Category: Wisdom

Categories : Wisdom

Why Mediation?

On By sdcountybar

By Lawrence A. Huerta

One of the most difficult jobs of an advocate is making a strong opening offer that generates a reasonable counter-offer.  There are no standard formulas, so how is a strong and realistic opening offer calculated?  In the context of litigation, when should an opening offer be conveyed?  Conventional wisdom is to open with an extreme offer to test the other party and to explore their flexibility.  Unfortunately, if the opening offer is perceived as extreme, it can lead to an early breakdown in negotiations.  Another piece of conventional wisdom is to make a “throwaway” offer without any reasonable expectation of launching a productive negotiation and for the primary purpose of probing the other party’s willingness to negotiate in a certain range.  In 26 years of mediating litigated cases, throwaway offers have been the source of many early stalemates or, at the very least, extensive time devoted to bringing the opening offer into a reasonable range.  In the worst cases, throwaway offers can poison an entire negotiation by negatively influencing all remaining counter-offers, including final offers.  Read More

Categories : WisdomTags :

Modes of Contract Review

On By sdcountybar

By William Marshall
Transactional attorneys refer simply to “reviewing” a contract. However, I have identified different modes of review and found that thinking about them can be helpful in improving my review practices. The following are nine modes of review that I, to varying degrees, am adopting as I review an agreement. Some of them overlap and, of course, I very often perform multiple or even all of these modes in a single reading of an agreement. However if time permits, separate readings focused on one or two of these modes at a time can result in a better, more comprehensive assessment and markup of a document. Read More

Categories : Law Practice Management WisdomTags :

Following Up on Your First Year

On By sdcountybar

By Marti Worms

Now that Fall has arrived, many of you who graduated from law school last year are approaching one-year of practice or maybe more, depending on whether you had a post-bar position lined up after graduation. This milestone provides an often-neglected opportunity for you, as a new lawyer, to perform some self-assessment and career planning that will help you continue to move forward in your career and prepare for your year-end review.  Whether you are a brand new attorney or a young lawyer with two or three years in practice, consider delving into the following four areas for a do-it-yourself career assessment.

Evaluate Your Work Direction Read More

Categories : WisdomTags :

Client Management in Disclosure Schedules

On By sdcountybar

By Aaron Sokoloff 

The preparation of disclosure schedules is typically one of the most time-intensive aspects of a financing or M&A transaction. In larger firms, this process is often in the hands of a junior associate, since the junior associate is usually the closest to the diligence materials that are the source of much of the information in the schedules. However, this practice gives the misleading impression that disclosure schedules are a straightforward exercise. In fact, the preparation of disclosure schedules often involves some tricky client management issues that can challenge even senior lawyers.

  • Process Management. The division of labor between the company and its counsel in disclosure schedules is not obvious, and the right approach may vary from deal to deal. This is different from many other transaction documents, which are simply drafted by the attorneys subject to the client’s review. Sometimes it may make sense for the attorneys to take the first cut at drafting the disclosures, particularly if the attorneys have significant institutional knowledge of the company. Sometimes it may be appropriate for the company to do the first draft, with the lawyers then taking the role of wordsmithing what the client has prepared. Sometimes the best approach will be for the lawyers to draft some of the disclosures first (e.g. those involving corporate organization, litigation that the firm has handled, etc.), with the company taking the lead on others (e.g. those involving commercial contracts or other operational matters that the outside lawyers are not close to). While the ideal approach varies from deal to deal, it’s crucial that the division of labor is decided early on so that the responsible parties can start making progress on the disclosures. If the company is not familiar with the disclosure schedule process, they may well underestimate the amount of time and effort that a disclosure schedule entails, especially for a mature company. Even if the company offers to take the lead on some or all of the disclosures, the attorney should stay close to the process, to avoid the scenario where the company volunteers to handle the disclosure schedules in an effort to reduce legal fees and then, at the last minute, gets overwhelmed with the process and pushes this project back to the lawyers; this puts the lawyers in the undesirable position of having to complete a disclosure schedule on short notice when they likely haven’t done the necessary underlying review, and may already be fully occupied with negotiating and finalizing other deal documents.
  • Full Disclosure. There is often a tug-of-war between the attorney and the company on the amount of disclosure to provide. The attorney is typically pushing for maximum disclosure, since this gives the client maximum protection by putting the buyer on notice of any issues. The company may desire to limit disclosure, so as to avoid airing out “dirty laundry” for a buyer or investor that they are trying to impress. Attorneys helping their clients with disclosure schedules need to be able to go beyond simply gathering and organizing information, and advise the client on why failure to disclose could lead to the client having to deal with indemnification or even fraud claims.
  • Monday Morning Quarterbacking. One aspect of the “full disclosure” argument that can be a particular flashpoint between attorneys and their clients are disclosures regarding corporate-level matters – e.g. ambiguities or gaps in capitalization documents, non-observance of corporate formalities, etc. Often, the attorneys representing the company on a major transaction have not been closely involved with the company throughout its history, and in the course of their deal work may notice errors or omissions on corporate matters that they believe need to be disclosed. Clients can sometimes take these kinds of disclosures personally, and see them as gratuitous faultfinding by the lawyer who is supposed to be on their side. This kind of issue therefore requires the attorney to exercise some diplomacy in explaining to clients why these disclosures are important, without the client viewing them as a Monday morning quarterback, which can have a negative effect on the attorney-client relationship as a whole.
  • Understanding What a Data Room Does and Doesn’t Do. Clients sometimes have the impression that, if a document is included in the data room (or whatever method by which diligence materials are provided to the buyer/investor), that is as good as disclosing the document in the schedules. This is almost never the case. While posting a document in a data room (or whatever is the manner of providing diligence materials in a particular deal) may be helpful in showing that the company wasn’t trying to defraud the buyer or investor by affirmatively hiding something, the company and its attorney still need to go through the (sometimes arduous) process of preparing a disclosure schedule that is complete and correct in order for it to provide the desired level of legal protection.

Aaron Sokoloff  is an attorney at Procopio, Cory, Hargreaves & Savitch LLP.

This article is for information purposes only and does not contain or convey legal advice.  The information herein should not be relied upon in regard to any particular facts or circumstances without first consulting an attorney. Any views expressed are those of the author only and not of the SDCBA or its Business & Corporate Law Section.

This article originally appeared as part of the 

SDCBA Business & Corporate Law Section’s column series Read More

Categories : Law Practice Management WisdomTags :

Tips from the Bench: Judge Joel R. Wohlfeil

On By sdcountybar

By Phillip Simpler

Since 2007, the Honorable Joel R. Wohlfeil has been a San Diego Superior Court judge. He presides over Department 73 and handles mostly civil cases. It was an honor to sit down with Judge Wohlfeil for our “Tips from the Bench” series.

1. What was your path to the bench?

I practiced as a plaintiff’s attorney for more than 20 years and tried cases all over the country. I was accepted as a member of the American Board of Trial Attorneys and with the support of my peers, I submitted an application to be considered for appointment to the bench. In 2007, I was appointed by Governor Schwarzenegger.

2. Do you have any tips for newer attorneys in San Diego?

Everyone makes mistakes. Don’t beat yourself up about it, and don’t take an adverse ruling personally. How you respond to adversity will impact how you are perceived by the bench. Judges talk about lawyers just as much, if not more than lawyers talk about judges. Your conduct in one courtroom can impact your reputation throughout the community.

A lawyer’s familiarity and comfort in the courtroom is important. However, it is difficult to get significant civil trial experience, particularly early in your career. Newer attorneys should make an effort to interact and learn from experienced attorneys. Joining an Inn of Court is an excellent option, and it is always beneficial to observe hearings and trials in other cases. Reading books authored by trial attorneys, such as Irving Younger, can also help to bridge that gap.

3. Do you have any pet peeves that attorneys should avoid when appearing in your courtroom?

In an effort to ensure that motions are heard in a timely manner, I do not limit the number of motions that can be heard on a given day. As a result, there is not always going to be a lot of time for oral argument. It is vital to be concise and to lead with your best argument. I appreciate when attorneys are cognizant of my time.

Phillip Simpler is an Associate at Paul, Plevin, Sullivan & Connaughton LLP.

This article was originally published in the August 2018 issue of 

For the Record Read More

Categories : WisdomTags :

The Why, What and How of Working with a Fractional CFO

On By sdcountybar

By James Wheeler

According to California’s Employment Development Department, San Diego is home to more than thirty thousand small businesses of between five and fifty employees.[1] As a trusted advisor to these growing businesses, you may have observed that one of your clients would benefit from a level of financial expertise beyond the capabilities or capacity of their existing leadership.  Most of these small to medium-sized companies are not large enough to justify a senior financial leader on a full-time basis and may not have considered retaining with a fractional CFO (“fCFO”).  As an attorney and advisor, you may want to learn about what a fractional CFO can do to help their business.

A fractional CFO is a Chief Financial Officer who is contracted to provide financial leadership and oversight in a part-time capacity. The fractional CFO is also known as part-time CFO, outsourced CFO or virtual CFO.

Once on board, a fractional CFO can:

  • Create additional alignment—the fractional CFO will often be an important advocate for your point of view, particularly where risk mitigation is concerned. This alignment particularly relevant as fractional CFOs are often more closely integrated into the business than the CPA or outside counsel.
  • Call for additional counsel—like their full-time counterparts, fractional CFOs often work closely with outside counsel on transactional work, litigation and even labor issues.
  • Cement your relationship and expand your influence—you may not be McKinsey & Co., but you can still develop your business like them by effectively placing senior leadership.

What does a fractional CFO do?

The fCFO operates similarly to a full-time CFO by providing financial leadership, financial expertise, and financial credibility.

  1. Financial leadership – Working with the CEO
  • Strategic ‘north star’ – Ensures that financial statements are actionable at a strategic level. E.g. Articulate what the balance sheet needs to look like if the CEO wants to acquire another company, and plan the best way to ‘get there’.
  • Sophisticated analysis – Provides forward-looking analysis beyond the capability of existing staff. E.g. Forecasting cash flow to help the business plan for and avoid cash shortfalls.
  • Best practices, process and oversight – Bring best practices to the various financial functional areas and incorporate internal checks for current processes. E.g. Establish appropriate controls over disbursements and payables reducing the risk of fraud and error.
  • Strengthen skill set of existing resources– Mentors the internal team. E.g. Develop the controller; increasing their productivity and value to the organization.
  1. Financial expertise – Working with Banks
  • Product selection –Select the optimal mix of treasury management, deposit, and debt products (an esoteric exercise with hundreds of institutions each offering different products). E.g. Access debt for the business without the owner/operator pledging their personal assets to secure it, resulting in reduced risk for the owner and potentially better credit for the business.
  • Process navigation – Navigate the unique language, regulations, and process under which most banks and financial institutions labor. E.g. Knowing when to negotiate with the credit department vs the legal department, or the company size at which different institutions move a relationship out of the retail or deposit office.
  • Relationship management – Maintain relationships with the right financial institutions to advocate for the business. E.g. Ensure lenders are messaged appropriately regarding any business changes to maintain or extend existing credit terms.
  1. Financial credibility – Working with investors
  • Curating financial data – Set policy and infrastructure to yield the quality and presentation of financial data investors are accustomed to seeing. E.g. Guiding the organization of the chart of accounts to support the company’s financial objectives.
  • Crafting financial narrative – Assist the CEO to craft an appropriate financial narrative for investors. E.g. Crafting communication to show how different sources of capital are being used to generate a return for investors

Limitations of the fractional CFO

Fractional CFOs are, by their very definition, limited in their ability to engage with an organization. Understanding this and working closely with an fCFO to ensure their limited time is utilized on the highest-value activities will yield the best outcome for the client. Clients who ask fractional CFOs to take on too many tactical activities or operational responsibilities may not get the value they’re paying for and end up frustrated.  The CEO and fCFO should engage in an ongoing dialogue to review initiatives and priorities to ensure alignment.

Working with your client to select an optimal fractional CFO

Companies have numerous options in selecting a fractional CFO, and a client’s expectations, needs, and style should be discussed early in the fCFO selection process. It’s helpful to consider how they want to work with their fCFO, and have a clear picture of what they want that individual to accomplish through the engagement.  The areas below are additional considerations to ensure the best fit.

  • Aligned experience – While an outside perspective can yield tremendous benefits, a lack of familiarity with an industry can be a source of inefficiency. Companies considering an fCFO should consider someone with experience in their space or an adjacent one.
  • Business model options – There are different models for delivering fCFO services, each with their own strengths and weakness depending on the needs and style of your client.
    • Team based – many fCFO offerings are part of a service provider that includes an outsourced accounting team and has multiple teams. The advantages of this type of delivery, as you might imagine, may include greater bench depth and service continuity that is less dependent on individuals. The downside may be higher client load resulting in less mindshare per client, and can be more complex by design to increase client retention. This model will also offer a different feel relative to the next model.
    • Individual practice – The individual practitioner may work with an internal accounting team or a different outsourced provider. The advantages of this type of delivery is that discrete segments of a client’s finance ‘stack’ can be individually changed out with less disruption and there is often greater mindshare per client. The downside may be less redundancy or bench depth than with a larger provider.

    Style/fit – fCFOs will be a strategic partner to the CEO, offering a uniquely valuable perspective. It’s a close working relationship and if stylistic differences, or a lack of shared values, erode trust or make communication too costly between the CEO and fCFO, it may not work.
    Fee structure – Some engagements provide for an fCFO to spend fixed day(s)/week in a client’s office. Other engagements are virtual. Some are fixed fee, some hourly. Some are stand-alone, some are bundled with other team members. Some fCFOs do project work or interim roles, others do not.

    Selecting a fCFO is not unlike hiring a full-time CFO, although it does offer the unique benefit of allowing both parties to get to know each other with reduced economic risk to the company if the selected individual isn’t a good fit.

    Final thoughts- the benefits of fCFOs for Outside Counsel

    Deciding to utilize a fractional CFO allows senior leaders to focus on their business and can fill both known and unrealized gaps in the leadership team. Even in a limited capacity, this role can bring tremendous value to the small business and to its working relationship with outside counsel.

    James Wheeler is CFO at Narrative Financial Management.

    [1] http://www.labormarketinfo.edd.ca.gov/LMID/Size_of_Business_Data.html accessed July 23, 2018 Read More

Categories : Legal Ethics WisdomTags :

Demand Letters: Where Do You Draw the Line?

On By sdcountybar

By David Carr

There is probably no bad time to discuss the ethics of extortionate demand letters, but this time may be better than most. These ethics may seem a little paradoxical, much like the crime of extortion itself – how can I be criminally liable for threatening to do something that is perfectly legal for me to do? But a close reading of authority shows that lines can be drawn that an attorney should not cross.

Criminal extortion is defined by Penal Code § 518 as “the obtaining of property or other consideration from another, with his or her consent … induced by a wrongful use of force or fear….”  Attorneys are in the business of obtaining property on behalf of clients, and they often do so by utilizing means that employ some types of force and are fearful in their effect. At the same time, attorneys are subject to the principles of extortion, depending on whether their use of force or fear was the “wrongful” type.

How to begin to draw that line? We can start with a specific Rule of Professional Conduct, Rule 5-100, which forbids an attorney from threatening to present criminal, administrative or discipline charges to gain an advantage in a civil dispute.

Notice that Rule 5-100 does not forbid the threat of civil litigation to gain an advantage in a civil dispute. Rule 5-100 can be read in light of Penal Code § 519, which defines the type of fear that “may” support a finding of extortion: “1. To do an unlawful injury to the person or property of the individual threatened or of a third person. 2. To accuse the individual threatened, or a relative of his or her, or a member of his or her family, of a crime. 3. To expose, or to impute to him, her, or them a deformity, disgrace, or crime. 4. To expose a secret affecting him, her, or them. 5. To report his, her, or their immigration status or suspected immigration status.”

Section 519’s use of the word “may” suggests this isn’t a definitive list of all the types of “force or fear” that might be “wrongful” and thus extortionate. Rather, the list included in Penal Code § 519 is representative of the characteristics that may serve to violate the statute.

Case law also illuminates the distinction, and the widely read case of Flatley v. Mauro (2006) 39 Cal.4th 299 is essential. Former Illinois attorney Mauro sent a demand letter to Irish dancer and entertainer Michael Flatley, famed as the “Lord of the Dance,” in Mauro’s capacity as the attorney for a woman who accused Flatley of raping her.

The letter demanded $100,000,000.00 and threatened that “all information, including Immigration, Social Security Issuances and Use, and IRS and various State Tax Levies and information will be exposed … [w]e are positive the media worldwide will enjoy what they find,” that “all pertinent information and documentation … shall immediately [be] turned over to any and all appropriate authorities ” and that along with “the filing of suit, press releases will be disseminated to various media sources, including but not limited to” a list of about two dozen different news media.

There was also a conversation Mauro had with Flatley’s attorney Bert Fields, wherein Mauro stated the story would follow Flatley wherever he went and that he would “destroy” him. Flatley then filed an action against Mauro in California for extortion and defamation. Mauro filed a SLAPP motion that was denied. After the Court of Appeal affirmed the denial, Mauro tried his luck with the California Supreme Court. The Supreme Court found Mauro’s conduct extortionate as a matter of law, not protected conduct or a SLAPP suit and, citing Libarian v. State Bar (1952) 38 Cal.3d 328, imbued with moral turpitude.

A more recent Court of Appeal decision examining a demand letter, Malin v. Singer (2013) 217 Cal.App.4th 1283, comes out the other way, finding the demand letter protected petitioning activity, not extortionate, and protected by the litigation privilege (Civil Code §47.)  Attorney Singer sent a demand letter to his client’s partner in a limited liability company (LLC), alleging conversion and breach of contract. Singer specifically contended the partner had sexual liaisons with older men he called by nicknames such as “Uncle” and “Dad.” He enclosed a photograph of one of the men, noting that he was a judge, and provided a complaint with blank spaces for their names. Singer stated the complaint filed in the trial court would disclose the men’s names.

In Malin, the trial court found the letter extortionate and denied a SLAPP motion. In its decision, the Court of Appeal found the demand letter was SLAPP-protected petitioning activity and subject to the litigation privilege (Civil Code §47), observing the men were not members of partner’s family and the demand letter included claims that partner embezzled money from the LLC and used the LLC’s resources to facilitate the liaisons and to communicate with the men. The Supreme Court denied review.

The line drawn by Flatley and Mailin is that you can raise some ugly allegations in a demand letter provided the contemplated disclosure of the bad stuff takes place solely in the context of litigation and such disclosure is necessary to prove your case. Such a use of legal “force” is not “wrongful” for extortion purposes.

In the end, Bus. & Prof. Code §6068(f) might provide the pithiest guidance of all: “It is the duty of the attorney … [t]o … advance no fact prejudicial to the honor or reputation of a party or witness, unless required by the justice of the cause with which he or she is charged.”

David Carr is an attorney at law. 

This article was originally published in the March 2018 issue of For the Record, the SDCBA’s publication for new lawyers.

No portion of this article is intended to constitute legal advice. Be sure to perform independent research and analysis. Any views expressed are those of the author only and not of the SDCBA or its Legal Ethics Committee. Read More

Categories : Law Practice Management WisdomTags :

Starting In-House: Pros and Cons

On By sdcountybar

By Denise Davila

What fascinates me the most about being a lawyer is the versatility aspect of the career. As a lawyer you can do more than just work at a law firm. While starting at a law firm is often the recommended path due to the fundamental amount of experience it offers, embarking as in-house counsel for a company can also expose you to a variety of legal areas despite having only one client — the company. Both paths have their perks and drawbacks but choosing the right course will ultimately depend on your skills and lifestyle expectations.

A common perception, which I personally believe is a misperception, is that working as in-house counsel is a vacation compared to the grinds of law firms and government practice. However, the scope of work and responsibilities of in-house counsel cannot be understated, as these are very different from those of specialized or private legal practitioners. Another misperception is that the skills earned in law firm practice can be easily translated to suit an in-house position, but only a few of the skills of an in-house position can be successfully translated to fill the shoes of a practicing attorney in a law firm.1  While the law firm experience is very valuable, it does not necessarily prepare you for a position in-house. Below is a general list of the pros and cons of in-house positions versus law firm positions, which based on my personal experience, better illustrates the principal differences among both paths.

One Client Only

To start, in-house counsel’s only client is the corporation, which means that the usual law firm concerns, such as business development and client conflict checks, are not issues in the in-house position. While this may sound like an easy theory, it is not always so clear-cut in practice. In California, Rule 3-600 of the Rules of Professional Conduct states that in representing an organization, the client is the organization itself, acting through its highest authorized officer, employee, or constituent overseeing the particular engagement. However, the interests of corporate constituents and those of the organization may not always align, giving rise to conflicts. In all cases, in-house counsel owes a duty of loyalty to the organization as the client and must act in the best interests of the corporate entity. Consequently, in-house lawyers should avoid giving corporate constituents individual legal advice on personal matters and must make their role clear. As you can see, having the company as your only client may take away the pressures of being a rainmaker or worrying about billable hours involved in private practice, but it brings along a different type of stress, complexities, and risks to watch out for, such as inadvertently creating conflictive attorney-client relationships.

Broader Scope of Responsibilities

Another big difference between working as in-house counsel and in a law firm or government is the broader scope of responsibilities a corporate legal department requires depending on the industry. An in-house legal position exposes you to wide variety of legal challenges, such as contracts, labor/employment, intellectual property, litigation, tax, antitrust, corporate/securities, ethics, real estate, privacy matters, and many others depending on the industry of the company, while law firms may put the pressure to specialize. For instance, I work in-house for a real estate investments company and most of my experience is on transactions, acquisitions, and contracts, but I have often found myself working on litigation for civil matters that come up, renewing trademarks, researching tax issues, and working with our IT department to handle privacy matters. However, because in-house counsel handles a little bit of everything, it is often necessary to rely on outside counsel to resolve matters that may require expertise in an area that in-house counsel lacks. Whereas a law firm is a training ground that assigns you to an area of expertise, an in-house position requires knowing the limits of your time and competency in an area of law and understanding the basis on which to rely on outside counsel and develop a good relationship with them. It is not so that in-house attorneys live in isolation.

Two Hats: Legal Duties and Business Role

As opposed to the law firm environment, in-house counsel must develop a strong working relationship with the corporate client that will allow that lawyer to provide not only legal advice, but also business strategies to the client. An in-house lawyer must wear both legal and business hats but also be wary of which hat counsel is operating because certain privileges, such as the attorney-client privilege, attach to legal advice but not to business advice. Moreover, contrary to the opinion that career development is only offered in law firms, many in-house counsel have another business function in addition to their legal duties, which range from heading a business unit within the company to serving as a Chief Legal Officer or director of another department.

On an ending note, in-house counsel must learn and become familiar with all aspects of the business to serve the company well. In-house counsel is often placed under negative light because rather than generating revenue like the private practitioner, an in-house legal department is considered a cost center. Therefore, it is important to demonstrate your value every day and manage costs carefully. Taking a more proactive approach on tasks, such as risk management, is another differentiating characteristic of the in-house position from the generally reactive legal work at a law firm. While there are many pros to in-house positions, such as a greater feeling of job security, flexible work schedule and no billable hours, it is by no means an escape route for all other law firm ills and woes. Starting as in-house counsel is a very different experience but it entails equal, if not an increasingly, amount of effort and hard work as a law firm or government position, and it should not be understated.

1 

https://www.lawcrossing.com/article/7806/Pros-and-Cons-In-house-vs-Law-Firm-Practice/  Read More

Categories : Wisdom

5 Tips for Making a Great First Impression in Under 30 Seconds

On By sdcountybar

By Rana Aryan

Have you ever felt that people are too quick to pass judgment on you? That’s because people are… and in a matter of seconds!

Even television commercials are limited to less than 30 seconds to persuade the audience. When we meet someone for the first time, we make an immediate inventory of characteristics and specifics about that person.  Psychologists call this “thin-slicing” which refers to the ability of our unconscious mind to find patterns in situations and behavior based on limited information.  One of my favorite authors is Malcolm Gladwell and in his book “Blink: The Power of Thinking Without Thinking,” he describes thin-slicing:

“Thin-slicing is not an exotic gift. It is a central part of what it means to be human. We thin-slice whenever we meet a new person or have to make sense of something quickly or encounter a novel situation. We thin-slice because we have to, and we come to rely on that ability because there are lots of hidden fists out there, lots of situations where careful attention to the details of a very thin slice, even for no more than a second or two, can tell us an awful lot.”

In other words, impressions are made when we meet a new person in a matter of seconds. The good news is that we can learn techniques to help us make a great first impression.

1. Be on Time. Read More