Controlling the Idiot in the Deal

CONTROLLING THE IDIOT IN THE DEAL

By Donald W. Hudspeth Esq.

When I was a young man starting in business I read the book

“Winning Through Intimidation” by Robert J. Ringer. The book, though denounced by some at the time, was not really about intimidating people, but of not being intimidated by people, for example, doctors, lawyers and high powered professionals.

The part of the book most interesting to me was its description of three kinds of persons that you may meet in a business transaction (or any dealings really).

 
The first type, described by Mr. Springer as a “Number 1 #” is the guy or gal who says, in effect,” “I am in this deal for the money – the more for me, the merrier – that’s how I roll.” While often criticized or condemned for being “self-interested” or “greedy,” the #1’s are actually the most honest and forthright because their cards are on the table. 

 
The second type, the “Number 2” says “I’m not after X,” but really is after X, so may be untrustworthy and cut you out of, or gyp you, in the deal if he or she can.  This is the proverbial “snake,” treacherous and slippery when wet. Captain Jack Sparrow (Johnny Depp) in the movie, “Pirates of the Caribbean” said that “you can trust the dishonest man to be dishonest.” So, in a way the treacherous man is less formidable than you might expect because he is more predictable. You know he is going to try to cheat you so you build triggers and fail safe mechanisms into the deal.  The secret is spotting his type early on.   

The third type, the “Number 3,” appears to mean it when he or she originally says “I’m not interested in X,” or “It’s not about the money for me,” but, eventually due to (i) incompetence, or (ii) weakness of character, makes a last minute grab and screws up the deal.

       The problem with working with types #2 or #3 is that you can become the victim. As the reputed Mafia saying goes: “If you don’t know who the patsy in the deal is, it’s you.”  So, when I am doing a deal or engaging in an important transaction I attempt to identify the kind of person I am dealing with as #1, #2 or #3.  

        

Perhaps, counter-intuitively to you, I fear #3’s the most. Let me give you an example of how #3’s can get in the way or just screw up the deal for everyone. A firm recently negotiated a lease for prime penthouse-suite type office space. Although landlord and tenant brokers were involved, the space never hit the market; the tenant was taking over the space “AS IS,” from the existing tenant.

      

 The existing tenant was a nationally famous and well respected attorney (who unfortunately does not practice business law).  So, after the new tenant and the landlord – who is heavily influenced or under the control of the building lender – entered into a letter of intent, the existing tenant said he wanted to take the rolling file shelving (because he paid for and installed it) even though the shelves are on tracks and are probably a fixture. Next, the tenant said that he wanted the front reception desk (built in) and a “Star Trek” type secretarial desk (also built in with no carpet underneath) and the old tenant also wanted to take a built in dishwasher. All three were there when the tenant moved in.

Obviously, when the new tenant signed the letter of intent to take the space “AS IS” it was not agreeing to replace $10,000 worth of rolling shelving (present value maybe $500 because of obsolete technology) or to refurbish the area left by their removal, nor was it contracting to lay carpet – which would never match or to buy a built in dishwasher. 

The landlord, with the lender’s approval, has agreed to cover the shelving; that is, to buy the shelving or provide a finished room where the shelving was, but the landlord – to our knowledge - does not even know the about the issues on the front desk, “Star Trek” desk, or the dishwasher.

       

This all leads to my point about “controlling the idiot.” If you do not control the idiot, you become the idiot. The idiot can make fools of us all. What may happen here is that the tenant does its thing and removes the built in items. The new tenant could then declare breach or ask the landlord to cover the cost to fix. The landlord has shown good faith, so let’s assume the landlord will want to do the latter.  However, the landlord is subject to the lender, which has been very tight-fisted in the transaction, so far. That could put a million dollar lease deal at risk:  lost lease, lost commission, bad will, etc.  All this.…because no one is controlling the idiot.   

        

Law Offices of Donald W. Hudspeth, P.C. | By Donald W. Hudspeth, ESQ.

Business Law | Commercial Litigation | International Law

www.AZBUSLAW.com  | 866-696-2033 |  TheFirm@azbuslaw.com

For more information about business law topics and the Hudspeth Law Firm please visit our website at azbuslaw.com or call us at 602-265-7997.

 

Let Us Now Praise Opposing Counsel

LET US NOW PRAISE….OPPOSING COUNSEL 

Law Offices of Donald W. Hudspeth, P.C. | By Donald W. Hudspeth, ESQ.

          Let us now praise opposing counsel. The good they do can live after them.[1]

        Roughly, seven out of ten cases the firm receives are in the conflict stage.  The client is being victimized by a partner, ex-employee or contract party who is acting unlawfully; that is, creating legal claims. Often the offending parties (i) do not realize the conduct is unlawful, (ii) the extent to which legal damages can be assessed against them and/or (iii) how incredibly expensive civil litigation can be.

        The firm’s counsel and reaction to this is to advise a “complete case work up,” which includes a chronology and extensive knowledge of the facts, analysis is of the legal issues, research as necessary on the current case law, drawing legal conclusions as to the possible outcome of litigation, and drafting of the “demand letter from Hell.”  The demand letter contains all of the above and can run from four to six pages or more. 

        The above process takes time and money, but has value in at least two ways: 

One, it makes it less likely the recipient party will throw the letter away. While it is easy to throw away or ignore a one page demand letter stating only general facts and conclusions, it is much more difficult to ignore a letter tailored to the facts and case at hand and stating as its conclusion that the recipient is, or could be liable, on a number of legal claims, some of them with punitive damages, which add up to a large sum of money.  If nothing else our letter may trigger a tremendous urge in the other side to respond and tell us how wrong we are. 

Second, it makes it more likely that the recipient will take the letter to an attorney, who becomes the “opposing counsel” alluded to above.  While it may seem counter-intuitive to want opposing counsel involved, not only is it typically a good thing to have opposing counsel involved, but also, paradoxically perhaps, often the “better,” i.e. knowledgeable and well-informed in business law,   opposing counsel is, the better it is for all concerned. Opposing counsel who has extensive knowledge and experience in the area can advise the client as to the unlawfulness and legal consequences of the offending client’s conduct. The attorney can tell the client that, at minimum, the legal consequences can be a lawsuit and the attendant horrific costs of litigation; at most the case could result in a large judgment being awarded against the party. So, again perhaps ironically, it is often opposing counsel who gets the wayward party under control, which goes back to the earlier point that frequently the offending party is acting out of ignorance or willful blindness. Once the opposing client is educated as to the nature and consequences of the conduct the case can go through what I call the “Process.” 

The “Process” is the clash of paradigms between how my client sees the case and wants to happen and how the other side sees the case and what it wants to happen. Typically, the clashing clients (mine and theirs) start with one thing in common: Each believes that he is right, in fact self-evidently so; thus, the other side should just concede that point, accept the client’s position, and surrender. Sometimes, the client will even state “I am so obviously right that I should not have to spend one dollar on this case.” Well, maybe the client should not have to spend money to resolve the matter but the fact is the client does or will have to spend money on the matter unless he or she wants to concede the matter to the other side and conceding in this case would mean major loss to my client. If my client were not facing significant harm, he/she/it probably would not be in my office. 

So, back to the “Process.”  The Process may be likened to the parties sitting on the opposite end of a conference table. Unless the matter goes all the way to trial the matter most likely will be resolved with the parties reaching agreement somewhere more or less in the middle one-third of the “table.” But this does not happen overnight, even in reaction to and as a result of a well-crafted “demand letter from Hell.”  A response letter is written, telling us our claims are weak and wrong-headed.  The attorneys state their clients’ positions as logically, and sometimes forcefully (what has been called “bull walrusing”) as they can. Eventually, the claims and defenses can reach equilibrium and a settlement can be reached. This is the Process. 

Unfortunately the Process can often cost $10,000 per side – and this can be without litigation, i.e. a lawsuit. Again, this outcome is reached because the offending, misbehaving party is advised on the unlawful nature of the conduct, learns the dollar amount of damages the court can award against him, pays substantial attorneys fees and faces the prospect of paying a whole lot more: to his attorney and to this firm if we prevail in the legal action.

But the Process can go a whole lot smoother and faster if the opposing counsel knows the area well enough to tell and advise the client as to the reality of the situation and reject spurious arguments that just waste time and money. B.S. can be eliminated and the parties can go to the heart of the matter. For example this firm just negotiated a severance package for an owner and engineer of a start-up semi-conductor company. The employer wanted to set up the client for “cause” termination to avoid paying the severance package. But, that claim was not sustainable under the existing case law or even the factual allegations made. Thus, in return for our firm’s client agreeing to look at a pending third party buy out of the company for his payment for his shares, the severance agreement was quickly reached. This is a good example of where the stature, knowledge and experience of the attorneys served each client well.  

Bottom line, I like it when a misbehaving party has legal representation. And, I like it even better where the opposing attorney is well versed in the area of business law. So, let us now praise opposing counsel; the good they do can last through the generations.         

The Law Offices of Donald W. Hudspeth, P.C.

| www.AZBUSLAW.com |

Business Law | Commercial Litigation | International Business

 

For more information about business law topics and the Hudspeth Law Firm please visit our website at azbuslaw.com or call us at 602-265-7997.

 

Donald W. Hudspeth is president of the

Law Offices of Donald W. Hudspeth, P.C. in Phoenix, AZ, where he is the senior attorney in the firm’s transaction group. Don can be reached at DWH@azbuslaw.com.

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© Copyright 2012 Law Offices of Donald W. Hudspeth, P.C.

This article is not intended to provide legal advice. Always consult an attorney for legal advice for your particular situation.

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[1] This is a takeoff, of course, on Ecclesiastes 44: 1-15.