Nvidia Corp., maker of graphics processing units fueling the arms race in artificial intelligence, has long been linked to one of Silicon Valley’s top law firms.
The chipmaker, which has soared to a rarefied trillion-dollar valuation, identifies Cooley LLP as its “general legal counsel” in its 2023 annual report. Cooley’s website states it formed Nvidia in 1993, took the company public in 1999, and spent three decades as its “principal outside corporate and litigation counsel.”
In a symbiosis that goes beyond traditional relationships between firms and clients, current and former Cooley lawyers have also held roles in the chip giant’s boardroom, C-suite, and been outside counsel to the company.
The relationship is not an exclusive one, however: “Nvidia retains many law firms,” the company said in a statement. “For each new matter, we evaluate multiple firms and select the team best suited to represent the company.”
Cooley chairman emeritus and senior counsel Stephen Neal is poised to succeed Mark Perry, a former Cooley partner, as lead board director at Nvidia’s annual stockholders meeting June 22, according to the company’s most recent proxy statement. Neal said in an email that he’s no longer a member of Cooley’s partnership but continues to draw a salary from the firm.
Neal, 74, “brings to the board deep knowledge and broad experience in corporate governance as well as his perspectives drawn from advising many companies throughout his career,” Nvidia said in its proxy statement.
James Gaither, a former Cooley partner-turned-venture capitalist, spent more than two decades on Nvidia’s board until retiring in 2020. Gaither, who was also senior counsel at Cooley while serving as a director, recruited Neal to Cooley.
Neal previously handled litigation for Nvidia but hasn’t represented the company in more than a decade, Nvidia said. Timothy Teter, Nvidia’s general counsel and corporate secretary since 2017, is another former Cooley partner.
Cooley is well-known for its work advising major technology companies, many of which the firm’s lawyers began counseling as startups. The firm has recently had to cut costs amid declining demand, laying off lawyers and staff last year and offering some new associates $100,000 to push back their start dates.
Cooley’s relationship with Nvidia isn’t unusual in Silicon Valley, said attorney Charles Elson, where many companies are relatively early in their life cycles and often have closer relationships with their outside counsel than those in other industries. Elson is also a retired business professor and founder of the John L. Weinberg Center for Corporate Governance at the University of Delaware.
Conflict and Compensation
Companies such as investment giant Blackstone Inc. and Facebook parent Meta Platforms Inc. have noted in their proxies what they paid in legal fees to firms that have lawyers from their ranks on those boards.
Nvidia made no such disclosure for Cooley. The company said there’s “no conflict” with the firm’s work.
“The fees paid to individual firms, including Cooley, are not material or required to be disclosed under any standard,” Nvidia said in its statement.
Securities regulations provide some disclosure exceptions, such as if the payments by a public reporting company do not exceed 5% of an external vendor’s gross revenue. Cooley’s gross revenue last year surpassed $2 billion, according to reporting by The American Lawyer, 5% of which is $100 million.
Cooley received less than $10 million in legal fees last year on behalf of the company, which now employs roughly a dozen core outside legal advisers, said a source familiar with Nvidia’s operations. Cooley declined to comment.
Cooley also had a role on roughly 11% of Nvidia’s cases in US federal courts over the past five years, according to Bloomberg Law data. DLA Piper had the lion’s share of litigation work for Nvidia during that time at almost 23%, with other firms such as Fish & Richardson, Fenwick & West, Quinn Emanuel Urquhart & Sullivan, and Delaware’s Richards, Layton & Finger representing the company.
Elson, who has served on several corporate boards, said it’s up to a company to determine what’s material to its shareholders. Still, standard conflict rules apply to lawyers on corporate boards. Walling them off from also doing legal work for a company “doesn’t solve the problem” of potential conflicts, he said.
“It would be really ill-advised if a lawyer on the board’s firm was doing significant work for the company and it wasn’t disclosed,” Elson said. “The fear is you will bend to the will of management rather than lose an engagement.”
Teter received more than $9.1 million in total compensation as Nvidia’s top in-house lawyer during fiscal 2022, up from a roughly $7.8 million pay package the year prior, according to the Santa Clara, Calif.-based company’s proxy.
The bulk of Teter’s pay last year came from an $8.2 million stock award, in addition to $847,300 in salary, the proxy noted. Nvidia also disclosed that it gave about $354,000 in total compensation to both Neal and Perry in their roles as directors. Teter, Perry, and Neal own Nvidia shares valued as of June 20 at about $122 million, $65 million, and $9 million, respectively, Bloomberg data show.
Nvidia has turned to Cooley over the years to help the company close deals and resolve litigation, including a chip dispute that ended with a $1.5 billion patent cross-licensing agreement with rival Intel Corp.