eLawyering Blog : Online Legal Services : DirectLaw : Document Automation, Web-Enabled Document Assembly, Virtual Lawyering

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.

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Washington State's Attorney General has entered into a settlement agreement with LegalZoom , requiring that LegalZoom cease comparing its fees to attorneys' fees unless the company clearly discloses that its service isn't a substitute for a law firm. The agreement also prohibits LegalZoom from engaging in the unauthorized practice of law, selling personal information obtained from Washington customers or misrepresenting the benefits of any estate distribution agreement. LegalZoom is also the subject of a class action suit in Missouri for the unauthorized practice of law.

This action has been a long time coming, but much of the damage to solos and small law firms has already been done, as LegalZoom, with its substantial venture capital backing, has already imprinted itself on the minds of America's middle class consumers that it offers a better alternative that seeking the advice of an attorney.

Even Polaris Investors - the VC firm that backs LegalZoom - claims on its web site that:

"Legalzoom is the nation’s largest online legal service center.  The company helps its consumer and small business customers quickly and affordably create estate planning documents, form businesses, and protect valuable intellectual property such as trademarks and provisional patents through their easy-to-use website thus avoiding costly attorney fees." (Our emphasis).

There is a value in having non-lawyer, trained paralegals assist consumers in completing legal forms, but LegalZoom's consumer practices have set this reform movement back.  If an attorney claimed that his practice, "put the law on your side," as Robert Shapiro of OJ fame has done on every Cable-TV channel, that lawyer would probably be subject to disciplinary action for an advertising claim that is a material misrepresentation.

It is time to level the playing field by requiring LegalZoom to disclose clearly the limitations of the services it provides.

Other State Attorney General's with responsibility for enforcing consumer protection legislation should take notice.

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Volume IV of the recently released 2010 ABA Legal Technology Survey Report is devoted to Web and Communication Technology. A section on E-Lawyering reports that 14% of Respondents over all, and 19% of solo practitioners, report that they have a virtual law office or virtual law practice. This question in the survey that deals with with the question of whether a law firm has a 
"virtual law practice" was framed in terms of whether the attorney primarily interacts with clients using Internet-based software and other electronic communications software.

In my opinion, these self-reported responses from attorneys are not meaningful and are much too high to be accurate. The reported numbers are not useful in understanding where the legal profession is in terms of adopting the concept of a "virtual law practice." The reality is that the adoption rate is much lower.

The ABA Law Practice Management Section's eLawyering Task Force (disclosure: I am Co-Chair of the eLawyering Task Force),  defines a "virtual law practice" as one that offers to its clients a secure client portal, as part of the law firm's web site, where the client can log in with a user name and password, and interact with their attorney, as well as consume other online legal services. A virtual law practice is more than simply communicating with clients by email and never meeting with clients face-to-face. In order to have a "virtual law practice" by our definition,  you have to have a web site and a portion of that web site has to be dedicated as a secure portal for clients. Without this distinction, many law firms can claim that they are "virtual law firms" simply because they use email extensively, as the ABA Study seems to imply, giving the impression that integration of Internet technologies as part of their legal service delivery system is much higher than it actually is.

For example, in another question, the survey participants were asked whether the firm has a web site. The solo practitioner group responded that only 52.1% had a web site, but this is the same group that responded that 19% has a "virtual law practice."  By our definition, if you don't have a web site you don't have a "virtual law practice." The only explanation for the discrepancy in these numbers is that the question of " Do you have a virtual law practice?" was phrased so broadly that more law firms where included in the category than should be.

Another question that was asked to determine what kinds of online legal services were offered by the firm was: "Does your law firm offer online document preparation?" 11.4% of solo firms reported that they did. Again this number doesn't make any sense. There were 149 respondents in the Solo category. Only 52.1% actually had a web site, or 77 firms had a web site from which online document preparation could be offered. 11.4% would suggest that only approximately 8 law firms could offer this service. Not only is this number too small to make any meaningful projections in terms of the total number of solo practitioners in the US (more than 400,000), but it is also likely to be misleading. Here's why:

The technological options for offering online document assembly for solo practitioners are very limited. One option is to provide fillable Adobe . pdf forms. But you can't easily use a fillable Adobe .pdf to create a text document such as a Will or a Shareholder's Agreement. The major document assembly vendors such as HotDocs, DealBuilder, and Exari have systems that support online document assembly but the price for licensing these systems is much too expensive for the average solo practitioner. Wizilegal, a new entrant to the field, provides a new low cost web-enabled document assembly solution, but our market information suggest that they have only a small number of users. (Disclosure: DIrectLaw, which sponsors this blog, is one of the few web-enabled document assembly solutions that is offered at a price that a solo practitioner can afford.)

In short, the question about the use of online document assembly should have been phrased much more narrowly, with a field in the questionnaire that would require that the law firm indicate what platform is being used to support online document assembly, and whether it is a third party vendor, or whether the programming was done in-house. My sense is that if the question were asked properly, the number of law firms offering online document assembly would be much lower than actually reported.

Finally, 3% of respondents report that their firms offer expert system on their web sites (compared with 1% in the 2009 survey), including 7% of the large firm respondents. Based on our surveys of law firms from solos to large law firms, this percentage seems very high to me. It is very rare that I come across a law firm web site that actually offers an "expert system" for use by its clients, and I review or check out literally thousands of law firm web sites a year.  Most lawyers don't even know what an "expert system" is! I would like to see a more precise question, where the respondent is required to name the kind of "expert system" they are offering and the url of the web site where it is offered, so that a reviewer could more closely examine what the law firm represents they are doing is in fact the case.

I think that it is commendable that the ABA Legal Technology Resource Center now has a separate section of its annual report just on web and communication technology. The platform for the delivery of legal services is gradually shifting from traditional face-to-face office practice to the Web, but my sense is that the the pace of adaptation is much slower than is being officially reported. This is understandable in a profession that views its core identity as one where clients are dealt with primarily face-to-face. 

On the other hand, our own research on consumer preferences suggests that more than half of consumers would like their law firm to have an online virtual component. Thus, the legal profession continues to lag behind what other service industries offer to their clients and customers online.

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The North Carolina Bar Committee reviewing the appropriateness of "cloud computing" has posted an Opinion for Comment which is posted on line courtesy of Stephanie Kimbro.  There are two parts to the Opinion. The first part leaves the issue of Cloud Computing to the law firm, leaving to the attorney to use his or her judgment in protecting client confidentiality and client data. The section part of the Opinion lists "best practices" for the use of Software as  a Service (SaaS), which are likely to be further refined by both comments and a review by a subcommittee.The proposed opinion will be published in the next issue of The State Bar Journal.

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