Firm’s Failed Tech Venture Foretells Big Law’s AI Sales Struggle

Norton Rose launched a Chicago office in 2022 with a lofty target: the firm and a tech company owned by a newly recruited partner would introduce 150 clients to a new legal workflow management tool called Proxy.

Three years later, the relationship didn’t record a single sale to a firm customer. The reasons for the failure are laid out in dueling lawsuits filed by Norton Rose and the company, NMBL Technologies, led by now ex-partner Daniel Farris.

The fight comes as firms are making more tech investments than ever, diving headfirst into buzzy artificial intelligence tools. Many of those investments are bound to fizzle out, but consultants expect successful ventures will mimic Norton Rose’s plan: sell tech-enabled legal products rather than traditional billable hours—a new challenge for law firms.

“Partners are good at selling legal services; selling products is not in their DNA, and that makes it hard,” said Jeroen Plink, chief operating officer of consultancy LegalTech Hub. “Products are typically sold by product salespeople. Most law firms don’t have product salespeople.”

There’s a long history of Big Law “innovation” efforts promising far more than they deliver, but the Norton Rose-Proxy episode offers a rare peak behind the scenes of the concomitant internal fallout.

NMBL argues that Norton Rose’s top leadership never invested in the company the way it promised and threw up bureaucratic roadblocks that made sales of the service impossible. It wants $15 million to make up for the botched rollout.

Norton Rose, meanwhile, says clients weren’t interested in the tool, noting that an e-mail campaign marketing free trials to clients didn’t receive a single response. The law firm wants as much as $250,000, saying it never would have invested in the tool had it known how poorly it was going to perform in the market.

Innovative Focus

Recruiting Farris from K&L Gates was instrumental to the firm’s start in Chicago. He was the first name listed in a quote from managing partner Jeff Cody announcing the 11 lawyers who launched the operation.

Farris led the design for the office in the trendy, Loop-adjacent business district known as Fulton Market. He’s featured in a Norton Rose video marketing the site as the first Big Law space in the district, which Cody said signals the firm’s focus on “innovation” in the city. In fact, the firm called the new office an “innovation hub.”

Cody told Bloomberg Law in an interview in June last year that Farris was a “big proponent” of opening in the Fulton Market district, calling the decision “brilliant” for capturing a “vibe that was very unique.”

He said Norton Rose needed to offer something distinct in the market to be successful, and that the firm has focused on Chicago being its “most innovative, forward-thinking office in how we deliver services.”

“I said, ‘We can’t go to Chicago like every other firm goes to Chicago,’” Cody said. “We have to be different, or we’ll get beat up.”

Floundering Partnership

Cody was heavily involved in the negotiations to recruit Farris and to partner with NMBL, according to the company’s lawsuit, which catalogues a nearly year-long recruiting effort that involved back-and-forth negotiations over Proxy.

One of the hold-ups was over language for getting 150 Norton Rose clients to sign up for the new technology. The law firm didn’t want to sign up 149 clients and be on the hook for not performing, the NMBL complaint says. So the two sides settled on language that made the number a soft target based on Norton Rose providing “commercially reasonable good faith efforts to introduce” that many clients to the product, according to a copy of the agreement.

NMBL says Norton Rose didn’t meet even that less-burdensome requirement—or other aspects of the agreement.

The firm “never had any actual interest in investing in and championing Proxy,” said Andrew Patton, an attorney representing NMBL. Norton Rose used the Proxy agreement to recruit its cofounders to the firm “so that NRF could pursue traditional practices,” he said.

After original discussions that envisioned Norton Rose introducing all new clients to the products, the firm’s leader later insisted that relationship partners would decide whether to do so, according to NMBL’s complaint.

Even after Farris developed training videos and white papers demonstrating the product, as few as 5% of the firm’s lawyers accessed the materials, NMBL’s complaint says. The firm never hired a “client success manager” as the agreement envisioned.

“The allegations made by NMBL are without merit. We will vigorously pursue this matter, which should be resolved in Texas” (where the firm’s suit was filed), a Norton Rose spokesperson said.

Legal Tech Surge

With the rush of generative AI legal technologies, law firm spending on technology has been growing at “an unprecedented rate,” according to a report from Thomson Reuters this month. Year-over-year spending on knowledge management by law firms in the second quarter increased by 8.5% after adjusting for inflation, notching a record high.

Rolling out such generative AI products, however, is another challenge—one not limited to law firms. A survey S&P Global released in May said companies are more quickly abandoning AI initiatives, with 42% saying they scrapped the majority of them before they reached production, up from 17% a year earlier.

Ron Friedmann, a research analyst at Gartner, said even as law firms increase their tech budgets, there is skepticism that firms will succeed at building their own products and selling them to clients. “It’s a very different business than a law firm,” he said.

A handful of law firms have developed standalone subsidiaries that sell legal solutions as a service.

Wilson Sonsini’s SixFifty subsidiary is perhaps the most recent, prominent example. It developed automated employment law products and was recently sold for between $70 to $85 million, legal journalist Bob Ambrogi reported. The company had a team of non-lawyer salespeople based out of Utah and sold annual subscriptions to its products.

The Norton Rose-Proxy agreement required the law firm to start a subsidiary to manage the relationship, according to the NMBL complaint. But the complaint calls the subsidiary, branded LX, a “sham entity” that was funded with $500 and never opened a bank account.

“The most successful law firm subsidiaries selling products operate completely independently from the law firm,” Plink said. “They don’t operate with law firm partners for sales.”