Breaking Up the Business: Conflict, Mediation, and Resolution

Katya Valasek:

We're joined today by Margeaux Thomas, a lawyer who specializes in business partnership disputes, commercial and residential landlord-tenant disputes, and contract disputes. Margeaux, becoming a lawyer wasn't always on your bucket list. Growing up, you considered things like the Peace Corps or Foreign Service, but ultimately decided to pursue a career in law because of your dad. Tell me about that.

Margeaux Thomas:

Well, my dad was an educator, so I was the kid that was in summer school every single summer to prevent summer slide. Even though I wasn't required to go to summer school, he definitely thought it was a necessity. He didn't have any college graduates in his family, so he was one of the first of his generation to go to college. So I think that he just saw an advanced degree as one of the things that I could accomplish in my generation that he wasn't able to. But I was graduating from college, and I graduated early, and he was just suggesting that it was good to further my education, not necessarily in the law, but any kind of advanced degree. And law school seemed the most relevant to the international relations degree that I had. I really was one of those people who really loved school, so I just figured it would open up some doors, whether or not I became a lawyer. And I didn't exactly know what I wanted to do, but I think it was a good opportunity. And I really did enjoy the process of law school.

Katya Valasek:

So you follow your dad's advice, you go on to law school, you think it's going to complement your interest in something like the Peace Corps or foreign service. And then during your time in law school, you ended up having some experience working on asbestos claims. Did this happen because you ended up interested in that area of law, or were you just pursuing an opportunity?

Margeaux Thomas:

Absolutely not. I had no interest in asbestos at the time. And I just joined a firm, and I was in the business litigation department, and part of that had to do with asbestos litigation. And it was just kind of like I was a new associate, and this is what they had. And frankly, it really affected my mindset about being a lawyer, because I really did not like the practice.

It wasn't very engaging. There wasn't a lot of opportunities to make oral argument and draft new briefs. And the clients that we were working with, we had done all of the motions before. It was like repeating a lot of things that had already been drafted with small tweaks and things like that. And I was there more like in the background observing or taking notes. I went to a lot of depositions, and I never got to ask a question. I was just there because we needed a representative for a specific client.

And I didn't feel like I was digging in my heels of becoming a lawyer and learning that much about the law, and the practice area didn't really excite me at all. So I think that it reflected in my reviews, like people reviewing me, because although I was trying to do my best and appear energized, I think people could tell that this was not something that I really had that much of an interest in. And I luckily got an opportunity to do some other types of law with other partners that were around. And I think those partners could see that if given the opportunity to do something that I really enjoyed, it would definitely make a difference.

Katya Valasek:

You were there during law school. Was that your first job after graduation then as well?

Margeaux Thomas:

Yes, I worked as a summer associate at the law firm that I ended up going to after I finished law school.

Katya Valasek:

So even though you didn't love the work, you ended up going there as a young associate after graduation. Did that experience teach you anything important about the practice of law?

Margeaux Thomas:

I think it taught me a lot about law firm dynamics. I think that there's a lot to be said about just, you know, who is your mentor, who you know. I kind of was one of them, I said, just do the work, do good work. I'm an introvert, so I'm not much of a networker. So I was not at the happy hours and I was at the lunches very briefly and I was really focused on getting my billable hours. And you know, I think I underestimated the value of that network and those communications. And that feeds into what type of cases you get and how much autonomy they give you on those type of cases, you know. And at that time, I was very hyper-focused on just the work and not so much the environment and building the relationships to further the work.

Katya Valasek:

So before you started your own firm, there was an in-between point in time between your first job out of law school and your own firm where you were working for a larger firm for some time. It was about a decade. What was the next practice area you jumped to after you moved on from the asbestos work?

Margeaux Thomas:

I started doing what I call now business divorces. We represented businesses that were having disputes with their partners or clients or vendors. But a lot of business partners versus business partner and navigating how to untangle everything that they had built together.

Then I did defensive consumer claims for financial institutions. So during my tenure at the bigger firms, there was a lot of the foreclosure crisis going on. So I represented a lot of banks that were being sued because people's houses were going through foreclosure or banks were trying to collect debts related to mortgage issues. And that was a great opportunity because I got to travel all throughout Virginia and argue hundreds of motions related to different things having to do with consumer claims.

And I really loved it. My client was like an in-house attorney. So I just felt like we were on the same page. It was a very much business oriented relationship. And I think I learned a lot about how to apply that to consulting clients going through these very personal business divorces that I now handle because these people have a huge attachment to the business. They have normally some kind of trusting relationship with the other business partners. They were either friends or family members or trusted advisors or associates of some sort that got them there. I have to help them navigate back to the business decision, the numbers, the chances of success, but how much is this going to cost me to make a good decision at the end of the day?

Katya Valasek:

Many young associates will join a firm, find out that they're happier doing the work there like you were when you started the business divorce work with an eye on wanting to become partner while they're there. Was that an ambition of yours to become partner at the firm where you were working?

Margeaux Thomas:

Yes, it certainly was because that's the path that everybody's on. Like you go to the firm and the first day they're like, here's the path to partnership. This is what you have to do. This is how many years you have to work here. This is how many hours you need to bill. This is how much people make. There's equity partners. There's not equity partners. Like I think that that whole path is like the thing that you're pushed towards since the day you walk in the door.

And a lot of conversations are structured around that and what year you're in and whether you're on track. After hearing those discussions for so long, you just feel like, well, I might as well just walk down this path and do the things that they're telling me that I need to do to accomplish this goal. But I don't think in my mind I ever was like, that is like what I consider success in my mind. It was just what everybody kind of told you was what you were supposed to be doing. And I mean, it looks good. It sounds prestigious, like it pays well.

I mean, there was nothing necessarily wrong with it, but I wasn't born to say I want to be a partner at a law firm. That was never really my goal.

Katya Valasek:

It's hard to step off the path that everyone else is walking and realize that it might not be the right future for you. And as you've already mentioned, you ultimately decided to leave the firm and open your own practice. Can you tell me that story about how you got to the point in time where you realized you wanted to do something different than the rest of the people around you?

Margeaux Thomas:

It was certainly the most difficult decision I've ever had to make. And it wasn't just a career decision. It impacted my family, my finances, my personal life, my everything.

But I did have some transformative experiences that led up to that decision. My dad passed away suddenly. And while that was going on, and I was going to the funeral and recovering from a very traumatic situation with his death, that was very unexpected.

I got pregnant with twins. And from the moment I got pregnant, there were difficulties. And I was in the hospital for almost a month at the beginning of the pregnancy. And then I went on bed rest at 20 weeks to 33 weeks. And then they were born early. And they went to the NICU. And then that went on for a while. So it was a very traumatic experience in and of itself. Because you're waiting for this ticking time bomb. The doctors are telling you there's an issue. Your babies could come early. If they do come early, these are the type of things that you need to prepare yourself for. And we're going to try to keep those babies in as long as we can. We really can't control how this happens.

So it was very difficult for me to be on bed rest. I am not the type that does well in laying around. It was just way too much time on my hands to think about things. And it gives you some perspective on time. My dad passed away when he was 64. And I was in my 30s. I really need to figure out what I want to do. I want to leave a legacy. I want to be the type of lawyer that makes a difference. And whatever that success looks like for myself. So I spent a lot of time figuring out what that looks like. And I always knew in the back of my mind that partnership was not the definition of success for me. So at that point, I determined that I wanted to start my own firm. And I wanted to be a business owner. And I wanted to practice law the way that I thought law should be practiced. Which was different than what I was seeing at the firms that I was at.

Katya Valasek:

You decide you're ready to go out on your own. Was there anyone professionally who were cautioning you against making that step?

Margeaux Thomas:

I think that I was my biggest critic. There were certainly people who were like, you have no book of business. So how are you going to make money? And most people who start their firms have clients that they take from the firm. And that wasn't the best thing to hear when I was trying to do this. But there were certainly people who said, what are you doing? That's insanity.

It really was like my belief in my own abilities that was holding me back more so than anybody else saying I could or couldn't do it. I really was the one who had to believe that it was possible for me to take the step to do.

Katya Valasek:

One of the things that ultimately propelled you to make that step was leaving a legacy. Being the kind of lawyer you wanted to be. Some attorneys find that they're able to do that by joining another firm. Did you consider during that period of time that maybe you just needed to find a different firm to become a part of?

Margeaux Thomas:

I did not because I really loved the firm that I was at. There was nothing that I would have changed about the firm. I just kind of wanted to do the work the way that I envisioned doing it. And it wasn't joining another firm. It was being more efficient, being more lean, being smaller, being able to have more autonomy in the decisions that we make for the clients because we don't have a ton of overhead.

Katya Valasek:

Do you think there are some clients that are surprised with the way you do business?

Margeaux Thomas:

Absolutely. There are a lot of attorneys doing what I do. So I know that we are not trying to be the one size fits all. That's not the goal. We are trying to serve as people that this mindset, this strategy works for. A big decision that I had to make was we have an office. I have to drive to the office and sit there and meet with somebody and drive home. I have three kids, by the way. I'm like, this isn't the most efficient time for me, right? I could do three consults in the amount of time it takes me to drive there and meet you in person, right? So I had to say, you know what? Even though we have an office and I could meet you in person, we're not going to do any more in-person meetings because it's just not efficient. And there are people who are very turned off by that. They're like, well, we want to meet the person that we're going to be working with in person. It was a mindset shift for me because am I losing business because I'm lazy? Because I don't want to like get in my car and drive to the office. But then I was like, I don't think it's about laziness. It's about efficiency. And that's what I'm about. If we can do this via Zoom, I can be more effective for you, right? I have more time to review your stuff. I have more time to meet with other clients and meet their needs. Like it's a better model.

Katya Valasek:

How long did it take you to feel confident to be able to say, I know this is what you want or what you expect of me, but this is how I do things?

Margeaux Thomas:

Years. Years. I mean, when I first started, I was like, I'll do anything for anybody that will pay me some money so that we can make this firm work. Like I would drive to Baltimore to take a case that was worth not enough to make me drive to Baltimore. At that time, it was just more of a grind mode. Like, you know, I will work harder than anybody else to make this work.

So I was pounding the pavement and I did that for a very long time and I had no parameters on what kind of cases I would take or what type of clients that I would represent. And I learned a lot of very difficult lessons in doing that because I represented a lot of people that I should have never represented. Like there were red flags from the beginning and I'm very cognizant of that now. We want A clients. We don't want C and D clients to take away from our A client time, right? So we turn away a lot of people that we just don't feel like are going to gel with our way of doing things. And I definitely didn't start out like that.

Katya Valasek:

A funny little wrinkle in your story is that the original plan was to start a firm with one of your then colleagues, but obviously that's not what happened. So tell me about how that plan came together and then what ultimately the end of that story was.

Margeaux Thomas:

So I spent a lot of time planning the creation of this firm with another colleague that I was working with at the firm that I left. And we talked about what kind of cases we're going to take and get in the office and what equipment. We had a business plan. We had a business coach. And not too far before we were supposed to give our notice of resignation and open the doors, he decided that this was not the best decision for him at this time in his life. And that was devastating at the time because I had never considered doing this by myself. It was always like a joint venture, so to speak. So I probably wouldn't have opened the doors if not for my husband, who was like, listen, if you don't do this right now, you're never going to do it. He was like, you always make an excuse. There's never going to be a better time. You have all of the pieces put in place. You're ready to pull the trigger. And I think he was right when he said that. And I was definitely catastrophizing all the bad things that could happen if this was the wrong decision. But I think that's part of being a lawyer. We kind of tend to do that. And that wasn't the reality of what I was facing. If it didn't work out, I could go get another job. I mean, the firms are still going to be there. And I just needed to get out of my own way.

Katya Valasek:

So typically, or ideally, when someone goes into business with someone else, you're looking for someone that will complement what your strengths are and sort of fill in the gaps where you may feel you're weaker in a particular skill. Was that the case with him? Was your hope that he would fill in on some of those skills that you maybe felt you weren't confident in doing on your own?

Margeaux Thomas:

Yeah, I think so. But I think it's just an easier decision when you're not making it by yourself. Where somewhat of a perceived safety net to just having a partner. Like, it doesn't all fall on me if it doesn't go well. It just seemed like an easier decision to make having somebody who's like-minded, somebody I really respected. It was a no-brainer when he was like, you know, we should leave and do this on our own. I was like, yes, let's do that. You know, it was a no-brainer. I mean, I really respect him. I still do. I mean, we're friends. I see him around. Like, it's not any hard feelings. And I think he really pushed me to do something that taught me a lot about myself. I think it's the best decision he could have made to open up a door for me. I think I've grown in ways that I probably never would have grown because you have this safety net. I had to figure it out on my own, but I didn't have that.

Katya Valasek:

When you left, you had no book of business, and you were knocking on doors. You were hustling to find business. Can you tell me what it felt like to land that first client and feel like, OK, this is something that's going to move forward?

Margeaux Thomas:

So when I left the firm with no clients, one of the cases that I had been working on for, I don't know, a year or more was still in active litigation. And that client decided to continue to work with me and the firm that I was leaving. And the firm that I was leaving was planning to replace me and bring another associate up to speed. And the client said, absolutely not. We're not doing that. And that was something that I never expected to happen. I thought that I was closing the door on all of the cases that I worked on. I didn't originate those cases. I mean, I got to know the clients very well because I was like the lead point of contact on these cases. But I wasn't trying to sell them on coming with me. I didn't ask them to come. I didn't think they would. And in my mind, that seemed a little like underhanded a little bit because these aren't my people. You know, other people brought these clients to the firm and I was just the worker bee, right? At least that's how I viewed myself.

But that client viewed me as more than just the worker bee at that point in time. And it was great. I mean, I got to continue to work with the firm that I left on this case that eventually got settled. It went on for maybe six or eight months of my first year. And it made all of the risk of not having any business and not getting any paycheck, it got eliminated that because for that six to eight months, I could still like network and kind of ramp up business on my own. So it created a soft landing for me that it's like never would have expected it to happen.

Katya Valasek:

It gave you the gift of time. It gave you the gift to settle into having your own firm and figuring out, as you said, what was the right way for you to find clients, the right types of clients for you to bring in. So now I want to dig in into what you are doing now. We've talked a lot about your past. What would you say are your main practice areas now?

Margeaux Thomas:

So our main practice area is business divorces, business partners and disputes with their clients, partners and vendors.

Katya Valasek:

Tell me what it means to have a business divorce. What are the issues that your clients are typically facing when they come to you?

Margeaux Thomas:

So we mainly do litigation. So our clients have either been served with a lawsuit by their business partner or partners, or they need to separate from a business partner and know that it's not going to be amicable. Like it's usually if they could work this out through their own communication, they certainly would have.

So they are past that point. A lot of these cases, because they're so contentious and adversarial, business partners can do a lot of things to the other partner to cause them harm, like vindictiveness. So it interferes with criminal lawyers. We've had many business partners get arrested for doing that, like just going to the business, which is just insane. A lot of them started this business with someone who is a trusted friend or family member. So they weren't like, let's go hire a lawyer and get a really good operating agreement. That's not something that usually crosses their mind because they trust this person implicitly. So we help them navigate that process that usually results in one of the business partners buying another partner out or the court dissolving the business, selling pieces of the business. So we deal with trying to get those foundational documents together so they can prosper in whatever avenue they want to go down in the future.

I like it because we can represent businesses, and they have the same entrepreneurial spirit I do. So we have something in common, and we help them through something that, although it's very foreign to them, if we can get them to focus on the business aspect of it, they usually tend to make good decisions, and we can help them through that process.

Katya Valasek:

At what stage do most clients reach out to you for help?

Margeaux Thomas:

Most of the people that come to us have already been sued. They have like in Virginia, 21 days to file a response. So it's a very short timeframe.

Katya Valasek:

At what stage should people reach out to you for help? Do you feel like they're coming to you too late?

Margeaux Thomas:

We have some cases that are in the demand phase. So they've received a letter from an attorney that says, we think you're doing all these things wrong and you should walk away from this business and we don't want to pay you anything, usually something like that. So in those cases, we can engage in a dialogue and hopefully avoid litigation.

But it just kind of depends on the relationship between the parties and how quickly they get to litigation or whether they're able to avoid it. Ideally, it would be great if people told us months in advance, but it's just not the type of thing that people are expecting. I mean, they know that the relationship is broken down, but I guess they don't know that their business partner has consulted an attorney and this is the day that they're going to file.

I think we do well under pressure and most of the people come to us in that timeframe of the 21 days and we figure out the best way to respond. And we know a lot of the attorneys on the other side, so we can negotiate extensions if we need them. We have very amicable relationships with opposing counsel in a lot of these cases because we have such a niche practice. We work with the same people a lot.

Katya Valasek:

You've seen a lot of businesses fall apart and because of all that knowledge, all those experiences you have under your belt, are you ever approached by someone who wants you to help them build the start of their partnership together?

Margeaux Thomas:

Yes, absolutely. We have attorneys that do transactional business work, so they help people navigate the front end and forming the partnership or scaling the partnership when there is no dispute.

Katya Valasek:

Do you think that your practice in navigating the business forces makes your firm provide different insight in that transactional work?

Margeaux Thomas:

Yes, because we know what doesn't work. And I think that a lot of transactional attorneys who don't have that background, they put in clauses that are just the clauses that everybody uses, and they don't really see how those clauses play out if there is a problem. We have completely revamped how we do operating agreements and shareholder agreements and things like that because we know mediation is a great avenue to resolving a lot of these partnership disputes.

Business owners don't want to have a judge or a jury decide the fate of their business. They're very emotionally attached to it, but mediators, on the other hand, can come in, especially very skilled ones, kind of navigate what are the pain points and what are people really holding on to and help the parties navigate a resolution that everybody can live with. And we do mediation in probably 90-plus percent of our cases. That's one of the things that we put in, a mandatory mediation clause in our agreements, and we specify the mediation companies that we use most often. Most agreements don't have that, but we find that if we're able to negotiate that early, it saves our clients a lot of time and money.

Katya Valasek:

So you have referred to the we a few times in terms of the work that your firm does. What does your staff look like at your firm?

Margeaux Thomas:

I'm proud to say we have an attorney. There was a woman who started as a paralegal when it was just me years ago, and she worked as a legal assistant and then a paralegal, and then she decided to go to law school. And then she came here for the summers, and she just graduated from law school in May, and she took the bar last week, and she's starting here in September. So I feel like the life cycle is complete. And I have an operations manager, which is a new role for our firm. I have an intake person. I have a marketing person. I have a paralegal, and I have a couple of contract attorneys. But by the end of the year, I should have two or three full-time attorneys.

Katya Valasek:

Do you ever feel like you're in a David and Goliath situation, litigating against lawyers from larger firms with potentially more support?

Margeaux Thomas:

I don't feel that way, because when I used to at a bigger firm, I used to think, I don't think there's anything different. There's an associate who's writing all these briefs. You have skilled staff, and you have enough technology. I think it's an even playing field. I'm not sure if that's true for all practice areas, but for the specific niche that I'm in, there's nothing that that big firm has that we can't offer. And we say that to people. This is going to be a better process. We can get you the same outcome. And most of the people on the other side are big firms. We all came from big firms. We know what that looks like. We know exactly what we're providing, and people understand that.

Katya Valasek:

What do you think the bigger firms would say about that claim you just made?

Margeaux Thomas:

I don't know. I guess they probably wouldn't agree. That's probably why I started this firm, because they didn't agree with it. But when I was at a big firm, it wasn't like there were 25 people working on a case. I mean, these type of cases that we do, it was like me. It really came down to one or two individuals doing really good work. So that's the exact same thing. I mean, there are cases that have tens of thousands of documents, but it's not like back in the day where you had to flip through every page. There are ways to consolidate those documents, organize them, scan them, keyword search them. And I felt that way then, because there would be a lot of people who were on the case who were not adding value, but they were charging for their time. And I was like, why are we doing this this way? Because they're incentivized by getting billable hours that aren't really contributing to the value of the case. I mean, I think that that's just a skewed model that doesn't really benefit the client.

Katya Valasek:

So do you not do billable hours then?

Margeaux Thomas:

So we have three billing models. We have subscription service. So we're like their outside general counsel, and we do their litigation work. And we have flat fee work, whenever we can do agreements on a flat fee. And we do have some litigation on billable hour rates, but we can be flexible, and we can kind of cater that to the clients. But I mean, the main thing we're trying to discourage is just motivating attorneys on how many billable hours they can put in. We do not have billable hour minimums for attorneys.

Katya Valasek:

So you are clearly very entrepreneurial and business-minded, but you also have a family. You have your husband, you have your kids, you have a life that you want to live outside of the office. How do you manage that work-life balance as a go-getter entrepreneur, a litigator, but also someone with a life at home?

Margeaux Thomas:

I'm not sure there's balance. I think that sometimes it requires a lot and sometimes less so. It just kind of is an ebb and flow of litigation and probably business ownership. But I think a lot is just the team of people that you build around you. I'm fortunate enough to have people who are along for this journey that see the vision, who want to be the preeminent business divorce law firm in the DMV, who dedicate a lot of time and their expertise to helping us reach that goal.