Product Summary: Corporate Purchasing Project: How S&P 500 Companies Evaluate Outside Counsel

banner1-2-1Photo by Brooks Kraft

The Harvard Law School Center on the Legal Profession’s (CLP’s) mission is to make a significant contribution to the modern practice of law by increasing understanding of the structures, norms, and dynamics of the global legal profession. In pursuit of this mission, CLP conducts rigorous, empirical research on the profession, implements new content and methods of teaching legal professionals at all stages of their careers, and fosters bridges between the global universe of legal practitioners and the academy. To learn more, visit the Center’s website.

Post by Bryon Fong, Assistant Research Director (HLS Center on the Legal Profession), and Nour Soubani, HLS Case Studies Assistant

“How are relationships between clients and service providers evolving—and why?” The HLS Center on the Legal Profession’s publication entitled “Corporate Purchasing Project: How S&P 500 Companies Evaluate Outside Counsel” is based on more than four years of empirical research aimed at answering exactly that question. The publication is drawn from a combination of quantitative and qualitative data on how large U.S. corporations make law firm hiring and assessment decisions, including a large-n survey as well as information gleaned from over 160 interviews with chief legal officers. The publication aims to address four main topics:

  1. How do companies evaluate the quality of legal service providers when making hiring and legal management decisions?
  2. Under what circumstances do these companies discipline or terminate their relationship with their law firms?
  3. How do these companies evaluate whether to follow “star” lawyers when they change law firms?
  4. In what ways do these companies manage the intersection between law and public relations?

As an example of the sort of in-depth, empirical findings presented in the publication, the research found that general counsel rely heavily on their own experience when making hiring decisions—fully 97 percent of general counsels (GCs) told us that the most important source of information in making hiring decisions is personal knowledge (either their own experience with the specific outside lawyers or law firm or their personal knowledge of the lawyers’ or law firm’s reputation). Three-quarters talked with colleagues at their own firm, and half with peers at other firms. Yet only 17 percent consulted public sources of information such as rankings or court records. As a result, and as interview data corroborates, the ways in which GCs hire outside counsel has not yet materially changed.

It is interesting to note that, for those who did consult outside rankings, prior experience became a less important criteria, while firm size, geographic reach, and commitment to diversity assumed more significance. External factors like these may gain in importance when selecting new clients if industry-wide rankings become more trusted and well known, but for now, relationships still dominate.


This is just a snap-shot of the sort of practical takeaways the publication offer. The full publication provides a fascinating and in-depth look at the thought process of chief legal officers, and provides a dataset that is challenging and important for the legal profession as a whole.

Want to learn more? Check out the Center on the Legal Profession’s digital magazine, The Practice, including the forthcoming May 2016 issue on The Changing Role of the Global General Counsel. This exciting new issue contains previously unreleased data from the Center’s survey on how in-house legal departments in India, Brazil, and China make purchasing decisions—and how these findings related to U.S. trends.

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NEW PRODUCT: Tiantong & Partners: Transforming Litigation in China

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post by Dr. Lisa Rohrer, Executive Director of the Case Development Initiative at Harvard Law  School

CDI is pleased to announce the publication of its first case on the Chinese legal market: Tiantong & Partners: Transforming Litigation in China, co-authored by Ashish Nanda, Director of the Indian Institute of Management Ahmedabad (IIMA) and HLS Distinguished Executive Education Fellow and Lisa Rohrer of CDI. The case, jointly published with IIMA, depicts an unusual Chinese litigation firm that while small in number of lawyers, is big on ambition. The founder of the firm, Jiang Yong, is a former judge of the Chinese Supreme Court and founded the firm with the goal to improve the litigation system in China. Many Chinese lawyers, Jiang says, do not want to become involved in litigation and the Chinese public views it with suspicion, yet it is an important component of the justice system. “When a society develops following the principle of rules of law,” he says in the case, “litigation as a practice must also develop.”

But Jiang does not stop with simply representing clients in important cases before Chinese courts. What makes Tiantong an interesting case study is how Jiang is pursuing his larger mission to improve the Chinese litigation system. By leveraging technology such as social media (Tiantong’s WeChat app connects lawyers across the legal profession and the firm estimates that 50% of all practicing lawyers in China were followers) and knowledge management tools, Tiantong is a fascinating blend of old and new China. The lawyers, who are situated in a traditional Chinese residence in the heart of Beijing, sit just a short walk away from an airy, modern loft that houses programmers and technicians, working on cutting-edge technology designed to improve knowledge sharing across the profession through case research tools made freely available to other practitioners.

The case provokes interesting questions about the evolution of litigation in China, with potential implications for other emerging legal systems. In addition, it asks readers to consider how far a small firm can take a platform designed to level the playing field for litigators across the country while still remaining profitable and focused on serving its clients. With the Chinese legal profession rising quickly to compete with western firms, this tale of old and new provides an additional perspective on this important market and on the evolution of justice in a society of over 1.3 billion people.

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The Classroom Experience: Prosecutorial Discretion in Charging and Plea Bargaining: The Aaron Swartz Case (A) and The Battle for Unocal Case Studies

Post by Logan Sawyer, Visiting Associate Professor of Law, Harvard Law School

“That class was awesome,” and “You should definitely do that again next year,” were the first things I heard from students after the two case studies I taught in two different classes, at two different institutions. The classes were core, doctrinal classes, with 40 to 60 students who had never done a case study before. Yet, those comments were representative of the overall student response.  What’s more, the cases were not just interesting: my students learned as much in those classes as they did in any class all year, both about the law and about what it means to be a good lawyer. Case study teaching, I’m convinced, should play an increasingly important role in law teaching. I know it will in my classes.

In my Legal Profession course at Harvard Law School, I taught the Aaron Swartz case as a way to cover the ethical concerns of prosecutorial discretion, and at the University of Georgia School of Law, I used three days to take my Corporations class through the Unocal case study in order to introduce mergers and acquisitions law. Both elicited more student involvement than any class all year and I’m quite sure they will be among the most memorable classes of the year.

At the core of what made the classes successful was that each case study placed students in the position of lawyers facing difficult decisions—in one how to fight off a corporate raider without counseling their clients into a violation of their fiduciary duties, in the other, how to proceed with a prosecution against an accused whose politically motivated actions many students found sympathetic—and each case also gave them a rich factual background that put their decisions in context. As a result, the students could see how abstract concepts like the duty of loyalty and serving the interests of justice mattered; how those concepts and other legal rules framed issues and raised questions. But they also saw that those rules and concepts did not provide answers.

The rich factual background allowed them to make textured arguments, develop alternative strategies, and understand the stakes of their advice and decisions. In the Unocal case, students formed small groups and fashioned defensive measures against a coercive two stage tender offer. One group even got pretty close to the self-tender strategy the Unocal board eventually adopted. In the Swartz case, students had to weigh the risks of a high profile prosecution and the potential coercion inherent in tough plea bargaining to determine how a prosecutor can best seek justice. In both cases, students were forced to not just make legal arguments, but to evaluate the risks and rewards those arguments created and then consider the implications of those risks. The students, in other words, had to be more than rule experts. They had to be lawyers. They loved it. And so did I.

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NEW PRODUCT: The Allergan Board Under Fire (A) and (B)

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The Case Development Initiative (CDI) at Harvard Law School recently debuted a new case study on the HLS Case Studies website. CDI develops role plays and case studies based on strategic and organizational issues faced by legal organizations. These cases focus on real life situations and are suitable for law school classrooms as well as professional development programs.

NEW PRODUCT: The Allergan Board Under Fire (A) and (B)

Post by Dr. Lisa Rohrer, Executive Director of the Case Development Initiative and Lecturer on Law at Harvard Law School

In a March 16 2016 Wall Street Journal commentary, Ronald Barusch suggested that the shareholders of Allergan deserved credit for fending off a 2014 takeover bid from Valeant Pharmaceuticals and Pershing Square Capital Management. In his article, Barusch remarked that although Allergan’s board appeared to have made the right decision (Valeant shares are trading over 70% below their share price when they approached Allergan), the company’s directors “faced withering criticism as they resisted the Valeant bid.”

A recently published HLS case study titled The Allergan Board Under Fire (A) and (B) details the dilemma faced by Allergan’s board of directors as they debated the takeover bid. The case, jointly published with Harvard Business School, is authored by HLS professor John Coates, HBS professors Lynn Sharp Paine and Suraj Srinivasan and HBS senior case researcher David Lane. It challenges students to think through the decisions faced by Allergan’s directors as they debated the merits of Valeant’s offer, media pressure surrounding the deal, and strategic alternatives involving other companies. The case study highlights the complexities induced by the increasing power of shareholders and how shareholder activism impacts boards of directors’ decisions around the company’s governance, management and business model.

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AmesCard: Creating Effective Legal Scenarios for Experiential Learning

The Case Development Initiative (CDI) at Harvard Law School recently debuted a new role play on the HLS Case Studies website. CDI develops role plays and case studies based on strategic and organizational issues faced by legal organizations. These cases focus on real life situations and are suitable for law school classrooms as well as professional development programs. The following blogpost is a Q&A with the authors of the case study.


By Karina Shaw and John Coates

We are pleased to announce a new case geared for law school classrooms titled AmesCard. It is a contracting and negotiation exercise about a small start-up (AmesCard) that is evaluating several options to raise capital. The case explores the dangers that start-ups face when looking for financing options and asks students to negotiate, playing the roles of an AmesCard representative and two people who present potential financing options: a trusted banker and a broker . One of the financing options turns out to have disastrous consequences for the company and its leaders. Professor John Coates, the John F. Cogan, Jr. Professor of Law and Economics at Harvard Law School and Research Director of the Center on the Legal Profession, spoke to us about the development of the case and its key takeaways:

Karina Shaw (KS): What inspired the AmesCard simulation?

John Coates (JC): I had three inspirations for the case.  First, there was a client need.  Many lawyers work from time to time for start-ups, struggling companies, and other companies that need finance and investors but are having a hard time finding them.  At the same time, and for the same reason, their clients are often eager to keep legal costs low.  This combination can lead clients to take on (or consider taking on) dangerous legal risks, often without realizing it, in the form of one-sided “gotcha” contracts.  Second, in my research and consulting, I follow M&A litigation, and have come to appreciate the importance of two doctrines — tortious interference with contracts and tortious interference with prospective advantage — that are often neglected in law school and may be unfamiliar in how they operate in courts even to many experienced practitioners.  This was vividly illustrated by several very large verdicts in real disputes, including the ones on which the case was loosely modelled. Third, law schools are increasingly looking to give students the ability to engage in “experiential learning” — learning by doing.  Developing materials to do this effectively is not easy, and I saw an opportunity to provide students with a hands-on negotiation exercise with good learning takeaways, while at the same time designing the case to keep the classroom management of the exercise within what a single professor can reasonably manage.

KS: What challenges and opportunities did the writing process present?

JC: It’s important but challenging to strike a balance between enough realistic detail to make the exercise have the feel of an actual negotiation, while not overwhelming students with so much information that they either flounder or feel unconnected to the task.  On the opportunity side, the advantage of a case like this is that it does not involve a lot of lengthy reading, so there’s an opportunity for the case writer to instead think carefully about design and implementation.

KS: What advice do you have for case writers and teachers in the legal classroom?

JC: Keep things as simple as they can be, but no simpler.  Focus on a non-intuitive, important, and underappreciated legal issue, and find a way to make it come alive, either in a narrative case, an exercise, or an analytical case.  Be realistic about how long things take to cover in class (almost always longer than you think), and at the same time don’t short-change the students — they can and like to move quickly when they’re motivated and interested.

KS: How did the students react to the simulation?

JC:  Some students were surprised or amused at the outcome, and others were satisfied at having played a realistic role in an important type of business negotiation.

KS: What is a major takeaway from AmesCard and the AmesCard role play?

 JC: Real world lawyers draft badly designed, and sometimes even quasi-fraudulent contracts, all the time.  Holmes’s “bad man” really does exist, and lawyers need to be alert for them, particularly in settings where their clients are under pressure.  Sometimes it’s better to have no contract at all than to agree to a badly designed one.

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United States v. Teller – a New Plea Bargaining Role Play on Domestic Terrorism, Hate Crimes, and Managing Principal-Agent Tensions

By Sam W. Straus and Robert C. Bordone

United States v. Teller, a newly released negotiation role play case by Sam W. Straus and Robert C. Bordone of the Harvard Negotiation and Mediation Clinical Program (HNMCP), explores the challenges of negotiating plea bargains in the face of intense principal-agent tensions that pose ethical challenges. The case involves domestic terrorism and hate crime charges.  Although the fact pattern is fictional, it draws loosely on actual events in U.S. history, including the Oklahoma City bombing of a federal building in 1995 and the Boston Marathon bombing of 2013.

The case requires four participants, two in the role of attorney and two in the role of clients. Max Teller, a 27-year-old member of a motorcycle gang known for its ties to a white supremacist organization, is the defendant in the case and has been charged with domestic terrorism and hate crimes. Teller is represented by a public defender, assigned to Teller’s case, who feels conflicted about representing someone associated with a domestic hate-based organization. The prosecution is represented by the U.S. Attorney for the District of Arizona (a client for purposes of this simulation) and the assistant U.S. Attorney. The prosecution must determine how to proceed with this case and consider the implications this will have for their professional mandate, their ethical obligations, and their careers. This engaging exercise in managing principal-agent tensions provides a challenging opportunity to negotiate both behind and across the table.

The case is designed as a two-stage negotiation of a plea bargain. The first part of the case takes place before the prosecution and the defense meet, with each agent – the Assistant U.S. Attorney and the Public Defender – meeting independently to interview their principal – the U.S. Attorney and defendant Max Teller, respectively – to determine the principal’s interests and objectives. The Assistant U.S. Attorney and the Public Defender meet subsequently to negotiate the terms of a potential plea bargain.

Because of the complexity of the issues and the background knowledge required, role-play participants should plan to invest at least 1 to 1.5 hours before class to prepare for the negotiation. The principal-agent interviews and the negotiation between the prosecution and defense should take place within a 1.5-hour time block, followed by a 30 to 60 minute facilitated review of participants’ experiences.

“The case is ideal for instructors who want to expose their students to the challenges of reconciling their own viewpoints and feelings with the duties they have to the court and the fair administration of justice,” says HNMCP Director Robert Bordone.  Instructors can use the case in a variety of ways and in many classes, including negotiation, criminal justice and procedure, and legal profession. Designed for participants with an intermediate level of negotiation training and some law background, it provides an introduction to interviewing, counseling, and representing clients. It is accompanied by an extensive teaching note to help those new to the case design debriefs that will ensure a rich learning experience.

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Vieira de Almeida (VdA): Legal Innovation Pioneers in Portugal

The Case Development Initiative (CDI) at Harvard Law School debuted a new case study on the HLS Case Studies website. CDI is a program that develops role plays and case studies based on strategic and organizational issues that those in the law and other professional settings encounter. These cases focus on real life situations and are suitable for law school classrooms as well as professional development programs. The following blogpost is from one of the authors of the case study.

NEW PRODUCT: Vieira de Almeida (VdA): Legal Innovation Pioneers in Portugal

By Nathan Cisneros, Case Writer for the Case Development Initiative at Harvard Law School

We are pleased to announce a new innovation-focused addition to the Case Development Initiative: Vieira de Almeida (VdA): Legal Innovation Pioneers in Portugal. CDI team members Lisa Rohrer, Nathan Cisneros, and Karina Shaw teamed up with Reena SenGupta, founder of RSG Consulting and a pioneer in the analysis of law firm innovation. The case study examines how Lisbon-based VdA embedded a durable culture of innovation in response to a number of internal and external challenges in the late 2000s. With this new case study readers and instructors have the opportunity to explore the nut-and-bolts of an innovation culture in a law firm setting.

We were fortunate to have Reena as our guide. For the past ten years she has partnered with the Financial Times to produce an annual Innovative Lawyers special report. Reena and the Financial Times receive hundreds of submissions each year, so it takes something truly extraordinary to catch Reena’s eye. That’s exactly what happened in 2013 when VdA emerged–seemingly from nowhere–to claim that year’s award for “Most Innovative Law Firm in Continental Europe.” How had this little Portuguese law firm managed to overcome the deep economic troubles of its home market and put innovation at the heart of its business and values? There was only one way to find out, so we headed down to Lisbon with Reena to meet Vieira de Almeida.

We learned that Europe’s sovereign debt crisis was just one of several acute challenges facing VdA in the second half of the 2000s. The firm also grappled with generational changeover and a rapidly maturing market. Rather than fall into a defensive crouch, firm leaders seized the moment as an opportunity for re-invention. They launched an ambitious multi-year strategic review with buy-in from all levels of the firm which came to be known as the Lighthouse Project. We came to understand that VdA’s approach to the Lighthouse Project was emblematic of the firm’s values: a strong emphasis on teamwork, a willingness to try risky endeavors, and a commitment to carry ideas through to completion. The case study shows that the process by which firms develop their strategic vision is just as important to its overall success as the vision itself.

VdA’s innovation campaign emerged from the Lighthouse Project, and firm members pursued it with the same methodical zeal. VdA created a committee to evaluate, incubate, develop, and fund new ideas from all over the firm. It reorganized its HR department and empowered HR professionals to experiment with novel promotion and assessment systems. It did the same with business development, giving staff substantial leeway to pursue new clients and experiment with internal work organization. We think students and practitioners will greatly value reading in concrete detail how VdA actually implemented its innovation drive on the ground.

The case study was first presented in the Leadership in Law Firms course here at HLS. We were delighted to welcome Reena as our guest, and she discussed VdA’s achievements in the context of innovation trends in the legal profession. We invite instructors and practitioners to share their own experiences now that the VdA case is available to the public.

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Case Studies Greatest Hits of 2015

As the year comes to a close, here’s a look at our greatest hits of 2015. Have you downloaded our top cases and role plays yet?

Top New Cases of 2015:

  1. Algorithmic Allegories (version 1.0)

A workshop-based case study about an experiment designed by Facebook which altered the Facebook News Feed to explore if emotions can spread through Facebook. This study met vocal opposition for manipulating the moods of Facebook users, and also because users neither volunteered nor opted in to such research and were not informed of their participation in the study. This case study explains the parameters of the experiment, the reaction in the media, and the legal issues raised when algorithms permeate society.

  1. Driving Blind at General Motors (A) and (B)

A two-part discussion-based case study about the complex legal problems faced by General Motors following revelations that GM had known about a safety defect in millions of cars that caused over a dozen deaths for at least ten years prior to recall.

  1. SeyfarthLean: Transforming Legal Services Delivery at Seyfarth Shaw

A discussion-based case study that follows the adaptation of Lean Six Sigma–a concept of collaborative team effort borrowed from manufacturing–for a law firm environment and describes the challenges the firm encountered when introducing it to partners.

  1. Somalia in Crisis: Famine, Counterterrorism, & Humanitarian Aid

A workshop-based case study that provides an opportunity for students to examine the potential impacts of U.S. material-support-to-terrorism laws in the context of humanitarian crises, through the lens of the 2011 Somalia famine. Participants are primed to problem solve, navigate potentially competing domestic and international law and policy, and make ethical and legal decisions in a high-pressure, complex international crisis.

Ten Most Downloaded Cases of 2015:

1,. Harborco

A six-player, multi-issue scorable negotiation role play disputing the construction of a deep-water port. Harborco, the consortium interested in building the port, must promote buy-in and gain support from other stakeholders in order to obtain a necessary license. Participants learn more about coalition strategies and elementary utility analysis.

  1. Diego Primadonna

A negotiation role play in which a veteran soccer player tries to sign with a Brazilian football club experiencing a slump. In striking a deal, participants will practice probing for interests and creating value, in addition to learning about the zone of possible agreement and distributional strategy.

  1. William Fox

A case study that follows the career and life path of William Fox, a middle-aged, English partner at a law firm in London. This case allows participants to reflect on how to evaluate one’s career trajectory, the balance between commitments to work and personal life, and how the meaning of “success” might evolve over time.    

  1. Problem Solving for Lawyers

A technical note that outlines a systematic approach to problem solving for lawyers and gives students a framework to solve client problems, including addressing legal and ethical issues.

  1. Linklaters (A): Seeking Clear Blue Water

A discussion-based case study concerning the importance of having a clear strategy in a professional service firm (PSF), the challenges related to implementing a strategy, and the considerations that lead to successful change management in a PSF.

  1. How to Approach a Case Study in a Problem Solving Workshop

A technical note that helps students to effectively read problem solving case studies and prepare for problem solving class discussions and exercises.

  1.  Algorithmic Allegories (version 1.0)\

A workshop-based case study about an experiment designed by Facebook which altered the Facebook News Feed to explore if emotions can spread through Facebook. This study met vocal opposition not solely for manipulating the moods of Facebook users, but also because users neither volunteered nor opted in to such research, and were not informed of their participation in the study. This study is a motivating example of the moral, legal, and technical questions raised when algorithms permeate society.

  1. Ernest Shackleton’s Journey to the Endurance

A discussion-based case study about explorer Ernest Shackleton’s dramatic voyage to the Antarctic, and a great example of effective teamwork and leadership in crisis.

  1. Managing the Client Portfolio

A discussion-based case study that helps students reflect on the benefits as well as challenges of having different types of clients;  how to determine the appropriate mix of clients in a professional service firm; and the change management challenge of achieving the desired mix.

  1. The Offer

A role play case on negotiations that helps students understand the advantages and disadvantages of using email for negotiation; evaluate the challenges of setting up and conducting an auction; and identify the impact of process decisions on relationships.

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Putting RBC Capital In Context

The following blogpost is from one of the authors of the HLS teaching case study, Barclays Capital and the Sale of Del Monte Foods, on a recent court ruling related to the case.

Putting RBC Capital In Context

By John C. Coates, John F. Cogan, Jr., Professor of Law and Economics at Harvard Law School and Karina Shaw, Research Associate, Case Development Initiative at Harvard Law School

In a recent decision, the Delaware Supreme Court upheld Chancery Court decisions requiring RBC Capital – a unit of the Royal Bank of Canada – to pay $76 million to Rural/Metro shareholders based on RBC Capital’s advisory work for Rural/Metro in its 2011 sale to Warburg Pincus. RBC Capital sought a buy-side financing role for Warburg Pincus, a private equity firm, while giving Rural/Metro sell-side advice, and sought to leverage its role in the Rural/Metro deal for work in an unrelated deal without disclosing that fact to Rural/Metro’s board. As a result, under the Revlon standard the Court applied to the case, RBC Capital “aided and abetted breaches of fiduciary duty by former directors of Rural/Metro Corporation,” said the Court, even as it sought to limit the holding by stating that “a board is not required to perform searching and ongoing due diligence on its retained advisors … to ensure that the advisors are not acting in contravention of the company’s interests….”

The claims in Rural/Metro follow the line of cases initiated in litigation over the 2011 Del Monte buyout, as detailed in the HLS teaching case study, Barclays Capital and the Sale of Del Monte Foods, as well as in a case study of the roles played by Goldman Sachs in El Paso’s Sale to Kinder Morgan. Unlike in Rural/Metro, where RBC Capital sought but did not obtain a buy-side role, Barclays Capital and Goldman Sachs actually worked both the buy-side and sell-side of those transactions, and shareholders accused the boards of the target companies of failing their duty of care by inadequately learning about and policing the resulting conflicts. The case studies, which are taught at both Harvard Law School and Harvard Business School, explore issues of ethical leadership and deal process management. They also provide a basis for exploring the effects of the financial crisis of 2007-08 on the complex interaction – and arguably, competition for primacy – in regulating investment banks in the M&A context by the Delaware courts, Congress, the U.S. Securities and Exchange Commission, and the other financial regulatory agencies.

In its deal, Del Monte sold itself to a “club” of three private equity firms, Kohlberg, Kravis, Roberts, & Co. (KKR), Vestar Capital Partners (Vestar), and Centerview Capital LP (Centerview). In the standard shareholder lawsuit that followed, evidence was discovered suggesting a failure on the part of the Del Monte board to oversee the deal process, particularly the roles played by Barclays. In February 2011, Delaware Chancery Court Vice Chancellor Travis Laster provisionally enjoined the deal, criticizing both Del Monte’s board and Barclays Capital. The judge delayed the shareholder vote on the buyout by 20 days and essentially extended the “go-shop” period under the agreement to give other buyers a further opportunity to top KKR’s price. When no buyers emerged, the deal closed unchanged a few weeks later.  

In October 2011, Del Monte announced a settlement of its shareholder litigation with a payment of $90 million, funded by the private equity buyers ($65.7 million) and Barclays ($23.7 million, roughly the amount of its buy-side fees), generating $22.3 million in fees for plaintiffs’ lawyers.  In the El Paso dispute, the settlement amount was even larger ($110 million), as were the plaintiffs’ legal fees ($26 million). Now together with Rural/Metro, these settlements are among the largest recorded payouts in M&A-related litigation.

These cases demonstrate to Wall Street that banks’ conflicts of interests can have serious repercussions for both the banks and their corporate clients. In each case, the courts are confronted with behavior that has not been the conventional focus of fiduciary duty disputes – whether the target board failed to get basic information about the deal (as in the famous Van Gorkom case) or were themselves conflicted or beholden to conflicted participants (as in freezeouts or management buyouts).  Rather, the behavior in question relates to advisors on whom the board depends. The cases are difficult, as it is the directors themselves who have the duties giving rise to the litigation, and yet without allegations of bad faith or disloyalty on their part, they are typically exculpated from any liability for failing their duty of care. The results can be anomalous, with directors ultimately let off the hook, while their advisors’ conduct is scrutinized closely for any gap between their apparent conduct and either the directors’ documented understanding or judicially articulated and at-times nuanced standards, often on an incomplete record (as in the Del Monte buyout).

The impact of the court decisions has been significant. Stapled finance, for example, was common in both public and private target buyouts in the 2000s, but since Del Monte has largely disappeared in public target deals, even as its continued role in private deals suggests that it can have benefits that outweigh its risks. “Boutique” investment banks, too, have enjoyed a steep rise in fee income since Del Monte, as their focused practices generate fewer conflict risks, even as they offer fewer services. The disputes illustrate how Delaware courts can chasten and control a high profile and lucrative part of the business of multi-service Wall Street banks, even as Congress and the federal regulatory agencies wrestle with the broader need for regulation of the financial system. Our case studies are framed without prejudging the outcomes, allowing for rich student-led discussions of the issues embedded in the facts of the deals. They also provide a better means than dry lecture to convey vividly important trends in the institutional context of M&A, such as the rise of the private equity industry, the ever-elaborating process through which buyouts of public companies must pass, and the essentially “regulatory” role played by shareholder plaintiff lawyers. At the intersection of corporate law and finance, the cases link theory and practice in both law and business school classrooms.

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Reforming Partner Compensation at Mattos Filho

The Case Development Initiative (CDI) at Harvard Law School recently debuted a new case study on the HLS Case Studies website. CDI is a program that develops role plays and case studies based on strategic and organizational issues faced by those in the law and other professional settings. These cases focus on real life situations and are suitable for law school classrooms as well as professional development programs. The following blogpost is from one of the authors of the latest case study. 

NEW PRODUCT: Reforming Partner Compensation at Mattos Filho

By Dr. Lisa Rohrer, Executive Director of the Case Development Initiative and Lecturer on Law at Harvard Law School

We are excited to announce the addition of a new case study to the Case Development Initiative collection: Reforming Partner Compensation at Mattos Filho, which was co-authored by CDI’s Lisa Rohrer and James W. Jones of Georgetown Law Center. The case study explores the efforts of Brazilian law firm Mattos Filho to move its partner compensation system away from an Eat-What-You-Kill formula to one that is more subjective in nature in order to break down silos and encourage teamwork and collaboration.

The Mattos case study is a fascinating story that provides many learning opportunities for both students and practitioners. First, partner compensation is a difficult issue for many firms, and the systems examined in the case (formula and subjective) represent two fundamentally different approaches to partner compensation. It is thus an ideal teaching tool because it enables readers and instructors to explore the pros and cons to each compensation approach in-context.

A second aspect of the Mattos case that caught our eye was the approach used by Roberto Quiroga Mosquera, the firm’s then managing partner, to convince his partnership to make a big and potentially risky change. Under the old compensation system, the most senior and productive partners were the biggest beneficiaries. Quiroga needed to convince this group to give up some of their immediate rewards for the long-term good of the firm. Quiroga’s skillful tactics makes this an excellent case study of effective change management.

We also wanted to write about Mattos Filho because the case setting itself is quite interesting. Brazil has a large and fast-growing legal market, and Mattos is one of the country’s top law firms. (In fact, Chambers and Partners recently ranked them as the Best Law Firm in Latin America.) The case provides a great opportunity to explore how a law firm that was already among the best in its market proactively addressed a difficult issue to further enhance its future competitive position. While it is often easier to implement change from a position of strength, many firms wait until there is a crisis before they attempt a major change because when performance is strong, it is difficult to convince partners to take a chance on the unknown. We believe the Mattos case is a particularly instructive and inspiring case study because the firm proactively implemented a reform during good times.

The case study has been piloted in several executive education programs both here at HLS and at Georgetown Law. We found that law firm leaders appreciate both the substance of the change and the tactics used to enact it. In 2014, we were especially excited to welcome Roberto Quiroga to address one of our HLS executive education sessions, during which he shared reflections on the events chronicled in the case study. Now that it has been released to the general public, we look forward to hearing from instructors and practitioners about their own learning experience with Mattos Filho case.

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