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Law & Technology
First, Let’s Uberize All the Lawyers

Is the over-priced and smug legal profession the next target for uberization and internet disintermediation? The Financial Times reports:

In the US in 2014, 74 firms enjoyed profits per partner of more than $1m, with Wachtell, Lipton, Rosen & Katz, the highest earners, turning in profits per partner of $5.5m, according to the journal American Lawyer.

While many see the mismatch between what top lawyers earn and what most can afford to pay as a problem, others see it as an opportunity. The legal profession, they say, is ripe for disruption. Cab drivers in London are, like lawyers, highly trained; mastering “The Knowledge”, the layout of the city’s streets, takes several years. But the cabbies’ high-quality, high-price service has been upended by Uber, the app-based taxi hailing system that has brought a flood of lower-cost drivers, using satellite navigation, on to the roads.[..]

NextLaw is backing legal technology start-ups. Its first investment was Ross Intelligence, a Palo Alto-based start-up launched just over a year ago by Jimoh Ovbiagele and Andrew Arruda. Ross is using IBM’s Watson artificial intelligence system to do some of the research currently done by junior lawyers. The pair decided to focus first on US bankruptcy law because they thought it was an area of legal practice that was recession proof. “Bankruptcy is always around,” Mr Arruda says.

How does their system work? Say you are a small company, Mr Arruda says, and one of your clients has gone bust. You suspect there are one or two legal cases that will help you recover what you are owed. Whereas a lawyer would have to scroll through precedents, possibly using a computerised keyword search, the Ross system will rifle through thousands of documents to find what the company wants.

The Ross system is in its infancy, as are most of the products that their champions hope will transform the legal business.

The FT‘s focus on big London and New York firms’ billing practices is eye-catching, but the poor and middle class who need lawyers in places like Fresno are the ones who will really benefit from this sort of technology. A merger between two global corporations may need specialized advice that makes expensive, bespoke advice from a team of lawyers worthwhile. Divorces, benefits disputes, or small corporation bankruptcies in middle America, on the other hand, will be much more amenable to standardization and technological assistance.

Furthermore, these are the groups that are having the most trouble affording legal help right now. There’s a huge market to be opened there—and a lot of people to be helped. And we could—and should—go a step further: if we were to pair this kind of technological advancement with legal educational reform, you could really take a quantum leap forward in increasing the access of the privileged to legal assistance.

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  • Rebecca Dann

    And by that you mean let’s remove bar examination and otherwise criminalize (aka: uberize) our legal system?
    I don’t think I’d support that.

    • Tom

      Meh, I’m down for it. Disintermediation is going to be more and more common as time goes on.

  • qet

    There are plenty of lawyers out there who don’t bill at Wachtell rates who can assist persons of more modest means. Technology that can mimic due diligence review by scanning documents for keywords is not going to help some guy in his custody battle with his soon-to-be-ex-wife. The day some guy uses some tech service’s standard form in a custody dispute, loses custody to his oxy-guzzling ex, and the kid dies from a beating by the ex’s methhead boyfriend, that tech service company will be sued out of business, if it hasn’t been already by a state’s board of bar overseers. The same reason that regular joes and janes are not trusted to choose prescription medications for themselves off the shelves of their local CVS is the reason this legal tech solution will never have the impact people are currently predicting.

    A less dramatic example would be incorporation. Sure, the formal incorporation papers can be delivered by a tech server for peanuts. But how is tech going to address the shareholders’ agreement? Just giving the shareholders some standard form with alternative sections to choose from is not going to help them decide which ones to choose, nor how each alternative might affect their unique individual interests.

  • Fat_Man

    You are correct to observe that the market for legal services to the middle class has little or nothing to do with the legal services needed by multinational banks and corporation engaged in hostile takeovers and derivative finance.

    The real problem is not the lack of automation. It is the restrictive practices of the bar associations in cooperation with the courts and regulatory authorities.

    The rules on unautorized practice of law exclude competition from providers who could use economies of scale. For instance. Banks could provide their customers with wills and trusts and the bank’s services as an executor and trustee as a part of their existing trust services, but for the unauthorized practice rules. Those rules should be limited to appearing on behalf of others before courts.

    Another set of rules is the requirements for admission to practice. Most states now require both a BA and a 3 year JD. They rerquirements have nothing to do with anything other than the desire to create an exclussive club of lawyers. Before these rules were adopted in the 1960s and 70s, a law degree could be obtained through completion of a bachelor’s degree program of 3 or 4 years. Both my father and my grandfather got their law degrees that way and they were both very successful practitioners in their community for many years.

    Of course, Abraham Lincoln did not go to law school at all, and we have not seen his like before the bar since. I would abolish the education requirement for bar admission and adopt the old Indiana rule that any citizen of good character could be admitted to the practice of law.

    For Rebecca: The bar exam is a worthless test on a bunch of subjects that may or may not be at all relevant to the lawyers subsequent career. giving it up will not hurt consumers at all.

  • FriendlyGoat

    1) This is what the website for Wachtell, Lipton, Rosen and Katz says about the firm: “We have experience in the fields of mergers and acquisitions, strategic investments, takeovers and takeover defense, corporate and securities law and corporate governance. We handle some of the largest, most complex and demanding transactions in the United States and around the world.” Areas of practice are:

    Corporate
    Litigation
    Restructuring and Finance
    Tax
    Executive Compensation and Benefits
    Antitrust
    Real Estate M&A

    First of all, the fees paid by clients to these firms are probably all deducted from taxable income of some entity, which is questionable enough. Secondly, the profits of the partners are undoubtedly under-taxed by society. In any event, these folks are most likely “creating value” for their clients in ways that we wish they weren’t (if the details of the practice were even half understood by the general public.)

    2) More and more powerful researching tools will not at all diminish what we pay to high-end lawyers, It will merely reduce the number of “junior” jobs in those firms.

    3) None of this has anything to do with Uberizing anything.

    4) The last sentence of the article needs editing because no one is worried about trying to “take a quantum leap forward in increasing the access of the privileged to legal assistance”.

  • Proud Skeptic

    Without the promise of high paying lawyer jobs to attract students, what will law schools do? They are already in trouble. This will be devastating.
    I hope!

  • Daniel Nylen

    Top legal firms are all about top brainpower and very detailed experience and knowledge in the tiny areas where they specialize. Take a very smart law student, add 20+ years working long hard hours under other smart lawyers in a specialized field of law and you get the ability to evaluate and choose a direction for a case/merger that others can’t. Take a look at those lawyers ranked in the top tier of their fields by Chambers and see why.

    Now expert systems can aggregate lots of data, and can currently likely replace some of the lower level grunt work that is now farmed out by the big law firms. However, Watson will need quite a few upgrades past expert systems before it is ready to take on top level legal work.

    However, like Uber, which doesn’t try to replace limo service, only cab service, Watson can take a run at the low level, middle class type law as Legal Zoom and other legal self-help sites are doing. There are many repeatable legal services that can be replicated for the middle class and it is occurring.

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