Gillian Hadfield argues for shift in legal business model
-By Jared Servantez
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| Prof. Gillian Hadfield is advocating fundamental changes to the business model for providing legal services. |
Current bar association rules in all 50 states disallow the sharing of legal fees with those outside the profession and prohibit corporations and other organizations from employing lawyers to provide legal services to the public. Instead, law firms are owned and operated only by J.D.-holding lawyers, who have to run the business in addition to providing legal counsel.
In a recent web seminar hosted by the ABA’s Commission on the Future of Legal Services, Hadfield said that those rules should be changed in order to allow companies employing or contracting with lawyers to handle things like billing and gathering clients, freeing up lawyers to spend more time on legal services.
“The business model required by bar association rules is very inefficient,” Hadfield said. “Legal businesses need access to the fundamental tools of how every other market, every other industry, every other business, and every other service and profession operate, which is that you reallocate who’s doing what within the organization. That’s fundamental economics."
According to a recent survey conducted by LexisNexis, Hadfield said, solo practitioners and two-person firms are often spending up to 40 percent of their time doing something other than billable legal work. Other evidence suggests the percentage of time unpaid may be as high as 65 percent. Hadfield said this causes lawyers to drive up their rates to compensate.
“What’s going on is if they’re charging $200 an hour, which is about the minimum you can find a lawyer for outside of the legal aid and public defender sector, a big chunk of that is not for legal services, it’s running the business,” Hadfield said. “So the theory here is to get more of those activities into the hands of those people who focus on them, invest in them, innovate in that area and develop expertise, and leave the lawyers to do lawyering.”
To illustrate her point, Hadfield used the example of solo practitioners, who often spend up to 15 percent of their time collecting payment and may be collecting hourly rates on as little as 35 percent of their time.
“Now imagine you have a for-profit company that operates a payment system collecting guaranteed payment for small law firms,” Hadfield said.
With that time spent collecting payment outsourced to a private company, the lawyer can now spend 50 percent of their time on legal work, allowing them to bill and collect for more hours at a lower rate while still earning the same income. Just this small adjustment, Hadfield said, would free up the lawyer’s time and result in a 20 percent reduction in their hourly rate.
Although bar associations encourage lawyers to do pro bono work, Hadfield said it is simply not enough to provide adequate legal services to the significant legally underserved population in the U.S.
According to data Hadfield provided in her presentation, 62 percent of American households at any point in time are facing at least one legal problem.
To emphasize the scope of this issue, Hadfield said that at the standard minimum rate of $200 per hour for legal services from an attorney in private practice, it would cost $42.8 billion to provide each of those households with just one hour of legal help for their problems. If those services were provided pro bono, it would require 275 hours of pro bono work every year from every practicing lawyer in private practice in the country.
“It's not really possible to provide adequate services to everyone who needs them with the traditional law firm model, and in particular not with the set of rules that we have about how legal services have to be provided,” Hadfield said.
The most important change to that set of rules, Hadfield said, would be to allow lawyers to operate in less expensive business models than the typical solo and small firm practice. She pointed to companies like LegalZoom, which already aim to provide low-cost legal service alternatives, but could expand under her proposed rule changes.
“What I’d love them to be able to do is to have more people on the end of the phone line who are actually able to help people with their legal problems,” Hadfield said. “They can do it at a price level that the lawyer operating in a very inefficient solo practice can’t do.”
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