Putting cheap, mediocre forms online is not “disrupting” the legal market. Instead, it serves the same price-conscious, careless or uninformed people that have always bought legal forms from office supply stores and will-drafting software from big box electronics retailers. There is definitely growth, but only because it is a lot easier to buy forms online than it is to get off the couch and drive to the store.

That is my opinion. As far as I know, there is no study comparing the paper forms and DIY legal software market to the online forms market.

I don’t see anything to indicate that there is some fundamental shift away from lawyers to online legal forms. Instead, what I and other lawyers see is a huge group of people who need legal help, can’t afford normal attorney fees, but aren’t willing to settle for mediocre forms.

Supply & demand doesn’t work out to affordable legal services

In any other market, the abundant supply of a thing — lawyers, in this case — would drive down prices. That doesn’t seem to be happening in the legal market, and it’s not hard to see why. As expensive as lawyers’ fees seem, remember that the vast majority of lawyers take home $40–65,000 before taxes. These lawyers presumably bill normal rates. They also probably have lots of debt to pay off, which makes a $65,000 paycheck disappear pretty quickly.

The traditional law practice, then, doesn’t translate all that well into affordable legal services. Fees can only come down so far before the lawyer can’t turn a profit. By “affordable,” I mean that most people don’t have a couple thousand dollars lying around to blow on legal fees, at least not unless it’s an emergency. A typical rate (around $150–250 per hour, I’m guessing) just isn’t going to seem affordable. This is the vastly under-served “middle market.”

To me, that looks like a huge opportunity. There has to be a way to bring down the cost of legal services without going broke or sacrificing all quality, so that ordinary people can afford the help they need.

Virtual law offices and online legal forms aren’t the solution

Online legal forms aren’t the answer. Companies that deliver online forms do so by not practicing law, if they can get away with it. Otherwise, they would have to assume liability for their advice and the quality of their forms, which would kill their profitability pretty quickly.

I don’t think virtual law offices are the answer, either. Not the whole answer, anyway. For one, merely cutting overhead isn’t enough to create lower fees. For another, dropping the cost of legal services while preserving the quality that only comes with having an actual lawyer handling a legal matter will require economies of scale. You need to turn a lot of small profit margins into one big one to make money in the middle market.

A new kind of law firm — enabled by non-lawyer investment

What this middle market needs is a new kind of law firm. Firms that serve the middle market will have to be built more like businesses than today’s firms. Lawyers will have to get comfortable with jobs that aren’t as glamorous, and look more like working for a typical large corporation instead of the law firm of today. That doesn’t mean mindless drudgery; it could (should) mean reasonable pay for a 40-hour work week instead of today’s demanding firm jobs or overwhelming solo practices.

The demand for allowing non-lawyer owners — thereby opening up law firms to outside investors — will probably be the linchpin. It’s going to take capital to start a firm that can serve the middle market on a large scale.

Would this be a good thing? If firms are built like corporations instead of law firms, there will have to be some limits in order to prevent shareholders’ profit motives from overruling the lawyers’ professional obligations. But I’m confident these risks can be mitigated. For example, limiting non-lawyer ownership to a minority interest would make it less likely that non-lawyer shareholder could force the firm to toss professional obligations out the window in pursuit of profits.

Assuming the risks can be mitigated, opening up firms to outside investors has the potential to drastically expand access to legal services without dragging the entire profession down to the level of online legal forms. It may be the solution to the problem of delivering quality legal services — not forms — at rates the middle market can bear.

(photo: http://www.flickr.com/photos/maclat/6467605919/)