On Being a China Lawyer and on Doing Business In China: An Interview

On being a China lawyer and on doing business in China

I was interviewed last year by Jason Aquino of Scouts Consulting as part of an ongoing interview series on strategy and innovation in business, sports, and national security. Jason will be releasing this series of interviews in the future, but in the meantime he is allowing me to publish mine here, mostly after I begged him to be able to do so because I liked it so much.

Dan Harris is the founder of Harris Bricken, an international law firm with offices in Seattle, Portland, San Francisco, Los Angeles, Barcelona and Beijing. He represents and seeks to protect companies doing business internationally, especially in or with emerging economies. His work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, overseeing dozens of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.
Dan co-edits the China Law Blog, which discusses the practical aspects of Chinese law and how it impacts foreign companies doing business there. China Law Blog has been a mainstay of ABA Journal’s Blawg top 100 law blogs, and in 2013 was named to the Blawg 100 Hall of Fame. It is an indispensable resource for lawyers and companies seeking to do business in or around China. Dan’s perspectives on international legal issues have appeared in such publications and media outlets as The Wall Street Journal, Forbes, Fortune, Business Week, The Economist, The New York Times, The Washington Post, CNBC, and BBC News.  

Last April Dan was a keynote speaker at the Oregon Law Review Symposium on Disruptive Innovation in Law and Technology, where he discussed how lawyers could better position themselves in the evolving legal marketplace. He talked about the aversion many lawyers have to marketing, as well as the need for lawyers to become more business-minded, which legal training traditionally hasn’t encouraged. You can find Dan’s paper from the symposium here.

How did you get into doing China work?

We’ve done a lot of international maritime and international litigation work, and we were known as the firm that could get things done in Russia. The Wall Street Journal did a cover story on some very unusual work we did for Caterpillar Financial. The contract provided that if Caterpillar didn’t get paid, it could seize these three ships without having to go to a court. We spent about six months planning, went to Russia and got the ships out. It got a lot of press, and then everybody started hiring us for those things.

Soon China started entering into that equation. I ended up going to China on behalf of a big Singaporean fuel supplier that was owed a lot of money. We also arrested fish product in China from a Danish company that owed our client money. While in China I became friendly with a lawyer in Qingdao, and also realized that China was where it’s at. The same thing started happening in a host of other industries. Our clients who had been focused on Korea or Russia or Japan started getting serious about China.

I convinced a friend of mine, Steve Dickinson (who had headed up the international law group at a big firm where both of us had worked, but was now teaching Chinese law at the University of Washington) to get back into the real world. We sent him to China, and it just took off from there. It was amazing how quickly it happened. There was such a demand for a law firm that would help small- and medium-size businesses deal with China. These companies were lost.

How would you describe the ethos of the Chinese legal system?

China’s legal system is geared to achieve harmony. Harmony has a lot in common with fairness, but it’s not the same thing. It’s closer to the legal conception of equity: if you and I are in a lawsuit, equity is what’s fair for you, what’s fair for me, what’s fair for society, what’s going to cause the least amount of waves. That’s China.

Also, Americans are so focused on substance over form. The ethos of an American company, especially a tech company, is to “just do it” and then deal with any problems in the foundation later. That doesn’t work for China.
A lawyer once called me and asked how much capital it would take for his client to form a company in China. I said, “It’s hard to know, I’d have to check, but I’m guessing it would probably cost $5-10 million because you’re going to have to buy the equipment and that’s going to be a lot of money.”

He goes, “Right, but we’ve already bought the equipment. And we’ve already sent it to China.”

“You have?”

“Yeah. So we can use that equipment towards our minimum capital, right?”

“No, you can’t.”

“Well, we spent $10 million on that equipment. Are you saying we have to spend another $10 million on equipment?”

“I’m not saying you need to spend another $10 million on equipment, but I’m saying that the $10 million that your client has already spent isn’t going to count. For anything that you’re buying, you have to get approval – a valuation or an appraisal –  before it can count for the capital requirement. You haven’t done that, and you can’t do it after the fact.”

“Well, that’s ridiculous. That’s putting form over substance.”

Whenever lawyers say that to me, I don’t know what to say. What can I say? It’s Chinese law. It is putting form over substance, but Chinese law is a lot of times based on that. China does not want its bureaucrats to have much discretion, because with discretion comes bribery.

What is also fascinating is that American companies think of China as the wild, wild west far too often. We had a company that makes a product with chemicals in it, and it took them – I’m going to make this up because I don’t really remember – $3 million and a year to get U.S. EPA approval to use the chemicals in the product. They go over to China, they build this factory, it’s all ready to go, and then they call us up and say that they’re being blocked from bringing these chemicals into China.

They didn’t realize that they would have to get their chemicals independently approved in China. It cost them three or four more months. It never occurred to them that China would be like the United States. The U.S. is not going to say, “Oh yeah, go ahead, put those chemicals in this product because it’s allowed in Malaysia.” That’s not how the U.S. works. That’s not how China works, either. So you get this situation where people assume that China’s completely different from the United States.

Other times, they will assume it’s the same. Here’s where we see that the most: you can fire somebody in the U.S. for good reason, bad reason, or no reason at all. You can’t do that in China. We are constantly getting calls from companies that are being threatened by ex-employees because they fired them. China is a communist country. It’s got major workers’ rights. You don’t fire somebody without getting a settlement and release. You just don’t. It’s not the U.S., and American companies have trouble grasping that.

As best you know, how does China’s history and culture shape or inform its legal norms?

This whole idea of harmony is very much a Chinese cultural phenomenon. China has 1.5 billion people. They need to get along.

What’s fascinating about the Chinese government is that it’s not a democracy like in the U.S., but it does answer to its people. It does listen to its people; not on everything, but on a lot of things. Legitimacy is very important to the Chinese government, and its legal system helps them maintain legitimacy. It’s very tailored to its history, and to the future it wants to shape.

How would you describe the Chinese style of negotiation?

Well, it ain’t win-win. It’s win-lose. In fact, if you talk about win-win, they’re just going to think you’re disingenuous, and that you’re using it as a tactic to crush them.

They can be very tough negotiators, and Americans are not used to that. It’s a completely different style of negotiation.

As you’ve learned more about China, what has surprised you the most?

What surprised me was that if I were to pick a country China is most like, it would be the United States. I dealt with Korea and Japan for many years before I started dealing with China intensively, and it is more like the United States than either of them.

In Japan, Tokyo is everything. In Korea, Seoul is everything. They are homogeneous countries, and China is not homogeneous. It is a big country like the United States, and a lot of the ways that Americans look at the world, the Chinese do too.

You can become a really big company without ever really leaving the United States. You can become a really big company without ever leaving China, too. What happens with Chinese companies is that they get really big and really successful in China, and then they come to the United States and try to do the exact same thing and it’s a complete disaster. American companies are getting better at this, but they still tend to do it in China sometimes. Americans and Chinese have the most difficulty making adjustments because they really haven’t had to.

Is there something about doing business in China that lawyers believed to be true, but never was?

People will say you can’t trust the Chinese, and that’s never been true. A lot of times, what Americans view as dishonesty is either miscommunication or cultural differences.

Take something as simple as, “Can you get me this product in 30 days?” The Chinese manufacturer will say, “No problem.” But they don’t think it means, literally, 30 days every time. They think it means we’ll try to get it to you in 30 days; sometimes it will be 45. It’s a cultural difference. It’s not dishonesty.

China’s culture is much more relationship-based than ours. Once you’re in a good relationship with a Chinese company, there’s usually hyper-honesty. There are companies out there that have had 20-year relationships with Chinese companies that have worked beautifully, where there’s huge amounts of trust.  We have had 10-plus-year relationships with a number of Chinese law firms without even the slightest hitch.

You do have to look at the culture and the history in that it’s more difficult for Chinese to trust because there’s been so much rapid change.

What do peers in your practice area think, say, or do all the time that strikes you as wrongheaded?

I remember a bankruptcy trustee who hired us to get money in China. We got them some money, and it wasn’t all that hard. The trustee said, “Wow. I had always heard that there basically was no legal system in China. I just wish I’d come to you sooner, because I’ve probably had five other cases where we could have gotten money.”

There is a legal system in China. There are lawyers who believe there isn’t, that “of course we need to set up our contracts so that all disputes are resolved in a Chicago court because if we go to China we’ll get slaughtered.” They put that in the contract, and they’ve just harmed the client because there’s never a way to collect. Chinese courts do not enforce U.S. judgments.

So, that’s one belief that is wrong. Most errors stem from the belief that everything needs to be done the American way.

Looking at your practice area, what has been the biggest development in the last five years?

Things that American and European companies could get away with in China five years ago, they can’t anymore. China now has sophisticated tax and tax collection systems. China has gotten a flavor of what it means to collect taxes, and they love it. Like all governments, they want your money. And if you’re not going to pay them the money that they believe they are owed, they will make your life miserable beyond any conception of the word miserable.
Americans and Europeans are getting in major trouble for this. We see it in two areas constantly.

An American or European company will hire, say, three “independent contractors” in China. The Chinese government will come to the American or European company three years later and say, “What are you doing? You have three employees but haven’t paid employer taxes for the last three years or withheld employee taxes. We’re going to say that you’re doing business in China because you have these three employees, so you owe company income taxes. And by the way, employer taxes and benefit taxes equal, like, 40% of what you paid them in salary for the last three years. And we’re going to charge you interest and a penalty. And if you don’t pay, we will shut down your business here and we may not let you leave the country.”

“What? They’re just independent contractors,” the Americans or the Europeans will argue. Well, guess what? If they’re not your cleaning person, or your plumber who’s coming to fix your sink for two days, and you’re paying them money and they don’t have a company, they are your employees.

The other thing is that Americans will set up a company in China that sells a service or a product back to the parent company in the United States. They set it up so that the company in China makes no profit. It is called transfer pricing. But the Chinese government will come in and say, “People don’t run businesses for no profit. We’re going to impute a 30% profit, and you need to pay the last three years’ taxes on that plus penalties, plus interest.” And the Americans freak out.

What you should do is bring on accountants who understand transfer pricing and they will figure out that the typical profit margin is, say, 6-10%, so maybe they put you down for 8%. The Chinese tax authorities will look at that and won’t mess with you. But if they have to come in and you’re making no profit, they don’t start at 8%. They come in at 30%.

That’s how governments always work. Americans need to start realizing that what American companies got away with five years ago, that era is no more. And the things Chinese companies down the street are getting away with? Well, you’re not a Chinese company.

Oh, and we are seeing a lot more disputes between foreign and Chinese companies that are no longer just getting shoved under the carpet. Both sides are realizing that it sometimes makes sense to litigate or arbitrate.

Looking out five years, what concerns you the most? What excites you the most?

It concerns me that American companies are getting on the wrong side of the Chinese legal system. But it also excites me because China’s legal system is becoming more developed, more advanced, and more secure – more real. That means an increased need for lawyers. Every time China tightens a screw our China lawyers get more work.
What also excites me is that I am seeing this happen to Chinese companies, too. That’s more important for China than that it just be happening to foreign companies. China does want to reduce corruption. Big Chinese companies pay their employees; they pay their employer taxes. A lot of them operate similarly to foreign companies, and it’s being pushed down to other Chinese companies.

What’s also exciting is the Chinese who come to the U.S. and then return to China. They are more international-thinking than typical Chinese. They go to Chinese companies and make them more international. But very, very slowly.

Is there work that you don’t really do a lot of today that you expect to see more of in the future?

Yes. That would be representing Chinese companies doing business in the U.S. or elsewhere. We’re very well equipped to represent them. We have around a half-dozen lawyers fluent in Chinese and we have two Chinese lawyers. We’re efficient and small, so Chinese companies tend to like us.

The problem is that we’re not willing to reduce our fees for them. A lot of firms will cut their rates to rock bottom to bring in Chinese companies, in the belief that they’ll be able to raise their rates later. We’re not willing to do that. We charge our regular rates to Chinese companies, and if they don’t like it they can walk.

A lot of them don’t like it, and our attitude is that we have plenty of business representing North American and European and Australian and even Korean and Japanese companies at these rates. We tell the Chinese companies to come see us in a year or two, and sometimes they do. We have not made any effort to bring in Chinese clients because it would take so much effort, and Chinese clients right now are very difficult clients.

Right now we prefer North American, European, Australian, South American, and Latin American clients. But I expect that’s going to change as Chinese companies become more international. It happened with Russia and Korea. We used to not like Russian or Korean clients because they tended to be unsophisticated in how they used lawyers. Now we love Korean clients, we love Russian clients, and eventually we’ll come to love Chinese clients.

What do you mean when you say Chinese clients are very difficult clients?

I’ll backtrack a little and tell you the problems American companies often have with Chinese lawyers.
An American company will hire a Chinese lawyer and tell the Chinese lawyer, “I want to do ‘A,’” and the Chinese lawyer will do “A.”

Three months later the American company will learn that no one’s doing “A” anymore. They’re all doing “B.” So it will go back to the Chinese lawyer and say, “Look, we did ‘A.’ Now everyone’s telling me that wasn’t a good idea.” The Chinese lawyer will then say, “Right, it was not a good idea.”

“Then why did we do ‘A’?”

“Because you told me to do ‘A.’”

It drives American companies nuts. If you had called up an American lawyer, he or she would have said, “Why do you want to do ‘A’? We do ‘B’ 99% of the time. Let’s talk about it.” When somebody tells me they want to do something, I don’t just say, “Yes.” I ask them 10 questions because I want to make sure that’s the right way to go.

The typical dynamic between Chinese companies and Chinese lawyers is, “I’m the boss. You’re my scrivener.”

One time we were brought in to help a Chinese company. Twenty years ago it had formed an American company, and then that American company had formed a Chinese company. It’s called a “roundtripper.” China once gave all sorts of preferences to foreign companies; Chinese nationals would form American companies, then go back to China to get the preferences. Not legal, but it was very common.

This Chinese company had gotten huge. They had a company in the United States that was formed by somebody’s cousin, had never paid taxes, and maybe had aspirations of going public. They needed to clean up their act. It was hugely complicated, and we brought in an international accounting firm to help on the tax side.

My colleague Steve Dickinson is based in China, and one of the lawyers we work with there invites him out to lunch. Steve is thinking, “That’s weird. This lawyer never invites me to lunch.” Steve goes to the lunch and the client’s there, and the client has this idea on how to solve the problem in about 1/10 the time and at about 1/100 the cost of what we have said needs to be done.

Steve tells the client (nicely, I presume), “Are you kidding me? You know nothing about U.S. laws, you know nothing about U.S. taxes, you’re not a lawyer or an accountant in China, and you think you’ve just solved the problem? Give me a break.” Why was Steve brought to this lunch? Because the Chinese lawyer knew it was absurd, but he just was not comfortable telling this to his client because that is not his role.

When Chinese companies come over here to the United States, they often want to tell us exactly what to do. Once we took on a case where as soon as we were paid, the Chinese company told us how we were going to handle it. We told them that what they were asking us to do would be the dumbest thing we could possibly do. (I talked with about 10 other lawyers and they were like, “Seriously?”)

“No, we need you to do that,” the Chinese company said.

We responded, “Nope. Here’s your money back.”

As lawyers, we can’t have that. Our reputations are on the line. We’re not going to do something that makes us look silly and just wastes the client’s time and money. We’ll do things for clients even if we disagree, but not when it’s absurd or unethical.

How pervasive is suspected Chinese hacking of law firms?

I don’t know. I just assume that they’re getting into my computer when I’m over there. Before we did a lot of work with China, we did a lot of work with Russia. Our Russian clients would never talk to us about anything important on the phone because they assumed they were being bugged. I always assume the worst and prepare for that.

It’s not just the Chinese government that does these things. It goes on from company to company, and from country to country. I have no idea how much, but are law firms immune? Absolutely not.

What special precautions does your firm take when you’re operating overseas?

We generally do not keep data on our computers. We keep it in the cloud, and we don’t access it when we’re overseas. We also don’t allow access to much of our data from any location other than our own offices. If our lawyers want to get on our network, they have to show up from certain ISP addresses. It makes things more difficult – if they’re at home and their home ISP has not been cleared they can’t get onto our network – but it’s a necessary security measure.

What is it about China that continues to mystify you? What would you like to learn more about?

What’s fascinating about China is that there is no Chinese archetype. China is not monolithic. If you spend a month in Shanghai and come back to the U.S., you’ll describe China in one way that has no reality for most of the rest of China. It is an incredibly diverse country.

That’s what’s exciting about China, and that’s also what’s exciting about the United States. In fact, China has a ton of minorities, just like the U.S.

But what we have over China – and I’m stealing this from a vice president at Microsoft who talked about this – is that China is not diverse in the way the United States is. A company like Microsoft, if it’s having an issue regarding, let’s say, Ethiopia, it can call together ten Ethiopians in Redmond, Washington, and figure out what to do. We have people from so many different countries who want to be here and on whom we can rely to bring their different views. China’s not even close to that level.

I have known so many Americans who have gone to work for Chinese companies to lend an American perspective, and they’re not listened to at all. China is still much more China-centric than the U.S. is U.S.-centric.

What’s a formative experience that has shaped how you make decisions or see the world?

I lived in France for a year when I was in fourth grade, and I lived in Turkey for a year when I was in 11th grade. So, living overseas definitely shaped me. My parents obviously shaped me because they were the ones who took me overseas. They were the kind of people who found it exciting to go to new places that were different. What also has shaped me is meeting all different kinds of people from different parts of the world.

I love the United States. I describe myself as patriotic even though that’s old-fashioned. But we don’t have a lock on things and it’s not good for us to think that we do. It drives me crazy when Americans say stuff like “we have the best healthcare system in the world,” or “we have the best food safety system in the world.” People think we’re the least corrupt country in the world. None of that’s true.

It’s an arrogance that can be destructive – we’re the best; we don’t have to work at it. I’m not saying we should become like China or Denmark or whatever, but I am saying we can and should learn from other countries.

How do you clear your head when life gets hectic?

I enjoy life. I work out every single day. I love eating good food. I love being with my family. I love watching basketball. I love traveling for fun. I love traveling for work. I go to movies. I binge watch TV shows. I voraciously read and listen to the news.

I learned early on not to stress out. When I first started practicing law, I went to a movie and the entire time I was thinking about a particular case. I didn’t enjoy the movie and I didn’t accomplish anything in terms of work, either. What I realized is that either you do one or the other. You go have fun or you work, but if you try to combine the two, it’s not going to work. You really do need to focus. If you have time to go to the movies, enjoy the movie or don’t go. Make your time count. That reduces stress.

What are some of the barriers to innovation in the legal industry you see today? 

One of the common barriers is that most lawyers charge by the hour, which takes away incentives to innovate and become more efficient. Another barrier is the fact that so many law firms are run by 60-year olds.

Not that I have anything against 60-year-olds, but innovation oftentimes comes from people who look at industries in a new way. And young lawyers generally do not have much power in the legal industry.

But don’t law schools recruit students from a diversity of backgrounds? Doesn’t that help bring in new ways of looking at the profession?

That’s actually another problem with the legal industry. You can have a diversity of backgrounds, but law school pounds that out of its students, training all of its students to be incredibly conservative and risk averse.

And it makes sense: a lawyer’s job is to point out risks and help ameliorate them. But what that also creates is a personality that is afraid. Too many lawyers are naysayers.

I can give any business starting out 20 reasons why it is going to fail. But the trick to what I see as the good lawyers’s job is not discourage the client by doing nothing but pointing out the risks, but to help the client surmount potential problems. So many lawyers come up with the 20 reasons for themselves (or for their firm) and view them as reasons not to push forward, not to take risks, not to innovate, not to risk failure.

Is it fair to say that clients moving legal work in-house is a big problem facing law firms today?

There are a lot of reasons why so many law firms are struggling today. That is just one of them. Another is that they’re not really in sync with their clients. Their clients are focusing on business issues. Too many lawyers don’t think the same way as their clients, and that frustrates clients.

You would be shocked (or maybe you wouldn’t) at how many times companies choose our firm over two or three others simply because we were the only one willing to quote them a fixed fee rate on a project. These companies tell me that the other firms insisted that they had no way to know what the project would cost. If a law firm drafts a China manufacturing contract 3-5 times a month (as mine does), how can it not know how long it will take? In the early days when my firm was offering flat fees, some of the lawyers in my firm would try to make the same excuse for being unwilling to come up with a flat fee amount. My response to them was to “get over it and start thinking of yourself as a plumber and now imagine how pissed off you would be if your plumber told you he or she had “no idea” how long a relatively simple project was going to take.

And here’s the thing: take something like writing a manufacturing contract. Ninety percent of those that we take on come within a two to three hour range of each other, with maybe ten percent taking a bit more or less time. It is not as though one will take five hours and another will take twenty hours. And why can’t a law firm doing 50+ China manufacturing contracts a year take on the risk that it might be underpaid just a bit on a few of them? There are two answers to this. The law firm is actually not very experienced with such contracts or it is way too risk-averse.
Then there is the reputation lawyers have for being deal killers. The old saying among businesses is that lawyers always say no. There’s some validity to that. Lawyers must change in the same ways their clients are changing.
I’ve become obsessed with certain companies to see how we can apply what they’re doing to our law firm. For example, I’m fascinated with how a company like Uber has disrupted the transportation industry. What can my firm do on the legal side to disrupt? Our willingness to do so much work on a flat fee basis is somewhat disruptive in that I have actually had lawyers complain to me about our doing that.

In your article for the Oregon Law Review, you talk about the aversion lawyers have to marketing. Why do you think that aversion exists?

One thing that propels lawyers is this idea that the world is a meritocracy. The typical lawyer goes to high school, works hard, does well; goes to undergrad, works hard, does well; and goes to law school, fights to be in the top 10% of the class. Your first job is determined in large part by how you did in law school. Lawyers’ formative lives are based on reaching an attainable, pretty much numerical goal and then being rewarded for it.

Then they get in the real world, and all of a sudden the clients don’t care that they graduated from law school magna cum laude. They care about what you can do for their companies. Lawyers get thrown for a loop by that.

Lawyers don’t like the idea of having to compete. They had to compete in law school, but it was for a very clear goal. Now all of a sudden, they have to meet with 10 people in the hopes of getting two clients, and the carrot at the end is just not as clear cut.

And again, there’s the whole idea of uncertainty and risk. Lawyers will often talk about how this doesn’t work or that doesn’t work, and they do it with marketing, too. So many are unwilling even to try because they cannot get past the idea of failing.

When we first started marketing via our website and our blog, almost all lawyers would say, “I’ve heard you can never get a good clients off the internet.” They would state it like it was a fact, even though they had no evidence to support it.

Lawyers don’t like experimentation, the idea of “let’s try this and see if it works.” That’s too risky. And marketing is that: sometimes you think something’s going to work and it doesn’t, sometimes you think it’s not going to work and it does. The uncertainty kills lawyers.

Looking to the future, what kinds of firms are going to survive?

The first-tier big firms are absolutely necessary and will continue to thrive, as will some regional firms. But then there are the second-tier big firms that don’t have a niche, that are just not as good as the Skadden Arpses, the Kirkland & Ellises, the Wachtell Liptons or the Latham & Watkinses of the world. These second-tier big firms are slowly getting edged out by both big and small firms and I expect that will accelerate..

Whenever our firm competes with a second-tier big firm for a matter, I love it because we offer so many advantages over them and yet they charge so much more than us.

The typical client that comes to us is not going to Skadden, Arps. You go to Skadden, Arps for the really big international deals, the really big international litigation. We get smaller international deals and smaller international litigation. Oftentimes we’ll compete for that work with a 250-lawyer law firm not nearly as well focused as us and yet it has a much higher cost structure. They might put five lawyers on a matter on which we would put two lawyers, or three lawyers on a matter on which we would put one lawyer and a paralegal or an international business specialist.

These second-tier big firms like to think of themselves as a Skadden Arps or a Kirkland & Ellis and they are trying to emulate those firms. But they’re not Skadden or Kirkland.

Have you noticed differences in how the Millennial generation of lawyers thinks and works compared to its predecessors?

Absolutely. The Millennials are more in tune with business. They’re more comfortable with technology, they’re more comfortable operating anywhere, and they’re more comfortable appearing more “normal” and less lawyer-like, not using lawyer-type words. I think they understand better what clients want. Too many older lawyers feel compelled to tell potential clients everything about their own backgrounds and the work that they’ve done, rather than listen to the client and respond directly to that.

There are Millennials who have formed their own law firms, and they use newer technology. Within my firm, I oftentimes have to fight the older lawyers (of which I am one) on certain things. For instance, we set up Yammer – which is really nothing more than an internal Facebook – and some of our lawyers complained. They were worried about security, saying we shouldn’t be discussing firm matters “in the open.” But the security on Yammer is the same as for our emails. Both Yammer and our email are on Microsoft Office 365, and so both are equally unlikely to be compromised.

Then there are various groups in the firm that really use Yammer. One is our Regulated Substances Group, which Hilary Bricken has headed since she was 28 years old. There will be five to ten discussions every day on that group’s Yammer page. Someone will say, “Hey, I read this article about what they’re doing in Oregon. Does this make sense to you?” Or “You know, I just saw that in California, they’re going to do this. Maybe we should be doing that.” Then five or six people will respond to it.

In other groups, somebody will send an email saying, “I’m going to this event, does anyone know anyone who will be there?” They will carbon-copy eight people, including me, and then my inbox will get slammed with twenty emails from three people discussing some person I don’t know who might be at some event I won’t be attending. I don’t care, yet I’ve got twenty emails on it. I am constantly pushing people to stay out of my inbox. Put it on Yammer. Older lawyers often have trouble with that.

Have you seen Millennials struggle with certain imperatives of the profession, like having to actually call people on the phone instead of emailing or texting?

Yes, but I don’t view that as a negative.

One of the things I always talk about in terms of marketing is that anybody can be a good marketer. I used to help coach my daughter’s high school basketball team in the offseason. They had a player who was 6’4” and heading to the University of Washington with a full ride. She was a terrific player, and was going to get 12 rebounds a game. But for us to win, every single starter needed to get four or five rebounds. We couldn’t just rely on her. It’s the same with marketing; everyone needs to contribute in their own way.

There’s this idea among lawyers and probably others that the best marketer is the car salesman or the quarterback type . The reality is that’s just not true. There are many different types of potential clients out there. Millennials can be extremely effective with other Millennials. They can be extremely effective by being who they are, and dealing with people like them. That means texting and emailing instead of calling.

Millennials tend to be very morally centered. They really dislike working on matters when they don’t like the client, and there have been times when they have refused to do so and so we sent the client walking. There’s something to be said for that. They really like working on matters when they believe in the client. We typically discount our fees for not-for-profits. They like that.

This idea that Millennials are lazy, I don’t buy that. I’ve not seen that. They want freedom, and we give it to them. We’re a law firm that doesn’t care when or where our people do their work. We just care about the quality and the timeliness of the work. Our attitude on this jibes with what they are seeking and in that way we are a good fit.
One thing I’ve noticed – and I don’t think this is necessarily peculiar to Millennials, but a factor of being a new lawyer – is that I’m more confident in them than they are in themselves. They’ll look at their workload and see that in three weeks, five things might happen, so they’re reluctant to take on anything new. I see it as my job to convince them to go ahead and take on something new. Of those five things, probably only two or three are actually going to happen. I encourage them to take on a little more risk.

How has technology affected the way you practice law?

I generally dislike most legal technology because it’s lousy. But there is a lot more VC money starting to go into it, so I’m hopeful.

We use a program called Clio. It’s a cloud-based software program geared to law firms, and way better than anything was five years ago. There’s another one called RocketMatter. RocketMatter and Clio very much compete. Both are dubbed “comprehensive legal software.” I would describe them as pretty good – the competition is definitely helping – but every once in a while, we come up with something that’s not that unusual that is just not possible to do in the software.

When it comes to software for our firm, the best software we use is non-legal. One program I always rave about is called DocuSign. It’s very simple, and it just works. I think all programs should be like it. We love it because we can get off the phone and send clients a fee agreement in five minutes. The client doesn’t have to print it out, sign it, scan it, and email it back, which is the way most law firms operate. Everybody in the firm has a record of what’s going on with the fee agreement because it’ll show when it went out and when it was signed, and it’ll stay up in the cloud. It’s really a good program, and there are very few of those that work well for law firms. The proof is that all of our lawyers use it. Here’s a contrast. Our firm is a member of an international legal and accounting association based in Spain. When we joined this association last year we had to sign a document and then overnight the original to Spain. The association would not even accept a pdf!

There’s another software program we love called LawPay. One of the problems law firms have with alternative payments (forms other than check) is that when money goes into a trust account, it cannot touch the hands of a third person. So law firms cannot use PayPal or credit cards for trust account payments. If you have a big case and you’re charging by the hour or by the month, or if you want an advance fee payment, you have to use something like LawPay. LawPay may be the only company that does this and somehow it’s set up so that it complies with the bar rules.

Now we can get off the phone with people – it happens two or three times a month – they’ll sign the fee agreement, and we’ll be paid within 10 minutes. It’s just amazing. This is unbelievably efficient for everyone involved and our clients will often compliment us on it and I have no doubt it makes them feel even better about having chosen my firm for their legal work.

What would you like technology to do for you that it presently can’t?

We’re an all-Mac law firm, and as far as I know there is no good document generation software for Mac that’s dual language. We do five or six manufacturing agreements a month with Chinese manufacturers. These agreements are fairly complicated agreements and vary with each client, each product, and each manufacturer.

A manufacturing agreement for having your candy made in China is going to be very different from a manufacturing agreement to have golf carts made in China – the time periods, the standards, etc. But there are always going to be similarities. What I would like is a document system that would allow us to easily pull and re-use provisions in both the English (or the Spanish or the German or the Japanese) and the Chinese. For instance, if we know that there is going to be a 1% penalty for every day beyond a week that the product delivery is delayed, it would be nice to be able to review our ten best delivery delay provisions and just click the one that best fits, in both languages.

Like in a dropdown menu in the software? So you don’t have to copy-paste from past agreements? 

Exactly. That’s not out there yet. We charge a flat fee for these manufacturing agreements, so any inefficiency is on us. If we could save even 30 minutes on each one, that’s real money. We would be willing to pay a lot for a Mac program that could do that in both our client’s first language and in Chinese.

Have you ever applied an idea from another field to help you do your job better?

All the time. Everybody at my law firm has the exact same computer and the same desks and the same chairs. I want the small things to be systematized, so that we are freed up to deal with the bigger things. If somebody has a problem with his or her computer, I don’t want a staff person to have to spend three hours researching the best computer to buy. He or she can just replace it right away with a MacBook Air. It takes three minutes. The same is true if we need a new chair or a new desk.

We have loyalty with our vendors because it allows for smoothness. Could we maybe get a better deal somewhere else? Yes, but then we are taking a risk that it will be a disaster and five hours will be wasted. I borrowed that from Henry Ford. I want our firm on the low-level things to be an assembly line, to be routinized.

2 responses to “On Being a China Lawyer and on Doing Business In China: An Interview”

  1. Great interview. You said, “Americans need to start realizing that what American companies got away with five years ago, that era is no more. And the things Chinese companies down the street are getting away with? Well, you’re not a Chinese company.” My consulting company works hard to operate legally in China and we end up paying a lot of taxes. Periodically our our Chinese accounting firm warns us that we will be making a profit and should turn in more FaPiaos (official receipts) or else be taxed. Our General Manager, who is Chinese, tells me that most companies (>80%) try to not show profits in China and practice illegal accounting tactics and bribes to get around paying taxes. It can really bother me at times but it is a reality we must accept. I am comforted at the end of the day knowing that whatever other companies might do, I can sleep with a clear conscience and can stand behind our accounting practices.

  2. The interesting thing is that the “independent contractor” rule is exactly the same in the United States — but US companies routinely get away with illegal behavior, misclassifying employees as independent contractors *in the US*, and apparently they assume they can get away with the same type of lawbreaking in China?
    That’s a very particular form of arrogance. It’s illegal here, it’s illegal there, but the authorities here don’t bother to enforce the law, so they assume that the authorities there won’t? How does anyone even think that way?

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