Van Buren's Takes the Law into Its Own Hands

by Patricia May  on Monday, Feb. 21, 2000 12:00 am  

Arkansas' newest publicly traded company, Inc., wants more customers to do that Yellow Pages thing: Let their fingers do the walking.

In this case, it's a stroll across a computer keyboard that puts Loislaw's products - legal research - literally at the fingertips of lawyers, judges, paralegals and students.

Van Buren-based debuted on the Nasdaq last Sept. 30. With the $57.7 million raised by the IPO, Loislaw has undergone a major ramp-up in its operations in recent months.

As of Dec. 15, the company had placed the last of the law libraries of all 50 states and the District of Columbia as well as 18 federal court circuits in its product offerings. For each state, that includes 50 to 100 years of supreme court and appeals court decisions, current statutes, the latest legislative acts and attorneys general opinions.

It was that accomplishment - getting all 50 state law libraries online - that pushed into a new realm of competition with the superpowers of Internet research: Lexus/Nexus and Westlaw, a division of The Thomson Corp.

It was also about that time that Loislaw's stock spiked to its highest level yet, $47.50 a share. Since then, the stock price has retreated to about $21 a share. (The low was about $13 a share, two days after the IPO.) But its earnings for the quarter ended Dec. 31 were 10 percent better than expected and the $5.6 million loss (27 cents per share) was less than expected.

The company IPO'd at $14 a share. Lead manager on the issue was Prudential Securities. Co-managers were U.S. Bancorp Piper Company officials, who own 81 percent of Loislaw's stock, expect it to cash-flow within two years, says Mike Romanies, vice president of marketing.

"Our business model," he explains, "is front-loaded in costs."

The three investment firms that follow evidently believe in the product and the strategy. At last report, the stock was ranked as a "strong buy" by one analyst and a "moderate buy" by two others.

Law School Beginnings

Loislaw grew out of a law school thesis that founding partner, now chairman and CEO, Kyle D. Parker did while he was a student at Franklin C. Pierce in New Hampshire. The subject was how technology would change the practice of law.

Upon graduation, Parker returned to his home state and began developing a computerized version of Arkansas law. He was helped in that endeavor by Jack Holt Jr., who was then chief justice of the Arkansas Supreme Court and who apparently was intrigued by the idea.

Parker signed an agreement with Thomson, parent company of Westlaw, to market his product, which was on CD-ROM. The company gradually expanded to states that were nearby - Oklahoma, for example - and states where the courts, such as New York's, were willing or eager to participate.

The company and Thomson eventually parted under amicable terms, Romanies says.

Although Parker did practice law in the early days, he's otherwise occupied these days with Loislaw. His father, Douglas W. Parker Sr., however, still practices in Van Buren.

The company was originally incorporated as Law Office Information Systems Inc. in 1987. It's kept the acronym as its part of its name because "lois" means "law" in French, Romanies says.

Since 1996 when it launched its web site, Loislaw has veered away from the CD-ROM product because it's difficult to keep information as current on a disc as on the World Wide Web.

But for those subscribers who like the physical natural of a CD, Loislaw will provide the discs for the nominal charge of $2.50 each, which covers the company's expenses.

Intensive Efforts

For a high-tech company, much of Loislaw's work is labor intensive.

Document acquisition is of utmost importance to a company that sells research products marketed as both comprehensive and up-to-date. To keep its legal research current, employees, many of them paralegals or with juris doctor degrees, are frequently in touch with courts throughout the nation.

New material is obtained in various fashions: by fax, in hard copy or by e-mail.

Incorporating new laws, judgments or opinions into the Loislaw database requires more than typing. References to other cases or material must be "tagged" so they're hyperlinked to the cited information. Users can then just click on the hyperlink to see the referenced material.

While Loislaw employs 200 to 300 people who do that keyboarding, it also uses companies in China, Malaysia and India.

Yes, Romanies says in response to a question, those workers all speak English and that's the language they type.

To assure accuracy, the company uses a "double-key" method. Two workers type the same document; then, proprietary software is used to compare the two versions and correct errors. The result is a 99.995 percent accuracy rate, Romanies says.

Make no mistake: These libraries are voluminous. Romanies estimates Loislaw's products contain well over 8 million documents of varying lengths. The total is roughly equivalent to 1,800 databases, he adds.

The ever-increasing volume is growing at a rate of about 1 billion characters - that's with a "b" - a month.

Lawyers don't have to be overwhelmed by the volume. They can subscribe to any number of various products, including individual states, state and federal combinations or national libraries.

Subscriptions are roughly equivalent to one hour of billing time, Romanies says. Prices range from $49 a month for state library access to $139 for what Loislaw calls The National Collection.

To date, the company has about 17,000 subscribers, 15,000 of them paid subscribers. Thus far, the renewal rate is about 90 percent, Romanies says.

Subscriptions have come from each of the 50 states and even some U.S. territories, the company says. As for Loislaw's home state, "We do very well in Arkansas," Romanies says.

Legal documents filed by the company give this example as far as use of the company's products. In July 1998, the Loislaw site registered 225,000 searches. A year later, in July 1999, the number of searches was 2.2 million.

Law schools would seem to be an obvious market for Loislaw, so it's no surprise to learn the company has targeted accredited law schools across the country.

Romanies says Lexus/Nexus and Westin have always charged law schools for their services, although students could then use them for no additional cost.

But Loislaw is allowing the schools to access its products at no cost.

Among professionals, Loislaw targets practices with one to 15 lawyers, small firms unlikely to have research librarians to assist in case preparations.

Because Loislaw is a flat-fee-based service, the firms can access the product as often and for as long as necessary. More than one person can use the service within a firm although simultaneous access is limited to the number of "seats" or subscriptions it holds. With one subscription, only one person may be using the product at one time.

Loislaw executives expect demand for their product to increase as three other things grow: the number of lawyers, the amount of litigation filed and the Internet.

Filings with the Securities and Exchange Commission cite Simba Information Inc.'s Web/Online Services 1998-2002 report for estimates of the online legal, tax and public record information market. The market was estimated at $1.7 billion in 1998. It's expected to reach $2.7 billion by 2002, giving Loislaw and its competitors a huge potential market.

A growing sales staff markets Loislaw products nationally, but the company is also trying to grow through partnership agreements with other companies.

The latest, announced just last month, is with PowerBrief Inc., a Houston-based technology company. The agreement is expected to expand Loislaw's potential market as PowerBrief hopes to sell the products to customers outside Loislaw's targeted area.



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