Making It Legal:

Did you know that yesterday was Law Day? I suppose that for many of you, the day passed with nary a whiff of the incredible celebrations to be had. Parades in the street! Inspirational speeches! Revelry! Bar associations around the country use it as a day to celebrate community and the importance that law plays in it.

50 years ago, May 1 was designated by a joint resolution of Congress as the official date for celebrating Law Day. Originally established by President Dwight D. Eisenhower (by proclamation), Law Day is a national day set aside to celebrate the rule of law and how the legal process contributes to the freedoms that all Americans share.

Before you start to tear your hair out about the ways that laws have complicated your life, take a moment to think about the ways that law has made our society great. People from all over the world risk life and limb, and leave their families behind, to come here. Laws contribute to this being the “land of opportunity.”

Law Day is not just a day to make lawyers feel good about themselves–if you think about what the world was like in 1958, when Law Day was first established, we had emerged from the ashes of World War II, seen two wars in the Middle East, gone in and out of Korea and watched the French get defeated in Vietnam. The U.S. Supreme Court case Brown v. Board of Education (”separate does not mean equal”) had been decided only a few years before and opened the door to significant social change in this country. Law was (and can still be) a way of righting a terrible imbalance of tyranny and unfairness.

We may debate whether laws are wise, necessary or fair, but few would dispense with them altogether. We use laws both to provide our freedoms and to protect our freedoms.

And now, I’m free to get off my soapbox and enjoy the rest of the day!

This week, I received a frantic call from “Rosie,” who had been referred by a colleague of mine. She plunked down a huge chunk of change (well into the five figures) to buy a day spa from the current owner. The seller told her he wanted to get out of the business because he wanted to retire. Of course it generated more than enough to meet its expenses, he cooed. It’s a great business, terrific location. The seller didn’t want to get lawyers involved: “They always complicate matters.” Rosie wanted to do the deal without laywers, too– it’s cheaper that way. So she bought it–the business… and the seller’s lines about the health of the company.

Turns out, there was very little the seller told her that was true, smooth operator that he was. And Rosie fell for it, hook, line and sinker. What didn’t she do?

• She didn’t ask to see the financials to verify his rosy (no pun intended) reports.
• She didn’t ask to see the lease for the premises to verify arrangements with the landlord.
• She didn’t ask to see the corporate documentation, verifying the seller’s ownership of the company.

Rosie wants out, but getting her out of this deal now is like trying to get milk out of the coffee when you realize you should have had cream. She can’t afford proper legal help because she sank her money into the deposit and on shoring up the ailing business.

As Twilight Zone creator Rod Serling would say: “Offered for your consideration.” Rosie rushed into the deal without guidance from an attorney or any other professional advisor. For whatever her reasons, she had to have this particular business now. For want of spending a few thousand dollars to make sure she got good advice and had seasoned experts watching her back, Rosie is now facing the possible loss of tens of thousands of dollars (that is, a perfectly good down payment that could have been put to better use), additional tens of thousands to get the business up and running (which should already have been up and running), and tens of thousands in possible litigation fees (to either sue the seller or be sued by the seller should she choose to walk away).

So I ask you: When you do the math, is it worth it not to get lawyers involved?

I may have mentioned in this blog the joke about the doctor and the appendix surgery: A man goes to the hospital to have his appendix removed. He receives the surgeon’s invoice for $10,000, and calls up the surgeon, furious. “How could this operation possibly have cost $10,000?” he screams. “I want to see an itemization of the costs of this procedure!” The surgeon responds with an itemized bill: $1,000 for making incision; $9,000 for knowing where to make incision.

I’ll leave the issue of how important it is for professionals to disclose their fees to clients in advance for another post. For today, however, I have another lesson: Sometimes, you get what you pay for. And if you pay nothing (or very little) for legal services, you may get just that.

This came to mind because of a recent article in The New York Times. Two brothers in Colorado have been accused of duping clients in a long-standing (15-year) fraud by running companies that claim to be a “legal aid” referral service, offering to “help you through the legal process.” As reported by Kirk Johnson,

Some victims wired money in exchange for legal help that never materialized, Ms. Martinez said. She offered the example of a Texas woman, Kristy Matthijetz, who sought help in a child custody case and paid a fee of $525. Ms. Matthijetz was told that a lawyer would meet her at her hearing, but the lawyer never appeared. She spoke for herself in court and ended up losing custody of her daughter.

A word to the wise: Unless you’re dealing with an attorney you have met or who comes recommended, do a little digging to make sure he or she is really an advisor who can meet your needs.

Far be it from me to turn away business (actually, I’m not), but there really are times when pre-paid legal services could be a better option for your business than hiring a firm and paying the higher rates.   

A pre-paid legal plan is like legal insurance.  You’re provided with some services at no cost (except for your monthly membership), some services at a reduced rate.  If most of your company’s legal needs involve quick consultations, pre-paid legal could be a convenient solution.  One of the drawbacks, as reported by Tina Dettman-Bielefeldt, Chairman of the Green Bay (Wisconsin) chapter of the Service Corps of Retired Executives (SCORE) is that you can’t necessarily request a particular attorney.  As a result, you don’t have the same opportunity to work with a trusted advisor who knows about your business and its goals, who can work with you proactively.   

Also, there are many companies offering pre-paid legal plans, and some may be less-than-adequate.  Ask for references, and research the companies before buying the coverage. 

OK, I’ll confess that my feathers are a little ruffled today (maybe a case of a bad night’s sleep), but seeing Guy Kawaskai’s Top Ten (Sixteen) Lies of Lawyers just stuck in my craw.  I can handle lawyer jokes just fine, but after seeing so many entrepreneurs shoot themselves in the foot because they were too scared/cheap/undercapitalized to seek the expert legal advice they really needed, after a while, enough is enough.  Lawyer-bashing is certainly not a recent phenomenon, but its prevalence is like watching The Flavor of Love:  first, it’s dopey entertainment; then, it becomes just plain stupid; finally, I just want to smash the television for projecting this nonsense.  (That’s when I yell at my husband to change the channel). 

I’m not saying that lawyers are perfect or immune from these things (and I thank fellow Entrepreneur blogger Tim Berry for putting a soft touch to the issue), but remember this:  Lawyers get lied to, too.  So do other service providers.    Here’s the top 10 lies I’ve been told over the years.  For entrepreneurs, all I can ask is:  don’t be these people.  Service providers will probably nod their heads in recognition: 1.                  “I’m eager to get started right away.�  So am I.  Is your initial deposit for fees as forthcoming as your desire to get started? 

2.                  “I just need something simple.�  I know you’d like something simple, but when you’re entering into a strategic alliance with an out-of-state company to market and develop intellectual property to children, there are a couple of issues that need to be handled delicately.  A one-page agreement won’t protect you.3.                  “I need this done yesterday.�  No, you don’t.  Unless someone is about to hang on Death Row, or you’re going to run up against an inviolable statutory deadline, it’s not an emergency.  Not that I’ll sit on it, but working until 3am because you woke up yesterday and decided you needed to sell your business today is not my problem.  Your failure to plan is not my emergency. 

4.                  “This wasn’t my fault.�  There are at least three versions of a dispute:  yours, theirs, and The Truth, which lies somewhere in between.  It’s exceedingly rare that someone has been an angel from heaven and the other side Hades Incarnate.  If I don’t know your downside, it’s hard to advise you properly.

5.                  “The last lawyer was an idiot, but I hear you’re terrific.�  I’m not a gambling woman, but I’d bet odds in Vegas that you said that to the last lawyer, too.  If you’ve hired and fired more than one other person before me for the same project, you’re probably no better than my philandering college boyfriend who left a trail of broken hearts.  And unpaid debts. 

6.                  “This company will be huge and have a lot of work to throw your way.�  This is usually raised in the context of trying to get me to reduce my rates.  There’s a reason it’s called a “volume discount�:  you provide me with the volume first and then I’ll give you the discount.  When I give the discount first, I’m usually left hanging, waiting for the volume.   

7.                  “The bookkeeper didn’t come in this week/month/quarter/had a death in the family.�  And that paralyzes your hand from writing a check?

8.                  “This wasn’t what I asked for.�  Usually said after a client has changed her mind 37 times since the beginning of the project. 

9.                  “This cost me a lot more than you promised.�  Did I really promise?  Did I guarantee a fee?  No, I estimated, based upon the amount of time I thought would be involved.  Time expands to fill the number of changes you request to a project.  See mind changing, #8.

10.              “I sent the check last week.�  Need I say more? 

Do-it-yourself legal sites drive me crazy.  I came across a DIY legal site called Negonation this week – yeah, OK, it’s in Brazil, but the principle is the same.  It touts a “get-your-contract-off-this-site-and-avoid-legal-feesâ€? service.  It claims that “its contracts are legally enforceable in the offline world, even if the parties are in different countries.â€?  That’s quite a bold claim.

Online sites don’t necessarily empower the lawyer in all of us.  What they do is delude many people into thinking that they have an “inner lawyer�.  Not everyone does, and that’s okay.  I don’t have an “inner doctor� –- if I have a medical need (even a regular check-up), I get help.  I don’t have an “inner accountant� – I make sure that I have one on call who can provide guidance as to how I should handle my financial statements and taxes.  I am who I am:  anal, cautious, and detail-oriented (among other things).  That makes me perfectly suited to being a lawyer.  I am not cut out for many other professions, and that suits me just fine.  I’ll leave those areas of specialty to the experts.

What’s dangerous about these sites is the false sense of security that entrepreneurs get from taking legal agreements from the Internet, without having the background or training to fairly evaluate whether what’s in the agreement is in their best interests, or whether there are other things that should be in the agreement that aren’t.  There’s no one affiliated with the sites who will give you the legal advice about your specific situation –- they’re just selling you a product (the agreement).  Take it or leave it.  They don’t take your own needs into account when creating the agreement –- it’s an off-the-shelf product. 

It would be like walking into Bloomingdales and buying a suit without looking at the size.  You know you need a one, but if it doesn’t fit properly, you could end up spending more for alterations than you paid for the suit.  Getting the right legal protections in place for your company isn’t just a matter of one-size-fits-all merchandise. 

Lawyers provide a hybrid:  product and service.  And it’s the service you receive that ensures that the product truly meets your needs.  For more guidance, see my article “What You Should Know Before Copying Contracts from the Internet.� 

“The meter is always running,� is a perennial complaint of small business owners when dealing with their attorneys.  And yet, if our attorneys aren’t properly informed about what we’re doing, they can’t give us the appropriate advice.  The latest plaint I’ve heard is:

My lawyer charges me so much money whenever I call him. I try to refrain from calling him but sometimes its important to give him updates. I pay all my bills to him. Are there lawyers that exist that don’t charge you like this for phone time? I feel taken advantage of… 

As business clients, there are a few things to keep in mind. 

1. This is a business relationship.  Your attorney sells his or her expertise, often measured in terms of the time spent.  Would you expect to regularly give of your own expertise without compensation?  Would that be fair to you? 
2. As I mentioned in my post, “Why Can’t My Attorney Be My Friend? � think carefully about why you are calling the attorney.  Are you looking for advice, or do you want to vent ad get general business advice?  If the latter, there may be more appropriate professionals whose time is not as costly. 
3. Many things can be negotiated with an attorney.  I don’t know what hourly rate you are paying, but you could ask for a reduced rate (or no charge) for things like listening to voice mail messages – particularly if the attorney is going to call you back any way to find out more about the situation.  Or, if the purpose of your call is just a status update (and not an in-depth exploration of your attorney’s expertise), a reduced rate might be appropriate.
4. If this particular attorney’s fees are breaking your bank, find another attorney whose fee structure fits better within your budget.  After all, you wouldn’t lease a Rolls Royce if you could only afford a Kia.  There’s no shame in making the price part of the reason you are choosing to work with someone.

The “Case of the $65 Million Pants� got me thinking over the holiday about how small business owners can protect themselves against crazy lawsuits.  Often, it’s not just (1) operating as a corporation or limited liability company to shield your personal assets, or (2) having the right contract provisions, or (3) knowing how to move a lawsuit along quickly (see my business partner, Ron Paltrowitz’s, article, “Shooing Away the Frivolous Lawsuit Pest�).  

Often, what can make the difference between surviving the nightmare and having it drown you is insurance.  And not just the kind of insurance that covers a claim (although I think it would be hard for a dry cleaner to anticipate a $65 million claim).  I’m talking about defense coverage.  This is (or should be) a part of your policy that will pay for some or all of your legal fees in the event that someone sues you for a claim that is covered by your insurance policy.  Generally, fee disputes aren’t covered.  But if your business insurance coverage protects you against your negligence in providing your product or service, defense costs may well be included.   

If you don’t have business insurance, get it.  As you can see, people bring lawsuits for cockamamie reasons, and there’s no law preventing them from doing so.  If you do have insurance, make sure your defense costs are paid by the insurance company.  If they are excluded from the policy, you could end up footing the bill out of your own pocket!  And if defense costs are included, find out if there is a deductible and how much it is.  Sometimes, you may get a better overall rate on a policy by accepting a higher deductible.  But, once again, the deductible is money that you will have to pay out of your own (or your company’s own) pocket.  And those amounts can be in the thousands of dollars!  Yes, insurance deductibles are tax deductible . . . but as a tax attorney friend once cautioned me, “Tax deductible does not mean free.�  Weigh the pros and cons of paying a little more over time against being hit hard with an unpleasant surprise.

As a lawyer, I love what I do.  I’m proud of how I do it.   

And sometimes, I hear about members of my profession who just make me want to spit.  On them. 

From the Annals of the Preposterous, here’s a story which, if true (I have not personally verified the pleadings) is an appalling addition to the “lawyers are [expletive]� files.  I can’t imagine what would possess a judge to bring such a lawsuit against a dry cleaner.  Nor can I explain why, after two years, this wasn’t laughed out of court long ago.  Nor can I possibly fathom how a pair of pants (and the ensuing distress at losing them) could be worth $65 million, consumer protection laws notwithstanding.  (That must be some tailor!).   

So this is a plea.  As Grace Kanoy reported, The American Association for Justice has taken action on this case.  But remember:  you hear these stories precisely because they happen relatively seldom.  That’s why it’s called “news�.  This is one meshugge apple among hundreds of thousands of decent, hard-working, caring people involved in the legal and justice systems.  And on behalf of the legal profession, I’m sorry. 

Well there’s absolutely no reason that she can’t.  Many attorneys are fun, interesting, caring people (you have to be, to go into a profession to solve people’s problems)!  But the “I thought my attorney was on my side . . . until I got the bill� plaint has come up a few times since I published my “Even the Big Players Complain About Legal Bills� post.  As Lauren commented: 

I started using my attorney for everything and felt so covered and so safe BUT then I got the bill. I was charged for things like “Listening to clients voicemail” and I couldn’t believe it.  

So let me add this to the subject.  Because of the stress of entrepreneurship, many business owners look for support.  That’s perfectly natural (and wise!).  Being part of an entrepreneur’s advisory team, a small business attorney is a natural place to look for it.  But sometimes, business owners may be looking for emotional support even more so than professional support.  Take the example of “Susan,” a consultant who worked with a difficult client.  Susan was upset that the client didn’t pay all of the fee . . . but what’s even more galling is that the client is complaining and wants her money back.  Susan spoke to an attorney (me!) and unleashed a torrent of information about the client, how she’s crazy/inconsistent/unrealistic/hasn’t a leg to stand on.  Part of what Susan was seeking was emotional support and validation, of the “Yes, you’re right, the client is crazy; you’re not being treated fairlyâ€? variety.  Susan wasnted to vent to a sympathetic ear (don’t we all?).  After all, who understands the trials and tribulations of her business better than her attorney?  However, attorneys sell their time, and the more you lean on an attorney in a quasi-therapeutic capacity, the higher the charges for telephone calls will mount. Here’s a way to manage that: 

• As I mentioned before, get really clear before beginning the attorney-client relationship on what the attorney will charge you for.  Use Lauren’s example (“listening to client voice mailâ€?) as a launching off point.  Ask for cost (and time) estimates for the services you’ll want performed.  You’d do it with a web designer – why not with your attorney?  If you want to be sure that the attorney’s style and demeanor is “simpaticoâ€? with yours, arrange for an initial in-person meeting where you can clarify many of the “how-will-we-work-together?â€? issues.
• Before you call your attorney, think carefully about what you want to say and why you are calling.  Are you looking for your attorney’s advice?  Or are you calling because you want to do the talking?  You are paying an attorney for her expertise, not just to listen to you talk.  If you real need is to be listened to, think about using a business coach or therapist instead to clear the emotions out of the situation.  You’ll then be able to use the attorney more effectively for, and with greater focus on, the business problem-solving. 
• Join networking and mastermind groups.  Your attorney can help you solve a business problem – and even prevent them from occurring in the future.  But for ongoing emotional and business strategy support, you should also cultivate a team.  Networking and mastermind (also called “peer advisoryâ€?) groups can help you develop and find members for your “Support Squadâ€?.
• Cultivate the attorney relationship “off-lineâ€?.  There are ways to develop a comfort level with your attorney other than taking time on the telephone.  Ask to be placed on an invitation list if she gives seminars or teleclasses on business-related subjects.  Subscribe to a newsletter or other publication list that she publishes.  You’ll not only learn a lot; you’ll have a better idea of the questions you should be asking her when you next speak on the telephone.  And that will help keep your costs down!

There’s the old (sad, pathetic, and worn, I might add) joke “whaddaya call 500 lawyers at the bottom of the ocean?  A good start.�  And I know that SOMEone will point me to a treasure trove of other lawyer jokes.  J   

So let me shed at least a little illumination on how to work with this prickly group of professionals.  As a business owner, you need them.  Like you need water to drink.  Sure, you could live your life drinking Fanta®, or even pineapple juice, but you won’t be as healthy as you could if you drink (what’s the current count?) 8 glasses of water a day.  Same way that you could do your own legal work, or even rely on your accountant to handle some of it (egads!), but your business won’t grow up big and strong.   

Here’s a handy little article hailing from the San Diego chapter of the National Association of Women Business Owners: What’s a Business Lawyer for Anyway? And if you have any questions, let me know!

Everyone has a favorite “whipping boy,� and for entrepreneurs, lawyers and legal fees often fill that role.  Sigh.   

Well, entrepreneurs, you’re not alone.  Seems a study of in-house and general counsel of major corporations in the UK have a similar gripe -– in particular, that the bills are padded with junior associate time.  There are ways to handle the legal fee situation without foregoing legal help altogether. 

• Ask detailed questions about billing structure before you start.  You have every right to ask, and you certainly don’t want to be surprised.  Who will actually be doing the work on your matters?  What is their billing rate?  Are you charged for inter-office communications, that is, two attorneys talking to each other about your situation? 

• Get clear before you call.  While an attorney can (and should!) help assuage your fears and anxiety, attorneys are like many other consultants:  they often sell their expertise in time-based increments.  And have a little sympathy; we can only (legitimately) sell the same 24 hours.  Every hour an attorney spends listening to the vengeful fantasies of a wronged client is an hour that can’t be spent on someone else’s matter.  So if you have a question, ask it; if you want to chew the fat and be “chummy,â€? try to find another alternative – take your lawyer out to dinner or drinks, or save the therapy hour for your friends.

• Set a budget.  Unquestionably, you don’t want to drown in legal fees, but it’s not reasonable to expect to get everything for free.  You expect to be paid for your products and services, yes?  And to be paid a fair amount (like, not 50 cents on the dollar just because someone doesn’t like what you charge)?  Discuss in advance what you can reasonably expect to pay for the services and how you can help keep costs down. 

• Raise billing questions immediately.  If there is anything you see on the bill that you don’t understand, ask about it.  There’s no shame in doing so.  My mother had a saying (about, for example, the diamond necklaces that would sparkle in Tiffany showcases): “If you have to ask [the price], you can’t afford it.â€?  Not only do I disagree totally, but in the business world, that’s a senseless attitude.  You want to know that you’re getting value for your money.  And people do make mistakes.  For the same reason, you should check your bank and credit card statements carefully every month.

You’re an entrepreneur – be fearless!  Don’t let the prospect of attorneys and their possible fees (you could be pleasantly surprised) deter you from seeing the help you need.  Here’s a shameless plug for a resource I have created on my Wise Counsel Press website – a free podcast on savvy strategies (and questions to ask) for choosing and using attorneys.  Check it out and let me know what you think!