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Name and title: Karen C. Sclafani, senior vice president, general counsel and secretary Age: 51 ‘Big wheels keep on turnin’: The wheel is a good metaphor for Karen C. Sclafani, general counsel to Parsippany, N.J.-based Cendant Car Rental Group Inc., better known through its ubiquitous Avis outlets. Cars, like legal issues, are constantly in motion. Cendant cemented its status as the world’s largest general-use car rental business when it purchased Budget out of bankruptcy in November 2002. This is the latest corporate mutation Sclafani has experienced since joining Avis as an in-house counsel more than 20 years ago. She has survived more than a dozen bosses, by her count. Avis’ own time line is considerably longer. The first Avis rental cars hit the streets of Detroit in 1946, when Warren Avis set up shop at the Willow Run airport. The name spread worldwide: there are now 1,700 outlets in the United States and 3,000 more across Europe, the Middle East and Asia. Cendant Car Rental Group Inc. acquired Avis Group Holdings in 2001. Cendant had $4.3 billion in revenues in 2002. Taken together, Avis and Budget had 29,480 employees that year. Legal unit: “We were tremendously understaffed,” Sclafani said of the legal unit. By June, the department will have added two additional lawyers to its current corps of four, Sclafani included. Budget had its own four-lawyer staff, of whom only the general counsel remains to handle the company’s estate, Sclafani said. With so much in flux, Sclafani, who became general counsel in 1998, abandoned more rigid patterns of divvying up work. Although there is an overarching structure, lawyers pitch in on various projects as time permits. Robert Muhs, the department’s most senior in-house lawyer, handles lobbying efforts on behalf of Avis and Budget, and also oversees litigation and the outside counsel who handle it. The department’s two remaining staff lawyers tackle tasks such as negotiating corporate account agreements and marketing agreements, including contracts involving frequent-flyer programs. Sclafani adds that there are also “plain vanilla” contracts for daily operations, the fleet agreements with suppliers like GM and Ford, uniform companies and the like. Renting cars means dealing with the public, which can raise issues ranging from discrimination suits to advising outlets regarding how to handle customer complaints. Cendant Corp., the corporate parent, has a legal staff to tackle employment litigation, information technology issues and corporate compliance. However, Sclafani is the corporate compliance officer for Avis and Budget. A GC’s challenges: Sclafani faces challenges both inside and outside of her office. On the inside, one staff lawyer has been on board for a month, the other for maybe a few weeks. With the exception of veteran Muhs, Sclafani has to tutor her lawyers about the industry and in-house practice. Integrating Budget into its new corporate home means reviewing each one of the acquired company’s contracts, agreements and forms, from the sophisticated to the mundane. Avis, unlike Budget, adopted a corporate strategy to buy back franchised locations and to concentrate revenue among corporate locations. Budget has far more franchise locations, so Sclafani is working on circulars and disclosure documents for prospective purchasers of Budget franchises. It is yet unclear whether Cendant will be the buyer. “I think that’s my biggest challenge right now: integrating the two brands,” Sclafani said. Plenty is going on outside. Muhs recently scored a huge lobbying victory for Cendant when New York state amended the General Business Law to allow rental car companies to offer customers a loss damage waiver, sometimes called a collision damage waiver. Before the change, rental companies could only recover $100 for a customer’s damage to a car. Now Avis may charge customers a daily fee of $9 or $12 (depending on the value of the car) in exchange for a waiver of the company’s right to recover for damage to the car. Under the amended law, which became effective in February, customers who forgo the waiver may be held responsible for the actual cost of repairs, Sclafani said. Litigation: Irate customers can become litigious, and Avis has faced discrimination suits over the years. Though the underlying suit was filed before Sclafani took the general counsel’s seat, Avis prevailed in a suit which had threatened to become a class action, accusing a South Florida Avis outlet of denying corporate accounts to Jewish customers. After an appeal of a provisional grant of class certification by a U.S. district court, the 11th U.S. Circuit Court of Appeals sided with Avis. Disability actions present challenges. Avis secured summary judgment in a federal case in Denver under the Americans With Disabilities Act. John E. Dahlberg claimed, among other things, that Avis lagged in supplying vehicles with hand controls. Among the flaws in the action brought by Dahlberg, who used a wheelchair, was his failure to ask for certain accommodations in the first place, the court said when ruling for Avis. Avis entered into a 1999 settlement with the Justice Department in an ADA enforcement action that focused on wheelchair accessibility for Avis shuttle-bus service at airports. Sclafani played a key role in crafting the agreement, which she labeled a “win” for all sides because it accommodated disabled customers without creating onerous economic burdens for the company. Oversight is key, even if general counsel does not do the hands-on legal work, Sclafani noted. “Sometimes this job is all about being a good manager-picking the right staff, rewarding their efforts and giving them the freedom to do what they do best.” Outside counsel: Before Avis was under Cendant’s umbrella, the company cultivated its own list of outside counsel. There is a core group of five to 10 firms, but the company sometimes uses anywhere from 30 to 35 firms, some of them not goliath operations with household names in the legal world. Among the well-known players: Los Angeles’ Gibson, Dunn & Crutcher and two New York firms, Proskauer Rose and Skadden, Arps, Slate, Meagher & Flom. Route to the top: A fondness for chocolate, plus a pair of determined parents, put Karen Sclafani where she is today. Neither of Sclafani’s parents finished high school, but they sacrificed to get their only child through school as she grew up in Troy, N.Y. After earning her degree in political science from LeMoyne College in Syracuse, N.Y., she moved to New York for law school at New York University. She worked as a summer associate, then an associate after graduating law school, at now-defunct Mudge, Rose, Guthrie and Alexander. A few years later, with corporate work flagging and a distaste for municipal-bond lawyering, Sclafani looked around for an interesting new assignment and found it with Cella’s Chocolates, one of Mudge Rose’s clients. As an outside counsel, she was the company’s point person on a spectrum of legal issues (and got samples to boot). However, seeing the toll that big-firm practice exacted on her colleagues-”your life is not your own”-she contacted a headhunter to ferret out in-house jobs, and landed a position with Avis in 1981. Not that life in-house is Easy Street. “This is definitely not a cushy job,” Sclafani said. She had to develop some corporate survival skills as Avis changed hands and management time and again-Sclafani estimated that she worked for about 13 general counsel over the years. “It’s a combination of having a skill the company needs and being able to deal with different people, being able to adapt to changes in management.” A personal note: Sclafani met her husband, Leonard (also an attorney), in college. The couple are raising their two children in Chappaqua, N.Y. Last book read: The first Harry Potter book, The Sorcerer’s Stone, by J.K. Rowling. Last movies seen: Two in-flight films: Love or Something Like It and, upon her son’s recommendation, Lilo and Stitch. —Lisa Stansky

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