Thank You Larry Ribstein.

I learned last evening of the passing of Larry Ribstein – a legal scholar but more than that a provocateur of the legal profession.  I had the pleasure of meeting Larry in March 2010 at Georgetown’s Center for the Study of the Legal Profession conference “Law Firm Evolution.”  It was there that I heard Larry speak about the “Death of BigLaw.”  Listening him speak unabashedly about the problems and accompanying arrogance of the BigLaw law firms – whose business models are destined to fail once the egos and reputations that currently support them retire - was refreshing.  He was direct and articulate in his approach – a matter-of-fact manner that distilled a lot of the noise one hears and reads in this arena into sound arguments and logical observations. 

The conference as a whole was spectacular but it was Larry’s presence and presentation that stood out for me.  It is not exaggeration or a morbid opportunistic ploy to state that Mr. Ribstein helped ignite in me my passion to provoke change within the legal profession.  For that I am truly grateful.  Thank you Mr. Ribstein . . . you are already missed.

For a glimpse of that presentation here is a video of Larry speaking with Gregory Bufithis of ThePosseList.com.

Capitalism: A Lawyer's Role

Our world is a complex one. While global markets converge, market capitalism has been a dominate force in social, political and financial realities – really the world economy. Recently however there has been a corresponding divergence of national and political rules and regulations and market capitalism has taken a beating both by populist distrust and by a weakening tide. While it has served as a serious engine for wealth creation over the last few decades we have witnessed recently (see 2008) the fragility of our institutions, governments and businesses. We have dealt with a too-near collapse of the US financial system and now we are dealing with an economic crisis in the Eurozone. While governments fail to create solutions, businesses are caught in a state of “wait and see” as new regulations, new regimes, and new rules emerge out of this global transformation of public and private concerns. Disruptive forces are upon us and will only continue to develop. As governments flounder, business has an opportunity to pick up some of the pieces and preserve if not advance capitalism within the markets. Lawyers working inside and for these businesses can be positioned at pivotal stations which would allow for influence and change-making. That is if lawyers think to be or even want to be in these roles.

In 2008, Harvard Business School celebrated its 100th anniversary of its Global Business Summit. Prior to this event, the school polled numerous business and government leaders around the globe to learn what issues should be on the agenda. Communicated by all was concern over the sustainability of the global markets. In other words, will capitalism survive? Some of the key trends that were cited for raising this concern were volatile financial markets, pressure on free trade and the rise of state-sponsored capitalism, widely divergent industrial policies, and failure of the rule of law. Harvard took the position that in order for capitalism to prosper it is incumbent on businesses to innovate new strategies that turn the systemic problems into opportunities for growth. Further, Harvard promotes an activist model whereby business looks beyond its own balance sheet and works to mobilize coalitions of companies and government in an effort to support and strengthen current market infrastructure - even develop new institutions which will sustain the system. In order for business to succeed in this mission lawyers will have to play a key role. Some are already doing so.

There are two related concepts that are in play here for lawyers to advance the most influence on markets – the rule of law and globalization of law. The rule of law (as mentioned above as one of the disruptive trends) is a very capacious concept with many different definitions. Read Robert Gordon’s piece The Role of Lawyers in Producing the Rule of Law: Some Critical Reflections from the Yale Faculty Scholarship Series for a detailed discussion. During a recent conference, I was in the audience to hear Frank Steeves, General Counsel of Emerson Electric Co. speak about the globalization of law. While the two concepts are similar in terms of their focus on building legal frameworks to foster stability and predictability in the law they differ in their targets for such creation. The focus of rule of law is on governments and political institutions. Globalization on the other hand addresses the laws and regulations of private interests in dealing with one another and the markets. According to Steeves, in globalization there are no agreements between sovereigns but rather between private parties. This in turn weakens sovereign borders and their ability to impact society and the markets. In a way it subverts international law and is in many ways the advancement of private law making.

Developments in technology of course have played a role in allowing globalization to occur - the grease on the wheel so to speak. The wheel is trade and commerce. With the dynamics of the global trade markets changing this has created the opportunity and outright need for globalization of law to expand. With the advance of the BRIC nations and other developing countries coupled with the retreat of formerly powerful trade countries such as most in the Eurozone, the leverage points have and are being altered. To use Steeve’s words, “[this] movement of different power is just really a product of millions of different commercial transactions between businesses and government [and] customers . . . all those commercial transactions have to have rules for things to be able to move. Where are those rules? Well standardization of contracts clauses.” So as the global trade and power structure adjust to the corresponding transactions – those transactions take new forms as new parties contract with one another and formalize agreements. What happens is that the incumbent trade party will use an existing contract, modify it to fit the situation and look to the new party to agree to it. Rather than start from the scratch both parties recognize the value in doing this. While this is a gross simplification of what occurs it nonetheless represents the reality out in the marketplace.

Steeve’s used the example of reviewing employment contracts for his company’s China division. In reviewing them they seemed quite similar to what he recalled from his time as a lawyer in Wisconsin. Upon further research he not only found that the majority of the provisions were identical to the State of Wisconsin’s but that there was a common thread across other subject areas beyond employment law. To explain this he stated, “[i]t really came into being as a result of private law making within the contracts. It’s got nothing to do with governments or government enforcement. The global markets are pressure for uniform contract and commercial terms obviously because you can’t function otherwise; the business doesn’t work. Private agreements take on a uniformity and that uniformity then becomes a global standard you see in this country and this country, wherever else you deal with it.”

Fortunately for US lawyers, the US is still the global leader in many rights. And English is the universal language of business. Therefore, there is a tremendous gravitation pull exerted from the US in the adoption and use of our contractual language and practices. This is one of the key elements that place lawyers in the pivotal positions to exert influence and impact market capitalism around the world. If you are an in-house lawyer for a global company doing business in a developing country where perhaps there is less developed law and practice in a certain arena, you will be able to influence that arena through the use and adaption of US law and your own company practices. This in turn will create a standard for the foreign company that they may use in future dealings, and so on. This is how globalization of law works. To bring the point more close to home. If you have ever dealt with the commercial behemoths such as Walmart, Apple, and ExxonMobil you know that it is typically not a negotiation but rather an acceptance of terms. Take a look for yourself how Walmart allows for zero ability to negotiate. From their FAQs for new supplier process this language appears.

“After the buyer reviews this questionnaire, the supplier will receive an email granting the vendor agreement. The supplier will complete and sign the vendor agreement by clicking the ACCEPT button. This will start the approval process”

This is a prime though somewhat atypical example of how globalization proliferates. By being in the dominant role, Walmart is able to extend its own contractual language across borders. Another example would be to look at how the US FCPA or UK Bribery Act extends their reach into any foreign jurisdiction in which one of their companies are doing business in. These do not look to foreign governments to grant jurisdiction rather each exercises jurisdictions based on private action – that is that due to the fact the a company is located or does business in the US or the UK – these governments then have the right to monitor and act in any foreign nation the company acts in. In both instances it can be said that the US and UK are exporting their own versions of the law and demanding that companies comply regardless of local custom or behavior.

Granted the globalization of law is more evolutionary than revolutionary it nevertheless represents a significant influence on global commerce. Since the US is a market-based economy and one that subscribes to capitalism as the underlying philosophy, our business practices reflect this. Business practice is not something found in an employee handbook or spelled out in some policy or handout. Business practice consists of culture, behavior, language (jargon), and people and how these elements combine to interact with other companies, consumers, and governments in conducting its business. One of the key troves of tangible evidence of business practice can be found in the language of a company’s contracts and how it utilizes these instruments to conduct its business. Lawyers typically control this language and so have real power to control the transaction and thus the market.

While lawyers have the ability to strengthen capitalism by exporting these commercial legal assets we must be careful to limit or avoid exporting other uniquely US legal elements into the world economy such as extensive litigation and tremendous expense. But then again such work creates jobs and increases transactions so in some sick way our legal system –though broken in the minds of some – also promotes a healthy market of activity. So it can be said that litigation itself promotes capitalism. Ok I wrote that last sentence just to see if you were still paying attention.

Now Comes Proportionality in Sanctions: Or Rather Sanctions Based on Proportionality in Process.

Last week a federal District Judge Susan Wigneton in Newark reduced a previously awarded sanction from $246k to $10k.  She found the original to be “extremely unreasonable” given that this “was merely a discovery matter.”   The underlying discovery issue here was one that was born out of a third party action to collect relevant documents and the costs associated with this effort.  On its face it appears to be a rather typical matter – that is a primary party needs documents held by a third-party.  The primary party subpoenas, collects, reviews and analyzes these documents in helping to build their case.  This effort costs money and so they ask the judge to award them these costs.  

What is interesting in this case is what constituted the underlying costs.  To state it simply - it appears there was a severe lack of proportionality in terms of the process and staffing used in this regard.  It was disproportionate in that the true costs were upwards of $800k plus.  The magistrate judge who initially awarded the sanctions found it excessive that a twenty three member team billed over 2100 hours on this project.  She thus awarded the $246k (See the Conclusion in her written opinion for details of costs).  The federal judge found this “clearly erroneous” and reduced the sanction to $10k. There was no reason given for this decision by the federal judge. 

The New Jersey Law Journal has more coverage on this.

Legal Services Act comes to US

UPDATE 4/5/11:  The ABA released an issue paper through its Commission on Ethics 20/20 seeking comments on allowing Alternative Business Structures (ABS).  As the paper states it is looking at how "core principles of client and public protection [can] be satisfied while simultaneously permitting U.S. lawyers and law firms to participate on a level playing field in a global legal services marketplace that includes the increased use of one or more forms of alternative business structures.”  Basically this would allow for active participation of non-lawyers in law firm operations and business models.  The smart folks at Legal Futures have a good overview here.

North Carolina State Senator (and lawyer), Fletcher Hartsell, Jr., introduced a bill into the NC General Assembly that seeks to allow non-lawyer ownership of law firms – known as Bill S254.  UK’s John Flood asked the question briefly “[h]as the US finally adopted the legal services act?”  Those familiar with the LSA know that it is a transformational law within England and Wales that is changing the landscape of the legal profession – to what degree remains unclear.  The ABA Journal also reported on this NC bill simply providing the name of the State Senator and the basics of the bill.

While the NC bill is referred to the Judiciary Committee (and I admit I am not a NC parliamentarian so have no idea on the course this will take or time line) it nonetheless represents at least some effort here in the US to change the way in which law firm ownership is controlled – moving from an lawyer only private equity partnership model to non-lawyer owned share-based model.  

Who cares and what could this mean?  Well it is worth noting that the bill in its current form only allows up to 49% ownership of nonlicensee (non-lawyer) so control of any organization pursuing this model would still rest presumably in the hands of licensees – barred lawyers.  While not as significant (yet) as the LSA it nevertheless is a serious effort to alter the way in which firms are structured and operated.  While I am not sure what Senator Hartsell’s motives were for this I do hope that they were similar to that of the UK’s Ministry of Justice – as stated on its home page:

 The Legal Services Act reforms the way legal services in England and Wales are regulated and puts the consumer interest at the heart of the regulatory framework.

 It is worth noting that Senator Hartsell himself is a lawyer and is a named partner for his firm Hartsell & Williams, P.A. – what can be considered a small regional firm.  I note this as this is not a Big Law initiative  - something that I at least thought any movement on this topic would originate from. 

More to come . . .

UPDATE:

Most recent articles:

 1. Forbes - expanded coverage

 2. The Lawyer - quoting Georgetown Law's Mitt Regan
 3. Legal Futures - who contact the NC Bar for more info

Proportionality in Ediscovery: Getting Beyond the Academic and Practitioner Perspective

The concept of proportionality in discovery is not new.  In fact it has been around for awhile and I will not add to the technical or academic dialogue here.  I have spoken on this recently at the ACEDS conference and will be talking more about this at the upcoming InsideCounsel SuperConference.  

Today I am at the Enterprise Data World conference and perhaps that is why I am thinking 'data' in terms of of bits and bytes.  The vast array of information contained in data is staggering and the proliferation of data across society and in our organizations continues to accelerate.  The folks at this conference are struggling to get hold of this data and organize it for better quality and accessibility.  Ediscovery, to this crowd, would be a small fraction of the overall challenge they are tackling.  

So in this post I am seeking to simply frame proportionality as an inevitable development resulting from the profound expansion of the data-verse (data universe) not to mention social media.

Point 1: The expanding digital universe will exceed 35 zettabytes by 2020, IDC predicts.

In 2009, global diital data topped 800,000 petabytes and was projected to reach 1.2 mil­lion petabytes in 2010. Storing 1 million peta­bytes on DVD would generate a stack of discs that reaches the moon and back. However, that rate of growth—62% in one year—pales compared with IDC’s prediction that the figure will top 35 zetta­bytes (36.7 million petabytes) by 2020, or 44 times as much as 2009. That stack of DVDs would reach halfway to Mars.

(following graphic originally posted by Tech News Ninja here)

Point 2: Usage of Social Media is increasing: (from comScore's US Digital Year in Review 2010)

Point 3: Social media represents significant ediscovery challenges:

The SCA is a formidable obstacle for parties looking to collect data from a social network.  Often the only option is to seek voluntary waiver by the person of interest.  Needless to say, more often that not any request to collect and analyze this type of data will need to be targeted and precise so as to avoid privacy concerns and other rights.  If the information is available on a public-facing portal of a social network then the collection may be easier to accomplish though the ability to do a targeted collection is somewhat limited by the user interface and/or local API.  Further it is difficult to think of this dynamic and changing data as a "document" under traditional ediscovery practices and so reviewing and analyzing presents unique challenges.

Point 4: Data Governance is becoming a stronger practice and discipline - it is also on the rise: (graphic created by DAMA.org)

Conclusion: Data - how we use it, how we access it, where we create it - is changing.  All of this leads to more and more data from more and more sources.  The MDM/Data Governance movement is seeking to organize data inside organizations and seeks to make information (which is what data contains and transports) more accessible.  So while the universe of data grows so does the ability to seek and capture only the relevant or useful information (See graph below for a non-scientific illustration.)  So proportionality could eventually be "built into" our ediscovery methods and practices - it simply will not be feasible any other way.

Do Lawyers Have Artificial Intelligence?

Artificial Intelligence (AI) is almost here.  Lawyers rely on knowledge and intelligence in practicing law.  Technology has made lawyering more difficult by increasing the amount of data that represents potential evidence while making it easier to search, retrieve and review such data.  AI represents the potential to better organize the ever-increasing amount of data and make "finding" data easier.  Implications for Law?  Many. Below is just an overview of some.

Most readers of this blog are familiar with the name Richard Susskind. His most recent book “The End of Lawyers” has been a fixture in the legal transformation debate and has slowly penetrated the everyday lexicon of the legal practice – though there are still many lawyers who have not heard of him.  The name Watson – most people will recall as Arthur Conon Doyle’s fictitious sidekick to Sherlock Holmes. There is a new Watson however and like the literary character this one could put Holmes and any of us through our paces in terms of reasoning and having the answers.

Watson is an IBM supercomputer that was built to advance the theory that computers can and will be able to “understand natural human language.” Note: the computer was named after IBM founder Thomas Watson not the literary figure. Its predecessor, Deep Blue, rose to fame by beating the Chess World Champion in 1997. Watson took what Deep Blue was many steps further in that it can listen to/read language as spoken by humans and respond accordingly. To do this requires amazing amounts of processing power and storage. Watson must be able to detect nuance, puns, emotive language, whether a statement is a declarative or a question, and overall – understand what is a person “saying.” Its processing power is an astounding 80 trillion operators a second which allows it to scan its brain (consisting of 200 million pages of content) in 3 seconds. This brain was developed by scanning in everything from encyclopedias and books to move scripts. Watson is not small – it is roughly equivalent to 10 refrigerators. This bring to mind the first computers ever built that filled rooms and had roughly the computing power of a throw-away solar powered calculator that sits on many of our desks today. 


Watson is powerful to be sure - so powerful that it can compete against humans on the game show Jeopardy!. And it wins! The show proceeds like any other where there are three human contestants expect in this case the show takes place where Watson is located. The host reads the answers as he would on any other show and the contests are to “buzz in” and respond with the correct question. Watson participants just like any other contestant but for in place of a human body there is the logo for Watson – behind which is Watson itself.

Moore’s Law + Kryder’s Law = AI

Most people are familiar with Moore’s Law which basically states that the number of transistors that can be placed on an integrated circuit doubles every 18-24 months – doubling the power and memory of a microchip. A lesser known but equally critical law (though debated as to being an actual law) is that of Mark Kryder which states that the amount of information that can put placed on a hard drive doubles every 13 months. Later research has found that it is more close to 18 months. Regardless, the trends on both fronts are advancing and so we are getting much faster computers able to store much more information. Watson is the current barometer for this potent combination. While today it sits inside a room and has an enormous foot print – so did the world’s first computers. How long will it take the capabilities of Watson to be delivered in a computer the size of a pocket calculator (or an iPad) – or even just in a more manageable size of a typical rack server?

In Susskind’s 1999 book “The Future of Law” he briefly touches upon some implications for the law for when artificial intelligence becomes a reality. “The shift from data processing, through information processing on to knowledge processing is all about increasing performance, range, and scope of computers, moving technology from mere number crunching and data storage and retrieval to task which would depend on knowledge and intelligence” Susskind writes. Knowledge and intelligence has been “the line in the sand” separating humans from computers since the dawn of the technical age. If computers are to step over this line, the future of law (and other professions e.g. health-care) will be here. In other words we will then witness artificial intelligence and are on the brink of convergence (or The Singularity). In terms of AI’s impact on the law, Susskind uses the example of computerized judges. Making the distinction between matters that involve moral judgment (something Susskind recognizes may be the next challenge for computing) and those that involve mere factual issues. He states that there is some “promise of systems which will help choose between diverging accounts of facts of cases – by applying probability theory together with the rules of evidence.”

Obviously another potent use of this type of AI would be to make ediscovery as simple as collecting data and then literally asking the computer to find all relevant information. Actually if we had AI, ediscovery would be easily eradicated. The implications on data management for any organization would be that business intelligence, risk management, compliance, knowledge management, information governance, and records management are made to be so easy and intuitive that there would be no need for ediscovery as we know it today. I predict that we would look back on ediscovery and think of it similar to how we view VCRs in today’s iTunes on-demand Netflix smartphone world – clunky and redundant. Nick Brestoff wrote a piece in Legal Technology News earlier this week that looks specifically at AI and ediscovery. Nick draws a similar conclusion as I have - the true power from a legal perspective of AI would lie not with making dispute resolution easier but rather making dispute-avoidance a reality.

The Future is Now!

If this all seems too distant or too nerdy-techy to resonate with lawyers, I invite them to watch Watson on Jeopardy! on February 14 through 16 via their iPad (or Slingbox). They will be watching "the future" now on a device that would have been as crazy an idea back in the VCRs days as AI may appear to be today. Changes in the legal profession are coming. Law has already become more technological (ediscovery is just one example). Lawyers will continue to further interface with technology – technology that is gaining in knowledge and intelligence.