Would you hire a vendor that does not properly regard conflicts of interest? Fails to abide by basic business rules and laws? Loses you in the shuffle of other and larger clients? Violates its own internal procedures?
Of course not. Yet business owners do this every day when engaging law firms. So please accept this business advice: (1) treat your selection of a law firm like any other key vendor. This includes hopping on to Google to learn what will certainly not be shared with you. (2) “Hiring IBM” is not a good excuse in 2024 especially when advances in technology place all firms on similar footing for so many issues and cases.
I hope these case summaries reiterate this message.
So Mrs. Lincoln, how was the play?
In Gurney-Goldman v. Goldman, a Delaware court faced issues after four siblings inherited a real estate empire in New York City. There were “literally hundreds of entities.” Of course, the siblings hired one of the largest New York law firms to create the legal structure for their business. So why did problems arise? (A) Simple entity formalities and aspects of corporate law were not observed in an embarrassing number of instances; (B) Some of the LLCs did not have written operating agreements including the most important one at issue; (C) no documents established the transfer of interest in key entities from the widow of the patriarch to the siblings; and (D) the management structure was not formalized.
To sum this up in one word: OY!
No Supervision + Inexperience = Giant Screw-Up
In Scion Breckenridge Managing Partner, LLC v. ASB Allegiance Real Estate Fund, ASB Capital and Scion Group formed five joint ventures in 2007-08. Scion Group sponsored the investments while ASB served as the investment promoter by providing 99% of the capital. During the formation of their third joint venture agreement, the junior associate tasked with drafting the agreement misplaced key terms and the senior partner did not recall whether she read the drafts of the agreements before they were circulated. As a result, Scion Group would receive incentive compensation even if the joint ventures lost money. The fourth and fifth agreements contained the same error.
Adding insult to injury, the junior associate “conceded that she did not have the experience to understand the Waterfall provisions at the time and only learned of the mistake” three years later when it was explained to her.
Did I Do That?
In late December last year, a federal judge in Philadelphia ruled two attorneys from a giant law firm–a senior partner and a junior associate–settled a case for a client without the authority to do so. How could such a mistake happen? According to the Judge, the “lawyers admittedly jumped the gun facing a mediation memo deadline … when they did not have the client’s express authority to settle the client’s case…”
Really.
PS: Morgan Spurlock died earlier this year at 53 years old. Cancer killed him. RIP.
David Seidman is the principal and founder of Seidman Law Group, LLC. He serves as outside general counsel for companies, which requires him to consider a diverse range of corporate, dispute resolution and avoidance, contract drafting and negotiation, and other issues. In particular, he has a significant amount of experience in hospitality law by representing third party management companies, owners, and developers.
He can be reached at david@seidmanlawgroup.com or 312-399-7390.
This blog post is not legal advice. Please consult an experienced attorney to assist with your legal issues.
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