But I am Omus. Emperor of Delta Three. I don’t want to hear any more. I don’t think I even know you; you’re some sentimental old fool who doesn’t understand anything. I, I am the world of the future, you’re back in some dark past. People are no longer necessary. — H.G. Wells, “The Shape of Things to Come”
Just because something has always been so doesn’t necessarily mean it always will be. Take the traditional law firm with partners, associates, and a slew of support staff. Is that really the model for the future? Or is that just a sentimental view from the dark past that’s no longer necessary?
I read an article recently about a legal tech start up that announced it was launching an independent law firm that would offer “AI-native” legal services. The legal tech company, Norm Ai, focuses primarily on compliance work. It claims it can turn “regulations into AI agents … that can make compliance determinations” according to its website.
The law firm, Norm Law LLP, will use Norm’s AI tools to do legal work for Blackstone (a Norm Ai investor) and other financial service clients. According to the article, the law firm will offer alternative legal services.
Lawhive And Woodstock
Some time ago, I wrote about the acquisition of a law firm in the UK by a legal tech company. The idea was that the firm would become more or less an “AI first” law firm, handling most matters with AI tools. The firm would use the technology developed by the tech company to achieve these ends. That deal involved Lawhive, a legal tech company buying a law firm, Woodstock.
I wondered about the impact of this development and whether it would be the shape of things to come as legal tech companies began to discover they can play a greater role (and take a greater share of the profits) by owning law firms that do the work with AI tools or even doing the legal work themselves.
Norm Ai
The Norm Ai deal is very similar to that I described in my previous article. Of course, since Norm Law is a U.S firm, it has to exist independently of Norm with no ownership interests by those dreaded “nonlawyers.” But that’s form over substance. Norm Law is Norm’s law firm, using its tools and no doubt being largely directed by Norm AI, just as the Woodstock firm is under the control of Lawhive.
It’s Just The Beginning
We’ll see more and more of these arrangements. The tech company ensures its tech will be used by the law firm. The tech company can ensure that the firm capitalizes on AI, reducing the cost of personnel and overhead. The profit comes from the reduced cost of the overhead and the ability to scale the lower overhead services across a broad spectrum.
And as AI gets more and more sophisticated, the role and number of the human lawyers in such arrangements gets less and less. These tech-affiliated firms can thus offer cost advantages to their owners and can leverage alternative fee structures in new and different ways. They have an advantage over traditional slow-moving large firms. They have an advantage over standalone AI-first law firms in that they have a steady client and access to the tech companies’ customers who need legal services as well.
What Does This Mean For Lawyers In The Loop?
The standard thinking is that we need not worry our pretty little heads about AI since there will always be a need for the lawyer in the loop. But rarely does anyone stop and ask just what this means. I noted in my previous piece some thoughts by Jordan Furlong who predicts that new era law firms may offer and get paid for output to clients with no lawyer involvement at all. He added that many of the services provided by law firms already can be done by AI. In a more recent LinkedIn post, Furlong wondered if the slew of recent law firm mergers signals that Biglaw is in “late stage decline or experiencing a platform shift.”
All of this is to say that the whole notion of lawyer in the loop will soon take a different shape. Indeed, the whole idea of the Lawhive and Norm Ai hinges on reducing the number of lawyers in the loop. Which is to the benefit of the legal tech company who can now not only provide the product but any legal services that its customers may need, at a fraction of the cost. This, in turn, ties the customer more and more to the legal tech company and its lawyers. It makes a lot of sense. And as I mentioned before, it’s only a matter of time, regulations permitting, that the tech company just provides the legal services itself and takes all the profits.
But What About Atrium?
Another “truism” is that history shows these deals don’t work. And yes, it’s been frequently pointed out that a similar arrangement was tried by Atrium in 2017 and failed. Reportedly the failure was caused by the inability of the law firm to deliver better efficiency than a traditional law firm. So, it folded in 2020. The argument therefor is the old “we tried that before, and it didn’t work” refrain.
But that was then and now is now. We have much more sophisticated AI tools that can do much more. So, the likelihood of success and continued expansion of these kinds of deals seems much higher.
An Added Benefit
There is one significant benefit that these deals could bring. There is a great underserved market for legal services in this country. Traditional law firms encumbered with a billable hour model and culture have not figured out how to tap this market. In fact, truth be known, they haven’t even tried. But legal tech companies with captive AI first law firms very well could. And that could be a financial bonanza for them and available legal services for millions.
The Risk And Cost
But the decline of the traditional law firm that may be inevitable comes with a cost: the loss of the human element in the practice and advice being offered. The ability to understand the personalities and needs of the clients. The ability to offer high-end strategy and expertise across various fields and the synergies that come with it.
The Challenge
But that’s like saying horses are better forms of transportation because they are mammals like us, have personalities, are nice companions, and have soft hair. All of which is true. But cars get us where we need to go faster and more efficiently, which enables us to do all sorts of other things.
The real challenge isn’t recognizing that the traditional law firm model is changing. Indeed, disruption always creates winners who see opportunities early. The challenge is ensuring legal services remain human centered where they need to be even as they become more automated, and that the benefits don’t accrue only to those who can already afford premium legal services.
Traditional firms can either adapt, or they can continue maximizing short-term distributions to wealthy partners while the market moves around them. The choice seems obvious.
Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes TechLaw Crossroads, a blog devoted to the examination of the tension between technology, the law, and the practice of law.
