Digitalization of the Legal Field and the Future of Large Law Firms
2. The Origins of the Current Business Model: A Commercially Oriented Professionalism
3. The First Cracks: Commodification and Bureaucratization
A: During the last two or three years we said goodbye to very skilled and talented people; even people that we put on our partner track. The first couple of times this happened we were a little bit amazed, because we thought we gave these people the very best offer available. You can become a partner in one of Denmark’s largest law firm with, at least in our opinion, the most spectacular cases you may get. You can appear before the Court of Justice of the EU if you like, you can go litigate in Greenland, and so on. We have the work. So, when they left to go fund their own company, often a two men company, then we were quite amazed and said: “Hey, what happened there, why would they do that?” But instead of saying, they must be idiots, we sat down and thought: “maybe we are not as attractive as we thought we were.” And why is that? Well, I think that, as firms grow bigger, even though you do become a partner, you will become one out of 60 or more partners. It is not as prestigious as it was before and if you really do have an entrepreneurial side inside yourself, then what does it mean to be one out of 60? It means that you still have to follow orders—unless you have my job of course.61
4. The New Challenges Posed by the Rise of Digital Capitalism and the Gig Economy
5. Existing Proposals for Reforming Large Law Firms: The Rocket Firm, and Beyond
6. The New Law Firm
6.1. A Corporate Law Firm
A: the main problem is the conservativism in our area. People say, well, doesn’t it work out pretty fine as it is? Well, they might be right, but my concern is that the level of awareness in our firm if pretty low. I have been talking to partners in our area about this. We are about 40 partners here. I think only three or four of whom I met have [the enforcement of new technologies] as main priority. People, you know, are pretty occupied, they have their cases, the business is going pretty well, but my concern is that, suddenly, one of our competitors has a breakthrough in using these systems and it becomes suddenly a trend in the market that you need to offer this and we are not ready. So you can actually be quite rapidly out of business if you are not able to prepare. My main message to the organization is, even though you are very busy, you need to spend time on this.Q: And, how is the organization responding to your concerns?A: Well, you know, of course people are thinking about it, but in the end they say, mañana. That will happen when I will have retired.109
A: Well, I came in in the firm [one of the biggest corporate law firm at the time] as an external recruit to create something different. They needed to leverage my knowledge, experience, and expertise in other areas of the law and start shaping it for the very large corporate global clients they had. And I quickly realized that what I had already been doing in my career, namely, mapping trends, patterns, and core processes against human behavior and against different kinds of business structures and processes, was equally valuable for large corporate firms. So, I started to use technology more and more to help and assist clients. I started training those clients and show them they should not need to use me as a lawyer in certain particular areas of operation of their business [implying that the technology would do that for them]. I told them that I would just require a training fee and as case law would change, as rules would change, a new best practice would be issued by a regulator, I would update and maintain their system and train them on the developments. I also told them that they should not pay hourly rates and should not waste a lot of money on large law firms for that particular area of business. As the technology developed, I realized that I could do this more and more, not only in my area of law, but in any area of law. And to be brutally honest, the partners in my firm started to be more and more concerned about what I was doing and I found myself arguing with my own partners. […] They believe I was threatening how they run their practice, which they run in the traditional model, by showing to clients how they could do things by themselves through technology by using fix prices and subscriptions. In their view, I was undermining the firm, as I was building a different kind of law firm in the law firm. And so, I resigned and left to build my own law firm.110
Q: How were the technological innovations you introduced received in the firms?A: There were people that were ready, the one I call “the coalition of the willing”. It is not always where you expect it, but they exist. Often it is said that partners are the most resistant. Generally, the most successful partners are those that often want to change. They have already changed and adapted in their career to become what they are. Then there are those that do not understand but are not against it and, finally, there are the most difficult ones, the one that do not want to do it. When I was young, I wanted to convince those that did not want to do endorse technology to do it. It is a waste of energy. You are not going to convince them and loose time and energies. Now, I go for the coalition of the willing, and then take my case to the next group. Those resisting will eventually come on board. If not, they will be out in the long-run. […] My best allies tend to be the successful partners in their 50s. They are ready; they get it; and they want to do it. They still got 10 years left and they understand that in order to remain competitive and relevant they need to keep on adapting and perhaps they listen to their clients.”111
6.2. A Multidisciplinary Law Firm
A: Today, your practice and specialization must be part of something bigger. Today, when we work, we work in teams that can be up to 50 people at the time in order to actually accommodate the clients’ needs. And they (the clients) are OK with that, in fact, they want that. […] This is because for certain projects we need to draw in special competences within different fields of law and put them together and we also actually employ project leaders and other non-lawyers, because when we are 50 or more people working together on large projects, we need, for instance to make reports on how the project is progressing, how is the money spent in that time, and so on. We really need to work in multidisciplinary teams.118
6.3. A Diffuse Law Firm
A: Our organization needs to be extremely adaptable for continuing moving around the resources we have. And this also means that the lawyers we employ must be very, very adaptable themselves…which I think, to my surprise, they are, as I would not be so adaptable. But then again, I am 47, and many of our lawyers are 30 years old. It is a different game for them. But the reason I think the future will look different is the fact that…well, the Danish Bar Association has recently made a report on legal tech, in which they use the expression gig economy, which is defined as being: you get a job for a client and you need maybe five different competencies to solve the case, you maybe have two of them in house, so you need to obtain the three remaining. So, you go and get them, but it is not necessarily competences that you need in stock all the time, so you hire them for a particular job. For me this means that, in the future, I will not have 700 lawyers on the payroll all the time. I think we are looking to a future where we will be just as well off by hiring in the competencies that we need to solve particular tasks on a case by case basis.123 Of particular interest in this regard is the, now already “old”, organizational technology known as Legal Process Outsourcing (LPO) and its newest incarnation Legal-Tech Process Outsourcing (LTPO). As expressed by Mark Ross “if law firms wish to remain the first port of call for corporate legal departments and the primary conduit for the delivery of legal services, this is predicated on their acceptance of the LPO operating model”.124 LPO essentially consists of subcontracting legal work from high-cost locations to sites where the same work can be executed at a significantly lower price. This often can be done by subcontracting the work to developing countries. Thus far, India, Chile, Hong Kong, Australia, the Philippines, and Sri Lanka have been the most frequent locations for outsourcing legal work, at least from the United States and the United Kingdom. Nearshoring to cheaper locations and providers that are geographically closer, including locations inside the home countries of law firms, is increasingly becoming an option.125 A more recent version of the LPO is when legal services are offered via a model that departs from the traditional law firm, for example, by using contract lawyers, process mapping, or web-based technology.126
Conflicts of Interest
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For an overview of these dynamics, see (Caserta and Madsen 2019; Thornton 2019).
See, Robert Ambrogi (2019). With IP Accelerator, Amazon Edges Into The Legal Services Arena. Above The Law. Available online: https://abovethelaw.com/2019/10/with-ip-accelerator-amazon-edges-into-the-legal-services-arena/. For some, this constitutes the beginning of a long-term strategy to gain control of large sectors of the legal market for service providers. Interview with CEO of English large law firm, 1 May 2020.
The T-shaped lawyer is the lawyer with a set of interdisciplinary skills developed to face the challenges of technological developments and to deliver legal advice more efficiently. See, (Mak 2017).
Even more than they do today. See, (Jacob et al. 2017).
The term “large law firm” is a relative and, somehow, elusive concept, especially in the light of the fact that there are a number of indicators by means of which one can measure and assess law firms (number of lawyers, revenue per partner, partner to associate ratio, and so on). For the purpose of this paper, I adopt an overly inclusive definition characterized by the following features, namely that these firms: (I) provide full-service, as they cover the most important areas of law; (II) are generally considered top-tier (or elite) law firms in their country; (III) employ a significant number of attorneys, usually 200 and often many more; (4) their lawyers have the best salaries in the industry; (IV) their lawyers are often recruited from the top law schools in the country; (V) their lawyers are expected to bill about 2.300 h per year. This, in turn, covers what is often described in the literature as global mega law firms (Flood 1996; Galanter 2014) and BigLaw (Galanter and Palay 1991; Galanter and Henderson 2008).
See, for instance, the various tech reposts of the American Bar Association https://www.americanbar.org/groups/law_practice/publications/techreport/abatechreport2019/.
This is the case of Fuse, launched by the United Kingdom firms Allen & Overy, and of Next Law, who established the Dentons law firms. See, How Are Law Firms Investing in Technology to Remain Cutting-Edge? Alvarez Technology Group. Available online: https://www.alvareztg.com/how-are-law-firms-investing-in-technology-to-remain-cutting-edge/.
(Galanter and Palay 1990, 1991) But see, (Wilkins and Gulati 1998; Galanter and Henderson 2008). The core institutional characteristic of this organizational structure of large law firms is the “promotion-to-partner tournament”, structured around a simple promise made by senior lawyers (partners), who have excess human capital, to junior lawyers (associates), with little human capital but abundant supply of labor. In return for the associates’ work, the partners promise that at the end of the probationary period, they will promote a fixed percentage of them to partnership (Galanter and Palay 1991, pp. 77–120).
In general terms, professionalism is a relationship among producers, consumers, and the state for the production and distribution of expert services (Abel 2003, p. XV). Thus, the politics of professionalism involves two main aspects: (1) the political confrontation between governments and the professions in relation to the regulation of the production and distribution of expert services and (2) the internal conflict engendered by different segments of the professions taking different views as to how to respond to the opportunities and threats triggered by political, societal, and technological changes.
The project, DigiProf—A Digitalized Legal Profession: Challenge or Opportunity (See the project’s webpage https://jura.ku.dk/icourts/research/digiprof-a-digitalized-legal-profession/), is financed by the Danish foundation Dreyers Fond and is focused on understanding the broader and multiform impact on new technologies in the European landscape of private law firms. The project is set to explore how changes in the capitalist forms of production have cultural, organisational, and ultimately societal implications, not only for the practice of the law, but also the work environment and the legal professionals’ daily life.
This article constitutes a preliminary study on the impact that digitalization is having and will have on large law firms; the study involves a realtively limited amount of actors interviewed and the limited focus on the United Kingdom and Denmark. Future studies within the framework of the DigiProf project will deepen the analysis by both testing these preliminary results on a large number of actors and by adding case studies studies from Germany, France, and Italy. Given the preliminary nature of the study, it is important to clarify the role that the interviews have played in the construction of my narrative. In broader terms, the DigiProf project is aimed at constructing original research based on extensive field work on large law firms in the above mentioned countries. It will do so by relying on a Bourdieusian approach with the goal of exploring the construction of a digitalized legal field and the underlying power battles that the rise of digital capitalism will bring about in the organizational structure of the profession (Bourdieu et al. 1991). For the more limited purpose of this paper, the interviews occupy a more marginal role as they have been used to complement existing visions of the impact of new technologies on legal work and on the legal profession. The data collected during field work were also particularly important to construct the more constructive part of this paper in which I propose to reform several aspects of the existing model of the large law firm. While my proposal is not entirely based on the interview, my conversation with my interviewees played an important role in shaping and refining my views. A word on the ethical guidelines followed during the field work is in place. At the beginning of each interview, the interviewees were provided with a brief but comprehensive explanation of the project and with an informal statement that the interviews would be recorded, but that the informant would remain anonymous when and if some of the statements realeased in the interviews were to be cited. All the interviewees accepted these ethical guidelines without problems.
(Rueschemeyer 1986). The autonomy of the profession in the Anglosaxon/common law world, however, should not be overblown, as in this context also there were instances of state-sponsored professionalization. But, in general, the claim still stands.
(Hammerslev 2003). See in general, (Weber 1978).
In 2014, however, an inter-ministerial committee set up by the Danish goverment as part of the Growth Package 2014 has been working toward analyzing the situation concerning the liberalization of the legal profession. (Okholm 2015).
In the hundred years from 1850 to 1950, the world witnessed major technological developments, such as the discovery of electricity and the replacement of old means of transportation with cars, airplanes, and space rockets, as well as of communication with telephones and computers. For an overview of this, see (Cambridge Strategy Group 2018, p. 12).
(Swaine 1946) Other lawyers such as Walter S. Carter and Louis D Brandeis have developed similar arrangements contextually to Cravath. See, for instance, (Hobson 1986).
Ibid. p. 28.
(Dezalay and Garth 2004, p. 621) In this paper, the two authors discuss the different situations in Europe and in the United States.
Ibid. p. 624. See also, (Smigel 1969). By elite lawyers or lawyers belonging to the ruling class, I mean members of the legal profession who have a strong influence both on the production of professional ideology and more generally on public life. As to the first, elite lawyers are those that produce a language that is ratified by the state and then used to justify and legitimate what lawyers do. As to the second, elite laywers are those that enjoy a close connection with national fields of state power. As shown by much sociological research on the legal profession, lawyers often play multiple roles in society in addition to exercising private practice. Lawyers act as founding fathers, interpreters of constitutional norms, advisors to holders of state power, brokers, politicians, agents of colonialism and imperialism and so on. See, among others, (Dezalay and Garth 2011).
See, in general, (Weber 1978).
Some scholars have shown how this idealistic representation of professionals as guardians of public interest and common good was not entirely in synch with the reality of the profession also in the early days. In particular, Magali Sarfatti Larson analyzed how the construction of this narrative was part of the broader process of professionalization of the lawyers as a corporatist strategy of ganing power and constructing a monopoly (Sarfatti Larson 1977). However, for the purpose of the brief historical reconstruction of the role of elite lawyers in society, the generalization that early large firms lawyers presented themselves as private and public enganged professionals still stands.
See, for instance, (Heineman 2016).
(Bruck and Canter 2008) Others have also convincingly argued that the rise of the in-house counsels led to a “decline of relationship lawyering” as these grow less attached to their law firms, and are more likely to shop for cheaper or more effective solutions. See, for instance, (Baker and Parkin 2006b, p. 1637).
(Aronson 2007). A viewpoint confirmed by many informants in the interviews, in particular by senior partners of large law firms in both Denmark and the United Kingdom.
A timeline of the DLA-Piper expansion is availavble here: https://www.dlapiper.com/history/#year2005.
(Galanter and Henderson 2008). Non-equity partners are attorneys who are treated as partners in terms of outward appearance (i.e., in relations with clients and other outside parties) but do not share in a percentage of the firm’s profits and are therefore not owners of the firm. A majority of large law firms now have non-equity partners, and their numbers are increasing. According to the AmLaw 100, 2020, non equity partners are, on average, 44%, and only 15 firms have only equity partners.
According to Steven Harper, the creation of a large cadre of permanent non-equity partners can result in big problems for a firm. This is because it can create second-class lawyers but also may result in depriving young lawyers of many opportunities (Harper 2013, p. 82).
(Regan 2004). As put by Aronson: “Under the traditional lockstep system, younger partners were generally underpaid for their efforts, while older partners tended to be overcompensated relative to their contribution to the firm. This system worked in a well-capitalized firm in a stable setting where young partners were confident that the system would still be in place and work to their benefit when they became senior partners. However, as firms grew and it became common for partners to move among firms, it became increasingly difficult to pay partners on any basis other than current performance. Young partners will generally not agree to delay receiving compensation and invest in a firm’s future when other firms will pay them more in accordance with their current market value (Aronson 2007, p.771).
This led scholars to call into question the professional ideal of public service. See, for instance, (Kronman 1993). See also, (Halliday et al. 2008).
This is similar to the path previously followed by other large professional service organizations, such as accounting firms, and includes, in many cases, a change to a limited liability partnership when that corporate form became available in the mid-1990s.
(Guttenberg 2012). A viewpoint expressed by all my informants in the interviews.
Interview with CEO of Danish legal tech company. Interview with CEO of new-tech based law firm in the United Kingdom.
Interview with Managing Partner of Danish large law firm, 20 September 2019.
See, among others, (Caserta and Madsen 2019).
This instability is also reflected in that, in the past decades, many major firms with more than 1000 partners have collapsed entirely. The surviving lawyers live in fear of suffering a similar fate, driving them to ever-more humiliating lengths to edge out rivals for business. See, (Scheiber 2013).
(Schiller 1999, p. XIV). The other historical manifestations of capitalism are: agricultural capitalism (Aston and Philpin 1985), merchant capitalism (Braudel 1982), industrial capitalism (Hobsbawm 1999), and financial capitalism (Lapavitsas 2014). The author is aware that there are numerous, and at times conflicting, theories of capitalism. These include, among others, classical political economists (Smith, Ricardo, Mills, Marshall), 20th-century economists (Keynes, von Mises, Friedman, Stigler, Hayek), Marxist economists (Mandel, Kalecki, Baran, Sweezy), and heterodox economic thinkers (Schumpeter, Polanyi, Wallerstein).
(Pace 2018, p. 255) See also, (Fuchs 2013).
These are often triggered by an increased push from clients to lower the costs of legal services (Bruck and Canter 2008). In this work, the authors listed the escalating billable hours requirements, a lack of diversity, and high associate attrition rates as the main issues of criticism raised by clients.
Similar to what is generally claimed in, (Boltanski and Chiapello 1999; Sennett 2006).
(Lodder 2006, p. 5).
See, (Caserta and Madsen 2019) It must be mentioned that the entrance of economic and commercial rationalities in the practice of the law has also important positive aspects. For instance, as argued by Bruck and Canter: “If mobilized properly, the consumers of corporate legal services can use their new market power to address some of the most critical problems facing the elite firms, especially the lack of diversity within firm leadership, rising associate attrition rates, and an over-reliance on the billable hour. The “professionalism” that dominated elite firms in the middle of the twentieth century undoubtedly encouraged civility and trust between lawyers. But it also operated as a mechanism for shielding the narrow financial interests of big-firm partners and for marginalizing lawyers based on religion, race, and gender”. (Bruck and Canter 2008, p. 2088.).
See, among others, (Theis 2010).
Ibid. p. 9.
Ibid. p. 11.
(Henderson and Evan 2017) See also, (Baker and Parkin 2006a).
For a good review of this literature and an informed discussion on the values of the partnership, see: (Empson 2007) discussing the ethos of partnership and its capacity of balancing the competing claims of three sets of stakeholders: professionals, owners, and clients.
Ibid. p 4. For a more recent critique, see (Molot 2014).
A view confirmed by all my informants in the interviews.
Although not specifically tailored to the issue of new technologies, this view is expressed, among others, in (Harper 2013) (see also, (Westcott 2018)). According to this author: “In these days of much movement of partners from firm to firm, it can be argued that many partners place little long-term value in [investment in the future]”. p. 55.
Arguably this problem could be minimized by adding retirement benefits for partners or by making partners permanent equity members. This means that they will maintain an economic interest in the firm also after retirement with the result that may be incentivized to approve long term investments. See, for instance, (Molot 2014). See also, (Westcott 2018).
Interview with Senior Partner of Danish large law firm, 16 August 2019.
Interview with CEO of English large law firm, 1 May 2020.
Interview with Head of Innovation of large law firm, 3 December 2019.
It is worth noticing that, especially in the United States, there are other non-corporate forms of law firms, namely the Limited Liabiliy Company (LLC) and Limited Liability Partnership (LLP). Yet, these different forms are mainly oriented to set up different forms of liability for the lawyers working in the firm and are less concerned with the internal organizational structure of the firm itself.
Or without having to rely on a complex and often informal division of responsibility between managing partners and other partners, which often leads to internal conflicts.
In a more or less informal way, many large law firms differentiate between categories and roles of partners. See, for instance, the well-known differentiation between the grinders, the minders, and the finders. See, among others, (Nelson 1988).
This generalist way of evaluating lawyers has been said to derive from the so-called partnership ethos. According to this, in their practice, partners must strike a balance between their individual interest and the interest of the firm in which they work and are socialized into acquiring all the requisite technical and moral skills needed to be part of the partnership though long years of apprenticeship, (Empson 2007). This approach was also the building block of the hierarchical way of structuring large firms, where young associates were trained by the more senior partners.
This difficult relationship is the by-product of the historical developments of the profession. In many instances, in fact, not only was it prohibited for non-lawyers to practice law, but it was also (and in certain jurisdictions still is) prohibited non-lawyers from combining with lawyers to offer legal services for profit. (Andrews 1989).
Interview with Managing Partner of Danish Large Law Firm, 20 September 2019.
This new roles somewhat resemble the ones adopted by engineers in engineering companies or of scientist in large pharmaceutical companies such as Novo Nordisk, Bayer or Novartis, just name a few.
A first mover in this direction is the UK law firms Rradar. See, https://www.rradar.com/.
To date, the largest law firm in the world in Dentons, with more than 8500 lawyers in its ranks, followed by a relatively large number of firms with more than 2000 lawyers.
(Westcott 2018) See also, (Bosman and Hakanson 2017).
Interview with Managing Partner of Danish large law firm, 20 September 2019.
See the 2017 report of Thomson Reuters, Georgetown Law Center for the Study of the Legal Profession, and University of Oxford Said Business School entitled ‘Alternative Legal Service Providers: Understanding the Growth and Benefits of These New Legal Providers’ (Alternative Legal Service Providers Report 2017).
Interview with Head of Innovation of large law firm, 3 December 2019.
See also, (Ross 2017; Beaton and Kaschner 2016). This constellation would obviously require a proper service legal agreement between the firms and the providers in order for the former to maintain control over the LPO providers.
Interview with Head of Innovation of large law firm, 3 December 2019; interview with CEO of English large law firm, 1 May 2020; and interview with Senior Partner of large law firm, 16 August 2019.
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Caserta, S. Digitalization of the Legal Field and the Future of Large Law Firms. Laws 2020, 9, 14. https://doi.org/10.3390/laws9020014
Caserta S. Digitalization of the Legal Field and the Future of Large Law Firms. Laws. 2020; 9(2):14. https://doi.org/10.3390/laws9020014Chicago/Turabian Style
Caserta, Salvatore. 2020. "Digitalization of the Legal Field and the Future of Large Law Firms" Laws 9, no. 2: 14. https://doi.org/10.3390/laws9020014