Gujarat Magazine

Mass tort attorney Mikal Watts is joining the rush to build artificial intelligence tools but with a twist—he aims to partner with private equity and sell the products to personal injury firms.

Watts said he has been in discussions with Wall Street investors he declined to name who are acquiring the back-office functions of personal injury firms through mechanisms called management services organizations, or MSOs. His goal is to make his AI tools common across firms in those MSOs, he said.

“They’re out there buying five, six, seven, eight, 10 different traffic firms,” Watts said of the investors. After they group the firms together and streamline their processes, his goal is to “plug in Watts AI,” he said.

The plan shows how one high-profile trial attorney, who has helped plaintiffs sue Johnson & Johnson over talcum powder and utilities over California wildfires, is aiming to put his mark on the AI transformation rippling across the legal industry. The test for Watts and other contenders will be to make their AI approach stand out in a crowded field.

The competition is “pretty wide open,” said Seth Deutsch, founder of Samson Partners Group. He worked on 25 law firm MSO deals so far this year and said AI and technology have been woven into each one.

“There are some that are developing their own AI and have decided to bring that capability in house, but a lot of them are going to be looking initially to outside providers,” Deutsch said.

Kirkland & Ellis, the largest law firm by revenue, grabbed headlines in June when it announced it is committing $500 million to a partnership with Palantir Technologies Inc to develop AI, starting with a tool to make private equity fundraising more efficient.

Other law firms are hiring AI directors to drive the technology through their operations, and startup legal entities are pushing to chart a new path in the legal industry through their use of artificial intelligence.

The AI Plan

Watts’s goal is to create a proprietary AI that will boost the workflow efficiency of his tariff cases, personal injury claims and mass torts. The effort includes automation of steps such as analyzing documents, drafting litigation, and verifying that cases qualify for a claim—all subject to attorney review.

Watts, who runs the Watts Law Firm out of two offices in Texas, declined to say how much he is investing into his AI effort but said it is seven figures. Before he took on an AI partner he said he took a four-month course on AI at the University of Texas earlier this year.

“There’s so many vendors that are charlatans that will sell you ocean-front property in Arizona,” Watts said. “You needed to understand enough about artificial intelligence to keep yourself from getting ripped off. “

After considering 200 vendors, he decided on the technology services arm of Monks, the operating brand of Sir Martin Sorrell’s S4 Capital Plc. They began working on the project in March.

Watts and Monks are now testing their AI with the goal of launching it next month for the firm’s tariff cases. The technology will reduce a firm’s time to develop a case by 70%, said Karan Chetal, chief growth officer at Monks.

Some claimants that want access to their refund faster have sold tariff claims to hedge funds and other investment managers. Watts’ AI accounts for this and is integrated with financial institutions, so that those who want to sell their tariff claims can instantly get a bid with one click, Chetal said.

“It allows the firm to take more cases and have more happier customers,” he said, “because now they can get access to information in literally real time and make decisions easily.”

The ultimate aim, Chetal said, is to “serve many law firms, which will then enable the right outcomes, faster outcomes, better customer experience.”

Personal Injury

Watts’ twist on AI is to capitalize on another trend—private equity dollars flowing into the legal industry. Specifically, PE and other investors are choosing to invest in the personal injury space through MSOs.

Most US states prevent non-lawyers from owning or profiting from law firms, and that constrains the legal industry’s access to growth capital.

Taking a cue from the medical and accounting fields, law firms are increasingly working around the constraints by separating their non-legal functions into separate entities. While the practice of law stays with the firm, functions such as technology, IT, human resources, marketing, and client intake are shifted into a separate MSO.

Personal injury is popular for the investors through MSOs because of the firms’ high volume of casework and a faster path to resolution than other types of litigation, Watts said.

Defense lawyers are taking note. Meshach Rhoades, a Hogan Lovells Cadwalader trial lawyer who represents consumer products companies in class actions, said plaintiffs’ lawyers pose a challenge to defense-side trial lawyers because of the rise of artificial intelligence and private equity sponsorship of law practices.

“They can move faster, their resources can be greater, and they can bring lawsuits to fruition because they have more resources,” she said.

A first-of-its-kind, invite-only conference in Holland & Knight’s New York office in April showed private equity firms’ interest in investing in personal injury firms, with major players including Apollo Global Management, Fortress Investment Group and Stifel Financial Corp. attending.

Uplift Investors, a private equity firm that invests in middle-market services companies, last month announced a fourth personal injury law firm has joined its Orion Legal MSO. Personal injury firm Rafi Law Group announced a $125 million investment from an outside investor into an MSO in April.

MSOs address a key concern of personal injury firms who want to invest in AI—that is, the cost, Chetal said. The MSO allows firms to take outside investment, relieving them of the financial burden, he said.

Watts and Monks aim to make their AI customizable for other firms, he said. They hope to start their MSO approach by the end of the year, Chetal said.

Watts said the project shows that while he is proud of being a lawyer and running his firm, “I’m also a businessman on the side.”

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