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Alternative Legal Business Models: Tipping the Martini Glass


 

By Erin Malapit, Vanderbilt Law School 2020

In this year's series of student blog posts for Legal Problem Solving, students are digging into the American Bar Association's 2016 Report on the Future of Legal Services to explore how far we've come in 2019 and what remains to do in the innovation of legal services delivery.

In Finding A.5 of their 2016 Report on the Future of Legal Services, the ABA declared that “[t]he traditional law practice business model constrains innovations that would provide greater access to, and enhance the delivery of legal services.”

In the past, spending in the traditional legal market has been compared to a martini glass, where the majority of the money to be had is spread across a shallow pool at the top (earned by large, traditional big law firms), with a very thin amount of money distributed throughout the stem (earned by more affordable practices representing the middle class), and at the bottom is a small base of public-interest law, just big enough to support the weighty top. Because of the large amounts of money to be made at the top of the glass, the legal community has tried to sustain this traditional model, but recent developments and innovations are threatening to tip this martini glass over and could provide not only more access to justice, but more creative opportunities for those with legal experience.

The traditional model involved the delivery of legal services by big law firms, all claiming to offer “bespoke” legal work and charging for their time on an hourly basis — the infamous “billable hour” model. Despite the poor incentive it provides for efficiency, this billable hour model was initially seen by clients (with little to no understanding of what legal work entailed) as a sensible way to pay for legal services. However, the billable hour model has come under criticism as the legal system is becoming less cryptic to the layperson and economic stress is requiring these same clients to become more fiscally conservative.

Furthermore, the billable hour model is coming under criticism from within the legal community as some scholars argue that, in addition to encouraging the dishonest practice of “padding” hours, the traditional model discourages an unhealthy firm environment by compelling associates to enter into the billable hour rat race. This not only puts pressure on associates to spend disproportionate amounts of time at work, but it also encourages them to measure their self-worth on a somewhat hollow metric that reduces their contributions to a measure of quantity instead of quality.

It’s no wonder that lawyers are struggling with substance abuse and mental health issues at levels much higher than the general population (and even compared to other highly educated professionals!) Despite these downsides to the traditional model, many young lawyers still recognize that there is more opportunity at the top of the martini glass than at the thin, public-interest bottom.

At one point, public-interest law was an area sought after by talented and ambitious young attorneys. This was at a time when the Johnson Administration’s War on Poverty provided the means and the programs necessary to seriously tackle the access to justice problem. However, with the Nixon Administration’s creation of the Legal Services Corporations (LSC, which stemmed from an attempt to roll back the War on Poverty) and the later imposition of the 1996 restrictions on LSC funding (most notably, the prohibition on any LSC recipient using their non-federal funds for any restricted activities), the ability of the public-interest community to advance any serious efforts has been significantly handicapped.

Thus, despite the fact that many law school students start off intending to advance public-interest work, the combination of crippling student debt and the futility of a hamstrung legal-aid job lead many of these bright-eyed justice-seekers to take a job as an associate at a big law firm. It’s no wonder that students enter law school as happy as the general population and leave with higher rates of depression and alcoholism! Fortunately, a recent rise in disruptive technology and pressure from clients for firms to provide financial accountability have opened a space for more creative business models and service providers to emerge.

These innovative methods of delivering legals services not only challenge the constraints of the traditional billable-hour model, they also have the potential to provide greater access to justice. For example, DoNotPay is a chatbot that allows laypeople to bring pro se law suits against larger entities, such as airlines, package delivery services, banks, and even municipalities that hand out one too many parking tickets. By asking a series of simple questions, apps such as this “level the playing field” by educating people in their legal rights and providing them a way to stand up for them in court. Another creative service provider is LegalZoom, which provides “drafts” of critical legal documents (ranging from estate planning and family law documents to business documents) for a fraction of the normal price, thus allowing otherwise unaffordable legal access to both the martini stem and bottom.

Older generations of legal providers may scoff at the idea of being replaced by websites and apps, the new wave of legal innovation provides some benefits for lawyers as well. The new focus on efficiency has created jobs for those with legal knowledge who do not desire to practice law. For example, experts in legal project management and legal workflow development are being sought after by forward-thinking law firms, which recognize and respect their clients’ desire for transparency and efficiency in their legal services. And for those who love the law but don’t want to feel tied down to big law firm hours? Accordion firms, such as Montage Legal Group, allow talented attorneys the opportunity to work freelance for big law rates.

While the traditional legal model served its purpose, the legal community has come to an intersection where it can either look back and cling to the past, or move forward with the changing times. It has been said that “the measure of intelligence is the ability to change.” Given the amount of intelligence required to thrive in the legal profession, it is inevitable that we, as a community, will all recognize the need for our business model to evolve.

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