Biglaw, Litigators, Small Law Firms, Technology

Transactional Work Is Going To Die

So what are small-firm lawyers who rely on transactional work to do?

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Something I’ve heard from numerous attorneys lately is that transactional work is going to go the way of the dodo. Technology is flattening the work, and people and companies are no longer finding it valuable. So many documents and contracts are really just small variations on a norm that actually don’t require that much legal work. Nor do people or companies see any value in the counseling or consulting of lawyers regarding these documents. Transactional legal work is becoming a mere transaction cost.

But just a few months ago, Thomson Reuters released a report showing that transactional work is on the rise in large firms (PDF link):

Transactional practices have outpaced litigation in nearly every quarter over the last two years. As a result, transactional practices have gradually been growing share, and now make up approximately 32% of large law firm billings.

Recent data shows no break in this trend. Demand for litigation declined just under 1% in 2014. At the same time, transactional practices grew 3.3% last year – and all four transactional practices (general corporate work, Mergers & Acquisitions (M&A), real estate, and tax work) were positive. In the first quarter of 2015 this trend continues: transactional practices rose 2.5%, while litigation declined 0.3%.

But there is something important to note in the report: the growth rate is not in the Am Law 100, it’s in the Am Law Second Hundred.

Thomson Reuters speculates that “it may be relatively easy for clients to move transactional work slightly down-market without significantly altering their risk profile.” Which follows if you believe that transactional work is no longer “important work,” even at the Am Law 100 client level. Clients, even large clients, are becoming cognizant of the fact that large amounts of transactional work are fungible. This forces work to move downstream to firms that can do work that’s “good enough.”

“I think transactional work is going to be dead for most small-firm lawyers in the next three to five years.”

The above was said to me by Daniel Gershburg, a real estate and bankruptcy attorney in New York with a successful small-firm practice. If transactional work is moving downstream at the Biglaw level, where does transactional work go at the the small firm level?  “It goes away, period,” Gershburg said. “Maybe it will live on in rural communities, but not in metropolitan areas.”

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Gershburg felt that 90% of the work done in many transactional deals at the small firm level is boilerplate. I continually hear this same line of thinking echoed by other transactional attorneys. The general opinion is once technology becomes more robust and people feel comfortable with relying on apps and services, people and businesses are going to shift any transactional work they have away from attorneys and over to technology.

In many cases, people and businesses already are. LegalZoom and RocketLawyer are relied upon as alternatives for many people. Mobile apps such as Shake further lower the cost of entry (to nothing) for basic transactional work of the type people might have gone to a small firm for in the past. This trend is not going to slow considering that legal technology companies are taking on record amounts of VC funding, even if their ideas are not the best.

So what are small-firm lawyers who rely on transactional work to do then? Move over to litigation? Criminal defense? Those areas are already full of lawyers with experience in those fields, and it will be difficult to transition or compete. I’m not sure if there is a good answer.

Of course, there is another alternative. I asked Gershburg if he thought he would still be practicing law in five years. His answer?

“Probably not.”

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Keith Lee practices law at Hamer Law Group, LLC in Birmingham, Alabama. He writes about professional development, the law, the universe, and everything at Associate’s Mind. He is also the author of The Marble and The Sculptor: From Law School To Law Practice (affiliate link), published by the ABA. You can reach him at keith.lee@hamerlawgroup.com or on Twitter at @associatesmind.

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