Building an eBay for Legal Services

If there is anything business people dislike more than lawyers, it is lawyers' bills. The traditional law firm business model is broken - the days of the hourly billing rate with little accountability are functionally prehistoric. Will an auction site for legal services work? Companies are already putting their jobs out to bid. A site aggregating buyers and sellers could work, but for a profession that prides itself on discretion, educational pedigree and nice incomes, this could be unpleasant.

Vanessa O'Connell in the Wall Street Journal:

"Auction sites like eBay work pretty well if you're looking for a hard-to-track-down piece of flatware. But can they work for lawyers' services?

Many attorneys have doubts, but a 21-year-old law student named Robert Grant Niznik is putting his money—or more candidly, he says, his parents' money—behind a website called Shpoonkle that will let lawyers bid for clients.

The New York Law School student and his start-up, whose motto is "Justice You Can Afford," are creating a buzz in legal circles. Lawyers and bloggers have been debating the merits of the idea leading up to its launch.

"I don't think Shpoonkle will fly and consider it a nonstarter," said Scott H. Greenfield, a New York criminal-defense attorney. Potential clients ought to be wary of "spilling their guts" online for the site's registered attorneys to see, he said.

Mr. Niznik, who launches Shpoonkle on Wednesday, disagrees.

Middle-class Americans who don't qualify for legal aid but also can't afford to pay for legal advice have few other places to go, he said.

The national average hourly billing rate in 2010 was $295, according to ALM Legal Intelligence, which surveyed 176 small and midsize law firms.

There are also a dwindling number of jobs for lawyers at corporate firms as the industry tries to recover from a prolonged downturn.

"Obviously attorneys are looking for work. Why isn't there a venue to connect them to people who need legal services?" Mr. Niznik said. "That's how I came up with the idea."

In a prelaunch test this month, Shpoonkle signed up roughly 135 attorneys and about 30 clients, who range from someone needing an attorney to review a lease to another seeking to fight a traffic ticket.

One of the potential clients is William MacArthur, 56, of Miami Beach, who posted a case on Shpoonkle this month, seeking bids from lawyers willing to help his mother renew her green card. So far, he has received only one bid, from a lawyer offering to take the case for $800 plus fees.

"I am hoping to get more bids," Mr. MacArthur said.

The site works like this: Clients register and post a case. Attorneys, who are prescreened and registered, receive an email alert notifying them to bid on the case.

When there is a bid, the client gets an email and can check the site to see the attorney's name and how little he or she is willing to charge for the assignment. The bids vary from contingency fees to hourly rates.

"You have a race as lawyers bid against one another," said Susan Cartier-Liebel, a lawyer who wrote about Shpoonkle on her blog.

Mr. Niznik, who plans to keep the site free for consumers, plans to sell advertising and eventually charge attorneys for access. The biggest challenge, he said, will be to attract a critical mass of clients and lawyers to participate.

Mr. Niznik has three employees in Miami but declines to say how much his family has invested in the company. Staff will check with state bar associations to verify an attorney that signs up is eligible to practice.

Some attorneys are keeping an open mind about the site. "I don't know if it will succeed, but I'm going to try it," said Patti S. Spencer, a tax and trust and estate attorney in Pennsylvania.

"Lawyers who are protecting their turf are going to criticize these innovations...but the delivery of legal services is pretty well a broken system," she added.

Mr. Niznik isn't alone in thinking of reverse auctions for legal services. Chad Pinkerton, a Texas-based trial attorney, is seeking about $25 million to launch a similar service called LawyerBid, possibly within the next 90 days.

In a recent test, more than 100 people posted their potential lawsuits on LawyerBid, and more than 40 lawyers bid for those cases, according to Mr. Pinkerton.

Americans spent $102.5 billion on legal services in 2009, according to the latest available data from the U.S. Department of Commerce.

Others are using competitive sourcing to try to lower the cost of corporate legal help. John B. Henry II, chief executive of DryStone Capital Corp., which buys litigation portfolios from major insurance companies, said he gets law firms to bid against each other to lower the cost of defending those claims.

But he uses the telephone as his primary means of communication, not the Internet. "It's very complex and time consuming," he said of the negotiation process.