It is every business person’s nightmare: a tangled web of litigation that gets more snarled the more they try to get out. But in most cases, involving the legal department from all stages of the process could have avoided a worst-case scenario and saved both valuable time and money.
Litigation — very few words evoke the same kind fear in the corporate world. Unfortunately, legal snafus are bound to happen. How to deal with them best? Avoid them in the first place.
Although legal department businesses exist in virtually all major corporations, they are often brought on as a hurried afterthought. Wrong approach, the experts say. Involving legal from the get-go does not only save time and money but it also prevents trivial mistakes from snowballing into catastrophes.
But the precautionary method is a team effort, requiring the legwork from both business and legal.
“If counsel sits around waiting for the problems to come, that lawyer is already too late,” remarked Scott D. Chaplin, former general counsel, secretary and senior vice president at Stanley Associates, Inc.
According to Chaplin, there is no justification not to be proactive, especially if the counsel holds an in-house position.
“As an in-house lawyer, when you have the privilege of sitting with your client every day, there is no excuse for not being able to delivery proactive legal services,” he said. “That said, it requires work on both sides of the aisle. For the client, it means being willing to get your counsel engaged at the strategy end of business decisions. For the lawyer, it means being able to demonstrate that you can deliver strategic business value and, from a practical perspective, it means getting out of your office and seeking out the work.”
The lawyer should take the first step by finding out when the business strategy meetings are taking place and getting in on the action, Chaplin advised.
“Keep in mind, however, that it’s not just about being present; it’s all about demonstrating value,” he said. “If the lawyer simply sits in the meeting and listens, without showing some value, he/she should not expect to get invited back. Counsel needs to understand the business strategy, the project/program goals, and the relevant business hurdles and then he/she is in a position to provide the type of proactive legal services that will translate to the reduction of risk and the increase of profitability. Yes, lawyers can and should have a positive impact on the bottom line.”
Proactive legal advice like this is not something that exists in case law or regulations — it is the translation of traditional legal terms a client may not want to hear into strategic business terms they love to hear, Chaplin said.
At times, it could be as easy as avoiding traditional lawyer fare like “you can’t do that” and instead say, “I can provide a safer and more profitable way of doing that.”
“It is the art of finding business solutions to potential legal problems, as opposed to legal solutions to existing business problems,” Chaplin said. “And, the answers are not always the same. This type of advice has to be approached on a case by case basis. Sometimes, the value is in taking steps to avoid litigation; sometimes, the value is in a new or enhanced compliance program. Sometimes, the value is in creative contracting or staffing approaches.”
The good news is, the measure of success is easy, Chaplin said.
“If your business partners are asking you back into the strategy room and start seeking you out at the start of a project, you know you are providing the type of proactive legal services that will have a positive impact on their bottom line,” he said. “If your business partners are only seeking you out when the fire is already burning, you have not proven that you can provide effective, proactive business solutions [through] your role as counsel.”
Business processes without legal involved is like taking a trip without a map, said Thomas E. McCabe, general counsel and secretary at Alion Science and Technology.
“If you don’t involve legal from the start, it’s kind of like you’re taking a trip and you have a GPS in your car, but you don’t turn it on until you’ve been in the car for five hours,” McCabe said. “Next thing you know, you’re trying to go to New York City and you find yourself in West Virginia.”
With more than 25 years of legal and business experience, McCabe has seen his fair share of legal snafus. Sometimes, agreements will go back and forth, with the inclusion of clauses that are “completely unacceptable,” something that could have been fixed had it been discovered early by a counsel, he said.
Lawyers can also help clarify business processes, even apart from the legal terms, he added. As lawyers are trained to think precisely, they can at times help the business people to really clarify what they mean, even from a business perspective.
“Myself, in particular, I’ve been president of several companies as well as being a lawyer,” McCabe said. “I try to bring to the table the business experience as well, and can sometimes make very welcome suggestions just as far as how to structure the business relationships that may even be beyond pure legal advice.”
Being involved early on also has its advantage in catching mistakes before they escalate into unmanageable blunders, McCabe stressed.
“[At Alion], we try to have what we call a preemptive philosophy, meaning we try to involve ourselves in the process very early—like the old adage ‘a stitch in time saves nine,’” he said. “We’ll go to the business development meetings and contract review meetings at very early stages of the business deliberations. By doing that, we can just point out with a comment or two at the meeting some things that can be changed very easily right up front, and end up saving hours of legal time as well as hours of business time a month later when things are more cast in stone.”
McCabe said his company has a system where “things are pretty systematic in terms of the discipline that the business applies to itself with many stages of proposal review,” enabling the legal department to get involved early in a very user-friendly way and help the executives to form their proposal strategy and execution strategy.
“It’s a two-way street; it’s important for the business people to involve the lawyers early,” he said. “Secondly, it’s important for the lawyers to put themselves in the shoes of the business people so that their advice is understandable. There’s one way I would speak to a lawyer and another way I’d speak to a business person — you have to put it in a language the person understands.”
“Exactly! The lawyer has to put himself or herself in the shoes of the business person and give them practical concrete and usable advice,” McCabe said.