Sacking your law firm can stir up a hornet’s nest. Think through the consequences before taking any action and make sure there are no skeletons in your own cupboard
Even the best relationships come to an end and solicitors and their clients are no exception. Corporate clients are rightly performance and value-driven; if a company thinks it is not receiving the level of advice or service it expects from its law firm then the question of whether, and if so how, to end the relationship will arise.
It is not always a simple issue of the lawyers failing to perform. As frequently happens, the law firm may have been outgrown by a fast-moving client; the relationship may have broken down due to a clash of personalities, or a new in-house counsel may have arrived and decided on a fresh start.
Whatever the reason, the client may decide that one or more of its law firms must be dropped.
But disentangling yourself from a law firm is not always straightforward, particularly if you are a large client with up to several hundred on-going matters dealt with by one or more of your legal advisers.
Clients have a business to run and nothing should be done to put the continuing well-being of that business at risk.
Prudent risk management needs to be planned and put in place before action is taken, otherwise serious damage may be sustained by the company.
Planning ahead is key, if you have time. A client should disengage from its law firm in a way that it would wish to be dealt with if the roles were reversed. Although circumstances sometimes mean this is not possible, the world is a small place and memories can be long. Your reputation and that of your company are too valuable to risk – a little courtesy can make all the difference. Often, it is not what you do, but how you do it that counts. And there is always the possibility that one day you may wish to go back into private practice. If you have an existing panel of law firms, you should review it from time to time to improve the quality of service and/or cut costs, and to meet the changing needs of your business.
Getting existing law firms to tender should be good for them. It ought to put them on their mettle and sharpen up selling skills. If you handle the matter fairly and objectively, firms will not be able to complain that you have not given them a chance. You may end up with a panel of law firms more suited to your needs and which perform better.
But do not underestimate the time, effort and cost involved in managing the process of reshaping a panel. Even more important is the process of how you transfer the work from the old firm(s) to the new. Ensuring a smooth handover without disruption to your business means forward planning is crucial. However smooth the handover, it will mean additional fees for you when the new law firm has to read the files and spend time getting to know how you work – unless you specify when taking them on that they are not to charge for that work.
Not everyone has the luxury of a panel of law firms to play with. Even if you have been using one firm for all your work, occasionally it can be worthwhile to invite the firm to retender for work in competition with others. It can be a good way to compare services. This is true, even if you have already made up your mind to move to another firm. If you do end up parting company with the firm, at least it will feel it had the opportunity to pitch for the work on a level playing field, even if it does not win in the end. This may help to make any handover less problematic.
But beware of playing with your law firm’s affections. As a matter of principle, some will not retender for work in competition with others and you could be left high and dry with no-one to advise you.
Alternatively, you could do what many clients do and just slide out of the relationship by gradually transferring your affections to another firm. This can carry less risk and is often less painful for the individuals involved. You do need the luxury of time to execute this, but if time is not an obstacle, many clients will simply feed all new instructions to other firms. The process may give the old firm sufficient time (if it reads the warning signals) to enable it to plan better for its future.
Sometimes circumstances dictate that you need to part company with your lawyers quickly. Take the common situation where the client partner at the firm leaves. Do you follow or stay put?
I know of a firm that insisted, as a deterrent, that every client that wished to follow the partner to another firm had to have all the files billed to the day of departure and that no files were to be handed over until all bills were paid (and cheques cleared). The clients chose to follow the partner, paid the bills, collected the files and never instructed the firm again.
This illustrates the difficulty of changing legal advisers – emotions can run high and get in the way of sound business judgement. The law firm may well have a lien on your papers until its bills have been paid. If you believe there is a risk of your existing lawyers not co-operating in the handover, you need to take steps beforehand to ensure you obtain all the papers you need to carry on with the matter. Again, forward planning is key.
If you have a high profile in your industry, parting from your law firm can be dangerous. This is particularly so if the firm has a similar profile in the legal profession.
Management of reputation is paramount. If you are seen to have been clumsy when terminating a business relationship it could work against you within the company, in relationships with other professionals, and it could have a long-term effect on your career progression.
External advisers also take pride in the reputations they have built up. If you seek to end a relationship with a law firm amid recriminations over its competence, levels of service or performance, make sure you have your facts correct – law firms have been known to fight back.
Often the matters complained of arise out of long-running and complex transactions that may have gone badly for the client. Pride is often at stake on both sides and emotions can run high. There is often fault on both sides.
Sacking your law firm can stir up a hornet’s nest. Think through the consequences before taking any action and make sure there are no skeletons in your own cupboard.
If your law firm suspects all is not well with the relationship and that you are considering moving, it may launch a charm offensive, including the usual type of corporate entertaining. Make sure you obey to the letter your company’s rules on what you can and cannot accept as hospitality, otherwise you may find it is you, rather than the law firm, who is sacked.
In risk-management terms, always deal with professional relationships between your company and its legal advisers in the same way that you would take any other well-planned and well-considered business decision. Emotions may sometimes run high, but never allow knee-jerk reactions to dictate your actions.
The most important message to clients and their law firms is that, however difficult the parting, try to retain courtesy in the relationship because one day you may need each other.
Today’s disappointment may be tomorrow’s recommendation.
