How Wrong Was Howrey?

After nearly a month since the dissolution of major US law firm Howrey, many (us included) are still trying to understand what went wrong and what the possible implications are for the US legal profession. A startling claim that emerged from an interaction between Howrey CEO Robert Ruyak and a Wall Street Journal reporter was a comment by Ruyak attributing part of the firm’s demise to legal outsourcing firms.

‘Another challenge was the rise of third-party document-discovery specialists that could provide litigation support services at substantially lower rates,’ [Ruyak] said. ‘Howrey, a law firm with many offices in big cities, and thus, higher costs and couldn’t compete,’ he added.”

For this month’s Fronterion Forefront newsletter (sign-up at the top of this page), we invited two leading members of the legal process outsourcing (LPO) world to respond to Ruyak’s comments and defend their contributions to the legal profession.

David Holme, the director of Exigent, said, “In reality, if a law firm is dependent upon (arguably) overcharging for straightforward work such as discovery then that isn’t a terribly sensible business model and probably deserves to fail.”

Similarly, Liam Brown, the president and CEO of Integreon said, “We don’t believe the emergence of LPO or the application of technology is detrimental to the legal market. High-value legal advice will always command premium fees, but with growing overall demand for legal services, clients can’t afford to pay historically high fees for routine legal support services that can best be served through process or technology.”

More details and commentary are available in this month’s newsletter. To subscribe, sign-up at the top of this page or email us at forefront@fronterion.com.

 

Additionally, I am currently working on article with Brad Blickstein, principal of US legal consultancy the Blickstein Group about the strategic imperative of LPO services. (Keep an eye out for it!) Blickstein also had some comments on the Howrey deal. The New Legal Review asked Blickstein, what kind of lessons the Howrey scenario had in store for other law firms. The following is a quote from that the NewLegal Review:

‘Law firms must understand that all their previous income streams will not be available to them forever,’ he said. ‘More and more clients are starting to understand that law firms are typically the most expensive way to solve any problem, and are reserving their use for times when a law firm is the only solution. That’s OK: law firms can survive that. They just need to focus on their core competencies and provide exceptional – and unique – value in all interactions.’

In the long term, warned Blickstein, any law firm that continues to count on the income it receives for providing services that it cannot deliver efficiently or cost effectively is committing itself to a losing streak. ‘The quicker firms stop fighting change for their own self-interest and try to help their clients solve problems as efficiently as possible – even if the solution is to NOT use the firm – the better,’ he said. ‘Law firms who build relationships with LSOs and other service providers will be viewed as value-added and retain some control over the situation. Firms that do not will be sidestepped or fired. This will not necessarily mean that firms will be smaller. But they will be limited to attorneys who can provide outstanding legal advice, and/or bring in business.’

 

Written by Fronterion