Bleeding Edge

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New Publication From ILTA!

Beginning early in the third quarter of 2019, ILTA is thrilled to unveil its new, multi-channel publication, Bleeding Edge! As a bimonthly serial, Bleeding Edge will tackle new, timely, and interesting topics in legal technology.

Each episode will consist of two parts: a podcast, conducted in an interview style, with opening and engaging dialogue, and a short column, associated with the topic covered in the podcast. These short interviews will cover a wide array of legal IT and will have, as interviewers and interviewees, a rotating cast of ILTAns and ILTA-family guests.

Hosts:

Joe Davis
Director of Product Strategy at Litify

Beth Anne Stuebe
Director of Publications and Press at ILTA

Episode 9:

Changes in Law Firm Ownership

Julia Shapiro
CEO of Hire An Esquire

Welcome to Episode 9 of ILTA's Bleeding Edge podcast. In this edition, host Joe Davis talks with the founder and CEO of Hire An Esquire, Julia Shapiro. When she was a contract attorney, she became fascinated with the world of contract attorneys and how they fit in the law firm landscape. The entrepreneur in her thought there had to be a better way, and Hire An Esquire was born back in 2011. Today the company has a network of over 12,000 vetted legal professionals, which gives her an interesting perspective on the changes in the profession – particularly the changes in law firm ownership that Utah and California are exploring.

“So I think the landscape in law has been changing for a really long time - any lawyer can tell you that,” Julia says. “I think that new changes coming up or going to accelerate and add on to the current changes that we've already been seeing.” She goes on to explain that Model Rule 5.4 of the ABA’s Model Rules of Professional Conduct currently prohibits fee sharing between lawyers and non-lawyers, which includes the idea of non-lawyer investment in and ownership of law firms. Utah, California, Arizona and Illinois have begun to look at relaxing that regulation.

“One thing people have forgotten about in this debate is that Washington D.C. has had more liberal laws than any states on non-attorney ownership of law firms since 1991,” she notes, “and it really hasn't changed anything dramatically or had an impact.”

When Joe asks about the reasons behind the proposed changes to Rule 5.4, Julia explains that the primary driver is the access to justice issue. “In the legal profession, we try to regulate it so that everybody gets safe access to justice. What the studies have found is that basically the way that the law is structured actually just prevents people from getting any help at all. The perfect has become the enemy of the great.” For people who need legal advice on routine matters like divorce or custody issues, she says “I would be much better off if I could have somebody who wasn't a lawyer just help me navigate the system or help me get some representation that I could afford rather than having this highly regulated, too-expensive representation. So most of the initiatives come from making legal services cheaper so that the normal consumer - and we'll call it the B-to-C market - can afford legal services.”

In their conversation, Joe and Julia discuss what these potential changes mean for lawyers and law firms, as well as how Julia believes these changes will impact the legal landscape in 5 years. “The future hasn't been written yet,” she says. “My guess is in five years we're going to have most states experimenting in some way in a heavily regulated, licensed way where you're going to have to be licensed to practice law, for non-lawyers to practice law or have a non-lawyer ownership. It's going to be really important for lawyers… to watch the market closely and look for where those next opportunities are as the landscape shifts.”

Learn more about Julia Shapiro at Hire An Esquire’s website.

Episode 8:

Law Firm Realization Rates

Roy Strom
Correspondent at Bloomberg Law

Welcome to another edition of ILTA’s Bleeding Edge, in which Joe Davis talks to journalist Roy Strom about recent trends in law firm realization rates. Roy writes the weekly Big Law Business column for Bloomberg Law, which looks at the trends affecting the business practices of top firms.

Roy begins by explaining the current state of law firm economics. “The good news was that over the first half of 2019, the general legal services market, at least for big law firms, had turned in a pretty solid performance,” he said, noting that revenues were up between 4 and 5 percent. The bad news was that realization rates, or the percentage of the amounts that firms invoice that firms actually collect, had declined by ½%. “At the end of 2007, collected realization rates for AmLaw 100 firms was more than 92%,” he explains. “In other words, you got 92 cents for every dollar you billed. In the first quarter [of 2019], that had, for the first time I believe, fallen short of 80%. If there was good news, it’s that in July that number popped back up above 80%, but it’s still a pretty healthy decline over that amount of time.”

Roy notes that the decline doesn’t tell the whole story. Firms have been raising their standard rates aggressively at the same time realization rates are falling. “I think where most people end up is just that you’re still better off having raised the rates 4 or 5 percent even if there’s still some nominal decline in the realization rate on the back-end,” he says. “There’s a lot of talk about clients pushing back on rate raises, but their ultimate effectiveness in lowering that billable rate – it’s unclear it’s keeping pace with what law firms are doing.”

Joe asks whether the disconnect is an indicator that clients are not happy with the way law firms are managing matters or if clients are just tired of paying rates that continue to rise year after year. “I think it’s probably both,” Roy says. “On the front-end, the effect of discounts on revenue, I think there’s a good argument to be made it has been fairly drastic.” He cites studies of legal economic activity that indicate that “45% of revenue was likely being discounted and that the average or median discount was about 10%. And so if you applied those figures to the $98.8 billion that the AmLaw 100 brought in last year, you’d get to the fact that about $4.4 billion of revenue was impacted by discounts, which is a lot of money obviously.”

Roy believes there is pressure on law firms to improve their project management as well. “They’re sort of having it forced upon them by clients who are increasingly using outside counsel guidelines and who are tracking what the bills say in new ways, at least relative to a decade ago or so, through e-billing. If a client says ‘we won’t pay for copying fees’ or ‘we won’t pay to have more than two people on a conference call,’ or you read stories about people not paying for first year associates’ time. If the client says that and you agree to it in an agreement letter, then it’s incumbent upon the law firm to manage the project that way, and if they don’t that’s where a lot of write-offs happen, and that’s where you lose a lot of revenue.”

Check out Roy Strom’s Big Law Business column about realization rates.

Episode 7:

Tips for Successful Innovation

Dennis Kennedy
President of Dennis Kennedy Advisory Services LLC

Welcome to another edition of ILTA’s Bleeding Edge. In this episode, Joe talks with Dennis Kennedy about legal innovation. Dennis is a technology lawyer, law professor, consultant, blogger, podcaster, and author of the new book Successful Innovation Outcomes in Law - A practical guide for law firms, law departments and other legal organizations

Dennis has also written a free PDF called 57 Tips for Successful Innovation Outcomes in Law. Tip #1 on this list is “Get to work on innovation however you define it, and let others talk about definitions while you are getting work done,” so Joe begins by asking Dennis about his definition of innovation.

Dennis replies that he once heard innovation defined as "applied creativity, and I really liked that - it really got me thinking about innovation and the way that I do it. And then as I dug deeper into it, I think it's applied creativity that enhances value for the customer, so I think customer value is a piece of it. And then as I kept working on the book, I also think there is a piece where you really have to question, look at and maybe change business models. So if you put those pieces together, the creativity, the customer value and business model, that gets you to pretty much where I would define innovation.”

Joe asked Dennis to elaborate on tip #14 – “You must deal aggressively with the lawyer inhibition factor. A creative idea might be to get a group of lawyers to brainstorm a process that optimizes their ideal roles.”

“Usually in the innovation world,” Dennis says, “if you're doing, say, design thinking or brainstorming, you could grab people off the street and in the right situation they would have plenty of ideas - an excess of ideas. But with lawyers, I find that that's typically not the case, so I think that lawyers really self-censor. They tend to be critical. They like to move quickly into either how this can work or why it can't work, and they're not comfortable with just throwing ideas out that other people might reject. That's one piece of lawyer inhibition.”

He also points out that some lawyers are quick to speak critically of new ideas. “That will inhibit what comes out of the whole session. And lawyers historically, I've observed, like to show how busy they are, so they will walk out of the room, look at their phones, not show up, those sorts of things. I think you have to take that into account, as I believe that what you want to drive at the idea stage is quantity of ideas rather than be super-focused on quality at the beginning. Lawyers are sort of a bad group for that... And as in all these things, if you give lawyers the notion that it was their idea in the first place, they really like that.”

Tip #54 asks “Is there always a reserved seat for your customer at your innovation table?” Dennis says that he has seen too many innovation projects that failed because the “innovators” never talked to the customer. He also talks about some excuses he has heard. “This is a great lawyer one: ‘We know what the clients need, so we're going to give that to them.’ But if instead you were talking to the client/customer at the beginning, and asking what is the problem that is most important to you - what do you need to solve, how is it best to that, how does that fit into what you're doing - you're going to come up with something that's way better, and you're actually going to have a paying customer at the end of it because they're co-creating and involved in the process.”

Visit Dennis Kennedy’s website at https://www.denniskennedy.com/

Episode 6:

Is there actual innovation going on?

Ron Friedmann
Chief Knowledge + Information Officer at LAC Group

Welcome to another edition of ILTA’s Bleeding Edge. In this session, Joe catches up with Ron Friedmann, Chief Knowledge and Information Officer at LAC Group. Ron has served in a variety of legal technology roles over the years. He is also a popular conference speaker and a prolific blogger. He was recently asked to participate on panels about innovation for both ILTA and AALL, and helped to put together a survey to help understand the current state of innovation in the legal space.

Noting that these kinds of surveys tend to poll firm management rather than employees, Ron wanted to understand the perspective of the people in the trenches. “We had a good representation of people from law firms, law departments and because it was AALL, also from law schools,” he says. “My take on the results – you asked where we are in innovation, and this is from the survey as well as being in the market – I think we’re at the end of the beginning.” He also notes that “the approaches and the issues vary widely, and so I think when there’s a field where there’s a lot of variation, that’s usually a signal that it still needs to mature.”

Joe follows up by asking whether the survey offered any keys to being successful with innovation. Ron believes “what’s key is to get the client point of view on a problem to solve. Sometimes innovation is not really focused on solving client problems, and then it’s less likely to succeed. A couple of the other key success factors were having sufficient resources and champions internally, and ideally at the client, to help the process along and then having a change management and adoption plan in place.”

When asked about how firm size correlated with innovation, Ron replies that “the big firms had more structured approaches, but… there are firms of all sizes doing innovation… Sometimes it’s easier at the smaller firms because they don’t have the layers of management and they can act more quickly.”

Overall, Ron remains optimistic about the future of legal innovation. “There’s a lot of things that are changing all at once and we don’t have good metrics, but I think talking to people… on the client side and at law firms and on the vendor side, we’re definitely making progress.”

Ron’s blog post about the details of the survey can be found here.

Episode 5:

Legal AI Efficacy Report

Brad Blickstein
Principal at Blickstein Group

Welcome to Episode 5 of ILTA’s Bleeding Edge. In this session, Joe Davis sits down with Brad Blickstein, principal of the Blickstein Group. Brad has been involved in the legal industry strategist, advisor and futurist for almost 30 years. The Blickstein Group recently released their Legal AI Efficacy Report, which was the topic of Joe and Brad’s conversation.

“It’s really a pretty deep look into about 50 different AI-powered legal technologies,” Blickstein says of the report. “The impetus for this was that companies - corporate law departments and law firms both - their IT teams are being tasked with developing an AI strategy.” Blickstein believes these groups are approaching the topic from the wrong angle. “It’s like asking ‘what’s our electricity strategy’… if you think about it, electricity helps you do lots of different things, and what you should do is decide what problem you have to solve and then see if some electricity-based solution is the solution to that problem.”

“Adoption is still pretty low, despite all the hype about it,” Blickstein says about legal AI. “It feels like every firm wants to say ‘we’re using AI’ and every vendor/service provider wants to talk about how they have a great AI solution. There are folks out there using this stuff – don’t get me wrong. The idea that every law firm is using this all the time is just a fallacy, just not true at all. I think we’re heading closer to that direction, but that’s not what’s going on out there.”

As Joe turns the conversation toward the notion of AI taking jobs from lawyers, Blickstein believes that it is inevitable that some associate-level tasks will be done more efficiently by technology solutions, while other parts will require experienced human attorneys. “Setting strategy, standing in a courtroom, strategizing how to set up your M&A deal to limit taxation – that stuff’s not going away. No machine is going to be able to do a lot of that stuff. But the due diligence work that goes into that deal, the discovery work, the responding to interrogatories… AI is going to be able to do a lot of that.”

This begs the question about how lawyers and law firms should be thinking about the way AI will change (or potentially eliminate) parts of their job. “What these [AI vendors] love to tell you – we hear it all the time – is ‘that’s ok, because while the machines will be able to do a lot of that work, the lawyers who were doing that work will be able to do higher level work.’ There’s some validity to that,” Blickstein says, “but ultimately we’re going to run out of higher level work. If a machine – and there’s a tool out there that does this – purports to do a day’s work that a second or fourth-year associate would do, and they do that work in 3 minutes’ time - good. So you get a day of second year associate free to do something else. How many different things can a second-year associate do? What work are you going to give them? Are you going to let them set your litigation strategy? Of course you’re not. So ultimately, especially in the world of big law and big corporate, there’s going to be a hole there. There [are] going to be associates out there that are not really qualified to do the work that’s left… and they’re going to have to find something else to do.”

The Blickstein Group’s Legal AI Efficacy report and its free preview are available at www.LegalAIReport.com. ILTA members receive a discount on the purchase of the report for a limited time.

Episode 4:

Alternative Fee Arrangements (AFAs)

Meg McEvoy
Legal Analyst at Bloomberg Law

Welcome to another episode of Bleeding Edge as we continue to look at the hot topics in legal technology! In this new episode, Joe Davis sits down with Meg McEvoy to discuss Alternative Fee Arrangements or AFAs. Meg is a Legal Analyst at Bloomberg Law who helped put together the Bloomberg Law 2019 Legal Operations and Technology Survey. She is also a co-host of Bloomberg Law’s new podcast Law X.0. In this Bleeding Edge episode, Joe and Meg talk about AFAs, how technology is involved, and whether the billable hour will go away anytime soon.

Joe begins the discussion by remarking that AFAs were supposed to revolutionize the legal world - or at least the billing part of the legal world. Meg believes that there is still the “potential for [AFAs] to revolutionize the legal world,” but notes that adoption levels are still relatively low. “I think that we're just at the beginning of the adoption curve,” she says. “I think that it's going to take quite a bit of time for firms to get their heads around really being effective with alternative fee arrangements. And I think there are some significant barriers to them doing so.” She goes on to explain that not only are most law firm business models built around the billable hour, but so are their systems of evaluating associates and their methods for scoping work. Even their software systems, such as timekeeping and accounting packages, are designed around the billable hour.

Going deeper, Joe asks “What's really behind the AFAs? Or maybe a better question is ‘who?’ Is it the law firms themselves or is it purely client driven?”

“Corporate legal departments are absolutely the main driver of the adoption of AFAs,” she says. “They are looking for cost certainty, and they’re looking for better pricing from their law firms.”

Meg also notes that “74 of the AmLaw 100 websites mention alternative fee arrangements in some manner. It’s either that they have a whole page dedicated to the way they’re crafting AFAs and how they can do different pricing models for clients, or they’ve got some thought leadership material out there on behalf of their partners about AFAs. Most of the AmLaw 100 are engaging on the topic of AFAs, and I think it’s because they know they need to. I would say that firms that are the most ‘out front’ with it are even going so far as to advertise how they’re using AFAs.”

In closing, Joe asks if Meg thinks we will see the death of the billable hour. “No, not anytime soon,” she replies.

Tune in to hear the whole podcast and learn more! they’re using AFAs.

Episode 3:

Analytics: Judgement Still Out

Richard Tromans
Publisher and Editor of Artificial Lawyer

Thanks for joining us for another installment of Bleeding Edge! For episode three, we sit down with Richard Tromans, Publisher and Editor of Artificial Lawyer, who is also a subject matter expert on law firm strategy and innovation. As we dive right in, Joe Davis, leads this interview into the recent French Justice Reform Act that prohibits modern analytics techniques.

For this podcast, we attempt to get a handle on this new law, which some US scholars believe could be considered unconstitutional in the United States. We also talk about how we use data analytic and data collection, and how we, as legal technologists and legal strategists could be more efficient, as we move ever closer to the Bleeding Edge

Opening quickly, Richard jumps into a conversation he recently had: “So a few weeks ago I was talking to,a contact in France who has a legal tech company...and he mentioned, ‘Have you seen this thing that the judges are doing?’ ... And he explained it to me...So I contacted some other people, including some companies that were directly affected by this [law], who have been previously collecting data on French court cases. And they said, yeah, this is, this is for real, they have actually done it. It is law.”

So now we’re no longer talking in hypotheticals about what a ban on analytics for parts of the judiciary... “They felt that an individual judge shouldn't really be named in a statistical analysis of what happened in that courtroom or relation to certain types of cases ...and hence it is now technically illegal to pour over data, produce statistical models about what a particular judge says about certain types of case and then publish it.”

Joe then asks about the legality of publishing this data or if the simple act of collecting the data itself is illegal; that is where Richard believes we enter a hazy area. Ultimately, the question of gathering this data is in how it will be reused. And, as this is a relatively new, untested law, and Richard believes that the French Justice Reform Act “must be trying to say [that] we don't want you to be producing a kind of scorecard and sharing it around the public, amongst the legal market about Judge X always says this. That is their fundamental problem with the whole thing that they, I think, feel that they're being sort of trapped by the data.”

We move the discussion along to the law’s legal technology angle and ask, what are the kinds of analytics or the companies that are affected by this ban? Richard makes the simple point that a person could do statistical research on judges simply with a pencil and pad. However, as Joe states, it comes down to that this Act is not really a ban on technology per se. “It's really, it should be perhaps taken more at face value that they [French Judges] just don't want to be identified individually.”

As the discussion turns to technology, data, and public decisions are being created and used. Richard believes “If it is in the public realm, why shouldn't you do some statistical analysis on it?” Tune in to the podcast for more on this emerging and interesting topic, as Richard and Joe delve into the Bleeding Edge, discussing even more, that “legal technology, fundamentally, is about efficiency.”

Episode 2:

CCPA, GDPR, and what’s up in California?

Mark Diamond
President & CEO at Contoural, Inc.

Welcome back to another episode of Bleeding Edge! For episode two, we sit down with Mark Diamond CEO and Founder of Contoural, to talk about the California privacy law (CCPA), personal data, who has to comply, GDPR similarities, and more, as we move ever-toward the Bleeding Edge…

The group discussion begins with an overview of the CCPA law, which was enacted a little over a year ago, but doesn’t go into effect until January 1, 2020. Essentially, CCPA is a bill that enhances privacy rights and consumer protection for residents (and businesses that have clients) in California, by giving very specific rights around their private data. The posed question, “What qualifies as personal data?” is at the heart of this bleeding edge topic, along with “Who has to comply?” Mark states “But there’s no require that says this is for ...a California-based company. The company could be in Yugoslavia that has information about California consumers and to that end, they need to comply with the law.”

This clearly draws a parallel then to GDPR. Diving further, the discussion moves on to whether or not CCPA] “is GDPR 2.0?” Mark believes “This law was inspired by GDPR … that, and quite frankly, the Cambridge Analytica issue around the Presidential election.” Both laws do allow for deletions, erasure; but there are some major differences, like disclosure under CCPA. “GDPR requires an opt-in and CCPA requires an opt-out.” He goes on to further say that “Probably the biggest difference… both laws are enforced by regulators… but CCPA has one extra got-cha...and that got-cha is that organizations that have a breach today… can face a right-of-private action.” The door is then open for litigation; the law is then possibly more onerous.

Moving the discussion along, Joe asks what has been the reaction to CCPA and how it applies to law firms? Clearly this new bill has massive, possible outreach and Mark believe that not only will this bill effect change and “I think a lot of law firms are saying ‘This doesn’t apply to me!’ and I think they’re wrong.” Joe asks about the “deep-pockets of the Facebooks and Googles” as we discuss the other businesses, including a real-estate mogul, that all have stakes in this CCPA bill. Mark mentions voter ‘buy-in’ and ground-swell support of bills like this; these types of privacy concerns aren’t going away and the businesses may not only have to face regulators, but consumers and their concerns. And further, other states (like Nevada, and another 15! states) are looking at legislation like CCPA.

Knowing that the bill hasn’t even taken effect yet, we ask Mark for his prediction on how CCPA, GDPR, etc., this will play out and if we will still be talking about it in a year or two? Both he and Joe believe that this is a definite yes, as post-CCPA regulations continue to take shape. And, as always, we end with the topic: “What’s a bleeding edge topic on your radar” Tune to the podcast to hear more!

Episode 1:

Windows is new again? Bleeding Edge Explores

Jay Parekh
Partner and Director of Legal Vertical Practice at Netrix

In this inaugural episode of Bleeding Edge, hosts Joe Davis and Beth Anne Stuebe sit down with Jay Parekh, Partner and Director of Legal Vertical Practice at Netrix. Jay, who is based out of Chicago, specializes in IT solutions and strategies and has a keen interest in Windows and Windows 10.

Over the course of 15 minutes, the first Bleeding Edge discusses how legal technology continues to innovate, compared to other flourishing IT arenas, like healthcare. Joe poses the question “Assuming legal is behind in innovation, what do we do to catch up? Jay suggests that legal “Start cloud adoption, even with budget and resource restraints…. Law firms don’t want to move that fast, they worry about third party partners.”

With innovation on their minds, the center of the conversation switches and the main legal tech player steps up to Bleeding Edge: Microsoft. As a player in the arena for decades, Microsoft is not only a familiar household name, but one that evokes images of swirling mouse icons while downloads and updates process. None of this seems Bleeding Edge, and yet, after decades of said updates and improvements, Windows 10 is the platform which many legal solutions work off. So how does such a firm continue to work in the innovation space? Simply, what makes it Bleeding Edge? And with the upcoming September launch of the new updates, 19H2 update for Windows 10, there’s a lot on the horizon. Jay goes in quickly, stating that “99.99% of law firms are Microsoft shops. Windows has been a very static operating system: once it was released, the features didn’t change for years. Windows XP was out for 9, 10 years. Now they have to add features… make it more feature-full. This [new release] is going to be a fast-moving train.” In the end, it seems that “Microsoft does innovate; it’s how fast the law firms will adopt this technology.”

As he will with all guests for Bleeding Edge, Joe asks, as his final question, ‘What’s the Bleeding Edge topic that’s on your radar that many of us may not know?” As Jay is on the BP side of the ILTA-family, we have to wonder what he’s seeing that our member-side of the constituency is not seeing. And it’s all about “Collaboration: how do I collaborate while reducing costs and tools? Budgets are lean: we automate as much as possible… like using options from Microsoft, Intapp, and others out there. There’s always a budget for security.”