‘Retaliatory Amendment’ of an LLC Operating Agreement

Like all contracts, operating agreements — which are celebrated for allowing business partners to freely define their relationship by contract — can be amended and modified, according to a post in The LLC Jungle.

Author Kevin Brodehl discusses a recent opinion from the Supreme Court of New York that illustrates how the process of amending an LLC’s operating agreement can sometimes be used to gain the upper hand in a dispute between members.

The case involves a majority of members amending the operating agreement to remove the manager and escalate capital calls.

Read the article.

 

 




Download: 5 Future Tech Forces & Board Expectations

A new publication by the National Association of Corporate Directors examines the areas of technology that are “fundamentally changing the economic world.”

The article can be downloaded from the NACD’s website at no charge.

The areas discussed in the article include artificial intelligence, blockchain, cybersecurity, hyperconnectivity, and symbiotic systems.

J.T. Kostman, the author of the article and managing director of Applied Artificial Intelligence at Grant Thornton, provides real-world examples that illustrate the capabilities these technologies have enabled, the risks they pose, and why they are considered to be the driving forces of “the fourth industrial revolution.”

Download the article.

 

 




The Rise of Analytics: How Legal Technology Finally Got a Seat in the Boardroom

By David Carns
Chief Strategy Officer of Casepoint

The story of legal technology over the past 30 years is by and large a story of tremendous progress. During that period there have been near-continual improvements, enabling significant gains in speed and efficiency, and lowering the headcount in many legal departments. But until recently the impact of these improvements has been felt primarily in the legal department itself. For the most part, legal continued to be perceived as just another department within the corporate structure, and rarely a strategic driver in the organization.

But recent advances in legal technology – in particular artificial intelligence technologies like analytics, predictive modeling and machine learning – are giving legal more prominence within the corporation and are helping make the department’s strategic value more tangible to the C-suite and the board. Let’s explore how these advanced analytic technologies are currently helping corporate legal departments elevate their standing and demonstrate they are at least as valuable as other corporate business units in managing profit and loss and informing strategic business decisions.

Yesterday’s technology creates new efficiencies, but is that enough?

Legal technology made significant improvements from the 1990s through 2010s by leveraging innovations like word processing, hard copy document scanning, electronic time capture, e-billing, and a broad range of e-discovery technologies, including web-based review and technology assisted review (TAR). The result of incorporating these and other innovations has been a much higher level of efficiency in legal departments.

In light of the paper-based alternatives of the 90s and earlier, the new efficiencies were dramatic. Word processing alone meant that fewer people were required to create memos, briefs, complaints, contracts and the like, and the addition of scanning and electronic time capture made possible huge gains in productivity for attorneys and legal staff. Even as technology opened the doors to exponential increases in data volume, e-discovery applications, web-based review and eventually TAR enabled case teams to pore through millions of digital pages with greater speed than it took to read thousands of physical pages just a few years earlier.

These were significant improvements, but for the most part they did not – and still fail to – resonate in the corporate boardroom. Why? Because legal departments remained predominantly reactionary rather than proactive. While these powerful new technologies allowed legal to manage current challenges with greater ease and with fewer employees, they did little to allow GCs to get ahead of future challenges. But that’s begun to change.

Today’s technologies provide unprecedented insight into current, and future, matters

More recent developments in legal technology – incorporating broader innovations like SaaS and cloud-computing, as well as machine learning, predictive modeling, data analysis and data visualization – are finally allowing legal departments to demonstrate proactive and strategic value to the board. The recent embrace of these innovations by general counsels and legal executives are part of a large trend in which the legal department is exerting much tighter control over eDiscovery technology. That’s happening because GCs understand it’s one of their best avenues to controlling costs. More importantly, the trend is providing the GC and other executives with the metrics they need to understand the precise relationships between cost and performance – not just in eDiscovery, but across the litigation lifecycle.

The power of analytics across multiple matters

These new technologies are realizing their fullest potential in multi-matter analytics and data reuse, in which information about data gleaned from one legal matter is leveraged and applied to the data in subsequent matters, and where analytic processes are tightly integrated across the entire litigation workflow. When advanced analytical technology is integrated across multiple legal matters, the legal department can identify key metrics to understand important trends outside the silo of individual matters. This is precisely where legal begins to transcend its traditional status and function in the organization and become a proactive participant in business strategy.

Machine learning, a key component of analytics, is all about continuous improvement. Machine learning algorithms are built to quickly detect patterns in large bodies of data. By repeatedly and iteratively generalizing from very specific examples, these algorithms steadily refine our understanding of the data and, as they are progressively exposed to even larger volumes of comparable data, are able to make increasingly accurate predictions about the kind of information a new body of data is likely to contain.

For instance, legal now has access to tools that can help them make accurate projections about important factors in eDiscovery like data volume, the number of individual documents, the document types, the number of custodians and the number of reviewers a particular matter is likely to involve. The same tools enable us to quickly make facts-based determinations on questions like these: Which outside counsel is making the most efficient and cost-effective use of technology? Which is likely to perform best on a particular kind of matter? Which reviewers were most effective and productive in Matter A? Which reviewers are likely to do the best job at the lowest cost on Matters B and C?

Analytic technology applied to a single matter – say, predictive coding to speed the review process – can be achieve big cost savings even in that comparatively narrow context, but the technology is especially powerful when you use it to leverage information from one litigated matter and apply that knowledge to additional matters.

For example, privileged documents from Matter A are highly likely to be privileged documents in Matter B. Finding those documents the first time around can be expensive and time-consuming – especially if you are relying on keyword searching – but machine learning can make that process many times faster and more accurate when you are leveraging a larger body of information from previous matters.

Similarly, “hot” documents in one matter are often likely to be informative across multiple matters. The sooner we identify such documents in the litigation lifecycle, the earlier we are able to make important decisions about whether to negotiate or proceed to trial, or about legal strategy – and, of course, this has the potential to save lots of money. The same dynamic applies to information about internal investigations: Analytics can help us quickly identify internal code words or project names tagged in previous investigations and predict their relevance to subsequent investigations. We can even use these metrics and processes to inform multiple matters simultaneously in real time. Suggested tagging from one matter can be applied to speed review in another matter being litigated at the same time.

Data-based portfolio management reduces costs across the board

When you consider the application of analytics across multiple matters, the result is something GCs haven’t had before: true portfolio management with a comprehensive view of costs, efficiencies and trends across all matters. You even have the components of high-level SWOT analysis right at your fingertips. As I’ve already suggested, this is the kind of information that earns legal a seat in the boardroom. Advanced analytics enables comprehensive, effective multi-matter management that will lead to reduced legal costs associated with litigation and reduced risk by improving legal outcomes.

Litigation cost forecasting based on multi-matter analytics is now possible and, properly applied, is much more accurate than less sophisticated forecasting methodologies. And the benefits can extend to other functions in the organization. For example, when the legal department successfully deploys analytics to overhaul its portfolio management processes, that deployment can serve as a model for corporate IT deployment in other departments and inform the organization at large about optimal technology strategies.

Does this kind of potential excite you? It should. Even if your organization chooses not to bring an advanced eDiscovery platform in-house, you should be demanding metrics from outside counsel and/or third-party vendors that can help you determine which outside counsel makes the most effective use of technology and which review teams are most cost-effective and achieve the best outcomes. Does your outside counsel take advantage of analytic tools like document classifiers, predictive coding, TAR 2.0 and advanced data modeling? If you don’t know, you should ask, and you should ask to see the data.

Analytics technology is no longer speculative in the legal domain. It is being used to great advantage in forward-looking law departments and firms right now. Technology platforms are being designed and developed specifically to accommodate a more rigorously proactive mindset in the legal department. These platforms not only incorporate advance technologies, but are also built for maximum extensibility and flexibility so they can be easily and rapidly customized and readily integrate new applications. There is little doubt they can efficiently automate the full spectrum of eDiscovery phases, but they are also giving legal departments a more holistic and data-driven view of the entire litigation process and providing the basis for strategic decision-making. That’s certainly good for legal, but it’s also good for the entire organization.

ABOUT THE AUTHOR

David Carns is the Chief Strategy Officer of Casepoint LLC. He joined Casepoint as a Director of Client Services in 2010, rose the ranks to Executive Vice President until his most recent promotion in 2017. In addition to being a recovering attorney, Carns possesses a lifelong passion for technology and its advancements. His career has always found him at the intersection of technology and the legal field given his intimate knowledge of both.

Prior to joining Casepoint, Carns’ positions included Director of Practice Technology at a premier global law firm, Technology Consultant, and Director of Technology. Carns holds a Juris Doctorate from The John Marshall Law School and a Bachelor’s degree in Philosophy from DePauw University.

 

 




CVS-Aetna Closes Deal; Not So Fast, Judge Says

Reuters is reporting that a federal judge on Thursday raised the prospect of not approving CVS Health Corp’s deal to buy insurer Aetna Inc, which closed earlier this week, during a routine portion of the legal process.

“I was reviewing your motion, which, of course is not opposed. And I kind of got this uneasy feeling that I was being kept in the dark, kind of like a mushroom,” Judge Richard Leon of the U.S. District Court for the District of Columbia told lawyers for the Justice Department and the two companies, noting that the American Medical Association, among others, had objected to the deal.

“I’m very concerned, very concerned that you all are proceeding on a rubber-stamp approach to this,” he told them, according to a transcript of the hearing.

Read the Reuters article.

 

 




How Does Your Salary Compare? Read the Full GC Landscape Report

LawGeex, in association with the Association of Corporate Counsel, has published an in-depth audit of the general counsel position — looking at more than 34,000 GCs, providing insights into the position and those that occupy it.

The publication, “The 2019 General Counsel Landscape,” can be downloaded from the LawGeex website at no charge.

The guide reveals insights from GCs at hundreds of companies across the United States, including Uber, PayPal, NetApp Amazon, Macy’s and Caterpillar.

Information includes:

  • Compensation based on age, gender, state, sector, and more
  • Industry standards for bonuses and perks
  • The road to becoming the modern GC
  • The Fortune 500 GC – what sets them apart

Download the guide.

 

 




Fewer Lawsuits for Corporations, But More Oversight on Data andTax Risk

Corporate counsel report a decrease in the number of lawsuits against their companies over the last year, but they face more regulatory proceedings and arbitrations in navigating increased cyber risk, data protection and tax issues.

Norton Rose Fulbright’s 2018 Litigation Trends Annual Survey polled 365 senior corporate counsel representing US-based organizations on disputes-related issues and concerns.

Two thirds of respondents report feeling more exposed in 2018 to cybersecurity and data protection disputes. The survey also found that the growing international nature of many business operations has caused a spike in conflicts related to countries’ differing discovery and data protection laws and regulations.

See the survey results.

 

 




What You Need to Know About Contract Management Software and Small Legal Teams

Contract managementContractWorks has published a new guide:  Contract Management Software for the Small Legal Team: Why It’s Not Just for the Big Fish Anymore, to navigate contract management options so the right solution can be found.

The guide discusses:

• How small legal teams are benefiting from contract management software
• How new solutions are designed to be easy and affordable
• How customization and cloud storage means there’s software for every legal department
• How automation, AI and machine learning can elevate contract management

Download the free ebook.

 

 




Legal Departments Sending Less Cash to Big Law, Survey Says

Bloomberg Law is reporting that corporate law departments are spending more, but less of that that money is landing in Big Law coffers, according to a new survey.

Altman Weil’s 19th Annual Chief Legal Officer survey revealed that most companies increased their spending between 2017 and 2018. But about a third of legal officers shifted work to lower-priced alternatives, the data indicated.

Survey participants said they received quality work and service at considerable reductions in cost with shifts to smaller firm, reports Bloomberg’s Elizabeth Olson.

Read the Bloomberg Law article.

 

 




Tesla Loses a Senior Lawyer Just as SEC Tightens Grip

Bloomberg is reporting that an experienced securities lawyer has left Tesla Inc. just as the company needs one under its fraud settlement with U.S. regulators.

Phil Rothenberg, a vice president in Tesla’s legal department who joined the company in 2011, became general counsel at Sonder, a hospitality startup, on Nov. 5, writes Bloomberg reporter Dana Hull.

Before joining Tesla, Rothenberg was an attorney-adviser for the U.S. Securities and Exchange Commission and has extensive securities law experience.

Read the Bloomberg article.

 




2018 Third-Party Risk Management Benchmark Report

NAVEX Global has published a new report discussing how to assess your program maturity, gain organizational buy-in and understand the value of a comprehensive third-party due diligence program.

The report can be downloaded from the NAVEX website at no charge.

“Third parties are an extension of your business and expose your organization to reputational and business risks,” NAVEX says on its website. “Help protect your organization with the latest insights, benchmarks and trends around how to manage these business partners.”

The report answers questions such as:

  • What strategies do organizations use to manage third-party risks?
  • How do organizations employ risk-based procedures to manage third-party risks?
  • How do respondents measure the effectiveness of their program?

Download the report.

 

 




IADC Journal Covers Asbestos, Punitive Damages and Manufacturers’ Legal Hurdles

The International Association of Defense Counsel (IADC), an invitation-only global legal organization for attorneys who represent corporate and insurance interests, has published its fourth quarter 2018 Defense Counsel Journal (DCJ) with articles on current trends in the practice of law.

The current DCJ issue’s articles explore asbestos tort reform on the state level, the growth of punitive damages in Anglo-Canadian contract law, and legal hurdles that manufacturers face when launching products in the United States.

In a release, the organization, said the DCJ is a quarterly forum for topical and scholarly writings on the law, including its development and reform, as well as on the practice of law in general. DCJ articles are written by members of the IADC, which is a 2,500-member, invitation-only, worldwide organization that serves its members and their clients, as well as the civil justice system and the legal profession.

The DCJ is available for free and without a subscription via the IADC’s website.

The current DCJ issue is the first to be overseen by new editor and former IADC board member Kenneth R. Meyer, a partner in the products liability practice group at McCarter & English, LLP, in Newark, N.J. The issue also is the first under the leadership of new IADC president Craig A. Thompson, a partner at Venable LLP.

Following are brief summaries of key articles included in the fourth quarter 2018 issue of the DCJ:

— “The More Things Change: Bankruptcy Trust Reform and the Status Quo in Asbestos Litigation” – The article debunks plaintiffs’ lawyers’ arguments that trust transparency reforms would delay litigation, deny compensation to the most sympathetic of plaintiffs, and divest plaintiffs of their traditional control over the trust and tort systems. The authors explain how trust transparency reforms have not delayed litigation and have, in fact, accelerated compensation from the asbestos trusts. The article also describes that, where reforms have been enacted, they have achieved their purpose of fostering communication within the two-tiered system of asbestos compensation so that juries can properly account for all of a plaintiff’s exposures to asbestos.

— “Moving Beyond Uberrima Fides? The General Duty of Honesty in Contractual Performance and Punitive Damage Awards in Anglo-Canadian Contract Law” – The article’s authors suggest that the characterization of punitive damages as “the bane of corporate defendants” has perhaps never been more true under Anglo-Canadian contract law. This article demonstrates that while punitive damages for pure breach of contract are undoubtedly exceptional remedies at common law, they are generally larger and more common than ever before, which marks an extraordinary development in Anglo-Canadian contract law considering that only 30 years ago punitive damages were barred for pure breach of contract.

— “Entering the U.S. Market: Legal Hurdles That Manufacturers Must Overcome” – Investigates the life cycle of a product’s development and marketing and provides insight into some of the most common legal hurdles – especially consumer protection lawsuits – faced by manufacturers entering the U.S. market.

 

 




Download: New NACD Blue Ribbon Commission Report on Disruptive Risks

National Association of Corporate DirectorsThe  National Association of Corporate Directors has published its 2018 Report of the NACD Blue Ribbon Commission on Adaptive Governance: Board Oversight of Disruptive Risks to provide directors with valuable insights and tools.

How can directors do a thorough job of assessing disruptive risks and then of guiding their companies toward effective responses? More broadly, how can directors fulfill their core responsibilities for overseeing performance, strategy, risk management, and enterprise content management when volatility, uncertainty, complexity, and ambiguity (VUCA) are the only constants?

The report provides:

  • a functional definition of disruptive risk
  • characteristics of the current environment—and their implications
  • a definition of adaptive governance as a framework for overseeing disruptive risks
  • the essential components of adaptive governance
  • recommendations for putting adaptive governance into practice

Download the complimentary report.

 

 




Google Exec Clouded by Scandal is a Veteran Silicon Valley Counsel

David Drummond, the  chief legal officer of Google parent Alphabet Inc. and a one-time Wilson Sonsini Goodrich & Rosati partner, was cited in a New York Times report about the allegedly lax approach that Google has taken to relationships between supervisors and their subordinates.

Bloomberg Law focused  on the part of the report that detailed an alleged extramarital affair involving Drummond and a subordinate, an in-house senior contract manager at Google. The affair resulted in the woman giving birth to Drummond’s child, the Times reported.

“The report, which cited [Jennifer] Blakely and other Google employees, said she and Drummond had a son in 2007,” Bloomberg reports. “Thereafter, it said, Drummond disclosed the relationship to the company—and Blakely was asked to leave because relationships between managers and subordinates were ‘discouraged.’”

Read the Bloomberg Law article.

 

 

 




ECVC2018: Ethics & Compliance Virtual Conference

NAVEX Global will present the 2018 Ethics & Compliance Virtual Conference as an online event Thursday, Nov. 8, 2018.

This year’s ECVC focuses on putting the ideals of ethics and compliance into practice. Find out how your program should perform through regulatory scrutiny, leadership influence and program enhancements, then deliver quantifiable proof of success.

The conference will feature:

• 4 Learning Tracks
• 3 High-Profile Keynotes
• 13 Hour-Long Sessions
• No Travel; No Cost
• 6000+ Peers for Networking
• Dozens of Free Resources
• Live Speaker Q&A
• On-Demand Access

Register for the virtual conference.

 

 

 




Download: 2018 Corporate Ediscovery Benchmarking Report

Zapproved recently partnered with Corporate Ediscovery to commission an in-depth survey of corporate ediscovery professionals. The resulting benchmark report uncovers key insights about the ediscovery community, including common challenges, aspirations, and approaches to managing each stage of the EDRM.

The 2018 Corporate Ediscovery Benchmarking Report can be download from Zapproved’s website at no charge.

The results and detailed benchmarks include:

  • The volume and types of matters that require ediscovery support
  • How corporate teams are managing each stage of the EDRM – from data preservation through document review
  • Common challenges and goals for 2019 and beyond
  • Best practice adoption rates and barriers

Download the report.

 

 




What Tesla Really Needs, SEC Says, Is an ‘Experienced’ Lawyer

Of the all fixes the SEC wants Tesla Inc. to make in the wake of Elon Musk’s now-infamous tweet, one stands out for its novelty: “An experienced securities lawyer” to review all social media communications by the company’s senior officers, reports Bloomberg Law.

“In resolving its fraud claims against Tesla and Musk, the Securities and Exchange Commission specified in the fine print of its settlement proposal that the lawyer hired or designated to vet tweets must have qualifications that’“are not unacceptable to the staff,’” writes reporter Peter Blumberg.

The head of the legal department now is a lawyer who represented Musk through two divorces, Todd Maron.

Read the Bloomberg Law article.

 

 




Download: A Field Guide to Bad Directors

National Association of Corporate DirectorsBad corporate directorship can be incredibly detrimental to a company or organization. From inattention to detail to feelings of entitlement, bad board members can seriously impede board operations, waste precious resources, and stifle best-practice corporate governance.

The National Association of Corporate Directors has published  “A Field Guide to Bad Directors,” in which four-time corporate chair and CEO of Special Investigations Michael Pocalyko

  • lays out the defining characteristics of a bad director,
  • identifies 14 of the most prevalent bad director archetypes, and
  • offers suggestions for mitigating the effects of a bad director.

Additionally, Pocalyko interviews three seasoned directors about their personal experiences with deficient board members and what management styles and personal qualities are beneficial in maintaining a high-performance board.

The article can be downloaded at no charge from the NACD website.

Download the article.

 

 




Elon Musk’s SEC Settlement Could Have Gone So Much Worse

SECLegal experts say the penalties that the SEC doled out to Elon Musk for  “false and misleading” statements made on Twitter could have been much, much worse for Musk and his car company, reports Wired.

Reporter Aarian Marshall writes that “Musk and Tesla will have to each write $20 million checks for the misadventure, which will be disbursed to investors harmed during the wild market swings that occurred after Musk’s tweets.” Musk had tweeted that he planned to take Tesla private and funding had been secured.

“Not settling with the SEC could have led to a more dire outcome,” Marshall explains. “The SEC’s initial suit sought to bar the CEO from becoming an officer or director for any public company, perhaps for life.”

Read the Wired article.

 

 

 




Download: Effective Practices for Internal Investigations Led by the Board

National Association of Corporate DirectorsA new article published by the National Association of Corporate Directors discusses the steps a company needs to take before deciding to embark upon a board-led investigation, and provides insight into essential actions the company should take to “weather the storm of an investigation,” like assigning committee responsibilities and having disinterested directors.

Based on best practices discussed at this spring’s AC Committee Chair Advisory Council meeting, this article outlines the key considerations for boards beginning an investigation:

  • Early decisions have far-reaching impacts
  • Keep the external auditor informed, while maintaining privilege
  • Take a proactive approach to remediation
  • Get ahead of reputational damage
  • Discuss whether the circumstances warrant self-reporting

The company said this article helps directors develop an internal investigation protocol to follow should an issue arise, and equips directors with a framework to mitigate the effects of an investigation both internally and externally.

Download the article.

 

 




Master Class: Aligning Board Responsibilities

NAVEX Global will present the online master class “Herding Big Cats: Improving Executive & Board Engagement” on Thursday, Sept. 20, 2018, beginning at 10:30 a.m. Central time.

Getting positive buy-in needed from an organization’s executives and board members is a common issue for most businesses, NAVEX says on its website. “And, it can be especially difficult for compliance professionals needing to demonstrate the true ROI of their programs. In this Master Class, you’ll learn how to wrangle top-level decision-makers to ensure all executives and board members understand their responsibilities for compliance oversight. Effectively protect your organization from compliance and behavioral risk, and learn why active board engagement is critical for establishing a strong ethical culture from the top down.”

This master class will cover:

  • How to contribute to the goals of the board
  • Rules of engagement for difficult board discussions
  • Common communication mistakes to avoid
  • Meaningful board training methods
  • How to position compliance to get critical program buy-in

Register or get more information.