Reinhart Boerner Van Deuren s.c. law firm is currently seeking a Research Specialist/Librarian. Responsibilities include providing reference and research services to internal clients. Other responsibilities include business development research, presentation of research training, intranet development and some technical services. Required…
Posts Tagged ‘Business’
North Carolina Bar Regulates Legal Cloud Computing
02
Jun
A proposed Ethics Opinion of the North Carolina Bar that provides guidelines for attorneys using cloud computing services, commonly known as SaaS (Software as a Service), contains language that is troubling because of its potential impact on solos and small law firm practitioners who are creating virtual law practices. The Bar is soliciting comments prior to making the Opinion final. Here are some comments for consideration.
The Opinion states that to comply with the attorney’s duty to keep client data confidential there should be:
"a separate agreement that states that the employees at the vendor’s data center are agents of the law firm and have a fiduciary responsibility to protect confidential client information and client property."
DirectLaw is a SaaS vendor that hosts law firm data at a Tier IV Data Center that implements the security controls that a bank or major financial institution uses. The idea that our data center would enter into an agreement that would make its employees agents of a law firm is not realistic. There is not sufficient consideration to expose the Data Center to this kind of liability, and there is no way that they would modify their terms and conditions to meet the needs of a single SaaS vendor. I doubt that counsel for the Data Center would ever approve such language. The Data Center would just tell us to take our business elsewhere. Amending the contract terms just for SaaS vendors that service the legal industry is not likely to happen.
There are other approaches to providing assurance to law firms that client confidential data is secure and less burdensome.
I think a better guideline would be to suggest or require that SaaS vendors host their data at a data center that is a Tier IV Data Center. A Tier 4 Data Center is one which has the most stringent level requirements and one which is designed to host mission critical computer systems, with fully redundant subsystems and compartmentalized security zones controlled by biometric access controls methods. The Data Center should also be SAS 70 certified. The Data Center should also have PCI DSS certification if credit card data is stored within the Data Center. With these safeguards in place, a law firm should be considered to have undertaken reasonable due diligence to satisfy the obligation to insure that client data will remain confidential.
There are other problems with the North Carolina opinion. Another guideline:
"requires the attorney to undertake a financial investigation of the SaaS vendor: to determine its financial stability."
What does that mean? I am not about to divulge our private financial statements to just any lawyer who inquires. How is it relevant? If there are provisions for data capture and downloading data that is stored in the cloud, and the law firm has access to that data, what difference does it make if the SaaS actually goes out of business?
It would make more sense to simply require that a SaaS vendor carry Internet liability insurance for the benefit of its law firm clients. Law firms will have problems securing Internet Liability Insurance to cover data loss. Data loss as a result of a Data Center outage is not normally covered under a law firm’s malpractice policy. For solos and small law firm’s securing this kind of coverage would be a burden and cost prohibitive. It makes more sense to require the SaaS vendor to secure such coverage and make its law firm subscribers a beneficiary of the coverage.
Another guideline states that:
"The law firm, or a security professional, has reviewed copies of the SaaS vendor’s security audits and found them satisfactory."
How much does such an audit cost? Can solo practitioners afford such an audit? Who qualifies as a security professional? I think this requirement will act as deterrent to solos and small law firms who are seeking cloud-based solutions that they can use in their practice. I think that a less costly and more effective solution would be for an independent organization to issue a Certificate of Compliance to the SaaS vendor indicating that the SaaS vendors has satisfied or complied with well recognized standards. Like the Truste Certificate in the privacy area, this would give solos and small law firms this would provide stamp of approval that minimum standards have been satisfied. This would move the cost burden of undertaking due diligence to the SaaS vendor, rather than to the solo or small law firm practitioner.
Another guideline states:
"Clients with access to shared documents are aware of the confidentiality risks of showing the information to others. See 2008 FEO 5."
This guideline should be clarified because it is not clear what "shared documents" means. This kind of statement is likely to scare clients into thinking that a law firm that stores client data on the the Internet is putting the client’s data at more risk than storing the data in a file cabinet in the lawyer’s office.
As the American Bar American, through its Ethics 20/20 Commission, and state bar associations adapt ethical rules to deal with the delivery of legal services over the Internet, it is important to consider that the burden of compliance may have a different impact on solos and small law firms, than on large law firms. The rules should not act as a barrier to solos and small law firms exploring new ways of delivering legal services online which are cost effective for both the law firms and their clients.
For a similar point of view see Stephanie Kimbro’s blog post on the same topic.
Disclosure: DirectLaw is a SaaS vendor that provides a virtual law firm platform to solos and small law firms.
How Much is Legal Advice Worth?
25
May
One of the winners of TechCrunch Disrupt Hackathon is a new, yet to be launched, legal document web site called, Docracy, The idea is that members will contribute their legal documents to an open source site so that there would be a basis for comparison between "open source" documents and the document that the member needs for their business. The theory is that by comparing documents, with the document that the member has on hand, there would be a basis for comparison, resulting in an informed decision, without the cost or benefit of legal advice.
In this model, legal advice from an attorney is worth zero. The model is designed to eliminate the attorney from the transaction.
The idea was developed by mobile app developers Matt Hall and John Watkinson ,from Larva Labs, who were faced with signing an NDA with a client and were unsure of some of the terms and concluded that the cost of legal advice was either unnecessary or prohibitive.
This is another example of the resentment that the average consumer and small business person has towards the legal profession resulting in the rise of non-lawyer legal form web sites such as LegalZoom.
Another example of an open source legal document repository is Docstoc which we have used as a research source. It is useful for us, because as lawyers we understand what we are reading. I think simply accessing raw documents as a consumer would be a daunting exercise, although I am sure that many consumers and small business use the site.
The problem with any legal document web site as a source for creating binding legal documents is that the use of a particular clause may be rooted in case law in a particular jurisdiction.
Without understanding all of the implications of using particular language in an agreement, the "non-lawyer" moves into a danger zone, because he or she has no idea what they are signing.
A better alternative is a "self-help" book from Nolo that contains both legal forms and explanations of the implications of each clause, but that often involves reading and understanding a 300 page book, which is beyond the attention span of most consumers.
Another solution is an automated document with extensive help screens that explain the implications of choosing one clause over the other.
A third alternative, is to purchase "unbundled and limited legal services" from an on-line law firm for a fixed price with legal advice bundled into the transaction. In that case you get a certain level of accountability and guarantee that the legal advice is correct for the user’s individual situation.
See for example the firms listed at DirectLaw’s legal document portal , where you can access legal forms for free, or forms bundled with legal advice for a fixed fee.
You don’t get legal advice from a legal forms web site or a LegalZoom for that matter, which can be a major limitation depending on the complexity of the document or the transaction. Without annotations that explain the significance of particular language in an agreement, the non-lawyer is stumbling around in the dark.
Nevertheless, I don’t doubt that consumers and small business will find this a popular site, despite its limitations. Caveat emptor!
Nolo is Acquired by Internet Brands as Part of Legal Roll Up
01
May
After 40 years of leading the self-help law movement, Nolo, is being acquired by Internet Brands an advertising driven Internet company. Nolo was created by two frustrated legal aid lawyers, Charles (Ed) Sherman and Ralph (Jake) Warner, who wanted to figure out a way to help the thousands of consumers with their legal problems who could not afford an attorney and were turned away by legal aid because their incomes were too high.
Based in Berkeley, California, the center of the counter cultural revolution of the 1960’s, Nolo assembled a group of radical lawyers, editors, and writers who were determined to do something about a broken legal system where 90% of the US middle class were priced out of the legal system. Championing legal reforms that would make the U.S. justice system accessible to everyone, the company has seen these reforms become mainstream in the US.
Courts now offer their own automated self-help legal forms, legal aid agencies publish state-wide legal information web sites and also distribute automated legal forms, legal form web sites give away legal forms for free as a way to generate traffic, small claims court limits have been raised in many states, and lawyers are delivering "unbundled legal services" and creating virtual law firms, figuring out ways to deliver legal services online for a fixed and affordable fee.
Its ironic that Nolo is being acquired by Internet Brands, for an amount rumored to be in the range of $20,970,000, by an advertising company that is focused primarily on generating leads for law firms through their directories and advertising properties. How does self-help law fit into this business model?
The amount being paid is little more than one times revenue — not exactly a premium. Although, Nolo publishes Willmaker and several other excellent web-based legal software programs, it is still primarily a book publisher. In its hey day, before the Internet penetrated almost every household in America, Nolo self-help law books were the primary source for accurate do it yourself legal information and forms.
As the web expanded hundreds of legal information and legal form web sites also emerged, plus national brands such as LegalZoom. These web-based alternatives also provided legal solutions without the need to use a lawyer — the same need that Nolo was meeting. Except that instead of reading a 200-300 page book in order to get to a legal solution — web-based applications delivered a legal solution more efficiently, faster, and at less cost.
Nolo has migrated many of its legal forms online, too little and too late, and except for a few major products, non-automated forms. Here is another example of a print publisher whose business, despite the excellence of its product, has been eroded by the Internet.
It is well known that Nolo’s book business actually declined during this recession and growth has been flat. The fastest growing area of Nolo’s business is their Lawyer Directory. This is ironic for a company that prided itself in developing self-help legal solutions that don’t require the assistance of an attorney.
The challenge for Internet Brands will be to figure out how to unlock the assets buried within Nolo’s vast collection of self-help law books and turn these assets into web-based applications that can be distributed over the Internet. It remains to be seen whether the quality of Nolo’s self-help legal content will deteriorate under the management of an advertising-driven company that measures results in page views and unique visitors.
Internet Brands, previously a public company, was recently taken private private when it was acquired by Hellman & Friedman, a private equity firm, based in San Francisco, in December, 2010. Internet Brands has acquired over 70 vertical web sites in areas ranging from travel to cars to real estate. Internet Brands derives more than 70% of its revenues from advertising on its portfolio of web sites.
In December, 2010 Internet Brands also acquired ALLLAW.com , a consumer legal information portal and AttorneyLocate – an Attorney Directory Service. Both of these web sites are relatively weak properties. Compete.com shows that in March, 2011 Nolo had 498,769 unique visitors ( an 8% decline for the year), ALLLAW.com had 190,069 unique visitors, (for the of March, 2011); AttorneyLocate.com was especially weak with only 18,277 unique visitors (for the month of March, 2011). Internet Brands also owns ExpertHub, which in turn manages web sites in verticals markets such as dentists, plastic surgery, accountants, tummy tuck, and of course lawyers. The ExpertHub site for lawyers only generates 96,289 unique visitors a month (March, 2011), so I wonder if that level of traffic is high enough to support their advertising rates.
There is irony in the fact that LegalZoom, a company that prides itself on offering legal solutions from a non-law firm generates more traffic than any of the sites mentioned above at 889,762 unique visitors in March, 2011, trailing only Findlaw and Lawyers.com, (both of which offer similar services as the Internet Brands properties). With the traffic that LegalZoom gets, maybe LegalZoom should consider creating their own lawyers directory for consumers who need just a bit of legal advice to go with their forms to keep them on the right track? I wonder what solos and small law firms would think if LegalZoom moved in that direction?.
It will be interesting to see how Internet Brands integrates these legal properties to leverage the assets in each acquisition as its tries to compete with the likes of Findlaw and Lawyers.com . It will also be interesting to see whether the quality of Nolo’s self help legal content deteriorates under the management of an advertising company that measures results in impressions, clicks, and unique visitors. If Jake Warner, the present CEO stays involved, I am sure the quality of Nolo’s products will remain "top of class."
It’s an odd mix, –the best in class self-help legal book publisher with an excellent reputation, with some less than best in class lawyer directories and a legal information web site. Only time will tell whether this combination will work. (Although Internet Brands may intend to run each of these properties as separate brands, which would help Nolo maintain the quality of it self help legal content).
How Does the IRS Treat Registered Domestic Partners?
14
Apr
Before 2010, the IRS treated Registered Domestic Partners (RDPs) who reside in community property states like Washington as single people. For tax year 2010, the IRS has changed its policy and now treats RDPs more like married couples. Attorney Elaine G. DuCharme wrote an article for the April 2011 King County Bar Bulletin called, “New IRS Rules for Registered Domestic Partners,” which points out the changes in the tax code and what they mean for RDPs. This is an overview of that article for people who are in a Washington RDP or are considering registering.
The Old Rule.
Before 2010, people who were in a Registered Domestic Partnership would each file a separate federal tax return, report only their income, and only be entitled to claim their credits and deductions. Basically, the IRS treated RDPs like single people. This was despite Washington’s Registered Domestic Partnership Act which extended community property rights to RDP’s as of June 11, 2008.
The New Rule.
The IRS has changed their rules for RDPs in Washington effective with the 2010 tax returns. People who are in an RDP still file individually, but now each person reports half of the combined income of the RDP and takes half of the combined total credits for income tax withholding. “Income” includes both wages and income from community-property assets. These rule changes also allow taxpayers to amend tax returns filed in 2008 and 2009, though they do not require amendment. If one taxpayer amends, the other must do so as well.
What is or isn’t community property is still being sorted out and is likely to change as the IRS refines their new rules. According to Ms. DuCharme’s article, withdrawals from IRAs and Coverdell Education Savings Accounts are treated as separate income, but withdrawals from pensions (including military retirement, civil service retirement and FERS retirement plans) could be treated as community property. Income from a community business is community income, but the self-employment taxes are only imposed on the partner who is carrying on the business. If the property was acquired before the couple was registered or before June 11, 2008 (whichever was later) it will be considered separate property unless it was clearly converted to community property via a quit claim deed or agreement.
Effect of New Rules.
There is bound to be a good deal of confusion about how these new rules affect you and your partner. If you are registered, should you stay registered? If you aren’t registered, should you take that step? What does the IRS consider to be separate property and what is community property? Should you and your partner enter into an agreement stating that property is or isn’t community property? Is the new rule going to save you and your partner money or end up with you paying more taxes? Do you and your partner need to amend your tax returns? If so, how far back do you need to go? These are all very good questions and should be answered by a tax professional and attorney who are fluent in the new IRS rules as well as the RDP Act.
Ms. DuCharme’s article can be read here. If you have questions, feel free to call Pro Se University at 877.776.7310.
60% of UK Survey Respondents Said They Would Buy Legal Advice From National Brands
10
Mar
YouGov, a research firm based in Great Britain, in a survey of consumer preferences for legal services recently reported that 60% of respondents said they would buy legal advice from brands like Barclays, AA, Co-op and Virgin. The report states that “Law firms build their business on their reputation not on their brands and, in a highly fragmented market, recognisable legal brands are few and far between. The large non-legal brands could follow the Co-op’s example and build a strong presence relatively quickly in a market where no strong brands currently exist." In the US there are no national legal brands that serve consumers directly, except for LegalZoom, which isn’t even a law firm. It would be interesting to see what would happen if nationally branded networks of law firms emerged to service consumers with a better value proposition than the typical local solo or small law firm practitioner.
The study also asked about online legal services: 34% of respondents said they would be more likely to choose a law firm that offered the convenience of online access to legal documents over one that had no online capability; 22% disagreed and 37% neither agreed nor disagreed.
Younger males were the most likely to choose a law firm with online services and access: 44% of 25-to-39 year-old males (and 40% of such women), along with 40% of 16-to-24 year-old males, would choose a law firm offering online access to documents over another law firm.
There is obviously a generational shift happening. As a younger generation matures to the age where they have legal problems, their desire to deal with counsel online becomes a preference.
LawPivot: Another Legal Advice Web Site
29
Jan
Another interesting start-up has emerged out of Silicon Valley to provide crowdsourced legal advice to other start-ups for free.
Vertical Q&A web sites seems to be the next new thing among venture capital investors. Even Facebook rolled out this year a crowd-sourced Q&A service.
LawPivot, a legal Q&A web site founded in 2009, hopes to fill a niche by providing legal advice to the founders of start-up and early stage high-tech companies based in California at a legal fee they can afford — FREE. Legal advice is provided by an experienced network of high-priced business law attorneys, recruited from the top 200 hundred or so law firms, who hope to pick up new clients by entering into discussions by providing free legal advice services to start-up companies.
Free legal advice or the “free consult” has been employed by lawyers for years, pre-Internet, as a tried and true marketing strategy for acquiring new clients. Now many lawyers are beginning to offer free legal advice online from their web sites directly. See for example, VirtualEsq.Com . By next year there will be hundreds of these free legal advice services offered directly by lawyers from their web sites as the virtual law firm movement begins to scale.
However, free legal advice from an individual law firm’s web site, is not the same thing as a vertical web site that aggregates answers from many lawyers, giving consumers a wider variety of responses to their particular situation.
Free legal advice online is not a completely new idea. FreeAdvice has been doing it for years, and consumers can get answers to their basic legal questions from sites such as AVVO, RocketLawyer, and JustAnswer. What is new, is that LawPivot provides through its network of lawyers “real” legal advice that applies to the client’s particular situation, as distinguished from merely legal information. And this advice is reputedly to be "high quality" given the stature of the lawyers recruited to the LawPivot network.
However, genuine legal advice, [as distinguished from “legal advice” that is characterized as “legal information” ], like any legal service, has to be delivered in an ethically compliant way requiring that the client’s information be kept confidential, that an attorney/client relationship be established, and that the attorney providing the legal advice be a member of the bar within the jurisdiction where the client is located. Presumably LawPivot is addressing these issues. The LawPivot service is presently limited to California, but the company, according to its representations, plans to expand nationwide.
Although the company recently raised $600,000 from Google Ventures, the venture capital arm of Google, after a $400,0000 round from from a group of angel investors, it will be interesting to see how or whether it survives. At this point, neither the clients are charged for legal advice, nor are the participating attorneys charged an advertising fee. So there is no revenue, and apparently no business model. However, I doubt that the investors thought they were making charitable contributions, so there must be a business model lurking in the background somewhere?
Unfortunately, the only business model that is ethically compliant in the US, is one where the participating lawyers pay an advertising fee to play (get listed) and get exposure. Splitting legal advice fees between a law firm and a non-law firm , is a big “No, No” and an ethical prohibition that exposes the participating attorneys to bar sanctions which could lead to disbarment. Perhaps because Google is now involved as a major backer of LawPivot , and the company is planning to move to the GooglePlex campus start-up incubator, "they can do no wrong.!"
Many other Western common law jurisdictions, like the United Kingdom, have abolished the division of fees, but the rules against splitting fees with non-lawyers remains sacrosanct in the US, on the theory that splitting fees would compromise the independent judgment of the attorney. However, in the UK, lawyers are permitted to work for a profit-making company and provide legal advice directly to consumers, and no one seems to be complaining about compromised judgment. [ See: FirstAssist in the UK for an example ].
Charging clients an administrative fee to “use” the web site, as an alternative revenue source, has been tried before in an earlier Internet era, and it failed then. [ e.g. AmeriCounsel ]. I doubt that this model will work today when consumers are expecting everything on the web to be for free.
I think it is a good sign that innovation is happening in the legal industry, and that private capital is finally looking for a way to get a return by investing in the delivery of legal services. [See: Total Attorneys Receives Multi-Million Dollar Investment ].
I would like to see companies like LawPivot thrive, but at this point I don’t see the juice. Are advertising revenues sufficient to make this venture sustainable, or has LawPivot figured out another legitimate source of revenue that doesn’t violate US ethical prohibitions? Only time will tell.
What Lawyers Can Learn From LegalZoom
30
Sep
Unless you’ve been asleep for the last five years, you have probably heard of LegalZoom, the California-based, non-lawyer legal document preparation company that claims it has delivered over 1,000,000 wills to consumers, and that it is the largest incorporation company in the country.
LegalZoom is only one of hundreds of Internet-based legal form web sites that have emerged during the last 10 years and which are eating away at the market share of solos and small law firms. LegalZoom has been challenged by some state bars with the unauthorized practice of law, but hasn’t lost a case yet. They are serving thousands of customers who ordinarily would be served by solos and small law firms. They must be doing something that is in demand because they continue to grow at the expense of solos and small law firms.
LegalZoom, and non-lawyer legal form web sites like it, have a business model that consists of the following elements:
- A legal service delivered purely over the Internet;
- No physical offices, and thus no extensive rental costs to pass on to customers;
- Limited services offered at a fixed price that can be easily compared with other providers including law firms;
- The use of web-enabled document automation technology to reduce costs and increase productivity;
- A secure customer portal where clients can execute legal tasks in their own personalized web space;
- Access on their web site to thousands of pages of free legal information on hundreds of subjects;
- Money-back guarantees to comfort consumers; and
- Reliance on informed consumers to do part of the work, often called co-production, such as filing their own documents or executing their documents on their own based on provided instructions to keep costs down.
Consumers don’t seem to care that they are not dealing with a law firm. As lawyers, we know the service they are selling is risky for consumers, but for consumers it delivers a “good enough” result. LegalZoom would not be growing at this fast a rate if they weren’t offering something that consumers want and value.
How to Compete Against Legal Zoom and Other Non-Lawyer Providers
In the new, competitive environment that solos and small law firms face in the current economy, the keys to law firm survival are to expand the strategic options available by opening new client markets, reducing the cost of services, and delivering legal services in a way that distinguishes your firm from other firms in the pack. These strategic options should be mixed with more traditional approaches to differentiation such as specialization within a niche practice area.
It is time for solos and small law firms that offer personal legal services to the broad middle class to rethink their law firm business models. There are many opportunities for incorporating some of the elements of the LegalZoom business model into a more traditional law practice.
To name a few:
- Consider offering "unbundled" limited legal services at a fixed price, both on-line and off-line;
- Leverage a reputation in your local community and a physical office into an on-line brand that is both local to your community and extends throughout your state;
- Add virtual law office functionality to your web site so that your clients can have the option of interacting with you on-line;
- Figure out ways of using Internet-based technologies, such as web-enabled document automation to strip out costs from your overhead structure increasing profitability;
- Figure out how to segment the market offering lower priced services for more routine matters in order to build trust so that when a client has amore complex problems they will turn to you for assistance;
- Emphasize all of the advantages of using an attorney over a non-lawyer forms provider in your marketing materials and your elevator speech. Click here to see one such comparison.
- Use web-based technologies to respond to both prospects and clients within hours rather than days.
- Reduce the perceived risk that consumers have in retaining a lawyer by increasing transparency and structuring forms of performance guarantees.
- Adopt project management technologies to better estimate costs and fees on more complex projects, translating that data into communications that clients understand.
The current depressed economy and its affect on the broad middle class is not going to change tomorrow. It is likely that solos and small law firms, will have to adjust to new pricing and market realities in the future as competition from non-lawyer providers of legal solutions continues to increase. Large law firms serving large corporations may be immune from these developments, at least for a few years any way, but the fact that Big Law is changing relatively slowly should not mask the rapid changes happening to solos and small law firm practitioners that serve consumers and small business.
I heard a report the other day that the volume of wills and estates practice in one state declined by 50% during the past year. I predict that this trend will continue and not reverse itself, despite any improvements in the economy.
Some commentators think that the monopoly will hold. History and the experience of other countries in deregulating the legal profession suggests otherwise.
Welcome to the "new normal."
