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David Sloan of Sunstone Hotel Investors talks to us about his counsel for in-house design and construction department

David Sloan joined Sunstone Hotel Investors in February 2007 as counsel for its in-house design and construction department, later taking on real estate transactions and corporate work. In 2009, he gained even more responsibility after the general counsel, as well as nearly 40 percent of Sunstone’s work force, was laid off after the recession. Sloan officially became general counsel in February 2013 and is now the company’s sole in-house lawyer. He shares how he works with outside counsel to fill the gaps in his lean department.

Modern Counsel: As Sunstone’s sole in-house lawyer, how do you handle such a large workload?

David Sloan: First and foremost, we’ve identified the primary legal and regulatory matters that are critical to the company. Second, we’ve aligned ourselves with outside firms to fill the internal knowledge gaps. These two important steps are crucial in laying the foundation of a successful in-house legal department, regardless of size. While a fair share of the day-to-day legal work for Sunstone is done internally, we’ve refined our internal processes to be flexible as our workload expands and contracts.

Key Players: David Sloan’s go-to outside counsel

“We worked with Latham and Watkins twice in the fourth quarter of 2014 mortgage refinancing, and we completed a new credit facility in the second quarter of 2015. Steve Stokdyk, our outside securities counsel there, helped take Sunstone public in 2004 while he was at Sullivan & Cromwell. Similarly, Kevin Ehrhart, who was formerly with Allen Matkins, has worked with Sunstone on real estate and finance transactions for nearly 15 years. We worked with Kevin and his finance colleagues, given their abundance of experience with similar transactions for Sunstone and the firm’s many other clients. While mortgage financing is fairly routine, credit facilities are often complex, given there’s usually a syndication of lenders and varying hot-button issues for each. Kevin’s familiarity with Sunstone and his team’s experience with financing work were beneficial to both Sunstone and the lender group.

“Another lawyer we’ve followed over the past five or so years is David Egdal, formerly with Gibson Dunn and now with Shartsis Friese out of San Francisco. David very much meets the quality and personality hurdles and is highly attractive from an economic perspective, given his new billing structure.”

MC: How do you manage outside legal spend with such a lean in-house staff?

DS: Over the years we’ve strategically partnered with lawyers who we enjoy working with, irrespective of which firm she or he is associated with. We’ve been pretty successful at identifying the strong suits of our outside legal partners and strategically engaging them in an efficient and cost-effective manner. Since 2009 our outside legal engagements have, for the most part, been on a fixed- or reduced-fee basis, which is easier to achieve as the volume of work escalates.

MC: What criteria do you evaluate outside firms on?

DS: We want quality work at a competitive rate. There are certain matters, such as securities and large transactions work, in which it’s more important for us to be right, so we’re less focused on cost. But for most other matters that we consider routine, cost is very important to us. We feel there is a large legal talent pool out there and believe that should be a driver of cost in the right direction. Beyond cost, quality and bedside manner—responsiveness to us, ability to quickly turn around a product, and ability to be collected under pressure—are paramount.

MC: As the GC, how do you manage relationships with outside counsel?

DS: Legal matters at Sunstone span the law practice spectrum, including securities and real estate work, human resources, intellectual property, and more. You name it, we’ve likely encountered it. For the most part, I like to be the front person for all legal matters involving the company, especially at the initial interaction between the company and outside counsel. By doing this, I’m able to distill the issues for outside counsel, which helps on the efficiency and economic fronts.