Paul Lippe is the founder and CEO of the Legal OnRamp, a Silicon Valley-based initiative founded in cooperation with Cisco Systems to improve legal quality and efficiency through collaboration, automation and process re-engineering. He wrote this piece on law firm ownership structures for the ABA Journal.
As law firm ownership structures continue to evolve and develop, lawyers are increasingly challenging the way in which law firms are owned and managed. ABA Journal contributor Paul Lippe wrote about one firm that is changing the way law firms operate, Riverview Law, and how regulatory and ethical restraints are stifling the development and competitive of law firms.
I had a visit this past week from Karl Chapman, the CEO of Riverview Law, and Steve Harmon, head of legal operations at Cisco. Steve, Karl and I spent time at several law schools, with several large clients, and with one large law firm. Click here for a full video of our panel at Northeastern Law School’s NuLawLab. (Full disclosure: OnRamp has a broad commercial and strategic collaboration with Riverview.)
Let me divide this travel report into three themes:
• The background of the Ethics 20/20 Commission and the change in the U.K. law around alternative business structures.
• What Riverview means to the legal market.
• Possible implications for American law firms from the differential regulatory regimes.
Ethics 20/20 and alternative business structures
Under U.S. ethics rules, lawyers can’t share profits with nonlawyers, which means that law firms can only be owned by lawyers: in other words, law firms (unlike many other professional service firms) can’t have nonlawyer partners. The U.K. changed this rule a few years ago, while in the U.S., the ABA’s latest Ethics 20/20 Commission effort declined to follow the U.K. change. Early commentators imagined that the U.K. rule change would result in Clifford Chance going public, but that’s not at all the most probable scenario; rather, we’re likely to see new market entrants with a mix of old and new DNA challenge the traditional structures.
Academics like University of Southern California law professor Gillian Hadfield in an outstanding new paper “The Cost of Law: Promoting Access to Justice through The (Un)Corporate Practice of Law” argue that restricting nonlawyer ownership of legal service firms limits innovation and increases prices to the detriment of clients. Others, including many general counsel friends of mine, believe that following the U.K. change would “undermine the unique attorney-client relationship, … exacerbate the law’s drift from a profession into a business, and … hasten the day when the legal profession is no longer self-regulated.” (PDF)
My view had been more agnostic. On the one hand, if you look at the behavior of many large law firms, it’s hard to imagine that they could be more short-term financially oriented if they were investor-owned. On the other, any lawyers who want to be innovative are perfectly capable of doing so within the constraints of pure lawyer ownership, since law really isn’t very capital-intensive. See page 123 of the comments on technology working group issues papers (PDF).
I also was on a panel on the International Bar Association meeting with Jamie Gorelick, who chaired the Ethics 20/20 effort, and Patricia Greer from the Law Society in the U.K., who reports a mini-boom in law firms choosing London as the place to base themselves. (If you listen to minute 58 in the Northeastern video, you’ll hear Luke Bierman, the associate dean for experiential education at Northeastern, describe a 1999 ABA effort at reform that would have put the U.S. well ahead of the U.K. in this area.)
Riverview is a brand-new firm that calls itself a “legal advisory outsourcer,” to distinguish itself from legal process outsourcers. Riverview is focused on high-volume activities that large companies do, sometimes recurring but other times “event-driven.” Their closest U.S. competitor is Axiom legal, although Axiom can’t organize as a law firm under U.S. rules. (According to George Beaton, Axiom is on the pace to be the biggest law firm in the world by 2018.)
Riverview is perhaps best known in the U.S. for their hysterical “fixed fee” video, but in the U.K. they are better known for having developed large advisory outsourcing businesses in recruitment and human resources over the last 25 years, so they’re building on a foundation in other fields. From what I saw from Karl, Riverview is extremely rigorous in its approach to training and managing work, much more so than what I see from law firms. Yet at the same time, Karl is very engaging and businesslike.
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