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Three attorneys oversee billion-dollar network at Modine

Wisconsin Law Journal takes a look at the way two in-house law departments – one small and one large – address legal issues for two different types of companies. Dean R. Zakos, vice president and general counsel for Modine, discusses how his small legal department handles legal issues for a billion-dollar, international manufacturing company. Robert J. Berdan, vice president and general counsel for Northwestern Mutual, talks about how his legal department supports a nationwide, multi-billion-dollar finance company.

Innovative thinking is expected at a company like Modine Manufacturing, a billion-dollar international company, which develops and produces thermal management systems.

That is also true for the Racine-based company’s legal department. A team of three attorneys and two assistants serve as primary in-house counsel for Modine which, as of March 31, 2007, had total assets of $1.102 billion.

“I think we do a lot with lesser resources and we have to get inventive sometimes,” said Dean R. Zakos, vice-president, general counsel and secretary for Modine, who estimated the company’s annual legal budget is $3.5 million.

Of that $3.5 million allotted for legal services, more than two-thirds goes towards outside counsel, which handles about 70 percent of Modine’s legal matters.

“It’s becoming harder every day,” continued Zakos. “I’ve been with Modine 22 years and when I came they had three attorneys, two support staff and did $180- to $200-million in sales. Now they are doing $1.7 billion and still have three attorneys and two support staff.

Modine has more than 7,000 employees at 34 facilities in 15 countries and Zakos admitted that there are not enough hours in the day for his staff to see everything through, but a successful philosophy helps them come close.

In-house Attorneys

Current senior counsel members include Kathryn Powell, who previously worked for Quarles & Brady in Milwaukee in their Corporate Finance/Securities realm, and Ann Mayberry-French, a former nurse and general counsel at Assurant Health.

Both fit the profile of “corporate generalists,” according to Zakos who prefers his in-house attorneys know a little bit about a lot.

“They have to have a working knowledge of a variety of relevant legal fields and not be specialized in one,” said Zakos. “It’s just like a utility infielder, in that we can’t afford to have someone who just plays first base.”

The broad expertise in areas like contracts, employment law and litigation allows Modine to handle most issues in-house, but also affords the company the ability to seek outside aid on an as-needed basis.

“We know enough to say we can either solve a problem or identify issues and then if we need to go outside for expertise, we can do that,” said Zakos.

When seeking outside aid, Zakos values depth over breadth, a policy which has worked well for Modine.

Mayberry-French joined Modine less than two years ago via Legal Placement Services, a tool which Zakos uses when the company is bombarded with business. Typically, Modine will seek out temporary attorney aid to “off-load that peak.”

“If there’s a lot of merger and acquisitions activity where our main people are tied up, our internal clients still need attention,” said Zakos.

Working Abroad

The responsibilities of Zakos and his staff extend beyond facilitating partnerships in the U.S.A carefully constructed network of legal support has allowed Modine to maintain its modest legal base in Racine, but also expand into Asia and Europe.

Modine employs the equivalent of two full-time attorneys to oversee its European operation, based in Bonlanden, Germany, but also retains outside firms on occasion. Zakos likened the company’s legal philosophy in Europe to that within the states in that it attempts to handle the workload internally, but seeks specialized representation when necessary.

The company expanded business to Europe in 1990 and more recently has begun to establish markets on the Pacific Rim. Headquartered in Shanghai, the Asian branch of Modine does not have an in-house counsel, but with two new plants under construction, there is a prominent need for legal guidance.

“There is a lot business coming and simple things like the office lease for space and other day-to-day tasks have to get done,” said Zakos. “Most of our international work has gone to firms with global footprints and they are very good at what they do. But like most global law firms that are full service with a huge amount of expertise, they are very expensive.”

So rather than retain a firm like Chicago-based Baker & McKenzie, as Modine did when first coming to China, Zakos enlisted the services of a local outfit in Shanghai. The “boutique” firm is located just two blocks from Modine’s current construction site.

“Once we got into China, it didn’t make sense to keep a large firm like Baker, so we looked for a firm that didn’t have that scale, but was close by and could act in effect as in-house counsel,” said Zakos. “It’s worked out very well with seven or eight attorneys who handle daily stuff I don’t think larger firms would even be interested in.”

While Zakos said he hoped to duplicate the model elsewhere, he noted that keys to the process were finding the right local firm and realizing limitations. In Modine’s case, an American attorney who was in-house counsel for Pepsi Co. in Asia established the Shanghai firm.

“He went out on his own and developed the practice in a niche market for companies like Modine, who wanted day to day stuff done at a reasonable rate,” said Zakos. “At the same time, for mergers and acquisitions work or large projects with a lot of dollars and risk, my philosophy is go to someone with the right expertise and experience even if it tends to be pricey.”

More for Less

Coordinating cross-continental legal operations, along with keeping up with the influx of work in Racine, is a daunting task for the counsel at Modine and Zakos freely admits that additional attorneys would be welcome.

At the same time, he realizes that expanding in-house resources is likely not a top priority because, as a manufacturing company, there is usually a greater need for resources in other areas.

“You look for happy mediums,” said Zakos, who estimates his work week to be near 55-60 hours. “I’d like to have more people, but it’s our department here competing with other departments for resources. Sometimes management makes the decision that the company needs engineers instead of more lawyers.”

One of the things which helps keep volume relatively manageable for in-house counsel is the sales representatives’ adherence to company parameters when making a routine transaction.

Zakos said the ability of the sales department to familiarize themselves with general legal guidelines and forms when making a deal lessens the burden on in-house counsel and increases sales. From confidentiality agreements to a $60 million contract with Hyundai, the legal team will only get involved if they need to.

“An agreeme
nt might be 60 pages and only half a dozen issues are really important,” said Zakos. “The volume of things like that is such that we’d be here all night so we set up forms on routine-type matters. We’ll identify key things and if the client is willing to sign the form as-is, we’re good to go.”

“We don’t want our business people to be lawyers, but we also don’t want them to pass every legal document on to us,” continued Zakos.

4 comments

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