When occasional staffing or contract problems arise for small businesses, they need to seek out legal advice.
Most can’t afford to keep an attorney on staff for times like that. That’s when the concept of external legal counsel “at a fraction of the cost” can help, according to one Alabama firm.
Hiring an outside attorney can be advantageous for a smaller business that doesn’t need or can’t afford a staff attorney or may simply want advice on something specific, explains attorney Bert Spence, of Birmingham firm Rumberger Kirk.
“Every business is going to have some legal issues that they need to take care of,” Spence says. “They may have tax issues. They may get sued from time to time. They may encounter a situation where they need to sue someone for breach of contract — maybe something didn’t come through like it was supposed to,” he says.
Spence has quite a few clients who have experienced such issues.
“They’re not big enough to have people on staff for that kind of thing,” he says.
When a legal matter does come up, they call and ask him what they need to do.
“It may be something I can handle for them,” Spence says. “It may be something that I need to say, ‘This is a very specialized situation. We need to find you a very specialized lawyer that does exactly this.’”
According to Forbes magazine, businesses can benefit from engaging outside experts in areas like regulatory compliance, corporate governance, employment laws, customer privacy, advertising and intellectual property.
Other needs are more boilerplate, so to speak.
“Matters that are often outsourced successfully include administrative work such as transcription, legal research and analysis and contract work such as drafting and review,” Forbes states.
The term “external general counsel” really means “being a kind of general counsel for one of your clients,” Spence says. “It’s like putting your office in their office but not sitting with them all day long. You’re just there when they need you.”
For example, if a client has a tax need, Spence — not being a tax specialist himself — would refer them to Rumberger’s tax attorney.
If something really unusual happens, he may send them outside his own firm. “There would be some occasional things where I would have to say, ‘We don’t have anybody who does that because this is a very narrow specialty and you may need that higher degree of expertise,’” Spence says.
In such a case he would say, “Let me introduce you to an old friend of mine who’s at a different firm but knows exactly how to do what you need done.” Even when it involves recommending another firm, “your duty is to that client,” Spence says.
Such a trusting relationship between one attorney and a client tends to evolve over time, he adds.
As for the type of issues that arise, a small business that is trying to expand may need help with a construction problem. In the commercial real estate world things can go wrong with a loan, he says, or there may be quality issues with the building.
“The bulk of what I do all day long is litigating mostly commercial disputes, some personal injury defense work for manufacturers, and this hybrid commercial loan/real estate nexus where you’re dealing with commercial mortgages and defaults on those mortgages,” Spence says.
In today’s legal minefield of personnel issues, too, a proactive approach can go a long way toward avoiding future lawsuits.
Spence says some of his partners put together employment handbooks for human resource planning. That kind of front-end assistance will help guide a business in their employment relationships “so they don’t get into problems,” he says.
Another example of when an outside attorney may prove helpful is when the company is required to use its insurance company’s recommended lawyer to handle a claim.
Spence explains that if a company is sued for something covered by liability insurance, the insurer will pick the lawyer to work on the defense. “That’s going to be a lawyer, generally speaking, that the company has never worked with, doesn’t know or never met,” he says.
The company could call the attorney they have a relationship with and ask him or her to become involved in sort of a peripheral way. The attorney they know might help the insurance company’s designated lawyer answer questions that surface during the discovery process.
“That’s a thing that can come up when you’ve got a long-term relationship with a client,” Spence says.
Tom Oldweiler, an attorney with the Armbrecht Jackson firm in Mobile, says one advantage of outside general counsel is that he or she can call on the resources of an entire firm instead of just a department.
An outside attorney has experience from working with other clients as well, he says.
“Outside counsel brings a higher level of objectivity, and often clarity, than inside counsel,” he adds. Many businesses with internal counsel focus them on recurring issues, Oldweiler adds.
“A good use of outside counsel is to assign non-recurring issues requiring different experience or ability,” he says.
Companies tend to trust attorneys who have offered helpful advice through the years. Spence says he’s had a relationship with one company since 1988.
Even companies that can afford their own staff lawyers often use outside legal help, he says. Spence himself for years was the chief litigation counsel in the legal department of one of the top 10 banks in the U.S.
Many larger businesses have staff, or “in house” lawyers, but specialized situations may drive those attorneys to seek someone else on the outside with more expertise in a particular area, he says.
Or the business may have one staff attorney who would like to engage a specialized attorney from time to time to help with a case.
“The real job of in-house lawyers is hiring outside lawyers and overseeing their work and supervising them,” Spence says.
Deborah Storey is a Huntsville-based freelance contributor to Business Alabama.
This article appears in the August 2023 issue of Business Alabama.