Lawyers who litigate business law disputes, securities class actions, intellectual property matters or even family law disputes can gain a great deal by engaging, early on in their matters, lawyers or legal academics with a strong background in what is known as “transactional law.”
Let me explain.
It’s probable that most people go to law school because they imagine themselves in a courtroom defending the innocent or putting away a bad guy. Or perhaps they imagine themselves arguing a complex intellectual issue in front of an appellate court.
But law students interested in business law realize they have a basic choice to make early in their careers. Either they become a litigator or what is known as a “transactional lawyer.”. The choice is a fateful one. Once made, it’s relatively unusual for a lawyer to switch to the other career path. For the most part, that means litigators and transactional lawyers lead very separate professional lives. Even when inside the same large law firms.
I was an associate with a transactional emphasis at two major law firms for five years. Then I left to teach business and securities law at a law school. At one of the firms, junior associates rotated among practice groups so I was exposed to litigation and business deals. But there was definitely pressure to indicate the direction I wanted to take my career. At the second firm there was only the basic choice between litigation and transactional law. As I had wanted to “do deals” from the outset this was not a difficult choice. Now I draw on those years of experience to train law students to understand business law from a “transactional” perspective.
During those five years of “doing deals” I rarely had contact with litigators and was never once inside a courtroom. Instead I spent my time – when not on airplanes – on the phone or in conference rooms with CEO’s, CFO’s, bankers, venture capitalists, entrepreneurs, boards of directors, accountants, and, of course, other deal lawyers.
Meanwhile, I think the litigators at those same firms spent much of their daily lives drafting and filing motions, preparing for and taking depositions, and engaged in discovery, trial preparation, negotiations and, of course, arguments and trials in courtrooms.
Transactional lawyers design business structures of all sorts. Then they negotiate the detailed and often complex terms and conditions that make those structures work. The goal, of course, is to design structures that are efficient in the sense that they achieve the client’s goal(s). While at the same time minimizing the client’s costs and risks. In other words, they are trying to insure the participants in the deals would not ever need a litigator.
Because deal lawyers design business structures and relationships, in part, to avoid litigation they can bring a unique and persuasive perspective to situations where a conflict or dispute does emerge, perhaps many years later, about a similar business transaction or structure. Litigators, however, may only realize relatively late in a matter that they either 1) do not have a complete grasp on the complexities and subtleties of business transaction; or 2) are not completely confident in their ability to explain how such a transaction works to the fact finder.
In a family law matter, for example, one of the parties to the dispute asked me to help the client’s lawyer understand and then opine on a series of transactions involving a successful startup technology company from its founding through to its acquisition by a major publicly traded firm. This included explanations of the founding process at the startup, the allocation of key intellectual property rights, the evolution of the entity’s capital structure, and a disentanglement of the large closing volume of documents that emerged from the acquisition of the startup company.
The client’s family law practitioners had very little exposure to these kinds of transactions. The attorneys were not even sure which documents might be available, what they might show and where they might be obtained. This is not surprising, of course, because transactional documents are often private. Even if its available as public filings with regulators like the Securities and Exchange Commission it may not be easily accessible or comprehensible to a litigator.
The opinion I prepared and the follow up deposition and trial testimony I delivered helped lead to a successful outcome for the client. I think my background in preparing nearly identical types of documents in very similar kinds of business transactions helped the attorneys present a stronger case on behalf of their client.
It’s important litigators realize that the field of business organizations law has expanded in complexity over the last twenty years. The sooner that an expert with a strong transactional background is involved in a matter the more likely it is that the expert can add value to the matter for the litigator’s client. Understanding transaction structures and parties can help the litigation team focus on relevant issues. They can also shape their argument on behalf of their client more persuasively and effectively. This may lead to an early and successful resolution of the case or reduce the chance of surprise as the matter moves forward. This increases the chances that the client’s position will prove persuasive to the fact finder.
