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In our first #ThinkTank, we asked a panel of our world-class Faculty to share their uniquely valuable insights on the State of the Legal Industry. In this case, we asked them to speak to what is “top of mind” right here, right now. The richness and diversity of their thinking makes for timely, compelling reading. We hope you enjoy it.
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#TopOfMind: What single issue or opportunity is top of mind for you in the legal industry right now – and why?
In today’s digital economy, the data that companies collect from consumers is a valuable asset. Consumer data, once analyzed, informs strategic decisions, such as which products to develop and how to market those products to consumers effectively. Consumer data also helps companies determine how to develop customer affection and loyalty, which increases brand value.
As an intellectual property lawyer, I’ve traditionally helped companies protect the value of their brands by pursuing trademark registrations for them and enforcing their trademark rights against infringers. Increasingly, there is a strong relationship between brand value and data protection. When a company mishandles its customers’ data, it loses customer trust and engagement, harming the value of its brand. I now have the opportunity to help companies implement comprehensive data privacy and cyber security strategies to protect their brands.
The legal industry is on the precipice of one of the most fundamental thought shifts in modern times. The single issue that is top of my mind in the legal industry right now is the rise of the role of the legal technologist. Any lawyer practicing today cannot underestimate the role that technology now plays in their matters. The digital age and electronic data has changed the nature of evidence and created more vital dependencies on technologists than ever before. Lawyers who embrace technologists as allies who enable legal teams to leverage electronic evidence in their cases effectively will be trailblazers of law. Technology is a discipline, just like law, and those who ignore this new reality do so at their peril.
A critical risk for all companies is the popularity of electronic messaging “apps,” specifically their cross over from personal to business use, and the challenges they present when clients are investigating allegations of misconduct in the pursuit of truth.
For many the lines between personal and business communications are now blurred. Instead of using company email or company phones, employees may be connecting with coworkers, customers, and suppliers through the dozens of electronic messaging apps. The issue is that these are apps that are outside of company control.
The texts, messages, and group chats sent in a work context are often relevant records, and used to complement company email for both authorized and unauthorized business.
The U.S. Department of Justice recently highlighted the use of messaging apps in its Foreign Corrupt Practices Act Corporate Enforcement Policy and this has put companies on notice. We expect other regulators and litigants to follow suit.
To address the use of messaging apps, we have a few suggestions for legal departments and outside counsel:
- First, identify how the issue applies to you, and take a proactive stance through updated policies, procedures, communication, and training.
- Second, watch out for apps that send temporary, disappearing or encrypted messages by design. It is exceedingly difficult, if not practically impossible, for a company to retain the messages sent through these types of apps.
- Third, if employees are using BYOD mobile devices, expect business data to be comingled with personal data. Alleviate privacy and confidentiality concerns by using an independent expert to handle the data collection versus company IT staff.
- Lastly, if apps do contain messages relevant to an investigation, rely upon sound forensic collection procedures to preserve the best available evidence using a defendable process.
Top of mind now, as it has been, and as it will be, is getting away from the billable hour. In a 2007 article in the ABA Journal, Scott Turow wrote “The Billable Hour Must Die” with the premise being that the billable hour system rewards inefficiency, creates client suspicion, and may be unethical. In the last paragraph, Turow stated:
“If I had only one wish for our profession from the proverbial genie, I would want us to move toward something better than dollars times hours. We have created a zero-sum game in which we are selling our lives, not just our time. We are fostering an environment that doesn’t provide the right incentives for young lawyers to live out the ideals of the profession. And we are feeding misperceptions of our intentions as lawyers that disrupt our relationships with our clients. Somehow, people as smart and dedicated as we are can do better.”
The problems with the billable hour are not new but they are constantly top of mind for a few reasons:
- Both legal service providers and service purchasers are perplexed at how to replace the billable hour and do so with scalability. Even when alternative fee arrangements are instituted, too often we are falling back on the billable hour to ultimately measure their value.
- Currently, “progress” translates into increased revenues or profits per partner. Value is measured as time multiplied by dollars. Since you can’t increase time, you have to increase the other unit of measurement – ie., dollars – used to define and increase the value. It requires persistent rate increases to achieve perceived progress.
- The billable hour touches so many aspects of the profession. It affects why we can’t get where we want in several areas: efficiency, cost-control, diversity & inclusion, work-life issues, on and on. When you measure value by units of time, which are finite, you cannot increase perceived value without adding time or taking time away from other areas.
Just over the last few years there has been a tremendous increase in focus on digital transactions, electronic signatures, and electronic records by the US Government and the private sector. Advancements in Blockchain, Biometrics, AI, smart contracts, establishing signatory attribution, privacy and security practices, document forensics and tamper seal technology (such as ZorroSign’s 4n6 Token). Furthermore, the whole recent discussion around eNotary and Electronic Will and Testament.
Especially, with the passage of the 21st Century Integrated Digital Experience Act (IDE Act) in December of 2018 – where two of the four points of that law are:
- Digitization of Government Services and Forms
- Plan to Increase use of Electronic Signatures within the Federal Agencies
As “going digital and going paperless” becomes more popular, there is a marked increase in financial frauds, legal frauds, and insurance frauds being conducted by tampering electronic records and forging electronic signatures.
I feel that all this is going to open a whole new world of opportunities and pose new challenges for the legal industry.
The most important conversation taking place in the legal industry right now is around innovation. There’s widespread recognition that innovation is essential to deal with continually increasing data volumes, rapidly emerging new technologies and escalating security threats. It’s also an increasingly important differentiator in a crowded legal services marketplace where price and technology are largely standardized. Innovation is an enormous area of opportunity for companies, law firms and service providers alike. However, seizing the opportunity means wrestling with significant challenges.
There is an industry-wide tendency to define innovation in terms of technology tools. The first challenge is to broaden the view of innovation to include process, operations and delivery. The second challenge is to start by defining the problem. Too often solutions are developed in a vacuum and fail to directly address a real-world problem. Greater cooperation between clients and innovators is needed to bridge this gap. As an industry we need frank discussions of needs, problem areas, options and costs.
The third challenge is fostering a culture of innovation. Organizationally this means defining roles and responsibilities that explicitly include innovation. Employers that genuinely value innovation will reward it with compensation and recognition. In addition, buyers of legal services can show they’re serious by awarding business to innovators – and withholding it from non-innovators. The final major challenge is implementation. All organizations that want to derive benefits from innovative solutions must commit the resources necessary for implementation, especially user training.
I feel that the legal community needs to focus better on translating cyber risk into legal and regulatory risk for the business community. We do a good job on incident response, Probably a better job on Crisis communications, but we collectively have not learned how to holistically counsel clients why and how to improve their cybersecurity posture. It is the old technical/legal dichotomy. I feel that I can straddle both sides of the coin really well, but there are not enough who can. Leaving the business community left to “figure it out on their own.” Well, they can’t and that’s one reason why we are in the predicament we are in.
Legal Operations strategies, i.e. 2-3 year Legal Ops Tech and Process Roadmap. When I was operating in house, we spent a significant amount of time planning. Planning what projects to embark upon, budget planning, headcount planning, etc. And while I had all of these individual plans documented mostly on paper, but sometimes in my head, I treated them as separate projects and I didn’t pull them all together into a single Legal Operations Strategy. Now that I’m consulting with departments, it’s become evident to me how critical it is to have all of this documented and mapped out in one place. A roadmap is simply a visual representation of what projects are to be undertaken in the next couple of quarters or years. This is done by working with stakeholders in the department to gain an understanding of priorities, developing solutions to address these priorities (which will be a combination of process enhancements, staffing and technology), then determining what resources are needed to implement said solutions. This plan gives the team a goal to work towards in a holistic fashion rather than addressing issues on an ad hoc basis.
Molly L. Pease
If law firms are serious about diversity – and they should be – they need to rethink how lawyers are hired, trained, and groomed to rise through the ranks towards partnership. The old model is not going to work for the newer generation nor for increasing diversity in the senior ranks. Studies show that millennial lawyers are less interested in the long-term goal of law firm partnership than ever before. And the ongoing attention and increase in legal disputes related to the gender pay gap and gender bias indicate that law firms still have work to do in figuring out how to create a culture that will allow women and minorities to achieve influential and highly-compensated partnership roles. The firms that get this done will be well rewarded by clients who genuinely care about the diversity of the legal teams representing them.
Managing Director, Curiam Capital LLC
The single issue that is most pressing for the legal industry right now involves obstacles to innovation that range from structural to cultural to issues with change management. There has been a tremendous amount of technical innovation and business model disruption that has occurred over the last few years that enables law firms to deliver more value to their clients than ever before. However, the large majority of clients still face too many obstacles to gaining access to justice and to availing themselves of the benefits of all the innovative and disruptive forces in the market. In order for the market to function in a more efficient manner, lawyers and their clients need to be open to doing things differently and to recognize that only by embracing change and innovation will they become more successful.
The biggest issue I wrestle with is how to help clients sort through all of the noise that pervades LinkedIn and our Inboxes. Our clients want to know where to start when looking at making technology investments. They often get stuck because they don’t know how to sort through the mass of information. As a result, they become either paralyzed to make investments or, they plow ahead without any guidance or mentoring. Helping clients understand the calibration that goes into technology decisions, the potential for ROI and the change management that goes with technology adoption is the most valuable service that MLA provides. Our clients are looking for shepherds to take them through the process in an objective way without having a financial stake in the outcome.
Artificial Intelligence is an unstoppable tool and we must use it.
- Becoming Commercially Available;
- Legal research using AI is around 90% accurate; and
- AI replaces associates and undermines the leveraged business model of most law firm.
I really think that there is an opportunity for law departments and law firms to collaborate on issues that are common challenges for both in house and outside counsel – areas like talent/diversity, service delivery, and technology/application of AI. With corporations’ legal demands at an all-time high – 80% of LDs citing increasing demands – law departments are under pressure to do more while maintaining flat or declining budgets. An investment in Legal operations professionals – 58% of law departments nationwide have a dedicated legal opsprofessional – and the associated growth of groups sharing templates and best practices like CLOC and ACC Legal Ops has been one way companies have tried to manage the rising demand. However, there is a need to do more; and law firms have the potential to lean in and support clients with cutting edge solutions, data and insights.
However, most firms are ill equipped to respond to this opportunity. The inertia of traditional law firm structure (loosely affiliated individual contributors – what Scott Westfahl at Harvard Law School refers to as hierarchical loose working groups) and compensation models (retained earnings and the billable hour as proxy for bonus achievement) are unlikely to change anytime soon, and in an increasingly competitive environment from ALSPs and even the Big 4, some firms are recognizing that now is the time to rethink their service delivery models to remain competitive. Some firms are thoughtfully examining their value proposition and streamlining or outsourcing certain operational support functions or “unbundling” law firm operations, not different from how eDiscovery was unbundled several years ago. Operational areas such as the law firm research/library function, procurement, and IT departments (given an increasing number of IT audits and data privacy concerns), are still mission-critical, but are not the areas that are particularly differentiating or provide a material competitive advantage. By unbundling certain aspects of running a law firm, operational capacity can be created to focus on innovation and collaboration with clients related to substantive legal issues and driving value. This need to focus on what is core to the value proposition and thinking differently about those areas that are not core, is something I expect will continue as firms seek to drive revenue and margin growth in the increasingly competitive environment.
With an investment portfolio of $3.2 billion, Burford Capital’s size demonstrates that the litigation finance industry is widely adopted and poised for explosive growth. The 2018 Litigation Finance Survey confirms as much: The results revealed that 50% of in-house respondents whose companies had not yet used litigation finance expect to do so within the next two years.
What explains this phenomenon? Litigation finance presents a game-changing opportunity for in-house leadership to address perennial challenges tied to: (1) managing risk, (2) containing cost, (3) demonstrating Legal’s monetary value to the overall enterprise, and (4) innovating in a way that is high-impact and easy to execute.
At its core, Burford uses the value of litigation and arbitration (claims, judgments, and awards) to unlock millions of dollars for its counterparties. Legal capital is provided to corporations and their law firms in exchange for a portion of potential recoveries tied to the underlying litigation or arbitration. The capital can be used to cover litigation costs, or even fund broader corporate needs, such as offsetting the legal department’s overall spend or reinvesting back into the Business. Since legal capital is committed on a non-recourse basis corporate clients can, in a literal sense, offload litigation risk to us where our investment return is contingent on both the success of the underlying matter and repayment by the defendant. Taken together, this innovation can generate millions without imposing a change management burden on the organization—financing requires no training, no new tech, and no new process changes to create an impact.
In a word, technology – and not just legal technology as such. Technology is finally having its day and assuming its rightful place in the modern legal armory. The relative complacency toward technology innovation of just a year or two ago is quickly being displaced by a rising interest in what it can do. Innovation is no longer a dirty word. Technology is becoming an expectation, not a luxury or quirk. There is a steadily growing sense of the business impact that technology can and will have in law. The difficult issue of role displacement is giving way to a sense of what is exponentially possible on account of technology deployment. There’s almost a sense of excitement in the air finally. Interesting days ahead, for sure.
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