New York Small Business Law

Lawyers like to "should" on themselves and others

Part of being a lawyer in the business of keeping business people out of court is being a big time "party pooper."  Don't do this, don't do that, be careful or else....

This generally makes for unhappy people, because that mindset usually doesn't stop there.  Lawyers "should" on themselves too:  As a lawyer, you should wear a suit, you should work for a big law firm, you should make a lot of money, you shouldn't appear weak, you shouldn't have a blog (or should you?), you should have all the answers all the time, and the list goes on and on.   Unfortunately, many lawyers will represent the "shoulds" more loyally and fervently than their client's interests.  They over-lawyer to make more money; they create issues to appear smart; they give answers that are not really answers, just to say something;  they look down on you for asking supposedly "silly" questions; they fail to explain so that a normal human being can understand.

Why "should" you care as a client?  Unhappy lawyers are bad lawyers, not only for the above obvious reasons.  Look for lawyers who break away from the pack, the trend-setters, the happy people, the people who can admit that they don't know (but know where to look it up); they are brave and creative people.  They take care of themselves and others.  They will tell you when you "should" and explain why, but they will also tell you to march on confidently and take risks in stride.  They will make you feel like somebody cares.

I had a client tell me the other day that I was the first lawyer she'd spoken to that didn't make her feel intimidated or stupid.  That made my day. 

Making Fun of Lawyers

Via A VC, I learned of this video making fun of lawyers.  While it is obviously a joke, it does illustrate one job of lawyers, especially lawyers in business transactions:  we are intermediaries for our clients and help them staying on good terms with their business partners.  They did end up kissing in the end, did they not?

Attorneys, more commonly called Lawyers

In case you were wondering what lawyers do, check out this video that looks like it was produced in 1985.  Note the lady doing legal research with actual books!  I am thankful today that I live and practice law in 2006! 

Thanks New York Times for Pointing this out

"Step 1 in Starting a Business: Hire a Lawyer."

How to Choose a Lawyer

If you are looking for a lawyer, you should educate yourself about the process, how to look for a lawyer, what to look for in a lawyer, which questions to ask, and how to prepare for the first meeting.

To that end, the New York, Monroe County Bar Association, has made available a public resource:

“How To Choose A Lawyer” is an unbiased web resource for the public provided by the Monroe County Bar Association. The website provides  guidance in finding and choosing the right lawyer for your legal matter and also provides general information regarding attorney fees, legal costs, and your rights as a client. It also provides a list of questions to ask attorneys that you are considering hiring, as well as links to other helpful sites.

Although the site is geared towards Monroe County, it offers helpful information to any person looking for a lawyer.

If you are looking for a lawyer in New York, you may also want to check out the Legal Referral Service offered by the Association of the Bar of the City of New York and the similar service offered by the New York State Bar Association.  Both organizations are professional associations of lawyers.

Sticker Shock

How would you like to pay your lawyer $1500 per hour?  This is what Greenwich, Connecticut divorce lawyer Gary I. Cohen charged his client (taking into account a $300,000 bonus).  As a result, he  is now being investigated by Connecticut disciplinary authorities for charging excessive fees and violating the disciplinary rule that

"a lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses" based on factors such as "[t]he time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly."

See here for the full story.

While I would never pay or charge these kinds of fees, if a lawyer can find clients willing to pay and no coercion or misrepresentation is involved whatsoever, I think lawyers should be allowed to charge it.   

First Impressions in the Business of Law

A lot has been said about first impressions in the business of law.  Does your letterhead look fancy, are your business cards engraved, is your correspondence well written and free of typographical errors? 

While all that is still important, I feel one aspect of professional appearance is rarely mentioned.  Does your lawyer (or other professional service firm) produce perfectly formatted electronic documents?  I think any agreement of more than a couple of pages drafted by a lawyer should be formatted using proper styles, outline numbering and so forth (or the equivalent in another program).  Anything else just looks like "tippex on the screen" to me.

In the end, it's not just cosmetics; proper electronic documents benefit the client.  Making changes to a poorly formatted agreement takes much longer than making changes to a properly formatted document.  While secretaries can do the typing and rearranging of the sections, attorneys still have to check the end product.  I wonder how many associate hours are being wasted every day by manually checking cross references and section numbering in poorly formatted agreements? 

If you are a lawyer reading this and don't have a good template to use for your agreements, check out Ken Adam's agreement templates here (which I assume are free for the taking) and learn (or have your secretary learn) how to use styles.  The templates are excellent.

Just my humble opinion.

Attorneys Not Allowed to collect Attorneys' Fees from Clients

Thankfully, a New York court has held that the following provision in a retainer agreement is unenforceable:

"If client fails to pay for charges due under this agreement and the law firm takes legal action and is awarded such charges, client shall owe to law firm costs, expenses and attorneys' fees (including but not limited to the reasonable value of the law firm's own work) attributable to law firm's collection proceedings and/or action."

The court found the provision "to be fundamentally unfair and unreasonable."

"Aside from its lack of mutuality, the clause, even if not so designed, has the distinct potential for silencing a client's complaint about fees for fear of retaliation for the nonpayment of even unreasonable fees"

Well, I couldn't agree more.  If you see that kind of language in your retainer agreement, walk away from that attorney or law firm.

A little background knowledge to take away:

In New York,  attorneys are required to enter into a written agreement with their clients setting forth the important points of the attorney - client relationship, a so called Retainer Agreement or Letter of Engagement.  That is good a good thing, because your attorney is the last person you want to engage in a "he said, she said" kind of argument.  (There are exceptions: fees expected to be less than $3000; client already hired attorney on similar matter; for more info on the rule look here.)  But, outrageous provisions like the one above should not be part of a retainer agreement.

For more commentary on the case look here.

Attorney Ethics and Your Start-Up

Against popular belief, attorneys must actually follow certain rules of ethical conduct.  In New York, these rules are set forth in 22 New York Codes, Rules and Regulations Part 1200.

One set of rules requires attorneys to avoid conflicts of interests among their clients.  Attorneys are not allowed to accept or continue representation of a client that will adversely affect the attorney's judgment on behalf of or dilute his or her loyalty to another client.  In addition, when an attorney is retained by an organization (such as a corporation), the organization is the client and not its members, mangers, shareholders or partners. 

These issues regularly arise for attorneys when they are asked to represent a start-up, because often they are asked by the unsuspecting founders to represent each of them individually and the to be formed entity.  As an example,  two founders may want to hire one attorney to form the corporation, draft a shareholder agreement between them and review a lease that the corporation is about to enter into.  That makes for three clients, each of the founders and the corporation.  Even if all interests are aligned at the moment, conflicts between the parties could arise at any point in time.

In an ideal world of free legal representation, each founder should have their own attorney and the new business entity should have its own attorney. Well, that's not the real world.  It's hard enough to convince start-ups to get an attorney early on in their business venture, try convincing them to spend the little cash they have on several attorneys!

Having said that, your attorney may be able to represent multiple clients with differing interests if (and that is a big if):

a disinterested lawyer would believe the lawyer can represent both clients competently and the parties consent after there has been full disclosure of the implications, advantages and risks.

So if your start-up agrees to be represented by one attorney, be aware of the potential conflicts and expect your attorney to explain and disclose these conflicts to you. Unless you specifically consent to multiple representation, your attorney is not authorized to represent you and the other clients.   Know also that anything you tell your attorney will not be confidential from the other respective clients.  If you feel at anytime that your interests are not represented fairly due to the multiple representation, you should seek out independent counsel.  However, you should also expect the first attorney to point out such conflict the moment it arises and withdraw from the multiple representation at such time.

For an in-depth discussion of the ethics issues involved in multiple representation regarding corporate and transactional matters, look at the  Formal Ethics Opinion 2001-2   issued by the Association of the Bar of the City of New York.

              

Nice Try Holland & Knight Partner!

Here is another reason why you should keep a close watch on your (big) law firm's billing practices:  lawyers cheat!  If you don't believe me, check out this story:

Today's WSJ carries a story about bill padding at the Chicago office of law firm Holland & Knight.  Apparently the junior partner in charge of a trial blew the whistle on the senior billing partner, who was inflating the bills.

Actually, if the client had followed my tips in this earlier post, I think he or she would have spotted the fraud without the junior partner's help.