Friday, July 03, 2015

Death of Big Law Announced Prematurely....


More often than not the sirens of the future predict the demise of Big Law, that the traditional law firm model has run its course, millennials won't work there, general counsel refuse to pay outrageous hourly rates for fat cat partners. The likes of Jordan Furlong, Richard Susskind, George Beaton, and occasionally myself, will tell us why and how the new age of lawyering will be upon us like the anthropocene age.

Are we professional clones of Klaatu in The Day the Earth Stood Still?

The death of Big Law may be premature.

My thoughts on the premature burial opened up on reading Dealbook's article in the New York Times about the rise in mergers and acquisition work in the first half of 2015. Almost 20,000 deals worth $2.2 trillion have been announced in the first half of this year. It's up 40% on the same period in 2014 and is just shy of 2007 levels of $2.3trn.

Deal book comments
Bankers and lawyers say that their “pipelines”—their backlog of pending transactions—are more stuffed than ever, claims that are both braggadocio and an acknowledgment of the sheer numbers of companies weighing mergers and acquisitions.
We know from previous economic cycles hubris usually overtakes any caution that existed in recession. So, despite the pitfalls of Grexit and the pricked Chinese bubble (let alone the future prospect of Brexit), the boom is on.

Law firms ride on these waves and The Lawyer has been reporting a steady flow of profit rises for most law firms in the last year. Certainly some firms are shifting resources to nearshoring and outsourcing and introducing various online portals for clients. Most of this is marginal at best.

Law firms also closely align themselves with investment banks who are doing these M&A deals. These alliances go back many years. What then are the figures?

The top four banks doing the biggest M&A deals are Goldman Sachs (31% market share), Morgan Stanley (26%), JPMorgan ((22%), and Bank of America Merrill Lynch (20%). They have the largest and most transactions of the major banks.

The key law firms doing M&A show how alliances often endure in such relationships.


There are few surprises with Skadden, Cravath, Davis Polk, Sullivan, and Wachtell. These firms are renowned for their M&A work. We are, however, seeing the incursion of the outsiders in the guise of Latham (Los Angeles) and Freshfields (London). Both are boosting their New York capacity. 

For me the law firm of interest is King Wood & Mallesons rising from number 49 last year to number 15 in 2015. This may be on the back of outward Chinese M&A, but it shows the rise of Chinese law firms in a world dominated by New York and London. 

The revenues from this work are significant and will be reflected in profits per partner. What is also significant is the the role of "the dog in the night". There appears to be no barking from general counsel in these deals, no demands for cut price work and the like. Given deals like Royal Dutch Shell's $70 billion takeover of the BG Group, this type of work is of the "bet the house" class. It is perceived as too risky and too valuable to be assigned to a second tier law firm. 

As is common with booms and slumps, the upward slope of the cycle induces a form of amnesia that negates the incentives for change and there is a regression to the mean. In this case the mean is business as usual. 

Now one could ask about changes in hiring practices and the habits of millennials who won't partake of the partner tournament. If millennials do view careers as portfolios of different jobs then the tournament has lost a critical player. I would argue differently in that the tournament is busted and that it was never a sustainable programme. It contained the seeds of its own self-destruction.

Indeed the death of tournament has played into law firm partners' hands. It is evident, as Bill Henderson and others have shown, that equity partnerships have shrunk over this century and become more elitist and less of a reward. That millennials and Gen Y refuse to play the game only assists law firms in rescaling themselves for the modern era. They have freed themselves from long term commitments equivalent to the Greek pension system. 

Am I reading too much into a set of short term figures? I wish I were. But the forces of change in law and legal services are remarkable for their resistance to change and pressures to modernity. We only have to look at the resistance of the Irish legal profession to market liberalisation and new regulation. In four years the Irish bill implementing these changes is yet to emerge from the parliament. And what eventually comes out will be considerably watered down. I would even cast a sceptical eye over British changes and the ability of the legal profession to countermand their spirit.

Perhaps we shouldn't yet gather for a premature burial...



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Monday, June 22, 2015

The Irish Bar, Magna Carta and the Future of Law

(thanks to Irish show bands)

I was asked to speak to the Irish Criminal Bar Association last week in conjunction with the 800th anniversary of Magna Carta. Why not, I thought, I've given around twenty talks this academic year. One more is fine. It meant I would see the new criminal courts in Dublin, designed by Henry J. Lyons.

We were two speakers, a Senior Counsel on what Magna Carta meant, and me on the future of law for lawyers in the cyber age. Those of you who've read Maeve Hosier's book, The Regulation of the Legal Profession in Ireland, will know the Irish Bar is best characterised as conservative. The King's Inns' (where barristers are trained) motto is Nolumus Mutari--we do not wish to be changed.

I started with the observation that Magna Carta, for all its virtues, was a treaty between the king and barons, not the common man. Instead a better commemoration would be the Charter of the Forest of 1217 under Henry III which opened up the Royal Forests to the common man for cultivation and foraging and grazing. The Charter also established Special Verderers Courts to enforce the forest laws.

From there to the 21st century where mainly focused on the delivery of online "law" in its different forms. Their benefits I argued are the democratisation of law, the reduction of information asymmetries in professional-client relationships, and the empowering of individuals. Which means a different role for lawyers. I don't think my audience was overwhelmed by my vision.

The examples I used were Modria.com, eBay's former online dispute resolution system, which is now working on online divorce resolution and neighbourhood dispute resolution in the Netherlands, and property tax assessment appeals in Canada. I ventured that small criminal case courts could use this technology to sentence accused by algorithm without their having to appear in court--a seeming inefficient use of lawyers' time where most cases plead out.

I shifted to IBM's excursions into data analytics and their use in professional services, notably medicine. The instance which really intrigues me, however, is IBM Cognitive Cooking, where you pick an ingredient and a region and out pops a recipe.

(thanks to IBM)

Why shouldn't law be as inventive as IBM's Cognitive Cooking? Corcoran gives examples of in house counsel using big data and predictive analytics to deal with problems like product recalls and tricky mergers and acquisitions. Ireland is already thinking about these issues with the Programmable City project at Maynooth University. Of course there is a need for skilled legal judgment outwith the algorithm. My audience wasn't enamoured of this prospect.

I gave them a run through of some of the innovations in legal provision including LegalZoom, Radiant Law, and roadtrafficrepresentation.com (I think this last caused the most consternation). The new "agile" legal providers such as Lawyers on Demand and Axiom were clear interlopers.

As a result of being bailed out by the EU, ECB and the IMF, Ireland agreed to a reform of legal services which resulted in the Legal Services Regulation Bill 2011. The legal profession, true to that motto, has resisted and rebuffed, and the bill has yet to be passed. The originating Minister of Justice has fallen by the wayside, as politicians do. The new one seems to have been well house trained by the legal profession and the bill is weaker than at the start.

Perhaps cyber law will not be so welcome yet in Ireland but the country still has a big problem with inadequate access to justice and diminishing legal aid isn't about to become fruitful. The legal profession exercises a tight monopoly which needs breaking.

Time for a new charter.......?



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Sunday, June 07, 2015

Trade in Service Agreement (TiSA) and Legal Services


(thanks to Wikileaks)

Wikileaks has just released 17 documents TiSA related documents. For those of you who haven't heard of TiSA before it's the Trade in Services Agreement. It is the largest part, but least known, of the three main trade agreements being negotiated now. They are TPP (Trans-Pacific Partnership), TTIP  (Trans-Atlantic Trade and Investment Partnerships) and TiSA.

Fifty-one nations participated in TiSA yet the BRICS were excluded. Moreover, the detailed contents were to remain secret for five years after signing. TiSA is much more far reaching than GATS and its negotiations have been ongoing since 2013.

According to the New Republic
The deal would liberalize global trade of services, an expansive definition that encompasses air and maritime transport, package delivery, e-commerce, telecommunications, accountancy, engineering, consulting, health care, private education, financial services and more, covering close to 80 percent of the U.S. economy. Though member parties insist that the agreement would simply stop discrimination against foreign service providers, the text shows that TiSA would restrict how governments can manage their public laws through an effective regulatory cap.
Among the documents released is the TiSA Annex on Professional Services which includes legal services. So what does TiSA say about professional and legal services?

If a member state has restrictions on trade in services it should enable cross-border supply of professional services without limit. So how will India be affected by this? It's a BRIC so it has had no role in this negotiation and it tightly forbids cross-border legal services. And parties must not try to impose national restrictions on cross-border suppliers of professional services.

If you want to practise in a member state, you don't have to set up an office there or be resident.

If a foreign provider is providing services through a "commercial presence", no limits on the amounts of foreign capital can be imposed in investment or share capital. Nor can the nationality of the partners or senior management be restricted.

A member state can't require that professional services be provided through a joint venture. Wholly owned foreign suppliers should be allowed. In addition member states can't impose discriminatory hiring practices, namely, nationals only.

As a professional services firm, you can keep your firm's name. Baker & McKenzie won't have to forage for partners with these names to open their offices. Interestingly, Japan is one of the proposers of this change and yet used to be one of the perpetrators.

If you as a lawyer want to provide foreign or international law advice, you will be permitted to fly in and fly out to do so for up to 90 days, and nor do you need an office in the other's state to do this. Again this will impact on India.

Member states should work to recognise each others' qualifications, licensing and registration regimes. At least there should be a regime for temporary recognition of other member states' licensing and registration procedures. Moreover, temporary recognition should not operate as a block on subsequent full recognition.

To make sure this happens member states must set up a Working Party on Professional Services with a mandate to working with the regulators to pursue mutual recognition.

If you take this set of proposals in conjunction with those on financial services--very liberal and will forbid restrictive local regulation--London and New York law firms especially are going to do extremely well. Local law firms will have to play catch up.

For legal services I don't see anything that perturbs me, at least too much. But I can see why the BRICS were excluded as this effectively stampedes their sacred cows. What will make it hard for countries such as India is that most of the foreign lawyer/law firm disputes that its courts have heard will become instead part of the investor-state dispute settlement system, i.e. arbitration. This could be explosive, I imagine.





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Wednesday, May 13, 2015

Are We Seeing the Real Multidisciplinary Practices Emerge?

(thanks to nierodzim)

EY Law has hired partners from Baker & McKenzie and Weil Gotshal & Manges to join its financial services practice. They combine with lawyers from Freshfields, BLP and Addleshaw's.

It makes sense, and since the SRA is easing its rules on forming ABS and therefore becoming an MDP, that the big accounting firms are resurrecting earlier ideas about becoming multidisciplinary practices. Despite Enron and the debacle of Arthur Andersen's implosion in the early 2000s, the Big 4 accounting firms realise legal services are too important to be left to the lawyers alone.

EY Law's website shows their imperial ambitions with the sole exclusion of North America (but for how long?). They have a neat and colourful graphic (which needs recolouring drastically--awful) detailing how legal services form a core element in their work.


The other Big 4 are plucking lawyers from law firms to build capacity in their own legal services units. Deloitte Legal has over 1300 lawyers but is not becoming an ABS, which is odd. PwC Legal,  KPMG and EY Law have received ABS licences from the SRA. Even in Ireland KPMG has taken on six lawyers from the Dublin law firms.

I presume that gaining the ABS status is a precursor to moving out into the market as an independent entity in the way that BT has done with BT Law. And why not? One of the main complaints of clients of law firms is that their lawyers don't understand their business. One could argue that accountants ought to have great insight into the running of businesses and so offer significant value to legal clients. Despite noises from accounting firms that they don't intend to challenge law firms on their core services, which I don't believe, it's inevitable they will compete. One of their strengths is in their global networks which lawyers can only dream about.

Years ago when the senior partners of Clifford Turner and Coward Chance, two somewhat insignificant London banking law firms, held secret merger talks on park benches they imagined they could form a law firm so big that they could merge with an accounting firm. Of course they didn't but now that would be impossible. No law firm could merge; it could only be taken over.



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Tuesday, May 12, 2015

Law Set Free...?



Liverpool Street Station Installation


Several years ago when I began tracking the changes in the legal services market, new types of law firm (or practice) were forming. Some were virtual, others were dispersed without formalised, central offices and some were not even law firms in the traditional sense but companies that offered legal services.

One of these I looked at was Keystone Law. It's idea was to get rid of expensive offices and use technology to coordinate its dispersed expertise. Lawyers would control their own workflow rather than being set targets, illusory or otherwise. The entity would deal with the administration and compliance.

To promote this way of working Keystone is running an installation in Liverpool Street Station called "Law Set Free". The central idea is that legal careers ought to be more responsive to personal needs than those of an organisation. It's a simple concept that speaks to enterprise and self-actualisation in these days of precarious careers.

Keystone foreground their move with a "Lifestyle Calculator", which asks you to input billable hours, salary, and more, then presents you with a pie chart of what your professional life looks like in order to compare it with their alternative. Apparently over 2000 lawyers have used it.

There is far more discussion and academic analysis now of the stresses of professional careers and especially lawyers. Depression isn't rare: what is difficult is how hard it is to talk about it without being seen as weak or inefficient. See, for example, Patrick Schiltz, "On Being a Happy, Healthy, and Ethical Member of an Unhappy, Unhealthy, and Unethical Profession" for a discussion of the importance of this topic. The legal profession is trying to face up to this but it's only made baby steps. Law schools have yet to tackle this. They tend to present legal careers in rosy terms as do most law firms. Just look at the publicity material they publish on how attractive legal careers are. For more on this see Richard Collier's fascinating work on well-being in law as well as this article on representations of trainees.

Traditional models of legal careers still hold sway and will continue to do so for some time. But during the Great Recession the legal profession ruined the trust it built with those who worked in law. Indiscriminate layoffs and increased financialization have have pushed the business philosophy way ahead of the professional ethos. They are not necessarily incompatible, but they do need to co-exist.



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Saturday, May 09, 2015

The New World Order for Lawyers and the Legal Profession(s)


(thanks to softpedia)

When you google "new world order" you find weird stuff. This was among the least weird and I do like the film, V for Vendetta.

I've written a piece for Jotwell on Ronit Dinovitzer & Bryant Garth, "Lawyers and the Legal Profession" (UC Irvine School of Law Research Paper No 2015-19). It opens thus:

"One of the main concerns of the authors is the structure of the legal profession in which perpetual reproduction of hierarchies forms a contest among different elements of the profession. The configuration of the profession shapes its research which places corporate lawyers and firms at the top of the hierarchy. This seems to stem from the early Cravath idealisation of law firm development. Even though the Cravath model dates from the late 19th century, it reverberates still in the 21st century and has captured scholars’ thinking. It appears difficult to shake off these established idealisations and models when discussing the legal profession. Dinovitzer and Garth (D&G) endeavour to show how these cleavages rip through the study of legal professions.

“Lawyers and the Legal Profession” draws on the research done on the structure of the legal profession, its divisions, lawyers’ backgrounds (gender, ethnicity, class), law firms and globalisation. The range is broad but there is one caveat, which is most of the work referred to is based on research done within the US. It is legitimate to question this given the global differences between legal professions, regulatory systems and the like. Although the Cravath model might have been the blueprint for law firm organisation that was exported by American lawyers—and its residues are apparent—whether it remains the dominant model is open and contested, even, perhaps, within the US. See, for example, the rise of the “smart” law firm. "

Continue reading here.






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Monday, April 27, 2015

Harvey Miller RIP


(thanks to New York Times)

The New York Times reported the death of Harvey Miller at 82 from Lou Gehrig's disease.

E.H. Carr who wrote a little book called "What is History?" years ago in the 1960s argued against the great man version of history or otherwise the theory of Cleopatra's Nose (on the basis that no man including Mark Anthony could fail to be attracted to Cleopatra therefore it couldn't be a cause). Yet for those of us interested in the scholarship of the legal profession, it's difficult not to look on Miller's death as a cataclysmic event.

Back in the 1990s by twist of fate I involved myself in a project on the globalization of bankruptcy. No one was researching this area then. Nor did I know much about bankruptcy and insolvency. As I ventured through my research interviews the name of Robert Maxwell cropped up many times as did that of the Reichmann Brothers.

Maxwell was a crook who through financial manipulations of shady trusts ripped off the Daily Mirror pension fund and had the decency to throw himself off his boat. (Who knows? Maybe somebody pushed him.) Maxwell's death started multiple simultaneous bankruptcy cases, especially in the US and the UK.

The Reichmann Brothers built Canary Wharf in London and went bankrupt. But then developers always do. What was remarkable about both was that banks would open their coffers to them and lend them huge amounts of "other people's money" without inspecting their books. This was the heritage of the Thatcher era.

Harvey Miller wasn't in the Maxwell case (although the protagonist of Mitt Regan's book, "Eat What You Kill" was and I interviewed him too about the same time), but he was in the Olympia & York case involving Canary Wharf. What brought the cases together was that they were multinational, required courts in different jurisdictions to cooperate with each other, and necessitated professionals from different countries and backgrounds to try and understand each other. None of this was easy.

In the case of Maxwell the development of the Protocol--a document that attempted to bring together lawyers and accountants from the US and UK in a mediated peace process thereby avoiding litigation--its success led to it being adopted by others such as those in Olympia & York.

I had arranged to interview Miller one afternoon in New York. My morning interview surprised me because that lawyer had had a bit of rough and tumble with Harvey in court one time and he gazed on me as if I would get the same treatment.

Harvey Miller had his own conference room and although I had "booked" only an hour with him he gave me around two to three hours of his time. It turned out his wife, Ruth, was a sociologist.

I learned so much that afternoon: about how bankruptcy eventually became respectable, how Jews had dominated the field because of exclusion from mainstream fields of law, and how these very bankruptcy lawyers were the ones who helped create Chapter 11 in the US. It was one of those stories that sweep before you.

I was so lucky to get that interview, which started me off on some new tracks, despite feeling vertiginous looking out of Miller's window (above) down at Central Park.

Harvey Miller always provided. On his return from the investment bank, Greenhill, he was plunged into Lehman Brothers chaos. In his 70s he was pulling long, long working days.

He created the bankruptcy field and he dominated it. And he's one of those people you can't help admiring.




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Monday, April 13, 2015

Fully Funded PhD Positions in Environmental Governance and Compliance


(thanks to esg)


My colleague, Suzanne Kingston, has just won a €1.5 million grant from the European Research Council for five years. Within it are three PhD positions and one post-doc.

Here's a brief description:

This is an exciting opportunity for talented students to play an important role in a cutting-edge project at the intersection of law, governance, psychology and economics, investigating the way that laws influence our decisions to engage (or not to engage) in environmentally compliant behaviour in Europe.

Non-compliance with the EU’s environmental rules is one of the key weaknesses of the EU’s environmental policy, and the EU has over the past decade brought in rules to encourage decentralised, society-led governance by local private actors, including environmental NGOs but also private individuals and companies, in an attempt to improve compliance levels.  Yet surprisingly little is known about the extent to which this major change in environmental governance rules has actually influenced compliance levels in practice, and why.  The central question of this project is therefore: Can the design of environmental governance rules influence us not only to comply with the letter of the law, but also to go further?

Funded by the European Research Council, you will form part of an interdisciplinary team of six people, comprising the Principal Investigator Dr. Suzanne Kingston, a postdoctoral researcher, the 3 Ph.D. students and a research assistant.  Specifically, we are looking for:
  • 1 Ph.D. candidate with a degree in Irish law or the law of another common law jurisdiction, or cognate discipline.  Where the application is for this position, the applicant should be proficient in English;
  • 1 Ph.D. candidate with a degree in French law, or cognate discipline.  Where the application is for this position, the applicant should be proficient in French and English;
  • 1 Ph.D candidate with a degree in Danish law, or cognate discipline.  Where the application is for this position, the applicant should be proficient in Danish and English.
You can find more information at the UCD page. They are for 4 years and funded at €18,000 per year.

This is a great opportunity.


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Wednesday, March 25, 2015

What Happened to the Law School Class of 2010?

Law-app

(With thanks to Legally Drawn)

Deborah Jones Merritt of Ohio State's Moritz College of Law has written a fascinating paper on what happened to the graduating class of 2010. Her study uses data from Ohio and compares it to the After the JD (AJD) study which used the national graduating class of 2000. Merritt's sample includes all those who passed the Ohio Bar examination in 2010. Another paper that treats some of these issues is The Economic Value of a Law Degree by Simkovic and McIntyre, which rates the lifetime value of a law degree at around $1 million.

 Merritt's use of Ohio appears to match national attributes (see Table II) but the single state approach means she can capture almost the entire population for 2010. She discloses her methodology fully and I won't discuss it here yet it's worth reading for both its successes and its limits.

The first key finding is how few lawyers got jobs that required a law licence (68%) and within that only a small proportion (40%) found jobs in law firms. And a year after graduating 10% remained unemployed. Four years later in 2014 the situation was little better. One per cent more had law firm jobs while the same proportion had jobs that required no licence (18%) and the unemployed came down to only 6.3%.

In contrast the AJD cohort showed more success. Nearly 80% had jobs requiring law licences and nearly 50% had jobs in law firms. Only 10% had jobs not requiring a licence and a mere 6.3% were unemployed.

The Ohio group changed jobs more frequently and their employment was episodic whereas the AJD group seemed to show continuing progress in the labour market. The AJD group worked in bigger law firms while the Ohio group appeared to gravitate to solo practice and small firm work. The economic pickup in the post-recession years didn't create jobs for the Ohio class in the bigger law firms. The consequence of this is that the Ohio class earned considerably less than the AJD group and didn't receive the same mentoring opportunities by virtue of working in small firms which engaged in less of these types of activities. Many of the Ohio cohort started their own, not very successful, solo practices. These tended to close down early on.

Government jobs showed equal numbers between the Ohio and AJD groups but after four years the Ohio group was disproportionately located in non-law government jobs. A similar process occurred with business jobs where Ohio ended up with a greater proportion of non-law posts in business than the AJD group.

Gender differences lived up/down to expectations as men were more likely to be in private practice while women were in state and local government and business jobs. In the AJD group the differences were never so marked.

Merritt points to the usual suspects or culprits for these results: disaggregation of legal work; disrupting technologies; deskilling of legal work, e.g. non-lawyer compliance officers; oversupply of lawyers; and global competition from,e.g. legal process outsourcers.

The consequences aren't good for law schools who are dealing with declining enrolments and squeezes on tuition levels with flat employment prospects for their graduates. Merritt argues that law schools will have to think creatively about future legal education. She asserts the changes occurring are not temporary but systemic and law schools will have to work out how to cater for law related jobs as well as those requiring law licences.

As a last thought I can't help but wonder if this is a particularly American phenomenon or whether we might see similar changes in Europe and Asia, for example. It doesn't appear so yet. Maybe the regulatory freedoms enjoyed by the legal services markets in the UK and Australia (and potentially other countries) are liberating the markets from old, hidebound, traditional ways of doing business that are generating new opportunities for law graduates. I see this in the UK. Perhaps then the US legal profession (and its regulators) is its own worst enemy.




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