Porsche's In-House Lawyers Work in High Gear

Mary Welch

Daily Report

02-14-2013

Joseph S. Folz is general counsel and corporate secretary of Porsche Cars North America, Porsche Cars Canada and Porsche Logistics Services. He is responsible for all legal matters arising in those businesses and for state, provincial and local government relations and public policy. He reports to the president and CEO of Porsche Cars North America and is a member of the company's executive committee.

A longtime Porsche owner and enthusiast, Folz joined the company in 2010 from the Automotive Practice Group of Chicago-based Barack Ferrazzano Kirschbaum & Nagelberg. Before that he served for 29 years with Volkswagen Group of America, including 16 years as its chief legal officer, retiring in 2008 as executive vice president, corporate relations, general counsel and secretary.

Folz earned a bachelor's degree in economics and business administration from Kalamazoo College and a law degree from the University of Michigan. He and his wife, Ellen, who taught elementary school in Michigan, have two children.

His hobbies are reading, movies, concerts and being tourists in Atlanta, his newly adopted hometown, especially trying great new restaurants every weekend. Folz said he intends to become more involved in the community but currently serves on the board of directors of the Airport Area Chamber of Commerce.

Daily Report: Tell us about your department and your role in it.

Joseph Folz: We have a tiny little team of three lawyers and four legal assistants here in Atlanta and two more lawyers in Chicago who are mainly responsible for our captive finance company. They'll be moving here later this year, in connection with our new headquarters project.

We all work on a little bit of everything, and we all work very independently. Everyone is very experienced and extremely well qualified for their jobs, so my daily supervision of anyone else's legal work is minimal.

I spend more time making sure we're all informed and coordinated and keeping the you-know-what from rolling downhill. I have found that the key is hiring smart people with great attitudes and then supporting them and staying out of their way.

DR: What befuddles, amazes or confuses your German counterparts about the American legal system?

JF: Our German colleagues have been known to exclaim, upon learning some point of American law that differs from what they are used to, "That cannot POSSIBLY be the law!" To the Germans, our huge damage awards, the number of lawyers looking for business (in fact, just the number of lawyers), the contingency fee system, and the almost endless possibility for appeals all are completely insane.

But, the good news is that our German legal colleagues, believing our system is crazy, know that they do not directly want to become involved in it. So, they trust us to handle things here and really don't look over our shoulders.

Our German counterparts expect us to know our stuff, tell them the truth and warn them as early as possible of anything bad. They trust us to do our jobs. Earning the trust of a German person is difficult, but it is very worthwhile because, once they trust you, they trust you forever. You never want to betray that.

DR: How will product liability cases be affected if cars will be required to install an event data recorder, which is similar to the black box in airplanes?

JF: The National Highway Traffic Safety Administration has proposed mandating "black boxes" – technically, "Event Data Recorders" or "EDRs" — starting with the 2015 model year, and the industry generally supports this. Some cars already have them, though ours do not. From a product defense standpoint, we actually expect the EDR to help us. It will make accident reconstruction an even more exact science than it already is.

The reality today is that cars – almost everybody's cars, not just ours – have become truly excellent, including their crashworthiness. Safety engineering and manufacturing precision are astoundingly good. A new car is the most technologically advanced machine most of us ever will operate. And it is just amazing that, for all its complexity, we just get in every morning, start it up, tune the stereo, adjust the climate and take off.

It is exceedingly rare today for any crash to be caused by a design or manufacturing defect in the car. Motor vehicle deaths and injuries, when the occupants are properly restrained, along with automobile product liability claims, have dramatically declined.

The sad reality is that most crashes involve a driver's mistake. Often it is as simple as driving at a speed that was excessive for the conditions. Most injuries could be dramatically lessened if everybody would just use the seat belt every single time they get into a car.

And don't even get me started on the topic of drunk driving – in Germany, if you are convicted, you simply never drive again, and if you do, or if your drunk driving injured someone, you spend years in jail. If we in America don't get serious about this, we've gotten the fatality count about as low as we can.

We expect that in the overwhelming number of cases an EDR would help us prove the car functioned perfectly. The issues that remain to be solved with EDRs involve data protection and personal privacy, and we hope the federal rule-making will shed light on these difficult issues.

DR: What are your biggest regulatory challenges?

JF: I think virtually every general counsel today interacts often with government, and that surely is true in an industry as highly regulated as the car business. Our principal agency relationships are with the National Highway Traffic Safety Administration, Transport Canada, the Environmental Protection Agency, Environment Canada and the California Air Resources Board.

Porsche has always enjoyed a very cordial, businesslike and mutually respectful relationship with the regulators. It is very time-consuming and technical but fundamentally not difficult: We do our level best to comply with every regulation. When we have a question, we ask; when we think we may have an issue in the future, we try to give early warning; and we meet periodically to update each other.

We also have had very significant government interaction at the state and local level the last two years, as we have developed our new North American corporate headquarters and its integral Porsche Driving Experience Center immediately adjacent to the Hartsfield-Jackson Atlanta International Airport.

DR: What was your experience developing your new corporate headquarters?

JF: On this topic, I have to say that I have never in my career experienced more positive, helpful and essential assistance from government agencies. This project entails several jurisdictions – the City of Atlanta, the City of Hapeville, unincorporated Fulton County, unincorporated Clayton County – and in various respects is under the oversight of several other agencies, including the Federal Aviation Administration, the Army Corps of Engineers, the Georgia Department of Transportation, the Georgia Environmental Protection Department, the Georgia Department of Community Affairs, the Georgia Department of Economic Development and the Atlanta Department of Aviation.

Three years ago, I was afraid the obstacles would be insurmountable. It turns out that every single person we met in every federal, state and local government office truly said, "How can we help?" Not only that, but they meant it! To name just a very few, we had frequent direct involvement, commitment and assistance from Georgia Governor Nathan Deal, Atlanta Mayor Kasim Reed,Hapeville Mayor Alan Hallman, FAA Regional Administrator Doug Murphy, Georgia Economic Development Director Chris Cummiskey, Georgia Community Affairs Commissioner Mike Beatty and Atlanta Aviation Department General Manager Louis Miller.

Our project would never have happened without the personal involvement of these people and the really great people on their staffs, like Blair Lewis at Economic Development and Vivica Brown at the airport. Every economic development agency in the country talks about how "business friendly" they are, but in Georgia and in Atlanta, it is really, really true. We plan returning the favor by being a great corporate citizen here for decades to come.

DR: How do you use outside counsel?

JF: A department as small as ours has no choice but to use outside counsel, even though I must say I hate giving interesting work to other people! We try, but do not always succeed, to handle everything inside except active litigation and "one off" projects outside our expertise.

Our strategy is to staff for the valleys, not for the peaks, and to staff for our core, recurring business needs. This means that we mostly handle internally all our nonlitigated dealer, employee, financial services, consumer protection, trade regulation, consumer complaint and commercial matters.

We engage outside counsel for the defense of litigated matters of all types, for special projects (like the real estate and environmental issues associated with the headquarters project) and for topics that one simply does not touch if one does not do them full time (like immigration). We typically choose boutique specialists, both for expertise and efficiency, and we try to use consistently a small network of firms in exchange for excellent commitments regarding quality, service and price.

The firms we chose for our headquarters project are Withrow, McQuade & Olsen and The Galloway Law Group. Our local employment matters are handled by Ellarbee Thompson.

DR: Have you used alternative billing with your law firms?

JF: Occasionally we assign a project for a fixed fee or use another nonstandard arrangement, but the nature of most of our outside counsel engagements makes an hourly rate fairest for both sides. We receive very favorable rates in exchange for a relatively predictable flow of work and an absolute commitment on our part that we will pay our bills and we will pay on time.

DR: Do you use contract automation software?

JF: Here I must confess to a significant shortcoming. We should use contract automation software as well as a fully electronic document management system, but it is a very significant investment that just has a hard time coming to the top of the pile.

Our business always has and always will be cyclical, and during the "Great Recession" we basically stopped investing in IT. Now, it is all we can do to deploy the latest laptops with the newest versions of Office around our company. I can only hope that, like everything else electronic, document management systems keep getting cheaper!

DR: How do you manage litigation?

JF: As you would expect from the nature of our business, our litigation is overwhelmingly product-related, partly personal injury but overwhelmingly breach of warranty and what we in the industry refer to as "lemon laws." It is very easy for a consumer in most states to file a claim against us, even before we and our dealer have had a fair chance to inspect the car and fix it, if necessary.

The second largest group of claims, but very few, are employment-related. Porsche's products are stupendous, and we do everything we reasonably can to make our customers happy, so our caseload is very manageable. If we think a customer has a good case, we want to take care of them.

The last thing any successful business wants to do is fight its customers. But, occasionally a customer is not happy, even when their car is performing exactly as it was designed; occasionally a plaintiff simply wants more than is fair; and occasionally someone brings a claim that is just plain untrue. Those, we fight.

DR: What are your biggest challenges?

JF: Managing an increasingly complex business in an increasingly difficult legal environment with very few if any additional resources. But, they pay us to figure out the solution, and it is why we are here, so I'm not complaining. Somehow I have come in under budget every year I have been here, and the clients seem happy. They aren't shy about telling me when they're not!

DR: There is always conversation about tort reform. What major changes would you like to see?

JF: I think whining about tort reform is a distraction that won't accomplish much. The U.S. Chamber of Commerce, the National Association of Manufacturers and many other large, rich business trade associations have made it Issue No. 1, to no effect whatsoever.

Instead, I see the biggest growth industry for plaintiffs today as the manufactured class action and the closely related copycat class action.

There's no question the concept is fair and reasonable, but the standards for class certification and the provisions for attorneys' fees are far beyond anything originally intended. If regular people knew what really went on and how little their concerns are being protected, they would be shocked.

DR: You have a lot of experience in contract negotiations. What is the secret to a successful contract negotiation?

JF: I think there is no secret at all. A contract negotiation will be successful if both parties want fundamentally the same outcome, if each party understands that the other needs to get a fair deal, if the parties are truthful with each other, and if they keep their commitments.

You might be able to take somebody's pants from them once. You might be able, in the short run, to get away with what devotees of '70s TV might call the "Columbo tactic" — reaching agreement, then coming back for "just one more thing" — but this is an amazingly small community, and people have very long memories, and people who do that won't be successful forever.

This article originally appeared in the Daily Report.