Frank D’Amore ()
Editor’s note: This article is the second in a two-part series.
The relentless pursuit of revenue in this era of decreased legal spending has made it anathema to turn away work. The battles to land new clients and matters are fierce and the consequences of losing are far more damaging than ever. Nevertheless, there are times when the smart play is to decline, no matter how alluring the likely fees are.
Five reasons that may lead a firm to “just say no” were reviewed last month: (1) lack of expertise in a firm; (2) triggering of rate issues due to new work; (3) a representation that causes positional conflicts; (4) the presence of a client with unrealistic expectations; and (5) clients with characteristics that do not portend well as to building a relationship. We conclude with the final five reasons this month.
6. The engagement will lead to loss of focus or becoming overextended.
An unintended consequence of receiving a large influx of work is that it could actually cost the firm in the long run. This could happen if resources are limited and leads to a firm missing more lucrative opportunities while it was preoccupied with the work that it eagerly accepted. This may be particularly disconcerting if taking on the initial work was also at odds with the firm’s strategic plan.
For example, consider a firm that is deeply invested in repositioning its commercial litigation capabilities. The firm may have decided that it will be better off, over the long haul, by handling higher rate and more complex commercial litigation matters. As such, the firm has narrowed its focus to exclude some types of cases that don’t fit its new strategic plan.
What does the firm do when a significant portfolio of collection cases will generate, in the aggregate, an attractive amount of revenue that will help it reach its budget this year? These are precisely the type of cases that the firm wants to shed, but the revenue is ultra alluring. This is a tough call to make, but, at some point, it will require the courage to just say no.
7. The new representation raises moral issues or is in conflict with a firm’s mission.
Most firms admirably devote a lot of time and attention to crafting mission statements that describe important principles that characterize just who they are. While there may be some new matters that impinge on these tenets—at least on the margins—occasionally, a new client or type of representation triggers a head-on collision.
For instance, assume a controversial person or company approaches the firm for representation in a high-profile matter that will generate large fees. The matter at hand involves a divisive religious or political issue that will put the firm on the front page for many months. What does the firm do if handling the matter, although it does not entail doing anything illegal, nonetheless, is in contravention of its operating principles and the image it has assiduously built over many years? What if the short-term monetary gain may be offset by a diminution in fees from other clients that do not want to be as closely associated with the firm due to the publicity and its new image?
Questions like these are not the stuff of law school hypotheticals—firms face these issues quite frequently. The decisions they make help to define them.
8. The new client is a notorious law firm shopper.
Firms have become savvier in conducting their own due diligence on prospective clients. One question that is sometimes not explored is why the client may have initiated contact with the firm. After all, with work being so hard to get, why question a company that approaches a client with good work in hand?
Ideally, the client may have initiated contact due to your firm’s reputation for handling certain types of matters, especially if good results have been publicized or otherwise have been in the public eye. Or, the client may have appeared through a personal connection with a lawyer or other professional in your firm, which also is a desirable precipitating factor.
However, what if this is a peripatetic client that seems to bounce from firm to firm? While the client may have explanations (if you inquire), it is important to listen attentively to those answers and not to assume that your firm will somehow be the one that avoids the fate of the others.
9. The potential legal exposure to the firm outweighs the upsides of the representation.
It is helpful to know the types of representations that should trigger alarms or at least enhanced scrutiny. A review of your firm’s own malpractice history should reveal the types of matters that most often have resulted in claims being pursued against it. The firm’s malpractice carrier can also surely provide information in that regard that will be helpful.
There are also more macro-level issues that should be weighed before accepting a new representation that are not necessarily practice-specific. For example, if a client has approached the firm very late in the proverbial game (such as very close to a statute of limitations that is about to run or a up against a looming filing deadline in transactional matters), be very careful as to what is promised—it just may be that it is not plausible to appropriately handle the matter. If that’s the case, don’t be blinded by the potential fee.
There are countless other examples, but the common thread is to be very aware of the risks inherent in a representation and the strengths and weaknesses of your firm. A careful balancing of those factors should go a long way toward deciding just how desirable the matter may be.
10. The financial risks associated with the representation are too significant.
There are two aspects of this issue. On the client side, the analysis should be straightforward. How creditworthy is the company? D&B reports and other research are typically quite informative, if not dispositive, in this realm. Newer or emerging companies may require more research into their resources and may entail having to look closely at their financial backing.
In some cases, the conduct of the client is as telling as the data.
For example, companies or individuals that push back too hard against providing appropriate retainers may be sending important signals as to what lies ahead when bills are sent. Similarly, if the prospective client provides information about its financial wherewithal that is incomplete (or worse), this may not only be indicative of how likely it is to pay, but just how strong its case or position in the matter may be.
On the firm side, some types of representations may require considerable investments that may or may not—depending on the size of the likely fee—make sense. For example, there may be expensive equipment, software, or other items that are needed to handle the case that a client may not be willing to pay for, as it is assumed that the firm has those items. Similarly, some litigation matters—especially when the firm is on the plaintiff’s side (in personal injury or even commercial cases)—may entail racking up significant expenses along the way. Careful and sober assessments of those factors should be made up front and not after an engagement has been accepted.
Current market conditions weigh heavily in favor of accepting new work. It helps to keep the lights on, after all, and can be dispiriting to turn away after working so hard to get it. Nevertheless, it is important to at least ask some important questions before reflexively saying yes, as there will be times when the answer, as painful as it is to utter, should be no.
Frank Michael D’Amore is the founder of Attorney Career Catalysts, http://www.attycareers.com, a Pennsylvania-based legal recruiting and consulting firm that focuses on law firm mergers and partner placements. He is a former partner in an Am Law 200 firm, general counsel in privately held and publicly traded companies, and vice president of business development. He can be reached at email@example.com.