As some of you already know, on Friday, May 29, 2020, I’m scheduled to present a 90-minute webinar on Power Pacts: Agreements to Fuel Law Firm or Career Growth and Unleash New Revenue Streams  (click on the link for details or to register, click HERE. But for those of you who can’t attend, I’ve devoted this post to some of the red flags you may encounter when considering a contractual work arrangement or joint venture with another law firm:

1. Are the lawyers offering the deal licensed and in good standing?  Sad to say, one of the oldest tricks in the book is for a disbarred or suspended-license lawyer to bring on an of-counsel or associate on a contract basis to stand in and sign pleadings while the disciplinary penalty runs its course. Trouble is, most disciplinary orders prohibit the wrongdoing attorney from practicing law not just directly, but also indirectly through others.  By accepting an of-counsel or fee share arrangement in these circumstances, you’d be aiding or abetting another lawyer in violating a disciplinary order which could get you in trouble too.

2. Is this a “you don’t get paid until I get paid” situation?  Some power pacts state that the lawyer providing the services won’t get paid until after the fee is collected from the client.  That can be a problem because if the hiring attorney doesn’t invoice the client for two or three months, you’re left holding the bag. And even if invoices are timely, what if the client simply refuses to pay?  In many power pact arrangements, the serving lawyer agrees to a below market rate in exchange for certainty in the form of work flow and payment. Unless you know a lawyer well or you’re commanding an enormous rate that makes any risk of non-payment worthwhile, make sure that the hiring lawyer pays for the work after it’s complete regardless of when the client pays.

3.      Is the attorney trying to slough off a problem client on someone else?  The only disciplinary threat I’ve ever had in my three-decade career came from a client whose attorney had retained me as local counsel. A quick google search of the fellow would have quickly revealed the kind of serial-litigant that I routinely turn away.  Unfortunately,  I trusted the attorney who retained me and thought that because I hadn’t signed a representation agreement with the client that I wouldn’t be on the hook for any misconduct. Fortunately, the situation never went past the stage of threat but lesson learned.

4. Does the hiring firm have malpractice coverage? It can’t hurt to ask about the retaining firm’s malpractice coverage? Though you should always carry your own, you don’t want to be caught in a situation where your insurer has to pick up the bag for a law firm practicing without coverage.

5. Are you just another pretty face?  In theory, power pacts should benefit both parties, but in practice, they can fall short. Many times, a firm will seek a power pact arrangement for the sake of having another body to bid on a contract, or to post a face on the firm website without any intention of passing work along.  Before entering into a power pact and making it official with an announcement or a website, be sure that you get as much benefit as you give.  An even-sided arrangement isn’t just important as a matter of equity but also ethics: most jurisdictions state that terms like “of counsel” or “associations” are properly reserved for bona-fide, ongoing arrangements and are considered deceptive in other contexts.

6. Is your power pact arrangement too close for comfort? On the flip side of a loose power pact is one that’s too close for comfort. Beware situations that could give rise to imputed partnerships which could make you responsible for the hiring firm’s malpractice.

For more information on Power Pacts, register HERE for our upcoming webinar at 1 pm ET on May 29, 2020