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Ability To Assess Risks, Suggest Solutions Key To Success In-House

In-house attorneys who can skillfully assess legal and business risks and recommend courses of action – rather than just describe those risks – are highly prized by companies, three business leaders tell New England In-House.

And company lawyers should also have the ability and the backbone to “push back” and say no to upper management when necessary, these company chiefs say.

The three leaders interviewed by New England In-House’s Paul Boynton were:

  • Mike DiFranza, president of Captivate Network, which provides news content on flat-panel television screens in top-flight office tower elevators across the country. Media giant Gannett acquired the company in April. The current management team, including DiFranza, will continue to run the company.

  • George W. LeMaitre, who heads LeMaitre Vascular, a privately held company that designs and manufactures vascular surgery devices. It has operations in Massachusetts, Florida, the United Kingdom and Germany.

  • Joe Lacher, president of the Florida unit of BellSouth Telecommunications, Inc., a Fortune 100 communications company headquartered in Atlanta, and a parent company of Cingular Wireless, the nation’s second largest wireless voice and data provider. Lacher is responsible for all Florida operations of the company, and he works with a staff of attorneys on a daily basis.

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    In-House: What in your view is the primary function of in-house counsel?

    LeMaitre: A year and half ago, we hired a transactional attorney. We didn’t have an in-house counsel prior to that. We have an outsized business development group in our company, and we wanted an in-house attorney to aid us in buying other companies. We wanted to have that expertise developed in-house – to capture the expertise in the detailed documents for the transactions.

    DiFranza: They should help manage the risks of the business – be it contractual, policy, or human resources. I look to in-house counsel to assess risks and provide a recommendation on how to deal with the risk. A frustration I have with counsel in general is that they lay out the risks, but they don’t always assess and interpret the risks and quantify how we should be moving. Just don’t tell me what the risks are, but recommend solutions. I can disagree. That’s fine. But I’m looking for that level of consultancy.

    Lacher: We look for in-house counsel to provide direct feedback and be a partner in the business. They are key members of the management team. I view them as a partner in evaluating and developing strategies for our business. I want them to give objective, honest advice on achieving our business objectives, while at the same time being sure that we’re in compliance with the various statutes and regulations that apply to our business. I want to bounce ideas off of them to be sure they past muster before we take them beyond the thinking stage.

    In-House: How do you measure the success or shortcomings of in-house attorneys? What metrics do you use to measure their productivity and effectiveness?

    LeMaitre: By the quality of paperwork that surrounds the deal, and by our ability to keep paperwork in-house rather than farm it out. By the lawyer’s ability to not let legalese get in the way of a deal between two businesses. Also, by the number and quality of acquisitions completed and the amount of equity raised.

    DiFranza: At the end of day, in-house counsel serves in a “customer service” function. I rely on anecdotal information from the different vice-presidents in the various business lines in the company that the general counsel supports. I also look to how well we’re managing outside counsel expenses, and how well we’re leveraging internal counsel’s expertise. Are we keeping too much or too little legal work internally?

    Lacher: Principally by observation. In our case we have numerous regulatory filings. We get a fairly quick determination of whether the filings meet the regulators’ rules. I attend a lot of the regulatory hearings and I observe how our lawyers do. I also get ad hoc feedback from our operations people on how our lawyers are assisting them with their business issues, such as getting permits or right-of-way permissions. I have discussions with most of our lawyers day-to-day, and I’m aware of how we’re doing on various cases.

    In-House: In a nutshell, what do you expect from your legal department? And aside from expectations, what do you ideally want from your legal department?

    LeMaitre: The first two expectations are to help buy companies and raise equity. We’re also prosecuting trademarks through him, as well as garden-variety business disputes with suppliers and distributors. We also have him processing and overseeing lawsuits, things happening at the courthouse. We don’t expect him to argue the case, but we do want him to do triage with outside counsel and make sure outside counsel is doing a good job. Our in-house attorney is also handling garden-variety personnel matters, such as contracts for new hires, and separation agreements. Ideally, you want an in-house counsel who’s adept and intelligent enough to interact with the board of directors and to help plot strategy for the company. They’re someone you start turning to for “general counsel” advice.

    DiFranza: Timely responses. Analysis of risks and a plan of action with information backing up the course of action that in-house counsel is proposing.

    Lacher: I’m not sure there’s a difference between the two. I expect honest, forthright advice, crisply stated and good execution on that legal advice, such as preparing regulatory filings promptly and effectively. I’m not looking for a yes person. I want them to make sure we meet the high ethical standards we set for our business.

    In-House: How can in-house attorneys best support your business?

    LeMaitre: Executing acquisitions and raising funds. Our attorney is involved in sourcing deals. We tend not to use investment banks. We’re looking for small to mid-sized market deals. The attorney helps the business guys at trade shows – finding companies that we should acquire. He’s less the main person at the front than the business guys. But at the back end he does all the paper work.

    When we transitioned that in-house initially, we were looking to save money. When I look back, a concern about just saving money was a silly endeavor. An in-house lawyer has the ability to craft and shape deals. They provide a legal perspective business people don’t have. When you are using outside counsel, your frightened to engage them frequently out of a fear of cost, as well as the inconvenience of them being in a separate office. When you have an in-house lawyer just down the hall, you can run ideas by them on a regular basis. They always have a wonderful legal angle that as a businessperson I just didn’t think of. You don’t get that working with outside counsel in hourly increments. It’s best to learn of the legal points up front when you can save hundreds of thousands of dollars potentially.

    DiFranza: This really just encapsulates what I said before: Assess business and legal risks and help craft a direction for the company.

    Lacher: Several ways. Understand our business. Be an active participant in forming strategies and executing on those strategies. Make sure we comply with the various rules and regulations that apply to us. The earlier we find potential conflicts between our business objectives and the regulatory requirements, the sooner we can alter our strategies to make sure we are in compliance and the quicker we can get to the marketplace. I’d rather they tell me beforehand, rather than after the fact, that we made a mistake.

    In-House: With pressures to hold down legal expenses as great as ever, is there any room for preventative-type training and education that in-house counsel can provide to your business units to help avoid lawsuits?

    LeMaitre: Definitely, particularly with respect to our employees in Europe. Our attorney, as well as our outside counsel, can help all of our managers on European labor law when it comes to hiring and firing and all the paper work involved. Any training they can provide can have a very big payback. The same holds true in the U.S., but to a lesser extent, since the labor laws are more flexible here.

    DiFranza Yes. Prevention is a much better solution. People often get in trouble due to a lack of understanding of what the rules are, be it human resources issues or even contractual issues. This is an opportunity for in-house counsel to contribute in a different way.

    Lacher: Absolutely. We do that on a regular basis. Our in-house lawyers provide a training package to our employees on a yearly basis. It varies from year to year depending on the issues.

    In-House: What role should in-house counsel play in working with outside counsel?

    LeMaitre: In-house counsel is a good interface between businesspeople in the company and outside counsel. He speaks a little of both languages. He can guard against mediocrity in the delivery of legal services by outside counsel. An in-house lawyer can spot mediocrity where a businessperson might be a little intimidated because they don’t have a J.D. at the end of their name.

    DiFranza: Outside counsel should be aware of the pending issues facing the company. In-house counsel and outside counsel need to figure out how to partition the workload. In-house counsel needs to know what their core competency is. In our company, our counsel is strong in real estate law, but he knows to go to outside counsel if the corporate legal issues get too complex.

    Lacher: They need to be the quarterback. They must effectively steward the corporation’s resources. It’s not practical for outside counsel to have the internal network of contacts. Inside counsel has to provide that interface to make sure the contacts between our employees and outside counsel are made on an efficient basis.

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