The Chief Executive in the Legal Arena

 

The Chief Executive often must choose the correct path in the legal arena.  No matter how strong the legal acumen of the General Counsel or CFO, it is the Chief Executive who is ultimately responsible for major legal decisions.  While Chief Executives are rarely attorneys, they have significant experience in making decisions, organizing people to achieve goals and monitoring progress.  This article provides guidance, from the perspective of a business trial attorney, on how the Chief Executive can thrive in the legal arena.

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Managing Your Attorney.  Much of being a Chief Executive is to make correct decisions efficiently.  The Chief Executive rarely, if ever, has time to read an attorney's extensive litigation report, brimming with citations to evidence and legal authorities.  The Chief Executive must be provided with the most important information in a clear format.  An effective decision can often be made based upon a 400-600 word summary and a 20-minute phone call.  When making a major legal decision, it may be best for the trial attorney to come to the office and write the pros and cons on the whiteboard. 

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The Chief Executive and the General Counsel.  Corporations allocate decision-making between different executives.  A General Counsel may oversee company legal issues, provide confidential advice, work with the Board, assist human resources, monitor regulations and supervise litigation.  It is the job of the General Counsel to provide objective advice with complete integrity for the company’s best interests.  A good Chief Executive will create a C-Suite environment where all executives, including the General Counsel, can provide straight-forward advice without fear of adverse employment consequences.  A General Counsel who always echoes the Chief Executive may be a sign that something is wrong in the executive suite.

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The Chief Executive and the CFO.  Outside counsel reports on most litigation matters and transactions to the CFO, or to an intermediate general counsel.  Outside counsel should report to the Chief Executive or Board only for major litigation or strategic transactions, and then only for the most important decisions.  In most situations, outside counsel will be working with the CFO or the CFO’s team for information gathering and day-to-day decisions.

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The Decisive Email.  Ideally, the Chief Executive’s participation in litigation should be both rare and decisive. In one business litigation dispute, the creditor was trying to collect a large unpaid receivable from a customer.  The amount was significant enough that the Chief Executive became involved.  The creditor gave notice of termination of services to the customer.  In the tense days following the notice of termination, the parties negotiated a settlement, but the debtor balked at signing.  As the lawyers bickered via email, the Chief Executive monitored the discussions. Suddenly, the Chief Executive sent the decisive email: threatening to cut off services in “two hours and four minutes.”  Signatures arrived before the deadline expired.

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Fight in the Board Room; Fight in the Court Room.  Executives who work together for years often grow closer, but they sometimes start to resent each other.  The common traits and mutual successes are forgotten. When the resentment metastasizes, someone has to leave.  Then, if the dispute cannot be resolved amicably, the struggle continues, albeit in a new venue: the court room.  Regardless of the expense, these cases rarely settle.  It takes intervention from a strong Board or an insurance company to force a resolution.  These cases go to trial and at trial, someone wins and someone loses. 

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How Much Is a Case Worth?  The general rule is that for every dollar spent on legal expenses, a business loses one dollar in business interruption and legal aggravation.  However, there is no mechanical test.  The value of a case depends on the Chief Executive’s taste for litigation balanced against business opportunities and personal goals. One Chief Executive in a major business lawsuit said—in the middle of a bitter trial—that, except for the cost involved, he was enjoying the process, which was true, perhaps for both sides.  Another Chief Executive—directing a rapidly expanding business—left some money on the table when resolving a lawsuit.  That Chief Executive got back to work growing the business.

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Opportunity to Excel.  Legal decisions change businesses. The Chief Executive must master the skill of making legal decisions just as with any other proficiency necessary for business operations. Decision-making in the legal arena is an opportunity to excel.

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Nathan Wirtschafter, Esq. is a California business trial attorney.  His law practice encompasses a broad range of business matters, and he represents clients in state and federal courts, arbitration and mediation.  He can be reached at (818) 660-2518 and ndw@ndwlaw.com.

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