Larry Ribstein on After the Fall (Of Regulation)

Larry Ribstein —  19 September 2011

My previous post in this symposium argued that deregulation is upon us.  Here I’ll discuss what that could entail.

The legal information expert:  I summoned up the specter of computers practicing law.  There is in fact no doubt that computers can practice law as that term is defined by some courts and regulators: giving personalized legal advice.  Clearly computers already can process a lot of data and come to fairly accurate determinations of many types of legal questions.

This does not, however, mean that computers can replace lawyers.  It means that lawyers will have to learn to work with technology.  The “legal information experts” of the future will have to provide the human insights about the world of law that computers must have to do their jobs.  They must also make the choices that computers can’t. For example, what types of contractual structures work best with the new types of arrangements that arise in a constantly changing business world?  What choices should individual clients make among the alternatives that a computer provides?

This is good news for lawyers.  Lawyers can focus on the more sophisticated tasks that require human ingenuity as computers take over the routine.

The policy architect. Freed by technology from routine, lawyers can increase their involvement in designing laws and other legal structures.  Computers may be great historians but they are not yet equipped to make judgments about what the future should look like.  Lawyers need not leave lawmaking to legislators, but can participate in a private market for law. Kobayashi and I discuss in a recent paper the potential for such private lawmaking and the changes in the law that could make it happen.

The death of the law firm.  Although I’ve written the obituary for Big Law, regulation continues to sustain a semblance of the big law structure.  These firms are sustained by rules restricting referral fees and non-lawyer financing of firms engaged in the practice of law.  At a more basic level, law firms address clients’ costs of obtaining information about lawyer quality.  Law firms presumably can help by monitoring, mentoring and screening lawyers, so that the client just needs to choose a firm with a good reputation.  But as big law weakens, so does its ability to provide these services.  More importantly, the markets and technologies discussed in my previous post can step in and solve clients’ information asymmetry better than can today’s law firms.

The future of licensing.  It’s unlikely that lawyer licensing will completely die.  It will be hard to reconcile complete deregulation of law practice with continued licensing of doctors, tour guides and horse dentists.   But there’s an important difference between lawyers and these other professions:  the prodigiously powerful lawyer interest group has managed to restrict access to the extremely broad field of human activity called the “practice of law.”  This regulatory monolith is bound to fracture.

It’s not clear what will remain.  Certain types of services to consumers may require a license, on the theory that ordinary consumers can’t fully protect themselves from lemons. Also, courts may insist that licensed lawyers conserve public courts’ scarce resources.  Licensing may reflect something like the traditional British distinction between barristers and solicitors.

Another approach to licensing may be to change how it is done.  Lawyers now must be licensed in every state where they practice law.  This enables states to erect regulatory walls that impede national law practice.  It also forces professional rules to be uniform in order to accommodate our mobile and global society.

A better option, similar to a system I’ve suggested for law firm regulation, is a “driver’s license” approach, where lawyers get a license in the state of their principal residence which they can use to practice anywhere in the country. Unlike the internal affairs doctrine for corporations, states could issue licenses only to their residents.  Because lawyers are likely to practice mainly where they live, this helps ensure that the licensing jurisdictions will have a stake in good regulation and prevent a potential race to the bottom.  At the same time, the drivers’ license approach would enable more jurisdictional competition for lawyer regulation than we have today, and thus help pave the way for the developments discussed in my previous post.

Larry Ribstein

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Professor of Law, University of Illinois College of Law

4 responses to Larry Ribstein on After the Fall (Of Regulation)

  1. 

    If you are suspended or disbarred in one state, that state immediately notifies the bars of other states and the federal district and circuit courts in which you are admitted of your suspension or disbarment. However, the standards for disbarment differ from state to state. For example, in New York, if a lawyer is convicted of a felony, he is automatically disbarred. However, other states only require disbarment where the conviction is for a crime involving moral turpitude.

  2. 

    “a “driver’s license” approach, where lawyers get a license in the state of their principal residence which they can use to practice anywhere in the country.”

    What about losing one’s license? I don’t know how that works with driver’s licenses, actually. Can an Indiana court take away my Illinois driver’s license?

  3. 

    Accepting as gospel Fred Carr’s description of legal services as falling in to one of four “buckets,” consisting of counseling, advocacy, process and content, as reported in http://kowalskiandassociatesblog.com/2011/09/14/the-clock-is-ticking-in-five-years-traditional-law-firms-may-be-extinct-what-are-you-doing-to-avoid-being-an-artifact/ and widely elsewhere, the fact is that in most cases, we have long moved in to the state driver’s license model of licensing and regulating lawyers.

    The corporation based in Arkansas, incorporated in Delaware, does not hesitate for an instant calling its regular New York based counsel to seek counsel on a legal issue. The Midwestern company with a litigation issue in Milwaukee more often than not will contact its Chicago based law firm to address the issue. The Chicago law firm is likely to handle the bulk of the matter, using a Wisconsin law firm to act as a ministerial “local counsel.” The Chicago firm will in short order seek admission pro haec vice. The need for “local is largely a vestige of ancient guild rules.

    Similarly, in most instances, local licensure is irrelevant to either process or content.

    Some few states are notoriously protective of its local guilds. Notable among them are Delaware, New Jersey, Florida and California. Pro haec admissions in those states more difficult than in other states. New Jersey, notably, sandwiched between lawyer rich New York and Philadelphia, will not allow a creditor to enforce a loan in New Jersey, unless the loan actually closed within the boundaries of the state by New Jersey counsel.

    State driver’s license analogy is interesting on a conceptual and theoretical basis, but it simply won’t work. Taking the analogy to its logical conclusion, it would be as if you couldn’t drive down the New Jersey Turnpike from New York and Philadelphia, unless you first stopped at the state’s border and picked up a New Jersey driver to sit in the jump seat until you safely passed through the state. The local bar would resist vigorously any other result,

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