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Archive for the ‘venture capital’ Category

Should law firms be owned by non-lawyer investors?

19 May

There has been much discussion recently in various venues about whether 5.4 of the US Rules of Professional Responsibility should be amended or revised to permit investment in law firms by non-lawyer, or non-lawyer entities, or even ownership of US law firms by non-lawyer entities. The ABA’s Ethics 20/20 Commission is circulating a paper on the subject and is soliciting comments.

Known in the United Kingdom as Alternative Business Structures (ABS), this new form of law firm organization, authorized by the UK Legal Services Act of 2007,  will be permitted after October 6, 2011. Alternative Business Structures are already permitted in Australia, where several law firms have already gone public.

Other than the State of North Carolina where there is bill pending to permit non-lawyer ownership of up to 40% of a law firm, there has been little movement in the US to make change Rule 5.4 Some hybrid models are beginning to emerge in the US,  but they are a workaround the existing rules.

There is no clear path for non-lawyer ownership or investment in a law firm in the United States, and as a result it is arguable that the legal services delivery system lacks the capital necessary to innovate and create the efficient systems that are necessary to serve not only the "latent market for legal services", but existing legal markets more effectively. Resources from Labor Law Compliance Center offer mandatory federal & state labor law posters or combination labor law posters for government business compliance.

Now comes Jacoby & Meyers, a law firm that has pioneered in changing the way legal services are delivered, filing multiple law suits in the Federal District courts of New York, New Jersey, and Connecticut against the presiding state justices in those states responsible for implementing and enforcing Rule 5.4, requesting that the Rule by overturned. The Complaint makes clear that Jacoby & Meyers "seeks to free itself of the shackles that currently encumber its ability to raise outside financing and to ensure that American law firms are able to compete on the global stage"

Click here for a complete version of the Complaint.

Andrew Finkelstein, the Managing Partner of Jacoby & Meyers, and also the Managing Partner of Finkelstein & Partners, said that "No legitimate rationale exists to prevent non-lawyers from owning equity in a law firm. The time has come to permit non-lawyers to invest in law firms in the United States,"

Now the fun begins!

Disclosure: Finkelstein and Partners is a subscriber to our  DirectLaw Virtual Law Firm Service.

 

 

 

 

 
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Posted in 2007, 5.4, Act, Competition, DirectLaw, industry, Jacoby, Meyers, of, practice, Responsibility, Rule, Rules, services, the, UK Legal Reform, unauthorized, Unauthorized Practice of Law, venture capital

 

LegalZoom is Considering an IPO

22 Mar

Apparently LegalZoom is in the early stages of planning an IPO, (going public),  according to an unnamed source at VentureBeat. Employing more that 500 employees, and having raised over $45 million in venture capital over the last few years, LegalZoom is clearly the leading non-lawyer legal document preparation web site. This is a good example of a disruptive innovation in the delivery of legal solutions by a non-lawyer provider that continues to eat away at the market share of solo practitioners and small law firms.

Focusing on a market that is not served well by the legal profession, in the same way that Southwest Airlines first targeted people who traveled by bus, rather than by air because air travel was too expensive, LegalZoom is will undoubtedly figure out a way to move up the value chain, capturing even more complex business from law firms, without actually giving legal advice.

In the United States, because the definition of what constitutes the "unauthorized practice of law" is so vague. (perhaps unconstitutionally vague),  it would seem that even though LegalZoom does not actually provide legal advice, it would be prohibited from assembling legal documents, even when the document assembly is purely software-driven. 

The reality is that bar associations have a tough case to make against a non-lawyer provider when no actual legal advice is given. UPL statutes haven’t been truly tested on the issue of whether a non-lawyer can assemble legal documents without actually giving legal advice. In Florida, when the issue came up, there was a compromise between the bar and non-lawyer providers and non-lawyers can help a consumer complete court forms as long as no legal advice is provided. It gets murky when you move beyond courts forms, to more complex transactional documents such as a will,  a living trust, or a marital separation agreement, even if the user is making the selection through a software driven questionnaire. Some UPL advocates, have argued that the selection of alternative clauses is still UPL, because a person had to "program" the clauses. There is some precedent for this position, but the State of Texas on the other hand, specifically excludes software driven document assembly from the "unauthorized practice of law., provided there there are disclaimers which state "clearly and conspicuously that the products are not the substitute for the advice of an attorney."

I think the risk portion of the prospectus will make for fascinating reading, particularly since in many states UPL is a felony. I can just visualize this language: "Investors should be aware that the company may be violating unauthorized practice of law statutes in many states, and as a result, if convicted, one or more executive officers may be required to serve time in the pokey."

In the interest of full disclosure,  Epoq US,  of which I am President, and which is the parent company of DirectLaw, also provides legal document preparation services over the web directly to consumers through a network of legal web sites    So perhaps I should be worried as well.

 
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Posted in Alan, Articles, artificial, Competition, DirectLaw, eLawyering Ethical Issues, Epoq.us, industry, intelligence, LegalZoom, nolo, Nolo.com, of, paralegal, Polaris, practice, preparation, programs, providers, responsivelaw.org, smartlegalforms.com, software, Spoon, systems, technicians, unauthorized, Unauthorized Practice of Law, unbundled legal services, venture capital, Ventures

 

Venture Capital Flowing Into Legal Enterprises: Total Attorneys Receives Infusion of Capital

22 Jan

Private capital is beginning to flow into companies that are operating at the intersection of the delivery of legal services and the Internet.

Total Attorneys, a Chicago-based company,  just announced that they received a multimillion dollar investment from BIA Digital Partners, a Virginia-based venture capital firm. Total Attorneys is most known for the marketing services that it provides to law firms and the recent ethical controversy in some states surrounding the use of pay-per-click advertising on behalf of law firms. (Apparently this controversy has been resolved in favor of Total Attorneys in every state where it was considered by bar ethics committees.)

The company plans to extend its technology assisted services to law firms by expanding its virtual law firm Software as a Service offerings (SaaS).   Total Attorneys mission is to become a leading provider of elawyering Services to solos and small law firms by providing a comprehensive suite of outsourced technology services, from marketing to web-based practice management tools to a robust client portal.

The company licenses virtual law office technology to solos and small law firms as a subscription service, that now consists primarily of a robust suite of "back-office" practice management tools. The pan is to expand the service into a more comprehensive "front-office" client portal, providing a total solution to solos and small law firms.

This expansion would entitle the company to claim that it is a leading provider in the eLawyering space  and it would compete more directly with our own DirectLaw virtual law firm platform service and other web-based companies moving in the same direction.  [ See:  Legal Vendors Cloud Computing Association ] .

The concept of "technology-assisted service" is an interesting category for  the legal industry for it describes a form of outsourcing which combines both a digitally-based service combined with human service. Thus Total Attorneys also provides "virtual receptionist services", and at one point virtual support services to bankruptcy law firms. One management solution for solos and small law firms it to out source to independent specialized companies functions which can be done more effectively and at less cost than the law firm can do itself using internal resources.

It is good to see competition heating up in the eLawyering space, which has been moribund for a long period of time.  The eLawyering Task Force of the Law Practice Management Section of the ABA was created in 2000, more than a decade ago. For many  years there was not much to report in terms of the innovative delivery of on-line legal services by law firms. The last 2 years has witnessed an explosion in elawyering industry developments as lawyers adapt to change — caused by a severe recession, widespread unemployment of recent law school graduates, and the challenges created by consumers who are seeking lower-cost and "good enough" alternatives to lawyers, [such as LegalZoom.]

Competition among a variety of vendors provides choices to law firms.  Competition focuses attention on the fact that delivering legal applications as a SaaS is emerging as a new paradigm for enabling solos and small law firms to access complex Internet technologies at a fraction of the capital cost of developing these applications internally.  Private capital moving into the legal industry will create more choices for law firms, and as a consequence more choices for consumers.

Creative legal outsourcing will enable solos and small law firms to become more productive and survive in an increasingly competitive environment.

 
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Posted in a, ABA, as, assisted, automation, BIA, Competition, digital, DirectLaw, elawyering, elawyerriing, firms, for, force, industry, Law Firm Productivity, LegalZoom, management, Marketing On-Line Legal Services, Outsourcing, Partners, portals, practice, Service, services, software, task, technology, total, venture capital, virtual, Virtual Law Firms, Virtual Law Practice, web-based, web-enabled