Law Students Get a Taste of Deal Structuring at First-Ever Transactional Lawyering Competitionby LINDA BRANDT MYERS | ILLUSTRATION by ROBIN AWES EVERETT | PHOTOGRAPHS by JASON KOSKI
Top-tier law schools are unbeatable at teaching students how to litigate. The conventional curriculum implicitly emphasizes appellate litigation, teaching students to read, argue, and distinguish cases, and to predict what a judge will do. But a transactional practice demands additional skills. When it comes to showing students how to structure and negotiate a complex business transaction, law schools often seem to miss the mark.
As a result, those who go into a corporate practice—more than half the J.D. graduates at Cornell Law School—face a steep learning curve for the first few years on the job.
“Law schools generally are not very focused on transactions,” says Professor Charles K. Whitehead, an experienced corporate deal maker who now teaches Corporations and Securities Regulation at the Law School. To illustrate his point, he tells the apocryphal story of a law graduate who, when asked to mark up a secretary’s certificate for a closing his first week on the job, says: “Sure, I’ll do it—but first tell me, what’s a markup, what’s a secretary’s certificate, and what’s a closing?”
But things are changing, at least at the Law School, thanks in part to the Transactional Lawyering Competition (TLC) sponsored by the Jack G. Clarke Institute for the Study and Practice of Business Law (Business Law Institute). The unique learning exercise, the first of its kind at any top-rated law program, had its premiere last fall.
“The idea,” said Whitehead, “was to give law students a basic sense of the tools used in a transactional law practice and the background to begin to understand what is going on when a merger, underwriting commitment, license, or bank loan is being structured and negotiated.”
The TLC, which was offered as a one-credit course last fall, began by introducing students to some of the language and substance of deal-making through five lectures interspersed throughout the semester and a mock negotiation by seasoned deal attorneys from Skadden Arps, which was open to the entire Law School and drew close to 150 students. The purpose: to prepare students enrolled in the course for an intense competition with classmates, which took place over the weekend on November 13 and 14.
Clearly the demand was there. The TLC was wildly oversubscribed, with about ninety applicants—whittled down to thirty-six, who were selected by lottery.
But the biggest draw, and the best part of the TLC, according to Whitehead and the students who took part, was getting candid criticism on their performances by alumni practitioners. Twenty-seven of them judged the competition, and they came on their own dime from places as far-flung as Beijing and Seattle.
“I’m very grateful to Jack Clarke for launching the Business Law Institute. Strong alumni support is essential to building out a new program. For that reason, I’m also grateful that some of our busiest alumni—in-house lawyers, law-firm lawyers, and people who have moved from law to business—were able to make time to come back to Ithaca to help our students,” said Whitehead. “They received hours of direct feedback from people who really know what they’re doing.”
Among the TLC instructor-judges was Karen Bertulli ’01, who began her career as a litigator before being drawn to a securities practice. Now a shareholder with Winthrop & Weinstine in Minneapolis, she said: “I learned most things by doing, over time, on the job. This competition would have been a great experience when I was a law student.”
Frank Schiff ’84, another instructor-judge in the competition, agreed. A partner with MidOcean Partners, a private investment firm with offices in New York and London, he says: “I wish we had had something like this when we went to law school. If you plan to go into transactional lawyering it puts you well ahead.”
“It’s a great program, incredibly valuable, something law students don’t get enough of,” said Law School clinical professor Sital Kalantry, who also served as an instructor-judge. “I was a business lawyer for seven years and never got this kind of training.”
The capstone of the TLC was a simplified, stylized deal that began with a case statement developed by Whitehead describing the potential sale of an upstate New York hotel property. The deal was brought vividly to life by the students, who worked in teams of two, half representing the buyer of the property and half the seller.
During the weeks leading up to the competition, the students drew from real-world precedents as each team marked up a simplified “form” purchase agreement (initially drafted by Whitehead). Then, during three intense sessions over the two-day weekend, students used the mark-ups to negotiate with opposing teams—in many cases, refining their positions to arrive at a necessary middle ground.
Both buyer’s and seller’s counsel teams were also given confidential instructions from their clients containing private information not shared with the opposing teams. The buyer’s lawyers learned that a Harry Potter theme park was planned close to the property, which, if built, could increase the property’s value significantly. And the seller’s lawyers were informed about a termite infestation at a nearby national park that could put the property’s value at risk.
“I wanted participants to negotiate hard for their clients,” said Whitehead, “but also try to structure and find a center point where accommodation would be possible—where both sides could find value from the transaction.”
During three sets of negotiations, the student teams worked to ferret out key information affecting deal structure and value. They adjusted their negotiation strategies and got thoughtful, detailed critiques of their performances after each session by the instructor-judges, who rotated so that each team heard from up to nine of them.
“Our judges seemed especially happy with our ‘anti-sandbagging’ provision, in which we denied the buyer indemnification for problems it discovered pre-sale if the buyer did not disclose them until after the closing,” said Marc Stepper ’11, who formed a seller’s counsel team with Rita de la Guardia ’11. “However, we assumed that our purchase price needed to start high, and so we chose a number above what our client was even offering, which our judges told us would not happen in the real world. In hindsight, we would have done that differently.”
Corentine Delobel, J.D./M.M.H. ’11, who formed the seller’s counsel team with Christopher Nenno ’12 and negotiated with de la Guardia and Stepper in Round 3, said: “Because there might be significant interest from other potential buyers if the Harry Potter deal were announced, we put in a larger-than-usual termination fee to make sure the seller wouldn’t walk away from our deal.”
Delobel added, “To get the buyer’s counsel to agree, we were flexible on the geographic area of the non-compete clause. But in an attempt to address the interests of each party,” she reported, “we ended up having three separate indemnification clauses, which made the contract overly complicated”—a point the judges also made in their critique.
Kalantry and Mark Underberg ’81, partner at Paul Weiss, who critiqued the two teams during Round 3, praised the students’ overall performances. “The dynamics between the two teams and the team members were good,” Underberg said.
Kalantry told Delobel and Nenno: “I liked your approach, not dwelling on specifics but getting to big-level issues.” She also praised de La Guardia and Stepper for asking to see the counsel team for the buyer’s commitment letter. “No one else did that,” she noted.
Instructor-judges voted on the overall winners by assigning points both for their mark-ups and negotiations. Stewart J. Schwab, the Allan R. Tessler Dean and Professor of Law, announced the winners at the end of the competition and awarded plaques for their achievements.
Nick Menillo ’12, who, with Joe Pohlkamp ’12, made up the winning buyer’s team, declared: “The best part was definitely the feedback sessions after each round of negotiations. I doubt there will be another point in my career when nine seasoned practitioners will dedicate so much time to commenting on my performance. There are few, if any, opportunities like this at any other law school.”
Omair Khan ’12, who along with Elisa Durrette ’12, was selected as the winning seller’s team, concurred. “We gained extremely insightful feedback from judges who are experts in their fields. I really haven’t gotten that anywhere else in my education.”
“There was a tremendous amount of learning during just two days,” added Durrette. “I knew before the competition that I wanted to be in a transactional practice after I graduate, but this was the first time I was critiqued on a particular skill set.”
The inspiration for the competition was a national contest that took place for the first time in 2009. Whitehead coached four Cornell Law School students who took part, introducing them to the basic tools that transactional lawyers use. The pre-event training helped. “They loved the experience, and they all came back and asked: ‘Would you think about doing something like this here, but as an intramural competition?’”
Two of the Law School competitors in 2009, Hrair Simonian ’11, and David Carlson ’11, helped Whitehead set up the TLC at Cornell Law School. Simonian is also president of the Business Law Society, a Law School student group that co-sponsored the competition. And all four TLC winners went on to compete at the national competition in March 2011.
As part of the wrap-up session at the end of the TLC, numerous alumni who took part offered advice to students and praise for the event.
Ray Minella ‘74, former vice chairman of Jefferies & Company, a global securities and investment banking group, and the new executive director of the Business Law Institute, credited the students with having a good understanding of legal concepts and negotiating the “microcosm” well. But he also counseled, “Lay out the big issues and try to get agreement on those. Know from the start where you want to be. Think two to four moves ahead so you end up there. And know early on what you are willing to give up. Without that, it’s hard to negotiate.”
Deborah McLean ’78, a partner in the Rochester office of the international law firm Nixon Peabody, suggested that student deal makers ask themselves, “What is it that would be important to my client for protection that isn’t in this draft?”
And Schiff told students: “Think about resolving the issues as opposed to creating new issues, and when you put in a provision, think reciprocal. But overall, you did a solid job,” he said. “I was impressed with your efforts, knowledge base, ability to think on your feet and understand the interactions.”
Weeks after the Transactional Lawyering Competition ended, Joyce Haag ’75, retired general counsel and senior vice president of Kodak, reflected on her involvement. “It was an enriching experience for the instructor-judges as well as the students,” she said. “It was a great way to involve alumni and provided us with an opportunity to re-engage with the school.”
And Steven Flyer ’91, principal with Gotham Private Equity Partners, said: “I thought the venue and platform were outstanding, and I believe the competition will grow into a great tradition at Cornell Law School.”
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