Miles van der Rohe, the noted architect, remarked: “Architecture depends on its time.” The same can be said about business structure–it depends on its time. A paradigm shift is occurring. Technology has enabled the creation of new business structures. It has facilitated a decentralized delivery structure, creating communities that connect sellers with buyers. This is sometimes called the collaborative or sharing economy, where individuals deploy underutilized assets—everything from cars and apartments to lawyers—to “share” with buyers. This eliminates centralized institutions that control supply and stifle competition by protectionist self-regulation. It has produced“ faster, cheaper, better” delivery of goods and services available on an as needed basis.
The ABA recently renewed—and shelved– the alternative business structures (ABS) debate, and the battle lines were familiar. The retail segment of the legal market is where the most strident exchange occurred. Reform advocates maintain that the access to justice crisis cannot be meaningfully addressed without ABS. The opposition cautions that ethical concerns mandate preserving the status quo. And some candidly admit that some form of ABS would knock them out of business. That’s hard to fathom since technology and process will help leverage lawyer time, reduce cost, and make legal services affordable to the millions of Americans—and small businesses presently unrepresented due to price. Translation: ABS will lower sky-high legal cost and introduce millions of new clients into the marketplace. And that’s good for society. And lawyers.
Horace Greeley, the American author, famously counseled pioneers to “Go West, young man” to advance the nation’s manifest destiny by expanding to the other coast. Law firms, of course, have figuratively heeded Greeley’s expansionist rhetoric for many years. Initially, they forged what would become national firms and, later, established outposts overseas. That is nothing new. But what is new—and tea leaves worth reading—are the recent moves of three very different legal services providers: (1) Cahill Gordon, an elite AmLaw 100 firm; (2) Dentons, now the world’s largest law firm; and (3) Legalzoom, a U.S.-based service provider who has recently secured an ABS license in the UK. These very different legal service providers—and their recent gambits—shed light on the globalization of legal services; the impact of different regulatory schemes (especially the U.S. and UK); the blurred line between law firms and service providers; as well the near-term future for the global delivery of legal services.
Cahill and Its ABS
Cahill Gordon has long been one of the most profitable firms among the AmLaw 100, focusing on corporate finance and big-ticket litigation. It has eschewed the “bigger is better” and “an office in every capital” approach and has, instead, limited its physical presence to three locations: New York, DC, and London. Cahill recently became the first U.S. law firm to secure an alternative business structures (“ABS”) license in the U.K. The license was issued to Cahill UK, LLP; however, it is clear that the principal purpose of securing it was not only to operate as an ABS in the UK and beyond, but also—and here’s where it gets interesting—to create an advantage with (read: greater synergies for) the firm’s clients in the U.S. Notwithstanding the stark regulatory contrast between the U.S. and UK, Cahill boldly and thoughtfully responded to its clients’ desire to operate through one integrated firm operating on both sides of the pond—and beyond. That is not novel, but what is noteworthy is that by securing an ABS in the UK, Cahill has positioned itself to be far more flexible servicing other markets using the UK as a base. It has also positioned itself to become a first-mover if/when (and the latter is a good bet) the U.S. finally sanctions some form of ABS model. And don’t think that the likelihood Canada will go ABS soon does not enter into the equation. [Read more…]