Over the past year, many of us have said “I guess all law firms are virtual law firms now.” While that may technically be true, there are many firms whose business model is based on being a virtual firm. Dan Packel from The American Lawyer gives us a primer on Distributed Law Firms like Fisher Broyles, Ramon, Taylor English and Duma, and Culhane Meadows and how they operate without a physical environment. While many of these firms may fly below the radar for many biglaw firms, distributed firms like Fisher Broyles may be poised to break into the AmLaw 200. And if that happens, and it might happen this year, many big firms will start to take notice.
While we don’t want you to replace us as your favorite podcast, we do think that Stephen Poor’s new podcast from Seyfarth, Pioneer and Pathfinders, provides some good sit-down discussions with legal innovators like Dr. Heidi Gardner, Dan Linna, Nicole Bradick, and more to come. Go check it out.
There are only eleven states now which do not require lawyers to have a competence level when it comes to legal technology. California is the latest to make such a requirement.
Our fellow geek, Casey Flaherty is the last of the Baker McKenzie dream team to finally leave Baker and go back into the legal innovation consulting world. Casey is now the Chief Strategy Officer at LexFusion and is bringing his talent back into the open legal market to help legal departments and law firms implement technology to improve overall legal processes.
The Good, the Bad, and the Ugly brings us a new blockchain sheriff in Texas. The Texas Blockchain Council is a nonprofit trade association with the objective to make Texas the center of the universe for blockchain technology.
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Marlene Gebauer 0:14
Welcome to The Geek in Review the podcast focus on innovative and creative ideas in the legal industry. I’m Marlene Gebauer,
Greg Lambert 0:20
And I’m Greg Lambert. Well, Marlene, when we do our information inspirations, we often finish some of them by saying, you know, we should get someone on the show to talk more about this. Well, this week, we did just exactly that with one of your previous inspirations on distributed law firms.
Marlene Gebauer 0:39
Yep, we followed our own advice. We talk with the American Lawyer reporter, Dan Packel, about his experiences talking with leaders at distributed law firms like Fisher, Broyles, and how these virtual or cloud based law firms operate, share revenue, and their approach to legal operations. So stick around for that discussion. But for now, let’s get to this week’s information inspiration.
Greg Lambert 1:04
If you like this style of podcast where we focus on those people who are finding creative and innovative ways to improve the legal market, then I think you will also like something that the law firm of Seyfarth is putting out called Pioneers and Pathfinders. So their Chair Emeritus and co lead for the Seyfarth labs, Steve Poor, he hosts this sit down conversation with some of the well known names in legal innovation, such as Dr. Heidi Gardner, who we’ve had on the show before, our friend Nicole Bradick, who hopefully is a guest in the near future. Dan Linna Jae Um, there’s a number of others who our listeners have heard of on this show and other podcast. And I think it’s really interesting that a law firm sponsored podcast is taking on this topic, but I guess that’s kind of the mission of Seyfarth Labs and and so it really shouldn’t come to anyone as a big surprise. It’s a it’s a great interview podcast, and I highly suggest you check it out.
Marlene Gebauer 2:05
Bob Ambrogi reports that California has become the 39th state to adopt a lawyer duty of technology competence. Effective March 22, the state rules of Professional Conduct provide that a lawyers duty of competence encompasses the duty to keep abreast of changes in the law and law practice, including the benefits and risks associated with relevant technology. I got this from Gabe Tenninbaum’s Lawmatic Newsletter, and if you don’t follow it on Twitter, you should. Gabe points out the Lawsites blog is tracking which states have and have not adopted a similar rule. So far. The last holdouts are Alabama, Georgia, Hawaii, Maine, Maryland, Mississippi, Nevada, New Jersey, Oregon, Rhode Island and South Dakota. So leave it to New Jersey to be on the list. Last state where someone pumps your gas one of the last days to require tech know how from lawyers. Not that I’m complaining about the pumping gas part.
Greg Lambert 2:59
Yeah, they also don’t trust you to make left hand turns there. Right. They get those jughandle turns.
Marlene Gebauer 3:04
Jug handle turns Oh, look at you terminology. Nice.
Greg Lambert 3:08
I’ve been there once.
Marlene Gebauer 3:10
Yeah. Uh huh. Well done.
Greg Lambert 3:13
My second inspiration is, you know, in 2019, which, you know, believe it or not, Marlene was just two years ago,
Marlene Gebauer 3:23
That just can’t even be true. I mean, it’s just the centuries ago.
Greg Lambert 3:24
Feels forever ago. But Baker McKenzie put together a dream team of David Cambria, Jae Um, Casey Flaherty to build the ultimate legal law ops team. As of last week of the last of the trio left Baker and move back into the legal innovation consulting world. So Casey Flaherty, who is a contributor on Three Geeks and a Law Blog, was the sole remaining member of the Dream Team at after Cambria and Um departed. Casey and Jae are actually they haven’t drifted too far apart as they are now both engaged in the legal innovation collaborative, LexFusion. And Casey is LexFusions new Chief Strategy Officer, while Jae Um sits on LexFusions advisory board, along with some familiar names like Christian Lang and Sanjay Kamlani. The new dream team that Casey joins also includes Joe Borstein and Paul Stroka. LexFusion’s mission is being a collective of innovative products such as Litera. Priori Legal, and Agiloft among some others. And they’re working with the industry to get these products actually into production in legal departments and law firms. So it sounds like it’s a really good fit for a friend Casey.
Marlene Gebauer 4:42
Yeah. So from all of the geeks to you, Casey, best of luck. There’s a new blockchain kid in town, the Texas blockchain Council. The Council has launched with the goal of making Texas the most favored jurisdiction in the United States for blockchain business and investment. The TBC is a nonprofit traders association representing the Texas business community and specializing in blockchain technology. Now, no moss grows under this councils feed four bills supported by the Council are under consideration in the Texas Legislature right now. Council members are also working with legislatures to create a blockchain caucus. The caucus would consist of state legislators who would promote legislative initiatives. One for example was updates on the Uniform Commercial Code. But wait, Greg, there’s more. The Council has created a legislators toolkit for blockchain technology, Texas Edition, to help educate legislators, regulators and businesses. The council partnered with the Chamber of Digital Commerce to develop that toolkit, which provides an overview of blockchain technology, information about the economic and job growth implications of blockchain and Texas specific public policy recommendations to promote the development of the blockchain industry in Texas. Long term the association intends to establish public private partnerships that include research institutes, regulatory agencies, private companies, and economic development entities to incubate and develop a blockchain innovation ecosystem in Texas.
Greg Lambert 6:13
All right, and that wraps up this week’s information inspirations.
Marlene Gebauer 6:21
When everyone began working from home last year, there was a saying that went around that “Well, I guess all law firms or virtual law firms Now.” While they technically may have been the case, there were already law firms who were virtual years before COVID force traditional law firms’ hands. Today’s guest gives us a primer on the rise of distributed law firms, and how they may be breaking into the AmLaw 200 and disrupting the legal industry.
Marlene Gebauer 6:49
We’d like to welcome Dan Packel, Business Law reporter for the American Lawyer. Dan, welcome to The Geek in Review.
Dan Packel 6:56
Hey, thanks for having me.
Marlene Gebauer 6:57
So, Dan, your article was my inspiration on the show a few weeks ago, and we wanted to follow up to hear about distributed law firms in more detail.
Greg Lambert 7:05
Dan, before we start, let’s define some of the words that I think we’ll hear on in this discussion. Can you describe what is a distributed law firm and who are some of the law firms out there that we may have heard of?
Dan Packel 7:18
Sure. Distributed law firms, you’ll also hear them referred to as virtual firms or cloud based firms. The biggest point here is that these are firms without brick and mortar locations. So most or all of their attorneys are generally working from their homes. One of the firm’s that will likely be talking about in the category Taylor English and Duma, is actually a hybrid firm, where they have some folks who do work in offices and but many others working remotely, but other big names here. Fisher Broyles is the largest firm in the category. They’ve reported to us that their 2020 revenue was about $105 million. They’re hoping that that’s going to put them in the AmLaw 200 rankings. They’d be the first virtual firm to make it there. A few other names you’ll you’ll see Potomac law, Ramon, and Culhane Meadows.
Marlene Gebauer 8:14
One of the pushbacks I’ve heard from lawyers from distributed firms say is that this is not remote work, because there’s no office to be remote from. What is the management structure for a law firm without a central location?
Dan Packel 8:29
You’ll see that these firms are run by a managing partner generally, one thing that you don’t have our office managing partners, because there’s no city wide offices to oversee. But then you’ll you will see traditional practice group leadership like you see in and conventional law brick and mortar firms.
Marlene Gebauer 8:50
that’s really interesting that they do this all remotely. But like how were things like operations or even sort of technology structure, or distribution, support, maintenance handled? You know, what about staffing? How do they How do they do that?
Dan Packel 9:08
IT is handled remotely. And as with everything else, and why I think a good example, comes from something as simple as where everyone needs a computer to work these days. That’s really the main thing you need and what firms do about their laptop. So some firms, you come on board and they, they IT will procure you the laptop and put it in the mail to you. Others. It’s up to the hire to purchase a laptop and then send it in to wherever it is located to get the systems they need on it. And some other firms. You buy the laptop and then you just work remotely with IT to get things up and going.
Marlene Gebauer 9:49
So these are employees or is it all like outsourced?
Dan Packel 9:52
They will did, my impression I could be wrong here but my impression is that they these the their IP is on their staff.
Greg Lambert 10:00
Okay. And again, the even the staff there, obviously, since there’s no central location, they’re also working from their homes?
Dan Packel 10:08
They’re also working remotely. Yes.
Greg Lambert 10:11
Very interesting. Well, I say interesting, but we’ve kind of all been doing this for the last year, right?
Dan Packel 10:18
That’s the appeal of these firms in this given moment that so many people are realizing that they can work away from the offices that they’ve been attached to for so long. And the why not go somewhere where there’s significantly less overhead?
Greg Lambert 10:34
Yeah. Well, let’s talk about the lawyers a little bit on this. Who are you seeing are the types of lawyers who are attracted to this type of model of law firm? I know we hear a lot. And we’ve talked a lot about lawyers not being risk takers, which I kind of have an argument against, but the clearly some are leaving big law firms and moving to this model. And I can say, for example, we had one a couple of years ago that left my firm and went to Fisher Broyles. So I’ve seen it happen.
Dan Packel 11:06
I think that question about risk is a big part of the picture. And that means to do something new and something that hasn’t been as tested, one does need to have a higher threshold for risk. And the compensation formulas at these firms, I can speak to Fisher Broyles in particular, everything comes from the amount of revenue that you bring in. Now, there’s no other factors that are in place here. You get 80% of the, with the Fisher Price formula, you get 80% of the revenue that you bring on on matters that you originate. And attorneys who, when there is incentive to share work. So I believe that the formula is if you’re getting if you’re referring out work, you get 32% of that, and the people who are actually doing the work, get the other 48%. Again, that leaves just 20% of the revenue that goes to overhead.
Greg Lambert 12:00
And with Fisher Broyles, just to clarify, when I was looking through, are they are all of the attorneys, their partners?
Dan Packel 12:06
Yes, I with most of these firms are all the attorneys or partners. The pitch to clients is that you’re not paying so soon, you’re not taking on you’re not paying for the training of associates or bringing up attorneys. Everyone, the fees are all going to folks who know what they’re doing.
Marlene Gebauer 12:25
that they also do all of the work all the legal work from soup to nuts, right?
Dan Packel 12:30
Yes, that’s the other side of things, the other side of the coin. So these these firms, the work they’re doing doesn’t necessarily match up when it comes to highly leveraged practices where you the economics depend on a team of less well paid associates to get a lot of the work done.
Marlene Gebauer 12:48
So does that mean that they’re only kind of focusing on certain types of work?
Dan Packel 12:53
They will tell you that they are trying to do, they are working as full service firms. But at the same time, they’re just there are certain practices that might not make as much sense. I mean, areas where labor and employment, where you need to have folks really everywhere on the ground. And that’s not something that necessarily makes as much sense for a distributed firm to take on.
Greg Lambert 13:22
So would you would you refer to this? I know, there’s some firms out there that are referred to as eat what you kill kind of firms. Is that is that a good definition for these as well?
Dan Packel 13:33
These are very much eat what you kill firms. Although they do take efforts to encourage sharing and cross selling between partners. But if you if you’re not bringing in business, and you’re not going to succeed at one of these.
Greg Lambert 13:47
Yeah, that brings me to the next thing. So I was I was perusing the Fisher Broyles website and one of their pages, they had a top 10 reasons for lawyers to join our firm. And I think Marlene, and I were tag team on this one. The one that I saw was, you know, as a legal operations person, it really caught my eye. And that was number seven, which says, our partners do not subsidize the expenses of other partners that are unique to the individual partner or practice group thereby eliminating resentment among partners for inequitable distribution of firm resources. So is that a good thing?
Marlene Gebauer 14:25
First of all, what does that mean? You know, you know, one of the benefits of working at a firm is that work tends to be you know, cyclical, so if the real estate practice goes down, bankruptcy may go up to cover that cycle. So you’re having like a balanced financial portfolio and, you know, if partners have to front all their expenses, would this cause some to collapse during downturns in work? You know what I’m like, and really, you know, isn’t this just like solo practitioners like the old model where it’s like a bunch of solo practitioners like sharing office and like splitting secretarial costs, isn’t this essentially kind of the same thing?
Dan Packel 15:04
The there is an element of that. I mean, ultimately 20% it’s not quite that there’s no subsidies because 20% of everything they bring in does go to the common pool to pay for things like marketing and IT and the other.
Marlene Gebauer 15:17
So if someone says, like, I need more of a secretary than then another person or or, you know, I’m not as good at it as another person, like people are gonna get upset?
Dan Packel 15:27
Well, I think that’s part of the self selecting nature of these firms is that the the people who are coming on board realize that they need to, they need less to work with and, and I think that’s what these firms are counting on. And I mean, there’s some, I talked about the the formula that does incentivize some degree of shared work and cross selling. And that does differentiate these firms from just being a bunch of solo practitioners sharing the same the same office base, not only they are they sharing those overhead expenses, but there are some incentives to, to cross selling and working together. Another firm at Ramon, I talked to other managing partner, and he’s made when they’re hiring folks, he makes sure that attorneys who are coming in are already working with at least three other attorneys when it comes to servicing their clients. And this is a way to ensure that you’re not he’s not bringing on lone wolves who are just purely working on their own. They attorneys have a history of working with others, then they presumably will work together with others at the new firm, and then spread things around that way.
Greg Lambert 16:38
Yeah, I guess that’s unless the other two are really wanting this third one to get lost? Well, let’s, let’s switch sides for for a minute. What about the clients? What do they like or dislike about this type of distributed firm?
Dan Packel 16:55
clients, like the fact that the fees are cheaper. There’s less overhead, so attorneys can in this model can charge less. And honestly, I don’t think clients really give a damn where the work is done, or how it’s getting done at just they if the quality is good, it doesn’t matter to them. Whether it’s being done at a fancy looking office, or by folks working out of the home offices.
Marlene Gebauer 17:20
So, it’s not about relationships?
Dan Packel 17:26
It’s about the relationship between the attorney and between the partner and the client, but where what sort of office that attorney is sitting in, doesn’t make a difference to the client.
Marlene Gebauer 17:38
So when I read your article, you know, it talks about some really kind of big name people from from big name firms, you know, going to some of these distributed firms. Are the are these distributed firms of threat to the traditional law model?
Dan Packel 17:55
It depends on where one is in the marketplace. I don’t think these firms are yet to or in any danger of posing a threat to elite firms who are doing bet the company litigation or deal work. But I think that their economics does allow them to pose a threat to firms who are farther down and on the charts and they can compete on price and a they’re bringing talent away from some of these firms. I think these distributed firms do have the ability to to strike some fear into our traditional law firms.
Marlene Gebauer 18:34
Yeah, because I seem to recall the article that one of them was was almost at the level like of in terms of revenue, was like an AmLaw 200 firm.
Dan Packel 18:42
Yeah, that’s Fisher Broyles. They brought in. I mean, all of these firms have brought in a number of folks, particularly in the pandemic, from name brand AmLaw 200 firms that you recognize. And I spoke back over the summer I spoke to the is the head of the corporate practice at Fisher Broyles. He was working out on his he’d been living and working out these I guess he’s based in New York, but he’d been out at his country house, wherever working from there during the pandemic. And one of his neighbors. He told me it was the is the head of capital markets at some big white shoe firm in New York and the neighbor. I guess, the neighbor had expressed skepticism about what they were doing over there, hey, how can you work remotely? And how you sharing documents and this and that and understand how you do it? And then but he apparently told the the head of capital markets, at Fisher Broyles, hey, I can understand this. Now. If I wasn’t retiring in a couple of years, I would consider making a move to distributed Firm myself.
Greg Lambert 19:50
Yeah. I’m just curious if if you if you know the numbers of what’s the percentage of difference between the rates Do you I mean, is there ind of set…
Dan Packel 20:00
That’s a good question. I actually I don’t know, I know that the rates are cheaper, but I don’t know the difference.
Greg Lambert 20:06
Yeah. Well, you gave the example of the two lawyers out in the country this past year, which brings me to my last question, which is, you know, has the pandemic made these traditional firms considered that they should adapt some type of modified distributed function for for their own firms? Or do you think that right now we’re just kind of bending the rules until we can get get back into the office and, you know, in the pandemic’s over and get back to normal?
Dan Packel 20:37
I have heard about an increasing number of firms being willing to hire outside of their existing footprints. The question is what, what happens after the pandemic? I was just speaking to a managing partner this morning. And his firm had hired folks recently in Kansas City, and Boston, where they don’t have offices, but his plan and that firms plan is to ultimately open open up offices there. So the there seems to be limited appetite among these firms. It’s it’s fine to to do it do things in a distributed fashion for now. But there, I think he’s not alone in thinking that in the long run, the firms want to have, more traditional firms want to have some sort of physical presence.
Greg Lambert 21:22
Yeah, yeah. Well, I can I can say from experience if, if a firm like Fisher Broyles starts increasing its rankings in the AmLaw200. That it will get noticed.
Marlene Gebauer 21:34
Yeah. Oh, yeah.
Dan Packel 21:38
They are very, they are very eager to, to talk about the the likelihood of being on the AmLaw 200. Because they do recognize it as a signaling signaling mechanism, that it’s going to make their legitimate their model and make it even more appealing to attorneys who might be considering making the switch.
Greg Lambert 21:58
Well, Dan Packel, we appreciate you taking the time to come on and educate us all on distributed law firms.
Marlene Gebauer 22:05
Dan Packel 22:06
Thank you all. It’s been a blast.
Marlene Gebauer 22:12
So Greg, I’m wondering if you know, this is sort of a moment in history where we’re basically seeing the beginnings of a real shift and transformation into a completely different way of practicing and we just don’t really realize it yet.
Greg Lambert 22:30
Yeah, and I think you’re right. But like, like I mentioned, right at the end there, if you start seeing firms cracking the top 200. And, and growing going in and upwardly trajectory, I think is going to catch a lot of people’s attention. And I looked at Fisher Broyles and they have a very diverse group of attorneys of partners. And, you know, with it being partners, they’re all fairly experienced, you know, a number of years of practicing somewhere else, a lot of them come from tier one, law schools, it’s really an interesting deal. And I think it’s, it’s been flying under the radar for a number of years.
Marlene Gebauer 23:09
I think it’s for attorneys who are really business savvy, and understand sort of exactly what they need, and recognize that they can do a lot of this stuff themselves. And, you know, if they’re comfortable doing that, then they realize, look, I can, I can make a lot more money doing this this way. And I can also have a lot more flexibility this way.
Greg Lambert 23:34
You know, I think there’s something like this. It’s it’s much more about the business model more than I think it is about, I prefer to work from home. I think it’s more the I’d prefer to keep 80% of what I’m bringing in.
Greg Lambert 23:48
Yeah, exactly right. You know, and I can do it.
Greg Lambert 23:50
And I don’t think you have to worry about mentoring an associate. And, you know, so there’s,
Marlene Gebauer 23:55
I can work with clients, I could do what I love. Sure,
Greg Lambert 23:58
Yeah, personality wise, I think this will fit a lot of the attorneys who are like you said, very, very business savvy.
Marlene Gebauer 24:06
And I think attorneys coming in, you do have to sort of build that business, I think in order to sort of move into one of these places and just sort of be up and running. But people coming in need a lot less support, for the most part. And so I think it’ll be very appealing to them.
Greg Lambert 24:23
Yeah, at some point, I’d like to talk to some of the legal ops people at one of these distributed firms to see how they’re operating.
Marlene Gebauer 24:30
I think that’s a great idea. I think we should do that.
Greg Lambert 24:33
All right. Well, thanks again to Dan Packel, from American Lawyer Media for coming in and again, educating us on distributed law firms.
Marlene Gebauer 24:41
Before we go, we want to remind listeners to take the time to subscribe on Apple podcasts, Spotify, or wherever you listen to podcasts. Rate and review as well. If you have comments about today’s show, or suggestions for a future show, you can reach us on Twitter at @gebauerm or @glambert, or you can call The Geek in Review hotline at 713-487-7270 or email us at GeekinReview email@example.com And as always, the music you hear is from Jerry David DeCicca. Thank you, Jerry.
Greg Lambert 25:13
Thanks, Jerry. All right, Marlene, I will see you later.
Marlene Gebauer 25:16