Dentons and referral industry square off ahead of new network launch

In May, Dentons unveiled Nextlaw Global Referral Network, a free online referral network that the global legal giant plans to launch this summer. Now at least two longtime referral network executives are complaining that Dentons is misrepresenting their business model, and perhaps its own, writes The Am Law Daily.

Dentons, meanwhile, has gone from promising to “disrupt” the competing networks to predicting their demise.

“Let’s see how long the status quo lasts without their expensive fees and territorial exclusivity,” Joe Andrew, Dentons global chairman, wrote in a recent column.

In announcing its new service, Dentons said it was offering an alternative to an inherent weakness of the established referral network industry. “The challenge for clients with today’s referral networks is that they are ‘pay-to-play’-you do not get the right firm for the client’s particular need, just the firm willing to pay to be part of the referral network,” Andrew said in the firm’s press release.

Andrew’s comments haven’t sat well with Stephen McGarry, who founded LexMundi in 1989 and World Services Group in 2002. In a letter this week to The American Lawyer, he said Dentons had distorted the nature of global referral networks, and he compared them to Dentons’ own model of acquiring firms through a verein structure.

“For some reason, Dentons feels that being identified as a network is inherently ‘demeaning’ (preferring the esoteric self-branding as a polycentric firm),” McGarry wrote.

At Dentons, thousands of lawyers and an ever-expanding number of offices operate under the firm’s brand. In common with global referral networks, Dentons requires dues from its constituent firms-terms may include 2% of annual revenues and 23% of referral fees, according to a recent American Lawyer report. Member firms of most referral networks, by contrast, pay just $10,000-$100,000 a year, depending on each firm’s size or revenue, McGarry said.

McGarry also took issue with Dentons’ claim that traditional networks bind members to exclusive referral relationships. Members of Dentons’ own law firm verein are “much more exclusive,” than most existing legal networks when it comes to referrals, he said in an interview Friday. Moreover, he said, NextLaw’s online, tech-assisted referral platform must be weighed against the existing networks’ experience, gained from decades of working together.

Networks have “developed collaborative trust over many decades,” McGarry said.

NextLaw, led by Dentons senior public policy counsel Jeff Modisett, promises to extend legal services at the firm-which already boasts 125 locations serving 50-plus countries-into even more corners of the world.

The venture, whose website invites “quality law firms regardless of size or location” to apply to become part of its “one-of-a-kind” network, pitches itself as the first to offer membership at no cost to firms.

After being approved by a panel that includes both Dentons and other member firm lawyers, new members will have access to Dentons technology that the firm claims will simplify referrals, according to an article in The American Lawyer on 10 May.

The first referral industry veteran to take aim at Dentons’ venture was Michael Siebold, a senior partner at Germany’s Arnecke Sibeth and chairman of Interlaw, a two-decade-old network of about 7,000 lawyers in 125 cities worldwide. In a scathing column on 23 May headlined “A Pale Imitation of a Network,” Siebold said that Dentons’ approach “is likely to create little more than a digital directory of firms.”

A week later, Andrew responded saying the new network “is not an endorsement of the network model that Interlaw represents, but a repudiation. Nextlaw is the beginning of the end for the existing model,” Andrew wrote.

Some longtime legal management consultants have been puzzled by the heated back-and-forth. “Why are you trying to pick a fight, trying to drag down all the other networks saying they’re overpriced?” said one, asking not to be identified because he does business with Dentons. “If you’ve got a better mousetrap, show me a better mousetrap.”

Others noted that the existing referral networks have been at this work for decades. “In the early days, they let in too many weak firms in expanding very quickly,” said Richard Tromans, of London-based Tromans Consulting. “But mostly they’ve changed that. The best networks long ago created a management group who effectively works full time on running the network and that made them much better run.”

The fact that there are so many networks out there “suggests there’s value that’s being delivered,” said Ottawa-based consultant Jordan Furlong. Denton’s free membership and technological platform “are certainly attractive features, but for a firm thinking about leaving a network to join Denton’s network, it will come down to ‘how well do I know the firms in the NextLaw network?’”

Many networks have elite members. World Services Group’s 19,000-lawyer network includes the likes of Hunton & Williams, Lowenstein Sandler and Haynes and Boone in the US, Minter Ellison in Australia, and Lawson Lundell and Lavery, de Billy in Canada.

Lex Mundi counts Canada’s Seven sisters elite firm Blake Cassels & Graydon, the US’s Baker Botts and top-tier offshore firm Appleby among its 160 firms globally.

Other top networks include InterLaw, Meritas, TerraLex and specialised networks like Ius Laboris, which specialises in labour law.

Nextlaw members won’t be prohibited from joining multiple networks, said Dentons, which answered questions via email. The firm said that Nextlaw will launch later this summer, including in jurisdictions in which Dentons already has a presence, but in new practice areas. The firm continued to call the fees for membership in traditional networks “sizeable” and repeated many of the same points made by Andrew.