Is the Future of the Practice of Law in Jeopardy?

Is the Future of the Practice of Law in Jeopardy?

Technology is affecting every part of our lives and the legal world is not immune to the changing world.  The practice of law as we know it will be unrecognizable in the next decade.  Technology is the biggest threat to the legal paradigm as it currently exists.  The legal establishment is complacent and unwilling to accept its ebbing grip on the legal market.

The recent ISBA report regarding the future legal practice[1] world severely underestimates the cataclysmic, exponential changes technology will have on the paradigm of legal practice.  The legal community has turned a blind eye to technological tsunami hitting our society and affecting inside and outside the legal profession for years, even now disregarding its most potent threat staring it in the face.  In their current state, the framework of law firms and schools are sorely underprepared to deal with the tsunami of technological changes and the non-legal alternatives it has created.

Within the lifetime of this year’s newly sworn attorneys, automation will radically change the legal profession. This may sound extreme, but once the dots are connected, anyone can see the domino effect on the legal structure.  For instance, self-driving cars are a not-so-distant reality. The idea of not having to drive yourself to the office seems like a dream, but in reality it will dramatically change the practice.  If vehicles are completely controlled by a computer, human error will be removed from driving, resulting in near eradication of accidents.  Of course, accidents will occur, even with autonomous cars.  However, when these accidents occur, will lawyers have the technological competence to interpret the computers that drive the vehicles?  Accidents involving autonomous cars will create a plethora of new legal issues and standards lawyers must be prepared to address.

In 2005 alone, 35% of the 26,950 civil cases that reached disposition stemmed from motor vehicle collisions across the nation.[2]  This seems insignificant, until compared to the 7.4 million civil cases filed around the nation in the same year.[3]  If the claims filed are representative of the cases that reached disposition, roughly 2.5 million claims caused by motor vehicles reached an out of court resolution, settlement or otherwise.  The harsh reality is that accidents create work for attorneys. Although the shift to autonomous cars will be gradual, it is obvious the lawsuits arising from accidents will decrease towards non-existence.

Autonomous cars will cripple the existence of solo-practitioners and big law firms alike.  With lack of accidents, the need for auto insurance will become  obsolete. The purpose of auto insurance is to cover the driver from any damages they may cause while operating a vehicle. If vehicles are operated by computers, the driver has no liability, and no reason to purchase auto insurance. If auto insurance is no longer needed, auto insurance companies’ revenue will plummet.  These companies will either adapt to the change, providing coverage for self-driving vehicles at a highly-reduced rate, or cease to exist.  Regardless, there is one clear outcome for attorneys employed by insurance companies: their jobs are in jeopardy. With less income, insurance companies will be less willing to employ big law firms for representation. Insurance companies may not be able to afford in-house counsel, eliminating the position entirely.

A decrease in accidents will also cause a decrease of injuries requiring hospitalization. When there are less patients in the hospital, one can assume a proportional reduction of medical malpractice claims will occur. Just like the insurance industry, attorneys on either side of medical malpractice claims will suffer from technological advances.

The effect of automation is not limited to the civil arena.  Cars that are self-driving cannot violate traffic laws, notwithstanding maintenance issues such as a dead brake light.  A computer cannot be inebriated, which will virtually eliminate DUIs.  Additionally, if there are no traffic violations, there will be less arrest resulting from routine traffic stops, lowering the case load of public defenders, and in turn, reducing the amount of employed public defenders. Fewer accidents means less work for au
to body shops and a change in the auto insurance business.

Is technology really a threat?

Non-legal for-profit companies like LegalZoom and Avvo have been around for decades.  These businesses provide do-it-yourself guides for a variety of legal actions, easily accessible and competitively priced.  By paying a small fee, LegalZoom provides its customers with questionnaires, using the answer to fill out and file the required legal forms for the requested service.  Additionally, it provides a year of unlimited attorney consultations, with an option to keep these services for a monthly fee.  Recognizing consumers desire convenience and price transparency, LegalZoom assisted 1 million customers in the first 10 years of its creation in 2001.  Since then, LegalZoom has assisted another 2.5 million customers in 7 years, and that number will only continue to grow in the state of the current legal paradigm.  This flat-fee pricing is arguably the biggest draw to these types of technological services.

Unfortunately, these for-profit companies are not the only threat to the legal community.  In New York and London, DoNotPay.co.uk assists users with a “robot-lawyer” chatbot.  Through a series of questions, the chatbot determines if an appeal is possible, and if so, guides users through the appeal process.  In the 21 months from it’s creation, DoNotPay has taken on 250,000 cases, winning 160,000, giving the program a 64% success rate.  This sophisticated program, which provides a simple process for appeals, was created by 19-year-old college student.   An individual with no legal training created a simple step-by-step online guide to traffic tickets.  This traffic ticket “robot” gives a clear warning to the legal field:  Adapt or Die.  The reason these services are such a threat to the legal community is their pricing.  These easily accessible sites provide flat fees and a well-defined service.  Customers know the exact price for what they are paying.

The opposite is known for the legal field where the adage “a lawyer’s stock in trade is his time” has governed our fee structure since Abraham Lincoln rode the circuit in the 1850’s.  Lawyers need to bill hours to make money, and thus strive to have more hours at the expense of efficiency. This common knowledge, combined with a general public lawyer stigma, causes consumers to be uncomfortable not knowing the actual price of legal counsel until a matter is resolved.   The billable-hour mentality prevents law firms from adapting to the changes of technology.  Sacrificing efficiency for profit is hurting the legal field.  Lawyers have known that technology can threaten the practice since the early 2000’s.  It was possible for a firm to automate a 65 page lease template, which generated leases in a mere 15 minutes, as opposed to the 4 hours it would take to generate manually.  The project was scrapped because based on the billable-hour model, the revenue expectations would be cut in half.[4]  By refusing to incorporate this technology, lawyers are willingly losing clients to non-legal companies.

Technology is leading to the downfall of the billable hours framework and is establishing a flat-fee structure.  Technology will automate or replace many of the traditional, billable functions performed by lawyers.  Some technology has become accepted within the legal field, particularly with document review and e-discovery.  With globalization of work, work usually done by junior associate and paralegals is being outsourced to companies in different countries for a fraction of the cost.

Is the legal job market still stagnant?

The legal field has yet to recover from the Great Recession in 2008, nearly a decade later.  Due to the escalating need for sophisticated legal representation prior to 2008, legal firms structured themselves to handle prodigious amounts of work while simultaneously training sophisticate business lawyers.  Post 2008, the need for representation plummeted, and firms have attempted to adapt, “reducing the number or entry-level lawyers, turning the traditional pyramid structure into a diamond with many senior associates and nonequity partners composing the broad middle.”  Unfortunately, “the short-term needs of established law firms to generate higher revenue and profits to retain the firms’ biggest rainmakers are at odds with long-term needs to invest in a more sustainable business model tied to the changing demands of its clients.” [5]While the industry attempts to shed the training costs of entry-level lawyers, it will eventually produce as shortage of mid level attorneys and higher labor costs to stave off unwanted attrition.

Despite law school enrollment and graduate numbers falling, the available jobs for new attorneys has decreased.  Law school enrollment in 2016 has decreased from 5% from the class of 2015.  The graduating class of 2016 dropped 9.2% from the previous years numbers.  In addition, so did the number of entry level legal jobs, dropping 8.6%.  Although the ABA reports a climbing employment rate of 86.7% for the classes of 2014 and 2015, only 62.4% of 2015 graduates and 64.1% of 2014 graduates obtained employment that required Bar passage.[6] [7] For those 83,816 graduates, only 53,000 were employed in positions that requires passage of a bar exam.

The 2014 OOH predicted 74,800 new lawyer jobs through 2022. Between 2014 and 2024, the agency now estimates, the number of lawyer positions will grow from 778,700 to 822,500, adding just 43,800 jobs—a plunge of 41 percent.  [8]

Although the disproportionate number of entry level jobs to recent graduates has been known for years, the disproportionality will only increase with incorporation of technology into the legal practice.  New legal technology will equivalently decimate the work load of entry level associate positions, document drafting and reviewing used to hone their skills will be outsourced to third parties or technology.  Although this will bring down the cost to consumers and increase efficiency, it will lower total billable hours available and drive down profits.

Are law schools preparing lawyers for the future?

In addition to the radically changing legal field caused by technology, law schools are stifling the job market.  Law schools have become cash cows, churning out inexperienced lawyers with crippling student loans who are as effective as a paralegal after graduation.

Foremost is the weight of the student debt most law school graduates incur.  Ten years ago, law school cost half the amount it does now.[9]  Historically, law school tuition has doubled every 10 years, roughly three times the rate of inflation.  But this is not limited to law school, because newly admitted law school students are most likely carrying over debt from undergraduate colleges which are facing the same problem.  It is not unheard of for a law school student to graduate with $250,000 of debt, a great place to start in a struggling job market.

Further, law schools do not adequately train their students in a variety of aspects that are necessary to provide effective legal representation.  Law students are not required to take courses that teach marketing or business, nor are students required to learn about practical legal practice.  Most law students don’t know how to properly fill out and file motions in court, some have never even stepped foot in a court room.  In order to gain this legal experience through law school, a student must take specific courses, sacrificing opportunities to study other areas of law.  Unfortunately, most students don’t even realize they need this practical knowledge until they have graduated.  Additionally, courses on how to market yourself or run a business, which is essentially what an attorney does, are almost non-existent.

Of course, law students may be able to gain some practical knowledge through legal externships, but many times the work is limited to drafting, document review, and research.    However, many an externship can consist of busy work, filing papers in an office.  Although these externships can help students gain practical experience, they must seek out these positions themselves.  Law schools do little more than provide information on where these externships may be sought.  Compare this placement to other professional education.  Medical students must participate in residencies where they hone their skills before beginning practice on their own.  Speech-language pathologists, or SLP, are required to participate in at least 9 months of medical “placements,” working with patients under the supervision of licensed therapists.  Specifically, in the SLP field, the schools assign each each student placement facilities.  In these fields, this practical training is required before you can receive a license to practice.  Although relatively inexperienced, this practical knowledge allows these students to have a level of competency before receiving licensure.  In the legal field there is no such requirement, many young attorneys learn on a trial-by-fire basis.  These student’s laughable experience, combined with a dismal job market, does not bode well for those who seek to practice in the legal field.

Technology is changing the legal paradigm and there is nothing that can be done to stop it.  Throughout history, technology has been adapted to innumerable industries, changing them entirely.  In the not so distant past, vehicle manufacturing was entirely changed by automation.  Technology decreased the labor costs by replacing humans with technology, making cars more affordable to consumers.  Today, technology is threating threatening the legal market in the same way.  This is not speculation; todays business giants are warning of the effect of technology.  Bill Gates, Mark Cuban and Elon Musk have recently warned of the impending displacement of human jobs from automation.  But don’t take their word for it, just ask your travel agent how their business survived technological advances.

In Summary:

The ISBA Report recognizes some of these issues, but instead of helping lawyers deal with the changing landscape, the report focuses on providing legal services to the mass of people who do not have access to legal services.   We need to start taking care of our own.  We are a trade association with selfish interests. Lawyers must showcase the value of legal expertise, differentiating ourselves from do-it-yourself websites. As as the legal paradigm shifts towards speed and efficiency, we must address the inherent clash of the billable-hour framework with the forced efficiency of technology.  To insure the existence and profitability of the legal practice, we must adapt to survive.

~ George S. Bellas (www.attorneyscreativeroundtable.com)

 

[1] https://www.isba.org/ibj/2017/01/seeingandshapingthefuture

[2] https://www.bjs.gov/content/pub/ascii/cbjtsc05.txt

[3] https://www.bjs.gov/content/pub/ascii/cbjtsc05.txt

[4] http://www.americanbar.org/publications/gp_solo/2014/may_june/how_technology_changing_­practice_law.html

[5] http://www.americanbar.org/publications/gp_solo/2014/may_june/how_technology_changing_ practice_law.html

[6]http://www.americanbar.org/content/dam/aba/administrative/legal_education_and_admissions_to_the_bar/reports/2015_law_graduate_employment_data.authcheckdam.pdf

[7] http://www.nalp.org/1216research#table1

[8] http://taxprof.typepad.com/taxprof_blog/2016/01/government-cuts-projection-of-2014-2024-lawyer-jobs-by-41-16k-lawyer-jobs-for-37k-law-grads-each-yea.html

[9] http://www.americanbar.org/content/dam/aba/administrative/legal_education_and_admissions_to_the_bar/statistics/ls_tuition.authcheckdam.pdf

 

 

Run Your Law Practice Like a Business

You have probably noted an ongoing “debate” on the topic of whether the practice of law is a business.  Some lawyers argue that since we are a learned profession, we are not running businesses, nor should we.  To those dinosaurs I say: Poppycock!

It speaks for itself that most of the lawyers who claim we are a highly educated profession and therefore not a business were either very successful in a specialty field or were professors of law. More power to them.  But as for the rest of us, we are operating businesses.  And if we don’t begin paying attention to how well we manage and promote our legal enterprises, we are in danger of going out of business as a profession.

If you don’t think the legal industry is a commercial enterprise, consider the following. We hire employees with related personnel issues. We have a payroll and pay payroll taxes.  We pay rent or buy real estate. We have debt. We have (or should have) systems to operate our practice. We have partnership issues. We market ourselves. We have business plans. And we are regulated. What else is needed to convince lawyers this is a business?

In one sense, the question at this point is more or less a matter of semantics. Law is clearly a profession, but since you are selling a service, it is also clearly a business. The distinction is not only arbitrary, it is also a potential threat to our future livelihood.

In an even more urgent sense, this philosophical debate is impractical in the real world.  The rest of the world is preparing to move ahead with or without us.  The market place has already recognized the legal practice as a business and is proceeding accordingly.  In fact, the entire legal field is viewed by many Venture Capitalists as fertile grounds for investment opportunities, but not necessarily by investing in law firms.  Instead, Venture Capitalists (who are not interested in whether or not they are part of a profession but are interested in making money) are throwing hundreds of millions of dollars at legal technology startups.

The commoditization of the practice is already well underway. If you are curious about the inevitable outcome of this juggernaut, ask your doctor how his life has changed.

In this rapidly evolving environment, I hope we can agree that simply doing a great job for your existing clients is not going to be enough.  If you expect to compete with the legal services companies that are growing under your nose, it’s time to get in the game as a business manager. And there are plenty of resources available.

Michael Gerber, author if the immensely popular book, “The E-Myth”, has written a version just for lawyers titled The E-Myth Attorney: Why Most Legal Practices Don’t Work and What to Do About It.”  In his book, Gerber points out that the secret to thriving is to operate like a business with systems in place and a comprehensive plan – a strategic plan – that focuses on your strengths and opportunities.

A great place to start is to set aside a specific chunk of non-law time dedicated exclusively to the administration and marketing of your law business. If you allot 30 to 40% of your time to developing and implementing a structured strategy for your organization, you may well find that you can pick and choose your clients.

There are lots of DIY books available on how to write a plan with all kinds of secret strategies.  One of the best I’ve seen is Successful Business Plan: Secrets & Strategies by Rhonda Abrams. I guarantee if you spend some time with this book you’ll find more than one idea that works for you.

You can’t afford to wait, so get a plan!  And remember: one of the things we help lawyers prepare is a strategic plan that is adapted to their particular field of law and locale.  Check out the Attorneys Creative Roundtable.  You won’t be disappointed.