The Same Methods Law Firms Deployed to Survive the Great Recession Will Not Work This Time Around

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In his recent New York Times Op Ed piece, Thomas Friedman described the COVID-19 outbreak by stating, “the last few weeks were actually pretty unsurprising and predictable in how the pandemic spread. But we’ve now reached a point where all our interlocking systems, each with their own feedback loops, are all shutting down in unpredictable ways. This will inevitably lead to some random and chaotic consequences…”

The COVID-19 outbreak has two main ways of disrupting a business. First, it may directly impact a business’ productivity or capacity. In the context of COVID-19, this takes the form of direct expenditures related to employee health, or a reduction of the amount of business they do because the nature of the business puts people in close physical proximity (e.g. a commercial airline underfilling or cancelling a flight to stop a vector of infection). The legal industry has really faced only two direct effects from the outbreak: court closures (as courts are public spaces that can act as infection vectors) and work-from home.

As the legal industry’s client base suffers under the direct impact of the outbreak, expect to see fewer cases in practice areas such as M&A (as companies won’t want to expand in a struggling economy), and more delinquent or tardy payables overall (as companies will experience shortages of liquid cash). Reputation and perception are factors as well: even when work exists and the client can afford to pay for it, longer term financial concerns may result in those clients having higher standards regarding how “important” a case has to be before it’s “worth” hiring outside counsel. Given the fact that an individual attorney can do from home most of what they can do in the office, the direct effect of the outbreak on the legal industry is fairly muted. It’s the indirect effects, the unpredictable interactions with other industries, that pose the greatest threat to the legal industry.

In light of that, it is concerning how little commentators can agree on what secondary effects we are currently experiencing, let alone trying to predict the future. Some articles and editorials report an increased demand for attorneys from the outbreak, while others report attorneys getting laid off as a response from the outbreak. None of these articles aren’t necessarily wrong but are looking at different sectors of the industry and making a different set of assumptions. But the disparity should serve as a reality check of how little we attorneys actually know about the outbreak and its present and future effects on our industry. Given how insulated we are, its hard to tell how bad it is out there from the comfort of our home offices, and its even harder to figure out what we should do.

A common theme in the more optimistic op-eds is that that the legal industry survived the Great Recession in 2008, thus it can survive this one doing more or less the same thing.  Since we are insulated from the direct effects of the outbreak, it’s easy to say “So clients think we overcharge and want a better value. That was true in 2008 too, how is this different?” This conclusion is naïve, as it is clear that the measures that allowed large law firms to survive the financial crisis of 2008 will not be effective this time around.

The legal industry has employed 2 primary strategies in the past to survive: raising fees and downsizing. Raising fees will not work: We’re still living under the “new normal” with regard to client expectations regarding pricing and value. Clients having generally higher standards regarding how “important” a case has to be before it’s “worth” hiring outside counsel. Many corporate clients have even created a new position, legal procurement, who is a non-lawyer tasked with shopping around and comparing prices for legal services.[i] Moreover, Alternative Legal Service Providers have become normalized since the last recession. Clients are more comfortable offloading legal work to non-lawyers and as a result, lawyers face more competition. Layoffs and downsizing won’t work this time either: Those solutions are exhaustible, and the expenses and lawyer/partner headcounts haven’t come close to their peaks in 2007.[ii] Law firms can’t rely on cuts in those areas to maintain profitability again because there is simply less available to cut. With the coronavirus outbreak ongoing, we can expect these trends to intensify (less client tolerance towards raised fees, not enough people still on the job to fire). All of this illustrates the danger of making these sorts of comparisons uncritically, and without the proper historical context: even if two events resemble each other superficially, the world was a different place and the circumstances of the businesses and individuals within it has changed.

So, what should the legal industry be doing in response to the COVID-19 outbreak? Contending with the direct impact should be relatively straightforward, as it mainly involves maintaining communication and productivity in a work-from-home environment. Work from home is nothing new to white-collar professionals, including attorneys. Indeed, 69% of business organizations participating in a 2019 study by the Society for Human Resource Management say they allow employees at least some work from home.[iii] However, firms who want to stay ahead of the curve and differentiate themselves from their competitors can take proactive steps to make sure they get the most out of their work-from-home employees. In particular, law firms need to make sure the technology they are using to facilitate work-from-home are robust and up to date and that their employees know how to use that technology. This obviously includes collaboration and communication tools, such as teleconference software, cloud storage etc. But this also includes informational security necessary to keep your client’s data secure.

Workflow automation also plays a key role in maximizing work-from-home productivity. Before the outbreak, automation was valued primarily as a means of getting more work done. However, automation can also mitigate one of the primary challenges with working from home: distraction. Distraction, like boredom, tends to strike during repetitive, unengaging tasks like copying and pasting, exactly the sort of the work that automation is suited towards. These tasks also tend to require little expertise. By eliminating these repetitive unengaging tasks, the work-from-home attorney produces more value for their employer per hour worked. The important thing for partners and managers to understand is that these are not just COVID-19 measures, but rather digital best practices that will continue to pay dividends even after the outbreak passes and nation returns to work. By treating work-from-home not as a temporary measure in response to a particular crisis, but as part of a broader trend, a law firm can land after the outbreak with a workforce that is able to comfortably and securely telecommute, use the cloud, and keep their data secure.

With relatively minor direct effects to worry about, the primary measure of a law firm’s COVID-19 readiness will be their ability to handle the secondary effects, and accommodate the difficult position their client industries are in. Building consumer confidence through innovation and proactive measures provide more value for less money. We face a new economic crisis when the last one was in recent memory. Any business that appears to be wasteful or resist innovation will suffer a serious loss of reputation: the customer will ask “what are you doing in response to the paradigm-shifting global crisis?” and they will not be satisfied if you answer “our accountants say we’ll probably be fine. Instead they want to see innovation, digital innovation, a field where the legal industry has historically lagged behind.[iv]

It’s hard to know what the legal industry, indeed the world as a whole, will look like after the dust from COVID-19 settles. But it’s hard to imagine a post-COVID-19 world that tolerates law firms that rely on austerity and resistance to change as opposed to flexibility and modernization.


[i]Buying Legal Council, a trade organization for the nascent legal procurement profession, was founded in 2013. See also Deb Tesser, “Legal Procurement 101, An Interview with Dr. Silvia Hodges Silverstein” Evolve the Law: ATL’s Legal Innovation Center, Sept. 13, 2018, and Deb Tesser, “Is Legal Procurement the Disruptor We’ve been Waiting For?” Evolve the Law: ATL’s Legal Innovation Center, Sept. 18, 2018.

[ii] Thomson Reuters Legal Executive Institute and Georgetown University Law Center, 2018 Report on the State of the Legal Market, 2018 (the “2018 Market Report”), at 13-14.

[iii] https://shrm.org/about-shrm/press-room/press-releases/pages/telecommuting-up-over-past-20-years.aspx

[iv] See https://www.forbes.com/sites/markcohen1/2018/12/20/law-is-lagging-digital-transformation-why-it-matters/#6128a056515c.

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LegalMation provides a suite of Artificial Intelligence tools to help litigation attorneys and legal professionals practice at their highest levels. Our litigation automation solutions tackle routine litigation tasks. Unlike existing template generators and form-fillers, LegalMation's ground-breaking AI system is able to dynamically produce responsive pleadings, discovery requests, discovery responses, and related documents that are tailored to the claims, allegations, and requests in the legal document uploaded, incorporating jurisdictional requirements as well as the attorney’s own style, formatting, and response strategy.

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Corporate In-House Case Study

A leading global retail giant achieves significant savings on legal fees on its high-volume litigation matters using LegalMation’s Complaint Analysis tool.

The Legal Operations group of a leading global retailer with significant litigation volume across the country was searching for technology tools to increase efficiency and consistency on its litigation matters, lower its legal spend, and obtain more value from outside counsel. Working with LegalMation, the retailer identified two litigation areas with large volume where the deployment of LegalMation’s Complaint Analysis tool could have a significant impact: employment and premises liability tort litigation.

The retailer conducted a pilot of LegalMation’s Complaint Analysis tool by asking select outside counsel to run complaints through the LegalMation Complaint Analysis tool and compare the outputs to those generated by the firm’s typical workflow.  LegalMation’s Complaint Analysis tool was able to generate an answer, requests for production and interrogatories that were almost identical to those generated by outside counsel and tailored to the facts and allegations of each.

Today, this global retailer has made LegalMation an integral part of its workflow and case assignment process. When a new lawsuit is served on the retailer in one of the jurisdictions where LegalMation operates, an in-house paralegal runs the complaint through LegalMation’s Complaint Analysis tool and sends the output, consisting of an answer, requests for production, interrogatories, and other jurisdiction or firm-specific output to the selected outside counsel for the matter.  Outside counsel then bills the retailer solely for the time spent reviewing and editing this initial output which generates significant savings for the global retailer.

Challenge

  • Increasing budgetary pressure to lower outside counsel legal fees
  • Obtain more value from hours billed by outside counsel
  • Lack of consistency in work product and quality from outside counsel

Solution

  • Deploy LegalMation internally to generate initial draft responsive documents in minutes
  • Integrate LegalMation into its initial case assignment process

Results

  • Up to 80% savings on outside counsel legal fees on key early stage litigation document drafting.
  • Reallocation of outside counsel time away from process/routine work to higher value strategic tasks.
  • Increased consistency and quality in work product

Large Firm Case Study

An Am Law 100 labor and employment law firm was searching for ways to become more competitive and capture more market share

Handling over 5,000 employment related litigation matters per year across the country, the Am Law 100 law firm (the “Firm”) needed a quantifiable solution to lower its servicing costs and provide more value to its national clients. The Firm engaged in extensive testing of LegalMation’s platform across multiple offices to determine its effectiveness.

Using LegalMation’s Complaint Analysis tool, the Firm was able to reduce the attorney time spent preparing answers, affirmative defenses, and initial written discovery (requests for production, interrogatories, and other jurisdiction-specific requests) from an average of 6-8 hours per matter, to less than 1 hour (including review time by an attorney). The Firm tested LegalMation’s tools across multiple types of employment cases across various jurisdictions and concluded that the resulting draft documents were not only produced incredibly fast, but were also consistent in quality.

Today, the Firm is able to offer more competitive proposals for its volume matters, which in turn allows it to obtain additional work from national clients.

Challenge

  • Downward price pressure in high-volume, lower-exposure matters
  • Making Alternative Fee Arrangements more competitive and yet more profitable
  • Differentiate from competitors during marketing pitches
  • Lack of work product consistency from associates/paralegals

Solution

  • Integrate LegalMation into volume litigation matters in the Firm’s busiest offices

Results

  • Up to 80% time savings on key litigation tasks
  • Higher profit margins on volume matters, particularly those on AFAs
  • More distinctive marketing
  • Higher levels of associate satisfaction

SMALL LAW Firm Case Study

A high-caliber general litigation boutique reduced paralegal and associate time and money expended on key early litigation tasks by 75%+

A general litigation boutique with around 40 attorneys needed to cut costs in order to stay competitive in a very crowded local market and also sought to minimize reliance on support staff.

Using LegalMation’s platform, the boutique law firm was able to reduce the attorney (and paralegal) time spent preparing answers, initial discovery (requests for production and interrogatories), and discovery responses, including objections, from several hours per matter, to less than 1 hour (including review time by a supervising attorney). The boutique firm tested LegalMation’s Complaint Analysis tool and Discovery Analysis tool across multiple practice areas and concluded that the resulting draft documents were not only produced incredibly fast but also with consistency and quality similar to its own junior attorneys and paralegals. In particular, the boutique law frim, which did not have the luxury of a large support staff, found LegalMation’s Discovery Request tool particularly helpful in dealing with burdensome discovery requests served on its clients.

Today, the boutique law firm is able to offer more competitive proposals for its matters and through the efficiency gained by LegalMation’s platform compete against national law firms with more resources.

Challenge

  • Downward price pressure due to a crowded local market
  • Limited associate/paralegal resources to handle routine drafting tasks
  • Compete against national law firms with more resources
  • Differentiate from competitors during marketing pitches
  • Lack of work product consistency from associates/paralegals

Solution

  • Deploy LegalMation’s Complaint Analysis tool to generate initial draft responsive pleadings, and the Discovery Analysis tool to quickly generate shells and responsive objections throughout the life of a case

Results

  • 70-85% time savings on key litigation tasks
  • Higher profit margins on volume matters, particularly those on AFAs
  • More distinctive marketing
  • Higher levels of associate satisfaction
  • Reduced staff overtime
 

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James M. Lee is co-founder and CEO of LegalMation. He is a founding partner of LTL Attorneys LLP, a nationally recognized litigation boutique. As an experienced litigator, he has tried numerous cases in federal and state courts. He has been recognized as a top business litigator by various legal publications including the National Law Journal. James has served as lead counsel to a number of Fortune and multinational clients including Wal-Mart, Thomson Reuters, Symantec, and VIZIO. He was formerly associated with litigation powerhouse Quinn Emanuel before co-founding LTL Attorneys. He is a frequent and noted speaker and commentator in the field of AI and innovations in the field of law. He received his J.D. from Stanford Law School, and his B.S. from the University of Southern California. At LegalMation, James serves as the key driver of the Company’s vision and strategy.

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Insurance COMPANY Case Study

A national insurance carrier achieves significant savings on its high-volume, low exposure litigation matters through its adoption of LegalMation’s Complaint Analysis tool

A national insurance carrier with significant litigation volume across the country for its insureds, was searching for technology, tools, and processes to increase efficiency on its litigation matters to lower its litigation costs. This national insurance carrier partnered with LegalMation to identify an area of litigation where LegalMation could have a significant and immediate impact and decided to deploy LegalMation’s Complaint Analysis tool for all of its third-party motor vehicle tort litigation.

LegalMation worked closely with the national insurance carrier to customize the output from its platform to generate documents that mirrored the current output of the national insurance carrier’s attorneys and paralegals.  LegalMation was able to automate the creation of an answer, requests for production of documents, interrogatories, requests for admissions, and deposition notices, all tailored to the facts and allegations of each complaint and almost indistinguishable from those manually created by the insurance company’s attorneys and paralegals.  LegalMation was able to generate this output in 2-3 minutes—a significant time savings over the insurance company’s prior practice for generating this output.

Following a pilot program consisting of processing all of its complaints for a single jurisdiction through LegalMation, the national insurance company made LegalMation an integral part of its workflow for all jurisdictions where LegalMation currently operates. In these jurisdictions, when a new motor vehicle-related lawsuit is served on the insurance company or its insureds, the assigned counsel or paralegal runs the complaint through the LegalMation Complaint Analysis tool, downloads the initial outputs, which are then reviewed by the attorney or paralegal and finalized, all within a few minutes.

Challenge

  • Increasing budgetary pressure to lower legal spend on defense of insureds
  • Obtain more value from staff counsel
  • Reduce legal secretary/paralegal overtime

Solution

  • Deploy LegalMation internally so staff/captive counsel can generate initial response draft documents in minutes

Results

  • Up to 80% time savings on key litigation tasks
  • Reallocation of staff/captive counsel time away from process/volume work to higher value strategic tasks
  • Increased consistency and quality in work product

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