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This Lawyer Had Better Lawyer Up

, , , | Legal | March 27, 2022

I am a corporate lawyer and used to work for franchisers. Several years ago, one of my client’s franchisees wanted to sell his location and focus on their other two stores, all under the same brand. My client decided to buy the store directly instead of vetting another franchisee to run it. The relationship between my client and that franchisee was great and they kept doing business together for years to come.

As part of the buying process, due diligence had to be made — basically figuring out how much the company was worth, what debts it had, and things like that. My part was to analyze the contracts the company had signed and what lawsuits were filed by/against the company. If they were being sued for 200k, we had to take that into consideration. Usually, the money would be put on hold and released when the lawsuit ended or used to pay it off.

The commercial part of it went extremely well. Everyone knew we were on the same side and were helpful and friendly. When I called their lawyer for the first time, however…

Lawyer: “Hello, [My Name], how are we going to argue today? What will we disagree about today?”

Me: “Hello… We won’t argue about anything. We are going to work together to make this happen the best way possible.”

Lawyer: “I am kidding! I am just joking around. So, what do you need?”

Me: “I need a list of every lawsuit filed against the company or by the company that hasn’t been archived yet. It needs to include [basic information] as the standard in due diligence like this. We will also need it to be signed by you or [Franchisee].”

Lawyer: “Wow, wow, wow! How am I going to remember all that? I also don’t have a list of every lawsuit the company is involved in, and it might take a while to figure it out!”

Me: “I will be sending you all the information needed by email. But what do you mean, you don’t have a list of the lawsuits your client is involved in? Shouldn’t you be keeping track of them regardless of this due diligence?”

Lawyer: “Oh, you know how it is. We just deal with it when it’s time to deal with it.”

Me: “Either way, we need this information, and I was told you were informed of the negotiations a few months ago, so I am sure it won’t take too long for you to compile it. It was nice talking to you. Expect my email in the next few minutes! If you have any questions or issues with it, let me know and we can figure it out.”

The way he spoke was like a used car salesman. I sent him the email and waited. It was the beginning of a week and the deadline was the next Friday. Absolutely nothing was sent. I sent another email, this time copying his boss, asking for an update.

He answered pretending he had already sent it but I somehow lost it. Instead of the list I needed, he wrote in the body of the email some of the information and nothing else. All the lawsuits he included were, as far as I could tell, small claims or lawsuits that the company had started, while I knew there was at least a big one that was filed against them.

I took a deep breath, made an Excel sheet that he could fill, and sent it back to him saying something like:

Me: “As we talked about previously, we need a signed list with [basic information]. To make it easier for you, I am attaching an Excel sheet for you to fill out. Make sure all the information is current and complete, print it, sign it, and send it back. We need this by Monday, as the due date was supposed to be today.”

Monday came. Nothing. Tuesday came. My client and I decided to ignore the lawyer and figure out every lawsuit they were involved in by ourselves. It took way longer to do so, and since they were on good terms with the franchisee, they thought it wasn’t necessary. We emailed the franchisee and informed them that we would need to halt the purchase of the store until we could properly assess the risk that the lawsuits might bring us. When the franchisee emailed us back surprised by it, we sent them the chain of emails and they told us they understood. 

Tuesday afternoon came, and the lawyer sent me an email with the spreadsheet filled but not printed nor signed. Nothing was said in the body of the email. I thanked him and said we would still be checking the lawsuits ourselves and, although I am sure he would be sending the list printed and signed soon, he didn’t need to bother about it any longer.

We did our own check and, big surprise, the lawyer had missed some deadlines and made it so that lawsuits that were basically won had defaulted against the franchisee, making them lose a lot of money. He lost his job and was reported to the bar association.

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