Choosing the right lawyer

Nation's Business, June, 1993 by Sharon Nelton

When Lynn H. Vandercook needed legal advice earlier this year, he didn't want just any lawyer. He turned to Kay B. Wakefield, an attorney who grew up in a family business and who now specializes in family firms. Even Wakefield's Portland, Ore., law firm is a family business--she's in partnership with her brother, Ronald D. Browning.

Vandercook, president of Oregon Handling Equipment Inc., in Portland, says Wakefield's experience makes him feel "very comfortable." For family businesses, he recommends lawyers with backgrounds similar to hers. "They know what you're going through," he says, "because they themselves have been there, or have been at it long enough to know. They have a little sympathy, whereas with somebody else, it's just another job."

The right lawyer can help a family in business find a way to resolve issues and become stronger, increasing its chances of avoiding expensive litigation and the bitterness that accompanies it. The Vandercook family is a case in point.

Lynn Vandercook, 45, has worked at Oregon Handling for more than 20 years. He is a minority shareholder in the company, which distributes material-handling equipment items ranging from forklift trucks to ladders and has more than $1.2 million in annual revenues.

For several years, Lynn had been asking his father, Lyle--who turns 81 in June and is still active in the business--for the chance to read a living trust that he was told would give him the remaining shares of the business upon Lyle's death.

The trust had been drawn up by a competent lawyer friend of Lyle from Texas after the death of Lyle's wife, who had owned 51 percent of the company. Lyle resisted, but Lynn wanted to be sure that the trust said what his father thought it said and that it complied with Oregon law.

Lyle finally relented, and when Lynn read the trust, he felt it did not carry out his father's intent. In January, with his father's knowledge, Lynn hired Wakefield to review the trust and offer her advice.

"The written document didn't give Lynn the business," says Wakefield. Instead, it gave the stock in trust for Lynn's children and named Lynn's sister, Jan Mariakis, who lives in California, as trustee.

As lawyers who work with family businesses know, a simple rewriting of the trust was not the solution--at least, not immediately. Family-business clients often ignore all kinds of legal advice and even fail to execute wills and trusts.

"A common explanation for this seemingly irrational behavior is that underlying, unresolved family issues, so long as they remain unaddressed, will block or at least constrain all but the most herculean efforts by attorneys to give effective counsel," says Richard L. Narva, a lawyer and principal consultant at Genus Resources, Inc., a family-business consulting firm based in Needham, Mass.

Wakefield understood this. She says she found "a lot of distrust" in the family. There were hard feelings between brother and sister that dated back to childhood. She learned that while both the sister and the father agreed that Lynn deserved the business, they lacked confidence in his ability to run it. To complicate matters further, the three members of the board are Lynn, his sister, and his father--and Jan and Lyle could outvote Lynn any time.

"There was an attempt to integrate the estate plan with the business transition, but their family issues were stopping it from being a smooth transition," says Wakefield.

She told Lynn, in a letter that was shared with Jan and Lyle, what needed to be done to correct the flaws in the estate plan. But she also referred them to Joe Paul, a Portland family-business consultant who could help them begin working on the problems in their relationships with one another.

In a meeting with Paul, the family members agreed to hire a management consulting firm that could serve as a coach for Lynn to strengthen his management skills so that the family might develop more confidence in his ability to lead the company. The consulting firm, which began its work in March for a six-month period, will also make proposals for improvements in the business.

Lyle Vandercook has not yet revised his estate plan, but both Lynn Vandercook and Kay Wakefield feel progress is being made. "I sense that Lynn is feeling more in control of his business and the other family members are backing away from feeling like they've got to step in and rethink and second-guess his decisions," says Wakefield.

Wakefield has since been hired not as just Lynn's attorney but as the attorney for the company itself. She says that if there were a real conflict of interest--such as a decision by the board to fire Lynn--the family understands that she would have to withdraw from representing either side.

Family-business lawyers are a relatively new breed. "It was only in the '80s that many law firms or many other advisers began to focus on the special needs of family businesses," says Michael L. Fay, a senior partner at Hale and Dorr, a 275-attorney Boston firm, and co-chairman of its Family and Closely Held Business Practice Group.