As many of you know, I am retiring from Dechert LLP but anticipate staying active in our industry in my advisory vehicle, Jackstay Investments, LLC.  The firm has graciously given me the domain name CRUNCHEDCREDIT and hence, I will begin to resume publishing my commentaries in CrunchedCredit on an ongoing basis.  You will also be able to find my interim commentary from Crunched Everything reposted on CrunchedCredit. As usual, I look forward to ongoing engagement with you, my patient readers.  


Richard D. Jones
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In Defense of Closings Human-ware Style:  Fixing Our Growing Lord of the Flies Problem

We used to do many negotiations and virtually all closings in person, not much choice really.  The process might start with an exchange of draft documents, closing checklist, etc., While initial negotiations and the exchange of diligence would typically be conducted by, at one point, snail mail, then FedEx and finally, online, ultimately we’d gather to hash out the tough stuff and close. 

We’d repair to a suite of rooms to get the deal closed.  All hands in attendance, lawyers and business side.  Coffee and bagels would be served and reams of paper would be assembled by teams of paralegals and junior associates.  Remember those weird, fold-out metal expandable doc organizers?  One of those would appear on a long conference room table somewhere in the closing suite (I wonder if one is in the Smithsonian now).  We’d have sustained conversations, as we’d all be there with nothing much else to do.  Conversations might seem somewhat desultory, but since everyone was in the same place, everyone stayed engaged.   While we’d periodically go to our separate corners to caucus, we indeed have the type of sustained dialogue that actually gets things done.  Momentum to get the deal done was palpable and compelling.  Lots of conference room food would get consumed.  

Between bouts of negotiation about the deal, we’d talk family, we’d talk baseball, we’d talk stuff.  We got to know each other.  We’ve lost track of how critically important this socialization was. 

Eventually, fueled by exhaustion and the risk of diabetic shock from the conference room cookies, we’d close.  Documents would get signed, money wired, copied distributed and recorded.  Hands would be shaken all around, a few moments of euphoric jubilation would follow and then we’d all go home to take a snooze and then spend days catching up with the paper on our desks.  Ah, the good old days. 

I’ve haven’t been to a real closing in a decade or more.  You?  Today, maybe we Zoom a bit, but actual human contact?  Egads, no!  That can’t possibly be efficient!

There are consequences of the embrace of this model.  What happens in today’s process?  Every time a call is done or a point is made or conceded, someone would circulate a complete set of documents; a new set of documents for every new “and” and “but.”  Unserious changes abounded because technology made that possible.  Since you really didn’t know the folks on the other side, there was no personal price in annoying them (and wasting everyone’s time with silly redrafts.  Lobbing documents over the transom (best, of course, on a late Friday afternoon) substituted for real progress. 

This remoteness, this disconnect between the parties encouraged folks (usually lawyers) to show their self-perceived intellectual prowess by rewriting and rewriting.  This gets done as a very solitary endeavor where it’s easy to psychologically confirm one’s views of the other side as hostile huddled in their trenches across a shell pocked battlefield.  The enemy!  How many times have you seen documents with hundreds of redline changes which amounted to virtually nothing but consumed time and energy?  Make all those “thats” into “whiches!”  (Regrettably, I remembered a deal where that actually happened.)  Time wasted, too many trees killed. 

It’s much easier to misunderstand, or to willfully ignore, counterparties’ comments in this paradigm.  You click off a call and beaver away in the dark turning drafts. 

This isn’t a good way to run a railroad. 

This is a self-inflicted wound.  We’ve decided to comport ourselves this way because of the siren song of technology and the misplaced faith that doing things at a distance back in our respective offices is efficient.  We have eschewed personal contact.  Regrettably, I can’t see us returning to the days of physical closings, although it’s clear to me we should. 

We’re de-civilizing our young lawyers, reducing their effectiveness and degrading their skillsets.  We’re deemphasizing the ability to work together.  There’s lots of chatter out there about collegiality, but less actual collaboration between folks.  For younger cohorts, this is infinitely worse.  It is so much easier to tell a face on a Zoom call to go to hell than to be obnoxious to someone with whom moments ago, you were talking trash about the Yankees.  Working at a remove, we’re degrading the ability of folks to make cogent arguments in real time, to be an active listener and discuss points with opposing parties and find a way to yes.  Sure, it can be done remotely, but that remoteness burdens the process.  Sitting around a conference room table, working through tough issues is the best and most efficient way to get to yes.  (While largely I’m talking lawyers here, this applies to business folks as well, albeit the problems are probably worse for young lawyers.)  If we’re stuck with this new paradigm (and I’m afraid we are), we ought to recognize and deal with the negative externalities of the current model of interaction between business and legal teams and do something about it.

In order to try to ameliorate the inevitable bad consequences of our abandonment of the physical closings (and in general, in-person meetings) here are some ideas:

  • Send the youngsters to CREFC or the trade organization of your choice.  I know, I know it’s expensive and there’s always a suspicion that going to Miami is more perk than work, but the youngsters have to get to meet each other somehow; to bond, to build relationships.  They have to hear what folks are sayings; they have to network with their cohorts in business and law, as well as the more senior folks there.  It’s a worthwhile investment.  (Oh, by the way, for all you folks who control in-house attorneys’ budgets, please send your in-house attorneys!  They never get to go, as budgets are reallocated to more important stuff like golf outings, but it would clearly enhance the performance of our market participants if their lawyers got a chance to hang with the industry folks at these conferences.).
  • Get your youngsters involved in trade organization initiatives.  At CREFC, get them into the forums, have them volunteer to work on comment letters and the like.  This is the best way to get connected in a way that will hold them in good stead as times goes on. 
  • After each deal, harvest the working parties list as a resource, as a source of connections.  Get the youngsters to pick folks off those lists they don’t know and go have a coffee, go have lunch. 
  • Focus on mentoring EQ.  Teach good behavior, teach how to cooperate and find common cause.  Certainly, the deal is not the client, and sometimes we need to disagree (and sometimes do so aggressively) but there is almost always a point where the parties need to get to yes.  Consider mock negotiations in the office as a training tool. 
  • Provide leadership to the youngsters and demonstrate that winning a conference call is not winning.  That embarrassing or diminishing a counterparty in the course of a transaction is not winning.  Scoring points over unsubstantive issues is not winning.  Over-editing documents to show how smart you are in the darkened confines of your own office is not winning.  Deferring delivery of key information to the other side on the theory that somehow there is a tactical advantage in jamming the other side is not smart.  Conducting yourself so that you don’t generate career-long goodwill is not smart.  Building credibility as a counterparty and honest negotiator is smart.  Investing in relationships is smart.  Trying to find common ground is smart.  Annoying counterparties for no purpose is not smart.  A decapitated pig is not a good totem for transactional practice. 
  • Don’t do internal Zoom meetings.  You’re in the same damn building, collect in a conference room.  Buy doughnuts.  While I’m talking Zoom, if you’re on zoom, keep the video on. 
  • Hey, radical thought; if the principal players are all in the same city, try getting together.  How silly is a Zoom call team between teams sitting a block apart?  You might find you like it. 

We need to actively manage the problems created by our current sterile lack of connectivity in the modern transactional practice.  It may cost money, it may take time, but the dividends in terms of developing competent, capable, thoughtful and engaging young lawyers and other professionals is worth the price.

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Richard D. Jones (“Rick”), Rick Jones is a capital markets and securitization practitioner highly rated by both Chambers, USA  and Legal 500.

A leader in the industry, a recipient of both the CREFC Founders Award and the Distinguished Service Award from the…

Richard D. Jones (“Rick”), Rick Jones is a capital markets and securitization practitioner highly rated by both Chambers, USA  and Legal 500.

A leader in the industry, a recipient of both the CREFC Founders Award and the Distinguished Service Award from the Mortgage Bankers Association (MBA) for his leadership.  Rick publishes widely and speaks on a wide range of issues effecting the capital markets and mortgage finance.  He is a past president of the CRE Finance Council; a founder of the Commercial Real Estate Institute (CRI); a member and past governor of the American College of Real Estate Lawyers and a former chair of its Capital Markets Committee; and a member of the Commercial Mortgage Board of Governors (COMBOG) of the MBA. Mr. Jones is a member of the Real Estate Roundtable, serving on its Capital and Credit Policy Advisory Committee. He also serves as the chairman of CRE Finance Council’s PAC.