Innovative Clinic Creates Pro Bono Opportunities for In-House and Law Firm Attorneys

I have been proud to participate in the creation of a “virtual” pro bono business law clinic, representing an innovative partnership between Medtronic, Inc. and Maslon Edelman Borman & Brand, LLP. This clinic, one of several that are sponsored by the Minneapolis nonprofit LegalCORPS, is the first program of its kind to be created jointly by an in-house legal team and a law firm.

Our pro bono clinic serves low-income small businesses and non-profits in the furthest reaches of northern Minnesota, giving the clients access to the advice of skilled business lawyers at no charge. The clinic also creates valuable pro bono opportunities for Medtronic’s in-house attorneys and Maslon’s business lawyers.

In a recent article in the Minneapolis St. Paul Business Journal, “LegalCORPS expands business pro-bono work,” Jim Hammerand described the virtual clinics:

Through Minneapolis nonprofit LegalCORPS and regional small-business development centers, lawyer volunteers from Best Buy Co. Inc., Medtronic Inc., Target Corp., U.S. Bancorp and Minneapolis law firm Maslon Edelman Borman & Brand hold 30-minute video-conference sessions with small-business owners through clinics in Marshall, Hutchinson, Bemidji, Brainerd, Moorhead and Virginia every month.

‘What we’re trying to do with the clinics is preventative medicine: spotting what can get you in trouble, what you need a lawyer for and what you need to be careful about,’ Maslon lawyer Marty Rosenbaum said.

. . . ‘We were looking for an opportunity for our lawyers to do transactional pro bono work,’ said David March, senior counsel for commercial transactions at Target. . . . The program matches business lawyers, who sometimes have a hard time finding non-litigation pro bono work in their areas of expertise, with small businesses that don’t know what to look for in a lawyer, if they can even find one.

‘In some parts of Minnesota, it’s difficult for people to find attorneys even to pay for business law,’ LegalCORPS Executive Director Michael Vitt said. Clinic participants get ‘a sense of what they need to ask a lawyer to do and feel more comfortable and more confident dealing with lawyers.’

As Chair of Maslon’s Pro Bono Committee, I have had many discussions with law firm business attorneys and in-house lawyers about the benefits of doing pro bono legal services for those who cannot afford to pay legal fees. The LegalCORPS business law clinics, unlike many pro bono activities that are litigation-focused, give business attorneys like me a way to apply our hard-earned skills in a way that really benefits the clients and also fosters economic development.

And there is another major benefit to performing pro bono service – it gets us out of our comfort zone and gives us an avenue to develop our skills in ways that conventional practice might not allow. In the LegalCORPS clinics, we have the challenge of explaining basic concepts of company organization, tax law or other types of business law to clients who may not be as sophisticated as our regular corporate clients. For example, I often have to explain the advantages of forming an LLC vs. a corporation or a partnership, breaking down the concepts for a client with no previous corporate experience, or even someone for whom English is a second language. I have often brought young associates to observe the clinics, and in some cases these associates have gone on to become valuable volunteers.

The many benefits of doing pro bono work have caused many groups of in-house attorneys to participate, and Medtronic has been a leader in this trend. An article in Inside Counsel highlights the emphasis placed by Cam Findlay, Medtronic’s General Counsel, on pro bono work since he joined the company. Medtronic’s legal staff deserves a lot of credit for getting involved in these important activities.

Conflict Minerals Rules May Foster Corporate Social Responsibility

Last week, the SEC adopted final rules (PDF) under Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (PDF), requiring reporting companies to disclose their use of so-called “conflict minerals” that originated in the Democratic Republic of the Congo (DRC) or a nearby country. These minerals, which include tantalum, tin, gold and tungsten, are used in computers, cell phones, cameras, automotive and aerospace components, medical devices, jewelry and many other products. The rules were controversial, passing by a 3-2 margin.

Companies that file reports with the SEC will be required to file a new SEC form called Form SD to disclose the use of conflict minerals that originated in the DRC. All issuers will report on a calendar year basis on May 31 of the following year, with the first report, covering 2013, due on May 31, 2014. Smaller reporting companies and foreign issuers are subject to the reporting requirement, although smaller reporting companies get a longer transition period for reporting about products where the origin is uncertain – four years vs. two years for larger companies. Companies that manufacture products with conflict minerals in the supply chain need to study the new rules and formulate an action plan to satisfy the due diligence and audit requirements. Since the first period covered by the disclosure rules starts in four months, time is of the essence.

I won’t try to summarize the entire 356 page SEC release. As usual, the SEC has provided a very useful Fact Sheet as part of its press release announcing the rule. And the release includes a handy one-page decision tree chart (PDF) that maps out the various reporting issues under the rules.

Comment. The SEC release describes that Congress, in enacting Section 1502,

“. . . intended to further the humanitarian goal of ending the extremely violent conflict in the DRC, which has been partially financed by the exploitation and trade of conflict minerals originating in the DRC. . . . Congress chose to use the securities laws disclosure requirements to bring greater public awareness of the source of issuers’ conflict minerals and to promote the exercise of due diligence on conflict mineral supply chains. . . .”

The disclosures are intended to reduce the use of conflict minerals that help fund the armed groups, and thus put pressure on the groups to end the conflict.

In reading the commentary and analyses on the new rules, I focused on the reactions of various groups. The rules have sparked an interesting debate about the role of disclosure requirements in shaping policy and changing corporate and governmental behavior, with both sides of the debate make valid points. However, even more fascinating, several very large electronics manufacturers, rather than fight the rules, have gone beyond mere compliance with the disclosure requirements. They have used the pendency of the rules as an opportunity to demonstrate leadership in corporate social responsibility.

Criticism and Counterpoint. Critics of the rules raise persuasive concerns about the rules’ value compared to the cost of compliance. SEC Commissioner Daniel Gallagher, who voted against adoption, released a Public Statement detailing why he could not support the rules. After deploring the violence in the DRC, Gallagher states that the benefits of the disclosure requirements in reducing the conflict cannot be quantified. On the other hand, the costs of the disclosure and audit requirements are very real, estimated by the SEC at $3 to $4 billion initially and around $200 to $600 million per year on an ongoing basis. Many commentators believe this cost is vastly underestimated. Gallagher acknowledged that Congress, not the SEC, mandated the disclosure requirement, but he could not support the final rules because the SEC did not use its discretion to exempt smaller reporting companies or create a de minimis exemption for products with incidental use of the minerals.

The statement of the other dissenting Commissioner, Troy Paredes, expressed his concern that the Commission did not determine “ . . . whether and, if so, the extent to which the final rule will in fact advance its humanitarian goal as opposed to unintentionally making matters worse.” As Professor Steven Davidoff wrote this week in a DealBook commentary, “These new rules could lead to manufacturers simply refusing to buy any of these minerals from Congo and surrounding area. This would be a de facto boycott that could harm the populace more than it would help.” Or the rules could provide a greater competitive advantage for foreign companies that do not report in the U.S.

On the other hand, the supporters of the rule respond that the SEC worked hard to craft final rules that minimize the costs to issuers and will be effective. Chairman Mary Schapiro said in her statement introducing the rules, “. . . [W]e incorporated many changes from the proposal that are designed to address concerns about the costs. I believe the rule we are considering today faithfully implements the statutory requirement as mandated by Congress in a fair and balanced manner.”

The Social Responsibility Opportunity. In reading much of the commentary on the conflict minerals rules, I was struck by the statements of a “multi-stakeholder network” that included issuers, socially responsible investor groups and non-governmental organizations. The group was really part of the process, participating in the SEC roundtable, submitting four comment letters and attending several meetings with the SEC staff. The companies in the group included major corporations: Advanced Micro Devices (AMD), Ford, General Electric, Hewlett-Packard, Microsoft, Philips and Sprint. This group submitted a letter to the SEC (PDF) supporting the disclosure rules and applauding the work of the agency.

The Co-Chair of the multi-stakeholder network was Tim Mohin, Director, Corporate Responsibility of AMD. On the day the SEC adopted the final rules, Mohin wrote a compelling piece in the Huffington Post, “How Electronics Companies Plan to Comply With the SEC’s New Conflict Minerals Rule.” He reported that an industry group not only supported the rules, but also went beyond the disclosure requirements to explore new ways to track the source of conflict minerals:

At first blush, this sounds like an impossible requirement. . . . But, after some time and thought, we, in the electronics industry -- specifically, the member companies of the Electronics Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative (GeSI) -- are confident we have found a way. And, more importantly as this rule ripples through the economy, we are willing to share our ideas with others. . . .

Mohin describes some of the nuts and bolts of their process for identifying smelters and the subset of “conflict free smelters” and continues:

. . . While the conflict free smelter list stands at just 13 so far, we anticipate that many more will be added as implementation of the rule progresses. . . . [Also,] [w]hile the law itself does not require any of these steps, the electronics industry has worked on a couple of programs aimed at avoiding a minerals embargo of the region [and thus harming legitimate mining enterprises]. AMD and several other companies joined the U.S. State Department to found the Public-Private Alliance (PPA) for Responsible Minerals Trade. This a joint initiative among governments, companies, and civil society aims to demonstrate that it's possible to secure legitimate, conflict-free minerals from this region. . . .

By partnering across the electronics industry and applying the spirit of innovation that created the tech revolution, we went from "it can't be done," to "we think we have a solution," to "we need to go beyond the law to make sure that our solution actually helps the people of the DRC."

In this case, a group of  companies, rather than challenging the validity of the rules, put their minds and resources into efforts to go beyond mere compliance. Consistent with the corporate social responsibility movement, their approach tries to address the problem in sophisticated ways, and they want to share their wisdom with other companies. And maybe, if their approach really works, their use of “conflict free” suppliers could actually help their sales – something like “dolphin-free” tuna. At the very least, it’s a commendable effort.

I’d really like to hear what readers think about the approach described by Mohin, and about the disclosure rules in general. Send me an e-mail, which I will keep confidential, and I can summarize the thoughts on an anonymous basis in a follow-up post.

Honored to Be Recognized for Pro Bono Work

I was honored to be recognized recently as Maslon’s 2012 Pro Bono Attorney of the Year. As Chair of our Pro Bono Committee for the past five years, I have been very proud of our firm’s commitment to the community. Also, as a Board member of the non-profit group LegalCORPS, it has been enjoyable to help LegalCORPS develop new ways to deliver business law pro bono services to low-income businesses and non-profits in Minnesota. I am currently working on an exciting project, in partnership with the in-house attorneys at a large company, to expand LegalCORPS’ reach in a novel way. After the launch of this program, I’ll share the news.