Small Firms and Big Litigation

By Jeffrey L. Solomon and Silvia Coulter

One of the most stressful dilemmas in small firm practice is landing a big case or being asked to participate in such a case. Big litigation can bring big benefits but also big burdens. We are quite happy at the prospect of big fees, high billable hours, and the professional challenges that complex litigation brings, but simultaneously we worry about having adequate resources to manage the demands of such litigation, including the concerns that such a case may overwhelm the office and prevent other clients from being properly served. Big billable hours may yield a large receivable, or even worse, result in large unreimbursed out-of-pocket expenses. Of course, refusing to take the case would bring its own potential problems; if you turn down work from a source you have solicited, you may be closing the door on future referrals from that source.

We believe that the risks of becoming involved in a large case can be minimized, and your firm’s willingness and ability to accept such an engagement enhanced, by building proper relationships with other attorneys and law firms as part of your ongoing marketing and practice management efforts.

Resources, or the perceived lack of resources, including financial, manpower, and infrastructure, may be the driving reason that a firm will hesitate or decline to accept an engagement that is otherwise within the firm’s professional capabilities. The challenges, then, are: (a) how to amass sufficient resources to conduct or participate in the case; (b) how to spread or minimize the risks of collection; and (c) how to allocate work, responsibility, resources, and expenditures so that the engagement does not take the firm out of its comfort zone and into the realm of unacceptable risk.

For purposes of this article, we will assume two generic ways in which a large matter comes to a small firm. In the first, a small firm or solo is recruited to be part of a large case by another, usually larger law firm. This can occur for several reasons: The smaller firm has a particular expertise in a substantive area of law such as bankruptcy, or there are multiple parties and real or potential conflicts of interest that currently exist or may subsequently arise. In the second scenario, either an existing client has become involved in a large and complex matter or a new client comes to you from a referral source.

Case Study #1

The decision to become involved in litigation is a direct function of a firm’s ability to create an acceptable retention environment. The firm’s ability to do so is strongly influenced by the source of the engagement. For example, some time ago a sole practitioner that we know was called upon to represent the chief in-house architect at a large real estate development company. The architect had been employed by a prestigious architectural firm that was designing a hotel for the developer, and he was the principal architect for the project. During the course of the project the architect accepted an in-house position with the developer, took the project in-house to the developer, and continued work on the hotel.

Needless to say, litigation arose over ownership of the plans for the hotel and the continuing supervision of the hotel project. The developer was represented by a large law firm for whom the sole practitioner had previously worked as a litigation associate. Because of the relationship of the parties to the litigation, it was decided that the architect should have separate counsel and not be represented by the developer’s attorneys. The case was referred to the solo firm because of the continuing relationship it had maintained with the referring firm, which knew the sole practitioner and was comfortable with his ability to participate in the case. Several important issues had to be addressed at the outset of the engagement.

Although the sole practitioner had been brought to the case by the developer’s counsel, the client was the architect. Notwithstanding that the parties had a virtual identity of interest in the subject matter of the case, there were potential conflicts in certain positions that one or the other might take later on.

First and foremost, the architect could not afford to pay counsel in a highly contentious case involving several millions of dollars and several “mega-firms” as adversaries. At the same time, the solo firm was neither willing nor able to undertake the financial risk of non-payment from the client, nor could it have sustained the operational burden of conducting discovery. It raised these issues with the referring attorney, and after considerable discussion, it was agreed that the developer would guarantee the architect’s legal fees as a benefit of employment, and that the solo firm would have relatively open use and access to the infrastructure and resources of the developer’s counsel.

A joint defense agreement was also entered into, which facilitated the free flow of information between the co-defendants. As a result of the financial guarantee, the solo firm was able to acquire and hire temporary resources, such as law students and per diem attorneys to conduct additional legal research. In circumstances where joint motions were made, the solo firm was able to piggyback onto some of the work product of the developer’s counsel. The massive production and replication of documents in connection with discovery responses and the monumental transcript costs were handled and absorbed by the developer’s counsel, acting on the solo firm’s instruction.

It was the strength of the relationship with the developer’s counsel that enabled discussion and resolution of conflict, payments, and operational issues in advance. The case illustrates the importance of candor, prior planning, and communication. As we know from the experience of our litigation clients, the most dangerous words in business are, “We’ll figure something out later.” Do not fall into this trap.

In this case, it was important for the solo firm to raise and discuss its concerns and to try to address and resolve them. You may find that resolution is not always possible, but the discussion is critical not only for the present matter, but to give referrers information about the types of matters and concerns that are important to you and that can be considered in future referrals. The discussion and problem-solving exercise enhances your credibility; your colleagues and referrers will appreciate your concern to make sure the relationship works to the advantage of the ultimate client.

Case Study #2

Unfortunately, not all cases work out so well. Contrast the situation above with the following case that a colleague had earlier this year. The colleague’s small firm, which had considerable expertise in bankruptcy law, was called into an already vigorous litigation between two very well funded and highly contentious factions. The plaintiff was represented by a large national “brand name” law firm. Our colleague’s firm was to be engaged on behalf of the defendants, composed of a number of interrelated corporate entities and the principals of these entities. At the time of the proposed engagement, there had already been an explosive volume of ferocious litigation in state court. The defendants were represented by one lead firm, with the assistance of an advisory group of attorneys selected for their relationship with the various corporate entities and their principals, as well as for their expertise in the diverse areas of law implicated in the suit.

The lead defendant filed a voluntary Chapter 11 case prior to the proposed engagement. The small firm was asked to represent the corporate debtor in the bankruptcy, which had already begun to spawn litigation in the form of an adversary proceeding, and in challenges to claims filed in the bankruptcy by the plaintiff in the state court litigation. As there was going to be certain overlap in the areas of discovery in both the state court action and the bankruptcy, the task was to coordinate discovery or to take advantage of the broader discovery available in bankruptcy to gain information that might be usable in the pending state court litigation.

The logistical problems in this matter were considerable. Unlike the architect case, where the solo firm represented a client separate from the developer, the small firm in this case was asked to represent parties in the existing litigation who were already represented by multiple counsel. Because of this multiple representation, even the most rudimentary decisions had to be approved and agreed to by a steering committee. This is a cumbersome way to conduct litigation, and our colleague tells us of receiving some 50 to 75 e-mails per day on the case, plus conference calls almost every other day. More important issues, however, caused the firm to drop out of the case.

There were frequently times when the small firm’s view of what was factually and legally justified in the bankruptcy conflicted with what lead counsel would request in order to dovetail with events in the state court action. In such situations, the small firm’s adherence to what it believed was proper conduct and appropriate procedure in the bankruptcy case led to conflict with lead counsel and with the steering committee, and to accusations that the small firm “did not play nicely with others.” By remaining true to what it believed was proper practice, the small firm created a rift between itself and the steering committee member who had referred the matter to the firm.

The friction and discomfort for the small firm was greatly multiplied because it had been brought in as a “bit” or “role” player and was not part of the team from its inception. It did not have meaningful access to the clients and decision makers. The small firm’s views and positions were thus filtered through to the ultimate client, with no guarantee of accuracy or absence of bias. By the same token, our colleague advises that often the information received from the client was delayed, incomplete, or inaccurate, and there was not always an opportunity to more thoroughly address these concerns directly with the client. These issues arose despite the pre-engagement representations of the referring counsel that there would be unimpeded access to the client.

Because of the fast-paced nature and ferocity of the state court litigation, the cumbersome inefficiencies of the steering committee, and the lack of meaningful access to the firm’s ultimate clients and decision makers, the case became an incredible drain on the firm’s time and infrastructure resources. The problem was compounded by the large bills and out-of-pocket expenses that were being accrued and the slow or nonexistent payment by the clients.

There apparently had been discussion between the small firm and the referring members of the steering committee on payment issues, and assurances had been made that the clients had “no shortage of funds” and that payment would not be an issue. The latter representation turned out not to be true, and ultimately, the small firm’s discomfort became overwhelming to the point where it withdrew from the case. The decision was difficult for many reasons, including that it was the first referral from attorneys with whom the firm had a long relationship.

This episode teaches a number of valuable lessons. First, the representations that the small firm would have access to clients and that payment would not be an issue turned out to be inaccurate. It is clear that the better course in this case would have been to insist on direct communication with the client and decision makers at the outset, prior to the engagement. Second, a clear protocol should have been developed for addressing potentially irreconcilable conflicts between counsel representing the same clients in different forums in matters involving a substantial identity of subject matter. Third, and perhaps most important, the small firm should have insisted on performing considerably more due diligence in the matter, instead of relying on representations of other counsel, who in this case apparently needed to get bankruptcy counsel on board in a hurry because of events in the case.

Most people and lawyers have a bias in favor of accepting the representations of our colleagues as being accurate. In a case as fractious as this one, independent due diligence is especially important; the small firm’s introduction to the case came from a source who, in retrospect, simply did not possess all of the information the firm needed to make a more reasoned decision as to whether to get involved. This case, just as the architect’s case, demonstrates the need for clear, complete, honest, and up-front communication among referring counsel. The outcome of such discussions may result in your not taking the engagement or not being asked to participate, but in either event you will present yourself as being straightforward, analytical, and committed to making the engagement and the overall relationship work both in the here and now and with respect to possible future opportunities.

In sum, small firms and solo attorneys have a real place in big litigation. The nature and extent of the involvement is and must be the subject of considerable thought, analysis, and discussion of the real and potential issues and problems that will inevitably present themselves. Diligence, candor, and communication are critical for building a consensus as to whether the proposed engagement is the right fit for all parties and how the mechanics of the engagement are to work. They will also establish your firm as a credible and committed co-counsel and a “go to” firm for future work.

Simultaneously, the process suggested allows you to assess the quality of work for which you are being considered or which has been sent. This feedback is valuable. If referrers or potential referrers are not sending you “good” work, you must analyze the reasons and begin a dialogue to discuss them. Open communication is key to building strong relationships and to obtaining interesting work from people who trust you and your firm.

Building Your Brand and Your Relationships

If you are going to get work from larger firms, they must know who you (and your firm) are. Sending business to your firm (a) helps the larger firm to meet its clients’ local needs; (b) helps the larger firm’s clients and contacts with work the firm may not handle or may not be able to handle economically; or (c) provides a strong alternative solution to a conflict or potential conflict situation. In some cases your firm may handle work related to the larger firm’s practice but not work the larger firm handles at all. Below are some effective ways to increase your visibility and attractiveness to larger firms.

  1. Create an annual marketing action plan that identifies clients, contacts, and potential referral sources as part of your plan’s “Target Markets” section.
  2. Reach out to all clients and contacts at least twice a year, preferably four times a year. Where feasible and for good clients and referral sources, go visit them in person once a year. For a fourth-quarter outreach, a handwritten note on a holiday card is a good “top of mind” outreach and demonstrates you took time to think about the individual. Other outreach activities should include a phone call once a year to catch up and say hello or an e-mail with an article about their business or about something else of interest. (One large firm sent a firm cookbook to all of its clients and contacts—people loved it!) Boring legal articles are not usually of much interest unless they are specific to an in-house counsel’s area of business and law. Remember, building business is about building relationships with people.
  3. Build your own brand. Be active in local business organizations, the bar association, and community boards. Contact your local media or media in the target geographic markets where you seek business. The editors should know you, not your PR firm. Pick up the phone, introduce yourself, and let them know who you are.
  4. Be patient. Business development is serendipitous—it’s often difficult to tell where business came from. It requires patience and outreach. Everyone whom you contact is connected to many other individuals, so building strong relationships on a regular basis always leads to new business. A high level of activity (even when you are very busy with legal work) will result in ongoing new business for your firm.
  5. Provide good relationship management. Keep your referral sources and contacts updated. Don’t wait for them to contact you about updates. Communication is the most important thing in relationships, and unprompted communication about how things are going builds strong, ongoing relationships. This is a key part of business development to continue building strong referral sources.

In summary, be organized, manage your resources effectively, be confident, create a marketing plan and manage it, communicate effectively, and build strong relationships. All these are ingredients for a successful solo or small firm practice to build an inventory of interesting, ongoing new work.

Jeffrey L. Solomon heads the litigation unit at the East Meadow, New York, law firm of Thaler & Gertler, LLP, where he has built a very successful practice owing, in part, to his strong relationships with large firms. He may be reached at . Silvia Coulter is a vice president and chair of the Client Development and Growth Practice at Hildebrandt International in Manchester, Massachusetts. She may be reached at or 978-526-8316.

Copyright 2009

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