Small Business

The Wild World Web of E-Law


Thomas M. Ciampa has not done anything heinous or even illegal. It just sounds that way sometimes when other lawyers talk about his indelicately named legal marketplace, SharkTank.com.

"Demeaning," "puerile," and "reprehensible" were some of the brickbats tossed at his year-old Massachusetts startup, and those were the nice ones. Perhaps they didn't like being compared to a vicious carnivore, or the picture of a menacing shark on the home page, or the slogan "Attorneys ready to attack your case." Maybe it was the business model, which promises to bring down legal fees by pitting lawyers against each other. Or perhaps it was concern that e-law services might trample on ethics, fairness, and clients' best interests. Whatever the reason, Ciampa is unbowed: "To the extent that I'm not popular with everyone, that's fine, as long as I'm popular with people who have the need for this service."

SharkTank.com Inc. is part of a wave of more than 100 Web sites that seek to help small businesses and individuals solve legal problems. Striking a pro-consumer tone, the sites promise deeply discounted rates and provide forms and instructions to do-it-yourself litigants. In this field, Ciampa is hardly the most prominent practitioner. Rival Web sites feature marquee names such as Edward. I. Koch, the former New York mayor who has a stake in TheLaw.com, and Arthur Miller, the Harvard Law School professor whose visage appears on AmeriCounsel.com. A site called USLaw.com boasts $10 million in financial backing and a blue-chip advisory board.

GNASHING OF TEETH. But tiny SharkTank, with only three full-time employees, has chummed the legal waters with its irreverent branding. If consumers had better information, Ciampa says, they could see that lawyers often charge too much and take on cases in which they lack expertise. As for his critics, the Boston University law graduate suggests they're worried mainly about the threat to their income.

Another case of the Web encroaching on someone else's turf? Probably. Does wounded pride play a role in the sharp criticism? Most likely. But amid all the agonizing, something more is at stake. The nation's 340,000 small and solo law firms face a host of new rivals in the $125 billion market for legal services, such as accountants and paralegals, who aren't bound by the elaborate codes of conduct that govern lawyers. That's prompted some small law firms to put aside the genteel methods of a profession and run themselves more like a small business.

Just one problem: Some tactics widely accepted in other fields can clash with the best interests of clients that attorneys are sworn to uphold. What happens if lawyers start thinking more about price points than points of law?

BARGAIN BASEMENT BARRISTERS. Ciampa thought consumers could have it both ways. By mid-1999, he had spent five years as an associate at Hutchins, Wheeler & Dittmar, a large Boston law firm. It was respectable work, but he found himself admiring the business clients who came in. "They were actually building something," he says. "I was a litigator. I was damage control."

He got the idea for his company during a series of lunches when he and some colleagues talked shop. The recurring theme: "If the clients only knew." Specifically, clients of other firms didn't know that they could pay half the price if they shopped harder. Others didn't seem to know that they were in the wrong hands when they chose their trusted divorce lawyer to handle their business startup. They didn't seem to know what service they were actually going to get for their money. They also didn't know that big corporate clients routinely conduct "beauty contests" in which several law firms outline their ideas and compete against each other for the work. Small clients don't have that kind of clout.

So, Ciampa reasoned, why not use the Web to conduct a similar exchange online? Clients could pose their questions with their identities protected. Lawyers would respond by listing their credentials, what they would do, and what they would charge, with competition driving prices down. But this isn't Priceline.com, says Ciampa, nor is it one-size-fits-all: Clients can reject any or all of the bids, and they can select a higher bidder if it sounds like a smarter lawyer with a better plan. The cost to consumers for his service: nothing.

The bet: Lawyers would pay SharkTank to help them attract new customers more efficiently

How would Ciampa get paid? Ethics rules in many states don't let lawyers pay for referrals or split fees. So Ciampa figured he would charge them a "subscription fee" to participate, which isn't much different from paying for a Yellow Pages ad. They would want to pay because SharkTank would help attract new clients more efficiently: There's little time these days to drum up business the traditional way, through face-to-face networking at community and civic groups. Besides, he says, with a bow toward market theory, consumers will buy legal services more often if they can see exactly what they'll get and how much they'll pay.

In December, 1999, at age 30, Ciampa took the plunge and quit his job. His parachute consisted of a laptop, a telephone, and a $500,000 initial investment plus office space provided by RPCV llc in the Boston suburb of Rockland. The result was Ciampa's "online dating service" where consumers could compare competing "pitches" line by line. To keep things confidential, the exchanges between lawyers and clients don't get publicly posted.

PROUD PREDATOR. As for the name, Ciampa says it was a calculated choice. When a friend first suggested SharkTank, "I rejected it out of hand." He knew lawyers and clients might react badly. Gradually, though, the name grew on him. When clients tell a lawyer he has been a "shark" or a "tiger," Ciampa reasoned, it was high praise: It meant the attorney had fought vigorously for their interests. Beyond that, the inflammatory name might attract publicity that he couldn't afford on his shoestring budget. Ciampa wound up paying $9,000 to buy the domain from a fitness center, and by Mar. 6, SharkTank was soliciting attorneys via a single e-mail and some print ads.

Lawyers, and journalists, rose quickly to the bait. The resulting buzz helped attract almost 3,300 attorneys nationwide who have a broad mix of specialties -- and little qualm about the name. "I think it's kind of catchy, pardon the pun," says Alan B. Harris, a lawyer in Odessa (Tex.). As of December, the site had logged 4,200 client inquiries.

"Justice is not for sale. Legal advice is not a commodity," says one critic

But media marketing isn't always a free ride. Hostile e-mails came from lawyers objecting to the name and SharkTank's very existence. The Massachusetts Bar Assn. cautioned its members about the ethical pitfalls of online sites, and President Edward Ryan Jr. personally called to protest the "insulting and demeaning" tone. Then there was the radio show last spring where Ciampa expected to discuss online law with "a local attorney." Instead, he was confronted by a veteran litigator holding several posts with the state bar association who proceeded to eviscerate SharkTank's name and tone and the questionable quality of e-law in general. Ciampa was taken aback. He has thought a lot about ethical issues and says he doesn't mean to insult the profession. In fact, Ciampa hopes SharkTank can team up with bar associations.

Somehow, that doesn't seem likely. "I told them what they are doing is terrible," says Ryan, who believes the special relationship between lawyer and client needs to be protected. "Justice is not for sale. Legal advice is not a commodity."

NOT ENOUGH WORK. To be sure, the advent of e-law comes at a bad time for small law firms. Many are under economic pressure caused by a glut of lawyers: At last count in 1995, the U.S. had 410 people for each private lawyer. A decade earlier, the ratio was 513 to 1. Sure, first-year associates at big firms can command well over $100,000, but lawyers who hang out a shingle sometimes find there isn't enough work. Meanwhile, they face the same problems as any conventional small business, including labor shortages, rising health and benefit premiums, and costly new technology.

The solution? Longer hours to pull in more cash and doing more drudge work. Even then, says Altman Weil Inc., a Pennsylvania law management consulting firm, margins remain under pressure: Revenues per lawyer have increased only 73% in 10 years, while costs rose 81%.

At the same time, lawyers have new rivals such as Web sites, flat-fee telephone hotlines, paralegals, book publishers, software companies, accountants, and financial planners. Their unregulated status gives the upstarts key cost advantages: They don't have to meet the same licensing and educational standards, they aren't bound by an elaborate code of ethics, and they're more aggressive about management and marketing.

COST CRUNCH. Lawyers win little sympathy from experts in their own industry. Even the American Bar Assn. acknowledges that many middle-class Americans simply can't afford legal help, and some critics say it's because regulations and ethics rules keep competition out. (One ABA report actually suggests that lawyers get rid of ethics rules that "impede the use of Internet technology.") The result: Many people don't see a lawyer or try to represent themselves, according to the ABA. That's lost business, says Richard S. Granat, who led an ABA technology panel. If the pricing and services were easier to grasp, people would buy legal services more often, says Granat, the author of two do-it-yourself divorce manuals and founder of MyLawyer.com Inc. The catch is that lawyers won't be able to charge premium rates for routine forms and filings -- the bread and butter of some firms -- which consumers can do for little or no cost on the Web.

Entrepreneurs have rushed to to offer several models of e-lawyer sites (see table). Nolo.com (which also uses shark imagery) provides interactive forms for business startups, wills, and divorces. MyLawyer.com adds a la carte advice. Others offer simple directories like AttorneyFind Inc., interactive matching and bidding services such as CaseMatch and SharkTank, or combined information and referral services like USLaw. Legal trade groups see the potential, too. The Association of Trial Lawyers gives its endorsement to individual sites.

Law schools spend little time teaching how to actually run a practice

The upshot: Small law firms have to become more efficient to stay competitive. Susan Raridon Lambreth, an ex-lawyer and practice management consultant with Hildebrandt International in Somerset, N.J., says most firms are not well run. They're slower to adopt new technologies than their various rivals, weaker on management and compensation plans, and very conservative about marketing. In part, that's because law schools spend little time teaching how to actually run a practice. It doesn't help that some advisers still frown on even the tamest forms of salesmanship, such as sending out newsletters. "You can't run it like a corner store, and that's what they've been doing," says Lambreth.

WHOLE NEW WORLD. That's changing as lawyers look for ways to make their peace with entrepreneurial tactics. Some turn to management seminars give by local bar associations or practice-management consulting firms that teach lawyers the nitty-gritty of commerce ranging from human resources to total quality management techniques. Some have adjusted their prices by charging a fixed fee for "unbundled" services, which means they give advice only for the parts of a legal proceeding that a client can't do themselves. Partners now post their hourly rate on their own Web sites, some of which can conduct an automated interview with clients. Some lawyers are sharpening their ads by using sophisticated methods such as data mining.

One of them is Joel B. Winnig, a 23-year veteran in Madison, Wis., who caters to working-class clients. Winnig targets his marketing by buying a list of people from a database that tracks whom creditors have sued and by affiliating with the 1-800-DIVORCE telephone and Web directory. ("There's almost no tasteful way to market divorce," he says.) He has to be more businesslike, Winnig says, because clients are shopping harder for price while his costs for rent, insurance, postage, and labor are rising. In response, Winnig reduced staff to part-time, automated his office, and does his own word processing.

It works financially, but Winnig finds he's putting in more hours and investing in nonlegal ventures "to subsidize what I really want to do with my law degree," which is practice law. One thing he won't do is compete with rock-bottom pricing. He feels he gives clients better value with a combination of good service and affordable rates. "I still believe in what I'm doing," says Winnig, who was drawn to the law by a sense of idealism about the profession. "If you can't handle the business pressure and still be a good lawyer, then you really should get out."

PITFALLS APLENTY. Can e-lawyers be good lawyers, too? Probably, but critics say online services need to solve a long list of problems first. Among them: Lawyers will wind up soliciting clients in states where they aren't licensed to practice. The fees charged by some sites violate conflict-of-interest rules that ban paying for referrals or splitting fees. Privacy and confidentiality won't be protected online. For-profit services are unlikly to help poor people.

Some of the concerns could be quickly fixed. For instance, sites could be coded to prevent lawyers from seeing queries that originate from states where they aren't licensed, and lawyers could pay flat listing fees instead of paying per referral. Lawyers have always had to obey rules about who they can take as a client and where they can practice. The Web doesn't change that.

Sites where lawyers pay to be listed may have little incentive to kick anyone out

Other problems are not so easily dismissed. For starters, online sites may not screen lawyers as thoroughly as do bar association referral services. Some don't even bother to ask lawyers for their permission to be listed. What's more, a commercial site where lawyers pay to be listed may have little incentive to kick anyone out. As for public service -- a point of pride for many lawyers -- only AmeriCounsel seems to have made pro bono work a major priority.

Even if a lawyer is conscientious, he still might get into trouble because the existing rules of conduct don't cover the new technology. For instance, attorney-client privilege may not apply because it's not always clear when an actual relationship begins with an e-lawyer. Confidential e-mails may be protected at the site, but copies can wind up on Web servers where prying eyes can get access. If clients become confused about whether they're getting usable advice or just casual chat, lawyers will be open to malpractice claims.

There's also something to be said for face-to-face contact. It's hard to know online whether a greedy relative is pressuring an elderly client to sign that $125 will or company succession plan. Matrimonial lawyers might treat a client differently if they saw her sporting a black eye. And flat-rate pricing like a $99 divorce strikes some lawyers as inherently deceptive: the client will either pay more or wind up poorly represented when the lawyer does only $99 of work.

NO-CLASS ACTIONS. Indeed, some attorneys wonder whether justice will be hurt by the circus atmosphere that comes with consumer marketing. How wacky could professionals really get? Pretty wacky: Last September, a Los Angeles firm seeking to promote its warrior image sent prospects 600 paperweights shaped like hand grenades. The replicas looked so real that two frightened recipients called the bomb squad. The ABA Journal says an Illinois firm ran ads featuring a fancy shoe and the slogan, "Apply to butt." In past years, a Hawaiian litigator raised his profile by passing out condoms to sailors that said: "Saving seamen the old-fashioned way." A Wisconsin personal injury lawyer placed a car in a demolition derby and advertised wills on a hearse. A female lawyer on Long Island who advocates the use of "cleavage and legs" to woo clients appeared in a series of suggestive poses with salacious slogans.

The difference here is that the "product" is the rule of law. A legal system doesn't work if people don't respect it, says Susan A. Huettner, the Falmouth (Mass.) lawyer who squared off with Ciampa on the radio, and people are less likely to respect something peddled with a hard sell. "We're not selling bags of potato chips here," says Huettner, a family law specialist who chairs the state bar association's practice management council.

As for SharkTank's name, sure, she thinks that equating her profession with an indiscriminate killer is demeaning and bad public relations for lawyers. But it's bad for clients, too, because the branding promotes a combative, win-at-all-costs mentality. People are better off with a fair, negotiated settlement, not a war, she says, especially in matrimonial cases where a lawyer needs to have "a degree of humanity. You never want to utterly destroy the other side. You make justice prevail."

SURVIVAL OF THE FITTEST. The brutal Darwinian justice that prevails in the marketplace may be on her side. The concept of reputation and respect is deeply ingrained in legal clients, says Jack Trout, the marketing and branding guru based in Greenwich, Conn. Consumers are reluctant to switch from a trusted brand, so they're likely to wonder why a good lawyer would have to resort to hard-sell tactics. What about SharkTank's cheeky tone? "It's a loser," Trout says. The Web's experiment with irreverence failed to inspire trust for conventional products, and it's ill-suited to categories like law and health that deal with serious, life-changing events. "There are certain categories you don't get cute with," says Trout.

Then there's money. There's no reason to expect online law sites will do better than anyone else in the beleaguered e-commerce sector. The field is already crowded and barriers to new entrants remain low, which all but ensures fierce competition for revenue. Ciampa, for one, doesn't plan to actually start charging lawyers for participating until February -- he isn't saying how much and declined to project what revenue will be.

SharkTank will need every dime: Going public seems unlikely now that Nasdaq investors have sobered up, and a shakeout may be looming. Ciampa says SharkTank's low overhead and quality service will make it one of the survivors. In the end, though, it may not matter whether SharkTank and its brethren make good or bad law. What matters is whether the whole concept makes good business sense. On that count, the jury is still out.

Legal E-gles

Examples of online legal services

Online Service

Model

Notable

USLaw (Silver Spring, Md.)

Find a lawyer (free), ask questions online ($10) or create documents

(about $15)

Prestigious backers. Self-annihilating disclaimer says its documents

shouldn't be a substitute for advice of competent counsel

AmeriCounsel (Needham, Mass.)

Pre-screened local lawyers with low, fixed fees. Filings cost extra. Money-back

guarantee

Visage of Harvard's Arthur Miller presides. An ombudsman smooths out the

bumps

TheLaw (Brooklyn, N.Y.)

Free online chats, forms, research and referrals to local specialists

Ed Koch rules this beta site. Limit of four lawyers per specialty per

region. Screening was incomplete at yearend

Legal Match (San Francisco)

A reverse auction: Describe your case, get bids back. Also offers flat-fee

service

Ratings of lawyers by prior clients. Where allowed, it collects referral

fees or commissions

FreeAdvice (Mill Valley, Calif.)

Huge browsable library, a legal directory and free initial consultations

Lawyers pay for premium placement in directory, provided by AttorneyPages.com

MyLawyer (Baltimore)

Do-it-yourself legal forms via an interactive Q&A for $10-$35. Advice

via LawExpress.com

Founded by a leader in law technology and do-it-yourself divorce. Sold

to Epoch Software PLC

LawExpress (Des Moines, Iowa)

Talk with a live in-state attorney for $39.95. Free law guide and directory

Law guide is just an overview, so you'll need a lawyer. Run by ARAG,

a provider of legal benefit plans

1-800-DIVORCE (Riverside, Calif.)

Matches clients to a local lawyer, who has paid a fee for the territory

covered

Good example of how to market with a dignified tone and colloquial language

that lay people can understand

DATA: BW, AS OF 12/31/00

DATA: BW, AS OF 12/31/00 By Rick Green and Ann Therese Palmer in New York


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