Amazon announced in June it would acquire Whole Foods Market Inc. for $13.7 billion. Included in the hefty price tag could be Whole Foods' legal department.
So far, as the deal awaits approval, Amazon.com Inc. and Whole Foods are staying tight-lipped about plans for the legal team's future. But based on clues from public information released by the companies, it appears that Amazon and Whole Foods could operate as independently as possible.
Attorneys who have been following the deal, but are not involved, believe that to be the best bet for both companies. They also weighed in on how Amazon might handle any liabilities and litigation it inherits from Whole Foods.
Heather Stern continues in her role as general counsel for the Austin-based grocery chain, according to the company website. She left her role as associate GC at Office Depot Inc. to become the top lawyer at Whole Foods in April as talks of the sale to Amazon began to advance, according to U.S. Securities and Exchange Commission filings.
In an interview with Corporate Counsel earlier this month, Amazon general counsel David Zapolsky said that the legal department at the Seattle-based e-commerce company is comprised of more than 800 people globally, about half of whom are lawyers. (Zapolsky did not disclose details of the proposed Whole Foods deal).
It's easy to ask, what's another dozen more? According to a LinkedIn search for Whole Foods' legal team, there could be just under a dozen in-house lawyers currently in the department. The search indicated the lawyers have expertise in retail operations, regulatory law, labor and employment, procurement, privacy, transactions and litigation.
Amazon did not respond for comment on this article, and Whole Foods declined to comment because the deal has yet to be finalized.
Michael Fricklas, former longtime general counsel at media conglomerate Viacom Inc., said that even if Amazon and Whole Foods operate independently, there is room to create efficiencies. During Fricklas' tenure as Viacom GC, the company made several major acquisitions, including Paramount Pictures, which has its own general counsel and team of lawyers.
Fricklas explained that while each division within the company operated as independently as possible to retain its own culture and brand identity, he found opportunities to centralize legal functions such as litigation, real estate, privacy and employment.
"I wouldn't begin to guess where those areas would be for Amazon and Whole Foods, but there will no doubt be some [opportunities for centralization]," Fricklas said.
He said that litigation was a great area to share resources due to time and budget limitations. Plus, it gives an opportunity for the general counsel or head of litigation to provide an opinion on issues including "changing outside counsel because you don't think the case is being hired correctly or suggesting a defense that somebody might have missed."
Then there are the liabilities and litigation that Amazon might inherit.
Christopher Sagers, a law professor at Cleveland State University's Marshall College of Law, explained that because Whole Foods appears to be operating as an independent entity based on public disclosures, the two company's liabilities will stay separate. However, Amazon has voluntarily taken on some expenses for Whole Foods already. Just this week, Amazon announced a $16 billion private debt offering to fund the acquisition.
"Unless Amazon agrees otherwise, it will not be personally responsible for any ongoing litigation or anything like that," Sagers said. But he added that the company might agree, in the course of deal talks, to take on some or all of the liabilities. While Whole Foods might not be the most litigious company, its docket is far from empty. Its legal battles would have, of course, been one of the considerations in Amazon's initial decision to acquire the company. As Fricklas put it, if a company has to pay damages for litigation it acquired, it could "hurt" but lawsuits wouldn't be a deal breaker "unless it's something that's going to bankrupt the company."
Whole Foods' ongoing litigation includes allegations of overcharging customers, cheating employees out of bonuses and discriminating against LGBTQ employees.
Chelsea Grayson, former general counsel and later CEO of Los Angeles-based American Apparel, who is not involved in the acquisition, thinks it is wise for Amazon and Whole Foods to craft the deal to give Amazon oversight without handing over all control.
"I feel like if I'm the Amazon GC, I certainly want to know what's going on down there with all that litigation and I certainly want to understand [the specifics] because some of it's going to be material enough to report to the Amazon board from time to time," Grayson said.
While Grayson was at American Apparel, Amazon was reportedly a potential buyer for the company, which was ultimately sold to Canada-based Gildan Activewear. She declined to comment on any alleged negotiations. Grayson said that while the GC of an acquiring company should have a good handle on the target firm's legal affairs, she predicts that Amazon will allow Whole Foods' lawyers to continue their same work since "their legal team has been really dialed in on that stuff for a long time and they understand the ins and outs of what they've been dealing with."
"The grocery store sector is so esoteric and so specific," Grayson added, "It's not normal retail and is so regulated in many ways. You've got to expect they're going to let the experts do what the experts do."