My wife is a great cook and watches “The Cooking Channel” for new recipes. I’m fascinated by her ability to translate the TV chefs’ recipes into delicious meals at home. It made me wonder: is there a recipe for affordable legal representation? Approximately 90% of Americans as well as a majority of small businesses cannot afford a lawyer–even when the need is acute. This is often referred to as “the access to justice crisis.” The human and societal toll is immense. How can a society based upon the rule of law operate this way?
I gave a talk last week at University College London. The topic was The Changing Legal Services Marketplace: A View From Across the Pond. It began with my admission of ‘acute ABS envy.’ No, ABS is not a Midlands light lager. It refers to ‘alternative business structures,’ an element of The Legal Services Act of 2007 (LSA). LSA—and ABS–is the UK’s re-regulation of its legal industry intended to spur innovation and competition to better serve the public. ABS–among other things– removes long-standing regulations preventing non-lawyers from ownership, profit sharing, and other managerial functions in law firms. Those restrictions made sense when legal delivery was solely about selling legal expertise. But they are now impediments to structural changes necessary to jump start new models at a time when legal delivery involves legal, IT, and process expertise.
The litany of law firm gripes is long and familiar: exorbitant cost and rates, overstaffing, budget unpredictability, IT and process deficiencies, and limited knowledge of clients’ business. One would think that law firms would be responding to all this—they read and hear about it every day. So why are legal consumers—not law firms—driving change in the legal marketplace? Simple answer: most large firm partners have yet to feel the financial consequences of stasis and are staying the course so they can “run the table.”
It’s hardly news that the once-cozy relationship between BigLaw and corporate legal departments has morphed into something quite different. In Facebook terms, it’s gone from “in a relationship” to “it’s complicated.” Relationships once cemented over rounds of golf and scotch have yielded to RFP’s and reverse auctions. The bloom is off the rose. And clients are voting with their feet as companies replace law firms about as often as laterals hopscotch in search of sweeter deals. But corporate legal departments are doing a lot more than simply substituting one firm for another.
Law has a distribution problem. Too many corporate firms vie for a shrinking pool of outsourced work. Competition is also fierce in the retail segment of the legal market where, paradoxically, tens of millions of individuals and small businesses are unrepresented while thousands of lawyers are unemployed or under-employed.
The Guardian recently reported that senior partners at Magic Circle firms now charge 1,100 pounds an hour— that’s $1,500 plus an expensive lunch. U.S. firms average a bit less, but their rates are not for the faint-of-budget, either. The National Law Journal reported that for 2014 the top 14 U.S.-based firms had a $980 average partner billable hour rate. Senior partners charge well above that and top out in the same zip code as their Magic Circle competitors.