When UnitedLex announced the creation of a "strategic business platform" with LeClairRyan in May 2018, company founder Dan Reed was not shy about his aims for the joint venture, dubbed ULX Partners.

"If we don't reach 10,000 employees in the next five years, then I'm not doing something right," he told The American Lawyer. "Some people would view that as heretical, but it's not."

With LeClairRyan's collapse only a year later, and the future of ULX Partners in doubt, "heretical" seems like an understatement. But several industry observers said law firm leaders shouldn't walk away with the wrong lessons—and they shouldn't shy away from the opportunities being offered by UnitedLex and other New Law outfits.

ULX hired more than 300 administrative and legal support professionals from LeClairRyan, taking over back-office and support staff services, before the law firm finally gave up hope for a rebound in August. An undisclosed number of ULX employees are now overseeing LeClairRyan's wind-down efforts, according to a filing in the firm's bankruptcy. The remaining LeClairRyan employees—fewer then 10, per the filing—will soon be working out of office space leased by ULX.

Amid the troubles at LeClairRyan, Reed and UnitedLex have been tight-lipped about what the future holds for ULX, and the entity—an LLC registered in Delaware—lacks a public-facing web presence. A spokeswoman for UnitedLex has repeatedly declined to comment on questions about the future of ULX, pointing to its previous client relationship with LeClairRyan.

From the start, Reed said the goal was to enlist a growing number of law firms as partners; like LeClairRyan, these firms would be granted minority equity stakes in the venture and rely upon it for their legal support functions—including HR, IT, knowledge management, pricing and procuring. The purported benefit for firms: superior services at lower costs.

But after public comments that it had been approached by several U.K. firms about joining the platform, it's unclear whether any firms in the U.S. or the U.K. have followed LeClairRyan's lead. At the moment, 10,000 employees seems a long way off.

Consultant Marcie Borgal Shunk of the Tilt Institute said that shouldn't spook the industry. In fact, she said LeClairRyan's experience should be a reminder of the opportunities that new arrangements can offer firms that aren't at the height of the law firm market.

"They should be thinking about this sooner rather than later," she said. "There's a potential opportunity to pursue work and find work that would otherwise be outside the realm of possibility. It allows them to compete with the big guys."

Several former partners at LeClairRyan said they did not believe the arrangement with ULX had any impact on the firm's collapse. One noted that he'd brought in several new clients via UnitedLex that are moving with him to his new firm.

While the bankruptcy filing shows that LeClairRyan owes ULX Partners $8 million plus interest, on the face of it, that number says little. The firm estimated between $10 million and $50 million in remaining assets, and wherever the actual number falls within those parameters, it might have been significantly lower, had the firm been paying directly for these services over the past year.

"I don't think that there's evidence that the deal with UnitedLex was a driver in LeClairRyan's demise, and in fact, I think it was a net positive in keeping their expenses down," said Kent Zimmermann, a consultant with the Zeughauser Group.

|

'Someone Is Eventually Going to Do It'

Ultimately, the competitive pressures pushing traditional firms to enter into novel arrangements with New Law competitors aren't going anywhere. Clients fight back on rates, and demand will suffer in the event of a recession, all while salaries creep upward.

"Getting growth at law firms is just a difficult job. It's very challenging," said Howard Rosenberg, the former chief operating officer at Baker McKenzie's Washington, D.C., office and now the co-founder and CEO of Decipher, a lateral hiring competitive intelligence firm.

"It's a solid idea for the marketplace," he added. "I think that somebody is eventually going to do it."

That someone could be UnitedLex or another player in the alternative legal services world. According to consultants Bruce MacEwan and Janet Stanton at Adam Smith, Esq., while some leaders remain risk-averse, to the detriment of their firms, other forward-looking leaders will continue to experiment with a range of combinations with alternative providers, from joint ventures to buying and renting each other's services, to long-term and short-term exclusive and non-exclusive alliances.

"This is exactly—and rightly in our view—what happens with emerging market dynamics," they said in an email, likening the experimentation to the auto industry, where traditional manufacturers and tech upstarts are dabbling with a range of technologies, including driverless and electric vehicles as well as cleaner permutations of the traditional internal combustion engine.

Some of the legal industry efforts are being spearheaded on the law firm side, like Greenberg Traurig's "Recurve" subsidiary, which aims to guide legal departments and other law firms on how to add auxiliary services, like legal tech, staffing and real estate guidance. These service providers may also be investors in Recurve.

"Many of these trial dating/live-together/marriage arrangements will endure, and many others will fail or simply run their course, but in the process the industry as a whole will get smarter about what the market wants and what the better and worse delivery models look like," Stanton and MacEwan added.

And while UnitedLex and LeClairRyan made a splash when they announced their joint venture, Shunk suspects that there are more of these relationships going on in the background than the public knows about. Beyond seeking the limelight, there's no compelling reason to be overly public.

"When you think about other industries, where they join forces along the supply chain, it's not something they announce publicly," she said.

That might also explain why UnitedLex has been unwilling to answer questions about other law firm partners.

Still, in a world where only one law firm, Dentons, can count over 10,000 lawyers—and that thanks to a sui generis growth strategy—achieving the same number of employees for a New-Law startup still feels like a distant goal .

"For the first joint venture to do this, I think 10,000 is asking for a lot," Rosenberg said.

|

Read More

How LeClairRyan's Grand Plans Unraveled