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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