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Are new alternative law firms necessarily better than traditional firms?

Are new alternative law firms necessarily better than traditional firms?

In the past few years more and more businesses have sprung up, offering so-called “alternative legal services”, known as “altlaw” or “nextlaw”. These firms usually market themselves as being non-traditional law firms, offering fixed legal billing with an absence of the billable hour, flexible work opportunities for their staff, and online, collaborative work leading to better solutions for their clients.

We have recently come across one of these firms, and this got us thinking: are these new altlaw-firms necessarily better than our, more traditional firm? And, if so, how should we change our systems in order to improve?

As stated above, one of the main advertising points for the altlaw-firms, is that they offer fixed billing, which is not based on the amount of time spent on a matter. It is of course well-known that hourly billing does not necessarily lead to efficiency. Indeed, it is one of the shortcomings of the hourly billing system, because the more time an attorney spends on a matter, the more he or she bills, irrespective of the outcome. This, of course, leaves the client in a situation where, win or lose, the client has to pay the lawyer, often for work that had no real benefit to the client. This is not always the case, as lawyers who take a relationship approach to a case (using the matter to build a relationship with a client in order to secure future work) rather than a transactional approach (attempting to extract maximum value from the transaction, with little consideration of a future relationship), will tend to ensure that their billing is ethical and only for work properly done. Therefore, hourly billing is not necessarily all bad and evil. Having said that, many traditional law firms are moving away from the billable hour, to other forms of billing. In our firm, we offer fixed billing, where a client is billed a fixed fee for each step of the legal process. This approach splits the risks inherent in litigation more evenly, as both client and lawyer carry a share of the risk, with neither party carrying all the risk. Therefore, to say that altlaw-firms are necessarily better than tradlaw-firms, because they offer fixed fees, is not quite correct.

Another drawback is that, even though altlaw-firms may assist clients with commercial matters, they cannot represent a client when litigation is involved. The current Legal Practice Act, together with the different court rules, prescribes that a client may only be represented in court by a duly admitted legal practitioner, i.e. an attorney or advocate. This is to ensure the maximum protection of the client, as legal practitioners are subject to the discipline of the Legal Practice Council, and may be struck from the roll of practitioners if found guilty of serious misconduct. Attorneys and advocates may also be fined or suspended from practice for a limited period, in cases of less serious misconduct. Altlaw-firms, making use of non-practising attorneys and advocates, cannot offer the same level of protection – if a client is unhappy with the work, or an employee of those firms have acted improperly, the only recourse will be through the normal channels: the courts or the Consumer Protection Act, if applicable. The fact that the client may only be represented in court by an attorney or advocate is, in our view, an important factor to be kept in mind when considering using either of the two types of firms: where there are negotiations on a contract to be concluded, it is usually better to have someone to assist who has in the past litigated on these contracts, so that he/she knows where the loopholes are that need to be closed, and which points in the contract are most often attacked. A lawyer who does not litigate on contracts will seldom be able to give the same level of advice as one who regularly litigates on those contracts.

Lastly, on a point combining the previous two points, where a client is unhappy about the invoices rendered by an attorney, the client may submit the invoices to the Legal Practice Council for evaluation, and the Council may not only reduce the account billed, but it may also institute disciplinary steps against the attorney or advocate if they are guilty of overreaching. Altlaw-firms cannot offer the same protection – in cases of alleged overbilling, the parties will have to head to court for a reduction in the contract price.

In conclusion, therefore, altlaw-firms do have their place, and may offer better services in the appropriate circumstances. The point is, however, that the mere fact that they offer alternative legal services does not make them better or more suited than traditional law firms. This short discussion can of course not be exhaustive of all the issues, but it gives an oversight of some of the important arguments.

For a more detailed analysis of hourly billing, contingency fees and fixed billing, see a paper presented by Ben Groot of our firm at the International Conference on Access to Justice, Legal Costs and Other Interventions, presented by the South African Law Reform Commission in 2018, which can be found here.