Preparing the Bar for an Innovation Economy

May 27th, 2008

Daumier - The LawyersThe Hawaii Venture Capital Association meets on the third Thursday of each month for lunch at the Plaza Club, and this month was no exception.

Their program was entitled "What Entrepreneurs Seeking Funding Should Expect When Choosing A Lawyer". It was moderated by entrepreneurship luminary Rob Robinson. The panel was blue ribbon, and included attorneys Lori Hiraoka, Darren Nunn and Dick Sherman and entrepreneur David Watumull.

They talked about how to select attorneys to help you raise investment capital and how to deal with that attorney once you select them, and the discussion was helpful. But in my mind this raised another question - how these lawyers themselves can deal with the competition for Hawaii legal work from counsel on the mainland.

Knowing the business environment of Hawaii is undoubtedly an advantage in fund raising here. But many entrepreneurs of Hawaii companies don’t even look for counsel on Bishop Street. They go straight to the mainland on a knee jerk basis. From my observation, this is the case in many business areas, including but certainly not limited to areas involving investment capital and intellectual property.

I suppose there are a number of reasons for this, some real, some based on myth. Some clients believe mainland attorneys can read Hawaii law just as well as Hawaii lawyers – after all, the law of all American jurisdictions is freely available on the net. Some clients are not concerned with higher costs on the mainland on the notion that if it’s more expensive it must be better. And then there’s the mystique - some clients feel that if you’re a patent attorney and your office is across the street from the Patent Office, you must know something we don’t know in Hawaii.

Legally, yes the world is smaller and the mainland is closer now than it was before. So entrepreneurs are more comfortable in dealing with counsel on the mainland – what’s the difference between emailing across Bishop Street and emailing to San Francisco or New York? The long distance telephone call or fax is the same and costs the same. If you really feel you need to have a face to face, use a webcam.

And the lawyers on the mainland are increasingly bold in marketing away from their home states and all the way to Hawaii. They can contact and develop relations with local clients and prospects with very little effort and without opening an office here. The limitations on practicing law without a license do not pose the same barriers as they did before. Most mainland firms representing clients here feel free to advise those clients on Hawaii law and when they need a little local help, they’ll hire a local firm on local points but do all the heavy lifting themselves, from the mainland.

The natural progression is that the work available to the local bar is proportionately less than it was a decade or two ago, and promises to be still less going forward. But what are the underlying sea changes, for the clients, and for the local bar?

I suggest that if local clients do not use local counsel, the local bar will not be as robust as it has been during the years since Statehood. There will be fewer matters, fewer jobs, fewer lawyers and more generalists. Some people will say that’s a good thing, but it may rather be a downward spiral. There will be less incentive for local lawyers to develop specialization. Scary, since the law is more complex all the time.

If specialization is not available locally, more Hawaii businesses that need lawyers in those areas will have to get legal help from the mainland. Given the increased costs on the mainland, some, or many, of those local businesses simply won’t be able to afford the representation and the advice they need to thrive. Not a good thing.

What to do? I suppose we could encourage local clients to give preference to local lawyers, but remember this is a free market driven by business considerations. The akamai client will, and should, look for the best expertise he can find at any price he can afford, and geography is not an object. That usually translates into going to the mainland.

One approach that can address this phenomenon, and trend, is to affirmatively encourage local attorneys to greater specialization and greater expertise, so they can more effectively compete with counsel on the mainland. How do we do that?

The answer may come from our Law School. I am hoping, looking forward, to the possibility that the Law School, under Dean Avi Soifer, might include outreach programs to the downtown legal community. Programs that would go beyond traditional CLE (Continuing Legal Education) that would liberate lawyers to develop new or greater expertise to migrate their practices into the areas they like best.

In the old days, if you were a generalist and wanted to expert yourself, you would refuse all other work and put all your time into learning the new field. In the context of a law firm that has to make money, this could put your job at risk. With programs from the Law School, where law faculty come down to teach local lawyers new areas and specialties in downtown classes, that kind of learning would be much easier.

If I’m a real estate lawyer and I really want to be an investment capital lawyer, on the job training will probably not be available for me. I could learn this new area by candlelight, but that’s hard to do if you’re working every day. Wouldn’t it be great if I could learn it as in law school, from someone very knowledgeable and dedicated to opening that door for me and bringing me up to marketable competence. This would be a kindness not otherwise available to many lawyers in the community, and would improve their prospects, their careers and their professional quality of life.

So I’m hoping the Law School will do this, and that they will have an enthusiastic response from the bar. If you get a chance to support them on this, please do, not only for the educational ideal but also because over time this kind of program is likely to build greater expertise, greater legal infrastructure, and greater confidence by local clients in local lawyers. All good things for Hawaii.

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