Former GC Says Legal Departments Need to Play Offense
With a single player (could be an inside or outside resource), a game plan can be designed to identify and pursue, systematically, monies which may be owed to the company as a result of actions or omissions by third parties.
March 05, 2019 at 11:58 AM
4 minute read
The original version of this story was published on Daily Report
In my time as Michelin's general counsel, we spent considerable time playing defense. The defensive game plan included, among other things, responding to our business clients' needs, defending claims and lawsuits and dealing with tremendous internal pressure to reduce costs. Our defense was solid, and it spent a lot of time on the field.
When we periodically benchmarked other legal department teams, we found the same thing: They had great defenses that played almost the whole game. Like us, they also spent considerable time responding to pressure to reduce the size and cost of the team, even when the business was growing and profitable.
Few, including us, played any offense. Everyone had good, versatile players, but they always played defense. Why?
One of our legal department management principles was, “Advances are made by answering questions. Discoveries are made by questioning answers.”
Applying this principle to our conclusion that most legal departments focus on defense—and coupled quite frankly with some boredom on defense—we started to investigate and question.
Why no offense? Isn't scoring points more fun? Doesn't the quarterback make the most money?
It did not take us long to find someone who actually played offense often—and well. We were fortunate enough to be introduced to DuPont and their legal department corporate recovery program. Thomas Sager, DuPont's GC, was the pioneer of corporate recovery programs. He thought legal departments owed a duty to shareholders to seek out opportunities to recover lost value.
The concept was simple: The legal department should monitor and mine their contracts, agreements, patents, licenses, franchises, deals etc. to discover any opportunity to recover monies owed to the company. As we understood it, DuPont defined a corporate recovery as, “Any recoupment in the form of cash, products, services, or other quantifiable rights obtained for the company through the proactive intervention of the legal department.”
And their offense scored a lot of points doing this—millions of them.
The Game Plan
This sounded like a good offense to copy, but DuPont had significant resources, and we had few. But, in a leap of faith, we asked a defensive player to execute a few plays on offense and gave it a shot, nonetheless.
With a single player (could be an inside or outside resource), a game plan can be designed to identify and pursue, systematically, monies which may be owed to the company as a result of actions or omissions by third parties. Because the recoveries are owed and add revenue to the bottom line, they do serve the interests of shareholders and stakeholders.
In our case, Year One results were OK—think six figures. After Year Two, the results more than doubled. Year Three results were significant and, importantly, well in excess of the cost of our legal department. We even won an internal quality award for the good results. Beyond that, by far the most valuable return was that the business clients were more attuned to this issue and proactively identifying the opportunity, rather than vice versa. The organic growth was exponential.
And rest assured that every budget presentation to the CEO started with an overview of the program and our recoveries. It is an entirely different conversation when revenue, which otherwise would be lost, is coming in the door.
As more and more companies follow this path, this is what we see.
Many companies are now proficient at recovering monies owed in the context of class action lawsuits. Pursuing these is relatively simple and can be done internally or outsourced for a small fee.
The opportunity that many miss, though, is to conduct a thorough, systematic sweep of other potential opportunities inside the company. My experience is that these opportunities are abundant and valued well in excess of participating in class action recoveries. The “art” is knowing how and where to look, evaluating whether the investment to pursue outweighs the benefit and, if the matter involves a critical business partner, how to make the recovery and maintain the relationship.
There is, of course, truth to the mantra that defense wins championships. But you still need an offense. We like playing offense. We suspect CEOs and shareholders will as well.
Dan Sanders is a partner in Nelson Mullins Riley & Scarborough's Greenville, South Carolina, and Atlanta offices, where he practices with both the corporate and litigation groups. He is a former vice president, general counsel and secretary of Michelin North America Inc.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllNew Federal Pregnancy Regulations: Five Key Takeaways and Five Key Action Steps for Employers
7 minute readLegal Profession's Mental Health Woes Start to Take Root in Law School, Many Attorneys Say
6 minute readTrending Stories
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250