Articles Posted in Legal Industry — Where It Fails Its Business Clients

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The Point

In a recent article, Bruce MacEwen, one of the three or four leading experts on lawyers and law firms, explains that those firms and the in-house law departments who hire them can’t keep up with the U.S. legal system’s increasing demands.

Not at the current rate of increase.

This Matters

MacEwen breaks down the numbers to show that the U.S. legal system’s demands on business enterprise are skyrocketing, and that the growth rate of those demands shows no sign of abating.

According to Mr. MacEwen, the corporate law function’s go-to move amounts to simply “throwing more bodies” at those demands as they increase.

Barring basic changes in the way that the corporate law function manages its work — i.e., finding economies of scale — simply adding attorney headcount (in-house and / or in law firms) ratable to the pace of increase in demand is not financially sustainable. Continue reading

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On Saturday morning (January 11, 2019), I glanced at the front page of the Wall Street Journal that I held in my hand as I walked up the driveway to my house:

“MAX Chatter at Boeing Undercuts Its Public Stance”.

The first line:

“Striking internal messages released this week by Boeing Co. have undercut many of the plane maker’s defenses of its design and marketing decisions for the beleaguered 737 MAX jet.”

In the words of the Dallas Morning News:

“Boeing employees knew about problems with flight simulators for the now-grounded 737 Max and apparently tried to hide them from federal regulators, according to documents released Thursday.”

Of course, what’s most important here is the tragic fact of two crashes immediately on take-off, less than five months apart, and the deaths of 346 people. But along with profound human loss are this catastrophe’s devastating legal consequences for the Boeing Company.

And these legal problems posed by release of these documents arose before any attorney became involved with the acts, omissions, and representations to Boeing’s customers and regulators that those documents describe.

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The legal profession, for the most part, does not emphasize prevention.

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Conventional law firms working to their profession’s prevailing business model — with its various forms of built-in waste — often claim to have a “customer focus”. And the in-house law departments who hire these conventional law firms may make the same claim.

But creating waste — or tolerating that waste by paying the bill for it — is not consistent with any meaningful “customer focus”.

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Most everyone — in any kind of business or nonprofit — says that they work from a “customer focus”.

Recent business management literature is full of articles that tout the primacy of the customer: “6 Ways to Build a Customer-Centric Culture“, Harvard Business Review, October 2, 2018; “Why Your Customers Should be Central to Your Innovation Efforts“, Strategy + Business, August 13, 2019. “Customer Centricity in the Digital Age“, MIT Sloan Management Review, May 30, 2019.

The legal profession is just as outspoken in its claimed embrace of the customer — or, as they like to put it — the “client”: “7 Habits of a Client-Focused Lawyer“, The American Lawyer, August 10, 2018; “8 Ways to Create a More Client-Centric Mindset at Your Law Firm“, JD Supra Perspectives, March 20, 2018; “Keeping a Firm Client-Focused During Changing Times“, Forum (Legal Executive Institute), September 3, 2015.

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My most recent post — about a December 17, 2019 article entitled “10 Ways That Outside Counsel Disguise Overbilling” — cited a case where an expert in auditing law firms’ bills for inaccuracies found this:

“The law firm charged 5.1 hours for work on a confidentiality agreement where opposing counsel had already provided a comprehensive draft agreement for comment and markup … This time is excessive. We propose the charge be reviewed to a total of 2.5 hours: 2.0 for analysis and markup of the draft agreement, and 0.5 for negotiation of points with opposing counsel.”

The legal bill auditor’s point: This law firm charged 5.1 hours times the attorney’s billing rate for a task that should have consumed half of that.

But I saw another point:

What’s any lawyer doing consuming 5.1 hours in creating a confidentiality agreement? Or consuming even half of that?

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5.1 hours might have been justified. I’d need to know more in order to make a definitive judgment.

But.

A lawyer charging a client for 5.1 hours — or even 2.5 hours — to conclude a “confidentiality agreement”, is a big … red … flag.

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“10 Ways That Outside Counsel Disguise Overbilling“. 

Headline of a December 17, 2019 article in Corporate Counsel, a prominent publication directed to in-house lawyers.

Citing the Association of Corporate Counsel’s findings in its “2019 Global Legal Department Benchmarking Report”, the article begins with this statement of fact:

” … Large companies with big legal departments go over budget by about 37% every single year.

“Why do they go over budget? A big reason is overbilling from the outside law firms they hire to do work for them.”

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Cost overruns of that size.

And inaccuracies in charges imposed on clients by people who serve as fiduciaries (attorneys) to the clients harmed by those inaccuracies.

Inaccuracies that advantage those outside firms — not ones that result in under-charges.

How did this become business as usual? How can it be that such overruns and billing inaccuracies are normalized?

What’s so wrong with this area of Legal — outside lawyers’ charges to client companies — that the article’s author, Ryan Loro, can be part of an entire industry — “legal bill auditing” — that checks up on the accuracy of what lawyers bill their clients? And gets paid solely from the excess of what law firms charge over what they agreed to charge (i.e., no net cost to the client)?

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So says Alex Hamilton, describing the gist of his recent speech to a conference about innovation in law practice — specifically about the role of artificial intelligence in companies’ creation and management of contracts.

A former partner at Latham & Watkins’ (2nd highest earning law firm worldwide in 2019 according to The American Lawyer) London office, and co-Chair of its global Technology Transactions Group, Hamilton founded Radiant Law in 2011, a law firm that supports large companies and banks in their major outsourcing and technology contracts, day-to-day commercial contracts, and contract review projects.

Radiant does contract automation in a big way — working with applications like docassemble (a free, open-source systems for guided interviews and document assembly originally created by a lawyer / computer programmer), and Contract Express (Thompson Reuters’ document automation software). Radiant’s mission is to free up businesses from manual drafting and review of masses of agreements by overwhelmed lawyers — replacing that traditional approach with faster, more accurate, and much cheaper contract creation and management.

So Hamilton’s description of the “circus of AI” does not reflect any skepticism about this technology’s potential for improving legal services.

Instead, lawyer and tech pioneer Alex Hamilton argues that his legal profession — my legal profession — is unserious about any meaningful use of AI for the foreseeable future (“AI and Contracting”, December 3, 2019).

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Too many businesses find that they spend too much on lawyers — and get too little risk protection in return.

But their executive management should not look to attorneys — outside or inside their companies — to fix this on their own any time soon.

At least not without relentless prompting from business leaders.

Only a minority of attorneys practicing in law firms offer business clients alternatives to the billable hour, to purposeful overstaffing & duplication of effort, to insertion of inexperienced lawyers alongside those capable of working on their own, and to the slow-walking of accuracy-enhancing and labor-saving tech adoption.

And only a minority of in-house counsel are making meaningful demands for such alternatives. Though you might expect that in-house counsels’ outlook might align with that of the P&L executives for whom they work.

In a recent Twitter conversation (here and here), a handful of this minority agreed that long-ballyhooed legal innovations have yet to arrive.

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