Is the “Death of Big Law” imminent, overblown, or an opportunity for innovation?

If you’re a partner or associate at a BigLaw firm, or an in-house lawyer who engages BigLaw – exclusively, primarily or intermittently – you may want to add a copy of Larry Ribstein’s Wisconsin Law Review article on “The Death of Big Law” to your reading list.

Following are a few highlights and key themes that may be of particular interest to General Counsels and other in-house leaders:

Problems with the Business Model

- BigLaw’s issues go well beyond any short-term adjustments necessitated by the Great Recession. “The real problem with Big Law is the non-viability of its particular model of delivering legal services.”

- What is that model? “Large law firms’ value derives from their function of ameliorating the inherent asymmetry of information between lawyers and clients.” Of course, the increasingly strategic and prominent role of in-house legal teams is rapidly eliminating this asymmetry.

But There Are Opportunities Out There

- Some light at the end of the tunnel: “a potential new Big Law business model: developing information, background, drafting, and litigation strategies on issues that arise repeatedly in the firm’s work. The firms then could use this information to render high-value legal advice in their areas of expertise at prices competitive with less expert firms.”

- Likewise, large law firms “also could build on this expertise by maintaining computerized databases of contracts, doing in-depth research on contracts and transactions, and engaging economists and other analysts to help anticipate future litigation and structure transactions to minimize litigation costs. In short, a restructured version of Big Law could significantly augment what both lawyers and legislatures currently can do in drafting statutes and form agreements.”

- And law firms may be able to form alliances with providers of services in adjacent fields (if ethics rules on fee-sharing evolve as well): “it may be more efficient for firms to combine legal services with other activities under common ownership, where control may or may not be exercised by lawyers.” (Although we may have seen this movie once before with the large global accounting firms.)

Capacity Insurance

- If as many GC’s say, “we hire lawyers, not firms,” then why do large firms exist? “One explanation is that legal work often involves a peak load problem… Sophisticated work on large transactions or litigation may call for lawyers with different specialties, non-lawyer experts, and costly technology. Large firms can keep sufficient human and technical resources on call to meet these needs because they can amortize the cost across many clients and cases.”

- To that end, corporations maintain relationships with Big Law as a form of “legal capacity insurance” rather than relying on a “spot market” for legal services. Two different sourcing strategies, each with its own challenges and cost structure – worth discussing with your C-level colleagues, in my opinion. But as Ribstein points out, “a limited class of clients and transactions needs this insurance…”

Technology-enabled Legal Services

- As for legal process outsourcing (LPO), Ribstein notes that “outsourcing’s future growth depends to some extent on the development of new technologies for monitoring outsourcers.” GC’s, what technologies would you like to see from your potential LPO partners? LPO vendors, do you see technology as a way to differentiate your offerings, and if so, what’s next? Ribstein observes that the “prospect of standardization therefore may be more a threat than an opportunity to Big Law, since it could squeeze some of the profit from transactional work and litigation without letting law firms profit from the new tools.”

Alternative Legal Services Providers

- Regarding what Paul Lippe of Legal OnRamp has called “non-firm firms,” Ribstein comments that “even if firms do not bring legal work inside, the rising costs of legal representation may push clients to alternatives to law firms such as non-lawyer law consultants, accounting and economic consulting firms, and mechanized legal advice through sophisticated software.”

Legal Project Management (LPM)

- I regularly discuss with clients the need to disaggregate their programs and projects into discrete tasks in order to achieve more timely and predictable outcomes at a lower cost. Ribstein notes that “firms theoretically can break down even the most complex projects into discrete tasks as to which lawyers and clients have enough experience to charge on some basis other than counting hours.” Of course, this increases the need for lawyers to be highly skilled project managers, or to have PM expertise on staff.

In-house leaders, what do you think about the “Death of Big Law”?

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One Response to Is the “Death of Big Law” imminent, overblown, or an opportunity for innovation?

  1. legaltruth says:

    Speaking from the perspective of my economics education their are number of problems in the legal industry.

    1) A lack of understanding and acceptance of market forces by those who govern the industry. They either are not consulting economists or refuse to accept their counsel as to the economic consequences of their professional codes. If members of your profession are not paid by the government, or donations for being part of a non-profit, then you are a commercial enterprise. Lawyers need to embrace that reality and understand the rules that govern commercialism, rather than attempting to impose their code of ethics that resemble what you find in the practice of law. IT like they are trying to use the laws of the US for arguing a case in Iraq. There might be some similarities which allow you to be successful for a time, but eventually this approach will fail.

    2) The overprotectionist natures of attorneys. There preofession is built on preventing the flow of information and defending the position of their clients. Their main tenets are loyalty and confidentiality to their clients. Isn’t it a natural out flow that they would have policies that insulate their professional field from non-lawyers. Lawyers not only tend to insulate their profession from non-layers but also from geographic outsiders, the governing bodies mainly being states but taking their rules from the ABA.

    3) Transactional opportunism. Why is their really a bar exam at all in each state. If a lawyer were terrible at their profession people would report it online, they would face multiple malpractice suits, their work would be overturned in court frequently. All of these would lead to a bad reputation and the end of their business. What does the bar exam really do other than pad the pockets of those who require it. The market does a much better job of getting rid of inefficient players. The exam also makes it more difficult for entrants thus making lawyers less scarce then they would be otherwise, leading to higher salaries. Those salaries then pay annual due of the bar associations and the other activities they seek support on.

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