So says Alex Hamilton, describing the gist of his recent speech to a conference about innovation in law practice — specifically about the role of artificial intelligence in companies’ creation and management of contracts.

A former partner at Latham & Watkins’ (2nd highest earning law firm worldwide in 2019 according to The American Lawyer) London office, and co-Chair of its global Technology Transactions Group, Hamilton founded Radiant Law in 2011, a law firm that supports large companies and banks in their major outsourcing and technology contracts, day-to-day commercial contracts, and contract review projects.

Radiant does contract automation in a big way — working with applications like docassemble (a free, open-source systems for guided interviews and document assembly originally created by a lawyer / computer programmer), and Contract Express (Thompson Reuters’ document automation software). Radiant’s mission is to free up businesses from manual drafting and review of masses of agreements by overwhelmed lawyers — replacing that traditional approach with faster, more accurate, and much cheaper contract creation and management.

So Hamilton’s description of the “circus of AI” does not reflect any skepticism about this technology’s potential for improving legal services.

Instead, lawyer and tech pioneer Alex Hamilton argues that his legal profession — my legal profession — is unserious about any meaningful use of AI for the foreseeable future (“AI and Contracting”, December 3, 2019).

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The key to cutting your company’s legal spending is not finding a lawyer who’ll work on-the-cheap.  To cut legal spending (intelligently), pay  – and don’t be afraid to pay well – for the legal help that you need. 

Then ruthlessly avoid paying for what you don’t need.

The legal profession’s prevailing business model designs its service offerings to defeat this strategy. Most law firms work this way. And the inefficiencies are compounded by the fact that most in-house counsel put up with it.

As a result, and as I described it in my most recent post, attorneys’ conventional service delivery loads up a lot of what you don’t need, to go with what you do need:

  1. Hourly quotas for attorneys encourage more lawyer time per task;
  2. This motivates a proliferation of lawyers on any given task — each lawyer with their own hourly quota; and
  3. This proliferation leads to insertion of recent law graduates alongside fully qualified attorneys to do the routine & repetitive work for which law clerks or paralegals are suited — but billed to clients at several hundred dollars per hour.

And these three waste-embedding traits discourage adoption of any technology that can materially increase the quality or efficiency of the legal tasks being performed. (See my December 13, 2019 post for elaboration on why I qualify this statement with “materially”: Law firms’ bread-and-butter work — what makes them most of their money — tends not to get automated. But there are some pain-in-the-neck legal tasks for which those firms can’t charge much — and, in a growing number of cases, law firms are using AI or other tech innovations to automate these tasks.)

Axiom Law is a legal service provider whose offering strips away these wasteful add-on’s. And leaves the client company with what it needs: An accomplished, prestigiously pedigreed lawyer, who practices at the highest level of their particular niche.

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Technology that improves the quality and efficiency of legal work will be stymied as long as hourly billing prevails among attorneys. At least that’s my belief.

Why do I say that?

  1. Hourly quotas for attorneys encourage more lawyer time per task;
  2. This motivates a proliferation of lawyers on any given task — each lawyer with their own hourly quota; and
  3. This proliferation leads to insertion of recent law graduates alongside fully qualified attorneys to do the routine & repetitive work for which law clerks or paralegals are suited — but billed to clients at several hundred dollars per hour.

A profession that gets paid more when its work takes longer, that gets paid even better when it assigns more people to do that work, and that charges clients for training its junior personnel — will lose money using a system that improves the quality or efficiency of that work.

Pretty straightforward, I think.

Last week I heard from a couple of others on this.

On December 6 I attended “Artificial Intelligence in the Enterprise (Legal Services Version)”, sponsored by the Law and Technology Initiative of Northwestern Pritzker School of Law and Northwestern McCormick School of Engineering.

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10 years into my legal career I accepted a corporate client’s offer to run one of its divisions as a general manager. Only by leaving law practice and becoming an executive did I learn how to protect a company from its legal risks.

This protection has two elements:

First Element: Prevent legal problems before they happen — attorneys’ emphasis on fire fighting amounts to bad risk management; and

Second Element: When you fail at the first element, see to it that legal problems are solved with the same high quality and efficiency that you demand in every other corporate function.

Every corporate function other than Legal.

Lawyers, for the most part, don’t see their jobs this way. Prevention of legal problems receive their lip service; but after-the-fact clean-up takes more time (hours billed) — and so it pays better. And one-off, ad hoc efforts on “bespoke” tasks (each contract is “different”) get their serious time and attention — “boring” process disciplines, not as much.

And when legal problems arise, the profession’s business model offers its own, dysfunctional, “management” methods:

  1. Pricing that’s unpredictable — because it’s based on how long the lawyers decide to take doing their work;
  2. Over-staffing by design — more people billing more hours; and
  3. Assignment of inexperienced attorneys alongside those who actually know what they’re doing.

Meanwhile, these “management” methods stymie adoption of accuracy-improving and labor-saving technology: Systems that remove errors automatically and make workflows more efficient reduce the hours for which attorneys can bill the client.

So a company needs P&L people to make sure that the job of protecting the company from legal risks gets done right. And that’s because CEOs, CFOs, and other general managers — in my experience — focus more readily on the company’s business goals.

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No sector in 2019 is entirely isolated from the application of scientific knowledge for practical purposes like higher accuracy or greater cost efficiency.

But the legal profession tends to resist such moves when they might result in fewer hours billed by attorneys.

Consider an artificial intelligence company whose founder I met earlier this year:*

His staff lawyers and software engineers collaborate to “teach” an AI-based system in the fact patterns found in selected, high-frequency lawsuit categories.

Like slip-and-fall liability on business premises, or an employment claim for sex discrimination.

They also “train” this AI-based system in the court cases and statutes of the state whose laws will govern the suit.

When one of his client companies / software users is served with a lawsuit — by a document that the legal system calls a “complaint” — they designate local counsel to represent them in the state where suit has been brought. By law, local counsel has to respond with specified documents.

These specified documents consist of tedious replies to alleged facts; point-for-point rebuttals to legal doctrines; and meticulous identification of information and evidence that the lawsuit recipient has the right to demand of the party who brought suit against them.

As any lawyer involved in litigation can tell you from personal experience — myself included — this is “grunt work”.

But it has to be done right. And it has to be done by an attorney.

In the “answer”, you’ve got to avoid making the wrong response to factual allegations. And you can’t afford to miss an “affirmative defense” that might get your client off the hook. Finally, you don’t want to omit anything important from your document demand or other “discovery” requests.

Otherwise, at best, you’ll create unnecessary work, and incur expense, in correcting these errors. At worst — you’ll prejudice your client’s case if the judge refuses to cut you a break and let you correct your mistake.

This is where this founder’s AI company comes in. 

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When Amazon announced a group of selected law firms to provide trademark registration services at pre-negotiated rates for small- and medium-size businesses with whom it works, it featured law firm FisherBroyles — what one commentator last year called, “The Most Important Law Firm You’ve Never Heard Of”.

Amazon’s goal, according to legal innovation and tech expert Bob Ambroggi:

To help companies more quickly obtain IP rights for their brands and access to brand-protection features in Amazon’s stores. It specifically  targets small- and medium-sized businesses by making it easier and more cost effective for them to protect their ideas.”

I’m a business attorney who was schooled in basic management skills only after being thrust into P&L duties after practicing law in a conventional law firm. During my first 10 years practicing law I was blind to the ways that conventional law firms’ and in-house counsels’ adherence to the billable hour, purposeful overstaffing & duplication of effort, insertion of inexperienced lawyers alongside those capable of working on their own, and slow-walking of accuracy-enhancing and labor-saving tech adoption — advantage the attorney — and disadvantage the business client.

This quote from FisherBroyles’ founders illustrates why I find their way of doing legal work true innovation instead of hype:

We took away the two most inefficient aspects of the law firm model: The expensive fixed cost real estate, and the $180,000 a year associate [junior lawyer] being trained on the client’s dime. And once you eliminate those two massive aspects of law firm overhead, that leaves a lot of capital revenue to pay your lawyers more.”

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Too many businesses find that they spend too much on lawyers — and get too little risk protection in return.

But their executive management should not look to attorneys — outside or inside their companies — to fix this on their own any time soon.

At least not without relentless prompting from business leaders.

Only a minority of attorneys practicing in law firms offer business clients alternatives to the billable hour, to purposeful overstaffing & duplication of effort, to insertion of inexperienced lawyers alongside those capable of working on their own, and to the slow-walking of accuracy-enhancing and labor-saving tech adoption.

And only a minority of in-house counsel are making meaningful demands for such alternatives. Though you might expect that in-house counsels’ outlook might align with that of the P&L executives for whom they work.

In a recent Twitter conversation (here and here), a handful of this minority agreed that long-ballyhooed legal innovations have yet to arrive.

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A final installment in this three-part post.

What’s a practical basis for placing a value on attorneys’ work for the business?

In Part 1 I addressed the legal profession’s prevailing measure of lawyers’ work:

How long did the attorney decide to take doing the job?

Cost-plus. Bill the client company by the hour.

In Part 2 I addressed “data-driven” methods (with at least one present-tense exception that I’ve found, put this under the heading of maybe-in-the-future).

Here in Part 3 I address:

A price agreed in advance — between lawyer and client.

An example:

Barlit Beck, LLP

From Fred Bartlit’s April 5, 2010 Orr Distinguished Lecture at the University of Tennessee Law School:

In the early 1980’s Chicago trial lawyer Fred Bartlit was head of litigation at one of Chicago’s finest firms. He’d brought in a client whose big case was keeping 8 partners and 30 associates busy for months. “My partners loved me”, he said.

But Bartlit felt that this firm could deliver more effective legal representation to its clients for less money.

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In Part 1 I addressed the need for reliable numbers relating to the value of legal services.

If what gets measured gets managed — and if measuring the wrong thing is worse than measuring nothing at all — then client company executives need a reliable measure of the value of legal services in their budget.

Toting up hours billed gives “certainty” about the method by which attorneys came up with the price that they charge to a client company.

But that total tells us nothing about the actual benefit received by the business.

Hence our consideration of two alternatives: “Data-driven”, and a price agreed in advance.

“Data-driven” calculation of the value of lawyers’ work for client companies.

I refer to “data-driven” in quotes because there’s (a lot) less here than meets the eye when you read legal profession headlines.

In fact, I’ve found just a single instance of data-gathering and analysis as the basis of determining the value of what attorneys do for a company. If I’ve missed something, I invite comment and correction on this point.

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