Washington Lawyer

The Uncertain Future:Turbulence and Change in the Legal Profession

From Washington Lawyer, April 2016

By Sarah Kellogg


The legal profession is experiencing an era of turbulence and transformation. Some have an aversion to change, others worry about losing ground, and still others are concerned that the headlong rush to remake the profession will cause a shift from the practice of law to the business of law, with the profession losing its moral and cultural footing along the way.

The leading edge of that future is already visible: paper pushing and data management long practiced by lawyers are making way for computers and robots, international boundaries are more legally porous than ever, and economic forces are refashioning law practices. Consumer trends such as do-it-yourself legal services and legal smartphone apps are now ubiquitous. And clients are playing a larger role in managing their legal portfolios.

These changes are significant, even revolutionary, and they will be magnified exponentially in the years to come. The transformation of the profession will be remarkably agnostic when it comes to law firms, experts say, applying equal pressure to solo practitioners as well as to the largest global firms. The responsibility for accommodating all this radical change will fall most heavily on the individual attorney, who must be nimble, savvy, and swift in responding to these fast-moving currents.

"In my mind, uncertainty is the hallmark of the future for law firms," says James G. Leipold, executive director of the National Association for Law Placement (NALP). "It's hard to predict what the profession will look like in 10 years because there are so many forces at work. We know it will look very different from what it does now."

The roll call of disruptive factors greeting the profession has proved transformative for other industries, too. Entertainment, media, medicine, and accounting have come face to face with globalization, technology, and the push for economic sustainability, with varying results. The revolution may have only begun in the legal industry, but the combination of these forces will reshape it for years ahead.

"Technology is going to have a profound effect on our profession," says Tanina Rostain, professor of law and co-director of the Center for the Study of the Legal Profession at Georgetown University Law Center. "The lawyers who are going to be in a good position and will do fine in the future are the lawyers who understand the technology and its limits, and [who] understand where they can add the value that technology cannot provide."

A highly mobile, globally interconnected, and seamlessly agile society will demand the same of its attorneys and law firms. Advanced technologies have already transformed the practice of law and soon will impact even more its delivery. Whether that transformation will continue to bring significant opportunities and challenges will depend on how fast lawyers and law firms embrace innovation.

The transition from bespoke services tailored to the client to an automated system of professional work is prompting structural changes in law firms. Some argue the practice of law is departing from the advisory business model and shifting to a depersonalized system of delivering services, driving corporate clients to seek out "deals" from law firms and redefine the attorney–client relationship as a transactional one.

"We've got a shift in the nature of legal work with globalization and technology," says Erin Troy Clinton, founding partner and president of Troy Clinton Law Group, PLLC. "Law firms combined over the years because they thought clients wanted a one-stop shop, but that's not the case anymore. Clients are much more willing to parse out the work based on various attorneys' expertise and [try] to make the most of shrinking budgets and global challenges. That's having a very large impact on the legal environment."

Finally, the unknowable effects of globalization promise to be far reaching, going beyond mere geography and establishing a system for disparate human beings to speak about, process, and resolve differences across space and time. All of these factors have the power to make the world seem both much bigger and smaller, which explains the opportunity and anxiety.

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A Snapshot in Time

Eight years after the 2008 recession began, the legal industry is still grappling with economic instability. The result? Revenues and profits in 2015 and 2016 were projected to remain modest in comparison to the prosperous pre-2008 period, according to one of the organizations that annually take the pulse of the legal profession in the United States.

"We expect overall industry revenue and profitability growth rates in both 2015 and 2016 to be in line with the low single-digit growth rates of 2010–13, with continued dispersion and volatility," noted Citi Private Bank and Hildebrandt Consulting in their "2016 Client Advisory"released in December.

In March 2015, the District of Columbia Bar, as part of its strategic planning process, asked its members to weigh in on the state of the profession, and feedback in a combination of surveys and focus groups made it clear that Washington, D.C., is not insulated from the instability being felt across the country. One in four survey participants said they had changed their area of professional practice within the past five years, and for 20 percent of that group, it wasn't by choice.

But there was a decided and optimistic interest among D.C. Bar members in figuring out ways to address their concerns about globalization and technology. They were curious about how to leverage technology and the Internet to provide legal services, and they wanted to explore the implications of online legal services competing with traditional legal work.

Moreover, Bar members showed great interest in initiatives to strategically address the proliferation of nontraditional legal services providers and the impact of increasing globalization on the legal profession. Members also suggested that the D.C. Court of Appeals consider entering into reciprocal agreements with foreign countries so that lawyers admitted in one jurisdiction could be admitted in another.

"There's no doubt the profession has changed significantly in the last 25 years," says Tim Webster, president of the D.C. Bar and a partner at Sidley Austin LLP. "The law has become nationalized. There are lawyers who work in D.C., Chicago, and Los Angeles, people who practice around the country. The same kind of thing is occurring internationally. We need to find ways to address those trends."

Altman Weil's 2015 Law Firms in Transition Survey, now in its seventh year, painted a similar picture, especially on the increasingly thorny decision by corporate legal departments to in-source work and use legal tech solutions to reduce the need for outside lawyers. "Sixty-seven percent of law firms say they are currently losing business to corporate law departments that are in-sourcing legal work," the survey found.

Much of the reason for that shift is the cost of doing business with outside counsel. After years of saddling corporate clients with substantial fees, companies began to balk at paying for billable hours, especially when it looked like they were paying to train associates on behalf of the law firm.

"I think there's always going to be a need for lawyers and law firms, especially for banks or other companies to get advice from the outside," says Suzanne Garwood, associate general counsel for JPMorgan Chase & Co. "If there's anything law firms need to work on [it] is their cost structure. They need to take a look at the billable hour."

The billable hour concept is embedded deeply in the financial raison d'etre of law firms and has been a fundamental building block of their financial system. As the law firm structure begins to change, however, experts believe the billable hour may become an artifact of the past.

The Tech Revolution Is Here

In the future, lawyers are not going to become a tribe of law school-educated programmers, but it wouldn't hurt them to know how to apply data analytics and mobile applications to the practice of law. The opportunity of these groundbreaking technologies lies in getting rid of the costly work of document management to assign greater value to the firm's expertise and the attorney's intellect.

The goal of much of this technological adaptation is to decrease costs, increase convenience, and improve access to justice—an admirable objective in anybody's book. Experts say computer-assisted document reviews are less expensive, more efficient, and more accurate. Many believe the profession will be less fixated on forms and more passionate about knowledge management in the future. The focus will be on designing legal tech systems, working across disciplines, and creating legal processes for clients rather than memorizing law.

"We're already seeing the beginning of the applications of artificial intelligence in the law," says Leipold. "ROSS [a computer program] at the University of Toronto is built on the IBM Watson platform, and they're developing sophisticated document assembly processes for machines. They've designed software with a 200- or 300-question tree. Once someone answers the questions, the machine can draft the document. It still needs a lawyer to review it, but it is not nearly as much drafting time. Once the question tree is complete, it can be used over and over again."

A new generation of online legal solutions has been created in the last few years, but the giants still dominate the market. Thomson Reuters' Westlaw and CLEAR and LexisNexis' Lexis Advance, Nexis, and Quicklaw command the legal research and legal management market. Rivals to each other, they also have attracted a number of rising competitors such as Fastcase and PACER.

LegalZoom is the granddaddy of consumer-based sites for legal advice and document creation, providing simple contracts and documents for online clients. But even it has upstart competitors nipping at its heels, such as Rocket Lawyer, LawDepot, and Nolo.

To differentiate themselves, legal sites have taken on a variety of roles. Clio focuses on law firm management system, the Depose app allows users to draft and edit depositions, DocketLaw calculates court deadlines, Axiom provides lawyer placement services, and Legal OnRamp is a place for legal professionals to share information and discuss trends. Exigent and Pangea3, the latter also owned by Thomson Reuters, provide global legal process outsourcing options.

Online solutions also are available for lawyers to access a network of qualified legal professionals and firms around the globe with which to develop collaborative relationships. Meritas, wireLawyer, UpCounsel, and Priori Legal are examples of this so-called marketplace of legal services that are gaining traction.

What is remarkable about these projects being considered by tech companies, law firms, and law schools is their variety. Some address the needs of firms, others are focused on lawyers, and still others are targeted at the legal interests of clients. A few groundbreaking examples illustrate the dizzying effects of technology on the practice of law.

The Canadian province of British Columbia has created the first of that country's online tribunal to resolve small claims disputes and condo conflicts of up to $10,000. The Civil Resolution Tribunal (CRT), also available as a mobile app, is in beta testing now and will launch later in 2016. Officials are offering CRT as a voluntary means of resolving disputes, but they expect it to become mandatory for certain cases. The system's built-in process includes party negotiations, a mediation-type phase, and an adjudication that has the same force as a court ruling.

Another project—designed by two law professors and a data scientist and consultant—is applying machine learning and artificial intelligence techniques to predict the outcomes of cases before the U.S. Supreme Court. So far the computer model has an accuracy rate of 70 percent, which is considered remarkably high for these kinds of predictive projects.

The widespread adoption of data analytics will be a game changer. Over and over again, legal technologists have forecasted the revolutionizing effects of data analytics and artificial intelligence in discovery, document review, and in teasing out legal strategies. "We know the world is about data," says Rostain of Georgetown Law. "Lawyers need to be able to find data, they need to know how to use it and manipulate it. We're teaching students how to get data off the Internet now and use it in ways that help and support the practice of law."

These kinds of legal tools are having a broad effect on the profession as they hand more control over legal matters to clients. A sampling of online legal sites, games, and mobile apps discussed below are just the tip of the iceberg when it comes to opportunities for attorneys and clients.

Designed for trial lawyers, The Juror Rater mobile app helps attorneys to select a jury by rating the probable bias of prospective jurors toward the criminal prosecution or civil defense by evaluating key factors. The $25 app is available for tablets.

Shake, another mobile app, allows users to create five types of contracts by walking them through a series of questions. It follows the TurboTax process of guiding users to create, sign, and send freelance, nondisclosure, buy–sell, loan, and rental and lending agreements. The contracts are stripped of "unnecessary" legal language and written in simple English.

Even the American Civil Liberties Union of the Nation's Capital (ACLU-DC) has gotten into the business of app production. Its Mobile Justice DC app, for instance, enables users to record suspect or violent encounters with law enforcement, file an incident report, and send those reports to the ACLU-DC for review.

And then there's Estate Quest, a video game that teaches basic estate planning concepts to consumers. While the game isn't intended at this stage to provide legal advice, the goal is to help players prepare to meet with an attorney. "The player is a detective presented with different case files about individuals who failed to prepare estate planning for their families before their death," according to the game's description online. "The player uses a time machine to time travel to different dates showing scenes in the case. Each scene is interactive with animated elements and clues for the player to discover. The clues reveal what should have been written into an estate plan to prevent the negative consequences."

If that doesn't feel like a brave new world, imagine the last time anyone considered estate planning the stuff of games.

A Shrinking World,  a Crowded Market

While technology is transforming the legal landscape, globalization also is making an impact. U.S. law firms have "gone global" to respond to client demands and the flow of capital, as well as to access new markets. With the profit magnetism of Dubai, Shanghai, Singapore, Tokyo, and many other world capitals, Big Law firms have established outposts and expanded their networks to better serve international clients.

"The world is shrinking and firms are setting up branch offices to service their corporate clients," says Sanford K. Ain, principal and cofounder of Ain & Bank P.C. "The law practice is becoming completely one in terms of other countries. Globalization of the legal profession is dramatic and dynamic and will continue. As time goes on, I expect that we'll be dealing with other countries much the way we deal with other states."

The 2016 Client Advisory forecasts that the "global legal market is becoming extremely competitive and, in some markets, over-crowded. The most successful global firms will be those where the goal is to service clients with global needs and to diversify the firm's practice profile."

Much of the globalization of the legal industry is focused on two types of law firms: the "global Goliaths" and the "global elites." Both are comprised of large firms serving their multinational clients' cross-border, multijurisdictional legal transactions. The global Goliaths are law firms with record numbers of attorneys and offices. The global elites are those firms known for their bespoke services that operate domestically or in adjacent markets.

"The fact we've become more global really has given lawyers . . . incredible opportunities," says Brigida Benitez, a partner at Steptoe & Johnson LLP and immediate past president of the D.C. Bar. "We now can be here and have an exciting practice that touches on issues and factors all around the world."

Many observers believe globalization will continue into the future, especially as firms respond to the need for comparative legal knowledge and the growing number of transnational transactions. The barriers to international businesses continue to fall, and law firms play a critical role in helping international companies to compete globally.

"In terms of the legal profession, I think it's increasingly difficult if not impossible to rely on expats to handle your overseas offices," says William Sudow, cofounder of Sudow Kohlhagen LLP who has worked his entire career on overseas transactions. "You really need to have folks who are local lawyers and fluent in the local language as well as English. It's evolved to the point where large international law firms, in order to thrive overseas, need to have a good network of local lawyers who are partners or who have collaborative relationships."

Moreover, international treaties have changed the complexion of the global legal practice, and will likely continue to break down barriers in the way international law firms and their services are defined and structured.

"Globalization is now part of the frame of reference in which the U.S. legal profession operates and one cannot talk about lawyers and globalization without considering the impact of international trade agreements on any given issue," wrote Laurel S. Terry in "From GATS to APEC: The Impact of Trade Agreements on Legal Services," which appeared in the Akron Law Review in 2010. "While these agreements may not ultimately apply, they reflect the globalized world in which we now live and are an integral part of the regulatory landscape that must be considered."

The D.C. Bar has joined other state bars in looking at the effects of globalization in terms of the size, makeup, and jurisdictions of local law firms. The Bar's Global Legal Practice Task Force, chaired by Darrell Mottley, a principal shareholder at Banner & Witcoff, Ltd. and a former D.C. Bar president, is expected to release its recommendations in the coming months. There also have been efforts locally, nationally, and internationally to harmonize professional rules between countries to reduce conflicts across international jurisdictions.

"The [Bar's] Board of Governors set up the Global Legal Practice Task Force to study how globalization is impacting the law practice," says Mottley. "Between alternative business structures and law firms trading on the stock market, there are many things out there we probably don't know about yet."

A New Business Model

After the recession, law firms around the globe were looking for ways to stay afloat. Some closed their doors, others cut back with massive layoffs. The turbulence of the economic collapse caused even some of the most successful firms to pare back by cutting interns, associates, and support staff.

In medium and large law firms, there is still tremendous pressure from corporate clients to bring down the cost of their overall legal spending. That means they're leaning on law firms to provide value.

Altman Weil's Law Firms in Transition Survey documents how the legal profession is changing, and also identifies emerging forces defining its future. One of those changes is the move by corporate legal departments to in-source work and to adopt legal technology solutions to reduce the need for outside lawyers.

"Sixty-seven percent of law firms say they are currently losing business to corporate law departments that are in-sourcing legal work," the survey states. "[M]any firms are engaging in a variety of changes in response to post-recession market forces. But the majority of change efforts can be characterized as limited, tactical and reactive. Law firms appear to be gambling that a measured approach to change will hold them in good stead among peer firms taking the same incremental approach."

The Center for the Study of the Legal Profession at Georgetown Law and Thomson Reuters Peer Monitor, in their 2016 Report on the State of the Legal Market, suggest that U.S. firms have been slow to react to the current situation because they aren't convinced the problem exists. "To date, however, very few firms have been willing to engage proactively in the consideration or implementation of the kinds of operational changes that would be required to respond effectively to the changed expectations of their clients," the report states.

That isn't the case worldwide. The United Kingdom, Australia, Hong Kong, and some Canadian provinces began to look for ways to handle legal case backlogs while also teeing up new clients from nontraditional sources. Officials focused their efforts on deregulating their legal sectors, opening up ownership of law firms, and allowing the provision of certain low-level services by nonlawyers.

"The reason they adopted the change in the law was they thought they'd have lower costs for consumers with a lot more competition and with creative business structures," says Mottley. "We're waiting to see if that happens."

Since 2007 the UK has allowed nonlawyers to enter the legal services market in a bid to address the unmet legal needs of lower-income individuals. The UK's welcoming attitude to nonlawyer services has opened doors for the Big Four U.S. accounting firms—Deloitte LLP, PricewaterhouseCoopers (PwC), Ernst & Young, and KPMG LLP—to offer legal services, as well as for law firms to seek external equity investments by raising investment capital or going public on the stock market.

The Co-operative Group, the UK's largest mutual business, has added legal services to its menu of offerings, which already include retail food operations, appliance sales, and financial and even funeral services.

"Obviously, law firms have to compete in a global marketplace where legal services are provided in a variety of settings and at a variety of price points," says Leipold of the NALP. "I think there's a strong movement toward deregulation. We have seen the Legal Services Act in the UK derail the law in a lot of ways. Law firms can raise outside capital on the stock market. They can be owned by nonlawyers. And alternative business structures allow the Big Four accounting firms to provide legal services in the UK."

The future might include Walmart or Safeway offering legal services at a window in its stores right next to the grocery and pharmacy. Or large accounting or consulting firms such as Deloitte or PwC offering new lines of business to their longstanding clients. In February 2016, PwC, the world's largest accounting firm, announced that it was on track to reach 100 million pounds in revenue by 2018 in the UK (about $142.8 million today). Following at a distance, but still growing, are consulting giants Ernst &Young and KPMG.

In 2015 the American Bar Association's House of Delegates adopted a resolution that provides states a framework for the regulation of nontraditional legal services providers. Known as Resolution 105, it acknowledges that some states may decide to allow nonlawyers to provide certain types of legal services.

The District of Columbia permits nonlawyer ownership of law firms, subject to certain restrictions. Under D.C. Rule of Professional Conduct 5.4(b), nonlawyer owners must perform professional services that assist the firm in providing legal services, and that the sole purpose of the firm must be the provision of legal services to clients.

Washington state allows nonlawyers to be licensed to provide legal services to clients in certain practice areas and to own a minority interest in a law firm. Legal technicians, also known as limited license legal technicians or LLLTs, are trained and licensed to advise and assist people going through divorce, child custody, and other family law issues. In Georgia, where nonlawyer ownership or investment is not permitted, a law firm is allowed to work and share legal fees with a firm in another jurisdiction that allows nonlawyer partnership or passive investment in a firm.

Opponents fear that licensing programs will give birth to a two-tiered system where nonlawyers serve the poor and lawyers are accessible only to the wealthy.

One feature of the past that most clients and many lawyers would like to see listed as extinct is the billable hour. The enormous cost of litigation has been a deterrent for many clients, and more and more of them, even corporations, want to work on a flat rate.

"I don't think that the billable hour encourages the right behavior," says Garwood of JPMorgan Chase. "If you think about it, you're a first-year [associate] and your mission in life is to work as many hours as you can. Whereas your client's mission is to get really good work with as few hours as possible. There is a huge disconnect."

The billable hour concept makes it easy to think of legal services as a product. "Legal services have become a bit of a commodity," says Clinton of Troy Clinton Law Group. "It used to be about relationships. It's far less so now. I do think clients are looking at legal services as a commodity, one that they can shop around for."

The billable hour system, with its corrosive effects, are likely to change for most law firms in the future, except possibly for some of the very largest. Outsourcing, data analytics, online tools, and broader tech solutions will make it difficult to convince price-conscious clients to accept what they consider an antiquated way to pay for services.

"The pressure to generate revenue adversely impacts people's quality of life and health," says Ain. "A more moderate culture and a more moderate approach to the way people practice law would be an improvement. We need to start treating it more like a profession" and less like a bottom-line business.

Now the Good News

The future appears to hold great promise for the legal profession. It's just too early to tell. After all, it's not mindless optimism that drives one to believe a problem can be turned into a virtue, and observers say challenges like globalization and rapid change in technology open new doors as fast as they close old ones.

"I think the future is even more integrated with more cross-border transactions," says Sudow. "I think there will end up being at least two or three or four languages used in international transactions. I believe we'll be able to figure out how to manage it."

The challenge for the profession, its leaders, and its foot soldiers is to be more creative and visionary in considering what to do next. This won't be a journey for the fainthearted or the nonaligned.

Sure, there are some who are predicting the demise of professions, including law, medicine, and engineering, because they are under attack from the forces of technology and culture. Or that the centuries-old social compact between the professions and the public is beginning to fray due to a series of challenges with no easy answers.

"The end of the professional era is characterized by four trends: the move from bespoke service; the bypassing of traditional gatekeepers; a shift from a reactive to a proactive approach to professional work; and the more-for-less challenge," wrote Richard Susskind and Daniel Susskind in The Future of the Professions: How Technology Will Transform the Work of Human Experts.

Yet, these changes also are expected to bring new opportunities for law firms and lawyers. Taking steps now to build a more global firm, to restructure from an antiquated billing system, and to adopt technology to its fullest capacity will pay off in years to come.

The question for people considering a legal career—or those already in it and hoping for a long one—is how will society interface with law in the future? Will robots be able to handle both basic and complex legal transactions and counsel? Will lawyers, if not law firms, be the knowledge keepers?

Uncertainty in the current business climate may not subside soon, but there will be lawyers taking risks and rolling the dice on the future of the profession. "For students going to law school, it's still a great profession and you get a great education, but you have to have some kind of risk tolerance. You're just entering a profession experiencing profound change."

Sarah Kellogg is a regular contributor to Washington Lawyer.