Sunday, February 19, 2012

Turning Overheads into Profits? What To Do with Spare Lawyers Lying Around...

I'm sure I recall a cartoon that showed a group of lawyers entering a canteen and someone shouting, "Here come the overheads!"

Legal work has always been difficult to situate in the range of useful work. By that I mean do lawyers add value to deals and other matters that people are involved in or are they merely an exasperating cost that has to be borne because of regulation? Plenty of scholars have tried to analyze lawyers' work to overcome that stereotype. For example, see here and here.

Usually the approach is centred around the conventional law firm. Following the introduction of Alternative Business Structures with the Legal Services Act, this restriction has fallen away. This was brought to mind when I read about BT Claims applying for an ABS licence.

BT Claims is a motor claims management service (part of what used to be British Telecom) which handles the claims for BT's fleet of vans. 
A BT spokesperson said: "We can confirm that BT Claims has submitted an application to begin the ABS process in order that it can offer its expertise to other corporates, insurance and companies and brokers who share the same values as them and see this as an opportunity to improve their approach to the way in which they manage claims. BT is not looking to enter the consumer claims market."

BT Claims is a wholly owned BT Group company which currently provides a UK-wide motor claims management service to 35,000 corporate fleet vehicles. It handles around 4,000 at fault accident damage and personal injury claims per year, with a an average liability value in excess of £5m and around 3,000 non-fault loss recovery claims with an annual recovered value of £2.5m.
BT Claims will be a B2B business with no consumer focus. I'm sure this will be the first of a wave of such ABS, ie, B2B rather than B2C. They will be a new form of corporate legal department, only freestanding rather than a component with a firm. And this is the way to challenge the "lawyers as overheads" proposition--turn them into for profit ventures by recreating them as Alternative Business Structures.

There are other examples of where this might occur. Two years ago I commented on Kent County Council's legal department's venture with Geldards to "create a single brand for public sector work capable of taking over local authority legal departments." The new "structure" will be called 'Law:Public'. It doesn't take much to imagine local authorities hiving off their law departments as freestanding ABS. They would embody enormous expertise in the regulatory field, for example.

The print industry has been predicted as a creator of an industry-specific ABS because law firms are woefully, and expensively, ignorant of the business.

Jon Robins' report, The Big Bang Report, published in 2009 previewed some case studies including the Co-op, A4E, and DAS as ABS.

We are finally seeing the emergence of these new legal entities. The curious thing about them so far is that they are not radically new businesses evolving in the liberalized regulatory environment but rather mutations of things that already exist. It's the phenomenon of "hiving off" to re-create.

For example, both DLA Piper and BLP are spinning off outsourcing businesses. DLA Piper is launching a new ABS called LawVest* that will do something magical along the lines of "market-disrupting brand, pricing and service delivery model", whatever that might mean.

BLP is selling off its contract lawyer operation, Lawyers on Demand, but as an ABS we don't know.

What is fair to say is that none of this yet signifies the End of Lawyers(?). As one examines these ventures they all have lawyers at their heart. I know Susskind says he's looking 20 years ahead but frankly that's an illusion. Go back 20 years and then ask yourself would you have predicted the iPhone and the iPad or the rise of social media as a political force? The answer is clearly no.

Yes, legal work will change. Yes, legal education will have to adapt to the 21st century let alone reach the twentieth. But these are adaptive changes that occur in any area. Are we envisioning changes so disruptive that our known world disappears? I don't know and we can't know.

Yet legal work has remained remarkably sticky (thixatropic) in the way it has endured. So it's fair to ask if the central task(s) that lawyers do could be replaced by intelligent software, regardless of convergence. Intelligence as a rational force is amenable to cloning by machine, but often the demand we hear these days is for more emotional intelligence, compassion, perhaps, in the case of access to justice. That is not so replicable.

At least it's fun to observe even if our predictive powers are rudimentary.
* 20 February 2012 Update: LawVest has revealed its new venture which is to become an ABS. It is Riverview Law. Essentially it is a B2B venture for SMEs that need quick legal advice, all at fixed prices. Riverview details its pricing policy here, and will be using technology to keep prices down.

The only thing that's surprising about this is why no one has done it before...


Thursday, February 16, 2012

There is No Doubt...Pekes Rule!

(thanks to Seth Wenig/AP)

As readers of this blog will know I am a Pekingese devotee. My father had them and now me. I am currently Pekeless and so rely on vicarious Peke pleasure from wherever I can get it. I've just got it.

That 4 year old, 11 pound (5kg) Peke above is called Malachy and he's the best dog in the world. He's just won the Westminster Kennel Club Dog Show in the US.

The New York Times reported Malachy's win thus:
Malachy is not a speedy dog. While his six competitors sped around the ring at Madison Square Garden, Malachy moved so deliberately that he only had to make a half circuit on the green carpet. It did not matter. Beneath his long coat and lion’s mane — and behind that distinctive pushed-in face — was the club’s ultimate champion.
The judge, Cindy Vogels, put Malachy ahead of a German shepherd, a Dalmatian, a Kerry blue terrier, a Doberman pinscher, a wire-haired dachshund and an Irish setter who gave birth to 15 puppies last May (using the frozen semen of a long-dead sire) and had just returned from a year’s maternity leave.
“He’s a super dog who had a stupendous night,” Vogels said of Malachy.
Of course all this is in accord with nature and the cosmos. It is the year of the Dragon, in the Chinese zodiacal calendar, the mightiest of signs. One can only be reminded of the words of Ozymandias
"Look on my works, ye Mighty, and despair!"
I think it's time to get out the DVD of "Best in Show" again.....


Thursday, February 09, 2012

Help the Maldives

We think of the Maldives as an idyllic place for scuba diving and stress-free holidays. But it isn't.

Yesterday, the army and police joined forces to mount a coup against the democratic government. President Nasheed is missing and other government officials will meet the same fate.

The Maldivian Democratic Party has put out an urgent appeal:
We strongly condemned the violent attack by the Maldivian Police Service on President Nasheed and senior officials of the MDP. President Nasheed is being beaten up as of now in an ongoing peaceful protest in the capital Male'. Mariya Didi and Reeko Moosa and several other MPs have been beaten up and arrested. We urgently appeal to the international community to assist us in securing their release and to call upon the government of Dr. Mohamed Waheed Hassan to halt beating up of unarmed and peaceful protesters.
 My former PhD student is concerned for her family's safety. She says
I am from the Maldives and at the moment the Maldives is going through a very tough time. The Maldives was a dictatorship for 30 years (1978-2008). And in 1980 my father was sentenced for life in jail and tortured for absolutely no reason but the President then Maumoon Abdul Gayoom to gain more popularity (only later found out). During this time me and my family were subjected all forms of difficulties by the then government. And now again the ex-President Maumoon Abdul Gayoom has organised a coup and people are being beaten by the police. A women has just passed away due to injuries from beatings by the police about 30 mins ago.

My father is currently the mayor of Male' (capital of Maldives), and he has received death threats today. He might be taken too by the police. My cousin has been beaten an hour ago by the police and taken into police custody. Please read the attachment from the Maldivian Democratic Party. 

If you can assist me in anyway that would be most helpful.
 Unfortunately India, the main power in the region, has said it looks forward to working with new regime.

For those who see the picture at the top, the Daily Telegraph reports
British holidaymakers are unlikely to be affected by the recent civil unrest in the Maldives, according to tour operators.
 I can't work out if that's British phlegm or something else......


Tuesday, February 07, 2012

Legal Education's Response to the Economic Realities Facing the Profession

There is a symposium on this topic at Legal Ethics Forum. It runs between February 6 to 8 with a wide range of participants including:

Rakesh Anand (Syracuse); Anita Bernstein (Brooklyn); Hannah Brenner (Michigan State); Ray Campbell (Peking STL); Paul Campos (Colorado); Michael P. Downey (Washington U./St. Louis U.); Paul Horwitz (Alabama); David Hricik (Mercer); Lucy Jewel (John Marshall Atlanta); Daniel Martin Katz (Michigan State); Renee Newman Knake (Michigan State); Judith Maute (Oklahoma); Jim Milles (SUNY Buffalo); Michele Benedetto Neitz (Golden Gate); Richard Painter (Minnesota); Russ Pearce (Fordham); Laurel Rigertas (Northern Illinois); Cassandra Burke Robertson (Case Western); Rita Shackel (Sydney); Mitchell Simon (New Hampshire); John Steele (Santa Clara); John Varghese (Government Law College, India); Brad Wendel (Cornell).


Monday, February 06, 2012

The Way of the World....

(thank you to

I want to take several disconnected events to show that the legal services world is really undergoing volcanic eruptions.

The first is the merger between King & Wood and Mallesons. That a Chinese law firm would merge with an Australian one was not visible on most people's radar, but it makes perfect sense. The firm will be the largest in Asia with over 2,100 lawyers and with offices in China, Australia, and London, New York, and Tokyo. One lawyer said:
"It is an absolute game changer, the birth of the first global Chinese firm. If they are not planning to add a third party now, then they most likely will in future. This is just a step along the way. King & Wood are way ahead of the rest of the pack in China. I've been here 26 years and seen at close quarter from the large state-owned companies what the Chinese can do. I don't see why not in the legal sector."
The legal professions of both countries had been viewed as marginal and parochial for a long time. The merger reflects the shifting axis of economic power from the west to the east. It also shows how in a remarkably short time China has developed a sophisticated and mature legal profession.

The second event is the purchase of Russell Jones & Walker by Slater & Gordon (the first law firm to have an IPO). Again this a move by the Australians, and one prompted by the liberalization of the legal services market following the Legal Services Act 2007. Slater & Gordon are paying close to £54 million for RJW. There are two elements to this. One is that the personal injury market, in which both firms specialize, is ideally suited to commoditization and outsourcing. Law firm investors I've talked with have always pointed to this sector as an easy one to handle in terms of its work. The second item is that RJW owns Claims Direct, a profitable personal injury business which advertises assiduously on TV and elsewhere. The RJW partners will become shareholders in Slater & Gordon and be formed as a wholly owned subsidiary of the Australian firm.

Besides over 70 applications to the SRA to become Alternative Business Structures, this move is one of the most significant yet as it puts law practices on the same level as other businesses. They are now commodities to be traded as any other.

The third event is Quinn Emanuel's experimental approach to litigation funding. It doesn't abide by conventional hourly bidding which has helped it become one of the most profitable law firms in the world with partners' average earnings over the $3m mark. This fits with general counsels' demands for more practical solutions to legal charging.

To show how Quinn does it, it gave some funding examples to the Lawyer--here are two:
We represent a large insurance company as plaintiff in a very complex, contentious litigation where the potential damages could reach  $150m or more.
The law in the area is unsettled.
We have estimated the cost of litigation through trial to be $12m to $15m. Our financial arrangement is as follows:
  • Quinn receives a flat fee of $750,000 for (a) the drafting of a complaint and (b) opposing a motion to dismiss.
  • Quinn receives a flat fee of $150,000 per month up to a cap of $4.25m.
  • Quinn absorbs all fees in excess of $5m.
  • Quinn receives 20 per cent of any recovery via settlement or verdict.
We represent a hedge fund as plaintiff in a very comSWa dispute over a [collateralised debt obligation]:
  • Quinn receives a flat fee of $20,000 per month through trial, regardless of the level of activity in the lawsuit.
  • Quinn receives 20 per cent of any recovery via settlement or verdict.
The final event is somewhat dispiriting but represents the last-ditch stand of the ancien regime. A recent post by Clerkingwell, a barrister's clerk, bemoans that the Bar's pitch of independence is overplayed and is holding the Bar back in the post-LSA era. For example, he says
individuality and independence can really hold a business back – especially if they are applied gratuitously. For example, does a barrister’s individuality really need to prevent them from giving a prompt response to an enquiry about availability, the timing of a piece of work or a simple, unqualified answer to a request for a fixed fee quote? Is it really independence that precludes the prompt provision of billing details in a form that fits in with the organisation’s and client’s requirements?
The Bar has such a long way to go if it is to progress and its recent advocacy of BOEs isn't the way to do it. These are barrister owned entities, a direct contrast to Alternative Business Structures. The Bar Council carried out a survey, Barristers' Working Lives, which found a quarter of barristers felt lukewarm about ABS and moreover
A lack of optimism is evident, with more than half of barristers believing that demand for their services is decreasing.
Legal aid still makes up a significant amount of work for the Bar, that is it still depends on the state for funding.

English barristers and Irish lawyers, who are currently complaining about their soon-to-be experience of external regulation, don't recognize the world is passing them by. They will have to adapt or have it done for them, which would be a shame.

The same is happening with legal education. The rest of the world is changing rapidly how it educates its future lawyers while the UK is stuck in the 19th and 20th centuries. The Legal Education and Training Review needs to propose radical reform but it's questionable how far the legal profession will allow them to do so. We must hope they can be persuasive.

So out of the four events I selected three are positive and show how things will go in the future; one is regressive and displays resistance. The problem with this one is that it could easily damage the prospects of those who want to join the Bar and who would accept the new world with eagerness.

Let's hope that legal education and practice will keep meeting the challenges of the new while incorporating the values of professionalism that encourage such things as better access to justice.