American Bar AssociationThe American Bar Association has issued its draft Report and Recommendations on the Future of Legal Education. You can download it here.

I agree with many of the recommendations of the report which urges law schools to experiment with different modes of legal education, recommends relaxing ABA accreditation rules which impede innovation, and modifies the traditional law curriculum to focus less on the teaching of doctrinal law and more on skills the prepare law students to actually practice law. Many of the recommendations,if adopted, would radically change the structure, focus, and culture of many law schools.

One of the recommendations of the Task Force is the idea of limited licensing of non-lawyers ("legal technicians") to deliver legal services to the public directly without the supervision of a lawyer:

"However, there is today, and there will increasingly be in the future, a need for: (a)persons who are qualified to provide limited law-related services without the oversight of a lawyer; (b) a system for licensing of individuals competent to provide such services; and (c) educational programs that train individuals to provide those limited services. The new system of training and licensing limited practice officers developed by Washington State and now being pursued by others is an example and a positive contribution."

Thus one of the final recommendations of the Task Force Report is:

"Authorize Persons Other than Lawyers with J.D.’s to Provide Limited Legal Services, Whether Through Licensure Systems or Other Mechanisms Assuring Proper Education, Training, and Oversight."

and:

"Develop Educational Programs to Train Persons, other than Prospective Lawyers, to Provide Limited Legal Services. Such Programs May, but Need Not, Be Delivered through Law Schools that are Parts of Universities."

Unlike the other recommendations which deal with fixing legal education, these recommendations are focused on access to justice issues, which requires a different framework for analysis. 

The recommendation to create a new class of limited licensed legal providers, so-called "Legal Technicians" –  needs to be re-evaluated in the light of changing legal industry market dynamics and the accelerating impact of Internet technology on the delivery of legal services.

Just to note, for decades I have been a strong advocate for the idea that trained paralegals should be permitted to serve the public directly, without further licensing or regulation by any state body, other than graduation from an ABA-accredited law school and a few years of experience working in a law firm.  I was formerly President and Dean of the Philadelphia Institute for Paralegal Training, the nation’s first paralegal educational institution, and in that role saw how effective a trained paralegal can be in serving a law firm’s clients.

More recently. the company I founded – DirectLaw – offers a virtual law firm platform for solos and small law firms. If there were a new class of limited license professionals in the market, I would not hesitate to modify our DirectLaw platform to serve limited licensed professionals, opening up a major new market for our virtual service. So personally I have much to gain by a new class of limited license professionals that would serve the public directly.

Only recently have I begun to reconsider the viability of a new class of legal paraprofessionals serving the public directly primarily because of  changes in the market for personal legal services.

I have  reservations about the proposal to license non-lawyers to provide limited legal services. My reservations are in the form of a challenge to the Task Force recommendations on limited-licensing, in the sense that the idea needs further thought and analysis before states rush to adopt these ideas. (despite the fact that Washington State already has a scheme in place, and  California and New York are considering similar proposals). 

Here are my reservations – comments welcome:

  • The data that we have (see for example www.attorneyfee.com) suggests that the pricing of legal services by solo practitioners and very small law firm firms is going down — not up. It is not a fact that the legal fees are out of reach of many consumers. There is an issue of connecting with consumers with lawyers– but it is becoming less of a price issue and more of an "engagement" issue. There is no evidence to suggest that the fees that limited licensed practitioner would charge would be any less than the fees currently charged by solo practitioners, but their service, by definition, would be much more limited than the service offered by an attorney.
     
  • Solo practitioners are already being displaced by technology which is forcing a reduction in legal fees. Limited license practitioners would be even more vulnerable to the impact of information technology on the more routine services that they would offer.
     
  • The restrictive licensing scheme for lawyers, which is based on a "job-shop" model is likely to be replicated in the licensing scheme for "legal technicians." Licensing of legal service professionals based on the "job shop" model creates a high overhead enterprise that is vulnerable to new entrants into the market, e.g., LegalZoom, that are not subject to such restrictions.  Lawyers already suffer from a competitive disadvantage against new market entrants. Legal technicians will face the same competitive disadvantages. I can’t see how the practices of legal technicians, with certain exceptions, will be viable economically. (I have yet to see a business plan of what such a limited license practice would look like that would include the cost of malpractice insurance, office expenses, advertising and marketing expenses, etc.).
     
  • Introduction of a new class of limited licensed professionals will continue to erode the economic model of solo and small law firm practice by sucking out from those practices the more routine legal services which are important to sustaining the economic viability of those law firms. It is naive to suggest that solo practitioners should concentrate on doing "more complex legal work" leaving the routine legal work to "limited license professionals.". If the ABA wants to deliver a death blow to solo practitioners this is a good way to do it. (See: Will California Threaten Lawyer Livelihoods with Legal Technicians?)
     

Creating a new re
gulatory scheme and educational system for limited licensed professionals is going to be high in cost. It is not likely that law schools and universities will be able to offer education a price point which is much lower than there existing price levels. The result will be that we will have a new class of students being trained in law that who will incur high student loans where the income generated from their practice will be insufficient to amortize the principal and interest, because of limited market prospects and price compression in the legal industry.

  • Many of these new students who aspire to limited licensed professionals professionals are likely to be members of minority groups. Since there will be no hard data on the income prospects for this new class of professionals — just the idea that that once graduate they will be able to compete with lawyers in a limited way – seducing students into a new field where there is no effective demand.
     
  • I can just hear the pitch of commission-based admission’s representatives at a variety of educational institutions who will jump in this market: "Become a licensed legal professional and you can provide legal services like a lawyer."

One result will be the imposition on a group of students excessive loan burdens which will be impossible for them to discharge. (This reminds me of the banking industry preying on minority neighborhoods with fraudulent loans). I would feel more comfortable with an of educational program to train legal technicians if the tuition was very low or free. Since there is no evidence that there is a viable career upon graduation, the risk should be assumed by society, and not the individual student. So if law schools and universities want to jump in this educational market the least they can do it make it tuition free or very low in cost for the first three years, until it is clear that there is a real career after graduation.

I could write more abut this subject, but this post is already long enough. 

 

Center for Law Practice TechnologyThere has been much discussion lately on whether law schools are training lawyers for 21st century law practice. At the ABA Annual Meeting this week in San Francisco a Presidential Task Force on the Future of Legal Education is scheduled to report out its recommendations.. In my last blog post, I identified 13 law schools that were making a commitment to training law students in legal technology and law practice management. At one point in my career,  I taught these subjects at several law schools under the guidance of Gary Munneke., — whose untimely death last November has created a vacuum that will be hard to replace.

My own bias is that in this digital age, to be a competent lawyer requires an understanding of legal practice technology. The ABA supports this view as at last year’s mid-year meeting the ABA House of Delegates  acting on the recommendations of the ABA 20/20 Commission, voted to amend the Model Rules of Professional Conduct to make clear that lawyers have a duty to be competent in technology. Specifically, the ABA voted to amend the comment to Model Rule 1.1, governing lawyer competence, to say that, in addition to keeping abreast of changes in the law and its practice, a lawyer should keep abreast of “the benefits and risks associated with relevant technology.”

Center for Law Practice TchnologyI have been looking for an opportunity to getting back into teaching law practice technology and now have the opportunity with Stephanie Kimbro to create a new Center for Law Practice Technology with the backing of Florida Coastal School of Law in Jacksonville, Florida.

Stephanie and I will become Co-Directors of this new Center. and the plan is to develop a series of online courses for law students nationwide  that will lead to a Certificate of Law Practice Technology and Management. The first courses will be offered in January, 2014.

The Center will also be a laboratory for developing and testing new forms of online legal services.  Students will have the opportunity to experience virtual law firm technologies and other emerging technology tools such as legal expert systems, document automation technology, and legal applications that are designed to increase access to the legal system. You can read more about this new Center here.

Just Answer is a question and answer platform that provides answers to users questions for a flat fee of approximately $30.00 per question. It turns out that one of the fastest growing categories within JustAnswer is the answering of legal questions by lawyers.  

Here are other the JustAnswer terms and conditions that apply to lawyers that participate in this service:

"Experts in the Legal categories must be attorneys licensed to practice law, and be
in good standing in at least one jurisdiction in the United States or foreign
country. Such Experts shall provide general information only, such as providing
descriptions of general principles of law, and shall not provide legal advice. In
responding to questions, Experts in the Legal Category shall not apply their legal knowledge or skills to resolve or advise on the Customer’s specific factual circumstances described in the question, such as by proposing a specific course of action (other than advising the User to seek the advice of an attorney licensed to practice in the relevant jurisdiction). Experts in the Legal Category shall not form an attorney-client relationship on the Site."

To be qualified to answer questions as a lawyer within the JustAnswer platform, the lawyer has to take a test in the practice area and meet other qualification standards.

Disclosure: I answer legal questions on the JustAnswer.com website in my capacity as an attorney and a member of the Maryland Bar.

The Website is very well executed. Users can select from a panel of lawyers that are online at the time that the question is asked. You can name your price – indicate what you are willing to pay for an answer. You can see the credentials of the lawyers and their track record in answering questions, communications are secure and confidential, and the user can indicate the urgency of the answer, and the level of detail required. Answers are 100% guaranteed. If you are not satisfied you get your money back. You can select the State that you are located in, so answers can be state specific. Most questions are answered within minutes.

I have yet to see a state bar association offer such a service with the same level of Website sophistication and quality control.

 

Continue Reading Does JustAnswer.com Provide Legal Advice Online? Is this Site Ethically Compliant?

LawPIvotLawPivot, is a Silicon Valley legal industry start-up,  a new breed of online legal advice Web site that provides legal answers through a network of attorneys. Sometimes the legal advice or legal information is free like AVVO and LAWQA,  and sometimes you pay a fee, which LawPivot and JustAnswer require. See more:  American Bar Association Journal article on LawPivot.

I had a technical, corporate legal question that I needed a quick answer to, so I decided to try LawPivot’s Confidential Question and Answer Service, pay their fee, and see how well it worked. I knew that LawPivot has a pretty extensive panel of corporate lawyers, so I thought this would be a good starting place. Because my question involved a technical question, I think  if I had asked our regular outside counsel I probably would have generated a $450.00 legal fee and a long memo — which I really didn’t need at this point.

Instead for  $49.00, I received within 24 hours 8 answers from as many lawyers.  Of the 8 answers I received, I marked 5 as not helpful for my purposes. But 3 were very much on target, and one answer was exactly what I was looking for.

This service is "Confidential", but no attorney/client relationship is created, and the answers are supposed to be "legal information" rather than "legal advice",  The reality is that what I received was pretty good legal advice that applied to the particular facts of my situation.

Overall the site was very easy to use and I was very satisfied with the result. I think that even if I were not an attorney with experience in corporate law, I would have been able to recognize which answer to my question was the correct one. I am not sure that this would always be the case, so my conclusion is that this kind of online service for the average user is a starting point for more research, not an end point. The service helps you make a decision whether you need to retain an attorney for additional assistance. This is a good example of the use of the Internet to deliver "unbundled" legal services at an affordable fee.

The Ethical Issues

LawPivot makes clear that they do not share any fees with an attorney. The site also makes clear that it is not a legal referral service and that it does not promote any particular attorney. LawPivot properly avoids making claims about the lawyers in their network such as they are "the best", highly specialized in their fields", or the most experienced lawyers in their specialty.

Apparently, lawyers are ranked by an algorithm  on how well and promptly they answer questions. Whether this technology violates traditional legal referral rules, which prohibits profit-making organizations to be in the legal referral business, is the subject of a future blog post. 

Is LawPivot, as a non-law firm, permitted to charge a fee for legal advice? Is this the unauthorized practice if law? Not if the fee is paid by the user for the use of the Web site, and not for the legal answer or legal advice itself. There is a bar association opinion that holds that a Web site may charge a user for the user of the Website, when purchasing a legal service, and that this fee is not a fee for the legal service itself. See for example, Nassau County OK’s Tie with Americounsel.

In the AmeriCounsel scheme, which dates back to 2000, the Nassau County Bar concluded that:

"[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 Cod of Professional Responsibility, and by ethics opinions interpreting the Code."

I think this opinion is still good law.

However, LawPivot has been forced to create a business model, based on a work-around of a Rule of Professional Conduct that no longer serves any useful purpose.

In my opinion,  a regulatory scheme that enables private companies to take a share of the legal fee for referring client work to law firms would have a positive benefit.  It would result in providing more resources to the Web provider so that it could develop more nuanced quality control systems, more extensive marketing programs,and invest in innovative client referral systems. The prohibition on splitting fees between non-law firms and law firms doesn’t serve the purpose for which the rule was originally designed — to discourage "ambulance-chasing."

In fact, the ABA’s Standing Committee on the Delivery of Legal Services most recently sent a letter to the ABA Ethics 20/20 Commission recommending that Rule 7 (2) (b) be eliminated. 

Model Professional Rule (7) (2) (b) states:

(b) A lawyer shall not give anything of value for the recommendation of the lawyer’s
services except that the lawyer may:
 (my emphasis).
(1) pay the reasonable costs of advertisements or communications permitted by this Rule;
(2) pay the usual charges of a legal service plan or a not-for-profit or qualified lawyer
referral service. A qualified lawyer referral service is a lawyer referral service that has been
approved by an appropriate regulatory authority;
(3) pay for a law practice in accordance with Rule 1.17;

 

Comment [5] to the Rule merely states, “Lawyers are not permitted to pay others for channeling professional work."

The Standing Committee’s letter to the Ethics 20/20 Commission states: 

"The comment provides no rationale for this conclusion, which frankly is a position swallowed by the Rule’s exceptions. Law directories have channeled legal services for well over a hundred years. Lawyer referral services have channeled work to lawyers since the mid-twentieth century. Prepaid legal services have channeled work to lawyers for nearly 50 years. Public relations and marketing have joined lawyer advertising as vehicles that channel work since the Supreme Court ruled that states could not prohibit lawyer advertisements in 1977. Law firms providing services to corporations and institutions have in-house marketing staff, some of whom are paid well into six-figures, for the purpose of channeling professional work to their firms. And most recently, we have seen a proliferation of online third-party intermediaries that in some instances defy categorization as advertisements or referral services. Intermediaries are discussed in detail below, but suffice it to say here that the channeling of professional services in the marketplace in and of itself is not inherently
inappropriate. Collectively, these mechanisms create access to legal services for potential clients of all economic strata. They are, however, most important for those of moderate or middle class individuals who infrequently use of the services of a lawyer and need the information provided by these resources to help them make the decisions about the legal services most appropriate for them. "

The Ethics 20/20 Commission gave no serious consideration to the Standing Committee’s proposal so this reform is dead for the foreseeable future — unfortunately. 

The problem with Rule (7)(2)(b) is that it has been made irrelevant by the Internet and arguably is a deterrent to innovation in devising new ways of enabling consumers to access legal services. This is a Professional Rule that chills innovation, rather than preventing consumer harm.

AmeriCounsel failed as a company because it could not generate sufficient cash flow as it was limited to charging a relatively small administrative fees for use of the Web site, as distinguished from earning larger fees that could result from channeling work to lawyer’s in their network.

I hope that LawPivot does not suffer the same fate as AmeriCounsel.
 

For those of you following the LegalZoom IPO, which was scheduled for Friday, August 2, 2012, it was postponed for the usual stated reason that market conditions were not suitable. This really means that the offering could not get off at the $10-$12 price per share that the selling shareholders wanted. Instead the maximum price institutional buyers were willing to pay was reportedly $7-$8 a share, which would have reduced the valuation of the company by one-third. The reasons that were given for this lower valuation were comparisons with other transactional-based companies like www,ancestry.com which is selling at a price to earnings ratio of 21.73, compared to a projected price to earnings ratio for LegalZoom of over 40x.

Perhaps the research analysts on the buy side perceived a more fundamental flaw in LegalZoom’s business model.

The LegalZoom product offering at its core is still the provision of legal forms offered up to recently, without the option of the legal advice from an attorney. The pricing for these legal forms are comparable to the pricing of paralegal prepared  legal forms offered for example by the many legal technicians in the State of California who work with consumers off line in face-to-face meetings, like lawyers.  

Thus for example LegalZoom charges $299  for no-fault divorce forms, and $139 for name change forms. Many virtual law firms now offer comparable legal form services but bundled with legal advice. See for example www.morrisfamilylaw.com  where a no-fault divorce is offered with the full accountability and the backing of an attorney for a fee of $275. For another example see FlashDivorce a virtual law firm service that offers  no-fault divorce in four states for $199.

Law firms are going virtual and are finally figuring out ways to compete against LegalZoom on its own playing field. To be sure, these small law firms don’t have the capital and marketing budgets of a LegalZoom, but as thousands of these law firms eventually migrate to delivering online legal services they will not only offer a better value to consumers, but they will constrain LegalZoom’s growth and dominance.

The problem with the LegalZoom pricing model is that automated legal forms are digital goods whose marginal cost is zero. Eventually a pure digital good has a marginal cost of zero and will be made available a price which is either free or close to free. It is for this reason that a song, for example, on iTunes cost only .99. [I wrote about this idea previously at Legal Forms for the Price of a Song on iTunes? which identifies other legal start-ups moving into the free legal forms market space.]

LegalZoom itself has aggressively argued that it services are essentially software-powered and its document assembly processes are publications entitled to the same First Amendment protections as other kinds of commercial speech. Its products are therefore, it argues, immune from organized bar claims that their services constitute the unauthorized practice of law. By its own admission, the professional review of legal documents by LegalZoom is very limited and does not constitute legal advice.

If this is the case, once consumers figure out that the product that they get from LegalZoom is essentially the same digital form that can be purchased from many automated legal form websites at a price which is 10% of LegalZoom’s existing selling prices,  -LZ’s revenue should implode, in theory. I say, "in theory", because LegalZoom has done an excellent job in persuading consumers that what they have to offer is a better service than what they get from the typical lawyer.

Because of the overwhelming advertising that LegalZoom pushes into multiple channels the LegalZoom brand  is likely to remain intact, because the truth about the nature of LegalZoom’s product offering is obscured by their aggressive advertising messaging.

For many consumers,  if a service does not appear on page one of a Google search, they will look no further, and the opportunity to avoid using a lawyer in solving a legal problem is often the controlling decision factor.

For example, many consumers are still unaware of the fact that the US Legal Services Corporation has subsidized the creation of free automated legal forms available to people of all income levels that are available for  free from a network of state-based legal information and legal document web sites. These free legal form services have no budget for marketing, certainly nothing like the $40 million a year that LegalZoom’s spends on marketing and advertising.

These legal forms are  fully automated, web-enabled, automated,easy to use, and often employ a visual graphical interface to help users navigate through online questions and courthouse procedures. The program is not limited to low- income people.

Even without a marketing budget, last year more than 500,000 legal forms were downloaded by users in 34 states using this program. This transactional volume already exceeds LegalZoom’s annual volume and it is increasing as more legal forms are automated and the number of states participating in this program increases.

State courts have also jumped into the free legal forms market in response to the demands of pro se filers looking for free legal help. See for example Online Court Assistance in Utah and Maryland Family Law Forms.

Even the US Bankruptcy courts are prototyping a free online set of Chapter 7 bankruptcy forms to be used by self-filers. This service will eventually be rolled out nationwide to every US Bankruptcy Court Website.

I can think of other ways that the development and distribution of free automated legal forms can be monetized, without the need to charge a transactional fee to the consumer. (This is the subject of a future blog post).

Free legal f
orms are here and the supply is expanding. Lawyer’s won’t like the fact, any more than LegalZoom, that this development will disrupt their business models. The reality is that both kinds of suppliers of legal solutions will have to accept the challenge of the accelerated pace of technological change.

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In accordance with the   FTC 16 CFR, Part 255: "Guidelines Concerning Use of Endorsements and Testimonial in Advertising" I am disclosing that I have a material connection to some of the companies referred to in this Post. I am the Founder/CEO of MyLawyer.com, a smart legal forms Website, and Founder/CEO of DirectLaw, a virtual law firm platform provider. The opinions expressed here are my own. I did not receive any compensation from any source for writing this post. DirectLaw sponsors this blog by paying for the costs of hosting.

LegalZoom is a trademark of LegalZoom, Inc.

 Raj AbhyankerHere is a tale of an exceptional entrepreneur/solo lawyer who has built a thriving Internet-based law practice of large scale in less than seven years. Raj Abhyanker, 37,  started his law practice in Palo Alto in a small office above a rug store in 2005 (sounds like many Palo Alto start-ups like Apple and Google!). The law firm’s focus is patent and trademark law which is Mr. Abhyanker’s specialty.  

In September, 2009, Mr Abhyanker launched a web site called Trademarkia which is designed to help small business secure a trademark for an affordable fee. Trademarkia contains an easy to search data base of all of the trademarks of the USPTO office. The site has been written up in the New York Times.

Little more than two year after launch,  Trademarkia has become the leading trademark site on the Web generating more than as 1,000,000 visitors a month, more than either LegalZoom or RocketLawyer.  The law firm now employs more than 60 lawyers, including a team of lawyers in India trained in U.S. trademark law.

This is an example of how a single lawyer with a deep knowledge of the power of the Internet, together with a background in knowledge process management and outsourcing, can create a world-class enterprise from nothing in a relatively short period of time.

Quality Solicitors in the United KingdomMr. Abhyanker is now moving his concept to a new level by creating LegalForce,  a new national legal services retail brand, similar to the Quality Solicitors concept in the UK.

Quality Solicitors
is a national network of retail offices serving consumers and small business by linking together a network of small law firms that share a common brand, advertising and marketing budgets, and an online presence. Mr Abhyanker’s goal is to create a Quality Solicitors type network in the United States.

Legal force Law CenterLegalForce is creating, in a historically-preserved building, a retail law center in downtown Palo Alto in the heart of Silicon Valley, (right across the street from the new Apple store on University Ave.)  The LegalForce center is set to open in the Fall of 2012.

Mr. Abhyanker’s idea is to create a physical space, that is as much about education as it is about "retail", like an Apple Store. In this innovative legal space clients can meet with their lawyers in a comfortable and non-formal setting. Like Starbuck’s "Third Place"  consumers and small business entrepreneurs will be able to meet their lawyer’s in a casual friendly environment. Part coffee bar, self-help book store, legal education and  legal research center, the idea is that a LegalForce center will be a nexus where people can connect and get to meet their lawyers in an accessible environment. Legal services won’t actually be delivered from the store – instead the store will be designed as a gateway to legal and other related services and the visible manifestation of a national retail legal services brand.

There have been other attempts to create a physical retail space where clients can meet with their lawyers in a comfortable and accessible environment. LegalGrind, based in Santa Monica, Los Angeles, advertises coffee with your counsel, but has never been able to expand beyond a few locations. Chicago has their LegalCafe, which is a similar concept, but remains a limited operation. 

My opinion is that the failure of these two operations to scale is the absence of an online strategy which offers legal services over the Internet as well as in a physical setting.

Unlike these smaller operations, Mr. Abhyanker plans to create a national branded legal service that links together lawyers working in the real world with a powerful online legal service strategy.

Unlike a typical law firm, Mr Abhyanker employs a team of software engineers capable of creating an innovative Internet legal services delivery platform that can create referrals for law firms that are members of the LegalForce network.

LegalForce  has the promise of creating a true national retail legal services brand that will offer a range of legal services – from limited legal services online to full service legal representation.

I have often thought that what serves consumers best is a business model that combines a strong online presence with lawyers who provide a full range of services within their own communities.

Online legal form web sites, like LegalZoom, CompleteCase,  RocketLawyer, and our own SmartLegalForms, are limited in scope.These are alternatives that consumers choose because (1) there is no existing national trusted legal service brand; and (2) consumers don’t understand what they are not getting when they purchase just a form from a non-law firm.

The LegalForce idea is designed to be a counter-force to these online insurgents which are capturing market share from the legal profession.

It will be interesting to see how this LegalForce idea develops and whether Mr. Abhyanker will be successful in this venture. LegalForce is one to watch.

 Free White Paper- Virtual Law Practice: Success FActors

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LegalZoom, the leading online provider of legal services to consumers and small business, as predicted here previously, finally filed for an IPO last week. The company is seeking to raise $120 million to expand their services both in the US and internationally.

LegalZoom’s data in the S-1 filing is now available for everyone to analyze:

  • In 2011, 490,000 orders were placed through their web site;
  • 20% of all limited liability companies in California were done by LegalZoom;
  • During the past ten years, LegalZoom has served over 2,000,000 customers.
  • Revenue in 2011 was $156 million.

These are impressive statistics and provide support for the proposition that consumers and small business prefer a very limited legal solution that is just good enough to get the job done, rather than pay the high legal fees charged by the typical attorney.

This is LegalZoom’s analysis of the legal market for consumers and small business, buried on p. 62 of the S-1 filing: 

"Making the right choices with respect to legal matters can be difficult, especially for those with limited time and resources. The U.S. legal system consists of overlapping jurisdictions at the city, county, state and federal levels, each of which has its own evolving laws and regulations. Businesses may be subject to additional laws, regulations and legal issues applying specifically to the industries in which they operate. In addition, the policies and procedures associated with the creation, filing and certification of legal documents are often arcane and confusing."

        "When in need of legal help, small businesses and consumers lack an efficient and reliable way to find high quality, trustworthy attorneys with the appropriate experience to navigate this complex legal system and handle their specific needs. Small businesses and consumers often do not understand their legal needs or know where to start looking for an attorney. Some are wary of attorneys in general, and others may have heard from friends or family about negative experiences with attorneys or the legal system."

        "The high and unpredictable cost of traditional legal services also presents challenges for many small businesses and consumers. In 2011, the average billing rate for small and midsize law firms was $318 per hour, according to ALM’s 2012 Survey of Billing and Practices for Small and Midsize Law Firms. Attorneys are frequently unable to predict the time required to address a client’s legal matter, sometimes billing thousands of dollars to research a legal issue they have not previously encountered. This can be particularly true of generalist attorneys that offer many disparate legal services to members of their local communities. Unlike attorneys at large global law firms or specialty boutiques who handle high volumes of similar matters and develop expertise in specific domains, generalists can find it difficult to efficiently address a client’s particular legal issue due to their lack of specialized expertise. Due to the high and unpredictable costs of traditional legal services, many small businesses and consumers limit their use of attorneys and instead often attempt to resolve legal issues without assistance."

       "As a result of these factors, many small businesses and consumers often are unsure of or dissatisfied with the legal services available to them, and many either elect not to seek help or take no action to address their important legal needs."

Many lawyers are in denial about the desire of consumers and small business to purchase their services. They will assert that consumers and small business are exposing themselves to liability by using LegalZoom’s limited services which will bring regret later. But consumer’s don’t seem to care. What they get from LegalZoom is "good enough." The numbers tell the story.

Solos and small law firms will find that it will be very difficult to compete against LegalZoom with its superior capital resources. The organized bar (State and ABA) has given up on trying to put LegalZoom out of business on they theory that the company is violating UPL (‘unauthorized practice of law") rules. Any organized bar attacks will be resisted by LegalZoom which will now have the capital to fight any challenges to its business model. The American Bar Association has created a Solo and Small Law Firm Resource Center, but it is too little and too late.

LegalZoom is here to stay and will expand its market share as the major provider of the delivery of legal solutions to consumers and small business.

LegalZoom will, inevitably, put many solos and small law firms out of business as it grows and expands its suite of services.  For a related analysis on my theory about the venture capital industry and disruption in the legal industry see video at: Legal Startups – An Overview at PointOneLaw ].

To survive in this fast changing environment, solos and small law firms need to figure out strategies that extend their brand online, without detracting in any way from their role as a trusted adviser in the communities where they live and work.  I see too many solos and small law firms that think they can emulate LegalZoom’s success but don’t have either the capital or the skills to compete in an online environment.

The competitive response for solos and small law firms should be to create a "click and mortal" strategy that combines what can be learned from LegalZoom with the best management practices of a law firm that has the capacity to deliver "limited" or "unbundled" legal services at a competitive price point, both in the office and online.

Here is a previous blog post which lists steps that solos and small law firms can take to become more competitive in this rapidly changing environment. The cost of adapting to this new competitive environment is not the cost of software, which is relatively inexpensive. The cost is the investment in time that the lawyer has to make to learn new online skills, create more efficient production procedures, and adopt marketing approaches that amplify a lawyer’s experti
se both online and offline.

It will be interesting to see what the legal landscape for solos and small law firms looks like five years from now. 

Limited Scope Legal Services: Unbundling and the Self Hep ClientStephanie Kimbro, a virtual solo practitioner based in North Carolina and a member of the ABA’s eLawyering Task Force,  has authored a new book on Limited Scope Legal Services- Unbundling and the Self-Help Client, published by the Law Practice Management Section of the American Bar Association.

The book is "must reading" for solo practitioners and lawyers in small firms who want to expand the reach of their legal services to serve an expanding latent market for legal services plus provide innovative and responsive legal services to existing clients.

The original book on this subject, also published by ABA/LPM, was written by Forest "Woody" Mosten, who is considered the "Father of Unbundling" in 2000. That was 12 years ago, before the ascendency of the Internet. A lot has happened in 12 years. Kimbro’s book up-dates the original concept and explains clearly how these ideas can be used ito create new on-line business models for law firms.

When you combine the power of the Internet as a delivery platform,  with the idea of limited scope representation, new "unbundled legal services"  can be created that can be sold to clients in volume over a wide geographical area. The Internet takes the idea of "unbundling" to an entire new level. An example is the packaging of highly specialized legal forms with legal advice for a fixed legal fee that are sold through out a state. Long Tail marketing concepts apply when selling specialized legal services to a niche market and are compatible with the idea of limited scope legal representation.

Like Kimbro’s earlier work on Virtual Law Practice,  this new book is a manual filled with relevant case studies, explanations, and other resources that help a lawyer figure out out how limited scope representation could be applied to an individual practice. It should be on the book shelf of every lawyer who is thinking about ways to compete with non-lawyer companies like LegalZoom – which in effect has taken the idea of "unbundling" to an extreme by simply "unbundling" the lawyer completely out of the legal document creation process. [ LegalZoom is not a law firm, in case you haven’t heard.]

The book comes with useful check lists, discussions of best practices, a discussion of the pros and cons of "unbundling" , a discussion of ethical rules that apply, a chapter devoted to marketing unbundled legal services, sample limited retainer agreements, and a sampling of state by state ethics rules that apply to limited scope representation with citations back to the relevant state statutes. This is only the tip of the iceberg. With this single book, a practitioner has enough information to develop a viable business plan for offering limited scope legal services.

If Woody Mosten is been considered the"Father of Unbundling" than Stephanie Kimbro has earned the title of "Mother of Unbundling." 

Buy this book!.

The Center for Computer-Assisted Legal InstructionThe Center for Computer-Assisted Legal Instruction (CALI) is offering a free online course on digital law practice, primarily for law students and law professors, but anyone can register.

 

I don’t doubt that most law faculty will find these topics to be irrelevant, but its connecting with law students, as over 500 law students have registered nationwide.

For lawyers interested in delivering legal services online, this course would be a good introduction to the subject.

The first session is February 10 at 2-3 EST. Stephanie Kimbro is doing a session on the virtual law office.

Later in the course, Marc Lauritsen is doing a session on document automation, and I am doing a session on “unbundling legal services”.

Here are some of the other sessions:

Week 5: Online Legal Forms in Legal Aid
Friday, Mar. 9, 2-3pm ET
Ronald W. Staudt, Professor of Law, Chicago-Kent College of Law

Week 6: Contract Standardization
Friday, Mar. 16, 2-3pm ET
Kingsley Martin, President, kiiac.com & contractstandards.com

Week 7: Free Legal Research Tools
Friday, Mar. 23, 2-3pm ET
Sarah Glassmeyer, Director of Content Development / Law Librarian, CALI

Week 8: Unauthorized Practice of Law in the 21st Century
Friday, Mar. 30, 2-3pm ET
William Hornsby, Staff Counsel at American Bar Association

Week 9: Social Media for Lawyers
Friday, Apr. 6, 2-3pm ET
Ernest Svenson, Attorney at Law

Here is the course description and the registration page:

http://www.cali.org/blog/2012/01/25/free-online-course-digital-law-practice

The James Keane Memorial Award for Excellence in eLawyering is awarded every year at the ABA TECHSHOW (March 29-31, 2012, Chicago, Illinois). James Keane was the founding Chair of the ABA/LPM eLawyering Task Force., which grants the Award.

Last year the Award was given to the Legal Aid Society of Orange County for their Legal Genie Project.  Another recipient was Stephanie Kimbro for her pioneering work in developing the virtual law firm concept at KimbroLaw.

The purpose of the award is to recognize law firms, private or public, that demonstrate innovative ways of using Internet technology to deliver legal services. Nominees may be any individual lawyer, law firm, or other deliver of legal services to individuals within the United States. The nominees can be a large or small law firm, public or private, or a legal services agency.  Self nomination by the Task Force is encouraged.

Here is a summary of the Award criteria:

  • Absence of precedent – Never been done or done quite this way before.
  • Evidence of action – The innovative idea was transformed into action and not merely reflective of best intentions. The nominee should be prepared to provide evaluation data that documents the effectiveness of the legal service in terms of client satisfaction, revenue enhancement, and/or law productivity. The nomination must provide an analysis of the measures used to define success.
  • Effectiveness of innovation – There is some measurable outcome that would indicate that the innovation is accomplishing what it was intended to do.
  • The project must demonstrate the use of the Internet to deliver legal services.
  • Action must have taken place no more than three years prior to this entry, and the legal service must be operating for at least one year prior to submission of the Application.
  • Additional consideration will be given to projects that focus on the delivery of legal services to individuals of moderate means.
  • The nomination should describe how the service was developed, how it is managed, and how it has been evaluated.
  • The nomination should describe how the service can be replicated by other law firms in terms of development costs, required technology, people requirements, and ongoing maintenance costs.

Click here to go to the ABA Application Page to apply.

The application deadline is February 15, 2012.