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February 25, 2004

The New York Times on Business Lawyers:

This article in today's New York Times (registration required) talks about the sometimes rocky relationship small businesses can have with big firm lawyers. According to the article, "There is a yawning gap between [small companies'] practical requirements and the legal culture. Small companies must watch costs and focus on cash flow, while law firms can lose sight of the cost effectiveness of their work and may be driven by the perverse incentives inherent in hourly billing." Small business owners were quoted about their relationships with lawyers:

"Lawyers for small companies take on a patronizing role."

"They (lawyers) will consume as much time as they possibly can and will assume as great a role in a transaction as they can."

"You find that the whole deal is negotiated, and you haven't even seen it."

"An attorney, to me, is like an expensive pen. It's a tool. You should negotiate the business points yourself. They should document what you've negotiated."

"They (lawyers) tend to fascinate themselves with all of sorts of trivial things,"

"They (the law firm) did a great job, but I knew when I walked into a gleaming conference room with Dean & DeLuca pastries that there would be problems."

At hourly rates exceeding $500, "it can cost $20,000 or $30,000 to have a question answered and a couple of letters written."

"You don't want to hit a flea with a sledgehammer."

The article also gives some tips small businesses should follow when hiring a lawyer:
• Ask for a flat fee. If the lawyer will bill only by the hour, get a cap. Request frequent updates on how much time has accrued.

• Insist on approving all staffing. Require the lawyer you hired, rather than a green associate, to do the important work; a busy, but experienced lawyer will generally be cheaper than an underused young lawyer, even at a higher hourly rate.

• Do not allow more than one lawyer to attend a hearing or deposition. Do not pay for travel time or for ordinary overhead like photocopies and phone calls.

• If the bill contains the names of lawyers and paralegals you have never met, work you did not ask for or fees out of proportion to the problem the lawyer was hired to solve, do not be afraid to question it.

In general, Ms. Lodenkamper said, small-business owners should stay away from larger law firms."You want either a sole practitioner or a small firm," she said. "If you get into a large law firm, you're going to get a lot of theory and 70-page contracts."

The article is right on, and should be required reading for all business lawyers.

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Comments

Clients no doubt want their attorneys to be efficient. But there often are many contingencies in deals which are not "trivial," and can have major importance to a client. As the real value of an attorney is in protecting a client, the attorney needs to be able to take the time to do a comprehensive, thorough job.

Of course, this does not mean "padding the bill" or being inefficient. It does mean that the experienced attorney who can do a job or draft an agreement much more quickly and effectively has a great advantage in competing for business.

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