It’s fashionable this time of year to look back at the events of the past year and identify the most significant. For me, that means finding the 2019 developments that have the greatest potential to change the practice of law. A top 10. And a number 1.
So, in no particular order, here are my top 10 events that occurred in 2019 that will or should impact the legal profession in the years to come. (The development that will have the most important long term impact: the growing movement to deregulate the legal profession and allow lawyers to practice in firms owned in whole or in part by nonlawyers).
My Top Ten
The first development that stands out is the growing impact of data and data analytics on all aspects of the practice. Data and analytics is revolutionizing litigation. (Although based on the AALL analysis of the various analytical programs, we aren’t there yet). Analytics is being used to determine how and for what lawyers can bill. Analytics may help define best work processes. The days of wild assed guessing, if not over, are waning, at least for good lawyers.
The days of wild assed guessing, if not over, are waning, at least for good lawyers.
The second development: ALM’s financial analysises suggests the rich and big are getting bigger and richer. But mid-size law firms are showing strain. Also, we see large firms like Dentons and Greenburg becoming more and more national in scope. Are we headed toward a Big Four or maybe Big 20 of law firms? perhaps.
Third, and perhaps relatedly, a few large law firms are finally getting it. These firms, like Wilson Sonsini are employing automation, analytics, and technology to more efficiently deliver a better product. (These firms have an advantage: they can better spread the costs of employing technology and innovation). By getting better, these firms will become more profitable at the expense of smaller firms.
Nothing like a little capitalism.
Turning to our nagging A2J problem, the legal management software provider, Clio may be ushering in a new approach. Clio’s President, Jack Newton, has advanced the idea that the underserved are a vast potential market for the oversupplied lawyer market. If the gap could be bridged, there would be more work for lawyers and more people served. Clio wants to bridge that gap and make some money in the process. Nothing like a little capitalism.
My fifth development is really a lack of one. There is still no definitive ruling on whether mandatory bar association fees violate the First Amendment under the Supreme Court’s Janus ruling. The 8th Circuit had a chance in but frankly punted. Why is this important? Many things bar associations do might be considered political and would have to be curtailed if Janus bars mandatory fees. If so, it will reduce the ability of bar associations to fund programs that help smaller firms. Without these programs, smaller firms will be even more stressed.
We haven’t made much progress and may not at least until the economic power is law firms shifts away from old white men
Sixth, an ABA study confirmed what most of us suspected: as a profession, we are still mostly white and male. We haven’t made much progress and may not at least until the economic power is law firms shifts away from old white men. That the ABA is at least willing to expose the profession for what is a step, albeit a baby one in the right direction. At least we are using data to talk about the elephant in the room.
Number seven: there is a recognition-even among big law firm lawyers-that the billable hour may also contribute to our bad mental health. (This in addition to its negative impact on efficiency and innovation). Perhaps this recognition might spur its demise. But we’ve all been saying it’s on its last legs for years.
Eighth: 2019 was a record for investment in legal tech. Millions of dollars were poured into legal tech providers by all sorts of venture capitalists. It is tempting to say, on the one hand, that VCs wouldn’t do this if they didn’t think there was a good chance for a return. And returns would mean that lawyers are buying the products which will change the profession. But it may just be a trendy thing to do. But it is nice to see legal tech guys getting funding (I know. it is still mostly guys.)
Ninth, every indication suggests the Big 4 accounting firms will continue to expand into the legal marketplace. I opened the year with a piece on the comments of the head of EY Legal, Rutger Lambriex, at a panel discussion at ALM Legalweek. During that discussion, Lambriex said things like: the U.S. legal market “is a fragmented market, and we want to grow.” “It’s the mid-sized firms that are most at risk,” “law firms must change their business model, or many won’t exist in a few years.” And finally, “our clients are very upset with the way their lawyers treat them.” The big four accounting firms are acquiring legal technology and software companies. They are forming alliances with US law firms. Increasingly, Big Four accounting firms—Deloitte, PwC, KPMG, and EY—are globally competing with the legal services industry by offering a range of legal services. The Big Four are now eyeing the U.S. legal market. They see a golden opportunity to be the go-to advisor to in house legal on technology, innovation, and artificial intelligence.
The Number One Development: Regulatory Change
Which brings me to the most significant legal development of the year. There are signs that the regulatory framework protecting lawyers from, among other threats, the Big Four, may be about to change. The California bar has advanced proposals for new rules that would permit such things as allowing non-lawyers to invest in law firms. Arizona, Utah, New Mexico, and Illinois are considering similar actions. There is a growing recognition that if California changes, other states will change as well.
There are signs that the regulatory framework protecting lawyers from, among other threats, the Big Four, may be about to change.
What’s the So What?
Although such changes are aimed at improving A2J, the move could end up allowing Big Four accounting firms to gain a foothold in the U.S. legal market. According to Jim Jones, a senior fellow with Georgetown Law’s Center on Ethics and the Legal Profession, if California loosens its bar rules, one or more of the Big Four could open a law office there. And if the trend turns national, and six or more of the largest states such as New York, Illinois, Texas, and Florida follow, then the Big Four would probably open law offices in those states as well.
A Big Four entree into the U.S. legal market could have a significant impact on law firm market. The Big Four’s war chests are exponentially larger than those of even the country’s wealthiest law firms. Their tech capabilities are far more significant. The Big Four are global service providers to some of the biggest companies in the world and can get the ear of their well-heeled clients. Many of these clients routinely hire U. S. lawyers. The Big Four are already offering legally related products and services that help businesses and not just add expense. And, as I have written previously, it is these clients that will ultimately drive change.
And finally, the Big Four sees legal problems in a different light than lawyers at law firms. Lambriex said it best during the LegalWeek conference earlier this year: “we approach problems as business issues that require legal attention.” The main thing in house counsel want from their lawyers is that the lawyers know the client’s business better. Again, it is the very thing accountants like Lambriex wish to provide. See The General Counsel Report: Corporate Legal Departments in 2020, a report and survey done by Ari Kaplan for FTI and Relativity.
If lawyers lose the regulatory protection that keeps the Big Four out of the U.S. legal market, they will face a fundamentally competitive threat. To compete, U.S. lawyers must change. Law firms will soon have to compete more broadly, especially in terms of disciplines and types of expertise. And that will inevitably mean providing more value in areas that are particularly important to clients and focusing on narrower specialties relevant to clients in order to provide value added services.
And this is why the regulatory changes may have such a lasting impact on how we practice law.
There you have it. My top 10. My number one. Happy New Year, everyone.