Bram Cohen: “Lawyers can’t tell you you can’t do something”

Lawyers can be and often are invaluable advisors to startups.

On the other hand, bum lawyering can come in all shapes and sizes. Some examples to watch out for:

1. Insecure (and particularly green) lawyers who are so bound to doing things by the book that no hint of common sense can be found in their advice or in their actions. They will tell you all you ever wanted to know about what the "tax law says" or what "judges do" but they have no idea how to give you custom advice that is practical for your situation. They will tell you they need to "look it up" only to bill you for many hours of research time that you had no idea you would be expected to pay for.

2. Arrogant lawyers who have become so imbued with a sense of their own self-importance that they actually presume to become actual decision-makers for their corporate clients (yes, this does happen, much to the chagrin of the clients involved). This is the point noted in the title of this post. I would say most principals will no longer put up with such nonsense but it still happens where lawyers with dominant personalities deal with deferential-type clients, sometimes from cultures where extreme deference can be common (e.g., Japanese clients).

3. Tin-ear lawyers who have no sense for a deal. This differs from #1 above in that the lawyers are secure in their abilities, as opposed to green young lawyers, yet they are so rigid on how something must be done that they effectively impede (or, in extreme cases, destroy) the deal they are supposed to be facilitating. This is the type of lawyering that tries to impose a 50-page contract upon a deal when a short and simple contract would do. Why? Because it "covers all the risks." Of course, most of these risks have no practical significance for the size or scope of the deal, and the contract itself, being unduly complex, causes the parties to run up large costs and to incur significant delays, all to the detriment of the parties involved.

4. Disputatious lawyers who have an insatiable need to "win" at every turn even when this is off-putting and alienating to all concerned. Some principals think this is a good thing, to have a lawyer who concedes nothing in doing a deal. In reality, this tends to be a disaster, either killing the deal or causing the other side to close with such a bitter sense about it that future harmony between the parties is not possible.

I love my profession, and love what I do in practicing law, but the abuses and shortcomings in this field are enough to make one scream.

This is true for any advisor, your expectation should be that they will make you aware of the likely consequences--some of which you may not have foreseen--for a course of action that you are contemplating. But they cannot make the decision for you.

There was a great quote in a 2006 Fortune profile of Larry Sonsini (the Sonsini in Wilson Sonsini) when they asked TJ Rogers why he valued Sonsini's advice:

"I don’t take orders well," says T.J. Rodgers, the founder, chairman and CEO of Cypress Semiconductor. "But taking advice from Larry Sonsini is easy. He’s professorial. He’s nonjudgmental. ’You can choose to do this, you can choose to do that, and these will be the consequences.’ So you realize you’re not being forced or pushed into anything. He explains to us why the sometimes frustrating, arcane and inefficient system we have makes sense, or at least made sense at one time, and therefore should be followed."

The full profile is here: http://money.cnn.com/magazines/fortune/fortune_archive/2006/...

I blogged about it here http://www.skmurphy.com/blog/2006/11/30/larry-sonsini-profil...

Three related take-aways for entrepreneurs:

1. The best attorneys present options and make you aware of the likely and potential consequences of different courses of action, but understand that the business decision still rests with the client.

2. If you allow an attorney to invest (and then re-capture his dollars in (possibly deferred) fees) you may find it difficult to fire or replace the attorney. Make sure it’s someone you want a long term relationship with: there is no such things as "free legal advice."

3. Work with advisors who are willing to be transparent about their fees. If you were a prospective WSGR client, the answers that they gave here should be unacceptable. Understand why the code of ethics for accountants prohibit similar fee arrangements.

I'm not a lawyer but I've seen, and paid for, my share of it, and one thing I know is that if you don't want your lawyers charging you don't fire off emails like; "Hey, if you know X off the top of your head, can you left me know about it?". You either need a legal answer, or you don't, otherwise you're wasting the lawyers time and your money. The law is complicated and convoluted and even things that seem simple can actually require lots of research.

If you're a young start-up, don't hire on WSGR, Orrick or their ilk - I know they're a status symbol, but they'll cost dearly (remember: deferred fees are still fees that need to be paid eventually). Most start-ups need some corporate, a little employment and maybe some patent/ip work. There are lots of small firms that specialize in that, especially in the tech hubs. If you need more specialized work, hire in a firm that specializes in that. Smaller firms usually offer better service, at lower prices - you'll pay a lot less and work with experienced partners rather than 1st year associates.

Finally, your lawyer is not an employee, firing them off an "urgent" email at 4pm on Friday means that you probably won't get a response until Monday, and probably won't get an answer until Tuesday. Just because you work on the weekends doesn't mean that they do. Don't leave important legal questions until the last minute and you'll have a much better experience.

Hm. I can't find the quote by Phil Zimmerman, of PGP fame. He said something along the lines of "If your lawyer says 'you can't do that,' they're useless. Look for one who can say, 'you can do that, if you do this first.'"

I think Bram’s comments and the comments below are solid. This is why I wrote the post "Top ten reasons entrepreneurs hate lawyers" (http://bit.ly/53SB5a): to promote this kind of discussion and to educate entrepreneurs. Let’s face it, the legal profession is broken. On the one hand, entrepreneurs and their companies are getting killed on fees; and, on the other hand, lawyers are being laid-off in waves and lots of law school grads can’t find jobs. On top of that, most lawyers don’t like that they are doing and service generally sucks. It’s time for a new kind of law firm.

I hope Bram shares his gripes about sysadmins and HR directors "of dubious ethics"!

The bit about "when all that was really wanted was the answer if the lawyer knew it off the top of their head" reminds me of people who want an ebay clone for a couple of hundred dollars.

I especially like the notion of only hiring partners. It's a perfect example of measuring OUTPUTS like "total job cost" and "time to get it done" vs measuring INPUTS like "hourly rate"

Cohen's comment about lawyers not grasping The Business side, and generally being overcautious rings true even for those of us who work for Giant Immoral MegaCorps.

A lot of what Giant Immoral MegaCorps don't do is because of over cautious lawyerly advice, as near as I can tell. Or at least its due to what mid-level managers and directors think the lawyers will tell them.