2015 - Page 4 of 29 - JusticeHub Innovation Lab

Private Capital for Funding Law Firms Serving Low and Moderate Income Clients

December 1, 2015 Christy Leos Leave a comment Business, Economy, Finance, In the Law, News

One of the obstacles to the development of innovative software solutions that automate part of the legal service delivery process resulting in lower, more affordable legal fees is the absence of capital. Traditional methods of legal service delivery based on hourly billing rates out of reach for low and moderate income clients. Capital investment is required to create innovative web-based software solutions that can enable low and moderate income clients to either solve legal problems on their own as pro-se litigants, or to enable law firms to offer legal solutions at a more affordable price point.

The major obstacle to making more capital available to law firms, is the prohibition on investment in law firms by nonlawyers enshrined in the ABA’s Model Rules of Professional Responsibility and replicated in the state rules of professional responsibility that regulate lawyers in their state. [ See Rule 5.4 – Professional Independence of a Lawyer ].

There has been little innovation within solo and smaller law firms to develop client-centered, web-based applications that provide a low cost solution to low and moderate income clients. Instead innovation is centered in the vendor community that provides tools to law firms, usually as a SaaS service for a monthly subscription fee. A good example is our own DirectLaw virtual law firm platform that provides a client-centered document automation application, and other tools that enables a law firm to unbundled legal services for a fixed fee to clients online. While the value of innovation outside of the law firm, within the vendor sector of the legal industry, is not to be minimized, it is the lawyer within the law firm that has the most nuanced view about what their clients need and want. The lawyer within the law firm also has the primary interest in figuring out how to develop and manage the delivery of legal services so that for certain kinds of legal problems a scalable, volume-based business model can be implemented.

Innovation requires capital. It is capital intensive to develop software applications and new delivery systems for legal services. Solos and small law firms that serve individuals and families do not have access to capital. Whatever innovation is taking place in the delivery of legal services is happening outside of the legal profession in organizations like LegalZoom financed by venture capital, or the within legal aid programs funded in part by the Technology grant program within the Legal Services Program, or outside of the United States. [See also, blog post from Lexicata – How Law Firms Can be More Like LegalZoom ].

There has been much controversial discussion with the legal profession on modifying the ownership rules that apply to law firms, with little result. For example, the American Bar Association created last year a Commission on the Future of Legal Services to address the access to justice problem, under the under the leadership of then ABA-President William C. Hubbard. The Commission convened a National Summit on Innovation in Legal Services, in May 2015 where private investment in law firms as a prerequisite to innovation was on the agenda. But I have yet to see any progress on this issue within the American Bar Association. Unlike other countries, private investment in law firms as a way to develop new ways of serving a latent market for legal services is dead on arrival when it reaches the ABA’s House of Delegates, although 80% of the U.S. population can’t afford the cost of legal services and is unserved by the legal profession.

The evidence we have seen in the United Kingdom, where the legal profession has moved towards de-regulation, and where capital can flow freely into law firms, suggests that the United States will remain a laggard in innovation in the delivery of legal services until this problem can be fixed. In the UK, LegalZoom is taking advantage of this de-regulation by becoming an ABS [ Alternative Business Structure ]. As a private company, operating in the UK, LegalZoom can offer legal services directly to the public. LegalZoom plans to use this opportunity to develop and experiment with new end-to-end legal services for consumers with the idea that in the far distant future these innovations can be imported into the U.S. legal market.

The bottom line is that you can’t really innovate without access to capital – it is the fuel of innovation. For solo and small law firms that serve people, rather than large corporations, capital is not available for innovation unless the lawyer or law firm has generated capital from their practice and makes a conscious decision to invest in software automation and web-based solutions.

An example of a law firm that has accumulated capital (because of litigation against the mortgage servicing companies and the banks in the robo-signing scandal during the U.S foreclosure crisis) is IceLegal, P.A., a small law firm based in Florida. IceLegal, under the leadership of Thomas Ice, is launching its own access to justice initiative. The firm has also created its own LegalYou video channel for educating pro-se litigants. This is a project of the law firm (not of a private company), and will provide low cost legal solutions to Florida residents. If LegalYou is a success it will serve a new latent market ignored by most of Florida’s law firms. LegalYou is the exception rather than the rule.

One would think that Internet-savvy, recent law school graduates would be motivated to serve a latent market for legal services by developing innovative solutions, but handicapped by large student loans they are forced into career roles that provide sufficient cash flow to amortize those loans. Risk-taking is not an option for them.

A Proposal: Safe Harbor for Law Firms Serving Low and Moderate Income Clients

To increase the flow of capital to law solos and small law firms who wish to serve only low and moderate income clients with automated legal solutions, I propose that:

The American Bar Association amend Rule 5.4 to permit private investment in just those law firms that serve low and moderate income clients exclusively.
Personal injury and other contingent fee practices would be excluded from this exception as capital is self-generating for successful firms in these practice areas.
To comfort those who are concerned that the independence of the lawyer is compromised by this proposal, the law firm must remain at least a 51% owner of the law firm. Private investors can be minority shareholders only.
It is relatively easy to create an income generation screen to capture just low and moderate income clients for the law firm, and exclude those of higher income. The data from this intake process can be archived and audited to comply with the exception to the rule.

Creating this exception opens up the opportunity for smaller law firms to take advantage of crowd-funding opportunities, the angel investor community, and the new SEC rules that permit crowd-funding investment. Further, the rich relatives and friends (if they exist) of a young lawyer could fund the new lawyer’s law firm, and get a return on investment, without the lawyer risking disbarment because of violation of the 5.4.

An argument can also be made that enabling law firms that serve primarily corporate entities can create capital on their own without additional incentives and should not be able to take advantage of this safe harbor. Most large law firms represent corporate entities (banks, insurance companies, health care organizations, drug companies, manufacturers, financial organizations) whose legal positions are opposed to many consumer interests. These firms should have to use their own capital to become more efficient so as not to tip the balances against the consumer even more than it is.

One would think that this modest proposal to enable innovation designed to increase access to the legal system for clients who can’t afford the high cost of legal fees would be an idea that that American Bar Association and state bar associations might entertain or even discuss.

However, given that the structure of regulation of the legal profession is controlled by the legal profession, this idea will probably be dead on arrival.

Article via eLawyering Blog, 4 December 2015

Photo: the shadow of justice via Jack [Creative Commons Attribution-NonCommercial-NoDerivs]

Blackberry takes stand for protecting user privacy

December 1, 2015 Shelby Bice Leave a comment Business, Privacy

Finding the balance between data surveillance and protecting user privacy is an ongoing process, but Blackberry has just chosen to take a stand for the latter. The company has decided to pull operations from Pakistan after demands from their Telecommunications Authority for unrestricted access to Blackberry Enterprise Services. The Pakistani government was basically asking for a “backdoor” to access encrypted message and emails sent or received within Pakistan. Blackberry not only refused to cooperate with the demands in Pakistan but has also stated that they will not submit to any demands for unrestricted “backdoor” access in any country.

While protecting user privacy is important, ensuring safety of citizens sometimes requires governments to conduct data surveillance. Blackberry has stated that these demands from Pakistani government do not fall under the realm of public safety. Rather, “Pakistan was essentially demanding unfettered access to all of our BES customers’ information,” explained Chief Operating Officer Marty Beard. In the blog post Beard released explaining Blackberry’s withdrawal from Pakistan, he stated that while Blackberry is more than willing to assist with law enforcement’s investigations when a crime has been committed, it won’t grant companies “backdoor” access. This shouldn’t come as a shock; Blackberry has displayed that security is a main priority in their interactions with other governments and businesses.

Blackberry has now shown how they will react to requests for access to their customers’ digital data, but they won’t be the only company having to decide how to protect user privacy. As governments decide how important access to encrypted data is to national security, other companies may be faced with tough decisions concerning their positions in the surveillance versus privacy debate.

Article via CNET, November 30, 2015

Photo: Blackberry Bold via johncatral [Creative Commons Attribution-NonCommercial-NoDerivs]

Law firm takes new approach to technology training

November 30, 2015 Shelby Bice Leave a comment Tech for Lawyers

Being knowledgeable about technology and programs that clients rely on lawyers to use daily is extremely important, but providing the training necessary to gain that knowledge can be somewhat difficult. The goal is to make sure that every lawyer has the adequate knowledge to fully serve their clients, but you don’t want to bore those who already know all the relevant information. Additionally, you want to be able to prove to your clients that their lawyers know what they’re doing. The firm Keesal, Young, and Logan have devised a training program that accomplishes both tasks. After realizing that information technology is important to client satisfaction, the director of information for the firm, Justin Hectus, decided to implement the Legal Technology Assessment.

The Legal Technology Assessment , or LTA for short, is a tech competency test developed by D. Casey Flaherty while working at Kia Motors. By implementing the test, lawyers could test out and bypass certain areas of instruction. Additionally, because the assessment highlighted the areas in which each individual required further education, individuals were able to complete their training in a third of the time. An associate at Keesal, Young, and Logan, Sean Cooney, explains that, “group training is often inefficient because everyone has a different familiarity with whatever program is being used. The individualized training allowed us to skip anything that is redundant.”

The LTA not only identified weak areas for Keesal, Young, and Logan but also measured how effective their tailored program was. After the training program was completed, the average LTA score was improved by almost 40%, which Keesal, Young, and Logan can now use to tout their personnel’s tech competency. Additionally, combining the LTA and specialized training resulted in the trainees implementing what they learned into their work. For example, another associate, Erin Weesner-McKinley, relates that, “some tasks that I previously delegated can now be done with the click of a button, and I have a better understanding of other tasks which I still choose to delegate to nonbillable personnel or colleagues with lower billing rates.”

Article via Legaltech News, November 25, 2015

Photo: Computers via Duane Storey [Creative Commons Attribution-NonCommercial-NoDerivs]

Data surveillance versus privacy: finding a balance

November 24, 2015 Shelby Bice Leave a comment Privacy, Security

With the ISIS attack in Paris still fresh in everyone’s minds, many concerns are being raised about data surveillance laws. Even though there has not been any evidence that the terrorist attacks involved the use of encrypted data, some supporters of expanding data surveillance are citing the attacks as proof that wider-ranging laws are needed. This is nothing new; the ongoing battle between privacy proponents and lawmakers supporting more surveillance is thrust into the spotlight increasingly often. Disagreements over data encryption will likely only increase, with 75% of internet interactions expected to be encrypted in the next ten to fifteen years. And while supporters of internet and data privacy have no problem with this rise in data encryption, it will cause technical problems for government agencies and law officials who need to access information to bring criminals and terrorists to justice.

A compromise has been suggested: some officials have proposed instituting laws that require tech companies to develop methods for police to obtain access to encrypted information, although this may not even be possible. Some companies such as Apple and Google cannot even access data encrypted in their own devices and services. Even if it is possible, the White House has agreed to not move forward with any legislation that would require companies to make encrypted data available whenever the police needed.

Finding a balance between protecting users’ privacy online and surveillance in the name of preserving law and order is an ongoing process and should not be determined quickly in the wake of a crisis. While there should be legal limits on the seizure of encrypted data, there must also be limits on how and what is encrypted. Determining these limits will take time.

Article via The Washington Post, November 18, 2015

Photo: Point Cloud Data via Daniel V [Creative Commons Attribution-NonCommercial-NoDerivs]

Nigeria and Online Dispute Resolution

November 24, 2015 Jeff Aresty Leave a comment Ask Jeff, Opinion

One of the earliest letters I received from Nigeria (before the Internet – postage/envelope/letter inside/a “real” signature) invited me to help out an individual there who was a relative of a prince and had a very substantial bank account in New York, but they could not access the funds there (millions of dollars) without my help. Hmmm….

Nigeria has had a reputation for scammers for a long time. The Internet gave these scammers new fuel and new ways to catch people in their lair. These scammers are sophisticated and the reason they don’t give up is because it works. Nevertheless, the reputation that has befallen Nigeria is not one that should be allowed to perpetuate. I remember the first time I met my good friend from Lagos, attorney Ayo Kusamotu, on a phone call and we talked about a legal problem regarding trademarks and online dispute resolution for a long time. He suddenly interrupted me to say “thank you.” I asked him “for what?” And he said “for not bringing up the Nigerian scammers.”

It never occurred to me to bring up scamming – it is everywhere and it shouldn’t be attributed to one country or another. Ijeoma Ononogbu, another Nigerian colleague of mine, began her recent presentation on the state of justice in the African Union during Cyberweek, and she pointed out that Nigeria has adopted a broad based cybersecurity initiative designed to increase trust for online commerce; an absolute prerequisite for its growth. And last week, yet another colleague from Lagos, Morenike Obi-Farinde LL.M, FCIArb (UK), (founder of www.e-consumersolve.com), organized a first ever training program between InternetBar.org Institute and the Nigerian Bar Association on the use of practical technology techniques for online dispute resolution. Led by IBO board member Dan Rainey, there were 41 attendees.

Scamming may be endemic to the Internet – but building the foundation of trust to overcome it is in the genes of my Nigerian attorney friends. Transformation is in their hands, and they are doing great works.

To read more about Jeff Aresty, click here.