When Clients Demand One Person in a Personal Services Firm

Use of Debt Financing by Law FirmsMy wife, Leslie, pursued an entrepreneurial venture mid-career like me, founding Leslie’s Leashes, provider of pet care services like dog walking and sitting to grateful animals on the North Shore of Long Island. There are only so many half-hour time slots for pet visits in a day, especially when everyone wants theirs to be at noon, so Leslie has hired walkers as demand for her services grew. However, some of the more particular clients specifically want Leslie to be the walker.

Non-Attorney Ownership of Law Firms

Non-Attorney Ownership of Law Firms | Andrew Abramowitz, PLLCCarolyn Elefant, writing (sensibly) in Above the Law, argues in favor of loosening restrictions in the U.S. against ownership of law firms by non-attorneys. She focuses on the increasing need for small firms to partner with non-lawyer professionals and how the inability to compensate these professionals by sharing profits makes it unnecessarily difficult to function. Regardless of a firm’s reasons for wanting to bring in non-lawyer equity holders, it’s worth considering the policy rationale underlying the current restrictions.

The general fear is that non-lawyer equity holders would interfere with legal decisions that should be left to the lawyers. This is a reasonable concern. To take a concrete example, suppose I had an outside non-lawyer investor in my firm, and suppose further that I was advising a cash-poor startup company who was negotiating with an outside investor on terms that I found to be inadvisable for the client. Now, it would be in my pure financial interest (short-term anyway) to downplay my concerns and let the client proceed with the investment, since it would mean my firm would get paid. But I’m constrained by ethical obligations that require me to put the client’s interests first. If my firm’s investor, however, became aware of this issue, the investor would be expected to push me to withhold my sound advice to the client.

Making Public Companies More Long Term-Oriented

LTSE Logo: Making Public Companies More Long Term-Oriented | Andrew Abramowitz, PLLC Andrew Ross Sorkin, writing in the New York Times’ DealBook, profiles Long-Term Stock Exchange (LTSE), a new exchange that would impose unusual restrictions on its listed companies:

Among its changes to the ecosystem: the voting rights of investors (the longer you own, the more voting power you have), new disclosure policies (including a moratorium on “guidance”) and a complete rewrite of compensation schemes so that executives truly focus on the long term (it recommends vesting stock over as long as a decade).

LTSE’s rationale is to address the headwinds that have caused the number of public companies to decline significantly in recent years, leading large private company so-called unicorns to remain private, even with multi-billion dollar valuations. These companies fear that, if they became public, they would be forced to take actions to satisfy their overly short term-oriented stockholders, like activist hedge funds. In contrast, companies adhering to the LTSE listing standards would be dominated from a voting power perspective by stockholders who have stuck with the company for a long period and would have executives who are incentivized to stay for a while and not engineer fleeting short-term results to jack up their compensation.

The Limits of Networking

Business professor Adam Grant, writing in the New York Times, argues that business networking activities are overrated. (Grant is the author of Give and Take, one of the rare business advice books that I have actually read. It’s worthwhile.) Formalized networking events, Grant argues, are not only uncomfortable (we knew that already), but they’re ineffectual as a means of building real professional connections. Instead of using networking to seek to achieve things, he contends, we should reverse the order and use our great achievements to build a network.

Why Robots Won’t Replace Lawyers Anytime Soon

Ezra Klein, writing in Vox, argues that at least over the short to medium-term, robots won’t be taking our jobs. Stating that most jobs a hundred years ago involved the production of food and collection of water, he goes on to note that:

Compared to those ancestors, humans today are a massive useless class. What sort of job is “editor of an explanatory journalism web site” next to “farmer”? Would our ancestors value the work of psychologists or customer service representatives or wedding planners or computer coders?

Drug and Alcohol Abuse among Lawyers

Drug and Alcohol Abuse among Lawyers | Andrew Abramowitz, PLLCEilene Zimmerman, whose ex-husband Peter died of a drug overdose, published an arresting account of his descent into addiction. Peter was a patent attorney at Wilson Sonsini, and Zimmerman ties Peter’s story to a larger problem of drug and alcohol abuse in the legal profession. While I haven’t witnessed much of this problem firsthand in my interactions with other attorneys, the problem identified by the article is that the culture at law firms leads attorneys to hide signs of weakness, so it’s not surprising that I haven’t seen it.

Pop-Up Organizations

The New York Times writes about the rise of “pop-up” employers, essentially temporary organizations that are organized for a specific project and then go away. As the article notes, certain types of activities have been organized in this manner for a long time – Hollywood productions and political campaigns, for example. What’s changed recently is the exponential improvement in technology that can match people to tasks efficiently, allowing even complex organizations in many different industries to be created quickly.

I believe this approach could be employed in the provision of legal services. Currently, only large law firms can efficiently handle projects requiring the involvement of more than a few attorneys. But it’s not hard to imagine a portal that can be used to identify a team of attorneys to work on, say, an M&A transaction (senior and junior corporate people, tax, benefits, etc.). Of course, this sort of arrangement would have to be harmonized with existing rules for attorney client relationships (i.e., does the client engage the portal or each of the individual attorneys? How are conflicts handled?). As I’ve written about recently, my firm has joined a network of solo and small firms, and this sort of arrangement has the potential for being the basis for pop-up teams of attorneys. …

Hollywood’s Nice-Guys-Finish-Last Portrayal of Business

I recently got around to seeing The Founder, the movie dramatizing the early years of McDonald’s, as Ray Kroc transformed the McDonald brothers’ local fast-food restaurant into an eventual global juggernaut. Given the business I’m in, films about entrepreneurial activities are inherently interesting to me, so scenes in The Founder involving people reviewing and signing contracts are perhaps more attention-grabbing to me than they are for the general public.

As recounted by the film (spoiler alert), Kroc grows tired of the brothers’ stubborn refusal to approve his proposed changes in business practices to facilitate fast growth, and he finds the deal he struck with them unprofitable. The brothers ultimately agree to unwind the deal, proposing a buyout by Kroc of them for $2.7 million plus a 1% royalty in perpetuity.  Kroc agrees, but says his lawyers need the 1% piece to be a handshake deal, not in the contract, so as not to hinder Kroc’s future financing plans. At the end of the movie, we find out that Kroc reneged on this and never paid them any further.

What to Expect When You Ask Your Lawyer about a Different Legal Specialty

Corporate Transactional Law Practice | Andrew Abramowitz, PLLCGary Ross, another founder of a small corporate law firm, writes in Above the Law about how lawyers should handle client inquiries about areas of law outside their specialty. As Ross notes, this issue comes up far more for lawyers at small law firms than it does at big ones, where there is usually someone with appropriate seniority and expertise to weigh in.

Clients should definitely avoid the mindset that lawyers should be able to speak intelligently about the basics for every area of the law. Law school and the bar exam cover a lot of ground, but far from everything. There is no reason to expect that a randomly selected lawyer would be able to rattle off details about, say, import/export regulation or local liquor licensing requirements, if asked out of the blue. While there are still true generalists who practice in small towns, their actual knowledge base is limited to the types of matters that generally come up among citizens doing regular things, i.e., not derivatives regulation.

Reading Statutory Language

Reading Statutory Language | Andrew Abramowitz, PLLCOne recent much-discussed political issue (at least until another one replaced it a few hours later) was that some of the Republican members of Congress admitted in interviews that they had not read the American Health Care Act of 2017 before voting to approve it. Democrats mocked this as further evidence of a rushed, irresponsible process. I’m not using this corporate and securities law blog to expound on my political views on the AHCA or anything else. (I do that about once every three months on my personal Facebook page.) However, on the general question of whether legislators should be expected to have read the full text of the bills they’re voting on, I’m with the “that’s a ridiculous waste of time” camp.