ReInvent(ing) Law

I've been struck by two contrary views on legal education recently. The first is by Matt Leichter on the inflexibility of the law degree. The second is an announcement by Michigan State University College of Law had received a $150,000 grant to support its new ReInvent Law Laboratory from the Kauffman Foundation.

Leichter, as creator of The Law School Tuition Bubble, is as you would imagine more dystopian in his view of legal education. (I agree with much of what he says in Bubble.) The gist of his American Lawyer piece is that the versatility of the JD degree is a misnomer for law graduates not being able to find jobs. Because the ABA convinced states to accept its monopoly over accrediting law schools the purpose of law school was to train lawyers for law jobs. Moving into other careers, ancillary or otherwise, was accidental.

It has been recognized from Max Weber onwards that law has been one of the most, if not the most, transferable and portable of educations and skills around. More so than engineering (but compare China) or administration (compare France). Political scientists have demonstrated the clear predominance of lawyers in legislatures at both state and federal levels. And 25 of the 43 presidents of the United States were lawyers.

For Leichter the luxury of latitude is now too expensive and so law degrees must be of single purpose. I think he is doing law and himself an injustice.

While legal education is in crisis, there are bright areas where teachers and scholars are trying to reinvent law and legal education in ways that don't detract from its purpose (read Karl Llewellyn on "law jobs"), but augment and expand its remit.

ReInvent Law is one of these explorations. It takes the idea of collaboration seriously and that lawyers can learn from other disciplines and practice. ReInvent Law also wants to eradicate the essential conservatism of law by introducing ideas of entrepreneurialism. The founders, Renee Knake and Dan Katz, have of course spent time in the UK and are acquainted with the new entrepreneurialism of legal services here. The expansion of Alternative Business Structures and online provision of legal services, to mention two, inform their course on Entrepreneurial Lawyering.

It was the success of LawTechCamp London 2012 that underpinned ReInvent Law. (And by the way three students received job offers at that LawTechCamp, all in diverse legal ventures.)

ReInvent Law is the indicator of the way things are going or ought to go in legal education, especially if it is to drag itself out of the morass it's in. It builds on the success of Miami's Law Without Walls and Temple's LawMeets.

There are high barriers to overcome, the conservatism of law and lawyers, the move to interdisciplinarity, and the readiness of the market to accept these new ideas. In some ways programs like ReInvent Law are pushing at opening doors. We know that law firms aren't looking for just highly-trained technical lawyers: they want people who can think about business, clients as well as law. These programs drive to the core of this thinking. Neither LawMeets nor ReInvent Law would have received the grants they attracted if this weren't so.

Yet they are still on the edge of law and we need to drag them to the centre.

ReInvent(ing) Law

The Legal Services Act Takes Off in the US?

(Concatenation by silentmute, with thanks)

There has been an interesting concatenation of events recently. The first Alternative Business Structures (ABS) were licensed this week with the Cooperative Legal Services (=Tesco Law) among them. Rather more prosaically and conservatively the New York State Bar Association finally decided to prohibit US law firms from taking external investment. Rule 5.4 would remain sacrosanct--never traduced.

This occurred, unfortunately, as the International Task Force of the New York City Bar Association (ABCNY) came to London on a fact-finding mission to see how the Legal Services Act works and if it could be introduced into New York. The ABCNY is one of the oldest bar associations in the US and represents most of the larger law firms, so it has considerable authority in the American legal establishment.

Various bloggers and critics (here and here) have debated whether the introduction of UK Legal Services Act style law practices would be a good thing both in the public and consumer interest. 

Nevertheless reaction to the forces of conservatism and NIMBYism has set in. North Carolina, which has been considering a bill, for over a year, to allow external ownership in law and accounting firms, has decided to move ahead having finally reached a consensus on the issue. North Carolina believes that neither New York nor the ABA's 20/20 Commission should have the last word on this.

A member of Senator Fletcher Hartsell's staff, who is sponsoring the bill, said, "This provides an opportunity for North Carolina that we can't miss. If we take this through, North Carolina could become to law firms what Delaware is to corporations. We see most of the major AmLaw 200 firms opening offices or headquartering here."

It is rumored that the senator's staff in conjunction with the North Carolina Bar Association (which has thrown its weight behind the move) have been talking to the Legal Services Board and the Solicitors Regulation Authority about how the Legal Services Act regulatory structures are working and also how outcomes-focused regulation might be applied in the US.

Other commentators have come out in support. Anthony Davis argues that the US needs a national lawyer regulator with common ethical standards. It's possible that North Carolina's move into external ownership could be the opening that national regulation needs. This would clearly put New York and the ABA on the back foot.

If North Carolina continues with this kind of commitment I candidly contemplate a new professional order emerging. If we add in the moves of the Troika in Europe on liberalizing legal professions, this could become an unstoppable movement. The world of law, law firms and professionalism will never be the same again.

The Legal Services Act Takes Off in the US?

The ABS Race is On!...Almost...

(thanks to Rocking Horse Works)

Today's the day the Solicitors Regulation Authority (SRA) belatedly began accepting applications from those who want to become Alternative Business Structures. It was meant to be last October 6, but the SRA hadn't quite got to the cantering stage then. Now it's trotting along.

According to Legal Week there have been 15 licence applications including Irwin Mitchell, which wants to take external investment, and Cooperative Legal Services which wants to integrate its legal practice under the Coop umbrella.

About 10 applicants are serious and although the process can take 6 months some applications will be processed earlier. The SRA says it will be rigorous

"For example, we'll be asking for the employment history of everyone going back five years - we need to have detailed information relating to those who want to be regulated by us."

Others for ABS conversion may be Claims Direct, a claims management firm on a no win-no fee basis, which is owned by Russell Jones & Walker.  And Solicitors Journal says

Other likely contenders include LEGAL365, the legal business set up by Freeserve founder Ajaz Ahmed with law firm Last Cawthra Feather, and In-Deed, the conveyancing service set up by Rightmove founder Harry Hill, who revealed last month that he would be buying up law firms.

Both LEGAL365 and In-Deed are online legal services providers and this form makes perfect sense. It will be interesting to see if other online providers, eg, Legal Zoom or Epoq Legal, move this way.

Well, it has been a slow start. Unlike the Big Bang of 1980s financial services, no equivalent explosion has occurred in legal services. In fact it has been rather a damp squib which has the potential to become a sparkler that might graduate to a firework bang in the future. 2012 should give us the picture.

What won't be clear is the effect on the delivery of legal services. Most analysis, for example that by Susskind, focuses on what lawyers will do or won't do. It doesn't say much about access to justice and whether we can look for an increase in legal services. One of the questions here is the carving out of the market with the potential that many might not get access to legal services, for example, those on benefits or unemployed.

I have not yet seen anything about say the pro bono commitments of ABS. Now there is a difference between corporate social responsibility and pro bono, although many lawyers confuse the two. But there is no reason why good CSR policies can't include commitments to pro bono. I hope so.

This is terrifically hard to do as the Kutak Commission on legal ethics in the US in the 1980s found when it proposed a mandatory 40 hour per year pro bono commitment. Outrage and uproar. It never happened.

Perhaps what we need is a pro bono index like a stock market index so we can track pro bono and share prices. Who knows, there could even be a healthy correlation, dare I even say causal link... OK, that's pushing it too far.

The ABS Race is On!...Almost...

Google Law!

(thanks to thegioiseo.com)

It's happened. Google has entered the law business! Google has invested in Rocket Lawyer according to Forbes magazine which says Rocket Lawyer has 70,000 users a day. Paul Lippe also covers this at the New Normal.

I've been giving presentations for the past couple of years where I have always finished with a picture of Google's logo and said, "There's the world's next biggest law firm. Beat that if you can." It was usually met with disbelief.

Google analyzes information very well and law is information. At some level there will be the need for sophisticated interpretation via human thought but for how much longer?

First it was Tesco Law and now it's Google Law!

Rock on....

Google Law!

Waiting for Godot...or ABS?

October will pass without Alternative Business Structures and it looks likely it will be the end of the year before we see them, unless you are a licensed conveyancer that is. In part this is due to the way parliamentary business is done and also to the manner in which appeals against Solicitors Regulation Authority decisions will be conducted. There is also the vexed question of what criminal convictions have to be disclosed by potential investors in ABS.

I'm sure we'll get there in the end even if parts of the legal profession wish this would all go away.

I was struck by Dan Bindman's column on Legal Futures, "Are you an ABS optimist or pessimist?" It's worth reading for the views represented on the potential effects of ABS. Dan ultimately says,

One thing is certain: the new entrants will have little regard for broader notions of access to justice, or the social value of having an independent legal profession to police the three-way interface between the state, the market and the individual.

We don't know this of course. And Dave Edmonds, chair of the Legal Services Board, comments,

Dan Bindman’s article poses the right questions. But I quarrel strongly with his assertion that new entrants will “have little regard for broader notions of access to justice”. Why will they not? Many of the most ambitious and innovative lawyers operating in the present marketplace have a very high commitment to this fundamental cause. My belief is that extending the ability of citizens to secure affordable legal advice from new forms of law firms (which will be in the main run by lawyers and properly regulated by regulators for whom access to justice is an underlying principle) will enhance access to justice, not diminish it.

Read the other comments also--there's good stuff there.

When it comes to dynamic change the legal profession has always been in the vanguard of resistance. It's almost a reflex action. Legal aid was resisted when introduced in the 1940s. Then lawyers learned how it would benefit them. They love it now! But that's going.

Lawyers were opposed to neighbourhood law centres because they thought they would take away business. Instead they promoted it. Their funding is being cut now.

The legal profession has a good eye for resisting winners and on that basis I think they might be on to something with their opposition to ABS. Just don't leave too late...

Waiting for Godot...or ABS?

The Action Hots Up--Irwin Mitchell Declares ABS

(thanks to Paul Mannix)

Now the Alternative Business Structure action is hotting up thanks to Irwin Mitchell's declaration that it will incorporate and use its investment to take on the many mid-tier law firms wondering what to do come October 2011.

If anyone is in the dark, this year the first ABS come into existence under the provisions of the Legal Services Act 2007.

The legal profession is being so complacent and ostrich-like about ABS that Irwin Mitchell's action is a necessary corrective. It's clear from a basic analysis of the law firms in the UK that the mid-tier firms are essentially fungible. They all say they do the best work for their clients, they all hire the best graduates, they all take the finest care of their clients, and they all learn about their clients' business. It's impossible to distinguish one from the other. And most of what they say is "iffy" at best. (I'm being very mild putting it this way.)

If these firms don't think strategically about their futures, they're lost. Irwin Mitchell has moved from being a personal injury firm into a law firm that will be able to offer a range of custom made services with a strong commoditized services wing that will offer white-label services to low cost providers. It is this last part where the investment will earn its return.

The comments on The Lawyer article are of interest. They represent the traditional views which are no longer consonant with the way the legal services market is moving. I'm surprised by the blinkered views especially as this is not new. Irwin Mitchell is not unlike Australia's Slater and Gordon, a personal injury firm that floated in 2008.

Let me reflect on three aspects of the Slater and Gordon flotation that are relevant to the UK. First, the firm was reconstituted with a transparent and meritocratic career structure, something which few UK law firms have. Second, the firm grew by merger and acquisition and its success can be measured by its stock performance. Participants in the firm now possess tradeable equity. Third, the system of regulation predicated on the back of the Australian incorporated law firm legislation, ie. outcomes focussed regulation, appears to be working. See Christine Parker's paper. The UK's version will be starting soon.

Now let's see if other law firms can shake off the dust.

The Action Hots Up--Irwin Mitchell Declares ABS

New Structures for Law Firms?

Julie Adams has written an article in Accountancy Age speculating on new structures for professional partnerships. She makes it clear that younger partners do not see the traditional model enduring.

Conventional partnerships will change into more "employee-owned" forms along the lines of the John Lewis department store model. See this discussion for how it works. This would enable employees and partners to participate in ownership but with greater ease and flexibility of movement. Their equity would be tradeable.

Of course there are other models such as the Goldman Sachs quasi-partner model which isn't a partnership but behaves like one. Stephen Harper has written about this.

Both John Lewis and Goldman have very high leverage ratios (if John Lewis can be said to have one). While some people may spend their entire careers with the firm, average tenure is short. In the case of Goldman burnout occurs after 7 years. Or as the Jesuits would say, "Give me the man and I'll show you the corpse."

Moreover, the advent of ABS there will be increased competition for senior positions as more professionals participate. The world will be more multi- and inter-disciplinary.

Technology and client demand, according to Adams, will lead to a greater segmentation of services and their delivery. Commoditization and standardization and new forms of service delivery are the key here. It's worth reading Jordan Furlong's paper "The Talent Portfolio: New Options for Where, How and By Whom Your Work Gets Done."

The part I like in Adams' article is her depiction of the changes wrought by Generation Y who use work and technology differently from earlier generations. We haven't got to grips with the potential of the scale of change here yet. In part I suspect people discount Gen Y as a fad, even chimerical. It's not and we won't be able to impose our values on it. See, for example, the shillingmesoftly blog. So, as a necessity, change will happen.

New Structures for Law Firms?

Government Abandons Legal Services Act--Tesco Law Dead!

In a shock U-turn the government has decided to abandon the most controversial parts of the Legal Services Act. Alternative Business Structures will not be introduced in October, if at all.

A spokesman from the Ministry of Justice said, "We have listened carefully to the concerns of the small firms and decided their preservation must come before innovation. Consumers are best served by traditional means. This is the essence of conservatism."

RIP Tesco Law.....

Government Abandons Legal Services Act--Tesco Law Dead!

Revolution or Evolution? The Future of Legal Services

(thanks to toonpool.com)

Legal Support Network has just published its fourth briefing on legal services reform. The thrust of the issue is to prefigure what will happen in a year's time when Alternative Business Structures start running.

There is an interview with Stephen Mayson about the future of the legal sector and Neil Rose (of Legal Futures) writes about the shape of the new regulatory landscape. Outcomes-focused regulation will be "regulation for grown-ups" according to the Solicitors Regulation Authority. What will be the outcomes for clients? The entity/firm not the individual lawyer will be responsible, and that goes wider than lawyers.

Finally, there's an article on "Welcome to the Revolution" which says it's already happening. Disclosure: I'm one of the people interviewed for this piece. Despite that it's good.

Happy reading and you can download the Briefing here. And remember, at the best of times, revolutions can be unsettling....

(thanks to hubpages.com)

Revolution or Evolution? The Future of Legal Services

Are Partners Any Good at Running Law Firms?

I was interviewed today by a legal journalist on the future of law firms once alternative business structures (ABS) enter the market in October 2011. The focus was on how partners and business managers/investors would work together.

This pre-supposed an image of integration and colleagueship within a new order. I am not optimistic. As my interlocutor remarked law firms have virtually shed whatever thin layer of management they had to maintain profits per partner (PEP). PEP is that mythical measure that signals to lawyers (and to suspicious corporate counsel) that I'm doing better than you. In the last year we have seen how the maintenance of PEP has stripped any sense of collegiality out of many firms as they have laid off associates, professional support staff, salaried partners, and even equity partners.

Yes, we've seen the final demise of another myth: that there is a tournament to partnership. I doubt there is even an "elastic" one anymore, or it's stretched beyond its limits.

There's a great film that's been re-visioned many times. Punishment Park was a typical 70s Nixon-era film, done in cinéma-vérité style, that follows a group of "convicted" hippies across a desert as they attempt to out run National Guardsmen. If they reach the flag location they will be freed. Of course when they reach the flag, there are the guardsmen and police waiting for them. I leave the rest to your imagination. This is a closer representation of the tournament today.

Once ABS arrive many partners are going to find themselves in the same situation as the hippies in Punishment Park. Investors and managers of the new law enterprises--law firm won't be a relevant term--will have definite ideas about what they want their human resources to do, what targets to achieve, and how decisions will be taken. Partnership, being notoriously inefficient in their eyes, will die out and self-governance will wither.

Why would this happen? Lawyers under the new regimes will find the managerial burden lifted and taken on by others. This will allow them to focus on--the law, what they like. But that is not where the power will lie. Lawyers will let this happen because they dislike management, but having ceded control, well they won't be able to get it back.

So the answer to my question is not very good. And it won't matter how many managing partners are sent to Harvard Business School, we are going to see a dramatic change in the business of law. The profession of law will still be there but much smaller than it once was.

And, finally, if you haven't seen Punishment Park, it's very worth catching if only to ponder its relevance now.

PS. Stephen Harper over at The Belly of the Beast has an interesting post on Biglaw and the Black Swan which picks up on analogous themes to the above post. It's worth reading.

Are Partners Any Good at Running Law Firms?

What Optima Really Did Wrong and Why It Was Sanctioned by the SRA

 (Thanks to BusinessAttorney)

The Lawyer published a more detailed analysis of where Optima Legal Services (see here 1 and here 2) went wrong when it jumped into bed with Capita.

The SRA accused Optima of not having an arms-length relationship with outsourcer Capita and therefore had become an Alternative Business Structure (ABS). According to the Lawyer:

Optima was established in May 2006 when Capita supplied the financial backing for the OLS directors to buy the volume property arm of DLA Piper. Over the next three years Capita lent the firm in excess of £35m, enabling it to make a series of acquisitions, including ­Pathway, the volume legal property services division of Walker Morris in September 2006, and Dickinson Dees’ volume arm D3 Legal in November 2009.

Furthermore

The SRA found that ­Capita did indeed have too much control over Optima. Its loan facil­ity was too ­”onerous” on the firm and OLS’s “extensive” reporting obligations to Capita were in “excess of a normal commercial lender arrangement”. The regulator also found that five of the nine managers on the firm’s operational board, including former chief ­executive Adrian Lamb, were paid by Capita.

 So any investor must now wait, patiently, for October 2011 before they start pumping money into legal practices. Despite this brouhaha Capita

has given no indication it is about to back away from the profession. In a statement released to The Lawyer last week, it acknowledged it went further than the rules allowed but added: “Optima continues to be a business in which we’re happy to invest.”

Finally, Neil Rose, at the LegalFutures website discusses the warning shots made by the Council of the Bars of Europe (CCBE) about the threat of ABS. The CCBE, along with the ABA, perhaps, is saying that the issue could end up in the European Court and

the CCBE’s argument centres around article 11 of the Lawyers Rights of Establishment Directive, which stipulates that member states have the power to ban from their jurisdictions any law firm that is not completely lawyer-run, if it were deemed contrary to public policy to allow them to operate.

 If it does end up in the European Court then it won't bode well for ABS. The ECJ has typically taken a national pro-profession line rather than a pan-European one when it comes to the legal profession. It appears that the ECJ has a knee-jerk reaction to these moves as the Wouters and Arduino decisions clearly demonstrate. For a good analysis of this see Richard Parnham's discussion at Jotwell.com.

It's certainly not going to be plain sailing into the new dawn. There will be the occasional nightmare or siren call along the way to ruffle the waters.

What Optima Really Did Wrong and Why It Was Sanctioned by the SRA

Optima Part Two (Or Why I Am Confused...)

(thanks to Kennedy's)

The more I think about what happened to the Optima-Capita link, the more puzzled I become. Although the SRA promoted the arrangement between the two as a breach of rules (and jumping the gun before the introduction of ABS in October 2011), it gave Optima the lightest of sanctions.

All very peculiar.

What has prompted my perplexity is that a few months back Anthony Davis brought to my attention the fact that Dewey and LeBoef in New York raised $125 million in a bond offering. Note how Bloomberg reports this

Debt in a private placement is sold directly to institutional or private investors and isn’t registered with the U.S. Securities and Exchange Commission. Law firms typically rely on bank loans and partners’ contributions to provide capital rather than outside investors, according to bankers and consultants.

Anthony then asked the obvious question: "Can somebody explain to me why this is different (or should be differently regulated) from raising equity capital?"

There is no doubt all kinds of conditions attach to this offering as Tony Williams commented: "Deterrents include fees, which can exceed $5 million, and loan covenants that may require the borrowers to maintain certain levels of cash flow or profitability."

Of course the fundamental difference is between debt and equity and this one falls on the right side of the line. So that's OK then. But let me follow up with one more observation that ties together what Davis is saying with the comment by Williams.


Peter Lederer, of Miami Law School, has noted that Citibank which is a favoured lender to many New York law firms has been enforcing the loan covenants because of the recession. The result? Partner and associate layoffs to bring profitability back into line. This is not the action of an investor but the lender. However, one can be certain that an investor's decision matrix wouldn't be any different, perhaps harsher, who knows.


So, to return to Optima: it borrowed from Capita. There was no investment. It outsourced its back office to Capita. Other law firms have outsourced their back office operations without a squeak from the SRA. Maybe the most contentious point is that Capita was awarded share options that would only be exercised when the ABS rules changed. Share options are not equity.


So, how is what Optima did any different from Dewey's bond offering or any other loan from a bank?


Though we say we are waiting for the ABS rules to switch on (a bit like Christmas lights), the reality is that it has already occurred through the back door.


Let's put this at its most blunt: the power exerted by banks (via loans, etc) and insurance companies (via PI insurance) is immense. They may know more about the operations of law firms than any other institution. What does that say about the independence of the legal profession? It adds to the multiple layers of regulation from the state level to the private, informal level, which this is. In the case of Optima we see how confused it gets when the two mingle. The question is: which is more important and to what extent is it accountable?

(thanks to save-and-learn.com)

Optima Part Two (Or Why I Am Confused...)

Alternative Business Structures Have Arrived...and Gone Already!

(Thanks to Jim Guckin)

Optima Legal set itself up to offer property and litigation services to the UK lending market. According to The Lawyer it went one step further than most other law firms and this raised trouble with the Solicitors Regulation Authority (SRA).

Optima borrowed heavily (£35m) from Capita in 2006, the outsourcing company, to fund a buyout of a volume arm of Dickinson Dees. Optima then outsourced its back office services to Capita which also took share options for when alternative business structures would be allowed (October 2011).

The SRA didn't like this and following a three-year investigation--starting in 2007: why did it take so long?--it reprimanded Optima for jumping the regulatory gun. Everything had to be put back as it was before the deal, including the 234 back office staff currently employed by Capita. The share options had to be cancelled too. Apparently Optima had taken counel's advice on the move.

Come October 2011 it can all be changed around again. What a roundabout!

Do read the comments to the story as they represent the polar opposites of views. Some, eg. Peter Rouse, ask, "Did services suffer? No, then what's the problem?" Others accuse Optima of hubris. The comment by Tony Guise raises the pertinent question of whether in fact borrowing money was wrong and that the SRA has overlooked the commercial realities of legal life.

I bet in the run-up to ABS this is going to get worse. Poor SRA...

Alternative Business Structures Have Arrived...and Gone Already!

The Future of Legal Services

(Thanks to scifirealENOUGH@.com)

The Legal Services Board held a conference today on the Future of Legal Services: Emergent Thinking. Its key themes were: risk based regulation; alternative business structures; innovation and the future of law firms; and consumers, lawyers and law firms.

Rather than summarize each paper I prefer to focus on those that raised the most interesting questions for the future. For those who would like to know more, the Legal Services Board has produced a pamphlet with digests of the papers which you can obtain from their research manager, Alex Roy.

Julia Black dealt with risk based regulation and showed that it needed a determined approach if it were to succeed. Often institutions might have risk based frameworks in place but don't implement them when a crisis arises. The Financial Services Authority's handling of the Northern Rock bank debacle was evidence of that. To succeed it needs the commitment of the organization (eg. the regulator and the law firm) and active monitoring. Since inevitably resources are scarce where are they best deployed? It's clear that most complaints come from the small law firm sector and hardly any from the large corporate sector. But when Arthur Andersen blew up after Enron, its law firm--the ninth largest in the world by revenue--had to be wound up to the satisfaction of the regulator.

So far regulators have only had to deal with what they know (known knowns)--law firms--but with the introduction of alternative business structures (ABS) in September 2011 they will be faced with known unknowns. Tony Williams, who was head of Andersen Legal when it had to be wound up, sketched a future where law firms wouldn't necessarily have to travel the ABS route or take external capital, but they had to be absolutely sure about what direction they would take. They could not afford to ignore this movement. Those that did elect to take external investment from private equity funds would find their management and decisionmaking processes rigorously challenged and audited. Moreover, their remuneration, if lockstep, would be overhauled as their billing was changed from hourly billables to fixed price or value billing.

Jon Trigg, A4e, spoke about the opportunities that existed in the individual end of the legal services market. He gave an example of A4e's work in its partnership with the Community Legal Advice Centres in Leicester and Hull bringing a range of legal services including telephone legal advice under one roof, in conjunction with a law firm. He demonstrated that innovation was not limited to the corporate sector of legal practice.

Legal Process Outsourcing (LPO) was described as a player that could truly exploit the legal services market. Mari Sako explained that LPOs were now beginning to move from low end, commoditized legal work into more high end work. With this is coming a new approach that sees LPOs forming ABS with law firms overseas and in India. In other words, LPOs will buy law firms. What LPOs have is the potential to colonize legal services in the way Apple did with combining hardware, software and music--iPod, iTunes, iPhone, etc. Their ability to take this road is because they are not constrained by the conventional wisdom of what law practice or the legal services market ought to be.

To remind you, if you want more information contact Alex Roy at the Legal Services Board. The board is committed to opening up research in this field and making all its research available via its website. They can't be any plainer than that.

The spaceship has landed and now it's time to contact the aliens.....

The Future of Legal Services

The Future of Law

I received an email from an "integrated communications specialist" telling me about some new research on the legal profession. Legal recruiters, Badenoch and Clark, commissioned research on how associates and partners see the future of law and legal practice.

The expectations of law firm partners and their associates differ on a number of management issues, ranging from defining the skills required for future legal talent to succeed to how assistants should be paid and the challenges both groups will face in five years’ time...[and] relationships between associates and partners [are] coming under increasing strain.

The survey is based on a sample of 900 lawyers. It's clear among lawyers the recession has upset typical career routes. And interestingly in answer to where the responsibility lies for developing solicitors by 2015, the two main institutions are private practice firms and solicitors (61% and 32%). The academy is marginalized at between 3% and 6%.

This is reinforced by the skills that lawyers are considered to need now and in the future. They are:

Legal knowledge is fourth on the list. None of the other skills, I believe, are taught in law schools. (Which raises the question: what are law schools doing?) By 2015 generalist legal knowledge is replaced by "niche technical ability". This is another way of saying specialization and here associates were wary. Those who worked in structured financial products found themselves in receipt of pink slips and P45s and it seems instead of retraining lawyers partners would remove them. Knowing that one is at the mercy of the whims of the market in this way is a strong disincentive to over-specialize and associates expressed a strong desire to be generalists. But partners want them to specialize.

The survey lists nine areas of impact on the legal profession by 2015. They are ranked thus:

In my view the ranking of this list represents a limited state of knowledge on behalf of lawyers. I would have thought that the Legal Services Act and alternative business structures would have registered higher both now and in 2015. But it is good to see how the impact of globalization has been incorporated into their thinking. What lawyers aren't able to do is synthesize the effects of globalization and ABS and the Legal Services Act. The sum of their combined effects is going to be inordinately powerful.

My perception of what is taking place is that lawyers--both partners and associates--are somewhat aware of the changes coming through the legal profession. But they are abysmally ignorant about changes outside their narrow ambits. Lynne Hardman, in an article attached to the report, says the legal profession is in an analogous position to management consultants and advertising companies 30 years ago when they went from being fragmented to mega-concentrated institutions. Perhaps law will go the same way, but not necessarily. Only hindsight is going to tell us that.

A website to encourage discussion has been set up at www.future-lawyers.co.uk.

The Future of Law

Shopping Around for Lawyers?

Jon Robins at Jures has produced a research report, entitled "Shopping Around", on what consumers want from the new legal services market. (HT to the Times.) It's based on a YouGov survey of 2000 adults in England and Wales. The research is therefore prospective examining what consumers might want after the alternative business structures come into play in September 2011.

Asked if they would prefer to buy their legal services from Tesco, Marks & Spencer, Barclays Bank, or Virgin, consumers plumped in the main for Marks & Spencer over the others. But don't think this was an overwhelming win as only 14% were drawn by a known brand.

According the research the prime criteria for consumers were quality of service and fixed prices (60% and 35% respectively). Brand name and cheapness scored low.

Before lawyers think they are now coasting to an easy life post-ABS take note of the question:

• Have you ever sought legal advice from a lawyer or solicitor? If the answer is 'Yes', in your opinion did that advice represent good value for money?
• Answer: Almost half of clients felt their experience of lawyers represented poor value for money.

Since this is based on something which doesn't yet exist, if anything it tells us that consumers are in the dark about the changes coming down the line. Only one supermarket is offering legal services, the Coop, Its website is not easy to navigate nor is taking off.

I would imagine that if Tesco and Marks & Spencer do offer legal services it will be as part of a package, maybe rolled into a financial services offering which they already do via their credit cards and insurance policies. Legal services in themselves are not an inspiring buy: they are approximately on the same level of utilities. You need them but you resent the prices charged. So it might be possible for the supermarkets to market these services more attractively than they are at present.


The Jures research does show that this is not an easy one-way drift for Tesco law. It will have to work hard if it is to wean consumers away from traditional suppliers. The research also shows by implication that for lawyers to remain in the game they are going to have to improve their services, retool their approach, and radically rethink how they charge for their work. None of this is too difficult if they can think imaginatively.


Well, they have 15 months left to do it in. That's when the ABSs start. Start thinking!

(

(Thanks to I Flash Ready)

Shopping Around for Lawyers?

The Law Firm Has Defaulted on Its Bonds?

Anthony E. Davis of Hinshaw and Culbertson LLP in New York sent me details of the $125 million bond issue by Dewey and LeBoeuf, which is over-subscribed. Now in the US there is nothing like the Legal Services Act 2007 that enables external investment in law firms. In fact the professional rules expressly prohibit non-lawyers having an interest in a law firm.

Anthony then asked: "Can somebody explain to me why this is different (or should be differently regulated) from raising equity capital?" (ie. as envisaged in the Legal Services Act.)


Well, I suppose the obvious answer is there's no equity. But that's not satisfactory. Imagine if the firm defaulted and had to be restructured. Who would own what, then? Would there be a debt-for-equity swap? Hardly.

The bondholders must be very confident. But then only a handful of firms have gone bankrupt...recently.

I think Anthony is right, Dewey and LeBoef has put itself in hock to outsiders. But as one colleague has said, "Debt be debt and equity be equity. Would it be any different if a firm defaulted on a loan?"

The Law Firm Has Defaulted on Its Bonds?

The Legal Services Board Has Spoken

The Legal Services Board has announced that the first  Alternative Business Structures will be able to apply for licences in mid-October 2011. For English lawyers this will be the dawning of a new age. For the Master of the Rolls (the head of our civil appeals court) this is the slippery slope to the fusion of barristers and solicitors. Maybe, or maybe the differences will be less defined. Whichever way it goes specialization will take care of what skills are needed.

The LSB quotes some interesting statistics from the Office of National Statistics on the legal profession.

The legal profession currently consists of some 16,455 barristers, 112,246 solicitors and 12,200 individuals authorised to operate in other aspects of the legal profession such as conveyancing. The sector has been valued at £25.97 billion per annum. In total the legal sector employed 323,000 individuals in 2008. [ONS]

With this kind of money and the numbers of people involved in legal services, there is plenty of incentive for some creative thinking in this future market. Now, question: will it be a matter of who gets there first or will the fast second ultimately win?

The Legal Services Board Has Spoken

Let a Thousand Flowers Bloom...Already?

(Thanks to RalphMag)

It was only a few days ago that I was speculating how local governments and their legal departments would respond to the opportunities raised by the Legal Services Act 2007 and Alternative Business Structures (ABS).

We don't have to wait that long. In today's The Lawyer it was reported that Kent County Council's legal department (mentioned in the previous post) has formed a quasi-joint venture with a regional law firm, Geldards, to "create a single brand for public sector work capable of taking over local authority legal departments." The new "structure" will be called 'Law:Public'. It is clear that Law:Public aims to take over as much work as possible from the legal departments of local authorities. Local authorities could then close down or hive off their legal departments. To what extent the loss of local specialist knowledge will matter is an open question.

Since the new rules on ABS haven't been formulated yet, there are questions over this operation but they are unlikely to be challenged. To ensure a level of compliance with Law Society rules the two elements will offer different rates. KCC will charge at £90 an hour and Geldards will drop a £100 off its normal hourly rate to £150.

The success of ventures like these will depend on how local authorities begin to re-arrange their legal spend in the light of the financial crisis that is now hitting the public sector. Birmingham City Council has opened its own legal panel to other local authorities that want to access its law firms rather than recruit their own panels. For example, Hackney council in London only has barristers on its panel so the open Birmingham panel gives Hackney access to solicitors. The Lawyer also mentions that "dozens of authorities in the North West, North East and South of England are teaming up on a regional basis to access advice more cheaply through joint panels."

Coda: on the same front page of The Lawyer is an item describing how Outer Temple chambers (barristers) have set up a company to target international work. The OT barristers will be its shareholders. Once the new ABS rules are implemented then this company could start doing domestic work as well as international and generate work for non-OT barristers who could also become shareholders. So, we shall be seeing barristers listed on the Stock Exchange.

We've come a long way since a former Lord Chancellor, Lord Hailsham (bless him), enunciated, "A solicitor is a man of business; a barrister is an artist and a scholar."

Let a Thousand Flowers Bloom...Already?

Shaking Up the Legal Profession

(you know what this is...)

Whether the legal profession in the UK is screaming for pleasure or because of the agonizing pain is open to interpretation after two announcements today.

The Legal Services Board announced and published its consultation paper on alternative business structures, titled, Alternative Business Structures: Approaches to Licensing. It's 113 pages long so I haven't read it yet, but the summary says:

The paper proposes removing restrictions that have, until now, prevented non-lawyers from owning legal service businesses. The new rules will mean that lawyers will have new freedoms to provide their services alongside services from non-lawyers, and for existing legal practices to attract new external investment.

A robust framework of consumer protection, professional competence and commercial integrity is at the heart of proposals. The LSB is currently consulting on guidance to govern the licensing of these new models of service delivery. There are three key protections.

• a test to ensure that non-lawyer owners and managers of new forms of legal practice are fit and proper;

• the introduction of two new roles in every new firm: the Head of Legal Practice and Head of Finance and Administration who will ensure compliance with licence requirements;

• a widening of the complaints handling system to deal with complaints about firms that do not deliver legal services in isolation but instead offer these alongside other services (for example, financial services) whilst ensuring access to the Office for Legal Complaints.

The new framework aims to ensure that lawyers and non-lawyers alike have the commercial freedom to provide legal services to consumers in ways that harness commercial creativity, maximise business efficiencies, embed professional ethics and meet consumer demand.

It has the potential to allow consumers to access their legal services in a variety of new different ways, for example as a part of a 'one stop shop' with other professional services such as insurance, tax advice and accountancy, or through existing legal practices diversifying and developing with the benefit of external investment.

The guidance announced today sets out principles that new ‘licensing authorities’ will be expected to regulate in accordance with, anticipating that the first licences will be issued by mid 2011.

The responsibility for ensuring that current restrictions on individual lawyers preventing them from developing new forms of practice lies with the eight Approved Regulators overseen by the LSB.

The second piece of news concerns the Bar. Its regulator, the Bar Standards Board, has decided, apparently (decision due 19 November), to permit partnerships between barristers and with others. Frances Gibb of the TimesOnline reports:

Hundreds of years of tradition may be ditched today when the ban on barristers joining in partnership with other professionals is lifted.

The decision, to be taken at a public meeting by the Bar Standards Board, the profession’s regulator, has provoked furious controversy because key papers have not been released in advance.

At present barristers cannot form partnerships with each other or with solicitors, and neither can form partnerships with other professionals such as accountants or surveyors. The Legal Services Act paves the way for a complete shake-up in the legal market and sweeps away current restrictions.

Of course the problem with Munch's screamer was solved by its theft. But I don't think anyone is going to steal away the Legal Services Board or the Bar Standards Board just yet. Lawyers will have to adjust and it's not that difficult. The 21st arrived a while ago.

Shaking Up the Legal Profession