Owning the law

Larry Ribstein —  30 August 2010

Just as my Death of Big Law has been published, I’m working with Bruce Kobayashi on a new paper with the above working title, which I will be presenting at the Canadian Law & Economics conference in October. Here’s a taste of an early version I presented last May at Law & Society.

Now the September issue of the ABA Journal has a long article on owning firms that produce legal work. The article discusses “[a] new class of lawyer-entrepreneurs in U.S. legal services [that] is attracting hundreds of millions of dollars from global investors, even while traditional law firms are forced to cut back.”

The article notes that ABA Model Rule 5.4 limits non-lawyer ownership of law firms. But:

Some say the market already has moved beyond the bar’s restrictions. “The question used to be: ‘Will the ABA change Rule 5.4?’ “says lawyer and professor Larry Ribstein, associate dean for research at the University of Illinois College of Law. “The question now is, ‘Who cares?’ If the ABA wants to continue to regulate a tiny fraction of the legal market, they can keep their rule.”

The article focuses on legal outsourcing, and on financing of litigation by firms like Juridica Investments Ltd.. The latter’s founder is quoted as observing that “I began to see claims simply as a business asset that needed to be monetized.”

The article concludes:

University of Illinois prof Ribstein says the growth of these financiers underscores the legal industry’s transition. “Bringing in capital allows businesses to scale up and provides efficient specialization,” he says. “Once a business model calls for capital, there’s no particular reason why lawyers themselves are the best people to provide it.”

Couldn’t have said it better myself.

My work in progress will go beyond outsourcing and litigation financing to discuss other potential mechanisms for owning a piece of the production of law and legal services.

Larry Ribstein

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Professor of Law, University of Illinois College of Law

8 responses to Owning the law

  1. 

    There is no law, no ‘justice’. Just raw power and manipulation for cash. Serial felonies mean nothing, if you’re connected. Conversely, families and businesses are vicariously ruined for the crime of not being connected. Thug-acracy.

    The idea that was America was killed by kleptocrats backed by brute force. Sad reality.

    Repugnant to the Constitution = Null and Void. Hope you all are on the right side of that when it comes time.

  2. 

    As a mere non-lawyer citizen, I am not sure what I think of this. It does not bother me that people make money, even lots of it from law. But it does concern me greatly if the law itself becomes the object of entrepenurial manipulation. Since big business and big government tend to be natural allies, who will litle guys like me turn to? Will the big-box lawyer I hire be working for me or for his company? Will he tell me? Will I be able to believe him? Will I know about the relationships between the law company and its government regulators? (I think only fools believe that this kind of business will escape regulation.) Just asking …

  3. 

    What I think will happen here is that lawyers, and soon other professionals like psychologists (web visits), are finally going to understand why we are whining about outsourcing. When you spend thousands and decades on building expertise in computers or engineering only to have other countries undercut your skill set you start to understand. The big education bubble will pop about the same time that the lawyers start losing significant work to India. It’s already happening with patent applications. I was destroyed by H1B and L1 visas in the computer industry. It’s going to be interesting to see this one move forward. Are you going to be able to get Obamacare to for psychological support in Urdu via the web? As sure as you’re reading this we’ll be spreading the wealth around in all areas.

  4. 

    It seems that this would do to the legal community what has already happened to the medical profession with people with MBA’s controlling doctors and medical care.

  5. 

    I don’t understand this: “The question now is, ‘Who cares?’ If the ABA wants to continue to regulate a tiny fraction of the legal market, they can keep their rule.”

    The ABA promulgates model rules; it is the state bar rules that discipline attorneys. Are the various states going to loosen 5.4 or their equivalent?

  6. 

    When you have a mountain to shift, individuals with shovels are no longer sufficient; capital equipment is needed. The mountain of laws is beginning to look like continental uplift, a Himalaya of colliding interests, and individual lawyers, whether or not in teams, are no longer sufficient to cope with it.

    Regards,
    Ric

  7. 

    This is an interesting article. Just when it seems as if big law may be seeing a decrease in popularity among future attorneys, it’s popularity increases among big investors. If big investors get big law firms within their sites, it will be interesting to see what will happen to these firms.

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