e-Closings: When Convenience Creates Inconvenience ' and Complexity

From a client's perspective, this change can be only welcome. The costs of assembling armies of attorneys, paralegals and clients in a room, and finding a time and place convenient to all, can often be avoided altogether, along with the last-minute travel costs, and the hotel and meal charges that go along with them.

The e-closing procedure also maximizes the use of everyone's time. No one has to sit around waiting for others to read documents for the first time, because as much as possible has been circulated previously for approval. An e'closing becomes literally a process of sitting down and signing, rather than a process of reviewing and reading.

Recent Popularity, Echoes of Yesterday

In fact, most deals I have handled in recent years have closed “virtually.” Our client and I may have been in a single location, but each party worked at the location most convenient to it, and final signatures are typically exchanged in .PDF, with originals following via overnight courier. While there may still be need for some “in-person” closings, whether to counsel clients on the consequences of a deal, to give wiring instructions or for other aspects that require face-to-face interaction between the parties, today's closing is not the “big deal” (pun intended) that it once was. (Of course, e-closings may still not solve some traditional closing headaches. Wiring and funds availability deadlines, for example, must still be met, and documents such as good-standing certificates or filing receipts may still have to be obtained from local filing offices. And because the technology budget of some local offices extends only to voice mail, these offices may conduct only daytime walk-in business. Pushing e-closing preparations until the last minute makes these practical issues a popular subject for “post closing agreements” to finish tasks that could not be accomplished in e-time.)

But has something been lost in the simplification of the process? Just as “video killed the radio star,” in the legal and business worlds, the question of whether digital technology has killed the closing room, and the functions it served in wrapping up a successful deal, arises. For example, I think there is still a benefit after a difficult negotiation to have a ceremonial finish, even if just a brief photograph staging or a handshake, to mark the psychological transition from an adversarial relationship to one of joint effort, at least in many cases. In addition, given the general bloat in legal documents generated with a push of a printer button, no one wants to wait while counsel reads a new draft or revision word for word at the last minute. As a result, revised documents are read only intermittently, to make sure that desired changes have been made, but not read in the context of the entire document ' meaning that a level of human analysis is also lost.

Paradox

The modern conveniences that have simplified the logistics of staging a closing, however, have, quite paradoxically, introduced new legal and business complexities to a deal's end game. Also, business persons used to transmitting routine, ordinary-course documents through “normal” electronic means may not appreciate some of the costs and risks that the e-closing has created. Let's consider some of the hidden inconveniences, and risks, that the convenience of the e-closing has created for businesses and their counsel.

Due Diligence

The biggest challenge I have encountered starts at the beginning of a deal, in due diligence. Historically, documents such as financial statements or business records were made available in a secure room, off-site, to allow review by a buyer without alerting the seller's employees to a pending deal. Copies were stamped “Confidential,” and were provided only subject to a confidentiality agreement requiring their return if the deal did not close. Less-secure documents were exchanged through the Postal Service or, more recently, by private document-delivery companies, to allow review at one's office.

A Real Savings?

Today, of course, no one wants to incur any of these costs: the copying, shipping, or travel to a diligence room. While the confidentiality agreement remains a prerequisite, documents are instead often made available at an online sharing site (for example, see www.firmex.com/blog/virtual-data-rooms-definition; http://www.firmex.com; http://en.wikipedia.org/wiki/Virtual_data_room; www.adobe.com/financial/pdfs/closebyconnect_wp.pdf; http://www.v-rooms.com; and www.unschcalidad.net/technology/computers/additional-features-of-virtual-data-rooms).

Although many vendors offer such services, the best ones can control and track exactly who looked at which information, and when, a potentially crucial data point for the party providing information ' if it knows that it can obtain that intelligence, and actually does so. Parties that participate in virtual due diligence without realizing how much information can be provided, beyond what is on the due diligence pages themselves, may find themselves negotiating at a disadvantage.

Real Risks, Too

But such rooms have a cost, and can be expensive for the typical “Main Street” business deal. Instead, more commonly, information is exchanged by e-mail, whether directly between the parties, or through counsel as an intermediary. Again, attaching a file, whether a word-processing document, spreadsheet or .PDF, is done so routinely today that people sending such files may not be aware of all the embedded information that travels with the document. For example, metadata may reveal prior versions or comments, unless the sender uses software that strips this information from the document before transmission.

In addition, just as it is easy and almost costless for the provider of information to transmit it electronically, it is equally easy for the recipient to pass it along. While it is appropriate and required to share data with a buyer's advisers (legal, accounting, banking and strategic agents, for instance), each could share it easily with a person whom the sender would have preferred not get it ' competitors who are clients of the information recipient, for example. Also, it needn't even be the negotiator who shares it ' a clerical worker or disgruntled employee of someone down the line may have passed it on, or it may have been sent to an incorrect e-mail address.

Confidentiality Concerns

Admittedly, such sharing would almost always violate typical confidentiality terms, but the information owner would have to incur the costs of figuring out who originally leaked the information, prove that it was improperly shared, and prove damages done by the information-sharing. As in the traditional nonelectronic world, premature disclosure often may be embarrassing, and undermine a negotiating provision, but not cause any economic harm that can be proven with the specificity required to collect damages.

And, typical confidentiality agreements generally have exclusions ' permitted uses of otherwise confidential information ' that persons who choose to pass on information may claim justify doing so. Again, the owner of the information may find it expensive and difficult to counter such claims. In short, even though e-closings may take place under state-of-the-art information protection (in the confidentiality agreements and the technology used by the parties), simply withholding some information (at least in electronic format) may still be the safest way to proceed.

I recently saw an example of this risk of e-diligence in a deal involving a combination of professional firms. While the acquirer was more than willing to share data about its finances “face to face” with each of the target's members (and financial and legal advisers), it firmly denied the target's attorney's repeated requests for that same information in .PDF format. The acquirer was concerned that because both firms operated in a small community, it would be very easy for adversaries to get one of those files, whether through intentional breaches of the confidentiality agreement (a relatively unlikely event, in either the conventional or electronic world) or unintentionally ' an incorrect file could be attached to a message or sent to another attorney by the use of a mistaken e-mail address. While good practice dictates that none of these problems should ever take place, and that systems should be in place to prevent them, “let he who is without sin cast the first stone” ' who hasn't at some point sent an e-mail to the wrong address, or attached the wrong file? As a result, the diligence procedure (in this case, at least) has come full circle to the level of inconvenience experienced long before any information was stored or made available electronically.

Getting Deals 'Done' Isn't the Same

Next, let's look at how e-closing has changed the dynamics of getting a deal done, and the often crucial ' and significant ' items left for the end. In the Paper Age, difficult issues were commonly left to be resolved at the closing table, with the parties applying the theory that the “best deals are made on the courthouse steps”; concessions that could not have been won early in a negotiation (at least at an affordable price) may be more attainable when the other party sees that the deal is imminent, and prefers to settle and move on, rather than continue to fight over what often are minor points. Such an approach, though, risked the people involved losing the deal entirely, if all parties had to adjourn and return at a later date when new papers had been prepared, and so this option had to be exercised judiciously ' the delay could lead the parties to just walk away from the deal. (In one contentious refinancing in which I was involved, it took 10 months to get everyone back to the table after a late-stage demand.)

Today, in contrast, the technology that allows e-closings also means that new documents can be generated almost instantly. As a result, springing a last-second demand can be very feasible to accommodate, if everyone agrees; or such a late-stage demand could very easily, by the same means, be easy to reject ' the tactical advantage of the specter of delay no longer exists.

Better Review with Technology, But Beware!

I find that documents used in e-closings tend to get less review than what was traditionally applied with paper documents, making the contemporary approach less contentious, in general. Unlike in the era when counsel actually read every page of the final signature document to verify that it was what had been agreed on, today, after the first draft, most people, attorney and client alike, will look closely only at the changes made since the last draft. No client will tolerate (or pay for) a rereading of lengthy documents, even vitally important ones, much less at the last minute when everyone is champing at the proverbial bit to sign and finish the closing.

This move to close more quickly than in the past has several ramifications. At one level, certainly, in my more than 25 years of practice, with or without the benefits of technology, an unspoken trust exists among parties to a closing that no one will make undisclosed changes to a complex document at the last minute, or will instead hope that the other party may not notice the undisclosed information. But without a final reading, it is even less likely that undisclosed changes will be noticed. (I am not suggesting that negotiated changes must be explained, only disclosed ' opposing counsel must ask questions if counsel has concerns.)

On the other hand, e-closings also mean that there is usually an easy way to check the “final” document against the electronic trail of earlier versions saved in e-mail, and by each participant, using document-comparison software. As a result, any discrepancies introduced into the e-closing documents, intentionally or otherwise, can quickly be identified and corrected after the closing is complete. (There are almost always formatting issues, dangling cross references and other “clean up” changes to be made after an e-closing.)

Some Negative Impact

Although e-closings make it easier to be confident that the final document is the truly final version, the nature of the e-closing, as I have described it, has imposed what I feel is a definite negative impact. When the negotiating has stopped and the parties are ready to close, for example, there is value in stepping back and reading the final document “as a whole,” to try to identify whether changes in one part may have, even in unintended ways, affected changes or other parts of what all concerned consider to be the final agreement. In other words, being able to reflect on the whole deal can add a perspective that is lost or overlooked while the concerned parties are focusing on the negotiation of each detail. When the pace of closing is quick, and time does not permit anything more than a perfunctory, intermittent spot check of the final document for the most recent changes, there may never be an opportunity for such insights and perspective on how and if a final document actually works in the way the client intends it to work.

Frequently, such a final review also is an opportune time for a “speak now or forever hold your peace” talk with a client, to be certain that the client understands what is about to be signed, and what the possible alternatives may be. When clients are signing and scanning remotely, using only a signature page (rather than a complete document), counsel must make an extra effort to carry out this critical counseling role. The fact that the client saved cash by having an e-closing will not be an acceptable answer to the after-the-fact question, “How could you let me sign a document that said ' ?” The fragmented nature of modern life and business, with busy executives performing five different tasks simultaneously, also makes such advice difficult to render, and difficult to be absorbed. Who can focus on complex details of one deal when time and attention must first be spent just on tracking down everyone who has to sign from remote locations while calling on customers or working on other matters, before one can even think about the deal? Whatever creature discomforts the situation may have imposed on participants, having everyone in a single closing room focused on getting a document “done” increased the likelihood that each person who was to sign the deal documents understood what he or she was about to sign ' especially when the actual document was in front of each signer to read, if he or she chose to read it.

Diligence Still Is Key to Success

In other words, the term “closing” once had a certain gravity, in the perception of client and attorney. The ability to “close on the fly” using modern technology, in contrast, without having to go through all the formalities once considered unavoidable, may also have made it easier to overlook issues critically important to parties reaching a resolution, because some of the procedures likely to highlight the fact that an issue exists are no longer necessary. Even if the issue is spotted, it may have to be resolved at the last minute, at greater expense and inconvenience, than if it had been dealt with in the ordinary course of traditional closing preparations.

Bytes and Boorishness

e-Closings have also made it easier for one party to engage in unprofessional behavior during negotiations, too ' to be a jerk, in blunt terms ' toward other counsel and clients alike. Rather than discuss open deal points, or proposed document changes, it is very easy to lob back a revised draft with one's own preferred words.

Similarly, in a deal I recently handled in summer-vacation season, the opposing counsel and I agreed that we would finalize all our documents in time for each of us to take long-planned family trips that summer. We both left the office “with clean consciences,” because we had wrapped up all documents well before our departure dates. Yet, on the first day that we were away, I got frantic messages that the other attorney wanted to speak because his client was demanding fairly extensive changes to the business deal (and closing documents) ' after he had read them for the first time.

In the past, little could have been done, other than canceling the vacations (or returning to the office while the family went away) or postponing the closing. Because we had planned an e-closing anyway, however, everyone spent several hours a day online from “vacation” spots, revising the deal documents, holding conference calls and, eventually, closing the deal on schedule. While the technology certainly made it possible to salvage the deal, it also enabled the other client's boorish behavior by allowing him to think that it was possible to put off focusing on the deal terms until long after many hours of work ' and billing, for both sides ' had been expended.

A similar example of incivility made possible by technology arises from the widespread use of familiar document-comparison software tools, or blacklining. More specifically, I have seen one party consciously choose not to use it, in the hope of getting a negotiating advantage. Because generating a lined version is very easy, a person who sends a lengthy revised draft ' solely in a clean version ' or whose cover letter announces major business term changes, but who does not send a blacklined version highlighting the changes, is no better than the inhabitants of whatever circle of the Dantean underworld houses the inhabitants of the fetid closing room describe above. While the recipient can generate the lined version itself, it must still spend the time and effort to do so.

From a process-oriented perspective, my vacation story also illustrates how e-closings allow parties to avoid making decisions and to drag out negotiations (and run up everyone's legal fees). Historically, the need to prepare for a paper closing forced everyone to bring discussions to an end, and close the deal. Today, however, secure in the knowledge that everything can remain on the table up to the last minute, the opposing party did not focus on the deal until he had to. This type of avoidance creates several harms ' not only do the other parties not have a realistic idea of the closing time line (and costs), but all parties incur out-of-pocket cash costs for counsel preparing for a very different closing from the one that will take place. It also prevents counsel for the party receiving this treatment from adequately advising his own client about the final deal terms.

The Upshot: e-Closings Do Help

So, do e-closings deliver the benefits they seem to offer to a cost-sensitive general counsel who wants to control his legal budget? Let's see:

• Documents are circulated without the costs of paper, copying or shipping.
• Travel costs no longer need be part of the closing budget.
• Closings can be completed soon after business terms are resolved, without the parties waiting to schedule everyone who has to attend.

So, yes: e-Closings deliver benefits, such as saving time and money. Yet, despite these benefits, counsel and clients should not lose sight of something that has never changed from the closing room one might have seen in 1911, or 1981: counsel's duties of professional responsibility and attention to all details of the deal. The ability to move massive quantities of paper and details quickly won't absolve counsel from malpractice liability if the wrong or incomplete terms make it into the final documents.

Conclusion

Just as classic rocker Nick Lowe warned in the 1980s that “you gotta be cruel to be kind, in the right measure,” the convenience of e-closings presents today's counsel and clients a similar paradox. The convenience of cost-cutting and savings from e-closings can lead to the “cruel” reality of bad deals and malpractice, if they are not used “in the right measure” ' by someone aware of the important processes that have occurred at a traditional closing, and which can be “e-placed” only at their risk.

Stanley P. Jaskiewicz, a business lawyer, helps clients solve e-commerce, corporate, contract and technology-law problems, and is a member of e-Commerce Law & Strategy's Board of Editors. Reach him at the Philadelphia law firm of Spector Gadon & Rosen P.C., at [email protected], or 215-241-8866.

A staple of law-firm d'cor and lawyer gift catalogs is the stock “closing print.”

The details are familiar to anyone who practiced corporate law in the 20th century: a room crowded with unshaven, weary men with ties and collars undone, and shirts untucked. A few stacks of neatly prepared folders and documents are mixed among many more papers strewn around the table amid half-eaten meals and half-filled coffee cups. Junior lawyers and paralegals proofread, oblivious to the chaos around them, while senior partners desperately try to keep clients entertained as the process drags on.

Fortunately, for most deals, this tableau is as extinct as the typewriter and manually typed documents that are always visible in those wall hangings. Today, thanks to the Internet, e-closings (and traditional closings) have become quite streamlined. The most sophisticated deals are done in virtual deal rooms that allow multiple parties secure, controlled access to documents and procedures for signing the documents. Even in routine deals, well before the point of a virtual closing, documents are reviewed, revised, finalized and signed in advance of the closing, through instant electronic exchanges. (Of course, the all-nighter remains a regular part of practice ' as deals can get done more quickly, clients' expectation that counsel will not go home until the deal is done has only increased.)

From a client's perspective, this change can be only welcome. The costs of assembling armies of attorneys, paralegals and clients in a room, and finding a time and place convenient to all, can often be avoided altogether, along with the last-minute travel costs, and the hotel and meal charges that go along with them.

The e-closing procedure also maximizes the use of everyone's time. No one has to sit around waiting for others to read documents for the first time, because as much as possible has been circulated previously for approval. An e'closing becomes literally a process of sitting down and signing, rather than a process of reviewing and reading.

Recent Popularity, Echoes of Yesterday

In fact, most deals I have handled in recent years have closed “virtually.” Our client and I may have been in a single location, but each party worked at the location most convenient to it, and final signatures are typically exchanged in .PDF, with originals following via overnight courier. While there may still be need for some “in-person” closings, whether to counsel clients on the consequences of a deal, to give wiring instructions or for other aspects that require face-to-face interaction between the parties, today's closing is not the “big deal” (pun intended) that it once was. (Of course, e-closings may still not solve some traditional closing headaches. Wiring and funds availability deadlines, for example, must still be met, and documents such as good-standing certificates or filing receipts may still have to be obtained from local filing offices. And because the technology budget of some local offices extends only to voice mail, these offices may conduct only daytime walk-in business. Pushing e-closing preparations until the last minute makes these practical issues a popular subject for “post closing agreements” to finish tasks that could not be accomplished in e-time.)

But has something been lost in the simplification of the process? Just as “video killed the radio star,” in the legal and business worlds, the question of whether digital technology has killed the closing room, and the functions it served in wrapping up a successful deal, arises. For example, I think there is still a benefit after a difficult negotiation to have a ceremonial finish, even if just a brief photograph staging or a handshake, to mark the psychological transition from an adversarial relationship to one of joint effort, at least in many cases. In addition, given the general bloat in legal documents generated with a push of a printer button, no one wants to wait while counsel reads a new draft or revision word for word at the last minute. As a result, revised documents are read only intermittently, to make sure that desired changes have been made, but not read in the context of the entire document ' meaning that a level of human analysis is also lost.

Paradox

The modern conveniences that have simplified the logistics of staging a closing, however, have, quite paradoxically, introduced new legal and business complexities to a deal's end game. Also, business persons used to transmitting routine, ordinary-course documents through “normal” electronic means may not appreciate some of the costs and risks that the e-closing has created. Let's consider some of the hidden inconveniences, and risks, that the convenience of the e-closing has created for businesses and their counsel.

Due Diligence

The biggest challenge I have encountered starts at the beginning of a deal, in due diligence. Historically, documents such as financial statements or business records were made available in a secure room, off-site, to allow review by a buyer without alerting the seller's employees to a pending deal. Copies were stamped “Confidential,” and were provided only subject to a confidentiality agreement requiring their return if the deal did not close. Less-secure documents were exchanged through the Postal Service or, more recently, by private document-delivery companies, to allow review at one's office.

A Real Savings?

Today, of course, no one wants to incur any of these costs: the copying, shipping, or travel to a diligence room. While the confidentiality agreement remains a prerequisite, documents are instead often made available at an online sharing site (for example, see www.firmex.com/blog/virtual-data-rooms-definition; http://www.firmex.com; http://en.wikipedia.org/wiki/Virtual_data_room; www.adobe.com/financial/pdfs/closebyconnect_wp.pdf; http://www.v-rooms.com; and www.unschcalidad.net/technology/computers/additional-features-of-virtual-data-rooms).

Although many vendors offer such services, the best ones can control and track exactly who looked at which information, and when, a potentially crucial data point for the party providing information ' if it knows that it can obtain that intelligence, and actually does so. Parties that participate in virtual due diligence without realizing how much information can be provided, beyond what is on the due diligence pages themselves, may find themselves negotiating at a disadvantage.

Real Risks, Too

But such rooms have a cost, and can be expensive for the typical “Main Street” business deal. Instead, more commonly, information is exchanged by e-mail, whether directly between the parties, or through counsel as an intermediary. Again, attaching a file, whether a word-processing document, spreadsheet or .PDF, is done so routinely today that people sending such files may not be aware of all the embedded information that travels with the document. For example, metadata may reveal prior versions or comments, unless the sender uses software that strips this information from the document before transmission.

In addition, just as it is easy and almost costless for the provider of information to transmit it electronically, it is equally easy for the recipient to pass it along. While it is appropriate and required to share data with a buyer's advisers (legal, accounting, banking and strategic agents, for instance), each could share it easily with a person whom the sender would have preferred not get it ' competitors who are clients of the information recipient, for example. Also, it needn't even be the negotiator who shares it ' a clerical worker or disgruntled employee of someone down the line may have passed it on, or it may have been sent to an incorrect e-mail address.

Confidentiality Concerns

Admittedly, such sharing would almost always violate typical confidentiality terms, but the information owner would have to incur the costs of figuring out who originally leaked the information, prove that it was improperly shared, and prove damages done by the information-sharing. As in the traditional nonelectronic world, premature disclosure often may be embarrassing, and undermine a negotiating provision, but not cause any economic harm that can be proven with the specificity required to collect damages.

And, typical confidentiality agreements generally have exclusions ' permitted uses of otherwise confidential information ' that persons who choose to pass on information may claim justify doing so. Again, the owner of the information may find it expensive and difficult to counter such claims. In short, even though e-closings may take place under state-of-the-art information protection (in the confidentiality agreements and the technology used by the parties), simply withholding some information (at least in electronic format) may still be the safest way to proceed.

I recently saw an example of this risk of e-diligence in a deal involving a combination of professional firms. While the acquirer was more than willing to share data about its finances “face to face” with each of the target's members (and financial and legal advisers), it firmly denied the target's attorney's repeated requests for that same information in .PDF format. The acquirer was concerned that because both firms operated in a small community, it would be very easy for adversaries to get one of those files, whether through intentional breaches of the confidentiality agreement (a relatively unlikely event, in either the conventional or electronic world) or unintentionally ' an incorrect file could be attached to a message or sent to another attorney by the use of a mistaken e-mail address. While good practice dictates that none of these problems should ever take place, and that systems should be in place to prevent them, “let he who is without sin cast the first stone” ' who hasn't at some point sent an e-mail to the wrong address, or attached the wrong file? As a result, the diligence procedure (in this case, at least) has come full circle to the level of inconvenience experienced long before any information was stored or made available electronically.

Getting Deals 'Done' Isn't the Same

Next, let's look at how e-closing has changed the dynamics of getting a deal done, and the often crucial ' and significant ' items left for the end. In the Paper Age, difficult issues were commonly left to be resolved at the closing table, with the parties applying the theory that the “best deals are made on the courthouse steps”; concessions that could not have been won early in a negotiation (at least at an affordable price) may be more attainable when the other party sees that the deal is imminent, and prefers to settle and move on, rather than continue to fight over what often are minor points. Such an approach, though, risked the people involved losing the deal entirely, if all parties had to adjourn and return at a later date when new papers had been prepared, and so this option had to be exercised judiciously ' the delay could lead the parties to just walk away from the deal. (In one contentious refinancing in which I was involved, it took 10 months to get everyone back to the table after a late-stage demand.)

Today, in contrast, the technology that allows e-closings also means that new documents can be generated almost instantly. As a result, springing a last-second demand can be very feasible to accommodate, if everyone agrees; or such a late-stage demand could very easily, by the same means, be easy to reject ' the tactical advantage of the specter of delay no longer exists.

Better Review with Technology, But Beware!

I find that documents used in e-closings tend to get less review than what was traditionally applied with paper documents, making the contemporary approach less contentious, in general. Unlike in the era when counsel actually read every page of the final signature document to verify that it was what had been agreed on, today, after the first draft, most people, attorney and client alike, will look closely only at the changes made since the last draft. No client will tolerate (or pay for) a rereading of lengthy documents, even vitally important ones, much less at the last minute when everyone is champing at the proverbial bit to sign and finish the closing.

This move to close more quickly than in the past has several ramifications. At one level, certainly, in my more than 25 years of practice, with or without the benefits of technology, an unspoken trust exists among parties to a closing that no one will make undisclosed changes to a complex document at the last minute, or will instead hope that the other party may not notice the undisclosed information. But without a final reading, it is even less likely that undisclosed changes will be noticed. (I am not suggesting that negotiated changes must be explained, only disclosed ' opposing counsel must ask questions if counsel has concerns.)

On the other hand, e-closings also mean that there is usually an easy way to check the “final” document against the electronic trail of earlier versions saved in e-mail, and by each participant, using document-comparison software. As a result, any discrepancies introduced into the e-closing documents, intentionally or otherwise, can quickly be identified and corrected after the closing is complete. (There are almost always formatting issues, dangling cross references and other “clean up” changes to be made after an e-closing.)

Some Negative Impact

Although e-closings make it easier to be confident that the final document is the truly final version, the nature of the e-closing, as I have described it, has imposed what I feel is a definite negative impact. When the negotiating has stopped and the parties are ready to close, for example, there is value in stepping back and reading the final document “as a whole,” to try to identify whether changes in one part may have, even in unintended ways, affected changes or other parts of what all concerned consider to be the final agreement. In other words, being able to reflect on the whole deal can add a perspective that is lost or overlooked while the concerned parties are focusing on the negotiation of each detail. When the pace of closing is quick, and time does not permit anything more than a perfunctory, intermittent spot check of the final document for the most recent changes, there may never be an opportunity for such insights and perspective on how and if a final document actually works in the way the client intends it to work.

Frequently, such a final review also is an opportune time for a “speak now or forever hold your peace” talk with a client, to be certain that the client understands what is about to be signed, and what the possible alternatives may be. When clients are signing and scanning remotely, using only a signature page (rather than a complete document), counsel must make an extra effort to carry out this critical counseling role. The fact that the client saved cash by having an e-closing will not be an acceptable answer to the after-the-fact question, “How could you let me sign a document that said ' ?” The fragmented nature of modern life and business, with busy executives performing five different tasks simultaneously, also makes such advice difficult to render, and difficult to be absorbed. Who can focus on complex details of one deal when time and attention must first be spent just on tracking down everyone who has to sign from remote locations while calling on customers or working on other matters, before one can even think about the deal? Whatever creature discomforts the situation may have imposed on participants, having everyone in a single closing room focused on getting a document “done” increased the likelihood that each person who was to sign the deal documents understood what he or she was about to sign ' especially when the actual document was in front of each signer to read, if he or she chose to read it.

Diligence Still Is Key to Success

In other words, the term “closing” once had a certain gravity, in the perception of client and attorney. The ability to “close on the fly” using modern technology, in contrast, without having to go through all the formalities once considered unavoidable, may also have made it easier to overlook issues critically important to parties reaching a resolution, because some of the procedures likely to highlight the fact that an issue exists are no longer necessary. Even if the issue is spotted, it may have to be resolved at the last minute, at greater expense and inconvenience, than if it had been dealt with in the ordinary course of traditional closing preparations.

Bytes and Boorishness

e-Closings have also made it easier for one party to engage in unprofessional behavior during negotiations, too ' to be a jerk, in blunt terms ' toward other counsel and clients alike. Rather than discuss open deal points, or proposed document changes, it is very easy to lob back a revised draft with one's own preferred words.

Similarly, in a deal I recently handled in summer-vacation season, the opposing counsel and I agreed that we would finalize all our documents in time for each of us to take long-planned family trips that summer. We both left the office “with clean consciences,” because we had wrapped up all documents well before our departure dates. Yet, on the first day that we were away, I got frantic messages that the other attorney wanted to speak because his client was demanding fairly extensive changes to the business deal (and closing documents) ' after he had read them for the first time.

In the past, little could have been done, other than canceling the vacations (or returning to the office while the family went away) or postponing the closing. Because we had planned an e-closing anyway, however, everyone spent several hours a day online from “vacation” spots, revising the deal documents, holding conference calls and, eventually, closing the deal on schedule. While the technology certainly made it possible to salvage the deal, it also enabled the other client's boorish behavior by allowing him to think that it was possible to put off focusing on the deal terms until long after many hours of work ' and billing, for both sides ' had been expended.

A similar example of incivility made possible by technology arises from the widespread use of familiar document-comparison software tools, or blacklining. More specifically, I have seen one party consciously choose not to use it, in the hope of getting a negotiating advantage. Because generating a lined version is very easy, a person who sends a lengthy revised draft ' solely in a clean version ' or whose cover letter announces major business term changes, but who does not send a blacklined version highlighting the changes, is no better than the inhabitants of whatever circle of the Dantean underworld houses the inhabitants of the fetid closing room describe above. While the recipient can generate the lined version itself, it must still spend the time and effort to do so.

From a process-oriented perspective, my vacation story also illustrates how e-closings allow parties to avoid making decisions and to drag out negotiations (and run up everyone's legal fees). Historically, the need to prepare for a paper closing forced everyone to bring discussions to an end, and close the deal. Today, however, secure in the knowledge that everything can remain on the table up to the last minute, the opposing party did not focus on the deal until he had to. This type of avoidance creates several harms ' not only do the other parties not have a realistic idea of the closing time line (and costs), but all parties incur out-of-pocket cash costs for counsel preparing for a very different closing from the one that will take place. It also prevents counsel for the party receiving this treatment from adequately advising his own client about the final deal terms.

The Upshot: e-Closings Do Help

So, do e-closings deliver the benefits they seem to offer to a cost-sensitive general counsel who wants to control his legal budget? Let's see:

• Documents are circulated without the costs of paper, copying or shipping.
• Travel costs no longer need be part of the closing budget.
• Closings can be completed soon after business terms are resolved, without the parties waiting to schedule everyone who has to attend.

So, yes: e-Closings deliver benefits, such as saving time and money. Yet, despite these benefits, counsel and clients should not lose sight of something that has never changed from the closing room one might have seen in 1911, or 1981: counsel's duties of professional responsibility and attention to all details of the deal. The ability to move massive quantities of paper and details quickly won't absolve counsel from malpractice liability if the wrong or incomplete terms make it into the final documents.

Conclusion

Just as classic rocker Nick Lowe warned in the 1980s that “you gotta be cruel to be kind, in the right measure,” the convenience of e-closings presents today's counsel and clients a similar paradox. The convenience of cost-cutting and savings from e-closings can lead to the “cruel” reality of bad deals and malpractice, if they are not used “in the right measure” ' by someone aware of the important processes that have occurred at a traditional closing, and which can be “e-placed” only at their risk.

Stanley P. Jaskiewicz, a business lawyer, helps clients solve e-commerce, corporate, contract and technology-law problems, and is a member of e-Commerce Law & Strategy's Board of Editors. Reach him at the Philadelphia law firm of Spector Gadon & Rosen P.C., at [email protected], or 215-241-8866.