Diversity - Part I Energizing A Litigation Group - Overview And Results - Part I

Editor: Please tell our readers about your background.

Villarreal: I was born and raised in San Antonio. I graduated from Columbia University in 1982. I then attended Yale Law School and graduated in 1985. I clerked in the Seventh Circuit Court of Appeals for the Honorable Luther Swygert. Then I worked at Sonnenschein Nath & Rosenthal where I became partner in the litigation group. In 1995, I went to General Electric where I was Senior Litigation Counsel at corporate headquarters in Fairfield, Connecticut. In the middle of March 2005, I came to Schering-Plough to become their Vice President of Litigation and Conflict Management.

Editor: Does your title reflect the fact that litigation is very important at Schering-Plough?

Villarreal: Yes, although I want to point out that when I took the job I changed the title to Vice President of Litigation and Conflict Management because of my view that "litigation," standing alone, is too narrow a view of the kinds of disputes and conflicts a company faces. I wanted to shift the emphasis of when a company should begin thinking about the resolution of disputes to the birth of the conflict from the filing of the lawsuit.

One of the appealing aspects of the job for me is that I was entering the pharmaceutical industry at a time when it had become a prime target of the plaintiff's bar. For that reason, some people might have been hesitant to take the job. It was appealing to me because I knew I would be facing tremendous challenges. Meeting challenges is what I long ago decided to do for a living. Although the company has gone through difficult times, it is on the rebound and recovering. It is an exciting place to work.

However, there are still legacy litigation problems left over from the prior administration. I view my job as eliminating those problems for the company so that the other functions of the company can have the time and resources to turn the company around. That is my job and I view it as critical. I am also pleased that I do not work for a company that simply exists to make money. We want to make money, to be sure, but we are also a company that has a life saving mission - providing needed medicines for people.

Editor: To what extent is your role one of trying to head off situations that might lead to litigation?

Villarreal: That is the conflict management part of the title. I have tried to create a bias toward addressing a conflict at an earlier stage - before it flares up as litigation. That means managing the communications with the person on the other side of the conflict. Any modern litigator who thinks that the job begins when the complaint lands on his desk is doing his client a disservice. It has to start earlier than that and be part of the culture of how to approach conflict. You must carefully consider how you approach a possible litigant and avoid actions that would inflame the conflict or be prejudicial in the litigation. Whatever you write may be seen by the other party. You should always ask yourself whether the message accurately, fairly and positively portrays the company.

Editor: Given the destructive effect of ill considered statements in emails, what is being done to train employees to avoid such statements?

Villarreal: We have one of the best compliance training programs in the country led by our chief compliance officer, Brent Saunders. It includes training employees to carefully consider the implications of statements made in emails. Every employee has to take such training and be recertified every year. I have had to take the course twice already. Those values are already within the culture of the company. The litigators also sensitize people about the consequences of what they put down in an email. We have a special role because we have to deal with the consequences of careless speech.

Editor: Are you putting emphasis on the use of ADR?

Villarreal: Definitely. I was a key developer of General Electric's award winning ADR program. We are now working on a somewhat similar dispute resolution process which will be unveiled in the next few months. It will be a state of the art conflict management program that will introduce a dispute resolution process in those areas of the company's activities where disputes are most likely to arise. In this way, ADR will be integrated into the way the company does business.

Editor: Many cases linger for years in court that might have been resolved by mediation or by other early resolution techniques. Are you doing anything about this?

Villarreal: We now conduct early case assessments of our major disputes. That is something that was previously not done here on a systematic basis and is now part of our routine. Within the first 60 days our outside counsel is charged with giving us an early assessment of the case. That involves looking at documents, interviewing witnesses, examining legal papers, doing damages analysis and all the things that used to take too long in the litigation world. Our view is that if you had two years to litigate a case you might know more than after the 60 day process. However, in 60 days, for a lot less money, you will know 80 percent of what you will ever know about a case. Most of the time, that knowledge is enough to make rational and intelligent decisions about resolving a case.

Editor: What else are you doing to clear the docket of old cases?

Villarreal: One of the key measurements we will have is cycle time. We look at the age of the case and reevaluate those cases because longer cycle times mean increased expenses. That seldom translates into better resolution outcomes. One of the things I did from the day I arrived was to emphasize the speed of resolution. We examined why certain cases had been around for two or more years. A lot of those cases have been resolved on a favorable basis within the last few months.

Editor: Are you considering a convergence program?

Villarreal: We are at the latter stages of completing a convergence program. DuPont, GE, and Baxter have implemented similar programs. We are consolidating a lot of our legal work into a small number of partner law firms. The slogan for the program is "One Client, One Team." The idea is to collapse the boundaries between outside counsel and inside counsel and between the different law firms so that we can create one dedicated core team for our legal needs - a virtual law department. In that context, part of what needs to happen is that the firms need to buy into the culture and values of the company.

Editor: Are you using technology to help track and contain legal expenses?

Villarreal: One of the things that has changed considerably is how much more adaptable law firms are to varying technology platforms. We have a system that allows us to review bills and to highlight variances from our standards. This system creates a disincentive to depart from our standards and produces savings. It is not however, a panacea to runaway legal bills.

The most effective way of achieving substantial savings is the creation of true partnership relationships characterized by the dedication of outside counsel to cost control and hands-on management of that process by the law department. A convergence program can also result in significant savings by reducing reinvention of the wheel as the firms exchange information with the company and among themselves and as they become intimately knowledgeable about the company's business and its products. An early dispute resolution process can significantly reduce legal expenses by resolving conflicts before they metamorphose into expensive litigation.

Editor: How did you go about selecting the firms that will be considered for your convergence program?

Villarreal: We sent out RFPs to over 60 law firms. That included a number of smaller and regional firms as well as international mega firms. The senior legal officers in the company then interviewed the firms, which is the part of the process in which we are currently involved. The last stage will be selecting the firms that will be the core team that will work on our matters.

In the selection process we have looked at quality, diversity and cultural fit as well as value issues such as use of alternative billing and promised efficiencies. We want these people to work well with us and with each other. That is where the real cost savings comes in.

Editor: In evaluating those firms that will handle your product liability litigation did you give any special weight to those firms that assist in civil justice reform issues.

Villarreal: If you are a lawyer engaged in product liability work and are good at what you do, you will inevitably be drawn into civil justice reform efforts. The fact that someone is active in civil justice reform efforts speaks to their prominence and importance in the profession. Many of the lawyers that we have interviewed for our convergence program are actively involved in civil justice reform initiatives.

Editor: How important were diversity and pro bono and other community welfare activities to your decision to include a firm in the list of candidates for your convergence program?

Villarreal: We made it clear to the candidates that diversity was definitely one of the factors that they would be evaluated on - and that the issue is front and center in our minds. During the interview process, we also asked about the diversity of the core teams that each law firm had identified to work with us. We took note of the diversity of the people they sent to the interviews with our legal vice presidents. We made it clear to the law firms that they would not get far without fielding a diverse team.

Since I came here, we started a diversity reporting process for our law firms on a semiannual basis. Every six months they have to report to us on the diversity of the lawyers doing work for Schering-Plough. Since Fred Hassan took over as CEO and Tom Sabatino became General Counsel, there has been renewed emphasis on the diversity of our internal staff. In fact, since 2003 the number of lawyers in the department has moved from 59 to 72. The number of female lawyers, however, has moved from 14 to 29 (around 40% of the Department). The number of minority lawyers has moved from 8 to 18 (25%). The percentages of minorities and women now compare favorably with those in the law departments of other large companies and are better than those at most of the law firms.

Editor: Why are these efforts important?

Villarreal: There are many reasons why diversity is important. For one thing, the diversity of a company's employees influences what decision makers and the public see of the company. More importantly, I believe that diversity improves the quality of legal work. Diverse law firms tend to generate better ideas. Diverse law firms have more energy and more creativity. Similarly, when a firm's lawyers are involved in community service and pro bono work, it indicates that the firm is made up of people who care about and are engaged in their world. This, too, is a reliable indicator of a vital, energetic, engaged workplace. People working in these kinds of firms will do the best work.

I came here to Schering-Plough to build the best in-house litigation department in America. I think we are almost there.

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