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Where Were the Lawyers?

Posted in Litigation Shorts

Guest blogger: Evan Slavitt is general counsel at AVX Corporation. He is also the publications chair and cybersecurity subcommittee chair of the ACC Litigation Committee. He can be reached at evan.slavitt@avx.com.

I just saw “The Big Short.” It was a good explanation of the mortgage meltdown and reasonably enjoyable as a movie. But it raised the question — where were the lawyers?

Perhaps as an inside counsel, I was overthinking the situation. After all, there is only a limited amount of drama anyone can squeeze out of a conversation between inside counsel and the corporate client, which carefully explores the risks of a new financial product or the fiduciary duty that a bond trustee owes to the holders. Thus, the only appearance of in-house counsel is to be yelled at by the protagonists.

Nonetheless, I caslavitt-evan-3nnot help but believe somewhere along the line, quite a few in-house counsel failed to do their jobs. It is clear that the sellers of these complex instruments either did not understand their own products or did not explain the risks to the purchasers. It is also clear that a number of key performers — both regulators and private entities — just didn’t do their jobs.

It should remind us that in-house counsel have — and should have — obligations not just to the people we deal with every day, but to the institutions for which we work. On any given day, the corporate officers have one eye on their stock price (or owner’s value for private corporations) and one eye on their own compensation and incentives. If they have time — or a third eye — they track the performance of those who work for them. They cannot focus on the long term, the interests of the entity as a whole, or sometimes conflicting interests of customers, the market, and society.

Directors, even good directors, relate to the enterprise only on an intermittent basis. That leaves it up to inside counsel to be the day-to-day protectors of all these interests. At least during the film’s time period, and in those corporations, many counsel appear to have lost track of this obligation.

These obligations are neither easy nor comfortable. Candidly, there are times when I struggle to find the right balance. That does not, however, give us license to ignore or even postpone considering them every day that we come to work.

For those of you who have seen the movie, I would be interested in your reaction. If there are enough comments, I will summarize them and revisit this in a later post.