This is the third in a series of columns based on a recorded discussion with George Collins, a master, teacher and mentor in the Chicago bar, who died in October at age 85.
George Collins represented many lawyers and law firms over the past six decades and was scrupulous about not representing anyone if he had ever represented any other member of their firm.
“I would say fully half, if not more, of the opportunities we might have to participate in a firm breakup we just can’t do because we got people on both sides. In those cases, I just back out,” he told me.
What about asking for a waiver?
I asked George about his general approach to firm breakups.
“A firm breakup is either a total disaster or it’s a mediation. First of all, when the firm starts to break up, there’s no repair. … You may never have noticed this, but lawyers are somewhat egotistical. When a law firm breaks up, it’s broke up before I even know about it.
“The correct thing to do with a firm breakup is you forget about your checkbook, you spend what you have to spend, you get the best mediator you can get and then that’s it. You put into the mediation agreement that once you’ve agreed the mediator becomes an arbitrator with full powers to enforce the agreement.
“If you get into litigation, it lasts forever, it costs infinity and it’s very seldom you get a satisfactory result. What the lawyers involved don’t realize is you can have a firm breakup going on and you can have lawyers who ordinarily would bill six hours a day or seven hours a day on firm business, they become entranced with this process and everybody quits making a living. The two firms’ revenues drop. The lawyers’ revenue drops to next to nothing. There’s some very good lawyers in this field and I think they would all tell you the same thing. You’ve got to mediate and you need to mediate quickly, and you need to get everybody on their separate way.”
What are the most important factors in negotiating a breakup?
“First of all you have to figure out who is the key person. You know who’s the key person on your side. You’ve got to figure out who is the key on the other side. If they’re representing themselves, that’s stupid. But you’ve got to communicate either through their attorney or so forth with the key person on the other side. You have to figure out what do the people really want. What they want to do is disgrace the other side and make them ashamed of themselves, but you’ve got to figure out what do they really want. Where are they at? Then you negotiate a bit toward that, and if you haven’t filed a suit you try to not file it. File it if you have to, but then you suggest mediation.”
I asked Collins why he thought breakups happen in the first place, and how partners can avoid them.
“The most frequent cause of law firm breakups is perceived inequity and division of the money. That would be the deepest cause. There are other causes, personality differences, differences in what should be the policy of the firm, should we take workers’ comp cases, should we refer them and get referrals … That can lead to trouble, but the real trouble is a perceived inequity and division of money. Whatever agreement you make — one-third, one-third, one-third or whatever — there will come a time in any group of three or 10 or whatever where there’s a star who makes more and then wants more. Governing that difficulty is the difference between a law firm growing to be a big one and a law firm going into dissolution. I would say that’s the main thing is just money.
“The big law firms, they are not really law firms. They are collections of small law firms. There’ll be a practice group that does wills and that practice group will have an annual resetting of its percentage of the total. The big law firms, they’re really skillfully run. They work on, ‘What’d you do last year?’ They’re careful and they still have break-offs all the time, but everything — not everything, but almost everything — is economic. There can be other things. There can be personality differences, somebody expects to be praised constantly, things like that, but the personality differences if you probe into them, you will find a money difference is the basis of the personality difference.
“The answer is to have a clear understanding and to reset. Nothing is forever. You have to reset. If a partner gets old, that partner tactically should say to the other partners, ‘I’m taking too much. Let’s reset,’ and then the firm stays together. That works in small firms. In larger law firms, you got the egocentric nature of lawyers is such that a lawyer cannot believe that he should reset his percentage.
“I’ve seen law firms break up over the who’s got the corner office, who’s got the windows, two sets of windows instead of one. It’s all economic.”
Sometimes, Collins said, the rational, third-party view that a mediator can provide is the only thing that can make feuding partners resolve their differences.
“We had a case last year with an enormous law firm, and a solo lawyer that they fired because he married a pole dancer. That was not something they approved of. She’s a good woman, had a child and they’re happily married — anyway, she did at one point star in some productions. [The firm] said, ‘We’ll mediate.’ I said, ‘Then you pick out the mediator, and as long as the mediator has Cook County judicial experience — I won’t tell you who it is — but I would probably take that mediator.’ They wound up picking a former federal magistrate. Nice lady that had been in my district. They wanted to take depositions, they wanted to go to Texas and interrogate people who knew about her and all that. She said, ‘No, this is a commercial matter. It’s a contract. Did you have the right to fire him? It doesn’t say in here, if you marry a pole dancer you get thrown out of the firm, and we have a right to veto your choice of wife.’ It was ridiculous. She knew enough about life to know that you can’t say to a lawyer, ‘You have to marry a certain type of person.’”