Target's Trajectory: A Look Inside Target's Legal Department

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Don Liu.[/caption] The running joke with Target Corp. is that customers will go into the store intending to buy an item or two and come out with a basket full of merchandise. That’s kind of what it’s like leading the legal department of Target. Just like customers in the aisles, one minute the lawyers are researching mattresses and the next, their focus has turned to the newest fashion brands the big-box retailer is selling. Indeed each piece of merchandise within the Minneapolis-based retailer’s more than 1,800 U.S. stores, every one of its 320,000 employees and all of the $70 billion worth of items sold each year—are of concern to chief legal officer Don Liu and his team of 450 legal, risk, compliance and security professionals. The company and its law department seem to be balancing out and entering a new era after an executive shakeup that started in 2014 when Target’s current CEO Brian Cornell took over. Liu is among the relatively new leadership, and his legal team appears to be unusually adept at taking the tumultuous changes the retail industry is experiencing, as well as the company’s own challenges, in stride.

Liu at the Helm

When Liu first interviewed for the CLO position back in 2016, he asked Cornell what he was looking for in a legal leader. More than anything, Cornell wanted a leadership team “integrally involved in the business,” Liu recalled. And involved Liu is. Since taking over the legal department of 100 lawyers last July, Liu has made it a point to frequent stores all over the country. His kids both attended college in Philadelphia, so when he visits, he’ll fit in a trip to Target. Sometimes he makes formal trips as a corporate executive and other times, as he described it, he’ll “go stealth.” Monitoring the stores is critical, because with Target’s broad customer base often comes major liabilities. Liu holds a strong focus on risk and compliance at Target, but he is equally honed in on looking for ways to improve the customer experience, just as he used to do as the GC of Xerox Corp. from 2007 to 2016. At Xerox, he’d help out on the customer service line to hear from consumers firsthand. While there are similarities between his time at Xerox and his new gig, he had to dive into a brand new industry when he joined Target in July 2016. “Because of the tumultuous nature of the entire industry, I think I’m still learning,” Liu says. “I think we’ll all still be learning as the industry itself evolves.” The retail industry is indeed evolving, and there have been plenty of growing pains in the form of store closures and layoffs. In-house lawyers at other major retailers have told Corporate Counsel they know many attorneys who are looking to get out of the industry due to all these changes, or who are suffering low morale. But Liu says that isn’t the case at Target. In fact, he points to an annual company survey that he says showed the legal affairs group “has high confidence in Target’s strategy and strong optimism in our future.” The company has certainly managed to retain talent, where other retail legal departments might see in-house lawyers trying to jump ship. In an analysis using data from LinkedIn, Corporate Counsel found that the company’s current set of lawyers have an average tenure of close to a decade. (Not every Target lawyer has a LinkedIn profile, but more than two-thirds of the department were accounted for in this analysis.) In fact, about half of those with LinkedIn profiles have been at Target for a decade or more, and at least a dozen have been there longer than 15 years, with a handful almost at the quarter-century mark. Joan McLendon Budd, a former real estate attorney with Target, described the legal department as “one big family.” Budd worked at Target from 2002 to 2007, as what she described as the company’s “heyday” when it was opening about 100 stores per year. “Target was the darling of the retail world at the time,” says Budd, who came to the company from department store chain Dillard’s. “And on the new stores team, the work was very complex and very sophisticated.” Budd says there’s no comparison to working on Target’s legal team but she ultimately decided to move back to the South to pursue other opportunities and is now general counsel with cable TV service CTV Beam in Alabama. While some of Target’s current lawyers have held in-house positions prior to joining the company, most came directly from law firms, according to LinkedIn. And many of Target’s attorneys count nearby University of Minnesota Law School as their alma mater, with more than 30 percent of its current group of lawyers graduating from there. The company seems to have strong regional ties. While Target is a prestigious company, it generally works best for the people planning to stay in the area, says Michael Roche-Kelly, director of in-house search with Special Counsel’s Parker + Lynch. “There are a lot of lifers there, but then there are some who have grown bored or feel blocked because there are only so many senior slots there,” he says. He hasn’t personally worked with Target’s corporate team for recruiting but has heard from some lawyers looking to explore their options in other cities or with new companies. According to Roche-Kelly, many of the lawyers “know in order to become a GC or a divisional GC they’re going to have to make a move.” But ultimately, Target can be a desirable workplace for those who want stability, he says.

A Fresh Start

Liu, who personally made a big move from the Northeast to the Midwest for his job at Target, technically started his role in August 2016, but former general counsel Timothy Baer stayed on for roughly one year to see the transition through. Baer’s departure came about one month after Target reached an $18.5 million settlement with 47 states in May 2017 over its notorious data breach that occurred the week before Christmas four years ago, exposing 40 million payment cards and personal information of 100 million customers and prompting numerous other suits. The legal department has, in large part, moved past the work tied to the breach, which cost the company more than $300 million in legal fees, according to filings with the U.S. Securities and Exchange Commission. As vice president of the law department at Target, Carter Leuty was one of the in-house attorneys heavily involved in working with state and federal regulators in the aftermath of the breach. In an October interview with Corporate Counsel, he described Target companywide as “a high-energy company” and said “the legal professionals are no different.” At a cybersecurity conference held in Washington, D.C., in September 2016, he said following Target’s breach, the company “accelerated [its] information security plan to be on the same level as the defense sector.” Since Liu joined last year, he has been working to integrate the risk and compliance functions within the legal affairs group. In fact, halfway through his tenure, he started overseeing team members who previously reported to the chief risk and compliance officer. Liu says that’s no indication that Target is in the clear when it comes to data security efforts and says the area “will always be a priority for me and the company.” Not only has Target moved past its data breach, but its lawyers have seen wins in other areas too. This past year, they swiftly convinced the Federal Trade Commission to close an investigation into Room Essentials-branded pillows sold at Target that claimed to be “Made in the USA,” but were actually made in China. In a closing letter dated March 1, 2017, the FTC commended Target’s quick response and how it “took several steps to prevent consumer deception” by resolving the error on the product packaging and made enhancements to prevent future country-of-origin marketing errors. The commission remarked in its letter how Target had immediately “assembled a cross-functional group” with multiple business divisions, including the law department to identify potential process improvements. But even a corporation as sophisticated as Target can’t resolve every legal battle neatly. In September 2016, a jury awarded a South Carolina woman $4.6 million after she was stuck by a needle she picked up in a Target parking lot. The customer’s lawyer, Joshua Hawkins, told The Des Moines Register in an interview that his client originally tried to settle the case for $12,000 to cover her medical expenses. “We tried to be reasonable and not take this to trial,” Hawkins said. “But Target took a really hard stance on it ... and I think the jury sent a message.”

New Seeds for Target

And then there are Target’s investments and transactions—all of which the legal department has contributed to in some way. Some deals are just fun to work on, because of how customers react to hot new brands. For instance, Liu and his lawyers helped paper a deal with emerging startup Casper Sleep Inc. in 2017. This was a perfect example of mixing the business’ goals with the law, he says. “I don’t want my team to be isolated into just doing the legal work,” Liu says. “The team helped guide [the transaction] along the way to make sure it made business sense for both sides.” In May, Target announced it would sell the online retailer’s mattresses and set up displays in 35 stores across the country. Weeks later, Target announced it was investing $75 million in Casper. (There were also reports that Target had conversations to acquire Casper, which Liu did not comment on directly.) Liu says with the Casper deal and “some of the new apparel brands we’ve rolled out, you will see a footprint of my team not only involved in the legal part, which they’re involved in, but they have to understand the business strategy.” Otherwise, he says, day-to-day legal decisions may be “inconsistent with the business goals we’re trying to accomplish.”