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Never ask a lawyer how much lawyering you need, and other advice on the use of lawyers.

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Lawyers are highly disliked in our society, at least until you need one. This is because we primarily use lawyers like weapons, offensive and defensive, and who likes the weapon? I think lawyers can serve the world better if we take different attitudes about what clients wish from lawyers. Here are some lessons about using lawyers I have learned over the years.

You stop being a startup when you get in-house counsel

Lawyers are trained extensively to look out for client interests and be thorough in how they do it. It's very hard for a lawyer to not be diligent and considering every angle to cover their client's vulnerabilities.

When a company starts, using the outside law firm is expensive. So you moderate how much you do it. You make decisions of what has to be run past the lawyers and what doesn't. You even make decisions to take certain risks without clearing them with the lawyers, because you know roughly what they will say and feel no desire to pay for it.

Lawyers are trained not to give you simple answers sometimes because simple answers are incorrect, and they are not doing their duty if they give you incorrect answers, or leave something out that might come back to bite you.

Once you get in-house counsel, they are with you every day. You are much more tempted to run things past the lawyer, because you are paying them no matter what. When you do, they will do the duty they are compelled by their ethics and the law to do, but it might not be the best thing for the business.

That's because I don't think it's possible to run a startup in full compliance with the law. Not that startups have to be deliberate scofflaws, but rather that the law has become too complex for a small company to be fully compliant without distracting the company far too much. The right goal is to try to be compliant with as much of the law as fits your resources.

In house counsel, on the other hand, see everything that goes on in a company. It is their job to notice something going on that doesn't fit, and try to stop it. Relationships that were done with a handshake now need a contract and a negotiating phase. They are more airtight from a legal standpoint, but that's not all that matters.

That's because these are business decisions about risk, and you should never use your lawyers to make business decisions. If you need to, you're in the wrong business. There is a risk to not getting full legal review on things, and it is up to you to judge if it's worth it. Your lawyers can help you judge that risk (though they tend to greatly overestimate it) but you must make the call. If you can get lawyers who are really honest about that risk, you are a step ahead.

The best duty of the lawyer is to help you with your legal work once you have decided how you want to play the risks. That leads to my second rule of working with lawyers.

The one thing you must never ask your lawyer is "how much lawyering do I need?"

Even if you have a good lawyer, their ethics and training demand they tell you that you need more than you actually do. If they tell you, "You don't need to do detailed review on that contract" and it turns out that a big legal problem arises out of the contract, they are in trouble. They even will be reluctant to give a more correct answer like "There is a 1% chance of legal trouble here, but most of the time these things go fine with minimal or no review" because lawyers tend not to be about probabilities the way business people are.

We need to promote the idea of non-adversarial legal advice

The above problems take place when lawyers are just working on your everyday issues. The real poor reputation of the legal profession comes when there is some sort of adversarial situation. When there is a dispute, and you are fighting in or before court, everybody wants a good lawyer on their side, though they wish it were less expensive. They hate the lawyer on the other side.

The real area we need to improve is negotiations. Negotiations are adversarial but the parties are going to become partners. It is actually for this reason that often you will see people using agents or lawyers to do their negotiation, so that the adversarial fight doesn't interfere with a happy and healthy business partnership after the deal is signed.

The idea of having an agent is great, but not if the agent is also your lawyer. Your agent is there to handle business decisions and, as noted above, it's hard for the lawyer to do that job.

Absent an agent, a negotiation should be done between the parties, working out the substantive terms of the deal. Both parties should be happy they have a good deal. Only after that should it be sent to the lawyers, and it should be made clear their job is to implement the deal with proper legal language. Not to add extra things to it, and hardest of all, not to represent just one side.

By the ethics of their profession, lawyers represent only one side, and nobody should pretend the other side's lawyer is giving them legal advice. But that doesn't mean a lawyer can't, on instructions from the client, try to express the two parties' joint will in the final agreement. This is important because in a lot of deals, both sides don't get a lawyer. In agreements between companies and people, it is very common if the deal value is below a certain amount for only the company to have a lawyer. This is especially true if the company is doing deals with lots of people since the company gets the economies of scale of drawing up one contract for many deals, while individuals need one contract per deal.

The law recognizes this, actually, and when only one side had a lawyer and thus drafted the wording, ambiguities will often be taken against them rather than for them. But this is a small consolation.

The one-sidedness of these contracts is bad for both parties because it harms the relationship. It generates distrust and dislike.

Just about every time I've been negotiating a contract, I've found myself having to talk to the other side's lawyer. This should not happen. It happens because even though I and the other party negotiated terms we both like, the lawyer modified them. Often not with any malice, but they worked only for their client and added all sorts of "boiler plate" and paragraphs from their collection of legal language that were very one sided, and altered the balance of the contract away from what was negotiated.

I get them to fix it, but it takes work and time, and makes me walk away with a bad taste in my mouth, and makes them frustrated at the cost. (Because I know a lot of law, I am sure I am more trouble in these matters than most people. In fact, I know it because when I am handed boilerplate contracts, I actually read them, and I almost always find clauses which border on ridiculous. When I point this out, the other side often agrees they are ridiculous, and removes them, and tells me I am the first to have pointed it out.)

A new regime of legal thinking

I would like to see a world where, when lawyers are drafting a contract on behalf of one side, they attempt to draft it to be fair to both sides. They don't give legal advice to the other side, but they do review the contract from the other side's viewpoint. The goal would be that if this firm were representing the other side, it would not have many or any issues to point out to them. Places where they could be issues would be pointed out, and turned into a checklist for the real parties to negotiate, with clear language to be used depending on what is negotiated.

The main client would instruct the lawyers to do this. Pay them to do this. The result would be happier parties and in the end, less time spent on the contract and actually less legal work. That's because when one side puts in a clause that the other side will question, you open up another round of negotiation and legal consultation. When the other side doesn't see anything to dislike, things move quickly and smoothly.

Even if the other side does have their own counsel, such a contract would make that counsel say, "This is a decent contract, no big problems to question." Both sides save money. Both sides feel good starting their relationship. Both sides feel like equal partners. That's why the client should want to pay for this.

This actually does happen in industries where it is common that both sides have lawyers, or it is known the other party will have a lawyer or agent. In fact, it's often disturbing to see the difference between the boiler-plate contracts sent out to unskilled individuals without counsel and ones sent out where they know there will be legal review. In those cases, the industry has moved to bilateral standard terms to save people arguing from scratch from a one-sided contract. This is how it should be all the time.

Comments

I once had a startup where one of the partners was a lawyer. He understood the distinction between business risk and legal risk, and he saved us a ton of money on attorneys on everything we did, including by negotiating the fees on practically every external legal bill we got. We made a lot of mistakes, but this wasn't one — having an in-house lawyer from nearly the start was a good move.

If I may ask, was this guy corporate counsel? Or was he a partner who happened to be a lawyer? Ie. did he have a lawyer-client relationship with the company with all the attendant rules and duties of that? There are tons of lawyers out there who don't practice law, but know it.

In general, a partner in a company is going to put the company's business interests first, like all other partners. They will have no trouble in understanding its legal risks as risks to the business, rather than risks to compliance.

While I am at it, I didn't talk about compliance departments, which make you even less like a startup. (Though fintech startups and those in a few other fields do have to have them.)

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