With Hale and Dorr, Danahy got more than he bargained for. He was steered to John Chory, a corporate partner who works exclusively with emerging companies and who was willing to gamble that a promising but cash-poor early-stage outfit would mature into a more substantial client. Danahy has used Hale and Dorr for practically every legal need since -- from finance and corporate affairs to intellectual property, contracts, and employment matters. That's because an emerging-company specialist like Chory is not as likely to fall into the usual lawyerly habit of overworking everything or dumping the fledgling client whenever a larger client snaps its fingers. He's also willing to brainstorm on strategic matters and offer legal advice on the fly -- often at no charge. "If I have a short conversation with clients, I'm not going to bill them," Chory says. "Not every partner at Hale and Dorr can do that."
Danahy has benefited from persuading his lawyers to view him less as a client than as an investment. It happens more often than you might imagine. A law firm's investment in a client can take any number of forms. At the benign end of the spectrum, the firm simply writes off a portion of its fees -- absolving the client of worry that every question, phone call, meeting, or collaboration will be billed in six-minute increments. It's an expression of hope that the company will throw more work to the lawyers as the business grows. Sometimes the investment is literal -- an equity stake in the company, purchased by the law firm's partners or bartered in lieu of fees. Even more aggressive law firms have been known to demand equity simply for agreeing to take a company as a client. The equity-stake tactics reached their high-water mark during the Internet bubble. They're now largely out of favor, for reasons both economic (because of postboom stock prices) and ethical (mainstream corporate-law experts caution against taking supposedly independent legal advice from lawyers who have one eye on the stock ticker).
Equity deals don't happen so often these days. But discounted fees and cash investments by lawyers do happen, especially with law firms that are serious about working with start-ups. Relationships with such lawyers are very different from those with most attorneys. For example, say a start-up encounters an ambiguous contract provision that could cause trouble down the line. A typically cautious lawyer will want to crawl all over the issue, locking it down into an indisputably safe form before signing off. A lawyer attuned to start-ups will often go along with the entrepreneur who's hurriedly trying to close the deal and is willing to assume some risk.
What if you're not fortunate enough to be based in an entrepreneurial hotbed like Silicon Valley or Boston's high-tech suburbs? Or if you can't promise a quick IPO or acquisition? Can you still get this kind of attention? It's possible -- just be sure to look for a law firm that specializes in smaller companies. Finding one is more art than science, but it's not impossible. Look for lawyers who flock to entrepreneurs' social or professional events; ask around at law firms and among other companies; and zero in on corporate law boutiques, which often segment their practices according to company size or level or maturity. Finally, stay attuned to that all-important element of any romance: good chemistry.
Pick Your Fights Carefully
Never sit on a bill and stew. All the law firm knows is that it hasn't been paid. It's better to air concerns early and often.
Legal malpractice claims arising from business disputes are far less prevalent than claims from personal injury, divorce, or real estate cases, according to a recent survey by the American Bar Association. But malpractice claims do happen, and one thing is certain: Suing law firms is not for the faint of heart.
Exhibit A: Michael Viner, founder of the Los Angeles-based audio-book publisher, Dove Audio. In 1998, Viner sued his law firm, Williams & Connolly, a prominent firm based in Washington, D.C., alleging that one of the firm's attorneys had botched his exit agreement from Dove, hurting his ability to capitalize on new ventures. A jury agreed, awarding Viner and his wife $13.3 million for their troubles. Then, inevitably, came the appeals. First, the award was cut to $8 million, and then last April it was cut again, to about $515,000. Mark Helm, the Los Angeles lawyer who represented Williams & Connolly, draws one lesson from the case: "If you're a businessperson, rely on lawyers to help you in the areas where they can, but take responsibility for the business decisions that you make." Viner draws another: Don't litigate against professional litigators.
Fortunately, most problems that arise between business owners and their lawyers almost never prove so catastrophic. Outright fraud by attorneys "happens a lot less than people think," says John Marquess, founder of Legal Cost Control in Haddonfield, N.J., which audits legal bills for clients who suspect they've been ripped off by their law firms. If you believe you are suffering from poor service, high costs, and divided loyalties, "never sit on the bill and stew," says Marquess. All the law firm knows is that it hasn't been paid. Now you're both mad. It's better to air your concerns early and often.
