In this week's Law Firm Disrupted, we look to a 150-lawyer firm in Salt Lake City to ask if midsized law firms are well-suited to earn new business by slashing prices.

You can reach me, Roy Strom, the author of this legal market newsletter at [email protected]. (NOTE: I do not set my own prices!)

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“Always Low Prices.”

What would happen if a law firm adopted that old Walmart slogan? I'd venture to guess just the thought of it would make most Big Law partners cringe. They're selling expertise. Their high hourly rates are a signal to the market that they are really good at what they do for clients.

And when it comes to high-stakes legal matters, general counsel generally aren't shopping based on price. As the saying goes, nobody ever got fired for hiring Skadden, Arps, Slate, Meagher & Flom. There is a large brand and prestige element to such work—and for good reason.

The hard part for law firms is being honest about whether or not they truly are competing in that market. Charging high prices for the sake of charging high prices is not the same as commanding a high rate. The hard part for purchasers of legal services is knowing what legal work needs high-end lawyers, and what can be done at a lower price.

Where those buyers and sellers intersect is where real change can happen. Good evidence of that comes from Parsons Behle & Latimer, a midsize firm based in Salt Lake City.

In April, the roughly 150-lawyer firm launched Parsons Behle Lab, which is led by an ambitious lawyer, Kimball Dean Parker, who is also head of LawX, a legal design lab at Brigham Young University's J. Reuben Clark Law School.

Parker said LawX and the Parsons Behle Lab are focused on similar problems in different sections of the legal market: LawX wants to help people who can't afford a lawyer with legal problems such as debt collection or foreclosure. Parsons Behle Lab wants to sell legal services at a fraction of the typical cost to primarily small or midsized businesses that otherwise would not buy them.

Parker said his goal is to sell automated legal services that cost one-tenth of what the firm's traditional legal services would cost. He has had recent success with an automated interview tool called GDPRIQ, which will create a full set of legal documents to comply with the European data privacy law for $10,000. The firm's sole GDPR-focused lawyer had been charging about $100,000 to complete the work, Parker said.

Which raises an obvious question: How does that lawyer feel about a computer taking over this work? Turns out the lawyer is actually the one who suggested automating the work.

“We could get something together and help organizations more than I would be able to on a one-on-one basis,” said Tsutomu Johnson, a Salt Lake-based of counsel at Parsons Behle who serves as the firm's go-to data privacy resource.

As Parker explained it, Parsons Behle figured that about one-third of its client base would likely need to be GDPR compliant. The firm didn't have enough legal minds to service that need. Which might have been a problem, except most of those clients likely didn't have $100,000 to pay for all that legal time anyway.

So Parker and Johnson turned to a software program that BYU's LawX had created less than a year earlier. The software has been used, in just six months, to help more than 700 Utah residents contest a debt collection suit. The SoloSuit software can be reconfigured to handle more complex legal matters with the help of a software designer named Lincoln Porter. (Parker said Porter “is better at his job than I will be at anything in my entire life.”) Still, it was hard work.

Johnson worked with a top European data privacy law firm to draft the documents. Parker said he thinks the documents are good: “The best you can get in the Mountain West” and in “the 95th percentile” overall. Then there was the process of creating a route of questions that would be dynamic enough to respond to the varying needs of small to large businesses.

Parker said one of the firm's clients who used the product was a one-man business in Utah who sells top-shelf bowling balls to consumers in Germany. Another client was a multibillion dollar aerospace company based in New York. The two clients require vastly different documents, and the questionnaire needed to know how to determine that.

“There were plenty of times where Kimball and I were sitting there in the late hours of the night just doubting ourselves about whether this was going to work,” Johnson said. “But when we started showing it to people, they were really impressed. Because when law firms put together software, it's usually a lead generation software. They don't usually automate work that a lawyer usually does. Clients were really receptive to that.”

So far, Johnson said about 300 clients have signed up online for the service and started generating documents. Most of those clients were new to Parsons Behle. The pair have been so encouraged by the business prospects of slashing prices (go figure!) that they are actively seeking out other areas of the law to go after. They plan to automate other privacy laws and are considering doing consulting-style projects with clients.

“One goal of the lab is: Let's make legal better. Let's make it cheaper and more efficient,” Parker said. “For this GDPR product, companies can do it in three-to-five hours. Some can do it in less than two hours. But for a lawyer to do it in person, it would take a month and a half. It's not just that it's cheaper. It's faster.”

I said earlier that real change can happen when clients and law firms are both smart enough to know when they are in the market for high-end legal services and when they aren't. The Parsons Behle Lab is an example of a law firm that came to that place out of necessity: It didn't have enough lawyers and its clients didn't have enough money for a broad legal need.

I don't think that is an isolated incident. Parker is likely right that there is a large “well” of services that his firm could automate for its particular set of clients. And maybe from there it can move upmarket—or convince more legal services purchasers at multibillion-dollar businesses that automated services can not only be done cheaper, but faster. And there's often no good reason to turn your nose up at low-priced legal services.

“You just get the feeling like there is this well of things that could be automated,” Parker said. “There's just no bottom to it.”

Roy's Reading Corner

Enough about Midsized Firms: Let's talk real money! My colleague Christine Simmons wrote this week about changes in the compensation model at Fried, Frank, Harris, Shriver & Jacobson that have resulted in some partners making more than $11 million per year. The entire story is really worth reading. There's a lot there, including this interesting bit about a partial black-box compensation system that has been put in place at the firm.

“Fried Frank has also moved to a partial black box system, where all partner pay is not disclosed. However, internally, the firm reveals to partners the compensation of its 10 highest-paid partners, as well as pay to partners on the firm's compensation committee who are not on the top 10 list, attorney sources told ALM. The firm also reveals a scattergram of anonymous partner pay so that partners can see how their pay stacks up against the rest of the partnership.”

The scattergram! Has anyone seen the scattergram? For everyone's sake, please send it here!

Lateral Losers: I've witten a lot in recent weeks (with the help of smart people who teach in good law schools) about the fragility of the law firm structure. So I enjoyed this article on The American Lawyer by David Parnell, who smartly included the phrase “the fragility of the law firm structure.”

Parnell, a founder and principal at New York-based legal headhunting boutique True North Partner Management, writes about the follow-on effects of rainmaking partners leaving elite firms. He concludes that the real losers of those moves are not just the firms from which they leave. But also the downstream firms from which talent is inevitably poached to replace the rainmakers.

From Parnell: “This is the real problem. Left behind the vacating partners are voids that the firms are aggressively trying to backfill with, of course, rainmakers from other firms, which creates a self-perpetuating cycle. Now, the concept of luring laterals away with money isn't new—it's been going on for decades—and of course firms have always sought to backfill those positions. But, it's never been this aggressive, the profile of the moves has never been this high, and the current market represents an escalation in “capillary action”—the movement of high-powered, apex partners upward in the hierarchy—that is creating a tit for tat scenario and is changing the way that the business of law is being done.”

That's it for this week! Thanks again for reading, and please feel free to reach out to me at [email protected]. Sign up here to receive The Law Firm Disrupted as a weekly email.