Don’t Let Your Lawyers Over-Work Simple Contract Issues — Higher Costs, No Better Risk Protection & Deals Delayed

My most recent post — about a December 17, 2019 article entitled “10 Ways That Outside Counsel Disguise Overbilling” — cited a case where an expert in auditing law firms’ bills for inaccuracies found this:

The law firm charged 5.1 hours for work on a confidentiality agreement where opposing counsel had already provided a comprehensive draft agreement for comment and markup … This time is excessive. We propose the charge be reviewed to a total of 2.5 hours: 2.0 for analysis and markup of the draft agreement, and 0.5 for negotiation of points with opposing counsel.”

The legal bill auditor’s point: This law firm charged 5.1 hours times the attorney’s billing rate for a task that should have consumed half of that.

But I saw another point:

What’s any lawyer doing consuming 5.1 hours in creating a confidentiality agreement? Or consuming even half of that?

5.1 hours might have been justified. I’d need to know more in order to make a definitive judgment.

But.

A lawyer charging a client for 5.1 hours — or even 2.5 hours — to conclude a “confidentiality agreement”, is a big … red … flag.

A legally enforceable contract that establishes confidentiality between two parties — the owner of protected information and the recipient of that information — is vital to the company’s wellbeing.

No doubt.

It has to be done right, or the security of that information — and the corporation’s interests with it — are at risk.

But the creation of such agreements — the vast majority of them — need not be so labor-intensive. Ditto for the party receiving a draft from a counter-party and reviewing its terms.

Not only can a confidentiality agreement process or system save time and money — it can enhance the accuracy of the resulting contract for better client protection.

Beyond the labor-intensity of writing-from-scratch, a non-disclosure agreement should not — usually — be treated as a one-off. Confidentiality agreements call for what any other corporate function — other than Legal –would fashion into a process or system:

  1. Do we already have a non-disclosure agreement with this counter-party? (Your company should keep all such agreements in one place, a shared folder set up on Google Drive, DropBox, OneDrive, or some other cloud service.);
  2. As to the kinds of confidentiality terms that we’ve already decided we want, and those that we definitely don’t wantdo we have templates that our team can get a start on in Google Docs or Drive? (Versus allowing Legal to become a bottleneck, and having the attorneys jerry-rigging such terms ad hoc when we need to execute a confidentiality agreement);
  3. Have we automated the routing of the confidentiality agreements for signing to those in our company who are authorized to sign them? (Using, for instance, systems like Slack, Microsoft Teams, or Google Forms?); and
  4. Do we have in place an e-signature function that bypasses hard-copy-and-ink for electronic execution of a legally authenticated document? (For instance, perhaps one of these 11 electronic signature options).

As a general manager at Whirlpool Financial Corporation and as an executive at GE, I saw the confidentiality agreements come in fast, in great volume, and often they related to a deal that needed completion — timely completion.

Otherwise, a customer’s payments would not start, or a strategic improvement delayed.

The need for accuracy was high. Item 1 above was key: Comprehensive records, centrally located, and quickly accessed. So was Item 2: Templates of the terms we wanted — and those we would avoid.

And — with a deal being stopped in its tracks until the confidentiality agreement was concluded — Item 3 was vital: Routing to those authorized to execute. As was Item 4: Pre-arranged signature logistics.

Until a few years ago, none of the above easy-to-use technologies was available.

And many a deal was held up as the confidentiality agreement languished — half-completed — on a lawyer’s desk, or in an executive’s file folder.

For decades, lawyers’ go-to move in such situations has been to just start drafting. In too many cases, that remains their go-to move — even as other corporate functions have long since thought in terms of processes or systems.

So in too many companies, implementing the accuracy, speed, and economy afforded by the above applications and processes and systems they make possible, will not happen until general managers tell the lawyers that they want them.