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Glass Half Full: The Decline and Rebirth of the Legal Profession

Glass Half Full

http://mnbenchbar.com/wp-content/uploads/2015/06/Glass-Half-Full-681x1024.jpg 681w" sizes="(max-width: 199px) 100vw, 199px" /> Excerpted from Benjamin H. Barton’s book Glass Half Full: The Decline and Rebirth of the Legal Profession, published by Oxford University Press in June 2015, $29.95.

Changes in technology, economics and client expectations are producing wholesale disruptions in the traditional practice of law. But for those who understand and embrace the challenges, argues a new book from Oxford University Press, there’s a brighter future ahead.

Charles Dickens wrote Bleak House as a serial in the 1850s and published it as a single volume in 1853. It is a blistering assessment of the English Chancery system and remains one of the most trenchant critiques of the common law system. It is also, like most Dickens serials, a ripping good yarn.

Given the bewildering series of technological and societal changes over the last 160 years, there is something remarkable about Dickens’s portrait of lawyers in Bleak House: it is utterly familiar to a modern reader. Chapter 1 takes us on a tour “In Chancery.” Dickens describes the Judge (the Lord High Chancellor), the lawyers (barristers), and the various court hangers-on. At the end of the chapter the Chancellor interrupts a lawyer—aptly named Mr. Tangle—to see if he has almost concluded his argument in the never-ending case of Jarndyce and Jarndyce. Mr. Tangle responds “Mlud no—variety of points—feel it my duty to submit—ludship” before the Chancellor cuts him off for good.

Similar scenes recur every day in courts all over the United States of America. Individual lawyers, representing clients by the hour, appear in person before judges to make arguments based upon a “variety of points.” If Mr. Tangle visited a contemporary court he would be puzzled by cell phones, iPads, and laptop computers, but as soon as a lawyer stood and addressed the court, Mr. Tangle would know exactly what was happening.

Bleak House portrays a legal profession little changed from then to now. Dickens describes lawyers meeting in person with clients, or drafting papers, or investigating their cases.
English lawyers in 1850 practiced an individualized and bespoke professional service that consisted of paying a lawyer for his time, sometimes in court, sometimes in consultation, sometimes in drafting documents or conducting research.

Legal practice has changed in tools (computers notably) and in scope (today’s large American law firms are without historical parallel), but not in kind. Law may have changed less than any other area of the economy between 1850 and today. The same basic product is being sold and the same basic service is being performed. The practice of law is notoriously resistant to change, and law schools have likewise remained largely the same over the last century.

No one dodges the reaper forever. The industrial revolution brought mass production to manufacturing and the information revolution has seen knowledge workers replaced by computers. In multiple areas of the economy, computers now handle work once done on an individualized basis by highly paid professionals.

The pattern for these changes began in the industrial revolution and continued in the information revolution. Bespoke work done by individuals for other individuals is replaced by standardized and then commoditized products, which are mass produced and much cheaper. The total number of people needed to create the good goes down, as does the average wage earned by those in the industry. The few at the top, who control the process or design the product, however, make much more than any single provider of customized services ever could.

This has contributed to what economists Robert Frank and Philip Cook call “the winner-take-all society.” The individuals who own the computer processes that replace individual humans become very wealthy. The same is the case with the professionals who can do the work that is too complicated or important to outsource or computerize. Those individuals will be in high demand and will also make an excellent living. The humans who used to do the work that has been computerized or outsourced fight it out in a fiercely competitive market, and earn much less. Growing income inequality reflects this phenomenon. The middle of various industries is being destroyed, leaving only a small top and a large bottom.

This book explains how these changes have come to the American legal profession. In homage to the late Larry Ribstein’s seminal piece, “The Death of Big Law,” these trends are called the four “deaths”: death from above, death from below, death from the state, and death from the side.

“Death from above” assesses the challenges facing Big Law (the large and highly lucrative American law firms that serve corporate clients). Big Law has grown exponentially in size and profits since 1980. Some of the strategies that fueled that growth are killing (or at least injuring) the goose that laid the golden egg. Big Law was built on “reputational bonding.” Clients seek out large corporate law firms because these firms have presumably done the work to select the most able lawyers for the most complicated work. Over time Big Law has been mortgaging its reputational capital and its firm cultures in the relentless pursuit of increased profits per partner and size. Law firms have increased leverage (the ratio between partners and associates), aggressively pursued lateral hiring, and raised hourly rates and hourly billing targets. These have been very successful short-term strategies, but are corrosive long term.

Corporate clients have responded to the higher prices by pressing for fixed price billing and using insourcing, outsourcing, and computerization for more straightforward legal work. Paradoxically, they have continued to pay more for true “bet-the-company” transactional and litigation work. This is consistent with the winner-take-all economy: the most profitable firms and most in-demand lawyers get richer doing the truly specialized work and everyone else falls backward toward the pack.

“Death from below” uses Clayton Christensen’s theory of disruptive technologies to describe how computerization is replacing bread-and-butter legal work. LegalZoom, Rocket Lawyer, and others are horning in on traditional areas of practice like drafting incorporation papers and wills. Websites offering free or very inexpensive legal advice have also proliferated. So far, these websites and virtual law firms have largely avoided prosecution for the unauthorized practice of law (UPL), and some, like LegalZoom, have grown so large and prevalent that the time to quietly nip them in the bud has passed.

Computerization will not replace in-court work anytime soon, however, because that is the area most jealously protected by judges and lawyers. Just like Big Law, there will always be some “bet-the-family/small business” cases that require expensive and individualized representation. As in Big Law, there is already ferocious competition over these cases and there is not enough of that work to support the current number of lawyers.

“Death from the state” describes the ways that courts and legislatures have reined in litigation since the 1980s. Tort reform and limitations on class actions, damages, and lawyer’s fees have proliferated. These changes have chased non-specialists from the market and consolidated the remaining work for a smaller group of lawyers. This trend has also hit the defense bar. Because tort or class action cases are worth less and the downside risk is often capped, defendants and insurance companies are less interested in rolling up bills litigating, and plaintiffs are more likely to settle quickly.

The ultimate example is the rise of the settlement mill, where a few lawyers front a mass of non-lawyers who work solely on getting settlements for as many clients as they can, and where the lawyers rarely, if ever, litigate. Specialists soak up the remaining work, and the small firm and solo practitioners who used to dabble in this area have been pushed out.

Government hiring, a steady source of lawyer employment for years, has stalled at the worst possible moment. The fees paid for appointed work as a defense lawyer have also stagnated.

“Death from the side” analyzes the thirty-year decline in small-firm and solo practitioner earnings. Recent coverage of the legal profession describes the market for lawyers collapsing, starting in 2008. That year does mark the start of Big Law’s struggles (the portion of the legal market generally covered by the press), but the majority of American lawyers who work in small firms or as solo practitioners have faced grim prospects since the mid-1980s. Between then and now solo practitioners have seen a 37 percent decline in real income. According to IRS data drawn from actual tax returns, the average solo practitioner earned $46,560 in 2010.

Why? There are too many lawyers and too many law school graduates. A comparison of the number of law school graduates, the number of licensed lawyers (not all of whom work as a lawyer), and the Bureau of Labor Statistics (BLS) estimate for the actual number of lawyers shows that there are many more law school graduates than there are persons employed as lawyers, and there have been since the 1980s. If you use the BLS count of lawyers, almost half of the individuals who earned a JD in the last forty years are not currently working as a lawyer. The National Association of Legal Placement (NALP) data over the same period demonstrate that roughly one in three law school graduates were unable to find work that required a JD post-graduation.

But if underemployment is such a problem for lawyers, why are legal services often too expensive for middle- and low-income Americans? If there is an oversupply of JDs, why has it not solved America’s access to justice problem? The answer is that lawyers at the low end of the market earn so little that it makes more sense to leave the profession and take another job suitable for a college-educated adult than to charge even less for individualized legal services. When the average salary of a solo practitioner is $46,500 it is easy to imagine that many JD holders would rather work as an insurance adjuster or run their own business than scrape by as a lawyer.

If you want to understand what has happened in the legal market over the last thirty years, there is one chart that explains it quite crisply. Since the 1960s the IRS has gathered and published the tax return data for all lawyers who file partnership income tax returns and all lawyers who file as sole practitioners. These categories are not as neat as they sound. For example, the partnership returns include many lawyers in small partnerships that more closely resemble solo practitioners than Big Law partners. Likewise, the partnership count does not include professional corporations, so some Big Law salaries are left out. Nevertheless, these two categories have been measured since the 1960s and Figure 1.1 well demonstrates what has happened in the market since then.

Figure 1.1

http://mnbenchbar.com/wp-content/uploads/2015/06/0515_IRS_DATA.jpg 432w" sizes="(max-width: 300px) 100vw, 300px" /> Figure 1.1

Consider just how much the earnings for these two categories have grown apart over the years. In the 1960s partners earned about twice what a solo practitioner did. In 2010, after the Great Recession, partners earned more than seven times as much. There is a clear split into two professions and the gulf has widened considerably since the mid-1980s.

Solo practitioners have done miserably since the 1980s. Adjusted for inflation to 2010 dollars, the average solo practitioner earned $69,955 in 1988 and $46,560 in 2010, a 34 percent decline in buying power. The years from 2008 to 2011 have been bad for law partners. They have seen almost a 16 percent decrease in real earnings over just a three-year period, easily the worst stretch in the 44 years of data.

Despite the fact that the last 30 years have been lean ones for the majority of American lawyers, more law schools opened, and existing schools relentlessly raised tuition and accepted more students. Between 1987 and 2010, the number of ABA-accredited law schools increased from 175 to 200 and total JD enrollment rose from 117,997 to 147,525. Over the same period law school tuition rose over 440 percent for instate residents at public institutions and 220 percent at private institutions. Student debt loads have increased substantially as well.

The fall of Big Law in 2008 finally brought public attention to the employment numbers for law graduates, and applications and attendance at law schools have fallen steeply since 2010. The downward trend is so marked that unless it reverses in 2014–15 fewer students may apply to law school than enrolled in 2010–11. In 2013 only 39,674 first-year students enrolled in ABA-accredited law schools, the lowest number since 1977. Some law schools may close, but a much likelier result is that law schools will risk disaccreditation by admitting anyone they can and cutting costs rather than actually closing the doors. This may mean closing the law library altogether or replacing the bulk of the tenured faculty with adjuncts. It is inexpensive to run a skeleton law school that has few administrators and is taught by adjunct faculty.

The question then shifts to what the ABA would do. The ABA has never disaccredited a fully accredited American law school, and the legal and public relations ramifications of such a move are unclear.

Things sound grim, no? Most of the work on this subject has, in fact, been negative. It has also been written by the parties most likely to suffer, law professors and Big Law partners. Many recent books by law professors and Big Law partners grimly describe the changes: The Lawyer Bubble, Failing Law Schools, Declining Prospects, Don’t Go to Law School (Unless). In contrast, this book attempts to fairly describe the many challenges and still present the glass-half-full case.

 

MORE: Read Bench & Bar’s online-only interview with author Benjamin Barton

Benjamin Barton is the Helen and Charles Lockett Distinguished Professor of Law at the University of Tennessee. His scholarship ranges from bias in the judiciary, to the backgrounds of Supreme Court Justices, to libertarianism in the world of Harry Potter. His scholarship has been covered in Time Magazine, the New York Times, Wall Street Journal, Washington Post, Washington Examiner, Sydney Morning Herald, and ABA Journal. He is the author of The Lawyer-Judge Bias in the American Legal System.    

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