Another AmLaw 100 Firm to Dissolve

Is anyone safe?

Thelawyer.com reports today that Thelen Reid Brown Raysman & Steiner LLP will be closing its doors on December 1. It was less than two years ago that Thelen Reid & Priest LLP merged with Brown Raysman Millstein Felder & Steiner, LLP, in what was the largest law firm merger of the year. Poor economic conditions and mass defections were identified as the catalyst for dissolution.

I need to undertake some research into this as it relates to U.S. affairs; however I am aware that in the UK, college of law and law schools applications are dramatically on the up. The reason being, that given the current financial market turmoil, academically qualified individuals who previously may have considered banking and finance as a career path of choice are opting for the relative security of the law.

Numerous cliches spring to mind, but I guess everything is relative.

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Indian Law Firms to Scale Dramatically

The Indian Parliament witnessed two crucial pieces of legislation being introduced over the last couple of weeks.

The Limited Liability Partnership (LLP) Bill 2008(click here to access) and the Companies Bill 2008(click here to access) allow the creation of limited liability partnerships while at the same time removing some of the previously imposed archaic restrictions on the number of partners allowed and the capability of taking on outside finance. The new operating structures will enable law firms to scale up their operations dramatically.

I have blogged many times about the necessity of the Indian legal profession having a level playing field before there is any relaxation of the restrictions imposed by the Advocates Act, prohibiting foreign law firms from setting up shop in India. Perhaps this new legislation is just that, a leveler for the Indian legal system sweetening the Bar Council and the Society of Indian Law Firms, prior to the inevitable entry of the UK’s magic circle, and the AmLaw top 10.

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Commoditization and Economic Pressure Alter GC Relationship with Outside Counsel

Law.com's In-House Counsel ran an interesting article today from the Fulton County Daily Report. Click here for the full article. The overarching theme being that General Counsel are becoming increasingly frustrated with rising legal fees when many legal tasks are becoming commoditized and department budgets being tightened.

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Florida Bar CLE Committee hosts: Legal Process Outsourcing in India – What You Need To Know About Who, How, Why & Why Not

A reminder to my readers about the upcoming Florida Bar CLE Legal Outsourcing event.

This half-day program will examine the Indian LPO industry and how U.S. corporations and law firms are using LPO services, or why they are choosing not to use such services. The first three hours will focus on how LPO is used in the following areas of law: (1) litigation and document review; (2) corporate transactional; and (3) intellectual property. The fourth hour will focus on ethics, professional responsibility and legal malpractice issues raised by use of LPO services, and a discussion of what impact India’s legal market opening to foreign law firms may have on the Indian LPO industry. Click here for more information on the Florida Bar CLE website.

This seminar will benefit private attorneys, in-house counsel, and corporate executives who are already experienced with using LPO services in India, as well as those seeking to learn about the increasing use of LPO services and how it may affect their practices. Using case studies, panelists will discuss real life examples of the issues and obstacles that providers and consumers of LPO services encounter in putting together an LPO transaction.

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Financial Crisis Hits BPO Industry

ValueNotes reported this week on a significant reduction in the number of deals within the BPO industry. The number of deals dropped from 109 in the first quarter of 2007 to 78 in the first quarter of the current year. The second quarter of this year saw 58 deals compared to 101 in the same period last year.

While the generally accepted viewpoint is that financial pressures will result in an upturn in the BPO, KPO, and LPO markets, I don't subscribe to the contention that this will materialize in the short-term.

Outsourcing initiatives of any substantial scale, irrespective of whether they relate to BPO, KPO, ITO or LPO, require a major degree of investment on the front end in terms of time, effort, money, and firm or corporate wide buy-in. It is entirely normal for the due diligence, RFP and pilot project process, for a Fortune 500 company, or Am Law 200 firm, prior to engagement with an LPO, to take 6-12 months or more. Key stakeholders on the client side have their hands quite full at the present moment in time dealing with more pressing matters than embarking on new outsourcing initiatives. We may even in the short-term witness a number of existing initiatives being discarded while the markets are in such a state of turmoil.

The argument for outsourcing, however, is stronger than ever before. I have no doubt that in the medium to long term we will once again be reporting on record numbers of deals in the space

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Freshfields Managing Partner: "LPO Inevitable and Will Change Legal Market"

The Financial Times released their Innovative Lawyers report rankings on Friday. This was the third year of the FT report examining change and innovation within the legal profession. It was particularly gratifying to read the lead article “Thought Leaders” by Reena SenGupta and Paul Solman. Issues that I’ve blogged about many times, that in my opinion are inextricably linked to each other, all featured, including the future of the global law firm, the U.K. Legal Services Act, the impact of globalization, LPO to India, and the traditional hierarchical law firm structure.

In fact the report’s lead article went so far as to say that:

“The trend that is having the most impact on the thinking of the partners at top law firms, is the impact of globalisation and its intersection with people and technology. In particular, the way in which legal work is resourced and the location in which it gets done is coming under greater scrutiny. Outsourcing to India was the theme of many top-ranked submissions both from company legal departments and private practice”.

Freshfields managing partner, Ted Burke is quoted as saying:

“LPO is inevitable and will radically change the legal market. We will see more unbundling of the way legal services are currently delivered.”

Click here to access the FT Innovative Lawyers home page.

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Last Chance to Register for Chicago Legal Outsourcing Conference

This is my last reminder to readers that IQPC is hosting a two day Legal Process Outsourcing conference, at the Raddison O'Hare, Chicago, on October 21-22. Click here for an overview of the conference.

Hear real life case studies relating to document review and intellectual property support, from Am Law 100 attorneys and Fortune 500 general counsel, who have taken the plunge and outsourced legal work to India.

This event will gather some of the world's top LPO executives, in-house and outside counsel with practical LPO experience, to share ideas and insight on the legal profession and the pros and cons of legal outsourcing.

Legal Process Outsourcing Blog readers can obtain a special discount to attend the LPO conference for only $999! Register by calling 1-800-882-8684 or clicking on the following link to view the detailed agenda and registering online. Either way, quote your Legal Process Outsourcing Blog discount registration code, MR999 to achieve the special offer discount.

I’ll be there, chairing the conference, as well as hosting the Intellectual Property panel, along with Steve Hassid of Greenberg Traurig. If any readers would like further information on the conference they can also contact me directly.

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Worrying Times Ahead for the U.K. and U.S. Legal Profession

The legal profession is currently in a state of flux. I have no desire to be a prophesier of doom, but I suspect extremely worrying times lie ahead for the profession as a whole, and specifically for law graduates on both sides of the Atlantic. The potential for currently choppy waters to be whipped up into a fully fledged storm was hammered home to me today when I read an article on thelawyer.com. Clifford Chance, the previously impermeable rock of cross-Atlantic legal giants, announced yesterday the laying off of 20 associates in the firm’s NYC and Washington D.C. offices.

Over the last few months we’ve witnessed Cadwalader Wickersham & Taft make 131 layoffs, Heller Ehrman dissolve, and U.K. firms earning their bread and butter dealing with conveyancing announce department closures and layoffs on a worryingly regular basis. In the U.K. alone the total number of layoffs over the last few months among the top 200 firms, now stands at 740.

Even as a trainee solicitor I believed that the market was saturated with law graduates. Fifteen years ago, there were too many law graduates competing for training contracts in the U.K. and junior associate positions in the U.S. This was before advances in technology enabled significant elements of many legal functions to be unbundled; before the Legal Services Act, alternative business structures and Tesco law; before Legal Process Outsourcing connected vast pools of talent in India, the Philippines and South Africa to law firms and legal departments in the U.S. and U.K.; and of course before the current Financial crisis.

Many may point to the impending retirement of the baby boom generation as the flip side to this argument. I’ve heard this many times, that there will be a dearth of high quality talent as these baby boomers head off into the sunset. I disagree. These individuals aren’t retiring from junior associate positions. These retirees are simply cogs that no longer require replacement in the legal profession’s ever turning evolutionary wheel. If one accepts my argument that the market was saturated to begin with, then perhaps without the variety of developments I highlighted above, the equation would balance. However, given the other forces at play, we’re not going to witness a “one out, one in” policy here.

I don’t believe the legal profession has begun to witness the full force of the financial crisis tsunami soon to reach its shores. Even though times of economic volatility inevitably lead to spikes in litigation, this will be outweighed by the disappearance of huge revenue streams from corporate clients that simply don’t exist anymore. As the Lawyer.com comments, when Clifford Chance merged with Rogers & Wells in 2000, R&W was billing over GBP9m to Merrill alone. Corporate legal departments will be tightening their belts like never before and undoubtedly either driving their outside counsel to lower fees, bringing work back in-house or exploring the possibilities available through offshore legal process outsourcing.

In another thelawyer.com article, Tony Williams, a former Clifford Chance managing partner and now principal at Jomati consultants highlights the example of a firm with a 25 per cent profit margin with a fee income that falls just 20 per cent, entirely plausible in the current financial climate. This firm would witness its profit fall by 80 per cent in the short term as costs simply cannot be adjusted quickly enough to take into account the revenue reduction. Add into the mix horrendous rises in indemnity insurance premiums and a tightening of credit, well you don’t need to be Nostradamus to predict bleak times ahead.

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Florida Bar Hosts Legal Outsourcing Conference

In what I believe is the first legal outsourcing conference to be formally associated with an individual Bar Association, the Florida Bar Continuing Legal Education Committee has teamed up with the South Asian Bar Association of Florida for:

Legal Process Outsourcing (LPO) In India – What You Need to Know About Who, How, Why and Why Not.

The conference is being held at the Hyatt Regency Orlando International Airport, on November 14, 2008. Click here for the full agenda and registration forms.

Of course it was The Florida Bar Board of Governors that on July 25, 2008 approved Ethics Opinion 07-2 of the Florida Bar Association. Click here for the full Opinion.

I will be speaking on the Intellectual Property Panel, alongside, Mihir Parikh, Assistant Professor, University of Central Florida.

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Underwoods Outsources Personal Injury Work to South Africa

I was delighted to receive an email yesterday from my former Senior Partner, Kerry Underwood, of Underwoods Solicitors. Underwoods has signed a deal with an unnamed law firm for the outsourcing of fixed cost personal injury cases to South Africa. Check out the article in today’s U.K. Law Society Gazette. Underwoods, which is acting as the unnamed firm’s agent, will be charging a flat fee of £500 per case.

My interest in, and passion for, the legal process outsourcing industry indubitably stems from my three years at Underwoods. I joined the firm shortly after the introduction of fixed costs for routine road traffic accident cases. Fixed costs came into being on 6th October 2003. Let me initially take this opportunity of explaining briefly how the fixed cost system works. Generally speaking, in the U.K., attorneys’ fees are not recoverable from a client’s damages. The fees are recovered from the losing party, in addition to recoverable damages. This somewhat archaic system is referred to as the “indemnity principle”. Following their introduction, fixed costs applied to pre-issue (i.e. cases which had not reached the filing of proceedings) road traffic accident cases (RTAs) where the ultimate value of compensation recovered by the claimant was less than £10,000. The amount of recoverable costs was calculated on the basis of a fixed fee of £800, plus 20% of the damages figure up to £5,000, and 15% of the damages between £5,000 and £10,000. So, if an RTA case was eventually settled for £5,000, the law firm received a £1,800 fixed fee.

Kerry and Underwoods Solicitors’ Managing Partner Robert Males had been instrumental in the development of the new fixed costs regime. However, even in advance of the October 2003 start date, both had been aware of the potential of legal process outsourcing to lower cost common law jurisdictions. I recall my interview with Kerry, for a position at Underwoods, in the Summer of 2003. He had explained back then his vision of the outsourcing of routine, commoditized legal work to South Africa. This was the first time I had ever even contemplated the possibility that certain types of legal work were suitable for outsourcing.

Even to those of us with a modicum of foresight, a number of possibilities became instantly apparent. First, that the status quo had been well and truly broken. The tables had been turned. It was now clearly counter productive for law firms earning their daily bread through running personal injury cases, to breed inefficiency, and conduct these cases utilizing senior attorneys. The days of billing these individuals out at over inflated hourly rates came to a juddering halt on October 5th 2003. Second, in order to remain competitive, and make a reasonable profit by running such a case load, it was obvious that these cases had to be processed as efficiently, quickly and frankly as cheaply (without compromising quality of representation), as humanely possible. Third, if one factored in the referral fees, paid by many, (not Underwoods, I might add) road traffic accident firms’ profit margins had been dramatically slashed overnight. Without exploring alternative methods of processing large volumes of such cases, in time, many firms would be unable to survive.

My first responsibility on joining Underwoods was to create a workflow system which would allow the effective outsourcing of road traffic accident cases to the firm’s South Africa office. The principals I learned during this exercise relating to the unbundling of a legal matter and the creation of a process, enabling a non UK qualified, yet common law trained attorney, to handle such cases, have stood me in good stead during my time with LawScribe.

I was enthused to read the Law Society Gazette article and I wish Underwoods every success with this first batch of cases.

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LawScribe CEO Interviewed in Daily Journal Legal Outsourcing Article

In growing evidence of the increasing clamor over all things LPO, California’s largest legal news provider, the Daily Journal, ran a front page editorial featuring LawScribe President and CEO, Kunoor Chopra.

Daily Journal reporter Amanda Becker also interviewed a number of LawScribe clients for the article, including a senior associate from an AmLaw 10 firm. The associate, who spoke on condition of anonymity, commented that his firm regularly outsources patent-related searches, and document review work to LawScribe.

The article also referenced a large-scale document review project undertaken for another LawScribe client and provided first hand, client assessment of the project.

I eagerly await the day when clients realize that they have more to gain than lose by going public on their utilization of offshore legal outsourcing. Given current market conditions, and the economic pressures faced by corporate America, I anticipate that day is only just round the corner.
For the full Journal article click here.

On a separate but related matter in that it pertains to LawScribe, I'm pleased to announce the launch of our new website, www.law-scribe.com.

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Economic Downturn Affecting UK Law Firms

Although not a staggering number by any stretch of the imagination, the 668 total redundancies (layoffs for this side of the pond) among U.K. law firms, documented by the TheLawyer.com on their new Job Watch page, is surely a sign of worrying times ahead. Click here to access the page. It is a sad state of affairs that such a reputable forum as TheLawyer.com deems it necessary to create a webpage aimed at:

“providing up-to-the-minute news of redundancies and breakdowns by location and skill set."

I have written numerous times about the necessity for law firms to re-evaluate their traditional operating model, if they wish to survive and thrive in today’s global economy. This was never truer than now given the harsh economic realities we are currently experiencing. While over the medium to long-term I anticipate that the restructuring we are now witnessing will induce a growth spurt in the demand for LPO, at this moment in time I urge my colleagues within the industry to maintain a degree of decorum when discussing the issue.

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Special Offer for IQPC Legal Process Outsourcing Conference

Regular readers will be aware that IQPC is hosting a three-day conference on Legal Process Outsourcing on October 20-22, 2008 in Chicago, IL at the Chicago Marriott® Southwest at Burr Ridge.

Attend the conference to hear real case studies and panel discussions on topics such as structuring and negotiating a best practices LPO agreement, improving contract management efficiency while working with LPO firms and measuring ROI of outsourced IP services processes.

This event will gather the world's top LPO executives, in-house and outside counsel with practical LPO experience, to share ideas and insight on the legal profession and the pros and cons of legal outsourcing.

Legal Process Outsourcing Blog readers can obtain a special discount to attend the LPO conference for only $999! Register by calling 1-800-882-8684 or clicking on the following link to view the detailed agenda and registering online. Either way, quote your Legal Process Outsourcing Blog discount registration code, MR999 to achieve the special offer discount.

I’ll be there, chairing the conference, as well as hosting the Intellectual Property panel, along with Steve Hassid of Greenberg Traurig. If any readers would like further information on the conference they can also contact me directly.

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