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November 30, 2008

lawyer entitlement and the price of legal services

Filed under: lawyer news or ethics — David Giacalone @ 3:43 pm

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It’s rare for the f/k/a Gang in our roles as Agent of Reality and Consumer Advocate within the legal profession (and broader legal services marketplace) to find a kindred spirit in the blawgisphere.  So, we were pleased when Scott Greenfield pointed his readers yesterday to Law21, the weblog of Canadian lawyer and journalist Jordan Furlong.  He sees Law21 as “an information hub for the extraordinary changes underway within the legal profession.”

What makes Jordan’s spirit akin to my own is not that we are likely to agree on every topic.  It’s that he is not afraid of the changes brought about by information technology and the dawning of a globalized marketplace, which allow and demand more choices for consumers.  He is not trying to prevent or delay those forces in order to preserve the ego, image, social status and (last but certainly not least) the income expectations of the legal profession.  His perspective is a happy contrast to many in the blawgisphere who purport to be future-oriented and the leading edge of law practice, but who spend their time trying to figure out ways to preserve, and even increase, lawyer income in the face of technological innovations and market forces that allow services to be provided more quickly and efficiently, by fewer lawyers and by more and more non-lawyers.

Jordan appears to realize — as does Richard Susskind, in books such as “The Future of Law: Facing the Challenges of Information Technology” and “The End of Lawyers? Rethinking the nature of legal services” — that the profession will have to adjust significantly to the realities of the digital era.  More important, he realizes that consumers are showing us by their choice of alternative sources and formats what is and is not valued about the way the “traditional” law firm provides solutions to client problems. The f/k/a Gang believes as a matter of principle that the legal consumer is king (and lawyers are merely the skilled-but-humble esquires holding the client’s shield).  I don’t know whether Jordan, who does after all work as the editor-in-chief of the Canadian Bar Association’s magazine National, agrees with that principle.  But, he seems to believe that a free marketplace supports the power of the consumer over the prerogatives of the provider — and, that a technological revolution is breaking down barriers that have too long protected the lawyer cartel from the forces of competition.

Two posts at Law21 got my attention yesterday, and are clearly connected: “the market doesn’t care” (Nov. 28, 2008) and  “De-coupling price from cost in legal sevices” (Nov. 26, 2008).   The primary points of “the market doesn’t care” are

  • “The web is the most disruptive force in the history of law, by many orders of magnitude, destroying every assumption on which traditional legal businesses are based.”
  • “The problem with the legal industry, as with the music and newspaper industries before it, is the sense of ENTITLEMENT.”

As Jordan explains:

First, clients don’t care if you make money. That’s important to say. You have no right to make money from every problem or opportunity clients face, and the humility that comes from approaching clients that way matters. It’s not “how can the client make me money,” it’s “how can I do things for this client.”

The lesson from offshored lawyers and document management companies is that there are even MORE legal service providers than there were before. What will get hurt is law firms and the guys in the suits and the unlimited budgets for entertaining. The legal services will keep coming.

That sounds a lot like Richard Susskind (and ethicalEsq), and is right on the mark.  A year ago in the post “The End of Lawyers or the Cartel’s Last Stand?“, we agreed with Susskind’s assertion:

“I do not believe lawyers are self-evidently entitled to profit from the law. As I have said before, the law is not there to provide a livelihood for lawyers any more than ill-health exists to offer a living for doctors. . . . And, just as numerous other industries and sectors are having to adapt to broader change, so too should lawyers. “

Susskind challenges the legal profession — not to try to prevent change and protect its traditional ways — but  “to find and embrace better, quicker, less costly, more convenient and publicly valued ways of working.”   Admittedly skeptical, we asked in that post:

Whither the American Bar? After three decades watching the legal profession in the USA from the perspective of a competition and consumer advocate, it is difficult to be optimistic that Susskind’s hoped-for introspection will yield progress rather than cartel-style roadblocks to change.

The remainder of that post suggests “a few signs to look for that will help determine whether the American bar is choosing to (or able to) act like a guild protecting its own interests first, or like a learned profession seeking to best serve the public interest in creating a truly accessible and affordable legal system.”  Quoting an earlier post from May 2003, we reluctantly opined that lawyers are far too worried about losing dollars, control and prestige:

[I]t seems that most lawyers expected a very good lifestyle to come automatically with their J.D., along with high social status. They are angry and worried that the marketplace doesn’t value their services as highly as they had expected, and they are bewildered that society doesn’t give them the anticipated respect. . . . The result, as individuals and as a group, is resistance to any change that threatens to further undermine their financial and social position.

Those sentiments are, we believe, relevant to Jordan Furlong’s message in “De-coupling price from cost in legal sevices” (Nov. 26, 2008), as they were in our post the day before on “bonuses and marketplace value.”  Jordan says, “Virtually all the talk these days in client circles is about the cost of legal services.”  But,

What’s interesting is that most conversations about “reducing costs” are one-dimensional. They focus on the client getting the same kinds of services from the same kinds of law firms at a lower price; or, more concisely, the same-old same-old for less. They don’t envision rethinking the source of the services, or more importantly, the ways in which those services are produced.

Jordan goes on to make two important points:

  • “Both lawyers and clients have succumbed to the long-standing lawyer assumption that the price of legal services is directly connected to its cost. Lawyers produce work today pretty much the same way they produced it 60 years ago . . . . Some time back, they figured out how much it costs them to do that, built in a percentage for profit, and arrived at a selling price for clients. . . . It’s an insulated, self-sustaining system in which price = cost + profit margin.
  • “Here’s the really important thing that’s happening right now: the price of legal services is finally becoming uncoupled from the costs lawyers incur to produce it. Partly through efforts to identify the underlying value of a service to the client (something unrelated to lawyers’ cost), and partly through the relentless advances of technology and globalization, legal services price has been liberated from lawyers’ costs and is starting to establish its own gravity and orbit.”

Here at f/k/a, we agree, but point out that technology and globalization should — if market forces are permitted to operate in the client’s interest — be bringing price down toward the cost of the less-expensive substitute providers and formats, which are also part of the market for legal services.

That’s why, as a client and competition advocate, I’m so irked by the proponents of value billing (see, e.g., this week’s “marketplace value” post and its Comments section, and our post “broadening the billable hour debate“).  The advocates of value billing are going the other way: they want to divorce value from law-firm costs in order to achieve prices higher than the bloated fees that are based on traditional law firm practices and billing models.  Realizing that new technologies and service options make what many lawyers do less “valuable” in the marketplace sense, they’re trying to re-define value to de-couple it from the market forces that are demanding that lawyers reduce costs and operate more efficiently, or relinquish large portions of their business to alternative providers.

It’s the lawyer’s sense of entitlement (and the normal human desire to keep a good thing going) that is largely to blame for the reluctance and outright hostility to adopting new technologies and methodologies or to passing along savings to clients.

Although he realizes that law firm costs and fees are often bloated, Scott Greenfield — using the traditional guild argument of preserving quality (and therefore price) in order to protect the customer from inferior products — worries that we can’t treat law like other industries that have been radically diminished by technology.  Scott says “Technology has spread legal information far and wide, but it’s a fools gold.” And, “It’s not the feared loss of civic value that matters, but the loss of a skillset necessary to competently perform the task.”

Scott is right that no sane consumer gets his legal information solely (or mainly) from weblogs.   He’s also clearly correct that there are some situations that call for legal skills that can only be provided by highly-trained individuals attending hands-on to an individual client’s situation.  But, I believe such sophisticated or high-difficulty practice makes up a rather small portion of the large pie that the legal profession asserts as its sole domain.  Indeed, most legal problems of most Americans do not need sophisticated lawyering — or at least not legal services provided directly by a lawyer.  They can be well-served by what Richard Susskind calls “smart systems and processes.”  Large corporations like Cisco, are already using information technology to engage in “self-help” and are forcing lawyers to unbundle their services.

Because they know their own facts and are highly motivated, persons of average intelligence and education directed to the right sources could solve most of their personal legal issues with a well-designed set of materials, at times supplemented by a helping human hand.  Tens of thousands of Americans are proving this each year in courts across the nation that offer well-designed programs to litigants appearing on their own behalf, often using digital forms and non-lawyer assistance.  Computerized document assembly is far more sophisticated now than it was a decade ago and can be used to solve many transactional and court-related legal issues.  Online legal documentation services are also more widely available and affordable and much improved over just a few years ago. [See HALT’s Do-It-Yourself Law Reviews for examples of currently-available products.]

As I said a couple years ago at SHLEP (The Self-Help Law ExPress), the average American is not an illiterate serf who cannot understand and handle — with a little bit of guidance — most of his or her own everyday legal problems. The best way to ensure that the non-rich also have access to necessary legal and judicial services is to give them the ability and the option to formulate adequate solutions themselves, including acting as pro se litigants in court. I added:

By combining the existence of a literate public with the power of computer-information technology, with a judiciary that understands that our court system exists for the public (rather than for judges or the bar), and with lawyers willing and able to “unbundle” their services and perform discrete tasks for clients who want to handle their own legal matters, we can now make it possible for self-help to be a viable option for solving most of the legal problems of most Americans.   Of course, those who want to hire a lawyer, or who have issues that can only be adequately handled by a professional trained in the law, should be able to find reasonably-priced, competent legal assistance.

At the very least, consumers should have the right to make intelligent choices about whether to use a lawyer or not in solving a legal problem.  Scaring them with worst-case scenarios is not helpful.  Consumers, out of necessity or choice, buy “riskier” or lower-quality products of every kind every day.  Lawyers need to stop fooling themselves that their services — at least what the vast majority of them do most of the time — are so different from other services and products the Bar should be able to force consumers to take their high-end product.  As a profession (especially the organized bar), we should be helping to design and construct those “smart processes” that can assure access to justice to every member of our society.

In the Times Online article “How the traditional role of lawyers will change” (Nov. 5, 2007), Richard Susskind  envisages the emergence of “the legal knowledge engineers. These are the highly skilled individuals who will be engaged in the jobs of standardising, systematising and packaging the law. They will be the analysts who reorganise and restructure legal knowledge in a form that can be embodied in smart systems, whether for use by lawyers, para-legals or lay people.”  Our law schools and the organized bar should actively assist in cultivating such legal knowledge engineers.

As I pointed out in May 2003, our courts are being flooded with the unrepresented, studies show that 80% or more of the legal needs of the poor and working poor currently are unmet in the United States, and over 150 million citizens are legally disenfranchised from our expensive, inaccessible court system.  Information technology, combined with personnel who have far less training than lawyers, can go a long way to solving these problems.  It would give those who currently cannot afford legal services, as well as those who choose to represent themselves or take a major role in the process, meaningful affordable access to justice.  Yes, that will mean fewer jobs and less income for many lawyers.  But, that is what we should expect as the benefits of the information age, and notions of democratization of our judicial system, are spread to consumers of legal services.

At Simple Justice, Jordan Furlong left a comment yesterday saying “I do think that a client is almost always better off with a lawyer than with a facsimile of one.”  As a lawyer who has observed far too many “Main Street” attorneys serve their clients poorly, and often foment and needlessly protract litigation, I’m not at all convinced that is true — particularly for all those middle-class Americans who must go deeply into debt in order to hire a lawyer, when many self-help-law alternatives could have both adequately served their needs and prevented significant financial distress for themselves and their families.

Susskind is right that our profession faces “a future in which conventional legal advisers will be much less prominent in society than today and, in some walks of life, will have no visibility at all,” due to two forces, commoditisation and the “pervasive development and uptake of information technology.”   That world is coming and the consumers of legal services deserve to reap its benefits. To remain viable members of the profession — who are truly serving the best interests of their clients and not merely levying a lawyer entitlement tax — individual lawyers who do not offer high-value-added legal services need to greatly reduce their costs and prices.  That means the extensive use of information technology, the adoption of lowered profit expectations, and settling for more modest trappings. Similarly, the Bar needs to either participate in the solution, including helping its members plan for the transition, or get out of the way.  In a world with more efficient, cheaper and easily-accessed alternatives, lawyers are not entitled to keep either all the work or all the income they have grown accustomed to over the last half century.

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