An Interview with Eileen Diepenbrock, Partner at Diepenbrock Elkin Gleason LLP
Natalie Ochoa
Eileen Diepenbrock | Diepenbrock Elkin Gleason LLP
Posted Monday, May 8, 2017

Tell me about your journey of being at this firm, being a partner at this firm, how you started, and what got you here.

Okay, actually pretty much my entire life, I knew I wanted to practice law with my dad. There was a bigger firm that my grandfather formed, and it was one of the very first firms in Sacramento. It was formed in the time of California gold rush. And then my grandfather joined in-- long family history with that. Then my father, my uncle and lots of others.

When I graduated from law school, I knew I didn't want to go to that firm immediately. And I really wanted to have a clerkship. So, I worked at the Third District Court of Appeals for Presiding Justice Robert Puglia, to just get a better sense of writing and analysis. Then I went and worked with my dad for one year but, right before I started there, I met Gene. We got married after my first year with my dad's firm. Gene was in law school in Philadelphia.

So, I moved back there and went to work for this firm that has 201 attorneys all in one office, which was huge in Philadelphia for that time frame. I always tell people to be smart enough to know when you're lucky, because succeeding in law is a combination of an excellent work ethic, excellent legal ethic, being an ethical person, and understanding the right amount of humility and willingness to learn, and realizing all of a sudden you're in the right place at the right time.

So, I come in as this junior person in this huge firm in Philadelphia and just coincidentally got assigned to a case that was being managed by one of the three most senior attorneys in the firm. He actually knew me by name, which was surprising, because I was so low on the totem pole. Anyway, I learned a lot from him, and Gene was in law school, and I just said, "I don't know anybody in Philadelphia," I'm just digging in, and really spent all my time at the office, a true sweatshop, working these crazy hours on these crazy cases, learning as much as I could.

And then we came back to San Francisco after Gene graduated, and I worked for another firm that was at that same size headed in Martin, it doesn't exist anymore. That was a great place because, again, I met some wonderful people, and learned a lot. But then we started having kids. When the kids were little, we had Sam and Sarah who are 15 months apart, family was not going to work with that lifestyle.

So, my dad invited us to come back to Sacramento and join-- he was splitting off from his firm and helped form this firm.

There were 10 of us who formed the firm, and we came back for family reasons. But what we really like is everybody at this firm came from a bigger firm, everybody. So, we've all had the chance to really experience the lifestyle of a huge firm, make the decision about what works for us, and as a smaller firm, we have a very sophisticated practice, which we really like. That's how I ended up here. That's a little bit of the short version, but it was ultimately to find a better balance between work and the kids, be closer to family, and then have an opportunity to really start something new.

That’s good to hear because it's something that is really important to me going forward—family, being close to my family—that's why I picked to come back to California in the first place to study law. So, my next question touches upon the stigma of business law that everything is mergers and acquisitions. However, I understand that you practice different facets of business law. I was looking at construction and government contracts.

Right.

So I was wondering if you could tell me a little bit about how those areas intersect with the idea of traditional business law of mergers and acquisitions, assuming that they do.

One of my partners, Mark Peterson, really does traditional mergers and acquisitions, and business and shareholders, and ownership rights and things like that. It's a little easier for me to talk about it from the construction standpoint, because I started out doing only litigation.

On the construction side, I actually merged that after time into more of a transactional practice, as well. Because you hire the litigator when you're already in trouble, and the fight has already happened and so we started looking at ways that we could reduce risk, and minimize risk, and put it more appropriately placed on the front end.

After every litigation matter, my entire practice into this day, I do what's called the “Lessons Learned” meeting with my clients, where we sit down and say, "You could have done this better. You did this really well." Just lessons learned to give them feedback, so that they don't wind up in complex litigation if they can avoid it. On a transactional side, in the construction business then, I now do a lot of the contracts, and a lot of contract drafting. Mainly on the public side, but also on the private side.

In the public sector, I wouldn't really say from the public owners' perspective, there's a great intersection between that and traditional business law with the exception that public owners are increasingly aware of the importance of having a really solid financial partner on their construction projects. Meaning that the construction company is really solid, that it's got longevity, and that it's good financial backing.

You look at things like the structure of the construction companies. A lot of construction companies set up what are called limited liability corporations. This is a brand new area of construction law in the last couple of years because to do construction in California, you have to have a contractor's license, and limited liability corporations have only recently been authorized to get a construction license, a contractor's license.

That's important because a limited liability corporation, a lot of times is a single purpose entity. So, you have the principals come together and say, "We're going to form an entity for the sole purpose of owning this building, or for the sole purpose of developing this development. Or for the sole purpose of building this construction project."

And as a single purpose entity, those kinds of LLCs are not necessarily heavily capitalized. So, when you're going into a complex project, you want to know that the person on the other side of the table has the financial backing to see it through and, if there's a problem, there's security and a resource. That's maybe some intersection on that part on the construction side.

Also in the construction side, there is a lot of generational changes, so parents or the founders are retiring and selling it off to either their kids or people they brought up in the organization. So that transition. I'm aware of that, I don't actually get directly involved with that, except to the extent of making sure if I have a litigation matter that the right players are at the table.

On the business side, the business litigation I do is really true business litigation. One of the cases that I just finished—this trial that lasted for eight weeks of evidence—is a misappropriation of trade secrets and an unfair business practices claim. And what happened was, my client had an employee who left and went to a competitor and when the employee left, he snuck into my client's secured computer system and took a client list, gave it to his competitor, and is using it to compete.

Again, not a mergers and acquisitions issue, but it gave my client an opportunity to take a really hard look at its systems. There was only one change that they needed to make, and it was not a material change; just little things like they don't allow their employees anymore to use a flash drive in their computers, so mall change like that. This gave us a hard look at how the company was structured, how it was set up, and the controls and things that it had in place.

And that sort of goes with what you mentioned earlier in regards to construction, the “lessons learned” type of thing. You're talking a lot of that.

Yes, exactly. So in this particular one I would say, “Great you did a really good job. This was really not anything that you could have prevented.” Then, you get locked down on the law and go after it from an organizational standpoint, “My company is actually in a very good place,” and it really helps with the litigation.

Wow, okay.

So if that helps. What you see from the litigation standpoint, I guess the theme of the intersection, is how organizational controls and checks and balances are working or not working for a company.

That perfectly segues a little bit into my next question. Your bio states that you've been active in drafting legislation that impacts the construction industry. Maybe this is what you’re alluding to, but I was wondering what are you currently working on or, if not, what are some of the issues that the construction industry is facing now?

There are two bills that I've actually drafted and both of them are now laws. They both stem from this issue of law which fascinates me, absolutely fascinates me, and a lot of people are shocked about this. But here's a little lesson in public contracting. If you're still wondering what area you want to go, I'm a big fan of public contracting. It's really fun, really, really fun.

All right, lay it on me.

Okay, there's this law in California where the legislature tells public owners how they can award their construction projects or any of their projects, for services or acquisition of good services, whatever it is. They have a statutory authority. If they award the contract in violation of that statutory authority, it's considered an illegal contract. The contractor who gets it, however, bears all the risk, and faces disgorgement of everything it’s been paid under that illegal contract; he has to pay it back. That's actually in the California constitution.

So it stems from a case, the simplest one is most contracts have to be competitively bid and awarded to the lowest bidder. There were cases where owners were not doing that. They were what's called “sole sourcing their contracts,” just picking up the phone, calling their friends saying, “I'm giving you this contract,” without competitive bidding. If the competitive bidding is required, and they don't to do it, that's illegal. And then the contractor who got the contract has to pay it all back. So that's what we call the “void contract law” in California.

In 1996, I had a case where a public owner, actually it was the city of Davis, competitively bid a contract, but didn't award it to the bidder who was entitled to receive it. Instead, the owner awarded it to somebody else. So my client challenged that, and we won at the court of appeal. By the time it got to the court of appeal, the contract had been 98% performed, and the contractor who got the contract had been paid a couple of million dollars. And so all of a sudden the Court of Appeal says this contract is illegal and void.

We're like, " Woo-hoo, we've won the case," but the rest of the construction industry, because I'm very involved in these industries, associations, the Association of General Contractors of California being one, called me and they say, “What the heck did you do, Eileen?” Because all of a sudden now this poor contractor has to pay back a couple of million dollars. I said, “I didn't do anything. I just won a case interpreting the law that's been around since the 1800's.” So that's what I did.

So, you did your job. [laughter].

That's exactly right. So what we started looking at how unfair it is to the contractor who has to pay it back. We drafted, got through, and got signed into law a statute that permits the contractor to be paid a certain part of the money, and keep a certain part of the money, to try and balance out the fairness. It's actually Public Contract Code 5110. There are certain circumstances and criteria that has to be met. You have to show that the contractor has acted in good faith, and it was really the owner who was responsible for the misaward of the contract. And then the contractor gets to keep its cost, but not its profits. But basically, what that means for the contractor is they are performing the contract for free, but they're not writing it---they're not performing it for a negative amount. So, they're going to get a wash. That was the first one.

The second one that I did was just last year, and that has to do with a particular form of contracting by school districts. This revised Education Code 17406, in requiring a specific process that school districts now need to follow for a particular type of construction contract.

Again, there was a case that came out in the summer of 2015. It said school districts were all breaking the law, and it triggered this “void contract rule.” So we said, “Well, let's try and solve that in the context of this particular form of contracting for school districts.” So that was that.

Those examples are the ones I've actually drafted. I've also been involved in commenting and providing assistance to the lobbyists for the Association of General Contractors of California on any number of bills. There's one another really important one in the construction industry that I was only tangentially involved with, but it has to do with getting contractors paid more quickly on their projects. Because public owners can take a really long time after contractors have done the work to make the payments, the contractors end up financing the job. That's not what they signed up to do and that's not fair. So, there's a new statute that now escalates the process for resolving those issues.

That's really interesting. It's really neat how you're so involved in the legislation process as well.

It's really fun. There are not a lot of attorneys who do public contracting in California, and there are not a lot of them who are very good. My partner Jennifer Dauer and I have just really focused on it, spent a lot of time researching it, writing about it, talking about it, and lecturing about it.

How did you get into that?

This case that the city of Davis had. Jennifer's father was one of our original partners. He had that case, and he needed some help, and he asked me. So that gets back to being smart enough to know when you're lucky. I'd never done that kind of work before at all. I'd done construction projects for public owners, but not the actual award of the contracts.

He was a leading authority in public contracting in California, and he took me under his wing, taught me, and I loved it and we got this great result. It was really fun. So I then just kind of took it from there.

This sort of has to do with contracting, and I don't know if this is actually even true. My school's very public policy focused, and I was trying to think of a few questions that would sort of spice it up a little bit. So, you've been very successful, obviously, in your career at a very respectable firm, and I was wondering if you've faced any challenges as a woman in maybe a primarily male dominated field such as construction law. Or if that's even something that you've even thought about or even, I don't know, noticed or anything like that.

I have not personally experienced that issue. I know a lot of women do. I don't really know why I haven't experienced it, other than the fact that I'm willing to talk the talk, and do what I need to do to get the information and represent my clients, and show them I work really hard, and I'm really on top of it, and just get their respect.

Sometimes I wonder if I have to work harder than the guys in the field to get the respect, but I truly have never felt it. I have really been careful in picking mentors, and making sure that I'm listening a lot and showing a lot of respect. For me, it doesn’t matter if the mentor is a man or a woman. The mentor is someone who is willing to take the time and teach you, and who you connect with and want to devote your time and energy to.

There's so much work that goes into being a lawyer above and beyond just the regular practice of law. You've got to really get involved, really learn the field, really learn construction, for example, in that area. And so I have had two in particular, amazing women mentors who I never actually worked with, but I got to know through the Association of General Contractors of California. In 2015, I was inducted into the American college of construction lawyers, which was a pretty big deal.

Wow, really?

Yes. One of these two women, though not active anymore, has just always been so kind to me. A little bit of that was “pay it forward” because my dad recognized her, even though they weren't in the same firm, as very talented, and plowed the road a little bit for her, showed her the ropes. So, she paid it forward to me, which I'm very grateful for.

There's a man male partner who I consider a mentor in San Francisco, besides my dad, who really took me under his wing, taught me a lot, was very gracious and kind with his time, and was just fun to be with.

Basically, I looked at my mentors and I just decided I was never going to let my gender be a disadvantage. I was always going to let it be an advantage.

My bottom line is that I think you can use your gender to your advantage. I've heard a lot about unfairness out there. I personally never experienced it. My firm in Philadelphia actually got sued by a woman who did not make partner, and she sued for gender discrimination. What I heard is that she said that the firm was unfair to every woman there, and no woman had the opportunity to succeed.

You know what's funny, is that I was reading this case in civil procedure it's called Walmart-- I don't even remember but it was the Walmart case. A woman sued for the same thing, and in order—this is probably a very elementary factor but—in order to get this claim, she had to claim that everyone in the Walmart industry who was a woman, suffered the same discrimination. Right?

Right. In this particular case, it had not been my experience and that firm had been so good to me. This was two years after I'd started there, and I had that case when I first got there with one of the three managing partners. I just marched myself into his office and said, "Hey, I heard that so-and-so filed this lawsuit against the firm claiming that you mistreat all women and I want you to know that is not the case for me." I ended up on the witness list.

I testified on behalf of the firm, but it was ultimately not that important. But I have heard about another case where a woman has sued a big firm, a big national firm. They have an office here in Sacramento, and she was talking about how, at the partnership level, female partners are paid differently. Her data is horrifying. If that's happening it's horrifying and inexcusable, and she needs to be supported.

So, when it truly happens, there's just no excuse for it. In my case, I've never experienced that. I've never been in the firm where that happens, and I didn't let the industry get in my way.

This next question is about your arbitration work. In addition to serving as a mediator and arbitrator yourself, what would you consider the benefits and downfalls of arbitration rather than classic litigation to be?

There are pros and cons to both. The benefits of arbitration are that it tends to be faster and you get to choose your decision maker. In construction, I'm a huge fan of arbitration because there are some very, very talented construction attorneys and judges who serve as arbitrators, and you get to pick who you want, you don't get the luck of the draw, and they have really dedicated their careers to it. You get these really complex issues and they care about them.

It's tricky doing a construction case to a jury because the juries aren't that interested and you don't like to put your fate of your client in the hands of people who really aren't that interested. It's the controlling the decision-maker, controlling the process, streamlining it, making it faster, and picking your trial date or your arbitration date. Courts tend to be impacted and you can show up for trial, and not have a courtroom so you have to wait, wait, and wait, and maybe even get kicked out. But, that is getting better.

The discovery process is something that I think gets horribly abused in the judicial system. There's a lot of effort now to address that, but the discovery process or things like interrogatories, request for production of documents, and depositions, can really go on, and on, and on and be abused. In the arbitration, it's much tighter and much more controlled.

Some disadvantages of arbitration. Number one, the level of review, meaning if you don't like the result, your appellate rights are extremely narrow, and it's very difficult to get an arbitration review decision overturned. If there are some interesting issues of law that maybe you want to have another person take a look at, or the arbitrator doesn't go the right way, that the way you think it should go your opportunity to have another higher court look at it is very, very small. Very, very slim.

Technically, arbitrators don't have to follow the law, but most arbitrators these days, in my experience do, and if it's a public works arbitration involving a public contract, they have to. The other thing about arbitration is that it's not necessarily less expensive because you're paying for the arbitrator. Whereas in court, you don't pay the same expense there. But I've never actually looked at the complete data, and compared a complete court costs to a complete arbitration cost. Even factoring in the arbitration expenses, my bet is that it's still a lot cheaper to do arbitration because all the things you have to do are a lot narrower; you're not engaged in all this discovery and you can get to trial faster or get to your hearing faster.

The last con for arbitration is not necessarily a con, it depends on who your arbitrator is. But we have this things dispositive motions, like a motion for summary-judgement. I've got this case going on right now, brand new case I literally picked up a week ago, where the other side was looking for all these damages that they claimed amounted to gross negligence. I talked to the lawyer I'm taking the case over from and I said, "Well, if we get rid of that claim, it guts the other side's position. It seems to me the issue of gross negligence is a question of law, and what if we just say, ‘Assume the facts,’ we don't have to agree that they are true for trial, but ‘assume for today that these facts are what they say.’ These don't amount to gross negligence because that's a legal question. If we win that, their case is gutted.” The issue is, that'd be great thing you absolutely do that in court. In an arbitration, the arbitrators a lot of times don't want to decide those kind of motions. They just say, "We'll decide when we get to court." So, you have the ability and right to narrow the issues in arbitration, but most times the arbitrators won’t do it. Now, so far I have a good track record. I've had arbitrators be willing to do it, and I've got issues narrowed in arbitration. There's one arbitrator in San Francisco I love, and he is very happy to issue those kinds of rulings.

I thought for sure the amount of money would be significantly different.

I think it probably is. Sometimes you have a three panel arbitration. We have three arbitrators, and so that's even more expensive, and that gets interesting. But overall, from start to finish, it's a lot faster with an arbitration.

Yes, because it doesn't drag on as long-- ?

Exactly. And the ability to narrow the discovery.

Okay, so this is my final question, and I actually heard it at the symposium I mentioned before, that was last Friday that was put on by the Business Law Journal. Every panel discussion ended with this question, which I think is pretty interesting: With the recent change in administration, do you foresee any effects on the practice that you do? [laughter].

Well, let me put it this way, I personally see a change in how I'm going to volunteer my time. I'm going to study Spanish and learn immigration law. That is something that for sure I'm going to do. In terms of my actual practice and the change in the administration, I don't think so.

What really affects our practice is the economy, more than anything. And the economy was turning around, anyway. We'll see what happens with the economy and how that relates to real estate because construction, and a lot of the business allocation I do, ultimately has a real estate component to it. And then we can see what happens with the tax breaks, and what's going on with the tax issues, and how that affects people putting money back into the economy. So, that's where I could see a change in the administration maybe having an effect.

The other thing that's going to be interesting in California, is what happens with all the environmental regulations and the apparent relaxing of that. In the construction industry, and I admit I'm conflicted on this issue because I'm not really opposed to a lot of the environmental regulations, one of the things to look at is the tension between California and the rest of the country since California has really strict regulations, for example, relating to air. We have all these cap and trade issues having to do with carbon emissions—companies are restricted on how much carbon they can emit--

--and if they overdo it they are getting taxed.

Correct, and then what people can do is they can sell if they are under their carbon emissions.

Yes.

That has had a huge effect on the construction industry, an absolutely huge effect on it. Just think about all the diesel equipment that people have. So, the obligation to get this new equipment and get it upgraded is a huge expense for a lot of companies and so we will see if that gets relaxed somehow in California. But ultimately, I think that is the only way the new administration might have an effect on my practice.

Eileen M. Diepenbrock is a partner at Diepenbrock Elkin Gleason LLP, focusing on construction law, government contracts and business litigation. She has a Martindale-Hubbell rating of AV Preeminent Lawyer, the highest rating awarded. In 2015, she was inducted into the American College of Construction Lawyers. In November 2008, she received the distinction of being listed in Forbes as one of The 10 Most Dependable Litigation Attorneys of California. Beginning in 2011, she has been recognized every year as among the Northern California SuperLawyers, and in 2015, she has been recognized as among the top 50 women in the Northern California SuperLawyers. She has been named among the “Best of the Bar” by the Sacramento Business Journal in 2013, 2014 and 2015, and she has been recognized among the Women Leaders in Law in the Corporate Counsel Journal and American Lawyer in 2013.