5 things business lawyers and their clients should know

Longtime Treasure Valley attorneys share thoughts on relationships, regulations, billing and common sense.

krodine@idahostatesman.com © 2013 Idaho StatesmanDecember 3, 2013 

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Business attorney Stephen C. Hardesty says lawyers should pay keen attention to clients’ personalities and adjust their legal style accordingly.

KYLE GREEN — kgreen@idahostatesman.com Buy Photo

One key to success for business lawyers is “to remember it’s a service industry and be adaptive to the needs of clients,” Stephen Hardesty says.

“It’s very important to keep in mind that, ultimately, we’re just a means to an end, to help clients work through legal problems and avoid future problems,” says Hardesty, adding that the company’s money and the lives of its workers are more important than the legal structure.

Hardesty, a partner at Perkins Coie who specializes in mergers, acquisitions and finance, is one of three Boise lawyers who recently put together a continuing legal education course for the Idaho Law Foundation dubbed “What We Wish Our Business Clients Knew About the Law.” The other two are John R. Sims Jr., former executive vice president and general counsel for Albertsons Inc., and Karen E. Gowland, longtime Boise Inc. counsel and now adviser to the general counsel for the company’s new owner, Packaging Corp. of America.

The three have made similar presentations to MBA candidates at Boise State University for the past four years. Their lawyer-focused version debuted as a teleconference Nov. 18. Here are some of their key points:

1. BE CAREFUL WITH CASUAL COMMENTS

One of the most important things for businesspeople to know, Sims says, is that not watching your words in an informal setting can derail a deal or a lawsuit.

“I’ve had people say things in front of me in elevators that could have been very dangerous” if a competitor or opposing lawyer was there, Sims says. “And people write things in an email or a text that they would never put in a letter.”

Casually passing on a rumor can be especially damaging, he says, and it could add slander to a lawsuit’s list of alleged wrongdoing.

Gowland says careless conversations with competitors at trade association meetings or in other social settings can ensnare businesses in antitrust laws intended to keep competing businesses from agreeing to restrain trade.

In such situations, she says, an attorney’s advice to a corporate client might echo a parent’s counsel for a prom-bound teen:

Æ “Know the host and who will attend.”

Æ “Make sure you have a chaperone (a lawyer with antitrust knowledge).”

Æ “Stay out of the bushes (stick to your agenda).”

Æ “Stay sober, and leave if things get out of hand.”

2. KNOW WHEN TO FOLD ‘EM

Lawsuits tend to “start the competitive juices flowing” for businesses and their lawyers, Sims says, particularly if the allegations seem false or offensive. However, he says, lawyers and their business clients should avoid losing track of practical issues such as cost.

He recalls one company that spent nearly $100,000 to fight a lawsuit when it could have settled for $6,000.

“Litigation should be treated like every other business expense,” he says. If settling wouldn’t endanger the company’s reputation or cause other significant damage, investigate settlement options.

When a business is sued, Sims says it’s “wise and very effective” for the leaders and their lawyers to meet with plaintiffs and their lawyers shortly after the legal action begins — before the two sides become entrenched. At that meeting, he says, both sides must agree that nothing the other says will be used against them.

“That’s resulted in quite a few cases being settled very early on, and sometimes the suit just goes away,” he says.

Also, he says, “Don’t start without knowing what you want. What’s a good deal? What’s your worst case settlement amount?”

After that, he says, “it’s just math.”

3. THINK AHEAD

Pre-thinking is also essential in forging a business deal, Gowland says.

“Think about how to get out of a business deal as much as how to get into one,” she says. Consider what happens if the deal goes sour or a product launch goes bad, and “get that into the agreement up front,” she says. “It’s sort of like a prenuptial.”

And if a company has inadvertently run afoul of government regulation, such as exceeding a permit amount, its leaders should inform the regulatory agency, she says.

“It’s always better to try to stop and deal with a legal problem in advance rather than wait and see if you get caught,” Gowland says. “You won’t avoid penalties, but it will make them less, probably.”

4. KNOW YOUR CLIENTS

In building relationships with clients, Hardesty says it’s useful for attorneys to look at the personality and business style of their clients and adjust their legal style accordingly.

“I really try to be very astute at the beginning of the relationship as to what the expectations are ... project by project,” he says. Does the client want an update every step of the way or only on the bigger points? Does he or she prefer communication by memo, email or a phone call?

Letting business people know they can call to ask a question without incurring a fractional hourly charge can improve communication and ward off more time-consuming work, Hardesty says.

Keeping communication flowing also can prevent misunderstandings over billing, he says, noting that transactions often take more or less time than predicted at the outset.

“This year, one cost more than three times what I told the client at the onset, but I kept in constant contact and at the end they were fine with it,” Hardesty says. “They knew what went into it and why their bill grew so much.”

Some clients request flat fees or fee caps, he says, mentioning one good longtime client that asks for a fee cap with every transaction. “In one, we ran $13,000 over and we didn’t charge that,” he says. “It’s important to meet the market standards and be flexible.”

Perkins Coie has a full-time administrator who focuses on alternative fee arrangements, he says. “It’s a tool that clients are asking for all the time. We’re very open to it, and a lot of firms are.”

5. BE FAIR

Hardesty stressed that agreements between businesses are social contracts as well as legal ones, and lawyers shouldn’t let the allure of victory make them lose sight of fairness, which has practical value.

“Even though we’re hired to try to achieve a certain result, it’s important to keep in mind the element of fairness” and point it out to clients if necessary, he says.

“It really doesn’t win anything in the end to try to get an unfair advantage,” Hardesty says. “If you start out with an unfair contract you’ll get a bad result and you’ll never be able to work with that contractor again. [It becomes] a lose-lose instead of win-win.”

“Last but not least, I tell my clients, ‘If it doesn’t feel right, don’t do it.’ ”

Kristin Rodine: 377-6447

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