LegalZoom Chief Executive Officer John Suh told a gathering of Indiana lawyers Sept. 29 that solo and small firms whose practices in many cases have struggled for decades may be facing existential challenges, but they shouldn’t blame the internet.
“It’s getting to an unsustainable level,” Suh said of plummeting workloads and declining average incomes of small-firm and solo attorneys. He told members of the Indiana State Bar Association during a panel discussion that the bulk of the decline happened before the internet. The digital revolution is neither the cause of, nor the savior from, the legal profession’s woes, Suh said, tracing trends dating to the early 1970s.
He explained that in his home state of California, about 1 percent of litigants in divorce cases were unrepresented by legal counsel in the early 1970s. Today, that figure has soared to 67 percent despite a doubling of lawyers during that time. Meanwhile, he said solo lawyers nationwide have seen their salaries plummet from about $71,000 in the early ’70s to around $49,000 in real terms in recent years.
The largest provider of online legal forms, LegalZoom is making a bold and controversial push into the legal industry itself, as is internet competitor Avvo, which compiles data and rankings for lawyers. Suh said he envisioned a day in the near-future when 100 percent of what LegalZoom does is deliver the services of lawyers to consumers online. Such a transition would require the company to do business with attorneys in Indiana to offer legal services in the state, he said.
Suh capped off a gloomy PowerPoint presentation on declining trends in the legal profession with a promotional video for LegalZoom. It showed a smartphone used to procure legal services through the company at key moments of a young couple’s life — when they bought a home, when their first child was born, and when the child turned 18.
“That was a wonderful presentation, and I’m horrified by it,” said panelist David Miranda, past president of the New York State Bar Association.
Miranda said no matter how companies such as LegalZoom and Avvo frame their business models, they represent an intrusion into a noble profession whose requirements of attorney education, fitness and licensing to practice are in place to protect the public. Because these companies are not law firms, they are free to advertise and market themselves without concern for the Rules of Professional Conduct.
He also said no matter how the companies cut it, their business models represent fee splitting that’s prohibited under the Rules of Professional Conduct of most states, including Indiana. Miranda said while many may think of big law firms when they think of the New York state bar, about two-thirds of its members, like the Indiana bar, are in solo firms or those with five or fewer lawyers.
“These are the lawyers that are getting squeezed” by companies like LegalZoom and Avvo, Miranda said. He suggested that because the companies aren’t lawyers, the lawyer providing services would be held responsible for any fee-splitting discipline.
“Change in our profession needs to come from our profession,” Miranda said.
But Avvo Chief Legal Officer Josh King shrugged off such fee-splitting concerns, likening online services to credit card providers who take a small percentage of a transaction when a client puts a legal bill on a charge card.
King said the legal industry has simply failed to adapt to changing times and expectations. “I think a lot of it is a self-inflicted wound,” King said. “The legal profession has brought this on itself.”
King said risk-averse lawyers have let fear of rule violations stand in the way of things such as offering and advertising a suite of standard services at a fixed cost. For legal consumers and the general public, he said legal service “remains in 2016 frustratingly hard to access.”
He urged lawyers to embrace standardization in their practices. This increases efficiency, and not all client matters require unique approaches. Very few, he said, “are unique special snowflake legal problems.” By embracing standardization, the legal profession could address the pro se litigant gap while promoting their practices and increasing business.
“You can go out and start solving these problems yourself,” King said.
Panelist Tom Rombach, past president of the State Bar of Michigan, said he was cognizant of the challenges presented by online competition. He said the Michigan and Indiana bars are taking steps to address that, for example, by using their services to promote attorneys online with enhanced member directories. He noted Suh said LegalZoom aims to be the largest law firm in Britain and plans to hire 20,000-50,000 lawyers in coming years, but Suh said those figures are overstated.
Rombach said lawyers must be open to new ways of doing business, and outdated rules of conduct must be modernized. He said over half of legal services are already being done online, and when he asked how many people in the ISBA banquet hall room had done business online, virtually no hands were raised.
He pointed to Avvo surveys that show consumers believe lawyers are too slow, too expensive and in many cases don’t care. “The fact is we have to change that,” Rombach said, and “reposition ourselves in the marketplace.”
“We have to have a profession so we can hand the baton to the next generation,” he said. “Once you no longer have a business model, quite frankly you’re no longer a profession. You’re a hobby.”•