Q&A With Michael Baroni, GC of BSH Home Appliances

Michael Baroni is the general counsel at BSH Home Appliances, a wholly owned U.S. subsidiary of the German company BSH Bosch und Siemans Hausgerate GmbH. The company maintains its U.S. corporate offices in Huntington Beach, Calif., along with factories in North Carolina and Tennessee and showrooms in Boston, Chicago, New York and suburban Philadelphia. Baroni operates a one-person law department but also works closely with three in-house intellectual property lawyers in North Carolina who report directly to the parent company in Germany. A 1993 graduate of Hofstra University School of Law, Baroni started out as a solo practitioner in the entertainment field before becoming in-house counsel at General Media Inc., publisher of Penthouse, Omni and other magazines. He briefly served as general counsel at book publisher Henry Holt & Co. before moving to the law department at Metromedia Fiber Network Services, a fiber-optic provider based in White Plains, N.Y. He left there in 2003 to become BSH Home Appliances’ first in-house general counsel. Q: When you came to BSH, did you have to start by ordering office furniture and literally start from scratch? A: Luckily, they had an office already for me. The toughest thing was that on day one, I was handed the biggest lawsuit in the company’s history, which involved our largest distributor. Normally, you want to instill processes and policies when you come into a job like this. You want to say, “Here’s how we’re going to get things done.” In this case it was mostly impossible to try and turn to those broader issues because I got so caught up in day-to-day issues and that big lawsuit in particular. Q: Are there firms that you regularly turn to? A: Alston & Bird [an Atlanta-based firm] is my key outside law firm when it comes to distribution questions. I’ve also turned to them for help on real estate matters and on some environmental law issues. The only other firm that I turn to regularly is [San Francisco-based] Gordon & Rees, which handles a number of issues, anything from product liability complaints to asbestos cases. Those are the only two that get my repeat business. In other states, as well as Canada, I’ve got a firm or two that I’ll turn to if lawsuits happen in those locales. Q: How do you generally go about selecting firms? A: I rely on Bosch for some of their connections. I also attend as many conferences as I can. I find that you often can meet people in person and kind of size them up and talk to them and see if they might be able to help you. I’ve made a lot of contacts that way. Q: You’ve mentioned elsewhere that you have succeeded in adjusting fees from time to time as a way to incur savings. How have you managed to do that? A: One thing is that I try to do as much of the work in house as possible. The other thing is that I will scrutinize legal bills in the big cases. If I feel a firm is overbilling, I just won’t do business with them again. In one instance, I was giving a big firm a chance to work with us. I told them, “Let’s talk for an hour on the phone about this one antitrust issue” and they ended up billing me for six hours for that one-hour phone call. Obviously, that’s not a firm I’m going to work with again. I also explain to firms what I expect in terms of billing. For instance, I want a detailed itemization of billing by hour segments. I don’t want to see a bill that says, “This associate worked for six hours on BSH matters.” I usually will send a letter to a firm explaining exactly what I want from the billing process and what I expect from it in terms of disclosure and work done. Also, I specify that no work should be performed without my knowledge. That’s because I’ve found that a lot of larger firms will engage in what I think of as useless research. When it comes to certain questions that I would know off the top of my head, I don’t need an associate at a firm to spend 12 hours on those just so he can learn how to do research and become a better attorney. Q: You’ve also mentioned before a certain degree of affinity to smaller law firms. Why is that? A: When it comes to working with a company like BSH, which is not a multibillion-dollar company in the United States, I think smaller firms are definitely going to be a lot more dedicated. To a small firm, I’m a big client and I can be a very important piece of their business. I find that with larger firms, $10,000 here or there isn’t really what they’re interested in, for the most part. Q: You said that you attempt to do as much as possible in house. What will it take to push you to outside counsel? Is it the size of the case, or are there certain areas of law that require an outside attorney? A: I’ll give all litigation matters to outside firms unless I can fight and argue them myself and settle them on my own. But when it gets to the litigation stage, I will turn things over to firms. For everything else, I’ll do it in house, using my own research and my previous experience as in-house counsel, until I get to an issue that has a high liability potential or that involves a very specialized area of knowledge. For instance, when I got here I knew antitrust concerns would play an important part in my role here so I did get some counseling from outside firms on those general issues. Q: How much contact do you have with the company’s headquarters in Germany? A: I have contact on a weekly basis. It’s somewhat tightly structured even though they want you to be independent and do your own thing. Germany is also very concerned with knowing what’s going on at all times. I tell them what’s going on. Q: Are there cultural issues you have to deal with such as educating them about the American legal system? A: Definitely. I don’t think I’ve had problems doing that but it’s always a battle to make someone understand just how unpredictable the American legal system can be at times. That’s particularly true in terms of Germany, where things are a lot more predictable and where you might have statutes that spell out set damages according to the type of action. Here, it’s much more of a free-for-all. The Germans tend to be very strict and wanting to do things by the book, which sometimes conflicts with American freewheeling entrepreneurialism. Q: I assume you sometimes wind up dealing with product liability or tort claims that would baffle a German? A: Absolutely. One of the things that really drives me nuts — because I feel like a crusader for justice, good versus evil, right versus wrong — is when I see frivolous cases come across my desk. I don’t care if I’m going to spend 10 times more fighting it than I would by just settling it. That’s because if a customer says, “Your washing machine keeps too many suds in it and makes my son sick” and the woman won’t even let us look at the washer but instead sues and wants a $5,000 settlement, I’m going to fight it even if it takes a year and costs $10,000. We had a situation in which another woman said that after one of the knobs fell off her 10-year-old oven, she was so emotionally traumatized that she could never cook again and that we’d ruined every Thanksgiving for her from here to eternity. I’m going to fight that kind of claim. If we find out that a customer is the one who damaged the unit, I’m not going to give in and settle and say that BSH has some kind of defective product. Those are the kind of cases where the Germans are just blown away by the fact that these things can even get to trial. Q: Are they supportive of your approach, or do they push you to settle those cases? A: I’ve been very lucky in the sense that they’ve been in support of my tactics. They just always want to know why I’m doing what I’m doing. As long as you can give them a valid argument that supports your tactics and your strategy and your position on something, they’ll let you go with it. But, of course, if anything goes wrong, you will be the one held accountable. Luckily, I haven’t had anything go wrong so far. Q: How did you manage to limit your outside legal fees last year to only $110,000 on 24 litigation matters? That sounds extraordinarily low for any company. A: That even blew me away when I put the numbers together and saw how little it was. There were two factors involved. One, I’ve had excellent outside law firms that were working with me on containing costs and weren’t padding their bills. And two, I did as much as I could up front for cases to be settled. I would investigate internally and settle a lot of these before they went to trial. But it was mostly a function, I think, of the types of cases they were and the types of law firms I had on my side. If I had given some of those cases to a large firm, a $10,000 matter could have very easily turned into a $100,000 matter. This year, unfortunately, I know that the overall number will probably be more in the range of $500,000. That’s because we’re going after infringers of our trademarks, and those are costly lawsuits. We’re going after competitors who make false advertising claims. We’ve also got what I consider to be some meritless asbestos cases because there were minute amounts of asbestos in door linings in some Thermador products back in the 1970s. Q: What other kinds of issues are you interested in as a general counsel? A: I am very concerned about ethics and professionalism. First of all, it’s just good business to keep the corporate workplace clean. But general counsels now are targets. Obviously, that’s true in public companies, but I think general counsels are going to be held to a much stricter standard even at private companies. People will assume you knew things or had control over things even when you didn’t. You’re looked at as the gatekeeper who should be the all-knowing person. It’s a little frightening because even when it comes to accounting issues, you may not know anything about that. Yet somebody down the road might hold you responsible for accounting irregularities or document destruction issues. So I think general counsels now have more sensitive jobs than ever. The more that they can do to protect ethics within the workplace, the better ground they’ll have to stand on as well. Q: Have your corporate executives in Germany been receptive to your efforts in this area? A: That definitely took some education. For instance, it took me about a year to convince people that we should have an ethics committee. People get worried that you’re exposing yourself and you’re creating liabilities. But I found that if companies don’t deal with things early on, the greater potential there are for problems later. For example, you could have a simple matter that could be addressed with a conversation. But if you don’t do that, two or three years later you could have an ex-employee going to the EEOC, and all of the sudden you’re being investigated for sexual harassment in the HR department. Q: How do you compare your current position with some of the previous work you’ve done as a lawyer? A: There is a lot of pride to it. At first, home appliances definitely would have seemed more boring to me than, say, handling entertainment work. But I’ve found now that I get more excited about the home appliance stuff than about entertainment issues. Mark Thompson is a freelance journalist in Southern California.