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The Business Magazine For In-House Counsel corpcounsel.com April 2014

progress

Plus: the NLRBs New gc comes out swiNgiNg the LoNg, stRaNge LitigatioN oveR datatReasuRy

Katherine Kate Adams

of Honeywell International


the number of female toP legal

officers at big comPanies has grown,

but slower than some wish

by sue reisinger




by sue reisinger

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5Contents

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in the news this month

13

Today women are leading the legal departments at 21 percent of fortune 500 companies, compared with 17 percent in 2009 and only 15 percent a decade ago [Womens Work, page 90].

20171615

Features

90 women at the topWomen have made slow but steady progress rising to the top of Fortune 500 legal departments. Until last year, when (for the first time) the number dropped. By Sue Reisinger

98 the 11-year warAt more than a decade (and counting), few litigations can match the lengthand the strangenessof Data-Treasury Corporations twisted legal saga.

By Jan Wolfe

4 2014

Cover story 90

inBoX 13 theyre Baaack The new NLRB and its full-fledged GC have taken on Wal-Mart, alleging retaliation.

By Rebekah Mintzer

14 GamersIn-house lawyers are playing games and learning about ethics and compliance. By Sue Reisinger

16 youre out!Against a backdrop of turnover at the top, two high-profile GCs were shown the door. By Sue Reisinger

17 preet speaksThe U.S. attorney in Manhattan talks about going after banks and bankers. By Julie Triedman

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6< < < < MORE: corpcounsel.com

Contents

april 2014 Corporate Counsel

4 2014

DEpartmEnts

23 deals & suits Suntory gets into bour-bon with Jim Beam; Google dabbles in household products.

59 canadian deals A Toronto real estate company consolidates control; Fortis looks again at the U.S.

63 moves Halliburton snags a Big Law litigation chief. Scheck Industries hires a woman who knows construction law. And a former TV Guide Network lawyer goes home.

87 dc WatchFive agencies are sup-posed to implement the new Volcker Rule. Whos in charge?

Columns 71 from the expertsAs companies expand globally, managing their workforces across borders grows ever more complicated.

By Bill Wright

and Celia Joseph

77 in-house tech The state of the art of e-discovery, at least how its seen by the courts.

By Cecil Lynn and Lauren

Schwartzreich

110 outboxThe Bitcoin Founda-tions general counsel has had a wild ride this year. And its not over.

By Marlisse Silver Sweeney

> > >

also

10 Editors NotE

cover photo by jordan hollender 87 63 63

2323

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Call it

The Business Magazine For In-House Counsel corpcounsel.com April 2014

progress


Katherine Kate Adams

of Honeywell International





by sue reisinger




by sue reisinger

QG_Cover;17-revoked.indd 1 3/6/14 12:41 PM

Corporate Counsel (ISSN 1524-7597) is published monthly by ALM Media, LLC. Chief Executive Officer: Bill Carter. Main office: 120 Broadway, New York, NY 10271, (212) 457-9400; [email protected]. Subscription rates: free to general counsel and staff attorneys upon direct request; all others $169 for one year (12 issues). For Canadian and foreign subscriptions, the rate is $245. The publisher reserves the right to determine qualification for free subscriptions. Periodicals postage paid at New York, NY, and additional mail-ing offices. POSTMASTER: Send address changes to: Corporate Counsel, Subscription Department, P.O. Box 5080, Brentwood, TN 37024. Please allow 46 weeks for address changes. Subscription inquiries: Subscription Department, (615) 850-5320 or [email protected]. Advertising inquiries: Mike Medwig, [email protected]; (212) 457-9470; fax (646) 822-5035. Current and back issues are available exclusively from this office.

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It dawned on me a few years ago. a couple of In- house lawyers from a large company in the Midwest were in town. They were regular readers of the maga-zine (this was before our website was a daily news oper-ation), and they wanted to meet for lunch.

We went to a new Italian place near our offices in Manhattan and had a terrific meal: sleek atmosphere, good food and intelligent conversation. Now Ill confess. We New Yorkers grow up with certain preconceptions about people from cities smaller and supposedly less cosmopolitan. Its wrong, I know. And I was shown just how wrong I was when these lawyers talked about how the global nature of their company influences how they do their jobs. As the meal progressed, I found out that one of them was involved in a dual-national marriage, shuttling back and forth to Italy every couple of weeks. And the other had lived in more places than Id ever hope to visit.

In fact, in one short afternoon I got the impression that our readership was widely traveled and had con-cerns far beyond the borders of the United States. And by now, its become a clich. Todays corporate counsel needs to keep track of different privacy regimes, anti-bribery laws, and European Commission directives, as well as how sourcing concerns might blow up the next

shareholder conference.So this past winter it was interesting

to see how our across-the-pond friends live and work. The occasion was a conference given by the U.K.based law firm Eversheds for their Euro-pean clients in Copenhagen. In some ways, theyre remarkably like their

American counterparts. They fret about costs, theyre look-

ing for ways to trim expenses and theyre trying to think about novel ways of deliver-ing their services.

In other ways, though, theyre not as far along as an established corporate institution as their

American versions. Part of it is cultural: Few countries are as lawyered-up as the United States. So theres less litigation risk, there are fewer go-to-the-mats lawsuits, and class actions are not much of a concern. And big, established corporate legal departments are a newer phenomenon.

A lot of the conference was devoted to, for want of a better term, internal press relations. How to show your worth to the corner office. How to condition your business-side colleagues to rely on your advice. How to communicate to the company what exactly the depart-ment is there for in the first place. As a legal journalist who sees the legal departments worth as every day as ATMs and the Internet, it was a enlightening to me to see how much Americans have evolved, and how much our ever-smaller world still doesnt move in lockstep.

THIS MoNTHS CovEr STorY, HoWEvEr, SHoWS A facet of the U.S. corporate legal department thats seen slow evolution. Women now account for about one in five top company lawyers in the U.S., but women have been almost half of American law school classes for decades. Theres a disconnect there.

Progress had been steady, but stalled recently. Theres an interesting theory behind that, though. Some analysts see it as a sign of progress for the legal depart-ment in general. once the province of lawyers seeking a gentler work/life balance, going in-house has become just as prestigious, and perhaps as much of a pressure cooker, as life in Big Firm law. So more men are pouring into the top slots.

Check out Sue reisingers story, with her profiles of women attorneys who have made it to the top. You can find it on page 94.

ViVe la Diffrence

4 2014eDitorsnote

Anthony [email protected]

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SEDGWICKRULE #72

At Sedgwick, we take the time to know our clients as people, whats going on with their company, and the impact a case can haveon them, their people and their business. First, we listen to our clients. Then, we become their voice. www.sedgwicklaw.com

ITS IMPOSSIBLE

TO BE AGREAT

LAWYERAND A

LOUSYLISTENER.

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In the end It was the Los angeLes County Health Departmentnot intellectual property lawthat forced Dumb Starbucks to close.

The satirical pop-up coffee shop opened in Los Angeles in February, garnering tons of media attention because it had the look and feel of a real Starbucksbut the word Dumb preceded the name on everything from a Dumb Frappuccino to a Dumb Venti. The shop turned out to be a publicity stunt by Comedy Central TV show host Nathan Fielder, whose show, Nathan for You, revolves around Fielder giving prank advice to small business owners.

But before that connection was known, Starbucks Corp. made state-ments about its trademark, saying that the interloper could not legally use its name. Dumb Starbucks countered by posting a message in its store defending its action by calling it a parody.

Although we are a fully functioning

coffee shop, for legal reasons Dumb Star-bucks needs to be categorized as a work of parody art, the message said. So, in the eyes of the law, our coffee shop is actually an art gallery and the coffee youre buying is considered the art.

The shop never actually sold coffeeor anything else. For the few days it was operating, it offered all items for free. The health department finally closed it down for operating without a license.

The uncertainty of trademark law makes it difficult to determine whether the parody argument would prevail. But even if Starbucks could make a good case for infringement, it might be better off doing nothing, lawyers say.

You have to think of the ramifica-tions, says Haynes and Boone partner and trademark practice group chair Purvi Patel. Its usually not a good idea for big companies to go after small oneseven if they have a legal case.

Legally, a brand owner has to prove that the alleged infringing prod-uct is likely to cause con-fusion. Starbucks would probably have a tough time, says Patel. A brand owner could also try to prove brand dilution, and in this case, Patel says, Starbucks might win,

But Patel, who has never represented Star-bucks, says that she and her colleagues have debated what they would advise a client to do in similar circum-stances. Some feel it best to do nothing. Others say that the brand owner should send a nice letter asking the infringer to stop. Still others opine that the brand owner should send a demand letter and pursue a preliminary injunction.

Jonathan Moskin, a partner who spe-cializes in IP at Foley & Lardner, argues

that big companies are often better off letting the infringement slideespe-cially if action is likely to bring nega-tive attention. These are usually lose-lose propositions for brand owners, he notes. If they win, theyre seen as beating up on an artist, and if they lose, then they come away with a black eye.

Starbucks has been especially vul-nerable to black eyes lately when assert-ing its intellectual property. In Novem-ber the company lost a 12-year legal battle with a small New England coffee producer in New Hampshire after tak-ing issue with its Charbucks roast, which Starbucks claimed infringed its mark and diluted its brand. The small coffee roaster acknowledged that the Charbucks name was an unflattering reference to Starbucks coffee, but the U.S. Court of Appeals for the Second Circuit nonetheless said that Starbucks had failed to prove that consumers

would be confused and found that the marks were only minimally similar.

Then, in December, Starbucks got hit with more negative publicity when it sent a cease and desist letter to a brew-ery in Missouri because the use of the name Frappicino to describe one of the brewerys beers too closely resem-bled Starbucks Frappuccino. The letter said the similar names (albeit spelled differently) might cause customers to mistakenly believe that this beer is affiliated with or licensed by Starbucks.

The brewery sent an amusing letter to a Starbucks attorney that purported to be an apology but clearly mocked the big company for its legal actioneven sending a check for $6 for the full amount of the profit gained from the sale of the three beers sold under the Frappicino name.

The incident was covered by major media outlets, including USA Today, CNN and National Public Radio. It went viral, Patel observes. Starbucks has a bad history when it comes to pro-tecting its mark.

With the Dumb Starbucks shop now closed, it seems unlikely that Seattle-based Starbucks will take legal action. But the potential does still exist: Nathan Fielder says he plans to open another Dumb Starbucks, this time in Brooklyn.

It looks like he is trying to bait Star-bucks to get more publicity, Moskin says. Otherwise, this Dumb Starbucks would just be pretty dumb.

LISA SHUCHMAN

Theres no such Thing as Dumb publiciTyA coffee shop risks a lawsuit to make a splash.

These are usually lose-lose propositions for brand owners, says Jonathan

Moskin. If they win, theyre seen as beating up on an artist

dumb starbucks In Los angeLes, photographed durIng Its (brIef) moment of gLory on feb. 9, 2014


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Attorney-client privilege mAy endure until deathbut not upon the sale of a company. At least thats what the Dela-ware Court of Chancery ruled recently.

According to Shep Davidson in Burns & Levinsons The In-House Advisor, the gist of the judgment was that the new owners of a business can waive the privilege with respect to communications that the former owner had with company counsel solely to use those communications as evidence against the former owners.

Say what? In the case before the Delaware court,

Great Hill Equity Partners v. Sig Growth

Equity Fund, the plaintiffs acquired a company called Plimus through a merger. But after the transaction was completed, they sued, claiming that the defendants lied about the business.

During the litigation, the plaintiffs discovered confidential emails between the defendants and their outside coun-sel. The defendants claimed that these communications were privileged and should not be introduced into evidence. But the court relied on a statute that says all privileges are the property of the resulting corporation.

The statute did not expressly includeor excludethe privilege

between a lawyer and a client, and the court ruled that the emails could be used as evidence. Accordingly, the Court of Chancery held that the defendants had no ability to assert the attorney-client privilege because when the business was sold, the right to assert privilege with respect to com-munications between the company and its counsel passed to the new owners as part of the sale, explains Davidson.

So, companies that hope to maintain attorney-client privilege after a merger or a sale had better put it in the contract, he warns.

MArLISSe SILver Sweeney

if generAl counsel Are feeling A little jittery about going to work these days, they can be forgiven. In Febru-ary, BTI Consulting Group revealed that 10 percent of large companies started 2014 with new GCs at the helm, according to its survey. Then wellpoint Inc., the nations second-largest health insurer, abruptly fired general counsel John Cannon.

It was the second surprise termi-nation at a major company in recent months. In December, Pfizer Inc. announced that its GC, Amy Schul-man, was leaving immediatelyeven though she was supposed to become president of a new Pfizer division on Jan. 1. And at press time, the GC at a third big company was under fire. Deutsche Bank is con-sidering replacing general coun-sel richard walker after a series of financial scandals, according to the German magazine Manager.

Deutsche Bank is apparently under pressure from Germanys

financial regulator, BaFin, to address the banks alleged role in currency manipulation and rate rigging by dismissing walker, and possibly other executives. (Bonn-based BaFin has declined to comment.)

while walker remains twisting in the wind, Cannon is out in the cold. In a two-sentence 8-K filing with the U.S. Securities and exchange Com-mission, wellpoint said: On Feb. 19, 2014, John Cannon was terminated without cause from his position as executive vice president, general counsel and chief public affairs offi-cer effective immediately.

He was let go one day before the Indianapolis company filed its annual 10-K with the SeC. The com-panys profits dropped 68 percent in the fourth quarter of 2013. Cannon had served as interim CeO for well-point from August 2012 to March 2013, until the company hired a new chief executive. SeC docu-ments show that he earned a total

of $6.5 million in 2012, in salary, stock, bonus and an adjustment for his CeO service. (The 2013 numbers werent available at press time.)

Cannon joined wellpoint in 2007, after spending 19 years with CIGnA Corporation, including a stint as deputy general counsel. In 2011 Cannons legal team was named a finalist as one of Corporate Counsel magazines Best Legal Departments. Apparently, the new CeO didnt get the magazineor didnt agree with our assessment. SUe reISInGer

GoinG, GoinG

Until death or merGer do Us part

Its been a shaky time for general counsel who like their jobs.

Attorney-client privilege may not survive after a company is sold.

> > >

former Wellpoint gc John cAnnon


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Corporate Counsel april 2014

Q: In your first few months on the job, your counterpart in Brooklyn lost a landmark criminal trial against two Bear Stearns hedge fund managers. Since then, the DOJ has relied primar-ily on big-ticket civil settlements. Why arent we seeing any criminal indict-ments of top executives involved in mortgage market frauds?A: Weve had great success in the white-collar area convicting people who have committed financial crimes like insider trading, but that does not mean that every kind of conduct, whether its neg-ligent or reckless, can be brought crimi-nally. It is very hard to convict someone criminallyand it should be. But that doesnt mean that just because some-thing cant be brought criminally, that you should just call it a day.

At the beginning of 2010 we were talking generally about how we might use civil statutes to accomplish things where the criminal statutes either were not adequate or appropriate to use. Among other things, civil cases had a quality to them that smart lawyers can become enamored of: the preponderance

standard. And we wanted to bring to bear powerful tools, some of which had not been used as aggressively as they might be or had not been used for spe-cific industries, so we could hold insti-tutions and individuals both account-able, to cause reforms to happen where appropriate, and to exact penalties that would actually mean something. On top of that, we wanted to make sure that if there were resolutions, there were admissions of conduct, so that people understood why we were bringing the cases and so that the whole world would see and understand the bad conduct.

Q: In your offices first three FIRREA lawsuits targeting mortgage underwrit-ing banks, civil prosecutors overcame objections by the defendants that the law doesnt apply in cases where the affected bank was both victim and per-petrator of alleged fraud. It must have been far from clear to your team that judges would agree with an expansive, self-reflexive interpretation of the stat-ute. What was your thinking going into the first test cases?

A: This place is great because lawyers here think within the constraints of the law, but outside the box. Thats exactly what happened here. Initially, our view internally was even though theres some risk when you use a statute in a particu-lar new way, it is worth itbecause if people werent going to use a statute in that way because theres no precedent, thats the effective equivalent of having bad precedent.

Q: Is the case against Bank of America/Countrywide, which resulted in a big trial win for your office on Oct. 23, the template for a new approach to civil enforcement against the big banks?A: Right. Its not a criminal case, but it is an incredibly significant civil case that has a lot of ramifications for that bank, and a lot of impact on the thinking of other banks because of all the things aired in a public courtroom. Sure, it would have been risky had we lost, but the value for the government in having won in a massive case with very sophis-ticated counsel on the other sidewho were maybe overconfidentis that the

> > >

The Southern District uses all the tools at its disposal, from wiretaps to expansive interpretations of old laws. Holding tHe bAnks (And bAnkers) AccountAble

Questions & Answers preet bhArArA

MAnhAttAn u.s. Attorney preet bhArArA hAs hAd his shAre of big weeks since taking office nearly five years ago. But even for him, the first week in February was a doozy. Bharara netted his 79th straight insider trading conviction, securing a guilty verdict against former SAC Capital Advisors portfolio manager Matthew Martoma. And his office started the week with a record-breaking False Claims Act settlement against a bank, inking a $614 million deal to resolve allegations that JPMorgan Chase & Co. duped two government agencies about loans that it under-wrote or originated.

The top prosecutor in the Southern District of New York since 2009, Bharara has spearheaded nine major cases against Wall Street banks since 2011. During his tenure, the 50-lawyer Civil Division has become an activist, risk-taking department, using some of the most powerful civil laws at the U.S. Department of Justices dis-posal and applying them in new ways and against new financial targets. In the pro-cess, Bhararas office has prompted several important precedents vastly expanding the scope of both the False Claims Act and a savings and loan crisisera statute, the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA).

Senior writer Julie Triedman recently spoke to Bharara about his approach to pursuing postfinancial crisis cases. An edited version of their conversation follows.

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next institution knows that were not afraid to go to trial. Too long on the civil enforcement side in a lot of places theres been a fear of going to trial. Not just a fear but concern about the enormous amount of resources that it takes. But you cannot go credibly into a litigation where you hope to get the result you want if you are afraid toor if it is perceived that you are afraid togo to trial in front of a tough judge and prove your case.

Q: All of the civil suits youve brought against the major mortgage market par-ticipants have been the work of a six-lawyer civil frauds unit that you created in March 2010. Why was creating a spe-cialized unit so important?A: The problem is that the more diffi-cult and time-consuming and labori-ous your defensive docket gets, the less time you can spend on the affirmative stuff. And unlike the Criminal Division,

which is all affirmative, on the civil side most of its responsibility is to defend agencies and individuals in the gov-ernment who are sued for things. We realized that one way to make sure that we didnt lose sight of the affirmative goals was to have a dedicated group of people who basically did not have any defensive docket, and their only job was to wake up and figure out what affirma-tive cases to do to ferret out fraud.

Is It legal to fIre an employee for being too cute? According to court documents, thats what happened to yoga instructor and massage therapist Dilek Edwards. She was fired last year from her job at Wall Street Chiropractic and Wellness in New York because, she claims, she was too good-looking for her boss and his jealous wife.

Edwards filed her claim against the husband and wife co-owners of Wall Street Chiropractic, Charles Nicolai and Stephanie Adams, citing sexual harassment, gender discrimination and unlawful termination of employmentviolations under New York state and New York City Human Rights Law. The owners fired back, asserting that alle-gations of spousal jealousy do not give rise to gender discrimination claims.

According to Edwards filing, she began work in April 2012, and her rap-port with Nicolai was strictly profes-sional, although he once told her that his wife might become jealous because she was too cute. Adams, whom Edwards claims she only encountered in person once, apparently sent her an angry text message last October, asking her to stay away from Nicolai and his office. Edwards was fired soon after.

Keisha-Ann Gray, a partner at Pros-kauer Rose and cohead of the firms employment group, says that the case isnt likely to get far. Being attractive is not going to fall under the umbrella of gender discrimination, she says.

Calling Edwards too cute was an

evaluation based not on gender, but on physical attractiveness, Gray notes. Unlike gender, race and other traits, attractiveness is not a protected char-acteristic under Title VII of the Civil Rights Act of 1964.

This concept is constantly coming up every couple of years, Gray con-tinues. But she doesnt see it gaining legally protected status anytime soon. Beauty is both subjective (in the eye of the beholder) and mutable. Other pro-tected characteristics, Gray says, are for the most part objective and permanent.

The case is reminiscent of an employ-ment dispute last year in Iowa, where the states supreme court struck down sexual harassment and discrimination claims filed by a dental assistant whose boss fired her because he found her

to be irresistible and was afraid he would cheat on his wife.

Though they were both about employers allegedly attracted to their employees, there were important dif-ferences between the cases. Maria Greco Danaher, a partner at Ogletree Deakins, points out that the Iowa case contained specific allegations about how the rela-tionship between the dentist and his assistant was having an adverse effect on the dentists marriage. Then the court extrapolated from that, Dana-her observes, and said because it was based on emotion, not on gender, it didnt violate that statute.

According to Gray, the best way for in-house attorneys to reduce the vol-ume of employment suits like the ones in New York and Iowa is to keep careful

too cute to work?A story made for the tabloids raises an interesting employment question.

> > >

track of employee behaviors and perfor-mance. Document it in real time, dont document it after you get the lawsuit, she advises. Document your reasons for taking any employment action, posi-tive or negative.

While its hard to prevent disgrun-tled employees from taking initial legal action, she adds, good solid documen-tation will help stop actions from pro-ceeding very far. Even if plaintiffs dont see the flaws in their cases, their attor-neys will. REBEKAH MINTzER


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OUR CULTURE IS ONE OF TRANSPARENCYAt K&L Gates, we believe that maintaining a transparent law fi rm enables us to achieve the critically important goal of providing superior service to clients, thereby advancing their business objectives. Our global fi rm operates in a fi nancially integrated manner, which allows our lawyers to more effi ciently collaborate on client matters throughout our international platform. We also take serious measures to ensure that we invest in the development of our next generation of lawyers.

As a testament to our culture of transparency, K&L Gates broke new ground last year as the fi rst U.S. law fi rm to voluntarily disclose an in-depth analysis of our fi nancial results, an act that we have repeated this year and have pledged to do annually. We feel strongly that honesty and transparencyare good for businessour own as well as thatof our clients.

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019pCC0414.indd 19 3/5/14 10:37 AM

INBoxINBox4 2014

jon

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inf

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LegaL disputes that take pLace in muL-tiple national jurisdictions or between parties based in different countries are posing challenges for corporate boards, CEOs and general counsel. And the problem isnt likely to go away.

These complex and costly cross-border disputes are expected to grow in the coming years, according to Global Currents: Trends in Cross-Border Dis-putes, a survey of about 150 GCs and chief legal officers conducted by Hogan Lovells. More and more companies have been going global, so it makes sense that they are seeing more cross-border litigation than in the past, says Dennis Tracey, the Hogan Lovells partner in charge of the study. But the increase is changing the way companies are managing litigation.

Certain jurisdictions are particularly problematic, the survey found. Coun-tries that topped the list included Brazil, China and India. But the most difficult jurisdiction, the survey concluded, was the United States. The U.S. was more challenging than China, Tracey says, noting that global companies are not necessarily used to the jury system, class actions and contingency cases.

For nearly half the respondents, cross-border disputes increased in the past two years. They said 90 percent involved two or three foreign countries, although some cases involved as many as 50 jurisdictions. And more than half said they expect to see more such dis-putes in the next two years.

They pose a threat to companies reputations and to their business mod-els, and even boards of directors are playing a role in trying to keep them under control, Tracey notes.

Companies spend an average of $6.6 million a year to manage cross-border disputes, the survey found. A signifi-cant proportion of cross-border dis-putes involve commercial or contrac-tual issues. But 18 percent of the survey

respondents said intellectual property issues were behind cross-border dis-putes at their companies.

With the high level of intellectual property litigation were seeing, its not surprising wed see an increase in IP cross-border disputes, says Andreas von Falck, a Hogan Lovells partner in Germany who specializes in intellectual property. When youre doing business in multiple jurisdictions and a patent dispute arises, its highly likely that it will be disputed in several places.

IP owners are increasingly using IP rights as a revenue-producing tool, and companies are tending to sue wherever they can use the threat of an injunction to force a settlement, von Falck says.

To cope with the intensity of cross-border disputes, companies are now hiring in-house counsel who have expe-rience handling such issues. And GCs are adopting preventive measuresdeveloping stronger compliance pro-grams, engaging proactively with com-petitors and redoubling due diligence before entering into joint ventures.

The idea is to try to avoid these dis-putes in the first place, Tracey says.

LISA SHUCHMAn

WorLdBeat in-house around the gLoBe

Rattling the wallsCross-border disputes are keeping in-house lawyers busy.

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23

DealsMORE: corpcounsel.com < < < > >

04 2014

Neil GilmanHunton & Williams

Franz SchwarzWilmer

Keila Ravelo Willkie Farr

John Savarese Wachtell

David Segre Wilson Sonsini

Beth Flaming Sidley

Paul Shim Cleary

SuntoryBeamJapanese whiskey and beer producer Suntory Holdings Ltd. is moving into bourbon. The family-owned company agreed on Jan. 13 to pay $13.6 billion in cash for Beam Inc., which makes Jim Beam bourbon as well as Markers Mark and Knob Creek bourbon, Cana-dian Club whiskey and Courvoisier cognac. Suntory will pay $83.50 a share in stock for Beam, a 25 percent premium to the targets closing price on Jan. 10, the last trading day before the deal was announced. The buyer will also assume $2.4 billion in Beam debt.

The deal would create one of the worlds largest liquor companies, and it caps the restructuring of Beams pre-decessor, Fortune Brands Inc. Under pressure from investors, the com-pany sold its golf unit, Acushnet Co., for $1.23 billion to a group of buyers including Fila Korea Ltd. and Mirae Asset Private Equity in 2011, and later that year split into Beam Inc. and For-tune Brands Home & Security Inc., which now has a market capitalization of about $8 billion.

Suntory and Beam hope to close their transaction in the second quarter of 2014 pending approvals from regula-tors and Beam shareholders.

For acquirer Suntory Holdings Ltd. (Osaka, Japan)

In-House: General managers Mihoko Oshima and Yoshihisa Yamamoto and deputy general managers Senjiro Kourai, Miku Maeda and Eikichi Nishioka. Cleary Gottlieb Steen & Hamilton: M&A: Benet OReilly, John Palenberg, Paul Shim, associates Andrew Coombs, Paul Imperatore, Jiun Kim, James Langston, Joseph Lanzkron and international lawyer Jaime Andrs Salas Vergara. Litigation: Mitchell Lowenthal. Financing: Margaret Meme Peponis and associates Daniel Fernandez and Greg McKay. Competition: Mark Nelson, Robbert Snelders, senior attorney Matthew Bachrack and associates Katia Colitti, Charlotte Emin, Maxim Izvekov and Emma Johansson. Executive compensation and employee benefits: Arthur Kohn, counsel Kathleen Emberger and associates Nicolette Lotrionte and Julia Rozenblit. Intellectual property: counsel Daniel Ilan and asso ciate Lisa Connolly. Tax: Partner Jason Factor and senior attorney J.J. Gifford. Environmental: counsel W. Richard Rick Bidstrup. (All are in New York except for the following: Kim is in Paris. Nelson and Bidstrup are in Washington, D.C. Snelders, Colitti, Emin and Johansson are in Brussels. Bachrack is in Hong Kong. Izvekov is in Moscow.) Cleary has done M&A work for Suntory for more than 30 years.Potter Anderson & Corroon: Corporate: Mark Morton. Litigation: Matthew Fischer and Donald Wolfe Jr.

(All are in Wilmington.) Beam is incorporated in Delaware.Buchman Law Firm: Nicholas Bergman, Valerie Karasz and Mark Koslowe. (All are in New York.) The firm is Suntorys regular U.S. beverage counsel.

For target Beam Inc. (Deerfield, Ill.)In-House: General counsel Kent Rose.Sidley Austin: Corporate: Thomas Cole, Beth Flaming and senior counsel Frederick Lowinger. (All are in Chicago.) Sidley advised Fortune Brands Inc. on the 2011 spinoff of Fortune Brands Home & Security Inc., after which the parent company was renamed Beam Inc.Morris, Nichols, Arsht & Tunnell: Corporate: Frederick Alexander. Litigation: S. Mark Hurd and Kenneth Nachbar. (All are in Wilmington.) DAvID MArCUS

* * * * * *

GooGleneSt laBSGoogle Inc. is trying to move from the cellphone and the computer screen into the home with its planned $3.2 bil-lion purchase of Nest Labs Inc., a deal announced on Jan. 13. Nest founder Tony Faddell helped develop the iPod when he was an executive at Apple Inc., and he formed Nest to apply similar cutting-edge technology to household devices. The company introduced a thermostat

InsIde thIs month

* Japans Suntory acquires Jim Beam.* Google picks up Nest Labs * JPMorgan settles Madoff charges* Judge: $545M in legal fees OK* Tiffany loses big to Swatch* Milk antitrust case revived

P23_Deals&Suits;15.indd 23 3/4/14 9:18 AM

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DEALs & sUITs04 2014


A judge approved the largest attorney fee award ever

in a private antitrust case$545 millionin a credit card fee suit.

> > >

in late 2011 and a smoke and carbon dioxide detector last year. Google could integrate such products into its Android mobile-device operating system

Googles venture capital arm invested in Nest in 2011 and 2012. Ven-ture capital funds Kleiner Perkins Cau-field & Byers, Lightspeed Venture Part-ners, Shasta Ventures and Venrock also put money into Nest. The parties hope to close the deal with a few months pending regulatory approvals.

For acquirer Google Inc. (Mountain View, Calif.)Wilson, Sonsini, Goodrich & Rosati: Corporate: Denny Kwon, David Segre and associates Scott Blumenkranz, Aby Castro, Jeffrey Kao, Anson Lau and Derek Liu. Technology transactions: Suzanne Bell, Michael Murphy and associate Sharon Lee. Tax: Eileen Marshall and associate Myra Sutanto Shen. Employee benefits and compensation: David Thomas and associate Brandon Gantus. Employment law: Rico Rosales and asso ciate Rebecca Stuart. Corporate finance: John Mao. (All are in Palo Alto except for the following: Kwon, Lau, Liu, Gantus and Mao are in San Francisco. Marshall is in Washington, D.C.) Wilson advised Google on its 2004 IPO and often works with the company.

For target Nest Labs Inc. (Palo Alto) In-House: General counsel Richard Chip Lutton Jr. Orrick, Herrington & Sutcliffe: M&A: Mark Seneca. Emerging companies: Mitchell Zuklie, counsel Adam Lin, senior asso ciate Anik Guha and associates Andrew Er skine, Owen Kirshner and Reed McBride. Technology transactions: Daniel Yost. Executive compensation and benefits: Nancy Chen and managing associate Michael Yang. Antitrust: of counsel Patricia Zeigler. Tax: Steven Malvey. International trade and compliance: Harry Clark. (All are in Menlo Park, California, except for the following: Guha and Malvey are in San Francisco. Erskine is in Los Angeles. Zeigler and Clark are in Washington, D.C.) Orrick advised an investor in Nests Series A financing and has represented the company since then.

For Kleiner Perkins Caufield & Byers (Menlo Park, Calif.), Generation Investment Management LLP (London), Lightspeed Venture Partners (Menlo Park), Shasta Ventures (menlo Park) and one other venture investorIn-House: At Kleiner Perkins: general counsel Paul Vronsky. Goodwin Procter: M&A: Lawrence Chu. Technology: James Riley Jr. and associates Jeffrey Cheng and Mark Schenkel. Tax: E. Kelsey Lemaster. Securities litigation: Stephen Poss. (All are in Menlo Park, except for San Franciscobased Lemaster and Boston-based Poss.) D.M.

* * * * * *

U.S. v. JPMorgan ChaSe Bank n.a.On Jan. 7 JPMorgan Chase & Co. agreed to pay $1.7 billion to settle crimi-nal charges by the U.S. Department of Justice that the bank had helped facili-tate Bernard Madoffs multibillion-dol-lar Ponzi scheme. Prosecutors called the amount a record recovery for violating the 1970 Bank Secrecy Act.

JPMorgan will pay $350 million more to resolve civil charges, and $543 million to settle claims by the Ber-nard L. Madoff Investment Securi-ties LLC liquidation trustee, Baker & Hostetlers Irving Picard. As part of the settlement, the bank signed a two-year deferred prosecution agreement and agreed to an extensive statement of facts in connection with alleged vio-lations of the Bank Secrecy Act. It also agreed to continue reforms of its com-pliance programs.

The bank tapped Wachtell, Lipton, Rosen & Katzs John Savarese for the civil resolutions, and Sullivan & Crom-wells Steven Peikin on the criminal side. JPMorgan general counsel Ste-phen Cutler and global litigation head Jill Centella also played key roles.

According to documents filed in Manhattan federal court related to the agreement, JPMorgan had served as Madoffs primary bank since 1986. As

far back as the early 1990s, the bank had concerns that Madoff was engaged in suspicious transactions. But it never alerted U.S. regulators about its con-cerns, and its U.S. compliance officers did little to investigate those suspicions.

Many documents filed in the gov-ernments case echo claims made by the Madoff trustee in earlier litigation. The trustees 2010 suit against JPMor-gan was packed with incriminating emails, such as the now-infamous June 2007 email that the government cites from the banks chief risk officer to his colleagues that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme. A series of unfavor-able court rulings, however, blocked Picard from recovering much of what he sought for Madoffs investors.

SuSAN BECK, WIth REBEKAh MINtZER

* * * * * *

In re PayMent Card InterChange Fee antItrUSt LItIgatIonIn the largest attorney fee award ever in a private antitrust case, a federal judge in Brooklyn granted a group of plaintiffs attorneys $545 million for their work in a class action on behalf of 12 million merchants against Visa Inc., MasterCard Incorporated, and a group of banks. U.S. District Judge John Gleeson gave the firms all but $25 million of the amount they requested, noting that the case involved years of extraordinary efforts and high risk. A similar earlier case had failed, and the lawyers didnt piggyback on a govern-ment action, he noted.

The lions share of the fees will go to three plaintiffs class action firms that filed suit in 2005. Leading the charge were K. Craig Wildfang and Thomas Undlin of Robins Kaplan Miller & Ciresi, Bonny Sweeney and Patrick Coughlin of Robbins Geller Rudman & Dowd, and H. Laddie Montague Jr. and Merrill Davidoff of Berger & Montague. The three firms contributed about 55 percent of the hours in the fee


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025pCC0412.indd 25 3/2/14 12:07 PM

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DEALs & sUITs04 2014


request, which suggests they could split about $270 million.

In December, Gleeson approved a $5.7 billion settlement resolving claims brought by merchants. Retailers accused the defendants of conspiring to fix the so-called interchange fees that retailers are charged when customers pay with a credit card. Before the settle-ments approval, 10 of the 19 named plaintiffs and several large retailers opted out. Objectors argued that it unfairly released Visa and MasterCard from future liability and would do little to affect interchange fees.

Representing Mastercard were Ken-neth Gallo of Paul, Weiss, Rifkind, Wharton & Garrison and Keila Rav-elo of Willkie Farr & Gallagher. Visa tapped Robert Vizas and Mark Mer-ley of Arnold & Porter. The settlement and fee award are the largest ever in a private antitrust case, according to the National Association of Legal Fee Anal-ysis. But the fee award is a third lower than the $688 million granted to lawyers who represented Enron Corporation shareholders in a $7.2 billion settlement in 2008.

Several retailers filed notices that they intend to appeal the settlement and the fee.

Ross Todd, wiTh R.M.

* * * * * *

Swatch Group v. tiffany & co.Wilmer Cutler Pickering Hale and Dorr partner Franz Schwarz helped deliver a nice Christmas gift to client The Swatch Group SA, persuading an arbitration panel on Dec. 21 that the watchmaker is entitled to more than a half-billion dollars from former busi-ness partner Tiffany & Co.

The arbitration panel, associated with the Netherlands Arbitration Institute, ordered Tiffany to pay $450 million for undermining a joint venture with Swatch. The panel also awarded Swatch interest and about $9.6 million in attorney fees and costs. The panel also dismissed Tiffanys $500 million counterclaim for breach of contract.

Tiffany, best known for its jew-elry, has long been eager to capture the market for high-end timepieces. In

2008 Tiffany and Swatch entered into a 20-year agreement to sell and distrib-ute Tiffany-branded watches, but by 2011 the companies had terminated the partnership. Swatch filed an arbi-tration in April of that year. Swatchs CEO told the Financial Times that Tif-fany pushed for the partnerships cre-ation in 2008 but then neglected it and blocked its development. Tiffany, for its part, alleged that Swatch failed to provide sufficient distribution for the watches.

The ruling follows hearings held in October 2012. The proceedings took place in Amsterdam, since Dutch law controlled the agreements at issue. (Tif-fany and Swatch presumably wanted any disputes resolved on neutral turf.) Schwarz, an Austrian-born interna-tional arbitration specialist based in London, served as lead counsel for Swatch, which is based in Biel, Switzer-land. The Wil mer team also included London-based partner Duncan Speller. The Dutch firm NautaDutilh was Wilmers cocounsel and advised on Dutch law. Tiffany was represented by Brian King, Elliot Friedman and Wal-ter Stuart of Freshfields Bruckhaus Deringer.

Lawyers on either side declined to comment. But in a public statement, Tiffany conceded to investors that Swatchs liability theory carried the day, while Tiffany prevailed substan-tially in its damage calculations. While Schwarz didnt get all he was seekingSwatch wanted $4 billion-plus in dam-agesthe ruling is still a major win for Swatch.

Jan wolfe, wiTh R.M.

* * * * * *

in re: SoutheaStern Milk antitruSt litiGationA federal appeals court on Jan. 3 rein-stated an antitrust complaint against Dallas-based Dean Foods Company, and remanded the case to U.S. District Judge J. Ronnie Greer in Greeneville, Tenn.

Food Lion LLC and other retailers allege in a complaint filed in 2007 in Tennessee that there was a conspiracy between Dean Foods and its subsid-iary, a new milk processor, the National

Dairy Holdings L.P., half-owned by the Dairy Farmers of America Inc., to restrict milk output, forcing up prices for processed milk.

The National Dairy processing part-nership was originally set up to com-pete with Dean Foods under a settle-ment with federal regulators related to Dean Foods 2001 merger with Suiza Foods Corp. The lawsuit alleges that Dean Foods subsequently teamed up with Dairy Farmers of America to undercut its own subsidiary in order to raise milk prices. The retailers accused Dean of striking a secret deal to buy the raw milk it needed while Dairy Farmers restricted milk output, harm-ing National Dairys ability to compete and raising milk prices for retail milk buyers.

Greer dismissed three of five counts in 2010. Defendants successfully moved for reconsideration of his decision to allow two counts, but during hearings on the motion, Greer excluded key expert testimony by a former director of the economics bureau at the Federal Trade Commission that concerned the relevant geographic market for the antitrust claims. In 2012 Greer threw out both remaining counts, ruling that the retailers lacked proof of injury and failed to establish the relevant antitrust geographic market. The retail milk buy-ers appealed.

A U.S. Court of Appeals for the Sixth Circuit panel, in reversing Greers rul-ing on the count of a conspiracy not to compete, wrote that the trial judge used the wrong standard for excluding an expert witness, incorrectly believing the expert could consider only the facts in the case record. In fact, the panel ruled, experts are not thus limited.

Food Lion looked to Richard Wyatt Jr., litigation co-head at Hunton & Wil-liams; R. Laurence Macon of Akin Gump Strauss Hauer & Feld; and Gor-don Ball to lead the underlying case. Wyatts colleague Neil Gilman argued the retailers appeal. Paul Friedman, a Washington, D.C. partner at Dechert, argued for Dean Foods, and Steven Kuney of Williams & Connolly repre-sented the Dairy Farmers.

sheRi QualTeRs, wiTh R.M.

Email: [email protected]


Global Currents: Trends in Complex Cross-Border Disputes

2014

Special sponsored section

00791 08 Main Report Cross-border litigation survey 25TE CORP COUNSEL.indd 1 2/25/14 9:41 AM

Executive summary 3

Headline findings 6

The scope of the challenge 8

What challenges do cross-border disputes present? 15

How are cross-border disputes being managed? 18

What does the future hold? 22

Methodology 26

Table of contents



00791 08 Main Report Cross-border litigation survey 25TE CORP COUNSEL.indd 4 3/4/14 12:06 PM

Global Currents: Trends in Complex Cross-Border Disputes Special sponsored section 3

Get ready to see more and more scenarios like these. Cross-border disputes are legally complex. They are hard to plan for or predict. And should they occur in a jurisdiction with an uncertain or difficult legal environment, they can become a serious burden.

Hogan Lovells leading Litigation and Arbitration practice surveyed 146 senior lawyers and executives across 18 industries from the worlds largest multinational corporations to determine how cross-border disputes have affected the legal landscape. The surveys most revealing findings involve location. Companies report that they are routinely challenged by certain geographical locations and jurisdictions. The countries where they have most frequently had to manage cross-border disputes in the past two years are China, England, France, Germany, and the United States. Companies say the most challenging markets are the United States, China, Brazil, and India.

The difficulties that businesses and their lawyers routinely face when they find themselves in court, especially in those four countries, can seem daunting: getting familiar with overseas rules; managing differences in legal systems and often unexplored interfaces between them; and overcoming issues involving long distances and different time zones, cultures, and languages. The greatest challenge by far, though, is locating quality local counsel, especially in these difficult regions.

Our survey measured the volume, proportions, and costs of cross-border disputes. We asked about trends, including how companies currently manage their multi-jurisdictional disputes and how they see regulatory agencies influencing litigation. We asked survey respondents to share the challenges that cross-border disputes present in specific countries, and to tell us which jurisdictions they believe are the most favorable and why. We encouraged respondents to share strategies and tactics they have

used successfully to ease the burden of cross-border disputes. We inquired about how they avoid such disputes now and how they plan to approach them in the future. And then we drew on the insights of a dozen Hogan Lovells partners who focus on global cross-border disputes to apply their own experiential analysis to the survey results.

It must be said that cross-border disputes are not always a bad thing. Yes, handled badly, they can be difficult and expensive to navigate. Yet, skillfully managed, they can provide extraordinary opportunities to protect or promote a companys market position. In a globalized economy, cross-border disputes are becoming ever more complicated, taking companies into disputes and courts in countries they could never have anticipated. Furthermore, regulatory agencies are subjecting corporate transactions to closer scrutiny and mounting coordinated enforcement actions across multiple jurisdictions.

Private companies based in Barbados and the Netherlands separately seek arbitration against a Latin American country, claiming its government has expropriated their assets. A Kazakh bank files suit in London, accusing a former employee now living in Italy of billions of dollars in fraud. Three aerospace companies, based in France, Denmark, and the United States, battle it out in a New York courtroom over a contract to supply aircraft oxygen systems.

Executive summary


Hogan Lovells4 Special sponsored section

Lawyers who work in the international arena are blazing new trails in courts in countries where they have never had to handle such complex disputes. To reassure boards of directors and chief executives about the legal risks of pursuing business opportunities in emerging markets, senior in-house counsel are having to develop new and complex global dispute management skills. They are finding new and proactive ways to prepare for cross-border clashes before there is even a spark of trouble. A majority of survey respondents even those who had not yet cemented an approach to managing complex international disputes said they viewed a cross-border litigation strategy as imperative.

This report confirmed a lot of what Ive seen happening in the marketplace, says Michael Davison, a partner in Hogan Lovells London office and co-head of the global Litigation and Arbitration practice. What I took from it is great concern about risks posed by international business disputes. The world is becoming increasingly more litigious.

Indeed, survey participants in a wide range of industries voiced this sentiment. For almost one-half of our respondents, cross-border disputes have become more frequent in the past two years. They reported that 90 percent of these disputes involved two or three foreign countries, although some cases involved as many as 50 jurisdictions. And just over one-half of those surveyed said they expected an increase in cross-border disputes in the next two years.

According to our respondents, such disputes accounted for almost one-third of their legal caseloads. And 45 percent said board scrutiny of cross-border disputes is intensifying. Directors worry about what these disputes mean for corporate reputations and what the cost and exposure to risk mean for their business models.

Customers were the main source of cross-border disputes all over the world. Other sources, including suppliers, regulatory entities, and competitors, varied by region. The most common disputes involved commercial or contractual issues. Eighteen percent of respondents reported intellectual property issues as an area of law under which cross-border disputes had occurred at

their organizations, 10 percent had encountered competition and antitrust disputes, and 8 percent cited product liability issues.

Much of the news related to cross-border disputes is positive. Respondents are learning to control costs and reduce the time and energy sucked up by cross-border disputes with new methods. Some are turning to a single firm with a global network of offices to manage the litigation an approach that allows general counsel to focus on the strategy. And many are implementing new measures such as early case evaluation and a deliberate strategy for settling disputes.

Companies are taking a more proactive approach, writing efficient and effective arbitration procedures into contracts or selecting friendlier governing law jurisdictions. Others have increased their internal cross-border expertise, bringing in lawyers with technical experience or especially strong project or case management skills. A number of companies are building stronger relationships with international law firms. And many are focusing on resolving disputes more quickly even if it means settling instead of fighting to the bitter end.

The cross-border dispute problem does not have a cookie-cutter solution, says Megan Dixon, a Hogan Lovells partner and head of the San Francisco and Silicon Valley offices. Going forward, I expect to see either constant or even higher numbers of cross-border disputes due simply to the shrinking global market

This report confirmed a lot of what Ive seen happening in the marketplace. What I took from it is great concern about risks posed by international business disputes. The world is becoming increasingly more litigious.

Michael Davison Partner at Hogan Lovells and co-head of the global Litigation and Arbitration practice



phenomenon of which we are all so acutely aware. But what I hope will happen concurrent with that trend is a decrease in the number of disputes caused by failure to anticipate or address easily resolved issues in advance.

Part of the overall solution will be improved coordination among regulators and lawmakers across the globe so that the inherent differences in law or practice do not result in unnecessary confusion, delay, or conflict as our world economy continues to overlap and interact in new and more expansive ways.

The world economy is not yet as flat and uniformly global as we might wish. But will a rising tide of cross-border disputes deter entrepreneurs or international corporations from continuing to expand into uncomfortable legal environments? No. After all, the countries whose legal systems our survey respondents highlighted as being the most difficult the United States, China, Brazil, and India also offer some of the worlds most exciting economic opportunities. To successfully access these markets, companies and their advisors will have to work together to overcome the legal challenges standing in their way.

The cross-border dispute problem does not have a cookie-cutter solution. Going forward, I expect to see either constant or even higher numbers of cross-border disputes due simply to the shrinking global market phenomenon of which we are all so acutely aware. But what I hope will happen concurrent with that trend is a decrease in the number of disputes caused by failure to anticipate or address easily resolved issues in advance.

Megan Dixon Partner at Hogan Lovells and head of the San Francisco and Silicon Valley offices

Special sponsored section 5


Hogan Lovells

China, England, France, Germany, and the United States were the most common jurisdictions involving cross-border disputes

Respondents found Brazil, China, India, and the United States the most challenging

Respondents define favorable jurisdictions as those with:

WhERE ARE ThESE DISpUTES hAppEnInG?ThE ChAnGInG LAnDSCApE

WhAT ARE ThESE DISpUTES ABoUT?

ninety percent of disputes involved two or three countries, but some crossed into as many

as 50 jurisdictions

A culture that respects the rule of law

high-quality court systems

predictability of outcomes

Associated costs and timescales

practicality and familiarity to the internal team

90%

Thirty percent of respondents

caseloads consisted of cross-border

disputes

One-half of respondents expected an increase in cross-border disputes over the next two years

Customers and suppliers were the main sources of cross- border disputes

Commercial and contractual issues

Intellectual property

Competition and antitrust

product liability

one-quarter of organizations faced cross-border disputes with regulators

44%18%10%8%

Most often, respondents disputes involved:

Several key themes emerged from survey respondents around the challenges, sources, management, geography, trends, and future of cross-border disputes. These six headline findings are takeaways of the report and are further explored in the pages ahead. Our findings depict what the future holds for multinationals and general counsel when faced with cross-border litigation.

Headline findings

30%

6 Special sponsored section



Respondents reported that their biggest challenges were:

What Does the FutuRe holD? hoW aRe they Being ManageD?

What Challenges Do they PResent?

early case evaluation

settlement strategy

More focus on regulatory impact

handling more in-house

using secondments

introducing a formal panel

Companies are implementing new measures:

one-half of respondents had used a single coordinating counsel

the mean annual overall spend to manage cross-border disputes

us$6.6 million

Finding experienced counsel

lack of familiarity with the territories

involved

Managing differences in legal systems

Coordinating local counsel across

jurisdictions

Board scrutiny intensifying around

cross-border disputes

Future strategies for managing cross-border disputes include:

avoidance, including proactive reviews of procedures, contracts,

and base jurisdictions

stronger relationships with firms, leading to better business understanding

and readiness for action

a resolution focus, including strategies for early case assessment, settlement, alternative dispute resolution (aDR), arbitration, and choice of jurisdiction

increased internal expertise, including relevant experience,

technical excellence, and project or case management skills

three-quarters of respondents write arbitration provisions into their contracts, but only one-quarter of disputes involve arbitration

75%



Hogan Lovells

The changing landscapeChanging and complex legal and regulatory developments around the world are presenting new challenges and opportunities. Not surprisingly, almost one-half of interviewed corporate legal officers have seen cross-border disputes rising over the last two years, and they expect them to continue to grow over the next two years. A number of respondents cited increased disputes with competitors, increased regulation, and a more litigious environment, or they were concerned about a specific project, strategy, or plan that would draw their organizations into new foreign territory.

There are major shifts under way in the sources of litigation around the world. Litigation brought by consumers used to be most prevalent in the United States, owing to that countrys well-organized and well-funded plaintiff bar. Now you see a much more structured plaintiff bar in Europe and in the world in general. It used to be very U.S.-centric, says

The scope of the challenge

Thomas Rouhette, a Hogan Lovells partner who is head of the Paris Litigation practice and head of the global Product Liability practice. There are targeted attacks on some industries throughout Europe by the plaintiff bar. They went after drugs and medical devices. Next it will be chemicals.

Rouhette also stresses the evolving potential for exposure to criminal law, which he believes many companies have not yet recognized. One area that I think should be the most

worrisome is exposure to criminal law. In countries like Italy, Spain, and France, corporations can be sent to criminal trial very easily. Business litigation in Europe is increasingly criminal and the exposure there really matters. Damages are under control, but whats less under control is that corporations can be hit with criminal fines, which can damage a companys reputation. I believe many corporations have not yet picked up on the relevancy and importance of that exposure.

One area that I think should be the most worrisome is exposure to criminal law. In countries like Italy, Spain, and France, corporations can be sent to criminal trial very easily. Business litigation in Europe is increasingly criminal and the exposure there really matters.

Thomas Rouhette Partner at Hogan Lovells, head of the Paris Litigation practice and the global Product Liability practice




Where are these disputes happening?Cross-border litigation makes up nearly one-third of all disputes in our respondents caseloads and increasingly, where they occur is becoming a concern for companies. It is especially worrying for companies expanding into countries like the United States, China, Brazil, and India, the legal landscape of which many of our respondents regard as the most difficult to navigate.

On average, respondents handled 15 cross-border disputes annually. However, they reported a vast range in the volume of disputes some dealing with just one or two a year, others more than 1,000. Respondents said that 90 percent of their cross-border disputes involved just two or three countries, but that some involved as many as 50. Though cross-border disputes constituted a smaller proportion of cases for U.S. respondents, the volume of cross-border disputes was similar to that in other countries because U.S. companies have a higher volume of disputes in general.

Collectively, respondents have faced cross-border disputes in more than 90 countries. The United States, England, Germany, China, and France were the most common countries for the adjudication of cross-border disputes. Brazil, Canada, Italy, and the Netherlands were also significant for at least 10 percent of respondents.

The most challenging regionsThose surveyed said the most challenging jurisdictions in which to navigate a cross-border dispute were the United States (21 percent) and China (20 percent), followed by Brazil and India. Although Europe is the region most likely to be involved in cross-border disputes, respondents did not generally flag specific countries as particularly challenging. Given the quasi-federal European political structure, this is not surprising.

Base: WEIGHTED Last two years (146); Next two years (146)

Historical and forecast trend in volume of cross-border disputes

%

0 10

18%

11% 36% 51%

34% 46%

20 30 40 50 60 70 80 90 100

Last two years

Next two years

Decrease Static Increase Dont know

Base: WEIGHTED (127)

Proportion of cross-border disputes covering various numbers of countries

10%

90%

4+ countries

2-3 countries



Hogan Lovells

The U.S. justice system continues to be seen as particularly difficult and problematic for non-U.S. corporations. There are aspects of the U.S. system that seem normal to those of us that live here, but not to people in other parts of the world, says Marc Gottridge, a New York-based partner and co-head of Hogan Lovells global Financial Services Litigation practice.

For example, non-U.S. companies find it concerning that ordinary Americans with little or no understanding of complex legal issues generally serve as jurors in trials, or that elected judges may take campaign contributions from plaintiffs lawyers. By contrast, judges are appointed in England. There are many aspects of the U.S. courts that can seem scary, Gottridge says. We have many different regulators with overlapping jurisdiction. You are subject to the U.S. Securities and Exchange Commission, the U.S. Department of Justice, and any number of other state and federal regulators that can spark a cascade of investigations, which is happening increasingly in financial cases.

Europe is viewed as a less challenging jurisdiction for cross-border disputes because, according to Ina Brock, a partner in Hogan Lovells Munich office and co-head of the global Life Sciences industry sector team, it is advanced, stable, and predictable. In Europe, there are fewer threatening features like juries, punitive damages awards, and, in most jurisdictions, mechanisms directly equivalent to the U.S. class action.

Compared to the United States, damages exposures in Europe are relatively low, Brock says. In the commercial and personal injury space,

50

Base: WEIGHTED Active (146); Challenging (137)

Countries involved in cross-border disputes and those that were most challenging

0 5 10 15 20 25 30 35 40 45

U.S.

UK

Germany

China

France

Brazil

Canada

Italy

Netherlands

Japan

India

Mexico

Turkey

Spain

Hong Kong

Switzerland

Norway

Poland

Australia

Austria

Nigeria

Base: WEIGHTED Active (146); Challenging (137)

Regions involved in cross-border disputes vs. most challenging

0 2010 30 40

71%

40%

39%

32%

23%

23%

14%

14%

13%

10%

9%

10%

2%

0%6%

6%

6%

5%

5%

5%

5%

5%

21%

6%

3%

20%

5%

10%

2%

6%

1%

3%9%

7%

7%

1%

0%

0%

0%

2%

1%

0%

2%

24%

55%38%

47%33%

16%11%

9%7%

50 60 70 80 90 100

Europe

Americas

Asia Pacific

Africa

Middle East

%

%

Active

Challenging




there are no punitive damages. While some countries in Europe are getting more challenging, like France, in general, Europe is seen as a place where cases are decided on their legal merits, without a lot of theater.

China, which deals mostly with cross-border disputes with the United States or Europe, is considered the second most challenging setting for a multitude of reasons. Foreign lawyers cannot practice law in China, although they can consult with local law firms (this is also true of Brazil and Singapore). Eugene Chen, a Shanghai-based Hogan Lovells partner in the Litigation and Arbitration practice, explains some of the issues:

Theres a fundamental question in China about how business disputes will be decided, Chen says. There are a lot of external influences in the court system. Its common to have local government interference. And,

generally speaking, depending on the type of case, you often find bias against multinational parties.

Chen says he expects to see more cross-border litigation disputes in China in the future. Regulatory changes will create more litigation between private parties who have entered into deals with the expectation that the law will behave a certain way, and then it changes, he says. Chinese parties arent that litigious by nature. They dont like litigation. But thats changing, too. Chinese parties are finding out that litigation can be used offensively and defensively. Youre going to see more Chinese companies involved in litigation. China is exiting its shell and investing all over the world. Conflicts will arise that have to be resolved.

When navigating disputes in China, Chen says, Having a well-defined exit strategy is important. A lot of

what we do is help clients get out of a deal and help them enforce shareholder rights.

Defendants can often have little say in where a case is heard. A major challenge for businesses is to minimize the risk of appearing in a court they do not know and to maximize the chances of appearing in a more favorable court. We are very likely to be representing a financial institution as a defendant, so we dont have a huge amount of choice in where to try the case, Marc Gottridge says. The best thing you can do is include a forum selection clause in any agreement. As long as it is properly drafted, it will generally be enforced. It may also be possible to win a motion for forum non conveniens dismissal in a U.S. court, if you have made a strong factual record.

Patrick Sherrington, Hogan Lovells Hong Kong-based Regional Managing Partner for Asia and the Middle East, explains the challenges of a changing legal landscape in Asia:

The nature and quality of a countrys legal system almost invariably changes in response to developing market norms because international businesses expect greater transparency and a semblance of predictable laws and even-handed justice where they do business. The result is that, as nations seek to develop economically, so too often do their legal systems.

China remains a very difficult jurisdiction for all sorts of reasons language, culture, unfamiliar procedures, political influence, and local protectionism, to name some of the continuing challenges. But it has come a long way, as has the Chinese legal profession, over the last 20 years as China has developed its economy. Exposure to international legal norms invariably influences immature legal systems. Of course, it will have to improve still further if China is to realize its ambition of establishing Chinese law as a major alternative to English law and New York law in international corporate transactions.

If a countrys legal system continually disappoints and denies justice for any of these reasons in relation to China, and many more besides or simply because the delays to getting anywhere are unacceptable, and if in addition international legal advice is not available locally, people will invariably look elsewhere to resolve disputes wherever possible. This will affect the pace of a countrys economic development. India is a case in point.



Hogan Lovells

Base: WEIGHTED Total (146); Americas (58); UK/Europe (58); Middle East/Asia Pacific/Africa (29)

Main sources of cross-border disputes (last two years)

100

90

80

70

60

50

40

30

20

10

0

56%50%

64%

49%44%

32%

15%

27%

41%

33%

15% 18% 14% 14%

27%

17% 15% 14% 13%19%

5%

%

Customers(55%)

Suppliers(44%)

Regulatoryentities (25%)

Competitors(23%)

Other govt bodies (19%)

Employees(16%)

Shareholders(14%)

UK/Europe Americas Middle East/Asia Pacific/Africa Significant difference

Base: WEIGHTED Total (146)

%

0 5 10 15 20 25 30 35 40 45 50

Commercial/contract disputes

Intellectual property

Competition and antitrust

Product liability

Corporate transactions, including M&A

Employment

Security/investments/shareholder disputes

Construction, infrastructure, and project finance

Regulatory

Professional negligence

White collar and anti-bribery

Trade and export regulation

Finance

Insolvency/restructuring

Directors and officers liability

44%

18%

10%

8%

8%

6%

6%

6%

6%

4%

3%

3%

2%

2%

2%

Areas of law in which cross-border disputes most frequently occurred (last two years)

Significantly higher among those

with more disputes overall, and/or those

predicting an increase

Competition also higher for UK/Europe

Intellectual property less for U.S.




What are these disputes about?Customers were the most cited source of cross-border disputes, accounting for one-half of such disputes in all regions. Thereafter, the pattern by region varied.

One striking regional difference was that competitors were a more likely source of conflict for European respondents than for respondents from the Americas. In the Americas, suppliers were a close second to customers, followed by regulators and other government bodies. In Asia Pacific, the Middle East, and Africa, regulatory entities were the second biggest source of cross- border disputes.

Twenty-five percent of respondents reported that regulatory entities were a source of their cross-border disputes and specifically cited the U.S. Department of Justice, the U.S. Federal Communications Commission (FCC), the European Commission, and the U.S. Securities and Exchange Commission. In general, the larger the organization, the more likely it was to face disputes with regulators and government bodies.

One trend that weve identified is the cooperation internationally among regulatory agencies that conduct enforcement proceedings against companies, says Peter Spivack, a Hogan Lovells partner based in Washington, D.C. who is co-head of the global Investigations, White Collar and Fraud practice. So think about it like a single game of chess played on multiple boards. We have to make sure all our moves match on each of the boards.

Companies need to look to establish internal control systems and to vet third parties carefully, especially in new jurisdictions, he continues. In general they need to position themselves in a way that anticipates regulatory enforcement and creates the best argument should regulatory enforcement occur.

Michele Farquhar, a Washington, D.C.-based partner who is head of Hogan Lovells Communications practice, says she mostly helps companies navigate the complexities of communications regulation in the United States and in other countries. She says the FCC has been making it easier for foreign companies to invest in America by loosening regulations. Other countries look to the FCC, she says, as a model to ensure competition thats more neutral and transparent, but they each still have their sovereign interests, which make them different from country to country. The FCC recently pushed forward with liberalizing foreign ownership rules for spectrum ownership, she says. The United States is more aware of the need for foreign investment and thats a positive development.

Farquhar says that it is also important to understand the different data privacy issues in different countries that most countries have much t

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