The legal community is getting a lot of negative publicity from the mess in Washington, television shows and street talk. If you watch the reports from D.C., you could conclude truth and integrity have no place in law as practiced in politics. What moved me to write this column was an event last week. I was walking out of an exercise session with a group of seniors. They were discussing an upcoming seminar on protecting their assets. I suggested seeing an attorney. She answered, questioning who was going to protect her from attorneys?
I have always supported the legal community. A good business owner must have a competent and trustworthy attorney. From organization to liquidation requires good legal counsel. Wills, estates and trusts are complicated and a minefield of potential disasters. Real estate transactions by the nature of dollar amounts involved always should involve an attorney.
Here is my opinion from experience and observation in how to watch out for incompetent or unethical attorneys.
A large prestigious firm does not guarantee quality. Everyone makes mistakes. Even the best. One of the funniest and most outrageous errors I saw was many years ago by a premier law firm. A man bought a small part of a large business. The legal work, which had been signed by both parties, was for the sale of the seller’s total business. The buyer had just bought a landmark property for probably less than 5 percent of its value. The buyer laughed it off and signed corrected documents willingly. Whew! The seller should have read the contract.
A solo practice or small firm can be more than adequate, but you have to know what your needs are. Some small firms specialize in certain areas of legal practice. What you don't want to do is have a divorce specialist in play for a corporate reorganization or criminal law. If your attorney cannot help you, they are your best source for an attorney who can.
Credentials do not guarantee quality. The difference between an Ivy League lawyer and a locally educated lawyer for the sake of illustration could be about $200 per hour. All you should care about is can the person perform the task you are hiring them to do. Referrals are the way to find a solid performer. If paying big bucks gives you bragging rights over cocktails, go for it. If you want to get the job done for a reasonable price, ask other business owners for a referral.
Make sure the attorney is knowledgeable in the area you need service. Make sure if engaging a large firm that you get the right person within the firm. I have seen a situation where an attorney either did not understand the difference between a stock purchase and an asset purchase or did not attentively read the documents. Until the error was pointed out, the attorney actually was making the argument for the opposition. Business was not that attorney’s specialty.
Be wary of being baited into a very expensive battle between attorneys. If you conclude the cost is not worth the gain, get out. If the attorney throws out a number they think you could recover, be very skeptical. Also, consider the viability of collecting on a settlement. A million-dollar settlement from a homeless person is not worth much.
Ask questions and get an answer. If you see something in a document that doesn't make sense to you, point it out. I saw $100,000 lost because the client accepted “trust me” as a reply from the lawyer in regards to a confusing document. Do not accept being brushed off with it is too complicated for you or you’re not capable of understanding due to age, illness, etc. Attorneys have off days due to illness, financial or personal problems just like the rest of us. Don't let their bad day ruin your finances.
If you have an elderly or impaired parent or grandparent, do not assume they are protected by human decency. I have seen an email from an attorney mocking the impairment of a senior. He found it laughable that his opponent’s client was having difficulty attending meetings due to medical issues. If you see a problem with an attorney engaged by your parent, contact the attorney and be assertive and make sure you get a logical comprehensive answer. Longevity of the relationship or friendship is not the answer to, “Why is this costing so much and what is the potential gain or loss?”
Never turn all your financial duties over to a law firm. Use an accountant for finance and an attorney for legal issues. Most law offices are not set up for the purpose of handling bill paying, tax compliance or cash flow management. I have seen thousands spent only to have a record keeping and compliance train wreck.
Legal fees are negotiable. An elderly client died, and I attended the meeting with the sons and the attorney. The sons asked how much the legal fees would be. The attorney said they charged by a percentage, so the legal fees would be $18,000. The sons asked if he would take it for $1,800. The answer was a quick yes. Charging estates by a percentage of the estate is illogical. I have seen an estate consisting of $2 million in cash and a house with a will for the distribution. I have seen estates of $300,000 that were extremely complicated due to lack of planning, contracts and agreements that had to be negotiated. The size of the estate does not dictate its complexity.
Be extremely careful when it comes down to going to court or arbitration. Emotion plays a significant role in court or arbitration settlements. If you are not a sympathetic character and your opponent is, the law and contracts may be ignored in order to balance a perceived inequity. I am particularly skeptical of accepting arbitration through a local entity. Relationships are complex, and the last thing you want is an arbitrator who has business connections with someone you are in a dispute with. The best lawyer for winning is not always the most knowledgeable of the law. Getting the judge or arbitrator to see their client as abused or a victim is often more important than the contract or the law. You need to be prepared to be maligned and accused of things you would never dream of doing. You can't let the abuse bother you. Consider the source. Do not lose your temper. That will not work in your favor. The opponent can be irrational, emotional and lack integrity. Stay calm and professional and stand your ground based on facts and the law. An attorney told me one time if the facts and the law are on your side, pound the facts and the law. If the facts and the law are not on your side, pound the table. What he left off was the table pounders win more than their share of the disputes.
Don't do business with bad people with the idea your attorney will save you. I warned a friend about a company he was doing business with, and I told him these were very dangerous people. They lacked any sense of decency and were unfettered by any sense of ethics. My advice was not heeded. That cost the person I was advising over a million dollars. No matter how good your lawyer is, putting them up against dishonest unethical people is not worth the risk.
If you feel you are not getting quality service or the fees are not reasonable, speak up. There is no situation that is not explainable. If you are really uncomfortable, get a second opinion. The best thing you can get is an engagement letter from your attorney that spells out the goals and projected cost of your engagement. Get agreements in writing.
My motive for writing this is to encourage responsible use of law firms. There are situations where attorneys save business owners from untold grief by the proper planning and use of legal expertise. There also are times when an attorney who is dishonest, incompetent or distracted by other events in their lives can function poorly. Watch carefully the mindset of your legal counsel. If you see some indication of distraction or distress, question the issue.
To the majority of the legal community that is working hard and billing honestly, I give thanks for your service. Business in our state and country are the envy of the rest of the world. That success is in large part due to our following the laws of finance and business. You can do business here with a reasonable certainty the contracts will be honored. Those that successfully circumvent our legal system and the letter and spirit of contracts gain a temporary and painful edge. But all that being said, is there anywhere else you would want to do business? Sometimes, the system fails, but usually, it works.
Paul Hense is the retired president of local accounting firm Hense & Associates and past chairman of the Small Business Association of Michigan.