By Reynolds Holding
NEW YORK, Jan 24 (Reuters Breakingviews) - U.S. law firms
are facing real disruption from a virtual rival. Already under
threat from pickier clients and cheaper alternatives, the
profession now confronts Washington, D.C.-based Clearspire. Flat
fees, salaried attorneys and online advice upend the traditional
business model. This upstart's approach could be the way of the
The last four years have been grim. Growth stalled, profits
dipped and major practices like Dewey & LeBoeuf's collapsed.
With overhead still bloated and customers demanding discounts,
the future isn't necessarily looking much brighter. Billable
hours slumped last year, according to a recent report by Citi
Private Bank and Hildebrandt Consulting.
The downturn did, however, inspire legal innovators.
Do-it-yourself shops like LegalZoom, attorney networks
like Rimon and rent-a-lawyer services including De Novo Legal
all popped up. While they fill a niche, none will necessarily
rattle old-school legal eagles as much as Clearspire.
Launched in 2010 with about $5 million from its two founders
and other backers, the firm promises top-quality advice for half
the price. It keeps costs low by having lawyers - former
partners from bigger, established firms - work from home.
They're paid salaries instead of profit shares. And clients
review documents online using software that virtually replicates
an office. A separate arm handles administrative matters and
pitches for new business.
Clearspire says revenue increased 85 percent last year and
is "well into seven figures." Expansion is also under way, with
plans to hire up to 100 attorneys in each of the next five years
in cities including San Francisco and Los Angeles.
It's an impressive track record, though too brief to make
top firms sweat just yet. Few boards will be ready to entrust
major lawsuits and transactions to anyone but the Cravaths and
Skaddens of the world.
The second tier, though, should take note. Beefing up online
services, investing in cost-saving technology and outsourcing
billing and other mundane matters are becoming prerequisites to
stay competitive. Jettisoning brick-and-mortar offices and star
partner rewards may be next.
Clients will be the winners, but lawyers could benefit, too.
The early success of firms like Clearspire suggests the future
of practicing law could have a better tomorrow than gloomy
- Washington, D.C.-based law firm Clearspire says it will
announce on Feb. 1 the opening of new offices in San Francisco,
Los Angeles, New York, Chicago and Atlanta and a plan for hiring
up to 100 lawyers in each of the next five years. The firm,
which opened in 2010, will maintain a conference room and a few
desks at each location, but most of its attorneys will continue
to work from home and practice law using proprietary on-line
(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
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