TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, September 24, 2013

ABA Journal: Legal Services Companies Are Eating Law Firms' Lunch

COverABA Journal:  Who’s Eating Law Firms’ Lunch?, by Rachel Zahorsky (Director of Marketing, Novus Law) & William D. Henderson (Indiana):

2012 revenue for the top 100 U.S. firms totaled more than $70 billion, according to American Lawyer magazine. Since the recession hit the legal profession in 2007, these firms have grown in headcount, often through mergers and the absorption of lawyers from several law firm failures. But on a per-lawyer basis, revenue has been essentially flat.

Novus Law, by contrast, is tripling its revenue year over year. And as Novus and many other legal vendors snatch millions of dollars in work typically done by traditional law firms, the growth of the Am Law 100 could disappear completely.

Nearly 80 percent of the work done by Novus Law attorneys is work large law firms would otherwise do, according to co-founders Ray Bayley and Lois Haubold. It reviews, manages and analyzes documents for large-scale litigation, and is poised to focus its technology and resources on drafting briefs and motions. ... Bayley and other legal service providers (some who’ve traditionally performed services for law firms, many who now deliver services in competition with them) who embrace technology and design and apply a scientific, process-driven methodology to this type of legal work offer an estimated $25 billion savings opportunity for corporate America, he says. ...

One thing is for sure—technology and law are the wave of the future. This tech-driven approach to law is the growth area being targeted by some law schools and professors, ones like Vermont and [Professor Oliver] Goodenough. Goodenough expands on his LegalTech epiphany in a recently published Chicago-Kent Law Review article [Developing an E-Curriculum: Reflections on the Future of Legal Education and on the Importance of Digital Expertise, 88 Chi.-Kent L. Rev. 845 (2013)], noting that the traditional law firm “is no longer the best game in town for delivering high-quality legal service through scaling and flexibility. Rather, we are developing even more concentrated engines of efficiency and scale, often technologically enabled, in the new service companies like those on the floor of LegalTech. “Legal practice isn’t going away,” he continues. “It is just going to forms of delivery that can combine the competence and flexibility of an old-fashioned firm with the efficiency and scale of a just-in-time cloud-computing company.” ...

That prediction may cause night sweats and denial among some longtime legal practitioners, but it’s proven in the growing lists of legal services and product providers that are not law firms and the market share they are now vying for. It is also changing how hiring is done by these legal-not-law firms, and how some bright students are plotting their careers in law. ... While nearly half of recent law school graduates have yet to find jobs requiring a law degree, law students with technical training are finding themselves in demand. ...

Not surprisingly, many of the companies mentioned above were vendors on display at the New York LegalTech show in January. To the dismay of Goodenough, one seemingly important group was missing: law professors. “This disconnect is striking,” Goodenough observes. “A technology-driven revolution is overturning how America practices law, runs its government and dispenses justice. The revolution has so far gone almost completely unnoticed by the people who teach aspiring lawyers. This has to change.”

Legal Education | Permalink


Marc Andreessen forcefully predicted this in 2011: "Companies in every industry need to assume that a software revolution is coming."
Even earlier, the cyberpunks were predicting a shift of normal human intereactions into digital space and one author, Ian MacDonald I think, featured a lawyer-character negotiating against an automated lawyer, a kind of Think Blue with Checkpoint.

Posted by: Yo Gabba Gabba | Sep 24, 2013 1:00:05 PM

I have no doubt these legal services companies can manage documents. I have some doubts about the quality of their review and analysis of the documents they manage. (Certainly, if my freedom, property, or livelihood were dependent upon document review and analysis, I would want the review and analysis done by live associates working in windowless rooms, employed by mid- to large-sized law firms rather than a legal services company.) But I have very grave doubts that legal services companies can produce high-quality briefs and motion papers. Nor would I want to put my license at risk in a case in which such shortcuts were employed.

Posted by: Publius Novus | Sep 25, 2013 6:38:06 AM

"License at risk" A silly comment!

Posted by: planwiz | Sep 25, 2013 3:24:34 PM

What do they do about conflicts? It seems like this would be a big problem trying to be a service instead of a firm. Do they just have their customers, I mean clients, sign good waivers?

Posted by: JudgeSmails | Sep 25, 2013 3:31:11 PM