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Are Virtual Law Firms Really a New Idea?

For the past news cycle, the blogosphere has been buzzing about Silicon Valley lawyer-entrepreneur Craig Johnson's next big thing:  Virtual Law Partners (VLP), an 18-member virtual law firm. The idea behind the firm, according to The Recorder, is that by cutting out costly overhead, clients can pay lower rates and attorneys can retain more of what they bill. In fact, the firm plans to charge $400 an hour, in contrast to prevailing rates of $700 to $800 to comparable work. But lawyers won't take much of a pay cut, as they'll retain 85 percent of what they take in. 

While the VLP concept of earning a good salary seems idyllic, how realistic is a large-scale virtual firm? Law firm consultant Peter Zeughauser expressed doubts to The Recorder about the firm's chances of success, commenting that a heavier infrastructure may be needed for the type of work that VLP proposes to do. At The Conglomerate, Christine Hurt also wonders whether it's feasible for a firm to do IPO or merger work without associates.

As for me, while I endorse any type of innovation that reduces the cost of legal services and gives lawyers more freedom, I question a couple of aspects of Johnson's proposal. First of all, keeping overhead to 15 percent of revenues is amazing, even by small firm standards. At her blog, Build A Solo Practice, Susan Cartier Liebel, a national consultant on starting a firm, recommends striving for overhead of 25 to 35 percent of each dollar earned. For a firm like VLP, they certainly must have significant costs for legal research and other computerized databases or the computer network that these lawyers use to communicate with each other. And what about marketing expenses? Will these lawyers have enough work to sustain 18 lawyers simply through word of mouth referrals? For the type of work that VLP plans to do, retaining 85 percent of revenues seems overly optimistic.

I'm also a bit put off by Johnson's arrogance. Consider this quote from an interview with Law Dragon:

Everyone agrees that the vision of a big virtual firm will succeed or fail on the quality of its lawyers. Johnson is an admitted CV snob and Virtual Law Partners is stocked with Harvard this, Yale that, and Stanford all around. "It's our way of saying this is not a ragtag group of people from fourth-grade law firms. This is an elite group of practitioners who think this is a better model."

Virtual law firms have been around for a long time -- there's Vantage Counsel in Hawaii that's been around for a few years, and solos like Stephanie Kimbro who have even developed software that allows clients to submit case information online. So if Johnson is, as he describes, such an "elite practitioner," why is he so late to the virtual law firm party?

Posted by Carolyn Elefant on July 16, 2008 at 11:39 PM | Permalink | Comments (3)


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