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Future of Law Friday: Disruption in Law Is So Last Century

by Carolyn Elefant on March 14, 2014 · 5 comments

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Over at Lawyerist, Sam Glover penned a thoughtful, witty piece questioning whether the recent crop of legal technology companies promising to disrupt the practice of law, can or will actually deliver.  Sam asserts that many of these companies haven’t a clue as to how lawyers practice and consequently, they “build a “solution” to what they perceive to be a problem.” And Sam hits the nail on the head with this pithy observation:

The business of disrupting law practice is crowded field of solutions looking for problems.

Sam also wonders whether the practice of law can or should be disrupted and concludes that at best, change will occur slowly and incrementally.  And while I tend to agree with Sam’s conclusion, I also don’t view “disruption in law” as an oxymoron because our profession has experienced disruption in the past and may again see it happen in the future, even though we  don’t necessarily know what it will look like or even whether change will be driven by technology or new business models or other developments entirely. Below I list a few past developments that I view as disruptive:

Contingency Fee

According to this law review piece by scholar Stephan Landsman, the roots of the contingency fee in the United States may be traced to the early 1800s.  This is significant, for as Landsman posits:

Locating the rise of contingency fees in the early 1800s highlights their association with the strongly felt American desire to insure access to court for both rich and poor alike as signaled in the Sixth Amendment’s guarantee of the right to counsel and rejection of the “loser pays” rule. America’s early embrace of the contingency fee bespeaks a choice to allow free court access rather than accept principles of repose.

By creating what is essentially a new business model to cover the cost of legal services, the contingency fee expanded access to law to large portions of the population who previously could not access legal services because of the high cost. To be sure, the contingency fee spawned its share of greedy personal injury lawyers and unscrupulous defense attorneys but it has also lead to the evolution of new laws on safety and forced private industry to consider safety, not just profits when sending products to market.

The contingency fee also demonstrates that disruption is sometimes driven by new business models rather than pure technology. The same is true in the energy industry, my “day job” practice focus. There, solar power has experienced explosive growth, at least in part due to sharp increases in home installation. But improved technology didn’t drive the adoption of solar power; rather, it was an innovative business model, devised by clean energy entrepreneur, Jigar Shah. Prior to Shah’s innovation, the large upfront cost of solar panels, and the lengthy time required to recover the costs (in the form of savings on one’s electric bill) deterred home owners — even staunch supporters of renewable energy — from installing solar systems. But Shah came up with the idea of a third-party fronting the entire system cost and recouping payments through a power purchase agreement with the customer who would still pay less, since solar sent back to the grid would be credited against their bill.  Once homeowners no longer had to pay up front, installing solar panels became a no-brainer.  The industry blossomed and soon, distributed generation will reach enough of a critical mass to impact utility planning and force utilities to rethink their own business models.

Contingency fees had a similar impact on the legal profession. But until there’s an ethical way to provide free legal services to all (and hopefully, it won’t be by asking clients to trade confidentiality and privacy by giving up personal information in exchange for free representation), any change in the legal profession will likely be quantitive (e.g., downward price pressure) rather than qualitative or disruptive.

IOLTA Funding

IOLTA – or interest on lawyer trust accounts – is another example of a disruptive policy, which fundamentally changed the way that the legal profession funds legal services and pro bono.  Originally devised in the late 1960s in Canada and Australia, IOLTA programs direct lawyers who handle nominal or short-term client funds that cannot earn net interest for the client place these funds in pooled, interest-bearing accounts to support legal aid programs.  Although personally, I tend to agree with the unsuccessful petitioners in Brown v. Legal Foundation of Washington that IOLTA is an unconstitutional taking of client property, there’s no doubt that IOLTA programs have changed the way that legal services are funded by creating a systemic stream of revenue for legal aid programs and reducing reliance on individual contributions and grants.

Lawyer Advertising

For better or for worse, Bates v. Board of Arizona, the landmark case (brought by solo – woo hoo!)that declared unconstitutional the bars’ complete ban on lawyer advertising, disrupted the legal profession. Prior to Bates, lawyers found clients exclusively through referrals from lawyers or through the bar and participation in organizations and community activities. As a result, many individuals were limited in potential choice of lawyers while others never learned that they might need a lawyer at all. Advertising changed all of that.  And sure, while advertising continues to devolved,with cheesy, over-the-top television commercials, 1-800-HELPME lines and other nonsense like this, at the same time, it has also made it easier for lawyers to reach larger audiences, increased competition in the profession and empowered and educated potential clients while expanding their options for choosing a lawyer.

Nolo

OK, so maybe I’m partial to Nolo, the self-help book publishers who generously sponsored my site for a couple of years. Although Nolo’s since been solo as a content source for an Internet marketing company, back at the beginning, Nolo’s goal was to empower unrepresented consumers with high-quality legal information that would allow them to represent themselves – or realize that they were in over their heads and needed to hire a lawyer. Early on, the bars viewed Nolo as enough of a threat that some states went after the company (unsuccessfully) for engaging in unauthorized practice of law. Nolo didn’t disrupt the profession the way that websites and online reservations have disrupted and largely displaced travel agencies. But Nolo threw down the gauntlet by demonstrating that for many legal matters, consumers can help themselves and that lawyers weren’t necessary for all transactions.

Today, many characterize companies like Legal Zoom or Shake Legal as disruptors. Sure, they use technology to expedite or streamline the pro se process. But as I see it, Nolo was the innovator; these new companies have made quantitative improvements; whether they’ll eventually change the landscape of the profession remains to be seen.

So do I view any of today’s innovations as disruptive? Hard to say. Many of the current breed of legal tech start-ups offer new ways for clients to find or bargain for legal services, from online video to auction sites. To me, these developments are quantitative; they make current processes (like calling lawyers to price shop or looking in the yellow pages) more efficient, but at bottom they’re just another way for lawyers to sell services and for clients to figure out what to buy.

If I were pressed to pick an actual “disruptor,” I’d have to generally, choose cloud computing. Although it hasn’t really changed the profession yet, it’s set in motion numerous possibilities such as distributed law firms, virtual practices and online document gene ration. The cloud has impacted firms large and small, enabling large law firms to outsource and offshore work once performed by associates and empowering small firms to collaborate with other firms on a project by project basis.

And moving forward, I think that systems like these text-a-doctor services, if introduced to the legal profession, may disrupt the way that we treat and handle pro bono. Currently (and with the exception of IOLTA), lawyers are encouraged or compelled  to represent clients of lesser means on a pro bono basis. In my experience, however, that’s often an exercise in futility – even though the lawyer may fix the client’s immediate problem (stopping eviction or foreclosure, finalizing a divorce to an abuser, halting a collection etc…), the underlying issues that gave rise to these problems – such as language barriers, poor or impulsive judgment or lack of knowledge – persist. To truly address pro bono, I’ve come to believe that clients of lesser means actually need to build a relationship with a “lawyer for life” – whom they can contact for quick and dirty advice (should I buy this expensive car? Is this contract fair?) and avert potential problems. So if we could develop a text-a-lawyer type of site and assign pro bono clients to a lawyer for life, we’d give them access to the kind of ongoing, preventative legal service that would keep them out of trouble to begin with. I have no idea who’d pay for this (maybe a kickstarter fund and then allow firms to purchase the tech and brand it for use with their own clients), but it would disrupt our current system of providing legal services to poor and lower income clients.

True disruptions are few and far between and sometimes (as with lawyer advertising), we may not recognize them except in hindsight. Moreover, disruption – particularly in service industries (law, energy) is not necessarily driven by technology but by regulatory policy and new business models. Finally, just because something isn’t disruptive doesn’t mean that it isn’t innovative or valuable. Whether the changes in our profession today are legitimately disruptive or not, there’s no doubt that they’re invigorating our profession and challenging us to think hard about what it means to be a lawyer in a way that hasn’t happened in my lifetime. So call the changes and trends and developments what you will.  As for me, I call this an exciting and hopeful time to be a lawyer and a solo.

UPDATE – For more discussion of past advancements that have disrupted the profession, read Scott Greenfield at Simple Justice .

  • Paul Spitz

    I would list the growth of in-house legal departments as a disruption. Twenty-five years ago, mid-size and large law firms did a lot of bread-and-butter corporate work for clients. That is almost all gone. Any company of size has at least one in-house lawyer to do that work. Companies like Google have hundreds of people in their legal department. Even more specialized work is being done in-house, like patent work. This has gutted big law, as you can see from their struggles over the past 5 years.

  • Carolyn elefant

    This is a good point. I’ve seen this trend even with solos and smalls in DC where it was once common for large companies to have a regulatory attorney stationed in DC for routine filings. Today with technology, this routine work that supported many solos and smalls is now handled in house

  • Paul Spitz

    What I hope is that this creates an opportunity for the solo and smalls that provide business law services (which is what I set up practice to do in December). Startups and small businesses still cannot afford to hire in-house counsel, and the pricing and billing practices of big law firms is still targeted at Fortune 100 clients. I’m hoping that enables solos and smalls to service smaller clients at affordable rates, acting essentially as outside in-house counsel.

  • Bill

    Interesting topic. A few (non-sequential thoughts):
    1) I see very few of my clients–who tend to be large and mid-market companies–interested in anything like wholesale disruption in how they obtain legal services. Less expensive? Yes (mostly getting away from the large firm practice of overstaffing with marginally qualified lawyers, junior and senior.) More seamless? Yes (i.e. counsel portals, electronic billing, etc.) But some radical change from the traditional use of outside counsel? Not so much.
    2) And I think a lot of the traditional solo work–real estate, trust and estate, small corporate work, is still performed ably and cost effectively in a traditional manner. I think there are very few small clients who are both unhappy and care enough about “disruption” to really look for one of those radical new models. I think there is a reason those disruptors tend to pitch themselves to tech start ups, as they have in various forms since the mid 1990s (and before, for all I know). I don’t know anyone in large firms (still most if not all of my professional friends and peers, and me until last year) who feels at all worried about those “new, cool” ways to deliver legal services being a threat to them. (They are worried about small and midsize firms peeling off profitable work, and about solo and small firms peeling off very profitable regulatory and specialize niche work. And they should be worried.)
    3) I think (and a bunch of recent AMLAW and other articles and surveys seem to confirm) that small and midsize firms are getting a lot more larger company litigation and transactional work. More and more the large firms seem to be relegated to the bet-the-company stuff. And that is scary for the large firms. First, while the scope and margins of those types of matters are great, they are very unpredictable, and in aggregate, don’t offset the loss of routine transactions and cases. (I really do think that is a major reason behind the very uneven AMLAW 100 and 200 financial results from 2013, where many “major” firms have flat or declining numbers.) Second, I think you will see the small and midsize law firms moving consistently up the size chain in the types of deals and cases they get. When you do a good, cost efficient job on a $50 million deal, the client will tend to try you on the $100 million, etc. etc.
    4) Back to watching the snow.
    Bill

  • Richard Slavens

    Having a disruption law will lead them into a hard trusted industry especially with the contingency fee issue. All the past developments in law firm can be viewed as disruptive including the high cost of some legal lawyer which sometimes became one of the reasons why some victims can’t afford to have their own legal lawyer which their right to have in the first place.

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