How NOT to Hire a Law Firm
Two decades ago, I had a real estate dispute with the seller of a property that I had contracted to purchase. The seller and I had a wonderful relationship. She had known our family for decades, and in fact, her first job was working for my great-grandfather during the Great Depression. She claimed that this job saved her family because it was so difficult to find work in the 1930s. Over the years, we became close, and she offered to sell her property to me to build a new house. Her only caveat was that she didn’t want to sell until she was ready to do so, but she wanted me to commit to a specific price, because the seller was concerned about the value of residential real estate in Silicon Valley, specifically concerning a downturn. To that end, the seller and her real estate advisors presented me with a price that was about 10% less than the value of the property — but in exchange, I had to commit to their specific purchase price at any time during the ensuing five years, no matter the value of the property. I signed three separate contracts drafted by her and her real estate advisors:
Standardized California residential real estate contract.
Standardized California option-to-purchase real estate.
Separate contract drafted by her and her advisor mandating that I purchase the real estate during the specified period at the time of her determination.
I reviewed them and signed all three contracts.
Two years into the contract, the seller informed me that she needed to move and intended to exercise the contract. To that end, I sold my residence and prepared to purchase her property. She delayed for over a year, during which point the value of our houses skyrocketed. I did not mind being out of the market, because I had contracted with her for a fixed price for her house. It is worth noting, incidentally, that the seller was ultimately correct. Silicon Valley residential real estate experienced a substantial downturn — as did the rest of the country — during the Great Recession. Within two years, the value of the house plunged to 30% below our original agreed-upon price.
However, when the time came that she was actually ready to move, the value of the house had soared, and she was pressured by her family and friends to sue me and cancel the transaction. They found an attorney who had been disbarred until the prior month. I received the complaint and began my search for an attorney.
Mistake #1: Overlawyering
My college roommate was a civil engineer and had a mid-term that consisted of one question: design a bridge based upon specific criteria, including expected conditions, topography and traffic. The professor graded the exams as follows: bridge designs that were too weak and failed received an “F”. Bridge designs that were properly executed received an “A”. And bridge designs that were too strong and wasted resources received a “C”.
This was my error, seeking the best possible real estate attorney. Today, the lawyer I selected is the CEO of a prominent local law firm. He was way too much horsepower for my case.
Mistake #2: Avoiding Competition
Generally speaking, lawyers don’t like to compete, and I didn’t force the issue. I didn’t ask two or three or four or more lawyers to compete for my work. I found a great lawyer and engaged him, as do four-fifths of all clients. Michael Rynowecer, CEO of BTI Consulting, the oldest and largest firm that surveys clients, wrote in October, 2024 that 79% of all clients engage law firms without benefit of a competition. No RFPs, no proposals, no pitches…nothing. In fact, my own experience over the past two decades is that it is closer to 83%, about five out of every six clients do not ask their lawyers to compete.
When a lawyer competes for the work, they are forced to share a case assessment and typically a competitive fee estimate. Requiring law firms to compete for your work is the single most effective step you can take to control legal costs.
Mistake #3: Depending Upon the Lawyer to Set Unrealistic Expectations
During our initial consultations, I reviewed the case in depth with my newly-engaged lawyer. The amount in dispute was $400,000. My lawyer was convinced that we would settle for no more than $100,000. He was wrong. The final settlement amount was $140,000.
The lawyer, of course, made no guarantees. The legal profession is one in which lawyers preferred to get paid on effort rather results, and I didn’t mandate the result he implied, nor did I offer a success fee contingent upon his predicted settlement amount, nor did I mandate a penalty should the settlement amount be above his prediction.
Mistake #4: Failing to Set a Fee Limit
During the same consultation, the lawyer stated that the case seemed very straightforward, almost basic, and that his fee should be in the $10,000 to $15,000 range, though he made no guarantees and set no fee cap.
I should have demanded a top end fee cap of $15,000. Ultimately, the fee was $25,000 for my basic, straightforward case, which was adjudicated in a six-hour mediation.
Mistake #5: Who Did I Hire?
When I appeared at the office for the mediation, the lawyer had a first-year associate in tow. We hadn’t agreed upon an additional attorney — in fact, we hadn’t even discussed it. Why would we need another attorney for this basic, straightforward case? And in point of fact, we didn’t need another attorney, but we were stuck in the mediation at that point, and my assumption was that as long as we stuck within the $10k to $15k parameters, I could live with it.
It should have bothered me. Everyone knows that you don’t pay for first-year associates, or even second-year associates in many cases. They simply don’t know anything, and certainly not enough to justify stiff fees. When I asked the lawyer why he brought her along, he lamely said “well, she needs to hear this in case we need to perform research.” Really? Research is necessary for a case this straightforward?
Mistake #6: Lawyers are Bad at Math
Lawyers are bad at math, at least compared to someone like me with a Finance degree, and who spent nearly two decades in the accounting business. When I received the bill for their services, I noticed that the first-year associate’s billing rate was identical to that of the senior partner whom I had hired. When I objected, he excused his firm’s administrative error and resubmitted the invoice. I noted that they somehow managed to get his rate correct.
Mistake #7: Unnecessary Work
My lawyer suggested two unnecessary matters which would have sent the legal fees skyrocketing. First, early on in the mediation, he was assured by the mediator that we had substantially all of the facts on our side. My lawyer wanted to go to trial (of course), which would quintuple the fee. I pointed out the fact that, no matter the facts of the case, the opposing side was led by a senior citizen…and lots of senior citizens sit on juries, making the verdict far from a slam dunk in our case. So I avoided that mistake.
The second potential mistake came at the end of the arbitration. We agreed upon a new sales price for the property, and my lawyer exulted “Great! Now we can get the (first-year associate) started on drafting a new real estate contract!” I responded, “Why wouldn’t we just use the standard California residential real estate contract?” He looked nonplussed and said “Oh, well sure, if you want to. She might be able to draft a better contract, though.”
Really? California’s six-page residential real estate contract had been modified over hundreds of trials and mediations during the prior half-century. And this first-year associate was going to draft a better contract? Ah…no. No thanks. I’ll pass on that suggestion.
Lawyers generally err on the side of generating more work for their firms. More depositions rather than fewer, more drafts rather than fewer, let’s examine more points that aren’t really germane to the case, etc.
These are just seven mistakes that I made or avoided in selecting and working with my attorney. My less-than-satisfactory experience led me to create Client Sciences, an organization dedicated to helping clients optimize their relationships with their law firms. We seek to find the best possible legal alternative for clients, with the highest quality lawyer necessary to the matter, at the most appropriate fee possible.
Give us a call and we can discuss our approach. Try us for one matter to experience what Client Sciences has to offer.
