GC Time Is Better Spent on Strategy Than Defense

A conversation with Eric Koster, general counsel, Ethan Allen

In guiding legal strategy for the multinational publicly traded company and its subsidiaries, Koster reflects on the importance of positive strategic planning and ways to dissuade frivolous lawsuits.

What legal issues occupy most of your time, and which are the most difficult in a business that has manufacturing and retail operations in a large number of countries?

In my role as chief legal officer, I am primarily responsible for the daily operations of the legal, human resources, real estate (including landlord-tenant, purchases and sales, environmental), and construction departments. I also oversee and manage all intellectual property and participate in the review of all advertising; contracts with third parties (including vendors, customers, independent retailers, and service suppliers); and customs/trade/tariff disputes.

As secretary to the boards of directors, I am responsible for all corporate, regulatory, and compliance matters for the Ethan Allen group of companies that consists of our publicly traded parent, Ethan Allen Interiors and some 24 subsidiaries in the U.S., Canada, Mexico, Honduras, Belgium, and India. I also serve as the company’s principal compliance officer.

Against this general overview, matters that fit within the broad category of real estate occupy at least half of my time. Our company has some 300 retail locations throughout the world, many of which are leased. Thus, landlord-tenant matters are paramount. By way of example, in the first eight months of this year, I completed work on 55 leases, the majority of which required construction of substantial tenant improvements. In addition, the company routinely purchases and sells real property, including industrial properties that are no longer needed, requiring compliance with federal and state environmental laws.

While consuming time and energy, I do not find the real estate matters to be particularly difficult as my professional background involved a substantial amount of real estate and construction.

Human resource matters are a close second. Insofar as the company has some 5,000 employees, various employment law issues occupy a substantial portion of my time and are among the more intellectually challenging. Due to the patchwork of statutes and regulations throughout the U.S. (not to mention worldwide) governing hiring, employment, and termination, I am constantly providing opinions on the advisability of myriad actions — and, unfortunately, overseeing litigation.

I handle all other matters as time allows. Needless to say, corporate matters become more important at quarter ends and in proxy season.

What tactical advice would you give to in-house counsel in smaller organizations to keep abreast of and avoid missteps in dealing with compliance issues?

Obtain and retain the best outside counsel! Nurture a network of colleagues across as many disciplines as possible. Be generous in giving advice when requested, and never be afraid to ask for advice.

With a long career behind you, both as partner in several law firms and general counsel for a publicly held company, how would you reflect on the changes that have taken place in the legal profession, particularly those that affect the role of general counsel?

The single largest change I have observed is the proliferation of trolls, be they corporate, ADA (physical and web based), personal injury, intellectual property, and/or employment related. In short, I detest plaintiff’s attorneys (except to the extent that they provide me with job security). There are myriad folks out there who look for a corporation to make an error and are quick to pounce for nothing more than their own financial gain.

Defending these matters, and proactively establishing defensive measures, has adversely affected the role of the GC in smaller companies as we must spend time in a defensive posture that should be better spent in positive strategic planning.

By way of example, we have suffered attacks by corporate trolls for issues as minor as language in credit facilities and other insignificant Delaware and/or SEC issues; ADA trolls who claim — incorrectly in each case — that handrails in bathrooms, slopes in sidewalks, signage or websites are minimally out of compliance. Moreover, in the field of employment law, it seems that we cannot terminate any employee without receiving a call from an attorney.

The good news is that in furtherance of my policy to vigorously defend against trolls, we have defeated most everyone. Indeed, in one litigated employment matter in which we were the successful defendant, we were able to obtain costs against the plaintiff. Word of our posture appears to have spread, as evidenced by the continuing decrease in the number of claims we receive.

A large part of the troll epidemic is due — at least in my opinion — to the rise of attorney advertising, especially that shown during the day on cable television. The advertising, in turn, has diminished the view of our profession — a profession that I hold dear — to that of a quick source of income for the less scrupulous.

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