December 11, 2013 Articles

Mark Califano of American Express Answers All Our Questions

And for only 25,000 membership rewards points.

By Zachary G. Newman – December 11, 2013

The Corporate Counsel Committee’s Zachary Newman sat down recently with Mark Califano, senior vice president and managing counsel at American Express, the largest card issuer by purchase volume with a worldwide network that processes millions of merchant transactions daily. American Express has over 102 million cards-in-force, and has 63,500 employees stationed worldwide and providing services to over 130 countries.

Mark is charged with the responsibility of overseeing all major litigation, significant investigations, and other sensitive legal matters within the company, as well as developing and monitoring legal policies and various legal reporting systems within the company. He shares with us his views and advice on legal project and case management, maintaining outside counsel relationships, and other related topics.

We thank Mark for his time, and especially express our gratitude to American Express, a loyal downtown Manhattan neighbor that promotes corporate responsibility and has significantly contributed to our efforts to rebuild after 9/11 and to memorialize all those who were lost, including American Express employees.

With that, we turn to Mark.

 

How long have you been with American Express? Tell our readers about your background.
I have been with American Express for two years now and enjoy it immensely. Prior to that, I was the head of litigation at GE Capital, which was one of the largest diversified financial services companies in the world, operating in over 35 countries. Before that I served as an Assistant United States Attorney, investigating and prosecuting public corruption, corporate and securities fraud, domestic and foreign bribery, terrorism, intellectual property, and a range of cyber offenses that spanned more than a dozen countries and five continents. Following the U.S. Attorney’s Office, I served as the chief legal counsel to Paul Volcker in the independent inquiry into the United Nations Oil-for-Food Programme, a global investigation of corruption in that program. At the start of my career, after graduating from Duke University School of Law, I clerked for Judge Stanley Sporkin in the U.S. District Court, District of Columbia, and was associated with Skadden Arps.

Explain the composition of your staff and a day in the life of Mark Califano.
Our litigation department is staffed with ten lawyers, eight paralegals, and three administrative assistants. The staff sits in our New York headquarters and in Florida. We work with an exceptional group of e-discovery, data-forensic, and law-enforcement professionals in our global-security and information-technology departments. American Express has a considerably larger legal and compliance staff, with over 600 in compliance and over 200 in legal. Most of these lawyers and professionals are stationed throughout American Express offices in New York, London, Australia, and other major commercial markets.

I oversee and am responsible for investigations, litigation, arbitrations, and pre-litigation disputes across the company. My daily responsibilities vary, although my day is largely consumed with supervision of ongoing matters, working with my team and outside law firms, supporting our business counsel and subject-matter experts, and communicating with senior management and various business clients. My calendar is usually filled with meetings and phone calls.

Let’s focus on effective management tips for a bit. What have you found to be the most effective way of managing legal staff and successfully strategizing, monitoring, and reporting legal issues internally? 
It starts with the make-up of the team. We recruit litigators that have extensive trial and litigation experience in federal and bankruptcy courts, experience in customer-facing businesses, solid communication skills, and, especially, good judgment. They are the bedrock of everything we do in our company. The senior counsel on the team have significant business experience, and I rely heavily on them to supervise and support not only our in-house lawyers but our outside counsel.

Our in-house litigators actively manage investigations, pre-litigation disputes, and litigation, and work directly with the impacted business and the business lawyers assigned to that business. They have frequent conversations with outside counsel and our internal clients to discuss matter status and objectives. They conduct real-time assessments and analyses at the outset of a matter and at appropriate intervals thereafter, and communicate these to our clients and our business-counsel colleagues.

Our practice requires each lawyer on the team to exercise a fair amount of autonomy and initiative in assessing problems, formulating legal strategy, and providing advice. That does not mean we do not collaborate and communicate among ourselves and our colleagues. We meet every two weeks to talk about specific cases and matters, share ideas and resources, and invite other colleagues to share their expertise and experience. Our industry is extremely dynamic and is evolving rapidly, and the learning curve will always be steep. Each of us pushed to reach out and work with our colleagues, who have deep experience in payments, antitrust, bank regulation, privacy, securities, corporate governance, and travel services.

We rely heavily on litigation management and e-billing technologies, and we have found that the systems we use are very valuable in cost and performance management. We require that legal matters be managed substantively by our firms through these systems. Our outside counsel are responsible for the daily management of the respective matter, and ensuring that each stage is pursued in alignment with our business and legal objectives. We regularly review litigation budgets, burn rates, and forecast legal spend. Requests for rate adjustments are reviewed closely. The goal at the outset of every matter is to identify clear objectives, develop a sound plan to attain those objectives, and establish a budget that allows us to execute the plan.

We also have strong relationships with a number of our outside counsel. We work very hard through competitive processes to identify and select firms we believe have the expertise and capability to represent us. A number of our firms have become terrific partners, not only in the matters they work on but in helping improve our performance, substantive knowledge, evaluation of market and legal developments, and supporting our businesses. And with very rare exceptions, all have been willing to work through our processes and systems.

What types of resources could outside counsel offer you today that immediately would alleviate a concern, responsibility, or some pressure?
If they have financial managers who help them prepare case budgets, then have them work directly with us when they prepare case budgets. If a firm makes use of the data they gather on their work across clients and matters (and they should), they could provide valuable assistance in managing case and matter budgets. Even with bet-the-house litigation, financial planning is far more important today than it was a few years ago, before the credit crisis. Litigation, historically unpredictable, no longer gets a pass in corporate financial planning, and firms must be ready to assist. Not all firms are willing to do this. When they do, it builds trust and helps relationships grow and last. When they ignore a client’s need for cost management in this area, the relationship suffers and is unlikely to last.

We receive too many emails and communications that can and probably should wait until a more appropriate time. As I mentioned earlier, we hold regular meetings with outside counsel. Given the overwhelming amount of email we receive, we would much rather outside counsel find another way to communicate nonemergency updates, thoughts, or inquiries. It would be far more effective if they took the time to learn our business and discover our issues and pressure points and to consider and react to those. This will give us the opportunity to absorb and respond to nonurgent issues.

Another way outside counsel can alleviate pressure and earn lasting appreciation is to take the time to understand and comply with our practice guidelines. Operating in an industry that is heavily regulated, we and our business clients are required to maintain accurate and up-to-date records—budgets, timely and detailed billing records, and all matter filings, decisions, and substantive communications. The company relies on these records to manage its portfolio of litigation and investigations, its costs, and its risk exposure.

We need to see written work, particularly anything that is to be filed in court or with an agency, as far in advance of the filing date as possible. In most instances, substantive work must not only be reviewed by in-house litigation counsel but also by business counsel, subject-matter experts, and the business client. Sending a draft filing without notice and two days before filing causes an unnecessary fire drill and may not allow the review needed. Filing dates should be pointedly and promptly conveyed to our team, and counsel should make sure in-house counsel understands the import of any scheduling issues.

Do you see in-house law departments assuming more proactive roles in pending litigation?
Absolutely. Litigation, especially in the United States, has become increasingly complex and its consequences more broad-ranging. Law departments must have the requisite litigation experience and capability to ensure that a company gets effective and efficient representation. The complexity of corporate processes and operational structures demand it. And the increasing demands for cost control require significantly increased attention by legal departments.

Our in-house litigators competitively select the best outside counsel for the case (in terms of capability and cost); assess the merits of the matter and the options available to defend and resolve it; ensure that the advice is clearly communicated to the client and that the client determines how it wants to defend or resolve the matter; defend or resolve the matter in an ethical manner in accord with the client’s direction; assess the effect of the litigation across all business operations; and work with legal colleagues and the businesses to address any risk identified. Litigators here do not simply “mind” the matter. Rather, they are expected to identify the impact of the problem on our business units and processes, coordinate with their colleagues who manage those areas, and solve the problem. In-house litigators are often in the best position to understand whether a particular strategy has broader implications for the company.

When lawyers come in from private practice to an in-house litigation role, we explain that they have moved from two to four dimensions. Litigators and trial lawyers in private practice work primarily along a two-dimensional line, from the beginning of a case through trial and appeal. In-house lawyers are responsible not only for managing the case but for coordinating the company’s response to two additional dimensions: (1) the effect of the matter on other business processes and relationships; and (2) the effect of the matter on the development of the law and market behavior, and how the company should respond to those developments. That includes working with our legal and compliance colleagues to help the business anticipate litigation risk identified through the passage of laws, litigation, and enforcement actions against other companies or market developments and either avoid it or leverage it.

After your tenure in the U.S. Attorney’s Office, you were appointed as chief legal counsel to the Independent Inquiry Committee into the U.N. Oil-for-Food scandal, and managed the global investigation; supervised over 75 lawyers and a host of investigators, analysts, and experts in multiple countries; and produced five major reports concerning the operations. That is a large law firm in many jurisdictions. What are the five most essential pieces of advice you would give to those that are in that type of managerial legal role to set the stage for success?
That was some assignment. We literally created a law and forensic accounting firm in 45 days, going from 0 to 70 miles per hour in an instant. We hired staff, procured everything from offices to phones and computers, and established offices in New York, Europe, and Baghdad in weeks. And we had little over a year to complete our investigations and reports.

I would identify the following advice as the most helpful when managing large projects or a legal department. First, you have to understand the objective and establish a clear plan, processes, and timelines to meet those objectives. Without that framework at the outset, you simply will not get anywhere. Second, stay disciplined about getting your tasks done, but monitor progress carefully and be prepared to change your plan if progress begins to slip. Keep your eyes and ears open. Face challenges promptly and directly, assess them with an open mind, and deal with them unambiguously. Third, hire capable people with good judgment and empower them when they perform well. Tell them when they don’t perform well and give them clear direction so they can. Fourth, try to avoid micro-managing. Consulting with trusted colleagues with an objective view on your own behavior can help. Finally, build on success. If you meet your goals earlier than expected, look for more you can do and do it. That momentum is worth its weight in gold.

We were fortunate enough to meet our goals and complete an extensive report on the problems the United Nations faced in the Oil-for-Food Programme. We used that momentum to complete a second, ground-breaking report on over 2,200 companies that made illicit payments to the Iraqi regime. We then used that work to prepare well over 300 criminal referrals to enforcement authorities around the world, which in 2005 jump-started an unprecedented growth in corruption investigations worldwide.

Recognizing that you have applied these lessons in your professional life, can you share your top management philosophies?
1. Understand your client’s goals and make them your own.
2. Listen carefully and communicate clearly.
3. Empower your team and help them grow, even if it may mean some ultimately go elsewhere.
4. Never stop reassessing performance, goals, and the competition.

Let’s focus a bit on outside counsel’s written product. What are the top offenses that outside counsel commit when providing written product for review? 
1. Failure to be concise. The most common frustration we experience with written product from all lawyers is the failure to communicate concisely, accurately, and effectively.
2. Not providing a finished, polished work product. When it comes to us for review, it should be file-ready.
3. Plan the writing. Discuss the written product with your in-house counterparts before the drafting begins. While there may not always be time for this, discussing a simple outline of the arguments could prove very useful.
4. Failing to absorb or incorporate in-house comments in written work without explanation. While outside counsel may have justification for their choice of words, the direction to edit from senior in-house counsel needs to be considered and addressed. We may be addressing particular concerns in our comments and outside counsel should seek to understand what those are.
5. Make sure there is time for in-house counsel and clients to review your draft. Your brief is likely not the only written work the in-house litigator has to read and edit that day.

What type of work product jumps out and catches your eye? 
A written product that is direct, addresses the important issues, and organizes the supporting arguments always will retain my attention. Weak or unfocused written communication indicates a lack of understanding of the law, the issues and facts involved, or our objectives.

We try to address subpar writing directly with the authors and more broadly with our relationship partners in an effort to strengthen the advocacy and level of communications. With younger lawyers, we recognize that they require training and mentorship, and we consciously work with our outside firms to ensure that the junior and mid-level lawyers receive constructive feedback to assist in their matriculation through their firm and to strengthen their skills.

If you had all your outside counsel in a room right now, what would you remind them to do on all matters?
At the beginning of new relationships, firms should be committed to assume a fair amount of costs to understand the client, its businesses, and its processes. The firms should not hesitate to rely on in-house counsel as a valuable resource.

Constantly assess the most efficient and effective way to defend and resolve matters, and do not be afraid to think outside the box and bring that thinking to us. Unconventional approaches can be very effective. Separately, we recognize the costs and uncertainty that trials yield, and so we encourage our firms to define, assess, and revise strategies to avoid substantial discovery and the rising litigation costs where possible.

Be creative, flexible, and innovative with billing approaches. Do not be afraid to suggest changing billing approaches in the middle of litigation if you believe there may be an alternative that will help. Do not rest on hourly rates. We and our corporate colleagues do not believe any Fortune 100 company is obligated to pay going rates in any matter. We value many of the long-standing relationships we have with firms and work hard to keep those relationships strong. A firm that fails to recognize that the environment today is extremely competitive and the growing need clients have for effective cost management risks losing its clients. When we have changed counsel due to pricing, we have had no problem retaining a law firm that can handle the matter efficiently and successfully.

What advice do you have for junior and mid-level in-house counsel to improve their written-advocacy skills?
Read a good book on legal writing. Note the basic convention for arguments: State the legal argument, then the law, then the facts that support the argument. Read some good briefs. Ask an outside counsel you respect (especially appellate counsel) to send you a few briefs and opinions that he or she thinks are effective and well written. Ask why he or she selected those pieces.

Read every draft you get. Ask yourself if it is concise and to the point. Does it communicate the key messages and important arguments early and clearly? Is there a better, simpler way to say it? Volunteer to draft a section of a brief and stay actively involved in the drafting and editing process. Be sure to read the cases cited, especially those cited by the adversary, so that you can understand whether they apply to your case.

Describe the impact of e-discovery on litigation and your views on its impact on litigation, and please speak to (a) your views on predictive coding, (b) how outside counsel can add value, and (c) your experiences with e-discovery.
E-discovery is one of the biggest challenges we face, and we, like most companies, have strived to establish relationships with discovery firms and to explore cost-effective options. Companies have a myriad of operational systems; email, communications, and management systems; and external systems that require attention when conducting discovery. Firms need to continue to stay abreast of the evolving e-discovery case law and the developing technology available to assist in discovery review.

I do believe predictive coding is a useful tool, especially in complex litigation and investigations involving a large number of documents and records. I do not see it as a cure-all, but rather a powerful tool that, if used properly, can enable counsel to spend more time strategizing and lawyering than reviewing materials. It is equally important to have law firms that are experienced and comfortable with predictive coding. Counsel need to ensure that the review processes and review team is experienced, well organized, and thoroughly briefed.

Technology-assisted review is progressing at impressive rates, and given my background, I do see some intriguing applications for it in massive regulatory, antitrust, and criminal cases.

Let’s turn to case budgets and damage evaluations. What is the most prevailing complaint you have with respect to case budgets?
The failure to notify the client at the earliest opportunity that the firm expects to exceed the budget or to significantly under-spend. If budget adjustments are required, then counsel should be identifying the issue and the cause at the very earliest opportunity with adequate explanations. In-house counsel today work closely with business-finance functions, and it is imperative for litigation and investigation budgets to be accurate and updated.

One recent article commented that the more specific the budget is, the more unreliable it is, advocating that aggregated tasks and estimates are more apt to be accurate. What are your thoughts and your preferences?
We do not expect budgets to be very detailed. The budget should identify the cost of high-level tasks, initial dispositive motions, and the cost of work on milestone case activities that can be reasonably estimated. Even where estimates are difficult, the more information and parameters a firm can provide to experienced counsel, the better. Experienced in-house counsel generally have a sense how much certain tasks and matters should cost, and outside counsel should talk to them as they prepare the budget and after it is submitted. The more communication, the less likelihood of a misunderstanding. Misunderstandings are expensive.

Let’s now turn to the tough questions. As you reside in New England, I am hoping you root for the Jets and/or Giants?
I am a Redskins fan, and I will not comment on the whole name-change issue. As for baseball, I am an Orioles fan, and it is lonely. The rest of the family is split between the Mets and Yankees.

Favorite piece of technology?
I just got the iPhone 5 and love it.

Career if you did not choose law?
I would have been an investigative reporter.

President Obama recently commented that law school should perhaps be two years rather than three. Your thoughts?       
He’s right. Better to work the third year and start learning the practice of law.

Favorite hobbies?
Cycling, fishing, tennis, climbing, and gardening.

New York has the absolutely best pizza, right?
Are you kidding me? New Haven, Connecticut—Pepe’s, Modern Apizza, and Sally’s. I will concede, though, that New York has the best Italian cuisine in the country.

Thanks Mark. It has been a pleasure.

Keywords: litigation, corporate counsel, American Express, outside counsel, oil for food


Zachary G. Newman is a litigation partner with New York-based Hahn & Hessen LLP.