Archive for January, 2011

This Post is 100% Home-Grown!

Sunday, January 30th, 2011

It’s the weekend and time for me to get caught up on my reading of the various legal publications that came throughout the week.  And so it was with great interest that I read an article in the January 2011 issue of the American Bar Association Journal entitled “Ghostwriters”.  It details how some lawyers in the U.S. are using ghostwriters to do their blog posts – either in whole or in part.  One lawyer talks about how he uses ghostwriters to do the main work for him but he at least gives each post a quick review before it gets published to his blog.  Others, it would appear, are literally outsourcing their blogging activities.

Maybe it’s just me, but I blog about topics of interest to my practice area – and thus to my clients.  I have to keep on top of recent developments in the law so I have to spend that time anyways.  I think maybe the difference is the number of bloggers who feel that they “have to” have posts on something every day.  I’ve seen some other lawyers’ blogs and you will find posts commenting on anything and everything that deals with the legal system.  Yes, Mayor Hazel McCallion was lambasted on the front page of The Toronto Star yesterday by the lawyer representing the commission of inquiry into her alleged conflicts of interest.  But that has nothing to do with my blog or with some of my compatriots’ blogs, yet they will comment on it.  I have chosen not to do so.  The end result is that I am not as “swamped” to keep posting every day with the result that you can be assured that my posts will remain 100% natural - for better or for worse.

But, then again, how would you REALLY know if this was something I wrote and hadn’t been outsourced?  As Arsenio Hall used to say, “something to make you think HMMMMM”.

CALC

Litigation – It Can be Quite Costly

Wednesday, January 26th, 2011

I have a piece of litigation that has gone on for more than four years.  At its height, there were eight defendants.  Two defendants did not defend and I obtained default judgments against them.  One of the two then went bankrupt.  The other did not go bankrupt but when we did a judgment debtor examination it became very clear that this fellow had absolutely no money, a lineup of creditors going around the block and the chances that my client would ever see a dime were absolute zero.  Then, one by one over the next four years, another five defendants either went into receivership or into bankruptcy or, in one case, came so close that my client accepted an absolutely paltry amount to settle because it was better to get that amount than nothing.

Well, yesterday the last shoe finally dropped with the bankruptcy of the only remaining defendant.

In the meantime, over the past four years my client has been lead on a merry chase against these eight defendants.  And what does my client have to show for his efforts – four years worth of legal bills.  I suppose that it is some small consolation that the client will be able to write off the legal fees and the bad debts on his business’ tax returns, but it’s only a small consolation.

I am not going to say that this is a travesty and that the bankruptcy laws and the civil litigation procedures should be immediately revamped, etc., etc.  That is not only a knee-jerk reaction but, more importantly, it’s an unfair assessment when you take into account all of the competing business and legal interests that intersect in situations like this.  The silver lining, I suppose, in all of this is the fact that the first defendant went bankrupt early in the proceeding and this gave my client the opportunity to decide whether he wanted to take a gamble that the others wouldn’t go bankrupt as well.  So, if the purpose of this post isn’t to rail against the system, then it’s purpose has to be to serve as a warning that litigation shouldn’t be taken too lightly because if the defendants go bankrupt, then a lot of good money can be thrown after bad.  However, this doesn’t only apply to defendants because the plaintiffs can go bankrupt also.  I have another matter where it looks like the plaintiff is going to go bankrupt any day now.  If that happens, it is highly unlikely that the trustee-in-bankruptcy would want to continue with the lawsuit.  The result is that my client will have to “eat” its costs of defending what was a bogus lawsuit for the last six months as the plaintiff will not be around to pay even a portion of my client’s costs.

Something to think about.

CALC

Why Do Lawyers Want Retainers?

Tuesday, January 25th, 2011

Maybe it’s a sign of the economic times.  Maybe it’s a function of the way legal services are provided.  Maybe it’s coincidental.  Maybe it’s all of these factors and more, but I’ve been speaking with colleagues and it’s very clear that lawyers are having a hard time making money.  I expect that it is the same for accountants, business consultants and other non-health professionals.

I’m not expecting people to start breaking out the violins but it is an interesting situation.  Suppose I go to my corner store and ask to buy a newspaper.  If I don’t pay, I don’t get the newspaper.  If I stand there and just start to read the paper I will be quickly told (whether politely or not) that the store is not a library and if I’m not going to pay I should move on.  I’m not allowed to get the information from the newspaper for free and then put it back on the display rack when I am finished reading the paper.  And yet, that is what can happen to lawyers and other professionals all the time.

I have had clients come to me and ask me to do injunctions.  My standard answer now is that I want a $25,000 retainer up front or I will not do anything.  Pretty harsh?  Possibly.  But it comes as a result of being burned by clients in the past.  If you have a significant motion, such as for an injunction or for summary judgment, fees can easily go up to $25,000 because this is the equivalent of marching into a trial.  I once saw a speaker pull out a bell curve and he called it something like the “litigation curve”.  It started at the one end with “Do I really need a lawyer?” at the start of the lawsuit and went up the curve with the realization that legal representation was necessary up to its high point which coincided with the time of the trial when the lawyer was definitely necessary and won the case.  It then proceeded down with comments like “yeah, he did a pretty good job” all the way down to the end a fair time after the trial with the comment “yes, he won, but any monkey could have won that case.”  The diagram was not only amusing, but also telling.

As a lawyer, I have only two commodities to “sell” – time and expertise.  If I meet with you, you get my time.  What happens if you do not pay my bill?  I can’t get my time back.  If I prepare a document for you or represent you in a lawsuit and you do not pay my bill, again, I cannot take back the document or ask the judge to reverse any findings in your favour.  At that point all I can do is take even more of my time and sue you to pay my bill.  So, to avoid not only facing the prospect of working for nothing but also to spend extra time to sue, I will ask for a retainer. 

Retainers also serve another purpose – to determine if the client is truly serious about the lawsuit.  I have now been practising law for almost 17 years and over that time I have had many people come in and say that they either have great plans for their business and need all sorts of work done for their companies or that they have been truly wronged and that the wrong ought to be fixed.  So I ask for a retainer.   With the exception of major motions, my retainers are much more reasonable in amount.  However, they also serve as an indicator of whether this person is truly serious about the legal work that he/she wants or if someone is just looking for free advice or significantly reduced fees.  If you want me to work for free, then ask me and I will decide yes or no.  However, if you say that you will pay my full fees and then don’t pay or later confess that you cannot pay, then I have effectively worked for free but I have not done so voluntarily.

The reality is that I have to pay the rent on my office space, pay my law clerk’s salary, pay all other expenses and then hopefully make money for me to live on after the expenses are paid.  I’m not any employee who gets paid so long as the company is operating.  I’m not a health-care professional who gets paid by OHIP or some benefits program whether or not the patient is happy with my services.  If I am not paid, I can suffer significant, and immediate, consequences.

Happily, unlike some of my colleagues, I have been lucky in that I have not suffered any significant losses from clients not paying me.  Why?  Because I ask for retainers.  So if you come to me and I ask you for a retainer, or if you go to another lawyer and he/she asks you for a retainer, it is nothing personal and it is not a reflection on whether your legal matter is seen as meritorious or not.  For a lawyer, it’s just good business.

Something to think about.

CALC

Sharing Real Estate Commissions

Wednesday, January 5th, 2011

First of all, a belated Happy New Year!

Some of my clients are real estate agents and, for them, I wanted to bring a recent decision of the Ontario Court of Appeal to their attention.  In Forest Hill, a vendor retained two real estate agents to act jointly in the sale of the home.  Two agreements were signed.  The first provided that for the sale of the home the commission would be split.  No problems there as the commissions from that sale were shared.  However, the intention was to hold at least one “open house”.  A second agreement was signed and this agreement provided that, for example, if someone came to the open house and subsequently used either real estate brokerage to lease or buy another property, then there would also be a sharing of the commission.

Not surprisingly, this situation occurred and a lady who went to the open house ended up buying two other properties and the other brokerage claimed to be entitled to a share of the commissions for those house sales.  The second agreement provided that anyone who was new who came to the attention of either sales agent as a result of the open house “will be shared”.  The Court of Appeal, as with the trial judge below, had no difficulty in finding that “will be shared” was unambiguous and meant a 50-50 split.  The fact that the commissions on the sale of the original property were to be split on a 70-30 basis did not mean that “shared” should somehow be consistent with the 70-30 arrangement that existed for the original property.

A few things come from this decision.  The first is that it must be remembered that if you do 2 or more agreements at the same time, each and every contract should be viewed as a completely free-standing agreement.  If you want them to be joined and have shared definitions or terms (so items mean the same in both / all contracts) then either there should be express cross-references between the contracts or, even better, the terms should be defined in each and every contract.  The second item to take from this decision is the old addage of “thou shalt not assume” (because, as my grandmother loved to say, when we assume we make an ASS out of U and ME).  The clear assumption on the one party was that a 70-30 split spelled out in the first agreement would be utilized for the second agreement.  But if we bear in mind the first item to take from the case, that each contract can (and in most cases should) be looked at in isolation, then this assumption immediately fails and the problems result – and at least one party can look like an ass, if not both parties or, even worse, will have to pay money for legal fees and judgments.  The third item is that, while only mentioned in passing, the second agreement did not provide a deadline by which commissions should be paid.  The case does not say how long after the open house the new contact purchased the two houses, but it was clearly within a “reasonable time period” to permit the sharing provision to be applicable.  What if the houses were purchased a year later?  Two years later?  How long is a “reasonable time period”?  That will depend on the facts and, sometimes, the judge’s view of what is reasonable.  Do you want to leave this to chance to even any extent?  So, if you are going to get into agreements such as this, or for that matter any agreement, you may want to put a definite deadline by which it ends.  You can always include a renewal mechanism - such as automatic renewals unless one party does something by a specific time limit – but if you fail to put in a termination deadline then either the contract could be found to be in existence for a “reasonable time” or else you might be required to give “reasonable notice” before you can terminate the contract.

Something to think about.

CALC