Tuesday, July 1, 2008

Litigation or Transactional Law Career: Some Advice to Law Students

Posted by Jeff Lipshaw

A reader who is interning in a NYC corporate law firm, and about to enter law school, saw my earlier post alluding to the creative possibilities in transactional work, and sought advice about choosing between transactional work and litigation work.  I'm happy to share some thoughts.

1.  Mostly I will be talking about big firm practice, but I should issue a disclaimer.  There's big firm practice, and there's mega-firm practice.  The reason it's important to make the distinction is because I'm looking backwards at a career in which many of the fulfilling aspects came later, after I did my time in the trenches (both in litigation and corporate).  So there is a substantial period of learning how to chop the wood before a new lawyer gets to build, much less design, the house.  My perception is that period is shorter in big firms outside of the financial centers.  You will probably take on more responsibility more quickly at a big firm in Detroit than Chicago, in St. Louis than Los Angeles, in Salt Lake City than New York.   [UPDATE:  See comment below on how this differs between transactional and litigation.]

2.  Law school, at least the way it's mostly taught, does not tell you much about the way the transactional practice works.  That's because of the case method.  Cases are always about litigation.  (Interestingly, business schools teach transactions in the case method, but they are cases in doing business, rather than litigating about it.)  Even contracts class, as usually taught, is something of a bait-and-switch.  Don't blow it off, because you'll need it for the bar exam, but there's not a lot of contract law that comes to the fore in transactional practice.  I often say, and am probably not far off, that the practice of contracts is 90% interpretation, and 10% all other (offer and acceptance, consideration, duress, mistake), and the teaching of contracts is 90% all other, and 10% interpretation.  Litigation tends to involve the LAW a lot more.  The number of occasions for going to the library and doing extensive research on a legal issue is far greater in litigation, and when you do research an issue on the transactional side, it rarely turns into work product in the way a brief springs out of the cases.  You might do corporate research, for example, on whether a transaction involves substantially all of the assets of a corporation, and hence require shareholder approval, but that will tell you how to structure the deal, not be the basis for an argument.

3.  Are you a win-lose kind of person or a win-win kind of person?  Great trial lawyers are sublimated warriors.  Winning a trial or decimating a witness in cross-examination is the thrill of conquest and vanquishing.  If you are not that kind of person, it can wear on you.  Personally, I realized ten years into a litigation career, (a) I wanted to be liked (if not loved) too much to be a conqueror, (b) dealing with the opponents' conception of the truth (opening up the other side's brief and reading it, for example) was frustrating and hard on my blood pressure, and (c) as I discuss below, once you get beyond the adrenaline rush that causes your eyeballs to pop out of your head (some people like that), the way trials work in cases that big firms do can be kind of . . . boring.

On the flip side, negotiating transactions is also "adversarial" in a way, and a lot of it is about winning points.  Just like a litigator can't win without good facts and good witnesses, a transactional lawyer can't make points without exogenous business leverage.  For example, even in a "friendly" business combination involving public companies, there are a series of points negotiated between the acquirer and the target that have to do with how tied up the deal is.  The task for the sellers is to maintain some wiggle room for future leverage, and the task for buyers is to make it as difficult as possible for the target's board of directors, short of violating their fiduciary duties, to get out of the deal if a better one comes along.  But that's all less a matter of the lawyer's skill than the leverage the client has or lacks.  (See the Bear Stearns - J.P. Morgan deal for an example of this.)

The bane of a transactional lawyer's existence, though, is an adversary who seems more intent on winning "lawyer points" than getting the deal done.  One aspect of creativity in deal lawyering, it seems to me, is knowing when to hold 'em and when to fold 'em - how to concede the points you don't need, or trade them for the ones you do.  Negotiating with a lawyer who, like a litigator, needs to conquer or vanquish, is tiresome.

One of my late ex-colleagues and dear friends told me that he found the give-and-take of negotiated deals tiresome in just that way, and that's why he "stuck to raising money in the public capital markets."

4.  The first part of a career, whether in litigation or corporate, is a combination of doing the grunt work and learning professional techniques.  Doing the grunt work, well, sucks.  Learning the professional techniques, whether it's second-chairing a deposition, or attending the negotiation of the acquisition agreement, is a lot of fun, as long as you like to learn.  Being creative with those techniques is something that comes later.  Two examples.  Litigation.  An old saw of cross-examination is that you never ask a question for which you don't know the answer.  That pretty much guarantees that you won't make a mistake.  But great cross-examiners violate that rule all the time, because they know what questions to ask in which they either don't care what the answer is, or have a plan for whatever comes out.   Corporate.  Things like the shareholders' rights plan (the poison pill) are invented by creative lawyers.  But generally that's by lawyers with cycles of learning in the transactions.

Moreover, technique in itself can get old.  It's the context then that supplies the interest.  I'll give two non-legal professional examples.  When my daughter was born 24 years ago, I was (obviously) blown away by the experience.  I said something to the OB about how thrilling it must be to deliver new babies.  He said the physical aspect of it lost its wonder after a while, and the thrill came from dealing with the parents.  Or to take a counter example, dentistry.  I don't know how much professional satisfaction comes from doing fillings and crowns once you've mastered the technique.  I do understand dentists have high suicide rates, compared to other professions, for whatever reasons. 

Similarly, mere technique in high-powered litigation or corporate work can get old.  As I've said, I didn't like litigation.  We had a ten week trial in Cheyenne, Wyoming in 1986, litigating a whole set of complex contractual issues between a coal supplier and a utility.  In the midst of what ought to be the most exciting time for a corporate litigator, I realized I was bored.  I knew what every already deposed witness was going to say, and what the cross-examination would be.  In corporate work, it got to the point that I negotiated the key business points of the deal, but was bored stiff by the lawyers' wrangling over the environmental representation or the interstices of the definition of the "knowledge" standard for representations that hinged on it.

5. (UPDATED)  Get good mentoring on this.  I don't take anything away from law professors (I am one, after all), but note that the experience (as opposed to mere knowledge or analysis) of mature practice occurs well after most professors have left practice to go into the academy.  Indeed, at the 2-4 year level, which is pretty common, you are still moving from grunt work to learning technique.  Obviously, thoughtful professors will have observed what senior lawyers do, and can be intelligent and insightful, but they haven't necessarily experienced what it's like to be a senior lawyer in practice.   Many of those senior lawyers - corporate and litigation - have real passion for their jobs, and it pays to listen to them talk about why.  Or talk to adjunct professors.  One of my most rewarding classes was a mock litigation course taught by Charles Marson, who had been the Executive Director of the northern California ACLU.

As with many decisions in life, there's no silver bullet, or algorithm, or pat answer.  You just pays your money and takes your chances!

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Comments

"We had a ten week trial in Cheyenne, Wyoming in 1986, litigating a whole set of complex contractual issues between a coal supplier and a utility."

If that doesn't make the hairs on your arm stand up straight, nothing will.

Posted by: shg | Jul 1, 2008 9:48:27 AM

So... it doesn't ever get better? After 2 really interesting clerkships, I'm 9 months into big firm practice and bored out of my mind. Why is it that law seems so interesting in law school and so boring in practice?

Posted by: 3d yr associate | Jul 1, 2008 11:20:12 AM

Shg: I probably shouldn't reveal this, but the statute of limitations has passed. We had a group of distinguished lawyers at our table, including in-house counsel from Peter Kiewit Sons', my firm (Dykema Gossett), Kirkland & Ellis, and Freudenthal, Salzburg & Freudenthal (Dave was not involved in the trial but he went on to become the governor of Wyoming). The best parts of the trial were the Post-It notes that went back and forth across the table. Little did we know that one of us had collected them all, and compiled them afterwards in a "Best of" collection. I suspect they aren't funny to anybody else, but I still end up on the floor laughing when I read them.

I should also note that true to big firm litigation, the witnesses were divided up. The nature of the case was that despite my senior associate status at the time, there ended up being only one witness who was "mine." It was one of the experts for the other side. He had a big chart with a bunch of calculations showing how the other side was correct in doing what it did. His direct was before lunch. At lunch, our experts discovered that he had made arithmetic errors that, when corrected, supported OUR position. So I quickly put together a cross-examination that took him slowly through the chart until he stopped dead silent and realized his error. I have to admit I made good show of it, but it was the experts who discovered the flaw. But during that particular segment, I wasn't bored; indeed, I was having a grand old time.

And none of this quite captures the camaraderie in the evenings, the sojourns to Jack's Cowboy Bar, the impromptu pick up basketball games at one of the local schools (the chief in-house lawyer was 6' 7" so he got picked first), and having Gerry Spence give me a big wink when he walked into the back of the courtroom one day.

Posted by: Jeff Lipshaw | Jul 1, 2008 12:13:58 PM

On No. 1: I think the big- vs. mega-firm take probably is true as described on the litigation side, but is less true on the transaction side. Deals that would be led by mid-level associates in Chicago are typically led by seasoned partners in St. Louis. And partners in St. Louis are less likely to include associates in negotiations along the way. So at every step, Chicago transactional associates are further along in their development than St. Louis counterparts. Of course, they also work a lot more, and make a lot more money.

I do think you get the essential differences of the practices right. But young transaction lawyers should never forget that a lawyer's skill does matter--that even the rote negotiations you describe can be lost if one doesn't know one's role, that creative presentations of those negotiations can often knock experienced lawyers off their spot, and that the conventional wisdom about what's important isn't always correct.

Posted by: Anon | Jul 1, 2008 12:50:10 PM

Great post. "One aspect of creativity in deal lawyering, it seems to me, is knowing when to hold 'em and when to fold 'em - how to concede the points you don't need, or trade them for the ones you do. Negotiating with a lawyer who, like a litigator, needs to conquer or vanquish, is tiresome."

Actually, since most litigation matters end in settlement, litigators need to know this skill too. For that matter, so does any lawyer making an oral argument. There are points you need to win, and points you can concede, and lawyers who refuse to concede anything tend to create annoyed judges.

Posted by: Bruce Boyden | Jul 1, 2008 1:01:28 PM

Anon, I think you're right on the Chicago vs. St. Louis assignment of deal work. While a partner in Detroit, I often found myself dealing with senior associates from Chicago. The downside was that they were (a) often full of themselves, and (b) not as flexible or creative. Having a conversation with a Chicago mega-firm senior associate about why it was that my firm, which got nothing from the deal but a fee, was NOT going to give a legal "opinion" about our knowledge of the client's contingent liabilities (an oxymoron?) was one of the more frustrating exchanges of my career.

To bolster your point on rote negotiations, see the classic by Jim Freund, Anatomy of a Merger. And I'm the first to acknowledge the importance of skill.

I think, however, getting knocked off your spot has more to do (often) with pride than skill (or lack of it). Nowadays a deal generalist simply can't know everything about every area of specialized representation, like ERISA or labor, nor are most lawyers competent beyond broad stokes on the financial representations and warranties (i.e all the exceptions to GAAP you put in the schedule). If you have the self-confidence when in danger of being bamboozled, the following can help: "that's interesting; let me get back to you".

Indeed, knocking another or getting knocked off one's spot may well be the kind of winning and losing that lawyers (versus perhaps their clients, and I have been both) see in transactional work. It was usually when the outside firm lawyers got wrapped up in these duels that I tended to step in figure out a compromise and get the deal done.

Posted by: Jeff Lipshaw | Jul 1, 2008 1:52:43 PM

Bruce: There tends to be a fundamental difference between the way in which transactional lawyers and litigators approach settlement. A litigation settlement is usually a "wrap" to the relationship between the parties. (There are a few exceptions to this, such as IP litigation between large corporate rivals; they will bump heads often.) In transactional practice, other than M&A deals between buyer and seller, the parties may have an ongoing business relationship and a series of future deals. In my experience, both in mega-firms and as a client in-house, I've found that litigators generally don't have the perspective of the continuing business relationship and the need for harmony between the parties. Their attitude is too wedded to the notion of the parties walking away from each other while the ink is drying. Indeed, one such (mega-firm) litigator severely screwed up my company's relationship with one of top customers, a Fortune 50 company; but he was only the worst example, not a unique one.

Posted by: A.J. Sutter | Jul 1, 2008 7:00:43 PM

You touch on an interesting array of points here. And thank you for raising them. Some of us in the sociolegal world are trying to analyze and understand empirically what happens in lawyers' transactional work. It isn't easy, but we are attempting to bring a theoretical perspective to this. Let me refer to two articles where we have tried to tackle this:

John Flood & Fabian P Sosa(2008) "Lawyers, Law Firms and the Stabilization of Transnational Business" http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1078820

John Flood (2007)"Lawyers As Sanctifiers: The Role Of Elite Law Firms In International Business Transactions" http://papers.ssrn.com/sol3/papers.cfm?abstract_id=949553

Posted by: John Flood | Jul 2, 2008 5:16:11 PM

My advice for law students who are trying to figure out "But what am I actually going to DO with this J.D. when I graduate?" is to pay close attention to current events. Pay attention to what lawyers in the news are actually doing. Before law school, I had no idea what "securities enforcement" was, and I certainly didn't know that lawyers make a living at it. But during law school I paid attention to Enron and other SEC enforcement actions, and thought that that line of work might be fun. (I also learned that, like many other legal fields, it doesn't fit neatly into the classic litigation-vs.-transactional paradigm.) Now I have a career that I really enjoy and that fits my personality.

Posted by: Ed | Jul 3, 2008 7:48:43 AM

Is this a friggin' joke??? CHOOSE???????? Are you aware of the state of the job market for new law grads today? Are you aware of the tremendous oversaturation of JDs and the unwillingness of many firms to hire inexperienced attorneys because law school teaches them no practical skills? Here's a bit of real-world career advice to current law students: if you're lucky enough to get any job offer within a year of graduation, take it, regardless of what it is or what it pays. Most likely, you will not be doing what you want or what you went to law school to do, and you will be making $40-$45k a year while trying to pay back $150k in student loans. And you will consider yourself lucky to have benefits and not be doing doc review for a living. This is the sad reality of the legal profession today.

"Choose," LOL!

Posted by: Unemplawyer | Jul 3, 2008 8:19:15 AM

Having practiced in both transactional practice (real estate, acquisitions, leasing, development and finance) and litigation (commercial bankruptcy, which is in reality closer to transactional work than "true" litigation, as most Chapter 11 cases are "forced negotiations", with taking it to the judge a last resort), both in a big Dallas firm, my experience was that litigating cases made me a better transactional lawyer, as I had a much better idea of what could go wrong, and "doing deals" made be a much better litigator, as it made me was much more detail-oriented than most litigators. As to the characterization that transactional practice is "90 percent interpretation and 10 percent all other", I think that is much less true at the firms that are doing high level transactional work. First, in order to really serve your client, it's not enough to just put together an enforceable contract; the contract also needs to anticipate and deal with the myriad issues that just might come up, even if unlikely. For that, the attorney needs to develop an understanding of the client's business. Second, knowing a limited area of law (like contracts) is almost NEVER enough - you must know enough about all areas of law, like tax, banking law, bankruptcy, zoning, secured transactions, etc., etc., to ask the right questions. As a young transactional lawyer (before the days of many of the on-line search facilities available today, when LEXIS was available only at the Library terminal & very expensive), I spend a good deal of time (maybe 40%) in the library, making sure that a proposed solution to the client's problem would really work, as opposed to just sitting in my office, editing a form Contract, Note, or Deed of Trust to fit the deal (if you are always looking for a form to "make it fit", you probably aren't doing high level transactional work). In my experience, the very best transactional lawyers are generalists, with a broad legal background, and having at least some experience in litigation to understand and appreciate what can go wrong.

Posted by: Daniel J. Artz | Jul 3, 2008 8:24:21 AM

I would add one piece of advice to the mix: stay in school the extra year and get the MBA too. I practiced for five years as a litigator, then got my MBA( by leaving the practice for 20 months). I cannot tell you how much it has improved my skill set and it has given me the vocabulary and perspective used by bankers/deal makers. On top of that, if being a lawyer does not work out, you will have the credentials for any number of careers, fields, and industries.
And at the very, very minimum, you should take MBA level accounting and finance classes while getting your JD. It will pay dividends.

Posted by: New York In-house Lit | Jul 3, 2008 8:33:25 AM

just some food for thought -- you were litigator at a good Detroit firm, Dykema Gossett, but hardly where a client could afford to go for a bet-the-company case, novel, or extremely complex litigation.

to the extent you find litigation techniques repetitive, perhaps it is because the type of litigation which is considered "trail blazing" doesn't come through firms like Dykema. perhaps if you were in a larger market, you would find yourself facing litigation issues that no one else (or very few) have faced and for which there are no established techniques.

Posted by: litigator | Jul 3, 2008 11:20:44 AM

I'm rationalizing the following defensive response to the last comment on the basis of defending the honor of my old firm, but I really beg to differ on the last comment.

Let's see: I wrote the briefs (including the cert denial brief) in the case that adopted the Areeda & Turner predatory pricing test in the Sixth Circuit (D.E. Rogers v. Gardner-Denver Co.); I was one of the partners in the litigation challenging a poison pill in the context of a hostile takeover (Harvard Industries v. Hayes-Albion); one of my associates wrote the 10th Circuit briefs in Big Horn Coal Company v. Commonwealth Edison, a very complex UCC-based case, which we won, even though James J. White was on the other side's briefs; in the coal cases I described, the client chose us as lead counsel over the following other lawyers and law firms involved: Arthur Liman of Paul Weiss, Stephen Susman, Kirkland and Ellis; we were involved in developing all of the law around the Michigan property and casualty guaranty association statute, including an equal protection challenge that went to the Sixth Circuit; our firm handled the Northwest Flight 255 air crash litigation for McDonald-Douglas, and on and on.

Yes, it's possible, and even likely, that one can do litigation unlike any other if one is in one of the mega-firms. But if you want to litigate, trust me, there's plenty of intellectual challenge being offered at big firms outside the mega-markets.

I'm not sure what a trail-blazing litigation technique is, apart from the substance of the litigation. Figuring out a clever way to do an interlocutory appeal? Using virtual reality to recreate an airplane crash? Learning how to write endless nasty-grams during discovery disputes? For what really are the techniques of litigation (or trial work) - how to take effective depositions, how to cross-examine, how to develop a case-in-chief, how to make an effective opening statement or closing argument - you'd have to show me how the mega-firms have any kind of special ability, much less a lock.

What I said was that satisfaction in being a litigator is mostly a personality issue, and that the process of trying complex cases can be boring. Even if the legal or factual issues in the case are interesting, or novel, or trail blazing, deposing an expert witness is deposing an expert witness. You bone up on the technical stuff, and have your own expert sitting beside you. If you love the process, the intellectual wrangling with the expert, then you're born to be a big firm litigator. If, on the other hand, it gets to be one more expert you're deposing, maybe it's not for you. Yes, it would be cool to be helping Ted Olson or David Boies in litigating Bush v. Gore, or working with (I can't remember her name but she was a Stanford alum) in defending an impeachment, but it's still litigation and maybe not for you.

Posted by: Jeff Lipshaw | Jul 3, 2008 12:10:21 PM

I went the small firm route, had no real interest in going to a big firm, let alone a mega firm. Two years in (with a six month break to chase down a dream), I'm probably doing more complex (and interesting) law and motion work than any of my law school colleagues. I'm also working in a field where there is very little governing case law (mortgage fraud).

I'm of the opinion that if you want real, hands on experience right away, you should go the small firm route.

But then, I also believe that you go to law school for one of two reasons: either you're a gambler, or you're not.

Posted by: KG | Jul 3, 2008 9:37:39 PM

I've been practicing for 12 years (fed clerk, midlaw, biglaw, and now in-house at F100). The corporate clients love transactional lawyers because they are "deal" lawyers and deals always mean $$$ to corporations (whether you are acquiring or divesting or merging, etc.). However, it's my opinion that having litigation as a foundation is great for newer lawyers. You can always learn corporate stuff (as my company has required of me), but solid litigation skills only come with practice, practice, practice.
In addition, I've seen a trend with the F100 companies that should be a wake-up call to all attorneys: The deal work (and other less glamorous "contract negotiation") is being leeched on by MBAs (without JDs) and corporate "contract negotiators." At some companies, depending on the culture, even the business people think that they can be "the lawyers."
Not so with litigation. Clients and ordinary people don't know the rules of the game, and have not been trained in the ways of written and oral advocacy and strategy. In addition, good litigators also have to be good negotiators--a skill that translates over to the transactional side. And, of course, lawyers are officers of the court. So, unless the person is appearing pro se, a non-JD MBA or "contract negotiator" usually can't make an appearance in a case as counsel. Lawyers will always be able to make a living being a litigator. That may not be so with transactional work.
I would counsel those on the board to get some bread and butter litigation experience; even a pro bono case would be good for those corporate types who can't stomach litigation. You can always learn corporate work if you have strong fundamentals.

Posted by: MK | Jul 7, 2008 7:23:21 AM

Good points about the start of your law career being a lot of grunt work. I think that law students need to set solid career goals and plan as much as they can, especially while they are still in law school.

Posted by: EL | Nov 26, 2008 7:30:04 AM

I really like about the starting of your law career. Thanks for posting this.

Posted by: Immigration Advice | Jan 9, 2009 4:17:43 AM

I think that transactional is more versatile if you are going the big law firm route. I have more friends that enjoy litigation though in smaller firms. If you are going transactional and bigger firm, try to get a niche - not just corporate. Tax and IP are great specialities and can be more recession proof than others. I transitioned from corporate/securities to IP as a 2nd year associate, and it really helped my career.

Posted by: jcutter | Feb 7, 2009 3:02:24 PM

Excellent discussion. As a staff attorney for a large corporation, my role is limited and somewhat menial. My tasks are mostly to facilitate moderately-budgeted day-to-day activities (e.g., the contracts that grease the wheels). It seems, sometimes, that prospective lawyers envision "transactions" as M/A only, but that's not true. There are a ton of different things a lawyer may be assigned to do as a "transactional" lawyer.

Given the current economic situation, it is true that there is great value in simply having a job - and this, above all, has taught me the most. I do not walk into a job each day that yields awesome power, gratification or fame, but it is a job for which I am being paid. I am assigned certain tasks, and until I have mastered the substantive and procedural aspects of those tasks, I have little or no advice for anyone else. My goal is to examine every aspect of my job - and improve upon it. There is something to be said for simply toiling in your own lot, regardless of how good it looks to the outside world.

Posted by: Pronounced | Mar 18, 2009 7:20:17 PM

Transactional law is becoming more and more important, especially as our economy shifts further into a strictly information economy and innovation becomes central to our competitiveness.

Along these lines, the legal profession looks to be recognizing this. See these recent articles in the National Law Journal and the Wall Street Journal on how Duke and CU-Law are changing up their curriculum to reflect this.

Want to Become an Entrepreneur? Get a Degree in it, at Law School! http://blogs.wsj.com/law/2010/01/22/want-to-become-an-entrepreneur-get-a-degree-in-it-at-law-school/
January 22, 2010 | The Wall Street Journal Law Blog

LLMs in entrepreneurial law reflect shifting view of profession's role http://www.law.com/jsp/nlj/PubArticleNLJ.jsp?id=1202439396255&rss=nlj&slreturn=1&hbxlogin=1
January 21, 2010 | The National Law Journal

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