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The Recorder recently invited a group of in-house counsel at Bay Area companies to participate in a roundtable discussion that focused on their working relationships with outside lawyers. The following is an edited version of the conversation, which was moderated by David Brown,The Recorder’s assistant managing editor. David Brown: Let’s start with each of you giving a snapshot of your law departments. Andrew Hughes: We have four commercial lawyers, four IP lawyers and a general counsel. The IP lawyers handle the patent issues. The commercial lawyers basically handle everything else. One lawyer is dedicated to SEC matters. One is dedicated to contractual issues. I pick up what I’d call miscellaneous issues: litigation, real estate, human resources, those types of areas. Linda Drucker: We have 40 to 50 lawyers. Basically we are divided into groups according to the structure of the business. We have a group of lawyers, for example, that advises the retail part of our business. Another group of lawyers advises the institutional part of our business. There’s a group that handles the capital market. We have two people or so who deal with real estate, and we have one employment attorney. The litigation group, which I manage, is the largest, with about 12 attorneys. Robert Shives: We have three lawyers, though we’re looking to hire another one. We support about a dozen Fujitsu subsidiaries in the United States, Canada and Mexico. We rely heavily on outside counsel because there are only three of us. I’m like a generalist in a very small firm, but with lots of responsibilities. Tabetha Nakasone: I’m department of one. I basically do everything that comes across my desk — from the manufacturing and distribution ends of the business to human resources. I handle just about everything under the sun that you can imagine, so I’ve got outside counsel pretty much on speed dial all the time. Scott Rickman: We’re sort of a department in transition. Up until last December, we had only three full-time in-house attorneys. As a result of a merger we did with certain business units at Heinz, we’ve now gone from three attorneys to eight attorneys. Five of them are in San Francisco and three are in Pittsburgh. I’m primarily responsible for managing all of the company’s litigation. I support our real estate department, and I’m also the primary attorney for 12 manufacturing facilities. Brown: Let’s talk a little bit about your use of outside counsel. How do you go about selecting those lawyers? Drucker: One of the things I’ve done is to get to know my counterparts at other firms in the securities industry such as the director of litigation at Merrill Lynch or Morgan Stanley. If I need a lawyer in Tennessee to do something I can call them up and ask them who does their work in that state. Those kinds of references are the most important ones to me. Hughes: My experience is that referrals tend to be good close to home, but as you get farther away, the referrals tend to get less reliable. I once tried to find counsel in New York for a relatively small matter — unfortunately we were being sued by another large company. The first referral conflicted out, the second referral conflicted out. I think the third referral also conflicted out. I couldn’t believe that there wasn’t a lawyer in New York who didn’t work for this company or was on their vendor list. I finally ended up with a relatively small firm that I was satisfied with. But it was more luck than anything else. Rickman: I’ve had a little different experience with referrals for matters further from home. I’ve asked attorneys who are in larger international firms that are working for us if they can recommend an attorney in Boston or Philadelphia or wherever, and I’ve had pretty good success with that. Brown: How do you make a decision about what matters to keep in-house and what you’ll send to outside counsel? Shives: We don’t do litigation. That’s an area where we can’t spend the time to go into court, handle motions and such. So if it’s a litigation matter, it’s automatically going to someone outside. When it comes to transactional matters, there are things that we do that are routine and that we do all the time. So those things we tend to keep in-house unless we’re overburdened. Then there are certain areas of labor law — wage-and-hour, for example — that I can’t say I know like the back of my hand. I’ll pick up the phone and call someone who’s supposed to know that a lot better than I do. Drucker: We have an in-house litigation department of about 12 lawyers so we keep a lot of the cases in-house. In particular, we keep most arbitrations in-house because those are generally seeking damages in the $100,000-$500,000 range, and it really isn’t cost-effective to send them to outside counsel. We also tend to keep cases that require very specialized knowledge of the company and personalities and our mode of doing business. Sometimes it’s better to have an in-house lawyer who’s dealt with that same complex issue before. An outside attorney may not know how to read time-and-sales for particular stock price movement, but our in-house lawyers do. Basically, we’re sending out the larger class actions or litigation that we can’t handle because we’re not licensed in a particular state. But we’re trying to keep as much of it in-house as possible because there’s no doubt that doing so is more cost-effective. Also, if a litigation matter involves something that we will either want to or need to settle, we’re probably going to try and keep that case in-house as opposed to one that’s likely to involve two or three years of trench warfare. If it’s something that’s going to involve full-fledged discovery, that’s when we’ll send it to an outside firm. Rickman: We send out all of our litigation. We also send out environmental matters that will require interaction with local regulatory agencies. I’ll do internal counseling myself, but if it’s going to require physical presence in another state, I’ll retain outside counsel for that. Beyond that, it’s really just a bandwidth issue. It’s a function of how overloaded I am at the time and whether I need some help. Hughes: We have always had a history of sending out litigation matters. I’m the first attorney in the company with a litigation background. So we’re trying a little bit more to start holding on to some of the smaller matters. You send something like that to an outside firm and they tend to throw a bunch of resources at it. Every associate that walks in the door is now on the case and billing you for it. If it’s really a simple case that’s going to end up settling for $50,000 or so after a couple of depositions and a couple of rounds of written discovery, it just makes sense to keep it in-house. Brown: At what point does it make sense simply to hire another in-house lawyer to help take on some of these cases that you don’t think are cost-effective to send outside? Hughes: When doesn’t it make sense to hire another lawyer? I think any in-house counsel is going to say it’s always time to hire another attorney. Brown: How do you sell that then? Hughes: We’re dealing with that issue right now. I think our group of four lawyers would be glad to have some additional support. The problem is that your legal department is not generating a lot of profit and management looks at it as a cost center. Rickman: The question is whether or not the work that you’re sending to outside counsel is something that you’ll continue doing for the foreseeable future or whether it’s a more short-term phenomenon. In addition to three attorneys that we inherited in our recent merger, we hired two new attorneys — one focusing on SEC compliance and the other focusing on labor and employment issues. In both of those instances our general counsel persuaded senior management to approve the increased head count. We looked at what we were spending on outside counsel to provide those services, which was in six figures. When you do the math in terms of the cost of hiring in-house lawyers, it’s relatively easy to justify from a financial standpoint. Now it’s going to be a matter of actually proving to senior management that these two new attorneys that we’ve added will deliver that cost savings. I’m confident that they will. Shives: We’re always having people come in from Japan, which means there is immigration work that we have to do. Right now that goes to outside counsel at a lot of different firms. Recently we’ve been rethinking that. If we hire an in-house immigration lawyer, we can reap the benefits of having one person do all the immigration work as opposed to going to all those firms that are charging us a premium because we want quick turnaround and because immigration issues are kind of complex, particularly in light of the post-Sept. 11 situation. I think there are certain areas where you can sell senior management on the notion that developing in-house expertise will be cheaper than paying through the nose for outside counsel. Drucker: With the in-house lawyer you also get the added benefits of having somebody there when an emergency or a crisis arises. You’ve got somebody who can possibly prevent it from escalating into litigation as opposed to the outside counsel that you generally call after the dispute has already erupted. I think there’s a kind of hidden value in terms of preventing lawsuits or getting in there early and resolving them for maybe a few hundred or a few thousand dollars. Hughes: But isn’t that difficult to track? Drucker: It’s very difficult. Hughes: And how do you present that to management? Maybe you saved something, but I don’t know how you can chart that and put it on a Power-Point presentation and show management the savings. Drucker: We’ve gone through a lot of budget cuts and the legal department — particularly the litigation group — has been less affected because management understands the math. Some of our competitors have laid off big chunks of their litigation departments and then they go out and hire outside counsel. I think they are responding to management that says you’ve got to cut head count even though economically it is sort of irrational. Brown: How do you determine if you’re getting the best bang for your buck from the outside counsel you do hire? Nakasone: Coming from a corporate securities background, in situations where you’re doing another round of financing or M&A transactions, I have done those before so I know what’s supposed to happen. I know how long they take and, basically, about what the bills should be at the end. In other situations, it’s tougher to know and manage that because I am a department of one, which means I don’t have other people to go to and say, “What do you think about this?” In litigation, for example, I have no idea how long it takes to write a motion. I can guess, but there are a lot of situations where I just don’t know. Patents are another area where this can happen. I had a situation with our previous patent counsel where I was getting bills for $80,000 a month for I don’t know what. I would try to call them and sit down with them to ask why they were billing me that amount. For two or three months after I started, there would be charge after charge on the bills that were completely incomprehensible. I finally sent the work somewhere else, and the first firm was upset and wanted to know why I was unhappy. I told them, “It was because I’ve been trying to talk to you for the last three months and get you to explain to me why you’re billing me 80 grand a month and I can’t figure it out.” Brown: Do you find that most firms are responsive when billing issue like that come up? Nakasone: Some are and some aren’t. I mean a certain amount of browbeating will get you some discount off of a bill. But ultimately that’s not how I want to manage a relationship. I would prefer there to be a lot more communication on the front end so that it’s not a complete shock when I open up the bills at the end of the month. But I guess that’s more of a relationship management issue than a billing issue. Hughes: The bills should never be a surprise. If you’re managing the matter well enough and you have sufficient communication with outside counsel, then the bill really shouldn’t be a surprise. Drucker: I’ve seen two different kinds of attitudes on the part of outside firms. One is, “We’re sorry you’re unhappy with this. What can we do to make you happy?” I had somebody write $15,000 off a bill at lunch. On the other hand, I’ve encountered a lot of people who don’t seem to want to write off even one dollar and who try to justify bills that are very unreasonable. It’s this second group that isn’t going to get the repeat business. How a firm reacts when you call up and say you’re not happy with this bill will tell you a lot about whether or not you will have a long-term relationship with them. Shives: I also think you have to set expectations on the front end when you are engaging your counsel. And it depends on what type of matter. If it’s a collection action and, at the end of the day, the debtor probably is going to go into bankruptcy and you know it’s not worth a whole lot to you, you have a different perspective in dealing with outside counsel. You’re going to tell them, “Look, I’m not going to make a whole lot of money from this so neither are you.” But if it’s a bet-the-business case or a class action where you might lose $10 billion, that’s a different situation. You might tell the firm, “I’m still going to manage the case very carefully but I’m not going to nickel and dime you.” I agree that there should be no surprises. They’re going to occur but I’m trying to minimize them because my company is paying the bill and some vice president is going to be mad at me if I haven’t managed his expectations. Drucker: You also have to select the right firm. You don’t select a firm that generally does $100 million bet-the-company cases to do your $1 million case because that firm is used to operating on a certain level. They just don’t have the experience of having to really watch the bills the way that a medium-sized firm that handles $300,000 and $500,000 cases would do. Rickman: That’s true. In terms of litigation, I use some very large national firms for more significant matters. I also use a sort of mid-sized for middle level litigation matters, and then I’ve got a fellow who was a partner at my former firm. He has 20 years of experience and works in a 10-lawyer firm. I use him for smaller matters that are under, say, $200,000. I’ve probably sent him four or five matters in the last year and his bill is typically $5,000 to $10,000 to handle a matter where the exposure may be $50,000 to $100,000. If you hire a large firm to handle something like that, it will cost $10,000 just to answer the complaint. Shives: Or answer the phone. Brown: Given the current state of the economy, do you think firms are becoming more sensitive to these kinds of billings? Hughes: I’ve noticed that billable rates have not slowed down. They’ve continued to increase year after year. I think we were expecting a little reprieve from the rates we were seeing in 1999 and 2000, maybe holding steady in 2001 and 2002. But they’ve continued to climb each year by a factor of 10 to 30 percent. I’ve been surprised to see the rates climb like that. While most firms we’ve worked with have agreed to tack on a 10-15 percent discount to their bills, I’m not sure that necessarily makes up for the amount of the increase over the 2000 rates. But they are working a little bit with us, which is helpful. Brown: Are others around the table finding any changes because of the economy? Shives: One change is that the firms will call you back now. During the heyday of the bubble, especially with Silicon Valley firms, you could go forever without getting a phone call returned because they were all busy doing all these transactions. I have noticed a greater degree of responsiveness. Rickman: We had a interesting situation not long ago where we wanted to consult with an outside firm about a securities matter. I called up a couple of different firms to get some proposals, including one firm that, during the tech bubble, wouldn’t even have considered us as a client. Within a day of my calling, I had the head of the securities litigation group on the phone with me. Suddenly they were interested in our business. Brown: What is the most effective way to develop a good working relationship with outside counsel? Drucker: I think communication at the outset is very important. There are some matters that, because they are so important to me, I basically want a phone call just about every day or at least two or three times a week. Then there are other matters where I’ll tell the outside counsel, “I trust your judgment do a good job on this, but I don’t want you calling me five times a week to report on every little nuance.” If they don’t understand what your expectations are, they’ll sometimes do the reverse. On small matters they think they’re doing a great job by constantly calling you to give you updates on it when it really is something you wanted off your plate. Rickman: My style of managing litigation is such that I’m not going to flyspeck a bill but I am going to be very involved in terms of how the litigation is run. I will want to have a discussion about what motions will be filed and what positions we’re going to take with respect to discovery. Staffing is another one of my pet issues in terms of outside counsel. So it’s critical, I think, to have an understanding at the outset as to what the ground rules are. And it’s incumbent upon in-house counsel to communicate that to outside counsel. Brown: Do you think firms take enough time to get to know your business and truly understand what you do? And is that important? Hughes: I don’t know that it necessarily is. If you have a litigation matter that involves a breach of contract, for example, I don’t know that outside counsel necessarily need to know that we make semiconductor chips to determine whether or not we breached this contract. Maybe for some of the broader relationships, like an M&A transaction, it may be a good idea for outside counsel to be familiar with what we’re doing and where that piece is going to fit into the overall puzzle of the company. Rickman: There are certain specialized areas where it does make sense. There are some attorneys we work with who have a strong background in agribusiness, and so they understand some of the more unique issues that arise. For instance, we may be involved in a secured transaction that applies to our dealings with growers or relationships that we might have with state agricultural agencies and so forth. So in certain areas it’s important and in other areas it is much less so. Brown: Linda, is it important for outside lawyers to know more about Schwab than just having a Schwab account? Drucker: Well, it helps if they have a Schwab account. It’s also really important to us that they understand the securities industry because most of our litigation is securities related. Every once and a while we get a slip and fall, and we don’t need to hire a firm that understands Schwab’s brokerage business to do a personal injury case. But in general we want firms that are not only experts in the securities industry, but that also understand how Schwab operates versus Merrill Lynch or Morgan Stanley. There are a lot of brokerage lawyers who are used to working for the traditional wire houses and who didn’t understand our model when we started doing online trading. The firms that did understand or were very quick learners were the ones we tended to use more often in our arbitrations. Nakasone: I was the outside counsel for my company for a few years before I came in-house, and to be perfectly honest I went to the board of directors meetings once a quarter, but I didn’t have a really good idea of what the company did. I knew they made routers but that’s about all I knew. That’s all I needed to know because I was just doing financings and minutes and stock option grants, and none of that stuff required a whole lot of technical knowledge about how a router works or where it was manufactured or anything like that. Brown: During the past year we’ve seen a number of law firms either merging or laying off lawyers or, in some cases, collapsing. How has that affected your decisions about hiring outside counsel? Nakasone: Things have been pretty chaotic in Silicon Valley over the last couple of years so it’s definitely part of the calculus when I’m choosing outside lawyers. I need to think about whether they are still going to be here in three or six months. If not, then I’m probably going to look to pick someone a little bit bigger, a little bit more secure. I can’t afford to have things dropped in the middle. Drucker: One of our executives is a director of a company that was involved in IPO litigation that went from Brobeck to Cadwalader to Clifford Chance. It’s been handled by different groups of lawyers who are moving from one firm to another. We want to avoid that kind of situation in the future. Generally I stick with the people that are actually working on the case rather than the firm. So if the people that are working the case now are moving I will probably let the business move with them. But I don’t like to be subjected to intense sales pressure to do that. I want them to say that it’s my choice. What we don’t like is when they don’t tell you and then you read about it in the newspaper. If they are going to move, they should be sure to call clients and let them know as a courtesy. Brown: How much investigation do you do to determine if a firm is healthy? Hughes: I’m just not sure that you can tell. We used Brobeck for some of our work, and most of the partners didn’t know the day before the announcement [about the firm's closure] that the announcement was coming out. You could have done all the investigating that you reasonably could have on Brobeck, and I think you would have said that it looks like a healthy firm two days before that announcement. It’s got 400 lawyers, it’s been around for 100 years and it looks like the firm will be here for another 100 years. That would have seemed like a reasonable conclusion at the time, and yet two days later it was gone. I think the relationship is more with the individual attorney than with the firm, and it’s likely that the attorney is going to end up somewhere. Most of the Brobeck attorneys went somewhere. Maybe there’s a week of downtime, but then your case moves on and there’s really not much in the way of disruption. Brown: A lot of firms are talking about their international scope. Rob, how important is it to you for a firm to have a global reach. Do you care how many attorneys a firm has outside the United States? Shives: Not particularly, especially if I’m looking at a matter that’s going to be completely local. Now, if I’m looking at a matter that involves, say, a European Union arbitration or something that’s happening in France of Germany, then it’s important because you need someone who’s going to be local that’s going to represent your interest in that foreign jurisdiction. But for the typical matters that we hire people in Silicon Valley to do, it really doesn’t matter that they have lawyers in Dubai or Cairo. But there are some firms that the home office in Tokyo is much more comfortable with. These are multinational firms with offices in Tokyo, which gives them reputations in Japan. Firms like Jones Day or Squire Sanders or Clifford Chance have that sort of aura. So there is somewhat of a name recognition factor at work there. It doesn’t mean they have a hundred million lawyers all around the world. That’s not necessarily what does it. It’s the fact that they are well known in Japan. Drucker: It’s helpful to have relationships with some larger firms that have that network of offices. If you have a problem later on in a foreign country where you don’t know anybody, you can call that lawyer who’s handling one of your matters and say, “I see you’ve got a Hong Kong office. We’ve got a problem there. Can you set up an introduction with a lawyer there that would handle this type of matter?” That’s helpful, but it is not going to be the decisive factor when I’m making a decision about a litigation here in the United States. Brown: Because all of you have a lot of matters on your plate on a daily basis, how do you manage quality control with outside counsel? Hughes: As a general rule, if it’s a litigation matter I want to see the filings before they get filed and give them a quick review. Hopefully, it’s not a situation where it’s 3:35 p.m. and the lawyer says, “We’re filing at 4 p.m. Can you take a quick look at it?” I realize there are emergency motions and things that need to be filed, but try to give me a little more time to review that interrogatory or interrogatory response, maybe even have some discussion before a major deposition about what areas they are going to be talking about and making sure we’re in sync. Because if a set of proposed interrogatories come back and outside counsel are just missing the boat, there’s a problem there. And if they are not asking the right questions, you have to ask yourself whether or not you’ve got the right firm. Shives: We’re a lot more hands on than that. The firms who work for us frequently represent the American interests of folks in Japan. Because people in Japan are going to look at the material, we need to build in a lot more time to review that motion or those interrogatories before they get filed. In a lot of instances, I’m not the ultimate decision maker. That decision maker is an ocean away. There could also be English-to-Japanese translation issues. There are a lot of very good and talented English-speaking Japanese lawyers who work for our company, and they want an opportunity to review and give their input and direct the litigation. So when we’re hiring lawyers in the United States, we really need them to understand that and not have them feel like it’s a problem. And if it is a problem for you to give me a motion two weeks in advance of when it’s going to be filed, perhaps you’re not the firm for us. Or don’t feel bad if we change things and suggest things because that’s going to happen. There are some instances when I’ll say, “I want this off my plate. I don’t even want to look at it.” But I don’t have that luxury on most cases, which we have to manage very carefully. Drucker: Because I have a large litigation department, we essentially are like second chairs on the cases we have with outside counsel. We are definitely reviewing the motions before they are filed. Sometimes we are rewriting them. We get in there and we do some potentially serious editing on them. Generally, if a company employee is being deposed we’re going to be there unless it’s an extremely junior employee or it’s in a third-party action where we’re not the defendant. I think it’s really important to have somebody in-house at the prep sessions to let the outside counsel know where the potential minefields are. Nakasone: Fortunately we haven’t had a whole lot of litigation so I haven’t had to worry about that too much. With respect to other matters, I’m not an expert on things like patent law, for example, so there’s a balance issue here. I can manage matters like that only so far because I don’t really know how it works. I just kind of let them do their thing. But that’s also why it’s really critical that I have a sort of personal relationship with the people that I’m working with or at least I have some recommendation, some confidence that these people know what they’re doing. Obviously, you then look at things on the other end. Did I get the results I was looking for? Did they charge me a reasonable amount of money? I can’t be a specialist in everything and I can’t micro-manage everybody outside. So you have to have a little bit of faith and hope that it works out okay. Brown: Without naming names, I’m interested in hearing some examples of instances where you thought your outside counsel really blew it. Also, what can an outside lawyer or firm do to get back in your good graces after something like that happens? Hughes: At a previous company where I worked, we had a situation involving a rather big piece of litigation. We looked for a lawyer who could handle it and found someone who had big name recognition. After he was on board, he came in and pounded the table and said, you know, we’re taking this to the Supreme Court, this is going to be the greatest case ever, that sort of thing. And then we never heard from him. We would call him and ask what he was doing on the case, tell him we wanted to take a deposition that we thought was important. But he would never respond. Finally we just called and said the relationship on this case is over. We found another lawyer with a similar reputation who did very well, and I think we did very well on that case when it concluded. I think the first lawyer blew it. Maybe he was too busy. If so, I think the better thing for him to have done would have been to say, “I can’t handle your case because I’ve got too many other matters going right now.” I’m not going to use him now, and I might not use that firm again. I don’t think my previous company is going to use him either. Drucker: I’ve had two situations like the one you just described where it was obvious that the lawyer got so busy and over-extended. Deadlines were coming up and we were calling but we could not get the person on the phone. In one case I was on maternity leave and my replacement was trying to get the brief. When he finally got hold of the associate, the associate refused to give him the draft until he had the partner’s approval even though the filing deadline was a day or so away. In the one instance, we would never use the firm again. In the other, we had a longstanding prior relationship with the firm, and the problem seemed to be limited to a particular lawyer who is actually quite talented in a lot of ways. That firm has tried very hard to mend its bridges with us and to let us know they really want to do business with us. I think that breach is going to be repaired because of the relationship that existed because of how hard a couple of partners there are working to repair it. Brown: Any pet peeves when it comes to working with outside counsel? Hughes: I’ve presented to my general counsel motions written by our outside lawyers. And the response sometimes has been, “Is this the first draft written by a first-year associate? This isn’t any good.” We’re paying these lawyers a lot of money and they need to produce a quality work product. I’ve received documents that haven’t been spell-checked. It’s not that hard. It’s automatic now with Microsoft Word. They also need to check cites. They need to do everything so that when it comes to in-house counsel for review, even if they’re calling it a rough draft, it should be very readable. I’ve read summary judgment motions that go on for 30 pages, and I’m trying to understand the issue as if I’m picking it up cold. I let outside counsel know they need to summarize the issue in a page or two. If you want to put in all the cites and everything else the judge isn’t going to read anyway, that’s fine. But let’s focus on the first couple of pages that will really set the motion apart. The writing style at a lot of law firms is just disappointing. Drucker: We have a joke in our office that we should deduct from the bill the hourly cost that the in-house lawyer has to spend editing and rewriting. We’re seeing things that wouldn’t pass muster from a second-year associate at my old firm. And we’re paying $450 per hour for that. You know, it’s quite upsetting. Rickman: For me, the most important thing is that the firm needs to remember that I’m the client. I can take my business elsewhere and I will take my business elsewhere if you don’t recognize that I’m the client and treat me accordingly. And what that means is that at the end of the day I get the say over the approach that we’re going to take. Shives: I’ve had that experience where an associate wouldn’t give me a brief because the partner hadn’t seen it. I understand that situation because if you’re that associate and you give the brief to the client before the partner has seen it, stuff is going to rain down on you like you wouldn’t believe. When that situation happened, I really felt for the associate. I said, “Okay, so find the partner, get authority and then send the brief to me. But I want that authority in the next two hours.” Nakasone: What drives me nuts is when people do not respond to me. I think that being female and a little younger means that sometimes I may not get the same kind of attentiveness or deference from senior partners, especially if they are older men. Maybe it’s just my little bias but it definitely differs when I’m talking to someone on the phone, depending on the age of the person I’m talking to and sometimes the gender. I mean, it is what it is, and there’s not much I can do about the fact that I’m female and I am however old I am. Brown: Do you broach that subject? Nakasone: No, but that’s because it’s just not in my nature to be particularly confrontational when it comes to how I’m being treated because I’m female or something. I’m just not going to do that. I mean, it does require me to be more assertive on occasion than is in my nature to be. But that’s part of learning the job and growing into it, I guess. Hughes: Do you find that happens more with firms that have worked for the company for a while versus the ones you hire? Nakasone: Right. I have to say that the firms that are kind of entrenched are far less responsive. I am at a point where I’m thinking about making some changes because of that. It’s hard enough doing the job as it is without having to deal with people’s biases or with them not being particularly responsive to the fact that I’m the client. Brown: One thing you hear occasionally from law firms is that in-house counsel tend to hire people who look like themselves. There’s a perception that sometimes the hiring decision is based upon some connection, whether it’s gender, race or whatever, with the law firm. Drucker: I think it’s more of a personality thing. I tend to hire people who have personalities that I can get along with. If I’m going to be talking to somebody for four or five hours each week, I want those conversations to go well. I want that to be a phone call I enjoy receiving and that I enjoy returning. I once hired somebody over the telephone based on a recommendation from another in-house lawyer in our department. The person had a really annoying personality and I hired them nevertheless because they had all these great credentials. Well, I found out the judge assigned to the matter was just as annoyed by this person’s personality as I was. By the end of the case, this person could not open their mouth in court. I said, “The senior partner can talk, the associate can talk. You will just sit there and be silent.” I would love to hire more women attorneys as outside counsel but there just aren’t as many out there. By the time you get to the senior partner ranks, there are fewer women available. So I would still say that most of the people I hire don’t look like me. They are not female and they are probably 10 or 15 years older than I am. Well, at least 10 years older. Rickman: Our general counsel has made it clear that he values diversity not only in the workplace but also in the outside counsel that we use. And so that is a priority for us. We’re still in the process of determining exactly what it means to retain diverse counsel. For instance, does it mean retaining counsel who is a member of an underrepresented group? Does it mean retaining a firm that has a strong track record of addressing those issues even though the specific attorney that you may be working with at the firm is not a member of a minority group? It’s sort of a work in process as to exactly what that means. Shives: When it comes to hiring outside counsel, you’re looking at who has the expertise in a particular area and whether I can get along with them. Can they understand my need for cost containment and that I’m in charge? Lots of times they don’t look like me. Sometimes they do. There are a whole lot of things involved and it’s hard to say how you’re going to end up with this or that particular counsel. It could be as well that it’s a small matter and that you went to law school with this person. Or that you’re the only lawyer I know in Wisconsin, and we just got a slip and fall. You want to do it? Okay. There is no science to it as far as I can tell. Drucker: For the bigger matters we started this practice of the written beauty contest, which I really like. We send five or six pretty detailed questions. We send a copy of the complaint and ask the firm what their strategy would be. We’ll also ask who they’re going to staff it with, along with bios and rates so that everything is written down. We’ll get those back and maybe a five- or 10-page response so you actually see who is a good writer. One very prominent firm cited an overruled authority, which got them out of the running. I don’t necessarily know what they look like. But I can see in cold, hard print whose strategy I agree with, who has the most interesting ideas, who cited all the right cases, that kind of thing. Brown: Do you have techniques that you use to weed out performers that may not be up to your standards? Nakasone: I am kind of a fan of the beauty contest. I think it does give you a sense of how hard the firm is going to try. It sets the tone right at the beginning. Brown: You all have a lot of different duties in your positions, from transaction work to litigation to real estate to employment matters. What do you find yourself spending the most time on? Rickman: Litigation clearly takes most of my plate. We inherited quite a few litigation matters after this merger we did in December, which doubled the size of the company. Prior to that I would say it was much more balanced between litigation, environmental matters and serving our manufacturing facilities. Since December litigation has take up 60-70 percent of my time. Nakasone: On a day-to-day basis, employment issues take up a significant portion of my time, which wasn’t necessarily what I expected. How do you fire people properly so that you don’t end up with a bunch of EEOC complaints? The company has been around for five or so years but there’s still very much a startup mentality in which a lot of young people are managing other people without much experience with these issues. Part of my job is trying to educate the managers. The employment stuff is so rule-bound, and unless you are an expert, it can be tough making off-the-cuff decisions. So it takes a lot of time. Shives: This is probably not what you were looking for, but I’m going to say e-mail. I get a phenomenal number of e-mails each day. A lot of that is spam, and we have filters for that. But then there’ll be some with an issue, some little glitch that gets mentioned in the fourth paragraph in an e-mail from one of the branch managers somewhere. You look at that and say, “Oh my God, how am I going to deal with that?” It could be that we fired somebody yesterday, and I’m thinking, “Gee, it would’ve been nice to have known that you were thinking of doing that beforehand.” Just about anything can come across my desk. I come in each day and I have four major things that I want to get accomplished that day. It might be to review a contract or review a reduction-in-force plan for one of the companies. Nakasone: I never get to those four things until 4:30 in the afternoon. Then it’s 5:00 and I haven’t done any of them. Brown: Let the record reflect that everyone is nodding their heads in agreement. Rickman: But sometimes those four things have to be done because you promised them two week ago. That’s when I have to turn off the computer and not look at any e-mail that comes in. I don’t care how important it is because I told somebody that I was going to get this to them by yesterday. I was going to review that contract. I was going to write that cease and desist letter that you don’t want to send to outside counsel because it costs too much and because you know the business better than they do anyway. But when are you going to get the time to gather the facts to write the cease and desist letter that has to go out because the person who’s relying on you is saying, “Someone is stealing my stuff. This is costing me money. Do something.” Does everyone feel like they’re always running two weeks behind at the office? I know it’s going to be the same way when I get back to my office today. I am going to have all this e-mail, I’ve got these things that I promised people and yet it’s not stuff that I promised them that I would have done today. It’s stuff I promised I would have done for them last week. Nakasone: Scott, you need another lawyer. Drucker: I think we are all feeling that answering e-mail has become our job. You come in and have these priorities, but e-mail somehow creates all these new issues you have to respond to. Somebody can dash off a one-sentence e-mail that might take you three days of research to get the right answer. Shives: You have to be responsive because if the e-mail sits there for more than 24 hours and you haven’t responded, something is wrong. We also have the time-zone issue because we’re a global company. We’re getting e-mail overnight from Europe and e-mail from Japan as well as the United States. That’s what I do on a day-to-day basis. I manage my e-mail and I try to get through the four things that are really critical. I can be just as bad as the person who sent me the e-mail by forwarding it to outside counsel. I need them to be as responsive to me as my vice president expects me to be responsive to him. One of the things I value in outside counsel, going back to an earlier part of the discussion, is their ability to answer my e-mail. Hughes: I was on the phone yesterday for a half-hour conference call, and by the time I got off the phone there were four new voicemails. And if I get on the next call it just keeps growing exponentially. Often it’s people who just want to run something by you. You look at it and you go, “Oh, did you think about this and this?” And they’ll say, “No, do I need to?” And then it’s, “Yes, you really do need to start thinking about all these other issues.” At that point, they’re thinking, “Maybe I’m not so glad I brought it to the legal department because now I can’t get it done right away. Can’t you just rubber stamp it?” I think counseling is the biggest part of my job. That’s the 8 to 5 job, and then you have to find time to do everything else that comes in. A recorded version of the full 90-minute discussion is available on compact discs and audiocassettes as part of The Recorder Roundtable series of CLE programs. To order the CD or tape, call (415)749-5406 or go to www.therecorder.com/roundtable.html. Recorder Roundtable programs are also available in online versions at www.callaw.com.

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