What We Learned Today
November 20, 2006
After spending more than a million dollars on a slew of professional fees, my partner and I were told today by our lawyers that the document our multimillion-dollar project was based on has been completely misinterpreted.
If they are right about this, it invalidates a huge business deal that we've struggled for more than a year to complete.
It may also mean that this project is worth just a fraction of what we think it is.
"It all depends," the lawyers told us, "on who reads the original document and how they interpret it."
We're in shock. How could it be that five separate law firms could have spent so much time drafting so many contracts that are all dependent on a four-page document that - from a cursory review by two amateurs - looks to be indisputably problematic?
How come nobody told us?
Why have we been having all these meetings, executing all these strategies, and paying all these professional fees for work that might not make any economic sense?
How is it that two of the most prestigious firms in Miami missed this crucial issue? How is it that attorneys who have been emphatically assuring us that everything was under control could so suddenly change their tune?
When you are paying top dollar for professional help, you should be able to trust the advice you are given. Unfortunately, as I've learned, that's not always the case.
Things I can take away from this experience:
1. In multimillion-dollar transactions, find the time to read key legal documents yourself.
2. Don't assume that highly paid professionals are any better than others.
3. When things go bad, don't let your mind stay in a bad place. Think forward to possible resolutions. Make peace with worst-possible outcomes. Then put one foot in front of the other.
posted by M. Masterson @ 2:16 PM,
10 Comments:
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At 9:11 AM,
said...
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Mr. Masterson,
When I moved into our new home a couple of years ago I contracted with a lawn service whose personnel were all wearing nice uniforms, there trucks had their company logo on them and they were always washed and waxed. Every Thursday, while I was at the office they would mow the lawn. They were expensive but I hired them because they were "the best" . One day a young man in his beat up truck offered to mow my lawn for about half of the "professionals". I said okay and now when I come home on Thursday not only is my lawn mowed but my wallet is a little bit fatter.
My point is you are right...highly paid professionals are NOT always better than others. -
At 9:20 AM,
said...
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Since you note that the basic-document looks to be indisputably problematic to you and your partner, did you raise specific questions about your concerns with your lawyers before their further document drafting began? If you did, there well may be good grounds to challenge the fees you paid thereafter.
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At 9:45 AM,
said...
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The lessons learned probably should have been:
1) In multimillion-dollar transactions -- and in any transaction -- realize that you are probably the person with the most insights into "the deal" and that it is your money on the line -- and that you should be VERY involved in every aspect of the deal, including in depth knowledge of every document and exactly how each provision of every document works.
2) When choosing lawyers, choose the lawyer with years of experience "in the field" of expertise needed for the deal. An average attorney in the field is much better prepared than a so-called top notch attorney who doesn't have experience in the field.
EJA
Attorney -
At 9:48 AM,
Bob Rutz said...
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Michael -
Get a 6th opinion, probably from an out-of-state lawyer willing to take on five misleading law firms. Hopefully, you can find someone who is a little bit sharper than the lawyers for the liability insurance companies of the five derelict firms, and who has a successful track record in suing law firms.
First, pay him for 2 days of his time, where you and your partner go over every document and action of the five law firms. Carefully note every comment he makes, and ask for a summary in writing.
There is a reasonable probability that he will state that you have a good chance of success. Pin him down to a percentage. If he is certain you have, say, at least a 75% chance of complete recovery plus legal costs, have him write up his agreement with you. Then go over every word with the fine-toothed comb you didn't use on the original 4-pager.
Finally, offer him, take-it-or-leave-it, to pay him, for instance, 25% of the fees he has proposed, plus, say, 50% of the amount he will recover.
Bob Rutz
479-665-2887
PS: But first figure out why, when your initial amateur review found the 4-pager indisputably problematic, you went ahead with the project anyway. -
At 10:45 AM,
said...
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The really scary thing is that this same thing happens in the medical field with life and death consequences.
It is my opinion that the "experts" can often become blinded by their egos, their narrow field of expertise (not seeing the forest for the trees) or an overwhelming demand for their services (you hire the expert and he turns it over to subordinates, penning his expensive signature to the work).
Conversely a sharp, intelligent professional with a reasonable amount of experience in the field will usually outperform the expert in his attempt excel. Remember Avis; "We Try Harder." Perhaps it's more than a marketing device.
Living and working in the Palm Beaches for 20 years, this expert mania was blatantly apparant. On the advice of others I found an accountant in Miami in a fancy glass and steel building. He was one of the "best" in the country. Shockingly, when I moved to NW Arkansas and had my taxes reviewed by an accountant in a run down office, he found enough shoddy work in my previous year tax forms to warrant amended returns, saving me piles of money.
In conclusion, the best is not always the best. -
At 11:19 AM,
Tom Justin said...
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When Robert Ringer called lawyers "deal killers" 30 years ago, I paid attention. Then, I think he meant as negotiators and I've had far more success leaving them at their desks. I later realized that even the best and most self-confident needed scrutiny. Next time, call Robert!
ETR is a powerful information vehicle and I continually appreciate the content.
Tom Justin
www.tomjustin.com -
At 12:31 PM,
Danny Guspie said...
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In all transactions be they interpersonal or business one must have their eyes open and be willing to assume personal responsibility - Contract terms often shift before the ink dries; it often comes down to the "tolerance" of each party to the contract of the other's attempts to have the advantage.
People either want to do business together on equitable terms or they do not. If a negotiation is "tough" to do a business deal, sometimes it's just not a deal at all, and its better to just minimize losses rather than trying to buttress a losing proposition.
A "legal professionals'" role is to give you options, not make decisions for you - While they have a duty of care to not misrepresent and be knowledgeable on the advice they give, once that's discharged, YOU are responsible for your instructions.
Just as YOU are responsible for the deals you make or break. That's how the real world works.
If you weren't told that at the outset by your attorney's you should RUN instead of HIRE.
As a law clerk for over 14 years, I see this kind of thing everyday, but rarely is it ever explained in simple terms the average person can understand and appreciate.
Danny Guspie
http://www.fathers-resouces.com
http://www.podcast-marketing-center.com -
At 1:36 PM,
said...
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Sorry to hear you lost nearly a million dollars. No attorney (including EEOC's recommendation) would take my, then (nor recently), 16 year old daughter's case after being permanently injured on the job. Ironically, the last atty commented on the nationally recognized fast food chain saying, "Unfortunately, they badly abuse teens and get away with it." Of course the atty is allowing the process to recur. I don't know which is worse in the line of justice: losing a great deal of money or being totally ignored. Just like in high school she now has to use note takers in college and has a permanent handicapped parking placard because walking is so painful. It would be nice to hear her play the cello again, but she can't. It hurts that I can no longer hear the music from her soul. Money can't replace that, but she turns 19 in a few months. Can you imagine how victimized she feels? I lost my job caring for her when she was total care in 2005. It proves how having money or not having money falls into the category of the same injustice.
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At 2:32 PM,
said...
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Michael,
Years ago I read Mark McCormack's book "What I should have learned at Yale Law School: The terrible truth about lawyers". This saved me both time and stress over the years. Treat yourself to a copy before you spend another cent on any law firm.
It may be the best few bucks you have spent in business for a long time!
Regards
Hovis -
At 4:03 AM,
said...
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Michael,
I learned a long time ago, by purchasing life insurance, that NO body cares more about you and your money than you do. If you don't read the contract and take the time to understand it, then you will be at the mercy of someone else. I hope that everyone who reads this truly understands the importance of this.
Unfortunately, the people who will be reading this, are typically those type of people who have a basic grasp on taking care of themselves and not being taken advantage of. However, the people who do NOT read this type of information are left to their own peril.
Michael S.
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