Should I tip my attorney?

April 7, 2007 6:14 PM

Should I give my lawyer a gratuity for acting as a broker in the sale of my business?

I am the active partner in a small company (less than $10mil sales per yr). I have received an unsolicited offer for our company. In the early stages of the negotiations I discussed trying to find a business broker to negotiate for me. Due to the relatively small size of the deal (to a broker, not to me!) my attorney offered to broker the deal, as well as handle all the legal aspects, all for his regular hourly fees.

Since then he has hinted, twice, that it is not unusual for a gratified client to give their attorney, in cases specifically like this one, a gratuity. He has done an excellent job representing me. He has saved me a lot of money, but he also declined a contract for brokering the deal. A broker would have taken a minimum of$4-600,000.00+ as a commission. I think he may have earned a tip, and it would come from my part of the proceeds of the sale.

So, the question is a two parter...Is it a real practice to tip your attorney? And if so how should I come up with a figure???

posted by SMELLSLIKEFUN to work & money (17 comments total)

He didn't find you the buyer, which is the usual task of a broker. He is getting his regular fee. Do you expect to need his services in the future? If so, maybe a bonus or an extremely handsome gift is in order. If he saved you that much, maybe 10,000. By gift, I mean round trip tickets to Tahiti, or the expensive artwork you know he desires.
posted by theora55 at 6:51 PM on April 7, 2007

Are you saying that a broker would have taken between $400,000 and $600,000? I just want to make sure I have my numbers straight.

That aside, if this guy helped you out, did a good job, and helped you make a lot of money, then I think he deserves a significant bonus. I'm not sure I'd call it a "tip," but whatever you call it, I think this is a situation that calls for generosity.
posted by alms at 7:16 PM on April 7, 2007

Is it a real practice to tip your attorney?

No.
ABA Model Rule of Professional Conduct 1.5 (and comment) explain that all fees are to be paid only after the client's consent to the hourly rate and/or contingency.
posted by Saucy Intruder at 7:35 PM on April 7, 2007

But model rule 1.8 allows gifts, so long as not solicited by the lawyer.
posted by Mr. President Dr. Steve Elvis America at 7:54 PM on April 7, 2007

Hmm, I am not sure you did things buy the book. In your situation, if you were going to consider using a broker, this should of happen when the offer was first made. Their role would of been to research the market place and try to find multiple buyers to drive up the price of the sale.

Just to clarify, did the attorney do something that got you more money that you would not of received otherwise? If so, then yes, the attorney deserves something for his role. The amount could be anywhere from 10 to 20 percent of the amount he got you over the original offered price- plus his fees.

I've sold two businesses but there was never any mention of tip. The sale of a business can be a "giddy" time indeed. There is a lot of money changing hands and generous people do generous things. Since your situation is so "original" you are going to have to go with your heart on this one. Just keep it within reason. You might want to ask your financial analyst whom you are going to use invest your windfall. They will give you a lay of the land ahead and possibly offer some insight of how much you should give based on what you want your money to do.
posted by bkeene12 at 8:18 PM on April 7, 2007

What bkeene12 said. When I worked for a business brokerage our fee was contingent on the purchase price we could get for our client. All this was negotiated as part of the representation agreement, and our fee structure put us at risk (i.e., if the deal didn't close, we got paid maybe a token marketing fee, plus expenses, if that.) By offering to do the deal for an hourly rate, your attorney decreased his risk by agreeing to lower compensation.

There's nothing keeping you from giving a very, very nice gift if you were happy with his work (always classy and expense is up to you.) Or even a "bonus" ("gratuity" might be offputting to a professional) if you feel like it -- but again it's completely up to you.

I'm going to guess your attorney is really a good guy but kind of green and so maybe he went into the process a little uninformed. That would almost excuse the strong hinting for more money, though it's kind of unprofessional regardless. Honestly, if he's been involved in this kind of work before then he knew what he was getting into and he's really being kind of a dick.
posted by Opposite George at 8:34 PM on April 7, 2007

Since then he has hinted, twice, that it is not unusual for a gratified client to give their attorney, in cases specifically like this one, a gratuity.

I think this is very unprofessional of the attorney. In fact, it appears to violate Model Rule of Professional Conduct 1.8(c), which states: "A lawyer shall not solicit any substantial gift from a client ... "
posted by jayder at 8:45 PM on April 7, 2007

Link to Model Rule of Professional Conduct 1.8(c)
posted by jayder at 8:46 PM on April 7, 2007

Absolutely NOT! If he's hinting that you should put something extra in his pocket, might I suggest a Bar complaint?
posted by america4 at 8:57 PM on April 7, 2007

did the sale go through yet? if not, would the lawyer give you a big break on fees? if not- give him a 1k gift. if yes- up to 5-10k maax.

jmho...
posted by Izzmeister at 9:00 PM on April 7, 2007

jayder is absolutely correct -- solicitation of the gift does violate the Model Rules. Of course, you may be in a jurisdiction that does not observe the MR, but most will have some kind of bar to the solicitation of gifts. Even when not solicited, most ethical attorneys would have an issue accepting such a large gift because it would open them up to scrutiny regarding whether or not the gift was truly voluntary.
Of course, that doesn't mean it never happens. If nobody ever gave their lawyers gifts, there wouldn't be a rule governing it. It's perfectly okay for you to give him something if you want to. Just don't let yourself be pressured by him. You have paid for this work in the form of his hourly fee. Anything else is up to you.
posted by katemonster at 9:39 PM on April 7, 2007

He has saved me a lot of money, but he also declined a contract for brokering the deal.

Well, it sounds like he had the opportunity to get more money out of this, but chose not too. Frankly his behavior makes me wonder if he took a little "gift" from the buyer as well. He seems to have broken some rules, as other people pointed out.

Either way, you seem to be happy with the deal, right? If so might as well give him a tip if you feel like it.
posted by delmoi at 9:44 PM on April 7, 2007

retired lawyer here to tell you no, don't tip him, he's behaving incredibly tacky and depending on the jurisdiction, maybe breaching the code of ethics as well.
posted by bruce at 9:53 PM on April 7, 2007

Changes in the fee dependent upon the outcome frequently occur, but are usually discussed, at least loosely, up front. You certainly don't owe him anything extra. If he really gave you extra special service then perhaps a little extra is in order, but it is a bit tacky for him to be begging for it. Yes, there are rules of professional responsibility, and then there is decorum, but those are for the lawyer, and frankly they are vague in such situations. For you, decide whether you got something extra and then decide whether you want to pay a little extra for it. Don't feel guilty if you decide not to pay extra.
posted by caddis at 10:22 PM on April 7, 2007

I gave the lawyer who handled the negotiations when I bought my condo a gift certificate for a massage at the day spa across the street from her office and the broker who helped me find the place a $100 gift card to J&R. But these things were not demanded of me.
posted by brujita at 5:31 AM on April 8, 2007

He did the job and you paid him his billable rate. Why should you tip him, too?

Jesus fuck, he's not some minimum-wage-plus-tips waiter working at Applebees.

The idea that someone who is already billing at a rate which is most likely a double-digit-multiple of what most people make deserves a tip for doing their fucking job is fucking ridiculous.

And the idea that he's hinting that you should give him more money just underlines the greed.
posted by Thorzdad at 7:26 AM on April 8, 2007

Thank you for all your suggestions and concern. This has been a very stressful tiring process. I can't wait to digest food again! I only used the word "tip" because I was feeling snarky. My lawyer has practiced law for over 30 years and is a trusted advisor. He has kept my goals firmly in mind and we are likely to achieve them. But he may have regretted not securing a "bonus" for a successful transaction at the onset?

To be honest, I was not offended when he suggested that a bonus was sometimes given. He did not directly ask for one. I had hired a business broker, 5 years ago, and all the details were in the contract. (And the broker was not nearly as savvy as my lawyer.)

He has done all the right things. He asked me for names of other companies that he could contact to create a competitive atmosphere. He threw out the buyers EBITDA formula and recalculated it, higher, based on the last 12 months trailing (increasing EBITDA by 25%), which the buyers have accepted. We have not closed the deal, but have finally secured a solid offer and term sheet which we will accept, with a few modifications, within the next week.

I think that if the transaction goes through I will consider a very thoughtful (and ridiculous) gift. But I realy wanted to know if it was common to bonus a lawyer and if so what would be appropriate.

I just wish Thorzdad could fucking express himself better. I really don't know where he fucking stands on this. And a special thanks to Delmoi who somehow took all three sides of a two-sided isue :)
posted by SMELLSLIKEFUN at 11:56 AM on April 8, 2007 [1 favorite has favorites]