“First they came for the book store owners, and I didn’t speak up because I didn’t own a book store and cheaper books sounded good. Then they went after the big music labels and I didn’t speak up because I never liked the Big Music industry anyway. But now they are coming after the legal profession and that is just wrong in so many ways. It is time to fight back.”
The paraphrasing of Martin Niemöller’s famous statement may strike many readers as a poor attempt at humor. But the recent news articles about Google focusing on the legal industry merit the attention of lawyers. Let’s face it. If you are in a contest, you would probably not want it to be against Microsoft or Google.
Forbes magazine carried the news this month that Google Ventures is part of a group pouring $18.5 million into Rocket Lawyer, which is claiming to be the “fastest growing online legal service.” This news was followed up by a Forbes column titled “Google Backing of DIY Legal Forms Will Force Lawyers To Lower Fees.”
Certainly Rocket Lawyer is not the only business seeking to profit from providing preparation of legal documents online. When the economic outlook for the legal profession is certainly not projected to be one of increasing profits, why are venture capitalists apparently so interested in the legal profession? To answer that question, I turned to Richard Granat. Granat is the lawyer behind DirectLaw, a firm that provides lawyers with the tools to set up virtual practices that deliver documents and legal services online. He is also a long-time member and current Co-Chair of the eLawyering Task Force of the ABA Law Practice Management Section.
Calloway: So what is the story behind such VC interest in the legal profession?
Granat: With Google Ventures funding both LawPivot and RocketLawyer™ and Kleiner Bell’s group investing $66,000,000 in LegalZoom combined with other evidence of interest that I have seen in the VC community, I see a “buzz” or “new paradigm” going around this community ( “the VC community”), that it is time to break the back of solos and small law firms by funding disruptive experiments that are designed to bring real change to the delivery of legal services, no matter what impact it has on the livelihoods of solos and small law firms.
Calloway: I talk to a lot of lawyers who already say they are working longer hours for less money. I thought the VC money chased highly profitable and emerging ventures.
Granat: The legal profession is just the next target of opportunity, no matter what the social cost. The VC funds don’t really care that what they are investing in may be violating existing unauthorized practice of law (UPL) laws, e.g. LegalZoom. They just see an opportunity to radically change the solo and small law firm legal industry sector at whatever costs, in order to create value for the enterprises they invest in and for themselves. Disruption means sucking the value from an industry sector in favor of the disrupter, just as Apple sucked value from desk-top computing, and changed the music industry, Amazon permanently sucked value from the book retail industry, and Netflix changed the movie distribution industry.
Calloway: Disruption sounds very scary, as do the examples you cite. But haven’t we seen this before? Every lawyer I know has several stories of clients who had to pay thousands of dollars to fix the mess created when they tried to do something themselves or had some non-lawyer try to do it. These so-called simple matters are often not as simple as they may seem.
Granat: I agree in part. It depends on the problem. Some consumers will settle for what I call a “good enough” result. So for example, if consumers buy a set of no-fault divorce forms and file their own divorce, and it is awarded, they get a result they can live with, because it is better than paying thousands of dollars in legal fees, which is often the other alternative.
On the other hand, the average consumer does know what they don’t know. In this instance the uninformed party may not know what rights they are giving up to child support, spousal maintenance or property division. To cite another example, a will may look simple, but if one issue is dealt with incorrectly, the entire document might be invalid, or a subject to attack.
LegalZoom says that it has sold more than 1,000,000 wills, and Robert Shaprio, of O.J. fame, claims the ”Law is on Your Side”, whatever that means. But the reality is no one knows whether the content of those wills fits the circumstances of the testator and reflects the testator’s true intent. When the consumer learns that a mistake has been made, it is often too late.
Calloway: You mentioned UPL laws. Lawyers believe that UPL laws serve an important role in protecting the public when some of the most important issues of their lives are in play. When I was in private practice, there were many times I was consulted when someone was about to sign a terrible document, like a completely unfair divorce settlement agreement. Are lawyers the only ones who see the danger to the public here?
Granat: This is a complicated area. I don’t think that the general public would want a regulatory régime where anyone could represent another person in a court, without being licensed. The courts would not permit it any way.
On the other hand, drafting and preparing documents seems to be another matter. I think that one of the consequences of the release of legal information and legal forms from the law books, and onto to the Internet, is that a large majority of the American public now think they can do things on their own without the assistance of a lawyer.
I don’t think the legal profession has done a good job of marketing its true value and its social contribution in this area. While every state has a statute on its books that prohibits a non-lawyer from preparing a legal document, LegalZoom continues to do so with impunity. The top leadership of the American Bar Association, dominated as it is by larger law firms, has done nothing to promote the contribution and role that solos and small law firms play in our larger society. So if the top leadership of the organized bar doesn’t take a position on the matter, it makes it look like solos and small law firms – the target of these new disruptive ventures – are just out to protect their incomes, rather than protecting the public from real harm.
Calloway: I can sense already a reaction from some lawyers that we only are talking about high-volume, lower cost work that is not really that profitable in the first place. Some lawyers avoid this type of work and other lawyers do it as much for a public service and building good will as anything. The legal profession is currently very competitive. Lawyers know how to compete. So won't a little competition just make us better?
Granat: I think that the economics of solo and small practice is undergoing a major transformation. Lawyers will still be able to demand high fees for complex, value-added work. For tasks where there is a large information component which can be manipulated by software, such as web-enabled document automation systems, lawyers will feel the effects of disintermediation, just as other industries have that have been transformed by the Internet.
Much higher volume work is the bread and butter of solo and small firm practice. If these services are pulled away from the law firm, and delivered by non-lawyer entities, it will completely destabilize the economic model upon which solos and small law firm practice is built. I think that the economics of small firm practice is beginning to change in a fundamental ways. $150-$250 an hour billing rates are not a guaranteed “right”. They are, or were, a response to market dynamics. The market for legal services is changing.
Calloway: Admittedly we both have personal objectives here. I’ve been advocating for some time that lawyers should have better document assembly solutions in place and your business is to help lawyers set up virtual law practices. But I’m sure you have some ideas about how solo and small firm lawyers should respond to this challenge.
Granat: Lawyers have to learn how to work smarter. Last year, Marc Lauritsen Co-Chair of our eLawyering Task Force wrote a brilliant book, The Lawyer's Guide to Working Smarter with Knowledge Tools, on how lawyers can work smarter but it has not been widely read. It should be required reading by every solo and small firm practitioner. Further, to compete in today’s connected world, lawyers need to pick up the skills to market their services online and to deliver legal services online. If you are not online, you are nowhere.
Calloway: There are other resources readers can review. Jordan Furlong recently did a blog post on this topic called Here come the disruptors and you can get a flavor of Marc Lauritsen's book mentioned above by reading this article he wrote for Law Practice magazine.
Like the law enforcement slogan, lawyers protect and serve their clients. I have no doubt that centuries-old tradition will continue, even if some methods of delivery of legal services may change. The ramifications of the trends discussed above are yet to be seen.