Top 10 Rainmaker Best Practices to Win in 2010 – Part 3

In the final installment of her three-part Business of Law guest blog posting at the National Law Review, Deborah Knupp of Akina Corporation details the final four steps to help focus and streamline legal business development.  

This week’s posts are identifying the Top 10 Rainmaker Best Practices, that when focused on with discipline and intention, distinguish you and your firm and help you gain a competitive sales advantage.  Our previous posts Part 1 and Part 2 focused on the first six Rainmaker Best Practices.  Today’s article focuses on the last set of four Best Practices and discusses WHAT works in any market and HOW to implement the best practices to impact your business with increased revenue, increased leverage of time and resources and improved accuracy and predictability in your sales pipeline.

7) Networking and Working a Room

Networking effectiveness has less to do with personality and more to do with readiness.  Simple answers to questions like, “What is my goal or objective for the event?”  “How many people do I want to meet at the event?”  “How might I follow-up after the event if I make a connection?” turn networking situations into productive treasure hunts.  Networking basics include having your Quick Pitch ready, having business cards accessible and managing your time to meet your objectives.  When possible, ask for the attendee list in advance and peruse the day’s headlines (news, sports, current events) to have small talk ready to break the ice.

8) Campaign Thinking

The ethos of Campaign Thinking is any single act of marketing or business development should be leveraged minimally for a 3:1 payback.   3:1 leverage could be turning an article into a speech and a webinar.  3:1 leverage could be turning a single event into a 3-part communication plan: pre-event communication, during the event conversation and post event follow-up communication. 3:1 leverage can also be geography based by utilizing travel as the authentic reason to connect, i.e. one meeting in NYC turns into three meetings in the Northeast Corridor.

9) The 6 Silver Bullets for Closing and Managing the Red Zone

Unfortunately, there is no magic phrase or silver bullet to close business.  There are however, six qualifiers that can be like silver bullets to understand when business should close.  Business will generally close if there is:

1)     A legitimate problem

2)     A good fit solution

3)     A sense of urgency attached to the timeline to make decisions.

4)     Access to the decision makers and their decision-making criteria

5)     Expectations that are in alignment regarding the level of effort it will take to initiate a relationship and work successfully with you

6)     Budget that fits with your fee structure

When your prospect’s interests align with your six qualifiers, business has a way of closing itself.  If you aren’t sure if your prospect’s interests align against a specific qualifier, asking additional Discovery Questions will provide clarity and a sense of what the appropriate next steps might be.

When business does close, it is understandable that when a prospective client gives you a verbal “yes,” it is tempting to celebrate and step back from your selling efforts.  However, managing the Red Zone means that you recognize that when you get the “yes”, the incumbent has gotten the “no,” which can often lead to desperate decisions and measures to retain the client.  Business is not truly closed until work has started.  Therefore, when you receive word that you have been hired you are on the 20-yard line.  You will want to continue to stay connected, step-up communication and set clear definitive next steps as you ready for the actual work.

10) Create SuperFans through Client Experience

Many professionals assume that if they do good work, clients will continue to hire them for more work. However, reality tells us that just doing good work is not enough.  The competitive market tells us that we need to continuously manage the client relationship to inspire client loyalty while simultaneously looking for additional problems to solve for the client. Recognizing that loyalty is usually a result of an accumulation of good experiences rather than one outstanding moment, we can create SuperFans by finding ways to deepen value within the client experience in seven areas of innovation:

1)     Client feedback

2)     Client intake process

3)     Communication and expectation management

4)     Client appreciation

5)     Knowing a client’s business

6)     Non-legal client project participation and facilitation

7)     Alternative fee arrangements

Summary

Whether you are new to business development or a seasoned veteran, the Top 10 Rainmaker Best Practices are designed to give you greater focus, greater control and greater results with more predictability.  When you remember to focus first on building authentic relationships and solving the problems that should be solved, you will have greater joy during the journey and greater impact in the communities in which you serve.

To see Part I of Top 10 Rainmaker Best Practices to Win in 2010 click here.

To see Part II of Top 10 Rainmaker Best Practices to Win in 2010 click here.

COPYRIGHT © 2010 AKINA CORPORATION

About the Author:

Deborah Knupp has worked globally with CEOs, executives, managing partners and attorneys as a coach and business executive for over 20 years. She has helped these leaders align their people systems and business objectives to create cultures based on the principles of accountability, integrity and authentic relationship building. Her work has focused on making the work environment a place where employees “want” to be; where clients “want” to buy; and, where leaders “want” to serve a bigger purpose in their communities and families.www.akina.biz /312-235-0144

Public Defenders as Effective as Private Attorneys

This week’s featured blogger at the National Law Review is Tom Jacobs of Miller-McCune – who discusses a recent study done comparing the relative effectiveness of public defenders and private attorneys in the Cook County criminal court system. The research team led by Richard Hartley of the University of Texas at San Antonio came up with some interesting and somewhat startling results.  Read on:

Perhaps it’s time for someone to come to the defense of public defenders. A newly published look at Chicago-area courts finds that, when you consider the actual outcomes of judicial hearings, these underpaid and underappreciated attorneys do just as well as their private-sector counterparts.

“This study suggests that there is little difference in the quality of legal defense provided to defendants by private attorneys and public defenders,” a research team led by Richard Hartley of the University of Texas at San Antonio writes in the Journal of Criminal Justice. “The type of attorney representing the defendant was not influential on any of the four decision-making points examined here.”

The researchers examined a random sample of 2,850 offenders convicted of felonies in Cook County Circuit Court, “a large Midwestern jurisdiction which is similar to other large, urban jurisdictions in the country.” They compared cases where the defendant was represented by a private attorney or public defender, focusing on four stages of the judicial process:

  • The decision to grant bail. The researchers looked at whether bail was set rather than whether it was made, since the latter is more a function of ability to pay rather than quality of legal representation.
  • Plea-bargaining decisions. This served as a measure of whether an attorney was successful in getting the initial charge reduced.
  • Whether the defendant, once convicted, served jail time.
  • The length of sentence imposed on those convicts who were incarcerated.

“The overall results of this study generally support the idea that there is no difference between private attorneys and public defenders regarding case outcomes,” the researchers conclude. “The type of attorney representing the defendant was not influential on any of the four decision-making points examined here.”

Two important caveats. The researchers did not look at convictions vs. acquittals. And they found that retaining a private attorney is apparently beneficial “for certain offenders and at certain stages” of the process. Specifically, they noted some interestingly varied outcomes when looking at a defendant’s race.

“White defendants are the only defendants who benefit from having a private attorney at the release decision,” they write. Specifically, they found whites with private attorneys are 2.7 times more likely than whites with public defenders to have bail granted.

For people of color, private attorneys may not help in getting bail, but they do facilitate plea bargains. “Black defendants who retain a private attorney are almost two times more likely to have the primary charge reduced than black defendants who are represented by a public defender,” the researchers write.

Why are public defenders so effective at representing their clients? One theory, according to Hartley, involves the “courtroom workgroup” model of justice, where the public defender, prosecutor and judge work together to dispose of cases.  He notes that when the system functions in this way, “public defenders are in better positions than private attorneys to negotiate favorable plea bargains and to mitigate punishment.”

These findings are not likely to put any law firms out of business. But given the negative media coverage of public defenders offices, they do offer some reassurance that the system is reasonably fair, even for those who can’t afford an attorney.

“This study provides evidence that contradicts the idea that you get what you pay for, at least in Cook County,” Hartley and his colleagues conclude. In Chicago courtrooms, “Public defenders are as effective as private attorneys.”

Miller-McCune © 2010 

About the Author:

Tom Jacobs is a veteran journalist with more than 20 years experience at daily newspapers. He has served as a staff writer for The Los Angeles Daily News and the Santa Barbara News-Press. His work has also appeared in The Los Angeles Times, Chicago Tribune and Ventura County Star.

TheEditor@miller-mccune.com / www.miller-mccune.com / 805-899-8620

Top 10 Rainmaker Best Practices to Win in 2010 – Part II

This week’s National Law Review Business of Law Guest Blogger is Deborah Knupp of  Akina Corporation . Deb authored a very helpful three part series on specific steps that attorney’s can take to increase business!  The following is part two: 

This week’s posts are identifying the Top 10 Rainmaker Best Practices, that when focused on with discipline and intention, distinguish you and your firm and help you gain a competitive sales advantage.  Our previous post focused on the first three Rainmaker Best Practices.  Today’s article focuses on the next set of three Best Practices and discusses WHAT works in any market and HOW to implement the best practices to impact your business with increased revenue, increased leverage of time and resources and improved accuracy and predictability in your sales pipeline.

4) Operate by the Platinum Rule through Discovery Questions

At Akina, we often speak about operating out of the Platinum Rule, which says “do unto others as they would be done unto,” or in more basic terms seek to serve another’s interest first, understanding that your own interests will be satisfied over time.  By operating from the Platinum Rule, we take on a posture of service over self-interest.  One of the best ways to evidence the Platinum Rule is through Discovery Questions.  “Discovery” implies that we are interested and care about others.  We often demonstrate more credibility by the types of questions we ask because our questions reveal our character.  Discovery Questions ultimately get others talking about the thing that they know best… themselves.  If new business is the natural outcome of solving problems, then the only way to understand what problems should be solved is to ask.

Getting into the habit of asking good Discovery Questions also enables us to find the most authentic way to stay connected over time.  When we ask good questions, it often becomes obvious how we can be most helpful to someone else, either through our introductions, information (knowledge) or invitations (access to events or opportunities).

Finally, good Discovery Questions help orient us as to where a prospective buyer might be in their decision-making process.  We don’t have to worry about “hard closing” if we’re paying attention to a buyer’s readiness to close.  Discovery Questions give us access and insight into a prospect’s perspective so that we can respond appropriately and adequately.

5) Time-Boxed Follow-up

Which brings us to the next best practice…great rainmakers call out Definitive Next Steps as they go.  Time-boxed follow-up is the opportunity to set next steps in the moment.  It’s saying “I’ll call you next Friday to set up lunch” or “I’ll reach back out to you in six months if we don’t connect again before then” versus leaving next steps open-ended or saying “we should do this again some time.”  Time-boxed follow-up concretely identifies what actions will be taken and by when.  Definitive Next Steps give us the chance to demonstrate that we are our word, that we are responsive, and that we care.

6) Prep/Plan/Strategy

At a high level, effective preparation demonstrates that you honor another’s time by caring enough to have a game plan designed to get to a clear destination. Tactically, effective preparation helps you control the variables you can in an uncertain market place.

At a minimum, they key elements of preparation include identifying: 

  • Your objective for why you want to meet
  • Your distinct key messages to convey interest and value
  • The discovery questions you will ask to deepen understanding and relationships
  • Anticipated scenarios and outcomes with potential definitive next steps, typically from a best case, likely case and worst case scenario

When done well, effective preparation, planning and strategy is done more than 24 hours before a meeting and is not conducted in a parking lot, elevator or car while driving.  Look for the final Rainmaker Best Practices in the following days!

To see Part I of Top 10 Rainmaker Best Practices to Win in 2010 click here.

COPYRIGHT © 2010 AKINA CORPORATION

About the Author:

Deborah Knupp has worked globally with CEOs, executives, managing partners and attorneys as a coach and business executive for over 20 years. She has helped these leaders align their people systems and business objectives to create cultures based on the principles of accountability, integrity and authentic relationship building. Her work has focused on making the work environment a place where employees “want” to be; where clients “want” to buy; and, where leaders “want” to serve a bigger purpose in their communities and families. www.akina.biz /312-235-0144

 

Top 10 Rainmaker Best Practices to Win in 2010 – Part I

This week’s National Law Review Business of Law Guest Blogger is Deborah Knupp of  Akina Corporation . Deb authored a very helpful three part series on specific steps that attorney’s can take to increase business!  Read On: 

This week’s posts will identify the Top 10 Rainmaker Best Practices, that when focused on with discipline and intention, distinguish you and your firm and help you gain a competitive sales advantage.  They focus on WHAT works in any market and HOW to implement the best practices to impact your business with increased revenue, increased leverage of time and resources and improved accuracy and predictability in your sales pipeline.

The Rainmakers Framework

Many people think that successful selling is all about “hard closing” the business.  The perception that you have to morph your personality into a pushy salesperson and pressure people to buy will often evoke fear, discomfort (and nausea).  Consider that the real truth about closing business happens long before the end of the deal.  Closing business is the natural outcome of an authentic relationship and providing a solution to a problem that should be solved… even if you must temporarily suspend self-interest in the short term.

Closing starts with targeting the right relationships in the right situations that might have the right problems for which you have the right solution.  When an authentic relationship exists and all conditions are present to close, business will often close itself.

The First Three Rainmaker Best Practices

So how do you focus with intentionality and discipline in ways that are likely to give you a better return on effort (ROE) and return on investment (ROI) as you pursue new business?

1) Targeting through the Top 40

Consider focusing your attention on your Top 40 Contacts – these include Prospects (people who can buy now or at some point in the future) and Connectors (people who can refer you to prospects – which may also include your clients.)  As you think about your top connectors, peruse your entire network.  Often many of our best connectors get overlooked because our relationships are rooted in personal contexts (i.e., family, neighbors, personal service providers, etc.)  Realize that targeting is about determining “who is most likely to have a problem I can solve through my legal skills” and “who do I know that knows people who have problems that can be solved by legal skills”.

Be intentional, be selective and be aware of how all your networks may be beneficial.

2) Getting in the Door with the Authentic Reason

If you don’t have a good reason to pick up the phone and call, don’t.  Having authentic reasons to connect is one of the keys to creating genuine relationships over time.  Authentic reasons require you to look for ways to connect that are relevant and authentic from the other person’s perspective, not just your own.

Ask yourself – “If I was the person I’m about to call, why would I be interested in hearing from me?”

If you are struggling for an authentic reason, brainstorm against your three “IN’s”:

  • Invitations:  what events do you have access to that your contact would appreciate or value attending?
  • Introductions:  who do you know that your contact may find beneficial to know?
  • Information:  what do you know that your contact would benefit from knowing?

3) Memorable Messaging

If you want to make yourself memorable, you need to be message ready with a “Quick Pitch” and a “What’s New? Message.” A Quick Pitch answers the question, “what do you do?” with a response to the question “what problem do I solve for whom”.  By answering this way you increase the odds of sounding more interesting and compelling yet remain conversationally appropriate.  When you communicate what problems you solve and for whom, you are able to draw people into further conversation and provoke genuine curiosity and interest.  To that end, “quick” is the operative word in “quick pitch”.  You will want to be relatively brief and create interest.  Instead of saying “I am a <noun>” try responding with “I <verb> <target market> <problem solved>”.  People care about what you can do for them or others more than your job title.

The Quick Pitch is useful when meeting people for the first time, however, there are messaging opportunities that happen every day with people we already know.  How you respond to the question, “What’s new?” or “What have you been working on lately?” is rife with opportunity if you can respond strategically and appropriately.  Rather than mumbling the usual, “nothing” or “same old, same old,” consider filling the void with something you are genuinely spending time doing or thinking about.  For example, you might reply, “I’ve just picked up a new employment case that is really interesting” or “I’m preparing to speak on employment updates at a conference in LA next week.”   Either response may spark additional queries and conversation, and they definitely help reinforce the kinds of problems you solve and for whom.  To that end, if a more personal “what’s new?” is a better fit for the situation, share a recent story about your family, an upcoming vacation or your golf game.  Effective messaging invites people to know you, care about you and want to develop a deeper relationship with you.

To see part II of Top 10 Rainmaker Best Practices to Win in 2010 – Click Here

COPYRIGHT © 2010 AKINA CORPORATION

About the Author:

Deborah Knupp has worked globally with CEOs, executives, managing partners and attorneys as a coach and business executive for over 20 years. She has helped these leaders align their people systems and business objectives to create cultures based on the principles of accountability, integrity and authentic relationship building. Her work has focused on making the work environment a place where employees “want” to be; where clients “want” to buy; and, where leaders “want” to serve a bigger purpose in their communities and families. www.akina.biz /312-235-0144

Navigating the Internal Revenue Service’s Industry Issue Focus Program: Ten Guidelines for Taxpayers

This week’s  National Law Review featured blogger is Matthew D. Lerner of   Steptoe & Johnson LLP providing some very detailed tips on what to expect and how to handle an IRS audit if your business is the subject of the Industry Issue Focus Program:  

Background

In March 2007, the Large and Mid-Size Business Division (“LMSB”) of the Internal Revenue Service (“IRS”) implemented new procedures for the “Industry Issue Focus Program” (the “Program”).  LMSB has since begun reorganizing into the Large Business and International Division (“LB&I”), and the IRS now also refers to the Industry Issue Focus Program as “Issue Tiering,” but the principles underlying the Program remain the same.  The Issue Tiering approach is a very significant change in the IRS’s approach to recurring issues and can present unique audit challenges, particularly for taxpayers who are unfamiliar with the Program’s procedures.  Nonetheless, it also presents opportunities for taxpayers that use the information available under the Program to position themselves better for audit.

The Program is the latest effort to consolidate the IRS approach to certain common issues presented by multiple taxpayers.   Such issues are now considered with an unprecedented level of coordination across taxpayers and industries.  Taxpayers and their advisors have frequently expressed the concern that the Program causes inflexibility and results in an inappropriate one-size-fits-all approach to issues that fails to consider distinguishing facts.  It removes discretion from the line agents who work with individual taxpayers as well.  The IRS has stated its goals for the Program are: (i) consistency in resolution across industry lines; (ii) improved currency; (iii) increased coverage of non-compliant taxpayers by maximizing limited resources; and (iv) greater oversight on and accountability for important issues.  As recently as June of this year, LMSB area counsel Nancy Vozar Knapp attempted to reassure taxpayers by stating that the Program was under review and will “evolve with the times.”[1]

This article explains some basic facts about the Program and offers a list of guidelines for taxpayers facing audit issues that have been designated for participation in the Program.  Understanding the rationales and goals of the Program and how the Program actually works is key to handling a case involving an issue that has been designated as a “tiered issue.” Although the Program presents challenges, its procedures also provide opportunities to understand the IRS’s approach to an issue in advance in order to develop your strategy and defense.

The basic concept of the Program is that the IRS identifies compliance issues and then prioritizes those issues based on their prevalence and level of compliance risk.  This prioritization is implemented by designating issues using a series of “tiers.”   Issues that have been so designated are generally referred to as “tiered issues.”

Tier I issues are identified by the IRS as issues of high strategic importance that have a significant impact on one or more industries.  There are two categories of issues within Tier I:  (i) compliance issues and (ii) shelter issues.  According to the IRS, Tier I identification does not necessarily mean a transaction or issue is “bad,” but rather indicates that the transaction or issue presents considerations that are of high importance.  Unfortunately, anecdotal evidence suggests that agents in the field do associate a negative, “shelter-like” connotation with any Tier I issue.  Tier II issues are identified by the IRS as issues where there is potentially high non-compliance and/or a significant compliance risk.  Tier III issues are generally industry-related and designated because of their prevalence, not necessarily because of their importance or risk level.

Issues are classified by the Industry Directors.  Potential Tier I or Tier II issues are presented to a group called the Compliance Strategy Council for approval.  If approved, an issue is assigned to the primary affected industry executive or another issue executive to develop a compliance strategy.  Once an issue has been fully developed and a resolution strategy prepared, it will move from “active” status in its tier to a “monitoring” status in the same tier.  The IRS does not typically “demote” issues from higher-priority to lower-priority tiers.  According to the IRS, an issue is considered eligible for “monitoring” status when the Issue Management Team (“IMT”) responsible for the issue has: (i) identified the universe of returns that are likely to contain the issue; (ii) provided the necessary direction to the Field; (iii) issued appropriate procedural guidance and legal position; (iv) developed a resolution strategy; and (v) determined that there is no need to continue the heightened level of oversight.

If you have an issue that is designated as a tiered issue, that issue will likely be more difficult to resolve, given the IRS’s coordinated approach.  You will face a very strong, pre-conceived notion on the part of the IRS as to how the issue should come out.  However, following a few guidelines can give you the best chance to use the Program to your advantage and achieve the best possible resolution under the circumstances.

Guidelines for Handling a Tiered Issue Under the Program

1.  Be Proactive Before and During Your Audit.

You need to know whether you may have a tiered issue before your audit.  Accordingly, it is important to research the different issues that have been designated as tiered issues and have a general understanding of the types of issues the IRS considers for the Program.

For most tiered issues, the IRS has published guidelines, which include an analysis of the issue and the pertinent facts, directions to agents on how to develop the issue, and Model Information Document Requests (“IDRs”).  If an issue has been designated, you must use this guidance to your advantage.  These published materials tell you what the IRS will ask to see and what facts it views as problematic.  Try to structure your transactions not to share those difficult facts.  Be sure you develop and maintain the specific types of information that you know the agent will demand.  Where the materials describe the scope of the issue, use that information to position your transaction outside of the definition or to make sure your transaction is as strongly defensible as possible.

You also need to understand the facts in IRS guidance and work proactively to distinguish your facts from those described in the guidance even before the inevitable audit commences and as you present those facts to the examination agent.  Being prepared to address the issues that you know will be raised will put you in the best position possible.  Recognize that your response to IDRs may be critical in defining the direction the examiners take.  Proceed cautiously during the initial stages of an audit and be careful not to let an agent mistakenly label an issue or transaction as tiered because it has some similarity to a tiered issue.

2. Develop a Good Relationship with the Agent.

An agent’s general impressions of a taxpayer may influence his or her interpretation of transactions.   This is purely common sense.  Where you develop a relationship of mutual respect and work to keep the audit current, the agent will more readily accept your representations and consider your arguments.  If the agent perceives you as unduly hostile or obstructionist, he will be more skeptical of your representations and less receptive to your arguments.

As it relates to tiered issues, if you take steps to cooperate with the agent by providing information as requested and generally make efforts to keep the audit moving, the agent may be more willing to consider your arguments that a transaction falls outside of the tiered issues, or at least go to bat for you in presenting his or her report to the IRS issue specialist or issue owner executive.  The tone the agent takes may have a significant impact on the issue specialist or issue owner’s involvement with the issue.  Do not wait until the last second to provide information or to establish a working relationship with the agent—establish a good relationship from the beginning so you can work to “manage” the examination as much as possible.  The agent is the gatekeeper, and it is better he trusts you.  Understand that a good relationship will not cause an agent not to do his job, but it can help your arguments against an issue’s being a tiered issue gain a foothold.

3.  Distinguish Your Facts.

One of the most critical tasks in handling a tiered issue is to distinguish your facts from those described in negative IRS guidance and from those of other taxpayers. You should take steps to be prepared early in your audit to present your specific facts to the examining agent and highlight the differences.  Sometimes this may be difficult if the guidance is vague and the facts described are generic.  However, the more specific facts that you can develop with respect to your own case, the better chance you will have to identify distinctions and convince the IRS your case is different.  Doing so is the best opportunity to avoid having your transaction mistakenly labeled as a tiered issue.  Once that label is assigned, it will be much more difficult to resolve the issue on audit.

4.  Don’t Rely Too Heavily on Arguing the Law With the Examining Agent.

There is a tendency among practitioners to believe that they can fashion a compelling legal argument that will change the IRS’s mind.  However, the IRS has very bright, capable tax specialists who analyze these issues extensively, and believe they have fully considered all sides, so the chances of getting them to change their view of the law are remote.  The IRS legal position on an issue that has been designated as a tiered issue is developed with consideration by multiple parties.  Any one person responsible for handling your issue will not have authority to reverse or modify that position himself or herself.  In almost all cases, the examining agent will understand that the Service’s issue experts have fully vetted the law, and will take a very pro-IRS view of the law.  Thus, neither agents nor the IMTs will be particularly receptive to your view of legal arguments that others at the IRS have considered as a group.  Unless you have an argument that you feel confident that the IRS has never considered, you are better off focusing on ways to distinguish your facts.

5.  Understand How the IRS Approaches Your Issue.

As noted above, if you have an issue that has been designated, read the guidance published by the IRS on that issue.  IRS guidance may include directives, settlement guidelines, audit guidelines, notices, rulings, coordinated issue papers, regulations, and other published materials.  This not only helps you in planning and implementing transactions, but also aids during the audit.  Compare your facts to those described in the guidance and answer the following questions:  Do your facts appear to be better or worse than the facts in the guidance?  How has the IRS approached this issue in this past?  What is the IRS record on this issue with respect to other taxpayers?  The answers to these questions will influence your strategy in pursuing a resolution to the issue.

6.  Understand the IRS’s General Litigation Strategy on Tiered Issues.

Anecdotal evidence has generally led practitioners to believe that the IRS’s strategy with respect to tiered issues is to identify the cases with the worst facts for the taxpayer and get those cases into court.  The IRS is therefore likely to try to delay or settle cases with better facts early on in an issue’s development so it can develop law favorable to the IRS by trying cases with facts unfavorable to the taxpayer.  Understanding this dynamic, you should work to position your case as a case that the IRS does not want to try in court and would rather settle.  Pushing your case forward quickly when it is strong may force the IRS’s hand, so that your case does not become the test case for an issue.  If your case has good facts, allowing it to languish is a mistake.  That means that you need to double your efforts to stick to deadlines and provide quick responses to all reasonable IDRs on all issues under examination so as not to provide the tools of delay.  It may even mean not agreeing to statute extensions that will keep your case from court.  In the most extreme cases, you may have to pay the tax, and file a refund claim, to move your case more quickly if being the test case for an issue is your chosen route.

7.  Consider How Your Case Fits in With the IRS General Litigation Strategy.

You should learn as much as you can about the cases on the IRS docket with respect to your issue.   Is the IRS litigating these cases?  What are the facts in these cases?  What are the strengths and weaknesses of the cases that are further along in the IRS administrative process or in the courts than yours?  Identifying the range of cases that exist and where your case falls in the spectrum between the most-IRS favorable and the most-taxpayer favorable cases can help you select the best strategy.  Do not fall into the common trap of convincing yourself your case is the best, without developing more information.

8.  Coordinate With Other Taxpayers With Similar Issues.

If possible, make an effort to identify other taxpayers with similar issues and learn their facts.  Learn how the IRS is approaching your issue with other taxpayers.  You may be able to exchange information with other taxpayers and work collectively to accelerate the strongest taxpayer’s case and delay the weaker ones.  If the issue is new and the IRS is still formulating its approach, getting cases with favorable facts to the forefront may influence the pattern IDRs issued by the IRS, alter the IRS’s legal position, and present the IRS with reasons to give examining agents more flexibility to settle cases.

For example, if you believe that you have a strong case and your issue has not been tested in the courts, put pressure on the audit team to move quickly to make your case one of the first.  As noted above, if you can convince the IRS that you have strong facts, there is a good chance the IRS will not want your case to be the test case and therefore will be more willing to engage in meaningful settlement discussions.

9.  Consider Elevating the Case.

If you are having difficulty resolving your case administratively, consider elevating the case within the IRS to get a new, more senior person involved.  The IRS has said that its goal is to resolve cases at the lowest possible level.  Thus, a lower level person at the IRS may be reluctant to seek guidance from more senior personnel unless you push for that.  Under the normal IRS Rules of Engagement, the seniority progresses as follows: (i) Team manager; (ii) Territory manager; and (iii) Director of Field Operations.  The Director of Field Operations has a direct line of communication with the “issue owner executive” responsible for the IRS’s coordinated approach to the issue.  The issue owner executive is usually not involved in specific cases, but at least one IRS official has said informally that a taxpayer may want to contact the issue owner executive if he/she has tried to elevate the case under normal channels without success.  Sometimes, only a high level official will have the authority or experience necessary to make the decision that a set of facts that looks like a tiered issue is not one.

10.  Understand Settlement Procedures.

There are special procedures that apply to the settlement of tiered issues.  Make sure that you understand these procedures before you start negotiations towards a resolution.  The exam team must present any proposed settlements of tiered, listed issues (i.e., Tier I shelter issues) to the Technical Advisor, Issue Specialist, and/or Counsel before going forward with any resolution other than full concession by the taxpayer unless there are settlement guidelines.  Otherwise, whether the proposed settlement of a tiered, non-listed issue needs to be presented to the Issue Management Team may depend on the following circumstances:  (i) issue “maturity” (i.e., how well-developed the IRS position is, whether other cases have been settled, etc.); (ii)  whether Counsel has provided published guidance; (iii) whether the issue has been designated for litigation; and (iv) whether the issue is being considered for litigation in a different case.

Note that the settlement of other, non-tiered issues you may have during your audit may also be more difficult when you also have a tiered issue.  The presence of the tiered issue may cause your examining agent or appeals officer to view such issue as already decided in favor of the IRS.  Thus, you as the taxpayer may lose the opportunity to trade a concession on that issue for the IRS’s concession on another issue.  While no one likes to think of an audit as a “horse trading” exercise, as a practical matter an audit is a series of negotiations that involves “gives” and “takes” by both taxpayers and the IRS.

Note that the special Fast Track settlement procedures may be available to resolve tiered issues.  Under Fast Track, the parties agree to seek a resolution within 120 days.  This accelerated time frame may conserve taxpayer resources and allow a case to be resolved before other unfavorable cases either cause the IRS to impose inflexible settlement guidelines or result in unfavorable court decisions.  Moreover, it may also help convince the IRS team that you do not have a tiered issue if a more independent third party thinks the distinctions you are making are legitimate.

The taxpayer, exam team, IMT coordinator, and Fast Track coordinator all must agree to use Fast Track.  It is better to get support from the exam team first because the exam team manager can contact the other constituencies and be helpful in obtaining the necessary approvals.  If Fast Track appears to be an attractive option, be prepared to address the views and concerns of all constituencies.  For example, IRS Appeals may look for settlements that can be used in other cases.  Remember that Fast Track is a mediation process, so the taxpayer should be prepared to compromise.  Do not use Fast Track and expect to receive a full, or near-full concession from the IRS parties involved.

Conclusion

The Industry Issue Focus Program presents unique challenges because the IRS may be more inflexible as a result of the coordinated approach to issues established through the Program.  However, taxpayers that are proactive and aware of these challenges can still achieve favorable resolutions.

[1] LMSB Tiered Issues Program Under Review, IRS Official Says, Simon Brown, Tax Notes Today, 2010 TNT 108-9, June 7, 2010.

© 2010 STEPTOE & JOHNSON LLP, ALL RIGHTS RESERVED

About the Author:

Matthew D. Lerner is a partner in the Washington-based law firm of Steptoe & Johnson LLP, where he is a member of the Litigation and Business Solutions Departments. He represents both corporations and high net worth individuals involved in tax controversies, from pre-audit advice about transaction documentation, file organization and privilege protection, to representation during IRS audits and appeals, through litigation in the Federal Courts. His experience is broad and includes cases involving repair and rehabilitation expenses, asset classification for depreciation purposes, losses from trading in securities and derivatives, corporate restructuring, domestic production activities, international intercorporate transactions, foreign tax credits, tax accounting method questions, and valuation issues. Matt also advises clients facing legal and public relations crises, coordinating responses to congressional inquiries, criminal investigations, civil litigation, public relations scrutiny, and agency review.

Matt received his J.D. from Harvard Law School, magna cum laude, and was editor of Harvard Law Review. He received his A.B. from Amherst College, Phi Beta Kappa. 202-429-8024 /  www.Steptoe.com

Protecting Tax Documents after United States v. Deloitte

This week’s National Law Review featured blogger is Matthew D. Lerner of Steptoe & Johnson LLP who provides some great tips on how to manage tax documents to best prepare for legal action. 

A recent appeals court decision provides the latest development in the ongoing battle between taxpayers and the IRS regarding the disclosure of tax workpapers.  It also provides hope that work product protections may still be available for litigation analyses that a company’s attest auditors review in preparing financial statements.[i] Typically, taxpayers claim that certain workpapers are protected by the work product doctrine because they contain analysis of potential tax issues raised by transactions in anticipation of future litigation with the IRS over those issues.  The IRS asserts that these workpapers are used to prepare financial statements and should not be subject to protection either because they are not prepared in anticipation of litigation or because they are disclosed to third party auditors, thus waiving any protection.

On June 29, 2010, the D.C. Circuit became the latest court to address this controversy in a matter that involved documents prepared by, or in the possession of, the accounting firm Deloitte LLP (then known as Deloitte & Touche LLP) (“Deloitte”).  In this case, the United States sought to compel Deloitte to produce two categories of documents related to a civil tax refund case brought by partnerships formed by subsidiaries of the Dow Chemical Company (“Dow”) (the partnerships are referred to as the Chemtech partnerships or “Chemtech”).   The first category included three documents Deloitte withheld on the basis of privileges asserted by Dow, including (i) a June 2005 tax opinion related to Chemtech; (ii) a September 1998 legal and tax analysis provided to Deloitte by an in-house attorney at Dow; and (iii) a July 1993 internal Deloitte memorandum recording thoughts and impressions of Dow’s attorneys concerning tax issues related to Chemtech.  The second category of documents included all responsive documents maintained at Deloitte’s affiliate in Zurich, Switzerland ( “Deloitte Switzerland”).

At the trial court level, the District Court for the District of Columbia held that the three documents in the first category were protected from disclosure by the work product doctrine because they were prepared in anticipation of future litigation over the tax treatment of Chemtech.[2]  The court held that the protection was not waived by disclosure to Deloitte because Deloitte, as Dow’s independent auditor, was not a potential adversary, and no evidence suggested that it was unreasonable for Dow to expect Deloitte to maintain confidentiality.

The trial court also denied the motion to compel with respect to the second category of documents.  The court held that Deloitte did not have sufficient control over the documents maintained at Deloitte Switzerland to enable their production.  The court stated that the government failed to establish that Deloitte had the “legal right, authority or ability to obtain documents upon demand” from Deloitte Switzerland.  The court determined, “Close cooperation on a specific project does not per se, establish an ability, let alone a legal right or authority, on [Deloitte’s] part to acquire documents maintained solely by a legally distinct entity.”

The United States appealed the District Court’s decision with respect to the three documents in the first category withheld by Deloitte: (i) the June 2005 tax opinion related to Chemtech; (ii) the September 1998 legal and tax analysis provided by an in-house attorney at Dow; and (iii) the July 1993 internal Deloitte memorandum recording thoughts and impressions of Dow’s attorneys concerning tax issues related to Chemtech.[3]

The government argued that the 1993 internal Deloitte memorandum was not work product because (i) it was prepared by Deloitte, not Dow or Dow’s counsel; and (ii) it was generated as part of the audit process, not in anticipation of litigation.  The D.C. Circuit rejected the government’s categorical arguments with respect to the first document prepared by Deloitte.  The court stated that Deloitte’s preparation of the document does not exclude the possibility that it contains Dow’s work product.  The court also stated that a document can contain protected work product material even though it serves multiple purposes, so long as the protected material was prepared because of the prospect of litigation.  However, the court determined that the District Court did not have a sufficient evidentiary foundation for its holding that the Deloitte memorandum was purely work product.  The court therefore remanded so that the District Court could conduct an in camera review of the document and determine whether it was entirely work product, or whether a partial or redacted version of the document could be disclosed.

The government also argued that the other two documents were not protected from disclosure because Dow waived work product protection by disclosing the documents to Deloitte. The D.C. Circuit rejected this argument and concluded that (i) Deloitte was not a potential adversary with respect to the litigation that the documents address and (ii) Deloitte was not a conduit to potential adversaries because Dow had a reasonable expectation of privacy as a result of Deloitte’s obligation to refrain from disclosing confidential information.

The Appeals court decision makes clear that some documents that become part of the tax audit workpapers do retain work product protection, even if disclosed to financial auditors to assist in the preparation of financial statements.  However, it is also evident from this decision that such work product claims will likely continue to be challenged by the IRS and heavily scrutinized by the courts.  Accordingly, it is imperative that taxpayers take as many precautions as possible to preserve work product protection, as well as attorney-client privilege, with respect to sensitive analysis contained in tax workpapers. 

Taxpayers must understand that proving work product generally involves common sense.  One trying to prove that a document was prepared in anticipation of litigation should ask herself what steps would indicate to a court that litigation truly was expected and this document was prepared for that purpose.  What follows is a series of suggestions to help preserve such protection to the extent possible. 

1.  Get Counsel Involved.

To preserve privilege, be certain to include counsel meaningfully in communications regarding legal issues, and document counsel’s substantive role in these communications.  While an attorney’s involvement is not legally required to make something work product in most jurisdictions, as an evidentiary matter, it helps to establish an anticipation of litigation and indicates that an issue is being treated as more than just an item for audit.  Coordinate with the company’s General Counsel with respect to sensitive tax documents to avoid waiver of work product with respect to those documents through disclosure in other litigation.   At the same time, be careful to avoid asserting inappropriate claims of protection on documents.  An inappropriate claim of privilege risks waiver of privilege with respect to documents that otherwise would be privileged with respect to the same issue.  Inappropriate privilege claims can also damage your credibility and result in higher tensions and increased controversy over what should be “routine” privilege claims.

2.  Formalize a Tax Litigation Group.

Creating a formal tax litigation group within the company can help to identify tax controversy matters more clearly and separate issues that are anticipated to result in litigation.  Such a group should advise the company on the conduct of tax controversies and litigation.  In this primary role, the group should give advice to the company regarding whether and how to proceed in litigation, whether to settle, and what settlement terms to propose or accept.   Secondarily, the company may use the group’s hazards-of-litigation advice in establishing financial statement tax reserves.

It is preferable that the group’s leader be an attorney responsible for managing tax litigation and have at least a dotted line reporting relationship to the law department (to enjoy a presumption that the attorney-client privilege applies as well).  The group should exclude the persons whose responsibilities are solely the preparation of financial statements.

This does not require hiring new personnel or re-assigning people to a new tax controversy position.  The group may be composed of people with other job responsibilities.  It is really a “part-time” committee of people with related roles.  The key is that decisions about which matters litigation may be expected for come in the setting of this separate group’s meetings or consideration, that the group members separately perform this function, and that they document their conclusions and clearly identify issues for which more than a mere audit is expected.  In the group’s analyses, it must be careful not to suggest that the company believes its position is wrong and that is why litigation is expected.  Document only that the IRS, given its policies and positions, is expected to challenge the company on the issue and the company intends to fight.[4]

 3.  Control Who Creates Documents.

If the company has a tax litigation group, sensitive analysis of tax issues should be confined to documents created at the direction of, and under the control and supervision of, the group’s leader.  If not, they should be prepared by someone with a key role and responsibilities regarding tax controversy decisions.  Such documents should indicate that they are prepared by attorneys or tax practitioners and that they are prepared at the request of the group leader for litigation purposes.  Take care not to attach these labels to other documents or that label will cease to have meaning and potentially be used to argue that a waiver of privilege or work product protection has occurred with respect to other documents.  Do not combine these work product analyses with non-work product discussions.

4.  Create Only Defined Types of Documents.

Categorizing your documents and establishing guidelines for what types of analysis should be included in each category can help confine sensitive legal analysis to litigation-oriented documents that are most entitled to privilege and work product protection.  When creating documents, separate legal analysis from non-privileged information, including: (i) business advice; (ii) tax reserve numbers and calculations; and (iii) other advice not intended to remain confidential.   Create specific documents for disclosure outside the group that are limited to only hazards-of-litigation percentages and only aggregate reserve information.[5] 

5.  Control How Documents Are Labeled

Documents should be labeled, as appropriate, to state that they contain confidential legal advice, subject to privilege and protected by the work product doctrine.  While not legally required, attaching a work product label to a document intended as such provides evidence of the company’s intent with respect to that document.  Likewise, be careful not to label business advice, tax return advice, or other advice not intended to be confidential, as privileged or protected.  If one overuses labels, the labels lose credibility even when properly attached, and may be ignored by a court in its analysis.  At the same time, also take care not to label documents containing legal analysis and advice as documents that relate to tax reserve analysis or tax contingency analysis.

6.  Control Access to Documents Inside the Company

The wider the distribution of a document, the more likely it is that a court will find there has been a waiver with respect to attorney-client privilege or work product protection.  Because one of the indicia of privilege or work product is the care with which a document is handled, common sense dictates that a court will look askance at claims for protection of documents that were made widely available within the company to people whose jobs did not require their access to those materials.  Accordingly, only disclose legal documents with respect to an issue to other employees/officers on a need-to-know basis.  Also, to the extent possible, try to avoid “broadcast” emails and limit email “chains” related to documents.  Each e-mail and response to an e-mail generates a copy of the document and increases the risk of waiver.  When storing documents, separate and clearly mark legal documents.  This not only protects against waiver, but can demonstrate intent to keep the information confidential.  Keep in mind that no protections attach to business advice documents, so store business documents in a separate location from the legal documents.

 7.  Enact and Follow Policies to Identify Anticipated Litigation

It is critical to prove that litigation was anticipated with respect to an issue in order to establish work product protection for documents that contain analysis of that issue.  General litigation policies can be used effectively as “designation” tools to identify issues for which litigation is anticipated clearly.  For example, make use of document hold requests to communicate that litigation is anticipated.  Consider formal guidelines that certain counsel must be involved in issues expected to result in litigation, and then include such counsel only when litigation is expected.  When enacting such general policies, be cognizant of the fact that the presence of a general policy and the absence of its application in a specific case can create a negative inference.  Thus, if a company has a general policy that documents related to issues for which litigation is anticipated are made subject to a litigation hold, then the absence of a litigation hold with respect to documents related to another issue may be used to demonstrate that litigation was not anticipated with respect to that issue.[6]  As a result, the tax department must apply a litigation hold to those documents relating to any issue for which the company is claiming to anticipate litigation Likewise, if company policy dictates that the General Counsel must approve litigation-related decisions (e.g. budget, choice of counsel), be sure those policies are followed for potential tax litigation.

8.  Work With Your Auditors and Other Third Parties to Protect Work Product

Interactions with auditors and other third parties create significant risks that material that would otherwise be subject to privilege or work product protection will lose that protection as a result of waiver.  Accordingly, take steps to work with your auditors and other third parties to develop a good relationship and preserve protection where possible. 

For example, many times accountants are hired not as auditors but to provide specific support in connection with a tax issue.  In those instances, enter into written agreements through counsel with third-party consultants to whom you wish to disclose privileged information (e.g., so-called Kovel arrangements), so that their work is performed under the direction and control of counsel.  Such a step makes the assertion of attorney-client privilege possible for communications with the consultant, and provides strong evidence of the anticipation of litigation.  Be aware of the potential limitations of the accountant-client privilege, particularly when considering whether to disclose sensitive documents in the context of the preparation of an opinion letter.  Request that your attest auditors’ engagement letter include a specific confirmation that those accountants must and will maintain confidentiality of your documents to the fullest extent allowed by law.  It may also be helpful to have the engagement letter acknowledge that the relationship between company and auditor is non-adversarial and the two expect to work together cooperatively. Where possible, have auditors review key documents but not take copies.  While that has no direct, legal effect on whether a protection is actually waived, it can bolster a claim that you took all possible steps to avoid wider dissemination by keeping control of the actual document, which is a key element of proving work product protection should apply.  Ask that your auditors specifically note when a conclusion in their workpapers was derived from documents prepared by the company as litigation analyses.  Finally, do not prepare separate documents directly for the auditors that discuss litigation analysis.  While a decision regarding work product should be based on the purpose for which the underlying analysis was prepared, not the specific documents, the recent decisions suggest that it is easier to preserve work product protection when the document itself was prepared for the purpose of litigation.

9.  Negotiate Disclosures with the IRS

After taking some or all of the above steps above to preserve protection of documents, take steps to prevent inadvertent disclosure to the IRS of protected documents.  Require approval of the group’s leader before documents are disclosed to the Service or establish some other formal screening process to prevent disclosures that could result in a waiver of privilege.  When withholding documents subject to protection, prepare a detailed privilege log, stating the specific grounds that support the claim for privilege and protection of each document withheld.

It is inevitable that there will be disagreements about the scope of protection afforded specific documents.  Try to manage the disclosure process to minimize the scope and intensity of these disagreements.  Be candid with the IRS about your concerns, try to get overbroad demands for protected materials scaled back, work quickly to provide responsive, non-protected materials, and be reasonable about the scope of your privilege claims.  Doing this can help establish a cooperative relationship with the IRS and focus the controversy, if any, on the most protected documents. Likewise, consider disclosing the least confidential documents to the Service.  For example, disclose to the Service those documents that contain no legal analysis or advice.  Where there is protected material the IRS really wants that the company is willing to disclose, attempt to negotiate a written agreement that the disclosure of that document will not waive privilege or work product protection more broadly.  If, after all this, controversy about a protection still arises, the fact of your cooperation and efforts to comply as much as possible may influence either the IRS’s decision to seek the documents through judicial proceedings, or the judge’s view of the matter.  Force the IRS to determine whether it wishes to press the issue against a taxpayer that has cooperated, but that has taken careful steps to create and maintain confidential documents.

The confines of the work product doctrine in the tax context are still being defined.  These suggested steps will help you best position your company to obtain the maximum protection.  As you consider the creation of materials, ask yourself “does this step help show that we really did anticipate litigation and that this document was created for that purpose.”   That is what a court may be called on to determine, and you want the record to demonstrate that the answer is yes.

[1] This is important because the review of such documents by third party auditors waives attorney-client privilege, the other common protection for sensitive materials.

[2] United States v. Deloitte, Case No. 08-411 (D. D.C. June 8, 2009).

[3] United States v. Deloitte, No. 09-5171, (D.C. Cir. June 29, 2010)

[4] Although not free from doubt, it is generally believed that the expectation of having an issue be unagreed and go to IRS Appeals is sufficient to show “an expectation of litigation.”

[5] Understand that there is a tension between protecting the attorney-client privilege and the work product protection.  Providing your accountant with a privileged document prepared in anticipation of litigation may result in a broad attorney-client privilege waiver, but it is more likely the document will be viewed as work product than a document drafted especially for the auditor.  Given the broad scope of auditors’ need for information and the fact that the document prepared for an auditor likely reveals privileged communications anyway and thus waives attorney-client privilege, many companies are placing more of their eggs in the work product basket.   

[6] A litigation hold consists of formal notification of the likelihood of litigation to personnel whose files may contain relevant information, and the implementation of document preservation steps to make certain those materials are not discarded.

© 2010 STEPTOE & JOHNSON LLP, ALL RIGHTS RESERVED

About the Author:

Matthew D. Lerner is a partner in the Washington-based law firm of Steptoe & Johnson LLP, where he is a member of the Litigation and Business Solutions Departments. He represents both corporations and high net worth individuals involved in tax controversies, from pre-audit advice about transaction documentation, file organization and privilege protection, to representation during IRS audits and appeals, through litigation in the Federal Courts. His experience is broad and includes cases involving repair and rehabilitation expenses, asset classification for depreciation purposes, losses from trading in securities and derivatives, corporate restructuring, domestic production activities, international intercorporate transactions, foreign tax credits, tax accounting method questions, and valuation issues. Matt also advises clients facing legal and public relations crises, coordinating responses to congressional inquiries, criminal investigations, civil litigation, public relations scrutiny, and agency review. 

Matt received his J.D. from Harvard Law School, magna cum laude, and was editor of Harvard Law Review. He received his A.B. from Amherst College, Phi Beta Kappa. 202-429-8024 /  www.Steptoe.com

Have You Been Sued…or Are You About to Sue Someone? Ten Questions to Ask Your Attorney

As recently posted on the National Law Review –some great “How To” advice from Anthony C. Valiulis of Much Shelist Denenberg Ament & Rubenstein P.C. on things to consider when retaining an attorney & law firm: 

Like a visit to the dentist, litigation is often necessary but seldom fun. It takes time, interferes with your business, disrupts your life, and can exact a substantial monetary and emotional toll. So if you have to go down the litigation road, choosing your travel guide is one of the most important decisions you will make. In a very real sense, your legal counsel will lead you on this journey. Therefore, you need someone who is not only skilled but also compatible with you and right for the case.

Despite the stereotypes, attorneys are as diverse as any group of people can be, each with a different approach and level of knowledge and experience. Most of us, however, do share one characteristic: we strive zealously to represent the interests of our clients.

Within that context, how can you determine which attorney is best for you? Although there are no guarantees (and if a lawyer tells you differently, immediately start looking for someone else), here are 10 questions you can ask to determine if an attorney is right for your matter.

Question 1: Why Should I Retain You or Your Firm?

Attorneys are not one-size-fits-all. You need a lawyer with whom you are comfortable, who also has the knowledge and skills necessary to represent you well and can differentiate himself or herself from other lawyers. To use a cliché, you need someone who can add value. After all, adding value for our clients is what lawyering is all about.

Although attorneys approach this challenge in many ways, generally it all comes down to one thing: helping you solve your problem in the most efficient and cost-effective way possible. This is especially true in litigation, where the emotional cost often exceeds the financial one. Thus, it is vitally important to discuss up front your attorney’s perspective and strategy. How will he or she proceed in order to accomplish your goals? Of course, that presupposes that you have already established those goals, which brings us to the next question. 

Question 2: How Strong Is My Case?

This is perhaps the most obvious and most important question to ask. It’s also what you want to know more than anything else, with the possible exception of Question 4. This is your opportunity to learn exactly what your lawyer believes about your case, which can be quite revealing in other ways. For example, if a lawyer tells you that you have a “slam dunk,” pick up your things and leave. There are no slam dunks! Why? Because there is no certainty whatsoever when a case goes before a judge, a jury, an arbitrator or any other third party.

Question 3: What Are the Weaknesses?

Here is the flip side to Question 2, and it is just as important. What you want from your attorney is an honest assessment of the strengths and weaknesses of your position—not only why you are likely to prevail but also why you might lose. As human beings, we tend to view everything through a self-serving filter. Your lawyer, however, should strive to see beyond that filter in order to accurately evaluate your case.

Question 4: How Much Will It Cost?

When you embark on litigation, it is important to decide whether it makes economic sense to fight to the end or settle as quickly as possible. In other words, if you have a $50,000 dispute, you need to know if it’s going to cost you $5,000, $15,000 or $40,000 to resolve it.

In a litigated matter, your lawyers might not be able to provide much certainty with respect to cost. But they can share their billing rates and estimate how much time they expect to devote to the case. This information will help you make an informed decision about how to proceed. If you are considering a lawyer who is not willing to give you an estimate or budget, find someone else who will.

Question 5: Will You Consider Alternative-Fee Arrangements?

Although lawyers generally charge by the hour and that traditional approach works for many clients, there are other methods of billing. For example, many attorneys are willing to handle certain matters on a blended-rate, flat-fee or contingent basis. Others might be willing to discuss an arrangement based on the result achieved.

Question 6: How Much Relevant Experience Does Your Lawyer Have?

You need to feel confident that your lawyer has the skills and knowledge to effectively represent you in the matter at hand. Likewise, your lawyer should want you to feel comfortable with his or her ability to represent you effectively. Therefore, don’t be shy about asking your attorney how much experience he or she has related to your particular dispute.

Question 7: Who Will Handle My Matter?

Let’s say you’ve met with a lawyer, were impressed with her capabilities and retained her to represent you. Will it really be that lawyer who acts on your behalf, or will your matter be relegated to a less experienced associate or maybe even a paralegal? You can’t know for sure unless you ask. Of course, when you select an attorney from a firm like Much Shelist, you are really hiring a team of lawyers at different billing rates, which may be advantageous on multiple levels. Research, for example, can often be done better and less expensively by associates or younger partners. If, however, you want a particular lawyer to handle everything, you should make that clear up front.

Question 8: Where Is the Engagement Letter?

Once you have decided to retain a lawyer, make sure there is an engagement letter signed by both you and the attorney. An engagement letter protects the client as much as, if not more than, the attorney. It should set forth the fee structure, the scope of the engagement, any requirement for an up-front retainer (including the amount), how out-of-pocket costs will be handled, what other charges are involved and so on. If there is anything in the letter that you do not understand, make sure the attorney explains it to you. Most importantly, your lawyer should never dismiss the engagement letter as “just boilerplate.” If he or she does, then you should seriously consider getting another lawyer. Ultimately, the engagement letter constitutes a contract between you and your attorney and is invaluable in establishing the parameters of the relationship.

Question 9: What Charges Should I Expect to See on My Bill?

This may seem like an obvious question, but in many respects, it is not. Generally, if you phone your attorney, you are going to be billed for that call. If your attorney has a substantive discussion about your matter with someone else in his or her office, you will usually be billed for that conference. If an associate does research on your file, you will likely be billed for that work. If a paralegal reviews documents or organizes a file, you will probably be billed for his or her time. There is nothing particularly surprising about these examples, but what about charges for electronic research like Westlaw? How about faxes or photocopies? All of these billing issues should be addressed in the engagement letter. And if it includes something you do not like, discuss it with your attorney before you sign on the dotted line.

Question 10: What Is the Likely Outcome?

Although your attorney will not be able to answer this final question with certainty—especially during the initial stages of the matter—it is important to discuss the issue right away. As I’ve said before, there are no guarantees, but experienced counsel should be able to give you an idea of what might take place down the road. Ultimately, there is no benefit to you or your relationship with your lawyer to have unrealistic expectations.

This list of questions is by no means exhaustive, and that’s a good thing. You should never hesitate to ask your lawyer anything, no matter how big or small. We are here to help, so ask away!

© 2010 Much Shelist Denenberg Ament & Rubenstein, P.C. 

Social Media Policy Drafting: What are the Ethical Risks & Pitfalls?

The National Law Review’s featured Business of Law Guest  Blogger Meredith L. Williams of Baker Donelson Bearman Caldwell & Berkowitz, PC outlines some very real concerns for lawyers and law firms related to social media and state bar assocation guidelines.  Ms. Williams also offers some very concrete Do’s and Don’t on how to address these concerns.  Read on….

Today, social media encompasses a broad sweep of online activity, all of which is trackable and traceable.  These networks include not only the blogs you write and those to which you comment, but also social networks.  Each day brings new online tools and new advances introduce new opportunities to build your virtual footprint.

As a law firm, social media can help drive business initiatives and support professional development efforts. In basic business terms social media can be considered the least expensive form of large scale advertising. However, social media is not exclusively used for business by law firm employees.  When it comes to expressing opinions about anything having to do with the law, firm employees are in a position that requires limitations and have certain limitations. Statements in public forums may inadvertently create an attorney-client relationship, and they may also violate the rules prohibiting law firm advertising.  The wrong communication can be construed as exposing firm or client secrets; invasion of privacy and defamation; trademark violations; and may even lead to wrongful termination claims. Therefore, a law firm must attempt to provide reasonable guidelines for online behavior by members of the firm.

The following are five (5) ethical areas that all law firms should address when drafting internal social media policies. These can also be utilized by law departments when dealing with lawyer and non-lawyer employees.  All of these rules are simply an extension of model rules of professional conduct & state rules of ethics.  The over arching principles should remain the same as new social media sites and technologies emerge.

Advertising (Model Rule of Professional Conduct 7.2)

Marketing and advertising are key functions for any business survival. However, lawyers, especially in law firms, are held to a higher standard when advertising through electronic means. Model Rule of Professional Conduct 7.2[1] states a lawyer or law firm may advertise through written, recorded or electronic means.  This includes all social media sites.

  Quick Reference
  Do

  • Have any personal or professional social media site as desired.
  • Use appropriate disclaimers as needed.

Do NOT

  • Use the organization’s name or email address on a personal site unless using the appropriate disclaimers.
  • Use the organization’s assets to update personal sites.
   

Example: A law firm creates a site on Facebook, MySpace, LinkedIn, Twitter, etc. using the firm name.  Is this advertising?

Example: An employee of a law firm uses the firm name or firm email address on their personal Facebook site.  Is this advertising? 

State ethics boards consider the true crux of the advertising issue to be not who creates the site or the intent of the site but rather whether or not the site can be considered to be used for professional use.  If being used for professional use, social media presence and communication can be considered to fall within the advertising rules. 

Below are a few guidelines to include in firm policies to teach your employees (lawyers and non-lawyers) how not to create a professional site unless intended.

  • Employees should not associate the firm name or firm email address with the site unless it is intended for professional use.  This includes stating they are an employee of the law firm. 
  • Do not use firm assets to update personal sites.  This includes any law firm owned laptop or computer, I-Phone or blackberry, firm IP address and email address.  Using the firm email address implies the employee is acting on the firm’s behalf. 
  • Create an advertising disclaimer to help employees specifically state their use is personal or professional. 

This subject is difficult to approach with employees. Many will argue it is the same as verbally telling someone they work at a specific law firm. However, state boards have compared the online activity to a law firm website vs. verbal communication.  The best approach is helping employees understand how not to blur the lines of professional/ personal sites for their own protection.  As an employer, you want employees to continue using social media sites to broaden and help promote the firm brand.  However, you only want them to do it in the most ethical way.

Attorney-Client Relationship (Model Rule of Professional Conduct 1 Series)

The attorney-client relationship is one of the oldest legal ethical standards.  It creates a certain set of duties the lawyer owes the client. The model rules of professional conduct set forth a series of guidelines that help regulate the creation and existence of this important relationship. In the electronic world, especially when utilizing social media, the important issue is whether any electronic communication creates an attorney-client relationship inadvertently. 

  Quick Reference
  Do

  • Post non-legal comments, blogs, etc. on any personal or professional site.
  • Use appropriate disclaimers as needed.

Do NOT

  • Post legal advice.
  • “Friend” anyone on a professional site unless previously corresponded or known.
  • “Friend” a Judge on a professional site.
   

Example: A lawyer of firm ABC is blogging on a social media site regarding new tax laws. A non-client comments to the blog inquiring about his specific tax situation. The lawyer in turn comments again discussing how the new tax laws apply to the non-client. Has an attorney-client relationship been created?

Law firms presently use disclaimers for emails and firm websites to verify no implied relationship is created.  But how do we instruct employees to this standard when social media sites are interactive by nature? Below are a few key policy guidelines to help employees navigate this difficult area.

  • Employees should never post legal advice.  This does not mean employees cannot comment or post to social media sites. It only relates to publishing or posting that could be construed as legal advice or opinion.  If the subject matter is related to a legal or ethical situation, attorneys and staff may only discuss the legal standards but not apply those standards to any particular fact situation. 
  • Firms should provide a disclaimer for employees to utilize when posting or commenting on professional social networking sites. 
  • When using social networks with firm e-mail and professional identification, employees should not “friend” anyone they do not know and/or with whom they have not previously corresponded. 
  • Some states have even gone so far as to also state that lawyers and judges cannot be “friends” on any professional social media sites. State ethics rules should be consulted prior to drafting any policy.

Client Confidentiality (Model Rule of Professional Conduct 1.6)

Client confidentiality and business privacy are two of the largest concerns of employers when dealing with social media communication. Generally, a lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent.  In addition, privacy of the organization, the business processes, the firm brand and the IP of the firm are key for business continuity.

  Quick Reference
  Do

  • Discuss job generically
  • Avoid uncontrolled forums.
  • Be respectful of other’s and the company’s privacy.
  • Get approval when responding to negative requests.

Do NOT

  • Discuss job specifics.
  • Use the client’s name.
  • Disclose specifics related to the business.
  • Disclose confidential information.
  • Upload law firm contacts onto a social media site.

 
   

Example: A lawyer begins discussing a case he is handling on his personal Facebook blog.  Although not referencing the client name, details of the case are discussed. Has the client confidentiality been broken?

Example: A law firm employee tweets about a firm staff meeting discussing salary and new hires.  Has the privacy of business been destroyed?

Law firms must address confidentiality and privacy standards in social media policies.  In addition, consequences for breaking these standards should also be detailed. Below are a few policy considerations to navigate this area. 

  • Employees should never use a client’s name unless written permission has been received.
  • Employees should never disclose confidential or private business information.  Sharing this type of information, even unintentionally, can result in legal action against the employee, the firm, and/or the client.
  • Outside the workplace, rights to privacy and free speech protect online activity conducted on personal social networks used with personal email addresses.  However, what is published on personal online sites should never be attributed to the firm and should not appear to be endorsed by or originated from the firm.
  • Employees should avoid forums where there is little control over what is known to be confidential information.  In the world of social networking, there is often a breach of confidentiality when someone emails an attorney or posts a comment congratulating him/her on representation of a specific client or on a specific case. 
  • Respect the privacy of other employees and of the opinions of others.  Before sharing a comment, post, picture, or video about a client or other employee through any type of social media or network, his/her consent is not only a courtesy, it is a requirement. 
  • Get Marketing/ PR departments involved when responding to certain inaccurate, accusatory or negative comments about the firm or any firm clients.

Expertise (Model Rule of Professional Conduct 7.4)

  Quick Reference
  Do

  • Allow recommendations.
  • Review and monitor all recommendations carefully.
  • Edit or hide recommendations as needed to remove any verbiage that states you are “better”, “the best”, “expert”, “specialized” or “certified”.

Do NOT

  • Be false or misleading in online credentials.
  • Use the words “better” or “the best” in credentials or when recommending others.
  • Use the verbiage “expert”, “specialist” or “certified” to describe experience unless certified by an organization that is accredited by the ABA or the state bar. 
   

Many lawyers are considered experts or specialists by their peers in select areas of law.  However, using the expert designation can only be done with appropriate approval. Model Rule of Professional Conduct 7.4 generally states that a lawyer may communicate the fact that the lawyer does or does not practice in particular fields of law.  In addition, a lawyer may promote the engagement in specific areas of practice.  However, a lawyer shall NOT state or imply that a lawyer is an expert or a certified specialist unless the lawyer has been certified by an organization that is accredited by the ABA or the state bar. 

This model rule affects the use of credentials and recommendations on social media sites.  What are the key areas to include in law firm policies?

  • Employees should never be false and misleading in online credentials.  All employees should maintain complete accuracy in all online bios and ensure no embellishment. 
  • Recommendations should be used carefully. Employees should review all recommendations created for them for any embellishment (i.e. use of the words better or best) expertise, certification or specialization listing.   Edit or hide recommendations as needed.
  • Employees should not include the words “expert”, “certified”, or “specialized” in their credentials unless authorized to do so.

Expertise and specialization is heavily regulated at the state level.  Some states have gone further in their restricted verbiage. State rules of ethics should be reviewed prior to any policy drafting.

General Communications (Model Rule of Professional Conduct 7 Series)

The final social media ethics concern revolves around general law firm and lawyer communication. In personal and especially professional communication, all communications must be truthful and accurate. 

  Quick Reference
  Do

  • Credit appropriately
  • Fact check
  • Spell & grammar check
  • Correct errors promptly
  • Be transparent
  • Follow firm policies
  • Obey the law

Do NOT

  • Personally attack, become involved in an online fights or hostile communication.
  • Solicit or use commercial speech.  The content must be informative only. Nothing should propose a commercial transaction
   

Law firms and law departments should consider the following general policy guidelines when drafting social media policies. 

  • Identify all copyrighted or borrowed material with citations and links.  When publishing any material online that includes another’s direct or paraphrased quotes, thoughts, ideas, photos, or videos, always give credit to the original material or author, where applicable. 
  • Ensure material is accurate, truthful, and without factual error prior to posting. 
  • Spell and grammar check everything.
  • Correct any mistakes promptly.
  • When participating social media sites in a professional manner, disclose identity and any firm affiliation.  Never use a false name, alias, or be anonymous.  Many courts have looked poorly on law firms and lawyers using alias names while on social media sites.
  • Follow all firm policies and procedures regarding online communications.  Be respectful and do not make statements that are defamatory; racially, sexually, or otherwise insensitive or offensive; or otherwise improper or likely to conflict with the interests of the firm, its employees, clients, affiliates and others, including competitors. 
  • Follow the site’s terms and conditions of use.
  • Do not post any information or conduct any online activity that may violate applicable local, state or federal laws or regulations.
  • Avoid personal attacks, online fights, and hostile communications. 
  • Employees should never solicit or use commercial speech.  Employees should not use a site as a way to directly solicit business for the firm.  While a blog itself is not subject to the limitation on commercial speech, the content of a blog can be.  The content must be informative only, and nothing in the content should propose a commercial transaction or be for the purpose of directly gaining a commercial transaction.

Conclusion

As discussed in this article, there are many ethical considerations when law firms and their employees decided to use social media sites.  Similar to email emerging as the main form of business communication ten (10) years ago, social media is now the communication wave of the future. This new format is how the next generation of leaders presently lives and communicates day to day.  The legal community must embrace the new technology and the opportunity to educate employees.

[1] Model Rules of Professional Conduct are professional standards that serve as models of the regulatory law governing the legal profession.  However, each state board of professional responsibility has additional or supplemental states rules of ethics. State rules should be considered prior to policy drafting.

©2010 Baker, Donelson, Bearman, Caldwell & Berkowitz, PC. All Rights Reserved.

About the Author:

Meredith L. Williams is Baker Donelson’s Director of Knowledge Management.  Although trained as a lawyer, she is not actively engaged in the practice of law.  Instead, she oversees BakerNet, the Firm’s industry-leading intranet, and coordinates strategic growth on behalf of the Firm in knowledge management, competitive intelligence and technology.  Ms. Williams is widely recognized as a leading authority in knowledge management issues for the legal field, and is a frequent presenter and author on knowledge management and competitive intelligence. 

Ms. Williams is a member of the Association of Women Attorneys and the American, Tennessee and Memphis Bar Associations. In addition, Ms. Williams is Conference Vice President for the International Legal Technology Association 2010-2011. She is a recipient of the Dean’s Distinguished Service Award from the University Of Memphis Cecil C. Humphreys School Of Law for her volunteer work.   901-577-2353 / www.BakerDonelson.com

Bratz Hitz Back at Mattel

From the National Law Review’s Featured Guest Blogger Pressly M. Millen of  Womble Carlyle Sandridge & Rice, PLLC– the on going saga of Bratz & Barbie……..

It’s football season, so apparently it’s time to trot out the old adage about the best defense being a good offense. This time in the ever-lasting Barbie vs. Bratz fight that we’ve reported on most recently here.

According to an article in Law.com, defendant MGA Entertainment, Inc. (the Bratz company), has filed a new counterclaim against Mattel (Barbie’s company) claiming racketeering and theft of trade secrets in connection with an alleged corporate espionage ring.
 
Among the claims is that Mattel executives used fake business cards to gain access to private toy showrooms of competitors. Those actions, according to MGA, allowed Mattel to assemble an “unparalleled library” of competitors’ plans and products, including products not yet on the market.
 
Mattel’s lawyers are understandably dismissive, calling MGA’s filing “second-rate tactics by desperate lawyers” and indicating that the counterclaim won’t survive the pleading stage.
 
At first blush, although styled a counterclaim, it’s hard to see how these counterclaims relate to the case at hand concerning MGA’s stealing the idea for Bratz dolls from Mattel.

Reprinted with permission from Womble Carlyle’s Trade Secret’s Blog located at:http://wombletradesecrets.blogspot.com/2010/08/bratz-hitz-back-at-mattel.html

 Copyright © 2010 Womble Carlyle Sandridge & Rice, PLLC. All Rights Reserved. 

Not All Press is Good Press: Managing a Crisis

A friendly reminder from the National Law Review’s Business of Law Section  —Not All Press is Good Press: Managing a Crisis from Gina F. Rubel of Furia Rubel Communications, Inc. 

New York Times reporter, Peter S. Goodman, hit the nail on the head in his article, In Case of Emergency: What Not to Do. Goodman shares with us the realities of bad crisis management which equals bad press. The examples he sites are Toyota, BP (who even my 10-year-old daughter sees as an environmental villain), Goldman Sachs, and others. He also sites “image implosion” examples of LeBron James and Mel Gibson, although he skipped over Michael Vick. 

Goodman shares great points and the entire article is worth a solid read (or two). However, there are some important points all which are dependent upon the situation you are dealing with. 1) Heed established protocol: When the story is bad, disclose it immediately; however 2) there are times when silence is better. Tiger Woods can tell you why. And 3) don’t say “anything” if there’s a chance it will lead to hypocrisy and ridicule and especially if the media can tear you apart word for word. 

Goodman also reminds us that lawyers and P.R. practitioners often find themselves in a battle when it comes to handling crisis communications. This is something I know all too well – as a lawyer and publicist who handles litigation publicity. I have found my Id and Ego in battle over the best way to handle a situation many times.  (Don’t ask me if the lawyer in me is the Id or the Ego – the public relations practitioner seems to win out in me every time.) 

Goodman says, “In times of crisis, communications professionals and lawyers often pursue conflicting agendas. Communications strategists are inclined to mollify public anger with expressions of concern, while lawyers warn that contrition can be construed as admissions of guilt in potentially expensive lawsuits.” Both are correct and there can be a happy medium when they play nicely in the sandbox. 

At one point in the article, Goodman quotes Eric Dezenhall, a communications strategist in Washington, D.C., who worked in the White House for President Ronald Reagan. He says that a corporation in crisis is “absolute chaos” and that the lawyers and P.R. consultants “despise each other.” Although this isn’t far from the truth during a crisis, it makes a great case for advance crisis communications planning – a practice where most corporations (and lawyers) miss the mark. 

A crisis communications plan anticipates issues before they arise. It deals in scenarios and responses. It’s the “if this then that” game and it works. This process also works for lawyers dealing with high-stakes issues for their companies and clients. For example, when a law firm is going to file a complaint on behalf of a client, and the complaint deals with well-known entities, it behooves the law firm to understand who might see that “once-filed public” document and what questions could be asked. In many courthouses, journalists are assigned to review the public filings for the day to uncover stories. Just because a firm or client doesn’t request media attention doesn’t mean they are not going to get it. 

So what is a law firm to do? Employ media strategy. Ask: “If a member of the media calls about this complaint, what are we going to say? What if they reach out to our adversary first? Should we disclose the filing or is it better to take a wait-and-see approach with a lawyer-approved statement in place? Who will serve as the spokesperson? Who are the affected audiences? Do they need to know about the lawsuit in advance of filing? How does this affect the company’s bottom line and what are we going to do about it?” These are just a few of the questions that need to be asked. 

On the other hand, companies susceptible to lawsuits should also play the “if this then that” game. Rather than be on the defense, employ proper planning before a crisis hits. Defense firms and P.R. firms alike can provide added value to clients by being proactive – thus putting the clients on the offense whenever possible. 

At the end of the day, it is important that attorneys and public relations practitioners work together with the same agenda. Determine what needs to be accomplished and the best road to get there – even before beginning the journey.

© 2010 Furia Rubel Communications, Inc. All rights reserved.

About the Author:

Gina F. Rubel Gina Rubel is the president and CEO of Furia Rubel Communications (www.furiarubel.com). A public relations expert, attorney, and author, Gina teaches professional service firms nationwide how to use integrated communications to gain credibility, to get recognized and to build and retain business. She has been named one of Pennsylvania’s Best 50 Women in Business and a Philadelphia Business Journal Woman of Distinction.  215-340-0480 www.furiarubel.com