Well, it’s not “day labor” but Axiom Law has created a profitable niche by provided lawyers to law firms and corporations for temporary assigments on matters. According to a recent Forbes article, we’re not talking about run of the mill…
Posts Tagged ‘model’
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!
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.
Will LegalZoom Become the Largest Law Firm in the US?
05
Jan
LegalZoom has been beta testing a concept which links its marketing capabilities to a network of law firms that offer legal services under the LegalZoom brand. With some state bar associations accusing LegalZoom of the unauthorized practice of law, it might makes sense for the company to seek deeper alliances with networks of attorneys who are able to offer a full and ethically compliant legal service. Solos and small law firms, leveraging off the visibility and prominence of the LegalZoom brand, could reduce their marketing costs and enable these firms to better capture consumers who are part of the “latent legal market” on the Internet. It could be a win/win for both parties.
Unfortunately, linking the capital and management resources of profit-making organization with private law firms is almost impossible in the United States, given the regulatory framework that governs law practice. Unlike, the United Kingdom, which is in the process of deregulating the legal profession, enabling profit-making companies, from banks and insurance companies to retail chains like Tesco, to actually own a law firm, and/or split legal fees with a non-law firm, these practices in the US are strictly taboo.
In the US, law directories can charge a flat marketing fee for a listing, but sharing legal fees with a marketing organization can get you disbarred.
During the dot-com boom around 1999-2000, a company emerged by the name of AmeriCounsel that tried to create a hybrid organizational structure similar to the LegalZoom experiment. The company sought to enable a network of attorneys to offer legal services at a fixed and reasonable price and to mediate between the consumer and the law firm in terms of guaranteeing the quality of the legal services offered. The company failed during the dot-com bust for various reasons, including lack of financing, but on the way to failure, secured some opinions from state bar associations that blessed their model and provides a blue print for hybrid delivery systems which combine the expertise of a law firm with the marketing, management, and technological resources of a non-law firm.
One such opinion was issued by the Nassau County Bar Association New York State.
The Bar Association reasoned that the AmeriCounsel scheme was permissible because:
[S]ince AmeriCounsel does not charge attorneys any fee and since AmeriCounsel does not “recommend” or “promote” the use of any particular lawyer ’s services, it does not fall within the purview of DR 2-103(B) or (D). Rather, AmeriCounsel is a form of group advertising permitted by the Code of Professional Responsibility and by ethics opinions interpreting the Code.
In this model, AmeriCounsel provided technology and administrative services to link the client with the lawyer, but the law firm made no payment to AmeriCounsel. Instead, a separate administrative/technology fee was paid by the consumer to AmericCounsel for using the web site and gaining access to the lawyer. (This is not a practical scheme in today’s web environment, in my opinion), Moreover, AmeriCounsel did not choose the lawyer. The client was able to compare the credentials of different attorneys and choose their own lawyer. Thus no legal referral was involved, which would not be permitted in New York, as only an approved non-profit organization can make legal referrals.
In my opinion, this model, forced on AmeriCounsel, by the Rules of Professional Responsibility, is cumbersome, hard to implement, and was not economically viable for AmeriCounsel. Perhaps this was one of the causes of its failure.
Almost a decade later, companies that want to enter into this kind of hybrid relationship with lawyers, have to follow the same rule structure, as the ABA Model Rules of Professional Responsibility as the rules have not changed in any significant way. changed. It will be interesting to see whether the ABA Ethics 20/20 Commission, which was set up just last year, will address these issues at all.
Perhaps there should be a “safe harbor” that enables organization’s like LegalZoom to experiment with new patterns of legal service delivery that could operate for a limited period of time in a specific state, like California, The experience would be evaluated carefully as a basis for rule and policy change. The evaluation would be aimed to see if client’s interests are compromised in any way, and whether the delivered legal service is less expensive, without compromising the quality of legal service.
Instead of creating legal profession regulatory policies that are based on the legal profession’s idea about what is good for the consumer, policy could be based on real experience and facts. Experimentation is good. It leads to change, and in other industries improvement of methods and approaches over a period of time.
Of course, I don’t believe that this will ever happen in the US, at least not in my professional lifetime.
Online Legal Services-A Revolution that Failed?"
06
Dec
Chrissy Burns, an Australian lawyer produced a PHD thesis in 2007, entitled ‘Online Legal Services-A Revolution that Failed?’, where she argued that Clayton Christensen’s theory of disruptive innovation does not apply to online legal knowledge products and that a "latent market" for legal services really doesn’t exist. Ms Burns is presently Director of IT and Knowledge Management at Blake Dawson so she brings first hand knowledge to her thesis based on her work with large law firms. In a recent review of her workby Darryl Mountain, an attorney with expertise in document automation, makes the counter-argument that Ms Burns focus is purely on large law firms and the corporate legal market and overlooks the documented unmet legal needs of the broad middle class and the disruptive response of non-lawyer providers such as LegalZoom which has served generated over a 1,000,000 wills for consumers during the past five years. Mountain cites other evidence that there is a wide and growing latent market for legal services, that Burns has overlooked. Mountain concludes that, " The legal marketplace has continued to evolve since Burns finished writing in 2007. On the retail side of law practice, the revolution is very much alive and people are beginning to resolve legal problems solely through the use of online legal knowledge products."
Mountain also argues that Burns has defined "online legal services" too narrowly because her definition is limited to knowledge products that solve legal problems without lawyer assistance or involvement. Such products are stand alone applications, such as "expert systems."
Mountain argues that the better model for thinking about disruptive change is to consider how Internet-based legal technology can work together with legal professionals to increase law firm productivity, maintain profit margins, or result in lower fees. Instead off stand-alone, legal knowledge products, Mountain argues that technology-assisted legal service is likely to become the more pervasive model in the future. Mountain writes:
"The best solutions are often those that combine people and software, whether the people are lawyers, paralegals, or outsourced personnel. "
His review and Burns’ thesis are both worth reading for those who follow developments in the delivering of legal services online.
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."
