Peter Carayiannis, Founder and President, Conduit Law

I took a step back and asked myself — if I were going to create a law firm from scratch, without the preconceived ideas of a typical pyramid sale hierarchy, a firm to serve businesses, what would it be?

Conduit Law provides in-house counsel services to companies. Conduit keeps its overhead low by embedding it senior lawyers at its clients’ locations. In March, 2016 (subsequent to this interview) Conduit Law was acquired by Deloitte, forming Deloitte Conduit Law LLP.

Conduit Law is part of the “alternative” or “new law” movement. We are a B2B law firm, and not B2C, in that our clients are businesses — companies — and not individuals. Finally, Conduit Law is a “dispersed” or “distributed” firm in that our lawyers are embedded with our clients, either physically in that they work at the client’s premises one or more days a week or they are embedded virtually. Each lawyer is assigned to a specific client or group of clients and has primary responsibility for that group of clients.

Different clients have different needs, which is why we offer three different service models: the Embedded Lawyer, the Gap Lawyer and the Targeted Lawyer.

The Gap Lawyer and the Embedded Lawyer are flip sides of the same coin. I use the language of the Embedded Lawyer when I am speaking to small to middle size enterprises — companies that are beyond the pure entrepreneurial phase. These companies have achieved a level of sophistication such that they need and consume legal services. But they understand that doing it on a traditional basis and by the hour does not work for them, and they are not ready to employ a full-time in-house counsel. What Conduit Law offers them is the services of a lawyer for, say, one or two days a week, and, if the work ramps up for a specific project, then more days a week for the length of time required. We can tailor this service, too, for the type of work the client requires. For example, growing companies typically need help in the areas of employment and intellectual property. Since there are very few lawyers who are specialized in both of these areas, we can offer the client the services of an employment lawyer for one day a week and the services of an IP lawyer for one day week. In effect, Conduit Law can offer a type of hybrid service, with the services tailored to the client’s needs.

In contrast, the Gap Lawyer is for larger organizations that have an in-house legal department. These tend to be mature organizations. They can have temporary gaps in their capacity because, for example, a project ramped up very quickly or someone has taken a leave of absence, or because of experience in a particular area- the company needs help in an area of law that the in-house team is not tooled up to handle.

The third model we offer is the Targeted Lawyer — this is for a company who needs a specialized lawyer working at a high level, for a specific short term project.

The secret of Conduit Law is our ability to combine the advantages of in-house counsel (such as knowledge of the business) with the advantages of external counsel (such as a flexible and adaptable team). In-house counsel understand their client — the business and the business’s objectives, its appetite for risk, how to get things done internally. External counsel are able to master facts and the law, and master the application of the law to the facts. Our lawyers are able to combine these — they have the knowledge and expertise of external counsel, and then, by virtue of being embedded with a client over a long term period, they also learn the client’s business and business objectives. This permits our lawyers to provide a unique, tailored service to our clients that a traditional law firm cannot match.

What also helps our lawyers to better understand our clients and improves the advice we give to our clients is the way we price our work. We do not bill by the hour. Instead, we agree with the client upfront on a monthly retainer. This reverses the incentives: when you deal with external counsel on an hourly basis, there is a negative incentive built into the system to not call them because every time the client does, the client gets a bill. In contrast, with our lawyers, the client has already agreed to pay a specific monthly fee. So the client has every incentive to call, in order to get the value out of that retainer. And since our lawyers are embedded at the client’s premises, this makes the contact that much easier — it allows for “water cooler conversations,” and for our lawyers to participate in management and planning meetings. In this way, our lawyers can help our clients proactively. In contrast, most external lawyers do not learn of a problem until the house is already on fire.

In other words, at Conduit Law we try to get in front of legal problems — to be proactive and not reactive. If your business really does have an emergency that requires the fire brigade of a traditional law firm, you should call the traditional law firm as they will have the resources to address it. Conduit Law will not — we do not have groups of lawyers sitting at their computers waiting for something to do. All of our lawyers are actively engaged in ongoing work with our clients.

I used to work for a big, national law firm. I left that firm in 2004, and started contracting myself out to different companies, in the model of the Embedded Lawyer. When I first started, I was not sure if I would get clients or if there would be a demand for this service. I soon learned there was an eager market. I did not realize it at the time, but what I was doing was test marketing what would grow up to be Conduit Law.

Over the years, not only did I find that attracting clients was not difficult, but also that there seemed to be more lawyers interested in what I was doing and interested in working on this kind of flexible basis. When I first started out in 2004, many of my friends who were lawyers slipped me the cards of headhunters, suggesting I call them to get my career back on track. I threw the cards in the garbage. A few years later, those same lawyers were asking to meet at local coffee shops — not in their office buildings — in order to ask me in detail about how I was set up — how I handled insurance, how I priced my work, questions like that. What had happened is that in the years after the Global Financial Crisis, more lawyers realized that they were ready to leave the traditional law firm.

At the same time, I was watching the regulatory changes in the UK, and also watching the growth in the US of firms like Axiom Law — the success they enjoyed and their leadership in innovating around the business of legal services.

Finally, in 2011, I started to think that I had stumbled onto a growing market — a growing number of clients that would like to work on this basis, a growing number of lawyers seeking to work on this basis, and Canadian clients were ready to embrace a new kind of service.

I took a step back and asked myself — if I were going to create a law firm from scratch, without the preconceived ideas of a typical pyramid sale hierarchy, a firm to serve businesses, what would it be? The way I envisioned it is the way Conduit Law grew.

Many many people have helped me create Conduit Law, but I am the sole shareholder.

We have about 16 lawyers today. They are all independent contractors. All of our lawyers have a minimum of five years’ experience — most of them have experience both in law firms and as in-house counsel.

We are not a lifestyle firm by any means. But we are a firm that offers flexibility. We recognize that people can have competing priorities in their lives, that they have children, elderly parents, which creates friction if they need to work in a 2000 hour a year environment. It is possible for a person to have those competing priorities and still want to be constructively and positively engaged in a professional workforce. Nowhere is it written that in order to be a good lawyer, you must work 50, 60, 70 hours a week. Why can’t you find a client who wants 15 hours a week, and be that great, high-performing, on the ball lawyer for those 15 hours? Why not?

We learned to invoice by fixed fees mostly by trial and error. We are better at it now than we used to be. At the beginning I was probably underpricing but we feel the current pricing model continues to improve.

We try to be as lean as possible. We have not invested a lot in technology — but we do use best in class “software as a service” (SAAS) solutions. We are big supporters of Cloud solutions.

We feel limited by the way legal services are regulated in Canada today. We were very excited to see the CBA Futures report — Jordan Furlong called its release a “watershed moment” — I do not think that that is an exaggeration. The CBA clearly organized a very strong panel, and they took their time — two years — to issue the report. It is an excellent report. They canvassed the entirety of the profession and they came up with some serious recommendations. They have now made most, if not all, lawyers in Canada aware of the conversation about alternative structures, and now the law societies in Canada must grab the bull by the horns and do something.

It is ultimately about access to justice — and that is what it has to be about. In Ontario, we have record numbers of unrepresented litigants — they are clogging up the courts and slowing the litigation process. If you are very poor you can qualify for legal aid and if you are very rich you can get any lawyer you want, but if you are in the middle class you are entirely shut out of reasonably and effectively accessing a lawyer. The law societies have to deal with this issue.

The rules have a limiting effect on how Conduit Law can operate. Our lawyers get paid on a fee-splitting arrangement. Conduit Law contracts with the client and is paid by the client, and those fees are then shared with the lawyers who are contracted to provide the service. We can split those fees because it is between lawyers. We cannot fee-split with a nonlawyer. So on a business development basis, if we wanted to offer the client a more diverse group of people, such as accountants and other professionals, we cannot do that, unless they are other lawyers.

I would also like to be able to bring other professionals into Conduit Law and have them be part of the equity structure — people who can make the company better. I am the CEO of a business, but I can’t do all the different jobs needed to — from sales, to marketing, to finance, to IT, to service and support and practicing law. I can’t solve the problem of my limitations in a way that is scalable, because I cannot bring in a CFO and offer them a fee sharing arrangement or equity in the business. This limits how quickly we can grow and also limits our access to top talent.

Also, I’d like to create an organization where everyone can share in the equity — not just the other lawyers, but everyone.

I think that Canada has a lot to learn from the UK. What the UK has done with ABSs is an evolutionary explosion in the way law firms and lawyers organize themselves and I think that we should be looking at the UK for a lot of lessons.

Somewhere in every ethical code, there is a requirement that lawyers deliver their services in the best way possible — in essence, to provide services in an effective and efficient manner. What is effective? That is subjective. What is efficient? That is about dollars and cents. It is about the amount of your overhead, it is about how you use technology. If you are not thinking about these things, then I would make the argument that there is a part of the ethical code that you are not observing.

The billable hour is a conflict of interest with the client. It is an incentive for inefficiency and it misaligns the lawyer’s interest with the client’s interest. The billable hour needs to be addressed under all ethical codes. It is the eight hundred pound gorilla in the corner many would prefer to ignore.

There are ways to address a conflict of interest, like informing your client and having your client consent to it. But no lawyer does this, they just turn on the timer.

The pressures on legal services that are present in Australia, the UK and Canada are present in the US as well. What is happening in Liverpool is probably also happening in Charlotte. What is happening in the countryside of the UK is probably also happening in rural areas in the US. The pressures are the same.

Canada and the US are in wonderful positions to observe how ABSs have worked in Australia and in the UK, and to cherry pick from those systems what they think have worked the best — they do not have to adopt the UK’s or Australia’s systems in their entirety.

But nor can Canada or the US ignore what is happening in the UK and Australia. They cannot put their heads in the sand and pretend what is happening there is not important here.

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