State Regulation Stifles American Ability to Compete Globally

Monday, July 26, 2010

State-based regulation of the legal profession threatens to irreparably damage the ability of American lawyers to compete in a revolutionary global marketplace.  And there is only one path forward, according to a provocative, new analysis by Anthony E. Davis, partner at Hinshaw & Culbertson

“Our state-based regulatory system made sense when the fastest means of communication–for lawyers and their clients–was on the back of a horse, but it does not make sense today,” Davis writes.  “The solution? Replace our existing regulatory patchwork with a single national regulator and uniform rules of professional conduct.”

Davis suggests that major United States law firms, acting in concert with Association of Corporate Counsel and business organizations such as the Chamber of Commerce,  has the clout to defeat predicted opposition from the ABA and state bar associations and supreme courts.

Action Needed to Protect American Competitiveness

“It will make for an interesting debate,” according to Davis.

The article focuses on how 21st Century competition in a growing global marketplace demands more flexibility than current state-based regulation can provide.  American lawyers are doomed to lose unless they can compete and respond to  their clients’ “understandable desire for seamless service across jurisdictional borders.”

For instance, this lack of uniformity makes it difficult, if not impossible, to predict whether a client’s chosen law firm will be able to act without the expense and delay of a disqualification motion whenever there is a current client conflict involving unrelated matters

United States Firms Forced to Competitive Disadvantage

Competition from London-based multinational law firms can now tap new sources of capital, including outside investors. Under the Legal Services Act, English firms are allowed to enter into alternative business structures with nonlaywers.

Such practice  is prohibited in every American state.

Davis points to the inability of United States firms to effectively negotiate liability for malpractice.  He argues that sophisticated clients may want to trade  waiver of some measure of that liability for lower fees.   Reduced malpractice insurance rates makes such an arrangement possible.

Outdated State Regulatory Restrictions Inhibit Competitiveness

“Solicitors in England and lawyers in Australia thus have a competitive edge that U.S. lawyers will be unable to match so long as the rules of any state where they operate prohibit such limitations of liability,” Davis writes.

American state rules that cause significant problems to lawyers “in practices of all sizes” include varied restrictions on interviewing witnesses, rules governing investigations, and of course, rules governing lawyer advertising.

Davis suggests that one alternative to a national unitary model would be a two-tier system.   National regulation would be imposed on firms pursuing multijurisdictional practice.   Either approach requires a new system ”designed in light of how legal services are actually provided in today’s world.”

Record for Hourly Billing? $1.4 Million a Day

Friday, July 23, 2010

This may be one for the hourly billing record books.    Lehman Brothers Holdings Inc. is paying $1.4 million a day in legal fees surrounding its collapse and bankruptcy.

Unsecured creditors are expecting as little as 14.7 cents on the dollar.

Lehman, the investment bank which collapsed in September 2008, paid its lawyers and managers $873.1 million for 21 1/2 months of work.   According to Bloomberg reports,  the total fees so far were disclosed in a filing with the U.S. Securities and Exchange Commission.

To gauge the impact, Bloomberg pointed out that athletes of the five highest paid professional baseball teams took home a combined $792 million.

Class of 2009: Grads Treading Water in Dismal Marketplace

Friday, July 23, 2010

 More attorneys who graduated from law school in 2009 are unemployed than at any time since the 1990’s, according to a new survey.

The results show that one in four employed graduates  who hold jobs that are temporary employment slots.   Dissatisfaction levels are very high, with 21.6% of the class seeking a different job – a “sharp upturn” in that category, according to the survey.

The survey by the National Association for Law Placement, Inc, claims to cover 96% of the Class of 2009.

Median Pay for Class of 2009 is $72,000 

The median annual pay for those who were working full-time in all reported jobs was $72,000.

The overall employment rate of 88.3% represented a drop of 3.6% in two years, according to the survey.   The proportion of the class of 2009 graduates in temporary jobs was far higher than in past years.  But even those dismal figures “masks a number of weaknesses in the job market faced by this class,” according to the study.

The survey showed a very sharp division between a group of the highest paid recent grads and everybody else.   This “have and have not” factor is illustrated in a graph.  The analysts reported the phenomenon is the result of “the prevalence of high salaries in large law firms, in concert with the relatively stable salaries among other employers.”  The two distinct peaks are at the $160,000 level and the $40,000-$65,000 levels.

Two Classes in Compensation, Little Middle Ground

“Relatively few salaries are near either the median or the mean,” according to the report.  The dotted line in the chart represents an adjusted mean.

James Leipold, NALP’s executive director said the job market for the Class of 2009 was very different than anything before.

“Members of this graduating class were more likely to be working part-time, working in a temporary job, working in a job that does not require a JD, working as a solo practitioner, or working but still looking for another job, than their peers who graduated in the classes before them,” according to Leipold.