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Sunday, August 5, 2012

How Equity Investment Could Spur Legal Employment

The Legal Whiteboard:  Connecting the Dots on the Structural Shift in the Legal Market, by William D.  Henderson (Indiana):

In my estimation, very few lawyers or law professors grasp what is taking place here. We look at flat revenues in BigLaw and draw the inference that we are in a prolonged recession. Meanwhile, the legal business is absolutely booming in India, thanks in substantial measure to its integration into the U.S. and U.K. legal supply chain. Play these trends forward for five more years, and the prolonged recession storyline will no longer be credible. 

And remarkably, the drivers of this change are publicly traded companies or companies funded by venture capital and private equity.

The ABA Commission on Ethics 20/20 was recently pressured to drop its recommendation for even a very most modest change to the Rule 5.4 prohibition on fee splitting with nonlawyers. (See here.) This effort was lead by the Illinois Bar Association, which wanted to shut down debate on this topic during the August ABA Annual Meeting in Chicago. 

I fear that the U.S. legal profession is looking through the wrong end of the telescope. In a practical sense, fee spliting only applies to counseling and advocacy. But the full legal supply chain includes a host of legal products and inputs than Wall Street and Sand Hill Road capitalists are anxious to supply. This supply chain analysis is especially true when the client is a Fortune 500 corporation. The policy that drives fee-splitting is consumer protection and a belief that the nonlawyer profit motive will compromise lawyer independence and injure the client.  Yet, organizational clients want innovation and more for less. And they are finding non-law firm vendors who are filling that need. The organized bar is powerless to stop these changes.

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Comments

Let the fortune 500 companies outsource their legal work to India.

When their Indian lawyers do as good of a job with legal work as Indian call center operators do handling irritated customers, they'll learn their lesson.

Some plaintiffs firms are going to pound these companies into the ground for their sloppy legal work.

Look at the mortgage mess. Wall Street tried to cut corners on the paper work, and now they can't produce the note and foreclose on MILLIONs of houses worth HUNDREDS OF BILLIONS of dollars.

Corporations have a choice. They can pay now, or they can pay a lot more later.

I'm sure U.S. plaintiffs lawyers will laugh all the way to the bank.

Posted by: Anon | Aug 8, 2012 11:49:58 AM