Volume 19, Number 7
October/November 2002


Business Law

By Joseph M. Hartley

Most of us are specialists in one way or another. Criminal defense, family law, estate planning, civil litigation: even "general practitioners" usually stick to a few areas they know well. But if they are any good at what they do, sooner or later a client will ask them to take on a matter with which they have little or no experience. This potential dilemma is especially common where the client is in business and your excellent representation fostered a sense of trust in the client. It is a compliment to your professionalism.

Although such an opportunity contains a large component of risk, it is nonetheless an opportunity to develop an additional area of practice. Thinking of yourself as not simply a "general practitioner" but instead a lawyer who possesses a variety of specialties will make it easier for you to determine whether the new matter is one you can safely undertake.

This consideration is extremely important when the case involves a business matter, whether a simple transaction or more complex litigation. Business matters are loaded with minefields, and being aware of the following considerations can help you navigate them smoothly:

o The law of contracts is complex. Any business transaction or lawsuit is likely to involve contracts. Because we study contracts in the first year of law school, we tend to think of them as simple legal matters. In fact, dealing with the ramifications of contract issues is one of the more complex and difficult areas of practice because they provide many opportunities for error; the general practitioner who is not prepared to become an expert in hornbook contract law should stay away from advising businesses.

o Knowledge of multiple substantive areas of law is required. Most likely your client's needs will not be confined to a single area of law. Advising even a small business means being familiar with real and personal property law, secured transactions, labor law, and the Uniform Commercial Code-at a minimum. You need not be an expert, but you should know enough to be able to become an expert quickly.

o Business is heavily regulated. Your client's business is likely to be regulated at state and local levels. Specific statutes may affect the contracts your client can make, and some knowledge of the industry is necessary to ensure you're aware of all the regulations. It does no good to know the common law only to discover that your brilliantly conceived transaction runs afoul of the government. (See sidebar below on industry specializing.)

o Issues outside your area of practice may arise. You will need to be able to spot issues in unfamiliar areas. At a bare minimum, some experience in corporate and partnership matters, tax laws, and securities will be necessary for most kinds of transactions. (The "simple" sale of a business, for example, rarely is and can impact all these areas.)
These possibilities do not mean that you shouldn't open your practice to a new area. But you should consider whether it makes sense for you to accept such a matter. Can you answer yes to each of the following questions?

o Can you tolerate the client? If you can't, don't even think of taking on the matter. It's bad enough to learn a new area of law; struggling with it for a client you can't stand will make it all the more difficult. Lawyers can rationalize anything, so be sure to follow your gut in answering this question.

o Is this an area of law you simply should refer out? If the matter involves ERISA, taxes, securities, or another highly specialized area, you cannot afford to take it. Specializing in these areas means affiliating yourself with a firm that does this kind of work on a regular basis; there's no other way to learn it.

o Can you recycle what you learn? Will what you learn if you do take the matter allow you to generate new business that fits with the rest of your practice? If this is a one-shot deal you'll never do again, it's probably too expensive-for you and your client-to develop sufficient expertise.
If you do decide to take the matter, the following suggestions may help:

o Remember that you're investing in yourself. You will probably not be able to bill for all the time you spend getting up to speed on the new area. That's okay: You have accepted this assignment only because it will ad-vance your practice in some way. You must avoid feeling irritated at the client. If you are, reconsider whether you should refer the client elsewhere.

o Plan to go back to school. Practicing law is lifelong learning. Read the statutes and case law pertaining to the new area. Find the treatise. Go to the local library. Some of the time you spend doing these things can legitimately be charged to the client, but the bulk of the investment cost will be yours.

o Decide early whether to refer the client. At some point you may realize that you do not have enough time to devote to the matter. Promptly advise the client, who will appreciate your honesty much more than your ducking phone calls.

o Use all available resources. In addition to the library, there may be continuing education courses on the subject you're researching. Another lawyer knowledgeable in the area may be available to mentor you, or at least to answer questions and not consider you a competitor. By all means, take advantage of these resources-but be prepared with cogent, succinct questions.

One of my law school professors would tell us that law school doesn't teach you to be a lawyer-it teaches you how to think so you can train yourself to be a lawyer. Acquiring the expertise to move into new areas will cost you time and effort but could be the best investment you ever make.

Tips for Specialization

Unlike lawyers, good accountants become successful by specializing in specific industries, not in substantive areas of accounting. Applying this simple rule to law practice can help you avoid the pitfalls of incorporating a new practice area.
Why is knowing the industry important? You may be the greatest expert on a substantive area of law, but if you don't know how your client's business operates, you won't understand the significance of the facts your client presents. Worse, you may not be able to ask the right questions to advise the client appropriately-after all, development of the law depends on facts.
Part of educating yourself thoroughly to undertake a new area involves going to the business site, inspecting the plant, meeting employees, and observing work flow. Talk with employees about how they spend their time or what they find are the hardest parts of the job. Be curious. The employees may be your most valuable sources of information, and developing them could pay off.

Litigating the Business Case

Most business cases don't go to trial. By contrast, lawyers practicing personal injury, family, and criminal law try a lot of cases and have honed excellent skills. They often repeat the old shibboleth that a trial is a trial: Once you learn how to try a case, the subject doesn't matter.
But this is a limited truth at best. Trial skills-simplifying complex facts, keeping the trier of fact awake, or examining a witness effectively-do transfer from one area of practice to another. The problem is that trial skills get you only so far; in business cases they are no substitute for substantive knowledge. If you haven't tried a real estate or contract case like this before, you need to hit the law books just like the baby lawyers do.
Many excellent lawyers go to trial in a substantive area they don't know well and get whacked. If your case involves a real estate sale, you better know about marketability of title-a concept you probably didn't find if you researched only contract law. In a fraud case, don't assume the definition of fraud is "negligence plus evil intent." It makes no sense to spend five months in trial and lose the case on damages because you didn't know that damages in your jurisdiction are not as broadly defined as negligence damages.
Trial skills are no substitute for knowledge of the substantive law. If you don't know the area of law well enough to argue a legal issue on demurrer or on appeal, you're not well enough prepared to handle the case.


 


Joseph M. Hartley

is a trial lawyer in Santa Monica, California, representing both clients and lawyers in legal malpractice cases.


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