Welcome to the Revolution in Affordable Legal Services
Many people think that an “affordable lawyer” is a contradiction. We think differently.
“This is the type of innovation that is going to drive our profession forward”
– Mark Britton, Founder and CEO of Avvo, Inc. speaking about Open Legal Services at the S.J. Quinney College of Law Commencement 2017
The Demand for Lawyers
80% of the legal needs of the poor go unmet. For the middle class that number is 40-60%. The number of people that represent themselves in court rather than hire an attorney also highlights the tremendous unmet need for lawyers. For divorces in Utah, 49% of petitioners and 81% of respondents are self-represented. Based on Utah District Court statistics, this represents 17,000 people per year that go without an attorney.
The Supply of Lawyers
13.3% of newly graduated lawyers are unemployed. Of those new lawyers that did find employment, only 66% found jobs that require a licensed attorney. Thus many attorneys are unemployed, underemployed, or working outside the legal field because they could not find jobs as lawyers.
Why is the supply not meeting the demand?
So there is unmet demand for legal services, and there is a ready supply of lawyers. Why isn’t this oversupply of lawyers rushing to meet the tremendous demand from middle and lower income people?
The Problem is Price
According to economics, the problem is price. In Utah, 89% of attorneys who stated their hourly rate in a Utah Bar survey said they charge more than $150 per hour. Nationally, the average price for an attorney is $284 per hour. Low and middle income people simply cannot afford to pay an attorney $284 an hour. The average newly graduated lawyer has $100,584 in student debt. So lawyers cannot afford to charge less than $284 an hour, right?
The Revolution: A non-profit law firm that charges based on income
Open Legal Services is an innovative solution to the problem of connecting the supply of lawyers to the demand for affordable legal services. The three pillars of our model are:
- Operating as a non-profit
- Charging on a sliding scale based on income
- Keeping costs low
“The roots of disruptive innovation lie in the serving of nonconsumption—areas in a sector where people have no access to the existing offerings because they are too expensive, inconvenient, or complicated to use and therefore the alternative to the innovation is nothing at all. There is significant nonconsumption in the market for legal services, which disproportionately impacts low-income and disenfranchised individuals.“
1) Benefits of operating as a non-profit
To be clear, non-profit does not always mean free services. For example, many universities, hospitals, and museums are structured as non-profits and charge for their services. Here are some of the benefits of a non-profit structure:
- Our attorneys are eligible for the Public Service Loan Forgiveness Program
- We pay less in taxes
- Referrals from unique sources – As a nonprofit, we are often exempt from rules that many courts and other nonprofit entities have about where they can refer potential clients. Courts, judges, other nonprofits, and even the State Bar can freely refer clients to us.
- People are willing to volunteer their time for a non-profit
- Clients don’t expect mahogany desks and corner offices in a non-profit
- Discounts – nonprofits are eligible for discounts and free services on all sorts of things like web hosting, software, and advertising
- Oversight – our board members share their expertise on everything from practicing law to business and accounting
- Transparency – like all nonprofits we have to file financial documents with the IRS, and when we reach a certain size we will have to undergo regular audits
- We can solicit donations*
*In order to remain sustainable, Open Legal Services does not use donations or grant money to fund daily operations. Instead, such money is leveraged to upgrade our infrastructure and to fund expansion of our services.
2) Charging on a Sliding Scale: Price discrimination, but in a good way
We charge between $75 and $145 an hour (based on income and family size), which is far below the industry average of $284 an hour. By charging clients on a sliding scale, we are charging based on their ability to pay.
If we had to choose only one rate to charge, we would either price ourselves out of this market (like traditional law firms) or charge too little to cover our expenses (like traditional non-profits, which require grants and donations just to operate). By charging on a sliding scale, the people at the top of our scale subsidize the people at the bottom, thus allowing us to help a wider range of people in need than we could otherwise.
Why charge money at all?
Completely free legal services do not actually exist. Someone is always paying, whether it’s grant money for legal aid, tax money and court fines for public defenders, or time away from work or family for pro bono attorneys. Grant money is notoriously fickle and usually comes with limitations and reporting requirements. These requirements increase overhead, thus decreasing the effectiveness and reach of the grant money.
By charging money, we also keep our clients and ourselves accountable. If we don’t provide quality services, people won’t pay us. And our clients stay engaged with their cases because they are paying us. Thus our existence depends on the the people that depend on our services, instead of on the whim of donors or grant funding organizations.
3) Keeping costs low
In order to charge less, we have to cost less. For example, Open Legal Services currently spends about 30% on overhead (everything beyond our lawyers’ salaries), while the rest of the legal industry spends 40% on overhead. How do we keep our costs down?
- Our desks were donated and they are not mahogany
- Our printers cost $40 second-hand from University Surplus
- We build it ourselves instead of hiring it out (client database, website, billing…)
- We use open source software instead of expensive proprietary software (WordPress, GIMP, Inkscape, etc)
- No costly marketing. Search terms like “Criminal Lawyer” and “Defense Attorney” can cost upwards of $100 per click on Google AdWords.
- Economies of scale – as we grow, we spread our overhead across more attorneys, thus reducing our cost. In addition, our quality improves as we grow because none of us is as smart or as skilled as all of us working together.
How can you provide quality representation at such low prices?
Traditionally, clients have thought their attorney was very skilled if they charged a lot of money. You often hear “you get what you pay for,” but we also often hear clients complain that their previous attorney charged a lot of money and didn’t produce a lot of results. Is an attorney that charges $300/hour really twice as good as one that charges only $150/hour? What if attorneys could run their businesses more carefully and thus be able to charge less? You get the same quality attorney at a lower price. We believe that price is not an accurate indicator of quality and that justice should no longer be available only to the wealthy. At Open Legal Services we take advantage of the following factors to provide high quality representation for our clients:
- A team approach: Similar to how an attending physician supervises a team of doctors, residents, and nurses caring for a patient in the hospital, all of our staff attorneys are supervised on every case by a supervising attorney. We also assign two attorneys to our cases. Thus if the primary attorney has a scheduling conflict, the secondary attorney is already in place to take over. This has the added benefit that our attorneys can check each other’s work and share their training and experience.
- Focusing on what we do best: We don’t take cases that are really big and complicated. Instead we focus on the simpler, smaller, and more routine cases that make up the vast majority of the legal market. For example, we focus on third degree felony and misdemeanor cases rather than first degree felony cases.
- Recruiting attorneys who do quality work: We are fortunate that both of the law schools in Utah have top ranked practical training programs. Although we often hire recent graduates, they already have hands on training for many of the types of cases we handle.
- Mentoring: The Utah State Bar has a mandatory mentoring program where more established attorneys who have practiced for several years mentor newly admitted attorneys. This is a fantastic way for attorneys to gain valuable training. Our attorneys also receive ongoing mentoring from local firms that support our mission.
- A systems approach: Doctors and pilots use checklists to prevent mistakes, and they use technology to detect issues before they become problems. We do the same. For example, we have built our own database system for tracking cases and hours billed, which helps our attorneys manage their caseload and allows them to focus on practicing law instead of getting bogged down in accounting, time tracking, and other administrative tasks. Because we built this system ourselves, we can continually modify it to handle new issues and problems that come up, thus preventing them from happening again.
- Operating as a non-profit: See 1) Benefits of Operating as a Non-profit above
- Technology: We built our own client management software, which gives us up-to-the-minute data on our clients’ trust balances. Our attorneys always know how much money their clients have and if they need to ask for more, withdraw from the case, or switch to unbundled services. Because of our system and policies, we write off about 1% of our revenue as bad debt. According to a recent survey of 40,000 attorneys, the average write-off rate is 14%. Thus other law firms have to charge higher rates to cover these losses, which effectively forces those who can pay to subsidize those who do not pay.
- Lower prices are actually a strategic advantage. If the opposing party hired the “best” (most expensive) attorney in town at say $350/hour then they are going to run out of money much sooner than our client will.
How we fit in the legal landscape
- Legal Aid and public defenders love us because now they have a place to send people that earn too much to qualify for their services but not enough to hire a traditional attorney.
- Private attorneys love us because now they have a place to send people that cannot afford their services.
- The courts love us because now there are fewer people going to court without an attorney.
The following chart shows the 33% of people that fall into the legal services gap and where Open Legal Services fits in the landscape of available legal services.
Data Sources: US Department of Health and Human Services, U.S. Census Bureau, The Henry J. Kaiser Family Foundation (Note: this data is for 2014 because that was the most recent year of data available for all of these sources when this chart was created)
We started in November of 2013 and have been growing steadily ever since. While we still have very limited cash reserves, we have met all of our ongoing expenses since January 2014.
The rest of the country is taking notice. The Atlantic, the ABA, and the Deseret News (a local newspaper) have all written articles about us. The ABA named our co-founders among the “Legal Rebels of the Year” and the Utah Minority Bar Association named us “Law Firm of the Year” in 2015. Our founding attorneys have presented to the Washington, Wyoming, Montana, and Utah State Bar Associations, and numerous attorneys have contacted us from all over the United States. All of them are interested in closing the justice gap by replicating our model for delivering affordable legal services. The map below shows that we are in the middle of an explosion of nonprofit law firms all over the country (states with nonprofit law firms are colored orange). For more information on the nonprofit law firm movement see Tipping the Scales of Justice:The Roles of the Sliding Scale Nonprofit Law Firm in the Delivery of Legal Services in the NYU Journal of Legislation & Public Policy.
Spreading the Revolution
Affordable access to justice for the average American is one of the most pressing social issues of our time. We think that Open Legal Services is a sustainable, market-based solution to this problem. To help us spread the revolution, you can: