Over-Lawyering: What It Is And What It Means To Small Businesses

Over-lawyering may not necessarily be a term that's top of mind to small business owners, but it's something they are innately aware of when it comes to lawyers. It's a key reason many small business owners don't engage lawyers, don't think they have any legal and risk issues and end up in situations or dealing with issues that could have been completely avoided. 

Here's what over-lawyering is a nut shell: the excessive or unnecessary use of legal services or resources, typically involving an excessive number of lawyers, staff or legal resources for a particular matter or situation. 

SO HOW DOES THIS IMPACT SMALL BUSINESS?

1. Excessive Legal Costs: Over-lawyering can result in significantly higher legal bills than necessary. This occurs when lawyers bill for unnecessary tasks, conduct excessive research, or redline/markup agreements excessively simply for the sake of doing so without making any material changes or suggestions. Not only does none of this result in any benefit to the client, it's to the clients detriment as it increases the bill for services. 
   
   
2. Excessive Staff Use: Here's a common scenario in firms of all sizes; paralegal drafts something, junior attorney reviews and makes notes, paralegal then makes adjustments, senior attorney reviews, paralegal then sends it out to the client or appropriate party. This process happens for routine things such as a simple letter, or in some cases an email response. The client then gets billed for each one of those persons' time; think about how quickly a bill will add up all because 3-4 people need to look at and assist on the most simple tasks.   
   
   
3. Complexity: Not many people are better than lawyers than taking a situation and making it unnecessarily complex. This open the door for a few options to over-lawyer. There's the time it will take to run through and discuss various complicated legal strategies or options, and then there's the execution or delivery of everything involved in implementing these unnecessary plans. 
   
   
4. Litigation Strategy: this would be doing things like filing excessive motions, engaging in a prolonged discovery process or pursuing numerous legal actions where there are options for a more streamlined approach that's more effective. 
   
   
5. Slowed Decision Making: when a lawyer takes their time, or presents numerous, unnecessary options it slows down decision making for businesses. This can be extremely problematic, companies often want to be able to move quickly, especially small businesses because it's an advantage they have that larger companies don't. It leads to missed opportunities and a lack of response to market changes. 

HOW DO YOU LMIIT OR AVOID OVER-LAWYERING? 

1. Consider using legal services providers or lawyers who specialize in serving small businesses, have business experience themselves (not just theoretical experience they read about) and understand the unique needs and constraints on small businesses. 
   
   
2. Make sure you have clear lines of communication with your lawyer. You want them to be as transparent about price, services and how they will provide you with counsel. Ensure that your lawyer understands your business goals and strategy. 
   
   
3. Set a budget or get a fixed rate for your legal services. This way there at least won't be any surprise costs coming your way. If your lawyer can't accomplish what they claimed on the budget that was set, that's a clear signal to look for another lawyer who can better accommodate your needs. 
   
   
4. Be proactive and make sure your lawyer is advising you how to limit potential issues or risks before they arise. It's going to be significantly more expensive in time and money to address a situation once it's a full on dispute or a lawsuit. And at that point the lawyer you go to for help will be in a situation to take advantage of the bad spot your business is in. 

Here's a real life example: I remember a particular situation where my client was selling a small business, and the lawyer on the other side needed to review the purchase agreement in order to get the deal finalized. This is standard practice and the other party should have had a lawyer reviewing information and advising them accordingly. It was a 9 page sale agreement; this wasn't a particularly complex deal and didn't need to be overly-complicated. The lawyer for the buyer made more than 150 redline edits, or suggestions, that they wanted changed in the agreement. Not a single one of them was a substantive change, made any changes to the deal, or changed any material portion of the agreement. Every single one of them was a change simply to allow the other lawyer to look like they were doing something, and rewrite language into antiquated legalese that served to say the same thing the agreement originally said, only in a more convoluted and complicated way. My client and I took one look at it, told the buyer we weren't going through it line by line, that there were no substantive or material changes suggested that required a meeting or conversation, and if they wanted to move forward they needed to sign the original version we sent over. It must have taken quite a few hours for the buyer's attorney to go through and make the redline changes, and all that time was being charged to the buyer, who wasn't getting anything of value out of it. It almost cost the buyer the deal and opportunity to make the purchase; for nothing more than over-lawyering and a lawyer looking to pad billable hours. 

I have seen over-lawyering happen repeatedly; I'd say it's the standard practice across the legal field, with solo practitioners, small firms and large firms - it's going on across the board. Over-lawyering can be costly and counterproductive, and more importantly it doesn't result in any benefit to the businesses trying to access legal services and protect themselves. It's important to make sure your legal services align with your needs and objectives, strike the right balance between being cost-effective and beneficial and that there is communication between you and your legal service provider. Many of the unnecessary costs and complexities that lawyers throw at clients can be avoided. 

Have questions about how to avoid being over-lawyered, or looking for small business legal solutions that are done differently? Contact us for a free consultation.