Category Archives: Lawyers

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Dropbox – No Good Deed Goes Unpunished

As someone who pays more attention than most to website terms of use (TOU), I’m amused by the kerfuffle over the Dropbox announcement this week that it is adding an arbitration provision to its TOU.

Reading the comments on the Dropbox blog, you would think this was the most devious, anti-consumer thing the company could have done.  But while these arguments have facial appeal (“THEY’RE CUTTING OFF MY CHANCE TO BE HEARD IN COURT!!”), they don’t acknowledge the reality of the situation.

Consider: the vast majority of consumer Dropbox users don’t pay Dropbox ANYTHING.  They’re using a free service.  And the rest of them aren’t paying much; maybe a few hundred dollars a year, at most.

Why is this important?  Because it means that most consumers will have little-to-no damages in any suit against Dropbox.  Like, little enough that it wouldn’t justify paying the filing fee in small claims court (typically $100-$200), let alone dealing with the time and expense of a full-blown case.

Dropbox is offering a free, expedited means of getting such claims resolved.  While many argue that the arbitrators will be biased toward Dropbox as the company is paying the bills, in my (20+ years) experience this is not a real concern.  Or at most it’s an edge case, a minimal risk compared to the crap shoot you’ll get in small claims court.  But more importantly, it’s a very minor concern compared to the fact that the Dropbox arbitration procedure removes the cost and friction that would leave most small, legitimate claims stillborn.

And another point on that friction:  Dropbox allows users to bring the arbitration in whatever county the user lives or works.  The typical website TOU – which you almost never hear objections about – will contain a forum selection clause requiring that all claims against the company be brought wherever the company is headquartered.  Such provisions are routinely upheld (and make a world of sense from the company perspective).

Dropbox COULD have said, “fine – you got a claim?  You can have your day in court.  In San Francisco.”  Instead, they’ve set up a process that makes it far easier for the vast majority of consumers to have claims addressed.

Yet predictably, they’re getting abused for it.

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Sign on the Line that is Dotted?

So the other day I was at work, reviewing a contract. It was no big deal; a standard form agreement for a venue were renting to host an event in. I wouldn’t ordinarily spend more than a few minutes on such a thing – it’s a one-off deal, less than $20k in value, etc. Not worthy of anything more than a cursory legal review.

But it had a quirky clause that basically said that if anything happened to prevent our event from happening (including things in the venue’s control, or due to their systems, labor relations, etc) our only recourse was to reschedule. That doesn’t work very well you’re setting up an event with out-of-town visitors that must happen on a specific date.

No biggie; I sent the venue an email telling them to cross it out and replace it with a few sentences I quickly ginned up that gave us the right to find alternate arrangements if they couldn’t come through.

OK, they said.  But we need a legal addendum.

Fine, I said – just attach my email to the contract.  Done.

Oh, no, read the indigent email I got back.  We need a LEGAL DOCUMENT.

So I put my email into a document titled “Contract Addendum” and sent it back to them.

What a freaking waste of time and effort.

Because here’s the dirty little lawyerly secret (and in fact it’s so secret many lawyers don’t get it): almost anything can be a “legal document.” Outside of a handful of areas where written documentation is required by law (chiefly real estate transactions and estate planning documents), the relative levels of “legalese” and formality that go into a contract are driven entirely by evidentiary concerns, inertia and ass-covering.

Here’s what I mean: for most transactions, you could rely on a verbal agreement – the quintessential”handshake” deal. Why? Because many deals are simple and straightforward, and most of the time both parties will do what they said they were going to do.

The problem, of course, is that if any question arises about the terms of the deal, you haven’t got anything written down.

So you write it down. This is a critical step. In fact, I’d say that 80-90% of the value of a written contract is obtained by the simple step of writing down the basic terms of the deal. It could be on a cocktail napkin, in an email exchange, or via a simple document. Just having the basic terms on paper, clearly laid out, so anyone can refer to them if they have questions about the parameters of the deal.

Beyond this point is where the legal surplussage starts to kick in. Terms to address incredibly remote contingencies. Ritualistic signature requirements. All things to button up problems that could arise – but doing so in advance extracts a cost.

Like the inanity of asking for “wet” signatures. Requiring a signature at all is simply a method of creating evidence (which will most likely never be used) to prove that your counterparties actually agreed to the terms of the deal.  The bigger or more complex the deal (or the less you trust the other side), the more you want actual signatures.  But do you really need 4 original signatures?  Will a copied version not suffice?

If you don’t have a good answer to this question – and indeed, to the need for any provision in your contracts that may create friction, slow things down, or prevent a deal from being done – you need to ask whether that provision can be excised from the contract.

Too much legal process around routine deals is a bad business practice. Yes, having that belt and those suspenders may buy you some clarity in the once-in-a-blue-moon case where someone claims they didn’t agree to your deal, or where your double-secret indemnity provision comes into play. But this contingent benefit is bought, every time, at a very real cost: it erodes trust with your business partners.  It can crater deals.  And it can make it harder to win follow-on business.

Because after all, the relationship and the deal are what’s most important. And sometimes – hell, most times – a cocktail napkin approach is really all you need.

 

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Lawyers as Board Directors

Two thoughts from this article on “The Rise of the Lawyer-Director:”

1) despite the title, most lawyers remain spectacularly unsuited for board membership.  Too much focus on risk; too little attention to opportunity.  While the article rightly points out the need for different roles on corporate boards, there’s no role for hand-wringing. However, those lawyers who are able to bring business and legal advice together should be finding more board roles open up, particularly as the thicket of regulation grows.

2) This may be the first staffing-related piece I’ve read that has mentioned “diversity of thought” as a goal.  When it comes to the world of corporate boards – with the attendant risks of insularity and groupthink – that’s probably the only kind of diversity that ultimately matters.

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George Zimmerman Verdict Follies

The George Zimmerman murder trial out of Florida hadn’t been big on my list of news stories to follow, but I’ve found the fallout from the verdict pretty darn strange (or maybe I’m just easily amused):

  • The crybaby prosecutor: it should be obvious to most prosecutors that the professional response to a trial loss is to say that you respect the process and move on with life.  That is, unless you’re Zimmerman prosecutor Angela Corey, who apparently has a record for being a mite thin-skinned.
  • The passive-aggressive defense counsel:  Zimmerman’s attorney, Don West, when asked after the verdict for his thoughts on the trial judge, declined comment stating “I’d like to keep my bar license for a few more years.”  Dick move; in one step he communicates both his low regard for the judge and his lack of understanding of the first amendment rights of attorneys.  Yes, Mr. West, you are free to criticize the judiciary – and specific judges – without worrying about losing your law license.  Of course, it’s best to follow the counter-example of Angela Corey and do so professionally.  Which is not, incidentally, something anyone would confuse your snide comment with.  
  • The strange bedfellows: Right-wingers celebrating a defense victory over the state!  Left wingers bemoaning a criminal defendant going free!  This was very much a stand-sit moment, and it’s offered great moments in squirm-itude watching those on both the right and the left try to justify their positions.
  • Support the State!:  For me, the ironic topper was my beloved local anarchists calling for protests against the verdict.  I didn’t know that anarchists thought the police and prosecutors should have more power!

And despite the unfortunate, avoidable circumstances, despite the bumbling of law enforcement and prosecutors, despite the crappy laws and attitudes in Florida, despite the built-in biases and suspicions that leads to events like this, I’m left with this thought:

I still prefer to live in a society where the state is held to its burden, where the accused has a full opportunity for defense, and where it’s at hard for people to be locked away.  We may fall far from the mark on these fronts – look no further than our woefully underfunded public defender programs.  But if there’s one lesson the Zimmerman case offers, it isn’t that we need to walk back the rights of defendants.

The Choices of Miranda

There’s been a fair bit of legal chatter about the decision of law enforcement to not read Boston bombing suspect Dzhokhar Tsarnaev his Miranda rights. What’s lost in most of the discussion is that doing so is a perfectly rational decision for the authorities to make. Why? The reasons are related to one of my favorite topics: why no one should blindly follow the law (or procedure, or “standard operating process”).

The police choosing to not Mirandize a suspect isn’t the same as choosing to disobey an unjust or unconstitutional law, or even the decision to proceed in the face of ambiguous applicability of regulation. It’s more akin to the cost-benefit involved in choosing to run a red light on a bicycle, or to breach a contract. You see, unlike the legal consequence for being caught running a red light (a ticket), there’s not a legal sanction for failing to Mirandize. There’s no independent “Miranda right;” the warning merely serves as a safe harbor allowing the police to use whatever statements the suspect may offer up after the warning has been given.

(for any criminal defense lawyer readers, yes, I am skipping over a lot of criminal law nuance here, but my point has to do with decision-making, not procedure).

Like my running the red light, the authorities here are making a pragmatic choice: give up the ability to use any incriminating statements that Tsarnaev may make against him in exchange for the increased likelihood that he yields information exposing co-conspirators, foreign support, etc. This decision is actually quite an easy one. While the FBI is preserving optionality by claiming that skipping Miranda is justified under the public safety exception (which would permit any statements to be used despite the failure to Mirandize), the much more important point is that there is almost no chance that they need any incriminating statements by Tsarnaev in order to convict him. Absent some truly startling developments, they’ve got all the evidence they need. So why not skip the warning and see what intelligence he offers up?

The rules of police procedure would say that you read the suspect his Miranda rights. And as with most rules (including red lights), that’s a good idea – most of the time. But as this case illustrates, we’re not going to maximize our chances of getting the best outcomes if we don’t critically assess, every time, whether we should follow the rules this time.

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Compliance Exercises

Counter-apropos of my last post comes this article in Corporate Counsel magazine about the need for an independent Chief Compliance Officer in most corporations. The article presupposes general agreement that having such a position is critical to “elevate compliance and improve corporate governance.” And I suppose it is. But is it critical for what really important in a corporation?

You know, doing business?

And growing that business?

There’s no question that having a Chief Compliance Officer will help tick the boxes when it comes to corporate governance. But it runs the risk of glorifying the grocery clerk mentality, the lording of form over substance. Unlike every other C-level officer, this putative Chief Compliance Officer is focused on something wholly apart from the business and its goals: complying with the dictates of government. Compliance bears within its genes the potential for mission creep. Just as the regulator inevitably seeks to expand the scope of that which is regulated, the compliance officer lives with the danger of seeing ever-more ways that laws – and, critically, interpretations of laws – can be complied with. This is especially true if “compliance” is unmoored from legal, which should, at least in theory, be laying a claim to helping the business grow.

An example: My first General Counsel job was with a regional cellular company, shortly after the Telecom Act threw the mobile wireless industry into deregulation. A compliance officer would have told my board that we couldn’t possibly sell wireless phones and rate plans on a bundled basis. That was the conservative, “compliance-centric” interpretation of the regulations, which were in a state of flux at the time. It was the approach taken by our competitor. To me, young and unburdened with a career spent working for the telephone company, it was lunacy. Of course we could sell bundles, and if the regulators came around asking questions, we had a perfectly good explanation for them. An explanation that was supported by our good faith interpretation of the law and consumer interest. So we bundled away, and took a ton of market share. After nearly a year, our competitor followed suit.

I think about that often when considering the damage a compliance-first attitude can cause a company. There’s so much grey area, and so many ways to find a “compliance solution” that prevents business from happening. There’s also the very real danger that by focusing solely on ticking off the compliance officer’s checklist the company will miss bigger, more amorphous legal problems.

There may be industries where a robust – perhaps even independent – compliance program is called for. But those industries where abuses have been at their worst (financials, I’m looking at you) have never suffered from a lack of people focused on compliance. While having a lot of grocery lists will help prevent everyday lawbreaking, it’s not proof against more systemic problems. And in the meantime, it carries a very real cost in risk of loss to business focus. Far better, then, to have someone in the legal department who is focused on compliance, but whose prescriptions are ultimately filtered through the more practical hand of the GC.

Asking the Wrong Question: Targeted Assassination of American Citizens

All of the noise about the “President’s kill list” and the freaking out about the assassination of Americans by our own government?  It strikes me as our uniquely American bent toward litigiousness – or at least the over-lawyering that pervades so much of our lives.  And not surprisingly, it completely misses the point.

You see, I don’t care whether the people we’re targeting in drone strikes are American citizens. 

Nobody should. That question – which is what has everyone wringing their hands – is completely irrelevant.  If someone is engaging in armed hostility against the US, their citizenship doesn’t matter.  It shouldn’t matter to troops in the field or government officials.  These citizens should be treated just like any other enemy combatant.  Shot at, captured, assassinated, whatever the dictates of combat require – and all without regard to citizenship.

Now, there are some more relevant questions raised by this whole exercise, like:

  • Should we be engaging in targeted executions at all?
  • What level of decision-making is required to do so?
  • How do we determine which entities we are “at war” with?

These are the things to be concerned with – and it’s a very fair question to ask whether we’ve gone too far, and ceded too much power to the executive, in pursuit of the “global war on terror.”  

But the type of passport held by the targets of our drone strikes?  We’re missing the forest for the trees if we’re worried about that.   

Corporate Pansies

Few things set my teeth on edge like all of the “Big Game” ads around the Super Bowl.  It’s like a badge of shame; it might was well scream “we’re a bunch of pussies” or “fine, we just let the lawyers run our marketing department.”

The thing that just happened was the SUPER BOWL.  Super. Bowl.  Say it slowly:  SUUUPPPEEER BBBOOOWWWL.

Yes, the NFL can be heavy-handed with its (typically frivolous and empty) lawsuit threats over the use of the name SUPER BOWL.  But it’s not the “Big Game” or whatever other lame euphemism you want to use.  It’s the SUPER BOWL.  And every advertiser in the country has a first amendment right to refer to it by name.

If you’re a lawyer representing one of these companies, next year do us all a favor: strap on your big boy pants, quit the hand-wringing, and go out and proudly call the thing by its intended name.

Nuts at Nutella

I’ve posted before about trademark bullying. It’s a classic example of letting legal process take precedence over good business judgment – and it illustrates starkly why it’s often a bad idea for a company to give their lawyers too much leeway.

The latest entrant in the trademark bullying hall of shame? Nutella, whose lawyers sent a cease-and-desist letter to a Boston smoothie joint for having the temerity to note on their menu that a certain smoothie contained the delicious chocolate-and-hazelnut concoction.

Which they’d been selling for 14 years, no doubt buying thousands of dollars’ worth of Nutella over that period, and driving free viral marketing for the brand.

So yes, by all means let’s make them stop that.

Clint Eastwood bashes Attorneys?

OK, I love Clint Eastwood as an actor, and while his speech last night as the RNC was a bit strange (I suspect that “having a conversation with an empty chair” will be the meme of the year) I found it humorous and endearing.

It struck me, however, that Clint called for a “businessman” in the White House rather than a lawyer – due to the fact that lawyers are “so busy.”

Two issues with this: First, Romney, like Obama, possesses a law degree. And neither man has spent any meaningful portion of their career practicing law. And second, as any recent law school graduate can tell you, many attorneys are far, far from busy.