Strengthen the Relationship With Your Outside Counsel

Retaining a lawyer? Follow these five steps.

January 1, 2011

Who doesn’t enjoy a joke that begins, “An attorney, an accountant, and a CEO walk into a bar…”? But all joking aside, properly managing your credit union’s relationship with outside counsel is no laughing matter.

Credit unions regardless of size need attorneys for issues such as real estate settlements, collections, bankruptcies, contract reviews, compliance documents, and employment issues. Unfortunately, many credit unions fail to effectively manage the relationship they have with their attorney—and waste thousands of
dollars in the process.

But managing your attorney relationship shouldn’t really be that difficult. Follow these five steps and your credit union will reap the benefits of retaining a lawyer:

1. Understand why you need an attorney. While this first step may seem obvious, it’s often overlooked. Before you engage the services of an attorney, you need to know why you need one. Framing the issues is a logical starting point in the counsel relationship.

Are you trying to avoid a problem or is it at your doorstep? What is the substantive issue? Does it involve litigation, contract negotiation, a regulatory problem, or a board governance issue? Is this really an issue for an attorney or your accountant? Are you looking for advice, expertise, technical assistance—or a fall guy? What is the expected work product? Your answers will direct the credit union to the proper resource.

2. Select the right attorney. You wouldn’t go to a podiatrist with an ear infection, so don’t go to a real estate attorney when you need an employment law expert. While an attorney not experienced in a particular area might accept your business, you’ll often pay them to research the issue and get up to speed, resulting in unnecessary billable hours. And experienced credit union specialists are able to share valuable “lessons learned” from other clients who’ve experienced the same issues you’re
facing, even if they can’t share names and details.

Remember that all of the requirements for appropriate third-party vendor due diligence apply to selecting an attorney. From references to data security, your vendor review file should reflect a reasonable investigation into your attorney’s credentials, experience, state licensing status, and business practices.

How do you find the best attorney for your needs? Do your research. This includes checking the law firm’s website and asking directly for an explanation of the attorney’s practice areas and experience. Ask around, particularly ask other credit unions what lawyers they rely on to address similar issues.

Finally, interview attorneys. Do they seem to know what they’re talking about? Do they represent other credit unions? Never overlook an important question—do you believe the person you’re interviewing has the necessary interpersonal skills?

And make sure they don’t have a conflict of interest, which means they represent someone or an entity with an interest adverse to yours. It’s really the attorney’s duty to determine the possibility of a conflict and disclose that information to you.

3. Define the relationship. Not defining the details of your relationship with retained counsel is perhaps the costliest mistake most credit unions make. You wouldn’t take your car to a mechanic and simply drop it off with instructions to fix anything found to be wrong, agreeing to pay all charges. So why would you refer a matter to an attorney with the same instructions.

Make it clear who the attorney represents. Most of the time the attorney is retained to represent the credit union as a corporate entity—not the individual such as the CEO who signs the retainer agreement. With some controversies, the credit union, the board, and the credit union’s employees all will have distinct legal needs requiring separate counsel.

You’ll want answers to other questions, too, as you define your relationship: Does your board want access to the attorney? Is it a public relationship, or will the attorney be a behind-the-scenes resource for the board and management? Can your attorney ever speak to others on your behalf without specific authorization?

A well-written “engagement letter” (or retainer agreement) can resolve most issues on assigned tasks and the expected work product and timeline. It’s often the best way to avoid future misunderstandings on both the scope of representation and billing methods. The attorney will draft the engagement letter to protect his firm. You shouldn’t feel the least bit reluctant to ask questions and request that the engagement letter be redrafted in plain English.

You also need to establish which billing method will apply. Possibilities include flat fees, hourly fees, contingency fees, or mixed billing rates depending on the type of matters referred to the attorney. (If you have to hit a stopwatch every time the attorney picks up the phone, something is wrong with the relationship.)

4. Communicate effectively. Communication is very much a two-way street. Make sure you respond to requests for information or guidance from your attorney, and be candid. Your attorney can’t help you if you’re not sharing all the information about the issue or concern you have. Don’t leave out the part of the story that you think might really be a problem or make someone look bad.

On the other hand, have you left multiple messages or e-mails without a response? Do you know when to expect an answer to your question or the requested work product? Are you not receiving regular updates on the status of your issue? If any of these red flags occur, act immediately to resolve communications breakdowns to ensure the success of the relationship. Attorneys have an ethical obligation to keep their clients informed.

5. Review invoices and offer feedback. Can you read your attorney’s bill easily? Invoices should be accurate and easy to understand. If the format of the invoice is confusing, speak to your attorney about modifying it. Have you been billed in the manner agreed upon in your engagement letter? Are there surprise charges or fees? Avoid budget variance surprises by regularly reviewing the invoices and identifying any troubling billing practices or trends. Communicate any concerns with the attorney immediately. 

Getting more from your counsel

Once established, a strong attorney relationship can resolve uncertainty and help save you both time and money. Not only can your lawyer review contracts and help you address specific problems, but by making your lawyer part of “the team,” he or she can better understand your operations and might help address potential problems before they become real problems.

For instance, consider having your lawyer:

• Provide legal guidance to various departments of the credit union. Such support can often help with due diligence and assure regulators the credit union takes its compliance duties seriously.

• Attend board meetings so the board can become familiar with the support that the lawyer can provide to the credit union, such as reviewing board policies.

• Conduct specialized staff training on lending rules, employment practices, or other topics. 

• Provide seminars for members.

Running a credit union these days is no laughing matter. By following the five points outlined above, your credit union can maintain a strong relationship with outside counsel. A well-managed relationship with qualified outside counsel can provide a wealth of comfort and insight in today’s challenging world. 

DAVID A. REED, Esq., is with Reed & Jolly, PLLC, Fairfax, Va. Contact him at 703-675-9578 or at