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Year 2000: Factors to Consider in Selecting Outside Counsel

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The Year 2000 computing problem has become, or should have become, a high priority item for business leaders worldwide. This article makes three points: (1) companies need outside Year 2000 counsel; (2) that counsel needs to be proficient; and (3) that counsel needs to be efficient. This article briefly discusses each point.

Why Companies Need Outside Counsel
There is no doubt that the Year 2000 will create serious problems facing every company. The magnitude of the Year 2000 problem and issues will vary from company to company. Regardless of the magnitude of the problem or the array of Year 2000-related issues, there will be Year 2000 legal issues which require the assistance of counsel. The legal issues entwined in the Year 2000 problem include SEC and other regulatory disclosure and reporting requirements:

  • Corporate, director and officer fiduciary duties
  • Contract, warranty, consumer and product liabilities
  • Intellectual property protection
  • Financial, credit and insolvency issues
  • Insurance coverage issues
  • Tax issues
  • Real estate issues
  • Labor and employment issues
  • Document creation and retention issues
  • Privilege issues
Virtually every company faces some (hopefully not all) of these Year 2000-related legal issues. Prudent business judgment may require seeking and obtaining competent legal counsel to address and handle these clearly legal issues.

As Year 2000 problems rapidly unfold, there is an accurate perception that this is a business problem that must be dealt with in a business-like manner. There is also a perception that Year 2000 problems are essentially technology or systems issues that can be dealt with and resolved by technicians. The Year 2000 does indeed raise primarily business and technology issues. However, be assured the Year 2000 also raises significant legal challenges.

The impending Year 2000 situation is a classic example where an ounce of prevention will be much better than a pound of cure. Companies need to involve counsel on these Year 2000-related legal issues early in the process. There will not be time to do so later.

A first reason why companies need to retain outside counsel is the need to integrate the most current Year 2000-related legal strategies into an overall Year 2000 program. Outside counsel can share the knowledge gained from working with other companies and can provide a second opinion about a company's Year 2000 strategy.

A second reason for outside counsel is to insure that the company has a mechanism to invoke the attorney-client privilege with respect to candid confidential discussions and legal advice, and related documentation, concerning Year 2000-related legal issues. Although discussions with corporate counsel may be privileged, the privileged status of such discussions is susceptible to challenge on the basis that corporate counsel was actually providing business, as opposed to legal, advice. The utilization of outside counsel should enhance the privilege.

A third reason for outside Year 2000 counsel is because the company may not have inside counsel, or inside counsel may not have the range of capabilities needed to address the diverse Year 2000-related legal problems at hand.

A fourth reason for outside counsel is to obtain needed proficiency and efficiency in addressing Year 2000-related legal issues. Time is of the essence. The remaining two points in this article address why time pressure requires that outside Year 2000 counsel should be both proficient and efficient.

The Benefits to Having Proficient Outside Year 2000 Counsel
Time is running out. It is no longer possible to ignore Year 2000 issues. With traditional legal and business issues, it is often possible to use a case-by-case or issue-by-issue approach. Because of the breadth of issues that need to be addressed and the short and immovable deadline of the year 2000, such an approach would not be prudent in this situation.

Every company should be utilizing a company-wide strategy to address its Year 2000 problems. For the reasons expressed above, outside Year 2000 counsel should be an integral part of an overall Year 2000 strategic program. The breadth of issues raised will require legal advice on a wide range of issues. There is not time to survey, interview and select a battery of different outside counsel to address the various Year 2000 issues as they arise and need attention. A proficient outside Year 2000 counsel will be that counsel with the capabilities to handle most if not all the company's Year 2000-related legal issues.

In selecting Year 2000 counsel, companies should select counsel proficient in the areas effecting their businesses. For example, small and privately owned companies need not be concerned about SEC disclosure and reporting requirements. Only financial institutions may be concerned about the Office of the Comptroller of the Currency, the Federal Reserve and other agencies regulating financial institutions. Potential contract, warranty, consumer and product claims may impact different companies in different ways and to different degrees. Other Year 2000-related issues pertaining to intellectual property rights, taxes, real estate, employees and insurance require close attention. However, in the time crunch ahead, a company facing SEC disclosure issues, corporate and D&O fiduciary responsibilities, possible contract and warranty claims, customer or consumer complaints, and intellectual property, insurance and employee issues would be well advised to retain one firm proficient at handling all of these Year 2000-related issues in a consistent and coordinated manner. Any company, regardless of size, will benefit from retaining a single outside Year 2000 counsel that has the expertise and capabilities to handle the full range of that company's imminent Year 2000 issues.

Proficient counsel must also have the necessary expertise in the substantive areas of the law that underlie the Year 2000 legal issues. There is no established body of "Year 2000 law". Rather, the legal problems arising from the Year 2000 present familiar legal principles founded on basic legal concepts. In selecting outside Year 2000 counsel, a company needs to be sure of the underlying substantive expertise in those areas that may be impacted by the Year 2000. Companies should inquire deeply to be sure that prospective outside Year 2000 counsel truly has the proven and necessary substantive expertise in handling the legal issues that may now arise in a Year 2000 context. The company should ask:

  • Have you handled SEC disclosure issues?
  • Are you familiar with the pertinent regulatory authorities?
  • Have you represented corporate officers and directors?
  • Have you handled complex class action litigation?
  • What is your experience with the UCC, unfair business practice laws and consumer protection laws?
  • Have you assisted policy holders in obtaining insurance coverage?
  • Can you handle financial, credit and insolvency issues?
  • What is your intellectual property, labor, tax and real estate experience that may be brought to bear on Year 2000 related issues?
Ideally, the company should be able to identify one outside Year 2000 counsel with the right blend of needed substantive proficiency and expertise. Even if a company opts to use several specialists, there is still substantial benefit to using one outside counsel to coordinate the company's overall Year 2000 legal efforts.

The Benefits to Having Efficient Outside Year 2000 Counsel
The third and final point of this article is the critical need for efficiency. Outside Year 2000 counsel must be able to respond efficiently. Year 2000 engagement demands immediate and continued priority and sustained efficiency. Efficiency may be demonstrated in many ways, including:

  • Actual proven performance;
  • Anticipating a company's Year 2000 needs;
  • Promptly responding to all inquiries (Year 2000 and otherwise) from clients and prospective clients;
  • Not having to "reinvent the wheel" to research or learn the pertinent legal principals and strategies;
  • Quickly grasping the business issues and objectives and devising and implementing the legal strategies to achieve those objectives;
  • Coordinating divergent but related issues and initiatives to ensure consistency and the economies of using one outside counsel;
  • Properly staffing each assignment with appropriate and dedicated attorneys who have the substantive expertise to get the job done;
  • Possessing the resources to give each assignment the necessary priority and attention;
  • Having the proven ability to put an inter-disciplinary team together and coordinate that team effort with the company's overall Year 2000 program;
  • Commitment to client satisfaction.
A final efficiency consideration is that each of the foregoing criteria is critical in the face of the unprecedented and unmovable Year 2000 deadline.

There is not time to test the efficiency of outside Year 2000 counsel. A company should make the inquiries and request a showing that demonstrates how the prospective outside Year 2000 counsel has been, and will be, efficient.

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