DFW3rd Qrtr newsletter revisedindd by mmcsx


									Inside 3Q2009
2-3...Haynes and Boone Raises the Bar on client Value
4-5...AccA-DfW’s Margolies Memorial scholarship Awarded
   to Law students Pursuing summer Internships with Pro
  bono agencies
5-6...KPMG and Prescott Legal search Present Results of
      In-House counsel compensation survey
6-7...Personal Risk Mitigation for In-House counsel

President’s Message
Marcia stuart ceplecha
It’s Been a Great Year for Our DFW             experience. As part of our                                       networking,
Chapter!                                       Chapter improvement, the                                         development, friendship
                                               Board also expanded in size                                      and just plain fun! For
We are coming to the close of our              last year not only to increase                                   me, ACC and our DFW
fiscal year and have completed elections       the diversity of ideas and                                       Chapter, is the place to
for the Officers and Directors for the         experience, but to provide                                       be for in-house counsel
2009-10 year. And we are just coming off       greater opportunities for                                        and I look forward to
our signature Golf & Spa event – a time        participation in Chapter                                         seeing and working with
for networking, great golf at the world        leadership. We will continue                                     you all in the future -- in
class Four Seasons resort, and fabulous spa    to work on new programs                                          our home, the Big D and
treatments. Now is the time for reflecting     and events, so look for these                                    Cowtown!
on how the year has been proceeding. The       over the next year. Our DFW area has also
DFW Chapter hit important milestones           experienced its share of hardship from           ACC-DFW 2009/10 Board of Directors
this year and rolled out some exciting new     the troubled national and world economy.
initiatives. The most                          ACC has expanded its services to include        Officers
significant milestone was that the Chapter     more in-transition assistance programs          Todd Martin (President), Bank of America
crossed the 600 member mark in January         and services, and we, as the local face of      Penny Phillips, (1st Vice President),
and continues to grow! Just five years ago,    the in-house bar, are introducing our own          Pinnacle Partners in Medicine
the Chapter membership was in the 300s.        new initiatives for in-transition members.      Kenneth Johnson (2nd Vice President),
Our goal is to ensure the Chapter              Our Chapter established an In-Transition           Quest Diagnostics Incorporated
continues its impressive growth while we,      Member Committee to develop ideas and           Jeff Everett (Treasurer), Sabre Holdings
as a Board, seek to provide even more          programs to assist those members                  Corporations
value to our members. We revamped our          transitioning between jobs. I take this         Richard Mosher (Secretary), Loctronix
sponsorship packages this year to              opportunity to invite you to contact us if        Corp.
provide improved programs to our               you wish to participate on this Committee       Marcia Stuart Ceplecha (Past President)
members while increasing sponsor               as we strive to improve services for all our      Lockheed Martin Aeronautics Company
effectiveness and satisfaction. As part of     members.
this commitment to member value, we                                                            Directors
instituted our In-Sight program series,        And I want to take this opportunity to          Christopher Ducanes, Allegro
challenging our sponsors and the Board         thank all of you for the privilege of serving     Development Corporation
leadership to include in-house counsel         as your Chapter President. I am proud to        Michael Cameron, Ericcson Inc.
panelists on as many presentations as          have worked with such a vibrant group of        Rhonda L. Lenard, PNMR Services
possible. I’m proud to say that we have        attorneys and can sincerely say that our          Company
exceeded our expectations – nearly all of      Chapter is one of the best in ACC. The          Bipasha Mukherjee, Cinemark, Inc.
our presentations this year included distin-   DFW Chapter is fortunate to have so many        P.J. Putnam, Gearbox Software, LLC
guished in-house panelists sharing             distinguished attorneys in its midst, and       Robert Robinson, BancTec
critical and useful insight, unique to in-     remains a fantastic home for
Haynes and Boone Raises the Bar on client Value
All of us have read about the challenges        resulting push by in-house counsel for           Jenkins predicted that within the next
law firms are facing in the light of the        greater predictability, improved efficiency      three to five years, the industry-wide use
prevailing economic conditions, and             (less cost) and improved value in legal          of “Fixed Fee” arrangements and “Budgets
with several well-known firms laying off        services as a “tsunami effect” that will         with Implications” will dramatically
attorneys, sky-rocketing first-year associate   accelerate transformational change. “Last        increase . . . specifically because clients
salaries seem a distant memory. However,        year we thought it would happen, but we          want greater predictability and improved
prior to these developments, the ACC            thought it might occur over ten years; but       efficiency. Haynes and Boone is not wait-
formulated its Value Challenge - a national     this year, it has become clear that these        ing to see if this transformational change
coordinated effort by corporate counsel to      changes will happen much sooner than we          will, in fact, occur. Instead, Haynes and
enhance the value our clients receive from      first thought,” Jenkins said. When asked         Boone is proactively taking steps now to be
outside counsel. In support of the Value        if they thought these changes are perhaps        ahead of the curve. For example, the firm
Challenge, the DFW chapter has hosted           merely a fad, in-house panelists at the          is building tools for enhanced budgeting,
several events focusing on various aspects      Fort Worth presentation, Robinson and            including a data warehouse to contain his-
of the relationship between outside counsel     Goldberg, agreed with Jenkins that these         torical fees across the firm for all matters
and their corporate clients, and our June       changes are imminent.                            handled, broken down by phases of the
Chapter Meeting, sponsored by Haynes                                                             engagements. They intend to use this tool
and Boone, was one of the most compel-          But Haynes and Boone is doing quite a bit        to offer fixed fee arrangements or project
ling events we have held this year.             more than forecasting – they are leading         budgets at levels that will be competitive
                                                the change and shaking things up along           for clients and reasonable for the firm.
On June 23rd (Fort Worth) and July 9th          the way. In their presentation, Haynes and       Building such a data warehouse that can
(Dallas), Haynes and Boone lawyers and          Boone shared how they see the industry           meaningfully serve this purpose will be no
a panel of distinguished general counsel        models for fee arrangements changing             small undertaking, but they are undeterred
discussed this sacrosanct relationship          (See Figure 1 – Change in the Mix and Use        and have identified several key impedi-
with frankness and goodwill during a            of Fee Arrangements). No one would be            ments that will need to be overcome. In
panel discussion titled “The Changing           surprised to see that “Hourly Rates”             addition to the data warehouse, the firm
World of Pricing and Cost Management            arrangements presently dominate among            has already developed a real-time cost
of Legal Services.” Tony Bangs – Senior         current fee arrangements. And while              management tool that allows the client and
Vice President, General Counsel for             Haynes and Boone believes that “bet the          the Haynes and Boone lawyers the ability
The Neiman Marcus Group, Inc.; David            company” matters (“BTC”) will remain             to track costs (including unbilled time) in
Goldberg, Vice President, General Counsel       fairly constant, they are planning for the       real time against a budget. Finally, Haynes
and Corporate Secretary for Union               likelihood that everything else will change.     and Boone is working on a firm-wide
Drilling, Inc.; and Bob Robinson – Vice                                                          project management training program that
President, General Counsel for BancTec,                                                          they expect to roll out this fall.
Inc., served as in-house panelists. Lawyers     Figure 1 – Change in the Mix and Use of
from Haynes and Boone included partners         Fee Arrangements                                 While billing by the hour will continue
Brian Barnard, Terry Conner, and Steve                                                           to be the arrangement of choice for many
Jenkins. During the session, the panelists                    Current           Future           matters, Haynes and Boone expects that in
assumed that a transformational change                                                           the relatively near future, the open ended
from the traditional billable hour model to                     BTC
                                                                                      BTC        billing by the hour approach will be used
client value-based models will occur and                                         Hourly Rates/   far less often and then with important
discussed how law firms and in-house legal                                       Expectations    changes which they refer to as “Efficiency
departments can work together to navigate                  Hourly Rates          Budgets with
                                                                                                 Expectations” . . . common sense best
the changing world.                                                                              practices such as front end discussions of
                                                    Budgets with Implications
                                                          Fixed Fees
                                                                                 Fixed Fees
                                                                                                 anticipated range of costs, cost transpar-
Jenkins, Chairman of Haynes and Boone’s                                                          ency, and surprise avoidance alerts, as well
Client Value Task Force, noted that in their                                                     as increased emphasis on and improved
firm’s view, the transformational change is                                                      use of technology, knowledge manage-
certain to come and likely to come sooner                                                        ment and project management. Haynes
than many law firms anticipated, primar-                                                         and Boone has heard clients’ demands
ily because of the extraordinary economic                                                        for greater predictability of costs and
uncertainty of the past year and the reality                                                     increased efficiency, and they are work-
that every company is actively looking for                                                       ing to formalize ways to improve on both
ways to reduce costs. He described the                                                           counts.               (continued on page 3)

2 Dallas fort Worth chapter focus 3Q09
Haynes and Boone Raises the Bar on client Value

(continued from page 2)
As an example of “Budgets with                   If the firm is able to conclude the           The actual percentages vary depending
Implications,” Haynes and Boone foresees         matter under the mutually agreed              on the type of engagement and actual
its use of “risk sharing” alternative fee        budgeted amount, the client keeps the first   circumstances, but the intent of the firm
arrangements playing a significant role in       10% of savings and shares evenly with the     in offering a “risk sharing” alternative fee
the firm’s Client Value initiative in engage-    firm the savings in excess of 10%. If the     arrangement is to demonstrate to the client
ments that might not be appropriate for          costs exceed the budgeted amount, the         a dual focus on doing a great job substan-
a Fixed Fee arrangement. As seen in the          firm is responsible for anywhere from 50%     tively while at the same time being very
illustration below (See Figure 2 – Risk          to 100% of the fees exceeding the budgeted    alert to managing the costs of the engage-
Sharing), this arrangement blends predict-       amount.                                       ment within the client’s expectations as
ability for the client with sharing of savings                                                 reflected in the budget.
and risk with the firm.

tegraT tegduB 1

Figure 2 – Risk Sharing

In conclusion, Jenkins noted that for            Perhaps your outside counsel would be         Your Feedback
Haynes and Boone and the legal industry          willing to take similar committed steps       Whether you use Haynes and Boone or one
as a whole, this is not a trend but a “sea       to enhancing the value they offer to your     of their competitors, all of our clients stand
change,” and they are determined to be           client. Why not ask them and further the      to benefit significantly from Haynes and
at the front of the curve as a thought and       dialog of the ACC’s Value Challenge?          Boone’s efforts. What are the inefficiencies
action leader, rather than being behind the      At Your Feedback, right, see how you can      you’ve seen at law firms that you have used?
curve by taking a wait-and-see approach.         help Haynes and Boone and other firms         Please send your feedback to Kathleen
They believe that by working together,           identify opportunities for greater            Yarborough at execdir@accdfw.com with the
clients and law firms can achieve a              predictability and improved efficiency.       words “Law Firm Feedback” in the subject
“win-win” result.                                                                              line. We will pass your comments along to
                                                                                               Haynes and Boone and other ACC-DFW
                                                                                               sponsors on an anonymous basis to assist
                                                                                               them in finding ways to enhance the value
                                                                                               they deliver to all of our clients.

AccA-DfW’s Margolies Memorial scholarships Awarded to Law students Pursuing
summer Internships with Pro bono agencies
By Penny Phillips, corporate counsel, Pinnacle Partners In Medicine; Acc’s DfW chapter secretary and Pro bono committee chair

Our chapter awarded two Margolies                Both of our scholarship recipients will be       Yon S. Sohn
Memorial Scholarships this year. The             honored at our chapter’s annual                  Candidate for Juris Doctor, 2012
memorial scholarship was named after             meeting on September 11, 2009, which is          SMU Dedman School of Law
Larry Margolies, a former DFW chapter            held at the luncheon portion of our signa-
board member who was active in pro bono          ture Golf & Spa event, with members of the       TWU Law student DeJon Redd
efforts. The scholarships are provided to        Margolies family present.                                                    Prior to starting
area law students, selected by the Board                                                                                      law school, DeJon
through an application process, who pursue       SMU Law student Yon Sohn                                                     Redd served on
summer pro bono work at approved legal                                                                                        active duty in the
services organizations. Organizations that                                                                                    United States Air
have received such help from the chapter’s                                                                                    Force for over
scholarship recipients in the past include                                                                                    seven years. He
Legal Aid of North West Texas, Catholic                                                                                       has a bachelor of
Charities and Central Dallas Ministries’                                                                                      Business
LAW Center. This year’s scholarship recipi-                                                                                   Administration
ents attend Southern Methodist University’s                                                                                   in marketing and
(SMU) Dedman School of Law in Dallas                                                              a Master of Art degree in journalism and
and Texas Wesleyan University (TWU)              Prior to attending law school, Yon Sohn          mass communication. When asked to
School of Law in Fort Worth.                     earned two Bachelor of Science degrees           explain his desire to serve in the pro bono
                                                 and a Master of Science degree. One of           arena, Mr. Redd told the panel, “I have
Both of this year’s scholarship recipients       her bachelor degrees is in Professional          never viewed public service as a hobby or
are currently providing their services at the    Chemistry and the other is in Materials          an interest, but more as a mandatory
Central Dallas Ministries Legal Action           Science & Engineering. Her M.S. degree           requirement.” Mr. Redd is enjoying his
Works (LAW) Center. The Legal Action             is in Metallurgical Engineering. Ms. Sohn        internship, as he eloquently expressed in his
Works (“LAW”) Center has served over             told the panel that her interest in serving in   gracious thank you to the chapter for this
2,000 low-income people since opening in         the area of pro bono arose from her “desire      scholarship, below.
1999. The LAW Center has three full time         to open [her] mouth for the mute, for the
attorneys and two legal assistants represent-    rights of all who are destitute and to judge     To the ACCA-DFW Chapter:
ing Dallas County residents who cannot           righteously, defend the rights of the poor       After completing my first week as an
afford traditional legal services. Over 80%      and needy” and that this desire is so funda-     interning fellow with the Central Dallas
of the LAW Center’s cases involve women,         mental to her that it is what lead her to seek   Ministries’ LAW Center, I write to express
and nearly half of these involve some            to become a lawyer.                              my gratitude. My initial time with CDM
form of domestic violence. Most of the                                                            has been both wonderful and
cases involve Family Law, which includes         “Experiential education is at the core of        sobering. Working with the attorneys and
Divorce, Suits Affecting the Parent-Child        learning the legal practice, and I am grate-     staff has been a privilege and joy beyond
Relationship, Adoption, Motions to Modify,       ful for being able to work in a fast-paced,      my expectations. Yet, the need for their
Protective Orders, Temporary Restraining         non-profit family law office serving indigent    expertise and services is also well beyond
Orders and Temporary Injunctions. The            clients who cannot afford traditional legal      my expectations.
rest of the LAW Center’s cases are a mix of      representation. Observing a case from
Probate and Heirship proceedings, draft-         in-take to post-judgment is hard to do in        I have also been surprised by the breadth
ing simple wills, consumer matters, Social       six weeks of internship, but, because of         and diversity of CDM’s legal aid services,
Security Disability appeals, employment          high volume of cases that Central Dallas         and I appreciate having seven more weeks
related claims and other matters.                Ministries L.A.W. Center handles, I get to       to learn and assist. It is only due to ACCA-
                                                 see each piece of the puzzle from several        DFW’s contributions on my behalf that I
As summer interns, Ms. Sohn and Mr. Redd         different cases. Most rewarding of all, I can    have this opportunity. I am thankful and
are assisting the LAW Center’s legal team        see why the attorneys at the L.A.W. Center       indebted.
with legal tasks including the drafting of       continue to enjoy their work despite the
pleadings, filing of motions, setting of hear-   scanty salary when the clients thank them        Very respectfully,
ings, interviewing clients and other tasks       profusely for resolving their crises. It has     DeJon Redd
approprite for their skill and                   been a tremendous experience for me, and I
experience level.                                am deeply appreciative of ACCA’s financial                            (continued on page 5)

4 Dallas fort Worth chapter focus 3Q09
AccA-DfW’s Margolies Memorial scholarships Awarded to Law students Pursuing
summer Internships with Pro bono agencies
By Penny Phillips, corporate counsel, Pinnacle Partners In Medicine; Acc’s DfW chapter secretary and Pro bono committee chair

(continued from page 4)                        A lawyer should render public interest          The provision of free legal services to those
Texas Pro bono Requirements                    legal service. The basic responsibility for     unable to pay reasonable fees is a moral
While Texas does not have mandatory pro        providing legal services for those unable       obligation of each lawyer as well as the
bono requirements, the State Bar of Texas      to pay ultimately rests upon the individual     profession generally. A lawyer may dis-
Board of Directors has a Pro bono Policy,      lawyer, and personal involvement in the         charge this basic responsibility by provid-
which establishes an aspirational goal of      problems of the disadvantaged can be one        ing public interest legal services without
50 hours of pro bono legal services to the     of the most rewarding experiences in the        fee, or at a substantially reduced fee, in one
poor each year for each Texas attorney. In     life of a lawyer. Every lawyer, regardless of   or more of the following areas: poverty law,
addition, Section 6 of the Preamble to the     professional prominence or professional         civil rights law, public rights law, charitable
Texas Disciplinary Rules of Professional       workload, should find time to participate       organization representation, the adminis-
Conduct, 1995 revision, provides the           in or otherwise support the provision of        tration of justice, and by financial support
following guidance on our professional         legal services to the disadvantaged.            for organizations that provide legal services
obligations to the poor:                                                                       to persons of limited means.

KPMG and Prescott Legal search Present Results of In-House counsel compensation survey
KPMG and Prescott Legal Search                 Approximately 450 in-house counsel par-         significant increases from 2007 to 2008.
presented the results of the In-House          ticipated in the survey throughout Texas,       Senior Counsel average base salary
Counsel Compensation Survey conducted          168 of whom indicated that they work in         increased from $133,333 to $148,333,
by ACC-DFW at breakfast meetings on            the DFW area. Among the other partici-          and Staff Attorneys saw a year-over-year
August 19th and 20th in Fort Worth and         pants, 207 were from the Houston area,          increase from $116,694 to $133,036. Over
Dallas, respectively. Russell Weifling, Dave   59 were from San Antonio, 6 were from           the same period, CLOs, GCs and Deputy/
Swiney, and Steve Law attended on behalf       Austin, and approximately 10 were from          Assistant General Counsel saw increases of
of KPMG, and Mark Prescott attended            elsewhere.                                      6.7%, 6.3% and 6.4%, respectively.
on behalf of Prescott Legal Search. While
in-house attorneys across the state of Texas   The average base salary of DFW partici-         The average cash bonus for DFW partici-
were invited to participate in the survey,     pants was $181,136, which is $5,378 higher      pants in 2008 was $41,121, an increase of
these presentation focused on the aggre-       than the average base salary of all Texas       about 3% from 2007. While, CLOs saw a
gate responses received from in-house          participants, but the average total compen-     24% decrease ($26,667) in their average
counsel in the DFW area. Weifling said         sation for DFW participants was $3,860          cash bonuses in 2008, Staff Attorney par-
that the survey results had been compiled      lower than the statewide average. While         ticipants saw their cash bonuses for 2008
into a PowerPoint presentation exceeding       the average base salaries for Chief Legal       increase by 114% ($7,898), as compared to
100 pages. While that document will be         Officers (CLOs) and General Counsel             the prior year. Average cash bonuses for
made available to ACC members and sur-         (GCs) in DFW is about the same as the           GCs decreased by 4% ($2,151), and Senior
vey participants, the presentations in Fort    average base salary for all Texas CLOs and      Counsel experienced an increase of 4%
Worth and Dallas highlighted the most          GCs, DFW CLOs and GCs average total             ($850).
meaningful findings. Reflecting on 2008,       compensation lags behind the average
Prescott noted that the in-house job mar-      total compensation for all Texas CLOs and       In an effort to gather information on the
ket in Texas has slowed as a result of the     GCs by around $27,000. In fact, except for      impact the economic downturn has had
economy and depressed oil and gas prices.      Deputy/Assistant General Counsel, DFW           on in-house counsel compensation, the
But in looking forward, he said he has seen    participants had lower average total com-       survey also asked participants to report
signs of thawing and believes growth and       pensation (grouped by titles) as compared       on changes they had seen in their annual
hiring will return to Texas in the latter      to average total compensation for all Texas     raises or bonuses for 2009. As of the date
part of Q1 of next year. He added that the     participants.                                   of the survey, more than 70% of the DFW
temporary attorney market, which Prescott                                                      participants indicated that annual raises,
Legal Search serves as well, is getting        The average base salary of $181,136 for         or merit increases, and bonuses were down
stronger and typically precedes a              participants in the DFW area represents         over the prior year, with nearly 30%
strengthening of permanent attorney hires.     an increase from 2007 to 2008 of 6.6%.          indicating that their raises or bonuses had
                                               Among DFW participants, Senior Counsel          declined by more than 10%.
                                               and Staff Attorneys saw the most
                                                                                                                  (continued on page 6)

KPMG and Prescott Legal search Present Results of In-House counsel compensation survey
(continued from page 5)                           However, more than 40% indicated that                                                  All ACC members and survey participants
More detailed information about                   upon separation, their employer would not                                              will receive a complimentary copy KPMG’s
compensation changes occurring from               provide them with continuation of their                                                full report by email. If you did not receive
2008 to 2009 will be covered in next year’s       healthcare benefits (or reimbursement) for                                             a copy of the report for the DFW area by
survey.                                           any period of time.                                                                    email, or would like a copy of KPMG’s
                                                                                                                                         reports for the Houston or Austin/San
In light of the rise in unemployment and          We appreciate the participation of every-                                              Antonio areas, please contact Kathleen
reports of lay-offs in late 2008 and 2009,        one who took 5-10 minutes to complete                                                  Yarborough at execdir@accdfw.com.”
this year’s survey inquired about benefits        this year’s compensation survey online.
available to in-house counsel in the event
of a job loss. More than 70% of DFW
participants indicated that their company
would pay them some form of cash sever-
ance, with nearly 40% reporting that they
would receive between 25% and 100% of
their base salary as severance.

Personal Risk Mitigation for In-House counsel
By Jon G. sheperd, Alston & Bird LLP

There are many misconceptions about                Second, a bankruptcy trustee or receiver                                              1. Broaden The Company’s Insurance
the life of an in-house lawyer: Forty hour        might assert claims against an in-house                                                Coverage
work weeks, weekends off, shunt the hard          lawyer if the company finds itself in the
issues off to outside counsel, etc. Another       bankruptcy courts. Third, shareholders                                                 One potential method to minimize the
common misconception is that going                might bring derivative or other law-                                                   liability of in-house counsel is to broaden
in-house means you can’t be sued for              suits directly against in-house counsel.                                               the employer’s Director & Officer (“D&O”)
legal malpractice and similar claims. The         Fourth, governmental entities – such                                                   policy. Many companies specifically
numerous lawsuits filed against in-house          as the Department of Justice, Securities                                               include the general counsel as a named
lawyers over the last several years demon-        and Exchange Commission, and State                                                     insured.3 It also is sometimes possible to
strates how untrue the latter misconcep-          Attorneys General – may pursue civil,                                                  include other in-house counsel positions
tion is. In-house lawyers at both public          criminal, or administrative claims against                                             as named insureds under a D&O policy,
and private companies are at risk of having       in-house attorneys. Fifth, various third                                               particularly where the employer is not a
claims arising out of the performance of          parties – such as banks doing business                                                 public company. Increasing the number of
their duties for their employers asserted         with the company – may bring claims                                                    named insureds may cause an increase in
against them. Additionally, companies             against in-house counsel.1 Even if such                                                the cost of the policy, but the cost increase
continue to bring complex legal tasks once        claims are ultimately determined to be                                                 typically is not substantial for most
performed by outside counsel in house.            unfounded, defending against them likely                                               companies.
                                                  will be an expensive and time-consuming
What does not follow those tasks, however,        process. However, there are steps that in-                                             3
                                                                                                                                             An insurer still may argue that the general counsel is protected only for those
is outside counsel’s liability insurance.         house counsel can take to provide protec-                                              actions taken in the capacity as an officer or director and not for legal advice
In-house lawyers often do not consider            tion in the event disaster strikes.2                                                   provided to the company; accordingly, the policy also should contain a description
that they can face liability as a result of the                                                                                          of the general counsel’s duties to prevent the insurer from arguing that he or she
professional advice they provide to their         1
                                                      See, e.g., JP Morgan Chase Bank v. Winnick, 406 F Supp. 2d 438 (S.D.N.Y.           was protected only for acts undertaken in the D&O capacity but not for legal advice
employers or from actions that they take in       2005) (syndicate of commercial banks sued, among others, company’s general             being provided to the company.
the course of their employment.                   counsel and a second in-house attorney).
                                                      This article focuses on general steps that in-house counsel may take to minimize
The potential parties who may pursue              risk. Of course, there are many other risk minimization actions counsel may pursue
claims against an in-house lawyer are             depending on the particular situation. For example, counsel employed by a parent
numerous. First, the employer might               company but asked to provide advice to a subsidiary could seek a conflict of inter-
assert a claim, particularly following a          est waiver to reduce exposure in the event the advice provided is beneficial to the                                                (Continued on page 7)
management change or change in control.           corporate employer and detrimental to the subsidiary.

6 Dallas fort Worth chapter focus 3Q09
Personal Risk Mitigation & In-House counsel

(Continued from page 6)                                                                 3.      Obtain Contractual                                                              When purchasing an ELP policy, in-house
Unfortunately, most D&O policies exclude                                                Indemnification Rights                                                                  counsel should carefully review the terms
claims brought by one insured against                                                                                                                                           to confirm full coverage. For example, the
another, thereby providing in-house coun-                                                         In addition to indemnification                                                policy form should provide coverage for
sel with no protection should the corpo-                                                provided by operation of state corporation                                              claims brought by one insured (e.g., the
rate employer, or someone standing in the                                               statutes, an in-house lawyer might seek                                                 company) against another insured (e.g.,
shoes of the employer, decide to bring a                                                contractual indemnification rights from                                                 the lawyer). Other coverage concerns
claim against counsel. As a result, most                                                the corporate employer or the employer                                                  include “severability as to application
efforts to broaden the company’s D&O                                                    might offer such an inducement to its                                                   defenses and exclusions [and] trigger lan-
coverage to include in-house counsel, even                                              lawyers. In Texas, such arrangements are                                                guage in personal conduct or fraud exclu-
if successful, will leave a substantial gap in                                          not prohibited by the Texas Disciplinary                                                sions.”11 The ELP policy also should clearly
coverage.4                                                                              Rules of Professional Conduct so long as                                                state that the coverage being provided is
                                                                                        the employer is independently represented                                               in addition to and not in derogation of the
2.                 Amend The Company’s By-Laws                                          by counsel in making the agreement.7                                                    coverage provide by any other policy, such
                                                                                        This also is consistent with the ABA’s                                                  as the company’s D&O or E&O policies.
          A second potential method for                                                 Model Rules of Professional Conduct.8
decreasing in-house counsel’s exposure                                                  However, in-house counsel should review                                                 Additionally, many ELP policies do
is to amend the company’s bylaws to                                                     the applicable ethical obligations for her                                              not provide coverage for disgorgement,
specifically list the general counsel as an                                             state to ensure that seeking or entering                                                restitution, and civil and criminal fines.
officer of the company and the duties of                                                into an indemnification agreement with                                                  Similarly, an ELP policy cannot insure a
the office to include the provision of legal                                            the corporate employer is not prohibited.9                                              lawyer against reprimand, suspension, or
services on behalf of the company. Even                                                 Moreover, given the ethical requirements,                                               disbarment by the state bar association.
if the general counsel is not specifically                                              in-house counsel should be wary of negoti-                                              Consequently, ELP insurance is not a
listed as a named insured under the com-                                                ating the terms of an employment agree-                                                 standalone solution to the risk
pany’s D&O policy, the policy arguably                                                  ment solely with the company’s human                                                    minimization problem.
still should provide coverage for anyone                                                resources department and instead should
holding the office given the company’s                                                  verify that the company is being repre-                                                                               CONCLUSION
by-laws.5 Additionally, other members                                                   sented by counsel in connection with the
of the in-house legal department can be                                                 agreement.                                                                              As with life, disability, and health
named in the by-laws as assistant officers,                                                                                                                                     insurance, ELP insurance is a critical
although such a designation ultimately                                                  4.                 Purchase ELP Insurance                                               component of the insurance protection
may not provide any additional protection                                                                                                                                       package that a business should offer to
to the individuals holding those positions.6                                                      Insurers now offer companies the                                              its in-house counsel. Particularly when
                                                                                        option of purchasing employed lawyers                                                   combined with broad D&O coverage and
                                                                                        professional (“ELP”) liability insurance                                                contractual indemnification rights, an ELP
                                                                                        policies. ELP insurance essentially is a                                                policy provides substantial protection to
                                                                                        type of malpractice insurance for in-house                                              an in-house lawyer in the event claims are
                                                                                        counsel and typically provides protec-                                                  asserted by the corporation, bankruptcy
                                                                                        tion to in-house lawyers for claims that                                                trustees, shareholders, governmental
                                                                                        could be asserted by both their employ-                                                 entities, and other third parties.12
You also should review the company’s D&O policy to determine whether it
                                                                                        ers – or someone standing in the shoes                                                  See, e.g., Va. Legal Ethics Op. 877 (Apr. 1, 1987) (“It is not proper for an

contains a “professional services” exclusion as such an exclusion would negate          of their employers – and third parties.10                                               attorney to solicit indemnification from a corporate employer which limits the

coverage for in-house counsels’ provision of legal services to the company.             For example, ELP policies may provide                                                   liability of the attorney’s own legal malpractice.”), overruled by Va. R. Prof.

    This also should provide the general counsel with any indemnification protections
                                                                                        coverage not only for malpractice claims                                                Conduct Rule 1.08(h) (allowing in-house lawyers to arrange for the same

afforded to officers and directors under the applicable state corporate indemnifica-    brought by the employer, but also for                                                   indemnity available to other officers and employees where employer is

tion statute. See, e.g., Del. CodeAnn. tit. 8, § 145.                                   charges resulting from Sarbanes-Oxley                                                   independently represented in making the arrangement).

    The company’s Errors & Omissions (“E&O”) policy likewise will typically not
                                                                                        violations.                                                                             10
                                                                                                                                                                                    One side benefit is that many policies also should provide coverage for

provide protection to corporate counsel. These policies usually cover only errors                                                                                               in-house lawyers providing pro bono services.

and omissions occurring in the performance of services that the company                 7
                                                                                            See T Disciplinary R. Prof. Conduct Rule 1.08(g) (“Alawyer shall not make           11
                                                                                                                                                                                    John C. Tanner et al., Does the Gatekeeper Lawyer Need Insurance?, ACC

provides to third parties, not in-house legal services. Additionally, E&O               an agreement prospectively limiting the lawyers liability to a client for malpractice   Docket at 115 (Sept. 2008).

policies frequently exclude claims arising out of the rendering of services to          unless permitted by law and the client is independently represented in making the       12
                                                                                                                                                                                    For a more fulsome description of some of the issues discussed in this

another insured.                                                                        agreement”).                                                                            article, see id. at 94-117.

                                                                                            SeeABAModel R. Prof. Conduct Rule 1.08(h).

              Board Members and contacts
                                            Welcome New Members
                                            charles Boehler,            Wayne Lewis,Dr.           scott Wilson, Eagle
     Todd Martin
                                                Pepsico, Inc.              Pepper snapple             Materials Inc.
     Asst. General counsel
     Bank of America                        Adrienne Brown,                Group                  Melissa Winchester,
     214-209-3061                               Pepsico/frito-Lay       shauna Martin,                Attorney
     todd.a.martin@bankofamerica.com        Nic cheneweth,                 GENBAND                Brian Wittneben,
                                                friendship              Philippe McAllister,          first southwest
     1st Vice President                         Developmental                Alcatel Lucent           company
     Penny Phillips                             services                Donna McNamara,
     corporate Attorney                     Ellen curnes, Logile Inc.      Attorney
     Pinnacle Partners in Medicine
     972.663.8527                           Julie Davis, Verizon        chirstopher McRorie,
     pphillips@pinnaclepartnersmed.com           Business                   Highlander
                                            Joseph Dearing, Nortel          Partners, LP
     2nd Vice President                         Networks                John Neumann, Bank
     Kenneth Johnson                        James Doyle, celanese          of America, N.A.
     Director, Legal compliance             David Ehrhart, Lockeed      Linda Newman, Bank of
     Quest Diagnostics Incorporated             Martin Auronautics          America, N.A
     972.884.1063                               company                 Ruairid Ross, Hewlett-
                                            Jana ferguson,                  Packard company
     Treasurer                                  Pepsico/frito-Lay       Thad schaefer,
     Jeff Everett                           Joseph ferretti, frito-         comerica
     Deputy General counsel                      Lay Inc.                   Incorporated
     sabre Holdings corporation             stephanie Giotes, ePP       clay scheitzach,
     682.605.1560                                Management, LLc            Affiliated
     Jeff.everett@sabre-holdings.com                                        computer services,
                                            otto Grunow,
                                                 American Airlines
     secretary                                                          Thomas schur, frito-
     Richard Mosher                         Mary Holohan, fluor
                                                                             Lay, Inc.
     chief Legal officer                         corporation
                                                                        Ty simmons, union
     Loctronix corporation                  Jeffery Hunt, Ratheon
     214-252-6124                                company
     hajime01@msn.com                       William Imwalle,                 company
                                                Halliburton Energy
     Past President                                                     sarah smith, Behringer
     Marcia stuart ceplecha                                                  Harvard
                                            steven Kemps, Dean
     chief counsel, Business Integration                                sinead soesbe, Energy
                                                 foods company
     Lockheed Martin Aeronautics company                                     future Holdings
     817.763.2332                           Marc Kesselman, frito-
                                                                        James stafford, BT
     marcia.s.ceplecha@lmco.com                  Lay, Inc.
                                                                             North America Inc.
                                            Dale Kimball, cadbury
     Board of Directors                                                 Jeffrey Tschirhart, MGc
                                            Melanie stapp,                   Mortgage, Inc.
     christopher Ducanes                         MetrcPcs
     Michael cameron                                                    John Vestal, Hewlett-
     Rhonda L. Lenard                                                        Packard company
     Bipasha Mukherjee
     P.J. Putnam
     Robert Robertson

     Executive Director
     Kathleen Yarborough

8 Dallas fort Worth chapter focus 3Q09                                                                                  8

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