By now, you know that Yahoo has allegedly been cooperating with the U.S. government at an unprecedented level with broad scans of customer emails. The EU is clearly not amused. I expect Verizon is thinking really hard now, given that this comes after the massive Yahoo breach reported earlier (a breach that could have been massively understated), about running away from an acquisition, and I expect that there is at least one clause in its purchase agreement that should allow it to do this. However, the part in all of this thatI want to focus on is the role that Yahoo’s legal counsel played. Reuters reported that Yahoo’s counsel allegedly advised Yahoo to not fight the U.S. government’s invasive request, even though the industry practice up until that point was to resist and fight these requests for access; Apple’s fight over breaching an old iPhone was the most visible.
Given that I, and firms I’ve worked with, have incurred massive avoidable costs, both business and legal, as a result of bad legal advice, I think it is important to talk about when you need to fire your firm’s legal team. I expect much of this likely could apply to your personal representation, as well.
Legal Counsel Telling You What You Want to Hear
One of the most expensive practices I’ve seen with attorneys is the tendency to tell you what you want to hear, rather than laying out the case and having you make a decision rationally. When two entities enter into a conflict, one is going to lose, yet both often believe they have the winning case. If you know you are exposed in a legal matter, there are tactics you can use to improve your position during settlement negotiations, but if you believe you are going to win, you are likely to conclude that the judge is biased, the other side is cheating, or that if you just hang in there long enough, eventually you will win. The entire effort becomes a money hole. You may, after having your odds disclosed, decide to proceed, it is your nickel. But if you are led to believe that you can’t lose when, in fact, the odds are against you, you’ll have been denied that decision and are likely to end up far worse off than if you’d settled at the outset.
Legal Counsel Not Doing What You Ask
One of the biggest problems with corporate attorneys, particularly older ones, is that they learn there is no risk to saying no. So they say no a lot. Recall that when Apple wanted the name “iPhone” and it was owned by Cisco, Steve Jobs just took it, and his legal team executed so he could keep it. It turned out that doing this was surprisingly inexpensive. And, as the Apple Watch showcased, the Apple Phone likely would not have sold anywhere near as well as the iPhone. When Dell and EMC decided to fully plan a merger before approval, there undoubtedly were objections raised by both legal teams, but they didn’t stop the practice. In the end, this is the best large merger that has ever been attempted. There are always risks; the team you want is the one that helps you get to your goals safely and assures success, rather than becoming an unpassable obstacle you can’t overcome.
Legal Counsel Being Afraid to Engage
Fear of engaging was likely the problem with Yahoo’s situation but I first ran into it decades ago with Toshiba. In that case, the company was being braced by a patent troll and settled for over 2 billion dollars. The other OEMs fought and prevailed, though their fight was harder because the troll, thanks to Toshiba, had a massive war chest. Some attorneys realize that it isn’t their money and that it is far less work and risk if they just settle, even though, until you actually do discovery, you often don’t really know enough to decide whether to fight or capitulate. Now, in situations like Yahoo’s, the government can apply unique and unusual pressure because it knows and is willing to use things that others aren’t. But regardless of the cause, the recommendation should have been overridden by management, suggesting, in hindsight, that the legal representation was inadequate.
Wrapping Up: The Real Purpose of Legal Counsel
I think there is a general misconception regarding legal support in many companies. The purpose isn’t to prevent risk as an absolute because that would badly damage the firm’s ability to execute. It is to assure that the least risky path is taken to achieve a viable goal and that the firm can be rigorously, legally and effectively defended if attacked. Like in any job, some people are really good at this and some, for whatever reason, aren’t. In addition, different cases require different skill sets. Generally, a specialist will perform better in a protracted action than a generalist, which is why staff attorneys will hire litigators from outside firms if they have to go to court.
In the end, you need someone who has you, or your firm’s, best interests at heart, has the right skill set, and can prioritize what you need done over their own need to reduce personal risk or effort. I think Yahoo likely is an example of what can happen if your representation isn’t up to snuff. You have to wonder if this alleged unprecedented access (Yahoo is sort of disputing this story now) and the earlier unprecedented breach aren’t in some way connected. We’ll leave that for another time.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+