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Name and title: Allan N. Rauch, vice president legal and general counsel age: 44 sheets, not suits: As its name implies, Union, N.J.-based retailer Bed Bath & Beyond Inc. is in the business of selling furnishings and merchandise for the bedroom and bathroom. General Counsel Allan N. Rauch makes it his business to avoid litigation headaches. Bed Bath & Beyond minimizes lawsuits through companywide training on employment law and other regulatory requirements, Rauch said. The company also rents the overwhelming majority of its stores, leaving to landlords the task of tussling with municipalities over land use and zoning issues. All of the company’s leases have arbitration clauses, which Rauch has never invoked during his five-year tenure as general counsel. He prefers to negotiate rather than arbitrate disputes, he said, likening litigation against a landlord to fighting with a spouse. “You’re in bed with these people for 20 years sometimes,” he said. “It’s very rare for either party to want to go to the mat and fight to the death.” Rauch is reticent about details of the company’s litigation docket, but said the caseload consists mainly of “low level” cases typical of big retailers, including employment and vendor disputes and IP matters. Rauch analyzes each case on its merits and has no “ironclad rule” against settlement, he said, although he will not settle cases for nuisance value. To protect a principle, or avoid being viewed as an easy mark by plaintiffs, the company will not hesitate to spend more than its liability exposure on defense costs, he said. “Sometimes it’s worth more to defend it than to settle it,” said Rauch, although he tries not to be ridiculous about it. “Taken to an extreme, you don’t want to spend a million to save $10,000.” bed bath big bucks: Co-chairmen Warren Eisenberg and Leonard Feinstein founded Bed Bath & Beyond in 1971. The company currently operates more than 500 stores nationwide selling home furnishings and domestic-appliance merchandise, leasing almost 18 million square feet of retail space. Bed Bath & Beyond plans to open at least 80 stores in fiscal 2003. The 23,000-employee public company reported $3.6 billion in sales in 2002. rauch’s role: Rauch works just outside downtown Union, N.J., in headquarters that Rauch proudly calls a “class C, nondescript building”-an unassuming office and warehouse facility that reflects a “style and philosophy to put all our money and effort into our stores,” he said. From his office overlooking a gas station, Rauch heads a nine-lawyer legal department that he manages through corporate counsel Michael Callahan and real estate counsel Alan Freeman. Rauch reports directly to CEO Steven Temares. The in-house office handles lease negotiations and administration, vendor contracts and disputes, intellectual property matters, regulatory compliance and corporate governance. “We view ourselves not as an independent law firm, but as business partners to the rest of the company,” he said. “As a result, they very often come to us not only with legal problems but [also with] business issues.” Last year, Rauch helped the company close on a $24.1 million acquisition of Harmon Stores Inc., a 29-store health and beauty care retailer. Rauch was “intimately involved” in the negotiations, he said, working closely with outside counsel Proskauer Rose of New York. Lease negotiation, drafting and administration take up the bulk of the company’s legal budget, said Rauch. Rauch represents the company in the more complex or important deals-such as the recent lease negotiations for a high profile store in New York-but leaves it to outside counsel to handle most of the 90-plus negotiations annually. Rauch uses the company’s extensive experience as a commercial tenant to keep outside real estate counsel expenses to realistic levels. “We know what leases should cost, and all of our firms know that they are in effect bidding for our [continued] business,” he said. Three lawyers oversee litigation, all of which is referred to outside firms. job dispute: In its annual report, Bed Bath & Beyond claims “excellent” employee relations, with a low rate of turnover among management employees. The company curbs employment litigation through firm policies against discrimination and sexual harassment and extensive employee training, said Rauch. However, these efforts weren’t enough to keep the company out of federal court in a 1964 Civil Rights Act Title VII action filed in 2001 by Ava L. Miller, a former African-American employee of the store in Hoover, Ala. Miller alleged race and color discrimination, claiming that she was denied promotions that were given to less experienced and less qualified white and lighter-skinned black employees, and she was being discriminated against by being required to perform cleaning duties that should have been assigned to white employees. In January 2001, a federal district judge granted the store’s motion for summary judgment, ruling that Miller had not produced sufficient evidence showing discrimination in promotions, and noting that she had volunteered for-and never complained about-the cleaning duties. Miller v. Bed Bath & Beyond, 185 F. Supp. 2d 1253 (N.D. Ala. 2002). “We didn’t do anything wrong [and] we tried to talk them out of suing us,” said Rauch, adding that the company incurred substantial legal fees in defeating Miller’s lawsuit. patent (litigation) pending: Bed Bath & Beyond occasionally finds itself the unwitting defendant in patent and trademark cases involving equipment in its stores or products on its shelves. These cases are typically brought by the patent or trademark holders against the allegedly infringing manufacturer and major deep-pocket retailers, said Rauch. Defense costs and liability exposure in these cases are usually covered by indemnification clauses in the company’s contracts with its vendors. The company is one of scores of retailers now ensnared in patent- infringement litigation brought by the estate of Jerome Lemelson, a prolific inventor and patent filer who allegedly invented a forerunner to the bar code scanner. Bed Bath & Beyond and the other nonsettling retail defendants have mounted a joint defense in the federal district court in Las Vegas. The court recently concluded a trial on the manufacturers’ declaratory judgment claims, and a ruling is expected this spring, Rauch said. principal outside counsel: Proskauer Rose handles general corporate matters. Real estate work goes to the New York office of Bryan Cave and two New Jersey firms, Cole, Schotz, Meisel, Forman & Leonard of Hackensack and Sills Cummis Radin Tischman Epstein & Gross of Newark. Thelen Reid & Priest is the company’s principal litigation firm. brooklyn boy to bed bath barrister: The son of Holocaust survivors from Poland, Rauch was born and raised in Brooklyn, N.Y. He attended the University of Pennsylvania, where he obtained his undergraduate degree in 1980 and his J.D. in 1983. One of his law school classmates was his current boss, CEO Temares. After law school, both Rauch and Temares were associates with New York’s Schulte Roth & Zabel. With business down at the same time Rauch was up for partnership in 1992, Rauch decided to accept a general counsel offer from a client, Wiener Realtors. After two years of dealing with condo conversions and rent collections, Rauch accepted an offer with Temares, then general counsel of Bed Bath & Beyond, to become the company’s real estate counsel. Rauch was named general counsel in 1997, when Temares became the company’s president. pet peeve: Rauch is ripped by lawyers who misspell their clients’ names or who don’t return phone calls. “These may seem silly and trivial, but to me they reflect a lot on the lawyer,” he said. personal: Allan and Elizabeth Rauch live in Short Hills, N.J., where they are raising a 15-year-old and 9-year-old twins. last book and movie: Longitudes and Attitudes: Exploring the World After September 11, by Thomas Friedman, and Roman Polanki’s The Pianist. -William C. Smith

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