Richard Epstein has published this review in the Wall Street Journal of Steven Harper’s provocative new book, The Lawyer Bubble. In a nutshell, Epstein believes that Harper’s criticisms and concerns are overblown, especially with regard to the future of “Big Law.” Here’s one notable section: “Ironically, Mr. Harper misses the most significant recent dislocation in the practice of law, which is at the consumer end of the market: the rise of low-cost online law firms like LegalZoom and RocketLawyer that aid clients in drafting standard partnerships, wills, leases and the like. These firms pose a mortal threat to sole practitioners, not to Big Law.”
I have a couple of problems with this passage. The first is pretty micro, but concerns an important matter of terminology: the definition of a law firm. If LegalZoom and RocketLawyer are “law firms,” they are clearly engaged in the unauthorized practice of law and violating Rule 5.4 of the Rules of Professional Conduct. Of course, LegalZoom has been the subject of UPL litigation, so perhaps a jurisdiction will eventually prove Epstein to be right. But I think it’s at least a debatable point. The problem is that we don’t have a meaningful definition of “law practice,” so we can't easily identify when a new entrepreneurial entity should be defined as a law firm and subject to the rules of professional conduct. Given the changing nature of the legal industry, this definitional issue is going to arise with greater frequency. (See, for example, this recent post and this one on whether Axiom is a law firm.)
Second, and more importantly, I disagree with Epstein’s claim that Big Law's avoidance of a "grisly fate" during the recent economic turmoil means that Big Law is sufficiently adaptable to thrive in the years ahead. In light of Epstein’s penchant for libertarianism, it is somewhat surprising that he overlooks another possible explanation for Big Law’s survival: existing rules in the U.S. largely prohibit competition from differently structured legal service providers. In every U.S. jurisdiction except D.C., Rule 5.4 of the rules of professional conduct prevents non-lawyer ownership of law firms, thus limiting the possibility of disruptive competition that might flow from liberalization. Of course, it may be true that Big Law could survive and thrive if (for example) PwC and Ernst & Young were permitted to practice law and compete with large law firms, but that seems far from clear. We will know more in the next few years as Australia and England have more experience with non-lawyer ownership of law firms. In the meantime, I think Epstein’s Big Law optimism rests, at least in part (and somewhat ironically given Epstein’s libertarian bent), on anti-competitive rules currently in place in the U.S.
Epstein’s optimism also underestimates the transformative effect that technology is having (and will continue to have) on the delivery of legal services. These changes are not just affecting sole practitioners and small firms, as Epstein contends, though the effects are probably being felt in those settings more dramatically and quickly. The reality is that technology is also transforming and commoditizing some Big Law services that traditionally generated revenue. This transformation is only in its infancy, so it is difficult to say what will happen when it matures. It may be that large law firms will be able to adapt and find other ways to generate revenue and maintain the status quo. Or it may be that technology will not be as transformative as prominent commentators like Richard Susskind and others believe. But it seems to me that existing trends involving technology and liberalization will bring about more dramatic changes to Big Law than Epstein's review predicts.