those principles in supervising and motivating our employees. If you think about it, everyone is a producer in some capacity. Essentially, managers oversee a production line where work product is created and delivered according to clear expectations for quality, cost, and timeliness. This applies in any context, including legal. And it runs into another emphasis, which is the importance of data analytics. Mr. Grove advises that every team have a set of key performance indicators to measure the impact of the work they're doing. Business intelligence, or leveraging data analytics and metrics to drive strategy, run operations successfully and achieve big goals, is an important functional area in legal operations.
Another key point in the book is that business has become less predictable. We have to anticipate the unexpected and be emotionally comfortable with it. We all just went through an unexpected year of mental and emotional discomfort like we've never experienced before. But that made us more resilient and more open to doing things differently. Legal operations professionals have an opportunity to leverage this muscle that's been built throughout the department to help facilitate some long-needed changes. That's a positive, unintended consequence of this challenging time.
Mr. Grove observed that technology makes everything happen faster and allows knowledge to spread more quickly. That has its burdens in addition to the obvious benefits. People can fall into the trap of instant response and taking fewer breaks from work. Intel's culture recognizes this trap and was emphasizing the importance of protecting our mental health long before the pandemic. For example, our general counsel is adamant that we stay off email while on vacation, and he really means it. Legal operations can help scale required breaks and time off by finding and addressing resource gaps. There's definitely a role for us to play in supporting that important initiative.
Finally, Mr. Grove talks about how relationships between managers and their reports have changed. That's obviously been even more of a challenge in the past year. Managers have had to adapt how they're managing their employees and communicating with them. Proximity between managers and employees is so important. Oneon-one meetings are important, as poor communication is the number one reason for employee dissatisfaction. We have to ensure we're staying proximate and communicating well, even when we can't be in the office
together. I think legal operations can play a big role in helping everybody in the department stay together as much as possible in these crazy, chaotic times.
If you look back, legal ops has been propelled by recessions. It was sort of born out of the dot-com bubble bursting around the turn of the century and gained steam in 2008 during the great recession. Now, coming out of the pandemic, expect operational excellence to move even further up the priority list across the industry.
CLOC has swung open the door to members who are not legal ops professionals in their organizations, including lawyers at big law firms. Does CLOC run the risk of diluting its mission and impact by welcoming different segments of the corporate legal ecosystem into what started out as a book club, which was a pretty small and cozy tent?
I don't see that as a risk. I see it as an enabler of our mission. The only way we can truly transform the business of law is by getting all segments of the industry rowing in the same direction. We have a symbiotic relationship with all of the members of the ecosystem, and we all need each other to thrive. We have to be united in our vision and our mission to tackle big, challenging problems. Getting everybody united in this mission is absolutely essential. The bigger risk is to stay insular and try to do this in a vacuum. We aren't going to make the progress we need that way.
There are many different kinds of ops teams ranging from solos to gargantuan teams in some companies. Members of CLOC vary accordingly. How does CLOC plan to serve the needs of such a diverse set of organizations and the people who work in them?
We have to support progress in diversity, equity, inclusion, belonging, access to justice, and more. We have to show up for our community by keeping these areas front and center.
We've been doing that already, running programs that focus on foundational elements of legal operations, others focused on more advanced elements, and others that cover the highest level of sophistication in what we do. We don't want to leave anyone behind. We have to remember to continue serving those who are just getting started on the journey.
One of the most popular presentations I've ever done for CLOC was called “Zero to Hero” and was focused on building a legal ops program from scratch. I presented it with Steve Harmon several times a few years back. We need to keep doing things like that for some time into the future to make sure we're bringing everybody onto the bus and helping them get to the next level. We have to be inclusive and consider people at all stages of the development process.
Step forward a year or two. When you look back, is there an accomplishment as president of CLOC that would make you the proudest?
We have a lot of cool things in the works, so it's tough to pick one. There are two percolating in my head. One, that our members rebound quickly from the pandemic and make significant progress enhancing their legal departments’ ability to improve service to their clients at scale. Two, that as a united ecosystem, we will have made significant progress making our industry more
representative, equitable and inclusive. A lot of things go into those two broad-stroke advances, but those will be high-level indicators of our success. I want to see us make a lot of progress in both.
Interestingly, law firms are now focusing on ops themselves. They’re building captive ALSPs or partnering with them. They have a trade group, the Legal Value Network. What do you think about law firms’ efforts to morph into what seems almost like alternative to themselves.
It’s a huge sign of progress that they're understanding the need to do that. They're figuring out how to leverage other components of the ecosystem that can enhance their overall service offering and set them up for a brighter future in the modern era. A lot of law firms are starting to get it. A lot still have a long way to go, but we are slowly but surely seeing progress in the law firm world and it's a wonderful thing.
What do you say to a young lawyer considering a legal ops career who asks what kind of expertise or experience he or she should lean into?
There are a variety of skill sets that come into play in a legal ops role.
Mike Haven is president of CLOC. A trained attorney, he has over two decades of experience in law and legal operations, including roles with K&L Gates LLP, NetApp, and Gap Inc. As a board member, he has been a staunch advocate for bringing the entire legal ecosystem together in the CLOC community to address and solve the most challenging obstacles standing in the way of industry progress.
It's helpful to have a legal background, and it's helpful to have a business background. If you have both, that's great. But expertise in finance, process, technology, and other things are helpful as well. You can come at a legal ops role from any of those angles and be successful as
long as you have the right mindset. It requires a curious mind, a thirst for learning, and a willingness to go out of your comfort zone to learn other skillsets that go into the role. Those are the essential traits for a successful legal operations professional.
As the new president of CLOC, and the head of ops at Intel, Mike Haven is highly focused on what he calls “showing up” for things that matter. One of those is diversity, equity and inclusion.
CLOC recently released its 2021 State of the Industry survey, which revealed a major shift in priorities for corporate law departments and their ops teams. Diversity, which had not been high on the priority list in prior surveys, rose all the way to the top of the list from fifth out of seven priorities in 2020 – above automating legal process and implementing new technology. Here’s what Haven says:
“It's top of mind for everybody right now. We've come out of a period that really hit everyone hard in a lot of different ways. One has been the blatant and horrible racial injustices that litter our society. We need to make sure that we're doing our part in solving that problem.”
Intel’s vice president and general counsel, Steve Rodgers, made a splash in late 2019 when he trumpeted his frustration with the snail’s pace progress on diversity in the legal profession and called for a Moore’s Law for diversity. “That sluggish progress is not enough for our profession, and it certainly is not enough for Intel – where we pride
ourselves on taking bold risks to achieve rapid progress,” he wrote. “In 1965, Intel co-founder Gordon Moore penned Moore’s Law, a prediction of constant, momentous improvement that has become the driving force for progress in the computer industry.
Our industry’s belief in our ability to achieve the core promise of Gordon’s prediction has driven thousands of engineers and scientists to produce ever-faster computer chips. We believe that driving real progress in the legal profession’s diversity requires taking risks and being audacious, in the best spirit of Moore’s Law.”
Haven agrees that there is still much work to be done at Intel and beyond. “We are ensuring that the partners we work with are focused on it, and we're ensuring that we're focused on it internally. But we have to go broader than that as an industry. We have to work on the pipeline. We have to make legal a more compelling and attractive industry for young, diverse professionals to come into. Those are huge challenges, and CLOC is in a position to make a difference. Those matters of the heart came through as a priority in our survey, and they will be top of mind for the board and our leadership moving forward into CLOC 3.0.”
Brendan Miller, legal operations advisor for practice innovation, and Troy Zander and Jordan Carr, partners with Barnes & Thornburg, discuss the typical process of drafting transactional documents and how new software tools can provide more predictability, greater efficiency, and other benefits – for clients and lawyers alike.
CCBJ: What are some of the greatest challenges organizations face when drafting transactional legal documents?
Troy Zander: First and foremost, the biggest challenge when drafting transactional documents is usually incorporating all of the relevant provisions and specific language that are applicable to each particular client. Every client has their own provisions, some of which are unique to them and some that are generic but tailored to them. It might have to do with choice of law and venue
and jurisdiction, for example. Then the documents need to be tailored to the specific needs of the deal, the clients and, of course, the counterparties. While the client may have a preferred set of starting points for the documents, each deal itself is unique.
There are also provisions that are unique to the particular counterparty. We are able to manage this by maintaining version control of the documents. So, for example, when we send out our initial drafts and documents, and then we get comments back, we can make sure that those comments are incorporated and reflected in the next version of the documents. The key is to do all of this efficiently – to incorporate all of the relevant provisions, tailor the documents to the deal and the client, and maintain version control in a consistent and timely way.
Jordan Carr: Traditionally, law firms approached most transactional document drafting either with the client’s forms or those from prior deals that were similar in nature – or at least similar in scope. Typically it’s a lot of time-consuming manual drafting work: finding the right set of documents, finding all the things to change in that set of documents, knowing what the most up-to-date language is for those types of provisions, remembering what might need to change from that last deal to this one.
That’s been the traditional model for a very long time. But we’re trying to get away from that model.
Brendan Miller: Much of what Jordan just described is what in today’s vernacular would be called “knowledge management.” What do we know about this practice area, this client, this service industry? What has been our historical repository of information about the best clauses, the most appropriate language to use for a particular deal? In the past, the technology
was more limited, which meant that it had to be this manual process. We are now able to leverage document automation to convert that manual process into document templates that reflect best practices and institutional knowledge—literally converting a document into a questionnaire that guides the user, efficiently gathers needed information, and generates a document tailored to the needs of the client or matter.
How has your firm embraced emerging software solutions to bolster transactional document drafting capabilities?
Miller: The reality is that as a law firm we are part of a broader service profession. A couple of the watchwords for our approach to embracing and integrating software solutions are “practicality” and “flexibility,” because at the end of the day, as a service profession, our job is to solve problems. For our clients, it’s about making their lives easier as relates to whatever legal challenges or opportunities they’re facing.
When it comes to document drafting capabilities, our firm started using document automation a few years ago on select matters. We started to dabble in automating templates that could be used to generate documents where there were either large volumes of documents or similar documents that needed to be generated on a repetitive basis. We’ve continued to grow that functionality.
In 2019, we added a document automation specialist attorney to our practice innovation team, to help us take our document automation efforts to scale. Bringing on board a document automation specialist who previously served as in-house counsel has been critical to our efforts, because she’s worked in-house with a client that was taking
At the end of the day, as a service profession, our job is to solve problems.
–Brendan Miller
and building document automation into their own processes and into how they generated documents internally.
We have leveraged that experience and knowledge –and expanded on it to fit the ways that we are serving our clients. Document automation is one example, and we continue to look for other opportunities to expand our usage of existing and emerging tools and software solutions to enhance document drafting and the entire legal document lifecycle.
How do you ensure that document automation processes and technology align with a client’s business objectives?
Carr: Most clients are looking for predictability, consistency and, of course, a high level of service. But efficiency and cost considerations are also extremely important, and the ability to automate documents and not spend so much time manually drafting and going through that entire process really, really helps. In my practice, it increased efficiency noticeably right away. The more we do it, and the more people are familiar and comfortable with the process, it’s going to increase efficiency even more. And that really allows us to provide very good alternative fee arrangements that are predictable for the client and profitable for us. Now we have a higher degree of certainty about what it takes to draft certain documents and to do a deal. It’s been a great addition to my practice, and I think others would agree.
Zander: I would add that there is no doubt that our goals around document automation are aligned with our clients’ needs. My team and I are focused on the representation of lenders as they lend principally to technology and life sciences companies, or to the venture capital and private equity firms that support those companies. Most of those lenders have their own prescribed set of loan documents, and many of the money center banks, and even some of the non-money center banks that are engaged in syndicated credit transactions, maintain a repository of their preferred or master forms and documents. Part of the reason they do that is because they recognize that there are efficiencies in doing so. So there’s no doubt in my mind that my clients’ interests are absolutely aligned with the goals of document automation – namely efficiency, cost-effectiveness and predictability.
What else would you like to share with our readers?
Zander: I’d say the best thing we can do is share information and learn from one another in terms of best practices and, frankly, best products, so that we are all delivering the highest quality, most efficient and most consistent work product to our clients.
Carr: My advice for anyone looking to do this kind of document
Brendan Miller is legal operations advisor - practice innovation with Barnes & Thornburg. He leads their practice innovation team and works closely with the firm’s attorneys and other professionals to achieve greater value and excellence in its partnerships. Reach him at brendan.miller@btlaw.com
automation is that it does take some investment of time and effort to get the documents set up, but it’s well worth it. The investment will be realized as long as you stick to it and actually finish it. In these busy times, saving a few hours, or even a few minutes, on every deal can have a noticeable impact on any team’s well-being.
Miller: What strikes me is that the use of new and emerging technologies in this space really provides an opportunity to collaborate directly with our clients and understand our clients’ services and businesses on a deeper level. We’re building something together, and it’s not just a single transaction – it’s about building business opportunities and really building a relationship together.
Troy Zander is a partner with Barnes & Thornburg. He is partnerin charge of their San Diego Office and focuses his practice on the representation of lenders in documenting technology, life sciences and middle market financing transactions. Reach him at troy.zander@btlaw.com
Jordan Carr is a partner with Barnes & Thornburg. He focuses on community and economic development, including low-income housing, new markets and historicrehabilitation tax credits. Reach him at Jordan.carr@btlaw.com
Ron Carey, chief revenue officer with Esquire Deposition Solutions, discusses the use of remote deposition technology, how the COVID-19 pandemic supercharged the trend, and why it’s here to stay.
CCBJ: Esquire Deposition Solutions recently published an infographic about COVID-19’s impact on technology for depositions. What had you observed that led you to create this infographic?
Ron Carey: Back in 2018, we at Esquire created what we called remote depositions, which, as the name suggests, are basically depositions done remotely using technology platforms. From 2018 through March of 2020, adoption of the service was very low – just a couple of hundred depositions total in that two-year period. That changed when the pandemic hit, as people realized that depositions could be done remotely too, and adoption of the program just took off from there.
We went from doing just those couple hundred remote depositions in two years to doing more than 100,000 of them since the pandemic started. Our volume is through the roof, and we wanted to get a better picture of the situation in terms of our future planning, strategic planning, and our organization. What things would look like for us in a postpandemic world. There are a number of people, both general counsel and those at law firms, who were reluctant to use this service at first who have now realized the advantage of doing so. We also wanted to make sure that we continued to invest in ways that would allow us to meet the needs of the new post-pandemic landscape, the so-called “new normal.”
We wanted to learn a few different things. First, will people continue to use remote platforms once they have the ability to take depositions in person again? And if so, at what
level? We also wanted to better understand a few things having to do with deliverables. One of the other interesting dynamics we’ve seen a move away from printed transcripts and toward more requests for digital transcripts, so we wanted to look at our investments in print technology and shipping costs, things like that. What should we plan for in that area? We thought it prudent to do a broad survey to really understand from both the corporate side and the law firm side of the house, what are we planning to do postpandemic?
Where do you see the future of depositions going?
We have a very large corporate portfolio, mainly insurance companies, energy, pharmaceutical, and medical companies that have large need for litigation and/or things like claims on the insurance side. Time is the enemy, generally, of extended litigation cycles, and many corporations want to leverage technology to ensure that they’re able to keep legal matters pushing forward as required and as allowed by state and federal mandates. What’s happened as a result is that organizations are seeing less pressure on their litigation calendar. There’s a court reporter shortage, which was really being felt pre-pandemic, all throughout 2019. But remote world, you don’t have court reporters having to take down their equipment, package it up, get in the car, drive to a new location and set the equipment back up to take the next deposition. Instead, they can sit in the comfort of their home and go from deposition to deposition, never having to move. In other words, the bandwidth of court reporters greatly improved, taking pressure off of the calendar.
The fact that we can get to litigation fast means that organizations can get through their matters faster, which means less expense related to litigation. On the law firm side, attorneys are having to travel less, so they can focus on their billable hours rather than those non-billable hours associated with travel. Then, of course, on the corporate side, they’re not having to reimburse law firms for
COVID-19 really created an absolute need to shift to a remote deposition model that leverages technology.
attorneys’ expenses related to travel because there’s less travel for litigation right now.
So, I see remote depositions as part of this overall trend, and I expect that they will continue to be a big part of how we do business going forward.
What are some other key takeaways from the survey?
First, the number one platform out there is Zoom, and most attorneys have familiarity with it. We offer Zoom, of course, along with Webex and Blue Jeans and some other platforms based on client requirements. But Zoom is the bulk of what we do. All of these platforms are video-conferencing platforms, and then there’s also exhibit management software like AgileLaw that gets used as well.
There are two dynamics happening with attorneys. One is that some attorneys feel like the focus on technology might take away from their ability to practice law and be effective within the deposition. So, we’ve really bolstered our offerings around making sure the attorneys fully supported before, during and after that deposition. That’s one piece. The other piece is that there were some issues with the attorneys managing exhibits using the video platforms as well. That’s why we’ve added tools like AgileLaw that allow us to more easily manage exhibits on the platform. If you think of remote depositions 2.0, it’s a purpose-built platform.
In fact, we are about to announce the release of Esquire eLitigate, which is a purpose-built platform that leverages Zoom, Webex, RingCentral, Microsoft Teams and anything like that. It’s a proprietary platform that exactly emulates
the interim deposition along with really robust exhibit management. Many of the things that we see evolving and emerging will be built into this purpose-built platform. It’s designed not as a video-conferencing platform, but as a depositions platform. It’s designed to address the concerns attorneys had about practicing law in this new technological world – that the technology was not necessarily comfortable for them, and especially that managing complex exhibits was difficult. We heard that very, very clearly, and we’ve worked hard to solve it.
Overall, what was the largest takeaway?
Remote depositions and technology are being accepted by the legal community, despite those complaints I just mentioned. They’re becoming more accepted. There was not much receptivity by the legal community to technology prior to the pandemic. But COVID-19 really created an absolute need to shift to a remote model that leverages technology. We found very quickly that corporations as well as law firms are seeing the advantages. It’s not scary. It’s not jeopardizing the record. In fact, in many ways, it’s improving upon the integrity of the record. And it’s highly scalable. So, we are coming out of the pandemic and into our new normal, if you will, with a whole industry that’s vastly more comfortable and more receptive to looking at technology – beyond just e-discovery, which was really the one place where you saw a lot of technology being leveraged in the past.
What else do you think our in-house counsel readers should know about this?
What we’ve heard over and over again is that, yes, everyone’s got a technology platform, right? And we’re all using the same sort of platforms – Zoom, whatever it may be – but it’s the support and the way that the platforms are operationalized in concert with a corporation’s needs that becomes so powerful.
Tools that allow corporations to understand their litigation calendar are very important, for instance. We use a product called EsquireConnect that allows anyone on the legal staff of a corporation to see all of depositions on the calendar, regardless of the attorney or the firm handling that matter. They can set depositions quickly. They can cancel depositions with the click of a button. They can receive transcripts digitally. They can access their video files.
As relates to the deposition itself, relieving pressure on the litigation calendar is so critically important. Remote technologies allow us to do that. It allows greater bandwidth for availability of court reporters, and it allows us to be able to do what we call “add-on business.” If a business calls us at 4 o’clock and says, “Oh my gosh, we forgot, we have a deposition tomorrow at 10 a.m. Can I get a court reporter available?” That’s very difficult to do in person, but very easy to do remotely. It removes the geographical burden that we used to have.
There are many things that bring efficiencies and, in essence, allow corporations to reduce legal spend. The variable costs of depositions – things like attorney travel – is certainly one of them. Remote technologies relieve the burden of those variable costs and help organizations bring that spend under control. And there’s really no degradation of quality of the deposition and no degradation of the deliverable either.
What the survey clearly states is that the acceptance of technology is the primary outcome, even as attorneys return to being able to do in-person proceedings. A large percentage of attorneys feel that a large percentage of their proceedings will still be held remotely, and we’re helping corporations with the litigation guidelines that they give to the law firms that support them, providing guidance on when remote should be used versus when in-person should be used.
For example, a corporation might decide that in in a complex matter they want attorneys there with a witness. But in some other matters, where it’s a low-risk situation or a low-exposure situation, they might decide that remote depositions are a more effective or more efficient way to manage it. We’re helping corporations write those guidelines and then publish them, and we provide a lot of reporting in the back end to make sure that their partners and attorneys that support their businesses are complying with the guidelines that they’ve written and published.
We also see a need for additional investment. That’s why we’re launching Esquire eLitigate, which is going to bring a whole new level of efficiency to the remote world. If we saw that the trend of remote depositions was going to decrease, we would invest elsewhere, but we’re not. We’re steadily investing in technology.
The last thing I’ll point out is that there’s a generational dynamic in play here as well. As some senior partners start to retire, they’re being replaced by newer partners who are more used to leveraging technology in their work. They understand the productivity benefits of technology and look at it as a complement to their effectiveness, not as a threat to their effectiveness or something that they’re uncomfortable with.
Carey is
responsible for designing and driving the company’s revenue strategy and managing sales, marketing, field operations and sales enablement. He aligns these departments under a unified strategy with a clear vision and focused go-to-market approach, which ensures Esquire delivers premium service, creating clients for life. Reach him at ron.carey@ esquiresolutions.com
The Sleepy Hollow Hotel & Convention Center, Tarrytown, NY October 19-20, 2021
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The Houston Club, Houston, TX November 3-4, 2021
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