International Law

Bizarre Advice for Lawyers From a Twisted Industry

By Stan

After my experience with the VC industry, beginning in the year 2000 and China’s Internet boomlet, it’s no great surprise that I have a bit of a chip on my shoulder when it comes to these guys.

On the other hand, it’s always good to know what’s going on and what folks are thinking, particularly when it comes to heavily lawyered transactions.

Via Wired, I saw the following missive from some VC guy who apparently used to be a lawyer in the industry and is now an executive/shareholder/retired. Check out his advice for VC attorneys, and then a bit of commentary. I’ll try not to be too nasty.

Here’s his intro:

You are a lawyer.  You represent a hot start up that is venture backed.  One day the CEO comes to you - out of the blue - and says ?you?re fired.?  (Cue Donald Trump frown).

You?ve stuck it out through the lean times with the company even when they weren?t funded and now you are on the outside looking in.  What gives?  It must be the evil venture capitalist (me).  He must want one of ?his guys? at the legal helm.

Not so fast.  Even ex-lawyers like me who believe we can evaluate the best of legal talent don?t take this action lightly.  And I never like to have a heavy hand with my CEOs.  It?s their company to run and I work for them.

I, however, have seen some unbelievably stupid things that company counsel lawyers have pulled that has ruined their credibility with the VC (me) and thus found their way out the door, either by my strong urging, or by agreement of the entire company.

So, today is the list of ?quick ways to get fired.?

Okay, fair enough so far. If he’s seen a few deals, and apparently he has, he probably has seen a few boneheaded maneuvers by legal counsel. Let’s continue and see what pisses him off.

In the category of things that will “get you fired immediately” are the following:

1.  Screw around with redlines.  You and my counsel are negotiating the Series A financing.  As normal, there are several revisions of the documents.  My counsel notices that paragraphs are reverting back to previously rejected ones, but are NOT showing up as redlines.  They assume it is a mistake, but when the junior associate is asked ?what?s up? he says that you told him to make the changes.  You?re fired (and you probably get reported to the state bar and the head of your law firm).

Right. If I’m a client, this kind of crap will definitely get me frothing at the mouth. But let’s take a closer look at this. Different law firms, and different companies, have various types of software and internal procedures for editing documents. Some systems are good, some are bad, and some internal procedures are simply abysmal.

In fact, IT systems and internal procedures are an important part of what makes a law firm good or bad, and one would expect that a prospective client would check into this stuff before selecting counsel. When something goes wrong, there are several possible explanations. One is human error, whether that person is the partner in charge, an associate, or even support staff. Alternatively, the fault can be with the client’s internal systems, not that they would ever admit to this.

Now, I can’t really tell from this guy’s hypothetical what is actually going on, although if it’s the firm’s fault then his overall point is certainly valid. However, to go so far as to say that the firm, or individual lawyers, will be reported to the State Bar is quite an amazing thing to say. Report someone to the State Bar because of a possible computer glitch or even some sort of miscommunication? I have seen this sort of thing before on many occasions, and I’ve even been guilty of making these kinds of editing mistakes myself, and I know how easy it is for this sort of thing to happen. Often it’s hard to tell where the mistake originated from in the first place.

On the other hand, if a lawyer is purposely revising documents against the wishes of his client (and if this is what the hypothetical is all about) then this is definitely an outrageous act that should be punished accordingly. In my experience however, I’ve never seen this in my life, and I’ve worked with some extremely headstrong individuals (”headstrong individuals” being a euphemism for flaming assholes).

Let’s look at another one that will get your ass handed to you immediately.

2.  Endorse the chief competitor.  We find a quote made by you on the primary competitor?s website extolling the wonders of the competitor.  First, it would have been nice to know that you represented our competitor.  Secondly, you providing the quote shows amazingly poor judgment.  You should never pick sides.  (And in hindsight, we kicked the other company?s butt, so you chose wrong).  You?re fired.

Once again, if your lawyer actually goes out of his way to endorse your competitor, I can understand this problem. On the other hand, there seem to be a lot of variables at play here. Was this competitor also a client of the firm? If so, and this conflict of interest had been cleared previously, then the client should shut the fuck up. Moreover, what was the context of these comments? Was it an extemporaneous answer to a question at a conference? Was the quote posted on the website even accurate? Was consent given to post the quote?

Seems like there are a lot of possibilities here that I, if I was the attorney in question, would expect my (reasonable) client to discuss with me before I was sacked. Somehow I don’t think the guy who wrote this blog post is overflowing with human kindness, although perhaps I am stereotyping from the industry he is in.

Okay, this post is running on a bit, so I’ll leave it to you to read the rest. So as not to be a complete dick, I should point out that many of the problems this VC lawyer points out are very legitimate issues. These include: overbilling, partners dumping entire cases onto junior associates, poor problem-solving, and some very common professional responsibility issues such as knowing who your client is (e.g. CEO versus the board or the company at large).

The advice is therefore mixed. In addition to the above, I guess I have a problem with the general tone. At the risk of being way too blunt, the guy sounds like a typical VC jerkoff that would rather go off half cocked at a perceived slight instead of calming down, gathering the facts, and only then taking remedial measures. Someone that would even consider immediately firing a firm for anything seems utterly crazy, not to mention irresponsible. Again, I may be stereotyping, but past experience naturally pushes me in that direction.

© Stan for China Hearsay, 2009. | Permalink | No comment | Add to del.icio.us

Full post as published by China Hearsay on May 12, 2009 (boomark / email).