Is the Legal Industry in Crisis?

 

There has been much anxiety of late over the future of the legal services industry — a term that covers both the private practice of law and legal education, but also extends beyond that to cover lawyers who work in government or in private business. In the Wall Street Journal today, I reviewed a particularly gloomy take on the future of the industry: Steven J. Harper’s new book, The Lawyer Bubble: A Profession in Crisis.

The review that I wrote was meant to call attention to the overwrought nature of his conclusion. While Harper’s book focuses on the collapse of a few poorly managed megafirms, I note that he:

… [I]gnores the more salient fact that the vast majority of big firms have avoided this grisly fate. Mr. Harper never looks into how these savvy firms survive in a tough environment. They do so, in part, by avoiding overstaffing, by cutting bad clients and by paying premium wages to young associates—many of whom, debts paid, happily bail out for less stressful work as in-house counsel for companies or in the government and nonprofit sectors. Over all, the model proves stable: With Congress passing monstrosities like Dodd-Frank and the Affordable Care Act, top-flight legal talent is needed more than ever to guide well-heeled clients through the growing regulatory maze.

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.

In some e-mail correspondence after the publication, I received many comments by individuals whose observations do not quite jibe with my own. One point in particular that is worth some mention is the observation that the stability that I see in the practice of law conceals the huge amount of churning and adaptation that goes on inside the field, so that it is a mistake to think of the profession as though it were stable. 

I agree with that general observation, and only meant to say that the adaptations thus far taken by many firms have staved off a far worse fate. But in any dynamic market, even in prosperous times, no one should ever sit on his or her laurels. It is always necessary to innovate and to respond.

It is also clear that no one person has a full knowledge of how the profession works. I have been active in a number of different contexts — from writing amicus briefs to giving client advice to working as an expert witness. All of these experiences revolve around a common core, but it would be foolhardy to make any claim to having all the answers.

For those Ricochet members in the legal community, what trends and shifts in the legal profession have you witnessed during your careers?

There are 18 comments.

  1. Boisfeuras Inactive

    I’ve been practising commercial litigation for some 15 years now, in various roles, as a solicitor with a British firm, a partner with an American-based “International Firm”, more recently as a self-employed barrister at a specialist set of chambers in London.

    I think the very top end of the market will continue to thrive, on the old “nobody gets fired for buying from IBM” basis. The number of specialist, botique firms, without the overheads of the large corporate firms, will continue to proliferate. The mid-tier generalist firms will however continue to be squeezed, unable to compete with smaller firms on price; without the “brand” advantage of the magic circle and large US firms.

    What does seem to be broken, accross the board, is the old collegiate, “associate-to-partner-in-5-7-years” model. Very few partners are being made up; existing partners guard their territories carefully. The unintended by-product of this is mass migration of associates to in-house roles and the expansion of in-house legal departments, with a corresponding shortfall in work being outsourced to external counsel, putting further pressure on the external legal model.

    • #1
    • May 7, 2013, at 1:25 AM PDT
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  2. The Dowager Jojo Member

    Lawyers are suffering?

    HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA

    Apologies for being unresponsive to the question.

    Actually it’s not funny, it’s terrifying. Hungry lawyers are a very dangerous and destabilizing thing.

    • #2
    • May 7, 2013, at 2:31 AM PDT
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  3. Boymoose Inactive

    Whats difference between a lawyer and sperm …

    They both have a 1 in 40 million chance of becoming a human being!

    HA!

    I kid because I LOVE.

    • #3
    • May 7, 2013, at 2:50 AM PDT
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  4. civil westman Inactive

    It is difficult to get past my reflexive, “If it is, they deserve it. Maybe there is some justice, after all.”

    After having practiced medicine for five years and faced a morass of health law, I was foolish enough to go to law school. I was under the serious misapprehension that I might have more control over my professional destiny, but was promptly disabused of that notion.

    I know only that small slice of legal practice which concerns malpractice, whose principal aim is laudable: to give practitioners an economic incentive to be reasonably careful and to make injured plaintiffs economically whole. Unfortunately, as practiced generally, these sensible goals have been lost in a surreal parallel universe of dueling opinions of paid ‘experts’ (doctors facilitate legal legerdemain for large fees). Couple this with emotional appeals of sympathetic plaintiffs who have suffered bad outcomes through no fault of their physicians, and you have a kabuki dance with random outcomes which include some truly outrageous damage awards.

    The main beneficiaries of all this activity? Lawyers – plaintiff and defense – who reap more than half of liability insurance payments. I can think of no other endeavor with such high transaction costs. Is this a crisis?

    • #4
    • May 7, 2013, at 2:52 AM PDT
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  5. Illiniguy Member

    Having been a sole practitioner for over 30 years, the changes in my practice have been technological and substantive.

    The LegalZooms of the world really don’t pose much of a threat if the practitioner keeps up with the times, since the old adage of a lawyer who represents himself has a fool for a client applies equally to lay people who think they can anticipate all of the unforeseen consequences of putting their intentions into legal form.

    The substantive aspect is one of pure experience. As my practice has evolved, it’s become less one of scrivening and more one of drawing on years of experience to guide clients through the thought process of planning for future events. This is the most gratifying part of the job, not just because it’s less formulaic, but because I’ve reached the point where I’ve gained a certain level of respect from people whose respect is important to me. Very little of the real law that I practice involves drafting, much of it is consultation, and I enjoy it. There is no substitute for a lifetime of experience.

    • #5
    • May 7, 2013, at 3:17 AM PDT
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  6. Tommy De Seno Contributor

    I practice Personal Injury (although on my way up like many I did general practice too).

    Personal Injury is no longer for the sole practitioner. Funding the cases has become very expensive and you can’t deduct what you put into a case as a business expense while the case is pending. The IRS considers it a loan to the clients.

    For instance, if my firm spends $1 million dollars funding our client’s cases this year, it’s not a business deduction. We still have to pay taxes on the money.

    Also, tort reform has made it so people with injuries the law considers not serious (even though they are) have a tough time winning cases, but we try to serve them anyway. Lose enough of them and you can put a significant dent in your bottom line (which is why I make it a habit to never lose).

    In New Jersey, this has created a Wal-Mart effect. Larger personal injury firms now have offices in multiple places where they can push out the corner store solo practitioner.

    But, there’s always room for a good man in any field. It’s just harder in my field.

    • #6
    • May 7, 2013, at 4:13 AM PDT
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  7. Cato Rand Reagan

    From a large firm perspective:

    Consolidation and internationalization have been an ongoing evolution for my entire 20+ years of practice

    In the past 10+ years there’s been a commoditization of the lower level grunt work that has reduced the need for law school hires, and law school hiring appears to be way down, especially post-Lehman. It isn’t clear to me whether it will recover or not.

    Income demands at the top end of the profession have substantially altered the old partner/associate model resulting in increased levels of income and status variation among attorneys within firms.

    Billing rates, which seem to increase as fast as university tuition (you’d swear the government was paying them) have priced large firms out of much work they formerly did and enabled the development of a larger array of mid-sized/local/boutique firms with more competitive rates. 

    Still, most large firms remain quite profitable, and attorney incomes at all levels in large firms remain attractive. Not every big firm is Dewey. Most are better run. I suspect most will survive, either on their own or as part of the ever larger, ever consolidating globalized firms. Before long_we’ll_look_like_the accounting firms.

    • #7
    • May 7, 2013, at 4:29 AM PDT
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  8. Amy Schley Moderator
    Illiniguy: 

    The substantive aspect is one of pure experience. As my practice has evolved, it’s become less one of scrivening and more one of drawing on years of experience to guide clients through the thought process of planning for future events. … There is no substitute for a lifetime of experience. · 13 hours ago

    Edited 13 hours ago

    And this is the problem with the legal profession from my bottom view. The basic scrivening work isn’t profitable enough for smaller firms to hire a new JD and train them to do it. There used to be something of a “small law track” that would blood a new attorney who so he could eventually go on to partner or starting his own firm. But now those kind of entry-level jobs don’t exist in anywhere near the numbers necessary to train all my fellow law school grads. So we’re stuck knowing that those basic forms have problems but lacking any real world experience to draft anything better. We can’t get that necessary lifetime of experience.

    After all, law professors don’t have to teach students the techniques of practicing law; our first jobs will do that.

    • #8
    • May 7, 2013, at 5:55 AM PDT
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  9. Patrick McClure Member

    Well, I’m a former lawyer, who has been out of practice for 9 years, and practiced for 14 years before leaving. I left for a number of personal and professional reasons, but if I were to boil it down, I left because Law was turning from a profession to a business. It was always a business, I know. But the idea of professional respect, both between attorneys and towards attorneys, was dying, or already dead, when I left. Medicine is heading that way. If the legal profession is in crisis, it is because it is no longer viewed as a noble pursuit of justice, but instead is seen as a way to find loopholes and grab large piles of money. Every commercial I see for automobile accident firms, mesothelioma claims and SSA disability claims just reinforces this view. Law now panders to the victim classes, rather than seeking to prevent victimization. Rant off.

    • #9
    • May 7, 2013, at 6:02 AM PDT
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  10. Larry3435 Member

    GFL (who I did not know was an attorney, although I probably should have known) is exactly right. I too have 30 years of practice in large firms.

    The phrase that comes to my mind is “Greed is good.” Sometimes it is. If greed means ambition, hard work, and the desire to succeed.

    But greed can also mean the burning desire to grab someone else’s piece of the pie. I’ve seen law firms where that second definition of greed controls. And the results are ugly.

    At the end of the day, though, there are plenty of law firms where the first definition is what motivates people. And that definition of the profession will endure and prosper.

    • #10
    • May 7, 2013, at 6:29 AM PDT
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  11. The Dowager Jojo Member
    Patrickb63: Law now panders to the victim classes, rather than seeking to prevent victimization. · 1 hour ago

    Yes, exactly. Just as with government, there’s money and power for the middleman in wealth redistribution.

    • #11
    • May 7, 2013, at 8:14 AM PDT
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  12. Robert Promm Inactive

    What got me was the title — “Legal Industry…”. Sad that there is such a thing.

    Now, on to lawyer jokes. Who has some good ones?

    :-)

    • #12
    • May 7, 2013, at 9:04 AM PDT
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  13. Fricosis Guy Listener

    This comment is the one that jibes with most closely with my experience with attorneys across a number of domains.

    The best ones clearly have a substantive opinion behind the options/advice about how to structure a deal, how to counter an offer, which claim to pursue/ignore, etc. I may not take it as presented, but I have something to react to which often gets us to a better place in follow ups.

    Too often I’m presented with an undifferentiated laundry list of options where I need to dig out the merits or the merits are that the options involve more billable hours.

    Illiniguy: TheLegalZooms of the world really don’t pose much of a threat if the practitioner keeps up with the times.

    The substantive aspect is one of pure experience. Very little of the real law that I practice involves drafting, much of it is consultation, and I enjoy it. There is no substitute for a lifetime of experience. ·

    • #13
    • May 7, 2013, at 11:03 AM PDT
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  14. Cato Rand Reagan
    Fricosis Guy:

    Too often I’m presented with an undifferentiated laundry list of options where I need to dig out the merits or the merits are that the options involve more billable hours.

    You should get better lawyers. We’re paid primarily to give good advice. Not for the quality of our word processing services.

    • #14
    • May 7, 2013, at 11:52 AM PDT
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  15. Fricosis Guy Listener

    To your point, sometimes this is the client’s fault. Let me be more specific (respecting the 200 word limit):

    1. Corporate attorneys who didn’t want to stick their necks out. The question would always be turned back to “what do you want to do?” We ended up having to bring in litigators, contract specialists, etc. to give us the actionable advice and counsel (and CYA for the attorneys).
    2. Attorneys who were working for other departments doing working for me (e.g., immigration for HR). These departments are often inexperienced at managing professionals who bill by the hour…a cascade of options that require billable follow up is a typical technique.

    The paralegals do the word processing/grunt work anyway. 

    GayFreedomLover
    Fricosis Guy:

    Too often I’m presented with an undifferentiated laundry list of options where I need to dig out the merits or the merits are that the options involve more billable hours.

    You should get better lawyers. We’re paid primarily to give good advice. Not for the quality of our word processing services. · 43 minutes ago

    • #15
    • May 8, 2013, at 1:41 AM PDT
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  16. Amy Schley Moderator
    GayFreedomLover
    MJBubba: I know two bright young men who are graduating with Bachelors’ degrees this month. Three years ago they were both thinking of law school. Neither one currently has plans that include law school. · 59 minutes ago

    Decent choice. I periodically get calls from friends whose children are considering law school. My answer varies with their school options and funding options. I still think law school an extraordinary education. Any billionaire who can just give it to his/her children is giving them a gift. But for most of the human race, the balance between expected financial investment and expected financial return requires serious consideration. · 8 hours ago

    Edited 8 hours ago

    I tell the parents/aunts/uncles to react to a young person wanting to go to law school in much the same manner they would react if that same young family member wanted to go into adult services.

    Of course, the people I’m normally talking to in this context are my customers at a shoe store, so they’re slightly more inclined to listen to my tales of not being able to get a better job than if I were working in law.

    • #16
    • May 8, 2013, at 5:52 AM PDT
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  17. MJBubba Inactive

    I know two bright young men who are graduating with Bachelors’ degrees this month. Three years ago they were both thinking of law school. Neither one currently has plans that include law school.

    • #17
    • May 8, 2013, at 8:32 AM PDT
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  18. Cato Rand Reagan
    MJBubba: I know two bright young men who are graduating with Bachelors’ degrees this month. Three years ago they were both thinking of law school. Neither one currently has plans that include law school. · 59 minutes ago

    Decent choice. I periodically get calls from friends whose children are considering law school. My answer varies with their school options and funding options. I still think law school an extraordinary education. Any billionaire who can just give it to his/her children is giving them a gift. But for most of the human race, the balance between expected financial investment and expected financial return requires serious consideration.

    • #18
    • May 8, 2013, at 9:37 AM PDT
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