The Delicate Art of the "Big Time"

Every lawyer has experienced being "big timed"; mostly because laywers are intelligent and prideful people always looking for an edge on each other. So when you meet another lawyer who has either a lot less experience or who went to a much less prestigious school than you did - you're likely to immediately perceive them as less capable. Of course, not all lawyers act on this prejudice. Despite what you may think or have experienced, the legal community is not completely full of bloated and self-absorbed asses who if they got any further up their own behind would become an M.C. Escher sketch. That's just most of us. The way that kind of lawyer acts once they find out how long you've been practicing, or what firm you work or don't work for, or where you went to school is to talk to you as though you're an idiot and to act as though they have all the leverage in a matter (despite what the actual equities may be).

One of the reasons I decided to be a transactional attorney (as opposed to a litigator) was to avoid as much of this as possible. I have always had plenty of personal conflict and drama in my life, and didn't want to sign up for any extra. What's more, I didn't find the upscale legal community particularly awesome on a social level, and it's difficult for me not to take the sort of treatment I'm talking about personally, which was a recipe for disaster (or at least clinical depression). And for the most part, my dealings with opposing counsel have been much less vitriolic and full of posturing than my litigation colleagues experience.

For the most part, since I went to a decent law school, I get usually get "big timed" based on the fact that: 1. I've only been practicing for four years or 2. I don't work for a big law firm (or any law firm for that matter. And that's recently what I got from a Las Vegas attorney who was seller's counsel in an asset purchase. He was the consummate "big timing" lawyer, from editorializing the deal with his own vision of what the terms should be, to constantly talking about "in his experience". And for the most part, I accommodated him. There's usually little, if any, need to start a fight in a transactional setting; and in this case, the equities and leverage were so soundly in my client's favor, that there was little negotiating that going to take place. We were in the take-it-or-leave-it position. Which didn't give us the right to force unfair terms, but it certainly put us in the driver's seat.

At the eleventh hour, when we had taken documents to seller for their signature (despite being advised against it by their big time lawyer) we discovered that Mr. Big Shot had made one of the most rookie of rookie mistakes. Because as every transactional lawyer will tell you: STEP ONE in any document is making sure you've got the PARTIES' RIGHT at the start of it. I had incorrectly assumed that one of Seller's officers was also a shareholder and drafted the document to that effect (including the opening paragraph and the signature blocks). Both Seller and Seller's counsel were fully aware of who the shareholders were and weren't (made simple by the fact that there was only one) but after weeks of (ostensibly) reviewing the documents, they failed to notice my misunderstanding about the involved parties.

Despite a big office and a big firm partnership, Mr. Big had failed to carefully read even the first sentence of the document I had sent for his review. Yet, he had no problem advising his clients not to proceed with the transaction and to give me comments on that same document. It was a good lesson for me, because, just as inappropriately as he had assumed I was not a very good lawyer based on my experience and business card, I had assumed the opposite based on his. The truth of the matter is, what makes a good lawyer has little or nothing to do with the diploma on his/her wall, the letterhead on his/her correspondence, or the years he/she has logged in practice. It's all about who you are and how you practice. Especially if you're an ass who doesn't actually read the documents you get to review.

The Wrong Operating Agreement

There are a lot of places online who will sell you on the promise that an Operating Agreement for your new limited liability company (LLC) is something that you can do yourself just by filling in a few blanks and sending them a nominal fee. Legal Zoom calls this a "custom" Operating Agreement. Of course, by "custom" they mean that they'll install the name of your company and your members in it. They won't ask you any questions about your business, the nature of the ownership structure or anything else for that matter. You can even buy a prefab Operating Agreement at Office Depot - just fill in the blanks, and what could go wrong, right?

The problem with these agreements is that they assume a membership situation which was a lot more common when LLCs first became popular. At that time, it was common for LLCs to be much like other partnerships, where all of the members were contributing capital and would base their membership percentages based thereupon. In the Operating Agreements for those types of companies, the equities between members were fairly simple, and there was no need for preferential financial treatment for anyone. The problem is, that as LLCs have become more and more popular (based on their tax advantages, flexibility, and minimal corporate maintenance) another, more popular, structure emerged.

In most start-up cases when an LLC is used, there are both "money" members and "sweat equity" members. The "money" members mostly (if not wholly) contribute cash for their ownership position, and the "sweat equity" members contribute their services (both past and future) for their ownership positions. This is a great way for investors to get money to entrepreneurs they believe in, and for those with talent and vision (without a whole lot of cash) to get businesses started and successful. But, these members are in vastly different positions when it comes to the finances of the company, and how they would need to be compensated in the case where the LLC is dissolved.

Unfortunately, these prefab or marginally "custom" agreements don't cover that. Just because you have a common business arrangement doesn't mean you can use a "standard" document. For only a little bit more money than you'll pay for something useless from a huge company that is forbidden from actually offering legal advice, you can have a lawyer make a few small modifications to a "standard" agreement which will actually make it "custom" and will actually give you an Operating Agreement you can use.

The Release and the Catch

So you've finally gotten in touch with someone at the network and they like your two minute pitch... Congratulations! You've made it farther than most. But now the network guy tells you that he'd like you to send him your promo video/treatment/etc., and he sends over something for you to sign - just as a formality - so that you can send him your materials. He may even have told you that it's as much for your protection as it is for his. But that doesn't mean you shouldn't read it, and just because a document (like a release) is short, doesn't mean it can't hide some very nasty things in some very innocent language. And before you know it, you may have just signed your idea completely away.

I recently had a client who was submitting his show idea to a major network, and got a release agreement with the following language:

... all results of Submitter's services, all materials contained in the Submission, and all uses thereof in connection with the [name omitted] production or project... belong to [name omitted] and shall, to the greatest extent possible, be considered "works-made-for-hire" within the meaning of the United States Copyright Act.

Now, you may have simply read over that and not even noticed that you just gave away all the rights to your work by signing a document with this in it and then submitting your idea. Yes, seriously. And this was not some fly-by-night start-up operation. This was a national network. Ultimately, when pressed on it, they deleted this language. But it leaves one to wonder, just how many suckers signed this thing, and gave it all away.

REMEMBER, ALWAYS READ BEFORE SIGNING, and if you have any questions, ASK A LAWYER.

The Art of Submission

No, no... not the MMA kind - although it would be cool to learn that. I'm afraid I can't me of much assistance there. But there are some submission issues that have come up recently. First, using lawyers to submit unsolicited scripts/screenplays/etc. and second, releases (which I'll discuss in a later posting).

Many large studios/production companies require you to have an attorney submit your unsolicited work to them. And in turn, countless aspiring writers have combed through their social networks to locate a lawyer who has practiced, at least in some minor part, "entertainment law". But the submission of scripts requires no more legal expertise than cooking a decent omelette, or more to the point, getting into a popular nightclub. These studios/companies are not trying to find creative ways to employ showbiz lawyers, and this is not a creative way to generate legal fees - these entities have simply shifted some of the burden of determining the legitimacy of submitted work to a group that can't really say "no" to the added workload.

Showbiz lawyers need showbiz, and if Hollywood says that this cadre of legal professionals will be the new gatekeeper for manuscripts and screenplays, then that's how it will be. And so it is. And now, with no additional cost to itself, the tv/movie industry has significantly reduced the number of ill-considered submissions that it has to review. The real purpose of requiring you to find a lawyer to submit your work, is to force you through this additional layer of scrutiny.

Most lawyers who don't work regularly in entertainment can't really even submit a script on your behalf, as most studios won't accept material from a lawyer or firm they don't already "know" - and for the lawyers that can get your stuff through, most of them aren't going to simply take the submission work if they don't already know you. From a colleague of mine who is a partner at an entertainment law firm:

I have had some luck in submitting projects to production companies that I have relationships with, but even then it's pretty spotty. I never feel right charging clients for script submission work, because I feel like I'm just getting the client's hopes up and they're going to be disappointed in the end. On the other hand, taking them on with a 5% deal is like doing charity work without the satisfaction of saving lives or trees.

Your best bet (although I know it's news that no writer wants to hear) is to continue to try and find an agent - who will already have a connection with an entertainment lawyer who submits work on their behalf. Besides, you don't really want a lawyer deciding on the viability of your creative efforts, do you?

State Bar Annual Meeting and Blog 2.0

Fresh off the finish of the State Bar of California's Annual meeting, I'm headed back to Burbank from points south with pages of full of insight information and ideas and re-energized on my practice. Most importantly, it's the use of Read Before Signing in a more substantive and more readable way. The entries will be shorter and more frequent. There will be an associated video blog (hosted on our own YouTube channel), and we'll even be on Twitter (which I've truly been trying to avoid). It's an exciting time to be a part of the new business models for the practice of law and MyContractsGuy intends to take advantage of this time by being on the forefront of these changes - bringing you the real help you need, how you need it.

One of the most important things I learned at the Annual Meeting was actually the most disappointing things about the event. I was hoping to run into many other lawyers who were like me: young, yet experienced and talented, and taking the opportunity generated by the widespread failure of the large law firm business model to create new value propositions for small to medium sized businesses and sole proprietors. I was looking forward to sharing ideas and lessons learned with these attorneys, and adding them to my network of service providers who I could refer when I got inquiries from clients that I was not going to handle. Unfortunately, I met less than five. Actually, I met three.

It was at first, disheartening (and made the few social events at the meeting unbearably awkward for your favorite contracts attorney), but then I realized that it's actually great news. So MyContractsGuy.com is still a trailblazer, and still able to create unprecedented value for its clients. The majority of lawyers still insist on outdated pricing and service models that can cost your dearly in a time when overpaying is the last thing you can afford to do. It will be fun to pass on the lessons learned at the meeting and including you in the new ways the blog will grow in the days and weeks to come!

STAY TUNED and welcome to Read Before Signing 2.0!