All too often, we think of the legal market, especially for law firms, as being composed of BigLaw or at least lawyers that bill by the hour.

 

The truth is, though, that today’s legal marketplace is composed of various segments. These segments have business models and goals that are so different that they might as well be thought of as separate types of businesses entirely.

 

The trend toward increase diversification and segmentation in legal was brought home to me in a couple of conversations this week. The first was with Kris Satunkas. Satunkas is the Director of Strategic Consulting for CounselLink.

 

The CounselLink 2022 Report: The Rich Get Richer

 

I talked to her about the new LexisNexis® CounselLink® 2022 Enterprise Legal Management Trends report. LexisNexis CounselLink is a cloud-based enterprise legal management program for corporate law departments.

 

According to CounselLink, the Trends Report, now in its 9th year, provides insights into seven metrics. These metrics all impact corporate legal decision-making. The Report leverages data based on more than $49 billion in legal spend across 350,000 timekeepers, 8 million invoices, and over 1.2 million matters. CounselLink collects and analyzes this data from the invoices it processes. The most recent CounselLink Report examined 2021 data on billing rates and growth.

 

The key findings of the recently released Report, according to Satunkas:

 

  • On average, 2021 hourly partner rates of those in the 50 largest law firms (those with more than 750 lawyers) increased by 3.4%, compared to 3.5% growth in 2020. This growth was despite in-house legal’s often professed interest in controlling legal spend and holding down costs.
  • The Largest 50 firms (those with more than 750n lawyers) continue to account for the largest share of legal spend. In 2021, 46% of outside counsel spend was paid to these firms, which is consistent with results from prior years.
  • The three categories commanding the highest partner rates: M and A, Finance, Loans and Investments, and Regulatory Compliance. Combined, the largest firms had a 61% share of billings in these categories in 2021. They also grabbed almost 3/4s of IP Litigation and Corporate Antitrust work.
  • In-house legal continued to show interest in alternative fee arrangements (AFAs). The 2021 results continued a ten-year trend of growth. Last year, 14.8% of matters had at least some portion of the work billed alternately. 9.6% of all fees were non-hourly
  • In 2021, nearly 60% of companies consolidated 80% or more of their legal work with ten or fewer law firms
  • Looking at these findings, you might be tempted to conclude that it’s a great time to be a lawyer, at least financially. And that’s true for the very top end of the market. But rates for firms of between 500 and 750 lawyers did not see the same rate increase. Firms with between 200-500 lawyers saw even less of an increase. According to the data, these firms receive some 20% of the overall legal spend. And some 25% of the spend went to firms of less than 50 lawyers.

 

As can be seen, a significant portion of the legal market is not getting big rate increases. Presumably, this is because the perceived value of their work is not as great as that for the high-end work done by the largest law firms. Presumably, these firms are also under increased pressure from their clients to hold down rates and overall fees. These firms are thus looking at a completely different picture, challenges, and pressures when it comes to the legal work they provide.

 

Integrated Law: the Factor/BT Partnership

 

I also recently talked to Chris DeConti, Head of Strategy of Factor, about the recently renewed and expanded partnership between Factor, a high-end ALSP, and BT. BT is a UK telecommunication and network provider. It also provides global communications services and solutions. DeConti told me that the expansion is part of Factor’s plan that he calls “integrated law.”

 

Here’s the idea. Like most ASLPs, Factor historically provided commoditized eDiscovery type services. According to DeConti, Factor realized that to continue to grow, it had to provide more sophisticated legal services to in-house clients. Says DeConti,” you have to focus on the center, not the fringes” of legal work to grow. DeConti observes that in-house counsel are today called upon to devote lots of time and attention to high-end, high-value legal matters (like M &A matters, for example). This pressure leaves them with little time to deal with and advise the business about more repetitive but still very important business transactions.

 

This kind of advice requires a sophisticated knowledge of the business and its goals and vision. It also requires sophisticated legal knowledge. In-house counsel are uniquely qualified to do this important work, says DeConti. Factor wants to do more transactional and repetitive important work to free up in-house counsel. To enable them to do what they do best: advise their business. Doing more of this transactional work at times requires sophisticated lawyering, which Factor wants to provide.

 

It is this type of repetitive transactional and litigation work that mid-size law firms (those with fewer than 750 lawyers) have historically provided

 

Great idea. But it’s just this type of repetitive transactional and litigation work that mid-size law firms (those with fewer than 750 lawyers) have historically provided, albeit often not as efficiently as ALSPs.

 

So these smaller firms are being pushed on rates by clients and have new and sophisticated competitors—ASLPs. Management of these firms has a whole different set of problems that require different strategies and perhaps even different business models than the very largest firms. Apples and oranges.

 

And let’s not forget an even more divergent business model used by plaintiffs’ contingency fee firms. To lawyers in these firms, less time spent on a matter means greater profit, not less. It’s like the difference between General Motors and Apple.

 

To think of the legal marketplace as a one size fits all, a monolithic market is a mistake

 

So to think of the legal marketplace as a one size fits all, a monolithic market is a mistake. More and more, legal vendors, to be successful, must tailor their products to the precise market segment they want to serve. Vendors need to understand the increasing differences in the market segments and the nuances of each. They need to be sensitive to how different lawyers in the different segments view the world.

 

And those of us who comment on the legal market? Now more than ever, we need to be careful about generalizations on the impact technology, and innovation might have. That impact will rarely be the same across all legal business models.

Lost in the acrimonious abortion debate in the wake of last week’s Supreme Court ruling are fundamental and downright scary questions. What does the brave new world of privacy? What privacy protections are there, or what should there be now that abortion is illegal in so many states? A brave new world that may terrify tech companies and ultimately all of us.

 

A recent report from Reuters entitled U.S. Tech Industry Frets About Handing Data to States Prosecuting Abortion sets out the issue. When you go online and search the web, there is a record created of your search history– and the sites to which you go. There is also geolocation data generated.

 

Let’s face it, companies like Google, Amazon, and Facebook collect enormous amounts of personal data: where we’ve been, what we’ve bought, who we’ve talked to, and what we’ve said. These companies have a record of and can tell advertisers about just everything about you. Every time you run a search, you are revealing something about yourself. You are leaving more and more information.

 

Indeed, this very record enables tech companies to sell advertising and stay in business. It’s why when you search the web for, say, lawnmowers, you get an email or Facebook message from a lawnmower seller.

 

These vast digital records could be used by law enforcement to ferret out those in states where abortion is illegal who are looking to obtain an abortion

 

But now, these vast digital records could be used by law enforcement to ferret out those in states where abortion is illegal who are looking to obtain an abortion in a state where it’s permitted. Information that might indicate plans to terminate a pregnancy, for example. Information that might suggest someone will aid a woman in search of an abortion.

 

Prosecutors could seek warrants to subpoena internet search records of a woman who they suspect obtained an abortion. Or of anyone who seeks to assist her in some fashion.

 

Far fetched? Under Texas law, private citizens can sue those who assist a woman in getting an abortion. In Texas, anyone who performs or aids with the abortion can be sued — and by almost anyone. There is a $10,000 cash reward if the bounty hunters are successful. So if you drive a woman to another state or pay for a plane ticket, you could be sued. And your digital records could be subpoenaed to provide evidence of what you did. Or the bounty hunters could hack into systems to get what they want. Scary stuff.

 

And what about tech companies? Tech companies could eliminate any record of customer searches. But then they would have nothing to sell.

 

Or they could refuse to comply with the subpoena. Remember the hoopla when Apple refused to allow law enforcement to hack into a terrorist cell phone? That case was resolved when law enforcement found a hacker who did the job. Cold comfort now.

 

These companies’ business model depends on the data they collect and peddle. But now, that data can be used against the tech companies’ users who don’t want it revealed.

 

 

Granted, the tech companies face a dilemma. These companies’ business model depends on the data they collect and peddle. But now, that data can be used against the tech companies’ users who don’t want it revealed.

 

Maybe the brave new world and this newfound tension will make every tech company question the volume of data they are collecting, whether they need it, how it could be harmful, and how long they want to hold it. But again, that’s a little like asking them to kill the goose laying the golden egg. On the other hand, if people quit sharing information and using the tech services, it also undermines the tech business model, but nowhere near as likely.

 

Since many other constitutional rights hinged on the Roe v. Wade reasoning—LGBT rights, contraceptive rights, and interracial marriage rights, to name a few—the privacy onslaught could become our worst nightmare.

 

Till now, the issue has been to what extent law enforcement can obtain records when a serious crime has been committed. But now, in many states, abortion has become a serious crime. And going to a state where it’s legal may or may not be a crime as well. Not only that, the Supreme Court has now made what last week was a constitutional right now illegal in many states. And since many other constitutional rights hinged on the Roe v. Wade reasoning—LGTB rights, contraceptive rights, and interracial marriage rights, to name a few—the privacy onslaught could become our worst nightmare.

 

And that’s an even scarier proposition. Are our digital records about to become fair game now for law enforcement even if we go someplace to do something that’s legal there? Do we have any right to privacy with respect to the information? Will the tech companies who we have ceded our privacy rights now going to roll over? Can they?

 

Oh how easy it was to give up what was once our private information for convenience purposes. And now the chickens may be coming home to roost.

 

It’s a brave new world.

 

Photo Attribution: Photo by mostafa meraji on Unsplash

I had an interesting discussion recently with Peter Baumann. Peter is the CEO and founder of data privacy and governance software provider ActiveNav. According to its website, ActiveNav, founded in 2008, helps “privacy and compliance teams quickly identify, inventory and map sensitive data.”

 

Peter’s present goal is to develop solutions that address what he calls the “elephant in the room .”That is businesses having and maintaining too much unstructured that they really shouldn’t.

Continue Reading Law Firms and Unstructured Data: A Disaster Waiting to Happen?

Several articles have recently discussed the claim by a Google computer scientist that a Google AI system was a sentient being. The scientist, Blake Lemoine, used his interview with the AI program to support his claim that the program appears to have consciousness. If you go by some of the interview responses, I got to wonder whether a lot of lawyers can be considered sentient.

 

For those who don’t know, sentient refers to the ability to perceive or feel things. The general thinking is that only humans are sentient and in the club. Animals (Dogs? Cats?) are not. Certainly, computers are not.

Continue Reading Are Lawyers Sentient?

At the risk of stating what perhaps should be obvious, lawyers valued for their abilities and insight are generally happier. They are certainly happier than those valued almost entirely on their production (i.e., billable hours). The latter group is by and large less healthy than the former. And in the long run, the happier lawyers are more–not less– productive than their unhappy, stressed out brethren.

 

Makes sense, right? Then why do so many law firms evaluate and compensate lawyers–especially associates–based on the billable hour yardstick? Maybe it’s because of a lack of empirical data demonstrating the advantages of the long-term view. If so (and as set out below, I am not convinced that that is the case), at least now there is data that confirms the obvious. Happier lawyers are more likely to be more productive over the long haul.

Continue Reading Lawyers Valued For Insight and Ability Are Happier. And More Productive

Data doesn’t lie. But sometimes, you have to ask it better questions to get anywhere meaningful.
 
 
In making criminal justice decisions, courts and prosecutors have tried to use data and algorithms to determine things like the risks to society a particular accused may pose. The concept is simple: look at the data and determine who is likely to commit another crime or flee before disposition. From this analysis, the theory goes, you can then determine if a particular accused is similar to the individuals the data says are likely to pose those risks.
 

Continue Reading Data Analytics: It’s All About The Question You Ask

Last week, Tesla CEO Elon Musk announced via Twitter that Tesla “is building a hardcore litigation department where we directly initiate & execute lawsuits.” The lawyers will report directly to him. Said Musk, “Looking for hardcore streetfighters, not white-shoe lawyers like Perkins or Cooley who thrive on corruption.”
 
Musk is soliciting responses from lawyers. Those interested should send him 3 to 5 bullet points about how they qualify presumably as streetfighters.  Musk’s finally shot: “We will never seek victory in a just cause against us, even if we will probably win. We will never surrender/settle an unjust case against us, even if we will probably lose.”
Some of the best trial lawyers I know are in small to mid-size firms
 
If what he is doing is trying to find really good trial lawyers, and he thinks the best trial lawyers aren’t necessarily in big law firms, then he has a point. Some of the best trial lawyers I know are in small to mid-size firms. These are the kind of lawyers that try lots of cases and have years of experience doing so. Yes, some big firm lawyers fit this bill, but many do not since the kinds of cases big firms handle often don’t go to trial due to cost and risk.
 
But I’m not sure this is what Musk is really doing. In my experience, clients that want “streetfighters” often don’t necessarily want the best lawyers. What they really want is lawyers who will argue and fight every point and issue. It doesn’t really matter to clients like this whether contesting everything is justified from a cost and substantive standpoint.
Again, in my 35+years of experience, clients like this want lawyers who will tell them what they want to hear about their cases. It doesn’t really matter to them whether that is the right assessment. And the lawyers who serve these clients all too often fall into the trap of not providing their best judgment about what to do. Or they provide judgment that the client does not want to hear and get berated for being “chicken” and fired. And like the Musk tweets imply, these kinds of clients usually want to micromanage their cases and substitute their judgment for their lawyer.
 
Good trial lawyers know that it’s pointless to contest everything. They know that agreeing to a reasonable extension that would probably be granted by the court anyway is not a sign of weakness. They appreciate that fighting only over things that matter builds credibility with the judge and jury. And they recognizes the principle that what goes around usually comes around.
Lawyers are paid for their best judgment. It’s what we are supposed to provide. Even if it’s sometimes hard for a client to accept
 
Lawyers are paid for their best judgment. It’s what we are supposed to provide. Even if it’s sometimes hard for a client to accept. Sometimes you have to tell your client it’s best to settle. That their case is not very strong.
 
So hiring “streetfighters’ that adopt a scored earth strategy probably doesn’t achieve much in the long run. Yes, as lawyers, we should be prepared to fight and try “unjust” cases. But clients that demand scorched earth strategies usually have convinced themselves that every case brought against them is unjust. That every case needs to be fought.
The other thing about clients like this: they want scorched earth, but they usully don’t want to pay for it
 
The other thing about clients like this: they want scorched earth, but they usully don’t want to pay for it. They are the quick to complain about and not pay their bills.
 
I don’t pretend to know what Musk is thinking with this scheme. But I did learn over my years of practice to steer clear of bullying, micromanaging clients. Life is too short.
Photo by Nick Bolton on Unsplash
Early on in the ABA’s most recent annual diversity Survey Report, the authors quote the French writer Jean-Baptiste Alphonse Karr: “The more things change, the more they stay the same”. The bottom line from this year’s Survey is summed up in one sentence from the Report:  “White attorneys, male attorneys, non-LGBTQ+ attorneys, and attorneys without disabilities dominate in representation within law firms and therefore in hires, promotions, leadership, and compensation”.
The Survey confirms pretty much what all the other similar Surveys from the ABA and elsewhere show year after year. Let’s face it: by and large, the legal profession is one of the last bastions of old white male domination. From equity partnership to compensation to associate hiring, being a white male entitles you to the keys to the legal kingdom. I have written about this here and here and here and here and here. You have to wonder what needs to happen for there to be any significant change.
This year’s Survey was released on May 22nd by the ABA’s Commission on Racial and Ethnic Diversity. This is the second annual Report on diversity, equity, and inclusion (“DEI”) in law firm practice, which is based on the Model Diversity Survey data. Those surveyed were from 287 law firms. 100,285 attorneys participated.
This Survey is based on 2020 law firm demographics and thus may not reflect the entire impact of the pandemic. In addition to the statistical findings, this year’s report highlights the few statistical changes from the first report, which was based on 2019 data.
The Report offers some nine “findings” and offers some key other statistics, almost all of which are depressing. The findings:
  • There was a small increase in the percentage of white partners but a decline in the percentages of racially and ethnically underrepresented, female, and LGBTQ+ partners
  • Sadly, the attrition rates for African-American/Black and Asian attorneys were the largest among racial groups.
  • In 2020, most law firms did not hire a single attorney self-identified as either Native American, Pacific Islander, LGBTQ+, or having a disability. Not one.
  • White attorneys were almost twice as likely to become partners roles than other racial groups
  • Male attorneys were twice as likely to make equity partner as female attorneys. Female attorneys were substantially more likely to be hired as associates versus male attorneys.
  • LGBTQ+ attorneys were substantially less likely to be made partners than non-LGBTQ+ attorneys.
  • Attorneys with a disability were underrepresented at every level.
  • The number of racially and ethnically underrepresented attorneys and white female attorneys who lead firm-wide committees, serve on compensation committees and serve as hiring partners actually went down. The number of white men in leadership positions increased substantially n 2020.
  • The representation of LGBTQ+ attorneys on partner review committees did increase but the numbers who lead local offices, practice groups or departments went down.
All this despite all the talk about the need for diversity. Obviously, the number of firms that just want to talk about diversity dwarfs those that are actually committed.
And as if the formal findings weren’t depressing enough, some of the statistics from the Survey frankly make me want to throw up:
  • For both years and all firm sizes, male attorneys constituted the highest percentages of equity partners. The average male and female equity partner percentages were 80% and 20%.
  • White attorneys constituted the highest percentages of associates (from 70% to 79%) within firms. The overwhelming majority of associate hires (approximately 70%) were white men. Obviously, we aren’t going to see much diversity change in partnership ranks for some time to come, if ever.
  • White attorneys compose 77% to 100% of equity partners’ ranks. The majority of promotions from associate to either equity and non-equity partner were white (75% to 89%). The majority of associates who became equity partners were white (roughly between 60% to 70%)
  • 60% of the associates who made non-equity partners were male.
  • 60% — 70% of those in firm leadership positions were white men.
  • The top 10% of the highest paid attorneys (and thus those with real power in the firm) were “overwhelmingly dominated” by white men (approximately 71%). Only 13% of white females were among the most highly paid.
Equity partners are mainly white men. The associates being hired are mainly white men. Those who are in leadership positions are mostly white. And the highest paid lawyers? Again almost all white

I think you get the picture. Equity partners are mainly white men. The associates being hired are mainly white men. Those who are in leadership positions are mostly white. And the highest paid lawyers? Again almost all white.

Quite honestly, it’s hard to know what to say about these numbers. How professionally embarrassing they really are. Other than lip service, there is consistently almost no diversity progress. And it’s not just at the law firm level. We see similar statistics for in-house legal departments and the judiciary.
How can we expect respect for our legal system and profession when we so poorly reflect society in general and those who we allegedly and supposedly serve?
Oh, when will we ever learn? 
Pete Seeger, Where Have All The Flowers Gone?

Early this week, Richard Tromans at Artificial Lawyer reported on a Survey done by the ContractWorks group of Onit. Onit is an enterprise workflow solutions provider. Onit acquired ContractWorks earlier this year.

 

ContractWorks surveyed some 350 general counsel, in-house lawyers, and other legal department members in the United States and the United Kingdom. The purpose of the Survey was to determine their satisfaction (or lack thereof) with tech implementation within their departments.

Continue Reading Legal Tech: a 77% Failure Rate?

A couple of commentators noted the announcement by AmLaw 100 firm Hogans Lovells last week that making partner requires “being all in .” According to Hogans Lovell, being all in typically means 2400 hours per year. (Hogans Lovell says it recognizes this “goal” could be achieved by billable hours and “further contributions .” But Hogans is clear that a “significant portion” of these hours will be client chargeable work).

As Hannah Walker noted in her excellent article, an associate would have to work on average 10 hours per day to achieve this goal. In her follow-up article, she correctly points out that it’s not so much that Hogans has a target (many firms have unspoken similar billable hour targets). What’s really noteworthy is that Hogans has publicly thrown down a hours gauntlet to its associates.

I admit I read about this with a bit of dismay, given the world in which the profession now lives. On the one hand, I guess you have to applaud Hogan’s transparency. What it really takes to make partner in most firms is never clearly articulated. In most firms, though, partnership standards clearly exist. But they are just unspoken standards, which places those who may not be familiar with how law firms work ( all too often women and people of color) at a distinct disadvantage.

 

It sends a message that what really counts is billing hours

 

But a firm announced 2400 hour quota emphasizes the wrong thing. It sends a message that what really counts is billing hours. It doesn’t emphasize and necessarily incentivize getting a good result for the client. It doesn’t encourage using technology or developing better workflows to be more efficient. To use efficiency and technology for the client’s benefit and be client-centered.

 

It doesn’t even necessarily focus on profitability: we all know that some billable hours are more profitable than others. It certainly doesn’t encourage business development—who has time to develop business when you need to work 10+ hours a day just to stay even. And what about devoting time to being a good steward of the firm and your fellow lawyer.

 

Being a good lawyer is contributing billable hours, yes. But it also means all these other things. Things that should count as much as if not more than whether you meet your quota.

 

Here’s the thing about lawyers, particularly young lawyers who want to make partner. Give them an hour’s goal like this, and they will do everything possible to meet it. At the expanse of everything else, including home life. (Of course, the other problem is that once a lawyer meets quota, the temptation is to coast till the new year).

 

So many of the things most would agree go into making a good partner are once again sacrificed to the altar of the almighty billable hour.

 

And pity the poor clients. Where is the incentive for associates (or partners, for that matter) to be efficient and get the best result for clients? In fact, the motivation is just the opposite. The longer the matter drags on and the more hours billed to it, the better the advancement chances for the associate and profit for the firm. Not to mention that work done during the last 2 hours of 10 hour day isn’t, frankly, very good. Yes, business people work these kinds of hours. But they aren’t billing for time; they are working toward a result.

 

Mouthing work-life balance while imposing hour requirements that ensure the absence of any sense of balance sends the wrong message

 

Hour quotas, especially high ones, incentivize lawyers not to think and solve problems irrespective of time but to bill more time. Our profession is already rife with stress, substance abuse, and mental health problems. Mouthing work-life balance while imposing hour requirements that ensure the absence of any sense of balance sends the wrong message.

 

Lawyers are fond of saying the amount of work to be done always seems to fill up the amount of time the lawyer has to get the work done. Duh. Of course it does when your model is the billable hour, and the path to promotion is to bill more hours.