Boutique Law Firms, Intellectual Property, Litigators, Small Law Firms

Cross-Selling in a Boutique Law Firm

Is it better for a boutique to be focused or diversified? Small-firm columnist Tom Wallerstein shares thoughts on cross-selling.

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Last week, I was having a business lunch at Michael Chiarello’s Coqueta overlooking the San Francisco Bay. (Those who know me won’t be surprised that I managed to combine a business meeting with some good eats. I’ll save my restaurant review for another time, or you can read it on OpenTable.)

Anyway, my lunch was with a partner at Leason Ellis, a thriving IP boutique in New York. The firm is a boutique in that the lawyers are specialists in intellectual property; as far as I know, that is their only practice area. But within that subject matter, they have both a litigation and transactional practice. Conversely, with limited exceptions, my own firm has remained a litigation-only boutique since it was founded four years ago. We handle a wide range of subject matters, but only do litigation within those subjects.

What are the pros and cons of running a litigation-only shop? Why haven’t we added a robust transactional practice as well?

As a practical matter, my firm was founded by two civil litigators without much significant non-litigation experience. When the firm started, I thought it made good sense to stick with what we know best. We were going where the climate suits our clothes, so to speak. Practice guides notwithstanding, the practice of law has become so diverse and compartmentalized that an attorney cannot be first-rate in a multitude of different practice areas. You know, “Jack of all trades, master of none.”

We also came from Quinn Emanuel, one of the world’s largest litigation-only shops. Given that background, we were acutely aware how well a litigation-only model could work. Like Quinn, my firm has affirmatively used our lack of a transactional practice to help emphasize our litigation prowess. The implication is that our attorneys are superior litigators because the firm’s only practice area is litigation.

But I think the marketing advantage of eschewing a transactional practice is rather limited. Would a client think any less of a litigator if he works at a firm that has a transactional practice? I understand contrasting true “trial lawyers” with mere “litigators,” but I doubt that having a transactional practice somehow detracts from a boutique’s litigation chops.

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More than anything, I viewed the lack of a transactional practice as helpful in establishing cross-referral networks. I tried to establish relationships with small groups of transactional-only attorneys who could refer litigation matters to me. If my firm had a transactional practice, I likely would lose those referrals because the other shop wouldn’t want to risk that the client would continue to use my firm for its transactions.

Of course, the less a boutique is dependent on referrals, the less important cross-referral networks become. In fact, lately it occurs to me that, notwithstanding my own firm’s litigation focus, having a transactional capacity can very advantageous for boutiques.

A litigator without a transactional capacity has little to say to a prospective client who is not already facing imminent litigation. Business development is harder when all you can tell a new contact is, “if you get sued, remember to call me….” Unless you work hard to maintain the relationship, that contact will have forgotten about you by the time they are in litigation.

So, instead, you need to be talking to prospects at the very time they are facing litigation.
Also, most litigation is neither sudden nor unsuspected. Disputes often percolate over time before finally developing (or degenerating) into litigation. By the time litigation is imminent, most sophisticated clients will have litigation counsel lined up, if they don’t already have an ongoing relationship with litigation counsel.

With a transactional practice, a boutique has something to say to every prospect. Virtually every company of any size needs legal help with employment advice and counseling, licenses or other contracts, business formation, tax issues, etc. In Silicon Valley especially, startups and established companies alike consistently need IP counseling and prosecution. Offering these practice areas allows a boutique to establish a relationship with a client which benefits even the firm’s litigators, who will be called to help when litigation hits.

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Employment litigation is a perfect example. Even though a boutique firm’s attorneys may be perfectly competent to handle employment litigation defense, many prospective clients are likely to already have their attorneys lined up by the time they find themselves facing employment litigation. Most companies of any success or seriousness will have consulted with an attorney for employment advice and counseling. They will have needed help preparing an employee handbook, establishing their policies for vacation and other benefits, properly handling hiring and firing, etc. If the company gets sued by an ex-employee, it obviously will turn to its employment lawyers for help.

Thus, it behooves an employment litigator to either also provide advice and counseling, or to have others in his firm who do so. A boutique that practices employment litigation is well-advised to also practice employment advice and counseling.

Cross-selling — i.e., providing additional services to an existing client — works both ways. When a litigator establishes relationships with his clients, those clients invariably will have need of transactional advice as well. Rather than settle for the cross-referral benefits of sending the work elsewhere, a boutique with a multitude of practice areas can profit directly from the transactional work.

In other words, cross-selling is not just for full-service, Biglaw firms. Being a “boutique” doesn’t mean you have to eschew all but one very narrow practice area. Rather, boutiques, too, should think carefully about the role cross-selling can play.

Tom Wallerstein lives in San Francisco and is a partner with Colt Wallerstein LLP, a Silicon Valley litigation boutique. The firm’s practice focuses on high tech trade secret, employment, and general complex-commercial litigation. He can be reached at tomwallerstein@coltwallerstein.com.

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