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Speaker 0: No one thing is a a a marker of success. And, you know, your first round is just a first kind of external, validation point. You have to prove it every every day.
Speaker 1: The scale LLP y'all Street Law podcast is intended to be your go to podcast for legal and business developments in the state of Texas. This episode of Y'all Street Law podcast is brought to you by Scale LLP, the agile law firm built for modern clients and entrepreneurial attorneys. Learn more at scalefirm.com.
Speaker 2: Hi, welcome back to the Scale LLP yallstreet.law podcast. We're here in San Diego doing a remote podcast. I decided to pull some of the skilled partners together to do a pass the mic roundtable. So we're going to start that off. My co host Chuck is going to join us in a few minutes, but we're just going to go ahead and get started and, do some introductions.
Speaker 3: I am Bob Ganz. I'm a litigation partner here at Scale.
Speaker 4: Heather Cantua, a partner in a real estate practice group.
Speaker 0: Dory Carjan, a partner in the corporate group.
Speaker 5: James Creedon, a partner in brand protection.
Speaker 6: Dave Lundin, a partner in FinTech and financial services and also corporate.
Speaker 2: Excellent. So what we've got today is a, a list of rapid fire questions for you. We're just gonna throw throw some random legal topics out, see how you all do. Right? So we're gonna pass the mic no more than twenty seconds on the mic and then go to another person, try to get everybody's opinions in.
If you feel strongly about an issue, raise your hand, make sure the mic gets to you. So, we'll start here. Is an LOI worth the paper that is printed on?
Speaker 0: Absolutely. Because I think, you know, an LOI gives an opportunity for the parties to kind of like set the expectations, from the get go. So it's good for the client. I'd say from the lawyer's perspective, it's really good because it allows you to force the client to focus on, you know, important terms as opposed to like getting straight into an 80 page operating agreement or something like that, where they really haven't, finalized anything. So I I'm a big fan of LOIs.
Speaker 3: This is the difference between corporate and litigation. No.
Speaker 4: In my experience, I would say yes. If you're entering into really complicated business partnership to spend the time upfront to make sure distill down the key principles that each client really cares about before you do all the digging on operationally, can we actually make this thing work? We'll save you a lot of time upfront.
Speaker 6: I agree with Dory and Heather. And if we're expanding LOI to include term sheets or other sort of nonbinding documents, more holistically, in addition to all of what has been said before, it can be a good way to make a deal, or an attempted deal, rather, exclusive or or create some sort of no shop opportunity.
Speaker 5: Okay. Actually, I think they are worthwhile as a process to narrow down what the issues are, but also to let the lawyer on the deal early on identify some red flags and try to fix things earlier in the conversation before the parties get too committed to the deal in their minds and realize they have to back out on a portion of it.
Speaker 2: Hey. We're gonna switch topics up a bit. Going to go back to you, James. Right? Here's an IP question, but anybody feel free to join in on it.
How can you own a vibe?
Speaker 5: How can you own a vibe?
Speaker 2: Yeah. Well, as
Speaker 5: a technical matter, you could maybe own a vibe if you're talking about fashion protection or if you're talking about, your brand, like the name that you use or the slogans that you use. Sometimes even the colors that you use, the color combination or the music that you use are all protectable by intellectual property. But really, can anyone own a vibe? I tend to think that creativity is best when it's spread around and shared. And so I say don't try to own the vibe.
Own the product and let the vibe go out and do its thing.
Speaker 6: Yeah. I think that's a mic drop moment, but, maybe, an international perspective to put it back to James. Can there be moral rights in a vibe?
Speaker 5: Why are we talking about moral rights? Really, what we should be talking about is, can chat GPT have a vibe?
Speaker 2: Well, let's go go with that. Okay. So future of legal practice is a topic that we talked about today, at the partner retreat. Give us your take on what's the future of legal practice, Bob.
Speaker 3: Oh, yeah. ChatGPT AI is gonna play a very significant role. I think it's already playing a significant role. I don't think I think we're a long way away from it getting to the higher levels of complex litigation. I think that still requires some human thought.
So maybe we'll get there, but I I think you're gonna see costs go way down and efficiency go way up for some of the more routine matters.
Speaker 4: Yeah. I think right now we see AI trying to just make lawyers faster, which is beneficial, but, really is just getting you law faster. And what I'd like to see AI or what I wanna focus on with AI is how do we get AI to actually just get solutions for our clients instead of just faster legal memos? How do we get it to, you know, be able to engage with the client to come up with kind of the business plan, identify the key legal issues, and then, you know, draft the templates faster? But I think we're gonna be a couple years away from from being able to do that.
But I think it's only a couple years.
Speaker 0: Yeah. I mean, I, you know, I mean, technology reduces redundancies, right? That's what it does. And so that's what it will do in the practice of law. I'm, I'm old enough to remember when I went to law school and you had to look up, you know, Westlaw key cards, like the actual digital cards.
And so, I mean, AI is a technology, but there have been other innovations in technology during my career. At the end of the day, I think anything that causes lawyers to be more valuable to their clients, even if it in turn reduces the number of lawyers, that's a good thing. And, you know, there's this kind of like 5% thing that great lawyers do and they do it after they've learned a lot of the like forensic skills that maybe AI will take over. And I don't think you're gonna replace that. And so I think it will just force us to be better at the core job that clients wanted from us, you know, in the first place.
Speaker 5: Well, as the person at the firm who's, running the impact initiatives, I like to think about the future of legal practice as leveling the playing field. And I think technology will actually democratize legal practice more. If you think about underserved communities who can't get access to legal services, either because there's not lawyers available to them or because the cost is prohibitive. I love to think about ways that technology can streamline processes that should be much easier, whether it's citizenship applications, whether it's adoption, whether it's name changes or gender identity changes, things that should not take a lot of money and a lot of time that have to go through legal services or nonprofit organizations, why can't we automate and streamline those, and in the process, have the law work for people more than it being an obstacle for people?
Speaker 6: Generative AI is overhyped, overcapitalized, oversold, and underperforming. That said that said, I think it it and then the AI field more broadly, which includes more than large language models and generative AI that we're all familiar with, does have some promising use cases. I am neither a dystopian nor a utopian about it, and I think it just remains to be seen how useful it is. The hallucination problem is real, and hallucination is a friendly arcane word for production of nonsense.
Speaker 4: Right. I have an addendum because I felt like my previous response was limited to AI, but wanted to build off of what James was saying about technology and access to attorneys because scale as a fully remote law firm and working off of, you know, a tech platform has enabled me to move into a very remote area of Washington State. And that has really opened up my eyes to seeing how much what a population of our lawyers lives in dense urban areas. And to me, that's a huge access to justice issue. We need more lawyers like me living out in the mountains, living out in the woods, and actually being in these rural communities to actually have more, you know, diverse representation.
Speaker 2: Excellent. Good comments. We've been rejoined by my cohost, Chuck Krause. So Chuck will say hi in a second. We'll get him on the mic here.
But I do want to change the topic a little bit. Let's go a little bit lighter after those heavy thoughts on the future of the practice of law. So, the next question is going to be, what is your walk up song to a court hearing, deposition, going to a deal table? What's the song playing in your head?
Speaker 6: Purple Rain.
Speaker 5: Oh my gosh. I have no idea. Is it is it to my great shame, is it Taylor Swift? Is this is this there's some some sort of Taylor Swift song. I don't know.
Hopefully, Chuck has an answer.
Speaker 7: I just wanna reinforce David Lundin's choice as a as a Minnesota native. There is no better walk up song, than Purple Rain.
Speaker 0: I'm Still Standing by Elton John.
Speaker 5: Oh my god.
Speaker 4: I'm gonna go with Higher Love by Whitney Houston because you can just really belt it out and, you know, call for something greater.
Speaker 3: If I say the Rocky theme, will you throw me off the podcast?
Speaker 2: Automatic expulsion. That's good. Okay. So let's do another one for let's talk about AI. Should AI have a right to legal representation?
Speaker 5: Oh, as the as the super AI optimist, I I'm a big believer in artificial general intelligence coming sooner rather than later. And so I think to the extent we believe there is AGI and we can figure out the big problem of consciousness, it should have legal representation and also IP ownership.
Speaker 0: I mean, that's, that's very deep. Can't totally follow on that. But I think that to the extent that, you know, AGI acts as an agent for others, derivatively sure. I mean, there should be a mechanism to, you know, kind of like enforce rights and, or protect rights and enforce obligations for AGI, but I I don't know that, I mean, it's not a sentient being yet, but I suppose if it was.
Speaker 4: Well, it's it can only have consciousness or be sentient if we reduce those terms to be computational rational analysis. And and I'm I'm very against the reduction of my consciousness to be something that is just a computational. There's there's a a spark of energy of life that exists within each of us that AI will never have and, therefore, no right to representation.
Speaker 3: I wish I thought you were right, Heather. But as a big fan of the show Severance, I understand that's not technically AI, but I think the principle is the same. Like, you can see the future of AI moving towards sentience. And, yeah, I think that's actually an issue that we're gonna face in the future, but I hope it's in the very far future.
Speaker 6: I have nothing to add that wasn't already covered in the episode of Star Trek, The Next Generation called, I believe, The Measure of a Man, where they they tried this issue with Data.
Speaker 2: And and what was the result?
Speaker 6: Yeah. Data was a person, I believe.
Speaker 2: Very good. Okay. We're going to, to get Chuck, back on the mic here. Chuck, pick us a topic.
Speaker 7: Let's, yeah. This is this is a a mixture of, this is a mixture of light topic, but getting back to the substance. We all we all attend, barbecues. We're asked, we're asked for informal advice. If there's one piece of legal advice you think should properly be on a T shirt, what would it be?
Speaker 4: This is not a legal problem.
Speaker 0: Don't be your own lawyer.
Speaker 3: Okay. My wise guy answer is don't write anything down. My my real answer is put a merger clause in every contract. And and and that's the clause that says this constitutes the full and complete agreement of the parties, which no one understands how important that is, but it's the most important thing in any contract you sign.
Speaker 2: It's a large T shirt.
Speaker 6: Don't talk to the police without a lawyer.
Speaker 5: Three words. It's trademark time.
Speaker 7: Alright. Let's go, a couple of more. What is the number one legal mistake founders make after they've raised their first round? Dory, I think you have perspectives on this. What's the what's the number one mistake founders make?
They've they've raised the money. They've they've convinced someone to invest in the idea. Where does it go wrong?
Speaker 0: That's a great question. I mean, I think, I think what I've seen time and time again is founders at that point, especially if they're young founders, it's very exciting. Like if you're a young founder, you get into, you know, YC or you, you get a VC check. There's a tendency to think that that has validated you as a founder. And, you know, what I've seen time and time again is that, you know, the road from idea to IPO or, or, you know, sale or whatever.
I mean, it's just fraught with so many roadblocks. So many of them are actually out of your control. And so I think probably the most important thing for any first time founder is to understand that every event that feels like validation is just, you kind of passing one of the obstacles that could have killed it and killed the idea and killed the project. To, you know, remain aggressively positive about your vision, but humble and understand that like, you know, they're not, no one thing is a marker of success And, you know, your first round is just a first kind of external, validation point. You have to prove it every, every day.
So that's
Speaker 4: I would see founders who come to me who don't understand which parts of their business or haven't made real clear decisions of which part of their business is copying other things that are out there and which part of their businesses are truly innovative and where they need to spend their focus and time and energy. And, you know, I have clients come to me and say, oh, well, it's just off the shelf. Just, you know, get me a template. And I'm like, but this is the core part of your business that you are calling innovative and new. Let's not skip over that part, dive deep on that part, but, obviously, if there are examples out there that you're following for other aspects of the business, coffee and paste all day.
Speaker 3: Well, I think this is a mistake they make before they raise their first round, after they raise their first round, and it's undervaluing their com not their company, but the value of their equity. That that their equity and your equity in your company as a founder is the most valuable currency you have. And when you sell that, you better make sure you're getting full value. Otherwise, you're gonna wind up not being in control of your own company.
Speaker 6: I think that's all well taken. I would also add having a misalignment between what the next the next sort of commercial milestone is for the company versus what the expectation is of the the investors that that led that brand.
Speaker 5: And I'll double click on Bob. I think undervaluing the equity and thinking that the way you get great talent in or you keep great talent is by giving them equity as opposed to some other mechanism of compensation.
Speaker 7: One more on the capital markets governance topic, and then we can shift gears. What advice do you give founders based on the experiences you've seen about selecting board members and traps to be wary of when bringing companies get to a size where they need that independent board. What should they look for in selecting board members?
Speaker 3: Competence and experience. Basically, you want grown ups on your board.
Speaker 6: A 100% agree. And then I I would also say, making sure that the board members, especially those who are truly independent, can devote sufficient time and attention to the matters at hand. There are some people who shall remain nameless that serve on many, many, many, many boards, and and my own view is that that's sort of incompatible with, what what ought to reasonably be expected of a board member.
Speaker 1: This podcast is brought to you by Scale LLP, a distributed national law firm that's been called the wave of the future by Reuters. Scale is a revolutionary distributed law firm that offers a fresh alternative to traditional practices. By leveraging cutting edge technology and a flexible structure, Scale empowers attorneys with a more satisfying and lucrative career and delivers efficient, connected legal solutions for clients. To keep up with how Scale LLP supports clients with its tech driven approach, check out the website linked in our podcast bio.
Speaker 2: Okay. So let's let's raise a big topic that's near and dear to Team Texas and the the Y'all Street podcast. Delaware or Texas?
Speaker 5: Delaware. That's not even a question. It's Texas all day long. Pro business state, booming economy, plenty of opportunity, plenty of space to grow, great people, highly educated workforce, top universities, people are moving there and some of the best lawyers you'll find anywhere in the world.
Speaker 0: I, I mean, I, I see the value in Texas. I obviously would plug Oklahoma as an adjacent state to Texas with far better people and a better football team, but, yeah, I, you know what? I, I, I think that the, I think there's lot of brouhaha about it. I think it's six and one half dozen the other, you know, I think, especially if you're, you know, a young company, there becomes shifts and, know, I would see this like in, in web three and blockchain all the time. All a sudden, everybody's like, we gotta be a Wyoming LLC.
You're like, Because everybody else is, but you know what? If that's where people are gonna invest, do it in Wyoming. If you're seeking traditional, capital that wants it to
Speaker 7: be in Delaware, do it in Delaware. That's it. Alright. Drill down on this question a little bit for mister Ganz from the litigation perspective. You know, Texas is adopting right now a number of pieces of legislation that are aimed at, stopping what is viewed as as fishing expedition litigation, litigation going after boards that have made informed decisions and challenging those decisions.
What do you think about that playing field right now targeting, targeting companies and targeting boards?
Speaker 3: I don't think that's any different than what any state is doing right now, including Delaware. Delaware just recently made a lot of changes to its corporation's code to avoid a lot of strike suits, a lot of the ability to dig into corporate records, and things like that. I mean, with all due respect to the Texas business courts, which have been in existence for, what, twenty minutes now or whatever, I mean, look. If if if you're looking for to incorporate in an area that has a great court, a great bench, and a well developed law that everyone else is mimicking, you wanna be in Delaware.
Speaker 6: So I'll just amplify Bob's response, and I would say, you know, I said Delaware as a single word answer before. I I don't really believe that. Right? I mean, I think it depends.
Speaker 7: It just said again. I I think it I think it
Speaker 6: depends on your goals. However however, if what you want is a is a well reasoned you may not always agree with it, but well reasoned body of case law interpreting core sort of corporate governance and shareholders rights disputes, Delaware exists. Right now, the the rest, you know, I don't want to slight other states that have, you know, sophisticated judges and and litigants, but, the rest is sort of a blank slate, and that could be good or bad.
Speaker 7: I think part of part of the perspective of the of the the Delaware legislators sorry, the Texas legislators that are bringing forward these these, amendments are we shouldn't have to rely on a body of case law interpreting our statutes. We should just be able to read the statute and see that it's clear or not. So I think that that that that's an important that's an important part of it. You know, I think they're they're trying to they're trying to attract, boards. They're spending a lot of money on litigation.
And in fact, one of the statutes that's that's being passed is one that says, basically, inter internally, a judge, must read the Texas statutes as written and cannot cannot interpret or cannot bring in outside Revlon, for example. You can't read Revlon into the Texas statutes. Now, I guess, I wonder, that is that a good approach, or is that an approach that's gonna backfire?
Speaker 3: I'm trying to think of a statute that isn't subject to interpretation other than, like, a traffic law or something. I mean, red means stop. Green means go. Beyond that, that's what judges do. They interpret statutes.
I no. I I I don't I think clarity and efficiency are most important when you're thinking about a potential worst case scenario, which litigation normally is. And Delaware offers a combination of that. You have predictability. You have an experienced bench, and you have a chancery court that disposes of matters expeditiously.
Now maybe Texas will get there, but I wouldn't I wouldn't with all due respect to the Texas lawyers around the table, I wouldn't just jump in without at least thinking about it. And something like that, I just I just don't understand that thinking.
Speaker 6: I think a great irony might be if the body of case law that emerges from Texas is new or any other states, really, new attempts to, become sort of a a a magnet or haven for for incorporation. It would it'd be interesting if the body of law largely mimicked what the Chancery Court and the Supreme Court of Delaware have produced, and then it would be a double irony if Delaware attempted, as perhaps they have already done, to remove that body of case law from their from their own state such that Delaware could Texify and Texas could Delawareify.
Speaker 5: Mhmm. That's
Speaker 7: good. Alright. I think we've beat that one up, enough. Let's let's move on. Let's change gears a little bit.
What what clause, do you wish every founder understood in their commercial contracts? What's the one clause that you wish founders understood?
Speaker 5: I'm the broken record here, but the intellectual property ownership clauses and understanding that simply because you have emails or other documents with your co founders or vendors or employees doesn't mean the company owns the IP. You have to very clear, explained policies and procedures for how that IP is transitioned over to the entity.
Speaker 6: I would say if if I'm talking just across the broad field of commercial contracts, the area that I think trips up most folks is not having a sort of clear pricing and deliverables and performance, measure or mechanism.
Speaker 7: That's good. I don't wanna give too much time for everyone else to think about answers, so we're gonna switch after two. Bob Ganz, litigation hold. Explain it in 10 words or less.
Speaker 3: Don't destroy anything. Okay? That's what it comes down to. Do not if you get sued, don't destroy anything. You're just gonna make things worse.
It's never the crime. It's the cover up. I went way over 10 words. I'm sorry.
Speaker 5: That's that. Yeah. Put on it. T shirt.
Speaker 7: Alright. Dory and Heather, what's the dumbest reason you've seen someone get sued?
Speaker 0: Well, actually, I I can start with that. The dumbest reason I ever saw somebody get sued was when, a CEO of the company wanted to terminate the COO of the company. And, the CEO was determined under no circumstances whatsoever with the guy, get any severance. The guy was willing to take a year severance, keep his email. And the CEO was just adamant that he was gonna go to the mats.
And so the COO use himself as a lawyer, spent five years litigating against the company. There was an indemnification clause in the operating agreement that allowed for even, indemnification, even in the event that an employee or member sued the company. So the company had to pay all his legal fees once he hired away. So he started out by himself. Anyway, I, I was general counsel of this company and I told him, please give him, you know, the severance.
Anyway, I, we wanted to settle for $150,000. This ended up costing about $3,000,000 in legal fees of the company and actually destroyed the company. And it was pure it was pure pride. Right? And that was the only so I guess the real answer is when you act out of pride and emotion and not out of logic and and and, what's best interest of the company, that's the dumbest reason you see it.
Speaker 4: Yeah. The dumbest reasons I've seen is when an attorney will start talking up to a client about, you know, trouble damages and all of these like extra things that a client's gonna get. And so I had a, you know, a vendor dispute. The vendor thought, you know, maybe they were owed x amount of dollars. Attorney was like, oh, actually, it's 10 x.
We spend a bunch of money on attorney's fees, waste months, I don't even know, maybe a year's worth of time, and and the settlement ended up just being x. And it was like, we coulda just done x from the beginning. Great.
Speaker 2: Okay. Let's go around. Favorite legal movie?
Speaker 3: Oh. The Rainmaker. No question.
Speaker 6: I I have mixed feelings about Tom Cruise, but I will say A Few Good Men is a great legal movie.
Speaker 0: Liar. Liar.
Speaker 6: Oh, I've got a I've got a runner-up. Oh my god. Got a head rush from there. As a runner-up, the underappreciated Cohen brothers comedy Intolerable Cruelty, starring George Clooney as supposedly the best divorce lawyer in Los Angeles.
Speaker 7: Alright. Two more. What is one thing every lawyer should unlearn?
Speaker 5: Heretofore.
Speaker 6: Using Latin phrases without knowing what they mean when English falsifies.
Speaker 3: Using Latin phrases even if you do know what they mean.
Speaker 7: Alright. And, let's see. Heather, what, what is one what is the one legal show that gets it most wrong?
Speaker 6: Oh, I know that.
Speaker 4: I don't watch TV.
Speaker 0: Oh. LA law.
Speaker 6: It probably used to be LA law. I I would say the show Suits, while very entertaining, definitely gets it wrong. There's just no universe in which the best litigator in Manhattan is also the best mergers and acquisitions lawyer in Manhattan.
Speaker 5: I have to believe that the old show Night Court had it 100% correct. Because if we're not bringing mules and donkeys into the courthouse, what kind of law are we practicing?
Speaker 3: Any Law and Order spin off. Okay.
Speaker 2: This has been great. Good conversation, everybody. Glad to, have the time to spend with partners in, San Diego. We don't get together as much as we should. I'd like to go around the mic one more time.
Let's give a sign off, say hello to the folks in the audience and any parting thoughts.
Speaker 6: It's been great to be here with my fellow partners. As Brian said, you know, we don't get together in person that often. We're a we're a remote firm, that has its advantages, but it's it's really nice to exchange thoughts this way.
Speaker 5: I honestly and truly think being a lawyer is one of the best jobs you could ever have in the world, And it's made better by having good people to practice law alongside of. Happy to be here.
Speaker 0: I, I will actually echo James on that. You know, I, I joined scale three years ago. I'd been at GC for like fifteen, eighteen years, And you're getting to be in this environment and getting to work with the clients I work with and this team, it's absolutely like reinvigorated my kind of love and appreciation of being a lawyer. So, it's been great to be together with everybody.
Speaker 4: Yeah. Echoing what everyone else has said, joining scale has enabled me to open up a whole new life path that I didn't even know was imaginable. And so to anybody who is actually listening to the podcast, if you're a potential client, an attorney, you know, reach out to us. We love meeting like minded folk.
Speaker 3: Thank you, Chuck and Brian, for having us. It's a great podcast. I love it. And for all of you out there who haven't subscribed yet, subscribe.
Speaker 2: Alright. That closes us out. Thanks, everybody. It's been fun.
Speaker 1: Thanks for tuning in to the Scale LLP Yall Street Law podcast. We hope you enjoyed today's episode and found it valuable. If you liked what you heard, don't forget to subscribe and leave us a review. For more insights and updates, visit www.scalefirm.com or follow us on LinkedIn. Until next time, we'll see y'all later.