ALM Properties, Inc.
Page printed from: Corporate Counsel
Select 'Print' in your browser menu to print this document.
A Lawyer Brings Order to an Unruly Shop: Palace Entertainment
It's a run-of-the-mill Tuesday morning, and Michael Baroni, the general counsel of Palace Entertainment Holdings LLC, has a killer whale problem. Palace's parent company, Madrid-based Parques Reunidos, owns amusement parks and attractions throughout Europe, including a sea life park in France. That park loaned a killer whale to a Six Flags in California for breeding purposes. But suddenly Six Flags wants to give the animal away to an unrelated party in Canada. Now, the parks are in a contractual dispute over one very large marine mammal named Shouka.
Buzzing through the colorful hallways of Palace headquarters in Newport Beach, California, Baroni shakes his head and smiles. Contracts are sacred to the 44-year-old lawyer, who sports nearly invisible Versace glasses and an equally subtle salt-and-pepper goatee. But given Palace's footprint40 attractions across the United States that draw more than 13 million visitors a yearit's not like Baroni hasn't dealt with an animal or two. There was the woman who wanted to sue because a bird dive-bombed her hat, and the one who claimed emotional trauma when she came face to face with a dolphin. In this instance, Baroni decides to halt that killer whaleand try to keep her in California. Add one more item to his running to-do list.
Baroni's ultra-lean legal groupuntil recently, he was Palace's only in-house lawyeris one of four that Corporate Counsel is honoring this year as Best Legal Departments. The inclusion of Palace beside much larger teams is a tribute to what one dedicated attorney can do.
Since his arrival at Palace in January 2010, Baroni has been putting things in order. His corner office, with views onto Newport's palm treelined business district and the nearby runway at John Wayne Airport, wasn't neat when he first moved in. It was in utter disarray, filled with a mess of loose papers and records pertaining to a company that had changed hands four times since it was established in 1998. There were no corporate books. Trademarks went unregistered. The payroll system for some 13,000 employees wasn't automated. Injury claims and lawsuits were settled as a matter of habit. Like a loose confederation, the parks, many of which were once family-owned, operated with little sense of a corporate culture. These were the challenges Baroni embraced.
He set out to create standards and systems, particularly when it came to contracts, employment matters, and litigation. But above all, he was determined to ensure that the parks were safe. He has transformed the company's legal function in the process.
Using a methodology as rigorous (and in some cases, unconventional) as it is effective, he's slashed accident rates, and suits are beginning to decline as he's held fast to a refuse-to-settle policy on frivolous litigation. No small feat when you're the general counsel of a company where every park is like a small city and the possibility of accidents and lawsuits springs eternal. He even does undercover safety checkssuch as pretending to have a back condition and asking a park attendant if he can ride the go-karts. "A lot of it is common sense," says Baroni. "You have to think of all the ways someone could get hurt."
In 2007 Parques Reunidos was looking to expand beyond its European stronghold, and Palace proved a gateway to the U.S. leisure park market. Gracing the conference room in the Newport Beach office, a giant green map of the country depicts Palace's world of fun. Each site is marked with a yellow dot, from Splish Splash in Long Island, New York; to Pennsylvania's historic Kennywood, with its quaint wooden roller coasters; to the cluster of attractions in the southeastern states and California. Soon the map will boast one more acquisition: Noah's Ark in the Wisconsin Dells, the largest water park in America.
It's a vast territory for Baroni's tiny team. Until a second attorney joined him in February, he had only paralegal Diana Tran and Penny Weber, the company's vice president for risk management. Each year Palace racks up tens of millions of customer rides, renews 2,000 permits and licenses, and signs contracts with parties ranging from IT providers to food vendors to film studios to ride manufacturers. Tally those numbers, and "you realize the enormity of what you're trying to do," Baroni says.
Add to that the U.S.'s state-by-state safety and compliance regulations and litigious culture, and CEO Fernando Eiroa needed a GC who would be perfectly up front with him. "I want somebody to tell me, 'Fernando, we have a problem, and we have to fix it,' " says Eiroa, whose office is just down the hall from Baroni's. He was sold on Baroni's honesty, as well as on his list of priorities and ideas about costs: "He had a clear vision of what to do with the company."
Baroni is a lawyer with an eye for details, and a sweeping gaze for how they fit together. An in-house attorney since age 29, he knew his background in entertainment law, corporate work, and product liability would dovetail perfectly with Palace's big picture. Teaming with Weber, who has been in charge of risk management for the company since 1998, and Tran, whom he hired in January 2011, he has zeroed in on his major objectives: ratcheting up safety measures, tamping down baseless lawsuits, and standardizing and maintaining company contracts and records.
The fruits of Baroni's labors are readily apparent. He pieced together Palace's nonexistent corporate books from the loose papers he found in the drawers and boxes. That painstaking activity alone smoothed the way for Palace's $550 million refinancing last year, which funded the Noah's Ark acquisition.
Baroni's bookshelves bear further evidence. Binder after bulging binder is filled with the contracts that exist in triplicate; there is no agreement now that doesn't go through legal first. Baroni's responsiveness and fast turnaround times win him praise from Palace executives. Dan Vogt, the company's new head of IT, who migrated from a Fortune 100 company, says he's never worked with an attorney who can prioritize work flow at such a granular level, down to an hourly basis.
Indeed, time is of the essence at Palace. Most parks only generate revenue for a season, so every day spent on a contract matters, says Rolf Paegert, vice president for operations and theme parks. Paegert is in charge of adding new attractions to the parks, and tacked to the wall in his office are renderings of mechanical rides, such as the Black Widow, which will debut at Kennywood this year. Many of Palace's attractions come from European companies like Italy's Antonio Zamperla S.p.A., and Baroni scours those agreements for exchange rate risks and to make sure all the nuts and bolts are sourced and traceable for liability.
Paegert also points to Baroni's emphasis on prevention. Every week Palace executives receive an analysis of safety-related incidents compiled from across the country. "That's been a vast improvement," says Paegert. "In the past, you waited for someone to file a lawsuit. That's not how this legal department works."
In spite of the improvements, Baroni isn't resting easy. And there's no question what keeps him up at night. He may be working at home until 1 a.m. (his self-imposed nightly cutoff), but the worst thing he can imagine would be for a death or serious injury to occur on his watch. Spotting trouble zones before they erupt is the most important job of a general counsel, he says.
Baroni has taken a hands-on approach to safety, involving himself in even the minutiae of operations. During his undercover visits, he plays the bumbling customer, opening doors to machinery that should be locked. Observing how people cluster, he has had lines restructured to avoid overcrowding. He hired third-party inspectors to regularly examine Palace's food operations. He loves to write and design safety signs.
Yet, above all, Baroni knew that creating a database would be critical. Now, the general managers of each Palace attraction input all safety-related incidents. This allows headquarters to monitor trends and address risks immediately. Palace is capturing more types of incidents than everdown to guests who need Band-Aidswhile Baroni says the company has experienced a 2530 percent reduction in incidents overall. "At least when you have the data, you can push for answers and make tweaks," he says.
That data is critical to how Palace handles claims. Palace runs what amounts to its own in-house insurance company, giving it more control over costs and investigations. Park general managers are even trained how to interview witnesses and take photos of scenes, says Penny Weber, the risk manager, who keeps a CSI cap perched on a bookshelf. The idea is to figure out how and why an incident occurred, and to make sure it never happens again. Viewed another way (as someone once put it to Weber), people come to the park, get their kids out of the car, and leave their brains in the trunk. "Much of our time is really spent protecting our guests from themselves," Weber says.
The system also operates as a sort of corporate backbone against false or exaggerated claims. Having been with Palace since its founding, Weber has a broad perspective on how the law department has changed.In the past, she says, legal was always inclined to settle. Now she works for a GC who listens to her and respects her opinion on when a claim simply doesn't hold waterlike when someone wants big bucks because they stubbed a toe. "You almost have to have the feeling that you're fighting the good fight," she says. "It's very challenging to keep your standards high."
Nothing rankles Baroni like baseless lawsuits. Once a father threatened to sue because his daughter hit him with a golf club on a Palace putt-putt course (the father eventually agreed to drop it). Don't even get Baroni started on an obese man with brittle bone disease who visited one of the water parks. Tired of waiting in line, he hopped a rope that cordoned off a deep fountain-pool, shattering his leg in the process. Then he sued Palace for $4 million. Ultimately, the jurors assigned 8 percent negligence to Palacefor not putting up a higher barrier to the waterwayand Baroni was still horrified by the outcome.
But Baroni is battling back. He knows the plaintiffs bar is a networked crowd, and word travels fast when a company is eager to settle. He would rather pay more to try the case, and his refuse-to-settle policy has gained traction. He took it as a compliment when one attorney yelled at him, "I'm never suing you assholes again!" He has kept the company's personal injury costs to just over $2 million a yearwhich is what a company could spend on a single lawsuit. He is also writing a bill to thwart frivolous lawsuits in Californiathe Amusement Ride Responsibility, Liability, and Unjust Claims Actand hopes to win the support of the state bar association before presenting it to the legislature.
As indignant as he gets at claims he considers unjust, Baroni doesn't minimize the cases that are not frivolous. At the mention of the Raging Waters incident, for example, he grows stone-faced. In April 2011 a sudden burst of chlorine in Palace's Sacramento water park sent children stumbling from the water, vomiting. Eleven children landed in the hospital. Baroni sent word to close down the park, and to make sure that everyone was being treated while Palace's roving facilities manager raced to the scene. Baroni also hired outside counsel to serve as a buffer between employees and state and federal investigators, and crafted rapid settlements with most claimants. In the end the company was fined only $45,000. An incident like this also demands aggressive self-reflection, he says, and not taking employees' explanations at face value: "You have to investigate and press hard so those issues don't happen again."
Of all Palace's attractions, the one closest to Baroni's office (and the one he visits most often) is called Boomers Irvine. Not a crown jewel like Noah's Ark or a classic like Kennywood, it is known in this parlance as a family entertainment center. The eclectic grounds are home to a cacophonous arcade inside a castle, and, outside, a go-kart track, a mini golf course, a climbing wall, and batting cages.
The law department's imprimatur abounds. At the entrance a sign warns parents and guardians that they are responsible for any children they drop off. Apparently this was not completely clear to parents before the sign was planted there. Judges have looked favorably on it. "Just having that notice has saved us," Baroni says.
Inside, teens play skeet ball in the arcade and hover in front of a "Guitar Hero" game blasting Coldplay. Further in, a hallway lined with birthday party rooms meets the entrance to the Surfer's Sunset Grill. As at so many parks, renewing or obtaining a liquor license is a major task, especially given regional bureaucracies. But a task well worth it, Baroni says. "If the kids are in the birthday room, and mom and dad can have a drinkthey appreciate it," he explains.
Past the grill and Merlin's Magic Tea Cups, Baroni pauses at the chain link fence that surrounds the Thunder Road go-kart track. It features his pièce de résistance: a triple warning system. There are signs, instructions that play on an audio loop, and a personal warning from the attendant. Pre-Baroni, the speakers were so bad that you couldn't understand the warning. After that was fixed, he banned flip-flops, which can slip off and jam in the brake pedals. And, since long hair not pulled into a ponytail can get caught in an engine, Baroni addressed that with a separate warning sign. (Once Baroni personally told a teen that she needed to put her hair up. When she demanded to know who he was, and was told he was a park executive, she threatened to sue him for ruining her hair.)
Baroni has more projects in mind. Near the bumper boats, the roar of go-kart engines gives way to the clink of baseballs hitting metal bats. When Palace has accidents in batting cages, it's nearly always because someone walked across the white line of the batter's box, so Baroni plans to have those lines painted red, and to roll out new signs.
The GC is not, by his own description, a "thrill seeker kind of guy," and hasn't been on many Palace attractions. But he did try the batting cages once. He hadn't taken a whack at a baseball since he was 14 years old. "It felt like I swung a bat into a steel wall," he recalls. "The next day, I had trouble opening my hands." His mind went to safety first. Should we make people wear gloves in the batting cages? he wondered.
But the thing about batting cages, as Baroni has since learned, is that most people who use them have batting experience, and they know how much speed they can handle. In the end, he realized no extra precautions were necessary. When he looked at the database, he says, "there were no claims like that at all."