Recently, Ramon’s business was involved in a long, drawn out negotiation over a contract. At a meeting involving him and the principals of XYZ Corporation, the attorneys for XYZ took an aggressive posture regarding certain provisions that Ramon and his lawyer insisted should be mutual. The executives of XYZ, supposedly leading the discussion, were relatively mute, as XYZ’s attorneys aggressively grilled Ramon.
Ramon and his counsel were incensed and, in a separate conversation with the CEO of XYZ, Ramon threatened to walk away from negotiations. Ultimately, Ramon and his business counterparts at XYZ got together (without the attorneys) and resolved the significant business issues; the legal issues ended up resolving themselves.
Ramon’s experience reminds me of an important aphorism that I frequently cite to clients: “Attorneys don’t cut deals; principals do.” A common problem encountered by business persons vis a vis their legal counsel is their uncertainty about the role that said legal counsel should play in their business’s decision making and the level of participation that should be expected of counsel in discussions with potential clients and business partners.
As a touchstone to addressing this issue, it is important for readers to understand that attorneys are only competent to render legal advice—not business advice. The line between business advice and legal advice is often blurred. You probably know more about your business than your lawyer does, law degree or not. There is a clear danger to business clients who defer to their counsel without establishing guidelines about the scope of their authority:
- Lawyers, being legal specialists, are more likely to emphasize the importance of legal considerations over business considerations, which can skew judgment in a negotiation where business considerations should dominate. Is it critical for a client to insist on a mutual confidentiality provision? Such issues over framing and language may well require compromise when considering the business goals. In short, the importance of getting the legal language right may well depend on the context. Not all legal differences between parties are necessarily important enough to warrant tooth and tong battles.
- Lawyers rarely resolve disputes without guidance from their clients. Left to their own devices, lawyers are more likely to draw out negotiations in trying to extract maximum concessions from the other side. This is because, under American law, a lawyer is commonly viewed as a gladiator for the client’s interests and expected to try to win legal points when possible. While vindicating client interests is laudable, it also can result in negotiations becoming endless pitched battles between opposing counsel. It is important for the client to understand the limits of this “take no prisoners approach” and to grab the reins from an overzealous lawyer so that the deal can be completed.
- Deferring the responsibility for leading negotiations to counsel can also inhibit the development of a sense of common purpose among the principals and their agents who will need to be able to rely on, and have confidence in, each other’s capacities long after the contract is signed and the attorneys have moved on to other work. Battling over legal issues that may not be that critical can also poison the chalice of good will from the outset, introducing an exaggerated sense of wariness that can inhibit future trust and cooperation.
- Allowing Lawyers to take the lead in negotiations can also make the client look more vulnerable and unsure of themselves. At worst, counsel can create the false impression that they, rather than the client, are the gate keepers when it comes to making important decisions for the enterprise. Again, allowing counsel to create the wrong impression of their own influence in an organization can raise doubts in the other party’s mind regarding the nature of the business relationship that is expected to evolve.
So how should you handle your lawyer? Here are some tips:
- Speak to counsel ahead of time about their expected role in a negotiation. Do not assume they will instinctively understand what this role is or what your strategic objectives are.
- Work out all disagreements concerning legal issues ahead of time so you and your attorney can speak with one voice. Differences of opinion should not be aired in front of the other party because it can undermine your credibility and raise doubts about your preparedness in meeting the requirements of the business relationship.
- The role of counsel should be to advise you concerning legal issues; not to make decisions or undertake commitments for you. Again, counsel’s level of activity and scope of authority should be defined by you.
Every situation is different and requires considering different strategies, but unless a more muscular role for counsel is required, the ideal framework would be to have them primarily work behind the scenes to advise and educate you concerning legal issues that could impact a business relationship. The role of counsel should be to empower you to advance your business interests directly and compellingly.
During the negotiations, it should be the client, not the attorney, who is primarily engaged in discussing the future of the business relationship. Legal issues should probably be left to counsel in a separate discussion, with the idea being that communications between opposing lawyers will be pursued with the client’s full knowledge and guidance.
In sum, clients should not take it for granted that attorneys are possessed of special negotiating skills or deep knowledge of the client’s business. The role of counsel needs to be specifically defined ahead of time so that legal issues can be placed in their proper perspective and the business considerations and goals of the prospective relationship can take center stage, as they should.