Category Archives: For lawyers

Dealing with difficult clients

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Once again, we’re bringing you helpful information from “the front lines” — an attorney who has actually been there!  This week, we caught up with Kate Gillespie.  Kate has practiced for years, and she has helped some wonderful clients and some not-so-wonderful clients.  She gives us (and you) a little advice about how to handle those difficult clients.

One of the great things about being a lawyer is the change that you can make for people – sometimes for one person, sometimes for a larger group of people.  It is fascinating what your education, skill and wisdom can do to help.  You can change lives if your clients let you do your job.  Sooner or later, though, you will encounter a client that will not let you do the work you were hired to do.  These “difficult clients” can make you want tear your hair out; or worse, they can make you want to tear their hair out.

I recently took a case through trial with one of these difficult clients.  I was challenged on each and every issue.  I took the case late in the litigation and didn’t have the pleasure to prepare and represent him during deposition; so, I was clueless as to his penchant for remembering certain facts that had never surfaced prior to his providing testimony.  I was blindsided by his confidence in his legal “expertise” and with that, his chronic lack of trust in my abilities to act as his lawyer.  And, I was floored when I discovered that no issue was too small to be challenged on, like appropriate trial attire.  (Green sweat pants?)  The bottom line is that he believed he knew best and I was a mere mouth piece.  I was, however, a mouth piece with a license to protect.

After handling that grueling client, I did some serious soul searching on how this client and many like him should have been handled.

1.  Screen your clients.  At intake, conduct a complete interview.  Get to know your potential client, find out what other litigation she was previously a party to and why.  Find out if she is employed or not (this is important not for damages issues, but for your sanity.  A client with a lot of free time, is a client that will be taking up your “free time.”)  And, find out if any other law firm withdrew from her case and why.  If the potential client’s case is already on file, call defense counsel and find out what their experience has been with your potential client BEFORE you take the case.

2.  Specify your role in the case.  After you conduct research and decide to take the case, don’t simply rest on your decision.  Spell out those items that are purely legal in nature and explain that those items, while they can be explained if requested, will not be issues for the client to decide.  Simply put, you are being hired to do a job and those items are included in that job.

3.  Hold your ground.  If you find that the client is ignoring your advice and, in turn, harming his case, discuss with him your professional advice, establish that it he is choosing to ignore the advice, and let him know that ignoring your advice could be detrimental to his case.  If the rejection of advice is rampant, follow-up the meeting with a letter to the client explaining the potential consequences of ignoring sound legal advice.

4.  Withdraw, if necessary.  If after all the letters have been written and your client still will not follow your advice, withdraw from the case.  In any relationship, there must be some sort of meeting of the minds.  If your client is not working with your advice, it is clear that there was not a meeting of the minds regarding the service your client was hiring you to do and you must disengage the relationship.  It will save you time, money, and many sleepless nights.

Kate Gillespie is an associate attorney at a Los Angeles law firm and focuses her practice on the firm’s drug product liability cases, class action cases and commercial trucking accident cases. Her drug litigation includes cases involving birth defects related to antidepressant use and suicide in patients taking SSRIs. More questions for Kate?  Please contact her on LinkedIn.

Want to connect with us?  Check us out on LinkedIn and Facebook.

How to Recover Your Client’s Fair Share Part II: Enforce Contract Compliance

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Once again, the talented and exceptionally brilliant Cedar Boschan has agreed to appear as a guest blogger this week.  To learn about laying the groundwork for maximum royalties, please see her first guest post, “How To Recover YourClient’s Fair Share: Negotiate Better. “

How to Enforce Contract Compliance

Even if contractual language is less than ideal, you can take action to ensure that licensees and business partners honor their agreements with your clients – and that your clients realize their full potential with respect to both earnings and contract renegotiation leverage.

1.    Pay attention - Many of the claims a trusted royalty auditor makes are matters that could have been resolved without an audit.  The moral: Don’t assume the business manager or the client is paying attention.  Here are some things to look out for:

a.    Track rights that “trigger” royalty rate escalations and payments:

i. Did you approve a reduced royalty rate on a “most favored nations” basis for one or more hit products?  If so, requisition rate analysis before your client’s right to object expires.

ii. What contingent payments may be due your client?  For example, a certain major record label frequently agrees to pay publishing fees worth hundreds of thousands of dollars upon certain criteria.  Yet, many artists who are eligible for the fees have not sought to collect them.  My firm is pleased to provide this service as part of an audit, but if attorneys and accountants tracked the clauses that were triggered, clients could receive the fees years earlier.

iii. What costs are not recoup-able?  Thorough cost analysis requires a thorough auditor, but there are ways to identify problems by matching approval rights and other contractual provisions to charges on your clients’ royalty statements.  For example, in the video game industry, contracts may require a publisher to credit a developer’s account upon its return of assets borrowed from the publisher.  TIP: If the first statement of account has not been rendered yet, an attorney may wish to request a detailed cost accounting from a client’s licensee upon the release of a product, or possibly sooner.  This should be analyzed immediately because, by the time product sales peak, it may be too late to audit costs.

b.    Watch the clock if you want a shot at reducing the charges to your client’s account and claiming unpaid royalties.  At Hurewitz, Boschan & Co., calls come in on a daily basis from potential clients who want to audit the royalties for a hit product … a decade after most of the sales occurred.  If your client has a spike in earnings, depending on a number of factors, you could have as little as a year to audit those earnings.  Further, as mentioned above, most of a project’s costs may be incurred early on – before there are royalty earnings.  Calendar your client’s objection deadlines in connection with costs, not just earnings.

c.    Read the news to know where the cash will come from tomorrow:

i. Follow relevant court proceedings.  For example, if you represent recording artists, make sure you read the September 2010 9th Circuit opinion on appeal in the case of FBT Productions LLC v Aftermath Records, which may impact whether your clients are entitled to a royalty or half of net receipts in connection with music downloads.

ii. Share with clients and their accountants news of major industry settlement and license agreements if you expect that it will result in earnings for your client.  Ask your client’s accountant to advise you if this income goes unreported.

iii. When their clients’ licensee is the subject of an upcoming merger or pending sale, savvy attorneys call me to discuss sending out audit notices (because the licensee might pay the client to go away, in order to look more attractive to a potential buyer).

iv. Join Twitter – it is a great resource for breaking IP legal and business news (follow me @Auditrix) – and read the trades for more in-depth analysis.

2.    Audit strategically – Every client’s case is different, but that doesn’t stop attorneys from asking me for a rule of thumb to determine whether it makes sense to audit.  Some say that if a client has $1 million in earnings, and the account is recouped or nearing recoupment, it will make sense to audit.  This may be true, but I have conducted many successful audits for clients with less than $1 million in earnings and for reasons beyond financial recovery (i.e., to identify breaches of contract, to gain negotiation leverage).  The question you should ask as your client’s counsel is not whether to audit, but how much to audit.  This is because even clients where a full audit does not make sense may benefit greatly from a “desk audit,” and/or the “Pay Attention” tips above.  Therefore, you must have in your network a trusted auditor review the circumstances of all of your clients and guide you in the cost/benefit analysis of determining the how deep to go, in order to ensure the best interests of the client are being served.

3.    Know the game:

a.    The decision to advise a client to audit rests squarely on your shoulders. (Often, if an attorney does not suggest an audit, nobody will – not even a business manager, unless the business manager happens to do audits, which may present a conflict of interest, incidentally.)

b.    Don’t depend on the client to initiate an audit.  Many clients come to their first audit believing that their business partners would never shortchange them.  Sadly, these clients couldn’t be more wrong in most cases.  Further, many licensees will try to make a licensor feel guilty for asking questions or initiating an audit.  As a client advisor, you must understand that this is a business tactic of licensees and if you chose professional auditors, they will be respectful of maintaining your clients’ business relationships.

c.    Tolling agreements are the norm.  In the old days, staff employed at major companies responded to audit requests and settle an audit.  Not so, today.  Nowadays, the companies we audit refuse to provide more documents, while the documents that they agree to provide can take months or years to be produced.  Therefore, it is often necessary to enter into tolling agreements so that the clock on the statute of limitations stops ticking while the audit is completed.  Not every auditor is aware of this, so as an attorney, you need to be.

d.    Be prepared to go to court.  It isn’t common, but some audits don’t settle until they reach “the courthouse steps,” while others raise matters that land in court.  This is one reason why your client’s licensee or business partner must believe that your client may consider litigation.  (In my experience, licensees who know your client cannot afford a lawsuit may respond to an audit by refusing to provide key information and denying your client’s audit claims.)  Therefore, be willing and ready to request tolling agreements and file a complaint to begin moving forward with a lawsuit if the licensee does not cooperate with your client’s audit or other deadlines.  This has a few implications:

i. When you choose an auditor, you may be choosing an expert witness as well.

ii. If you need your auditor to serve as an expert witness, do not engage your auditor on a contingency basis.  If you do, your auditor cannot serve as an expert witness because he or she will have a financial stake in the outcome of the case.

iii. Plan the communication strategy and discuss with the auditor what types of work product may be discoverable.  I often communicate solely with the legal counsel of my clients and not directly with the clients in order to preserve attorney-client privilege.  Discuss this with your client and the auditor up-front.

iv. If you are a transactional attorney, is there a litigator you trust to whom you can refer your client?  Your auditor may be able to refer your client to a strong litigator.

Implementing the above steps – paying attention, auditing strategically and knowing “the game” – may deliver impressive results, such as additional payments to your clients and possibly the power to renegotiate their contracts.  However, you will need more than this article.  Working with a trusted auditor to tailor proactive strategies to your clients’ unique needs goes much further, and it will help you build a legal practice with loyal lifetime clients.

Additionally, since cost is a primary factor in determining the best course of action with respect to compliance enforcement, check back soon for my final guest posts on this blog, How To Recover Your Client’s Fair Share Part III: Minimize Audit Costs.

In the meantime, please share: Do you have a strategy or system for tracking contractual rights?  As an attorney, how do you work with auditors and business managers?  Do you share your clients’ contracts with their accountants?   Confess: Have you worked to negotiate contingent compensation for a successful client, only to have that provision go unchecked until now?

Cedar Boschan’s royalty audit firm Hurewitz, Boschan & Co. LLP serves those with intellectual property rights interests.  The firm focuses on royalty, participation and other contract compliance audit consulting services. It also provides litigation support (such as damage theories and expert witness testimony), administration and statement preparation, and forensic investigations.  Cedar can be reached at boschan@royaltyauditors.com or (310) 882-6381.  If you have music clients, follow Cedar’s links to music business news on Twitter to take a first step in “paying attention” to music royalty news.

The Long, Winding Road To Funding Your Settlement: Timing of Settlement Funding

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We’re proud to announce another post by one of our guest bloggers.  This week, in order to stay on top of the California legal market, we asked Kate Gillespie, an experienced California attorney in the fields of drug product liability cases, class action cases and commercial trucking accident cases, to give a few words of wisdom.  We hope her information can enrich your California legal practice.  (And remember, if you have any questions about how to find your dream job at your dream firm — contact us!)

You did it!  You settled your case — big or small it always feels good to get your client not only a positive resolution, but a quick one, too (at least quicker than if you took the case through trial).  But, don’t sit back and kick up your heels just yet because your job of reducing your case to that one tiny piece of paper – a check – is not over, in fact, some may say it has just begun.

Settlement of a case is not the end of your case, it is actually the threshold to a slew of interesting questions and negotiations, all dealing with funding that settlement.  These items include:  negotiation of the timing to fund the settlement, negotiation of the Release Agreement, negotiation of your client’s liens, processing Medicare forms to negotiate the Medicare lien, pursuing probate issues, pursuing settlement approval from the courts, deciding whether a lump sum or structured settlement is better for your client to protect your client’s settlement, and determining what should be done if your client is receiving government aid and the settlement threatens to derail that aid.  Whew!

It sounds like a lot and it is a lot.  So, obviously, it is important to be prepared to tackle these items immediately.  In fact, some of them should be handled in the final negotiation of the settlement.  But, as they say “one step at a time, sweet Jesus.” This blog post will focus on one topic:  negotiating the time that the defendant has to fund the settlement and including the date in the initial settlement agreement, right there in front of the judge or the mediator or arbitrator.  This happens before you get to the nitty-gritty of the Release Agreement.

Recently, there has been a move by the defense bar to extend the time to fund settlements.  It used to be standard that settlements funded in 30 days.  It wasn’t even an issue.  Lately, however, the 30-day window that allowed you to get all of your paperwork together has slowly and consistently been expanded to 45 days, 60 days and even 90 days.  What gives? Well some may blame the economy; but I, myself, think the insurance companies have figured out that they can get this liability off its books (technically), but have the money remain in the account and grow interest (which it doesn’t have to pay to your client).  Now, I know what you are thinking – interest is not a big deal – but it is a big deal for your client.  The client wants to be done with the stress of dealing with their case; and every day that passes after a settlement with the adversary holding the money is a day your client feels stuck.  Not to mention the couple hundred bucks they are missing out on in interest (provided they invest the cash).

Back to the issue at hand.  If left unchecked, defendants will take as much time as they can to fund a settlement.  Don’t let this happen.  During your settlement negotiations, demand, at the very least, that the settlement be funded within 30 days.  This means that you must agree to finalize the Release Agreement, have it fully executed and returned to defendants within that time.  You have to move to get it done, but it is worth it to you and to your client.  If nothing else, this demand sends a message that you are focused on securing and finalizing the settlement and will not allow the funding process to drag out indefinitely.  So, nail them down to a specific time to fund.  Good luck.

Kate Gillespie is an associate attorney at a Los Angeles law firm and focuses her practice on the firm’s drug product liability cases, class action cases and commercial trucking accident cases. Her drug litigation includes cases involving birth defects related to antidepressant use and suicide in patients taking SSRIs. More questions for Kate?  Please contact her on LinkedIn.

How To Recover Your Client’s Fair Share – Part I: Negotiate a Better Contract

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It’s that time again!  We present a different point of view for you, the California attorney.  This week, we invited royalty auditor, Cedar Boschan, to talk a little bit about something we all care about — getting more money for our clients.  Have questions that this post doesn’t cover?  Contact us!  We’ll be happy to help.

Ramping up your entertainment or IP practice?  Looking for a way to differentiate yourself in the job market?  Do you want to transform the trajectory of your career and become a power player?   Take a page from the rulebook of entertainment attorneys: Secure a bigger share for clients and build an elite reputation and a loyal clientele.  No matter what your area of practice, getting more money for your clients will always be appreciated.  Although I’m a royalty auditor, and therefore, I work with entertainment attorneys in particular, the rules are the same for all types of practices.  Negotiating better contingent compensation provisions is the first key to helping you recover more money for your clients.

When it comes to negotiating accounting provisions, consult with a trusted royalty auditor as you red-line definitions and provisions related to royalty calculations, accounting due dates, objections and audit clauses.  Such a consultant can offer insights regarding royalty and profit participation calculation and accounting provisions.  Here are some additional points that she can help you navigate:

  1. Clear and Simple Definitions of Contractual Terms – A licensee will not account correctly to your clients when its staff cannot understand the accounting provisions.  Inviting an accountant to weigh-in on definitions, especially those relating to Net Sales, Gross Sales, or Adjusted Gross Revenue (including any deductions or other amounts that can be charged to your client) is key to your understanding of how the language you draft may be interpreted.
  2. Objections and audit periods – Recently, an attorney asked me why I focused on the objections clause in his client’s accounting provision – instead of the audit clause – to determine the period subject to our client’s royalty compliance audit.  In fact, there is little point in auditing anything to which the client no longer has a right to object.  This particular client’s objection provision was not favorable.  It stated something along the lines of “Statements of account will be binding unless your written objection is received within two years of the date that the statement is due.  Such written objection must cite the specific basis therefore.”  This clause potentially requires us to issue an audit report before we conduct an audit of a two year period.  The bottom line is: many attorneys do not realize that the objection clause may limit the audit period.  Thus, the longer the objection period, the better it is for the licensor or creator of the subject material (four years is better than two).
  3. Applicable laws – Laws vary by state and territory, so it is important to appreciate the impact that local laws can have on the contract you are negotiating.  For instance, if a recording contract is subject to California state law, your artist client may have audit rights pursuant to state law, regardless of the terms of the contract.  Applicable state laws may also have this can impact an auditor’s calculations of interest due, foreign tax withholding and other claims.  Further, in the event of a dispute, you may wish to ensure that the contract is subject to US law and not that of another territory.
  4. Not all audit clauses are created equal, but they can be some of the provisions that require the least negotiating leverage to change.  Here are some important points to consider when negotiating an audit clause

a. Scope of the audit (can an auditor review manufacturing and digital distribution agreements and records, or   just “sales” records)?  This can make an enormous impact on the audit procedures and results.

b. Who will pay for the audit?  When representing licensors, I suggest including a clause that requires the licensee to pay for an audit that discloses an underpayment.  This is standard in many industries, but less common in the entertainment industry.

c. Who can conduct an audit?  Many audit clauses require an independent CPA to conduct an audit, even though an author may be better off hiring an experienced auditor who may or may not be a CPA or an attorney – and who will focus on finding underpayments to the client , not over-payments (so strike “independent” as well as “CPA” if possible). Since my firm has both CPA and non-CPA auditors, so this isn’t usually a problem for us.  Also, some audit clauses require than the auditor not be engaged on a contingency basis. Although most reputable auditors work on an hourly, not contingency basis, times are changing and if I were a creator or licensor, I would not want any restrictions on who I can hire and on what basis.

The above may help transactional attorneys negotiate a more favorable agreement for their clients, in order to lay the groundwork for maximizing profits down the road. Unfortunately, as we will learn in part two of this three-part series, having a great contract is not enough.

Next week we will cover how to enforce compliance, which is something that can be done even if you have a lousy contract with which to work.  Both transactional attorneys and litigators can gain a lot by reading about compliance enforcement from an auditor’s perspective, so please check in next week for “How To Recover Your Client’s Fair Share Part II: Enforce Licensee Compliance.”

In the meantime, do you have any experiences to share about audit or accounting provisions?  Confess: Do you usually go with boilerplate language proposed by the other side, or do you spend a lot of time negotiating these points?  Do you have questions about any of the terms frequently found in accounting provisions?  Have you worked with an auditor to negotiate contingent compensation matters?  Let us know!

Cedar Boschan’s royalty audit firm Hurewitz, Boschan & Co. LLP serves those with intellectual property rights interests.  The firm focuses on royalty, participation and other contract compliance audit consulting services. It also provide litigation support (such as damage theories and expert witness testimony), administration and statement preparation, and forensic investigations. Cedar can be reached at boschan@royaltyauditors.com or (310) 882-6381.  You can also follow her tweets about music business news on Twitter.

Building business in spite of the other partners

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It’s true.  Not every attorney “gets” marketing and self-promotion.  Those attorneys who do are usually not thrilled about putting them into action.  It isn’t why you signed up to be a lawyer, but it needs to be done.  So, how do you get started when you know it must be done and the other partners are reluctant (or downright refuse) to help and support you?  Great question!

Start slowly

Start with small things that you know how to do without a huge learning curve.  One day at a time.  Check out our step by step process of how to market yourself and generate revenue.  This way, you can start marketing without outside financial help.  Also, you’ll probably do these things so quickly that no one will realize you’re not doing your “real” job of helping clients.

Keep track of your progress

Keep a marketing journal of everything you do and the date on which you did them.  After several weeks, you’ll begin to see some results, and you want to know which of your efforts actually produced the results.  No sense wasting time on things that don’t work.   You want to concentrate on things that help grow your book of business.

After you start seeing results, it’s time to put them into a report and show the partners.  You can prove to them that your efforts are working.  You’ll be amazed how quickly their attitudes change when they see how much money marketing and networking can bring in to the firm!

Be persistent

It’s true that marketing doesn’t always result in immediate success.  Sometimes, your efforts will take awhile to show results.  That’s OK.  Since you’re tracking progress, you’ll appreciate the little steps and you can see what is working and what isn’t.  Stick to a schedule and treat marketing like it’s a second part of your job.  You will see results eventually.  Make sure you give your efforts enough time to reap rewards!

Need more help?  Contact us!  We know that bringing business can be overwhelming, and we’re here to help!