In House Rants

It was only a matter of time before law firms started treating their clients as adversaries. Consider the now fairly standard boilerplate engagement letter provision in which the client consents to be sued by its own lawyer.

It’s never stated quite so directly. The waiver is always soft-pedaled with soothing, somewhat apologetic explanations that all boil down to this: We really aren’t a law firm, but are instead a collection of independent franchisees, and we aren’t gong to let the shortsightedness of one of our dopier “partners” stifle our chance to represent a much more lucrative client against you if the opportunity presents itself.

I’m used to seeing these provisions in the national firms’ engagement letters, but they’re even showing up in the smaller firms’ letters.

Of course I strike these routinely and have never had a firm refuse our business because of it. What’s more interesting is that I never get any push back. No hesitation, no negotiation, no comment. The paragraph just disappears. Which makes me wonder why it’s there in the first place.

How candid will the client be if he knows he could meet his own lawyer across the negotiating table on the next transaction . . . or worse: as opposing counsel in court?

I always knew this, and my former private practice colleagues frequently criticized me for it, but as a transactional lawyer you learn quickly that the business transaction is more important than the legal position. “But the client has risk if you do the transaction that way,” I frequently heard. “Well, yes, but that’s the client’s decision to make, not ours” I would remind them.

Early in my career a client had reminded me. After listening patiently to my explaining why he should abandon a transaction, he admonished me saying, “we are in business to do deals, not to not do deals.”

This is a lesson that is often lost on many of our outside counsel, and it’s one I have to teach (and re-teach) frequently. I find myself saying, “O.k. Fine. There are risks. What is your best advice on mitigating that risk?” — which is usually met with a few moments of awkward silence, followed by (on a good day), “let me think about that and get back to you.” Or on a not-so-good day, “We (the royal “we” as in THE FIRM) can not recommend you proceed with this transaction.”

“Don’t do it” is reserved for the suicidal. Everything else has more than one good alternative. Please assume we’re looking for the latter when we’re asking for your advice.

One theory says my outside counsel should know my case better than I. He’s scoured the transcripts, grilled the witnesses (ours and theirs) and poked the experts thoroughly. On the other hand, as in house counsel, I know which of my clients and colleagues has the better memory, the better work habits, the troublesome idiosyncrasies and so forth.

No matter what, however, he should know the facts as least as well as I do.

Case in point: Employment counsel prepares and files a position statement with the EEOC. He knocks these off in his sleep, so he figures I don’t need to review it first. I finally get a copy when I have to call and ask, “Say, didn’t we have to file a position statement a while ago in this case?”

He replies, “Oh, didn’t we send that to you? We filed that last week,” and proceeds to blame his secretary. Shortly a copy arrives by email. I glance at it, and immediately see that he identifies our parent company as the employer. Wrong. (The complaining employee works for a subsidiary.) He says the parent company does business in the state. Wrong again — only the subsidiary does.

I mark up the document with the necessary changes and send it back to him with a note asking him to amend the statement, as failing to do so threatens to place our parent company’s multi-million dollar income stream at the mercy of the state’s taxing authority. This would be bad. Apologies abound, promises are made, and another lesson learned. For the both of us. Facts count.

So today I have a very upset internal client calling me to complain that one of our outside counsel has “swapped” lawyers on him, and he’s obviously received someone from the “second tier.” This happened earlier this week without any kind of advance notice.

The lawyer is a C+ player at best. Slow response time. Not very insightful. Purely reactive.

Everyone in my internal client’s department has worked with this guy, and they all say the same thing: never again. A call goes to the managing partner with whom I have “the relationship.”

Naturally, he’s not in. I leave a message with his secretary. (Yes, law firms still have secretaries. We clients have assistants. What gives?)

He calls within the hour (good) to tell me he would have called me sooner but he was having lunch with [insert dropped name here] and was on his way to a meeting with [drop another name here] (bad).

“Listen,” I say, “we’ve got a very unhappy customer here. Y was working on project Xanadu, and my guy tells me that Y was assigned to another “urgent matter” and Z was going to take her place. Z is not hitting the ball out of the park. In fact, Z is taking strikes and balls all day, and won’t swing at anything. My guy has no confidence in him.”

And then the defensiveness starts: “But Z is one of our best! Order of the Coif! Law review!” Blather, blather, blather. Followed by blame the victim: “I’m sure there must be a misunderstanding. Are you sure your guy understands what a great lawyer Z is?”

“No misunderstanding. He’s non-responsive, tentative and lets the world wash over him. We need Y back on the team.”

“But Y is working on a deal for [insert Fortune 100 company (which we are not)], and is essential to that transaction. Your transaction is in the early stages and can handle a change of staffing.”

I just let him stew in silence for about 20 seconds. I couldn’t resist, “You’re right. I can call [partner at competing firm] and get them going on the matter while it’s still in the early stages. Good idea.”

“Now, c’mon, that won’t be necessary. Z will be great! He’s worked with you guys on a lot of deals,” he implores.

“Z is not great, at least in the eyes of my guy who has to work with him every day. Say, I’m a little confused why we’re still on this subject. If you needed to change the team on us, it would have been nice to know in advance.”

“I didn’t think you’d mind.”

“We mind. Seriously, we really need Y back on the team. Is that something you can take care of, or should we just make other arrangements.”

After a pause and deep sigh, “I’ll look into it.”

About an hour later, Y was back on the deal team. Managing partner calls, strutting, “Wow, it was like pulling teeth, but I managed it. Y is all yours.”

“Thanks. I appreciate the effort.”

But why should I? Why did I even have to debate the issue? Why was it that nothing was going to change until I threatened to change law firms?

I spoke to Y earlier today to welcome her “back” to the team. She was reluctant to talk about the transition, and was eager to help any way she could. After we hung up, I realized I had forgotten to give her some information, but when I called back her secretary said she was on the phone with my guy (good — already back in the saddle). I asked to have her return my call when she was finished. The secretary said “o.k.”, and then added, “it’s a good thing the [Fortune 100 company] transaction fell apart — I don’t know how she’d work on both transactions at the same time!”

That was an easy one. She wouldn’t have.

Litigators who say they specialize in “business litigation” ought to know something about business. Unfortunately many don’t. Accounting or other business courses are not found in traditional humanities-based undergraduate “pre-law” curricula. And while most law schools offer rudimentary accounting and business electives, these are often under-enrolled.

For example, in recent months, we’ve come across counsel (on both sides of litigation) who’ve had no grasp of:

– How a balance sheet “balances”

– The difference between a cash flow statement and a profit & loss statement

– Accrual versus cash methods of accounting

– Payments due in advance versus due in arrears

– Amounts “realized” versus “recognized” under the tax code

– The concept of “aged” receivables

Earth-shattering? No, of course not. It’s more embarrassing than anything else, and not likely to lead to repeat business. Yet it becomes more on-the-job training (make that: on-my-invoice training).

Google tells us that in 0.11 seconds one can get several pages of search results for the query “accounting basics.” This seems like a reasonable investment of time for any lawyer whose practice depends on resolving business disputes.

Have you found yourself in this mini-tragedy?

You and your outside counsel agree you need to have a three-way call with his tax partner. You will call him, and he will tie in his partner through their phone system.

The time arrives for the call. You dial him up.

You: Hi Jim. Ted here. I’m ready for our call with your tax partner.

Jim: Okay. Ah . . . just . . . one . . . second while I, um . . . lemme see if I can remember how to make this thing work . . . . . . . . . Hang on.

(The line goes silent for about 10 seconds. Then Jim returns.)

Jim: You still there?

You: Yep.

Jim: (somewhat embarrassed) Heh heh, okay, I think I’ve got this down. Here we go.

(More silence. This time about twice as long.)

Jim: Sarah?

You: Nope. Still me.

Jim: (nervously giggling) Ted, I’m sorry, but, heh heh, you know . . . these phones . . . heh heh. Let me just try another thing . . .

(And off in into silence you float for a third time. After about half a minute, Jim climbs back onto the line.)

Jim: (confidently) Ted?

You: Yep, I’m here.

Jim: Sarah?

Silence.

Jim: Sarah? . . . oh damn. She was just there. (Deep sigh)

And so it continues, with many variations on this theme. Like most tragedies, it ends with lots of regret. On all sides. Unfortunately, this real-life episode added 10 worthless minutes (actually 12, since this firm rounds up to the next tenth of an hour) to our invoice.

Today we enjoy (suffer from?) instantaneous information transfer, yet it’s remarkable that so many lawyers haven’t mastered the simple act of working the telephone. This does not instill confidence. Why on earth would we trust outside counsel to exercise good judgment under pressure (such as, say, DURING A TRIAL) when he or she hasn’t invested an ounce of firm time – not client time – to learn the two or three basic steps to completing a three-way call?

If the firm’s telephone system came with this feature (we don’t know of any that don’t), it also came with an idiot-proof “cheat sheet” on how to use its features. Dear outside counsel, please find it and use it. This isn’t splitting atoms; three-way calling is 1960s technology. Like hourly billing.

Outside counsel shouldn’t expect us to sympathize either. These are basic skills. Like meeting deadlines and following procedure. Tittering and blaming the phone system won’t cut it.

Who writes this time entry on a legal bill and expects it to be paid?

Research. 4.1 hrs.

Well, someone does. In fact, this time entry was on a whole page of similar ones like “Read letter. 0.3.” and “Answer email. 0.2″.

It’s remarkable that lawyers who don’t hesitate to labor over their briefs to capture every second of the reader’s attention fail to spend a fraction of that time composing what needs to be their most persuasive monthly work: the fee statement. Neither I (nor the business center manager whose budget is carrying this cost) should ever have to wonder what we received for the time billed.

A well-written legal bill should fully describe the work performed, with a view toward the relevance of the task to the engagement. Doesn’t “research applicability of 3-year statute of limitations to plaintiff’s recent claim for repetitive stress injury and summarize findings in short memorandum. 4.1 hrs.” sound like real work was done, instead of “Research. 4.1 hrs.”?

Each time entry should be self-justifying, and should never prompt an inquiry. In other words, a well-written legal bill is so clear and so transparent as to compel its recipient to pay it without question; its value is immediately apparent.