Most other industries could evolve to meet the new challenges. But the law business can’t change as easily because it’s choked by ethical rules that developed based on a century-old model of law practice that seeks to preserve the illusion that law practice is a “profession” rather than what it plainly is – a business. …
These rules have been developed by lawyers, for lawyers. They are not in clients’ long run interests.
The obvious retort is that, while the ethical rules governing lawyers are old (at least as a matter of practice – as a matter of codified rules, the American Bar Association’s Model Rules of Professional Responsibility are less than 100 years old, younger than some of the firms which have collapsed), they are no more “archaic” than the Code of Hammurabi or the Ten Commandments.
That is, the passage of time has not shown the criminal prohibition of, say, theft to be any less a good idea than it was thousands of years ago. Similarly, the ethical prohibition on representing clients with a conflict of interest is still the primary mechanism we have for insuring the legal system functions smoothly without even an appearance of impropriety.
But Ribstein’s post is first an empirical argument – that ethics rules are “choking” law practices in a way that is detrimental to clients – and so deserves first an empirical analysis. Let’s take a look at some of Ribstein’s evidence (which he quoted from a WSJ story):
"Many law firms are susceptible to the phenomenon that led to Heller’s collapse. Their main assets are their senior lawyers. * * * [L]awyers with big books of business now commonly shop themselves to more profitable firms that can offer larger compensation packages."
"The economic downturn has prompted lawyers to jump to firms perceived to be more financially stable. If enough partners head for the exit, a firm can crater in a hurry."
I look at that and reach opposite conclusions from Ribstein. Note how the “senior lawyers” with “big books of business” have no trouble jumping from firm to firm. Does that sound like a "choked" market?
Indeed, as the chairman of Sullivan & Cromwell recently noted “clients are extraordinarily understanding.” If a client wants a particular lawyer, odds are they’ll get them, no matter where they are.
The sole “problem” appears in the context of one massive law firm attempting to merge with another. But that’s to be expected – the world of corporate America, billion-dollar deals, and eight-figure-plus litigation is a finite size. What are the odds of one major firm not having multiple direct conflicts of interest with another firm?
Continuing down that rabbit hole, what, exactly, is the benefit to consumers of legal services by permitting every last proposed merger to occur? The firms involved have every opportunity to locate these conflicts and then, if needed, ask certain lawyers with irreconcilable conflicts not to come along.
Off the top of my head I can recall a recent instance of that in the Philadelphia area, when Eckert Seamans absorbed the bulk of McKissock & Hoffman, which dissolved, unable to bring aboard all of M&H’s attorneys due to conflicts. Certainly tough for the lawyers, but definitely not tough for the clients – any client who wanted their lawyer to go along could have waived the conflicts and let them go.
Indeed, I see the question to be exactly the opposite: how do consumers of legal services benefit from rampant mergers and acquisitions creating ever-larger law firms? Rarely does the consumer gain from M&A activity in a mature market; just look at telecommunications.