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?

LegalForce Store Offers Walk-in Lawyer Access in Palo Alto

Ray Abyhanker, the entrepreneur lawyer behind the Trademarkia web site,  the highest traffic legal sites on the Web, opened a kind of Apple Store for legal stuff and other stuff (self-help law books, non-Apple tablets, tablet accessories, etc), right across from the Apple Store on University Avenue in Palo Alto. [See previous post on this company at: May the LegalForce Be With You! ]

Beautifully designed in a historic building the idea is to provide an  "third place" where lawyers can meet and mingle with potential clients, provide community law classes, and generally demystify the law by creating an accessible and friendly legal environment.

The ultimate goal is to create a branded network of law firms that promises a high value client experience for the broad range of consumers and small business that are also attracted to pure online ventures such as LegalZoom and RocketLawyer, but want something more.

LegalForce Store in Palo AltoThere is a lot to be said for a "click and mortar" strategy which involves lawyers working with clients in their offices, and interacting as well online,  but also meeting and interacting in a neutral physical space that is a retail environment. Sort of like having a  "Genius Bar" for legal problems where you can ask a question and get a quick legal answer or get assistance in knowing how to start out to solve a legal problem.

Where do I start? Do I need a legal form or a self-help law book? An "unbundled"  legal service, or full service representation? What's the lowest cost solution to my legal problem?

The LegalForce lawyer store staff call themselves  "Concierges" and I believe that is an apt title. We need more legal concierges, on the web, and in the real world.

Legal services, particularly the more complex the legal service, depends on the presence of a skilled trusted adviser. Sometimes the lawyer presence can be virtual, but sometimes the legal problem requires a face to face meeting with a client so that a thorough exploration of the facts of the case can be fully understood.  For lawyers, the ideal strategy is one that combines an off-line practice with an online presence and a brand that expresses both dimensions of the practice.

 

The term "Click and Mortar" is attributed to David Pottruck, then CEO of Charles Schwab Corp, in a July, 1999 speech at a conference sponsored by the Industry Standard. Pottruck is quoted as saying:

 "Schwab's vision has always been designed around customer needs and the company is engaged in constant reinvention to stay ahead of these powerful investors. Schwab believes that it is the combination of people and technology that investors want -- a "high-tech and high-touch" approach. As such, Schwab is redefining the full-service business around the integration of "clicks and mortar."

Pottruck subsequently wrote a book about the strategy.  A brokerage firm is more like a law firm, than a law firm is to a ecommerce web site with no human touch. It might be fine to buy your shoes online from Zappos, but I am not so sure that in the fullness of time will clients want a purely virtual experience with their law firms. As someone who runs a company ( DirecttLaw) that provides a virtual law firm platform to law firms, and has operated my own virtual law firm since 2003,  I have experienced both the advantages and the  disadvantages of a pure legal service without any human meeting.

By linking together an online experience with an off-line, real work experience, Abyhanker may have come with a legal service concept that is unique. Trademarkia is being re-branded under the LegalForce brand and recruiting  law firms for the network, first in California and then nationwide has begun..To be clear this is not a franchise, but more of a marketing network with productivity benefits for its law firm members.

Disclosure: Our company created an interactive legal form portal under the LegalForce brand and a "legal form kiosk" for the store.

Legal Cloud Computing Association Publishes Responses to ABA, North Carolina State Bar

The Legal Cloud Computing Association (LCCA) has published responses to proposals issued by the ABA Commission on Ethics 20/20 and the North Carolina State Bar regarding the use of cloud computing within a law practice.

The Legal Cloud Computing Association ("LCCA"), formed in December 2010, is the collective voice of the leading cloud computing software providers for the legal profession, consisting of Clio (Themis Solutions, Inc.), DiaLawg, LLC, DirectLaw, Inc., NetDocuments, Nextpoint, Inc., RealPractice, Inc., Rocket Matter, LLC, and Total Attorneys, LLC.

Response to ABA Commission on Ethics 20/20

The LCCA’s letter to the ABA Commission on Ethics was issued in response to the Commission’s Initial Draft Proposals on "Technology and Confidentiality" published on May 2, 2011. The Proposals include certain modifications to the ABA Model Rules of Professional Conduct that are designed to facilitate the responsible adoption of technology that will increase the quality, and reduce the cost, of legal services.  The Proposals were issued as part of a process initiated in early in 2010 where the Commission published an Issues Paper requesting comments and feedback from the legal community.

The LCCA fully supported the Commission’s Proposals, and concluded that the Commission 's recommendations provided a reasonable framework the would enable law firms to make infomed decisions about using cloud computing resources.

Response to North Carolina State Bar Proposed 2011FEO6

The LCCA’s letter to the North Carolina State Bar pertains to Proposed Formal Ethics Opinion 2011FEO6. The Proposed FEO attempts to address the ethical issues relating to the use of Software-as-a-Service or cloud computing within a law firm environment.

While the LCCA supported the NC State Bar’s efforts to provide clarity on the use of cloud computing, the Proposed FEO as written would negatively impact a broad scope of attorneys from those who do nothing more than use a web-based email client or conduct online legal research to those that do full scale online delivery of legal services.

The onerous requirements of the Proposed FEO, detailed in full in the LCCA’s response to the NC State Bar, would force many cloud computing providers to withdraw from the NC market entirely, thus negatively impacting the technological capabilities and competitiveness of NC-based law firms.

Unlike the recommendations of the ABA Ethics 20/20 Commission, the draft North Carolina bar opinion, as it stands, is likely to have a negative impact on the use of cloud computing resources and applications by law firms in North Carolina. One result is that North Carolina's law  firms, particularly solos and small law firms would be handicapped when competing with law firms from other states.

We are hopeful that the revised opinion will be more compatible with the recommendations of the ABA Ethics 20/20 Commission.  Why is it necessary for each state bar to have their own set of guidelines in this area, when the companies that offer cloud computing services operate nationally?


How safe and secure is your law practice environment?

A new nonprofit organization has emerged to help lawyers assess the safety and security of their law practice environment. The organization is the International Legal Technology Standards Organization and it recently released a set of standards that law firms can used to evaluate:

  1. the law firm's internal security standards; and
  2. help law firm's make informed decisions about "cloud computing" vendors and other hosting arrangements where confidential data is stored outside of the physical office of the law firm

The Standards are much more detailed and comprehensive than the ABA/LPM's eLawyering Task Force publication of Cloud Computing Guidelines for Law Firms.

Disclosure: I am on the Advisory Board of ILTSO and provided some guidance to the development of the standards.

The standards are being circulated for comment before final publication.

The standards offer a sensible definition of "reasonable under the circumstances" by recognizing that different types of law firms have different security needs, although all lawyers are bound to prevent the disclosure of client data. Law firms are categorized into three types of situations:

  • "Bronze - this standard is appropriate in every law practice, including solo practices."
  • "Silver - this standard is typically appropriate for firms of more than one attorney, or where circumstances or resources dictate."
     
  • "Gold - this standard is typically appropriate for larger firms or those with additional IT resources, or where circumstances or resources dictate."

The idea of categorizing law practice environments into these three categories is a new idea, as some of the standards only apply to the Gold and Silver category. The intent is to recognize that law firms have different IT capabilities and the size of the law firm usually determines how the law firm will approach the problem of securing client and other firm data.

At this point of development, the law firm is responsible for undertaking their own self-assessment. Law firms can apply to the standards to their own law practice environment and if in compliance display the ILTSO seal.

ILTSO Seal of ComplianceAt some point, I can see where ILTSO might undertake an independent assessment of a law firm's security arrangements and if it compliance with the standards, award a certificate like the Truste certification which assesses an organization's privacy policies. A small fee could be charged for this assessment and it would vary depending on whether the type of law firm practice environment is  Bronze, Silver, or Gold. This would give assurance to clients that all reasonable efforts have been taken to secure the confidentiality of their data.

It will be interesting to see how the organized bar responds to these standards, as their are entities both at the state level, and the American Bar Association that are analyzing these same subjects.

The ABA Ethics 20/20 Commission, for example, has been holding hearings on cloud computing and security of data and has released a working paper on this subject.

Just last week, the Commission released its recommendations on outsourcing, which is a process that has an impact on the confidentiality of client data. The recommendations have not yet been posted on the Commission's web site, but the ABA Journal reports that:

"The commission proposes revisions to the Model Rules recognizing that electronically stored information, including metadata, is material subject to confidentiality rules. It also proposed revisions directing lawyers to make reasonable efforts to prevent inadvertent disclosure of information relating to representation of a client."

ILTSO's new standards would give concrete meaning to the definition of "reasonable efforts" and provide a detailed framework that could guide attorney assessment of particular outsourcing and cloud computing arrangements.

A positive impact of having this evaluation framework in place might be the accelerated adoption of technologies, such as cloud computing. Compliance with the guidelines would support a law firm's assertion that the firm has taken all reasonable steps to secure client data to reduce its liability in case of a security breach over which the firm had no control.

An unanticipated consequence might be a slow down in adoption, as the lack of clarity in this area might give many lawyers a reason not to become "early adopters." Many lawyers might choose to wait until standards like ILTSO's are accepted by a broad base of legal organizations and law firms.

Of course, by then, the "real" early adopters will have acquired a first mover advantage over law firms that are still thinking about the subject, to the those firms competitive disadvantage.

Venture Capital Flowing Into Legal Enterprises: Total Attorneys Receives Infusion of Capital

Private capital is beginning to flow into companies that are operating at the intersection of the delivery of legal services and the Internet.

Total Attorneys, a Chicago-based company,  just announced that they received a multimillion dollar investment from BIA Digital Partners, a Virginia-based venture capital firm. Total Attorneys is most known for the marketing services that it provides to law firms and the recent ethical controversy in some states surrounding the use of pay-per-click advertising on behalf of law firms. (Apparently this controversy has been resolved in favor of Total Attorneys in every state where it was considered by bar ethics committees.)

The company plans to extend its technology assisted services to law firms by expanding its virtual law firm Software as a Service offerings (SaaS).   Total Attorneys mission is to become a leading provider of elawyering Services to solos and small law firms by providing a comprehensive suite of outsourced technology services, from marketing to web-based practice management tools to a robust client portal.

The company licenses virtual law office technology to solos and small law firms as a subscription service, that now consists primarily of a robust suite of "back-office" practice management tools. The pan is to expand the service into a more comprehensive "front-office" client portal, providing a total solution to solos and small law firms.

This expansion would entitle the company to claim that it is a leading provider in the eLawyering space  and it would compete more directly with our own DirectLaw virtual law firm platform service and other web-based companies moving in the same direction.  [ See:  Legal Vendors Cloud Computing Association ] .

The concept of "technology-assisted service" is an interesting category for  the legal industry for it describes a form of outsourcing which combines both a digitally-based service combined with human service. Thus Total Attorneys also provides "virtual receptionist services", and at one point virtual support services to bankruptcy law firms. One management solution for solos and small law firms it to out source to independent specialized companies functions which can be done more effectively and at less cost than the law firm can do itself using internal resources.

It is good to see competition heating up in the eLawyering space, which has been moribund for a long period of time.  The eLawyering Task Force of the Law Practice Management Section of the ABA was created in 2000, more than a decade ago. For many  years there was not much to report in terms of the innovative delivery of on-line legal services by law firms. The last 2 years has witnessed an explosion in elawyering industry developments as lawyers adapt to change -- caused by a severe recession, widespread unemployment of recent law school graduates, and the challenges created by consumers who are seeking lower-cost and "good enough" alternatives to lawyers, [such as LegalZoom.]

Competition among a variety of vendors provides choices to law firms.  Competition focuses attention on the fact that delivering legal applications as a SaaS is emerging as a new paradigm for enabling solos and small law firms to access complex Internet technologies at a fraction of the capital cost of developing these applications internally.  Private capital moving into the legal industry will create more choices for law firms, and as a consequence more choices for consumers.

Creative legal outsourcing will enable solos and small law firms to become more productive and survive in an increasingly competitive environment.

Total Attorneys Responds to Zenas Zelotes Attack

Total Attorneys has responded to Attorney Zenas Zelotes filing of ethics complaints in 47 different jurisdictions.

The Total Attorneys response can be found here.

Total Attorneys summarizes its response as follows:

"In a nutshell, Mr. Zelotes’s 303-page complaint (including exhibits) alleges that Total Bankruptcy (and various other Total Attorneys companies) is a for-profit referral service, that the business model of the Total Attorneys marketing sites amounts to impermissible fee splitting, that our advertising is impermissible solicitation and that our advertising is misleading. The complaint is a hodge-podge of hearsay, factually inaccurate statements, and carefully selected lines from a myriad of state advisory opinions taken wholly out of context, all crafted together to paint a picture of our program that could not be ignored by state regulatory counsel."

This is a complicated issue that needs further analysis, as there are two sides to this story. Supporting documents in the Total Attorneys response which require further examination include:

Zelotes Complaint with Exhibits

Total Attorneys Response filed in Illinois

Zelotes Reply

South Carolina Ethics Opinion

Kentucky Ethics Opinion

Legal Outsourcing from Israel

The Rimon Law Group, based in Israel, is a virtual law firm of lawyers who are members of various U.S. bars but who live in Israel and offer their services to lawyers and corporate legal departments in the United States at fees which are less than half U.S.-based legal fees.  The Group claims that its attorneys all have experience in complex legal matters and can deliver legal services that are comparable to legal services offered by U.S. based lawyers for much less cost because of the different cost structures between the U.S. and Israel. I think this is an interesting example of a law firm building a virtual business based on identifying a niche market and maximizing a comparative economic advantage.

With today's connectivity, some  kinds of legal work no longer require face to face interaction. This  results in a kind of economic leverage based on geographic location. It is interesting to note that the Rimon Law Group has as its clients other law firms and corporate legal departments, rather than working with clients directly.

To take this model even further, one could envision a virtual law firm of attorneys who are members of various U.S. state bars, and who are active members of those bars, but serving clients directly by telephone and email, and using virtual tools that are now being developed that facilitate the delivery of online legal services directly to consumers. These attorneys, for various reasons may live in locations that are lower in cost, than our major metropolitan areas, such as downtown Chicago or New York, and and are able to translate lower costs into reduced fees. Such lawyers don't have to live in Israel. They could live where ever it is possible to leverage a lower cost of living into reduced legal fees particularly, for the same commodity transactions that traditional face-to-face lawyers, with dedicated expensive offices, charge out at a much higher rate.

After all, I operate a virtual law firm in Maryland, where I am an active member of the bar, from my home in Palm Beach Gardens, Florida. Not a bad life style if you make it work.

I predict we will see many more "virtual networks" of lawyers emerge in the coming decade, some based in the United States, and some based in other parts of the world, serving not only client law firms in the U.S., but U.S. consumers directly.

Client Confidentiality and Online Document Preparation

Some of our law firm clients have asked us whether there is a breach of confidentiality if a law firm uses our automated legal documents and virtual law firm technology as part of their web site. In our model, we provide a technology platform where a client who has been accepted by the law firm can complete an on-line questionnaire which captures answers provided by the client through the web browser. All information provided by the client is passed by the client to the law firm in encrypted form. These factual answers from the client, and client choices, are used by our web-enabled document automation technology ( Rapidocs) to instantly create a first draft for the lawyer to review or amend as appropriate.

The question is:

Does a lawyer breach his or her obligation to maintain a client’s confidentiality when using an online document automation application for his or her clients, which is provided from a third party vendor?

The rules of professional conduct of every state impose an obligation on lawyers to maintain the confidences of their clients. In addition, rules of evidence protect lawyers from testifying against their clients under the attorney-client privilege.

ABA Model Rule 1.6 addresses confidentiality and has been adopted by most states. The rule provides that a “lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted” by one of the exceptions set out in the next part of the rule, none of which pertain to this situation. Paragraph 16 of the comment to the rule states, “A lawyer must act competently to safeguard information relating to the representation of a client against inadvertent or unauthorized disclosure by the lawyer or other persons who are participating in the representation of the client or who are subject to the lawyer’s supervision.”

Opinions that examine the lawyer’s obligation to maintain confidentiality when using technology generally address email. The leading analysis of this is ABA Formal Opinion 99-413 (March 10, 1999). The opinion examined different modes of email transmission and concluded that in all modes, “lawyers have a reasonable expectation of privacy …despite some risk of interception and disclosure.” The opinion also cautions that when a lawyer may send information that is “so highly sensitive that extraordinary measures to protect the transmission are warranted,” the lawyer should consult the client about the mode of the transmission.

Opinion 99-413 is of particular note here because it includes an examination of email transmitted over the Internet, like online forms. The opinion states that confidentiality may be compromised by an ISP’s legal right to monitor what is transmitted through it or stored on its network and by illegal hacking. On the first point, the opinion indicates that by law providers may conduct random monitoring only for mechanical or quality service control checks. Therefore, the interception of content of a communication sent through the Internet would be illegal in either situation. This gives the lawyer a reasonable expectation of privacy that requires no further action, except as noted in the highly sensitive communication.

Although not required under the ABA Opinion or those of various states, encryption makes the possibility of interception even more remote and creates even greater assurances the information will be confidential. Nevertheless, under the analysis of these opinions, the transmission of online forms over the Internet would not breach the lawyer’s obligation to maintain the client’s confidentiality even when the communication is not encrypted.

For other opinions on this subject see: New State Laws Requiring Encryption May Affect Law Practices  on the Blog on Virtual Law Office Technology.