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The Boutique Firm Business Plan for 2021

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As managing partners and practice group leaders weigh the costs and benefits of returning to their offices, they should take advantage of the next six months to modernize their business plans. Three areas in particular are especially ripe for new approaches right now – real estate, practice area mix, and talent acquisition.

Lawyers are creatures of habit steeped in the importance of following precedent. But that doesn’t mean firms should reflexively return to the way they used space pre-pandemic. Surely, the last year has shown that most firms can function with a much smaller real estate footprint. Many lawyers may initially enjoy aspects of a traditional office setting, but this could be a fleeting feeling. Don’t just assume that face-to-face interactions among co-workers boost productivity. Instead, consider how you can downsize and use real estate savings to invest in technology or other innovations.

Boutique firms are well positioned to change their practice area mixes as well. For example, if your practice has been litigation-heavy and that’s left you worried about how courts will be able to handle the backlog of civil cases, this is an unusually good time to explore new practice areas.

The shift away from the physical workplace also opens firms up to more options when it comes to recruiting and retaining talent. You can avoid losing lawyers who relocated during lockdowns and want to stay where they are, however far it may be from the office. You can also bring on additional attorneys with their own books of business who previously were too remote. Moreover, the new world of legal services doesn’t require recruiters who cost a big chunk of a new hire’s first-year salary. Instead, a firm can list an opening on job sites for as little as $20/day and get in front of lawyers who can help the firm expand and diversify.

Simply put, the second half of 2021 will present numerous opportunities for boutique firms that are willing to embrace the changes that the last 16 months have brought.

ABA Ethics Committee Provides Tech Guidelines for Practicing Remotely

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On March 10, the American Bar Association’s Standing Committee on Ethics and Professional Responsibility published Formal Opinion 498 permitting the virtual practice of law. A year into pandemic shutdowns which included the widespread closure of courts and law offices, this is unsurprising. With much of the industry forced to practice remotely during this period, it’s become clear that it can indeed be done.

Much of what the committee reviews in this opinion is predictable and general, reinforcing that a lawyer’s ethical responsibilities stand even under abnormal circumstances. The document gives particular attention to potential issues of confidentiality that may arise when lawyers work from home.

Taking client calls a few feet away from a family member or roommate who is not under the same ethical obligations as a law firm colleague could, for instance, expose confidential details of a client matter. On a similar note, the committee recommends a “clean screen” policy so work documents aren’t visible to others in the home.

Perhaps what is most interesting about this opinion is the committee’s decision to reference specific uses of technology. Handy for lawyers new to practicing virtually, it could be used as a starting checklist for a remote office. Beyond simple steps like shutting off smart speakers that listen for voice commands, the opinion also includes instructions for ensuring privacy in how client data is stored and shared through third party platforms.

While opinions from the American Bar Association are advisory in nature, they are also frequently referenced by regulatory authorities in determining actual standards of conduct. This means that Formal Opinion 498, in detailing ethical responsibilities around remote work technology, may raise standards relating to lawyers’ use of particular categories of software and hardware. It is possible, going forward, that lawyers could be disciplined for failing to follow specific language regarding the use of technology.

While it does indirectly reference a prior opinion focusing on lawyers’ duties during an emergency, Formal Opinion 498 establishes that the Rules of Professional Conduct apply fully to virtual arrangements outside of these circumstances as well. The virtual law practice is here to stay, and this opinion provides useful information. Pronouncements regarding the uses of technology, especially in a home environment, cry out for some application of a harmless error rule or related doctrine. But given the composition of the committee, its history, and its mission, it is probably asking too much to expect an opinion with that kind of nuance.

Utah and Arizona Moving Forward With Nonlawyer Ownership of Law Firms

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As California considers major regulatory changes that would allow non-lawyers to own stakes in law firms, we are closely following updates in Utah, where similar shifts are a step ahead.

Citing “crisis levels” of demand for affordable legal services stemming from the effects of COVID-19, the Utah Supreme Court on August 14 announced its decision to permit nonlawyer ownership and investment in law firms as a move toward greater access to justice. Accompanied by changes to the Rules of Professional Conduct, the regulatory sandbox created a two-year trial period, at the end of which the Utah Supreme Court can make these changes more permanent.

With the exception of one solo practitioner offering a 10% stake to his paralegal, the initial batch of organizations allowed into Utah’s pilot project is largely comprised of legal technology firms.

LawHQ is sharing revenues with software developers in relation to an application which would allow users to report spam communications and join lawsuits against those behind the messages or calls. 1Law is offering legal advice via chatbots, and LawPal would automatically generate legal documents for matters of divorce, custody, eviction, and property-seizure. The last of those announced so far is Rocket Lawyer, which the ABA Journal emphasized in its coverage earlier this month. The platform, which has already been serving as a middleman between consumers and attorneys, along with assisting in the creation of legal documents, is taking this opportunity to hire lawyers directly.

Arizona followed Utah just weeks later, eliminating rules that previously blocked nonlawyers from having financial stakes in firms, and the state went a bit further. The Arizona Supreme Court at the same time created a category of nonlawyer licensees permitted to represent clients in court. These “legal paraprofessionals” are expected to adhere to the same ethical requirements applicable to lawyers, and one must “meet education and experience requirements, pass a professional abilities examination, and pass a character and fitness process” to qualify.

The changes in Arizona have gone into effect without a temporary trial period, but alternative business structures will have to go through a “rigorous application process.” Arizona’s Task Force on the Delivery of Legal Services cited technology and free market competition as benefits of this change that could lead to greater access to justice. Rocket Lawyer is also expected to play a role in Arizona.

It remains unclear how nonlawyer ownership in law firms will evolve. For example, will the Utah Supreme Court or other proponents of this shift prevent venture capital and private equity firms from backing legal technology firms that are, in turn, permitted to own or invest in law firms? The answer to this question may have a huge impact on the financial fortunes and independence of lawyers, especially as California considers moving in the same direction as Utah and Arizona.