Archives For lawyers

Those attending the Wisconsin in-house counsel conference this weekend (kudos to Jonathan Lipson for a well-organized and comprehensive program) got a great overview of the problems and opportunities facing the lawyers who work inside corporations.  Here’s some brief observations.

As previously reported, my own contribution focused on how technology might significantly affect in-house lawyers’ work, including by moving many of their tasks to software and non-lawyers.  This has potential implications for the discussions by Larry Hamermesh, Don Langevoort, Deborah DeMott, Steve Schwarcz and Kathleen Cully of the watchdog or gatekeeper responsibilities of in-house lawyers. If in-house lawyers try to become gatekeepers, might this encourage firms to replace their lawyers with software and non-lawyer employees?

Several speakers (Sida Liu, David Wilkins, Christoph Henkel) discussed in-house lawyers outside the U.S. We learned, among other things, that countries such as China and Germany train and accredit lawyers separately for litigation and in-house service. I argued in Practicing Theory and in my paper for this symposium against the one-size-fits-all approach of legal education in the U.S.

The global perspective reinforced my view that U.S corporations and therefore their lawyers need to understand the laws of the many countries they do business in.  Daniel Chow, Mike Koehler, Andrew Spalding and Joe Yockey’s discussions of the Foreign Corrupt Practices Act also showed that firms need to understand foreign cultures. The U.S.-centric approach of U.S. legal education is increasingly out of step with global markets.

In general, while technology and markets are eroding the market for lawyers, there’s still plenty left for them to do, including in-house. But are U.S. law schools training for this work?

Wal-Mart lawyers

Larry Ribstein —  11 November 2011

Yesterday’s WSJ discussed Wal-Mart’s (possible) plan to dominate the industry of primary health-care clinics:   

Wal-Mart said in its proposal document that it is interested in offering services, including clinical care such as asthma, sleep apnea and osteoporosis monitoring, diagnostic services such as allergy and blood testing, and preventive services such as vaccinations and physical exams, as well as health and wellness products. It asked vendors to propose low-cost plans and said it would make final selections by January

Wal-Mart is evidently responding to the expansion in demand for such services that could result from Obamacare.

Staffed by nurse practitioners and physician assistants, the clinics are increasingly pushing into the management of chronic diseases like diabetes, helping to fill a shortage of primary-care doctors that is only expected to worsen as health-care reform increases the number of Americans seeking their services. The clinics help lower health-care costs by dealing with patients with basic illnesses or nonemergency issues who otherwise might have gone to an emergency room.

But Wal-Mart already faces stiff competition in the medical field from such big players as CVS (645 clinics), Walgreen (347 clinics), Kroger, Target and Safeway. 

So maybe Wal-Mart would be interested in leading the way in the less-crowded field of low-end legal services, once deregulation comes to our shores.  

Should this happen?  If in medicine, why not law? The need for lower-cost legal services is surely as great as that for medical services.  The public is protected by the providers’ need to protect their costly brands. 

My point here is only that, like it or not, the Wal-Mart lawyer is rapidly getting more plausible.

Many believe that law school applicants have been misled about or just don’t understand the market for legal services. I think it’s worth exploring the alternative hypothesis that law school is college grads’ best opportunity despite the market.  

Today’s WSJ discusses one possible basis for this conclusion — college students’ poor choice of what to study:

Although the number of college graduates increased about 29% between 2001 and 2009, the number graduating with engineering degrees only increased 19%, according to the most recent statistics from the U.S. Dept. of Education. The number with computer and information-sciences degrees decreased 14%. * * *

Research has shown that graduating with these majors provides a good foundation not just for so-called STEM jobs, or those in the science, technology, engineering, and math fields, but a whole range of industries where earnings expectations are high. Business, finance and consulting firms, as well as most health-care professions, are keen to hire those who bring quantitative skills and can help them stay competitive.


Science classes may also require more time—something U.S. college students may not be willing to commit. In a recent study, sociologists Richard Arum of New York University and Josipa Roksa of the University of Virginia found that the average U.S. student in their sample spent only about 12 to 13 hours a week studying, about half the time spent by students in 1960. They found that math and science—though not engineering—students study on average about three hours more per week than their non-science-major counterparts.

Tyler Cowen discusses the problem from a broader perspective:

Since 1997-2000, there is downward pressure on lots of wages, but morale matters and labor market incumbents retain a favored position. Though some wages fall, employers resist that downward pressure, and pass along a lot of the burden of adjustment to new job seekers. Even if that original downward pressure on wages is smallish, new job seekers have to make big adjustments in their career plans, majors, ambitions, etc. to get through the door at all. They didn’t. * * *

So the law placement problem may be about bad choices, but the choices are the ones made by college sophomores, not college seniors.  The persistent demand for law school might be at least partly explained by the fact that college hasn’t given law school applicants the skills to go where most jobs are. Law school then becomes the best way to utilize the skills that they have.

Perhaps colleges should offer better career guidance at an earlier stage. Or maybe the problem lies in grammar or high school education, or in the design of college science, math and engineering courses.

Law schools should, of course, provide full disclosure of the job market for their grads.  But we shouldn’t assume that disclosure is the whole problem, particularly as news of the law job market gets out anyway. Law school applications might be a symptom of a broader problem with broader solutions.  If I’m right, the real drop in law school applications may significantly lag the law job market as the message percolates down to college students.

And it’s worth adding that law itself might be a STEM job of the future, as law becomes more tech-oriented.

Today’s WSJ covers the Howrey bankruptcy and specifically the ex-partners’ and their new firms’ potential liabilities for unfinished business taken from Howrey.

As the article says, Howrey’s bankruptcy trustee, the custodian of its claims under state law, “has the right to sue for profits generated by work that partners started at their old law firms and took to their new positions, such as continuing cases.” The defendants can include the new firms the partners joined, including Dewey & LeBoeuf, Baker Botts and Arent Fox, which “may have the deepest pockets.”

This may be Howrey’s most important asset because, according to the old saw the article quotes, a law firm’s “most valuable assets of a law firm go home every night.”

A similar fight is happening over the remains of Heller Erhman.  The article says that the defendant law firms in the Heller case are “arguing that clients have a right to take their business where they choose.”

Of course that’s true, but it doesn’t end the legal complications.  As discussed in The Source, §7.08(e) (footnotes omitted):

All of the partners of the dissolved firm, however, are generally entitled to share in fees for pre-dissolution work-in-process paid after dissolution to the dissolved partnership or to withdrawing partners, even if the client has exercised a right to discharge the attorney or attorneys who are sharing in the fees.* * *

Moreover, depending on the applicable law, the partner or firm completing the case may not be entitled to extra compensation for completing the case.  Rather, the case is treated as an asset of the prior firm and shared among the partners of that firm on the same basis that they shared fees while the firm was still alive.  As discussed in Bromberg & Ribstein, this reflects the difficulty of figuring out an alternative basis for dividing the free, the assumption that the partnership continues on the pre-dissolution basis until winding up is completed, and the need to encourage partners to stay with the firm.  Of course there are strong policy arguments on the other side:  giving partners freedom to move and the risks to the client if the lawyer isn’t paid for extra work.

But note that these are only default rules.  Thus, my book notes (footnotes omitted):

The partners can and should anticipate the above problems in their agreement. The partners should be careful to define the situations in which the work-in-process provision applies.

Often, however, there is no clear agreement, and the lawyers and their lawyers are left to hash out the issues at substantial cost.

I have two questions:

  1. Would it really be so bad if the practice of law were put on sounder financial footing by permitting non-lawyer capital? These bankruptcies illustrate the instability and insubstantiality of these weak cooperatives we call “firms.”  See Death of Big Law.  The dissolutions are likely to increase as Big Law devolves, and clients are caught in the middle.
  2. Why aren’t these matters dealt with more definitively in agreements among lawyers who write agreements for others for a living?

Law firms’ competition

Larry Ribstein —  6 November 2011

The biggest competition for law firms is not other law firms but in-house counsel. So reports the ABAJ.   I make a similar point in a paper I’m presenting at a University of Wisconsin program next week.

There are two reasons for this:  pressures on firms to reduce fees, and law’s information revolution which is reducing firms’ need to rely on traditional legal services. In my Wisconsin paper I consider the impact of the following developments, among others:  automated contracting, compliance software, knowledge management, streamlined dispute resolution mechanisms, and Web-based processes for learning about and hiring lawyers.

Simultaneously with these developments, law firms are becoming less reliable as reputational intermediaries because they do less monitoring, mentoring and screening of lawyers (see Death of Big Law).  Corporations are finding that they can dispense with the middleman (law firms) and hire lawyers directly.

I predict the next step in the evolution of corporate legal services will be the mutation of in-house lawyers themselves.  Instead of corporations simply bringing law firms within their walls, they will spread legal expertise throughout the organization — what I refer to in the Wisconsin paper as “embedded lawyers.”

These developments have significant implications for the market for corporate legal services.  Law firms have managed to survive for decades on a business model that enables them to charge corporate clients hundreds of dollars an hour more for their lawyers’ services than the firms are paying.  The difference, of course, is profits to the partners.  Corporations are now competing away these profits.

Needless to say, law graduates and law schools will see the effects of this competition between in-house and outside law firms.  At the same time that law grads are seeing fewer corporate jobs they may also be seeing lower wages for the jobs that are available.

Moreover, applicants for these in-house jobs will have to meet corporate specs. Under the old model, law firms hired generalists from the best schools and trained them.  Corporations hired some of the better ones a few years out. Now corporations are looking to hire cheaper lawyers right out of law school.  They’re looking for graduates who don’t need the law firm apprenticeship.

The law schools that will win the corporate job placement derby will be the ones that can provide some of the training law firms used to provide.  In other words, while law schools seem to think they need to teach their graduates where to find the courthouse, the biggest need will be those who understand how businesses make money.

These developments have implications beyond corporate legal services.  Corporations can access legal technology without worrying about the unauthorized practice rules that restrict this technology at the consumer level.  But once this technology is widespread in firms it will be harder to block its availability to consumers.

Watch this space for more on these issues.

Bill Henderson vs. Orin Kerr (in comments, with reply by Henderson). HT Leiter.


U.S. Legal Education is in the midst of a large, structural transformation. This structural shift is driven by a confluence of factors, which includes three significant trends:

  1. The decline, or plateau, of the traditional time and materials legal services model
  2. The politics of law school finance
  3. A new generation of legal entrepenuers that are turning some aspects of law into process-driven products and services. * * *

My post raises two questions for law faculty that need to be answer in order:

  1. Is the evidence of structural change sufficiently compellling that we need to retool in order to survive? This is a business decision. It must be based on facts and probabilities. And it has to be answered first so the appropriate urgency and perspective is present to answer question #2.
  2. If the answer to #1 is yes, how should our law school retool its curriculum and appointments process? Law professors are prone to focus on the difficulty/impossibility of the retooling process because–let’s face it–we are worried about how the changes will affect us. Question #2 is the wrong place to start.


When I have asked a few peers who are in the business of practicing law if they think we are undergoing a major change in the legal market, or if we are just experiencing the usual cyclical pains of a recession, they generally respond that they think we are seeing the latter rather than the former. So that means that you as an academic are saying one thing about what is happening in the legal market, and the group I have spoken with who are actually in the legal market generally are saying another.

Henderson reply:

Lawyers generally don’t consult industry level data. When I talk to groups of practicing lawyers–and I do so regularly–and I show them trendlines and comparisons with other industries that have undergone structural change, very few continue to advance the deep recession argument because such an analysis just does not fit the industry level trendlines.

I’m with Henderson.  Here’s my take on the future of legal education in light of the developments he describes.  It seems clear that conventional law jobs are rapidly being replaced by technology, there is significant political and competitive pressure on the existing regulatory model, and that changes in the profession will accelerate with deregulation. These shifts are occurring apart from problems in the economy.  Indeed, these changes will increase as the economy, and therefore environment for innovation, improves. In other words, a significant portion of the legal profession may be left behind by the recession’s end.

Think what even a 30% decline in the demand for legal education (or more if tuition continues to increase) would mean for legal education.  The law schools outside the first tier in places with poor legal job markets will be left stranded.  All law schools outside the very top will have to scramble for position by changing their products.

Exactly what law schools should be doing is unclear.  This is not a time to set in place a complete revamp that could get the market’s direction wrong. But law schools are foolhardy if they think they can continue to bury their collective heads in the sand because of the soothing noises they’re hearing from their (currently) successful alumni.

The NYT has finally caught onto non-lawyer financing of law firms, and specifically the possibility of Wal-Mart lawyers, now being ushered in by England’s new Legal Services Act. As the article notes, “[s]uch a move could upend the industry’s stiff adherence to the partnership system in favor of full-fledged corporations that have access to the capital markets.” I’ve been there for awhile.

The traditionalists quoted in the article evidently are still hoping they can stop the train by holding out their arms and yelling “stop.” They claim that non-lawyer-owned firms won’t be ethically responsible.  They don’t seem to wonder why law firms should differ from all the other non-worker-cooperatives out there.  Or they somehow imagine

that the lawyers “who currently own law firms are not motivated by profit,” said Ken Fowlie, the executive director of Slater & Gordon, an Australian law firm that was the first in the world to become a publicly traded company.

As for the risk that consumers will harmed:

Consumers may gravitate toward a particular retailer for legal services because “they know what the brand stands for and what they’re going to get,” said Stephen Mayson, the director of the Legal Services Institute in England.

The best comment in the article is the last one:

 “The more sophisticated firms, the ones that will thrive in the future, they have become very much aware of what this new situation presents,” said Silvia Hodges, who teaches law firm management at Fordham Law School. “To say or to assume that the status quo is going to prevail and that we’re not going to have any changes, that doesn’t make any sense.”

I believe that non-lawyer-owned law firms are only the first step toward a new market that may bear little resemblance to conventional law practice.  In the less regulated world of the future, much of what Wal-Mart lawyers can do will be done by machines in a new legal information market.

Today’s WSJ has a great article about class action crusader Ted Frank, who is (1) out to kill class actions or (2) make them fairer by getting better settlements for plaintiffs (and worse for their lawyers), depending on whether you believe Ted or those whose oxen he has gored (class action lawyers).  I believe Ted.

For me, the takeaway is in the last paragraph:

“Ted has already made a big difference,” said Mr. [Jeffrey ] Jacobson, a Debevoise & Plimpton partner [who defended a settlement Ted attacked]. “Even if he accomplishes nothing else, he’ll have had a greater impact than most lawyers will achieve in their careers.”

Ted’s an example of what a lawyer can accomplish when he has the guts to break away from the cookie-cutter world of traditional law practice.  One of the good things about the uncertain future of law practice is that it encourages more Ted Franks by reducing the opportunity costs of forsaking convention.

Selling judgments

Larry Ribstein —  30 October 2011

The ABA Journal discusses a law student’s entrepreneurial solution to the legal job market:  start his own market.  It’s called Judgment Marketplace, and it enables trading court judgments.  The aim is to make a dent in the nearly 80 percent of judgments in the U.S. that aren’t collected.  The firm ultimately may “serve as a tool for potential investors to purchase large portfolios of judgments” and provide a mechanism for evaluating judgment sellers’ credibility and judgment collectibility.

This is one possible piece of law’s information revolution, in which the traditional cottage industry of lawyers advising individual clients turns into a robust information market.  It’s also an example of the new opportunities that may replace the disappearing traditional law jobs.

Jordan Weissman is scared about Winston & Crandall’s plan to deregulate all the lawyers.  He admits that the idea has some appeal, but concludes that “a lot of it is also completely bunk.” He says the proposal is basically irrelevant for big law, where clients are looking for top talent (although he’s on board with non-lawyer financing of big firms).  But for small-time lawyers, “without licensing you’ll welcome incompetent lawyers into the market.”  He doesn’t have W & C’s confidence in third party intermediaries’ ability to do the screening or that “most consumers will be savvy enough to do their research and protect themselves.”

Weissman has a point: the idea of simply deregulating the whole industry is too simplistic.  But he needs to check out our symposium before assuming that the alternative is just a few relatively modest tweaks.

The possible futures aren’t limited to the “legal profession” as we know it today, but extend to the creation of a legal information industry.  Deregulation isn’t all about lawyer licensing. Most importantly, it will involve dismantling the regulatory infrastructure that requires legal information to be parsed out by lawyers one client at a time. Kobayashi and I discuss some of the possibilities.

The likely consequences of meaningful deregulation will not be more incompetent lawyers.  Rather, lawyers will have to prove their value against an array of technologies and information services that make legal advice cheaper and more accessible to ordinary consumers.  Whether or not they continue to be licensed, lawyers will have to get better in order not to be replaced by machines.  Licensing may remain, but its domain will shrink.  The changes throughout the existing profession are likely to be vast.

Clifford Winston argues for this in the NYT.  For much more, see our symposium with Winston and many others.

The WSJ discusses the declining value of first-year associates as clients are refusing to pay for training. Clients question whether new associates have “a sophisticated knowledge of the business world, and many nuts and bolts, such as how to prepare a witness for a deposition or the precise terms that, say, need to be included in a particular kind of loan agreement.”

Law firms can’t put the associates to work anymore because a lot of the work they used to be able to bill to clients, particularly research and discovery, is now outsourced or automated.  And what isn’t goes to contract lawyers who get $60-$70/hour rather than $200-$300.

So what’s the solution?

I suppose that the clients and the firms think it’s the law schools’ responsibility.  But law schools don’t have a comparative advantage doing this kind of training without significant retooling.  I have suggested some things law schools should be doing that are within their comparative advantage, including more finance and business-oriented training, but they don’t include apprenticeship programs.

Even if the law schools should do this from some perspective, who or what is going to give them the incentive to do it, and do it well?  Where, for example, will the money come from?  Higher tuition?

One would think the clients would pay to train the lawyers who will be working for them after they get trained, as the WSJ article notes.  But training lawyers is not what non-law firms do, so buying them already trained seems like a sensible “make or buy” decision.

The law firms once could benefit from training associates who would be their partners, but this long-range view doesn’t work in the Death of Big Law era.

In Germany, from which I just returned, university law grads go through a two-year training/apprenticeship at government expense prior to taking their final bar exams.  Somehow I don’t think the idea of the government paying to train lawyers would work in the current US political environment.

So what’s the solution?  I think we are ultimately going to come down to apprenticeship programs at law firms, where the pay matches the experience level.  This solution, though quite logical, will not sit well with the current model.  No more $160,000 salaries right out of law school.  And of course, student debt and law school tuition will have to ramp down to reflect law students’ reduced prospects on graduation.