Sometimes Law Firms Do Not Tell the Whole Truth

Some time ago there was a fellow who I will call Jack.? Jack had invented a product and had found a large company to be his partner and finance the start-up of a business to manufacture the product.? The business did not do well. The partnership did worse. The day came when a deal had to be struck for the partnership to be dissolved.

Jack’s partner was represented by a large Bay Street law firm.? I, a partner at a medium sized Mississauga law firm, represented Jack.? Jack did not have much in the way of negotiating position or financial resources.? Luckily for him, while Jack was focused on being able to stay solvent and continue to develop and sell his product, his partner was more focused on putting an end to its losses than on recovering very much on its investment.?

The transaction itself was technically complex, and it lined up nicely with my skills and experience.? There were elements of general corporate and commercial law, employment law, commercial leasing, and intellectual property law to be addressed.

The lawyer at the large Bay Street firm representing Jack’s partner was in her first few years of practice.? I will call her Sarah.

As we negotiated the settlement documents, I noticed a pattern developing.? I would ask Sarah for something that I expected would be refused.? She would agree.? Emboldened, I would ask her for something else. She would agree again.? I asked for more and more, and she agreed to more and more. As the negotiations continued, I was continually getting away with much more than I should have been getting away with.? It was almost as if Sarah did not know the golden rule (being that her client had the gold and should be making the rules.) ?I felt like I had arrived as a great negotiator.

At the closing I finally met Sarah in person.? By this time, I was curious about her background.? As we reviewed the document files prior to closing, I commented that for a young lawyer, she seemed to have been handling a fairly sophisticated matter, which required expertise in several different practice areas, on her own.? Sarah told me that this was a file “that did not merit partner time.”?? I asked her to explain, and she said that at her firm there was a category of files into which this transaction fit, in respect of which she was not allowed to consult with any of the partners because it was just too small in dollar value.

I found this revelation to be astounding.? Here we had a large company which undoubtedly gave this Bay Street law firm a truck load of billings from its core business.? Presumably, its client used this firm because they had been sold on the notion that dealing with a big law firm would result in them getting the best representation. I had been out-negotiating Sarah throughout, and I expect that aside from my innate brilliance, an exceptionally large part of the reason was that not only was she inexperienced, but she was entirely on her own and was not allowed to even ask any partner a question on the file, let alone ask lawyers in different practice areas to get involved.

I have no way of knowing whether this approach was prevalent throughout that firm or across Bay Street at the time, or whether such policies are prevalent today.? However, the experience did get me thinking about the discrepancy between what lawyers tell clients about how their firms operate, and how they actually operate.?

Lawyers tell clients that they assign different hourly rates to lawyers and law clerks based on their level of experience, and that files, and parts of files, are assigned to the professional with the lowest hourly rate who is capable of doing the work well.?? They also tell clients about the many different areas of practice that they offer and their ability to put together a team comprised of experts in different areas of the law.? They sell all of this to clients as giving the client the benefit of having access to all of the experience and expertise of the firm, but only having to pay for what they use.

Meanwhile, under the hood, different things are going on.?

It is not uncommon in law firms (big or small) for lower dollar value files to be assigned to junior lawyers.? Of course, this makes some sense, but it is worth noting that “lower dollar value” does not necessarily line up with “less technically complex” or “unimportant to the client.”? At the same time, it is also not unusual for senior lawyers producing ridiculous amounts of billable hours to be too busy to spend much time mentoring the juniors.

In addition, what constitutes a lower dollar value is all relative. In a medium sized firm, a $15,000,000 share purchase would be a decent file. Being a decent file, it would probably be handled by one of the senior lawyers. ?I expect that in a large firm, the same file might be a bit of an inconvenience and would be delegated to a much more junior lawyer.

The relevant question for a client with a $15,000,000 share purchase file might be whether they would be better served by a junior lawyer at a large firm or a senior lawyer at a smaller firm, especially since they may be paying the same amount (or more) for the junior lawyer at the large firm as they would be paying for the senior lawyer at the smaller firm.

Leaving aside the reality that many small clients do not have the option of hiring lawyers who charge at the high end of the scale, there are similar questions about which lawyer should be hired by sophisticated and well-financed clients for a particular type of issue.? Despite law firm marketing, the answer is never “always Bay Street” or “never Bay Street”. ?Similarly, sometimes the best answer is a boutique firm, a medium sized firm or even a sole practitioner.

The real answer, of course, is that it all depends, which is the typical type of answer that you get from lawyers, pretty much regardless of the question. (I am reminded of a client who told me that she wanted to find a one-armed lawyer, because she was sick and tired of lawyers saying “on the one hand… but on the other hand…”)

There are a number of clients who have told me that “they hire lawyers, not law firms”, by which they mean that it is all about finding the right individual for the right project, and the firm that they work for is of little importance to them.? There is definitely merit to that approach.? But still, which lawyer to hire?? Certainly not Sarah, who was not getting the training or support that she needed, despite being surrounded by a vast array of expertise within her firm.