Use of Lawyers

1. 1

   Despite frequent policy disputes with parts of the legal profession, 69 percent of small business owners have trust and confidence in lawyers and the legal profession compared to 31 percent who do not.

2. 2

   Most small-business owners use lawyers in a given year. Sixty-five (65) percent of small employers (defined as employing 5 to 250 people) sought advice or other assistance from a lawyer in the last year. The figure for those seeking legal help rises to 78 percent when the reference period is the last three years.

3. 3

   Median legal expenses, of those who incurred them in the last year, were between $4,000 and $5,000. However, 10 percent (6-7% of the population) incurred expenses of $25,000 or more. Legal costs in the last year appear to be atypically high.

4. 4

   Seventy-eight (78) percent have an on-going relationship with a lawyer or law firm. Those relationships appear reasonably stable over time. Just 13 percent changed their primary lawyer/law firm in the last three years. The most frequently cited reason for changing is the need for expertise followed by a lack of legal competence.

5. 5

   Fifty-five (55) percent of those who consulted a lawyer in the last year asked him/her to prepare one or more legal documents. The most frequent documents prepared include a letter(s), contract(s), and papers surrounding the filing of, or response to, an actual or potential law suit.

6. 6

   Forty-one (41) percent of those seeking a lawyer’s help, or over one in four in the population, were involved in at least one legal dispute during the last three years. The median number of disputes involved in was between one and two.

7. 7

   Most disputes are resolved informally out-of-court. A common method of out-of-court settlement is formal arbitration/mediation. Only 12 percent of legal disputes between small-business owners and other parties are resolved in court, the least frequent method of dispute resolution.

8. 8

   A substantial portion of legal disputes appear to have modest stakes. The most frequent topics are debtor/creditor relations and/or debt collection (21%), and contracts (19%). The most frequent party to these disputes are customers (47%) followed by suppliers (25%). The median total legal cost to settle a dispute is about $5,000. Two-thirds of resolved disputes result in no money or anything of monetary value exchanging hands.

9. 9

   Legal disputes often require considerable time to resolve. The median time between engagement of a lawyer to handle a dispute and its resolution is four to five months. However, 30 percent took more than one year to settle while 16 percent took more than two years.

10. 10

    Twice as many small-business owners are satisfied with the resolution of a legal dispute as are dissatisfied suggesting that small-business owners are on balance pleased with the performances of their lawyers.

Volume 5, Issue 2, 2005
ISSN 1534-8326

William J. Dennis, Jr.
NFIB Research Foundation

• 2In the last year, did you seek legal advice or consult with a lawyer about any matter involving your business? Top 100
• 2cHave you used a lawyer in the last three years? Top 100
• 7In the last three years, have you used a lawyer to assist you in a legal dispute involving your business? Top 100
• 1How much trust and confidence do you have in lawyers and the legal profession?
• 2aAbout how many times?
• 2bIn the last year, how much did your business pay for legal expenses, including filing fees and associated costs?
• 2b1Were those expenses unusually high, unusually low or about normal for a typical year?
• 3Do you have an on-going relationship with a law firm or individual lawyer such that you consider the firm or individual to be “your lawyer"?
• 3aIs your lawyer a firm or an individual?
• 3bHave you changed the principal lawyer or law firm that you do business with in the last three years?
• 3b1What was the most important reason you changed?
• 4Was the general topic of the consultation:?
• 5Who prepared your business’s most recent tax return? Was it an accountant, a lawyer, or someone else?
• 6In the last year, did a lawyer prepare any legal documents, other than a tax return, for your business?
• 6Aa(document prepared) A contract.
• 6Ba(document prepared) An incorporation document.
• 6Ca(document prepared) Will or estate planning document.
• 6Da(document prepared) Paperwork for an administrative hearing.
• 6Ea(document prepared) Filed a suit or responded to a suit or potential suit.
• 6Fa(document prepared) A letter.
• 6Ga(document prepared) A written consumer credit policy.
• 6Ha(document prepared) A written employment policy.
• 7aAbout how many different business disputes occurred over the last three years for which you used a lawyer?
• 8How long was it between the time you contacted a lawyer about the matter and its settlement?
• 8aWas the matter settled in-court, informally out-of-court, or through formal arbitration or mediation of some type?
• 8a1Did insurance or an insurance company play an important role in the decision to pursue an out-of-court settlement/arbitrated or mediated settlement?
• 8bWhat was the general topic of the dispute?
• 8Ac(other party in dispute) Customer(s).
• 8Bc(other party in dispute) Supplier(s).
• 8Cc(other party in dispute) Employee(s).
• 8Dc(other party in dispute) Government.
• 8Ec(other party in dispute) Competitor(s).
• 8dPlease estimate the unreimbursed legal expenses for the dispute between the time you first contacted a lawyer about it and its eventual settlement?
• 8eWas your lawyer paid with an hourly fee, a retainer, a flat fee, or a contingency fee?
• 8fAside from legal expenses, did money or something else of monetary value exchange hands between participants as a result of the dispute?
• 8gHow satisfied were you with the dispute’s outcome? Were you:?