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 pr
ofession, 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?

Legal Referral websitesI have noticed recently the launch of many lead generation Web sites for lawyers.

In a previous blog post  , I noted that lead generation sites for lawyers as one category of legal start-ups were increasing and entering into an already crowded market space. By a "lead generation Web site" I mean a third party Web site whose primary purpose is to provide qualified leads to law firms. The site may be free to users, or sell legal advice to users for a fixed fee, but the purpose is still to generate leads for lawyers. A "lead generation web site" is typically what I call a multi-sided platform – one side involves users looking for a lawyer,  and other side are the providers who offer legal services. The lawyers who subscribe to the Web site typically pay a "marketing" or "advertising" fee to get access to the leads generated by the Web site.

More mature legal generation sites are expanding their features and depth of offerings TotalAttorneys recently received of infusion of $15 million in new venture capital from Bain Capital Ventures of Mitt Romney fame. A new CEO, Paul Ford, with expertise in developing lead generation Web sites is in place providing leadership.  TotalAttorneys now gives away their Web-based practice management system for a $1 a month, to attract attorneys to their more expensive legal generation services.  At $1.00 a month this is really good value for a web-based practice management application. However, for TotalAttorneys this web-based practice management solution that was originally developed by Stephanie Kimbro, now with Burton-Law,  and her husband and acquired by TotalAttorneys, is now just a marketing strategy for their lead generation services.  TotalAttorneys now claims that it is," the leading US company providing customer acquisition for lawyers"

I am not sure that ExpertHub, owned by InternetBrands, which acquired Nolo last year,  would agree with this assessment, with its broad network of practice specific legal sites now being reinvigorated with content from Nolo. [ See previous blog post on this acquisition ]. 

 

Virtual Law firm Success Factors

Continue Reading New Law Start-Up Lead Generation Sites: What Lawyers Need to Know

 

The ABA Commission on Ethics 20/20 Working Group on Uniformity, Choice of Law, and Conflict of Interest has identified some issues related to defining limits on Virtual Practice under Rule 5.5. Model Rule 5.5 (b) (1) requires a lawyer to obtain a license in a jurisdiction if the lawyer has an office or a “systematic and continuous” presence there, unless the lawyer’s work falls within one of the exception identified in Rule 5.5 (d). The Commission has identified as a potential problem the situation where lawyers are physically present in one jurisdiction, yet have a substantial virtual practice in another. The problem is “that it is not always clear when this virtual practice in a jurisdiction is sufficiently “systematic and continuous” to require a license in that jurisdiction.”

This comment could be interpreted to mean that lawyers who have a virtual law practice, mostly solos and small law firms, may have an issue about whether they need to “secure a license” in the other jurisdiction.

This is a solution looking for a problem where none exists as far as the typical virtual law practice is concerned.

A virtual law practice is commonly associated with the online delivery of legal services. Lawyers engaging in virtual practice are only able to provide legal work that pertains to the laws of the state(s) in which they are licensed or they are in violation of 5.5. Whether or not their delivery methods or work with the clients takes place in a physical location other than where the lawyer is licensed, the key factor is that the lawyer is practicing the law of the jurisdiction they are licensed in and to which the client’s legal needs pertain. A law firm will have a website that anyone in any jurisdiction may find and read online. The lawyer places the appropriate disclaimers on the website and makes it clear in any registration process for a client portal that the law firm is only permitted to practice the laws of a certain jurisdiction. This is not misleading to the public nor is it the unauthorized practice of law.

For example, a client living in Florida who owns real estate in Maryland should be able to work online with a lawyer licensed in Maryland to handle the matter. That lawyer licensed in Maryland, whether he or she lives in Florida or New York, is not creating a “systematic or continuous presence” in the state of Florida to subject the lawyer to Rule 5.5(b). Contacts for the purpose of determining “systematic and continuous presence” in the context of determining “personal jurisdiction” have nothing to do with a virtual law firm that limits its practice to residents of the state in which it is primarily located, or serving out of state residents who have matters that are within the state where the attorney is licensed.

When an attorney creates a virtual law office, the gateway to the virtual law office is a Website that any other law firm would create and which is available for viewing by anyone in the world. The difference is the addition of a secure client portal where the prospective client and existing clients will register for assistance. The virtual law office Website states throughout where the attorney is licensed to practice law. The terms and conditions or disclaimers on the site should clearly explain where the attorney is licensed to practice law. This is no different than a traditional law firm Website.

Only residents of the state where the attorney is licensed, or out of state residents who have a legal matter within the state are permitted to register as clients of the law firm. Often the attorney may have the online client sign a traditional or digital engagement agreement that provides notice of which state’s law will apply should there be any dispute.

In addition, some virtual law office platforms have jurisdiction checks so that in order to register, the prospective client must provide their address. If the client is not physically located in the state, a notice is sent to the attorney reminding the attorney that before the client can be accepted as a client of the firm the attorney has to determined that the matter to be handled is a legal matter within the attorney’s jurisdiction. A notice is also sent to the client, reminding the client that the attorney is only licensed to practice law in the state in which the attorney is located. A client’s presence in a different geographic location than his or her attorney does not mean that a state’s ethics rules should come into play for the attorney handling a project that is unrelated to that state’s laws. Just because an attorney’s Website can be viewed in another state, doesn’t mean that a state should have disciplinary authority over that attorney because the Website and the law firm are not offering to provide “legal services” in that state. The alternative logic would suggest that a law firm should be available to be viewed only in the state in which the lawyer is a member of the bar – a truly absurd result – not worthy of further discussion.

To summarize: There are two separate questions about when a UPL claim would arise. First, what contacts does a state require to establish presence when the lawyer is not admitted there but is working with a client who physically resides in that state? Second, in the situation where the lawyer is admitted to practice in that state, but the lawyer physically wants to reside outside of that jurisdiction, what are the contacts that would need to be required to establish presence in the state where the lawyer is licensed? Again, the answer to both questions should be that the legal work that the lawyer provides to the client is what matters rather than where either the client or the lawyer is physically located. 

Stephanie Kimbro contributed to this post and see:  What constitutes virtual presence?  see also Carolyn Elefant’s post on this subject on her MyShingle Blog.

 

 

LegalZoom has been beta testing a concept which links its marketing capabilities to a network of law firms that offer legal services under the LegalZoom brand. With some state bar associations accusing LegalZoom of  the unauthorized practice of law,  it might makes sense for the company to seek deeper alliances with networks of attorneys who are able to offer a full and ethically compliant legal service. Solos and small law firms, leveraging off the visibility and prominence of the LegalZoom brand, could reduce their marketing costs and enable these firms to better capture consumers who are part of the “latent legal market”  on the Internet. It could be a win/win for both parties.

Unfortunately, linking the capital and management resources of profit-making organization with private law firms is almost impossible in the United States, given the regulatory framework that governs law practice. Unlike, the United Kingdom, which is in the process of deregulating the legal profession, enabling profit-making companies, from banks  and insurance companies to retail chains like Tesco,  to actually own a law firm, and/or split legal fees with a non-law firm, these practices in the US are strictly taboo.

In the US, law directories can charge a flat marketing fee for a listing, but sharing legal fees with a marketing organization can get you disbarred.

During the dot-com boom around 1999-2000, a company emerged by the name of AmeriCounsel that tried to create a hybrid organizational structure similar to the LegalZoom experiment. The company sought to enable a network of attorneys to offer legal services at a fixed and reasonable price and to mediate between the consumer and the law firm in terms of guaranteeing the quality of the legal services offered. The company failed during the dot-com bust for various reasons, including lack of financing, but on the way to failure, secured some opinions from state bar associations that blessed their model and provides a blue print for hybrid delivery systems which combine the expertise of a law firm with the marketing, management, and technological resources of a non-law firm.

One such opinion was issued by the Nassau County Bar Association New York State.

The Bar Association reasoned that the AmeriCounsel scheme was permissible because:

[S]ince AmeriCounsel does not charge attorneys any fee and since AmeriCounsel does not “recommend” or “promote” the use of any particular lawyer ’s services, it does not fall within the purview of DR 2-103(B) or (D). Rather, AmeriCounsel is a form of group advertising permitted by the Code of Professional Responsibility and by ethics opinions interpreting the Code.

In this model, AmeriCounsel provided technology and administrative services to link the client with the lawyer, but the law firm made no payment to AmeriCounsel. Instead, a separate administrative/technology fee was paid by the consumer to AmericCounsel for using the web site and gaining access to the lawyer. (This is not a practical scheme in today’s web environment, in my opinion), Moreover, AmeriCounsel did not choose the lawyer. The client was able to compare the credentials of different attorneys and choose their own lawyer. Thus no legal referral was involved, which would not be permitted in New York, as only an approved non-profit organization can make legal referrals.

In my opinion, this model, forced on AmeriCounsel, by the Rules of Professional Responsibility, is cumbersome, hard to implement, and was not economically viable for AmeriCounsel. Perhaps this was one of the causes of its failure.

Almost a decade later, companies that want to enter into this kind of hybrid relationship with lawyers, have to follow the same rule structure, as the ABA Model Rules of Professional Responsibility as the rules have not changed in any significant way. changed.  It will be interesting to see whether the ABA Ethics 20/20 Commission, which was set up just last year, will address these issues at all.

Perhaps there should be a “safe harbor” that enables organization’s like LegalZoom to experiment with new patterns of legal service delivery that could operate for a limited period of time in a specific state, like California, The experience would be evaluated carefully as a basis for rule and policy change. The evaluation would be aimed to see if client’s interests are compromised in any way, and whether the delivered legal service is less expensive, without compromising the quality of legal service.

Instead of creating legal profession regulatory policies that are based on the legal profession’s idea about what is good for the consumer, policy could be based on real experience and facts. Experimentation is good. It leads to change, and in other industries improvement of methods and approaches over a period of time.

Of course, I don’t believe that this will ever happen in the US, at least not in my professional lifetime.