Legal News Reach S3E1: The DEI Dialogue: How Feedback Fosters Inclusion and Diversity in the Workplace

Welcome to Legal News Reach Season 3! We begin the new year with a conversation between the National Law Review’s Social Media Manager, Crissonna Tennison, and Bracewell’s D&I and Community Outreach Director, Monica Parker.

By now, most firms understand that diversity and inclusion are nonnegotiable foundations for a successful organization, but feedback conversations remain a commonly overlooked—or avoided—tool for fostering deeper professional connections amongst colleagues with different backgrounds and experiences. What role does feedback play in successful D&I practice, and how can attorneys approach it?

We’ve included a transcript of the conversation below, transcribed by artificial intelligence. The transcript has been lightly edited for clarity and readability.

 

Crissonna Tennison

Thank you for tuning in to the Legal News Reach podcast. My name is Crissonna Tennison, Web Publication Specialist and Social Media Manager for the National Law Review. In this episode, I’ll be speaking with Monica Parker, Director of D&I and Community Outreach at Bracewell LLP.

Monica, can you tell me a little bit about your background, what led you to practice law in the first place and eventually to Bracewell?

Monica Parker

Well first of all, thank you for having me. I’m excited to be here to have this chat with you today Crissonna.

As you mentioned, I’m a former practicing attorney. I have spent about two decades in law firms and professional development and, recently, diversity and inclusion. And what made me practice law, I’m not the typical law student. I didn’t go straight from college to law school, I worked for four years. And you know what, I missed school. So I appreciated the intellectual rigor, I would say, of law school, and then I ended up falling in love with Harvard Law’s negotiation program. That’s where I went to school. So I ended up becoming a teaching assistant for the negotiation program while I was there, and then came back as a lecturer in law to teach the course after I graduated.

What led me to Bracewell–I would say here is the plug for the importance of your network. I heard about this position through someone that I knew when I was a summer associate many years ago at a law firm. This person was then working in professional development for that firm. She’s now the Chief Talent Officer at Bracewell. So that’s how I heard about the opportunity. I will say that when I interviewed I had conversations with the firm’s Managing Partner, as well as the chair of the D&I Committee, the firm’s General Counsel, the hiring partners, and others, and really just appreciated the genuine, authentic nature of the leadership. They were candid with me about what’s working, what the challenges are, and it was an opportunity to have an impact and work with some good folks to that timeline at Bracewell.

Crissonna Tennison

It’s always great when your workplace is transparent with what’s going on and shows that they’re willing to have ongoing conversations. What brought you more specifically into the diversity and inclusion world and practice?

Monica Parker

I would say, like many folks who work in this arena, I was motivated by my own experiences of being a woman of color in this profession. At this stage of the game, I have a wealth of experience. And I’ve been fortunate in my career, and I saw this as an opportunity to help lift others up. Plus, I really wanted to have the opportunity to have an impact. And there’s lots of space to have impact in the world of diversity and inclusion these days.

Crissonna Tennison

Definitely. Broadly speaking, what would you say some of the hurdles are to ensuring diversity specifically in the legal business and legal field?

Monica Parker

There are three major challenges among others, right? There are several, but I would say pipeline is one, recruiting is another, and then retention is a third.

So when I think about the pipeline piece, not everyone has the same opportunities, right? They can’t all necessarily go to the best schools, they may not have family members or family friends who sit around the dinner table talking about the practice of law, they may not have opportunities with college applications or law school applications. So that’s one hurdle, right? And if you do make it over that hurdle, and you graduate from law school, then not everyone is going to come to a large law firm. So this is actually a very competitive market that we’re operating in to begin with. And then once you get there, for underrepresented groups, you have to make sure that they’re getting the same kinds of opportunities as everyone else. So for example, you need there to be a lot of candid feedback conversations, people need mentors and sponsors. But often people tend to connect with those who are like them. So those are some of the challenges specifically for the legal industry, it can be kind of difficult to feel comfortable enough with people to have the kind of conversations you’re talking about. So if you have people that look like you that makes all the difference in the world.

Crissonna Tennison

So when it comes to diversity and inclusion, what are some general patterns that you’ve noticed that have been productive, and some patterns that are not quite so productive at this time that you’re hoping might change?

Monica Parker

So let me talk about the not so productive patterns, right? So in the world of D&I, you sometimes can see what I call “check-the-box” exercises. So, for example, if everyone jumps onto the training bandwagon, training in and of itself doesn’t have the greatest return on investment. Here’s what you can do to be more productive: you can pair that with coaching, you can choose a particular area. So let’s say you want to do unconscious bias training when it comes to hiring practices, then you can do the training with folks who are involved. And you can provide coaching for those folks as they’re going through the hiring process. And then you can notice what’s working, what’s not working, continue to develop it and iterate it. And I think that’s how you shift from a not so productive practice or pattern to something that is more productive.

I think just telling people that you need them to do something, but then not giving them any tools to do it, is probably not the best approach. So for example, I mentioned feedback. We know it’s good. We know it’s important, but if people aren’t doing it, especially if you notice they’re not providing feedback to folks of color, you want to dig into that and you want to understand why and then offer some specific support around that.

Crissonna Tennison

I can see how that’s definitely something that comes up a lot. Leaning more into the feedback piece, that’s something that you speak a lot about. When it comes to feedback, these conversations obviously are not fun for most parties involved. Can you talk more about how you can navigate those conversations in a positive way, and what some of the benefits are of doing so?

Monica Parker

Sure. As you said, having feedback conversations can be difficult. And I can say this because I’m a lawyer, lawyers are often conflict averse. And so what happens is, you need to give this feedback, you know you do, you don’t want to give feedback because you’re worried about how the other person’s going to respond to it. So then you don’t do it, the behavior continues or gets worse. And you need to have this conversation. It ends up being this vicious cycle. Also, as we’ve talked about, if people tend to work with those that they like, or who look like them, then they tend to be more comfortable giving feedback to those folks as well. And let me just point out also, everyone’s very busy. And it can feel like giving feedback is one of those things that can take so much time. And “you know what, maybe it’s just better if I do it myself.”

Well, the challenge there is that if you’re not giving that feedback, then you’re not giving the person the opportunity to grow and to develop. And that’s the benefit of giving feedback. And then also as a way of showing your commitment to your employees too, if you’ve spent the time and the money to invest in them joining your firm, then you want to make sure you’re giving them the feedback that they need in order to be able to succeed there.

And I think that sometimes we think it’s going to take a lot of time to give that feedback. But it actually can take less time than you think. If you think about what you want to share, provide specific examples. Give the person the opportunity to ask questions, and then see how they do.

Crissonna Tennison

Unfortunately, I relate to the putting off things part. And what’s interesting about that is when you notice something that requires feedback early on, that conversation, it would seem, would tend to go a bit better than if you let it go on for a while and now you’ve built up resentment and the problem’s bigger. I can see how maybe creating a framework for doing it in a positive way might decrease the dread that might make you put it off. I can see how that can be really important.

Can you talk about some actionable tips that managers can take to provide feedback, maybe more routinely and in a more comfortable way?

Monica Parker

The first thing to do is to think about how you want to frame the conversation, especially if it’s making you nervous that you have to give this feedback and you’re worried about how the other person’s going to respond. So even a simple line, something you can remember and say easily, “I care about you and want you to do well here,” and then provide the feedback, it demonstrates to the other person, “This is about helping you grow and develop, and that’s important to me.” And I think that’s often what people want to hear when they’re on the receiving end of that feedback.

The second thing you want to do is share specific examples rather than talking in general terms. I can remember when I was a junior associate at a law firm and I received back work covered in red lines, you know, it looked like it was written in blood, just a marked up memo of my work. And the partner had put a handwritten note at the top of the memo that said, “Do better.” Who? What? What does “do better” mean? Some specificity would help. Now in my case, what I did is I went and talked with a more senior associate, to get a sense of what needed to be done to improve the memo. But being specific with your feedback is very helpful.

And then…it’s time to let the feedback sandwich go. Okay! The feedback sandwich is where you say something good, then you give them some other critical feedback, and then you say something good. The reason why it’s time to let it go is because everybody knows it’s coming. People are very savvy now. So they can tell when there’s a feedback sandwich in the works. And they can never actually hear the good stuff you’re saying because they’re waiting for that other shoe to drop where you tell them what’s not working. So why not just offer the critical feedback upfront? That’s one option. Another option is to ask the recipient, “What do you want to hear? Do you want to hear the feedback about what I want us to improve on first and then tell you what’s going well? Or the opposite?” You can ask!

Crissonna Tennison

Right as you said “it’s time to let go the feedback sandwich go” I was going to ask whether we should do the feedback sandwich, because I feel like if I received that paper that said “do better” with just a bunch of red marks I would shut down, at least at first. So yeah, there’s definitely room for being kind in the way that you do it.

Out of curiosity, when it comes to offering feedback, is it helpful if you’ve already developed some kind of a positive relationship with the person you’re giving feedback to? Can you speak to that a little bit?

Monica Parker

I think that’s a really good question. I think that to the extent there’s rapport and trust has been developed in relationship, it does make it easier to give that feedback because the recipient already knows that you care about them and knows that you want them to do well, and also hopefully feels comfortable asking more questions or sharing their perspective about whatever the situation is. With that being said, that can’t always be the case, right? If you’re just starting at an organization, if you’re a new person, building that rapport is going to take some time. Interestingly enough, I think if you were to give candid feedback, if you were to provide examples, if you were to do that in a timely fashion that would actually help you to build that trust and rapport, that will suit you further in the relationship as you go forward.

Crissonna Tennison

If you’re an employee, what should you be looking out for in terms of indicating that you’re not getting the level of feedback that you should be getting or that you deserve to get?

Monica Parker

If all you’re hearing is you’re doing fine, you want to dig deeper. It could be true that you’re doing fine. But it also may not be true that you’re doing fine. It could be that you’re working with someone who has difficulty sharing critical feedback or who’s very busy. And in that case, you’re going to want to dig a bit. Also, if you find yourself in your annual review, and you’re surprised by some critical feedback that you get, that’s an example that you haven’t been getting the feedback that you need, because what you hear in your annual review should never be a surprise, in terms of offering feedback. And it’s something that you want to offer regularly.

Crissonna Tennison

Would it be helpful for people to establish more frequent check-ins instead of the once a year, big one?

Monica Parker

It’s definitely helpful to establish regular check-ins. In some of my previous roles, I’ve had the opportunity to have a weekly or every other week check-in with the folks that I was supervising. And those are fantastic opportunities, not only for me to give feedback, but also for me to receive feedback. And again, that’s another way to build that relationship of trust and rapport. But if you’re doing this on a regular basis, even if it’s just a quick check, and a quick coaching session, you can catch a lot of things early and repair those things early as opposed to waiting until the annual review. By the time you get to the annual review, it’s actually too late. At that point, it really should just be a review of the year and then looking forward. So it’s very important to establish those regular check-ins again, even if they’re very short, for sure.

Crissonna Tennison

So I’m an employee, and I’m finding that I’m not getting the feedback that I think I deserve. What are some tips you have for an associate to proactively ask for that feedback if their supervisor hasn’t reached out recently, or may be dropping the ball in that area?

Monica Parker

I think a common mistake that people make is they just say “I’d appreciate any feedback.” And you may not get it when you ask that question. I think you want to be more specific than that. You could say something like, “Well, how would you have handled this?” Or “What would your approach with the client have been?” in case of an associate talking to the partner, or “I noticed you changed this point here? Will you tell me more about that?” Because when you’re asking very specific questions, you’re much more likely to engage the person in the conversation. And I think also sometimes being on the receiving end of critical feedback is hard for a lot of us, myself included. And so then you want to be prepared to take in what you hear. I often suggest that people take notes, because sometimes it can be hard to hear and taking notes can help you digest a bit better. And then also go find someone to process it with, someone who can help you understand the feedback that you received, you know, help you stay on an even keel. So those are some of the things that I would recommend.

Crissonna Tennison

That is really helpful advice. I can see how asking, “Oh, how would you have done that?” or “What was your thought process behind that?” makes it less about you, which makes it easier for everyone involved.

What can leaders do to ensure that people of color and other minoritized people feel comfortable being open about their experiences and evolving needs? I think you already spoke to this a little bit when it comes to building rapport, but is there anything else that you think would help?

Monica Parker

For sure, I think providing opportunities for underrepresented groups to share their perspective is really important. But then you have to take it a step beyond that. You have to be sure to look for ways to act upon what it is that you hear. And then there’s a step beyond that, where you then have to communicate that you’ve done so. So as an example, when I joined Bracewell, I did a listening tour. So I talked with over 100 attorneys about their experiences with diversity and inclusion at the firm. And then I had the opportunity to go to the partner retreat to present my findings as well as to make recommendations. And then from there, the D&I committee has spent its energy and time implementing those recommendations. So it’s really important, if you’re going to if you’re going to ask people to share about their experiences, you want to make sure that you’re demonstrating that you heard it, you’re trying to make an effort to do something with that feedback, and you’re making sure that they know that that’s what you’ve done.

Crissonna Tennison

Yeah, I can see that being helpful because it is a bit of emotional labor, sharing your feedback as a person of color or someone with a different experience, especially in a professional context. That can be a bit challenging, and it’s helpful to know that the other parties involved are also doing their part.

You talked a little bit about it, but what does a day in the life of a D&I consultant or leader look like? I’ve always been curious about that.

Monica Parker

I can tell you first, it’s always a mix, always. So for example, I could be talking with firm leadership about a strategic diversity initiative, I could be immersed in programming, I mentioned the feedback workshops. That’s something that I’ve designed and then delivered to the partners of the firm. There can be times where I’m meeting one-on-one with a partner or an associate to talk about an issue. Also Bracewell likes to collaborate with clients on diversity initiatives. So for example, we partnered with a client through our mutual summer programs where our summer associates of color got to meet with the clients of color, and then the General Counsel and members of the legal team for that client had lunch with all those folks and they got to talk about diversity and inclusion in that legal industry. So it’s always a fun mix of activities, it means that there’s never a dull day.

Crissonna Tennison

No, I can imagine there would not be a dull day in that area. So shifting a little bit, you mentioned that you used to work as an Associate Executive Director for a Seattle-based education nonprofit. Would you be interested in talking a little bit more about that and how it informs your current practice?

Monica Parker

Sure. At the education nonprofit we worked with students of color who are often the first in their families to go to college. So I got to see pipeline issues firsthand. Our students were rising fifth graders, and we worked with them all the way through college. And what I learned more than anything else is the importance of starting early, and then also looking for opportunities to continue to support the pipeline. But I think one of the major lessons was thinking about what it’s like to be the first. So not everyone has a parent or a family friend, or connections, right? Folks who went to law school or practice at large law firms or work for large corporations. Not everyone has that. They have a very different experience coming into a law firm, and that can be all new for an associate. And so it’s both recognizing the challenges for folks as you think about the pipeline issues, then it’s also about thinking about the challenges once that person enters a law firm. So that very much informs the work that I currently do.

Crissonna Tennison

It’s so easy to fall through the cracks. Do you have any D&I initiatives at Bracewell that you’re particularly proud of, or that have been particularly effective?

Monica Parker

I mentioned one of them, so let me dive a little bit deeper into it. I have a background in training folks on how to navigate difficult conversations, this came out of my work at Harvard Law School. And so I developed an interactive workshop on how to give feedback for the partners of the firm. And so what I’m doing in the workshops is I’m sharing a framework for how to have these conversations that allows you to prepare for them and hopefully navigate them with a little less anxiety and with more ease. And then we also talk about differences in feedback, that concept of how it can be easier to give feedback to someone who is like you or looks like you. And when there’s differences in feedback that can create some challenges.

So let’s say, for example, that a white male partner is wanting to give feedback to a woman of color associate. He might be worried that what he says can be perceived as sexist or racist, in which case he’s not going to share that feedback, he’s gonna say you’re doing just fine. So we talked about how differences in feedback can impact the relationship and the associate’s ability to grow and develop at the firm. And I think of the workshops too as a luxury for partners to have a dedicated span of time where they can just talk about delivering feedback and what’s challenging about it, and how to improve upon it. And also to hear about the experiences of their colleagues and know that they’re not the only ones navigating this and that it can be very difficult.

One of the things that’s funny to me about doing workshops, I’ve done training for lawyers, and of course, being a lawyer, I know what lawyers are like, and I know what we think about training. So one of my favorite comments was after a workshop when a partner came up to me and said, “I was skeptical. But this was good.” It’s a tough crowd! It’s a tough crowd.

I would also say that one of the things I’ve loved is that after the workshops, partners will request individual coaching. I remember one partner coming up to me right after the workshop and saying, “I’ve got a feedback conversation coming up with an associate and I’m worried about how the associate’s going to respond.” So we did some coaching on how to frame the conversation with specific examples on what to do with your own strong emotions that you might be experiencing as you’re giving the feedback. So the partner had that conversation with an associate and came back and told me that it went well and that the training was time well spent. That is high praise.

Crissonna Tennison

Honestly, I feel like if you can master the feedback conversation, especially in this kind of a high stakes environment, that has to be transferable to life. I feel like your communication skills would be through the roof. I would love to attend a workshop.

Monica Parker

You’re right. What I tell participants is, it will absolutely help you at work in terms of feedback with associates, it will help you in your work with clients, in your relationships with your colleagues; in general, it can help you at home as well with your significant other. The only folks that this material does not work on would be toddlers. They are quite skilled at difficult conversations and negotiation. I have lost every single negotiation that I’ve had with my nephew starting when he was a toddler and now his toddler sister. So forget it. It won’t work on toddlers but everyone else yeah, okay,

Crissonna Tennison

Well, we’ll just have the toddlers tell us how to communicate. They’re very clear with their needs.

So you wrote a book that was published by the American Bar Association, it’s called “What It Takes: How Women of Color Can Thrive Within the Practice of Law.” Can you talk a little bit more about what motivated you specifically to write that book and what you think readers might get from it?

Monica Parker

At the time, there was a study that the ABA had published called “Visible Invisibility,” and it was about how women of color tend to slip through the cracks at large law firms. There have been studies done on women, done on people of color, but women of color just weren’t in the mix. And so this particular report focused on women of color at large law firms, and I will say what I read was sobering, but absolutely necessary. And what I started thinking was, this was needed. I wonder if it’s possible to do a follow-up where we talk with women of color partners at large law firms who are doing well and see what we can learn from them. So I had a chance to conduct interviews with women of color partners across the country, which was wonderful. So we got a wide range of perspectives on what was working for them, what was challenging, and then lots of tips and tricks on how to be successful at large law firms. So it’s a fantastic read for associates, of course, but it’s also a great read for law firms as well.

Crissonna Tennison

Do you think it would be helpful to read even if you’re not a woman of color?

Monica Parker

Absolutely, it is. It’s useful for anyone to get perspective on what it’s like to be a woman of color. And interestingly enough, and probably not a surprise, but a lot of the advice offered there is valuable for anyone in any role, essentially. So yes, it’s a great read. If I do say so myself.

Crissonna Tennison

Oh, no, I love it. I believe you. And it’s good to advocate for yourself. So I will probably read it.

Can you talk a little bit more about what you feel the stakes are when it comes to developing diversity and inclusion practices in law? Like what do you feel like the larger stakes are?

Monica Parker

Well this one may be obvious, but it bears repeating: clients are wanting to see diversity in their legal teams. It’s going to vary from client to client. But we have seen this trend where it’s becoming increasingly important, and there are clients who absolutely demand diversity in their legal teams. And that’s something that’s not going to go away. So that’s a major stake. I would say also, firms, again no surprise, have invested a lot in their people. And so if you invested that much in your people, you want to retain your people, and you want them to succeed, and you want them to be fulfilled. Turnover is expensive.

I’d also say that you want to have a reputation for attracting diverse talent. And candidates for firms are asking about that. That’s something that I’ve noticed that’s also becoming increasingly the case, and not just candidates of color, but white candidates as well, because they want to work at a place that values diversity, equity, inclusion, and belonging. So if you want to attract the best talent, you want DEI to be top of mind.

Crissonna Tennison

I feel like I’ve been hearing that lately, that diversity issues are, in addition to all the other reasons why they’re so important, they’re also important when it comes to just the business elements of running a firm. Do you see any possible trickle down effects of diversity and inclusion in law affecting people in the broader world, like clients or just people who need legal services? Is that something that you think is relevant?

Monica Parker

It’s relevant, because as humans, we all want to see people who look like us. So if I’m a client of a law firm, I would like to see people who look like me working at that law firm, doing well at that law firm, whether it’s a client at a large law firm, you know, a medium sized firm, a small firm. That’s important too just because lawyers often are very involved in their communities as well. It’s important to see the representation match up with the community. So I do think it’s important for that to be there.

There are some of the standard arguments you may have already heard around how diverse teams perform better, have better results overall. So I think that just by nature of having that diversity, you bring a diversity of experiences to the table, and that’s at the end of the day going to be all to the good.

Crissonna Tennison

Do you have any final thoughts or messages to share for listeners or anything that you feel we should have asked or touched on that we didn’t?

Monica Parker

One final point: diversity, equity and inclusion is a team effort. So it’s not up to your DEI person or leadership to make things happen, although those are necessary, folks. I look at it as, D&I requires every person in the organization to be focused on making the workplace an inclusive space where everyone can achieve.

Crissonna Tennison

Yeah, I can see how in an office environment you have to work together to create an effective workplace. And that includes working together to build a more accessible, inclusive workplace where everyone feels comfortable to do their best work.

Thank you so much for coming on through and talking to us today. That was a lot of really interesting and good information. So yeah, thank you for coming and joining our show today and sharing your insights with us.

Monica Parker

Well, thanks again for having me. I enjoyed our conversation.

OUTRO 

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Top Legal Industry Highlights for November 2022: Law Office Hiring and Expansion, Industry Awards and Recognition, and the Latest Updates in Diversity and Inclusion

Happy Holidays from the National Law Review! We hope you are remaining safe and healthy as Thanksgiving rolls around. Read more below for the latest in law firm hiring and expansion, noteworthy industry awards and recognitions, and the latest news in law firm diversity, equity, and inclusion efforts.

Additionally, please be sure to check out the latest Legal News Reach podcast episode from the NLR: “What’s New In Law Firm Thought Leadership? with Alistair Bone, Vice President for Passle.

Law Firm Hiring and Expansion

Oblon, McClelland, Maier & Neustadt, LLP has added attorney Mark Nagumo as Of Counsel in the firm’s Chemical Patent Practice Group. Mr. Nagumo, who is a former U.S. Patent and Trademark Office administrative patent judge, has a great deal of experience in chemical research, particularly with regard to biomolecules, materials, and a wide range of other analytical techniques.

“We are thrilled to welcome Mark to our firm,” said Oblon Managing Partner Philippe Signore. “Mark is an extremely knowledgeable and respected chemical patent attorney whose many years of experience at the USPTO offers tremendous value and benefits to our clients. He is a great addition to our team.”

Polsinelli PC has appointed two new co-chairs of the firm’s Business Department: Jane Arnold and Kolin Holladay. Ms. Arnold, an experienced attorney in mergers and acquisitions, is based in the St. Louis office, where she currently serves as Office Managing Partner. Mr. Holladay, who also focuses his practice on mergers and acquisitions, is a Shareholder in the firm’s Nashville office.

“The selection of Arnold and Holladay as Business Department Co-Chairs reflects the firm’s long-standing commitment to inclusion, representation, and geographic diversity at every level,” said Chase Simmons, Chairman and Chief Executive Officer of Polsinelli. “Both are leaders who are highly respected within our firm and the industries in which they practice. Under their leadership, the Business Department will continue to create meaningful opportunities for our lawyers and clients, all consistent with our strategic priorities.”

James M. Tartaglia has rejoined Steptoe & Johnson PLLC as Of Counsel in the firm’s Charleston office. With a background in mineral title opinions and due diligence, Mr. Tartaglia joins the firm’s Energy Group , where he will focus his practice on energy contract law.

“We’re looking forward to having Jim back at the firm,” said Steptoe & Johnson CEO Christopher L. Slaughter. “His skill set and knowledge of the oil and gas industry strengthens our energy contracts practice and will be an asset to our clients.”

As of November 1st, 2022, Proskauer Rose LLP has promoted 33 of its attorneys – 25 to partner, and 8 to senior counsel. This class of promotions is the firm’s largest to date, and it includes attorneys from nine different offices around the world.

“We are delighted to promote this talented group of lawyers, whose values, entrepreneurial spirit and drive represent the best of the Firm,’” said Steven M. Ellis, Chairman of Proskauer. “We congratulate each of these new partners and senior counsel on this milestone and wish them continued success as they support our clients, secure historic victories, set precedents and serve as strategic partners.”

The following attorneys have been promoted to partner: Michelle AnneseKimberly BraunRyan CarpenterAliza CinamonGrant DarwinChristopher ElsonNolan GoldbergLaura GoldsmithOliver HowleyJohn IngrassiaPhilip KaminskiChristine LazatinShawn LedinghamMatthew LevyStéphanie MartinierRichard MillerBharat MoudgilAdam NelsonCaroline RobbinsCameron RoperBradley SchecterAdam ScollSean SpenceScott Patrick Thurman, and Harriet West.

The following attorneys have been promoted to senior counsel: Stephen ChukPinchos GoldbergAllison Lynn MartinJennifer RigterinkJurate SchwartzJennifer YangEdward Young, and Oleg Zakatov.

Frost Brown Todd has combined with California-based law firm Alvarado Smith, effective January 1, 2023. The combined firm will have more than 575 attorneys in 17 offices across nine states and Washington, D.C, with AlvaradoSmith’s addition providing strategic expansion into the Los Angeles, Orange County, and San Francisco markets.

AlvaradoSmith is known for successfully taking on matters and clients often associated with big firms, while FBT has the resources of a large firm with the culture of a boutique shop,” said AlvaradoSmith Managing Shareholder Ruben Smith. “That’s why we’re confident this combination will be an excellent fit, allowing us to grow our capacity and resources while still retaining our deep connection to clients and community. We look forward to a very productive future with Frost Brown Todd.”

“This merger is a natural next step and tremendous growth opportunity for both Frost Brown Todd and AlvaradoSmith,” said FBT Chief Executive Officer Adam Hall. “As one of the largest and most influential economies in the world, California intersects with every one of Frost Brown Todd’s practice groups and many of our offices. We know our clients will benefit greatly from the extensive knowledge and relationships that AlvaradoSmith attorneys have cultivated throughout the state for decades. We look forward to working with them as we significantly expand our presence in California and strengthen Frost Brown Todd’s preeminent industry teams.”

Legal Industry Awards and Recognition

Ballard Spahr has received 26 National Tier 1 rankings in the 2023 Best Law Firms and a total of 160 rankings across all Best Law Firms categories. Best Law Firms rankings are gathered based on surveys from clients and professional references. To qualify, a law firm must have one attorney who is recognized in the current edition of Best Lawyers in a Best Law Firms-ranked practice area or metro area.

Ballard Spahr received National Tier 1 rankings in the following categories:

  • Banking and Finance Law
  • Bankruptcy and Creditor Debtor Rights / Insolvency and Reorganization Law
  • Commercial Litigation
  • Copyright Law
  • Corporate Law
  • Criminal Defense: White-Collar
  • Employment Law – Management
  • Environmental Law
  • Labor Law – Management
  • Land Use & Zoning Law
  • Litigation – Banking & Finance
  • Litigation – Bankruptcy
  • Litigation – First Amendment
  • Litigation – Intellectual Property
  • Litigation – Labor & Employment
  • Litigation – Patent
  • Litigation – Real Estate
  • Media Law
  • Mergers & Acquisitions Law
  • Patent Law
  • Public Finance Law
  • Real Estate Law
  • Securities / Capital Markets Law
  • Securities Regulation
  • Trademark Law
  • Trusts & Estates Law

Lauren Wachtler, partner at Barclay Damon’s New York office, will be honored with the prestigious Hon. Shira A. Scheindlin Award for Excellence in the Courtroom by the New York State Bar Association’s Commercial & Federal Litigation Section. Ms. Watchler’s practice focuses on commercial and business litigation matters, and she advocates for women’s equality in the legal profession as well as mentoring and educating young attorneys.

The Scheindlin Award is presented annually on or around November 6, the date women were granted the right to vote in 1917 in New York state. “It is a true honor to receive the Scheindlin Award,” said Ms. Wachtler. “Judge Scheindlin was a gifted jurist and continues to be a role model for women in our profession.”

The award honors its namesake Shira A. Scheindlin, the Commercial & Federal Litigation Section’s former chair and former district judge for the Southern District of New York. Scheindlin said, “I extend my sincerest congratulations to Lauren for being selected to receive the Scheindlin Award. Her commitment to the legal profession and mentoring young women attorneys is truly inspiring and continues to grow year after year. Women litigators still face adversity in the courtroom; however, Lauren’s work will hopefully pave the way for future generations of women litigators.”

Foley & Lardner LLP has received the Corporate Citizen Award from the Three Harbors Boys Scouts of America Council, which seeks to honor a particular organization that exemplifies the Scout Law through community service and upstanding business practices. The award will be presented at the Distinguished Citizen Award Dinner in Milwaukee on November 17, 2022.

Foley was selected for its long-standing support of Scouting, as well as the firm’s significant pro bono support through Partner Peter Fetzer to Three Harbors Council. Mr. Fetzer is a partner in the firm’s Milwaukee office, where he focuses his practice on securities regulation, mergers and acquisitions, corporate governance and general corporate counseling to mutual funds, exchange traded funds, publicly traded investment advisers and public companies.

Diversity, Equity, and Inclusion in the Legal Profession

Womble Bond Dickinson attorneys Britt Biles and Stephanie Yarbrough have been selected for inclusion on Women We Admire’s 2022 Top 50 Women Leaders in the Law list, which celebrates influential and successful women in the legal field.

Ms. Biles is a Litigation Group Partner who played a key role in the federal government’s response to the Covid-19 pandemic. After her time as Associate White House Counsel and SEC senior enforcer, Biles became Senior Counsel of the Small Business Administration, where she was principal legal advisor to the CARES Act Administrator and an active participant in drafting guidance for the Paycheck Protection Program. At Womble Bond Dickinson, she focuses her practice on business litigation and government investigations.

Ms. Yarbrough is a Womble Bond Dickinson Global Board Member and Economic Development Team Co-Chair who has spent her two-decade legal career aiding economic development in the southeastern United States by helping domestic and international companies expand their operations to Charleston and surrounding regions. Yarbrough’s role in creating thousands of new jobs and billions in investments has led her to become an industry thought leader, speaking at local and national events and appearing in a 2017 New York Times article about Charleston’s economy.

Bradley Arant Boult Cummings LLP Partner Gary L. Howard has been selected to serve a one-year term as Vice Chair of the Defense Research Institute’s Diversity and Inclusion Committee. The Birmingham, Alabama attorney has been active with DRI for many years, previously serving as Diversity Expo Chair, Diversity for Success Seminar & Corporate Expo Program Chair, and Annual Meeting Steering Committee Member. Howard’s appointment comes on the heels of his 2021 Albert H. Parnell Outstanding Program Chair Award, which he received for creating engaging educational programming for DRI.

Mr. Howard’s 25-year legal career has seen him managing commercial litigation related to class actions, mass torts, contract disputes, insurance cases, and related matters. He has argued in state and federal courtrooms and is admitted to practice in more than ten states.

Moore & Van Allen have announced the creation of a new Civil Rights & Racial Equity Assessments Practice within their White Collar, Regulatory Defense & Investigation Practice. Fifteen of MVA’s most experienced investigative attorneys will harness the firm’s ESG, internal and cross-border probe, and human trafficking prevention expertise to conduct public-facing racial equity and civil rights audits. These reviews will assist businesses interested in improving their internal and external diversity practices.

Valecia M. McDowell, who will be leading the new practice, commented, “Our Civil Rights & Racial Equity Assessments Practice brings together our deep experience and bench strength in key areas to help our clients strategically assess their internal and external practices, programs, and policies to more thoroughly and thoughtfully address diversity, equity, and inclusion (DEI).”

Copyright ©2022 National Law Forum, LLC

July 2022 Legal Industry News and Highlights: Law Firm Hiring, Industry Recognition, and the Latest in Diversity and Inclusion

Thank you for reading the National Law Review’s latest in legal industry news – read on below for updates on law firm hiring and expansion, industry awards and recognition, and diversity and inclusion initiatives! We hope you are staying safe, happy, and healthy.

Law Firm Hiring and Expansion

Womble Bond Dickinson has announced its upcoming merger with Cooper, White & Cooper LLP, a multi-practice law firm based in San Francisco. Effective on September 1, 2002, the expansion will strengthen Womble’s presence in the Bay Area, with more than two dozen legal professionals operating out of the San Francisco area.

“California is home to some of the world’s key business and technology hubs, with San Francisco chief among them,” said Betty Temple, CEO and Chair of Womble Bond Dickinson (US). “The state – and indeed the entire West Coast – is strategically important to Womble, and we are thrilled to anchor our presence in the market through a firm that is well-known for its robust litigation and transactional skills. We look forward to continuing the growth of our services and footprint on the West Coast and in other key markets to provide greater value to our clients.”

“We have been impressed by Womble’s transatlantic platform and stellar reputation for advising companies on complex, high-stakes issues,” said Jed Solomon, a partner at Cooper, White & Cooper. “Combined with our cultural compatibility and shared commitment to exceptional client service, this was an ideal opportunity to expand our services to our collective client base.”

James W. Cox, MS, an experienced biologist and risk assessor, has joined Bergeson & Campbell, P.C. and The Acta Group as Senior Scientist. Mr. Cox, who has formerly served as an Acting Lead Biologist in Risk Assessment in the EPA’s Office of Pollution Prevention and Toxics and as a Biologist at the Department of Defense, has reviewed hundreds of biological agents, nanomaterials, industrial chemicals, and more to determine risks to human health and the environment. At the firm, he will continue to provide regulatory process guidance for products subject to the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), the Toxic Substances Control Act (TSCA), and other notable regulatory programs.

“James’s contributions to our practice areas come at a crucial time, given the considerable uptick in the need for risk assessment skills,” said Lynn L. Bergeson, Managing Partner of Bergeson & Campbell and President of Acta. “We are so pleased James has joined our team and look forward to introducing him to our clients.”

Varnum LLP has expanded its office in Birmingham, Michigan. With growing client demand and ongoing hiring, the firm has nearly doubled the size of its operations in the area in the last three years, featuring noteworthy practices in the fields of banking, finance, corporate law, M&A, intellectual property, and more.

“Since opening our doors in Birmingham three years ago, we have been thrilled with the reception from clients, legal talent and the community alike,” said Firm Chair Ron DeWaard. “Our newly expanded office will allow us to continue our growth trajectory with first-class space for clients and talent.”

Industry Awards and Recognition

Nick Welle, Partner at Foley and Lardner LLP, has received a 2022 Philanthropic 5 Award from the United Way of Greater Milwaukee & Waukesha County. Created by the organization’s Emerging Leaders Council, the award recognizes five notable leaders in the community, particularly ones that have made significant contributions of mentoring, volunteer work, or leadership to nonprofit organizations in the area.

Mr. Welle is the Chair of the firm’s Health Benefits Practice Group, as well as the co-chair of the Pro Bono Committee based in Milwaukee. Both at the firm and through community volunteer work, Mr. Welle has managed projects such as camp clean-ups, backpack drives, and clothing fundraisers in the area, dedicating hundreds of hours to the Boys & Girls Club of Greater Milwaukee. Additionally, he assists in running the Milwaukee Street Law Legal Diversity Pipeline Program, which aids high school students from diverse backgrounds in researching potential legal professions.

At the 40 at 50 Judicial Pro Bono Recognition Breakfast, Barnes & Thornburg LLP was honored by the Judicial Conference of the District of Columbia Circuit’s Standing Committee on Pro Bono Legal Services for its ongoing commitment to pro bono legal services. More than 40 percent of the firm’s Washington D.C.-based attorneys performed more than 50 hours pro bono work in the last year, and as such, the firm was made eligible for the recognition.

In addition, the organization recognized Barnes & Thornburg for being one of only six firms in which at least 40 percent of its partners in the Washington D.C. office reached the 50-hour marker.

Tycko & Zavareei LLP’s Sabita J. Soneji has been nominated to the Public Justice Board of Directors for a term that will last three years. Working against unchecked corporate power, ongoing pollution, unjust employers, punitive credit card companies, and more, Public Justice engages in impactful legislation to take on notable systemic threats to justice in the United States. Ms. Soneji, a Partner at Tycko & Zavareei, has nearly 20 years of experience in litigation and legal policy, fighting consumer fraud at both the federal and state level.

“I’m genuinely honored to be nominated to serve on the Board of an organization that tirelessly works to promote justice, diversity, and fairness,” said Ms. Soneji. “I’m even more excited to get to do that work with such an incredible group of devoted attorneys.”

Diversity, Equity, and Inclusion

Brittainy Joyner, attorney at Shumaker, Loop & Kendrick, LLP, has been accepted into the 2022 cohort for the Nonprofit Leadership Center’s Advancing Racial Equity on Nonprofit Boards (ARENB) Fellowship. Broken into six separate sessions, the ARENB program helps to advance the racial and ethnic diversity of nonprofit boards throughout the Tampa Bay area, ensuring these organizations are prepared and committed to fostering more inclusive cultures and environments. Ms. Joyner, a member of Shumaker’s Litigation and Disputes Service Line, focuses her practice on litigation and disputes for homeowners associations, as well as arbitration, mediation, and negotiation.

“We are proud that Brittainy got accepted into Advancing Racial Equity on Nonprofit Board Fellowship,” said Maria Del Carmen Ramos, Shumaker Partner and Diversity and Inclusion Committee Co-Chair. “At Shumaker, we understand the importance of promoting racial equity. We are happy to see our attorneys, like Brittainy, being committed to doing something about it. We know Brittainy will be a valued fellow.”

In celebration of 2022’s Pride Month, New York Times bestselling author and Pulitzer Prize finalist Dr. Eric Cervini joined Katten Muchin Rosenman LLP attorneys for a virtual conversation about the history of LGBTQ+ politics in the United States, as well as the continued battle for LGBTQ+ rights. The event was moderated by firm Partner J Matthew W. Haws, who is a member of the Lesbian and Gay Bar Association of Chicago and the National LGBTQ+ Bar Association.

With more than 300 anti-LGBTQ+ bills proposed this year across the country, Mr. Cervini acknowledged the community’s ongoing struggle. However, he noted “As I remind people, we have been through much worse. We have survived the inquisition, the Lavender Scare, the AIDS crisis, and Anita Bryant […] We can certainly get through this. But we need to be studying up, how we were successful and how we failed in the past and then also be recruiting new allies, just as Frank Kameny recruited the ACLU, we need to be recruiting new allies today.”

Darrell S. Gay, partner at ArentFox Schiff LLP, has been named one of Crain New York Businesses’ 2022 Notable Diverse Leaders in Law. Selected for his contributions to local counseling, pro bono work, and community service and philanthropy, as well as his commitment to diversity, equity, and inclusion initiatives, Mr. Gay is an experienced attorney, focusing his practice on the field of labor and employment. He assists in guiding clients through employee relations issues, as well as internal investigations and traditional labor matters.

In addition, Mr. Gay is a longtime leader in the private bar and the business community. He served for three years as the Commissioner for the New York State Civil Service Commission, and additionally played a central role in founding and leading the firm’s Center for Racial Equality.

Copyright ©2022 National Law Forum, LLC

Top Legal Industry News for Summer 2022: Law Firm Expansions, Industry Awards and Recognition, and the Latest in Diversity and Justice Efforts

Happy July from the whole team at the National Law Review! We hope you are enjoying the warm weather. Please read on for our coverage of the latest in legal industry news, including firm hiring and expansion, industry awards and recognition, and notable diversity and justice initiatives.

Law Firm Hiring and Expansion

Frost Brown Todd has added Member Sohan Dasgupta, Ph.D to its Business Litigation Practice Group. An experienced litigator, Mr. Dasgupta has represented clients before U.S. courts of appeals, trial courts, and the U.S. Supreme Court. His practice focuses on regulatory and compliance issues, investigations, and international law; previously, he served as Deputy General Counsel to the U.S. Department of Homeland Security and as Special Counsel to the U.S. Department of Education. In his new role, Mr. Dasgupta will continue advising on matters related to compliance, investigations, and regulation.

Hill Ward Henderson has added four new attorneys to its Tampa, Florida office:

  • David Keel, who joins the firm as Senior Counsel. Mr. Keel is an experienced construction attorney. He represents clients across the industry, including owners, developers, contractors, subcontractors and design professionals, in matters such as litigation, transactions, and the preparation and design of contracts.
  • Steven Cline, who joins as an Associate. Mr. Cline is a complex commercial litigator with a background in insurance claims. He represents clients in both state and federal court, with a particular emphasis on various types of business disputes.
  • Michael J. Farr, who joins as an Associate. His practice is focused on mergers and acquisitions, venture capital, joint ventures and partnerships, and general corporate advice.
  • Zoila Lahera, who joins as an Associate. Her practice is centered on commercial law matters and litigation, including land use, real estate, zoning, and estate disputes. In the past, she has defended lawsuits involving commercial landlord/tenant disputes, breach of contract, non-compete litigation, and more.

Drew Hirshfeld, an experienced intellectual property lawyer, joined Schwegman Lundberg & Woessner as Principal. Located in the firm’s Minneapolis office, he will draw upon nearly 30 years of federal agency experience, working in all areas of the firm’s patent practice, from prosecution and litigation to navigating USPTO policy. He will also act as an expert witness on USPTO-related issues.

Mr. Hirshfeld began his career as a USPTO Patent Examiner in 1994. In 2015, he was named Commissioner for Patents, and then served as Acting Deputy Under Secretary of Commerce for Intellectual Property and Acting Deputy Director. In 2021, he led in the creation and implementation of a new director review process for Patent Trial and Appeal Board final written decisions, a response to United States v. ArthrexManaging IP has listed him as one of the Top 50 Most Influential People in IP.

Law firm Davis|Kuelthau, s.c. continues its Trusts, Estates & Succession Team expansion with the addition of estate law attorney Andrew (Drew) MacDonald. Mr. MacDonald, a Founding Board Member and Past President for the charity Old Glory Honor Flight, will be located in the firm’s Appleton, WI office. He focuses his practice on issues related to estate administration, business succession, firearm trusts, and special needs planning. He also has a great deal of experience related to the planning of long-term care.

Legal Industry Awards and Recognition

David I. Brody, partner at Sherin and Lodgen, has been elected President of the Massachusetts Employment Lawyers Association (MELA) for 2022-2023. A member of the firm’s Employment DepartmentMr. Brody is an experienced litigator and advisor, representing clients before state court, federal court, and the Civil Service Commission, as well as advising executives on restrictive covenants, non-competes, change of control agreements, and more.

MELA is the Massachusetts Chapter of the National Employment Lawyers Association, the largest professional organization in the U.S. that is composed entirely of employment-focused attorneys. The organization seeks to improve advocacy, increase awareness, monitor key legislation, and support members who are devoting their practice to the representation of employees.

Shumaker’s Chief Marketing and Business Development Officer Erica Shea has been selected by Leadership Florida to join Cornerstone Class 40, a team of executives and professionals that collaborate toward the overall improvement of the state. Participants attend educational sessions on both leadership and relevant issues in Florida, and will remain connected through ongoing meetings once the program is complete. At the present moment, Leadership Florida has fostered a network of over 3,300 alumni, ranging from CEOs and elected officials to agency heads, hospital administrators, legal professionals, and more.

“It is exciting that Erica will have the opportunity to use her leadership skills to benefit our great state,” said Ron Christaldi, Shumaker Tampa Managing Partner and President/CEO of Shumaker Advisors Florida. “Erica sets a clear vision, and genuinely cares about people. Her passion and energy inspire us all.”

Don Eglinton, business and commercial litigation attorney at Ward and Smith, P.A., has been named to the Order of Juris, an honorary trial order of the Litigation Counsel of America (LCA). Comprised of Fellows who have tried to verdict at least fifty jury or bench trials, the LCA selects less than half of one percent of all American lawyers for membership. Fellowship is highly selective, allowed only through invitation and based on exhibited excellence and accomplishment in litigation at trial and appellate levels, as well as notable ethical reputation.

Mr. Eglinton is a Senior Fellow of the Litigation Counsel of America. His practice at Ward and Smith is primarily focused on commercial litigation, with particular emphasis on patent and trademark disputes, copyright infringement, and trade secrets. He has represented clients in infringement actions based in North Carolina, Texas, and California, as well as complex trademark and copyright actions in the Eastern District of North Carolina, and before the United States Trademark Trial and Appeal Board.

Diversity, Equality, and Justice in the Legal Field

After a grant from Venable LLP, the Mid-Atlantic Innocence Project (MAIP) has established a new support fund aimed at helping exonerees from Maryland, Virginia, and the District of Columbia after their release from prison. The Venable-Burner Exoneree Support Fund, named in part for client Troy Burner, will seek to provide job placement assistance, counseling, social services, and advocacy training for its recipients. Mr. Burner was represented by Venable attorneys Seth Rosenthal, Lauren Stocks-Smith, and MAIP co-counsel, who secured his full exoneration in March 2020 for a crime he did not commit.

“From its inception, MAIP has represented individuals with bona fide claims of actual innocence and advocated for changes in law and policy to prevent wrongful convictions,” said Mr. Rosenthal. “But MAIP has not had the capacity to provide comprehensive, direct support to its clients following their exonerations. Now it will. This new program is a game changer for the organization.”

Shawn Armbrust, MAIP Executive Director, said, “The adjustment to life outside prison is challenging for all returning citizens, but exonerees have suffered additional trauma and have needs that traditional reentry services – which often are not available to them – cannot address. Thanks to Venable, our clients will have the support they need to rebuild their lives and, if they desire, use their experiences to advocate for reform.”

La’Tika Howard, attorney at Womble Bond Dickinson, has been named to the National Black Lawyers Top 40 Under 40 list. An invitation-only development and networking association composed of noteworthy African American attorneys in the U.S, National Black Lawyers has a stringent list of criteria for recognition, including outstanding reputation among peers and the judiciary, notable achievements or settlements, nomination from leading lawyers in the field, and rankings by other leading evaluation organizations. Selection to the list is a high honor, limited to only the top Black lawyers under the age of 40.

Ms. Howard, who practices in the firm’s Baltimore office, focuses her practice on corporate law. She represents clients on matters such as private equity, mergers and acquisitions, due diligence, venture capital financing, and corporate governance.

This June, after efforts from the firm’s DEI committee as well as shareholder David GoldmanCMBG3 Law presented a $5,000 scholarship to a graduating high school student pursuing higher education. The scholarship, intended for an individual who is seeking a law degree but does not have the economic means to do so, was granted to a student at Central Falls High School in Rhode Island. Selected after an essay contest which detailed her hopes to pursue a law degree, she will be attending Brown University in the fall of 2022 as a freshman.

CMBG3’s newest scholarship initiative was born from two separate efforts: first, in 2021, Mr. Goldman was selected to participate in the Leadership Rhode Island program, in which he designed a social contract promising to give back to the local community. Simultaneously, the firm’s DEI committee was seeking additional opportunities to support high school students from disadvantaged backgrounds. Working together, Mr. Goldman and the committee developed the scholarship, and on June 6, 2022, Mr. Goldman was able to present the award in person.

Copyright ©2022 National Law Forum, LLC

Keeping Eyes Wide Open When New Members Join the Pack: A Cautious Approach to the Addition of New Business Partners

There are many reasons for business owners to consider adding new partners, including to secure additional capital, to add needed expertise to help grow the company, to bring family members or close friends to join in building the business and to put a succession plan in place. Adding new partners can, therefore, provide a boost to the company’s revenues, lighten the load carried by the founder, and put the business on course for long-term success.  But this decision is not without risk because the new business partners may create conflicts, disrupt the business and insist on making changes that put the company’s existence in peril.

If after carefully weighing the pros and cons, business owners decide to move forward in adding new partners, this post reviews important steps they can take to protect themselves and the business from the decisions and actions of these new stakeholders in the company.

Equity Ownership Can Be Conditional or Subject to Cancellation

One protective step business owners can take when adding a new partner is to make the addition of a new partner’s conditional or subject to cancellation. This approach permits the owner to wait to grant the ownership interest in the company to the new partner until he or she has met specified business goals by a certain date or to cancel the grant of equity to the new partner if the specific goals have not been achieved by the agreed date.

The addition of a new business partner is conditional when the partner does not receive equity in the business until the prescribed business goals are met. For example, if a new partner is tasked with generating new investments or growing sales for the business, the partner will not receive any equity in the company unless these business targets are met by the stated date. This conditional arrangement prevents a potential new partner from becoming an owner if he or she has failed to deliver on important goals right from the outset.

Under a cancellation arrangement, the new partner may receive equity in the company initially, but the grant of this ownership stake is subject to being cancelled if the set goals are not met. Using the example above, if the new business partner is tasked with raising funds or with increasing sales for the company and cannot meet these goals by a specific date, the equity grant will be cancelled automatically or it can be made subject to cancellation. In the latter case, the business owner has discretion to extend the time for the new partner to meet the specified goals.

The use of a conditional or “cancelable” approach to adding a new business partner gives the business owner an “out clause.” These are contract rights that authorize the business owner to avoid adding a new partner who has failed to meet clear and defined expectations.

Securing a Buy-Sell Agreement Is Essential

We have written frequently about the importance of a Buy-Sell Agreement, which gives the business owner the right to redeem the ownership interest of a new partner.  This is a key provision to permit the majority owner to exercise rights to remove an investor as an owner of the business who has become disruptive or even adversarial.  Absent a Buy-Sell Agreement, a business owner may be “stuck” with a minority investor who cannot be removed, and who is demanding access to financial records and who may also assert claims against the owner for alleged breaches of fiduciary duty.

To avoid this situation, business owners should secure a Buy-Sell Agreement with all of their new partners at the time they become owners in the company.  The specific terms and the issues associated with Buy-Sell Agreements have been discussed in previous posts [here] and [here].

Consider Confidentiality Provisions and Restrictive Covenants

New business partners may not be employed by the company, but they will likely receive access to the company’s trade secrets and other business sensitive information. For this reason, all new business partners should be requested to sign confidentiality agreements to protect all of the company’s confidential information. This confidentiality agreement should be in force, of course, while partners have an ownership stake, as well as for at least some period of time after they no longer hold any interest in the business.  A majority owner will not want to be forced to compete with former business partners who are using the company’s confidential information immediately after they sever ties with the company.

For this reason—avoiding competition with former business partners—majority owners may want to require their new business partners to also agree to non-competition and non-solicitation agreements as a condition of becoming new owners of the company. These may not be multi-year agreements, but it is not unreasonable for a majority owner to require former partners not to engage in competition for a period of 12-18 months after departing as owners of the company. A non-compete agreement may not be warranted if the new partner will be holding only a small stake of less than 10% of the company. But for partners who receive a substantial ownership stake in the business, the majority owner will want to consider requesting some type of non-compete and non-solicitation agreement with these partners.

Allow Competition by Owners

As a final note, Texas law permits the duty of care to be eliminated as fiduciary duty by officers, directors and managers and that duty should therefore be removed from the company’s governance documents.  Texas law does not permit company owners, however, to eliminate the fiduciary duty of loyalty owed by governing persons, but the owners can agree that each of them are permitted to engage in competition with the business and they can agree that certain officers or managers are not required to devote full-time efforts to the business. Therefore, if a business owner wants the freedom not to work full-time for the company and/or the owner is engaging in activities that may be seen as competitive by other company owners, the company’s governance documents should expressly provide for the majority owner to have this type of flexibility.

Conclusion

A majority owner’s decision to add new business partners to the company can rejuvenate the business by providing financial capital, critical new vision, and helpful support. But these new business partners may also challenge the owner and create disruptive conflicts that harm the company and its prospects.  Business owners should therefore be cautious when they decide to add new partners, and the addition of these new owners should be structured in ways that will ensure that the business remains successful.  If things do not work out, as a last resort, the Buy-Sell Agreement that the majority owner should obtain from all new partners will enable the owner to exercise redemption rights to remove these new partners from the business when their presence threatens the company’s continued existence.


© 2020 Winstead PC.

For more on business partner considerations, see the National Law Review Corporate and Business Organizations law section.

Profits Interest as Equity-Based Incentive: Keeping Your Team Motivated

LLC, Business Team, Equity based incentiveSay you own one-half of an LLC that is taxed as a partnership. You and your partner invested the initial capital that was necessary to get the business up and running, and you both built the business with the help of a few key employees. With the business still in the growth phase, you want to make sure that you motivate and retain these key employees who are helping you grow your company. What should you do? You and your partner might want to consider causing the LLC to issue the key employees a profits interest in the LLC.

What is a Profits Interest?

From a tax-standpoint, an LLC can issue two basic types of membership interests: capital interests and profits interests. A capital interest is an interest in a partnership or LLC taxed as a partnership that entitles the recipient to share immediately in the proceeds of liquidation. A capital interest normally results from a capital investment and provides recipients with participation in current and future equity value, a share of income, and distributions. When someone receives a capital interest in an LLC in exchange for a corresponding capital contribution, this is typically a tax-free event. When someone receives a capital interest in exchange for services, this is taxable compensation to the service provider.

Profits interests are distinct from capital interests, providing no current right to share in the proceeds of liquidation as of the date of grant. Instead, they typically only provide a holder with the right to share in those profits of the business that arise after the recipient acquires the interest. The primary goal of issuing profits interests is typically to give a service provider the ability to participate in the growth of the enterprise without incurring tax on the receipt of the interest, and to enjoy at least some long-term capital gain treatment (instead of ordinary income treatment) on proceeds they receive on a sale of the LLC or similar liquidity event.

Structuring a Profits Interests

Usually, as long as the profits interest is structured properly and capital accounts are booked up on entrance of the profits interest member, the IRS should not treat the grant of a vested or unvested profits interest as a taxable event. Most practitioners design profits interests so that they meet IRS safe harbor standards for ensuring profits interest treatment. These standards include:

  1. The profits interest must not relate to a substantially certain and predictable stream of income from the entity’s assets, such as income from high quality debt securities or a net lease,

  2. The recipient of the profits interest must not dispose of it within two years of receipt, and

  3. The profits interest may not be a limited partnership interest in a publically traded partnership.

The issuing entity’s partnership or operating agreement should be closely examined upon the issuance of a profits interest. Things to consider with respect to newly issued profits interests include whether such recipients should have voting rights similar to that of members who contributed capital to the enterprise. Additionally, the agreement should be updated to clearly define how the profits interests will be valued relative to capital interests under current buy-out or redemption provisions. Oftentimes, practitioners ensure that a profits interest has no right to share in liquidation proceeds on the grant date by valuing the company as of that date, and providing that a profits interest holder will not share in distributions except to the extent a threshold established based on the value is exceeded. Also, booking up capital accounts is generally critical to ensuring that the profits interest does not entitle the recipient to any proceeds of liquidation if the entity was liquidated on the grant date.

To the extent the profits interest issued is unvested at the time of issuance, most practitioners opt to make an 83(b) election to ensure tax-free treatment upon receipt. When a profits interest is issued, it has no value. If the profits interest is vested, there is no question that it is taxed at the time of receipt, at $0. Unvested property is taxed at the time of vesting, on the property’s value at the time of vesting. Hence, if the profits interest has appreciated in value since the time of grant, then there would be ordinary income at the time of vesting. To avoid this treatment, recipients of profits interests can make an 83(b) election, which is an election to treat the profits interest as vested for tax purposes at the time of grant and to be taxed on the value of the profits interest at the time of grant. There is some IRS guidance that states that an 83(b) election is not necessary. However, that issue is beyond the scope of this article and a so-called “protective 83(b) election” is usually still made to assist in easing the minds of profits interest holders who want to ensure that the interest is not taxable when it vests.

Tax Consequences of a Profits Interest

The recipient of a properly structured profits interest is not taxed on receipt because the IRS views the profits interest’s value as $0. Because the profits interest is treated as having no value, there is no deduction that corresponds to the issuance of the profits interest for the entity. The profits interest will be treated as having a $0 basis, and no capital account. Going forward, the recipient should be treated as an equity owner under the terms of the governing partnership or operating agreement for the entity starting on the date on which the profits interest was granted. The recipient should receive a K-1 and pay taxes on income that is passed through from the entity. Capital accounts should be adjusted accordingly, just as is the case for any other member.

The Future of Profits Interests

The history of how profits interests are taxed is riddled with controversy. In addition, politicians continue to discuss the desirability of profits interests (also sometimes called “carried interests”), in the context of private equity and hedge funds. However, the foregoing analysis reflects the IRS’ stated position on profits interests based on several Revenue Procedures that were issued to address the topic pending additional guidance. Until the IRS or Department of Treasury issues additional guidance, the current rules will generally remain applicable to small businesses and startups who are issuing profits interests.

Overall, profits interests are a unique and creative way to give people who are rendering services to the LLC or partnership a stake in the enterprise. They can generally be viewed as similar to options, except that they also provide the holder with a stake in the losses of the entity. With the increasing use of LLCs for startup operations, the use of profits interests as an incentive compensation mechanism has grown in the past years.

ARTICLE BY Katie K. Wilbur of Varnum LLP

© 2016 Varnum LLP

Using Phantom Equity to Grow Your Business: Pros and Cons

phantom equityThis is the second article in a series examining when an entrepreneur should consider granting equity or equity-like interests in his or her company, and if so, how to properly structure that equity or equity-like grant.  To view the first article in this series, please click here.  Today’s topic: Phantom Equity.

Phantom Equity Overview

Phantom equity is an equity-like grant that is tied to the underlying value of a unit (if the company is an LLC) or a share of stock (if the company is a corporation) in the company. More often than not, phantom equity is granted pursuant to a phantom equity plan, with individual phantom equity agreements for each of the applicable employees/executives.  The individual phantom equity agreements will likely have some customized terms for each particular employee (number of units, vesting schedule, etc.), while other terms are usually standard across each of the phantom equity agreements (rights to certain payments, forfeiture upon termination, rights to certain information, etc.).

An example may be helpful.  Let’s assume there are 100 units issued and outstanding to the members of an LLC prior to creating the phantom equity.  Then, 10 “phantom units” are granted to key employees pursuant to a phantom equity plan.  The end result is that the phantom unit holders would receive an amount equal to 9.09% (10 units out 110 units total) of certain payments made to the real unitholders (the holders of the 100 units) of the company.  The key fact to remember is that these phantom units are not actual units of equity in the company, but they are counted as if they are actual units for purposes of certain payment or events of the company.

Vesting

Generally, phantom units or shares are not paid for by an employee, but instead vest over time in exchange for the employee continuing to work full-time at the company during such vesting period.  Typically, I see a one year cliff (from the first date of employment), then vesting in monthly or quarterly increments over the following two to four years.  The one year cliff (meaning, no vesting occurs during the first year of employment) is done to protect the company from granting phantom equity to employees that leave the company for whatever reason within their first year of employment.  Sometimes, an employee that is granted phantom equity will negotiate partial or accelerated vesting if the company terminates the employee “without cause.”  This is typically not granted by most companies, but every situation is unique and I have seen it negotiated and granted to a few individuals.

Eligible Payments

A phantom equity holder will be entitled to payments in connection with certain triggering events.  These triggering events will be set forth in either the phantom equity plan or in the phantom equity agreement.  There is great flexibility for a company in designing their own particular phantom equity plan and what payments the phantom equity holders participate in.

The most company-friendly plans only provide for a payment in the event of a change in control transaction (i.e. the sale of the company).  This means any dividends that flow to members or stockholders of the company (not otherwise in connection with a change of control transaction) will not be shared with the phantom equity holders.  For example, if a company has 100 shares issued and outstanding to its shareholders and 10 phantom shares issued to is phantom equity holders that do not have a right to participate in dividends, and the Company is going to dividend out $1,000,000, then the holder of each share of stock would receive $10,000 per share ($1,000,000 split amongst 100 shares), while the phantom shareholders (10 shares) would receive nothing.  If a phantom equity plan is structured this way, the clear message to the phantom equity holders is that they will only share in the success of the company if the company is ultimately sold.  Phantom equity holders should understand the risk that he or she may not work at the company when it is sold, and therefore it is likely that such phantom equity holder will not receive any benefit from the phantom equity.  This is because phantom equity is often contractually forfeited by the employee when he or she leaves the company.  This allows the company to issue new phantom equity to future hires without further diluting payments made to real equity holders.

Valuation Hurdle/Phantom Appreciation Rights

Another key feature typically found in phantom equity grants is the concept of a valuation hurdle, or what is sometimes referred to as a “phantom appreciation right.”  If a company has been in existence for a few months or longer, then the company likely has some ascertainable “fair market value” greater than zero.  Let’s assume that a company’s fair market value is determined to be $5,000,000, and this company now desires to grant phantom equity to certain employees.  If there is a valuation hurdle in the phantom equity plan or agreement, then the phantom equity holders only share in the value that is created (based on their phantom equity percentage) that is above $5,000,000.  Using this same example, let’s assume the company is sold three years later for $10,000,000 and there are 100 units of real equity issued and outstanding and 10 units of phantom equity.  In such example, the real equity holders (100 units) would receive all of the first $5,000,000 of proceeds from the sale, and then the next $5,000,000 would be split 90.91% to the real equity holders and 9.09% to the phantom equity holders (per the math at the beginning of this article).

No Ownership Rights/Control 

From the company’s perspective, it is important that the plan and/or phantom agreements very clearly spell out that phantom equity does not grant any rights to the holder that would be typically granted to a normal equity holder under law.  This provision should explicitly state that the phantom equity holder has no voting or decision making authority with respect to the company in connection with being granted phantom equity.  It should also limit the rights of the phantom equity holder to demand certain information (financial or otherwise) from the company.  Conversely, if you are the person being granted phantom equity, you should consider negotiating certain information rights into your phantom equity agreement.

Tax Implications

Whether phantom equity or phantom appreciation rights are being granted, the tax situation is generally the same for the company.  Generally, payments made by a company in connection with phantom equity or phantom appreciation rights are deductible by the company at the time the payment is made.  Regardless, always be sure to discuss the tax consequences with a tax advisor before granting phantom equity or phantom appreciation rights.

Conversely, and as a big disadvantage to the employee being granted phantom equity instead of real equity, payments received by phantom equity holders are taxed as ordinary income.  The difference between ordinary income and capital gains (which typically would apply to certain payments made to true equity owners) can add up to thousands (if not millions) of dollars of additional taxes paid by the employee if the company has a successful exit event.  However, in positive news for the recipient, no taxes should be due by the phantom equity holder upon his or her receipt of phantom equity.  With respect to true equity issuances, the recipient will likely owe tax on the fair market value of the equity received, unless such equity was actually purchased by the recipient for fair market value.

General Pros and Cons

There are a number of reasons phantom equity may make sense for a company as compared to other types of equity and equity-like plans.  Below are a few final points to think about as you decide whether or not phantom equity may be a viable option for your company:

Pros:

  • It allows certain key employees to share in the growth and success of the company while existing equity owners are not explicitly diluted and do not give up any control.

  • May serve as a golden handcuff to keep key executives from looking at other job opportunities.

  • Employees do not need to actually purchase the phantom equity; in other equity plans, the employees will likely need to purchase the equity at fair market value or have to pay tax on the fair market value of the equity that they receive.

  • There is a great deal of flexibility that can go into the phantom equity structure.  The phantom equity can mirror true equity almost completely (participate in dividends, etc.), or it can be very limited (participates only in a change of control event, with a valuation hurdle).

  • If structured correctly, phantom equity can easily be forfeited without penalty to the employer or the employee if the employee leaves the company.

            Cons:

  • If structured poorly it can lead to extremely bad results, including the permanent dilution of existing shareholders or unit holders, and/or the forced disclosure of sensitive information to individuals no longer working at the company.

  • May require a valuation of the company by an outside accounting or valuation firm.

  • May not be as attractive to a key employee because it is not real equity, and the company usually has the ability to terminate the employee and consequently extinguish the phantom equity.

  • 409A (deferred compensation) issues can add complexity to structuring and achieving the intended objectives of the company and the employee recipients.

Summary

When structured correctly, phantom equity is an excellent option for both companies and key employees.  As I like to tell clients, granting phantom equity is somewhat akin to dating before getting married – there are clear benefits to both the employee and employer in putting a phantom equity plan in place, but if it does not work out, both sides can walk away with minimal, if any, strings attached.

© Horwood Marcus & Berk Chartered 2015. All Rights Reserved.

May 28th – NAWL Pipeline to Equity Partnership Program, Chicago

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The National Association of Women Lawyers (NAWL) and Chicago’s Coalition of Women’s Initiatives in Law are joining forces to help usher the next generation of women law firm leaders into place with a program entitled Pipeline to Equity Partnership (P2P).  The program will be held at Loyola University Law School from 11:30 AM to 5:00 PM, followed by a networking reception.   P2P is aimed at women on the brink of equity partnership, in either a one-tier or two-tier law firm system.  This is the third presentation of NAWL’s P2P program nationwide, and its first time in Chicago.

The P2P program is an attempt to move the dial on the numbers of women in law firm leadership by offering a forum to identify and discuss challenges women face as they reach for the top.

The P2P program will begin with a luncheon presentation from Andrea (“Andie”) Kramer, a partner at McDermott Will & Emery.  Andie Kramer is well known as a longtime motivating force in the effort to both advance more women to leadership roles and equity partnership in law firms and to ensure that women are fairly compensated along the way.  She is a founding member of McDermott’s Diversity Committee, and chair of the Gender Diversity Sub-committee.   Andie previously served on both the Firm’s Management and Compensation Committees.

The P2P program will continue with facilitated roundtable group discussion of multiple issue-based scenarios that women face in their journey towards equity partnership.  Discussion will focus on real world experiences such as the departure of a young partner’s sponsor, the loss of previous opportunities for business pitches, handling ethical issues that used to be handled by superiors, the reluctance of a new partner’s colleague to address a client conflict, flexibility and perception of work ethic, or perhaps the overloading of a new partner with uncredited firm administration.

The scenarios will be familiar to attendees and presenters, and will offer an opportunity for both a unique, peer-to-peer discussion and the counsel and perspective of a resource panel of distinguished women law firm leaders, who will offer their counsel and advice.  The panel consisting of law firm leaders, managing partners, and general counsel includes Susie L. Lees, Executive Vice President, General Counsel & Secretary of Allstate Insurance Company, Jennifer A. Kennedy, Managing Partner of Chicago office, Locke Lord LLP, Amy B. Manning, Managing Partner of Chicago office, McGuireWoods LLP, and Angelea Ulum, Co-Chair, Partnership Promotion Committee, Mayer Brown LLP.  The panel will be moderated by Margo O’Donnell, President of the Coalition of Women’s Initiatives in Law and Shareholder at Vedder Price, and Maureen M. Reid, President of Maureen M. Reid, LLC and a co-founder of the P2P program.The resource panel will offer advice for handling the scenarios discussed in the roundtables and will answer attendees’ questions about navigating the way to equity partnership.

Program participants will leave the program with a much better sense of what roadblocks may exist on the path to equity partnership and how to overcome them.  Those interested in registering for the P2P Program can get all of the information and register at http://www.nawl.org/p/cm/ld/&fid=168.