How to Choose the Right Law Firm for Your Small Business

Unlike large corporations, who have in-house counsel, a small business is confronted by difficult choices when faced with the need for legal counsel - which firm do you hire? Do you look for a big firm or a small firm? In order to assist the small business owner in making these decisions, I have compiled the following list which clarifies some of the advantages and disadvantages of the big and small firms.

Big Firms:

In general, there are four (4) reasons why you may want to hire a big law firm to represent your small business:

1. Resources
   You need sufficient support staff to manage an antitrust matter, a complex merger and acquisition, or a litigation matter with documentary discovery that would fill a large conference room or two.
2. Interdisciplinary Expertise.
   You require the in-depth knowledge of counsel on a broad range of legal services to collaborate on matters requiring expertise spanning several disciplines, such as corporate and securities, mergers and acquisitions, securitization, intellectual property, funds and other pooled investments, bankruptcy and corporate reorganization, bank and commercial lending, public finance, real estate, tax and employee benefits, as well as trusts and estates.
3. Global Presence.
   You need a global network of law offices to provide integrated multi-jurisdictional and cross-jurisdictional legal services.
4. Big Firm Stature.
   You need the prestige of a big firm's name on an opinion letter to support the actions your company intends to take.

Small Firms:

Conversely, if your needs do not fit into one of these categories, your money would probably be better-spent on a small law firm specializing in your business's needs. The reasons for specifically choosing a small law firm are several:

1. Client Satisfaction is Critical to a Small Firm's Survival.
   Since, by definition, small law firms lack the "big name" distinction of a large law firm, the distinguishing characteristic for any small firm is its reputation for excellence in its particular areas of practice, and the personal attention the firm offers each client. Since each attorney's performance is judged on client satisfaction and results obtained rather than on the attorneys' annual billable hours that are charged to the firm's clients (including you), the small firms have a vested interest in assuring that the resolution of your litigation or other assignment is as expeditious and inexpensive as possible.
2. Seeing the "Big Picture"
   The day-to-day handling of your case is carried out by the partner in charge of the case, and therefore will always remain mindful and positioned to recognize the most cost-effective manner to achieve your goals.
3. No Duplication of Work Effort
   You should never be billed for meetings between the partners and associates on your case, and will rarely, if ever, be billed for more than one attorney appearing at a Court conference or deposition. Why should you pay to assure that the "head" knows what each "hand" is doing, or pay for two or more attorneys appearing when often only one of the attorneys will be allowed to speak on your behalf?
4. Learning on your Nickel
   Since your case is being handled directly by the partner in charge, you will only pay your lawyer to complete the requested task; you will not incur the additional time and expense for educating a new attorney.

In sum, selecting the right law firm is not always simple; one size does not fit all. The key is to choose wisely based upon the factors that are set forth above. It will save you a lot of time and aggravation (and probably money) in both the short and long term.

The Dangers of E-Mail and Other Traps to Avoid When Consummating a Business Deal

Over the last few years, e-mail has largely replaced "snail mail" as the standard means of communication, as its speed and ease of use are vastly superior (not to mention more cost-effective and environmentally friendly). This revolution is not without its drawbacks, however.

First, almost everyone I know has, at one time or another, mistakenly hit the wrong button, and sent a sensitive e-mail to the wrong person.

Second, as New York's courts have increasingly made clear, many small business owners remain unaware that their seemingly innocuous e-mails can have far-reaching legal consequences for their businesses. Indeed, New York's highest court has ruled that a foreign business can be sued in New York if its e-mails seek to engage in a "sustained and substantial transaction of business" in the State. And that remains true even if the business never entered New York State.

In a parallel vein, although many states still require a "subscribed writing" before a contract may be deemed valid, it bears mention that the legislatures and courts are recognizing with increasing frequency the validity of electronic documents, i.e., those that do not bear a handwritten signature (See, e.g., the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §§7001-7006, and the New York State Electronic Signatures and Records Act). That being said, here are three (3) more traps to avoid when negotiating a business deal:

1. Never Do Business on a "Handshake"
   Ironically, the handshake deal did not begin with a show of trust in the other side to a deal; it originated from each party trying to assure the other that neither was carrying a weapon. The same holds true today: If the other side is not willing to reduce a fair agreement to writing, you should not be willing to do business with them. Simply put, it is unreasonable to ask you to risk the financial security of your family and employees on a relative stranger's "good will." Moreover, notwithstanding the courts' growing recognition of unsigned electronic documents, oral contracts are still not binding under many circumstances and in many jurisdictions. Consequently, absent a signed agreement, you may be left without any recourse if a dispute arises later about the other side's performance (or failure to perform) under the agreement. Stated plainly, there is little to no justification for failing to assure that you have a signed agreement.
2. Remember That Silence Does Not Equal Assent
   Although this should be self-evident, unless it is established in concrete terms what the other side is willing to do for you in return for your services or payment, you cannot have a "meeting of the minds" between the parties. And without a meeting of the minds, there is no agreement.
3. A Well-Detailed Agreement Will Save You Both Time and Money
   A detailed agreement that "dots each 'I'" and "crosses each 'T'" may prove somewhat tedious, and will cost you a modest sum of money in the short term. But the better-crafted agreement which specifies each party's obligations will not only afford greater protection for your assets and reduce your potential liabilities, it will diminish, if not eliminate, uncertainty and misunderstandings between the parties, and therefore, help prevent litigation, which almost certainly would prove far more costly.

Caveat Venditor: Why a Retailer Sells Goods at His Own Peril

Many small business owners that I've encountered are surprised to learn that under New York law, anyone in a product's chain of distribution can be held liable for injury that results from the foreseeable use of the product. This law includes a retailer, who may have just put that product on his shelf without ever opening the box, and a distributor, who merely transported the product from one destination to the other. Under this scenario, neither the retailer nor the distributor was actively at fault for the product's defect or the plaintiff's accident - and they can still be held liable. Does that sound scary from the retailer or distributor's perspective? It sure is.

The Plaintiff's Burden of Proof in a Products Liability Action

In very basic terms, in order to prevail in a products liability action, a plaintiff needs to prove two things: first, that the product is defective, i.e., the product is so likely to be harmful to persons or property that a reasonable person who had actual knowledge of its potential for producing injury would conclude that it should not have been marketed in that condition, and, second, that the defect was a substantial factor in causing plaintiff's injuries.

The plaintiff can meet this burden of proof by demonstrating one of the following: (1) this specific product was defectively manufactured; (2) the product was defectively designed; or, (3) the safety warnings accompanying the product were inadequate.

At first blush, this law seems particularly tough on middlemen like the retailer and distributor, which presumably have little to no input in either the manufacture or design of the product, or the warnings that are placed on the product. However, it bears mention that these entities reap the financial rewards from selling the product. Consequently, the courts have opined that in the interests of assuring that a plaintiff with a legitimate defective products claim has a viable and readily available party from whom he or she can be compensated (as opposed to a foreign manufacturer with no connection to the plaintiff or place of occurrence), it is fair to hold the middlemen liable for the product's failures.

This law does not leave retailers or distributors without recourse; to the contrary, they are still entitled to seek indemnity and/or contribution from the responsible party (generally, the manufacturer). On the other hand, clearing the technical and procedural hurdles necessary to get indemnity from the manufacturer is often far from simple, particularly where the manufacturer is foreign.

Assumption #1: The manufacturer has the requisite minimum contacts with the forum of the claim. In order to obtain personal jurisdiction over the foreign manufacturer, you must demonstrate that the manufacturer either transacts business or has some other tangible nexus with the forum state (see, e.g., New York Civil Practice Law and Rules §302).

Assumption #2: The manufacturer's host country is a signatory to the Hague Convention's Service of Process Rules. If Assumption #1 can be satisfied (which is uncertain at best), you will still need to assure that your legal papers are personally served on the manufacturer. This in turn requires that the manufacturer is not only readily located, but can be served under the Hague Convention's rules.

Assumption #3: The manufacturer is a viable entity with collectible assets. It goes without saying that a paper judgment against a defunct corporation is utterly worthless.

So how can a domestic retailer or distributor protect itself against products liability claims? Here are a few suggestions:

3 Easy Steps to Protect Your Retail Business Against Defective Products Claims

Step #1: Make sure that those entities above you in the chain of distribution carry adequate products liability insurance from a domestic, well-reputed and established insurer that specifically names your company as an additional insured on the policy. Do not rely on the manufacturer's claim that you are named on the policy; get confirmation directly from the insurer (I have seen instances where the declaration sheet provided by the other party to the agreement was a complete fabrication).

Step #2: Make sure that you have an agreement that indemnifies you against any claim of a product defect that is not of your own doing. Stated otherwise, if you are a retailer or distributor, you should be indemnified against any claims of manufacturing or design defect and/or inadequate warnings.

Step #3: Try to assure that those companies directly above you in the chain of distribution have a domestic presence, such as an office or agent for service of process.

While following these rules may cost some time and money in the short run, these safeguards are indispensable, for they may ultimately save your company from needless exposure to financial ruin.

Choosing the Right Lawyer - Do Not Become a "Cash Cow"

Last year, Donald Trump has sued his former attorneys for legal malpractice, and claims that the firm performed unnecessary work to generate higher fees. In particular, Mr. Trump maintains that the firm should have advised against pursuing the one of the claims in the underlying contract case because it was foreseeable the legal costs incurred would far outstrip any recovery.

While Mr. Trump's downplaying of his attorneys' role in securing the successful result ("We won the case because I'm a great witness," he said) should certainly be taken with a large grain of salt, this case does bring to light a serious issue that small businesses should strongly consider when choosing and working with their attorneys - streamlining the litigation process to maximize results at a reasonable cost. Practically, that means having frank discussions about the viability and likelihood of success of the potential claims, and weeding out those claims that are unlikely to warrant the time and expense necessary to pursue them.

Indeed, a number of years ago I defended a doctor in an action to collect legal fees arising out of a trusts and estate matter. He contended that this large law firm billed him with reckless abandon, and never took the time to assess whether it was worthwhile to pursue certain claims. For example, he correctly pointed out that this firm billed him roughly $5,000 to collect scuba equipment whose total value was maybe $2,500.

Bottom line: When selecting a lawyer, make sure the lawyer sets out clearly - at the outset - what your anticipated outcome is, and the costs that are likely to accrue in getting there. It is also a good idea to periodically revisit this conversation with your lawyer throughout the course of the case, as different facts and circumstances may arise that alter this initial picture. While this does not guarantee the results that you may want, it will certainly help prevent your getting an unexpected result - or legal bill.

Choosing the Right Law Firm for Your Small Business

In general, there are four (4) reasons why you may want to hire a big law firm to represent your small business: (1) Resources. You need sufficient support staff to manage an antitrust matter, a complex merger and acquisition, or a litigation matter with documentary discovery that would fill a large conference room or two. (2) Interdisciplinary Expertise. You require the in-depth knowledge of counsel on a broad range of legal services to collaborate on matters requiring expertise spanning several disciplines, such as corporate and securities, mergers and acquisitions, securitization, intellectual property, funds and other pooled investments, bankruptcy and corporate reorganization, bank and commercial lending, public finance, real estate, tax and employee benefits, as well as trusts and estates.(3) Global Presence. You need a global network of law offices to provide integrated multi-jurisdictional and cross-jurisdictional legal services. (4) Big Firm Stature. You need the prestige of a big firm's name on an opinion letter to support the actions your company intends to take.

Conversely, if your needs do not fit into one of these categories, your money would probably be better-spent on a small law firm specializing in your business's needs. The reasons for specifically choosing a small law firm are several:

(1) Client Satisfaction is Critical to a Small Firm's Survival. Since, by definition, small law firms lack the "big name" distinction of a large law firm, the distinguishing characteristic for any small firm is its reputation for excellence in its particular areas of practice, and the personal attention the firm offers each client. Since each attorney's performance is judged on client satisfaction and results obtained rather than on the attorneys' annual billable hours that are charged to the firm's clients (including you), the small firms have a vested interest in assuring that the resolution of your litigation or other assignment is as expeditious and inexpensive as possible. (2) Seeing the "Big Picture." The day-to-day handling of your case is carried out by the partner in charge of the case, and therefore will always remain mindful and positioned to recognize the most cost-effective manner to achieve your goals. (3) No Duplication of Work Effort.You will never be billed for meetings between the partners and associates on your case, will rarely, if ever, be billed for more than one attorney appearing at a Court conference or deposition. Why should you pay to assure that the "head" knows what each "hand" is doing, or pay for two or more attorneys appearing when often only one of the attorneys will be allowed to speak on your behalf? (4) Learning on your Nickel.Since your case is being handled directly by the partner in charge, you will only pay your lawyer to complete the requested task; you will not incur the additional time and expense for educating a new attorney.

Independent Contractor or Employee? Employer Beware

At the end of last December, FedEx was given a tax bill for $319 million following the Internal Revenue Service's ruling that the company had misclassified about 13,000 drivers as independent contractors when, according to the IRS, they really were employees.

It appears that the dispute, in essence, centers around FedEx's claim that the drivers were contractors who operate their delivery routes as independent businesses, even though the drivers use FedEx equipment, wear FedEx uniforms and work under explicit FedEx rules.

This case will be closely watched, because it will have far-reaching ramifications for employers and employees alike. Briefly, from the employers' perspective, the difference between classifying a worker as an independent contractor, as opposed to an employee, is as follows: with regard to the independent contractor, the employer is not only exempt from paying workers compensation or federal unemployment and disability taxes, it is released from matching 7.65% Social Security and Medicare taxes; moreover, the employer is saved the burden and cost of income-tax withholding.

Independent contractors don't qualify under minimum-wage laws and have no government rights to a safe work environment. Finally, and perhaps most importantly, independent contractors do not qualify for employee benefits.

For employers who are caught misclassifying, they can not only be subject to monetary penalties, they can also be criminally charged with evasion of payments, filing of false tax returns and conspiracy.

In order to help clarify their thinking as to whether a worker is more properly classified as an employee or as an independent contractor, the IRS has published Form SS-8, which sets forth a multi-factorial test.

There is also new legislation on the horizonThe Independent Contractor Proper Classification Act.

In short, employer beware.