Is Axiom Law a Law Firm?

AxiomLawSome colleagues asked me that other day if I knew whether Axiom is a law firm. I said I didn't really know, so I decided to find out. There has been much buzz lately about AxiomLaw .  The company recently raised $28,000,000 in private equity funding, after an initial round of $5,000,000.  Axiom has recently launched a new Web site call ReThinkLaw  - a kind of forum Web site that is designed to "provoke thought and drive innovation in the business of law—leading to greater efficiency and positive change for the benefit of clients, firms and lawyers alike."

The AxiomLaw Web site and ReThinkLaw site makes it look like Axiom is a law firm.

For example:

AxiomLaw sounds like a law firm and has a domain name that makes it look like a law firm. When it describes itself it states that "it is not your father's law firm" or it is  "a new model legal services firm."

But its not a law firm at all. The company's real name is Axiom Global, Inc.,  It is organized as a "C" corporation, and incorporated in the State of Delaware, just like any other company. (This explains of course how it can have investors).

So if AxiomLaw is not a law firm - what does it actually do? It targets the General  Counsel's office of large corporation's and provides the following services:

  • It's a high priced placement firm assigning lawyers to work for in-house General Counsel;
  • It's an outsourcing firm working directly for General Counsel of major Fortune 500 corporations;
  • It does "projects" directly for General Counsel of major Fortune 500 corporations.

Should any one care whether AxiomLaw is a law firm or not?

  • Prospective attorney recruits might care whether they are being recruited by a law firm or something else;
     
  • Prospective customers should understand that only a company with an in-house counsel who is a member of the bar where the legal matter is being conducted can qualify for AxiomLaw's services;
     
  • If you don't have an in-house counsel, then you can't use Axiom's services. Not being a law firm. Axiom cannot provide services to the public (individuals or organizations) directly;
     
  • Prospective corporate customers should understand that the traditional lawyer-client confidentiality privilege does not apply. Any confidentiality must result from the relationship between the company's general counsel and their outsourced lawyer workers by virtue of the agreement between Axiom and the corporation customer - but I wonder if that is sufficient.
     
  • Competing law firms might care that Axiom suggests that its services are "legal services" competitive with the services of other law firms, when in fact they are are just "services" by definition. Actually contracted support services by in-house counsel. Otherwise Axiom would be violating Unauthorized Practice of Law (UPL) regulations in every state. Since Axiom is not really a law firm it can make claims about its services, that are not subject to bar regulation. Some of the statements that Axiom makes about its services, a law firm is prohibited from making because it would be in violation of the advertising and disclosure rules which are operative in every state.
     
  • Law firms are prohibited from solicitation. AxiomLaw is not subject to the same constraints.
     
  • Maybe state bar association officials should be concerned that the location of the disclaimer on the AxiomLaw web site that states that Axiom is not a law firm and cannot give legal advice. It is difficult to find. . I finally found it here.  and here.

Is AxiomLaw a positive development for the legal profession? Who knows?

General Counsel of major companies seem to think so. AxiomLaw is demonstrating that certain kinds of services can be delivered at a much lower price, without compromising quality. By enabling corporate counsel to get done certain kinds of legal work that ordinarily would be provided by outside counsel at a much higher price, Axiom has opened up a major market be simply segmenting the kind of work that can be done more efficiently in-house with help from Axiom.

It seems to me, however, that an in-house counsel assumes the risk of malpractice when they contract with Axiom. Axiom is not a law firm so it can't secure a law firm malpractice insurance policy. Moreover, the supervisor of the legal work is not Axiom, (technically it can't be), but in-house counsel. When in-house counsel contracts with a company like Axiom they give up the assurance of quality legal services and accountability that they get from a traditional law firm. 

In checking directly with Axiom on this point, Axiom states that:

"The individual lawyers don't carry their own malpractice, Axiom maintains a lawyer's professional liability insurance policy that provides coverage for all Axiom attorneys, regardless of W-2 or independent contractor status. Almost all of our lawyers in the US are W-2 employees. Axiom does not, because we cannot, have access to or supervise the substantive work of our lawyers."

One likely impact of these developments is to destabilize the business model of the Big Law firms by sucking out the more routine work from big law firms which results in decreasing overall profitability.  As the Axiom's of the world expand their services and their reach,  there will be less work for the large law firms resulting in a shrinkage of the market share of traditional law firms. (real law firms!). The firms that are left standing will offer the most high-end legal services but will probably raise their fees as they will be the only game in town as a supplier of complex legal services where law firm accountability is a necessity.

Do GC's have any interest in a vibrant independent and expanding legal profession, or do they prefer a world where there will be less traditional law firms offering their services at higher fees?

Two final questions for consideration:

1. Should AxiomLaw be more transparent on its Web site about what kind of an organization it really is by making clear that it is not a law firm, and should it avoid comparisons with traditional law firms?

2. Maybe non-law firms like Axiom, with their access to capital and superior management and technological resources, should be able to offer legal services like a real law firm, but just make these new organization's subject to the Rules of Professional Conduct like any other law firm.

Of course, private investment in a law firm is prohibited by Model Rule 5.4, but maybe it's time that state bar associations recognize that there is a new kind of organization moving into the legal industry any way, so why not simply subject these new players to the same regulatory scheme as traditional law firms?

Would that level the playing field? Would that provide better consumer protection for both individual consumers and corporate purchasers of legal services?

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Comments (7) Read through and enter the discussion with the form at the end
legaltruth - April 9, 2013 2:53 PM

You should look at the evolution of the computer to see what is going on here. Initially those constructing computers produced all of their components in house and sold the computer. Then the production become cheaper and unbundled, so their were many supplier that constructed parts of the computers, and the parts were assembled by the computer maker. This is general trend for the delivery of products and services. The in house counsel is delivering the services to the firm, but Axiom Legal is like the supplier of the supporting pieces.

Will Biglaw survive maybe and maybe not. Other managed service provider law firms are popping up, Silicon Valley wants to enter the field in even greater numbers, and the UK opened up the legal services market. There are many challenges to the status quo of legal services that are on the horizon. There are two companies to look to as example here of possible future for Biglaw, IBM and Kodak. IBM has responded well to new entrants, creating organization to compete with emerging innovation, while Kodak went bankrupt due to the failure to respond appropriately. I perceive much of Biglaw to be more like Kodak than IBM, though they are well respected they can fail just as easily. The failure might be a few years off but I expect many more Biglaw implosions in the future, Dewey will only be seen as part of an emerging trend.
AmLaw should really create a section to highlight the implosions, it would probably spark the incumbents to innovate a bit more.

Roger Glovsky - April 9, 2013 5:18 PM

Well written and thoughtful article! You are asking important questions about where the legal profession is going.

The axiom model is restricted by it being a placement firm and providing services only to in-house counsel. However, it is part of a much wider trend of quasi-legal services that are competing with traditional law firms.

The expansion of AxiomLaw will only further erode the traditional infrastructure. It will become more important for the state bar associations to provided more definitive guidelines regarding when quasi-legal services are providing "unauthorized practice of law."

Rogers- thanks for your comment.

Andrea Riccio - April 9, 2013 6:17 PM

I m not so sure we will see many more big law implosions. I have always seen the relationship between Axiom and Big Law as tacitly symbiotic. Axiom needs big law to provide a training ground for its pool of contract lawyers. Meanwhile Axiom stays away from the biggest files and actually helps create space for big law to pursue them. I don't think big law minds losing the more routine work and the partners that go along with it as long as profits per remaining partners is not adversely affected.

Once the Axioms of the world have sucked all of the routine work out of the big firms though, they will necessarily have to target mid-sized firms for continued growth. Unlike big law, such routine¬Ě work is truly the lifeblood of these firms. With the Axioms¬Ě coming down from the top and theLegalZoomss coming up from the bottom, it is the smaller to mid-sized firms that will literally be squeezed out of the market.

Axiom's and LegalZoom's continued success is totally dependent upon the legal professional's continued resistance to change. The more we resist, the better they do. I believe that clients prefer the assurances of quality and accountability they get from traditionally regulated law firms. It's just that these non-legal entities are simply delivering so much more value to customers of legal services that the customers are willing to forego the protections provided by using regulated law firms.

It's for that reason that I think the public would react negatively if we were to bring Axiom or LegalZoom under the same regulatory umbrella as traditional law firms. I think the public would rather see traditional law firms adopt more innovation to raise the responsiveness and lower the cost of legal services.

Andrea:
Great comment.
Richard

Carolyn Elefant - April 10, 2013 9:29 AM

Richard - your post could not have been more timely. I received a call from a reader of my blog several weeks ago who wanted to undertake a particular activity to further a small firm but was ethically precluded from doing so because he practices as a lawyer. Axiom faces no similar bar and therefore has a competitive advantage.
I won't say what the specific issue was, but as you point out, law firms face problems like solicitation and conflicts that Axiom does not. I don't think that Axiom is going to harm large firms per se, but if it ever decides to open a small biz unit, small law firms will find themselves at a disadvantage.

Carolyn- I agree. But as a non-law firm Axiom would be prohibited from serving small business directly that don;t have in-house counsel.

BCReed - April 16, 2013 12:43 PM

Here is another observation from the evolution of disruption that most people don't quite grasp, especially lawyers. When a disruptive innovation enters the market it is usually a cheaper, lower quality product, delivering the service in a different way, and entering at the least profitable sector of the industry. They then move up market offering higher quality goods for more money but at a cheaper price and lower margin than the incumbents. They have to move up market in order to maintain profit growth. Increasing profits by 10% is much easier when you have $100 in profits than when you have $100,000 in profits. So when the LPO's and Axiom come from the bottom, doing document review and other less sophisticated tasks where do you think they will be going over time? (To more sophisticated work) They will likely hire more lawyers from Biglaw that want to get out of the traditional law firms.

The main threat here to Biglaw is that Axiom is on average 50% less, not just because they might be lesser quality but because they operate differently. So when Corporate America regards them as comparable to ever other firm but far cheaper either the GC's or the CFO's will have to go with them in order to make their mandated annual overhead reductions. Even with Suicide Pricing Biglaw won't be able to match the price over the long run because Axiom operates much differently at a lower margin. Nor will Biglaw be able to replicate their model, there will be too much resistance by the partners. You can't expect partners to agree to gutting their annual payouts by 50%, they will likely just do a lateral move in droves and the firm will implode. That is likely why legal truth forecasts more law firm implosions, as the managed service providers come into the market traditional law firms won't have much recourse, other than to implode or declare bankruptsy. This will be gradual at first but then we will see it more frequently. Axiom will also have to worry if and when Legalzoom and/or Rocketlawyer want to move even further up market, that will be a few decades I expect though.

As for investing in law firms. The ABA really doesn't need to make any changes. Those wanting to invest or wanting investment need to consult with a innovative financial expert. There are plenty of ways to replicate investments in law firms without violating the Rules of Professional conduct. For example Larry Ribstein proposed Law Firms selling derivatives or futures. You could have a call option or put option that entitles you to sell or purchase the right to firm profits. Firm profits are not the same as lawyer/case fees, thus not restricted under the rules of professional conduct. A clear reading of RPC 5.4 should make that apparent. It why you are allowed to share firm profits with a non-lawyer employee but not legal fees with a non-lawyer. Financial Professional could aid lawyers to understand how these financial instrument work, much better than some lawyer approaching it as an amateur, at best. So if you want to really invest or seek investment, talk to a financial professional or copy Axiom and Clearspire in the managed services models.

Talia - November 6, 2013 12:12 PM

Axiom Law is a website that has laywers work as independent contractors. it serves corporate clients but is not regulated like a law firm. I think the laywers carry their own malpractice insurance. Read and summarize

tim mahoney - January 3, 2014 10:30 AM

Has anyone reported Axiom to state regulatory bodies to see what their view of their advertising/business model is?

Not that I know of. Their model holds up as long as they are serving an in-house general counsel.

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