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Paradigm Shift

Who’s eating law firms’ lunch?

Oct 1, 2013, 10:30 am CDT

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Remember kids, law school is the key to a great, prosperous future.

By associate on 2013 09 26, 2:39 pm CDT

One thread I see here is that these firms look for and value non-traditional law experience.  Its a mistake that law firms have made for a while.  I am a second career attorney, law review, previous experience in bank auditing and technology.  I got intervuews with Big Law becuase of my law review status.  The looks on their faces when I walked in the room made it clear I was not going to be considered because I had prior non-law experience.  I wound up doing financial crimes prosecution at my local district attorney’s office.  I got record restitution amounts starting my first year. I am a sole practitioner now.  I am not surprised that big laws insular thought process are killing them.  Law school can be a step toward a great future.  Big law is not the only (or even maybe best) way to find it.  The big law folks are not stupid. They will embarce technology before they die.  Its just that as long the partners are still making good money, they have no reason to take on new challenges.

By Melissa on 2013 09 27, 11:59 am CDT

Unauthorized practice of law. What Novus law is doing is illegal.  None of the idiots at the ABA Journal could figure this out?

By getting sick of it on 2013 09 27, 12:15 pm CDT

Yes, it probably is illegal.  But, just as the case in so many other areas of work we USED to do exclusively, nobody will enforce it, pursue it, or blink an eye at it… other than us.

By Mike on 2013 09 27, 1:04 pm CDT

This appears to be an advertisement.  The ABAshpuld label ads clearly so they are not confused with journalism.

By Anon on 2013 09 27, 1:38 pm CDT

This article is an advertorial - it reads as if the ABA is endorsing the companies profiled rather than just reporting on the services offered.  Also, the issue of who is eating lawyers’ lunches is far broader than just the impact on big law.  This trend is crippling small and medium firms whose clients now do their own legal research on Google Scholar, process their own filings on ecourts systems, draft their own paperwork with Nolo, and settle their own cases with mediators (especially financial matters - clients know that lawyers and judges cannot comprehend those issues).  A thoroughly researched article on how technology and environmental changes are eating away at all levels of legal operations would have served the readership better here.  I don’t care about multi-million dollar discovery matters, I care about keeping the lights on.

By NYS courts ex-wife on 2013 09 27, 1:44 pm CDT

So the coauthor, “who was a legal affairs reporter for the ABA Journal at the time this story was written, accepted a position at Novus Law as this issue was going to press”??  I could have guessed that by the tone of the article.  This is an interesting and important topic.  It’s just too bad the ABA Journal did not address it in a more credible manner.

By In-House Intermediate on 2013 09 27, 2:58 pm CDT

If small and medium firms are being destroyed by google searches, perhaps they are not providing much value to their clients.  A significant portion of my practice is fixing problems for busineeses that tried to incorporate with Legalzoom, folks who drafted their own contracts because they couldn’t afford a lawyer, etc.  Unauthorized practice of law is a probem but lawyers cannot hide behind that.  We have to provide cost effective services by embracing effective technology (not necesaruly the lastest thing pushed on this site) and efficient practices.  I google my medicines to be sure I am comfortable with the effects of interactions.  If my doctor doesn’t think I should becuase that cuts into his practice, I really don’‘t care.  Our customers feel the same way about our services.

By Melissa on 2013 09 27, 3:01 pm CDT

This article doesn’t say what Novus Law actually does.  It’s a doc review outfit.  Biglaw has NOT been doing doc review for years and years now.  Nobody’s going to pay $500 or even $200 per hour to click on yes/no buttons.  Novus Law is going to be run out of business in 5-10 years by offshoring firms doing the same work but using Indian or CN labor.

By Sanenazok on 2013 09 27, 3:10 pm CDT

@9 - Good point about the article not saying what Novus actually does.  The article makes it sound like half of Novus’ employees are black belts at Six Sigma.

When it comes to document review, the future may be in “predictive coding.”  There have been studies which show that automated text-search document “review” programs statistically are no less accurate (admittedly a loaded term) in differentiating between discoverable and privileged documents than are human reviewers.  For better and worse, the market for document review attorneys may get much smaller.

By In-House Intermediate on 2013 09 27, 3:22 pm CDT

Novus Law advertises itself as a company that provides document review, management and analysis.  I can agree with the argument that a non-attorney should be allowed to read, summarize, and organize non-legal/non-technical documents.  But analysis for legal purposes may be crossing the line.  Likewise, I find it troubling when an attorney is asked to review technical documents like medical records in order to perform an analysis that should be done by a medical professional.

By Reader on 2013 09 27, 5:07 pm CDT

@9, I’ve had big law partners brag to me about how their paralegals charge $250/hr.  I can definitely see this as the next fat to be trimmed from big law.

By Reader on 2013 09 27, 5:14 pm CDT

Technology will annihilate tradition. Bayley and Haubold are bright cookies, understand that the commodization of legal is a done deal, it’s here, it’s happening, they’re embracing it and making money on that reality. And this isn’t their first start-up rodeo, so my guess is that they’re not necessarily envisioning Novus as being around in its current iteration in ten years. They’ll have made their money and their point and will have moved on to or evolved toward the next low-hanging fruit in the industry. And there’s a lot of it, I think. We’re not going to replaced by robots, but automation of some key functions is going to continue to spread and the sophistication of the end-products will advance. It’s scary on one level, fascinating on another. If you’re going to cling to more traditional models of operation, you’d better be prepared to prove value to clients’ bottom line, like down to the cent. I’m not sure a lot of legal practitioners are thrilled at the prospect of possibly having to engage more directly in a sales strategy for their services in order to compete against the machine.

By Reader on 2013 09 27, 7:08 pm CDT

Here is the basic problem.

Ms. Johnson wants her “BigLaw” firm to put their malpractice policy on the and use a document review contractor that is not under their supervision & control.

It may be that BigLaw and many of the rest of us should be buying software to more efficiently do document reviews. However, those of us who have been at this awhile know that there is a reasonably probability that the next time the outside contractor will miss the “silver bullet” document. They never publicize their ‘misses’ or the claims they pay when they miss.

If I were Ms. Johnston I’d say, “I don’t want to hear about your hits, I want to hear about your misses. And, what you did about them.”

If next time Ms. Johnston’s outside contractor misses the ‘silver bullet’ and the other side cleans her clock will she sue them for malpractice? If next time Ms. Johnston’s BigLaw firm misses the ‘silver bullet’ & her clock gets cleaned will sue them for malpractice or never hire them again?

Everyone wants a competent lawyer & wants them to be responsible but when it comes to paying for them they complain. Ms. Johnston’s company gets into lawsuits because of something they did or did not do, not because of something their lawyer(s), BigLaw or otherwise, did or did not do; i.e., the lawyers did not make the mess.

Paid, unpaid, over paid, or under paid, a lawyer has to exercise their ‘independent professional judgment’. Outside document reviewers, unless they want to (& are licensed) sign on as co-counsel in the case (& I don’t see any wanting to do that!) they are not able to do that.

If my malpractice carrier is on the hook I must control the factual preparation of the case, including all document reviewers, exhibit preparers, etc. “My people” may miss something but if they do its my professional problem. Those in BigLaw that think that they can not live in the style that they have become accustom without working for Ms. Johnston’s company they need to cut back on their style of living & tell her ever so politely that in cases when I sign the pleadings I control, among other things, the document review.

T Rankin Terry, Jr.
Fort Myers, FL
9/27/2013

By T Rankin Terry, Jr. on 2013 09 27, 9:02 pm CDT

She didn’t have half an hour to spare, and she only works for a law firm. How am I supposed to spare lots of time reading your enormously long article when I own and run two companies, one of which is a law firm?

By Anna Gray on 2013 09 27, 9:40 pm CDT

Lot’s to read so I may have missed it. Do these organization’s carry malpractice insurance in case they miss the important doc?  If so, that would classify them as a law firm. If not, I question the service delivery model.

By Mark Grobbel on 2013 09 28, 12:12 am CDT

Don’t forget about Axiom - see July 18, 2013 ABA/Bloomberg interview http://www.abajournal.com/news/article/bvideo_are_companies_like_axiom_law_a_threat_to_biglaw/

In the interview, Harris noted that 2012 revenue was reported to be $150 million and they had raised $28 million much of which went into technology and infrastructure.  Unlike many of the companies that focused on discovery review, Axiom probably earns less than 3% of its revenue from document review, instead emphasizing transactional work, e.g., managing the contracting function. In other words, this isn’t just a discovery review phenomenon.

By Joe Howie on 2013 09 28, 2:47 pm CDT

What a joke. When the “litigation support” or illegal law practice, whatever it is, misses THE smoking gun because it does not fall into whatever algorithms are programmed into the searches, guess what happens?  The attorney at trial gets a nasty surprise, and finds out that the document was produced by the adversary. And when that attorney loses the case, who is responsible?  You’ve got it- the attorney, not Novus or ‘litigation support.”

If clients want Novus or “litigation support” to do the work, then they should also let them try the case with the work product they have produced. 

And since when is the ABA in the business of marketing for other people?  How do I get them to do a piece on my law firm like this?  To get all that publicity for nothing, what a deal.

By DKK on 2013 09 28, 6:39 pm CDT

Apologies to T. Rankin.  I was so disturbed after reading this that I posted without reading everyone’s posts.  I had the same thought independently.

By DKK on 2013 09 28, 6:43 pm CDT

Too many interesting issues to think about and continue discussing while surfing the legal waves

By mariano on 2013 09 30, 3:26 pm CDT

At my staffing company, if the law firm is going to use K attys (sometimes at the client’s insistence), we ask the law firm to select the attorneys and make sure everyone understands it is the law firm who must supervise the work and be responsible for the work product.  Many, if not most, malpractice policies cover temp attorneys reviewing documents in the discovery setting.  The key to make this work is the law firm is in charge and directs the temp attorneys in terms of what to do, QC’s carefully and is responsible for what is or is not turned over.

By Mark Grobbel on 2013 09 30, 6:50 pm CDT

I have been struggling with the new trend in social acquisition of information for free.  Knowledge is being devalued and knowledge was the mechanism on which our unique talents were based.  Experience of course is the interpretation of knowledge and people don’t have the training or the experience.  That being said, packaging knowledge for sale, knowledge being a commodity is a new paradigm that all busineses and services I believ must accept.  And I enjoyed the reader’s comment about LegalZoom.  Never seen one done right yet.  Pay me now or pay me later.

By Rich Gaines on 2013 09 30, 8:57 pm CDT

@21- that is precisely why these other “litigation support” services don’t work.

By DKK on 2013 10 01, 9:34 pm CDT

The theme might be legal services provided by legal services company at a lower cost than traditional law firms; but it’s just a piece of the larger discussion:  and that’s legal services are too extensive and cost cutting will continue to occur.

I’ve taken this to heart every time I walk into the local court house and see hundreds and maybe even thousands of attorneys walking around.  it doesn’t matter if you’re biglaw or a solo - you’re still a lawyer hustling for work, but it’s just on a different scale. 

I have over 10 years of great experience handling cases in the areas of law I practice and I have achieved good results for clients.  I get clients by charging less - often far less - than competing attorneys.  I have plenty of work because of it.  How do I do it? 

I’ve resigned myself to making less than other attorneys.  I may never have a country club membership and I probably won’t drive a range rover.  But I’m still making good money - more than the average household in my area. 

I have a lot of work and my phone always rings with new clients.  I have a diversified client base.  I can handle volume efficiently and I can accurately gauge the amount of time a case will take prior to being retained. 

At the end of the day in my small firm I earn about what a senior associate earns at mid-sized firm.  Plenty of other attorneys I know earn far more than me. And I"m OK with that.  Like I said, I’m on the forefront of the wave here.  I’m trying to grab a larger share of a smaller piece of the legal pie in my areas of law; and the only way to do that is to charge less money.  And by charging less money, I earn less money.  And that’s just the way it is.

By Peasant with student loan debt on 2013 10 02, 3:27 pm CDT

To Peasant with Student Loan Debt

I acknowledge you for being comfortable with who you are and what you have decided is your lifestyle.  I started in larger firms, went solo for many years and am now building a mid size law firm.  Like you we had a decent lifestyle with a good reputation but with a bit of a struggle to keep the volume going particularly as we see the trend in value shifting.  When I turned 50 I wanted something bigger and better than just doing transactions so the conversation has shifted.  Competition is always there and I think the question is how do we innovate and add extra value to clients for example by creating collaborative teams?  How do we create recurring revenue in an industry that is more focused on transaction?

By Rich Gaines on 2013 10 02, 3:58 pm CDT

You’re wrong about ‘competition always being there’.  Competition isn’t just there, it’s increasing at alarming rates.  There are 3,000 new attorneys in my state every year and there are no signs of abating.  It’s quite obvious that the legal pie is shrinking and more attorneys trying to grab at that piece of pie.  These new attorneys who come out are opening their own shops down the block from you and competing.  In this town I see new firms and partnerships and firms open nearly every day; and the websites show grads from 2007-2012 just diving in to the legal market.

For a large majority of the market outside of the top 1% of the market, it’s clearly about price.  You can try and pitch value but keep the same price, but at the end of the day, ‘good enough’ at a cheaper price is always going to win.  Every lawyer with two luxury car payments, a 2 kids in private schools or college, a $4,000 a month mortgage in an upper middle class suburb and a yearly vacation requirement is going to rationalize the situation by saying “I need to make X so I’ll provide more ‘value’”; (this aside, my favorite are the divorce lawyers in my market who say “business is slow these days, so I’m going to raise my hourly fee to make up for the lost revenue” - how absurd!).

The fact of the matter is that lower incomes are coming for everyone in our profession; the writing is on the wall.  The development of income partner as opposed to equity partner was just another sign that things were getting bad.  It’s also evident, at least from anedoctal stories, that few people are making equity partner, and the ranks of equity partner are shrinking.  the equity partners are doing everything possible to try and keep their income high, in fact, they’ve redesigned the entire partnership model to try and keep their incomes high, but it’s not working. 

The only answer is less income and revenue for everyone in the profession except for the very top.  2000 billable hours at a relatively low hourly rate is already the norm and expect the trend to continue.  You better get used to running around like a chicken with yoru head cut off handling a huge case load because if you don’t, somebody out there like me will. 

I laugh at the lawyers who try to keep up the facade that they drive the range rover with the vanity license plates, live in some $800,000 to $1,000,000 house in a fancy upper middle class neighborhood.  It’s all a facade, with a lot of debt behind a shrinking or stagnant income. 

My bar assoc did an income survey about 10 years ago and it was the first survey of its kind in 20 years.  The bar assoc found that attorney’s incomes (outside of the biglaw increases) increased on average 1% each year for 20 years.  Yes, 1% a year.  that’s less than inflation so it’s actually a decreasing income; but I imagine the recession finally caused that 1% to go backwards into negative Territory for a lot of the profession.

By Peasant with student loan debt on 2013 10 02, 4:23 pm CDT

Excellent analysis fellow peasant.

By associate on 2013 10 03, 4:18 pm CDT

Hi Peasant.  LOL.  Love the term

I have found my belief is we live in a world of abundance and yes while there is greater pressure on competition and pricing innovating and finding new ways to bring value will always be there for any kind of business.  This is the area we have been focused on and our services and products and messaging have been re-designed to take advantage of this and we are in a major push right now to take our sales and marketing up. 

What state are you in?  We are in San Diego, CA.  High cost of living, lower wages cause it is truly a great place to live.  (always subjective of course. LOL).  By the way.  In the spirit of this disucsion if we can be of value to you in any way please let us know.  I have 28 years in the bus., the LLM in taxation and have worked with a broad range of clients up to 100 Million.

Thanks for your input and feedback.  It is great to have this kind of dialogue.

By Rich Gaines on 2013 10 03, 9:43 pm CDT

So, Novus apparently poached young Ms. Zahorsky while she was doing her write-up.  I guess that explains the staff opening.  I only hope they will bring her back for a guest spot if the Journal ever reprises the Rebels road trip.

By B. McLeod on 2013 10 03, 10:40 pm CDT

Bill Henderson is a hack.  The type of guy who defines the saying, “those who can’t do, teach”.  This guy has never done a thing in his life but tell others what to do. 
Jerry Carter’s experience is absolutely non applicable to the law firm setting in America. Maybe if he hadn’t struck out at US firms, or even firms in Indiana, he woulden’t have had to do unpaid internships (hemm “summer associate positions”) abroad.

By Andrew Massimino on 2013 10 28, 3:38 am CDT

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