Online text of the Business Lawyer's Handbook
Each year American law schools graduate thousands of new lawyers who have absolutely no idea what the practice of law is all about. The traditional law school curriculum stresses the development of deductive reasoning skills and the ability to dissect appellate court opinions, at the expense of practical skills like negotiating or drafting legal documents. Law schools have been slow to develop clinical programs designed to teach such skills, much less mandate them for all students.
Similarly, the organized bar has been slow to recognize the need for meaningful postgraduate training for newly minted lawyers. While the Practising Law Institute and state bar associations have offered "continuing legal education" courses for years, such courses have until very recently emphasized substantive developments in the law ("what the law is" with respect to, say, a given financial transaction) at the expense of hands-on training in practical skills ("what the lawyer does" in representing a client in such a transaction). In the past couple of years, some of the largest law firms and state bar associations have adopted "bridge the gap" and mandatory continuing legal education programs designed to teach junior lawyers the rudiments of office practice in an organized way, but these programs have varied in quality partly because of the lack of suitable textbooks and workbooks.
This problem is made worse by the fact that few if any college students contemplating a career in law have the foggiest idea of what lawyers actually do for a living on a day-to-day basis. To the extent students think about the practical aspects of the legal profession at all, they usually think of courtroom lawyers interrogating witnesses at trial or making long winded, dramatic speeches to a jury. The problem is that, in late twentieth century America, few lawyers actually do such things for a living. The actual work that most American lawyers do on a daily basis would not be suitable material for an award winning movie or television series.
BUSINESS LAWYER'S HANDBOOK is designed to give the aspiring lawyer, the law school student, and the recent law school graduate, an introduction to the workaday world of the lawyer who does not litigate for a living -- who in fact may never see the inside of a courtroom his entire professional life. The few available statistics indicate that such lawyers -- who are variously called "office lawyers," "business lawyers" or, to use the British term, "solicitors" -- are the fastest growing segment of the organized bar, and may even constitute a working majority of the lawyers practicing today. This book begins by explaining why a book such as this is necessary, with a brief digression on what this book is NOT intended to do, and then offers a brief overview of the business lawyer and his practice. Chapters 2, 3, 4 and 5 discuss in detail the four principal jobs of the office lawyer -- monitoring his clients' business and legal environment, counseling his clients on specific issues of law affecting the client's business, managing the client's important business transactions, and negotiating. Most of the "transaction management" discussion in Chapter 4 will focus on three basic skills not taught in law school: structuring transactions so as to minimize legal risk; drafting the necessary documents; and closing the transaction. Chapters 6, 7 and 8 discuss some of the peripheral aspects of office practice, such as the ethical responsibilities of the business lawyer (Chapter 8) and the special role of the lawyer who serves as secretary to a business corporation (Chapter 6) or counsel to a government agency (Chapter 7). Chapter 7 also discusses the ways in which business lawyers interact with their counterparts in government service.
Chapter 9 discusses the traditional career path business lawyers have followed and how it has been evolving into something quite different over the past decade. Chapter 10 describes the sometimes difficult transition business lawyers make from a private law firm to an in-house corporate counsel's position, with advice on how to make such a transition smoothly. Chapter 11 discusses "law office politics" and offers tips to help the business lawyer survive in the political and cultural environment in which he works. Finally, the HANDBOOK concludes with my own personal (and extremely heartfelt) advice to the novice on what it takes to succeed as a business lawyer (or indeed in any other profession). To assist the reader in understanding and reviewing principal points made in this book, each chapter of the HANDBOOK concludes with an individual "Summary of Individual Points".
Except for the three final chapters, this HANDBOOK is not designed to serve as a "how to" book, but only a description of "what is done" in the world of office practice. Suggestions for further reading, with short reviews of some of the better books on the market today for young business lawyers, are made in the Bibliography.
To the extent that this book has an axe to grind, it is to serve as a counterweight to the numerous "lawyer bashing" books that periodically grace the bestseller lists, the most recent of which is Mark McCormack's THE TERRIBLE TRUTH ABOUT LAWYERS. Quite often misunderstandings between lawyers and their business clients happen not because of any insidious intention on the lawyer's part (as the "lawyer bashing" authors would have nonlawyers believe), or any reckless disregard for the law on the client's part (as more than a few lawyers are sometimes tempted to believe), but simply because lawyers and businesspeople are trained to view the same things from different perspectives. For example, a businessperson focusing on the economics of a proposed document is likely to look at the written contract as a "blueprint" for his ongoing relationship with the other party, while a lawyer focusing on the risks inherent in the transaction is likely to look at the written contract as a trial memorandum setting forth the position his client would like to be in if the contract is ever interpreted by a court (regardless of the actual business conduct of the parties). It is meaningless to say either view is correct or incorrect; a written agreement is both a guide to conduct and an insurance policy against risk, and should ideally accomplish both ends.
Although the HANDBOOK is directed at the novice business lawyer and lawyer-to-be, I believe that it could also be of value to businesspeople in their dealings with office lawyers. I hope that by reading this book some businesspeople will gain a better appreciation for "how business lawyers got that way," a better ability to empathize with the pressures a business lawyer is under in his professional life, and a better insight into what business lawyers do.
NOTE: In this work, every effort has been made to use gender neutral language. Where clarity requires, however, the masculine pronoun has been used. The reader should note that it refers to persons of either gender.
CHAPTER 1 INTRODUCTION
1.01 What This Book Does and Why It Is Needed
BUSINESS LAWYER'S HANDBOOK is for the college pre-law student, the aspiring lawyer, the law school student, the recent law school graduate, and the novice lawyer (zero to five years in practice) who wants to practice law for a living but does not want to become a courtroom lawyer, or "litigator". I believe it is the first book ever to introduce the reader to the day to day work of perhaps the majority of lawyers in the United States today.
 The Problem: Ignorance of What Business Lawyers Do
Each year thousands upon thousands of young men and women graduate from law schools in the United States not having the foggiest idea what they will do when they begin their practice. Some of course do, and they generally fall into one of two groups. First are the sons, daughters and spouses of lawyers. Having been part of a legal household for some time, they can be presumed to have some working knowledge of what lawyers actually do each day (although in light of the lawyer's traditionally long working hours away from home, this may be a large presumption). Second are the ex-paralegals who spend one to three years between college and law school performing clerical tasks for a large law firm, usually in a big city. This second group has seen firsthand what lawyers do; they have served in the trenches with the junior attorneys of the firm, they know only too well what the lifestyle of the working lawyer is like, and they have received considerable advice from the firm's junior attorneys about how to succeed in law school and in practice.
I would be surprised if both of these groups together make up more than five percent of the typical first year law school class. For the remaining ninety five percent (and, one suspects, more than a smidgin of the elite five percent as well), the entry into the practice of law comes as an extreme shock, for two reasons. First, most young people who decide to enter the legal profession base their decisions on imperfect information, and fail to focus their career plans. Second, the traditional American law school curriculum emphasizes the development of skills that are useful to the courtroom lawyer or litigator, not the business lawyer as this book defines the term.
[a] Unfocused Career Planning
Most aspiring lawyers have shaped their knowledge of the legal life from one or more of the following, not entirely reliable, sources: college political science courses (including one usually entitled "American Constitutional Law" which covers more than two hundred years of United States Supreme Court cases in a single semester); high school and college guidance counselors; career aptitude tests such as the Strong-Campbell Interest Inventory; television programs such as PERRY MASON, L.A. LAW and THE PAPER CHASE; movies such as JAGGED EDGE and THE VERDICT; an influential childhood friend or neighbor who either was a lawyer or whose father was a lawyer; or biographies of famous criminal lawyers, United States Supreme Court justices, and lawyers turned politicians, which are usually written by a nonlawyer "ghost" or the subject's former law clerk. Needless to say, the image of the profession derived from these sources does not reflect the everyday, workaday world of the hundreds of thousands of American lawyers who are NOT famous criminal lawyers, justices or politicians. The world yet awaits the definitive biography of the greatest drafter of stock purchase agreements in American history, and will continue waiting a long time.
I believe that the decision to attend law school is often based on one or more of the following rationales:
What do most aspiring lawyers think they will do as they jump over the formidable hurdles of the LSAT, law school and the bar examination and cross the finish line (actually the starting gate) into the actual practice of law? Many aspiring lawyers envision a life as the successful "corporate lawyer" or "Wall Street lawyer": a highly paid, high status, prestigious "macho" professional who wears only the best suits and has the power to shape society to his will, influence business and government policy decisions, and get his name into the history books by doing great deeds, thinking great thoughts, and making great speeches. The primary goal of this book is to offset this naive view of the profession with a strong dose of reality, and a calm, dispassionate, objective view of the work American business lawyers are called upon to perform day after day after day (and night after night, weekend after weekend).
As a young lawyer almost a decade ago, who did not have the foggiest idea what "corporate lawyers" did (but knew somehow he wanted to be one), I searched in vain for a book that described, in clear simple English, what lawyers did for a living outside the courtroom, with perhaps some insight into how and why these lawyers did what they did. The HANDBOOK is designed to fill this gap in legal literature. While it cannot possibly take the place of interviewing business lawyers (the young reader should talk to lawyers practicing in law firms AND in corporate legal departments), or working a year or two in a law office environment, it hopefully will enlighten you sufficiently on what business lawyers do for a living. This book may help your career planning to become more focused, your questions more probing, and your ultimate career decision (whether for or against the legal profession) more informed. For a more thorough survey of the ENTIRE American legal profession, including litigators and their ilk, the reader is referred to Martin Mayer's THE LAWYERS, which although out of print for over a decade can be found in many community, college and university libraries.
[b] Law Schools Teach Advocacy Skills
If the beginning law student has any idea of what American lawyers really do, he has likely shaped that idea in terms of litigation or courtroom practice. This vision of the lawyer as first and foremost an advocate -- one who is presented with a given set of facts or past events over which he has no control, analyzes and researches the legal issues involved, builds the best possible case for his client by lining up the legal authorities supporting the case and distinguishing the legal authorities that cut against the case, and advocates the client's case zealously, shrewdly and loudly in a trial or appellate court setting -- is one that is rigidly reinforced by the traditional American law school curriculum and by the socialization process that occurs during the first year of law school.
What the law school student spends most of his time reading are appellate court decisions which apply a legal principle more or less accurately to a given set of facts. This encourages the student to develop a habit of thinking about the law in rigidly logical, rational, deductive terms. Those who took philosophy courses in college recognize this habit of thinking as the Aristotelian syllogism:
The reader will notice the similarity between the Aristotelian syllogism and the typical case "brief" that first year law students are called upon to write each day:
The ambience of the first year law school classroom and the Socratic teaching style further encourage the development of advocacy style thinking, which many law professors call "thinking like a lawyer". The stern, uncompromising professor who grills his hapless student victim into the ground before an audience often only too happy to see the student make an utter fool of himself, in most cases is not a sadist. Rather, he is following an age-old plan that is carefully designed to lead the student to certain conclusions about how to survive in the practice of law. First, the student learns humility: that he is not as smart as he thought he was, and cannot trust his instincts and feelings as much as he did in high school and college. Without this humility, it is believed, the practicing lawyer is more likely to make mistakes by not checking, double checking and triple checking his facts and law as he should. A friend of mine partly attributes his making partner at a prominent Wall Street law firm to being the most insecure young lawyer in his class, a tribute to his law school training. For the business lawyer does not tolerate mistakes or unchecked assumptions in his work: in his world there is no grade lower than 100 percent.
Second, the law student learns through embarrassment and fear that he cannot "wing it" in a legal discussion. He must always be prepared to the Nth degree every day, so as to give his answers quickly and without hesitation. For the business lawyer to win the confidence of his client he must be intellectually "fast on his feet" and give the impression that he is never unsure of himself or his position.
Third, the student learns that the truth or falsity of a legal argument is relative, not absolute. What matters is that a position can be justified by a rigorous application of deductive logic to an encyclopedic knowledge of legal rules. When a student is presented with a "hypothetical" -- a fact situation that he has not encountered before -- in class he must instantly size it up, determine whether it is the same case as the one he was just discussing or whether it is sufficiently different from that case ("distinguishable" in legal terminology) to warrant a different legal outcome; in either instance, he should state his conclusion and rationale concisely. The professor will then offer counterargument in an effort to dissuade the student from the position taken. The wise student learns to stock to his guns at all costs, since if he fails to do so the professor will "whipsaw" him back and forth between contrary positions until it becomes clear to the entire class that the student is totally confused and does not understand the material. Whether the student's analysis of the hypothetical is right or wrong is seldom decided in the Socratic dialogue, much to the consternation of students who want above all to know what the professor thinks is the right answer. What matters is that the student can come up quickly with an answer, support it by logical reasoning, defend it against counterarguments, and present himself in such a way as to instill confidence in his audience that he knows what he is talking about and is certain his position is the correct one.
In some cases, the student learns to love argument and debate for its own sake: developing a position, sticking with it, answering any and all objections, and denying any conceivable merit to the other side's position. The student will know just enough of the other side's case to be able to refute effectively its strong points and highlight its weaknesses, regardless of the student's own actual belief in the strength or weakness of his own position.
In a courtroom setting, of course, such a habit of argumentative thinking and behavior is essential. If a courtroom lawyers is unable to maintain his personal credibility with a judge and/or jury, if he displays any doubt about the merits of his client's case, if he concedes any merit to the opponent's case, in an environment where it is given that no one knows the truth about what actually happened in the case (if the truth can be found out easily the case will usually be settled out of court before going to trial), he will not be effective in representing his client's interests, with results that may be catastrophic to his client and his career. Simply put, a courtroom is not a nice, forgiving, user friendly sort of place, and it takes a certain toughness of character to succeed there.
This does not mean that business lawyers are softhearted, sloppy thinking wimps who never use advocacy skills in their practice. Quite the contrary. There are times, especially when negotiating a client's business transaction or dealing with government officials, when a business lawyer must be an advocate for his client's cause. The lawyer in such circumstances who decides to be reasonable and refrains from vigorously defending his client's position so an agreement can be reached quickly and painlessly will often find himself on the short end of the stick. Sometimes even a business lawyer must appear as a gladiator in his client's and opponent's eyes.
The problem is that there are times when advocacy skills are not appropriate, where in fact an entirely different set of skills are needed to do the business lawyer's job. These other skills, which relate to the lawyer's ability to help his client solve problems in a way that will not lead to litigation, are not taught in law school. This HANDBOOK will introduce the reader to the most fundamental of these skills, such as anticipating legal problems before they happen, counseling the client on a proposed course of action, and drafting legal documents in a business transaction.
 The Business Lawyer and the Advocate: A Study in Contrasts
What do we mean when we refer to a "business lawyer"? In the real world of practice, the term has a flexible meaning; it refers generally to a lawyer whose specialty encompasses one of the areas of substantive law (such as corporate law, antitrust law, or securities regulation) which forms part of the legal environment of a business corporation, partnership or other entity (such as a joint venture or limited liability company). Thus a litigator who specializes in shareholders' derivative suits or administrative proceedings before the Environmental Protection Agency is a "business lawyer", while the lawyer who drafts wills for individuals and never sees the inside of a courtroom is not.
This book uses a different definition of "business lawyer". As used herein, the term refers to one who spends most of his professional time on tasks that do not involved advocacy or representing clients in court. Thus it does not matter whether the business lawyer's specialty is corporate law, tax law, real property law, estates and trusts, matrimonial law, environmental law or labor/employment law; for the purposes of this book a lawyer is a "business lawyer" if he seldom or never sees the inside of a courtroom in performing his work. The term "office lawyer" will occasionally appear as a synonym for "business lawyer" in this book.
In the closing decades of the twentieth century, the majority of lawyers graduating from law schools will be business lawyers, as this book defines the term. Fifty or even thirty years ago, litigation was the core of almost every lawyer's practice; a lawyer, especially in a small to medium-size law firm, simply could not survive without courtroom skills. Today litigation is only one of many legal specialties the young lawyer may elect to pursue upon graduating from law school and passing the bar examination, and it is fair to say that the majority of lawyers other than litigators are unlikely to see the inside of a courtroom their entire professional lives.2
The English legal system has always recognized the difference between litigators and business lawyers. In the United Kingdom, a BARRISTER is a "specialist pleader who also gives expert opinions on all legal matters". Barristers have almost exclusive rights of appearing in English courts on behalf of clients. A SOLICITOR on the other hand, is a "general law agent dealing with litigious and non-litigious matters". It is the solicitor who drafts wills, counsels business corporations and partnerships on their legal problems, negotiates marital separation agreements, and closes title to real property. While the barrister in court can only act on the instructions of the client's solicitor, who often sits at the barrister's side throughout the proceedings, the solicitor cannot speak in court except to instruct the barrister. Curiously, in this arrangement the barrister is the only one of the two-lawyer team who is referred to as "counsel".
In contrast, the American legal system blurs the distinction between the "barrister" and "solicitor" functions. Aside from the obvious fact that, once one has been admitted to practice law in one or more of the American states, one does not need an additional license to appear in court in that state (although an increasing number of jurisdictions are imposing additional licensing requirements for lawyers who wish to specialize in certain highly technical areas of practice, such as tax law), an American lawyer, even a business lawyer, is expected to serve his clients as both advocate and counselor.
While American law schools are generally successful in teaching advocacy skills to their students, they have historically ignored the other set of skills -- those of the office lawyer or solicitor -- which the newly minted lawyer will need to serve her clients effectively. Part of this ignorance is based on tradition; one still hears many litigators say that their practice is "closer to the life of the law" than the practice of business lawyers. Indeed, some litigators view their office lawyer counterparts as little more than businesspeople with law degrees!
Some law schools also believe that law school graduates can easily pick up office lawyering skills during their apprenticeships as associates in medium- to large-size law firms, the traditional first step in a legal career. The problem with that view is that normally such apprenticeships are open only to the best law graduates -- sometimes only the top ten percent of each year's graduating class. The remaining ninety percent are denied this internship opportunity and are compelled to learn the necessary skills on the job, at client expense.
Moreover, the quality of the apprenticeship at the large law firms varies widely. Many senior lawyers in such firms are simply too busy to offer the novice business lawyer any structured training in office practice skills, and give assignments to the juniors willy nilly in the hope that the cream will rise to the top without effort on their part. Finally, the first couple of years at most large law firms are spent researching the law to answer client questions, drafting memoranda of law, and performing the more routine (often clerical) tasks involved in documenting and closing a major business transaction such as a merger of two corporations. All of these "junior associate" tasks require only the deductive reasoning skills taught in law school, and so the corporate associate in a large law firm may spend several years in practice without learning the importance of the office lawyering skills which will be so essential to his later development.
This is not to say that deductive reasoning and other advocacy skills are "strictly kid stuff" that the business lawyer jettisons at some point in his career in favor of the more refined office lawyering skills that will be discussed in this book. Quite the contrary: both sets of skills are necessary to the balanced development of a competent business lawyer. In writing this book I seek only to restore the balance between the two in the education of young lawyers; I do not seek to tip the scale in the opposite direction from that taken by American law schools for centuries.
For a lawyer who has developed only advocacy skills is not likely to be successful as a business lawyer. As will be discussed in Chapter 3 on counseling clients, the businessperson who visits with counsel to discuss a problem or a proposed transaction with another company is not interested in knowing "what the law is" or what his side of the issue should be. She wants to know, quite simply, what she should do (or, more precisely, what others commonly do when faced with her situation). Close logical reasoning, even if completely accurate, will not give her the advice she seeks. There is an old story about lawyers which illustrates perfectly the way businesspeople view their counseling sessions with lawyers:
Two men set out in a hot air balloon to cross the Atlantic Ocean. About halfway across they were enveloped by a thick fog and lost their bearings. After several days of floating through the pea soup they found themselves over land, and soon saw a solitary man riding his bicycle through what appeared to be an endless meadow. They called out to the man on the bicycle, and asked "where are we?"
The man answered, "you're in a hot air balloon about fifty feet above the ground".
The two men in the balloon turned to each other and agreed, "this man must be a lawyer. The information he has given us is totally accurate and totally useless to us".
What distinguishes the business lawyer from the litigator is the ability not only to furnish legal information but to relate it to the client's needs and objectives, so that the client may achieve those objectives and satisfy those needs with the smallest possible risk of litigation or violating the law, without giving nonlegal or business advice (no matter how much such advice is desired by the client) which the lawyer is not competent to give.
 The Objectives Of This Book
This HANDBOOK has several goals. First and foremost, this book describes the day-to-day work of business lawyers in language that aspiring lawyers and nonlawyers can understand. Second, this book will introduce the reader to the skills which office lawyers need to perform their day-to-day work, and will convey some sense of how and why business lawyers do what they do. Third, this book will describe the business lawyer's career path and how it is changing from a relatively narrow path with few deviations to a broad highway with many interchanges and alternative routes. Finally, I hope along the way to offer counterarguments to those whose misunderstanding of the business lawyer's work leads them to criticize lawyers unfairly: the "lawyer bashers" who would make the businessperson believe that business lawyers are hostile alien creatures from another planet rather than the benign, harmless drudges they are in fact.
 What This Book Does Not Do
In the words of the philosophy professors, this book is "descriptive", not "normative", in its approach to the business lawyer's work. The primary goal of this HANDBOOK is to describe what office practice is, not what it ought to be under ideal circumstances. While practice pointers will occasionally appear throughout this book, and while Chapter 12 contains my own views on how to succeed in office practice, this book should not be read as a "how to" manual for the novice lawyer who wants to impress her superiors or clients. There are other books on the market which better serve that purpose, and some of these have been included in the Bibliography.
This HANDBOOK is emphatically not a "lawyer bashing" book. I am an office lawyer who genuinely enjoys being an office lawyer, and who believes there are far too many books on the market already which point out the profession's shortcomings. Too often the practicing lawyer, out of deference to his client's feelings, will make self-deprecating statements in an effort to persuade others that he really isn't a lawyer at heart. For example, at a recent negotiating session in which I participated, one of the investment bankers present made a point of saying that he "doesn't usually admit it, but [he] began [his] career as a lawyer", in an effort to communicate that he understood something about the contractual language being discussed. Far from establishing a rapport with a perceived "anti-lawyer" client, I believe such statements actually work to a lawyer's disadvantage, since most clients go to a lawyer's offices to talk to a lawyer, not another businessperson in lawyer's clothing.
Those who join the fraternity of office lawyers, either in private practice or in a corporate legal department, must accept the profession and its limitations as they are, but one should never make a career choice one cannot be proud of. Those business lawyers who play down their lawyerly values and attitudes are often those who cannot accept the profession's limitations, and who are most likely to step over the line that separates the business lawyer's job from the businessperson's job. Such people often leave the profession early in the game to become businesspeople, academics, journalists, or ballet dancers, but some diligently slog on, toiling day and night at a job they cannot stand, a job whose limitations they are constantly trying to circumvent. It is my hope that this HANDBOOK, by dispassionately pointing out the limitations of the profession, will reduce the ranks of those miserable people who reach the top of the career ladder in office practice only to discover that it is propped up against the wrong building.
This book is not a treatise on the practice of law or professional responsibility (also known as "legal ethics"), although Chapter 8 will touch on some of the ethical aspects of office practice. Neither is this book a sociological study of office lawyers, and it is certainly not an attempt to psychoanalyze office lawyers (a truly daunting task).
Finally, this book, while generally light and conversational in tone, is not a good source of "lawyer jokes". For those you will have to read books like Gerald White's THE OFFICIAL LAWYER'S HANDBOOK, which is available in the "humor" section of most bookstores, or call the Lawyer Joke Line at 1-900-420-9675 (the charge is $2.00 for the first minute, and $1.00 for each additional minute) for such gems as "How can you tell when a lawyer is lying? His lips are moving."
1.02 The Several Types of Business Lawyer
Any good legal document will begin with a definition section, in which certain key terms will be defined at length before the actual text of the document begins. This definition section may be the longest in the entire document; I have seen many documents in complex financial transactions where almost every noun is capitalized, as in the German language, and defined in an "Article I - Definitions" running thirty pages or more. It is thus appropriate that as an introduction to the business lawyer's work this HANDBOOK should begin by discussing the different types of business lawyer and their basic functions.
 The Business Lawyer In Private Practice
While the growth of corporate legal departments has been explosive in the past decade, it is still the case that most business lawyers practice their craft in private law firms, which can range in size from two lawyers to over 1,000 lawyers. Business lawyers in a small firm usually are generalists, and often are expected to handle litigation as well as office matters. Sometimes, however, a litigator and an office lawyer will go into partnership where each practices his specialty; a client who runs a gasoline service station, for example, who retains the firm of A & B may see Lawyer B for his routine contracts and estate planning but will be referred to Lawyer A when somebody sues the station for negligence.
In larger firms, the business lawyers are usually segregated from the litigators in their own department, which is most commonly called the "corporate department" even though lawyers in that department do not confine their practice to corporate law. In many large firms, there will be several such departments, each of which will be devoted to a particular specialty (such as antitrust law, tax law or securities regulation), or to a particular group of clients. It is not uncommon, in the very largest firms that represent Fortune 500 corporations, for each client to have its own team of lawyers assigned exclusively to work generated by that client.
The business lawyer practicing in a medium- to large-size law firm is a specialist in a particular field of law. An antitrust lawyer will have to refer the client to another lawyer in his department when the client wishes to make a public offering of its stock, which requires expertise in securities regulation. In the largest firms, he may also be a specialist in a particular type of transaction; many business lawyers in large firms do nothing more than draft the documents for, say, corporate offerings of debt securities, or leases of computer equipment. Such a lawyer can be likened to the surgeon who specializes in a particular organ of the body, and to whom patients are referred by the general practitioner (the lawyer in a smaller firm or an in-house corporate counsel) who handles the more routine medical problems of the patient.
 The Corporate Or In-House Business Lawyer
As recently as 1980, the overwhelming majority of business lawyers were employed by law firms large and small. Few corporations hired lawyers as corporate employees; the few that did hired one or two senior lawyers from the outside law firms that regularly did their legal work, often as a favor to the outside firm that wanted to remove a senior associate from the premises who had been passed over for partnership at the firm. These senior lawyers, who became general counsel at the client organization, were responsible for advising the corporation's board of directors and chief executive officer on the legal risks inherent in the corporation's business activities, and for maintaining the lines of communication between the senior corporate officers and the partners of the outside law firm. The bonds which tied the general counsel to the outside firm that gave him his training were many, not the least of which was the lawyer's gratitude to his former employers for making the career change possible without a prolonged period of unemployment.
Times have changed. As the costs of using outside law firms skyrocketed during the past decade, many business organizations have cultivated in-house legal departments of business lawyers who are also employees of the organization. At some of the largest Fortune 500 corporations, the law department is a law firm within the corporation, consisting of dozens if not hundreds of litigators and business lawyers with assigned tasks, corporate titles and reporting responsibilities. While titles vary, usually the young business lawyer in a corporate legal department starts out as a "counsel", performing very routine tasks, then works her way up to "associate general counsel", then "assistant general counsel", and finally ending her career at the top of the departmental ladder as "general counsel" to the corporation (that is, if someone has not been brought in from the corporation's outside law firm to fill this extremely sensitive and critical position).
The corporate law department in most large business organizations is expected to perform most of the routine, day-to-day legal tasks once performed by junior attorneys in the organization's outside law firm. When a matter arises that is too large, too politically sensitive, or too specialized for the in-house legal team, it usually will be referred to outside lawyers by the general counsel. While in theory the general counsel is free to choose any law firm he believes can do the job, and while most general counsel these days shop their referrals around to several firms in an effort to generate price competition that will lower the organization's overall legal costs, in practice most general counsel will refer matters to the law firm from which they came, as it is rare even today for a general counsel to have spent his entire career solely in the corporate legal environment. Chapter 9 will explain in greater detail where in-house corporate lawyers come from, and how their career path takes shape.
Why do business organizations build in-house legal departments? Obviously, by paying their in-house lawyers a salary rather than an hourly fee for their services, the organizations hope to reduce their overall legal costs. Less obviously but just as importantly, most business organizations desire to have legally trained personnel who speak their language, who understand the business of the organization, who work day-by-day with senior management without the distraction of other clients, who are familiar with the organization's internal politics and corporate culture, and who therefore are in a better position than outside lawyers to assess how changes in the legal and regulatory climate will affect the corporation's business and operations.
The in-house lawyer, unlike his counterpart in private practice, is expected to practice what one author has called "preventive corporate law", by spotting potential legal and regulatory problems before they get out of hand, pointing out alternative courses of action to the executives involved, participating actively in the planning of corporate strategy to deal with the problems, and becoming a part of the decisionmaking process by which management solves its problems and assesses business risks. By so doing he inevitably becomes part of the management team, and is susceptible to involvement in the company politics and groupthink that sometimes infect the decisionmaking process in large organizations. More seriously, he is often tempted, by reason of his advanced knowledge of the client and its business, to secondguess management's business judgment and to blur beyond recognition the distinction between assessing and assuming legal risks.
 The "Lawyer By Training" Business Executive
As will be discussed in Chapter 9, a growing number of business lawyers are choosing to leave the profession of law altogether for a wide variety of careers in business, education, government, journalism and the arts. Due to the intense competition for legal jobs in law firms and business organizations, an even greater number of law school graduates never become practicing lawyers in the first place, making their start in nonlegal careers the minute they pass the bar examination (assuming they get even that far). Magazines such as Business Week, Fortune and Forbes often use a code phrase when referring to a business executive who at some point in her career received legal education or practiced law -- she inevitably is referred to as a "lawyer by training", even if her exposure to the law consists entirely of one year of law school. While such a phrase is innocuous by itself, referring as it does only to a person's career background, when put in context it can sometimes be seen to carry derogatory undertones of "this person is not really one of us".
Despite the obvious value of legal training to the young business executive (most business schools require their students to take courses in business law and the "legal environment of business"), some legally trained executives view themselves as "people without a country" who have not been fully accepted either by the legal profession or by the M.B.A. club (unless, of course, they possess an M.B.A. degree in addition to their Juris Doctor or LL.B.). How such an individual responds to this dilemma will depend, of course, on the individual. Some will use their legal training either to lay claim to expertise they may or may not really possess ("I don't usually admit this, but I started out as a real estate lawyer so I do know something about what provisions customarily go into a ground lease"), or to assert a false modesty when dealing with other businesspeople ("it's probably because I'm a lawyer by training, and you know the biggest reason people become lawyers is math anxiety, but can we go over these numbers one more time?"). Then, too, there are many who leave the legal profession who never use their skills at all.
 The Staff Attorney For A Government Or Administrative Agency
A special type of business lawyer, who will be discussed at greater length in Chapter 7, is the lawyer who works for a federal, state or local government, legislative committee, or administrative agency such as the Federal Trade Commission or the Securities and Exchange Commission. These individuals perform a number of tasks, including the preparation of new laws and regulations, the drafting of legislative history (such as the releases which always accompany new Securities and Exchange Commission pronouncements), the interpretation of agency rules and regulations in ruling letters to business lawyers and their clients, and the approval of documents required to be filed with the agency before a particular course of action (such as a corporate acquisition or the construction of a public facility) can begin.
While the practice of government attorneys is in many ways similar to that of business lawyers in private practice or in-house legal departments, it differs in one fundamental respect: there is but one client, and that client is the State. Many government lawyers have an extremely strong belief in the importance of their work, and are less inclined than other business lawyers to be flexible in negotiations. In dealing with a government lawyer, the burden of persuasion is on the lawyer requesting an interpretation of government policy or approval of documents to present clear and convincing evidence that the proposed action does not violate any law or regulation and is consistent with government policy.
Government lawyers are often hired directly out of law school, although some young associates in large law firms will make a career move to a government position in their second or third years of practice. Once in government they are assigned a civil service ranking, and a statutory schedule determines the compensation to be paid uniform to civil servants in each rank. Because in recent years government salaries have failed to keep pace with salaries in private practice and in-house legal departments, it is common for government lawyers to relocate to legal jobs in the private sector once they have gained useful experience in a certain field.8 Of greater concern is that it has become more difficult in recent years for government agencies to attract the best and brightest young lawyers due to competition from the private sector, and almost impossible to attract seasoned lawyers from private practice who are not willing to take a substantial pay cut to serve the common weal.
1.03 The Three Basic Functions Of The Business Lawyer
The business lawyer in the United States serves three basic functions for her clients: monitoring the client's legal and business environment; counseling the client on legal problems raised by the client's present and proposed business activities; and managing the client's business transactions with others. These functions, which are described briefly below, are the subjects of Chapters 2, 3 and 4, respectively.
 The Client Monitoring Function
A vital yet underappreciated function of the business lawyer is the constant monitoring of the legal and regulatory landscape as it relates to the client's particular business activities. As an example, a business lawyer who notices in his professional reading a new case or statute that he knows will have an adverse effect on a client's proposed merger with another corporation may wish to prepare a brief memorandum to the client discussing the case or statute and showing both why and how the proposed merger will be affected. While a business lawyer should not render unsolicited legal advice on a regular basis, he is not expected to sit on his hands when he discovers a potentially dangerous development and wait for the client to ask him about it.
 The Client Counseling Function
A major part of the business lawyer's work involves advising and counseling clients on matters which they bring to the lawyer's attention. As an example, an inventor may call a business lawyer to tell him he has obtained a patent for a new type of widget, wants to go into business to produce and market it, and has a few questions of a "technical legal nature". Should he go into business as a sole proprietorship, a partnership or a corporation (either a regular corporation or an S corporation which receives certain benefits under the federal and state tax laws)? How should he raise his operating funds, from friends and neighbors, from a bank, from a venture capital firm, or from a public offering of the new company's stock? Would he be better off from a tax viewpoint by contributing his patent to the newly formed company or by licensing it to the company? Some of these questions may be beyond the lawyer's competence, but he is nonetheless called upon to advise and counsel the client by looking up the relevant law, determining how the law applies to the client's business situation, and educating the client on the options available to him and the pros and cons of each available option. By counseling the client before the client takes action, the business lawyer often can reduce or eliminate the risk that the client's proposed activity will violate a law or regulation, will require him to pay unnecessary taxes, or will cause him to be sued by someone whose legally protected rights were infringed by the client's conduct. As a friend of mine puts it, "the primary role of the business lawyer is to make sure the litigators don't get involved later on".
 The Transaction Management Function
Finally, business lawyers are often called upon to manage their clients' business transactions. This is especially true of transactions which by their nature carry a high risk of liability to the client and (if the client is a corporation) its directors, officers and employees. Martin Mayer, in his book THE LAWYERS, correctly describes this process as one of "private lawmaking" involving many little "pieces of paper". The statutes, administrative regulations and case law are often not sufficiently detailed or up-to-date to address adequately the many problems, risks and liabilities that the parties to a business transaction will encounter during the course of their relationship. So, the parties make up for it by making their own law, in the form of a written agreement or set of agreements that will spell out in exquisite detail what they will do should any of a dozen (or a hundred) reasonably foreseeable things happen in the future. If one of the parties fails to obey the private law set out in the agreement, the other parties can seek to enforce the private law in the courts, and the courts usually are bound to enforce the written agreement unless the wording is unclear or the agreement violates a law or regulation.
Because many business transactions have significant legal consequences in this era of high taxes and complex government regulation, it is common to have business lawyers draft all of the transaction documents from beginning to end and manage the negotiations, so that legal issues will be spotted and papered over before the documents are signed and the transaction is closed. As a result, a majority of the time spent by many business lawyers (especially the younger ones) in large law firms will be spent drafting, proofreading, redrafting, reproofreading, collating, stapling, unstapling, "redlining" (marking the draft of a legal document to show the changes made from the immediately prior draft), "blacklining" (comparing two different legal documents and marking one of them word for word to show how it differs from the other), Xeroxing and binding together dozens and dozens of pieces of paper. Over and over and over again.
 What Determines The Functions A Business Lawyer Will
Perform At Any One Time?
Business lawyers are expected to be versed in all three of these functions, and it is meaningless to speak in terms of "counseling lawyers", "monitoring lawyers" and "transaction lawyers" as if they were recognized specialties. A lawyer's age, type of practice and office environment (large law firm, small law firm or in-house law department) may, however, have some bearing on which of the three functions will predominate at any one time.
[a] The Age Factor
A young business lawyer in a large law firm, for example, will spend most of her time on transaction oriented tasks and researching the law necessary to answer client questions. As she becomes a midlevel associate, counseling skills and advanced transactional skills (such as drafting the language in a new type of agreement) will come to the fore. As she grows into a senior associate or junior partner of the firm and begins to have extensive client contact, monitoring and counseling activities generally take precedence over transactional activities, although the lawyer will still be expected to know enough of the latter to supervise her subordinates in getting the client's paperwork out the door on time and in proper form.
[b] The Practice Factor
The lawyer's knowledge of one or more substantive areas of the law comes into play as well. Certain types of practice (mergers and acquisitions or securities offerings, for example) are almost exclusively transactional in nature, with some counseling. Other types of practice, such as tax law, are almost exclusively counseling and monitoring in nature.
[c] The Legal Environment Factor
Generally, the larger the law firm the more specialized are its lawyers. Business lawyers in a small firm are usually legal generalists, prepared to handle any and all problems raised by their business clients. In a large law firm, certain business lawyers develop reputations as being good "deal lawyers" or transaction managers, or good "relationship lawyers" or good legal researchers and analysts, depending on what they excel at or enjoy most. Most large firm lawyers would agree that it takes all three types -- the "finders" (who are good at monitoring and client relations activities), the "minders" (who are good at administering the firm's ongoing relationships with its clients and thus spend most of their time on day-to-day counseling activities), and the "grinders" (who spend most of their time on the details of structuring, documenting, negotiating and closing transactions for the firm's clients) -- to run a large law firm successfully.
Few corporate legal departments are large enough to warrant extensive specialization, although that is changing. Traditionally, in-house lawyers are expected to spend most of their time working closely with senior corporate management in developing policies and business strategies, and so are almost compelled to engage fulltime in counseling and monitoring activities. As in-house legal departments grow larger, however, the organization will hire specialists to handle the more routine business transactions in which the organization engages. For example, a large financial institution with an extensive data processing department will be leasing computer equipment, and amending its existing leases, on a monthly if not a weekly basis. Because the dollar amount of these leases are small individually but large in the aggregate, at some point it makes economic sense for such an institution to hire a specialist in drafting and negotiating computer leases, even though the institution is not engaged in the equipment leasing business per se.
1.04 Mindsets and Perceptions: How Business Lawyers, Advocates And Businesspeople View Each Other And Themselves
As the business lawyer's work unfolds in the following chapters, it will be useful for the reader to keep in mind how lawyers and businesspeople view each other and themselves when they are working together. In presenting this material I make no judgment whether any particular point of view has a basis in fact or is merely a professional prejudice. I merely suggest that it is important to recognize that such mindsets and perceptions exist and must be taken into account when they are encountered in practice.
 Litigators And Business Lawyers
It is common for many litigators to regard business lawyers as if they were nonlawyers. One often hears litigators referring to their practice as "the life of the law", particularly in their dealings with transactional lawyers who may not have the time to perform elaborate legal research or keep up with the latest cases in their field due to the client's pressure to get deals done quickly. Business lawyers, for their part, often view litigators as specialists to be brought in and coached by them on the client's business and the factual background of a matter much as English solicitors counsel and direct the limited activities of barristers before and during a trial. Sometimes business lawyers will criticize what they perceive to be the litigators' inability to view a transaction or matter in the context of the client's overall business objectives and other related activities.
 Lawyers And Businesspeople
It is no secret that lawyers are not loved by businesspeople; at best they are tolerated by their business clients as necessary evils, at worst they are detested by clients who will use every means to circumvent them and prevent them from performing the work they feel it is necessary to do. Part of the reason can be illustrated by the old story about the young swain who asked his girlfriend to marry him and, when rejected, asked "Why? We've been such a part of each other's lives for so long".
Thus do clients, and especially business clients, view lawyers in general. Like the girlfriend in the story, the client only sees his business lawyer when something is going wrong, or when he is planning to do something and is worried that something might go wrong. In any case the circumstances under which the business lawyer and his client get together to conduct business are usually stressful ones, and it is not uncommon for businesspeople to transfer responsibility for this stress from the situation to the lawyer (and to be fair, some business lawyers give businesspeople good reason to make the transfer). If the reader can imagine how the young lady would have thought of her boyfriend if the latter had gratuitously offered his services on those three occasions when the young lady, in her own view, was perfectly capable of helping herself, the reader will know how a business client views a lawyer who is not adept at client relations.
Another source of misunderstanding between business clients and their lawyers is not as obvious. Whether litigators or business lawyers, attorneys are viewed by most businesspeople (even those well disposed to the profession generally) as a cost of doing business in the modern world which, like any cost, is to be minimized. The lawyer, on the other hand, especially a lawyer in private practice, views himself as a profit center and measures his productivity by the number of hours spent on a matter and the quality (some would say the perfection) of the finished work product. The lawyer, being a professional who is guided by the dictates of rigid deductive logic, will want to produce an airtight brief or legal document that leaves nothing to chance and thoroughly research all legal points that are not one hundred percent clear, no matter how many hours it takes. The businessperson, on the other hand, will usually be willing to trade some protection for a smaller legal bill. The businessperson does not always appreciate that when he tells his lawyer to do only a fifty percent job because that is all he can afford to pay for, the lawyer is nonetheless professionally obligated to provide not less than 100 percent service, and will not take it upon herself to decide where the 50 percent cut in service will be made. As a former colleague of mine once put it, "in this business there are only two grades: 100 percent and failure. Even a grade of 99 percent is a failing grade if the one percent error causes the client to suffer a loss or exposes him to an unnecessary risk." Thus the lawyer will insist, in a subtle way of course, that the client be the one to make the determination of what concessions shall be made to the other side, or which of the customary provisions shall be left out of the legal documents, and will be sure to document for his own protection that it was the client who specifically requested that work deemed necessary or proper by the lawyer not be done in the interest of holding costs down. The businessperson, who is accustomed to taking risks and may not fully appreciate that the lawyer cannot do so, will often misinterpret the lawyer's behavior as squeamishness, cowardice or worse.
 Litigators And Businesspeople
To the extent businesspeople have any fondness for lawyers at all, they are likely to reserve their greatest respect for litigators, since the latter live in a world with which the businessperson is not at all familiar and are therefore shrouded in an aura of mystery. To go to court, in the eyes of many businesspeople, is to travel to a foreign land where people speak a different language and follow entirely different customs and procedures than those with which the businessperson is familiar. To survive in such a world requires having a guide with "local knowledge" such as a litigator.
By the time a matter is ripe for litigation, the businessperson has lost the ability to influence the flow of events. The businessperson has no choice but to retain counsel to minimize the damage to her enterprise. To use a medical analogy, by the time the patient arrives at the hospital emergency room with severe abdominal pains, it is too late to warn the patient that eating too many rich foods increases the likelihood of an attack of acute appendicitis (the reader will forgive any ignorance of medicine on my part; this is merely an illustration, and silly illustrations are often easier to remember). At that point in time either the appendix must be removed or the patient will die. Since even the most brilliant surgeon on earth is incapable of removing his own appendix, the patient has no choice but to put himself entirely into the hands of the surgeon on duty, and must defer to that surgeon's judgment.
The litigator's prestige in the client's eyes can therefore be explained by the litigator's specialized knowledge which the businessperson cannot secondguess, and by the client's lack of choice in a fast moving environment that has passed beyond the stage where he can influence events.
 Businesspeople And Business Lawyers
Generally, business lawyers find they are not treated with the same degree of awe and deference as litigators. First, business lawyers do not operate in a world that is foreign to the businessperson; the businessperson, after all, took courses in business law and taxation in studying for his M.B.A. degree, and believes he knows something about the legal and regulatory climate of his business. Moreover, the businessperson and her business lawyer speak basically the same language, although they may sometimes define words such as "fraud" or "cash flow" in different ways. It is human nature that when one hears a common word pronounced differently by someone else (perhaps with a different accent, or with the emphasis placed on the second rather than the first syllable), one assumes the other person and not he is the country bumpkin that does not know how to speak English.
For example, assume a businessperson who is well versed in mergers and acquisitions burns the midnight oil to prepare a detailed term sheet for the leveraged acquisition of a business from another company. He submits the plan to counsel (inside or outside), who reviews the plan and determines that the structure chosen by the businessperson is a "fraudulent conveyance" that could be set aside by the other company's trustee in bankruptcy years down the road so as to frustrate the businessperson's plan to expand his business. If the problem is not communicated delicately by the business lawyer, it will not be uncommon for the businessperson to think of the lawyer as a "deal killer" whose sole purpose in life is to frustrate the legitimate plans of businesspeople by "what-if-ing" them to death. Many businesspeople, who are supported in their prejudice by the many "lawyer bashing" books on the market, believe that by doing so the lawyer is trying to prove his superior intellect because he is jealous of the businessperson's power to make things happen, or is an absent minded professor who delights in discovering new and intellectually challenging legal problems to analyze without regard to the client's need to have the matter settled quickly and economically. In the words of a businessperson friend of mine, "the only thing our in-house lawyers know how to do is say no whenever we want to do something".
Similarly, the business lawyer operates in an environment where the businessperson continues to retain some power to influence the flow of events. In the "fraudulent conveyance" example above, the transaction has not yet been consummated and there remains time (although perhaps not much) to work around the problem. Perhaps there is an alternative structure that will get the businessperson what she wants while avoiding the "fraudulent conveyance" problem that counsel has correctly pointed out. If the business lawyer points out the alternative structure to the businessperson in condescending tones ("you could have thought of this too, Jane, if you had taken the time") or in a way that communicates to the businessperson that her business judgment was wrong ("leveraged acquisitions are very risky, Jane; why don't you do a joint venture with the other company -- joint ventures are so much easier and cheaper"), the businessperson's low regard for her lawyer will not change and she will be tempted to disregard the lawyer's advice (to her own possible detriment) to avoid giving the lawyer satisfaction.
If, however, the business lawyer calls the businessperson into his office, explains the problem, and carefully points out all of the available alternatives and the pros and cons of each, without indicating his own personal preference unless invited to do so, two things will happen: the businessperson, in picking the alternative that will achieve her objectives at the lowest possible level of legal risk to the organization, will be exercising her business judgment properly; while the lawyer, by demonstrating his expertise and nimbleness of mind in showing the many ways in which the transaction can be accomplished (thereby not threatening the businessperson's faith in the soundness of her business judgment), will gain a better image in the businessperson's mind.
Many businesspeople feel frustrated when their lawyers disapprove of their plans, present them with alternatives, but fail to say which of the alternatives is best for the client. As Chapter 3 will point out, it is the business lawyer's job to lead the client to water, but only the client can decide whether or not to drink. To put it another way: the lawyer can provide information that will help the client make the best possible business decision, the lawyer may even help organize the client's analysis of the situation by discussing the available realistic options and pointing out the pros and cons of each along the way, but the business lawyer does not make the final business decision to "go or no go" which is the client's ultimate responsibility. Some businesspeople misinterpret the lawyer's reluctance to make the ultimate business decision as cowardice or lack of self-confidence on the lawyer's part; it seems to them almost as if the lawyer is saying "I don't like your idea, there's tons of things wrong with it, I can think of a better way to do it, but I'm not going to tell you what it is". The lawyer, whether a litigator or a business lawyer, must educate the client on the limits of his role as advisor and counselor.
Finally, unlike the litigator, the business lawyer operates in a relatively cold, unemotional environment where the only thing at stake is money and (occasionally) the businessperson's reputation within the client organization. While business discussions and negotiating sessions can often get quite heated, there are seldom threats of physical violence, and no dead bodies or broken hearts. Thus no matter how great the service a business lawyer performs for her client, she should not expect the adulation and gratitude that sometimes comes from an individual client who has experienced an emotional release at having his divorce settled without alimony, his son acquitted on felony charges, or his claim to a large estate settled in his favor. When the work on this transaction or matter is done, the businesspeople involved simply move on to the next one, as does the business lawyer.
The business lawyer, for his part, is not without his own set of professional prejudices in dealing with businesspeople. Many business lawyers have a low regard for businesspeople generally; after all, most don't work nearly as hard as lawyers do, and they only have two years of postgraduate education to the lawyer's three. There is a feeling among a lot of lawyers that businesspeople don't really think through their decisions carefully -- that they make a decision from their gut, go careening recklessly down the road and look to their lawyers to apply the brakes before they jump the embankment. There is also sometimes a perception that businesspeople have the easiest part of the work and reap most of the glory for a job well done, while the lawyer gets stuck with all the detail work for which he will receive little or none of the credit. The business lawyer who feels this way each time he is tapped to work on a matter should seriously consider another profession; as Chapter 2 will point out, anonymity and the willingness to "make the client look good" are vital aspects of the business lawyer's work.
To summarize, the business lawyer, unlike the litigator, cannot rely on his status or his specialized knowledge to command the respect and admiration of the client. The business lawyer earns her client's respect by demonstrating her knowledge of the client's business and objectives in a way that does not threaten the client, and his flexibility and creativity in showing the client not "why he cannot do what he wants to do" but "how to do what he wants to do".
1.05 Summary of Important Points
|BACK TO TOP|