President Obama and Republicans have reportedly reached an agreement on some of the burning tax issues.

Posted by Autumn Ronda

The proposal boils down to a two-year extension of the Bush tax cuts. President Obama made it clear in the statement he made after Monday night’s compromise, that he doesn't favor extending tax cuts for the upper tax brackets, but that he compromised in order to keep the tax breaks for the middle class. Although the agreement on these tax issues still needs to be introduced as legislation, voted on by Congress and signed by the President (meaning that the agreement could vary from its reported form), President Obama stated that legislators "have arrived at a framework for a bipartisan agreement," and it is expected that the proposed legislation will look something like the following…

- The estate tax will be reinstated with a 35 percent rate on estates worth more than $5 million for individuals and $10 million for couples;

- The current tax rates from 10% to 35% will remain intact for the next two years, rather than reverting back to 15% to 39.6%;

- The section 179 deduction will be expanded to allow businesses to completely write off their investments next year;

- The top rate of 15 percent on capital gains and dividends would remain in place for 2011 and 2012;

- There will be a reduction in the employee-portion of Social Security taxes to 4.2% from 6.2%.

- The child tax credit will continue to be $1000, rather than reverting back to $500;

- The earned income credit will continue to provide tax credits for a three dependents, rather than reverting back to a maximum of two dependents;

- The American opportunity credit for college expenses will be extended;

- Unemployment insurance benefits will be extended for 13 months.

Contact Autumn Ronda...

Arlen Gunner to Hold Workshop on Nonprofits - January 12

Nonprofit management and legal representation are becoming increasingly critical to the survival of nonprofits. With the governance and legal landscape regarding non-profits changing, nonprofit professionals and volunteer leaders need to broaden their skills set and learn about these critical areas so that you can provide accurate and up to date business advice for your clients. If you have ever been on a board or thinking about being on a board, you need to attend this session (Part 2 of 2).

Topics include:
· REGULATIONS, THE IMPACT OF THE 990S
· NON-PROFITS AND UNRELATED BUSINESS INCOME TAX
· EVALUATING NON-CORE REVENUE STREAMS
· USE OF DONOR-ADVISED FUNDS
· MERGERS, ACQUISTIONS AND COLLABORATION, RECAPILIZATION, SALE OF ASSETS
· SET UP FOR-PROFIT ENTITIES FOR A NONPROFIT

Speakers:
Arlen Gunner, Esq.
Managing Partner, Valensi Rose, PLC

Bob McKim
McKim Nonprofit Consulting

Time and Location:
Wednesday, January 12, 2011
12:00 p.m. - Registration and Lunch
12:30 p.m. - 1:30 p.m. - Program

Beverly Hills Bar Association
300 S. Beverly Drive, #210, Beverly Hills
Beverly Hills, California 90211
(Public parking at 216 S. Beverly Drive)

Price:
$50 for BHBA Business/Immigration Section Members who pay in advance*
$60 for BHBA Members who pay in advance*
$75 for all Non-BHBA Members who pay in advance*
$30 for BHBA Law Students who pay in advance*
($10.00 more at door for all)
FREE for members of The Order of Distinguished Attorneys

*Refund with 48 hours notice - Raincheck with 24 hours notice

Section Chair: Leigh Leshner, Esq.

MCLE CREDIT: This activity has been approved for Minimum Continuing Legal Education credit by the State Bar of California in the amount of 1.0 Hour and the Beverly Hills Bar Association certifies that this activity conforms to the standards for approved education activities prescribed by the rules and regulations of the State Bar of California governing minimum continuing legal education.

To Register Click

Arlen Gunner - Interview on Big Media USA

Trivedi v. Curexo Technology: a warning about pre-dispute employment arbitration agreements

Posted by David Krol

Take a look at your pre-dispute employment arbitration agreements. Do they have standard prevailing party attorneys’ fees provisions and provisions which purport to allow the parties access to the courts for injunctive relief? If they do, and if the arbitration forum’s applicable rules have not been provided to the employees, these agreements may be unenforceable – rendering the employer liable for attorneys’ fees if the employer attempts to enforce such agreements. That was the result in Trivedi v. Curexo Technology Corporation (Sept. 28, 2010, RG09459748) ____ Cal.App.4th _____ (2010 WL 3760224).

In Trivedi, the Court of Appeal found that a pre-dispute employment arbitration provision was procedurally unconscionable, because it was prepared by the employer and was a mandatory part of the arbitration agreement, but the employer failed to provide the employee with a copy of the arbitration rules under which the employee would be bound.

The Court of Appeal also found that the clause was substantively unconscionable, because it did not limit the employer’s right to recover attorneys fees to instances where the employee’s claims were found to be “frivolous, unreasonable, without foundation, or brought in bad faith,” which is the standard under California case law, and because it was far more likely that the employer, not the employee, would seek to enforce an injunctive relief provision in court.

After refusing to enforce the provision, the Court of Appeal awarded costs and attorneys’ fees to the employee on appeal.

Pre-dispute employment arbitration agreements which purport to expand employers’ rights to attorneys’ fees, and which contain injunctive relief provisions, and which are executed without ensuring that the employees have received the rules of the applicable arbitration forum, may be unenforceable in light of this new decision.

Contact David Krol

PRESS RELEASE: Gary Torrell Wins La Toya Jackson Royalty Dispute

Valensi Rose, PLC partner Gary F. Torrell prevailed on behalf of his client La Toya Jackson by successfully opposing a trustee's motion to obtain additional royalties due to the internationally renowned entertainer.

Mr. Torrell said, "This was a very challenging case, to convince a judge in New York that Ms. Jackson's creditors should not obtain additional royalties, even though they had not received any payment. Luckily, the judge agreed with my arguments and issued a well-reasoned opinion in favor of our valued client."

A written trust agreement allowed the trustee to collect Ms. Jackson's royalties for a specified time period, pay the priority claims of the trustee and his lawyers, and then distribute the balance to certain creditors. Because the priority claims exceeded $780,000, they were expected to consume nearly all of the royalties collected during the term of the creditor trust. As a result, the trustee filed a motion seeking to extend the term for an additional five years and thereby obtain additional royalties for the benefit of creditors.

On August 5, 2010, the Honorable James M. Peck issued a published opinion denying the motion. The court agreed with Mr. Torrell's argument that it would be unfair and inequitable to Ms. Jackson to grant the motion, despite no distributions to creditors, because Ms. Jackson had honored the trust agreement and was not responsible for the trustee's high fees, which had consumed the allocated royalties.

The judge also interpreted the trust agreement to not permit an extension of the term to allow creditors to obtain additional royalties otherwise due to Ms. Jackson.

Contact Gary Torrell...

Warning to California Employers

Posted By

Laurie Murphy

The federal courts have long held that "stray remarks which are defined as isolated discriminatory comments unrelated to the decision-making process were not admissible to prove employment discrimination. The California Supreme Court recently (in ruling against Google in an age discrimination case) held that stray remarks can be considered in the totality of the circumstances of the case. Bottom line, this will make it even harder for employers to defend employment discrimination cases prior to trial.

Attorneys Beware

By
Laurie Murphy

A recent California appellate decision holds that an attorney who entrusted a filing with a paralegal who did not get the papers filed timely did not adequately supervise his employee and was therefore not saved when the trial court found for the defendant because the opposition to the motion for summary judgment was not timely filed. The trial court did not buy plaintiff's counsel's argument that the late filing was the result of surprise, mistake or excusable neglect. The court of appeals agreed and found that it was inexcusable neglect for the attorney to entrust the preparing and filing of the opposition to a summary judgment motion to his paralegal who took the file on vacation with her and did not file it timely.

Should Chipotle Lower Their Counters?

Posted By
Lynda Chung

In a decision that came down a few days ago, the Ninth Circuit Court of Appeals held that Chipotle Mexican Grill violated the Americans with Disabilities Act because its food preparation counters were too high for for wheelchair-bound customers, meaning that such customers could see the food on display or how it was assembled. (Antoninetti v. Chipotle Mexican Grill, Inc. (2010) 2010 DJDAR 11537.)

Both the disabled plaintiff and Chipotle agreed that all, except for the tallest wheelchair-bound persons, could not see the food preparation counter or the food on display, such as salsa, guacamole, cheese, lettuce and tortilla. The Ninth Circuit found that Chipotle's 45-inch tall wall violated federal regulations which require that a main counter height not exceed 36 inches.

While I sympathyze for the plaintiff for not being able to see the food preparation, I wonder whether there were reasons why the counter in the restaurant was 45-inch tall. Perhaps that was the optimal height for the average-height employee assembling food while standing. Maybe federal regulations should not apply to this scenario as lowering the counter may create problems for the workers who are on their feet all day wrapping burritos.

Tax Law Update

Posted by Michael Morris

Tax laws are always changing. Here are some of the most recent changes that may affect you and your clients.
Read...

Dynasty Trusts: The Power Of Compounding And Avoiding Estate Tax

By Geoffrey A. Weg

Clients who engage in estate planning are generally thinking long-term, and want to provide financial benefits for future generations. The dynasty trust is a uniquely powerful estate planning tool to achieve these goals.

What is a Dynasty Trust?
Simply stated, a dynasty trust is an irrevocable trust with an extremely long or unrestricted term. The trust is governed by the terms initially established by the grantor, and is designed to hold assets in trust without direct ownership of the trust assets being transferred to any beneficiary. Successive generations of beneficiaries may receive distributions of income and/or principal. For transfer tax purposes – gift tax and generation skipping transfer tax ("GST" tax) – trust assets are usually valued at the time of transfer into the trust. The trust assets and any future appreciation thereon are generally exempt from estate tax.

Read Complete Post...
Contact Geoffrey Weg

Paying for Health Care Reform

Posted by Autumn Ronda

Starting in 2013, taxpayers at higher income levels will feel the pinch of two new tax hikes included in the Health Care bill that passed in March. The first is a .9% increase in the Medicare tax on wages over $200,000 ($250,000 in the case of a couple). Generally, every wage earner owes a 2.9% Medicare tax, which is split between the employee and the employer. Under the new tax, the additional .9%, which brings the total Medicare tax for these high earners to 3.8%, is payable entirely by the employee.

The second tax contained in the bill is a Medicare tax on investment income at a 3.8% flat rate for taxpayers with a modified adjusted gross income of $200,000 (or $250,000 for couples). Investment income is a broad category including, but not limited to, most interest, rents, dividends, royalties, capital gains from the sale of a stocks and bonds, and passive rental and business income. Even any taxable gain on the sale of a home is hit by this new tax. The tax on investment income not only affects individual taxpayers, but also can have a significant effect on the income taxes owed by trusts and estates.


Congress’s effort to raise revenue to pay for the costly healthcare bill has made two very significant changes to the tax system. Historically, the tax on wages to pay for Medicare has been a flat tax and have only been imposed on earned income. The new .9% tax on wages will impose a progressive Medicare on the previously flat tax, and the new 3.8% tax will impose a Medicare tax on investment income which previously did not exist.

Contact Autumn Ronda

Tax and Business Attorney Autumn Joins Firm

We are pleased to announce that attorney Autumn Ronda has joined their firm as an associate, working in the Tax & Wealth Planning, Entertainment Group and Transactional Group practice areas.

Managing Partner Arlen Gunner said, “She is a welcome addition to our team of tax and business professionals that service a variety of individual, business and nonprofit clients.”

The San Francisco Bay Area native earned her law degree from Southwestern University School of Law while concurrently earning her M.B.A. at Loyola Marymount University. After passing the bar, Autumn joined a small entertainment and real estate development company as in-house counsel. Subsequently, she elected to continue her legal education earning a Master of Laws in Taxation.
Contact Autumn Ronda

Beverly Hill Bar Association Newsletter:

Environmental Due Diligence Critical In Any Real Estate Transaction

By Arlen Gunner

Due to the fact that any person or entity that takes title to real property has essentially perpetual liability for environmental matters (with a few very narrow affirmative defenses that are difficult to prove) under both federal and state of California laws, it has become increasingly important that some level of environmental due diligence should be performed as a condition to closing a transaction involving real property.

Several different situations concerning the environmental condition of real property that was the subject of a long-term ground lease, where one of our clients was the lessor and another was contemplating becoming the lessee, have crossed my desk in recent months. I have also addressed situations on behalf of certain nonprofit clients who were scheduled to receive real property as charitable donations. In reviewing the environmental condition of the properties involved in the aforementioned situations, the environmental condition of each of the separate properties was a determinative factor as to whether or not the transaction would proceed.

One of our clients held title to real property for a long period of time upon which the client was operating a profitable business. Due to overtures made by a very financially stable potential lessee, a long-term ground lease was contemplated and a great deal of time was spent negotiating the proposed lease. The lessee had a contingency in the lease running in its favor which stated that the environmental condition of the property had to be acceptable to the lessee in its sole and absolute discretion.

When an environmental inspection was conducted it was discovered that there was underground hazardous material migration affecting our client's property, which emanated from a nearby gas station. Our client also was informed that the Regional Water Control Board was already monitoring the situation and eventually included our client's land in its investigation thus causing our client a great deal of out-of-pocket expense and a loss of the transaction since the lessee had a cancellation right if the environmental condition of the property was not satisfactory to it.

In another ground lease transaction where one of our clients was contemplating acquiring the tenant's interest under the lease, as well as fee title to other assets owned by the proposed transferor, our client was initially hesitant about incurring the expense necessary to conduct a Phase 1 review of the property in question. With a certain level of persistence (some might call it nagging) the client eventually ordered the Phase 1 report to be prepared by an environmental consulting firm. Within a short period of time, our client's environmental consultant uncovered a serious contamination issue which potentially could have had immense financial liability consequences for our client should it have closed the transaction and enterrd into the chain of title.

I am currently working on a probate situation where the trustee of an estate has instructions to convey the real property to one of our nonprofit clients as a gift. We have advised our client that it should perform the ordinary and customary real estate due diligence that would normally be performed if it was going to buy the property in an arm’s length transaction. While this may cause our client some upfront expense, the cost and expense would be de minimis if the property has any environmental liability attached to it.

One must also keep in mind that any lender, before it will be obligated to fund a loan, will in virtually every instance, involving real property, require an environmental Phase 1 report to be prepared at the borrower's expense, and they would probably also require an indemnity for environmental matters from not only the borrower but also its constituent stakeholders.

In the real estate market that currently exists, the longer a period of time that a property has been in service, the greater chance of environmental contamination coming into play due to the unknown prior uses of the property. Therefore, regardless of what position a client has in its transaction, an environmental review is more than ever a necessary due diligence contingency item.

(Mr. Gunner was named a “Super Lawyer” in 2008 in three practice areas: real estate, corporate and business, and mergers and acquisitions. Arlen was named a “Super Lawyer” in 2009 and 2010 in the area of real estate and also in 2010 as corporate counsel.)

Songwriters And Publishers Continue To Score Tax Breaks

By Michael R. Morris, Esq.

(Mr. Morris recently moderated a California Copyright Conference's panel discussion "Monetizing Music Publishing" on March 9, 2010 in Los Angeles.)
Introduction.
Favorable tax law changes originally made in 2006 continues to offer significant tax planning opportunities for both songwriters and music publishers. The potential tax breaks for songwriters were especially ground-breaking, permitting self-created musical compositions or copyrights in self-created musical works to be electively treated as capital assets. Why does this matter? Because gain upon the sale of a long-term capital asset (i.e., an asset held more than 12 months) is generally taxed at an extremely favorably 15% rate, in lieu of regular personal income tax rates presently ranging as high as 35%. Thus, a seller of eligible self-created musical compositions or copyrights in musical works can save a bundle in taxes. Under a related law, buyers of these rights can elect to write off the purchase price over five years, enabling music publishers to take a tax deduction for the purchase price of copyrights (including songwriter advances) ratably over five years. Let's take a closer look at how these favorable tax laws work.

Elective Capital Gains Treatment for Self-Created Musical Works
Under prior law, copyrights, literary, musical or artistic compositions, letters or memoranda or similar property were not considered "capital assets" in the hands of its creator. Thus, a songwriter who sold his or her own songs, like an artist selling a painting, paid "ordinary" income tax rates (currently up to 35%). Conversely, the same songs in the hands of the music publisher who bought those copyrights were considered tax-favored "capital assets." Not only could the music publisher take a tax deduction for the cost of acquiring the copyrights (as a yearly percentage of the purchase price), but the subsequent resale of such copyrights would be at a tax favored capital gains rate of 15% (provided the songs had been held by a non-corporate publisher for at least the 1-year long-term capital gains period). Congress sought to redress this imbalance in tax rates between songwriters and publishers, stating in a report: “ … it is appropriate to allow taxpayers to treat as capital gain the income from a sale or exchange of musical compositions or copyrights in musical works the taxpayer created.”

Initially, this favorable capital gains election for self-created musical works was set to expire on December 31, 2010, but fortunately for songwriters, it was made permanent. However, this lower capital gains rate is not automatic! A songwriter selling compositions held more than 12 months must affirmatively elect the lower tax rate (sounds like a no-brainer, unless you want to voluntarily reduce the national debt).

This tax law does not define what constitutes a self-created "musical composition" or a self-created "musical work." For example, if one songwriter contributed lyrics and another music to a composition, should there be any tax difference? Probably not. But what if a writer's existing poem became the lyrics of a song to which another writer contributed the melody. That song would generally be covered by a single copyright, and in this author's opinion, the sale of that song should entitle the creators of both the lyrics (i.e. the poem) and the melody to favorable capital gains treatment, even though the sale of the stand-alone poem would not qualify.

The law also fails to address what music assets in addition to self-created songs qualify as "capital assets," only stating that both self-created "musical compositions" and "copyrights in musical works" qualify for elective capital gains treatment. Thus, royalty and other income from the exploitation of musical compositions is not eligible for reduced capital gain rates. However, the term "copyrights in musical works" is intuitively more expansive than "musical compositions," and could include copyrights in self-created sound recordings (which, of course, would be recordings of "musical compositions"). This distinction can have real financial impact upon an artist selling both self-created master recordings and the underlying self-created musical compositions. For example, an artist might sell a library of existing recordings concurrently with the copyrights in the underlying musical compositions to a film-TV music production house. Again, this author believes the transfer of master recordings constitutes the sale of a copyright in a self-created musical work, but the IRS has not yet issued any interpretive rulings.

Just when the 1-year holding period for long-term capital gains treatment begins can also be an interesting question. Obviously, the 1-year period begins from creation of the work for a songwriter who always retained ownership. But what about situations where a songwriter (or heirs) have rights to reclaim previously granted copyrights under the termination provisions of Sec. 203(a) of the Copyright Act? For example, grants made after 1977 of rights in a copyright may be terminated at any time during the 5-year period beginning 35 years after the date the original grant was executed. The right to the subsequent reversion of a previously transferred copyright gets triggered by the songwriter (or statutorily prescribed heirs) providing timely notice and making the proper filing under Sec. 203 (such right would then be "vested"). This notice must be given not less than 2 nor more than 10 years prior to the effective date of termination. Once the termination provisions of Sec. 203 have been met, the copyright automatically reverts at the designated future date during the 5-years following the expiration of the 35-year grant.

Since the rights to this future reversion can be sold, does the 1-year long term capital gain period begin from the date the Sec. 203 notice was given, enabling the sale of that right to be eligible for favorable tax treatment? Or does the 1-year holding period only run from the date the copyright actually reverted? The earliest effective date for termination under Sec. 203 is January 1, 2013 (for grants made on January 1, 1978). Only if the sale of a future reversion is considered the sale of a copyright in a musical work would the songwriter (or heirs) be eligible for reduced tax rates on sales made 1 year after complying with the Sec. 203 termination provisions. Otherwise, the 1-year long-term capital gain holding period would only commence from the date of actual copyright reversion, so that copyrights which begin reverting in 2013 would only then become eligible for long-term capital gain treatment (after being held for at least 12 months following reversion). Again, the IRS has issued no pronouncements on this issue.

Last year, the IRS did, however, issue proposed and temporary regulations providing that the election to treat a musical composition or copyright as a capital asset must be made separately as to each composition or copyright sold or exchanged during the taxable year. This election must be made on or before the due date of the tax return for the year of sale or exchange (including extensions). Accordingly, creators of musical compositions and copyrights in musical works who sold such rights in 2008 are reminded that an affirmative election is necessary to take advantage of favorable capital gains rates.

Five-Year Amortization Period for Musical Works.
Buyers of eligible musical works and copyrights also continue to get “tax bang” for the buck. Under prior law, the cost of acquiring a musical copyright generally had to be amortized and deducted over the period that the song was projected to generate income under the "income forecast" method (a frequently complicated computation).

Since 2006, any expenses paid or incurred creating or acquiring any "applicable musical property" can be amortized over the 5-year period beginning with the month during which the property was "placed in service" (for example, when a song gets exploited). Both songwriters who incurred expenses creating "applicable musical property" and music publishers who acquire them can take advantage of this business-friendly 5-year schedule. For example, assume a music publisher paid $1,000,000 for applicable musical property on January 2, 2008 and places it in service on January 31, 2008. Provided the 5-year amortization election is made, the publisher would get to deduct $200,000 as an expense for 2008 (and a like amount for 2009-2012). The term "applicable musical property" is defined as any musical composition (including any accompanying words) or any copyright with respect to a musical composition that is depreciable under the income forecast method. This means that sound recordings are probably not eligible for the 5-year amortization schedule.

Conclusion.
Congress has lowered tax rates for songwriters who sell their catalogs and electively take advantage of capital gains treatment, provided such songs were held more than one year. This is in stark contrast to the higher non-capital gain tax rates paid by authors and painters who sell their literary works or paintings. In addition, music publishers buying songs can recover the purchase price over an election 5-year period.

Questions do remain as to what constitute self-created musical works eligible for favorable capital rates. Does it include sound recordings and/or vested future reversion rights? Hopefully, the IRS will provide rulings that favorably resolve these issues. In the meantime, these tax incentives afforded songwriters and publishers will continue to provide a powerful stimuli to the music publishing market.
© 2009 Valensi Rose PLC
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Michael R. Morris is a former president of the California Copyright Conference and a principal in the Century City law firm of Valensi Rose PLC (www.vrmlaw.com). A former IRS trial attorney and Certified Specialist – Taxation Law (State Bar of California), Michael's practice emphasizes music, entertainment and tax-related matters.

How To Succeed With In-House Counsel

By Gary F. Torrell
Valensi Rose, PLC

After serving as temporary in-house counsel (IHC) to a client in 1990, I published an article entitled “How to Work With In-House Counsel.” Since then, I have been general counsel at a publicly-owned financial institution and a privately-owned real estate company and developed the following guidelines based on my experience as both IHC and outside counsel. The guidelines may seem unremarkable, but following them will increase your chances of obtaining business from (and developing strong bonds with) IHC and their companies. As with most everything in the law, there are exceptions to every guideline below, and you must always tailor your service to the wants and needs of the particular client and matter.

1. Getting Retained. Most IHC (and their companies) already have a full compliment of outside counsel to contact for new matters. To break in with them, you need a hook to distinguish you and your law firm from other law firms soliciting IHC for business -- e.g. being referred to IHC, promoting specific lawyers (by name) at your law firm with necessary expertise, offering a fee discount, or some other incentive. Money is a huge incentive, but not at the expense of high quality services. As general counsel, I regularly retained lawyers with big-firm training who charged lower rates at their present (smaller) law firm. If your law firm’s regular hourly rates are low compared to national law firms or other lawyers with similar credentials, sell this feature. Consider offering a discount for the initial matter or for an initial time period, to give IHC an obvious reason to try you. Diversity can also be an asset: Advertise and promote the minority lawyers employed at your law firm – this may be an important criteria to IHC. If you simply ask for business because you provide quality lawyers, competitive rates and good service, chances are your solicitation will go in IHC’s round file.

2. Your First Matter. Congratulations – you’ve been retained! The next step is to ask for and review all of IHC’s policies and procedures (written and unwritten), and then share them within your law firm and follow them to the letter. The point is to recognize that IHC is in control of the relationship, so ask how and when IHC prefers you communicate with them and accommodate IHC’s preferences. Do not speak directly with others at the company without IHC’s permission (unless it’s an emergency). When permitted to communicate with others at the company, copy IHC on all written/electronic communications; it’s more than a courtesy, it keeps IHC where they should be—the number one spot.

3. Get Noticed For the Right Reasons. IHC knows the client, the goals in the matter, the budget concerns, the internal politics and the other important considerations. As outside counsel, you should talk less and listen more, especially on your first matter. Let IHC interrupt you and ask questions; they are not hiring you to hear speeches. Encourage IHC to ask questions and ask for their opinion on substantive decisions. Treat them as you would want to be treated as co-counsel. Be humble when asked about your experience; give examples, but undersell. Be cost conscious--ask before you charge substantial fees or incur substantial costs. Try to offer ways to reduce the legal expenses and behave as if you were paying (rather than collecting) the fees and costs being charged.

4. Give Substantive Advice and Be Accessible. If IHC leaves a substantive question on your voicemail, give a substantive response in your return voicemail/e-mail and don’t just say “returning your call.” Give IHC choices on possible legal strategies, but recommend your top choice and justify it. Then, if/when IHC (or the company) chooses a different direction, support the client’s choice. Do not direct – suggest, and always solicit IHC for suggested strategy. When IHC asks about your availability later that day or in the next few days, tell IHC when you are available, rather than what you’re doing that prevents you from being available – IHC didn’t ask for that and doesn’t really care (sorry). Give IHC ample advance notice of your planned absences/unavailability and remind IHC as the dates approach. Return all calls/e-mails promptly. If you cannot, have your assistant promptly return the call/e-mail and politely explain when you will be available again.

5. Predicting Results, Fees and Costs. Often IHC will request a budget from outside counsel for the matter and, in a disputed matter, your opinion on the likelihood of success. (As general counsel, I had a third question for outside counsel: the likelihood of recovery of legal expenses as the prevailing party.) At the outset of a new matter, outside counsel often underestimate the fees/costs and overestimate the likelihood of success. Be conservative on predicting results and on the high side in estimating legal fees; then strive to obtain a better result and charge lower fees than estimated. It is also essential to update all estimates as the matter progresses, to avoid surprises and offer a meaningful option for IHC to change direction midstream, before the fees and costs have gone too high.

6. Meet or Exceed Time Deadlines. The following should be familiar for those of you who have had regular, recurring meetings (business or pleasure) with the same group of people: Certain (few) attendees are almost always early, most are on time or slightly tardy and some are almost always late. Most lawyers (IHC and outside counsel) promise and endeavor to provide prompt service, but often deliver/show up late. To distinguish yourself from many outside counsel, you must accept IHC’s tardiness yet be on time (or early) for meetings. The same goes for providing legal advice and draft documents to IHC. In litigation matters, my rule of thumb is to get a polished (not rough) draft of pleadings to IHC at least a few business days before the filing deadline (earlier for dispositive pleadings), then request substantive input from IHC on the pleadings. To reduce costs, ask whether IHC wants to use company resources to respond to discovery requests, especially gathering documents. Remind IHC as deadlines approach, rather than telling IHC only once about the deadline.

7. Promptly Send Clear Billing Statements. Outside counsel’s billing statements should follow the same general guidelines for good legal writing: They should be clear, concise, descriptive and complete. Many companies now have billing guidelines or requirements; follow them to the letter. Also, a person unfamiliar with your matter may review the invoice, sometimes years later, so it should contain enough information for a stranger to understand what you did for the time charged. Make it easy on IHC to see the total time and billing rate charged for each timekeeper. Describe and itemize the costs in easily understood terms. When you write off time or do not charge for certain services, show that on your invoice (when appropriate) so IHC realizes this benefit you provided. When IHC questions you about the invoice, promptly respond and resolve all doubts in favor of IHC, lest you win the battle but lose future business. Try to get your monthly invoice to IHC within 20 days after the end of the month; you can create problems for IHC (and for payment) with tardy, incomplete or inaccurate billings.

8. Other Important Services. Give credit to IHC for successes, especially in front of IHC’s client and superiors. Offer free services – seminars, etc. Send new published cases and articles of interest to IHC (about relevant legal issues, the company, the industry in general, competitors, etc.). When asked by IHC for a lawyer referral, it’s fine to recommend another lawyer in your law firm (or yourself) if the person has the expertise, but recommend the right lawyer, even if that lawyer is outside your firm. Give practical advice. Suggest IHC and/or outside counsel get involved in any actual or potential dispute early on, to help develop better facts in the event the dispute goes to litigation. Finally, try to be positive and upbeat in conversations and other communications with IHC.

About Gary F. Torrell:
Gary’s career spans over twenty-four years of solid legal and business experience working with extremely sophisticated clients, companies and firms. He spent the first seventeen years of his career working in the Los Angeles area with such notable law firms as Paul, Hastings and Brobeck, Phelger & Harrison, where he honed his legal skills and developed savvy business insight handling creditors’ rights and bankruptcy cases. In 2000, Gary changed the focus of his career to become in-house counsel to several major corporations, including holding the Executive Vice President, General Counsel and Corporate Secretary titles for Downey Financial Corporation, a $16 billion, NYSE traded company that had over 2,500 employees. Gary Torrell’s role as a partner at Valensi Rose brings his practical business thinking and problem solving approach to their clients. Gary helps continue the Valensi Rose tradition of providing clients the highest level of business and legal advice, structured to keep fees and costs in check without sacrificing results.

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