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Take-away #2 :

The applications of artificial intelligence to legal industry tasks is robust in three areas where the relevant data is publicly available.   

In Part I of this series I wrote that the use of artificial intelligence (AI) to predict outcomes in civil litigation isn’t happening any time soon because the necessary data is held mostly in fragmented silos. The relevant data is available from proprietary sources only — you need a law firm’s or company’s permission to access it — and you’re unlikely to get it.

In this Part II I turn to applications for AI to tasks where the relevant data is publicly available.

These applications are further along in development. They’re not yet the subject of widespread adoption (see my post on slow adoption of legal technology).

Legal Research:

Case law, statutes, and regulations are all publicly available. So a handful of tech firms are already applying AI to legal research.

Getting the most widespread attention in this group is Ross Intelligence,

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Application of artificial intelligence (AI) to business law is the subject of much hope and some hype among legal tech promoters, a handful of forward-thinking law professors, alternative legal services providers — and their avid followers in the legal media.

Which brings me to the other (much larger) group — law firm lawyers who base their livelihoods on billable hours and pursuit of associate leverage — and in-house lawyers who pretty much take their professional cues (they’d contend vociferously that this isn’t the case) from what their counterparts in outside law firms do.

Among this group the application of AI to business law meets with one of two responses:

1. Harrumphing skepticism, or
2. Damn-with-faint-praise — “we’ll look at this — later”.

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Lawyers are indispensable for legal analysis.

In fact, they’re so indispensable in situations that call for legal analysis that it’s dumb not to defer to them when a business decision depends on getting the law right.

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Consider:

While in corporate practice in early 1987, I was asked to advise on a lease deal with a company whose principal customer was Texaco. As one of the world’s leading oil companies at the time, Texaco would be an eminently creditworthy customer.

Creditworthy with one caveat: Pennzoil’s 1985 judgment for $8.7 billion then pending against Texaco.

But those pursuing this lease deal were upbeat and undeterred.

They were sure that Texaco would never file bankruptcy. And they asked me to support their conclusion so that they could get on with their credit approval process.

After all, they said, wasn’t it true that no business this big and this creditworthy (except for that pesky $8.7 billion “payable”) had ever filed for bankruptcy?

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While wrapping up Part I of this two-part series I learned through a friend about a sizable family business here in Chicago that has consistently sent its legal work to one of the most prestigious law firms in town — very capable lawyers — with whom I’ve worked directly.

For what seemed like a routine employment matter — these prominent attorneys had proposed litigation on a scale out of all proportion to the problem presented.

And the legal fees — the client’s executives feared — would similarly be on a scale out of all proportion to the problem they faced.

They needed an alternative — and met with a sophisticated sole practitioner who acts as outsourced general counsel to privately-held businesses between $10 million and $50 million in revenues. Continue reading

Seth Godin’s blog post today — “The other kind of customer service” — offers an outlook pretty much foreign to the legal industry:

“Reactive customer service waits until something is broken …

“Perhaps we ought to spend more time being proactive.

” … Guiding the process so that most disappointments won’t even happen, which means we won’t have to fix them …?”

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For most law firm and in-house counsel this does not compute:

This isn’t to deny that lawyers render lip service to “preventive law”. But preventive law is not where the money is — and it’s not how most business lawyers view their jobs.

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The attorney’s definition of “productivity”? How many hours did I bill the client and get paid for?

It’s that simplistic. And it’s that one-sided — in favor of the lawyer — and against the client.

Consequently — according to conventional law firm metrics — the lawyer who bills and gets paid for ten hours to draft a contract is twice as “productive” as the one who bills and gets paid for five hours to draft the same contract.

In business, “productivity” means units of output divided by units of input. The enterprise sets out to produce a good or a service to defined specifications using the least inputs of capital, labor, and materials.

But the 2018 Report on the State of the Legal Market by Georgetown Law School and Thomson Reuters Peer Monitor defines “law firm productivity” as “the number of billable hours worked by lawyers divided by the total number of lawyers”.

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As a lawyer who became a general manager when a corporate client invited me to run one of its divisions, I learned that each corporate function — each individual — had to be accountable to someone else in the organization.

Everyone.

Almost everyone.

Everyone except the law and regulatory compliance function. For them the legal industry’s business model — not the company’s owners or executives — calls the shots on pay, work flows, and personnel. Of course owners and executives get to gripe about tactical details like individual bills and next year’s in-house head count.

But (otherwise) demanding leaders who require accountability from every other part of the business are remarkably docile when it comes to this function. They let outside and inside attorneys make decisions about compensation, organization, and assignment of people that no general manager would tolerate anywhere else in the business.

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A new app from Silicon Valley highlights a legal industry that resists innovation to the point of self-parody.

Zero, a 2015 start-up headquartered in Los Gatos, California, now enlists artificial intelligence in the retrograde practice of lawyers billing by the hour:

“ … Today, lawyers work everywhere and anywhere, on mobile devices, and until now, that time has been fiendishly hard to capture. It was typically just written off. Not anymore …

“ … The result? Time that used to be lost is now captured, and billable. A typical attorney using Zero recovers between half an hour and an hour per day. Multiply that by your hourly rate. Now multiply it by 20 billable days in the month. Zero delivers ROI on the first day you use it – and keeps on delivering, day after day.”

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In light of the severe and volatile legal and regulatory demands on business in 2018 — this is kind of like MIT or Cal Tech studying laser power — to deploy in buggy whips.

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In the early 1980’s Fred Bartlit headed litigation at one of Chicago’s premier law firms.

He’d brought in a client whose big case was keeping 8 partners and 30 associates busy for months. Classic leverage (see “Leverage” Part I).

“My partners loved me”, he said.

But — as he recounted in a 2010 speech at the University of Tennessee Law School — he was doing some soul searching about client needs: “I’m no saint … but I started to think about the practice of law”.

Bartlit was concerned that the pursuit of leverage was yielding bloated teams loaded up with less experienced lawyers. He reasoned that lean and experienced teams would get more courtroom wins and better pretrial settlements — at less cost to clients.

Bartlit then went to his partners and recalled for them their firm’s experience in the 1960’s and 1970’s when their 2- and 3-lawyer trial teams went up against much larger New York firms — and won. Continue reading

A friend of mine – new to his job as chief financial officer – received a bill from a law firm for advice in an obscure area of federal income tax law. The law firm was nationally prominent – one of the 100 highest profit-per-partner practices in the country.

My CFO friend called the partner named in the bill:

“I’ve got your bill here. I see that you’re charging me for hours worked by associate tax lawyers Susan and Joe. I’ve worked with each. I respect them both. I’m fine with paying their charges.”

“But I see that I’m being charged for hours that you’ve worked. You and I have never met. I’ve never seen any of your work. I’ve never even heard of you until seeing your charges on this bill. Can you help me to understand how payment for your work relates to some actual benefit that my company’s received?”

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