If you’ve read this blog often, you’ve hopefully figured out that I view myself as a practical, pragmatic lawyer who takes a businesslike approach to the practice of law. That means a lot of things, including only providing the amount of “lawyering” that a deal needs – in other words, avoiding “over-lawyering” a deal.
I don’t think you’ll find the word over-lawyering in a dictionary (even a law dictionary), but I think every client knows it when he or she sees it – I just wish every lawyer did. Over-lawyering may be one of the biggest reasons people dislike and avoid lawyers; and here’s another shocker – it’s also one of the biggest reasons lawyers like me dislike working with certain other lawyers. At a minimum, over-lawyering makes deals take longer and cost more than necessary; at its worst, over-lawyering causes deals not to get done.
When I say over-lawyering, you may immediately think I mean a lawyer providing more legal services than necessary in order to produce more billable hours and therefore a bigger legal bill. While that certainly can be one reason for over-lawyering, I’m not talking just about that (in fact, I’m not talking about that much at all, because I find it to be ethically and morally reprehensible). Instead, I’m talking, for example, about the contract that includes provisions that are completely unnecessary under the circumstances, either because they don’t fit the context or because the likelihood of them being triggered is so remote and unlikely as to make them a waste of time and resources. I’m also talking about 3 page paragraphs to describe what can be said in 3 lines.
Most contracts are intended to memorialize the parties’ promises, duties and obligations after there has been a meeting of the minds. The negotiations and ultimate contract should cover those terms and the real risks and likely outcomes and stop there. Say it once; say it clearly; and be done. Anything more is over-lawyering.
We’ve all heard the expression many times – you have to have the right tool for the job. Taken a step further, you could say you have to have the right tool to do this specific job and to do it right. After all, you can turn a screw with a butter knife, and you can pound a nail with a rock, but neither would be mistaken for the “right tool.”
The flip-side of this – and something that is often misunderstood by both lawyers and non-lawyers – is that one size does NOT fit all in the practice of law. This is true even when you know all of the facts and the applicable law.
Take an asset purchase transaction. The actual procedure and documentation for an asset purchase can involve a letter of intent and a lengthy due diligence process, followed by a 60 page asset purchase agreement with numerous warranties, representations, contingencies, conditions precedent and antecedent, post-closing escrows and indemnities, etc. Alternatively, it can be consummated by a handshake or a simple bill of sale.
The reality is, there is no one way to conduct or document a transaction. That is why the client’s preferences and risk tolerance and the terms of the deal must dictate the process and documentation. Just as a large scale livestock producer typically doesn’t want a 50 page document even for a complicated multi-million dollar transaction, a banker typically doesn’t want a 3 page document even for a fifty thousand dollar deal. It’s the lawyers’ job to determine which of the many approaches is appropriate for the deal and acceptable to the clients.
The appropriate documentation is determined first and foremost by the terms of the deal and (a close) second, by the parties and their preferences. The practice of law is not one size fits all – you need the right tool for the job.
As I spent most of my day today developing our law firm’s budget for the upcoming year – something I’ve now done 13 times – I thought, every business lawyer should go through this process at least once. And as we budgeted for items reflected in our firm’s strategic plan, I thought – every business lawyer should go through that process too. Finally, as we discussed overall firm management issues, I thought – every business lawyer should have the opportunity (and the responsibility) to be involved in and accountable for the management of a business.
Perhaps you’re thinking that I mean preparing a budget, participating in strategic planning and being involved in management would be beneficial to lawyers in better understanding their own firms – and of course they would – but actually, the reason I think all business lawyers should participate in these processes is to better understand their clients and their clients’ businesses.
All of our corporate clients must think strategically, operate on a budget, and confront management issues on a daily basis. Furthermore, those that have the deepest and most valuable relationships with their business lawyers directly involve those lawyers in these matters – treating them not as mere legal consultants, but as trusted business advisors and confidantes. How can a lawyer fulfill that role and justify that trust if he or she has never actually dealt with these issues in a real life situation? – where they not only have to makes these decisions, but also communicate them to their colleagues, persuade others to buy into them, execute them, and ultimately be accountable for the results – including business, financial and human consequences. That’s the experience I want my lawyer to have. That’s the experience I’m glad I have when advising clients.
Having just completed a very successful closing in which we helped an Iowa-based company and its owners sell for a number that represents a HUGE return on investment, I’m feeling pretty good about the practice of law. After all, there’s nothing more satisfying to me than working with Iowa business people who have done it right and are getting their reward for doing so. These are people who recognize the value of a dollar and the importance of setting goals, evaluating risks/benefits, prioritizing tasks, allocating resources, and then executing.
I cannot, however, say the same for the “big city” law firm that represented the buyer in this transaction. That firm – whose website boasts that they are an international firm with nearly 1,000 lawyers located in multiple offices around the world – and its approach to the deal, represented precisely what many business people dislike about lawyers and what this blog preaches against – an overly technical approach that complicates rather than simplifies business deals and leads to countless hours and thousands of dollars in unnecessary legal fees (and lost business revenues) protecting against contingencies that are so remote and unlikely that no party to the deal really believes they need to be addressed, except for one side’s lawyers. In this deal, in fact, there were at least a half dozen times where the buyer said the equivalent of “we’re fine with that from a business perspective, but we’ll have to run it past our lawyers” – only to result in the buyer’s lawyers saying it couldn’t be done – generally for one of the following less than compelling reasons:
• “We’ve never seen it done that way.”
• “That’s not industry standard.”
• “We haven’t given that right to any of the other parties we’ve worked with.”
I’m not suggesting that the buyer’s lawyers in this deal are not good lawyers – especially if the sole measure is legal expertise and the analytical ability to identify every potential issue (no matter how peripheral) or contingency (no matter how unlikely), and every risk (no matter how small), and arrive at a legal strategy to address it (no matter how impractical or costly from a business perspective). By this measure, they are outstanding lawyers. So, if that’s what you’re looking for, go to the big firms in the big cities. But if you’re looking for a firm that views a business deal like you do – from a business/value perspective – you might start with a firm that’s a little closer to home and a little smaller.