EY Expands Its Reach Even Further into the Legal Services Arena

Detail from Above the Law article on EY’s acquisition of Pangea3

In early April, Ernst & Young (EY) announced that it had acquired the legal outsourcing service provider Pangea3 from Thomson Reuters, increasing the intensity of the accounting giant’s assault on the legal services industry. Robert Ambrogi at Above the Law warns that the move “does not bode well for law firms.”

Pangea3 was originally established in 2005 to provide legal outsourcing to law professionals in India. A profile on Wikipedia reports that today the company has a staff of 1000 “attorneys, engineers, scientists and professionals providing global legal outsourcing services in seven offices across the United States and India.”

EY’s acquisition of Pangea3 follows its 2018 acquisition of Riverview Law, a UK firm whose innovative practice featured such initiatives as fixed-price-managed services for in-house teams, and the use of virtual assistants.

Ambrogi reminds us that today, “calling EY an accounting firm is like calling Amazon a bookseller. EY is a global professional services firm — actually a network of member firms — that provides a range of consulting and advisory services.” With the Riverview Law and Pangea3 acquisitions, the reorganization of the company’s legal services in the UK into “EY Law,” and other areas of expansion both geographically and technologically, Ernst & Young is taking a commanding position in the increasingly popular and rapidly growing segment of the legal market known as “alternative legal service providers” (ALSPs).

Ambrogi’s article, which delves into the subject far more thoroughly than I do here and is deserving of our close attention, cites two major studies that have examined the rise of ALSPs worldwide. Ambrogi attributes their success to their facility (better than that of most law firms, he suggests) with “people, process and technology,” and particularly to their sophistication in the technology arena.

Are major accounting firms about to push Big Law out of business? Let me know your thoughts on this or any other matter relating to the law, either in the comments section below, or directly via email.

First U.K. Blockchain Residential Property Deal Ever Is Now History

Screen capture: The Artificial Lawyer

The Artificial Lawyer reports on the completion of the first-ever U.K. residential property deal using blockchain technology rather than traditional property-transfer methods.

The deal was managed by the law firm Mishcon de Reva, which describes its work as “cross-border, multi-jurisdictional and complex,” and this specific deal as the first “end-to-end digitised residential property transaction.” The Artificial Lawyer explains that in effect, the deal was carried out on “a blockchain-based platform, and completed via working alongside the HM Land Registry’s Digital Street research and development group and Premier Property Lawyers.”

This is clearly a big deal. There has been plenty of talk about such blockchain uses, but this one is for real. – The Artificial Lawyer

The Artificial Lawyer points out that not only does the use of blockchain mean a dramatic difference in the length of time it takes to complete a property deal in a real-estate market that has been “famously slow, manual, paper-based and often open to fraud due to the disconnected processes it involves,” but it is also a dramatic affirmation of the blockchain technology itself, “given that the U.K. is one of the most important property markets in the developed world…. [I]f people here think blockchain is a useful method for property sales, then it certainly has legs and is operating in a very demanding environment.”

Read the details on The Artificial Lawyer site, and then consider: Are you ready for blockchain transactions at a level equal to or exceeding residential property purchases and sales? If not, what steps does your firm need to take to attain this expertise?

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.

Miss North Carolina has an MBA and practices law with prominent N.C. law firm Poyner Spruill

Update May 3, 2019: Congratulations to Cheslie Kryst, who has won the Miss USA Pageant and will now move on to compete for the title of Miss Universe!

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A civil litigation lawyer in Charlotte, North Carolina, Miss North Carolina has been attracting media attention, as well as invitations to speak and to serve as host at charitable events, for reasons that seem at first to be unrelated to her legal practice. Not only is Cheslie Kryst, JD, MBA an associate at the prominent North Carolina law firm Poyner Spruill LLP, she is also a Miss USA beauty pageant contestant and a highly regarded fashion blogger. On May 2 she will represent North Carolina at the Miss USA pageant in Reno, Nevada.

Kryst was recently featured in a “day in the life” article in the Charlotte Observeras she ramped up preparations for the national pageant, fulfilled a commitment to one of the city’s charitable organizations, and carried out her legal responsibilities —  popping a tiara on her head at the end of her workday en route to the benefit event. The article reveals an individual with a balanced view of life, strength both personally and as a lawyer, and a spirit of generosity and philanthropy.

She knows that much of the world sees pageant girls as only pretty faces, and, on a larger scale, unfairly judges women based on appearances — especially in the workplace. She’s hustling hard to change all that. – Charlotte Observer

Women who are working to advance their careers in the law and other male-dominated, corporate endeavours tend to avoid becoming associated with the worlds of fashion and beauty. They are aware of the widespread tendency of humans to prejudge attractive women (not only pageant contestants), and to assume that they lack intelligence and vision. As The Observer article reports, Kryst has plenty of anecdotes about times when she has been taken less than seriously in legal settings due to her eye-catching appearance. But as lawyers like Amal Clooney, Marie Heinen and Kryst are demonstrating, it is dangerous to make assumptions about women on the basis of how they look.

Screen Capture from whitecollarglam.com

A graduate of South Carolina University Honors College (BS cum laude) and Wake Forest University (JD and MBA), Kryst got into the pageant business in her teens when she realized that achievements in that arena could give her a power that she could use in other contexts. Over the years, her avocation as a pageant contestant has also contributed to her public speaking abilities, offered networking opportunities, and resulted in invitations  to serve community initiatives like Autism Charlotte. Kryst launched her blog, White Collar Glam, after a female judge in a moot court competition advised her that if she wanted to win the next time, she should wear a skirt. She uses her platform to advise women on dressing for the workplace, and she has thousands of followers from around the world.

It takes courage to pursue the crown in a beauty pageant when you are working in a profession in which many women are still struggling for equal treatment and opportunity, but by excelling at both initiatives without apology (for either!), Kryst is teaching everyone she encounters a thing or two about the synergy that can by attained by following one’s passions.

Please share your thoughts on any topic relating to the law, either in the comments section below or directly via email.

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.

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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

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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.

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* 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.

 

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