New tech business unit at Cleary rare among Wall Street law firms

Cleary Gottlieb Steen & Hamilton offices in Washington, DC REUTERS/Andrew Kelly

(Reuters) – Cleary Gottlieb Steen & Hamilton’s new technology-driven legal services business venture could inspire other Wall Street law firms that have not started such projects to follow suit, according to industry experts.

New York-founded Cleary on Thursday said it formally launched ClearyX, which it said will use technology and creative staffing and pricing arrangements to develop new ways of delivering legal services for clients, focused on transactional work.

Law firms in recent years have experimented with new tech-focused products and services to streamline work done by their own lawyers and develop software for use by clients.

Some firms have set up new business units, structured either internally or as subsidiaries, to create new ways to make money and win client matters.

The move into tech-driven legal services has in part been spurred by increased competition from alternative legal services providers (ALSPs), which specialize in doing large amounts of work for clients at relatively low costs.

Legal marketing and advisory firm Baretz+Brunelle found in a 2020 report that 35 of the top 100 US firms by gross revenue had created their own “captive” ALSPs. Many of those were internal units rather than wholly owned entities.

So far the group of large New York-founded law firms that focus on high-end transactional work have generally not created ventures like ClearyX, according to legal industry experts.

Wall Street law firms Sullivan & Cromwell, Davis Polk & Wardwell and Cravath, Swaine & Moore did not immediately respond to requests for comment on they have a subsidiary or business unit like ClearyX or are planning one.

A spokesperson for another Wall Street firm, Cadwalader, Wickersham & Taft, said it has a tech accelerator that does some client-facing work, but is not a subsidiary.

Wall Street firms have generally associated technology use with high volume and low complexity or “commodity” work and have “distanced themselves from that,” according to Beatrice Seravello, co-head of the NewLaw practice at Baretz+Brunelle.

“They really had no need to actually think about doing it differently because their clients were really not asking for it,” said Seravello. “But it’s compelling now, to see a very profitable revenue stream coming from these captives to at least pause, step back and think about well, if firms of the ilk of Cleary are doing it, we should probably at least be thinking about it.” “

Cleary hired Carla Swansburg in September to lead the new unit, which has its own separate management team.

Swansburg, previously vice president and general manager at large legal services company Epiq Systems Inc, has been building up her team of remote employees, which she said has now reached about 15 people. It also includes roles like technologists, analysts and subject-matter experts.

Swansburg said ClearyX has already worked on about 16 deals, so far working with Cleary deal teams mainly on due diligence in M&A transactions. The firm said other projects will focus on areas including private equity and funds, real estate and capital markets.

The unit may also make legal technology investments, she said.

According to James Jones, a senior fellow at the Center on Ethics and the Legal Profession at the Georgetown University Law Center, building law firm tech business units “takes some real investment, not only of manpower but also of money.”

But clients are generally looking for more efficient legal services and will seek them out on the market, he said.

If they can’t compete with other providers like ALSPs, that will be “money out of law firms’ pockets,” said Jones.

Read more:

Norton Rose Fulbright joins large law firms with new tech units

Report sees ‘tipping point’ as market for law firm alternatives hits $14 billion

Taking stock as Big Law’s ‘captive’ ALSPs expand their reach

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