If You Are Apathetic Toward Technology, General Counsel Will Fire You

Inside E-Discovery & Beyond: Navigating Legal Digital Disruption BDO USA

A new report by professional services firm BDO USA suggests that more than 70 percent of in-house counsel “plan on leveraging technology in the next year to streamline legal operations” – and that outside counsel that are unable to adapt to the technology will likely be replaced. This information comes to us via an April 11, 2019 article in law.com, which explains that the report – based on a survey of 100 senior in-house lawyers at major companies across industries – has found that “in-house counsel are making it a priority to leverage technology and [an estimated 36%] are considering changing outside counsel in the coming months.”

George Socha, managing director at BDO, says it appears that the desire of in-house counsel to change the outside firms they work with is based in part on the unprecedented pressure to “live and die by metrics,” combined with “lack of innovation” on the part of outside firms, as well as firms’ pricing models.

It is clear that it is impossible any longer to survive as outside counsel if you are not on top of relevant technology. And not just any relevant technology: Socha says that “firms are now expected to use technology that in-house counsel has in place,” thereby allowing companies to improve their control, and reduce risk. “Control” and “risk” are major considerations, as more than half of the surveyed companies reported “data breach” as their major legal threat.

The article quotes BDO Partner Stephanie Giammarco as saying that, moving forward, “corporate counsel will not only have to deal with the increasing quantity and complexity of compliance obligations, but also greater standards of accountability and transparency of them from external stakeholders.”

The implications for outside counsel are clear: opportunities abound, but only for those individuals and firms who are fully cognizant of the legal and related technology with which their preferred clients work.

I am interested to know your thoughts on this topic or any other relating to the law, either in the comments section below, or directly via email.

 

Changes to State Bar Rules Could Mean Trouble For Big Law

Writing in Bloomberg Law, Sam Skolnik and Amanda Iacone report that recent initiatives to lower the costs of legal services in at least three western states may inadvertently make it easier for Big Four accounting firms to enter the U.S. legal marketplace. This could, in turn, present a major threat to Big Law.

The proposed changes, which would affect state bar rules regarding law-firm ownership in California, Arizona and Utah, are intended to stimulate competition by allowing closer collaboration with “professionals in tech, data analytics, and accounting” – thereby reducing legal-service costs in civil and family courts. If these initiatives are successful, it seems likely that other state bars would soon follow suit.

The Sarbanes-Oxley Act (2002), which includes a prohibition against audit firms offering certain non-audit services, has so far prevented the Big Four from offering legal services in the U.S. – and this Act would not be affected. What would be modified are rules imposed by most state bar associations that are based on the American Bar Association’s Model Rule 4, which forbids lawyers and law firms from “[sharing] legal fees with a nonlawyer” or partnering with nonlawyers “if any of the activities of the partnership consist of the practice of law.”

If law-firm ownership rules are altered in this way, the Big Four accounting firms could open law offices in the affected states or take other steps that would allow them to expand their services into the legal arena while continuing to conform to the Sarbanes-Oxley Act.

If the movement for more access to justice for regular citizens winds up opening a lane for the Big Four to pursue corporate clients in the U.S., Big Law could be in trouble. The Big Four’s war chests are exponentially larger than those of even the country’s richest law firms, and their tech capabilities are often greater. – Bloomberg Law

An EY executive director told a legal-tech conference recently that the Big Four has no “secret plan” to put Big Law out of business. But plan or no plan, it is clear that Deloitte, PwC, EY and KPMG could soon have the option – and the resources – to encroach on the territory of the country’s largest law firms. If that happens, it seems unlikely that they would look the other way.

I am very interested to know your thoughts on this or any other matter related to the law, either in the comments section below or directly via email.

By Dramatically Reducing the Need for Paper, Technology Becomes the Great Global Equalizer

In a recent post on The Artificial Lawyer, Jon McNerney, CEO at CaseLines, reports on a partnership his company has established with the Court of Justice for the Common Market for Eastern and Southern Africa (COMESA), as well as initiatives the company has undertaken with Kenya’s court of appeal and South Africa’s civil courts.

CaseLines offers a cloud-based platform for courts, local government and law firms that is designed to facilitate the management of evidence. McNerney says that the application of this digital technology in Africa “has now put African courts at the forefront of the legal technology drive, with legal technology as advanced as anywhere in the world.”

The dramatic effect of the application of the CaseLines system in African legal contexts primarily comes down to a significant reduction in the need for paper, McNerney says. In the UK alone, he points out, “the amount of paper … used by the courts [prior to the implementation of Crown Court Digital Case System] would reach the height of the London Shard every four days if stacked from the ground up.”

“Paper costs” include not only the price of paper stock itself, but fees associated with its physical storage, filing and retrieval, moving documents from one place to another, and other related expenditures. McNerney estimates that the transition from a paper to a digital platform has saved the 21 member states of COMESA’s Court of Justice thousands of dollars a month.

“Digital justice systems are not only aiding improvements in the rule of law,” McNerney writes, “but also assisting countries in meeting the UN’s Sustainable Development Goal 16, which is to provide access to justice for all and ‘build effective, accountable and inclusive institutions at all levels’.”

The CaseLines experience in Africa is a reminder of the overwhelming range of benefits that digital technology offers the legal system  – in this case facilitating the cause of justice in relatively poor countries around the planet.

Please let me know your thoughts, on this topic or any other relating to the law, either in the comments section below or directly via email.

Big Four Continues Advance into Legal Space with World-Wide AI Legal Doc Review System

The Artificial Lawyer reports on another significant move by a Big Four accounting firm into legal territory with EY Law‘s installation of an AI document review system at its offices around the world.

A February 9, 2019 post in The Artificial Lawyer states that “EY Law, which has over 2,000 lawyers across 81 jurisdictions, will use the system across its legal advisory and managed legal services (MLS) groups.”

This is only the latest advance by one of the world’s Big Four accounting firms into legal practice, where they are particularly focused – at least for the moment – on immigration law and technology-assisted legal work. Dentons’ global chairman Joe Andrew has described these initiatives as a “Trojan Horse.”

I recently encouraged readers to check out a podcast by LegalSpeak that examines the question of whether or not recent forays into the legal arena by the accounting industry’s Big Four actually comprise a significant threat, particularly to Big Law. (The answer is “Yes.”) If you didn’t listen to it then, I encourage you to do so now.

Please let me know your thoughts on this or any other matter related to the law, either in the comments section below or directly via email.

We Must End Abusive Behavior toward Articling Students, Junior Lawyers, and Law-Firm Staff

A recent article in The Toronto Star draws attention to a widespread problem that should concern every lawyer in our profession. It describes the growing number of reports to the Discrimination and Harassment Counsel of the Law Society of Ontario by articling students who describe the firms that employ them as “abusive workplaces.” Specific examples include “Verbal threats and humiliation. Working more than 100 hours a week. Not being properly paid.”

These problems are not restricted to Ontario, nor are articling students the only victims of this kind of mistreatment. Most of us know junior lawyers and staff who experience disrespect from senior lawyers in their firms. In fact, The National Task Force on Lawyer Well-Being, about which I have written recently, makes it clear that for many, working in a law firm is nothing short of intolerable.

I appreciate that the offensive behavior is not representative of the average lawyer, nor indeed of most lawyers, but only a small minority. No matter how few the perpetrators, there is no excuse for their behavior in law firms – nor for the tolerance of it by law-firm leadership.

It is my conviction that at all firms have a duty to keep an eye out for abusive behavior and to keep in line any partners who may be guilty of acting toward any employees in a way that brings disrepute to our profession.

One of the reasons I care so much about this issue (beyond loving and respecting the legal profession, of which I have been a proud member for 45 years) is the growing trend among lawyers toward alcohol and drug abuse, depression, and other mental disorders or illnesses associated with trauma and stress.

So my message is this: if you have a bully in your midst with the power to hurt junior lawyers and staff, stand up and put a stop to it.

Dismissing an Abusive Lawyer Does Not Mean Financial Loss

In larger firms, unfortunately, those guilty of the worst conduct are often among the top rainmakers and billers. Again, do not interpret this to mean that I believe that negative behaviour is typical of all rainmakers and top billers.  I am saying that those few who seem to be most guilty of unseemly behavior are often those with a great deal of power – and power in a law firm is often obtained from outstanding performance in the area of billing and attracting new clients.

For those who fear losing income by dismissing an abusive partner, I have good news for you. In the cases I am aware of where perpetrators have left a firm – either of their own volition or because they were asked to leave – the firms always report that they were able after a reasonable period of time to make up the lost income. Even in one case where the perpetrator had billings of $10 million, the team of which he was a member reported that they made up for those lost billings within a year of his leaving – and that following his departure, all involved had a spring in their steps that had been absent for many years because of him.

….

A message to victims: Do not suffer in silence. I appreciate that you may fear dire consequences by reporting within a firm that does not have the proper mechanisms for receiving such information in a trusted, confidential manner.  You also have the option to report to the governing body in your jurisdiction. In addition, should you experience physical or psychological effects, you should seek medical attention. Many courageous members of the legal profession have reported that their choice to be open about their problems and get help was a life-saving decision.  – GAR

….

I am interested to know your thoughts on this topic or any other relating to the law, either in the comments section below, or directly via email.

QNBT: Extracting Real Value from Non-Billable Time

“Your billable time is your income; your non-billable time is your future.” – David Maister

Non-billable time gets little respect*

Many perceive non-billable time as something that can be conjured at will. Taking someone to dinner who may or may not be a qualified client prospect can be recorded as business development. Furthermore, that two-hour dinner can turn into three or four and, with travel time, five hours. Those who have spent many hours on gruelling and challenging legal work can easily resent the generation of these hours with so little effort.

The consequence: Non-billable time is often not tracked accurately

In fact, in many firms, it is seen as a sign of prestige not to record non-billable time.

Some firms have learned to break this cycle by making non-billable time less discretionary and harmonizing it with the objectives of the team or firm.

The nature of the “qualified non-billable hour” is pre-negotiated and pre-authorized.

Suppose a senior associate wants to join the ABA section relevant to her practice area. Furthermore, she’d like to attend the meetings of her subsection locally, regionally, and nationally. Her practice group leader wants to know why this will be a worthwhile investment for the firm and indeed what the return on investment might be. She argues that over the next several years, gaining prominence in the section will yield referrals from other parts of the country and thereby enhance the practice for her, her group and the firm.

Her practice group leader might wisely ask something like: “Do you think you can get on the ladder such that you will occupy a position of prominence in the section, perhaps leading to becoming a chair of the section within five years?” The senior associate may respond that she was successful in attaining elected offices in school and then university and is confident that she can do so in the section. The deal might be struck such that the approval to spend the non-billable time (and the travel expenses) will be conditionally approved based upon a monitoring of her progress over the course of the next two years. If that progress is promising, the firm will continue to support the effort.

In this instance, the non-billable time expended by the associate becomes qualified non-billable time (QNBT). It is not merely discretionary time, nor is it perceived to be something that can be conjured at will, but rather it is something that has been vetted and will be measured against a set of objectives.

Imagine a situation where most, if not all, of the lawyers create a plan – for approval – that will constitute QNBT. Aside from an improved perception and respect for the non-billable time that is being invested, there is also a much higher probability of a good return on that investment for the firm.

A heretical principle: The non-billable hour is worth more than the billable hour

A Chicago firm I know which has had a meteoric rise in prosperity decided that a non-billable hour was worth more than a billable hour. Before you faint, this did not mean that spending eight non-billable hours and no billable hours in a day was considered more valuable for the firm. Not at all. Rather, the firm decided that those who spend ten billable hours and no non-billable hours are depriving the firm of the strong return that it would obtain on having at least one quality non-billable hour from that individual in a day.

Desirable non-billable minimums and billable maximums

For those firms that still bill exclusively by the hour, it is tough to persuade leadership that excessive billable hours are counterproductive. The truth is that the more senior people with the relationships should be spending at least a portion of their time attracting more work from existing clients and attracting new clients. Those who do exclusively billable work deprive the firm of that new work generation. Therefore, some enlightened firms actually place a maximum on the billable hours that a partner can spend, especially if that partner is a part of senior leadership or practice group leadership or industry group leadership or have a proven rainmaking capability.

I strongly recommend that the managing partner and executive team give some serious consideration to becoming QNBT-oriented.

____

* Note: This article first appeared in the March, 2019 issue of Edge International Communiqué (EIC). Each month, EIC publishes items of interest to lawyers around the world on various aspects of law-firm strategy, marketing, technology, management, economics, human relations and a host of other topics. In addition to the most recent edition, the EIC site includes a sign-up page for those who are interested in subscribing to EIC, as well as a list of archived articles.

I welcome your thoughts and feedback on both Edge International Communique and Amazing Firms, Amazing Practices, either in the comments section below, or directly via email.

 

Scam Against Dentons Serves as a Reminder: No Law Firm Is Immune

In a world where unfamiliar and complex communications systems are the norm, it is not only the legislatively naive and digitally undereducated who are subject to expensive cons and scams. This difficult lesson was driven home at Dentons Canada last year during a real estate transaction, when an associate inadvertently wired $2.5 million to a fraudulent account in Hong Kong rather than to the intended recipient.

In an article in The American Lawyer, Scott Flaherty explains that the associate, who works at the Vancouver office of Dentons, received emails purportedly from affiliates of the mortgage company his firm was dealing with, asking the firm to transfer the funds to a different account than the one originally designated.

In fact, the emails came not from the mortgage company, but from a scam operator who was clearly familiar with the details of the transaction. Despite the firm’s carrying out what was seen as due diligence, the hoax went undetected and the funds were transferred to the fraudulent account. After it realized what had happened, the firm managed to recoup about a third of the money on its own, and turned to its insurance company for the balance. The insurance company refused to pay, and the matter is still before the courts.

Flaherty writes that a representative from Dentons Canada explained that the hoax began “when a third party’s computer system was breached, arming the fraudsters with knowledge of the details and timing of the underlying transaction, and allowing them to impersonate employees of the third party.” The representative also said that all Dentons lawyers and employees are extensively trained in matters relating to potential cyber fraud, and that none of the firm’s existing standards had been breached during the unfortunate transaction.

This and several other instances where law firms have been subjected to cyber theft and computer hacks serve as reminders that all of us need to raise our antennae when it comes to potential breaches – and to check on the status of our insurance policies as they relate to cyber fraud in case our antennae let us down.

I welcome your thoughts on this and any other matter related to the law, either in the comments section below or directly via email.

 

Lawyer Well-Being: An Issue We Must Address Right Now

There may never have been a better time to read The Path to Lawyer Well-Being: Practical Recommendations for Positive Change, a 2017 report by the National Task Force on Lawyer Well-Being.

The Report “defines well-being and sheds light on the lack of well-being in the legal profession.” It then “offers concrete, actionable recommendations on how to fix the problems […] .” The document can be read online, where recommendations may be accessed by stakeholder (defined as “judges, regulators, legal employers, law schools, bar associations, professional liability carriers, and lawyer assistance programs”), or downloaded as a PDF.

This is an extremely important report and should be considered by every law firm leader.

My experience working with many firms globally, is that some lawyers believe that their problems are unique to them and not widely shared in the profession. That is wrong.
These are tough times for lawyers to perform in a way that meets their firm’s expectations. Competition in the legal marketplace has never been more intense. Lawyers are dealing with increased client pressures (including fee pressures), and the rapid acceleration of technology is posing a real threat to pieces of traditional legal work.

The sum total of such professional pressures, when added to global concerns shared by almost everyone and the inevitable personal issues of individuals, can create an emotional situation that is ripe for disaster. With the help of this report, a law firm that is determined to address the issue of lawyer well-being before it is too late for any member of its staff – or before it loses any of its brightest minds to other firms, or even to different career paths – is taking a step in the right direction.

As always, I am interested to know your thoughts on this or any other area of the law, either in the comments section below, or directly via email.

Black Law Firm Partner Says GCs Open Letter on Diversity Is More PR than Practice

Don Prophete, Partner, Constangy, Brooks, Smith & Prophete

Several weeks ago I reported on a significant initiative by 170 general counsel and corporate legal officers – an open letter, published on LinkedIn, warning law firms that if their record of partnership promotions failed to reflect the diversity of the general population, a number of leading corporations would be disinclined in future to hire them as outside counsel.

Shortly after the letter was published, Don Prophete, a partner at Constangy, Brooks, Smith & Prophete, chastised the law profession in general for the continual need for initiatives such as the open letter, which he says have been ongoing for years without noticeable effect.

“Here is what has happened to law firm diversification since the first letter was penned in the early 2000s,” Prophete writes. “Today, law firm racial diversity has either remained stagnant or has decreased significantly. The latest report on Black male lawyers in law firms is alarming. Judging by these numbers, the profession has regressed significantly. [….] The numbers for Latinos, Asians and ‘others’ remain dreadfully low as well.”

Based in part on his own, highly successful career in labor and employment law – which has, he says, led to exactly zero offers from GCs based on his track record to work on major matters – Prophete believes that most of those with “significant outside counsel spend” as the signatories to the open letter describe themselves, put their names to such letters because it is “a politically necessary thing to do, which ultimately requires zero accountability.”

Saying the right thing to appear politically correct is different than taking real measures to diversify the legal profession. – Don Prophete

While no direct line can be drawn between the lack of improvement in racial diversity in law firms and lack of initiative even by those who are protesting the lack of improvement, it is impossible to ignore the soundness of his allegations. His statement includes a list of ways in which GCs demonstrate their lack of actual interest in increasing diversity when they hire outside counsel. Here’s one: “If you asked most GCs today to identify by name a single racially diverse outside counsel that the company uses, how many could actually identify that lawyer by name […]?”

Prophete’s questions must be addressed in congruence with – not instead of – the points that were raised in the open letter. Clearly, confrontations with this significant problem must take place on more than one front, and must include action as well as words.

Please let me know your thoughts on this or any other matter related to the law, either in the comments section below or directly via email.

The Future of the Law Includes More than the Legal Elite

In an article on LawSites entitled “Five Days, Two Conferences, One Echo Chamber,” Massachusetts lawyer and legal journalist Bob Ambrogi describes his recent attendance at two legal conferences held in New York City in early February, Legalweek (now in its 37th year) and Inspire.Legal (inaugurated in 2019).

Although the events were very different, Ambrogi says, he found them both to be of value. However, he was discouraged to note that the organizers, presenters, target audiences, and attendees at both meetings consisted primarily of the ten percent of lawyers who work at the world’s largest law firms and its biggest corporations.

“Virtually nowhere to be found were the 90 percent of lawyers who practice outside biglaw, the business clients who do not run mega-corporations, the access-to-justice community, or those disenfranchised from the legal system,” Ambrogi says.

To Ambrogi’s concern, I would add my own observation that in general there is little help for the majority of lawyers and law firms who are desperate for assistance in managing the technological maze and the host of other issues that face the legal industry today.

I was left wondering how legal tech and innovation became the domain of the legal elite, and how can we bring more voices to the table in order for true change to come about in law. – Robert Ambrogi

In a more expansive article on the same subject at Above the Law, Ambrogi explores ways in which more meaningful and inclusive conversations, and exchanges of information about the future of the law, can be facilitated. I encourage you to read the article as it raises important questions that are worthy of our close consideration.

Ambrogi concludes that “If we truly want to solve the problems that face the legal system […] as a whole, then we need to find ways to bring together all the stakeholders. That means biglaw and small law, big business and small business, clients and those who cannot afford to become clients, those embroiled in the system and those excluded from it.”

It’s a tall order but one that is, I believe, essential to the future of our profession.

Please let me know your thoughts on this or any other matter related to the law, either in the comments section below or directly via email.

 

LexBlog