Articles Posted in How Lawyers Deliver Their Services to Business

This four-part post’s premise:

A company’s “legal” problems are likely to be — in functional terms — business problems that have a legal aspect.

The traditional impulse to call in a licensed attorney from a law firm or in-house counsel department doesn’t always lead client companies to the most practical choice for their needs.

Hence my introduction of “Alternative Legal Services Providers”, or “ALSPs” — and Georgetown Law Center’s recent, authoritative survey, “Alternative Legal Services Providers 2019” — in this four-part post.

Here are four take-aways:

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OK.

Review of Part 1 and Part 2 of this four-part post:

1. In your company, many “legal” problems are more accurately viewed as business challenges that raise legal issues (as Mark Cohen put it).

2. Delivery of many of the legal services that respond to such business-challenges-that-raise-legal-issues now requires process management and technology skills that attorneys mostly lack (again, Mark Cohen).

3. “Legal services & providers of those [legal] services are ever more important — lawyers, however, are not.” (Jeffrey Carr’s tweet last Monday)

For most of the past four or five decades, the phrase “legal services & providers” has meant one of two things:

1. Law firms, and

2. In-house counsel employed by companies as full-time employees.

Until — that is — a few years ago: With the advent of “alternative legal service providers” — or “ALSPs”.

“Alternative” to what? Alternative to law firms and in-house counsel.

Beyond that, the definition is pretty wide-ranging — except that all ALSPs embody the aphorism set forth in this post’s title: “Clients Need Legal Services But Not Necessarily Lawyers”.

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I interrupt my four-part post on how a company can achieve higher quality legal services, that are faster, more accurate — and cheaper — by “disaggregating” business challenges that raise legal issues into tasks that (often) someone other than an attorney can do better than a lawyer (“Clients Need Legal Services But Not Necessarily Lawyers”).

I saw the following in this morning’s in-box:

“Want a Market-Sized Bonus? Better be Ready to Bill Your Butt Off at this Biglaw Firm”.

For avoidance of any doubt, this meant that a large and prominent law firm issued new, formal guidelines by which it will now require the lawyers they employ (associates) to charge a quota of specified hours in order to receive a particular bonus. I don’t know if this firm previously had such a quota — though they are common in the legal profession. My point here is simply that hourly billing quotas like these are very much a part of the landscape, and that they’re widely accepted among conventional law firms — and the in-house counsel who hire them.

Regarding this law firm and its employee-lawyers, the article included a chart with two axes.

The vertical axis denoted the “level” of the associate in question. “Level” was expressed in terms of years out of law school. Nothing about demonstrated skill or competence. Just: How long had it been since this employee-lawyer graduated with their J.D.?

The horizontal axis: Increasing dollars of bonus for “1,950 billable hours …”, “2,100 …”, “2,250 …”, and “2,400 …”

Raising the question — as use of the billable hour invariably does:

Was this hour billed for the client’s good? Or for the lawyer’s good?

I always do a double take at such a headline.

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Part 1 of this four-part post introduced a February 19, 2019 Forbes article, “Clients Need Legal Services But Not Necessarily Lawyers” — by Mark Cohen, both an accomplished business attorney and former chief executive of his own (non-law firm) business.

Part 1 introduced Cohen’s observations about the process management and technological benefits of “disaggregating” what law firms and in-house departments traditionally have viewed as “legal” tasks. In this connection he wrote about “alternative legal service providers”:

“Law is not solely about lawyers anymore ….”

“Several new-model legal service providers … have replaced law’s brute force, labor intensive lawyer-does-all model with data-driven, customer-centric, automated, corporatized, scalable, collaborative, multi-disciplinary, and well capitalized service models.  These providers are often managed by business professionals and entrepreneurs, not licensed attorneys …”  

Why this “disaggregation” of “legal tasks” now?

Because, says Cohen:

“‘Legal problems’ have become ‘business challenges that raise legal issues.’ The complexity, speed, and new risk factors impacting business—together with the impact of the global financial crisis, technological advances, and globalization—have changed the legal buy/sell dynamic.

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My client was an Amsterdam-based investor who wanted to build an aviation services business in the United States.

As a corporate and commercial lawyer whose practice largely emphasized the transportation sector, I needed to get this client the best advice possible on positioning its new business from a U.S. federal income tax perspective.

This meant choosing between tax attorneys who practiced in a law firm versus tax accountants who practiced in an accounting firm.

Minimizing tax and keeping the IRS off their back was not just a “legal” problem. It was more like a business problem that had a legal aspect.

For their business savvy, tax law expertise, familiarity with how the IRS treats such foreign investors — and a cost advantage — I recommended a regional accounting firm instead of tax attorneys in a law practice. 

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I ended Part 2 of this three-part post with this:

“Naysayers contend that Big 4 accounting firms cannot enter the U.S. market for legal services due to ‘regs and laws’ the ‘preclude Big 4 entry’.

“Is that really true?”   

No, it’s not.

First — Big 4 accounting firms’ entry into the U.S. market for legal services has already begun — as I’ve covered in past posts:

  • PwC (Price Waterhouse Coopers) opened a law firm in Washington, D.C. in September 2017.
  • Deloitte UK and the San-Francisco-headquartered immigration law firm of Berry, Appleman & Leiden LLP announced an agreement that gives U.S. businesses access to Deloitte Global’s immigration law services worldwide — including in the U.S. — in June 2018.
  • EY (Ernst & Young) announced its acquisition of Riverview Law in August 2018 — a UK-based “alternative legal service provider” — what some call a “law company”.

Second, former Am Law 200 partner Stephen Embry makes the case that the above moves are only a part of larger developments across the Big 4 accounting firms that signal their likely entry into the U.S. market for legal services in a big way.

In his article earlier this month, “U.S. Law and the Big Four: Who’s Afraid of the Big Bad Wolf?“, Embry does a deep dive on statements of two lawyers who presented at a recent conference for business lawyers:

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I concluded Part 1 of this three-part post by asking:

For business owners and managers, what could the Big 4 accounting firms offer to client companies that a conventional law firm does not?

In his U.S. Law and the Big Four: Who’s Afraid of the Big Bad Wolf?“, Stephen Embry, formerly a national litigation partner with the Am Law 200 firm of Frost Brown Todd — one of the 200 highest grossing law practices in the country — addresses this question.

Embry looks at it from inside the legal profession: What do “we” — conventional law firms — have to fear from the Big 4 accounting firms entering the U.S. market for legal services?

“The Big 4: Think Different

“What are the Big 4 doing differently that poses a threat [to U.S. law firms]? [Rutger] Lambriex [a lawyer with Ernst & Young’s new legal arm that practices in the U.S.] said it best: ‘We approach problems as business issues that require legal attention’. He continued, ‘you have to understand what the relevant areas of law are (with respect to any problem) but also what are the relevant business issues.’

“So cyber security is not just data breach litigation to use one of Lambriex’s examples, it’s a fundamental business problem that EY [Ernst & Young] is poised to holistically and synergistically solve. Legal plays a role but it is their desire and ability to help clients through the entirety of the business issues that will ultimately enable the Big 4 to make inroads.

“Lawyers? Too many see legal as the tail wagging the dog. Why do clients say they want lawyers to understand their business better? Because we [lawyers] fail too often to see beyond the legal problems. We don’t see that the most important thing is not legal but business. The Big 4 recruit business problem solvers and innovators while lawyers look at pedigree and law school academic records.”

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My most recent post urges business owners and managers to seek terms of service from their legal services providers that are consistent with the basic management disciplines that they require in every other part of their companies — other than legal.

That means finding alternatives to the terms of service that conventional law firms usually insist on — terms of service usually at odds with basic management disciplines.

This post addresses one place to look for those alternative terms of service: Legal services from accounting firms.

It will surprise nobody that when U.S. lawyers consider the array of service offerings available to their business clients that they think in terms of their own wellbeing:

What’s out there that might threaten our lunch?

Until recently, Stephen Embry was a national litigation partner with the Am Law 200 firm of Frost Brown Todd — one of the 200 highest grossing law practices in the country. He has spent most of his career specializing in the defense of mass tort actions for large corporate clients.

In a piece entitled “U.S. Law and the Big Four: Who’s Afraid of the Big Bad Wolf?“, he offers his view of the Big 4 accounting firms as a near-term, viable, competitive alternative to law firms in the U.S.

Though he offers this view from the standpoint of what law firms have to fear from the Big 4 accounting firms as their potential competitors.

“I have written before about the Big 4 accounting firms and the threat that these firms may pose for U.S. lawyers and law firms.

“The response has typically been a bit like that of the first two pigs in the old 3 Little Pigs nursery rhyme who arrogantly believed their houses of straw and twigs would protect them from the Big Bad Wolf.

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In Part 1 of this two-part post I wrote that the conventional business law firm does not compete on the terms of service — does not adhere to management disciplines — that best serve client companies:

  1. Know what the price will be before you agree to pay it.
  2. Don’t accept assignment of two lawyers to do the work of one.
  3. Every lawyer your company pays should be fully qualified to do the work you pay them for; don’t pay apprentice-type junior lawyers for their on-the-job training.
  4. Avoid labor-intensive use of lawyers on routine tasks. Automate what can be done by artificial intelligence and other tech-enabled solutions;

And low rates were not among the terms of service I emphasized:

“Picking the ‘low cost provider’ when choosing your company’s lawyers is dumb.”

What’s a good first step towards these better terms of service — towards your lawyers adhering to the same management disciplines you require of every other function in the business — other than legal?

Get your company the terms of service — insist on basic management disciplines — in increments. Start somewhere.

Let’s say that federal income tax is a problem area for your company:

  • You can look for a boutique law firm that’s focuses on tax;
  • You can check out an accounting firm for the tax advice you need; or
  • You can seek out an individual lawyer who practices within a conventional law firm — but retain solely that lawyer — avoid the “cast of thousands” that conventional firms try to add on.

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Competition creates the value that the customer gets. There’s no substitute for it.

Take a look at this morning’s Wall Street Journal (subscription required):

“Charles Schwab, Fidelity Escalate Brokerage Price War”.

Featuring a picture’s-worth-a-thousand-words chart showing Schwab’s average commission per trade going from $12 in 2015 down to a little more than $7 — along with similar moves over the same time frame by TD Ameritrade and E*Trade.

Here’s the kicker:

“Schwab kicked off the latest round of price cuts with an announcement Tuesday morning that it would double the number of ETFs [exchange-traded funds] that can be bought and sold at no cost on its platform. Fidelity followed within the hour saying its platform would likewise expand its commission-free lineup to include more than 500 ETFs.”

“Fidelity followed within the hour.”

Not so the marketplace for lawyers’ services to companies.

I am not saying that you should pick lawyers based on price. Picking the “low cost provider” when choosing your company’s lawyers is dumb.

What I am saying:

A company should be able to expect that its outside lawyers will compete based on non-price terms of service that meet basic management disciplines that owners and managers require in every other part of the business — other than legal. 

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