Doing The Right Thing

I recently had lunch with a non-lawyer colleague whom I have long respected, and he asked me a very interesting question. He wanted to know if, during my 43-year legal career as a transactional lawyer, I had ever found it difficult to do the “right thing.” I understood the reason for his question.

During the Great Recession of 2008, I often asked myself what all of the attorneys had been doing when their clients were bringing so many toxic transactions to the public markets, causing so much damage to our economy, and resulting in their clients paying billions of dollars in fines and settlements to various regulatory agencies.

I had no trouble answering his question — I told him that I had never found it difficult to do what I thought was the “right thing.” I then told him some true stories about some of my experiences. He encouraged me to write them down so that I could share them with others, so here they are. Note that the names have been changed to protect both the guilty and the innocent.

I grew up in Yonkers, New York. My father ran a men’s clothing retailer. He was a charming man, and he taught me a lot, including the value of hard work. However, I also learned at a young age that he really hated insurance companies. He believed, not without some justification, that they were happy to collect the insurance premiums that he paid them, but that they were never happy to pay his claims. This led him, on more than one occasion, to greatly exaggerate his actual damages because he believed that this made it more likely that he would achieve a larger settlement.

I share this only to give you some context for the following story. The day after I finished my first year at Harvard Law School, I was going to a bachelor party in New York City for one of my oldest friends. There were five of us in my friend’s car, and he was driving in the center lane of the New York State Thruway headed towards Manhattan. A large black Chrysler, which had started to merge onto the highway, crashed into the back of our car, causing our car to spin around and crash backwards into the right side of a large brick overpass. Fortunately for us, the collapsing trunk acted like a shock absorber. Except for a cut on my right elbow, where the shattering glass sliced through my clothes and then my skin, no one else in my friend’s car was injured. The driver of the black Chrysler was not as lucky. His car crashed front first into the other side of the brick overpass, breaking his legs and his ribs. He died the next day in the hospital.

The police drove us home, and the father of one of my friends, who was a doctor, assured me that there was no glass in my cut and that I would be fine. When I saw my father and told him what had happened, he told me that he was very glad that I was fine but that I had acted like a schmuck. I was stunned, and I asked him what he meant. He told me that I should have gone to a hospital in an ambulance, complaining about the serious whiplash that I must have suffered in the accident. I told him that I thought that was terrible advice, and that I would handle the matter in my own way.

I called the other driver’s insurance company and spoke to the agent handling the claims that arose out of the accident. I told the agent that I had been a passenger in the car that had been hit by his insured, that I had been injured, and that I intended to file a claim. He asked me to describe my injuries. I told him the exact truth — that my suit, shirt and elbow had been cut by flying glass, and that I thought I was going to die. He told me that he did not believe those damages were significant, and he discouraged me from even bothering to file a claim. I told him that I had just finished my first year in law school, that the statute of limitations on personal injury claims in New York would not expire until after I graduated, and that my first case would be my suit against his insurance company. He asked me how much I would accept to settle my claim, and I said, “five thousand dollars.” That seemed like a lot of money to me. Remember, it was 1968. He said that the most he could pay me was $2,500. I told him to send me a check and a release.

A few days later, the check arrived. I showed it to my father, told him exactly what I had done, and asked him if he still thought that I was a schmuck. I was grateful when he said that he was proud of me. As I recount this story after all of these years, I realize that I may have done the wrong thing the right way, rather than the right thing. However, I was quite young when this happened, my father had really hurt my feelings, and I had a point to prove. I think I got better at doing the right thing as I got older.

Fast forward about fourteen years. I was now outside counsel for a major commercial airport. In short order, I had three experiences worth relating.

In the first, another company was seeking fueling rights at my client’s airport. I was asked to attend a meeting with the Executive Director of my client and two representatives of Company A: Jack, its Vice President, and Paul, its head of governmental affairs.

After the meeting started, the Executive Director was called out to take an important telephone call. After he left the meeting, Paul took out an enormous roll of $100 bills, put it on the table, and said, “Here, Gordon, make it happen.” I was speechless for a moment, and then said, “Is this your idea of a bad joke?” Jack then said to Paul, “It’s not that Gordon is offended, it’s just not enough money.” Paul then swiftly took the money off the table and put it back in his pocket. The Executive Director then walked back into the room. I asked him to step outside, told him those bastards tried to bribe me and that Paul still had the cash in his pocket, and asked if he wanted to call the police and have them arrested. He said that he would rather tell them that the meeting was over and that their request was denied. While I accepted the client’s decision, perhaps I should have had them arrested. I never had another chance to get this “right,” since this was the only time in my entire legal career that someone actually tried to bribe me.

Roll the clock forward a few more years, and that same airport had to decide whether to give some valuable aircraft gates that had just become available to Airline A, a financially strong airline with a fairly large presence at that airport, or to Airline B, an airline with no presence at the airport that was in a Chapter 11 bankruptcy. The Executive Director and his staff analyzed the routes and rate structures of both airlines, and, with my help, the legal risks of dealing with Airline B.

We knew that it would be far less controversial to award the gates to Airline A, given its strong financial condition. However, we didn’t think that was the right long-term strategic decision for the airport. We wanted Airline B, one of the nation’s first low cost carriers, to get those gates since that would bring more airline competition to the airport. We decided to fight hard for that result, even though any agreement with Airline B would require Bankruptcy Court approval.

A special meeting of the board of the public agency that ran the airport was held on Christmas Eve. The Executive Director and I recommended that the gates be awarded to Airline B. After a spirited debate, and much criticism from Airline A, the members of the board unanimously approved our recommendation. (A week later, the Bankruptcy Court approved the agreement, and Airline B signed it as soon as the appeal period expired.)

When the board meeting ended, Sam, the representative of Airline B, came up to me. He said that he had been told by his boss “not to return without the airline gates,” and that he thought the outcome had saved his job. He said that he was grateful that we had the courage to make a difficult recommendation, and that if he could ever do a favor for the Executive Director or me, all we had to do was ask.

A few years later, that same airport client, now the fastest growing airport in the world, wanted to do a $1 billion capital expansion. Approval of that expansion had to be granted by an airline negotiating committee, the chair of which would be named by Airline B, which had grown to become the busiest airline at the airport. The day before an important negotiation with that airline committee, I learned that the new chair would be Bob. I knew from my prior dealings with Bob that he would never support the airport’s planned expansion. I remembered what Sam had told me on that Christmas Eve, so I called him. Sam was now in senior management at Airline B. Sam remembered me and asked why I was calling. I told him why I was concerned about Bob being named the chair of the airline committee. He asked me whom I would recommend instead. I told him that I thought Carl, another of Airline B’s representatives whom I had dealt with over the years, would do a much better job in that position. Sam said, “Consider it done.”

I went to the airport the next morning, and by chance, rode in the elevator with Bob. I had never seen him so full of himself. It was clear that he knew he was going to be named chair of the airline committee. He went into the conference room to meet with the other airline representatives, and I waited outside with the Executive Director as the airline representatives held their organizational meeting. After a very short time, a visibly upset Bob left the meeting, slammed the meeting room door, got on the elevator and was never seen at the airport again. We were then invited into the meeting and were told that Carl was the new committee chair. About six months later, after some tough but fair negotiations, the airline negotiating committee approved the airport’s capital expansion. I am grateful to this day for Sam’s intervention.

Roll the clock forward a few more years. This time, I was representing a local bank that had made a loan to a men’s retail clothing store. The loan was in default, and the bank wanted to enforce its security interest in the store’s inventory and sell it in a going out of business sale from the store, which was located in a major shopping center owned by Associates, a national shopping center operator. The store’s lease with Associates prohibited any going out of business sale without Associates’ consent. I called the office of Associates’ counsel and spoke to Jim, one of the attorneys in that office. I asked Jim how I could get Associates to consent to a going out of business sale. Jim said that that consent would be granted if my client agreed to a number of conditions. I checked with my client and sent Jim a letter confirming the bank’s agreement to all of the conditions that he had outlined during our call.

The bank complied with those conditions when it held the going out of business sale. About six months later, I got a frantic call from Jim. He asked if my client had signed the agreement that he had sent to me to allow the going out of business sale to occur. I told him that I had confirmed the bank’s agreement in writing and that the bank had conducted the sale in accordance with the agreed upon conditions, but that I had never received any agreement from him. Jim told me that unless he could show his boss a signed agreement he might be fired. I told Jim that if he sent me the agreement, I would try to get it signed by my client. Jim did. While my client wondered why I was recommending that it sign an agreement relating to a transaction that had occurred months ago, after I explained Jim’s problem, my client signed it. I sent the agreement to Jim and never thought about the matter again.

Roll the clock forward a few more years. Now, I was representing Company R, a shoe manufacturer that wanted to open retail stores in major shopping centers across the country. From my prior negotiating experience, I knew that landlords would often agree to modify the change in control provisions in their leases to permit the parent company of a tenant to be sold without the landlord’s consent, and I was successful in getting these provisions modified in every lease that I negotiated for Company R except for the leases with Associates. I was told by counsel for Associates that it would never agree to modify the change in control provisions in its leases. Since Associates operated a number of very important shopping centers across the country, Company R signed several leases with that landlord without any modification to the change in control provisions.

Roll the clock forward about five more years. I got a call from the President of Company R. He told me that he had signed a contract to sell his company, and his lawyers had just called to tell him that the closing would have to be delayed because they needed to get the landlord’s consent under each of the shopping center leases that I had negotiated. I assured him that that wasn’t true, since only the leases with Associates required that consent.

I called Associates, asked to speak to its counsel, and Jim answered the phone. He was now general counsel for Associates. I asked Jim if he remembered me from the bank’s going out of business sale of many years ago. He said that he did and asked me why I was calling. I told him about the pending sale of Company R and the need for Associates’ consent. He asked for my fax number and told me that I would have the consent in less than an hour. About thirty minutes later, it arrived on the fax machine in my office. I called the President of Company R and told him that I had received Associates’ consent. He expressed disbelief in how I could possibly have obtained it so quickly. I told him that I was simply being repaid a debt of gratitude.

For me, doing the “right” thing always felt good and often brought unanticipated rewards. It would be great for the legal profession if more attorneys did that for the first reason. The rest should do it for the second reason. Life can be funny. So often what goes around, comes around.

Gordon Arkin is a 1970 graduate of the Law School. He is a retired partner of Foley and Lardner LLP.

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