Representing a Small Business

By Elio F. Martinez Jr.

The call came in mid-morning. Janice, the principal of a small telecommunications company I represent, had a problem. “My little brother was arrested last night,” she said. “He was involved in an altercation on South Beach with an off-duty policeman and spent the night in jail. I need help in dealing with this situation.”

I do not practice criminal law. I am an intellectual property and business litigator, and the only time I normally deal with the police is when I refer trademark counterfeiting matters to their attention on behalf of clients. I was being asked to step into a situation outside my sphere of experience.

“I will make some calls,” I said.

The Large/Small Company Dichotomy

There is a fundamental difference in the way large companies and small companies deal with lawyers. Large companies are usually departmentalized, with employees in each segment handling separate and distinct tasks. Each department may have its own set of outside attorneys to whom the department members will turn when legal matters arise. Consequently, a lawyer’s representation of a large company is likely to be specialized. A large bank’s real estate department will deal with real estate lawyers, whose work for the bank will be limited to real estate issues. These lawyers are likely to be different from the litigators to whom the bank’s litigation department will assign litigation issues. Thus, the role of the lawyers, like that of the large companies’ department members, will be limited in scope and highly specialized.

A small business, on the other hand, does not possess the division of labor inherent in large companies. There are no departments staffed with specialized employees. Instead, there is a small core group of individuals, sometimes members of the same family, which handles all of the company’s issues daily. Although each of these individuals may have defined tasks for which he or she will be principally responsible, such tasks are seldom exclusive. Multitasking is a way of life for the principals of a small company. The company president may, in a single day, handle matters as diverse as advertising, production, employee problems, and collection of outstanding receivables. When legal issues arise, she will have neither the time nor inclination to sift through several law firms to determine which are best suited for specific tasks. Rather, she will turn to the one person she always contacts on such issues: the company lawyer.

The lawyer who represents a small business is routinely asked to undertake tasks outside his experience and comfort level. Like the titular character in the film Michael Clayton, he is looked upon by the client as a problem solver. When a call comes in with the day’s emergency, he is expected to know what to do, regardless of whether he has ever dealt with a similar situation. He is, in effect, part of the small company’s business operation—an unofficial member of the core management group. He is not just preparing documents and dispensing legal advice; he is managing the company’s legal affairs.

Managing the Relationship

The lawyer representing a small corporation is not working with a faceless legal entity created by statutory authority. The lawyer is working with people—a small group of people for whom the business represents more than a weekly paycheck. The principals of a small business are seldom “off the clock.” They take the problems of the business home each night, and these problems may carry over into their personal lives. They associate themselves with and often define themselves as the business. It is therefore not surprising that personal issues—such as the late-night arrest of a younger brother on South Beach—become matters for the company’s lawyer to handle.

The relationship between lawyer and small business is personal and must be treated as such. When picking up the phone, the company’s president expects to have the lawyer at his or her disposal. If temporarily unavailable, the lawyer cannot remain that way for long. The client will expect the prompt, if not immediate, return of the call. There are no excuses for delay, particularly today, when communication is facilitated by technology. Accessibility and responsiveness are therefore key to managing the relationship between lawyer and small-business client.

It is not sufficient, however, for the lawyer to promptly return phone calls when issues arise. The lawyer representing a small business must take proactive steps to ensure a successful relationship. The key to successfully managing that relationship can best be summarized by the following mantra: Know the people and know the business.

Knowing the People

The old adage that long-distance relationships seldom succeed is particularly true of relationships with small businesses. The lawyer must become more than just a voice on the phone. He or she must be someone that the company’s principals can visualize, someone who, like the members of the core management group, is part of the extended business family.

Establishing and maintaining that type of relationship with the company’s principals requires work. The lawyer must look for opportunities to communicate with the client in a manner that enhances the lawyer’s value to the small business. For example, after reading an article that may be of interest to the client, the lawyer should send a quick letter or e-mail attaching the article. When learning of a seminar involving issues germane to the company’s business, the lawyer should again make the client aware of the seminar, offer to attend the seminar with the client, and even pay for the client’s attendance.

The lawyer should also look for ways to help the client grow the business. One way of doing that is by bringing together clients whose respective businesses may complement each other. For example, I work with small commercial banks looking to enhance their clientele and broaden their role in the local business community. Such banks are a perfect fit for small manufacturing companies looking for lines of credit to finance their operations. Bringing these two types of clients together is simple. It can be done by having periodic luncheons to which the clients are invited, by setting up introductory meetings at the lawyer’s office (or at one client’s place of business) where the two sides can sit down in a less-than-formal setting and discuss their mutual interests, or even by inviting both clients to a baseball game where, between pitches, they can discuss their common goals. In each instance, the lawyer is not acting as a matchmaker but as a facilitator of dialogue between clients with potential business symmetry.

Lawyers representing small businesses should strive to remember key dates in the principals’ lives (birthdays, anniversaries, children’s graduations) and call clients to offer congratulations on such occasions. Lawyers should attend parties and functions given by clients, who are usually happy to introduce them to other business associates. Lawyers should take clients to lunch periodically to learn what is going on in their lives and what is happening with their businesses.

Although the above acts are not billable, they can yield fruitful returns. Such acts show the client that the lawyer does not simply view the company as a source of income. The lawyer cares about the client’s business and will do what he or she can to help that business. The simple acts of giving something back and making personal contact will enhance the lawyer’s stature in the client’s eyes, strengthen the attorney-client relationship, and make the lawyer an integral part of the business of the company and the daily lives of its principals. And, significantly, these acts will help the lawyer learn more about the client’s business.

Knowing the Business

Perhaps the single greatest error the lawyer representing a small business can make is not taking the time to learn about the company’s business. How can the lawyer function as an unofficial member of the core management group if he or she has no clue what is being managed?

The lawyer should learn about all facets of the client’s business: What business is it doing? With whom is it doing business? How much business is it doing? How is the business conducted? What are the company’s finances? These are all questions the lawyer should ask the client directly because they will provide a better grasp of the nature and needs of the business and allow more effective management of the company’s legal affairs.

The lawyer should have regular meetings with the client at the client’s place of business to go over the above questions and assess the client’s legal needs. Such meetings are different from the informal luncheons and gatherings referenced above. These are more formal business meetings, scheduled for the express purpose of familiarizing the lawyer with the business operation, and they may well be billable, depending on what is accomplished.

I have, on many occasions, visited clients and reviewed their operations, looking for intellectual property issues. In several instances these visits have resulted in work (registration of trademarks and copyrights) that would not have surfaced without the visits. The lawyer must remember that the client’s focus is on running the business, not on collateral (albeit important) legal issues that may arise. The client is relying on the lawyer to spot and address these legal issues, but the lawyer can do so effectively only if he or she has a clear understanding of the client’s business.

Knowing the client’s finances is a significant part of knowing the client’s business. The lawyer representing a small business must at all times remember that, unlike some large companies, the small corporation does not have unlimited resources to throw at its legal needs. The lawyer must always be aware of, and inform the client about, less expensive legal alternatives. Litigation, for example, can be protracted and expensive. The lawyer must consider and advise the client about alternative dispute resolution methods, such as mediation, which may lessen the financial strain on the company. This is best done early in the litigation, before the client has spent a lot of money that may never be recovered.

Knowledge of the client’s business may also lead to sometimes overlooked sources of funding for legal matters. Some of my clients, for example, have been sued by trademark owners for false advertising. Trademark litigation is usually conducted in federal court and can be quite expensive. The financial strain of such litigation is often too much for a small business to bear. However, many small businesses have insurance that covers these types of cases, something that the companies often do not know or simply forget. The lawyer can save the client much grief and expense by disclosing the availability of insurance coverage. However, this is only possible if the lawyer is aware of the type of insurance the client carries and how it applies to the client’s business.

A Balancing Act

The lawyer representing a small business must balance his interest in maximizing firm profit with the client’s desire for cost certainty and control. The practice of sending monthly statements to the client reflecting hourly billing may not be suitable for a small company with limited available funds. The small company will likely have earmarked its earnings for business-related expenses and will have little left over for an unexpected large legal bill. The lawyer should therefore consider alternative meth-ods of billing, such as fixed fees for specific tasks or monthly retainers for specified services. In both scenarios the client can incorporate the legal fee into the budget because the cost will be known in advance.

Monthly retainer arrangements, however, should be approached cautiously. The lawyer should enter into a written agreement with the client that specifies the nature of the services covered by the retainer and the maximum number of hours the lawyer will be expected to devote to these services. The retainer agreement should make clear that anything outside of the specified services or hours will not be covered by the retainer, and the client will be responsible for payment of such extra services. This provides a proper balance: The client is given cost control and the lawyer’s time is protected.

The lawyer representing a small business must also be alert for potential conflicts of interest. Although the relationship with the client will be framed by the relationship with its individual principals, the lawyer must never lose sight of the fact that, first and foremost, the client is the company. If ever asked to do something for an individual that would not be in the company’s best interests, the lawyer must decline. Thus, the lawyer must necessarily balance the interest of the company with that of its individual members and must resolve all potential conflicts in favor of the company.

The South Beach Solution

After hanging up with Janice, I made several telephone calls to colleagues who specialize in criminal law. Shortly after noon, Janice’s little brother had been released and had scheduled a meeting with a lawyer I recommended to help him resolve his legal problem. I called Janice later that day and she thanked me for my help. We agreed to get together for lunch later in the week and discuss the intellectual property im- plications of a new business venture her company was considering. We selected a restaurant on South Beach.

Elio F. Martinez Jr. is a partner with Concepcion, Sexton & Martinez in Coral Gables, Florida, where he concentrates on commercial litigation and intellectual property law. He may be reached at .

Copyright 2009

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