FIVE STEPS TO A PROFITABLE RELATIONSHIP WITH YOUR LAWYER

A process server bursts into the office on an otherwise quiet morning and serves you with papers in a lawsuit. You open the envelope, read the first few paragraphs, and that’s enough! You stuff the papers in a bigger envelope and dash off a note to your attorney: “Defend me!” This common practice is guaranteed to at least double the cost of the initial analysis of the dispute.

Business owners use their lawyers in a wide variety of matters with significant financial consequences, ranging from lawsuits, contract negotiations, regulatory advice or litigation, and securities matters to alternative dispute resolution. Despite the cost and importance of these matters, owners and executives often pay a high price by using legal services inefficiently.

In the case of the quick emotional response to notice of the lawsuit, for example, the initial legal costs could be cut substantially if your transmittal letter also said: “I will deliver a memo, tomorrow, on the background of the lawsuit with copies of all correspondence and related documents.” That small step, if done “in-house” is more efficient and less expensive than using the lawyer’s time to ferret out the details.

In an ideal world, your note would end with, “My plant manager (or bookkeeper, etc.) knows the details behind this matter and has been delegated to work with you on this.”

The point is: A little bit of planning, good communications and clear goals are among the keys to a cost-effective relationship with your lawyer, especially when confronting urgent matters. Here are five tips for working like a pro with your lawyer and making sure he or she does likewise.

Set Goals Up Front. A lack of clear goals means your lawyer may do expensive, unnecessary work. For example, when your company is sued, do you want your lawyer to try to settle the lawsuit as reasonably as possible or to fight every disputed issue to the bitter end? Without clear instructions from you, the lawyer may risk a malpractice claim if he or she doesn’t raise every issue and defend against every risk.

As new matters arise, you need to spend “up front” time with your lawyer, clarifying and detailing your goals. Just as you set goals for each department in your company, spend time doing the same with your lawyer when a new contract negotiation, refinancing or lawsuit arises. This is easily the most common area of weakness in businesses’ relationships with legal counsel.

Identify Risks. As you set goals, your lawyer should help you identify the extent of your potential exposure in lawsuits and the risks you face in negotiations. Business owners tend to focus naturally on the stated dollar amount in transactions, but most complex matters also have significant downstream risks and potential hidden or contingent costs.

As you discuss the business problems you foresee in a new matter, expect your lawyer to identify the obscure or hidden risks involved and tell you what is common practice in your industry for allocating those potential risks among parties. An obvious example is in a lease for new plant facilities: Who pays if the roof develops a leak in the last six months of your 10-year lease? If you are a manufacturer and you contract to install your product in a customer’s facility, who pays the bill if your subcontract installer accidentally damages the electrical wiring , and the plant burns down?

Respond Promptly (in both directions). When you call, expect your lawyer to get back to you within 24 hours or the same business day if at all possible. Don’t expect your lawyer to have all the answers to your questions within that time, but at least you need to have confidence that you can make contact regularly and without fail, particularly during difficult negotiations.

Similarly, you need to respond to your lawyer’s calls with the same speed for the lawyer to be efficient. Don’t hesitate to ask your counsel when to expect that draft contract or completion of a project. Setting reasonable time expectations helps everyone, although trying to shorten working time on complex projects may not always produce the best results.

The suggestion for ongoing communicating seems like a no-brainer, particularly during delicate negotiations. Nevertheless, a quick informal survey of several close colleagues revealed a number of stories about parties to a lawsuit or a transaction inadvertently giving away disputed points already won by their lawyers in negotiations. The cause? Someone failed to communicate promptly.

Communicate with Copies. Tools such as e-mail and voice mail may be useful, but eliminating paper-flow isn’t always wise. The best way to keep current on a complex legal matter, for example, is to have your lawyer send you copies of all correspondence, pleadings and draft documents as the lawsuit or negotiations move forward. You may not want to read everything, but by seeing the copies, you have a sense of the tempo and tone of the matter without wasting expensive time on “what’s the status” phone calls.

You don’t need a cover letter (adding billable time) for every copy. The lawyer and secretary should be able to send your copies routinely.

Budget for Time and Dollars. The scope of most legal matters is difficult to predict at the outset. Nevertheless, you can and should ask early in every significant matter for an estimate of legal fees and costs that will be incurred, whether pursuing or defending a lawsuit, working on a contract, structuring a new business, making a transaction, or preparing to issue securities. A smart budget should include contingencies for matters and events beyond the control of the parties.

In any complex matter, the budget may identify alternative courses of action on which early choices should be made. For example, is an early settlement at one price more or less economical than continuing a dispute through trial? It’s worth asking such strategic questions at the outset, so you and your attorney can move quickly at critical decision points.

The process of budgeting, of course, incurs a cost, but in most cases, the process pays dividends by avoiding unpleasant surprises,those found at the bottom line!

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Vincent W. Thorpe is a partner in the recently merged firm of Hanna and Morton – Thorpe and Thorpe, based in downtown Los Angeles.