Prologue—Choice of Law

When a litigator argues for a particular choice of law, the litigator seeks retrospectively the law most favorable to a particular claim or claims. When a business lawyer chooses a state of formation for a business entity, the lawyer seeks prospectively the governing law whose characteristics most favor the client’s interests.

Although in particular situations one characteristic may dominate, in general the business lawyer should look for governing law that is clear, comprehensive, coherent, accessible, and stable (or at least predictable). With these five metrics in mind, this column explains why lawyers forming limited liability companies should not dabble in Delaware.

The Preeminence of the Delaware Law of LLCs

Although Wyoming, not Delaware, pioneered the modern limited liability company, Delaware has long since overcome that embarrassing origins story. Most experienced LLC practitioners consider the Delaware Limited Liability Company Act (Delaware Act or Act) to be the statute of choice for sophisticated ventures organized as LLCs, and in many deals involving entrepreneurs or investors from more than one state, the lawyers routinely “default” to using the Delaware Act rather than the LLC statute of any of the states actually involved in the deal.

According to Bishop & Kleinberger, Limited Liability Companies ¶ 14.01[2], “Delaware law seems to exert an almost gravitational pull on attorneys.” For example, at the ABA Section of Business Law’s 2016 LLC Institute, the discussion of recent case developments allocated approximately equal time to Delaware case law and to case law from the other 49 states, the District of Columbia, and U.S. territories.

The Delaware Act

The Delaware Act is a complex, sophisticated, and eminently flexible statute that exalts freedom of contract even to the point of permitting an operating agreement to eliminate some or all fiduciary duties. However, the Act’s attractiveness has little to do with its inherent qualities. To the contrary, the Act’s drafting style is arcane, with substantive requirements embedded in definitions, sentences in which length seems a virtue, and provisions that overlap and intertwine so as to require substantial efforts of deconstruction. For example, section 18-101(7) of the Act’s definition of “limited liability company agreement” comprises 411 words, and in the Act’s provisions on protected series, subsection 18-215(b) comprises 577 words.

As Delaware’s own Supreme Court has written in Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 291 (Del. 1999), “To understand the overall structure and thrust of the Act, one must wade through provisions that are prolix, sometimes oddly organized, and do not always flow evenly.” In sum, the Delaware Act lacks clarity, coherence, and ease of access.

As for comprehensiveness, the Delaware Act has only a skeletal set of default rules, unlike the Uniform Limited Liability Company Act (2006) (Last Amended 2013) (ULLCA) and the LLC statutes of most nonuniform states. As for stability, Delaware amends the Act every year. Sometimes the changes are inconsequential; sometimes they are fundamental. Moreover, Delaware eschews the normal “strike and underline” method for showing statutory changes and uses instead an antiquated method requiring decryption. The result is more symbolic than substantive, but consider for example section 9 of 2007 Del. Laws, chapter 105:

Amend § 18-201(d), Chapter 18, Title 6 of the Delaware Code by deleting the word “may” in the first place where such word appears therein and substituting in lieu thereof the word “shall”, by inserting the words “or otherwise existing” immediately after both appearances of the words “entered into”, and by inserting the words “or reflected by” immediately after the words “as provided in”.

As for substance, many other states have statutes offering comparable flexibility and an essentially equal commitment to enforcing agreements made by LLC members. The Delaware Act does stand out by authorizing an operating agreement to eliminate all fiduciary duties, but the LLC acts of several other states do so as well. Moreover, in Leo E. Strine Jr. & J. Travis Laster, “The Siren Song of Unlimited Contractual Freedom,” Research Handbook on Partnerships, LLCs and Alternative Forms of Business Organizations (Robert W. Hillman and Mark J. Loewenstein, eds.), two of Delaware’s leading jurists have criticized that approach as resting on false premises and being otherwise misguided. In any event, even under a Delaware operating agreement that successfully waives all fiduciary duties, the implied contractual covenant of good faith and fair dealing remains in place to constrain unduly opportunistic behavior. See “In the World of Alternative Entities What Does ‘Good Faith’ Mean?” and “Delineating the Implied Covenant and Providing for ‘Good Faith’”.

The Inherent Quality of the Delaware Judiciary

Why, then, do many non-Delaware practitioners choose Delaware when forming LLCs? The answer lies in the reputation of the Delaware judiciary. The Delaware Court of Chancery has jurisdiction over claims relating to the internal affairs of a Delaware LLC, and that court is the preeminent business court in the United States. It is comfortable with business disputes and is capable of handling esoteric and even arcane issues of law. The Delaware Supreme Court is likewise comfortable and capable; many of its judges have served previously in the Court of Chancery.

Both the Court of Chancery and the Delaware Supreme Court accept and adhere to the policy of the Delaware Act “to give maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements” under section 18-1101(b). Indeed, Delaware courts are conservative about contracts in general. They lean away from modernist notions that all agreements are necessarily indeterminate and toward the old-fashioned approach that a contract is a contract and that a court is not a proper forum for salving the pain of “buyer’s remorse.”

But Delaware case law has its disadvantages. First, keeping pace is almost a full-time job. As a court of equity, the Court of Chancery often ladens its decisions with voluminous statements of facts. Fifty-page decisions are not unusual, and some decisions can be understood only in the context of previous decisions in the same case. For example in Renco Grp., Inc. v. MacAndrews AMG Holdings LLC, No. CV 7668-VCN, 2015 WL 394011, at *1, n.1 (Del. Ch. Jan. 29, 2015), the court states that it “focuses on the facts related to the specific disputes in the pending motion and assumes general familiarity based on related proceedings.” For that familiarity, the court refers to two of its earlier decisions in the same matter.

Second, a “Delaware LLC lawyer” must stay up to date on more than just LLC law; Delaware LLC and limited partnership law are reciprocally precedential. Knowledge of Delaware contract law is also essential. For example, B.M. Gottesman & S.E. Swenson state in “More Than Bargained For? Topics for Consideration in the Issuance and Acceptance of Delaware LLC Opinions,” 81 N.Y. St. B.J. 20, 22 (2009), that when an attorney is asked for a formal legal opinion pertaining to a Delaware limited liability company, “[i]t is . . . the responsibility of the opinion-giver to navigate Delaware common law [especially contract law] prior to rendering a Delaware LLC opinion, and to keep abreast of its shifting landscape.”

Third, sometimes a “Delaware LLC lawyer” must take into account Delaware corporate law. On more than one occasion, the Court of Chancery has applied that law to resolve a dispute among members of a Delaware LLC. For example in Bay Ctr. Apartments Owner, LLC v. Emery Bay PKI, LLC, No. CIV. A. 3658-VCS, 2009 WL 1124451, at *8 (Del. Ch. Apr. 20, 2009), the court noted that “[t]he LLC cases have generally, in the absence of provisions in the LLC agreement explicitly disclaiming the applicability of default principles of fiduciary duty, treated LLC members as owing each other the traditional fiduciary duties that directors owe a corporation.” Similarly, in a case in which an LLC member sought judicial dissolution, Haley v. Talcott, 864 A.2d 86, 96–97 (Del. Ch. 2004), the court gave pivotal importance to 8 Del. C. § 273, a corporate statute addressing dissolution of a joint venture corporation having two stockholders.

Moreover, Delaware corporate law can be inordinately complicated. For example, for many years “new standards of [judicial] review [of director conduct] proliferated when a smaller number of functionally-thought-out standards would have provided a more coherent analytical framework,” according to William T. Allen, Jack B. Jacobs & Leo E. Strine, Jr., Function over Form: A Reassessment of Standards of Review in Delaware Corporation Law, 56 Bus. Law. 1287, 1292 (2001).

Fourth, Delaware entity law is not especially stable. For example, Smith v. Van Gorkom, 488 A.2d 858, 864 (Del. 1985), shocked the corporate bar and led to prompt corrective action—i.e., exculpation statutes adopted in Delaware and around the country. For unincorporated business organizations, Gotham Partners, LP v. Hallwood Realty Partners, LP, 817 A.2d 160, 167–68 (Del. 2002) provides a similar example. In Gotham Partner, the Delaware Supreme Court criticized dicta in Court of Chancery opinions, indulged in its own dicta, and stated that a limited partnership agreement could restrict but not eliminate fiduciary duty. This dicta, equally applicable to limited liability companies, prompted another legislative correction: 2004 Del. Laws, ch. 275 (HB 411), §§ 13, 14 (expressly stating that an LLC operating agreement may eliminate fiduciary duties); 2004 Del. Laws, ch. 265 (SB 273), §§ 15 and 16, and ch. 266 (SB 274), §§ 3 and 4 (same as to limited partnership agreements and general partnership agreements). The most recent example comprises Gatz Properties, LLC v. Auriga Capital Corp., 59 A.3d 1206 (Del. 2012) and 2013 Del. Laws, ch. 74, § 8. The case called into question whether fiduciary duties even exist in a limited liability company; the statutory, albeit obliquely, that in the default mode, LLC law includes “rules of law and equity relating to fiduciary duties.”

A Report Card and an Explanation

Thus, Delaware LLC law does not fare well under the five metrics set forth at the beginning of this column (clarity, comprehensiveness, coherence, accessibility, and stability). Yet Delaware remains fundamentally important to the law and practice of limited liability companies, and in countless sophisticated circumstances, a Delaware LLC is the most effective and practicable vehicle available.

This situation is no conundrum. For the cognoscenti, the drawbacks in the Delaware law are immaterial. For a lawyer whose practice centers on Delaware LLCs, assiduous study and continuous attention dissipate the drawbacks of the Delaware Act. The Delaware case law is indeed lengthy and plentiful almost to the extent of being fulsome, but the decisions: (i) address issues of great importance that often require sophisticated analysis and subtlety; and (ii) are authored by carefully vetted jurists for whom concepts like ROI, waterfall distributions, dilution, and marginal cost hold no mysteries. For transactional lawyers focused on Delaware LLCs, the weekly “assigned reading” has a more than acceptable “average cost.”

But for any dabbler in these mysteries, the average cost is insupportable, and the resulting risks are substantial. Therefore, don’t dabble in Delaware.

With parents who immigrated from Cuba to the United States, Brigida Benitez grew up immersed in two cultures. That upbringing influenced her career path, giving it an international flavor. A partner at Steptoe & Johnson, Benitez focuses on complex litigation, global anti-corruption matters, and internal investigations. She’s also served as Chief of the Office of Institutional Integrity of the Inter-American Development Bank, which provides development financing for Latin America and the Caribbean. She served as president of the D.C. Bar, the second largest unified bar in the country. The highlight of her career—so far—was representing the University of Michigan for six years in the case that led to a victory for diversity in higher education before the U.S. Supreme Court.

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Tell us about your upbringing. I read your parents immigrated from Cuba.

My parents immigrated from Cuba and came to the United States pursuing the American dream. I grew up in a working-class community just north of Miami and many of my friends and peers had similar backgrounds. My parents did not have much formal education. My father started working at age 12 to support his family. But they instilled in my brother and me a strong work ethic and a belief that hard work and education were the keys to success.

Did you grow up speaking Spanish and English? And my follow-up question, did your immersion in two cultures influence your decision to have a global practice?

I grew up speaking only Spanish at home, and I learned English when I started kindergarten in public school. I’ve been immersed in two cultures my entire life. I’m sure that at some level that influenced some of my choices along the way. My Spanish fluency and my background led to opportunities early on, such as my work in Latin America. That certainly had an effect on my career path.

One of your specialties is internal investigation, including investigations in front of enforcement agencies. What skills are required for this, and how are they the same or different from being a lawyer?

I started my career as a litigator, which I still am. About 20 years ago, I also started doing internal corporate investigations when that emerged as a practice. Conducting an investigation as a lawyer requires that you look at a problem strategically and figure out the best approach and solution for the client. It’s critical to have good judgment and strong communication skills and to be able to connect with people and to build trust.

Ultimately, as with anything that one does as a lawyer, it’s about finding the optimal solution for the client. So the skills that make one a successful litigator and investigator are those that make you a good lawyer.

You also focus on complex litigation and global anticorruption matters. What is involved in a global anticorruption practice?

I counsel multinational companies on anticorruption issues, such as the Foreign Corrupt Practices Act, anti-money laundering, ethics and violations of codes of conduct, and sanctions laws, including OFAC and the sanctions procedures of the World Bank and other leading international financial institutions. I help these companies with the development and implementation of policies, procedures, and training on all of these issues. Then I advise them if anything serious comes up in these areas. Sometimes it means there’s a question or issue that has arisen about a certain law or policy. Other times there’s a significant problem that requires an internal investigation, for example, and maybe potentially disclosing to and negotiating with a regulator such as the Department of Justice or the Securities and Exchange Commission.

Is your practice exclusively U.S. based?

I know some about the anti-corruption laws, for example, that have been passed recently in a number of countries around the world. But ultimately, my specialty is U.S. law and advising companies that have exposure under U.S. law, and that may be U.S. companies who are doing business in other parts of the world. But it could just as easily be what we think of as non-U.S. companies that, because they’re listed on the exchanges here or they do a lot of business in the U.S., have exposure under U.S. laws.

You were part of a team in the landmark case, Grutter vs. Bollinger, in which the affirmative action admissions policy of University of Michigan was upheld by the U.S. Supreme Court. Can you describe the experience for us and how you were involved and just having that win?

The University of Michigan case has really been one of the highlights of my career, and an experience that I will cherish my entire life. I represented the university for six years from the filing of the complaint to a very successful resolution before the U.S. Supreme Court. As a litigator, it is such a rare experience to work on a case through all of the possible stages of a litigation from the beginning all the way through a Supreme Court resolution, which is rare in and of itself.

This was a case in which we had to be very creative from the outset and think long-term and strategically about building a defense that no one had crafted before. It was truly an incredible professional experience, a great team effort. I worked closely with the late John Payton, who was a terrific civil rights lawyer and became a great friend and mentor. On a personal level, given my own background, it was also very meaningful to achieve a victory for diversity in higher education.

And no one thought the Supreme Court would decide the way it did?

That’s correct. The issue had not come before the Supreme Court for 25 years and given the climate at the time, in the wake of the Hopwood case out of the Fifth Circuit, few were optimistic that the court would rule in our favor.

You’ve also had an interesting experience as Chief of the Office of Institutional Integrity of the Inter-American Development Bank. What does this entity do and what did you set out to achieve?

The Inter-American Development Bank is a multilateral development bank. It’s a leading source of financing for development throughout Latin America and the Caribbean. It functions in a manner similar to the World Bank, except its focus is on Latin America. I headed the office that was responsible for investigating potential fraud and corruption in any project financed by the bank, as well as implementing compliance policies and procedures relating to anti-corruption, anti-money laundering, sanctions laws, and the like.

I was a member of the senior management team and reported to the president of the bank and the audit committee of the board of executive directors. My work encompassed 26 countries in Latin America and the Caribbean. It was a very challenging yet rewarding experience.

Former Attorney General Richard Thornburgh had made a number of recommendations, including that the head of the Office of Institutional Integrity be elevated to a senior management position. At that time, the bank was trying to figure out how to build that office. That’s why I was recruited and ultimately hired. One of the things I did was implement policies relating to anti-corruption and anti-money laundering laws. For example, one policy concerned the use of offshore financial centers and how to tell where there are red flags in the use of off-shore financial centers. Another one was having a policy relating to the sanctions laws and regulations administered by the Office of Foreign Assets Control. There was a lot of opportunity to implement policy in the office.

You’re an adjunct professor at Georgetown University Law Center where you teach a course on International Business Litigation and Federal Practice. What do you enjoy about teaching?

One of the things I enjoy most is interacting and getting to know the students. I find that the students are eager to learn, always in need of mentoring, and it’s just fun to get to know them.

Also, because of the class I teach, I end up having a number of JD students as well as LLM students from around the world, some of whom already have practiced law. So it leads to very interesting discussions about how law is practiced elsewhere.

Can you give an example?

We get a lot of non-U.S. plaintiffs who come to the U.S. because of the availability of certain types of damages, of potentially larger verdicts, and broad discovery that’s simply not available in other countries. If you’re litigating a matter in France, for example, you’re not going to have the access to discovery that you do in the context of U.S. litigation. It’s always interesting to have those discussions with students who come from these other countries where the practice is very different.

You served as past president of the D.C. Bar. What are you most proud of accomplishing in that position?

I’m very proud to have been able to have served in that position. For me, it was a great honor to be able to lead the D.C. Bar, which is a fantastic organization. It’s the second largest mandatory bar in the country, with more than 100,000 members worldwide. I was very honored to have been elected and to have served in that position.

With team effort, we accomplished a great deal during my tenure. We bought a building, for example, that is being built and will be ready in January. It will be the new headquarters for the D.C. Bar and will be not only the first building that the Bar owns, but will ultimately save members millions of dollars over the course of the next 20 years. It’s going to offer technological resources, meeting spaces, and all of the advantages that an organization like the D.C. Bar can provide to its members. We also accomplished a number of other things, including developing and implementing a five-year strategic plan that sought unprecedented input from the membership to determine the D.C. Bar’s course moving forward. I also appointed a global legal practice task force to study and make recommendations on some of these issues and how the D.C. Bar can continue to be on the cutting edge in that area.

You’ve won many awards. Is there one that stands out for you or most meaningful?

I’ve been very fortunate to have been recognized during the course of my career and very proud of that. I would say that one award that stands out goes back to my work on the University of Michigan case. The first award that I won in connection with that case came from MALDEF, the Mexican-American Legal Defense and Education Fund.

For me, the fact that a national civil rights organization such as MALDEF that’s so well-known and well-respected presented me with its Excellence in the Legal Profession Award for the work that I had done in the University of Michigan case is something that I’m very proud of.

I’m wondering if you have any suggestions to law schools or law firms on how to promote diversity.

It’s a difficult issue and unfortunately, while there have been many efforts made, I think that there’s still much work to be done in the area of diversity, both in law schools and certainly in the legal profession. I would say that initiative, grit, and resilience can be more important than top grades from a top law school. It is essential to look at these attributes and to consider the potential of individuals to become great lawyers.

What advice would you give to a new attorney who’s just starting out?

The first thing I would say is welcome to the profession. It’s a great profession. There’s a lot of opportunity and a lot of potential to do many great things. It is first and foremost a service profession, and so I would encourage them to keep that in mind as they move forward; it’s whether you’re servicing your clients or giving back to the profession or doing pro bono work and serving those in need, I think that’s an important principle of our profession and a commitment for all of us to observe.

I would also say, be proactive about your career. It’s tempting when you get a job, whether it’s at a law firm or in-house corporate department, to just put your head down and do good work and, of course, that’s important. But it’s also essential for your professional development to look up, to connect with other lawyers, to network, to get involved in bar associations, to get involved with issues that you care about, because you learn of opportunities, you figure out what you want to do, you can contribute to the profession, and you have a more exciting and fulfilling career.

What has been the value of the ABA to you?

The ABA offers an amazing network of lawyers in diverse practice areas throughout the world. And for me, it’s been valuable to be able to be part of that network and connect with other lawyers. That’s really one of the key values of the ABA.

What do you like to do for fun?

I love to run. I discovered running about 10 years ago, and now I’m hooked. I regularly run races. I’ve run everything from 5Ks to marathons throughout the U.S. and even internationally. I find it to be a good stress relief and it keeps me balanced. I also enjoy travelling and spending time with my family and friends.

Thank you so much for your time!

“Pro Bono Publico” is a Latin phrase meaning “for the good of the public.” The phrase has come to refer to something done or donated without charge, especially with respect to legal representation.

Every year the nation celebrates National Pro Bono Week. Pro Bono Week was started over eight years ago by the Standing Committee on Pro Bono of the American Bar Association as “a coordinated national effort, to meet the ever-growing needs of this country’s most vulnerable citizens by encouraging and supporting local efforts to expand the delivery of pro bono legal services and by showcasing the great difference that pro bono lawyers make to the nation, its system of justice, its communities and, most of all, to the clients they serve.”

Pro Bono Week events take place all over the country, and even overseas. Pro Bono Net, a national nonprofit, has an interactive map that highlights everything happening around the world at www.probono.net. Of course, the need for pro bono legal assistance, and the opportunity to provide pro bono services, is year round. This need is ever growing, and the impending loss of federal funding of the Legal Services Corporation makes pro bono volunteerism even more critical.

While the ABA, through Model Rule 6.1, and many states through their respective rules governing the practice of law, encourage, and in some cases, require, attorneys to provide legal services to those unable to pay, there is still a tremendous difference nationwide between the number of attorneys admitted to practice, and those actually providing pro bono services. There are a variety of reasons that attorneys are reluctant to take a pro bono case. There are those that say they don’t have the time. There are those that say they have no way to waive the conflicts. There are concerns about malpractice coverage. There are those who are associates in firms and their firms do not give them credit for taking a pro bono case. And most popular among business lawyers—they do not want to go to court.

Let’s start with the time commitment. Yes, there are some pro bono cases that can take a great deal of time. Just ask any attorney who has worked on a death penalty case or a Hague Convention child custody case. But there are many pro bono opportunities that will take no more than a couple of hours of time—for example, staffing walk-in clinics, manning small claims hotlines, or going to public libraries to demonstrate how to use and understand different legal and court websites. If you are not certain what programs are available in your area, you can go to the ABA website, to the webpage for the Standing Committee on Pro Bono & Public Service, where you will find a Directory of Local Pro Bono Programs. That directory will guide you to a pro bono provider in your area, who will, in turn, advise you what volunteer opportunities are available to you.

Attorneys working for “big law” are concerned about the conflicts that pro bono work can trigger, especially attorneys working to help borrowers or debtors seeking to save their homes or discharge credit card debt. How does the representation avoid violating Model Rule 1.7?

Client-Lawyer Relationship

Rule 1.7 Conflict Of Interest: Current Clients

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if:

(1) the representation of one client will be directly adverse to another client; or

(2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer’s responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;

(2) the representation is not prohibited by law;

(3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and

(4) each affected client gives informed consent, confirmed in writing.

All states, as well as the District of Columbia, have adopted Model Rule 1.7 in some form.

If an attorney is working at a walk-in or phone-in clinic, there is no time or opportunity to clear conflicts or get written waivers. Moreover, some attorneys are concerned about providing legal help that would conflict with the interests of banking clients—cases, for example, involving foreclosure assistance or bankruptcy. Some states have exceptions to these conflict rules when the attorney is doing a pro bono case as part of a walk-in clinic or small claims hotline. For example the New York Rule of Professional Conduct 6.5 has a limited exception to the conflict rules if the lawyer “under the auspices of a program sponsored by a court, government agency, bar association or not-for-profit legal services organization, provides short-term limited legal services to a client without expectation by either the lawyer or the client that the lawyer will provide continuing representation in the matter.” “Short-term limited legal services” is defined in the rule as “services providing legal advice or representation free of charge as part of [a program described above] with no expectation that the assistance will continue beyond what is necessary to complete an initial consultation, representation or court appearance.”

Another benefit of taking a pro bono case through a legal aid provider is that the attorney has malpractice coverage. Thus, so long as the case is referred through the appropriate agency, malpractice insurance should not be an issue.

Often business lawyers tell me they don’t take pro bono cases because they will not go to court. Many pro bono cases do not involve court appearances at all. Many legal aid providers around the country have small claims clinics or landlord tenant clinics that, whether by telephone or walk-in, require a commitment of a couple of hours. The clinic organizers usually have scripts that provide the answers to the most common questions and “experts” available if the answers are not readily ascertainable. 

There are also opportunities for business lawyers to advise companies whether those companies are in the start-up phase or are dealing with ongoing business issues. For example, the Florida Bar Business Law Section conducts pro se clinics for not-for-profit businesses in different cities around the state. Clients have included a job training program for veterans, a collective for visual artists, and a cooperative for micro-businesses for women in poverty. Their needs have varied from creating all the documents necessary to start the business, to filing annual reports, to drafting resolutions to lease space or equipment, to creating documents for fundraising under section 501(c). And, unfortunately, once in a while, volunteers have provided legal advice relating to financial distress.

Many law schools around the country are doing business start-up clinics. For example, Duke Law School has the Start-Up Ventures Clinic, which “provides legal advice and assistance to seed and early state entrepreneurial ventures . . . including formation, intellectual property protection, commercialization strategies and operational issues.” These programs are springing up all over the country and it is likely that a law school near you either has such a program or is considering such a program. The students in these start-up clinics need mentors. Where the new venture qualifies as a pro bono client in your state, you can get pro bono credit for being a mentor.

Pro bono service is something that every law firm should encourage. For those young lawyers in your firms that want trial experience, pro bono cases give those young lawyers the opportunity to get courtroom experience not usually available for attorneys at entry level positions in firms. Those law firms that don’t have a formal pro bono policy should consider adopting a policy. Even if your firm encourages pro bono participation without a policy, the lack of a formal policy may discourage young lawyers from pursuing those opportunities. If your firm doesn’t encourage pro bono participation, you need to ask yourself why.

If your firm does have a pro bono policy make sure it is up to date. If your law firm does not have a pro bono policy, or it needs updating, take a look at the resources available at the webpage of the ABA Standing Committee for Pro Bono & Public Service, or on the Pro Bono Institute’s website. You can also take a look at the Florida Bar Business Law Section’s Best Practices Guide for a Firm Pro Bono Policy, located here. The Pro Bono Committee of the Florida Bar Business Law Section developed this Guide to encourage law firms to adopt a formal pro bono policy, or, if a firm already has a policy, to provide suggestions for improvements.

In sum, there is no reason not to do pro bono. And it makes business sense to do pro bono. As my colleague Judge Catherine McEwen from the Middle District of Florida is fond of saying  “pro bono is like a box of assorted donuts; open it up and you will find the flavor just for you.”

Judges can be significant contributors to pro bono service. No, they certainly cannot jump across the bench and represent poor litigants in the well of the courtroom. But there are other meaningful ways judges can participate in promoting access to the courts for indigent parties. So how can judges foster pro bono service to parties who otherwise cannot afford an attorney? And how do judges learn about what they can and should be doing to advance this important goal?

Those questions are answered in my area by a biennial Judicial Pro Bono Summit. The organizer is my state circuit’s Florida Supreme Court–mandated pro bono committee (of which I am a member). We invite all judges—state and federal—who sit within the boundaries of our state judicial circuit (which comprises our county) to attend an informal, box-lunch meeting away from their courthouses.  During the summit, we educate judges about referral resources and actions the judges can take to promote pro bono representation. The summit is easy to organize, inexpensive, and enjoyable. Indeed, a great byproduct of these judges-only gatherings is getting to know our state and federal colleagues better. 

Organizing the Summit

We meet in a casual, private setting, our local general bar association building’s meeting hall. The cost of the boxed lunch can be handled in two ways: The local pro bono committee can find sponsors (law firms), or each judge and pay the modest cost of the lunch. A great time for holding a judicial pro bono summit is during National Celebrate Pro Bono Week, which this year runs October 22–28, 2017. (Go here for more information on the celebration: www.probono.net/celebrateprobono/.)

The summit’s format is simple and designed to take no more than one hour. The first part features a few local pro bono legal service providers making brief presentations on what populations those organizations serve and in what subject matters. And then we discuss various ways judges can perform pro bono service personally and can encourage and promote pro bono service by attorneys. We also provide a handbook-style compilation of useful resources, including referral information for legal services providers in the area, so that these resources will be within arm’s reach on the bench. Excerpts of the written materials can also be posted on our local bar association’s website. The materials also list ways a judge may participate in pro bono, and the lunch discussion usually generates more ideas. Below is a sampling of permissible activities.

Hands-on Pro Bono Service

• Work with the local bar to create a self-help desk and materials for pro se parties (see, e.g., www.flmd.uscourts.gov/pro_se/docs/USDC-MDFL-Civil_Case_Flowchart.pdf, and http://www.flmd.uscourts.gov/pro_se/docs/FLMD_ProSe_Handbook.pdf)
• Work with the local bar to create a courthouse walk-in clinic, open during specified hours and staffed by volunteer attorneys
• Create a legal assistance program in which judges may appoint volunteer lawyers to staff cases involving indigent parties (see, e.g., www.mieb.uscourts.gov/programs-services and www.flmb.uscourts.gov/legal_assistance/)
• Alert bar organizations to opportunities for pro bono funding, such as Bench Bar Funds (attorney admission fees), undistributable funds in a chapter 11 case, or cy pres funds in other cases
• Act as a notary or intake assistant at legal clinics, such as the ABA’s Homeless Experience Legal Protection program that is run in many major cities
• Create a pro bono toolkit for judges (see, e.g., Missouri’s at www.courts.mo.gov/page.jsp?id=4975)
• Provide training for pro bono attorneys
• Lecture on consumer law topics at local libraries
• Reach for your wallet and donate money to a local pro bono provider and/or your state bar’s foundation (incidentally, I obtained an ethics opinion from the Judicial Conference of the United States saying this is okay for federal judges to do in most circumstances, and one of my state colleagues obtained similar advice for Florida judges; contact me if you’d like copies)

Encouraging and Promoting Pro Bono Service

• Participate as a member of a local or state bar association pro bono committee
• Urge your federal judicial law clerk to engage in pro bono work consistent with the Code of Conduct for Judicial Employees, Canon 4D (a judicial employee may provide pro bono service on his or her own time under certain circumstances set out in the canon) or your state code’s counterpart
• Advocate for pro bono publicly by writing op-ed pieces for local news media or appearing on radio or TV (see, e.g., www.tbo.com/list/news-opinion-commentary/national-celebrate-pro-bono-week-should-be-cheered-20151025/ and www.tbo.com/list/news-opinion-commentary/a-wish-list-for-access-to-the-courts-20150110/)
• Write a letter to newly barred attorneys asking them to take a pro bono case or provide other pro bono service
• Express appreciation of pro bono attorneys in open court, court newsletters, or personalized letters
• Provide perks and accommodations for pro bono attorneys such as “go to the front of the line” privileges or even providing a special parking place at the courthouse
• Display pro bono opportunities/promotional materials in the courtroom
• Nominate pro bono lawyers and voluntary bar associations for pro bono awards
• Permit unbundled (limited scope) services in pro bono cases
• Appear at pro bono award ceremonies
• Speak on pro bono service at bar association luncheons, swearing-in ceremonies, and other legal organization gatherings
• And, last but not least, organize a Judicial Pro Bono Summit to spread the word to your area’s colleagues on the bench

Judges, by planning a judicial pro bono summit in your area for some time in the coming year, I bet you could double this list!

Editor’s Note: This article is a substantial revision of an article that first appeared in the National Conference of Bankruptcy Judges’ Conference News.

Introduction

Cybersecurity continues to raise red flags among investment advisers and their government regulators. According to a recent Investment Adviser Association and Cerulli Associates poll, 97 percent of surveyed registered investment adviser executives cited cybersecurity compliance as a priority concern and 93 percent noted increased related regulatory pressure. Their concern is not unfounded. As a continuation of an ongoing trend over the past few years, the U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) included cybersecurity among their 2017 examination priorities. This article will address the regulatory cybersecurity framework applicable to investment advisers and what steps advisers can take to combat cyber attacks.

Background

Over the past few years, the SEC and FINRA, the chief regulators of investment funds and advisers, have demonstrated continued interest in cybersecurity.

In April 2014, the SEC Office of Compliance, Investigations and Examinations (OCIE) launched a Cybersecurity Initiative, conducting a series of examinations of registered investment advisers and broker-dealers to identify cybersecurity risks. In September of the following year, OCIE announced its 2015 Cybersecurity Examination Initiative, with a focus on the following areas: (i) governance and risk assessment, (ii) access rights and controls, (iii) data loss prevention, (iv) vendor management, (v) training, and (vi) incident response. That same year, FINRA released a Report on Cybersecurity Practices, detailing practices that firms can tailor to their business models to advance cybersecurity efforts. OCIE continued to advance the efforts of its Initiatives in 2016, reviewing in particular the technical sufficiency of respondents’ security programs.

Cybersecurity will remain on regulators’ radar. On January 12, 2017, both the SEC and FINRA released their 2017 examination priorities. The SEC announced that it will continue its ongoing initiative to examine, including “testing the implementation of,” investment adviser and broker dealers’ cybersecurity compliance procedures and controls. FINRA will similarly pay close attention over the course of the year to cybersecurity risks and firms’ programs to mitigate those risks.

Governance and Risk Assessment

The best way of mitigating the impact of security breaches is to seek to reduce the number that actually occur. Investment advisers should have cybersecurity governance and risk assessment procedures to prescribe perimeter and other defenses. These procedures should include implementation of written policies tailored to business operations and communication of plans to and from senior management. While no amount of security can thwart a determined, well-equipped and sophisticated hacker, organizing and implementing even a basic defense can ward off more run-of-the-mill intruders.

Governance and risk assessment requirements are codified in the federal laws governing investment advisers. For example, the Gramm-Leach-Bliley Act (GLBA) “Safeguards Rule” requires financial institutions to establish a written information security program (WISP), designate an employee to coordinate its WISP, identify and assess risks to customers’ non-public personal information, and regularly test and evaluate the effectiveness of current safeguards. The GLBA is administered and enforced by several federal agencies, including the SEC via Regulation S-P. Rule 30 of Regulation S-P requires registered investment advisers, investment companies, and broker dealers to adopt written procedures to insure the confidentiality and protect against anticipated threats to the security of customer records or information.

In April 2015, the SEC’s Investment Management Division released a guidance based on OCIE’s 2014 examinations. In addition to periodic assessments of cybersecurity readiness, the guidance recommended that investment funds and advisers create and implement a cybersecurity response strategy through written policies that include access control, data encryption, restrictions on the use of removable storage media, data backup and retrieval, and an incident response plan. In the guidance, the SEC encouraged investment funds and advisers addressing these cybersecurity concerns to review the NIST Cybersecurity Framework, which is currently being updated. Investment advisers are required to review the adequacy of their policies and the effectiveness of their implementation at least annually pursuant to Rule 206(4)-7 of the Investment Advisers Act of 1940.

Notwithstanding the foregoing paragraph, it is important to note that while federal guidelines may be useful, there is no “one size fits all” with regard to cybersecurity compliance. Individual advisers, smaller firms, and branch offices are limited in financial and human resources allocable to cybersecurity defense. Additionally, the rapid pace of technology has engendered an ongoing technical struggle between hackers and their targets and staying on the cutting edge can be an expensive prospect. As FINRA noted in its recent Regulatory and Examination Priorities Letter, investment advisers must tailor their cybersecurity programs to their specific business model, size, and risk profile.

Consequences of failing to comply with the Safeguard Rule include loss of clients, private lawsuits from former clients, reputational damage, and civil penalties. The latter may be imposed even where no pecuniary losses can be shown. For example, in September 2015, one St. Louis–based investment adviser, R.T. Jones Capital Equities, settled an investigation with the SEC for $75,000. R.T. Jones had suffered a breach of its server, resulting in the leak of personally identifiable information (PII) of 100,000 individuals. While the SEC found no evidence that the firm’s clients were financially harmed, it concluded R.T. Jones had violated Rule 30(a) of Regulation S-P by having no written policies or procedures in place to reasonable protect client data.

Several states have gone further than federal regulators, imposing more stringent data security requirements on financial institutions. For example, while the GLBA applies only to customer information, Massachusetts’s “Standards for the Protection of Personal Information of Residents of the Commonwealth” apply to both employee as well as customer information. Massachusetts’s Standards also provide a list of items a WISP should contain, require encryption of personal information and limit the amount of information financial institutions are allowed to collect. New York’s recent “Cybersecurity Requirements for Financial Services Companies” require that financial institutions designate a Chief Information Security Officer, encrypt all “nonpublic” data and annually certify compliance with the regulations. While the regulations do not directly apply to investment advisers (which are not licensed by the New York Department of Financial Services), they may serve as a harbinger of future state-registered investment adviser requirements.

Access Rights and Controls

In its 2015 Cybersecurity Examination Initiative, OCIE noted that security breaches can stem from the failure to implement even basic controls to prevent unauthorized system or information access. Controls on onsite and offsite access to systems and data include management of user credentials and authentication and authorization methods.

“Man-in-the-middle” attacks—where a fraudster tricks (in the context of investment funds) a general partner or a limited partner into wiring a contribution intended for a fund or a distribution intended for a limited partner to a third party—are particularly threatening to investment advisers. Theft of client bank account information or an adviser’s private client list are also causes for concern, particularly where sensitive data is later exposed to the public.

Every investment adviser, large or small should ideally require multifactor user authentication to access their networks. Multifactor authentication refers to the use of at least two of the following categories: knowledge factors, location factors, time factors, possession factors, and inheritance factors. The knowledge factor is the most common type of authentication and requires users to provide an individualized piece of information, such as a password, pin code, or answers to security questions. The location factor cross-references a user’s current physical location against the user’s pre-registered location and the time factor cross-references the timing of user logins. The possession factor requires users to possess a specific item, such as a previously identified mobile device, computer, security card, or thumb drive. The inheritance factor involves biometric information that is inherently unique to each user, such as fingerprint, iris or facial pattern recognition.

Once relegated to the realm of Mission Impossible, biometric validation is now available on ordinary smartphones and is gaining traction among investment advisers and other financial institutions. For example, following a cybersecurity audit, Capital Advisors Ltd., an Ohio-based investment adviser, implemented fingerprint scans in addition to password protection for users to access its network. Validation processes are still in development however, and biometric validation is far from foolproof. Investment advisers deciding among biometric validation programs should bear in mind whether their relevant computer systems are more sensitive to false negatives (e.g., a repository of investors’ bank account information) or false positives (e.g., a system with high user traffic containing more mundane information).

As important as multifactor user authentication is the maintenance of a secure database of login information and updates to access rights based on personnel or system changes. Single sign-on software that logs into linked applications with a master identity can help investment advisers change large number of passwords at once rather than on an individual basis.

In addition to multifactor authentication and protocols for login issues, investment advisers can use firewalls and perimeter defenses to defend against breaches. Investment advisers should also conduct “hardening,” which generally refers to the reduction of security risks by removing unnecessary software, utilities, devices, or services. If a user account is compromised, multi-tiered approval processes (for example, those needed to access customer accounts or make distributions) may prevent serious harm from ensuing. On the system level, a virtual local area network segmentation, which creates a collection of isolated networks within a data center, can mitigate the damage a hacker could unleash.

Data Loss Prevention

In its 2015 Cybersecurity Examination Initiative, OCIE indicated that it would assess how investment advisers and broker-dealers monitor the volume of content transferred outside of the firm by its employees or through third parties, such as via email attachments or uploads. Customer data, especially PII, should be encrypted, whether transmitted or stored.

Investment advisers can address OCIE’s concerns by implementing a data loss prevention (DLP) strategy. DLP refers to the process for preventing the transfer of information outside of a corporate network. DLP software products use algorithms to classify and protect confidential and critical information. For instance, if an employee attempted to forward a business email outside of the firm’s email domain or upload a file to cloud storage (such as Dropbox or Google Drive), the employee would be automatically denied access, or an administrator password would be required. In addition to being able to monitor and control endpoint activities, some DLP tools can also be used to filter data streams on the corporate network and protect data in motion.

Two particular areas of DLP that OCIE emphasized are patch management and system configuration. Patch management and system configuration involves acquiring, testing, and installing multiple code changes (“patches”) to an investment adviser’s computer systems. System administrators should (i) maintain an updated inventory of all production systems (including operating system types, IP addresses, physical location, custodian, and function); (ii) standardize (to the extent possible) production systems to the same operating system and software; (iii) assess and compare reported vulnerabilities against inventory (e.g., estimating the cost of mitigation or recovery or checking whether an affected system is within a perimeter firewall); and (iv) deploy patches as needed.

As the name implies, patches are “patch-up jobs,” rather than comprehensive overhauls of a firm’s computer network, and can sometimes cause more problems than they fix. System administrators should take simple measures to avoid issues, like performing backups and testing patches on non-critical systems. In addition to running patches, investment advisers should regularly update their cybersecurity programs, whether configuring software to automatically download security updates or keeping on the lookout for newer and more advanced programs.

The importance of DLP to investment advisers has seen recent publicity. In June 2016, Morgan Stanley Smith Barney LLC (MSSB) was fined $1,000,000 for having violated the Safeguards Rule. Between 2011 and 2014, a MSSB employee impermissibly accessed and transferred data regarding 730,000 MSSB accounts to his personal server, which was then hacked by third parties. The SEC found that while the firm used modules to operationalize the restrictions set forth in its security policy, the modules did not effectively limit employee access to data and MSSB failed to test the modules or monitor user activity in applications where PII was stored.

Vendor Management

“Vendor management,” in the context of the Investment Management Division’s guidance, refers to an investment adviser’s actual vendor due diligence, monitoring and oversight, as well as the terms of the adviser’s vendor contracts. Appropriate vendor management and oversight is an area of critical importance, especially to larger firms that engage a large number of third-party service providers.

The first line of defense in vendor cybersecurity risk are vendor contracts. Investment advisers’ vendor contracts should include data security-specific representations and warranties, as well as nondisclosure provisions. Once vendors are retained, as threshold matter investment advisers should identify all vendors that have access to personally identifiable data and ascertain what data is visible to each vendor. In accordance with system segmentation policies described above, vendors should only have access to the data needed to perform their contracted services.

Investment advisers should ideally vet vendors (especially smaller vendors) with a systematic review process, which may include (in the case of larger advisers) interviews by cybersecurity consultants, as well as questionnaires examining the vendors’ operational and security procedures. Vendors that routinely use or hold the PII of their clients’ customers should report on the key security measures they employ, and in fact many larger vendors publish white papers explaining their security standards. Established investment advisers with leverage over certain vendors may subject those vendors to an information technology audit. For larger vendors this could take the form of an AICPA Service Organization Controls report but for smaller vendors, it could be a substitute report guaranteeing satisfactory compliance with applicable security protocols.

The minimum security protocols that investment advisers should require of vendors should include password parameters, multifactor authentication for unidentified devices and encryption of data, both in transmission and at rest. Finally, while data security is the overriding concern, data availability also is critical. Data that is not available is not worthless if it cannot be accessed. Vendors should have sufficient plans for backup data centers and telecommunications lines to ensure a seamless business continuity plan. In some cases, vendors may be required to purchase cyber security insurance to provide some compensation payout in the wake of a breach.

The aforementioned best practices may apply not only to vendors but also to subcontractors and third parties that host or have regular access to investment advisers’ data, including computer support vendors. A vendor questionnaire thus should verify to what degree a vendor uses subcontractors to handle sensitive data, and in some cases, an investment adviser may conduct direct sub-contractor due diligence in addition to vendor due diligence.

Training

Training efforts focus on ways in which the investment adviser prevents data breaches result from unintentional employee actions. Often, the most egregious of consequences can be prevented when employees are attentive to detail and know how to identify warning signs.

Cyber threats have been caused by such mundane lapses in security as misplaced laptops, attachments downloaded from unknown sources, and access of client accounts through an unsecured Internet network. On March 12, 2016, a nearly $1 billion cyber theft was blocked at the last minute by a bank employee who noticed a typo in the wire instructions from a foreign bank.

FINRA, recognizing the importance of this issue, has given detailed guidance for effective staff cybersecurity training programs. First, investment advisers should clearly define their cybersecurity training needs. Second, advisers should identify appropriate cybersecurity training update cycles, such as offering training on a periodic basis. Third and finally, advisers should deliver interactive training that has been tailored to their history of cybersecurity incidents, risk assessments and cyber intelligence. Employee training will likely focus on password and confidential information (especially client PII) protection, physical and mobile security, and escalation policies.

Bearing in mind that an overload of information can be detrimental rather than helpful, FINRA suggests that investment advisers consider whether staff trainings will be mandatory or optional and whether they will be tailored towards a target audience, such as general topics for the entire firm and specific topics for management. Investment advisers without dedicated in-house training personnel may wish to consult cybersecurity consultants that offer programs and platforms to help employees become a barrier against cyber threats.

Incident Response

As important as preventing security breaches is dealing with the aftermath. Investment advisers should identify the most likely types of cybersecurity incident and attack vectors, from DDoS attacks to a network or customer account intrusion, and outline tailored response plans in their WISPs.

A response plan will include steps to contain and mitigate the collateral damage from a cybersecurity breach. Employing intrusion detection systems and intrusion prevention systems can help detect compromises in their early stages. Firms should be prepared to shut down key elements systems, disconnect attached network devices, and, where possible, remove admin rights of compromised user accounts. A response plan should not just encompass a firm’s IT department (if there is one) but should be a collaborative effort on the part of all departments. In one enforcement matter, a factor considered by FINRA was the “firm’s failure to rapidly remediate a device the firm knew was exposing [client] information to unauthorized users.” Consequently, firms must see to the prompt recovery and restoration of systems to normal operations as soon as possible.

In addition to damage mitigation, investment advisers will need to investigate the source of the attack and provide a prompt damage assessment. OCIE learned from its 2014 study that while over 80 percent of investment advisers had implemented WISPs, less than 15 percent of those WISPs addressed how advisers will determine if they are responsible for client cyber-related losses. A WISP should therefore allocate resources to conducting an investigation, determine the extent of data and monetary loss and should identify when client reimbursement is required.

Importantly, investment advisers are obligated to notify clients and regulators in the event of certain breaches. With regard to notices to clients of the loss or misuse of personally identifiable information and other sensitive data, this obligation takes on a fiduciary nature. Although not required by Regulation S-P, mandatory customer and regulator notices have been codified in the regulations of the District of Columbia and 47 states. Consequently, WISPs should allocate resources for the conduction of a timely reporting of cybersecurity incidents to clients and regulators.

Conclusion

Investment advisers have both a legal and a practical obligation to affirmatively protect their clients’ data. While an investment adviser’s size, industry, and other factors will determine what degree of protection is appropriate within the context of federal and state privacy laws, all advisers can and should take some protective measures, such as consulting a cybersecurity consultant, using authentication and encryption tools and preparing a WISP. With so much public focus on the issue and future regulations likely, taking cybersecurity precautions may be well worth the cost.

Introduction

Whether fighting for or against policy agendas, providing support to communities affected by policy changes, or fighting for their existence due to a lack of funding or legislative action specifically targeting an organization or its activities, charities often find themselves more engaged in advocacy activities during periods of significant political shifts. For some organizations, the change in political climate just means more or less advocacy activities in certain areas than normal. For other organizations, advocating for their communities means working to support their clients and communities in ways that require more attention to compliance in order to continue operating within the confines of their tax-exempt status. As a result, it is more important than ever that advisors to nonprofits understand the range of advocacy-related activities organizations can conduct, and the considerations organizations must take into account when conducting those activities. Charities will often avoid some types of advocacy activities, or at least do far less than is allowed by their tax-exempt status, because of the fear and misunderstanding that exists around the restrictions imposed on section 501(c)(3) organizations. This article provides an overview of the most common advocacy activities charities conduct, and the issues with those activities that could endanger an organization’s federal tax-exempt status.

Background

Charities receive significant levels of public subsidy, both in the form of tax deductibility for gifts and in exemption from tax on most forms of income. As a result, charities are subject to significant restrictions on their activities to ensure that they exist to benefit public rather than private interests. Those restrictions include an absolute prohibition on engaging in campaign intervention activities for or against a candidate, a requirement that a public charity can conduct only insubstantial amounts of lobbying, and a prohibition on private foundations conducting any lobbying activities. By comparison, other types of organizations that do not receive the same level of tax benefits, such as section 501(c)(4) social welfare organizations or section 501(c)(6) chambers of commerce and professional associations, can conduct political activities so long as those activities are not their primary activity, and they can conduct unlimited amounts of lobbying supporting their exempt purpose(s). Organizations exempt under sections 501(c)(4) and 501(c)(6) are also likely to get more involved in lobbying and other activities during periods of political shifts, although because the restrictions on these organizations are less stringent, they are less likely to cause problems for an organization’s tax-exempt status. For those seeking to fund or fundraise for advocacy activities, section 501(c)(3) organizations are often more desirable vehicles than other types of tax-exempt organizations because their activities can be funded with tax-deductible contributions. In addition to the funding advantages charities provide, they arguably should also have an even stronger drive to engage in policy and advocacy activities because the constituencies charities serve are often some of the least likely to have a voice in the policy arena.

Lobbying Activities

One of the most common types of advocacy activities that charities conduct is legislative lobbying. Lobbying is understood to occur when an organization contacts, or urges the public to contact, legislators in order to propose, support, or oppose legislation or otherwise advocates the adoption or rejection of legislation. Legislation includes an act, bill, resolution, or similar proposal before Congress, a state legislature, local councils, or similar governing bodies (including legislative bodies in foreign countries), or before the public in a referendum, constitutional amendment, or similar procedure. As mentioned above, whether a charity can lobby depends on its foundation status. Public charities can lobby, but the amount of lobbying they can conduct depends in large part on which lobbying test they are under (see below). Private foundations cannot engage in any lobbying.

The default test that all charities are subject to unless they affirmatively elect otherwise is the no-substantial-part test. There is no clear definition of “substantial,” but it is generally understood that, if lobbying activities are anywhere from five percent to 20 percent of an organization’s total activities, it may be determined to be substantial. It should also be understood, however, that the no-substantial-part test is not a pure percentage or expenditure test of an organization’s lobbying activities. The no-substantial-part test looks at other factors, including time spent on lobbying activities, physical space devoted to lobbying activities, volunteer labor used for lobbying activities, and other factors that help understand the scope of lobbying activities as compared to the organization’s other activities. For some types of public charities, such as governmental units and churches and their related organizations, the no-substantial-part test is the only test of lobbying activities that applies. If a public charity governed by the no-substantial-part test is determined to have exceeded its lobbying limits, the penalty is revocation of its tax-exempt status. Public charities under the no-substantial-part test may use certain exceptions found in the private foundation regulations to exclude certain activities from the definition of lobbying. Those exceptions are discussed in further detail below.

Other public charities may elect to be governed by the expenditure test under sections 501(h) and 4911 (and the associated Treasury Regulations), which provide a specific calculation of the total amount of lobbying activities that may be conducted, capped at $1 million, and with a separate limitation on expenditures for reaching out to the general public to urge them to lobby their legislators (grassroots lobbying). The expenditure test provides additional definitions that are not available under the no-substantial-part test that help to exclude a much broader array of activities from the definition of lobbying. A 25-percent excise tax is imposed on organizations that exceed the total or grassroots lobbying amounts, but the organization’s exempt status is not subject to revocation unless they “normally” exceed the limits. “Normally” in this context is looked at over a four-year period and requires exceeding the lobbying limits by at least 150 percent during any given four-year period.

Private foundations are prohibited from lobbying unless the activity falls under one of the specific exceptions provided in section 4945 and its associated regulations: nonpartisan analysis, study, or research provided to the public or legislative officials; examinations and discussion of broad social, economic, and similar problems; requests for technical advice or assistance to a requesting legislative body; and self-defense lobbying communications. Currently, the exception for self-defense communications has been relied upon by many of the private foundations involved in opposing any repeal or change to the prohibition against political activities by section 501(c)(3) organizations (commonly referred to as the Johnson Amendment). If a private foundation engages in lobbying activities, it has engaged in a taxable expenditure under the private foundation rules, which subjects it to excise taxes and a requirement to correct the taxable expenditure. In some circumstances, organization managers may also be subject to an excise tax. If the amount of the taxable expenditure is not corrected within a given time period, the private foundation may be subject to a second-tier tax, and it may have its private foundation status terminated.

Political Activities

Both public charities and private foundations are subject to an absolute prohibition on political campaign activities, which is enforced through excise taxes and the revocation of an organization’s tax-exempt status. The definition of “political campaign activities” (also frequently referred to as campaign intervention or electioneering) is much broader than the election law/campaign finance law definition of “political activities.” Unfortunately, despite recent efforts to clarify this arena, there is no clear statutory or regulatory definition of what qualifies as campaign intervention. The IRS will look at all of the facts and circumstances to determine whether the charity is signaling or implying support for a candidate or party through its communications and activities. This context-driven identification of prohibited political campaign activities often causes organizations to be overly cautious. Many activities not intended to result in campaign intervention could be viewed that way by the IRS. For example, campaign intervention can very easily arise, particularly in an election year, as a result of an organization’s lobbying and issue advocacy. However, it can also be found as a result of business transactions the organization enters into, such as selling advertising, or even via its website and social media communications. Given that the context of the communications or the activities controls the analysis, many activities of an organization not directly connected to its advocacy programs could still result in a finding that the organization engaged in impermissible campaign activities.

Concerns regarding this issue are significant for many organizations this year because Donald Trump filed a notice in early 2017 with the Federal Election Commission that his campaign committee had raised enough money for the 2020 election such that it was required to file. He has also already filed a trademark registration for his 2020 campaign: “Keep America Great!” Those filings have resulted in fear by organizations, fueled in part by misinformation in the media and blogosphere, that charities are now prohibited from criticizing Donald Trump’s acts and statements as president because he is already taking actions as Trump the candidate for 2020. In fact, such communications and actions by the charitable sector are analyzed in the same way they always are, which is with regard to all of the facts and circumstances surrounding the activity or communication. There are no factors that are determinative, and organizations are advised to obtain advice from qualified counsel on the subject. Some of the relevant factors specifically referenced by the IRS in guidance include (not an exhaustive list): whether the statement identifies a candidate by name (or any other identifier that clearly indicates it is referencing the candidate); whether it is delivered close in time to the election (clearly a factor that currently weighs in favor of an organization); whether the timing of the communication or action is related to specific legislation or policies; whether the communication or action is addressing the individual as an officeholder or a candidate; whether it is an issue the organization historically has worked on; and whether it relates to the organization’s mission. A communication or action that encourages voters not to re-elect Trump would likely be regarded as campaign intervention. In contrast, an action that is issue-focused in response to current legislative action, and does not reference Trump the candidate, would likely not be campaign intervention. However, there is enough gray area that can result between (and even potentially including) those examples that, depending on the facts and circumstances surrounding the criticism (or praise), an analysis of the actual planned action or communication is often required.

Illegal Activities

It is generally understood that a charitable organization that promotes violations of the law or public policy in order to achieve its charitable purposes cannot be operated in compliance with the requirements of section 501(c)(3). This restriction comes from the law regarding charitable trusts and has arisen for charitable organizations in a variety of circumstances, including: Medicare and Medicaid fraud; sponsoring nonviolent protest demonstrations as a primary activity at which members are encouraged to commit acts of civil disobedience; activities intended to support the cultivation and distribution of medical marijuana in a state in which such activities are legal; and university prohibition against interracial dating and marriage. Charitable organizations can, however, conduct activities such as strikes, economic boycotts, picketing, mass demonstrations, etc. as a means of furthering educational or charitable purposes so long as the activities are not illegal or contrary to clearly defined public policy.

Litigation as a Charitable Activity

Organizations may be able to conduct litigation as a means of advocacy and in furtherance of their charitable purpose without jeopardizing their tax-exempt status. Most commonly seen are organizations that litigate to enforce environmental legislation, consumer protection, and to defend human and civil rights secured by law. Therefore, it is not uncommon to see significant litigation during periods of political unrest and significant changes in public policy. In order to qualify as charitable, litigation must be conducted for a public, rather than a private, purpose. This does not mean that a nonprofit cannot represent individual plaintiffs; however, the litigation should be expected to have a significant impact beyond the interests of the specific plaintiffs represented by the nonprofit. Although well-recognized as a means to exemption, organizations seeking to operate as a public interest law firm are advised to review the IRS’s detailed guidance and restrictions regarding the firm’s operations, which are intended to ensure that that the operations further charitable purposes and are distinguishable from the operations of a for-profit law firm.

Attribution Issues

Charitable organizations must take precautions to prevent activities that could jeopardize exemption from being attributed to the charity as the result of the actions of individual staff or directors, members, or organizations with which the charity is affiliated or works in coalition. Individuals associated with charitable organizations do not lose their free speech rights when they are speaking outside of official organization functions and publications. However, attribution from staff member or director’s actions can occur when it could be inferred that speech from the individual is made under the authority of the organization or the action is ratified by the organization. Individuals associated with charities, particularly individuals who are generally viewed as speaking on behalf of an organization, should take care to clarify when they are speaking in their individual capacity. That care should be taken not just in more traditional modes of public communication such as speeches, op-eds, interviews, etc., but also in the individual’s social media communications (particularly if they use personal social media accounts to engage in organization-related or organization-endorsed speech).

Charities that organize their membership and supporters to engage in protests and other public demonstrations are not generally going to be held accountable for the unauthorized activities of individuals who engage in illegal activities as a part of a march or demonstration sponsored by the charity. However, if the organization encourages, authorizes, or otherwise ratifies the illegal activities of the individual members, such action may jeopardize the organization’s charitable status.

Similarly, organizations that work in coalition with other groups that are not 501(c)(3)s, including organizations that the charity may be closely affiliated with, must take care to ensure that activities of the coalition members that the charity cannot conduct itself are not attributed back to it. For example, if a 501(c)(3) has an affiliated 501(c)(4) or 501(c)(6), it must avoid the appearance of subsidizing the political campaign activities of the affiliated entity that the charity cannot itself conduct. In other situations, 501(c)(3) organizations may be working in coalition with a variety of organizations to advocate for an issue that is important to all involved groups. The charities involved in the coalition must take steps to ensure that activities that may be conducted by some coalition members, such as political campaign activity or excessive lobbying, are not attributed to the charity.

Conclusion

There are many ways, in addition to those discussed above, for charities to advocate for policies and positions that advance their charitable purposes and benefit their charitable constituency. All organizations engaging in advocacy activities should understand the compliance issues inherent in each type of activity, but particularly organizations that are newly engaging in a certain type of advocacy in response to political and public-policy changes. It is often necessary for charities to involve themselves in policy to ensure that communities lacking a voice (or a loud enough voice) in the political process are able to have their voices amplified and heard, particularly in these political times.

As a teen, Donald Maurice helped with his family’s construction and land development company. Out in the hot sun, he’d spend hours pounding nails, sawing boards, as part of a team building houses. It was the perfect beginning for his legal career, in which he began as a land use attorney. But this was the mid-1980s, and the savings and loan crisis quickly transformed him into a financial services attorney. “I had a knack for understanding commercial property and the challenges that borrowers and lenders faced,” he says. When that crisis resolved, his career continued to evolve in this practice area. Now, he helps manage a 30 plus attorney law firm, Maurice Wutscher, with offices in 16 states. He’s a regular contributor to his firm’s blog, hosts webinars, and gives speeches throughout the country on consumer and commercial finance laws.

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What inspired you to become a lawyer?

My family’s work was construction and land development, mostly commercial and residential land development. I would work with my family in the summer and when I had breaks from school. At a very young age I learned that the law impacted how we could develop properties and construct buildings. I found it very interesting, and when you’re outside in the hot heat of the summer sun, it seemed a lot better to be on that side of the business than on the labor side.

How did you come to specialize in consumer and commercial finance companies?

When I went to law school, which was in the mid-’80s, the S&L crisis began to unfold. When I graduated in 1988, my intent was to pursue a career in land use law, but at that time there weren’t many developments going on because of the crisis. In fact, commercial and residential developments were largely in default. The loans were not being paid and the lenders needed to begin to take back their properties. Some smaller New Jersey banks reached out to the law firm where I worked and wanted assistance in recovering these properties. I had a background in construction and development, so I understood the state of the properties and went from being a land use attorney to a financial services attorney just by virtue of the economy at the time.

What do you enjoy about it?

I had a knack for understanding commercial property and the challenges that borrowers and lenders faced. As the economy began to recover, there was less and less work like that. Commercial properties were thriving, and the development end of it was moving forward properly. A theory of law called lender liability began. It was interesting and new, and it involved borrowers accusing banks of wrongdoing. I began successfully defending against these cases.

Soon there was a new area of lending that was growing very rapidly and that was the consumer side. What banks began to see in the late ’80s and early ’90s was a growth in consumer-related litigation arising from financial products and services, particularly in the automobile finance area. The same banks that had hired my firm and myself to defend them in commercial matters began to send the consumer matters to me. I found them very similar to commercial matters. It fit very well into what I was doing, and I was very successful on that end of the work, as well as defending the financial services companies against those types of claims.

Later on, a group of plaintiffs’ attorneys representing consumers in the financial services transactions began to expand out from automobile loans to all types of consumer loans. So, we saw a lot of activity in credit cards and credit card disclosures and the alleged failure to make proper disclosures. In the late ’90s and turn of the century, we saw the growth of debt collection, particularly with the emergence of large companies that bought defaulted debt and then would collect on it. Unlike original creditors and creditors who extend credit, the debt-buying companies were often subject to other sets of federal and state regulations that allowed for civil claims to be brought against them that were not typically brought against creditors.

So I began to represent these debt-buying companies. There were not a lot of people 20 years ago doing this work, and I have been representing that industry for 20 years. I continued to grow that practice in New York, New Jersey, and Pennsylvania.

You now help to run a 30-plus attorney law firm with offices in 16 states. What do you most enjoy about heading up a firm?

Running a firm is the toughest thing an attorney can do. I don’t run it myself, I can assure you of that. We have partners who handle various aspects of it. What I like about having a firm like ours is that we can specialize primarily in consumer financial services. To have a group of attorneys who all are working on regulatory compliance and financial services litigation brings a great amount of knowledge and experience to the table. It allows us to provide our clients with superior services. We have, for example, myself and others here who have been practicing in this area for 30 years.

We have offices from California to Boston to South Florida. It gives us a very good overview of what is happening nationally. We are able to spot emerging trends and help our clients who primarily are engaged nationwide to address some of these emerging issues quickly. I also do a lot of work in state legislative affairs. You begin to see patterns in how states are regulating consumer financial services, and in my role, I get to assist in shaping those state laws through my legislative work.

What are the main challenges of running a firm?

My biggest challenge is to provide assistance to all the other attorneys whom I work with. The attorneys are coming to me with questions either on the law or strategy, and my role is to assist them in answering those legal questions and developing a strategy. That means I have to be familiar with all of their cases.

Do you have a systematic or technological solution to tracking cases?

We do employ a wide variety of technology solutions. We share a lot of information through that technology, and we have systems that allow us to track the cases. But in ligation you can’t replace the ability to strategize with technology. So it has to be a hands-on endeavor in each of the cases. We are constantly having meetings concerning each of the cases that we work on internally and with our clients. Technology can only assist you in the very fundamental aspects of tracking and monitoring cases.

Is there a lot of travel for you?

I travel very often. I’m licensed in Massachusetts, New York, New Jersey, and D.C., and I have about 30 federal admissions. In any coming week, it’s not unusual for me to be in Boston, New York, Chicago, or New Jersey. I also do a good bit of travel for my legislative work.

You also provide advice and counsel to attorneys in matters of professional responsibility and attorney ethics. What issues do you see rise most frequently?

In the consumer financial services space, there are attorneys engaged in consumer debt collection. Unfortunately, the practices of these attorneys have come under extraordinary scrutiny as a result of the application of the federal Fair Debt Collection Practices Act (FDCPA). This has created extraordinary difficulties that other attorneys do not regularly face. They are subject to lawsuits by consumers simply because the attorneys file lawsuits on behalf of their clients.

The FDCPA is sometimes utilized to sue these attorneys, alleging, for example, that because they lost a case, the lawyers did not have a basis to sue on the claim. Sometimes the lawyers are sued because it’s alleged that they did not spend enough time reviewing a file before they sent a letter. The federal Consumer Financial Protection Bureau has brought enforcement actions against lawyers and law firms based on that theory. There is no other attorney practice area that I know of that is subject to that great deal of risk. It has caused a significant number of problems for these attorneys.

What I have learned from representing these attorneys is that they probably spend far more than other types of practice groups on both professional compliance and compliance with the federal and state laws in the areas in which they practice. They do this not only because they want to do a very good job for their clients, but because of the personal risks that they now face.

You help write a blog, the Consumer Financial Services Blog. How valuable is the blog to the firm?

We started the blog about six years ago, and we did it because we love to write. My articles are typically analytical, but the blog also has a lot of case updates that our clients may find interesting. Certainly there is an element of the blog that is there to display the talent of our attorneys. Most, if not all, of our attorneys publish to the blog regularly. It provides the public with insights into the skill and expertise of our attorneys.

It also keeps our attorneys up to date on developments in law. Because we’re writing about what we believe are important developments impacting consumer and financial services, our attorneys are staying abreast of changes in the law, both in the decisional law and in the regulations and statutes.

How often is a new article posted on the blog?

Since May of 2015, we typically publish four articles a week. In all, there are nearly 550 articles published through the blog.

You recently spoke at the ABA Business Law Section about the case the Midland Funding v. Aleida Johnson case before the U.S. Supreme Court. What are your main views about this case?

The issue presented in Midland v. Johnson, whether a proof of claim for a debt subject to an expired limitation violates the FDCPA was one our firm successfully defended many years ago in the Eastern District of Pennsylvania bankruptcy court. I though the issue was resolved, but it re-emerged in the 11th Circuit Court of Appeals, in Crawford v. LVNV and again from the same court in Midland v. Johnson. We knew that that the decisions did not sit right under bankruptcy law. Claims under the bankruptcy code include debt subject to defenses. The fact that a debt is subject to the defense of an expired limitations period doesn’t mean that the creditor no longer has a claim under bankruptcy law.

We thought maybe the theory would remain in the 11th Circuit, which covers Georgia, Florida, and Alabama, and wouldn’t expand to other parts of the country, but sure enough it did. Soon after, we had a case in the Third Circuit, Torres v. Cavalry, a case in the Fourth Circuit, Dubois v. Atlas, and several trial court level cases in the Fifth and Seventh Circuits. All of them involved these Crawford claims.

We successfully argued for a dismissal in the Torres case. Dubois went to the Fourth Circuit Court of Appeals which, in August of 2016, affirmed the decision of the bankruptcy court dismissing the claim. And in the Seventh Circuit—several Illinois bankruptcy courts also dismissed the claim, one of which was affirmed by the U.S. District Court.

I’m outside counsel to the Receivables Management Association, which is a trade organization of companies that are engaged in the purchase and collection of accounts receivable. Some of these companies are debt buying companies, which were mostly the targets of each of these complaints. They had asked us to look at this issue because of the work that we had done and the cases I mentioned.

Our firm filed an amicus for RMA in Midland v. Johnson. We thought we could add to the excellent work that Midland’s attorneys had done by addressing the issue of due process—an issue we had explored in one of the Illinois cases. Essentially, in a Chapter 13 bankruptcy filing, due process can only be afforded to creditors holding claims is they are allowed to participate in the bankruptcy process by the filing of a proof of claim. I later had the pleasure of being at the Supreme Court to hear the oral argument.

You also give many webinars. What is the primary value of doing these?

Because I’m working across the country, we see a lot of trends. One of the early webinars we gave was on Crawford. We talked about Crawford soon after it came down and said that there’s a possibility this could spread throughout the United States. We offered insights so that others could defend these cases. Both plaintiffs and defense counsel participate in our webinars. It’s not a lecture, but rather a discussion of the issues.

I work a lot with the ABA and produce presentations and sometimes webinars, and various other organizations ask us to do the same.

You give many speeches. If you could pick any topic to talk about what would it be?

The one I enjoy the most is professional responsibility. Attorneys hold themselves to such a high standard of moral and professional responsibility. I don’t know of any other profession that goes as far as what is required of us. It lets the public know that attorneys strive not only do their best work for each of their clients, but also that our job is to protect the integrity of our legal system.

What advice would you give to a new attorney who’s just starting out?

Number one: spend your early years learning how the law developed. Learn procedure as well. Spend a lot of time not only reading the case law but understanding the how and why the common law, statutory law, and procedure developed.

In my first five years of practice, I spent an inordinate of amount of time learning not just what the law was but how the law got there. It’ll help you later on because as you continue in your career, it helps you understand the future development of the law.

Number two is to have peers and mentors. Certainly if you’re in a smaller firm you need to be part of the larger organizations. The ABA is prime example of that. When I first started out, my firm was small. Even our firm, though we have 30 attorneys, is still small compared to larger firms. The ABA’s Consumer Financial Services Committee is the preeminent spot for you to be. I’ve been a member since I began to practice, and so many of the leaders in that group, whether they realize it or not, were mentoring me. They were encouraging me to participate in presentations and in writing. The Consumer Financial Services Committee wants you to be involved. At the same time the people who go to the meetings are the people shaping consumer financial services law. You will not see that anywhere else. And it is also a unique setting, you have defense attorneys, plaintiff attorneys, general counsel, federal and state regulators, and enforcement attorneys all in one place.

I have personally benefited from these interactions. As a defense litigator, I often touch on so many areas of consumer financial services law, whether it be credit reporting, or debt collection or disclosures or privacy and now technology and payment systems. Because of this group, it allowed to me to explore the connections between the financial products and services from the creditors, regulators and consumer advocates perspectives, long before the products or services made their way to the public.

What do you do for fun?

I love to do things around the house. I do our yard work and landscaping and all of our handyman work. Anything that needs to be done around the house from plumbing to electrical to cutting the grass.

I’ve always loved taking pictures in different forms—sports photos, photos of the family, or our travels. Lately, I’ve been very interested in aerial photography. A lot of people call them drones but these drones have pretty sophisticated cameras attached to them. It enables you to get to locations that you typically wouldn’t or couldn’t go, and you can capture some beautiful landscapes. I also enjoy traveling with my wife and my two adult daughters.

Thank you so much!

Corporate lawyers rarely focus their practice on managing corporate records and the information, knowledge, and expertise that those records contain, but doing so can be enormously valuable to a corporate client. The question that corporate lawyers should be vitally interested in is why it matters to effectively manage corporate information, knowledge, and expertise. Lawyers who provide advice and counsel to corporate clients, even in specialty subjects such as security compliance, EEO, intellectual property, tax, or any other legal subject, should have some familiarity with the issues involved with that client’s records because they contain vital data, information, and knowledge that may be directly on point to their subject matter advice. The quality of that advice is directly dependent on the quality of the information, knowledge, and expertise in, or that should be in, the corporate records.

Managing corporate records might seem to the uninitiated to be a simple, straightforward matter, often the responsibility of file clerks who pay little or no attention to the content of those records. Managing the data, information, and knowledge in corporate records is by far a quite complicated subject that must be the responsibility of critically thinking individuals who are familiar enough with corporate operations and the applicable law to be able to evaluate the quality and appropriateness of that data, information, and knowledge.

Corporate lawyers and those in private practice should be able to quickly and accurately answer such questions as “What is a corporate record?” and “How long must a particular corporate record be maintained in corporate files?” These are just two of the most fundamental questions with which corporate lawyers serving as professional record managers must be familiar and comfortable with answering because those answers absolutely govern the fate and longevity of the data, information, and knowledge the records contain. Fundamentally, the question is whether the quality of the information, knowledge, and expertise is as high as it possibly could be in terms of its accuracy, completeness, timeliness, and at least a dozen more factors that measure its quality.

Complicating the practice of corporate records management is the fact that today’s records no longer are pieces of paper in a physical file somewhere in the corporate facilities. For several decades now, many, if not most, corporate records involve technical electronic systems for their creation, transmission, storage, and maintenance. These technical electronic systems not only speed the creation and communication of corporate data, information, and knowledge, but also often frustrate their being quickly located, identified, and used for the purposes that corporate lawyers need to make of them. For these and many other reasons, attorneys who represent corporate clients and those in private practice must have enough familiarity with corporate records-management practices to be able to retrieve the data, information, and knowledge they need to ensure that their practices are providing the best legal advice possible. Furthermore, many lawyers might not realize that practicing corporate records management and providing legal services in this field can be a lucrative practice area.

Mismanagement of data, information, and knowledge can cause enormous legal liabilities, as recent corporate disasters have shown, and the Sarbanes-Oxley Act has tried to rectify some of these situations and prevent them happening in the future. Given the myriad of laws, regulations, and other requirements, corporate compliance is a tremendous legal challenge, but corporate counsel must go beyond mere compliance to understand how they might anticipate legal problems before they occur to avoid potential liabilities. Effective management of corporate information, knowledge, and expertise by experienced counsel will go a long way toward preventing legal and other corporate disasters that have taken so many companies to their graves.

As professionals responsible for managing the content of corporate records, attorneys must achieve various levels of understanding about the content of those records in order to be extraordinarily capable in their field. Attorneys must have the ability to:

• access the quality of the information, knowledge, and expertise in those records;
• know how to classify, i.e., determine the type of information, knowledge, and expertise that is in the record content;
• organize the records so that their information, knowledge, and expertise can be quickly found when needed;
• detect problems in the content and context of the information, knowledge, and expertise;
• develop solutions for the problems found in the information, knowledge, and expertise content or context;
• implement solutions to the problems found in the information, knowledge, and expertise content or context;
• assure that problems found in the information, knowledge, and expertise content or context do not reoccur; and
• educate firm members throughout the company so that problems found in record content or context are not repeated.

(Excerpted from the Preface to Designing an Effective Corporate Information, Knowledge Management, and Records Retention Compliance Program, 2016 Edition (Thomson Reuters 2016).)

In summary, lawyers serving both inside a corporation and in private practice with corporate clients should pay significantly more attention to the quality of the corporation’s information, knowledge, and expertise and should develop a program to systematically capture as much of the tacit information, knowledge, and expertise that should be in its records, but that walks out the company’s doors in the minds of its employees every night. Simply put, this article advocates that corporate counsel adopt a more inclusive strategic mindset to their corporate practices. To do this they should operate using an innovative strategy rather than a traditional one. The business universe, including the business of law practice, consists of two distinct types of operating space and strategies: traditional and innovative, with the latter devoting significant resources to corporate law practice that, to date, has not received the attention it deserves, which is managing the quality of its information, knowledge, and expertise:

To apply an innovative strategy: (1) never use the competition as a benchmark, but create a leap in value for both one’s practice and one’s clients; and (2) reduce the firm’s costs while also offering clients more value. Operating with an innovative strategy focusing on corporate information, knowledge, and expertise is an underserved and mostly ignored area in which lawyers can build a profitable practice with plenty of room to grow and, most critically, serve as an important leader to corporate clients.

The bottom line for attorneys responsible for managing the content of corporate records is that they must have a comprehensive understanding and appreciation for: (1) all the business operations and functions of the company; and (2) all the applicable and relevant laws and regulations that apply to his or her company. That is why those serving as counsel to corporate clients are uniquely qualified to take on this responsibility of managing corporate information, knowledge, and expertise and why attention to this subject must be included in those lawyers’ responsibilities.