Contract Drafting in a Regulated Environment: Contract Tips from Carolyn Elefant

This is the full transcript of You Can Contract's episode featuring Carolyn Elefant.

Carolyn Elefant is a recognized change-maker in energy and environmental justice law and the legal profession. Over 20 years ago, fresh out of law school, she got a job at the Federal Energy Regulatory Commission. Later she opened her law firm to help her renewable energy clients, co-founded an organization which lobbied for hundreds of millions of dollars in R&D for the renewable energy industry. She also started the award-winning blog, MyShingle.com and wrote Amazon #1 Bestseller Solo by Choice.

In this interview, Carolyn talks about the art of balancing regulatory and commercial approaches to contracting, and shares advice on figuring out what to draft, what to revise, and what to negotiate in contracts. She also gives her tips on working with and educating clients on contracts.

Please note: this is an automatically generated transcript. Please allow for some imperfections.

Laura Frederick: Hi, I am Laura Frederick. Welcome to this episode. Today I'm talking with Carolyn Elefant. She's a solo practitioner focused on energy regulatory matters. In this episode, she shares her journey of learning how to draft contracts when coming from a regulatory background. She also shares some of her advice for working with clients and helping clients understand their contracts. After the deal is done. Let's kick off the interview.

Welcome, Carolyn Elefant. I'm so excited that you're on the show.

Carolyn Elefant: Hi, Laura. It's great to see you, and it was great to talk to you at least over Zoom as opposed to just communicating by email or posts.

Laura Frederick: Yeah, so we've been talking a lot over, I guess the last year or two. For those joining the show who aren't familiar with Carolyn's background, she's been heavily involved for the last 20-plus years in helping lawyers with their small law firms and solo practices.

So maybe you can share a little bit about your background and what you've been doing. But definitely, Carolyn's been an inspiration for me.

Carolyn Elefant: Thanks, sure. By day I am a mild-mannered energy regulatory attorney. I work with renewable energy companies and landowners and environmental justice communities that are impacted by gas pipelines.

And on the side, I've been blogging about solo and small firm practice and law firm ownership for 20 years, and so that topic has gone through cycles when I started doing it. Owning a law firm was not cool. And fast forward to today and now entrepreneurship is something that a lot of people in legal are really interested in.

So having a resurgence of popularity. And certainly, I was one of them because I had been an employee for 24 years when I opened my own firm in 2019, and I'd never run a firm, I'd never been a partner in a firm. I was completely clueless.

Laura Frederick: And your materials are so relevant to the practical demands of the everyday.

Carolyn Elefant: Thank you. I always love hearing about people who have read the materials and said that it I guess the feedback I get the most is people will say that my writing has given them the courage to start. Probably because I was so in-depth when I started that comparison, people can't help but feel confidence.

Laura Frederick: Yeah. And there's so many parts of starting your own firm that aren't intuitive or obvious. So let's go back, all the way to the beginning. When did you first get exposed to contracts? Was it in law school? Or did you have any exposure before that?

Carolyn Elefant: So I think it was before that, and it actually wasn't a contract per se, but it was a graduation policy. They changed the way that they calculated GPAs for if you're gonna graduate like Magna or Suma. And I think that it was I argued that it was changed retroactively and that I would've taken different classes. I can't, I cannot believe that I was so obsessed with getting some kind of graduation honor, but that's what it was. I made an argument. I remember I was dating somebody who was in law school.

He read my letter. He said it was very well-written and persuasive, and I thought that was amazing. That was better than like him telling me I looked good or something. I was told I was persuasive. And it did turn the day. They did keep the policy in place. So again, an's embarrassing topic, I think that stuff is so stupid and so ridiculous, I don't know why I cared about it so much, but I did. It was my first exposure to a type of contractual relationship and it showed me that if you could make certain arguments or parse the text in a certain way, you could actually change it or get the interpretation that you wanted.

Laura Frederick: That's a great exposure because it is, at its core, that's what we're doing with our contracts, is trying to get the rules to work for this transaction in a way that work for us and makes sense for our situation.

So then you get to law school. Did you learn contracts other than your first year class, or was that the only place that you were exposed to it then?

Carolyn Elefant: I believe it was just in the first year in our contract. I'm actually going back for my 35th reunion in two weeks. But my contracts professor was the typical Kingsfield model if people still watch "The Paper Chase," so that's how we learned contracts. I don't think we ever looked at a contracts clause that I can remember, but I do remember just some of the cases that we read. So that was really the limit of the exposure there.

Laura Frederick: Yeah, mine I remember the wedding ring as a gift versus detrimental reliance and all those things. That stands out in my memory because it was different than I would've expected, and I'd never thought of wedding rings as a contract. It's interesting what we remember. Yes. So you graduated law school and then did you end up working with contracts right away, or did you take a different path?

Carolyn Elefant: No, so what happened was I had been working at a big firm where I had an offer and I just decided as I was getting towards the end of my third year that wasn't something that I wanted to do. So I just came down to DC. I started working for the Federal Energy Regulatory Commission where I was for two years, and most of that was really regulatory work, so I was parsing regulations and writing commission orders or advising technical people. So I didn't really do any work on contracts. Then I think my first exposure was when I went to work at a firm and we would litigate over these large power supply contracts and rate agreements with different parties, and so I think my first exposure was probably, I wound up working on an arbitration and a dispute over the different obligations under that contract and the contract provided for AAA arbitration. And That's what we had to learn.

Laura Frederick: Now, when did you start actually drafting your own contracts in your work?

Carolyn Elefant: That's a good question. I think that was something that came much later when I started my own firm. I had another case that was breach of contract or a breach of a lease agreement. And so the first agreements that I drafted were really clauses of settlement agreements with different parties. And then I started doing work for Eminent domain clients and communities impacted by pipeline. So sometimes there would be an easement agreement, which is  basically a contract for the company to take an easement for its pipeline, and there would be different provisions about what rights the landowners had, what rights the property owner had.

And so that's when I started drafting those kinds of agreements, basically easement agreements and also settlement agreements for damages.

Laura Frederick: So as you were learning contracts, you were in your own small firm, how did you figure out what to draft and what to revise and what to negotiate? What do you remember about your learning process there?

Carolyn Elefant:  That's a good question. I remember that the New York Times had done this project where they gathered up thousands of easement agreements for I guess they were mostly for gas and oil easements, but there were a couple that related to pipelines.

So I remember going through their database and looking at different clauses and seeing which ones repeated themselves. There are also some online resources that talked about different terms, and then there were also court cases that were interpreting which terms could be negotiated, because some of the terms of these agreements are basically decided almost by default, the regulator imposes some kind of obligation that you can't contract around.

And so there was case law that dealt with those. So it was a lot of kind of, it was very piecemeal training, I would say. I never had anybody who sat me down and took me through a lease clause by clause and told me what to include in the easement and what you shouldn't include. And I saw a lot of poorly drafted easement agreements too, because there were often attorneys who were drafting agreements who didn't know about the federal approval process, and so they would have terms in there that I knew weren't enforceable that were in there. So I wasn't dealing with a perfect database either.

Laura Frederick: I think that contracting in a regulated space is a whole different kind of contracting than those of us who are working more in general commercial, general technology kinds of deals. So you always are balancing the regulatory requirements with the more creative, less restricted terms in the agreement. How did you approach that balancing?

Carolyn Elefant:  Yeah, so I was thinking after the easement agreements, I also started doing it with a certain subset of power supply agreements under the Public Utilities Regulatory Policies Act. Basically, it's a tool that requires utilities to buy power from small independents.

And so there are certain provisions in the statute that have to be included. So it was, so really what I was doing more than drafting was really troubleshooting or inserting clauses or taking language out as opposing to drafting from the ground up. I didn't feel like I had enough knowledge about more general contract provisions that I could really draft something from the ground up. But being able to come in and troubleshoot and avoid some of the litigation issues that I'd seen in some of the cases, interpreting the clauses, I felt was very rewarding. It was like a different part of the brain than just litigating over the breach after the fact.

Laura Frederick: One of the things I liked about what you said and which is this access to database and lots of different contracts, and that's a great technique I think a lot of lawyers have used to learn contracts. Now there's other platforms, there's things like Law Insider or other ways to search online for clauses of particular contexts. When we're not sure how to draft something, I've found going in and looking at lots of samples is the best way. And in particular, if you can find samples from your subject matter. So for you, those power purchase agreements are a unique kind of beast. So finding an indemnity from a software license might not be that helpful for you in drafting indemnities in your contracts. That was how I learned to draft complaints was going to pacer or into the court, walking into the court and asking for a copy of the paper file and looking at the complaints. I think that's how lawyers have always learned how to draft complaints. So it would make sense that doing it that way for contract you would apply a similar kind of learn and see or copy or do for contracts.

If you only learn that way, if you only learn looking at provisions, you're probably missing a lot of it because the provisions don't really say why they're doing it a particular way. And it's the cases or the personal experience or the stories and advice from mentor or manager, that flavor helps us know how to draft those provisions. So we can look at a whole bunch of provisions and say, oh, this looks good. But without that wisdom that comes from being exposed to either personal experience or reading cases and understanding how it works in the real world, the language itself isn't enough.

Carolyn Elefant: The other source of information that comes into contracts is clients. I tend to attract clients who ask a lot of questions because I don't mind if they Google the law and then ask about it. That just keeps me on my toes. It often exposes me to new ideas. And so sometimes they'll say, this doesn't seem quite right. Can we make them do this? And I'll think. We probably can, why don't we try including that clause in here? Or why don't we do this way? And so I think that sometimes clauses will also come into play because my clients ask for those particular types of protection or because they'd seen it somewhere else, or maybe a friend had it in their easement agreement and it sounded like a good idea.

So that's also been a very good resource, and that's really the purpose of the contract, is to protect your client's rights and define their obligations.

Laura Frederick: I remember, and this goes back to that regulatory versus commercial approach. When I worked in this energy company, I was the commercial lawyer only, and then there were regulatory lawyers who just did regulatory stuff. And we often had to come together and it was, I wouldn't say a battle, but it was a bit of a butting heads. My business team wants to do this, which is cutting edge, pushing the envelope. The regulatory lawyer is coming with that knowledge of the regulations, no, you can't do 1, 2, 3 at all. And it would end up being this negotiation between the regulatory lawyer and me about, okay, what if we just do this thing? Is that okay? If we can't do this other big thing, can we do this small thing? And it was, and of course there's no bright line rules on anything. So it's always that judgment call. But doing both the contracts and the regulatory yourself, I'm sure you have this internal discussion of, oh wait, the regulations require this, but my client wants to do this. How do I marry those two?

Carolyn Elefant: Yeah, that has happened before, especially in recently I've been negotiating a series of agreements to resolve issues where the law is incredibly unclear and where there really isn't even any other course that you can approach to get this kind of results. And so there's been a lot of draft as best as you can, then cross your fingers. And I don't wanna sound cavalier, these clauses that we worked out were the product of incredible back and forth and like on the verge of deadline trying to get the clauses correct. But at the end of the day, sometimes you just assess the risk and you make a informed judgment and go forward and hope it doesn't come back to bite you three years later.

Laura Frederick: And I think that's so true across a lot of regulated things. Privacy and data security right now is there are so many things people are doing and seeing and there's no explicitness in the regulation about particular things. So people are trying to figure out how to draft contracts for something where there's no bright line rules or no obvious stated practices that everybody does. Yeah. And especially with the laws keep changing in the privacy rule with what's okay, what's not okay. The interplay of regulatory and contractual. It's such an interesting dynamic. Yes, it definitely is. So you were self-taught through these methods, learned over the years how to draft contracts.

When you are working with clients, and because you are being in a heavily regulated area, do most of your clients already or do you work mainly with clients who already know how these contracts work?

Carolyn Elefant: So it breaks down two different ways. Most of the renewable energy companies that I work with probably have more experience with contracts than I do many times. It's a non-attorney who does the first crack it negotiating the terms, and then I get called in to do reviews. And so in those situations, if I point out some sort of regulatory issue, they're usually very appreciative and very deferential. When I work with landowner clients, some of them have had other leases or easements on their property, and so if there's a term in another agreement that they like, they may ask about that. The biggest area of questions that I get from the landowner clients is unfortunately in working with pipelines, you invariably have to include a very onerous confidentiality clause. So I often have questions about clients even years later asking if they can talk about a certain topic because of that confidentiality clause.

So what I try to do is, after the agreement is signed, I try to give them a memo kind of explaining the different ways that they can do this. And this is one place where one of my summer associates was really helpful because he had worked in the news industry and so he was very familiar with how PR works and different kinds of restrictions and things. So he helped with giving these clients some tips on what they could and couldn't do, and they still keep those memos when they call me. They ask me about what I've written in a particular paragraph. So that's usually what I do to educate them. And the thing is when you sign these agreements, everyone's been so angry. The case is on their mind, everybody's bitter. Memories are short. And two years later, if they slipped and said some, unless they talk about the number itself, if they slipped and said something like, oh, that pipeline was a jerk. They're not gonna be sued for defamatory remarks or painting the company in a bad light. And the company is probably destroyed or, merged with somebody else. And it's probably like a whole different company anyway, doesn't even know about this case. So these things are just like immediate right after you sign the deal. But those are the things that clients are really afraid of because they don't want to get hauled into court for something like this. And they're concerned about the consequences.

Laura Frederick: I think you gave two different points that you made, which I think are really useful. One is this idea that the prime time for a contract breach and a contract dispute is that short window when it starts usually, that's when things go wrong. At least, I dunno if that's been your experience, but that's definitely been mine. It's not. 10 years later, it's like a six months, a year, two years.

And I think for that exact reason that people forget, they forget what's in the contract, what their rights are. Nobody's managing it closely. So that was one point I really liked that you said. And the other one was this education of clients as a way of helping them with their contracts and contract operations.

I think that's an underemphasized counseling opportunity for a lot of lawyers. The challenge is we don't have a lot of time or clients don't wanna pay for us to do that, but finding a way to add that value, either a quick summary in an email that takes you 20 minutes, just say, Hey, remember these are some of the key things you agreed to.

As you're winding it up when it's fresh in your head, because you're not gonna remember a year later either.

Carolyn Elefant: Yeah, that's true. That's very true. The best clients, the ones with the optimal operational efficiency, they actually have had every contract assigned to a role and whoever was in that role was in charge of that contract. And then that person had to go in and document every single thing that they had to do and then, Identify a checklist that they'd done it, or I have to check on this. We're gonna have a meeting once a quarter, what was on a quarterly operational checklist to have a meeting with this counterpart or whatever kinds of things. I think that point about giving them that guidance, especially when it's fresh with your, in your head when you've just negotiated it seems like such an easy win and benefit for the clients.

Laura Frederick: For the last part, just I'd love to hear what advice you have. People listening to this podcast, some are law students who want a career working in commercial potentially, or working with contracts in some way. Others are just lawyers who are trying to get better and want to improve their training and learning about contracts. So what advice do you have for people who are on that journey of figuring things out?

Carolyn Elefant: So I guess the biggest piece of advice would be not to be afraid of contracts. I have to admit that I was a little intimidated about some of the power supply contracts, just because they had been held out to be these mysterious things that were dealt with on the transactional side of the big law firm rather than the litigation side, I think the first thing is just not to be afraid of them, but to approach them the way you would approach any other legal issue that you have to figure out.

And the second piece of advice would be just to, get your hands on as many contracts as you can review, even if they're just ordinary contracts in your own life. Pay attention to the terms of service or the credit card that you sign off on the lease that. You're signing for your apartment those types of things, just so you get more experience reviewing agreements and, understanding what they say. And then the last thing is, fortunately, there are so many amazing resources.

There's your book, there's that book about redlining.

Laura Frederick: Yeah. Contract Redlining Etiquette by Nada Alnajafi.

Carolyn Elefant: So there are so many amazing books that weren't available before, and so I would just say to take advantage of those resources too as a starting point, as well as those online contract databases.

Laura Frederick: Yeah, and I think that's right and especially for law students who just got case law during law school, that if you're gonna be working in any way where you'll touch a contract. I think getting to be exposed to those either books that talk about it from a practical perspective, again, not more of an academic case law perspective of more what do we really do in the real world, which Nada's book, my book and particularly I like David Tollen's book Tech Contracts Handbook is excellent at explaining a lot of the fundamentals.

Thank you so much, Carolyn. I really appreciate being on the show.

Carolyn Elefant: Yeah, no, thank you for having me. This was, this has been fun. This is great. I can't wait to listen to the other ones.

Laura Frederick: It's so fun for me because I get to hear all these stories about how people learned contracts and it's amazing all the different paths that everybody took. So there's definitely not just one way and I think your story is a unique one as well. And appreciate you sharing it with us.

Carolyn Elefant: Sure.

Laura Frederick: Thanks again.

Carolyn Elefant:  Thanks. Bye. Bye.

Laura Frederick: Thanks for tuning into this episode. If you'd like to learn more about how to contracts training programs, check out our [email protected]. You can sign up for our weekly newsletter, which includes links to these episodes as well as contract tips, upcoming events, and other offers.

Happy contracting.