An alternative to Alternative Business Structures?
21 January 2014 | By Shana Ting Lipton
19 March 2014
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Online practices are joining ABSs in shaking up the traditional legal marketplace, reports Shana Ting Lipton.
Since their official introduction into the UK marketplace in October 2011, Alternative Business Structures (ABSs) have been feared, eagerly anticipated, and perceived as heralding the democratised future of law firms – and a ‘de-lawyered’ one at that, according to the director of the Legal Services Board. ABSs – which allow non-lawyers to own and manage legal practices – are on the rise.
Put into law by way of the Legal Services Act of 2007, an ABS is designated through the procurement of a license. The Solicitors Regulation Authority, which oversees this process, granted 169 such licenses in 2013 (up from 72 in 2012 – the scheme’s first full year in operation). But, for traditional firms, the threat of a looming brave new legal world of ABSs may not be the only one as some online legal service providers do not even require ABS licenses to operate readily and on-the-cheap — an alternative to Alternative Business Structures, as it were.
One such company is San Francisco’s Rocket Lawyer, a Google Ventures-backed online legal services provider that launched in the UK in late 2012. “We’re not technically an ABS and don’t need to be,” says Mark Edwards, Rocket Lawyer’s UK vice president and general manager.
Instead of dispensing direct legal advice through in-house solicitors, Rocket Lawyer “uses tech to provide those legal services and a network of lawyers” – consisting of 20 on-call external law firms – made available to customers at a third of their normal rates.
Rocket Lawyer’s own small in-house legal team develops the online products and tools made available to customers but does not give legal advice; ergo no ABS license requirement. They even boast a platform to facilitate free do-it-yourself (DIY) employment contracts – which caused a stir with their perceived chief rival, LegalZoom.
The latter, Los Angeles-based, legal services provider, founded by O.J. Simpson advocate Robert Shapiro, finally beta-launched in the UK in December 2013 after a measured introduction to the British legal landscape. LegalZoom promised but failed to launch in 2012, but made headlines instead for filing a lawsuit against Rocket Lawyer for false advertising (of ‘free’ services) and trademark infringement. A California district court judge denied LegalZoom its motion for a summary judgment and ordered it to trial. “They need to focus on their customers and stop worrying about ‘[Rocket Lawyer],” says Edwards. LegalZoom was contacted for this article but would not comment.
Currently, LegalZoom’s UK site operates without an ABS license, under the format of providing DIY services, plus an arsenal of solicitors, which it contracts out on a need basis from the ABS-licensed QualitySolicitors. The latter, funded by Palamon Capital Partners, demonstrates the core appeal of becoming an ABS to law firms: substantial non-law world capital investment from big corporations and the powerful world of private equity (Palamon is a European private equity partnership).
The reverse also holds true as marquee-name non-legal service companies utilise ABSs to enter a previously inaccessible business sector. A case in point: media giant BT’s ABS venture BT Law Limited (launched in Spring 2013), which is targeting corporate clients.
However, the marketplace appears to be rife with ABS-designated companies and online legal service providers – such as DIY site LawPack, for instance – many of whom are fervently eyeing and targeting another prize: the previously marginalised small and medium-sized business client (aka SMEs). Nevertheless, Edwards maintains: “The legal market is gigantic; there’s loads of room for people to work alongside us, to compete with us.”
In this vein, the propagation of ABSs and non-conventional online legal service providers portends more competitive pricing, which is certainly beneficial at a time of legal aid cuts and financial challenges to small businesses. Regardless, The Law Society – which, in 2012, launched a national advertising campaign to encourage the public to procure the services of their local solicitors’ firms – admonishes against such cost-cutting alternatives during times of financial duress. “If a case is poorly managed, it can end up costing a lot more in the long term”, says Desmond Hudson, Chief Executive at The Law Society. “Non-lawyers are not qualified and often not regulated or insured, and we would strongly recommend a consumer does not get their legal advice this way.”
Yet, online legal service provider Law Bite was founded in 2011 by a qualified lawyer, barrister Clive Rich, and is nevertheless seeking an ABS license. It currently operates without one, offering customers “solicitor-approved DIY legal kits and legal forms” and promising a “growing library of plain English commercial documents which customers can edit, share and complete with secure e-signing through our bespoke platform and legal tools”, according to Alan Moore, the company’s head of strategic marketing. Additional personalised solicitor support is furnished by North Star Law LLP.
Law Bite is yet to apply for an ABS license but has plenty of incentive to do so as the company considers non-law world investments, including crowd-funding. Law Bite has already raised £400,000 (in ten days) on CrowdCube. “We are the first legal service to raise in this manner as far as we know,” says Moore. In its current (second) crowd-funding foray, the company has already pulled in £28,270 of its £120,000 target amount (with 52 days left of the campaign, at time of publication).
Traditional top-70 firms are also entering the wild west of innovative legal enterprise, with national practices like Gateley and Freeth Cartwright clearly responding to this ‘sign of the times’ by applying for, and recently obtaining, ABS licenses. Even The Law Society seems resigned to the fact that such new model legal service providers may well be more than just a momentary flash in the pan with Hudson adding, “…experience from other sectors suggests that underestimating the disintermediation effect of technology would be a mistake”.
Shana Ting Lipton is a journalist and law student.