Legal Ethics Forum

The Legal Ethics of Verein-Style Law Firms

This ABA Journal column describes some interesting ethical challenges arising from the increasing prevalence of verein-style law firms. 

In a nutshell, a firm set up as a verein typically uses a common name (e.g., DLA Piper), but each office is administratively and financially separate from the other offices.  The ABA Journal column notes that this kind of structure raises possible problems under Model Rule 1.5(e), depending on how the firm handles the origination of business and the referral of matters among offices.

Another interesting question -- not directly addressed in the column -- relates to Rule 5.4.  For example, imagine that a verein-style firm has offices in New York and London, and the London office has nonlawyer partners.  The New York office may be asked to make certain cost contributions to a common fund for, say, marketing that benefits all offices.  Depending on how the common fund is administered (e.g., Is it just for marketing?  Or is "cost" sharing used in such a way that it rewards particular offices or lawyers for their origination of business?), such contributions could raise problems under Rule 5.4.  (Somewhat related issues are addressed in ABA Formal Opinion 464.  See also here.)

I suspect that we'll be hearing more about the ethics issues associated with vereins in the years ahead.

Unbundling, turf battles, and the decline of law as an information profession

Jim Milles 

Like Cassandra Burke Robertson, I had another life before becoming a law professor full-time. Working as a law librarian for 25 years at three different law schools gave me a different perspective, within the system of legal education while not fully part of it. This post reflects that personal perspective, and expresses my sense of changes in the legal profession as filtered through my experience of the changing profession of librarianship.

The legal profession is, among other things, an information profession. Lawyers, as members of one of the three paradigmatic “learned professions” (the others being medicine and divinity), base their claim to professional status on the possession of “advanced, or complex, or esoteric, or arcane knowledge” or “formally rational abstract utilitarian knowledge.” The legal profession is facing increasing competition from other professions and semi-professions (from accountants and business consultants to paralegals and e-discovery vendors), the growing reluctance of clients to pay exorbitant legal fees and increased scrutiny of fees by corporate counsel, and the ready availability of legal information and services online.

Like other information professions such as librarianship and journalism, law is under siege because of the increasing opportunities for disintermediation, and is engaged in a fight over turf. Law libraries are a good example of this struggle. Almost 15 years ago Richard Danner wrote in “Redefining a Profession” about the pressures faced by law librarianship as a profession, competing for resources with IT (information technology) professionals over the authority to mediate and control access to information in law schools. The competition has only become fiercer in recent  years, as most law libraries have faced massive budget cuts and the transfer of former library space to faculty office, administrative, and classroom space. The pressures arising from the current tuition and student debt crisis are intensifying the demands to cut, and even eliminate, law libraries.

To be sure, librarians and their supporters like to proclaim that “they will always need libraries and librarians.” But librarians struggle to articulate what it is that they provide that remains essential in a world of Google Books, Google Scholar, and instantaneous access to an enormous wealth of high quality online information, especially when the economics of practice lead lawyers to change from legal information maximizers to satisficers.

As for journalism, we are all familiar with the decline of newspapers: from one perspective, see the blog Newspaper Death Watch; from another, see the Public Editor of The New York Times asking “for reader input on whether and when New York Times news reporters should challenge ‘facts’ that are asserted by newsmakers they write about.”

One of the key insights in Richard Susskind’s book The End of Lawyers is that the current form of the practice of law is not eternal.

Responding to the structural break requires real change

Michael P. Downey 

In my prior post, I discussed how recent economic turbulence has altered what I teach and how I teach it. Now I will share how my experience, work with students, and personal observations lead me to believe that the legal academy has not embraced the tough solutions that this economy demands. In his December 2008 McKinsey Quarterly article “Strategy in a ‘structural break,’” UCLA management school Professor Robert Rumelt opines that we were experiencing a structural break.  Rumelt explains that such a break “denotes the moment in time-series data when trends and the patterns of associations among variables change.” Rumelt cautions, “The wrong way forward in a structural break during hard times is to try more of the same. The break and the hard times are sure indications that an old pattern has already been pushed to its limits and is destroying value.”

Of perhaps greatest relevance to the legal services industry, Rumelt voices exasperation over the cost of management structures that our present system requires “companies to spend at least $300,000 a year in wages, benefits, support personnel, and systems to enable one educated person to do his or her job,” warning that such a system “could be unsustainable in a less luxuriant world.”

The $300,000 per year Rumelt references almost perfectly tracks the compensation, benefits, and overhead costs that I allocate to an associate in my Introduction to Law Firm Practice class materials and in my book of the same title. This is the law practice that many now law school professors experienced, and that (as noted, in part due to OCI’s influence) some law students expect: practice at a very large firm, often with little client contact and no real feel for how the firm operated as a business. Yet law students are finding the decreases in new associate hiring have substantially diminished the opportunities for such employment.

Yet many law schools continue to educate students the same way. Students are charged high prices to learn legal thinking and legal philosophy, not what they actually need to succeed in court, in a business transaction, in a law firm, or in another legal practice or setting.

So what can and should law schools do? I offer three points in this manifesto. First, law schools must prepare students to be better able to provide legal services to clients. This includes clinical education courses. But it also includes the contents of substantive classes. When I was a law student, there were two Property professors. One taught only the mental gymnastics of thinking like a lawyer. The other taught real property law. While there may be a place – even a need – for both classes, particularly in the first year of law school, schools must make sure that graduates receive a substantial dose of course that will help them practice. Schools should also send a clear message that a  legal philosophy education will best prepare students to be legal philosophers, not lawyers.

Second, law schools should help students better understand the operation of law firms. Most law school graduates still enter private practice. If these lawyers understand how law firms generate clients or profits, they will be better prepared to practice, whether they are running their own firm or trying to survive and succeed as a junior lawyer at someone else’s law firm. Even graduates who do not expect to enter private practice can benefit from a basic understanding of law firm operations and economics, particularly considering the number of lawyers whose careers take unanticipated detours.

In addition, practical learning in legal ethics is critical. I started teaching trust accounting in my legal ethics courses after hearing a Colorado disciplinary counsel discuss that recent graduates were facing an increasing number of bar investigations when they overdrew their trust accounts. Considering that the economy is pushing many lawyers to smaller firms or solo practices, knowledge of trust accounting can be crucial, particularly when mishandling client funds may result in prompt, catastrophic discipline.

Third, law schools need to take some responsibility for students’ economic situations. For years, law schools have increased tuition at rates much faster than inflation, knowing law students could obtain (often federally funded) education loans to pay the increases. The result is that, through consolidation, lawyers today will likely be paying off their own student loans as their kids entered college. The recent economic downturn makes this even more probable.

Addressing such issues in part means working to ensure that at or shortly after graduation law students are more capable of practicing law, and practicing it successfully. Thus, this point ties back to my prior two points. But law schools can and should do more.  Law schools need to examine how they can reduce the economic burden on students, including reducing the cost of legal education. This may include tuition reductions, offering alternative payment arrangements, and loan repayment programs (which are too limited if they reach only pro bono lawyers, and ignore that many other graduates face huge economic struggles in trying to live and repay loans. I don’t have perfect solutions. I leave that for the more knowledgeable legal educators in this Symposium.

Finally, law schools can and should provide accurate information for applicants and students about job prospects upon graduation. Having worked hard to make law firms more transparent, I commend those pushing for greater transparency in the law school application process as well. Only then can people make intelligent choices about whether they want to be lawyers, as well as where they will try to be lawyers. 

Rogerian rhetoric and law school cred – part II

Lucy Jewel

In my last post, I suggested that law schools employ Rogerian rhetoric to engage debate on the current crisis in legal education.  Rogerian rhetoric holds that the advocate fully and completely state the opposing view and only then move forward to consider the counter view.  So the question is – how do we apply a Rogerian structure to the question of whether there is still value in the J.D., given troubling tuition costs, employment numbers, and starting salaries?  For purposes of this argument, let’s consider a J.D. from a low-tier school, which can be expected to have the worst rate of return for its graduates.  At a minimum, Rogerian rhetoric mandates that we not obfuscate our graduates’ employment and salary data.  We would have to start by expounding on the following, with complete accuracy:

• The law graduate may only have a 50% chance of not finding a full-time job as a lawyer;
• If the graduate does find a law job, there is a strong likelihood that the job will only pay in the range of mid five-figures [$45,000 - $65,000].
• The graduate will likely be carrying an enormous amount of student loan debt.
• If the graduate elects income based repayment options for his/her student loans, the graduate is likely to remain on a modest fixed income for the next twenty-five years of his/her life.
• As Dean Jim Chen has cogently pointed out, coming out of this mix, many law school graduates will not be in an optimal financial place.

With all that said, let’s focus on why someone would want to go to law school, with full knowledge of the above risks.  I’ve been mulling these ideas around for quite some time, in part, to justify my existence as a fourth-tier law professor (where I primarily teach practice skills).  I’ve also been perturbed by the strains of elitism running through this debate (justify your existence, lowly fourth tier law schools!) and the idea that law professors, accumulating our own cultural capital as we write and blog our way to more prominence, are the expert arbiters on whether law school is a good investment.  None of this is to discount there are deeply compelling narratives as to why one should not attend law school.  But I’m curious to explore the counter position, if there is one.

One thing to consider is cultural capital, i.e. the non-economic value, that a law degree affords.  Social mobility has long been associated with obtaining a law degree, and obviously, the argument that a law degree will help move one up in society’s structure is a difficult one to make given the financial hole one must dig in order to obtain the degree.  But there is more to the story of social mobility than just economics.  Some law students, the first in their family to obtain a JD, may see the opportunity to practice law as an important cultural marker in their community.  The cultural cache of a law degree might mean something, even if the newly minted JD can only find full-time work in a non-legal job and must enter the profession via a part-time solo-practice.

Meaningful autonomy is the other reason I can think of as to why someone would take a huge risk to obtain a J.D. with little guarantee of job security in return.   Practicing law, even if it is only part-time and even if it includes tasks that have long been designated as unchallenging and low-level (drafting wills, preparing bankruptcy petitions, family law, criminal defense) still requires the outlay of substantive knowledge, rhetorical skill, and counseling ability, as the attorney seeks to help others maneuver through the legal system. 

As professors, let’s not impose our own hyper-snobbery on the rest of the world.  For all the professional elitism about rank of law school and type of law practice, most lay-people, especially in underserved communities, view being a lawyer as being a lawyer.  It doesn’t matter what school one graduated from or what type of law one practices.  Moreover, as Professors Dinovitzer and Garth have reported, lawyer satisfaction rates among lawyers who graduate from less-elite schools (more likely to represent individual clients) remain higher than those legal professionals that graduate from elite schools (more likely to land a corporate law-firm job).  (The authors then posit that these differential outcomes in lawyer satisfaction are a manifestation of how our professional hierarchy replicates itself, an analysis that remains valid, but which may need updating, as the Great Recession and its after-effects have re-aligned our professional hierarchy).  Nonetheless, I think the data on lawyer satisfaction should give law professors pause before we project our own values and risk-aversion scales onto everyone who contemplates a career in law. 

Why do people make seemingly irrational economic choices?  Why, for instance, do throngs of people move to New York City, to be musicians, writers, or actors, when NYC is hardly an incubator of financial security or success in these endeavors?  Yes, we must accept that job security is no longer a reason for obtaining a law degree.  In addition, the argument that “one can do anything with a law degree” does not work these days (if it ever did).  The Rogerian line of reasoning may not continue to draw 40,000-plus new law students into our classrooms each year, but my predication is that the JD will continue to retain cultural value that defies pure economic reason. 

Two of three Carnegie Reports support the undergraduate law degree

Russ Pearce

When defending graduate legal education, many assume that it requires deference as the traditional American approach.  To the contrary, the requirement of an undergraduate degree before law school admission did not become standard until the 1960s.[1]  And while much of the push for making law a graduate degree came from the belief that lawyers needed liberal arts training, more bigoted sentiments found their way into the debates. 

In 1929, Henry Drinker, later the author of a leading treatise on legal ethics, argued that the American Bar Association should require two years of college before law school.  He explained why “a two year college course preliminary to the three year course of the law school [is] calculated to produce a better type of lawyer.” As “Chairman of the Committee of the Grievances of the Law Association of Philadelphia,” he had observed that lawyers “that came up out of the gutter and were catapulted into the law, have done the worst things and did not know they were doing wrong.”  In particular, “of the men who came before us who had been guilty of professional abuses, an extraordinarily large proportion were Russian Jew boys.”  What these lawyers lacked was what Drinker learned in college – not “book learning,” but “the American spirit of fair play.”[2]

Two Carnegie Reports provided the intellectual foundation for those who resisted efforts to require undergraduate education.  In contrast to the 2007 Carnegie Report that sought to reform graduate legal education, the 1921 and 1928 reports authored by Alfred Z. Reed recognized that different levels of legal training were appropriate for different segments of the market for legal services. 

The end of law schools

Ray Campbell

Law school as most of us know it is doomed.  Law school is doomed not because law schools fail to prepare students to become lawyers, but precisely because law schools, however badly and however anachronistically, train lawyers. Lawyers have been for centuries synonymous with the delivery of legal services, but that day is ending.

Already today, what might have been part of legal services are being delivered by non-lawyer organizations offering other important skill sets.  Tanina Rostain documented six years ago how companies that offer “corporate compliance” or “risk management” or “document production” or even “litigation consulting” already serve corporate general counsel, doing tasks once done by law firms.  The displacement will not just happen at the high end of the market where corporations assemble their own teams. In the future, aided by software and tightly defined business processes, paraprofessionals will also encroach on what has been lawyers’ turf, just as nurse practitioners have supplanted primary care physicians in many settings.

To the extent society is concerned about, and willing to support, educational training for those engaged in legal services, the time has come to think about very different kinds of training and, most likely, very different types of educational institutions. As with any other industry, the $230 billion plus US legal services industry exists because it meets needs of consumers. Clients come to lawyers because they have a job that needs to be done.

Professionals, unlike retail merchants or manufacturers, do not fill consumer needs by selling products to which they have added some kind of value. They pursue a different business model than that of the value chain, one that has been called by Clayton Christensen and others the “solution shop,” or, to distinguish it from a “value chain” business, a “value shop.” Professionals diagnose and solve problems – often vaguely defined problems of uncertain scope – by bringing to bear a specialized skill set or technology accessible to them but not to the general public. Problem solvers of this type include not just lawyers, but doctors, police detectives, and management consultants, to name a few.

The nature of the special skills and technology play a critical role in this model. The skills must be sufficient to solve the client’s problem, and they must be skills or a technology not generally available outside the profession. Typically, the people employed by solution shops have specialized training, which is further enhanced as they gain experience on the job.

Legal services are in crisis because the technology imparted by law schools no longer meets the needs of consumers. Put differently, today’s law schools deliver a set of skills and a body of knowledge not sufficient to meet the needs of consumers.  As Herbert Kritzer has argued, we need to rethink “law workers.”

What’s wrong with the skill set law schools give lawyers?

Social dimensions of legal education

John Varghese

Like any system of education, the purpose of legal education is to inculcate value system in the students, in addition to imparting knowledge and skills. If we define the purpose of legal education is to create good lawyers, the question who is a good lawyer would come immediately: Is a good lawyer one who is a good orator, or one who is skilled in legal drafting, or one who has a strong foundation in legal reasoning? A good lawyer is like the “good” neighbour as propounded by Jesus Christ- one who is good for you in bad times; one who is inwardly ethical, helping and caring, regardless of the image the world has for such person.

Cicero more or less defined a “good lawyer” when he said that Sulpicius was not less a master of law than of justice (non minus juris consultus quam justitiae). This shows that even from very early days, a true breed of lawyer was seen as one who is striving always to be in command of all the learning of the law, but striving no less earnestly to make the law fit the equality of justice and the ethical demand of righteousness. See John Maxcy Zane, The Story of the Law [1927].

  The foundations of creating a good lawyer should start from the law school. The Carnegie Report pointed to the needs of ethical foundations in legal education.

The three year J.D. – Does one-size-fits-all legal education still make sense?

Laurel Rigertas

Periodically there are discussions about whether a three-year program of legal education is still necessary, or whether a two-year program would be sufficient.  See here.  These discussions, however, contemplate a change to the length of legal education for all Juris Doctorate programs.  The legal profession should consider whether a range of degrees should be available.  Such a range could include the three-year J.D. based on a general program of legal education, in addition to specialized degrees based on one or two years of legal education.  This approach would, of course, require approval by the state supreme courts because they would ultimately have to grant limited licenses so that individuals with specialized degrees could independently practice law within their license’s specialty without committing the unauthorized practice of law.  Such a stratification of the legal profession is an unexplored option that may be worth considering for many reasons in today’s marketplace.

As an initial matter, the legal profession is not meeting the needs of population.  Today, while many law school graduates are unemployed or underemployed, the legal needs of individuals in today’s troubled economy has risen sharply.  And yet, this over-supply of lawyers and under-served population cannot meet in the marketplace because the cost of legal services is unaffordable to so many individuals.  While household income has decreased 5% since 1999 (see here), lawyers’ average billing rates increased 7.7% in 2007, 4.3 percent in 2006 and 2.5% in 2009.  To make matters worse in the marketplace, the cost of legal education increased 317% between 1989 to 2009.  Law students frequently take out six figure loans and then need to find employment with salaries high enough to repay those loans.  The jobs that pay salaries high enough to repay these loans are rarely the jobs that serve the needs of low- and middle- income individuals; they are usually the jobs that serve wealthy individuals and commercial interests.  In the end, individual consumers are priced out of the marketplace and have to rely increasingly on government funded or subsidized legal services at a time when funding for these types of services is suffering severe pressure and cuts.  The cost of legal services in the marketplace needs to be driven down. 

This leads me back to my original thought. 

Economic realities and gender (in)equality in the legal profession

Hannah Brenner

The contemporary economic realities facing the legal profession affect multiple constituencies including most obviously, lawyers and clients. Critical analysis of the breadth of these issues, however, would not be complete, however, without significant attention directed at the site of preparing future lawyers for practice.  Often, discussions of the legal profession begin at the place where lawyers enter the world of practice, ignoring law schools as part of this continuum. Many thanks to Renee Newman Knake and the Legal Ethics Forum for addressing these issues vis a vis this innovative symposium.

The impact of the current economic realities is even more complex when considered alongside the existing gender (in)equality in the legal profession, yet little attention is paid to these issues in tandem. Despite significant progress toward eliminating explicit gender bias, women lawyers continue to face barriers and obstacles to their advancement.  The result is a profession in which female lawyers are under-represented in positions of leadership and power and under-compensated for performing the same work as their male counterparts.

Professional Responsibility and substance abuse: teaching students how to handle the pressures of lawyering in a difficult economy

Michele Benedetto Neitz

Substance abuse is a controversial topic in the legal profession.  Although law firm culture is changing, some lawyers still rely on happy hours and martini lunches as an informal way to meet clients.  Unfortunately, many violations of state bar disciplinary codes can be traced to alcoholism and drug abuse.  For this reason, and to prepare students for the realities of legal practice, I began teaching the topic of substance abuse in my Professional Responsibility class in 2007. 

In the midst of the Great Recession, alcohol and drug abuse is skyrocketing among lawyers.  Lawyer Assistance Programs throughout the country are reporting higher demands for their services since the recession began.  In addition to the ordinary stresses of life as lawyers, our current students and recent graduates are facing increasingly burdensome student loans and reduced job opportunities.  These pressures, and the direct link between rising stress and rising substance abuse in the legal profession, combine to make substance abuse a relevant and important subject for PR classes during this recession.

This is not an easy topic for law professors.  Substance abuse is a personal matter for many lawyers and law students.  According to a 2009 survey of Professional Responsibility Courses at American Law Schools, 22.9% of PR professors do not teach substance abuse issues in their classes, and only 7.3% spent more than two class hours on the topic.  (Survey here.)  Law professors justifiably do not want to be perceived as “preaching” to their students, and they are concerned about discussing moral or social issues in a law school classroom.  Perhaps more importantly, many of us are not trained in substance abuse or mental health counseling.  How can PR classes provide a forum for these issues without engaging students and professors in an uncomfortable dialogue outside of a professor’s expertise?