Making the Transition from Outside to In-House Counsel Bethany L

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Making the Transition from Outside to In-House Counsel Bethany L Both Sides Now: Making the Transition from Outside to In-House Counsel Bethany L. Appleby & Gary R. Batenhorst I. Introduction Many in-house lawyers for franchise companies began their careers at law firms where they gained experience representing these same franchise companies. For a vari- ety of reasons, lawyers at various stages of their careers may find it more appealing to move to an in-house posi- tion. In this article, two long-time members of the ABA Forum on Franchising, who have worked both in-house and for law firms, discuss the differences between work- Ms. Appleby ing for franchised companies directly as opposed to rep- resenting these companies at law firms. Although most of the discussion in this article focuses on in-house law departments for franchisors, many of the issues dis- cussed also are relevant for in-house lawyers working in the law department of a multi-unit franchisee, including those with franchises in multiple concepts. II. Backgrounds of the Authors Mr. Batenhorst Bethany Appleby received a Bachelor of Arts degree from Yale University, magna cum laude, and graduated with highest honors from The University of Connecticut School of Law. Shortly after finishing law school, she joined the New Haven office of Wiggin and Dana LLP, where she eventually became a litigation partner and co-chaired the firm’s Franchise and Distribution Prac- tice Group. After almost twenty years of representing the Subway® restaurant franchisor in litigation, arbitration, and other matters as outside counsel, she Bethany L. Appleby ([email protected]) is a member of Appleby & Corcoran, LLC, in New Haven, Connecticut, and focuses her practice on franchise and business law litigation. Ms. Appleby was the Editor-in-Chief of the Franchise Law Journal from 2012 to 2015. Gary R. Batenhorst ([email protected]) is of counsel in the Omaha office of Cline Williams Wright Johnson & Oldfather, L.L.P., where he focuses on franchising and distribution, business organization, and mergers and acquisitions. Mr. Batenhorst was the Editor-in-Chief of the Franchise Law Journal from 2015 to 2018. 149 FranchiseLaw_Jul20.indd 149 8/18/20 3:28 PM 150 Franchise Law Journal • Vol. 40, No. 1 • Summer 2020 left private practice to serve as the company’s Chief Legal Officer for approxi- mately three years. She now practices franchise and business law and litigation at Appleby & Corcoran, LLC, in New Haven, Connecticut. Gary Batenhorst graduated magna cum laude from Creighton University with a Bachelor of Science in Business Administration. After graduating from the New York University School of Law, he began his career in franchise law in 1979 representing Godfather’s Pizza, Inc. (GPI) at an Omaha law firm. He moved in-house at GPI in 1983 where he remained until 2001, most of which time he served as General Counsel and GPI’s only in-house lawyer. Since 2001, he has worked for law firms in Omaha, serving as outside Gen- eral Counsel to GPI while also representing other franchisors, multi-unit franchisees, and prospective franchisees, primarily in transactional matters. Bethany and Gary are the two immediate past editors-in-chief of the Franchise Law Journal and currently serve as members of the Governing Committee of the ABA Forum on Franchising. III. Moving In-House: Some Changes in Mindset By the time most lawyers move in-house from private practice, they have honed their legal skills, developed multiple areas of expertise, and have excellent oral and written communication skills. All of these are important foundations for a successful in-house career, but certain shifts in mindset are important in completing the transition. A. Law Departments as Support Functions and the Importance of Risk Tolerance In-house lawyers must develop a different mindset regarding their role within the organization. The sole reason a law firm exists is to provide legal services. As difficult as it may be for in-house lawyers to accept, law depart- ments in companies are not the primary reason for the company’s existence. The law department is a support function, not unlike the accounting, human resources (HR), or technology departments, all of which support their fellow employees who are engaged in the selling of the company’s products and services. Understanding that role and the law department’s place within the organization are critical aspects of developing the law department’s credibil- ity. In-house lawyers should always be seeking opportunities to make their business colleagues look good to their supervisors and peers (and share the credit for the development of successful solutions to business problems). Some risk is inevitable in the disruptive environments in which most com- panies operate today. When asked in a recent survey what their boards of directors ask about most frequently, thirty percent of chief legal officers said risk issues, twenty-five percent said compliance issues, and twenty-two percent said corporate governance.1 This risk can take many forms, and it is important 1. ACC, 2019 CLO Survey, https://www.acc.com/resource-library/2019-acc-chief-legal-offi cers-clo-survey. FranchiseLaw_Jul20.indd 150 8/17/20 2:38 PM Both Sides Now: Making the Transition from Outside to In-House Counsel 151 for in-house lawyers to understand the proper role of risk management in the company’s decision-making process. A central part of most companies’ culture is its risk tolerance, and in-house lawyers need to understand this tolerance level in assessing and advising on risk. Businesspeople want to know the type and degree of risk involved in a potential decision and the likely outcome of proceeding in the face of this risk. One way to do this is to attempt to deter- mine the worst-case scenario in pursuing a certain course of action and the odds of that worst-case scenario occurring, and then ask the decision mak- ers to consider whether they can live with that outcome. The law department should work closely with inside and outside risk management professionals, whose experience with risk management issues enables them to provide valu- able insights into the risk analysis process. Along these same lines, it is important that in-house lawyers know when to acquiesce in a business decision to proceed despite the risk and when to escalate the matter to a higher authority within the company.2 By using the ability to escalate matters sparingly, in-house lawyers gain credibility in making these decisions, show their desire to be team players, and increase the likelihood that their input regarding risk management issues will be accepted. However, there are times when the risks of proceeding are too great. The key is for in-house lawyers to give businesspeople the informa- tion that they need regarding risk to make informed business decisions. A recent Cambridge University study discussed a disconnect between law firms and their clients.3 Although this study focused on outside law firms and their clients, in-house lawyers need to be aware of the causes of this dis- connect and take steps to avoid it in interactions with their business clients. The Cambridge Study identified three causes for this disconnect: (1) ser- vice offerings by law firms; (2) service quality; and (3) unpredictability of the delivery of legal services.4 The disconnect involving services offerings may occur because law firms often see their role as simply providing advice that clients can use in crafting solutions to legal problems. Clients, on the other hand, are look- ing for solutions to their business problems.5 This same dilemma con- fronts in-house lawyers. Businesspeople are looking for practical solutions 2. The model rules of professional conduct require that “if a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law that reasonably might be imputed to the organization, and that is likely to result in substantial injury to the organization, then the lawyer shall proceed as is reasonably necessary in the best interest of the organization. Unless the lawyer reasonably believes that it is not necessary in the best interest of the organization to do so, the lawyer shall refer the matter to higher authority in the organization, including, if warranted by the circumstances to the highest authority that can act on behalf of the organiza- tion as determined by applicable law.” Model R. of Prof’l Conduct r. 1.13(b) (Am. Bar Ass’n 1983). 3. Mark S. Smith, Amplifying the Voice of the Client in Law Firms, LexisNexus (2018) https:// www.lexisnexis.co.uk/pdf/3799_LN_VOTC_Online.pdf [hereinafter Cambridge Study]. 4. Id. at 5. 5. Id. FranchiseLaw_Jul20.indd 151 8/17/20 2:38 PM 152 Franchise Law Journal • Vol. 40, No. 1 • Summer 2020 to legally accomplish their business objectives. If in-house lawyers come from law firm backgrounds, they may have been trained in the “just provide advice” model. In-house lawyers will need to strive to help craft practical solutions, expressed in plain English, that will enable the businesspeople to solve business problems while maintaining the highest standards of honesty and integrity.6 One simple exercise may prove useful. In-house lawyers can set aside, temporarily, their legal hats, and put themselves for a moment in the busi- nessperson’s shoes. Imagining the implementation of a new business initia- tive and the resulting increase in profits or other benefits without thinking about all the legal issues raised may increase empathy and help the lawyer enthusiastically seek out creative solutions or alternatives to accomplish the initiative’s fundamental goals.
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