Dye & Durham rate increases for Unity in 2021 and 2022 sparked lawyers to take action
In a move designed as a response to price increases imposed by software vendors, members of the legal community are attempting to start up a new association.
At this point in time, the Ontario Real Estate Lawyers Association (ORELA) is barely more than a notion. It has a presence on the Internet. A mailing list of names is being compiled. But it’s a start says Jonathan Ely Cass, general manager of the Burlington-based real estate/commercial/family/estate law firm Cass & Bishop Professional Corporation. He explains that the approach being taken to launch ORELA is similar to that used to create another industry group.
“The association is about what the Ontario Trial Lawyers Association is for trial lawyers, but for real estate lawyers. The idea is that it would allow us to advocate for what is important to its members, and also give us a banner to operate under in Ontario which will be reassuring to our prospective clients. They’ll see lawyers are part of a professional association,” says Cass.
Once a core group of at least 100 members sign up for the mailing list – at this point about 30 people have submitted their names to ORELA – Cass says he’d like to see meetings and roundtables happening to allow the organization to decide which issues to focus its efforts on, but he knows exactly what the first and most pressing problem is: “Our first order of business is the pay-per-use fees for legal software.”
Sparking ORELA’s creation
Cass explains that the firm had been using DoProcess’s Conveyancer software to help manage real estate files. In December 2020, Dye & Durham Limited completed the acquisition of DoProcess, an affiliated entity of Teranet Inc., from OMERS Infrastructure, in a deal worth $530 million. In January 2021, Dye & Durham raised the per file fee user fee from $25 to $129. “That’s what lit the fire and started ORELA,” explains Cass. “That was a shock for lawyers as, for many of them, that represents a large percentage of what their clients were paying, and they’re passing the fees onto the clients, of course. And [the price increase] came without warning and arbitrarily.”
The following year, prices rose again, and lawyers were told they’d be paying $249 per file. “The pattern was that they didn’t really mind that lawyers were outraged at the first price hike of over 400 percent, and then they raised it again,” says Cass.
“The lawyers got the clear message that these fees would be subject to the whims of a mega corporation like Dye & Durham, and that made them very uncomfortable. Every lawyer was negotiating their own pay-per-usage contract separately. Basically, the community of real estate lawyers in Ontario felt quite scattered.”
Cass says that in taking over DoProcess, Dye & Durham updated the software and put it under the Unity brand. The company also moved it from something that resided on each law firm’s own servers to something that runs on the cloud, giving it a more modern look and feel. That change, however, is tied to concerns about how quickly or easily law firms would be able to retrieve their data and migrate it to a different company’s software, should they need to switch vendors or should another “exorbitant rate hike” occur.
Increasing rates spur lawyers to react
Of course, not every lawyer reacted to the price hikes in the same way, but there were definitely reactions. Shayle Rothman and Eric Rabkin of Parnes Rothman LLP, for example, stated their intentions to launch their own software, iClose, a move which led Dye & Durham to terminate their access to Conveyancer, which, in turn, caused the lawyers to get an injunction against the software company from the Superior Court of Justice of Ontario.
Burford Law Professional Corporation and sole practitioner Tais Davis attempted to launch a class action suit against the company, but the case was dismissed in October 2023 and the plaintiffs were required to cover some of the software company’s legal costs.
Hussein A. Hamdani, a partner who handles corporate commercial law and real estate at SimpsonWigle Law (which has offices in Burlington and Hamilton) hasn’t taken any direct actions to protest the pricing yet, but he’s considering joining ORELA.
“In light of the brazenness of the amount of the increases, and the lack of notice to the profession about these increases, it tells us that we don’t quite have that communication relationship that we wanted to have with some of these service companies that are out there. And so perhaps having an association will make that communication cleaner and clearer, so there’s one group to talk to and that group will then disseminate that information to the profession. I think it could be quite helpful,” he says.
Hamdani notes that his firm has created a subcommittee whose purpose is to look at how Unity is being used and to see if there are any alternatives. Currently, at least one other product from a firm called LawyerDoneDeal is being trialled by the firm, with some lawyers using the LawyerDoneDeal offering, some using Unity and some using both. Hamdani is in the latter category. The subcommittee is expected to make a recommendation by the end of the first quarter of 2024.
According to Hamdani, some lending institutions aren’t part of the LawyerDoneDeal communications hub, making it a little bit harder to get their mortgage instructions through the software and requiring the legal team members to do a bit more work. The trade-off, however, is what he calls a “dramatically” lower price. “I think that's where the big challenge really is in the future: how well can these competitive alternatives be the hubs of communication? Can they dislodge Unity from being that hub? And if so, then I think we’re going to see a lot more people buy into the alternatives and the competitors.”
Competition and regulation
The idea of competition is one, however, that worries Hamdani, given Dye & Durham’s track record of acquiring competing software companies – according to the court endorsement, there was an attempt made to purchase iClose, for example – and he believes that lawyers need to do something to ensure that there is a competitive market for legal software.
“If lawyers don’t take a stand, Unity will just wipe out all the other competitors, and then they’ll have a monopoly. And when they have a monopoly, then we have absolutely no hold on what those prices are going to be. And who ultimately pays for this are individual Canadians, because the price gets passed along – the cost just gets passed along. And in a time where it’s almost impossible for first-time homebuyers to buy a home without mom and dad helping them out, it’s just one more cost that’s going to be levelled against Ontario and Canadian homebuyers. So, it’s not ‘please feel sorry for real estate lawyers.’ This is a much bigger issue.”
Outside of making the house buying or refinancing process more expensive for homeowners, Hamdani explains that the nature of the current legal industry makes it pretty much expected that lawyers use software to assist them.
“Lawyers are put under a lot of pressure to do certain searches and have certain documentation. We’re regulated to do that... We’re forced to use software to facilitate that, especially at the pace of where Ontario was in terms of real estate closings. It was impractical not to use technology to help us,” he says.
As both Cass and Hamdani are quick to point out, under Law Society of Ontario rules, a fee-per-use model means that the cost gets passed along to the client as a disbursement, whereas something like an annual subscription would be a cost that would be borne by the firm or the practitioner, and that might cause law societies to pay more attention to software companies’ pricing policies. And it’s not just the real estate conveyance pricing that has caused concerns. Cass says that his firm conducted some market research and determined that the average cost for a couple to have simple wills drawn up by a lawyer is $860. “If you’re spending $130 to generate the document conveniently and store it online, that's a significant upcharge for the client.” (Software provider Estateably lists a fee of $129 on its website per probate file. eStatePlanner charges a base monthly fee, with a set number of files plus an extra $99 per client outside of the allowed number.)
Cass said he values the services legal software companies provide, but he also believes their pricing models need to be regulated. “They’re excellent products. But I think there should be a cap on [pricing] relative to the lawyer’s fee. And I think there should also be rules in place to prevent a sudden hike. They need to provide advance notice and I think they don’t do that deliberately because it would give a really powerful negotiating position to the lawyers because they could start talking about ‘what [competitor] are you going for? What are you going to do when this time comes up?’ But they can’t do that.”
The Dye & Durham perspective
According to executives at Dye & Durham, one thing lawyers can – and do do – is participate in the company’s Canadian customer legal innovation advisory council.
“We bring together law firms, big and small from across Canada. In fact, they’ll be here in our office in January, and we talk about the trends that are happening in the industry but also about how we can improve our product set. How can we improve ultimately, to help them improve their firm with less effort?” explains Morgan McLellan, vice-president, global communications. “We understand that everybody’s got a different idea of what’s a fair price, but at the end of the day, a lot of our decisions are based on direct customer feedback and in directly what they're telling us.”
Beyond the customer-feedback angle, CEO Matthew Proud says the pricing model is one that is designed to reflect how Dye & Durham views its software.
“We’re very comfortable charging a premium price for a premium product. We’re reinvesting in our product. I think that's key. We’re providing additional benefit to our customers through significant reinvestment,” he says. “We invest more than anyone else does. We’re not taking big dividends and paying our shareholders. Except for LexisNexis and Thomson Reuters, no-one else is spending more than us on R&D.”
This year, McLellan says Dye & Durham is investing $60 million in research and development.
Dye & Durham is also taking steps to improve its balance sheet. In November 2023, the company announced that it was undertaking efforts to reduce its convertible debt, reduce the balance of its debentures by $95 million and decrease its overall convertible debt by $10 million.
Historically, Dye & Durham has grown through acquisitions. “We look at it as a platform strategy. We want to plug in as many key components as a law firm uses everyday… Acquisition fits in because you can acquire capabilities and integrate them seamlessly into the environment and make it really easy for [law firms],” says Proud adding that he’s happy to see small or large companies enter the legal software market.
“We welcome competition,” he says, “We’re pretty confident that through the investment we make in our products, we will win at the end of the day. That will be the differentiator.”
In terms of competition, Cass would like to see the Law Society of Ontario offer a bit more support to lawyers.
“I would love it if the law society said, ‘here is a set of things you can use to produce documents. They could provide us with precedents, we don’t need software. I think they could be helping out more than they are right now. I know that would be a challenge for them, but it would be better for them to get the money rather than these giant companies who have just been using it to ask for more money.”
Goals for the future
After ORELA gets to the point where it can hire an administrator and vote on a part-time CEO, Cass wants to see the association undertake some lobbying of both the law society and the government on the issue of software fees.
Ideally, he can envision the association making efforts to negotiate fees on behalf of its members and maybe even going a step further, and persuading software companies in other parts of the world to enter the Canadian market – perhaps even funding the entry as an organization.
“Say there’s a conveyancing software rival to Unity in Ireland, or England or New Zealand. We could ask ‘what would it cost to bring it over here?’ As a group, we might have the power and the financial might to do that,” says Cass. “Encouraging more competition in the space – I think that’s important.”