Technology transforming pockets of the legal world

(From left to right) Todd Flaming, a partner at two-attorney firm KrausFlaming, and Andrew Greene, name partner of 10-lawyer firm Johnston Greene, seek out ways to implement new technology into their practices. - Lisa Predko
(From left to right) Todd Flaming, a partner at two-attorney firm KrausFlaming, and Andrew Greene, name partner of 10-lawyer firm Johnston Greene, seek out ways to implement new technology into their practices. —Photo by Lisa Predko
April 2012

In a growing number of law firms, mouseclicks replace footsteps down the hallway to consult with a partner on a legal matter.

Video conferences take the place of in-person client meetings.

Facebook-like discussion threads stand in for long e-mail chains.

Often, business occurs among lawyers who don't even work in an office.

Technology doesn't just change the way lawyers practice law, it offers a way for law firms ranging in size from one to 500 attorneys to radically change their business models and often compete on the same level regardless of their size.

Axiom Law, for example, leveraged technology to create a cost-stripped firm that went global in the span of 12 years.

"Our very existence has been facilitated by access to low-cost, very usable technology," said Tom Finke, general manager of Axiom's Chicago "office." (The vast majority of Axiom's lawyers work from their clients' offices or from home.)

"Because we've eliminated the cost structure of a regular law firm, our rates are about half of what a typical firm charges," Finke said.

Axiom's model shows how tech-focused firms can scale up and attract big-name clients. At the same time, small firms often use technology in other ways to change their practice and expand their reach.

Todd Flaming, a partner at a two-lawyer firm, said he uses relatively simple technologies to virtually team up with groups of other small firms to bid on big-firm legal work as an "ad hoc law firm."

"Suddenly, the whole world is your potential law firm," Flaming said.

Andrew Greene, name partner of 10-lawyer Chicago firm Johnston Greene, created the start of a network of lawyers who work together on a technology platform that integrates lawyers' work and eases communication.

While Greene's idea remains in its infancy, one example of a developed online work environment for lawyers comes from Washington, D.C.-based firm Clearspire.

Clearspire developed an $8 million-plus piece of proprietary software called Coral that helps it to wipe from its business model the large, expensive downtown office and, in turn, the billable hour.

"The world is changing so rapidly," said Bryce Arrowood, Clearspire's CEO. "As we move more and more toward a technology-focused society, the brick-and-mortar model makes less and less sense."

Many say technology will continue to shake up the legal field just as it has with many other professions and businesses. Cost-conscious companies might be enticed by the often-cheaper legal services that alternative firms offer. And this movement could quicken the speed of change within the law firm landscape.

The "ad hoc" law firm

In February, Flaming, a partner who handles patent litigation at a two-attorney firm called KrausFlaming, received a phone call from another small-firm attorney. The attorney asked Flaming if he wanted to create an "ad hoc law firm."

Todd Flaming
Todd Flaming of KrausFlaming said he virtually teams up with other small law firms on about half of his cases.
Photos by Lisa Predko.

An ad hoc law firm combines a group of small firms or solo practitioners as the lead group of attorneys, working together virtually, on a big case, Flaming said.

The call he received in February resulted in him flying to New York with two other attorneys, each from different firms, to pitch themselves to a client. The three lawyers would handle the whole case.

"The reality of most case management is that you don't need any of the specialized software," Flaming said.

"You can communicate by e-mail, cellphone and by (video conferences)."

That kind of virtual connectivity allows him to team up with lawyers from any firm anywhere in the world to handle cases that he couldn't possibly do on his own, he said.

"I'm going after and handling bigger cases than you would expect a small firm to take and I add people as I need them on an ad hoc basis," Flaming said. "And then, suddenly, the whole world is your potential law firm.

"When you look to a smaller firm, it doesn't appear at first glance to scale very well, but I think that's changing, and technology enables this because small firms know other lawyers who were at large firms and are experienced in a certain practice area."

Flaming knew attorneys who worked in this way before he formed his firm. Because of that, he said he didn't worry about his practice being confined to small matters.

"I saw that we could use technologies to keep our costs low, which allows us to lower our rates," Flaming said. "We scale up as needed rather than keeping a lot of people on board waiting for work."

While law firms "made up on the fly" can't handle "Big Tobacco litigation," an ad hoc law firm gives clients more control over their cases, Flaming said.

"The typical law firm has an available pool of associates and often assignment policies that dictates who works on a matter," Flaming said. "The client usually hires one lawyer even though the rest of the team may be unknown. Assembling the lawyers who handle a matter on the fly gives the client a lot more say in its case."

His ability to scale up for larger cases also helps him land referrals from attorneys at big firms, he said.

Marcelo Halpern, a partner at Perkins Coie who handles technology-based acquisitions, said he refers clients to Flaming when he can't handle their work due to conflicts.

"It does make it easier to refer someone to him knowing he has the ability to draw in resources outside his firm to make sure the work gets done most effectively," Halpern said.

"By making those small firms more effective and able to reach out (to other small firms) to do more things, in a funny way, it makes large firms more comfortable working with them.

"Whereas if I were to refer it to someone at another big firm, there's always the fear that they're going to try to usurp the broader relationship, not just the one-off deal."

Legal models will inevitably change, perhaps stubbornly, as technology evolves to make connectivity even easier, Halpern said.

"The problem with technology is that if we can reduce costs, it's heresy to say it, but we can reduce fees," he said.

Greasing the ad hoc wheels

Greene wants to create an infrastructure that will ease the creation of ad hoc law firms. He calls it: The Chicago Business Law Network.

"Network," in this case, has as much to do with personal relationships as it does the Internet.

Andrew Greene
Andrew Greene of Johnston Greene said he started a network of small-firm lawyers to grow his practice.
Photos by Lisa Predko.

So far, Greene said 15 to 20 attorneys signed up for the network. The attorneys come with big firm experience, but now practice on their own or in a small firm and often work in ad hoc firms.

They will get to know each other and their practice areas and work together on an Internet-based platform. At the time of this article, the network was working with technology developers to create its own platform.

"Our plan is to develop a technology to share information, allow the client to track progress, allow the client to pay one invoice instead of multiple invoices, as well as a number of other potential functions," Greene said.

The idea came to him as a way to grow his 10-attorney law firm, Greene said.

"We realized that growing a firm, you start gaining a lot of the problems that other firms have; conflicts, overhead and increased costs," he said.

"Our thought was why do we need to grow a firm? Can't we just network with other firms just like us, people who focus on complex legal matters, and were trained at big firms, and serve complex clients. Can't we just work with them on matters where we need to work with them?"

Patrick Richards, owner of Richards Patent Law, signed up for Greene's network. He left McDermott Will & Emery in 2009 because he said he wanted to escape the bureaucracy of a large firm.

The network helps him get more work without the side effects of running a big firm, he said.

"One of the advantages … is not having to have the dedicated infrastructure, so you don't have a single file management system and I don't want access to the files of the other attorneys because I don't want conflicts," Richards said. "We want to minimize the overlap between the firms. So, it does keep a bit of a wall between you and the other attorneys."

Being part of the network also helps Richards' relationships with clients because he now knows more intimately the abilities of the attorneys he refers clients to.

"Being in a network like ( The Chicago Business Law Network) you get an opportunity to meet the other lawyers, interact with them and get a sense of who would be a good personality and technical subject matter fit for your client," Richards said.

A developed, alternative model

Leveraging technology to change a business model doesn't just work for small groups of lawyers.

Started 12 years ago, Axiom, a 500-plus- attorney firm, today turns a profit — something it's done for some time, said Finke, general manager of Axiom's Chicago office.

"Because of technology, our attorneys are able either to work out of a home office or a client site," he said. "Because we've eliminated the cost structure of a regular law firm, our rates are about half of what a typical firm charges."

For example, if he practiced today at Sidley Austin, where he worked for six years in the 1990s, he said he could bill about $600 an hour. At Axiom, his practice costs less than $200 an hour.

A major part of the firm's work comes from what it calls "Secondments," Finke said. Secondments work virtually or at a client's office on a permanent, part-time or project-oriented basis.

"You're the general counsel of a large tech company and your business involves quite a few commercial agreements with vendors or customers and your business is picking up, you're stretched, or as a general rule, you're sending the work to outside counsel," he said.

"One of our attorneys would do that work that otherwise would go to a traditional law firm or would not have gotten done in a timely manner because the in-house team was stretched thin."

It seems to be a model that big companies get along with. The firm's website lists Google, IBM, Johnson & Johnson, Citigroup, Cisco and 30 other large companies as Axiom clients.

Thomas Holden works for corporate clients from his home office as an Axiom attorney. He said he moved to Axiom because of the flexibility it offers him.

"They do all the marketing and sales; I get to practice law," Holden said. "That's a huge plus in my book."

Axiom "does the initial beating of the turf" to find clients, Holden said. Then, they match the client's needs with their attorney's experience.

"I just started a new customer last week and went through three or four interviews with them before working with them," he said. "It's almost like being hired in-house."

Axiom said its attorneys make, on average, about $200,000 a year. And Holden said models like Axiom's "take a big chunk out of the common law firm's market share."

"I think the cost sensitivity for large and small corporations is huge these days," he said. "If you can deliver quality legal services for a third or quarter of the price, then people are going to jump at that."

A younger alternative

Born in 2010, Clearspire represents another example of a firm that leverages technology to offer an alternative business model, said David Hobbie, a Boston attorney at Goodwin Procter who blogs for the International Legal Technology Association.

The firm's software, Coral, combines practice and document management tools with Web 2.0 capabilities like video chat and attorney news feeds to provide a set of technologies that "certainly aren't present in any off-the-shelf product," Hobbie said.

For example, Clearspire attorneys can keep tabs on colleagues or clients through a "hallway" of constantly changing photos that show if a lawyer is at a desk, on the phone or away from the office.

The hallways change along with the legal matter to show case-relevant attorney and client photos.

By clicking on a photo, the lawyer can video chat, e-mail, instant message or call that person. Then, they can work together on case documents through programs built into Coral and invite clients to view their process along the way.

Jeffrey Brandt, owner of consulting firm Brandt Professional Services and former chief information and knowledge officer at Crowell & Moring in Washington, D.C., worked with Clearspire to develop Coral.

"Every time I move from matter to matter, practice to practice and client to client, the system is constantly adapting all the information it shows," Brandt said. "Other software doesn't do that."

Hobbie compared aspects of Coral to Littler Mendelson's CaseSmart software, which lets clients track progress on their legal matters and collects lawyers' previous work so it can be used again when helpful.

For Clearspire's business model, Coral lets the firm's lawyers work from home, which eliminates the need for a large downtown office, said Arrowood, Clearspire's CEO. To further cut costs, Clearspire scrapped profit per partner, which Clearspire estimates accounts for about 30 percent of the balance sheet at a typical law firm.

With those two major costs out of the way, Arrowood said the firm's fees usually come in at half of what a typical law firm might charge.

Clearspire's billing model, handled through Coral, uses fixed fees that get budgeted by the type and duration of work and by which lawyer will handle it. The client and Clearspire then sign a contract for that amount — it can't change unless agreed upon.

If Clearspire's attorneys spend more time on the matter than they budgeted — too bad for Clearspire. If the attorneys finish in less than the time allotted, the client gets a third of the savings while the attorney and firm split the rest.

"One of our fundamental tenants is the proper economic and strategic alignment between the lawyers who are doing the work, the clients receiving the work and the law firm," Arrowood said.

The impact

Professor Ronald Staudt of IIT Chicago-Kent College of Law said technology ultimately lowers the cost of legal services.

But, he said it remains unclear if firms like Axiom and Clearspire that take advantage of their lower costs by offering lower rates or fixed fees will become mainstream.

"The problem still remains that it's hard to do that," Staudt said of budgeting legal work. "There still needs to be metrics involved and the metrics can't be the number of hours you spend, it has to be the value of your work to the client."

If law firms prove reluctant to switch to alternative structures, "there will be this drag on change and innovation and this stuff that's happening at Clearspire and other organizations will have a hard time taking root," Staudt said.

Still, people rapidly adopted technologies in less-complicated areas of the law years after their initial introduction, Staudt said.

For example, Staudt pointed to a free online software his school helped develop that completes legal paperwork after asking users a series of questions.

Last year, people used the software 500,000 times. That's double its use from the previous five years combined, he said.

If that trend repeats itself in the way law firms adopt technology and, in turn, new business models, firms could face the early stages of a rapid transition, he said.

Young lawyers who cannot find jobs at hiring-averse law firms might also spur the growth of virtual law firms, said Peter LaSorsa, chairman of the Illinois State Bar Association Committee on Legal Technology.

"If you don't have $50,000 or $100,000 in the bank, you have to hit the ground running and not look like you're on a shoestring budget, even though you are on a shoestring budget," he said.

To do that, LaSorsa suggested not hiring a paralegal or renting an office. He said those two expenses run lawyers about $54,000 a year.

LaSorsa rents an office in the same building as Sidley Austin that he can access five days a month for $250, he said.

"That's a way of pulling up in a Rolls-Royce instead of pulling up in some little beater that's got rust coming out of it," he said.

His low costs allow him to charge an hourly rate of $250, although he said most of his work gets done on a contingency fee basis.

In a post-recession world, that cheaper rate looks more attractive to cost-conscious clients, he said.

"The traditional law firm where you have to go in, sit in this big two-story-tall lobby before you talk to your lawyer, well, clients are smart enough to realize they're paying for all that," LaSorsa said.

"So when you give them a $600-an-hour bill, they're like, 'Whoa, I'd rather you keep the two-story atrium and charge me for the legal services.'"