Michael Best puts forward his argument for choosing the best lawyer you can afford
We’ve all heard the uncomplimentary jokes about lawyers, but love them or loathe them, we can’t do without them. In our complex, litigious society, even small business owners will need a good lawyer from time to time, and when it comes to choosing one, it’s best to go top drawer. Taking a chance with ‘cheap‘ is definitely not smart – the stakes are usually too high. A good lawyer with whom you can maintain a cordial, professional relationship can be an invaluable resource for your small business. Aside from reliably providing you with routine legal services, your lawyer will be your avenue to specialised legal resources in his or her firm when something extraordinary arises (and it will). Being an established client will give you an advantage and will save you time and angst when you need specialised help.
First order of business with your lawyer
Partnership and shareholders’ agreements are essential documents that should be prepared by a good lawyer. A properly prepared, comprehensive agreement, once signed, can be placed in secure storage until needed – and could be a business saver. I say that with the conviction of someone who could so easily have lost his business after just one year when my partnership had to be terminated. Without a clear, concise and watertight shareholders’ agreement, there almost certainly would have been a dispute that could have smothered the business at a very delicate stage of its young life.
Ongoing routine business with your lawyer
Throughout your small business’s existence, refer to your lawyer for certain routine matters that will arise. In addition to the most obvious examples of lease agreements, supplier agreements, joint venture agreements and franchise agreements, a variety of other business contracts and agreements could have adverse implications for your business should disputes occur in matters governed by these documents. Quite often landlords, suppliers and others will present agreements as a fait accompli, giving you the impression it’s all a matter of routine and you really have no choice but to accept them as presented. I know of many small business owners who were coerced into signing such agreements believing they were powerless to question or negotiate. Never acquiesce in this way. Have your lawyer do what a good and experienced lawyer does well: go over the agreement or contract with a fine-tooth comb and identify those clauses that could haunt you later. Then, if necessary, engage your lawyer in the negotiations to arrive at a fair agreement. Never assume there is no room for manoeuvring or negotiating – there invariably is, regardless of how it’s initially presented.
Over the years I have been astounded by how often small businesses are the targets of spurious lawsuits. My business was no exception. The first time your small business is the target of a lawsuit, particularly a spurious one, the legal process can be both disconcerting and maddening. The key, I learned, is to stay calm, engage your lawyer and trust that the truth will prevail. The first time we were targeted by a spurious lawsuit, we spent a few sleepless nights courtesy of an associate in our industry we’ll call Screen System. We had been in conversation with Screen System about representing our products in their region of the country in exchange for representing their products in our region of the country. After extensive discussions failed to resolve some key issues, we received a fax from the principal of Screen System saying if we didn’t conclude a deal within 24 hours, he was going to cancel the negotiations. Ironing out the remaining outstanding matters in 24 hours was not going to be possible, and I therefore agreed to cancel negotiations.
Almost a year later I received a telephone call from a whistleblower. He had seen a falsified back-dated letter being prepared to claim that I had assured printers in Screen System‘s region of the country that we had concluded a deal whereby they would be able to buy our product from Screen System. The purpose of the letter was to support a claim that terminating negotiations with Screen System had caused them loss of potential business. The whistleblower told us the letter had been typed on a screen printing company’s letterhead from a draft in the handwriting of Screen System’s principal. The anticipated letter from Screen System‘s lawyer arrived by FedEx within days. They were claiming Can$75,000 (£43,000) in damages for breach of contract. The falsified letter was offered as proof. My lawyer arranged for one of his partners, a trial lawyer, to meet with us. I explained the circumstances, including the fact that the whistleblower was willing to swear an adavit concerning the falsified letter. The lawyers were almost salivating in anticipation of confronting the plaintiff in discovery and hoisting him by his own petard. That strategy quickly derailed however when I asked who would be paying for the spectacle.
As tempting as such a hoisting was, I was reluctant to fund it, and we settled instead on a much less costly yet very effective solution. My lawyer replied to Screen System‘s lawyer saying that we had reason to believe the letter upon which they were basing their claim was questionable. He added that if they didn’t withdraw their claim in writing within a specified period, we would allege fraud and file a civil suit for damages. Within very short order my lawyer received a letter stating the claim had been withdrawn. I still ascribe the swift resolution of the Screen System matter to the value of having access to the resources of a partner in a large, national law firm with an impressive letterhead. The lesson for any small business owner caught up in a similar situation is simply this: don’t launch spurious lawsuits, fight back vigorously if you’re the victim of a spurious lawsuit, prepare properly and work with a good lawyer in a good firm.
While I advocate that small business owners should fight their legal battles with vigour, there may be times when you’re simply outgunned and without the resources to sustain a lengthy battle against an opponent capable of dragging out the legal process almost ad infinitum. One of my customers, a textile screen printing shop, was the victim of a scam involving orders paid by credit card over the phone. It turned out the card numbers had been stolen from customers at a gas station. The credit card company billed the screen shop for the Can$27,000 (£15,000) lost to the scammer. The screen shop owner saw his lawyer about suing the credit card company for restitution and was told that although he had a strong case, he was unlikely to be able to stay the course long enough to win against the big opponent, given its superior resources. To illustrate the point, the lawyer said, “If this represents the extent of your resources” – he held his thumb and index finger about two inches apart – “then this” – he stretched his arms out as if preparing to fly – “represents the credit card company’s resources.” Some lawyers may have allowed the business owner to proceed with the suit with a view to reaping a fee. A good lawyer isn’t just one who knows how to battle effectively on behalf of your small business, but also one who knows when not to battle at all.
Money pit alert
Even if you’re working with a reputable lawyer whom you’ve known for a long time and in whom you have the utmost faith, you shouldn’t forget you are the primary guardian of your small business’s budget. A lawsuit is like a home renovation. It can be well considered, carefully planned and meticulously budgeted, and then it can drag on much longer than anticipated and hit snags you would never have expected. It can become a bottomless money pit. Unfortunately, as far as I know, there is no blanket formula for anticipating the costs and benefits of a lawsuit – it comes down to both the lawyer’s and the client’s good judgement. This is just another reason to have a concerned lawyer who views you more as a long-term client than a one-off fee opportunity.
You get what you pay for
I can’t resist reiterating my experience-based advice: be very careful when selecting a lawyer for your small business. In the cases where my opponents received inadequate legal advice, they were relying on small local practices. I’m not suggesting there aren’t any good sole-practitioner generalists, but frankly, I would have reservations about one with an office above Amy’s Massage Parlour in an industrial-area strip mall desperately in need of a coat of paint. If you ever need legal assistance, you’ll be pleased when your small business lawyer is a partner in a national firm able to access a smorgasbord of talent. It will almost certainly cost more than engaging a small-firm generalist, but the odds are your business will stand a much better chance of success in its legal trials and tribulations.
This is an edited excerpt from Characters Who Can Make Or Break Your Small Business by Michael Best. Through 39 characters, Michael covers all aspects most small business owners can expect to encounter in the life of a business from inception to disposition. It can be read linearly or used a reference book to be consulted when confronted with a particular issue. Real life examples and anecdotes presented conversationally means it’s not your average, boring business book. It is available from: