A rush toward legal regulatory reform?

Voiceover: You’re listening to the Canadian Bar Association National Magazine.

Yves Faguy: Hi. I'm your host, Yves Faguy, and the Editor in Chief of CBA National Magazine. Welcome to After the Pandemic where we discuss emerging issues in law in a world of transform.

What a strange past year it’s been. The impact COVID-19 has had on the legal sector is undeniable. And it isn't just that much of the practice of law is taking place remotely and in front of video screens, or that firms and legal departments have been forced to take stock and reconsider space needs, business strategy and the organization of their workforce.

Perhaps just as significantly – not more – there are growing signs that the regulatory environment governing the delivery of legal services is headed for a sea change. And many of the signs are coming from a group of western states south of the border. We’re talking about Utah which has created a regulatory legal sandbox to allow people who aren’t lawyers to offer certain legal services in a controlled environment.

Arizona has bypassed the sandbox model altogether, becoming the first state to change its rules to allow for alternative business structures, something they already have in England and Wales and Australia. California is also studying the sandbox model and now in Canada, B.C. has set up its own model. There are even reports that Ontario is looking into it.

Anyway, to discuss all of this – and I should say we are recording this in mid December, just before the break – we’ve invited legal analyst Jordan Furlong to share his insight. For those of you who don’t know Jordan, he is one of the leading analysts of the global legal market. He has written extensively on a range of topics dealing primarily with how law firms and law departments need to prepare for the future of the industry. Many of his writings you can find on his Law21.ca blog.

More recently, he has taken a somewhat new professional direction focusing more on access to justice, regulatory reform and lawyer formation. And he’s the author of a very recent report presented to the Law Society of Alberta offering recommendations on lawyer licensing and competence. Which is why I'm really pleased to have him on the podcast again, my good friend, thank you very much for taking the time to speak with us. Welcome, Jordan.

First of all, Jordan, thanks for joining us today to share your insight, which is always very welcome.

Jordan Furlong: Yves, thank you very much. It’s always a pleasure.

Yves Faguy: I'll kick things off by asking you, because you’ve mentioned this recently so it’s out there in the public, that you were hired this year by the Alberta Law Society to write a report analyzing issues around articling, legal education I guess, how to improve the learning environment, and make some recommendations to improve lawyer licensing and competence in Alberta –

Jordan Furlong: Mm-hmm.

Yves Faguy: – specifically. And then we could talk about your findings but it’s definitely an issue that has captured a lot of attention during this pandemic here in Canada but also definitely in the United States. Can we talk generally about this first? What do you think will emerge from all of this?

Jordan Furlong: One of the ramifications, Yves, I think of the fiasco of the utter disaster of bar admission in the United States this year – and if people aren’t familiar with this, go on to Twitter and look for the hashtag barpocalypse. It’s apocalypse but with a bar instead of a. And it will talk about the absolute nuttiness of how American bar examiners have been putting the poor bar applicants this year through the wringer.

First they said, “You have to take the test in person” during the pandemic, during the spring and summer at the height of a lot of the transmission. And you don’t just have to show in person to do this but you have to wear a suit, although one jurisdiction very kindly said, “Oh well, I guess if you’re – the men don’t have to wear ties” so you know, “that’s our concession”.

And you had to sign a waiver. If you were taking this test, you had to sign a waiver you would not hold the bar examiner reliable if you contracted COVID-19 and, you know, died. To the extent that some jurisdictions said, OK, we won't do it in person. We’re going to do it online. And they are these draconian conditions under which you have to write it. So, you have to sit in your chair in front of your computer for five or six hours at a time. You can't go up to get – you can't go to the bathroom. You can't go out of camera range.

I saw this thing on Twitter today where the California bar taker is saying, “Your eyes flicked away from the camera for a few seconds during the – from the screen for a few seconds, and we’re putting you on notice that you might have cheated.”

And I don't know what has possessed these people to do all these things. And the worst of it is, all of this in service of a bar exam that even before this year many people were saying this is redundant. All this does is it retests three years of law school in the space of a few hours’ time, so you have to study things you haven't studied in three years. And you’re just retesting law school.

You are not assessing fitness to practice. You’re not assessing practice abilities or client relations or business acumen or any of the things that people are going to need if they’re going to be lawyers serving clients. And so, it’s just brought into sharp relief the absurdity of the system that operates at least in the U.S. and for many of us here in Canada.

Yves Faguy: So just very quickly, how did we fare here in Canada compared to them?

Jordan Furlong: I think we’ve done significantly better is my understanding. There are some jurisdictions which don’t require any test like this at all. Alberta, Saskatchewan, Manitoba, Nova Scotia are all jurisdictions that are working with CPLED, the Canadian Centre for Professional Legal Education. CPLED runs the bar admission program for those provinces. And it’s all, well normally it’s mostly online with some in-person components; this year of course it’s been all online. But there’s modules, online modules for learning about all sorts of different aspects of practice and business.

There’s a virtual law firm, a simulated law firm where you come online in the morning and you’re receiving emails from clients and partners to do this and to do that and carry things out. Extremely hands-on, very collaborative, to the extent that you can work with other – because you’re put into a group with other bar applicants who are in the same, quote/unquote, firm. And it’s relatively new but it’s really effective. And it’s a great way to complement law school.

The bar admission process should not be repeating law school as it does in the U.S. and even here in Canada. I mean Ontario has a barristers’ exam and a solicitors’ exam and they’re very kind of similar. But they shifted online this year, didn’t put bar applicants through the wringer to say you must do all these things, so we’re ahead on that score. British Columbia has a practical legal training course. They were the pioneers in this area. It’s very effective.

So, I think in Canada we have fared much better. We have been much more considerate of our applicants themselves. And we have, I think, taken a better approach to the purpose of this bar admission process which is to build upon law school rather than to repeat it.

Yves Faguy: So, would you say that it seems that Canadian Law Societies in general seem to be moving on, or? I mean, how do you explain this in the States? Is it just ingrained in the legal profession culture that things must be as they always have been because that’s just the way we do it?

Jordan Furlong: Yeah, it’s really hard to come up with a rational explanation for it, right? You’re digging. You’re looking at it really hard thinking, OK, I'm assuming these are all rational actors, what could prompt them to behave in this manner? And quite possibly it’s, you know, maybe there’s a massive wave or irrationality sweeping the United States. This would not perhaps be a surprise in some respects.

But in a specific contest of the bar system, there is, from what I understand, a fairly strong sentiment within a lot of experienced lawyers in the U.S. – and I suspect this is similar here in Canada because we have our own version of it here – to say whatever the merits or the demerits of the bar admission process or the bar test, I had to go through it therefore all these young entitled, lazy, whatever expressions you want to give to the young lawyers, they had to go through it too, right?

And then you see the similar thing here with articling. Lawyers say well, everyone’s got to go through articling. It’s a rite of passage. When someone doesn’t know why they’re doing it, they call it a rite of passage. That’s like a key giveaway. If someone describes it as a rite of passage, it’s like you don’t have any idea what purpose this serves to you.

Yves Faguy: OK. It’s the fusion of almost religion and professional competence.

Jordan Furlong: It really, honestly, it really is. It’s a fact of faith, collective tribal faith. But the other aspect of it I think is that, because they’re retesting law school, one of the questions you have to ask yourself is why do they feel they have to do that? And what it suggests at the very least – I don't know if this is how they actually feel about it but it suggests a huge lack of confidence in American law schools, in American legal education.

And generally, there’s just a – it’s kind of a blind spot. I was told when I was researching this project for Alberta that only two jurisdictions in the world do not require a supervised practice element before being called to the bar. In other words, don’t require articling or apprenticeship or traineeship or what have you. And that’s India and the United States. And there’s no real reason why not. It’s simply they’ve never done it that way and there has never been a sufficient drive, up until now, to do things any differently.

Yves Faguy: That’s interesting. And the distinction between Canada and the U.S. and the absence of articling and … Although, now we’re talking a little bit about Alberta here; what have you learned from your experience consulting them? What came out your research? And what are some of your findings about the articling process and the licensing process there?

Jordan Furlong: Well you know, it’s really interesting because, when I was several weeks into the process of working on this, I was chatting with the folks at the Law Society and I said, “I have to tell you, I think that your approach to the licensing process” – because it’s a CPLED jurisdiction – “and your approach to ongoing competence for lawyers are already the best in Canada.” Now that’s not to say they can't be improved and enhanced and I made several recommendations as to how they could, but “I think your approach is very sound. And you have been and continue to be pioneers in this area and I would not recommend deviating from the path you’ve set out.”

Yves Faguy: What is sound about what they do?

Jordan Furlong: Well, I talk about CPLED and why I think that’s a really good approach to take. In terms of ongoing competence, Alberta is the only jurisdiction in Canada – indeed, it is the only jurisdiction in North America from what I can tell – that does not require, for ongoing competence, the completion of a minimum number of hours of CLE. And to my understanding, I don’t think they ever have.

I think this has been, you know, about initio as you say, the way that it has been approached. Because in most places and, you know, here in Ontario and there in Quebec I'm understanding it’s the same thing, you are required to tell the Law Society, I have carried out a certain number of activities and they amount to this minimum number of hours spent doing this. And for the vast majority of lawyers these are programs, these are CLEs, these are conferences or what have you. Maybe some of the more tech savvy ones you can register on – watch something online. If you’re more creative you can come up with, oh well, I actually wrote all these articles and I did these various activities and so forth. But the whole process is designed to count up to a number.

And the funny thing is, right, that it’s a minimum number of hours. And find me a lawyer who does more than the minimum number of hours on purpose, right. You don’t. It’s actually a maximum, right. You set it as a floor, it becomes a ceiling. A lawyer says, oh, after 25 hours (sound effect), oh, thank God for that. I'm done. I'm done my CLE now.

And the problem with this, as was observed by the smartest investigation document of ongoing learning for lawyers, the Legal Education Training Review in England and Wales, is that number of hours is an input measure. It simply says what you did. It does not say anything about what you actually accomplished, what you learned, how you’ve moved forward.

Alberta’s approach has long been – perhaps has always been; I don't know the complete origins – but their approach has been the first thing you do is you figure out what are your learning needs, right. You know yourself best. You’re a practicing lawyer. You know your clients. You know your business. You know your whatever. What do you need in over the course of the next year to acquire or to improve in terms of your knowledge, in terms of your skills, in terms of your proficiency in order to be a better lawyer?

And you can define better however you like. You want to be more competitive. You want to be running a more effective practice in terms of efficiency and reducing errors and risks and so forth. If you want to be more knowledgeable. If you want to do any of these things. You figure it out, lawyer, because you know your business best. But when you’ve figured out where you want to get to, when you figure out what Point B is – you know you’re at Point A – then think about, alright, what do I need to do. What sort of activities should I involve myself in in order to get from Point A to Point B?

And then you sit down and you work through those activities. Say OK, now I know what my activities are going to be to the Law Society, I'm going to work on that over the course of the year. And at the end of the whole process, I start again. And this is consistent with how adults learn. This is consistent with how professionals get better at what they do.

And so, one of the things I said to Alberta was do not switch out of that. I talked to about two dozen people over the course of developing this report, and everybody who was in the business of professional development to talk to said do not switch back to minimum number of hours. That’s not the way of the future.

Yves Faguy: Yeah, they seem to be putting the onus on some individual responsibility, which I guess is very Albertan in a way.

Jordan Furlong: That’s true. That’s true.

Yves Faguy: I think there’s also something else going on that I'd like to discuss with you today which is that a few years ago I know the Canadian Bar Association came out with its futures report. We saw ABS and liberalization of the regulatory environment in England and Wales. I know there have been little advances here in Canada and at the Law Society level and discussions around ABS, but I think it’s fair to say that the overall sense is that things have been moving a little bit slowly.

Suddenly, 2020 seems to be at least a very big year –

Jordan Furlong: Mm-hmm.

Yves Faguy: – in terms of the U.S. certainly, or the western states of the United States taking big strides toward a new kind of regulatory model for lawyers. What do you make of all this?

Jordan Furlong: Well, it’s really been an extraordinary series of developments. I mean, say what you will about 2020, and there’s plenty to say and little of it good, but it has been a catalyst for many long overdue developments suddenly bursting into reality, you know. I mean just to take one example; we have known for years lawyers could work from home and could connect from home, and people could connect to [course? 00:15:28] remotely and through online.

But the culture of the profession, the culture of law firms said no, no, no it has to be in person. You have to be, you know, wet-ink signature and you have to look a person in, you know, all this kind of nonsense. And we figured out, yeah, you know what? You don’t have to; you just didn’t feel like it.

So similarly, I think in 2020 we have seen a real catalytic realization that this whole access to justice crisis we’ve been talking about, this isn't just something that is used to make lawyers feel bad about themselves, which you know has been the case for a long time, and for lawyers to pontificate about and say, oh gosh, if only we had more money for legal aid we could fix all these problems. I think there’s been a realization, no, this is actually an honest-to-god problem and our Band-Aid approach to this has not worked. Our approach to say keep giving money to lawyers to carry out this work stuff, that hasn’t worked because people aren’t giving us, you know, legal aid programs are in disarray. People aren’t giving us money to serve clients. We need something different.

So, Utah and Arizona are the two pioneers at the moment in this area. Utah, among other things, has opened up what are called a regulatory sandbox. This is a term you’re going to hear a lot more about in the months and the years to come. They essentially set up a safe space. They are saying to providers of legal services who are not lawyers, they are saying to companies that provide legal services that are not lawyer-owned law firms, they’re saying, you know what? If you tried to deliver legal services in our jurisdiction, you would run afoul of our regulations which prevent that kind of a thing.

But you know what? We’re going to give you a safe space. You’re going to come in here, you’re going to tell us what your business is, who you’re serving and what you’re trying to accomplish. We’re going to monitor you as you do it. We’re going to see are you effective. Are you reliable? Are you giving good service and experience? And are people getting their money’s worth? Are you ripping them off? Or are you serving them in good faith and giving good outcomes?

And if we decide that, yeah, you are reliable and effective and ethical, you can keep doing it. And this alone, five years ago this would have been heresy. And in some parts of the U.S. and many parts of the world it still is. But it makes eminent sense. The whole point of regulation is what is the risk to the consumer. OK.

Yves Faguy: So how did it come about? Is it just a couple of jurisdictions that are starting to tip the scale and that this is creating some momentum of its own?

Jordan Furlong:           Yeah.

Yves Faguy: I think some people are actually kind of surprised that it has emerged out of the United States.

Jordan Furlong: Well, you know it’s interesting. You mention the western U.S. and I think it’s fair to say that, you know, I've used the word pioneer twice already so I'm reluctant to use it again, but there is something to be said I think about maybe some of the cultural history of a place where it’s like, you know what, we’re going to make the rules that make sense for us out here.

And it is surprising that it comes out of the United States, but a really important point in both Utah [unintelligible 00:18:17] states are like this, regulation of the legal profession rests with the judiciary. It is stationed within the Supreme Court of Utah, Supreme Court of Arizona. And they create task forces and committees, which both states did, and they go off and they come back and they say Your Honors, we think you should do A, B and C. And Your Honors say OK, sounds good, let’s do it.

And here in Canada, this is so weird for us. We’re like we don’t – judges have no role in the regulation of legal services or the governance of lawyers except in a most, you know, remote sense. It’s entirely lawyer-driven. So, we talk about lawyer self-regulation, but this is actually the case in Canada, pretty much in every single jurisdiction. But in many parts of the United States it’s judicial regulation of the legal profession, which is only self-regulation in the broadest sense of the term if possible.

So, Utah said, “We’re going to do a sandbox.” Arizona said, “We’re going to …” They haven't done it yet. They’re in the process of getting the mechanics to make it happen. “We’re going to essentially throw out what’s known as Rule 5.4 in the ABA model rules of conduct, which essentially says lawyers may not share fees with non-lawyers. Lawyers may not own a law firm in common with non-lawyers” and some other array of aspects to it.

But essentially, it is the barrier that has always prevented outside equity, outside investment into the legal services environment, into law firms. And Arizona says, “You know what? What we’ve been doing hasn’t been working. What we’ve been doing seems to have been making the problem steadily worse at an accelerating rate. So, we’re going to do something radical. We’re going to try something different.” And this is what they’re going to do.

And I cannot wait to see what both of these jurisdictions are going to come up with, especially because the landslide waiting to happen is the fact that Arizona and Utah are awful close to California. And California almost this time last year was very close to recommending its own sandbox. And they got cold feet there was a little political influence and whatever; who knows what was going on. But California kind of pulled back a little bit and they told the task force to go away and think about whether they should consider a sandbox, and hopefully they’ll be bringing their own report back fairly soon.

But the fact that Utah and Arizona have made these moves I would like to think makes it easier for California to say OK, we’ll try this. And I think if California rolls over, then I think you’re going to see a domino effect across the U.S. And you’re already seeing noises about this in Illinois, in New York State. They’re the most conservative jurisdictions in the United States when it comes to legal services regulation. So, I think the U.S., remarkably enough, might just end up being a hotbed, a regulatory innovation over the next couple of years, which would be the coolest thing ever.

Yves Faguy: And what does it mean also from then an industry, legal industry point of view? And what I'm getting at here is I notice that Rocket Lawyer for example, which is an online legal services outfit, has decided that it’s going to try out its products in Utah, in Arizona as well. Meanwhile, we keep on hearing these stories about the Big Four accountancies snapping up law firms. OK, it might be over in England and whatnot, but do you think they might be preparing themselves for a very different regulatory landscape in the States?

Jordan Furlong: I think there’s two really interesting, separate but related and parallel things going on here. With regard to Rocket Lawyer and its close cousin LegalZoom, which essentially comes to the same thing, these are companies that are in the business of providing very straightforward legal services, basic legal documentation, the most straightforward of steps, the kind of stuff that you would feel confident that a first-year lawyer could pull off without getting sued or causing a problem.

But at the same time, these are services that are still out of reach of the vast majority of people who want them for a bunch of reasons, and the main one is price, is that, number one, lawyers either charge a fair amount of money for these kind of services. Or, as often is thought, they don’t really charge for – they even do this kind of work because it just doesn’t pay enough for them to do it, right.

Because if you’re a lawyer, for whatever reason – and we can talk about cost versus revenue expectations and so forth – but lawyers tend to set a pretty high floor in terms of the profitability and revenue generation capacity of the kind of work they’re going to do. The problem comes when that same lawyer takes off the lawyer hat, puts on a regulator hat and says, and nobody else can offer it either. Nobody can offer the same for 75 bucks an hour, which is what it’s actually worth.

I think that what we’re going to see, or what we could very well see if the Rocket Lawyers and the LegalZooms and similar businesses, probably much bigger businesses get into this line of work. If we start seeing, as I hope we will, broad public provision, the establishment of almost like basic legal services as a public utility – which that’s probably several years off but we can hope – what we’re going to see I think is a market correction. We’re going to start seeing people able to access straightforward legal services at a price point that makes sense to them, that reflects the value of what they’re producing, and it’s going to push lawyers higher up into the market. But they belong anyway.

This is my thing. You go back 50 years; lawyers did everything because lawyers had to do everything. We didn’t have machines. We didn’t have computers. You know, we had very basic, very basic legal education compared to what we have now. And there wasn’t really anybody else except lawyers. The entire supply side of the legal marketplace was a big group of people with a big sign saying lawyers, OK?

And that’s not the case anymore. It’s 2020. We have paralegals. We have paraprofessionals. We have family law services technicians. We have computers. We have software. We have systems. We have outsourced legal services. We have alternative legal service providers. We have law companies. We have this whole diverse array of providers on the supply side and they’re all saying we can do this stuff too, and we can do it reliably and ethically, and we can do it at a price point that makes sense.

And that’s what’s new. Probably not even new anymore, frankly. This is several years old now. And it’s what the legal services regulation system hasn’t yet come to grips with and which I think we’re starting to see right now with the slow realization that the point here is not to make sure only lawyers can provide legal services. The point is to make sure that anybody who provides a legal service, a legal remedy, a legal solution can do so reliably, effectively and ethically. If they can do that, who cares if they’re a lawyer, if they’re a non-lawyer, if they’re a Martian? It doesn’t matter.

Yves Faguy: So Canada, it’s often said, likes to be third in trying [laughter] in trying new things. We’ve had Australia go down this road. We’ve had England and Wales go down this road. The United States is going down this road. We’re dangerously flirting with fourth. But what do you make of all this discussion here? Are we beginning to see some movement? We have seen some movement in British Columbia, namely, recently. Like, I would say more significant than what we’ve seen over the last 10 years.

Jordan Furlong: Yeah, absolutely. No, you’re exactly right. British Columbia is leading the way here. B.C. is now our own legal laboratory, as far as I'm concerned, in Canada. And that is not to say other jurisdictions have not been taking steps of their own in various measured ways. But British Columbia has in fact authorized quite recently the development of its own sandbox, exactly along the lines, or pretty closely along the lines of what Utah is doing. If anything, B.C.’s approach is even more interesting, OK?

So B.C. Law Society has all these task forces and they’re digging away and they’re coming up with, OK, how can we solve access to justice. How can we do a better job of this? And one committee was looking specifically at this idea of, you know, can we, should we, how would we carve out a particular kind of subspeciality, a lawyer technician who can do all these sorts of things. And the model was the limited licence legal technician, LLLT, in Washington State, which was almost 10 years old when Washington State Supreme Court shut it down earlier this year for a bunch of reasons. That’s a separate story.

What they were thinking about, essentially, how do we do this in a top-down manner? We’re the lawyers. We’re the regulators. We’re going to carve out a little piece of our monopoly and give it to these people and say you go and run with this. And to their full credit, the people on the task force said, no that’s not the right approach. The right approach is not top-down, it’s bottom-up. It’s grassroots. And this is the approach that’s going to be, and this is similar again to in a way what Utah is doing. They’re going to say, you know what? Let’s go ask the market. Let’s go ask the market what they need.

And so the idea is, you go out to potential providers, same as in Utah, and say, do you have a service or a product that you would like to offer to the people of British Columbia and to the businesses of British Columbia, but that you do not do because we have regulations here that prevent you and will come down on you like a ton of bricks if you do. And if that does describe you, come on in. You show us, right. We don’t know this stuff. This isn't our specialty. This isn't our area but it’s yours. You tell us what you’ve got in mind. We’ll take a look. If we think it deserves a chance, then we will give you a chance and we will let you show what you can do. And let the market demonstrate, right?

So it could be, right, someone comes in and says I've got a great idea and it’s fantastic. And they look at it and says, yeah, wow, you’re a complete fly-by-night shyster. Goodbye to you. (Sound effect) Off you go. And someone else comes in and says, hey, I've got this great idea and it’s going to work really well. And they look at it and say well, you’re smart, you’re sensible, you’re strong. You’ve got a good ethical backing. We like you. Sure, give it a shot. And they try it for a year and nobody buys it, right? Like no take up whatsoever. And it’s like, oh well, you tried. Good on you, you know. It was worth a shot, and what have you.

But then what’s going to happen is, someone’s going to come in who is ethical, who is sensible, who is well-grounded, and they’re going to offer something and people are going to say, I could use that. And I will pay for that. And I will tell my friends and my family about that and they will start to use it. And I think that’s the right approach that B.C. is taking.

And B.C. is doing a lot of really interesting stuff across the board. But in the one area of regulatory reform, they are opening the door that I think other provinces and territories in Canada should open the door to as well. Because again, it is fundamentally risk-focused and it’s consumer-focused, and I think that’s how you regulate.

Yves Faguy: And the idea behind these regulatory sandboxes is to give legal companies, law firms the tools that they need to innovate and to develop new suites of legal services.

Jordan Furlong: Mm-hmm.

Yves Faguy: Having said that, we just went through, again, the pandemic, or we’re still going through this pandemic. I think I'm calling this one done a little too soon. But in your estimation, how’s the – here in Canada, how has the legal industry responded in terms of adapting to this? And you know, maybe compare it for me to the response to the 2008 financial crisis where the firms had to cut costs, reign things in. You know, I think there were concerns after 2008 that they’d already cut a lot of the fat out of their operations. So, did anything surprise you about how they’ve withstood this particular challenge?

Jordan Furlong: Yeah. Nothing has surprised me too much either positively or negatively. I think that law firms, generally speaking in Canada – and of course this is obviously, it’s a big country, there’s lots of different types of law firms, OK. But I think generally speaking, they have managed it reasonably well. They were worried. They were scared, as we all were back in the spring. OK, lockdown, shutdown, suspend partner draws to whatever we need. This could be brutal.

And over the course of time, a number of them found, OK, well, this isn't as bad as we hoped, or we can manage it. We can pull it off. And there’s been a certain amount of, OK, easing off a little bit. So, I don’t think that the pandemic has caused any more than a slight rise in law firm shutdowns. No major or even midsize or regional law firms to my knowledge have shutdown or suffered considerably.

I think law firms of various sizes that were already on the edge or teetering or were coming close to the end of their natural life, this probably accelerated or pushed them over a little bit. But I think for the most part we’ve learned. We have learned from the lessons of the past. We learned, don’t fire everybody because you’re going to have this massive gap in people going forward.

I think another thing too is law firms have also … The one thing about this crisis – and this was the case in 2008/2009. It was also the case, if you go back to the dot-com crash, to the extent that firms were involved in that as well. But law firms keep figuring out, the hard way, but they keep figuring out, you know what, we can actually keep doing a lot of things that we’re doing but spend less money, pay fewer people and reduce our costs doing it.

Yves Faguy: But when they cut like that, what does it mean for them, for the way of running business?

Jordan Furlong: Yeah, well I think what you’re seeing is a greater willingness to invest in technology as a means of producing legal outcomes and producing legal work. And that is something law firms have always dragged their heels on for a whole bunch of reasons. But there’s more willingness to do this now.

I don’t have stats for Canada but in the U.S. Am Law 100 law firms – well 100 most profitable law firms according to self-reporting statistics; take that for what it’s worth – a third of them now have their own captive alternative legal service provider, their own captive law company. And that could be in discovery. It could be in document review and due diligence and contract drafting and technology and a few sorts of things. And that’s great, right? I think it’s terrific because it’s firms realizing, you know – and this goes back to the point about market correction. There’s a lot of work now that has been reduced below the threshold that we can give it to a human lawyer and say bill it out at the amount of money it takes to sustain you in a profitable manner for us.

So a lot of work’s fallen below that threshold. We don’t want to give it away. We don’t want to lose it. Let’s create systems and software so we can keep that and capture that. I think that’s been a really interesting development, certainly in the U.S. As I say, I don't know the extent to which Canadian firms have followed suit on that, but it wouldn’t surprise me if at least a few of them are doing exactly that.

I think it’s this recognition that the increasing importance of technology. I've heard from a few people now, especially in the business of leases and commercial real estate for law firms, and they’ve all been making a really interesting projection which is that, from this point onwards we’re going to see – and I don't know when the switch will take place; probably at a medium level maybe in about a couple of years, maybe not that long.

He said we’re going to see technology overtake real estate as the second-largest expense law firms have. Or at the very least, it’s going to move up into the top two along with salaries and partner draws and so forth. Because as we all know, for the longest, longest time, the vast majority of law firm costs were, in whatever order they would come in, the physical premises that you lease and the money you pay to your people to make it happen, to make everything happen.

And we could have an argument about whether or not partner draws count as – it’s either distribution [unintelligible 00:34:06] profit or it’s the payment income. I don’t really care that much. The idea is some of the money that you make you give to a human being in exchange for the work that they did, OK? And those have been the top two for the longest time.

And the prediction in the industry I'm seeing, which makes perfect sense to me, is that the lease costs, the physical presence costs are going to shrink and the technology costs, or at least the investments, are going to go up. I think that is maybe the most important impact that this crisis is going to accelerate. Again, this was a [Maison? 00:34:38] trend anyway, but it’s going to accelerate it. It’s going to push it forward. And I think it’s going to have an impact on law firms over the course of the coming decade.

Yves Faguy: And so that would presumably also have an impact on how the workplace in law firms is organized, because I'm presuming what that means too is that they’re going to be cutting down on office space and overhead for the benefit of investments in technology.

Jordan Furlong: Yeah, I tend to think so, or at the very … You know, I suspect that there’s not going to be that many firms whose leases are coming up right now saying I think we need another 10, 20, 30% more space than we had before. I think, if anything, it’s likely we’re going to see the opposite. A certain percentage of partners, a certain percentage of associates are going to say, I would rather work from home than come into the office. Or I would rather work remotely. Even if it’s like two days a week, three days a week; that in itself would have a significant impact. It is likely that partners would do this.

Associates want to be in the office because they want to be around partners. That’s how you get the work. That’s how you build the networks. That’s how you grow your own power base and your status within the firm; you find partners and you work closely with them. But if the partners aren’t there, then what’s the point of the associates being there? They’re not going to get, you know, it’s – hanging out with each other isn't all that big of a thrill.

So yeah, it is going to – I think you’re going to see physical footprints either shrink or perhaps see them change. So, space that used to be exclusively given over to law offices, perhaps it gets converted into very high-tech meeting space where you can meet remotely or in person with clients or with other firms with other people. You’ve got collaborative workspaces because there are some types of work that lawyers still need to get together if you’re doing trial prep and if you’re working on a major deal. Everybody needs to be in the same room talking to each other, looking at each other. OK, you need space for that.

You also need space to train your new people, right? And this is a separate conversation but law firms have to take the training of their young lawyers increasingly seriously. But what I think this really points us towards – and this is where I'm going to come back to a question you asked me earlier that I didn’t answer – it’s going to point us towards the gradual movement of law firms away from a place where lawyers come all the time and build their time and effort for the benefit of clients; and there will still be elements of that.

But you’re going to see them move more into we are legal solutions businesses. We have a portfolio of ways in which we can provide solutions to our clients. Part of that portfolio is, here’s a whole bunch of really experienced, brilliant partners. Part of that portfolio is, here’s some hardworking, eager-to-learn young associates. Part of that portfolio is, here’s all these paralegals and paraprofessionals and legal technicians. Part of the portfolio is, here’s all this technology and software and systems that can do all these sorts of things.

And in that way they’re going to start resembling the Big Four, because the Big Four aren’t accounting firms. They haven't been for ages. They are business consulting firms but they are essentially business solutions firms. And that’s how they sell themselves.

And if you are your average say large client and all those things being equal, which they aren’t, but if you go to a law firm and say what have you got for me, the law firm says we have lawyers. We’ve got lots of them and they’re really cool and they’re brilliant and they’re awesome. If you’re not sure, just ask them; they’ll tell you. And they say, that’s great. Thanks, got it. You’ve got brilliant lawyers. Love it.

Accounting firm, Big Four, what have you got? We got the whole suite. We’ve got a spectrum of solutions. We’re not one size fits all. We are whatever you need for your particular solutions, your particular problems. We will pick and choose. We can provide you the combination that you need.

And that has always I think been the major advantage in a business sense that the Big Four have had over large law firms. I think large law firms, maybe not intentionally because, you know, heaven forbid a lawyer has anything to learn from an accountant, but I think unintentionally they’re heading in that same direction, towards a portfolio of providers at different levels of sophistication, different levels of cost. I think that’s where we’re heading.

Yves Faguy: And so, just to bring it back full circle to what we were discussing earlier, it’s interesting because, you know, it sounds like what you’re saying is that there is going to be an imperative on law firms to invest in updating, modernizing their business processes, their use of technology, their incorporation of technology into their legal services delivery. That takes money. That takes money and that takes investment. And I guess the question’s going to – does the question then become where do they get that money and how do they tap into that money? And does that then lead to the next question that is we actually need regulatory reform to move ahead?

Jordan Furlong: Well, you know what? It’s funny because that is exactly the prediction I made. And this is at least three, four years ago now, maybe longer. I'd have to go back and find the blog post. But one thing I said was, you know who is going to tear down the walls against non-lawyer investment law firms? It’s going to be the lawyers. It’s going to be the law firms. Because they’re going to realize they’re being outgunned. They’re being massively outspent by all these other providers and they’re going to say, why can't we get access to some of that? Oh, that’s right. Because we’re now allowed to have people who aren’t lawyers in the equity circle. And they’re going to say, we are at a massive competitive disadvantage and we don’t like that.

And I think that’s one thing that’s going to drive it forward. You’re going to see law firms and lawyers in those law firms themselves saying, let’s be realistic about this. Let’s grow up. It’s the 21st century. And maybe, just maybe, the presence of capital from someone who doesn’t have a JD or an LLB isn't in fact the fruit of the poison tree and is not going to destroy the whole operation.

I don’t mean to minimize the importance of ethical concerns and ethical issues. Of course they’re important. But there has been this assumption that – and this is actually built into; this is a core regulatory assumption of the legal profession; if we can just keep the non-lawyers out we’ll be fine, right? It’s bringing the non-lawyers in that ruins everything, right, because we can't trust them as much as we trust lawyers. They’re not as good as we are. They’re not as ethical as we are. They don’t care as much as we do.

You know, that is a clear fundamental presumption built into how we regulate. Don’t let people who aren’t lawyers run law firms or be part of law firms or share fees with lawyers means that fundamentally we don’t trust them. We think they carry a disease of some kind and they’re contagious. Right? And this is what I mean when I say grow up. I mean, come on.

So fundamentally, for me, this is an opportunity for the legal profession to look around and understand the legal sector is bigger than us. There’s more going on here than just lawyers. And we don’t have to like that. We can hide our eyes from it all and say no, no, no it’s not actually happening. But it is happening.

We are part of a large sector of legal services solution acquisition and delivery. What’s our role going to be? How will we conduct ourselves? How are we going to relate to our clients? How are we going to relate to the other providers in this market? And how are we going to use the best tools available to us? I don’t just mean technology; I mean business processes. I mean training. I mean regulation, right?

It astonishes me that to this day most parts of the legal profession around the world, we don’t have entity regulation. We regulate the individual lawyers. We do not regulate the enterprises in which they operate, right? Again, that’s a whole separate conversation. But it’s this kind of delayed learning curve we’ve been on for a long time that I think is going to snap forward. I think we’re going to see more progress and reformation and enhancement and improvement in legal regulation over the next 10 years than we saw in the last 100. I think it’s going to be a huge decade in that regard.

Yves Faguy: On that note, I'm going to end the interview. Thank you, Jordan, very much for joining us and for sharing your wonderful insights once again.

Jordan Furlong: Thank you.

Yves Faguy: And happy 2021 to you and your family.

Jordan Furlong: Thank you, Yves. Right back to you as well.

Yves Faguy: Well on that note, sadly, we have to end the interview. Thank you so much, Jordan, for sharing your wonderful insight with our audience once again. And happy 2021 to you and your family.

I've been talking with the legal analyst Jordan Furlong. You can follow him at Law21.ca and on Twitter @Jordan_Law21. You can hear this podcast and others on our CBA channel, The Every Lawyer, on Spotify, Apple Podcasts, Google Podcast and Stitcher. Subscribe to receive notifications for new episodes. And to hear us in French, listen to our Juriste branché podcast.

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A big, big thank you to our podcast editor, Ann-Catherine Désulmé. And thank you all for listening to this month’s episode of After the Pandemic. We’ll catch you next month.