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The Lawyer Network That Was a Lawyer Notwork: Lessons from An Unsuccessful Venture

by Carolyn Elefant on November 19, 2013 · 0 comments

in Future of Law, New Ideas

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shutterstock_133753070Four and a half years ago – when Axiom Legal was just gaining traction and Virtual Law Partners and Rimon Legal and Fisher Broyles were the only dispersed legal business models on the block, a group of eight solo colleagues and I who practiced in four different cities came together to form a collaborative of our own.  On paper, we fit the profile for this kind of new-age model– we each had a decade or more of experience in our respective fields, we represented traditionally “big firm” clients, we were familiar with each others’ work having referred cases or teamed up in various combinations before and we were all fluent in technology.  Yet, after nearly a year of research and negotiation, we were unable to consummate the venture.  Here’s what happened and some of the lessons that I took away that may be valuable for others contemplating similar enterprises.

By way of background, the impetus for the group came from one of my colleagues, a successful, seasoned litigator. He expressed a frustration at the challenges he faced in procuring business from major companies  due to concerns that his firm might lack either back-up or the capability to scale up to handle a larger matter. My colleague believed that a more formal collaboration could address these issues.

The lawyers asked to participate saw additional benefits as well.  Because we practiced in a few different cities, we saw the effort as an opportunity to expand and attract work in other jurisdictions and because we had different specialties, we anticipated opportunities to refer work to each other as well. We believed that we pool our resources for marketing which would heighten the visibility of the group as well as each of us individually.

As part of our first task, we researched possible structures – examining the Axioms and Rimons, affiliated national firms (affiliations between lawyers in similar practice areas, e.g., appeals or eminent domain – but located in different parts of the country), and even law societies like Primerus). We came across several that I viewed as a sham – either a bunch of names listed on the page with no indication that they actually engaged in ongoing relationship (which is required under ethics rules for a group of lawyers to hold themselves out as affiliates). We quickly agreed that we wanted to operate as more than just a list of names, but at the same time, we did not want to sacrifice our respective firm’s individual identities or create a situation that would give rise to conflicts.  We came up with a workable approach and our group’s excellent corporate lawyer drafted an agreement to memorialize the arrangement. We also came up with a name for our enterprise.

Then, the road blocks. A few of members practiced in jurisdictions that prohibited trade names and we could not come up with a way around the problem that fully satisfied their concerns (I am barred in New York so this posed an issue for me too but since I’m not active, I wasn’t bothered). Most of the group also hoped that we could figure out an ethical way to collect referral fees especially when different state rules applied to many of us. We came up with a couple of approaches but I am not sure if we ever resolved the issue.

Ethics issues posed an added complication but weren’t the only reason for the demise. On the practical side, we all had active practices, and our respective cases often pulled us away from following up on issues or participating in the regular organizational calls. I had also tried to use one of the (now popular) law practice management portals to create an infrastructure for document sharing, but let’s just say that it wasn’t ready for prime time back in 2009.

All told, between our busy schedules, ethics hurdles and a few other disagreements, the venture disintegrated.

So now, lessons learned and my observations on why these networks are succeeding (or appearing to)

1.  Ethics and risk. Current ethics rules don’t make these collaborations easy.  Part of that is simply the cost of doing business. We lawyers operate in a regulated industry and it’s up to us to figure out how to do what we want within the parameters of what’s permissible. In fact, that’s what I do for my renewable energy clients: leverage my knowledge of the rules to carve a path between regulation and innovation. But for lawyers, the regulatory thicket is so hopelessly convoluted, that even clever lawyers can’t develop a solution. When some states prohibit certain activity (like trade names or referral fees), the answer isn’t (as bars would prefer) to go with the most stringent requirement because that forces the lawyers in other jurisdictions to give up their rights. Ultimately, conflicting state rules inhibit cross-state collaboration.

Compounding matters, there’s little opportunity to mitigate risk. The bars’ hotlines don’t offer guidance and a request for a ruling on a proposed action can take a year to issue. Nor will states grant a safe harbor – i.e., an ability to show efforts to research the matter and simply came up short. Regulation complicates innovation, but regulatory uncertainty, which is what we have now, kills it dead.

But what’s truly troubling is that somewhat perversely, the conflicts and lack of clarity in current ethics rules wind up discouraging the very lawyers whom we’d want to innovate. In my group’s situation, one of the lawyers who wasn’t willing to take the trade name risk has a stellar reputation that he’s worked hard to cultivate as well as a thriving practice. In short, he has too much at stake to chance an ethics violation on a venture that might never work out. By contrast, a lawyer with a minimal track record and limited experience has less to lose. And while there are certainly other personal reasons that a more experienced lawyer might be averse to experimentation (already has a good thing going, huge mortgage, limited time), ethics rules shouldn’t act the deciding factor.

2. Technology.  Our group communicated by email and never reached a point of true collaboration, so tech wasn’t a problem. But as I mentioned, the law practice portals in place that now serve as the backbone of some of these network models really weren’t ready for prime time back then.

3. Desire to get it right. Our group struggled hard to come up with a structure that was more than just a website with faces listed to add bulk. I would not have wanted to do it any other way. That said, there are lots of these “affiliations” that are, indeed, nothing more than a bunch of lawyers listed on a page who have no regular communication and simply eat what they kill.

Perhaps the greatest drawback to our model, though, was that there were too many chiefs. You’d think that having a pool of talent would be a benefit, but they either have their attention on other matters or have too much to risk. I think that most of the models that succeed are started by one or two lead lawyers who have a large client to serve or excess capacity – and they bring in others on a contract basis to handle the overflow. Pretty soon, they either have some kind of loosely affiliated network or an Axiom like structure, comprised of finders and grinders. In some ways, not so different from a law firm only on a dispersed platform, and with participating lawyers happier because they have more flexibility and with clients happier because they’re paying less. Whether it’s truly a new business model or an amped-up version of the old one, I’m not sure and it doesn’t really matter so long as it works and increases the options available to clients.

Now, as for where all of these new networked business models leave solos and smalls, I’m not sure. That’s a topic for another post – though I’d love to hear your feedback in the comments.

Social Network Idea graphic courtesy of Shutterstock

 

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