Monday, May 21, 2007

Law Firm Has IPO and Goes Public...but what about the public?

Why wait for Clementi and the Legal Services Act? It's already happening. The Lawyer reported today that Slater & Gordon, a PI firm based throughout Australia floated on the stockmarket. Over 8 million shares were sold, the market closing at AUS$1.4 on an issue price of AUS$1. It's hardly in the Google IPO stratosphere but still represents a huge change on the ancien regime. Legal Soapbox has written an insightful piece on the potential conflicts for lawyers that arise with the IPO.

No other law firm, to my knowledge, has done this. Once the Legal Services Act is enacted in the UK, then it will be possible for English law firms to do this too. However, do see Ideoblog on "Blackstone and the publicly traded law firm".

So what does it mean to the legal profession and its client base? The first tension is that between professionalism and business. Professionalism speaks of disinterestedness, community orientation, ethically minded conduct, duties to court (as Legal Soapbox reaffirms), all of which conspire to be antithetical to business. The real question for analysts is to what extent are these real tenets as opposed to shibboleths produced to create an artificial impression? It's difficult to know, but these days any lawyer that hewed merely to these values wouldn't last long.

Law is a business. And that's not just the case for corporate law firms, but also those that survive on legal aid cases. Let me exemplify this: today I interviewed a barrister's clerk in a set of chambers that does a range of work including a heavy dose of legal aid work. He makes sure that the lawyers who brief his barristers include travel expenses with the delivery of the brief so that his barristers aren't out of pocket when travelling to suburban courts. It may be simple and mundane but the clerk knows that he's got to watch his cash flow. It's easy for solicitors to go out of business and leave counsel with no chance of collecting their fees. That doesn't happen in the elite, of course.

Lawyers have financial targets and a range of incentives (and penalties) to help meet them. Even the new legal aid regime post-Carter will be organized around more severe financial terms than before. To see how dire the situation can become, have a look at Richard Abel's article, "Practicing Immigration Law in Filene's Basement" in the North Carolina Law Review. Here incompetent lawyers recklessly misrepresent their clients for a paltry fee and then dump them. It helps too if the clients can't speak English.

But perhaps the key tenet of professionalism is incarnated in the ideal of self-regulation: the ability to keep one's own house in order. Unfortunately the English legal profession has not kept on top of this. The legal services ombudsman has reported a rising caseload of complaints about lawyers from the public year on year. Neither the Bar Council nor the Law Society have managed to reduce the complaint load. And the result is that government now believes external regulation must take over from self-regulation. This will be encapsulated in the Legal Service Act.

The final push has come from the competition authorities who see lawyers' arrangements as constitution restrictive practices not in the public interest. With their focus on consumer's rights, lawyers can no longer rely on traditional modes of working.

Given these moves, it's no wonder that law firms have begun to look for more entrepreneurial ways of organizing and financing themselves. What used to be a direct bargain between lawyer and client is now mediated by the state. (And I am not discussing the changes in internal organization with permanent associates, salaried partners, consultants, etc. For that see here.)

But herein lies the essential paradox of the matter: lawyers established themselves on the principle of independence and being the guardians of individuals against the might of the state. The state is now co-opting them in various ways. First, there is the direct regulation of the legal profession. Second, more selective funding of state legal services. And finally, it is easing (pushing) the way for lawyers to move away from traditional forms of organization enshrined with personal liability into more technocratic and bureaucratic forms that will no longer be able to claim the ancient rights and privileges, as in, for example, attorney-client privilege.

It's no surprise. The state has intensively increased its surveillance of the populace, with the excuse of terrorism, so it must ensure that its "struggle" isn't compromised by groups who are opposed to its aims and stand up for human rights. Promoting the business model is actually one way of subverting these aims, unless human rights becomes big business.


Legal Eagle said...

Excellent post, John!

vivek said...

Interesting move !!

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lawyers for injury in car accident said...

Hhmm this is an interesting topic but I still agree though that is a business which needs to be handled well.

lawyers for injury in car accident said...

Hhmm this is an interesting topic but I still agree though that is a business which needs to be handled well.