As the title of Ben Barton’s new book, Glass Half Full, suggests, he sees something positive in the relentless stories of woe we have been hearing about the legal profession since the Global Financial Crisis. In truth we’ve been hearing these stories since before that time, regarding both the legal profession and legal education. Crisis rhetoric seems to come with the territory for lawyers. There were some fat years for the profession, fueled by a long period of postwar economic growth, from the 1950’s through the 1980’s.
But in about the late 1980’s, things started to go badly for many large law firms. Their long-time clients, who had been grumbling about hourly billing and inefficiency, began to bring more legal work in-house. Corporate general counsels then restructured their relationships with outside law firms, often putting work out for competitive bidding and breaking up existing, cozy, bilateral monopolies with the company’s regular outside counsel. Companies no longer looked to outside law firms as general advisors, but as providers of discrete, specialized services. Publications like American Lawyer made information available about revenue and profits per partner, touching off a significant upturn in lateral hiring. Partners now demanded to be compensated for originating business, not simply performing legal services for clients, and as firms shifted from lockstep to “eat what you kill” compensation systems, internal firm cultures became destabilized.
One result of the loss of control by management over potentially rogue rainmaker lawyers – not addressed by Barton – is a series of expensive fiascoes like Mayer Brown’s representation of Refco and the involvement of Jenkins & Gilchrist in blessing aggressive tax shelters. But in other respects the ugly side of the changing market for legal services is familiar and well documented by Barton, who looks at the entire market for legal services, not just the world of large firm practice.
Stories of woe are so familiar, in fact, that one might wonder what could be the silver lining in the storm clouds. Barton’s answer is one of those points that is obvious once it is made, but had previously eluded most observers: If you switch perspectives, from that of big-firm lawyers and law professors (who have a great deal in common, and who also tend to dominate discourse about the profession), to that of consumers of legal services, the news is mostly good.
From the point of view of corporate clients, the shift of power from outside law firms to in-house counsel is all to the good: “[H]aving broad-gauged, high-integrity, business-savvy lawyers around the coffee pot and around the conference table increases speed and productivity. These lawyers operate seamlessly in business teams, gaining credibility by helping more swiftly to achieve performance goals and by assisting business leaders promote high integrity down the line inside the corporation.”1 From the perspective of individuals and small companies, who are more central to Barton’s story, the increasing use of technology to deliver legal information and services will reduce transaction costs, and thus make it easier to transact.
As Barton rightly notes, citing statistics from Deborah Rhode’s work on access to justice, some 80% of the needs of the poor, and 40-60% of the needs of working-class consumers, for civil legal services go unmet. Services like LegalZoom, which make legal forms and information available on-line, may help address the need of clients for assistance with relatively routine divorce, landlord-tenant, or probate matters. This positive story assumes a great deal of faith in markets to deliver the benefit of technology to consumers, and in turn the efficient operation of markets depends on the absence of anti-competitive behavior by incumbent producers. The Supreme Court’s recent decision in North Carolina Board of Dental Examiners v. Federal Trade Commission, 135 S. Ct. 1101 (2015), is a reminder that the intervention of regulators is sometimes necessary to ensure robust competition in the market for professional services.
I’m fairly optimistic by nature, so I’d like to take reassurance from Barton’s narrative. But there’s something I don’t get. Why has the problem of access to legal services persisted when there are so many recent law graduates out there who have been unable to secure a job requiring a J.D. degree? Why have unemployed lawyers not exerted tremendous downward price pressure on existing providers of legal services? We are all familiar with the statistics, particularly from schools ranked in the third or fourth quartile of the almighty U.S. News hierarchy. At many schools fewer than half of graduates are employed in a J.D.-required job nine months after graduation.
Smart, industrious recent law school graduates have labor-market alternatives to starting their own firms, but if there truly is a large pool of potential clients with un-met legal needs who can afford to pay at least something for a lawyer to handle their divorce or prepare their will, shouldn’t there be enough demand for lawyers to entice some of these recent graduates into the practice of law? Granted, there are considerable expenses associated with starting a law practice – office space, computer equipment, a Westlaw subscription, and the costs of marketing the new firm. But several recent graduates could share expenses, or perhaps an existing non-profit or for-profit institution could serve as an “incubator” for startup practices, providing office space and tech support while the new lawyer got up and running. Perhaps the problem is that students are graduating from law school without sufficient skills training, and worry that they could not competently represent clients and also handle the business aspects of running a practice. It could be the case that, considering the difficulty and risk of hanging out a shingle, practice law simply does not offer enough of a premium over other available employment.
If there are substantial barriers to entering the market as a J.D.-holding provider of legal services, Barton recommends a number of second-best solutions, most of which involve either the use of technology to increase efficiency or the expansion of practice rights for non-lawyers. Washington State, for example, has created a new para-profession called Limited License Legal Technicians (LLLTs), with an initial focus on matrimonial matters. The trouble with this approach, as Barton shows, is that the organized bar is dead-set against it. Unauthorized practice of law (UPL) commissions in many states have sought to restrict LegalZoom from operating and, given the breadth of UPL prohibitions, they have a decent argument on the law.
The Washington LLLT para-profession will be regulated by lawyers and be subject to stringent entry requirements. Lawyers always give consumer protection as the reason for this opposition, but as Barton points out, complaints against LegalZoom are almost non-existent. Lawyers are so worried about ceding turf to computers or non-lawyers that they may be exacerbating long-term access problems. The result will almost certainly eventually be a backlash. The relatively recent history of legal services reform in the United Kingdom shows that public pressure and a determined legislature can radically restructure the legal profession’s monopoly. But the ever-optimistic Barton has faith in the market. He believes that the legal profession’s loss will be consumers’ gain in the long run. He even argues that law firms and law schools will be better off in the long run. It’s nice to hear a cogent argument for this position, after years of stories of doom and gloom. Let’s hope he’s right.
- Ben W. Heineman, Jr., The Rise of the General Counsel, Harv. Bus. Rev. (Sept. 27, 2012).