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How Not To Foreclose the Future of Law

by Carolyn Elefant on November 11, 2013 · 2 comments

in Future of Law

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Behold, the law firms of the future:

Lean operations powered by technology, with heavy reliance on outsourced labor and non-lawyer professionals.   Reliance on economies of scale, corporate business practices and technology to maximize efficiencies.  Laser-focused dedication to client demands for results and bye, bye billable hour. And even a little bit of outside investment, for good measure.

Guess what? The firms of the future are here — and to find them, you needn’t even look as far as the UK, where alternative business structures are in full bloom or Silicon Valley where fledgling companies are innovating new ways to provide access to justice. Nope – all you have to do is take a look at the large-scale foreclosure mill law practice that dominated the mortgage market and the future of law will hit you right in the face.

Of course, it seems so counter-intuitive. Dustin Zack’s law review article, Robo-Litigation  (March 2013) is probably the last place that you’d look to find a glimpse of the future of law.  Focused on the rise and fall of the robo-signing, foreclosure mill law practices that mushroomed in response to the collapse of the housing market, Zacks delves into the seedy side of a  volume legal practice run amuck.  These fly-by-night operations hardly resemble the slick branding and sharp logos of the envisioned firms of the future. But believe it or not, back in the day in internet time, these foreclosure mill practices were as innovative (well, perversely anyway) and ahead-of-the-curve as any of today’s future firms.

As Zacks describes (beginning at 895), the foreclosure mills”were built for speed and efficiency, not the billable hour.”  Although foreclosure mills did employ younger lawyers, they didn’t devote time to training or mentoring them. And in fact, rather than employ large numbers of associates, foreclosure mills favored lower paid staff to “drive efficiency higher and costs lower.”   In fact, one hallmark of foreclosure mills was heavy reliance on non-lawyer staff, with 90-100 paralegals for every lawyer-partner.  To further boost efficiency and deliver results on budget to clients, the foreclosure mills relied heavily on forms and technology developed overseas by third party providers. 

Some might argue that outside investment would have solved the problems in the foreclosure mills by exposing many of their questionable practices to the light of day. But in fact, most foreclosure mill lawyers had already found a way to access private capital – and it did little to deter malfeasance. From the article:

Another unexamined aspect of the foreclosure attorney misconduct is private equity firms’ increasing stake in foreclosure law firms or their ancillary businesses.

The International Herald Tribune reported “several private equity firms or entities [. . .]have stakes in the business operations of foreclosure law firms in California, Connecticut, Florida, Georgia, New York, and Texas.  involvement in the foreclosure industry began in around 2005.

The basic idea behind private equity investment in foreclosure firms, as explained by theInternational Herald Tribune, parallels the rise of David Stern. “A private equity firm [. . .] buys a wide range of services used by the law firm, like its accounting, computer data, document processing and title search documents. Then, a subsidiary of that private equity firm or an entity it controls makes money by providing those services back to that law firm or other businesses for a fee.

Zacks concludes that the risk of attorneys having professional judgment overrun by third party investors’ drive for the bottom line is an aspect of foreclosure firm practice that is troubling and warrants additional review.

Don’t misunderstand me — the foreclosure mill crisis doesn’t mean that we can’t get the future of law right. Rather, it’s a cautionary tale of what our future may look like if we get it wrong.  As we explore deregulation  as a possible solution to the problems of access to justice, we need to keep the past in mind to make sure we don’t repeat it. Because if we do, solos and smalls –who were the heros of the foreclosure mill crisis– may not be around to pick up the pieces if we get it wrong next time.

  • shg

    Excellent points. It’s not about antagonism to change or tech, but about scrutinizing in terms of its positives and negatives, its real world impact and the hole that can be dug when things go awry. Very nice to see such a fully conceived view of the potential downsides of change, and an important cautionary tale for those who want to cheerlead with their eyes shut.

  • Cliff Tuttle

    The foreclosure factory was modeled, to a great degree, after the high volume real estate settlement service. However, the quality was much less. The paralegal driven work was usually sub-par. But the firms gradually gained control of the process by greater reliance on lawyers and because the legal problems were repeating, Whether mass-production can be used in other areas of practice, where the issues are more diverse, remains to be seen.

    Cliff Tuttle
    Pittsburgh PA

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