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All Lawyers are Not Created Equal

by Jeff Steele

You can find good lawyers at all size firms and you may even know some (or be related to some, I know I am).  However, even within the entertainment business not all lawyers are created equal.

Are you planning to use your production council to negotiate the finance closings on your film? If so the rationale makes sense since most production attorneys will negotiate a flat rate for their services (hey, you got ’em, you might as well use ’em). However, issuing crew deal memos and negotiating with SAG (while no small task) is not the same as taking a multi-party financing through to a

After choosing the wrong attorney

closing.

You’ll find most entertainment attorneys claim they are capable of negotiating a closing (and that may be true to some extent), but be warned: the lenders are going to increase your deposits if they are unfamiliar with your council or have had a negative experience. Hence your $15,000 legal deposit can become $20k-$25k in the blink of an eye.

Think of it this way… finance closings can take up to three months of hardcore billable hours.

I have seen lenders spend from $125k-$250k in legal on a single-picture closing that ends up being billable to the production.  In most cases an established entertainment finance attorney can deliver the closing in fewer billable hours, than an attorney who does not conduct closings on a regular basis.

Why?

Because attorneys can be notorious for not being able to get out of their own way and stop negotiating on points better off left alone, which means that even though they’re charging less, they’re billing more and in turn delaying the start of production.  Bottom line, ask the financier  (or their business affairs person) you’re about to do business with what attorneys they work with on a regular basis before choosing one. After that make sure to talk with other producers who have used them in the past and make sure they didn’t run up a bill.

If you are already working with a lawyer here is a quick test to to determine if they will be best suited to help handle your closing…. ask if they have ever done a deal with the bank or investor you are about to acquire funds from, if they say yes, confirm it. If they say no, run don’t walk. Unless of course you are related to them and then you’ll have to do a dance.

5 Responses leave one →
  1. Andy Halmay permalink
    March 12, 2010

    Good advice, Jeff, but you can add some to this. When dealing with lawyers, always remember that YOU are paying their bills and YOU are in charge. Frequently remind them of this, too. You need to make the business decisions. They check the legal feasibility.

    I once found myself in conflict with a young lawyer who had just hung up his shingle and who offered to work for me on spec since he felt I had a very viable project in real estate. He expected that I would get the project off the ground at which time he would bill the company heavily to make up for the risk he took at the outset. I was negotiating with a colonial government exclusive development rights for a 1,500 acre Crown Land island in the Turks & Caicos Islands.

    I planned to develop only 150 acres but wanted to be sure I kept environmental control over the whole island so that I could assure prospective buyers that their grandchildren would enjoy the same unspoiled nature.

    Before bringing in this lawyer I had foolishly asked for first refusal on the rest of the land. The lawyer pointed out, rightly, that this could cost me dearly later on since my development would inflate the value of the rest of the land which I might later be forced to buy at high prices to keep others out.

    Wisely, he suggested we include in the agreement a negative covenant, simply that the government would require the company’s permission before they sold any additional crown land. Since I wanted to invest in some infrastructure in the rest of the island anyway, I suggested that for this change we offer them a fixed amount to be invested in this infrastructure (which hadn’t been mentioned before) which would be of benefit to the small, existing community as well.

    The young lawyer was adamant. He didn’t want to offer them anything. We argued. But the most important point of disagreement between us was the agreement itself.

    I DID NOT WANT AN AGREEMENT IN PRINCIPLE. To me these are toilet paper. I made it clear to him that I don’t want to leave the island without a signed sealed agreement, even if only one or two pages. Richard, the lawyer came in with a 12 page agreement in principle. We argued more.

    Then at one point I began to feel that I was being unreasonable with him. I had spent years in advertising where clients who were amateurs in advertising and who had no clue would tell me, the professional, how to do their advertising. Here, this lawyer who was doing it all on spec. Perhaps I should give him more free rein, I thought.

    Well, the government had their land officer, an elderly, retired, British judge, negotiate with us. Richard pulled the wool over his eyes in his presentation. The judge agreed to it all without properly understanding that they would give up rights to the balance of the land on the island for no additional compensation. But it was all on toilet paper – an agreement in principle.

    A couple of weeks later I got a wire from a new friend, the editor of the Conch News, the islands’ only paper at the time. There had been a secret State Council meeting and they’d made a deal with a Texas oil group to sell off 600 acres of my 1,500 acre island for a $75 million oil refinery. This was in 1970 dollars. Oil refineries stink. An oil spill could ruin the whole effing chain of islands, not just ours.

    I contacted the islands’ governor who took the position that we had an agreement that they couldn’t hold us to thus we couldn’t expect to hold them to it.

    I was right in the first place, the lawyer was wrong and I was then wrong to let him have his way. In dealing with lawyers in any field, it is important to know what you are doing and then have the lawyers make sure it is legal.

    My lawyer, on his own, wrote to the governor rattling his saber which only had them digging in their heels some more.

    Later I wrote the governor saying, “It seems we were making much better progress before I introduced my former lawyer.” That opened up negotiations again but by this time, the damage had been done, friendliness had been lost in the relationship, I had lost my investors and finally my zest – and so I closed the chapter.

    There is an old line about “What is a film producer?”
    The answer: “A guy with a telephone who knows what he is doing.”

    If you want to be a real film producer, you need to educate yourself in all elements of production. Funding is one of the most important elements. When you know what you are doing, then you’ll know when to appreciate your lawyer and when to kick him in the ass.

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    • March 12, 2010

      @Andy, thank you for sharing your cautionary tale. You are absolutely correct, in that you must be the entrepreneur and the attorney is the legal counsel: they’re roll is to advise, not to consent.
      Henry C. Krasnow wrote a good how-to book on the subject called:

      “Your Lawyer: An Owner’s Manual: A Business Owner’s Guide to Managing Your Lawyer”
      http://www.amazon.com/Your-Lawyer-Business-Managing-AgatePro/dp/1932841121

      it’s a good read for anybody who intends to hire a lawyer at some point (which means everybody), and wants to avoid these sorts of pitfalls.

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  2. R.Much permalink
    March 12, 2010

    This isn’t as long as Andy’s comment. But, I made the mistake of having my production lawyer try to close my financing and I ended up losing the lender I was working with over it. I had to learn this mistake for myself. The sad thing is I was never able to find another lender. That was my one shot at getting my film financed and my lawyer blew it over a couple of measly negotiating points.

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  3. Matt permalink
    March 12, 2010

    This just happened to me. My lender didn’t consider my lawyer “A Closer” and I was actually charged with a higher deposit.

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  4. March 13, 2010

    Great advice, and well taken. Putting my running shoes on…

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